[Federal Register Volume 81, Number 211 (Tuesday, November 1, 2016)]
[Rules and Regulations]
[Pages 76220-76263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25567]



[[Page 76219]]

Vol. 81

Tuesday,

No. 211

November 1, 2016

Part IV





Federal Communications Commission





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47 CFR Part 73





2014 Quadrennial Regulatory Review; Final Rule

  Federal Register / Vol. 81 , No. 211 / Tuesday, November 1, 2016 / 
Rules and Regulations  

[[Page 76220]]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MB Docket Nos. 14-50, 09-182, 07-294, and 04-256; FCC 16-107]


2014 Quadrennial Regulatory Review

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document retains the broadcast ownership rules with minor 
modifications in compliance with section 202(h) of the 
Telecommunications Act of 1996 which 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 adopts an eligible entity 
definition pursuant to the remand of the Commission's 2008 Diversity 
Order by the U.S. Court of Appeals for the Third Circuit. This document 
also readopts the Television Joint Sales Agreement (JSA) Attribution 
Rule, which was vacated on procedural grounds by the Third Circuit. 
Lastly, this document adopts a definition of Shared Service Agreements 
(SSAs) and requires commercial television stations to disclose those 
SSAs by placing the agreements in each station's online public 
inspection file.

DATES: Effective December 1, 2016, except for the amendment to Sec.  
73.3526, which contains information collection requirements that are 
not effective until approved by the Office of Management and Budget 
(OMB). The Commission will publish a document in the Federal Register 
announcing the effective date of these changes. A separate notice will 
be published in the Federal Register soliciting public and agency 
comments on the information collections and establishing a deadline for 
accepting such comments.

FOR FURTHER INFORMATION CONTACT: Benjamin Arden, Industry Analysis 
Division, Media Bureau, FCC, (202) 418-2605. For additional information 
concerning the PRA information collection requirements contained in the 
Second Report and Order, contact Cathy Williams at (202) 418-2918, or 
via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This Second Report and Order, in MB Docket 
Nos. 14-50, 09-182, 07-294, and 04-256; FCC 16-107, was adopted on 
August 10, 2016, and released on August 25, 2016. The complete text of 
this document is available electronically via the search function on 
the FCC's Electronic Document Management System (EDOCS) Web page at 
https://apps.fcc.gov/edocs_public/. The complete document is available 
for inspection and copying during normal business hours in the FCC 
Reference Information Center, 445 12th Street SW., Room CY-A257, 
Washington, DC 20554. 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 FCC's Consumer and 
Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 
(TTY).

Synopsis

I. Introduction

    1. The Commission brings to a close the 2010 and 2014 Quadrennial 
Review proceedings with this Second Report and Order (Order). In this 
Order, the Commission maintains strong media ownership rules and adopts 
rules that will help to promote diversity and transparency in local 
television markets. The Order readopts the Television JSA Attribution 
Rule, which was vacated on procedural grounds by the Third Circuit. 
Also, pursuant to the Third Circuit's remand in Prometheus Radio 
Project v. FCC, 652 F.3d 431 (3d Cir. 2011) (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), the Order also reinstates the 
revenue-based eligible entity standard, as well as the associated 
measures to promote the Commission's goal of encouraging small business 
participation in the broadcast industry, which will cultivate 
innovation and enhance viewpoint diversity. Finally, the Order adopts a 
definition of SSAs and requires commercial television stations to 
disclose those SSAs by placing the agreements in each station's online 
public inspection file.

II. 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 in 
Prometheus Radio Project v. FCC, 373 F.3d 372 (3d Cir. 2004) 
(Prometheus I) that necessary in the public interest is a plain public 
interest standard under which necessary means convenient, useful, or 
helpful, not essential or indispensable. The court also concluded that 
the Commission is required to take a fresh look at its regulations 
periodically to ensure that they remain `necessary in the public 
interest. No presumption in favor of repealing or modifying the 
ownership rules exists. 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 Commission continues to find that the 
longstanding policy goals of competition, localism, and diversity 
represent the appropriate framework within which to evaluate the 
Commission's media ownership rules. Accordingly, the Commission rejects 
suggestions in the record that the Commission should adopt any 
additional or different policy goals. While those proposals generally 
represent worthwhile pursuits, the Commission does not believe that 
they can be meaningfully promoted through the structural ownership 
rules and/or are outside the Commission's statutory authority.

III. Media Ownership Rules

A. Local Television Ownership Rule

1. Introduction
    4. The current Local Television Ownership Rule allows an entity to 
own two television stations in the same Nielsen Designated Market Area 
(DMA) only if no Grade B contour overlap between the commonly owned 
stations exists, or at least one of the commonly owned stations is not 
ranked among the top-four stations in the market (top-four prohibition) 
and at least eight independently owned television stations remain in 
the DMA after ownership of the two stations is combined (eight-voices 
test). Based on the record that was compiled for the 2010 and 2014 
Quadrennial Review proceedings, the Commission finds that the current 
Local Television Ownership Rule, with a limited contour modification, 
remains necessary in the public interest.
    5. Under the revised Local 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 Sec.  73.622(e) of the 
Commission's rules) do not overlap;

[[Page 76221]]

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 that would remain post-
transaction, only those stations whose digital NLSCs overlap with the 
digital NLSC of at least one of the stations in the proposed 
combination will be considered.
2. Discussion
    6. Market. The Commission finds that the record supports its 
conclusion from the FNPRM (79 FR 29010, May 20, 2014, FCC 14-28, rel. 
Apr. 14, 2014) that non-broadcast video offerings still do not serve as 
meaningful substitutes for local broadcast television. Accordingly, the 
Commission's analysis regarding the Local Television Ownership Rule 
must continue to focus on promoting competition among broadcast 
television stations in local television viewing markets. Competition 
within a local market motivates a broadcast television station to 
invest in better programming and to provide programming tailored to the 
needs and interests of the local community to gain market share. 
Community-tailored programming, which includes local news and public 
interest programming, is largely limited to broadcast television as 
online video and cable network programming is largely national in 
scope. By thus strengthening its position in the local market, a 
television broadcaster also strengthens its ability to compete for 
advertising revenue and retransmission consent fees, an increasingly 
important source of revenue for many stations. As a result, viewers in 
the local market benefit from such competition among numerous strong 
rivals in the form of higher quality programming.
    7. While the Commission recognizes the popularity of video 
programming delivered via MVPDs, the Internet, and mobile devices, it 
finds that competition from such video programming providers remains of 
limited relevance for the purposes of analysis. Video programming 
delivered by MVPDs such as cable and DBS is generally uniform across 
all markets, as is online video programming content. Unlike local 
broadcast stations, such programming providers are not likely to make 
programming decisions based on conditions or preferences in local 
markets. No commenter in this proceeding offered evidence of non-
broadcast video programmers modifying their programming decisions based 
on the competitive conditions in a particular local market. This 
strengthens the Commission's determination that, while non-broadcast 
video programming may offer consumers additional programming options in 
general, they do not serve as a meaningful substitute in local markets 
due to their national focus. Unlike broadcast television stations, 
national programmers are not responsive to the specific needs and 
interests of local markets, and as the Commission has previously 
stated, competition among local rivals most benefits consumers and 
serves the public interest.
    8. In addition, the Commission finds that broadcast television's 
strong position in the local advertising market supports the 
Commission's view that non-broadcast video programming distributors are 
not meaningful substitutes in local television markets. The current 
data do not support the claim that advertisers no longer distinguish 
local broadcast television from non-broadcast sources of video 
programming when choosing how to allocate spending for local 
advertising, as advertising revenues for broadcast television stations 
remain strong and are projected to grow through 2019. While advertising 
revenues on cable, satellite, and digital platforms have risen, those 
gains do not appear to be at the expense of broadcast television 
stations. The Commission finds that broadcast television continues to 
play a significant role in the local advertising market, particularly 
when it comes to political advertising. Broadcast stations receive 
considerable revenue from political advertising every other year, which 
further highlights broadcast television's unparalleled value to 
advertisers for reaching local markets.
    9. With regard to an economic study submitted by the National 
Association of Broadcasters, the Commission does not find the study 
relevant or informative in this proceeding for multiple reasons. First, 
the Commission finds significant issues with the statistical methods 
employed within the study and with the interpretation of those results. 
In addition, the study critiques the local broadcast television market 
relied on by the Department of Justice (DOJ) in its merger reviews 
pursuant to Section 7 of the Clayton Act--which focuses solely on the 
impact of the transaction in the local advertising market--and not the 
market definition relied on by the Commission for analyzing its Local 
Television Ownership Rule pursuant to Section 202(h), as discussed 
herein. While the Commission's market definition for purposes of the 
Local Television Ownership Rule is similar to the market definition 
used by DOJ when evaluating broadcast television mergers, in that the 
scope of the Commission's rule is limited to broadcasters, DOJ focuses 
on competition for advertising, whereas the Commission's rule is 
premised on multiple factors, including audience share. Therefore, the 
Commission finds that the study does not inform the current proceeding.
    10. The Commission concludes 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. Accordingly, the Commission concludes that, for purposes 
of determining whether the Local Television Rule remains necessary in 
the public interest, the relevant product market is the delivery of 
local broadcast television service.
    11. Contour Overlap/Grandfathering Existing Ownership Combinations. 
Consistent with the tentative conclusions in the FNPRM, the Commission 
declines to adopt the DMA-only approach. Instead, the Commission will 
retain the existing DMA and contour overlap approach but replace the 
analog Grade B contour with the digital NLSC, which the Commission has 
treated as the functional equivalent of the Grade B contour in previous 
proceedings. By contrast, there is no digital counterpart to a 
station's analog city grade contour, which is an aspect of the 
Commission's satellite station inquiry. Accordingly, consistent with 
case law developed after the digital transition, the Commission 
continues to evaluate all future requests for new or continued 
satellite status on an ad hoc basis. The Commission finds that this 
modified approach accurately reflects current digital service areas 
while minimizing any potential disruptive impact. In addition, 
consistent with previous Commission decisions, the Commission finds 
that retaining the DMA and contour overlap approach serves the public 
interest by promoting local television service in rural areas. That is, 
such an approach continues to allow station owners in rural areas to 
build or purchase an additional station in remote portions of the DMA, 
so long as no digital NLSC overlap exists.
    12. The Commission confirms that the digital NLSC is an accurate 
measure of a station's current service area and thus is an appropriate 
standard. The Local Television Ownership Rule must take into account 
the current digital service

[[Page 76222]]

area of a station. Thus, the Commission continues to define the 
geographic dimensions of the local television market by referring to 
DMAs under the adopted modified rule but replaces the analog Grade B 
contour with the digital NLSC, with the effect that within a DMA an 
entity may own or operate two stations in a market if the digital NLSCs 
of those stations do not overlap. The Commission previously determined 
that the DMA is the most appropriate definition of the geographic 
dimensions of the local television market, and it does not disturb that 
finding. The approach adopted in this Order is consistent with the 
approach under the prior Local Television Ownership Rule. Where digital 
NLSC overlap exists, the combination will be permitted only if it 
satisfies the top-four prohibition and the eight-voices test.
    13. The Commission also adopts the proposal to grandfather existing 
ownership combinations that would exceed the numerical limits by virtue 
of the revised contour approach instead of requiring divestiture. Under 
these circumstances, the Commission does not believe that compulsory 
divestiture is appropriate. In the Local Radio Ownership Rule section, 
the Commission confirms the disruptive impact of compulsory 
divestitures but determine that divestitures would be appropriate if it 
tightened the local radio ownership limits. In adopting the digital 
NLSC standard, the Commission is not reducing the number of stations 
that can be commonly owned by all licensees; rather, it is adopting a 
technical change that may result in a small number of station 
combinations no longer complying with the criteria necessary to permit 
such common ownership. Accordingly, compulsory divestiture is not 
appropriate in these circumstances. The Commission continues to believe 
that the disruption to the marketplace and hardship for individual 
owners resulting from forced divestiture of stations would outweigh any 
benefits of forced divestiture to its policy goals, including promoting 
ownership diversity. Furthermore, the Commission notes that the 
replacing the Grade B contour with the digital NLSC--given the 
similarity in the contours--effectively maintains the status quo for 
most, if not all, owners of duopolies formed as a result of the 
previous Grade B contour overlap provision.
    14. However, the Commission concludes that where grandfathered 
combinations are sold, the ownership rule governing television stations 
in effect at the time of the sale must be complied with. 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 before the 
digital transition. Accordingly, requiring that a grandfathered 
combination be brought into compliance with the new standard at the 
time of sale is consistent with the Commission's rationale for adopting 
the digital NLSC-based standard and does not cause hardship by 
requiring premature divestiture. Consistent with Commission precedent, 
the Commission 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 ownership rules 
at the time of transfer or assignment. Under the adopted approach, the 
Commission continues to allow grandfathered combinations to survive pro 
forma changes in ownership and involuntary changes of ownership due to 
death or legal disability of the licensee.
    15. Numerical Limits. The Commission concludes that the local 
television marketplace has not changed sufficiently to justify 
tightening the current numerical limits of the rule and returning to a 
single-license television rule. The record data demonstrate 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 offset any potential harms that are associated 
with common ownership. Such benefits include substantial operating 
efficiencies, which potentially allow a local broadcast station to 
invest more resources in news or other public interest programming that 
meets the needs of its local community.
    16. Likewise, the Commission does not find that there have been 
sufficient changes in the local television marketplace to justify 
ownership of a third in-market station. Growing competition from non-
broadcast alternatives and the economic efficiencies of owning multiple 
stations are cited generally as the reasons why the Commission should 
permit ownership of more than two stations. As with the decision to 
define the relevant product market as broadcast television, the 
Commission concludes that it is not appropriate to consider competition 
from non-broadcast sources in evaluating whether the rule remains 
necessary. Despite the aforementioned benefits that duopolies can 
create, excessive consolidation remains likely to threaten the 
Commission's competition and diversity goals by jeopardizing small and 
mid-sized broadcasters. Without significant evidence of the public 
interest benefits that could result from the ownership of three 
stations in a local market that are not already available from the 
ownership of two stations, the Commission does not believe that 
adequate justification exists at this time for increasing the numerical 
limits.
    17. Top-Four Prohibition. The Commission concludes that the top-
four prohibition remains necessary to promote competition in the local 
television marketplace; accordingly, it retains the top-four 
prohibition in the Local Television Ownership Rule. First, the 
Commission continues to find that audience share is the appropriate 
metric for purposes of the top-four prohibition, and the record does 
not offer persuasive reason to depart from this determination. Second, 
the Commission finds that there typically remains a significant cushion 
of audience share points that separates the top-four stations in a 
market from the fifth-ranked station. Further, the court has twice 
upheld the Commission's rationale for retaining the top-four 
prohibition. The Commission notably has never based the top-four 
prohibition solely on the existence of the ratings cushion in every 
market. The Commission previously determined that the cushion existed 
in two-thirds of the markets with five or more full-power commercial 
television stations and the court in Prometheus I, cited specifically 
to this finding as evidence to support the Commission's line-drawing 
decision. Therefore, the Commission finds unconvincing any claim that 
the top-four prohibition cannot be supported because the ratings 
cushion is not present in every market. The cushion continues to exist 
in most markets and, as such, it continues to support the Commission's 
decision to retain the top-four prohibition. The Commission is not 
persuaded by NAB's assertions regarding the revenue of fourth- and 
fifth-ranked stations in a market. As noted in the FNPRM, NAB's 
analysis evaluates revenue share and does not sufficiently examine 
audience share, which the Commission has utilized when evaluating the 
need for the top-four prohibition. The Commission continues to find 
that the ability to attract mass audiences distinguishes the top ranked 
stations in local television markets, which is why ratings 
appropriately serve as the basis for the top-four prohibition. The only 
data NAB offers regarding audience share relate to the shares of the 
third and fourth ranked stations in comparison to the top ranked 
station in Nielsen markets, but do not compare

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them to the fifth ranked station in the market. The court in Prometheus 
I rejected a similar argument when upholding the Commission's decision 
to retain the top-four prohibition. Therefore, NAB's evidence does not 
disturb the Commission's previous determinations that the relevant 
metric for purposes of the top-four prohibition is audience share and 
does not rebut the evidence in this proceeding that a cushion still 
exists between the fourth- and fifth-ranked stations in most markets.
    18. The Commission reaffirms its belief that top-four combinations 
would generally result in a single firm obtaining a significantly 
larger market share than other firms in the market and that such 
combinations would create welfare harms. Top-four combinations reduce 
incentives for local stations to improve their programming by giving 
once strong rivals incentives to coordinate their programming to 
minimize competition between the commonly owned stations. The 
Commission is not persuaded by assertions that commonly owned stations 
have no incentive to coordinate their programming based solely on 
anecdotal showings from Nexstar-owned stations in two DMAs. While the 
Commission recognizes that duopolies permitted subject to the 
restrictions of the current rule can create operating efficiencies, 
which allow the commonly owned stations to invest in news and other 
local programming, the Commission finds that this potential benefit is 
outweighed by the harm to competition where a single firm obtains a 
significantly larger market share through a combination of two top-four 
stations. Accordingly, the Commission finds that the public interest is 
best served by retaining the top-four prohibition.
    19. Affiliation Swaps. The Commission finds that application of the 
top-four prohibition to affiliation swaps is consistent with previous 
Commission action and policy; the Commission is merely closing a 
potential loophole and preventing circumvention of its rules. Parties 
can achieve through an affiliation swap the same result as a transfer 
of control or assignment of license, which would be subject to 
Commission review and be required to comply with the Local Television 
Ownership Rule. Absent Commission action, parties could utilize 
affiliation swaps to achieve a result otherwise prohibited by the Local 
Television Ownership Rule. Therefore, the Commission finds that its 
statutory authority to extend the Local Television Ownership Rule to 
include affiliation swaps derives from the same general rulemaking 
authority that supports all of the Commission's broadcast ownership 
rules, as the Supreme Court has repeatedly held. In the 1999 Ownership 
Order (64 FR 50651, Sept. 17, 1999, FCC 99-209, rel. Aug. 6, 1999) that 
adopted the top-four prohibition, the Commission did not make a 
statement regarding its authority to require divestiture if two merged 
stations both became ranked among the top-four rated stations in the 
market; it stated only that it would refrain from doing so to further 
certain, specific public interest benefits. By allowing combinations 
between a large station and a small station, the Commission sought to 
enable the smaller station to improve its operations and local program 
offerings. The Commission wanted to avoid penalizing a station whose 
operations improved to the point that it became a top-four station. By 
contrast, the Commission was concerned that mergers involving top-four 
stations would harm competition and viewpoint diversity. Affiliation 
swaps, by their design, implicate the specific harms to public interest 
that led the Commission to adopt the top-four prohibition. Aside from 
the assignment/transfer of a station license, an affiliation swap is 
essentially indistinguishable in its effect on the policy underlying 
the Commission's duopoly rule from a top-four merger described by the 
Commission in the 1999 Ownership Order. If compelling evidence exists 
that an affiliation swap involving a top-four station and a non-top-
four station would not result in the non-top-four station becoming a 
top-four station after the swap (e.g., a station's top-four ratings are 
driven by non-network programming that is unaffected by the affiliation 
swap), the parties are free to seek a waiver of this prohibition under 
Section 1.3 of the Commission's rules.
    20. Moreover, the Commission cautioned in 1999 that future 
transactions, such as license transfers, that do not satisfy the top-
four prohibition may not be granted. This demonstrates that the 
Commission sought to distinguish instances where a station organically 
becomes a top-four station through station improvement from situations 
where a station actively transacts to become a top-four station via an 
ownership transfer or assignment. As the Commission said in the FNPRM, 
acquiring control over a second in-market top-four station through 
affiliation swap transactions can be distinguished easily from other, 
legitimate actions a station may undertake to increase ratings at the 
expense of a competitor, such as producing higher quality or more 
extensive local programming or acquiring higher quality syndicated 
programming. Moreover, the adopted extension of the top-four 
prohibition would not apply in situations where a network offers an 
existing duopoly owner (one top-four station and one station ranked 
outside the top four) a top-four-rated affiliation for the lower-rated 
station, perhaps because the network is no longer satisfied with the 
existing affiliate station and the duopoly owner has demonstrated 
superior station operation (i.e., earned the affiliation on merit). 
Such a circumstance represents organic growth of the station and not a 
transaction that is the functional equivalent of an assignment or 
transfer of control.
    21. While the Commission said in the 1999 Ownership Order that the 
top-four determination would be made at the time of the initial 
transaction, the Commission signaled its intent to review future 
transactions involving assignments or transfers of ownership resulting 
in a single entity owning two top-four stations in the same market. A 
contrary conclusion would greatly diminish the effectiveness of the 
top-four prohibition, as an entity could essentially transact to 
acquire a top-four station through an affiliation swap as soon as the 
Commission approved the initial duopoly. Although the Commission 
decided in 1999 not to prohibit licensees from owning two top-four 
stations when a station's top-four status resulted from organic growth, 
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 serve as the functional equivalent of 
a transfer of control or assignment of license. Therefore, affiliation 
swaps undermine the purpose of the top-four prohibition and the Local 
Television Ownership Rule as a whole. Application of the top-four 
prohibition to affiliation swaps is necessary to prevent circumvention 
of the Local Television Ownership Rule.
    22. The Commission rejects any assertion that extending the top-
four prohibition to affiliation swaps amounts to impermissible content 
regulation and is subject to strict scrutiny. The adopted clarifying 
amendment does not regulate content any more than the top-four 
prohibition and the media ownership rules that consistently have been 
upheld by the courts, and it is therefore subject to rational basis 
review. The decision to prohibit affiliation swaps involving two top-
four stations, as described herein, does not consider content but 
rather the

[[Page 76224]]

content's ratings only. In that regard, the extension of the top-four 
prohibition to affiliation swaps operates exactly as the existing top-
four prohibition does. The rule is predicated entirely on content-
neutral objectives, primarily the public interest goal of promoting 
competition in local markets. The rule does not limit a licensee's 
discretion to air the content of its choice but rather limits the 
number of stations in a single market that a licensee may own if common 
ownership would result in significantly reduced competition.
    23. The Prometheus II court found under the rational basis standard 
of review that the media ownership rules do not violate the First 
Amendment because they are rationally related to substantial government 
interests in promoting competition and protecting viewpoint diversity. 
The court rejected broadcasters' claims that the rules are 
impermissible attempts by the FCC to manipulate content and rejected 
Sinclair's argument that the Local Television Ownership Rule violates 
the First Amendment because it `singles out television stations. 
Instead, the court recognized that these rules apply regardless of the 
content of the programming. The adopted extension of the top-four 
prohibition merely clarifies that the top-four prohibition applies to 
agreements that are the functional equivalent of a transfer of control 
or assignment of license from the standpoint of the Commission's Local 
Television Ownership Rule. The Commission noted in the 1999 Ownership 
Order that a duopoly may not automatically be transferred to a new 
owner if the market does not satisfy the eight voice/top four-ranked 
standard. Accordingly, this application of the top-four prohibition 
remains subject to the same constitutional analysis, and the amended 
rule is rationally related to the substantial government interests in 
promoting competition and diversity. Pursuant to that constitutional 
analysis, courts repeatedly have found that the Local Television 
Ownership Rule, which includes the top-four prohibition, does not 
violate the First Amendment.
    24. The Commission also rejects the assertion that extension of the 
top-four prohibition constitutes unlawful interference in the network 
affiliation marketplace. The Commission does not believe that its 
action is likely to have a significant impact on the marketplace, as 
affiliation swaps are, at this point, rare. Indeed, the record 
demonstrates only a single instance of an affiliation swap that would 
be subject to the rule adopted herein. Evidence in the record 
demonstrates that the negotiation of affiliation agreements typically 
does not involve affiliation swaps; therefore, most negotiations will 
be unaffected by the amendment clarifying the top-four prohibition. The 
Commission confirms that extension of the top-four prohibition to 
affiliation swaps would not prevent a station from obtaining an 
affiliation through negotiating with a national network outside the 
context of an affiliation swap. While affiliation swaps have not 
occurred often to date, given the potential of such transactions to 
undermine the Local Television Ownership Rule, the Commission finds 
that the application of the top-four prohibition to such transactions 
is necessary to ensure the continued effectiveness of that rule. Such 
action is necessary because the Commission does not believe a reliable 
marketplace solution exists that would restrain the future use of 
affiliation swaps to evade the top-four prohibition should it decline 
to extend the top-four prohibition to affiliation swaps, nor is there a 
less restrictive means to accomplish the goal.
    25. Accordingly, to close this loophole, the Commission finds that 
affiliation swaps must comply with the top-four prohibition at the time 
the agreement is executed. Specifically, an entity will 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, for purposes of making this 
determination, the new affiliate's post-consummation ranking will 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 will find any party that directly or 
indirectly owns, operates, or controls 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 to affiliation swaps is prospective; therefore, all future 
transactions will be required to comply with the Commission's rules 
then in effect. Parties that acquired control over a second in-market 
top-four station by engaging in affiliation swaps before the release 
date of this Order will not be subject to divestiture or enforcement 
action.
    26. Eight-Voices Test. The Commission does not find that there have 
been any changes in the local television marketplace that would warrant 
modification of the eight-voices test at this time. Nearly every market 
with eight or more full-power television stations--absent a waiver of 
the Local Television Ownership Rule or unique circumstances--continues 
to be 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 serves an 
important function by motivating both the major network stations and 
the independent stations to improve their programming, including 
increased local news and public interest programming. This competition 
is especially valuable during the parts of the day in which local 
broadcast stations do not transmit the programming of affiliated 
broadcast networks and rely on local content uniquely relevant to the 
stations' communities.
    27. The Commission continues to believe the minimum threshold 
maintained by the eight-voices test helps to ensure robust competition 
among local television stations in the markets where common ownership 
is permitted under the rule. The eight-voices test increases the 
likelihood that markets with common ownership will continue to 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. In addition, the Commission 
disagrees with the interpretation that the eight-voices test implies 
that at least eight competing over-the-air TV stations are the minimum 
necessary to ensure competition and so each market must have at least 
eight independent stations. The eight-voices test only establishes the 
minimum level necessary to permit common ownership of stations in a 
market, subject to the other requirements in the rule. Therefore, 
markets with fewer than eight independent stations can still maintain a 
significant level of competition given the absence of duopolies in 
these markets. Also, because a significant gap in audience share 
persists between the top-four stations in a market and the remaining 
stations in most markets--demonstrating the dominant position of

[[Page 76225]]

the top-four-rated stations in the market--the Commission continues to 
believe that it is appropriate to retain the eight-voices test, which 
helps to promote at least four independent competitors for the top-four 
stations before common ownership is allowed. Accordingly, the 
Commission retains the eight-voices test.
    28. The Commission also sought comment on whether the Sinclair 
Broadcasting Group v. FCC, 284 F.3d 148 (D.C. Cir. 2002) (Sinclair), 
opinion compels the Commission to include other voices in addition to 
full-power television stations in the eight-voices test. The Commission 
finds that it does not. In Sinclair, the court rejected the eight-
voices test, finding that the Commission had failed to justify its 
decision to define voices differently in the radio-television cross-
ownership rule and the Local Television Ownership Rule. The primary 
purpose of the Local Television Ownership Rule and the eight-voices 
test is to promote competition among broadcast television stations in 
local television viewing markets. By contrast, the primary purpose of 
the radio-television cross-ownership rule is to promote viewpoint 
diversity; therefore, it is appropriate to consider a broader range of 
voices there than in the context of the Local Television Ownership 
Rule. Accordingly, the Commission continues to include only full-power 
television stations in the voice count for purposes of the Local 
Television Ownership Rule.
    29. The Commission's conclusion adheres to Prometheus II, where the 
court upheld the Commission's rationale in the 2006 Quadrennial Review 
(73 FR 9481, Feb. 21, 2008, FCC 07-216, rel. Feb. 2008) proceeding for 
limiting voices in the Local Television Ownership Rule to full-power 
television stations. The Commission had determined in that proceeding 
that the primary goal of the Local Television Ownership Rule was to 
promote competition among local television stations, and not to foster 
viewpoint diversity because there were other outlets for diversity of 
viewpoint in local markets. Therefore, although other types of media 
contribute to viewpoint diversity, the Commission determined that they 
should not be counted as voices under the Local Television Ownership 
Rule. The court agreed and upheld the Commission's decision.
    30. Attribution of Television JSAs. In the JSA Order (79 FR 28996, 
May 20, 2014, FCC 14-28, rel. Apr. 14, 2014), the Commission adopted a 
rule that attributed television JSAs under which a television station 
(the broker) sold more than 15 percent of the weekly advertising time 
for another same-market television station (the brokered station). 
Pursuant to the new rule, in such circumstances, the brokering station 
was deemed to hold an attributable interest in the brokered station. 
Among other implications associated with attribution, this resulted in 
counting the brokered station toward the brokering station's 
permissible ownership totals. While one purpose of the attribution 
rules is to determine compliance with the Commission's various 
broadcast ownership rules, including the Local Television Ownership 
Rule, the Commission's attribution rules are relevant in many other 
contexts, as well (e.g., Form 323 ownership reporting, auctions, 
retransmission consent negotiations, and foreign ownership). 
Accordingly, even if the Commission were to eliminate all its ownership 
caps, the attribution rules would remain relevant in connection with a 
large number of other rules. As such, the Commission must retain the 
ability to update its attribution rules, as appropriate. In addition, 
the Commission provided a two-year period from the effective date of 
the JSA Order (March 31, 2014) for parties to existing, same-market 
television JSAs whose attribution resulted in a violation of the 
ownership limits to terminate or amend those JSAs or otherwise come 
into compliance with the ownership rules. Following the adoption of the 
JSA Order, Congress twice extended this compliance period, ultimately 
extending the relief through September 30, 2025.
    31. The Third Circuit vacated the Television JSA Attribution Rule 
in Prometheus v. FCC, 824 F.3d 33 (3d Cir. 2016) (Prometheus III), 
finding that the adoption of the rule was procedurally invalid as a 
result of the Commission's failure to also determine that the Local 
Television Ownership Rule served the public interest. The court stated 
that the Commission could readopt the rule if it was able to justify 
readopting the ownership rules to which television JSA attribution 
applies or to adopt new ownership rules. The court specifically noted 
that it offered no opinion on substantive challenges to the Television 
JSA Attribution Rule.
    32. Consistent with Prometheus III, having concluded that the Local 
Television Ownership Rule (with minor modifications) continues to serve 
the public interest, the Commission now readopt the Television JSA 
Attribution Rule first adopted in the JSA Order. In so doing, the 
Commission incorporates by reference the rationale articulated in the 
JSA Order for the adoption and application of the rule. The Commission 
notes that television JSA attribution is also relevant in the other 
adopted broadcast ownership rules that involve ownership of a broadcast 
television station. The Commission continues to find attributing 
certain television JSAs under the Commission's attribution standards 
appropriate. Upon the effective date of this Order, the following 
rules, which were not modified or removed from the CFR, shall again be 
effective as they relate to television JSAs: 47 CFR 73.3555, Note 
2(k)(2)-(3) and 47 CFR 73.3613(d)(2). The Commission finds that 
readopting the rule serves the public interest by ensuring compliance 
with its broadcast ownership rules, and anecdotal evidence exists that 
suggests the attribution of television JSAs has helped promote minority 
and female ownership opportunities.
    33. In addition, the Commission adopts different transition 
procedures than those adopted in the JSA Order. Specifically, the 
Commission retains the previous effective date for application of the 
grandfathering relief--March 31, 2014--and will extend the compliance 
period through September 30, 2025. Until that time, such grandfathered 
agreements will not be counted as attributable, and parties will be 
permitted to transfer or assign these agreements to other parties 
without terminating the grandfathering relief. Any television JSAs 
adopted or revised following the Third Circuit's decision to vacate the 
Television JSA Attribution Rule are not provided any transition relief 
and must immediately be brought into compliance with the Commission's 
rules. This is consistent with the treatment of television JSAs 
executed after the release of the JSA Order, which were not provided 
any transition period. The Commission believes that it is reasonable to 
adopt a similar measure here given that parties were on notice 
following Prometheus III that the Commission could readopt the 
Television JSA Attribution Rule if the Commission were to conclude, 
following completion of its Section 202(h) review, that the existing 
Local Television Ownership Rule should be retained or replaced with a 
new rule--which has been done herein. In addition, any television JSA 
that previously lost grandfathering relief as a result of a condition 
imposed by the Commission in the approval of a transaction may seek to 
have the condition rescinded. Upon request of the transferee or 
assignee of the station license, the Commission will rescind the 
condition and permit the licensees of the stations whose advertising 
was

