Rule2024-02577
2018 Quadrennial Regulatory Review-Review of the Commission's Broadcast Ownership Rules
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
February 15, 2024
Effective
March 18, 2024
Issuing agencies
Federal Communications Commission
Abstract
In this document, the Federal Communications Commission (Commission) retains the broadcast ownership rules with minor modifications in compliance with the Telecommunications Act of 1996 which requires the Commission to review its broadcast ownership rules quadrennially to determine whether they are necessary in the public interest as a result of competition. Specifically, the Commission retains the Dual Network Rule, modifies the Local Radio Ownership Rule to make permanent the interim contour-overlap methodology long used to determine ownership limits in areas outside the boundaries of defined Nielsen Audio Metro markets and in Puerto Rico, and modifies the Local Television Ownership Rule to reflect changes that have occurred in the television marketplace and current industry practices.
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[Federal Register Volume 89, Number 32 (Thursday, February 15, 2024)]
[Rules and Regulations]
[Pages 12196-12229]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-02577]
[[Page 12195]]
Vol. 89
Thursday,
No. 32
February 15, 2024
Part VI
Federal Communications Commission
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47 CFR Part 73
2018 Quadrennial Regulatory Review--Review of the Commission's
Broadcast Ownership Rules; Final Rule
Federal Register / Vol. 89, No. 32 / Thursday, February 15, 2024 /
Rules and Regulations
[[Page 12196]]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 73
[MB Docket No. 18-349; FCC 23-117; FR ID 200880]
2018 Quadrennial Regulatory Review--Review of the Commission's
Broadcast Ownership Rules
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In this document, the Federal Communications Commission
(Commission) retains the broadcast ownership rules with minor
modifications in compliance with the Telecommunications Act of 1996
which requires the Commission to review its broadcast ownership rules
quadrennially to determine whether they are necessary in the public
interest as a result of competition. Specifically, the Commission
retains the Dual Network Rule, modifies the Local Radio Ownership Rule
to make permanent the interim contour-overlap methodology long used to
determine ownership limits in areas outside the boundaries of defined
Nielsen Audio Metro markets and in Puerto Rico, and modifies the Local
Television Ownership Rule to reflect changes that have occurred in the
television marketplace and current industry practices.
DATES: Effective March 18, 2024, except for changes to Commission Forms
required as the result of the rule amendments adopted herein which are
delayed indefinitely. The Commission will publish a document in the
Federal Register announcing the effective date for changes to the
Commission Forms.
FOR FURTHER INFORMATION CONTACT: Ty Bream, <a href="/cdn-cgi/l/email-protection#33674a1d714156525e735550501d545c45"><span class="__cf_email__" data-cfemail="e3b79acda19186828ea3858080cd848c95">[email protected]</span></a>, of the
Industry Analysis Division, Media Bureau, (202) 418-0644.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order, FCC 23-117, adopted on December 22, 2023, and released on
December 26, 2023. The full text of this document is available at
<a href="https://docs.fcc.gov/public/attachments/FCC-23-117A1.pdf">https://docs.fcc.gov/public/attachments/FCC-23-117A1.pdf</a> and via
electronically via the search function on the Commission's Electronic
Document Management System (EDOCS) web page at <a href="https://www.fcc.gov/edocs">https://www.fcc.gov/edocs</a>. Documents will be available electronically in ASCII, Microsoft
Word, and/or Adobe Acrobat. Alternative formats are available for
people with disabilities (Braille, large print, electronic files, audio
format, etc.) and reasonable accommodations (accessible format
documents, sign language interpreters, CART, etc.) may be requested by
sending an email to <a href="/cdn-cgi/l/email-protection#a7c1c4c4929793e7c1c4c489c0c8d1"><span class="__cf_email__" data-cfemail="40262323757074002623236e272f36">[email protected]</span></a> or calling the Commission's Consumer
and Governmental Affairs Bureau at (202) 418-0530 (voice), 1-844-4-FCC-
ASL (1-844-432-2275 (videophone).
Synopsis
I. Introduction
1. With this Report and Order (Order), we bring to a close the 2018
Quadrennial Review proceeding. In this Order, we retain the existing
media ownership rules and adopt minor modifications that better tailor
them to the current media marketplace. The record of this proceeding
demonstrates that while the media industry has experienced both
unforeseen challenges and substantial changes since the last
quadrennial review, broadcasters retain a uniquely important role
serving the American public in their local communities. The COVID-19
pandemic has underscored the importance of readily available and easily
accessible news and information at the local community level, for which
broadcast outlets remain a critical source. Despite the proliferation
of new forms and sources of programming, broadcast television and radio
remain essential to achieving the Commission's goals of competition,
localism, and viewpoint diversity.
2. Based on our careful review of the record, we find that our
existing rules, with some minor modifications, remain necessary in the
public interest. Specifically, we retain the Dual Network Rule and the
Local Radio Ownership Rule, the latter of which we modify only to make
permanent the interim contour-overlap methodology long used to
determine ownership limits in areas outside the boundaries of defined
Nielsen Audio Metro markets and in Puerto Rico. We likewise retain the
Local Television Ownership Rule with modest adjustments to reflect
changes that have occurred in the television marketplace. The existing
Local Television Ownership Rule ensures competition among local
broadcasters while allowing for flexibility should the circumstances of
local markets justify it. Accordingly, today we update the methodology
for determining station ranking within a market to better reflect
current industry practices, and we expand the existing prohibition on
use of affiliation to circumvent the restriction on acquiring a second
top-four ranked station in a market. We find that the modifications
adopted today will enable the Commission to promote competition,
localism, and viewpoint diversity more effectively going forward.
II. Background
3. Consistent with the statutory requirement directing the
Commission to review its media ownership every four years, the
Commission initiated this Quadrennial Review on December 12, 2018, by
adopting a Notice of Proposed Rulemaking (NPRM), 84 FR 6741 (Feb. 28,
2019). In the NPRM, the Commission sought comment on whether the three
media ownership rules subject to this review--the Local Radio Ownership
Rule, the Local Television Ownership Rule, and the Dual Network Rule--
remain necessary in the public interest in their current forms or
whether the rules should be modified or eliminated.
4. At the time the NPRM was released, litigation was still pending
as a result of the Report and Order that concluded the 2010 and 2014
Quadrennial Reviews (2010/2014 Quadrennial Review Order), 81 FR 76220
(Nov. 1, 2016), and a subsequent Order on Reconsideration (2010/2014
Quadrennial Review Order on Reconsideration), 83 FR 733 (Jan. 8, 2018).
In the 2010/2014 Quadrennial Review Order, the Commission resolved its
2010 and 2014 proceedings and kept five structural ownership rules
largely intact: the Local Television Ownership Rule, the Local Radio
Ownership Rule, the Newspaper/Broadcast Cross-Ownership Rule, the
Radio/Television Cross-Ownership Rule, and the Dual Network Rule. In
addition, the 2010/2014 Quadrennial Review Order reinstated the
Commission's previous revenue-based eligible entity standard as a means
to promote broadcast ownership by small businesses and new entrants.
Under this standard an ``eligible entity'' is any entity that qualifies
as a small business under revenue-based standards established by the
Small Business Administration. In turn, the Commission's rules afford
such qualified eligible entities additional flexibility, for example,
by extending the time required to construct a broadcast facility or
raising the threshold at which ownership strictures are triggered.
Several parties filed Petitions for Reconsideration of the 2010/2014
Quadrennial Review while others sought judicial review in the D.C.
Circuit Court of Appeals and the Third Circuit Court of Appeals.
5. On November 16, 2017, the Commission responded to the Petitions
for Reconsideration and adopted an 2010/2014 Quadrennial Review Order
on Reconsideration, which, among other things, reversed certain
elements of the
[[Page 12197]]
2010/2014 Quadrennial Review Order, most notably by repealing the
Newspaper/Broadcast Cross-Ownership Rule and the Radio/Television
Cross-Ownership Rule and revising the Local Television Ownership Rule.
Specifically, the Commission revised the Local Television Ownership
Rule by eliminating the prior Eight-Voices Test and adopting a case-by-
case review process for proposed transactions involving new
combinations of top-four rated stations in a local market. Though it
declined to revise the market definition relied on in the Local Radio
Ownership Rule, the Commission adopted a presumption for certain
transactions involving embedded markets. Embedded markets are smaller
markets that are located within the boundaries of a larger Nielsen
Audio Metro market. The Commission also eliminated the Television Joint
Sales Agreement Attribution Rule readopted in the 2010/2014 Quadrennial
Review Order, while retaining the Shared Services Agreement disclosure
requirements adopted therein. A joint sales agreement (JSA) is an
agreement that authorizes one station (the broker or the brokering
station) to sell some or all of the advertising time on another station
(the brokered station). Further, the Commission adopted an Incubator
Program and sought comment on how to structure and implement the
program.
6. On August 2, 2018, after notice and comment, including
consultation with the Commission's Advisory Committee on Diversity and
Digital Empowerment (ACDDE), the Commission adopted the Incubator
Order, which established an incubator program for radio broadcasters
designed to increase diversity by addressing the barriers to new and
diverse station ownership, in particular lack of access to capital and
operational expertise. The Incubator Order provided a structure whereby
established AM and FM broadcasters could offer financial, technical,
and operational assistance to new and diverse entrants. In return for
successful incubation, established broadcasters could receive a limited
waiver of the Local Radio Ownership Rule, allowing them to acquire
another station in a market that would otherwise be prohibited by the
Local Radio Ownership Rule, provided the market is ``comparable'' to
the market in which the broadcaster successfully incubates another
station. The Commission considered a market to be ``comparable'' to the
market where the incubation relationship occurred ``if, at the time the
incubating entity seeks to use the reward waiver, the chosen market and
the incubated market fall within the same market size tier under our
Local Radio Ownership Rule and the number of independent owners of
full-service, commercial and noncommercial radio stations in the chosen
market is no fewer than the number of such owners that were in the
incubation market at the time the parties submitted their incubation
proposal to the Commission.''
7. Several parties sought review of the 2010/2014 Quadrennial
Review Order on Reconsideration in the D.C. Circuit and Third Circuit
Court of Appeals. These petitions were consolidated before the Third
Circuit Court of Appeals with the previously filed reviews of the 2010/
2014 Quadrennial Review Order. On September 23, 2019, the Third Circuit
vacated and remanded the bulk of the Commission's actions in the 2010/
2014 Quadrennial Review Order on Reconsideration, opining that the
Commission had failed to consider adequately how the rule changes would
impact female and minority ownership. On December 20, 2019, the Media
Bureau issued an Order reinstating the rules as set forth in the 2010/
2014 Quadrennial Review Order.
8. In the wake of the Third Circuit's decision, the Commission and
broadcast industry petitioners filed separate Petitions for Writ of
Certiorari before the Supreme Court, each asking the Supreme Court to
review and overturn the Third Circuit's decision on different grounds.
On October 2, 2020, the Supreme Court granted the petitions for a writ
of certiorari and consolidated the cases, ultimately hearing oral
argument on January 19, 2021. On April 1, 2021, the Supreme Court, in a
unanimous opinion, upheld the rules as adopted and eliminated in the
Commission's 2010/2014 Quadrennial Review Order on Reconsideration. The
Supreme Court reaffirmed the Commission's ``broad authority to regulate
broadcast media in the public interest'' and stated that under the
Administrative Procedure Act's arbitrary and capricious standard, a
court may not substitute its own policy judgment for that of the agency
so long as the action is reasonable and reasonably explained. In this
instance, the Supreme Court found that the Commission appropriately
analyzed the evidence and data it had before it, and came to a
reasonable conclusion that the rules no longer served the public
interest. Finally, the Court noted that it did not reach, and therefore
left undisturbed, issues regarding whether section 202(h) authorizes or
requires the Commission to consider, or prohibits the Commission from
considering, minority and female ownership when it conducts its
quadrennial reviews.
9. Accordingly, the Supreme Court upheld the Commission's decision
to eliminate the Newspaper/Broadcast Cross-Ownership and Radio/
Television Cross-Ownership Rules and revise the Local Television
Ownership Rule. It also upheld the Commission's decision to eliminate
the Television Joint Sales Agreement Attribution Rule while retaining
the Shared Services Agreement disclosure requirements. The Court
likewise upheld the Commission's decisions on the ``eligible entity''
definition and the creation of a diversity incubator program.
10. On June 4, 2021, the Media Bureau adopted an order, 86 FR 34627
(June 30, 2021), reinstating the 2010/2014 Quadrennial Review Order on
Reconsideration, the Incubator Order, as well as the revenue-based
eligible entity definition from the 2010/2014 Quadrennial Review Order.
Moreover, cognizant of how much time had passed since the original
comment period closed, the Bureau released a public notice, 86 FR 35089
(July 1, 2021), seeking to refresh the record in the 2018 Quadrennial
Review proceeding and received extensive comment. The Bureau asked
commenters to review and comment on any materials that had been filed
in the proceeding since the original comment period closed. The Media
Bureau also sought any new and relevant information, including new
empirical and statistical evidence, proposals, and detailed analysis.
Additionally, the Bureau sought comment on how the media marketplace
had evolved since early 2019 and whether new technological innovations
had spurred noticeable trends or changed industry practices, as well as
how any trends had impacted how consumers obtain local and national
news and information.
III. Standard of Review
11. We reaffirm in this proceeding the long-standing framework
under section 202(h) of the Telecommunications Act of 1996, pursuant to
which we examine the rules subject to the Quadrennial Review to
determine if they remain necessary in service of our three traditional
policy goals--competition, localism, and viewpoint diversity. We find
that the language of the statute, judicial precedent, and the record in
this proceeding support retaining our traditional multi-factor
approach, and we reject suggestions that we re-interpret the statute as
requiring solely a competition-centric review. In addition, consistent
with past Commission determinations, we find
[[Page 12198]]
that section 202(h) grants us discretion to make rules more or less
stringent to ensure they serve the public interest. We also conclude
that under this approach, and consistent with past reviews, we will
consider whether our existing rules are consistent with minority and
female ownership and to evaluate potential harms, if any, to minority
and female ownership that would result from any changes we make
thereto.
12. As stated above, the media ownership rules subject to this
Quadrennial Review are the Local Radio Ownership Rule, the Local
Television Ownership Rule, and the Dual Network Rule. These rules are
found, respectively, at 47 CFR 73.3555(a), (b), and 47 CFR 73.658(g).
Section 202(h) of the Telecommunications Act of 1996 requires the
Commission to review these rules every four years to determine whether
they ``are necessary in the public interest as the result of
competition'' and to ``repeal or modify any regulation [the Commission]
determines to be no longer in the public interest.'' Consistent with
the guidance of the Third Circuit, the Commission has previously
considered the language ``necessary in the public interest'' to be a ``
`plain public interest' standard under which `necessary' means
`convenient,' `useful,' or `helpful,' not `essential' or
`indispensable.' '' Furthermore, the Commission has applied the
principle that there is no ``presumption in favor of repealing or
modifying the ownership rules,'' but rather, that the Commission has
the discretion ``to make [the rules] more or less stringent.''
Accordingly, the Commission's review under section 202(h) focuses on
determining whether there is a reasoned basis for retaining, repealing,
or modifying each rule consistent with our long-standing public
interest goals of competition, localism, and viewpoint diversity.
13. Parties presented arguments related to the proper
interpretation of section 202(h) to the Supreme Court in FCC v.
Prometheus. Subsequent to the Supreme Court's decision, in the 2021
Update Public Notice, the Media Bureau sought comment on various
issues, including whether there were any legal factors that the
Commission should consider as part of its 2018 Quadrennial Review. In
response, several commenters opine regarding how the Commission should
interpret section 202(h) going forward in the wake of FCC v.
Prometheus, as well as their views regarding the impact of the Supreme
Court's decision on the Commission's consideration of minority and
female ownership in this proceeding.
14. As we have many times in the past, and consistent with
Congress's directive in section 202(h), we review the rules that are
subject to the Quadrennial Review to determine whether they are
necessary in the public interest as the result of competition and with
the express statutory purpose of repealing or modifying any rule that
is no longer in the public interest. In conducting that review, our
determination as to whether the rules remain necessary in the public
interest focuses primarily on our longstanding policy goals of
competition, localism, and viewpoint diversity. In addition to those
core policy goals, the Commission has also considered whether its rules
are consistent with, and the effect, if any, changes to its rules would
have on, minority and female ownership of broadcast stations, and we do
so as well.
15. As noted above, the Supreme Court did not consider the Third
Circuit's prior conclusions regarding the interpretation of section
202(h)--in fact, the Supreme Court explicitly declined to reach such
issues. Therefore, as an initial matter, the Third Circuit's guidance,
as well as the Commission's application of that guidance in past
quadrennial reviews, continues to inform our analysis. Consistent with
that precedent, and as discussed in more detail below, we reject calls
to depart from precedent or to reinterpret section 202(h) in a manner
that would abandon our traditional multi-factor framework in favor of
an approach focused solely on competition or that would permit only the
relaxation or elimination of the rules.
16. First, consistent with the Third Circuit's guidance in
Prometheus I and Commission precedent, we continue to find that
``necessary in the public interest'' is a `` `plain public interest'
standard under which `necessary' means `convenient,' `useful,' or
`helpful,' not `essential' or `indispensable.' '' The Commission has
applied this interpretation repeatedly in its previous quadrennial
reviews, and we continue to find that this understanding of ``necessary
in the public interest'' is the most reasonable and logical
interpretation.
17. Second, we decline NAB's invitation to re-interpret section
202(h) in order to find a presumption in favor of deregulation, and we
disagree with the assertion that section 202(h) only allows for the
repeal or relaxation of a rule. Rather, as we have concluded in prior
quadrennial reviews and the courts have upheld, we find that the
Commission may ``make [the rules] more or less stringent'' after
reviewing and considering the state of competition in the media
marketplace. As the Third Circuit held in Prometheus I, section 202(h)
does not carry a presumption in favor of deregulation, nor is it a
``one-way ratchet.'' We continue to find that the iterative process
established by section 202(h) compels us to ``repeal or modify any
regulation [the Commission] determines to be no longer in the public
interest.'' Based on the plain language of this directive, and the use
of the word ``modify,'' we reiterate that the Commission is not merely
relegated to repealing or relaxing a rule that, over time, has become
unnecessary or obsolete. Instead, where an existing rule as written is
``no longer in the public interest,'' the Commission can modify that
rule (for instance, by making it more or less restrictive, changing the
structure of the rule, or closing loopholes) to ensure that the rule
better serves the public interest. Contrary to NAB's suggestion, the
logic of a deregulatory presumption undercuts the references in section
202(h), in both its text and legislative history, to evaluating the
rules in the public interest. We further believe that it would be
counter to the public interest to deregulate by either repeal,
relaxation, or inaction (e.g., by ignoring competitive developments
that run counter to the public interest) to the point that a few
entities may dominate a media market. There is no indication that it
was Congress's intention when it passed the 1996 Telecommunications Act
to adopt a presumption in favor of deregulation, or to alter the then
established principle under the Administrative Procedure Act (APA) that
if there is any presumption, it is not against regulation but against
changes in current policy that are not justified by the rulemaking
record.
