[Federal Register Volume 77, Number 12 (Thursday, January 19, 2012)]
[Proposed Rules]
[Pages 2868-2904]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-148]



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Vol. 77

Thursday,

No. 12

January 19, 2012

Part IV





Federal Communications Commission





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47 CFR Part 73





2010 Quadrennial Regulatory Review; Proposed Rule

  Federal Register / Vol. 77 , No. 12 / Thursday, January 19, 2012 / 
Proposed Rules  

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MB Docket Nos. 09-182 and 07-294; FCC 11-186]


2010 Quadrennial Regulatory Review

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, section 202(h) of the Telecommunications Act 
of 1996 requires the Commission to review its broadcast ownership rules 
quadrennially to determine whether these rules are necessary in the 
public interest as a result of competition. This document solicits 
comment on proposed changes to the broadcast ownership rules in 
compliance with this requirement. In addition, this document solicits 
comment on certain aspects of the Commission's 2008 Diversity Order 
that the U.S. Court of Appeals for the Third Circuit remanded and 
directed the Commission to address in this proceeding. This document 
solicits comment also on potential changes to the Commission's 
broadcast attribution rules.

DATES: The Commission must receive written comments on or before March 
5, 2012 and reply comments on or before April 3, 2012. Written comments 
on the Paperwork Reduction Act proposed information collection 
requirements must be submitted by the public, Office of Management and 
Budget (OMB), and other interested parties on or before March 19, 2012.

ADDRESSES: Federal Communications Commission, 445 12th Street SW., 
Washington, DC 20554. In addition to filing comments with the 
Secretary, a copy of any comments on the Paperwork Reduction Act 
information collection requirements contained herein should be 
submitted to the Federal Communications Commission via email to 
[email protected] and to Nicholas A. Fraser, Office of Management and Budget, 
via email to [email protected] or via fax at (202) 395-
5167.

FOR FURTHER INFORMATION CONTACT: Hillary DeNigro, Industry Analysis 
Division, Media Bureau, FCC, (202) 418-2330. For additional information 
concerning the PRA proposed information collection requirements 
contained in the Notice of Proposed Rulemaking, contact Cathy Williams 
at (202) 418-2918, or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This Notice of Proposed Rulemaking, in MB 
Docket Nos. 09-182; 07-294, FCC 11-186, was adopted and released on 
December 22, 2011. The complete text of the document is available for 
inspection and copying during normal business hours in the FCC 
Reference Center, 445 12th Street SW., Washington, DC 20554, and may 
also be purchased from the Commission's copy contractor, BCPI, Inc., 
Portals II, 445 12th Street SW., Washington, DC 20054. Customers may 
contact BCPI, Inc. at their Web site http://www.bcpi.com or call 1-
(800) 378-3160.

Initial Paperwork Reduction Act of 1995 Analysis

    This Notice of Proposed Rule Making may result in a new or revised 
information collection requirement. If the Commission adopts any new or 
revised information collection requirement, the Commission will publish 
a notice in the Federal Register inviting the public to comment on the 
requirement, as required by the Paperwork Reduction Act of 1995, Public 
Law 104-13 (44 U.S.C. 3501-3520). In addition, pursuant to the Small 
Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4), the Commission seeks specific comment on how it 
might ``further reduce the information collection burden for small 
business concerns with fewer than 25 employees.''

I. Synopsis of the Notice of Proposed Rulemaking

A. Introduction

    1. Pursuant to a statutory mandate under the Telecommunications Act 
of 1996, the Commission seeks comment in this Notice of Proposed 
Rulemaking on the Commission's media ownership rules and proposed 
changes thereto. The Commission is required by statute to review its 
media ownership rules every four years to determine whether they ``are 
necessary in the public interest as the result of competition.'' A 
challenge in this proceeding is to take account of new technologies and 
changing marketplace conditions while ensuring that the media ownership 
rules continue to serve the Commission's public interest goals of 
competition, localism, and diversity. The Commission is also seeking 
comment on economic studies analyzing the relationship between local 
media market structure and the policy goals that underlie the 
Commission's media ownership rules. In addition, the Commission seeks 
comment in this proceeding on the aspects of the Commission's 2008 
Diversity Order (73 FR 28361, May 16, 2008, FCC 07-217, rel. Mar. 5, 
2008) that the Third Circuit remanded in Prometheus Radio Project v. 
FCC (Prometheus II).
    2. The proliferation of broadband Internet and other new 
technologies has had a dramatic impact on the media marketplace. 
Consumers are increasingly turning to online and mobile platforms to 
access news content and audio and video programming. For example, in 
2010 and in the first quarter of 2011, satellite radio and TV 
companies, which offer both satellite and online access to content, 
have reported growth in subscribership. Similarly, content providers 
are increasingly looking to the Internet and other new media platforms 
to bypass traditional media and reach consumers directly. Social media 
sites are empowering individuals to share news and information in real 
time, becoming tools of social interaction and revolution throughout 
the world.
    3. For the broadcast and newspaper industries, the growth of these 
new technologies both challenges established business models and 
provides opportunities to reach new audiences and generate new revenue 
streams. Broadcast and newspaper consumption in traditional forms is in 
decline, and advertising revenues have been shrinking in recent years. 
Some broadcast and newspaper outlets have contracted the size of news 
staffs in response. These economic realities have sounded an alarm for 
some who are concerned that non-traditional media sources are not 
adequate substitutes for the provision of local news and information by 
broadcasters subject to public interest obligations. In voicing such 
concerns, some commenters have asserted that the Commission's media 
ownership limitations remain vitally important, as increased 
consolidation places control of programming choices in the hands of too 
few owners, limiting diversity and underserving the needs of local and 
minority communities.
    4. In short, the media marketplace is in transition, particularly 
as a result of broadband Internet; but new media are not yet available 
as ubiquitously as traditional broadcast media. The nation has not yet 
reached universal deployment or adoption of broadband. Too much of the 
country is unserved or underserved by broadband, and the average 
broadband speed available to consumers varies in different areas and 
lags behind some other nations. Broadband adoption remains under 70 
percent, meaning that tens of millions of Americans do not have access 
to news and other programming on the Internet.

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Some parts of the population, including minorities, people with 
disabilities, and low-income Americans, have much lower rates of 
broadband adoption. Access to sufficient broadband speeds is critical 
for consumers to take full advantage of today's online programming and 
applications, including access to media content through streaming 
technology and downloading programs. According to one estimate, more 
than 14 million Americans do not have access to broadband 
infrastructure that can support today's applications. Much of the 
content available by streaming and downloads requires minimum broadband 
speeds. The Commission is taking important steps to close this digital 
divide, but much work remains.
    5. The Commission began this proceeding with a series of workshops 
held from November 2009 through May 2010. Participants in the workshops 
discussed the scope and content of the review process. Thereafter the 
Commission released a Notice of Inquiry (75 FR 33227, June 11, 2010, 
FCC 10-92, rel. May 25, 2010) (NOI) on May 25, 2010, seeking comment on 
a wide range of issues to help us determine whether the current media 
ownership rules continue to serve the Commission's policy goals. The 
NOI sought input on developments in the marketplace since the last 
review and on whether the Commission should adopt alternatives to 
bright-line, sector-specific rules. It also sought comment on the 
Commission's fundamental goals of competition, localism, and diversity 
and how to balance these goals when they conflict. In response, 
industry participants and representatives, public interest groups, and 
members of the public filed a significant number of comments.
    6. To provide data on the impact of market structure on the 
Commission's policy goals of competition, localism, and diversity, the 
Commission commissioned eleven economic studies, which were conducted 
by outside researchers and Commission staff. The Commission previously 
released the studies to allow parties additional time to review the 
data and analyses and now is seeking formal comment on them herein. As 
discussed herein, the Commission reaffirms that its media ownership 
rules are necessary to further the Commission's longstanding policy 
goals of fostering competition, localism, and diversity. In particular, 
the Commission reaffirms that a major goal of the rules is to encourage 
the provision of local news, and the Commission invites suggestions 
about how that goal can be further achieved.
    7. In Prometheus II, the Court of Appeals for the Third Circuit 
considered appeals of the Commission's review of the media ownership 
rules in the 2006 Quadrennial Review Order (73 FR 9481, February 21, 
2008, FCC 07-216, rel. Feb. 4, 2008). As discussed in more detail 
below, the court affirmed the Commission's decision to retain the local 
television and radio rules to protect competition in local media 
markets. The court also affirmed the Commission's decision to retain 
the dual network rule based on potential harm to competition that would 
result from mergers of the top four networks. The court also affirmed 
the Commission's conclusion to retain the radio/television cross-
ownership rule as well as, in part, to retain the local radio rule 
based on the benefits to the Commission's diversity goal. Moreover, the 
Third Circuit vacated and remanded the newspaper/broadcast cross-
ownership rule as modified by the Commission in the 2006 Quadrennial 
Review Order, concluding that the Commission failed to comply with the 
notice and comment provisions of the Administrative Procedures Act. As 
discussed in more detail below, the court also vacated and remanded a 
number of measures adopted in the Commission's 2008 Diversity Order, 
which the Commission now addresses in this proceeding.
    8. As discussed in detail herein, as part of its regular review of 
broadcast ownership rules required by the Communications Act, the 
Commission proposes the elimination of one rule and suggests leaving 
the others largely unchanged. The Commission believes that the public 
interest is best served by these modest, incremental changes to the 
Commission's rules. Recognizing current market realities, the 
Commission seek comment on the following proposals:
     Local Television Ownership Rule. The Commission 
tentatively concludes that it should retain the current local 
television ownership rule with minor modifications. Specifically, the 
Commission proposes to eliminate the Grade B contour overlap provision 
of the current rule. The Commission tentatively concludes that it 
should retain the prohibition against mergers among the top-four-rated 
stations, the eight-voices test, and the existing numerical limits. In 
addition, the Commission seeks comment on whether to adopt a waiver 
standard applicable to small markets, as well as appropriate criteria 
for any such standard. Also, the Commission seeks comment on whether 
multicasting should be a factor in determining the television ownership 
limits.
     Local Radio Ownership Rule. The Commission proposes to 
retain the current local radio ownership rule. The Commission also 
seeks comment on modifications to the rule and whether and how the rule 
should account for other audio platforms. The Commission proposes to 
also retain the AM/FM subcaps, and seeks comment on the impact of the 
introduction of digital radio. The Commission seeks comment on whether 
to adopt a waiver standard and on specific criteria to adopt.
     Newspaper/Broadcast Cross-Ownership Rule. The Commission 
tentatively concludes that some newspaper/broadcast cross-ownership 
restrictions continue to be necessary to protect and promote viewpoint 
diversity. The Commission proposes to use Nielsen Designated Market 
Area (DMA) definitions to determine the relevant market area for 
television stations, given the lack of a digital equivalent to the 
analog Grade A service contour. The Commission proposes to adopt a rule 
that includes elements of the 2006 rule, including the top 20 DMA 
demarcation point, the top-four television station restriction, and the 
eight remaining voices test. The Commission seeks comment on these 
proposals and whether to incorporate other specific elements and 
factors of the 2006 rule.
     Radio/Television Cross-Ownership Rule. The Commission 
proposes to eliminate the radio/television cross-ownership rule in 
favor of reliance on the local radio rule and local television rule. 
The Commission believes that the local radio and television ownership 
rules adequately protect the Commission's localism and diversity goals 
and seeks comment on this proposal.
     Dual Network Rule. The Commission tentatively concludes 
that the dual network rule remains necessary in the public interest to 
promote competition and localism and should be retained without 
modification.
    9. Minority and Female Ownership. As noted above, the Commission 
seeks comment in this proceeding on the aspects of the Commission's 
2008 Diversity Order that the Third Circuit remanded in Prometheus II. 
Specifically, the court vacated and remanded a number of measures 
adopted in the Diversity Order that were designed to increase ownership 
opportunities for ``eligible entities,'' including minority- and women-
owned entities, because it determined that the Commission's revenue-
based eligible entity definition was arbitrary and

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capricious. The court directed the Commission to address this issue in 
the course of the 2010 Quadrennial Review. As directed by the court, 
the Commission invites views on how its ownership rules and policies 
can promote greater minority and women ownership of broadcast stations. 
The Commission will explore a broad range of potential actions it might 
take to that end, consistent with judicial precedent.

B. Policy Goals

    10. The Commission reaffirms that media ownership rules are 
necessary to further the Commission's longstanding policy goals of 
fostering competition, localism, and diversity. In the NOI, the 
Commission sought comment on how these goals should be defined and 
measured and on whether there are additional goals the Commission 
should consider. The Commission did not receive many specific comments 
on defining, measuring, and evaluating the performance of the 
Commission's policy goals, and the Commission invites such comment 
again. In particular, the Commission describes and seeks comment below 
on the Commission's 11 Media Ownership studies that evaluate the impact 
of local media market structure on the Commission's policy goals. In 
addition, the Commission invites parties to submit their own studies 
evaluating the impact of particular market structures on the 
Commission's goals. Below, the Commission discusses its competition, 
localism, diversity, and other policy goals. The Commission also 
discusses how it should evaluate the costs and benefits of the media 
ownership rules.
    11. Competition. As the Commission noted in the NOI, because 
broadcast content is available for free to end users, broadcast 
competition cannot be assessed in the same manner as in many other 
markets. Specifically, the Commission cannot examine changes in price 
to assess the impact of different levels of ownership concentration. 
Accordingly, the Commission sought comment on a variety of potential 
ways to assess competition in the media marketplace. The Commission 
discussed whether competition among broadcast outlets is likely to 
benefit consumers by making available programming that satisfies 
consumer preferences.
    12. The Commission reaffirms its longstanding commitment to ensure 
that media markets are competitive. The Commission strives to set 
ownership rules that create a marketplace in which broadcast 
programming meets the needs of consumers, and the Commission believes 
competition is a key means to that end. Moreover, the Commission 
reaffirms the Commission's previous findings that the local ownership 
rules should be analyzed in the context of local markets. The 
Commission finds however that for the Dual Network rule, competition is 
appropriately analyzed in the national advertising and programming 
markets.
    13. Localism. In the NOI, the Commission sought comment generally 
on how to define and promote localism in the context of the media 
ownership rules, including whether its traditional localism goal needs 
to be redefined in light of today's media marketplace.
    14. The Commission reaffirms its commitment to promote localism 
through the media ownership rules. At its core, localism policy is 
``designed to ensure that each station treats the significant needs and 
issues of the community that it is licensed to serve with the 
programming that it offers.'' The media ownership rules, as part of the 
Commission's overall regulatory framework, seek to promote a 
marketplace in which broadcast stations ``respond to the unique 
concerns and interests of the audiences within the stations' respective 
service areas.'' The Commission continues to evaluate the extent of 
localism in broadcasting markets by determining whether programming is 
responsive to local needs and interests. The Commission's focus 
continues to be on news and public information programming. The 
Commission continues to believe that these types of programming are 
relevant to evaluating the extent of localism as it exists in local 
markets. While the Commission's core commitment to promoting localism 
in media remains undiminished, the Commission also recognizes that 
changes in the marketplace and changes in consumer preferences may 
impact aspects of localism in today's marketplace. Thus, the Commission 
believes that the appropriate definition of localism today, in the 
digital age, may not be the same definition as in decades past.
    15. As a result of the growing availability of the Internet and the 
proliferation of wireless technology, consumers are accessing news and 
public affairs programming through their computers and electronic 
devices. Moreover, the potential for hyper-local Web sites and blogs to 
provide consumers with local news and information, such as 
neighborhood-specific news and events, may contribute to meeting the 
current or future needs and interests of local communities. As 
consumers continue to rely more and more on additional, multiple 
sources of local news, the Commission seeks comment on whether, and 
how, to reevaluate localism to account for changes in the way consumers 
get local news.
    16. Diversity. In the NOI, the Commission sought comment on how to 
define and measure diversity in today's marketplace to determine 
whether the current media ownership rules are meeting the Commission's 
diversity goal. The Commission has relied on its media ownership rules 
to ensure that diverse viewpoints and perspectives are available to the 
American people in the content they receive over the broadcast 
airwaves. The policy is premised on the First Amendment, which ``rests 
on the assumption that the widest possible dissemination of information 
from diverse and antagonistic sources is essential to the welfare of 
the public.'' The Commission historically has approached the diversity 
goal from five perspectives: viewpoint, outlet, program, source, and 
minority and female ownership diversity. In the 2002 Biennial Review 
Order (68 FR 46286, August 5, 2003, FCC 03-127, rel. July 2, 2003), the 
Commission concluded that program diversity is best achieved by 
reliance on competition among delivery systems rather than by 
government regulation and that the media ownership rules ensure 
competition in local markets. In addition, the Commission concluded 
that source diversity was not one of the diversity goal objectives of 
the media ownership rules. The Commission reaffirms those conclusions. 
The Commission has regulated media ownership as a means of enhancing 
viewpoint diversity based on the premise that diffuse ownership among 
media outlets promotes the presentation of a larger number of 
viewpoints in broadcast content than would be available in the case of 
a more concentrated ownership structure. The Commission previously has 
discussed two schools of thought on the relationship between ownership 
and diversity. On one side is the notion that the more independently 
owned outlets there are, the greater the viewpoint diversity. The 
concept is that 51 station owners will provide more diverse viewpoints 
than 50 station owners. The second school of thought is that 
concentrated ownership will provide an opportunity for diverse content. 
According to this view, an owner of multiple stations in a local market 
will provide a variety of programming and viewpoints in order to gain 
the widest audience and market share. It can be questioned whether the 
latter approach is as likely to provide the public with information 
from ``diverse and

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antagonistic sources.'' The Commission seeks comment on this issue and 
on how the Commission should account for this aspect of its diversity 
goal in any rules the Commission might adopt.
    17. The Commission reaffirms its belief that media ownership limits 
are necessary to preserve and promote viewpoint diversity. Furthermore, 
the Commission also reaffirms its conclusion that viewpoint diversity 
is generally promoted by competition among independently owned media 
outlets. The Commission believes that a key measure of how well the 
Commission's current rules promote the Commission's overall diversity 
goal is the availability of local news and information, and the 
Commission examines that availability herein as it relates to local 
ownership structure and the level of civil engagement.
    18. Minority and Female Ownership. In the NOI, the Commission 
sought comment on a variety of questions regarding the impact of the 
ownership rules on minorities and females, including minority and 
female ownership of broadcast stations. The Commission asked how its 
localism goal should be defined and measured as applied to historically 
underserved minority communities. The Commission sought comment on what 
aspects of localism are most relevant specifically to minority 
communities, as well as on the effect of consolidated ownership on the 
availability of a variety of diverse viewpoints to women and minority 
consumers. The NOI asked if women and minorities are increasing their 
ownership shares in companies that are content providers or in other 
aspects of media production aside from station ownership.
    19. There were only limited comments on these issues. According to 
Diversity and Competition Supporters (DCS), significant barriers to 
entry for minority ownership remain in both the traditional and new 
media industries. DCS states that minority-owned stations are more 
likely than non-minority owned stations to provide programming geared 
toward minority audiences and that minority communities are underserved 
as a result of the lack of minority media ownership. DCS supports 
measures that facilitate minority media ownership.
    20. The Commission tentatively concludes that its policy goals of 
competition, localism, and diversity are the appropriate framework 
within which to evaluate and address minority and female interests as 
they relate to the media ownership rules. The Commission seeks comment 
on this tentative conclusion. The Commission also seeks additional 
comment on how the proposed framework for each of the media ownership 
rules, as explained herein, would affect minority and female ownership 
opportunities.
    21. Additional Policy Goals. In the NOI, the Commission sought 
comment on whether it should consider any other formal policy goals, in 
addition to the Commission's competition, diversity, and localism 
goals, in determining ownership limits in this proceeding. 
Specifically, the Commission sought comment on whether to consider the 
impact of the media ownership rules on the availability to all 
Americans of news and information, including national news and 
information. The Commission also sought comment on whether it should 
consider the impact of its rules on investigative journalism, and 
whether any specific aspects of the National Broadband Plan, including 
issues related to broadband access, are relevant to the media ownership 
rules. The Commission tentatively concludes not to adopt any other 
formal policy goals in this proceeding. As described above, the 
Commission's longstanding policy goals of competition, localism, and 
diversity are broadly defined to promote the core responsibilities of 
broadcast licensees. The Commission notes that its media ownership 
rules seek to further consumer welfare by promoting the availability of 
community-responsive news and public affairs programming from a variety 
of sources. The Commission seeks comment on its tentative conclusion 
not to adopt any policy goals other than competition, localism, and 
diversity in this proceeding.
    22. Balancing the Costs and Benefits of Limiting Media 
Combinations. The Commission seeks information that will help it 
balance the positive benefits of the ownership limits in promoting the 
Commission's policy goals against the costs that specific limits may 
impose on consumers and firms. The Commission has discussed in broad 
terms in this section the policy goals it seeks to promote. Section V 
of the Notice of Proposed Rulemaking presents the studies that the 
Commission commissioned to quantify the influence of the Commission's 
rules on the policy goals. In particular, Media Ownership Study 2 
quantifies the benefits and costs of particular media market structures 
on consumers. The Commission seeks comment on the appropriate use of 
this study in quantifying the impact of the media ownership rules on 
consumers and balancing the positive effects on consumers with any 
adverse effects on firms.
    23. The Commission's studies do not address the direct impact 
ownership limits have on media outlets. The Commission seeks detailed 
information on the benefits that would accrue to media outlets from 
entering into combinations that currently are impermissible. What are 
the cost-savings associated with a combination of two TV stations in 
markets where duopolies are not currently permitted? What are the 
sources of those cost savings? Are the savings a one-time event or are 
they recurring? Do they vary by the size of the market or the 
popularity of the TV station? The Commission seeks similar detailed 
estimates of cost savings for the combination of radio stations as well 
as cross-media combinations between newspapers, TV stations, and radio 
stations. Commenters should document to the extent possible the sources 
and methods of their estimates.
    24. How should the Commission balance the effects of its rules on 
consumers with those on firms, in particular, media outlets? Should 
each receive equal weight? How should the Commission account for 
situations in which the costs and the benefits of a change in the rules 
occur at different points in time? The Commission encourages commenters 
to provide examples of the suggested balancing of the Commission's 
rules.

C. Media Ownership Rule Proposals

1. Local Television Ownership Rule
a. Introduction
    25. As discussed in the NOI, in the 2006 Quadrennial Review Order, 
the Commission determined that the then long-standing local television 
ownership rule promotes competition within local television markets. 
Consistent with this conclusion, the Commission retained that rule. The 
rule allows an entity to own two television stations in the same DMA 
(duopoly rule) only if there is no Grade B contour overlap between the 
commonly owned stations, or at least one of the commonly owned stations 
is not ranked among the top-four stations in the market (top-four 
prohibition) and at least eight independently owned television stations 
remain in the DMA after ownership of the two stations is combined 
(eight-voices test). The court in Prometheus II upheld the Commission's 
decision in the 2006 Quadrennial Order to retain the local television 
ownership rule, specifically concluding that the Commission was 
justified in retaining the top-four prohibition, the eight-voices test, 
and the duopoly rule.