[[Page 76226]]

jointly sold pursuant to such agreement to enter into a new JSA--to the 
extent that both parties wish to enter into the agreement--on 
substantially similar terms and conditions as the prior agreement. The 
Commission delegates authority to the Media Bureau to review these 
requests and grant relief, as appropriate. While the Commission notes 
that this grandfathering relief is not typical of the relief normally 
provided by the Commission--generally grandfathered combinations cannot 
be assigned or transferred unless they comply with the ownership rules 
in effect at the time--it believes that the relief is warranted given 
the various expressions of Congressional will in this regard.
    34. In addition to readopting the Television JSA Attribution Rule, 
the Commission finds that such attribution does not change its 
determination here that the existing Local Television Ownership Rule 
should be retained, with a minor contour modification. The analysis 
underlying the various components of the Local Television Ownership 
Rule (e.g., the numerical limits, the top-four prohibition, and the 
eight-voices test) assumes that independently owned and operating 
stations are just that--independent. The Commission's attribution rules 
are designed to help to ensure that independence, or, stated 
differently, to reflect a determination of when stations are not truly 
independent, because of common ownership or other relationships that 
provide the ability to exercise influence or control over another 
station's core operating functions. The Local Television Ownership Rule 
is a bright-line rule designed to promote competition. Accordingly, 
Commission analysis focuses on concepts that are generally applicable 
across all markets and this approach is favored by broadcasters. The 
bright-line approach, however, precludes full consideration of changing 
economic conditions within a particular local market or all of the 
variations that may exist across markets. To take account of such 
considerations, the Commission would need to adopt a case-by-case 
approach. However, such an approach provides less certainty to the 
market, imposes higher administrative burdens on the Commission than 
the bright-line approach, and may delay Commission decision-making, 
which could ultimately chill marketplace activity. The Commission does 
not find any support in the record for such an approach. Accordingly, 
arguments that the Commission's analysis regarding the Local Television 
Ownership Rule and/or television JSAs fails to account for market-by-
market differences are unavailing, as an approach that takes those 
differences into account would be inconsistent with the bright-line 
rule favored by broadcasters.
    35. The attribution of certain television JSAs, which prevents 
those agreements from being used to circumvent the ownership limits by 
compromising the independence of a same-market station, helps to ensure 
that the goals of the Local Television Ownership Rule are realized. 
This mechanism applies to any circumstances in which an individual or 
entity has an attributable interest in more than one station in a 
market. The arguments that television JSAs should not be attributed 
because they produce public interest benefits are essentially 
indistinguishable from arguments that the ownership limits should be 
relaxed because common ownership produces public interest benefits. The 
Commission acknowledges and addresses these arguments throughout; 
however, it has ultimately determined that the Local Television 
Ownership Rule should be retained, with a minor modification to the 
contour standard. The Commission's responsibility under section 202(h) 
is to ensure that the Local Television Ownership Rule continues to 
serve the public interest, not to manipulate the rule to counterbalance 
the attribution of television JSAs. As discussed in this section, the 
Commission finds that the adopted rule serves the public interest.
    36. Waiver Policy. Under the existing failed/failing station waiver 
policy, to obtain a waiver of the local television rule, an applicant 
must demonstrate that one of the broadcast television stations involved 
in the proposed transaction is either failed or failing and that the 
in-market buyer is the only reasonably available candidate willing and 
able to acquire and operate the station; and selling the station to an 
out-of-market buyer would result in an artificially depressed price. A 
station is considered to be failed if it has not been in operation due 
to financial distress for at least four consecutive months immediately 
before the application, or is a debtor in an involuntary bankruptcy or 
insolvency proceeding at the time of the application; a television 
station is considered to be failing if it has an all-day audience share 
of no more than four percent and it has had negative cash flow for 
three consecutive years immediately before the application. Under the 
failing station standard, the applicants must also demonstrate that 
consolidation of the two stations would result in tangible and 
verifiable public interest benefits that outweigh any harm to 
competition and diversity.
    37. Waiver of the Commission's rules is meant to be exceptional 
relief, and the Commission finds that the existing waiver criteria 
effectively establish when relief from the rule is appropriate. The 
Commission remains concerned that loosening the existing failed/failing 
station waiver criteria--such as by eliminating the four percent 
audience share requirement or by reducing the negative cash flow period 
from three years to one--would result in a waiver standard that is more 
vulnerable to manipulation by parties seeking to obtain a waiver. Also, 
such changes may not be rationally related to improving the 
Commission's ability to evaluate the viability of a station subject to 
the waiver request. The Commission declines to adopt any industry-
proposed waiver standard that would significantly expand the 
circumstances in which a waiver of the Local Television Ownership Rule 
would be granted, absent sufficient demonstration that the stations 
could not effectively compete in the market. Such relaxation of the 
waiver standard would be inconsistent with the Commission's 
determination that the public interest is best served by retaining the 
existing television ownership limits to promote competition. Therefore, 
the Commission concludes that the existing waiver standard is not 
unduly restrictive and that it provides appropriate relief in all 
television markets. The Commission also declines to adopt a 180-day 
shot clock for waiver request reviews. No record evidence indicates 
that waiver requests are subject to undue delay; on the contrary, the 
Commission believes that the current process works effectively and that 
applications are processed in a timely and efficient manner. In 
addition, the Commission currently endeavors to complete action on 
assignment and transfer of control applications (including those 
requesting a failed/failing station waiver) within 180 days of the 
public notice accepting the applications. Routine applications are 
typically decided within the 180-day mark, and all applications are 
processed expeditiously as possible consistent with the Commission's 
regulatory responsibilities. However, several factors could cause the 
Commission's review of a particular application to exceed 180 days. 
Certain cases will present difficult issues that require additional 
consideration, and the Commission does not believe that artificially 
constraining its review is appropriate.

[[Page 76227]]

    38. Multicasting. The Commission finds that the ability to 
multicast does not justify tightening the current numerical limits. 
Based on evidence in the record, broadcasting on a multicast stream 
does not typically 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 adjusting 
the numerical limits as a result of stations' multicasting capability 
is not appropriate.
    39. As proposed in the FNPRM, the Commission declines to regulate 
dual affiliations via multicast, including dual affiliation with more 
than one Big Four network, at this time. 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. 
The Commission finds that the strongest public interest concerns posed 
by dual affiliations via multicasting involve affiliations between two 
Big Four networks. However, based on the record, dual affiliations 
involving two Big Four networks via multicasting are generally limited 
to smaller markets where there are not enough full-power commercial 
television stations to accommodate each Big Four network or where other 
unique marketplace factors responsible for creating the dual 
affiliation exist. Marketplace incentives, at present, appear to limit 
the occurrence of dual affiliations via multicasting involving multiple 
Big Four networks largely to these smaller markets. Therefore, the 
Commission concludes that the nature of the local television market 
supports the Commission's decision to decline regulation of dual 
affiliations via multicasting at this time. However, the Commission 
will continue to monitor this issue and take action in the future, if 
appropriate; moreover, the Commission can consider issues that impact 
the Commission's policy goals in the context of individual transactions 
such as transfers of control or assignments of licenses.
    40. The factors that justify the Commission's decision not to 
restrict dual affiliations via multicast are not present in 
circumstances involving affiliation swaps. Dual affiliations via 
multicasting do not result in an entity owning two television stations 
rated in the top four in the market in violation of the Local 
Television Ownership Rule, which is the case with affiliation swaps now 
subject to the top-four prohibition, and no marketplace forces exist 
that would limit affiliation swaps absent the Commission's action in 
this Order. Indeed, given the marketplace conditions that tend to give 
rise to dual affiliations, prohibiting dual affiliation with more than 
one Big Four network could result in some Big Four networks becoming 
unavailable over the air in certain markets because there are not 
enough commercial television stations to accommodate each Big Four 
network in these markets. Prohibiting affiliation swaps would not 
create such a result since affiliation swaps, by definition, involve 
separate licensees affiliated with each network.
    41. Minority and Female Ownership. The Commission affirms its 
tentative conclusion from the FNPRM that the current rule remains 
consistent with the Commission's goal to promote minority and female 
ownership of broadcast television stations. While the Commission 
retains the existing Local Television Ownership Rule for the reasons 
stated above, to promote competition among broadcast television 
stations in local markets, and not with the purpose of preserving or 
creating specific amounts of minority and female ownership, the 
Commission finds that retaining the existing rule nevertheless promotes 
opportunities for diversity in local television ownership. The 
competition-based rule helps to ensure the presence of independently 
owned broadcast television stations in the local market, thereby 
indirectly increasing the likelihood of a variety of viewpoints and 
preserving ownership opportunities for new entrants. The Commission 
notes also that it retains without modification the current failed/
failing station waiver policy, including the requirement that the 
waiver applicant attempt to first solicit an out-of-market buyer, which 
promotes possible new entry in a market by ensuring that out-of-market 
entities interested in purchasing a station are aware of station sale 
opportunities.
    42. The Commission is unconvinced by arguments made by the 
Coalition of Smaller Market Television Stations that sharing 
agreements, such as JSAs and SSAs, promote minority and female 
ownership. While the record demonstrates that some stations that are 
owned by minorities and women participate in JSAs, the record also 
indicates that many such stations do not. The Smaller Market Coalition 
provides statistics regarding only full power television stations owned 
by women and African Americans. By their own data, the majority of 
stations owned by women do not participate in JSAs; moreover, they do 
not offer any statistics for stations owned by other minority groups, 
which make up the largest portion of minority station owners. No 
evidence shows that current minority or female station owners utilized 
such agreements to acquire those stations. To the contrary, anecdotal 
evidence suggests that JSAs, in particular, have been used by large 
station owners to foreclose entry into markets and that the 
Commission's decision to attribute JSAs has actually led to greater 
ownership diversity--a proposition supported by multiple parties 
throughout this proceeding.
    43. Additionally, the Commission finds the claim that tightening 
the Local Television Ownership Rule will promote increased 
opportunities for minority and female ownership to be both speculative 
and unsupported by existing ownership data. No data provided in the 
record support a contention that the duopoly rule has reduced minority 
ownership or suggest that a return to the one-to-a-market rule would 
increase ownership opportunities for minorities and women. On the other 
hand, while the data reflect an increase in minority ownership 
following relaxation of the Local Television Ownership Rule, the 
Commission has no evidence in the record that would permit it to infer 
causation and thus it declines to loosen the rule on this basis.
    44. Finally, the Commission finds that, at the present time, 
analyzing the implications of the incentive auction for the Local 
Television Ownership Rule generally, or minority and female ownership 
specifically is impossible. In the auction proceeding, the Commission 
has considered the effects of the auction on diversity, stating that 
voluntary participation in the reverse auction, via a channel sharing, 
ultra-high frequency (UHF)-to-very-high frequency (VHF), or high-VHF-
to-low-VHF bid, offers a significant and unprecedented opportunity for 
these owners to raise capital that may enable them to stay in the 
broadcasting business and strengthen their operations. A licensee's 
participation in the reverse auction does not mean it has decided to 
exit the business, even if its bid is accepted. The auction provides 
for bid options that allow the licensee to obtain a share of auction 
proceeds but still remain on the air: (i) Channel sharing; (ii) a UHF 
station could bid to move to a VHF channel; and (iii) a high VHF 
station

[[Page 76228]]

(channels 7-13) could bid to move to a low VHF channel (2-6).
    45. The broadcast television incentive auction is ongoing and its 
implications will not be known for some time. Broadcasters interested 
in participating in the reverse auction filed their applications in 
January 2016. Entities interested in bidding in the forward auction on 
the spectrum made available through the reverse auction filed 
applications in February 2016. The clock round bidding for the reverse 
auction commenced on May 31, 2016, and concluded on June 29, 2016; the 
Commission announced August 16, 2016, as the start date for the initial 
stage of the forward auction. Under statute, the identities of the 
broadcasters participating in the reverse auction are confidential. 
After the conclusion of the auction--the date of which is unknown--the 
Commission will release a public notice announcing the reverse and 
forward auction winners, and identifying those television stations that 
will be reassigned to new channels (or repacked). Reassigned stations 
will have up to 39 months after release of that public notice to 
complete the transition to their new channels, while winning bidders 
who will relinquish their spectrum entirely or move to share a channel 
with another station must do so within a specified number of months 
from receipt of their incentive payment.
    46. Because of these factors, and because the incentive auction is 
a unique event without precedent, the Commission cannot evaluate or 
predict the likely impacts of the auction at this time. The Commission 
will soon commence its evaluation of the broadcast marketplace post-
auction, and the Commission will address the implications of the 
incentive auction for the media ownership rules in the context of 
future quadrennial reviews. Further, the court in Prometheus III 
indicated that the Commission should consider how the ongoing broadcast 
incentive auction affects minority and female ownership. Consistent 
with this direction and the Commission's previous requests for comment 
on this issue, the Commission has evaluated the record and the status 
of the ongoing incentive auction, and its determination is that it is 
too soon to assess the impact of the auction on minority and female 
ownership.

B. Local Radio Ownership Rule

1. Introduction
    47. Based on the record in the 2010 and 2014 Quadrennial Review 
proceedings, the Commission finds that the current Local Radio 
Ownership Rule remains necessary in the public interest and should be 
retained without modification. The Commission finds that the rule 
remains necessary to promote competition and 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 finds that a competitive local radio market 
helps to promote localism, as a competitive marketplace tends to lead 
to the selection of programming that is responsive to the needs and 
interests of the local community. Also, the Commission finds that the 
Local Radio Ownership Rule is consistent with its goal of promoting 
minority and female ownership of broadcast television stations. The 
Commission finds that these benefits outweigh any burdens that may 
result from retaining the rule without modification.
    48. Accordingly, the Local Radio Ownership Rule will continue to 
permit the following: 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.
2. Discussion
    49. Under section 202(h), the Commission considers whether the 
Local Radio Ownership Rule continues to be necessary in the public 
interest as a result of competition. In determining whether the rule 
meets that standard, the Commission considers whether the rule serves 
the public interest. While the Commission believes that the 
competition-based Local Radio Ownership Rule is consistent with its 
other policy goals and may promote such goals in various ways, the 
Commission does not rely on these other goals as the basis for 
retaining the rule. Consistent with Commission precedent, upheld by the 
court in Prometheus II, the Commission finds that the Local Radio 
Ownership Rule continues to be necessary to protect competition, which 
provides a sufficient ground on which to retain the rule.
    50. Market. In this Order, the Commission adopts its tentative 
conclusion from the FNPRM that the relevant product market for review 
of the Local Radio Ownership Rule is the radio listening market and 
that including non-broadcast audio sources in that market is not 
appropriate. When determining the appropriate market definition for the 
Local Radio Ownership Rule, the Commission must determine whether 
alternate audio platforms provide consumers with a meaningful 
substitute for local broadcast radio stations. For purposes of 
Commission review, the nature of broadcast radio must be considered 
when determining whether an alternate source of audio programming 
provides a meaningful substitute for broadcast radio--the ability to 
access audio content alone is not sufficient to demonstrate 
substitution. Broadcast radio stations provide free, over-the-air 
programming tailored to the needs of the stations' local markets. In 
contrast, Internet radio requires either a fixed or mobile broadband 
Internet connection, and satellite radio requires a monthly 
subscription to access programming. Neither of these sources is as 
universally and freely available as broadcast radio, and neither 
typically provides programming tailored to the needs and interests of 
specific local markets.
    51. As noted in the FNPRM, despite the growing popularity of non-
broadcast platforms such as satellite radio and Internet-delivered 
audio in the commercial audio industry, broadcast radio continues to 
dominate in its reach among listeners. Moreover, no data was submitted 
to the record to refute the findings stated in the FNPRM, and recent 
data confirm that broadcast radio listenership remains essentially 
unchanged. In addition, the vast majority of Americans prefer to use 
broadcast radio as their in-car audio entertainment over new technology 
options. Lastly, the Commission notes that the growth of online radio 
listening likely includes audiences that are listening to streams of 
broadcast radio stations online instead of or in addition to listening 
over the air. One data source cited by NAB to establish the competitive 
impact of online radio define online radio as listening to AM/FM radio 
stations online and/or listening to streamed audio content available 
only on the Internet. To the extent that online audio merely allows

[[Page 76229]]

listeners to access broadcast radio station content over the Internet 
rather than over the air, it may not be a true alternative to broadcast 
radio. Ultimately, broadcast radio remains the most easily accessible 
and popular way for consumers to listen to audio programming, and the 
only one that focuses on the needs and interests of local markets.
    52. In addition, the Commission disagrees with NAB's assertion 
regarding the lack of significance of non-broadcast radio's national 
platform. The local character of broadcast radio is a significant 
aspect of the service that must be considered when determining whether 
alternate audio platforms provide a meaningful substitute. The record 
fails to demonstrate that non-broadcast radio programmers make 
programming decisions to respond to competitive conditions in local 
markets. As the Commission has stated previously, competition among 
local rivals most benefits consumers and serves the public interest.
    53. The Commission also disagrees with NAB's characterization that 
the Commission has recognized non-broadcast radio programming as 
meaningful substitutes for broadcast radio simply by virtue of the 
Commission's acknowledgment of the potential impact of alternate audio 
platforms on AM radio. While the Commission has recognized that AM 
radio is susceptible to audience migration due to its technical 
shortcomings, recognition of this fact does not mean that non-broadcast 
audio alternatives are a meaningful substitute for AM radio, 
specifically, or broadcast radio, in general. As discussed earlier, 
non-broadcast audio alternatives do not respond to competitive 
conditions in local markets and are not available to all consumers in a 
local market to the same extent as broadcast radio, which are critical 
considerations when determining substitutability. While the Commission 
does not take the position that advanced telecommunications/broadband 
deployment and adoption must be universal before it will consider 
Internet-delivered audio programming to be a competitor in the local 
radio listening market, the Commission finds that the current level of 
penetration and adoption of broadband service remains relevant when 
considering the extent to which this platform is a meaningful 
substitute for broadcast radio stations.
    54. Ultimately, the Commission finds that the record demonstrates 
that alternative sources of audio programming are not currently 
meaningful substitutes for broadcast radio stations in local markets; 
therefore, the Commission declines to depart from its tentative 
conclusion to exclude non-broadcast sources of audio programming from 
the relevant market for the purposes of the Local Radio Ownership Rule. 
The Commission's approach to limit the relevant market to broadcast 
radio stations in local radio listening markets is consistent with 
current DOJ precedent in evaluating proposed mergers involving 
broadcast radio stations. The Commission finds that the Local Radio 
Ownership Rule should continue to focus on promoting competition among 
broadcast radio stations in local radio listening markets.
    55. Market Size Tiers. As the FNPRM stated, the Commission's 
experience in applying the Local Radio Ownership Rule supports 
retention of the existing framework to promote competition. The 
Commission consistently has found that setting numerical ownership 
limits based on market size tiers remains the most effective method for 
preventing the acquisition of market power in local radio markets. This 
bright-line approach helps to keep the limited available radio spectrum 
from becoming locked up in the hands of one or a few radio station 
owners. Furthermore, the Commission believes that this approach 
benefits transaction participants by expediting the processing of 
assignment or transfer of control applications and by providing clear 
guidance on which transactions comply with the local radio ownership 
limits.
    56. The Commission received two proposals for alternative 
methodologies for determining market size tiers. Mid-West Family 
proposes that the Commission assign different values to stations of 
different classes when calculating how many stations an entity owns in 
a local market (e.g., Class C FM station = 1 station; Class A FM 
station = .5 station) or adopt a case-by-case analysis that would allow 
a station owner to acquire more stations than otherwise permitted under 
the rule to equalize the population coverage achieved by an in-market 
competitor. Connoisseur proposes that acquisitions involving stations 
in embedded markets--smaller radio markets that are located within the 
boundaries of a larger radio market (parent market)--should not be 
required to include stations owned in other embedded markets when 
demonstrating compliance with the ownership limits of a parent market.
    57. The Commission declines to adopt Mid-West Family's proposals. 
First, the Commission disagrees with Mid-West Family's contention that 
the Prometheus I decision mandates an adjustment to the rule's current 
methodology in the way proposed by Mid-West Family. Second, as the 
Commission has said previously, 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 retention of the existing numerical ownership limits 
discussed below. Specifically, Mid-West Family's proposal to assign 
different values to stations of different classes does not account for 
the possibility of a relatively low power radio station potentially 
reaching a larger audience than a station with a larger service 
contour.
    58. Moreover, service contour (and the associated population 
coverage) is just one of many aspects of station operations that may 
impact the ability to compete in a local market. Each station serves as 
a voice in its local market, and the Commission is not inclined to 
discount the value of certain voices, particularly based on criteria 
that may have a limited impact on a station's ability to compete. For 
these reasons, the Commission declines to change the methodology for 
determining market size tiers, as proposed by Mid-West Family.
    59. The Commission also declines to adopt Mid-West Family's 
proposal for a case-by-case analysis of population coverage. The 
Commission does not believe that population coverage alone is an 
appropriate basis on which to judge the competitiveness of a station 
(or cluster of stations) or the impact of these voices in the local 
market. The existing rule already provides for economies of scale that 
help stations compete; the Commission does not believe it is 
appropriate (or even possible) to revise the rule based on population 
coverage in an attempt to achieve a competitive equilibrium, which is 
effectively what Mid-West Family seeks. Moreover, the ability to seek a 
waiver of the ownership limits already provides parties with an 
opportunity to assert that special circumstances justify deviation from 
the rule in a particular case.
    60. The Commission also declines to alter the methodology for 
determining market size tiers as proposed by Connoisseur. Under the 
current methodology, owners wishing to acquire a radio station in an 
embedded market must satisfy the numerical limits in both the embedded 
market and the overall parent market. In the 2002 Biennial Review (68 
FR 46286, Aug. 5, 2003, FCC 03-127, rel. July 2, 2003) that adopted the 
Nielsen Audio Metro (formerly Arbitron Metro) methodology for 
determining radio markets, the Commission specifically declined to 
treat embedded markets differently. The

[[Page 76230]]

Commission found that requiring proposed combinations to comply with 
the Local Radio Ownership Rule in each Nielsen Audio Metro implicated 
by the proposed combination (i.e., in both the embedded and parent 
markets) comports with its general recognition that Nielsen Audio's 
market definitions are the recognized industry standard. The Commission 
rejected a proposal to apply a different test for embedded markets 
because it concluded that the proposed scheme would be inconsistent 
with the general reliance on Nielsen Audio's market definition and 
cumbersome to administer. The Commission finds that Connoisseur has not 
presented evidence of changes in the radio industry that would warrant 
an across-the-board departure from the Commission's longstanding 
reliance on Nielsen Audio's market analysis as reported by BIA as the 
basis for multiple ownership calculations for embedded and parent 
markets. In these situations, a station's above-the-line listing in the 
parent market (i.e., stations that are listed by BIA as home to that 
Metro) reflects a determination by Nielsen Audio and BIA that the 
station at issue competes in the parent market. For this reason, all 
embedded market stations that are listed as home to the parent market, 
like any other above-the-line stations, must be taken into account when 
demonstrating multiple ownership compliance in the parent market. This 
principle is consistent with Commission treatment of stations whose 
communities of license are outside the geographic boundaries of a Metro 
but are listed by BIA as home to the Metro. Such stations must comply 
with the multiple ownership limits in both the Metro market in which 
they are listed as home and the market in which their community of 
license is located, because they are considered to compete in both. 
Connoisseur conflates the embedded and parent market analyses, 
suggesting that the parent market analysis erroneously introduces 
stations from one embedded market to another, which may have tenuous 
economic or listenership ties to the first. This contention misses the 
point that, as a separate application of the Commission's multiple 
ownership rules, the parent market analysis necessarily includes all 
stations that compete in that market, whether or not they also compete 
in another embedded Metro market.
    61. However, the Commission recognizes Connoisseur's concerns that 
Nielsen Audio and BIA's practice of designating all embedded market 
stations as home to the parent market--regardless of actual market 
share--could result in certain stations being counted for multiple 
ownership purposes in a market in which they do not actually compete. 
Although the Commission does not believe that the record justifies a 
blanket exception to the rule, it will entertain market-specific waiver 
requests under section 1.3 demonstrating that the BIA listings in a 
parent market do not accurately reflect competition by embedded market 
stations and should thus not be counted for multiple ownership 
purposes.
    62. Numerical Limits. The Commission concludes 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 and to propose to retain the limits in the 
FNPRM remain largely unchanged. No data was provided in the record to 
contradict this conclusion. As demonstrated in the record, following 
the relaxation of the local radio ownership limits by Congress in the 
1996 Act, there was substantial consolidation of radio ownership both 
nationally and locally. In local markets, the largest firms continue to 
dominate in terms of audience and revenue share.
    63. The Commission also concludes that the record in this 
proceeding does not reflect changes in the marketplace that warrant 
reconsideration of the Commission's previous decision not to make the 
limits more restrictive. The Commission continues to believe that 
tightening the restrictions would disregard the previously identified 
benefits of consolidation in the radio industry and would be 
inconsistent with the guidance provided by Congress in the 1996 Act. 
Further, the Commission continues to find that tightening the rule, 
absent grandfathering, would require divestitures that it believes 
would be disruptive to the radio industry and would upset the settled 
expectations of individual owners. The record does not indicate that 
the benefits derived from tightening the limits would outweigh these 
countervailing considerations. For these reasons, and consistent with 
prior decisions, the Commission concludes that tightening the limits 
would not be in the public interest.
    64. Clarification of Application of Local Radio Ownership Rule. In 
the 2002 Biennial Review Order, the Commission established safeguards 
to deter parties from attempting to manipulate Nielsen Audio Metro 
market definitions for purposes of circumventing the Local Radio 
Ownership Rule. Specifically, the restrictions prohibit a party from 
receiving the benefit of a change in Nielsen Audio Metro boundaries or 
home market designation unless that change has been in place for at 
least two years (or unless the station's community of license is within 
the Metro, in the case of a home designation change). In general, a 
licensee seeking to demonstrate multiple ownership compliance may rely 
upon the removal of a station from BIA's list of home stations in a 
Metro, without a two-year waiting period, when the exclusion results 
from an FCC-approved change in the community of license from a 
community that is within a Metro's geographic boundaries to one that is 
outside the Metro. In the FNPRM, the Commission proposed to clarify 
that this exception applies only where the community of license change 
also involves the physical relocation of the station facilities to a 
site outside the relevant Nielsen Audio Metro market boundaries. 
Otherwise, the licensee of a station currently located in a Nielsen 
Audio Metro market 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. No objections to this clarification of the exception 
to the two-year waiting period were voiced in the record. Accordingly, 
the Commission adopts this clarification as it will ensure that the 
local radio ownership limits cannot be manipulated based on Nielsen 
Audio market definitions.
    65. 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). However, the Commission 
recognizes that certain circumstances require applicants to come into 
compliance with the numerical ownership limits even though 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 when an applicant with a grandfathered cluster 
of stations seeks to move a station's community of license outside the 
relevant Nielsen Audio Metro market. Given that the Commission relies 
on the BIA database for information regarding Nielsen Audio Metro home 
designations, such an applicant cannot concurrently demonstrate 
compliance with the multiple ownership limits at the time of

