Broadcast Television National Ownership Rules

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MM Docket Nos. 96-222, 91-221, 87-8; FCC 99-208]

Broadcast Television National Ownership Rules

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document amends the Commission's rules regarding how to

calculate a group station owners national audience reach for purposes

of determining compliance with the broadcast television national

ownership rule. This action is necessary to respond to changes in the

underlying rule mandated by the Telecommunications Act of 1996, as well

as to changes in the Commission's satellite rules and changes in the

broadcast television market.

DATES: Effective November 16, 1999.

FOR FURTHER INFORMATION CONTACT: Kim Matthews, (202) 418-2120, Policy

and Rules Division, Mass Media Bureau.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report

and Order (``R&O''), FCC 99-208, adopted August 5, 1999; released

August 6, 1999. The full text of the Commission's R&O is available for

inspection and copying during normal business hours in the FCC Dockets

Branch (Room TW-A306), 445 12th St. S.W., Washington, D.C. The complete

text of this R&O may also be purchased from the Commission's copy

contractor, International Transcription Services (202) 857-3800, 1231

20th St., N.W., Washington, D.C. 20036.

Synopsis of Report and Order

1. On November 7, 1996, the Commission released a Notice of

Proposed Rule Making (``Notice''), 61 FR 66987, December 19, 1996, in

this proceeding, seeking comment on how to calculate a broadcast

television station group owner's aggregate national audience reach for

the purposes of determining compliance with the national broadcast

television multiple ownership rule, which limits that reach to 35%.

Based on the record before us, we conclude that the public interest

would be served by counting a market only once when calculating an

entity's national ownership reach, even if that entity has an

attributable interest in more than one television station in that

market. As specific applications of this policy, we are: (1) narrowing

the application of the ``satellite exemption,'' under which we

disregard satellite station ownership in measuring aggregate national

ownership; (2) not incorporating same-market local marketing agreements

(``LMAs'') into the calculation of the brokering station's national

audience reach; and (3) replacing our use of Arbitron's Areas of

Dominant Influence (``ADIs'') to define geographic television markets

with the use of Nielsen's Designated Market Areas (``DMAs'').

Background

2. Pursuant to section 202(c)(1) of the Telecommunications Act of

1996 (the ``1996 Act''), the Commission amended its national broadcast

television ownership rule. Before passage of the 1996 Act, the

Commission generally prohibited entities from having an attributable

interest in more than 12 broadcast television stations. Further, the

Commission generally prohibited an entity from having an attributable

interest in a station if it would result in that entity's having an

attributable interest in television stations with an aggregate national

audience reach exceeding 25%. However, pursuant to section 202(c)(1) of

the 1996 Act, the Commission eliminated the 12-station cap and raised

the 25% aggregate national audience reach limit to 35%.

3. Pursuant to Sec. 73.3555(e)(2)(i) of the Commission's Rules, a

station's audience reach is defined as consisting of the total number

of television households within the television market for that station.

The television market, in turn, is currently defined as the Area of

Dominant Influence (ADI) used by Arbitron, a commercial audience-rating

service, to analyze broadcast television station competition. For

purposes of calculating this aggregate audience reach under the rules,

UHF stations are attributed with only 50% of the audience within their

ADI (the UHF discount), a policy that is under careful review in the

biennial ownership review. In addition, satellite stations generally

are not counted at all in the national audience reach calculation (the

satellite exemption). Neither the 1996 Act nor our Order implementing

its national television ownership provisions addressed how to measure a

licensee's national audience reach, thus leaving undisturbed the

process prescribed earlier in connection with the 25% limit. In light

of the modified national ownership rule and the new competitive and

regulatory structure of the video marketplace brought about by the 1996

Act, we initiated this proceeding to update the record on measuring

national television audience reach for purposes of the new national

ownership limit.