18. Third, we agree with commenters who assert that FCC v.
Prometheus reaffirmed our broad statutory authority to regulate
broadcast stations in the public interest. As the Supreme Court noted,
agencies are entitled to deference assuming that they act in a ``zone
of reasonableness'' and have ``reasonably considered the relevant
issues and reasonably explained the decision.'' The Supreme Court held
further in City of Arlington, Tex. v. FCC, that any statutory
ambiguities should be ``resolved, first and foremost, by the agency''
so long as the agency stays ``within the bounds of reasonable
interpretation.'' Accordingly, we conclude that the Commission has
considerable latitude in our interpretation and application of section
202(h), and the Supreme Court's recent decision in FCC v. Prometheus
only
[[Page 12199]]
affirms this conclusion by underscoring the Commission's broad
discretion.
19. Accordingly, we reaffirm that our assessment of whether the
structural ownership rules remain in the public interest continues to
focus on the Commission's longstanding policy goals of competition,
localism, and viewpoint diversity. The Commission has long held that
the public interest is furthered by promoting the principles of
competition, localism, and viewpoint diversity to ensure that a small
number of entities do not dominate a particular media market, a holding
we reaffirm in this current Quadrennial Review. Indeed, as early as the
1998 Biennial Review (the first review required by section 202(h)), the
Commission rejected calls by commenters to consider only competition in
the context of section 202(h) reviews. Looking at the statutory
language of section 202(h), the Commission noted at the time that the
phrases ``necessary in the public interest'' and ``as the result of
competition'' could not be separated and, read together, the language
``appears to focus on whether the public interest basis for the rule
has changed as a result of competition, and does not appear to be
intended to limit the factors we should consider.'' Further, the
Commission noted that, in the legislative history of the 1996
Telecommunications Act, Congress expressed diversity concerns regarding
the media marketplace. For example, the legislative history highlights
the national need to promote ``diversity of media voices, vigorous
economic competition, technological advancement, and promotion of the
public interest, convenience, and necessity'' and twice pairs diversity
with competition as factors for the Commission's consideration in its
decisions regarding the marketplace. The Senate Conference Report
states that ``in the Commission's proceeding to review its television
ownership rules generally, the Commission is considering whether
generally to allow such local cross ownerships, including combinations
of a television station and more than one radio station in the same
service. The conferees expect that the Commission's future
implementation of its current radio-television waiver policy, as well
as any changes to its rules it may adopt in its pending review, will
take into account the increased competition and the need for diversity
in today's radio marketplace that is the rationale for subsection
(d).'' It also states that ``the Commission may also permit VHF/VHF
combinations where it determines that doing so will not harm
competition and diversity.''
20. In light of our continued adherence to this approach, and based
on the record, our discretion, and the text of section 202(h), we
reject calls to revise the Commission's longstanding approach in favor
of reading the statute narrowly to focus on, or elevate, either the
reference to the ``public interest'' or the reference to
``competition'' individually and in the absence of the other. Instead,
we agree with commenters who suggest that we embrace a `` `plain public
interest' standard'' that does not place emphasis on one public
interest goal over another and continue to read the phrase ``necessary
in the public interest as the result of competition'' in its entirety
and in a manner that we find logically marries the two references. We
continue to find that such an interpretation appropriately recognizes
the importance and meaning of the phrase ``necessary in the public
interest,'' which Congress affirmatively included and has long been
read to encompass several important public policy goals, alongside the
distinct term ``competition,'' which is consistent with the larger
thematic context of the 1996 Act. The broader scope of the public
interest inquiry is also reflected in the additional language in
section 202(h), which defines the inquiry as whether these rules are
``no longer in the public interest,'' a term not limited to a focus on
effects on competition. Thus, throughout Quadrennial Reviews over the
years, the Commission has modified and eliminated rules that it deemed
to be ``no longer in the public interest.'' Those inquiries have not
been confined to effects on competition, but have included analyses of
viewpoint diversity and localism as well. At some point, then,
competition might reach a point where, as the result of such
competition, certain of our rules would be ``no longer in the public
interest'' to achieve the Commission's stated public interest goals.
Quadrennial review is the forum in which the Commission takes account
of that progress in light of all three of these goals.
21. Accordingly, we disagree with NAB's interpretation that
Congress intended to elevate competition as the ``preeminent factor''
to guide the Commission's review under section 202(h), and we reject
the attempt to revisit this long-resolved issue. We similarly disagree
with NAB's contention that the tenets of statutory interpretation,
including the reference to competition in section 202(h) (rather than
any other specific public interest factors), support its interpretation
that the Commission's section 202(h) review should consider competition
as the primary factor in evaluating the rules. As noted above, the text
of section 202(h) requires the Commission to determine whether our
rules remain ``necessary in the public interest as the result of
competition.'' In the past, the Commission has consistently interpreted
the reference in section 202(h) to the ``public interest'' as
incorporating our traditional policy objectives under that standard,
namely, competition, localism, and viewpoint diversity. Congress
envisioned a future where changes in the amount and type of competition
could one day render some or all of our structural media ownership
rules unnecessary. The crux of the phrase, and indeed of section
202(h), however, is whether these competitive market forces are
satisfying the public interest objectives that our rules are intended
to serve, such that our rules are ``no longer necessary . . . as the
result of competition.'' Ultimately, we cannot ignore the fact that
Congress included the words ``public interest'' in section 202(h), and
those words need to be treated as prominently and with equal reverence
as the mention of competition. For instance, had Congress wished to do
so, it could have omitted the phrase ``public interest'' and simply
directed the Commission to review its rules to determine whether ``any
such rules are necessary as the result of competition.'' Instead,
Congress elected to include the concept of the ``public interest''
together with that of competition, knowing full well that service to
public interest, convenience, and necessity is the foundation of the
Commission's rules. And as noted above, it underscored that more
general reference to the public interest analysis in describing the
inquiry as whether rules are ``no longer in the public interest.'' We
conclude that there was a reason Congress used these references to the
public interest, and that it is reasonable to interpret these
references in light of all three of the well-established criteria for
that public interest analysis. Similarly, NAB suggests that, had
Congress chosen to, it could have omitted the phrase ``as the result of
competition'' and simply instructed the Commission to determine whether
a rule remains ``necessary in the public interest,'' thereby making
competition co-equal with other public interest goals. NAB asserts that
Congress's decision to do otherwise and to specifically mention
competition was intended to single out one particular element of the
public interest analysis. Contrary to NAB's position, however, it
[[Page 12200]]
does not follow that Congress's inclusion of the phrase ``as the result
of competition'' indicates Congress intended to elevate competition
among other traditional public interest goals. Rather, as we have
explained, Congress's inclusion of the phrase ``as the result of
competition'' reflects an ongoing statutory directive to the Commission
to account for the results of an evolving competitive landscape in
evaluating the continued necessity of its structural ownership rules to
fulfill its public interest goals. This seems perfectly logical given
the changes brought about, and envisioned, by the 1996 Act. As we
discuss in more detail below and with respect to our individual rules,
this involves evaluating whether the media marketplace has delivered--
and would continue delivering absent our rules--each of the public
interest benefits of competition, localism, and viewpoint diversity
that our rules seek to further. If not--that is, if the competitive
marketplace would not deliver these benefits in the absence of our
rules--we conclude that our rules still remain ``necessary in the
public interest,'' and we cannot conclude that such rules are ``no
longer in the public interest,'' even after accounting for the results
of competition to date. Contrary to NAB's concerns, then, we do not
interpret section 202(h) in a way that would ignore or read the word
``competition'' out of the statute; instead, we interpret it in a way
that gives meaning to that word in context. By contrast, we find that
NAB's interpretation would read out the reference to the ``public
interest,'' which even at the time of the 1996 Act, was a longstanding
and well-known term in the context of the Commission's media
regulation. Over the years, the Commission has further fleshed out that
term in the context of the Quadrennial Review to encompass three
tangible public interest goals--competition, localism, and viewpoint
diversity--which have been further interpreted, articulated, and
defined with substantial detail through the Commission's Quadrennial
Review notices and orders. As such, contrary to NAB's arguments, we
find that there is no non-delegation problem with our interpretation,
because we are not interpreting our public interest mandate to be
unmoored from any defined or articulable policy goal. Instead, we have
articulated three clear and longstanding policy goals--competition,
localism, and viewpoint diversity--that have long been aligned with the
public interest standard applicable to the media marketplace. We find
that this interpretation is consistent with how the Commission has
applied the standard over time and best reconciles the two phrases
within it--``necessary in the public interest'' and ``as the result of
competition.'' Even if, for argument's sake, one accepts NAB's
contention that section 202(h) is focused first and foremost on
competition, it raises a subsequent question about what the threshold
is for how much competition is necessary to justify elimination of a
rule. Our consistent interpretation essentially speaks to that
subsequent question, in that it asks if there is competition sufficient
to produce the public interest benefits the Commission has
traditionally looked to the rules to foster. Moreover, as we discuss
below with regard to particular rules, we find that even under a
competition-only standard, loosening our rules and allowing additional
consolidation (or, under some proposals, unlimited consolidation) would
cause substantial harm to the public interest. Moreover, despite NAB's
interest in relitigating this issue, nothing in the Supreme Court's
decision in FCC v. Prometheus warrants revisiting the Commission's
established interpretation of section 202(h).
22. To be clear, competition has always been, and remains, a key
consideration in the Commission's Quadrennial Review process, but it is
not the only consideration encompassed by the public interest standard
or by section 202(h). As discussed below, we remain committed to
examining the media marketplace, acknowledging new and additional forms
of competition where they exist, and evaluating whether market forces--
as they have evolved--satisfy public interest objectives, such that our
rules as currently devised are no longer ``necessary in the public
interest as the result of competition.'' We note that NAB recommends
the Commission review each ownership rule based upon the public
interest rationale at the time it was adopted to see if competition had
rendered it no longer necessary, and, according to NAB, once a rule is
deemed to no longer serve a particular goal, the Commission should no
longer test the rule's relationship to that goal. We do not think
section 202(h) demands such a narrow approach--i.e., its quadrennial
nature and the statutory reference to the ``public interest'' suggest
an intent to be flexible in accounting for new, different, or changed
rationales over time--and as NAB notes, historically, the rationales
for certain rules have evolved over time as part of the quadrennial
review process.
23. Finally, even as we reaffirm here that our traditional policy
goals of competition, localism, and viewpoint diversity continue to
serve as the lodestars to guide us in our Quadrennial Review
proceeding, we note that the Commission has traditionally also
considered other aspects of the public interest, including the impact
of its ownership rules on minorities and women. In particular, and as
the Supreme Court noted in FCC v. Prometheus, ``[t]he FCC has also said
that, as part of its public interest analysis under section 202(h), it
would assess the effects of the ownership rules on minority and female
ownership.'' While NAB challenges the notion of considering the impact
of the media ownership rules on minority and female ownership in our
quadrennial reviews, arguing that the Supreme Court did not say that
the Commission has to consider minority and female ownership as part of
the Quadrennial Review proceeding, we continue to find that our public
interest standard is broad and that the impact of our rules on
broadcast ownership by minorities and women remains an important part
of our multi-factor public interest inquiry. Indeed, the Supreme Court
did not say we have to consider any particular policy goal. In fact, as
NAB notes and discussed above, the Supreme Court did not reach the
question of section 202(h) interpretation at all. Under this precedent,
we are not bound to consider the three traditional policy goals of
competition, localism, and viewpoint diversity. Moreover, we do not
have to consider minority and female ownership as an important part of
our larger public interest goal of diversity (which, most notably and
historically, includes viewpoint diversity). Nonetheless, the Supreme
Court did not alter the Commission's discretion to consider these
factors, in the manner we choose, and we elect in this proceeding, as
the Commission has previously, to do so. Accordingly, as we have in the
past, we continue to consider whether our current rules are consistent
with (i.e., do not disserve) opportunities for minority and female
ownership and whether any proposed changes to those rules would be
likely to result in harm to minority and female ownership.
24. In this way, consideration of the impact of our rules on
minority and female ownership is related to, and consistent with, the
broader aim of our structural ownership rules in ensuring the diffuse
ownership of broadcast stations. As the Commission has noted in the
past, a general policy goal of
[[Page 12201]]
diversity may encompass different forms of diversity. One central goal
of our structural ownership rules, in particular, has been, and
remains, promoting a diversity of viewpoints. Our rules do so by
limiting the aggregation of stations in any single entity's hands and
thereby fostering a multiplicity of speakers. The Commission, in
general, also has recognized the disproportionately low number of
stations owned by minorities and women and has embraced the objective
of better understanding and addressing this situation. By limiting the
aggregation of stations among a few owners, we continue to conclude
that our existing ownership limits preserve ownership opportunities for
many different types of owners, including minority and female owners.
25. As has always been the case in the Commission's application of
section 202(h), the public interest analysis required by the statute
has been conducted as a multi-factor review in which no one factor is
controlling. To the extent there are conflicts between competing goals
(e.g., a rule or rule change would promote one factor while harming
another), the Commission weighs the effects and determines whether, on
balance, the rule serves the public interest. Consideration of minority
and female ownership is no exception to that approach.
26. We conclude that the record in the current proceeding does not
establish concrete, affirmative steps the Commission can or should take
with respect to our structural ownership rules to address concerns
regarding minority and female ownership, but we remain committed to
examining barriers to minority and female ownership of broadcast
stations and expect that the upcoming 2022 Quadrennial Review
proceeding will provide an opportunity to examine more specifically
what can or should be done within the context of our structural
ownership rules. In addition, we note that the Commission has taken
several actions beyond its quadrennial reviews, such as improving its
collection and analysis of broadcast station ownership information on
FCC Form 323 and 323-E, and chartering the Communications Equity and
Diversity Council (CEDC), that are intended to provide the Commission
with more information about the state of minority and female broadcast
ownership and to promote the important goal of increasing such
ownership. Moreover, we remain committed, as Free Press suggests, to
analyzing how changes to broadcast ownership rules may impact future
opportunities for women and minorities. Indeed, the Commission's Office
of Economics and Analytics recently conducted an analysis and released
a white paper on minority ownership of broadcast television stations
that will continue to inform our understanding of the television market
and the diversity of ownership. And, as discussed below with respect to
our rules, we find in this proceeding that our existing rules remain
consistent with the objective of improving ownership diversity,
including minority and female ownership, and would cause no harm.
IV. Media Ownership Rules
A. Local Radio Ownership Rule
27. As explained below, we conclude that the Local Radio Ownership
Rule--which limits both the total number of radio stations an entity
may own within a local market and the number of radio stations within
the market that the entity may own in the same service (AM or FM)--
remains necessary to promote the Commission's public interest goals of
competition, localism, and viewpoint diversity, in accordance with our
foregoing analysis. We therefore retain the current rule. The only
modification we adopt is to make permanent the interim contour-overlap
methodology long used to determine ownership limits in areas outside
the boundaries of defined Nielsen Audio Metro markets and in Puerto
Rico.
28. We decline commenters' requests to modify our presumption
regarding embedded markets adopted in 2017. Likewise, we reject calls
to eliminate or ease the rule's ownership limits in an effort to help
station owners stem the loss of listeners and advertising revenues. We
take seriously the challenging circumstances confronting broadcast
radio in today's media marketplace, but the record does not persuade us
that further consolidation would meaningfully address the problems
radio faces. Rather, additional consolidation within radio markets is
not only likely to decrease competition, viewpoint diversity, and
localism but also is inconsistent with our statutory mandate to
disseminate licenses as widely as possible. Ultimately, we find that
allowing one entity to own more radio stations in a market than
currently permitted would harm competition without achieving the
benefit sought by some of enabling station owners to compete more
effectively with social media companies and national advertising
platforms like Google and Facebook.
29. The Local Radio Ownership Rule allows an entity to own: (1) up
to eight commercial radio stations in radio markets with at least 45
radio stations, no more than five of which may be in the same service
(AM or FM); (2) up to seven commercial radio stations in radio markets
with 30-44 radio stations, no more than four of which may be in the
same service (AM or FM); (3) up to six commercial radio stations in
radio markets with 15-29 radio stations, no more than four of which may
be in the same service (AM or FM); and (4) up to five commercial radio
stations in radio markets with 14 or fewer radio stations, no more than
three of which may be in the same service (AM or FM), provided that the
entity does not own more than 50% of the radio stations in the market
unless the combination comprises not more than one AM and one FM
station. The limitation on the number of stations an entity may own in
a single service, AM or FM, is typically referred to as the subcap
limit. Overlap between two stations in different services is allowed if
neither of those stations overlaps a third station in the same service.
When determining the total number of radio stations within a market,
only full-power commercial and noncommercial radio stations are counted
for purposes of the rule. Radio markets are defined by Nielsen Audio
Metros where applicable, and the contour-overlap methodology is used in
areas outside of defined and rated Nielsen Audio Metro markets. An
exception to this market definition approach is Puerto Rico, where the
contour-overlap methodology applies even though Puerto Rico is a
Nielsen Audio Metro market.
30. In its last quadrennial review, the Commission concluded that
local radio ownership limits promote competition, a public interest
benefit that the Commission found to be a sufficient basis for
retaining the current rule. Additionally, the Commission affirmed its
previous findings that competitive local radio markets help promote
viewpoint diversity and localism, and it deemed the rule consistent
with the Commission's goal of promoting minority and female broadcast
ownership. Accordingly, the Commission retained the rule without
modification, although it provided several clarifications regarding the
rule's implementation. Subsequently, on reconsideration, the Commission
adopted a presumption to use in evaluating transactions involving radio
stations within embedded markets (i.e., smaller markets, as defined by
Nielsen Audio, that are contained within the boundaries of a larger
Nielsen Audio Metro market) where the parent market currently has
multiple embedded markets (i.e., New York, NY and
[[Page 12202]]
Washington, DC). A transaction would qualify for the presumption if the
applicants demonstrated: (1) compliance with the numerical ownership
limits in each embedded market using the Nielsen Audio Metro
methodology, and (2) compliance with the ownership limits in the parent
market using the contour-overlap methodology applicable to undefined
markets in lieu of the Commission's ordinary parent market analysis.
