Definition of Markets for Purposes of the Cable Television Broadcast Signal Carriage Rules

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 95-178; FCC 99-116]

Definition of Markets for Purposes of the Cable Television

Broadcast Signal Carriage Rules

AGENCY: Federal Communications Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: In this document, the Commission dismisses petitions for

reconsideration of the First Report and Order filed by Blackstar of Ann

Arbor, Inc., licensee of WBSX-TV and by Costa de Oro Television, Inc.,

licensee of KSTV, that ask for special treatment for certain kinds of

situations during the transition from ADIs to DMAs. The Commission has

found that special relief is not warranted for these stations as they

have taken advantage of the market modification process. Also addressed

are possible ways to ease the transition for both broadcasters and

cable operators, and the viewers they serve, as the Commission moves

from an ADI to a DMA-based market structure. The Commission has set

forth several procedural and evidentiary mechanisms to ameliorate the

impact the change in market definitions may have on cable operators and

broadcasters. The principal goal of the measures taken is to reduce, to

the maximum extent feasible, cable subscriber confusion, and disruption

in viewing patterns, that may arise because of the change. The

Commission also improves the functioning of the ad hoc market

modification process mandated by the Communications Act. New rules have

been implemented encapsulizing the evidence necessary for filing market

modification petitions.

DATES: These rules are effective July 26, 1999. Public comments on the

modified information collection requirements are due on or before July

14, 1999.

ADDRESSES: A copy of any comments on the modified information

collection requirements should be submitted to Judy Boley, Federal

Communications Commission, Room 1-C804, 445 12th Street, SW,

Washington, DC 20554, and to Timothy Fain, OMB Desk Officer, 10236

NEOB, 725--17th Street, NW, Washington, DC 20503.

FOR FURTHER INFORMATION CONTACT: Ben Golant, Consumer Protection and

Competition Division, Cable Services Bureau, at (202) 418-7111. For

additional information concerning the information collection contained

herein, contact Judy Boley at (202) 418-0214, or via the Internet at

[email protected].

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

on Reconsideration and Second Report and Order, CS Docket No. 95-178,

FCC 99-116 adopted May 21, 1999 and released May 26, 1999. The full

text of this decision is available for inspection and copying during

normal business hours in the FCC Reference Center, 445 12th St. SW,

Washington, DC 20554, and may be purchased from the Commission's copy

contractor, International Transcription Service, (202) 857-3800, 445

12th St. SW, Washington, DC 20554.

Synopsis of the Order on Reconsideration and Second Report and

Order

1. The First Report and Order and Further Notice of Proposed

Rulemaking (``First Order''), 61 FR 29312, in this proceeding

established new television market definitions for purposes of the cable

television signal carriage and retransmission consent rules. The

Commission concluded that it was appropriate to change market

definitions from Arbitron areas of dominant influence (``ADIs'') to

Nielsen Media Research designated market areas (``DMAs'') for must-

carry/retransmission consent elections. That action was necessary

because the Arbitron market definition mechanism previously relied on

was no longer available. However, the Commission continued to use

[[Page 33789]]

Arbitron's 1991-1992 Television ADI Market Guide designations for the

1996-1999 must-carry/retransmission consent election period and

postponed the switch to DMAs until the third must-carry/retransmission

consent cycle that is to commence on January 1, 2000.

2. The First Order delayed the transition to DMAs because of

concerns related to the transition from one market definition to

another and the relationship of such a transition to the ad hoc market

boundary change process provided for in Section 614(h) of the

Communications Act. For this reason, the Further Notice of Proposed

Rulemaking was issued to solicit additional information and provide

parties an opportunity to further consider issues relating to the

transition to market designations based on DMAs. It also sought comment

on procedures for refining the Section 614(h) market modification

process.

3. Our task in this Order on Reconsideration and Second Report and

Order is twofold. First, we consider the arguments raised in petitions

for reconsideration of the First Report and Order filed by Blackstar of

Ann Arbor, Inc., licensee of WBSX-TV (ch. 31--Ann Arbor, MI) (``WBSX-

TV''), and by Costa de Oro Television, Inc., licensee of KSTV (ch. 57--

Ventura, CA) (``KSTV-TV''), that ask for special treatment for certain

kinds of situations during the transition from ADIs to DMAs. For the

reasons discussed below, we conclude that no special treatment for

these petitioners is warranted.

4. Second, we address the issues raised in the Further Notice, and

by the comments filed in response to that Notice, regarding possible

ways to ease the transition for both broadcasters and cable operators,

and the viewers they serve, as we move from an ADI to a DMA-based

market structure. We also take this opportunity to improve the

functioning of the ad hoc market modification process mandated by

Section 614(h) of the Communications Act. Our principal goal is to

reduce, to the extent feasible, cable subscriber confusion and

disruption in viewing patterns that may arise because of the switch

from ADIs to DMAs. Another goal is to clarify the procedures for

determining markets for must carry purposes so that the administration

of Section 614 by the Commission is efficient and workable.

5. Under provisions added to the Act by the Cable Television

Consumer Protection and Competition Act of 1992 (``1992 Cable Act''),

local commercial broadcast television stations may elect whether they

will be carried by local cable television systems, and open video

systems, under the mandatory carriage (``must-carry'') or

retransmission consent rules. A station electing must carry rights is

entitled to insist on cable carriage in its local market. Should a

local station choose retransmission consent, it and the cable system

negotiate the terms of a carriage agreement and the station is

permitted to receive compensation in return for carriage. Stations are

required to make this election once every three years. The current

cycle commenced on January 1, 1997, with elections having been made by

October 1, 1996.

