# Revision of Radio Rules and Policies

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URL: https://www.frixlaw.com/law-library/documents/fr%3A94-29941

## Record

- **Collection:** Federal Register
- **Document type:** Uncategorized Document
- **Published:** December 6, 1994

## Text

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MM Docket No. 91-140; FCC 94-267]

Revision of Radio Rules and Policies

AGENCY: Federal Communications Commission.

ACTION: Final rule; petitions for reconsideration.

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SUMMARY: In the Second Memorandum Opinion and Order (Second
Reconsideration Order), the Commission revises the national radio
ownership limits to permit minority broadcasters to own a controlling
interest in up to 25 AM and 25 FM stations, and to permit non-minority
broadcasters to hold a non-controlling interest in an additional five
AM and five FM stations over the general national limits that are
controlled by minorities or small businesses. The Commission declines
to revise its local radio ownership limits or its rules and policies
regarding time brokerage. The actions taken in the Second
Reconsideration Order, in conjunction with the other actions taken in
this proceeding, are needed to permit radio broadcasters to combine
resources, as well as to provide greater opportunities for minority and
small business broadcasters.

EFFECTIVE DATE: January 5, 1995.

FOR FURTHER INFORMATION CONTACT: Jane Hinckley Halprin, Mass Media
Bureau, Policy and Rules Division, (202) 632-7792.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Second Reconsideration Order in MM Docket No. 91-140, adopted October
20, 1994, and released November 8, 1994.
The complete text of the Second Reconsideration Order is available
for inspection and copying during normal business hours in the FCC
Reference Center (Room 239), 1919 M Street, NW, Washington, DC, and
also may be purchased from the Commission's duplicating contractor,
International Transcription Service, 2100 M Street, NW, Washington, DC
20036, (202) 857-3800.

Synopsis of Second Reconsideration Order

1. The Second Reconsideration Order resolves issues raised in three
petitions for reconsideration of the Memorandum Opinion and Order in MM
Docket No. 91-140, 7 FCC Rcd 6387 (1992), 57 FR 42701 (Sept. 16, 1992)
(First Reconsideration Order). Those petitions were filed by the League
of United Latin American Citizens (LULAC), the National Association of
Black Owned Broadcasters, Inc. and the National Black Media Coalition
(NABOB/NBMC), and the Telecommunications Research and Action Center and
the Washington Area Citizens Coalition Interested in Viewers'
Constitutional Rights (TRAC/WACC). The Second Reconsideration Order
also addresses a Petition for Rule Making (RM-8414) filed by the
National Association of Broadcasters (NAB), and denies a NABOB/NBMC
request for stay and rescission of the previous increase in the
national ownership rules.
2. The First Reconsideration Order, upon which the Second
Reconsideration Order is based, revised the Commission rules governing
the ownership of interests in multiple radio stations. The First
Reconsideration Order revised Sec. 73.3555 of the Commission's Rules
(47 CFR 73.3555) to increase the national radio ownership limit from 12
AM and 12 FM stations to 20 AM and 20 FM stations. The Commission also
revised the national minority ownership cap, which had permitted non-
minority owners to take a non-controlling interest in an additional two
AM and two FM stations that were minority-controlled, and permitted
minority owners to hold a controlling interest in 14 AM and 14 FM
stations. The First Reconsideration Order modified the rule to permit
all owners to take a non-controlling interest in an additional three
stations per service above the national caps if those stations were
controlled by minorities or small businesses. It declined to adopt a
provision allowing minority broadcasters to own more stations outright.
3. The First Reconsideration Order also relaxed the local ownership
limit, which had been one AM and one FM station per area, to permit
common ownership of up to two AM and two FM stations, depending on the
size of the market. Specifically, in markets with 15 or more stations,
an individual or group was permitted to acquire up to two AM and two FM
stations provided that the combined audience shares of those stations
did not exceed 25 percent of the local radio market. In markets with
fewer than 15 stations, a single owner was permitted to acquire a total
of three stations, no more than two of which may be in the same service
(i.e., AM/AM/FM or AM/FM/FM), provided that the group owner's stations
represent less than half of the total number of stations in the market.
The First Reconsideration Order also declined to revisit the
Commission's prior determination that certain time brokerage
arrangements would be treated as attributable ownership interests for
purposes of the multiple ownership rules.
4. The Second Reconsideration Order generally affirms the rules
adopted in the First Reconsideration Order, except that the Commission
has decided to revise the national ownership rule with respect to
minority and small business broadcasters. The Second Reconsideration
Order increase the national limits for minority owners to 25 AM and 25
FM stations, and raises to five the number, in excess of the national
limits, of minority or small business controlled AM or FM stations in
which a non-minority broadcaster may hold a non-controlling interest.
5. In addition, because of concerns raised by a number of parties
with respect to the effects of the revised rules on competition and
diversity in radio markets, the Commission, on its own motion, reviews
the radio ownership rules in light of relevant economic and antitrust
principles. Pursuant to its analysis of these principles, the
Commission concludes that the radio ownership rules are consistent with
established principles of competitive analysis and at the present time
provide adequate safeguards to ensure acceptable levels of diversity in
the radio marketplace.

