Radio Broadcast Services; Television Program Practices

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MM Docket No. 94-123; FCC 94-266]

Radio Broadcast Services; Television Program Practices

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission invites comments on its initiation of a

rulemaking proceeding to assess the legal and policy justifications, in

light of current economic and technological conditions, for the Prime

Time Access Rule, and to consider the continued need for the rule in

its current form.

DATES: Comments are due on or before January 6, 1995, and reply

comments are due on or before February 6, 1995.

ADDRESSES: Federal Communications Commission, Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT:

David E. Horowitz and Alan E. Aronowitz, Mass Media Bureau, Policy and

Rules Division, (202) 632-7792.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's

Notice of Proposed Rule Making, MM Docket No. 94-123, adopted October

20, 1994, and released October 25, 1994. The complete text of this

document is available for inspection and copying during normal business

hours in the FCC Reference Center (Room 239), 1919 M Street NW.,

Washington, D.C. 20554, and may be purchased from the Commission's copy

contractor, International Transcription Service, (202) 857-3800, 2100 M

Street NW., Washington, D.C. 20037.

Synopsis of the Notice of Proposed Rule Making

1. The Commission initiated a rulemaking proceeding to assess, in

light of current economic and technological conditions, the legal and

policy justifications for the Prime Time Access Rule (``PTAR''),

Section 73.658(k) of the Commission's Rules, and to consider the

continued need for the rule in its current form. The rule generally

prohibits network-affiliated stations in the top 50 television markets

from broadcasting more than three hours of network or former network

(``off-network'') programs during the four prime time viewing hours

(i.e., 7 to 11 p.m. Eastern and Pacific times; 6 to 11 p.m. Central and

Mountain times). The rule also contains exemptions for certain types of

programming (e.g., special news, documentary, children's and sports

programming).

2. PTAR was initially promulgated in 1970 in response to the

concern that the three major television networks--ABC, CBS and NBC--

dominated the program production market, controlled much of the video

fare presented to the public, and inhibited the development of

competing program sources. The Commission believed that PTAR would

increase the level of competition in the independent production of

programs, reduce the networks' control over their affiliates'

programming decisions, and increase the diversity of programs available

to the public.

3. The Commission believes that as the video marketplace has

developed and the major networks' power has declined in the years since

PTAR was established, an overall review of the rule is now appropriate.

In this regard, on April 12, 1994, the Commission issued a Public

Notice soliciting public comment on various filings seeking

modification or elimination of PTAR. Parties filing comments thus far,

however, have failed to present a rigorous economic framework for

analysis, supported by adequate data, that will enable the Commission

to assess the competitive effects of the rule and its efficacy in

achieving both competition and non-competition-based public interest

goals. Therefore, this Notice of Proposed Rule Making proposes a

framework to evaluate the continued efficacy of the rule.

4. The analytical framework set forth by the Commission recognizes

that in 1970, there was a strong cast for taking government action to

correct the effects of a competitively unbalanced market. Accordingly,

the FCC established PTAR. However, with the development of alternative

forms of video distribution, the growth of the broadcast industry

(including increased competition among networks for affiliates), and

the increase in the number and types of entities creating nationally

distributed video programming, the case for PTAR must be revisited. The

analytical framework proposed in this Notice provides a means for

evaluating the factual and economic assumptions underlying PTAR, to

ascertain whether the rule operates to achieve its intended effects,

and what unintended effects it may also cause. In addition, the

Commission will use the framework to evaluate whether the intended and

unintended effects further the attainment of legitimate goals in

today's world. The ultimate decision to retain, modify or eliminate the

rule will turn on a weighing of its costs against its benefits.

5. More specifically, the analytical framework seeks comment on the

validity of the following three basic ways PTAR is said to alter the

competitive opportunities in the relevant markets for the public good.