The presumption supports waiving the numerical ownership limits in
existing parent markets where an applicant can demonstrate both
compliance with the numerical ownership limits in the embedded market,
as well as compliance with the ownership limit using the contour
overlap method. The Commission stated that the presumption would apply
pending further consideration of embedded market transactions in this
2018 quadrennial review.
31. The NPRM asked generally whether the current Local Radio
Ownership Rule remains necessary in the public interest to promote
competition, localism, or viewpoint diversity. It also sought comment
on several specific issues regarding the radio rule, including whether
to retain the rule's current market definition, market size tiers,
numerical limits, and AM/FM subcap limits. In particular, the NPRM
sought comment on whether the Commission should make permanent use of
the contour-overlap methodology for areas not within Nielsen Audio
Metro markets. In addition, it asked about the treatment of embedded
markets and the effect of the rule on minority and female ownership.
32. For the reasons discussed below, we find that the Local Radio
Ownership Rule remains necessary in the public interest as the result
of competition. There is no question that the broader media environment
within which broadcast radio operates has changed dramatically since
the radio rule was enacted in 1996. Consumer choice in audio
entertainment has grown with the launch of satellite radio, the
introduction of audio streaming services, and the proliferation of
podcasts. There is no consensus in the record, however, regarding
whether changes to the Local Radio Ownership Rule would enable radio
owners to respond to these developments more effectively, or even, if
so, whether those benefits would outweigh potential harms to
competition, localism, or viewpoint diversity. The commenters were
deeply divided in their responses to almost every issue raised in the
NPRM. As discussed below, after considering the conflicting arguments
in the record, and the split that exists even within the radio
industry, we agree with those commenters asserting that loosening the
rule would harm competition to the detriment of listeners.
33. Market Definition. As in the past, we continue to find that the
relevant market to consider for purposes of the Local Radio Ownership
Rule is the radio listening market. We further find that due to the
unique characteristics of broadcast radio, it would not be appropriate
to include satellite or non-broadcast audio sources, such as internet
streaming services, in that market at this time. Notably, this finding
is consistent with our findings in prior quadrennial reviews, where we
looked at the unique characteristics of broadcast radio and the lack of
substitutability with other audio sources, elements that remain
fundamentally unaltered in spite of larger marketplace changes.
34. Moreover, we find that the nature of the larger advertising
market, in which advertising dollars have always flowed between
different sectors in accordance with advertiser preferences, does not
compel us to revise the way we view broadcast radio's unique place
within the audio landscape or the distinct market within which radio
stations operate. First, we note that the U.S. Department of Justice
(DOJ) consistently has found broadcast radio advertising to constitute
a distinct product market. We recognize that some local businesses may
have shifted increasing shares of their advertising budgets to internet
platforms, such as Facebook and Google, while at the same time buying
fewer radio advertisements. We also note, however, that the broader
reach of radio advertising offers different benefits than the targeted
advertising offered by Facebook and Google, such that at least some
advertisers do not view them as substitutes. In addition, recent data
indicate that broadcast radio dominates listening among ad-supported
audio sources. We find that, within the broader advertising ecosystem,
there still remains a distinct broadcast radio advertising market, such
that our existing rule promotes competition among local radio stations
through competition for advertising dollars, as well as along other
dimensions that directly benefit listeners (e.g., quality, choice of
offerings, innovation, among others). Moreover, for the reasons stated
below, it is primarily as a result of this competition that broadcast
radio stations are spurred continually to look for ways to improve
service to the listening public.
35. Although we acknowledge, as commenters contend, that there is
today a broader audio landscape that includes a variety of audio
options for consumers, many of which did not exist a decade or two ago,
we continue to find that within that broader landscape, free over-the-
air broadcast radio maintains a unique place and that radio stations
compete primarily with other radio stations for listeners. Accordingly,
we reject commenters' claims that we must revise our market definition
to reflect the ``expanding universe of content providers'' and should
include non-broadcast sources of audio content such as Sirius XM/
Pandora, Spotify, YouTube Music, Apple Music, and Amazon Music. As the
Commission previously has found, although the broader marketplace for
the delivery of audio programming includes satellite and online audio
sources, along with traditional broadcast radio, there are significant
differences in the availability, reach, consumer engagement, and cost
of these services, such that they deliver different value propositions
to consumers. Significantly, of the various options available in the
broader audio marketplace, generally speaking, only terrestrial
broadcast radio both is available without a paid subscription and does
not require access to internet service. Not only does this
accessibility make broadcast radio uniquely and widely available, it
also makes it a lifeline for many Americans, especially in times of
local emergencies. In its Fourteenth Broadband Deployment Report, the
Commission determined that despite significant gains in delivering
access to broadband, in 2019, at least 14.46 million Americans, or
about 4% of the population, still lacked access to fixed terrestrial
broadband service at a standard speed of 25/3 Mbps. Additionally, the
Commission found that the adoption of fixed terrestrial broadband in
the 10/1 Mbps speed tier was 67.2% among households in the quartile
with the lowest poverty rate, versus 40.7% among households in the
quartile representing the highest poverty rate. As commenters observe,
radio is a trusted and essential source of public safety information
during emergencies and in times of crises.
36. We also continue to find that the local nature of broadcast
radio makes it unique within the broader audio landscape. In
particular, we note that broadcast radio is alone within the audio
landscape in having an affirmative obligation to serve the needs and
interest of the local community. As
[[Page 12203]]
part of their license obligations, each quarter, radio station
licensees are required to submit a list of programs that treat issues
faced by the local community. Such programs may include local news and
public affairs programming. Moreover, there is evidence that being
local is the defining value proposition that many radio stations see
themselves as providing to consumers. As commenters point out, radio
programming includes offerings with a community focus, such as program
hosts that are known within the locality, music by local bands,
reporting on local sports teams, and sponsorship of neighborhood
festivals, which other audio services do not provide. As the
Commission's 2022 Communications Marketplace Report states, ``promoting
a local on-air personality as the `face' of a station may be an
important way for a station to distinguish or brand itself from other
stations in its market.''
37. In addition, even with the emergence of new audio services and
platforms, radio listenership remains strong and dominant within the
broader audio marketplace in many key respects. Although commenters
warn that the decline of radio listening during the pandemic is not
likely to rebound to pre-pandemic levels, it is premature to determine
whether the pandemic will have long-term effects on local radio. We
find that forecasts of future declines of radio listenership and
revenue are speculative, and therefore unreliable for the purposes of
this review. Certainly, commenters provide some evidence that time
spent listening to broadcast radio has declined, especially among
younger audiences. Nonetheless, in 2018, Edison Research's ``Share of
Ear'' report allocates the share of time spent listening to audio
sources for Americans aged 13 years old and over as follows: 46%
terrestrial broadcast radio, 14% streaming audio, 12% owned music, 11%
YouTube, 7% SiriusXM satellite radio, 5% TV Music channels, 3%
podcasts, and 2% other sources. Similarly, a more recent Share of Ear
report indicated that, in 2021, the total share of time spent listening
to AM/FM radio remained the highest at 38%, and the share of time spent
listening to podcasts had risen to only 5%. Additionally, while the gap
in usage between broadcast and online audio programming has declined
over time, terrestrial broadcast radio remains dominant and the number
of weekly listeners to broadcast radio in the United States remains
relatively stable. Moreover, historically, easy access to AM/FM radio
inside automobiles has been a distinctive characteristic and advantage
of broadcast radio, and in-car radio listening has rebounded as people
return to their cars following the height of the pandemic. By contrast,
some commenters claim that radio's dominance over in-car listening is
fading as Bluetooth and satellite radio capabilities become standard
features in new cars. While there is no question that consumers are
increasingly finding new audio sources to consume while driving,
broadcast radio remains the clear top choice. Inside the home, we
acknowledge there is a decreasing number of radios in households with
the ubiquity of digital devices, like smartphones and smart speakers,
that provide access to an array of audio content. Nonetheless, evidence
further suggests that, even within the evolving marketplace, broadcast
radio stations are embracing these new devices and finding additional
ways to reach listeners.
38. Ultimately, we agree with iHeart that ``competitive pressures
across platforms within the audio ecosystem are not determinative of
what is the relevant market'' for purposes of our Local Radio Ownership
Rule. We reject NAB's suggestion that the relevant competition is for
``the public's attention and time.'' Since its inception, radio has
competed with other types of entertainment for the public's attention
and time. Television, movies, books, newspapers, magazines, concerts,
plays, and all manner of activities present consumers with countless
options for how to spend their time or be entertained or informed.
Today's consumers have a broad selection of audio options that can be
accessed on an increasing number of devices, but that does not mean
competition among local radio stations should be weakened or that
consumers and advertisers consider non-broadcast options to be
appropriate substitutes for local radio.
39. As we have acknowledged, in recent years, the audio landscape
has seen the growth of streaming music services that have amassed
millions of subscribers. Nonetheless, there is evidence that consumers
may be most directly substituting online audio services for what would
once have been purchases of recorded music rather than for live, local,
free broadcast radio, and that consumers still flock to broadcast radio
for elements that other audio sources in the marketplace are not
currently providing. For instance, while advertising dollars may have
started to flow to other sources over time, in filings with the
Securities and Exchange Commission (SEC), iHeart (the largest radio
station owner by revenue, number of stations, and number of markets)
suggests that within the broader audio marketplace, there are distinct
sectors that vie separately for listeners, and in some respects, serve
as complements to one another. Specifically, iHeart states:
Within the audio industry, companies operate in two primary
sectors: [1] The `music collection' sector, which essentially
replaced downloads and CDs and [2] The `companionship sector, [in]
which people regard radio and podcasting personalities as their
trusted friends and companions on whom they rely to provide news on
everything from entertainment, local news, storytelling, information
about new music and artists, weather, traffic and more. We operate
in the second sector and use our large scale and national reach in
broadcast radio to build additional complementary platforms.
As iHeart suggests, in general, broadcast radio continues to serve
a distinct role in the marketplace by providing important
entertainment, information, and ``companionship'' to listeners that
other forms of audio content likely do not. Moreover, by contrast,
online streaming services that offer access to tens of millions of
songs and other audio tracks to listeners on demand are perhaps
situated more directly as substitutes for traditional purchased music
collections.
40. For the reasons stated above, we find that the local radio
listening market remains a distinct market for purposes of our Local
Radio Ownership Rule analysis. We conclude that allowing further
concentration within local radio markets would disserve listeners by
jeopardizing the aspects of radio that make it a unique and appealing
service.
41. Market Size Tiers and Numerical Limits. Based on the record of
this proceeding, we find that the Local Radio Ownership Rule as
currently designed remains necessary in the public interest as the
result of competition, and we reject proposals in the record to modify
its market size tiers or numerical limits at this time. For example,
NAB urges the Commission to repeal the radio rule entirely, or at a
minimum, to loosen restrictions in the top 75 Nielsen Audio Metro
markets to allow a single entity to own or control up to eight
commercial FM stations, with no cap on AM ownership, and, outside of
the top 75 Nielsen markets and in unrated markets, to allow a single
entity to own or control an unlimited number of AM and FM stations. NAB
also proposes that an owner in the top 75 markets be permitted to own
up to two additional FM stations (for a total of 10 FMs) in a market
after successfully participating in the Commission's incubator program.
As discussed below, we find that the
[[Page 12204]]
existing rule continues to serve the public interest, that the record
does not establish that permitting greater consolidation would benefit
either the radio industry or the listening public, and that proposals
to loosen the rule would reduce competition among broadcast radio
stations to the detriment of listeners. For these reasons, we also
reject various other proposals to relax the radio restrictions.
42. We find that the current tiers and limits maintain an
appropriate level of competition in the local radio markets to the
benefit of listeners and the public. Ever since Congress established
these demarcations more than two and a half decades ago, the Commission
consistently ``has found that setting numerical ownership limits based
on market size tiers remains the most effective method for preventing
the acquisition of market power in local radio markets.'' We disagree
with the notion that changes in the broader audio environment require a
restructuring of the rule's market size tiers or numerical limits. Not
only do we find that the current limits promote our policy goals, but,
as discussed below we conclude that allowing further consolidation
would not ensure that local radio stations retain their listeners and
advertisers. In addition, we note that the market tiers that NAB
proposes would be determined by the size of the population in the
Nielsen Audio Metro market. The current rule uses Nielsen markets as a
starting point, but its tiers depend on the number of radio stations in
the Nielsen market, rather than on how many people live in the market.
Because the rule limits the number of stations an entity may own within
a local market, we find that the most consistent and relevant measure
upon which to base the rule's tiers is the total number of stations in
the market, a concept that has been applied as part of the rule for
many years, is well understood, and provides a degree of certainty to
applicants. Under the rule, if there are more total stations in a
market, an entity can own more stations. In effect, this ensures that a
certain number of stations in a market would not be owned by a single
entity. By contrast, NAB's proposal would permit ownership of eight
stations in each of the top 75 markets as ranked by population,
regardless of the total number of stations (or number of stations
available to be owned by other entities) in the market. NAB's proposal
to eliminate all ownership limits in most markets and retain only FM
limits in the largest 75 markets would represent a radical departure
from the existing numerical limits and would allow an increase in
consolidation that would significantly decrease existing competition.
43. Commenters in favor of loosening radio ownership limits suggest
that the broadcast radio industry, in general, is in dire need of
relief and contend that its viability may be at stake if additional
consolidation is not permitted. Other commenters, however, assert that
the survival of the radio industry depends on keeping ownership limits
in place to prevent massive consolidation that could result in a few
national owners buying all or most of the stations in a market and
piping in preset programming from distant headquarters. These
commenters contend that relaxing the rule to ``save'' radio under NAB's
plan would have the opposite effect: destroying what is the very
essence of local radio. We recognize that the record contains evidence
showing that broadcast radio has experienced declines in listening
shares and in advertising revenues in recent years, while streaming
audio has seen growth in both areas. We further realize that broadcast
radio, like other industries, has faced and continues to face
challenges as technologies, market dynamics, and consumer behaviors
evolve. Notwithstanding these challenges, we continue to find, as
compelled by the instruction of section 202(h), that the current
structure of the ownership rule remains necessary to promote the
Commission's public interest goals. Moreover, we note that in any
action that affects licensing, the Commission must be mindful of
Congress' directive to avoid excessive concentration of licenses and to
disseminate licenses widely. Allowing all radio stations in a market to
be licensed to one entity would demand an exceptional justification
given this directive. In FCC v. Prometheus, the Supreme Court
recognized the Commission's longstanding policy of ``ensuring that a
small number of entities do not dominate a particular media market.''
In any event, we remain highly skeptical that permitting additional
consolidation beyond that currently allowed under our rule is warranted
or would address radio's stated woes.
44. For one thing, as we note above, broadcast listenership within
the broader audio landscape remains relatively strong despite declines
in radio's popularity. In addition, broadcast radio revenue--the
lifeblood of the industry--has shown signs of stability over the past
decade. As the Commission found in its most recent Communications
Marketplace Report, ``the primary source of revenue for commercial
terrestrial radio stations is advertising'' and while ``total broadcast
radio revenue dropped to $13.7 billion in 2020,'' revenue then ``rose
to $14.8 billion in 2021, resulting in a net decline of approximately
17% from 2019 to 2021, due largely to the drop in demand for
advertising due to the COVID-19 pandemic.'' In fact, broadcast radio
advertising revenue remained virtually flat from 2010 to 2019, which
obviously is not preferable to steep growth, but also is not indicative
of a prolonged or pronounced decline. Moreover, as broadcast radio
companies expand into other parts of the audio marketplace (streaming,
podcasts, etc.), online revenue for broadcast radio has seen
substantial growth and stands as an ``area of potential growth'' going
forward. Perhaps tellingly, the total number of broadcast radio
stations remained fairly steady, and actually increased slightly,
between 2015 and 2020, suggesting there has not been a massive
shuttering of radio stations due to financial stress.
45. We understand that radio stations depend on advertising
revenues to survive and to provide free, over-the-air programming, as
they have since the inception of broadcasting. However, evidence does
not appear to show that owning more stations necessarily correlates to
being able to attain proportionally more revenue (i.e., the number of
owned stations and the net advertising revenue per station vary
considerably among the top ten largest radio companies by net
advertising revenue). While we recognize that adding more stations to a
radio owner's local holdings may offer some benefit to the owner,
including the ability to reduce costs, it would come at a tradeoff to
the public interest, and we agree, moreover, with those commenters who
contend that it would not reverse the overall downward trend in the
amount of time that American consumers spend listening to broadcast
radio or encourage local advertisers to increase their radio
advertising budgets, both of which our rule cannot address. Although
NAB and others provide evidence that broadcast radio is losing
advertising revenue to online platforms and digital audio, we find that
greater consolidation is unlikely to improve the ability of local radio
owners to regain their advertising losses, particularly given the
dissimilar value propositions that they and large technology companies
offer to advertisers. We agree with those commenters who assert that if
further consolidation were allowed, smaller and independent radio
stations could be
[[Page 12205]]
sacrificed needlessly based on an unrealistic premise that ever larger
radio owners are the answer to compete for advertising on a level
playing field with large technology companies. Or as one commenter put
it, radio ``will never out-Google Google, or out-Facebook Facebook.''
46. In any event, our conclusion that the current radio rule
remains necessary in the public interest as the result of competition
rests on the premise that the listening public is the constituency that
the rule is intended to serve. The purpose of the rule is to ensure
competition among broadcast radio stations within a market so that
radio owners are motivated to provide the highest quality of service to
the public. Reducing the number of competitors in a local market puts
that quality of service at risk, threatens viewpoint diversity, and may
reduce the amount of local programming available. Some commenters
contend that if an owner is allowed to acquire the competing stations
in a market, it will diversify the programming formats on its newly-
acquired stations because it will not want to compete with itself. One
has to question, however, whether that owner would maintain the same
quality of service on its stations without facing external competition
from other station owners. Furthermore, evidence in the record suggests
that as the radio industry has become more consolidated over time, some
types of formats have been reduced.
47. Notably, the existing rule already allows a generous amount of
common ownership within a radio market and does not limit ownership
across markets, nor, any longer, across other media such as newspapers,
television stations, or cable systems. For example, in the largest
radio markets, one owner may own as many as eight radio stations, and
up to five in the same service, and that same owner is permitted to own
stations up to the limit in every local market in the country.
Moreover, since the passage of the 1996 Act, considerable consolidation
already has taken place within the radio industry, and there is
mounting evidence that it has not been without at least some negative
effects for consumers. As some commenters observe, such consolidation
has resulted in the homogenization of content; less local programming;
fewer market entry opportunities for new or small owners, including
minorities and women; employee layoffs; and competitive harm to the
smaller station owners striving to remain in the market. The result is
that, even under the current Local Radio Ownership Rule, there are some
radio companies with hundreds of radio stations around the country and
many radio markets are already quite concentrated, a fact that the
Commission highlighted in the last quadrennial review.
