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pG;2a=5,u&a\  P6G;&P2e=5,&e4  pG;&\0_=5,%&_*f9 xr G;&X  P:% ,J:\  P6G;JP!H5!,),5\  P6G;,P\"{,W80,%BZW*f9 xr G;X#1a=5,<4&a9 xOG;&<p3bbb,Xvb6X@`7@ p3bbb,`b6Nhez7H\$5hC:,%rXh*f9 xr G;XX%W!@(#,h@\  P6G;hP6jC:,<̃Xj9 xOG;X yO'  4% X4w B Federal Communications Commission`(#FCC 99209 ă   yxdddy v#X\  P6G;ɒP#X01Í ÍX01Í Í Before the WFederal Communications Commission  yO'}Washington, D.C. 20554#&a\  P6G;u&P# Đl ) In the Matter of ) )  S'Review of the Commission's Regulations )MM Docket No. 91221 Governing Television Broadcasting) )  S@'Television Satellite Stations Review of)MM Docket No. 878 Policy and Rules)  S ' ~REPORT AND ORDER ă  Sx ' Adopted: August 5, 1999Ghh}Released: August 6, 1999 By the Commission: Chairman Kennard and Commissioners Ness, Powell, and Tristani issuing separate statements; Commissioner FurchtgottRoth dissenting and issuing a statement.  S' TABLE OF CONTENTS Đl  S`'` `  Ghh}pp"X  xxParagraph  S'I.XINTRODUCTIONGhh}pp"X  xx 1(#(#1(#  S'II.XBACKGROUNDGhh}pp"X  xx 2(#  S'III. XOVERVIEW Ghh}pp"X  xx 15(#  S'IV.XLOCAL TELEVISION OWNERSHIP RULEpp"X  xx 42(#  Sp'A.` ` Geographic Scope of the Rulepp"X  xx 42(#`  SH'XB.X` ` Permitting Television Duopolies in the Same Local Market  xx 54(#`  S 'XX` ` 1.X Modification of the Rule: Eight Voice/Top FourRankedxx 60(# XX` ` X Station Standard(#  S'` ` 2. Waiver Criteriapp"X  xx 71(#  S'` `  a.` GFailed Stationspp"X  xx 71(#  S'XX` `  b.GFailing Stationspp"X  xx 78(#  SX'` `  c.` GUnbuilt Stationspp"X  xx 83(#  S0'XX` `  d.GUHF Combinationspp"X  xx 88(#  S'XX` ` 3.X Satellite Stationspp"X  xx 90(#  S'V.XRADIOTELEVISION CROSS OWNERSHIP RULEpp"X  xx 92(#  S 'XA.X` ` Modification of the Rulepp"X  xx 100(#`  S!'XB.X` ` Waiver Criteriahh}pp"X  xx 115(#`  Sh"'XX` ` 1.X Failed Stationshh}pp"X  xx 115(#  S@#'XX` ` 2.X "Five Factors" Waiver Standardpp"X  xx 119(#  S$'XX` ` 3.X Existing Conditional Waiverspp"X  xx 123(# "$0*''ZZ""  S'VI. XTELEVISION LOCAL MARKETING AGREEMENTSX  xx 126(#  S'VII.XNEW APPLICATIONShh}pp"X  xx 150(#  S'VIII.XCONCLUSIONGhh}pp"X  xx 151(#  S'IX.XADMINISTRATIVE MATTERSpp"X  xx 152(# X(# Appendix A: Final Regulatory Flexibility Analysis Appendix B: Rules Appendix C: List of Commenters  Sp' I. INTRODUCTION Đl  S '  k1.` ` In this Report and Order, we revise our local television ownership rules the "TV  |$Dduopoly" rule and the radiotelevision crossownership or "onetoamarket" rule to respond to ongoing  |$changes in the broadcast television industry. Our action today culminates a broad reaching examination  |$of these and other broadcast media ownership rules first initiated by the Commission in 1991, and more  S ' |$recently guided by the statutory directives of the Telecommunications Act of 1996.g e yO'ԍPub. L. No. 104104, 110 Stat. 56 (1996) ("1996 Act").g The new rules we  |$adopt today reflect a recognition of the growth in the number and variety of media outlets in local  |$markets, as well as the significant efficiencies and public service benefits that can be obtained from joint  |$ownership. At the same time, our decision reflects our continuing goals of ensuring diversity and localism  |$and guarding against undue concentration of economic power. The rules we adopt today and in our  |$related national television ownership and broadcast attribution proceedings, being adopted simultaneously  S' |$with this Report and Order,Xe {O'ԍSee Report and Order, In the Matter of Broadcast Television National Ownership Rules, Review of the Commission's Regulations Governing Television Broadcasting, Television Satellite Stations Review of Policy and  {O'Rules, MM Docket Nos. 96222, 91221, & 878, FCC 99208 (adopted Aug. 5, 1999) ("National TV Ownership  {O'Report and Order"); Report and Order, In the Matter of Review of the Commission's Regulations Governing Attribution of Broadcast and Cable/MDS Interests, Review of the Commission's Regulations and Policies  {Ox'Affecting Investment in the Broadcast Industry, Reexamination of the Commission's CrossInterest Policy, MM  {OB'Docket Nos. 94150, 9251, & 87154, FCC 99207 (adopted Aug. 5, 1999) ("Attribution Report and Order").  balance these competing concerns and are intended to facilitate further  |$gdevelopment of competition in the video marketplace and to strengthen the potential of broadcasters to serve the public interest.  S' II. BACKGROUND Đl  S|'  kW2.` ` The television duopoly rule currently prohibits an entity from having cognizable interests  |$in two television stations whose Grade B signal contours overlap. The Commission rarely grants  |$permanent waivers of the duopoly rule, reserving such relief for cases with unique or highly unusual",0*%%ZZd"  S' |$circumstances.;Xe yOh'ԍFor example, the FCC has permitted common ownership of television stations in New York City and Philadelphia. In addition, the Commission has granted temporary waivers of the duopoly rule, subject to fixed, nearterm divestiture requirements, to facilitate mergers.; Under current policy, the time brokerage by one television station of another television  |$"station, even one in the same market, pursuant to a time brokerage or "local marketing" agreement  S' |$k("LMA"),.~e yO8'ԍAn LMA or time brokerage agreement is a type of contract that generally involves the sale by a licensee of discrete blocks of time to a broker that then supplies the programming to fill that time and sells the  {O'commercial spot announcements to support the programming. See Further Notice of Proposed Rule Making, In the Matter of Review of the Commission's Regulations Governing Attribution of Broadcast and Cable/MDS Interests, Review of the Commission's Regulations and Policies Affecting Investment in the Broadcast Industry,  {O" 'Reexamination of the Commission's CrossInterest Policy, MM Docket Nos. 94150, 9251, 87154, 11 FCC Rcd.  {O '19895, 19908 (1996) ("Attribution Further Notice").. is not attributable, and accordingly these relationships are not subject to our multiple ownership  |$/rules. The radiotelevision crossownership rule generally forbids joint ownership of a radio and a  S`' |$@television station in the same local market.uX`. e yO.'ԍSpecifically, the rule forbids joint ownership of a radio and a TV station where the specified service contour of the radio station (2 mV/m for AM and 1 mV/m for FM) encompasses the entire city of license of the TV station or the Grade A contour of the TV station encompasses the entire city of license of the radio station.u We have presumed it is in the public interest to waive this  |$Mrule in the top 25 television markets if, postmerger, at least 30 independently owned broadcast voices  |$remain, or if the merger involves a failed station. Such waivers are available to permit ownership of up  |$^to one television, one AM, and one FM station per market. We have evaluated other waiver requests case by case, based on an analysis of five criteria (the "five factors" test).  Sp'  k3.` ` This proceeding began in 1991 with the issuance of a Notice of Inquiry soliciting comment  |$on whether existing television ownership rules and related policies should be revised in light of ongoing  S" ' |$7changes in the competitive market conditions facing broadcast licensees." N e {O'ԍNotice of Inquiry, In the Matter of Review of the Policy Implications of the Changing Video  {O'Marketplace, MM Docket No. 91221, 6 FCC Rcd 4961 (1991) ("NOI"). After reviewing the comments  S ' |$received in response to the NOI, the Commission issued a Notice of Proposed Rule Making containing a  |$gnumber of alternative proposals involving the national and local television ownership rules, and seeking  S 'comment on the extent and impact of LMAs in the broadcast television industry.R e {O'ԍNotice of Proposed Rule Making, In the Matter of Review of the Commission's Regulations Governing  {O'Television Broadcasting, MM Docket No. 91221, 7 FCC Rcd 4111 (1992). This NPRM also examined the dual network rule, national ownership, and other network rules. The dual network and national ownership rules are  {OR 'presently under examination in the Commission's 1998 biennial review of its broadcast ownership rules. Notice of Inquiry, In the Matter of 1998 Biennial Regulatory Review Review of the Commission's Broadcast  {O!'Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MM  {O"'Docket No. 9835, 13 FCC Rcd 11276 (1998) ("Biennial Review NOI"). R  S\'  k4.` ` In 1994, in a Further Notice of Proposed Rule Making in this docket, the Commission set"\0*%%ZZ"  S' |$7forth a competition and diversity analysis for examining our ownership rules.e {Oh'ԍFurther Notice of Proposed Rule Making, MM Docket Nos. 91221 & 878, 10 FCC Rcd 3524 (1995)  {O2'("TV Ownership Further Notice"). Based on this analysis, the  |$MCommission proposed changes to the national television ownership rule, the local television ownership  |$rule (otherwise known as the "duopoly" rule), and the radiotelevision crossownership rule. In addition,  |$^the Commission solicited comment on whether broadcast television local marketing agreements ("LMAs")  |$should be considered attributable for purposes of applying the ownership rules in a manner similar to radio LMAs.  S'  k5.` ` On February 8, 1996, the Telecommunications Act of 1996 became law. Section 202 of  |$Mthe Act directed the Commission to make a number of significant revisions to its broadcast ownership  S' |$rules. B$e yO\ 'ԍAmong other things, Section 202 directed the Commission to eliminate its restriction on the number of radio stations a single entity can own or control nationally, and to increase the number of radio stations that a  {O 'single entity can own or control in a local market. See Sections 202(a) and (b) of the 1996 Act. The Act also states that the Commission may permit an entity to exceed the revised local radio ownership limits if such ownership or control "will result in an increase in the number of radio broadcast stations in operation." Section 202(c). Section 202 also directed the Commission to eliminate the numerical cap on the number of television stations a single entity can own or control nationally, and revised upward (from 25 percent to 35 percent) the national audience reach limitation for television stations. Section 202(c)(1).  Section 202 also requires us to review aspects of our local ownership rules that were the subject  Sp' |$of the TV Ownership Further Notice. Specifically, Section 202 requires the Commission to: 1) conduct  SJ ' |$a rulemaking proceeding concerning the retention, modification, or elimination of the duopoly rule;S J . e yO'ԍSection 202(c)(2) of the 1996 Act.S and  |$2) to extend the top 25 market/30 independent voices onetoamarket waiver policy to the top 50 markets,  S ' |$}"consistent with the public interest, convenience, and necessity."P e yOX'ԍSection 202(d) of the 1996 Act.P In addition, both the Act and its  |$legislative history contain language regarding the appropriate treatment of existing television LMAs under  S ' |$Mour ownership rules.P N e yO'ԍSection 202(g) of the 1996 Act.P Finally, Section 202 directs the Commission to conduct a biennial review of all  |$of its broadcast ownership rules and to repeal or modify any regulation it determines is no longer in the  SZ'public interest. Ze {O'ԍSection 202(h) of the 1996 Act. The Commission initiated this biennial review in March 1998. See  {O'Biennial Review NOI. This review covers a number of our ownership rules that were not already subject to  {Ol 'pending proceedings. In the Biennial Review NOI, the Commission stated that it would take action with respect to the rules that were already subject to pending proceedings, including the TV duopoly and radiotelevision crossownership rules, independently of the biennial review proceeding. We take such action today in amending our TV duopoly and radiotelevision crossownership rules.  