[Federal Register Volume 79, Number 97 (Tuesday, May 20, 2014)]
[Proposed Rules]
[Pages 29010-29064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-10870]



[[Page 29009]]

Vol. 79

Tuesday,

No. 97

May 20, 2014

Part III





Federal Communications Commission





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47 CFR Part 73





2014 Quadrennial Regulatory Review; Proposed Rule

  Federal Register / Vol. 79 , No. 97 / Tuesday, May 20, 2014 / 
Proposed Rules  

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MB Docket Nos. 14-50, 09-182, 07-294, and 04-256; FCC 14-28]


2014 Quadrennial Regulatory Review

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: This document solicits comment on proposed changes to the 
broadcast ownership rules in compliance with section 202(h) of the 
Telecommunications Act of 1996 requires the Commission to review its 
broadcast ownership rules quadrennially to review these rules to 
determine whether they are necessary in the public interest as a result 
of competition. 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 its quadrennial review proceeding. This document solicits 
comment also on a potential disclosure requirement for certain 
broadcast television shared service agreements.

DATES: Comments are due on or before July 7, 2014 and reply comments 
are due on or before August 4, 2014. 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 July 21, 2014.

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 Further Notice of Proposed Rulemaking, contact Cathy 
Williams at (202) 418-2918, or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This Further Notice of Proposed Rulemaking, 
in MB Docket Nos. 14-50, 09-182, 07-294, and 04-256; FCC 14-28, was 
adopted on March 31, 2014, and released on April 15, 2014. The document 
is available for download at http://fjallfoss.fcc.gov/edocs_public/. 
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 20554. 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 Further Notice of Proposed Rulemaking proposes a new or 
revised information collection requirement. The Commission, as part of 
its continuing effort to reduce paperwork burdens, invites the general 
public and the OMB to comment on the information collection 
requirements contained in this document, as required by the Paperwork 
Reduction Act of 1995, Public Law 104-13. Public and agency comments 
are due July 21, 2014. Comments should address: (a) Whether the 
proposed collection of information is necessary for the proper 
performance of the functions of the Commission, including whether the 
information shall have practical utility; (b) the accuracy of the 
Commission's burden estimates; (c) ways to enhance the quality, 
utility, and clarity of the information collected; (d) ways to minimize 
the burden of the collection of information on the respondents, 
including the use of automated collection techniques or other forms of 
information technology; and (e) way to further reduce the information 
collection burden on small business concerns with fewer than 25 
employees. 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 Further Notice of Proposed Rulemaking

A. Introduction

    1. The Commission takes another major step in its review of the 
broadcast ownership rules. The Commission wishes to build on that 
record to resolve the ongoing 2010 proceeding, and the Commission is 
cognizant of its statutory obligation to review the broadcast ownership 
rules every four years. To accomplish both objectives, with this 
Further Notice of Proposed Rulemaking the Commission is initiating this 
2014 Quadrennial Review; incorporating the existing 2010 record into 
this proceeding; proposing rules that are formulated based on the 
Commission's evaluation of that existing record; and seeking new and 
additional information and data on market conditions and competitive 
indicators as they exist today. The Commission issues this Further 
Notice of Proposed Rulemaking to seek additional comment on the 
appropriateness of the broadcast ownership rules to today's evolving 
marketplace. Also, the Commission seeks additional comment on issues 
referred to the Commission in the Third Circuit's remand in Prometheus 
II of certain aspects of the Commission's 2008 Diversity Order (73 FR 
28361, May 16, 2008, FCC 07-217, rel. March 5, 2008). Finally, the 
Commission takes steps herein to address concerns about the use of a 
variety of sharing agreements between independently owned television 
stations--Shared Service Agreements or SSAs.

B. Background

    2. The media ownership rules subject to this quadrennial review are 
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. Congress requires the 
Commission to review these rules every four years to determine whether 
they ``are necessary in the public interest as the result of 
competition'' and to ``repeal or modify any regulation [the Commission] 
determines to be no longer in the public interest.'' The Third Circuit 
has instructed that ``necessary in the public interest'' is a `` `plain 
public interest' standard under which `necessary' means `convenient,' 
`useful,' or `helpful,' not `essential' or `indispensable.' '' There is 
no `` `presumption in favor of repealing or modifying the ownership 
rules.' '' Rather, the Commission has the discretion ``to make [the 
rule] more or less stringent.'' This 2014 Quadrennial Review will focus 
on identifying a reasoned basis for retaining, repealing, or modifying 
each rule consistent with the public interest.
    3. Policy Goals. The media ownership rules have consistently been 
found to be necessary to further the Commission's longstanding policy 
goals of fostering competition, localism, and diversity.

[[Page 29011]]

The Commission seeks additional comment on the NPRM's (77 FR 2867, Jan. 
19, 2012, FCC 11-186, rel. Dec. 22, 2011) tentative conclusion that 
these policy goals continue to be the appropriate framework within 
which to evaluate and address minority and female interests as they 
relate to the broadcast ownership rules. Based on the record developed 
in response to the NPRM, the Commission continues to believe that the 
longstanding policy goals of competition, localism, and diversity are 
broadly defined to promote the core responsibilities of broadcast 
licensees. The Commission is not persuaded by the comments in the 
record that it would be appropriate to adopt any additional formal 
policy goals. The Commission seeks comment on this tentative 
conclusion.

C. Media Ownership Rules

1. Local Television Ownership Rule
a. Introduction
    4. Based on the record that was compiled for the 2010 Quadrennial 
Review, the Commission tentatively concludes that the current local 
television ownership rule remains necessary in the public interest and 
should be retained with a limited modification. As discussed below, the 
Commission believes that, based on the current media marketplace and 
the record in this proceeding, the public interest would be best served 
by replacing the Grade B contour overlap test used to determine when to 
apply the local television ownership rule with a digital noise limited 
service contour (NLSC) test, rather than the DMA-based approach 
proposed in the NPRM. The Commission believes that the local television 
ownership rule is necessary to promote competition. The Commission 
further believes that the competition-based rule proposed in this 
Further Notice of Proposed Rulemaking also would promote viewpoint 
diversity by helping to ensure the presence of independently owned 
broadcast television stations in local markets and would be consistent 
with the Commission's localism goal. The Commission finds that the 
local television ownership rule proposed in this Further Notice of 
Proposed Rulemaking would be consistent with the goal of promoting 
minority and female ownership of broadcast television stations. 
Finally, the Commission believes that the proposed limited modification 
of the rule will better promote competition, and that this benefit 
would outweigh any burdens, which would be minimized by the proposal to 
grandfather combinations as described herein.
    5. The Commission proposes to modify the local television ownership 
rule to allow an entity to own up to two television stations in the 
same DMA if: (1) The digital NLSCs of the stations (as determined by 
Sec.  73.622(e) of the Commission's rules) do not overlap; or (2) at 
least one of the stations is not ranked among the top-four stations in 
the market and at least eight independently owned television stations 
would remain in the DMA following the combination. In calculating the 
number of stations remaining post-merger, only those stations whose 
digital NLSC overlaps with the digital NLSC of at least one of the 
stations in the proposed combination would be considered, which would 
be consistent with the contour overlap provision of the current rule. 
In addition, the Commission proposes to retain the existing failed/
failing station waiver policy. The Commission seeks comment on these 
proposed modifications to the local television ownership rule and ask 
whether there have been any developments since the NPRM that the 
Commission should take into account in the review of the rule. The 
Commission seeks comment on the costs and benefits of the proposed 
local television ownership rule. To the greatest extent possible, 
commenters should quantify the expected costs or benefits of the 
proposed rule and provide detailed support for any actual or estimated 
values provided, including the source of such data and/or the method 
used to calculate reported values.
b. Background
    6. In the NPRM, the Commission proposed to retain the local 
television ownership rule, with one modification. Specifically, the 
NPRM proposed to retain the top-four prohibition, eight-voices test, 
and numerical limits of the existing rule, while proposing to replace 
the Grade B contour overlap provision with a DMA-based approach, under 
which the Commission would prohibit ownership of two stations in the 
same DMA unless at least one of the stations is not rated in the top 
four and at least eight independent voices would remain after the 
transaction. The NPRM also invited comment on whether to adopt a market 
size waiver standard, the impact of multicasting on the local 
television ownership rule, and the impact of the proposed rule on 
minority and female ownership.
c. Discussion
    7. Market. As proposed in the NPRM, the Commission tentatively 
finds that the local television ownership rule continues to be 
necessary to promote competition among broadcast television stations in 
local television viewing markets. Although the Commission believes the 
record in the 2010 Quadrennial Review proceeding supports its view of 
the appropriate parameters for defining the market, the Commission 
seeks comment on whether developments since the NPRM should cause the 
Commission to shift the focus of its analysis.
    8. First, the Commission believes that the video programming market 
remains the relevant market for review of the local television 
ownership rule. The Commission also believes that the video programming 
market is distinct from the radio listening market. While multiple 
broadcast commenters argued in favor of an expansive market definition 
that would include nearly all forms of media, the Commission 
tentatively finds such arguments to be unpersuasive. The Commission has 
previously found that the video programming market is distinct from 
other media markets because consumers do not view non-video 
entertainment options (e.g., listening to music or reading) and non-
delivered video options (e.g., DVDs or movie theaters) as good 
substitutes for watching television, and there is no evidence in the 
current record that would cause the Commission to disturb these 
findings. In addition, the Commission notes the NPRM's tentative 
conclusion that it is not now appropriate to expand the relevant 
product market beyond video programming to include non-video 
information sources of local news and information. This tentative 
conclusion was based on evidence that Internet-only Web sites provide 
only a small amount of local news content and a lack of evidence that 
non-video information sources modify their programming decisions based 
on the actions of local broadcast television stations or vice versa. 
The Commission did not receive significant comment on this specific 
issue in the 2010 proceeding, and the Commission seeks comment on 
whether it should confirm the NPRM's tentative conclusion for the 
reasons discussed therein.
    9. Second, the Commission believes that its analysis regarding the 
local television ownership rule should continue to focus on promoting 
competition among broadcast television stations in local television 
viewing markets. In order to compete effectively

[[Page 29012]]

in its local market, and thereby gain market share, a broadcast 
television station must invest in better programming and provide 
programming tailored to the needs and interests of the local community, 
including local news and public interest programming. By strengthening 
their position in the local market, television broadcasters are better 
able to compete for advertising revenue and retransmission consent 
fees, an increasingly important source of revenue for many stations. 
Viewers in the local market benefit from such competition among 
numerous strong rivals in the form of higher quality programming.
    10. While the Commission is keenly aware of the growing popularity 
of video programming delivered via MVPDs and the Internet, it 
tentatively find that competition from such video programming providers 
is currently of limited relevance for the purposes of its analysis. 
These programming alternatives compete largely in national markets--
cable network programming is generally uniform across all markets, as 
is video programming content available via the Internet--and, unlike 
local broadcast stations, such programming providers are not likely to 
respond to conditions in local markets. Though certain broadcast 
commenters disputed this notion, the Commission tentatively finds their 
arguments to be unsupported by evidence of non-broadcast video 
programmers modifying their programming decisions based on the 
competitive conditions in a particular local market.
    11. In addition, the Commission tentatively finds that broadcast 
television's strong position in the local advertising market supports 
its view that non-broadcast video programmers are not yet meaningful 
substitutes in local television markets. Broadcasters asserted that the 
Commission should expand the relevant market, in part because of 
increased competition for advertising from non-broadcast sources of 
video programming, particularly in the local advertising market. The 
data do not support this claim. From 2008 through 2011, though overall 
local advertising spending was down from its highs in 2005 and 2006, 
local broadcast television's market share actually increased and 
achieved the highest levels since 2004. While the shares of local 
advertising on cable television and the Internet also increased during 
this time period, those gains do not appear to be at the expense of 
broadcast television stations. NAB asserted that the recent growth in 
television station advertising revenue is temporary and not likely to 
``address the structural changes that have taken place in the 
[television] market'' because the predicted 2012 advertising revenues 
for the broadcast television industry are below the levels achieved in 
2006. While advertising revenues for broadcast television stations were 
lower during this period, the Commission believes the evidence does not 
support the conclusion that this was the result of a unique change in 
the television marketplace; instead, the total advertising market for 
all media experienced a significant contraction, which was most likely 
the result of the global financial crisis that impacted nearly all 
markets. Moreover, total station revenue for 2012 was predicted to 
exceed the total station revenue for 2006 and to grow steadily through 
2017. However, the Commission seeks comment on whether any structural 
changes have occurred in the television marketplace and, if so, whether 
to adjust the 2014 Quadrennial Review analysis to account for such 
changes. The Commission seeks comment on whether there have been any 
significant changes since these figures became available.
    12. The Commission believes that broadcast television stations 
continue to play a unique and vital role in local communities that is 
not meaningfully duplicated by non-broadcast sources of video 
programming. In addition to providing viewers with the majority of the 
most popular programming on television, broadcast television stations 
remain the primary source of local news and public interest 
programming. Moreover, millions of U.S. households lack broadband 
access at speeds sufficient to stream or download video programming 
available via the Internet. Accordingly, the Commission tentatively 
finds that the record continues to support a local television ownership 
rule designed to promote competition among broadcast television 
stations. The Commission believes the 2010 Quadrennial Review record 
supports the use of this approach, and it seeks comment on whether this 
market definition should apply for purposes of the 2014 Quadrennial 
Review.
    13. Contour Overlap. The NPRM proposed to eliminate the Grade B 
contour overlap test and rely solely on Nielsen DMAs to determine when 
to apply the local television ownership rule. The NPRM recognized that 
the DMA approach could have a disproportionate impact in certain DMAs 
and sought comment on the impact of such a change. As discussed below, 
the Commission tentatively finds that the public interest is best 
served by retaining the contour-based approach of the previous rule but 
by replacing the analog Grade B contour with the digital NLSC. The 
Commission seeks comment on whether any developments have occurred 
since the NPRM that should cause it to reconsider this proposed 
approach.
    14. The Commission believes that the proposed DMA-only approach 
would unnecessarily expand the reach of the local television ownership 
rule in certain DMAs and thus would be overbroad. Therefore, the 
Commission tentatively declines to adopt that approach. NAB argues that 
relying instead on the digital NLSC, which the Commission has treated 
as the functional equivalent of the Grade B contour, would serve the 
purpose of establishing a trigger that would accurately reflect current 
digital service areas while avoiding any potential disruptive impact, 
and the Commission believes that approach is reasonable. By contrast, 
there is no digital counterpart to a station's analog city grade 
contour. Accordingly, consistent with case law developed after the 
digital transition, the Commission would continue to evaluate all 
future requests for new or continued satellite status on an ad hoc 
basis. In addition, consistent with previous Commission decisions, the 
Commission tentatively finds that retaining a contour-based approach 
would serve the public interest by promoting local television service 
in rural areas. In particular such an approach would continue to allow 
station owners in rural areas to build or purchase an additional 
station in remote portions of the DMA, so long as there is no digital 
NLSC overlap. It is important that the local television ownership rule 
take into account the current digital service area of a station. The 
Commission confirms that the digital NLSC is an accurate measure of a 
station's current service area and thus would be an appropriate 
standard. Thus, under the modified rule proposed in the Further Notice 
of Proposed Rulemaking, the Commission would continue to define the 
geographic dimensions of the local television market by reference to 
DMAs, but the Commission would replace the analog Grade B contour with 
the digital NLSC, such that within a DMA an entity could own or operate 
two stations in a market if the digital NLSCs of those stations did not 
overlap. To the extent that the digital NLSC of two stations in the 
same DMA overlapped, then the stations serve the same area, even if 
there was no analog Grade B contour overlap prior to the digital 
transition, and in that case the combination would be permitted

[[Page 29013]]

only if it satisfied the top-four prohibition and the eight-voices 
test. In the 2002 Biennial Review Order (68 FR 46286, Aug. 5, 2003, FCC 
03-127, rel. July 2, 2003), in which the local television ownership 
rule was relaxed, the Commission eliminated the contour overlap 
provision. However, in recognition of the unique circumstances 
involving stations without Grade B contour overlap, the Commission 
adopted waiver criteria that would permit common ownership if the 
applicant could demonstrate ``that the stations have no Grade B overlap 
and that the stations are not carried by any MVPD to the same 
geographic area.'' The revised rule adopted in the 2002 Biennial Review 
Order was overturned on appeal. The Commission believes its proposal to 
adopt the digital NLSC standard is in the public interest and is 
supported by the record, and it declines to propose alternate possible 
solutions, such as waiver criteria similar to those adopted in the 2002 
Biennial Review Order. However, the Commission invites commenters to 
propose alternate solutions if they object to the Commission's 
approach.
    15. The NPRM described the potential benefits of a DMA-based 
approach, including correlation with DMA-wide carriage of broadcast 
signals pursuant to mandatory carriage requirements and benefits 
similar to those realized by the geographic market definition in the 
radio rule. For the reasons discussed above, however, that approach 
could have a negative impact in certain DMAs. The Commission seeks 
comment on the tentative conclusion that the alternative approach 
proposed in this Further Notice of Proposed Rulemaking would avert the 
negative impact of the DMA-based approach, accurately reflect current 
digital service areas, and appropriately balance the Commission's 
public interest goals.
    16. Grandfathering. The Commission tentatively affirms the NPRM's 
proposal to grandfather existing ownership combinations that would 
exceed the numerical limits under the revised contour approach, though 
it tentatively finds that the sale of such combinations must comply 
with the local television ownership rule then in effect. In addition, 
the Commission proposes that all permanent waivers from the prior rule 
that previously have been granted would continue in effect under the 
new rule, but, like any newly grandfathered combinations, could not be 
transferred/assigned intact unless the combination complies with the 
local television ownership rule in effect at the time of the transfer/
assignment. The Commission seeks comment on whether it should adopt 
this approach in the 2014 quadrennial proceeding.
    17. The Commission tentatively finds that the concerns raised by 
those in favor of permitting grandfathering and the transfer of 
grandfathered combinations would largely be addressed by the proposal 
to retain a contour overlap provision in the local television ownership 
rule and to substitute the digital NLSC for the Grade B contour. The 
contour element of the rule would effectively maintain the status quo 
for most, if not all, owners of duopolies formed as a result of the 
previous Grade B contour overlap provision. Consistent with the 
tentative conclusion in the NPRM, however, the Commission proposes to 
grandfather ownership of existing combinations of television stations, 
if any, that would exceed the ownership limit as a result of the change 
to the digital NLSC test the Commission proposes herein. Even in 
limited circumstances, compulsory divestiture is disruptive to the 
marketplace and is a hardship for individual owners; the Commission 
believes any benefits to its policy goals (including promoting 
ownership diversity) would be outweighed by these countervailing 
equitable considerations.
    18. The Commission proposes, however, to require that the sale of 
any such grandfathered combination comply with the local television 
ownership rule in place at the time the transfer of control or 
assignment application is filed. As stated above, the digital NLSC is 
an accurate measure of a station's digital service area. If the digital 
NLSC of two stations in the same DMA overlap, then the stations serve 
the same area, even if there was no Grade B contour overlap prior to 
the digital transition. Accordingly, requiring that the sale of a 
grandfathered combination comply with the new standard would be 
consistent with the Commission's rationale for adopting the digital 
NLSC-based standard and would not cause hardship by requiring premature 
divestiture. Consistent with the Commission's previous decisions, it 
tentatively finds that the public interest would not be served by 
allowing grandfathered combinations to be freely transferable in 
perpetuity where a combination does not comply with the local 
television ownership rule at the time of transfer/assignment. Under its 
proposed approach, 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. The Commission seeks comment on 
this tentative conclusion.
    19. Numerical Limits. The Commission proposed in the NPRM to retain 
the current numerical limits in the local television ownership rule. 
The Commission seeks comment on whether to adopt that proposal, thereby 
permitting a licensee to own up to two stations (i.e., a duopoly) in a 
market, subject to the other requirements proposed in this Further 
Notice of Proposed Rulemaking.
    20. The Commission seeks comment on its preliminary view that the 
local television marketplace has not changed significantly since the 
NPRM to justify either tightening or loosening the current numerical 
limits of the local television rule. Ownership of a second in-market 
station can create substantial efficiencies, which may allow a local 
broadcast station to invest in programming that meets the needs of its 
local community, such as local news or other public interest 
programming. Notably, the Commission tentatively finds that there is 
substantial evidence in the record that the duopolies permitted subject 
to the restrictions of the current rule have created tangible public 
interest benefits for viewers in local television markets that more 
than offset any potential harms that are associated with common 
ownership. Moreover, as discussed in greater detail in the paragraphs 
below on multicasting, the Commission believes that the ability to 
multicast is not a substitute for common ownership of multiple stations 
and, therefore, would not justify tightening the existing numerical 
limits. The Commission seeks comment on these tentative findings.
    21. Similarly, the Commission does not believe there have been 
sufficient changes in the local television marketplace to justify 
ownership of a third in-market station. The Commission seeks comment on 
this tentative conclusion. The primary ``change'' in the marketplace 
cited by those commenters in favor of loosening the rule is competition 
from non-broadcast alternatives. As discussed above, however, the 
Commission believes the local television ownership rule is designed to 
promote competition among broadcast television stations in local 
television markets, and the Commission has tentatively concluded that 
it is not yet appropriate to consider competition from non-broadcast 
sources in evaluating whether the rule remains necessary. Even if the 
Commission were to consider such competition, Entravision, which 
supported ownership of up to two stations in all markets and up to 
three stations in markets with 18 or more television stations, conceded 
that such

[[Page 29014]]

consolidation is likely to threaten the Commission's competition and 
diversity goals by jeopardizing small and mid-sized broadcasters. To 
combat these harms, Entravision proposed a series of ``behavioral 
regulations'' that the Commission could adopt in tandem with loosening 
the ownership restrictions. The Commission declined to adopt this 
proposal in the 2006 Quadrennial Review proceeding, a decision that was 
upheld in Prometheus II, and the Commission sees no changes in the 
local television marketplace that would warrant reconsideration of the 
Commission's previous decision. The Commission has long applied 
structural local media ownership rules and has previously rejected 
proposals for instituting behavioral rules. The Commission proposes to 
affirm this approach, as it continues to believe that behavioral rules 
are not appropriate substitutes for structural local media ownership 
rules. The Commission seeks comment on this proposal. Without 
significant evidence of the public interest benefits that could result 
from the ownership of three stations in a local market, the Commission 
does not believe that there is adequate justification at this time for 
increasing the numerical limits.
    22. Top-Four Prohibition. The Commission proposes to continue to 
prohibit mergers between two top-four-rated stations in a local market, 
consistent with the tentative conclusion in the NPRM. The Commission 
tentatively finds that the top-four prohibition remains necessary to 
promote competition in the local television marketplace. The Commission 
seeks comment on whether there have been any developments since the 
NPRM that it should consider with regard to this issue.
    23. Consistent with previous Commission decisions, the Commission 
proposes to continue to prohibit mergers involving two of the top-four 
stations in a market because it believe such combinations would be the 
most deleterious to competition. The Commission has previously 
identified potential harms associated with top-four combinations, and 
the Commission found no evidence in the 2010 Quadrennial Review record 
to disturb the Commission's previous findings. Accordingly, the 
Commission continues to believe that top-four combinations would often 
result in a single firm obtaining a significantly larger market share 
than other firms in the market and that such combinations could create 
welfare harms. Top-four combinations have been found to reduce 
incentives for local stations to improve their programming, as once 
strong rivals suddenly have incentives to coordinate their programming 
in order to minimize competition between the commonly owned stations. 
In addition, in general, there remains a significant ``cushion'' of 
audience share points that separates the top-four stations in a market 
from the fifth-ranked station. Accordingly, the Commission tentatively 
finds that the public interest is best served by retaining the top-four 
prohibition. The Commission seeks comment on this tentative conclusion.
    24. The NPRM also sought comment on certain circumstances in which 
a licensee is able to obtain control over two of the top-four stations 
in a market through a transaction or series of transactions, sometimes 
referred to as ``affiliation swaps,'' that do not require prior 
Commission approval. Based on its review of the 2010 Quadrennial Review 
record, the Commission tentatively finds that such transactions should 
be subject to the top-four prohibition because it believes they 
circumvent the intent of the rule and are not in the public interest. 
The Commission seeks comment on whether it should adopt this approach.
    25. In general, national network affiliation is a significant 
driver of a station's audience share. The Commission has previously 
found that, nationally, the Big Four networks (i.e., ABC, CBS, Fox, and 
NBC) are the highest rated networks and that, in general, the national 
audience statistics are reflected in the rankings in the local markets. 
Recent Nielsen data confirm this finding. Accordingly, an affiliation 
swap involving a top-four station and a non-top-four station will 
nearly always result in the non-top-four station becoming a top-four 
station after the swap. Because such affiliation swaps do not involve 
the assignment or transfer of a station license, the transaction is not 
subject to prior Commission approval under Section 310(d) of the 
Communications Act of 1934. Thus, by engaging in an affiliation swap, 
parties can achieve a top-four station combination that would otherwise 
have been prohibited by the Commission's rules.
    26. This fact is evidenced in the Honolulu, Hawaii, DMA, where an 
affiliation swap between a top-four station and a non-top-four 
station--which was commonly owned with a different top-four station in 
the market--was executed. In addition to the affiliation swap, the 
parties swapped certain of the stations' non-network programming and 
the stations' call signs, purportedly to avoid viewer confusion. Thus, 
the stations (though not the licenses) effectively changed hands 
without prior Commission approval--approval that was not technically 
required. Consistent with the Commission's observation above regarding 
the correlation between affiliation with a Big Four network and market 
rank, following the affiliation swap, the non-top-four station became a 
top-four station. By structuring these transactions so as to evade 
Commission review, a single entity was able to acquire control over a 
second top-four station in the market, a result that is prohibited 
under the local television ownership rule.
    27. The Commission tentatively finds that transactions involving 
the sale or swap of network affiliations between in-market stations 
that result in an entity holding an attributable interest in two top-
four stations can be used to evade the top-four prohibition. 
Accordingly, in order to close this loophole, the Commission proposes 
to clarify that such transactions must comply with the top-four 
prohibition at the time the agreement is executed. Specifically, the 
Commission believes an entity should not be permitted to directly or 
indirectly own, operate, or control two television stations in the same 
DMA through the execution of any agreement (or series of agreements) 
involving stations in the same DMA, or any individual or entity with a 
cognizable interest in such stations, in which a station (the new 
affiliate) acquires the network affiliation of another station (the 
previous affiliate), if the change in network affiliations would result 
in the licensee of the new affiliate, or any individual or entity with 
a cognizable interest in the new affiliate, directly or indirectly 
owning, operating, or controlling two of the top-four rated television 
stations in the DMA at the time of the agreement. In addition, the 
Commission proposes that, for purposes of making this determination, 
the new affiliate's post-consummation ranking would be the ranking of 
the previous affiliate at the time the agreement is executed, 
determined in accordance with Sec.  73.3555(b)(1)(i) of the 
Commission's rules. The Commission proposes to find any party that has 
control over two top-four stations in the same DMA as a result of such 
transactions to be in violation of the top-four prohibition and subject 
to enforcement action. Application of this rule would be prospective, 
and parties that acquired control over a second in-market top-four 
station by engaging in such transactions prior to the release date of a 
decision to adopt such a rule would not be subject to divestiture or 
enforcement action.

[[Page 29015]]

Consistent with KHNL/KGMB License Subsidiary, such transactions that 
would not be subject to such a rule could still be considered in the 
context of individual licensing proceedings. All future transactions 
would be required to comply with the Commission's rules then in effect. 
The Commission seeks comment on these proposals. In addition, it seeks 
comment on whether and how station owners are attempting to circumvent 
the top-four prohibition, or any other of the media ownership rules, 
through the invention of similar devices. While the Commission has 
tentatively determined that the present circumstances support 
prospective application of this rule, parties are on notice that 
similar efforts to evade the media ownership rules could be subject to 
enforcement action.
    28. The Commission seeks comment on whether this application of the 
top-four prohibition is consistent with the Commission's policy to 
avoid constraints on commercial activities that are designed to effect 
station improvements. The Commission continues to encourage licensees 
to improve the quality of the programming and operation of their 
stations in ways that are consistent with the Commission's rules and 
policies. Moreover, the Commission does not believe that closing this 
loophole in the top-four prohibition violates the First Amendment. 
Indeed, recent constitutional challenges to the media ownership rules 
have been rejected, and the Commission tentatively finds that this 
application of the top-four prohibition withstands First Amendment 
scrutiny for the same reasons.
    29. While certain commenters argued to the contrary, for the 
reasons discussed herein, acquiring control over a second in-market 
top-four station through the transactions described above is easily 
distinguishable from other, legitimate actions a station may undertake 
to increase ratings at the expense of a competitor. In addition, 
Sinclair cautioned the Commission against interfering in the free 
market negotiation of affiliation agreements--which it asserted occur 
often and for valid business reasons--based upon a single instance 
where the Commission believes an affiliation swap constituted an ``end 
run'' around the top-four prohibition. Contrary to Sinclair's 
assertion, the Commission does not believe that it is necessary, or 
wise, to permit additional parties to evade the top-four prohibition 
before it acts, nor does it believe that this proposal is likely to 
have a significant impact on the negotiation of affiliation agreements. 
Consistent with Sinclair's comments, the Commission believes that the 
negotiation of affiliation agreements typically does not involve 
affiliation swaps and, therefore, would be unaffected by this proposal. 
And while such swaps may not occur often, given the potential of such 
transactions to undermine the local television ownership rule, the 
Commission believes that the application of the top-four prohibition to 
such transactions would be necessary. The Commission does not believe 
there is a reliable marketplace solution that would restrain the use of 
affiliation swaps to evade the top-four prohibition. The Commission 
seeks comment on these views.
    30. Eight-Voices Test. Consistent with the proposal in the NPRM, 
the Commission tentatively concludes that a merger between two in-
market stations with overlapping contours should not be permitted 
unless there would be at least eight independently owned commercial and 
noncommercial television stations remaining in the market post-merger, 
and at least one station is not a top-four station. The Commission 
tentatively finds that the eight-voices test continues to be necessary 
to promote competition in local television markets. The Commission 
seeks comment on these tentative conclusions.
    31. The Commission's view is that the 2010 Quadrennial Review 
record does not reveal sufficient changes in the local television 
marketplace to warrant modification of the eight-voices test at this 
time. Consistent with the Commission's prior position, the Commission 
tentatively finds that, in order to permit common ownership of two in-
market stations with digital NLSC overlap, there should be a minimum of 
eight independently owned and operated television stations in the 
market post-merger. The Commission believes this minimum threshold 
would help ensure robust competition among local television stations in 
the markets where common ownership is permitted under its proposed 
rule, as it would increase the likelihood that each such market would 
be served by stations affiliated with each of the Big Four networks as 
well as at least four independently owned and operated stations 
unaffiliated with these major networks. Indeed, nearly every market 
with eight or more full-power television stations--absent a waiver of 
the local television ownership rule or unique circumstances--is served 
by each of the Big Four networks and at least four independent 
competitors unaffiliated with a Big Four network. Competition among 
these independently owned stations is important, as it serves to 
improve the programming offered both by the major network stations and 
the independent stations, including increased local news and public 
interest programming. The Commission notes that this competition is 
perhaps most valuable during the parts of the day in which local 
broadcast stations do not transmit the programming of affiliated 
broadcast networks. Moreover, because there continues to be a 
significant gap in audience share between the top-four stations in a 
market and the remaining stations in most markets, the Commission 
continues to believe that it is appropriate to retain the eight-voices 
test, which helps to promote at least four independent competitors 
before common ownership is allowed. The Commission seeks comment on the 
tentative conclusion that, in light of this concentration and 
consistent with the 2006 Quadrennial Review Order (73 FR 9481, Feb. 21, 
2008, FCC 07-216, rel. Feb. 4, 2008), it remains prudent to require the 
presence of at least four additional independently owned and operated 
competitors in the market in order to promote competition in the local 
television market before permitting any common ownership in that 
market. The Commission is most interested in learning whether any new 
information has become available since the NPRM that it should take 
into account in considering this issue.
    32. The Commission tentatively finds that it is appropriate to 
include only full-power television stations in the voice count. The 
primary purpose of the rule is to promote competition among broadcast 
television stations in local television viewing markets; therefore, the 
Commission tentatively finds that it would be inappropriate to include 
other types of media when counting voices. The Commission notes that in 
the 2006 Quadrennial Review Order the Commission addressed the Sinclair 
court's criticisms of the eight-voices test, specifically the rationale 
for defining voices differently in the radio-television cross ownership 
rule and the local television ownership rule. The Commission detailed 
its rationale for limiting voices in the television rule to only full-
power television stations, a rationale that was subsequently upheld on 
appeal in Prometheus II, and to which the Commission proposes to 
continue to adhere herein. The Commission seeks comment on its view 
that Sinclair does not compel the Commission to include additional 
voices in the eight-voices test.
    33. Market Size Waivers. The NPRM sought comment on whether the

[[Page 29016]]

Commission should adopt a waiver standard for markets where the rules 
would otherwise limit ownership to a single television station, and, if 
so, how such a waiver standard should be structured. The NPRM sought 
comment also on whether such a market size waiver, which could even 
allow combinations between top-four stations, would promote additional 
local news offerings in small markets that are less able to support 
four local news operations. Based on review of the 2010 Quadrennial 
Review record, the Commission tentatively concludes that a market size 
waiver standard is not necessary. Instead, the Commission tentatively 
concludes that retention of the existing failed/failing station waiver 
policy would serve the public interest and it seeks additional comment 
on whether to relax the waiver criteria or establish additional grounds 
for waiver.
    34. The Commission seeks comment on the tentative conclusion that 
establishing a new market size waiver standard is not needed. Having 
evaluated the various proposed waiver standards proffered by 
commenters, the Commission is concerned that many of the proposed 
waiver criteria would be difficult to monitor or enforce, are not 
rationally related to the ability of each station to compete in the 
local market, and could be manipulated in order to obtain a waiver. 
Ultimately, the Commission predicts that such standards would 
significantly expand the circumstances in which a waiver of the local 
television ownership rule would be granted. The Commission is concerned 
that such relaxation would be inconsistent with the tentative 
conclusion that the public interest is best served by retaining the 
existing television ownership limits. Moreover, the Commission believes 
that the existing waiver standard is not unduly restrictive and that it 
provides appropriate relief in markets of all sizes. Waiver of its 
rules is meant to be exceptional relief, and the Commission tentatively 
finds that the existing waiver criteria strike an appropriate balance 
between enforcing the ownership limits and providing relief from the 
rule on a case-by-case basis.
    35. In addition, the Commission tentatively finds that it is not 
necessary to modify the existing waiver standard in order to promote 
additional local news, as the current policy already indirectly takes 
this into consideration in cases involving failing stations. Indeed, 
parties frequently pledge to continue and/or increase local news 
offerings in order to demonstrate that the proposed transaction would 
produce public interest benefits. The Commission's commitment to 
promoting increased local news remains strong, and the Commission 
believes that the existing waiver policy helps further that goal. The 
Commission seeks comment on whether there is new information since the 
NPRM that would alter its preliminary views on this issue.
    36. The Commission seeks comment on the tentative conclusion that 
maintaining the failed/failing station waiver policy will serve the 
public interest. While it proposes to retain the existing failed/
failing station waiver policy, it acknowledges that some industry 
participants have argued that certain elements of the existing policy 
are too restrictive. Accordingly, the Commission seeks comment on 
potential changes to the policy to address those circumstances. For 
example, are there circumstances in which the Commission should refrain 
from applying the four-percent all-day audience share requirement or 
adopt a higher threshold? If so, what circumstances would justify such 
a change? Are any other changes appropriate? The Commission encourages 
commenters to provide alternative waiver criteria for its 
consideration, including specific justifications for such criteria, as 
well as the potential impact on its policy goals.
    37. Multicasting. The NPRM sought comment on whether the transition 
to digital television, and specifically a station's ability to 
multicast multiple program streams has eliminated the need to permit 
common ownership of two stations in local television markets, as the 
local television ownership rule does. The 2010 Quadrennial Review 
record does not persuade the Commission that multicasting justifies 
imposition of a single-station ownership restriction or other 
tightening of the current ownership limits. The Commission seeks 
comment on whether there have been any developments since the NPRM that 
should cause it to reevaluate this position.
    38. The Commission tentatively concurs with the broadcast 
commenters that, while multicasting has produced public interest 
benefits, the ability to multicast does not justify tightening the 
current numerical limits. Based on evidence in the 2010 Quadrennial 
Review record, broadcasting on a multicast stream does not--at 
present--produce the cost savings and additional revenue streams that 
can be achieved by owning a second in-market station. Therefore, 
tightening the numerical limits might prevent those broadcasters in 
markets where common ownership is permitted under the existing rule 
from achieving the efficiencies and related public interest benefits 
associated with common ownership. Accordingly, the Commission's view 
based on the most recent record is that it is not appropriate to adjust 
the numerical limits as a result of stations' multicasting capability. 
The Commission seeks comment, however, on whether it should reconsider 
its position within the context of the 2014 Quadrennial Review 
proceeding. The Commission notes that it has authorized channel sharing 
by broadcast television stations in connection with the incentive 
auction of broadcast television spectrum and that the statutory 
provision mandating the incentive auction protects the must-carry 
rights of stations that voluntarily relinquish spectrum usage rights in 
order to channel share. The Commission seeks comment on the potential 
impact of this aspect of the incentive auction for purposes of the 
media ownership rules.
    39. Moreover, as discussed above, the Commission tentatively finds 
that the public interest is served by retaining the current numerical 
ownership limits; it believe that doing so would promote competition in 
local television markets. Therefore, as the court noted in Prometheus 
II, even if multicasting did generate cost savings and new revenue 
streams similar to owning a second in-market station--though the 
Commission believes that at present it does not--the Commission is not 
required ``to promulgate a more restrictive rule just because entities 
may gain similar economies of scale and generate new revenue by 
multicasting.'' Indeed, for the reasons discussed herein, the 
Commission proposes not to make such a change, and it seeks comment on 
the potential consequences of such an approach for purposes of the 2014 
Quadrennial Review.
    40. The NPRM sought comment also on the impact of dual network 
affiliations on local markets and whether the Commission should limit 
the ability of stations to utilize their multicast capacity to form 
dual affiliations with certain networks. As discussed below, the 
Commission proposes to decline to regulate such dual affiliations in 
the context of the media ownership rules at this time, and it seeks 
comment on this proposal. The Commission seeks comment on multicasting 
issues in general and, in particular, on any potential impact on the 
incentive auction.
    41. The Commission does not believe the 2010 Quadrennial Review 
record supports regulation within the context of its media ownership 
rules to restrict the use of multicast capability to form dual 
affiliations. The commenters were primarily concerned with such dual