6. For the purposes of these carriage rights, a station is

considered local on all cable systems located in the same television

market as the station. As enacted, Section 614(h)(1)(C) of the Act

specifies that a station's market shall be determined in the manner

provided in section 73.3555(d)(3)(i) of the Commission's rules, in

effect on May 1, 1991. Section 73.3555(d)(3)(i), now redesignated as

section 73.3555(e)(2)(i), is a separate rule concerned with broadcast

station ownership issues that refers to Arbitron's ADIs. An ADI is a

geographic market designation that defines each television market based

on measured viewing patterns. Essentially, each county or portion of a

county in the contiguous areas of the United States is allocated to a

discrete market based on which home-market stations receive a

preponderance of total viewing hours in the county. For the purposes of

this calculation, both over-the-air and cable television viewing are

included. Because of the topography involved, certain counties are

divided into more than one sampling unit. Also, in certain

circumstances, a station may have its home county assigned to an ADI

even though it receives less than a preponderance of the audience in

that county.

7. Moreover, under the ``home county rule,'' the county in which

the station's community of license is located is considered within its

market. Under Arbitron, a station's city of license, and its home

county, may be located in one ADI but assigned by Arbitron to another

ADI for ratings reporting purposes. The station may assert its must

carry rights, or elect retransmission consent, against cable operators

in its home county and all of the cable operators in the ADI to which

the station is assigned.

8. In addition to ADIs that generally define the area in which a

station is entitled to insist on carriage, Section 614(h) of the Act

directs the Commission to consider individual requests for changes

through a market modification process, including the determination that

particular communities may be part of more than one television market.

The Act provides that the Commission may ``With respect to a particular

television broadcast station, include additional communities within its

television market or exclude communities from such station's television

market to better effectuate the purposes of this section.''

9. Section 614(h)(1)(C)(ii) states that in deciding requests for

market modifications, the Commission shall consider several factors:

(I) whether the station, or other stations located in the same area,

have been historically carried on the cable system or systems within

such community; (II) whether the television station provides coverage

or other local service to such community; (III) whether any other

television station that is eligible to be carried by a cable system in

such community in fulfillment of the requirements of this section

provides news coverage of issues of concern to such community or

provides carriage or coverage of sporting and other events of interests

to the community; and (IV) evidence of viewing patterns in cable and

noncable households within the areas served by the cable system or

systems in such community. Section 76.59 of the rules provides that

broadcast stations and cable operators shall submit requests for market

modifications in accordance with the procedures for filing petitions

for special relief.

10. Arbitron discontinued its television ratings and research

business after the Commission established the mechanism for determining

a station's local market for purposes of the triennial must carry/

retransmission consent election. Thus, future editions of the

publications referred to in the rules are no longer available and new

procedures for defining market areas for must carry purposes had to be

established.

11. Historically, Arbitron and Nielsen have been the primary

national television ratings services. Conceptually, their market

designations--ADIs and DMAs--are the same. They both use audience

survey information from cable and noncable households to determine the

assignment of counties to local television markets based on the market

whose stations receive the largest share of viewing in the county. The

differences in their assignments of specific counties to particular

markets reflect a number of factors, including slightly different

methodologies and criteria as well as normal sampling and statistical

variations. Each company also has a policy for determining what

constitutes a separate market based on a complex

[[Page 33790]]

statistical formula. For example, Arbitron considers some areas, such

as Hagerstown, Maryland, or Sarasota, Florida, as separate markets,

compared to Nielsen, which includes Hagerstown in the Washington, DC.

DMA and Sarasota in the Tampa DMA. In addition, these services reserve

the right to take into account other considerations. Nielsen, in

particular, ``reserves the right not to create a DMA if there is a lack

of sufficient financial support of Nielsen Service in that potential

DMA.''

12. Nielsen has established a system to determine which stations

are considered ``local'' for ratings reporting purposes. This is the

``Market-Of-Origin'' assignment process and involves several

statistical calculations based upon viewership and other factors.

However, a station may petition Nielsen to change its Market-Of-Origin

assignment if both its transmitter and the majority of its Grade B

service contour are located in a different DMA than the DMA in which

the station's community of license is located. Such a petition must

include relevant information on which the petitioning station bases its

request for a change in Market-Of-Origin including, but not limited to,

community of license, present transmitter location, signal coverage

(including FCC coverage maps), audience data from previous

measurements, and/or competitive considerations. Nielsen reserves the

right to use its best judgment based upon the information available to

it in considering whether the change sought by the petition reflects

the reality of the market affected. The station's assignment is then

made available in Nielsen's Directory of Stations publication. Thus, it

appears that the home county rule applies in the DMA context as it had

in the ADI context.

13. In the First Order, the Commission concluded that Nielsen's DMA

market assignments provide the most accurate method for determining the

areas serviced by local stations, recognizing that over time the 1992-

92 ADI market list, if relied upon, would become outdated. Moreover, we

continued to believe that our 1993 decision to use updated market

designations for each election cycle to account for changing markets

was appropriate. Nielsen currently provides the only generally

recognized source of information on television markets that would

permit us to retain this policy. Thus, we concluded that Nielsen's DMA

market designations will provide the best method of ``delineat[ing]

television markets based on viewing patterns'' in the future.

14. We observed, however, that a shift to a DMA-based market

definition standard could result in some stations currently on local

cable systems being replaced, some other programming services (i.e.,

cable networks) being dropped to accommodate situations where the

number of stations entitled to carriage increases, and some channel

line-ups needing to be reconfigured to accommodate the channel

positioning requests of stations with new must-carry rights. The

Commission also voiced concern about the impact the change to DMAs

would have on the Section 614(h) market modification decisions already

in force. The consensus of commenters was that prior market

modification decisions should remain in effect. It was unclear,

however, whether cable operators could face conflicting obligations or

be subject to carriage of signals from multiple markets based on a

revised market standard when these modifications are considered in

conjunction with a new market definition. We did not receive any

information regarding the effect that such decisions, in conjunction

with a change to a DMA standard, would have on the must-carry

obligations of cable operators. In addition, we were unable to

determine the burden on the Commission to remedy conflicts that might

result from an immediate switch to DMAs. The complexity of such

situations and the administrative burden on the Commission and others

to resolve possible conflicts could, the Commission believed, disrupt

the orderly provision of local television service to subscribers.