48. For instance, we find that within local radio markets, the
largest station group owners continue to dominate other radio stations
in terms of audience and revenue share. Specifically, evidence shows
that the largest owners of commercial stations continue to enjoy
substantial advantages in revenue share--on average, the largest
station group in each Nielsen Audio Metro market has a 46.7% share of
the market's total radio advertising revenue, with the two largest
owners accounting for 73.9% of the revenue. In more than a third of all
Nielsen Audio Metro markets, the top two commercial station owners
control at least 80% of the radio advertising revenue. According to BIA
data, in the 50 largest markets, on average, the top two firms account
for 62.3% of radio advertising revenue in the market; in the 100
smallest markets, on average, the top two firms account for 81% of
market revenue. With respect to ratings, the top four station group
owners continue to dominate audience share. BIA data indicate that the
four firm market concentration ratios (i.e., the percentage of audience
share attributed to the four largest firms in the market) average 97.2%
in smaller markets and 89.7% in the 50 largest markets. Even without
accounting for the market shares of station groups beyond the largest,
these data reflect the high level of concentration in local radio
markets, where on average the top station group owner's advertising
revenue share hovers between 40 and 50 percent. We therefore do not
find that the current rule is overly burdensome or unduly restrictive,
or that relaxing the existing numerical limits would promote
competition in a manner that would be consistent with the public
interest. The Herfindahl-Hirschman Index (HHI) is a commonly accepted
measure of market concentration. The HHI is calculated by squaring the
market share of each firm competing in the market and then summing the
resulting numbers. For example, for a market consisting of four firms
with shares of 30, 30, 20, and 20 percent, the HHI is 2,600 (302 + 302
+ 202 + 202 = 2,600). The U.S. Department of Justice (DOJ) and Federal
Trade Commission (FTC) generally consider markets in which the HHI is
between 1,500 and 2,500 points to be moderately concentrated and
consider markets in which the HHI is in excess of 2,500 points to be
highly concentrated. Under an HHI analysis, in a market where the
market share leader has a share in excess of 50%, the market would be
considered highly concentrated on the basis of that one firm alone
(i.e., 502 = 2,500). In a market where the market share leader has a
share in excess of roughly 40%, the market would be considered
moderately concentrated on the basis of that one firm alone (i.e., 402
= 1,600). Arithmetically, the addition of other firms' market shares
would not make the market any less concentrated under an HHI analysis,
as all market shares, no matter the quantity or size, are additive to
the total HHI value for the market and that value would only increase
with the addition of market share information for other firms.
49. Indeed, we find that the current rule remains a backstop
against further excessive consolidation. When the Commission repealed
the Radio/Television Cross-Ownership Rule in 2017, it reasoned that any
negative effects would be mitigated by the continued operation of the
Local Radio and Local Television Ownership Rules, which would act as
constraints on undue concentration. There is some evidence that,
although a considerable amount of consolidation has occurred, the rule
has prevented further excessive consolidation. For instance, although
the market share information cited above reflects a high degree of
concentration among the largest firms, it also appears that those
numbers have remained fairly stable for the past decade or so under the
existing ownership limits. For instance, the average advertising
revenue market share of the largest station group in each market
increased only slightly from 45% in 2012 to approximately 47% in 2022.
Similarly, the combined market share for the top two station owners
increased from 73% in 2012 to approximately 74% in 2022.
50. On the other hand, NAB's proposal of eliminating all limits in
most markets and retaining only FM limits in the largest 75 markets
would exacerbate the dominance of the larger firms. It would permit
consolidation to the level of monopolization or near monopolization in
many, if not most, markets. It would mean, for many markets, the
potential to move from moderately concentrated today, under traditional
antitrust standards, to another level of concentration altogether, and
for others that are already highly concentrated, it would mean making
them even more so. For instance, based on 2021 data from BIA Kelsey
Media Access Pro, HHIs for advertising revenue share in radio
[[Page 12206]]
markets finds that there is one market with low concentration, 49
markets that are moderately concentrated, and 203 markets that are
highly concentrated. For listening share among commercial stations,
there are no markets with low concentration, 40 markets that are
moderately concentrated, and 213 markets that are highly concentrated.
Under NAB's proposal, every one of these 253 markets would carry the
risk of becoming highly concentrated or becoming even more highly
concentrated if already so. Practically speaking, this effect could be
particularly pronounced in the smallest markets (i.e., those outside
the top 75) where NAB's proposal to remove limits altogether would
represent a radical departure from the current limits. For instance,
most of the 178 markets outside the top 75 would be classified in one
of the two smallest tiers per our existing rule (Tier 3 or Tier 4),
with the majority (108) being considered Tier 3 and having, on average,
10.3 commercial FM stations. Under NAB's proposal, then, in those 108
markets, an owner could increase its ownership from a maximum of four
FM stations today to ten or more FM stations (or all such stations in
the market). The potential effect on competition inherent in NAB's
proposal--which, as noted, is substantial--does not even account for
any practical administrative difficulties that could be present with
transitioning to a completely new approach to radio limits that sets a
size cutoff based on Nielsen ranking (by households) rather than the
number of stations in a market.
51. Surely, further consolidation could have benefits for certain
radio owners, but such benefits are not worth the cost of the real and
likely harms that would result to the listening public from a further
reduction in competition. In particular, we find that undue
consolidation is likely to lead to radio stations becoming less
responsive to the needs and interests of their local communities. As
the Commission has noted previously, ``[b]ecause stations have a duty
to serve the needs of their local communities, localism has been a
cornerstone of broadcast regulations for decades.'' We find that the
cost pressures and incentives associated with consolidation could be
expected to work against the provision of programming responsive to
local issues. Specifically, we think the cost incentives in favor of
repurposing content on multiple stations--a practice that would be
expected to expand with ownership of more stations in local markets--
would work against vigorous competition for service responsive to local
needs.
52. In addition, we note that some commenters raise concerns about
the effects that loosening limits on FM ownership could have on the AM
band. Specifically, commenters opposing NAB's proposal argue that
eliminating the FM limit in the majority of radio markets and raising
it from five to eight stations in the largest 75 markets would devalue
the AM band by causing the migration of AM station owners to the FM
band. They argue that migrating AM station owners would take audiences,
advertising, programming, investment of capital, resources, and talent
with them. They assert that the result would be counterproductive to
the Commission's AM revitalization efforts and would undermine the
Commission's incubator program by removing or reducing the incentive to
participate in the program. NAB counters that its proposal, in fact,
would promote AM revitalization by allowing owners to acquire more AM
stations. It contends that radio stations in smaller markets need the
regulatory relief its proposal would provide and that AM stations, in
particular, are struggling. Because we decline to adopt NAB's proposal,
we need not reach a determination on whether the proposal would have a
deleterious impact on the AM band due to a purported exodus of owners
that commenters claim would occur.
53. We acknowledge that even under the existing rule there may be
instances in which smaller owners are increasingly finding it difficult
to remain viable in the current radio industry (a fact that is perhaps
not surprising given the dominance of the largest firms). While NAB and
others present this as a rationale in favor of further consolidation,
i.e., to allow larger firms to buy struggling smaller firms, we
disagree. Rather, we agree with those commenters that assert that
loosening the current rule would result in the disappearance of smaller
stations from the market entirely, either because they would be more
vulnerable to acquisition or because they would be unable to compete
with the larger station groups that would expand their dominance if
further consolidation was permitted. Excessive aggregation through
acquisition of stations of any size disserves our policy goals of
competition, diversity, and localism. In any event, we continue to find
that there is ample leeway under the current rule for additional
consolidation within limits. For instance, in looking at the ten
largest radio station owners (by net advertising revenue), none has an
average of more than five radio stations per market, suggesting there
are markets where these companies could acquire additional stations,
even under the current rule. What the current rule does constrain,
however, is the further aggregation of market share by an already
dominant firm in a local market. Put another way, even if it would be
efficient for a struggling firm to exit the market, it does not follow
that an in-market competitor has to be, or should be, the one to
acquire that firm. Instead, we find that a new entrant (or at least a
new market entrant) would be preferable from the perspective of
competition and diversity, and our current rule is conducive to such an
outcome. The ten largest radio station owners, on average, own stations
in 43 markets, suggesting there may be more markets they could enter to
pursue cost efficiencies and economies of scale under the current rule.
54. AM/FM Subcaps. We conclude that, like the market tiers and
associated ownership limits, the sub-limits on AM and FM ownership
within the Local Radio Ownership Rule also remain necessary in the
public interest given the current audio marketplace. The radio rule's
AM/FM subcaps limit the number of radio stations from the same service,
i.e., AM or FM, that an entity may own in a single market. Currently, a
broadcaster may not own more than five AM or five FM stations in
markets in the largest market tier, four AM or four FM stations in
markets in the two middle-sized tiers, or three AM or three FM stations
in markets in the smallest tier. These subcaps, which were set by
Congress in 1996, are intended to prevent excessive concentration in a
particular service, to foster market entry, and to promote competition
by accounting for the technological and marketplace differences between
AM and FM stations.
55. We find that the AM/FM subcaps continue to serve these
purposes. The subcaps help prevent excessive common ownership of either
AM or FM stations in a local market. Retaining a cap specific to FM
stations addresses the concerns of commenters that relaxing or removing
the FM subcaps potentially could cause AM stations to migrate to the FM
band, resulting in a diminished AM band where lower-cost market entry
opportunities for small owners, including minorities and women, are
most likely. Moreover, despite the growing use of FM translators to
transmit AM signals and the transition of some AM stations to digital
radio, disparities between the AM and FM services persist. iHeart
provides evidence that the number of AM stations has declined while the
number
[[Page 12207]]
of FM stations has increased, and it states that quantitative data for
audience listening and advertising revenue demonstrate ``a large and
increasing competitive gap between AM and FM radio stations'' from 2010
to 2018. In the interest of preventing undue concentration among local
stations in either band, we reject the proposals in our record aimed at
modifying or eliminating the rule's subcaps.
56. Though iHeart and other commenters contend that elimination of
the AM subcap would provide needed relief to the struggling AM band
without risk of harming competition, we disagree. iHeart's proposal to
remove all limits and subcaps on AM stations while retaining all
current limits and subcaps on FM stations would not create a risk of
migration of AM owners to the FM band, which is one concern that has
been raised regarding FM deregulation. However, we agree with those
commenters who contend that AM deregulation would allow large owners of
AM stations to buy up the smaller AM stations in their markets and
could lead to excessive concentration within the AM band. iHeart
asserts that there is no longer a risk of concentration in the AM band
given ``increasingly steep declines in audience listening to AM
stations and the continuing erosion of advertiser revenue experienced
by AM stations, especially when compared to FM stations.'' However, we
find that although AM stations overall tend not to achieve the ratings
or revenues of FM stations, this disparity is by no means a universal
truth. For instance, in each of the top five markets, there is an AM
station among the top three stations in revenue. Additionally,
throughout the 253 Nielsen Audio Metro markets, there are 124 a.m.
stations ranked in the top five in terms of all-day audience share, or
approximately 10% of all top-five stations in those markets.
Specifically, across all 253 Nielsen Audio Metro markets, there are
1,265 total stations that would be ranked in the top five (discounting
any potential ties for the number five ranking), which means that AM
stations account for approximately 9.8% percent of the top five
stations in these markets. So although, in general, FM stations may
continue to enjoy some competitive advantages over AM stations, there
continue to be many strong AM stations and AM remains a vital service.
Further, four out of the top ten (and seven out of the top twenty)
radio stations in the United States (as ranked by net advertising
revenue for 2021) are AM stations. Therefore, it cannot be presumed
that AM stations would not be targets for acquisition if AM
restrictions were eliminated. Regardless, even in markets where AM
stations are not among the highest-ranked stations in the market, the
AM limits and subcaps promote a competitive AM band by preventing
excessive concentration.
57. In addition, we find that reduced competition in the AM band
would threaten the band's distinctive qualities. Notably, some
commenters observe that the AM band, in particular, includes more small
broadcasters than the FM band, including minority and female licensees,
and that it is important to preserve that diversity of ownership. AM
stations also include more Spanish and Ethnic, News, Sports, and Talk
formats relative to FM stations. Despite competitive developments that
have continued to affect the AM and FM bands, relative to each other,
we find that the public interest benefits of maintaining diffuse
ownership within the AM and FM bands continue to support retaining the
AM and FM subcaps.
58. Methodology for Determining Compliance in Non-Nielsen Audio
Markets. We will make permanent the Commission's contour-overlap
methodology that has been used on an interim basis to determine
compliance with ownership limits in areas that are not within defined
Nielsen Audio Metro markets. At the time the Commission adopted the use
of Nielsen Audio Markets (formerly Arbitron Metro markets), it
acknowledged that not all portions of the country fall into a market
area defined by Arbitron or later Nielsen. In fact, a significant
portion of the country, both in terms of geography and population is
not located in such rated/defined markets, meaning that another method
must be employed in those instances to determine the number of stations
in a given market. Accordingly, the Commission previously stated that
it would continue to use the former ``contour-overlap methodology'' to
determine the relevant geographic market for purposes of ascertaining
compliance with the relevant radio ownership market tiers and caps. In
adopting the Arbitron Metro (now Nielsen Audio Metro) market definition
for purposes of the radio rule in the 2002 Biennial Review Order, the
Commission stated that the contour-overlap methodology would continue
to apply to undefined markets on an interim basis while it explored the
potential for a better substitute. While the Commission continued to
apply the methodology on an interim basis, it adopted changes to the
methodology that minimized what it found to be the more problematic
aspects of that approach. Specifically, the Commission excluded from
the market calculation radio stations that are commonly owned with the
stations seeking to be combined and radio stations whose transmitter
site is more than 92 kilometers (58 miles) from the perimeter of the
mutual overlap area. Under this approach, the relevant geographic
market is defined by the cluster of stations with overlapping signal
contours of a given strength. The contour-overlap methodology for
defining radio markets and counting the radio stations that are in
those markets uses the principal community contours of the commercial
radio stations that a party seeks to own. The relevant radio market is
defined as the area encompassed by the principal community contours of
the commonly owned radio stations whose contours mutually overlap.
Principal community contours also are used to count the number of radio
stations in a radio market, that is, to determine the size of the
market for purposes of applying the ownership limits. Specifically, in
addition to the radio stations whose contours form the market, any
station whose principal community contour intersects the market is
considered to be in the relevant market. Although the Commission was
initially critical of the contour-overlap methodology, and indeed
abandoned it in favor of using markets defined by Arbitron or Nielsen
ratings where such markets exist, it has continued to use the approach
now on an ``interim'' basis for nearly 20 years for those areas that
fall outside a rated market. In that time, and in various quadrennial
proceedings, the Commission has invited commenters to offer
alternatives to the methodology for use in non-rated areas, but
ultimately has found no reason to revisit the approach. Rather, it has
found previously that the revised contour-overlap methodology appeared
to be working well.
59. Seeking to resolve the issue once and for all, and either
remove the ``interim'' label or else find a suitable replacement, the
Commission once again called for any potential alternatives to the
contour-overlap method in the NPRM. The record neither offers any new
alternative to the method, nor any opposition to its continued use in
those areas of the country that are outside of a rated Nielsen Audio
Market. Accordingly, because we find that the approach has worked
sufficiently well for the past 20 years and is familiar to both radio
broadcasters and Commission staff, we will make permanent the
Commission's
[[Page 12208]]
contour-overlap methodology that has been used on an interim basis to
determine ownership limits in areas that are not within defined Nielsen
Audio Metro markets. Therefore, going forward, parties proposing a
radio station combination involving one or more stations whose
communities of license are not located within a Nielsen Audio Market
must show compliance with the local radio ownership rule using the
contour-overlap methodology.
60. Embedded Markets. We decline requests from commenters to modify
our presumption regarding embedded markets, which was originally
adopted in 2017 and made applicable pending further consideration of
embedded market transactions in this 2018 Quadrennial Review
proceeding. We now complete our 2018 Quadrennial Review and retain the
presumption in its current form. As described above, embedded markets
are smaller markets, as defined by Nielsen Audio, that are contained
within the boundaries of a larger Nielsen Audio Metro market. In
general, entities seeking to acquire a radio station in an embedded
market must satisfy, separately, the numerical limits of the Local
Radio Ownership Rule for both the embedded market and the overall
parent market. In addition, our current policy includes a presumption
in favor of waiving the general rule for radio stations in embedded
markets where the parent market contains multiple embedded markets,
provided two conditions are satisfied: (1) compliance with the
numerical ownership limits using the Nielsen Audio Metro methodology in
each embedded market, and (2) compliance with the ownership limits
using the contour-overlap methodology applicable to undefined markets--
in lieu of evaluating compliance with the numerical limits in the
overall parent market. Currently, the only two markets for which the
presumption is relevant--i.e., parent markets that contain multiple
embedded markets--are New York, NY, and Washington, DC, and application
of the presumption is limited to these markets.
61. We find that the record, and the lack of applications received
to date, supports not making any changes to our embedded markets
policies at this time. In particular, we reject suggestions that we
eliminate the policy that counts an embedded market station in both the
embedded market and in the parent market in favor of counting embedded
market stations only within an embedded market. In addition, we reject
the suggestion that the waiver presumption should be extended to any
and all future situations with multiple embedded markets, beyond New
York and Washington, DC. Instead, after evaluating the presumption in
the 2018 Quadrennial Review proceeding, we retain the presumption in
its current form. We agree that Connoisseur Media and others have
demonstrated evidence in the past that embedded market stations
primarily compete for listeners within the confines of their own
embedded market, that is, against stations located within their own
embedded market and those stations located in the main city of the
parent market whose signals reach the embedded market (but not against
stations in other embedded markets). It is precisely for these reasons
that the Commission adopted the presumption in 2017. Nonetheless, we
find that the proposal not to count embedded market stations toward an
entity's compliance with the limits in the parent market could lead to
excessive concentration, allowing a single owner to combine parent
market stations together with those in embedded markets in a way that
harms competition within the embedded market. For instance, within the
New York, NY parent market, suppose an entity owns eight stations, four
in each of two embedded markets. If those stations do not count toward
the limits in the parent market, then the entity would be free to
acquire up to eight non-embedded stations in the New York, NY parent
market. If, as Connoisseur Media claims, New York parent market
stations compete for listeners in outlying embedded markets, then this
change could effectively allow an entity to own a total of sixteen
stations, twelve of which, according to Connoisseur Media's claims,
would be competing in each of two embedded markets (i.e., the four
embedded market stations each competing within their respective
embedded markets as well as the eight non-embedded parent market
stations that presumably compete in each of the two embedded markets as
well). Moreover, absent further experience with the existing
presumption in practice, we remain unconvinced that there is a
demonstrated need, or that it would be wise, to adopt additional
flexibility at this time. For these same reasons, we decline to
automatically extend the waiver presumption to all future situations
involving multiple embedded markets.
