Amicus Curiae Brief — Federal Communications Commission, et al., Petitioners v. Prometheus Radio Project, et al.

Supreme Court briefDec 23, 2020

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Nos. 19-1231, 19-1241

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In The

Supreme Court of the United States

---------------------------------♦--------------------------------FEDERAL COMMUNICATIONS COMMISSION, et al.,

Petitioners,

PROMETHEUS RADIO PROJECT, et al.,

Respondents.

---------------------------------♦--------------------------------NATIONAL ASSOCIATION OF BROADCASTERS, et al.,

Petitioners,

PROMETHEUS RADIO PROJECT, et al.,

Respondents.

---------------------------------♦--------------------------------On Writs Of Certiorari To The

United States Court Of Appeals

For The Third Circuit

---------------------------------♦--------------------------------BRIEF AMICUS CURIAE ON BEHALF OF

MEDIA LAW AND POLICY SCHOLARS

IN SUPPORT OF RESPONDENTS

---------------------------------♦--------------------------------JAMES DAVY

Counsel of Record

ALL RISE TRIAL & APPELLATE

P.O. Box 15126

Philadelphia, PA 19125

609-273-5008

jimdavy@allriselaw.org

================================================================================================================

COCKLE LEGAL BRIEFS (800) 225-6964

WWW.COCKLELEGALBRIEFS.COM

TABLE OF CONTENTS

Page

STATEMENT OF INTEREST ...............................

SUMMARY OF ARGUMENT ................................

ARGUMENT ...........................................................

Video-on-demand services are not functional

equivalents and competitive alternatives to

local broadcast content, and the FCC’s proposed deregulation does not reckon with

that absence .................................................

A. Video-on-demand programming does

not serve as a functional equivalent or

comparable alternative to local broadcast content ............................................

B. Deregulation of the type proposed by

the FCC will harm access to important

broadcast content without providing for

a functional equivalent or comparable

alternative ............................................. 12

II.

Mergers and acquisitions offer limited, if

any, enhancement of core statutory goals,

including diversity, localism and competition................................................................ 17

A. The broadcast industry uses mergers

and acquisitions to increase profits,

without any evidence that those mergers and acquisitions increase diversity,

localism, and competition ...................... 18

TABLE OF CONTENTS—Continued

Page

B. To the contrary, local broadcast television

is profitable, invests in new technologies,

and adapts to changing marketplace

conditions without needing further industry consolidation .............................. 21

C. Firms will remain on stable footing going forward because rising retransmission consent revenues amply offset

declines in advertising revenue, but negotiations for those fees underscore the

stakes for consumers ............................. 24

i. Retransmission fees offset declines

in advertising revenue ..................... 25

ii. Retransmission negotiations among

large consolidated entities harm consumers because of brinksmanship and

leverage ............................................. 26

III.

Robustly competitive and diverse media

remains essential, particularly during the

COVID-19 pandemic and our post-pandemic

recovery ........................................................ 29

A. Broadcast media has thrived during the

pandemic ................................................ 30

B. Consolidation will harm the volume and

quality of news, public affairs, and local

content, and the FCC ignored readilyavailable data to assume otherwise...... 31

CONCLUSION .......................................................

iii

TABLE OF CONTENTS—Continued

Page

APPENDIX

Signatory Media Law and Policy Scholars ......... App. 1

TABLE OF AUTHORITIES

Page

CASES:

American Broadcasting Cos., Inc. v. Aereo, Inc.,

573 U.S. 431 (2014) .................................................11

Hispanic Affairs Project v. Acosta,

901 F.3d 378 (D.C. Cir. 2018) ..................................33

Motor Vehicle Mfrs. Ass’n v.

State Farm Mut. Auto. Ins. Co.,

463 U.S. 29 (1983) ............................................. 16, 35

Okla. Dept. of Env’t Quality v. EPA,

740 F.3d 185 (D.C. Cir. 2014) ..................................33

Prometheus Radio Project v. FCC,

939 F.3d 567 (3d Cir. 2019) ............................... 13, 34

Qwest Corp. v. FCC,

258 F.3d 1191 (10th Cir. 2001) ................................35

SEC v. Chenery Corp.,

332 U.S. 194 (1947) .................................................16

United States v. AT&T, Inc.,

310 F. Supp. 3d 161 (D.D.C. 2018),

aff ’d, 916 F.3d 1029 (D.C. Cir. 2019) .......................27

STATUTES:

Communications Act of 1934, as amended,

47 U.S.C. § 325(b)(3)(C) ...........................................28

47 U.S.C. § 503(b)(2)(A) ...........................................28

Television Viewer Protection Act of 2019,

Pub. L. No. 116-94, 133 Stat. 2534 (2019) ..............28

TABLE OF AUTHORITIES—Continued

Page

AGENCY MATERIALS:

Broadcasters Serving Their Communities in Response to COVID-19 Pandemic, FCC (July 8,

2020), https://www.fcc.gov/broadcasters-servingtheir-communities-response-covid-19-pandemic .......31

DIRECTV, LLC v. Deerfield Media, Inc.,

MB Docket No. 19-168, F.C.C. 20-122

(rel. Sept. 15, 2020) .................................................28

FCC, Broadcast Station Totals as of September

30, 2020, Press Release (Oct. 2, 2020), https://

docs.fcc.gov/public/attachments/DOC-367270A1.

docx ..........................................................................21

FCC News, Sinclair Agrees to Pay $48 Million

Civil Penalty, FCC Penalty Will Be Largest Ever

Paid by a Broadcaster (May 6, 2020) retrieved

from: https://docs.fcc.gov/public/attachments/

DOC-364198A1.docx ...............................................22

Good faith and exclusive retransmission

consent complaints,

47 C.F.R. § 76.65 ......................................................28

Implementation of Section 1003 of the

Television Viewer Protection Act of 2019,

MB Docket No. 20-31, Notice of Proposed

Rulemaking, F.C.C. 20-10 (rel. Jan. 31, 2020) ........28

In the Matter of Establishment of the

Office of Economics and Analytics, Order,

33 FCC Rcd. 1539 (2018) ........................................34

TABLE OF AUTHORITIES—Continued

Page

In the Matter of Promoting Innovation and

Competition in the Provision of Multichannel

Video Programming Distribution Services,

MB Docket No. 14-261, Notice of Proposed

Rulemaking, 29 FCC Rcd. 15995 (2014) .......... 11, 12

In the Matter of the Applications of Tribune Media Company (Transferor) and Nexstar Media

Group, Inc. (Transferee) et al., for Transfer of

Control of Tribune Media Company to Nexstar

Media Group, Inc., and Assignment of Certain

Broadcast Licenses and Transfer of Control of

Certain Entities Holding Broadcast Licenses,

MB Docket No. 19-30, Memorandum Opinion

and Order, 2019 WL 4440126 (2019) ......................17

In re Communications Marketplace Report,

GN Docket No. 18-231, 2018 WL 6839365 (rel.

Dec. 26, 2018) .................................................. passim

Wayne Leighton, et al., FCC, Plan for Office of

Economics and Analytics (OEA) Recommendations and Report to Chairman Ajit Pai (Jan.

