[Federal Register Volume 79, Number 16 (Friday, January 24, 2014)]
[Proposed Rules]
[Pages 4138-4149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-01338]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[MB Docket No. 12-3; FCC 13-162]
Sports Blackout Rules
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: In this document, the Commission seeks comment on its proposal
to eliminate the sports blackout rules. Elimination of the sports
blackout rules alone likely would not end sports blackouts, but it
would leave sports carriage issues to private solutions negotiated by
the interested parties in light of current market conditions and
eliminate unnecessary regulation.
DATES: Comments for this proceeding are due on or before February 24,
2014; reply comments are due on or before March 25, 2014.
ADDRESSES: You may submit comments, identified by MB Docket No. 12-3,
by any of the following methods:
[ssquf] Federal Communications Commission's Web site: http://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
[ssquf] Mail: Filings can be sent by hand or messenger delivery, by
commercial overnight courier, or by first-class or overnight U.S.
Postal Service mail (although the Commission continues to experience
delays in receiving U.S. Postal Service mail). All filings must be
addressed to the Commission's Secretary, Office of the Secretary,
Federal Communications Commission.
[ssquf] People with Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by email: [email protected] or phone: (202) 418-
0530 or TTY: (202) 418-0432.
For detailed instructions for submitting comments and additional
information on the rulemaking process, see the SUPPLEMENTARY
INFORMATION section of this document.
FOR FURTHER INFORMATION CONTACT: For additional information, contact
Kathy Berthot, [email protected], of the Media Bureau, Policy
Division, (202) 418-7454.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rulemaking, FCC 13-162, adopted on December 17, 2013 and
released on December 18, 2013. The full text is available for public
inspection and copying during regular business hours in the FCC
Reference Center, Federal Communications Commission, 445 12th Street
SW., CY-A257, Washington, DC 20554. This document will also be
available via ECFS (http://www.fcc.gov/cgb/ecfs/). Documents will be
available electronically in ASCII, Word 97, and/or Adobe Acrobat. The
complete text may be purchased from the Commission's copy contractor,
445 12th Street, SW., Room CY-B402, Washington, DC 20554. To request
this document in accessible formats (computer diskettes, large print,
audio recording, and Braille), send an email to [email protected] or call
the Commission's Consumer and Governmental Affairs Bureau at (202) 418-
0530 (voice), (202) 418-0432 (TTY).
This document contains no proposed information collection
requirements.
Summary of the Notice of Proposed Rulemaking
I. Introduction
1. In this Notice of Proposed Rulemaking, we propose to eliminate
the Commission's sports blackout rules, which prohibit certain
multichannel video programming distributors (MVPDs) from
retransmitting, within a protected local blackout zone, the signal of a
distant broadcast station carrying a live sporting event if the event
is not available live on a local television broadcast station.\1\ The
sports blackout rules were originally adopted nearly 40 years ago when
game ticket sales were the main source of revenue for sports leagues.
These rules were intended to address concerns that MVPDs' importation
of a distant signal carrying a blacked-out sports event could result in
lost revenue from ticket sales, which might cause sports leagues to
expand the reach of blackouts by refusing to sell their rights to
sports events to all distant stations. The rationale underpinning the
rules was to ensure to the greatest extent possible the continued
availability of sports telecasts to the public. Changes in the sports
industry in the last four decades have called into question whether the
sports blackout rules remain necessary to ensure the overall
availability of sports programming to the general public. In this
proceeding, we will determine whether the sports blackout rules have
become outdated due to marketplace changes since their adoption, and
whether modification or elimination of those rules is appropriate. We
recognize that elimination of our sports blackout rules alone might not
end sports blackouts, but it would leave sports carriage issues to
private solutions negotiated by the interested parties in light of
current market conditions and eliminate unnecessary regulation.
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\1\ See 47 CFR 76.111 (cable operators), 76.127 (satellite
providers), 76.128 (application of sports blackout rules),
76.1506(m) (open video systems).
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II. Background
A. History of the Sports Blackout Rules
2. Prior to 1953, National Football League (NFL) bylaws prohibited
member teams from, among other things, (i) telecasting their games into
the home territory of another team that was playing at home, and (ii)
telecasting their games into the home territory of another team that
was playing away from home and was telecasting its game into its home
territory. In 1953, a federal court held that the NFL's prohibition on
the telecast of outside games into the home territory of a team that
was playing at home was a reasonable method of protecting the home
team's gate receipts and was not illegal under the antitrust laws. The
court found, however, that restricting the telecast of outside games
into the home territory of a team not playing at home was an
unreasonable restraint on trade because, when the home team was playing
away, there was no gate to protect.
3. In 1961, the NFL entered into an agreement with the CBS
television network under which the NFL's member teams pooled the
television rights to their games and authorized the league to sell the
rights to the network as a package, with the revenue from the league
sales to be distributed equally among the member teams. Under this
agreement, CBS was permitted to determine which games would be
televised and where the games would be televised. The NFL then
petitioned the court for a ruling on whether the terms of its contract
with CBS violated the court's 1953 final judgment. The court concluded
that the provision giving CBS the power to determine which games would
be televised and where was contrary to the final judgment and that
execution and performance of the contract was therefore prohibited.
This ruling did not, however, apply to a similar contract between the
newly formed American Football League (AFL) and the ABC television
network, because the AFL was not a party to the court's 1953 final
judgment. Concerned
[[Page 4139]]
that the court's ruling placed it at a disadvantage to the AFL, the NFL
petitioned Congress for relief, arguing that packaged network contracts
were desirable because they allowed the member teams to negotiate for
the sale of television rights with a single voice and equalized revenue
among the member teams.
4. Congress responded to the NFL's plea for relief with its passage
of the Sports Broadcasting Act of 1961. The Sports Broadcasting Act
exempts from the antitrust laws joint agreements among individual teams
engaged in professional football, baseball, basketball, or hockey that
permit the leagues to pool the individual teams' television rights and
sell those rights as a package. This statute also expressly permits
these four professional sports leagues to black out television
broadcasts of home games within the home territory of a member team. At
the time the Sports Broadcasting Act was enacted, television blackouts
were believed to be necessary to protect gate receipts, and the
packaging of individual teams' television rights was thought to be
necessary to enhance the financial stability of the leagues by assuring
equal distribution of revenues among all teams. The NFL subsequently
instituted a practice of blacking out the television broadcast of all
home games of its member teams in their home territory, irrespective of
whether the games were sold out.
5. In August 1971, the Commission sent a letter to Congress seeking
guidance on the Commission's proposed regulatory scheme for the then-
nascent cable television industry, which included several proposals
relating to sports programming. The Commission noted the exemptions
from the anti-trust laws granted to professional sports leagues under
the Sports Broadcasting Act and stated that ``cable systems should not
be permitted to circumvent the purpose of th[is] law by importing the
signal of a station carrying the home game of a professional team if
that team has elected to black out the game in its home territory.''
The Commission indicated that it would follow the ``spirit and letter''
of the Sports Broadcasting Act ``since it represents Congressional
policy in this important area'' and stated that it intended to initiate
a rulemaking proceeding on this issue in the near future. The
Commission commenced a rulemaking proceeding proposing a sports
blackout rule for cable television systems in February 1972.
6. In 1973, during the pendency of the Commission's rulemaking
proceeding, Congress enacted Public Law 93-107 in response to
complaints from dissatisfied football fans who were unable to view the
sold out home games of their local teams on the public airwaves due to
the NFL's blackout policy. Public Law 93-107 added new section 331 to
the Communications Act of 1934, as amended (Communications Act), which
prohibited professional sports leagues from blacking out the television
broadcast of a home game in a team's home territory if the game was
televised elsewhere pursuant to a league television contract and the
game sold out 72 hours in advance of game time. Public Law 93-107 was
intended as a limited experiment to allow all affected parties to
assess the impact of the statute and expired by its own terms effective
December 31, 1975. Although the statute was not renewed, the NFL
subsequently continued to follow the practice of blacking out the
television broadcast of home games in a team's home territory only if
the game was not sold out 72 hours in advance of game time.