[[Page 2872]]

    26. Based on the record in this proceeding, the Commission 
tentatively concludes that the local television ownership rule, with 
certain modifications discussed below, remains necessary in the public 
interest as a result of competition. The Commission tentatively agrees 
with the Commission's previous determination that the local television 
ownership rule is necessary to promote competition. While the 
Commission proposes to adopt a local television ownership rule to 
advance its competition goal, the Commission seeks comment on whether 
the proposed rule also is necessary to promote the Commission's 
localism and viewpoint diversity goals.
    27. As discussed in greater detail below, the Commission proposes 
to eliminate the Grade B contour overlap provision of the current rule 
and seek comment on this proposal. The Commission tentatively concludes 
that it should retain the prohibition against mergers among the top-
four-rated stations. The Commission proposes to also retain the eight-
voices test and the existing numerical limits, but seek comment on 
whether modifications to either the voice test or numerical limits is 
warranted. In addition, the Commission seeks comment on whether to 
adopt a waiver standard applicable to small markets, as well as 
appropriate criteria for any such standard. Also, the Commission seeks 
comment on whether and how the digital transition and multicasting may 
impact television ownership limitations. Finally, the Commission seeks 
comment on the impact of the proposed rule on minority and female 
ownership.
b. Background
    28. In the NOI, the Commission sought comment on whether to retain 
the current rule, including the eight-voices test, the top-four 
prohibition, and the contour overlap definition. It also asked whether 
relaxation of the rule is warranted in small markets to help 
broadcasters achieve efficiencies sufficient to compete with other 
video programming providers.
    29. Television broadcasters generally support relaxing the local 
television ownership rule, asserting that they face decreased revenues, 
as a result of both increased competition from nonbroadcast video 
programming providers and the recent economic downturn. Broadcasters 
assert that the efficiencies gained from combined ownership will allow 
them to compete better in today's changing marketplace. According to 
broadcasters, common ownership can increase viewpoint diversity, as 
owners of multiple stations seek to capture the greatest possible 
audience share by diversifying their news and public interest program 
offerings among co-owned properties. In addition, they contend that the 
cost savings generated by common ownership allow stations to add local 
newscasts and other locally oriented programming.
    30. Public advocacy groups, on the other hand, caution the 
Commission against using current economic conditions as a justification 
for relaxing the local television ownership rule. UCC et al., for 
example, assert that every U.S. industry was impacted by the declining 
economy and that signs suggest that the broadcast television industry 
has emerged from the downturn. Moreover, they contend that, if certain 
stations cannot survive in the current economic climate, then the 
public interest is best served by allowing new entrants to become 
broadcasters or finding new uses for the broadcast spectrum. In 
addition, public advocacy groups assert that further consolidation will 
reduce viewpoint diversity through reductions in female and minority 
ownership and the loss of independent news operations. Contrary to the 
broadcasters' assertion, the public advocacy commenters cite to studies 
that have found that consolidation does not lead to increases in local 
programming, suggesting that additional consolidation would not serve 
the Commission's localism goal.
    31. In the media ownership studies, the Commission sought data to 
help determine how best to structure a local television ownership rule 
to satisfy the Commission's policy goals. Particularly relevant to the 
local television rule, Media Ownership Study 1 examines whether common 
ownership of stations affects the amount of local news provided by 
television stations in the local market. The study does not find 
significant evidence that common ownership affects local media usage or 
programming. In addition, Media Ownership Study 4 analyzes, at both the 
market level and the station level, the relationship between media 
ownership and the amount of local news and public affairs programming 
provided in a local television market. The study suggests that multiple 
ownership in a local market does not impact the amount of local 
information programming at the market level or at the station level. 
Media Ownership Study 9 provides a theoretical analysis of the impact 
of media ownership structure on viewpoint diversity, finding that more 
independent outlets can increase viewpoint diversity in a market.
c. Discussion
    32. Market. Broadcasters generally assert that they are facing 
increased competition from new technologies, which has led, at least in 
part, to a reduction in advertising revenues, which could threaten the 
financial viability of local television stations. Broadcasters contend, 
therefore, that the Commission should modify the local television 
ownership rule to permit increased common ownership in local markets.
    33. The Commission proposes that the local television ownership 
rule continue to focus on promoting competition among broadcast 
television stations in local television viewing markets. The Commission 
tentatively concludes that the video programming market is distinct 
from the radio listening market. The Commission finds that local 
broadcast television stations compete directly with each other, 
particularly during the parts of the day in which these stations do not 
transmit the programming of affiliated broadcast networks. The 
Commission previously has determined that the video programming market 
includes both broadcast television stations and cable networks. 
Moreover, the Commission recognizes that viewers are increasingly able 
to access current network programming (both broadcast and cable) and an 
increasing array of video programming alternatives via the Internet, 
including on mobile devices. However, competition between local 
television stations and cable networks may be of limited relevance, 
because national cable networks generally do not alter their 
programming decisions based on the actions of individual local 
television stations. Competition in local markets among local 
television stations and programming alternatives available via the 
Internet may be similarly limited, as these alternatives compete 
largely in national markets and are not likely to respond to conditions 
in local markets. The Commission seeks comment on whether the 
development of local and hyperlocal Web sites should alter this 
analysis. The Commission seeks data in support of alternative 
conclusions, for example, that nonbroadcast video programmers modify 
programming decisions based on the actions of individual local 
television stations.
    34. The Commission also seeks comment on the impact of alternative 
video platforms on the continued viability of broadcast television 
stations. While the growth of MVPDs and Internet delivery of video 
programming is undeniable, the impact of this growth

[[Page 2873]]

on the broadcast television industry is unclear. While broadcast 
television's share of television viewing has been on the decline, 
broadcast network programming remains popular. Viewership, however, 
appears to be fractured between local affiliates, the Internet, and 
other mobile platforms. Is there evidence that viewers find broadcast 
television stations to be interchangeable with new technologies, or is 
broadcast television unique? If it is unique, what characteristics 
define it as such? Should the Commission determine that, contrary to 
its tentative conclusion, the local television ownership rule should 
focus on promoting competition among broadcast television stations and 
alternatives to broadcast television stations in local markets, the 
Commission seeks comment below on whether and how to include these 
alternatives in the rule, either in the eight-voices test or any 
alternate framework the Commission may adopt for determining whether to 
permit common ownership in a local market.
    35. Moreover, the Commission seeks comment on whether the product 
market for review of the local television rule should include more than 
video programming. For instance, some of the alternative sources of 
locally oriented content, such as Web sites and blogs, may not be 
entirely in video form. Is the relevant product market expanding from a 
video-only market to one that also contains non-video sources of local 
news and information? The Commission tentatively concludes that, 
although the relevant product market may expand beyond video 
programming over time, it has not done so at this point. Evidence 
suggests that, in the aggregate, Internet-only Web sites provide only a 
small amount of local news content. The Commission has not seen 
evidence that non-video information sources modify programming 
decisions based on the actions of local television stations or vice 
versa. The Commission seeks comment on these tentative conclusions.
    36. Contour Overlap. The current local television ownership rule 
employs a Grade B contour overlap test for determining whether to allow 
common ownership of television stations. The Grade B contour is an 
analog contour that is no longer relevant now that television stations 
have completed the digital transition and ceased broadcasting in 
analog. The Commission sought comment in the NOI on whether an overlap 
provision or some reliance on contours in the local television 
ownership rule was still necessary or whether the Commission should 
rely on geographic areas, such as a television DMAs. NAB asserts that 
the Commission should, to the extent feasible, maintain a contour-based 
approach for the local television ownership rule. Grant Group asks the 
Commission to grandfather existing combinations in the event an 
alternate approach is adopted and to permit the sale of grandfathered 
combinations to a single party.
    37. The Commission believes that eliminating the contour approach 
is necessary to be consistent with today's marketplace realities. 
Therefore, the Commission tentatively concludes that it will eliminate 
the Grade B contour approach and rely solely on Nielsen DMAs. Because 
of the Commission's mandatory carriage requirements, MVPDs generally 
will carry all the broadcast stations assigned to the DMA in which they 
are located. These MVPDs are also likely to carry most major cable 
networks. Therefore, the DMA most accurately captures the universe of 
broadcast and MVPD video programming available to viewers. As such, any 
combination of stations in a particular DMA could have an impact on the 
levels of competition in that local market. However, the current rule 
permits certain mergers between stations that compete in the same 
market simply because of a lack of Grade B contour overlap--a factor 
that may not have any significant impact on the level of competition 
between those stations. Therefore, the Commission tentatively concludes 
that eliminating the contour-overlap requirement in favor of the DMA-
based approach would result in a more consistent application of the 
local television ownership rule. Moreover, the Commission believes that 
the grandfathering provisions discussed below will preserve existing 
ownership combinations, thus avoiding disruption of settled 
expectations and alleviating any negative impact this change could have 
on the provision of television service in rural areas. The Commission 
seeks comment on these tentative conclusions.
    38. The Commission previously adopted a geographic market 
definition for the local radio rule. In the radio context, Arbitron 
Metro market definitions were found to be an industry standard and to 
represent a reasonable definition of the geographic market within which 
radio stations compete. Adopting Arbitron Metro markets was found to 
improve the Commission's ability to preserve and promote competition by 
more accurately identifying actual geographic markets; more accurately 
measuring concentration levels in local markets; and providing for a 
more consistent application of the local radio ownership rule. The 
Commission has long recognized in the television ownership rule that 
DMAs are the relevant geographic market in which television stations 
compete, and the Commission expects that a DMA-based approach here will 
achieve benefits similar to those found in adopting the Arbitron Metro 
market standard in the radio context. Finally, unlike Arbitron Metro 
markets, which do not cover large portions of the United States and its 
territories, the DMA-based approach covers the entire country and 
includes all television stations. In instances where a station's 
community of license is located in one DMA but the station is assigned 
by Nielsen to another DMA the station will be considered to be within 
the DMA assigned by Nielsen for purposes of this rule. In addition, 
Puerto Rico, Guam, and the U.S. Virgin Islands, which are not assigned 
a DMA by Nielsen, each will be considered a single DMA.
    39. The Commission recognizes, however, that a DMA-based approach 
may disproportionately impact certain DMAs that have unique 
characteristics. For instance, in a geographically large DMA two 
stations may be so far removed from one another that the stations do 
not actually compete over-the-air (though they are both carried by 
MVPDs throughout the DMA). While the Grade B provision of the existing 
rule allowed common ownership of those stations, a DMA-based approach 
could prohibit common ownership. Therefore, the Commission seeks 
comment on whether and how to accommodate such a situation and other 
types of situations in which the Grade B provision allowed ownership of 
stations but a DMA-based rule would prohibit common ownership. The 
Commission seeks comment on how frequently such situations arise. The 
Commission tentatively concludes to grandfather ownership of existing 
combinations of television stations that would exceed the ownership 
limit under the proposed local television ownership rule by virtue of 
the change to a DMA-based approach. Compulsory divestiture is 
disruptive to the industry and a hardship for individual owners, and 
any benefits to the Commission's policy goals would likely be 
outweighed by these countervailing considerations. Consistent with the 
Commission's previous decisions, the Commission seeks comment regarding 
whether to allow the sale of combinations only if the station groups 
comply with the local television ownership rule in place at the

[[Page 2874]]

time the transfer of control or assignment application is filed. The 
Commission would continue to allow pro-forma changes in ownership and 
involuntary changes of ownership due to death or legal disability of 
the licensee. Are the Commission's policy goals served by allowing 
grandfathered combinations to be freely transferable in perpetuity, 
irrespective of whether the combination complies with the local 
television ownership rule? What is the effect on the stations if they 
are sold separately? Is it possible that such a rule could have the 
unintended consequence of causing a station to close? The Commission 
seeks comment on these tentative conclusions.
    40. Top-Four Prohibition. The top-four prohibition prevents mergers 
between two of the top-four-rated stations in a local market, subject 
to the other provisions of the local television ownership rule. In the 
previous media ownership proceeding, the Commission retained the top-
four prohibition because mergers between these stations ``would be the 
most deleterious to competition.'' Such mergers would often result in a 
single firm obtaining a significantly larger market share than other 
firms in the market and would reduce incentives for local stations to 
improve programming that appeals to mass audiences. The Commission also 
found that a significant ``cushion'' of audience share continued to 
separate the top-four stations from the fifth-ranked station. The 
Commission also found that mergers involving two top-four stations 
would harm competition in the local broadcast television advertising 
market. The Commission tentatively concludes that this market does not 
have a direct impact on consumers and should not be a focus of the 
Commission's inquiry. The Commission seeks comment on these tentative 
conclusions. The Commission tentatively concludes that retaining the 
top-four prohibition is necessary to promote competition for the 
reasons set forth in the 2006 Quadrennial Review Order. The Commission 
continues to believe that this rationale supports retention of the top-
four prohibition, and the Commission seeks comment on these tentative 
conclusions.
    41. The Commission seeks comment also on the impact of the top-four 
prohibition on its localism goal. NAB supports mergers among the top-
four stations in a local market because it argues that many of these 
stations cannot afford to produce local news independently. Allowing 
these stations to combine, they argue, could lead to increased news 
offerings. The Commission notes, however, that evidence suggests that 
the majority of top-four stations are already originating substantial 
amounts of local news. Moreover, there is generally a drop off between 
the fourth- and fifth-rated station in the market in the amount of 
local news broadcast. Based on this evidence, it is not clear that 
permitting mergers among top-four stations generally would result in 
additional local news or other local programming. The Commission seeks 
comment on these issues. The Commission also seeks information 
regarding whether the amount of local news provided between the top 
four stations and any others depends upon the size of the market and a 
community's ability to support multiple news outlets. As discussed in 
greater detail below, with respect to a potential waiver standard 
applicable to small markets, the Commission seeks comment on whether 
permitting common ownership in small markets, even between top-four 
stations, would promote additional local news.
    42. In addition, the Commission seeks comment on whether it should 
retain the top-four prohibition to also promote the Commission's 
viewpoint diversity goal. Media Ownership Study 9's theoretical 
analysis shows that a market structure with four firms--two firms 
presenting each viewpoint--provides efficient information transmission, 
and the experimental work confirms the value of competition among 
outlets with similar viewpoints. Although the Commission recognizes the 
limitations of this finding for the Commission's analysis, since a top-
four prohibition does not guarantee the theoretical result, Media 
Ownership Study 9 provides some support for maintaining at least four 
strong independent outlets. Furthermore, the Commission recognizes 
that, in some instances, there may be other significant sources of 
viewpoint diversity in a market (e.g., local newspapers or local radio 
stations). Nonetheless, because evidence suggests a link between more 
independent television outlets and increased viewpoint diversity in a 
market and given the significance of television as a source of local 
news and information, retaining the top-four prohibition should advance 
the Commission's viewpoint diversity goal. The Commission seeks comment 
on Media Ownership Study 9's findings, as well has how the top-four 
prohibition impacts the Commission's viewpoint diversity goal.
    43. Furthermore, the Commission invites commenters to provide 
evidence demonstrating why a different criterion might be more 
appropriate. For example, would it be more appropriate to impose a top-
five or the top-six prohibition in all markets or in certain markets? 
If so, why?
    44. Unlike the other ownership rules discussed here, the top-four 
component of the Commission's local television ownership rule relies on 
the in-market ranking of the stations to be commonly owned, and this is 
subject to change over time. Accordingly, the rule specifies that the 
ranks of the stations are to be determined ``[a]t the time of 
application to acquire or construct the station(s) * * *.'' If, at that 
time, both stations are ranked among the top-four stations in the 
market, common ownership would not be permitted. The Commission's local 
television ownership rule intends, then, to prohibit an entity from 
acquiring two top-four stations. However, a broadcaster that owns two 
television stations located in the same market will not be required to 
divest a station ``if the two merged stations subsequently are both 
ranked among the top four stations in the market.'' The Commission 
adopted this approach to encourage licensees to improve the quality of 
the programming and operations of their stations and so not to 
constrain commercial activity that is designed to effect such 
improvements.
    45. The point of applicability of the top-four prohibition at the 
time of an application to the Commission creates a potential for 
evading the intent of the rule. Accordingly, the Commission seeks 
comment on whether and, if so, how it should address circumstances in 
which a licensee obtains two in-market stations, both of which are 
ranked among the top-four stations in the market through agreements 
that may be considered the functional equivalent of a transfer of 
control or assignment of license in the context of this rule, but that 
do not require an application or prior Commission approval. For 
example, an existing licensee with two stations, one of which is among 
the top four stations in the market, purchases the network affiliation 
of another top-four-ranked market station and airs that network's 
programming on its second, lower-ranked station. The licensees party to 
this transaction also exchange call signs. As a consequence, the 
second, lower-ranked station becomes a top-four-ranked station and the 
licensee now controls two top-four-ranked stations in the market, but 
no application has been filed and none was required. How, if at all, 
should the Commission address such circumstances? Should the Commission 
amend the top-four prohibition to apply to these types of transactions? 
Should the Commission focus on instances

[[Page 2875]]

where licensees swap network affiliations, regardless of whether other 
types of agreements that impact station operation are also executed? 
How, if at all, should the Commission address situations where a 
network offers an existing duopoly owner (one top-four station and one 
station ranked outside the top four) a top-four-rated affiliation for 
the lower-rated station, perhaps because the network is no longer 
satisfied with the existing affiliate station and the duopoly owner has 
demonstrated superior station operation (i.e., earned the affiliation 
on merit)? Does such a transaction undermine the Commission's local 
ownership rules or goals? If so, how would the Commission craft a rule 
to address such circumstances, while at the same time not unduly 
constraining beneficial commercial activities?
    46. Eight-Voices Test. Under the eight-voices test, a merger 
between two in-market stations will not be permitted unless there are 
at least eight independently owned commercial and noncommercial 
televisions stations remaining in the market post merger, subject also 
to the top-four prohibition. The Commission, in the previous media 
ownership proceeding, determined that it was necessary to retain the 
eight-voices test in order to promote competition. Specifically, the 
Commission determined that maintaining a minimum of eight independently 
owned-and-operated television stations in a market would ensure that 
each market includes the four major networks (i.e., ABC, NBC, CBS, and 
Fox) and four independent competitors, and thus would spur competition 
in program offerings, including local news and public affairs 
programming. The Commission found that maintaining four independent 
competitors was necessary to offset the competitive advantage generally 
held by the top four stations in a market. In addition, the Commission 
continued to count only full-power television stations as voices 
``because the local television ownership rule is designed to preserve 
competition in the local television market.'' The Commission proposes 
to retain the eight-voices test for the reasons set forth in the 2006 
Quadrennial Review Order and seeks comment on this proposal. The 
Commission notes that the current eight-voices test relies on Grade B 
contour overlap to determine whether a voice is counted. Consistent 
with the Commission's decision to eliminate the Grade B contour overlap 
provision from the local television ownership rule, the Commission 
proposes to also eliminate the Grade B contour overlap criterion from 
the eight-voices test and rely instead on stations' inclusion in the 
same DMA as a basis for applying the rule. The Commission seeks comment 
on this proposal. Do any changes in the television marketplace warrant 
modification of the eight-voices test? For example, would adopting a 
six- or seven-voices test better promote the Commission's competition 
goal while allowing for additional common ownership?
    47. Though the Commission proposes to retain the eight-voices test, 
including the decision to exclude nonbroadcast television media from 
the voice count, in the event the Commission determines it is 
appropriate to consider alternative sources of video programming in the 
local television ownership rule, the Commission seeks comment 
specifically on whether market conditions have changed since the 2006 
quadrennial proceeding such that the Commission should consider 
alternative sources of video programming in the voice count. If the 
Commission should consider additional sources of video programming, how 
should the Commission account for those sources in the local market? 
Should noncommercial stations be included in figuring out the number of 
voices in the market? Or should the Commission consider as an 
additional voice video programming delivered via MVPDs or Internet 
video programming if such programming is available to a certain portion 
of the local market? If so, what should the threshold be and what 
source or sources of data should the Commission rely on in determining 
whether the threshold is met? Should the Commission consider adoption 
rates? Should the Commission consider, and if so how, the local or non-
local nature of the voice?
    48. As an alternative to the eight-voices test, the Commission 
seeks comment on whether to adopt a different framework for determining 
whether to permit common ownership in a local market. For example, the 
Commission could adopt a tiered approach, similar to the local radio 
ownership rule, in which numerical ownership limits are based on market 
rankings, such as the number of full-power television stations in the 
DMA or the Nielsen DMA rank (based on television households). As 
discussed below, the Commission tentatively proposes to retain the 
duopoly rule; therefore, any tiered approach the Commission may adopt 
would be limited to two tiers (i.e., markets where an entity could own 
up to two stations and markets where an entity could own only one 
station). Under such a tiered approach, how should the Commission 
determine the number of stations/Nielsen DMA rank associated with each 
tier? Do markets with similar numbers of television stations share 
particular characteristics and, if so, what are those characteristics? 
Do DMAs of a similar Nielsen rank share certain characteristics even 
though there may be a significant difference in the number of 
television stations? For example, the Commission has previously 
determined that the top 20 DMAs are more vibrant and have more media 
outlets than lower-ranked DMAs. What would be the benefits and/or 
drawbacks of such an approach in the television ownership rule?
    49. If the Commission were to adopt an approach other than the 
eight-voices test and determine that it is appropriate to consider 
alternative sources of video programming, should the Commission include 
alternative sources of video programming in the new test, and, if so, 
how? For example, could video programming delivered via MVPDs or the 
Internet be considered an additional market participant (i.e., the same 
as an additional broadcast television station) so long as a certain 
portion of the market has access to one or more of these services? In 
that case, what should that threshold be and what source or sources of 
data should the Commission rely on in determining whether the threshold 
is met? Should adoption also be considered? If the Commission were to 
rely on Nielsen DMA rank, how would the Commission incorporate these 
alternative sources into the rule, as Nielsen's ranking system does not 
take such sources into account? Do DMAs of a certain size share certain 
characteristics with respect to deployment and adoption of MVPDs and 
broadband Internet service?
    50. Numerical Limits. Under the current rule, a licensee can own up 
to two stations (i.e., a duopoly) in a market, subject to the 
requirements discussed above. The Commission concluded in the 2006 
Quadrennial Review Order that the duopoly rule remained necessary in 
the public interest to protect competition despite the increase in 
media outlets within the last decade. The Commission also declined to 
tighten the ownership limits, finding that the potential significant 
benefits from joint ownership permitted under the current rule 
outweighed claims of harm to diversity and competition.
    51. The Commission proposes to retain the current numerical limits. 
Based on the record in this proceeding, the Commission has not observed

[[Page 2876]]

sufficient changes in the marketplace to allow an entity to own more 
than two television stations in a local market. Moreover, the 
Commission notes that not every licensee owns the maximum number of 
stations permissible under the existing duopoly rule. Therefore, if the 
owner of a single station (or, singleton) believes the potential 
benefits of common ownership are necessary to compete effectively in a 
market where additional duopolies are permitted; there are 
opportunities to combine with other singletons under the existing rule. 
In addition, the Commission does not believe that the record in this 
proceeding supports limiting ownership to a single station in all local 
television markets. The Commission seeks comment on these tentative 
conclusions. For example, is there evidence that the current rule has 
produced actual harms to the Commission's policy goals such that 
tightening the numerical ownership limits would be justified? 
Alternatively, is there evidence that existing duopolies in the largest 
markets require additional common ownership to compete effectively, or 
that there are additional benefits in allowing existing duopolies to 
acquire additional stations?
    52. Market Size Waivers. Commenters have raised concerns that 
prohibiting all mergers in small markets could prevent broadcasters in 
these markets that may be facing severe competitive pressures from 
realizing potential efficiencies that could be achieved through 
allowing common ownership, even of top-rated stations, which could in 
turn promote the Commission's fundamental policy goals. Therefore, the 
Commission seeks comment on whether it should adopt a waiver standard 
for stations in markets where the proposed rule would limit station 
ownership to a single station for all licensees in the market and how 
such a standard would affect the Commission's policy goals. In the 
event the Commission determines such a waiver standard is appropriate, 
the Commission seeks comment below on how such a standard should be 
structured.
    53. The Commission seeks comment specifically on whether allowing 
certain combinations in small markets, even between top-four stations, 
would promote additional local news. The Local TV Coalition asserts 
that outside of the largest markets often only a few dominant stations 
can afford an independent news operation because stations in these 
markets earn less revenue than stations in large markets. Sainte 
Sepulveda, which owns one station in a small market and entered into 
sharing agreements with another in-market station, asserts that the 
savings generated by these sharing agreements are insufficient to 
implement a local newsgathering and production facility. According to 
NAB, stations in small markets are earning less profit than stations in 
large markets. In addition, NAB provides data that stations in small- 
and medium- sized markets spend less on their news operations than 
stations in large markets both in absolute terms and as a percentage of 
total station budget. NAB also submits data demonstrating that these 
stations provide less local news content and devote less station staff 
to news production than stations in large markets. The Commission seeks 
comment on whether adopting a waiver standard for small markets would 
promote more news offerings in these markets. In particular, the 
Commission notes that there is some evidence to suggest that markets 
with six or fewer stations may be less able to support four local 
television news operations. Should a market size waiver standard take 
this information into account? Would allowing mergers under this 
proposed standard result in a loss of viewpoint diversity in those 
markets? If so, would such mergers produce sufficient gains in 
competition and/or localism to overcome the reduction in viewpoint 
diversity?
    54. The Commission requests comment also on the criteria it should 
adopt for any market size waiver standard. Should the Commission adopt 
some or all of the current failed/failing station waiver policy? What 
financial documentation should the Commission require? Alternatively, 
should the Commission adopt a standard based simply on structural 
considerations--the size of the market and the number of outlets? For 
example, should the Commission permit a combination if the number of 
independent media owners in the market post merger would be at least 
two or three? If so, what independent media owners should the 
Commission consider? Would this approach create a race to merge that 
would reward the first to do so and foreclose other market stations 
from achieving similar competitive advantages? Should the Commission 
consider the combined market share of the stations seeking to combine 
ownership? For example, should one of the criteria for a waiver be that 
the proposed station combination would not exceed a certain percent of 
the audience or revenue share in the local market? Should the 
Commission require the applicants to make affirmative commitments to 
initiate/increase local news offerings? If so, should the Commission 
require the station owner to demonstrate compliance with that 
commitment and for how long? Should the Commission adopt specific 
penalties for noncompliance? What other factors should the Commission 
consider?
    55. Finally, should the Commission consider alternative definitions 
of the markets in which this waiver approach would apply? For example, 
should the Commission adopt a less restrictive definition of those 
``small markets'' in which the rule would apply, perhaps by including 
those markets where a single duopoly would be permitted under the 
proposed rule? The Commission invites comment on whether these markets 
might benefit if top-four combinations were permitted, with some 
restrictions, so that sufficient critical mass could be achieved to 
support more and/or better local news and public affairs programming. 
For example, it may be that in such markets the top four stations do 
not all produce local news and that only two or three news operations 
could be supported by the market. In these circumstances, should the 
Commission consider permitting mergers among top-four stations but not 
between the number one and number two stations, or some variant 
thereof, if such an outcome would increase the quantity and quality of 
local programming provided? The Commission seeks comment on this 
approach and on the practical components of any rules to govern such 
situations.
    56. Multicasting. The digital television transition was completed 
on June 12, 2009. As a result, all full-power television stations are 
now broadcasting in digital and have the ability to use their available 
spectrum to broadcast not only their main program stream but also, if 
they choose, additional program streams, an activity commonly referred 
to as multicasting. UCC et al. argue that the ability to multicast 
justifies a return to the Commission's previous single-station rule. 
According to UCC et al., multicasting allows broadcast stations to 
provide multiple program streams without acquiring an additional in-
market station. Furthermore, Time Warner Cable (TWC) argues that 
multicasting permits stations to create ``virtual duopolies'' by 
affiliating with multiple networks and multicasting their programming. 
TWC identified a report asserting that 68 instance of dual affiliation 
exist that involve the Big Four networks. On the other hand, Belo and 
NAB argue that multicasting is not a substitute for duopoly ownership 
and does not justify retaining or tightening the local television 
ownership rule.

