# 2014 Quadrennial Regulatory Review > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2014-10870 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** May 20, 2014 - **Citation:** 79 FR 29010 ## Text FEDERAL COMMUNICATIONS COMMISSION 47 CFR Part 73 [MB Docket Nos. 14-50, 09-182, 07-294, and 04-256; FCC 14-28] 2014 Quadrennial Regulatory Review AGENCY: Federal Communications Commission. ACTION: Proposed rule. SUMMARY: This document solicits comment on proposed changes to the broadcast ownership rules in compliance with section 202(h) of the Telecommunications Act of 1996 requires the Commission to review its broadcast ownership rules quadrennially to review these rules to determine whether they are necessary in the public interest as a result of competition. In addition, this document solicits comment on certain aspects of the Commission's 2008 Diversity Order that the U.S. Court of Appeals for the Third Circuit remanded and directed the Commission to address in its quadrennial review proceeding. This document solicits comment also on a potential disclosure requirement for certain broadcast television shared service agreements. DATES: Comments are due on or before July 7, 2014 and reply comments are due on or before August 4, 2014. Written comments on the Paperwork Reduction Act proposed information collection requirements must be submitted by the public, Office of Management and Budget (OMB), and other interested parties on or before July 21, 2014. ADDRESSES: Federal Communications Commission, 445 12th Street SW., Washington, DC 20554. In addition to filing comments with the Secretary, a copy of any comments on the Paperwork Reduction Act information collection requirements contained herein should be submitted to the Federal Communications Commission via email to PRA@fcc.gov and to Nicholas A. Fraser, Office of Management and Budget, via email to Nicholas_A._Fraser@omb.eop.gov or via fax at (202) 395-5167. FOR FURTHER INFORMATION CONTACT: Hillary DeNigro, Industry Analysis Division, Media Bureau, FCC, (202) 418-2330. For additional information concerning the PRA proposed information collection requirements contained in the Further Notice of Proposed Rulemaking, contact Cathy Williams at (202) 418-2918, or via the Internet at PRA@fcc.gov . SUPPLEMENTARY INFORMATION: This Further Notice of Proposed Rulemaking, in MB Docket Nos. 14-50, 09-182, 07-294, and 04-256; FCC 14-28, was adopted on March 31, 2014, and released on April 15, 2014. The document is available for download at http://fjallfoss.fcc.gov/edocs_public/ . The complete text of the document is available for inspection and copying during normal business hours in the FCC Reference Center, 445 12th Street SW., Washington, DC 20554, and may also be purchased from the Commission's copy contractor, BCPI, Inc., Portals II, 445 12th Street SW., Washington, DC 20554. Customers may contact BCPI, Inc. at their Web site http://www.bcpi.com or call 1-800-378-3160. Initial Paperwork Reduction Act of 1995 Analysis This Further Notice of Proposed Rulemaking proposes a new or revised information collection requirement. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public and the OMB to comment on the information collection requirements contained in this document, as required by the Paperwork Reduction Act of 1995, Public Law 104-13. Public and agency comments are due July 21, 2014. Comments should address: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology; and (e) way to further reduce the information collection burden on small business concerns with fewer than 25 employees. In addition, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the Commission seeks specific comment on how it might further reduce the information collection burden for small business concerns with fewer than 25 employees. I. Synopsis of the Further Notice of Proposed Rulemaking A. Introduction 1. The Commission takes another major step in its review of the broadcast ownership rules. The Commission wishes to build on that record to resolve the ongoing 2010 proceeding, and the Commission is cognizant of its statutory obligation to review the broadcast ownership rules every four years. To accomplish both objectives, with this Further Notice of Proposed Rulemaking the Commission is initiating this 2014 Quadrennial Review; incorporating the existing 2010 record into this proceeding; proposing rules that are formulated based on the Commission's evaluation of that existing record; and seeking new and additional information and data on market conditions and competitive indicators as they exist today. The Commission issues this Further Notice of Proposed Rulemaking to seek additional comment on the appropriateness of the broadcast ownership rules to today's evolving marketplace. Also, the Commission seeks additional comment on issues referred to the Commission in the Third Circuit's remand in Prometheus II of certain aspects of the Commission's 2008 Diversity Order (73 FR 28361, May 16, 2008, FCC 07-217, rel. March 5, 2008). Finally, the Commission takes steps herein to address concerns about the use of a variety of sharing agreements between independently owned television stations—Shared Service Agreements or SSAs. B. Background 2. The media ownership rules subject to this quadrennial review are the local television ownership rule, the local radio ownership rule, the newspaper/broadcast cross-ownership rule, the radio/television cross-ownership rule, and the dual network rule. Congress requires the Commission to review these rules every four years to determine whether they “are necessary in the public interest as the result of competition” and to “repeal or modify any regulation [the Commission] determines to be no longer in the public interest.” The Third Circuit has instructed that “necessary in the public interest” is a “ `plain public interest' standard under which `necessary' means `convenient,' `useful,' or `helpful,' not `essential' or `indispensable.' ” There is no “ `presumption in favor of repealing or modifying the ownership rules.' ” Rather, the Commission has the discretion “to make [the rule] more or less stringent.” This 2014 Quadrennial Review will focus on identifying a reasoned basis for retaining, repealing, or modifying each rule consistent with the public interest. 3. Policy Goals. The media ownership rules have consistently been found to be necessary to further the Commission's longstanding policy goals of fostering competition, localism, and diversity. The Commission seeks additional comment on the NPRM' s (77 FR 2867, Jan. 19, 2012, FCC 11-186, rel. Dec. 22, 2011) tentative conclusion that these policy goals continue to be the appropriate framework within which to evaluate and address minority and female interests as they relate to the broadcast ownership rules. Based on the record developed in response to the NPRM, the Commission continues to believe that the longstanding policy goals of competition, localism, and diversity are broadly defined to promote the core responsibilities of broadcast licensees. The Commission is not persuaded by the comments in the record that it would be appropriate to adopt any additional formal policy goals. The Commission seeks comment on this tentative conclusion. C. Media Ownership Rules 1. Local Television Ownership Rule a. Introduction 4. Based on the record that was compiled for the 2010 Quadrennial Review, the Commission tentatively concludes that the current local television ownership rule remains necessary in the public interest and should be retained with a limited modification. As discussed below, the Commission believes that, based on the current media marketplace and the record in this proceeding, the public interest would be best served by replacing the Grade B contour overlap test used to determine when to apply the local television ownership rule with a digital noise limited service contour (NLSC) test, rather than the DMA-based approach proposed in the NPRM. The Commission believes that the local television ownership rule is necessary to promote competition. The Commission further believes that the competition-based rule proposed in this Further Notice of Proposed Rulemaking also would promote viewpoint diversity by helping to ensure the presence of independently owned broadcast television stations in local markets and would be consistent with the Commission's localism goal. The Commission finds that the local television ownership rule proposed in this Further Notice of Proposed Rulemaking would be consistent with the goal of promoting minority and female ownership of broadcast television stations. Finally, the Commission believes that the proposed limited modification of the rule will better promote competition, and that this benefit would outweigh any burdens, which would be minimized by the proposal to grandfather combinations as described herein. 5. The Commission proposes to modify the local television ownership rule to allow an entity to own up to two television stations in the same DMA if: (1) The digital NLSCs of the stations (as determined by § 73.622(e) of the Commission's rules) do not overlap; or (2) at least one of the stations is not ranked among the top-four stations in the market and at least eight independently owned television stations would remain in the DMA following the combination. In calculating the number of stations remaining post-merger, only those stations whose digital NLSC overlaps with the digital NLSC of at least one of the stations in the proposed combination would be considered, which would be consistent with the contour overlap provision of the current rule. In addition, the Commission proposes to retain the existing failed/failing station waiver policy. The Commission seeks comment on these proposed modifications to the local television ownership rule and ask whether there have been any developments since the NPRM that the Commission should take into account in the review of the rule. The Commission seeks comment on the costs and benefits of the proposed local television ownership rule. To the greatest extent possible, commenters should quantify the expected costs or benefits of the proposed rule and provide detailed support for any actual or estimated values provided, including the source of such data and/or the method used to calculate reported values. b. Background 6. In the NPRM, the Commission proposed to retain the local television ownership rule, with one modification. Specifically, the NPRM proposed to retain the top-four prohibition, eight-voices test, and numerical limits of the existing rule, while proposing to replace the Grade B contour overlap provision with a DMA-based approach, under which the Commission would prohibit ownership of two stations in the same DMA unless at least one of the stations is not rated in the top four and at least eight independent voices would remain after the transaction. The NPRM also invited comment on whether to adopt a market size waiver standard, the impact of multicasting on the local television ownership rule, and the impact of the proposed rule on minority and female ownership. c. Discussion 7. Market. As proposed in the NPRM, the Commission tentatively finds that the local television ownership rule continues to be necessary to promote competition among broadcast television stations in local television viewing markets. Although the Commission believes the record in the 2010 Quadrennial Review proceeding supports its view of the appropriate parameters for defining the market, the Commission seeks comment on whether developments since the NPRM should cause the Commission to shift the focus of its analysis. 8. First, the Commission believes that the video programming market remains the relevant market for review of the local television ownership rule. The Commission also believes that the video programming market is distinct from the radio listening market. While multiple broadcast commenters argued in favor of an expansive market definition that would include nearly all forms of media, the Commission tentatively finds such arguments to be unpersuasive. The Commission has previously found that the video programming market is distinct from other media markets because consumers do not view non-video entertainment options ( e.g., listening to music or reading) and non-delivered video options ( e.g., DVDs or movie theaters) as good substitutes for watching television, and there is no evidence in the current record that would cause the Commission to disturb these findings. In addition, the Commission notes the NPRM' s tentative conclusion that it is not now appropriate to expand the relevant product market beyond video programming to include non-video information sources of local news and information. This tentative conclusion was based on evidence that Internet-only Web sites provide only a small amount of local news content and a lack of evidence that non-video information sources modify their programming decisions based on the actions of local broadcast television stations or vice versa. The Commission did not receive significant comment on this specific issue in the 2010 proceeding, and the Commission seeks comment on whether it should confirm the NPRM' s tentative conclusion for the reasons discussed therein. 9. Second, the Commission believes that its analysis regarding the local television ownership rule should continue to focus on promoting competition among broadcast television stations in local television viewing markets. In order to compete effectively in its local market, and thereby gain market share, a broadcast television station must invest in better programming and provide programming tailored to the needs and interests of the local community, including local news and public interest programming. By strengthening their position in the local market, television broadcasters are better able to compete for advertising revenue and retransmission consent fees, an increasingly important source of revenue for many stations. Viewers in the local market benefit from such competition among numerous strong rivals in the form of higher quality programming. 10. While the Commission is keenly aware of the growing popularity of video programming delivered via MVPDs and the Internet, it tentatively find that competition from such video programming providers is currently of limited relevance for the purposes of its analysis. These programming alternatives compete largely in national markets—cable network programming is generally uniform across all markets, as is video programming content available via the Internet—and, unlike local broadcast stations, such programming providers are not likely to respond to conditions in local markets. Though certain broadcast commenters disputed this notion, the Commission tentatively finds their arguments to be unsupported by evidence of non-broadcast video programmers modifying their programming decisions based on the competitive conditions in a particular local market. 