7. In the meantime, the Commission adopted the cable sports
blackout rule in 1975 to address concerns that cable systems could
frustrate sports leagues' blackout policies by importing the distant
signal of a television station carrying the home game of a sports team
that has elected to black out the game in its home territory.
Specifically, the Commission found that
[g]ate receipts are the primary source of revenue for sports
clubs, and teams have a reasonable interest in protecting their home
gate receipts from the potentially harmful financial effects of
invading telecasts of their games from distant television stations.
If cable television carriage of the same game that is being played
locally is allowed to take place, the local team's need to protect
its gate receipts might require that it prohibit the telecasting of
its games on [distant] television stations which might be carried on
local cable systems. If this were to result, the overall
availability of sports telecasts would be significantly reduced.
The Commission emphasized that its concern was not in ensuring the
profitability of organized sports, but rather in ensuring the overall
availability of sports telecasts to the general public, which it found
was ``of vital importance to the larger and more effective use of the
airwaves.'' The cable sports blackout rule adopted by the Commission,
which was originally codified in Sec. 76.67 and later renamed,
slightly revised, and renumbered as Sec. 76.111, is designed to allow
the holder of the exclusive distribution rights to the sports event
(i.e., a sports team, league, promoter, or other agent, rather than a
broadcaster) to control, through contractual agreements, the display of
that event on local cable systems. Under this rule, the rights holder
may demand that a cable system located within the specified zone of
protection of a television broadcast station licensed to a community in
which a sports event is taking place black out the distant importation
of the sports event if the event is not being carried live by a
television broadcast station in that community. The zone of protection
afforded by the cable sports blackout rule is generally 35 miles
surrounding the reference point of the broadcast station's community of
license in which the live sporting event is taking place. The cable
sports blackout rule applies to all sports telecasts in which the event
is not exhibited on a local television station, including telecasts of
high school, college, and professional sports, and individual as well
as team sports.
8. The Telecommunications Act of 1996 (1996 Act) added a new
section 653 to the Communications Act, which established a new
framework for entry into the video programming distribution market, the
open video system. Congress's intent in establishing the open video
system framework was ``to encourage telephone companies to enter the
video programming distribution market and to deploy open video systems
in order to `introduce vigorous competition in entertainment and
information markets' by providing a competitive alternative to the
incumbent cable operator.'' As an incentive for telephone company entry
into the video programming distribution market, section 653 provides
for reduced regulatory burdens for open video systems subject to the
systems' compliance with certain non-discrimination and other
requirements set forth in Section 653(b)(1). Section 653(b)(1)(D)
directed the Commission to extend to the distribution of video
programming over open video systems the Commission's rules on sports
blackouts, network nonduplication, and syndicated exclusivity. The
Commission amended its rules in 1996 to directly apply the existing
cable sports blackout rule to open video systems.\2\
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\2\ We note that the sports blackout rule for OVS, which is
codified at 47 CFR 76.1506(m), references 47 CFR 76.67, which has
been renumbered as 47 CFR 76.111. If the sports blackout rule for
OVS is retained, we propose to update 47 CFR 76.1506(m) to cite the
appropriate rule section, 47 CFR 76.111.
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9. In November 1999, Congress enacted the Satellite Home Viewer
Improvement Act of 1999 (SHVIA), which provides statutory copyright
licenses for satellite carriers to provide additional local and
national broadcast programming to subscribers. In enacting
[[Page 4140]]
SHVIA, Congress sought to place satellite carriers on an equal footing
with cable operators with respect to the availability of broadcast
programming. Section 1008 of SHVIA added a new Section 339 to the
Communications Act. Section 339(b) directed the Commission to apply the
cable network nonduplication, syndicated exclusivity, and sports
blackout rules to satellite carriers' retransmission of nationally
distributed superstations and, to the extent technically feasible and
not economically prohibitive, to extend the cable sports blackout rule
to satellite carriers' retransmission of network stations to
subscribers.
10. The Commission adopted a sports blackout rule for satellite
carriers in November 2000. This rule provides that, on the request of
the holder of the rights to a sports event, a satellite carrier may not
retransmit a nationally distributed superstation or a network station
carrying the live television broadcast of the sports event to
subscribers if the event is not being carried live by a local
television broadcast station. This rule applies within the same 35-mile
zone of protection that applies to cable systems applies to satellite
carriers; that is, 35 miles surrounding the reference point of the
broadcast station's community of license in which the live sporting
event is taking place.
11. The Commission last examined the sports blackout rules more
than seven years ago, in a 2005 report to Congress required by the
Satellite Home Viewer Extension and Reauthorization Act of 2004
(SHVERA). SHVERA directed the Commission to complete an inquiry and
submit a report to Congress ``regarding the impact on competition in
the multichannel video programming distribution market of the current
retransmission consent, network non-duplication, syndicated
exclusivity, and sports blackout rules, including the impact of those
rules on the ability of rural cable operators to compete with direct
broadcast satellite (`DBS') industry in the provision of digital
broadcast television signals to consumers.'' SHVERA also directed the
Commission to ``include such recommendations for changes in any
statutory provisions relating to such rules as the Commission deems
appropriate.'' The Commission concluded in its report that the sports
blackout rules do not affect competition among MVPDs, that commenters
failed to advance any link between the blackout rules and competition
among MVPDs, and that no commenter pressed the case for repeal or
modification of the sports blackout rules. The Commission therefore
declined to recommend any regulatory or statutory revisions to modify
the protections afforded to the holders of sports programming rights.
12. Today, sports leagues' blackout policies determine which games
are blacked out locally. These policies are given effect primarily
through contractual arrangements negotiated between the leagues or
individual teams that hold the rights to the games and the entities to
which they grant distribution rights, including television networks,
local television broadcast stations, Regional Sports Networks (RSNs),
and MVPDs. The Commission's rules, described above, supplement these
contractual relationships by requiring MVPDs to black out games that
are required by the sports leagues or individual teams to be blacked
out on local television stations.
B. Petition for Rulemaking
13. In November 2011, the Sports Fan Coalition, Inc., National
Consumers League, Public Knowledge, League of Fans, and Media Access
Project (collectively, Petitioners or SFC) filed a joint Petition for
Rulemaking urging the Commission to eliminate the sports blackout
rules. The Petitioners assert that, at a time when ticket prices for
sports events are at historic highs and high unemployment rates
persist, making it difficult for many consumers to afford attending
local sports events, the Commission should not support the ``anti-
consumer'' blackout policies of professional sports leagues. The
Petitioners also argue that the sports leagues' blackout policies are
no longer needed to protect gate receipts and therefore should not be
facilitated by the Commission's sports blackout rules. The Petitioners
maintain that, ``without a regulatory subsidy from the federal
government in the form of the [sports blackout rules], sports leagues
would be forced to confront the obsolescence of their blackout policies
and could voluntarily curtail blackouts.'' On January 12, 2012, the
Media Bureau issued a Public Notice seeking comment on the Petition.
Comments in support of the petition were filed by SFC, a group of nine
sports economists, several members of Congress, and thousands of
individual consumers. The NFL, the Office of the Commissioner of
Baseball (Baseball Commissioner), the National Association of
Broadcasters, and a group of network television affiliates filed
comments opposing the Petition.
III. Notice of Proposed Rulemaking
14. We propose to eliminate the sports blackout rules. The sports
blackout rules were first adopted nearly four decades ago to ensure
that the potential loss of gate receipts resulting from cable system
importation of distant stations did not lead sports clubs to refuse to
sell their rights to sports events to distant stations, which would
reduce the overall availability of sports programming to the public.
The rules were extended to open video systems and then to satellite
carriers to provide parity between cable and newer video distributors.
The sports industry has changed dramatically in the last 40 years,
however, and the Petitioners argue that the economic rationale
underlying the sports blackout rules may no longer be valid. Below we
seek comment on whether we have authority to repeal the sports blackout
rules. Next, we examine whether the economic considerations that led to
adoption of the sports blackout rules continue to justify our
intervention in this area. Finally, we propose to eliminate the sports
blackout rules and seek comment on the potential benefits and harms of
that proposed action on interested parties, including sports leagues,
broadcasters, and consumers.