Discussion

The Satellite Exemption

4. Background. A television satellite is a full-power terrestrial

broadcast station authorized under part 73 of the Commission's Rules to

retransmit all or part of the programming of another station (most

commonly the parent station). Satellite stations are operated by the

same party that operates the parent station. The Commission does not

authorize satellite operation unless it is demonstrated that the

frequency would likely go unused otherwise. As a result, satellite

stations typically operate in areas that are likely to provide

television broadcasters relatively little opportunity for growth and

profit when compared with larger markets. Pursuant to 47 CFR 73.3555,

Note 5, the Commission's multiple ownership rules do not apply to

satellite stations. The Commission exempted TV satellites from the

national multiple ownership rules when it adopted the 12-station cap

and the 25% audience reach limitation. The Commission believed that

this would encourage the provision of television service to smaller

communities. It also noted that satellite stations and stations

operating primarily as satellites were already exempt from the

Commission's duopoly rule because they generally did not originate

programming. In 1991, we abolished the 5% ``limit'' on the amount of

local programming that a satellite could originate, which we had used

as a benchmark for determining whether a station was still a satellite.

Same-Market Satellites

5. Background. The national multiple ownership rule, as amended by

the 1996 Act, is concerned with a station's potential audience rather

than with its actual viewership. Also, we are not concerned with the

specific number of television stations owned by a group owner, since

the 1996 Act eliminated

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the numerical limitations on station ownership formerly in the rule;

rather, the national television ownership rule now focuses solely on

national audience reach. In the Notice of Proposed Rule Making in this

proceeding, we tentatively concluded that if a licensee acquires a

satellite television station in a market within which it already

operates a station, it has not extended its audience reach in that

television market for purposes of the national audience reach limit;

the television households in that market are already counted, given the

existence of the licensee's parent station. Accordingly, we proposed to

retain the exemption for satellites operating in the same market as

their parents.

6. Discussion. We shall retain the satellite exemption for same-

market satellites. We are not concerned with the specific number of

television stations owned by a group owner, since the 1996 Act

eliminated the numerical limitations on station ownership formerly in

the rule. In addition, the national ownership rule is concerned with

competition and diversity on a national scale, and dual station

ownership in one market neither adds to national reach nor affects

competition and diversity on a national basis. Also, even if a licensee

increases the total number of its viewers by acquiring a second station

in the market, the relevant measurement is of audience reach, not of

actual viewership.

7. Accordingly, we are amending Sec. 73.3555(e)(2)(ii) of our rules

to clarify that we shall not double-count individual markets. In

practice, this means that we are retaining the satellite exemption for

those satellites that operate in the same television market as their

parent stations. Counting the audience twice in such a situation would

serve only to distort our calculation of how many potential viewers a

group owner is able to reach nationwide.

Separate-Market Satellites

8. In the Notice of Proposed Rule Making, we proposed to repeal

the satellite exemption for satellites operating in separate markets

from their parent stations. As discussed below, we are adopting the

proposal.

9. We conclude that the satellite exemption is no longer warranted

for satellite stations operating in separate markets from their parent

stations. Satellite stations are no longer limited as to the amount of

local programming they may originate. Therefore, when a parent station

operates a satellite in another market, the licensee's over-the-air

audience reach is expanded into another market by the audience reach of

the satellite station. Consequently, we shall treat separate-market

satellites as we do other television stations, and we shall include

them when calculating a group station owner's national aggregate

audience reach.

10. We believe that the benefits of inclusion of these stations,

including a more accurate reflection of actual audience reach, outweigh

any potential costs. The 1996 Act's elimination of the restriction on

the absolute number of television stations that may be commonly owned

has substantially reduced the disincentive to satellite operation.

Also, because a satellite generally serves a sparsely populated area

that is underserved, the population of the entire market in which the

satellite is located should add relatively little to a group owner's

aggregate national audience reach. The record does not indicate that

the operation of a satellite station would generally put licensees over

or so close to the 35% national aggregate audience reach limit as to

dissuade them from operating the station at all.