9, 2018), https://docs.fcc.gov/public/attachments/

DOC-348640A1.pdf .................................................33

2018 Quadrennial Regulatory Review: Review of

the Commission’s Broadcast Ownership Rules

and Other Rules Adopted Pursuant to Section

202 of the Telecommunications Act of 1996,

MB Docket No. 18-349, Notice of Proposed

Rulemaking, 33 FCC Rcd. 12111 (2018) .......... 13, 29

vii

TABLE OF AUTHORITIES—Continued

Page

2014 Quadrennial Regulatory Review – Review of

the Commission’s Broadcast Ownership Rules

and Other Rules Adopted Pursuant to Section

202 of the Telecommunications Act of 1996 et al.,

MB Docket No. 14-50, Order on Reconsideration and Notice of Proposed Rulemaking, 32

FCC Rcd. 9802 (2017) ........................... 13, 14, 15, 18

2014 Quadrennial Regulatory Review – Review of

the Commission’s Broadcast Ownership Rules

and Other Rules Adopted Pursuant to Section 202

of the Telecommunications Act of 1996 et al., Second

Report and Order, 31 FCC Rcd. 9864 (2016) .......17

OTHER AUTHORITIES:

All Internet Is Powered by Data, XFINITY, https://

www.xfinity.com/learn/internet-service/data ...........6

AT&T Internet + TV, AT&T, https://www.att.com/

bundles/ ...................................................................16

Brad Adgate, Local TV Broadcasters Launching

Streaming Video to Reach a Broader Audience,

Forbes (Sep. 18, 2020), https://www.forbes.com/

sites/bradadgate/2020/09/18/local-tv-broadcasterslaunching-streaming-video-to-reach-a-broaderaudience...................................................................23

Brad Adgate, TV Station Blackouts Are Accelerating;

Here’s Why, Forbes (Nov. 12, 2019), https://

www.forbes.com/sites/bradadgate/2019/11/12/

tv-station-blackouts-are-accelerating-hereswhy/?sh=5a2b582c7f6c............................................27

viii

TABLE OF AUTHORITIES—Continued

Page

Michael Balderston, Tegna Stations Blackout for

DirecTV Customers, TV Technology (Dec. 2,

2020), https://www.tvtechnology.com/news/tegnastations-blackout-for-directv-customers.................27

Karl Bode, Wall Street: Traditional Cable TV

Sector ‘Unraveling’ in Wake of Covid, TechDirt

(Oct. 26, 2020, 6:26 AM), https://www.techdirt.

com/articles/20201005/07244645443/wall-streettraditional-cable-tv-sector-unraveling-wakecovid.shtml ................................................................8

Brief of Gray Television, Inc. as Amicus Curiae

Supporting Petitioners, Nos. 19-1231 & 19-1241

(filed Nov. 23, 2020) .................................................31

Joe Cornell, Gray Television Withdraw Bid For

Tegna, Forbes (Mar. 19, 2020), https://www.forbes.

com/sites/joecornell/2020/03/19/gray-televisionwithdraw-bid-for-tegna ...........................................20

Rick Edmonds, As Print and Digital Newsrooms

Struggle, Local Broadcast Stations Are Making Money ‘Hand Over Fist’, Poynter: Business

and Work (Dec. 11, 2019), https://www.poynter.

org/business-work/2019/the-rich-get-richer-localbroadcast-readies-for-a-3-2-billion-political-adbonanza-in-2020/ .....................................................22

For Local News, Americans Embrace Digital

But Still Want Strong Community Connection, PEW RES. CTR.: Reports (Mar. 26, 2019),

https://www.journalism.org/2019/03/26/for-localnews-americans-embrace-digital-but-still-wantstrong-community-connection/ ...............................23

TABLE OF AUTHORITIES—Continued

Page

Rob Frieden, Krishna Jayakar, & Eun-A Park,

There’s Probably a Blackout in Your Television

Future: Tracking New Carriage Negotiation

Strategies Between Video Content Programmers and Distributors, 43 COLUM. J.L. & ARTS

487 (2020) ................................................................26

Rob Frieden, Case Studies in Abandoned Empiricism and the Lack of Peer Review at the Federal Communications Commission, 8 J. ON

TELECOMM. & HIGH TECH. L. 277 (2010) .................34

Elizabeth Grieco, 10 Charts About America’s

Newsrooms, PEW RES. CTR.: FactTank (Apr. 28,

2020), https://www.pewresearch.org/fact-tank/

2020/04/28/10-charts-about-americas-newsrooms/.......23

Elizabeth Grieco, U.S. Newspapers Have Shed

Half of their Newsroom Employees Since 2008,

PEW RES. CTR.: FactTank (April 20, 2020),

https://www.pewresearch.org/fact-tank/2020/

04/20/u-s-newsroom-employment-has-droppedby-a-quarter-since-2008/ .........................................23

Krystal Hu & Greg Roumeliotis, Gray Television

Withdraws Tegna Offer Amid Coronavirus Rout:

Sources, Reuters (Mar. 17, 2020), https://www.

reuters.com/article/us-tegna-m-a-gray-television/

gray-television-withdraws-tegna-offer-amidcoronavirus-rout-sources-idUSKBN2143D1 ..........20

TABLE OF AUTHORITIES—Continued

Page

In The ‘New Normal’ of Covid-19, Local TV News

Proves to be the Medium of Choice for News

and Information, Nielson: Insights (Mar. 24,

2020), https://www.nielsen.com/us/en/insights/

article/2020/in-the-new-normal-of-covid-19-localtv-news-proves-to-be-the-medium-of-choice-fornews-and-information/ ............................................30

In Your Area, American Television Alliance, https://

www.americantelevisionalliance.org/in-yourarea/ .........................................................................27

Journalism & Media Staff, Which Ownership

Produces the Best “Quality” News?, PEW RES.

CTR. (Apr. 29, 2003), https://www.journalism.

org/2003/04/29/which-ownership-produces-thebest-quality-news/ ...................................................32

Victor Kao, Retransmission Fees Give Lift to TV

Broadcast Revenue As Advertising Declines, RSM:

The Real Economy Blog (Sep. 11, 2019), https://

realeconomy.rsmus.com/retransmission-feesgive-lift-to-tv-broadcast-revenue-as-advertisingdeclines/ ...................................................................25

KNIGHT FOUNDATION, LOCAL TV NEWS AND THE NEW

MEDIA LANDSCAPE: PART 1, THE STATE OF THE INDUSTRY (Apr. 5, 2018), https://knightfoundation.

org/wp-content/uploads/2020/03/TVNews_bundlev5.pdf .........................................................................7

TABLE OF AUTHORITIES—Continued

Page

John Kodera, Sony Interactive Entertainment to

Shut Down PlayStation Vue, PLAYSTATION:

BLOG (Oct. 29, 2019), https://blog.playstation.

com/2019/10/29/sony-interactive-entertainmentto-shut-down-playstation-vue/#:~:text=Today

%20we%20are%20announcing%20that,on%20

our%20core%20gaming%20business......................15

Jon Lafayette, 200 Stations Jump into New Streaming Venture, Next TV (Sep. 1, 2020), https://

www.nexttv.com/news/200-stations-jump-intonew-streaming-venture ..........................................24

Local TV Sees Audience Boost, Reaching Younger

and More Diverse Audiences, Nat’l Assn. of Broads.

(Nov. 20, 2020), https://blog.nab.org/2020/11/13/

local-tv-sees-audience-boost-reaching-youngerand-more-diverse-audiences/ ..................................30

New America Foundation, Focus on the United

States, THE COST OF CONNECTIVITY 2020 (2020),

https://www.newamerica.org/oti/reports/costconnectivity-2020/focus-on-the-united-states ..........6

Justin Nielson, Retrans Projections Update: Sub

Rates Continue to Rise, S&P Global: Market

Intelligence (July 25, 2019), https://www.spglobal.

com/marketintelligence/en/news-insights/research/

retrans-projections-update-sub-rates-continueto-rise .......................................................................26

Pay Less for Your TV, HULU, https://www.hulu.

com/live-tv ...............................................................15

xii

TABLE OF AUTHORITIES—Continued

Page

Sarah Perez, Nielsen: 16M U.S. Homes Now Get

TV Over-the-Air, a 48% Increase Over Past 8

Years, TechCrunch (Jan. 15, 2019, 7:51 AM

PST), https://techcrunch.com/2019/01/15/nielsen16m-u-s-homes-now-get-tv-over-the-air-a-48increase-over-past-8-years/ .......................................8

Bob Papper, RTDNA/Newhouse School at Syracuse

University Survey (2020); retrieved from: https://

www.rtdna.org/uploads/files/2020%20RTDNA

%20Survey%20-%20TV%20profit-budget.pdf ........22

Bob Papper, 2018 RTNDA/Hofstra University

Newsroom Survey: Local News by the Numbers, Radio Television News Digit. News Assoc.

(2018), https://www.rtdna.org/article/research_

2018_local_news_by_the_number ..........................32

PEW RES. CTR., How News Happens: A Study of

the News Ecosystem of One American City

(Jan. 11, 2010), https://www.journalism.org/2010/

11/how-news-happens ...............................................8

PEW RES. CTR., Local TV News Fact Sheet, Newsroom Investment (June 25, 2019), https://www.

journalism.org/fact-sheet/local-tv-news/ ................23

Lillian Rizzo, Local TV Sees Spike in Viewers,

Drop in Ads in Coronavirus Crisis, Wall St. J.