S '  k6.` ` In view of the 1996 Act's directives regarding broadcast multiple ownership, the" \ 0*%%ZZ"  S' |$pCommission in 1996 adopted a Second Further Notice of Proposed Rule Making in this proceeding  S' |$inviting comment on several issues in light of the 1996 Act.e {OB'ԍSecond Further Notice of Proposed Rule Making, MM Docket Nos. 91221 & 878, 11 FCC Rcd 21655  {O '(1996) ("Second Further Notice"). We reiterated that "'our concern with  S' |$Mdiversity is most acute with respect to local ownership issues.'"$e {Ov'ԍ11 FCC Rcd at 21657 (quoting TV Further Ownership Notice, 10 FCC Rcd at 3574). ċ We further stated our belief that we  |$should proceed with "reasonable caution" to consider the impact on industry structure made possible by  |$gthe legislation and by other forces that are "changing, often in unpredictable ways, the marketplace for  S:' |$video programming. . . ."E:e yO 'ԍ11 FCC Rcd at 21657.E The Commission solicited further comment in light of its review of comments  |$*previously filed in this proceeding, and invited comments on a number of specific issues pertaining to the  |$duopoly rule, the radiotelevision crossownership rule, and the treatment of existing television LMAs in the event they are deemed attributable under any rules adopted in our attribution proceeding.  Sr'  k7.` ` Our ownership rules, particularly the local ownership rules at issue in this proceeding,  |$^serve a vital public interest by promoting competition and diversity in the mass media. These are bedrock  |$Zgoals reaffirmed by Congress and the Supreme Court on numerous occasions in carrying out our  |$<statutory mandate of ensuring that broadcast licensees serve the "public interest, convenience, and  S ' |$necessity." Fe {O'ԍ47 U.S.C.  309(k)(1). See also infra  17, 20, 21 (discussing decisional and statutory sources regarding competition and diversity). With these goals in mind, and after carefully reviewing the record in this proceeding, e {O'ԍFor a list parties that filed comments in response to our Second Further Notice, see Appendix C, attached. we  |$xbelieve we should relax to some extent our local television ownership restrictions where the public interest  |$tbenefits resulting from samemarket common ownership outweigh the threat to diversity and localism.  |$The record reflects that there has been an increase in the number and types of media outlets available to  |$*local communities. With respect to cable television, we recognize that clustering of systems in the major population centers enables cable to compete more effectively for advertising dollars.  S'  k8.` ` Specifically, we have decided to modify our local television ownership rule as follows.  |$First, we are relaxing our television duopoly rule by narrowing the geographic scope of the rule from the  |$Dcurrent Grade B contour approach to a "DMA" test. Thus, common ownership of two television stations  |$will be permitted without regard to contour overlap if the stations are in separate Nielsen Designated  |$Market Areas ("DMAs"). In addition, we will allow common ownership of two stations in the same DMA  |$ if their Grade B contours do not overlap (a continuation of our current rule), or if eight independently  |$owned, fullpower and operational television stations (commercial and noncommercial) will remain post |$merger, and one of the stations is not among the top fourranked stations in the market, based on audience  |$7share, as measured by Nielsen or by any comparable professional and accepted rating service, at the time  |$the application is filed. We will also adopt three waiver criteria as follows. First, we will presume a"R 0*%%ZZ"  |$waiver of the rule is in the public interest to permit common ownership of two television stations in the  S' |$same market where one station is a "failed station," as supported by a showing that the station either has  |$been off the air for at least four months immediately preceding the application for waiver, or is currently  |$involved in involuntary bankruptcy or insolvency proceedings. Second, we will presume a waiver of the  |$rule is in the public interest where one of the merging stations is a "failing" station, as supported by a  S8' |$showing that the station has had a low audience share and has been financially struggling during the  |$*previous several years, and that the merger will result in demonstrable public interest benefits. Third, we  |$will presume a waiver is in the public interest where applicants can show that the combination will result  |$in the construction and operation of an authorized but as yet "unbuilt" station, supported by a showing that  |$the permittee has made reasonable efforts to construct. For all of these waivers, we will also require a  |$showing that the inmarket applicant is the only buyer ready, willing, and able to operate the station, and  SH 'that sale to an outofmarket applicant would result in an artificially depressed price.  