[[Page 76231]]

application filing, because the station proposing to change its 
community will continue to be listed by BIA as home to the Metro. To 
resolve this administrative issue, the Commission adopts the proposal 
in the FNPRM to allow a temporary waiver of the radio multiple 
ownership limits in this limited instance for three months from grant 
of the community of license modification application to allow BIA 
sufficient time to change the affected station's home designation 
following a community of license relocation. Grant of the application 
will be conditioned on coming into compliance with the applicable 
multiple ownership limits within three months. If the relevant station 
is still listed by BIA as home to the Metro at the end of this 
temporary waiver period, the Commission will rescind grant of the 
application and re-specify the original community of license.
    66. The Commission also proposed to exempt intra-Metro community of 
license changes from the requirements of Note 4. In 2006, the 
Commission introduced a streamlined procedure allowing an FM or AM 
broadcast licensee or permittee to change its community of license by 
filing a minor modification application. The Commission has found that 
strict application of Note 4 has produced disproportionately harsh 
results from what is now otherwise a minor and routine application 
process. The Commission also agrees with commenter Results Radio that 
the reasoning supporting the proposed exemption should apply not only 
to community of license changes within the physical boundaries of the 
Metro market, but to any community of license change where the station 
remains designated as home to the Metro market. Such an exemption 
would, in limited circumstances, provide equitable relief from the 
divestiture requirements of Note 4. Moreover, the Commission finds that 
such intra-market community of license changes in most cases will have 
little or no impact on the concentration of ownership within the local 
market. Accordingly, the Commission adopts these exemptions to Note 4.
    67. Since 2003, the Commission has regularly waived the Nielsen 
Audio Metro market definition for Puerto Rico, which defines Puerto 
Rico as a single market, instead relying on a contour overlap analysis 
for proposed transactions. The Commission has held that the unique 
characteristics of Puerto Rico present a compelling showing of special 
circumstances that warrant departing from the Nielsen Audio Metro as 
the presumptive definition of the local market. This practice is based 
on Puerto Rico's extremely mountainous topography, large number of 
radio stations and station owners, and division into eight Metropolitan 
Statistical Areas (MSAs) as defined by the Office of Management and 
Budget (OMB), which demonstrate that Puerto Rico has more centers of 
economic activity than are accounted for by the single Puerto Rico 
Nielsen Audio Metro definition.
    68. In previous waiver proceedings involving the Puerto Rico radio 
market, the Commission utilized the contour-overlap methodology that 
normally applies to defining markets in non-Nielsen Audio rated 
markets. The contour-overlap methodology is generally permitted to 
define the local radio market only when a station's community of 
license is located outside of a Nielsen Audio Metro boundary. Under 
this methodology, the relevant radio market is defined by the area 
encompassed by the mutually overlapping principal community contours of 
the stations proposed to be commonly owned. The Commission has 
determined previously that this methodology was appropriate to apply 
when examining the Puerto Rico radio market because of Puerto Rico's 
unique characteristics. Therefore, the Commission concludes that 
adoption of the contour-overlap market definition will facilitate the 
most appropriate application of the Local Radio Ownership Rule in 
Puerto Rico, and there is no opposition to this proposal in the record. 
Accordingly, the Commission adopts the market definition based on 
contour overlap for Puerto Rico that it has applied consistently in 
previous waiver proceedings.
    69. AM/FM Subcaps. The AM/FM subcaps limit the number of stations 
from the same service--AM or FM--that an entity may own in a single 
market. Just as the Commission has found that the public interest is 
served by retaining the existing numerical limits, it finds appropriate 
to retain the existing subcaps. The subcaps, as originally adopted by 
Congress, were premised on the ownership limits adopted in the 1996 
Act. As the Commission has stated previously, tightening one or both of 
the subcaps absent a corresponding change to the numerical ownership 
limits (or a tightening of one subcap absent a loosening of the other) 
would result in an internal inconsistency in the rule, as such a 
tightening would result in an entity not being permitted to own all the 
stations otherwise permitted under certain numerical tiers. The 
Commission sought comment on whether any reason supports adopting 
different subcaps despite this potential inconsistency and received no 
comments arguing for tightening the subcaps. The Commission also finds 
that loosening or abolishing the subcaps would create public interest 
harms by potentially permitting excessive consolidation of a particular 
service--an outcome the subcaps are designed to prevent--and reducing 
opportunities for new entry within local radio markets.
    70. The Commission is not persuaded by suggestions that eliminating 
the subcaps would result in public interest benefits sufficient to 
justify that action. While flexibility in ownership structuring may 
benefit existing licensees, such benefits may not extend to new 
entrants who potentially would see opportunities for radio ownership 
diminish through the increased concentration of ownership in a 
particular service that elimination of the subcaps would permit. The 
Commission also does not agree that eliminating or modifying the AM 
subcap would be an effective way to revitalize AM radio. NAB's 
assertion that elimination of the subcap would revitalize AM radio is 
unsupported, as NAB fails to explain how additional consolidation of AM 
stations will improve the ability of those stations to overcome 
existing technological and competitive challenges.
    71. The Commission continues to believe that broadcast radio, in 
general, remains the most 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. As the Commission has 
stated previously, 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. Nothing in the record of this 
proceeding indicates that this marketplace characteristic has changed. 
Therefore, the Commission concludes that the public interest remains 
best served by retaining the existing AM subcap, which limits 
concentration of AM station ownership and thereby promotes 
opportunities for new entry that further competition and viewpoint 
diversity. In addition, FCC Form 323 data for 2011 and 2013 notably 
indicates that minority and female ownership of radio stations (and AM 
stations, in particular) exceeds that of television stations.

[[Page 76232]]

    72. Furthermore, despite the general technological limitations of 
AM stations, there continue to be many markets in which AM stations are 
significant radio voices. No data was offered in the record to refute 
the Commission's tentative conclusion in the FNPRM that AM stations 
continue to be significant radio voices in many markets. Also, AM 
stations are among the top revenue earners in some of the largest radio 
markets (e.g., New York, Chicago, and Los Angeles). The Commission 
therefore finds that, in addition to the general promotion of new entry 
across all markets described above, retention of the existing AM 
subcaps is also necessary to prevent a single station owner from 
acquiring excessive market power through concentration of ownership of 
AM stations in those markets in which AM stations are significant radio 
voices.
    73. The Commission also concludes that there continue to be 
technical and marketplace differences between AM and FM stations that 
justify retention of both the AM and FM subcaps to promote competition 
in local radio markets. As the Commission has noted previously, FM 
stations enjoy unique advantages over AM stations, such as increased 
bandwidth, superior audio signal fidelity, and longer hours of 
operation. These technological differences often, but not always, 
result in greater listenership and revenues for FM stations that 
justifies a limit on the concentration of FM station ownership, in 
particular. Nothing in the record of this proceeding indicates that the 
Commission should depart from the tentative conclusions in the FNPRM 
regarding the differences between AM and FM radio. Therefore, the 
Commission concludes that retaining the existing FM subcap continues to 
serve the public interest as well. Accordingly, the Commission retains 
both the AM and FM subcaps without modification.
    74. The Commission also finds that the digital radio transition and 
the changes to the FM translator rules have not yet meaningfully 
ameliorated the general differences between AM and FM stations, such 
that the justifications described above have been rendered moot. Recent 
digital radio deployment data support previous findings that FM 
stations are actually increasing the technological divide through 
greater adoption rates of digital radio technology than AM stations. 
The trends noted in the FNPRM have continued. Also, 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 the change to the FM translator rule benefited many 
AM stations, more than half of all AM stations continue to operate 
without associated FM translators. The Commission received no 
objections or material in the record to refute its findings; however, 
the Commission will continue to monitor the impact of the digital radio 
deployment and the FM translator rule change in future media ownership 
proceedings.
    75. Waiver Criteria. The Commission declines to adopt specific 
waiver criteria for the Local Radio Ownership Rule and will continue to 
rely on the general waiver standard. The Commission finds that the 
considerations in proposals for specific waiver criteria can be 
advanced adequately in the context of a general waiver request under 
Sec.  1.3 of the Commission's rules and notes that the Commission has 
an obligation to take a hard look at whether enforcement of a rule in a 
particular case serves the rule's purpose or instead frustrates the 
public interest. Therefore, the Commission concludes that adoption of a 
specific waiver standard is not appropriate at this time.
    76. Minority and Female Ownership. The Commission affirms its 
tentative conclusion from the FNPRM that the current rule remains 
consistent with the Commission's goal to promote minority and female 
ownership of broadcast radio stations. While the Commission retains the 
existing Local Radio Ownership Rule for the specific reasons stated 
above, it finds that retaining the existing rule nevertheless promotes 
opportunities for diverse ownership in local radio ownership. This 
competition-based rule indirectly advances the Commission's diversity 
goal by helping to ensure the presence of independently owned broadcast 
radio stations in the local market, thereby increasing the likelihood 
of a variety of viewpoints and preserving ownership opportunities for 
new entrants. The Commission has also retained the AM/FM subcaps, in 
part, to help promote new entry--as noted, the AM band in particular 
has historically provided lower-cost ownership opportunities for new 
entrants.
    77. Consistent with Commission analysis of the local television 
ownership rule above, however, the Commission finds the claim that 
tightening the Local Radio Ownership Rule would promote increased 
opportunities for minority and female ownership to be speculative and 
unsupported by existing ownership data. No data in the record support a 
contention that tightening the local radio ownership limits would 
promote ownership opportunities for minorities and women.
    78. In addition, the Commission does not believe that Media 
Ownership Study 7, which considers the relationship between ownership 
structure and the provision of radio programming targeted to African-
American and Hispanic audiences, supports the contention that 
tightening the local radio ownership limits would promote minority and 
female ownership. While the data suggest the existence of a positive 
relationship between minority ownership of radio stations and the total 
amount of minority-targeted radio programming available in a market, 
the potential impact of tightening the ownership limits on minority 
ownership was not part of the study design, nor something that can be 
reasonably inferred from the data.
    79. Nothing in the data or any other evidence in the record permits 
the Commission to infer causation; therefore, the Commission declines 
to loosen the existing ownership limits on the basis of any trend 
reflected in the data. The Commission remains mindful of the potential 
impact of consolidation in the radio industry on ownership 
opportunities for new entrants, including small businesses, and 
minority- and women-owned businesses, and the Commission will continue 
to consider the implications in the context of future quadrennial 
reviews.

C. Newspaper/Broadcast Cross-Ownership Rule

1. Introduction
    80. The Newspaper/Broadcast Cross-Ownership (NBCO) Rule prohibits 
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 community of publication. The rule currently in effect 
prohibits the licensing of an AM, FM, or TV broadcast station to a 
party (including all parties under common control) that directly or 
indirectly owns, operates, or controls a daily newspaper, if the entire 
community in which the newspaper is published would be encompassed 
within the service contour of the station, namely: (1) The predicted or 
measured 2 mV/m contour of an AM station, computed in accordance with 
Sec.  73.183 or Sec.  73.186; (2) the predicted 1 mV/m contour for an 
FM station, computed in accordance with Sec.  73.313; or (3) the

[[Page 76233]]

Grade A contour of a TV station, computed in accordance with Sec.  
73.684.
    81. In analyzing the NBCO Rule under section 202(h), the 
Commission's focus is on the rule's primary purpose--to promote 
viewpoint diversity at the local level. As the Commission noted in 
adopting the NBCO Rule, if a democratic society is to function, nothing 
can be more important than insuring a free flow of information from as 
many divergent sources as possible. Broadcast stations and daily 
newspapers remain the predominant sources of the viewpoint diversity 
that the NBCO Rule is designed to protect. The proliferation of 
(primarily national) content available from cable and satellite 
programming networks and from online sources has not altered the 
enduring reality that traditional media outlets are the principal 
sources of essential local news and information. The rapid and ongoing 
changes to the overall media marketplace do not negate the rule's basic 
premise that the divergence of viewpoints between a cross-owned 
newspaper and broadcast station cannot be expected to be the same as if 
they were antagonistically run.
    82. After careful consideration of the record, the Commission 
concludes that regulation of newspaper/broadcast cross-ownership within 
a local market remains necessary to protect and promote viewpoint 
diversity. The Commission continues to find, however, that an absolute 
ban on newspaper/broadcast cross-ownership is overly broad. 
Accordingly, and consistent with the Commission's approach in the 2006 
proceeding, the adopted rule generally prohibits common ownership of a 
broadcast station and daily newspaper in the same local market but 
provides for a modest loosening of the previous ban on cross-ownership 
consistent with the Commission's view that an absolute ban may be 
overly restrictive in some cases. The Commission finds that the 
benefits of the revised rule outweigh any burdens that may result from 
adopting the rule.
2. Discussion
a. Policy Goals
    83. Viewpoint diversity. The record reaffirms the Commission's view 
that the NBCO Rule remains necessary to promote diversity, specifically 
viewpoint diversity. The FNPRM commenters that oppose this position do 
not present evidence persuading the Commission to alter its tentative 
conclusion in the FNPRM that newspapers and broadcast television 
stations, and their affiliated Web sites, continue to be the 
predominant providers of local news and information upon which 
consumers rely. For the most part, opponents of the rule reiterate the 
two principal arguments put forth by commenters to the initial NPRM, 
namely that: (1) Ownership does not necessarily influence viewpoint and 
(2) an array of diverse viewpoints is widely available from an 
abundance of outlets, particularly via the Internet. The Commission 
addressed these arguments extensively in the FNPRM and does not find 
them any more persuasive after reviewing the FNPRM comments.
    84. With regard to the first argument, in the FNPRM, the Commission 
acknowledged that NPRM commenters provided examples of instances when 
cross-owned properties diverged in viewpoint. The Commission noted, 
however, that, although similar examples were provided during the 
Commission's 2002 and 2006 reviews, the Commission continued to 
restrict newspaper/broadcast cross-ownership given that an owner has 
the opportunity, ability, and right to influence the editorial process 
of media outlets it owns, regardless of the degree to which it 
exercises that power. The Third Circuit affirmed the Commission's 
reasoning that the possibility of a connection between ownership and 
viewpoint is not disproved by evidence that a connection is not always 
present. Moreover, the Commission has noted previously the existence of 
ample evidence pointing in the other direction, namely that ownership 
can affect viewpoint. In any event, the Commission's goal is to 
maximize the number of distinct voices in a market, which the 
Commission believe is achieved more effectively by relying on separate 
ownership rather than on a hope or expectation that owners of cross-
owned properties will maintain a distance from the editorial process. 
The Commission's concern is not alleviated by the broadcasters' 
argument that consumers' ideological preferences have a greater 
influence on editorial slant than ownership does. Indeed, the 
Commission believes that such influence only increases the importance 
of ensuring that a multiplicity of voices are available to consumers.
    85. With regard to the second argument, in the FNPRM, the 
Commission addressed arguments that the NBCO Rule is obsolete because 
today's consumers have access to a vast array of news sources. The 
Commission tentatively concluded that a cross-ownership restriction 
remains necessary, despite the increase in media outlets. Supporters of 
the rule agreed with the Commission that traditional news providers, 
and their affiliated Web sites, continue to be the most relied-upon 
sources of local news and information. In the FNPRM, the Commission 
pointed to evidence suggesting that, despite the Internet's increased 
role in news distribution, traditional news providers are still 
critical to ensuring viewpoint diversity at the local level. The record 
showed that independent online sources currently cannot substitute for 
the original reporting by professional journalists associated with 
traditional local media.
    86. After reviewing the FNPRM comments, which raise substantially 
the same points that were addressed in the FNPRM, the Commission's 
position is unchanged. Several FNPRM commenters reiterate that the 
Commission's focus on traditional media is too narrow because other 
media outlets contribute to viewpoint diversity. Evidence shows, 
however, that the contributions of cable, satellite, and Internet 
sources serve as a supplement, but not as a substitute, for newspapers 
and broadcasters providing local news and information. A U.S. District 
Court judge recently rejected an argument that online sources of local 
news present sufficient competition to local newspapers in Orange 
County and Riverside County in Southern California (United States v. 
Tribune Publishing Co., No. 16 CV 01822 AB (PJWx) (C.D. Cal. Mar. 18, 
2016)). The judge concluded that, as creators of local content, local 
newspapers continue to serve a unique function in the marketplace and 
are not reasonably interchangeable with online sources of news. He was 
not convinced that the Internet renders geography and distinctions 
between kinds of news sources obsolete. The news and information 
provided by cable and satellite networks generally targets a wide 
geographic audience, and the record demonstrates that local news and 
information available online usually originates from traditional media 
outlets. As discussed in the NPRM and FNPRM, considerable evidence 
shows that most online sources of local news are affiliated with 
newspapers or broadcast stations or contain content that originates 
from those traditional sources. The Commission affirms its earlier 
finding that local, hyperlocal, and niche Web sites generally do not 
fill the role of local television stations or daily newspapers. Local 
television continues to dominate despite the increasing use of social 
media as a source of news. Moreover, the social media platforms that 
consumers turn to for news, such as Facebook, Twitter,

[[Page 76234]]

and Google, generally aggregate news stories from other sources and 
those sources do not focus necessarily on local news.
    87. The Commission concludes that the NBCO Rule should continue to 
apply to newspaper/radio cross-ownership. The Commission finds that the 
newspaper/radio cross-ownership restriction serves the public interest 
because the record shows that radio stations contribute in meaningful 
ways to viewpoint diversity within their communities. The Commission is 
persuaded that radio adds an important voice in many local communities 
such that lifting the restriction could harm viewpoint diversity. 
Although the Commission tentatively concluded earlier in this 
proceeding that radio stations are not the primary outlets that 
contribute to viewpoint diversity in local markets and that consumers 
rely predominantly on other sources for local news and information, the 
Commission finds that radio's role in promoting viewpoint diversity is 
significant enough to warrant retention of the restriction. Therefore, 
the Commission declines to eliminate the restriction or to adopt a 
presumptive waiver standard, such as the one proposed in the NPRM, 
favoring newspaper/radio mergers in the top 20 DMAs.
    88. As discussed in the FNPRM, the Commission's conclusion that 
radio contributes sufficiently to viewpoint diversity to warrant 
retention of the newspaper/radio cross-ownership restriction is 
consistent with the longstanding position that newspaper/radio 
combinations should be prohibited even though radio generally plays a 
lesser role in contributing to viewpoint diversity. A lesser role does 
not mean that radio plays no role. The record shows that broadcast 
radio stations produce a meaningful amount of local news and 
information content that is relied on by a significant portion of the 
population and, therefore, provide significant contributions to 
viewpoint diversity.
    89. With over 90 percent of Americans listening to radio on a 
weekly basis, radio's potential for influencing viewpoint is great. 
Moreover, recent evidence suggests that radio stations air a 
substantial amount of local news programming. Evidence in the record 
also indicates that members of certain communities may rely more 
heavily on broadcast radio stations for local news and information. 
Such reliance may be especially strong when radio stations target 
particular demographic groups or offer news programs in a foreign 
language. A community radio station recently licensed in Minneapolis 
reports local news stories in the Somali language and provides 
information of particular interest to the local Somali-American 
community. Although the NBCO Rule does not apply to that particular 
station due to its low-power status, the example nonetheless 
demonstrates the important contributions that radio can make to 
viewpoint diversity.
    90. Evidence of reliance on broadcast radio for local news and 
public information programming is important for assessing radio's 
contributions to viewpoint diversity; however, to be a meaningful 
source of viewpoint diversity in local markets, broadcast radio 
stations must increase the diversity of local information, not simply 
its availability. The record demonstrates that radio stations still 
contribute to viewpoint diversity by producing a meaningful amount of 
local news and public interest programming that is responsive to the 
needs and concerns of the community. Moreover, invitations to call-in 
to a radio program offer local residents unique opportunities to 
participate interactively in a conversation about an issue of local 
concern.
    91. For the foregoing reasons, the Commission finds that radio 
provides an important contribution to viewpoint diversity such that 
lifting the newspaper/radio cross-ownership restriction in all markets 
across-the-board could sweep too broadly. The Commission finds that it 
must take care not to overlook the contributions to viewpoint diversity 
offered by radio stations, particularly to the extent that dedicated 
audiences of radio stations rely on radio as a valuable source of local 
news and information, and that radio stations provide an additional 
opportunity for civic engagement, as certain commenters attest. Thus, 
while the Commission previously has recognized that a radio station 
generally cannot be considered the equal of a newspaper or television 
station when it comes to providing news, in fact, for a significant 
portion of the population radio may play an influential role as a 
source for news or the medium turned to for discussion of matters of 
local concern.
    92. Accordingly, the Commission finds that radio stations can 
contribute in a meaningful way to viewpoint diversity within local 
communities and that a newspaper's purchase of a radio station in the 
same local market could harm viewpoint diversity in certain 
circumstances. As a result, the Commission retains both the newspaper/
radio and the newspaper/television cross-ownership restrictions. 
However, consistent with previous Commission findings, the Commission 
believes that enforcement of the NBCO Rule may not be necessary to 
promote viewpoint diversity in every circumstance and that there could 
be situations where enforcement would disserve the public interest. 
Furthermore, the Commission reaffirms its earlier findings that the 
opportunity to share newsgathering resources and realize other 
efficiencies derived from economies of scale and scope may improve the 
ability of commonly owned media outlets to provide local news and 
information. In certain circumstances, newspaper/broadcast cross-
ownership may benefit the news offerings in a local market without 
causing undue harm to viewpoint diversity. In recognition of this, the 
Commission will ease the application of the prohibition through a 
waiver process and other modifications to the scope of the rule.
    93. Localism. The Commission affirms its belief stated in the FNPRM 
that 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. While FNPRM commenters 
proffer further examples in support of the proposition that such cost-
savings and efficiencies may allow cross-owned properties to provide a 
higher quality and quantity of local news, these additional examples do 
not change the Commission's conclusion. The Commission has long 
accepted that proposition but also recognized that increased 
efficiencies do not necessarily lead to localism benefits. Furthermore, 
even if cost-savings are used to increase investment in local news 
production, the purpose of this rule is to promote and preserve the 
widest possible range of viewpoint; it is not, as NAB seems to suggest, 
to promote localism. The Commission therefore disagrees with NAB's 
argument that retaining cross-ownership restrictions will stymie the 
rule's intended benefits. Allowing media owners to achieve economies of 
scale and scope may enable them to disseminate a greater amount of 
local news over one or both of their cross-owned properties, but the 
costly result would be fewer independently owned outlets in the market. 
The loss of a local voice runs counter to the Commission's goal of 
promoting viewpoint diversity, regardless of whether cross-ownership is 
more or less likely to produce localism benefits. Although the 
Commission has found previously that

[[Page 76235]]

the NBCO Rule is not necessary to promote its localism goal, that 
determination, which the Commission affirms in this Order, does not 
undermine the viewpoint diversity rationale for the rule.
    94. Competition. Promoting competition was not the Commission's 
primary concern when it considered implementation of the NBCO Rule, and 
in its 2002 biennial review the Commission found that the rule was not 
necessary to promote competition because newspapers and broadcast 
stations do not compete in the same product markets. The FNPRM record 
does not present a convincing case that is contrary to the Commission's 
longstanding position. The fact that broadcasters and newspapers both 
sell to local advertisers does not mean they compete with each other 
for advertising.
    95. Although the Commission does not find that the rule is 
necessary to promote competition, it has concluded that the rule is 
necessary to promote viewpoint diversity. Therefore, the Commission is 
not swayed by the media industry's arguments that the NBCO Rule should 
be eliminated because it potentially limits opportunities for 
newspapers and broadcasters to expand their businesses. As stated in 
the FNPRM, the Commission does not believe that viewpoint diversity in 
local markets should be jeopardized to enable media owners to increase 
their revenue by pursuing cross-ownership within the same local market. 
Moreover, the application of the NBCO Rule has a very limited 
geographic scope. Even if the potential efficiencies of inter-market 
consolidation are fewer than those to be gained from in-market 
acquisitions, the rule does not prevent media owners that seek new 
revenue streams from acquiring properties in other markets or 
alternative media outlets that are not subject to the NBCO Rule.
b. Scope of the Rule
    96. Newspaper/Television Combinations. 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 retained the Grade A 
contour approach when it revised the NBCO Rule in 2006. The trigger for 
the newspaper/television cross-ownership restriction therefore relies 
on a station's Grade A contour, which was rendered obsolete by the 
transition to digital television service.
    97. The Commission adopts its uncontested proposal in the FNPRM to 
update the geographic scope of the restriction by incorporating both a 
television station's DMA and its digital service contour. Specifically, 
cross-ownership of a full-power television station and a daily 
newspaper will be prohibited 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 Sec.  73.625 of the 
Commission's rules, encompasses the entire community in which the 
newspaper is published. For the reasons provided in the FNPRM, the 
Commission will maintain the current definition of a daily newspaper as 
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 explained its 
disinclination to revise the definition such as by imposing a minimum 
circulation requirement. Both conditions need to be met for the cross-
ownership prohibition to be triggered. The DMA requirement ensures that 
the newspaper and television station serve the same media market, and 
the contour requirement ensures that they actually reach the same 
communities and consumers within that larger geographic market.
    98. Newspaper/Radio Combinations. The current rule prohibits cross-
ownership when the entire community in which the newspaper is published 
would be encompassed within the service contour of: (1) The predicted 
or measured 2 mV/m contour of an AM station, computed in accordance 
with Sec.  73.183 or Sec.  73.186, or (2) the predicted 1 mV/m contour 
for an FM station, computed in accordance with Sec.  73.313. Consistent 
with arguments made in the record, the Commission will not replace 
radio contours, but instead the Commission will include an additional 
requirement that the radio station and the newspaper be located in the 
same Nielsen Audio Metro market, where one is defined. In circumstances 
in which neither the radio station nor the newspaper is geographically 
located within a defined Nielsen Audio Metro market, then the trigger 
will be determined, as before, solely on the basis of the station's 
service contour. The Commission finds that the added Nielsen Audio 
Metro market condition will serve a valid limiting role because Nielsen 
Audio designations are based on listening patterns, which will focus 
the restriction on properties serving the same audience.
    99. Specifically, in areas designated as Nielsen Audio Metro 
markets, cross-ownership of a full-power radio station and a daily 
newspaper will be prohibited when: (1) The radio station and the 
community of publication of the newspaper are located in the same 
Nielsen Audio Metro market, and (2) the entire community in which the 
newspaper is published is encompassed within the service contour of the 
station, namely: (a) The predicted or measured 2 mV/m groundwave 
contour of an AM station, computed in accordance with Sec.  73.183 or 
Sec.  73.186; or (b) the predicted or measured 1 mV/m contour for an FM 
station, computed in accordance with Sec.  73.313. Both conditions need 
to be met for the cross-ownership restriction to apply, except when 
both the community of publication of the newspaper and the community of 
license of the radio station are not located in a Nielsen Audio Metro 
market, then only the second condition need be met. Consistent with the 
Local Radio Ownership Rule, the Commission will rely on Nielsen to 
determine whether a radio station is in the same Nielsen Audio Metro 
market as the newspaper's community of publication. The Local Radio 
Ownership Rule relies, in part, on Nielsen Audio Metro markets in 
applying the radio ownership limits. In that context, the Commission 
has developed certain procedural safeguards to deter parties from 
attempting to manipulate Nielsen Audio market definitions to evade the 
Local Radio Ownership Rules. By relying on Nielsen Audio Metro markets, 
where available, the revised NBCO Rule is susceptible to similar 
manipulation by parties; accordingly, the Commission will apply the 
procedures adopted in the context of the Local Radio Ownership Rule to 
the adopted NBCO Rule. Specifically, for purposes of this rule, a radio 
station will be counted as part of the Nielsen Audio Metro market in 
which the station's community of license is geographically located and 
any other Nielsen Audio Metro market in which the station is listed by 
BIA as home to that market. This approach will ensure that a radio 
station is considered to be part of each Nielsen Audio Metro market in 
which that station is either geographically located or competes. The 
Commission believes Nielsen's determination of a radio market's 
boundaries is useful in considering whether particular communities rely 
on the same media voices. The Commission believes that such a 
determination, combined with the actual service areas of the respective 
facilities, gives a stronger picture of the relevant market and 
instances in which the Commission should prohibit common ownership. 
Therefore, the

[[Page 76236]]