11. In addition, the Commission tentatively finds that broadcast television's strong position in the local advertising market supports its view that non-broadcast video programmers are not yet meaningful substitutes in local television markets. Broadcasters asserted that the Commission should expand the relevant market, in part because of increased competition for advertising from non-broadcast sources of video programming, particularly in the local advertising market. The data do not support this claim. From 2008 through 2011, though overall local advertising spending was down from its highs in 2005 and 2006, local broadcast television's market share actually increased and achieved the highest levels since 2004. While the shares of local advertising on cable television and the Internet also increased during this time period, those gains do not appear to be at the expense of broadcast television stations. NAB asserted that the recent growth in television station advertising revenue is temporary and not likely to “address the structural changes that have taken place in the [television] market” because the predicted 2012 advertising revenues for the broadcast television industry are below the levels achieved in 2006. While advertising revenues for broadcast television stations were lower during this period, the Commission believes the evidence does not support the conclusion that this was the result of a unique change in the television marketplace; instead, the total advertising market for all media experienced a significant contraction, which was most likely the result of the global financial crisis that impacted nearly all markets. Moreover, total station revenue for 2012 was predicted to exceed the total station revenue for 2006 and to grow steadily through 2017. However, the Commission seeks comment on whether any structural changes have occurred in the television marketplace and, if so, whether to adjust the 2014 Quadrennial Review analysis to account for such changes. The Commission seeks comment on whether there have been any significant changes since these figures became available. 12. The Commission believes that broadcast television stations continue to play a unique and vital role in local communities that is not meaningfully duplicated by non-broadcast sources of video programming. In addition to providing viewers with the majority of the most popular programming on television, broadcast television stations remain the primary source of local news and public interest programming. Moreover, millions of U.S. households lack broadband access at speeds sufficient to stream or download video programming available via the Internet. Accordingly, the Commission tentatively finds that the record continues to support a local television ownership rule designed to promote competition among broadcast television stations. The Commission believes the 2010 Quadrennial Review record supports the use of this approach, and it seeks comment on whether this market definition should apply for purposes of the 2014 Quadrennial Review. 13. Contour Overlap. The NPRM proposed to eliminate the Grade B contour overlap test and rely solely on Nielsen DMAs to determine when to apply the local television ownership rule. The NPRM recognized that the DMA approach could have a disproportionate impact in certain DMAs and sought comment on the impact of such a change. As discussed below, the Commission tentatively finds that the public interest is best served by retaining the contour-based approach of the previous rule but by replacing the analog Grade B contour with the digital NLSC. The Commission seeks comment on whether any developments have occurred since the NPRM that should cause it to reconsider this proposed approach. 14. The Commission believes that the proposed DMA-only approach would unnecessarily expand the reach of the local television ownership rule in certain DMAs and thus would be overbroad. Therefore, the Commission tentatively declines to adopt that approach. NAB argues that relying instead on the digital NLSC, which the Commission has treated as the functional equivalent of the Grade B contour, would serve the purpose of establishing a trigger that would accurately reflect current digital service areas while avoiding any potential disruptive impact, and the Commission believes that approach is reasonable. By contrast, there is no digital counterpart to a station's analog city grade contour. Accordingly, consistent with case law developed after the digital transition, the Commission would continue to evaluate all future requests for new or continued satellite status on an ad hoc basis. In addition, consistent with previous Commission decisions, the Commission tentatively finds that retaining a contour-based approach would serve the public interest by promoting local television service in rural areas. In particular such an approach would continue to allow station owners in rural areas to build or purchase an additional station in remote portions of the DMA, so long as there is no digital NLSC overlap. It is important that the local television ownership rule take into account the current digital service area of a station. The Commission confirms that the digital NLSC is an accurate measure of a station's current service area and thus would be an appropriate standard. Thus, under the modified rule proposed in the Further Notice of Proposed Rulemaking, the Commission would continue to define the geographic dimensions of the local television market by reference to DMAs, but the Commission would replace the analog Grade B contour with the digital NLSC, such that within a DMA an entity could own or operate two stations in a market if the digital NLSCs of those stations did not overlap. To the extent that the digital NLSC of two stations in the same DMA overlapped, then the stations serve the same area, even if there was no analog Grade B contour overlap prior to the digital transition, and in that case the combination would be permitted only if it satisfied the top-four prohibition and the eight-voices test. In the 2002 Biennial Review Order (68 FR 46286, Aug. 5, 2003, FCC 03-127, rel. July 2, 2003), in which the local television ownership rule was relaxed, the Commission eliminated the contour overlap provision. However, in recognition of the unique circumstances involving stations without Grade B contour overlap, the Commission adopted waiver criteria that would permit common ownership if the applicant could demonstrate “that the stations have no Grade B overlap and that the stations are not carried by any MVPD to the same geographic area.” The revised rule adopted in the 2002 Biennial Review Order was overturned on appeal. The Commission believes its proposal to adopt the digital NLSC standard is in the public interest and is supported by the record, and it declines to propose alternate possible solutions, such as waiver criteria similar to those adopted in the 2002 Biennial Review Order. However, the Commission invites commenters to propose alternate solutions if they object to the Commission's approach. 15. The NPRM described the potential benefits of a DMA-based approach, including correlation with DMA-wide carriage of broadcast signals pursuant to mandatory carriage requirements and benefits similar to those realized by the geographic market definition in the radio rule. For the reasons discussed above, however, that approach could have a negative impact in certain DMAs. The Commission seeks comment on the tentative conclusion that the alternative approach proposed in this Further Notice of Proposed Rulemaking would avert the negative impact of the DMA-based approach, accurately reflect current digital service areas, and appropriately balance the Commission's public interest goals. 16. Grandfathering. The Commission tentatively affirms the NPRM' s proposal to grandfather existing ownership combinations that would exceed the numerical limits under the revised contour approach, though it tentatively finds that the sale of such combinations must comply with the local television ownership rule then in effect. In addition, the Commission proposes that all permanent waivers from the prior rule that previously have been granted would continue in effect under the new rule, but, like any newly grandfathered combinations, could not be transferred/assigned intact unless the combination complies with the local television ownership rule in effect at the time of the transfer/assignment. The Commission seeks comment on whether it should adopt this approach in the 2014 quadrennial proceeding. 17. The Commission tentatively finds that the concerns raised by those in favor of permitting grandfathering and the transfer of grandfathered combinations would largely be addressed by the proposal to retain a contour overlap provision in the local television ownership rule and to substitute the digital NLSC for the Grade B contour. The contour element of the rule would effectively maintain the status quo for most, if not all, owners of duopolies formed as a result of the previous Grade B contour overlap provision. Consistent with the tentative conclusion in the NPRM, however, the Commission proposes to grandfather ownership of existing combinations of television stations, if any, that would exceed the ownership limit as a result of the change to the digital NLSC test the Commission proposes herein. Even in limited circumstances, compulsory divestiture is disruptive to the marketplace and is a hardship for individual owners; the Commission believes any benefits to its policy goals (including promoting ownership diversity) would be outweighed by these countervailing equitable considerations. 18. The Commission proposes, however, to require that the sale of any such grandfathered combination comply with the local television ownership rule in place at the time the transfer of control or assignment application is filed. As stated above, the digital NLSC is an accurate measure of a station's digital service area. If the digital NLSC of two stations in the same DMA overlap, then the stations serve the same area, even if there was no Grade B contour overlap prior to the digital transition. Accordingly, requiring that the sale of a grandfathered combination comply with the new standard would be consistent with the Commission's rationale for adopting the digital NLSC-based standard and would not cause hardship by requiring premature divestiture. Consistent with the Commission's previous decisions, it tentatively finds that the public interest would not be served by allowing grandfathered combinations to be freely transferable in perpetuity where a combination does not comply with the local television ownership rule at the time of transfer/assignment. Under its proposed approach, the Commission would continue to allow pro forma changes in ownership and involuntary changes of ownership due to death or legal disability of the licensee. The Commission seeks comment on this tentative conclusion. 19. Numerical Limits. The Commission proposed in the NPRM to retain the current numerical limits in the local television ownership rule. The Commission seeks comment on whether to adopt that proposal, thereby permitting a licensee to own up to two stations ( i.e., a duopoly) in a market, subject to the other requirements proposed in this Further Notice of Proposed Rulemaking. 20. The Commission seeks comment on its preliminary view that the local television marketplace has not changed significantly since the NPRM to justify either tightening or loosening the current numerical limits of the local television rule. Ownership of a second in-market station can create substantial efficiencies, which may allow a local broadcast station to invest in programming that meets the needs of its local community, such as local news or other public interest programming. Notably, the Commission tentatively finds that there is substantial evidence in the record that the duopolies permitted subject to the restrictions of the current rule have created tangible public interest benefits for viewers in local television markets that more than offset any potential harms that are associated with common ownership. Moreover, as discussed in greater detail in the paragraphs below on multicasting, the Commission believes that the ability to multicast is not a substitute for common ownership of multiple stations and, therefore, would not justify tightening the existing numerical limits. The Commission seeks comment on these tentative findings. 21. Similarly, the Commission does not believe there have been sufficient changes in the local television marketplace to justify ownership of a third in-market station. The Commission seeks comment on this tentative conclusion. The primary “change” in the marketplace cited by those commenters in favor of loosening the rule is competition from non-broadcast alternatives. As discussed above, however, the Commission believes the local television ownership rule is designed to promote competition among broadcast television stations in local television markets, and the Commission has tentatively concluded that it is not yet appropriate to consider competition from non-broadcast sources in evaluating whether the rule remains necessary. Even if the Commission were to consider such competition, Entravision, which supported ownership of up to two stations in all markets and up to three stations in markets with 18 or more television stations, conceded that such consolidation is likely to threaten the Commission's competition and diversity goals by jeopardizing small and mid-sized broadcasters. To combat these harms, Entravision proposed a series of “behavioral regulations” that the Commission could adopt in tandem with loosening the ownership restrictions. The Commission declined to adopt this proposal in the 2006 Quadrennial Review proceeding, a decision that was upheld in Prometheus II, and the Commission sees no changes in the local television marketplace that would warrant reconsideration of the Commission's previous decision. The Commission has long applied structural local media ownership rules and has previously rejected proposals for instituting behavioral rules. The Commission proposes to affirm this approach, as it continues to believe that behavioral rules are not appropriate substitutes for structural local media ownership rules. The Commission seeks comment on this proposal. Without significant evidence of the public interest benefits that could result from the ownership of three stations in a local market, the Commission does not believe that there is adequate justification at this time for increasing the numerical limits. 