[[Page 2877]]

They note that multicast channels have difficulty attracting 
advertisers because these channels are not entitled to must-carry 
rights and typically lack established programming line-ups. 
Furthermore, not all stations will elect to air multiple program 
streams, instead using the available spectrum to provide mobile video, 
high-quality, high-definition (HD) programming, or other innovative 
services.
    57. With the digital transition complete, the Commission seeks 
comment on whether the transition has eliminated the need for the local 
television ownership rule to permit common ownership in local 
television markets. Specifically, does multicasting replicate the 
potential benefits to station owners and viewers associated with owning 
a second in-market station (e.g., efficiency gains and improved 
programming) or are there benefits unique to common ownership that 
cannot be replicated by multicasting? If the Commission finds that 
multicasting does replicate the potential benefits of common ownership, 
both to station owners and viewers, should the Commission continue to 
permit common ownership? Should the Commission limit the ability of 
station owners to form dual affiliations involving certain networks? 
The Commission seeks comment on specific instances of dual affiliation 
and on how such situations have impacted the markets where they occur. 
The Commission notes that broadcasters are not required to use their 
additional spectrum to multicast, and that some stations will instead 
elect to use their additional spectrum to offer other services (e.g., 
mobile video). How, if at all, should that affect the Commission's 
decision regarding whether multicasting justifies a tightening of the 
duopoly rule? The Commission also seeks comment on how multicasting is 
affecting stations in small markets, including specifically whether 
stations in small markets have been successful in negotiating for MVPD 
carriage of their subchannels and what revenue and viewer benefits 
these channels generate. The Commission seeks comment on whether and 
how to consider multicasting with regard to any waiver standard in 
small markets.
    58. The Commission notes that Media Ownership Study 10, which 
studies the impact of the ownership rules on multicasting, found some 
evidence to suggest that variations in ownership structure have little 
effect on the extent of multicasting. Media Ownership Study 10 finds 
that other market characteristics, such as market size and the number 
of television stations operating in a market, may have a greater impact 
on the extent of multicasting than ownership structure. The Commission 
seeks comment on the findings of Media Ownership Study 10.
    59. Minority and Female Ownership. According to DCS, there are 
still significant barriers to entry by minority owners in both the 
traditional and new media industries; DCS supports measures to 
facilitate minority media ownership. DCS states that minority-owned 
stations are more likely to provide programming geared toward minority 
audiences and that minority communities are underserved as a result of 
the lack of minority media ownership. The Commission seeks comment on 
how the proposed local television rule would affect minority and female 
ownership opportunities. The Commission seeks comment on how promotion 
of diverse television ownership promotes viewpoint diversity. The 
Commission requests commenters to provide additional data supporting 
their positions.
2. Local Radio Ownership Rule
a. Introduction
    60. The Commission has intended the local radio ownership rule to 
promote competition, diversity, and to some degree localism. The 
current local radio ownership rule, retained without modification in 
the previous media ownership proceeding, allows an entity to own: (1) 
Up to eight commercial radio stations in radio markets with 45 or more 
radio stations, no more than five of which can be in the same service 
(AM or FM), (2) up to seven commercial radio stations in radio markets 
with 30-44 radio stations, no more than four of which can be in the 
same service (AM or FM), (3) up to six commercial radio stations in 
radio markets with 15-29 radio stations, no more than four of which can 
be in the same service (AM or FM), and (4) up to five commercial radio 
stations in radio markets with 14 or fewer radio stations, no more than 
three of which can be in the same service (AM or FM), provided that an 
entity may not own more than 50 percent of the stations in such a 
market, except that an entity may always own a single AM and single FM 
station combination. In Prometheus II, the Court upheld the 
Commission's decision in the last media ownership proceeding to retain 
the local radio ownership rule, specifically concluding that the 
Commission was justified in retaining the existing numerical limits and 
the AM/FM subcaps.
    61. Based on the record in this proceeding, the Commission 
tentatively concludes that the current local radio ownership rule 
remains necessary in the public interest as a result of competition. 
The Commission tentatively agrees with the previous determination that 
competition-based radio ownership limits promote viewpoint diversity 
``by ensuring a sufficient number of independent radio voices and by 
preserving a market structure that facilitates and encourages new entry 
into the local media market.'' The Commission also tentatively agrees 
with the previous determination that a competitive local radio market 
helps to promote localism, as a competitive marketplace will lead to 
the selection of programming that is responsive to the needs and 
interests of the local community. The Commission seeks comment on these 
tentative conclusions.
    62. As discussed in greater detail below, the Commission 
tentatively concludes that it should retain the existing numerical 
ownership limits and market tiers, but still seeks comment on whether 
to change the existing numerical limits and/or market tiers. The 
Commission also proposes to retain the AM/FM subcaps, but seeks comment 
on the impact of the ongoing digital radio transition on the 
differences between AM and FM stations. In addition, the Commission 
seeks comment on whether to adopt a specific waiver standard and, if 
so, what criteria to apply. Finally, the Commission seeks comment on 
the impact of the local radio ownership rule on minority and female 
ownership.
b. Background
    63. In the NOI, the Commission sought comment on whether the 
current local radio numerical ownership limits are appropriate to 
achieve the Commission's policy goals and whether to account for other 
sources of audio programming in the rule.
    64. Broadcasters generally support loosening the ownership limits, 
contending that common ownership of radio stations in the same market 
does not harm competition, as consolidation has been shown to have no 
effect on advertising rates. In addition, broadcasters assert that 
radio stations can, and do, change formats with ease, which they claim 
should make the possibility of coordinated behavior among owners an 
insignificant concern to the Commission. Moreover, broadcasters argue 
that radio ownership limits are not necessary to foster program 
diversity or localism. According to Clear Channel, econometric analysis 
from the 2006 quadrennial review shows that group

[[Page 2878]]

ownership of radio stations has enhanced diversity of programs and 
music formats and substantially increased radio broadcasters' ability 
to serve the local needs and interests of their communities. Clear 
Channel's econometric analysis relates to the impact of common 
ownership on format diversity. The Commission has previously ``declined 
to rely on format diversity to justify the local radio ownership 
rule.'' In this proceeding, the Commission tentatively concludes that 
it should focus the Commission's analysis on viewpoint diversity. The 
Commission seeks comment on this tentative conclusion. Clear Channel 
states that the company's experience demonstrates that group owners 
have natural incentives to counter-program their stations and that 
there are efficiencies and economies associated with higher levels of 
common ownership.
    65. Public interest groups urge the Commission to retain the local 
radio ownership rule and argue that radio station ownership caps are 
key to preventing the concentration of economic, social, and political 
power. Communications Workers of America (CWA) states that ``in 1996, 
there were 10,257 commercial radio stations and 5,133 radio owners.'' 
In 2010, ``there [were] 11,202 commercial radio stations and 3,143 
owners, representing a 39 percent decrease in the number of owners 
since 1996.'' Future of Media Coalition (FMC) argues that consolidation 
in the radio industry ``has no demonstrable public benefit'' and that 
``[r]adio programming from the largest station groups remains focused 
on just a few formats--many of which overlap with each other, creating 
further homogenization.''
    66. In the Commission's studies it sought data to help it determine 
how best to structure a local radio ownership rule to satisfy the 
Commission's policy goals. Particularly relevant to the local radio 
rule, Media Ownership Study 5 analyzes the quantity of radio stations 
that are classified as news-formatted stations in the top 300 Arbitron 
metro areas. Media Ownership Study 7 addresses radio station ownership 
structure and minority-targeted programming using data on radio station 
formats.
c. Discussion
    67. Market. Broadcasters generally assert that they are facing 
increased competition from new audio platforms and that this increased 
competition has led, at least in part, to a reduction in advertising 
revenues, which could threaten the continued viability of the broadcast 
radio industry. Broadcasters contend that Internet-based audio 
platforms such as Pandora and Apple's iTunes have ``transitioned--in 
just a few years--from new market entrants to full-fledged competitors 
of terrestrial radio broadcasters.'' Broadcasters assert that none of 
the new competitors to free, over-the-air radio broadcasting are 
constrained by government-imposed limits on the number of outlets that 
can be owned, and therefore, limiting ownership of broadcast stations 
places broadcasters at a disadvantage. For this reason, according to 
broadcasters, the Commission should modify the local radio ownership 
rule to permit increased common ownership in local markets.
    68. The Commission tentatively concludes that broadcast radio 
stations compete in the radio listening market and that it is not 
appropriate, at this time, to expand the relevant market to include 
nonbroadcast sources of audio programming. This tentative conclusion is 
consistent with previous Commission decisions to not expand the 
relevant market to include satellite radio and Internet audio 
streaming. The Commission has also found previously that radio 
broadcasters compete in the radio advertising and radio program 
production markets. The Commission tentatively concludes that these 
markets do not have a direct impact on consumers and should not be the 
focus of the Commission's inquiry. The Commission seeks comment on 
these tentative conclusions. The Commission notes that the current 
record suggests that the audio marketplace has changed since the last 
media ownership review in terms of the number of choices consumers have 
to access audio programming, the number of audio programming providers, 
and audio programming choices. For instance, satellite radio 
subscribership has grown significantly, and millions of listeners now 
access audio content via the Internet. However, satellite radio still 
only serves a small portion of all radio listeners and millions of 
listeners do not have broadband Internet access. Moreover, these audio 
programming alternatives are national platforms that are not likely to 
respond to conditions in local markets. Therefore, the Commission 
proposes that the local radio ownership rule continue to focus on 
promoting competition among broadcast radio stations in local radio 
listening markets. The Commission seeks comment on these tentative 
conclusions.
    69. These tentative conclusions not withstanding, the Commission 
seeks additional comment on the impact of new audio technologies on the 
continued viability of broadcast radio stations. Broadcast radio 
audiences appear stable, the recent decline in advertising has been 
replaced by gains in 2010, and overall advertising revenue share is 
predicted to decline only slightly through 2019. Does the apparent 
resiliency of the broadcast radio industry despite the growth of new 
technologies suggest that broadcast radio is unique? If so, what 
characteristics of broadcast radio make it unique, and is it 
appropriate to consider other technologies in the local radio ownership 
rule? How, if at all, do nonbroadcast sources of audio programming 
contribute to the Commission's policy goals? For example, do these 
alternatives to broadcast radio make programming and/or business 
decisions based on competitive considerations in local markets? Should 
the Commission determine that, contrary to its tentative conclusion, 
the local radio ownership rule should focus on promoting competition 
among broadcast radio stations and alternatives to broadcast radio 
stations in local radio markets, the Commission seeks comment below on 
whether and how to include these sources in the rule, either in 
determining market size or in setting the numerical limits.
    70. Market Size Tiers. The Commission proposes to retain the 
current approach of numerical ownership limits based on market size 
tiers. Based on the Commission's years of experience in applying the 
rule, the Commission believes that the existing framework best ensures 
that the local radio ownership rule serves the Commission's policy 
goals and that limiting common ownership helps to prevent the formation 
of market power in local markets by ensuring that a few owners cannot 
``lock up'' the available--limited--radio spectrum in a local market. 
Moreover, this bright-line approach provides transaction participants 
with a clear understanding of which transactions comply with the 
ownership limitations and allows for timely processing of assignment/
transfer applications. The Commission seeks comment on these tentative 
conclusions.
    71. The Commission tentatively concludes that it will continue to 
determine market size based on the number of commercial and 
noncommercial radio stations in the relevant local market. This 
tentative conclusion is consistent with the Commission's goal of 
promoting competition among local broadcast radio stations and the 
Commission's

[[Page 2879]]

decisions in the previous two media ownership proceedings not to 
consider nonbroadcast programming in the rule itself. However, to the 
extent the Commission determines it is appropriate to consider these 
alternative sources in the rule, the Commission seeks comment on 
whether to count these alternative sources in defining market size to 
determine how many stations an entity may own, and, if so, how. To what 
extent does the presence of these alternatives vary by market (e.g., 
Internet-based audio services) or remain constant across markets (e.g., 
satellite radio)? Should the Commission consider broadband deployment 
and/or adoption in a particular local market when determining whether 
to count Internet-based audio services? Should the Commission consider 
fixed or wireless broadband, or both? How much online radio listening 
is devoted to streams of broadcast radio stations, and how should this 
amount impact the weight of the impact of internet audio streaming in 
local markets? Should the Commission consider availability and/or 
adoption of satellite radio in local markets?
    72. Numerical Limits. The Commission tentatively concludes that it 
should retain the existing numerical ownership limits for each existing 
market size tier. The Commission retained these numerical limits in the 
last media ownership proceeding, finding that public interest would not 
be served either by relaxing the numerical limits or by making the 
numerical limits more restrictive. In light of the degree of 
consolidation in the broadcast radio market following the relaxation of 
the local radio ownership limits in the 1996 Act, the Commission 
continues to believe that further relaxation of the numerical limits is 
not appropriate. Furthermore, the Commission continues to believe that 
making the limits more restrictive would be inconsistent with 
Congress's decision to relax the ownership limits and too disruptive to 
the radio marketplace. In light of these considerations, the Commission 
tentatively concludes that it is appropriate to continue to retain the 
numerical ownership limits adopted by Congress in the 1996 Act.
    73. The Commission seeks comment, however, on whether to adopt any 
changes to the numerical ownership limits. Is there evidence that the 
existing limits no longer serve the Commission's policy goals or have 
caused specific harm to the radio broadcast industry? Do changes in the 
marketplace require modification of these limits, or do the 
characteristics of certain markets justify increasing the ownership 
limits in those markets? For example, should the Commission allow 
additional common ownership in markets with substantially more than 45 
stations, now the top tier? Some larger radio markets may contain more 
than 100 stations, yet the ownership limit is the same--eight 
stations--in each. Should the Commission, as Clear Channel suggests, 
allow for increased common ownership in larger markets by creating 
additional tiers? Clear Channel suggests an increase from eight to ten 
in the number of stations a single entity may own in markets with 
between 55 and 64 stations and from eight to twelve the number of 
stations that a single entity may own in markets with 65 or more 
stations.
    74. As an alternative to considering nonbroadcast audio programming 
in determining the size of a radio market, to the extent the Commission 
determines it is appropriate to consider these sources in the rule, the 
Commission seeks comment on whether to include these sources when 
setting the numerical limits and, if so, how it would do so. For 
example, the Commission could allow for ownership of an additional 
station in markets where alternative sources of audio programming are 
available, even though the market tier was established solely by the 
number of broadcast radio stations in the market. If the Commission 
does so, how should it determine whether such sources are available? 
For example, are Internet-based audio services consistently available 
across markets of similar sizes? Should the Commission take adoption 
rates into account? For example, satellite radio is generally 
consistently available across a local market, but the number of 
subscribers remains low compared to the total number of radio 
listeners. How should this factor into the Commission's consideration 
of the impact of satellite radio in local markets?
    75. AM/FM Subcaps. In the NOI, the Commission sought comment on 
whether to retain the AM/FM subcaps. The Commission previously 
concluded that retaining the subcaps serves the public interest by 
promoting new entry into broadcast radio ownership, particularly by 
small businesses, including minority- and women-owned businesses. The 
Commission also concluded that technical and marketplace differences 
between AM and FM stations supported retention of the subcaps, 
consistent with the Commission's goal to protect competition in local 
radio markets.
    76. Those advocating elimination of the subcaps argue that recent 
advances in technology, including online streaming, HD radio 
technology, and the use of FM translators to augment AM station 
broadcast signals, have improved the ability of AM radio to compete in 
the marketplace. In addition, they assert that many of the top stations 
in large and small markets are AM stations, which undercuts any 
argument that AM radio will flounder if the subcaps are removed. Some 
broadcasters also assert that lifting the subcaps will create new 
ownership opportunities of divested station for entities, which include 
minorities, women, and small businesses, because broadcasters will buy 
and sell certain in-market stations to strengthen existing station 
clusters. In addition, they state that the owners of these station 
clusters would then be in better financial positions to devote 
additional resources to local programming. Mt. Wilson, however, asserts 
that subcaps remain necessary to promote competition in local radio 
markets.
    77. The Commission proposes to retain the current AM/FM subcaps for 
the reasons set forth in the 2006 Quadrennial Review Order. The 
Commission continues to believe that this rationale supports retention 
of the subcaps and seeks comment on this proposal.
    78. In addition, the Commission seeks comment on the impact, if 
any, of the ongoing introduction of digital radio on the AM/FM subcaps. 
AM stations face unique technical limitations with respect to FM 
stations, such as lesser bandwidth and inferior audio signal fidelity. 
In addition, unlike FM signals, AM signal propagation varies with the 
time of day (i.e., AM signals travel much farther at night than during 
the day), and many AM stations are required to cease operation at 
sunset. As a result, FM stations tend to have greater listenership and 
revenues than AM stations, though this is not necessarily true of all 
stations in all markets. The Commission has previously stated that 
digital radio may help AM stations to even the playing field with FM 
stations.
    79. What is the impact of digital radio on the technological and 
economic differences between AM and FM stations? The Commission notes 
that, unlike the digital television transition, radio stations have no 
obligation to operate in digital mode. At present, far more FM stations 
have provided the Commission with a notice of commencement of digital 
operations than AM stations, though the vast majority of stations in 
both services have not provided such notice. How, if at all, should 
these facts inform the Commission's analysis of the impact of digital 
operations on the AM/FM

[[Page 2880]]

subcaps? At this stage, has digital radio helped address the technical 
disadvantages of AM stations, such as fidelity and signal propagation, 
and led to a more balanced competition between AM and FM stations 
generally? Is it premature to consider the impact of digital radio, 
given the lack of widespread digital radio options (both AM and FM)? 
How, if at all, should the lack of a deadline to operate in digital 
affect this decision? Should the Commission also consider the level of 
consumer adoption when determining the impact of digital operations on 
the subcaps? What are the current levels of commercial availability and 
consumer adoption of radios capable of receiving digital signals?
    80. Some broadcasters support elimination of the subcaps so they 
can acquire additional AM stations in order to aggregate AM stations to 
provide full signal coverage in large geographic areas or in areas with 
mountainous terrain. The Commission notes that it recently changed the 
FM translator rules ``to allow AM stations to use currently authorized 
FM translator stations to retransmit their AM service within their AM 
stations' current coverage areas.'' Approximately 500 a.m. stations are 
currently retransmitting their signals via FM translators, which has 
allowed some AM stations to operate at night for the first time and--
according to anecdotal reports--has allowed certain AM stations to more 
effectively serve their communities. In light of this success, the 
Commission recently sought comment on whether to extend this 
rebroadcast authority to new FM translators with applications for 
authorization on file as of May 1, 2009. What has been the impact of 
the revised FM translator rule on the ability of AM stations to provide 
expanded coverage in their service areas without the need to acquire 
additional AM stations? If these stations are now able to provide 
expanded coverage in their service areas without acquiring additional 
AM stations, is elimination of the AM/FM subcaps also necessary to 
address signal coverage concerns? Why or why not? How, if at all, has 
this rule change impacted other AM technical/competition concerns, 
aside from the signal coverage issue raised by some broadcasters?
    81. Market Size Waivers. The Commission has previously declined to 
adopt a specific waiver standard for the local radio ownership rule; 
instead, parties ``may seek a waiver under the `good cause' waiver 
standard in [the Commission's] rules.'' Given the significant amount of 
common ownership currently permitted, is a specific waiver standard 
warranted, or should applicants continue to be required to justify a 
waiver of the rule under the Commission's general waiver standard? If 
the Commission determines that a specific waiver standard is warranted, 
what are appropriate waiver criteria? Should such a waiver standard 
apply equally to all markets, regardless of size, or should the 
Commission adopt different standards based on market size? Should the 
Commission limit the waiver standard to smaller markets? If so, what 
characteristics of those markets establish the need for a specific 
waiver standard (to the exclusion of larger markets)?
    82. Minority and Female Ownership. As noted above, DCS suggests 
that significant barriers to entry for minority ownership remain in 
both the traditional and new media industries. The Commission seeks 
comment on DCS' assertion that minority communities are underserved as 
a result of the lack of minority media ownership, specifically as it 
relates to the radio market. Moreover, the Commission seeks comment on 
how the local radio rule affects minority and female ownership 
opportunities. The Commission asks that commenters be as specific as 
possible when identifying particular aspects of the rule that may 
impact the opportunity for minority and female entry into the radio 
business and ownership of broadcast stations. How is any such impact 
relevant to the Commission's goals, in particular promoting viewpoint 
diversity?
    83. Media Ownership Study 7 analyzes the relationship between 
ownership structure and the provision of radio programming targeted to 
African-American and Hispanic audiences. Acknowledging that Black and 
Hispanic listeners have different viewing preferences from the majority 
White population, the data suggest that there is a positive 
relationship between minority ownership of radio stations and the total 
amount of minority radio programming available in the market. The data 
do not indicate a clear relationship between ownership concentration 
and programming variety, although the cross-sectional analysis does 
suggest that concentration promotes variety. A minority-owned radio 
station may not be more popular with minority audiences than a non-
minority-owned radio station providing the same minority-targeted 
format. If minority-owned stations have smaller coverage areas they 
will necessarily have lower ratings and therefore appear less popular 
even though they may be more popular among those consumers that can 
receive the signal. The Commission seeks comment on the methodology and 
conclusions of Media Ownership Study 7 and how its conclusions should 
influence the Commission's decisions on the proposed local radio rule. 
The Commission requests commenters to provide additional data 
supporting their positions.
3. Newspaper/Broadcast Cross-Ownership Rule
a. Introduction
    84. Newspaper/broadcast cross-ownership was first prohibited in 
1975 to preserve viewpoint diversity in local markets. In the 2006 
Quadrennial proceeding, the Commission concluded that some limitations 
on newspaper/broadcast cross-ownership continued to be necessary to 
promote viewpoint diversity. The Commission recognized, however, that 
certain newspaper/broadcast combinations may promote its localism goal. 
It found that the opportunity for sharing newsgathering resources and 
for realizing other efficiencies derived from economies of scale and 
scope may improve the ability of commonly owned media outlets to 
provide local news and information. In the 2002 Biennial Review Order, 
the Commission determined that a ban on newspaper/broadcast cross-
ownership was not necessary to promote its competition goal. The 
Commission concluded that most advertisers do not consider newspapers, 
television stations, and radio stations to be close substitutes for 
each other, and that therefore newspapers and broadcast stations do not 
compete in the same product market.
    85. The newspaper/broadcast cross-ownership rule prohibits common 
ownership of a full-service broadcast station and a daily newspaper if: 
(1) A television station's Grade A service contour completely 
encompasses the newspaper's city of publication; (2) the predicted or 
measured 2 mV/m contour of an AM station completely encompasses the 
newspaper's city of publication; or (3) the predicted 1 mV/m contour 
for an FM station completely encompasses the newspaper's city of 
publication. In the 2006 Quadrennial proceeding, the Commission 
concluded that an absolute prohibition on newspaper/broadcast 
combinations is overly broad. It added waiver provisions to the rule 
whereby a waiver would be presumed to be not inconsistent with the 
public interest if a daily newspaper in a top 20 DMA sought to combine 
with: (1) A radio station or (2) a television station, and (a) the 
television station was not ranked among the top

[[Page 2881]]

four stations in the DMA and (b) at least eight independently owned and 
operated ``major media voices'' would remain in the DMA after the 
combination. For purposes of the newspaper/television combinations, 
major media voices would include full-power commercial and 
noncommercial television stations and major newspapers. For markets 
below the top 20 DMAs, the Commission would presume a waiver of the 
newspaper/broadcast cross-ownership rule to be inconsistent with the 
public interest.
    86. Under the 2006 rule, a waiver applicant could overcome this 
negative presumption by demonstrating, with clear and convincing 
evidence, that the merged entity would increase the diversity of 
independent news outlets and the level of competition among independent 
news sources in the relevant market. The Commission would reverse the 
negative presumption in two limited circumstances: (1) When the 
proposed combination involved a failed/failing station or newspaper, or 
(2) when the proposed combination was with a broadcast station that was 
not offering local newscasts prior to the combination, and the station 
would initiate at least seven hours per week of local news after the 
combination.
    87. Under both presumptions, the following four factors would 
inform the Commission's review of a proposed combination: (1) The 
extent to which cross-ownership would serve to increase the amount of 
local news disseminated through the affected media outlets in the 
combination; (2) the ability of each affected media outlet in the 
combination to employ its own staff exercise its own independent news 
judgment; (3) the level of concentration in the DMA; and (4) the 
financial condition of the newspaper or broadcast station, and if the 
newspaper or broadcast station was in financial distress, the owner's 
commitment to invest significantly in newsroom operations.
    88. In Prometheus II, the Third Circuit vacated and remanded the 
newspaper/broadcast cross-ownership rule as modified by the Commission 
in the 2006 Quadrennial proceeding. The court based its decision on its 
conclusion that the Commission failed to comply with the notice and 
comment provisions of the Administrative Procedures Act. The court did 
not address the Commission's substantive modifications to the rule. 
Because the court reinstated the former rule, the absolute ban on 
newspaper/broadcast cross-ownership remains in effect, with no specific 
provision for waivers.
    89. Consistent with previous Commission findings, the Commission 
tentatively concludes that some newspaper/broadcast cross-ownership 
restrictions continue to be necessary to protect and promote viewpoint 
diversity. Research shows that newspapers and local television 
stations, and their affiliated Web sites, are the primary sources that 
consumers rely on for local news. The Commission continues to believe, 
however, that a blanket prohibition on newspaper/broadcast combinations 
is overly broad and does not allow for certain cross-ownership that may 
carry public interest benefits. The Commission tentatively affirms its 
earlier findings that the opportunity to share newsgathering resources 
and realize other efficiencies derived from economies of scale and 
scope may improve the ability of commonly owned media outlets to 
provide local news and information, and the Commission seeks comment on 
how cross-ownership may promote the Commission's localism goal. The 
Commission notes here the observations of the Information Needs of 
Communities Report with regard to newspaper/broadcast cross-ownership. 
The report was written by an ongoing, informal working group that 
consisted of Commission staff, industry scholars, and consultants. As 
noted in the report, the views expressed in the report ``do not 
necessarily represent the views of the Federal Communications 
Commission, its Commissioners or any individual Bureaus or Offices.'' 
The report observes that newspaper/television cross-ownership ``could 
lead to efficiencies and improved business models that might result in 
more reporting resources,'' thereby promoting the Commission's localism 
goal. The report cautioned, however, that cross-ownership may instead 
``simply improve the bottom line of a combined company without actually 
increasing the resources devoted to local newsgathering.'' In addition, 
the Commission tentatively concludes, as the Commission found in 
previous ownership reviews, that newspapers and broadcast stations do 
not compete in the same product market and, therefore, that the rule is 
not necessary to promote the Commission's competition goal.
    90. The Commission continues to believe that the nation's largest 
markets can accommodate some cross-ownership without unduly harming 
viewpoint diversity. For reasons set forth below, the Commission 
proposes to adopt a rule that includes elements of the 2006 rule, 
including the top 20 DMA demarcation point, the top-four television 
station restriction, and the eight remaining voices test. The 
Commission tentatively concludes that viewpoint diversity is best 
achieved by analyzing these elements for proposed newspaper/broadcast 
combinations on a case-by-case basis. The Commission seeks comment on 
whether alternative approaches or different demarcations and 
restrictions would promote the Commission's diversity goal more 
effectively. For newspaper/television combinations, the Commission 
proposes to use Nielsen DMA definitions to determine when the rule is 
triggered, given the lack of a digital equivalent to the analog Grade A 
service contour.
    91. The 2006 rule contained some elements that may not be necessary 
to promote the public interest. Specifically, as explained below, the 
Commission seeks comment on whether the detailed elements describing 
what showings are required to overcome the rule's stated presumptions 
and the showings required of all applicants unnecessarily increased the 
rule's subjectivity and complexity. The Commission also seeks comment 
on whether to retain some or all of the factors the Commission adopted 
under the 2006 rule to consider in cross-ownership transactions. The 
Commission also solicits input on whether to formulate a specific 
waiver provision that relies on clear, objective, and enforceable 
standards and a burden of proof standard for waiver requests. Finally, 
the Commission seeks comment on the impact of the newspaper/broadcast 
cross-ownership proposals on minority and female ownership 
opportunities.
b. Background
    92. In the NOI, the Commission asked whether newspaper/television 
combinations should be treated differently from newspaper/radio 
combinations, as they are in the 2006 rule. The Commission sought 
comment on the impact of marketplace changes in the newspaper industry, 
which has seen increased competition for audiences and declining 
revenues. The Commission elicited input on the extent to which relaxing 
the rule could benefit newspapers and result in a net gain of local 
news and information. In the NOI, the Commission noted that consumers 
are increasingly getting their news from online and mobile platforms 
and asked about the significance of this trend for the newspaper 
industry. The Commission sought comment on whether relief from the 2006 
rule, if any, should be provided through a revised rule or a waiver 
standard, and the factors that should apply under either approach. For 
example, the Commission