Commission believes that including consideration of the Nielsen Audio 
Metro market (if one exists) in the determination of when the cross-
ownership prohibition is triggered will help focus the restriction 
specifically on those circumstances where the newspaper and broadcast 
facility truly serve the same audience.
c. Exception for Failed and Failing Broadcast Stations and Newspapers
    100. For the reasons expressed in the FNPRM, the Commission will 
not create an exception for failed/failing stations or newspapers and 
no commenters addressed this issue. The current approach will not 
preclude waiver applicants from attempting to show how such a 
commitment could enhance viewpoint diversity in the local market. 
However, applicants seeking a waiver in part or in whole on that basis 
should recall the Commission's previously stated concerns that such a 
commitment would be impracticable to enforce and arguably might require 
the Commission to make content-based assessments.
    101. Consistent with its proposal in the FNPRM, the Commission will 
adopt an express exception for proposed combinations involving a failed 
or failing newspaper, television station, or radio station. For the 
reasons explained below in connection with the timing of a waiver 
request, the Commission will require television and radio licensees to 
file for an exception to the NBCO Rule before consummating the 
acquisition of a newspaper. It stands to reason that a merger involving 
a failed or failing newspaper or broadcast station is not likely to 
harm viewpoint diversity in the local market. If the entity is unable 
to continue as a standalone operation, and thus contribute to viewpoint 
diversity, then preventing its disappearance from the market 
potentially can enhance, and will not diminish, viewpoint diversity.
    102. The Commission adopts failed/failing criteria consistent with 
those proposed in the FNPRM, which are similar to those used for the 
Local Television Ownership Rule and the Radio/Television Cross-
Ownership Rule. That is, a failed newspaper or broadcast station must 
show that, as applicable, it had stopped circulating or had been dark 
due to financial distress for at least four months immediately before 
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 a broadcast television 
station is the failing entity, that it has had a low all-day audience 
share (i.e., 4 percent or lower); (2) the financial condition of the 
newspaper or broadcast station was poor (i.e., a negative cash flow for 
the previous three years); and (3) the combination would produce public 
interest benefits. In addition, as with the exemption for satellite 
television stations pursuant to Note 5 of Sec.  73.3555, in the event 
of an assignment of license or transfer of control of the broadcast/
newspaper combination, the proposed assignee or transferee would need 
to make an appropriate showing demonstrating compliance with the 
elements of the failed/failing entity exception at the time of the 
assignment or transfer if it wishes to continue the common ownership 
pursuant to this exception. Further, although the Commission is not 
including this failed/failing exception in Note 7 of Sec.  73.3555 of 
the Commission's rules (which addresses the failed/failing waiver 
criteria applicable to the local television ownership rule and the 
radio/television cross-ownership rule), given the similarities, the 
precedent established in the application of Note 7 shall apply to the 
application of the NBCO failed/failing criteria, as appropriate. In 
addition, the applicants must show that the in-market buyer is 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 requirement would 
be to provide an affidavit from an independent broker affirming that 
active and serious efforts had been made to sell the newspaper or 
broadcast station, and that no reasonable offer from an entity outside 
the market had been received.
    103. Because the Commission is creating an exception to the NBCO 
Rule, rather than a waiver opportunity, applicants seeking a failed/
failing entity exception need not show, either at the time of their 
application or during subsequent license renewals, that the tangible 
and verifiable public interest benefits of the combination outweigh any 
harms. As the Commission has concluded that the exception serves the 
public interest in diversity simply by preserving a media outlet, 
licensees need not demonstrate that the additional benefits outweigh 
the potential harms. Recognizing that an absolute ban on newspaper/
broadcast cross ownership is overly broad, the Commission believes 
providing greater flexibility and certainty in the context of this rule 
is appropriate. Thus, the Commission believes a clear exception to the 
rule for failed and failing entities, rather than a waiver requiring a 
balancing of the harms and benefits, is appropriate to provide 
certainty for relief, as the Commission believes such combinations will 
have a minimal impact on viewpoint diversity.
d. Waiver Standard
    104. Consistent with the tentative conclusion in the FNPRM, the 
Commission declines to adopt a bright-line rule that would exempt 
certain combinations from the newspaper/broadcast cross-ownership rule 
based on a certain set of criteria. Given the variability among local 
markets, the Commission maintains its view that blanket exemptions 
should not be built into the rule. As the Commission explained in the 
FNPRM, while a rule with built-in exemptions might lend greater 
certainty to parties considering a merger, it would not lead 
necessarily to the best result in an individual market. The Commission 
reiterates its concern that such a rule would be too blunt an 
instrument to be used for these types of mergers. Rather, the 
Commission believes that the more prudent way to ease the rule's 
application is through a case-by-case waiver process with a particular 
focus on the impact the proposed merger would have on viewpoint 
diversity in the market.
    105. Therefore, consistent with other efforts to ease the rule's 
application, the Commission provides for the consideration of waiver 
requests of the NBCO Rule on a case-by-case basis. The Commission 
believes a case-by-case waiver approach will produce sensible outcomes 
and also improve transparency and public participation in the process. 
To facilitate public participation further, the Commission will require 
television and radio licensees to file a request for waiver of the NBCO 
Rule before consummating the acquisition of a newspaper, rather than at 
the time of the station's license renewal. As the Commission explained 
in the FNPRM, a broadcast licensee that triggered the NBCO Rule with 
the purchase of a newspaper previously was required, absent a waiver, 
to dispose of its station within one year or by the time of its next 
renewal date, whichever was longer. Alternatively, it could have 
pursued a waiver in conjunction with its license renewal, at which 
point interested parties could comment on the waiver request. As a 
result, the opportunity to comment on a licensee's acquisition of a 
newspaper might have arisen years after the purchase. The Commission's 
remedy will enable the public to comment on such acquisitions in a 
timely and effective manner before

[[Page 76237]]

the purchase is consummated. Moreover, by requiring prior approval, 
this approach will provide certainty to transaction participants that 
the proposed combination will not be subject to potential divestiture 
after the operations already have been integrated--a certainty that is 
not provided by the current approach. To alert interested parties to a 
proposed newspaper acquisition, the Commission will require that the 
Media Bureau place such waiver requests on public notice and solicit 
public comment on the proposed acquisition.
    106. With regard to the two case-by-case options described in the 
FNPRM for considering waivers, the Commission adopts what is termed a 
pure case-by-case approach. That is, the Commission will evaluate 
waiver requests by assessing 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. Waiver applicants will have the flexibility to 
present their most compelling reasons why strict application of the 
rule is not necessary to promote the goal of viewpoint diversity in 
that particular local market. Furthermore, consistent with its 
tentative conclusion in the FNPRM, the Commission declines to adopt the 
four-factor test that applied to waiver requests under the 2006 rule 
because the Commission concludes that the factors would be vague, 
subjective, difficult to verify, and costly to enforce. As the 
Commission stated in the FNPRM, evidence supporting considerations like 
those reflected in the four factors, although not required, is also not 
discouraged if a waiver applicant believes it would be useful in 
supporting its request. Thus, an applicant seeking a waiver under this 
approach will have to show that grant of the waiver will not unduly 
harm viewpoint diversity. Likewise, opponents of a transaction can 
respond with a range of arguments and evidence they consider most 
pertinent to that case. The Commission believes this approach will 
provide the Commission the flexibility needed to allow due 
consideration of all factors relevant to a case, without spending time 
and resources assessing presumptive criteria that may not be useful for 
a particular review. The 2006 rule required a waiver applicant 
attempting to overcome a negative presumption to show, with clear and 
convincing evidence, that the merged entity would increase diversity 
and competition. In the FNPRM, the Commission proposed not to 
incorporate the requirement into any presumptive waiver standard that 
the Commission might adopt. FNPRM commenters did not address the issue, 
and the Commission's concern remains that the requirement would impose 
an overly burdensome evidentiary standard. Although the issue arguably 
is mooted by the Commission's decision not to adopt a presumptive 
waiver standard, the Commission also will not incorporate that standard 
into the adopted waiver approach. Thus, the Commission can hone in 
quickly on the most important considerations of the proposed 
transaction and approach them with an openness that might not occur 
with a set framework. The Commission believes that, as a result, it 
will be able to determine more accurately and precisely whether a 
proposed combination will have an adverse impact on viewpoint diversity 
in the relevant local market. If a proposed combination does not 
present any undue harm to viewpoint diversity, which is the underlying 
purpose of the rule, then prohibiting the combination is not necessary 
in the public interest.
    107. The Commission recognizes that a case-by-case approach with 
presumptive guidelines, such as the one described in the FNPRM, 
potentially could offer waiver applicants greater certainty and 
consistency. The criteria proposed in this proceeding, however, were 
widely criticized and rejected by commenters. Ultimately, the 
Commission is persuaded by the criticism in the record that the 
proposed presumptive guidelines should not be adopted. Moreover, the 
Commission is concerned that any presumptive approach could result in 
an unduly rigid evaluation of a waiver application. Instead, the 
Commission believes that the pure case-by-case approach is the 
appropriate way to assess requests for waiver of the NBCO Rule. For all 
the reasons that favor a pure case-by-case approach, plus those stated 
in the FNPRM, the Commission declines to adopt Cox's proposal for a 
two-part test that would measure every proposed transaction against the 
same set of fixed criteria. As the Commission stated in the FNPRM, it 
believes that the first part of Cox's proposed test would define 
independent media voices too broadly and that the second part of Cox's 
proposed test would be difficult to apply and enforce in an objective, 
content-neutral manner.
    108. In addition, the Commission disagrees with Cox that a pure 
case-by-case approach is necessarily a retreat from a presumptive 
waiver standard. Rather, a pure case-by-case approach lifts the 
potential burden of having to overcome a negative presumption. 
Regardless, the Commission's intent in choosing a pure case-by-case 
approach over a presumptive waiver standard is not to increase or 
decrease the number of waiver approvals; it is to increase the 
likelihood of achieving the proper result in each individual case. 
Applying presumptive criteria can work well in other contexts and for 
other rules, but, under the current record and given the nature of 
viewpoint diversity and its dependency on the particular facts and 
circumstances of a specific market, the Commission finds that a pure 
case-by-case approach is best suited for handling requests for waiver 
of this rule.
    109. The Commission also disagrees with Cox that a pure case-by-
case approach is the equivalent of not having a waiver standard. To be 
clear, the Commission's standard requires applicants seeking a waiver 
of the NBCO Rule to show that their proposed combination would not 
unduly harm viewpoint diversity in the local market. The pure case-by-
case approach describes the method by which the Commission will 
determine whether this standard is met. The method of examining the 
totality of the circumstances may entail a broad review, but the 
standard to be met is narrowly focused on the impact on viewpoint 
diversity. The Commission anticipates that the precedent that evolves 
from future waiver decisions will provide further guidance to entities 
considering a merger.
    110. The Commission clarifies that this waiver standard is distinct 
from the traditional waiver standard under section 1.3, which requires 
a showing of good cause and applies to all Commission rules. By 
specifically allowing for a waiver of the NBCO Rule in cases where 
applicants can demonstrate that the proposed combination will not 
unduly harm viewpoint diversity, the Commission signals its recognition 
that there may be instances where enforcing the prohibition against 
ownership of a newspaper and broadcast station is not necessary to 
serve the rule's purpose of promoting viewpoint diversity in the local 
market. Indeed, the Commission's determination herein is that the 
public interest would not be served by restricting specific 
combinations that do not unduly harm viewpoint diversity. While in the 
context of section 1.3 waiver requests the Commission has considered 
showings of undue hardship, the equities of a particular case, or other 
good cause, in this particular context an applicant is

[[Page 76238]]

required to make a narrower showing, and a waiver will be granted so 
long as the applicants can demonstrate that viewpoint diversity will 
not be unduly harmed as a result of the proposed combination. The NBCO 
waiver standard does not replace or limit a waiver applicant's 
available options under section 1.3. Indeed, while the NBCO waiver 
standard articulated focuses specifically on the impact of the proposed 
merger on viewpoint diversity in the local market and requires 
applicants to make a showing as to such impact, waiver requests under 
section 1.3 could include a broader public interest showing, under 
which parties can assert any variety of considerations they believe 
warrant waiver of the rule consistent with established precedent. 
Waiver of the Commission's policies or rules under section 1.3 is 
appropriate only if both (1) special circumstances warrant a deviation 
from the general rule, and (2) such deviation will serve the public 
interest. Under this section, the Commission may take into account 
considerations of hardship, equity, or more effective implementation of 
overall policy on an individual basis. Although the Commission must 
give waiver requests a hard look, an applicant for waiver under section 
1.3 faces a high hurdle even at the starting gate and must support its 
waiver request with a compelling showing.
    111. FNPRM commenters did not address the Commission's question 
whether a case-by-case approach should incorporate, or disavow, these 
waiver criteria, which remain in effect along with the current rule. 
Accordingly, because of the lack of comment on these criteria (for or 
against), and for the reasons discussed above, the Commission is 
adopting a new waiver standard that replaces these earlier divestiture 
waiver criteria.
e. Grandfathering
    112. The Commission will grandfather, to the extent required, any 
existing newspaper/broadcast combinations that no longer comply with 
the NBCO Rule as a result of the changes to the scope of the rule. In 
addition, as stated in the FNPRM, the Commission will continue to allow 
all combinations currently in existence that have been grandfathered or 
approved by permanent waiver to the extent that grandfathering/
permanent waivers are still necessary to permit common ownership. As 
the Commission explained, it leaves in place any filing deadlines the 
Commission has imposed previously on specific parties related to cross-
ownership proceedings. Consistent with Commission precedent, 
grandfathered combinations, including those subject to permanent 
waivers, are not transferrable. The Commission disagrees with 
assertions that, contrary to longstanding Commission precedent, 
grandfathered and approved combinations should be freely transferable 
in perpetuity. As stated in the FNPRM, the Commission will continue to 
allow grandfathered status to survive pro forma changes in ownership 
and involuntary changes of ownership due to death or legal disability 
of the licensee. The Commission's approach strikes the appropriate 
balance between avoiding imposition of the hardship of divestiture on 
owners of existing combinations that have owned a combination in 
reliance on the rules and moving the industry toward compliance with 
current rules when owners voluntarily decide to sell their properties. 
A transferee or assignee of the properties must comply with the NBCO 
Rule in effect at the time of the transaction or obtain a new waiver. 
This requirement applies to the transfer of existing combinations 
already grandfathered or approved and to the transfer of combinations 
grandfathered as a result of becoming non-compliant due to the changes 
to the scope of the rule.
f. Minority and Female Ownership
    113. The Commission has declined to adopt the potential rule 
changes that commenters argue could lead to increased consolidation to 
the possible detriment of minority- and women-owned businesses. 
Instead, the adopted rule generally prohibits common ownership of a 
broadcast station and daily newspaper in the same local market but 
provides for a modest loosening of the previous ban on cross-ownership 
through revisions to the rule's geographic scope, creation of an 
exception for failed/failing entities, and adoption of a viewpoint 
diversity-based waiver standard. The Commission does not believe that 
these modest revisions are likely to result in significant new 
combinations, nor does the record establish that significant demand 
exists for newspaper/broadcast combinations; indeed, the trend is in 
the opposite direction, as cross-owned combinations are being severed. 
Moreover, as discussed in the FNPRM, the Commission finds that the 
record fails to demonstrate that the modifications to the adopted NBCO 
Rule are likely to result in harm to minority and female ownership. 
Additionally, the study that Free Press proposes, which involves 
examining grandfathered combinations separately from waived 
combinations, would be unlikely to provide useful results given the 
small sample size available for each of those categories (Free Press's 
own criticisms of the MMTC Cross-Ownership Study are instructive in 
this regard). Nor is such a study necessary given the existing record 
evidence and the modest revisions adopted.
    114. Ultimately, while the Commission adopts the revised NBCO Rule 
based on its viewpoint diversity goal, and not with the purpose of 
preserving or creating specific amounts of minority and female 
ownership, the Commission finds that this rule nevertheless helps to 
promote opportunities for diversity in broadcast television and radio 
ownership. The rule helps to increase the likelihood of a variety of 
viewpoints and to preserve potential ownership opportunities for new 
voices.

D. Radio/Television Cross-Ownership Rule

1. Introduction
    115. The Radio/Television Cross-Ownership Rule prohibits an entity 
from owning more than two television stations and one radio station 
within the same market, unless the market meets the following size 
criteria. The rule applies only to commercial stations. If at least 10 
independently owned media voices would remain in the market post-
merger, an entity may own up to two television stations and four radio 
stations. If at least 20 independently owned media voices would remain 
in the market post-merger, an entity may own either: (1) Two television 
stations and six radio stations, or (2) one television station and 
seven radio stations. In all instances, entities also must comply with 
the local radio and local television ownership limits. The market is 
determined by looking at the service contours of the relevant stations. 
The rule specifies how to count the number of media voices in a market, 
including television stations, radio stations, newspapers, and cable 
systems.
    116. After consideration of the full record, including the further 
comments received in response to the FNPRM, the Commission concludes 
that the Radio/Television Cross-Ownership Rule continues to be 
necessary given that radio stations and television stations both 
contribute in meaningful ways to promote viewpoint diversity in local 
markets. The Commission's finding is consistent with its decision in 
the 2006 Quadrennial Review Order to retain the rule, which the Third 
Circuit upheld. In the NPRM and FNPRM, the Commission asked whether the 
rule continues to serve the public interest by preserving

[[Page 76239]]

viewpoint diversity in local markets or whether the local radio and 
television ownership rules alone would protect these goals adequately. 
The Commission has concluded that the rule continues to play an 
independent role in serving the public interest separate and apart from 
the local radio and television ownership rules, which are designed 
primarily to promote competition. Accordingly, given the important 
policy interests at stake, the Commission will retain the cross-
ownership rule to ensure that consumers continue to have access to a 
multiplicity of media voices.
2. Discussion
    117. The Commission concludes that the Radio/Television Cross-
Ownership Rule should be retained because it finds that radio stations 
are meaningful contributors to viewpoint diversity within their 
communities. The Commission finds that broadcast radio and television 
stations are valuable mediums for viewpoint expression such that losing 
a distinct voice through additional consolidation could disserve the 
public interest. The Commission recognizes that the current rule 
permits a degree of common ownership, especially in larger markets, but 
that latitude is not a sufficient reason to ignore the potential harms 
to viewpoint diversity that may result from further consolidation. The 
Commission believes that a significant risk of harm exists in 
potentially reducing the number of diverse and antagonistic information 
sources within a market. Therefore, the Commission retains the Radio/
Television Cross-Ownership Rule, with modifications limited to updating 
its obsolete references to analog television service contours, to 
protect viewpoint diversity in local markets. Consistent with 
Commission analysis in the NBCO context, it finds that Radio/Television 
Cross-Ownership Rule is not necessary to promote competition or 
localism in local markets. In the FNPRM, the Commission recognized that 
cross-ownership can create efficiencies that may result in public 
interest benefits, such as localism. However, there is no guarantee 
that owners will use any gains produced by such efficiencies to benefit 
consumers.
    118. Retaining the Rule. While broadcast television stations and 
newspapers may be the primary sources of viewpoint diversity in local 
markets, the current record shows that broadcast radio contributes to 
viewpoint diversity in meaningful ways. Moreover, platforms such as the 
Internet or cable do not contribute significantly to viewpoint 
diversity in local markets and therefore do not meaningfully protect 
against the potential loss of viewpoint diversity that would result 
from increased radio/television cross-ownership. The Commission is 
cognizant of the fact that consumers' reliance on radio for local news 
and information has declined over time, as has the number of all-news 
commercial radio stations. While broadcast radio stations have 
historically been a less significant source of viewpoint diversity than 
newspapers and broadcast television stations, the Commission has still 
been justified in its efforts to regulate cross-ownership. Nonetheless, 
the Commission finds that it would be inconsistent with the goal of 
preserving viewpoint diversity to rescind the Radio/Television Cross-
Ownership Rule and allow greater consolidation to diminish the 
viewpoint diversity available in local markets.
    119. As acknowledged in the FNPRM, the existing rule already 
permits various levels of cross-ownership, based on the size of the 
market. The Commission sought comment in the FNPRM on the extent to 
which the rule constrains consolidation beyond what is permitted under 
the local television and local radio ownership rules and whether those 
rules would be sufficient to protect Commission policy goals absent the 
Radio/Television Cross-Ownership Rule. The Commission tentatively 
concluded that eliminating the rule would have no effect on the number 
of television stations an entity could own in a market and would permit 
the acquisition of only one or two additional radio stations in large 
markets. As the Commission has found previously, however, the existing 
limits strike an appropriate balance between the protection of 
viewpoint diversity and the potential public interest benefits that 
could result from the efficiencies gained by common ownership of radio 
and television stations in a local market. While relying solely on the 
local television and local radio ownership rules, each designed to 
promote competition, might result in only limited additional 
consolidation, there would still be a loss to viewpoint diversity if 
the Radio/Television Cross-Ownership Rule were eliminated. Although the 
Commission continues to find that, in general, newspapers and 
television stations are the main sources that consumers turn to for 
local news and information, and the Commission previously has held that 
radio generally plays a lesser role in contributing to viewpoint 
diversity, it nevertheless concludes that radio contributes 
meaningfully to viewpoint diversity. The record shows that broadcast 
television and radio are both important sources of viewpoint diversity 
in local markets; accordingly, the Commission finds that the public 
interest is best served by retaining the existing rule to protect 
viewpoint diversity in these markets. The FNPRM referenced Prometheus I 
for the proposition that mergers involving media that are not 
significant sources of local news do not pose a serious threat to 
viewpoint diversity. The cited discussion in Prometheus I does not 
contradict the Commission's conclusion that radio's contributions to 
viewpoint diversity are significant enough to warrant the rule's 
retention. Rather, Prometheus I supports the Commission's current view 
that cable and satellite television and the Internet are not 
significant sources of independently produced local news and 
information.
    120. Finally, the Commission asked in the NPRM how the results of 
Media Ownership Studies 8A and 8B, which found little to no correlation 
between radio/television cross-ownership and viewpoint diversity, 
should inform its analysis. As explained in the FNPRM, Media Ownership 
Study 8A analyzes the impact of radio/television cross-ownership on 
viewpoint diversity available in local markets by examining how 
consumers react to content. Media Ownership Study 8B examines the 
impact of media ownership, including radio/television cross-ownership, 
on the amount of programming provided in television news programs in 
three categories: Politics, local programming, and diversity in 
coverage of news topics. The Commission did not receive meaningful 
comment on how the results of these studies should inform its analysis. 
Based on Commission review, these studies provide some evidence that 
common ownership does not always limit viewpoint diversity. The 
Commission already has recognized that some evidence exists that cross-
ownership does not always limit viewpoint diversity. However, the 
Commission also has found that the possibility of a connection between 
ownership and viewpoint is not disproved by evidence that a connection 
is not always present. Indeed, the Commission has noted previously the 
existence of ample evidence that ownership can affect viewpoint. As 
noted in the context of the NBCO Rule, the Commission believes the best 
way to promote viewpoint diversity is by maximizing the number of 
independently owned stations in a market, not by relying on a hope or 
expectation that cross-owned properties will maintain distinct voices. 
The

[[Page 76240]]

Commission finds, however, that the conclusions in these studies are 
too limited to serve as a basis for a rule change. The authors of Media 
Ownership Study 8A caution that their evidence does not provide any 
conclusive basis for policymaking, that they do not make any claims of 
causality, and that their findings are based on limited data. The 
authors of Media Ownership Study 8B, while forming more detailed 
conclusions than in Media Ownership Study 8A, concede that they were 
forced to rely on limited variation in many policy variables, a 
constraint that leads to less precise estimates, making it difficult to 
identify the effects of interest. Ultimately, while the studies do 
present interesting findings based on indirect means of measuring 
viewpoint diversity, the Commission does not find that the results--
standing in contrast to the record evidence demonstrating the 
importance of broadcast radio and television stations to viewpoint 
diversity in local markets--justify elimination of the Radio/Television 
Cross-Ownership Rule.
    121. Contour Modifications. In the NPRM, the Commission sought 
comment on how the Radio/Television Cross-Ownership Rule could be 
modified to account for the fact that the analog broadcast television 
contours upon which the rule relies became obsolete with the transition 
to digital television service. The Commission observed that the digital 
NLSC approximates the Grade B contour but that the Grade A contour does 
not have a digital equivalent. Given that the Commission is retaining 
the rule and did not receive any comments on this issue in the context 
of this rule, the Commission will draw from the relevant discussions 
and comments in the context of other rules to make the modifications 
necessary to update the Radio/Television Cross-Ownership Rule.
    122. The first of these modifications updates the television 
contour used to determine when the rule is triggered. The digital PCC, 
as defined in Sec.  73.625 of the Commission's rules, will replace the 
analog Grade A contour when assessing whether a television station's 
contour encompasses a radio station's community of license. This change 
is consistent with the Commission's replacement of the Grade A contour 
for purposes of the NBCO Rule. Additionally, as stated in the FNPRM, a 
television station's PCC ensures reliable service for the community of 
license, is already defined in the Commission's rules, and can be 
verified easily in the event of a dispute.
    123. The second modification updates the use of a television 
station's Grade B contour for purposes of determining how many media 
voices would remain in a market following a station acquisition. A 
television station's digital NLSC, the digital approximate of the Grade 
B contour, will replace that analog measurement. Therefore, the 
Commission will count as media voices those independently owned and 
operating full-power broadcast television stations within the DMA of 
the television station's (or stations') community (or communities) of 
license that have digital NLSCs that overlap with the digital NLSC(s) 
of the television station(s) at issue. This digital NLSC substitution 
is consistent with the Commission's replacement of the Grade B contour 
in the Local Television Ownership Rule.
    124. Grandfathering. Due to the contour modifications the 
Commission adopts herein, there may be circumstances in which an 
existing combination now will be impermissible under the revised rule. 
Consistent with the Commission's approach in adopting technical 
modifications to the Local Television Ownership Rule and the NBCO Rule, 
the Commission will grandfather any existing combinations, so long as 
they are held by their current owners, to avoid imposing the hardship 
of divestiture on owners previously compliant with the rules. However, 
subsequent purchasers must either comply with the rule in effect at 
that time or obtain a waiver. Thus, stations that are subject to 
license assignment or transfer of control applications will be required 
to comply with the applicable rules, except that grandfathering will 
continue to apply to stations that are subject to pro forma changes in 
ownership and involuntary changes of ownership due to death or legal 
disability of the licensee.
    125. Minority and Female Ownership. While the Commission retains 
the existing Radio/Television Cross-Ownership Rule (with minor contour 
modifications) based on its viewpoint diversity goal, and not with the 
purpose of preserving or creating specific amounts of minority and 
female ownership, the Commission finds that retaining the existing rule 
nevertheless helps to promote opportunities for diversity in broadcast 
television and radio ownership. The rule helps to increase the 
likelihood of a variety of viewpoints and to preserve ownership 
opportunities for new entrants.

E. Dual Network Rule

1. Introduction
    126. Based on the record compiled in the 2010 and 2014 Quadrennial 
Review proceedings, the Commission 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 
(specifically, ABC, CBS, Fox, and NBC), continues to be necessary to 
promote competition and localism and should be retained without 
modification. The rule provides that a television broadcast station may 
affiliate with a person or entity that maintains two or more networks 
of television broadcast stations unless such dual or multiple networks 
are composed of two or more persons or entities that, on February 8, 
1996, were networks as defined in Sec.  73.3613(a)(1) of the 
Commission's regulations. The Third Circuit upheld the Commission's 
decision in the 2006 Quadrennial Review Order to retain the dual 
network rule to promote competition and localism. The Commission finds 
that, in comparison to other broadcast and cable networks, the top-four 
broadcast television networks have a distinctive ability to attract 
larger primetime audiences on a regular basis, which enables the top-
four networks to earn higher rates from those advertisers seeking to 
reach large, national mass audiences consistently. By reducing the 
number of choices available to such advertisers, a combination among 
top-four broadcast networks could substantially lessen competition and 
lead the networks to pay less attention to viewer demand for 
innovative, high-quality programming. The Commission also finds that 
the Dual Network Rule remains necessary to preserve the ability of 
affiliates to influence network decisions in a manner that best serves 
the interests of their local communities, thereby maintaining the 
balance of bargaining power between the top-four networks and their 
affiliates. The Commission concludes that the benefits of retaining the 
rule outweigh any potential burdens.
2. Discussion
    127. Competition. The Commission concludes that the Dual Network 
Rule continues to be necessary in the public interest to foster 
competition in the provision of primetime entertainment programming and 
the sale of national advertising time. The Commission continues to 
believe that at present these four major networks continue to 
constitute a strategic group in the national advertising marketplace 
and

[[Page 76241]]

compete largely among themselves for advertisers that seek to reach 
comparatively large, national audiences. Accordingly, the Commission 
finds that a top-four network merger would substantially lessen 
competition for advertising dollars in the national advertising 
marketplace, 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 
concludes that the top-four broadcast networks continue to serve a 
unique role in the provision of primetime entertainment programming and 
the sale of national advertising time that justifies the retention of 
this rule specific to them.
    128. The Commission finds that the top-four broadcast networks 
continue to attract primetime audiences that are more consistent and 
larger than those achieved by other broadcast or cable networks, as 
measured both by the audience size for individual programs and by the 
audience size for each network as a whole. The primetime entertainment 
programming supplied by the top-four broadcast networks generally is 
designed to appeal to a mass audience, and financing such programming 
on the scale needed for a consistent primetime lineup, in turn, 
requires investment of substantial revenues that only a consistently 
large, mass audience can provide. Thus, the primetime entertainment 
programming that the top-four networks provide to their affiliated 
local stations is intended to attract on a regular basis both mass 
audiences and the advertisers that want to reach them. This is in 
contrast to other broadcast networks, and many cable networks, which 
tend to target more specialized, niche audiences. Due to their targeted 
approaches, programming on these networks attracts smaller audiences 
than the top-four networks.
    129. The Commission notes that in recent years some cable networks 
may have modified their primetime lineups to more closely resemble 
those of broadcast networks and that some online video providers have 
started offering original programming that may also attract sizable 
audiences. Nonetheless, at this time the Commission does not believe 
that cable networks or online providers have assembled a platform of 
programming that is consistently of the same broad appeal and audience 
share, on the whole, as the primetime entertainment programming 
provided by the top-four broadcast networks.
    130. Commission staff review of more recent data shows that, while 
certain cable networks have continued to air a discrete number of 
individual programs or episodes that have become increasingly capable 
of attracting primetime audiences on par with, or even greater than, 
the top-four broadcast networks, no one cable network--let alone 
several--has been able to consistently deliver such audiences beyond 
individual programs or episodes.
    131. This conclusion is also supported by data on the average 
primetime audience size of individual broadcast and cable networks, as 
measured at the network level. Even though an increasing number of 
individual cable primetime entertainment programs or episodes have 
achieved audiences of a similar size to their broadcast network 
counterparts, on average the primetime audience size for each of the 
top-four broadcast networks has remained significantly larger than the 
audience size for even the most popular cable networks. Accordingly, 
the Commission concludes that the primetime entertainment programming 
provided by the top-four broadcast networks continues to be a distinct 
product capable of attracting large audiences of a size that individual 
cable networks cannot consistently replicate, despite the ability of a 
few primetime cable network programs to achieve similarly large 
audiences on an individual basis.
    132. In addition, there continues to be a wide disparity in the 
advertising rates earned by the top-four broadcast networks and the 
advertising rates charged by other broadcast and cable networks, which 
further indicates that the top-four broadcast networks are distinct 
from other networks.
    133. Data on net advertising revenues provide further indication 
that the top-four broadcast networks are particularly appealing to 
advertisers seeking consistent, large national audiences. The 
Commission finds that the data further support its conclusion that the 
top-four broadcast networks comprise a strategic group in the national 
advertising marketplace and compete largely among themselves for 
advertisers that seek to reach large, national mass audiences 
consistently.
    134. Therefore, the Commission retains the existing Dual Network 
Rule without modification to promote competition in the sale of 
national advertising time. The Commission also agrees with comments 
that the rule remains necessary to promote competition in the 
marketplace for primetime programming. Specifically, the Commission 
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 that are willing to pay a premium for such 
audiences. Thus, a combination between two 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 
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 permitted to merge. Accordingly, the Commission 
finds that the Dual Network Rule remains necessary to foster 
competition in the sale of national television advertising time and the 
provision of primetime entertainment programming.
    135. Localism. In addition to furthering its competition goal, the 
Commission concludes that, consistent with past Commission findings, 
the Dual Network Rule also continues to be necessary to foster 
localism. Specifically, the Commission finds that eliminating the rule 
could increase the bargaining power of the top-four broadcast networks 
over their affiliate stations, thereby reducing the ability of the 
affiliates to influence 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 affiliate 
stations with high-quality programming. Because this programming is 
distributed nationwide, broadcast networks have an economic incentive 
to ensure that the programming both appeals to a mass, nationwide 
audience and is widely shown by affiliate stations. By contrast, a 
network's local affiliate stations provide local input on network 
programming decisions and air 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 affiliate stations or the communities they 
serve.
    136. In the context of this complementary network-affiliate 
relationship, the Commission agrees with network affiliate commenters 
that

[[Page 76242]]

a top-four network merger would reduce the ability of a network 
affiliate station to use the availability of other top, independently 
owned networks as a bargaining tool to exert influence on the 
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. 
Elimination of the Dual Network Rule would increase the economic 
leverage of the top-four networks over their affiliate stations, which 
would harm localism by diminishing the ability of the affiliates to 
serve their communities. The Commission has recognized that affiliate 
stations play an important role in assuring that the needs and tastes 
of local viewers are served. The Commission also agrees with network 
affiliate commenters that the Dual Network Rule is an important 
structural principle that helps to maintain equilibrium between the 
top-four networks and their affiliate stations. Accordingly, the 
Commission concludes that the Dual Network Rule remains necessary to 
foster localism. In the NPRM, the Commission also sought comment on 
whether antitrust laws and its public interest standard are sufficient 
to address any harms to competition or localism that might result from 
a top-four network merger. The Commission's concern here is that a 
merger of two or more top-four networks would restrict the 
availability, price, and quality of primetime entertainment programming 
and the bargaining power and influence of network affiliate stations, 
harming consumers and localism. Because these harms to consumers and 
localism are not typically considered in a structural antitrust 
analysis, the Commission does not believe that antitrust enforcement 
would adequately protect against these harms.
    137. Dual Affiliation. As noted previously, some commenters have 
urged the Commission to prohibit a TV station from affiliating with two 
or more top-four broadcast networks in a single market, claiming 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 finds, however, that dual 
affiliation does not implicate the Dual Network Rule and that the rule 
should not be expanded to address dual affiliation practices. The Dual 
Network Rule addresses harms to competition and localism that would 
result from a decrease in the number of networks competing for national 
advertisers and the reduced ability of local affiliate stations to use 
the availability of other top, independently owned networks as a 
bargaining tool to influence network programming decisions. Because 
dual affiliation does not reduce the number of network owners, the 
Commission believes that dual affiliation does not give rise to either 
of these harms. Accordingly, arguments related to dual affiliation are 
not relevant to the Commission's consideration of the Dual Network 
Rule.
    138. Minority and Female Ownership. In this proceeding, the 
Commission sought comment on the impact of its media ownership rules on 
minority and female ownership of broadcast stations. No commenters, 
however, addressed the potential impact of the Dual Network Rule on 
minority and female ownership. Given the distinct nature of the Dual 
Network Rule and its focus on mergers involving the top-four broadcast 
networks, and not ownership limits in local markets, the Commission 
does not believe that this rule would be expected to have any 
meaningful impact on minority and female ownership levels.