15. Based on these considerations, the Commission postponed the

switch in market designation until the next must-carry/retransmission

consent takes effect on January 1, 2000, to ensure that potential

transitional problems could be addressed. We reasoned that the phased-

in approach would assist parties who expressed concerns that a switch

in market definitions would result in administrative burdens and costs

for cable operators, including small cable operators, and would impede

the entry of new market entrants, such as local exchange carriers

planning to operate cable systems under Title VI or the OVS provisions.

Thus, the Commission decided to continue to use the 1991-1992 ADI

market list for the 1996 election and to establish a framework that

uses updated DMA markets lists for the 1999 and subsequent elections.

16. Two parties, Blackstar of Ann Arbor, Inc., licensee of WBSX-TV

(channel 31, Ann Arbor, Michigan) (``WBSX-TV'') and Costa de Oro

Television, Inc., licensee of KSTV (channel 57, Ventura, California)

(``KSTV-TV'') filed petitions for reconsideration of the First Order

generally arguing that the Commission did not adequately consider

updated market information, unique to their situations, when

considering the transition from ADIs to DMAs.

17. We believe there is no reason to make special exceptions for

these two stations. The individual circumstances that apply to WBSX-TV

and KSTV-TV are most appropriately dealt with through the market

modification process, which takes into consideration their future DMA

assignments. Both stations have used the market modification process to

seek significant expansion of their ADI markets for must carry

purposes. WBSX-TV has already added 55 communities to its current ADI,

and KSTV-TV has added 22 communities. The Commission has specifically

indicated that information regarding DMAs could be useful in resolving

individual ad hoc market modification requests filed pursuant to

Section 614(h). The stations may therefore use the modification process

to change their DMAs, in the future, if the situation so warrants.

18. The Further Notice of Proposed Rulemaking sought comment on

mechanisms for facilitating the transition from a market definition

system based on ADIs to one based on DMAs. Commenters were asked to

consider whether special provisions should be made for particular types

of systems (e.g., systems with fewer than a specified number of

subscribers) to minimize the disruptions that could occur due to a

switch to DMAs. The Commission is also concerned about the potential

impact on consumers who are cable subscribers.

19. We are not making the change suggested by Southern. Its concern

about non-network territorial exclusivity arrangements appears to be

misplaced and are better left addressed in Gen. Docket No. 87-24, which

focuses on the network rules of concern to Southern. The change from

ADIs to DMAs for must carry purposes in section 76.55 affects neither

of the market listings referenced in Section 73.658(m) for purposes of

territorial exclusivity in non-network arrangements. Section 73.658(m)

provides that exclusivity may be secured in hyphenated markets included

in the top 100 markets listed in section 76.51 or, if the market in

question is not in the top 100 list, then Section 73.658(m) makes

reference to the ARB Television Market Analysis. Even though Arbitron's

television market analysis is no longer published,

[[Page 33791]]

there has been no change in the reference, and the Nielsen DMA list has

not been substituted theretofore. Because section 73.568(m) refers to

section 76.51, the reference to DMAs in section 76.55 is not relevant

to territorial exclusivity in non-network arrangements, and Southern's

objection to the switch to DMAs on this basis is unwarranted.

20. We agree with those commenters that continue to express concern

about the potentially disruptive consequences of switching to DMAs. A

comparison of the ADI markets currently used with the DMA markets that

will be used after the current election cycle is over, reveals that 135

counties change markets because of the switch from ADIs to DMAs. A

sampling of these counties suggests that, in certain instances, the

changes will have serious impact, even though a relatively small number

of cable systems and broadcasters would be involved. And, though a

strong case could be made for reversing the market shift based on the

ad hoc market evaluation factors contained in Section 614(h), this

statutory mechanism, in and of itself, may not significantly lessen the

impact of the change. Thus, we believe that some general relief is

warranted. We note that the change in market definition from ADI to DMA

will take effect on January 1, 2000, which prompts us to consider on

our own motion whether this timing would create a Year 2000 (``Y2K'')

problem, particularly for the cable systems that will experience

carriage or channel line-up changes. Commission staff has confirmed

with relevant industry representatives that cable systems' headend

signal processing equipment is not dependent on date or time, and,

therefore, the market definition change would not raise Y2K

considerations.

21. A cable system currently within a particular station's ADI, but

outside that station's DMA, may want to continue carrying that station

after the transition to DMAs because the station serves the local

interests of its subscribers. We believe that when the cable system

wants to carry a particular station, it is a strong indication that the

community it serves continues to be within the station's local market

notwithstanding the change in market definition. Therefore, to minimize

programming disruptions, we adopt a policy whereby a cable system

within a television station's ADI (but outside its DMA) that currently

carries the station on its channel line-up may continue to carry the

station, without being subject to copyright liability, even after the

transition to DMAs. We note that the Act's one-third channel capacity

cap, and related closest network affiliate provision, apply in this

particular situation. This policy adheres to the Commission's goals of

providing cable subscribers with television programming that serves the

interests of localism, while also reducing the possibility of channel

line-up disruptions and subsequent subscriber confusion. Our approach

also takes into account the Commission's need for current market

information that only Nielsen can provide while, at the same time,

ensuring that cable subscribers are not deprived of valued broadcast

services. In these cases, the commercial television station is, and

will continue to be, local with respect to this cable system, in

conformance with section 76.55 of the Commission's rules. This policy

applies to stations that elected retransmission consent or must carry.

22. As stated earlier, one of the principal goals in this

proceeding is to reduce channel line-up disruptions whenever possible.