[[Page 29017]]

affiliations involving two Big Four networks. Evidence available during 
the 2010 proceeding indicates that dual affiliations involving two Big 
Four networks via multicasting are generally--if not exclusively--
limited to smaller markets with an insufficient number of full-power 
commercial television stations to accommodate each Big Four network or 
where other unique marketplace factors are responsible for creating the 
dual affiliation arrangements. BIA data from 2012 indicate that there 
are approximately 40 instances of dual affiliation via multicasting 
involving multiple Big Four networks. Each market in which the 
Commission identified such dual affiliation was outside the top-100 
ranked DMAs, with the vast majority of such markets--approximately 73 
percent--containing three or fewer full-power commercial television 
stations. These findings are consistent with the data and estimates 
provided by cable commenters, as a significant majority of the dual 
affiliations identified in these comments involved a Big Four network 
and a ``Little Two'' network (i.e., The CW or MyNetworkTV). The 
Commission tentatively finds that Big Four/Little Two dual affiliations 
via multicasting, regardless of market rank, do not raise sufficient 
competitive concerns to justify an amendment to the local television 
ownership rule. While there may be potential harms that result from 
certain dual network affiliations, the Commission tentatively agrees 
with broadcast commenters that the potential benefits of dual 
affiliation via multicasting in these smaller markets, including dual 
affiliation with more than one Big Four network, outweigh any potential 
harms to the Commission's policy goals. Indeed, the Commission believes 
that a significant benefit of the multicast capability is the ability 
to bring more local network affiliates to smaller markets, thereby 
increasing access to popular network programming and local news and 
public interest programming tailored to the specific needs and 
interests of the local community. Based on the 2010 Quadrennial Review 
record, it appears that marketplace incentives operate to limit the 
occurrence of dual affiliations via multicasting involving multiple Big 
Four networks to these smaller markets. For these reasons, the 
Commission tentatively declines to regulate dual affiliations at this 
time, and the Commission seeks comment on this approach within the 
context of any marketplace changes that may have occurred since the 
NPRM.
    42. Minority and Female Ownership. The Commission sought comment on 
the impact of the proposed local television ownership rule on minority 
and female ownership opportunities, as well as the impact of diverse 
television ownership on viewpoint diversity. The Commission tentatively 
finds that the local television ownership rule proposed in this Further 
Notice of Proposed Rulemaking is consistent with its goal to promote 
minority and female ownership of broadcast television stations. The 
Commission seeks comment on this tentative conclusion.
    43. As discussed above, the Commission tentatively finds that the 
2010 Quadrennial Review record demonstrates that the existing local 
television ownership rule remains necessary to promote competition 
among broadcast television stations in local markets. Moreover, the 
Commission believes the competition-based rule would also indirectly 
advance its viewpoint diversity goal by helping to ensure the presence 
of independently owned broadcast television stations in the local 
market, thereby increasing the likelihood of a variety of viewpoints. 
In addition, while the Commission does not propose to retain the rule 
with the specific purpose of preserving the current levels of minority 
and female ownership, the Commission tentatively finds that retaining 
the existing rule would effectively address the concerns of those 
commenters who suggested that additional consolidation would have a 
negative impact on minority and female ownership of broadcast 
television stations. The Commission notes also that it proposes to 
retain without modification the current failed/failing station waiver 
policy, including the out-of-market-buyer solicitation requirement--the 
failed station solicitation rule (FSSR)--which promotes new entry in a 
market by ensuring that out-of-market entities interested in purchasing 
a station, including minorities and women, will have an opportunity to 
bid. The Commission seeks comment on how any developments since the 
NPRM may affect these tentative findings. In addition, the Commission 
seeks comment on whether the incentive auction has the potential to 
impact minority and female broadcast ownership and whether any such 
impacts should affect the 2014 Quadrennial Review.
2. Local Radio Ownership Rule
a. Introduction
    44. Based on the 2010 Quadrennial Review record, the Commission 
tentatively finds that the current local radio ownership rule remains 
necessary in the public interest and should be retained without 
modification. The Commission believes that the rule is necessary to 
promote competition. In addition, the Commission believes that the 
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.'' Similarly, the Commission tentatively finds 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 tentatively finds also that the local radio ownership rule 
is consistent with its goal of promoting minority and female ownership 
of broadcast television stations. Finally, the Commission believes that 
these benefits outweigh any burdens that may result from its proposal 
to retain the rule without modification. The Commission seeks comment 
on these tentative conclusions.
    45. In accordance with these tentative conclusions, the Commission 
proposes that an entity may continue 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. The Commission seeks comment on the costs and benefits of 
its proposal to retain the existing local radio ownership rule. To the 
greatest extent possible, commenters should quantify the expected costs 
or benefits of retaining the rule and provide detailed support for any 
actual or estimated values provided, including the source of such data 
and/or the

[[Page 29018]]

method used to calculate reported values.
b. Background
    46. In the NPRM, the Commission proposed to retain the local radio 
ownership rule without modification, including the AM/FM subcaps, and 
sought comment on this tentative conclusion. The Commission also sought 
comment on whether and, if so, how, to incorporate new audio platforms 
into the rule and on the impact of such platforms on the broadcast 
radio industry. In addition, the NPRM sought comment on whether to 
adopt a specific waiver standard for the local radio ownership rule and 
on how the proposed rule would affect minority and female ownership 
opportunities.
c. Discussion
    47. Market. In the NPRM, the Commission tentatively concluded that 
the relevant market for review of the local radio ownership rule is the 
radio listening market and that it is not appropriate, at this time, to 
expand that market to include non-broadcast sources of audio 
programming. Based on the Commission's review of the 2010 Quadrennial 
Review record, it believes this approach is appropriate, and it seeks 
comment on whether it should maintain this market definition.
    48. The Commission tentatively finds that, for purposes of the 
Commission's ownership rules, non-broadcast sources of audio 
programming are not yet meaningful substitutes for broadcast radio 
stations with respect to either listeners or advertisers. While 
alternate platforms such as satellite radio and Internet-delivered 
audio are growing in popularity, broadcast radio remains the dominant 
radio technology. In 2012, 92 percent of Americans age 12 or older 
listened to broadcast radio, a figure that has remained essentially 
constant over the last decade. Satellite radio still serves only a 
small portion of the population, even though its subscription rates 
continue to climb. And though recent data suggest that a significant 
portion of adult U.S. broadband households (42 percent) listen to 
Internet-delivered audio programming, the Commission notes that 
millions of U.S. households continue to lack broadband connections. In 
addition, only 14 percent of Internet radio listeners listen in their 
cars, where most broadcast radio listening occurs. Thus, the Commission 
tentatively concludes that Internet-delivered audio programming is not 
yet a meaningful substitute for broadcast radio listening for most 
listeners. The Commission seeks comment on this tentative conclusion 
and invites commenters to provide any more recent relevant information 
and data.
    49. The Commission believes, moreover, that satellite radio and 
content delivered via the Internet generally are national platforms 
that are not likely to respond to competitive conditions in local 
markets. Satellite radio content is uniform nationally, and there is no 
evidence in the record that content decisions are made based on 
competitive conditions in local markets. Similarly, there is no 
evidence in the record that Internet radio stations and other Internet-
delivered audio programming providers (excluding streams of local 
broadcast radio stations) modify their programming decisions to respond 
to competitive conditions in local markets. Ultimately, the Commission 
tentatively finds that only local broadcasters provide programming 
based on the unique characteristics of their respective local markets. 
As the Commission has stated previously, it is the competition between 
such rivals that most benefits listeners in a local market and serves 
the public interest--competition that is currently lacking from non-
broadcast audio alternatives. Therefore, the Commission proposes to 
continue to limit the relevant market for the local radio ownership 
rule to broadcast radio stations in local radio listening markets, and 
it seeks comment on this proposal.
    50. In addition, broadcast radio's consistently strong position in 
both local and national advertising markets appears to support the 
Commission's tentative finding that non-broadcast sources of audio 
programming are not significant competitors at this time. Broadcasters 
asserted that the Commission should expand the relevant market for 
review, in part, because of competition for advertising revenue from 
non-broadcast audio sources; however, recent advertising data do not 
support this contention. From 2008 through 2011, broadcast radio's 
local advertising revenue market share increased each year, reaching 
16.6 percent in 2011. In the national advertising market during that 
same time period, broadcast radio's market share remained stable 
(between 1.8 and 2.0 percent). By contrast, satellite radio's 
advertising revenue market share in both the local and national markets 
did not exceed 0.1 percent. And while ``Internet advertising'' has seen 
significant gains in advertising revenue market share both locally and 
nationally, evidence suggests that the revenue is not attributable in 
any significant portion to providers of Internet-delivered audio 
programming. For example, in 2011, online-only audio programming 
providers were estimated to have earned approximately $295 million in 
advertising revenue. By contrast, in 2011, the total broadcast radio 
advertising revenue market was projected at approximately $17.8 
billion. The Commission notes that NAB conceded that local radio 
broadcasting revenues have improved in recent years, but it argued that 
there has been a ``structural change in the audio marketplace'' because 
overall revenues were below levels earned in 2005 and 2006 and are not 
expected to reach those levels until 2015. While total advertising 
revenue for local radio stations did decline from 2006-2009, with the 
most significant declines in 2008 and 2009, the evidence does not 
support the conclusion that this was a result of a unique change in the 
audio marketplace; instead, the total advertising market for all media 
experienced a significant contraction that was most likely the result 
of the global financial crisis that impacted nearly all markets. 
Moreover, overall advertising revenues for the broadcast radio industry 
have steadily improved since 2010 and are predicted to grow through 
2020. However, the Commission seeks comment on whether any structural 
changes have occurred in the audio marketplace and, if so, whether to 
adjust the 2014 Quadrennial Review analysis to account for such 
changes. The Commission seeks comment on whether there have been any 
significant changes since these figures became available.
    51. Market Size Tiers. The NPRM proposed to retain the current 
approach of setting numerical limits based on market size tiers and 
determining the market size based on the number of commercial and 
noncommercial radio stations in the local market. The Commission 
tentatively concludes that it should adopt these proposals and seek 
comment on this approach.
    52. The Commission tentatively declines to modify the current 
rule's method of calculating the number of stations a licensee owns. 
The Commission seeks comment on Mid-West Family's assessment that the 
Prometheus I decision mandates an adjustment, in light of the court's 
Prometheus II decision upholding the existing rule's methodology. The 
Commission's preliminary view is that adopting Mid-West Family's 
approach would permit potentially significant consolidation in local 
radio markets, which would be inconsistent with the rationale for the 
Commission's proposal, discussed in greater detail below, to

[[Page 29019]]

retain the existing numerical ownership limits. Finally, the Commission 
proposes to reject Mt. Wilson's proposal. As discussed in greater 
detail below in the context of the AM/FM subcaps, digital radio is 
still a growing technology; there is no mandate requiring its adoption; 
and it has not yet achieved widespread deployment or consumer 
acceptance. Therefore, the Commission tentatively finds that it is 
premature to amend its local radio ownership rule as a result of 
digital technology, and it seeks comment on this approach.
    53. Numerical Limits. The NPRM proposed to retain the existing 
numerical limits. In addition, the NPRM sought comment on Clear 
Channel's proposal to allow increased ownership in larger markets by 
creating additional tiers. Clear Channel suggested 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 in the 
number of stations that a single entity may own in markets with 65 or 
more stations. No party provided comments on this proposal and, as 
discussed below, the Commission tentatively finds that the record 
supports retaining the existing numerical limits (i.e., the existing 
number of tiers and the numerical limits associated with each); 
therefore, it tentatively declines to adopt the new ownership tiers 
proposed by Clear Channel. As discussed above, many commenters in the 
2010 Quadrennial Review proceeding supported the Commission's proposal 
to retain its existing limits, while other commenters argued in favor 
of loosening or tightening the existing limits. However, no commenters 
proposed specific numerical limits to replace the existing limits. For 
the reasons discussed below, the Commission proposes to adopt the 
tentative conclusion in the NPRM to retain the existing numerical 
ownership limits for each existing market size tier.
    54. In the 2006 Quadrennial Review Order, the Commission rejected 
calls to relax the numerical ownership limits, finding instead that 
retaining the existing limits was necessary to protect against 
excessive market concentration. The Commission noted that, following 
the relaxation of the local radio ownership limits by Congress in the 
1996 Act, there had been substantial consolidation of radio ownership 
both nationally and locally. Evidence in the record demonstrated that, 
in local markets, the largest firms often dominated the market in terms 
of audience and revenue share. The Commission ultimately concluded not 
only that the existing limits were not unduly restrictive, but also 
that permitting additional consolidation would not be in the public 
interest. The Prometheus II court upheld the Commission's decision.
    55. The Commission determined also in the 2006 Quadrennial Review 
Order that tightening the radio ownership limits was not justified 
based on the record. The Commission held that tightening the ownership 
limits would be inconsistent with Congress's decision to relax the 
limits in the 1996 Act and would ignore the financial stability that 
consolidation brought to the radio industry. In addition, the 
Commission determined that tightening the rule would require 
significant divestitures that would disrupt the radio marketplace and 
could undermine the ability of local stations to provide quality 
programming to their local markets. While acknowledging that 
grandfathering was an option to avoid the disruptive impact of 
divestitures, the Commission determined that grandfathering in this 
instance would not be in the public interest.
    56. Based on the 2010 Quadrennial Review record, the Commission 
tentatively finds that the competitive conditions in the radio 
marketplace that supported the Commission's decision to retain the 
existing numerical limits in the 2006 Quadrennial Review Order are 
essentially unchanged. Evidence from 2012 shows that in local markets, 
the largest commercial firms continue to enjoy substantial advantages 
in revenue share--on average, the largest firm in each Arbitron Metro 
market has a 45 percent share of the market's total radio advertising 
revenue, with the largest two firms accounting for 73 percent of the 
revenue. In more than a third of all Arbitron Metro markets, the top 
two commercial station owners control at least 80 percent of the radio 
advertising revenue. With respect to ratings, the top-four firms 
continue to dominate audience share. Therefore, the Commission does not 
believe the public interest would be served by relaxing the existing 
numerical limits. The Commission seeks comment on whether there are any 
more recent data that point toward a different conclusion.
    57. The Commission notes also that the record in the 2010 
Quadrennial Review proceeding does not reflect changes in the 
marketplace that warrant reconsideration of the Commission's previous 
decision not to make the limits more restrictive, as some commenters 
recommended. The Commission believes that tightening the restrictions 
would disregard the previously identified benefits of consolidation in 
the radio industry and would be inconsistent with the 1996 Act. 
Further, tightening the rule would require divestitures that the 
Commission believes would be disruptive to the radio industry and would 
upset the settled expectations of individual owners. The Commission 
seeks comment on whether any benefits derived from tightening the 
limits would outweigh these countervailing considerations. In addition, 
the Commission seeks comment on its continued belief that, for the 
reasons stated in the 2006 Quadrennial Review Order, tightening the 
limits while grandfathering existing combinations would not be in the 
public interest and should be avoided.
    58. Clarification of Application of Local Radio Ownership Rule. In 
the 2002 Biennial Review Order, the Commission adopted the current 
standard of using Arbitron Metro areas, where available, for the 
application of the numerical radio ownership limits. At that time, the 
Commission also adopted certain procedures and safeguards designed to 
guide the implementation of the revised local radio ownership rule and 
to deter parties from attempting to circumvent the rule through the 
manipulation of Arbitron market definitions. Years of experience 
applying the current approach suggest certain aspects of the current 
standard that the Commission believes merit clarification or further 
action to fulfill the intent of the 2002 Biennial Review Order.
    59. Multiple parties raised other issues in the 2010 Quadrennial 
Review proceeding that the Commission tentatively declines to address 
specifically herein. Mid-West Family requested changes to the 
grandfathering rules regarding transfers of control due to death or 
other departure of shareholders/partners of closely held businesses, 
asserting that such transfers of control should be treated the same as 
transfers that occur pursuant to a will or intestacy. In addition, UCC 
et al. argued that the Commission should consider reversing its 
decision in the 2002 Biennial Review Order to grandfather certain radio 
station combinations, particularly in light of the elimination of the 
eligible entity exception, which they asserted could present ownership 
opportunities for minorities and women. By contrast, Frandsen argued 
that the Commission should permit the sale of grandfathered clusters to 
any party. The Commission tentatively declines at this time to address 
the issues raised by Mid-West Family, UCC et al., and Frandsen. As the 
Commission has proposed to retain the existing

[[Page 29020]]

numerical limits, it sees no reason at this time to reverse or expand 
the grandfathering policies that apply to existing combinations. The 
Commission has previously found Mid-West Family's requested relief to 
be outside the scope of the quadrennial review proceeding. Moreover, as 
discussed herein, the Commission has proposed to reinstate the eligible 
entity exception.
    60. The 2002 Biennial Review Order prohibits a party from receiving 
the benefit of a change in Arbitron Metro boundaries or ``home'' market 
designation unless that change has been in place for at least two years 
(or, in the case of a ``home'' designation change, the station's 
community of license is within the Metro). The Commission does not 
apply the two-year waiting period to Arbitron Metro changes resulting 
from a Commission-approved change in community of license to an area 
outside the Metro's boundaries. The Commission proposes to clarify that 
the exception to the waiting period for Commission-approved changes 
applies only where the community of license change also involves the 
physical relocation of the station facilities to a site outside the 
relevant Arbitron Metro market boundaries. Otherwise, the licensee of a 
station currently located in an Arbitron Metro could use the exception 
to reduce the number of its stations listed as ``home'' to that Metro, 
without triggering the two-year waiting period and without any change 
in physical coverage or market competition, merely by specifying a new 
community of license located outside the Metro. Thus, this 
clarification safeguards the local radio ownership limits from 
manipulation based on Arbitron market definition. The Commission seeks 
comment on this proposed clarification.
    61. Note 4 to Sec.  73.3555 of the Commission's rules (Note 4) 
grandfathers existing station combinations that do not comply with the 
numerical ownership limits of Sec.  73.3555(a). Certain circumstances, 
however, require applicants to come into compliance with the numerical 
ownership limits despite the fact that the relevant station may have 
been part of an existing grandfathered cluster. One such circumstance 
is a community of license change, which occasionally can lead to 
difficulty in the case where an applicant with a grandfathered cluster 
of stations seeks to move a station's community of license outside the 
relevant Arbitron Metro. Given that the Commission relies on BIA for 
market designations, such an applicant may be prevented from 
demonstrating compliance with the multiple ownership limits because the 
station proposing to change its community will continue to be listed by 
BIA as ``home'' to the Metro until the community of license change has 
taken place. To resolve this practical issue, the Commission 
tentatively proposes to allow a temporary waiver of the radio multiple 
ownership limits for three months in this limited instance to allow BIA 
sufficient time to change the affected station's ``home'' designation 
following a community of license relocation. The Commission also 
proposes to exempt from the requirements of Note 4 ``intra-Metro'' 
community of license changes--from one community to another within the 
same Arbitron Metro. The Commission tentatively finds that, in the 
majority of cases, such a move will have little or no impact on the 
state of competition within the local market. The Commission seeks 
comment on these proposed adjustments to the operation of Note 4.
    62. In its comments in the 2010 Quadrennial Review proceeding, ARSO 
renewed its longstanding request that the Commission redefine local 
radio markets for Puerto Rico. ARSO argues that Arbitron's definition 
of the entire island of Puerto Rico as a single Arbitron Metro market 
does not accurately reflect market and geographic realities, which 
prevent stations from competing island-wide. ARSO requests that the 
Commission: (1) redefine the local radio markets in Puerto Rico using 
the eight Metropolitan Statistical Areas defined by the Office of 
Management and Budget (OMB); or (2) redefine the local radio markets 
using the three Combined Statistical Areas defined by OMB; or (3) treat 
Puerto Rico as a non-Arbitron Metro area and redefine its local markets 
using contour-overlap methodology. The Commission has consistently 
waived the Arbitron Metro definition for applicants in Puerto Rico and 
employed the contour-overlap methodology in the course of implementing 
the 2002 Biennial Review Order. The Commission has previously stated 
that it would address ARSO's request for relief in a future proceeding. 
The Commission seeks comment on ARSO's suggestions and on the 
effectiveness of the Commission's prior waivers of the definition in 
this context.
    63. AM/FM Subcaps. The NPRM proposed to retain the existing AM/FM 
subcaps, finding that the rationales for doing so set forth in the 2006 
Quadrennial Review Order were still valid, namely to promote new entry 
and to account for the technological and marketplace differences 
between AM and FM stations and thereby promote competition. In 
addition, the NPRM sought comment on the impact of the digital radio 
transition on the AM/FM subcaps, as well as issues regarding the 
aggregation of multiple AM stations to provide signal coverage in large 
geographic areas or in areas with mountainous terrain. Consistent with 
the proposal in the NPRM, the Commission tentatively finds that there 
have not been significant changes in the broadcast radio marketplace 
with respect to the rationale for maintaining the AM/FM subcaps since 
the conclusion of the 2006 Quadrennial Review proceeding, and it 
proposes to retain the existing AM/FM subcaps for the reasons set forth 
in the 2006 Quadrennial Review Order. The Commission seeks comment on 
this approach.
    64. The Commission tentatively agrees with the commenters in the 
2010 Quadrennial Review proceeding that supported retention of the AM 
subcaps in order to promote new entry. Consistent with Commission 
precedent, the Commission believes that broadcast radio, in general, 
continues to be a more likely avenue for new entry in the media 
marketplace--including entry by small businesses and entities seeking 
to serve niche audiences--as a result of radio's ability to more easily 
reach certain demographic groups and the relative affordability of 
radio stations compared to other mass media. AM stations are generally 
the least expensive option for entry into the radio market, often by a 
significant margin, and therefore permit new entry for far less capital 
investment than is required to purchase an FM station. While some 
commenters suggested that eliminating the subcaps could result in 
divestiture of properties that could be acquired by new entrants, the 
Commission tentatively finds that this speculative rationale is not 
persuasive. Therefore, consistent with Commission precedent, it 
believes that the public interest is best served by retaining the 
existing AM subcaps, which would continue to further competition, and 
possibly also viewpoint diversity, by promoting new entry. The 
Commission seeks comment on this issue and invites commenters to 
provide any new relevant information that has become available since 
the NPRM.
    65. In addition, the Commission tentatively finds that there 
continue to be technical and marketplace differences between AM and FM 
stations that justify retention of both the AM and FM subcaps in order 
to promote competition in local radio markets. As the Commission has 
noted previously, FM stations enjoy unique

[[Page 29021]]

technical advantages over AM stations, such as increased bandwidth and 
superior audio signal fidelity. In addition, 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. These technological differences often, but not 
always, result in greater listenership and revenues for FM stations.
    66. While the Commission has previously stated that digital radio 
technology may help AM stations to level the playing field with FM 
stations, it tentatively finds that this is not yet the case. 
Deployment of digital radio technology for both AM and FM stations is 
limited and has not changed significantly in recent years. In addition, 
the Commission believes it is important to consider consumer adoption 
when evaluating the impact of digital radio on the technological and 
marketplace differences between AM and FM stations. AM stations will 
not be able to realize the potential competitive benefits of 
transitioning to digital if listeners are largely unable to receive the 
digital broadcasts. Recent digital radio deployment data suggest that 
FM stations may actually be increasing the technological divide through 
greater adoption rates of digital radio technology. Furthermore, 
consumers have been slow to adopt radios capable of receiving digital 
signals, though consumer awareness of the technology is relatively high 
and there are efforts to increase the availability of such radios, 
particularly as standard or optional equipment in many new car models. 
The Commission proposes to continue to monitor the impact of the 
digital radio transition in future media ownership proceedings. It 
seeks comment on this approach.
    67. Furthermore, the Commission tentatively finds that the recent 
changes to 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'' have not yet 
significantly impacted the technological and marketplace differences 
between AM and FM stations. While this change has been beneficial for 
many AM stations, many more AM stations have not availed themselves of 
the opportunity and/or lack the ability to do so. Consequently, the 
Commission believes that FM stations generally continue to enjoy 
significant advantages over AM stations. The Commission proposes to 
continue to monitor the impact of this change in future media ownership 
proceedings, and it seeks comment on this approach. The Commission has 
recently initiated a proceeding to explore ways to revitalize the AM 
band. Similarly, the Commission proposes to monitor that proceeding for 
any future impact on the AM marketplace that may warrant consideration 
in its media ownership proceedings. The Commission seeks comment on any 
present implications of these revitalization efforts for the 2014 
Quadrennial Review.
    68. Finally, while the technological and marketplace differences 
between AM and FM stations generally benefit FM stations, and thus 
support retention of the FM subcaps, there continue to be many markets 
in which AM stations are ``significant radio voices.'' For example, a 
study provided by Clear Channel found that throughout the 300 Arbitron 
Metro markets, there are 187 a.m. stations ranked in the top five in 
terms of all-day audience share. And according to NAB, AM stations are 
among the top revenue earners in some of the largest radio markets 
(e.g., New York, Chicago, and Los Angeles). Therefore, the Commission 
tentatively finds that retention of the existing AM subcaps is 
necessary to prevent a single station owner from acquiring excessive 
market power through concentration of ownership of AM stations in 
markets in which AM stations are significant radio voices.
    69. In addition, as discussed above, the Commission tentatively 
concludes that it is not in the public interest to tighten the 
numerical ownership limits; therefore, the Commission sees no need to 
reassess the subcaps associated with each numerical tier, as proposed 
by Mt. Wilson. Indeed, tightening the subcaps absent a concurrent 
tightening of the numerical ownership limits would result in an 
internal inconsistency in the rule, as an entity would be unable to own 
all the stations otherwise permitted under certain numerical tiers. For 
example, in markets with 30-44 stations, an entity currently may own up 
to seven stations, provided that no more than four of the stations are 
in the same service. If the subcap was tightened to three stations in 
the same service, an entity could then only own up to six stations, 
even though the rule's premise is that the public interest is best 
served by permitting ownership of up to seven stations in this 
particular market. The Commission seeks comment on whether there is any 
reason the Commission should adopt different subcaps despite this 
potential inconsistency.
    70. Market Size Waivers. Though the NPRM sought comment on whether 
to adopt a specific waiver standard, no commenter proposed such a 
standard in the 2010 Quadrennial Review proceeding. The Commission 
tentatively declines to adopt a specific waiver standard for the local 
radio ownership rule. The Commission seeks comment on whether it is 
sufficient that, consistent with Commission precedent, parties that 
wish to seek a waiver of the local radio ownership rule may do so 
pursuant to the general waiver standard under Section 1.3 of the 
Commission's rules.
    71. Minority and Female Ownership. The Commission sought comment on 
how the radio rule affects minority and female ownership opportunities, 
including specific comment on the results of Media Ownership Study 7, 
which analyzes the relationship between ownership structure and the 
provision of radio programming targeted to African-American and 
Hispanic audiences. The Commission tentatively finds that the radio 
ownership rule proposed in this Further Notice of Proposed Rulemaking 
is consistent with the goal to promote minority and female ownership of 
broadcast radio stations. The Commission seeks comment on this 
tentative conclusion.
    72. As noted above, the Commission tentatively finds that retaining 
the existing competition-based numerical limits would indirectly 
promote its viewpoint diversity goal, in part by preserving ownership 
opportunities for new entrants, including minority- and female-owned 
businesses. Moreover, part of the rationale for the proposal to retain 
the AM/FM subcaps is to promote new entry, particularly in the AM band, 
which has historically provided low-cost ownership opportunities for 
new entrants, including minorities and women.
    73. The Commission tentatively declines to tighten the local radio 
rule's ownership limits in order to promote increased minority and 
female ownership, as some recommend. While the Commission remains 
committed to promoting minority and female ownership, it is one of 
many--sometimes competing--goals that the Commission must balance when 
setting the numerical ownership limits. As discussed above, the 
Commission believes that tightening the local radio rule's ownership 
limits would ignore the benefits of consolidation in the radio industry 
and therefore be inconsistent with the 1996 Act. Furthermore, it 
believes that tightening the local radio rule would require 
divestitures that would be disruptive to the radio industry. In 
addition, while the Commission does not propose to retain the rule 
specifically to preserve the current levels of minority and female

[[Page 29022]]

ownership, it tentatively finds that retaining the existing rule 
effectively would address the concerns of those commenters who suggest 
that additional consolidation would have a negative impact on minority 
and female ownership of broadcast radio stations. Ultimately, the 
Commission tentatively finds that, based on the record in the 2010 
Quadrennial Review proceeding, the current competition-based limits 
reflect an appropriate balance of its policy goals and that retaining 
these limits would serve the public interest and simultaneously promote 
viewpoint diversity. The Commission seeks comment on these tentative 
conclusions and invites commenters to provide any evidence bearing on 
this issue that has become available since the NPRM.
3. Newspaper/Broadcast Cross-Ownership Rule
a. Introduction
    74. Since 1975, the newspaper/broadcast cross-ownership rule (NBCO 
rule) has prohibited common ownership of a daily newspaper and a full-
power broadcast station (AM, FM, or TV) if the station's service 
contour encompasses the newspaper's city of publication. This absolute 
ban on newspaper/broadcast cross-ownership remains in effect today 
despite the Commission's attempts over the last decade to modify the 
restriction. Most recently, in the 2006 Quadrennial Review Order, the 
Commission adopted a revised standard whereby waiver requests for 
certain mergers in the top 20 Nielsen DMAs were granted a favorable 
presumption. The Third Circuit, however, vacated and remanded the 
revisions on procedural grounds, finding that the Commission had failed 
to provide adequate public notice of its proposed rule pursuant to the 
APA. Although the Court in Prometheus I affirmed the Commission's 
conclusion that an absolute ban is not necessary, the Court in 
Prometheus II did not reach the Commission's substantive modifications 
to the NBCO rule.
    75. The Commission continues to believe that some restriction on 
newspaper/broadcast cross-ownership is necessary to protect and promote 
viewpoint diversity in local markets. The Commission seeks comment on 
that tentative conclusion. This view is consistent with the 
Commission's longstanding rationale for the NBCO rule. As the 
Commission recognized in the 2002 Biennial Review Order, ``[a] diverse 
and robust marketplace of ideas is the foundation of our democracy.'' 
The Supreme Court has recognized the importance of the Commission's 
role in promoting viewpoint diversity, calling it a ``basic tenet of 
national communications policy.''
    76. As discussed below, daily newspapers and local television 
stations (and their affiliated Web sites) continue to be the dominant 
providers of local news and information to which consumers turn. 
Evidence in the 2010 Quadrennial Review proceeding does not suggest 
that the Internet, for all its ability to make infinite sources of 
information immediately and globally accessible, has yet tilted that 
balance. Thus, the ``diverse and antagonistic sources'' that the NBCO 
rule historically has protected--daily newspapers and local television 
stations--are still the primary outlets of local news and information 
that consumers use. Comments in the current record touting the localism 
benefits of newspaper/broadcast cross-ownership or claiming a 
competitive need for traditional media to achieve economies of scale in 
today's marketplace, while providing a fuller understanding of the 
newsgathering efficiencies of cross-owned properties and the current 
financial challenges facing traditional media, were not substantially 
different from those made in previous reviews, and the Commission does 
not believe they diminish the viewpoint diversity rationale for the 
rule. Moreover, the efficiencies that may be gained from newspaper/
broadcast combinations do not necessarily lead to gains in localism. As 
explained below, the Commission seeks comment on the extent to which 
this dominance of daily newspapers and local televisions stations in 
the provision of local news and information persists today.
    77. However, the Commission found in previous reviews that the 
nearly 40-year-old blanket prohibition on newspaper/broadcast cross-
ownership is overly broad, and the Third Circuit upheld those findings. 
It is possible that some newspaper/broadcast combinations could be 
allowed without unduly harming viewpoint diversity. To that end, the 
Commission seeks comment on whether the prohibition on newspaper/radio 
combinations should be lifted. The Commission asks what impact such a 
modification would have on viewpoint diversity in local markets. 
Research shows that most radio stations do not produce significant 
amounts of local news and that most consumers do not rely on radio 
stations as their primary source of local news. Given that the 
newspaper/television restriction has always been the crux of the NBCO 
rule, the Commission seeks comment regarding the added value of the 
rule's newspaper/radio component. The Commission seeks comment, 
therefore, on whether there is sufficient justification under the legal 
standards of Section 202(h) for continuing to restrict newspaper/radio 
combinations. The Commission seeks comment also on the costs and 
benefits associated with retaining or eliminating the restriction on 
newspaper/radio combinations. To the greatest extent possible, 
commenters should quantify the expected costs or benefits of the rule 
and any alternatives and provide detailed support for any actual or 
estimated values provided, including the source of such data and/or the 
method used to calculate reported values.
    78. The Commission invites comment also on whether and in what way 
it should modify the newspaper/television cross-ownership restriction. 
Although further comment is welcome, the Commission is disinclined to 
impose a bright-line rule permitting combinations in certain 
circumstances. Instead the Commission seeks comment on approaches that 
would maintain the ban on newspaper/television combinations in all 
markets but that would allow applicants the opportunity to seek 
approval of particular transactions. The Commission could consider any 
waiver requests on a purely case-by-case basis, assessing each request 
independently and considering the totality of the circumstances each 
proposed transaction presents, including all asserted and potential 
likely public interest implications of the specific proposed 
combination. The Commission seeks comment on this approach, including 
the costs and benefits associated with a pure case-by-case review of 
waiver applications. To the greatest extent possible, commenters should 
quantify the expected costs or benefits of this proposal and any 
alternatives and provide detailed support for any actual or estimated 
values provided, including the source of such data and/or the method 
used to calculate reported values.
    79. The Commission also invites further comment on a case-by-case 
waiver approach that would include presumptions that favor or disfavor 
the grant of waiver requests in accordance with certain prescribed 
guidelines. This approach would build on proposals in the NPRM to 
modify the vacated 2006 rule. Under this approach, a request for waiver 
of the newspaper/television cross-ownership prohibition would be 
entitled to a presumption that it is consistent with the public 
interest, convenience, and necessity to allow an entity to own, 
operate, or control one daily newspaper and one full-power television 
station in a top-20 Nielsen

[[Page 29023]]