(Apr. 3, 2020) ...........................................................30

Christopher Terry & Caitlin Ring Carlson, Hatching Some Empirical Evidence: Minority Ownership Policy and the FCC’s Incubator Program,

24 COMM. L. & POL’Y 403 (2019) .............................33

xiii

TABLE OF AUTHORITIES—Continued

Page

Danilo Yanich, Buying Reality Political Ads,

Money, and Local Television News (2020) ..............22

Danilo Yanich, Does Ownership Matter? Localism, Content, and the Federal Communications

Commission, 23 J. MEDIA ECON. 51 (2010) .............32

Danilo Yanich, Duopoly Light? Service Agreements and Local TV, 91 JOURNALISM & MASS

COMM. Q. 159 (2014)................................................19

Danilo Yanich, Local TV News Content & Shared

Services Agreements: The Honolulu Case, 57 J.

BROAD. & ELEC. MEDIA 242 (2013) ..........................19

Atif Zubair, Economics of Broadcast TV Retransmission Revenue 2020, S&P Global: Market Intelligence (Aug. 24, 2020), https://www.spglobal.

com/marketintelligence/en/news-insights/blog/

economics-of-broadcast-tv-retransmission-revenue2020 .........................................................................26

STATEMENT OF INTEREST1

Media Law and Policy Scholars are an ad hoc

group of university professors whose research includes

analysis of whether the Federal Communications Commission (“FCC”) has compiled data that support its

decisions to relax, eliminate, modify, or maintain ownership restrictions on broadcast licensees. As part of

our research, teaching and scholarship, the Media

Law and Policy Scholars assess legislative, regulatory and judicial matters affecting whether and how

communications media in the United States has

achieved longstanding policy objectives such as promoting diversity, localism, and competition, while fully

complying with statutory mandates. Signatory Media Law and Policy Scholars are identified in the

Appendix.

The Media Law and Policy Scholars have a particular academic interest in the questions presented by

this case, because the FCC’s market assessments, as

well as the assertions made by some Parties in this

case, do not accurately reflect marketplace conditions

and the impact of recent and prospective reductions in

regulatory safeguards. As scholars committed to generating research that stands up to rigorous peer review, we take particular issue with serious defects

in the manner by which regulatory agencies and

All parties have consented to the filing of this brief. No

counsel for a Party authored this brief in whole or in part, or made

a monetary contribution to fund the preparation or filing of this

brief. This brief has been prepared and filed pro bono by counsel

in concert with amici Scholars.

reviewing courts use market and statistical analysis in

reaching decisions having substantial impacts on the

marketplace of ideas.

---------------------------------♦---------------------------------

SUMMARY OF ARGUMENT

The Third Circuit, in four opinions spanning almost twenty years, has identified defects, deficiencies,

and analytical gaps in the FCC’s Congressionallymandated review of its broadcast ownership rules.

This Court should affirm, because the FCC’s proposed

regulations rely on assumptions belied by the reality

of how the broadcasting marketplace currently functions and, often, the FCC’s own conclusions.

First, video-on-demand services offered over the

Internet are not functional equivalents and competitive alternatives to content transmitted by local broadcasters using FCC-licensed spectrum. They are more

expensive, typically do not disseminate emergency announcements and news quickly and widely, and generally offer different types of content. Consumers still

want access to broadcast content that video-on-demand

services do not provide. The FCC has acknowledged all

of these fundamental truths, yet it has proposed substantial changes in its rules based on unsupported

assumptions that video-on-demand market entrants

have generated competitive alternatives that obviate

the need for most broadcast industry ownership restrictions.

Second, mergers and acquisitions do not serve core

statutory goals including diversity, localism, and competition. Consolidation increases profits for providers

without stimulating new investment in technology or

local content, as broadcasters themselves admit in regulatory filings. To the contrary, as FCC data show,

broadcast television station owners invest in new technologies and adapt to changing marketplace conditions

successfully even without ownership consolidation into

a small number of hands. Broadcast media remains on

stable footing despite challenges to advertising revenue in a changing climate. Consolidation only increases brinksmanship that harms consumers.

Finally, competitive and diverse media remain essential to our polity, as the ongoing pandemic underscores. Demand for high quality live news is higher

than ever, and consolidation will harm access to that

essential content. The FCC ignored readily-available

data that demonstrate how ownership concentration

reduces volume and quality of news, public affairs programming and other local content.

The Third Circuit’s direction for the FCC to use its

subject-matter expertise and lawful authority to collect essential data about marketplace conditions, and

to make decisions based on empirical data rather than

unsupported assumptions, is not error. The FCC has

ignored reduced competition and its effects for two

decades and seeks to further deregulate without justifying its proposal. The Media Law and Policy Scholars

urge this Court to affirm, and to apply its long line of

precedent requiring administrative agencies to engage

in reasoned analysis that promotes the public interest,

as directed by statute.

---------------------------------♦---------------------------------

ARGUMENT

Video-on-demand services are not functional

equivalents and competitive alternatives to

local broadcast content, and the FCC’s proposed deregulation does not reckon with

that absence.

Despite proliferating new video-on-demand programming sources, over the air reception of “live” broadcast programming remains essential in American life.

Broadcast content serves many key and irreplaceable

functions. It reaches more Americans, including those

who cannot afford video-on-demand and broadband internet. It disseminates news, including emergency announcements, quickly and widely. And it offers local

and live content rather than recorded content that

does not differ across the country or world. While acknowledging that video-on-demand content offered over

the Internet does not serve as a functional equivalent

or alternative to local broadcasting, the FCC nevertheless ignored its statutory mandate and prior direction

from the Third Circuit in proposing poorly-justified deregulation.

A. Video-on-demand programming does not

serve as a functional equivalent or comparable alternative to local broadcast

content.

Video-on-demand2 programming substantially

differs from live broadcast content. Several aspects

of service delivery illustrate why such content is not

a functional equivalent to local broadcasting. First,

video-on-demand content costs consumers substantially more to access than broadcast content. Second,

video-on-demand programmers do not disseminate vital news quickly and widely, particularly concerning

emergencies. And third, the content itself targets different consumer tastes and uses different technologies

for delivery.

First, video-on-demand content costs substantially

more than local broadcast television. The former offers

premium, “on-demand” access to content for subscribers willing and able to pay a monthly fee for broadband

access, plus, in most instances, an additional monthly

subscription for the content. The latter requires no direct payment from viewers, because advertisers pay for

the opportunity to make commercial pitches to large

audiences. This price difference matters, because a

“Linear channels offer specific video programs at a specific

time of day in a manner akin to broadcast television. VOD programs

are stored electronically by the provider and can be viewed by the

consumer at any time, i.e., on demand.” In re Communications

Marketplace Report, GN Docket No. 18-231, 2018 WL 6839365, at

*19 n.130 (rel. Dec. 26, 2018), https://docs.fcc.gov/public/attachments/

FCC-18-181A1.pdf [hereinafter 2018 Communications Marketplace Report].

significant portion of United States households cannot

readily budget a monthly subscription payment for

premium programming offered primarily by cable and

satellite television operators.3 The average monthly

broadband access subscription rate in the United States,

based on a dataset comprising 290 different service

plans, is reported to be $62.17 per month for short term

promotional plans and $83.41 per month thereafter.4

Some broadband-delivered video programming is advertiser-supported service with no additional out-ofpocket monthly payments for content, but most options, such as Disney, HBO Max, and Netflix, have

monthly subscription rates between $9 and $15. Subscribers must pay a monthly broadband subscription

The FCC reports that the inflation-adjusted price of multichannel video programming distribution service primarily from

cable and satellite television MVPD video service increased 74%,

from an average of $698.30 per year in 2000 to $1,211.58 in 2017.

2018 Communications Marketplace Report at *39 ¶117 (citations

omitted).

New America Foundation, Focus on the United States, THE

COST OF CONNECTIVITY 2020 (2020), https://www.newamerica.

org/oti/reports/cost-connectivity-2020/focus-on-the-united-states

(last visited Dec. 17, 2020). Out-of-pocket monthly broadband

payments will increase for many households with multiple occupants. Major national broadband access providers, such as Comcast, have begun to impose a limit on the amount of content

subscribers can use without paying a surcharge. See, e.g., All Internet Is Powered by Data, XFINITY, https://www.xfinity.com/learn/

internet-service/data (last visited Dec. 17, 2020). The COVID-19

pandemic, with households participating in work-from-home and

remote learning, has increased the need for data and illustrated

the effect of caps.

plus additional monthly payments for each content

subscription.

