Broadcast Services; Financial Interest and Syndication Rules

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MM Docket No. 95-39; FCC 95-144]

Broadcast Services; Financial Interest and Syndication Rules

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This Notice of Proposed Rule Making is needed to initiate the

planned review of the FCC's financial interest and syndication rules

prior to their scheduled expiration date on November 10, 1995. The

burden of proof in this proceeding is on those parties arguing for

continuation of the rules; if these parties fail to carry this burden,

the rules will be allowed to expire. The Commission also seeks comment

on whether, in the event these parties do not meet their burden of

proof, it should accelerate the expiration date of the rules.

DATES: Comments are due by May 30, 1995, and reply comments are due by

June 14, 1995.

ADDRESSES: Federal Communications Commission, Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT:

Charles Logan, (202) 776-1653.

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

Notice of Proposed Rule Making in MM Docket No. 95-39, FCC 95-144,

adopted and released on April 5, 1995. The complete text of this NPRM

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 copy contractor,

International Transcription Service, Inc., 2100 M Street NW., suite

140, Washington, DC 20037, (202) 857-3800.

Synopsis of Notice of Proposed Rule Making

1. The Commission's financial interest and syndication (``fin/

syn'') rules, originally adopted in 1970, placed significant

restrictions on the ability of the established networks (ABC, CBS, and

NBC) to own television programming and engage in the practice of

syndication. In the Second Report and Order in MM Docket No. 90-162, 58

FR 28927 (May 18, 1993) (``Second R&O''), recon. granted in part,

Memorandum Opinion and Order, 58 FR 65132 (Dec. 13, 1993), the

Commission eliminated certain aspects of the fin/syn rules immediately,

including restrictions on network acquisition of financial interests

and passive syndication rights in network programming. The Commission

also established a timetable for the expiration of the remaining rules,

which include restrictions on network involvement in the active

syndication and first-run markets, as well as anti-warehousing

safeguards. Under this timetable, these remaining rules are now set to

expire on November 10, 1995. The Commission's decision in the Second

R&O was upheld on appeal by the United States Court of Appeals for the

Seventh Circuit (``Seventh Circuit''). Capital Cities/ABC, Inc. v. FCC,

29 F.3d 309 (7th Cir. 1994).

2. The Commission also determined in the Second R&O that, prior to

the scheduled expiration of the remaining fin/syn rules, it would

conduct a review of network activities in the financial interest and

syndication areas, and that this review would be initiated no later

than six months prior to the rules' scheduled expiration date, i.e., no

later than May 10, 1995. This Notice of Proposed Rule Making (``NPRM'')

initiates this planned review. It provides an opportunity for comment

on the accuracy of the Commission's conclusion in the Second R&O that

the remaining fin/syn restrictions should be eliminated. The NPRM

states that comments submitted by parties who oppose the scheduled

expiration of these restrictions will need to prove that, based on the

current status of the program production and distribution markets and

the activities of the networks since 1993, the Commission should

continue regulation in this area. Parties arguing for retention of fin/

syn restrictions should support their positions with empirical data and

economic analysis.

3. The Commission lists the following factors as being relevant to

its review of the rules: (1) The extent to which a network-owned

program is syndicated primarily to that network's affiliates; (2)

patterns that reveal daily in the introduction of network programs (in

which the networks had financial interests or syndication rights) into

the syndication market; (3) the percentage of network programming in

which a network has obtained a financial interest or syndication right;

(4) the relative change in the number of independent producers creating

and selling television shows to the networks; (5) each network's share

of the first-run syndicated programming domestic market; (6)

concentration of ownership in the program production industry; (7)

audience shares of first-run syndicated programming carried by non-

network affiliated stations during prime time; (8) the overall business

practices of emerging networks, such as Fox, in the network television

and syndication business; (9) network negotiating patterns,

particularly the manner in which networks obtain financial interests

and syndication rights and the extent to which successful negotiations

over back-end rights influence network buying decisions; (10) network

syndication practices, to the extent they are permitted; (11) the

relationship and business arrangements between networks and third-party

syndicators of off-network programming; (12) mergers [[Page 19563]] or

acquisitions involving networks, studios, cable systems and other

program providers since the Commission's 1993 fin/syn decision took

effect; (13) the growth of additional networks, including the

development of Fox and its position vis-a-vis the major three networks;

and (14) the growth in the number and types of alternative outlets for

sale of programming (e.g., the development of the Direct Broadcast

Satellite service; cable penetration; wireless cable development). In

addition to examining information submitted regarding the above

factors, the Commission states that it will also take notice of the

record developed in its pending proceeding regarding the Prime Time

Access Rule to the extent it is relevant to its review of the fin/syn

rules.