DMA provided that: (1) The television station is not ranked among the 
top-four television stations in the DMA, based on the most recent all-
day (9 a.m.-midnight) audience share, as measured by Nielsen or by any 
comparable professional, accepted audience ratings service, and (2) at 
least eight independently owned and operating major media voices will 
remain in the DMA. Major media voices would include full-power 
television broadcast stations and newspapers that are published at 
least four days a week within the DMA in the dominant language of the 
market and have a circulation exceeding 5 percent of the households in 
the DMA. In all other cases and in any DMA below the top-20 there would 
be a presumption that granting a waiver to permit a newspaper/
television combination is inconsistent with the public interest, 
convenience, and necessity. A party seeking to overcome a presumption 
would carry the burden of proof that the proposed combination will or 
will not unduly harm viewpoint diversity within the DMA. As provided 
below, the Commission seeks comment on all aspects of this framework, 
including the costs and benefits of each of the elements discussed 
herein. To the greatest extent possible, commenters should quantify the 
expected costs or benefits of this approach and any alternatives and 
provide detailed support for any actual or estimated values provided, 
including the source of such data and/or the method used to calculate 
reported values.
    80. As described in more detail below, the Commission seeks comment 
on various other issues regarding a newspaper/television cross-
ownership restriction. First, any restriction would be modified to 
replace the obsolete analog Grade A contour with an approach that 
approximates the outdated contour as closely as possible. The 
Commission proposes to prohibit common ownership of a full-power 
television station and a daily newspaper when: (1) The television 
station's community of license and the newspaper's community of 
publication are in the same Nielsen DMA, and (2) the principal 
community contour (PCC) of the television station, as defined in Sec.  
73.625 of the Commission's rules, encompasses the entire community in 
which the newspaper is published. Second, the restriction would not 
include the four-factor test that all waiver applicants, even those 
entitled to a favorable presumption, were required to satisfy under the 
2006 rule. As discussed below, the Commission believes that the factors 
are for the most part vague, subjective, difficult to prove and 
enforce, and/or not directly linked to viewpoint diversity. Third, the 
restriction would not include a local news exception, such as the one 
permitted by the 2006 rule under which the Commission reversed the 
negative presumption against a waiver when the proposed combination 
involved a broadcast station that had not been offering local newscasts 
and the applicants committed to airing at least seven hours of local 
news per week after the transaction. As described below, the Commission 
believes that the potential difficulties in monitoring and enforcing 
the exception would render it meaningless. Fourth, the Commission 
proposes to include in any restriction an exception for merger 
applicants that demonstrate that either the television station or the 
newspaper has failed or is failing.
    81. Finally, the Commission tentatively agrees with DCS that the 
NBCO rule does not have a significant impact on minority ownership, and 
the Commission believes that these modest revisions the Commission put 
forth for comment would be unlikely to have a disproportionate effect 
on either minority or female owners. The Commission seeks comment on 
whether the benefits of the revisions it describes here in the interest 
of protecting viewpoint diversity would outweigh any burdens that could 
result from such revisions, which the Commission would minimize by 
grandfathering any combinations that would become newly non-compliant 
because of the revisions.
b. Background
    82. As discussed below, the NPRM inquired about detailed scenarios 
in connection with proposed rule modifications.
c. Discussion
(i) Policy Goals
    83. Background. In the NPRM, the Commission tentatively affirmed 
the Commission's past determinations that the NBCO rule promotes 
viewpoint diversity but is not necessary to advance its localism and 
competition goals. Consistent with previous Commission findings, the 
Commission tentatively concluded that, although an absolute ban is 
overly broad, some newspaper/broadcast cross-ownership restrictions 
continue to be necessary to protect and promote viewpoint diversity. 
The Commission's reasoning centered on evidence that newspapers and 
local television stations, and their affiliated Web sites, are the 
primary sources that consumers rely on for local news and information. 
The Commission recognized that newspaper/broadcast cross-ownership may 
provide certain benefits that promote its localism goal. Thus, it 
tentatively affirmed the Commission's earlier findings that the 
opportunity to share newsgathering resources and to 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. It tentatively concluded, 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 its competition goal.
    84. Discussion. The Commission seeks comment on the current 
validity of the Commission's tentative conclusion in the NPRM that 
newspapers and local television stations, and their affiliated Web 
sites, are the dominant sources consumers rely on for local news and 
therefore that cross-ownership restrictions continue to be necessary 
under Section 202(h) to promote viewpoint diversity in local markets. 
The Commission proposes to adopt the NPRM's tentative findings that the 
NBCO rule is not necessary to foster its localism and competition 
goals. While the Commission recognizes that the rule may hinder the 
realization of certain efficiencies that could result in the production 
of more local news, it anticipates that modifications of the rule, such 
as those outlined below, could enable such efficiencies, and thereby 
potentially promote localism, in situations where viewpoint diversity 
would not be unduly sacrificed.
(i) Viewpoint Diversity
    85. In the 2010 Quadrennial Review proceeding, newspaper and media 
owners proffered two principal arguments to support their position that 
the Commission's diversity goal no longer justifies a prohibition on 
newspaper/broadcast cross-ownership. They argued, first, that ownership 
does not necessarily influence viewpoint and, second, that an array of 
diverse viewpoints is widely available from an abundance of outlets, 
particularly via the Internet. Both of these arguments were addressed 
by the Commission in the 2002 and 2006 media ownership reviews and by 
the Third Circuit in Prometheus I. The Third Circuit agreed with the 
Commission that, although these arguments provide an appropriate basis 
for relaxing the absolute ban on newspaper/broadcast cross-ownership, 
they do not mandate the removal of all

[[Page 29024]]

restrictions on such combinations. The Commission seeks comment on the 
tentative conclusion that neither of these arguments presents a reason 
for eliminating the NBCO rule in the 2014 Quadrennial Review 
proceeding.
    86. The Commission does not believe that the 2010 Quadrennial 
Review record compels it to alter the earlier conclusion that cross-
ownership can diminish viewpoint diversity. For example, the authors of 
Media Ownership Study 9 find that ownership concentration may adversely 
affect viewpoint diversity and the quality of local news. The 
Commission finds that the results of Media Ownership Studies 8A and 8B, 
suggesting that ownership structure does not have a marked impact on 
viewpoint diversity, cannot serve as a basis for assessing the impact 
of the NBCO rule. The analysis in Media Ownership Study 8B did not 
include any variables pertaining to newspaper/broadcast cross-
ownership, and Media Ownership Study 8A examined only newspaper/
television cross-ownership, for which its data was particularly 
limited. The 2008 Pritchard Study cited by Cox supports the proposition 
that cross-ownership does not diminish viewpoint diversity; however, 
its analysis includes only three cross-ownership situations. The 
editorial restraint exhibited by media owners in the three markets 
Pritchard studied does not negate what Pritchard calls the 
``theoretical power'' of media owners to control viewpoint. Even if 
cross-media owners do not exercise that power frequently, the 
Commission believes it is important to restrict cross-ownership of the 
dominant local news providers in markets where viewpoint diversity is 
insufficiently robust to withstand the potential loss of an 
independently owned voice. The Commission seeks comment on this view.
    87. With respect to the second argument, opponents asserted that 
the rule cannot be justified on diversity grounds because consumers 
today have nearly ubiquitous access to a multitude of voices. The 
Commission believes that the media environment has changed dramatically 
since 1975 when the average American read one local print newspaper and 
watched one of three evening newscasts in real time. Without question, 
the Internet, MVPD services, and other technological developments have 
profoundly changed the ways in which people access, consume, and share 
news and information. In its 2002 and 2006 ownership decisions, the 
Commission described the rapid advancements in the media industry at 
great length. Since then, those changes have been compounded as both 
providers and consumers of news use the Internet even more intensely. 
As the Commission concluded in its 2002 and 2006 proceedings, the 
Commission believes the proliferation of media outlets since 1975 may 
well render the absolute ban on newspaper/broadcast cross-ownership 
obsolete.
    88. While the extent to which Americans turn to news Web sites 
unaffiliated with traditional media may be increasing, it appears that 
such sources have not supplanted print newspapers and local television 
stations, and their affiliated Web sites, as the dominant providers of 
local news. As a threshold matter, online services and information are 
not available or not enjoyed at full capacity by many Americans due to 
disparities in broadband availability and adoption rates. Furthermore, 
according to a recent Pew Report on the State of the News Media, 
``local TV remains America's most popular source of local news and 
information.'' Commission staff reported in the Information Needs of 
Communities Report that, on a typical day, 78 percent of Americans 
obtain news from their local television station. A recent trade 
association analysis reportedly concluded that viewership of local 
evening news broadcasts in the 10 largest markets exceeded the five 
highest rated cable news programs combined by more than 430 percent. 
Although more consumers now turn to the Internet than to print 
newspapers for news and information, newspapers (both the print and 
online versions) are relied upon for the widest range of local news 
topics, and newspaper Web sites are the primary traditional source of 
local news for online consumers in the vast majority of large markets. 
In addition, many local television stations have become ``major online 
sources of news,'' even surpassing the popularity of newspaper Web 
sites in a number of local markets. The author of Media Ownership Study 
6 concludes that ``[n]ewspapers and television stations dominate what 
local news can be found online.'' The author found that only 17 of the 
1,074 local news Web sites he examined were unaffiliated with 
traditional print or broadcast media. As the Commission described in 
the NPRM, the results of Media Ownership Study 6 are supported by data 
from other studies demonstrating a consumer preference for Web sites 
affiliated with legacy media. The Commission seeks comment on its 
assessment of the current record and it invite commenters to provide 
any updated information or evidence regarding consumer reliance on 
unaffiliated online sources for local news and information.
    89. Even Web sites unaffiliated with newspapers and television 
stations often contain local news content that originates from those 
traditional sources. The results of the Pew Baltimore Study revealed 
new media's ``limited role'' in providing original reporting. The 
Information Needs of Communities Report points to a number of studies 
demonstrating that ``the growing number of web outlets relies on a 
relatively fixed, or declining, pool of original reporting provided by 
traditional media.'' In addition, Media Ownership Study 6 finds a 
dearth of independent Web sites with original local news content. 
Commenters in the 2010 Quadrennial Review proceeding tended to agree 
that most independent online sources, particularly news aggregator Web 
sites, currently do not provide a substitute for the original reporting 
by professional journalists associated with traditional local media. 
Media Ownership Study 6 cautions that even the independent local Web 
sites that produce high-quality content are not necessarily substitutes 
for traditional media outlets. The Commission invites commenters to 
submit updated information or evidence regarding the prevalence of 
original local news content on Web sites unaffiliated with traditional 
media outlets.
    90. At the current time and based on the record before the 
Commission, it tentatively finds that the record does not support the 
conclusion that the impact of the Internet has obviated the need for 
cross-ownership restrictions. The NBCO rule is intended to preserve 
access to a variety of viewpoints on substantive matters of local 
concern. The Commission tentatively finds that the diversity of local 
news coverage is not enhanced by the fact that newspapers from around 
the world are only a click away. Remote access to hometown sports 
scores and local weather reports expands the availability, but not the 
diversity, of information. While the Commission tentatively agrees with 
Tribune that the presence of local and specialized Web sites ``enriches 
the conversation,'' the record in the 2010 Quadrennial Review 
proceeding does not appear to demonstrate that most local, hyperlocal, 
and niche Web sites fill the role of local television stations or daily 
newspapers. In addition, the studies that Tribune cited in support of 
its assertion that Americans increasingly use the Internet to obtain 
election information concluded that television remains the primary 
source for such information among all Americans.

[[Page 29025]]

Although the 2010 Quadrennial Review record does not appear to provide 
convincing evidence that the Internet eliminates entirely the need for 
cross-ownership restrictions, the Commission seeks comment on its 
tentative assessment of the record. The Commission also seeks comment 
on whether there have been any changes in the Internet's role in the 
current marketplace for local news and information that the Commission 
should consider in its 2014 Quadrennial Review.
(ii) Localism
    91. The evidence in the 2010 Quadrennial Review record does not 
appear to negate the basic proposition that newspaper/broadcast cross-
ownership may enable commonly owned properties to produce and 
disseminate more and sometimes better local news. As acknowledged in 
the NPRM, the Commission has found that cross-ownership may produce 
such benefits to localism. The Commission recognizes that localism 
benefits are not guaranteed, however. The Commission sought comment in 
the NPRM not only on the benefits of cross-ownership generally, but 
also specifically on how to weigh the finding in Media Ownership Study 
4 that an increased amount of local news on a cross-owned television 
station does not necessarily translate into more local news at the 
market level. The author of the study theorized that cross-owned 
stations may tend to ``crowd out'' the news production of other 
stations.
    92. The author of Media Ownership Study 4 cautions that the result 
showing less local news in markets with newspaper/broadcast cross-
ownership is ``imprecisely measured and not statistically different 
from zero.'' Given that disclaimer, and the disputed evidence in the 
2010 Quadrennial Review record, the Commission proposes not to accord 
much weight to the study's finding that the amount of local news at the 
market level may be negatively correlated with newspaper/broadcast 
cross-ownership. Despite the criticisms of the methodology used in 
Media Ownership Study 4, the Commission thinks it reasonable to accept 
the premise that such cross-ownership may result in a greater amount of 
local news production by the cross-owned properties based on other 
record evidence. The Commission is aware, however, that such an outcome 
is not assured and depends in part on the owner's commitment to 
disseminate local news.
    93. The Commission believes the nation's interest in maintaining a 
robust democracy through a ``multiplicity of voices'' justifies 
maintaining certain NBCO restrictions even if doing so prevents some 
combinations that might create cost-savings and efficiencies in news 
production. Moreover, the Commission does not believe that the 
elimination of the NBCO rule would necessarily result in benefits to 
localism. The Commission seeks comment on whether a continued 
restriction, with the modifications described below, would minimize any 
potential effects on localism while preserving and promoting viewpoint 
diversity.
(iii) Competition
    94. Traditionally, the Commission does not evaluate the NBCO rule 
in terms of its competition goal because it has found that newspapers 
and broadcast stations do not compete in the same product market. 
However, some commenters in the 2010 Quadrennial Review proceeding 
expressed concerns about the impact of the NBCO rule on competition 
more generally. Other commenters disputed these concerns.
    95. Although the Commission shares the concerns of many Americans 
about the future of the newspaper industry, the Commission agrees with 
certain commenters that it would be inappropriate to relax the NBCO 
rule on the ground that newspapers are struggling to reinvent a 
successful business model. The Commission maintains that the pertinent 
issue for this part of its analysis is whether the NBCO rule is 
necessary to promote competition between newspapers and broadcast 
stations. The Commission already has determined that it is not. The 
Commission does not believe it could justify jeopardizing viewpoint 
diversity in local markets based on assertions that the rule limits 
opportunities for traditional media owners to increase revenue. 
Nonetheless, given that the revisions to the NBCO rule considered below 
would narrow its application, the Commission seeks comment on the 
extent to which such revisions would mitigate any unintended harms.
    96. Despite the bleak outlook for newspapers' print revenues, there 
have been some encouraging signs that traditional media are finding new 
ways to monetize their content. The Commission recognizes that the 
adjustments needed to survive this transition period may pose 
insurmountable challenges for some owners. Accordingly, as discussed 
below, the Commission proposes to include an exception to the cross-
ownership restriction when either the newspaper or the television 
station involved in a proposed merger is failed or failing. The 
Commission believes the risk that a common owner will influence the 
viewpoint of a newly acquired outlet is preferable to the greater 
diversity harm of losing the outlet altogether.
    97. The Commission seeks comment, for purposes of the 2014 
Quadrennial Review proceeding, on its tentative view, as described 
above and consistent with Commission precedent, that the NBCO rule is 
not necessary to promote localism and competition goals but that some 
form of cross-ownership restriction remains necessary to preserve and 
promote viewpoint diversity in local markets.
(ii) Newspaper/Radio Cross-Ownership
    98. Background. In the NPRM, the Commission sought comment on 
whether it should eliminate the part of the NBCO rule that applies to 
newspaper/radio combinations. The Commission tentatively concluded that 
radio stations are not the primary outlets that contribute to viewpoint 
diversity in local markets and that a substantial amount of news and 
talk show programming on radio stations is nationally syndicated, 
rather than locally produced. The Commission's preliminary view was 
that radio stations are not a primary source that consumers turn to for 
local news and information and that, rather, consumers in markets of 
all sizes rely most heavily on other types of news outlets for local 
news and information. The Commission asked whether newspaper/radio 
cross-ownership would promote localism and provide financially 
struggling newspapers and radio stations the opportunity to become 
vital participants in the news and information marketplace. In 
addition, the Commission asked whether it should substitute Arbitron 
market definitions for radio contours to determine when the NBCO rule 
is triggered for newspaper/radio combinations and whether existing 
combinations implicated by a rule change should be grandfathered. The 
Commission invites further comment also on these issues.
    99. Discussion. The Commission seeks further comment on whether the 
restriction on newspaper/radio cross-ownership should be eliminated 
from the NBCO rule. The Commission seeks comment on the Commission's 
tentative conclusions that radio stations are not the primary outlets 
that contribute to viewpoint diversity in local markets and that 
consumers rely predominantly on other outlets for local news and 
information. Several commenters in the

[[Page 29026]]

2010 Quadrennial Review proceeding referenced the fact that promoting 
viewpoint diversity has been the Commission's lone justification for 
retaining the restriction. As discussed above, the Commission has found 
repeatedly that the restriction does not promote its localism or 
competition goals, and the Commission tentatively reaffirms those 
findings. Therefore, the Commission tentatively agrees with several 
commenters that if the rule were no longer necessary to support the 
Commission's viewpoint diversity policy, then the newspaper/radio 
cross-ownership restriction would be left without a public interest 
rationale. Under Section 202(h) of the 1996 Act, the Commission must 
repeal or modify any media ownership regulations that no longer serve 
the public interest. Accordingly, it seeks comment on whether the 
newspaper/radio cross-ownership restriction advances its interest in 
promoting viewpoint diversity or whether the Commission should 
eliminate the restriction and permit common ownership of newspapers and 
radio stations in all markets, within the prescribed limits of the 
local radio ownership rule.
    100. Evidence from the Information Needs of Communities Report 
shows that consumers' reliance on radio news has declined steadily over 
the past two decades. From 1991 to 2010, the number of people reporting 
that they listened to some news on the radio dropped from 54 percent to 
34 percent. Of the approximately 11,000 commercial radio stations in 
the country, only 30 are all-news radio stations, a reduction from the 
mid-1980s when there were 50 such stations. Although a small number of 
commercial all-news radio stations in the nation's largest markets are 
very successful, radio stations in most cities do not provide much 
local journalism. One finding showed that in 2007 more than 40 percent 
of radio stations carried news programming produced remotely by a 
commonly owned station outside the local market. Typically, only one 
employee is involved in news output at a median-sized radio station. 
Although the news-talk radio format has exploded in popularity, it has 
done little for traditional local radio news. Eighty-six percent of 
programming on news-talk stations is nationally syndicated, rather than 
locally produced. The Commission invites commenters to provide any new 
data on these subjects that would be useful for the 2014 Quadrennial 
Review.
    101. In seeking comment on the elimination of the newspaper/radio 
cross-ownership restriction, the Commission notes that it has 
recognized since at least 1970 that radio does not play a dominant role 
in promoting viewpoint diversity. That year, while seeking comment on 
proposals that led to the adoption of the NBCO rule, the Commission 
identified as its foremost concern the common control of television 
stations and newspapers and noted the significant decline in the number 
of people relying primarily on radio for local news. Even as it adopted 
the NBCO rule in 1975, the Commission recognized that ``a radio station 
cannot be considered the equal of either the paper or the television 
station in any sense, least of all in terms of being a source for news 
or for being the medium turned to for discussion of matters of local 
concern.'' The Commission, nevertheless, included newspaper/radio 
combinations within the NBCO prohibition ``to encourage still greater 
diversity'' because ``even a smaller gain is worth pursuing.'' Since 
1975, the Commission repeatedly has acknowledged radio's lesser 
contributions to viewpoint diversity. For example, the Commission 
stated in its 2002 media ownership review that ``broadcast radio 
generally has less of an impact on local diversity than broadcast 
television.'' In its 2006 review, it observed that ``radio is a 
significantly less important source of news and information than 
newspapers or television.'' The Commission seeks comment on whether in 
today's marketplace the link between the newspaper/radio cross-
ownership restriction and the Commission's goal of promoting viewpoint 
diversity has become too tenuous to support the rule under Section 
202(h).
    102. The Commission invites commenters to augment the record with 
any information or evidence regarding any impact on diversity in the 
local radio markets. The Commission notes that Media Ownership Study 5 
suggests that eliminating the restriction would be unlikely to affect 
either radio news variety or listening, given its finding that 
newspaper/radio cross-ownership is not correlated with either of those 
metrics. The Commission seeks comment on this finding. Moreover, 
several commenters claimed that lifting the newspaper/radio cross-
ownership restriction would revitalize local news on radio stations and 
would provide struggling newspapers with a broader base of financial 
support and an increased ability to reach audiences. Although the 
Commission would not decide to eliminate the restriction based on those 
projected outcomes, it would welcome the accrual of any such incidental 
benefits and it seeks comment on such commenters' assertions. Further, 
the Commission seeks comment on to what extent, if any, its decisions 
regarding the newspaper/radio cross-ownership rule and radio/television 
cross-ownership rule, discussed below, should align given that the 
basis of its analysis for both rules may rest primarily on the 
contributions of radio to viewpoint diversity.
    103. Finally, the Commission notes that earlier this year MMTC 
submitted a study examining the issue of cross-owned media properties 
in a market. According to MMTC, the study indicated that cross-
ownership does not have a disparate impact on minority and female 
broadcast owners. As discussed further below, the Commission asks 
commenters to provide any demonstrable evidence of such a link that may 
have become available since the MMTC Cross-Ownership Study.
(iii) Newspaper/Television Cross-Ownership Rule
(i) Case-by-Case Waiver Approach
    104. Background. In the NPRM, the Commission tentatively concluded 
that it should reinstate a simplified version of the 2006 rule's 
framework generally prohibiting newspaper/broadcast cross-ownership but 
granting waiver requests on a case-by-case basis, using presumptive 
guidelines, when the proposed merger would not unduly harm viewpoint 
diversity in the local market. The Commission sought comment on 
whether, alternatively, it should adopt a bright-line rule allowing 
mergers for newspaper/broadcast combinations in the top 20 DMAs in 
those situations where a waiver request would have been given a 
favorable presumption under a case-by-case approach. The Commission 
noted that a bright-line rule for such newspaper/broadcast combinations 
would conserve resources and promote certainty but that a case-by-case 
approach would afford greater flexibility to account for the specific 
circumstances of a proposed merger.
    105. Discussion. Although further comment on the issue is welcome, 
the Commission does not propose to adopt a bright-line rule allowing 
newspaper/television combinations, even under narrowly prescribed 
circumstances. The Commission noted in the NPRM that a bright-line rule 
permitting certain newspaper/broadcast combinations in the top 20 DMAs 
might promote consistency and certainty in the marketplace and reduce 
the need for a potentially costly waiver process. The Commission 
recognizes that, under certain conditions, the largest markets

[[Page 29027]]

may be able to accommodate a limited amount of consolidation without 
impairing viewpoint diversity. The Commission also is aware that 
bright-line rules are more likely to produce predictable and consistent 
outcomes in an expeditious and less costly manner than rules that 
incorporate a waiver process, which is inherently more uncertain. The 
Commission is concerned, however, that a bright-line rule is too blunt 
an instrument to be used for allowing newspaper/television cross-
ownership, no matter how limited. For example, allowing certain 
combinations only in the top-20 DMAs could foreclose merger 
opportunities in smaller markets where viewpoint diversity is 
sufficiently robust. Conversely, such a bright-line rule might permit a 
combination in a top-20 DMA that would harm the public interest.
    106. The Commission tentatively concludes, therefore, that a 
general prohibition on newspaper/television combinations in all markets 
is the appropriate starting point when considering the impact of 
newspaper/television cross-ownership on viewpoint diversity. It 
believes the 2010 Quadrennial Review record supports this view. The 
Commission recognizes, however, that particular combinations might be 
shown to be consistent with its diversity goal, and so it proposes to 
entertain waiver requests. A waiver process would enable the Commission 
to examine proposed mergers on a case-by-case basis to determine the 
likely effects on the affected market. Because the Commission would 
have the flexibility to evaluate the particular circumstances of a 
newspaper/television combination, it could tailor its decision 
accordingly.
    107. The Commission believes that a case-by-case waiver approach 
would produce sensible outcomes and also improve transparency and 
public participation in the process. Such an approach would afford 
interested parties the opportunity to comment on a proposed newspaper/
television combination because the parties to the transaction would be 
required to seek a waiver of the Commission's rules regardless of 
whether the transaction involved the transfer of a broadcast license. A 
newspaper owner seeking to obtain a television station license would 
need to seek a waiver of a newspaper/television cross-ownership rule as 
part of its application for assignment of license or transfer of 
control. In considering a bright-line rule approach, the NPRM indicated 
that an opponent of a transaction permitted under a bright-line rule 
would continue to have the option to file a petition to deny a 
broadcast license transfer and assignment application involving an NBCO 
combination. However, with respect to any newspaper purchases by 
broadcast owners that would be permitted under a bright-line rule, 
would-be petitioners would not have an opportunity to oppose the 
newspaper purchase because there would be no transfer application 
involved. A case-by-case waiver approach would resolve that issue as 
every proposed newspaper/television combination would require 
Commission approval. To that end, the Commission seeks comment on 
whether, to enable a timely public response to a merger involving a 
newspaper purchase by a television licensee, it should require the 
station to file its waiver request prior to a newspaper acquisition, 
rather than at the time of the station's license renewal, and should 
require Commission staff to place such waiver requests on public 
notice. Under the Commission's current practice, if a television 
licensee purchases a newspaper that triggers the NBCO rule, then, 
absent a waiver, it must dispose of its station within one year or by 
the time of its next renewal date, whichever is longer. Alternatively, 
it can seek a waiver of the rule in conjunction with its license 
renewal, at which point interested parties are free to comment on the 
waiver request. As a result, the opportunity to comment on a television 
station's acquisition of a newspaper may not occur until many years 
after consummation of the purchase. The Commission therefore seeks 
comment on requiring television licensees to file waiver requests prior 
to a newspaper acquisition in order to facilitate the public's timely 
participation. What are the benefits of this approach and what burdens, 
if any, would it impose on the applicants? Would the potential benefits 
outweigh any burdens?
    108. Pure Case-by-Case Approach. The Commission also request 
comment on what type of waiver process would enable it to identify any 
acceptable newspaper/television combinations most accurately and 
effectively. The Commission could implement a pure case-by-case 
approach that evaluates the totality of the circumstances for each 
individual transaction, considering each waiver request anew without 
measuring it against a set of defined criteria or awarding the 
applicant an automatic presumption based on a prima facie showing of 
particular elements. The Commission would not require any particular 
type of evidence to support a waiver applicant's showing that the 
proposed merger would not diminish viewpoint diversity, and thus would 
be in the public interest. Similarly, opponents of a transaction could 
offer a range of arguments and evidence concerning the unique 
characteristics of a transaction that weigh against the grant of that 
particular application. This approach could offer the Commission 
maximum flexibility and discretion in each case to decide whether a 
waiver would serve the public interest. Such a potentially broad 
inquiry would avoid a formulaic approach, which may not always 
adequately measure an imprecise quality like viewpoint diversity. On 
the other hand, a pure case-by-case approach might not promote 
consistency and certainty in the marketplace and could impose 
additional burdens or costs on the applicants, petitioners, or 
Commission. The Commission seeks comment on the pros and cons, costs 
and benefits of evaluating waiver requests on the individualized merits 
of each particular case without relying on presumptive guidelines or 
established criteria.
    109. If the Commission were to adopt a case-by-case approach to 
waiver applications, it seeks comment on whether, and if so how, the 
approach should differ from the Commission's traditional waiver 
standard under Commission rules. Further, it seeks comment on whether a 
case-by-case approach should incorporate, or disavow, the criteria for 
waiver set forth when the NBCO rule was adopted in 1975, and which are 
currently in effect. At the time of adoption, the Commission 
``contemplated waivers in four situations: (1) Where there is an 
inability to dispose of an interest to conform to the rules; (2) where 
the only possible sale is at an artificially depressed price; (3) where 
separate ownership of the newspaper and station cannot be supported in 
the locality; and (4) where the purposes of the rule would not be 
served by divestiture.'' Has the application of these criteria 
historically been useful to the industry, the public, or the Commission 
in evaluating transactions? Have they tended to create an 
insurmountable bar to the grant of applications or inhibited industry 
participants from considering transactions? Or do the conditions 
provide a loophole to the existing ban? Do the specific criteria add 
value to the standard included in the Commission's rules? Should 
different criteria be enunciated, for instance including any or all of 
the elements that are described as possible presumptions as described 
below? The Commission seeks comment on these issues.

[[Page 29028]]

    110. Case-by-Case Approach with Presumptions. In addition, the 
Commission seeks comment on an approach whereby the Commission would 
ascribe a favorable presumption to certain waiver applicants in the 
top-20 DMAs and a negative presumption to all other waiver applicants. 
As described below, the Commission seeks comment on requiring as 
conditions for a favorable presumption that: (1) The proposed merger 
does not involve a television station ranked among the top-four 
television stations in the DMA and (2) at least eight major media 
voices remain in the DMA following the transaction. In the 2010 
Quadrennial Review proceeding, NAA warned that opportunities for 
acquisition and investment are stifled by the regulatory uncertainty 
and delay associated with even a straightforward waiver request 
entitled to a favorable presumption. CRT called the NBCO waiver 
provision ``convoluted,'' and Tribune claimed that the use of 
presumptions creates ``uncertainty, additional cost and prejudice.'' 
Nevertheless, presumptive guidelines would provide waiver applicants a 
greater degree of predictability than under a pure case-by-case 
approach while still affording the Commission some flexibility to take 
into account the particular circumstances of a proposed merger. 
Newspaper and television station owners could make more informed 
decisions about whether to expend the time and resources to pursue a 
merger. Presumptive guidelines would not prevent a waiver applicant 
from submitting whatever evidence it deemed useful and would not 
constrain the Commission's decision-making discretion. However, by 
providing direction regarding what showings to make, presumptive 
guidelines could save a waiver applicant time and money and improve its 
chances for a successful outcome in warranted circumstances. On the 
other hand, the presumptions could lead to unintended consequences in 
specific situations, such as recommending denial of an application that 
could benefit the public interest as a result of the specific 
characteristics of the transaction and local market or the grant of an 
application that would not. The Commission seeks comment on the pros 
and cons, costs and benefits of adopting a case-by-case approach that 
includes presumptions and the trade-offs involved as compared to the 
pure case-by-case approach.
(ii) The Scope of the Rule
    111. Background. The current rule prohibits common ownership of a 
daily newspaper and a television station when the Grade A contour of 
the station encompasses the entire community in which the newspaper is 
published. The Commission tentatively concludes that the rule should be 
updated to reflect the fact that, since the transition to digital 
television service, full-power television stations no longer have 
analog Grade A contours. In the NPRM, the Commission sought comment on 
whether it should modify the rule so that the cross-ownership 
prohibition is triggered when a daily newspaper and a television 
station are located in the same Nielsen DMA. It asked what the impact 
of the change would be, and in particular whether many more newspaper/
television combinations would be implicated under a DMA-based approach 
than under a contour-based approach. The Commission's preliminary view 
was that DMA market definitions would reflect newspaper circulation and 
television viewing areas more accurately than the current approach.
    112. The Commission proposed to grandfather ownership of existing 
newspaper/television combinations that would be in violation of the 
NBCO rule as a result of shifting to a DMA-based approach. It 
tentatively concluded that requiring divestiture would be disruptive to 
the industry and a hardship for the individual owners. In addition, it 
sought comment on whether grandfathered combinations should be freely 
transferable in perpetuity.
    113. Discussion. Based on the 2010 Quadrennial Review record, 
including the responses of many newspaper and broadcast owners, the 
Commission proposes to adopt an approach that uses both DMAs and 
contours. Newspaper and broadcast owners argued that, because DMAs can 
be much larger in size than the former Grade A contour areas, the 
NPRM's proposed DMA-based approach would expand the reach of the rule 
too broadly. Several commenters asserted that the approach proposed in 
the NPRM could prohibit cross-ownership when there is no overlap 
between the community in which a newspaper is published and the primary 
service area of a broadcast station. To avoid that possibility, the 
Commission proposes to prohibit cross-ownership of a full-power 
television station and a daily newspaper when: (1) The community of 
license of the television station and the community of publication of 
the newspaper are in the same Nielsen DMA, and (2) the PCC of the 
television station, as defined in Section 73.625 of the Commission's 
rules, encompasses the entire community in which the newspaper is 
published. Both conditions would need to be met in order for the cross-
ownership prohibition to be triggered. The DMA requirement would ensure 
that the newspaper and television station both serve the same economic 
market, while the contour requirement would ensure that they actually 
reach the same communities and consumers within that larger geographic 
market. Further, if a newspaper's community of publication is located 
in a different DMA than the television station, then the station likely 
does not primarily serve the community of publication, despite the fact 
that the over-the-air signal reaches that community. The Commission 
notes further, that a television station is not entitled to carriage on 
cable or satellite television systems outside its DMA, and thus would 
not be entitled to carriage in the newspaper's out-of-market community 
of publication. The Commission acknowledges that such an approach could 
permit combinations that would be prohibited under a contour-only 
approach; however, it believes that the number of instances where a 
station's PCC encompasses a newspaper's community of publication not 
located in the same DMA would be limited. The Commission seeks comment 
on this approach and notes that, if adopted, it would apply 
irrespective of how the Commission decides to evaluate requests for 
waiver of the prohibition.
    114. The PCC is a digital contour that ensures reliable service for 
the community of license. Commission rules already define the PCC, and 
it can be verified in a straightforward manner if a dispute arose 
concerning the reach of the NBCO rule.
    115. In the Notice of Inquiry (75 FR 33227, June 11, 2010, FCC 10-
92, rel. May 25, 2010) (NOI), the Commission explained that it has 
defined one other digital television service contour, the digital NLSC. 
However, the NLSC is roughly equivalent to the former analog Grade B 
service contour and approximates the same probability of service as 
that contour, which reaches a broader geographic area than the Grade A 
service contour. For that reason, the Commission does not believe the 
NLSC would be an appropriate contour to use in conjunction with the 
NBCO rule. When the Commission initially adopted the NBCO rule, it 
deliberately chose the smaller Grade A contour to define the rule's 
boundaries. The Commission seeks comment on its preference not to adopt 
the NLSC.
    116. The Commission recognized in the NOI that because the PCC is 
larger than the Grade A contour, its use could result in a more 
restrictive NBCO rule. The Commission's proposed approach,

[[Page 29029]]

however, would be less restrictive than its initial proposal to rely 
solely on the DMA market definition to trigger the cross-ownership 
prohibition. In addition, the Commission has examined size 
differentials between the PCC and the former Grade A contour for 
various categories of television stations, specifically, high-VHF, low-
VHF, and UHF stations. While the PCC is slightly larger than the Grade 
A contour, the Commission seeks comment on its belief that the size 
differentials are not so great as to have a meaningful impact in terms 
of the proposed rule's applicability.
    117. Furthermore, the Commission believes the PCC would be 
preferable to the other suggestions commenters offered. NAA proposed 
that the Commission simulate a digital Grade A contour by applying to a 
station's NLSC the propagation and implementation margin factor it 
established for cable carriage of digital broadcast stations (i.e., 
20dB). NAA asserted that the resulting simulated contour would be 
appropriate because the Commission developed the 20dB measurement using 
``Grade A-type signal quality factors.'' The Commission believes that 
using a measurement based on the signal quality required for cable 
carriage would impose too strict a standard for purposes of the NBCO 
rule because it would exclude parts of the coverage area that reliably 
receive the television signal. A.H. Belo and CRT suggested that the 
Commission add a mileage qualifier to the DMA measurement. A.H. Belo 
and CRT, however, did not specify what mileage the qualifier should be 
or explain how the Commission could develop a mileage qualifier that 
would be meaningful. The Commission seeks comment on its view that 
using the PCC would be the superior approach.
    118. The Commission is not inclined to adopt the suggestion of A.H. 
Belo and CRT to limit the application of the NBCO rule to ``major'' 
daily newspapers having a circulation exceeding 5 percent of the DMA's 
households. Cox similarly argued that the NBCO rule should not be 
triggered unless the newspaper's circulation exceeds 5 percent of the 
households in the television station's community of license. The 
Commission seeks comment on whether there are any reasons to change the 
current definition, which states that ``a daily newspaper is one which 
is published four or more days per week, which is in the dominant 
language in the market, and which is circulated generally in the 
community of publication.'' The Commission notes that the newspaper 
definition suggested by A.H. Belo and CRT could fail to trigger the 
rule when a newspaper is not widely circulated in the larger DMA 
despite its influence in its own community of publication. In addition, 
the Commission is not inclined to adopt Cox's suggestion to impose a 
minimum circulation requirement within the television station's 
community of license. Under the vacated 2006 rule, a newspaper was not 
deemed a ``major media voice'' for purposes of the rule's eight voices 
test unless it had a circulation exceeding five percent of the 
households within the DMA. Different definitions may serve different 
purposes, however, and the Commission seeks comment on whether the 
current requirement that a daily newspaper be published at least four 
days a week, in the dominant language in the market, and circulated 
generally in its community of publication is sufficient to ensure the 
significance of the newspaper for purposes of triggering the rule, 
thereby obviating specification of a minimum circulation amount or 
modification of the area of consideration. The Commission previously 
has determined that newspapers with these characteristics are 
significant enough to come within the scope of the NBCO rule, and 
commenters in the 2010 Quadrennial Review record proceeding have not 
provided evidence that a less restrictive definition would be 
sufficient to protect viewpoint diversity.
    119. The Commission seeks comment on the tentative conclusion that, 
to the extent that an existing newspaper/television combination would 
become newly non-compliant as a result of its proposed modification of 
the NBCO rule, the Commission should grandfather such combinations in 
order to avoid market disruption and to avoid penalizing licensees for 
the switch from an analog contour to a digital contour. The Commission 
believes that incorporating the PCC into the rule would limit the 
number of existing newspaper/television combinations that would fall in 
this category. Consistent with existing precedent, the Commission does 
not believe grandfathered combinations should be transferrable. The 
Commission seeks comment on its view that any future transfer of a 
grandfathered combination should comply with the applicable ownership 
rules, including the NBCO rule, in place at the time the transfer of 
control or assignment application is filed. The Commission does not 
intend to upset any filing deadlines it has previously imposed on 
specific parties related to cross-ownership proceedings. In addition, 
consistent with the Commission's decision in the 2006 Quadrennial 
Review Order, the Commission would allow all grandfathered combinations 
or permanent waivers from the prior rule that previously have been 
granted to continue in effect under the rule ultimately adopted, to the 
extent that such grandfathering/permanent waivers would still be 
necessary to permit common ownership.
(iii) Market Tiers
    120. Background. In the NPRM, the Commission proposed to 
differentiate between markets ranked among the top 20 DMAs and markets 
below the top 20 DMAs for purposes of determining whether a waiver 
request is entitled to a favorable presumption under the approach 
discussed in the NPRM. The Commission proposed a top-20 demarcation 
point for newspaper combinations involving either television or radio 
stations. The Commission's proposal to lift the restriction on 
newspaper/radio cross-ownership would render moot the delineation of 
market tiers for such combinations. The Commission seeks comment, 
however, on whether a top-20 demarcation point should apply to 
newspaper/radio combinations in the event it retains a restriction on 
such combinations. Consistent with its findings in the 2006 Quadrennial 
Review Order, the Commission's preliminary view was that the top 20 
DMAs are notably different from other markets, both in terms of voices 
and in terms of television and radio households. The Commission 
tentatively concluded that, based on the range of media outlets 
available in the top 20 DMAs, viewpoint diversity in those largest 
markets is healthy and vibrant in comparison to other DMAs. It sought 
comment on its 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. It also sought comment on 
its continued belief that markets below the top 20 DMAs generally 
cannot accommodate such cross-ownership absent particular circumstances 
warranting a waiver. In addition, it asked whether a different 
demarcation point would more effectively protect and promote its goals.
    121. Discussion. In the event it were to adopt a waiver standard 
with presumptive guidelines, the Commission seeks further comment on 
whether to grant a favorable presumption to waiver requests seeking 
approval for a merger in a top-20 DMA where certain conditions are met 
and to