62. When the Commission adopted the embedded market presumption in
2017, it stated that the presumption would ``give Connoisseur--and
other parties--sufficient confidence with which to assess possible
future actions.'' We find that this continues to be the case, as the
presumption favors an entity's ability to invest in multiple embedded
markets without the stations it owns in one embedded market counting
against its ownership of stations in the other. Moreover, the
Commission anticipated that future transactions utilizing the
presumption would ``help inform our subsequent review of . . . the
treatment of embedded market transactions.'' In fact, however, during
the time since 2017 that the presumption has been in effect, no party
has filed an application seeking to avail itself of the presumption.
Moreover, the record in this proceeding contains no evidence to
indicate that the current presumption is deterring such transactions or
that that the presumption would be inadequate to facilitate their
successful completion where the criteria of the presumption could be
met. As a result, we find that the Commission is providing sufficient
flexibility and certainty to prospective applicants and that we do not
have any further experience or information supporting further policy or
rule changes at this time. With regard to Connoisseur Media's
suggestion that our policy should apply to all future parent markets
with multiple embedded markets, we find that it would be speculative
and premature to consider how we will apply the presumption to all such
future markets without understanding the particular competitive
dynamics of those markets. As Connoisseur Media claims, the drawing of
embedded markets is, at least in some sense, a function of geography,
such that the competitive dynamics of future markets may or may not
resemble those of the current two to which the presumption applies. It
is possible that, even if applied to other markets, the presumption
could be overcome by factors in future markets that we have not
observed in the New York, NY or Washington, DC markets.
63. Minority and Female Ownership. We find that the record provides
no reason for the Commission to reevaluate its conclusions in the 2010/
2014 Quadrennial Review Order that the current Local Radio Ownership
Rule remains consistent with the Commission's goal of promoting
minority and female ownership of broadcast radio stations. We retain
the rule for the reasons stated above, particularly to promote
competition among broadcast radio stations in local markets. The record
does not contain persuasive evidence that relaxing the rule would boost
minority or female radio ownership. To the contrary,
[[Page 12209]]
several commenters contend that loosening ownership restrictions could
make it more difficult for minority and women owners to remain and/or
to enter the local radio market. For example, NABOB opposes any changes
to the local radio ownership rule and notes that increased
consolidation of ownership in the broadcast industry reduces
opportunities for minorities to enter the business or to grow. In
contrast, NAB states that the best way to encourage broadcast ownership
by new entrants, including minority and female owners, is to ensure
access to capital and argues that the existing rule impedes investment
in broadcasting by making other unregulated forms of media more
attractive. We note that a balance must be struck between incentivizing
investment in broadcasting and ensuring that station-buying
opportunities exist for new entrants. We find that the existing rule
strikes the appropriate balance, especially considering that investment
by new entrants is less likely in a market that is highly concentrated.
We note that simply eliminating ownership limits would allow more
consolidation. We also share commenters' concerns that allowing greater
consolidation could increase the challenges many of these relatively
smaller stations face in competing for revenue in the marketplace and
could reduce opportunities for new entrants, including minority and
women owners, to participate in the market.
64. In this context, we note, as discussed above, that the
Commission has taken several actions, such as improving its collection
and analysis of ownership information on FCC Form 323/323-E, exploring
access to capital through its re-chartered CEDC, and implementing the
radio incubator program, that are intended to provide the Commission
with more information about the state of minority and female broadcast
ownership, or that seek to further the important goal of increasing
minority and female ownership, objectives to which we remain committed.
65. Cost-Benefit Analysis. The NPRM asked how the Commission should
compare the benefits and costs of retaining, modifying, or eliminating
the Local Radio Ownership Rule. As discussed above, commenters disagree
regarding whether rule modifications would enable radio owners to
respond more effectively to changes in the broader audio environment,
or even, if so, whether any such benefits would outweigh potential
harms to competition, localism, or viewpoint diversity. For all the
reasons explained above, we conclude that any potential benefits that
further consolidation might offer larger radio owners are outweighed by
potential costs to the consumer stemming from such harms as weakened
competition within the local broadcast radio market, increased
homogenization of content, less local programming, the disappearance of
stations from the market, and fewer opportunities for new and diverse
market entrants.
B. Local Television Ownership Rule
66. In this section, we retain the existing Local Television
Ownership Rule subject to minor modifications. As an initial matter, we
find that the rule remains necessary to promote the Commission's public
interest goals of competition, localism, and viewpoint diversity.
Specifically, we find that the Local Television Ownership Rule remains
necessary to promote these goals given the unique obligations broadcast
licensees have as trustees of the public's airwaves to serve their
local communities.
67. In reaching our conclusion, we find that the relevant market
for the rule should continue to focus on broadcast television stations,
as no other source of video programming provides a substitute for
broadcast television, and we retain the current numerical ownership
limits. We also retain as a condition of common ownership that a
broadcaster cannot acquire two stations ranked in the top four in
audience share in a market--known as the Top-Four Prohibition--unless,
at the request of an applicant, the Commission finds that such an
acquisition serves the public interest, convenience, and necessity on a
case-by-case basis. The Top-Four Prohibition does not prohibit a
broadcaster from ending up with two top-four stations through organic
growth. But we modify the methodology of the Top-Four Prohibition to
reflect better the current state of broadcast industry practices.
Specifically, as detailed further below, under the revised Local
Television Ownership Rule adopted herein, a television station's
audience share ranking in a Nielsen Designated Market Area (DMA) will
be determined based on the combined audience share of all free-to-
consumer, non-simulcast multicast programming airing on streams owned,
operated, or controlled by that station as measured by Nielsen Media
Research or by any comparable audience ratings service. The Nielsen
Company assigns each broadcast television station to a designated
market area (DMA). The DMA boundaries and DMA data are owned solely and
exclusively by Nielsen. Each DMA is a group of counties that form an
exclusive geographic area in which the home market television stations
hold a dominance of total hours viewed. There are 210 DMAs, covering
the entire continental United States, Hawaii, and parts of Alaska. Some
station owners simultaneously broadcast the primary programming stream
of a second station they own on the nonprimary multicast stream of the
other station they own in the same market. A nonprimary multicast
stream is typically designated by appending a ``.2'' or greater digit
to the channel number to distinguish such streams from a station's
primary stream which usually is designated with a ``.1'' suffix. We
update the relevant daypart used to make audience share and ratings
determinations to the metric that, based on Commission experience and
consultation, most accurately reflects a station's true performance
given changes in the broadcast industry. Because the same daypart is
also used to make audience share and ratings determinations in the
context of failing stations waivers as provided in Note 7 to section
73.3555 of the Commission's rules, we find that our update to the
methodology of the Top-Four Prohibition logically leads us to update
also the failing station waiver methodology with respect to the daypart
used. We also specify a definite time period over which ratings data
should be averaged to minimize the impact of anomalous ratings periods.
68. In addition, we extend a previously adopted measure in order to
prevent further circumvention of the Top-Four Prohibition and ensure
the efficacy of the Local Television Ownership rule. Pursuant to the
changes we adopt herein, an entity will not be permitted to acquire a
network affiliation and place it on a station or broadcast signal that
is otherwise not counted as a station for purposes of the Local
Television Ownership Rule as a way to circumvent the prohibition on
such affiliation acquisitions adopted in the 2010/2014 Quadrennial
Review Order. We retain the shared service agreement (SSA) disclosure
requirement to continue providing transparency regarding the extent of
cooperation and coordination between competing stations in a market. We
also find that retaining the rule continues to preserve opportunities
for a variety of different owners, including minority and female
owners, who can contribute to the multiplicity of speakers in a market.
Lastly, we find that the public interest benefits achieved by retaining
the rule with the adopted changes outweigh the
[[Page 12210]]
potential economic cost of continued compliance with the rule.
69. The Local Television Ownership Rule limits the number of full
power television stations an entity may own within the same local
market. The Local Television Ownership Rule provides that an entity may
own up to two television stations in the same Nielsen DMA if: (1) the
digital noise limited service contours (NLSCs) of the stations (as
determined by Section 73.622(e) of the Commission's rules) do not
overlap; or (2) at the time the application to acquire or construct the
station(s) is filed, at least one of the stations is not ranked among
the top-four stations in the DMA, based on the most recent all-day (9
a.m.-midnight) audience share, as measured by Nielsen Media Research or
by any comparable professional, accepted audience ratings service. With
respect to the latter provision--the Top-Four Prohibition--an applicant
may request that the Commission examine the facts and circumstances in
a market regarding a particular transaction, and based on the showing
made by the applicant in a particular case, make a finding that
permitting an entity to directly or indirectly own, operate, or control
two top-four television stations licensed in the same DMA would serve
the public interest, convenience, and necessity. The Commission
considers showings that the Top-Four Prohibition should not apply due
to specific circumstances in a local market or with respect to a
specific transaction on a case-by-case basis.
70. The NPRM sought comment on the effects of rule changes made in
the 2010/2014 Quadrennial Review Order on Reconsideration and raised
several issues for consideration related to changes in the video
programming industry. In particular, the NPRM sought comment on whether
the current version of the Local Television Ownership Rule remained
necessary in the public interest as a result of competition. The NPRM
also sought comment on whether the Local Television Ownership Rule is
necessary to promote localism or viewpoint diversity. In response to
broadcaster claims in previous quadrennial review proceedings that non-
broadcast sources of video should be considered substitutes for
broadcast video, the NPRM sought comment on whether and to what extent
this was true, as well as how to incorporate non-broadcast video into
market definition analyses. The NPRM then asked whether changes in the
video programming industry support modification of the numerical limit
of owning up to two television stations in the same market. If the
Commission retained the Local Television Ownership Rule and the
existing limits, the NPRM asked whether the Top-Four Prohibition should
be retained or modified. The NPRM then sought comment on the prevalence
of, and how to account for, broadcast stations placing content from the
Big Four broadcast networks (ABC, CBS, NBC, Fox) on multicast streams
and low power television stations. As a matter of diligence, the NPRM
also sought comment on the implications, if any, of the television
broadcast incentive auction and of the new broadcast television
transmission standard. The NPRM also asked if the Commission should
continue to require the filing of SSAs. Regarding minority and female
television owners, the NPRM sought comment on how retaining, modifying,
or eliminating the local television rule might affect minority and
female ownership including potential entry into the market by these
types of owners. Finally, the NPRM sought quantifications of the costs
and benefits of its proposed changes.
71. We find that the Local Television Ownership Rule remains
necessary to promote the Commission's public interest goals of
competition, localism, and viewpoint diversity. No other source of
video programming serves local communities as broadcast television
does, particularly at low, or no, cost to consumers. The rule promotes
competition among local broadcast television stations that, to this
day, remain the only entities in the video marketplace that are
licensed by the Commission with use of the airwaves to provide a
broadcast television service, in exchange for a unique obligation to
serve the public interest. Furthermore, although primarily focused on
competition, as detailed further below, the rule continues to promote
localism, as broadcasters have a unique obligation to supply
programming of interest to their local communities and stations are
likely to be more responsive to those local interests where there are
other local competitors. The Commission has previously stated that a
competition-based rule, while not designed specifically to promote
localism, may still have such an effect. The Commission has
consistently found that broadcast licensees have an obligation to air
programming that is responsive to the needs and interests of their
communities of license. Similarly, the rule promotes viewpoint
diversity by preserving opportunities for non-commonly owned stations
to air a multitude of viewpoints through independent choices regarding
the local news and other local programming on their stations.
72. Accordingly, for these reasons we find that the Local
Television Ownership Rule remains necessary in the public interest. We
discuss below the various elements of the rule, the goals the rule
serves, as well as adopt several key modifications to update
application of the rule and to ensure its continued efficacy.
73. Market definition. After careful review, we continue to find
that broadcast television remains unique and non-substitutable with
other sources of video programming, particularly with respect to
fulfilling our traditional public interest objectives of competition
(e.g., in terms of competition among local broadcast television
stations and with respect to local programming), localism (e.g., in
terms of supplying locally responsive programming), and viewpoint
diversity (e.g., in terms of airing a multitude of viewpoints through
local news and other local programming). Although some commenters
contend that by defining the market to include only broadcast
television the Commission fails to account for the myriad of video
programming options now available to consumers, the Commission has
acknowledged for some time the availability of other forms of video
programming, even while continuing to find that broadcast television
remains its own distinct market. Indeed, from video cassette recorders
and DVDs, to subscription cable television services, to on-demand
streaming services, video programming alternatives to free over-the-air
broadcast television have existed for decades in a number of forms. The
critical question in Quadrennial Review has been and continues to be
whether and to what extent such video programming options can be
considered substitutes to broadcast programming, or put another way,
whether competitive market forces alone are proving sufficient to
create a video marketplace that satisfies the public interest
objectives long associated with broadcast television, such that our
Local Television Ownership Rule can be deemed no longer ``necessary in
the public interest as the result of competition.''
74. Although there are far more sources of video programming
available today than there were when the Local Television Ownership
Rule was first adopted, most commenters assert that non-broadcast
programming is not a substitute to broadcast programming, which remains
unique. We agree. The Commission has previously found that
[[Page 12211]]
the video programming market is distinct from other media markets
because consumers do not view non-video media (e.g., audio or print
media) as good substitutes for watching video, and there is no evidence
in the current record that would disturb this finding. Notably, cable,
satellite, and streaming media all have higher consumer fees as they
require an additional service, such as internet access or cable or
satellite service, as well as, often times, a subscription fee, in
contrast to broadcast media, which consumers can access freely over the
air, a distinction that keeps non-broadcast media from being a
comparable alternative to broadcast television, especially for price
conscious consumers. To this point, estimates suggest that 15% of U.S.
television households (or 18 million households) use free, over-the-air
television, a percentage that has increased in recent years,
particularly as the number of consumers subscribing to pay TV
alternatives continues to decline significantly.
75. Moreover, the record reflects that despite its growing
prevalence, online video still largely complements, rather than
competes with, broadcast television. In fact, some streaming services
include local broadcast programming as part of their linear channel
offerings. While broadcasters assert that they compete with a myriad of
sources that now provide video programming, competition from other
video programming sources appears to be mostly focused on advertising
revenue, which is but one of the facets of competition among local
broadcast television stations. In general, non-broadcast sources of
video programming do not compete with broadcasters for retransmission
consent fees, network affiliations, or the provision of local
programming, which continue to remain largely unique to broadcast
television. Retransmission consent fees are unique to broadcast
stations, and the broadcast content for which MVPDs pay retransmission
consent fees has special appeal to television viewers in comparison to
any other type of video content to the point where viewers do not
consider any other video programming to be substitutes for such
broadcast content. The largest national networks (ABC, CBS, Fox, and
NBC) affiliate with broadcast stations for over-the-air delivery of
their programming. Moreover, while broadcasters may be seen as
participating in various markets or competing along various dimensions
(including, among others, the sale of local or non-local advertising;
the creation, acquisition, and provision of local, syndicated, or
national programming; and the acquisition of on-air talent), the
provision of local programming remains a hallmark of broadcast
television and an area where viewers directly benefit from competition
among local broadcast television stations.
76. We note that our market definition is also consistent with the
Department of Justice's (DOJ's) approach, which considers local
broadcast television to be its own market in antitrust analysis. The
Department of Justice examines local television broadcasters competing
in the spot advertising market and competition for retransmission
consent licensing fees in local television markets. DOJ has rejected
the assertions of broadcasters that non-broadcast sources of video
programming should be considered competitors to broadcast television in
the context of analyzing transactions, focusing on the spot advertising
product market in local television markets. Although DOJ's analysis has
focused historically on competition for advertising, whereas the
Commission's rule considers competition in a number of areas, including
audience share, we find DOJ's approach further supports, and is
consistent with, our own.
77. As we have concluded in previous quadrennial reviews, there are
strong public interest reasons for promoting competition among local
broadcast television stations. Promoting competition among local
television stations prevents local broadcasters from demanding higher
retransmission consent fees and charging higher rates for local
businesses seeking to purchase advertising time on local stations,
costs that may be passed on to consumers. Moreover, competition spurs
quality improvements by broadcast television stations that benefit
consumers, including through reinvestment in stations, expanded
programming choices, and technological innovation.
78. Spurring competition among broadcast television stations also
promotes localism, as licensees seek to differentiate themselves while
fulfilling their obligation to air programming responsive to the needs
and interests of their local communities. For many stations, that
includes local news and information programming. In contrast to other
sources of video programming, broadcast stations are particularly well
situated to cover local news, as stations are licensed to local
communities to facilitate locally responsive content and information.
Indeed, the record contains numerous assertions from broadcasters that
the local programming they provide is unique and unduplicated by any
other video programming provider. The Leadership Conference on Civil
and Human Rights (LCCHR) states that 77% of Americans get most of their
local news from broadcast sources, while only 23% get local news from
online only sources, little of which is actually created by online
outlets since much of the news consumed online are uploaded videos of
television broadcast news.
79. Although much local news is undoubtedly cost intensive to
produce, we reject the broadcasters' assertions that in order to
preserve localism we must allow greater consolidation than is permitted
under our current rule. As an initial matter, there is evidence that
despite some declines in audience size over time, there remains
significant demand for local television news, and the amount of local
news on television has increased over time. Moreover, contrary to
claims that absent consolidation television stations cannot continue to
produce local news, Nielsen data shows that the number of stations
airing local news actually increased slightly in a four year period
from 2017 to 2021. Nielsen Local TV View shows there were 976 stations
airing at least one verified local news program in November 2017 and
992 such stations in November 2021. Also, Nielsen data demonstrates
that while almost 20% of markets saw an increase in the number of
stations airing local news, only 10% of markets saw a decrease and 70%
of markets saw no change. The Commission examined Nielsen data in all
available markets in November 2017 and November 2021 to identify any
station that aired at least one program categorized as local news by
Nielsen and then used program titles to verify that programming was
correctly classified as local news. Notably, only the top 50 markets
saw more decreases than increases in the number of stations airing
local news. According to Nielsen data, all of the top 50 markets have
at least four broadcast stations airing local news, and the
overwhelming majority of these markets have at least six stations
airing local news. In markets ranked 51 and lower, where broadcasters
argue the need to consolidate is particularly acute, the number of
markets that saw increases in stations airing local news outnumbered
those that saw decreases. Further, studies by the Radio Television
Digital News Association (RTDNA) found that the number of stations
originating local news (i.e., the number of stations producing local
news) increased slightly from 2017 to 2021. These studies found that
703 stations originated local news in 2017 and 707 stations originated
local news in 2021.