Local Marketing Agreements

11. Background. An LMA 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. Such agreements may enable separately owned stations to

function cooperatively via joint advertising, shared technical

facilities (including shared production facilities), and joint

programming arrangements. In the Notice of Proposed Rule Making, we

proposed not to count same-market LMAs towards the brokering station's

national aggregate audience reach calculation.

12. Discussion. In our companion Attribution R&O, FCC 99-207, we

determine that same-market LMAs are attributable to the brokering

station for the purposes of administering the local ownership rules

when the brokering station programs more than 15% of the brokered

station's weekly broadcast hours. However, as we concluded above in the

context of same-market satellite stations, the national ownership rule

limits audience reach on a national scale, and dual station influence

or control in one market does not add to national audience reach. That

is merely a specific application of our new general rule of not double-

counting markets. The record indicates no additional factors warranting

a different analysis in this case. For these reasons, we find that

same-market LMAs shall not be included in the brokering station's

national aggregate audience reach calculation.

13. We note that when the brokering station is located in a

different market than the brokered or programmed station, the issue of

double-counting does not arise. As discussed in the Attribution R&O,

under our new equity/debt plus rule, we will attribute the interest of

a program supplier in a station where it: (1) provides more than 15% of

the station's weekly programming; and (2) it holds more than 33% of the

licensee's total assets. Such an attributable interest will count

towards the 35% national reach limit since the brokered and brokering

stations are in different markets.

Market Definition

14. We use the number of television households in each market in

which an entity's stations are located to calculate that entity's

national audience reach. The definition of the market for this purpose

has remained unchanged since 1985, when the Commission first adopted a

national audience cap:

[n]ational audience reach means the total number of television

households in the Arbitron Area of Dominant Influence (ADI) markets

in which the relevant stations are located divided by the total

national television households as measured by ADI data at the time

of a grant, transfer or assignment of a license. . . . Where the

relevant application forms require a showing with respect to

audience reach and the application relates to an area where Arbitron

ADI market data are unavailable, then the applicant shall make a

showing as to the number of television households in its market.

Upon such a showing, the Commission shall make a determination as to

the appropriate audience reach to be attributed to the applicant.

15. However, because Arbitron no longer updates its county-by-

county determinations of each broadcast station's ADI, they are static

and have become less reliable over time as market conditions change.

Accordingly, as we proposed in the Notice, we shall now use Designated

Market Areas (DMAs) as compiled by A.C. Nielsen Media Research--another

commercial ratings service--where we previously relied on ADIs. We use

DMAs to define markets in the context of cable must-carry and

retransmission consent. Nielsen uses the term DMA to define a unique

geographic area based on the TV viewing habits of its residents. In

designating DMAs, Nielsen Media Research collects viewing data from

diaries placed in television households four times a year. Nielsen

assigns counties to DMAs annually on the basis of television audience

viewership as

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recorded in those diaries. Counties are assigned to a DMA if the

majority or, in the absence of a majority, the preponderance, of

viewing in the county is recorded for the programming of the television

stations located in that DMA.

16. In some instances the use of DMAs instead of ADIs might lead to

small variations in the audience reach calculation of some stations,

because in some instances Arbitron and Nielsen define markets somewhat

differently. However, these variations would have only a minor effect

on the calculation of licensees' national ownership reach.

Conclusion

17. This document reforms how we calculate audience reach for

purposes of the national television ownership rule in response to

changes in the broadcast television marketplace and changes in the

underlying rule itself required by the 1996 Act. The changes that we

make are relatively minor. We see no need to adopt any transition

policy to implement these relatively minor changes, which should not

result in any existing group television station owner's exceeding the

35% national aggregate audience reach cap set forth in the national

television ownership rule.