A. Legal Authority
15. We seek comment on whether we have the authority to repeal the
sports blackout rules. As discussed above, Congress did not explicitly
mandate that the Commission adopt the cable sports blackout rule.
Rather, the Commission adopted the cable sports blackout rule as a
regulatory measure premised on the policy established by Congress in
the Sports Broadcasting Act, which exempts from the antitrust laws
joint agreements among individual teams engaged in professional
football, baseball, basketball, or hockey that permit the leagues to
pool the individual teams' television rights and sell those rights as a
package and expressly permits these four professional sports leagues to
black out television broadcasts of home games within the home territory
of a member team. Section 653(b)(1)(D) of the Act, as added by the 1996
Act, directed the Commission to extend to open video systems ``the
Commission's regulations concerning sports exclusivity (47 CFR
76.67).'' Similarly, Section 339(b) of the Communications Act, as added
by SHVIA in 1999, directed the Commission to ``apply . . . sports
blackout protection (47 CFR 76.67) to the retransmission of the signals
of nationally distributed superstations by satellite carriers'' and,
``to the extent technically feasible and not economically prohibitive,
apply sports blackout protection (47 CFR 76.67) to the retransmission
of the signals of network stations by satellite carriers.'' Reflecting
the language used in these
[[Page 4141]]
statutory provisions, the legislative history of Section 339(b) states
that Congress's intent was to place satellite carriers on an equal
footing with cable operators with respect to the availability of
television programming. Petitioners argue that the Commission has the
authority to repeal the sports blackout rules for both cable and DBS
because Congress never directed the Commission to issue the sports
blackout rules in the first instance and only directed the Commission
to establish parity between the cable and DBS regimes. Senators
Blumenthal and McCain likewise assert that ``[i]t is important to note
that Congress never instructed the Commission to promulgate the Sports
Blackout Rule in the first place. The Commission therefore possesses
ample authority to amend the Sports Blackout Rule sua sponte, without
any action by Congress.'' Several commenters opposing elimination of
the sports blackout rules assert that Congress mandated the sports
blackout rule for DBS. These commenters do not, however, expressly
argue that the Commission does not have authority to eliminate the
sports blackout rules, either for cable or for DBS and OVS. We
tentatively conclude that repeal of the cable sports blackout rule is
authorized by the Communications Act, which grants the Commission
general rulemaking power, including the authority to revisit its rules
and modify or repeal them where it concludes such action is
appropriate. We seek comment on this tentative conclusion. We also seek
comment on whether we have the authority to repeal the sports blackout
rules for DBS and OVS. We observe that when Congress enacted the sports
blackout provisions in Sections 339(b) and 653(b)(1)(D) of the Act,
Congress directed the Commission to apply to DBS and OVS the sports
blackout protection applied to cable, set forth in 47 CFR 76.67, rather
than simply directing the adoption of sports blackout rules for those
services. The statute does not withdraw the Commission's authority to
modify its cable rule at some point in the future, nor is there any
indication in the legislative history that Congress intended to
withdraw this authority. Given that the DBS and OVS provisions are
expressly tied to the cable sports blackout rule, does this evince an
intent on the part of Congress that the Commission should accord the
same regulatory treatment to DBS and OVS as cable, i.e., if the
Commission modifies or repeals the cable rule it should also modify or
repeal the DBS and OVS rules? Would Congress's intent to subject open
video systems to reduced regulatory burdens as an incentive for their
entry into the video market support an assertion of authority to
eliminate the sports blackout rule for OVS if we determine that the
cable sports blackout rule is no longer needed? Alternatively, are
Congress's directives to the Commission regarding application of sports
blackout protection to open video systems and to satellite carriers
more appropriately interpreted to mean that the Commission does not
have the authority to repeal the sports blackout rules for these types
of entities, even if it does so for cable? If we determine that we do
not have the authority to repeal the satellite sports blackout rule
and/or the OVS sports blackout rule, would it nevertheless be
appropriate to repeal the cable sports blackout rule? Would eliminating
the sports blackout rule for cable but not for DBS and/or OVS create
undue disparities or unintended consequences for any of these entities?
B. Assessing the Continued Need for Sports Blackout Rules
16. We request comment on whether the economic rationale underlying
the sports blackout rules remains valid in today's marketplace.
Specifically, we invite commenters to submit information, and to
comment on information currently in the record, regarding (i) the
extent to which sports events continue to be blacked out locally as a
result of the failure of the events to sell out, (ii) the relative
importance of gate receipts vis-[agrave]-vis other revenues in
organized sports today, and (iii) whether local blackouts of sports
events significantly affect gate receipts. We invite commenters also to
submit any other information that may be relevant in assessing whether
the sports blackout rules are still needed to ensure the overall
availability of sports telecasts to the public. We ask commenters to
assess whether this information, as updated and supplemented, supports
retaining or eliminating the sports blackout rules.
1. Blackouts of Sports Events
17. We seek comment on the extent to which sports events are
blacked out locally today due to the failure of the events to sell out.
The record indicates that professional football continues to be the
sport most affected by blackouts. Under the NFL's longstanding blackout
policy, the television broadcast of home games in a team's home
territory has been blacked out if the game was not sold out 72 hours in
advance of game time. In 1974, just prior to the Commission's adoption
of the cable sports blackout rule, 59 percent of regular season NFL
games were blacked out due to failure of the games to sell out. During
the 2011 NFL season, only 16 out of 256 regular season games, or six
percent of games, were blacked out. These 16 blackouts occurred in just
four cities: Buffalo, Cincinnati, San Diego, and Tampa Bay. Thus, the
percentage of NFL games that are blacked out today has dropped
substantially since the sports blackout rules were adopted, and
blackouts of NFL games are relatively rare. Does this substantial
reduction in the number of blacked out NFL games suggest that the
sports blackout rules are no longer needed? Conversely, does the
relatively small number of blackouts of NFL games argue against the
need to eliminate the sports blackout rules? To what extent are
blackouts of NFL games averted when teams and local businesses work
together to ``sell'' outstanding tickets, thereby allowing local
coverage of games? Has the cable sports blackout rule had any impact on
the number of NFL blackouts? How should this affect our analysis?
18. We note that in 2012, after the petition for rulemaking in this
proceeding was put out for comment, the NFL modified its blackout
policy to allow its member teams the option of avoiding a blackout in
their local television market if the team sold at least 85 percent of
game tickets at least 72 hours prior to the game. Specifically, under
this new policy, individual teams are required to determine their own
blackout threshold--anywhere from 85 percent to 100 percent--at the
beginning of the season and adhere to that number throughout that
season. If ticket sales exceed the threshold set by the team, the team
must share a higher percentage of the revenue from those ticket sales
than usual with the visiting team. We seek comment on the extent to
which this new policy has impacted blackouts of NFL games. According to
SFC, there were 15 NFL games blacked out affecting five NFL franchises
during the 2012 season. Which teams opted to take advantage of the
NFL's new blackout policy and what effect, if any, did the NFL's
relaxation of its blackout policy have on ticket sales for the home
games of these teams? Does the NFL's recent relaxation of its sports
blackout policy weigh in favor of or against elimination of the
Commission's sports blackout rules?
19. We note that the record is largely silent on the prevalence of
blackouts affecting sports other than the NFL; thus we invite comment
on the extent to which these sports events are blacked out locally
today. As noted above, the sports blackout rules apply to all sports
[[Page 4142]]
telecasts in which the event is not available live on a local
television station, including telecasts of high school, college, and
professional sports, and individual as well as team sports. The Sports
Economists assert, however, that ``major professional sports leagues in
the U.S. [other than the NFL] generally do not use blackout rules to
prevent a game from being televised in the locality in which it is
being played'' because they ``sell television rights to only some games
through national broadcast agreements.'' The Sports Economists explain
that
[t]he FCC's rules currently have little relevance with respect
to television rights that are sold by a team rather than the league.
The FCC's rules apply only to games in the local area where they are
being played. Thus, the FCC's blackout rules bear no relation to
league policies that prevent telecasts in a team's home market of a
game being played elsewhere. For games that are played locally, the
vast majority of teams choose to sell television rights to all or
most of their games. * * *
To what extent are the sports blackout rules still relevant for
sports other than professional football, where individual teams, rather
than the league, hold and sell the distribution rights for all or most
of the games? In this regard, we seek comment on the importance of
retaining the sports blackout rules to protect the viability of any
nascent sports leagues that may emerge in the future.