[[Page 12212]]
Just as the record does not demonstrate that consolidation, as opposed
to competition to meet audience demand, is what drove increases in
local news over time, we similarly cannot conclude that additional
consolidation is necessary to preserve these gains, much less to
preserve the ability of stations to produce local programming at all or
to otherwise serve their local communities as required as licensees.
80. Regarding the Market Size and Television News study conducted
by OEA that concluded small and mid-sized markets are unlikely to
support four independent local news operations, we note that the study
itself mentions that it examines but one dimension to consider when
determining the desirability of consolidation. In the authors'
preferred specification, only markets with more than 615,000 TV
households were predicted to support at least four independent local
news operations. We carefully reviewed other studies submitted in the
record to show that consolidation improves local news coverage or makes
production of local programming feasible. We also note the report of
Professor Thomas Hubbard whose analysis shows that local news is not
declining and has actually increased. Although there appears to be
agreement that the amount of local news has increased, there remains
disagreement on whether this growth is due to consolidation or part of
an industry-wide trend to increase local news. We also note
disagreement regarding the role of scale economies in the provision of
local news relative to the increasing practice of contracting and
sharing local news between stations. Finally, we note disagreement
around what constitutes local news. We found the empirical studies and
arguments helpful to our deliberations and decisions. We also note that
the Local Television Ownership Rule has never been designed to ensure,
and does not prescribe markets should or must have, at least four
independent news operations. Rather, as discussed below, the rule helps
ensure a level of viewpoint diversity so that there is an opportunity
for as many independent news operations as a market can support, even
if some markets have less independent local news operations and some
have more, as they always have. In markets where there may be fewer
independent news operations already, greater consolidation would not
create new independent news operations and would only decrease the
diversity of voices in the providers of local news.
81. We also find that the rule remains important for helping to
ensure viewpoint diversity in a local market. While the Local
Television Ownership Rule remains first and foremost competition-
focused, our policy goals are not unrelated or mutually exclusive, and
the rule continues to promote viewpoint diversity as well. We continue
to find that the competition-based rule helps to ensure the presence of
a number of independently owned broadcast television stations in the
local market, thereby indirectly increasing the likelihood of a variety
of viewpoints (including a variety of viewpoints within local
programming) and preserving ownership opportunities for new entrants.
Numerous commenters agree and state that the rule remains necessary to
promote viewpoint diversity. We recognize, as NAB points out, that the
Commission concluded in a prior Quadrennial Review that the rule was
not necessary to promote viewpoint diversity due to the presence of
``other types of media, such as radio, newspapers, cable, and the
internet [that] contribute to viewpoint diversity in local markets.''
Although it remains true that there are various types of media
available to consumers within local markets, we reject the Commission's
prior conclusion that the rule is not necessary to promote viewpoint
diversity. As we have described herein, the provision of local
programming remains a defining characteristic of television stations,
one that has grown, even as other sources of local content have
disappeared or have repurposed local television content for their own
platforms. Moreover, as we have reiterated, our rule serves to maintain
diffuse ownership of this key platform--a local television station--
among a wide variety of owners and types of owners, thereby promoting
the interest in a multiplicity of speakers, particularly with respect
to local issues and the needs and interests of local communities.
82. Numerical Limit. We find that permitting ownership of up to two
stations in a local market continues to strike the appropriate
competitive balance of enabling some efficiencies of common ownership
while maintaining a level of competition amongst broadcast television
stations to ensure that they continue to serve the public interest. No
commenter argues that the numerical limit should be tightened to permit
ownership of only one station in a market. Indeed, we recognize that
common ownership subject to the restrictions of the current rule can
create operating efficiencies, which potentially could lead to public
interest benefits if a local broadcast station chooses to invest more
resources in programming that meets the needs of its local community as
a result of those efficiencies. However, such efficiencies come at the
expense of reducing competition and diversity and must be balanced
accordingly.
83. Given our determination of the relevant market, above, we do
not find that the current state of the local television marketplace
justifies ownership of a third in-market station. Broadcast commenters
suggest that permitting ownership of a third, or additional, in-market
station would enable broadcasters to compete more effectively,
especially in large markets with a large number of full-power
commercial stations. We do not find adequate support, however, for the
notion that allowing ownership of a third station would generate public
interest benefits outweighing potential public interest harms. The
hypotheticals cited by commenters do not state why adding a third low-
ranked station would grant a combination of two other lower ranked
stations efficiencies and benefits above and beyond what a combination
of two stations could achieve. While greater consolidation may lead to
more operating efficiencies for the commonly owned stations, such
consolidation also would mean the loss of an independent station
operator, to the detriment of competition, localism, and viewpoint
diversity. We find that any such marginal additional efficiency fails
to outweigh the countervailing harms to these public interest goals.
Excessive consolidation from a lack of ownership restrictions threatens
the Commission's competition and diversity goals by jeopardizing the
continued existence and operations of small and mid-sized broadcasters
that may be bought out by larger competitors instead of, as broadcast
commenters suggest, enabling them to combine to become more effective
competitors to the larger stations.
84. Based on Nielsen viewership data over the period May 2021 to
April 2022 and advertising revenue data for 2021 from BIA Kelsey Media
Access Pro, the majority of television markets are already highly
concentrated according to the 2010 Horizontal Merger Guidelines. The
guidelines classify market concentration using HHI. The Commission
examined Nielsen viewership data over the period May 2021 to April 2022
to compute the viewership HHIs. The Commission examined ad revenue data
for 2021 from BIA Kelsey Media Access Pro to compute the advertising
revenue HHIs. Even taking into account viewership of all noncommercial
full-power television, Class A, and LPTV stations
[[Page 12213]]
and any associated multicast streams in addition to all full-power
commercial television stations, 147 of the 210 local television markets
have viewership HHIs of greater than 2,500, meaning they are highly
concentrated. Likewise, factoring in advertising revenue from all
commercial full-power television, Class A, and LPTV stations and any
associated multicast streams, 166 markets have advertising revenue HHIs
of greater than 2,500. Given the current levels of concentration in
television markets, we find no grounds to loosen the existing numerical
limits.
85. Top-Four Prohibition. We retain the general prohibition on
common ownership of two stations ranked in the top four of audience
share in a market, along with the ability to allow such combinations on
a case-by-case basis. At the same time, however, given changes in
broadcast industry practice, we update our methodology used to
implement this part of our rule. Specifically, we update the audience
share metric used to determine a station's in-market ranking and
clarify that ratings data should be averaged over the 12-month period
preceding a transaction. Additionally, we incorporate the ratings of a
station's multicast streams, to the extent such streams have measurable
ratings, to reflect a station's total audience share more accurately.
86. Consistent with the Commission's prior decisions, we continue
to find that a combination involving two of the top-four stations in a
market would be the most detrimental to competition, and thus the
public interest. We continue to find that top-four combinations would
often result in a single entity obtaining a significantly larger market
share than other entities in the market and that such combinations
could create welfare harms such as reduced incentives for local
stations to improve their programming, as allowing former rivals to
combine would reduce incentives to compete vigorously against one
another. Notably, there are still four major broadcast networks (ABC,
CBS, NBC, and Fox), and the programming from these networks continues
to be the most highly rated. These top-four broadcast television
networks continue to have a distinctive ability to attract large
primetime audiences on a regular basis, and generally the top-four
stations in any market are affiliated with these highly-viewed
networks. Accordingly, we continue to find that the ability to attract
mass audiences distinguishes the top ranked stations in local
television markets so that owning two such stations in a market should
be prohibited. We find further that top-four ranked stations are also
still the most likely stations to originate local news. Accordingly,
prohibiting top-four combinations helps ensure a diversity of voices
among those stations providing such coverage of local issues. We note
that, in the past, the Commission has cited the typical gap in ratings
between the fourth and fifth ranked stations in a market as supporting
the Top-Four Prohibition. To the extent there are situations where, for
instance, a large gap in ratings occurs between the third and fourth
ranked stations in a market (rather than between the fourth and fifth
ranked stations), the fact remains that there is substantial
concentration of audience share among the top-ranked stations in most
markets and such situations may be indicative of the largest stations
in a market exploiting loopholes in our rule (which we address today)
to increase their market shares. For instance, our rule was
historically premised on the notion that four full power stations in a
market corresponded with four Big Four network affiliates. However, as
discussed below, there are now numerous examples where entities have
moved programming from what had been top-four rated stations (including
Big Four network affiliates) to low power stations or multicast
streams, such that what had been top-four rated station programming now
may be aggregated on fewer than four full power stations (or among
fewer than four separate owners) in a market. Accordingly, even if,
say, the top three full power stations, rather than the top four full
power stations, may dominate audience share in some markets, it
certainly does not follow that one of those three stations
categorically should be permitted to acquire the fourth ranked station
and increase its market share even more. Rather than eliminating the
Top-Four Prohibition, we find that the flexibility of the case-by-case
approach to consider combinations of top-four rated stations is better
suited to address broadcasters' concerns about the viability of
stations in smaller markets or situations in which there may no longer
be a clear-cut distinction between the top-four rated stations and the
rest of the stations in a market.
87. We note that the Top-Four Prohibition's case-by-case approach
serves an important purpose by affording flexibility to the Commission
and licensees to consider combinations of highly ranked stations in
unique circumstances. And we are not persuaded by the sweeping claims
that for the broadcast television industry to remain viable,
broadcasters must be given greater opportunities to consolidate without
reference to such circumstances. Nor do such claims change our
conclusion about the actual objective of the quadrennial review, which
is to review our rules to ensure that they remain necessary in the
public interest as a result of competition to promote the Commission's
public interest goals of competition, localism, and diversity. As the
record demonstrates, broadcast television stations have multiple
streams of revenue that support them. One stream, advertising revenue,
has remained fairly steady in recent years, even while, broadcasters
assert, they have lost advertising dollars to other sources of video
programming. According to a Pew Research Center analysis of MEDIA
Access Pro & BIA Advisory Services data, local television over-the-air
advertising revenue follows a cyclical pattern that sees significant
increases from political advertising during even-numbered elections
years. By contrast, other industries besides broadcast television
(e.g., print advertising, newspaper classifieds, and direct-mail
advertising) have seen precipitous and lasting declines in advertising
revenue concomitant with the growth of online advertising. In light of
this, it is possible that online advertising is not siphoning
advertising dollars only, or even primarily, away from broadcast
sources. Stations increasingly are also generating revenue from digital
advertising and the distribution of their programming on digital
platforms. Most importantly, as discussed above, many broadcast
television stations also receive per subscriber fees from video
programming distributors in exchange for retransmitting their broadcast
programming. Retransmission consent fees remain a significant source of
station revenue and one that, at least for now, is expected to continue
growing. Ultimately, we find assertions regarding the future of
retransmission consent fees to be speculative and that retransmission
consent fee revenue continues to grow, in spite of predictions that
they may flatten out or decrease at some point in the future. We note
further that technological developments in broadcast television could
create opportunities for other revenue sources from new digital
services ancillary to ATSC 3.0. ATSC 3.0 is a television transmission
standard currently being developed by broadcasters with the intent of
merging the capabilities of over-the-air broadcasting with the
internet's broadband viewing and information
[[Page 12214]]
delivery methods while using the same 6 MHz channels presently
allocated for digital television.
88. We find that on the whole, the record does not demonstrate an
imminent threat to the viability of broadcast television at this time
that would either warrant, or, more importantly, be remedied by
loosening or eliminating the Top-Four Prohibition. Broadcast commenters
argue for the Top-Four Prohibition to be repealed because they claim it
prevents consolidation that is crucial for broadcasters to continue
serving the public interest. Conversely, ATVA and NCTA assert that the
rule must be retained to protect consumers from rising costs due to
pass through of retransmission consent fee increases that result when
broadcasters are able to negotiate retransmission consent fees for two
top-four stations jointly in a market. Even if we were to accept
broadcasters' arguments that certain broadcast television stations in
certain markets (e.g., smaller markets) are struggling to produce local
programming due to an inherently limited revenue base and may benefit
from consolidation, such a finding would not support relaxing the local
television rule in all markets. Broadcasters would have us eliminate
all ownership restrictions in all markets to enable consolidation that
may only be of some benefit to certain stations in certain markets.
Some commenters support relaxation of the rules only for smaller
markets. As discussed below, we find that the local television rule's
case-by-case approach allows for the Commission to address the
challenges faced by small and other uniquely situated markets. The
case-by-case flexibility contained in the current rule is intended to
account for the practical challenges some stations may face.
89. We find that the case-by-case approach has allowed the
Commission to maintain the proper balance between ensuring that no
market is excessively concentrated and allowing flexibility in
particular circumstances. Although some commenters state that the case-
by-case approach offers inadequate relief because of the lack of any
defined criteria for granting relief, the Commission previously offered
several examples of information that could help establish whether
application of the Top-Four Prohibition would be in the public
interest, such as (1) ratings share data of the stations proposed to be
combined compared with other stations in the market; (2) revenue share
data of the stations proposed to be combined compared with other
stations in the market, including advertising (on-air and digital) and
retransmission consent fees; (3) market characteristics including
population and the number and types of broadcast television stations
serving the market (including any strong competitors outside the top-
four rated broadcast television stations); (4) the likely effects on
programming meeting the needs and interests of the community; and (5)
any other circumstances impacting the market, particularly any
disparities primarily impacting small and mid-sized markets. Variations
in local markets and specific transactions make it impractical to
provide an exhaustive set of criteria for the case-by-case analysis,
but we will continue to monitor transactions and the marketplace in the
course of further reviews and identity additional factors as it is
useful to do so. Moreover, we note that pursuant to the previously
articulated factors and even in the absence of rigid criteria, the
Commission granted three case-by-case requests for flexibility
affecting five DMAs before the provision was temporarily vacated and
subsequently restored by the courts, demonstrating the utility of the
case-by-case approach under appropriate circumstances.
90. We decline to adopt presumptions in favor of top-four
combinations at this time and based on the current record as
recommended by some commenters. Gray suggests that the Commission
should adopt presumptions in favor of top-four combinations where an
entity commits to improving local news. Although the Commission has
considered additional local programming to be a factor in previous
requests, we find that creating a presumption in all such requests may
detract from examining the unique circumstances of a market, such as
the level of local programming already present or the relative strength
of the stations in the market, as intended by the case-by-case
approach. Also, ION Media argues that top-four combinations should be
presumed to comply with the rules, and the burden should be on
opponents of a proposed top-four combination to show that it would
violate the Commission's policies. We do not find that there is
adequate record support for changing the Commission's previous
conclusion regarding the anticompetitive nature, in general, of
combinations of top-four ranked stations in the same market. As the
Commission has stated, we find that most combinations of top-four
ranked stations would result in a single entity obtaining a
significantly larger market share than others in the market and that
such combinations would create public interest harms. Furthermore, the
impact of top-four station combinations could vary greatly depending on
factors such as the relative strength of the stations in the market,
which would weigh against creating a presumption based on other
factors. Therefore, we find it preferable to allow for exceptions to
the prohibition rather than to presume such combinations should be
allowed.
91. Finally, we adopt two modifications to elements of the Top-Four
Prohibition to better reflect current broadcast industry practices.
While commenters for the most part either support retaining the Top-
Four rule as-is or repealing it completely, we find that it is
appropriate to update the methodology used to determine whether a
station is ranked among the top-four stations in a Nielsen DMA to
comport with current market realities. We retain the language in the
rule that allows for consideration of other comparable audience
measuring services in addition to Nielsen to keep flexibility in the
rule. The first modification updates the audience share metric used to
determine a station's in-market ranking and specifies that ratings data
must be averaged over a 12-month period preceding any transaction. The
second modification clarifies that, because the rule only references
``stations,'' the ratings of multicast streams will be aggregated with
the ratings of all non-simulcast programming airing on streams owned,
operated, or controlled by the same station, provided that such streams
have measurable ratings reported by an audience measuring service and
are not the simulcast stream of another in-market station.
92. First, we modify the provision in the current rule that
determines market ranking to use the Sunday to Saturday, 7AM to 1AM
daypart in order to reflect more accurately a station's performance in
terms of audience share. In addition, we delegate to the Media Bureau
the authority to update the relevant FCC forms to conform with the
changes we adopt today. Previously, the rule determined market ranking
``based on the most recent all-day (9 a.m.-midnight) audience share, as
measured by Nielsen Media Research or by any comparable professional,
accepted audience ratings service.'' The NPRM sought comment on whether
this data point is still the most useful for accurately determining a
station's ranking for purposes of the Top-Four Prohibition. As Gray and
Nielsen indicate, that daypart, which is also used for evaluating
failing station waiver requests, does not accurately reflect a
station's full performance in light of programming changes over the
years, including the addition of early
[[Page 12215]]
morning programming. In particular, we expect that expanding the
daypart will capture more local news, an important part of a station's
programming and a driver of viewership that stations have begun airing
earlier in the day than in the past. Moreover, using the 7AM to 1AM
daypart, as opposed to a 24-hour reporting period, avoids ``minor
fluctuations'' in ratings during nighttime hours when some stations may
not transmit video programming. Lastly, given that the existing 9AM to
midnight daypart is also used for determining audience share for
purposes of evaluating failing station waiver requests, we find that
using the new 7AM to 1AM daypart in the failing station waiver context
going forward makes sense logically for the same reasons discussed
above and to maintain consistency in the Commission's methods. We find
that making this change is the logical outgrowth of updating the Top-
Four Prohibition since the use of audience measurements in both
contexts serves the same purpose in allowing the Commission to evaluate
a station's performance in its local market, and the same measurement
has historically been used for both.
93. We also specify that, for purposes of determining a station's
in-market ranking under the Local Television Ownership Rule, the rule
will require submission of ratings averaged from available data over a
12-month period immediately preceding the date of application rather
than an average over a shorter ratings period or a snapshot of a single
such data point (i.e., ratings at the time an assignment of license or
transfer of control application is filed with the Commission). Also,
where the station or stations at issue have changed network
affiliations within the preceding 12 months, the ratings should be
averaged for the period since the affiliation change took place so as
to most accurately reflect the ratings position of the station or
stations at the time of application. While the NPRM sought comment on
whether the Commission should clarify the phrase ``at the time the
application to acquire or construct the station(s) is filed'' with
respect to the appropriate ratings data applicants submit for
consideration, we received no comments responsive to this question. We
note that ratings data have become available on a more frequent (and
more frequently updated) basis than in the past and are now accessible
for many different time periods. We find that replacement of the phrase
``most recent'' in favor of establishing a defined time period in this
manner will enable a more complete understanding of the market and the
competition among stations within it. Such information will in turn
better inform the Commission and public as to whether a proposed
transaction is in the public interest. In particular, such an approach
will provide a more accurate assessment of a station's true market
position by minimizing the impact of seasonal or one-off monthly
ratings anomalies (typically the result of sporting events or seasons)
and also reduce opportunities for gamesmanship based on the lack of a
clearly established timeframe in the rule's language. For example,
applicants would have less incentive to time a transaction or
application filing to correspond with a period where a station
experiences abnormally low ratings. Finally, the consideration of
ratings averaged over a 12-month period will apply to all instances
that involve determinations of whether stations are ranked in the top-
four, including applications of Note 11 to section 73.3555 and its
extension as described below.