[[Page 2882]]

asked whether distinctions should be drawn based on market size and the 
number of voices remaining post-transaction. The Commission sought 
comment also on how to evaluate the efficacy of the rule in terms of 
the Commission's goals and the effects on the market participants.
    93. Among the commenters responding to the NOI, newspaper and 
broadcast owners recommend repeal or relaxation of the rule, and public 
advocacy groups support the rule's retention. Supporters of repeal or 
relaxation of the rule argue that cross-ownership enhances localism and 
supports diverse points of view. They describe an evolution of the 
marketplace, including introduction of the Internet and other non-
traditional media, such as iPhone applications, that they assert 
provide local and diverse content. They describe serious economic 
challenges faced by newspapers and suggest that the only way for them 
to survive is by entering combinations and creating economies of scale. 
Commenters state that: Newspaper circulation is in a downward spiral 
since 2008, reaching its lowest point in nearly 70 years in October 
2009; advertising revenues, which traditionally make up 80 percent of 
overall newspaper revenues, have dropped 43 percent from 2007 through 
2009; and several newspaper publishers have sought bankruptcy 
protection, while others have ended their print editions. They state 
that the newspapers that remain in business have closed domestic and 
foreign bureaus, laying off thousands of journalists. Newspaper 
Association of America (NAA) cites to Project for Excellence in 
Journalism's (PEJ) recent estimate that newspapers will devote $1.6 
billion less annually to news reporting in 2010 than they were able to 
do just three years ago.
    94. Supporters of the 2006 rule--or a strengthened rule--assert 
that restrictions remain necessary to protect against further 
concentration in an industry already characterized by concentrated 
vertical ownership and consolidated local ownership. They argue that 
the 2006 rule provides flexibility where cross-ownership efficiencies 
might benefit the public interest and permit combinations in failing 
business situations, while requiring maintenance of separate newsrooms 
for the purpose of diversity. They argue that the only benefits of 
cross-ownership are financial benefits for the owners, which they 
assert arise at the cost of diversity and localism for citizens. In the 
Commission's studies, the Commission sought data to help it analyze 
questions related to the relevance of the newspaper/broadcast cross-
ownership rule to the Commission's policy goals. Particularly, the 
Commission measured whether the presence of cross-owned stations 
affects the amount of local news provided at the local market level and 
at the individual station level. The Commission also measured localism 
by analyzing consumer satisfaction with the amount of local news 
available in markets. In addition, the Commission studied the impact of 
cross-ownership on viewpoint diversity in media markets. The Commission 
seeks comment on the extent to which its proposed approaches for 
newspaper/television combinations are supported by data from the 
Commission's studies or other available data.
c. Discussion
    95. The Commission tentatively concludes that some restrictions on 
newspaper/broadcast combinations continue to be necessary to promote 
viewpoint diversity within local markets. The Commission seeks comment 
on this tentative conclusion. There is evidence that Americans continue 
to rely on local television stations and newspapers for the majority of 
their local news, despite the rising popularity of the Internet as a 
platform for access to news. Studies have found that approximately 
three-quarters of Americans obtain news from a local television 
station. In addition, although newspaper readership has declined in 
recent years, in 2010, 37 percent of Americans reported reading a 
newspaper the preceding day.
    96. Although consumers are turning increasingly to the Internet for 
news and information generally and seeking new platforms on which to 
access local news, the Web sites most frequently viewed for news and 
information are affiliated with legacy media. In the fall of 2009, 
among the top roughly 200 news Web sites based on traffic, 67 percent 
were associated with legacy media, and 48 percent were associated with 
newspapers in particular. More recently, the Information Needs of 
Communities Report concluded that ``from a traffic perspective, 
newspapers have come to dominate the Internet on the local level.'' 
Along with newspaper Web sites, local television news Web sites rank 
among the most popular news Web sites. Indeed, Media Ownership Study 6 
looks at online local news content and finds very little that is not 
affiliated with a newspaper or television or radio station. Other Web 
sites offering local news presently receive little traffic. Even where 
there are Internet-only local news outlets, the study suggests that the 
aggregate weekly quantity of such content is about equal to a single 
page of a full-size daily newspaper. The PEW Research Center's 
Baltimore Study similarly finds that the majority of local news content 
on Web sites unaffiliated with newspapers or broadcast stations 
contains only commentary on the stories and features that originated 
from traditional media outlets. Given the continuing prevalence of 
broadcast stations and newspapers as news sources consumers rely on the 
most, the Commission tentatively finds that some newspaper/broadcast 
restrictions remain necessary to protect viewpoint diversity. The 
Commission will continue to monitor and assess the Internet's role in 
the marketplace for local news and information in this regard. The 
Commission seeks comment on these tentative conclusions.
    97. The Commission has found evidence previously that some 
newspaper/broadcast cross-ownership may produce increased local news. 
What benefits and efficiencies accrue from cross ownership? Media 
Ownership Study 4 examines the impact of newspaper/television cross-
ownership on the amount of local television news at both the station 
and the market level. The study finds that, other things being equal, a 
station that is cross-owned with a daily newspaper produces more local 
news than a stand alone station. However, when the analysis is done at 
the market level, other things being equal, a market with a cross-owned 
station offers somewhat less local news than a market without a cross-
owned station. Because there was little variation in the extent of 
newspaper-television cross-ownership during the period studied, the 
author recognizes that the conclusions of the statistical analysis must 
be treated with caution. The Commission seeks comment on how to weigh 
the Media Ownership Study 4 findings and how those findings should 
affect the Commission's analysis. Has this rule resulted in the 
reduction of local news, the loss of journalism positions, and the 
failure of newspapers? What challenges have newspapers faced because of 
the current economy and the changing marketplace?
    98. Nielsen DMAs. As an initial matter, for television stations, 
the Commission proposes to apply any ownership combination restrictions 
to daily newspapers and stations within the same DMA. The Commission 
seeks comment on its tentative conclusion that the Commission will use 
Nielsen DMA definitions to determine when the cross-ownership rule is 
triggered, as there is no digital equivalent contour for

[[Page 2883]]

the analog Grade A contour specified by the current rule. The 
Commission seeks comment on the impact of changing from a contour-based 
rule to a DMA-based rule. For any proposed rule, would many more 
newspaper/television station combinations be implicated by the cross-
ownership rule under a DMA-based approach as compared to a contour-
based approach? Are there negative consequences to switching to a DMA-
based rule? What are the benefits? The Commission's preliminary view is 
that DMA market definitions would reflect circulation and viewing areas 
more accurately than the current approach. However, given the large 
size of some DMAs, the Commission seeks comment on whether the rule 
instead should be triggered only if the newspaper's circulation extends 
to the community of license of the television station.
    99. To the extent the rule relies on DMAs, the Commission proposes 
to grandfather ownership of existing combinations of television 
stations and newspapers that would conflict with the newspaper/
broadcast cross-ownership rule by virtue of the change to a DMA-based 
approach. Compulsory divestiture is disruptive to the industry and a 
hardship for individual owners, and any benefits to the Commission's 
policy goals would likely be outweighed by these countervailing 
considerations. The Commission seeks comment on these tentative 
conclusions. Are the Commission's policy goals served by allowing 
grandfathered combinations to be freely transferable in perpetuity, 
irrespective of whether the combination complies with the newspaper/
broadcast cross-ownership rule? What is the effect on the entities if 
they are sold separately? Is it possible that such a rule could have 
the unintended consequence of causing a station or newspaper to close?
    100. Proposed Rule. In taking a fresh look at the rule, the 
Commission tentatively finds that a blanket rule prohibiting all 
newspaper/broadcast cross-ownership within the same service area is 
unnecessarily broad. The Commission tentatively concludes that the top 
20 DMA demarcation point, the top-four television station restriction, 
and the eight remaining major media voices test for television/
newspaper combinations contained in the 2006 rule are the fundamental 
elements of a rule that will protect and promote viewpoint diversity 
while also properly supporting localism most effectively. The 
Commission notes that these criteria are objective standards that can 
be applied and enforced consistently and fairly, with low cost to the 
applicants and Commission. The Commission seeks comment generally on 
the benefits of adopting these criteria and specifically on their 
individual aspects, as detailed below.
    101. The Commission proposes a rule that prohibits common ownership 
of a daily newspaper and (1) a full-power commercial television station 
within the same DMA, (2) an AM station with a predicted or measured 2 
mV/m contour service area that encompasses the newspaper's city of 
publication; or (3) an FM station with a predicted 1 mV/m contour 
service area that encompasses the newspaper's city of publication. The 
proposed rule would presume a waiver to be consistent with the public 
interest if: (1) A daily newspaper in a top 20 DMA sought to combine 
with a radio station, or (2) a daily newspaper sought to combine with a 
full-power commercial television station in the same top 20 DMA, and: 
(a) The television station is not ranked among the top four television 
stations in the DMA and (b) at least eight independently owned and 
operated ``major media voices'' would remain in the DMA after the 
combination. For purposes of the waiver, major media voices would 
include full-power commercial and noncommercial television stations and 
major newspapers. The rule would presume a waiver to be inconsistent 
with the public interest in all other circumstances. Below the 
Commission seeks comment on alternative demarcation points for these 
three key elements of the proposed rule (top-four television station 
restriction, eight remaining major media voices criterion, top 20 DMA 
cutoff) and on how in practice these three constraints interact with 
one another.
    102. The Commission tentatively concludes that the case-by-case 
approach adopted as part of the 2006 rule to consider requests for 
waivers of the newspaper/broadcast cross-ownership rule would best 
serve the Commission's goal of promoting viewpoint diversity. This 
approach should provide an appropriate amount of flexibility to allow 
the Commission to consider specific, individual circumstances. 
Presumptions either in favor of or against a waiver can be overcome 
when specific facts so warrant. Under this approach, opponents to a 
waiver request, even in the largest markets, maintain the ability to 
argue that specific circumstances overcome a favorable presumption. In 
addition, parties requesting a waiver in smaller markets are not 
precluded from demonstrating the benefits of that particular 
combination in the individual market. The Commission seeks comment on 
these tentative conclusions.
    103. Alternatively, the Commission seeks comment on whether a 
bright-line rule addressing newspaper/broadcast cross-ownership would 
be preferable. Such a rule would allow common ownership of (1) one 
daily newspaper in a top 20 DMA and one commercial radio station, or 
(2) one daily newspaper and one full-power commercial television 
station in a top 20 DMA under the circumstances in which the case-by-
case approach proposed above would establish a favorable presumption. 
For purposes of the rule, major media voices would include full-power 
commercial and noncommercial television stations and major newspapers. 
Other combinations would be prohibited. The purpose of a bright-line 
rule is to create a clear-cut, readily enforceable standard that 
provides consistency and certainty to the marketplace. The Commission 
seeks comment on whether this approach would result in a simplified 
rule that would preserve essentially the same levels of local viewpoint 
diversity as a case-by-case approach but reduce applicants' costs and 
make the Commission's review of transfer and assignment applications 
more objective, predictable, and expeditious. Is a bright-line formula 
too blunt a tool to account for variable conditions that may exist when 
considering newspaper/broadcast cross-ownership waivers, even in 
similarly sized markets? The Commission notes that even utilizing a 
bright-line rule, petitions to deny an application would not be 
precluded even for a newspaper/broadcast combination within a top 20 
DMA or a waiver request in other markets. Would including the 
determinative criteria in a governing rule alleviate the need to 
undergo a potentially lengthy and expensive waiver process for 
applications presumed to be in the public interest? If the results are 
likely to be the same in most cases, is the flexibility of a tailored 
review process worth the additional time and expense? The Commission 
seeks comment on the extent to which the structure of the bright-line 
approach would diminish the likelihood of successfully opposing such a 
merger. Under a bright line approach, should the Commission adopt 
specific standards for waivers or rely on the Commission's generally 
applicable waiver standards?
    104. Market Tiers. The Commission proposes to differentiate between 
markets in the top 20 DMAs and markets below the top 20 DMAs. In the 
last review of this rule, the Commission found a ``notable difference 
between the

[[Page 2884]]

top 20 markets and all other DMAs,'' citing the range of media outlets 
available in the top 20 DMAs and concluding that ``[t]he diversity in 
the number and types of traditional media outlets in the largest 
markets ensures that the public is well served by antagonistic 
viewpoints. Markets outside of the top 20 DMAs do not feature diversity 
to such an extent.'' The Commission continues to believe that the top 
20 DMAs are notably different from other markets, both in terms of 
voices and in terms of television and radio households. Based on the 
range of media outlets available in the top 20 DMAs, the Commission 
tentatively concludes that diversity in those largest markets is 
healthy and vibrant in comparison to other DMAs. For example, while 
there are at least 10 independently owned, commercial television 
stations in 15 of the top 20 DMAs, none of the DMAs ranked 21 through 
25 has even eight independently owned, commercial television stations. 
Additionally, while 15 of the top 20 DMAs have at least two newspapers 
with a circulation of at least five percent of the households in that 
DMA, four of the five DMAs ranked 21 through 25 have only one such 
newspaper. Moreover, the top 20 markets, on average, have 16 
independently owned television stations and major newspapers and 
approximately 2.5 million television households. By comparison, DMAs 21 
through 30 have on average nine major voices and fewer than 1.2 million 
television households, representing drops of 44 percent and 52 percent 
from the top 20 markets, respectively. DMAs 31 through 50 have average 
numbers of voices for each category similar to markets 21 through 30, 
but even fewer television households on average, 856,700 and 694,500, 
respectively. DMAs 51 through 210 show even more dramatic drops, with, 
on average, seven major voices and approximately 236,000 television 
households, representing drops of 56 percent and 91 percent from the 
top 20 DMAs, respectively. The diversity in the number and types of 
traditional media outlets in the largest markets ensures that the 
public is well served by a variety of viewpoints. Markets outside of 
the top 20 DMAs do not feature diversity to such an extent.
    105. The Commission seeks comment on this analysis of the 
distinction between the top 20 DMAs and others and on the Commission's 
tentative conclusion that the viewpoint diversity level in the 20 
largest DMAs is sufficient to consider adopting a regulatory framework 
that would accommodate a limited amount of newspaper/broadcast cross-
ownership in those markets. The Commission also seeks comment on its 
continued belief that markets below the top 20 DMAs cannot accommodate 
any such cross-ownership, absent particular circumstances warranting a 
waiver. The Commission asks commenters to address separately market 
structure characteristics, such as the number of independent media 
voices, and market size characteristics, e.g., the number of television 
households in the market. Market structure characteristics are directly 
and separately addressed by the proposed top four television station 
restriction and the proposed eight remaining major media voices 
criterion. Due to the high fixed costs of television program production 
(including local programming in general and local news programming in 
particular), the number of television households in the market affects 
the revenue base available to support local programming and hence 
affects the quantity, quality, and diversity of local programming 
produced in the market, independent of the number of media voices.
    106. In addition, the Commission seeks comment on whether a 
different demarcation point would more effectively protect and promote 
the Commission's viewpoint diversity and localism goals. For example, 
would differential treatment be warranted for newspaper/broadcast 
combinations in the top 30 DMAs, top 40 DMAs, top 50 DMAs, or at a 
different market size? Please provide specific market data to support 
the proposed demarcation point. If the Commission were to maintain the 
prohibition on combinations involving the top four television stations 
and the requirement to retain eight major media voices in the market, 
what is the impact on permitted combinations of varying the demarcation 
point?
    107. Newspaper/Television Station Combinations: Top-Four 
Restriction. The Commission proposes to prevent a daily newspaper from 
combining with a television station that is ranked among the top four 
television stations in the DMA. The Commission proposes that the 
current criteria would continue to apply when determining what 
qualifies as a daily newspaper and what qualifies as a television 
station ranked among the top four stations. The Commission believes 
that allowing a top-four station to merge with a daily newspaper would 
create the greatest risk of losing an independent voice in that market. 
The Commission's analysis shows that there is a decrease in the amount 
of local news broadcast between the fourth and fifth ranked stations. 
In larger markets, the fifth ranked station generally provides no more 
than half the amount of local news of the fourth ranked station. The 
Commission seeks comment on this analysis and on its application to the 
proposed approaches.
    108. Furthermore, the Commission notes the dominance of the four 
major television networks in most local television markets. How 
commonly are the top four stations in a market affiliated with the four 
major broadcast networks? The Commission seeks comment on the findings 
in Media Ownership Study 4 that television stations affiliated with one 
of the four major broadcast networks tend to air more local news than 
other stations and that there are about 35 additional minutes of local 
news programming in the market for each additional station in the 
market that is affiliated with one of the four major broadcast 
networks. The Commission seeks comment on the presumption that, 
therefore, the top four television stations generally contribute the 
most local news and information among the television stations within a 
market.
    109. Alternatively, the Commission seeks comment on whether a 
different limit is appropriate. For example, is there evidence to 
support a cross-ownership restriction between newspapers and the top-
five or the top-six television stations in some markets? If so, why? Is 
there support to prevent combinations between newspapers and stations 
affiliated with one of the four major broadcast networks? If so, why? 
Could such combinations potentially harm diversity more than other 
combinations? Is there evidence that these stations provide more 
diversity in local markets?
    110. Newspaper/Television Station Combinations: Eight Major Media 
Voices Restriction. The Commission tentatively proposes to prohibit 
transactions where less than eight independently owned and operated 
``major media voices'' would remain in the DMA after a transaction. The 
Commission seeks comment, however, on the potential impact of 
eliminating this voices test. The Commission's examination of the top 
20 DMAs indicates there would be no impact in these markets. Under the 
existing ownership patterns in the top 20 markets, even if all daily 
newspapers combined with television stations, at least eight major 
media voices would remain in the market. The existence of the eight 
voices test in the local television ownership rule also helps retain 
independent major media voices by limiting commercial consolidation 
once only eight independent television

[[Page 2885]]

stations remain in the market. As long as these eight independent 
television voices remain in the market, consolidation between 
newspapers and television stations will not reduce the number of major 
media voices below eight. Is the Commission's assessment accurate, and 
if so, is there any reason to incorporate the eight voices test into a 
new rule or waiver provision? Is there a reason to require a different 
number of voices to remain in the DMA, and if so, how would that number 
better protect the Commission's diversity goal? Should the Commission's 
analysis change if the Commission does not distinguish the top 20 DMAs 
but adopt a different demarcation point? For example, would there be an 
impact on the market if the Commission eliminates the eight voices test 
and creates a separate tier for the top 30 DMAs?
    111. Newspaper/Radio Station Combinations. As an alternative to the 
Commission's proposal above to retain the restriction on newspaper/
radio combinations, the Commission also seeks comment on whether it 
should eliminate the newspaper/radio restriction in all markets or 
otherwise relax the restriction. The Commission tentatively concludes 
that radio stations are not the primary outlets that contribute to 
local viewpoint diversity. Media Ownership Study 5 finds that at least 
one commercial radio station with a news and talk format serves most 
markets and that a public news radio station serves about 40 percent of 
markets. Research shows, nevertheless, that consumers' main sources for 
local news and information are television stations, newspapers, and 
their affiliated Web sites. Moreover, the Commission tentatively 
concludes that a substantial amount of news and talk show programming 
on radio stations is nationally syndicated. The Commission seeks 
comment on its tentative conclusion that radio stations generally are 
not the dominant source consumers turn to for local news and 
information, as compared to newspapers and television stations. The 
Commission seeks comment on whether, to the extent radio stations serve 
as sources of local news and information, viewpoint diversity would be 
adequately protected by the proposed local radio limits. Because 
consumers in markets of all sizes rely most heavily on other types of 
news outlets for local news and information, is there any reason to 
distinguish between markets in the top 20 DMAs and those below the top 
20 DMAs for purposes of newspaper/radio combinations? Would the removal 
of prohibitions against newspaper/radio combinations have any impact on 
the ownership, or contribution to local viewpoint diversity, of 
noncommercial educational FM broadcast stations, given the restriction 
that they may be licensed only to nonprofit educational organizations? 
Would common ownership between a radio station and a newspaper increase 
the quality and quantity of local news programming available on radio 
stations due to shared newsgathering expertise and resources? Could 
such combinations provide an opportunity for both radio stations and 
newspapers that are struggling financially to become more vital 
participants in the news and information marketplace and what is the 
likelihood of this outcome? Should the Commission consider a rule that 
prohibits newspaper-radio combinations in certain markets only when the 
radio station is among the largest four in the market by audience 
share?
    112. The proposed newspaper/broadcast cross-ownership rule retains 
the use of radio contours to determine when the rule is triggered. As 
discussed below, Arbitron market definitions are used to delineate a 
market's geographic boundaries for purposes of the local radio limits 
and the Commission proposes to use DMAs for purposes of triggering the 
local TV ownership rule and the newspaper/television aspect of the 
cross-ownership rule. Should the Commission continue to use contours to 
determine whether the newspaper/broadcast cross-ownership rule is 
triggered for newspaper/radio combinations? What are the benefits of 
continuing to rely on contours only for this portion of the rule? Can 
retaining a contour approach to newspaper/radio combinations be 
reconciled with the Commission's proposed use of geographic market 
definitions for newspaper/television combinations? Alternatively, 
should the Commission replace radio contours with Arbitron market 
definitions for purposes of determining whether the newspaper/broadcast 
cross-ownership rule is triggered for newspaper/radio combinations? Are 
there any specific concerns about moving to an Arbitron market 
definition for this rule? Would more or fewer newspaper/radio station 
combinations be implicated by the cross-ownership rule under an 
Arbitron-based approach as compared to a contour-based approach? How 
would the Commission handle non-Arbitron radio markets? The Commission 
seeks comment.
    113. To the extent the rule relies on a different market area, the 
Commission proposes to grandfather ownership of existing combinations 
of radio stations and newspapers that would conflict with the 
newspaper/broadcast cross-ownership rule by virtue of the change. 
Compulsory divestiture is disruptive to the industry and a hardship for 
individual owners, and any benefits to the Commission's policy goals 
would likely be outweighed by these countervailing considerations. The 
Commission seeks comment on these tentative conclusions. Are the 
Commission's policy goals served by allowing grandfathered combinations 
to be freely transferable in perpetuity, irrespective of whether the 
combination complies with the newspaper/radio cross-ownership rule? 
What is the effect on the stations if they are sold separately? Is it 
possible that such a rule could have the unintended consequence of 
causing a station or newspaper to close?
    114. Factor Tests. The 2006 rule included a list of four factors 
for the Commission to analyze when deciding whether a specific 
newspaper/broadcast ownership combination was in the public interest. 
The Commission seeks comment on whether it should retain those factors. 
In 2006, the Commission stated that the factors were intended to 
address ``the need to support the availability and sustainability of 
local news while not significantly increasing local concentration or 
harming diversity.'' Specifically, the 2006 rule required applicants to 
make showings regarding: (1) The amount of local news that would be 
produced post-transaction; (2) the extent to which the affected media 
outlets would exercise independent news judgment; (3) the level of 
concentration in the DMA; and (4) the financial condition of the 
applicant, and if financially distressed, the applicant's commitment to 
invest in newsroom operations. Do the factors provide useful 
predictability or clarity for applicants applying for a waiver of the 
newspaper/broadcast cross-ownership rule? Do factors provide specific 
benefits to the Commission staff reviewing applications and waiver 
requests? Alternatively, are any of the factors, such as the first two 
factors, too subjective, or focused on future behavior that may be too 
difficult to predict or enforce? Do specific factors create unnecessary 
delay in the application and review process? Should the Commission 
exclude all of these elements from the new rule and consider 
applications on a more case by case basis? If so, should the 
presumptions included in the rule be interpreted as establishing a 
prima facie case in favor of or against a transaction and, once 
established, shifting the