Second, video-on-demand alternatives do not replicate one of the most important functions of broadcast

television. Despite market entry by a variety of Internet sources for news, local broadcasting remains the

preeminent provider of both local programming and vital emergency notifications that people must receive

immediately. The FCC explicitly acknowledges that

the more things change in the media marketplace, some

dynamics remain rock solid, including the essential

lifeline extended to the public by local broadcasters:

Many broadcast television stations differentiate themselves from both other stations and

cable channels by offering local news, exclusive news stories, investigative reporting, regional and local sports, and coverage of

community events. . . . Although local news is

becoming more available from other sources,

local broadcast television stations remain the

most viewed source and the most preferred

source for emergency news.5

Broadcasting remains vital for disseminating

news and emergency information in part because of

the irreplaceable role it plays for many Americans who

do not have, or cannot afford, broadband internet and

2018 Communications Marketplace Report at *36 ¶104 (citations omitted). See also KNIGHT FOUNDATION, LOCAL TV NEWS

AND THE NEW MEDIA LANDSCAPE: PART 1, THE STATE OF THE INDUSTRY (Apr. 5, 2018), https://knightfoundation.org/wp-content/uploads/2020/03/TVNews_bundle-v5.pdf.

video-on-demand services. As of 2018, the FCC reported that an estimated 16.6 million households in

the United States, representing 13.9% of the total with

televisions, solely relied on over-the-air reception of

broadcast television signals.6 This represents a 48% increase in the last eight years, despite the proliferation

of new video entertainment options available via a

broadband connection to the Internet.7 Those households rely solely on broadcast television to receive

news and emergency notifications, and video-on-demand

cannot substitute that role.8 Moreover, studies show

that Internet news sources often replicate, but do not

compete with, locally-produced news on broadcast television and in newspapers.9

Third, video-on-demand and broadcast services

differ substantially in content and delivery. Live

2018 Communications Marketplace Report at *37 ¶109 (citations omitted). Using data collected by the Nielsen audience

ratings firm, the FCC reported that 15.7 million TV households

(13.2%) in 2017, and 13.3 million TV households (11%) in 2016

relied solely on off air reception. Id.

Sarah Perez, Nielsen: 16M U.S. Homes Now Get TV Overthe-Air, a 48% Increase Over Past 8 Years, TechCrunch (Jan. 15,

2019, 7:51 AM PST), https://techcrunch.com/2019/01/15/nielsen-16mu-s-homes-now-get-tv-over-the-air-a-48-increase-over-past-8-years/.

The COVID-19 pandemic has accelerated these trends with

cable and satellite subscriptions declining as consumers look for

ways to save money. See, e.g., Karl Bode, Wall Street: Traditional

Cable TV Sector ‘Unraveling’ in Wake of Covid, TechDirt (Oct. 26, 2020,

6:26 AM), https://www.techdirt.com/articles/20201005/07244645443/

wall-street-traditional-cable-tv-sector-unraveling-wake-covid.shtml.

PEW RES. CTR., How News Happens: A Study of the News

Ecosystem of One American City (Jan. 11, 2010), https://www.

journalism.org/2010/01/11/how-news-happens/.

broadcast television offers advertiser- or governmentsupported programming transmitted to audiences via

FCC-licensed spectrum for immediate reception, including local content created by local affiliates of national networks, such as ABC, CBS, Fox and NBC. Most

video-on-demand content, available via a broadband

Internet connection, offers consumers access to a variety of non-local content, including movies and multiepisode entertainment, as well as the content only

available via national cable and satellite television

networks. Subscribers can watch such content immediately, as it “streams” through broadband conduits onward to their television and computer screens, or in

some instances, they can store it for later viewing.

The FCC itself explicitly recognizes that local television broadcasters and video programmers delivering content via the Internet typically target different

audiences:

[C]onsumers may view video services as substitutes when they offer the same or similar

content, but consumers may view video services as supplements when they offer exclusive

or dissimilar content. Consumers frequently

subscribe to multiple OVDs [online video distributors] (Netflix, HBO, Hulu), but typically

to only one MVPD [multichannel video programming distributor] (cable, DBS, or telco).

Some consumers supplement OTA [over the

air] television viewing with one or more

OVDs. Consumer views on the competitive nature or substitutability of video programming

providers depends on factors such as available

content, prices, the number of advertisements,

the ability to watch content on different devices in different locations, user interfaces,

and the need for and cost of broadband access at sufficient speeds for video delivery.

Whether consumers view video services as

substitutes or supplements depends on the

relative values they assign to these and other

features.10

The FCC also acknowledges that, despite the proliferation of online options, consumers still want access

to live, “must see” broadcast television programming,

such as local news, sports and weather, as well as the

sporting events exclusively offered by the four major

broadcast television networks:

Despite new technologies competing for viewers’ attention, the amount of video Americans

watch has actually been on the rise—approaching six hours a day in 2018—with a majority continuing to consist of live or timeshifted traditional television viewing. Similarly, more than 90 percent of Americans still

listen to the radio each week. Total broadcast

industry revenues have appeared fairly stable

in recent years. Moreover, television remains

a common place for Americans to get their

news, and some evidence suggests that broadcast television outlets produce a significant

2018 Communications Marketplace Report at *38 ¶114.

portion of the video news content published on

websites and social media platforms.11

Caselaw and administrative proceedings confirm

the content and the conduit used for delivery are

simply not equivalent. Both the FCC and this Court

have observed that video services delivered via the Internet are not functional equivalents to what existing

video programmers offer via cable and satellite networks. In American Broadcasting Cos., Inc. v. Aereo,

Inc., 573 U.S. 431 (2014), this Court held that retransmission of copyrighted video content streamed via the

Internet did not qualify Aereo to be classified as a cable

system by the FCC, thereby disqualifying the company

from the opportunity to secure an inexpensive, compulsory copyright license for the content delivered to subscribers.

The FCC, similarly, has tentatively determined

that most broadband-delivered, video-on-demand content does not constitute a functional equivalent to the

services provided by incumbent cable and satellite

television providers.12 Without an FCC finding that

broadband providers furnish a similar conduit for live

video programming, most new broadband entertainment

2018 Quadrennial Regulatory Review: Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted

Pursuant to Section 202 of the Telecommunications Act of 1996,

MB Docket No. 18-349, Notice of Proposed Rulemaking, 33 FCC

Rcd. 12111, 12113 (2018) (citations omitted).

In the Matter of Promoting Innovation and Competition in

the Provision of Multichannel Video Programming Distribution

Services, MB Docket No. 14-261, Notice of Proposed Rulemaking,

29 FCC Rcd. 15995 (2014).

ventures will not qualify for the low-cost compulsory

available to cable and satellite television operators.13

B. Deregulation of the type proposed by

the FCC will harm access to important

broadcast content without providing for

a functional equivalent or comparable

alternative.

Because of those differences, this Court should not

allow the FCC to use the growing availability of videoon-demand content to support a deregulatory campaign

that will limit local content. Indeed, the Commission’s

own findings and conclusions undermine its proposed

rules. The FCC acknowledges the importance of local

programming to consumers and continues to find that

preserving competition promotes ubiquitous access.

Nevertheless, it also continues to propose relaxed regulations that would undermine competition and access

to important local content, without promoting access

via a functional equivalent or comparable alternative.