22. Top-Four Prohibition. The Commission proposes to continue to prohibit mergers between two top-four-rated stations in a local market, consistent with the tentative conclusion in the NPRM. The Commission tentatively finds that the top-four prohibition remains necessary to promote competition in the local television marketplace. The Commission seeks comment on whether there have been any developments since the NPRM that it should consider with regard to this issue. 23. Consistent with previous Commission decisions, the Commission proposes to continue to prohibit mergers involving two of the top-four stations in a market because it believe such combinations would be the most deleterious to competition. The Commission has previously identified potential harms associated with top-four combinations, and the Commission found no evidence in the 2010 Quadrennial Review record to disturb the Commission's previous findings. Accordingly, the Commission continues to believe that top-four combinations would often result in a single firm obtaining a significantly larger market share than other firms in the market and that such combinations could create welfare harms. Top-four combinations have been found to reduce incentives for local stations to improve their programming, as once strong rivals suddenly have incentives to coordinate their programming in order to minimize competition between the commonly owned stations. In addition, in general, there remains a significant “cushion” of audience share points that separates the top-four stations in a market from the fifth-ranked station. Accordingly, the Commission tentatively finds that the public interest is best served by retaining the top-four prohibition. The Commission seeks comment on this tentative conclusion. 24. The NPRM also sought comment on certain circumstances in which a licensee is able to obtain control over two of the top-four stations in a market through a transaction or series of transactions, sometimes referred to as “affiliation swaps,” that do not require prior Commission approval. Based on its review of the 2010 Quadrennial Review record, the Commission tentatively finds that such transactions should be subject to the top-four prohibition because it believes they circumvent the intent of the rule and are not in the public interest. The Commission seeks comment on whether it should adopt this approach. 25. In general, national network affiliation is a significant driver of a station's audience share. The Commission has previously found that, nationally, the Big Four networks ( i.e., ABC, CBS, Fox, and NBC) are the highest rated networks and that, in general, the national audience statistics are reflected in the rankings in the local markets. Recent Nielsen data confirm this finding. Accordingly, an affiliation swap involving a top-four station and a non-top-four station will nearly always result in the non-top-four station becoming a top-four station after the swap. Because such affiliation swaps do not involve the assignment or transfer of a station license, the transaction is not subject to prior Commission approval under Section 310(d) of the Communications Act of 1934. Thus, by engaging in an affiliation swap, parties can achieve a top-four station combination that would otherwise have been prohibited by the Commission's rules. 26. This fact is evidenced in the Honolulu, Hawaii, DMA, where an affiliation swap between a top-four station and a non-top-four station—which was commonly owned with a different top-four station in the market—was executed. In addition to the affiliation swap, the parties swapped certain of the stations' non-network programming and the stations' call signs, purportedly to avoid viewer confusion. Thus, the stations (though not the licenses) effectively changed hands without prior Commission approval—approval that was not technically required. Consistent with the Commission's observation above regarding the correlation between affiliation with a Big Four network and market rank, following the affiliation swap, the non-top-four station became a top-four station. By structuring these transactions so as to evade Commission review, a single entity was able to acquire control over a second top-four station in the market, a result that is prohibited under the local television ownership rule. 27. The Commission tentatively finds that transactions involving the sale or swap of network affiliations between in-market stations that result in an entity holding an attributable interest in two top-four stations can be used to evade the top-four prohibition. Accordingly, in order to close this loophole, the Commission proposes to clarify that such transactions must comply with the top-four prohibition at the time the agreement is executed. Specifically, the Commission believes an entity should not be permitted to directly or indirectly own, operate, or control two television stations in the same DMA through the execution of any agreement (or series of agreements) involving stations in the same DMA, or any individual or entity with a cognizable interest in such stations, in which a station (the new affiliate) acquires the network affiliation of another station (the previous affiliate), if the change in network affiliations would result in the licensee of the new affiliate, or any individual or entity with a cognizable interest in the new affiliate, directly or indirectly owning, operating, or controlling two of the top-four rated television stations in the DMA at the time of the agreement. In addition, the Commission proposes that, for purposes of making this determination, the new affiliate's post-consummation ranking would be the ranking of the previous affiliate at the time the agreement is executed, determined in accordance with § 73.3555(b)(1)(i) of the Commission's rules. The Commission proposes to find any party that has control over two top-four stations in the same DMA as a result of such transactions to be in violation of the top-four prohibition and subject to enforcement action. Application of this rule would be prospective, and parties that acquired control over a second in-market top-four station by engaging in such transactions prior to the release date of a decision to adopt such a rule would not be subject to divestiture or enforcement action. Consistent with KHNL/KGMB License Subsidiary, such transactions that would not be subject to such a rule could still be considered in the context of individual licensing proceedings. All future transactions would be required to comply with the Commission's rules then in effect. The Commission seeks comment on these proposals. In addition, it seeks comment on whether and how station owners are attempting to circumvent the top-four prohibition, or any other of the media ownership rules, through the invention of similar devices. While the Commission has tentatively determined that the present circumstances support prospective application of this rule, parties are on notice that similar efforts to evade the media ownership rules could be subject to enforcement action. 28. The Commission seeks comment on whether this application of the top-four prohibition is consistent with the Commission's policy to avoid constraints on commercial activities that are designed to effect station improvements. The Commission continues to encourage licensees to improve the quality of the programming and operation of their stations in ways that are consistent with the Commission's rules and policies. Moreover, the Commission does not believe that closing this loophole in the top-four prohibition violates the First Amendment. Indeed, recent constitutional challenges to the media ownership rules have been rejected, and the Commission tentatively finds that this application of the top-four prohibition withstands First Amendment scrutiny for the same reasons. 29. While certain commenters argued to the contrary, for the reasons discussed herein, acquiring control over a second in-market top-four station through the transactions described above is easily distinguishable from other, legitimate actions a station may undertake to increase ratings at the expense of a competitor. In addition, Sinclair cautioned the Commission against interfering in the free market negotiation of affiliation agreements—which it asserted occur often and for valid business reasons—based upon a single instance where the Commission believes an affiliation swap constituted an “end run” around the top-four prohibition. Contrary to Sinclair's assertion, the Commission does not believe that it is necessary, or wise, to permit additional parties to evade the top-four prohibition before it acts, nor does it believe that this proposal is likely to have a significant impact on the negotiation of affiliation agreements. Consistent with Sinclair's comments, the Commission believes that the negotiation of affiliation agreements typically does not involve affiliation swaps and, therefore, would be unaffected by this proposal. And while such swaps may not occur often, given the potential of such transactions to undermine the local television ownership rule, the Commission believes that the application of the top-four prohibition to such transactions would be necessary. The Commission does not believe there is a reliable marketplace solution that would restrain the use of affiliation swaps to evade the top-four prohibition. The Commission seeks comment on these views. 30. Eight-Voices Test. Consistent with the proposal in the NPRM, the Commission tentatively concludes that a merger between two in-market stations with overlapping contours should not be permitted unless there would be at least eight independently owned commercial and noncommercial television stations remaining in the market post-merger, and at least one station is not a top-four station. The Commission tentatively finds that the eight-voices test continues to be necessary to promote competition in local television markets. The Commission seeks comment on these tentative conclusions. 31. The Commission's view is that the 2010 Quadrennial Review record does not reveal sufficient changes in the local television marketplace to warrant modification of the eight-voices test at this time. Consistent with the Commission's prior position, the Commission tentatively finds that, in order to permit common ownership of two in-market stations with digital NLSC overlap, there should be a minimum of eight independently owned and operated television stations in the market post-merger. The Commission believes this minimum threshold would help ensure robust competition among local television stations in the markets where common ownership is permitted under its proposed rule, as it would increase the likelihood that each such market would be served by stations affiliated with each of the Big Four networks as well as at least four independently owned and operated stations unaffiliated with these major networks. Indeed, nearly every market with eight or more full-power television stations—absent a waiver of the local television ownership rule or unique circumstances—is served by each of the Big Four networks and at least four independent competitors unaffiliated with a Big Four network. Competition among these independently owned stations is important, as it serves to improve the programming offered both by the major network stations and the independent stations, including increased local news and public interest programming. The Commission notes that this competition is perhaps most valuable during the parts of the day in which local broadcast stations do not transmit the programming of affiliated broadcast networks. Moreover, because there continues to be a significant gap in audience share between the top-four stations in a market and the remaining stations in most markets, the Commission continues to believe that it is appropriate to retain the eight-voices test, which helps to promote at least four independent competitors before common ownership is allowed. The Commission seeks comment on the tentative conclusion that, in light of this concentration and consistent with the 2006 Quadrennial Review Order (73 FR 9481, Feb. 21, 2008, FCC 07-216, rel. Feb. 4, 2008), it remains prudent to require the presence of at least four additional independently owned and operated competitors in the market in order to promote competition in the local television market before permitting any common ownership in that market. The Commission is most interested in learning whether any new information has become available since the NPRM that it should take into account in considering this issue. 32. The Commission tentatively finds that it is appropriate to include only full-power television stations in the voice count. The primary purpose of the rule is to promote competition among broadcast television stations in local television viewing markets; therefore, the Commission tentatively finds that it would be inappropriate to include other types of media when counting voices. The Commission notes that in the 2006 Quadrennial Review Order the Commission addressed the Sinclair court's criticisms of the eight-voices test, specifically the rationale for defining voices differently in the radio-television cross ownership rule and the local television ownership rule. The Commission detailed its rationale for limiting voices in the television rule to only full-power television stations, a rationale that was subsequently upheld on appeal in Prometheus II, and to which the Commission proposes to continue to adhere herein. The Commission seeks comment on its view that Sinclair does not compel the Commission to include additional voices in the eight-voices test. 33. Market Size Waivers. The NPRM sought comment on whether the Commission should adopt a waiver standard for markets where the rules would otherwise limit ownership to a single television station, and, if so, how such a waiver standard should be structured. The NPRM sought comment also on whether such a market size waiver, which could even allow combinations between top-four stations, would promote additional local news offerings in small markets that are less able to support four local news operations. Based on review of the 2010 Quadrennial Review record, the Commission tentatively concludes that a market size waiver standard is not necessary. Instead, the Commission tentatively concludes that retention of the existing failed/failing station waiver policy would serve the public interest and it seeks additional comment on whether to relax the waiver criteria or establish additional grounds for waiver. 