In the Matter of Network Affiliated Stations Alliance (NASA) Petition for Inquiry into Network Practices and Motion for Declaratory Ruling

Federal Communications Commission

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of

)

)

Network Affiliated Stations Alliance (NASA)

)

Petition for Inquiry into Network Practices and

)

Motion for Declaratory Ruling

)

DECLARATORY RULING

Adopted: August 20, 2008

By the Commission:

I.

INTRODUCTION

FCC 08-192

Released: September 3, 2008

1.

The Commission has before it a Petition for Inquiry into Network Practices ( .. Petition''),'

a Motion for Declaratory Ruling ( .. Motion")2 and a Joint Request of Network Affiliated Stations AJliance

("NASA'') and the ABC, CBS, NBC and Fox Television Networks (''Networks") to Resolve NASA

Petition.3 NASA and the Networks request that the Commission affirm a number of basic principles

relating to the Commission rules governing network/affiliate relationships to avoid future disputes.

Pursuant to section 1.2 of the Commission's rules,

4 we grant NASA's request for declaratory ruling in

part and grant the Joint Request in full.

Il.

BACKGROUND

2.

In its Petition, NASA asked the Commission to institute an inquiry as to whether certain

alleged practices of the Networks regarding their affiliates were consistent with the Commission's

network rules, the Communications Act, and the public interest.5 NASA subsequently filed the Motion,

in which it sought a declaratory ruling that certain specified practices engaged in by the Networks are

inconsistent with the Communications Act and the Commission's rules and policies.6 In response, the

1 Petition for Inquiry into Network Practices ( .. Petition") filed by Network Affiliated Stations Alliance (Mar. 8,

2001).

2 Motion for Declaratory Ruling ("Motion") filed by Network AffiJiated Stations Alliance (June 22, 2001).

3 Joint Request of NASA and the ABC, CBS, NBC and Fox Television Networks to Resolve NASA Petition ("Joint

Request") filed by NASA and the ABC, CBS, NBC and Fox Television Networks (June 9, 2008)

etwork Practices ( .. Petition") filed by Network Affiliated Stations Alliance (Mar. 8,

2001).

2 Motion for Declaratory Ruling ("Motion") filed by Network AffiJiated Stations Alliance (June 22, 2001).

3 Joint Request of NASA and the ABC, CBS, NBC and Fox Television Networks to Resolve NASA Petition ("Joint

Request") filed by NASA and the ABC, CBS, NBC and Fox Television Networks (June 9, 2008). These four

networks will be referred to herein as "the Networks." The Joint Request is attached to this Declaratory Ruling.

4 47 C.F.R. § 1.2.

5 Petition at I.

6 In order to pemtit a full exchange of views on the multiple issues raised in the Petition, and given NASA's

clarification that it was seeking a declaratory ruling rather than specific enforcement action, the Commission

classified this proceeding as permit-but-disclose under the ex parte rules, permitting interested parties to make ex

parte presentations to the Commissioners and Commission employees and requiring that these presentations be

disclosed in the record of the proceeding. See Public Notice, Comment sought on "Petition for Inquiry into Network

Practices" filed by Network Affiliated Stations Alliance; "Pennit But Disclose" Ex Porte Status Accorded, DA 01-

1264 (rel. May 22, 2001).

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Networks contended that it would be improper for the Commission to involve itself in the private

contractual relationships between networks and affiliates. 7

3.

On Janwuy 19, 2005, NASA filed a Third Update of Record and Continued Request that

Commission Issue Declaratory Ruling on Basic Principles in which it stated that each of the Networks has

refonned its contracts to address the central issues raised by NASA. At the same time, NASA asked the

Commission to clarify the meaning of the existing network/affiliate rules, consistent with the reformed

affiliation agreements

NASA filed a Third Update of Record and Continued Request that

Commission Issue Declaratory Ruling on Basic Principles in which it stated that each of the Networks has

refonned its contracts to address the central issues raised by NASA. At the same time, NASA asked the

Commission to clarify the meaning of the existing network/affiliate rules, consistent with the reformed

affiliation agreements. In response, the Networks asked the Commission to reject NASA's request and to

close this proceeding, arguing that there is no longer any basis for Commission action. 8

4.