As the FCC acknowledges, “must see” broadcast

television remains a core consumer requirement not

The FCC tentatively concluded that “Internet-based distributors of video programming” not offering live programming

like that offered by cable and satellite television operators should

not qualify for functional equivalents, because they do not “(1) make

programming available for free, and not ‘for purchase’ as required

by the definition of an MVPD, or (2) do not provide prescheduled

programming that is comparable to programming provided by a

television broadcast channel.” Id. at 16002.

available from nearly all new video programming ventures offering on-demand access to previously recorded

content. Its own review describes the uniqueness and

singular importance of local broadcasting:

While the video marketplace has changed

substantially since the current television

ownership limits were adopted in 1999 and

since the last Commission review of these

rules concluded in 2008, broadcast television

stations still play a unique and important role

in their local communities. As such, we believe

that, on the current record, a rule focused on

preserving competition among local broadcast

television stations is still warranted.14

Even as the FCC acknowledges the importance

and uniqueness of local broadcasting, it seeks to relax

ownership caps and restrictions on local broadcasting

acquisitions. Its initiatives would eliminate two baseline requirements for proof of market robustness before

the Commission considers mergers and acquisitions

generating further concentration. The Commission

concludes that proposed ownership relaxation will

have only positive effects, without any harm to its

2014 Quadrennial Regulatory Review—Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted

Pursuant to Section 202 of the Telecommunications Act of 1996 et

al., MB Docket No. 14-50, Order on Reconsideration and Notice of

Proposed Rulemaking, 32 FCC Rcd. 9802, 9833 (2017) [hereinafter 2014 Quadrennial Regulatory Review Order on Reconsideration], vacated and remanded, Prometheus Radio Project v. FCC,

939 F.3d 567 (3d Cir. 2019), cert. granted, Nat’l Ass’n of Broad. v.

Prometheus Radio Project, No. 19-1241, 2020 WL 5847133 (Oct.

02, 2020).

longstanding mission of promoting localism, diversity,

competition and market entry by women, minorities

and small businesses:

[W]e reconsider the Local Television Ownership Rule and adopt common sense modifications

that will help local television broadcasters

achieve economies of scale and improve their

ability to serve their local markets in the face

of an evolving video marketplace.15

The FCC’s proposed rulemaking, however, will

cause exactly the harm it seeks to avoid. The Commission justifies abandonment of its requirement that local markets have a minimum of eight voices and its

greater willingness to allow mergers of top four broadcast network affiliates on the mistaken proposition

that video-on-demand programming can serve as a substitute for local broadcast television. The FCC appears

to treat consumer access to more Internet-delivered,

on-demand video entertainment as competition offering directly substitutable options, despite having recognized the unique role of local broadcasting.16 The

FCC’s failure to reconcile contradictory analysis constitutes arbitrary and capricious decision-making under the APA—as identified by the Third Circuit’s

decision below.

The Third Circuit understandably doubts the

FCC’s justifications. The FCC supports its functional

2014 Quadrennial Regulatory Review Order on Reconsideration, 32 FCC Rcd. at 9834.

See id. at 9833.

equivalency assumption in a single footnote.17 The

footnote starts with reference to the availability of

award-winning, video entertainment available via the

Internet. The footnote continues with a demonstrably

incorrect assertion that “live online streaming services

continue to grow,” citing the availability of local broadcast stations via Hulu, AT&T, and Sony PlayStation

Vue.18

In fact, fewer online options for simulcasted local

broadcasting exist now, or will exist in the near term,

than the FCC identified in 2017. Sony PlayStation Vue

will shut down on January 30, 2021 due to “expensive

content and network deals . . . [that have] been slower

to change than we expected.”19 The remaining options

now match the cost of cable and satellite television services, despite requiring a paid broadband subscription

and offering fewer channels. Rather than offer a much

cheaper, “skinny bundle” of broadcast and on-demand

content, Hulu charges $64.99, plus taxes and fees, as

of December 18, 2020.20 AT&T now concentrates on

offering subscribers a premium service bundle, at a

See id. at 9834 n.219.

Id.

John Kodera, Sony Interactive Entertainment to Shut

Down PlayStation Vue, PLAYSTATION: BLOG (Oct. 29, 2019), https://

blog.playstation.com/2019/10/29/sony-interactive-entertainmentto-shut-down-playstation-vue/#:~:text=Today%20we%20are%20

announcing%20that,on%20our%20core%20gaming%20business.

See Pay Less for Your TV, HULU, https://www.hulu.com/

live-tv (last visited Dec. 17, 2020).

monthly cost far exceeding $64.99, that combines broadband access and video content.21

The FCC’s overemphasis on the availability of

broadband-delivered video entertainment as a competitive alterative to local broadcast television does not

represent a minor flaw in its predictive judgments

about marketplace conditions. Rather, it provides clear

evidence that the Commission did not rationally analyze the available evidence presented to it by interested parties, nor did it augment the record with

empirical data in several proceedings following the

Commission’s reconsideration of its 2014 Quadrennial

Regulatory Review.

The Court may not supply a reasoned basis for a

regulatory agency’s action that the agency itself failed

to generate. See Motor Vehicle Mfrs. Ass’n of U.S. v.

State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)

(citing SEC v. Chenery Corp., 332 U.S. 194, 196 (1947)).

Accordingly, the Court should reject the arguments

made by the FCC and other Parties that the Third Circuit insufficiently considered changed marketplace conditions that now favor eliminating or easing ownership

restrictions on broadcasters. On the contrary, the Third

Circuit correctly faulted the FCC for failing to articulate reasoned analysis to support its actions, in violation of the APA.

See AT&T Internet + TV, AT&T, https://www.att.com/bundles/

(last visited Dec. 17, 2020).

II.

Mergers and acquisitions offer limited, if any,

enhancement of core statutory goals, including diversity, localism and competition.

The FCC has approved numerous mergers and

acquisitions in the telecommunications marketplace

based on the conclusion that larger companies will

have the necessary financial wherewithal to survive

increasing marketplace competition, invest in new

technology and manage extreme market volatility.22

The Commission supports this conclusion with an

extraordinary circular argument: incumbent broadcasters cannot acquire the scale needed to compete

effectively without first increasing market share.23

See, e.g., In the Matter of the Applications of Tribune Media

Company (Transferor) and Nexstar Media Group, Inc. (Transferee) et al., for Transfer of Control of Tribune Media Company to

Nexstar Media Group, Inc., and Assignment of Certain Broadcast

Licenses and Transfer of Control of Certain Entities Holding

Broadcast Licenses, MB Docket No. 19-30, Memorandum Opinion

and Order, 2019 WL 4440126 (2019).

“[T]elevision broadcasters’ important role makes it critical

for the Commission to ensure that its rules do not unnecessarily

restrict their ability to serve their local markets in the face of

ever-growing video programming options. Consumers are increasingly accessing video programming delivered via MVPDs,

the Internet, and mobile devices. Moreover, the online video distributor (OVD) industry—which includes entities such as Netflix

and Hulu—continues to grow and evolve. In addition to providing

on-demand access to vast content libraries, many OVDs are now

offering original programming and/or live television offerings

similar to traditional MVPD offerings. The Second Report and Order [2014 Quadrennial Regulatory Review—Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted

Pursuant to Section 202 of the Telecommunications Act of 1996 et

al., Second Report and Order, 31 FCC Rcd. 9864 (2016)] acknowledged the popularity of these services but failed to properly

Rather than generate data and statistics providing

empirical evidence that a consolidating broadcast industry promotes competition and consumers, the Commission simply asserts that the market requires large

ventures that attain maximum possible efficiency

through economies of scale, and simultaneously serve

longstanding legislative and regulatory policy goals.

In the absence of thorough analysis, the FCC has

persistently failed to recognize that mergers and acquisitions increase profits without any corresponding

increase in consumer welfare. The FCC similarly ignores

evidence that existing market conditions support profits,

innovation, and investment in new technology even

without the need for deregulatory relief that would

eliminate competitive safeguards, including limits on

incumbent companies’ ability to acquire insurgent and

innovative competitors.

A. The broadcast industry uses mergers and

acquisitions to increase profits, without

any evidence that those mergers and acquisitions increase diversity, localism,

and competition.

Blockbuster mergers and acquisitions accrue limited if any enhancements to competition. Acquiring

account for this in its analysis. Accordingly, we reconsider the Local Television Ownership Rule and adopt common sense modifications that will help local television broadcasters achieve economies

of scale and improve their ability to serve their local markets in the

face of an evolving video marketplace.” 2014 Quadrennial Regulatory Review Order on Reconsideration, 32 FCC Rcd. at 9834.

firms seek regulatory approval by framing the transaction as serving the public interest, arguing that merged

ventures can better achieve legislative and public policy goals through economies of scale, enhanced competitiveness and more innovation. Acquiring companies

also claim they will become more inclined to achieve

legislative and regulatory goals if the FCC permits further industry consolidation. Those claims do not match

reality.