S '  kh9.` ` With respect to the radiotelevision crossownership rule, we are adopting a new, threepart  |$rule that permits some degree of samemarket radio and television joint ownership. We will permit a  |$party to own a television station (or two television stations if permitted under our modified TV duopoly  |$rule or television LMA grandfathering policy) and any of the following radio station combinations in the same market:  S' G6!Xup to six radio stations (any combination of AM or FM stations, to the extent permitted under our  S' G6!Rlocal radio ownership rulesKXe yOH'ԍFor example, if the radio/TV combination at issue is in a market where our local radio ownership rules would allow a radioonly combination to own eight stations, five of which are FM and three of which are AM, the radio/TV combination could own five FM stations and one AM station.K) in any market where at least 20 independent voices would remain postmerger;(#  Sh' G6!EXup to four radio stations (any combination of AM or FM stations, to the extent permitted under  G6!our local radio ownership rules) in any market where at least 10 independent voices would remain postmerger; and(#  S'Xone radio station (AM or FM) notwithstanding the number of independent voices in the market.(#  |$&In addition, in those markets where our revised rule will allow parties to own eight outlets in the form  |$&of two TV stations and six radio stations, we will permit them to own one TV station and seven radio stations instead.  S'  k 10.` ` For purposes of the new radiotelevision crossownership rule, we will count as voices all  |$Dindependently owned, fullpower, operational, commercial and noncommercial television stations licensed  |$to a community in the DMA in which the TV station in question is located, and all independently owned  |$and operational commercial and noncommercial radio stations licensed to, or with a reportable share in,  |$^the radio metro market where the TV station involved is located. In addition, we will count independently  |$owned daily newspapers that are published in the DMA and have a circulation exceeding 5 percent in the  |$DMA. Finally, we will count, as a single voice, wired cable service, provided cable service is generally" 0*%%ZZ"  |$available in the DMA. As with our revised duopoly rule, we will permit waiver of our new radio/TV  |$Zcrossownership rule where one station is a failed station. We will not, however, adopt a presumptive  |$3waiver based on a showing that one station is a failing station or that the combination will result in the  S' |$Dconstruction and operation of an authorized but as yet unbuilt station. We will consider further relaxation of this rule and waiver policies as part of future biennial reviews.  S'  kJ 11.` ` We have granted a number of radiotelevision crossownership rule waivers conditioned  |$on the outcome of this proceeding. The majority of these waivers involve radiotelevision combinations  |$Qthat will now be permissible under the revised rule we adopt today. For those that are not covered by the  |$revised rule, as well as for those for which an application was filed on or before July 29, 1999 (the date  Sp' |$of the "sunshine" notice for this Report and Order) if such application is ultimately granted by the  |$Commission, we will allow these combinations to continue, conditioned on the outcome of the  |$Commission's 2004 biennial review. Parties who wish the Commission to conduct this review prior to  S ' |$2004 may apply for such relief, using criteria set forth below,J e {Ob 'ԍSee infra  148.J beginning one year after the date this  S ' |$*Report and Order is published in the Federal Register. Any transfer of a grandfathered combination after  |$the adoption date of this Report and Order (whether during the initial grandfathering period of after a permanent grandfathering decision has been made) must meet the radio/TV crossownership rule.  S4'  k 12.` ` Finally, with respect to existing television LMAs, we have decided in our related  |$^attribution proceeding to attribute time brokerage of another television station for purposes of our multiple  |$*ownership rules where the brokered and brokering station are in the same market and the amount of time  S' |$gbrokered is more than 15 percent of the brokered station's weekly broadcast hours.mZe {O'ԍSee Attribution Report and Order, section III.C.m Once attributed,  |$however, the majority of currently existing samemarket television LMAs will not violate our new TV  |$Dduopoly rule going forward, because they either will be in separate DMAs, or will constitute an otherwise  |$permissible arrangement under the new rule or related waiver policies. We will permit those LMAs that  |$do not comply with our new duopoly rule and waiver policies to continue in full force and effect, if  S' |$tentered into before November 5, 1996, the grandfathering cutoff date proposed in the Second Further  S' |$Notice. LMAs entered into on that date or thereafter must come into compliance with our new duopoly  S' |$rule and/or waiver policies or terminate within two years of the adoption date of this Report and Order.  |$Television LMAs entered into before November 5, 1996 will be grandfathered, conditioned on the  |$outcome of the Commission's 2004 biennial review, at which time the Commission will reconsider their  |$status. Parties who wish the Commission to review the status of their LMAs prior to the 2004 biennial  S ' |$Zreview may apply for such relief, using the criteria specified below,J e {O 'ԍSee infra  148.J beginning one year after the date  S' |$gthis Report and Order is published in the Federal Register. During the initial grandfathering period, the  S'parties to the LMA may renew and/or transfer the term of LMA that remains in the fiveyear period.  Sl'  k, 13.` ` We note that a number of parties have expressed concern about the fact that greater  |$consolidation of ownership in broadcasting makes it more difficult for new entrants parties that own"D~0*%%ZZ7"  |$no or only a few mass media outlets to enter this industry. This is particularly the case for minorities  S' |$xand women who are underrepresented in broadcasting.e {O@'ԍSee, e.g., Letter from David Honig, Executive Director, Minority Media and Telecommunications Center, to William Caton, Acting Secretary, FCC, dated March 25, 1997; AWRT Comments. We share these concerns. The Commission has  |$recognized the importance of promoting new entry into the broadcast industry as a means of promoting  |$competition and diversity. Indeed, we have adopted a "new entrant" bidding credit as part of our  |$Qbroadcast auction procedures for these reasons and also to comply with our statutory mandate to "ensure  |$that small businesses, rural telephone companies, and businesses owned by members of minority groups  S' |$and women are given the opportunity to participate in the provision of spectrumbased services.""e {O 'ԍ47 U.S.C.  309(j)(4)(D). See First Report and Order, In the Matter of Implementation of Section 309(j) of the Communications Act Competitive Bidding for Commercial Broadcast and Instructional Television Fixed Service Licenses, Reexamination of the Policy Statement on Comparative Broadcast Hearings, Proposals to  {O, 'Reform the Commission's Comparative Hearing Process to Expedite the Resolution of Cases, MM Docket No. 97234, GC Docket No. 9252, GEN Docket No. 90264, 13 FCC Rcd 15920, 1599315996,  186190 (1998)  {O '("Competitive Bidding First Report and Order").  We will monitor the effects of the relaxation of our local TV ownership rules on new entry.  S'  k# 14.` ` We are now guided in considering initiatives to encourage greater minority and women |$owned mass media businesses by a 1995 Supreme Court decision that held that any federal program that  |$uses racial or ethnic criteria as a basis for decisionmaking is subject to strict judicial scrutiny; to  |$3withstand this scrutiny, any such programs must now be shown to "serve a compelling governmental  S ' |$interest, and must be narrowly tailored to further that interest."u e {O8'ԍ Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 235 (1995).u We are presently conducting studies that  |$we believe will allow us to address this issue in the context of our broadcast licensing and ownership  S ' |$policies. Upon the completion of these studies, we will examine the steps we can take to expand  |$3opportunities for minorities and women to enter the broadcast industry. In the interim, we encourage  |$broadcasters to establish incubator programs and to engage in other cooperative ventures that will boost  |$new entry into the broadcast industry, particularly with regard to the participation of women and minorities in the mass media.  S' )III. OVERVIEW ă  S@'  kF15.` ` The ultimate objectives of our ownership rules are to promote diversity and to foster  |$economic competition, while minimizing any adverse effects our pursuit of these goals has on the efficient  |$organization of the industry. All of our broadcast crossownership and multiple ownership rules, including  |$the "TV duopoly" and "onetoamarket" rules at issue in this proceeding, are based on these "twin goals"  |$of competition and diversity. For example, when the Commission adopted the current version of the TV  |$7duopoly rule in 1964, it stated that its multiple ownership rules "seek to promote maximum diversification  |$of program and service viewpoints and to prevent undue concentration of economic power contrary to the"P2 0*%%ZZ"  S'public interest."9\e {Oh'ԍReport and Order, In the Matter of Amendment of Sections 73.35, 73.240, and 73.636 of the  {O2'Commission's Rules Relating to Multiple Ownership of Standard, FM, and Television Broadcast Stations, Docket No. 14711, 45 FCC 1476, 147677 (1964).9 The Commission explained:  GxSXThe concept embodied in these rules is not complex: When two stations in the same  Gxbroadcast service are close enough together so that a substantial number of people can  Gxreceive both, it is highly desirable to have the stations owned by different people. This  Gx`objective flows logically from two basic principles underlying the multiple ownership  Gxrules. First, in a system of broadcasting based upon free competition, it is more  GxSreasonable to assume that stations owned by different people will compete with each  Gxother, for the same audience and advertisers, than stations under the control of a single  GxJperson or group. Second, the greater the diversity of ownership in a particular area, the  Gxless chance there is that a single person or group can have 'an inordinate effect, in a  GxOpolitical, editorial, or similar programming sense, on public opinion at the regional  S 'level.'"V e {O'ԍId. at 1477 (citation omitted).V   |$Similarly, when the Commission adopted the onetoamarket rule in 1970, it likewise stated that the rule  |$has a "twofold objective: (1) [f]ostering maximum competition in broadcasting, and (2) promoting  S 'diversification of programming sources and viewpoints."A\ ~e {O'ԍFirst Report and Order, In the Matter of Amendment of Sections 73.35, 73.240, and 73.636 of the  {Oh'Commission Rules Relating to Multiple Ownership of Standard, FM, and Television Broadcast Stations, Docket No. 18110, 22 FCC 2d 306, 307 (1970).A  S0' G6!p16. In considering the changes we have proposed to our local television ownership rules, we must  |$assess the costs and benefits of such modifications in light of both our diversity and competition  |$Qobjectives. Our multiple ownership restrictions must strike a balance between the benefits to the industry  |$xand to the public of common ownership, such as economies of scale which can result in stronger stations  |$and improved service to the public, and the reduction in the diversity of ownership and competition in a  |$market that may arise from consolidation of station ownership. We must also take into account  |$marketplace developments and the increased competition broadcasters are facing from other mass media outlets.  S'  k17.` ` Promoting Diversity. One of the most important purposes of our multiple ownership rules  |$is to encourage diversity in the ownership of broadcast stations so as to foster a diversity of viewpoints  Sx' |$in the material presented over the airwaves.\xe yO"'ԍ We have previously observed that our ownership rules seek to foster "outlet" and "source" diversity as  {O#'a means of promoting a diversity of viewpoints. TV Ownership Further Notice, 10 FCC Rcd. at 35493550,   {OL$'6061. "Outlet" diversity refers to "a variety of delivery services (e.g., broadcast stations) that select and present"L$0*%%Z$" programming directly to the public"; "source" diversity refers to "a variety of program producers and owners."  {OX'Id. at 35493550,  61. Both outlet and source diversity are "integral to the ultimate goal of providing the public with a variety of viewpoints. . . . The Commission has felt that without a diversity of outlets, there would be no real viewpoint diversity if all programming passed through the same filter, the material and views presented to the public would not be diverse. Similarly, the Commission has felt that without diversity of sources, the variety  {Oz'of views would necessarily be circumscribed." Id. at 35503551,  61. As the Supreme Court recently reaffirmed, "'it has long"x D0*%%ZZ"  |$+been a basic tenet of national communications policy that "the widest possible dissemination of  S' |$information from diverse and antagonistic sources is essential to the welfare of the public."'"e^De {O'ԍTurner Broadcasting System, Inc. v. FCC, 512 U.S. 622, 663 (1994) ("Turner I") (quoting United States  {O 'v. Midwest Video Corp., 406 U.S. 649, 668 n.27 (1972) (plurality opinion) (quoting Associated Press v. United  {OP 'States, 326 U.S. 1, 20 (1945). e This  |$diversity policy is consistent with, and in fact furthers, the First Amendment goal of fostering the  S' |$"marketplace of ideas"j e {O 'ԍThis "marketplace of ideas" metaphor was first articulated by Justice Holmes. See Abrams v. United  {O\'States, 250 U.S. 616, 630 (1919) (Holmes, J., dissenting). and encouraging "uninhibited, robust, and wideopen" debate.z  e {O'ԍNew York Times v. Sullivan, 376 U.S. 254, 270 (1964) (Brennan, J.).z For these reasons,  |$Mthe Supreme Court has stated that it has "no difficulty" in concluding that the Commission's interest in  |$"promoting widespread dissemination of information from a multiplicity of sources" is "an important  |$governmental interest"; indeed, the Supreme Court has stated that "assuring that the public has access to  |$a multiplicity of information sources is a governmental purpose of the highest order, for it promotes values  S'central to the First Amendment."Q!X e {O'ԍTurner I, 512 U.S. at 663.Q  Sp'  k=18.` ` This is especially the case with respect to broadcasting. Broadcast stations, particularly  |$Rtelevision stations, reach large audiences and are the primary source of news and entertainment  S ' |$programming for Americans.J"Z e yO'ԍAccording to a recent survey, almost 70 percent of adults said they get most of their news from  {Or'television almost twice the number that list newspapers as their main news source. See "America's Watching," March/April, 1997, Roper Starch Worldwide, Inc.J Broadcasters consequently play a leading role in shaping democratic debate  |$and cultural attitudes. For example, the manner and viewpoint a station uses in presenting the news can  |$&have a substantial impact on a local election. A television drama that raises controversial or important  |$societal issues can not only be entertaining but also shape cultural attitudes about these issues in significant  |$ways. There is consequently a vital public interest in ensuring that these influential outlets for communication are in the hands of a broad number of different owners.  S'  k19.` ` Our concern for ensuring diversity in broadcasting is most pressing at the local level. As  S' |$Zthe Commission explained in the TV Ownership Further Notice, "[t]he reasons for seeking diversity on  |$the local level are readily apparent. Monopolization [of] the means of mass communication in a locality  |$assure the monopolist control of information received by the public and based upon which it makes" "0*%%ZZ"  |$elective, economic and other choices. Measures to prevent such control have taken the form of our  |$duopoly and onetoamarket rule and our newspaper/broadcast crossownership rule, all of which limit  |$@the ability of a single person or entity to control local organs of mass communications in a geographic  S'locale."N#e yO'ԍ10 FCC Rcd. at 3559,  78.N  S8'  k20.