The rule changes we are adopting, which permit individual fact-specific

Commission adjustments prior to the shift to DMAs, seek to accomplish

that goal. The new rules, amending sections 76.55(e) and 76.59, will

include the following features:

--In the absence of any mandatory carriage complaint or market

modification petition, cable operators in communities that change from

one market to another will be permitted to treat their systems as

either in the new market, or with respect to the specific stations

carried prior to the market change, as in both markets.

--If any dispute is triggered by a change in markets that results in

the filing of a mandatory carriage complaint, any affected party may

respond to that complaint by filing a market modification request. The

market modification request and the carriage complaint will then be

addressed simultaneously. All broadcast signal carriage issues, such as

channel positioning matters, would be addressed in the same proceeding.

Pending complaints and petitions will be disposed of in a single

proceeding whenever practicable.

23. We also find that where a broadcast station is dissatisfied

with a final market modification decision issued by the Commission, and

then successfully petitions Nielsen to change its market-of-origin in

response to the Commission's adverse decision, the Commission's market

modification decision remains controlling.

24. In Section 614(h) market modification cases, where issues are

raised as to which market the cable communities are properly

associated, the Commission will pay particular attention to the

following considerations:

--Where persuasive evidence exists showing that two markets have been

merged into a single market because there was insufficient financial

support from purchasers of the rating report available from the rating

service to maintain separate markets, or for other reasons unrelated to

market definitions relevant to the purposes of the Commission's

broadcast signal carriage rules, it will be presumed, in the absence of

a demonstration to the contrary, that the previous demarcation points

between the markets should be maintained. A failure of financial

support for the ratings service shall not be regarded as indicative of

a market change for purposes of the rules. Such evidence, as letters to

the station from Nielsen explaining the change, would fulfill the

burden of proof in this context.

--Where a county is shifted into a noncontiguous market (e.g., a county

in State A is considered part of a DMA in State B, which is not

geographically contiguous with the county in State A), in considering

whether that shift should be followed or revised through the Section

614(h) process, localism as reflected in over-the-air audience ratings,

will be given particular attention. That is, because over-the-air

audience data is a more accurate and reliable indication of local

viewership, greater evidentiary weight will be given to over-the-air

audience data than to cable audience data. Careful attention will be

given to unique market situations, like those in the Rocky Mountain

area, where counties are sometimes hundreds of miles away from the core

of the market. In considering a requested market modification, the

Commission will closely examine whether the challenged market

redesignation resulted from audience change due to cable carriage of

the signals in question as opposed to resulting from changes in the

local market.

--Where Nielsen's market redesignation is the result of potentially

transitory programming popularity shifts on particular stations rather

than from significant changes in the facilities or locations of such

stations, the Commission may, upon request, resurrect the former market

structure. Thus, for example, if a county were shifted to market A

because the stations in that market garnered a 52% share of the

audience and

[[Page 33792]]

deleted from market B because its stations garnered only a 48% share,

the Commission would consider leaving the market unchanged because

stability is in the public interest and the underlying structure of the

market has not been significantly altered to warrant the difficulties

associated with the change.

--We will also consider factors such as changes in the time zone from

the old market to the new market, as well as significant disruptions to

subscribers. Evidence of significant disruptions to subscribers could

include extensive changes in channel line-ups and subscriber objections

to the change.

--Where a cable operator or broadcaster seeks to remain associated with

a smaller market rather than be shifted to a larger market, the

Commission will give weight to this consideration in a market

modification proceeding. Supporting the smaller market is consistent

with the Section 614(h) policy of paying ``particular attention to the

value of localism.'' In general, small cable system and small broadcast

station concerns will be given careful attention. In this regard, the

Commission will review whether such a change supports the policy of

localism. In this situation, we will also take into consideration

broadcasters' costs to deliver signals to cable system headends in the

market and the costs to cable systems to receive local market stations.

--Separate from the specifics of the market modification process, the

four statutory criteria, and other evidence considered in that process,

the Commission will consider whether extreme hardship is imposed on

small cable systems or small broadcast stations, often those

unaffiliated with the top networks, by the DMA conversion process. Such

hardship would include disproportionate expense to the system and

programming disruption to subscribers that is exacerbated by the small

size of the system. Evidence of such hardship would include reliable

cost estimates for carrying the new stations and channel position

conflicts between old and new stations. We believe this hardship scheme

will address the concerns raised by small cable operators in their

comments, and are more closely aligned with the Act's localism tenets

than the small operators' opt out and reimbursement proposals

discussed.

25. We noted concern about the effect of changing to a DMA market

definition on previous Section 614(h) decisions and petitions pending

before the Commission. Specifically, we requested commenting parties to

address the consequences of a shift in definitions on the more

particularized market boundary redefinition process contained in

Section 614(h), the decisions that have been made under that section,

and the proceedings under it that would result from shifting market

definitions.

26. We conclude that market modification requests filed prior to

the effective date of the change from ADI to DMA, including petitions,

petitions for reconsideration, and applications for review, will be

processed under Arbitron's ADI market definitions. We do not believe

that the petitions for reconsideration and applications for review

currently pending will be affected by the conversion to DMAs because,

in most of these cases, the market assignment will not change. In cases

in which the conversion to DMAs will have a direct consequence, we will

take the future DMA assignment into account, as we have done since the

First Order was released. We will also leave intact final market

modification cases that have not been appealed and/or cases that have

been subject to final Commission review so as to avoid disturbing

settled expectations.

27. In addition, we agree with NCTA's argument that where the

Commission has previously decided to delete a community from a

station's ADI market, that deletion will remain in effect after the

conversion to DMAs. We also recognize NCTA's concern that stations

should not be able to assert carriage rights in its former market while

a market modification deletion request is pending. Generally, a cable

operator may not delete a commercial television station from carriage

during the pendency of a market modification proceeding. However, if

conversion to DMAs moves a station out of the ADI that is the subject

of a pending deletion request, the deletion request is effectively

moot, and the cable operator may drop the station. We believe that few,

if any, pending proceedings will fall within this factual pattern.