20. Professional baseball is the only other sport for which
commenters provided any information on blackouts. Commenters indicate
that the number of MLB games blacked out is relatively small because
individual MLB teams, rather than the league, negotiate with local
broadcast television flagship stations or RSNs for exclusive rights to
televise most of the teams' games, both home and away games, in the
teams' home territories. According to the Baseball Commissioner, in
2011, 151 of 162 regular season games of each MLB team, on average,
were televised on the team's local broadcast television station or RSN.
Therefore, the Baseball Commissioner asserts, at most eleven of 162
regular season games of each MLB team were affected by the sports
blackout rules. To the extent that more specific data are available
regarding the number of home games of MLB teams blacked out pursuant to
the Commission's sports blackout rules, as opposed to MLB's blackout
policies, we request that commenters provide those data. Specifically,
for each MLB team, we seek current data on whether exclusive rights to
televise most of the teams' games have been granted to local broadcast
flagship stations or RSNs and the number of home games that are blacked
out pursuant to the Commission's rules. Does the number of games
blacked out argue in favor of or weigh against repeal of the sports
blackout rules? In addition, for home games that are blacked out under
our rules, we seek information as to why they are blacked out. In this
regard, the Baseball Commissioner states that ``[t]he vast majority of
MLB games are not sold out. While there are specific instances in which
MLB clubs do take account of gate attendance in making decisions about
telecasting patterns (and invoking the [Commission's sports blackout
rules]), MLB clubs do not routinely black out games that are not sold
out.'' Accordingly, what factors other than attendance are taken into
account in determining which MLB games are blacked out locally? How
many MLB games were blacked out due to failure to sell out and how many
were blacked out for other reasons? If, as reported, few MLB games are
blacked out due to failure to sell out, does this support the
conclusion that the sports blackout rules are not needed to promote
attendance at sports events?
21. We likewise request specific data detailing the extent to which
any other sports events, including games of other major professional
sports leagues (e.g., the NBA and NHL), and any other professional,
collegiate, or high school sports events, are blacked out locally. To
the extent that these other sports events are blacked out, are they
blacked out due to failure of the event to sell out or for some other
reason?
2. Gate Receipts and Other Revenues
22. We seek comment on the relative importance of gate receipts
vis-[agrave]-vis other revenues in sports today. As discussed above,
when the Commission adopted the cable sports blackout rule in 1975, it
found that ``gate receipts were the primary source of revenue for
sports clubs.'' The record before us indicates, however, that the
importance of gate receipts has diminished dramatically for NFL clubs
in the past four decades, particularly in relation to television
revenues. The Sports Economists state that in 1970 the estimated
average revenue of an NFL team was approximately $5 million and the
estimated average operating income was less than $1 million, whereas in
2009 the estimated average revenue of an NFL team was about $250
million and the estimated average operating income was $33 million. The
Sports Economists further state that ticket sales today account for
around 20 percent of NFL revenues, while television revenues account
for around 60 percent. According to SFC, television revenues, which are
shared equally among teams, are 80 times what they were in 1970 and now
account for 50 percent of the NFL's total revenues. SFC asserts that
gate receipts, which are split 60/40 between the home team and visiting
team, account for only 21.6 percent of the NFL's total revenues. These
figures indicate that television revenues have replaced gate receipts
as the most significant source of revenue for NFL clubs. Does this
shift in the source of revenue for NFL clubs undermine the economic
rationale for the sports blackout rules? We invite commenters to
supplement the record with more current data on NFL revenues, including
total revenues, gate receipts, and television revenues, to the extent
that such data are available. If gate receipts are no longer the
primary or most significant source of revenue for NFL clubs, are the
sports blackout rules still necessary to promote attendance at games
and to ensure the overall availability of telecasts of these sports to
the public? If so, why?
23. There is scant information in the record regarding the
significance of gate receipts in relation to other sources of revenue
for sports other than professional football. The Baseball Commissioner
states only that, ``in any given year, ticket sales and television
revenues account for roughly the same portion of [MLB's] revenues and
both are critically important to an MLB club's economic health.'' To
the extent that commenters assert that the sports blackout rules remain
necessary to ensure the overall availability of telecasts of particular
sports to the public, we request that they provide current revenue data
for such sports, including total revenues, television revenues, and
gate receipts. We note that, during recent years, MLB has entered into
other revenue-generating ventures, such as the MLB Channel, a baseball-
related programming channel available to MVPD subscribers, and Extra
Innings, which offers regular season game premium (pay) packages
through MVPDs to their subscribers. MLB also offers regular season game
packages directly to customers through MLB.tv. Such programming is
streamed over the Internet and can be viewed on computers and mobile
devices, as well as on televisions using devices such as Apple TV.
Moreover, many teams either own the RSNs that carry their game
telecasts or have obtained ownership interests in RSNs. Does the
emergence of these additional revenue sources impact the relative
importance of gate receipts and, accordingly, the continued
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need for the sports blackout rules? If gate receipts are not the
primary or most significant source of revenue for these sports, why are
the sports blackout rules necessary to ensure the overall availability
of telecasts of these sports to the public?
3. Effect of Blackouts on Gate Receipts
24. We seek comment on the extent to which local blackouts of
sports events affect attendance and gate receipts at those events and
the extent to which the cable sports blackout rule itself affects
attendance and gate receipts at sports events. As discussed above, the
sports blackout rules are intended to address concerns that MVPDs'
importation of a distant signal carrying a blacked-out sports event
could lead to lost revenue from ticket sales, which might cause sports
leagues to expand the reach of blackouts by refusing to sell their
rights to sports events to all distant stations. The objective of the
sports blackout rules is not to ensure the profitability or financial
viability of sports leagues, but rather to ensure the overall
availability of sports programming to the general public. Thus, we are
interested in gate receipts and other revenues of sports leagues only
to the extent that such revenues are relevant to this objective. Based
on their review of several econometric studies of attendance at NFL
games as well as other team sports in the U.S. and Europe, the Sports
Economists conclude that there is no evidence that local blackouts of
NFL games significantly affect either ticket sales or no-shows at those
games. We seek comment on the Sports Economists' conclusion and the
underlying studies on which it relies. Do these studies support the
conclusion that our sports blackout rules are no longer needed? For
example, if local blackouts of NFL games do not significantly affect
either ticket sales or no-shows at those games, does it follow that the
cable sports blackout rule has no significant effect on attendance?
Additionally, we invite commenters to submit any additional studies or
evidence showing the extent to which local blackouts of NFL games
impact gate receipts at those games and the extent to which the cable
sports blackout rule itself impacts gate receipts. In particular, we
note that the NFL asserts that its blackout policy, as supported by the
Commission's sports blackout rules, is designed to promote high
attendance at games. We invite the NFL and other interested commenters
to submit any available data or evidence indicating that the NFL's
blackout policy in fact has the intended effect of promoting attendance
at games. As noted above, only four cities were affected by local
blackouts of NFL games in 2011: Buffalo, Cincinnati, San Diego, and
Tampa Bay; in 2012, local blackouts of NFL games were limited to
Buffalo, Cincinnati, Oakland, San Diego, and Tampa Bay. We seek comment
on whether certain teams or cities are routinely disproportionately
affected by local blackouts of NFL games and, if so, why. For example,
some commenters suggest that certain cities are more severely impacted
by blackouts because of conditions in the local economy (e.g., locally
high unemployment) or a large stadium capacity in a city with a
relatively small population. If these are the factors that lead to
failure to sell out games, does blacking out a game promote attendance
at future games in those cities? Are any cities affected by these
factors able to sellout games on a regular basis? If so, why? To what
extent does a team's performance lead to poor attendance and blackouts?
For example, are blackouts more common when a team is not in playoff
contention? Should this affect our analysis? If so, how?