Ventures get bigger, but they rarely get better—

and they particularly do not quantifiably increase competition, diversity and access to local programming.24

Incumbent broadcasters pursue acquisitions primarily

to extract larger profits and drive stock prices higher,

gains that reflect “synergies” from reductions in staff

and original programming. “Economies of scale” does

not mean more and better local content, but rather, acquiring firms better able to spread existing or lower

programming costs across a larger group of affiliated

stations and via the Internet.

Firms do not pursue broadcast mergers and acquisitions with altruistic goals. For example, Gray

See, e.g., Danilo Yanich, Duopoly Light? Service Agreements and Local TV, 91 JOURNALISM & MASS COMM. Q. 159, 168

(2014) (two stations under common ownership duplicated new

story scripts 73% of the time and video/graphics, 80% of the time

in 8 metropolitan areas), http://jmq.sagepub.com/content/91/1/159;

Danilo Yanich, Local TV News Content & Shared Services Agreements: The Honolulu Case, 57 J. BROAD. & ELEC. MEDIA 242, 254

(2013) (merger of broadcast stations in Honolulu generated substantial duplication of news and public affairs content instead of

net increase), http://dx.doi.org/10.1080/08838151.2013.787074.

Broadcasting recently withdrew an offer to acquire another national station owner, TEGNA, based on a decline in the targeted firm’s projected revenues, due in

large part to depressed advertising sales caused, inter

alia, by the COVID-19 pandemic.25 Despite touting

its ability to revitalize lagging local broadcasters in

medium and small markets in this proceeding, Gray

Broadcasting withdrew its TEGNA bid based on forecasts that the company would not generate the profits

warranting the original $8.5 billion offer.

Acquisition strategies of incumbent broadcast

ownership firms belie any assertion that only more

ownership concentration can revive a struggling industry whose incumbents lack the financial wherewithal and expertise to survive changing marketplace

conditions. The FCC did not support its assessment

that broadcast ownership rules should be changed to

enable even more ownership concentration.

See, e.g., Joe Cornell, Gray Television Withdraw Bid For

Tegna, Forbes (Mar. 19, 2020), https://www.forbes.com/sites/joecornell/

2020/03/19/gray-television-withdraw-bid-for-tegna; Krystal Hu &

Greg Roumeliotis, Gray Television Withdraws Tegna Offer Amid

Coronavirus Rout: Sources, Reuters (Mar 17, 2020), https://www.

reuters.com/article/us-tegna-m-a-gray-television/gray-televisionwithdraws-tegna-offer-amid-coronavirus-rout-sources-idUSKBN2143D1.

B. To the contrary, local broadcast television

is profitable, invests in new technologies,

and adapts to changing marketplace conditions without needing further industry consolidation.

Despite a global pandemic and declining advertising revenues, the local broadcast industry remains vibrant, vital, and profitable. The FCC reports that the

number of broadcast licensees remains stable,26 verifiable empirical evidence that market changes have not

so adversely harmed local broadcasters that they can

no longer serve the public interest and must shut

down. If economic conditions had become so adverse,

stations lacking top four network affiliation, generating low audience ratings, and serving small markets

would have exited the market by now. FCC-compiled

data evidence no such decline. In fact, the FCC’s count

for 2020 shows an increase in the total number of local

broadcast stations: 375 commercial VHF stations, up

from 359 in 2018, and 993 commercial UHF stations,

up from 990 in 2018.27

FCC data also show that local television broadcasting remains profitable. The Commission reported

that in 2016 total television broadcasting industry

revenues amounted to $30.835 billion, an increase of

The FCC reports that 990 commercial UHF broadcast television stations and 359 VHF stations operated in 2018. 2018

Communications Marketplace Report at *33 ¶93, Fig. B-4.

Id. See also FCC, Broadcast Station Totals as of September

30, 2020, Press Release (Oct. 2, 2020), https://docs.fcc.gov/public/

attachments/DOC-367270A1.docx.

12.9% from the prior year. In 2017, total television

broadcasting industry revenues declined by one-half of

one percent to $30.676,28 far from an alarming decline

signaling the demise of broadcasting absent substantial regulatory relief.29 A recent survey for 2020 reports

that only 4.2% of respondents anticipate a loss in

advertising revenues generated during news broadcasts.30 Firms themselves report the same. A senior executive at Sinclair Broadcasting observed in a 2019

earnings conference call, “In 2020 we are not going to

be able to get out of the way of the money. It’s literally

going to be hand over fist.”31

Statistics on the number of broadcast news employees provide another measure of industry stability.

The Pew Research Center reports that employment remained stable throughout the period from 2004 to

2018 Communications Marketplace Report at *35 ¶101,

Fig. B-5

The nature and scope of current regulatory oversight remains essential to prevent misrepresentations made by broadcast

licensees during FCC investigations. See, e.g., FCC News, Sinclair Agrees to Pay $48 Million Civil Penalty, FCC Penalty Will

Be Largest Ever Paid by a Broadcaster (May 6, 2020); retrieved

from: https://docs.fcc.gov/public/attachments/DOC-364198A1.docx.

Bob Papper, RTDNA/Newhouse School at Syracuse University Survey (2020); retrieved from: https://www.rtdna.org/uploads/

files/2020%20RTDNA%20Survey%20-%20TV%20profit-budget.pdf.

See also, Danilo Yanich, Buying Reality Political Ads, Money, and

Local Television News (2020).

Rick Edmonds, As Print and Digital Newsrooms Struggle,

Local Broadcast Stations Are Making Money ‘Hand Over Fist’,

Poynter: Business and Work (Dec. 11, 2019), https://www.poynter.

org/business-work/2019/the-rich-get-richer-local-broadcast-readiesfor-a-3-2-billion-political-ad-bonanza-in-2020/.

2018,32 contrasting starkly with substantial declines

occurring contemporaneously at newspapers.33 Pew’s

independent research provides additional statistics on

audience ratings and on advertising revenues separating period spikes generated by political campaigns.

Pew also reports an increase in the number of hours

dedicated to local news, which supports the conclusion

that video consumers still demand local broadcasting,

despite the availability of new Internet-delivered options.34

Firms also have sufficient stability to make investments in new technologies to serve consumers and

maintain profitability. Station owners continue to make

investments in news dissemination via broadband, for

example.35 As consumers adopt new technologies for

PEW RES. CTR., Local TV News Fact Sheet, Newsroom Investment (June 25, 2019), https://www.journalism.org/fact-sheet/

local-tv-news/.

See, e.g., Elizabeth Grieco, U.S. Newspapers Have Shed

Half of their Newsroom Employees Since 2008, PEW RES. CTR.:

FactTank (April 20, 2020), https://www.pewresearch.org/fact-tank/

2020/04/20/u-s-newsroom-employment-has-dropped-by-a-quartersince-2008/; Elizabeth Grieco, 10 Charts About America’s Newsrooms,

PEW RES. CTR.: FactTank (Apr. 28, 2020), https://www.pewresearch.

org/fact-tank/2020/04/28/10-charts-about-americas-newsrooms/.

For Local News, Americans Embrace Digital But Still

Want Strong Community Connection, PEW RES. CTR.: Reports

(Mar. 26, 2019), https://www.journalism.org/2019/03/26/for-localnews-americans-embrace-digital-but-still-want-strong-communityconnection/.

See, e.g., Brad Adgate, Local TV Broadcasters Launching

Streaming Video to Reach a Broader Audience, Forbes (Sep. 18,

2020), https://www.forbes.com/sites/bradadgate/2020/09/18/local-tvbroadcasters-launching-streaming-video-to-reach-a-broader-audience/;

accessing news and public affairs, broadcasters have

responded by making their content available online,

thereby maintaining market share.

C. Firms will remain on stable footing going

forward because rising retransmission

consent revenues amply offset declines

in advertising revenue, but negotiations

for those fees underscore the stakes for

consumers.

Even acknowledging the possibility of reductions

in future advertising revenue, the broadcast industry

can remain profitable because of reliable offsetting

new revenue. In addition to their compulsory copyright

licensing revenues with cable and satellite operators,

local television broadcasters also receive compensation

for allowing the retransmission of their signals via

these networks. Retransmission fee negotiations not

only provide vital revenue for broadcasters, but also

underscore the stakes of deregulation for consumers.