Nevertheless, we agree with NCTA that, as we stated earlier, the Act

and our rules cannot be read to allow a television station to claim

carriage rights in more than one DMA, barring a modification by the

Commission.

28. We also sought comment on what changes in the modification

process may be warranted given that administrative resources available

to process Section 614(h) requests are limited and the Act established

a 120-day time period for action on these petitions. We stated that new

techniques may be needed to increase the efficiency of the decision

making process. Under the existing process, a party is free to make its

case using whatever evidence it deems appropriate. One suggested means

of expediting the modification process was to establish more focused

and standardized evidentiary specifications. Therefore, we proposed to

establish specific evidentiary requirements in order to support market

modification petitions under Section 614(h) of the Act. We requested

comment on the following specific information submission requirements

and sought alternatives that would assist the Commission in its review

of individual requests. In particular, we proposed that each filing

include exhibits showing:

--A map detailing the relevant community locations and geographic

features, disclosing station transmitter sites, cable system headend

locations, terrain features that would affect station reception, and

transportation and other local factors influencing the shape of the

economic market involved. Relevant mileage would be clearly disclosed;

--Historical cable carriage, illustrated by the submission of

documents, such as rate cards, listing the cable system's channel line-

ups for a period of several years.

--Coverage provided by the stations, including maps of the areas in

question with the universe of involved broadcast station contours and

cable system franchise areas clearly delineated with the same level of

specificity as the maps filed with the Commission for broadcast

licensing proceedings;

--Information regarding coverage of news or other programming of

interest to the community as demonstrated by program logs or other

descriptions of local program offerings, such as detailed listings of

the programming provided in a typical week that address issues of

importance in the community in question and not the market in general;

--Other information that demonstrates a nexus between the station and

the cable community, including data on transportation, shopping, and

labor patterns;

--Published audience data for the relevant stations showing their

average all day audience (i.e., the reported audience averaged over

Sunday-Saturday, 7 a.m.-1 a.m., or an equivalent time period) for both

cable and noncable households over a period of several years.

[[Page 33793]]

29. We will adopt the standardized evidence approach with regard to

market modification petitions and amend the rules accordingly.

Petitions that do not provide the evidence required by the rule will be

dismissed without prejudice. This option has distinct advantages.

First, it promotes administrative efficiency. Commission staff would no

longer have to spend time tracking down the appropriate maps, ratings

data, and carriage records that are missing from the record. Nor would

Commission staff need to contact the relevant party to request the

information that should have been included in the filing in the first

place. With the relevant evidence available, the resources needed to

process modification requests would be reduced. It now takes almost the

entire 120-day statutory period to research, draft, adopt, and release

a market modification decision. The interests of both broadcasters and

cable operators will be advanced by a standardized evidentiary approach

that will facilitate the decision-making process. By adopting the

standardized evidence option, we may be able to bring greater

uniformity and certainty to the process and avoid unnecessary

reconsideration petitions and appeals, which will enable us to redirect

administrative resources that would have been devoted to those

proceedings.

30. In addition to the evidence delineated above, we encourage

petitioners to provide a more specific technical coverage showing,

through the submission of service coverage prediction maps that take

terrain into account, particularly maps using the Longley-Rice

prediction methodology. In situations involving mountainous terrain or

other unusual geographical feature, the Commission will consider

Longley-Rice propagation studies in determining whether or not a

television station actually provides local service to a community under

factor two of the market modification test. We will view such studies

as probative evidence in our analysis and a proper tool to augment

Grade B contour showings. The Longley-Rice model provides a more

accurate representation of a station's technical coverage area because

it takes into account such factors as mountains and valleys that are

not specifically reflected in a traditional Grade B contour analysis.

Since both the Commission and the broadcasting industry have relied

upon the Longley-Rice model in determining the digital television Table

of Allocations, these studies will become increasingly useful in

defining market areas for digital television stations as they come on

the air.

31. We do not find merit in the argument that the standardized

evidence option would pose an unreasonable financial burden on

petitioners. We believe that the requested evidence should be

obtainable without unreasonable difficulty and is in any case the kind

of information that should be reviewed in determining whether a filing

is appropriate. Most of the requested information has been included by

more careful petitioners in the past without complaint about costs or

administrative difficulties. Our decision here simply standardizes the

type of evidence we find relevant in processing market modification

petitions. However, if a requested item is in the exclusive control of

the opposing party, and the opposing party refuses to provide the

information, we will take into consideration which party is responsible

for the absence of the requested information.

32. ALTV contends that the standardized evidence approach conflicts

with the Act because Section 614(h) specifies a limited range of

evidence needed to support a market modification petition. We disagree.

The language of Section 614(h) provides that in considering market

modification requests, ``the Commission shall afford particular

attention to the value of localism by taking into account such factors

as * * *'' (emphasis added), indicating that the factors are non-

exclusive. Likewise, the legislative history accompanying Section

614(h) indicates that the four factors are non-exclusive, and we have

interpreted this language to mean that the parties may submit any

additional evidence they believe is appropriate. The approach we adopt

today adds substance to this directive by clearly indicating what kind

of evidence is necessary for a modification petition to be deemed

complete. Parties may continue to submit whatever additional evidence

they deem appropriate and relevant.