` ` The strong policy of promoting diversity is distinct from our competition goal. As the  |$Supreme Court has recognized as recently as 1997, "[f]ederal policy . . . has long favored preserving a  |$Imultiplicity of broadcast outlets regardless of whether the conduct that threatens it is motivated by  S' |$anticompetitive animus or rises to the level of an antitrust violation."$Xe {O 'ԍTurner Broadcasting System, Inc. v. FCC, 520 U.S. 180, 194 ("Turner II"). Whether or not a particular  |$ownership combination may have anticompetitive effects in the sale of advertising time or other markets  |$in which broadcasters compete, it may nonetheless reduce the diversity of independently owned voices  |$in a community. Congress implicitly recognized this in amending the local radio ownership rules in the  |$1996 Act. Although these amendments significantly relaxed these rules, they nevertheless maintained a  |$3set of radio ownership limitations. Congress promoted diversity separate and apart from competition.  |$VIndeed, Section 202(b) of the 1996 Act, which sets forth the new limitations, is titled "Local Radio  S ' |$QDiversity."p% e yO2'ԍPub. L. No. 104104, 110 Stat. 56, 110 (1996) (emphasis added).p Moreover, in discussing the radiotelevision crossownership rule, the Conference Report to  |$ the 1996 Act noted "the potential for public interest benefits of [radiotelevision station combinations]  SZ' |$twhen bedrock diversity interest[s] are not threatened," and further stated that in reviewing this rule the  |$FCC should take into account not only the increased competition facing broadcasters but also "the need  S 'for diversity in today's radio marketplace."y& ze yO&'ԍS. Conf. Rep. 104230, 104th Cong. 2d Sess. 163 (1996) (emphasis added).y  S'  k21.` ` Congress has repeatedly emphasized in other contexts its concern for promoting diversity  |$Min the mass media, notwithstanding the increasingly competitive nature of virtually all communications  Sl' |$kmarkets.8'\l e {O'ԍMichael Harrington, ABC, See You Real Soon: Broadcast Media Mergers and Ensuring A "Diversity of  {O'Voices," 38 B.C. L. Rev. 497, 52325 (1997) ("Congress has repeatedly expressed its intent to maintain a diversity of media viewpoints.").8 For example, the 1996 Act, as stated in its preamble, seeks to establish a "procompetitive, de |$regulatory national policy framework," yet still directs the Commission, in Section 257, in identifying and  |$eliminating market entry barriers for entrepreneurs and other small businesses in certain services, "to  S' |$7promote the policies and purposes of this Act favoring diversity of media voices."G(. e yO!'ԍ47 U.S.C.  257(b).G Likewise, among the  |$kpolicies of the Cable Competition and Consumer Protection Act of 1992 ("1992 Cable Act") were not only  |$to "ensure that cable television operators do not have undue market power," but also to "promote the" (0*%%ZZ"  S' |$&availability to the public of a diversity of views and information.")e yOh'ԍCable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102385, 106 Stat. 1460,  2(b) (1992). The 1992 Cable Act's requirement  |$that cable systems carry the signals of local broadcast stations also reflects Congress' efforts to advance  S' |$tdiversity.*,  e {Op'ԍSee S. Rep. No. 92, 102d Cong., 1st Sess. 58 (1991), reprinted in 1992 U.S.C.C.A.N. 1133, 1191; H.R. Rep. No. 628, 102d Cong., 2d Sess. 28, 63 (1992).  {O'The communications laws otherwise incorporate the public policy goal of diversity. See, e.g., 47 U.S.C.  309(i)(3)(A) ("The Commission shall establish rules and procedures to ensure that . . . significant preferences will be granted to applicants or groups of applicants, the grant to which of the license or permit would increase diversification of ownership of the media of mass communications."); 47 U.S.C. 521 ("The purposes of this title are to . . . assure that cable communications . . . are encouraged to provide the widest possible diversity of information sources. . . ."); 47 U.S.C.  532(a) ("The purpose of this section is to promote competition in the delivery of diverse sources of video programming and to assure that the widest possible diversity of information sources are made available to the public. . . .); 47 U.S.C.  548(a) ("The purpose of this section is to promote the public interest, convenience, and necessity by increasing competition and diversity in the multichannel video programming market. . . .").  The Supreme Court has also consistently recognized the strong public policy of promoting  S'viewpoint diversity in the mass media.+Le {O<'ԍSee, e.g., Turner II, 520 U.S. at 189190 (1997); Turner I, 512 U.S. at 66263 (1994); Metro  {O'Broadcasting, Inc. v. FCC 497 U.S. 547, 566 (1990), overruled on other grounds by Adarand, 515 U.S. 200  {O'(1995); National Citizens Committee for Broadcasting v. FCC, 436 U.S. 775, 795 (1978); Associated Press, 326  {O'U.S. at 20 (1945). Adarand overruled Metro Broadcasting only to the extent it was inconsistent with the  {Od'Adarand holding that all racial classifications are constitutional only if narrowly tailored to further compelling  {O.'government interests. Adarand, 515 U.S. at 227. Thus, Adarand does not undermine either the importance of the policy goal of viewpoint diversity from a constitutional perspective, or nonracebased ownership regulation as a means to achieve that goal.  