[[Page 2886]]

burden of proof regarding the Commission's treatment of an application 
to those that may seek to overcome the presumption? If so, what should 
that burden of proof be? Would a well defined exception or waiver 
standard, as discussed below, sufficiently support the Commission's 
consideration of specific factual scenarios related to a proposed 
transaction, including for instance, the financial condition of the 
entities involved and/or the availability of local news, such that the 
specification of these additional factors is not necessary? The 
Commission seeks comment.
    115. Exception or Waiver. The Commission also seeks comment on 
whether to retain or abolish the factors adopted in 2006 to overcome or 
reverse a negative presumption. Is it better to remove all factors from 
the rule and rely on the Commission's general waiver standard? Under 
the 2006 rule, a waiver applicant could overcome a negative presumption 
by demonstrating, with clear and convincing evidence, that the merged 
entity would increase the diversity of independent news outlets and the 
level of competition among independent news sources in the relevant 
market. Is such a standard sufficiently objective and quantifiable? The 
2006 rule further stated that the Commission would reverse the negative 
presumption in two limited circumstances: (1) When the proposed 
combination involved a failed/failing station or newspaper, or (2) when 
the proposed combination was with a broadcast station that was not 
offering local newscasts prior to the combination, and the station 
would initiate at least seven hours per week of local news after the 
combination. Is such a standard sufficiently objective and 
quantifiable? Should the give special consideration to a transaction 
that involves a station or newspaper that is failed or failing? If so, 
what showing should an applicant be required to make to qualify as 
failed or failing? Is a requirement that a waiver applicant show that a 
proposed combination would increase the number of hours of local news 
programming overly focused on future behavior that may be too difficult 
to predict or enforce? Are there other factors that the Commission 
should adopt that would be more objective or easier to enforce than 
those adopted in 2006? If so, what would be the benefits of adopting 
any other proposed factors and what would be the harms? The Commission 
also seeks comment on whether it may be appropriate to adopt specific 
factors to consider in instance in which an applicant is seeking a 
waiver of the restriction on combinations involving a top-four 
television station or the eight voice test. Finally, the Commission 
seeks comment on whether and why such provisions are needed given that 
filing a waiver petition is always an option under Sec.  1.3 of the 
Commission's rules?
    116. Minority and Female Ownership. According to DCS, there are 
still significant barriers to entry by minority owners in both the 
traditional and new media industries; DCS supports measures to 
facilitate minority media ownership. DCS states that minority-owned 
stations are more likely to provide programming geared towards minority 
audiences and that minority communities are underserved as a result of 
the lack of minority media ownership. The Commission seeks comment on 
how the proposed newspaper/broadcast cross-ownership rule could affect 
minority and female ownership opportunities. The Commission seeks 
comment on how promotion of diverse ownership promotes viewpoint 
diversity. The Commission requests that commenters provide additional 
data supporting their positions.
4. Radio/Television Cross-Ownership Rule
a. Introduction
    117. The current radio/television cross-ownership rule limits the 
number of commercial radio and television stations an entity may own in 
the same market, with the degree of common ownership permitted varying 
depending on the size of the relevant market. The rule allows common 
ownership of at least two television stations and one radio station in 
the smallest markets, while in larger markets, a single entity may own 
additional stations depending on the number of media owners in the 
market. The Commission retained the radio/television cross-ownership 
rule in the 2006 Quadrennial Review Order to ensure diversity in local 
markets. In Prometheus II, the Third Circuit upheld the Commission's 
decision to retain the rule, based in part on the Commission's 
assertion in the 2006 Quadrennial Review Order that the rule benefited 
viewpoint diversity. It noted that the Commission supported retention 
of the rule in the 2006 Quadrennial proceeding with some evidence that 
commonly owned stations can share the same viewpoint.
    118. Pursuant to a statutory mandate, the Commission considers 
whether the radio/television cross-ownership rule continues to be 
necessary to promote the public interest. The Commission tentatively 
concludes that it does not. The Commission believes that repeal of the 
radio/television cross-ownership rule is not likely to increase 
significantly consolidation of broadcast facilities. To the extent that 
repeal does allow additional consolidation, the Commission seeks 
comment on whether such consolidation would result in greater 
efficiencies, to be passed through to consumers in the form of enhanced 
programming choices or other consumer welfare benefits. Moreover, as 
discussed further below, data suggest that radio/television cross-
ownership does not negatively impact the amount of local news available 
to consumers or the diversity of such programming. Finally, the 
Commission is persuaded by the evidence from its studies and the 
changes in the marketplace that the rule is not necessary to ensure 
sufficient diversity in local markets. Accordingly, the Commission 
tentatively concludes that in the current media market, the 
Commission's goals of localism and diversity will be adequately 
protected by the local radio and television ownership rules without 
this additional limitation. The Commission seeks comment on these 
tentative conclusions. The Commission also seeks comment on whether 
there are any reasons to retain the rule.
b. Background
    119. The Commission first restricted combined ownership of radio 
and television stations in local markets in 1970 to foster competition 
and promote diversification of programming sources and viewpoints. As 
discussed in the NOI, in 1999 the Commission relaxed the rule to 
balance diversity and competition concerns against the desire to permit 
broadcasters and the public to realize the benefits of common 
ownership. In the 2006 Quadrennial Review Order, the Commission 
retained the radio/television cross-ownership rule, based in part on 
the concern that the local television and radio rules were not 
sufficient to protect diversity in the media marketplace. After 
reviewing the record, the Commission determined that radio and 
television both contributed to the ``marketplace of ideas'' and thus 
competed in providing diversity. At the same time, the Commission 
acknowledged that newspapers and television were ``far and away the 
most important sources'' of news and information, with radio ``a 
distant third.'' On review, the Third Circuit upheld the Commission's 
decision to retain the rule finding that the rule

[[Page 2887]]

continues ``to ensure that viewpoint diversity is adequately 
protected.''
    120. In the NOI, the Commission sought comment on whether the 
current rule continues to be necessary in the public interest. NAB 
supports repeal of the radio/television cross-ownership rule because it 
believes that additional cross-ownership will allow broadcasters to 
better compete for advertising and viewers with the new media sources 
entering the market and will allow them to invest more in local news 
and information. Fox also suggests that allowing more common ownership 
of different types of media in a single market could enhance localism. 
NAB, Fox, and CBS argue that, in light of the explosion of media 
outlets and Internet-related media in all markets, and the resulting 
fragmentation of the local audience, ``repeal of the [radio/television 
cross-ownership] rule will not adversely affect the availability of 
diverse audio and video programming and viewpoints.'' Fox contends that 
in the Internet age ``all outlets have an equal capacity to reach the 
vast majority of citizens (especially now that three-quarters of all 
American adults use the Internet).'' In contrast, AFTRA argues that the 
Commission should maintain the radio/television cross-ownership rule to 
prevent further consolidation and promote localism and diversity. AFTRA 
points out that, between 1996 and 2010, ``the number of commercial 
radio stations increased by about 10 percent * * * [while] the number 
of station owners fell by about 40 percent.'' AFTRA further asserts 
that, during the same period, ``the number of commercial television 
stations increased by about 15 percent * * * [while] the number of 
station owners fell by 33 percent.''
    121. In the Commission's economic studies, which are discussed in 
more detail below, the Commission sought data to help analyze questions 
related to the relevance of the radio/television cross-ownership rule 
to the Commission's policy goals. Particularly, the Commission measured 
whether the presence of radio/television cross-ownership affects the 
amount of local news provided at the local market level and at the 
individual station level. The Commission also measured localism by 
analyzing consumer satisfaction with the amount of locally oriented 
programming available in markets. In addition, the Commission studied 
the impact of radio/television cross-ownership on the amount of diverse 
viewpoints available in media markets.
c. Discussion
    122. Competition. As the Commission has held in the past, the 
Commission does not believe this rule is necessary to promote 
competition. Previously, the Commission has concluded that most 
advertisers do not consider radio and television stations to be good 
substitutes for their advertising needs, and, therefore, combinations 
of radio and television stations would not harm competition in local 
media markets. This conclusion was based in part on Department of 
Justice assertions that radio advertising constitutes a separate 
antitrust market. The Commission continues to believe that radio and 
television are not good substitutes in the advertising market. The 
Commission seeks comment on this tentative conclusion.
    123. Similarly, the Commission tentatively concludes that most 
consumers do not consider radio and television stations to be 
substitutes for one another. That is, the Commission believes that 
consumers are not likely to switch between television viewing and radio 
listening based on the program content of radio and television 
stations. Nor does the Commission believe it likely that radio or 
television stations adjust their content in response to changes in the 
other medium's programming. Accordingly, the Commission believes that 
repealing the radio/television cross-ownership rule will not negatively 
impact the Commission's competition goals and seek comment on this 
tentative conclusion.
    124. As stated above, broadcasters argue that lifting the radio/
television cross-ownership restriction will enable them to compete 
better in today's marketplace. The Commission seeks comment on whether 
repealing the restriction would allow greater efficiencies through 
joint operations that can be passed on to consumers through investment 
in programming. In addition, the Commission seeks comment on whether 
allowing additional radio-television combinations would lead to 
consumer benefits in the form of additional investment in radio or 
television news rooms, increased editorial staffs, or additional local 
news coverage on radio stations.
    125. The Commission does not anticipate, however, that eliminating 
the radio/television cross-ownership rule would significantly 
contribute to broadcast consolidation. Pursuant to the existing radio/
television cross-ownership rule, in the largest markets, entities 
currently may own, in combination, either two television stations and 
six radio stations or one television station and seven radio stations. 
The local radio ownership rule permits an entity to own a maximum of 
eight radio stations in a single market. Therefore, in the largest 
markets, absent the current radio/television cross-ownership rule, an 
entity approaching the limits of the existing cap could acquire only 
one additional radio station and remain in compliance with the local 
radio rule. Likewise, an entity with one television station already 
could acquire only one additional station in the largest markets under 
the current local television rule. Thus, the Commission believes that 
the effect of eliminating the radio/television cross-ownership rule 
will be small, and that the local radio and local television rules will 
continue to prevent a significant increase in the consolidation of 
broadcast facilities. The Commission seeks comment on these issues. 
What impact is the proposed action likely to have in small and mid-
sized markets? Are there specific examples of markets where repeal of 
the rule may substantially contribute to broadcast consolidation?
    126. Localism. As the Commission has held in the past, the 
Commission does not believe this rule is necessary to promote localism. 
The Commission tentatively concludes that repealing the radio/
television cross-ownership rule will not negatively impact the 
Commission's localism goal. Again, the Commission believes that the 
local television and local radio rules, as well as the newspaper/
broadcast cross-ownership rule, will sufficiently promote and protect 
the Commission's localism goals. Radio and television broadcasters 
would continue to have the same obligation to serve their local 
communities in the absence of a radio/television cross-ownership 
restriction. The Commission also recognizes that consumers primarily 
rely on television and newspapers, and their affiliated Web sites, for 
their local news. Moreover, audiences of traditional news sources have 
moved toward new media, with both Internet and cable news sources 
growing. The Commission recognizes that radio stations that air 
nationally syndicated news or talk show programming contribute to the 
overall amount of news and information within their local market. The 
Commission notes that lifting the radio/television cross-ownership rule 
will not impact the availability of non-commercial news radio stations. 
The Commission seeks comment on these tentative conclusions.

[[Page 2888]]

    127. In the media ownership studies, the Commission sought to 
develop data to inform its analysis of whether the radio/television 
cross-ownership rule promotes localism. In particular, both Media 
Ownership Study 1 and Media Ownership Study 4 look at whether the level 
of radio/television cross-ownership in a market is associated with the 
amount of local television programming provided. Evidence from the 
studies is mixed with respect to this question.
    128. Media Ownership Study 1 examines how cross-ownership is 
associated with localism, as measured by the amount of local news 
provided in the market. The study finds that cross-ownership decreases 
local television news hours but raises ratings, which leads to 
ambiguous results. The Commission seeks comment on these findings and 
their relevance to the Commission's analysis of whether the radio/
television cross-ownership rule is necessary to promote the 
Commission's localism goal.
    129. Media Ownership Study 4 finds that, at the station level, 
radio/television cross-owned stations appear to air more local news on 
average, though the impact is marginal. According to the study, for 
every additional in-market radio station a parent owns, the television 
station will air 3.7 more minutes of local news. The Commission seeks 
comment on these study findings and how they should affect the 
Commission's analysis. At the local market level, however, Media 
Ownership Study 4 finds that increases in radio/television cross-
ownership correlate to decreases in the total amount of news minutes 
provided in the market. As the study notes, however, due to economies 
of scale, this negative correlation is partially mitigated as the 
average number of broadcast outlets per cross-owned station group in 
the market increases.
    130. Diversity. The Commission tentatively concludes that the 
radio/television cross-ownership rule is no longer necessary to promote 
the Commission's goal of encouraging viewpoint diversity. The 
Commission seeks comment on this tentative conclusion, as well as the 
tentative conclusion that the proposed local television and radio rules 
and the newspaper/broadcast cross-ownership rule will suffice to 
protect and promote the Commission's diversity goal. The Commission 
also seeks comment on alternatives to this tentative conclusion, 
including whether or not it is necessary to retain the radio/television 
cross-ownership rule for diversity purposes. The Commission seeks data 
to support retention of the rule, including any data that the cross-
ownership rule is necessary to ensure diverse viewpoints in local 
markets.
    131. Overall, the media ownership studies provide little evidence 
that cross-ownership, to the degree currently allowed under the radio/
television cross-ownership rule, has an effect on viewpoint diversity. 
Media Ownership Study 8A analyzes the impact of radio/television cross-
ownership on viewpoint diversity available in local markets by 
examining how consumers react to the content delivered to them. The 
study utilizes variations in viewing patterns of local television news 
programs as compared to local viewing patterns for national television 
news programs to develop a measure of diversity of content on local 
news programs, and relates changes in viewing patterns to changes in 
local media cross-ownership. The study finds that, in general, radio/
television cross-ownership has a negligible effect on viewpoint 
diversity. Media Ownership Study 8B examines the impact of media 
ownership, including radio/television cross-ownership, on the amount of 
programming provided in television news programs in three categories: 
Politics, local programming, and issue diversity (diversity in coverage 
of news topics). Overall, the study finds little evidence that market 
structure influences diversity. Nonetheless, with respect to one of the 
three types of diversity--issue diversity--the study finds that, for 
the majority of topics for which cross-ownership is statistically 
significant, increases in cross-ownership are associated with greater 
diversity. The Commission seeks comment on the findings presented in 
Media Ownership Study 8A and Media Ownership Study 8B. Specifically, 
the Commission seeks comment on how these findings should inform its 
analysis of whether the radio/television cross-ownership rule remains 
necessary to promote viewpoint diversity.
    132. While consumers continue to rely on television and newspapers, 
and their affiliated Web sites, for their local news, they increasingly 
turn to new media, both the Internet and cable, as news sources. The 
recent Information Needs of Communities Report finds that the Internet 
has created more diversity and choice in news and information, and that 
most communities have seen a rise in the number and diversity of 
outlets, as well as more diversity in commentary and analysis. The 
Commission seeks comment on whether these sources contribute 
significantly to the diversity of news sources available to consumers. 
As the Third Circuit noted, the traditional media continue to be an 
important news source. Nonetheless, Internet adoption rates continue to 
grow, leading to changes in how consumers get their news. Because the 
primary marketplace for news is shifting, the Commission seeks comment 
on whether the shift in consumption of news supports elimination of the 
rule. For instance, does the increase in the diversity of news outlets 
provided by the Internet contribute enough to the marketplace of ideas 
to ensure that viewpoint diversity would be adequately protected absent 
this rule? The Commission also notes that the Commission previously has 
rejected the argument that the use of common facilities by cross-owned 
stations to gather news, traffic, and weather would be harmful to 
diversity, because such cost-cutting measures allow the vital 
information to be available to the public through a greater number of 
outlets. The Commission seeks comment on how other changes in the media 
marketplace affect diversity.
    133. The Commission also seeks comment on how elimination of the 
radio/television cross-ownership rule would affect minority and female 
ownership opportunities. As noted, DCS asserts that significant entry 
barriers continue to exist for minorities and women in both the 
traditional and new media industries. Would elimination of the radio/
television cross-ownership rule have any effect on such barriers? DCS 
also states that minority-owned stations are more likely to provide 
programming geared towards minority audiences and that minority 
communities are underserved as a result of the lack of minority media 
ownership. Would elimination of the radio/television cross-ownership 
rule have any effect on programming geared toward minority audiences?
    134. Digital Transition. The Commission observes that, following 
the digital transition for full-power television broadcasters in 2009, 
the current radio/television cross-ownership rule became at least 
partially obsolete. The rule relies on analog broadcast television 
contours as one of its criteria. As broadcast television stations have 
completed the transition to digital television service and ceased 
broadcasting in analog, the analog contours are no longer relevant, and 
comparable digital contours do not exist for all of the analog contours 
previously employed in the media ownership rules. As discussed in the 
NOI, while the Commission has found the digital noise limited service 
contour to approximate the larger Grade B contour, the Commission has 
not found an

[[Page 2889]]

equivalent for the smaller Grade A contour, which is used to trigger 
the radio/television cross-ownership rule. If the Commission were to 
apply the larger Grade B contour, the Commission could allow entities 
to own more broadcast stations than was the case with the analog 
contours. The Commission received no suggestions in filed comments 
about how to address this problem. Although the Commission does not 
base its decision to repeal the rule on the rule's use of analog 
contours and the lack of digital equivalents, the difficulty of 
creating a consistent rule in the digital age is a factor the 
Commission has considered. The Commission seeks comment on how it could 
overcome this difficulty to the extent commenters propose to maintain 
restrictions on radio/television cross-ownership. In particular, if 
commenters favor retaining a contour-based rule, the Commission seeks 
comment on what contour to utilize and how the rule should be applied.
5. Dual Network Rule
a. Introduction
    135. Historically, the Commission has concluded that the dual 
network rule is necessary in the public interest to promote competition 
and localism. In order to promote these goals, the current dual network 
rule permits common ownership of multiple broadcast networks, but 
prohibits a merger between or among the ``top four'' networks (ABC, 
CBS, Fox, and NBC). The Commission concluded in the 2002 Biennial 
Review Order that, given the level of vertical integration of each of 
the top four networks, as well as their continued operation as a 
``strategic group'' in the national advertising market, a top-four-
network merger would give rise to competitive concerns that the merged 
firm would be able to reduce its program purchases and/or the price it 
pays for programming. The Commission reasoned that these competitive 
harms would reduce program output, choices, quality, and innovation to 
the detriment of viewers. The Commission also concluded that allowing a 
merger of any of the top four networks would harm localism by reducing 
the ability of affiliates to bargain with their networks for favorable 
terms of affiliation, diminishing affiliates' influence on network 
programming, and thus harming the ability of the affiliates to serve 
their communities. In the 2006 Quadrennial Review Order, the Commission 
concluded that the dual network rule continued to be necessary in the 
public interest to promote competition and localism. The U.S. Court of 
Appeals for the Third Circuit upheld the Commission's decision to 
retain the rule, finding that the Commission reasonably relied on 
several unique features of the top four broadcast networks, such as 
their vertical integration and their ability to reach a larger audience 
than other networks. The Court also found that the Commission's 
description of the media marketplace as ``dynamic'' and ``competitive'' 
was not inconsistent with its decision to retain the rule, in part, to 
avoid the damage to competition that a merger of the top four networks 
would cause.
    136. The Commission notes that since its last review significant 
changes have taken place in the television marketplace. In particular, 
the number and popularity of non-broadcast sources for video 
programming continue to grow. Nonetheless, the Commission tentatively 
finds that the top four broadcast networks continue to possess 
characteristics that distinguish them from other broadcast and cable 
networks and therefore still serve a unique role in the electronic 
media that justifies retaining a rule specific to them. As discussed in 
more detail below, the top four broadcast networks, as compared to 
other broadcast and cable networks, achieve substantially larger 
primetime audiences, which can then be sold at a premium to advertisers 
that want to reach large, nationwide audiences. Accordingly, the 
Commission tentatively finds that a top-four network merger would 
restrict the availability, price, and quality of primetime 
entertainment programming to the detriment of consumers. The Commission 
also tentatively finds that a top-four network merger would 
substantially lessen competition for advertising dollars in the 
national advertising market, which would reduce the incentives for the 
networks to compete against each other for viewers by providing 
innovative, high quality programming. For these reasons, the Commission 
tentatively concludes that the dual network rule remains necessary in 
the public interest to promote competition and should be retained 
without modification. The Commission seeks comment on this tentative 
conclusion. The Commission also seeks comment on whether allowing a 
merger of any of the top four networks would harm localism by reducing 
the bargaining power of affiliates, which would consequently lessen 
their ability to influence network programming in ways that serve their 
local communities. The Commission also seeks comment on whether 
allowing a merger of any of the top four networks would promote 
localism.
b. Background
    137. In the NOI, the Commission sought comment on issues related to 
the dual network rule, including whether the rule remains necessary to 
protect competition in the program acquisition and national advertising 
markets. In the current proceeding, very few parties have addressed 
these issues. Several parties suggest that the dual network rule 
remains important to promoting the Commission's policy goals. By 
contrast, both CBS and Fox assert that, in light of changes in the 
marketplace, the dual network rule is no longer justified and should be 
eliminated. Specifically, CBS contends that the Commission has failed 
to identify the distinguishing characteristics of the top four networks 
that justify a rule specific to those networks, and that greater 
audience share in comparison to other broadcast and cable networks does 
not adequately explain why the top four networks should be specifically 
singled out.
c. Discussion
    138. Competition. Broadcast networks serve in multiple roles as an 
intermediary between content creators, advertisers, and local broadcast 
stations. As a result, the Commission tentatively finds that the top 
four broadcasters participate, and can affect competition, in more than 
one market. Specifically, the Commission considers the implications of 
a top-four network merger for competition in the provision of primetime 
entertainment programming and competition in the sale of national 
advertising time.
    139. Primetime network programming is generally designed to attract 
a mass audience, and financing such programming, in turn, requires the 
substantial revenue that only a mass audience can provide. The top four 
broadcast networks supply their affiliated local stations with 
primetime entertainment programming intended to attract mass audiences 
and the advertisers that want to reach such large, nationwide 
audiences. By contrast, other broadcast networks target more 
specialized, niche audiences similar to many cable television networks. 
The Commission recognizes that, in general, consumers substitute 
between broadcast and cable networks, and that cable networks earn 
substantial advertising revenues. Nevertheless, the Commission 
tentatively finds that the primetime entertainment programming supplied 
by the top four broadcast networks is a distinct product, the

[[Page 2890]]

provision of which could be restricted if two of the four major 
networks were to merge.
    140. First, the audience size for primetime entertainment 
programming provided by each of the top four broadcast networks remains 
unmatched by that of any other broadcast or cable network. The 
primetime audience for all cable networks taken together is greater 
than that of the broadcast networks and that the gap in size between 
broadcast and cable network audiences has been narrowing over time. 
Nonetheless, the average audience size for each of the top four 
broadcast networks remains significantly larger than the audience size 
for even the most popular cable networks. For example, over an 11-month 
period in 2009-2010, the average primetime audience across the four 
broadcast networks was 8.61 million. During the same period, the 
highest rated cable networks were USA Network, Nickelodeon, Disney 
Channel, and ESPN. Their average primetime audience was approximately 
2.79 million. Thus, the average broadcast network audience was more 
than three times larger than the average audience for the highest rated 
cable networks. Additionally, during the same period, the fifth highest 
rated broadcast network was Univision, which provides Spanish-language 
programming, and which had an average primetime audience of 3.62 
million. The next highest rated English-language broadcast network was 
the CW, which ranked sixth overall, with an average primetime audience 
of 1.78 million. Thus, the average primetime audience for the top four 
broadcast networks was more than twice as large as that of the fifth 
highest rated broadcast network, and nearly five times larger than that 
of the next highest rated English-language broadcast network.
    141. Similarly, among individual primetime entertainment programs, 
the audiences for the top four broadcast networks remain substantially 
larger than those for other broadcast and cable networks. With the 
exception of certain individual sports events, cable network programs 
do not regularly rank among the highest rated television programs. For 
instance, during the first three months of 2011, the highest rated 
single episode of a non-sports primetime program on a cable network was 
an episode of Jersey Shore, which achieved an audience of 8.87 million 
when it appeared on MTV during the week of January 17-23, 2011. Despite 
this sizable audience, for the week, a total of 21 non-sports programs 
that aired on top-four broadcast networks achieved larger audiences. 
Primetime programs on broadcast networks outside the top four likewise 
generally achieve smaller audiences than primetime programs carried on 
the top four networks. For instance, for the 2009-2010 television 
season, no program from any non-top-four broadcast network ranked among 
the 100 highest rated broadcast programs.
    142. Another indicator of the distinctiveness of the top four 
broadcast networks is the wide disparity in advertising prices between 
the top four broadcast networks and cable networks. Some advertisers 
are willing to pay a premium per viewer for programs that attract 
larger audiences. As the Information Needs of Communities Report notes, 
despite a fragmented audience, broadcast television networks still 
retain some clout, relative to most cable networks, as an effective way 
for advertisers to reach large audiences. As evidence of this, the top 
four broadcast networks generally earn higher advertising rates than 
cable networks. In 2009, among the top four broadcast networks, CBS had 
the lowest average advertising rate, as measured in cost per thousand 
views (referred to as cost per mille or CPM), but its CPM was still 38 
percent higher than the highest CPM among non-sports cable networks 
(MTV) and 178 percent higher than the CPM for the highest rated cable 
network (USA). The appeal of the top four broadcast networks to 
advertisers seeking large, national audiences is also reflected in data 
on net advertising revenues. The top-four broadcast network with the 
lowest net advertising revenue in 2009 was Fox, but it still received 
more than three times that of any non-top four broadcast network. It 
also received double that of the highest rated non-sports cable network 
(USA).
    143. The Commission disagrees with the assertion by CBS that 
greater audience share in comparison to other broadcast and cable 
networks does not justify a rule specific to the top four networks. The 
Commission finds that the top four broadcast networks have a 
distinctive ability to attract larger primetime audiences regularly 
relative to other broadcast and cable networks, which enables them to 
earn higher rates from advertisers that are willing to pay a premium 
for such audiences. Thus, a combination between top-four broadcast 
networks would reduce the choices available to advertisers seeking 
large, national audiences, which could substantially lessen competition 
and lead the networks to pay less attention to viewer demand for 
innovative, high quality programming. The Commission therefore 
tentatively concludes that primetime network entertainment programming 
and national television advertising are each distinctive products, the 
availability, price, and quality of which could be restricted, to the 
detriment of consumers, if two of the top four networks were to merge. 
Accordingly, the Commission tentatively concludes that the dual network 
rule remains necessary to foster competition in the provision of 
primetime entertainment programming and the sale of national 
advertising time. The Commission seeks comment on these tentative 
conclusions. In particular, the Commission seeks comment on whether the 
top four networks face competition from any other sources that are also 
capable of delivering a large, national audience to advertisers, such 
that they provide a reasonable substitute for the top four networks in 
the national advertising market. The Commission also seeks comment as 
to whether the dual network rule is necessary to promote and protect 
competition in the primetime network entertainment programming and 
national television advertising markets, or if antitrust laws and the 
Commission's public interest standard are sufficient for reviewing any 
possible merger between the four networks.
    144. The Commission also seeks comment on whether a merger between 
top-four broadcast networks would give rise to any other potential 
competitive concerns. For instance, the Commission seeks comment on 
whether, as the Commission has previously determined, the level of 
vertical integration of each of the top four networks is such that a 
top-four-network merger would give rise to competitive concerns that 
the merged firm would be able to reduce its program purchases and/or 
the price it pays for programming. In addition, the Commission seeks 
comment on the role that the top four broadcast networks play in the 
provision of national news content. As the Information Needs of 
Communities Report notes, despite their declining audiences, the three 
broadcast network evening newscasts (ABC, CBS, and NBC) still draw 22 
million viewers--five times the number tuning in to the three major 
cable news networks (CNN, FOX, and MSNBC) during primetime. The 
Commission seeks comment on whether a merger among the top four 
broadcast networks would significantly restrict the availability of 
diverse sources of national television news. The Commission also seeks 
comment on whether other sources of news--including cable television, 
newspapers, and the Internet--are sufficient to ensure a diverse and 
competitive market

[[Page 2891]]

for national news, or whether the dual network rule remains necessary 
to protect against excessive concentration in this market. The 
Commission also seeks comment as to whether the dual network rule is 
necessary to promote and protect competition in a national news market 
and purchasing or pricing of such programming, or if antitrust laws and 
the Commission's public interest standard are sufficient for reviewing 
any possible merger between the four networks.
    145. Localism. The Commission seeks comment on the continued 
validity of the Commission's previous finding that the dual network 
rule is necessary to foster localism. In particular, the Commission 
seeks comment on potential ways in which a merger among the top four 
broadcast networks would impair the ability of their affiliates to 
serve the interests of their local communities. Specifically, does the 
rule remain necessary to preserve the balance of bargaining power 
between the top-four networks and their affiliates? Would a top-four 
network merger reduce the ability of a TV station, in bargaining with 
its affiliated network, to use the availability of other top 
independently owned networks as a bargaining tool? Furthermore, would 
the availability of fewer alternatives give an affiliate less influence 
on network programming decisions? For instance, would it reduce the 
ability of an affiliate to engage in a dialogue with a network over the 
suitability for local audiences of either the content or scheduling of 
network programming? The Commission also seeks comment as to whether 
the dual network rule is necessary to ensure options and preserve the 
bargaining power and independence of affiliates, or if antitrust laws, 
the Commission's public interest standard, and other Commission rules 
are sufficient for reviewing any possible merger between the four 
networks. In addition, the Commission seeks comment on whether the 
growth of alternate sources for local content should have any impact on 
the Commission's decision whether the dual network rule remains 
necessary to promote localism.