Consolidation increases brinksmanship in those negotiations, and brinksmanship harms consumers through

blackouts when broadcasters cut off cable and satellite

subscribers’ access to their content.

Jon Lafayette, 200 Stations Jump into New Streaming Venture,

Next TV (Sep. 1, 2020), https://www.nexttv.com/news/200-stationsjump-into-new-streaming-venture.

i. Retransmission fees offset declines

in advertising revenue.

Retransmission fee revenues provide broadcasters

with substantial revenues that offset declines elsewhere.

Despite a reduction in viewership, local television

broadcasters still have superior negotiation leverage

in retransmission consent negotiations, because their

live content remains a major component of what most

consumers consider “must see” programming:

Broadcasters are making up for their ad revenue

shortfalls, in part, by placing more emphasis on the

fees paid by cable, satellite, and streaming platforms

to retransmit local TV broadcast signals to their platforms. These fees, which are calculated based on viewership, have overtaken traditional TV advertising as a

broadcast revenue source. In fact, just ten years ago

this revenue was virtually nil for most broadcasting

companies. Today, retransmission fees are expected . . .

to grow at a compounded rate of 15% each year. . . .”36

The importance of that programming bolsters its

value and insulates it from revenue declines. In 2019,

local television broadcasters received approximately

$11.89 billion in retransmission consent compensation,

Victor Kao, Retransmission Fees Give Lift to TV Broadcast

Revenue As Advertising Declines, RSM: The Real Economy Blog

(Sep. 11, 2019), https://realeconomy.rsmus.com/retransmission-feesgive-lift-to-tv-broadcast-revenue-as-advertising-declines/.

with a 2020 estimate of $12.17 billion37 and a 2024 estimate of $16.26 billion.38

ii. Retransmission negotiations among

large consolidated entities harm consumers because of brinksmanship and

leverage.

Increased market concentration further raises the

financial stakes in retransmission negotiations, and

underscores the risk posed by deregulation-facilitated

consolidation to consumers. The combination of greater

reliance by broadcasters on retransmission consent revenues and the concentration of the industry prompts

harder bargaining with tougher tactics, and brinksmanship by large entities. When broadcasters cannot

close deals with retransmitting operators, consumers

experience blackouts, the elimination of access to

broadcast television channels until the parties reach

an agreement. And the number of blackouts and their

duration have increased significantly in recent years.39

Atif Zubair, Economics of Broadcast TV Retransmission

Revenue 2020, S&P Global: Market Intelligence (Aug. 24, 2020),

https://www.spglobal.com/marketintelligence/en/news-insights/blog/

economics-of-broadcast-tv-retransmission-revenue-2020.

Justin Nielson, Retrans Projections Update: Sub Rates Continue to Rise, S&P Global: Market Intelligence (July 25, 2019), https://

www.spglobal.com/marketintelligence/en/news-insights/research/

retrans-projections-update-sub-rates-continue-to-rise.

Rob Frieden, Krishna Jayakar, & Eun-A Park, There’s Probably a Blackout in Your Television Future: Tracking New Carriage

Negotiation Strategies Between Video Content Programmers and

Distributors, 43 COLUM. J.L. & ARTS 487, 515 (2020), https://

Courts have struggled to identify these stakes and

the resulting harm to consumers. In United States v.

AT&T, Inc., 310 F. Supp. 3d 161 (D.D.C. 2018), aff ’d,

916 F.3d 1029 (D.C. Cir. 2019), Judge Leon summarily

concluded that mergers and industry concentration

have no effect on the likelihood of local broadcast signal blackouts due to failed retransmission consent negotiations. Empirical evidence shows the opposite,

however, with AT&T involved in many high visibility

disputes that have triggered more blackouts that last

longer. The Court focused on whether and how AT&T

might attempt to demand higher payments and trigger

blackouts in its capacity as a provider of content such

as HBO Max and CNN.40 The Court largely ignored

AT&T’s greater incentives to trigger blackouts in its

capacity as a satellite and cable television operator

and broadband service provider.

Both broadcast stations and retransmitting ventures can trigger blackouts, based on internal assessments of which side has greater negotiating leverage.

The FCC rightly prefers that the negotiating parties

reach closure without regulatory intervention. However,

journals.library.columbia.edu/index.php/lawandarts/article/view/

6128; Brad Adgate, TV Station Blackouts Are Accelerating; Here’s

Why, Forbes (Nov. 12, 2019), https://www.forbes.com/sites/bradadgate/

2019/11/12/tv-station-blackouts-are-accelerating-heres-why/?sh=

5a2b582c7f6c; In Your Area, American Television Alliance, https://

www.americantelevisionalliance.org/in-your-area/ (last visited Dec.

17, 2020).

See, e.g., Michael Balderston, Tegna Stations Blackout for

DirecTV Customers, TV Technology (Dec. 2, 2020), https://www.

tvtechnology.com/news/tegna-stations-blackout-for-directv-customers.

the Commission has a Congressionally-mandated duty

to ensure that the parties negotiate in good faith,41 and

it recently fined 18 broadcasters the maximum permissible amount42 for failing to participate in productive

negotiations with AT&T.43

Broadcasters already have other legal preferences

that give them economic leverage and contribute to the

blackout problem. A provision in the Television Viewer

Protection Act of 2019, Pub. L. No. 116-94, 133 Stat.

2534, 3198 (2019) (amendments codified at 47 U.S.C.

§ 325), requires the FCC to permit negotiations by

some groups of unaffiliated cable operators with owners of multiple broadcast stations.44 As part of its

longstanding efforts to promote the financial viability

of broadcast television and to promote more timely

and efficient retransmission consent negotiations,

Congress helped reduce the total number of retransmission consent negotiations. However, that reduction

has increased the financial stakes of each remaining

negotiation, as the parties involved represent more

47 U.S.C. § 325(b)(3)(C). See also 47 C.F.R. § 76.65.

Section 503(b)(2)(A) of the Communications Act, as amended,

authorizes the FCC to assess a forfeiture of up to $51,222 per violation or day of a continuing violation, up to a statutory maximum of $512,228 for a single act or failure to act. 47 U.S.C.

§ 503(b)(2)(A).

DIRECTV, LLC v. Deerfield Media, Inc., MB Docket No.

19-168, F.C.C. 20-122 (rel. Sept. 15, 2020), https://docs.fcc.gov/

public/attachments/FCC-20-122A1.docx.

Implementation of Section 1003 of the Television Viewer

Protection Act of 2019, MB Docket No. 20-31, Notice of Proposed

Rulemaking, F.C.C. 20-10 (rel. Jan. 31, 2020), https://docs.fcc.gov/

public/attachments/FCC-20-10A1.docx.

stations and retransmitting ventures, typically covering more localities. In its 2018 Notice of Proposed

Rulemaking, initiating a new quadrennial review of

broadcast ownership rules, the FCC noted the potential concerns about “undue bargaining leverage for stations if commonly owned top-four stations are able to

negotiate . . . [retransmission] fees jointly as a result of

the[ir] combination” should the Commission allow

mergers of local television broadcasters holding a top

four market share.45

III. Robustly competitive and diverse media

remains essential, particularly during the

COVID-19 pandemic and our post-pandemic

recovery.

Our need for competitive media that serves the

goals of localism and diversity has not lapsed, and the

pandemic and its fallout only confirm the ongoing vitality of broadcast media. Numbers during the pandemic confirm voracious appetite for quality content

about matters of public concern, and the ability of existing providers to meet that need. Relaxing regulations at such a key juncture, without considered and

reasoned justification, will eliminate exactly that sort

of content when we need it the most and illustrates the

potential impact of the proposed regulations.

In the Matter of 2018 Quadrennial Regulatory Review—

Review of the Commission’s Broadcast Ownership Rules and

Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Notice of Proposed Rulemaking, 33 FCC

Rcd. 12111, 12135-36.

A. Broadcast media has thrived during the

pandemic.

During the COVID-19 pandemic, local broadcast

radio and television ratings have increased significantly.46 Such success in the marketplace provides concrete, empirical evidence that consumers continue to

view competitive and diverse local broadcasting as essential:

As concerns and restrictions around the novel

coronavirus (COVID-19) heighten in the U.S.,

consumers are gravitating to local news outlets to stay informed about the impact of the

pandemic on their communities. While the

U.S. began to experience the impact later than

other parts of the world, a recent Nielsen

analysis highlights a notable spike in local

news viewing between early February and

early March.47

Despite the lack of a commensurate increase in advertising revenues, local television broadcasters have

Local TV Sees Audience Boost, Reaching Younger and More

Diverse Audiences, Nat’l Assn. of Broads. (Nov. 20, 2020), https://blog.

nab.org/2020/11/13/local-tv-sees-audience-boost-reaching-youngerand-more-diverse-audiences/.