4. The NPRM provides that the burden in this proceeding will be on

fin/syn proponents to demonstrate, as stated by the Seventh Circuit,

``an excellent, a compelling reason'' why the restrictions should be

continued. Capital Cities/ABC, Inc., 29 F.3d at 316. As the Commission

stated in the Second R&O, it is prepared to presume that complete

removal of all remaining restrictions will be appropriate, and is

therefore placing the burden of proof on those that urge retaining fin/

syn restrictions. If proponents of retaining the rules fail to

demonstrate to the Commission that the rules should be left in place,

or if the Commission does not take affirmative action to the contrary,

the rules will automatically expire.

5. The Commission also seeks comment on whether, in the event

parties arguing for the continuation of the fin/syn rules fail to carry

their burden of proof, it should amend its rules to allow the remaining

rules to expire before the presently scheduled expiration date of

November 10, 1995. The Commission further seeks comment on whether

doing so would unduly disrupt any business arrangements or practices

that have been established in reliance on the presently scheduled

expiration date.

Administrative Matters

6. Pursuant to applicable procedures set forth in Secs. 1.415 and

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

on or before May 30, 1995, and reply comments on or before June 14,

1995. All relevant and timely comments will be considered by the

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

formally in this proceeding, parties must file an original and four

copies of all comments, reply comments and supporting comments. If

parties 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, 1919 M Street NW., Washington, DC 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,

DC 20554.

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

proceeding. Accordingly, ex parte presentations will be permitted,

except during the Sunshine Agenda period, provided they are disclosed

as set forth in the Commission's Rules. See 47 CFR 1.1202, 1.1203,

1.1206(a).

Initial Regulatory Flexibility Act Statement

8. As required by Section 603 of the Regulatory Flexibility Act,

the Commission has prepared an Initial Regulatory Flexibility Analysis

(``IRFA'')--set forth in Appendix A attached to the full text of the

NPRM and set forth in paragraphs 10-15 below--of the expected impact on

small entities of the proposal suggested in the NPRM. 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 NPRM, 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 NPRM, including the IRFA, to

the Chief Counsel for Advocacy of Small Business Administration in

accordance with paragraph 603(a) of the Regulatory Flexibility Act, 5

U.S.C. 601 et seq.

9. Reason for Action and Objectives: This NPRM is initiated to

conduct a review of the Commission's financial interest and syndication

(``fin/syn'') rules as part of the timetable the Commission has

previously established in scheduling the elimination of the rules. It

also seeks comment on whether to accelerate the scheduled expiration

date of the fin/syn rules in the event parties opposed to their

elimination fail to persuade the Commission that the rules should be

continued.

10. Legal Basis: Authority for the action proposed in this

proceeding is contained in Section 4(i), 4(j), 301, 303(i), 303(r),

313, and 314 of the Communications Act of 1934, as amended, 47 U.S.C.

154(i), 154(j), 301, 303(i), 303(r), 313, and 314.

11. Reporting, Record Keeping, and Other Compliance Requirements:

None.

12. Federal Rules which Overlap, Duplicate, or Conflict with the

Proposed Rule: None.

13. Description, Potential Impact and Number of Small Entities

Affected: The entities that could potentially be affected by this

proceeding include television program producers and syndicators,

television networks and their affiliate stations, and non-network

television stations. It is anticipated that any rule changes arising

out of this proceeding would have a minimal impact on the small

entities that could be affected.

14. Any Significant Alternatives Minimizing the Impact on Small

Entities and Consistent with the Stated Objectives: None.

List of Subjects in 47 CFR Part 73

Television broadcasting.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 95-9632 Filed 4-18-95; 8:45 am]

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