33. The second proposal proffered by the Commission to increase the

efficiency of the decision making process was to alter to some extent

the burden of producing the relevant evidence. Thus, for example,

Section 614(h) establishes four statutory factors to govern the ad hoc

market change process, including historical carriage, local service,

service from other station, and audience viewing patterns. These

factors are intended to provide evidence as to a particular station's

market area, but they are not the only factors considered. These

factors must be considered in conjunction with other relevant

information to develop a result that is designed to ``better effectuate

the purposes'' of the must-carry requirements. The Notice sought

comment on whether the process could be expedited by permitting the

party seeking the modification to establish a prima facie case based on

historical carriage, technical signal coverage of the area in question,

and off-air viewing. Such factors track the statutory provision and are

relatively free from factual dispute. The presentation of such a prima

facie case could then trigger an obligation on the part of any

objecting entity to complete the factual record by presenting

conflicting evidence as to the actual scope of the economic market

involved. This could include, for example, programming information and

other evidence as to the local advertising market involved. Dividing

the obligations in this fashion, the Notice suggested, would force the

party with the best access to relevant information to disclose that

information at the earliest possible point in the process.

34. We find that the prima facie option is not the proper approach

because it seems likely to create another area for procedural disputes.

In contrast to the standardized evidence approach, which provides a

framework that should expedite review, we are concerned that the prima

facie approach, while possibly streamlining the process, would

sacrifice the flexibility to consider all useful evidence. We also

reject the market deletion plan proposed by Paxson. Under this

approach, the Commission need only find that the cable system and the

broadcaster share a DMA, and the cable system still has capacity for

the carriage of local signals, in order to dismiss a market deletion

petition. We believe this plan is contrary to the plain meaning of the

Act because it ignores the four statutory factors that we must take

into account when reviewing market deletion requests.

35. With regard to WRNN-TV and Paxson's request that programming

should be given more weight in the modification analysis, we believe

that it is inappropriate to state that one factor is universally more

important than any other, as each is valuable in assessing whether a

particular community should be included or excluded from a station's

local market, and the relative importance of particular factors will

vary depending on the circumstances in a given case. Programming is

considered in the context of Section 614(h) proceedings only insofar as

it serves to demonstrate the scope a station's existing market and

service area, not as

[[Page 33794]]

a quid pro quo that guarantees carriage or an obligation that must be

met to obtain carriage. However, we do find that such information is

particularly useful in determining if the television station provides

specific service to the community subject to modification. As such, we

will include programming of local interest in the analysis along with

mileage, Grade B contour coverage, and physical geography, when

reviewing the local service element of the market modification test.

36. We continue to believe that our interpretation of Section

614(h), and the evidence we have used to analyze local service and

adjust markets is reasonable and consistent with the language of the

Act and statutory intent. We note that the arguments Paxson and WRNN

raise were addressed at length in the New York ADI Appeals Memorandum

Opinion and Order, (``New York ADI Order''), 12 FCC Rcd 12262 (1997),

which disposed of numerous separate must carry/market modification

appeals involving seven New York ADI cable operators and five

television stations. The Commission's decision, subsequently affirmed

by the United States Court of Appeals for the Second Circuit, WLNY v.

FCC, 163 F.3d 187 (2d Cir. 1998), generally affirmed a staff decision

to retain certain communities, and to delete other communities, from

each of the stations' markets based on the four statutory factors, with

particular attention paid to the local service factor as measured by

Grade B contours and geographic distance, as well as other

considerations. The Court's opinion fully endorsed the Commission's

approach to market modifications and agreed that our careful balancing

of the enumerated statutory factors, and other important

considerations, are entirely consistent with the language and intent of

the Act.

37. We note that Section 614(h) prohibits cable operators from

deleting from carriage commercial broadcast stations during the

pendency of a market modification request but does not address

maintaining the status quo with respect to additions. Given the absence

of a parallel statutory directive with respect to channel additions, we

see no reason to depart from the general presumption that a decision is

valid and binding until it is stayed or overruled. To the extent the

process aids broadcast stations in both retaining and obtaining cable

carriage rights, that appears to be the result intended by the

statutory framework adopted.

Market Entry Analysis

38. Section 257 of the Act requires the Commission to complete a

proceeding to identify and eliminate market entry barriers for

entrepreneurs and other small businesses in the telecommunications

industry. The Commission is directed to promote, inter alia, a

diversity of media voices and vigorous economic competition. We believe

that this Order is consistent with the objectives of Section 257 in

that it promotes a smooth transition to DMAs for both cable operators

and broadcasters.

Paperwork Reduction Act

The requirements adopted in this Report and Order have been

analyzed with respect to the Paperwork Reduction Act of 1995 (the

``1995 Act'') and would impose modified information collection

requirements on the public. The Commission has requested Office of

Management and Budget (``OMB'') approval, under the emergency

processing provisions of the 1995 Act (5 CFR 1320.13), of the modified

information collection requirements contained in this Report and Order.

Public comments are due on or before 20 days after date of publication

of this Notice in the Federal Register. OMB comments are due on or

before 30 days after date of publication of this Notice in the Federal

Register. 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 would 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; and (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.

OMB Approval Number: 3060-0546.

Title: Definition of Markets for Purposes of the Cable Television

Broadcast Signal Carriage Rules.

Type of Review: Revision of existing collection.

Respondents: Business and for-profit entities.

Number of Respondents: 150.

Estimated Time per Response: 4-40 hours.

Frequency of Response: On occasion filing requirement.

Total Estimated Annual Burden to Respondents: 1,680 hours.

Total Estimated Annual Cost to Respondents: $721,500.

Needs and Uses: This collection (OMB 3060-0546) accounts for the

paperwork burden imposed on entities when undergoing the market

modification request process. Information furnished in market

modification filings is used by the Commission to deem that the

television market of a particular commercial television broadcast

station should include additional communities within its television

market or exclude communities from such station's television market.

Final Regulatory Flexibility Act Analysis

39. As required by Section 603 of the Regulatory Flexibility Act, 5

U.S.C. Section 603 (RFA), an Initial Regulatory Flexibility Analysis

(IRFA) was incorporated in the First Order and Further Notice of

Proposed Rulemaking, 61 FR 29312. The Commission sought written public

comments on the proposals in the Further Notice including comments on

the IRFA. The FRFA conforms to the RFA, as amended by the Contract with

America Advancement Act of 1996 (CWAAA), Pub. L. 104-121, 110 Stat.