IV. Diversity Order Remand

    139. In addition to assessing each of the broadcast ownership rules 
subject to quadrennial review pursuant to Section 202(h), the 
Commission is considering in this proceeding the Third Circuit's remand 
of the Commission's 2008 Diversity Order, in particular the decision in 
that order to adopt a revenue-based eligible entity definition as a 
race-neutral means of facilitating ownership diversity. In Prometheus 
III, the Third Circuit ordered the Commission to act promptly to bring 
the eligible entity definition to a close by making a final 
determination as to whether to adopt a new definition. The court stated 
that it did not intend to prejudge the outcome of this analysis.
    140. The Order discusses below the actions that the Commission 
believes are appropriate in response to the Third Circuit's remand. As 
a threshold matter, the Order discusses the Commission's ongoing 
initiatives to promote diversity of ownership among broadcast licensees 
and to expand opportunities for minorities and women to participate in 
the broadcast industry. The Order also discusses the Commission's 
ongoing improvements to the collection of data and other empirical 
evidence that are relevant to minority and female ownership issues. 
Next, the Order discusses the measures the Commission adopted to 
enhance ownership diversity. Based on the record in this proceeding, 
the Third Circuit's remand instructions, and Commission analysis of the 
preexisting eligible entity standard and the measures to which it 
applied, the Commission concludes that it should reinstate the revenue-
based eligible entity standard and apply the standard to the regulatory 
policies set forth in the Diversity Order. The Commission concludes 
that reinstating the previous revenue-based standard will serve the 
public interest by promoting small business participation in the 
broadcast industry and potential entry by new entrepreneurs. The 
Commission finds that small businesses benefit from flexible licensing 
policies and that easing certain regulations for small business 
applicants and licensees 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 outweigh any 
potential costs of the Commission's decision to do so. Accordingly, the 
Commission concludes that this action will advance the policy 
objectives that traditionally have guided the Commission's analyses of 
broadcast ownership issues.
    141. This action does not, of course, preclude Commission 
consideration of other or additional eligibility standards that have 
been put forward as means to promote minority and women ownership of 
broadcast stations. The Commission has carefully studied the record, 
and the evidence does not establish a basis for race-conscious 
remedies. Thus, the Commission does not believe that such measures 
would withstand review under the equal protection component of the Due 
Process Clause of the Constitution. The Supreme Court held in Adarand 
Constructors, Inc. v. Pe[ntilde]a, 515 U.S. 200 (1995) (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. Finally, the Commission 
evaluates additional measures that commenters have proposed as 
potential means of promoting diversity of ownership, aside from the 
measures that the Third Circuit remanded in Prometheus II, including a 
proposal that the Commission adopt an Overcoming Disadvantage 
Preference (ODP) standard.

A. Commission Diversity Initiatives and Data Collection Efforts

1. Continuing Diversity Initiatives
    142. Diversity Rules and Policies. The Commission strongly believes 
that a

[[Page 76243]]

diverse and robust marketplace of ideas is essential to democracy. As 
the Supreme Court has recognized Metro Broadcasting, Inc. v. FCC, 497 
U.S. 547, 567 (1990), safeguarding the public's right to receive a 
diversity of views and information over the airwaves is an integral 
component of the FCC's mission. The Commission has established numerous 
policies and rules intended to further the proliferation of diverse and 
antagonistic sources. Furthermore, as noted by the Third Circuit in 
Prometheus III, the Commission has a congressional mandate to 
disseminate spectrum licenses among a wide variety of applicants, 
including businesses owned by members of minority groups and women. 
This statutory directive, however, does not mandate race- or gender-
conscious initiatives.
    143. The Commission and Congress previously adopted 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. Following the Adarand 
decision, however, the Commission discontinued those policies and 
programs. Congress repealed the tax certificate policy in 1995 as part 
of its budget approval process. Subsequently, the Commission continued 
its efforts to promote viewpoint diversity through a variety of race- 
and gender-neutral initiatives intended to promote diversity of 
broadcast ownership, and the Commission currently has a number of such 
rules and initiatives in place. The Commission addresses the concerns 
raised by the court in Prometheus II and finds that reinstating the 
revenue-based eligible entity standard and the related regulatory 
policies will serve its broader goal of diversity of ownership, and 
thus viewpoint diversity, by facilitating small business and new 
entrant participation in the broadcast industry. In addition to these 
measures, the Commission also took a number of other actions in the 
Diversity Order to promote viewpoint diversity through diversity of 
ownership. Beyond fostering viewpoint diversity, the Commission has 
taken steps to facilitate the entry of new participants into the 
broadcasting industry to promote innovation in the field also. Because 
the Third Circuit expressly upheld those other actions, they remain in 
place. Those actions include, among others, a ban on discrimination in 
broadcast transactions, a zero tolerance policy for ownership fraud, 
and a requirement that non-discrimination provisions be included in 
advertising sales contracts. The Commission has revised its Form 303-S 
license renewal application form to include this certification 
requirement. The court also expressly upheld several other measures 
adopted by the Commission in the Diversity Order, including the 
commissioning of longitudinal research on minority and women ownership 
trends, enabling the Commission's Office of Communications Business 
Opportunities (OCBO) to coordinate with the Small Business 
Administration to encourage local and regional banks to make loans 
through SBA's guaranteed loan programs, the holding of Access to 
Capital conferences, and the creation of a guidebook on diversity. 
Similarly, the Prometheus II opinion did not question the Commission's 
decision to reinstate the failed station solicitation rule (FSSR), 
which is intended to provide out-of-market buyers, including minorities 
and women, with notice of a sale and an opportunity to bid on stations 
before the seller seeks a waiver of certain ownership rules. The FSSR 
provides that, before selling a station to an in-market buyer, an 
applicant for a failed or failing station waiver of the local 
television ownership rule or the radio/television cross-ownership rule 
must demonstrate that the in-market buyer is the only entity ready, 
willing, and able to operate the station and that sale to a buyer 
outside the market would result in an artificially depressed price. In 
the 2002 Biennial Review Order, the Commission eliminated the FSSR, 
finding that the buyer most likely to deliver public interest benefits 
by using the failed, failing, or unbuilt station will be the owner of 
another station in the same market. The Prometheus I court remanded the 
issue on the basis that the Commission did not consider the potential 
impact on minority owners when it eliminated the rule. In the 2006 
Quadrennial Review Order, the Commission reinstated the FSSR. 
Accordingly, this measure has remained in place and is retained as part 
of this Order on the local television ownership rule. In addition, the 
Commission notes that anecdotal evidence suggests that JSAs may have 
had the effect of enabling large station owners to foreclose entry into 
markets and that the Commission's decision to attribute JSAs has 
actually led to greater ownership diversity.
    144. OCBO Initiatives. Additionally, OCBO promotes diversity by 
serving as the principal advisor to the Chairman and the Commissioners 
on issues, rulemakings, and policies affecting small, women-owned, and 
minority-owned communications businesses. OCBO also hosts workshops and 
conferences designed to help promote small business and minority 
participation in the communications marketplace. OCBO's efforts to 
promote small business participation and ownership diversity--in 
broadcast, telecommunications, and new media--have continued since the 
release of the FNPRM.
    145. Foreign Ownership. The Commission has taken steps to help 
facilitate investment in the broadcast industry, which a number of 
commenters suggest would help to facilitate ownership diversity. 
Recently, the Commission released a Notice of Proposed Rulemaking 
proposing to extend to broadcast licensees the same streamlined 
procedures and rules used to review foreign ownership in common carrier 
licensees, with certain tailored modifications. These proposed changes, 
if adopted, could facilitate investment from new sources of capital at 
a time of growing need for investment in the broadcast sector. Further, 
MMTC and others believe that these proposed changes could potentially 
benefit minority-owned broadcasters and facilitate diverse programming.
    146. Tax Certificate Legislation. Consistent with comments in the 
record, the Commission's most recent Section 257 Report to Congress 
includes a recommendation that Congress pass tax deferral legislation. 
The report states that such a program could permit tax credits for 
sellers of communications properties who offer financing to small 
firms.
    147. AM Revitalization. As discussed in the FNPRM, several of the 
Diversity and Competition Supporter's (DCS) proposals involve 
modifications to the AM broadcast service, and the AM Revitalization 
NPRM (78 FR 69629, Nov. 20, 2013, FCC 13-139, rel. Oct. 29, 2013) 
solicited comment on a number of the technical issues that DCS raised 
in this proceeding. Given the nature of these proposals, they must be 
considered in the broader context of the Commission's efforts to 
revitalize the AM service. Since the release of the FNPRM, the 
Commission has adopted the six proposals set forth in the AM 
Revitalization NPRM. The Commission believes that its actions in the AM 
Revitalization Order (81 FR 2751, Jan. 19, 2016, FCC 15-142, rel. Oct. 
23, 2013) will assist AM broadcasters to better serve the public, 
thereby advancing the Commission's fundamental goals of diversity, 
competition, and localism in broadcast media. These actions address 
some of the technical issues that DCS has raised

[[Page 76244]]

in this proceeding about the AM broadcast service. The Commission notes 
that some commenters regard the AM radio service as a critical point of 
entry for women and minorities seeking to become broadcasters.
    148. Hispanic Television Study. In addition, the Commission 
conducted a study of Hispanic television viewing. The study is the 
Commission's first systematic examination of the Hispanic television 
marketplace, which comprises a growing segment of the nation's 
population. Specifically, the study considers: (1) The impact of 
Hispanic-owned television stations on Hispanic-oriented programming and 
Hispanic viewership in selected local television markets; and (2) the 
extent of Hispanic-oriented programming on U.S. broadcast television. 
The results of the study's regression analysis indicate that, among 
other things, Hispanic viewers favor the major Spanish-language 
networks, especially Univision (which is not Hispanic-owned); watch 
local, Spanish-language news at higher levels than English-language 
news; and watch more telenovelas than other program types.
    149. The Commission recognizes, however, that no one study, 
including the Hispanic Television Study, will be responsive to the many 
and varied concerns raised by commenters. The objective of the study 
was to attempt to examine the nexus, if any, between Hispanic ownership 
of broadcast television stations and Hispanic-oriented program content.
2. Continuing Improvements to Data Collection
    150. Collection of Biennial Ownership Data. The Commission has 
improved its collection and analysis of broadcast ownership 
information. Indeed, its recent efforts have largely addressed the 
concerns expressed by certain commenters. The Commission has been 
engaged in a sustained effort to improve the quality, utility, and 
reliability of broadcast ownership data it collects on FCC Forms 323 
and 323-E.
    151. To improve the quality of its broadcast ownership data, the 
Commission adopted several significant changes to Form 323 in the 323 
Order (74 FR 25163, May 27, 2009, FCC 09-33, rel. May 5, 2009). The 
Commission established a new, machine-readable Form 323, expanded the 
filing requirement to sole proprietors, partnerships of natural 
persons, low power television (LPTV), and Class A television licensees 
and established a uniform filing deadline of November 1 for biennial 
ownership reports on Form 323. Most recently, the Commission in 2016 
adopted a number of additional enhancements to its broadcast ownership 
data collection to further improve the comprehensiveness and 
reliability of the data. In particular, the Commission implemented a 
Restricted Use FCC Registration Number (Restricted Use FRN)--a new 
identifier within the Commission's Registration System (CORES)--that 
will allow for unique identification of individuals listed on broadcast 
ownership reports, without necessitating the disclosure to the 
Commission of individuals' full Social Security Numbers. The Commission 
also eliminated the availability of the interim Special Use FRN for 
individuals reported on broadcast ownership reports, except in certain 
limited circumstances.
    152. In addition, the Commission revised Form 323-E to collect 
race, gender, and ethnicity information for attributable interest 
holders; to require that CORES FRNs or Restricted Use FRNs be used; and 
to conform the biennial filing deadline for NCE station ownership 
reports to the biennial filing deadline for commercial station 
ownership reports. Together, the further enhancements that the 
Commission adopted in the Form 323/CORES Report and Order (81 FR 19432, 
Apr. 4, 2016, FCC 16-1, rel. Jan. 20, 2016) will enable the Commission 
to obtain data providing a more useful, accurate, and thorough picture 
of minority and female broadcast station ownership, while reducing 
filing burdens.
    153. Improving Response Rates and Data Quality. In addition to 
substantially revising Forms 323 and 323-E, the Commission has made 
ongoing outreach efforts to assist filers in an effort to improve 
response rates and to reduce common filing errors. Prior to the 2011, 
2013, and 2015 biennial filing periods for Form 323, the Media Bureau 
released public notices to remind commercial licensees of their 
obligation to file a biennial ownership report. To assist both novice 
and experienced filers, the Bureau has hosted information sessions 
regarding the filing of biennial ownership reports on Form 323, which 
are also available on the Commission's Web site.
    154. Analysis of Ownership Data. To assist parties in their ability 
to access and analyze the ownership data, the Commission has ensured 
that the data submitted on Form 323 are incorporated into a relational 
database, the most common database format, which is standard for large, 
complex, interrelated datasets. Complete raw data from the Commission's 
broadcast ownership filings, both current and historical, are available 
for download from the Commission's Web site, and the data are updated 
on a daily basis to account for new and amended filings. Researchers 
and other parties may download the data files from the Commission's Web 
site at any time and study, search, and manipulate the data in a wide 
variety of ways. The Commission has made explanatory documents publicly 
available and easy to find. Also, in response to requests from outside 
parties, the Commission now provides spreadsheets that contain 
additional ownership data, such as call signs, broadcast location, and 
market information. These spreadsheets are released with the 323 
Reports to help present a broader picture of the biennial Form 323 
data.
    155. In addition, the Media Bureau hosted an all-day public 
workshop in September 2015 to assist individuals and organizations that 
wish to use and study the large amount of broadcast ownership data that 
is available to the public on the Commission's Web site. The workshop 
addressed a number of topics concerning access to, and use of, the 
Commission's commercial broadcast ownership data, including relevant 
data that the Commission collects, how members of the public can access 
those data, and mechanisms for querying, studying, and visualizing the 
data, including in combination with data available from non-FCC 
sources. The workshop, a video of which is available online, provides 
researchers with the tools and understanding to electronically search, 
aggregate, and cross reference the data to prepare their own analysis.

B. Remand Review of the Revenue-Based Eligible Entity Standard

    156. The Commission concludes that its prior revenue-based eligible 
entity definition should be reinstated and applied to the regulatory 
policies set forth in the Diversity Order. The Commission finds that 
reinstating the eligible entity definition and the measures to which it 
applied will serve the public interest by promoting small business 
participation in the broadcast industry and potential entry by new 
entrepreneurs. Accordingly, the Commission reinstates its previous 
revenue-based eligible entity definition and the measures adopted in 
the Diversity Order that were vacated and remanded by the Third Circuit 
in Prometheus II.
    157. The Commission concludes that the revenue-based eligible 
entity standard is a reasonable and effective means of promoting 
broadcast station ownership by small businesses and potential new 
entrants. The Commission

[[Page 76245]]

continues to believe that small business applicants and licensees often 
have financial and operational needs that are distinct from those of 
larger broadcasters, and that they require greater flexibility with 
regard to licensing, construction, auctions, and transactions. By 
easing certain regulations for small business applicants and licensees, 
the Commission believes it will increase station ownership 
opportunities for small businesses and new entrants, to the benefit of 
the public interest.
    158. Moreover, the Commission concludes that its traditional policy 
objectives will be served by enhancing opportunities for small business 
participation in the broadcast industry via the eligible entity 
standard. The Commission continue to believe that enabling more small 
businesses to participate in the broadcast industry will encourage 
innovation and promote competition and viewpoint diversity. As the 
Commission has noted previously in the 2002 Biennial Review Order, 
greater small business participation in communications markets will 
expand the pool of potential competitors and should bring new 
competitive strategies and approaches by broadcast station owners in 
ways that benefit consumers in those markets. The Commission continues 
to believe that this is true. Furthermore, increasing opportunities for 
small businesses to participate in the broadcast industry will foster 
viewpoint diversity by facilitating the dissemination of broadcast 
licenses to a wider variety of applicants than would otherwise be the 
case. Competition and viewpoint diversity are two primary policy 
objectives that have traditionally guided the Commission's analysis of 
broadcast ownership issues.
    159. The record supports these conclusions. Commenters, including 
AWM and NAB, agree that re-adopting the revenue-based eligible entity 
standard is an appropriate means of enhancing ownership opportunities 
for small businesses and new entrants. Although public interest 
commenters criticize the Commission's proposal to reinstate the 
revenue-based standard, they also acknowledge the data cited in the 
FNPRM to support the Commission's conclusion that the standard promotes 
viewpoint diversity. Public interest commenters that criticize the 
revenue-based eligible entity standard do so based on their view that 
the standard is not an effective means of increasing ownership 
specifically by women and minorities. However, this has no bearing on 
the Commission's conclusion that the standard will help promote small 
business and new entrant participation in the broadcast industry.
    160. The Native Public Media and the National Congress of American 
Indians (NPM/NCAI) argue that, pending further action on a race- and 
gender-conscious eligible entity standard, the Commission can take 
another significant step towards overcoming the underrepresentation of 
Native Americans in broadcast station ownership by expanding the 
definition of eligible entity to include Native Nations. The Commission 
does not believe expanding its revenue-based eligible entity definition 
to include Tribes and Tribal Applicants to enable more small businesses 
to participate in the broadcast industry is necessary. Moreover, as 
NPM/NCAI point out, the Commission has adopted measures in a separate 
proceeding that are intended to expand broadcast opportunities for 
Tribal Nations and Tribal entities. To the extent that their proposal 
is intended to increase broadcast service to Tribal lands, the 
Commission believes it is outside the scope of this quadrennial review 
proceeding. The Commission notes that, in a proceeding concerning rural 
radio, the Commission adopted a Tribal Radio Priority to expand the 
number of radio stations owned or majority controlled by federally 
recognized American Indian Tribes and Alaska Native Villages, or Tribal 
consortia, broadcasting to Tribal lands.
    161. The Commission's decision to reinstate the revenue-based 
eligible entity standard is also supported by the Commission's own 
records, which indicate that a significant number of broadcast 
licensees and permittees availed themselves of policies based on the 
revenue-based eligible entity standard between the implementation of 
that standard and its suspension following Prometheus II. One of those 
policies was to allow an eligible entity that acquired an expiring 
broadcast construction permit to obtain additional time to build out 
its facilities in certain circumstances.
    162. The data clearly suggest that providing additional time to 
construct broadcast facilities has facilitated market entry by small 
broadcasters. Further, the Commission notes that the data reflect the 
use of the prior eligible entity standard in a limited context and do 
not reflect the total number of applicants and permittees that 
benefited from all the various broadcast policies that relied on the 
revenue-based eligible entity standard. Even so, this information 
supports the Commission's conclusion that the revenue-based eligible 
entity standard has been used successfully by a significant number of 
small firms and has not only aided their entry, but also contributed to 
the sustained presence of small firms in broadcasting in furtherance of 
the Commission's public interest goals.
    163. In addition to reinstating the revenue-based eligible entity 
standard, the Commission believes applying the standard to the full 
range of construction, licensing, transaction, and auction measures to 
which it previously applied is in the public interest. Commenters that 
have argued against reinstatement have done so based on whether the 
measures will specifically increase minority and female ownership of 
broadcast stations, which has no bearing on whether the measures will 
promote small business participation in the broadcast industry. 
Accordingly, the Commission hereby re-adopts each measure relying on 
this definition that was remanded in Prometheus II. Specifically, the 
Commission reinstates the following measures: (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) Assignment or Transfer 
of Grandfathered Radio Station Combinations. In reinstating this 
measure, the Commission emphasizes that this exception to its strict 
broadcast station construction policy is limited to one 18-month 
extension based on one assignment to an eligible entity. 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 also 
reinstates this application of the modified EDP standard. Moreover, to 
ensure realization of the Commission's policy goals, in reviewing the 
sale of a permit to an eligible entity, the Commission will assess the 
bona fides of both the arms-length structure of the transaction and the 
assignee's status as an eligible entity as proposed in the FNPRM. In 
addition, the Commission clarifies that this exception to its broadcast 
station construction policy applies both to original construction 
permits for the construction of new stations and to construction 
permits for major modifications of authorized broadcast facilities. The 
Commission also lifts any prior suspension of Commission rules 
implementing these measures and applying the eligible entity standard,

[[Page 76246]]

including 47 CFR 73.3555, Note 2(i)(2); 73.3598(a); and 73.5008(c)(2). 
As of the effective date of the reinstated Eligible Entity measures, 
the suspension will no longer be in effect.
    164. Consistent with the Commission's pre-existing eligible entity 
definition, the Commission defines 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. As the Commission previously held, going forward it will 
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. In the FNPRM, the Commission sought comment 
on whether to use different eligible entity definitions for commercial 
and noncommercial entities, and no commenters have urged the Commission 
to do so. For all SBA programs, a radio or television station with no 
more than $38.5 million in annual revenue currently is considered a 
small business. The definition of small business for the radio industry 
is listed in North American Industry Classification System (NAICS) code 
515112, and the definition of a small business for the television 
industry is listed in NAICS code 515120. To determine qualification as 
a small business, the SBA considers the revenues of domestic and 
foreign affiliates, including the parent corporation and affiliates of 
the parent corporation, not just the revenues of individual broadcast 
stations. The Commission will also require an eligible entity to 
satisfy one of several control tests to ensure that ultimate control 
rests in an entity that satisfies the revenue criteria. Specifically, 
the eligible entity must 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. When the Commission, in the 2002 Biennial 
Review Order, ruled that licensees would be allowed to transfer 
grandfathered station combinations to eligible entities, it required 
that control of the eligible entity purchasing the grandfathered 
combination must meet one of several control tests to meet the 
Commission's public interest objectives and ensure that the benefits of 
the exception flowed as intended. The Commission readopts these 
requirements for the same reasons.