94. Second, going forward we will aggregate the audience share of
all free-to-consumer non-simulcast multicast programming airing on
streams owned, operated, or controlled by a single station to determine
the station's audience share and ranking in a market (to the extent
that such streams are ranked by Nielsen or a comparable professional,
accepted audience ratings service). The NPRM sought comment on whether
and how the Commission should evaluate multicast streams for purposes
of the Local Television Ownership Rule. The existing rule does not
specify that it includes multicast streams, but we find that ignoring
such streams when evaluating a station's in-market audience share is no
longer appropriate given the proliferation of such programming and the
industry trend toward carriage of major network affiliate programming
on such streams. To the extent that a nonprimary multicast stream has
measurable audience ratings, not accounting for such ratings when
evaluating a station's performance would seem to ignore a potentially
significant portion of the station's service and competitive strength
within the market. Some multicast streams have ratings reported by
audience ratings services while others do not. We find that, to the
extent Nielsen or a comparable professional, accepted audience ratings
service reports ratings for a multicast stream, such a stream is
significant enough to be included in its station's audience ratings
measurement. The use of multicasting has grown in prevalence over the
years and is expected to continue to grow as a way for broadcasters to
expand their offerings and distribution. Although accounting for
nonprimary multicast streams may not have affected a station's ratings
significantly in the past, such streams may have an impact on ratings
now and in the future, and thus including them in ratings should
provide a better indicator of the competitive strength and health of a
station than simply focusing on a single stream. As noted, some
stations are even placing programming affiliated with major broadcast
networks on nonprimary multicast streams, making it all the more
important to consider in our analysis when possible.
95. We limit aggregation to free-to-consumer programming airing on
streams owned, operated, or controlled by a station because stations
make such streams available to consumers over the air as part of their
broadcast signal. We also do not count simulcast streams airing the
programming of another station, because, based on Commission
experience, the ratings for such streams typically are measured by
audience ratings services as part of the ratings for their originating
stations. Accordingly, because the multicast stream's ratings are not
separately reported, we do not aggregate the programming's ratings in
order to avoid double counting ratings already attributed to another
station. In other words, if a station utilizes one of its nonprimary
multicast streams to simulcast the primary programming stream of
another station, the ratings of that simulcast stream will not be
aggregated in determining the overall ratings of the station. Through
these limitations, we find that aggregation will capture a station's
true ratings by focusing on programming originating from that station
and broadcast in the same manner as traditional television signals.
96. Similarly, we are aware that some broadcast stations may be
hosting programming of other stations on a temporary basis during the
transition to ATSC 3.0. We clarify that only the ratings of programming
owned or controlled by a station and airing on the station's multicast
streams will be aggregated. Consistent with the way such streams are
licensed, we do not find that hosting the ATSC 1.0 signal of another
station for purposes of the transition amounts to operating the
signal's programming. In other words, if Station A is hosting Station
B's ATSC 1.0 signal on one of its multicast streams, Station B's ATSC
1.0 ratings will not be aggregated with Station A's
[[Page 12216]]
multicast streams (which are airing programming belonging to Station
A). Rather, Station B's ATSC 1.0 ratings will be aggregated with those
of Station B's streams depending on how audience ratings services
choose to incorporate ATSC 1.0 and 3.0 ratings into their measurements.
97. Anti-Circumvention Measures. Note 11 to section 73.3555 of the
Commission's rules prohibits certain types of acquisitions of a network
affiliation by one station from another station in the same market that
the Commission has found to be the functional equivalent of an
assignment or transfer of control from the standpoint of our Local
Television Ownership Rule. For example, since the last quadrennial
review, the Commission has taken action against certain affiliation
acquisitions that violate Note 11. Today we take further action to
expand the measure contained in Note 11 to prevent other means of
circumventing the Top-Four Prohibition. In response to the NPRM's
questions about entities placing major network affiliations on
multicast streams and LPTV stations, parties have raised in the record,
and the Commission has observed itself, that some station owners appear
to be circumventing the prohibition on network affiliation
acquisitions--and hence the Top-Four Prohibition--by acquiring the
network-affiliated programming of another top-four full power station
in the DMA, either alone or in conjunction with other tangible and non-
tangible assets and then placing that programming on the multicast
stream of an existing full power station or on an LPTV station in the
same DMA, neither of which is counted for purposes of the Local
Television Rule. Because we view such actions as undermining our Local
Television Rule, we revise the language in Note 11 to extend the
existing prohibition on certain network affiliation acquisitions to
prohibit such behavior in the future and ensure the efficacy of our
rule.
98. We take this action to preserve the efficacy of the Top-Four
Prohibition because we find it necessary to prevent further
exploitation of unintended ambiguities or gaps in the rule. Such
exploitation harms competition and denies consumers the benefits of
competition. Therefore, we find that our actions are consistent with
the statutory mandate of section 202(h) to modify a rule so that the
rule continues to serve the public interest.
99. The record demonstrates that there are two methods through
which parties have been able to achieve results that are inconsistent
with the policy objectives and intent of the Top-Four Prohibition
rule's Note 11 provision. Although different in certain respects, the
two methods both avoid acquisition of another full-power station in the
same local market and instead rely on use of broadcast facilities or
transmissions that have not been subject to the ownership limitations
placed on full-power facilities. For the sake of clarity, we employ
hypothetical examples to illustrate the methods in operation.
Accordingly, consider situations involving two independently owned,
full-power stations among the top four stations (as measured by
ratings) in the same local market. Station A is affiliated with Network
YYY and Station B is affiliated with Network ZZZ.
<bullet> Under the first scenario, the licensee of Station A
acquires Station B's Network ZZZ affiliation but, stymied by the
ownership rules from also buying Station B outright, instead places the
Network ZZZ affiliation on an LPTV station that the licensee of Station
A already owns in the market. This action comports with the
Commission's regulations to date because LPTV stations have been exempt
from the Local Television Ownership Rule's restrictions.
<bullet> Under the second scenario, the licensee of Station A still
acquires Station B's Network ZZZ affiliation but simply places it on
one of Station A's own digital multicast streams. This action also
comports with the Commission's regulations to date because the agency
has not treated a licensee's multiple programming streams on a single
station (e.g., a primary and one or more multicast stream) to be the
functional equivalent of operating two stations.
100. However, the use of an LPTV station or multicast stream in
these manners to air top-four rated programming acquired from an in-
market competitor results in the acquiring party's obtaining the
equivalent of a second top-four rated station in terms of audience and
revenue share in the local market. In this manner, parties have
obtained the programming and non-license assets of a competing, in-
market full power television station, typically without the need or
opportunity for any review by the Commission, as no broadcast station
license is being transferred. Further, by acquiring the network
affiliation and most valuable non-license assets from the former
station, these machinations typically result in the removal of a
commercial full power competitor from the market. Therefore, such
actions are inconsistent with the Top-Four Prohibition because they
allow excessive aggregation of viewers and revenue among top stations
in the market, which harms competition and the competitive benefits
that flow to consumers.
101. While some broadcast commenters characterize the placing of
major network (e.g., ABC, CBS, NBC, Fox) content on non-primary
multicast streams and LPTVs as legitimate efforts to improve their
stations' programming and to increase the availability of quality
programming in local markets, that does not always appear to be the
case. Instead, rather than representing genuine attempts by stations to
compete better through organic growth, such transactions often appear
to be intentionally manufactured to skirt the prohibitions on excessive
market concentration. Commenters have identified instances, and we are
aware of others that, if not clearly intentional, at least appear to be
deliberately exploiting these loopholes. For example, ATVA identifies
six markets where Sinclair put a newly acquired network affiliation and
programming on a multicast stream where the existing prohibitions would
have prohibited Sinclair from putting the programming on separate full-
power stations. ATVA also characterizes Gray's use of LPTV and
multicasting to cure an apparent Note 11 violation as a ``form over
substance'' move since the end result is still the same accumulation of
top-four affiliations and programming by one entity.
102. We note that, in the past, placing major network affiliations
on LPTV stations or multicast streams happened relatively rarely and
often enabled broadcasters to bring such network programming to so-
called ``short markets,'' that is markets that do not have enough full
power commercial stations to accommodate all of the major networks on
their own individual full power stations. Indeed, the Commission has
considered previously the prevalence of dual Big-Four network
affiliations on multicast streams and expressed its intent to monitor
the issue. While in the past such situations were relatively limited,
circumstances have changed. ATVA and NCTA state that such network
affiliation arrangements and acquisitions are increasingly being used
to circumvent the Top-Four Prohibition and its ban on using an
agreement or series of agreements to effectuate an acquisition of
another station's programming (i.e., affiliation acquisitions or swaps)
by enabling entities to acquire affiliations and non-license assets and
placing them on
[[Page 12217]]
multicast streams or LPTV stations to avoid running afoul of the
existing ban. ATVA identifies 121 instances of this perceived rule
circumvention, 46 of which have occurred in true short markets as
determined by ATVA. ATVA also notes that several such affiliation
arrangements occur in the top 100 Nielsen DMAs, further indicating that
they are not limited to the smallest markets where the number of full
power stations would be more limited. We agree with ATVA and NCTA that
the number of instances where top-four rated programming appears on
nonprimary multicast streams or low power stations now vastly outnumber
the occurrence of actual ``short markets'' where there are an
inadequate number of full power stations to host each major network on
its own full power station.
103. The Commission has encountered similar circumvention of the
Top-Four Prohibition in the past and adopted Note 11 in response.
However, because Note 11's language concerns only stations within the
meaning of the Local Television Ownership Rule (full power stations),
the existing prohibition does not currently restrict the use of LPTV
stations or multicast streams for the reasons discussed above.
Therefore, we expand Note 11 by adding the following language in order
to address some of the new affiliation acquisition practices described
above:
Further, an entity will not be permitted through the execution
of any agreement (or series of agreements) to acquire a network
affiliation, directly or indirectly, if the change in network
affiliation would result in the affiliation programming being
broadcast from a television facility that is not counted as a
station toward the total number of stations an entity is permitted
to own under paragraph (b) of this section (e.g., a low power
television station, a Class A television station, etc.) or on any
television station's video programming stream that is not counted
separately as a station toward the total number of stations an
entity is permitted to own under paragraph (b) of this section
(e.g., non-primary multicast streams) and where the change in
affiliation would violate this Note were such television facility
counted or such video programming stream counted separately as a
station toward the total number of stations an entity is permitted
to own for purposes of paragraph (b) of this section.
104. With the above expansion of Note 11, the Commission going
forward will not permit an entity to acquire the network affiliation of
another in-market station and then place that affiliation on ``a
television facility that is not counted as a station toward the total
number of stations an entity is permitted to own under [the Local
Television Ownership Rule contained in] paragraph (b) of [section
73.3555]'' such as an LPTV station or any other class of television
station exempted from the ownership rules, if the affiliation could not
be placed on a station that is counted ``toward the total number of
stations an entity is permitted to own for purposes of [the Local
Television Ownership Rule contained in] paragraph (b) of [section
73.3555],'' namely, a full-power commercial station. The Commission
also will not permit an entity to acquire the network affiliation of
another in-market station and then place that affiliation on ``any
television station's video programming stream that is not counted
separately as a station toward the total number of stations an entity
is permitted to own under [the Local Television Ownership Rule
contained in] paragraph (b) of [section 73.3555]'' be it a .2, .3, or
.4 multicast stream, if the affiliation could not be placed on a
station that is counted ``toward the total number of stations an entity
is permitted to own for purposes of [the Local Television Ownership
Rule contained in] paragraph (b) of [section 73.3555].'' This
restriction applies to streams that an entity owns, operates, or
controls even when those streams are being hosted by another station in
which the entity has no cognizable interest. We believe these changes
will suffice to resolve the loopholes identified above and to ensure
the efficacy of the Top-Four Prohibition and the public interest
benefits that flow therefrom. Our revision of Note 11 to prevent other
means of circumventing the Top-Four Prohibition is not a content-based
restriction on speech. The prohibition on affiliation acquisitions
involving two top-four stations does not consider content but rather
market concentration. As with Note 11 when adopted in the 2010/2014
Quadrennial Review Order, the extension adopted today will apply on a
prospective basis. The extension will apply to all applications filed
after the release date of this Order and transactions entered into
after the release date of this Order. Where their actions have not
otherwise violated current rules, parties that prior to the release of
this Order had acquired the affiliation of a top-four rated television
station and placed it on a multicast stream and/or a low power
television station in a manner that would violate Note 11 as revised
herein will not be subject to divestiture. All future transactions will
be required to comply with the Commission's rules then in effect. Such
grandfathered arrangements will not be transferable or assignable.
Instead, proposed sales involving such grandfathered station
arrangements in existence as of this Order's release date will be
subject to Commission review upon application to transfer or assign the
license or licenses of the station or stations involved. Consistent
with prior applications of Note 11, entities may seek case-by-case
examination of such proposed transactions and seek Commission approval
to transfer or assign the grandfathered arrangement. Just as with pre-
existing combinations of top-four stations that applicants seek to
transfer intact, this approach will enable the Commission to weigh
potential harms and benefits of permitting the arrangement to continue,
including any unique circumstances of the market and potential effects
related to service disruption to viewers.
105. We find that our approach today closes loopholes to Note 11
and the Top-Four Prohibition while continuing to support legitimate
uses of both LPTV and multicast streams. We note that our amendment to
Note 11 narrowly targets actions by which broadcast stations
effectively seek to circumvent application of the Top-Four Prohibition
and the need for the Commission's transaction review, actions that
typically result in the elimination of an in-market competitor station.
The rule change we adopt today does not inhibit organic growth,
expansion, or changes in station programming, nor does it impact
affiliation changes initiated by a network itself. For example, where a
network, absent any undue direct or indirect influence from a broadcast
entity, chooses to move its affiliation from one station to another in
the market (perhaps because the network is no longer satisfied with the
existing affiliate station and the other station has demonstrated
superior operation and thus earned the affiliation on merit), such a
change in affiliation is not a circumvention of Note 11. A broadcast
commenter points out that the Commission declined to restrict instances
where a station acquired a multicast affiliation with a major network
through direct negotiations with the network rather than with the
existing local affiliate. The Commission did state that Note 11 would
not apply in situations where a network offers an existing duopoly
owner a top-four-rated affiliation (perhaps because the network is no
longer satisfied with the existing affiliate station and the duopoly
owner has demonstrated superior station operation and thus earned the
affiliation on merit) because such a circumstance represents organic
growth of the station and not a transaction that is the functional
equivalent of an assignment
[[Page 12218]]
or transfer of control from the standpoint of our Local Television
Ownership Rule. In contrast, circumstances where a station induces an
existing local affiliate to terminate its affiliation with its network
so that the station can then affiliate with the same network clearly
falls outside of the situation described by the Commission.
106. In adopting this approach, we reject suggestions that the
Commission should eliminate the exemption of LPTV stations for purposes
of the Top-Four Prohibition, except in markets without at least four
full-power stations. That approach would effectively eliminate the
existing provision in our rules exempting LPTV stations from the local
television ownership restrictions. When the Commission adopted its
rules exempting LPTV stations from the ownership restrictions, 47 FR
21468 (May 18, 1982), it found that LPTVs were limited by their
coverage, operation, and secondary status, and that such limitations
weighed in favor of ``permitting experienced participants in the market
to pioneer the low power service.'' It found further that pioneering
the creation of such low power service outweighed the Commission's
traditional concerns regarding multiple ownership. Accordingly, LPTV
stations have never been subject to the Commission's multiple ownership
rules, nor seen as entirely equivalent to full power television
stations. At this time, we do not find that the record supports
completely abandoning this previous determination or fully extending
the local television ownership restriction to LPTV.
107. Similarly, we reject ATVA's suggestion that the Commission
prevent a station in a market with four or more full-power or LPTV
stations from multicasting two or more streams of top-four network
affiliated programming. As the Commission has found in the past, a
significant benefit of the multicast capability is the ability to bring
more local network affiliates to smaller markets, thereby increasing
access to popular network programming and local news and public
interest programming tailored to the specific needs and interests of
the local community, and we do not wish to constrain this ability
unnecessarily. However, the record does contain indications that some
entities currently may be using the fact that multicast streams and
LPTV stations are exempt from the ownership rules to circumvent the
Commission's local television ownership restrictions, indications that
are corroborated by the Commission's own aforementioned experience.
Such circumvention runs directly against the intended purpose of
exempting LPTV and multicast streams, which was expected to benefit
competition in the form of new programming alternatives and increasing
the availability of network programming respectively. In adopting the
LPTV exemption, the Commission believed that excluding LPTV from
ownership restrictions would ``foster a low power service that can grow
to provide program alternatives to full service stations and cable
systems in a manner that increases competition in the marketplace and
thus enhances the telecommunications service available to the public.''
Therefore, although we do not change the Top-Four Prohibition's
methodology with respect to LPTV and multicast streams in general, we
nevertheless find our action today appropriate to address when entities
seek to exploit the exemption in ways that circumvent our rules and
result in market concentration, considering both the exemptions'
original pro-public interest purposes and the clear intent of the Top-
Four prohibition.
108. We recognize that in the future licensees may devise other
ways to read our rules narrowly or to manufacture transactions that
circumvent the intended purpose of the Top-Four Prohibition. At this
time, the Commission will not prohibit conduct other than that which we
have observed to be circumventing the purpose of established rules, as
there remain compelling reasons for low power and satellite television
stations to remain transferable and otherwise exempt from our ownership
rules. Although the NPRM sought comment on satellite stations as
another type of television station exempted from ownership restrictions
through which an entity could air multiple major network-affiliated
programming, the record does not indicate that satellite stations are
being misused in such a way. In any case, the language of the
modification to Note 11 includes any station that is not counted for
purposes of the local ownership restriction and is not limited to LPTV
or multicast streams as the only possible methods for circumvention.