847.

40. Need and Purpose of this Action: This action is necessary

because the procedure for determining local television markets for

signal carriage purposes relies on a market list no longer published by

the Arbitron Ratings Company. Moreover, action is required to mitigate

disruptions in cable channel line-ups that will be caused by the shift

to a new television market paradigm.

41. Summary of Issues Raised by the Public in Response to the

Initial Regulatory Flexibility Analysis: SCBA filed comments in

response to the Initial Regulatory Flexibility Analysis. SCBA states

that the Commission's objective of a smooth transition from a market

definition based on ADIs to one based on DMAs can be accomplished with

respect to small cable systems by creating special transition rules.

SCBA has submitted small cable transition rules that allegedly will

help minimize regulatory burdens on small cable systems. SCBA first

proposes rules that allow qualified small cable systems to opt out of

the change in market definitions for the 1999 election. According to

SCBA, this will allow certain small cable systems an additional three

years to prepare for the impact of market redefinition. In the

alternative, SCBA suggests transition rules, detailed in paragraphs 29-

30, above, that will protect existing programming and shift certain

costs associated with market redefinition to the broadcasters that

benefit from those costs. These comments are addressed in the Order.

[[Page 33795]]

42. Description and Estimate of the Number of Small Entities

Impacted. The RFA defines the term ``small entity'' as having the same

meaning as the terms ``small business,'' ``small organization,'' and

``small governmental jurisdiction,'' and the same meaning as the term

``small business concern'' under Section 3 of the Small Business Act.''

A small concern is one which: (1) is independently owned and operated;

(2) is not dominant in its field of operation; and (3) satisfies any

additional criteria established by the Small Business Administration

(SBA).

43. Cable Operators. The Communications Act at 47 U.S.C. Section

543 (m) (2) defines a small cable operator as ``a cable operator that,

directly or through an affiliate, serves in the aggregate fewer than 1

percent of all subscribers in the United States and is not affiliated

with any entity or entities whose gross annual revenues in the

aggregate exceed $250,000,000.'' The Commission has determined that

there are 61,700,000 subscribers in the United States. We have found

that an operator serving fewer than 617,000 subscribers shall be deemed

a small operator, if its annual revenues, when combined with the total

annual revenues of all of its affiliates, do not exceed $250 million in

the aggregate. Based on available data, we find that the number of

cable operators serving 617,000 subscribers or less totals 1,450.

Although it seems certain that some of these cable system operators are

affiliated with entities whose gross annual revenues exceed

$250,000,000, we are unable at this time to estimate with greater

precision the number of cable system operators that would qualify as

small cable operators under the definition in the Communications Act.

We are likewise unable to estimate the number of these small cable

operators that serve 50,000 or fewer subscribers in a franchise area.

We can, however, assume that the number of cable operators serving

617,000 subscribers or less that (1) are not affiliated with entities

whose gross annual revenues exceed $250,000,000 or (2) serve 50,000 or

fewer subscribers in a franchise area, is less than 1450.

44. SBA has developed a definition of small entities for cable and

other pay television services, which includes all such companies

generating less than $11 million in revenue annually. This definition

includes cable systems operators, closed circuit television services,

direct broadcast satellite services, multipoint distribution systems,

satellite master antenna systems and subscription television services.

According to the Census Bureau, there were 1,323 such cable and other

pay television services generating less than $11 million in revenue

that were in operation for at least one year at the end of 1992.

45. Open Video System (``OVS''). To date the Commission has

certified 23 OVS systems, at least two of which are known to be

currently providing service. Little financial information is available

for entities authorized to provide OVS that are not yet operational. We

believe that one OVS licensee may qualify as a small business concern.

Given that other entities have been authorized to provide OVS service

but have not yet begun to generate revenue, we conclude that at least

some of the OVS operators qualify as small entities.

46. Television Stations. The proposed rules and policies will apply

to television broadcasting licensees, and potential licensees of

television service. The Small Business Administration defines a

television broadcasting station that has no more than $10.5 million in

annual receipts as a small business. Television broadcasting stations

consist of establishments primarily engaged in broadcasting visual

programs by television to the public, except cable and other pay

television services. Included in this industry are commercial,

religious, educational, and other television stations. Also included

are establishments primarily engaged in television broadcasting and

which produce taped television program materials. Separate

establishments primarily engaged in producing taped television program

materials are classified under another SIC number. There are

approximately 1,589 operating full power television broadcasting

stations in the nation as of April 30, 1999. Approximately 1,200 of

those stations are considered small businesses.

47. In addition to owners of operating television stations, any

entity who seeks or desires to obtain a television broadcast license

may be affected by the rules contained in this item. The number of

entities that may seek to obtain a television broadcast license is

unknown.

48. Reporting, Recordkeeping and Other Compliance Requirements. The

rules adopted in this Order will affect broadcast stations, cable

operators, and OVS system operators, including those that are small

entities. The rules adopted in this Order require broadcasters, cable

operators, and OVS operators to provide specific forms of evidence to

support market modification petitions. We do not believe that the rules

adopted here today will require any specialized skills beyond those

already used by broadcasters and cable operators.

49. Steps Taken to Minimize the Significant Economic Impact on

Small Entities and Significant Alternatives Rejected. While declining

to adopt SCBA's proposals, the Commission has implemented a procedural

mechanism allowing small cable systems to file hardship petitions, if

certain conditions are met. Specifically, the Commission will consider,

in a case-by-case adjudicatory proceeding, whether extreme hardship

would be imposed on small cable systems by requiring a transition to a

new DMA market. Such hardship would include disproportionate expense to

the system and programming disruption to subscribers exacerbated by the

small size of the system. Evidence of such hardship would include

reliable cost estimates for carrying the new stations; channel position

conflicts between old and new stations; or an extensive change in

channel line-ups. This mechanism should allay the concerns proffered by

small cable operators.