D. Diversity Order Remand/Eligible Entity Definition

    146. The Commission seeks comment in this Notice of Proposed 
Rulemaking on issues that previously were being addressed in a separate 
rulemaking proceeding focused on enhancing the diversity of ownership 
in the broadcast industry, including by increasing ownership 
opportunities for minorities and women (the Diversity proceeding). As 
explained below, the Third Circuit in Prometheus II remanded the 
measures adopted in the Commission's 2008 Diversity Order that relied 
on a revenue-based ``eligible entity'' standard and emphasized that the 
actions required on remand from the Diversity Order should be completed 
``within the course of the Commission's 2010 Quadrennial Review of its 
media ownership rules.'' Accordingly, the Commission seeks comment in 
this proceeding on how the Commission should respond to the court's 
remand and on other actions the Commission should consider to increase 
the level of broadcast station ownership by minorities and women.
    147. Current Diversity Initiatives. The Commission believes that 
promoting diversity of ownership among broadcast licensees and 
expanding opportunities for minorities and women to participate in the 
broadcast industry are important parts of the Commission's mission 
under the Communications Act. The Commission currently has a number of 
rules and initiatives in place that are designed to advance these 
objectives. For example, although the Third Circuit remanded the 
provisions adopted in the Diversity Order that relied on the eligible 
entity definition, it expressly upheld a number of other actions the 
Commission has taken to promote diversity of ownership. These actions 
include, among others, a ban on discrimination in broadcast 
transactions, a ``zero tolerance'' policy for ownership fraud, and a 
requirement that non-discrimination provisions be included in 
advertising sales contracts. Similarly, the Prometheus II opinion did 
not question the Commission's decision to reinstate the failed station 
solicitation rule (FSSR), which is intended to provide out-of-market 
buyers, including minorities and women, with notice of a sale and an 
opportunity to bid on stations. Accordingly, these measures remain in 
place.
    148. Over the past several years, the Commission also has 
implemented recommendations from the Advisory Committee on Diversity 
for Communications in the Digital Age (Advisory Committee) designed to 
enhance opportunities for minorities, women, and other underrepresented 
groups to participate in the broadcast industry. For example, based on 
a recommendation from the Advisory Committee, the Commission's Office 
of Communications Business Opportunities (OCBO) hosts annual 
capitalization strategies workshops in order to facilitate lending to 
and investment in minority- and women-owned entities. Most recently, 
OCBO convened a Capitalization Strategies Workshop that focused on 
capital acquisition for small, women- and minority-owned businesses in 
broadcasting, telecommunications, and related fields. In addition, as 
explained further below, the Commission currently is considering a 
recommendation from the Advisory Committee to afford bidding credits in 
license auctions to persons or entities that have overcome substantial 
disadvantage. The Commission seeks input in this Notice of Proposed 
Rulemaking on how the Commission most effectively can expand upon its 
diversity initiatives at the same time that the Commission addresses 
the Third Circuit's concerns and other legal considerations, including 
potential impediments to affording licensing preferences to minorities 
and women under current standards of constitutional law.
    149. Eligible Entity Standard and Prometheus II Remand. Aside from 
implementing the initiatives noted above, the Commission also has 
sought to promote diversity through the measures adopted in the 
Diversity Order that incorporated the eligible entity definition. As 
discussed below, the Third Circuit in Prometheus II vacated and 
remanded each of these measures. Accordingly, the Commission seeks 
comment on how the Commission should respond to the court's criticisms 
of the Commission's previous eligibility standard, how the Commission 
should proceed with respect to the measures that previously relied on 
that standard, and any other actions the Commission should consider to 
advance its diversity objectives.
    150. As defined in the Diversity Order, an ``eligible entity'' is 
any entity that qualifies as a small business under revenue-based 
standards that have been established by the Small Business 
Administration (SBA). In adopting measures based on this definition, 
the Commission concluded that it would ``be effective in creating new 
opportunities for broadcast ownership by a variety of small businesses 
and new entrants, including minorities and women.'' The Commission also 
noted that adopting this ``race- and gender-neutral definition'' would 
avoid the ``constitutional difficulties'' associated with a race-
conscious definition ``that might create impediments to the timely 
implementation'' of the measures adopted in the Diversity Order. In 
response to commenters' requests that the Commission take direct action 
to increase minority and female ownership of broadcast stations, 
however, the Commission asked for comment in the Third Further Notice 
of Proposed

[[Page 2892]]

Rulemaking to the Diversity Order (73 FR 28400, May 16, 2008, FCC 07-
217, rel. Mar. 5, 2008) (the Diversity Third FNPRM) on whether it 
should adopt an alternative, race-conscious eligibility definition as 
well as other potential definitions. The alternative definitions 
proposed in the Diversity Third FNPRM are discussed below.
    151. In Prometheus II, the Third Circuit held that the Commission's 
revenue-based eligible entity definition was arbitrary and capricious. 
While noting that other actions in the Diversity Order ``take a strong 
stance against discrimination and are no doubt positive,'' the court 
found that the Commission failed to show that measures based on the 
eligible entity definition ``will enhance significantly minority and 
female ownership, which was a stated goal of'' the rulemaking 
proceeding in question. The court further observed that, in discussing 
its decision to adopt this definition, the Commission had referred 
``only to `small businesses,' and occasionally `new entrants,' as 
expected beneficiaries.'' In addition, the court expressed doubt that 
the Commission would be able to provide an adequate explanation on 
remand of how ``measures using this definition would achieve the stated 
goal'' of increasing broadcast ownership by minorities and women. In 
particular, the court pointed to data cited by the Commission showing 
that ``minorities comprise 8.5 percent of commercial radio station 
owners that qualify as small businesses, but 7.78 percent of commercial 
radio stations as a whole -- a difference of less than 1 percent.'' The 
court also noted that, in adopting the eligible entity standard, 
``[t]he Commission referenced no data on television ownership by 
minorities or women and no data regarding commercial radio ownership by 
women.''
    152. Finding that the Commission had not provided a ``sufficiently 
reasoned basis for deferring consideration'' of the alternative 
definitions proposed in the Diversity Third FNPRM, the court 
specifically directed it to consider those proposals within the course 
of the 2010 Quadrennial Review. The Third Circuit also admonished that 
the Commission could not further delay its consideration of its prior 
proposals simply because of the constitutional difficulties they may 
present. To the extent that the Commission ``requires more and better 
data'' in order to complete its analysis, the court directed the 
Commission to ``get [such] data and conduct up-to-date studies.''
    153. Data Collection Concerning Minority and Female Ownership. 
Since the adoption of the Diversity Order, the Commission actively has 
sought to improve the broadcast ownership information available to it 
and has gathered additional data regarding the current levels of 
minority ownership of broadcast stations. In 2009, the Commission 
implemented a number of changes to its Form 323 ownership reports to 
further its goal that the data reported in the form, including data 
regarding minority and female broadcast ownership, are reliable, 
accurate, searchable, and aggregable. In addition, the Commission set a 
new uniform biennial filing deadline for the Form 323 and expanded the 
class of entities required to file the form. The Commission requires 
all full power commercial broadcast stations and all low power 
television stations, including Class A stations, to file the new form 
biennially. It also eliminated the exemption from the biennial 
reporting requirement that formerly applied to sole proprietorships and 
partnerships of natural persons that are commercial broadcast 
licensees. In addition, all attributable interest holders must now 
obtain unique FCC registration numbers for purposes of filing the form 
in order to facilitate cross-referencing of reported ownership 
interests.
    154. The Commission's first data collection that incorporates these 
changes reflects ownership interests as of November 1, 2009. The 
deadline for filing the data with the Commission was July 8, 2010, and 
on February 28, 2011 the Commission released to the public a data set 
compiling all of the ownership reports that were filed. That release 
included descriptions of the data and instructions on accessing them to 
permit interested parties to analyze and manipulate the data. This data 
set represents the first ``snapshot'' of broadcast ownership data in a 
series of planned biennial reviews that collectively should provide a 
reliable basis for analyzing ownership trends in the industry, 
including ownership by minorities and women.
    155. Commission staff has reviewed the 2009 biennial ownership 
filings of full power commercial broadcast television stations in order 
to determine the number of stations controlled by reported racial and 
ethnic categories. For purposes of this analysis, the Commission 
examined the race or ethnicity of owners with attributable voting 
interests in the entity that ultimately owns the station license and 
defined a controlling interest as an interest that exceeds 50 percent 
alone or in the aggregate. There were 1,394 full-power commercial 
television stations in the United States as of November 1, 2009, the 
information collection date. According to the Commission's review of 
the 2009 data, 29 of these stations, or 2.1 percent, are minority 
owned. Of those 29 stations, 9 have Black or African-American owners, 
accounting for 0.6 percent of all stations. American Indian or Alaska 
Native owners control 10 stations, or 0.7 percent, while Asian owners 
control nine stations, or 0.6 percent. Native Hawaiian or Pacific 
Islanders own one station, or 0.1 percent. Hispanic or Latino owners 
control 36 stations, or 2.6 percent. By comparison, the Commission's 
review showed that non-Hispanic White owners control 1,021 stations, or 
73.2 percent of the total stations. In addition, the Commission was not 
able to categorize the race or ethnicity of the ownership for 244 
stations, representing 17.5 percent of the total stations, because at 
least 50 percent of the ownership of these stations was not reportable 
via the Form 323. Information was unavailable for 64 stations, or 4.6 
percent.
    156. Several of the Media Ownership Studies provide additional 
analysis of these subjects. These and other studies are discussed more 
fully in Section V herein. Media Ownership Study 7 considers the 
relationship between ownership structure and the provision of radio 
programming targeted to African-American and Hispanic audiences. The 
study finds that Black and Hispanic listeners have very different 
listening preferences from the White population. The study also finds 
that although most minority-targeted stations are not minority-owned, 
most minority-owned stations target minority listeners, and the 
presence of minority-owned stations in a market appears to raise the 
amount of minority-targeted programming. Media Ownership Study 2 
concludes that consumers value diversity of opinion and community news 
to varying degrees that generally increase with age, education, and 
income. The study also examined the value listeners place on 
multiculturalism, however, which was found to decrease with age. The 
study further concludes that White male consumers generally do not 
value multiculturalism.
    157. The Commission recognizes that the data currently in the 
record of this proceeding are not complete and are likely insufficient 
either to address the concerns raised in Prometheus II or to support 
race- or gender-based actions by the Commission. Although the 
Commission would prefer to be able to propose specific actions in 
response to the Third Circuit's remand of the measures relying on the 
eligible entity

[[Page 2893]]

definition in this Notice of Proposed Rulemaking, the Commission 
believes that making legally sound proposals would not be possible 
based on the record before us at this time. Accordingly, the Commission 
plans to undertake the following actions in preparation for the 2014 
broadcast ownership review to establish with the requisite foundation 
and clarity what additional policies can be implemented promoting 
greater broadcast ownership diversity, including female and minority 
ownership: (1) Continue to improve the Commission's data collection so 
that the Commission and the public may more easily identify the diverse 
range of broadcast owners, including women and minorities, in all 
services the Commission licenses; (2) Commission appropriately-tailored 
research and analysis on diversity of ownership; and (3) Conduct 
workshops on the opportunities and challenges facing diverse 
populations in broadcast ownership. In addition, the Commission asks 
interested parties to supplement the record and provide any and all 
data available that can complete a picture of the current state of 
ownership diversity, including minority and female ownership in the 
broadcast industry and to justify any prospective actions the 
Commission may take on remand.
    158. Options for Reconsideration of the Eligible Entity Standard. 
The Commission seeks comment herein on a number of actions it could 
take with respect to the remanded eligible entity definition. With 
respect to these proposals and any others that may be suggested, the 
Commission emphasizes that interested parties should squarely address 
the potential legal impediments to any specific approach. The 
Commission asks commenters to explain the constitutional law analysis 
that would apply to, as well as the potential constitutional problems 
with, any proposals for a new eligibility definition. Commenters should 
explain in detail, based on relevant case law, whether and how the 
Commission could overcome the application of strict or intermediate 
constitutional scrutiny to any race- or gender-based standard. 
Commenters also should explain whether and how proposals can be 
supported by data and whether they can be applied in a consistent and 
rational manner.
    159. As an initial matter, the Commission invites comment regarding 
the possibility of reinstating the preexisting eligible entity 
definition. Recognizing the Third Circuit's apparent skepticism that 
the Commission would be able to demonstrate on remand that the revenue-
based eligibility definition serves the Commission's goal of increasing 
broadcast ownership by minorities and women, the Commission asks 
commenters to address whether or not there is additional evidence 
available that would show a stronger connection between according 
licenses preferences to small businesses and promoting this goal. Is 
there evidence demonstrating that there are now more small businesses, 
particularly those that are owned by minorities or women, that own 
broadcast outlets than there were when the eligible entity standard was 
put in place? The Commission strongly encourages parties to supply any 
such information to the Commission. The Commission also notes the Third 
Circuit's statement that ``it is hard to understand how measures using 
[the eligible entity] definition would achieve the stated goal'' of 
increasing broadcast ownership by minorities and women in light of 
Commission data showing that ``minorities comprise 8.5% of commercial 
radio station owners that qualify as small businesses, but 7.78% of the 
commercial radio industry as a whole. * * *'' The Commission seeks 
comment on whether this comparison of minority representation in 
different segments of the radio industry accurately reflects the 
potential impact of the eligible entity standard on minority and female 
ownership. In addition, the Commission invites input on whether it is 
possible that the preexisting definition would have a more substantial 
impact on minority and female station ownership if the Commission 
modifies the licensing preferences to which the definition applies. As 
discussed in more detail below, the Commission invites commenters to 
propose changes to these preferences and to explain how such changes 
would promote the Commission's minority and female ownership 
objectives.
    160. Alternatively, should the Commission consider reinstating the 
eligible entity definition to support other policy objectives aside 
from the promotion of minority and female station ownership? For 
example, should increasing station ownership by small businesses be 
considered an independent policy goal in this proceeding and, if so, 
would readopting the preexisting eligibility definition be a reasonable 
and effective means of promoting this objective? Several provisions of 
the Communications Act require the Commission to promote the interests 
of small businesses. See, e.g., 47 U.S.C. 309(j)(3)(B) (obligating the 
Commission to ``disseminat[e] licenses among a wide variety of 
applicants, including small businesses'' in authorizing the Commission 
to award licenses via competitive bidding); see also 47 U.S.C. 257(a) 
(directing the Commission to identify and eliminate ``market entry 
barriers for entrepreneurs and other small businesses in the provision 
and ownership of telecommunications services and information services * 
* *''); 47 U.S.C. 614(a)(i) (establishing a ``Telecommunications 
Development Fund'' to, among other purposes, ``promote access to 
capital for small businesses in order to enhance competition in the 
telecommunications industry''). The Commission also asks commenters to 
consider whether creating opportunities for small businesses to 
participate in the broadcast industry via the eligible entity standard 
would serve the Commission's traditional goals of fostering viewpoint 
diversity, localism, and competition. In the Diversity Order, the 
Commission suggested that the use of the eligible entity standard would 
``result in a wider array of programming services, including some that 
are responsive to local needs and interests and audiences that are 
underserved.'' In this regard, the Commission ``anticipate[d] that 
small businesses will be more likely than large corporations to have 
ties to the communities that they serve, and thus be more attuned to 
local needs and interests.'' The Commission seeks comment on this 
prediction and on other ways in which the continued use of the eligible 
entity definition could serve the Commission's traditional policy 
objectives.
    161. The Commission also seeks comment on whether there are other 
race- and gender-neutral standards for defining eligible entities that 
the Commission should consider for the measures adopted in the 
Diversity Order and any others the Commission may implement in the 
future. Given the Third Circuit's conclusion that the Commission failed 
to demonstrate a connection between the previous revenue-based 
definition and the Commission's stated diversity goals, commenters 
should supply specific evidence demonstrating why a proposed definition 
is likely to serve the Commission's policy objectives, especially the 
Commission's goal of increasing station ownership by minorities and 
women. In addition, the Commission asks commenters to discuss any 
potential legal problems as well as any administrative issues 
associated with their proposals.
    162. In the Diversity Third FNPRM, the Commission sought comment on

[[Page 2894]]

replacing the eligible entity standard with a standard based on the 
SBA's definition of socially and economically disadvantaged businesses 
(SDBs) used for purposes of its Business Development Program. African 
Americans, Hispanic Americans, Asian Pacific Americans, Subcontinent 
Pacific Americans, and Native Americans are presumed to qualify for the 
Business Development Program, and other individuals may qualify for the 
program if they can show by a preponderance of the evidence that they 
are disadvantaged. The Commission again seeks comment on this proposal 
in this proceeding. In addition, the Commission seeks comment on 
whether there is an alternative race-conscious and/or gender-specific 
standard that the Commission should adopt.
    163. To be lawful, race-based and gender-based governmental action 
must satisfy the Equal Protection Clause of the Fourteenth Amendment to 
the United States Constitution. The Supreme Court has established that 
race-based classifications are subject to strict scrutiny and may be 
upheld ``only if they are narrowly tailored measures that further 
compelling governmental interests.'' Gender classifications are subject 
to intermediate scrutiny, under which the government's actions must be 
substantially related to the achievement of an important objective. 
Commenters advocating a race-conscious classification, therefore, 
should explain, based on relevant judicial precedent and empirical 
data, how such a classification would satisfy the strictest level of 
constitutional scrutiny. To justify the adoption of a race-conscious 
standard, would it be possible for the Commission to demonstrate a 
compelling interest in fostering viewpoint diversity, redressing past 
discrimination, or some other interest? If the Commission could 
establish such an interest, how could the Commission demonstrate that a 
race-based standard would be a narrowly tailored means of achieving 
this interest? Similarly, could the Commission meet the relevant 
constitutional standards for a gender-specific standard? Commenters 
also should explain what data the Commission would need in order to 
adequately support a race- and/or gender-based definition. Commenters 
should provide relevant data and are encouraged to submit peer-reviewed 
studies.
    164. The Commission also sought comment in the Diversity Third 
FNPRM on an ``individualized full-file review'' approach to awarding 
the preferences adopted in the Diversity Order. Under this proposal, 
applicants would be accorded licensing preferences if they could 
demonstrate that they have overcome ``significant social and economic 
disadvantages.'' After the release of the Diversity Third FNPRM, the 
Media and Wireless Bureaus sought comment on a proposal made by the 
Advisory Committee to award bidding credits in licensing auctions to 
applicants that demonstrate that they have overcome a ``substantial 
disadvantage.'' The Commission seeks comment on the use of this type of 
standard for purposes of the licensing preferences adopted in the 
Diversity Order. Would these standards, both of which are based on 
individualized reviews to determine whether applicants have overcome 
considerable disadvantages, be subject to strict judicial scrutiny and 
would they be able to survive this level of constitutional analysis? 
Alternatively, would it be feasible for the Commission to conduct such 
reviews in a race- and gender-neutral manner that would be subject to a 
lower level of constitutional scrutiny? If so, would the Commission be 
able to satisfy the Third Circuit's concern that the use of a race- and 
gender-neutral approach may not materially advance the Commission's 
minority and female ownership goals? In addition, the Commission asks 
commenters to consider how the Commission could ensure that the highly 
individualized reviews of broadcast applications that would be required 
under a substantial disadvantage standard could be administered in a 
sufficiently objective and consistent manner as well as in accordance 
with First Amendment values. The Commission also would like interested 
parties to comment on the Commission resources that would be required 
to conduct, as a matter of course, highly fact-specific reviews of this 
nature. What data would the Commission need to support the adoption of 
this type of standard? The Commission seeks comment as to the 
practicability of implementing such a standard and what information 
would be required by the Commission to determine potential eligibility. 
What privacy concerns, if any, are raised by collecting such 
information? Would the Commission have statutory authority to adopt it? 
To the extent that additional data are needed, commenters are 
encouraged to provide such information.
    165. In addition, the Commission seeks comment on any other 
approaches it should consider. Commenters advocating alternative 
proposals should explain how the proposal would satisfy the applicable 
level of constitutional scrutiny, how it would advance the Commission's 
policy goals, how the Commission could address any administrative 
burdens or practical considerations inherent in the proposed approach, 
and what data the Commission would need in order to justify it. Again, 
commenters are strongly encouraged to supply any relevant data to the 
Commission.
    166. Finally, the Commission asks commenters to consider whether 
the Commission should decline to adopt any new eligibility standard 
specifically aimed at increasing minority and female station ownership 
in light of the record in front of the Commission in this proceeding. 
In particular, the Commission asks parties to consider, on the one 
hand, the Third Circuit's dissatisfaction with the Commission's prior 
race- and gender-neutral approach. On the other hand, the Commission 
asks parties to consider the high constitutional hurdles the Commission 
would face if it were to adopt an expressly race- or gender-based 
standard on remand and the data that would be necessary to justify such 
a standard prior to the completion of the 2010 Quadrennial Review. 
While the Commission continues to believe that promoting minority and 
female ownership is an important goal, the Commission also recognizes 
that implementing a program expressly aimed at this goal in the context 
of this proceeding would require the support of a substantial 
evidentiary record that the Commission has not yet been able to amass. 
Accordingly, the Commission seeks comment on how the Commission most 
effectively could continue to pursue its longstanding goals of 
promoting diversity among broadcast licensees, and especially of 
fostering broadcast ownership by minorities and women, in the event 
that the Commission determines that it is unable to support a new 
eligibility standard in this proceeding.
    167. Measures Relying on Eligible Entity Standard. In addition to 
seeking comment on the eligible entity definition, the Commission also 
seeks comment on how the Commission should proceed with respect to the 
licensing preferences that previously relied on this definition, each 
of which was remanded in Prometheus II. As numbered in the Diversity 
Order, these measures include: (1) Revision of Rules Regarding 
Construction Permit Deadlines; (2) Modification of Attribution Rule; 
(3) Distress Sale Policy; (4) Duopoly Priority for Companies that 
Finance or Incubate an Eligible Entity; (5) Extension of Divestiture 
Deadline in Certain Mergers;

[[Page 2895]]

and (6) Transfer of Grandfathered Radio Station Combinations to Non-
Eligible Entities. The Commission seeks comment on whether or not the 
Commission, either in this proceeding or a separate rulemaking, should 
attempt to reinstate any of these measures. In particular, if the 
Commission decides to readopt the preexisting eligible entity 
definition on remand, should it also reinstate each of the measures 
that rely on this definition? Alternatively, if the Commission adopts a 
new standard to replace or supplement the eligible entity definition, 
should the Commission apply that revised standard to each of the above-
listed measures, but otherwise reinstate them in their current form? 
Are there reasons why the Commission should either decline to readopt 
any of these measures on remand or make any changes to them if the 
Commission implements a new eligibility standard? The Commission also 
seeks comment on whether reinstating these measures, either in their 
current form or with proposed changes, would be an effective means of 
advancing the Commission's policy goals and whether such action would 
be consistent with applicable constitutional law standards. The 
Commission further invites comment on whether the Commission would need 
additional data in order to justify the readoption of any of these 
measures and, if so, the Commission requests that such data be 
submitted. By contrast, if the Commission decides that it is not 
feasible to replace the eligible entity definition and therefore 
declines to adopt any new definition on remand, then, absent further 
action by the Commission, each of the measures vacated by the court 
would remain void. Accordingly, these measures would be rescinded by 
the Commission.
    168. The Commission also sought comment on a number of additional 
measures intended to promote diversity among broadcast licensees in the 
Diversity Third FNPRM. Several of these proposals rely on the now 
vacated eligible entity definition or another proposed eligibility 
standard. As set forth in the Diversity Third FNPRM, these proposals 
include: (1) Share-Time Proposals; (2) Retention of AM Expanded Band 
Owners' Station if One Station Is Sold to an Eligible Entity; (3) 
Structural Waivers for Creating Incubator Programs; and (4) Proposals 
of the National Association of Black Owned Broadcasters and the 
Rainbow/PUSH Coalition. A number of parties filed comments on these 
proposals in response to the Diversity Third FNPRM. With regard to the 
third proposal, MMTC recently has urged the Commission to take action 
on a similar Minority Ownership Incubation Proposal. Specifically, MMTC 
has proposed an incubation program pursuant to which the local radio 
ownership rule would be waived for radio broadcasters that engage in 
one of six ``Qualifying Activities,'' including (1) selling or donating 
a commercial radio station to a qualified entity; (2) entering into a 
local marketing agreement with an independent programmer for a five 
year period for the use of an FM HD-2 or HD-3 channel; (3) financing 
one year of operations and providing in-kind technical and engineering 
assistance or equipment that enables an eligible entity to reactivate 
and restore to full service a dark commercial or noncommercial 
broadcast station; (4) donating a commercial or noncommercial station 
to an Historically Black College or University, an Hispanic Serving 
Institution, an Asian American Serving Institution, or a Native 
American Serving Institution; (5) ``providing loans, loan guarantees, 
lines of credit, equity investments or other direct financial 
assistance to a qualified entity to cover more than 50 [percent] of the 
purchase price of a radio station''; or (6) engaging in another action 
that is ``likely to enhance radio station ownership opportunities for 
qualified entities.'' Under MMTC's proposal, the Qualifying Activity 
must occur in either the same market as or a larger market than the 
market for which the waiver is requested. Radio broadcasters that 
engage in Qualifying Activities would be eligible to receive an 
unlimited number of waivers of the AM and FM subcaps and a specified 
number of waivers of the local radio ownership caps based on market 
size. In light of the Third Circuit's remand, the Commission again 
seeks comment on the proposals in the Diversity Third FNPRM, as well as 
those that have been suggested more recently, in this proceeding. In 
particular, the Commission asks for input on how the court's remand of 
the provisions relying on the eligible entity definition should impact 
the Commission's consideration of each of these proposals. The 
Commission also seeks comment on whether the adoption of these measures 
would advance the Commission's policy objectives and on the legal 
implications of implementing these proposals. Further, the Commission 
invites parties to comment on whether the Commission would need 
additional data in order to justify any of these measures and encourage 
parties to provide any data that may be helpful to the Commission's 
analysis.
    169. Additional Measures To Further the Commission's Diversity of 
Ownership Goals. The Commission also seeks comment on any other 
measures it should consider that would advance the Commission's 
longstanding goal of having a wide diversity of broadcast licensees 
and, more specifically, of increasing the number of minority- and 
women-owned broadcast stations. In addition to the measures noted 
above, the Diversity Third FNPRM sought comment on several other 
proposals designed to increase participation in the broadcast industry 
by new entrants and small businesses, including minority- and women-
owned businesses. These proposals include: (1) Opening FM Spectrum for 
New Entrants; (2) Must-Carry for New Class A Television Stations; and 
(3) Reallocation of TV Channels 5 and 6 for FM service. The Commission 
seeks to refresh the record on these proposals in this proceeding. The 
Commission also asks commenters to suggest any additional actions the 
Commission should consider to advance its important diversity 
objectives. For example, MMTC has suggested that the Commission seek to 
reinstate and expand its previous Tax Certificate Policy by 
coordinating with the White House on draft legislation. The Commission 
asks commenters specifically to explain how their proposals would serve 
the Commission's goals and whether they would satisfy relevant 
constitutional law standards.