34. The Commission seeks comment on the tentative conclusion that establishing a new market size waiver standard is not needed. Having evaluated the various proposed waiver standards proffered by commenters, the Commission is concerned that many of the proposed waiver criteria would be difficult to monitor or enforce, are not rationally related to the ability of each station to compete in the local market, and could be manipulated in order to obtain a waiver. Ultimately, the Commission predicts that such standards would significantly expand the circumstances in which a waiver of the local television ownership rule would be granted. The Commission is concerned that such relaxation would be inconsistent with the tentative conclusion that the public interest is best served by retaining the existing television ownership limits. Moreover, the Commission believes that the existing waiver standard is not unduly restrictive and that it provides appropriate relief in markets of all sizes. Waiver of its rules is meant to be exceptional relief, and the Commission tentatively finds that the existing waiver criteria strike an appropriate balance between enforcing the ownership limits and providing relief from the rule on a case-by-case basis. 35. In addition, the Commission tentatively finds that it is not necessary to modify the existing waiver standard in order to promote additional local news, as the current policy already indirectly takes this into consideration in cases involving failing stations. Indeed, parties frequently pledge to continue and/or increase local news offerings in order to demonstrate that the proposed transaction would produce public interest benefits. The Commission's commitment to promoting increased local news remains strong, and the Commission believes that the existing waiver policy helps further that goal. The Commission seeks comment on whether there is new information since the NPRM that would alter its preliminary views on this issue. 36. The Commission seeks comment on the tentative conclusion that maintaining the failed/failing station waiver policy will serve the public interest. While it proposes to retain the existing failed/failing station waiver policy, it acknowledges that some industry participants have argued that certain elements of the existing policy are too restrictive. Accordingly, the Commission seeks comment on potential changes to the policy to address those circumstances. For example, are there circumstances in which the Commission should refrain from applying the four-percent all-day audience share requirement or adopt a higher threshold? If so, what circumstances would justify such a change? Are any other changes appropriate? The Commission encourages commenters to provide alternative waiver criteria for its consideration, including specific justifications for such criteria, as well as the potential impact on its policy goals. 37. Multicasting. The NPRM sought comment on whether the transition to digital television, and specifically a station's ability to multicast multiple program streams has eliminated the need to permit common ownership of two stations in local television markets, as the local television ownership rule does. The 2010 Quadrennial Review record does not persuade the Commission that multicasting justifies imposition of a single-station ownership restriction or other tightening of the current ownership limits. The Commission seeks comment on whether there have been any developments since the NPRM that should cause it to reevaluate this position. 38. The Commission tentatively concurs with the broadcast commenters that, while multicasting has produced public interest benefits, the ability to multicast does not justify tightening the current numerical limits. Based on evidence in the 2010 Quadrennial Review record, broadcasting on a multicast stream does not—at present—produce the cost savings and additional revenue streams that can be achieved by owning a second in-market station. Therefore, tightening the numerical limits might prevent those broadcasters in markets where common ownership is permitted under the existing rule from achieving the efficiencies and related public interest benefits associated with common ownership. Accordingly, the Commission's view based on the most recent record is that it is not appropriate to adjust the numerical limits as a result of stations' multicasting capability. The Commission seeks comment, however, on whether it should reconsider its position within the context of the 2014 Quadrennial Review proceeding. The Commission notes that it has authorized channel sharing by broadcast television stations in connection with the incentive auction of broadcast television spectrum and that the statutory provision mandating the incentive auction protects the must-carry rights of stations that voluntarily relinquish spectrum usage rights in order to channel share. The Commission seeks comment on the potential impact of this aspect of the incentive auction for purposes of the media ownership rules. 39. Moreover, as discussed above, the Commission tentatively finds that the public interest is served by retaining the current numerical ownership limits; it believe that doing so would promote competition in local television markets. Therefore, as the court noted in Prometheus II, even if multicasting did generate cost savings and new revenue streams similar to owning a second in-market station—though the Commission believes that at present it does not—the Commission is not required “to promulgate a more restrictive rule just because entities may gain similar economies of scale and generate new revenue by multicasting.” Indeed, for the reasons discussed herein, the Commission proposes not to make such a change, and it seeks comment on the potential consequences of such an approach for purposes of the 2014 Quadrennial Review. 40. The NPRM sought comment also on the impact of dual network affiliations on local markets and whether the Commission should limit the ability of stations to utilize their multicast capacity to form dual affiliations with certain networks. As discussed below, the Commission proposes to decline to regulate such dual affiliations in the context of the media ownership rules at this time, and it seeks comment on this proposal. The Commission seeks comment on multicasting issues in general and, in particular, on any potential impact on the incentive auction. 41. The Commission does not believe the 2010 Quadrennial Review record supports regulation within the context of its media ownership rules to restrict the use of multicast capability to form dual affiliations. The commenters were primarily concerned with such dual affiliations involving two Big Four networks. Evidence available during the 2010 proceeding indicates that dual affiliations involving two Big Four networks via multicasting are generally—if not exclusively—limited to smaller markets with an insufficient number of full-power commercial television stations to accommodate each Big Four network or where other unique marketplace factors are responsible for creating the dual affiliation arrangements. BIA data from 2012 indicate that there are approximately 40 instances of dual affiliation via multicasting involving multiple Big Four networks. Each market in which the Commission identified such dual affiliation was outside the top-100 ranked DMAs, with the vast majority of such markets—approximately 73 percent—containing three or fewer full-power commercial television stations. These findings are consistent with the data and estimates provided by cable commenters, as a significant majority of the dual affiliations identified in these comments involved a Big Four network and a “Little Two” network ( i.e., The CW or MyNetworkTV). The Commission tentatively finds that Big Four/Little Two dual affiliations via multicasting, regardless of market rank, do not raise sufficient competitive concerns to justify an amendment to the local television ownership rule. While there may be potential harms that result from certain dual network affiliations, the Commission tentatively agrees with broadcast commenters that the potential benefits of dual affiliation via multicasting in these smaller markets, including dual affiliation with more than one Big Four network, outweigh any potential harms to the Commission's policy goals. Indeed, the Commission believes that a significant benefit of the multicast capability is the ability to bring more local network affiliates to smaller markets, thereby increasing access to popular network programming and local news and public interest programming tailored to the specific needs and interests of the local community. Based on the 2010 Quadrennial Review record, it appears that marketplace incentives operate to limit the occurrence of dual affiliations via multicasting involving multiple Big Four networks to these smaller markets. For these reasons, the Commission tentatively declines to regulate dual affiliations at this time, and the Commission seeks comment on this approach within the context of any marketplace changes that may have occurred since the NPRM. 42. Minority and Female Ownership. The Commission sought comment on the impact of the proposed local television ownership rule on minority and female ownership opportunities, as well as the impact of diverse television ownership on viewpoint diversity. The Commission tentatively finds that the local television ownership rule proposed in this Further Notice of Proposed Rulemaking is consistent with its goal to promote minority and female ownership of broadcast television stations. The Commission seeks comment on this tentative conclusion. 43. As discussed above, the Commission tentatively finds that the 2010 Quadrennial Review record demonstrates that the existing local television ownership rule remains necessary to promote competition among broadcast television stations in local markets. Moreover, the Commission believes the competition-based rule would also indirectly advance its viewpoint diversity goal by helping to ensure the presence of independently owned broadcast television stations in the local market, thereby increasing the likelihood of a variety of viewpoints. In addition, while the Commission does not propose to retain the rule with the specific purpose of preserving the current levels of minority and female ownership, the Commission tentatively finds that retaining the existing rule would effectively address the concerns of those commenters who suggested that additional consolidation would have a negative impact on minority and female ownership of broadcast television stations. The Commission notes also that it proposes to retain without modification the current failed/failing station waiver policy, including the out-of-market-buyer solicitation requirement—the failed station solicitation rule (FSSR)—which promotes new entry in a market by ensuring that out-of-market entities interested in purchasing a station, including minorities and women, will have an opportunity to bid. The Commission seeks comment on how any developments since the NPRM may affect these tentative findings. In addition, the Commission seeks comment on whether the incentive auction has the potential to impact minority and female broadcast ownership and whether any such impacts should affect the 2014 Quadrennial Review. 2. Local Radio Ownership Rule a. Introduction 44. Based on the 2010 Quadrennial Review record, the Commission tentatively finds that the current local radio ownership rule remains necessary in the public interest and should be retained without modification. The Commission believes that the rule is necessary to promote competition. In addition, the Commission believes that the radio ownership limits promote viewpoint diversity “by ensuring a sufficient number of independent radio voices and by preserving a market structure that facilitates and encourages new entry into the local media market.” Similarly, the Commission tentatively finds that a competitive local radio market helps to promote localism, as a competitive marketplace will lead to the selection of programming that is responsive to the needs and interests of the local community. The Commission tentatively finds also that the local radio ownership rule is consistent with its goal of promoting minority and female ownership of broadcast television stations. Finally, the Commission believes that these benefits outweigh any burdens that may result from its proposal to retain the rule without modification. The Commission seeks comment on these tentative conclusions. 45. In accordance with these tentative conclusions, the Commission proposes that an entity may continue to own: (1) Up to eight commercial radio stations in radio markets with 45 or more radio stations, no more than five of which can be in the same service (AM or FM); (2) up to seven commercial radio stations in radio markets with 30-44 radio stations, no more than four of which can be in the same service (AM or FM); (3) up to six commercial radio stations in radio markets with 15-29 radio stations, no more than four of which can be in the same service (AM or FM); and (4) up to five commercial radio stations in radio markets with 14 or fewer radio stations, no more than three of which can be in the same service (AM or FM), provided that an entity may not own more than 50 percent of the stations in such a market, except that an entity may always own a single AM and single FM station combination. The Commission seeks comment on the costs and benefits of its proposal to retain the existing local radio ownership rule. To the greatest extent possible, commenters should quantify the expected costs or benefits of retaining the rule and provide detailed support for any actual or estimated values provided, including the source of such data and/or the method used to calculate reported values. b. Background 46. In the NPRM, the Commission proposed to retain the local radio ownership rule without modification, including the AM/FM subcaps, and sought comment on this tentative conclusion. The Commission also sought comment on whether and, if so, how, to incorporate new audio platforms into the rule and on the impact of such platforms on the broadcast radio industry. In addition, the NPRM sought comment on whether to adopt a specific waiver standard for the local radio ownership rule and on how the proposed rule would affect minority and female ownership opportunities. c. Discussion 47. Market. In the NPRM, the Commission tentatively concluded that the relevant market for review of the local radio ownership rule is the radio listening market and that it is not appropriate, at this time, to expand that market to include non-broadcast sources of audio programming. Based on the Commission's review of the 2010 Quadrennial Review record, it believes this approach is appropriate, and it seeks comment on whether it should maintain this market definition. 