50. Report to Congress. The Commission shall send a copy of this

Final Regulatory Flexibility Analysis, along with this Order, in a

report to Congress pursuant to the Small Business Regulatory

Enforcement Fairness Act of 1996, 5 U.S.C. Section 801(a)(1)(A). A copy

of this FRFA will also be published in the Federal Register.

Ordering Clauses

51. Accordingly, it is ordered that, pursuant to Section 4(i),

4(j), 614 and 653 of the Communications Act of 1934, as amended, 47

U.S.C. 154(i), 154(j), 534 and 573, and Section 301 of the

Telecommunications Act of 1996, Pub. L. 104-104 (1996), part 76 is

amended as set forth in the rule changes, effective July 26, 1999.

It is further ordered that the commission's Office of Public

Affairs, Reference Operations Division, Shall send a copy of this Final

Report and Order, including the Final Regulatory Flexibility Analysis,

to the Chief Counsel for Advocacy of the Small Business Administration

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

Pub. L. 96-354, 94 Stat. 1164, 5 U.S.C. 601 et. seq. (1981).

List of Subjects in 47 CFR Part 76

Cable television.

[[Page 33796]]

Federal Communications Commission.

William F. Caton,

Deputy Secretary.

Rule Changes

Part 76 of Title 47 of the U.S. Code of Federal Regulations is

amended as follows:

PART 76--CABLE TELEVISION SERVICE

1. The authority citation for part 76 continues to read as follows:

Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a,

307, 308, 309, 312, 315, 317, 325, 503, 521, 522, 531, 532, 533,

534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 552, 554, 556,

558, 560, 561, 571, 572, 573.

2. Section 76.55 is amended by revising paragraphs (e)(1) through

(e)(6) to read as follows:

Sec. 76.55 Definitions applicable to the must-carry rules.

* * * * *

(e) Television market. (1) Until January 1, 2000, a commercial

broadcast television station's market, unless amended pursuant to

Sec. 76.59, shall be defined as its Area of Dominant Influence (ADI) as

determined by Arbitron and published in the Arbitron 1991-1992

Television ADI Market Guide, as noted, except that for areas outside

the contiguous 48 states, the market of a station shall be defined

using Nielsen's Designated Market Area (DMA), where applicable, as

published in the Nielsen 1991-92 DMA Market and Demographic Rank

Report, and that Puerto Rico, the U.S. Virgin Islands, and Guam will

each be considered a single market.

(2) Effective January 1, 2000, a commercial broadcast television

station's market, unless amended pursuant to Sec. 76.59, shall be

defined as its Designated Market Area (DMA) as determined by Nielsen

Media Research and published in its DMA Market and Demographic Rank

Report or any successor publication.

(i) For the 1999 election pursuant to Sec. 76.64(f), which becomes

effective on January 1, 2000, DMA assignments specified in the 1997-98

DMA Market and Demographic Rank Report, available from Nielsen Media

Research, 299 Park Avenue, New York, NY, shall be used.

(ii) The applicable DMA list for the 2002 election pursuant to

Sec. 76.64(f) will be the DMA assignments specified in the 2000-2001

list, and so forth for each triennial election pursuant to

Sec. 76.64(f).

(3) In addition, the county in which a station's community of

license is located will be considered within its market.

(4) A cable system's television market(s) shall be the one or more

ADI markets in which the communities it serves are located until

January 1, 2000, and the one or more DMA markets in which the

communities it serves are located thereafter.

(5) In the absence of any mandatory carriage complaint or market

modification petition, cable operators in communities that shift from

one market to another, due to the change in 1999-2000 from ADI to DMA,

will be permitted to treat their systems as either in the new DMA

market, or with respect to the specific stations carried prior to the

market change from ADI to DMA, as in both the old ADI market and the

new DMA market.

(6) If the change from the ADI market definition to the DMA market

definition in 1999-2000 results in the filing of a mandatory carriage

complaint, any affected party may respond to that complaint by filing a

market modification request pursuant to Sec. 76.59, and these two

actions may be jointly decided by the Commission.

* * * * *

3. Section 76.59 is amended by revising paragraphs (b) and (c) to

read as follows:

Sec. 76.59 Modification of television markets.

* * * * *

(b) Such requests for modification of a television market shall be

submitted in accordance with Sec. 76.7, petitions for special relief,

and shall include the following evidence:

(1) A map or maps illustrating the relevant community locations and

geographic features, station transmitter sites, cable system headend

locations, terrain features that would affect station reception,

mileage between the community and the television station transmitter

site, transportation routes and any other evidence contributing to the

scope of the market.

(2) Grade B contour maps delineating the station's technical

service area and showing the location of the cable system headends and

communities in relation to the service areas.

Note to paragraph (b)(2): Service area maps using Longley-Rice

(version 1.2.2) propagation curves may also be included to support a

technical service exhibit.

(3) Available data on shopping and labor patterns in the local

market.

(4) Television station programming information derived from station

logs or the local edition of the television guide.

(5) Cable system channel line-up cards or other exhibits

establishing historic carriage, such as television guide listings.

(6) Published audience data for the relevant station showing its

average all day audience (i.e., the reported audience averaged over

Sunday-Saturday, 7 a.m.-1 a.m., or an equivalent time period) for both

cable and noncable households or other specific audience indicia, such

as station advertising and sales data or viewer contribution records.

(c) Petitions for Special Relief to modify television markets that

do not include such evidence shall be dismissed without prejudice and

may be refiled at a later date with the appropriate filing fee.

[FR Doc. 99-15959 Filed 6-23-99; 8:45 am]

BILLING CODE 6712-01-P