[[Page 29030]]

ascribe a negative presumption to waiver requests involving mergers in 
the remaining DMAs. As described below, the Commission also seeks 
comment on whether waiver requests for proposed newspaper/television 
combinations within the top-20 DMAs should be entitled to a favorable 
presumption only if the television station were not ranked among the 
top-four television stations within the DMA and there would be at least 
eight independently owned and operated major media voices remaining in 
the DMA post-transaction. It seeks comment on the impact of such an 
approach on viewpoint diversity, particularly in the 20 largest DMAs, 
and on how any such presumptive waiver standard would work. The 
Commission tentatively concludes that any such rule should create a 
favorable presumption for waiver requests only in cases where the 
proposed combination consists of a single television station and single 
daily newspaper, as described above, and not in cases where the common 
ownership is proposed to include a television duopoly, regardless of 
whether a duopoly is permitted under the local television ownership 
rule. The Commission seeks comment on this tentative conclusion. For 
each element it proposes to include in a presumptive waiver standard, 
it seeks comment on its usefulness and the costs and benefits of its 
inclusion.
    122. Some commenters in the 2010 Quadrennial Review proceeding 
asserted that differentiating the 20 largest DMAs from smaller markets 
would be arbitrary and capricious. On the other hand, there is evidence 
supporting such a distinction. The greater demographic diversity found 
more frequently within larger populations is more likely to generate 
demand for a wider range of viewpoints. The larger populations of the 
top-20 DMAs may also be better able to provide the economic base to 
support a greater number of media outlets. Indeed, evidence 
demonstrates a greater level of media diversity in the 20 largest DMAs 
that distinguishes those markets from the remaining DMAs. Data show 
that, while there are at least 10 independently owned, commercial 
television stations in 14 of the top 20 DMAs, none of the DMAs ranked 
21 through 25 has more than seven independently owned, commercial 
television stations. Additionally, while 10 of the top 20 DMAs have at 
least two newspapers with a circulation of at least 5 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 
15 independently owned television stations and major newspapers and 
approximately 2.6 million television households. By comparison, DMAs 21 
through 30 have on average nine major media voices and fewer than 1.2 
million television households, representing drops of 37 percent and 56 
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 a lower number of television households averaging 
795,000. DMAs 51 through 210 show even more dramatic drops, with, on 
average, fewer than seven major media voices and approximately 240,000 
television households, representing drops of 54 percent and 91 percent 
from the top 20 DMAs, respectively.
    123. Several commenters in the 2010 Quadrennial Review proceeding 
contended that many lower-ranked DMAs are abundantly diverse. The 
Commission emphasizes that any presumptions would provide merely a 
starting point for the analysis of the likely impact of a proposed 
merger on a particular market. A presumption could be overcome if the 
weight of the evidence favors the party with the burden of proof. 
Waiver applicants in smaller markets would not be precluded from 
demonstrating that a proposed merger would create efficiencies that 
would serve the public interest without harming viewpoint diversity in 
the local market.
    124. None of the commenters specified an alternative demarcation 
point, but a few commenters argued that the same standard should apply 
to all, or the majority of, markets. For example, Cox proposed a two-
part test that it argued should apply to NBCO waiver requests in all 
markets. The first part of the test, Cox claimed, would protect 
viewpoint diversity by requiring that 20 independent media voices 
remain in the market following a proposed combination, which could 
include a newspaper and any broadcast properties that would be 
permitted under the local ownership rules. Cox proposed that 
independent media voices include independently owned daily newspapers, 
full-power television stations, full-power radio stations, cable and 
satellite television services (counted as one voice), and the Internet 
(counted as one voice). As Cox stated, the diversity prong of its 
proposed test was patterned in part after the radio/television cross-
ownership rule. The second part of Cox's test, intended to preserve 
localism, would require that at least three independent media voices 
that produce and distribute local news and information programming, 
other than the combining properties, remain in the market post-
transaction. The Commission seeks comment on Cox's suggestion. For the 
reasons explained below in connection with the eight-voices 
restriction, the Commission believes that the first part of Cox's 
proposed test would define independent media voices too broadly. As to 
the second part of Cox's proposed test, the Commission believes it 
would be difficult to apply and enforce an objective, content-neutral 
standard of what constitutes an independent media voice that produces 
and distributes local news and information programming. Moreover, 
nothing in the Cox proposal provided specific evidentiary support that 
relates the standard specifically to newspaper/television combinations.
(iv) Top-Four Restriction
    125. Background. Consistent with the 2006 NBCO rule, the Commission 
proposed in the NPRM that newspaper/television combinations involving a 
television station ranked among the top-four television stations in the 
DMA would not be entitled to a favorable presumption. The Commission 
proposed that television rankings be based on the most recent all-day 
(i.e., 9:00 a.m. to midnight) audience share, as measured by Nielsen or 
another comparable professional, accepted audience ratings service.
    126. The Commission's preliminary view was 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.'' Based on the 
Commission's data analysis, the amount of local news drops 
significantly between the fourth- and fifth-ranked stations. The most 
dramatic difference occurs in larger markets, where the fifth-ranked 
station generally provides no more than half the amount of local news 
aired on the fourth-ranked station. The Commission sought comment on 
whether a different limit would be more appropriate, such as a top-five 
or top-six restriction. It also asked if the restriction should depend 
on whether the station is affiliated with one of the four major 
broadcast networks, given evidence that such stations tend to air more 
local news.
    127. Discussion. If the Commission were to adopt a waiver standard 
with presumptive guidelines, it would not provide a favorable 
presumption for newspaper/television combinations involving a 
television station ranked among the top-four television stations in the 
DMA. The Commission would continue to determine a television

[[Page 29031]]

station's ranking in accordance with Section 73.3555(d)(3)(i) of the 
Commission's rules. As stated in the NPRM, evidence shows that the top-
four television stations in a DMA generally air more local news and 
information than the other television stations in the market, 
particularly in the larger DMAs. The Commission seeks comment on its 
tentative conclusion that viewpoint diversity in even the largest 
markets could be harmed if a top-ranked television station merged with 
a daily newspaper within the same DMA. Therefore, regardless of the 
DMA's size, the Commission believes that a proposed combination 
involving a top-four television station would be inconsistent with the 
public interest. The Commission invites commenters to provide any new 
information or evidence that the Commission should take into 
consideration regarding this issue.
    128. The Commission disagrees with those commenters who contend 
that the rationale for allowing cross-ownership in the top 20 markets 
would also support not having a top-four restriction. The Commission's 
analysis of this rule hinges not on whether it should be relaxed to 
enhance efficiencies that could promote localism, but on whether some 
form of the rule remains necessary to promote viewpoint diversity. 
Although the Commission would hope that any permitted combinations 
under a revised rule would generate localism benefits, the NBCO rule is 
designed to protect viewpoint diversity. Under the presumptive waiver 
standard the Commission seeks comment on today, waiver applicants in 
the top-20 DMAs would be entitled to a favorable presumption on the 
theory that permitting certain newspaper/television combinations in 
those markets would not likely harm viewpoint diversity. Allowing the 
combination of a newspaper and a top-four station, however, could 
potentially harm viewpoint diversity precisely because the top-four 
television stations typically provide the most local news among 
television stations. A combination with one of those stations thus 
could result in a diminution of viewpoint diversity, and therefore the 
Commission believes that a waiver request involving such a station 
should not be entitled to a favorable presumption. The Commission seeks 
comment on this proposition.
    129. Other arguments also sidestep the diversity rationale. Tribune 
contended that combining with one of the market's weaker television 
stations may not provide the lifeline that many struggling newspapers 
need. It further asserted that the rationale for the top-four 
restriction within the context of the local television rule--to 
preserve competition among the strongest television stations--is 
inapplicable to the NBCO rule. The Commission's primary intent, 
however, in considering whether to retain the top-four component of the 
NBCO rule, if amended, is to protect viewpoint diversity, not to save 
struggling newspapers or to promote competition. The Commission seeks 
comment on its position with respect to these assertions.
    130. Finally, Fox claimed that a top-four restriction would violate 
the First Amendment because it would preclude a speaker from acquiring 
additional outlets based on the popularity of the speaker's content. 
The Commission disagrees. As the U.S. Supreme Court stated, assuring 
``access to a multiplicity of information sources . . . promotes values 
central to the First Amendment.'' The Commission also disagrees with 
Fox's assertion that such a restriction would be content-based. Rather, 
the Commission believes the top-four restriction would operate on the 
content-neutral basis of market ranking. It notes that, within the 
context of the local television rule, the Third Circuit upheld the top-
four restriction as a reasonable limit on market power.
(v) Eight Major Media Voices Restriction
    131. Background. The Commission proposed that transactions that 
would leave fewer than eight independently owned and operating ``major 
media voices'' in the DMA would not be entitled to a favorable 
presumption under a presumptive waiver standard. Major media voices 
were defined in the 2006 Quadrennial Review Order as full-power 
commercial and noncommercial television stations and major newspapers. 
The Commission sought comment on the potential impact of eliminating 
this voices test given its analysis that eight major media voices would 
remain in each of the top-20 DMAs even if all daily newspapers in those 
markets combined with television stations. The Commission also asked 
whether requiring a different number of voices would protect its 
diversity goal more effectively.
    132. Discussion. Were the Commission to adopt the presumptive 
waiver standard on which it seeks comment, the Commission proposes to 
ascribe a negative presumption to waiver requests for newspaper/
television combinations in the top-20 DMAs if fewer than eight major 
media voices would remain in the DMA following the proposed merger. The 
Commission believes it should continue to define major media voices as 
full-power television broadcast stations and newspapers that are 
published at least four days a week within the DMA in the dominant 
language of the market and have a circulation exceeding 5 percent of 
the households in the DMA. None of the commenters in the 2010 
Quadrennial Review proceeding addressed the impact of removing the 
eight-voices test from a presumptive waiver standard or recommended an 
alternative voices test for the top-20 DMAs. Notwithstanding the 
supposition in the NPRM that the eight-voices test may not have an 
impact in the top-20 DMAs currently, if the Commission decides to adopt 
a presumptive waiver standard, then it proposes to retain the test as 
the more cautious approach and to protect viewpoint diversity in the 
event that media diversity in a top-20 DMA drops to the point where the 
test would become a critical factor in promoting that goal. The 
Commission included the eight-voices test in the 2006 waiver standard 
to prevent ``a significant decrease in the number of independently 
owned major media voices'' in the top-20 DMAs, and it seeks comment on 
whether it should incorporate the test for the same reason if it adopts 
a presumptive waiver standard.
    133. Some commenters recommended that the Commission expand the 
definition of major media voices beyond full-power commercial and 
noncommercial television stations and major newspapers. For example, 
Cox urged the Commission to include in the definition full-power radio 
stations, cable and satellite television services (counted as one 
voice), and the Internet (counted as one voice). Cox argued that its 
approach would resemble the definition used for the radio/television 
cross-ownership rule. Referencing the local television rule, Tribune 
asserted that a voices test should include radio stations, cable and 
satellite news channels, weekly newspapers, and independent Web sites 
with news and local information. The Commission's view is that neither 
of these comparisons should persuade it to expand its definition: This 
Further Notice of Proposed Rulemaking seeks comment on repealing the 
radio/television cross-ownership rule, and only television stations 
count toward the minimum number of remaining media outlets required 
under the local television rule. In addition, the Commission is 
disinclined to agree with NAA that the definition should include any 
media outlet that ``contribute[s]

[[Page 29032]]

meaningfully to local news diversity,'' the determination of which 
would depend on the type of media outlet under consideration. For 
practical and legal reasons, the Commission believes it unwise to 
engage in the kind of subjective, content-based assessment that such a 
standard likely would entail. The Commission seeks comment on these 
views.
    134. The Commission tentatively concludes that, for purposes of any 
newspaper/television cross-ownership rule that the Commission may 
adopt, full-power television stations and major newspapers are the 
relevant voices that should be included in the definition of major 
media voices. As noted in the 2006 Quadrennial Review Order and 
discussed above, television stations and major newspapers are the 
predominant sources consumers rely on for news and information. In 
addition, evidence demonstrates that radio stations and independent Web 
sites generally do not originate significant amounts of local news. 
Evidence also suggests that viewership of local broadcast television 
news far outstrips that of cable news programming. Therefore, the 
Commission believes that counting the full-power television stations 
and the major newspapers within a local market provides a reasonable 
proxy for the level of viewpoint diversity that is meaningful for 
purposes of its proposed rule, and the Commission seeks comment on this 
belief.
(vi) Four-Factor Test
    135. Background. Under the NBCO rule as revised in the 2006 
Quadrennial Review Order, the Commission considered four factors in 
evaluating a request for a rule waiver. All waiver applicants, 
regardless of whether they were entitled to a favorable presumption, 
were required to show: (1) That the combined entity would significantly 
increase the amount of local news in the market; (2) that the newspaper 
and the broadcast outlets each would continue to employ its own staff 
and exercise its own independent news judgment; (3) the level of 
concentration in the Nielsen DMA; and (4) the financial condition of 
the newspaper or broadcast station, and if the newspaper or broadcast 
station was in financial distress, the proposed owner's commitment to 
invest significantly in newsroom operations.
    136. In the NPRM, the Commission sought comment on whether to 
retain these four factors. The Commission asked if the factors 
benefitted the waiver applicants or the Commission staff responsible 
for reviewing waiver requests. It sought comment on whether the factors 
were overly subjective or likely to create unnecessary delay. The 
Commission also asked whether, if the four-factor test were excluded 
from the rule, the presumptions in favor of or against a transaction 
should create a prima facie case, which would shift the burden of proof 
to the party seeking to overcome the presumption.
    137. Discussion. The Commission proposes not to include the four-
factor test in any newspaper/television cross-ownership rule that it 
ultimately may adopt. None of the commenters in the 2010 Quadrennial 
Review proceeding supported retaining the test. The Commission 
tentatively concludes that the factors are not well-suited as standards 
required of every waiver applicant because they are vague, subjective, 
difficult to verify, and costly to enforce. The Commission would not 
discourage waiver applicants, particularly those in smaller markets, 
from attempting to strengthen their requests by presenting evidence in 
support of considerations like those reflected in the four factors. 
Rather, the ill-defined nature of these factors leads the Commission to 
believe that they should not be imposed automatically on every waiver 
applicant. The Commission seeks comment on this approach.
    138. In the event the Commission adopts a presumptive waiver 
standard, it seeks further comment on whether, instead of a four-factor 
test, it should treat a presumption either in favor of or against a 
waiver request as establishing a prima facie case. The party seeking to 
overcome the presumption would have the burden to show that the 
proposed newspaper/television combination would or would not unduly 
harm viewpoint diversity within the DMA. To meet this burden, parties 
could present evidence, for instance, regarding the quantity and 
strength of existing local news providers within the DMA including, for 
example, their availability, accessibility, and focus on local news and 
information; the level and pervasiveness of their presence or influence 
within the DMA, particularly in those portions of the DMA that 
potentially would be most affected by the proposed merger; and the 
strength of the applicant's proposed local news and other local program 
offerings. The impact on viewpoint diversity in the local market would 
be the focal point of the Commission's review. Evidence related to 
other variables could shade the Commission's analysis but would not be 
necessary or sufficient. The Commission believes this type of narrowed 
approach would be consistent with its objective to rationalize the NBCO 
rule by linking its requirements to its purpose.
(vii) Overcoming the Negative Presumption
    139. Background. In the NPRM, the Commission sought comment on 
whether to retain the criteria required by the 2006 Quadrennial Review 
Order to overcome a negative presumption. 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. The rule adopted 
in the 2006 Quadrennial Review Order further stated that the Commission 
would reverse a 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. The NPRM asked whether these standards were 
sufficiently objective and quantifiable. It asked also whether special 
consideration should be given to a transaction involving a station or 
newspaper that is failed or failing, and if so, what type of showing 
should be required. Finally, the NPRM sought comment on whether the 
Commission should adopt any other criteria, particularly given that 
licensees could seek waivers under Section 1.3 of the Commission's 
rules.
    140. Discussion. The Commission believes it should not adopt the 
criteria required by the 2006 Quadrennial Review Order to overcome a 
negative presumption in any presumptive waiver standard that the 
Commission may adopt, other than the failed/failing station or 
newspaper criterion. In the preceding discussion of the four-factor 
test, the Commission sought comment on whether it should enable merger 
applicants to overcome any negative presumption by demonstrating that 
the proposed transaction would not unduly harm viewpoint diversity 
within the DMA. The Commission seeks comment on whether that standard 
also should replace the 2006 criteria requiring clear and convincing 
evidence that diversity and competition would increase. The Commission 
believes that the clear and convincing measure imposed an overly 
burdensome evidentiary standard, unnecessarily included a competition 
showing, and failed to identify relevant

[[Page 29033]]

evidence that would support the diversity showing. The Commission is 
inclined to agree with Free Press that the exception for waiver 
applicants that commit to initiating weekly local news programming on a 
television station that has not been offering any local news would be 
too difficult to enforce. Not only does the Commission think it would 
be impractical for the Commission to monitor the station's subsequent 
local news output, but it does not wish to engage in making content-
based judgments regarding what constitutes local news. For this reason 
and for the reasons stated above for proposing to reject the four-
factor test, the Commission is not inclined to adopt NAA's 
recommendation that any NBCO rule the Commission adopts include an 
exception when: (1) The merger applicants commit to retaining, 
protecting, and exercising their respective editorial independence or 
(2) the merger applicants commit to adding news or public affairs 
programming to a broadcast station that previously had not been airing 
news. The Commission seeks comment on this approach.
    141. The Commission proposes to adopt a failed/failing entity 
exception, which would allow merger applicants to overcome a negative 
presumption under a presumptive waiver standard when a proposed 
combination involved a failed/failing television station or newspaper. 
In addition, it similarly proposes to consider an exception for failed/
failing entities if it adopts a waiver standard that does not include 
presumptive guidelines. As explained above in the discussion of its 
policy goals, the Commission believes the continued operation of a 
local news outlet under common ownership would cause less harm to 
viewpoint diversity than would its complete disappearance from the 
market. Noting that no alternative definitions were suggested in the 
2010 Quadrennial Review proceeding, the Commission seeks comment on 
whether to incorporate the criteria adopted in the 2006 Quadrennial 
Review Order to determine if a television station or newspaper is 
failed or failing. Specifically, in order to qualify as failed, the 
newspaper or television station would have to show that it had stopped 
circulating or had been dark due to financial distress for at least 
four months immediately prior to the filing of the assignment or 
transfer of control application, or that it was involved in court-
supervised involuntary bankruptcy or involuntary insolvency 
proceedings. To qualify as failing, the applicant would have to show 
that: (1) If the television station was the failing entity, that it had 
a low all-day audience share (i.e., 4 percent or lower); (2) the 
financial condition of the newspaper or television station was poor 
(i.e., a negative cash flow for the previous three years); and (3) the 
combination would produce public interest benefits. An applicant 
seeking a waiver of a newspaper/television cross-ownership prohibition 
on the basis that either the television station or the newspaper was 
failed or failing would be required to show that the tangible and 
verifiable public interest benefits of the combination outweighed any 
harms. Further, as is already the case with failed and failing station 
waivers of the local television rule, in seeking subsequent renewals of 
the television station's license, the owner of the combined entities 
would be required to certify to the Commission that the public interest 
benefits of the combination were being fulfilled, including a specific, 
factual showing of the program-related benefits that had accrued to the 
public. Cost savings or other efficiencies, standing alone, would not 
constitute a sufficient showing. The Commission seeks comment on the 
implications of requiring such a showing. In addition, the applicant 
would have to show that the in-market buyer was the only reasonably 
available candidate willing and able to acquire and operate the failed 
or failing newspaper or station and that selling the newspaper or 
station to any out-of-market buyer would result in an artificially 
depressed price. One way to satisfy this criterion would be to provide 
an affidavit from an independent broker affirming that active and 
serious efforts had been made to sell the newspaper or television 
station, and that no reasonable offer from an entity outside the market 
had been received. The Commission seeks comment on whether to adopt 
such a criterion. It seeks comment on whether to adopt such an 
exception for failed/failing entities regardless of the waiver standard 
it adopts.
(iv) Minority and Female Ownership
    142. Background. The Commission has provided several opportunities 
for public input on issues pertaining to minority and female ownership. 
It sought comment in the NPRM on how the proposed revisions to the NBCO 
rule could affect minority and female ownership opportunities. Further, 
it asked how promotion of diverse ownership promotes viewpoint 
diversity. The Commission also sought comment on the minority and 
female ownership data contained in the 2012 323 Report. In addition, 
the Commission invited comment on the MMTC Cross-Ownership Study which 
seeks to examine ``whether, and to what extent, cross-ownership might 
have a material adverse impact on minority and women ownership.'' To 
inform the 2014 Quadrennial Review, the Commission seeks further 
comment below on the relationship of the NBCO rule to minority and 
female ownership.
    143. Discussion. Some commenters criticized the Commission for 
proposing to relax the NBCO rule without first determining that there 
would be no negative impact on levels of minority and female ownership. 
The Commission recognizes that the Third Circuit directed the 
Commission to address certain portions of the Diversity Order in the 
context of its quadrennial review. The Commission has considered 
carefully whether there is evidence in the current record that 
modifications to the NBCO rule, such as those the Commission seeks 
comment on above, would likely adversely affect minority and female 
ownership, and it tentatively concludes, as discussed below, that the 
current record does not establish that such harm is likely. The 
Commission tentatively finds that the information in the current record 
asserting a potential impact would not change its underlying analysis 
regarding the possible rule modifications set forth above. Moreover, 
the Commission rejects the argument that the Prometheus II decision 
requires the Commission to take no action unless it can show 
definitively that a rule change would have no negative impact on 
minority ownership levels. In any case, considering the low levels of 
minority and female ownership reflected in the 2012 323 Report, the 
Commission does not believe the record evidence shows that the cross-
ownership ban has protected or promoted minority or female ownership of 
broadcast stations in the past 35 years, or that it could be expected 
to do so in the future. The Commission seeks comment on these views.
    144. The Commission notes that commenters in the 2010 Quadrennial 
Review record did not focus on the impact of newspaper/radio cross-
ownership in particular. None of these commenters seriously contended 
or provided any data showing that newspaper mergers with minority/
female-owned radio stations would harm viewpoint diversity in local 
markets. As discussed above, the Commission does not believe that the 
vast majority of radio stations contribute significantly to viewpoint 
diversity. Moreover, the Commission has no evidence in the current 
record suggesting that minority/female-owned

[[Page 29034]]

radio stations contribute more significantly to viewpoint diversity or 
broadcast greater amounts of local news on which consumers rely as a 
primary source of information than other radio stations. Even if they 
did, the Commission could not conclude that it would therefore be 
reasonable to restrain the ability of owners of all commercial radio 
stations to make business decisions to exit the market or to combine 
with a newspaper should the record otherwise support allowing such 
combinations. The Commission invites commenters to provide any new 
relevant information, data, or evidence that should inform the 2014 
Quadrennial Review.
    145. With respect to newspaper/television combinations, the current 
record reflects varying opinions concerning the impact of a rule 
modification on minority and female ownership. While the Commission 
agrees with the commenters that current levels of minority and female 
ownership are discouragingly low, the Commission is not persuaded by 
evidence in the current record that the NBCO modifications it seeks 
comment on above would adversely affect minority and female ownership 
levels. Even assuming that some minority-owned stations would become 
acquisition targets if the rule were loosened, the Commission does not 
believe that such a possibility necessarily would preclude rule 
modifications that are otherwise consistent with its statutory mandate. 
To the extent that governmental action to boost ownership diversity is 
appropriate and in accordance with the law, the Commission does not 
believe that any such action should be in the form of indirect measures 
that have no demonstrable effect on minority ownership and yet 
constrain all broadcast licensees. The Commission seeks comment on this 
tentative conclusion and its impact on any decision to modify its 
cross-ownership rules. Several commenters argued that promoting access 
to capital would advance minority ownership more effectively than 
either limiting the number of potential buyers for minority broadcast 
owners interested in selling or preventing minority broadcast owners 
from experimenting with print publication. The Commission addresses 
related proposals below.
    146. At this time, the Commission is not convinced that a top-four 
restriction, if adopted as part of a presumptive waiver standard, would 
decrease minority ownership. Commenters predicted that minority-owned 
television stations, the majority of which are stand-alone stations 
unaffiliated with a network, would be likely targets for acquisition if 
top-four television stations were excluded from cross-ownership. 
However, a newspaper publisher that is foreclosed from buying a top-
ranked television station may not necessarily seek to purchase a lower-
ranked station. In any event, station owners would not be compelled to 
sell their stations as a result of a modification to the NBCO rule. 
Moreover, a station owner that wishes to exit the market is not 
prevented from selling its station under the current NBCO ban, which 
merely eliminates newspaper owners as potential buyers. The Commission 
notes that the commenters' concern is in tension with the more frequent 
complaint that the Commission has not been aggressive enough in 
encouraging investment in minority broadcasters. The changes the 
Commission seeks comment on today could permit stand-alone stations 
without a network affiliation to compete better in the market and to 
improve their local news offerings by combining resources with an in-
market daily newspaper, if they so desired and such an opportunity were 
available. The Commission seeks comment on the likelihood of such an 
effect.
    147. In addition, commenters arguing that minority-owned 
broadcasters are competitively disadvantaged in the presence of large 
media conglomerates pointed to alleged effects of multiple station 
ownership, not cross-ownership of newspapers and broadcast stations. As 
the Commission has found, newspapers and broadcast stations generally 
do not compete in the same product markets, and it does not believe 
that an owner of a newspaper/television combination would possess any 
greater ability to impede local competition among local television 
stations than the well-capitalized owner of a single media property. 
Free Press pointed to various financial pressures that it claims have 
forced a number of minority owners to exit the market. To the extent 
that Free Press alleged that these financial difficulties stemmed from 
or were exacerbated by media consolidation, the consolidation to which 
Free Press refers is not related to the NBCO rule. Given that an NBCO 
restriction did not prevent the minority owners Free Press identified 
from leaving the market and in light of the Commission's finding that 
newspapers and broadcast stations generally do not compete in the same 
product market, the Commission seeks further comment specifically on 
the relationship between the NBCO rule and minority and female 
ownership.
    148. The MMTC Cross-Ownership Study stated that ``the impact of 
cross-media ownership on minority and women broadcast ownership is 
probably negligible.'' MMTC indicated that the study surveyed both 
minority- and/or female-owned broadcast stations in markets with cross-
owned media, along with non-minority/non-female-owned broadcast 
stations in the same markets, to explore whether there was a difference 
in the responses of the two groups regarding the importance of local 
cross-owned media. According to MMTC, the study's findings showed a 
lack of concern by almost all of the respondents about the presence of 
cross-owned media in the market. MMTC acknowledged, however, that the 
study was ``not intended as a comprehensive random sample survey'' and 
cautioned that the limited number of responses warrants ``great care'' 
in reaching any conclusions.
    149. A number of commenters argued that the MMTC Cross-Ownership 
Study was critically flawed in its methodology and analysis and that 
the Commission cannot rely on the study as a basis for policy making. 
In response, MMTC recognized that the MMTC Cross-Ownership Study is not 
dispositive but argued that it provides useful evidence about the 
impact of cross-ownership, noting the record was previously devoid of 
any such data.
    150. Given the limitations of the study that even MMTC 
acknowledges, the Commission does not believe it can draw definitive 
conclusions about the impact of cross-ownership on minority and female 
ownership from the MMTC Cross-Ownership Study alone. The Commission 
invites commenters to provide additional evidence that bears on this 
issue, especially any evidence arising since MMTC's filing of the 
study.
    151. Furthermore, the Commission notes that any attempt to conduct 
an empirical study of the relationship between cross-ownership 
restrictions and minority and female ownership would face obstacles 
that likely would make such study impractical and unreliable. A 
rigorous econometric analysis would require that the Commission observe 
a sufficient number of markets in which cross-ownership and/or minority 
and female ownership levels recently have shown variation. Due to the 
Commission's cross-ownership restrictions having been in place for such 
a long period of time and to low levels of minority and female 
ownership, however, both cross-ownership and minority and female 
ownership levels show very little variation, making empirical study of 
the relationship between these multiple variables extremely difficult. 
In

[[Page 29035]]

addition, any study necessarily would be based on a very small dataset 
for the same reasons. As a result of these limitations, any estimation 
of the relationship between cross-ownership restrictions and minority 
and female ownership is likely to be imprecise. Given such imprecision, 
the Commission does not believe that a study could extrapolate with any 
degree of confidence the effect that changing the Commission's cross-
ownership rules would have on minority and female ownership levels, and 
any attempt to do so would be misleading. Variation in ownership 
structure over time, resulting from additional cross-owned entities, 
could provide additional data points to study in the future. The 
Commission seeks comment on these views concerning the inherent 
challenges to conducting comprehensive research on these issues.
    152. Finally, the Commission emphasizes that, as proposed above, no 
newspaper/television combination would be permitted without a 
Commission waiver of a general rule prohibiting such combinations. Even 
a waiver request that would be granted a favorable presumption under a 
presumptive waiver standard would be subject to denial if the 
Commission found that the proposed transaction was likely to harm 
viewpoint diversity in the local market. A case-by-case waiver approach 
under either option the Commission offers for comment would allow for 
close Commission examination of the particular circumstances of a 
proposed combination. Where the newspaper purchase of a television 
station, minority/female-owned or otherwise, would disserve the public 
interest, the Commission would deny the request for a rule waiver. The 
Commission seeks comment on whether a waiver requirement would provide 
adequate protection when the particular circumstances of a proposed 
merger run counter to its diversity goals.
4. Radio/Television Cross-Ownership Rule
a. Introduction
    153. The Commission seeks comment on whether the radio/television 
cross-ownership rule, which limits the combined number of commercial 
radio and television stations a single entity may own in the same 
market, is still necessary in the public interest or whether it should 
be repealed. It seeks comment on whether the current media marketplace 
and the evidence adduced in the 2010 Quadrennial Review proceeding 
support a conclusion that the local television ownership rule and the 
local radio ownership rule, which the Commission proposes to retain 
with limited modification elsewhere in this Further Notice of Proposed 
Rulemaking, adequately serve the goals the radio/television cross-
ownership rule was intended to promote, namely, competition and 
diversity in local markets. The Commission seeks comment on whether the 
benefits of eliminating this regulation would outweigh any potential 
costs and whether simplifying its rules in this way would have only a 
minimal effect in most markets. Moreover, the Commission seeks comment 
on whether repeal of this rule would be consistent with its goal of 
promoting minority and female ownership of broadcast stations. The 
Commission invites commenters to discuss any relevant evidence in the 
2010 Quadrennial Review record and submit any new evidence that bears 
on its review of this rule. In addition, the Commission seeks comment 
on the costs and benefits of retaining or eliminating the radio/
television cross-ownership rule. To the greatest extent possible, 
commenters should quantify the expected costs or benefits of the rule 
and any alternatives and provide detailed support for any actual or 
estimated values provided, including the source of such data and/or the 
method used to calculate reported values.
b. Background
    154. In the NPRM, the Commission tentatively concluded that the 
radio/television cross-ownership rule is not currently necessary to 
promote the public interest. The Commission sought comment on a range 
of issues, including whether radio and television stations constitute 
different markets, whether repeal of the rule would encourage more and 
better competition in local media markets, whether repeal of the rule 
would result in additional broadcast consolidation, and what impact, if 
any, repeal would have on small, independent broadcasters, including 
those stations owned by minorities and women. The Commission indicated 
that changes in the marketplace and evidence from the media ownership 
studies specifically supported the tentative conclusion that the rule 
is not necessary to promote viewpoint diversity in local media markets.
    155. The Commission invites commenters to augment the 2010 
Quadrennial Review record with any new or different evidence, data, or 
information relevant to its consideration of the radio/television 
cross-ownership rule in this consolidated docket.
c. Discussion
    156. Considering the record in the 2010 Quadrennial Review 
proceeding and consistent with the tentative conclusion in the NPRM, 
the Commission seeks comment on whether the radio/television cross-
ownership rule is still necessary to promote the public interest or 
whether the rule should be repealed. The Commission notes that the 
record suggests that, unlike local television stations and daily 
newspapers, radio stations are not a dominant source of local news and 
information, and thus, the Commission seeks comment on whether 
retention of this rule is necessary to promote and preserve viewpoint 
diversity in local markets. Moreover, the Commission seeks comment on 
whether the existing rule offers substantial benefits in addition to 
its other rules. The Commission tentatively finds, as the Commission 
consistently has in past proceedings, that this rule is not necessary 
to support its goals of competition or localism.
    157. Viewpoint Diversity. Limiting the combined number of 
commercial radio and television stations that a single entity may own 
in a market was previously found necessary to promote a diversity of 
viewpoints. The Commission seeks comment on the continued necessity of 
such a restriction. It notes that, despite its specific request in the 
NPRM, no studies were submitted in the 2010 Quadrennial Review record 
to demonstrate that this rule supports viewpoint diversity or that 
repeal of the rule would cause a decrease in viewpoint diversity. The 
Commission seeks comment on whether the local radio and local 
television ownership rules, which it proposes to retain, as well as its 
proposed newspaper/television cross-ownership rule, would be sufficient 
to protect viewpoint diversity such that retaining the radio/television 
cross-ownership rule is unnecessary.
    158. The Commission seeks comment on evidence in the 2010 
Quadrennial Review record suggesting that radio stations are not 
currently a dominant source of local news and information. Consistent 
with the tentative conclusions in the NPRM, the record in the 2010 
Quadrennial Review proceeding demonstrates that consumers rely 
primarily on local television stations and daily newspapers (and their 
affiliated Web sites) for their local news, and not on radio stations. 
If the record demonstrates that radio stations are not the primary 
outlets that contribute to local viewpoint diversity, what harm to 
viewpoint diversity would