Local Ownership Limits

6. The First Reconsideration Order revised Sec. 73.3555 to permit a
single owner in a larger market to own up to two AM and two FM
stations, subject to an audience share cap of 25 percent, and to permit
an owner in a smaller market to own up to three stations, provided that
no more than two are in the same service and that the stations
represent fewer than half of the total number of stations in the area.
A ``market'' is defined with respect to overlapping signal contours.
For instance, the relevant market with respect to a combination of two
stations in the same market would encompass those two stations as well
as all other radio stations whose principal community contours overlap
those of the two stations involved in the proposed transaction.
7. Urging reconsideration, LULAC argues that the new local rules
disadvantage small stations, and reiterates its suggestion that, rather
than change the local ownership rules, the Commission should allow
greater consolidation for financially failing radio stations. NABOB/
NBMC reiterate their previous argument that increased ownership limits
will substantially reduce opportunities for increased minority
ownership in broadcasting and will force minority broadcasters out of
the radio industry. In opposition, NAB contends that adoption of
LULAC's proposal would impede the positive effects of the new rules.
8. The Commission notes that it directly addressed LULAC's
suggestion to adopt a failed station standard in the First
Reconsideration Order. It concludes that LULAC's argument, that its
``failing'' station would permit a troubled station to obtain ownership
relief well before it actually fails, does not adequately address the
Commission's fundamental concern with the vitality of the industry
generally. It therefore finds that LULAC has presented no new evidence
or argument to revisit that review. The Commission also concludes that
NABOB/NBMC likewise have not presented any new information that would
persuade it to further modify the local limits.
9. While it does not modify its local ownership rules, the
Commission does make a minor correction. A reference to ``the most
recent published audience share data available at the time that the
application is filed'' was deleted from Sec. 73.3555(a)(3)(iii) when
that rule section was revised (and renumbered) pursuant to the First
Reconsideration Order. That deletion was inadvertent, and the quoted
provision was intended by the Commission to remain in the rules.
Section 73.3555(a)(3)(iii) will be modified to reinsert that language,
as set forth below.
10. In its petition for rule making. NAB suggests that when only
one of the stations in a proposed combination has a principal community
contour that would place the transaction in a market of 15 or more
stations, the parties to the transaction should be permitted to elect
whether to be governed by (1) the rules for small markets based on the
number of stations overlapping the smaller facility's contour (thus
avoiding the audience share limitation); or (2) the rules for large
markets, but with the audience share calculated based on all counties
receiving any one of the 15 or more stations counted as in the market
pursuant to Sec. 73.3555(a)(3)(ii).
11. NAB also proposes that the local ownership rule be modified so
that ownership of ``not greater than 50 percent'' of the stations in a
market would be permitted rather than the current ``less than 50
percent'' rule. In addition, NAB contends that any single station or
AM/FM combination licensee should be allowed in all situations to add
one additional station to common ownership.
12. Finally, in the event the above changes are not adopted, NAB
believes that a clear and liberal set of criteria should be established
for requests for waiver of the local ownership rule in traditionally
small markets. Among the critical elements of any waiver policy
according to NAB, would be the effort to save a dark or failing
station.
13. Duke Broadcasting, commenting on the NAB petition, raises
similar concerns with the contour-based market definitions in the new
rules when applied in small markets, but proposes a different solution.
Duke suggests a delineation of two tiers of markets based on
Metropolitan Statistical Area (MSA) ranking, with ``larger'' markets
still subject to the combined audience share limitation of 25 percent,
and ``smaller'' markets not subject to the combined audience share
limitation in the absence of a showing that the particular combined
share exceeding 25 percent creates an excessively high concentration of
audience. Duke proposes that MSAs ranked above 150 would be placed in
the larger market tier, while those ranked 150 and below, as well as
non-MSA markets, would be placed in the smaller tier.
14. The Commission declines to modify the local ownership rules. It
notes that in designing the signal overlap standard, it specifically
rejected suggestions that Arbitron data, MSAs (proposed by Duke here)
or other narrow geographic designations be employed to count the number
of stations in a market. It concludes that there is no evidence to
suggest that the rationale underlying the adoption of the contour
overlap approach--a more accurate measure of where a station's signal
can be adequately received and, therefore, where it can compete for
listeners--is any less appropriate for stations in smaller markets
under the circumstances presented by NAB and Duke. It notes that a
station combination with an aggregate principal community contour
overlapped by 15 or more stations can be expected to compete for
listeners with those stations, and the audience share cap is applied in
such a case as an additional safeguard intended to identify potential
concentration problems that may threaten diversity and competition.
15. The Commission states that it declines to, in effect, ignore
those stations, such as Class C FM stations, with superior signal
coverage. It also declines to redefine the area to which county-by-
county audience share calculations apply in the manner suggested by
NAB. The Commission believes that the suggested change would unduly
dilute the diversity and competition safeguards adopted in its previous
orders, and, in any event, would not reflect competitive conditions in
the areas in which stations proposed to be combined provide the
majority of their service, i.e., within their principal community
contours.
16. With respect to NAB's other proposals, the Commission notes
that it already expressly rejected a change of the rule applicable to
markets of fewer than 15 stations to permit ownership of half of the
stations in a small market because it could result in an unwarranted
level of consolidation in too many markets. Further, the Commission
states that it is not persuaded that the specific changes NAB advocates
are warranted as a means of rescuing failing or dark stations. The
Commission is concerned that the proposed changes would be applicable
without regard to the circumstances of an individual facility or its
financial condition, and would have the potential to increase
concentration signifcantly. It also believes that cases involving a
genuine threat of station failure are best addressed via a waiver
process that can appropriately account for the specific factual
circumstances at hand. Moreover, the Commission states that because of
the variety of circumstances that may be present in any given radio
market, requests for waiver of the rule should not be limited to
specific criteria.