25. Are the sports blackout rules necessary to sustain gate
receipts and other revenues for NFL clubs? Commenters who assert that
eliminating the sports blackout rules would result in a significant
reduction in gate receipts or other revenues for NFL clubs should
quantify or estimate the anticipated reduction and explain the basis
for their estimates. We also seek comment on the connection between any
such lost revenues and the willingness of teams to enter into
agreements allowing broadcast coverage of their games, maximizing the
availability of such broadcasts to the public.
26. There is no specific information in the record regarding the
effect of blackouts on gate receipts for any other sports events. We
seek comment on whether blackouts have any significant effect on gate
receipts for any sports events other than NFL games. Commenters should
provide any available data or evidence to support their positions. What
impact, if any, would elimination of the sports blackout rules be
expected to have on gate receipts and other revenues for these sports?
To the extent that commenters argue that eliminating the sports
blackout rules would result in a significant reduction in gate receipts
or other revenues for these sports, we request that they quantify or
estimate the anticipated reduction and explain the basis for their
estimates.
27. Some commenters suggest that blacking out games may actually
harm, rather than support, ticket sales. We seek comment on whether
blacking out sports events may have the unintended effect of alienating
sports fans and discouraging their attendance at home games. According
to the Petitioners, recent empirical studies suggest that televising
professional sports may actually have a positive effect on attendance
at home games. Does televising sports events serve to generate interest
among sports fans and thereby promote higher attendance at home games
in the long run? If this is the case, then why would a professional
sports league, such as the NFL, ever seek to black out games? For
example, do commenters believe that the NFL is operating pursuant to a
mistaken understanding of the relationship between blackouts and
attendance? Or do commenters believe that the NFL has reason for
maintaining its blackout policy other than attendance? Commenters are
invited to submit any studies or evidence supporting the view that
televising sports events encourages attendance at home games.
4. Other Relevant Data
28. We invite commenters to submit any other information or data
that they believe is relevant to our assessment of whether the sports
blackout rules remain necessary to ensure the overall availability of
sports telecasts to the public. For example, are changes in the video
distribution market in the 40 years since the sports blackout rules
were originally adopted, such as those described above, relevant to our
assessment? To what extent do sports leagues distribute games via such
premium services today and what impact do such premium services have on
the leagues' revenues and blackout policies? Commenters should explain
how any such information supports or undercuts the economic basis for
the sports blackout rules.
C. Elimination of the Sports Blackout Rules
29. We propose to eliminate the sports blackout rules. With respect
to professional football, the sport most affected by the sports
blackout rules, it appears from the existing record that television
revenues have replaced gate receipts as the most significant source of
revenue for NFL clubs in the 40 years since the rules were first
adopted. Moreover, the record received thus far indicates no direct
link between blackouts and increased attendance at NFL games. The
record also suggests that the sports blackout rules have little
relevance for sports other than professional football, because the
distribution rights for most of the games
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in these sports are sold by individual teams, rather than the leagues.
Finally, it appears that the sports blackout rules are unnecessary
because sports leagues can pursue local blackout protection through
private contractual negotiations. Thus, it appears that the sports
blackout rules have become obsolete. Accordingly, if the record in this
proceeding, as updated and supplemented by commenters, confirms that
the sports blackout rules are no longer necessary to ensure the overall
availability to the public of sports telecasts, we propose to repeal
these rules. We seek comment on this proposal.
30. We seek comment on how elimination of the sports blackout rules
would affect sports leagues and teams and their ability, as holders of
the exclusive distribution rights to their games, to control the
distribution of home games in the teams' home territories. As discussed
above, the sports leagues, not the Commission, are the source of sports
blackouts. And the Commission's rules supplement the contractual
relationships between the leagues or individual teams that hold the
rights to the games and the entities to which they grant distribution
rights by requiring MVPDs to black out games that are required by the
sports leagues or individual teams to be blacked out on local
television stations. To the extent that the Commission's rules are no
longer needed to assure the continued availability of sports
programming to the public, does the Commission have any continued
interest in supplementing these contractual relationships? Should it
instead be left to the sports leagues and individual teams to negotiate
in the private marketplace whatever local blackout protection they
believe they need?
31. Several commenters argue that the compulsory copyright licenses
granted to MVPDs under Sections 111 and 119 of the Copyright Act would
make it difficult or impossible for sports leagues or teams to
negotiate the protection provided by the sports blackout rules through
private contracts. The compulsory licenses permit cable systems and, to
a more limited extent, satellite carriers to retransmit the signals of
distant broadcast stations without obtaining the consent of the sports
leagues whose games are carried on those stations, when the carriage of
such stations is permitted under FCC rules. Absent the sports blackout
rules, these commenters argue, an MVPD would be able to take advantage
of the compulsory license to retransmit the signal of a distant station
carrying a game that has been blacked out locally by a sports league or
team.
32. We seek comment on how the compulsory licenses would affect the
ability of sports leagues and sports teams to obtain through market-
based negotiations the same protection that is currently provided by
the sports blackout rules. The NFL contends that, since it contracts
with the CBS, NBC, and FOX networks for broadcast distribution of its
games, it lacks privity with the local network affiliates that carry
the games and with the MVPDs that retransmit the broadcast signals.
Thus, it claims that ensuring that all of the other parties involved in
the distribution of its games are contractually bound to honor the
NFL's sports blackout policy would require rewriting hundreds of
contracts, including contracts between the NFL and the CBS, NBC, and
FOX networks, contracts between the networks and their affiliates, and
contracts between the network affiliates and the MVPDs. The Petitioners
assert that this argument ignores the direct privity of contract the
sports leagues have with the MVPDs themselves, noting that virtually
all MVPDs carry networks or game packages owned directly by the sports
leagues, such as the NFL Network, MLB Network, NBA TV, NHL Network, and
NFL Sunday Ticket (DIRECTV). We seek comment on the extent to which the
sports leagues contract directly with MVPDs for carriage of networks or
game packages owned directly by the sports leagues. Do such contracts
already include some form of blackout protection and, if so, what
protection do these contracts provide? In this connection, the
Commission has previously found that sports leagues routinely negotiate
with MVPDs greater blackout protection than that afforded by the sports
blackout rules, and the comments in the record support this finding.
For example, sports leagues and teams contractually negotiate with
MVPDs blackouts of games throughout the teams' home territories, which
generally extend well beyond the limited 35-mile zone of protection
afforded by our sports blackout rules. In addition, the sports blackout
rules afford blackout protection only to the home teams, whereas sports
leagues or teams often negotiate blackout protection for both the home
and away teams. Accordingly, if sports leagues and teams are able to
obtain greater protection than that afforded under the sports blackout
rules in arm's length marketplace negotiations, why do they need the
sports blackout rules to avoid the impact of the compulsory licenses?
33. Moreover, the Commission has found that ``[s]ports leagues
control both broadcast carriage and MVPD retransmission of their
programming.'' It observed that a broadcaster cannot carry a sports
event without the permission of the sports leagues or clubs that hold
the rights to the event and, under the retransmission consent rules,
MVPDs, with limited exceptions, cannot carry a broadcaster's signal
without the permission of the broadcaster. Thus, the Commission
reasoned that a sports league could prevent unwanted MVPD
retransmission through its contracts with broadcasters by requiring, as
a term of carriage, the deletion of specific sports events. Because the
sports leagues could obtain local blackout protection through their
contracts with broadcast stations, the Commission suggested that the
sports leagues may not need the sports blackout rules to prevent MVPDs
from using the compulsory licenses to carry blacked-out games. Instead,
it stated that the sports blackout rules may serve primarily as an
enforcement mechanism for existing contracts between broadcasters and
sports leagues. We seek comment on this analysis. Could sports leagues
or teams prevent MVPDs from retransmitting certain sports events
through their contracts with broadcasters? If so, especially given the
popularity of certain sports programming, would leagues such as the NFL
be well positioned to secure blackout protection through private
contractual negotiations? Would leagues need to renegotiate existing
contracts with broadcasters to secure such protection? If so, should
that affect our analysis? What effect, if any, would the NFL's lack of
direct privity with the local network affiliates that carry the games
have on its ability to control MVPD retransmission? What are the costs
and benefits to sports leagues and teams of our elimination of the
sports blackout rules? To the extent possible, we encourage commenters
to quantify any costs and benefits and to submit supporting data.