In The ‘New Normal’ of Covid-19, Local TV News Proves to

be the Medium of Choice for News and Information, Nielson: Insights (Mar. 24, 2020), https://www.nielsen.com/us/en/insights/

article/2020/in-the-new-normal-of-covid-19-local-tv-news-proves-tobe-the-medium-of-choice-for-news-and-information/. See also Lillian

Rizzo, Local TV Sees Spike in Viewers, Drop in Ads in Coronavirus

Crisis, Wall St. J. (Apr. 3, 2020), https://www.wsj.com/articles/

local-tv-sees-spike-in-viewers-drop-in-ads-in-coronavirus-crisis11585915203.

demonstrated commitments to serve the public interest, as documented by the FCC.48

B. Consolidation will harm the volume and

quality of news, public affairs, and local

content, and the FCC ignored readilyavailable data to assume otherwise.

Despite the demand for quality content, the FCC

proposes regulations that would reduce access to it. In

this appeal, multiple-station owners have argued that

consolidation will increase volume and quality of news

and public affairs programming. In support, they offer

this Court anecdotal evidence purportedly showing

improved performance of acquired stations, in specific, single markets.49 But these briefs provided no

comprehensive evidence to bolster the FCC’s contradictory reasoning, and even if they had, they cannot

substitute for the agency’s own failure to articulate

reasoned analysis. Their post-hoc appellate examples

of bolstered news and public affairs programming from

newly acquired media properties are akin to real estate speculators asserting that successfully-rehabbed

homes prove that deregulation guarantees more affordable housing.

Broadcasters Serving Their Communities in Response to

COVID-19 Pandemic, FCC (July 8, 2020), https://www.fcc.gov/

broadcasters-serving-their-communities-response-covid-19-pandemic.

Brief of Gray Television, Inc. as Amicus Curiae Supporting

Petitioners, Nos. 19-1231 & 19-1241 (filed Nov. 23, 2020), https://www.

supremecourt.gov/docket/docketfiles/html/public/19-1231.html.

The multiple-station owners making these arguments also have enormous incentives to overemphasize the benefits of scale, their journalism expertise,

and purported increases in news and public affairs programming. They have long overstated the net benefit

to diversity, localism, and competition while centrally

producing news and public affairs programming broadcast in multiple markets, or on multiple stations in

the same market.50 This particular economy of scale

does not assure that owners of multiple stations will

produce more news and public affairs programming,

or higher quality content.51 The Pew Research Center

found that owners of a small number of stations outperformed larger, presumably better-funded station

groups on those measures.52 And in fact, some

A 2018 review of news broadcasts from all commercial

broadcast television stations in the United States identified that

34% of news content was created by external sources. Bob Papper,

2018 RTNDA/Hofstra University Newsroom Survey: Local News

by the Numbers, Radio Television News Digit. News Assoc. (2018),

https://www.rtdna.org/article/research_2018_local_news_

by_the_numbers.

See, e.g., Danilo Yanich, Does Ownership Matter? Localism, Content, and the Federal Communications Commission, 23

J. MEDIA ECON. 51, 51 (2010), https://doi.org/10.1080/08997764.

2010.485537 (independent stations broadcast more local content

on their newscasts than those stations that were either ownedand-operated by a national network or had the same owner in a

locality).

Journalism & Media Staff, Which Ownership Produces the

Best “Quality” News?, PEW RES. CTR. (Apr. 29, 2003), https://www.

journalism.org/2003/04/29/which-ownership-produces-the-best-qualitynews/. “Racial and ethnic minority owners are more likely to produce minority targeted content, and more than eight out of ten

owners providing minority programming are operating six or

multiple-station owners deliberately mislead viewers

into thinking that news and public affairs programming have been locally produced when in fact identical

content was transmitted, or lightly edited to include local broadcaster staff.

The FCC’s failure to engage with these realities

dooms its proposed regulation. An agency bears the

“affirmative burden” of “examin[ing] a key assumption” when “promulgating and explaining a non-arbitrary, non-capricious rule,” and “must justify [a key]

assumption” underlying its regulation “even if no one

objects during the comment period.” Hispanic Affairs

Project v. Acosta, 901 F.3d 378, 389 (D.C. Cir. 2018) (citing Okla. Dept. of Env’t Quality v. EPA, 740 F.3d 185,

192 (D.C. Cir. 2014)). The FCC did not consider its underlying assumptions despite empirical research by

the Pew Research Center, the Knight Foundation, and

data collected by the FCC itself.53 This information not

fewer stations. While larger station groups are providing some

minority programming, an approach premised on the internal

competition theory far underperforms simple diversification of

ownership to smaller groups of stations.” Christopher Terry &

Caitlin Ring Carlson, Hatching Some Empirical Evidence: Minority Ownership Policy and the FCC’s Incubator Program, 24 COMM.

L. & POL’Y 403, 428 (2019), https://doi.org/10.1080/10811680.2019.

1627810.

The FCC candidly acknowledges that it has not “systematically managed” collected data by ensuring that data are “easily

accessible and sufficiently understood” by all personnel including

“economists or policymakers outside” the Bureaus initially collecting

the data. Wayne Leighton, et al., FCC, Plan for Office of Economics

and Analytics (OEA) Recommendations and Report to Chairman

Ajit Pai (Jan. 9, 2018), https://docs.fcc.gov/public/attachments/

DOC-348640A1.pdf. See also In the Matter of Establishment of

only undermines the FCC’s assumptions, but also

demonstrates that researchers have readily available

empirical data for helpful research even without the

need for lavish funding or new staffing. It simply requires a conscientious commitment to seek the truth,

rather than ignore, or even fail to compile, readily

available data.

The Third Circuit has insisted that the Commission use best practices in compiling a complete evidentiary record before relaxing previously required

broadcast ownership caps and safeguards.54 In particular, it expected the FCC to comply with applicable law,

acquire data from broadcaster licensees, and analyze

statistical information about current marketplace conditions. The decision below concluded that “the reasoned explanation given by the Commission rested on

faulty and insubstantial data” with the FCC attributing its “reasoning to an insubstantial statistical

analysis of unreliable data.”55

the Office of Economics and Analytics, Order, 33 FCC Rcd. 1539

(2018).

When the FCC fails to compile a complete evidentiary record, appellate courts have reversed on the basis of that shortcoming and required the Commission to do a better job. See Rob

Frieden, Case Studies in Abandoned Empiricism and the Lack of

Peer Review at the Federal Communications Commission, 8 J.

TELECOMM. & HIGH TECH. L. 277, 300 (2010), http://jthtl.org/content/

articles/V8I2/JTHTLv8i2_Frieden.PDF.

Prometheus Radio Project v. FCC, 939 F.3d 567, 587 (3d

Cir. 2019), cert. granted sub nom. Nat’l Ass’n of Broadcasters v.

Prometheus Radio Project, Nos. 19-1231 & 19-1241, 2020 WL

5847134 & 5847133 (Oct. 2, 2020).

Courts regularly remand FCC cases for record

supplementation and further proceedings “if limitations in the administrative record make it impossible

to conclude the action was the product of reasoned decision-making.” Qwest Corp v. FCC, 258 F.3d 1191,

1198-99 (10th Cir. 2001). Ample precedent supports

the Third Circuit’s call for reasoned analysis under the

APA. “[A regulatory] agency must examine the relevant data and articulate a satisfactory explanation for

its action including a rational connection between the

facts found and the choice made.” Motor Vehicle Mfrs.

Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43

(1983).

---------------------------------♦---------------------------------

CONCLUSION

For the reasons discussed, this Court should affirm the judgment below.

Respectfully submitted,

JAMES DAVY

Counsel of Record

ALL RISE TRIAL & APPELLATE

P.O. Box 15126

Philadelphia, PA 19125

609-273-5008

jimdavy@allriselaw.org

Counsel for Amici Curiae

Media Law and

Policy Scholars

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.