Administrative Matters

Final Paperwork Reduction Act of 1995 Analysis

18. The rules adopted herein have been analyzed with respect to the

Paperwork Reduction Act of 1995 and found to contain no new or modified

form, information collection and/or record keeping, labeling,

disclosure or record retention requirements. These rules will not

increase or decrease burden hours imposed on the public.

Regulatory Flexibility Analysis

19. Pursuant to the Regulatory Flexibility Act of 1980, as amended,

5 U.S.C. 601 et seq., the Commission's Final Regulatory Flexibility

Analysis in this R&O is below.

Ordering Clauses

20. Accordingly, it is ordered that, pursuant to Secs. 4(i) and

303(r) of the Commission's rules, 47 U.S.C.154(i) and 303(r), 47 CFR

part 73 is amended as set forth as below.

21. It is further ordered that, pursuant to the Contract with

America Advancement Act of 1996, the amendment set forth set forth

below shall be effective November 16, 1999.

22. It is further ordered that the Commission's Office of Public

Affairs, Reference Operations Division, shall send a copy of this R&O,

including the Final Regulatory Flexibility Analysis, to the Chief

Counsel for Advocacy of the Small Business Administration.

23. It is further ordered that this proceeding is terminated.

Final Regulatory Flexibility Analysis

24. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C.

603, an Initial Regulatory Flexibility Analysis (IRFA) was incorporated

in the Notice of Proposed Rule Making, 61 FR 66987, December 19, 1996,

in this proceeding. The Commission sought written public comment on the

proposals in the Notice, including comment on the IRFA. This Final

Regulatory Flexibility Analysis (FRFA) conforms to the RFA, 5 U.S.C.

604.

I. Need For and Objectives of the National TV Ownership R&O

25. The R&O modifies the method by which the Commission determines

a group television station owner's national aggregate audience reach

for compliance with the national television ownership rule. The

modifications are necessary to reflect changes in the underlying

national ownership limit adopted pursuant to the Telecommunications Act

of 1996.

II. Summary of Significant Issues Raised by the Public in Response to

the Initial Analysis

26. No comments were received specifically in response to the IRFA

contained in the Notice of Proposed Rule Making. However, some comments

addressed issues relating to small businesses and businesses controlled

by minorities and women, some of which may be small entities. Several

commenters made general assertions that broadcast station ownership has

consolidated since passage of the 1996 Act, and that the Commission

should take businesses controlled by minorities and women into account

in all of our pending broadcast ownership proceedings. CBS argued that

the ownership rules were not designed to foster minority ownership in

the broadcast industry, and that this goal should be pursued by other

means.

27. Turning to the specific rules that are the subject of this rule

making proceeding, BET argued that if both a parent and a same-market

satellite are allocated a second 6 MHz for DTV purposes, then the

satellite station audience should be counted towards the 35% national

ownership cap because the licensee of such a station will have

increased its broadcasting power at least fourfold. It claims that

incumbent broadcasters' market power will increase sufficiently to

create insurmountable entry barriers against competing stations.

However, the R&O concludes that such concerns involve competition and

diversity on a local, not a national, scale and are not the focus of

the national ownership rule.

28. BET asserted that retention of the satellite exemption for

separate-market satellites would ``squeeze out'' entrepreneurs and new

entrants by enabling large group owners to transfer costs among

stations and eliminate competition from small operators. However, the

R&O adopts a rule whereby such separate-market satellite stations shall

be attributed for the purposes of the national ownership rule.

III. Description and Estimate of the Number of Small Entities to Which

the Rules Will Apply

29. The amended rules will affect entities that have attributable

interests in numerous full power commercial television stations

reaching a substantial portion of the national viewing public. These

multiple station owners are not likely to be small businesses.

1. Definition of a ``Small Business''

30. Under the RFA, small entities may include small organizations,

small businesses, and small governmental jurisdictions. 5 U.S.C.