On June 9, 2008, NASA and the Networks filed the Joint Request, stating that they had

revised their standard affiliation agreements to address the issues raised by NASA with respect to

particular contractual provisions, and that a Commission ruling regarding the resolved contractual issues

is unnecessary. Nevertheless, they state that ''NASA and the Networks have a mutual interest in avoiding

future controversies regarding the meaning of the Commission's network/affiliate rules and in assuring

that the rules of the road for the network/affiliate relationship are clear.·.9 The parties thus request that the

Commission issue an order ratifying a number of principles "with which both NASA and the Networks

agree, consistent with the revisions to the standard affiliation agreements by the Networlcs and the

amendments negotiated by the Networks and their affiliates to their current affiliation agreements."10

Ill.

DISCUSSION

5. Under section 1.2 of the rules, the Commission "may ... issue a declaratory ruling terminating

a controversy or removing uncertainty."11 The Commission bas broad discretion whether to issue such a

ruling.12 We agree with NASA and the Networks that additional guidance concerning licensee control,

the right-to-reject rule, and the option-time rule would be helpful to avoid future disputes, and that the

principles identified below are consistent with the Act and our rules.

A.

Licensee Control

6

oversy or removing uncertainty."11 The Commission bas broad discretion whether to issue such a

ruling.12 We agree with NASA and the Networks that additional guidance concerning licensee control,

the right-to-reject rule, and the option-time rule would be helpful to avoid future disputes, and that the

principles identified below are consistent with the Act and our rules.

A.

Licensee Control

6.

Section 310( d) of the Communications Act prohibits the direct or indirect transfer of

control of any station license to another entity without a Commission finding that .. the public interest,

convenience, and necessity will be served thereby."13 We affinn that the following principle identified in

the Joint Request is consistent with the Act and the Commission's rules:

•

Affiliates, as the licensees of local television stations, must retain ultimate control over station

programming, operations and other critical decisions with respect to their stations, and network

affiliations must not undercut this basic control. Retention of this control by Commission

licensees is required by Section 310( d) of the Communications Act and the Commission's Rules.

7 See, e.g., Comments of Walt Disney Company on behalfof ABC at 8, 13, IS, 24-27; Comments of Viacom, on

behalfofCBS at 21, 27; NBC Comments at 6-8, 12, IS-18; Fox Comments at 7-9, J 1-14, 24-27.

8 Networks' Response to NASA's Continued Request, filed jointly by the Networks (Feb. 24, 2005).

9 Joint Request at I.

10 Id at 2.

II 47 C.F.R. § 1.2.

12 See Yale Broadcasting Co. v. FCC, 478 F.2d 594, 602 {D.C. Cir. 1973); Telephone Number Portability, Order,

CC Docket No. 95-116, 19 FCC Red 6800, 6810, 20 (2004).

13 47 u.s.c. § 310(d).

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2, IS-18; Fox Comments at 7-9, J 1-14, 24-27.

8 Networks' Response to NASA's Continued Request, filed jointly by the Networks (Feb. 24, 2005).

9 Joint Request at I.

10 Id at 2.

II 47 C.F.R. § 1.2.

12 See Yale Broadcasting Co. v. FCC, 478 F.2d 594, 602 {D.C. Cir. 1973); Telephone Number Portability, Order,

CC Docket No. 95-116, 19 FCC Red 6800, 6810, 20 (2004).

13 47 u.s.c. § 310(d).

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B.

Right-to-Reject Rule

7.

To ensure that licensees retain sufficient control over programming to fulfill their

obligation to operate in the public interest, the Commission's right-to-reject rule prohibits a television

broadcast station from entering into "any contract, arrangement, or understanding, express or implied,

with a network organization" that prevents or hinders the station from "[r]ejecting or refusing network

programs which the station reasonably believes to be unsatisfactory or unsuitable or contrary to the public

interest., or from ··cs ]ubstituting a program which, in the station's opinion, is of greater local or national

importance. "

14

8.