First, by carving out a portion of prime time to be used for non-

network use, the rule made it easier for independent producers to sell

their programming to the more successful stations in the top markets

(i.e., affiliates of the three major networks). Among the intended

effects was the goal of strengthening existing independent producers

and encouraging entry of new ones. From an economic perspective, the

Commission had anticipated that the decrease in supply of programming

available to affiliates (caused by PTAR's ban on network and off-

network programming) would increase prices paid for independently

produced programming, thus acting as a spur for greater production and

new entry. Thus, the Commission had predicted that the rule would

increase the net amount of diverse programming available to the viewing

public and create new competitors to the existing three networks. The

Notice asks commenters to assess this dynamic, raising such questions

as: (1) Whether this enhanced opportunity increases the net amount of

independently produced programs available to the public; (2) whether

this opportunity increases the net number of independent program

producers serving the market; and (3) whether the limit placed by this

opportunity on an affiliate's ability to carry network or off-network

programming during the access period reduces the economic value of

network programming aired during the other parts of prime time, by

limiting the potential buyers for these programs after the network run

is complete, thereby depressing the total return on these programs.

6. Second, the rule sought to reduce the networks' role in

dictating their affiliates' programming choices, by forbidding the

affiliates in the top 50 markets from running more than three hours of

network or off-network programming during the four-hour prime time

period. Thus, the rule was viewed as a way to increase affiliate

autonomy and reduce network dominance. The immediate effect was to

ensure that not all of an affiliate's prime time programming came

through the same network filter. The Notice asks commenters to provide

evidence regarding the bargaining positions of affiliates vis-a-vis

their networks. For example, during hours other than the PTAR access

period, do affiliates in the top 50 markets carry programs other than

network programs? To what extent does the market dynamic in the top 50

markets dictate performance in the less populated markets? Are the

recent affiliation switches indicative of a change in the relative

bargaining power of the networks and their affiliates, or are these

switches due to other factors? To the extent that the behavior of

affiliates might change in some way if PTAR were modified or repealed,

how would that affect the programs ultimately available to viewers? The

Notice solicits comment on these and other related issues.

7. Third, the rule has come to be viewed as a mechanism for

strengthening independent stations, with the result of increasing the

strength and number of the primary buyers of independently produced

programming. The argument is that, with this increase, not only are the

number of independent program producers increasing, but the opportunity

for new networks to emerge and compete with the existing networks is

enhanced (by the presence of a healthy pool of independent stations).

Thus, by strengthening independent stations overall, the rule has been

considered to further both diversity and competition goals. Moreover,

the independent stations themselves produce some degree of original

programming, which contributes to the overall levels of diverse

programming available in the market. The Notice thus invites comment on

whether, given the current level of program diversity, the competitive

alteration that PTAR causes with respect to a segment of the market is

warranted. Similarly, the Notice asks commenters to address the degree

to which, from economic and public interest perspectives, PTAR leads to

misallocated resources, limits viewers' programming choices, and alters

the optimal prices paid. The Notice seeks comment on its analysis of

this issue in general, and in particular raises questions such as: (1)

whether regulatory measures designed to encourage the introduction into

the broadcast industry of increased competition in the form of new

networks remain necessary when the established networks and their

affiliates are also competing against nonbroadcast video services; and

(2) whether any inefficiencies of encouraging entry of new networks by

placing limits on incumbents are outweighed by real benefits, and if

so, what types and what number of inefficiencies and benefits.

8. In addition to seeking comment on the above-described ways in

which PTAR alters the competitive opportunities in the relevant

markets, the Commission framed certain overarching issues going to the

public interest basis for PTAR, including, but not limited to, whether

non-broadcast media should be considered in assessing the rule, whether

PTAR is the appropriate mechanism to ensure diversity for those who do

not avail themselves of technological alternatives to broadcast

television, and whether other regulatory responses other than PTAR

would be more effective or efficient to achieve the stated goals of the

rule.

9. To the extent that the record to be developed might support

retaining PTAR in whole or part, the Commission seeks public comment on

the incidental elements of the rule--the definition of a ``network''

for purposes of the rule, and the various program categories that are

exempted from application of PTAR. Moreover, although the policy

examinations to be undertaken in this proceeding may make it

unnecessary to address specific constitutional questions raised by the

rule, if the rule is to be retained in some form, the Commission seeks

comment on various constitutional implications of the rule and any

proposed alternatives.