601(6). The RFA, 5 U.S.C. 601(3), generally defines the term ``small

business'' as having the same meaning as the term ``small business

concern'' under the Small Business Act, 15 U.S.C. 632. A small business

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''). According to the SBA's regulations, entities engaged in

television broadcasting Standard Industrial Classification (``SIC'')

Code 4833--Television Broadcasting Stations, may have a maximum of

$10.5 million in annual receipts in order to qualify as a small

business concern. This standard also applies in determining whether an

entity is a small business for purposes of the RFA.

31. Pursuant to 5 U.S.C. 601(3), the statutory definition of a

small business applies ``unless an agency after consultation with the

Office of Advocacy of the SBA and after opportunity for public comment,

establishes one or more definitions of such term which are appropriate

to the activities of the agency and publishes such definition(s) in the

Federal Register.'' While we tentatively believe that the foregoing

definition of ``small business'' greatly overstates the number of radio

and television broadcast stations that are small businesses and is

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not suitable for purposes of determining the impact of the new rules on

small television and radio stations, and auxiliary services, we did not

propose an alternative definition in the IRFA. Accordingly, for

purposes of this R&O, we utilize the SBA's definition in determining

the number of small businesses to which the rules apply, but we reserve

the right to adopt a more suitable definition of ``small business'' as

applied to radio and television broadcast stations and to consider

further the issue of the number of small entities that are radio and

television broadcasters in the future. Further, in this FRFA, we will

identify the different classes of small television stations that may be

impacted by the rules adopted in this R&O.

2. Issues in Applying the Definition of a ``Small Business''

32. As discussed below, we could not precisely apply the foregoing

definition of ``small business'' in developing our estimates of the

number of small entities to which the rules will apply. Our estimates

reflect our best judgments based on the data available to us.

33. An element of the definition of ``small business'' is that the

entity not be dominant in its field of operation. We are unable at this

time to define or quantify the criteria that would establish whether a

specific television or radio station is dominant in its field of

operation. Accordingly, the following estimates of small businesses to

which the new rules will apply do not exclude any television or radio

station from the definition of a small business on this basis and are

therefore overinclusive to that extent. An additional element of the

definition of ``small business'' is that the entity must be

independently owned and operated. We attempted to factor in this

element by looking at revenue statistics for owners of television

stations. However, as discussed further below, we could not fully apply

this criterion, and our estimates of small businesses to which the

rules may apply may be overinclusive to this extent. The SBA's general

size standards are developed taking into account these two statutory

criteria. This does not preclude us from taking these factors into

account in making our estimates of the numbers of small entities.

34. With respect to applying the revenue cap, the SBA has defined

``annual receipts'' specifically in 13 CFR 121.104, and its

calculations include an averaging process. We do not currently require

submission of financial data from licensees that we could use in

applying the SBA's definition of a small business. Thus, for purposes

of estimating the number of small entities to which the rules apply, we

are limited to considering the revenue data that are publicly

available, and the revenue data on which we rely may not correspond

completely with the SBA definition of annual receipts.

35. Under SBA criteria for determining annual receipts, if a

concern has acquired an affiliate or been acquired as an affiliate

during the applicable averaging period for determining annual receipts,

the annual receipts in determining size status include the receipts of

both firms. 13 CFR 121.104(d)(1). The SBA defines affiliation in 13 CFR

121.103. In this context, the SBA's definition of affiliate is

analogous to our attribution rules. Generally, under the SBA's

definition, concerns are affiliates of each other when one concern

controls or has the power to control the other, or a third party or

parties controls or has the power to control both. 13 CFR

121.103(a)(1). The SBA considers factors such as ownership, management,

previous relationships with or ties to another concern, and contractual

relationships, in determining whether affiliation exists. 13 CFR

121.103(a)(2). Instead of making an independent determination of

whether radio and television stations were affiliated based on SBA's

definitions, we relied on the data bases available to us to provide us

with that information.