48. The Commission tentatively finds that, for purposes of the Commission's ownership rules, non-broadcast sources of audio programming are not yet meaningful substitutes for broadcast radio stations with respect to either listeners or advertisers. While alternate platforms such as satellite radio and Internet-delivered audio are growing in popularity, broadcast radio remains the dominant radio technology. In 2012, 92 percent of Americans age 12 or older listened to broadcast radio, a figure that has remained essentially constant over the last decade. Satellite radio still serves only a small portion of the population, even though its subscription rates continue to climb. And though recent data suggest that a significant portion of adult U.S. broadband households (42 percent) listen to Internet-delivered audio programming, the Commission notes that millions of U.S. households continue to lack broadband connections. In addition, only 14 percent of Internet radio listeners listen in their cars, where most broadcast radio listening occurs. Thus, the Commission tentatively concludes that Internet-delivered audio programming is not yet a meaningful substitute for broadcast radio listening for most listeners. The Commission seeks comment on this tentative conclusion and invites commenters to provide any more recent relevant information and data. 49. The Commission believes, moreover, that satellite radio and content delivered via the Internet generally are national platforms that are not likely to respond to competitive conditions in local markets. Satellite radio content is uniform nationally, and there is no evidence in the record that content decisions are made based on competitive conditions in local markets. Similarly, there is no evidence in the record that Internet radio stations and other Internet-delivered audio programming providers (excluding streams of local broadcast radio stations) modify their programming decisions to respond to competitive conditions in local markets. Ultimately, the Commission tentatively finds that only local broadcasters provide programming based on the unique characteristics of their respective local markets. As the Commission has stated previously, it is the competition between such rivals that most benefits listeners in a local market and serves the public interest—competition that is currently lacking from non-broadcast audio alternatives. Therefore, the Commission proposes to continue to limit the relevant market for the local radio ownership rule to broadcast radio stations in local radio listening markets, and it seeks comment on this proposal. 50. In addition, broadcast radio's consistently strong position in both local and national advertising markets appears to support the Commission's tentative finding that non-broadcast sources of audio programming are not significant competitors at this time. Broadcasters asserted that the Commission should expand the relevant market for review, in part, because of competition for advertising revenue from non-broadcast audio sources; however, recent advertising data do not support this contention. From 2008 through 2011, broadcast radio's local advertising revenue market share increased each year, reaching 16.6 percent in 2011. In the national advertising market during that same time period, broadcast radio's market share remained stable (between 1.8 and 2.0 percent). By contrast, satellite radio's advertising revenue market share in both the local and national markets did not exceed 0.1 percent. And while “Internet advertising” has seen significant gains in advertising revenue market share both locally and nationally, evidence suggests that the revenue is not attributable in any significant portion to providers of Internet-delivered audio programming. For example, in 2011, online-only audio programming providers were estimated to have earned approximately $295 million in advertising revenue. By contrast, in 2011, the total broadcast radio advertising revenue market was projected at approximately $17.8 billion. The Commission notes that NAB conceded that local radio broadcasting revenues have improved in recent years, but it argued that there has been a “structural change in the audio marketplace” because overall revenues were below levels earned in 2005 and 2006 and are not expected to reach those levels until 2015. While total advertising revenue for local radio stations did decline from 2006-2009, with the most significant declines in 2008 and 2009, the evidence does not support the conclusion that this was a result of a unique change in the audio marketplace; instead, the total advertising market for all media experienced a significant contraction that was most likely the result of the global financial crisis that impacted nearly all markets. Moreover, overall advertising revenues for the broadcast radio industry have steadily improved since 2010 and are predicted to grow through 2020. However, the Commission seeks comment on whether any structural changes have occurred in the audio marketplace and, if so, whether to adjust the 2014 Quadrennial Review analysis to account for such changes. The Commission seeks comment on whether there have been any significant changes since these figures became available. 51. Market Size Tiers. The NPRM proposed to retain the current approach of setting numerical limits based on market size tiers and determining the market size based on the number of commercial and noncommercial radio stations in the local market. The Commission tentatively concludes that it should adopt these proposals and seek comment on this approach. 52. The Commission tentatively declines to modify the current rule's method of calculating the number of stations a licensee owns. The Commission seeks comment on Mid-West Family's assessment that the Prometheus I decision mandates an adjustment, in light of the court's Prometheus II decision upholding the existing rule's methodology. The Commission's preliminary view is that adopting Mid-West Family's approach would permit potentially significant consolidation in local radio markets, which would be inconsistent with the rationale for the Commission's proposal, discussed in greater detail below, to retain the existing numerical ownership limits. Finally, the Commission proposes to reject Mt. Wilson's proposal. As discussed in greater detail below in the context of the AM/FM subcaps, digital radio is still a growing technology; there is no mandate requiring its adoption; and it has not yet achieved widespread deployment or consumer acceptance. Therefore, the Commission tentatively finds that it is premature to amend its local radio ownership rule as a result of digital technology, and it seeks comment on this approach. 53. Numerical Limits. The NPRM proposed to retain the existing numerical limits. In addition, the NPRM sought comment on Clear Channel's proposal to allow increased ownership in larger markets by creating additional tiers. Clear Channel suggested an increase from eight to ten in the number of stations a single entity may own in markets with between 55 and 64 stations and from eight to twelve in the number of stations that a single entity may own in markets with 65 or more stations. No party provided comments on this proposal and, as discussed below, the Commission tentatively finds that the record supports retaining the existing numerical limits ( i.e., the existing number of tiers and the numerical limits associated with each); therefore, it tentatively declines to adopt the new ownership tiers proposed by Clear Channel. As discussed above, many commenters in the 2010 Quadrennial Review proceeding supported the Commission's proposal to retain its existing limits, while other commenters argued in favor of loosening or tightening the existing limits. However, no commenters proposed specific numerical limits to replace the existing limits. For the reasons discussed below, the Commission proposes to adopt the tentative conclusion in the NPRM to retain the existing numerical ownership limits for each existing market size tier. 54. In the 2006 Quadrennial Review Order, the Commission rejected calls to relax the numerical ownership limits, finding instead that retaining the existing limits was necessary to protect against excessive market concentration. The Commission noted that, following the relaxation of the local radio ownership limits by Congress in the 1996 Act, there had been substantial consolidation of radio ownership both nationally and locally. Evidence in the record demonstrated that, in local markets, the largest firms often dominated the market in terms of audience and revenue share. The Commission ultimately concluded not only that the existing limits were not unduly restrictive, but also that permitting additional consolidation would not be in the public interest. The Prometheus II court upheld the Commission's decision. 55. The Commission determined also in the 2006 Quadrennial Review Order that tightening the radio ownership limits was not justified based on the record. The Commission held that tightening the ownership limits would be inconsistent with Congress's decision to relax the limits in the 1996 Act and would ignore the financial stability that consolidation brought to the radio industry. In addition, the Commission determined that tightening the rule would require significant divestitures that would disrupt the radio marketplace and could undermine the ability of local stations to provide quality programming to their local markets. While acknowledging that grandfathering was an option to avoid the disruptive impact of divestitures, the Commission determined that grandfathering in this instance would not be in the public interest. 56. Based on the 2010 Quadrennial Review record, the Commission tentatively finds that the competitive conditions in the radio marketplace that supported the Commission's decision to retain the existing numerical limits in the 2006 Quadrennial Review Order are essentially unchanged. Evidence from 2012 shows that in local markets, the largest commercial firms continue to enjoy substantial advantages in revenue share—on average, the largest firm in each Arbitron Metro market has a 45 percent share of the market's total radio advertising revenue, with the largest two firms accounting for 73 percent of the revenue. In more than a third of all Arbitron Metro markets, the top two commercial station owners control at least 80 percent of the radio advertising revenue. With respect to ratings, the top-four firms continue to dominate audience share. Therefore, the Commission does not believe the public interest would be served by relaxing the existing numerical limits. The Commission seeks comment on whether there are any more recent data that point toward a different conclusion. 57. The Commission notes also that the record in the 2010 Quadrennial Review proceeding does not reflect changes in the marketplace that warrant reconsideration of the Commission's previous decision not to make the limits more restrictive, as some commenters recommended. The Commission believes that tightening the restrictions would disregard the previously identified benefits of consolidation in the radio industry and would be inconsistent with the 1996 Act. Further, tightening the rule would require divestitures that the Commission believes would be disruptive to the radio industry and would upset the settled expectations of individual owners. The Commission seeks comment on whether any benefits derived from tightening the limits would outweigh these countervailing considerations. In addition, the Commission seeks comment on its continued belief that, for the reasons stated in the 2006 Quadrennial Review Order, tightening the limits while grandfathering existing combinations would not be in the public interest and should be avoided. 58. Clarification of Application of Local Radio Ownership Rule. In the 2002 Biennial Review Order, the Commission adopted the current standard of using Arbitron Metro areas, where available, for the application of the numerical radio ownership limits. At that time, the Commission also adopted certain procedures and safeguards designed to guide the implementation of the revised local radio ownership rule and to deter parties from attempting to circumvent the rule through the manipulation of Arbitron market definitions. Years of experience applying the current approach suggest certain aspects of the current standard that the Commission believes merit clarification or further action to fulfill the intent of the 2002 Biennial Review Order. 59. Multiple parties raised other issues in the 2010 Quadrennial Review proceeding that the Commission tentatively declines to address specifically herein. Mid-West Family requested changes to the grandfathering rules regarding transfers of control due to death or other departure of shareholders/partners of closely held businesses, asserting that such transfers of control should be treated the same as transfers that occur pursuant to a will or intestacy. In addition, UCC et al. argued that the Commission should consider reversing its decision in the 2002 Biennial Review Order to grandfather certain radio station combinations, particularly in light of the elimination of the eligible entity exception, which they asserted could present ownership opportunities for minorities and women. By contrast, Frandsen argued that the Commission should permit the sale of grandfathered clusters to any party. The Commission tentatively declines at this time to address the issues raised by Mid-West Family, UCC et al., and Frandsen. As the Commission has proposed to retain the existing numerical limits, it sees no reason at this time to reverse or expand the grandfathering policies that apply to existing combinations. The Commission has previously found Mid-West Family's requested relief to be outside the scope of the quadrennial review proceeding. Moreover, as discussed herein, the Commission has proposed to reinstate the eligible entity exception. 60. The 2002 Biennial Review Order prohibits a party from receiving the benefit of a change in Arbitron Metro boundaries or “home” market designation unless that change has been in place for at least two years (or, in the case of a “home” designation change, the station's community of license is within the Metro). The Commission does not apply the two-year waiting period to Arbitron Metro changes resulting from a Commission-approved change in community of license to an area outside the Metro's boundaries. The Commission proposes to clarify that the exception to the waiting period for Commission-approved changes applies only where the community of license change also involves the physical relocation of the station facilities to a site outside the relevant Arbitron Metro market boundaries. Otherwise, the licensee of a station currently located in an Arbitron Metro could use the exception to reduce the number of its stations listed as “home” to that Metro, without triggering the two-year waiting period and without any change in physical coverage or market competition, merely by specifying a new community of license located outside the Metro. Thus, this clarification safeguards the local radio ownership limits from manipulation based on Arbitron market definition. The Commission seeks comment on this proposed clarification. 