We affirm that the following principles relating to the right-to-reject rule identified in the

Joint Request are consistent with the Act and the Commission's rules:

•

Pursuant to Section 73.658(e) of the Commission's Rules, networks and their affiliates are

prohibited from .. having any contract ... which, with respect to programs offered or already

contracted for pursuant to an affiliation contract, prevents or hinders the station from: (I)

Rejecting or refusing network programs which the station reasonably believes to be unsatisfactory

or unsuitable or contrary to the public interest, or (2) Substituting a program which, in the

station's opinion, is of greater local or national importance." This language does not give an

affiliate the unfettered right to preempt network programs, but where a preemption is made

pursuant to one of the two prongs of the right-to-reject rule, the economic consequence

lieves to be unsatisfactory

or unsuitable or contrary to the public interest, or (2) Substituting a program which, in the

station's opinion, is of greater local or national importance." This language does not give an

affiliate the unfettered right to preempt network programs, but where a preemption is made

pursuant to one of the two prongs of the right-to-reject rule, the economic consequence to the

affiliate is irrelevant.

•

Consistent with the Commission's right-to-reject rule, affiliation agreements should not include

provisions that limit right-to-reject preemptions for .. greater local or national importance" to

breaking news events or any other specific type of programming. Affiliation agreements should

not include provisions that prevent affiliates from rejecting a program as "unsatisfactory or

unsuitable or contrary to the public interest" because they have carried a similar network program

in the past. Affiliation agreements should not include provisions that impose monetary or non-

monetary penalties on affiliates based on preemptions protected by the right-to-reject rule.

Affiliation agreements should not include provisions that subject right-to-reject preemptions to, or

count them against, contractual preemption limits (or ''baskets") (though baskets are perfectly

appropriate for preemptions not protected by the right-to-reject rule).

C. Option-Time Rule

9.

The Commission's option-time rule proscribes any clause in an affiliation agreement that

"prevents or hinders the station from scheduling programs before the network agrees to utilize the time

during which such programs are scheduled, or which requires the station to clear time already scheduled

when the network organization seeks to utilize the time."1' In its Petition, NASA argued that certain

contract provisions, with respect to both analog and digital broadcasting, violated the option-time rule by

allowing networks to reserve an option to use an affiliate's broadcast time without committing to supply

programming for the

r which requires the station to clear time already scheduled

when the network organization seeks to utilize the time."1' In its Petition, NASA argued that certain

contract provisions, with respect to both analog and digital broadcasting, violated the option-time rule by

allowing networks to reserve an option to use an affiliate's broadcast time without committing to supply

programming for the optioned time. 16 To clarify the reciprocal obligations of networks and affiliates

under the Commission's option-time rule, we affinn that the following principles set forth in the Joint

Request are consistent with the Act and our rules:

14 47 C.F.R. § 73.658(e).

IS 47 C.F.R. § 73.658(d).

16 Petition at 12, 17.

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•

Consistent with the option-time rule, affiliation agreements should not include provisions that

result in the optioning of the station's time to the network organization or that have the same

restraining effect as time optioning. Network affiliation agreements may not, under the

Commission's option-time rule, obligate stations to carry a network's programming or other

content during certain time periods without reciprocally obligating the network to provide the

content for those time periods. Similarly, network affiliation agreements may not require affiliates

to carry, at some unspecified future date, unspecified digital content that the network may (or

may not) choose to offer.

IV.

ORDERING CLAUSES.

10.

Accordingly, IT IS ORDERED that the Network Affiliated Stations Alliance's Motion

for Declaratory Ruling filed June 22, 2001 IS GRANTED IN PART as discussed above.

11.

IT IS FURTHER ORDERED that the Joint Request IS GRANTED and that this

proceeding IS TERMINATED.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

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