34. We seek comment also on whether and how repeal of the sports
blackout rules would affect consumers. We received more than 7,500
comments on the Petition from individual consumers who support
elimination of the sports blackout rules. These comments indicate that
sports blackouts, while less frequent now than when the sport blackout
rules were first adopted, are still a significant source of frustration
for consumers. Some of these consumers are disabled or elderly sports
fans who are physically unable to attend games in
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person and rely on television (either broadcast or pay TV) to watch
their favorite teams. Others complain that they can no longer afford to
attend games due to high ticket prices, the economy, or reduced income
following retirement; that they already subsidize professional sports
through publicly funded stadiums and should be able to watch the games
at home; or that they pay a substantial premium to watch their favorite
NFL team on DIRECTV's NFL Sunday Ticket but are sometimes unable to
watch due to a blackout, even though they may live 150 miles or more
from the team's stadium. We seek comment on what impact, if any, repeal
of the Commission's sports blackout rules would have on these and other
consumers.
35. The Petitioners acknowledge that eliminating the Commission's
sports blackout rules alone likely would not end local sports blackouts
as sports fans may wish. We note that the leagues' underlying blackout
policies would remain, and, as discussed above, the leagues may be able
to obtain the same blackout protection provided under our rules through
free market negotiations. The leagues could still require local
television stations to black out games; thus, consumers that rely on
over-the-air television would still be unable to view blacked-out
games. Moreover, repeal of our sports blackout rules alone would not
provide relief to consumers that are subject to blackouts resulting
from the leagues' use of expansive home territories. Nevertheless, the
Petitioners assert that, ``unless and until the Commission eliminates
the [sports blackout rules], the sports leagues will be under no
pressure to contractually negotiate for the protection that they claim
is necessary.'' The Petitioners suggest that, if the leagues find that
such negotiations would be too daunting, eliminating the sports
blackout rules may compel the leagues to lower ticket prices until all
seats are sold out or perhaps to end blackouts altogether. We seek
comment on whether there is any benefit to consumers of repealing the
sports blackout rules if the sports leagues' underlying blackout
policies remain. Is removing unnecessary or obsolete regulations in
itself a sufficient justification for eliminating the sports blackout
rules, even if there is no direct or immediate benefit to consumers? If
the evidence in this proceeding, including any data or studies
submitted by commenters, suggests that there are no tangible benefits
to retaining the sports blackout rules but that these rules also do not
cause any tangible harms, should the Commission repeal the sports
blackout rules? Would removing the Commission's tacit endorsement of
the leagues' blackout policies serve the public interest? Are the
leagues more likely to relax or reconsider their blackout policies if
the Commission's sports blackout rules are repealed? How does our
analysis of the issues differ between professional sports leagues which
have been granted exemptions from the antitrust laws and sports leagues
which have not been granted antitrust protections?
36. Further, we invite comment on any potential harm to consumers
of eliminating the sports blackout rules. Some commenters express
concern that eliminating the sports blackout rules could accelerate the
migration of sports from free over-the-air television to pay TV, which
would be harmful to consumers who cannot afford pay TV. As noted above,
the compulsory copyright licenses granted to MVPDs apply to the
retransmission of broadcast signals, not to pay TV content. According
to NAB, if the sports blackout rules are eliminated, ``sports leagues
wishing to retain control over distribution of their content would have
an incentive to move to pay platforms where the compulsory license
would not undermine their private agreements.'' Similarly, the NFL
asserts that eliminating the sports blackout rules ``would make
broadcast television distribution more difficult, expensive and
uncertain and accordingly would make cable network distribution a more
appealing prospect.'' What percentage of consumers watch the sports
programming they view on broadcast television channels rather than pay
TV or via the Internet using premium services such as MLB.tv? Would
repeal of the sports blackout rules hasten the migration of NFL games
from broadcast television channels to pay TV? If so, is it appropriate
for the Commission to have the objective of preventing such a
migration? We note that the NFL recently extended its contracts with
the CBS, FOX, and NBC television networks, ensuring that many NFL games
will remain on broadcast television channels at least through the 2022
season. In view of these contract extensions, it appears unlikely that
NFL games would migrate further from broadcast television channels to
pay TV in the near future. We nevertheless seek comment on whether
repeal of the sports blackout rules would likely encourage migration of
NFL games to pay TV in the immediate future or in the longer term. What
effect, if any, would repeal of the sports blackout rules have on
migration to pay TV of sports other than professional football? In this
regard, the record suggests that other professional sports teams
already distribute a majority of their regular season games via RSNs
and other cable networks. Is elimination of the sports blackout rules
likely to result in any further migration of these sports from
broadcast television channels to pay TV? Are there any other potential
harms to consumers from repealing the sports blackout rules? We
encourage commenters to quantify, to the extent possible, any benefits
and costs to consumers of eliminating the sports blackout rules and to
submit supporting data.
37. Some commenters argue that eliminating the sports blackout
rules would undermine broadcasters' local program exclusivity and harm
localism. These commenters assert that the sports blackout rules,
together with the network non-duplication and syndicated exclusivity
rules, support local broadcasters' investments in high quality, diverse
informational and entertainment programming. By hindering the ability
of local broadcast stations to obtain and enforce exclusive local
program rights, they assert, elimination of the sports blackout rules
would make it more difficult for the stations to attract advertising,
which in turn would reduce their ability to invest in local information
programming and popular programming. Would elimination of the sports
blackout rules have a negative impact on localism? What, if any, costs
and benefits would repeal of the sports blackout rules have on
broadcasters? To the extent possible, we encourage commenters to
quantify any costs and benefits and to submit data supporting their
positions.
38. We seek comment also on whether and how elimination of the
sports blackout rules would affect any other entities. Some commenters
assert that under the Copyright Act any change in the sports blackout
rules will trigger a proceeding before the Copyright Royalty Tribunal
to adjust the compulsory licensing rates that cable systems pay. Would
such a rate adjustment proceeding be mandatory or discretionary on the
part of the Copyright Royalty Tribunal? In this regard, we note that
the Copyright Act provides that, if the sports blackout rules are
changed, the compulsory licensing rates ``may be adjusted to assure
that such rates are reasonable in light of the changes.'' What burdens
and costs would a rate adjustment proceeding impose on the Copyright
Royalty Tribunal and any other entities? Are there any other entities
that would be impacted by elimination of the sports
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blackout rules? If so, what are the benefits and costs of elimination
for those entities? We request that commenters quantify any benefits
and costs to the extent possible and submit supporting data.
39. Finally, we seek comment on whether, as an alternative to
outright repeal of the sports blackout rules, we should make
modifications to these rules. If so, what modifications should we make,
and why would such modifications be preferable to repeal of the sports
blackout rules? Commenters that propose any such modifications should
quantify the benefits and costs of their proposals and provide
supporting data.
IV. Procedural Matters
A. Initial Regulatory Flexibility Act Analysis
40. As required by the Regulatory Flexibility Act, as amended
(RFA), the Commission has prepared this Initial Regulatory Flexibility
Analysis (IRFA) of the possible significant economic impact on a
substantial number of small entities by the policies and rules
considered in the attached Notice of Proposed Rulemaking (NPRM).
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 on the NPRM as indicated on the first page of the NPRM.
The Commission will send a copy of the NPRM, including this IRFA, to
the Chief Counsel for Advocacy of the Small Business Administration
(SBA). In addition, the NPRM and the IRFA (or summaries thereof) will
be published in the Federal Register.
Need for, and Objectives of, the Proposed Rules
41. The NPRM proposes to eliminate the sports blackout rules, which
prohibit certain multichannel video programming distributors (MVPDs)
(cable, satellite, and open video systems (OVS)) from retransmitting,
within a protected local blackout zone, the signal of a distant
broadcast station carrying a live sports event if the event is not
available live on a local television broadcast station. The sports
blackout rules were originally adopted nearly 40 years ago, when the
primary source of revenue for sports leagues was game ticket sales. The
sports blackout rules were intended to ensure that the potential loss
of ticket sales resulting from MVPD retransmission of distant stations
did not cause sports leagues to refuse to sell their rights to sports
events to the distant stations, thereby reducing the overall
availability of sports telecasts to the public. The sports industry has
changed dramatically in the past four decades, however, and it appears
that the sports blackout rules may no longer be necessary to assure the
overall availability of sports programming.