61. Note 4 to § 73.3555 of the Commission's rules (Note 4) grandfathers existing station combinations that do not comply with the numerical ownership limits of § 73.3555(a). Certain circumstances, however, require applicants to come into compliance with the numerical ownership limits despite the fact that the relevant station may have been part of an existing grandfathered cluster. One such circumstance is a community of license change, which occasionally can lead to difficulty in the case where an applicant with a grandfathered cluster of stations seeks to move a station's community of license outside the relevant Arbitron Metro. Given that the Commission relies on BIA for market designations, such an applicant may be prevented from demonstrating compliance with the multiple ownership limits because the station proposing to change its community will continue to be listed by BIA as “home” to the Metro until the community of license change has taken place. To resolve this practical issue, the Commission tentatively proposes to allow a temporary waiver of the radio multiple ownership limits for three months in this limited instance to allow BIA sufficient time to change the affected station's “home” designation following a community of license relocation. The Commission also proposes to exempt from the requirements of Note 4 “intra-Metro” community of license changes—from one community to another within the same Arbitron Metro. The Commission tentatively finds that, in the majority of cases, such a move will have little or no impact on the state of competition within the local market. The Commission seeks comment on these proposed adjustments to the operation of Note 4. 62. In its comments in the 2010 Quadrennial Review proceeding, ARSO renewed its longstanding request that the Commission redefine local radio markets for Puerto Rico. ARSO argues that Arbitron's definition of the entire island of Puerto Rico as a single Arbitron Metro market does not accurately reflect market and geographic realities, which prevent stations from competing island-wide. ARSO requests that the Commission: (1) redefine the local radio markets in Puerto Rico using the eight Metropolitan Statistical Areas defined by the Office of Management and Budget (OMB); or (2) redefine the local radio markets using the three Combined Statistical Areas defined by OMB; or (3) treat Puerto Rico as a non-Arbitron Metro area and redefine its local markets using contour-overlap methodology. The Commission has consistently waived the Arbitron Metro definition for applicants in Puerto Rico and employed the contour-overlap methodology in the course of implementing the 2002 Biennial Review Order. The Commission has previously stated that it would address ARSO's request for relief in a future proceeding. The Commission seeks comment on ARSO's suggestions and on the effectiveness of the Commission's prior waivers of the definition in this context. 63. AM/FM Subcaps. The NPRM proposed to retain the existing AM/FM subcaps, finding that the rationales for doing so set forth in the 2006 Quadrennial Review Order were still valid, namely to promote new entry and to account for the technological and marketplace differences between AM and FM stations and thereby promote competition. In addition, the NPRM sought comment on the impact of the digital radio transition on the AM/FM subcaps, as well as issues regarding the aggregation of multiple AM stations to provide signal coverage in large geographic areas or in areas with mountainous terrain. Consistent with the proposal in the NPRM, the Commission tentatively finds that there have not been significant changes in the broadcast radio marketplace with respect to the rationale for maintaining the AM/FM subcaps since the conclusion of the 2006 Quadrennial Review proceeding, and it proposes to retain the existing AM/FM subcaps for the reasons set forth in the 2006 Quadrennial Review Order. The Commission seeks comment on this approach. 64. The Commission tentatively agrees with the commenters in the 2010 Quadrennial Review proceeding that supported retention of the AM subcaps in order to promote new entry. Consistent with Commission precedent, the Commission believes that broadcast radio, in general, continues to be a more likely avenue for new entry in the media marketplace—including entry by small businesses and entities seeking to serve niche audiences—as a result of radio's ability to more easily reach certain demographic groups and the relative affordability of radio stations compared to other mass media. AM stations are generally the least expensive option for entry into the radio market, often by a significant margin, and therefore permit new entry for far less capital investment than is required to purchase an FM station. While some commenters suggested that eliminating the subcaps could result in divestiture of properties that could be acquired by new entrants, the Commission tentatively finds that this speculative rationale is not persuasive. Therefore, consistent with Commission precedent, it believes that the public interest is best served by retaining the existing AM subcaps, which would continue to further competition, and possibly also viewpoint diversity, by promoting new entry. The Commission seeks comment on this issue and invites commenters to provide any new relevant information that has become available since the NPRM. 65. In addition, the Commission tentatively finds that there continue to be technical and marketplace differences between AM and FM stations that justify retention of both the AM and FM subcaps in order to promote competition in local radio markets. As the Commission has noted previously, FM stations enjoy unique technical advantages over AM stations, such as increased bandwidth and superior audio signal fidelity. In addition, AM signal propagation varies with the time of day ( i.e., AM signals travel much farther at night than during the day), and many AM stations are required to cease operation at sunset. These technological differences often, but not always, result in greater listenership and revenues for FM stations. 66. While the Commission has previously stated that digital radio technology may help AM stations to level the playing field with FM stations, it tentatively finds that this is not yet the case. Deployment of digital radio technology for both AM and FM stations is limited and has not changed significantly in recent years. In addition, the Commission believes it is important to consider consumer adoption when evaluating the impact of digital radio on the technological and marketplace differences between AM and FM stations. AM stations will not be able to realize the potential competitive benefits of transitioning to digital if listeners are largely unable to receive the digital broadcasts. Recent digital radio deployment data suggest that FM stations may actually be increasing the technological divide through greater adoption rates of digital radio technology. Furthermore, consumers have been slow to adopt radios capable of receiving digital signals, though consumer awareness of the technology is relatively high and there are efforts to increase the availability of such radios, particularly as standard or optional equipment in many new car models. The Commission proposes to continue to monitor the impact of the digital radio transition in future media ownership proceedings. It seeks comment on this approach. 67. Furthermore, the Commission tentatively finds that the recent changes to the FM translator rules, “to allow AM stations to use currently authorized FM translator stations to retransmit their AM service within their AM stations' current coverage areas” have not yet significantly impacted the technological and marketplace differences between AM and FM stations. While this change has been beneficial for many AM stations, many more AM stations have not availed themselves of the opportunity and/or lack the ability to do so. Consequently, the Commission believes that FM stations generally continue to enjoy significant advantages over AM stations. The Commission proposes to continue to monitor the impact of this change in future media ownership proceedings, and it seeks comment on this approach. The Commission has recently initiated a proceeding to explore ways to revitalize the AM band. Similarly, the Commission proposes to monitor that proceeding for any future impact on the AM marketplace that may warrant consideration in its media ownership proceedings. The Commission seeks comment on any present implications of these revitalization efforts for the 2014 Quadrennial Review. 68. Finally, while the technological and marketplace differences between AM and FM stations generally benefit FM stations, and thus support retention of the FM subcaps, there continue to be many markets in which AM stations are “significant radio voices.” For example, a study provided by Clear Channel found that throughout the 300 Arbitron Metro markets, there are 187 a.m. stations ranked in the top five in terms of all-day audience share. And according to NAB, AM stations are among the top revenue earners in some of the largest radio markets ( e.g., New York, Chicago, and Los Angeles). Therefore, the Commission tentatively finds that retention of the existing AM subcaps is necessary to prevent a single station owner from acquiring excessive market power through concentration of ownership of AM stations in markets in which AM stations are significant radio voices. 69. In addition, as discussed above, the Commission tentatively concludes that it is not in the public interest to tighten the numerical ownership limits; therefore, the Commission sees no need to reassess the subcaps associated with each numerical tier, as proposed by Mt. Wilson. Indeed, tightening the subcaps absent a concurrent tightening of the numerical ownership limits would result in an internal inconsistency in the rule, as an entity would be unable to own all the stations otherwise permitted under certain numerical tiers. For example, in markets with 30-44 stations, an entity currently may own up to seven stations, provided that no more than four of the stations are in the same service. If the subcap was tightened to three stations in the same service, an entity could then only own up to six stations, even though the rule's premise is that the public interest is best served by permitting ownership of up to seven stations in this particular market. The Commission seeks comment on whether there is any reason the Commission should adopt different subcaps despite this potential inconsistency. 70. Market Size Waivers. Though the NPRM sought comment on whether to adopt a specific waiver standard, no commenter proposed such a standard in the 2010 Quadrennial Review proceeding. The Commission tentatively declines to adopt a specific waiver standard for the local radio ownership rule. The Commission seeks comment on whether it is sufficient that, consistent with Commission precedent, parties that wish to seek a waiver of the local radio ownership rule may do so pursuant to the general waiver standard under Section 1.3 of the Commission's rules. 71. Minority and Female Ownership. The Commission sought comment on how the radio rule affects minority and female ownership opportunities, including specific comment on the results of Media Ownership Study 7, which analyzes the relationship between ownership structure and the provision of radio programming targeted to African-American and Hispanic audiences. The Commission tentatively finds that the radio ownership rule proposed in this Further Notice of Proposed Rulemaking is consistent with the goal to promote minority and female ownership of broadcast radio stations. The Commission seeks comment on this tentative conclusion. 72. As noted above, the Commission tentatively finds that retaining the existing competition-based numerical limits would indirectly promote its viewpoint diversity goal, in part by preserving ownership opportunities for new entrants, including minority- and female-owned businesses. Moreover, part of the rationale for the proposal to retain the AM/FM subcaps is to promote new entry, particularly in the AM band, which has historically provided low-cost ownership opportunities for new entrants, including minorities and women. 73. The Commission tentatively declines to tighten the local radio rule's ownership limits in order to promote increased minority and female ownership, as some recommend. While the Commission remains committed to promoting minority and female ownership, it is one of many—sometimes competing—goals that the Commission must balance when setting the numerical ownership limits. As discussed above, the Commission believes that tightening the local radio rule's ownership limits would ignore the benefits of consolidation in the radio industry and therefore be inconsistent with the 1996 Act. Furthermore, it believes that tightening the local radio rule would require divestitures that would be disruptive to the radio industry. In addition, while the Commission does not propose to retain the rule specifically to preserve the current levels of minority and female ownership, it tentatively finds that retaining the existing rule effectively would address the concerns of those commenters who suggest that additional consolidation would have a negative impact on minority and female ownership of broadcast radio stations. Ultimately, the Commission tentatively finds that, based on the record in the 2010 Quadrennial Review proceeding, the current competition-based limits reflect an appropriate balance of its policy goals and that retaining these limits would serve the public interest and simultaneously promote viewpoint diversity. The Commission seeks comment on these tentative conclusions and invites commenters to provide any evidence bearing on this issue that has become available since the NPRM. 3. Newspaper/Broadcast Cross-Ownership Rule a. Introduction 74. Since 1975, the newspaper/broadcast cross-ownership rule (NBCO rule) has prohibited common ownership of a daily newspaper and a full-power broadcast station (AM, FM, or TV) if the station's service contour encompasses the newspaper's city of publication. This absolute ban on newspaper/broadcast cross-ownership remains in effect today despite the Commission's attempts over the last decade to modify the restriction. Most recently, in the 2006 Quadrennial Review Order, the Commission adopted a revised standard whereby waiver requests for certain mergers in the top 20 Nielsen DMAs were granted a favorable presumption. The Third Circuit, however, vacated and remanded the revisions on procedural grounds, finding that the Commission had failed to provide adequate public notice of its proposed rule pursuant to the APA. Although the Court in Prometheus I affirmed the Commission's conclusion that an absolute ban is not necessary, the Court in Prometheus II did not reach the Commission's substantive modifications to the NBCO rule. 75. The Commission continues to believe that some restriction on newspaper/broadcast cross-ownership is necessary to protect and promote viewpoint diversity in local markets. The Commission seeks comment on that tentative conclusion. This view is consistent with the Commission's longstanding rationale for the NBCO rule. As the Commission recognized in the 2002 Biennial Review Order, “[a] diverse and robust marketplace of ideas is the foundation of our democracy.” The Supreme Court has recognized the importance of the Commission's role in promoting viewpoint diversity, calling it a “basic tenet of national communications policy.” 