Minority Ownership and Small Business Incentives

17. NABOB/NBMC urge the Commission to reinstate the aspect of the
prior rule that permitted minority-owned companies to take a
controlling interest in additional stations above the national
ownership caps. NABOB/NBMC maintain that the change from the prior rule
will decrease the total number of stations that can be controlled by
existing minority licensees, and, with the increase of the national
ownership limits generally, will lead to further concentration of
ownership in the broadcast industry, diluting substantially the
opportunities for increased minority ownership. NABOB/NBMC also contend
that the First Reconsideration Order did not provide evidence with
which to evaluate the effect of the rule changes on minority ownership,
and they reiterate their argument that the Commission's appropriations
legislation prohibits modification of the minority ownership incentive.
Further, NABOB/NBMC reiterate their request, denied in the First
Reconsideration Order, that the national ownership limits be returned
to 12 stations per service. LULAC, NABOB/NBMC and NAB urge the
Commission to repeal the small business incentive established in the
First Reconsideration Order. LULAC and NAB argue that adoption of the
small business incentive violated the Administrative Procedure Act
(APA), 5 U.S.C. 553, because such an incentive was not proposed in the
initial Notice of Proposed Rule Making in this proceeding. They also
maintain that the small business incentive will dilute or otherwise
undermine any incentive for group owners to invest in minority-
controlled stations.
18. The Commission states that it continues to believe, as
discussed both above and previously in this docket, that further
expansion of the national ownership limits would not hinder diversity
of viewpoint and could spur competition in the industry. The Commission
notes that the arguments raised by petitioners with respect to the
increase in the general national ownership limits from 12 to 20
stations per service were fully addressed earlier in this proceeding.
19. The Commission is persuaded by petitioners, however, that
permitting minority owners to hold a controlling interest in additional
radio stations will serve the goal of increasing minority ownership
without posing a significant threat to competition or diversity. It
will therefore amend Sec. 73.3555 of its rules to permit minority
owners to own and control additional stations over and above the
general national caps. Moreover, based on its belief that further
national consolidation is appropriate, it will increase from three to
five the number of additional stations per service that may be acquired
pursuant to the incentive. The Commission's aim in making these
modifications is to permit minorities to own more stations as well as
to make the investment incentive aspect of the rule more attractive to
large group owners.
20. The Commission is not persuaded to delete the small business
incentive. It states that its current application processing standards,
which involve a case-by-case analysis of each transaction, are
sufficient to guard against sham small business applications. With
respect to petitioners' arguments regarding notice, the Commission
points out that the Notice of Proposed Rule Making in this proceeding,
6 FCC Red 3275 (1991), 56 FR 26365 (June 7, 1991), invited commenters
to discuss a range of issues regarding the national ownership caps, and
some commenters emphasized that access to capital is a problem for new
entrants and small businesses in general, not just minority-owned
entities. The Commission further notes that it intends to explore
minority ownership issues in an upcoming proceeding.
21. Pursuant to the rules adopted in the First Reconsideration
Order, the national ownership limits automatically increased from 18 AM
and 18 FM to 20 AM and 20 FM on September 16, 1994. On October 7, 1994,
NABOB and NBMC filed a ``Joint Motion for Rescission and Stay'' asking
the Commission to rescind the automatic increase and stay the effective
date of that increase until the Commission has acted on their petition
for reconsideration and evaluated the effect of the 18AM/18FM cap on
minority ownership. The Commission notes that NABOB/NBMC's petition for
reconsideration is resolved in the Second Reconsideration Order, and
that the Radio Station Ownership Report released concurrently with that
Order analyzes the effect that the increase in the national caps has
had on minority broadcasters to the extent presently possible. The
Commission finds the request for stay to be moot, and denies the
request for rescission.