10. The Commission seeks comment on these issues, as well as

specific economic analysis and supporting data favoring either

retention, modification or repeal of the rule. If the Commission

chooses to modify or eliminate the rule, we must then determine when to

do so and whether to adopt transition measures. A modification to the

rule might be appropriately enacted immediately after such a decision

is made, or through a timetable that allows industry participants to

adjust to the changing economic conditions that might result from

modifications to PTAR. Elimination of the rule might be tied to

technological developments or the timing might be tied to regulatory

developments such as the scheduled expiration of the fyn/syn rules of

some time thereafter. Similarly, a transition mechanism could be based

on a variety of different considerations, focusing on defining the

stages of that transition if one is adopted. For example, one possible

transition would entail initial repeal of the off-network restriction

followed by later repeal of the remainder of the rule. The Notice

questions whether such a staggered repeal of the rule would further the

public interest by reducing marketplace disruption or would delay the

realization of benefits that could otherwise be realized from immediate

form. In summary, should the record support elimination or modification

of the rule, the Commission will require a record regarding the timing

of any action and whether specific transition measures are necessary or

appropriate.

11. Initial Regulatory Flexibility Analysis

Reason for the Action

This proceeding was initiated to review and update the provisions

of PTAR.

Objective of the Action

The actions proposed in this Notice are intended to reexamine and

perhaps modify or eliminate the prime time access rule, 47 C.F.R.

Sec. 73.658(k), in response to changes in the communications

marketplace, and to better adjust to the needs of the public.

Reporting, Record Keeping, and Other Compliance Requirements Inherent

in the Proposed Rule

None.

Federal Rules which Overlap, Duplicate, or Conflict with the Proposed

Rule

None.

Description of Potential Impact and Number of Small Entities Involved

Approximately 416 existing television broadcasters of all sizes may

be affected by the proposals contained in this Notice.

Any Significant Alternatives Minimizing the Impact on Small Entities

and Consistent with the Stated Objectives

The proposals contained in this Notice are meant to simplify and

ease the regulatory burden currently placed on network affiliates in

the top 50 markets.

12. As required by Sec. 603 of the Regulatory Flexibility Act, the

Commission has prepared this Initial Regulatory Flexibility Analysis

(``IRFA'') of the expected impact on small entities of the proposals

suggested in this Notice of Proposed Rule Making. Written public

comments are requested on the IRFA. These comments must be filed in

accordance with the same filing deadlines as comments on the rest of

the Notice, but they must have a separate and distinct heading

designating them as responses to the Regulatory Flexibility Analysis.

The Secretary shall send a copy of this Notice, including the IRFA, to

the Chief Counsel for Advocacy of Small Business Administration in

accordance with paragraph 603(a) of the Regulatory Flexibility Act

(Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C. Sec. 601 et seq. (1981)).

Ex Parte

13. This is a non-restricted notice and comment rulemaking

proceeding. Ex parte presentations are permitted, provided they are

disclosed as provided in the Commission's Rules.See generally 47 C.F.R.

Sections 1.1202, 1.1203 and 1.1206(a).

Comment Dates

14. Pursuant to applicable procedures set forth in Sections 1.415

and 1.419 of the Commission's Rules, interested parties may file

comments on or before January 6, 1995, and reply comments on or before

February 6, 1995. All relevant and timely comments will be considered

before final action is taken in this proceeding. To file formally in

this proceeding, participants must file an original and four copies of

all comment, reply comments, and supporting comments. If participants

want each Commissioner to receive a personal copy of their comments, an

original plus nine copies must be filed. Comments and reply comments

should be sent to the Office of the Secretary, Federal Communications

Commission, Washington, D.C. 20554. Comments and reply comments will be

available for public inspection during regular business hours in the

FCC Reference Center (Room 239) of the Federal Communications

Commission, 1919 M Street NW., Washington, D.C. 20554.

List of Subjects in 47 CFR Part 73

Television broadcasting.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 94-27425 Filed 11-4-94; 8:45 am]

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