C. Remand Review of a Race- or Gender-Conscious Eligible Entity 
Standard

    165. The Commission's adoption of a revenue-based definition of 
eligible entity to promote small business participation in the 
broadcast industry does not, of course, preclude the Commission from 
considering whether to adopt an additional standard designed 
specifically to promote minority and female ownership of broadcast 
stations.
    166. However, the Commission declines to adopt an SDB eligibility 
standard or other race- or gender-conscious eligible entity standard. 
While the Commission finds that a reviewing court could find the 
Commission's interest in promoting a diversity of viewpoints over 
broadcast media compelling, the Commission does not believe that the 
record evidence sufficiently demonstrates that adoption of race-
conscious measures would be narrowly tailored to further that interest. 
In particular, the Commission finds that the evidence in the record, 
including the numerous studies that have been conducted or submitted, 
does not demonstrate a connection between minority ownership and 
viewpoint diversity that is direct and substantial enough to satisfy 
strict scrutiny. The two recent studies that directly address the 
impact of minority ownership on viewpoint diversity, Media Ownership 
Studies 8A and 8B, find almost no statistically significant 
relationship between such ownership and their measure of viewpoint 
diversity. Other studies in the record examine the relationship between 
minority ownership and other aspects of the Commission's diversity 
goal, such as programming 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, too, 
demonstrate at most a limited relationship between minority ownership 
and other aspects of the Commission's diversity goal.
    167. In addition, the Commission does not believe that the record 
evidence establishes a sufficiently strong relationship between 
diversity of viewpoint and female ownership of broadcast stations that 
would satisfy the constitutional standards for gender-based 
classifications. The Commission finds that the evidence in the record 
does not reveal 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. Because the studies in the record do 
not indicate that increased female ownership will increase viewpoint 
diversity, the Commission believes that they do not provide a rationale 
for adopting gender-based diversity measures.
    168. Moreover, the Commission does not believe that the record 
evidence is sufficient to establish a compelling interest in remedying 
past discrimination. The Commission finds that no evidence exists in 
the 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, and the Commission 
lacks a plausible way to determine the number of qualified firms owned 
by minorities and women. The Commission believes that it cannot 
demonstrate a compelling interest in remedying discrimination in the 
Commission's licensing process in the absence of such evidence. Because 
the only statistical evidence in the record pertains to discriminatory 
access to capital and the rest is anecdotal evidence that is of more 
limited value for purposes of satisfying heightened scrutiny, the 
Commission finds that the record evidence of past discrimination in the 
broadcast industry--both by the Commission itself and by private 
parties with the Commission acting as a passive participant--is not 
nearly as substantial as that accepted by courts in other contexts as 
satisfying strict scrutiny. Based on its evaluation of the record 
evidence, the Commission also concludes that it is not of sufficient 
weight to support gender-based remedial action. Accordingly, the 
Commission cannot adopt rules that explicitly rely on race or gender. 
The FNPRM also contains a detailed and thorough analysis of these 
issues, and it reflects the Commission's extensive efforts to evaluate 
the current constitutional considerations and available evidence 
regarding the adoption of race- and gender-conscious measures.
1. Enhancing Viewpoint Diversity
    169. Race-Based Diversity Measures. In the FNPRM, the Commission 
expressed its belief that the Commission's interest in promoting 
viewpoint diversity could be deemed

[[Page 76247]]

sufficiently compelling to survive the first prong of the strict 
scrutiny test, and the Commission sought comment on this analysis. In 
response to the FNPRM, many commenters agree that the Commission's 
interest in promoting viewpoint diversity could be deemed sufficiently 
compelling under strict scrutiny, and the Commission affirms this 
belief. 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. In Metro Broadcasting, the 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 its determination that 
broadcast diversity is, at the very least, an important governmental 
objective, the Court stated that safeguarding 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. In Adarand, the Court overruled the application 
of intermediate scrutiny in Metro Broadcasting but did not disturb 
other aspects of that decision, including the recognition of an 
important governmental interest in broadcast diversity. However, the 
D.C. Circuit held in Lutheran Church-Missouri Synod v. FCC, 141 F.3d 
344, 354-55 (D.C. Cir. 1998) that broadcast diversity does not rise to 
the level of a compelling governmental interest. Also, in 2007, the 
Supreme Court in Parents Involved in Community Schools v. Seattle 
School District No. 1, 551 U.S. 701 (2007), declined to recognize a 
compelling interest in diversity outside of the context of higher 
education. In the FNPRM, the Commission tentatively found that the case 
law nevertheless supports its position that viewpoint diversity would 
be found to be compelling--even though the law is unsettled. Regardless 
of whether viewpoint diversity is a compelling interest, however, the 
Commission finds that it still cannot adopt an SDB eligibility standard 
or other race- or gender-conscious eligibility standard.
    170. Assuming a reviewing court could be convinced that diversity 
of viewpoint is a compelling governmental interest, the Commission 
finds that the record in this proceeding fails to satisfy the second 
prong of the strict scrutiny test, i.e., that a sufficient nexus exists 
between minority ownership of broadcast stations and viewpoint 
diversity. As explained in the FNPRM, the two recent studies in the 
record that directly address the impact of minority ownership on 
viewpoint diversity find almost no statistically significant 
relationship between such ownership and their measure of viewpoint 
diversity. Also, consistent with the FNPRM, the Commission finds that 
the body of evidence contained in the other 2010 Media Ownership 
Studies and the studies that commenters submitted in this proceeding 
largely concerns program or format diversity rather than viewpoint 
diversity, which the Commission believes is the only kind of diversity 
likely to be accepted as a compelling governmental interest under 
strict scrutiny. As stated in the FNPRM, the Supreme Court's prior 
recognition of broadcast diversity as an interest of the highest order 
seems to pertain to viewpoint diversity. Moreover, as explained in the 
FNPRM, many of those studies support only limited conclusions. Although 
the Commission invited commenters to provide additional evidence and 
other information that might be relevant to its analysis, some 
commenters merely dispute the assessment of known evidence, rather than 
submit additional information that the Commission did not consider in 
the FNPRM. However, these commenters generally seem to accept the 
Commission's view that the record evidence does not provide a 
sufficient basis for the Commission to adopt race-conscious measures 
that will withstand strict scrutiny. The Commission rejects claims 
that, in tentatively finding that the evidence in the record does not 
demonstrate the requisite connection between minority ownership and 
viewpoint diversity, the Commission relied on dissenting opinions to 
establish an artificial and unofficial standard for narrow tailoring or 
evaluated the record evidence inconsistently to minimize evidence of a 
connection between minority ownership and viewpoint diversity. The 
Commission disagrees with assertions that it is premature for the 
Commission to reach any conclusions on narrow tailoring. The Third 
Circuit directed the Commission to consider the SDB eligibility 
standard and other eligible entity definitions proposed in the Third 
Diversity FNPRM (73 FR 28400, May 16, 2008, FCC 07-217, rel. March 5, 
2008), and the Commission is complying with the court's instruction 
based on an extensive analysis of applicable judicial precedent and 
available empirical evidence. In addition to criticizing the FNPRM's 
assessment of the record evidence and the applicable evidentiary 
standard, public interest commenters also criticize the FNPRM for 
asking whether a theory of viewpoint diversity or remediation is 
viable, when in fact the Commission would likely need to pursue several 
legal theories jointly to succeed. As the Commission explained in the 
FNPRM and continues to believe, it does not believe that any interest 
other than viewpoint diversity or remediation of discrimination (if 
established by the record) would be found to be a compelling 
governmental interest sufficient to satisfy the first prong of the 
strict scrutiny test. And the Commission knows of no case law, nor do 
the commenters cite any, which analyzes justifications for race-
conscious action on a cumulative basis. Consequently, the Commission 
rejects this suggestion from the commenters.
    171. The Commission's narrow tailoring analysis included a 
discussion of relevant judicial precedent, and its tentative findings 
were based on a careful reading of that precedent, taken as a whole, 
and its assessment of the body of evidence in this proceeding. The 
Commission finds no reason in the present record to depart from that 
analysis. Other commenters suggest additional topics that they believe 
the Commission should study but do not propose specific, executable 
studies or claim that the additional inquiries they propose would 
establish the requisite nexus between minority ownership and viewpoint 
diversity.
    172. Moreover, while the Commission finds that the Hispanic 
Television Study is an important contribution to the study of the 
impact of ownership on programming and viewership, the Commission does 
not believe that the study's findings materially impact the 
Commission's constitutional analysis. The Commission does not believe 
that the study changes the Commission's constitutional analysis, though 
it has helped inform the study of these issues. Indeed, commenters 
generally agree with the Commission's assessment that the study has not 
provided a basis for the Commission to adopt race-conscious measures.
    173. Some commenters disagree with the Commission's analysis of 
case law involving judicial review of race-based classifications, but 
they do not cite any precedent that the Commission did not consider in 
the FNPRM. As explained in the FNPRM, the Commission believes that 
empirical evidence of a stronger nexus between minority ownership and 
viewpoint diversity than was demonstrated in Metro Broadcasting would 
be required in order for a race-

[[Page 76248]]

conscious rule to withstand strict scrutiny. The Commission is not 
persuaded by assertions to the contrary, which it believes are 
substantially the same as those it considered and rejected in the 
FNPRM, and commenters do not cite any additional judicial precedent to 
support their argument here. And while some commenters disagree with 
the sufficiency of the Commission's efforts to study the connection 
between minority ownership and viewpoint diversity, the evidence in the 
record, the Commission's assessment of the evidence, and the applicable 
evidentiary standard in this proceeding, they generally seem to accept 
the view that the evidence is not sufficient to enable the Commission 
to adopt race-based measures. Other commenters also seem to concede, 
implicitly or explicitly, that the evidence in the present record is 
insufficient to support race-conscious action by the Commission.
    174. In addition, the Commission continues to believe that 
implementing a program for awarding or affording preferences related to 
broadcast licenses based on the individualized review that the Supreme 
Court has required under strict scrutiny would pose a number of 
significant administrative and practical challenges for the Commission 
and would not be feasible. As explained in the FNPRM, 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 impacts on third parties, and temporal limits. In 
particular, the Court found 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 to evaluate 
individual applicants for admission to an educational institution. The 
Commission finds that the manner in which it allocates broadcast 
licenses differs from university admissions in many important respects. 
The process of acquiring a new commercial broadcast license is dictated 
by statute and involves a highly structured, open, and competitive 
bidding process. Individuals or entities must enter bids for broadcast 
allotments--a market-based regime--and must offer the highest monetary 
value for the allotment to acquire a construction permit. As explained 
in the FNPRM, the Commission believes that this framework does not lend 
itself to the type of case-by-case consideration envisioned by the 
Court. Although the FNPRM sought comment on potential ways in which an 
individualized review process could be incorporated feasibly, 
effectively, and efficiently into any race-conscious measures adopted 
by the Commission, no commenter has offered such a proposal, nor has 
the Commission been able to develop one. Therefore, the Commission 
concludes that the record reveals no feasible means of carrying out the 
type of individualized consideration that the Supreme Court has 
required under strict scrutiny. The Commission disagrees with the 
assertion that the FNPRM confines its consideration of the proposed ODP 
standard to the Commission's viewpoint diversity interest without 
considering whether the proposed ODP standard could be applied as a 
remedial measure. The administrative, practical, and First Amendment 
issues that the Commission has identified would need to be resolved 
before the implementation of an ODP standard regardless of whether that 
standard is used to further the Commission's interest in viewpoint 
diversity or remedy past or present discrimination. Contrary to the 
assertions of some public interest commenters, the FNPRM did not 
tentatively conclude that the Commission must emulate university 
admissions to pursue viewpoint diversity. Rather, the FNPRM noted that 
the Supreme Court relied in part on the concept of critical mass to 
find the requisite nexus between student body diversity and race-based 
admissions and that this concept is not easily transferable to 
broadcasting.
    175. ODP Proposal. As the Commission noted in the FNPRM, whether 
the proposed ODP standard would be subject to heightened constitutional 
scrutiny is not entirely clear. The Commission disagrees with MMTC's 
assertion that the FNPRM mischaracterized the ODP standard as a race-
conscious measure that would be subject to heightened scrutiny. The 
FNPRM did not describe the proposed ODP standard as a race-conscious 
measure. Rather, the FNPRM noted that whether the proposed ODP standard 
would be subject to heightened constitutional scrutiny is not entirely 
clear. The Commission explained that an ODP standard that does not 
facially include race-conscious criteria, yet is constructed for the 
purpose of promoting minority ownership, might be subject to heightened 
scrutiny. Even assuming that it is not subject to heightened review 
under the equal protection component of the Due Process Clause, the 
Commission declines to adopt the proposed ODP standard in the absence 
of a feasible means of implementing such a standard without running 
afoul of First Amendment values. Several commenters express general 
support for the proposed ODP standard but none have proposed a method 
for the Commission to provide the type of individualized consideration 
that an ODP standard would require without being unduly resource-
intensive and inconsistent with First Amendment values. Commenters also 
have not addressed other specific issues that the FNPRM indicated would 
need to be resolved before implementation of the ODP proposal. In 
particular, no commenter has proposed a means for the Commission to 
validate claims of eligibility for ODP status. Based on available 
information about the proposal, the Commission believes that validating 
a claim of eligibility for ODP status would require a finding that the 
applicant has faced and overcome a substantial disadvantage--a 
determination that inherently would be prone to some degree of 
subjectivity--as well as a finding that the applicant would likely 
contribute to viewpoint diversity by virtue of him or her facing and 
overcoming a substantial disadvantage. The Commission does not believe 
that a means exists for the Commission to administer such a program in 
a manner that is sufficiently objective and consistent, and that would 
ensure that the Commission does not evaluate applicants based on a 
subjective determination as to whether a particular applicant would be 
likely to contribute to viewpoint diversity. In addition, no commenter 
has offered input on (1) what social or economic disadvantages should 
be cognizable under an ODP standard, (2) whether applicants should bear 
the burden of proving specifically that they would contribute to 
diversity as a result of having overcome certain disadvantages, (3) 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 
(4) how the Commission could evaluate the effectiveness of the use of 
an ODP standard. In its recommendation concerning a preference for 
overcoming disadvantage, the Diversity Advisory Committee identified a 
non-exhaustive list of disadvantages which, if substantial, would 
likely qualify an individual for a preference. No

[[Page 76249]]

commenters in this proceeding have offered additional input on the 
social or economic disadvantages that should be cognizable under an ODP 
standard. Accordingly, the Commission is not adopting the proposed ODP 
standard.
    176. Gender-Based Diversity Measures. Gender-based measures are 
subject to a less restrictive Constitutional standard--intermediate 
scrutiny--than race-based measures. Under intermediate scrutiny, a 
gender-based classification must be substantially related to the 
achievement of an important objective. While Metro Broadcasting 
established that viewpoint diversity is at least an important 
government objective, Lamprecht v. FCC, 958 F.2d 382 (D.C. Cir. 1992), 
found that available evidence failed to demonstrate a statistically 
meaningful link between ownership of broadcast stations by women and 
programming of any kind. As a result, the D.C. Circuit, in Lamprecht, 
overturned the Commission's former gender preference policy. To 
overcome Lamprecht, the Commission must be able to establish the 
requisite connection between viewpoint diversity and ownership by 
women; however, in the FNPRM, the Commission stated that, based on its 
evaluation of relevant studies, the Commission did not believe there 
was evidence to demonstrate 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.
    177. In response to the FNPRM, commenters did not provide any 
additional evidence, studies, proposed study designs, or other 
information that is relevant to the Commission's analysis of this 
issue. The Commission has similarly been unable to identify such 
evidence or devise study designs that are likely to provide such 
evidence. In its efforts to create specific study designs (which 
includes reaching out to experts in the field), the Commission has 
identified a number of issues that significantly impede study of the 
connection between ownership and viewpoint diversity. These issues 
include the lack of a reliable measure of viewpoint; small sample size; 
accounting for potential variations from differences in the way the 
data were collected rather than actual changes in the marketplace when 
combining old and new sets; and the lack of relevant data sets from 
before and after policy changes or marketplace developments (if any can 
be identified) that would help demonstrate causation regarding the 
impact of ownership on viewpoint diversity. While commenters still 
express general support for gender-based initiatives, such support is 
not sufficient absent evidence to establish a connection between 
viewpoint diversity and ownership by women. And 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 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. As explained in the FNPRM, 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. The 
Commission does not believe that this study demonstrates 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. 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. 
Therefore, the Commission concludes that there is insufficient evidence 
to satisfy the constitutional standards that apply to gender-based 
measures.
2. Remedying Past Discrimination
    178. Similarly, the Commission concludes that, although it has 
studied extensively the question, no strong basis exists in evidence of 
discrimination in the award of broadcast licenses or other 
discrimination in the broadcast industry in which the government has 
actively or passively participated that would satisfy the 
constitutional standards that apply to race- or gender-based remedial 
measures. Less evidence is required for gender-based measures than for 
race-based measures, although an exceedingly persuasive justification 
is still necessary. The question of whether governmental participation 
is required is unsettled. Some courts have held that private 
discrimination need not be linked to governmental action under 
intermediate scrutiny. As discussed in this section, the Commission 
also concludes that the record evidence is not of sufficient weight to 
support gender-based remedial action. In the FNPRM, the Commission 
noted that it never has asserted a remedial interest in race-or gender-
based broadcast regulation. The Commission explained that the evidence 
of discrimination offered in the studies that commenters cited, while 
informative, was not nearly as substantial as that accepted by courts 
in other contexts. In response, commenters are generally critical of 
the Commission's analysis but most do not cite any additional relevant 
precedent or data that the Commission did not discuss in the FNPRM. 
Although commenters identify additional information that they believe 
is relevant to an analysis of the Commission's interest in remedying 
past discrimination, they do not assert that such information is 
sufficient to satisfy the relevant constitutional requirements. There 
is no inconsistency, as some comments claim, between the Commission's 
conclusion in this proceeding that it lack the strong basis in evidence 
of racial discrimination in the broadcast industry in which the 
Commission has been complicit that is necessary to adopt race-conscious 
remedial action and the Commission's adoption of bans on discrimination 
in advertising contracts and in private transactions. The latter 
actions are not race-conscious measures and therefore did not require 
an evidentiary foundation sufficient to withstand strict scrutiny. They 
were simply measures designed to combat private discrimination in the 
marketplace. The Commission has evaluated the evidence in the record 
and finds that it is not of sufficient weight to support race- or 
gender-based remedial measures.
    179. The Commission disagrees with the assertion that it raised the 
bar in its remedial interest tentative conclusions and that it 
incorrectly rejected or ignored evidence of discrimination in the 
broadcast industry. Rather than rejecting evidence because it does not 
prove that the Commission itself has engaged in discrimination, the 
FNPRM tentatively found that existing evidence of past discrimination 
is not nearly as substantial in this case as the evidence that courts 
have required in other contexts. In particular, the Commission noted 
the absence of evidence 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. 
The Commission asked commenters to address whether evidence of a

[[Page 76250]]

statistically significant disparity between the number of minority- and 
women-owned broadcast stations and the number of qualified minority- 
and women-owned firms is ascertainable. In the FNPRM, the Commission 
also observed that the only statistical evidence of discrimination in 
the record at the time pertained to discriminatory access to capital 
and that the rest of the evidence was anecdotal and therefore of more 
limited value because of the heightened evidentiary requirements of 
strict scrutiny. As the Commission explained there, the Capital Markets 
Study found statistical evidence of discrimination in U.S. capital 
markets, but the study indicates that its results are not fully 
conclusive. Also, its focus on wireless auctions and other non-
broadcast industry information makes it less probative of 
discrimination in the broadcast licensing process. In Richmond v. J.A. 
Croson Co., 488 U.S. 469 (1989), the Supreme Court found that the 
factual predicate for race-based action was deficient where, among 
other things, the government failed to make findings specific to the 
market to be addressed by the remedy. Because broadcasting is the 
industry that would be addressed if the Commission were to adopt 
remedial measures here, and neither the 2000 Capital Markets Study nor 
the Auction Utilization Study contains conclusive findings that reveal 
a governmental role in discrimination in the broadcast industry, the 
Commission does not believe these studies establish a factual predicate 
for race-based action that the Court would deem sufficient. Even 
considering the Capital Markets Study together with available anecdotal 
evidence in other studies, the Commission finds that the evidence of 
past discrimination in the Commission's broadcast licensing process is 
not nearly as substantial as that accepted by courts in other contexts. 
In Adarand v. Slater, 228 F.3d 1147 (10th Cir. 2000), a leading public 
contracting case in which the Tenth Circuit found the requisite strong 
basis in evidence, 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. In reaching that determination, the court relied on 
evidence of private discrimination. The evidence was similar in nature 
to the evidence in this case--denial of access to capital, as well as 
the existence of exclusionary old boy networks and union discrimination 
that prevented access to the skills and experience needed to form a 
business--but it was substantially 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.
    180. The Commission also disagrees with suggestions that it is 
legally permissible for the Commission to infer past discrimination 
based on the disparity between the number of minority- and women-owned 
broadcast stations and the number of minorities and women in the 
general population. As explained in the FNPRM, the Supreme Court has 
held that an inference of discrimination may arise when 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 arises. Although public 
interest commenters suggest that no special qualifications are 
necessary to own a broadcast station, the Commission has long required 
that broadcast applicants meet certain character, financial, and other 
qualifications to operate a station. And, of course, not all members of 
the population are interested in operating a broadcast station. 
Accordingly, the Commission does not believe that evidence of a 
significant statistical disparity between the number of minority- and 
women-owned broadcast stations and the number of minorities and women 
in the general population would be sufficient by itself to overcome the 
constitutional hurdle that has been established for race- and gender-
based remedial measures. Instead, the Commission continues to believe 
that, absent evidence showing a statistically significant disparity 
between the number of minority- and women-owned broadcast stations and 
the number of qualified minority- and women-owned firms, the Commission 
cannot demonstrate a compelling interest in remedying discrimination in 
the Commission's broadcast licensing process.
    181. Some commenters assert that the Commission is required to fund 
research to identify whether such disparities exist. According to these 
commenters, the Commission should refrain from making any tentative 
conclusions until its work is complete, including examining its own 
records and history to evaluate evidence to show that remedying past 
racial (or gender) discrimination is a compelling (or substantial) 
governmental interest. Based on its review of existing disparity 
studies, the Commission does not believe that is true. In particular, 
commenters identify no method of studying this question that would 
produce meaningful results in the broadcast context. For existing 
studies, often employed in government contracting cases, there is 
generally a ready database of minority or female contractors that are 
willing and able to perform a particular service--or an established 
methodology to identify such contractors--that can be compared to the 
number of such contractors that are actually engaged by the government. 
Indeed, in most industries one need not be a government contractor to 
operate a business that provides the services that the government seeks 
(e.g., construction or advertising). This provides an ample pool of 
available contractors for the researchers to identify, both nationally 
and locally, depending on the nature of the program. And Supreme Court 
precedent instructs that the appropriate comparison is to the number of 
qualified firms that would be interested in being engaged by the 
government. However, there are no broadcast station owners other than 
those already licensed to be broadcasters, and the record does not 
reveal any method for identifying otherwise qualified firms that are 
not already broadcast licensees. In these circumstances, no pool of 
qualified non-licensee minority- or women-owned broadcast firms exists 
to compare against existing minority- or women-owned broadcast 
stations. Without such evidence or a methodology for ascertaining such 
evidence, the Commission finds that a disparity study similar to those 
relied on by other agencies for government contracting purposes is not 
feasible in the broadcast context. Given the Commission's determination 
of the infeasibility of this research, the lack of any support in the 
record indicating that it would be feasible, and the very substantial 
funds and time it would take to conduct it--likely millions of dollars 
and several years--the Commission does not believe that the Commission 
undertaking a disparity study is in the public interest.
3. Other Issues
    182. Several commenters state that the FNPRM falls short of what 
these commenters assert to be the Third Circuit's directive that the 
Commission gather relevant ownership data and develop policies to 
address the paucity of female and minority owners among broadcast 
licensees. As stated previously, the Commission disagrees with 
arguments that the Prometheus II

[[Page 76251]]

decision requires that it adopt a race- or gender-conscious eligible 
entity standard in this quadrennial review proceeding or that the 
Commission continue this proceeding until the it has completed whatever 
studies or analyses that will enable it to take race- or gender-
conscious action in the future consistent with current standards of 
constitutional law. By evaluating the feasibility of implementing a 
race- or gender-conscious eligibility standard based on an extensive 
analysis of the available evidence, the Commission has followed the 
Third Circuit's direction in Prometheus II and Prometheus III. The 
Commission notes that over the course of this proceeding, it has 
performed or commissioned a dozen studies. The FNPRM provides a 
detailed analysis of the relevant studies that were available at the 
time, and the Commission discusses herein more recent evidence and 
pertinent information that commenters submitted in response to the 
FNPRM. The Third Circuit court in Prometheus III stated that it did not 
intend to prejudge the outcome of the Commission's analysis of the 
evidence or the feasibility of implementing a race- or gender-conscious 
standard that would be consistent both with applicable legal standards 
and the Commission's practices and procedures.
    183. Moreover, the Commission does not believe that any relevant 
statutory directive requires the adoption of race- or gender-conscious 
measures to promote ownership diversity. The Commission has previously 
determined that it has a general mandate to promote ownership diversity 
under section 257 of the 1996 Act and section 309(j) of the Act, which 
includes promoting ownership by small businesses, new entrants, and 
minority- and women-owned businesses. But this authority does not 
mandate specific outcomes or ownership levels or race- or gender-
conscious action to foster diversity, nor does it permit the adoption 
of rules and policies that are not supported by the record or that 
conflict with the Constitution. Therefore, the Commission finds the 
suggestion that either the Third Circuit or the statute compels it to 
adopt race- or gender-conscious measures to be untenable. The Third 
Circuit ordered the Commission to make a final determination as to 
whether to adopt a new eligible entity definition (including 
consideration of SDB- and ODP-based definitions), and the Commission 
has done so. As discussed herein, the Commission continues to take 
significant steps to improve its ownership data and to promote 
ownership diversity, and its determination that it cannot take race- or 
gender-conscious action at this time does not mean that the Commission 
has failed to act appropriately in furtherance of its goal to promote 
ownership diversity.
    184. Some commenters criticize the Commission based on their 
perception that the Commission has not made a substantial effort to 
gather evidence that would support race- and gender-conscious measures. 
Free Press notes that an analysis of ownership diversity would be 
useful even if it fell short of justifying race- and gender-based 
policies. One basic assessment that the Commission has not made is a 
study of the types of market and ownership structures that correlate 
with women's and people of color's entry into the market, success in 
the market, or exit from the market. The Commission disagrees and notes 
that it has made significant efforts to analyze issues of ownership 
diversity and market structure. Other public interest commenters assert 
that the Commission inappropriately places the burden of providing 
additional evidence on commenting parties without describing what it 
believes is necessary to withstand strict scrutiny. However, the 
Commission has not only commissioned a number of studies, none of which 
provided it a constitutional basis to take race- or gender-conscious 
action; it has also taken a number of steps to improve the quality of 
its broadcast ownership data and to facilitate future additional 
studies that commenters, academics, or others believe might provide a 
constitutional basis to adopt race- and gender-conscious measures. 
Further, the Commission has provided a detailed and thorough analysis 
of what is necessary to meet the relevant constitutional standards and 
identified the reasons it believes that, having studied the question, 
it does not have evidence that would allow it to meet those standards.
    185. In addition, while some commenters have suggested study topics 
or broad research frameworks, none has provided actionable study 
designs that the Commission or private researchers could execute. The 
Commission has expended considerable time and effort throughout the 
course of this proceeding in an effort to create such study designs; 
and it has commissioned or performed a dozen studies that it was able 
to develop over the course of the proceeding. General calls to conduct 
Adarand studies or to study the impact of the Commission's rules on 
ownership diversity do not help advance the Commission's research in 
these areas. At present, neither the record in this proceeding nor the 
Commission's own efforts have produced additional study designs that 
the Commission expects would develop the evidence necessary to support 
race- and/or gender-conscious measures. Therefore, the Commission's 
decision in this Order that the record does not support the adoption of 
race- or gender-conscious measures reflects the inability of the 
Commission and commenters--including many groups and individuals 
experienced in research methodology--to identify relevant study designs 
that, if implemented, would be likely to support such measures. While 
the Commission believes it worthwhile to continue to explore these 
issues and to monitor the relevant constitutional jurisprudence, the 
Commission exercises in this Order its responsibility to pass on the 
race- and gender-based proposals before it at this time. The 
Commission's action in this Order does not prevent the Commission from 
reassessing these measures in the future if changed circumstances 
suggest a different outcome. Indeed, this decision does not preclude a 
different finding in the future, including the adoption of a race- and/
or gender-conscious measure, based on new information. Additionally, 
the Commission will be on alert to any such data that may support such 
a finding and/or that may suggest steps that may lead to the collection 
of other relevant data.

D. Additional Proposals Related to Minority and Female Ownership

    186. As discussed in the FNPRM, several commenters asked the 
Commission to consider additional measures that they believed would 
foster ownership diversity. Those measures 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. The Commission also sought 
comment on various proposals that the Alliance for Women in Media (AWM) 
asserted would help to promote ownership opportunities for women. The 
Commission noted that some of these measures have already been 
implemented and tentatively concluded that the other measures would 
raise public interest concerns, might not provide meaningful assistance 
to the intended beneficiaries, or are outside the scope of this 
proceeding.

[[Page 76252]]

    187. Since the release of the FNPRM, the Commission has implemented 
more of these measures, including several of the proposals regarding 
the AM band. The Commission also notes that the 2008 Diversity Order 
considered a number of DCS's earlier diversity proposals and adopted a 
dozen of those proposals, some with modifications. The specific 
proposals are discussed below.
1. Incubation
    188. In the FNPRM, the Commission stated its concern that proposals 
like DCS's incubation proposal, which would allow blanket waivers of 
the local radio ownership rule to broadcasters that finance or incubate 
an SDB or valid eligible entity, would allow for more consolidation in 
local radio markets than the Commission's rules currently permit 
without sufficient offsetting benefits. In addition, the Commission 
stated that implementation of an incubator program would pose other 
concerns and administrative challenges, including challenges relating 
to the need to monitor over time the types of complex financing and 
other arrangements that would qualify an entity for an incubation 
waiver under DCS's incubation proposal.
    189. The Commission does not believe that its concerns are 
addressed by the incubator program that NAB proposes, which would rely 
on an ODP standard to define the class of entities eligible to benefit 
from incubation. The Commission finds that the type of individualized 
consideration that would be required under an ODP standard would be 
administratively inefficient, unduly resource-intensive, and 
potentially inconsistent with First Amendment values. Therefore, 
limiting the incubator program in the manner that NAB suggests would 
not address the Commission's concern that implementation of an 
incubator program would pose administrative challenges, such as the 
need to monitor continually the complicated legal and financial 
agreements between broadcasters and the entities they seek to incubate. 
Other commenters that urge the Commission to adopt an incubator program 
similarly do not address the policy and practical concerns identified 
above. Therefore, the Commission declines to adopt an incubator program 
as proposed by NAB and others.
2. Migration of AM Radio to VHF Channels 5 and 6
    190. In the FNPRM, the Commission sought comment on its tentative 
conclusion not to adopt the proposal that most AM radio be migrated to 
VHF Channels 5 and 6 in this proceeding. In response to the FNPRM, 
commenters did not express opposition to this tentative conclusion. No 
commenters dispute that implementation of this proposal would involve 
extensive changes to the Commission's current licensing rules and 
spectrum policies. As noted in the FNPRM, Congress directed the 
Commission to conduct an incentive auction of broadcast television 
spectrum--which is ongoing--to make additional spectrum available for 
wireless use. The Commission finds that implementation of the Channel 5 
and 6 proposal has a realistic potential to interfere with the 
Commission's implementation of the incentive auction and is therefore 
contrary to the spectrum policies established by Congress. Accordingly, 
the Commission declines to adopt this proposal.
3. Additional DCS Proposals
    191. The FNPRM identified numerous other DCS proposals that 
involved changes to various Commission licensing, service, and 
engineering rules and policies. It also noted that some of the 
proposals related to the AM band were already being considered in a 
separate proceeding. The Commission also notes that DCS asks the 
Commission to clarify that the 18-month construction extension policy 
applies both to original construction permits (for the construction of 
new stations) and to construction permits for major modifications of 
authorized broadcast facilities (Proposal 17). This is not a new 
diversity-related proposal, but a request for a clarification of an 
existing policy, which has been provided herein. Moreover, the 
Commission notes that relaxation of the main studio rule--among other 
DCS proposals--is being explored in the AM Revitalization Proceeding. 
And while the Commission declines to adopt a specific waiver standard 
for the main studio rule in this proceeding, it notes that currently 
licensees are able to seek waiver of the rule under the Commission's 
general wavier standard. While some general support exists for the 
remaining proposals--primarily from MMTC--the Commission does not 
believe that the record establishes that these changes to Commission 
licensing, service, and engineering rules and policies would provide 
meaningful benefits to the intended beneficiaries. Commenters have had 
multiple opportunities to voice support for these proposals and explain 
the potential benefits that would arise from their implementation, but 
the record contains almost no support for the vast majority of these 
proposals.
    192. The Commission has reviewed these proposals multiple times 
throughout the course of this proceeding. Those proposals that, based 
on Commission analysis, warranted additional consideration have been 
explored in relevant proceedings, such as the AM Revitalization 
Proceeding. However, upon review, the Commission determines that many 
of these proposals would be ineffective or insufficient to address the 
diversity issues under consideration in this proceeding. Despite 
multiple opportunities for comment, the record reflects little support 
for the majority of these proposals or evidence that would cause the 
Commission to reconsider its determination that these proposals warrant 
additional consideration or adoption. Accordingly, consistent with the 
tentative conclusion in the FNPRM, the Commission declines to adopt 
these proposals: (1) Bifurcate Channels for Share-Times with SDBs; (2) 
Use the Share-Time Rule to Allow Broadcasters to Share Frequencies to 
Foster Ownership of DTV and FM Subchannels; (3) Extend the Three-Year 
Period for New Station Construction Permits for Eligible Entities and 
SDBs; (4) Create Medium-Powered FM Stations; (5) Authorize Interference 
Agreements; (6) Harmonize Regional Interference Protection Standards; 
Allow FM Applicants to Specify Class C, CO, C1, C2 and C3 Facilities in 
Zones I and IA; (7) Relax the Limit of Four Contingent Applications; 
(8) Create a New Local L Class of LPFM Stations; (9) Redefine Community 
of License as a Market for Section 307 Purposes; (10) Remove Non-Viable 
FM Allotments; and (11) Issue a One-Year Waiver, on a Case-by-Case 
Basis, of Application Fees for Small Businesses and Nonprofits.
    193. In the FNPRM, the Commission also tentatively concluded that 
certain DCS proposals are outside the scope of this proceeding. The 
Commission explained that some of those proposals extend into areas 
that are beyond the Commission's authority and ultimately would require 
legislative action or action by other federal entities aside from the 
Commission to create changes in rules or policies. The Commission 
further explained that other proposals involve non-broadcast services 
that are outside the scope of the quadrennial review proceedings. While 
the Commission stated that it did not anticipate taking further action 
on these proposals within this or successive quadrennial review 
dockets, it also noted that some of these proposals may warrant further 
consideration.
    194. MMTC challenged the Commission's decision not to consider