3. Estimates Based on Census Data

36. The rules amended by this R&O will apply to full power

commercial broadcast television licensees, permittees, and potential

licensees.

37. There were 1,509 television stations operating in the nation in

1992. That number has remained fairly constant as indicated by the

approximately 1,594 operating television broadcasting stations in the

nation as of June, 1999. For 1992 the number of television stations

that produced less than $10.0 million in revenue was 1,155

establishments.

38. Thus, the rule changes will affect approximately 1,594

television stations, approximately 77% (or 1,227) of which are

considered small businesses. These estimates may overstate the number

of small entities since the revenue figures on which they are based do

not include or aggregate revenues from non-television affiliated

companies.

39. We recognize that the rule changes may also affect minority and

women-owned stations, some of which may be small entities. In 1995,

minorities owned and controlled 37 (3.0 percent) of 1,221 commercial

television stations in the United States. According to the U.S. Bureau

of the Census, in 1987 women owned and controlled 27 (1.9 percent) of

1,342 commercial and non-commercial television stations in the United

States.

IV. Projected Compliance Requirements of the Rule

40. No new recording, recordkeeping or other compliance

requirements are adopted.

V. Steps Taken To Minimize Significant Economic Impact on Small

Entities and Significant Alternatives Considered

41. The modified rules would apply to full power broadcast

television licensees, permittees, and potential licensees. No entity

that is near the 35% national aggregate audience reach limit can be

classified as a ``small entity.'' As a result, the counting methodology

adopted in this R&O will not have a direct effect on any small entity.

42. We have decided not to double-count LMAs or commonly owned

stations in the same market for the purpose of calculating a licensee's

national audience reach. We also eliminate the satellite exemption for

licensees that operate a satellite station in a separate market from

the parent station. In addition, we have decided to use A.C. Nielsen's

Designated Market Areas (DMAs) rather than Arbitron's Areas of Dominant

Influence to calculate national audience reach. A.C. Nielsen, like

Arbitron, is another commercial ratings service. They are analytically

similar. In each of these cases, we have determined that to do

otherwise would not be consistent with the objective of the national

television ownership rule as modified by the 1996 Act: to promote

competition and diversity on a national level by limiting an entity's

national audience reach. We expect that such additional competition and

diversity will benefit commercial television entities, including small

entities.

Report to Congress

43. The Commission will send a copy of the National TV Ownership

R&O, including this FRFA, in a report to Congress pursuant to the Small

Business Regulatory Enforcement Fairness Act of 1996, codified at 5

U.S.C. 801(a)(1)(A). In addition, the Commission will send a copy of

the National TV Ownership R&O, including this FRFA, to the Chief

Counsel for Advocacy of the Small Business Administration. A copy of

the National TV Ownership R&O and FRFA (or summaries thereof) will also

be published in the Federal Register, 5 U.S.C. 604(b).

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List of Subjects in 47 CFR Part 73

Television broadcasting.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Rule Changes

For the reasons discussed in the preample, the Federal

Communication Commission amends 47 CFR part 73 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, 336.

2. Sec. 73.3555 is amended by revising paragraphs (e)(2)(i),

(e)(2)(ii) and the first sentence of Note 5 to read as follows:

Sec. 73.3555 Multiple ownership.

* * * * *

(e) * * *

(2) * * *

(i) National audience reach means the total number of television

households in the Nielsen Designated Market Area (DMA) markets in which

the relevant stations are located divided by the total national

television households as measured by DMA data at the time of a grant,

transfer, or assignment of a license. For purposes of making this

calculation, UHF television stations shall be attributed with 50

percent of the television households in their DMA market.

(ii) No market shall be counted more than once in making this

calculation.

* * * * *

Note 5: Paragraphs (a) through (d) of this section will not be

applied to cases involving television stations that are

``satellite'' operations. * * *

* * * * *

[FR Doc. 99-23695 Filed 9-16-99; 8:45 am]

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