E. Media Ownership Studies

    170. To provide data on the impact of market structure on the 
Commission's policy goals of competition, localism and diversity, the 
Commission has commissioned eleven Media Ownership Studies, which are 
listed in Appendix A and have now been completed. The economic studies 
were completed and subject to formal peer review during the period 
January to July 2011. The studies, peer reviews, and author comments on 
the peer reviews are available on the Commission's media ownership Web 
site at http://www.fcc.gov/encyclopedia/2010-media-ownership-studies. 
The Commission invites interested parties to submit any comments on the 
studies on the same comment dates indicated on the first page of this 
document.
    171. As discussed below, each of these studies defines a relevant 
performance metric with respect to one or more of the three policy 
goals and examines how results vary across markets with differing 
ownership

[[Page 2896]]

structures. Generally, the research was designed to relate relevant 
performance metrics directly to changes in ownership of broadcast 
facilities in local markets, the attribute of the market that the 
Commission's rules directly affect. In some cases the studies found 
useful and important correlations. In other cases variations were found 
across markets but with little correlation to local market ownership 
structure. The Commission seeks comment on how to interpret and apply 
these results. Are there other statistical studies available that the 
Commission should consider that relate relevant performance metrics to 
market structure using statistical analysis of a reasonably large 
sample of markets? Are there individual market case studies available 
that are relevant and, if so, what role should they have in the 
Commission's deliberations?
1. Studies Relating to Competition
    172. With standard private goods, a study of competitive 
performance would normally begin with an examination of the 
relationship between price and marginal cost. Broadcast television and 
radio programming do not have end user prices, so this approach cannot 
be implemented here. This leaves two other options. First, the 
Commission can examine television viewing and radio listening on the 
assumption that, other things being equal, higher viewing and listening 
levels in a market are associated with higher consumer satisfaction 
(the Commission values competition because it provides high levels of 
consumer satisfaction). Second, the Commission can survey consumers 
about their valuation of the media environment. Competition can benefit 
consumers not only by delivering a valued mix of programming at a point 
in time, but also by promoting innovation. The Commission's slate of 
studies included both approaches to the direct assessment of consumer 
satisfaction and also examines one manifestation of innovation. The 
Commission tentatively concludes that these metrics are appropriate to 
analyze competition and seek comment on that conclusion, as well as the 
structure and conclusions of the studies described below.
    173. Media Ownership Study 1 examines television audience ratings 
during parts of the day when programming is locally selected (in 
particular, dayparts other than prime time, because most prime time 
programming is network selected). The study found no significant 
relationship between variations in viewing and variations in market 
structure across markets. The Commission seeks comment on the use of 
these metrics to measure competition, as well as the results of Media 
Ownership Study 1.
    174. Media Ownership Studies 5 and 7 each provide some analysis of 
variations across markets in radio listening. Media Ownership Study 5 
examines listening to news radio stations. It finds no significant 
correlation between market structure and listening, although it does 
find that the addition of a public news station has a significant 
impact on news listening. In many if not most markets, there is not 
more than one public news station, so the results are plausibly 
understood as suggesting that adding the first public news station in a 
market has a significant effect. It is not clear that adding additional 
public news stations would have the same effect. The Commission seeks 
comment on the structure and conclusions of Media Ownership Study 5, 
including how the Commission should consider the impact of public news 
stations on competition given the results of the study.
    175. Media Ownership Study 7 focuses on the provision of radio 
programming to minority audiences. It first documents the significant 
differences in listening patterns across the Black and White and across 
the Hispanic and non-Hispanic demographic groups. The study also 
examines the impact of market structure on listening with inconclusive 
results. The Commission seeks comment on the design of Media Ownership 
Study 7, as well as its results with respect to radio listening, and 
what, if anything, those results can contribute to the Commission's 
analysis.
    176. Media Ownership Study 2 utilizes survey data as a basis for 
estimating consumers' willingness to pay for (i.e., valuation of) 
various characteristics of their media environment (diversity of 
opinion, community news, multiculturalism, and advertising). The 
portion of the Media Ownership Study 2 analysis most directly related 
to competition is the study of advertising and consumers' revealed 
willingness to pay for reductions in it. Some past research has 
interpreted the amount of advertising as a kind of ``price'' that 
consumers must pay to receive television programming. The market 
structure analysis in Media Ownership Study 2 focuses on the number of 
television voices in the market, and the results appear to show that an 
increase raises the amount of advertising. The Commission seeks comment 
on whether the characteristics used in Media Ownership Study 2 to 
measure consumer satisfaction adequately measure total consumer 
satisfaction. In particular, the Commission seeks comment on the extent 
to which correlations between market structure and the amount of 
advertising in a market provide a useful proxy for competition in the 
marketplace. Commenters who argue that important elements of the media 
environment are missing from the study are requested to indicate how 
consumer satisfaction is affected by the missing elements as well as 
how the missing elements are likely to be correlated with the elements 
of the media market structure the Commission's ownership rules can 
influence.
    177. Media Ownership Study 10 examines how the structure of the 
television market has influenced the increase in television stations' 
use of multicasting. Innovation as evidenced by the spread of 
technological advances is another area where competition in the media 
markets can be observed. One could view increases in multicasting as 
the result of competition among television stations in a market. The 
study offers two measures of multicasting: The total number of 
multicast channels in the market and the average number of multicast 
channels per television station in the market. The study finds little 
evidence that variations in ownership structure affect the extent of 
multicasting. Rather it appears that other market characteristics, such 
as the market size and the number of television stations operating in 
the market, are more relevant factors. The Commission seeks comment on 
the use of multicasting as a metric to study innovation and competition 
in the market, including whether one measure used in Media Ownership 
Study 10 is a more appropriate one than the other.
2. Studies Relating to Localism
    178. The Commission sought to measure localism, in part, by looking 
at the effect of local market structure on the quantity of local news 
and public affairs programming provided at both the market level and 
the station level. Media Ownership Study 1 examines a number of factors 
relating to the quantity and quality of local information and 
correlates that information with the structure of the local media 
market. In this study, quality is measured by using ratings as the 
variables to determine how much people prefer certain types of 
programming, including local news programming. The study does not 
identify a relationship between ownership structure and local news 
ratings or hours of programming. The Commission seeks comment on how

[[Page 2897]]

well Media Ownership Study 1 measures the degree to which the localism 
needs of the local population are being served. The study defines 
television ratings, restricted to the evening time period, as a 
reasonable measure for the quality of the local television content in 
the market. Does a measure of the rating of local news provide a better 
measure of localism than a measure of all content viewing during this 
period? Should the Commission's localism metric necessarily rely on 
consumer preference? Media Ownership Study 1 also examines three 
measures of the amount of news available in the market: The number of 
news formatted radio stations, the number of hours of local news, and 
daily newspaper circulation. Is the number of news formatted radio 
stations an appropriate measure of localism in the absence of 
information on the type of news carried by the stations? Would one 
expect the amount of local news on a news formatted station to vary 
across markets in a predictable manner? Is the circulation of daily 
newspapers in a market a reasonable measure of the availability of 
local content? How should it be interpreted? What, if anything, does a 
high newspaper circulation level indicate about local content on 
television and radio stations in the same market?
    179. Media Ownership Study 4 also provides an analysis of the 
quantity of local television news and public affairs programming. Media 
Ownership Study 4 finds that local news and public affairs minutes 
provided in a market increases with the number of television stations 
and the number of Big Four (ABC, NBC, CBS, Fox) affiliates in the 
market. The presence of a newspaper-television combination in a market 
appears to reduce total local news minutes in the market, even though 
the cross-owned station itself produces more local news than otherwise 
comparable stations. At the station level, Media Ownership Study 4 
finds that radio-television cross-ownership appears to increase local 
news. Superficially Media Ownership Study 1 and Media Ownership Study 4 
appear similar because each measures the quantity of local news. The 
Commission notes, however, that the sources each study uses to catalog 
the amount of news are different. In addition, the empirical models 
differ. How should the Commission weigh each of these studies? Is one 
data source superior to another? Media Ownership Study 4 examines 
individual station and market behavior. How should the Commission weigh 
conflicting results between market outcomes and station behavior?
    180. Media Ownership Study 5 examines the prevalence of news 
formatted radio stations and the listenership of those stations. The 
data for this study do not separate local and national news programming 
or account for news programming on stations that are not designated as 
news formatted. Is the news content of news-formatted stations 
sufficiently local that the Commission can use the number of such 
stations as a reliable metric for the amount of localism in a radio 
market? The study also analyzes usage of news, via the overall ratings 
of the news-formatted radio stations. Are ratings a sufficient measure 
of the quality of the local content provided by the station? The 
Commission notes that the study examines only radio markets defined by 
Arbitron, which tend to be in the more populous areas of the country. 
Should the Commission expect the more rural areas to differ? The study 
concludes there are few significant relationships between news 
formatted stations and ownership structure. The study does provide weak 
evidence, however, that an increase in the size of the largest local 
owner group is associated with an increase in the number of news 
stations and the number of different news formats offered in the 
market. The Commission seeks comment on these conclusions.
    181. Media Ownership Study 6 examines the state of local news on 
the Internet to determine whether the Internet provides a net increase 
to media diversity in local markets. Media Ownership Study 6 first 
determines which news sites are not affiliated with a traditional media 
outlet such that they can be considered a new or independent news 
source. The study provides data on online local news sites within the 
top 100 U.S. television markets that reach more than a minimum 
threshold of traffic. Media Ownership Study 6 concludes that there is a 
very limited amount of local news on the Internet that is provided by 
organizations that are not broadcasters or print media organizations. 
The Commission tentatively concludes from Media Ownership Study 6 that, 
while the potential of the Internet for local, or even hyper-local, 
news is great, very few such sites today reach a significant audience, 
at least in the top 100 markets. The Commission seeks comment on that 
tentative conclusion. The Commission also notes that the analysis is 
based upon the most widely visited sites. Is it possible that a 
sufficient number of lightly visited sites carrying content produced by 
non-traditional media exist such that they act as a reservoir of local 
content available to consumers? If not, are the barriers to entry into 
Web publishing sufficiently low such that a failure by broadcasters to 
provide consumers with their desired level of local news and 
information will attract competitors? Does the current relative absence 
of competitors provide any indication of how well the traditional media 
are serving the needs of consumers?
    182. Media Ownership Study 3 examines public knowledge and civic 
participation to determine whether consolidation results in a more or 
less informed public. Media Ownership Study 3 considers several metrics 
of civic engagement, including knowledge of political candidates and 
issues, as potential indicators of how well the media environment 
supplies information about local issues. It finds little relationship 
between media market structure and consumers' knowledge about 
presidential and congressional candidates, interest in politics, or 
turnout at the polls. The peer reviewer raised several questions about 
the usefulness of these particular measures of civic knowledge and 
engagement. Are the metrics reliable indicators of such 
characteristics? The study does find a relationship between political 
participation and political advertising on television. Could there be a 
connection that Media Ownership Study 3 did not measure between market 
structure and a political candidate's decision to advertise in that 
market, which influenced civic knowledge and participation? The 
Commission seeks comment on these issues.
    183. Finally, Media Ownership Study 2, discussed above in the 
Competition section, provides the Commission with information on the 
relative value consumers place on the Commission's diversity and 
localism goals. When examining the influence of market structure on 
consumer valuation, the study finds that the number of television 
voices does not have an impact on the consumer's perception of the 
amount of community news provided. The Commission notes that the 
average consumer places a higher value on opinion diversity and local 
news content than on content diversity. How should the Commission 
evaluate this trade-off? Is the valuation by the average consumer the 
most appropriate measure or should the Commission look at the 
valuations broken down by demographic groups?

[[Page 2898]]

3. Studies Relating to Diversity
    184. In commissioning ownership studies on diversity, the 
Commission elected to measure the availability of news and civic 
engagement in local markets as it relates to local market structure in 
a variety of ways, as described below. The Commission tentatively 
concludes that these metrics are appropriate to analyze diversity and 
seek comment on that conclusion, as well as the individual studies 
described below. Media Ownership Study 5 examines whether ownership 
structure impacts the availability and listenership of radio stations 
with a news format in local radio markets, as discussed above. Markets 
with more news formatted radio stations would be considered to have a 
greater level of program diversity. The study concludes there is no 
evidence that newspaper-radio cross-ownership increases news variety or 
listening. As discussed above, the study provides weak evidence that an 
increase in the size of the largest local owner group is associated 
with an increase in the number of news stations and the number of 
commercial news varieties present in the market. Are these format 
categories for news and information useful measures of program 
diversity?
    185. The Commission also assessed diversity in Media Ownership 
Study 2. The study analyzes the existing and preferred quantity of 
information of interest specifically to women and minorities, which it 
refers to as multiculturalism. Analysis of the survey results allowed 
the researchers to estimate the value consumers place on increased 
amounts of this media market characteristic. The Commission tentatively 
concludes that what the study labeled as multiculturalism is a useful, 
though not singular, indicator of the level of program diversity in the 
market. The survey asked consumers about their media environments 
overall rather than the characteristics of a particular medium such as 
radio or television. When examining the influence of market structure 
on consumer valuation, the study finds that the number of television 
voices has a significantly positive impact on consumers' valuation of 
opinion diversity and multiculturalism, even after accounting for the 
number of stations in the market. Examining the effect of a combination 
of two television stations in a market, the study finds such a 
combination leads to a loss in average consumer welfare which is 
greater in smaller markets. The study finds that the combination does 
benefit consumers due to a reduction in the perceived amount of 
advertising. While the changes in consumer welfare from such a 
transaction vary significantly by market size for opinion diversity and 
advertising, the effect on multiculturalism varies substantially less 
by market size. How should the Commission assess consumers' 
satisfaction against the overall media environment when balancing the 
benefits of program diversity with any possible countervailing effects?
    186. Media Ownership Study 8B directly measures the diversity of 
content by measuring the diversity of viewpoints discussed on local 
television news programs. The study catalogs words used in broadcasts 
and then measures variation among stations in a market. Viewpoint 
diversity in this study is considered in terms of diversity in 
discussions of political figures, issues, and local regions. How should 
each of these measures of content diversity be weighted? The analysis 
is based on the content available in 37 large markets. Would the 
results of this study likely hold in smaller markets? Can the findings 
for television news be generalized to other sources of news, such as 
radio and newspapers?
    187. Media Ownership Study 9 is a theoretical and experimental 
study of the impact of market structure on the incentives of media 
outlets to withhold information from citizens when withholding could 
benefit the policy position the media owner favors. In the past, many 
analyses of market structure and diversity have focused on the idea 
that, to ensure a wide range of viewpoints are provided, it is 
important to have multiple independent media outlets. The underlying 
presumption is that with many independent outlets it is likely that the 
decision makers for content transmission will have varying points of 
view and so varying points of view will be disseminated.
    188. Media Ownership Study 9 emphasizes the importance for 
information transmission of having multiple outlets with the same 
viewpoint, with rivalry among outlets with similar viewpoints serving 
to prevent information withholding. The theoretical model is an 
abstraction, beginning with two outlets and a single policy issue on 
which they can have differing viewpoints and adding additional outlets. 
One conclusion is that ``competition within viewpoints dramatically 
enhances information revelation.'' In the real world, there are of 
course multiple issues and likely more than two alternative viewpoints 
per issue. Nevertheless, the analysis is valuable because it provides 
strong support for having at least four independent media voices, since 
every issue has at least two viewpoints and two outlets per viewpoint 
are needed in the model to ensure information regarding a viewpoint is 
not withheld. The experimental results are also suggestive, first 
because, broadly speaking, they confirm the theoretical predictions, 
but also because they indicate the market performance improves with 
additional media outlets, but that the marginal value (for information 
transmission) of additional outlets declines as the number of outlets 
increases. The Commission seeks comment on the validity of the 
theoretical model and the extent to which inferences based on it are 
relevant to the Commission's diversity analysis.
    189. While Media Ownership Studies 5 and 8B focus on diversity 
measures relating to the content of the medium, Media Ownership Study 
8A measures diversity of content by observing how consumers react to 
the content delivered to them. Can consumer behavior provide a reliable 
indicator of the level of diversity? The study utilizes variations in 
viewing patterns of local television news programs as compared to local 
viewing patterns for national television news programs to develop a 
measure of diversity of content on local news programs. The study 
compares the dispersion of the market shares of national news programs 
to the dispersion of the market shares of local news to benchmark the 
diversity offered by local news in a market. It finds little 
correlation between viewpoint diversity and local market ownership 
structure. The Commission seeks comment on these results.
    190. Media Ownership Studies 1 and 5 measure the market share of 
local television news programs and news-formatted radio stations, 
respectively. Media Ownership Study 1 examines variations in viewing of 
local television news programming but finds little relationship to 
market structure. Can these metrics also provide information about the 
diversity of content provided by the media in addition to satisfaction 
with the media? Will diverse content necessarily attract a larger 
audience than less diverse content, or is the effect contingent on the 
diversity of the population within the market? The Commission seeks 
comment on whether these two studies can provide additional information 
on the level of diversity in a local market.
    191. Measures of civic engagement also can be used to assess the 
level of viewpoint diversity in a market. For instance, if media 
outlets in a market supply programming with a diverse range of 
viewpoints, consumers may be

[[Page 2899]]

better informed, which can lead to increased local civic participation. 
As noted above, Media Ownership Study 3 provides data relevant to this 
analysis. It measures civic participation and knowledge. Does this 
metric also provide useful information about the level of viewpoint 
diversity in the market? Several measures examined by the study may 
have relevance to diversity depending on how consumers react to hearing 
diverse viewpoints. The study measures consumers' recognition of 
politicians. Is it reasonable to conclude that markets where consumers 
are more likely to recognize the positions held by various politicians 
are markets in which more diverse information is available? The 
Commission seeks comment on the relevance of civic participation for 
measuring the level of viewpoint diversity in the market.
4. Study Relating to Minority and Women Ownership Issues
    192. Media Ownership Study 7 considers the relationship between 
ownership structure and the provision of radio programming targeted to 
African-American and Hispanic audiences. It provides mixed evidence on 
whether minority-owned radio stations better serve minority 
populations. This study looks at the provision of radio programming to 
minority (African-American and Hispanic) audiences, as reflected in the 
choices of radio stations to select formats that are popular with 
minority audiences. It reflects that minority audiences--specifically 
Black and Hispanic listeners--have very different listening preferences 
from the majority non-Hispanic, White population. For example, the 
study shows that a single programming format, Urban--attracts half of 
black listening, while it attracts less than five percent of nonblack 
listening. The data also suggest that there is a positive relationship 
between minority ownership of radio stations and the total amount of 
minority-targeted radio programming available in a market--in other 
words, that minority-owned stations are more likely to provide 
programming targeted to minorities than are non-minority owned 
stations. The data do not indicate a clear relationship between 
ownership concentration and the number of different radio formats in 
each market, although the cross-sectional analysis does suggest that 
ownership concentration promotes a greater number of formats in the 
market. The Commission seeks comment on this study and on the 
appropriate application of its analysis to the Commission's policy 
goals. Are there other statistical studies available that the 
Commission should consider, relating market structure and the promotion 
of content that is specifically of interest to minorities and women? Do 
such studies use statistical analysis of a reasonably large sample of 
markets? Are there individual market case studies available that are 
relevant and, if so, what role is there for such case studies in the 
Commission's deliberations?