Time Brokerage Arrangements

22. The Commission defines time brokerage as a type of joint
venture that generally involves the sale by a licensee of discrete
blocks of time to a ``broker'' who then supplies the programming to
fill that time and sells the commercial spot announcements to support
it. The First Reconsideration Order affirmed the Commission's earlier
holding that if a time brokerage agreement between two stations in the
same market involves more than 15 percent of the brokered station's
programming per week, the brokered station will be treated as if it was
owned by the brokering station for purposes of the national and local
ownership rules.
23. TRAC/WACC note that time brokerage decisions have been made by
the Commission's staff and argue that the Commission should not be
bound in future rulemakings by policy decisions of its staff made in ex
parte informal adjudications. TRAC/WACC also note that members of the
public are not given notice of, and may not have standing to
participate in, declaratory rulings at the staff level. NAB counters
that the revised time brokerage rules and policies, as adopted and
applied by the staff in its rulings, are lawful and are designed to
adequately ensure that licensees do not relinquish control of their
stations and remain responsive to the obligations of a licensee.
24. The Commission states that the language of the First
Reconsideration Order was intended to reflect the Commission's
continuing view that particular situations are better resolved on a
case-by-case basis. The Commission further finds that the specific
aspects of time brokerage arrangements questioned by TRAC/WACC in its
petition were thoroughly discussed previously in this proceeding, where
the Commission adopted restrictions on time brokerage arrangements so
that they will be counted as ownership interests where significant
brokering between competing stations is involved. Furthermore, the
Commission reiterates that a licensee must retain ultimate control over
its station. The Commission concludes that TRAC/WACC has not introduced
any new arguments to convince it that it needs to take further action
in this proceeding with respect to time brokerage. It also states its
belief that imposition of any additional restrictions on time brokerage
arrangements would run counter to one of the objectives of this
proceeding, which was to strengthen the radio industry by giving radio
broadcasters more flexibility.
25. The Commission notes that it previously decided not to require
the termination of an agreement that does not comply with the local
ownership rules if the agreement was entered into prior to the
effective date of the rules. These agreements were, in effect,
``grandfathered.'' The Commission clarifies that when a brokering
station is sold, an existing brokerage agreement that would be barred
by the rules if entered initially at the time of the sale, may be
transferred. The new owner may enjoy all rights and limitations with
respect to the multiple ownership rules as the original owner, but only
for the duration of the term of the agreement in effect at the time of
transfer. The purchaser of a station or stations involved in a
brokerage agreement, however, cannot create a new violation or
exacerbate an existing rule violation by that acquisition. Thus, for
example, a station combination that involves a brokerage agreement and
that exceeds the 25 percent audience share limit, but is nonetheless
permissible under the rules, could not be acquired by a party with
another station in the same market. A similar station combination with
an audience share of 24 percent could not be acquired by a licensee
with a station enjoying a 3 percent share in the same market. In
addition, parties will not be permitted to renew or extend time
brokerage agreements, including those that are grandfathered, once the
initial term expires if, at the time of expiration, the agreement would
not be permissible under the rules.