42. The NPRM tentatively concludes that the Commission has the
authority to eliminate the cable sports blackout rule under its general
rulemaking power, given that Congress did not explicitly mandate that
the Commission adopt the cable sports blackout rule. Because Congress
directed the Commission to extend the sports blackout protection
applied to cable to satellite and OVS, the NPRM seeks comment on
whether the Commission also has the authority to repeal the sports
blackout rules for satellite and OVS. In addition, the NPRM seeks
comment on whether there is a continued need for the sports blackout
rules. In particular, the NPRM seeks comment on whether the economic
rationale underlying the sports blackout rules is still valid. Finally,
the NPRM proposes to repeal the sports blackout rules and seeks comment
on the benefits and costs of such repeal on interested parties,
including the sports leagues, broadcasters, and consumers.
Legal Basis
43. This NPRM is adopted pursuant to the authority found in
Sections 1, 4(i), 4(j), 303(r), 339(b), 653(b) of the Communications
Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), 303(r), 339(b),
and 573(b).
Description and Estimate of the Number of Small Entities to Which the
Proposed Rules Will Apply
44. 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.
45. Wired Telecommunications Carriers. The 2007 North American
Industry Classification System (``NAICS'') defines ``Wired
Telecommunications Carriers'' as follows: ``This industry comprises
establishments primarily engaged in operating and/or providing access
to transmission facilities and infrastructure that they own and/or
lease for the transmission of voice, data, text, sound, and video using
wired telecommunications networks. Transmission facilities may be based
on a single technology or a combination of technologies. Establishments
in this industry use the wired telecommunications network facilities
that they operate to provide a variety of services, such as wired
telephony services, including VoIP services; wired (cable) audio and
video programming distribution; and wired broadband Internet services.
By exception, establishments providing satellite television
distribution services using facilities and infrastructure that they
operate are included in this industry.'' All establishments listed
above are included in the SBA's broad economic census category, Wired
Telecommunications Carriers, which was developed for small wireline
businesses. Under this category, the SBA deems a wireline business to
be small if it has 1,500 or fewer employees. Census data for 2007 shows
that there were 31,996 establishments that operated that year. Of this
total, 30,178 establishments had fewer than 100 employees, and 1,818
establishments had 100 or more employees. Therefore, under this size
standard, the majority of such businesses can be considered small
entities.
46. Cable Television Distribution Services. Since 2007, these
services have been defined within the broad economic census category of
Wired Telecommunications Carriers, which was developed for small
wireline businesses. This category is defined as follows: ``This
industry comprises establishments primarily engaged in operating and/or
providing access to transmission facilities and infrastructure that
they own and/or lease for the transmission of voice, data, text, sound,
and video using wired telecommunications networks. Transmission
facilities may be based on a single technology or a combination of
technologies. Establishments in this industry use the wired
telecommunications network facilities that they operate to provide a
variety of services, such as wired telephony services, including VoIP
services; wired (cable) audio and video programming distribution; and
wired broadband Internet services.'' The SBA has developed a small
business size standard for this category, which is: All such businesses
having 1,500 or fewer
[[Page 4147]]
employees. Census data for 2007 shows that there were 31,996
establishments that operated that year. Of this total, 30,178
establishments had fewer than 100 employees, and 1,818 establishments
had 100 or more employees. Therefore, under this size standard, we
estimate that the majority of such businesses can be considered small
entities.
47. Cable Companies and Systems. The Commission has also developed
its own small business size standards, for the purpose of cable rate
regulation. Under the Commission's rules, a ``small cable company'' is
one serving 400,000 or fewer subscribers nationwide. Industry data
shows that there were 1,141 cable companies at the end of June 2012. Of
this total, all but ten cable operators nationwide are small under this
size standard. In addition, under the Commission's rate regulation
rules, a ``small system'' is a cable system serving 15,000 or fewer
subscribers. Current Commission records show 4,945 cable systems
nationwide. Of this total, 4,380 cable systems have less than 20,000
subscribers, and 565 systems have 20,000 or more subscribers, based on
the same records. Thus, under this standard, we estimate that most
cable systems are small entities.
48. Cable System Operators (Telecom Act Standard). The
Communications Act of 1934, as amended, also contains a size standard
for small cable system operators, which is ``a cable operator that,
directly or through an affiliate, serves in the aggregate fewer than 1
percent of all subscribers in the United States and is not affiliated
with any entity or entities whose gross annual revenues in the
aggregate exceed $250,000,000.'' There are approximately 56.4 million
incumbent cable video subscribers in the United States today.
Accordingly, an operator serving fewer than 564,000 subscribers shall
be deemed a small operator if its annual revenues, when combined with
the total annual revenues of all its affiliates, do not exceed $250
million in the aggregate. Based on available data, we find that all but
ten incumbent cable operators are small entities under this size
standard. We note that the Commission neither requests nor collects
information on whether cable system operators are affiliated with
entities whose gross annual revenues exceed $250 million. Although it
seems certain that some of these cable system operators are affiliated
with entities whose gross annual revenues exceed $250,000,000, we are
unable at this time to estimate with greater precision the number of
cable system operators that would qualify as small cable operators
under the definition in the Communications Act.
49. Television Broadcasting. This Economic Census category
``comprises establishments primarily engaged in broadcasting images
together with sound. These establishments operate television
broadcasting studios and facilities for the programming and
transmission of programs to the public.'' The SBA has created the
following small business size standard for such businesses: Those
having $14 million or less in annual receipts. The Commission has
estimated the number of licensed commercial television stations to be
1,386. In addition, according to Commission staff review of the BIA
Advisory Services, LLC's Media Access Pro Television Database on March
28, 2012, about 950 of an estimated 1,300 commercial television
stations (or approximately 73 percent) had revenues of $14 million or
less. We therefore estimate that the majority of commercial television
broadcasters are small entities.
50. We note, however, that in assessing whether a business concern
qualifies as small under the above definition, business (control)
affiliations must be included. Our estimate, therefore, likely
overstates the number of small entities that might be affected by our
action because the revenue figure on which it is based does not include
or aggregate revenues from affiliated companies. In addition, an
element of the definition of ``small business'' is that the entity not
be dominant in its field of operation. We are 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 is therefore possibly over-inclusive to that extent.
51. In addition, the Commission has estimated the number of
licensed noncommercial educational (NCE) television stations to be 396.
These stations are non-profit, and therefore considered to be small
entities.
52. Direct Broadcast Satellite (DBS) Service. DBS service is a
nationally distributed subscription service that delivers video and
audio programming via satellite to a small parabolic ``dish'' antenna
at the subscriber's location. DBS, by exception, is now included in the
SBA's broad economic census category, Wired Telecommunications
Carriers, which was developed for small wireline businesses. Under this
category, the SBA deems a wireline business to be small if it has 1,500
or fewer employees. Census data for 2007 shows that there were 31,996
establishments that operated that year. Of this total, 30,178
establishments had fewer than 100 employees, and 1,818 establishments
had 100 or more employees. Therefore, under this size standard, the
majority of such businesses can be considered small entities. However,
the data we have available as a basis for estimating the number of such
small entities were gathered under a superseded SBA small business size
standard formerly titled ``Cable and Other Program Distribution.'' The
definition of Cable and Other Program Distribution provided that a
small entity is one with $12.5 million or less in annual receipts.
Currently, only two entities provide DBS service, which requires a
great investment of capital for operation: DIRECTV and DISH Network.
Each currently offer subscription services. DIRECTV and DISH Network
each report annual revenues that are in excess of the threshold for a
small business. Because DBS service requires significant capital, we
believe it is unlikely that a small entity as defined under the
superseded SBA size standard would have the financial wherewithal to
become a DBS service provider.
53. Satellite Master Antenna Television (SMATV) Systems, also known
as Private Cable Operators (PCOs). SMATV systems or PCOs are video
distribution facilities that use closed transmission paths without
using any public right-of-way. They acquire video programming and
distribute it via terrestrial wiring in urban and suburban multiple
dwelling units such as apartments and condominiums, and commercial
multiple tenant units such as hotels and office buildings. SMATV
systems or PCOs are now included in the SBA's broad economic census
category, Wired Telecommunications Carriers, which was developed for
small wireline businesses. Under this category, the SBA deems a
wireline business to be small if it has 1,500 or fewer employees.