[[Page 76253]]

these 24 proposals in its appeal of the FNPRM. In the course of the 
Prometheus III litigation, the court issued a letter asking MMTC to 
address which, if any, of the 24 proposals . . . met both of the 
following criteria: (1) The FCC can adopt them without actions by 
Congress or other regulators and (2) they relate to the broadcast 
industry. In response, MMTC identified 17 proposals that it asserted 
met both criteria; in a reply letter to the court, the Commission 
indicated that it would address the proposals in this item. In 
Prometheus III, the court declined to act on MMTC's challenge, but 
indicated that it expected the Commission to adhere to its 
representations to the court.
    195. Following the release of Prometheus III, MMTC met with 
Commission staff to discuss the 17 proposals identified for the court. 
Following these discussions, MMTC now requests that the Commission 
address five of these proposals in this Order; the remaining 12 
proposals are being withdrawn from consideration in the context of this 
proceeding, though MMTC asserts that it may pursue some of these 
proposals in other proceedings. The five proposals are: (1) Examine How 
to Promote Minority Ownership as an Integral Part of All FCC General 
Media Rulemaking Proceedings; (2) Extend the Cable Procurement Rule to 
Broadcasting; (3) Mathematical Touchstones: Tipping Points for the Non-
Viability of Independently Owned Radio Stations in a Consolidating 
Market and Quantifying Source Diversity; (4) Engage Economists to 
Develop a Model for Market-Based Tradable Diversity Credits as an 
Alternative to Voice Tests; and (5) Create a New Civil Rights Branch of 
the Enforcement Bureau. The remaining 12 proposals presented to the 
Third Circuit are: (1) Collect, Study and Report on Minority and Women 
Participation in Each Step for the Broadcast Auction Process; (2) 
Increase Broadcast Auction Discounts to New Entrants; (3) Require 
Minimum Opening Bid Deposits on Each Allotment for Bidders Bidding for 
an Excessive Proportion of Available Allotments; (4) Only Allow 
Subsequent Bids to Be Made Within No More than Six Rounds Following the 
Initial Bid; and (5) Require Bidders to Specify an Intention to Bid 
Only on Channels with a Total Minimum Bid of Four Times Their Deposits; 
(6) Grant Eligible Entities a Rebuttable Presumption of Eligibility for 
Waivers, Reductions, or Deferrals of Commission Fees; (7) Designate a 
Commissioner to Oversee Access to Capital and Funding Acquisition 
Recommendations; (8) Develop an Online Resource Directory to Enhance 
Recruitment, Career Advancement, and Diversity Efforts; (9) Study the 
Feasibility of a New Radio Agreement with Cuba; (10) Must-Carry for 
Certain Class A Stations; (11) Create a Media and Telecom Public 
Engineer Position to Assist Small Businesses and Nonprofits with 
Routine Engineering Matters; and (12) Conduct Tutorials on Radio 
Engineering Rules at Headquarters and Annual Conferences. In addition, 
MMTC is also withdrawing from consideration in this proceeding the 
seven proposals that it did not identify to the Third Circuit, which 
largely were legislative recommendations. These legislative 
recommendations include: (1) Legislative Recommendation to Expand the 
Telecommunications Development Fund (TDF) Under section 614 and Finance 
TDF with Auction Proceeds; (2) Legislative Recommendation to Amend 
section 257 to Require the Commission to Annually Review and Remove or 
Affirmatively Prohibit Known Market Entry Barriers; (3) Legislative 
Recommendation to Clarify section 307(b) to Provide that Rules Adopted 
to Promote Localism are Presumed to be Invalid if They Significantly 
Inhibit Diversity; (4) Legislative Recommendation to Amend the FTC Act 
(15 U.S.C. 41-58) to Prohibit Racial Discrimination in Advertising 
Placement Terms and Advertising Sales Agreements; (5) Legislative 
Recommendation to Amend section 614 to Increase Access to Capital by 
Creating a Small and Minority Communications Loan Guarantee Program; 
(6) Legislative Recommendation to Amend section 614 to Create an Entity 
to Purchase Loans Made to Minority and Small Businesses in the 
Secondary Market; (7) Legislative Recommendation to Provide Tax Credit 
for Companies that Donate Broadcast Stations to an Institution Whose 
Mission is or Includes Training Minorities and Women in Broadcasting. 
Consistent with the direction from the Third Circuit and the revised 
request from MMTC, the Commission will now address the five remaining 
proposals. While these proposals were originally submitted in this 
proceeding as part of the DCS Supplemental NPRM Comments, the 
Commission notes that MMTC submitted the comments on behalf of DCS; 
accordingly, the Commission finds that relying on MMTC's assertions 
regarding the preferred treatment of these proposals in this proceeding 
is appropriate. Moreover, consistent with the Third Circuit's letter, 
the Commission is generally limiting its consideration of these 
proposals to the extent that they relate to the broadcast industry.
    196. Proposal 5. MMTC requests that the Commission consider how to 
promote minority ownership as part of all of its media-related 
proceedings. At the outset, the Commission notes that OCBO currently 
provides outreach services to assist small businesses and new entrants 
into the communications industry and input on how the Commission's 
proposed rules impact minority ownership. While OCBO already plays an 
important role in this process, the Commission finds room potentially 
to do more to help inform the Commission's consideration of these 
important issues. Accordingly, going forward, the Commission will 
consider how to promote minority ownership in relevant media-related 
rulemaking proceedings and include an inquiry in any appropriate 
rulemaking to inform that question.
    197. Proposal 10. MMTC also proposes that the Commission extend the 
cable procurement requirements to broadcasters and other regulated 
communications industries. Pursuant to section 634 of the 
Communications Act, as amended, the Commission adopted what DCS and 
MMTC refer to as the cable procurement rule, which generally requires 
that a cable system encourage minority and female entrepreneurs to 
conduct business with all parts of its operation, for example, by 
recruiting as wide as possible a pool of qualified entrepreneurs from 
sources such as employee referrals, community groups, contractors, 
associations, and other sources likely to be representative of minority 
and female interests. The Commission notes that the Commission's OCBO 
has already implemented various initiatives consistent with this 
proposal, holding multiple supplier diversity conferences and a 
government advertising workshop--and the Commission anticipates that 
there will be more such events in the future. However, the Commission 
finds that merit exists in exploring whether, and if so, how, to extend 
the cable procurement requirements to the broadcasting industry. 
Therefore, the Commission will evaluate the feasibility of adopting 
similar procurement rules for the broadcasting industry.
    198. Proposal 33. MMTC proposes two formulas it asserts are aimed 
at creating media ownership limits that promote diversity. 
Specifically, it suggests a Tipping Point Formula that would be applied 
in the local radio rule context, and a Source Diversity Formula that 
appears to be more broadly applicable. The Tipping Point Formula

[[Page 76254]]

would be applied in the local radio rule context to determine the 
tipping point in the distribution of radio revenue in a market between 
independent owners and owners of multiple stations in that market. The 
theory is that the independent stations would no longer be able to 
survive once the combined revenues of the owners of multiple stations 
exceed the tipping point. The Source Diversity Formula is based on the 
premise that increases in consumer utility flow from their access to 
additional sources, with diminishing returns to scale, and is intended 
to express the consumer benefit derived from marginal increases in 
source diversity. At present, neither of these proposals is 
sufficiently defined. As MMTC itself notes, the Tipping Point Formula 
rests on admittedly rough assumptions, and the record does not provide 
the Commission with sufficient information to justify or refine the 
formula for general application across all radio markets. Similarly, 
the Source Diversity Formula would require field-testing before it 
could be applied, and the Commission does not believe that the record 
provides it with the information necessary to rely on the formula to 
adopt media ownership limits. The Commission therefore directs the 
Media Bureau to consider these proposals further and to solicit input 
on these ideas in the document initiating the next quadrennial review 
of the media ownership rules.
    199. Proposal 37. MMTC also proposes that the Commission engage 
economists to develop a model for market-based tradable diversity 
credits that would serve as an alternative method for adopting 
ownership limits. Broadly speaking, this proposal involves issuing 
Diversity Credits that could be traded in a market-based system and 
redeemed by a station buyer to offset increased concentration that 
would result from a proposed transaction. While the Commission's 
authority to adopt such a system is, at best, unclear, the Commission 
finds merit in evaluating the underlying proposal. The Commission 
therefore directs the Media Bureau to consider this proposal further 
and to solicit input on this idea in the document initiating the next 
quadrennial review of the media ownership rules.
    200. Proposal 40. MMTC recommends the creation of a new Civil 
Rights Branch of the Enforcement Bureau that would enforce Media Bureau 
Equal Employment Opportunity rules, as well as other rules impacting 
the broadcasting, cable, satellite, wireless, and wireline industries. 
The Commission has evaluated this proposal and finds that it warrants 
further consideration. Though the Commission does not see a need to 
denominate a separate branch, enforcement of the Media Bureau Equal 
Employment Opportunity rules, which is presently handled by the Media 
Bureau, might be more appropriate as a function of the Enforcement 
Bureau, given the Enforcement Bureau's existing mission and expertise 
in the enforcement of the Commission's regulations. The Commission in 
no way, however, believes that the Media Bureau has failed to 
effectively enforce these rules. Accordingly, the Commission directs 
the appropriate Commission Bureaus and Offices, including the Media 
Bureau, Enforcement Bureau, and Office of the Managing Director, to 
discuss the feasibility, implications, and logistics of shifting the 
enforcement of the Media Bureau Equal Employment Opportunity rules from 
the Media Bureau to the Enforcement Bureau.
4. AWM Proposals
    201. In response to the NPRM, AWM proposed that the Commission (i) 
prepare a primer on investment in broadcast ownership for smaller and 
regional lenders willing to provide loans to new broadcast entrants; 
(ii) prepare a primer for new entrants that provides guidance on how to 
find financing; (iii) establish a link on the Commission's Web site to 
provide information on stations that may be available for sale to small 
businesses; and (iv) allow sellers to hold a reversionary interest in a 
Commission license in certain circumstances. The Commission sought 
comment on these proposals in the FNPRM.
    202. The Commission believes it has acted to achieve the purposes 
of these proposals to the extent appropriate for the industry and the 
regulatory agency. As noted in the FNPRM, OCBO currently engages in a 
number of activities that provide broadcasters and potential investors 
with resources that are similar in substance to primers on investment 
and financing. Beyond those activities, the Commission continues to 
believe 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.
    203. With regard to the proposal to allow sellers to hold 
reversionary interests in Commission licenses in certain circumstances, 
the Commission previously noted that AWM's proposal does not address 
the Commission's historical concerns about reversionary interests and 
is insufficiently developed to warrant departure from the Commission's 
longstanding policy against the holding of such interests. The 
Commission has traditionally held that no right of reversion can attach 
to a broadcast license and that a station licensee is fully responsible 
for the conduct of the station and its operation in the public 
interest--a responsibility that cannot be delegated by contract. While 
NAB notes that it has previously urged the Commission to allow sellers 
to hold reversionary interests in certain circumstances, NAB does not 
address the specific concerns the Commission discussed in the FNPRM 
regarding this proposal. The Commission declines to adopt these 
proposals. If presented with appropriate evidence or analysis regarding 
the Commission's historical concerns, the Commission may consider in a 
future proceeding a general review of its reversionary interest policy, 
subject to resource constraints.

V. Shared Service Agreements

A. Introduction

    204. With this Order, the Commission brings transparency to the use 
of sharing agreements between independently owned commercial television 
stations. Through these agreements, competitive stations in a local 
market are able to combine certain operations, with effectively the 
same station personnel handling or facilities performing functions for 
multiple, independently owned stations. While such combined operations 
no doubt result in cost savings--savings that could be reinvested in 
improved programming and other public interest-promoting endeavors--the 
Commission has an obligation to ensure that these agreements are not 
being used to circumvent the Commission's broadcast ownership rules and 
are not otherwise inconsistent with the Commission's rules and 
policies. Specifically, the Commission adopts a comprehensive 
definition of SSAs and a requirement that commercial television 
stations disclose these agreements by placing them in the stations' 
online public inspection files. This method of disclosure will place a 
minimal burden on stations, while providing the public and the 
Commission with easy access to the agreements. Accordingly, the 
Commission finds that the benefits of this rule outweigh the minimal 
burdens associated with disclosure.

B. Discussion

    205. The Commission finds that commenters have raised meaningful 
concerns regarding the potential impact of sharing agreements involving

[[Page 76255]]

commercial television stations on the Commission's competition, 
localism, and diversity policy objectives, particularly with respect to 
its local broadcast ownership rules. At the same time, resource sharing 
can deliver meaningful public interest benefits, and the sharing of 
certain resources may have no negative impact on any of the 
Commission's policy goals. At present, however, consideration of these 
issues is impeded because so little is known by the Commission and the 
public about the content, scope, and prevalence of sharing agreements. 
Therefore, the Commission adopts a clear definition of SSAs--
substantially similar to the definition proposed in the FNPRM--to 
identify the agreements between stations that are relevant to the 
Commission's improved understanding of how stations share services and 
resources, and a mechanism for making such arrangements involving 
commercial television stations transparent to the public and the 
Commission. Specifically, commercial television stations will now be 
required to disclose these agreements by placing them in the 
participating stations' online public inspection files. Through this 
action, the public and the Commission will be able to better evaluate 
the impact of these agreements, if any, on the Commission's policy 
goals.
1. Definition of Shared Service Agreement
    206. Scope of definition. The Commission finds that the definition 
proposed in the FNPRM, with a minor modification, best comports with 
the informational needs that support its efforts to define SSAs. 
Contrary to broadcaster assertions, the Commission does not believe 
excluding certain resource sharing, such as administrative support or 
other back-office services, from the definition based on premature 
assessments of the potential future regulatory treatment of such 
activities is appropriate. In addition, the Commission agrees with Free 
Press that a definition narrower than the one adopted would invite 
legal gamesmanship whereby parties would be able to draft sharing 
agreements to fall outside of the established definition to avoid 
disclosure. For this reason, the Commission will not adopt exclusions 
from the definition of SSA, such as those based on the duration of the 
agreement or a set dollar amount.
    207. To address concerns expressed by certain commenters, however, 
the Commission emphasizes that the adopted definition limits the scope 
of agreements to those that involve station-related services. The 
Commission also provides non-exhaustive examples in the definition for 
guidance, consistent with the proposal in the FNPRM. Station-related 
services include, but are not limited to, administrative, technical, 
sales, and/or programming support. Indeed, the Commission's goal is not 
to adopt a definition of SSAs that encompasses station interactions 
that do not relate to station operations or that are incidental in 
nature. For example, community service initiatives and charity events, 
while worthwhile in their own regard, do not relate to the operation of 
the broadcast station; accordingly, charitable collaborations involving 
independently owned broadcast stations would not fit within the adopted 
definition of SSAs.
    208. Similarly, the Commission clarifies that ad hoc or on-the-fly 
arrangements during breaking news coverage are also outside the 
definition of SSAs. While such interactions may involve a station-
related service, namely news-gathering, such informal, short-term 
arrangements are typically precipitated by unforeseen or rapidly 
developing events. Absent a covering agreement that facilitates such 
cooperation, the Commission does not believe that these types of 
interactions demonstrate that the stations are working together; 
rather, they are acting in a manner that allows each station to 
separately pursue its own ends (e.g., the production of an independent 
news story). For example, if two news trucks from independently owned 
broadcast television stations arrive at the scene of an accident at the 
same time and agree to set up their camera shots from different angles 
or to rely on the footage shot by only one of the stations due to 
limited space and safety concerns, this agreement does not evidence 
actual collaboration between the stations to produce the news segments. 
Instead, the news teams are reacting to unforeseen circumstances and 
ensuring that each news team can safely and effectively create its own 
news story. By contrast, such conduct would be evidence of 
collaboration, and included in the definition of SSAs, if the stations 
were parties to an LNS agreement (or similar agreement) that governs 
the terms of news coverage, even if the stations retain the ability to 
produce their own segments.
    209. Text of Definition. While the Commission finds that a clear 
definition of SSAs is appropriate, one technical change to the text 
proposed in the FNPRM is necessary. In the FNPRM, the proposed 
definition of SSAs was designed to identify the universe of agreements 
for the provision of station-related services involving stations that 
are not under common control. Stations under common control do not 
share services or collaborate in the same way as stations that operate 
independently for purposes of this definition.
    210. Accordingly, the Commission defines an SSA as any agreement or 
series of agreements, whether written or oral, in which (1) a station 
provides any station-related services, including, but not limited to, 
administrative, technical, sales, and/or programming support, to a 
station that is not directly or indirectly under common de jure control 
permitted under the Commission's regulations; or (2) stations that are 
not directly or indirectly under common de jure control permitted under 
the Commission's regulations 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. For purposes of this rule, the term 
station includes the licensee, including any subsidiaries and 
affiliates, and any other individual or entity with an attributable 
interest in the station. The Commission emphasizes that sharing 
agreements to which non-licensee entities are a party (e.g., an 
operating subsidiary of the ultimate parent company) fall within the 
adopted definition. The Commission finds that including such entities 
within the term station is necessary to foreclose the possibility that 
stations could use operating subsidiaries or similar entities to evade 
the SSA disclosure requirement. This is consistent with the proposal in 
the FNPRM that the Commission should not limit the definition of SSAs 
to only those agreements to which licensees are parties. Consistent 
with previous Commission rules, the substance of oral agreements shall 
be reduced to writing.
2. Disclosure of Shared Service Agreements
    211. Justification for disclosure. The Commission requires the 
disclosure of SSAs in each participating station's online public 
inspection file. The SSA disclosure requirement shall apply regardless 
of whether the agreement involves stations in the same market or in 
different markets. This approach follows the approach taken with the 
public file disclosures for JSAs and LMAs and is consistent with the 
Commission's intent to learn more about how commercial television 
stations use these agreements. The Commission finds that this 
disclosure requirement is tied to a clear regulatory purpose. 
Commenters in the proceeding have

[[Page 76256]]

raised meaningful issues regarding the potential impact of the joint 
operation of independently owned commercial broadcast television 
stations pursuant to SSAs on the Commission's rules and policy goals, 
including, but not limited to, the Commission's local broadcast 
ownership rules and rules regarding unauthorized transfer of control. 
These commenters have identified specific provisions in sharing 
agreements that, according to the commenters, convey a significant 
degree of influence over the core operating functions of an independent 
commercial television station (and potentially de facto control over 
the station). In addition, commenters have also provided examples of 
markets in which sharing agreements have been executed and of the 
asserted impact of these agreements on the market (e.g., job losses and 
reductions in independently produced local news programming). According 
to these commenters, such sharing agreements impact the Commission's 
competition, localism, and diversity goals, as well as suggest 
violations of the Commission's rules against unauthorized transfers of 
control. The disclosure of these agreements is necessary for the public 
and the Commission to evaluate these potential impacts.
    212. Moreover, the Commission's rules have long required that 
television and radio broadcast stations enable public inspection of 
certain documents to provide information both to the public and to the 
Commission about station operations. The public and the Commission rely 
on information about the nature of a station's operations and 
compliance with Commission rules to verify that a station is meeting 
its fundamental public interest obligations. The Commission has 
consistently found that disclosure requirements facilitate the 
Commission's regulatory purposes while imposing only a minimal burden 
on licensees.
    213. Additionally, the Commission disagrees that it must first 
address the appropriate regulatory status of sharing agreements (e.g., 
make them attributable) before requiring their disclosure. The 
Commission agrees with public interest commenters in rejecting NAB's 
assertion that back-office or administrative agreements--agreements 
that clearly relate to station operations within the adopted definition 
of SSAs--should be excluded from disclosure because they currently do 
not raise any attribution or other regulatory concerns. Disclosure 
itself informs such decisions, and the Commission has wide latitude to 
impose such a requirement. Moreover, such agreements may also help 
inform allegations involving unauthorized transfers of control. In the 
past, the Commission has first required the disclosure of certain 
agreements that relate to station operations before making a 
determination that such agreements should be subject to additional 
regulation. The Commission's action in this Order is consistent with 
this precedent. Indeed, the Commission could hardly fulfill its 
obligation to ensure that station operations are consistent with 
Commission rules and policies if it were required to determine the 
regulatory status of certain agreements before obtaining the 
information necessary to evaluate the agreements. The Commission does 
not think the public interest would be served by adopting such a 
constricted view of the Commission's authority. The Commission notes 
that its action does not predetermine that any additional regulation 
will be forthcoming for SSAs; rather, the disclosure is necessary for 
the Commission to make such a determination.
    214. Furthermore, the Commission is not persuaded that the adopted 
disclosure requirement will discourage stations from entering into 
SSAs. First, the adopted method for disclosure minimizes the cost of 
compliance and utilizes a procedure with which commercial television 
broadcasters already have extensive experience. It cannot be credibly 
stated that the burden associated with disclosure would exceed the 
benefits of the agreements. Second, the Commission finds it instructive 
that no evidence exists showing that the disclosure requirements for 
JSAs and LMAs, specific types of SSAs, have inhibited the formation of 
those agreements. To the contrary, the Commission first required the 
public filing of television JSAs in 1999, and the prevalence of these 
agreements increased significantly after the disclosure requirement was 
adopted. Ultimately, the Commission does not find any evidence to 
support the contention that disclosure of SSAs would discourage 
stations from executing such agreements, particularly if the agreements 
are as beneficial as broadcast commenters contend.
    215. Finally, the Commission rejects NAB's assertion that the SSA 
disclosure requirement would violate the First Amendment because the 
Commission is immersing itself in broadcasting stations' day-to-day 
operations. The cases cited by NAB in support of its theory are readily 
distinguishable from the adopted disclosure requirement, as neither 
case involves simply requiring disclosure of contracts relating to 
station operations. Contrary to NAB's claims, the Commission is not 
interfering with broadcasters' editorial discretion. Rather, the 
Commission is simply requiring that commercial television stations 
place certain contracts in their public file, just as the Commission 
has done numerous times in the past. In particular, the Commission is 
not restricting broadcasters' discretion to determine what content to 
offer, nor is the Commission mandating or prohibiting any particular 
contractual terms. Thus, the disclosure requirement does not burden 
broadcasters' speech. In particular, the Commission is not compelling 
broadcasters to express a message or viewpoint. Further, no evidence 
exists that previous disclosure requirements have resulted in such 
involvement. Indeed, the Commission has a long history of deferring to 
a licensee's good faith discretion in programming decisions--
particularly news programming--and the Commission believes that the SSA 
disclosure requirement is consistent with this precedent. In this case, 
the Commission is not even proposing to regulate SSAs beyond the bare 
disclosure requirement.
    216. NAB further argues that the disclosure requirement fails to 
satisfy the constitutional standards for regulations that require 
businesses to disclose factual information, stating that the agency 
must show that a substantial government interest exists that is 
directly and materially advanced by the restriction and that the 
restriction is narrowly tailored to achieve the government interest. On 
the contrary, even assuming that the disclosure requirement burdens 
broadcasters' speech to any extent (which the Commission concludes 
above is not the case), the requirement would be subject, at most, to 
rational basis review, which is the same standard that courts have 
applied to the Commission's ownership rules. Under this standard of 
review, a rule does not violate the First Amendment if it is a 
reasonable means of promoting the public interest in diversified mass 
communications.
    217. The Commission's SSA disclosure requirement satisfies this 
standard. SSAs relate to a broadcast station's core operational 
functions and thus could have the effect of lessening competition, 
diversity, or localism by creating a commonality of interests. They 
could also have beneficial effects. Public interest commenters and 
broadcasters have conflicting viewpoints about whether SSAs should be 
deemed attributable for purposes of the Commission's ownership rules 
and whether they negatively or positively

[[Page 76257]]

affect the Commission's public interest goals of competition, 
diversity, and localism. Without an industry-wide disclosure rule, the 
Commission lacks the information necessary to determine the extent to 
which SSAs may affect diversity, competition, and localism and whether 
SSAs in fact confer significant influence or control warranting 
attribution for purposes of its ownership rules or raising unauthorized 
control concerns. Although broadcasters have disclosed SSAs in 
connection with individual license assignments/transfers of control 
applications, the Commission does not know what types of SSA are in 
place between stations that are not parties to such pending Commission 
applications, nor does the Commission know the extent to which 
broadcasters across the industry utilize SSAs that are not already 
required to be disclosed. Thus, the Commission believes industry-wide 
disclosure is necessary to allow the Commission and public to evaluate 
in a comprehensive manner the extent to which broadcasters use various 
types of SSA, the nature of the contractual relationships, and the 
manner in which specific types of agreements affect competition, 
diversity, or localism. Broadcasters hold licenses issued by the 
Commission and are obligated to operate in the public interest, and 
thus they have no right to withhold from the Commission or the public 
agreements that may significantly affect their service to the public. 
Therefore, the Commission's rule is a reasonable means of promoting the 
Commission's diversity, competition, and localism goals and assuring 
that SSAs do not raise unauthorized control concerns and satisfies the 
criteria for First Amendment rational basis review.
    218. The case law NAB cites in support of a higher standard of 
review concerns requiring a regulated entity to undertake new speech, 
and presents the question of whether a restriction on commercial 
speech, normally subject to intermediate scrutiny, satisfies the 
criteria for rational basis review under the exception applicable to 
compelled commercial speech that is strictly factual. Ultimately, NAB 
seems to be relying on Central Hudson Gas & Electric Corp. v. Public 
Service Commission, 447 U.S. 557 (1980), for the proposition that 
restrictions on commercial speech are subject to intermediate scrutiny. 
In Central Hudson, the Court invalidated a state regulation that 
prohibited public utilities from promoting the use of electricity in 
their advertising and marketing materials. Here, in contrast, the 
Commission is simply requiring broadcasters to publicly disclose 
contracts they have already executed, not undertake new speech. 
Further, although the SSA disclosure rule does nothing more than 
require placement of SSAs in the broadcasters' public inspection file, 
it is subject to rational basis review for a different reason (i.e., 
because it is a content-neutral rule that furthers the Commission's 
scheme of broadcast ownership regulation and the policy goals 
supporting such regulation). Thus, if the SSA disclosure requirement 
burdens speech at all, the rational basis review applicable to 
structural broadcast regulations--not the intermediate scrutiny 
standard applicable to commercial speech--applies to the disclosure 
requirement.
    219. Finally, even assuming that the intermediate scrutiny standard 
of Central Hudson applies, which the Commission concludes is not the 
case, the rule directly and materially advances governmental interests 
that the Supreme Court has recognized in Turner Broadcasting System, 
Inc. v. FCC, 512 U.S. 622, 663 (1994), as substantial. The purpose of 
the rule is to provide information that is directly relevant to the 
Commission's regulation of broadcast ownership and the policy goals 
that underlie its ownership rules. The filing of SSAs will further the 
Commission's goal of collecting the necessary information. The 
Commission has tailored the requirement to exclude agreements that are 
already subject to disclosure in a station's public file and to exclude 
agreements that are not likely to implicate the Commission's policy 
concerns. The rule does not restrict or dictate the ways in which 
broadcasters may share resources but simply requires them to disclose 
contracts that already exist. The filing requirement is therefore 
narrowly tailored to achieve the regulatory objective, and the burden 
is minimal. Accordingly, the Commission finds that the disclosure 
requirement does not violate the First Amendment even under the higher 
standard of review that NAB advocates.
    220. Disclosure in station's online public inspection file. The 
Commission will require commercial broadcast television stations to 
post SSAs to each participating station's online public inspection file 
that is hosted by the Commission. The Commission finds that the online 
public filing requirement, pursuant to Sec.  73.3526 of the 
Commission's rules, best facilitates the disclosure of SSAs. In the 
Enhanced Disclosure Order (77 FR 27631, May 11, 2012, FCC 12-44, rel. 
Apr. 21, 2012), the Commission updated the disclosure requirements to 
make information concerning broadcast service more accessible to the 
public by having stations post their public files online in a central, 
Commission-hosted database. Consistent with its findings in that order, 
the Commission finds that an online public filing requirement best 
comports with Commission policy to modernize the procedures that 
television broadcasters use to inform the public about how stations are 
serving their communities. Having stations post their SSAs online in a 
central, Commission-hosted database utilizes existing technology to 
make information concerning broadcast service more accessible to the 
public and reduces broadcasters' costs of compliance over time. The 
Commission is not convinced that other disclosure methods, such as an 
ECFS docket or filing with the Commission pursuant to Sec.  73.3613 of 
the Commission's rules, are less burdensome than the online public file 
requirement or that such methods provide meaningful advantages to the 
public and the Commission in terms of identifying and accessing SSAs.
    221. The Commission declines to adopt NAB's proposed alternative to 
require that stations submit an aggregate list of SSAs as part of the 
biennial ownership reports. The Commission agrees with comments that a 
mere list of agreements would be insufficient for the purpose the 
Commission seeks. Such a limited disclosure would not permit the public 
or the Commission to develop a full and complete understanding of SSAs 
and their impact on the broadcast television industry. Simply 
submitting a list of agreements would not provide the public or the 
Commission with any information about the nature and scope of the 
agreements, only that the agreements exist. While the prevalence of 
SSAs is of some importance, the terms of the agreements and their 
impact on station operations are far more critical to an analysis of 
the potential impact of SSAs on the Commission's rules and policy 
goals. In addition, disclosure only in biennial ownership reports would 
not result in timely disclosure of these agreements, which would 
frustrate continued efforts to study SSAs. Moreover, searching for SSAs 
disclosed in biennial ownership reports would be a more laborious task 
for the public and the Commission than searching the online public 
files. Indeed, a significant benefit of the online public file is that 
it improves public access to documents while minimizing burdens on 
stations. NAB's proposal ignores this significant benefit without 
identifying any meaningful benefits in return.
    222. Disclosure by noncommercial stations, radio, and newspapers. 
The