[[Page 29036]]

result from repealing the radio/television cross-ownership restriction? 
To the extent that noncommercial radio stations contribute to local 
news and information, the Commission notes that, because its ownership 
rules do not apply to noncommercial radio stations, the repeal of this 
rule would not impact their contribution to viewpoint diversity. The 
Commission seeks comment on how this fact should affect its analysis.
    159. The Commission has previously acknowledged that radio is a 
distant third behind newspapers and television stations in terms of 
being an important provider of news and information. Indeed, the 
Commission has long recognized that ``a radio station cannot be 
considered the equal of either the newspaper or the television station 
in any sense, least of all in terms of being a source for news or for 
being the medium turned to for discussion of matters of local 
concern.'' In the 2006 Quadrennial Review Order the Commission decided 
to retain the radio/television cross-ownership rule on the basis that 
the public relied on both radio and television for news and 
information. Information in the record in the 2010 Quadrennial Review 
proceeding, as well as the Information Needs of Communities Report and 
the most recent media ownership studies, suggest that local radio 
stations do not contribute to local viewpoint diversity to the same 
degree as local television stations and daily newspapers.
    160. As discussed in the context of the NBCO rule above, recent 
evidence demonstrates that consumers regard local television stations 
and daily newspapers as the principal sources of local news and 
information. According to a recent Pew study, this popularity has, in 
turn, encouraged many television stations to produce more local morning 
and mid-day news programming, further establishing television stations 
as the main providers of local news and information in local markets. 
Independent television stations, particularly in those markets where 
they air local news, showed bigger audience or ratings gains in 2011 
when compared to any of the stations affiliated with Big Four broadcast 
networks, which may provide more national programming content during 
those day parts.
    161. As described in detail above, the Information Needs of 
Communities Report records a steady decline over the past two decades 
in consumer reliance on commercial radio news. The number of people who 
listen to some news on the radio dropped from 54 percent to 34 percent 
during that period. Only 30 commercial radio stations out of over 
11,000 are all-news radio stations, a reduction from 50 in the mid-
1980s. Although the Commission acknowledges that a small number of 
commercial all-news radio stations in the nation's largest markets are 
very successful, radio stations in most cities do not provide local 
journalism. Eighty-six percent of programming on news-talk stations is 
nationally syndicated, rather than locally produced. The Commission 
seeks comment on whether there is any more recent countervailing 
evidence refuting these trends.
    162. Additionally, the Commission seeks comment on whether the 
existing radio/television cross-ownership rule provides meaningful 
additional restriction on consolidation, given that the local 
television and radio rules separately impose limitations on the amount 
of broadcast ownership permitted in local markets. Would the repeal of 
the rule have more than a minimal impact on broadcast consolidation in 
most local markets, as parties would continue to be constrained by the 
applicable local radio and local television ownership rules? As 
discussed in the NPRM, absent the radio/television cross-ownership 
rule, an entity approaching the limits of the existing cap, if 
constrained only by the local radio rule, would be permitted to acquire 
one or two additional radio stations in large markets, at most. Under 
the local radio rule, an entity owning six or seven radio stations can 
own as many as eight radio stations in the largest radio markets in the 
absence of the cross-ownership rule. The Commission seeks comment on 
whether the local radio rule is sufficient to protect competition in 
local radio markets. It believes the elimination of the radio/
television cross-ownership rule would have no effect on the number of 
television stations an entity may own as the existing cross-ownership 
rule references the local television rule to determine how many 
television stations an entity may own. The Commission seeks comment on 
this conclusion and on whether the radio/television cross-ownership 
rule has independent effects, aside from those provided by the other 
local ownership rules, on consolidation in most local markets.
    163. The Commission also seeks comment on the implications of the 
cross-ownership rule's two-tiered voice count restriction on broadcast 
consolidation in local markets. The restrictions appear to be readily 
met in many markets. In many large markets, the requirement that at 
least 20 independently owned and operating media voices remain in order 
to own television stations and as many as six or seven radio stations 
is met or exceeded and therefore appears to have little effect. 
Similarly, in many small markets the requirement that at least 10 
independently owned media voices remain in order to own a television 
station and as many as four radio stations is met, so that element of 
the rule presumably has a limited impact on the potential for 
consolidation in those markets. The Commission seeks comment on these 
findings and on markets where this element of the rule may have an 
impact on television/radio consolidation. What is the significance of 
any such impact? The Commission seeks comment on whether the record 
from the 2010 Quadrennial Review proceeding or any more recent evidence 
establishes any particular or measurable potential harm that would 
likely result from repeal of this cross-ownership rule.
    164. Competition. Consistent with prior holdings, the Commission 
tentatively finds that the radio/television cross-ownership rule is not 
necessary to promote competition. The Commission has found previously 
that most advertisers do not consider radio and television to be good 
substitutes for one another, and that ``television and radio stations 
neither compete in the same product market nor do they bear any 
vertical relation to one another.'' This position is consistent with 
the long-standing conclusion of the Department of Justice, which 
considers radio advertising as a separate antitrust market for purposes 
of its competition analysis. Similarly, the Commission tentatively 
finds that most consumers do not consider radio and television stations 
to be substitutes for one another and do not switch between television 
viewing and radio listening based on program content. Nothing in the 
current record undermines the Commission's previous conclusion that a 
television-radio combination, therefore, cannot adversely affect 
competition in any relevant product market. Given that radio and 
television stations do not appear to compete in the same market and 
that the local television and radio rules would prevent significant 
additional consolidation even in the absence of this rule, the 2010 
Quadrennial Review record does not suggest that repeal of the radio/
television cross-ownership rule would harm competition. The Commission 
seeks comment on whether any data or evidence made available since the 
NPRM warrants a renewed analysis of the competitive effect of the 
radio/television cross-ownership.
    165. Localism. Consistent with the tentative conclusion in the NPRM 
and

[[Page 29037]]

previous Commission holdings, the Commission tentatively finds that the 
radio/television cross-ownership rule is not necessary to promote 
localism. The Commission seeks comment on this tentative conclusion. 
Furthermore, it seeks comment on whether elimination of this rule is 
likely to result in benefits to localism in the form of improved or 
expanded programming.
    166. The Commission sought comment in the NPRM on the relevance of 
the media ownership studies to its analysis of whether the radio/
television cross-ownership rule promotes its localism goals. The 
Commission specifically highlighted the findings in Media Ownership 
Study 1 and Media Ownership Study 4 about the correlation between the 
level of radio/television cross-ownership in a market and the amount of 
local television programming provided. The Commission stated in the 
NPRM that Media Ownership Study 1 examines how cross-ownership is 
associated with localism, as measured by the amount of local news 
provided in the market, and that the study finds that cross-ownership 
decreases local television news hours but raises ratings, which leads 
to ambiguous results. Additionally, the Commission observed the finding 
in Media Ownership Study 4 that, at the station level, radio/television 
cross-owned stations appear to air more local news on average, though 
the impact is marginal. The study showed that for every additional in-
market radio station a parent owned, the television station aired 3.7 
more minutes of local news. Some commenters in the 2010 Quadrennial 
Review proceeding maintained that these media ownership studies support 
the conclusion that the cross-ownership rule cannot be justified based 
on localism concerns. NAB stated that the record is clear that repeal 
of the radio/television cross-ownership rule would benefit both 
localism and diversity.
    167. The Commission agrees with industry commenters who maintained 
that some limited cross-ownership could create efficiencies that could 
benefit the public should broadcasters choose to invest additional 
resources in the production of local news and information programming. 
When broadcasters engage in joint operations, whether those operations 
are focused on programming and news gathering or back office matters, 
the Commission believes it likely that financial efficiencies result. 
Such efficiencies could lead ultimately to consumer benefits in the 
form of additional station investments in equipment for radio or 
television newsrooms, an increase in staffing for news and 
informational programs, or additional local news coverage on radio 
stations. The Commission recognizes the potential for such benefits and 
seeks comment on the likely extent of such gains if the rule were 
repealed.
    168. Minority and Female Ownership. The Commission also sought 
comment in the NPRM on the effect that eliminating the radio/television 
cross-ownership rule would have on efforts to foster ownership 
diversity among minorities and females. Further, the Commission sought 
comment on the minority and female ownership data contained in the 2012 
323 Report. In addition, interested parties had the opportunity to 
comment on the MMTC Cross-Ownership Study, as discussed in the context 
of the NBCO rule above. In response, several commenters criticized the 
Commission for proposing to relax any of its rules, including the 
radio/television cross-ownership rule, without first determining that 
there will be no negative impact on minority and female ownership. The 
Commission has considered carefully whether there is evidence in the 
current record that elimination of the radio/television cross-ownership 
rule would likely adversely affect minority and female ownership, and 
it believes, as discussed below, that the current record does not 
establish that such harm is likely. Furthermore, the Commission does 
not believe that record evidence shows that the cross-ownership ban has 
protected or promoted minority or female ownership of broadcast 
stations, or that it could be expected to do so in the future. 
Nevertheless, the Commission invites commenters to submit further data 
on the connection, if any, between the radio/television cross-ownership 
rule and minority and female ownership.
    169. Notably, radio/television cross-ownership combinations were 
not the focus of commenters' concerns raised in response to the NPRM. 
In fact, no commenter to the NPRM presented empirical data or other 
analyses that established that repeal of this rule would harm 
competition, localism, or viewpoint diversity in local markets. As 
discussed above, the Commission tentatively concludes that the rule is 
not necessary to promote competition or localism, and the record 
reflects that most radio commercial stations do not broadcast 
significant amounts of local news and information. The current record 
does not suggest that minority/female-owned radio stations contribute 
more significantly to viewpoint diversity than other radio stations or 
broadcast more meaningful amounts of local news on which consumers rely 
as a primary source of information. The Commission seeks comment on 
these views. As discussed further in the Diversity section below, 
several of the media ownership studies in this proceeding concluded 
that there is a positive relationship between minority station 
ownership and the provision of certain types of minority-oriented 
content or the consumption of broadcast content by minority audiences. 
Several commenters also raised this issue. This observation, however, 
does not alter the Commission's view that radio stations--be they 
minority-owned or not--do not contribute significantly to local news. 
The Commission seeks comment on whether recent evidence shows 
otherwise. Recognizing that repeal of the rule would potentially allow 
for the acquisition of a limited number of additional radio stations in 
some markets by incumbent television broadcasters, the Commission seeks 
comment on the impact that elimination of the rule would have on media 
consolidation and thus on small broadcast owners, including minority 
and women owners. As noted above, the current radio/television rule 
already allows for a significant degree of cross-ownership of radio and 
television stations in a market. Second, the cross-ownership rule has 
always been accompanied by the ownership limitations contained in the 
local television and local radio rules, which the Commission proposes 
to retain substantively unchanged in order to protect competition in 
local markets. The Commission seeks comment on whether the local 
ownership rules are sufficient to protect minority and female broadcast 
owners from the competitive effects of media consolidation.
    170. Moreover, while the Commission acknowledges the concerns 
raised by NABOB and others advocating for additional minority ownership 
opportunities, it agrees with commenters, including NAB, that the low 
level of minority and female broadcast ownership cannot be attributed 
solely or primarily to consolidation. Nor has any commenter shown that 
these low levels of ownership are a result of the existing radio/
television cross-ownership rule. The Commission recognizes the presence 
of many disparate factors, including, most significantly, access to 
capital, as longstanding, persistent impediments to ownership diversity 
in broadcasting. As discussed below, such factors require further study 
and consideration.
    171. In this Further Notice of Proposed Rulemaking, the Commission

[[Page 29038]]

reaffirms its commitment to broadcast ownership diversity as an 
important goal. The 2010 Quadrennial Review record, however, does not 
appear to establish that elimination of the radio/television cross-
ownership rule would adversely affect ownership diversity. The 
Commission asks commenters to provide any demonstrable evidence of such 
a link that may have become available since the 2010 Quadrennial 
Review.
5. Dual Network Rule
a. Introduction
    172. The Commission tentatively finds that the dual network rule, 
which permits common ownership of multiple broadcast networks, but 
prohibits a merger between or among the ``top-four'' networks (ABC, 
CBS, Fox, and NBC), continues to be necessary to promote competition 
and localism and should be retained without modification. In 
particular, the Commission tentatively finds that the top-four 
broadcast networks have a distinctive ability to attract, on a regular 
basis, larger primetime audiences than other broadcast and cable 
networks, which enables them to earn higher rates from those 
advertisers willing to pay a premium for such audiences. Thus, the 
Commission believes that 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 also tentatively 
find that the rule remains necessary to preserve the balance of 
bargaining power between the top-four networks and their affiliates, 
thus improving the ability of affiliates to exert influence on network 
programming decisions in a manner that best serves the interests of 
their local communities. The Commission tentatively concludes that the 
benefits of retaining the rule outweigh any potential burdens. The 
Commission seeks comment on these tentative findings, particularly with 
respect to any relevant developments that may have occurred since the 
NPRM. The Commission seeks comment also on the costs and benefits of 
its proposal to retain the existing dual network rule. To the greatest 
extent possible, commenters should quantify the expected costs or 
benefits of the rule and provide detailed support for any actual or 
estimated values provided, including the source of such data and/or the 
method used to calculate reported values.
b. Background
    173. In the NPRM, the Commission sought comment on its tentative 
conclusion that the existing dual network rule should be retained 
without modification in order to promote competition. The Commission 
also sought comment on the potential impact of top-four network mergers 
on localism. The Commission invites commenters to augment the 2010 
Quadrennial Review record with any new or different evidence, data, or 
information relevant to its consideration of the dual network rule in 
this consolidated docket.
c. Discussion
    174. Competition. Consistent with the Commission's tentative 
conclusion in the NPRM, the Commission tentatively finds that the dual 
network rule remains necessary in the public interest to foster 
competition in the provision of primetime entertainment programming and 
the sale of national advertising time. Specifically, as discussed in 
more detail below, the Commission tentatively finds that the primetime 
entertainment programming supplied by the top-four broadcast networks 
is a distinct product, the provision of which could be restricted if 
two of the four major networks were to merge. The Commission also 
tentatively finds that, consistent with past Commission findings, the 
top-four broadcast networks comprise a ``strategic group'' in the 
national advertising market and compete largely among themselves for 
advertisers that seek to reach large, national mass audiences. 
Accordingly, the Commission continues to believe that a top-four 
network merger would substantially lessen competition for advertising 
dollars in the national advertising market, which would, in turn, 
reduce incentives for the networks to compete with each other for 
viewers by providing innovative, high quality programming. Based on 
their distinctive characteristics relative to other broadcast and cable 
networks, the Commission tentatively finds that the top-four broadcast 
networks serve a unique role in the provision of primetime 
entertainment programming and the sale of national advertising time 
that justifies retaining a rule specific to them. The Commission seeks 
comment on these tentative findings.
    175. As noted in the NPRM, in comparison to other broadcast and 
cable networks, the top-four broadcast networks achieve substantially 
larger primetime audiences, as measured both by the audience size for 
individual programs and by the audience size for each network as a 
whole. Primetime broadcast 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 both mass 
audiences and the advertisers that want to reach such large, national 
audiences. By contrast, other broadcast networks, and many cable 
networks, tend to target more specialized, niche audiences. As CBS 
noted, in recent years, some cable networks have moved away from 
serving niche audiences and have modified their primetime programming 
lineups to more closely resemble those of broadcast networks. 
Nonetheless, with the exception of certain individual sports events or 
mini-series, even the highest rated primetime entertainment programs on 
cable networks achieve substantially smaller audiences than their 
broadcast network counterparts. For instance, during 2011, the highest 
rated primetime entertainment programs on cable networks attracted, at 
most, between 8 and 9 million viewers. By contrast, in any given week 
during the 2010-2011 television season, there were typically a dozen or 
more primetime entertainment programs on the top-four broadcast 
networks that attracted more than 10 million viewers, with the highest 
rated broadcast programs frequently attracting more than 20 million 
viewers, based on Nielsen data. Thus, the audience size for individual 
primetime entertainment programs provided by each of the top-four 
broadcast networks remains unmatched by that of any other broadcast or 
cable network.
    176. Furthermore, as measured at the network level, the average 
primetime audience size for each of the top-four broadcast networks 
remains significantly larger than the audience size for even the most 
popular cable networks. The Commission recognizes that consumers 
generally substitute between broadcast and cable networks and that the 
gap in size between broadcast and cable audiences has narrowed over 
time, such that the aggregate audience for cable networks is now 
larger. Nevertheless, as stated in the NPRM, in 2009-2010 the average 
primetime audience for a top-four broadcast network remained 
substantially larger than the average primetime audience for other 
broadcast and cable networks. The Commission finds that this gap in 
audience size

[[Page 29039]]

continued in 2011. In 2011, the average primetime audience for a top-
four broadcast network was nearly three times larger than the average 
primetime audience for the highest rated cable networks, based on SNL 
Kagan data. In addition, 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 more than five times larger 
than that of the next highest-rated English-language broadcast network. 
As a result, based on the 2010 Quadrennial Review record, the 
Commission tentatively finds that, despite the ability of certain 
primetime cable network programs to achieve large audiences on 
occasion, in general, primetime entertainment programming provided by 
the top-four broadcast networks remains a distinct product capable of 
attracting large audiences, the size of which individual cable networks 
cannot consistently replicate. The Commission seeks comment on whether 
this audience gap has narrowed significantly since the NPRM.
    177. Another indicator that the top-four broadcast networks are 
distinct from cable networks is the wide disparity in advertising 
prices between them. Using data for 2009, the Commission found in the 
NPRM that the top-four broadcast networks generally earn higher 
advertising rates than cable networks. In 2011, based on SNL Kagan 
data, the average advertising rate among the top-four broadcast 
networks, as measured in cost per thousand views (referred to as cost 
per mille or CPM), was $19.19. By contrast, the four highest CPMs among 
non-sports cable networks were for MTV, Bravo, Discovery Channel, and 
TBS, which had an average CPM of $10.95, or approximately 43 percent 
less than that of the top-four broadcast networks. The appeal of the 
top-four broadcast networks to advertisers seeking large, national 
audiences is also reflected in data on net advertising revenues. In 
2011, the top-four broadcast networks averaged $3.17 billion in net 
advertising revenues, based on SNL Kagan data. By contrast, the four 
non-sports cable networks with the highest net advertising revenue 
totals (Nickelodeon, USA Network, TNT, and MTV) averaged just under 1 
billion dollars in net advertising revenues, or less than one-third of 
the average amount that the top-four broadcast networks received. The 
Commission invites commenters to provide any relevant data that has 
become available more recently.
    178. The Commission tentatively concludes that it should adopt the 
proposal in the NPRM to retain the existing dual network rule without 
modification in order to promote competition. The Commission finds 
force in WGAW's view that the rule remains necessary to promote 
competition in the market for primetime programming. Specifically, the 
Commission believes that the top-four broadcast networks have a 
distinctive ability to attract, on a regular basis, larger primetime 
audiences than other broadcast and cable networks, which enables them 
to earn higher rates from those advertisers that are willing to pay a 
premium for such audiences. Thus, the Commission believes that 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 the 
primetime entertainment programming provided by the top-four broadcast 
networks and national television advertising time are each distinct 
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 television advertising time. The Commission seeks 
comment on these tentative conclusions.
    179. Localism. In addition to promoting its competition goal, the 
Commission tentatively finds that, consistent with past Commission 
findings, the dual network rule remains necessary to promote its 
localism goal. Specifically, the Commission tentatively finds that the 
rule remains necessary to preserve the balance of bargaining power 
between the top-four networks and their affiliates, thus improving the 
ability of affiliates to exert influence on network programming 
decisions in a manner that best serves the interests of their local 
communities. Typically, a critical role of a broadcast network is to 
provide its local affiliates with high quality programming. Because 
this programming is distributed across the country, broadcast networks 
have an economic incentive to ensure that the programming both appeals 
to a mass, nationwide audience and is widely shown by affiliates. A 
network's local affiliates serve a complementary role by providing 
local input in network programming decisions and airing programming 
that serves the specific needs and interests of that specific local 
community. As a result, the economic incentives of the networks are not 
always aligned with the interests of the local affiliates or the 
communities they serve.
    180. In the context of this complementary network-affiliate 
relationship, the Commission believes that the dual network rule is, as 
the Affiliates Associations asserted, ``an important structural 
principle'' that helps to maintain equilibrium. Specifically, the 
Commission tentatively finds that a top-four network merger would 
reduce the ability of a network affiliate to use the availability of 
other top, independently owned networks as a bargaining tool to 
influence programming decisions of its network, including the 
affiliate's ability to engage in a dialogue with its network over the 
suitability for local audiences of either the content or scheduling of 
network programming. The Commission seeks comment on its tentative 
conclusion that the dual network rule remains necessary to foster 
localism.
    181. The NPRM also sought comment on whether antitrust laws and the 
Commission's public interest standard are sufficient to address any 
harms to competition or localism that would result from a top-four 
network merger. As discussed above, the Commission is concerned here 
that a top-four network merger would restrict the availability, price, 
and quality of primetime entertainment programming to the detriment of 
consumers. The Commission is also concerned that the bargaining power 
and influence of affiliates would be reduced. As the Commission has 
previously noted, it does not think antitrust enforcement would 
adequately protect against these harms. The Commission seeks comment on 
these concerns.
    182. Dual Affiliation. Some commenters urged the Commission to 
prohibit a TV station from affiliating with two or more top-four 
broadcast networks in a single market, because they contended that the 
practice allows stations to circumvent the intent of the dual network 
rule. Specifically, commenters claimed that dual affiliation allows a 
broadcaster to ``do locally what the networks are forbidden from doing 
nationally,'' which is to consolidate the bargaining power of multiple 
top-four network signals under the control of a single entity. The 
Commission notes, however, that the dual network rule addresses harms 
to competition and localism that would result from the consolidation of 
top-four

[[Page 29040]]

network ownership at the national level. In particular, as discussed 
above, the Commission tentatively finds that a combination between top-
four broadcast networks would reduce the number of networks competing 
for national advertisers and would reduce the ability of a local 
affiliate to use the availability of other top, independently owned 
networks as a bargaining tool to influence network programming 
decisions. By contrast, the Commission believes that dual affiliation 
does not give rise to either of these harms because it does not reduce 
the number of network owners. Although commenters are invited to offer 
opposing views, the Commission does not perceive arguments related to 
dual affiliation as relevant to consideration of the dual network rule. 
Instead, it believe that issues related to dual affiliation, including 
the potential consolidation of market power by a single station owner 
in a local market, are more relevant to the local television ownership 
rule, and the Commission discusses them above in that context.

D. Diversity Order Remand

1. Introduction
    183. In addition to assessing each of the broadcast ownership 
rules, the Commission is considering in this proceeding the Third 
Circuit's remand of certain aspects of the Commission's 2008 Diversity 
Order. In Prometheus II, the Third Circuit concluded that the decision 
in the Diversity Order to adopt a revenue-based eligible entity 
definition as a race-neutral means of facilitating ownership diversity 
was arbitrary and capricious, because the Commission did not show how 
such a definition specifically would assist minorities and women, who 
were among the intended beneficiaries of this action. In light of this 
conclusion, the Third Circuit remanded each of the measures adopted in 
the Diversity Order that relied on the revenue-based definition.
    184. Based on its analysis of the preexisting eligible entity 
standard as well as the measures to which it applied, the Third 
Circuit's remand instructions, and the record thus far in this 
proceeding, the Commission tentatively concludes that the revenue-based 
eligible entity standard should be reinstated and applied to the 
regulatory policies set forth in the Diversity Order. The Commission 
believes that small businesses benefit from flexible licensing policies 
and that making it easier for small business applicants to participate 
in the broadcast industry will encourage innovation and enhance 
viewpoint diversity.
    185. For the reasons explained below, the Commission tentatively 
concludes that the Commission is not in a position at this time to 
adopt a socially disadvantaged business (SDB) eligibility standard, 
which expressly would recognize the race and ethnicity of applicants, 
or any other race- or gender-targeted measures. The Commission invites 
further input on ways to expand the participation of minorities and 
women in the broadcast industry. It also seeks comment on specific 
measures, in addition to those that that the Commission tentatively 
concludes should be reinstated, that may provide further opportunities 
for minorities and women to own and operate broadcast outlets.
    186. The Commission discusses below the actions that it currently 
believes are appropriate in response to the Third Circuit remand of the 
Diversity Order.
2. Background
a. Commission Diversity Initiatives
    187. In addition to promoting viewpoint diversity generally through 
the broadcast ownership rules, the Commission has a long history of 
promulgating rules and regulations intended to foster diversity in 
terms of minority and female ownership. Although the Commission and 
Congress previously made available race- and gender-conscious measures 
intended specifically to assist minorities and women in their efforts 
to acquire broadcast properties, such as tax certificates and distress 
sale policies, those policies and programs were discontinued following 
the Supreme Court's 1995 decision in Adarand Constructors, Inc. v. 
Pe[ntilde]a. The Supreme Court held in Adarand that any federal program 
in which the ``government treats any person unequally because of his or 
her race'' must satisfy the ``strict scrutiny'' constitutional standard 
of judicial review. Under strict scrutiny, racial classifications are 
constitutional only if they are narrowly tailored measures that further 
a compelling governmental interest. As a result, the Commission 
currently does not use race or ethnic origin as a factor in its 
ownership diversification policies. In addition, Congress repealed the 
tax certificate policy in 1995 as part of its budget approval process.
    188. The Commission announced in October 2013 that it is conducting 
a study of Hispanic television viewing. The study is the Commission's 
first systematic examination of the Hispanic television market, a 
market that implicates an important and growing segment of the nation's 
population. It incorporates comprehensive data from the improved Form 
323 biennial ownership reports, described below. Specifically, the 
study will consider: (1) The impact of Hispanic-owned television 
stations on Hispanic-oriented programming and Hispanic viewership in 
selected local television markets; (2) the extent of Hispanic-oriented 
programming on U.S. broadcast television; and (3) the role of digital 
multicasting in increasing the amount of Hispanic-oriented programming.
b. Data Collection Concerning Minority and Female Ownership
    189. Collection of Biennial Ownership Data. As explained in detail 
in the NPRM, the Commission actively has sought in recent years to 
improve its collection and analysis of broadcast ownership information. 
Among other initiatives, the Commission has implemented major changes 
to its Form 323 biennial ownership reports to improve the reliability 
and utility of the data reported in the form, including data regarding 
minority and female broadcast ownership.
3. Discussion
a. Remand Review of the Revenue-Based Eligible Entity Standard
    190. Background. The Commission solicited comment in the NPRM on 
whether the Commission should reinstate the pre-existing revenue-based 
eligible entity definition to support the measures the Third Circuit 
vacated and remanded as well as other measures the Commission may 
implement in the future. In light of the Third Circuit's conclusion 
that the Commission previously had failed to demonstrate a nexus 
between this definition and its stated goal of promoting female and 
minority ownership, the Commission asked commenters to supply any 
available evidence demonstrating that a revenue-based definition would 
support this specific policy objective. In addition, the Commission 
sought comment on whether re-adoption of the revenue-based standard 
would support its traditional diversity, localism, and competition 
goals in other ways, particularly by enhancing ownership opportunities 
for small businesses and other new entrants.
    191. The Commission adopted its revenue-based eligible entity 
definition in the 2002 Biennial Review Order as an exception to the 
prohibition on the transfer of grandfathered station combinations that 
violated then newly adopted local radio ownership limits.

[[Page 29041]]

The Commission ruled that licensees would be allowed to transfer 
control of or assign a grandfathered combination to an eligible entity, 
which was defined as any entity that would qualify as a small business 
consistent with SBA standards for its industry grouping, based on 
revenue. In addition, the Commission ruled that eligible entities would 
be permitted, with limited restrictions, to sell existing grandfathered 
combinations intact to new owners. The Commission adopted this transfer 
policy as a means to promote diversity of ownership and observed more 
generally that policies supporting the entry of new participants into 
the broadcasting industry also may promote innovation in the field.
    192. Thereafter, in the Diversity Order, the Commission concluded 
that additional uses of the eligible entity definition would advance 
its objectives of promoting diversity of ownership in the broadcast 
industry by making it easier for small businesses and new entrants to 
acquire licenses and attract the capital necessary to compete in the 
marketplace with larger and better financed companies. In this regard, 
the Commission stated that the adoption of new measures relying on this 
definition would ``be effective in creating new opportunities for 
broadcast ownership by a variety of small businesses and new entrants, 
including those owned by women and minorities.'' The Commission further 
observed that facilitating market entry by new entrants into the 
broadcast industry would promote new programming services, particularly 
those that are responsive to local needs, interests, and audiences 
currently underserved. Thus, between 2002 and the Third Circuit's 
remand of the measures relying on the eligible entity definition in 
2011, the Commission used the revenue-based standard to support a range 
of measures intended to encourage ownership diversity.
    193. Several commenters, including AWM and NAB, supported 
reinstatement of a revenue-based eligible entity definition and the 
measures to which it previously applied as a means to diversify 
broadcast ownership. UCC et al. recommended that, instead of abandoning 
or repurposing the current eligibility definition, the Commission 
should assess whether it has had any measurable effect on the ownership 
of broadcast stations by minorities and women. As discussed in more 
detail below, DCS believed that the Commission should adopt a revised 
eligible entity definition that incorporates the Overcoming 
Disadvantage Preference (ODP) standard proposed by the Commission's 
Diversity Advisory Committee in 2010. According to DCS, no meaningful 
impact on minority ownership will be achieved by relying on a 
definition based solely upon the SBA's revenue limits for small 
businesses.
    194. Discussion. The Commission tentatively concludes that a 
revenue-based eligible entity standard is an appropriate and worthwhile 
approach for expanding ownership diversity whether or not the standard 
is effective in promoting ownership of broadcast stations by women and 
minorities. The Commission concedes that it does not have an 
evidentiary record demonstrating that this standard specifically 
increases minority and female broadcast ownership. The Commission 
invites commenters to supplement the record with any new data or 
analysis that may bear on this issue. Nonetheless, even in the absence 
of such evidence, the Commission believes that reinstatement of the 
revenue-based standard would serve the public interest by promoting 
small-business participation in the broadcast industry. The Commission 
believes that small-business applicants and licensees benefit from 
flexible licensing, auction, transactions, and construction policies. 
Often, small-business applicants have financing and operational needs 
distinct from those of larger broadcasters. By easing certain 
regulations for small broadcasters, the Commission believes that it 
will promote its public interest goal of making access to broadcast 
spectrum available to a broad range of applicants. The Commission also 
believes that enabling more small businesses to participate in the 
broadcast industry will encourage innovation and expand ownership and 
viewpoint diversity.
    195. The Commission seeks comment on these tentative conclusions. 
The Commission also seeks input on other potential public interest 
benefits or detriments that could result from reinstating the eligible 
entity standard. It is interested in hearing from eligible entity 
broadcasters that have used one or more of the measures adopted in the 
Diversity Order. What measures were used? Did the eligible entity 
definition facilitate entry into broadcast ownership? Was increased 
financing and investment available to eligible entity broadcasters as a 
result of the existence of the eligible entity standard or any of the 
measures? The experiences of such broadcasters could aid the 
Commission's assessment of this standard and the measures that utilize 
the definition.
    196. The Commission's records indicate that a large number of 
Commission permittees and licensees previously have availed themselves 
of policies based on the revenue-based eligible entity standard. In 
particular, the Diversity Order afforded eligible entities that acquire 
broadcast construction permits through an assignment from another 
permittee additional time to construct their facilities under certain 
circumstances, and many small businesses made use of this measure. FCC 
Form 314 requires that assignees in broadcast transactions indicate 
whether the assignee is an eligible entity as that term is defined in 
the Diversity Order. Between the implementation of the eligible entity 
definition and the suspension of the definition following the 
Prometheus II decision, Commission staff processed approximately 247 
Form 314 construction permit assignment applications in which the 
assignee self-identified as an eligible entity. Of those 247 
applications, approximately 132 (53.4 percent) of the eligible entities 
have constructed their broadcast facilities and are now on the air. The 
data also reveal that the largest group of broadcasters that availed 
themselves of the eligible entity definition are noncommercial 
educational broadcasters. Of the 247 total eligible entities, 160 (64.7 
percent) are NCE permittees or licensees.
    197. On the whole, the Commission believes that these data indicate 
that the revenue-based eligible entity standard has been used 
successfully by small firms and has aided their entry into, as well as 
sustained their presence in, broadcasting in furtherance of the 
Commission's public interest goals. While these data may not include 
the total number of applicants and permittees that have availed 
themselves of one or more of the measures to which the eligible entity 
standard applied, this information nonetheless suggests that providing 
additional time to construct broadcast facilities and other measures 
have assisted market entry by small broadcasters.
    198. The Commission also tentatively concludes that, if the 
Commission reinstates the eligible entity definition, it would be 
appropriate to readopt each measure relying on this definition that was 
remanded in Prometheus II. These measures include: (1) Revision of 
Rules Regarding Construction Permit Deadlines (The Commission proposes 
that this exception to its strict broadcast station construction 
policy, if reinstated by the Commission, would be limited to one 18-
month extension based on one assignment to an eligible entity.

[[Page 29042]]

Moreover, to ensure realization of its policy goals, in reviewing the 
permit sale to the eligible entity, the Commission proposes to assess 
the bona fides of both the arms-length structure of the transaction and 
the assignee's status as an eligible entity.); (2) Modification of 
Attribution Rule (In addition, pursuant to the new entrant bidding 
credits available under the Commission's broadcast auction rules, the 
modified EDP attribution standard was available to interest holders in 
eligible entities that are the winning bidders in broadcast auctions. 
The Commission proposes to reinstate this application of the modified 
EDP standard.); (3) Distress Sale Policy; (4) Duopoly Priority for 
Companies that Finance or Incubate an Eligible Entity; (5) Extension of 
Divestiture Deadline in Certain Mergers; and (6) Assignment or Transfer 
of Grandfathered Radio Station Combinations.
    199. The Commission proposes to define an eligible entity as any 
entity, commercial or noncommercial, that would qualify as a small 
business consistent with SBA standards for its industry grouping, based 
on revenue. The Commission proposes to include both commercial and 
noncommercial entities within the scope of the term ``eligible entity'' 
to the extent that they otherwise meet the criteria of this standard. 
The Commission previously applied the SBA standards to define eligible 
entities, and the Commission seeks comment on whether those standards 
should apply if it re-adopts the eligible entity standard. The 
Commission requests comment on whether there is any reason to use 
different eligible entity definitions for commercial and noncommercial 
entities. For all SBA programs, a radio or television station with no 
more than $35.5 million dollars in annual revenue currently is 
considered a small business. To determine qualification as a small 
business, the SBA considers the revenues of the parent corporation and 
affiliates of the parent corporation, not just the revenues of 
individual broadcast stations. The Commission proposes to do the same. 
In addition, in order to ensure that ultimate control rests in an 
eligible entity that satisfies the revenue criteria, the Commission 
proposes that the entity must satisfy one of several control tests. 
Specifically, the eligible entity would have to hold: (1) 30 percent or 
more of the stock/partnership shares and more than 50 percent voting 
power of the corporation or partnership that will hold the broadcast 
license; (2) 15 percent or more of the stock/partnership shares and 
more than 50 percent voting power of the corporation or partnership 
that will hold the broadcast licenses, provided that no other person or 
entity owns or controls more than 25 percent of the outstanding stock 
or partnership interest; or (3) more than 50 percent of the voting 
power of the corporation if the corporation that holds the broadcast 
licenses is a publicly traded company.
    200. The Commission seeks comment on the costs and benefits of the 
proposal to adopt a revenue-based eligible entity definition and the 
measures relying on this definition as proposed herein. To the greatest 
extent possible, commenters should quantify the expected costs or 
benefits of the proposals and provide detailed support for any actual 
or estimated values provided, including the source of such data and/or 
the method used to calculate reported values.
b. Remand Review of a Race- or Gender-Conscious Eligible Entity 
Standard
(i) Background
    201. The Third Circuit in Prometheus II instructed the Commission 
to address on remand the other eligible entity definitions it had 
considered when the revenue-based definition was adopted. Specifically, 
in the Diversity Third FNPRM, the Commission sought comment on the 
possibility of replacing the revenue-based standard with a standard 
based on the SBA's definition of SDBs used for purposes of its Business 
Development Program. Pursuant to the SBA's program, persons of certain 
racial or ethnic backgrounds are presumed to be disadvantaged; all 
other individuals may qualify for the program if they can show by a 
preponderance of the evidence that they are disadvantaged. In response 
to the court's directive, the Commission sought comment in the NPRM on 
the benefits and risks of adopting an SDB standard to support the 
various ownership diversity measures remanded by the court. The 
Commission also solicited input on other proposals that were included 
in the Diversity Third FNPRM as well as any other race- or gender-
conscious standards the Commission should consider.
    202. Under the SBA's 8(a) Business Development Program, certain 
individuals are presumed to be socially disadvantaged: African-
Americans, Hispanic Americans, Asian Pacific Americans, Native 
Americans (American Indians, Eskimos, Aleuts, or Native Hawaiians), and 
Subcontinent Asian Americans. Additionally, the SBA permits the 
applicant to show through a ``preponderance of the evidence'' social 
disadvantage due to gender, physical handicap, long-term residence in 
an environment isolated from the mainstream of American society, or 
other similar causes.
    203. To the extent an SDB standard includes race-specific criteria, 
it would be subject to strict constitutional scrutiny. As explained in 
the NPRM, rules and policies that operate based on race, ethnic origin, 
or gender are subject to an exacting constitutional analysis. All race-
based classifications imposed by the government ```must be analyzed by 
a reviewing court under strict scrutiny' . . . [and] are constitutional 
only if they are narrowly tailored to further compelling governmental 
interests.'' The U.S. Supreme Court to date has accepted only two 
justifications for race-based action as compelling for purposes of 
strict scrutiny: student body diversity in higher education and 
remedying past discrimination. Gender-based classifications are 
evaluated under an intermediate standard of review and will be upheld 
as constitutional if the government's actions are deemed substantially 
related to the achievement of an important objective. In the NPRM, 
commenters were asked to 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. The Commission sought data and explanation for whether and 
how proposals could be supported and applied in a consistent and 
rational manner. In particular, the Commission solicited input on 
whether the Commission could demonstrate a compelling governmental 
interest in fostering viewpoint diversity, redressing past 
discrimination, or some other interest and, if so, whether policies 
based on a race-conscious standard would be a narrowly tailored means 
of addressing any such interest.
    204. The Commission acknowledged in the NPRM that its ownership 
data and other empirical evidence in the record at that time likely 
were insufficient to support the adoption of a race- or gender-based 
standard. In recognition of the fact that such data are not by 
themselves sufficient to satisfy the constitutional hurdle that has 
been established for race- and gender-based measures, the Commission 
asked in the NPRM that commenters supply any relevant evidence, 
including peer-reviewed studies, which could assist in supporting a 
race-conscious approach. With respect to any proposals for a gender-
conscious standard, commenters similarly were asked to address the

[[Page 29043]]

relevant constitutional standards and to provide any available 
empirical support.
    205. A number of commenters supported the adoption of a race- or 
gender-conscious standard as a means to increase minority and female 
ownership. Based on the Third Circuit's instructions in Prometheus II, 
commenters asserted that the Commission must fully consider the 
feasibility of adopting an SDB standard in this proceeding and that the 
Commission is not permitted to defer consideration of race- or gender-
based action until a future proceeding. Some commenters also asserted 
that, prior to the conclusion of this proceeding, the Commission must 
provide any further data and complete any additional empirical studies 
that may be necessary to evaluate or justify the adoption of an SDB 
standard. Similarly, several commenters asked the Commission not to 
make any changes to any of the media ownership rules until it collects 
and analyzes data on broadcast ownership by women and minorities in a 
manner that they view as consistent with the court's remand of the 
eligible entity standard.
    206. Several commenters further asserted that Prometheus II not 
only obligates the Commission to consider fully the feasibility of 
implementing a race-conscious eligible entity standard in this 
proceeding, but also requires the Commission to adopt such a standard. 
NABOB maintained that in this proceeding the Commission ``must 
establish policies, similar to those it had prior to the Adarand 
decision, which were designed to specifically increase minority 
ownership of broadcast stations.'' NABOB also stated that ``[f]ailure 
to adopt a policy to promote minority ownership in this proceeding is 
contrary to the mandate of the Third Circuit in the Prometheus II 
case.'' NABOB argued that ``the Commission is obligated by the 
Prometheus II decision to continue this proceeding until it has 
completed the studies required and adopted a policy to promote minority 
ownership.'' In addition, NABOB asserted that if the Commission does 
not take these actions in the instant proceeding, then it must, at a 
minimum, provide a specific timetable for developing a policy to 
promote minority ownership.
    207. Advocates of a race- or gender-conscious standard cited the 
Supreme Court's rulings in Grutter v. Bollinger and Metro Broadcasting 
v. FCC as precedent for establishing a compelling interest in 
facilitating broadcast ownership diversity
    208. Some commenters suggested that the Commission currently lacks 
evidence sufficient to implement a race- or gender-targeted standard. 
In light of this perceived deficiency, DCS suggested that the 
Commission promptly implement an ODP standard, which it described as 
race- and gender-neutral, while the Commission develops the record 
necessary to adopt a constitutionally sustainable race-conscious 
definition. Similarly, UCC et al. argued that ``there are problems with 
the Commission's data collection and analysis that need to be fixed'' 
prior to the adoption of race- or gender-conscious measures. UCC et al. 
further argued that, because ``the Commission will have to show that it 
tried race-neutral solutions and found them insufficient'' in order to 
``defend against a constitutional challenge to any future policy that 
uses race as a factor,'' the Commission should move forward in this 
proceeding to ``evaluat[e] whether its current race- and gender-neutral 
policies designed to promote opportunities for minorities and women are 
in fact working as intended.'' NHMC et al. opined that ``any 
consideration of [SDBs] is premature'' until the Commission resolves 
the existing problems with its data and analysis and that any SDB 
proposal ``would lack requisite supporting data and analysis necessary 
to withstand scrutiny from the court based on the current record.''
(ii) Discussion
    209. The Commission tentatively concludes that it does not have 
sufficient evidence at this time to satisfy the constitutional 
standards necessary to adopt race- or gender-conscious measures. In 
evaluating the possibility of adopting an SDB standard, or any other 
race-conscious standard, the first question the Commission must 
consider is whether the standard could be justified by a ``compelling 
governmental interest.'' Assuming that such an interest could be 
established, the Commission then would have to be able to demonstrate 
that the application of the race-conscious standard to specific 
measures or programs would be ``narrowly tailored'' to further that 
interest. The Commission discusses below its preliminary approach to 
this analysis. While the Commission tentatively finds that a reviewing 
court could deem the Commission's interest in promoting a diversity of 
viewpoints compelling, the Commission believes that it does not have 
sufficient evidence at this time to demonstrate that adoption of race-
conscious measures would be narrowly tailored to further that interest. 
The Commission also discusses the constitutional analysis that would 
apply if it sought to adopt gender-conscious measures based on that 
interest. Further, the Commission tentatively finds that it does not 
have sufficient evidence to establish a compelling interest in 
remedying past discrimination. The Commission seeks comment on both its 
preliminary analysis and its tentative findings.
    210. As a threshold matter, the Commission rejects commenters' 
arguments that the Commission is required to adopt an SDB standard or 
another race-conscious eligible entity standard in this proceeding in 
light of the court's instructions in Prometheus II. The Commission also 
disagrees with arguments that the Commission is not permitted to 
conclude this proceeding until it has completed any and all studies or 
analyses that may enable it to take such action in the future 
consistent with current standards of constitutional law. The Commission 
intends to follow the Third Circuit's direction that the Commission 
consider adopting an SDB definition before completion of this 
proceeding and evaluate the feasibility of adopting a race-conscious 
eligibility standard based on an extensive analysis of the available 
evidence. The Commission does not believe that the Third Circuit 
intended to prejudge the outcome of the Commission's analysis of the 
evidence or the feasibility of implementing a race-conscious standard 
that would be consistent both with applicable legal standards and the 
Commission's practices and procedures.
(i) Constitutional Analysis of Commission Interest in Enhancing 
Viewpoint Diversity
    211. Compelling Governmental Interest Analysis. In the NPRM, the 
Commission reaffirmed its longstanding commitment to advancing a 
diversity of viewpoints. The Commission noted that it ``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,'' and stated that ``media 
ownership limits are necessary to preserve and promote viewpoint 
diversity.'' In this regard, the Commission further explained that it 
has ``regulated media ownership as a means of enhancing viewpoint 
diversity on the premise that diffuse ownership among media outlets 
promotes the presentation of a larger number of viewpoints in broadcast 
content'' than otherwise would be available. The NPRM also noted that, 
in addition to viewpoint diversity, the Commission has considered the 
impact of its rules on program, outlet, source, and minority and female 
ownership diversity.