Remaining Matters

26. There is an inconsistency between the language of the First
Reconstruction Order and that of Sec. 73.3555(a)(1)(ii) as published,
as to the benchmark for permissible audience share. In order to remove
any ambiguity on this point, the Commission states that it intended the
language of the rule to be controlling. Thus, only audience shares that
exceed 25 percent are to be considered prima facie inconsistent with
the public interest.
27. Further, the Commission clarifies that while it is appropriate
to exclude non-operational stations from calculation of the number of
stations in the market where it cannot be presumed that they will add
to the competition and diversity in a market, such as analysis is not
appropriate when the non-operational station is a part of the
transaction under scrutiny, because the applicant has control over and
can generally be presumed to intend to put the station on the air.
Thus, if the non-operational station is one of the proposed commonly
owned stations involved in the transaction, the principal community
contour of the non-operational station will not be disregarded in
calculating how many stations are counted as in the market or in
determining the geographic area for which audience share is calculated.
28. The Commission also notes that current rules permit an AM
licensee to own an existing AM station in the 535-1605 kHz band and
apply for a construction permit for an AM station in the expanded band,
1605 kHz-1705 kHz, without regard to otherwise prohibited principal
community contour overlap. Moreover, the national ownership
restrictions are not applied when an entity with an attributable
interest in an AM station in the existing band applies for an AM
station in the expanded band. Note 10 to Sec. 73.3555 specifies a five-
year period during which joint ownership of existing band and expanded
band AM authorizations will be acceptable; at the expiration of this
five-year period, the licensee must elect to operate either the
expanded band station or to operate the station on its former frequency
in the existing band.
29. The Commission clarifies that if, during the five-year
transition period, the licensee has not yet elected whether to move to
the expanded band or retain its existing facility, the expanded band
station will be disregarded for purposes of the local and national
ownership rules. Thus, the principal community contour of the existing
band station will be considered for purposes of determining the
relevant market and for purposes of determining the number of stations
in the market. Moreover, if it is necessary to determine whether the
combination complies with the audience share cap, the Commission will
consider only the audience share attributable in the relevant market to
the existing band station.

Ordering Clauses

30. It is therefore ordered that, pursuant to the authority
contained in section 4(i) and 303(r) of the Communications Act of 1934,
as amended, 47 U.S.C. section 154(i), 303(r), part 73 of the
Commission's rules, 47 CFR part 73 is amended as set forth below.
31. It is further ordered that the petitions for reconsideration
filed in this proceeding are granted to the extent indicated herein and
are denied in all other respects.

32. It is further ordered that, pursuant to Sec. 1.401(e) of the
Commission's rules, 47 CFR 1.401(e), the Petition for Rule Making filed
on August 23, 1993, by the National Association of Broadcasters, RM-
8414, is denied.

33. It is further ordered that the Joint Motion for Rescission and
Stay filed October 7, 1994, by the National Association of Black-Owned
Broadcasters and the National Black Media Coalition is denied.

List of Subjects in 47 CFR Part 3

Radio broadcasting.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Part 73 of title 47 of the U.S. Code of Federal regulations is
amended to read as follows:

PART 73--RADIO BROADCAST SERVICES

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

Authority: 47 U.S.C. 154, 303, 334.

2. Section 73.3555 is amended by revising paragraphs (a)(3)(iii)
and (e)(1)(i) to read as follows:
(a) * * *
(3) * * *
(iii) A station's ``audience share'' is the average number of
persons age 12 or older on an average quarter-hour basis, Monday-
Sunday, 6 a.m.-midnight, who listen to the station expressed as a
percentage of the average number of persons listening to AM and FM
stations in that radio metro market or a recognized equivalent, in
which a majority of the overlap between the same service stations
involved in the transaction takes place. The ``combined audience
share'' is the total audience share of all AM or FM stations that would
be under common ownership or control following a proposed acquisition.
In situations where the majority of the overlap between the same
service stations does not lie in a single metro market, the relevant
audience share data is the data for all counties that are within the
principal community contours of the mutually overlapping stations
proposed for common ownership, in whole or in part, weighted based on
the listening population, age 12 and older, and totalled to determine
the average audience share. Audience share shall be calculated by using
the most recent published audience share data available at the time
that the application is filed, unless an alternative showing is
submitted pursuant to the Note following 47 CFR 73.3555(a)(1)(ii).
* * * * *
(e) * * *
(1) * * *
(i) more than 20 AM or more than 20 FM stations, provided, however,
that minority controlled entities may acquire an additional five
stations per service above the national limit, and that multiple owners
that are not minority controlled may hold an attributable, but not
controlling, interest in five additional stations per service above the
national limit that are minority controlled or small business
controlled;
* * * * *
[FR Doc. 94-29941 Filed 12-5-94; 8:45 am]
BILLING CODE 6712-01-M

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