[[Page 76258]]

Commission declines to expand the SSA disclosure requirement beyond 
commercial television stations, as commenters have not provided 
sufficient justification for such an expansion at this time. Commenters 
provided the Commission with numerous examples of sharing agreements 
involving commercial television stations. Based on these examples, 
commenters raised meaningful concerns about the potential impact of 
such agreements on the Commission's public interest goals. The evidence 
in the record, however, does not demonstrate that SSAs involving 
noncommercial stations, radio stations, or newspapers are common or 
that they present the same kinds of potential public interest concerns. 
However, the Commission may revisit its decision to limit disclosure to 
commercial television stations in the future if evidence suggests that 
additional disclosure may be appropriate.
    223. Redaction of confidential or proprietary information. As part 
of the SSA disclosure requirement, the Commission adopts provisions 
that permit stations to redact confidential or proprietary information, 
just as the Commission has for LMAs and JSAs. The Commission notes, 
however, that the redacted information must be made available to the 
Commission upon request. The redaction allowance directly addresses the 
concerns of commenters that oppose the disclosure of SSAs on the 
grounds that it will require stations to disclose sensitive, 
confidential business information.
    224. The Commission rejects NAB's argument that the redaction 
allowance will not be sufficient to protect broadcast stations' 
business interests because the disclosure of the mere existence of 
these agreements will provide useful information to competitors. All 
broadcasters have long been required to attach copies of transaction-
related SSAs to a license assignment or transfer application, including 
placing the application and relevant agreements in the station's public 
inspection file until final action has been taken on the application. 
No evidence in the record indicates that this requirement has resulted 
in any competitive harm. In addition, the Commission notes that 
broadcast commenters have failed to provide evidence that the business 
interests of television broadcast stations have been inhibited by the 
adoption of the LMA and JSA disclosure requirements or that such 
interests are likely to be inhibited by the substantially similar SSA 
disclosure requirement adopted in this Order. Furthermore, the 
Commission finds that NAB's argument is at odds with its own proposed 
alternative for stations to submit aggregate lists of SSAs as part of 
their biennial ownership reports, which would disclose the existence of 
such agreements. The Commission concludes that the adopted redaction 
allowance sufficiently balances the informational needs of the public 
and the Commission with the business interests of broadcasters to keep 
proprietary information confidential.
    225. Cost of compliance. Consistent with Commission precedent, the 
Commission finds that an online public filing requirement minimizes the 
cost to broadcasters while ensuring that the public has easy and 
convenient access to the information. As the Commission has previously 
stated, the Commission finds that the electronic upload or scanning and 
upload of SSAs is not unduly burdensome. The Commission does not find 
arguments to the contrary to be persuasive or supported by evidence. 
Aside from general statements that disclosure will be too costly, 
commenters opposing disclosure provide no cost estimates to support 
their assertions. Moreover, because of the clarifications above, the 
Commission finds that it has adequately addressed concerns that the 
definition of SSAs is overly broad and would result in a significant 
increase in the number of agreements stations would be required to 
upload to their public inspection file. Television broadcasters should 
also be well versed in uploading documents to the Commission's online 
public inspection file database, as they have been required to use the 
database since 2012.
    226. Duplicative filings. As the Commission already requires 
broadcasters to submit JSAs and LMAs in accordance with its public file 
disclosure requirements, the Commission confirms that, to the extent 
that the SSA disclosure requirement would duplicate established JSA and 
LMA disclosures, a broadcaster would have to place these agreements in 
their public inspection file only once. A broadcaster will not be 
required to file additional copies of JSAs and LMAs for the SSA 
disclosure requirement if the broadcaster's public inspection file 
already contains a copy of the agreement. This clarification reduces 
the burden of compliance to broadcasters and is consistent with 
previous Commission decisions regarding duplicative filings.
    227. Procedural matters. Each station that is party to an SSA 
executed before the effective date of the adopted disclosure 
requirement, which is subject to OMB approval, shall place a copy of 
the SSA in its public inspection file within 180 days after the 
disclosure requirement becomes effective, provided that the agreement 
is not already in the station's public inspection file. The Commission 
will seek OMB approval for the disclosure requirement, and, upon 
receiving approval, the Commission will release a Public Notice 
specifying the date by which SSAs must be placed in the stations' 
online public files. The Public Notice will also provide further 
details on how the SSA files are to be designated within each station's 
online public file. SSAs that are executed after the disclosure 
requirement is effective must be placed in the stations' online public 
files in a timely fashion, and stations are reminded to maintain 
orderly public files.
3. Attribution
    228. Finally, in response to the FNPRM, multiple commenters assert 
that the Commission should immediately make SSAs attributable based on 
the existing record and the Commission's experience with SSAs in the 
context of assignments/transfers of control of station licenses. The 
Commission declines to make SSAs attributable. As noted in the FNPRM, 
and as confirmed herein, the Commission believes that first defining 
SSAs and requiring their disclosure is necessary before making any 
decisions regarding attribution or any other regulatory action that may 
be appropriate based on review of these agreements. Unlike the resource 
sharing provided for in LMAs and JSAs--which are specific types of SSAs 
involving discrete, easily defined activities with a clear impact on a 
station's core operating functions--the types of resource sharing in 
other SSAs are not easily categorized and their potential impact on a 
station's core operating functions is not well understood at this time, 
largely due to the lack of a definition of SSAs and lack of disclosure. 
Accordingly, the Commission's action in this Order is a necessary step 
before the Commission can consider whether attribution of any 
additional types of SSAs or any other regulatory action is appropriate. 
The Commission has traditionally taken an incremental approach in 
determining whether and how to attribute agreements between and among 
broadcasters. In these circumstances, the Commission finds that 
proceeding in this fashion, one step at a time, when addressing these 
complicated issues is appropriate and reasonable. The Commission notes 
also that the court in

[[Page 76259]]

Prometheus III rejected the argument that the Commission acted 
arbitrarily and capriciously by not attributing all . . . SSAs in the 
JSA Order, finding instead that the Commission was justified in its 
sequential approach in addressing this issue. Though the Commission 
reiterated that its action in this Order is not intended to prejudge 
whether attribution or any other regulatory actions are appropriate for 
SSAs. Once the Commission has had an opportunity to evaluate the 
potential impact of SSAs on the Commission's rules and policy goals, it 
will be able to consider whether attribution or other regulatory action 
is warranted.

VI. Procedural Matters

A. Final Regulatory Flexibility Analysis

    229. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared a Final Regulatory 
Flexibility Analysis (FRFA) of the possible significant economic impact 
on small entities of the policies and rules addressed in the Second 
Report and Order.
    230. Need for, and Objectives of, the Second Report and Order. The 
Second Report and Order concludes the 2010 and 2014 Quadrennial Reviews 
of the broadcast ownership rules, which were initiated pursuant to 
section 202(h) of the Telecommunications Act of 1996, Public Law 104-
104, section 202(h), 110 Stat. 56, 111-12 (1996) (1996 Act) (codified 
as amended at 47 U.S.C. 303 note) (1996 Act). 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 the 
Commission determines to be no longer in the public interest. The media 
ownership rules that are subject to this quadrennial review--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--are found, respectively, at 
47 CFR 73.3555(b), (a), (d), (c), and 73.658(g). Ultimately, while the 
Commission acknowledged the impact of new technologies on the media 
marketplace, it concluded that some limits on broadcast ownership 
remain necessary to protect and promote the Commission's policy goals 
of fostering competition, localism, and diversity.
    231. Specifically, the Order retains the Local Television Ownership 
Rule, which allows an entity to own two television stations in the same 
Nielsen Designated Market Area (DMA) only if no Grade B contour overlap 
exists between the commonly owned stations, or at least one of the 
commonly owned stations is not ranked among the top-four stations in 
the market (top-four prohibition) and at least eight independently 
owned television stations remain in the DMA after ownership of the two 
stations is combined. The Order modifies the Local Television Ownership 
Rule by updating the contour provision for the rule's application to 
reflect the digital television transition. The Order also clarifies 
that the top-four prohibition applies to transactions involving the 
sale or swapping of network affiliations between in-market stations 
that result in an entity holding an attributable interest in two top-
four stations in the same DMA.
    232. The Order retains the Local Radio Ownership Rule, which 
specifies the maximum number of commercial radio stations that can be 
owned depending on the total number of full-power commercial and 
noncommercial radio stations in the market. The Order makes minor 
modifications to the Local Radio Ownership Rule to assist the Media 
Bureau in processing license assignment and transfer applications. 
Specifically, the Order (1) clarifies the exception to the two-year 
waiting period for certain Nielsen Audio Market changes; (2) adopts an 
exemption from the Note 4 grandfathering requirements for intra-Metro 
community of license changes; and (3) redefines the Puerto Rico market.
    233. The Order adopts a revised Newspaper/Broadcast Cross-Ownership 
Rule, which prohibits certain newspaper/television and newspaper/radio 
combinations subject to a case-by-case waiver. The Order updates the 
Newspaper/Broadcast Cross-Ownership Rule's contour provision to 
consider digital television contours consistent with the switch to 
digital television. The Order also eases application of the cross-
ownership prohibition by adopting new market criteria for the rule's 
application and an explicit exception for failed/failing properties.
    234. The Order retains the Radio/Television Cross-Ownership Rule, 
which restricts common ownership of television and radio stations in a 
local market based on the number of independently owned media voices in 
the market. The Order updates the Radio/Television Cross-Ownership 
Rule's contour provision for the rule's application from analog to 
digital to reflect the digital television transition. First, consistent 
with the update to the NBCO Rule, a television station's digital PCC 
will be used instead of its analog Grade A contour when determining the 
rule's trigger. Second, a television station's digital NLSC will be 
used instead of its analog Grade B contour when counting the number of 
media voices remaining in the market post-merger.
    235. The Order 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.
    236. The Order readopts the Television Joint Sales Agreement (JSA) 
Attribution Rule, which was vacated on procedural grounds by the Court 
of Appeals for the Third Circuit in Prometheus III. The Commission has 
found that certain JSAs between in-market television stations rise to 
the level of attribution as they afford the brokering station the 
potential to unduly influence or control the brokered station. The 
Television JSA Attribution Rule attributes same-market television JSAs 
in which the broker sells more than 15 percent of the brokered 
station's weekly advertising time. In such circumstances, the brokered 
station will be counted towards the brokering station's permissible 
broadcast ownership totals for purposes of the Local Television 
Ownership Rule. The Television JSA Attribution Rule also requires the 
filing of attributable television JSAs with the Commission pursuant to 
47 CFR 73.3613 and authorizes the Media Bureau to amend certain forms 
that are impacted by the FCC's action to attribute certain television 
JSAs. The Order preserves the existing grandfathering legislation 
(which grandfathered until Sept. 30, 2025 those television JSAs that 
were in effect as of March 31, 2014) and allows for the transferability 
of such grandfathered television JSAs, consistent with congressional 
guidance.
    237. The Order reinstates the revenue-based eligible entity 
standard and associated measures to promote the Commission's goal of 
encouraging small business participation in the broadcast industry, 
which will cultivate innovation and enhance viewpoint diversity. In the 
Order, the Commission considers possible definitions that would 
expressly recognize the race and ethnicity of applicants but finds that 
the legal standards the courts have said must be met before government 
implementation of preferences based on such race- or gender-conscious 
definitions have not been satisfied.

[[Page 76260]]

    238. The Order adopts a definition of shared service agreements 
(SSAs) and requires commercial television stations to disclose those 
SSAs by placing the agreements in each station's online public 
inspection file. The SSA disclosure requirement will lead to more 
comprehensive information about the prevalence and content of SSAs 
between commercial television stations, which will improve the 
Commission's and the public's ability to assess the potential impact of 
these agreements on the Commission's rules and policies. The method of 
disclosure by placing SSAs in the online public inspection file will 
apply a minimal burden on stations, while providing the public and the 
Commission with easy access to the agreements.
    239. Response to Public Comments and Comments by the Chief Counsel 
for Advocacy of the Small Business Administration. The Commission 
received no comments in direct response to the IRFA or the SIRFA. The 
Chief Counsel for Advocacy of the Small Business Administration did not 
file any comments in response to the proposed rules in this proceeding.
    240. Description and Estimate of the Number of Small Entities to 
Which Rules Will Apply. The SBA defines a television broadcasting 
station that has no more than $38.5 million in annual receipts as a 
small business. Census data for 2012 indicate that 751 television 
broadcasting firms were in operation for the duration of that entire 
year. Of these, 656 had annual receipts of less than $25.0 million per 
year and 95 had annual receipts of $25.0 million or more per year. 
Based on this data and the associated size standard, the Commission 
concludes that the majority of such firms are small.
    241. Additionally, the Commission has estimated the number of 
licensed commercial television stations to be 1,387. According to 
Commission staff review of the BIA/Kelsey, LLC's Media Access Pro 
Television Database on June 2, 2016, about 1,264 of an estimated 1,387 
commercial television stations (or approximately 91 percent) had 
revenues of $38.5 million or less. The Commission has estimated the 
number of licensed noncommercial educational television stations to be 
395.
    242. The SBA defines a radio broadcasting entity that has $38.5 
million or less in annual receipts as a small business. Census data for 
2012 indicate that 3,187 radio broadcasting firms were in operation for 
the duration of that entire year. Of these, 3,134 had annual receipts 
of less than $25.0 million per year and 53 had annual receipts of $25.0 
million or more per year. Based on this data and the associated size 
standard, the Commission concludes that the majority of such firms are 
small.
    243. Further, according to Commission staff review of the BIA/
Kelsey, LLC's Media Access Pro Radio Database on June 2, 2016, about 
11,386 (or about 99.9 percent) of 11,395 commercial radio stations in 
the United States have revenues of $38.5 million or less. The 
Commission has estimated the number of licensed noncommercial radio 
stations to be 4,096. The Commission does not have revenue data or 
revenue estimates for these stations. These stations rely primarily on 
grants and contributions for their operations, so it will assume that 
all of these entities qualify as small businesses.
    244. The Commission notes, however, that, in assessing whether a 
business concern qualifies as small under the SBA definition, business 
(control) affiliations must be included. The Commission's estimate, 
therefore, likely overstates the number of small entities that might be 
affected by its action, because the revenue figure on which it is based 
does not include or aggregate revenues from affiliated companies.
    245. 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 or radio station is 
dominant in its field of operation. Accordingly, the estimate of small 
businesses to which rules may apply does not exclude any television or 
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 assessing these criteria in the context of media entities is 
difficult at times and the estimates of small businesses to which they 
apply may be over-inclusive to this extent.
    246. The SBA has developed a small business size standard for the 
census category of Newspaper Publishers; that size standard is 1,000 or 
fewer employees. Census Bureau data for 2012 show that there were 4,466 
firms in this category that operated for the entire year. Of this 
total, 4,378 firms had employment of 499 or fewer employees, and an 
additional 88 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 its action.
    247. Description of Reporting, Record Keeping, and other Compliance 
Requirements for Small Entities. The Order adopts rule changes that 
will affect reporting, recordkeeping, and other compliance 
requirements. The need for and content of each of these rule changes is 
described in detail above in the summary of the action, and the 
Commission's efforts to minimize the impact of these rules is described 
in detail below. Additionally, the Order adopts a requirement that 
commercial broadcast television stations must place a copy of any SSA 
entered into between commercial broadcast television stations in their 
online public inspection files within 180 days after the filing 
requirement becomes effective. The Commission will seek OMB approval 
for the filing requirement, and, upon receiving approval, the 
Commission will release a Public Notice specifying the date by which 
SSAs must be filed. Going forward, commercial broadcast television 
stations must place copies of such agreements in their online public 
inspection files in a timely fashion following execution.
    248. As a result of these new or modified requirements, the 
Commission does not believe that small businesses will need to hire 
additional professionals (e.g., attorneys, engineers, economists, or 
accountants) to comply with the new reporting, recordkeeping, and other 
compliance requirements. Commercial television stations should already 
have staff capable of placing SSAs in the stations' online public 
files, given the existing public file requirements.
    249. Steps Taken to Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered. 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 finds that 
the rules adopted in the Order, which are intended to achieve the 
policy goals of competition, localism, and diversity, will continue to 
benefit small entities by fostering a media marketplace in which they 
are better able to compete and by promoting additional broadcast 
ownership opportunities among a diverse group of owners, including 
small entities. The Commission 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.

[[Page 76261]]

    250. The Commission finds that the Local Television Ownership Rule, 
as modified, will continue to help 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. The Order also addresses the competitive 
challenges faced by broadcasters that operate in small markets--
including small entities--by retaining the existing failed/failing 
station waiver policy. 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.
    251. The Order 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. The Commission 
finds that retention of the local radio ownership limits, including the 
AM/FM subcaps, will help foster opportunities for new entry in local 
radio markets, including by small entities. Moreover, the Commission 
believes that by limiting the consolidation of market power among the 
dominant groups, the rule will help ensure that small radio station 
owners remain economically viable.
    252. In several ways, the Commission's decisions regarding the NBCO 
Rule minimize the economic impact on small entities, namely small 
broadcasters and newspaper owners. First, retaining the prohibition on 
newspaper/broadcast combinations in local markets will help small 
entities compete on more equal footing with larger media owners that 
may have pursued consolidation strategies through cross-ownership. 
Second, by entertaining waiver requests on a pure case-by-case basis, 
taking into consideration the totality of circumstances surrounding a 
proposed transaction and the potential harm to viewpoint diversity, the 
Commission will have the flexibility to accord the proper weight to any 
factors that are particularly relevant for small media owners. The 
significant alternatives that the Commission considered, such as 
allowing combinations under either a bright-line rule or a presumptive 
waiver standard, would not have afforded the Commission the same degree 
of flexibility. Third, adopting a more lenient approach for proposed 
combinations involving a failed or failing broadcast station or 
newspaper will benefit entities in financial distress, which may be 
more likely to include small entities. Fourth, grandfathering existing 
combinations will avoid disruption of settled expectations of existing 
licensees and prevent any impact on the provision of service by smaller 
entities that are part of such combinations. Finally, requiring 
subsequent purchasers of grandfathered combinations to comply with the 
rule in effect at that time will provide opportunities for new entrants 
to acquire a divested media outlet.
    253. By retaining the Radio/Television Cross-Ownership Rule, the 
Commission minimizes the economic impact on small entities. The 
Commission considered the significant alternative of eliminating the 
rule but concluded that it remained necessary to promote viewpoint 
diversity. Retaining the rule will benefit small broadcast stations by 
limiting the growth of existing combinations of radio stations and 
television stations in local markets. In addition, grandfathering 
existing combinations will avoid disruption of settled expectations of 
existing licensees and prevent any impact on the provision of service 
by smaller stations that are part of such combinations; requiring 
subsequent purchasers of grandfathered combinations to comply with the 
rule in effect at that time will provide opportunities for new entrants 
to acquire a divested media outlet. The Commission's decision also 
alleviates the concern expressed by commenters that further 
consolidation would harm small businesses because radio provides one of 
the few entry points into media ownership for minorities and women.
    254. The Commission finds that the Dual Network 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 believes that these benefits to affiliates are particularly 
important for small entities that may otherwise lack bargaining power.
    255. The Commission finds that reinstating the revenue-based 
standard will help 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 help encourage 
innovation and expand viewpoint diversity. In addition, the 
Commission's intent in reinstating 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 these 
measures will benefit small entities, not burden them.
    256. Although the Commission does not currently require the filing 
or disclosure of sharing agreements that do not contain time brokerage 
or joint advertising sales provisions, broadcasters are required to 
file many types of documents in their public inspection files. 
Therefore, broadcasters, including those qualifying as small entities, 
are well versed in the procedures necessary for compliance and will not 
be overly burdened with having to add SSAs to their public inspection 
files. In addition, the Commission considered various disclosure 
alternatives in the record, but determined that such measures would 
either be more burdensome than the disclosure method adopted in the 
Order or that the proposals would not adequately address the concerns 
raised by the Commission. Ultimately, as the Commission finds that the 
new SSA disclosure requirement will not be especially burdensome to 
small entities, adopting any special measures for small entities with 
respect to this new disclosure requirement is therefore unnecessary.

B. Final Paperwork Reduction Act Analysis

    257. This Report and Order contains information collection 
requirements subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. The requirements will be submitted to the Office of 
Management and Budget (OMB) for review under section 3507(d) of the 
PRA. OMB, the general public, and other Federal agencies will be 
invited to comment on the information collection requirements contained 
in this proceeding. The Commission will publish a separate document in 
the Federal Register at a later date seeking these comments. In 
addition, the Commission notes that pursuant to the Small Business 
Paperwork Relief Act of

[[Page 76262]]

2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the Commission 
previously sought specific comment on how it might further reduce the 
information collection burden for small business concerns with fewer 
than 25 employees. In this present document, the Commission has 
assessed the effects of the SSA disclosure requirement, and finds that 
the disclosure requirement will not impose a significant filing burden 
on businesses with fewer than 25 employees. In addition, the Commission 
has described impacts that might affect small businesses, which 
includes most businesses with fewer than 25 employees, in the FRFA.

C. Congressional Review Act

    258. The Commission will send a copy of this Second Report and 
Order to the Government Accountability Office pursuant to the 
Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

VII. Ordering Clauses

    259. 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 Second Report and Order is 
adopted. The rule modifications attached hereto as Appendix A shall be 
effective thirty (30) days after publication of the text or summary 
thereof in the Federal Register, except for those rules and 
requirements involving Paperwork Reduction Act burdens, which shall 
become effective on the effective date announced in the Federal 
Register notice announcing OMB approval. Changes to Commission Forms 
required as the result of the rule amendments adopted herein will 
become effective on the effective date announced in the Federal 
Register notice announcing OMB approval.
    260. It is further ordered, that the proceedings MB Docket No. 09-
182 and MB Docket No. 14-50 are terminated.

List of Subjects in 47 CFR Part 73

    Radio, Reporting and recordkeeping requirements, Television.

Federal Communications Commission.
Gloria J. Miles,
Federal Register Liaison Officer, Office of the Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 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.  73.3526 by adding paragraph (e)(18) to read as follows:


Sec.  73.3526  Local public inspection file of commercial stations.

* * * * *
    (e) * * *
    (18) Shared service agreements. For commercial television stations, 
a copy of every Shared Service Agreement for the station (with the 
substance of oral agreements reported in writing), regardless of 
whether the agreement involves commercial television stations in the 
same market or in different markets, with confidential or proprietary 
information redacted where appropriate. For purposes of this paragraph, 
a Shared Service Agreement is any agreement or series of agreements in 
which:
    (1) A station provides any station-related services, including, but 
not limited to, administrative, technical, sales, and/or programming 
support, to a station that is not directly or indirectly under common 
de jure control permitted under the Commission's regulations; or
    (2) Stations that are not directly or indirectly under common de 
jure control permitted under the Commission's regulations 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. For 
purposes of this paragraph, the term ``station'' includes the licensee, 
including any subsidiaries and affiliates, and any other individual or 
entity with an attributable interest in the station.
* * * * *

0
3. Amend Sec.  73.3555 by revising paragraphs (b) introductory text, 
(b)(1) introductory text, (b)(1)(ii), (c)(1)(i) and (ii), (c)(3)(i), 
and (d), and revising Note 4 and Note 5; and adding Note 11 and Note 12 
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 
(computed in accordance with Sec.  73.622(e)) do not overlap; or
* * * * *
    (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 DMA, count the TV stations 
present in an area that would be the functional equivalent of a TV 
market. Count only those TV stations 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.
* * * * *
    (c) * * *
    (1) * * *
    (i) The predicted or measured 1 mV/m contour of an existing or 
proposed FM station (computed in accordance with Sec.  73.313) 
encompasses the entire community of license of an existing or proposed 
commonly owned TV broadcast station(s), or the principal community 
contour(s) of the TV broadcast station(s) (computed in accordance with 
Sec.  73.625) encompasses the entire community of license of the FM 
station; or
    (ii) The predicted or measured 2 mV/m groundwave contour of an 
existing or proposed AM station (computed in accordance with Sec.  
73.183 or Sec.  73.186), encompasses the entire community of license of 
an existing or proposed commonly owned TV broadcast station(s), or the 
principal community contour(s) of the TV broadcast station(s) (computed 
in accordance with Sec.  73.625) encompass(es) the entire community of 
license of the AM station.
* * * * *
    (3) * * *
    (i) TV stations: Independently owned and operating full-power 
broadcast TV stations within the DMA of the TV station's (or stations') 
community (or communities) of license that have digital noise limited 
service contours (computed in accordance with Sec.  73.622(e)) that 
overlap with the digital noise limited service contour(s) of the TV 
station(s) at issue;
* * * * *
    (d) Newspaper/broadcast cross-ownership rule. (1) No party 
(including all parties under common control) may directly or indirectly 
own, operate, or control a daily newspaper and a full-

[[Page 76263]]

power commercial broadcast station (AM, FM, or TV) if:
    (i) The predicted or measured 2 mV/m groundwave contour of the AM 
station (computed in accordance with Sec.  73.183 or Sec.  73.186) 
encompasses the entire community in which the newspaper is published 
and, in areas designated as Nielsen Audio Metro markets, the AM station 
and the community of publication of the newspaper are located in the 
same Nielsen Audio Metro market;
    (ii) The predicted or measured 1 mV/m contour of the FM station 
(computed in accordance with Sec.  73.313) encompasses the entire 
community in which the newspaper is published and, in areas designated 
as Nielsen Audio Metro markets, the FM station and the community of 
publication of the newspaper are located in the same Nielsen Audio 
Metro market; or
    (iii) The principal community contour of the TV station (computed 
in accordance with Sec.  73.625) encompasses the entire community in 
which the newspaper is published; and the community of license of the 
TV station and the community of publication of the newspaper are 
located in the same DMA.
    (2) The prohibition in paragraph (d)(1) of this section shall not 
apply upon a showing that either the newspaper or television station is 
failed or failing.
* * * * *

    Note 4 to Sec.  73.3555:  Paragraphs (a) through (d) of this 
section will not be applied so as to require divestiture, by any 
licensee, of existing facilities, and will not apply to applications 
for assignment of license or transfer of control filed in accordance 
with Sec.  73.3540(f) or Sec.  73.3541(b), or to applications for 
assignment of license or transfer of control to heirs or legatees by 
will or intestacy, or to FM or AM broadcast minor modification 
applications for intra-market community of license changes, if no 
new or increased concentration of ownership would be created among 
commonly owned, operated or controlled media properties. Paragraphs 
(a) through (d) of this section will apply to all applications for 
new stations, to all other applications for assignment or transfer, 
to all applications for major changes to existing stations, and to 
all other applications for minor changes to existing stations that 
seek a change in an FM or AM radio station's community of license or 
create new or increased concentration of ownership among commonly 
owned, operated or controlled media properties. Commonly owned, 
operated or controlled media properties that do not comply with 
paragraphs (a) through (d) of this section may not be assigned or 
transferred to a single person, group or entity, except as provided 
in this Note, the Report and Order in Docket No. 02-277, released 
July 2, 2003 (FCC 02-127), or the Second Report and Order in MB 
Docket No. 14-50, FCC 16-107 (released August 25, 2016).


    Note 5 to Sec.  73.3555:  Paragraphs (b) through (e) of this 
section will not be applied to cases involving television stations 
that are ``satellite'' operations. Such cases will be considered in 
accordance with the analysis set forth in the Report and Order in MM 
Docket No. 87-8, FCC 91-182 (released July 8, 1991), in order to 
determine whether common ownership, operation, or control of the 
stations in question would be in the public interest. An authorized 
and operating ``satellite'' television station, the digital noise 
limited service contour of which overlaps that of a commonly owned, 
operated, or controlled ``non-satellite'' parent television 
broadcast station, or the principal community contour of which 
completely encompasses the community of publication of a commonly 
owned, operated, or controlled daily newspaper, or the community of 
license of a commonly owned, operated, or controlled AM or FM 
broadcast station, or the community of license of which is 
completely encompassed by the 2 mV/m contour of such AM broadcast 
station or the 1 mV/m contour of such FM broadcast station, may 
subsequently become a ``non-satellite'' station under the 
circumstances described in the aforementioned Report and Order in MM 
Docket No. 87-8. However, such commonly owned, operated, or 
controlled ``non-satellite'' television stations and AM or FM 
stations with the aforementioned community encompassment, may not be 
transferred or assigned to a single person, group, or entity except 
as provided in Note 4 of this section. Nor shall any application for 
assignment or transfer concerning such ``non-satellite'' stations be 
granted if the assignment or transfer would be to the same person, 
group or entity to which the commonly owned, operated, or controlled 
newspaper is proposed to be transferred, except as provided in Note 
4 of this section.

* * * * *

    Note 11 to Sec.  73.3555:  An entity will 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. Parties should 
also refer to the Second Report and Order in MB Docket No. 14-50, 
FCC 16-107 (released August 25, 2016).


    Note 12 to Sec.  73.3555:  Parties seeking waiver of paragraph 
(d)(1) of this section, or an exception pursuant to paragraph (d)(2) 
of this section involving failed or failing properties, should refer 
to the Second Report and Order in MB Docket No. 14-50, FCC 16-107 
(released August 25, 2016).

[FR Doc. 2016-25567 Filed 10-31-16; 8:45 am]
 BILLING CODE 6712-01-P