[[Page 29044]]

    212. As the Third Circuit observed in Prometheus II, the Supreme 
Court long has recognized the Commission's interest in broadcast 
diversity. In Metro Broadcasting, the Supreme Court held, based on the 
application of intermediate constitutional scrutiny, that ``the 
interest in enhancing broadcast diversity is, at the very least, an 
important governmental objective.'' In reaching this determination, the 
Court stated that ``[s]afeguarding the public's right to receive a 
diversity of views and information over the airwaves is . . . an 
integral component of the FCC's mission'' and that the Commission's 
```public interest' standard necessarily invites reference to First 
Amendment principles.'' That opinion was issued prior to Adarand, 
however, which overruled the application of intermediate scrutiny in 
Metro Broadcasting. Notably, Adarand did not disturb other aspects of 
Metro Broadcasting, including the recognition of an important 
governmental interest in broadcast diversity. Nonetheless, in the 
aftermath of Adarand, it is clear that the Commission would have to 
establish that its interest in promoting diversity is not only 
important, but compelling, in order to adopt a race-conscious standard. 
In addition, the Supreme Court held in 2003 in Grutter v. Bollinger 
that diversity is a compelling governmental interest in the realm of 
higher education. That finding was based on the Court's determination 
that ``universities occupy a special niche in our constitutional 
tradition'' and on substantial evidence, including numerous expert 
studies and reports, regarding the educational benefits that flow from 
student body diversity.
    213. The Commission believes that its interest in promoting a 
diversity of viewpoints could be deemed sufficiently compelling to 
survive strict scrutiny analysis. In a different context, the Supreme 
Court has recognized viewpoint diversity as an interest ``of the 
highest order.'' In addition, the Supreme Court in Metro Broadcasting 
recognized similarities between broadcast diversity and the interest in 
promoting student body diversity the Court later recognized as 
compelling in Grutter: ``Just as a `diverse student body' contributing 
to a ```robust exchange of ideas''' is a `constitutionally permissible 
goal' on which a race-conscious university admissions program may be 
predicated, the diversity of views and information on the airwaves 
serves important First Amendment values.'' Other similarities between 
Metro Broadcasting and Grutter further strengthen the conclusion that 
viewpoint diversity may qualify as a compelling interest. In both 
cases, the Supreme Court recognized that there were important First 
Amendment interests at stake and acknowledged that diversity was 
central to the relevant institution's mission. In addition, just as the 
Grutter Court acknowledged the longstanding recognition of education's 
``fundamental role'' in American society, the Court long has recognized 
that broadcasting is ``an essential part of the national discourse on 
subjects across the whole broad spectrum of speech, thought, and 
expression.''
    214. The Commission notes, however, that some decisions applying 
strict scrutiny have cast doubt on the likelihood that courts would 
accept the Commission's interest in viewpoint diversity as the basis 
for race-conscious action. In 2007, the Supreme Court declined to 
recognize a compelling interest in diversity outside of ``the context 
of higher education.'' Moreover, the DC Circuit held in Lutheran 
Church-Missouri Synod v. FCC that broadcast diversity does not rise to 
the level of a compelling governmental interest. The DC Circuit 
reasoned that ``even the majority'' of the Supreme Court ``who thought 
the government's interest `important' [in Metro Broadcasting] must have 
concluded implicitly that it was not `compelling'; otherwise, it is 
unlikely that the majority would have adopted a wholly new equal 
protection standard to decide the case as it did.'' That reading is not 
compelled, however. The Metro Broadcasting Court actually stated that 
``enhancing broadcast diversity is, at the very least, an important 
governmental objective,'' thereby leaving open the possibility that 
broadcast diversity might be a compelling interest.
    215. The Commission seeks comment on this preliminary analysis, 
including any other factors or relevant precedent that it should 
consider. The Commission also seeks comment on other relevant interests 
that a reviewing court might recognize as compelling and the analysis 
of such interests under applicable judicial precedent.
    216. Narrow Tailoring Analysis. Even assuming that the Commission 
were able to establish a compelling interest in diversity, it still 
would be required to demonstrate that the adoption of a race-conscious 
SDB standard, as well as the programs to which it would apply, would be 
``narrowly tailored'' to further that interest. As the Supreme Court 
has stated, ``[e]ven in the limited circumstance when drawing racial 
distinctions is permissible to further a compelling state interest, 
government is still `constrained in how it may pursue that end: [T]he 
means chosen to accomplish the [government's] asserted purpose must be 
specifically and narrowly framed to accomplish that purpose.'' The 
Commission tentatively concludes that the evidence in the record at 
this time does not satisfy this requirement for two reasons. First, the 
Commission tentatively finds that it does not demonstrate that the 
connection between minority ownership and viewpoint diversity is direct 
and substantial enough to satisfy strict scrutiny. Second, it believes 
that the record does not reveal a feasible means of carrying out the 
type of individualized consideration the Supreme Court has held is 
required for a diversity-based program to pass constitutional muster.
    217. The Commission disagrees with commenters who argued that a 
nexus between minority ownership and viewpoint diversity sufficient to 
satisfy strict scrutiny already has been established and accepted by 
the Supreme Court in Metro Broadcasting. The Commission believes that 
empirical evidence of a stronger nexus between minority ownership and 
broadcast diversity than was demonstrated in Metro Broadcasting would 
be required for a race-conscious SDB standard to withstand strict 
scrutiny. In finding that the Commission's minority ownership policies 
were substantially related to achieving broadcast diversity, the 
Supreme Court in Metro Broadcasting deferred to the judgment of 
Congress and the Commission, as corroborated by various social science 
studies. As stated above, however, the Supreme Court since has 
repudiated Metro Broadcasting's application of intermediate scrutiny, 
and under strict scrutiny, the Commission's judgment regarding the 
relationship between minority ownership and broadcast diversity is 
unlikely to receive the same deference. In her dissent in Metro 
Broadcasting, Justice O'Connor argued that the Court should have 
applied strict scrutiny and that, under such scrutiny, the available 
evidence fell far short of the requisite direct and substantial 
connection, establishing at best ``the existence of some rational 
nexus.'' Subsequent developments in constitutional jurisprudence 
further suggest that empirical evidence of a stronger nexus between 
broadcast diversity and minority ownership than was shown in Metro 
Broadcasting would be required to withstand strict scrutiny.
    218. As explained below, there is a significant amount of evidence 
in this proceeding regarding the role and status of minorities in the 
broadcast industry.

[[Page 29045]]

Although this evidence contributes valuable information to the record 
in this proceeding and informs the Commission's broader review of the 
broadcast ownership rules, it tentatively concludes that the evidence 
in the record would not satisfy strict scrutiny. Commenters are invited 
to address the Commission's tentative conclusions and evaluations of 
this evidence. In addition, the Commission invites commenters to 
provide any additional evidence that may be relevant to this analysis. 
With regard to any such evidence, commenters should explain whether 
and, if so, how the evidence would bolster the Commission's ability to 
satisfy the requisite narrow tailoring standard.
    219. The two recent studies in the record that directly address the 
impact of minority ownership on viewpoint diversity are Media Ownership 
Studies 8A and 8B. Media Ownership Study 8A focuses on the relationship 
between local media ownership and viewpoint diversity in local 
television news. The authors calculate a measure of viewpoint diversity 
based on program audience data and then analyze the relationship of 
this measure to certain aspects of the Commission's broadcast ownership 
rules, finding either that the relationship is not statistically 
distinguishable from zero or very small in absolute magnitude. In 
particular, this study finds that the relationship between minority 
ownership and viewpoint diversity is not statistically distinguishable 
from zero. As a result, this study does not appear to provide evidence 
that the Commission could rely upon to justify race-conscious action.
    220. Media Ownership Study 8B examines viewpoint diversity in local 
television news through an analysis of television news transcripts. In 
general, the authors find very little evidence of a robust relationship 
between available measures of market structure and viewpoint diversity, 
perhaps due to the fact that the measures of market structure are, in 
the words of the authors, ``rather blunt.'' With respect to minority 
ownership in particular, the authors find almost no statistically 
significant relationship between such ownership and their measure of 
viewpoint diversity. Notably, the study does find a positive 
relationship between minority ownership and coverage of minority 
politicians, which suggests that minority-owned stations may focus on 
certain types of minority-oriented content more than other stations and 
which could be viewed as a measure of one form of viewpoint diversity. 
Despite this finding, the Commission tentatively concludes that Media 
Ownership Study 8B does not provide sufficient evidence to satisfy the 
requirements of strict scrutiny. First, the effects of minority 
ownership revealed in the study are quite limited overall, and minority 
ownership does not have an effect on most variables and disparity 
measures analyzed. Second, in the vast majority of cases the authors 
study, the relationship between minority ownership and viewpoint 
diversity is not statistically different from zero.
    221. Other studies in the record examine the relationship between 
minority ownership of broadcast outlets and other aspects of the 
Commission's diversity goal, such as programming or format diversity. 
The Commission does not believe that evidence regarding program or 
other forms of diversity is as relevant as evidence regarding viewpoint 
diversity for the purpose of establishing narrow tailoring to a 
compelling interest. The Commission tentatively concludes that, of any 
diversity-related interest that the Commission has authority to 
advance, viewpoint diversity currently is most likely to be accepted as 
a compelling governmental interest under strict scrutiny. Although the 
Metro Broadcasting Court did not define broadcast diversity with this 
level of precision, a court applying strict scrutiny is likely to 
require such precision, and the Supreme Court's prior recognition of 
broadcast diversity as an interest ``of the highest order'' seems to 
pertain to viewpoint diversity. Media Ownership Study 7 assesses the 
relationship between ownership structure and the provision of radio 
programming, as measured by program formats, to minority (African-
American and Hispanic) audiences between 2005 and 2009. The study finds 
that minority audiences have different format tastes than white 
audiences and that minority-owned stations disproportionately cater to 
these tastes. In addition, the regression analyses included in Media 
Ownership Study 7 show that, on a market-wide basis, the presence of 
minority-owned stations increases the amount of minority-targeted 
programming and that the availability of minority-targeted formats 
attracts more minorities to listening. The study also concludes that 
most stations with minority-targeted formats are not minority-owned and 
that group ownership, including particularly ownership by non-minority 
owners, within a local market allows for greater format 
diversification. Because this study is focused on format diversity and 
shows that non-minority stations provide a significant amount of 
minority-targeted programming, the Commission tentatively finds that it 
would have limited value as a justification for adopting race-conscious 
measures.
    222. In addition to the Media Ownership Studies commissioned for 
this proceeding, commenters have submitted a number of studies into the 
record that analyze issues related to minority broadcast ownership. The 
Commission discusses those studies that appear to relate most closely 
to the impact of minority ownership on its diversity goals. Commenters 
are invited to supplement this discussion with additional views of the 
relevance of these studies and to submit additional evidence that may 
be pertinent to the Commission's analysis. For example, ``Media 
Ownership Matters: Localism, the Ethnic Minority News Audience and 
Community Participation,'' a 2006 study commissioned by the Benton 
Foundation, finds that there is a ``nexus'' between minority ownership 
and service to underserved communities. This study used ethnographic 
and survey research to discern patterns in news consumption among 
minorities in the Washington, DC, metropolitan area. It finds that of 
the 18 percent of minority listeners who reported that they prefer to 
obtain news programming from radio, a majority of those listeners 
preferred minority-owned stations. While this finding is informative, 
the Commission tentatively finds that the evidentiary value of this 
study in the context of a strict scrutiny analysis would be limited 
because it covered only three neighborhoods in one metropolitan area. 
In addition, the study does not provide any statistical analysis of or 
adjust for factors aside from minority ownership that may explain this 
result. Additionally, this finding represents only a small percentage 
of the individuals the authors surveyed (i.e., a majority of 18 percent 
of the listeners surveyed). Furthermore, the study does not analyze the 
news content on minority-owned radio stations or provide analysis 
comparing such content to the news content on other stations.
    223. In sum, the Commission believes that the body of evidence 
contained in the recent Media Ownership Studies and the studies 
submitted in the record by commenters do not demonstrate the ``nearly 
complete'' or ``tightly bound'' nexus between diversity of viewpoint 
and minority ownership that would be required to justify a race-based 
eligibility entity definition. Nevertheless, the Commission believes 
that the studies strengthen the evidence

[[Page 29046]]

of a link between broadcast diversity and minority ownership. They also 
begin to answer questions raised by Justice O'Connor's Metro 
Broadcasting dissent, such as how to define minority programming and 
whether such programming is underrepresented, that the Supreme Court 
found it unnecessary to address under intermediate scrutiny. In 
particular, existing studies show that minority groups have distinct 
preferences, and that expanding minority ownership increases the amount 
of programming targeted to such preferences. As stated above, however, 
the evidence largely concerns program or format diversity rather than 
the viewpoint diversity that the Supreme Court has recognized as an 
interest ``of the highest order'' and that the Commission believes is 
most central to First Amendment values. Many of the studies also 
support only limited conclusions and reflect a need for further 
analysis. Given the Commission's tentative assessments of these studies 
and other data, it cannot conclude at this time that the evidence 
demonstrates a sufficient nexus between minority ownership of broadcast 
stations and viewpoint diversity to withstand strict scrutiny.
    224. In response to NABOB's request that the Commission provide a 
specific timetable for completing future studies necessary to adopt a 
policy to promote minority ownership, the Commission has identified in 
detail in this Further Notice of Proposed Rulemaking the studies in the 
current record that it have found establish useful information 
regarding the relationship between viewpoint diversity and minority and 
female ownership of broadcast stations. In addition, the Commission has 
outlined ongoing and additional efforts to achieve important further 
analysis of the status and impact of minority ownership, including, but 
not limited to, the studies being conducted by OCBO and the Hispanic 
television viewing study discussed above. In addition, as indicated in 
the NPRM, Form 323 ownership data will continue to be collected and 
analyzed and considered in connection with future media ownership 
reviews. The process for doing so will continue to be refined and 
improved. The Commission cannot firmly establish herein a timetable for 
release of future biennial ownership data or the completion of studies, 
examinations, or assessments. Commenters may submit additional studies 
that the Commission should consider in its analysis.
    225. In addition, the Commission tentatively finds that the record 
in this proceeding does not reveal a feasible means of carrying out the 
type of individualized consideration the Supreme Court has held is 
required to pass constitutional muster under strict scrutiny. Where 
race-conscious governmental action is concerned, the Supreme Court 
previously has found that narrow tailoring requires individualized 
review, serious, good-faith consideration of race-neutral alternatives, 
minimal adverse impact on third parties, and temporal limits. In 
particular, the Court found in Grutter that narrow tailoring demands 
that race be considered ``in a flexible, non-mechanical way'' alongside 
other factors that may contribute to diversity and that consideration 
of race was permissible only as one among many disparate factors in 
order to evaluate individual applicants for admission to an educational 
institution. The manner in which the Commission allocates broadcast 
licenses is different in many important respects from university 
admissions, and the Commission believes that implementing a program for 
awarding or affording preferences related to broadcast licenses based 
on the ``individualized review'' required in other contexts would pose 
a number of administrative and practical challenges for the Commission. 
The Supreme Court has held, however, that ``[t]he fact that the 
implementation of a program capable of providing individualized 
consideration might present administrative challenges does not render 
constitutional an otherwise problematic system.'' The Commission seeks 
comment on its tentative conclusion and potential ways in which an 
individualized review process feasibly, effectively, and efficiently 
could be incorporated into any race-conscious measures adopted by the 
Commission.
    226. Commenters generally did not suggest criteria, other than race 
and ethnic origin, that could be considered in an individualized, 
holistic evaluation system like that approved in Grutter. DCS 
recommended that the Commission replace its revenue-based eligible 
entity definition with an ODP standard as a race-neutral means of 
advancing ownership diversity. The Commission notes that it is not 
entirely clear whether the proposed ODP standard would be subject to 
heightened constitutional scrutiny. Moreover, the Commission believes 
that it does not have a sufficient record at present on a number of 
issues that would need to be resolved prior to the implementation of an 
ODP standard. Among other issues, no commenter provided input on (1) 
what social or economic disadvantages should be cognizable under an ODP 
standard, (2) how the Commission could validate claims of eligibility 
for ODP status, (3) whether applicants should bear the burden of 
proving specifically that they would contribute to diversity as a 
result of having overcome certain disadvantages, (4) how the Commission 
could measure the overcoming of a disadvantage if an applicant is a 
widely held corporation rather than an entity with a single majority 
shareholder or a small number of control persons, and (5) how the 
Commission could evaluate the effectiveness of the use of an ODP 
standard. Even if the Commission could develop an adequate record on 
these issues, it is concerned that it may lack the resources to conduct 
such individualized reviews. Moreover, the Commission would have to 
walk a very fine line in order to fully evaluate the potential 
diversity contributions of individual applicants without running afoul 
of First Amendment values. The Commission is concerned that the type of 
individualized consideration that would be required under an ODP 
standard could prove to be administratively inefficient, unduly 
resource-intensive, and inconsistent with First Amendment values. The 
Commission seeks comment on these issues and its foregoing analysis 
regarding the feasibility of adopting an ODP standard.
    227. Analysis of Gender-Based Diversity Measures. The Supreme Court 
has held that gender-based classifications must satisfy intermediate 
scrutiny and, as such, must be substantially related to the achievement 
of an important objective. As noted above, the Supreme Court found in 
Metro Broadcasting, based on the application of intermediate 
constitutional scrutiny, that ``the interest in enhancing broadcast 
diversity is, at the very least, an important governmental objective.'' 
Applying intermediate scrutiny, the DC Circuit overturned the 
Commission's former gender preference policy in Lamprecht v. FCC. 
Recognizing that Metro Broadcasting established broadcast diversity as 
an important government objective, the DC Circuit focused on its 
relationship to female ownership. The court stated that the existence 
of such a relationship rests on several assumptions, but chose to 
address only one: that women who own broadcast stations are more likely 
than white men to broadcast ``women's programming.'' The court 
concluded that the only available study failed to establish a 
statistically meaningful link between ownership by women and

[[Page 29047]]

programming of any particular kind. At this time, the Commission cannot 
conclude that the record evidence establishes a relationship between 
the Commission's interest in viewpoint diversity and the ownership of 
broadcast stations by women that would satisfy intermediate scrutiny. 
While the Commission acknowledges that the data show that women-owned 
stations are not represented in proportion to the presence of women in 
the overall population, the Commission does not believe that the 
evidence available at this time reveals that the content provided via 
women-owned broadcast stations substantially contributes to viewpoint 
diversity in a manner different from other stations or otherwise varies 
significantly from that provided by other stations. The only study 
included in the record of this proceeding that analyzes the 
relationship between female ownership and broadcast content is the 
Turner Radio Study, which finds that markets that contain radio 
stations with either female or minority ownership are more likely to 
broadcast certain progressive and conservative talk shows. This study 
does not appear to demonstrate a causal relationship between female or 
minority ownership and the diversity of viewpoints or content 
available, as it does not control for other factors that may explain 
both the presence of a greater diversity of talk shows and a higher 
percentage of female or minority ownership in certain markets. In any 
event, the Commission tentatively concludes that this study is too 
limited in scope to establish a substantial relationship between female 
ownership and viewpoint diversity. Other studies in the record 
establish that female ownership of broadcast stations is well below the 
proportion of women in the population, a fact that is not in dispute in 
this proceeding. Because these studies do not indicate that increased 
female ownership will increase viewpoint diversity, the Commission 
believes that they do not provide a rationale under the foregoing 
analysis for gender-based diversity measures. However, the Commission 
seeks comment on this preliminary determination as well as any relevant 
evidence regarding this issue.
(ii) Constitutional Analysis of the Commission's Interest in Remedying 
Past Discrimination
    228. As an alternative to establishing a compelling interest in 
viewpoint diversity, race- or gender-based measures are permissible as 
a remedy to past or present discrimination. To justify race-based 
remedial measures, the Commission would have to establish a ``strong 
basis in evidence'' of discrimination, i.e., evidence ``approaching a 
prima facie case of a constitutional or statutory violation.'' To 
substantiate this approach, the Commission would have to identify, with 
specificity, evidence of public discrimination within the broadcast 
industry or private discrimination in which the government acted as a 
``passive participant.'' Less evidence is required for gender-based 
measures, although an ``exceedingly persuasive justification'' is still 
necessary. The Commission never has asserted a remedial interest in 
race- or gender-based broadcast regulation, and courts primarily have 
considered such measures in the context of public contracting 
decisions. Most commenters in this proceeding have not focused on 
establishing a case for remedial measures, although DCS argued that 
``remedying the present effects of past discrimination provides a 
compelling interest.'' While some evidence supports a finding of 
discrimination in the broadcast industry, the Commission tentatively 
concludes that it is not of sufficient weight to satisfy constitutional 
standards. The Commission seeks comment on the preliminary analysis 
described below, including any other relevant precedent or data it 
should consider.
    229. As the Commission concedes in this Further Notice of Proposed 
Rulemaking, the proportions of minorities and females that own 
broadcast stations are lower than their proportions in the general 
population. An inference of discrimination may arise ``when there is a 
significant statistical disparity between the number of qualified 
minority contractors willing and able to perform a particular service 
and the number of such contractors actually engaged.'' But ``[w]hen 
special qualifications are required to fill particular jobs, 
comparisons to the general population (rather than to the smaller group 
of individuals who possess the necessary qualifications) may have 
little probative value.'' Thus, the raw numbers reflecting existing 
levels of minority or female ownership by themselves are not sufficient 
to overcome the constitutional hurdle that has been established for 
race- and gender-based remedial measures. In Croson, the Supreme Court 
warns against the ``completely unrealistic assumption that minorities 
will choose a particular trade in lockstep proportion to their 
representation in the local population.'' There is no evidence in the 
current record demonstrating a statistically significant disparity 
between the number of minority- and women-owned broadcast stations and 
the number of qualified minority and women-owned firms. Commenters are 
asked to address whether evidence of such a disparity is ascertainable, 
particularly given the low number of minority and women-owned firms. 
Based on relevant precedent, the Commission tentatively concludes that 
it cannot demonstrate a compelling interest in remedying discrimination 
in the Commission's licensing process in the absence of such evidence. 
The Commission seeks comment on this tentative conclusion.
    230. Anecdotal or historical evidence of discrimination also can 
establish that a strong basis in evidence exists for remedial measures, 
although such evidence generally is helpful only when it reinforces 
statistical evidence. DCS argued that a 2000 study comprising more than 
100 interviews demonstrates that broadcast licensing procedures present 
challenges to minority and female access to spectrum and licenses. In 
the Historical Study, minorities and women repeatedly report 
encountering discrimination in their efforts to obtain capital to 
finance their broadcast and wireless businesses, secure advertising on 
their stations, gain exposure and experience to qualify for ownership 
through employment opportunities, and learn of ownership opportunities. 
The Historical Study reports no evidence, however, of actual 
discrimination by the Commission.
    231. DCS also argued that another 2000 study establishes that 
barriers inhibiting minority and female access to capital amount to 
industry discrimination in which the government has passively 
participated. The Capital Markets Study found that both minority- and 
women-owned businesses were significantly less likely to obtain 
wireless licenses in auctions than were non-minority businesses and 
that among current broadcast licensees, minority (but not female) 
applications for debt financing were significantly less likely to be 
approved than non-minority applications, and minority applicants paid 
higher interest rates. The study also contains a literature survey of 
empirical studies using data over two decades, which is not specific to 
the broadcast industry, finding or suggesting that racial 
discrimination exists in U.S. capital markets in both denial rates and 
interest rates. However, the study indicates that its results are not 
fully conclusive and emphasizes the need for further analysis to 
control for potentially important variables. Also, the focus on 
wireless auctions and other

[[Page 29048]]

non-broadcast industry information makes it less probative of 
discrimination in the broadcast licensing process. Further, the study 
does not address the secondary market for licenses.
    232. While the evidence offered is informative on these subjects, 
the Commission preliminarily finds that it is insufficient to satisfy 
the constitutional requirements to support a race- or gender-based 
remedial action. In this regard, comparison is instructive to Adarand 
v. Slater, a leading public contracting case in which the Tenth Circuit 
found the requisite strong basis in evidence. The court found 
``significant'' evidence of public discrimination in that case: the 
record contained 39 studies revealing an aggregate 13 percent disparity 
between minority business availability and utilization in government 
contracting, a figure which the court found to be ``significant,'' if 
not overwhelming, evidence of discrimination. Nevertheless, the court 
relied principally on evidence of private discrimination. The evidence 
was similar in nature to that discussed above--denial of access to 
capital, as well as the existence of racially exclusionary ``old boy'' 
networks and union discrimination that prevented access to the skills 
and experience needed to form a business--but greater in extent and 
weight. The court had the benefit of a Department of Justice report, 
prepared in response to the Supreme Court's decision in Adarand, 
summarizing 30 congressional hearings and numerous outside studies 
providing both statistical and anecdotal evidence of such private 
discrimination. Here, in contrast, the only statistical evidence 
pertains to discriminatory access to capital. The rest of the evidence 
available at this time is anecdotal and, therefore, of more limited 
value. Thus, it tentatively appears that the existing evidence of past 
discrimination in this case is not nearly as substantial as that 
accepted by courts in other contexts.
c. Additional Proposals Related to Minority and Female Ownership
    233. As explained above, the Commission tentatively concludes that, 
if it reinstate the revenue-based eligible entity standard, it also 
would be appropriate to readopt each of the regulatory policies the 
Third Circuit remanded in Prometheus II that rely on this standard. 
Several commenters asked the Commission to consider additional measures 
that they believed would foster ownership diversity. For example, DCS 
submitted 47 proposals that it claimed would ``address the barriers to 
diverse participation in media ownership and . . . increase minority 
and women participation in broadcasting.'' Although DCS advocated 
adoption of all of these proposed measures, it focused on four that it 
believed the Commission ``should immediately begin implementing.'' 
These recommendations include: (1) Relaxing the foreign ownership 
limitations under Section 310(b)(4) of the Communications Act; (2) 
encouraging Congress to reinstate and update tax certificate 
legislation; (3) granting waivers of the local radio ownership rule to 
parties that ``incubate'' qualified entities; and (4) migrating AM 
radio to VHF Channels 5 and 6. In addition, AWM asked the Commission to 
consider several actions to address the ``historic underrepresentation 
of women'' in ownership of broadcast stations and managerial positions 
in the broadcast industry.
    234. As discussed below, the Commission has implemented some of 
these recommendations. Because the Commission believes that the 
remainder of these proposals would raise public interest concerns, may 
not provide meaningful assistance to the intended beneficiaries, or are 
outside of the proper scope of this broadcast ownership proceeding, the 
Commission tentatively concludes that it should not adopt them here. 
The Commission seeks comment on this tentative conclusion.
    235. Foreign Ownership Restrictions. DCS recommended that the 
Commission relax its policies under Section 310(b)(4) of the 
Communications Act, which restricts foreign ownership and voting 
interests in entities that control Commission licensees. DCS claimed 
that this action would provide ``U.S. broadcasters, particularly 
minorities, who have difficulty access[ing] capital'' with ``access to 
new sources of capital that are not available to them under the current 
regulatory paradigm.'' Additionally, in a separate proceeding a broad 
coalition of broadcasters, public interest groups, and media brokers 
(Coalition for Broadcast Investment or CBI) sought clarification of the 
Commission's policies and procedures in reviewing applications or 
transactions that propose foreign broadcast ownership that would exceed 
the 25 percent benchmark contained in Section 310(b)(4). The Media 
Bureau issued a public notice inviting comment on the CBI Request. The 
majority of comments filed in response to the public notice supported 
CBI's position.
    236. In November 2013, the Commission issued a Declaratory Ruling 
(78 FR 75563, Dec. 12, 2013, FCC 13-150, rel. Nov. 14, 2013) clarifying 
that the plain language of Section 310(b)(4) provides the Commission 
the authority to review applications for approval of foreign investment 
in the controlling U.S. parent of a broadcast licensee above the 25 
percent benchmark on a case-by-case basis. The Commission stated that 
such applications may be granted unless it finds that a denial will 
serve the public interest. In issuing the Declaratory Ruling, the 
Commission observed the range of changes in the media landscape and 
marketplace since enactment of the foreign ownership restriction and 
noted that limited access to capital is a concern in the broadcast 
industry, particularly for small entities, including entities owned by 
minorities and women. The Commission further noted that a clear 
articulation of its ``approach to Section 310(b)(4) in the broadcast 
context has the potential to spur new and increased opportunities for 
capitalization for broadcasters, and particularly for minority, female, 
small business entities, and new entrants.''
    237. Tax Certificate Legislation. DCS also urged the Commission to 
``continue to support and encourage Congress to reinstate and expand'' 
the former tax certificate policy, which permitted firms to defer 
capital gains taxation on the sale of media properties to minorities. 
It also suggested that an updated tax certificate policy could address 
previous congressional concerns if it were race-neutral, encompassed 
both media and telecommunications entities, and included limits on the 
size of eligible transactions and programs. The Commission agrees that 
tax deferral legislation could prove an effective means to enhance 
broadcast ownership diversity. The Commission's most recent Section 257 
Report to Congress addresses the benefits of tax certificate 
legislation to ownership diversity and includes a recommendation that 
Congress pass such legislation.
    238. Incubation. DCS requested that the Commission provide waivers 
of the local radio ownership rule to broadcasters that finance or 
incubate an SDB or a ``valid eligible entity.'' Specifically, DCS 
proposed that an entity that engages in a specified list of 
``qualifying incubating activities'' be granted, under certain 
conditions, a waiver of the local radio ownership cap ``by one station 
per incubating activity.''
    239. The Commission shares concerns that proposals like DCS's 
incubation proposal that would allow blanket waivers of the local radio 
ownership rule could create a substantial loophole to the ownership 
caps without sufficient offsetting benefits. The Commission's local 
radio rules have been carefully calibrated to protect competition and

[[Page 29049]]

new entry. By allowing broadcasters to exceed these caps, DCS's 
proposal could result in more local radio consolidation than is 
presently permitted under the Commission's rules. Moreover, it is 
unclear based on the record in this proceeding what kind of entities 
should be eligible to benefit from incubation. Bonneville/Scranton 
suggested that the guidelines for determining entities that would be 
eligible to be incubated could be based on the diversity channel set-
aside requirement adopted by the Commission as a condition to the 
approval of the merger of XM and Sirius. In that decision, the 
Commission ordered the combined new satellite radio entity to set aside 
channels to encourage new market entry, enhance viewpoint diversity, 
and promote the delivery of programming content to underserved 
audiences. Bonneville/Scranton suggested that a voluntary broadcast 
incubation program modeled on this condition could permit a currently 
licensed broadcaster to select a ``New Voice'' to incubate based on 
certain minimal Commission requirements and general selection 
considerations, such as small business size and independence from the 
broadcaster. NABOB cautioned, however, that ``[a]ny policies the 
Commission adopts which do not have the effect of making it desirable 
for industry insiders to seek out minorities for broadcast ownership 
opportunities will be ineffective in increasing minority ownership.'' 
The Commission is concerned that implementation of such proposals would 
pose substantial legal, administrative, and practical challenges. To 
the extent that the program were limited to SDBs, it would pose the 
Equal Protection concerns described in detail above. If it were instead 
extended in the manner suggested by Bonneville/Scranton, it would be 
difficult for the Commission to administer as a broad-based program and 
could potentially open a wide loophole in the ownership rules, while 
possibly having little or no significant effect on minority and female 
ownership.
    240. In addition, the Commission is concerned that it would not be 
feasible for it to monitor adequately the activities that would qualify 
an entity for an incubation waiver. As proposed by DCS, qualifying 
activities would encompass a broad array of arrangements, including, 
among others, underwriting or financing the operations of eligible 
entities, providing loans or other financial assistance to eligible 
entities, and local marketing arrangements between independent 
programmers and commercial broadcasters. Given the challenges of 
monitoring over time the types of complex financing and other 
arrangements suggested under DCS's incubation proposal, there is a 
substantial risk that the Commission would not be able to ensure that 
such arrangements would be, or prospectively would remain, beneficial 
to eligible entities or other intended beneficiaries. Accordingly, the 
Commission tentatively declines to adopt this proposal in this 
proceeding.
    241. Migration of VHF Channels 5 and 6. In addition, DCS 
recommended that the Commission migrate most AM service to VHF channels 
5 and 6. Aside from DCS, it does not appear that any party to this 
proceeding has supported this proposal. The Commission tentatively 
concludes that this proposal, which would involve extensive changes to 
the Commission's current licensing rules and spectrum policies, exceeds 
the proper scope of this broadcast ownership proceeding. Moreover, the 
Commission notes that Congress has directed the Commission to conduct 
an incentive auction of television broadcast spectrum and to reassign 
the remaining broadcast channels in order to make more spectrum 
available for wireless use. Migrating AM services to VHF channels 5 and 
6 has the potential to interfere with the Commission's implementation 
of Congress's directive.
    242. Additional DCS Proposals. Many of DCS's remaining proposals 
recommend changes to a wide range of Commission licensing, service, and 
engineering rules and policies. Several of these recommendations 
propose modifications to the AM broadcast service. The Commission 
recently adopted a notice of proposed rulemaking which seeks to 
revitalize the AM band by identifying ways to enhance AM broadcast 
quality and proposing technical rules that would enable AM stations to 
improve their service. The AM Revitalization NPRM (78 FR 69629, Nov. 
20, 2013, FCC 13-139, rel. Oct. 29, 2013) solicits comment on some of 
the technical issues DCS has raised in this proceeding, including 
modification of: (1) Daytime community coverage standard for existing 
AM stations; (2) nighttime community coverage standards for existing AM 
stations; and (3) AM antenna efficiency standards. The Commission 
anticipates that the AM Revitalization NPRM will lead to an examination 
of important issues regarding the viability of AM broadcast service, 
and thus, address many of the concerns of minority broadcasters 
regarding the technical aspects of their licensed services.
    243. Some of DCS's proposals extend into areas that are beyond the 
Commission's authority, including proposals that ultimately would 
require legislative action or action by other federal entities aside 
from the Commission in order to create changes in rules or policies. 
Other proposals involve cable operators and other non-broadcast 
services that are outside the scope of the quadrennial review 
proceedings. Although these proposals are accompanied by detailed and 
thoughtful analysis, and some of them may warrant further 
consideration, the Commission believes that they are outside the scope 
of this proceeding. Thus, the Commission does not anticipate taking 
further action within this or successive quadrennial review dockets on 
these proposals because they extend beyond its statutory mandate under 
Section 202(h).
    244. AWM Proposals. AWM's proposals include (1) preparing a primer 
on investment in broadcast ownership for smaller and regional lenders 
willing to provide loans to new broadcast entrants; (2) preparing a 
primer for new entrants that provides guidance on how to find 
financing; (3) establishing a link on the Commission's Web site to 
provide information on stations that may be available for sale to small 
businesses; and (4) allowing sellers to hold a reversionary interest in 
a Commission license in certain circumstances. Although several parties 
broadly stated that they support some of these proposals, there is 
little record on these subjects in the current proceeding. While the 
Commission agrees that primers on investment and financing could be 
useful to new entrants, the Commission notes that OCBO already engages 
in activities that provide similar resources to broadcasters and 
potential investors, including the regularly scheduled Capitalization 
Strategies Workshops noted above and in the NPRM. The Commission also 
believes that specific advice about investment and financing is more 
appropriately provided by private parties that are directly involved in 
the financial marketplace than by the Commission.
    245. In response to AWM's proposal that the Commission create a 
public listing of stations that may be available for sale to small 
businesses, the Commission note that the Commission currently does not 
have at its disposal the information that would be necessary to create 
such a resource. In addition, the Commission believes that many 
licensees would object to any requirement that would obligate them to 
make publicly available information regarding their plans to sell 
specific

[[Page 29050]]

stations. Finally, the Commission tentatively finds that AWM's proposal 
to allow sellers to hold a reversionary interest in broadcast licensees 
as a means of financing sales of broadcast stations to women and 
minorities does not address the Commission's historical concerns about 
reversionary interests and is insufficiently developed to support 
departure from the Commission's longstanding policy against the holding 
of such interests. At this time, therefore, the Commission does not 
believe there is sufficient justification to adopt these proposed 
measures.

 E. Disclosure of Shared Service Agreements

1. Introduction
    246. In this Further Notice of Proposed Rulemaking, the Commission 
considers whether to require broadcast stations to disclose agreements 
for sharing services and/or resources with other broadcast stations 
that are not commonly owned, as discussed in greater detail below, to 
the extent that such agreements are not already separately defined and 
required to be filed and/or disclosed under the Commission's rules 