F. Attribution Matters

    193. The Commission's broadcast attribution rules define which 
financial or other interests in a licensee must be counted in applying 
the broadcast ownership rules. They seek to identify those interests in 
licensees that confer on their holders a degree of ``influence or 
control such that the holders have a realistic potential to affect the 
programming decisions of licensees or other core operating functions.'' 
Although the Commission did not seek comment on attribution issues in 
the NOI, the Commission does so now in order to address issues raised 
in the record regarding the impact, both positive and negative, of 
certain agreements on the Commission's ownership rules and fundamental 
policy goals.
    194. The Commission seeks comment in particular regarding local 
news service (LNS) agreements and shared service agreements (SSAs). An 
LNS agreement is defined by commenters as an agreement in which 
multiple local broadcast television stations contribute certain news 
staff and equipment to a joint news gathering effort coordinated by a 
single managing editor. According to commenters, an SSA is an 
agreement, or series of agreements, in which one in-market station 
provides operational support and programming for another in-market 
station. Public interest commenters contend that LNS agreements and 
SSAs result in fewer independent voices and less local news content and 
could be used to circumvent the Commission's rules. On the other hand, 
broadcasters assert that these agreements facilitate greater 
collaboration between media outlets and permit stations to sustain 
labor intensive journalism, thereby offering more communities access to 
local news content than could otherwise be achieved.
    195. Background. The Commission's attribution rules currently make 
attributable certain local marketing agreements (LMAs), also referred 
to as time brokerage agreements (TBAs), in which a broker purchases 
discrete blocks of time from a licensee and supplies programming and 
sells advertising for the purchased time. Certain joint sales 
agreements (JSAs), which ``involve primarily the sale of advertising 
time and not decisions concerning programming,'' are also subject to 
attribution. These agreements are not precluded by any Commission rule 
or policy as long as the Commission's ownership rules are not violated 
and the participating licensees maintain ultimate control over their 
facilities.
    196. The Commission first adopted attribution rules for same-market 
radio LMAs in 1992. The Commission was concerned that absent such rules 
significant time brokerage under such agreements, combined with 
increased common ownership permitted by revised local radio ownership 
rules, could undermine the Commission's competition and diversity 
goals. In 1999, the Commission adopted attribution rules for television 
LMAs, finding that the rationale for attributing same-market radio LMAs 
applied equally to same-market television LMAs, but declined to adopt 
attribution rules for radio or television JSAs. However, the 
Commission, in its 2002 Biennial Report and Order, adopted attribution 
rules for same-market radio JSAs, finding that JSAs may convey 
sufficient influence and control over advertising to merit attribution. 
Subsequently, in 2004, the Commission initiated a rulemaking to 
determine whether or not to adopt attribution rules for television 
JSAs; the Commission tentatively concluded that it should. No decision 
has been issued in that proceeding.
    197. Potential Concerns. CWA and Free Press object to LNS 
agreements because they believe that collaboration under LNS agreements 
harms competition and reduces the amount of independently produced 
local news programming available to consumers. These commenters are 
concerned that stations will be unable to devote sufficient resources 
to independent journalism as a result of the staff reductions and 
resource sharing resulting from the creation of an LNS. CWA also is 
concerned that consolidating newsgathering and editorial control 
reduces diversity and in-depth coverage of local news. Because stations 
are reporting the same story, CWA argues, viewers are exposed only to a 
single perspective on every story covered by the LNS. Moreover, CWA 
suggests that increased communication between stations could lead to 
antitrust law violations.
    198. CWA and Free Press also object to SSAs, particularly those 
that allow a

[[Page 2900]]

single station to produce the news content for multiple stations in a 
local market. According to these commenters, such agreements result in 
``re-run'' content being broadcast over multiple newscasts, thereby 
reducing the number of independent voices available in the local 
community. Furthermore, these commenters assert that the staff 
reductions that typically accompany SSAs reduce the quality, quantity, 
and diversity of local news coverage.
    199. CWA and Free Press object to SSAs also because they believe 
broadcasters may be using them to circumvent the Commission's multiple 
ownership rules. CWA suggests that SSAs contain very similar provisions 
to LMAs and JSAs, which are attributable under certain conditions under 
the Commission's multiple ownership rules. For instance, like many LMAs 
and JSAs, SSAs may involve the sharing of facilities, advertising sales 
personnel, news production, and certain station operations, and options 
to purchase the brokered station. CWA opposes broadcasters using SSAs 
to outsource (or broker) newscasts, in asserted circumvention of the 
Commission's attribution rules. According to CWA, news programming 
accounts for an average of 45 percent of a station's revenue; 
therefore, a brokering station can unfairly acquire a significant 
portion of the economic benefit generated by the brokered station 
without triggering the attribution rules. In addition, the American 
Cable Association (ACA) argues that both SSAs and LMAs harm local 
competition particularly when they permit stations to jointly negotiate 
retransmission consent. ACA argues that such arrangements permit local 
broadcast stations to exercise additional leverage with respect to 
MVPDs leading to higher fees for signal carriage, which are passed on 
to consumers in the form of higher rates. ACA suggests that 
broadcasters should be precluded from including collective negotiation 
of retransmission consent in SSAs or LMAs, particularly with respect to 
the four top-rated local stations.
    200. Potential Benefits. On the other hand, broadcasters assert 
that sharing arrangements (including LNS agreements, LMAs, SSAs, and 
JSAs) are beneficial to local media markets, generating local news and 
other services that would not be possible otherwise. Gray asserts that, 
because of the considerable cost savings associated with its sharing 
agreements, it can invest in the development of multicast programming 
streams, mobile video applications, and other uses of the broadcast 
spectrum. The Local TV Coalition and Nexstar note that the Commission 
has long held that sharing agreements (e.g., JSAs) generate 
efficiencies and serve the public interest.
    201. According to the Local TV Coalition and TTBG, sharing 
agreements can be particularly important in small and mid-sized 
markets. The Coalition asserts that the advertising revenue available 
in most small and mid-sized markets is insufficient to support four 
stand-alone broadcast television news operations. In such markets, the 
Coalition states, broadcasters budget an average of approximately $1.8 
million per year for the capital and operating expenses associated with 
local news production. The Local TV Coalition notes that unprofitable 
news operations, like any unprofitable business venture, likely will be 
eliminated over time. The Local TV Coalition submits an analysis of 20 
small and mid-sized markets, which it asserts shows that one or more 
news operations would have been lost without the existence of shared 
services agreements or common ownership of local stations.
    202. In addition, the Local TV Coalition provides numerous examples 
of claimed public interest benefits from sharing agreements. For 
example, in the Burlington, Vermont-Plattsburgh, New York market, the 
local Fox affiliate and the local ABC affiliate entered into a JSA and 
a SSA in 2005. Prior to entering into these agreements, the Fox station 
had never aired a local newscast and the ABC station had discontinued 
its news operation and fired 25 staffers. Since concluding the sharing 
agreements, the Fox station now produces newscasts for both stations, 
resulting in 28 new jobs. NAB also submits examples of broadcast 
television stations that increased local news programming as a result 
of sharing agreements. Nexstar states that sharing agreements have 
enabled it to increase news coverage in the Lubbock, Texas and the 
Peoria-Bloomington, Illinois markets, and as a result it has launched a 
nightly newscast in various markets across five states that previously 
had no local news coverage. Nexstar asserts that any layoffs associated 
with these agreements typically involve back-office staff and not news 
personnel. It also asserts that any layoffs of redundant news personnel 
permit local broadcasters to invest more money in news production and 
other local programming. Broadcasters state that issues concerning the 
joint negotiation of retransmission consent fees should be addressed in 
the Commission's retransmission consent proceeding, and not in the 
media ownership proceeding. Ultimately, broadcasters oppose any 
additional regulation of sharing agreements.
    203. Request for Comment. Are LNS agreements and SSAs substantively 
equivalent to agreements that are already subject to the attribution 
rules, and are they therefore attributable today or should they be 
attributable? What characteristics make them different from already 
attributable agreements? How, if at all, do LNS agreements and SSAs 
create interests in licensees that confer a degree of ``influence or 
control such that the holders have a realistic potential to affect the 
programming decisions of licensees or other core operating functions''? 
What is the impact of agreements such as LNS agreements and SSAs on the 
Commission's competition, localism, and diversity goals? Does either of 
these types of agreements have a greater impact on the Commission's 
policy goals than the other? If so, what characteristics account for 
the disparity in impact? Should the Commission, and if so how, consider 
the impact of these agreements on the Commission's policy goals when 
formulating the ownership rules?
    204. If the Commission determines that LNS agreements and/or SSAs 
should be attributable, how should the Commission define LNS agreements 
and SSAs and what attribution standard should the Commission adopt? If 
the Commission adopts new attribution rules, should existing agreements 
be grandfathered? If so, how should the grandfathering be structured? 
If not, how long should broadcasters have to comply with the new 
attribution rules? If the Commission determines that these arrangements 
should not be attributable, should the Commission adopt disclosure 
requirements? If so, what disclosure should be required? Such 
disclosures could help viewers determine the origin of news content and 
help the Commission monitor the proliferation of such agreements and 
determine whether to revisit the issue of attribution.
    205. What benefits accrue from stations entering into LNS 
agreements or SSAs? What would be the impact of a rule that would lead 
to the attribution of LNS agreements or SSAs? If these agreements 
result in attribution, what would be the effect, if any, on the cost to 
produce local news, the ability to employ journalists, and the overall 
quality of news programming? Is it possible that, without such 
agreements, local news coverage could be reduced or that some stations 
will cease news production?
    206. Instead of focusing on attributing certain named agreements 
(e.g., JSAs,

[[Page 2901]]

LMAs, SSAs, LNS agreements) as the Commission has in the past, should 
the Commission adopt a broader regulatory scheme that encompasses all 
agreements, however styled, that relate to the programming and/or 
operation of broadcast stations? If so, how should the Commission 
define the covered agreements and structure this regulatory scheme? 
What characteristics of such agreements are most likely to confer a 
degree of ``influence or control such that the holders have a realistic 
potential to affect the programming decisions of licensees or other 
core operating functions''? Should the Commission consider the impact 
of these agreements on other matters of Commission interest, such as 
retransmission consent negotiations? Or are these issues more 
appropriately considered in another context, such as the retransmission 
proceeding?
    207. The Commission strongly encourages parties to existing 
agreements of all of these types to respond to this request for comment 
and to provide any other information they think is relevant. It is 
critical that the Commission obtain accurate information on how these 
agreements operate in order to make a reasoned decision on what, if 
any, changes should be made to the Commission's attribution rules.

II. Procedural Matters

A. Filing Requirements

    208. Ex Parte Rules. The proceeding this Notice of Propose 
Rulemaking initiates shall be treated as a ``permit-but-disclose'' 
proceeding in accordance with the Commission's ex parte rules. Persons 
making ex parte presentations must file a copy of any written 
presentation or a memorandum summarizing any oral presentation within 
two business days after the presentation (unless a different deadline 
applicable to the Sunshine period applies). Persons making oral ex 
parte presentations are reminded that memoranda summarizing the 
presentation must (1) list all persons attending or otherwise 
participating in the meeting at which the ex parte presentation was 
made, and (2) summarize all data presented and arguments made during 
the presentation. If the presentation consisted in whole or in part of 
the presentation of data or arguments already reflected in the 
presenter's written comments, memoranda or other filings in the 
proceeding, the presenter may provide citations to such data or 
arguments in his or her prior comments, memoranda, or other filings 
(specifying the relevant page and/or paragraph numbers where such data 
or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with rule 1.1206(b). In proceedings governed by 
rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the electronic comment filing system available 
for that proceeding, and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.
    209. Comment Information. Pursuant to Sec. Sec.  1.415 and 1.419 of 
the Commission's rules, 47 CFR 1.415, 1.419, interested parties may 
file comments and reply comments on or before the dates indicated on 
the first page of this document. Comments may be filed using: (1) The 
Commission's Electronic Comment Filing System (ECFS), (2) the Federal 
Government's eRulemaking Portal, or (3) by filing paper copies. See 
Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 
(1998).
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/ or the Federal eRulemaking Portal: http://www.regulations.gov.
     For ECFS filers, if multiple docket or rulemaking numbers 
appear in the caption of this proceeding, filers must transmit one 
electronic copy of the comments for each docket or rulemaking number 
referenced in the caption. In completing the transmittal screen, filers 
should include their full name, U.S. Postal Service mailing address, 
and the applicable docket or rulemaking number. Parties may also submit 
an electronic comment by Internet email. To get filing instructions, 
filers should send an email to [email protected], and include the following 
words in the body of the message ``get form.'' A Sample form and 
directions will be sent in response.
     Paper Filers: Parties who choose to file by paper must 
file an original and four copies of each filing. If more than one 
docket or rulemaking number appears in the caption of this proceeding, 
filers must submit two additional copies for each additional docket or 
rulemaking number.
    Filings can be sent by hand or messenger delivery, by commercial 
overnight courier, or by first-class or overnight U.S. Postal Service 
mail. All filings must be addressed to the Commission's Secretary, 
Office of the Secretary, Federal Communications Commission.
     All hand-delivered or messenger-delivered paper filings 
for the Commission's Secretary must be delivered to FCC Headquarters at 
445 12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours 
are 8 a.m. to 7 p.m. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes must be disposed of before 
entering the building.
     Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
     U.S. Postal Service first-class, Express, and Priority 
mail must be addressed to 445 12th Street SW., Washington DC 20554.
     People with Disabilities: Contact the FCC to request 
materials in accessible formats for people with disabilities (braille, 
large print, electronic files, audio format), send an emailto 
[email protected] or call the Consumer & Governmental Affairs Bureau at 
202-418-0530 (voice), (202) 418-0432 (TTY).

B. Initial Regulatory Flexibility Analysis

    210. As required by the Regulatory Flexibility Act (RFA), the 
Commission has prepared this Initial Regulatory Flexibility Analysis 
(IRFA) of the possible significant economic impact on small entities by 
the policies and rules proposed in this Notice of Proposed Rulemaking. 
Written public comments are requested on this IRFA. Comments must be 
identified as responses to the IRFA and must be filed by the deadlines 
for comments provided in this Notice of Proposed Rulemaking. The 
Commission will send a copy of this Notice of Proposed Rulemaking, 
including this IRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration (SBA). In addition, the Notice of Proposed 
Rulemaking and IRFA (or summaries thereof) will be published in the 
Federal Register.
1. Need for, and Objectives of, the Proposed Rules
    211. Pursuant to a statutory mandate under the Telecommunications 
Act of 1996, the Notice of Proposed Rulemaking seeks comment on the 
Commission's media ownership rules and proposed changes thereto. As 
discussed in the Notice of Proposed

[[Page 2902]]

Rulemaking, the Commission is required by statute to review its media 
ownership rules every four years to determine whether they ``are 
necessary in the public interest as the result of competition.'' The 
Notice of Proposed Rulemaking discusses the local television ownership 
rule, the local radio ownership rule, the newspaper/broadcast cross-
ownership rule, the radio/television cross-ownership rule, and the dual 
network rule. A challenge in this proceeding is to take account of new 
technologies and changing marketplace conditions while ensuring that 
the media ownership rules continue to serve the Commission's public 
interest goals of competition, localism, and diversity. The Notice of 
Proposed Rulemaking also seeks comment on economic studies analyzing 
the relationship between local media market structure and the policy 
goals that underlie the Commission's media ownership rules. In 
addition, the Notice of Proposed Rulemaking seeks comment in this 
proceeding on the aspects of the Commission's 2008 Diversity Order that 
the Third Circuit remanded in Prometheus II.
    212. The Commission finds that the public interest is best served 
by modest, incremental changes to the rules. Recognizing current market 
realities, the Notice of Proposed Rulemaking seeks comment on the 
following proposals:
     Local Television Ownership Rule. In the Notice of Proposed 
Rulemaking, the Commission tentatively concludes that it should retain 
the current local television ownership rule with minor modifications. 
Specifically, the Notice of Proposed Rulemaking proposes to eliminate 
the Grade B contour overlap provision of the current rule. The 
Commission tentatively concludes that it should retain the prohibition 
against mergers among the top-four-rated stations, the eight-voices 
test, and the existing numerical limits. In addition, the Notice of 
Proposed Rulemaking seeks comment on whether to adopt a waiver standard 
applicable to small markets, as well as appropriate criteria for any 
such standard. Also, the Notice of Proposed Rulemaking seeks comment on 
whether multicasting should be a factor in determining the television 
ownership limits.
     Local Radio Ownership Rule. The Notice of Proposed 
Rulemaking proposes to retain the current local radio ownership rule. 
The Notice of Proposed Rulemaking also seeks comment on alternative 
modifications to the rule and whether and how the rule should account 
for other audio platforms. The Notice of Proposed Rulemaking also 
proposes to retain the AM/FM subcaps, and seeks comment on the impact 
of digital radio. The Notice of Proposed Rulemaking seeks comment on 
whether to adopt a waiver standard and on specific criteria to adopt.
     Newspaper/Broadcast Cross-Ownership Rule. In the Notice of 
Proposed Rulemaking, the Commission tentatively concludes that some 
newspaper/broadcast cross-ownership restrictions continue to be 
necessary to protect and promote viewpoint diversity. The Notice of 
Proposed Rulemaking proposes to use Nielsen DMA definitions to 
determine the relevant market area for television stations, given the 
lack of a digital equivalent to the analog Grade A service contour. The 
Notice of Proposed Rulemaking proposes to adopt a rule that includes 
elements of the 2006 rule, including the top 20 DMA demarcation point, 
the top-four television station restriction, and the eight remaining 
voices test.
     Radio/Television Cross-Ownership Rule. The Notice of 
Proposed Rulemaking proposes to eliminate the radio/television cross-
ownership rule in favor of reliance on the local radio rule and local 
television rule. The Commission believes that the local radio and 
television ownership rules adequately protect the Commission's localism 
and diversity goals and tentatively conclude that eliminating this rule 
is not likely to lead to significant additional consolidation of 
broadcast facilities. The Notice of Proposed Rulemaking seeks comment 
on this.
     Dual Network Rule. In the Notice of Proposed Rulemaking, 
the Commission tentatively concludes that the dual network rule remains 
necessary in the public interest to promote competition and localism 
and should be retained without modification.
     Diversity Order Remand/Eligible Entity Definition. The 
Commission seeks comment in this Notice of Proposed Rulemaking on 
issues that previously were being addressed in a separate rulemaking 
proceeding focused on enhancing the diversity of ownership in the 
broadcast industry, including by increasing ownership opportunities for 
minorities and women. As explained in the Notice of Proposed 
Rulemaking, the Third Circuit in Prometheus II remanded the measures 
adopted in the Commission's 2008 Diversity Order that relied on a 
revenue-based ``eligible entity'' standard and emphasized that the 
actions required on remand from the Diversity Order should be completed 
``within the course of the Commission's 2010 Quadrennial Review of its 
media ownership rules.'' Accordingly, the Commission seeks comment in 
this proceeding on how the Commission should respond to the court's 
remand and on other actions the Commission should consider to increase 
the level of broadcast station ownership by minorities and women.
2. Legal Basis
    213. The proposed action is authorized under sections 1, 2(a), 
4(i), 303, 307, 309, and 310 of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 152(a), 154(i), 303, 307, 309, and 310, and 
section 202(h) of the Telecommunications Act of 1996.
3. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply
    214. The RFA directs agencies to provide a description of and, 
where feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one which: (1) Is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the SBA.
    215. Television Broadcasting. The SBA defines a television 
broadcasting station as a small business if such station has no more 
than $14.0 million in annual receipts. Business concerns included in 
this industry are those ``primarily engaged in broadcasting images 
together with sound.'' The Commission has estimated the number of 
licensed commercial television stations to be 1,382. According to 
Commission staff review of the BIA Kelsey Inc. Media Access Pro 
Television Database (BIA) as of October 3, 2011, 950 (or about 73 
percent) of an estimated 1,301 commercial television stations in the 
United States have revenues of $14 million or less and, thus, qualify 
as small entities under the SBA definition. The Commission has 
estimated the number of licensed noncommercial educational (NCE) 
television stations to be 392. The Commission notes, however, that, in 
assessing whether a business concern qualifies as small under the above 
definition, business (control) affiliations must be included. The 
Commission's estimate, therefore, likely overstates the number of small 
entities that might be

[[Page 2903]]

affected by the Commission's action, because the revenue figure on 
which it is based does not include or aggregate revenues from 
affiliated companies. The Commission does not compile and otherwise 
does not have access to information on the revenue of NCE stations that 
would permit it to determine how many such stations would qualify as 
small entities.
    216. In addition, an element of the definition of ``small 
business'' is that the entity not be dominant in its field of 
operation. The Commission is unable at this time to define or quantify 
the criteria that would establish whether a specific television station 
is dominant in its field of operation. Accordingly, the estimate of 
small businesses to which rules may apply does not exclude any 
television station from the definition of a small business on this 
basis and are therefore over-inclusive to that extent. Also, as noted, 
an additional element of the definition of ``small business'' is that 
the entity must be independently owned and operated. The Commission 
notes that it is difficult at times to assess these criteria in the 
context of media entities and the Commission's estimates of small 
businesses to which they apply may be over-inclusive to this extent.
    217. Radio Broadcasting. The proposed policies could apply to radio 
broadcast licensees, and potential licensees of radio service. The SBA 
defines a radio broadcast station as a small business if such station 
has no more than $7 million in annual receipts. Business concerns 
included in this industry are those primarily engaged in broadcasting 
aural programs by radio to the public. According to Commission staff 
review of the BIA Publications, Inc. Master Access Radio Analyzer 
Database on as of October 3, 2011, about 10,783 (97 percent) of 11,125 
commercial radio stations have revenues of $7 million or less and thus 
qualify as small entities under the SBA definition. The Commission 
notes, however, that, in assessing whether a business concern qualifies 
as small under the above definition, business (control) affiliations 
must be included. The Commission's estimate, therefore, likely 
overstates the number of small entities that might be affected by the 
Commission's action, because the revenue figure on which it is based 
does not include or aggregate revenues from affiliated companies.
    218. In addition, an element of the definition of ``small 
business'' is that the entity not be dominant in its field of 
operation. The Commission is unable at this time to define or quantify 
the criteria that would establish whether a specific radio station is 
dominant in its field of operation. Accordingly, the estimate of small 
businesses to which rules may apply does not exclude any radio station 
from the definition of a small business on this basis and therefore may 
be over-inclusive to that extent. Also, as noted, an additional element 
of the definition of ``small business'' is that the entity must be 
independently owned and operated. The Commission notes that it is 
difficult at times to assess these criteria in the context of media 
entities and the Commission's estimates of small businesses to which 
they apply may be over-inclusive to this extent.
    219. Daily Newspapers. The SBA has developed a small business size 
standard for the census category of Newspaper Publishers; that size 
standard is 500 or fewer employees. Census Bureau data for 2007 show 
that there were 4,852 firms in this category that operated for the 
entire year. Of this total, 4,771 firms had employment of 499 or fewer 
employees, and an additional 33 firms had employment of 500 to 999 
employees. Therefore, the Commission estimates that the majority of 
Newspaper Publishers are small entities that might be affected by the 
Commission's action.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    220. The Notice of Proposed Rulemaking proposes a number of rule 
changes that will affect reporting, recordkeeping and other compliance 
requirements. Each of these changes is described below.
    221. The Notice of Proposed Rulemaking proposes modifications to 
several of the media ownership rules as set forth above. The proposals, 
if ultimately adopted, would modify several FCC forms and their 
instructions: (1) FCC Form 301, Application for Construction Permit For 
Commercial Broadcast Station; (2) FCC Form 314, Application for Consent 
to Assignment of Broadcast Station Construction Permit or License; and 
(3) FCC Form 315, Application for Consent to Transfer Control of 
Corporation Holding Broadcast Station Construction Permit or License. 
The Commission may have to modify other forms that include in their 
instructions the media ownership rules or citations to media ownership 
proceedings, including Form 303-s and Form 323. The impact of these 
changes will be the same on all entities, and the Commission does not 
anticipate that compliance will require the expenditure of any 
additional resources.
5. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    222. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    223. The specific proposals on which the Notice of Proposed 
Rulemaking seeks comment, set forth above, are intended to achieve the 
Commission's public interest goals of competition, localism, and 
diversity. The Notice of Proposed Rulemaking seeks comment on a number 
of measures designed to minimize the economic impact of the 
Commission's proposed rules on firms generally, as well as those 
intended to promote broadcast ownership opportunities among a diverse 
group of owners, including small entities. For example, as part of the 
local radio ownership rule, the Notice of Proposed Rulemaking proposes 
to retain the AM/FM subcaps, which limit the number of radio stations 
in the same service that an entity can own. As noted in the Notice of 
Proposed Rulemaking, the Commission has previously concluded that AM/FM 
subcaps serve the public interest by promoting new entry into radio 
ownership, particularly by small businesses, including minority- and 
women-owned businesses.
    224. The Notice of Proposed Rulemaking also seeks comment in this 
proceeding on the aspects of the Commission's 2008 Diversity Order that 
the Third Circuit remanded in Prometheus II. Among other measures, the 
Notice of Proposed Rulemaking seeks comment on those intended to 
promote broadcast ownership opportunities for small businesses. For 
instance, the Notice of Proposed Rulemaking seeks comment regarding 
whether to reinstate the preexisting revenue-based eligible entity 
definition, which the Commission has concluded would ``be effective in 
creating new opportunities for broadcast ownership by a variety of 
small businesses and new entrants, including minorities and women.'' 
The Notice of Proposed Rulemaking also seeks comment on

[[Page 2904]]

whether increasing station ownership by small businesses should be an 
independent policy goal in this proceeding and, if so, whether 
readopting the preexisting eligible entity definition would be a 
reasonable and effective means of promoting this objective.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rule
    225. None.

C. Ordering Clauses

    226. Accordingly, It Is Ordered, that pursuant to the authority 
contained in sections 1, 2(a), 4(i), 303, 307, 309, and 310 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152(a), 154(i), 
303, 307, 309, and 310, and section 202(h) of the Telecommunications 
Act of 1996, this Notice of Proposed Rulemaking Is Adopted.
    227. It Is Further Ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of the Notice of Proposed Rulemaking, including the Initial 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

List of Subjects in 47 CFR Part 73

    Radio, Reporting and recordkeeping requirements, Television.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR part 73 as follows:

PART 73--RADIO BROADCAST SERVICES

    1. The authority citation for part 73 continues to read as follows:

    Authority:  47 U.S.C. 154, 303, 334, 336 and 339.

    2. Amend Sec.  73.3555 by removing and reserving paragraph (c) and 
revising paragraphs (b) and (d) to read as follows:


Sec.  73.3555  Multiple ownership.

* * * * *
    (b) Local television multiple ownership rule. An entity may 
directly or indirectly own, operate, or control two television stations 
licensed in the same Designated Market Area (DMA) (as determined by 
Nielsen Media Research or any successor entity) if:
    (1) At the time the application to acquire or construct the 
station(s) is filed, at least one of the stations is not ranked among 
the top four stations in the DMA, based on the most recent all-day (9 
a.m.-midnight) audience share, as measured by Nielsen Media Research or 
by any comparable professional, accepted audience ratings service; and
    (2) At least 8 independently owned and operating, full-power 
commercial and noncommercial TV stations would remain post-merger in 
the DMA in which the communities of license of the TV stations in 
question are located. Count only those TV stations with a community of 
license in the same DMA as the stations in the proposed combination. In 
areas where there is no Nielsen DMA, count the TV stations present in 
an area that would be the functional equivalent of a TV market. Count 
only those TV stations with a community of license in the same area 
that would be the functional equivalent of a TV market as the stations 
in the proposed combination.
    (c) [Reserved]
    (d) Daily newspaper-broadcast cross-ownership rule. (1) No license 
for a full power AM, FM or TV broadcast station shall be granted to any 
party (including all parties under common control) if such party 
directly or indirectly owns, operates or controls a daily newspaper and 
the grant of such license will result in:
    (i) The TV station's community of license and the entire community 
in which the newspaper is published being located within the same 
Nielsen DMA;
    (ii) The predicted or measured 2 mV/m contour of an AM station, 
computed in accordance with Sec. Sec.  73.183 or 73.186, encompassing 
the entire community in which such newspaper is published; or
    (iii) The predicted 1 mV/m contour for an FM station, computed in 
accordance with Sec.  73.313, encompassing the entire community in 
which such newspaper is published.
    (2) There is a presumption that it is consistent with the public 
interest, convenience, and necessity for an entity to own, operate or 
control in a top 20 Nielsen DMA a daily newspaper and
    (i) A full power radio station, or
    (ii) A full-power TV broadcast station provided that,
    (A) The TV station is not ranked among the top four TV stations in 
the DMA, based on the most recent all-day (9 a.m.-midnight) audience 
share, as measured by Nielsen Media Research or by any comparable 
professional, accepted audience ratings service; and
    (B) At least 8 independently owned and operating major media voices 
would remain in the DMA in which the community of license of the TV 
station in question is located (for purposes of this provision major 
media voices include full-power TV broadcast stations and major 
newspapers).
    (4) There is a presumption that it is inconsistent with the public 
interest, convenience, and necessity for an entity to own, operate or 
control in a DMA other than the top 20 Nielsen DMAs a daily newspaper 
and a full-power TV broadcast station in the same DMA as the 
newspaper's community of publication, or a commercial AM or FM 
broadcast station as defined in paragraph (d)(1) of this section.
* * * * *
[FR Doc. 2012-148 Filed 1-18-12; 8:45 am]
BILLING CODE 6712-01-P