Census data for 2007 show that there were 31,996 establishments that
operated that year. Of this total, 30,178 establishments had fewer than
100 employees, and 1,818 establishments had 100 or more employees.
Therefore, under this size standard, the majority of such businesses
can be considered small entities.
54. Home Satellite Dish (HSD) Service. HSD or the large dish
segment of the satellite industry is the original satellite-to-home
service offered to consumers, and involves the home reception of
signals transmitted by
[[Page 4148]]
satellites operating generally in the C-band frequency. Unlike DBS,
which uses small dishes, HSD antennas are between four and eight feet
in diameter and can receive a wide range of unscrambled (free)
programming and scrambled programming purchased from program packagers
that are licensed to facilitate subscribers' receipt of video
programming. Because HSD provides subscription services, HSD falls
within the SBA-recognized definition of Wired Telecommunications
Carriers. The SBA has developed a small business size standard for this
category, which is: All such businesses having 1,500 or fewer
employees. Census data for 2007 show that there were 31,996
establishments that operated that year. Of this total, 30,178
establishments had fewer than 100 employees, and 1,818 establishments
had 100 or more employees. Therefore, under this size standard, the
majority of such businesses can be considered small entities.
55. Open Video Systems. The open video system (OVS) framework was
established in 1996, and is one of four statutorily recognized options
for the provision of video programming services by local exchange
carriers. The OVS framework provides opportunities for the distribution
of video programming other than through cable systems. Because OVS
operators provide subscription services, OVS falls within the SBA small
business size standard covering cable services, which is ``Wired
Telecommunications Carriers.'' The SBA has developed a small business
size standard for this category, which is: All such businesses having
1,500 or fewer employees. Census data for 2007 shows that there were
31,996 establishments that operated that year. Of this total, 30,178
establishments had fewer than 100 employees, and 1,818 establishments
had 100 or more employees. Therefore, under this size standard, we
estimate that the majority of these businesses can be considered small
entities. In addition, we note that the Commission has certified some
OVS operators, with some now providing service. Broadband service
providers (BSPs) are currently the only significant holders of OVS
certifications or local OVS franchises. The Commission does not have
financial or employment information regarding the other entities
authorized to provide OVS, some of which may not yet be operational.
Thus, again, at least some of the OVS operators may qualify as small
entities.
56. Cable and Other Subscription Programming. The Census Bureau
defines this category as follows: ``This industry comprises
establishments primarily engaged in operating studios and facilities
for the broadcasting of programs on a subscription or fee basis. . . .
These establishments produce programming in their own facilities or
acquire programming from external sources. The programming material is
usually delivered to a third party, such as cable systems or direct-to-
home satellite systems, for transmission to viewers.'' The SBA has
developed a small business size standard for this category, which is:
all such businesses having $15 million dollars or less in annual
revenues. Census data for 2007 show that there were 659 establishments
that operated that year. Of that number, 462 operated with annual
revenues of $9,999,999 dollars or less. One hundred ninety-seven (197)
operated with annual revenues of between $10 million and $100 million
or more. Thus, under this size standard, the majority of such
businesses can be considered small entities.
Description of Projected Reporting, Recordkeeping, and Other Compliance
Requirements
57. The proposed rule changes discussed in the NPRM would affect
compliance requirements. The proposed rule changes would eliminate the
sports blackout rules, which prohibit certain MVPDs from televising the
home game of a sports team within a specified geographic area
surrounding a television broadcast station licensed to the community in
which the game is being played if the game is not available live on a
television broadcast station in that community.
Steps Taken To Minimize Significant Impact on Small Entities, and
Significant Alternatives Considered
58. The RFA requires an agency to describe any significant
alternatives that might minimize any significant economic impact on
small entities. Such alternatives 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.
59. As discussed in the NPRM, repeal of the sports blackout rules
would not eliminate the sports leagues' underlying blackout policies.
Rather, it would simply remove Commission support for these policies.
Sports leagues would still be able to require local television
broadcast stations to black out games. In addition, sports leagues
would likely be able to obtain the same protection afforded under the
sports blackout rules either through market-based negotiations with
MVPDs or through their contracts with broadcasters by requiring, as a
term of carriage, the deletion of specific sports events. Accordingly,
we believe that repeal of the sports blackout rules would impose only
minimal burdens on any affected entities. For this reason, an analysis
of alternatives to the proposed rule changes is unnecessary. We invite
comment on whether there are any alternatives we should consider that
would minimize any adverse impact on small entities, but which maintain
the benefits of our proposal.
Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
60. None.
B. Paperwork Reduction Act
61. This Notice of Proposed Ruemaking proposes no new or modified
information collection requirements. In addition, therefore, it does
not propose any new or modified ``information collection burden for
small business concerns with fewer than 25 employees,'' pursuant to the
Small Business Paperwork Relief Act of 2002.
C. Ex Parte Rules
62. Permit-But-Disclose. The proceeding this NPRM 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,
[[Page 4149]]
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 Sec.
1.1206(b). In proceedings governed by rule Sec. 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.
D. Filing Requirements
63. 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 the Commission's Electronic
Comment Filing System (ECFS).
[ssquf] Electronic Filers: Comments may be filed electronically
using the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/.
[ssquf] Paper Filers: Parties who choose to file by paper must file
an original and one copy 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.
1. 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
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with
rubber bands or fasteners. Any envelopes and boxes must be disposed of
before entering the building.
2. 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.
3. U.S. Postal Service first-class, Express, and Priority mail
should be addressed to 445 12th Street SW., Washington, DC 20554.
64. People With Disabilities: To request materials in accessible
formats for people with disabilities (braille, large print, electronic
files, audio format), send an email to [email protected] or call the
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).
65. For additional information on this proceeding, contact Kathy
Berthot, [email protected], of the Media Bureau, Policy Division,
(202) 418-2120.
V. Ordering Clauses
66. Accordingly, it is ordered that, pursuant to the authority
found in sections 1, 4(i), 4(j), 303(r), 339(b), and 653(b) of the
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j),
303(r), 339(b), and 573(b) this Notice of Proposed Rulemaking is
adopted.
67. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Notice of Proposed Rulemaking in MB Docket No. 12-3,
including the Initial Regulatory Flexibility Analysis, to the Chief
Counsel for Advocacy of the Small Business Administration.
List of Subjects in 47 CFR Part 76
Cable 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 part 76 as follows:
PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE
0
1. The authority citation for part 76 continues to read as follows:
Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 302a, 303,
303a, 307, 308, 309, 312, 315, 317, 325, 339, 340, 341, 503, 521,
522, 531, 532, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 549,
552, 554, 556, 558, 560, 561, 571, 572 and 573.
Sec. 76.111 [Removed]
0
2. Remove Sec. 76.111.
0
3. Amend Sec. 76.120 by removing paragraph (e)(3) and revising the
section heading to read as follows:
Sec. 76.120 Network non-duplication protection and syndicated
exclusivity rules for satellite carriers: Definitions.
* * * * *
Sec. Sec. 76.127 and 76.128 [Removed]
0
4. Remove Sec. Sec. 76.127 and 76.128.
0
5. Amend Sec. 76.130 by revising the first sentence to read as
follows:
Sec. 76.130 Substitutions.
Whenever, pursuant to the requirements of the network program non-
duplication or syndicated program exclusivity rules, a satellite
carrier is required to delete a television program from retransmission
to satellite subscribers within a zip code area, such satellite carrier
may, consistent with this subpart, substitute a program from any other
television broadcast station for which the satellite carrier has
obtained the necessary legal rights and permissions, including but not
limited to copyright and retransmission consent. * * *
Sec. 76.1506 [Amended]
0
6. Amend Sec. 76.1506 by removing paragraph (m) and redesignating
paragraphs (n) and (o) as paragraphs (m) and (n).
[FR Doc. 2014-01338 Filed 1-23-14; 8:45 am]
BILLING CODE 6712-01-P