However, we stress that this should not be interpreted as an invitation
for licensees to invent creative ways to circumvent the clear intent of
our ownership rules, and the Commission stands ready to take further
action as necessary. Finally, we note that if an entity believes the
Top-Four Prohibition and Note 11 should not apply to its plan to place
on a low power station or multicast stream an affiliation or affiliated
programming acquired from another top-four station in the same market,
the entity may seek case-by-case consideration under the Local
Television Ownership Rule. Put another way, just as entities may seek
case-by-case review of a top-four combination that would otherwise
violate the Top Four Prohibition, entities may also seek case-by-case
consideration of an affiliation acquisition that we would consider
effectively equivalent to a top-four acquisition and that would
otherwise violate Note 11 of our rule. In small markets, the Commission
may look favorably upon a request for consideration where, if Note 11
were to be applied, the result would be fewer programming streams in
the market than there were before (e.g., an assignment or transfer of
control of a grandfathered combination where coming into compliance
with Note 11 would result in the loss of an existing top four stream
from the market).
109. Broadcast Spectrum Auction and Next Generation Broadcast
Television Transmission Standard. We conclude that neither the
television broadcast incentive auction, conducted in 2016, nor the
related repack of the television spectrum, concluded in late 2020, had
any significant effects on local television ownership or implications
for retention or modification of the Local Television Ownership Rule.
Nor do we find that the adoption and deployment of the new broadcast
television transmission standard should have any effect on the Local
Television Ownership Rule.
110. First, we find that the auction and resulting repack did not
significantly affect the ownership ranks or our consideration of the
ownership rules. As we noted in the Public Notice seeking to update the
record of this proceeding, only 41 television stations permanently
discontinued operations as a result of the auction. All other stations
involved in the auctions are still available to their viewers because
they chose to implement channel sharing arrangements or moved from the
UHF to the VHF band. The 41 television stations that surrendered their
licenses represented less than 2% of the 2,148 full power and Class A
stations that existed at the time. Furthermore, only 19 of the 41
stations that surrendered their licenses and terminated service were
full power commercial stations, which represents a reduction of 1.38%
of the 1,373 full power commercial stations counted in the most recent
broadcast station totals. In sum, we find the impact of the incentive
auction and resulting repack of the television spectrum on ownership to
be negligible.
[[Page 12219]]
111. Second, the record does not indicate that the broadcasters'
voluntary transition to the ATSC 3.0 transmission standard has any
immediate or direct implication for the ownership rules. Although we
noted above that new digital services ancillary to ATSC 3.0 could
create revenue opportunities for broadcast stations that belie a bleak
outlook of the broadcast industry, we do not find that the benefits of
ATSC 3.0 have been actualized to the point where we could draw any more
direct implications until the new transmission standard becomes more
widely deployed. There is no evidence in the record that use of 3.0
allows anyone to own more or less stations, creates any loopholes to
our rules, or affects any of the conclusions underlying our actions in
this proceeding. We will continue to monitor any innovations and
developments that could affect television industry practices or
otherwise call into question the premises under which the ownership
restrictions were adopted.
112. Shared Service Agreements. We conclude that the SSA disclosure
requirement should be retained to maintain transparency as to the
extent of common operation between broadcast stations. We agree with
the only commenter who mentions the SSA disclosure requirement in the
record, who contends that the rule should be retained because SSA
disclosure facilitates the Commission's analysis of the broadcast
industry and allows the public to analyze ownership diversity in the
industry, recognizing that consolidation of operations could limit
competition and diversity.
113. No commenter provides a reason for eliminating this
requirement, and so in the interest of maintaining transparency, we
conclude that the disclosure of SSAs should continue. As when the
Commission adopted the SSA disclosure requirement six years ago, we
find that the requirement continues to be useful for the public and the
Commission to monitor the content, scope, and prevalence of SSAs, as
well as to evaluate the impact of these agreements on the Commission's
public interest policy goals. Despite calls from some commenters for
greater oversight or action by the Commission, we note that the NPRM in
this proceeding did not seek comment on attributing SSAs, Joint Sales
Agreements, or any other contractual relationships between stations in
the same market, and we therefore do not have an adequate record to
take further action in this order with respect to such agreements. The
Commission eliminated attribution for television JSAs and did not seek
comments on reestablishing attribution in the NPRM. Several commenters
nevertheless call on the Commission to attribute sharing arrangements,
which they perceive as a loophole to the ownership restrictions.
114. Minority and Female Ownership. We find that retaining the
existing ownership limits continues to preserve opportunities for
ownership diversity, including minority and female ownership. As in
past quadrennial reviews, we retain the existing Local Television
Ownership Rule for the reasons stated above, primarily to promote
competition among broadcast television stations in local markets.
Nevertheless, we also find that retaining the existing rule can promote
opportunities for diversity in local television ownership. Broadcast
commenters state that the best way to encourage broadcast ownership by
new entrants, including minority and female owners, is to ensure access
to capital by removing rules that impede investment and by
incentivizing existing broadcast owners to provide capital to new
entrants. As stated earlier with regard to radio, we find that the
existing rule strikes the appropriate balance between incentivizing
investment in broadcasting and ensuring that station-buying
opportunities exist for new entrants in a market, particularly since
investment by new entrants is less likely in a market that is highly
concentrated. We share the concerns of commenters such as LCCHR, Free
Press, NABOB, NHMC, and UCC et al. that media consolidation could
further increase entry barriers for ownership by people of color and
women by decreasing the likelihood that television stations would be
sold to a new entrant. In addition, the Commission has observed some
evidence that divestitures and other transactions made to comply with
the existing ownership limits have resulted in new entrants, including
minority and female owners, entering into local television markets.
115. Ultimately, we find there is no basis to conclude that
retaining the Local Television Ownership Rule with the slight
modifications we adopt above will harm minority and female ownership.
If anything, we believe that retention and modification of the rule
will maintain a level of competition and multiplicity of speakers that
could allow room for entry into the market, including by minority or
female owners. We do not find that our modifications to the Top-Four
Prohibition will have a negative impact on minority and female
ownership as the modifications simply support the competitive purposes
of the overall television ownership rule. In addition, the
modifications will apply on a prospective basis, and the case-by-case
approach provides the opportunity for flexibility in application of the
Top-Four Prohibition should it prove necessary. As the Commission has
stated in the past, ensuring ``the presence of independently owned
broadcast television stations in the local market [indirectly
increases] the likelihood of a variety of viewpoints and preserving
ownership opportunities for new entrants.'' We continue to believe this
to be the case. Accordingly, we find that retaining the Local
Television Ownership Rule as modified furthers the public interest by
ensuring the potential for new and diverse entrants.
116. Cost-Benefit Analysis. In light of the lack of record on the
specific costs or benefits of this rule, and the limited nature of the
modifications we adopt today, we believe that the public interest
benefits achieved by retaining the rule as so modified outweigh the
potential economic cost of complying with this long-standing structural
ownership rule. While the NPRM sought quantifications of the costs and
benefits of its proposed changes, we note that commenters did not
provide such quantifications in the record. For all the reasons
explained in the discussion above, we conclude that the public interest
benefits promoted by the rule outweigh the cost of compliance with the
rule. Also, any potential benefits that further consolidation might
offer television station owners are outweighed by potential public
interest costs to the consumer in the form of harms resulting from
weakened competition within the local broadcast television market, less
viewpoint diversity in the only entities producing local programming,
and fewer opportunities for new market entrants.
C. Dual Network Rule
117. We find that the Dual Network Rule, which effectively
prohibits a merger between the Big Four broadcast networks
(specifically, ABC, CBS, Fox, and NBC), remains necessary in the public
interest to protect and promote both competition and localism. With
regard to competition, we find that the Big Four broadcast networks
have a unique ability to regularly attract large, national audiences,
which separates them from other broadcast and cable networks. And given
their large audience shares, the Big Four broadcast networks earn
higher rates from advertisers seeking to consistently reach mass
audiences than other networks are able to earn. We find that loosening
the rule to allow a combination between Big Four broadcast networks
would lessen
[[Page 12220]]
competition for advertising revenue and likely subsequently result in
the remaining networks paying less attention to viewer demand for
innovative, high-quality programming. With regard to localism, we find
that the Dual Network Rule increases the bargaining power of local
broadcast affiliates and enables them to influence Big Four broadcast
network programming decisions in ways that better serve the interests
of their local communities.
118. The Dual Network Rule states: ``A television broadcast station
may affiliate with a person or entity that maintains two or more
networks of television broadcast stations unless such dual or multiple
networks are composed of two or more persons or entities that, on
February 8, 1996, were `networks' as defined in Sec. 73.3613(a)(1) of
the Commission's regulations (that is, ABC, CBS, Fox and NBC).''
Section 73.3613(a)(1) in turn defines ``network'' as ``any person,
entity, or corporation which offers an inter-connected program service
on a regular basis for 15 or more hours per week to at least 25
affiliated television licensees in 10 or more States; and/or any
person, entity, or corporation controlling, controlled by, or under
common control with such person, entity or corporation.'' Therefore,
the rule allows common ownership of multiple broadcast networks, but
effectively prohibits a merger between or among the Big Four broadcast
networks, ABC, CBS, Fox and NBC. The Dual Network Rule has existed
since the 1940s and has remained largely unchanged except for a
revision in response to the Telecommunications Act of 1996. In the
Telecommunications Act of 1996 Congress permitted common ownership of
two or more broadcast networks, but not a merger among ABC, CBS, Fox or
NBC, or between one of these networks and the two largest emerging
networks, UPN or WB. In 2001, after concluding in its 1998 Biennial
Review that the rule as applied to UPN and WB might no longer be in the
public interest, the Commission further modified the dual network rule
to permit a Big Four network to merge with or acquire UPN or WB. In the
NPRM, the Commission sought comment on whether the Dual Network Rule
remained necessary in the public interest to protect competition and
localism as the Commission previously held in its 2010/2014 Quadrennial
Review Order. Specifically, the Commission sought comment on whether
broadcast networks still participated in the video marketplace by (1)
assembling and distributing a collection of programming suitable for
large, national audiences, and (2) selling advertising based on this
programming to large, national advertisers. The Commission further
asked if the Big Four broadcast networks still outperform their
broadcast and cable counterparts in terms of viewership and advertising
revenue such that they represent a ``strategic group'' within the
marketplace. The Commission also asked how online video distributors
and digital advertisers have affected competition for national
broadcast television advertising. Finally, the Commission sought
comment on whether the rule still promotes an important and sufficient
balance between the national interests of the Big Four broadcast
networks and the local interests and obligations held by their local
affiliates. The Commission received little comment focused on the Dual
Network Rule in response to the NPRM and the 2021 Update Public Notice.
In the record, there appears to be nominal interest in changing the
rule while a handful of other commenters call for the Commission to
retain the rule without modification.
119. After careful review, we find that the Dual Network Rule
remains necessary in the public interest despite marketplace changes,
as it continues to foster our core policy goals of competition and
localism. Consistent with our findings in the past, we find that the
rule promotes competition in the provision of programming suitable for
large, national audiences and the sale of national advertising time and
furthers localism by maintaining a balance among the Big Four broadcast
networks and their affiliate groups.
120. Competition. The Big Four broadcast networks continue to hold
a unique position in the video marketplace. They earn higher and more
consistent ratings on linear television than other broadcast and cable
networks. With their high ratings, the Big Four broadcast networks in
turn are highly sought after by advertisers seeking to reach large,
national audiences. The Big Four broadcast networks largely compete
amongst themselves for such advertising revenue, and to differentiate
themselves, they attempt to produce programming that will generate the
highest ratings possible from the widest audiences. We find that such
competition for revenue and audience share serves the public interest
by spurring the networks to compete to develop and deliver programming
that is innovative, high-quality, and of interest to the viewers. If
two of the networks were to merge, competition for this advertising
revenue would lessen and the networks would be less incentivized to
compete for viewers by providing a national television product that is
desired by viewers. Accordingly, we find that the Dual Network Rule
remains necessary in the public interest to promote competition in the
provision of programming suitable for large, national audiences and the
sale of national advertising time.
121. This conclusion is supported by data that show the Big Four
broadcast networks are in a class of their own when it comes to
producing national programming and selling national advertising time
such that a merger among these networks would reduce competition and
would be likely to increase these networks' ability to create barriers
to entry. As demonstrated by the data below, a review of both the total
primetime ratings of the networks and the primetime ratings of
individual shows reveals that, in general, the Big Four broadcast
networks consistently attract the largest audiences, greatly exceeding
the ratings of their broadcast and cable counterparts. Over the last
several years, cable networks, as well as some online services, have
produced some high-quality television series that can draw high ratings
comparable to the Big Four broadcast networks or reach sizeable
audiences. These shows are the result of significant investments and
many are critically acclaimed and garner media attention. However, as
discussed below, this programming still does not achieve the sort of
consistent audience share and advertising revenue that the programming
of the Big Four broadcast networks generate. And we continue to find
that the Big Four broadcast networks form a unique and discrete group
within the video marketplace.
122. For example, the most popular show outside of National
Football League programming in the 2021-2022 television season was
Yellowstone airing on the basic cable channel Paramount Network
(formerly SpikeTV), which averaged 11.312 million total viewers across
its fourth season. This cable network show has surged in popularity
since its premiere in 2018. However, Nielsen ratings data reveal that
Yellowstone is not only the only program aired by Paramount Network to
make it on the annual list of the 100 most-popular shows judged by
average total viewers, but also is the only non-NFL affiliated program
from any cable network that makes it into the top 70 most-watched
shows. The next highest rated show aired by a cable network is the
cable network History's Curse of Oak Island, which ranks 72nd with a
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3.611 million total viewers average. In contrast, the non-sports
programming of the Big Four broadcast networks dominates the list with
25 of the top 30 shows averaging at least 7 million total viewers in
the 2021-2022 season. Notably, CBS had 14 of those shows; NBC had
seven; and Fox and ABC each had two. Further, of the 39 non-sports
telecasts on the list of 100 most-watched telecasts, all but two aired
on a Big Four broadcast network.
123. Further indicating the unique status of the Big Four broadcast
networks, sports leagues seeking to reach the largest audiences
generally seek to enter into rights agreements with those networks in
part because of their proven ability to reach a mass audience. Due to
the revenues they are able generate by packaging and distributing
sports programming alongside other highly rated network programming,
the Big Four broadcast networks are also in a unique position to pay
substantial fees to control the television rights for sports leagues.
In return, sports programming historically has generated, and continues
to generate, high advertising revenues for the networks in return.
Nielsen ratings data for 2021shows that the Big Four broadcast networks
carried sports programming from the NFL, MLB, NBA, the Olympics, and
NCAA that dominated the list of highest rated telecasts, representing
40 of the top 50 and 51 of the top 100 telecasts. Moreover, based on
the same data, sports programming on the Big Four broadcast networks
represented 39 of the top 50 telecasts watched by the highly sought
after 18-49 demographic. Sports programming airing on cable networks
represented only 9 of the top 50 telecasts for the 18-49 demographic.
We agree with WGAW that sports leagues have significant incentives to
prefer to negotiate programming rights with the Big Four broadcast
networks given their proven ability to reach the largest audiences with
fewer of the technical issues sometimes associated with online
platforms and, in return, have the potential to draw the largest
advertising revenues. While we recognize that some leagues are
experimenting with shifting some programming online, most notably, the
NFL moving Thursday Night Football to Amazon Prime, it appears that
airing programming on a Big Four broadcast network continues to be the
most reliable way to reach the largest, most consistent audience
possible. The continued dominance of the Big Four broadcast networks in
offering the premier sports leagues and events demonstrates further
that these four networks remain distinct from other programming
channels or networks in the video marketplace.
124. Comparing data regarding the average primetime rating of the
Big Four broadcast networks to the top cable networks further
demonstrates the strength of the Big Four broadcast networks. Despite
some individual cable network programs earning high ratings, the
average primetime rating of the Big Four broadcast networks has
remained larger than the audience size for even the most popular cable
networks. In 2016, the average primetime rating for the Big Four
broadcast networks was 3.78, while the average primetime rating of the
four highest-rated cable networks (Fox News Channel, ESPN, TBS, and
HGTV) was 1.45--roughly a 62% difference. Because Spanish-language
networks reach a different audience (i.e., those viewers who speak
Spanish), only English-language cable networks are included in these
averages. We note that if Spanish-language networks were included, it
would not greatly impact the analyses or lead us to change our ultimate
conclusions. Moreover, the Big Four broadcast networks' average
primetime rating was more than four times larger than that of the next-
highest rated English-language broadcast network (The CW). At first
glance, more recent data show the gap in primetime ratings between the
Big Four broadcast networks and either the top cable networks or the
next largest broadcast network is tightening. For example, in 2020, the
Big Four broadcast networks averaged a primetime rating of 2.54 while
the four highest rated cable networks (Fox News Channel, MSNBC, ESPN,
and CNN) average a 1.88 rating, which is approximately a 26 percent
difference. The average primetime rating of the Big Four broadcast
networks was nearly three times the size of the next highest broadcast
network, ION. While smaller than in the past, the percentage
differences between the Big Four broadcast networks and all other
networks remain significant.
125. Moreover, it should be noted that much of the increased cable
network ratings in 2020 were the result of cable news programming that
surged in popularity during the election season on Fox News Channel,
MSNBC, and CNN. If Fox News Channel, MSNBC, and CNN, which are
categorized as more specialty news networks rather than general/variety
networks, are removed and one adds the three next highest rated cable
networks (Hallmark Channel, HGTV, and TLC), the average of the top four
cable networks is reduced to a 1.15 rating, which is roughly a 55
percent difference with the Big Four broadcast networks. We also note
that the differences become much greater when one excludes all
vertically integrated cable networks (i.e. cable networks that share
the same parent company as a Big Four broadcast network). In 2020, the
average primetime rating for the four highest rated non-vertically
integrated cable networks (CNN, Hallmark Channel, HGTV, and TLC) was
1.16, which is roughly a 55 percent difference with that of the Big
Four. We also note that sports and cable news programming is often
produced for a more niche audience rather than for a national, mass
audience, the type of competition which the Dual Network Rule seeks to
promote. If one considers only broadcast and cable networks that S&P
Global categorizes as ``General/Variety,'' the four highest rated,
English-language networks in 2020 were TBS, ION, Investigation
Discovery, and USA with an average primetime rating of 0.77--less than
a third of the Big Four broadcast networks.
126. Beyond just the primetime hours, the Big Four broadcast
networks also still boast a significant advantage in terms of the 24-
hour average ratings, despite an increase for cable networks' ratings
in recent years. In 2020, the average 24-hour rating for the Big Four
broadcast networks was a 1.97 compared to a 1.15 for the four highest
rated cable networks (Fox News Channel, MSNBC, CNN, and Hallmark
Channel).
127. In addition to the disparity in ratings, there continues to be
a wide disparity in the advertising rates charged by the Big Four
broadcast networks and the advertising rat
[…truncated; see source link]Indexed from Federal Register on February 15, 2024.
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