76. As discussed below, daily newspapers and local television stations (and their affiliated Web sites) continue to be the dominant providers of local news and information to which consumers turn. Evidence in the 2010 Quadrennial Review proceeding does not suggest that the Internet, for all its ability to make infinite sources of information immediately and globally accessible, has yet tilted that balance. Thus, the “diverse and antagonistic sources” that the NBCO rule historically has protected—daily newspapers and local television stations—are still the primary outlets of local news and information that consumers use. Comments in the current record touting the localism benefits of newspaper/broadcast cross-ownership or claiming a competitive need for traditional media to achieve economies of scale in today's marketplace, while providing a fuller understanding of the newsgathering efficiencies of cross-owned properties and the current financial challenges facing traditional media, were not substantially different from those made in previous reviews, and the Commission does not believe they diminish the viewpoint diversity rationale for the rule. Moreover, the efficiencies that may be gained from newspaper/broadcast combinations do not necessarily lead to gains in localism. As explained below, the Commission seeks comment on the extent to which this dominance of daily newspapers and local televisions stations in the provision of local news and information persists today. 77. However, the Commission found in previous reviews that the nearly 40-year-old blanket prohibition on newspaper/broadcast cross-ownership is overly broad, and the Third Circuit upheld those findings. It is possible that some newspaper/broadcast combinations could be allowed without unduly harming viewpoint diversity. To that end, the Commission seeks comment on whether the prohibition on newspaper/radio combinations should be lifted. The Commission asks what impact such a modification would have on viewpoint diversity in local markets. Research shows that most radio stations do not produce significant amounts of local news and that most consumers do not rely on radio stations as their primary source of local news. Given that the newspaper/television restriction has always been the crux of the NBCO rule, the Commission seeks comment regarding the added value of the rule's newspaper/radio component. The Commission seeks comment, therefore, on whether there is sufficient justification under the legal standards of Section 202(h) for continuing to restrict newspaper/radio combinations. The Commission seeks comment also on the costs and benefits associated with retaining or eliminating the restriction on newspaper/radio combinations. To the greatest extent possible, commenters should quantify the expected costs or benefits of the rule and any alternatives and provide detailed support for any actual or estimated values provided, including the source of such data and/or the method used to calculate reported values. 78. The Commission invites comment also on whether and in what way it should modify the newspaper/television cross-ownership restriction. Although further comment is welcome, the Commission is disinclined to impose a bright-line rule permitting combinations in certain circumstances. Instead the Commission seeks comment on approaches that would maintain the ban on newspaper/television combinations in all markets but that would allow applicants the opportunity to seek approval of particular transactions. The Commission could consider any waiver requests on a purely case-by-case basis, assessing each request independently and considering the totality of the circumstances each proposed transaction presents, including all asserted and potential likely public interest implications of the specific proposed combination. The Commission seeks comment on this approach, including the costs and benefits associated with a pure case-by-case review of waiver applications. To the greatest extent possible, commenters should quantify the expected costs or benefits of this proposal and any alternatives and provide detailed support for any actual or estimated values provided, including the source of such data and/or the method used to calculate reported values. 79. The Commission also invites further comment on a case-by-case waiver approach that would include presumptions that favor or disfavor the grant of waiver requests in accordance with certain prescribed guidelines. This approach would build on proposals in the NPRM to modify the vacated 2006 rule. Under this approach, a request for waiver of the newspaper/television cross-ownership prohibition would be entitled to a presumption that it is consistent with the public interest, convenience, and necessity to allow an entity to own, operate, or control one daily newspaper and one full-power television station in a top-20 Nielsen DMA provided that: (1) The television station is not ranked among the top-four television stations in the DMA, based on the most recent all-day (9 a.m.-midnight) audience share, as measured by Nielsen or by any comparable professional, accepted audience ratings service, and (2) at least eight independently owned and operating major media voices will remain in the DMA. Major media voices would include full-power television broadcast stations and newspapers that are published at least four days a week within the DMA in the dominant language of the market and have a circulation exceeding 5 percent of the households in the DMA. In all other cases and in any DMA below the top-20 there would be a presumption that granting a waiver to permit a newspaper/television combination is inconsistent with the public interest, convenience, and necessity. A party seeking to overcome a presumption would carry the burden of proof that the proposed combination will or will not unduly harm viewpoint diversity within the DMA. As provided below, the Commission seeks comment on all aspects of this framework, including the costs and benefits of each of the elements discussed herein. To the greatest extent possible, commenters should quantify the expected costs or benefits of this approach and any alternatives and provide detailed support for any actual or estimated values provided, including the source of such data and/or the method used to calculate reported values. 80. As described in more detail below, the Commission seeks comment on various other issues regarding a newspaper/television cross-ownership restriction. First, any restriction would be modified to replace the obsolete analog Grade A contour with an approach that approximates the outdated contour as closely as possible. The Commission proposes to prohibit common ownership of a full-power television station and a daily newspaper when: (1) The television station's community of license and the newspaper's community of publication are in the same Nielsen DMA, and (2) the principal community contour (PCC) of the television station, as defined in § 73.625 of the Commission's rules, encompasses the entire community in which the newspaper is published. Second, the restriction would not include the four-factor test that all waiver applicants, even those entitled to a favorable presumption, were required to satisfy under the 2006 rule. As discussed below, the Commission believes that the factors are for the most part vague, subjective, difficult to prove and enforce, and/or not directly linked to viewpoint diversity. Third, the restriction would not include a local news exception, such as the one permitted by the 2006 rule under which the Commission reversed the negative presumption against a waiver when the proposed combination involved a broadcast station that had not been offering local newscasts and the applicants committed to airing at least seven hours of local news per week after the transaction. As described below, the Commission believes that the potential difficulties in monitoring and enforcing the exception would render it meaningless. Fourth, the Commission proposes to include in any restriction an exception for merger applicants that demonstrate that either the television station or the newspaper has failed or is failing. 81. Finally, the Commission tentatively agrees with DCS that the NBCO rule does not have a significant impact on minority ownership, and the Commission believes that these modest revisions the Commission put forth for comment would be unlikely to have a disproportionate effect on either minority or female owners. The Commission seeks comment on whether the benefits of the revisions it describes here in the interest of protecting viewpoint diversity would outweigh any burdens that could result from such revisions, which the Commission would minimize by grandfathering any combinations that would become newly non-compliant because of the revisions. b. Background 82. As discussed below, the NPRM inquired about detailed scenarios in connection with proposed rule modifications. c. Discussion (i) Policy Goals 83. Background. In the NPRM, the Commission tentatively affirmed the Commission's past determinations that the NBCO rule promotes viewpoint diversity but is not necessary to advance its localism and competition goals. Consistent with previous Commission findings, the Commission tentatively concluded that, although an absolute ban is overly broad, some newspaper/broadcast cross-ownership restrictions continue to be necessary to protect and promote viewpoint diversity. The Commission's reasoning centered on evidence that newspapers and local television stations, and their affiliated Web sites, are the primary sources that consumers rely on for local news and information. The Commission recognized that newspaper/broadcast cross-ownership may provide certain benefits that promote its localism goal. Thus, it tentatively affirmed the Commission's earlier findings that the opportunity to share newsgathering resources and to realize other efficiencies derived from economies of scale and scope may improve the ability of commonly owned media outlets to provide local news and information. It tentatively concluded, as the Commission found in previous ownership reviews, that newspapers and broadcast stations do not compete in the same product market and, therefore, that the rule is not necessary to promote its competition goal. 84. Discussion. The Commission seeks comment on the current validity of the Commission's tentative conclusion in the NPRM that newspapers and local television stations, and their affiliated Web sites, are the dominant sources consumers rely on for local news and therefore that cross-ownership restrictions continue to be necessary under Section 202(h) to promote viewpoint diversity in local markets. The Commission proposes to adopt the NPRM' s tentative findings that the NBCO rule is not necessary to foster its localism and competition goals. While the Commission recognizes that the rule may hinder the realization of certain efficiencies that could result in the production of more local news, it anticipates that modifications of the rule, such as those outlined below, could enable such efficiencies, and thereby potentially promote localism, in situations where viewpoint diversity would not be unduly sacrificed. (i) Viewpoint Diversity 85. In the 2010 Quadrennial Review proceeding, newspaper and media owners proffered two principal arguments to support their position that the Commission's diversity goal no longer justifies a prohibition on newspaper/broadcast cross-ownership. They argued, first, that ownership does not necessarily influence viewpoint and, second, that an array of diverse viewpoints is widely available from an abundance of outlets, particularly via the Internet. Both of these arguments were addressed by the Commission in the 2002 and 2006 media ownership reviews and by the Third Circuit in Prometheus I. The Third Circuit agreed with the Commission that, although these arguments provide an appropriate basis for relaxing the absolute ban on newspaper/broadcast cross-ownership, they do not mandate the removal of all restrictions on such combinations. The Commission seeks comment on the tentative conclusion that neither of these arguments presents a reason for eliminating the NBCO rule in the 2014 Quadrennial Review proceeding. 86. The Commission does not believe that the 2010 Quadrennial Review record compels it to alter the earlier conclusion that cross-ownership can diminish viewpoint diversity. For example, the authors of Media Ownership Study 9 find that ownership concentration may adversely affect viewpoint diversity and the quality of local news. The Commission finds that the results of Media Ownership Studies 8A and 8B, suggesting that ownership structure does not have a marked impact on viewpoint diversity, cannot serve as a basis for assessing the impact of the NBCO rule. The analysis in Media Ownership Study 8B did not include any variables pertaining to newspaper/broadcast cross-ownership, and Media Ownership Study 8A examined only newspaper/television cross-ownership, for which its data was particularly limited. The 2008 Pritchard Study cited by Cox supports the proposition that cross-ownership does not diminish viewpoint diversity; however, its analysis includes only three cross-ownership situations. The editorial restraint exhibited by media owners in the three markets Pritchard studied does not negate what Pritchard calls the “theoretical power” of media owners to control viewpoint. Even if cross-media owners do not exercise that power frequently, the Commission believes it is important to restrict cross-ownership of the dominant local news providers in markets where viewpoint diversity is insufficiently robust to withstand the potential loss of an independently owned voice. The Commission seeks comment on this view. 87. With respect to the second argument, opponents asserted that the rule cannot be justified on diversity grounds because consumers today have nearly ubiquitous access to a multitude of voices. The Commission believes that the media environment has changed dramatically since 1975 when the average American read one local print newspaper and watched one of three evening newscasts in real time. Without question, the Internet, MVPD services, and other technological developments have profoundly changed the ways in which people access, consume, and share news and information. In its 2002 and 2006 ownership decisions, the Commission described the rapid advancements in the media industry at great length. Since then, those changes have been compounded as both providers and consumers of news use the Internet even more intensely. As the Commission concluded in its 2002 and 2006 proceedings, the Commission believes the proliferation of media outlets since 1975 may well render the absolute ban on newspaper/broadcast cross-ownership obsolete. 