(e.g., LMAs and JSAs). Commenters in a number of proceedings have 
expressed concern about the impact on competition, localism, and 
diversity of agreements whereby one station shares studio space, 
operational support, staff, programming, and/or other services or 
support with a separately owned station. Often these sharing agreements 
are executed in conjunction with an option, right of first refusal, 
put/call arrangement, or other similar contingent interest, or a loan 
guarantee. Because the Commission does not currently require the filing 
or disclosure of all such agreements, the Commission and the public 
lack information about the content or breadth of the agreements or the 
frequency of their use, inhibiting a thorough analysis of the impact of 
these arrangements on the Commission's rules and policy goals. 
Accordingly, in order to enable the Commission and the public to better 
understand the terms, operation, and prevalence of these agreements, 
the Commission proposes to define a class of sharing agreements that 
could impact its rules and policy goals and to require the disclosure 
of those agreements to enable a comprehensive assessment of their 
impact. Specifically, in this Further Notice of Proposed Rulemaking the 
Commission proposes to define a category of sharing agreements 
designated herein as Shared Service Agreements (SSAs), it proposes to 
require the disclosure of SSAs by commercial television stations, and 
it seeks comment on the appropriate method for achieving such 
disclosure. While considering whether to require the filing of SSAs and 
how the term SSA should be defined for this purpose in order to obtain 
information that will inform the Commission's decision about what, if 
any, general rules might be appropriate with respect to such 
agreements, the Commission will, of course, continue to consider such 
joint agreements, as relevant and appropriate, in deciding whether 
particular individual transactions serve the public interest. Once 
disclosure is achieved, the Commission will be able to study these 
agreements and to determine what further regulatory action, if any, it 
should take with respect to them.
2. Background
    247. In the Enhanced Disclosure FNPRM (76 FR 71267, Nov. 17, 2011, 
FCC 11-162, rel. Oct. 27, 2011), the Commission sought comment on 
whether to require the disclosure of sharing agreements that were not 
already defined and required to be disclosed under the Commission's 
rules (as are, for example, LMAs and JSAs), and whether to require 
stations to include such agreements in their online public files. 
Commercial television stations (full-power and Class A) are required 
under Section 73.3526 of the Commission's rules to maintain a local 
public inspection file, the contents of which include, inter alia, the 
station's current authorization, citizen agreements, issues/programs 
lists, radio and television LMAs, and radio and television JSAs. 
Historically, the file was located at the station's main studio; 
however, in the Enhanced Disclosure proceeding, among other actions, 
the Commission modified Section 73.3526 for commercial television 
stations to require that most of the contents of the public file (e.g., 
LMAs and JSAs) be included in an online public file hosted by the 
Commission. In the Enhanced Disclosure Second R&O (77 FR 27631, May 11, 
2012, FCC 12-44, rel. Apr. 27, 2012), the Commission declined to adopt 
any new disclosure requirements for sharing agreements but indicated 
that it would continue to monitor the issue and revisit the disclosure 
requirement in the future.
    248. Concurrent with the pendency of the Enhanced Disclosure 
proceeding, the Commission sought comment in the NPRM about various 
types of sharing agreements, noting that commenters to the NOI had 
specifically identified sharing agreements and a subcategory of 
agreements, local news sharing (LNS) agreements, as matters of concern, 
but acknowledging that these terms were not defined in Commission 
rules. The NPRM invited views on the potential impact of such 
agreements on the Commission's ownership rules and fundamental policy 
goals. It identified potential concerns about such agreements and 
potential benefits and invited submissions of further information about 
how to define such agreements and comment on whether they should be 
attributed or disclosed.
    249. The records in the Enhanced Disclosure proceeding and in the 
2010 Quadrennial Review proceeding do not contain comprehensive data or 
information about the breadth, content, or prevalence of sharing 
agreements between stations that are not commonly owned. The Commission 
is not aware of any public source for this information. Although some 
such agreements are filed with the Commission in connection with 
applications for assignment or transfer of control of broadcast 
licenses, the Commission has no way of knowing how many of these 
agreements exist or what they cover. The comments in the earlier 
proceedings make clear that there are various types of sharing 
agreements, including those that implicate local news production, that 
can involve differing levels of coordination--from those that involve 
back office functions or leases of property or equipment, to the 
sharing of raw video footage, to rebroadcasts of another station's 
entire newscast, to near-total outsourcing of a station's day-to-day 
operations. Accordingly, any impact on viewers or markets could vary 
depending on the substance of the agreement and the level of 
coordination. In the absence of greater information about the number of 
agreements that exist in the market and their content, the Commission 
and the public cannot fully evaluate the potential public interest 
harms and benefits of various arrangements, which is necessary for the 
Commission to formulate sound public policy.
3. Discussion
    250. The Commission believes that commenters have raised important 
issues about how and to what extent sharing agreements implicate the 
Commission's competition, localism, and diversity policy objectives. 
Consideration of these issues is impeded because so little is known 
about the content, scope, and prevalence of sharing agreements. In 
order to assess these issues, however, the Commission must first define 
the agreements between stations that are

[[Page 29051]]

relevant to its improved understanding of how stations share services 
and resources and then create a mechanism for making such arrangements 
transparent to the public and the Commission. Accordingly, the 
Commission seeks comment on a proposed definition of SSAs and a 
requirement that commercial television stations be required to disclose 
these agreements to the public and the Commission. This is a necessary 
first step in determining whether the Commission's public interest 
goals will be furthered through additional regulation of these 
agreements, as some commenters suggest.
a. Definition of Shared Service Agreement
    251. Commenters refer to sharing agreements using various terms, 
such as sharing agreements, SSAs, or LNS agreements; however the 
Commission's rules do not define these terms. LMAs and JSAs are two 
types of sharing agreements that are defined in the Commission's rules. 
A single sharing agreement, however named, may include provisions for 
time brokerage, local news production, joint advertising sales, and 
various other station-related services. All of these different kinds of 
arrangements present questions about the level and type of coordinated 
activity that may exist between stations and the impact of such 
cooperation on the public interest. Therefore, the Commission 
tentatively concludes that it should define SSAs broadly enough to 
capture all types of resource sharing and collaboration that may take 
place between stations as the best means to inform the public and the 
Commission about the scope of any joint activities between stations. 
This information will provide the basis for informed decision making 
about any necessary future Commission regulation impacting SSAs or 
particular categories of SSAs.
    252. Accordingly, for the purpose of implementing the proposed 
disclosure requirements discussed below, the Commission tentatively 
defines an SSA as any agreement or series of agreements, whether 
written or oral, in which (1) a station, or any individual or entity 
with an attributable interest in the station, provides any station-
related services, including, but not limited to, administrative, 
technical, sales, and/or programming support, to a station that is not 
under common ownership (as defined by the Commission's attribution 
rules); or (2) stations that are not under common ownership (as defined 
by the Commission's attribution rules), or any individuals or entities 
with an attributable interest in those stations, collaborate to provide 
or enable the provision of station-related services, including, but not 
limited to, administrative, technical, sales, and/or programming 
support, to one or more of the collaborating stations.
    253. The Commission believes that this definition, by focusing on 
the provision of station-related services and collaboration by and 
between broadcast stations, encompasses the universe of agreements that 
are broadly referred to as ``sharing agreements.'' This would include, 
for example, the provision of back office services by one independently 
owned station to another; a joint news-gathering operation; or the 
joint negotiation of retransmission consent agreements. Each such 
example is a type of resource sharing, among many others, and the 
agreements that govern such arrangements are appropriately referred to 
as SSAs. These agreements, including those that relate to ``back 
office'' functions, reflect the range of interaction between stations, 
and the Commission believes that disclosure of all such agreements will 
permit it to understand the scope of station interactions so that it 
can more effectively advance its public policy goals in this area.
    254. Moreover, the Commission believes that the definition of SSA 
should not be limited to only those agreements to which station 
licensees are parties, as the licensees are not always a party to the 
sharing agreement that affects their station's operations. For example, 
the parent company of one station may contract with the parent company 
of another independently owned station to provide station-related 
services for the first station, using the same employees for both 
stations. If the definition were limited to agreements that involved 
licensees, this type of agreement would arguably not be included, even 
though this is certainly an example of the type of sharing agreement 
the Commission seeks to identify. Accordingly, limiting the definition 
of SSAs to agreements between licensees would exclude existing 
agreements that the Commission intends to include in the definition, as 
well as afford a means to evade any disclosure requirements. Neither 
outcome would serve the public interest.
    255. The Commission seeks comment on the tentative conclusion that 
SSAs should be defined broadly to enable the Commission and the public 
to understand the potential concerns and benefits of these agreements. 
Is a broad definition the most appropriate way to inform the Commission 
and the public about the breadth and prevalence of agreements across 
the marketplace? The Commission seeks comment also on the proposed 
definition. Is it broad enough to include all types of resource sharing 
and service agreements between stations that may be relevant to the 
Commission's policy making initiatives? Is the definition too broad, 
such that it would apply to agreements that do not involve the 
provision of station-related services and/or collaboration between 
stations to enable the provision of such services? Is there an 
alternate definition that would better serve the Commission's purpose? 
The Commission's transaction review experience indicates that SSAs are 
often accompanied by contingent interest agreements. The Commission 
seeks comment on whether this is also the case for SSAs that are not 
part of a transaction. If so, the Commission seeks comment on whether 
and how it should seek to achieve additional transparency concerning 
such contingent interest arrangements in this this proceeding. The 
Commission encourages those who disagree with the proposed definition 
to provide specific alternative language to define SSAs for purposes of 
this proceeding.
    256. Should the term SSA instead be defined more narrowly, and if 
so how? For example, are there sharing agreements that are 
insignificant to the operation of the station(s), such that disclosure 
would not meaningfully benefit the Commission's or the public's 
understanding of station operations, and that should thus be excluded 
from the definition of SSA for this purpose? If so, what types of 
exclusions to the definition should the Commission adopt? Would a de 
minimis financial exception be appropriate (i.e., if the total dollar 
amount of the goods or services provided under the agreement is below a 
certain total dollar amount)? If so, what should the cutoff be? How 
should the Commission determine where to set the cutoff? Could such an 
exclusion omit significant agreements that involve in-kind 
contributions? Should the Commission define SSAs to implicate only 
agreements that involve local news operations or the provision or 
production of programming? Is so, how would such a definition be 
crafted? Would it implicate any special legal or Constitutional 
considerations? If so, how could the Commission address such issues? 
Should the Commission limit the definition of SSAs only to those 
involving stations in the same local market? Could such a limitation 
exclude agreements that have a significant impact on station operations

[[Page 29052]]

or programming? As discussed in the following section, the Commission 
proposes to limit disclosure of SSAs to commercial television stations. 
Accordingly, should the Commission limit the definition of SSAs to only 
those agreements involving exclusively commercial television stations? 
The Commission notes that commenters focus primarily on sharing 
agreements involving commercial television stations; accordingly, the 
Commission tentatively concludes that any disclosure requirement for 
SSAs should be limited to agreements involving exclusively commercial 
television stations. The Commission seeks comment on whether to expand 
the disclosure requirement to include agreements involving commercial 
radio stations and/or noncommercial stations. Are there many examples 
of agreements between commercial television stations and other types of 
stations (e.g., noncommercial stations, AM/FM stations)? What are the 
costs and benefits of the definition the Commission proposes and of any 
alternate definitions offered? How would a narrower definition be 
reconciled with the Commission's and the public's interest in 
understanding the breadth and prevalence of agreements across the 
marketplace?
b. Disclosure of Shared Service Agreements
    257. Although the Commission believes that commenters have raised 
meaningful concerns about the potential impact of sharing agreements on 
competition, diversity, and localism in television markets, it also 
acknowledges that broadcast commenters have provided evidence that such 
agreements may produce public interest benefits. Currently, the 
Commission and the public lack a full understanding of the agreements 
and the ability to assess the impact of the agreements on Commission 
policy goals. Thus, the Commission tentatively concludes that 
disclosure of SSAs as defined in this proceeding is necessary to inform 
the Commission and the public of joint operations and collaborations 
between independently owned commercial television stations. Section 
73.3613, which governs the filing of contracts with the Commission, 
requires that a summary of the substance of oral contracts subject to 
filing under that section must be reported in writing. The Commission 
proposes that any disclosure requirement it may adopt for SSAs 
similarly require that the substance of oral SSAs be reported in 
writing. The Commission seeks comment on this proposal.
    258. The Commission believes that disclosure of such agreements 
involving commercial television stations will permit the Commission to 
better understand the operation of stations and to assess the impact, 
if any, of SSAs on the television marketplace. Furthermore, members of 
the public will be able to gain a greater understanding of the 
relationships between independently owned stations that are parties to 
SSAs, which will allow them to evaluate whether such interaction has an 
impact on programming or other station operations. The Commission seeks 
comment on its tentative conclusion that disclosure of SSAs as defined 
herein is necessary to enable the Commission and the public to assess 
the implications of these agreements for the marketplace and the 
Commission's public policy goals. Does the Commission have any 
alternate means of assessing the breadth and prevalence of these 
agreements or their impact and implications? If so, what means are 
currently available to the Commission and the public?
    259. The Commission seeks comment on the manner in which SSAs are 
to be disclosed to the public and the Commission. For example, should a 
television station be required to place a copy of each SSA for the 
station in its public inspection file? Under such a requirement, should 
the Commission require that these agreements be placed in the local 
public inspection file located in the station's main studio or in the 
station's online public file, or both? Should the disclosure 
requirement apply to each station that is involved in the agreement 
(e.g., the recipient of services and the provider of the services)? 
Would a requirement to disclose only in a physical (i.e., not online) 
public inspection file limit the Commission's and the public's ability 
to learn about the content, scope, and prevalence of sharing 
agreements? The Commission already requires that all radio and 
television LMAs and JSAs between commercial broadcast stations be 
disclosed by placing them in the station's public file, regardless of 
whether the agreements are attributable or filed with the Commission. 
Should the Commission extend this existing requirement for LMAs and 
JSAs to include all SSAs for commercial television stations? What are 
the costs and benefits of each method of disclosure? As noted above, 
certain types of sharing agreements are already specifically defined in 
the Commission's rules and are already subject to various regulations 
and policies (e.g., LMAs and JSAs). The Commission does not believe 
that the adoption of any proposal in this Further Notice of Proposed 
Rulemaking should result in a duplicate disclosure obligation for such 
agreements. For example, if the Commission were to extend the existing 
public inspection file disclosure requirement for LMAs and JSAs to 
SSAs, an agreement that satisfies the definition of a JSA and an SSA 
would only need to be placed in the public inspection file once. 
However, in the event that the Commission adopts a disclosure 
requirement for SSAs that is different than the disclosure requirements 
already in existence for other types of sharing agreements--for 
example, a dedicated docket in the Commission's Electronic Comment 
Filing System (ECFS) or a new form--the Commission seeks comment on the 
extent to which that disclosure requirement should apply to other 
sharing agreements that are already subject to various disclosure 
requirements, as well as the associated benefits, burdens, and costs of 
any such approach.
    260. Should the Commission consider a requirement that SSAs be 
filed pursuant to Section 73.3613 of the Commission's rules? What are 
the benefits or drawbacks of this alternative? Pursuant to Section 
73.3613, licensees or permittees of commercial or noncommercial AM, FM, 
television, or International broadcast stations must file copies of 
certain contracts (including written summaries of oral contracts) with 
the Commission within 30 days of execution. These contracts cover a 
broad array of agreements that relate to station ownership and 
operation. Because the Commission proposes to limit the disclosure of 
SSAs to commercial television stations, as noted above, any new filing 
requirement under 73.3613 would be similarly tailored. How would such a 
requirement be structured? Should the Commission consider adopting a 
different filing process? For example, should the Commission create a 
new form to be filed with the Commission or open a dedicated docket in 
ECFS, in which licensees, permittees, or applicants would file copies 
of agreements? What would such a process entail and what would be the 
benefits and/or drawbacks of that process?
    261. In addition, the Commission proposes that any disclosure 
requirement it may adopt be subject to the same redaction allowances 
made available with respect to the filing of LMAs and JSAs, namely, 
that licensees may redact confidential or proprietary information. 
Currently, stations are

[[Page 29053]]

permitted to redact confidential or proprietary information when 
disclosing LMAs and JSAs, though the information must be made available 
to the Commission upon request. The Commission proposes that the same 
procedure apply to the disclosure of SSAs. Would this approach be 
desirable with respect to the disclosure requirements the Commission is 
proposing here? Should it consider limiting any disclosure or filing 
requirement to larger markets, such as the top 50 or 100 Designated 
Market Areas? What considerations would justify any proposed 
limitation, and what other factors should the Commission consider in 
evaluating any limitation? While such an approach might reduce burdens 
on stations in smaller markets, is the impact of SSAs in smaller 
markets potentially greater due to the typically smaller number of 
stations in these markets, such that limiting disclosure to larger 
markets would not be advisable? For each potential alternative 
proposed, the Commission seeks comment on the associated benefits, 
burdens, and costs. How much time should it provide for stations to 
come into compliance with this proposed filing requirement? What 
burdens would the proposed disclosure requirement place on stations, 
and what costs are associated with those burdens? How often would these 
burdens or costs be incurred? Do SSAs as defined herein typically last 
for a period of multiple years, and if so does that fact mitigate any 
associated burdens or costs, and by how much? How would the possible 
exclusions from the definition of SSA discussed above impact the 
burdens and costs?

II. Procedural Matters

A. Ex Parte Rules

    262. Permit-But-Disclose. The proceeding for this Further Notice of 
Proposed Rulemaking 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.

B. Comment Filing Procedures

    263. Comments and Replies. Pursuant to Sec. Sec.  1.415 and 1.419 
of the Commission's rules, 47 CFR 1.415 and 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). See Electronic 
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
    [ssquf] Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
    [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.
    [ssquf] 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.
    [ssquf] 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.
    [ssquf] U.S. Postal Service first-class, Express, and Priority mail 
must be addressed to 445 12th Street SW., Washington, DC 20554.
    264. 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).

C. Supplemental Initial Regulatory Flexibility Analysis

    265. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the NPRM in this proceeding. The Commission sought 
written public comment on the proposals in the NPRM, including comment 
on the IRFA. The Commission received no comments in direct response to 
the IRFA. Additionally, the Commission has prepared this Supplemental 
IRFA of the possible significant economic impact on small entities of 
the proposals in the Further Notice of Proposed Rulemaking. Written 
public comments are requested on this Supplemental IRFA. Comments must 
be identified as responses to the Supplemental IRFA and must be filed 
by the deadlines for comments provided on the first page of the Further 
Notice of Proposed Rulemaking. The Commission will send a copy of the 
Further Notice of Proposed Rulemaking, including this Supplemental 
IRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA). In addition, the Further Notice of Proposed 
Rulemaking and Supplemental IRFA (or summaries thereof) will be 
published in the Federal Register.
1. Need for, and Objectives of, the Further Notice of Proposed 
Rulemaking
    266. The Further Notice of Proposed Rulemaking initiates the 2014 
Quadrennial Review of the broadcast ownership rules, which was 
initiated pursuant to Section 202(h) of the Telecommunications Act of 
1996 (1996

[[Page 29054]]

Act). This review will incorporate and build on the record of the 
ongoing 2010 Quadrennial Review. 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'' and to ``repeal or modify any regulation it determines to 
be no longer in the public interest.''
    267. The media ownership rules that are subject to this quadrennial 
review are 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. As 
discussed in more detail below, the Further Notice of Proposed 
Rulemaking proposes to retain two rules without modification--the local 
radio ownership rule and the dual network rule--and seeks comment on 
potential changes to two others--the local television ownership rule 
and the newspaper/broadcast cross-ownership rule. The Further Notice of 
Proposed Rulemaking also seeks comment on whether to eliminate the 
radio/television cross-ownership rule. In addition, the Further Notice 
of Proposed Rulemaking seeks comment on issues referred to the 
Commission in the Third Circuit's remand in Prometheus Radio Project v. 
FCC (Prometheus II) of certain aspects of the Commission's 2008 
Diversity Order. Lastly, the Further Notice of Proposed Rulemaking 
seeks comment on the proposed disclosure of certain sharing agreements.
    268. Local Television Ownership Rule. In the Further Notice of 
Proposed Rulemaking, the Commission seeks comment on whether the 
current local television ownership rule remains necessary in the public 
interest and should be retained with a limited modification. 
Specifically, the Commission seeks comment on whether to retain the 
existing ownership limits, including the top-four prohibition and the 
eight voices test, but replace the Grade B contour overlap test used to 
determine when to apply the local television ownership rule with a 
digital noise limited service contour (NLSC) test, rather than the DMA-
based approach proposed in the NPRM.
    269. The item tentatively concludes that the current local 
television ownership rule remains necessary in the public interest and 
should be retained with a limited modification. Based on the current 
media marketplace and the record in this proceeding, the public 
interest would be best served by replacing the Grade B contour overlap 
test used to determine when to apply the local television ownership 
rule with a digital NLSC test, rather than the DMA-based approach 
proposed in the NPRM. The Commission believes that the local television 
ownership rule is necessary to promote competition. The Commission 
further believes that the competition-based rule proposed in the 
Further Notice of Proposed Rulemaking also would promote viewpoint 
diversity by helping to ensure the presence of independently owned 
broadcast television stations in local markets and would be consistent 
with the Commission's localism goal. The Commission finds that the 
local television ownership rule proposed in the Further Notice of 
Proposed Rulemaking would be consistent with the goal of promoting 
minority and female ownership of broadcast television stations. The 
Commission believes that the competition-based rule would also 
indirectly advance the Commission's viewpoint diversity goal by helping 
to ensure the presence of independently owned broadcast television 
stations in the local market, thereby increasing the likelihood of a 
variety of viewpoints. In addition, while the Commission does not 
propose to retain the rule with the specific purpose of preserving the 
current levels of minority and female ownership, the Commission 
tentatively finds that retaining the existing rule would effectively 
address the concerns of those commenters who suggested that additional 
consolidation would have a negative impact on minority and female 
ownership of broadcast television stations. Ultimately, the Commission 
believes that its proposed limited modification of the rule will better 
promote competition, and that this benefit would outweigh any burdens, 
which would be minimized by the proposal to grandfather combinations.
    270. The Further Notice of Proposed Rulemaking also tentatively 
concludes that retaining the existing failed/failing station waiver 
criteria would be in the public interest. The Commission evaluated the 
various proposed waiver standards proffered by commenters, and is 
concerned that many of the proposed waiver criteria would be difficult 
to monitor or enforce, are not rationally related to the ability of 
each station to compete in the local market, and could be manipulated 
in order to obtain a waiver. Ultimately, the Commission predicts that 
such standards would significantly expand the circumstances in which a 
waiver of the local television ownership rule would be granted. The 
Commission is concerned that such relaxation would be inconsistent with 
the tentative conclusion that the public interest is best served by 
retaining the existing television ownership limits. Moreover, the 
Commission believes that the existing waiver standard is not unduly 
restrictive and that it provides appropriate relief in markets of all 
sizes. Waiver of the Commission's rules is meant to be exceptional 
relief, and the item tentatively finds that the existing waiver 
criteria strike an appropriate balance between enforcing the ownership 
limits and providing relief from the rule on a case-by-case basis.
    271. Local Radio Ownership Rule. The Further Notice of Proposed 
Rulemaking seeks comment on whether the current local radio ownership 
rule remains necessary in the public interest and should be retained 
without modification. The Further Notice of Proposed Rulemaking seeks 
comment also on whether to retain the existing AM/FM subcaps.
    272. The Commission tentatively finds that the current local radio 
ownership rule remains necessary in the public interest and should be 
retained without modification. The Commission believes that the rule is 
necessary to promote competition. In addition, the Commission believes 
that the 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.'' Similarly, the Commission tentatively 
finds 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 tentatively finds also that the local radio ownership 
rule is consistent with the goal of promoting minority and female 
ownership of broadcast television stations. Ultimately, the Commission 
believes that these benefits outweigh any burdens that may result from 
its proposal to retain the rule without modification.
    273. The Commission agrees with commenters that supported retention 
of the AM subcaps in order to promote new entry. The Commission 
believes that broadcast radio, in general, continues to be a more 
likely avenue for new entry in the media marketplace--including entry 
by small businesses and entities seeking to serve niche audiences--as a 
result of radio's ability to more easily reach certain demographic 
groups and the relative affordability of radio stations compared to 
other mass media. AM stations are generally the least expensive option 
for entry into the radio market, often by a

[[Page 29055]]

significant margin, and therefore permit new entry for far less capital 
investment than is required to purchase an FM station. While some 
commenters suggested that eliminating the subcaps could result in 
divestiture of properties that could be acquired by new entrants, the 
Commission tentatively finds that this speculative rationale is not 
persuasive. Therefore, consistent with Commission precedent, the 
Commission believes that the public interest is best served by 
retaining the existing AM subcaps, which would continue to further 
competition, and possibly also viewpoint diversity, by promoting new 
entry.
    274. In addition, the Commission tentatively finds that there 
continue to be technical and marketplace differences between AM and FM 
stations that justify retention of both the AM and FM subcaps in order 
to promote competition in local radio markets. As the Commission has 
noted previously, FM stations enjoy unique technical advantages over AM 
stations, such as increased bandwidth and superior audio signal 
fidelity. In addition, 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. 
These technological differences often, but not always, result in 
greater listenership and revenues for FM stations.
    275. While the technological and marketplace differences between AM 
and FM stations generally benefit FM stations, and thus support 
retention of the FM subcaps, there continue to be many markets in which 
AM stations are ``significant radio voices.'' For example, a study 
provided by Clear Channel found that throughout the 300 Arbitron Metro 
markets, there are 187 a.m. stations ranked in the top five in terms of 
all-day audience share. And according to NAB, AM stations are among the 
top revenue earners in some of the largest radio markets (e.g., New 
York, Chicago, and Los Angeles). Therefore, the Commission tentatively 
finds that retention of the existing AM subcaps is necessary to prevent 
a single station owner from acquiring excessive market power through 
concentration of ownership of AM stations in markets in which AM 
stations are significant radio voices.
    276. In addition, the Commission tentatively concludes that it is 
not in the public interest to tighten the numerical ownership limits; 
therefore, the Commission sees no need to reassess the subcaps 
associated with each numerical tier, as proposed by Mt. Wilson. Indeed, 
tightening the subcaps absent a concurrent tightening of the numerical 
ownership limits would result in an internal inconsistency in the rule, 
as an entity would be unable to own all the stations otherwise 
permitted under certain numerical tiers. For example, in markets with 
30-44 stations, an entity currently may own up to seven stations, 
provided that no more than four of the stations are in the same 
service. If the subcap was tightened to three stations in the same 
service, an entity could then only own up to six stations, even though 
the rule's premise is that the public interest is best served by 
permitting ownership of up to seven stations in this particular market.
    277. Newspaper/Broadcast Cross-Ownership Rule. The Further Notice 
of Proposed Rulemaking seeks comment on the Commission's previous 
finding, which has been upheld in the courts, that the current absolute 
ban on newspaper/broadcast cross-ownership, first adopted in 1975, is 
overly broad. The Commission continues to believe that some restriction 
on newspaper/broadcast cross-ownership is necessary to protect and 
promote viewpoint diversity in local markets; this view is consistent 
with the Commission's longstanding rationale for the NBCO rule. The 
Supreme Court has recognized the importance of the Commission's role in 
promoting viewpoint diversity, calling it a ``basic tenet of national 
communications policy.''
    278. In addition, the Further Notice of Proposed Rulemaking seeks 
further comment on whether the restriction on newspaper/broadcast 
cross-ownership is necessary to protect and promote viewpoint diversity 
in local markets. The Further Notice of Proposed Rulemaking seeks 
comment on whether the absolute ban should be revised to allow 
combinations that would not unduly harm viewpoint diversity or 
localism. The Further Notice of Proposed Rulemaking specifically 
requests comment on whether the prohibition on newspaper/radio 
combinations should be eliminated. The Further Notice of Proposed 
Rulemaking seeks comment on approaches that would retain a ban on 
newspaper/television combinations in all markets and further seeks 
comment on whether to entertain waiver requests on a pure case-by-case 
approach, assessing each request independently and considering the 
totality of the circumstances each proposed transaction presents, or on 
a case-by-case waiver approach that would include presumptions that 
favor or disfavor the grant of waiver requests in accordance with 
certain prescribed guidelines. The Further Notice of Proposed 
Rulemaking seeks comment on whether the Commission should provide for 
an exception to a newspaper/television cross-ownership prohibition if 
the merger applicant demonstrates that either the television station or 
the newspaper has failed or is failing. The Further Notice of Proposed 
Rulemaking also seeks comment on possible modifications to the 2006 
rule to adjust for aspects of that rule that may be obsolete, difficult 
to prove or enforce, or ineffectual.
    279. In the event that the newspaper/television restriction were to 
be revised, the Further Notice of Proposed Rulemaking seeks comment on 
the following aspects of the rule. First, should the obsolete analog 
Grade A contour be replaced with an approach that uses both the DMA and 
the digital the principal community contour (PCC) to determine when the 
newspaper/television prohibition applies in order to approximate the 
former analog contour approach as closely as possible? Second, should 
the four-factor test that all waiver applicants, even those entitled to 
a favorable presumption, were required to satisfy under the 2006 rule 
be eliminated? The Further Notice of Proposed Rulemaking suggests that 
the factors were vague, subjective, difficult to prove and enforce, 
and/or not directly linked to viewpoint diversity. Third, should the 
previous local news exception permitted by the 2006 rule under which 
the Commission reversed the negative presumption against a waiver when 
the proposed combination involved a broadcast station that had not been 
offering local newscasts and the applicants committed to airing at 
least seven hours of local news per week after the transaction be 
eliminated? The Commission tentatively concludes that the potential 
difficulties in monitoring and enforcing such an exception would render 
it meaningless.
    280. Radio/Television Cross-Ownership Rule. The Further Notice of 
Proposed Rulemaking seeks comment on whether the radio/television 
cross-ownership rule, which limits the combined number of commercial 
radio and television stations a single entity may own in the same 
market, is no longer necessary in the public interest, and whether it 
should be repealed. Based on the current media marketplace and the 
evidence adduced in this proceeding, the Further Notice of Proposed 
Rulemaking seeks comment on whether the local television ownership rule 
and the local radio ownership rule, which the Further Notice of 
Proposed Rulemaking proposes to retain with limited modification, 
adequately serve the goals

[[Page 29056]]

this rule was intended to promote, namely, competition and diversity in 
local markets. Thus, the Further Notice of Proposed Rulemaking seeks 
comment on whether this additional prohibition on the cross-ownership 
of broadcast facilities is unnecessary. Further, the Further Notice of 
Proposed Rulemaking seeks comment on whether this simplification of the 
rules will have minimal effects in most markets.
    281. The Commission tentatively finds that the radio/television 
cross-ownership rule is not necessary to promote competition. The 
Commission has found previously that most advertisers do not consider 
radio and television to be good substitutes for one another, and that 
television and radio stations neither compete in the same product 
market nor do they bear any vertical relation to one another. This 
position is consistent with the long-standing conclusion of the 
Department of Justice, which considers radio advertising as a separate 
antitrust market for purposes of its competition analysis. Similarly, 
the Commission tentatively finds that most consumers do not consider 
radio and television stations to be substitutes for one another and do 
not switch between television viewing and radio listening based on 
program content. Nothing in the current record undermines the 
Commission's previous conclusion that a television-radio combination, 
therefore, cannot adversely affect competition in any relevant product 
market. Given that radio and television stations do not appear to 
compete in the same market and that the local television and radio 
rules would prevent significant additional consolidation even in the 
absence of this rule, the record does not suggest that repeal of the 
radio/television cross-ownership rule would harm competition.
    282. The Commission tentatively finds that the radio/television 
cross-ownership rule is not necessary to promote localism. The 
Commission agrees with industry commenters who maintained that some 
limited cross-ownership could create efficiencies that could benefit 
the public should broadcasters choose to invest additional resources in 
the production of local news and information programming. When 
broadcasters engage in joint operations, whether those operations are 
focused on programming and news gathering or back office matters, the 
Commission believes it likely that financial efficiencies result. Such 
efficiencies could lead ultimately to consumer benefits in the form of 
additional station investments in equipment for radio or television 
newsrooms, an increase in staffing for news and informational programs, 
or additional local news coverage on radio stations.
    283. The Commission considered carefully whether there is evidence 
in the current record that elimination of the radio/television cross-
ownership rule would likely adversely affect minority and female 
ownership. The Commission believes that the current record does not 
establish that such harm is likely. Furthermore, the Commission does 
not believe that record evidence shows that the cross-ownership ban has 
protected or promoted minority or female ownership of broadcast 
stations, or that it could be expected to do so in the future. Notably, 
radio/television cross-ownership combinations were not the focus of 
commenters' concerns raised in response to the NPRM. In fact, no 
commenter to the NPRM presented empirical data or other analyses that 
established that repeal of this rule would harm competition, localism, 
or viewpoint diversity in local markets. The Commission tentatively 
concludes that the rule is not necessary to promote competition or 
localism, and the record reflects that most radio commercial stations 
do not broadcast significant amounts of local news and information. The 
current record does not suggest that minority/female-owned radio 
stations contribute more significantly to viewpoint diversity than 
other radio stations or broadcast more meaningful amounts of local news 
on which consumers rely as a primary source of information.
    284. Moreover, while the Commission acknowledges the concerns 
raised by NABOB and others advocating for additional minority ownership 
opportunities, the Commission agrees with commenters, including NAB, 
that the low level of minority and female broadcast ownership cannot be 
attributed solely or primarily to consolidation. Nor has any commenter 
shown that these low levels of ownership are a result of the existing 
radio/television cross-ownership rule. The Commission recognizes the 
presence of many disparate factors, including, most significantly, 
access to capital, as longstanding, persistent impediments to ownership 
diversity in broadcasting.
    285. Dual Network Rule. The Further Notice of Proposed Rulemaking 
tentatively concludes that the dual network rule, which permits common 
ownership of multiple broadcast networks, but prohibits a merger 
between or among the ``top-four'' networks (ABC, CBS, Fox, and NBC), 
continues to be necessary to promote competition and localism and 
should be retained without modification.
    286. The Commission tentatively finds that the dual network rule 
remains necessary in the public interest to foster competition in the 
provision of primetime entertainment programming and the sale of 
national advertising time. Specifically, the Commission tentatively 
finds that the primetime entertainment programming supplied by the top-
four broadcast networks is a distinct product, the provision of which 
could be restricted if two of the four major networks were to merge. 
The Commission also tentatively finds that, consistent with past 
Commission findings, the top-four broadcast networks comprise a 
``strategic group'' in the national advertising market and compete 
largely among themselves for advertisers that seek to reach large, 
national mass audiences. Accordingly, the Commission continues to 
believe that a top-four network merger would substantially lessen 
competition for advertising dollars in the national advertising market, 
which would, in turn, reduce incentives for the networks to compete 
with each other for viewers by providing innovative, high quality 
programming. Based on their distinctive characteristics relative to 
other broadcast and cable networks, the Commission tentatively finds 
that the top-four broadcast networks serve a unique role in the 
provision of primetime entertainment programming and the sale of 
national advertising time that justifies retaining a rule specific to 
them.
    287. In addition, the Commission tentatively finds that, consistent 
with past Commission findings, the dual network rule remains necessary 
to promote the Commission's localism goal. Specifically, the Commission 
tentatively finds that the rule remains necessary to preserve the 
balance of bargaining power between the top-four networks and their 
affiliates, thus improving the ability of affiliates to exert influence 
on network programming decisions in a manner that best serves the 
interests of their local communities. Typically, a critical role of a 