88. While the extent to which Americans turn to news Web sites unaffiliated with traditional media may be increasing, it appears that such sources have not supplanted print newspapers and local television stations, and their affiliated Web sites, as the dominant providers of local news. As a threshold matter, online services and information are not available or not enjoyed at full capacity by many Americans due to disparities in broadband availability and adoption rates. Furthermore, according to a recent Pew Report on the State of the News Media, “local TV remains America's most popular source of local news and information.” Commission staff reported in the Information Needs of Communities Report that, on a typical day, 78 percent of Americans obtain news from their local television station. A recent trade association analysis reportedly concluded that viewership of local evening news broadcasts in the 10 largest markets exceeded the five highest rated cable news programs combined by more than 430 percent. Although more consumers now turn to the Internet than to print newspapers for news and information, newspapers (both the print and online versions) are relied upon for the widest range of local news topics, and newspaper Web sites are the primary traditional source of local news for online consumers in the vast majority of large markets. In addition, many local television stations have become “major online sources of news,” even surpassing the popularity of newspaper Web sites in a number of local markets. The author of Media Ownership Study 6 concludes that “[n]ewspapers and television stations dominate what local news can be found online.” The author found that only 17 of the 1,074 local news Web sites he examined were unaffiliated with traditional print or broadcast media. As the Commission described in the NPRM, the results of Media Ownership Study 6 are supported by data from other studies demonstrating a consumer preference for Web sites affiliated with legacy media. The Commission seeks comment on its assessment of the current record and it invite commenters to provide any updated information or evidence regarding consumer reliance on unaffiliated online sources for local news and information. 89. Even Web sites unaffiliated with newspapers and television stations often contain local news content that originates from those traditional sources. The results of the Pew Baltimore Study revealed new media's “limited role” in providing original reporting. The Information Needs of Communities Report points to a number of studies demonstrating that “the growing number of web outlets relies on a relatively fixed, or declining, pool of original reporting provided by traditional media.” In addition, Media Ownership Study 6 finds a dearth of independent Web sites with original local news content. Commenters in the 2010 Quadrennial Review proceeding tended to agree that most independent online sources, particularly news aggregator Web sites, currently do not provide a substitute for the original reporting by professional journalists associated with traditional local media. Media Ownership Study 6 cautions that even the independent local Web sites that produce high-quality content are not necessarily substitutes for traditional media outlets. The Commission invites commenters to submit updated information or evidence regarding the prevalence of original local news content on Web sites unaffiliated with traditional media outlets. 90. At the current time and based on the record before the Commission, it tentatively finds that the record does not support the conclusion that the impact of the Internet has obviated the need for cross-ownership restrictions. The NBCO rule is intended to preserve access to a variety of viewpoints on substantive matters of local concern. The Commission tentatively finds that the diversity of local news coverage is not enhanced by the fact that newspapers from around the world are only a click away. Remote access to hometown sports scores and local weather reports expands the availability, but not the diversity, of information. While the Commission tentatively agrees with Tribune that the presence of local and specialized Web sites “enriches the conversation,” the record in the 2010 Quadrennial Review proceeding does not appear to demonstrate that most local, hyperlocal, and niche Web sites fill the role of local television stations or daily newspapers. In addition, the studies that Tribune cited in support of its assertion that Americans increasingly use the Internet to obtain election information concluded that television remains the primary source for such information among all Americans. Although the 2010 Quadrennial Review record does not appear to provide convincing evidence that the Internet eliminates entirely the need for cross-ownership restrictions, the Commission seeks comment on its tentative assessment of the record. The Commission also seeks comment on whether there have been any changes in the Internet's role in the current marketplace for local news and information that the Commission should consider in its 2014 Quadrennial Review. (ii) Localism 91. The evidence in the 2010 Quadrennial Review record does not appear to negate the basic proposition that newspaper/broadcast cross-ownership may enable commonly owned properties to produce and disseminate more and sometimes better local news. As acknowledged in the NPRM, the Commission has found that cross-ownership may produce such benefits to localism. The Commission recognizes that localism benefits are not guaranteed, however. The Commission sought comment in the NPRM not only on the benefits of cross-ownership generally, but also specifically on how to weigh the finding in Media Ownership Study 4 that an increased amount of local news on a cross-owned television station does not necessarily translate into more local news at the market level. The author of the study theorized that cross-owned stations may tend to “crowd out” the news production of other stations. 92. The author of Media Ownership Study 4 cautions that the result showing less local news in markets with newspaper/broadcast cross-ownership is “imprecisely measured and not statistically different from zero.” Given that disclaimer, and the disputed evidence in the 2010 Quadrennial Review record, the Commission proposes not to accord much weight to the study's finding that the amount of local news at the market level may be negatively correlated with newspaper/broadcast cross-ownership. Despite the criticisms of the methodology used in Media Ownership Study 4, the Commission thinks it reasonable to accept the premise that such cross-ownership may result in a greater amount of local news production by the cross-owned properties based on other record evidence. The Commission is aware, however, that such an outcome is not assured and depends in part on the owner's commitment to disseminate local news. 93. The Commission believes the nation's interest in maintaining a robust democracy through a “multiplicity of voices” justifies maintaining certain NBCO restrictions even if doing so prevents some combinations that might create cost-savings and efficiencies in news production. Moreover, the Commission does not believe that the elimination of the NBCO rule would necessarily result in benefits to localism. The Commission seeks comment on whether a continued restriction, with the modifications described below, would minimize any potential effects on localism while preserving and promoting viewpoint diversity. (iii) Competition 94. Traditionally, the Commission does not evaluate the NBCO rule in terms of its competition goal because it has found that newspapers and broadcast stations do not compete in the same product market. However, some commenters in the 2010 Quadrennial Review proceeding expressed concerns about the impact of the NBCO rule on competition more generally. Other commenters disputed these concerns. 95. Although the Commission shares the concerns of many Americans about the future of the newspaper industry, the Commission agrees with certain commenters that it would be inappropriate to relax the NBCO rule on the ground that newspapers are struggling to reinvent a successful business model. The Commission maintains that the pertinent issue for this part of its analysis is whether the NBCO rule is necessary to promote competition between newspapers and broadcast stations. The Commission already has determined that it is not. The Commission does not believe it could justify jeopardizing viewpoint diversity in local markets based on assertions that the rule limits opportunities for traditional media owners to increase revenue. Nonetheless, given that the revisions to the NBCO rule considered below would narrow its application, the Commission seeks comment on the extent to which such revisions would mitigate any unintended harms. 96. Despite the bleak outlook for newspapers' print revenues, there have been some encouraging signs that traditional media are finding new ways to monetize their content. The Commission recognizes that the adjustments needed to survive this transition period may pose insurmountable challenges for some owners. Accordingly, as discussed below, the Commission proposes to include an exception to the cross-ownership restriction when either the newspaper or the television station involved in a proposed merger is failed or failing. The Commission believes the risk that a common owner will influence the viewpoint of a newly acquired outlet is preferable to the greater diversity harm of losing the outlet altogether. 97. The Commission seeks comment, for purposes of the 2014 Quadrennial Review proceeding, on its tentative view, as described above and consistent with Commission precedent, that the NBCO rule is not necessary to promote localism and competition goals but that some form of cross-ownership restriction remains necessary to preserve and promote viewpoint diversity in local markets. (ii) Newspaper/Radio Cross-Ownership 98. Background. In the NPRM, the Commission sought comment on whether it should eliminate the part of the NBCO rule that applies to newspaper/radio combinations. The Commission tentatively concluded that radio stations are not the primary outlets that contribute to viewpoint diversity in local markets and that a substantial amount of news and talk show programming on radio stations is nationally syndicated, rather than locally produced. The Commission's preliminary view was that radio stations are not a primary source that consumers turn to for local news and information and that, rather, consumers in markets of all sizes rely most heavily on other types of news outlets for local news and information. The Commission asked whether newspaper/radio cross-ownership would promote localism and provide financially struggling newspapers and radio stations the opportunity to become vital participants in the news and information marketplace. In addition, the Commission asked whether it should substitute Arbitron market definitions for radio contours to determine when the NBCO rule is triggered for newspaper/radio combinations and whether existing combinations implicated by a rule change should be grandfathered. The Commission invites further comment also on these issues. 99. Discussion. The Commission seeks further comment on whether the restriction on newspaper/radio cross-ownership should be eliminated from the NBCO rule. The Commission seeks comment on the Commission's tentative conclusions that radio stations are not the primary outlets that contribute to viewpoint diversity in local markets and that consumers rely predominantly on other outlets for local news and information. Several commenters in the 2010 Quadrennial Review proceeding referenced the fact that promoting viewpoint diversity has been the Commission's lone justification for retaining the restriction. As discussed above, the Commission has found repeatedly that the restriction does not promote its localism or competition goals, and the Commission tentatively reaffirms those findings. Therefore, the Commission tentatively agrees with several commenters that if the rule were no longer necessary to support the Commission's viewpoint diversity policy, then the newspaper/radio cross-ownership restriction would be left without a public interest rationale. Under Section 202(h) of the 1996 Act, the Commission must repeal or modify any media ownership regulations that no longer serve the public interest. Accordingly, it seeks comment on whether the newspaper/radio cross-ownership restriction advances its interest in promoting viewpoint diversity or whether the Commission should eliminate the restriction and permit common ownership of newspapers and radio stations in all markets, within the prescribed limits of the local radio ownership rule. 100. Evidence from the Information Needs of Communities Report shows that consumers' reliance on radio news has declined steadily over the past two decades. From 1991 to 2010, the number of people reporting that they listened to some news on the radio dropped from 54 percent to 34 percent. Of the approximately 11,000 commercial radio stations in the country, only 30 are all-news radio stations, a reduction from the mid-1980s when there were 50 such stations. Although a small number of commercial all-news radio stations in the nation's largest markets are very successful, radio stations in most cities do not provide much local journalism. One finding showed that in 2007 more than 40 percent of radio stations carried news programming produced remotely by a commonly owned station outside the local market. Typic [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2014-10870. Public record. Not legal advice.