broadcast network is to provide its local affiliates with high quality 
programming. Because this programming is distributed across the 
country, broadcast networks have an economic incentive to ensure that 
the programming both appeals to a mass, nationwide audience and is 
widely shown by affiliates. A network's local affiliates serve a 
complementary role by providing local input in network programming 
decisions and airing programming that serves the specific

[[Page 29057]]

needs and interests of that specific local community. As a result, the 
economic incentives of the networks are not always aligned with the 
interests of the local affiliates or the communities they serve.
    288. Diversity Order Remand and Eligible Entity Definition. In 
addition to evaluating each of the broadcast ownership rules, the 
Further Notice of Proposed Rulemaking addresses the Third Circuit's 
remand of certain aspects of the 2008 Diversity Order. Based on the 
Commission's analysis of the preexisting eligible entity standard as 
well as the measures to which it applied, the Third Circuit's remand 
instructions, and the record in this proceeding, the Further Notice of 
Proposed Rulemaking proposes to reinstate the revenue-based eligible 
entity standard and to apply it to the regulatory policies set forth in 
the Diversity Order. While the Commission does not have an evidentiary 
record demonstrating that this standard specifically increases minority 
and female broadcast ownership, the Commission anticipates that 
reinstating the previous revenue-based standard will promote small 
business participation in the broadcast industry. The Commission 
believes that small businesses benefit from flexible licensing policies 
and that making it easier for small business applicants to participate 
in the broadcast industry will encourage innovation and enhance 
viewpoint diversity. The Commission also believes that the benefits of 
reinstating the eligible entity standard and applying it to the 
regulatory measures set forth in the Diversity Order would outweigh any 
potential costs of the decision to do so. Accordingly, the Commission 
tentatively determines that this action will advance the policy 
objectives that traditionally have guided the Commission's analyses of 
broadcast ownership issues and will serve the public interest.
    289. Shared Service Agreements. The Further Notice of Proposed 
Rulemaking provides further consideration of the regulatory treatment 
of various agreements for the sharing of services between broadcast 
stations. Because the Commission does not currently require the filing 
or disclosure of all sharing agreements that do not contain time 
brokerage or joint advertising sales provisions, the Commission has 
limited information about the content or breadth of such agreements or 
the frequency of their use. Accordingly, in order to allow the 
Commission and the public to better understand the terms, operation, 
and prevalence of these agreements and their potential impact on the 
Commission's competition, localism, and diversity goals, the Further 
Notice of Proposed Rulemaking seeks comment on proposals to require the 
disclosure of such agreements. Specifically, the Further Notice of 
Proposed Rulemaking proposes a specific definition for a category of 
sharing agreements designated in the Further Notice of Proposed 
Rulemaking as Shared Service Agreements (SSAs). Because the Commission 
desires to expand its knowledge of these agreements, the Further Notice 
of Proposed Rulemaking proposes to adopt a broad definition of SSAs. 
The Further Notice of Proposed Rulemaking, however, seeks comment on 
whether to narrow the scope of the definition, seeking comment, for 
example, on whether a de minimis financial exception would be 
appropriate. The Further Notice of Proposed Rulemaking then seeks 
comment on various proposals for the disclosure of SSAs, including that 
commercial television stations be required to place copies of such 
agreements in their public inspection files, the filing of SSAs 
pursuant to 47 CFR 73.3613, or the adoption of a new filing process 
(e.g., a new form or a dedicated docket in the Commission's Electronic 
Comment Filing System (ECFS)). The Commission proposes that any 
disclosure requirement it may adopt be subject to the same redaction 
allowances made available to local marketing agreements and joint sales 
agreements, namely, that licensees may redact confidential or 
proprietary information.
    290. The Commission believes that disclosure of these agreements 
will further its understanding of the television marketplace and inform 
future policy decisions to address any potential negative impacts of 
SSAs on the Commission's competition, localism, and diversity goals. 
The Further Notice of Proposed Rulemaking tentatively concludes that 
disclosure will permit the Commission to better understand the 
operation of stations and to assess the impact, if any, of such 
combined operation on the television marketplace and that members of 
the public will be able to gain a greater understanding of the 
relationship between independently owned stations that are parties to 
SSAs, which will allow them to evaluate whether this interaction has an 
impact on programming or other station operations.
2. Legal Basis
    291. The Further Notice of Proposed Rulemaking is adopted pursuant 
to Sections 1, 2(a), 4(i), 303, 307, 308, 309, 310, and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152(a), 154(i), 
303, 307, 308, 309, 310, and 403, 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
    292. The RFA directs the Commission to provide a description of 
and, where feasible, an estimate of the number of small entities that 
will be affected by the rules 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 Small Business 
Administration (SBA). The final rules adopted herein affect small 
television and radio broadcast stations and small entities that operate 
daily newspapers. A description of these small entities, as well as an 
estimate of the number of such small entities, is provided below.
    293. Television Broadcasting. The SBA defines a television 
broadcasting station that has no more than $35.5 million in annual 
receipts as a small business. The definition of business concerns 
included in this industry states that establishments are 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. These 
establishments also produce or transmit visual programming to 
affiliated broadcast television stations, which in turn broadcast the 
programs to the public on a predetermined schedule. Programming may 
originate in their own studio, from an affiliated network, or from 
external sources. Census data for 2007 indicate that 2,076 such 
establishments were in operation during that year. Of these, 1,515 had 
annual receipts of less than $10.0 million per year and 561 had annual 
receipts of more than $10.0 million per year. Based on this data and 
the associated size standard, the Commission concludes that the 
majority of such establishments are small.
    294. The Commission has estimated the number of licensed commercial 
television stations to be 1,387. According to Commission staff review 
of the BIA Kelsey Inc. Media Access Pro

[[Page 29058]]

Television Database (BIA) as of November 26, 2013, 1,249 (or about 90 
percent) of an estimated 1,387 commercial television stations in the 
United States have revenues of $35.5 million or less and, thus, qualify 
as small entities under the SBA definition.
    295. The Commission notes, however, that in assessing whether a 
business concern qualifies as small under the above definition, 
business (control) affiliations must be included. This estimate, 
therefore, likely overstates the number of small entities that might be 
affected by this 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. 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 is therefore possibly 
over-inclusive to that extent.
    296. 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 $35.5 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 as of November 26, 2013, about 11,331 (or about 99.9 percent) 
of 11,341 commercial radio stations have revenues of $35.5 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. This estimate, therefore, 
likely overstates the number of small entities that might be affected 
by this action, because the revenue figure on which it is based does 
not include or aggregate revenues from affiliated companies.
    297. 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 estimates of small businesses to which they apply may 
be over-inclusive to this extent.
    298. 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. Business concerns included in this 
category are those that ``carry out operations necessary for producing 
and distributing newspapers, including gathering news; writing news 
columns, feature stories, and editorials; and selling and preparing 
advertisements.'' 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 this action.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    299. The Further Notice of Proposed Rulemaking proposes rule 
changes that will affect reporting, recordkeeping, and other compliance 
requirements. Each of these changes is described below.
    300. The Further Notice of Proposed Rulemaking proposes 
modifications to several of the media ownership rules as set forth in 
Section A 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.
    301. In addition, the Further Notice of Proposed Rulemaking 
proposes changes that would affect reporting, recordkeeping, or other 
compliance requirements with regard to the proposed disclosure of SSAs. 
If this proposal is ultimately adopted, commercial television stations 
will be required to disclose all SSAs to the public and the Commission. 
Depending on the method of disclosure for SSAs that may ultimately be 
adopted, commercial television stations may be required to upload all 
SSAs to their online public file or place a copy of all SSAs in their 
physical local public inspection file. In addition, if the Commission 
were to require the filing of SSAs pursuant to 47 CFR 73.3613, 
commercial television stations would be required to file a paper copy 
of such contracts with the Commission; list the contracts on their FCC 
Form 323, Ownership Report for Commercial Broadcast Station; and either 
place the SSAs in their local public inspection file or maintain an up-
to-date list of all contracts reported on Form 323 and make such 
contracts available on request. Other proposed alternatives may include 
the creation of a new form for the filing of SSAs or the creation of a 
dedicated docket in the Commission's Electronic Comment Filing System 
that could be used for filing purposes.
5. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    302. 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.
    303. In conducting the quadrennial review, the Commission has three 
chief alternatives available for each of the Commission's media 
ownership rules -- eliminate the rule, modify it, or, if the Commission 
determines that the rule is ``necessary in the public interest,'' 
retain it. The Commission believes that the rules proposed in the 
Further Notice of

[[Page 29059]]

Proposed Rulemaking, which are intended to achieve its policy goals of 
competition, localism, and diversity, will continue to benefit small 
entities by fostering a media marketplace in which they are able to 
compete effectively and by promoting additional broadcast ownership 
opportunities, as described below, among a diverse group of owners, 
including small entities. This Supplemental IRFA discusses below 
several ways in which the rules may benefit small entities as well as 
steps taken, and significant alternatives considered, to minimize any 
potential burdens on small entities.
    304. Local Television Ownership Rule. The Commission proposes to 
retain the local television ownership rule with only a minor 
modification, consistent with the proposal in the NPRM. In the NPRM, 
the Commission proposed to retain the rule but sought comment on a 
number of alternatives to this proposal. Specifically, the NPRM 
proposed to retain the top-four prohibition, eight-voices test, and 
numerical limits of the existing rule, while proposing to replace the 
Grade B contour overlap provision with a DMA-based approach. The NPRM 
also invited comment on whether to adopt a market size waiver standard, 
the impact of multicasting on the local television ownership rule, and 
the impact of the proposed rule on minority and female ownership.
    305. Multiple commenters asserted that the Commission should 
retain, or tighten, the local television ownership rule to promote 
competition and create ownership opportunities for new entrants. In 
contrast, broadcast commenters asserted that the local television 
ownership rule should be eliminated or substantially relaxed as a 
result of competition for viewers and advertising revenue from non-
broadcast video alternatives. A number of commenters argued that such 
relief is warranted particularly for broadcasters--including small 
entities--that operate in small and mid-sized markets. Broadcast 
commenters also support adoption of a more flexible waiver standard for 
small and mid-sized markets.
    306. In the Further Notice of Proposed Rulemaking, the Commission 
tentatively finds that the local television ownership rule remains 
necessary in the public interest and should be maintained with a 
limited modification. Accordingly, under the proposed modified 
television ownership rule an entity may own up to two television 
stations in the same DMA if (1) the digital NLSCs of the stations (as 
determined by Section 73.622(e)) do not overlap; or (2) at least one of 
the stations is not ranked among the top four stations in the market 
and at least eight independently owned television stations will remain 
in the DMA following the combination. In calculating the number of 
stations remaining post-merger, only those stations whose digital NLSC 
overlaps with the digital NLSC of at least one of the stations in the 
proposed combination will be considered. In addition, the Commission 
proposes to retain the existing failed/failing station waiver policy.
    307. As noted above, the NPRM proposed to replace the Grade B 
contour overlap provision with a DMA-based approach. The Commission 
tentatively finds, however, that adoption of a DMA-based approach to 
replace the analog Grade B contour as the trigger for the rule would 
unduly expand the reach of the local television ownership rule in some 
DMAs, particularly in those DMAs that cover large rural areas in the 
western United States where numerous small television stations operate. 
Thus, the Further Notice of Proposed Rulemaking proposes to adopt 
instead the use of a digital NLSC as the functional equivalent of the 
analog Grade B contour, which is no longer relevant following the 
digital television transition. In the Further Notice of Proposed 
Rulemaking, the Commission tentatively affirms the NPRM's proposal to 
grandfather existing ownership combinations that would exceed the 
numerical limits under the revised contour approach, though the 
Commission proposes that, going forward, the sale of such combinations 
must comply with the local television ownership rule then in effect. 
The Commission believes that this approach will avoid disruption of 
settled expectations and prevent any impact on the provision of 
television service by smaller stations operating in rural areas. 
Moreover, the Commission believes that by preventing stations with the 
largest market shares from combining to achieve excessive market power, 
the local television ownership rule protects against potential harm to 
broadcasters with smaller market shares, including small entities. 
Accordingly, the Commission believes that the rule, as modified, will 
continue to ensure that local television markets do not become too 
concentrated and, by doing so, will allow more firms, including those 
that are small entities, to enter local markets and compete 
effectively.
    308. The Further Notice of Proposed Rulemaking also addresses the 
competitive challenges faced by broadcasters that operate in small 
markets--including small entities--by proposing to retain the existing 
failed/failing station waiver policy. The Commission finds that the 
existing waiver standard is not unduly restrictive and provides 
appropriate relief in markets of all sizes. In particular, the 
Commission notes that a review of recent transactions demonstrates that 
waivers under the failed/failing station policy are frequently granted 
in small and mid-sized markets, which often provides relief for small 
entities. Moreover, waiver of the Commission's rules is meant to be 
exceptional relief, and the Commission believes that the existing 
waiver criteria strike an appropriate balance between enforcing the 
ownership limits and providing relief from the rule in circumstances 
where it is truly appropriate. However, the Further Notice of Proposed 
Rulemaking seeks comment on whether to relax the failed/failing station 
waiver criteria or establish additional grounds for waiver. For 
example, the items asks whether there are circumstances in which the 
Commission should refrain from applying the four-percent all-day 
audience share requirement or adopt a higher threshold.
    309. Local Radio Ownership Rule. The Further Notice of Proposed 
Rulemaking proposes to retain the local radio ownership rule without 
modification, consistent with the NPRM. In the NPRM, the Commission 
proposed to retain the rule and sought comment on alternatives to this 
proposal. Specifically, the NPRM proposed to retain the AM/FM subcaps, 
which limit the number of radio stations in the same service that an 
entity can own. The Commission also sought comment on whether and, if 
so, how, to incorporate new audio platforms into the rule and sought 
additional comment on the impact of such platforms on the broadcast 
radio industry. In addition, the NPRM sought comment on whether to 
adopt a specific waiver standard for the local radio ownership rule and 
on how the proposed rule would affect minority and female ownership 
opportunities.
    310. Several commenters supported the tentative conclusion to 
retain the local radio ownership rule, including the AM/FM subcaps. 
They asserted that the AM band, in particular, is a critical point of 
new entry in the marketplace. By contrast, many broadcast commenters 
supported eliminating or loosening the rule, including the AM/FM 
subcaps. In particular, NAB disputes the tentative conclusion that the 
subcaps promote new entry, asserting instead that elimination of the 
subcaps could spur market activity that

[[Page 29060]]

leads to divested properties that could be purchased by new entrants, 
including small businesses and minority and women-owned businesses.
    311. The Commission proposes to retain the local radio ownership 
rule, including the AM/FM subcaps, finding that AM subcaps in 
particular promote new entry in the broadcast radio marketplace. 
Accordingly, an entity may 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.
    312. The Commission tentatively concludes that, consistent with 
previous Commission findings, broadcast radio continues to be a viable 
avenue for new entry in the media marketplace, including by small 
businesses, minorities, women, and entities seeking to serve niche 
audiences. Specifically, the Commission tentatively finds that AM 
stations are generally the least expensive option for entry into the 
radio market, often by a significant margin, and therefore permit new 
entry for far less capital investment than is required to purchase an 
FM station. The Commission believes that retention of the local radio 
ownership limits, including the AM/FM subcaps, will foster 
opportunities for new entry in local radio markets, particularly by 
small entities. Moreover, the Commission believes that by limiting the 
consolidation of market power among the dominant groups, the rule will 
ensure that small radio station owners remain economically viable.
    313. Newspaper/Broadcast Cross-Ownership Rule. The Further Notice 
of Proposed Rulemaking seeks additional comment on the NPRM's proposals 
regarding the newspaper/broadcast cross-ownership (NBCO) rule. The NPRM 
offered a myriad of tentative conclusions and inquired about detailed 
scenarios. In particular, the NPRM sought comment on a number of 
alternatives, including whether to modify the top 20 DMA distinction, 
the top-four restriction, or the eight voices test. The NPRM also 
proposed to eliminate the use of a station's analog signal contour in 
favor of a DMA-based approach for triggering the rule.
    314. The Commission received a substantial number of comments on 
the NBCO rule, several of which discuss issues that may be of interest 
to small entities. For instance, several commenters claimed that 
lifting the newspaper/radio cross-ownership restriction will revitalize 
local news on radio stations and will provide struggling newspapers 
with a broader base of financial support and an increased ability to 
reach audiences. In the Further Notice of Proposed Rulemaking, the 
Commission seeks comment on whether the restriction on newspaper/radio 
cross-ownership is no longer necessary to promote viewpoint diversity 
and therefore should be eliminated from the NBCO rule.
    315. Additionally, in the Further Notice of Proposed Rulemaking, 
the Commission tentatively concludes that it should not adopt a bright-
line rule allowing some newspaper/television combinations, even under 
narrowly prescribed circumstances. The Commission is aware that bright-
line rules are more likely to produce predictable and consistent 
outcomes in an expeditious and less costly manner than rules that 
incorporate a waiver process, which is inherently more uncertain. The 
Commission is concerned, however, that a bright-line rule is too blunt 
an instrument to be used for allowing newspaper/television cross-
ownership, no matter how limited. Of particular interest to small 
entities, the Commission also is concerned that a bright-line rule 
allowing only certain combinations in the largest markets could 
foreclose merger opportunities in smaller markets where a combination 
might be acceptable.
    316. Although the Commission tentatively concludes that a general 
prohibition on newspaper/television combinations in all markets is the 
appropriate starting point when considering the impact of newspaper/
television cross-ownership on viewpoint diversity, it recognizes that 
particular combinations might be shown to be consistent with its 
diversity goal. Therefore, it proposes to entertain requests for waiver 
of the general prohibition. An approach that incorporates a waiver 
process would provide the Commission with the flexibility to take into 
account the particular circumstances of a proposed merger and 
potentially provide relief for broadcasters--including small entities--
by allowing the combination of a newspaper and a television station 
where appropriate.
    317. The Commission requests comment on what type of waiver process 
would enable it to identify any acceptable newspaper/television 
combinations most accurately and effectively. It asks whether it should 
implement a pure case-by-case approach that evaluates the totality of 
the circumstances for each individual transaction, considering each 
waiver request anew without measuring it against a set of defined 
criteria or awarding the applicant an automatic presumption based on a 
prima facie showing of particular elements. Additionally, the 
Commission seeks comment on an approach whereby the Commission would 
ascribe a favorable presumption to certain waiver applicants in the 
top-20 DMAs and a negative presumption to all other waiver applicants. 
It seeks comment on requiring as conditions for a favorable presumption 
that: (1) The proposed merger does not involve a television station 
ranked among the top-four television stations in the DMA and (2) at 
least eight major media voices remain in the DMA following the 
transaction. The Commission seeks comment on the pros and cons, costs 
and benefits of both these approaches.
    318. As noted above, the NPRM also proposed to eliminate the use of 
a station's Grade A contour in favor of a DMA-based approach for 
triggering the rule. As commenters note, however, because DMAs can be 
much larger in size than the former Grade A contour areas, the proposed 
DMA-based approach could expand the reach of the rule and prohibit 
cross-ownership when there is no overlap between the community in which 
a newspaper is published and the primary service area of a broadcast 
station. To avoid that possibility, the Further Notice of Proposed 
Rulemaking proposes instead to prohibit cross-ownership of a full-power 
television station and a daily newspaper when: (1) The community of 
license of the television station and the community of publication of 
the newspaper are in the same Nielsen DMA, and (2) the Principal 
Community Contour (PCC) of the television station, as defined in 
Section 73.625 of the Commission's rules, encompasses the entire 
community in which the newspaper is published. Under this proposal, 
both conditions must be met in order for the cross-ownership 
prohibition to be triggered. Furthermore, the Commission proposes to 
grandfather those existing combinations that would exceed the ownership 
limit by virtue of

[[Page 29061]]

the change to this new DMA/PCC approach. The Commission believes that 
this approach will avoid disruption of settled expectations and prevent 
any impact on the provision of television service by smaller stations. 
Moreover, the Commission believes that the newspaper/television cross-
ownership limits--including the top 20 DMA distinction, the top-four 
restriction, and the eight voices test--will continue to foster diffuse 
ownership among media outlets and thereby create more ownership 
opportunities for small entities.
    319. Radio/Television Cross-Ownership Rule. In the Further Notice 
of Proposed Rulemaking, the Commission seeks comment on whether to 
eliminate the radio/television cross-ownership rule, which limits the 
combined number of commercial radio and television stations a single 
entity may own in the same market. In the NPRM, the Commission 
tentatively concluded that the radio/television cross-ownership rule is 
not currently necessary to promote the public interest. The Commission 
sought comment on a range of issues, including whether radio and 
television stations constitute different markets, whether repeal of the 
rule would encourage more and better competition in local media 
markets, whether repeal of the rule would result in additional 
broadcast consolidation, and what impact, if any, repeal would have on 
small, independent broadcasters, including those stations owned by 
minorities and women. The Commission indicated in the NPRM that changes 
in the marketplace and evidence from the media ownership studies 
specifically supported the tentative conclusion that the rule is not 
necessary to promote viewpoint diversity in local media markets.
    320. Most broadcast commenters supported the Commission's tentative 
conclusion, and asserted that the cross-ownership rule is no longer 
necessary to protect the public interest, particularly in light of 
competition from new media technologies and Internet-based information 
outlets. Not all broadcasters, however, agreed. Mt. Wilson, an 
independent broadcaster, asserted that CBS, its primary competitor, is 
able to wield significant power in the radio market because of its 
ability to leverage its non-radio holdings, which, in turn, adversely 
affects the ability of independent radio owners in the market to 
compete effectively. Mt. Wilson argued that elimination of the radio/
television cross-ownership rule will benefit group owners, such as CBS, 
by allowing them to acquire additional co-owned radio stations in a 
market, and thereby giving them a further competitive benefit to the 
disadvantage of independent broadcasters.
    321. Commenters who supported retention of the rule also expressed 
concern about the potential loss of viewpoint diversity in local 
markets if the rule were to be repealed. They were skeptical of 
conclusions in the media ownership studies that consolidated broadcast 
stations air more local content, and thus, contribute more to viewpoint 
diversity than independent voices. Commenters also asserted that the 
Commission must take into account the public's reliance on broadcast 
stations and newspapers as the primary sources of information for 
individuals to learn about their local communities and to participate 
in local civic affairs.
    322. In addition, public interest commenters claimed that broadcast 
radio is one of the few remaining entry points into media ownership for 
women and minorities, and that its usefulness as such would potentially 
be limited if the radio/television cross-ownership rule were 
eliminated. Other commenters argued more generally that any media 
consolidation disproportionately affects opportunities for women and 
minorities to become and remain broadcast station owners and that 
female- and minority-owned stations thrive in markets that are less 
concentrated. NHMC et al. contended that strengthening, or at least 
retaining, broadcast ownership limits is one of the few race- and 
gender-neutral ways to increase broadcast station ownership by women 
and minorities, thereby, avoiding the constitutional concerns raised by 
race- and gender-specific remedies. NABOB asked that the Commission not 
take any action that would further erode minority broadcast ownership, 
particularly given that new media outlets are not positioned to replace 
traditional broadcasters and the information services they provide to 
minority communities. NABOB contended that any deregulation allows 
consolidation and it asserted that consolidation enhances an entity's 
competitive advantage in obtaining advertising.
    323. Consistent with prior Commission holdings, the Commission 
tentatively finds that the radio/television cross-ownership rule is not 
necessary to promote competition. The Commission has found previously 
that most advertisers do not consider radio and television to be good 
substitutes for one another and that television and radio stations do 
not compete in the same product market. This position is consistent 
with the long-standing conclusion of the Department of Justice, which 
considers radio advertising as a separate antitrust market for purposes 
of its competition analysis. The Further Notice of Proposed Rulemaking 
tentatively finds that most consumers do not consider radio and 
television stations to be substitutes for one another and do not switch 
between television viewing and radio listening based on program 
content. Contrary to Mt. Wilson's conflicting opinion, the Commission 
believes that the weight of the evidence in the record of this 
proceeding and precedent supports these tentative conclusions.
    324. The Further Notice of Proposed Rulemaking tentatively 
concludes that the radio/television cross-ownership rule is not 
necessary to promote localism. The Commission agrees with industry 
commenters who maintained that some limited cross-ownership could 
create efficiencies that could benefit the public should broadcasters 
choose to invest additional resources in the production of local news 
and information programming. When broadcasters engage in joint 
operations, whether those operations are focused on programming and 
news gathering or back office matters, the Commission believes it 
likely that financial efficiencies result. Such efficiencies could lead 
ultimately to consumer benefits in the form of additional station 
investments in equipment for radio or television newsrooms, an increase 
in staffing for news and informational programs, or additional local 
news coverage on radio stations.
    325. The Commission seeks comment on whether the radio/television 
cross-ownership rule is not necessary to promote viewpoint diversity. 
In addition, the Further Notice of Proposed Rulemaking tentatively 
finds that the current record does not support claims that elimination 
of the radio/television cross-ownership rule would have a negative 
impact on minority and female ownership. Notably, radio/television 
cross-ownership combinations were not the focus of commenters' concerns 
raised in response to the NPRM. In fact, no commenter to the NPRM 
presented empirical data or other analyses that established that repeal 
of this rule would harm competition, localism, or viewpoint diversity 
in local markets. Moreover, while the Commission acknowledges the 
concerns raised by those advocating for additional minority ownership 
opportunities, the Commission agrees with commenters, including NAB, 
that the low level of minority and female broadcast ownership cannot be 
attributed solely or primarily to consolidation. Nor has any commenter 
shown that these low levels

[[Page 29062]]

of ownership are a result of the existing radio/television cross-
ownership rule. The Commission recognizes the presence of many 
disparate factors, including, most significantly, access to capital, as 
longstanding, persistent impediments to ownership diversity in 
broadcasting.
    326. Shared Service Agreements. The proposed filing requirement for 
SSAs is not expected to have a significant economic impact on any 
entities, whether small or otherwise. The filing requirement is limited 
to commercial television stations, so any small entities that are 
licensees of commercial radio stations and any small entities that are 
licensees of noncommercial television or radio stations are exempt from 
the filing requirement. Furthermore, the Commission believes that SSAs 
are generally executed for a period of multiple years, which likely 
limits the number of agreements that will be subject to the proposed 
disclosure requirement. However, the Further Notice of Proposed 
Rulemaking seeks comment on ways to limit the disclosure requirement 
that could reduce the burden while not negatively impacting the policy 
justifications for requiring disclosure. For example, the Commission 
asks whether any category of agreements between stations should be 
excluded from the definition of SSA in this proceeding, for instance by 
adopting a de minimis financial exclusion, limiting the definition to 
agreements that involve local news production or that only involve 
stations from the same local market. The Further Notice of Proposed 
Rulemaking also seeks comment on how much time should be provided for 
compliance with the proposed requirement, which could reduce the burden 
on all stations. Finally, the Further Notice of Proposed Rulemaking 
seeks comment on whether to limit the disclosure requirement to certain 
larger markets (e.g., the top 50 or 100 Designated Market Areas).
    327. In addition, the Further Notice of Proposed Rulemaking seeks 
comment on multiple alternatives for the proposed disclosure 
requirement. These alternatives include placing the SSAs in the 
stations' public inspection files (online or physical), filing the 
agreements with the Commission, the creation of a new form for the 
filing of SSAs, or the creation of a dedicated docket in ECFS that 
could be used for filing purposes. This gives commenters the 
opportunity to demonstrate that one of these alternatives may have less 
of an economic impact on small businesses and/or all entities. The 
Commission will consider all such comments.
    328. Diversity Order Remand/Eligible Entity Definition. The 
Commission solicited comment in the NPRM on whether the Commission 
should reinstate the preexisting revenue-based eligible entity 
definition to support the measures the Third Circuit vacated and 
remanded as well as other measures the Commission may implement in the 
future. In addition, the Commission sought comment on whether re-
adoption of the revenue-based standard would support the Commission's 
traditional diversity, localism, and competition goals in other ways, 
particularly by enhancing ownership opportunities for small businesses 
and other new entrants.
    329. As noted above, the Further Notice of Proposed Rulemaking 
tentatively concludes that the Commission should reinstate the 
preexisting revenue-based eligible entity definition, which includes 
those entities, commercial or noncommercial, that would qualify as 
small businesses consistent with SBA standards for its industry 
grouping, based on revenue. Specifically, the Commission believes that 
reinstating the revenue-based standard will promote small business 
participation in the broadcast industry. The Commission believes that 
small-sized applicants and licensees benefit from flexible licensing, 
auctions, transactions, and construction policies. Often, small-
business applicants have financing and operational needs distinct from 
those of larger broadcasters. By easing certain regulations for small 
broadcasters, the Commission believes that it will promote the public 
interest goal of making access to broadcast spectrum available to a 
broad range of applicants. The Commission also believes that enabling 
more small businesses to participate in the broadcast industry will 
encourage innovation and expand viewpoint diversity.
    330. In addition, the Commission proposes to readopt each measure 
relying on the eligible entity definition that was remanded in 
Prometheus II. 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; and (6) Transfer of Grandfathered Radio 
Station Combinations. The Commission's intent in proposing the 
reinstatement of the previous revenue-based eligible entity 
definition--and in applying it to the construction, licensing, 
transaction, and auction measures to which it previously applied--is to 
expand broadcast ownership opportunities for new entrants, including 
small entities. Therefore, the Commission anticipates that the measures 
proposed in the Further Notice of Proposed Rulemaking will benefit 
small entities, not burden them.
    331. The Commission tentatively concludes that it does not have 
sufficient evidence at this time to satisfy the constitutional 
standards necessary to adopt race- or gender-conscious measures. In 
evaluating the possibility of adopting a socially disadvantaged 
business (SDB) standard based on the definition employed by the SBA, or 
any other race-conscious standard, the first question the Commission 
must consider is whether the standard could be justified by a 
``compelling governmental interest.'' Assuming that such an interest 
could be established, the Commission then would have to be able to 
demonstrate that the application of the race-conscious standard to 
specific measures or programs would be ``narrowly tailored'' to further 
that interest. While the Commission tentatively finds that a reviewing 
court could deem the Commission's interest in promoting a diversity of 
viewpoints compelling, the Commission believes that it does not have 
sufficient evidence at this time to demonstrate that adoption of race-
conscious measures would be narrowly tailored to further that interest. 
Additionally, the Commission tentatively finds that it cannot conclude 
that the record evidence establishes a relationship between the 
Commission's interest in viewpoint diversity and the ownership of 
broadcast stations by women that would satisfy intermediate scrutiny. 
While the Commission acknowledges that the data show that women-owned 
stations are not represented in proportion to the presence of women in 
the overall population, the Commission does not believe that the 
evidence available at this time reveals that the content provided via 
women-owned broadcast stations substantially contributes to viewpoint 
diversity in a manner different from other stations or otherwise varies 
significantly from that provided by other stations. Further, the 
Commission tentatively finds that it does not have sufficient evidence 
to establish a compelling interest in remedying past discrimination.
    332. In addition, the Commission reject commenters' arguments that 
the Commission is required to adopt an SDB standard or another race-
conscious eligible entity standard in this proceeding in light of the 
court's

[[Page 29063]]

instructions in Prometheus II. The Commission also disagrees with 
arguments that the Commission is not permitted to conclude this 
proceeding until the Commission has completed any and all studies or 
analyses that may enable it to take such action in the future 
consistent with current standards of constitutional law. The Commission 
intends to follow the Third Circuit's direction that the Commission 
consider adopting an SDB definition before completion of this 
proceeding and evaluate the feasibility of adopting a race-conscious 
eligibility standard based on an extensive analysis of the available 
evidence. The Commission does not believe that the Third Circuit 
intended to prejudge the outcome of the Commission's analysis of the 
evidence or the feasibility of implementing a race-conscious standard 
that would be consistent both with applicable legal standards and the 
Commission's practices and procedures.
    333. The Commission also declined to adopt at this time an eligible 
entity definition that incorporates the Overcoming Disadvantage 
Preference (ODP) standard proposed by the Commission's Diversity 
Advisory Committee in 2010. Commenters generally did not suggest 
criteria, other than race and ethnic origin, that could be considered 
in an individualized, holistic evaluation system like that approved in 
Grutter. Commenters recommended that the Commission replace its 
revenue-based eligible entity definition with an ODP standard as a 
race-neutral means of advancing ownership diversity. The Commission 
notes that it is not entirely clear whether the proposed ODP standard 
would be subject to heightened constitutional scrutiny. Moreover, the 
Commission believes that it does not have a sufficient record at 
present on a number of issues that would need to be resolved prior to 
the implementation of an ODP standard. Among other issues, no commenter 
provided input on (1) what social or economic disadvantages should be 
cognizable under an ODP standard, (2) how the Commission could validate 
claims of eligibility for ODP status, (3) whether applicants should 
bear the burden of proving specifically that they would contribute to 
diversity as a result of having overcome certain disadvantages, (4) how 
the Commission could measure the overcoming of a disadvantage if an 
applicant is a widely held corporation rather than an entity with a 
single majority shareholder or a small number of control persons, and 
(5) how the Commission could evaluate the effectiveness of the use of 
an ODP standard. Even if the Commission could develop an adequate 
record on these issues, the Commission is concerned that it may lack 
the resources to conduct such individualized reviews. Moreover, the 
Commission would have to walk a very fine line in order to fully 
evaluate the potential diversity contributions of individual applicants 
without running afoul of First Amendment values. The Commission is 
concerned that the type of individualized consideration that would be 
required under an ODP standard could prove to be administratively 
inefficient, unduly resource-intensive, and inconsistent with First 
Amendment values.
    334. The Commission also tentatively declined to act on various 
recommendations from commenters regarding the promotion of minority and 
female ownership. These recommendations include: (1) Relaxing the 
foreign ownership limitations under section 310(b)(4) of the 
Communications Act; (2) encouraging Congress to reinstate and update 
tax certificate legislation; (3) granting waivers of the local radio 
ownership rule to parties that ``incubate'' qualified entities; and (4) 
migrating AM radio to VHF Channels 5 and 6. In addition, the Alliance 
for Women in Media, Inc. (AWM) asked the Commission to consider several 
actions to address the ``historic underrepresentation of women'' in 
ownership of broadcast stations and managerial positions in the 
broadcast industry. The Commission has already implemented some of 
these recommendations. Because the Commission believes that the 
remainder of these proposals would raise public interest concerns, may 
not provide meaningful assistance to the intended beneficiaries, or are 
outside of the proper scope of this broadcast ownership proceeding, the 
Commission tentatively concludes that it should not adopt them here.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rule
    335. None.

D. Ordering Clauses

    336. Accordingly, it is ordered, that pursuant to the authority 
contained in sections 1, 2(a), 4(i), 303, 307, 309, 310, and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152(a), 154(i), 
303, 307, 309, 310, and 403, and section 202(h) of the 
Telecommunications Act of 1996, this Further Notice of Proposed 
Rulemaking is adopted.
    337. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of the Further Notice of Proposed Rulemaking, including the 
Supplemental Initial Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration.

List of Subjects 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

0
1. The authority citation for part 73 continues to read as follows:

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

0
2. Amend Sec.  73.3555 by revising paragraph (b) 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) The digital noise limited service contours of the stations (as 
determined by Sec.  73.622) do not overlap; or
    (i) 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 
(9:00 a.m.-midnight) audience share, as measured by Nielsen Media 
Research or by any comparable professional, accepted audience ratings 
service; and
    (ii) 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 the digital noise 
limited service contours of which overlap with the digital noise 
limited service contour of at least one of 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

[[Page 29064]]

of a TV market. Count only those TV stations the digital noise limited 
service contours of which overlap with the digital noise limited 
service contour of at least one of the stations in the proposed 
combination.
    (2) [Reserved]
* * * * *
[FR Doc. 2014-10870 Filed 5-19-14; 8:45 am]
BILLING CODE 6712-01-P