S8'  k22.` ` Some question whether diverse outlets and sources lead to diverse viewpoints, or whether  |$our rules are necessary to promote diversity, suggesting that commonly owned outlets can produce diverse  |$pviewpoints equally as well as separately owned outlets. We disagree with these arguments. As the  |$Commission stated when it adopted the newspaper/broadcast crossownership rule, ". . . it is unrealistic  |$to expect true diversity from a commonlyowned newspaper combination. The divergency of their  Sp' |$Dviewpoints cannot be expected to be the same as if they were antagonistically run."c,\p(e {O8'ԍSecond Report and Order, In the Matter of Amendment of Sections 73.34, 73.240 & 73.636 of the  {O 'Commission's Rules Relating to Multiple Ownership of Standard, FM & Television Broadcast Stations, Docket  yO 'No. 18110, 50 FCC 2d 1046, 10791080,  111 (1975).c As the Commission  |$explained, "[t]he significance of ownership from the standpoint of 'the widest possible dissemination of  |$information' lies in the fact that ownership carries with it the power to select, to edit, and to choose the  |$&methods, manner and emphasis of presentation, all of which are a critical aspect of the Commission's" L,0*%%ZZ "  S' |$&concern with the public interest."L-e {Oh'ԍId. at 1050,  14.L Although the issue is not easily susceptible to empirical proof, we  |$&think intuitive logic and common sense support our belief that the identity and viewpoint of a station's  |$owner can in fact influence the station's programming. This certainly can be seen when a station chooses  S'to editorialize, as well in many other decisions affecting a station's news and other programming. .~Ze {O'ԍSee, e.g., Jeff Dubin & Matthew Spitzer, Testing Minority Preferences in Broadcasting, 68 S. Cal. L. Rev. 841 (May 1995) (concluding that increasing number of minorityowned broadcasting stations increases  {O'amount of minorityoriented programming); Congressional Research Service, Minority Broadcast Station  {O'Ownership and Broadcast Programming: Is There a Nexus? (June 1988) (concluding same). See also CME Comments at 48 in MM Docket No. 9835 (describing how two broadcast owners produced new programming to promote "conservative" or "traditional" values, and explaining how owners have affected content and editorial  yO8 'decisions).   S8'  k23.` ` The Supreme Court has upheld the Commission's judgment that there is a positive  S' |$ccorrelation between a station's ownership and its editorial viewpoint. The Court observed in Metro  S' |$Broadcasting, with reference to the Commission's decision adopting the newspaper/broadcast cross |$kownership rule, that the link between ownership and viewpoint is logical because "'ownership carries with  S' |$it the power to select, to edit, and to choose the methods, manner and emphasis of presentation. . . .'"/e {O'ԍMetro Broadcasting, 497 U.S. at 571 n.16 (1990) (quoting Second Report and Order/Docket 18110, 50  yO'FCC 2d at 1050).  |$In part because of this intuitive logic, the Supreme Court, in upholding the newspaper/broadcast cross SL ' |$ownership rule, stated in National Citizens Committee for Broadcasting that ". . . notwithstanding the  |$inconclusiveness of the rulemaking record, the Commission acted rationally in finding that diversification  |$of ownership would enhance the possibility of achieving greater diversity of viewpoint. . . . In these  |$}circumstances, the Commission was entitled to rely on its judgment, based on experience, that 'it is  |$unrealistic to expect true diversity from a commonly owned stationnewspaper combination. The  S 'divergency of their viewpoints cannot be expected to be the same as if they were antagonistically run.'"0 e {O 'ԍNational Citizens Committee for Broadcasting, 436 U.S.at 796797 (1978) (citing Second Report and  {O'Order/Docket 18110, 50 FCC 2d at 10791080,  111).  S6'  k24.` ` We consequently believe our local television ownership rules continue to further the  |$Mimportant public interest of promoting diversity. Of course, in attempting to foster our diversity goals  |$through structural regulation, we endorse a contentneutral method that does not evaluate the substance  S' |$of any station's editorial decisions,1V e {O 'ԍThe Court has noted that the Commission's ownership rules are "content neutral." National Citizens  {O~!'Committee for Broadcasting, 436 U.S. at 801 (noting that newspaper/broadcast crossownership rule was "not content related"). According to the applicable test, "[a] contentneutral regulation will be sustained under the First Amendment if it advances important governmental interests unrelated to the suppression of free speech and  {O#'does not burden substantially more speech than necessary to further those interests." Turner II, 520 U.S. at 189. The Supreme Court has stated that with respect to the government interest in "promoting the widespread"$00*%%$" dissemination of information from a multiplicity of sources," it has "no difficulty" in concluding that the interest "is an important governmental interest"; indeed, the Supreme Court has stated that "assuring the public has access to a multiplicity of information sources is a governmental purpose of the highest order, for it promotes values  {O'central to the First Amendment." Turner I, 512 U.S. at 66263. As mentioned above, see supra  23, the Supreme Court has likewise found that ownership regulation is an appropriate and sufficient means to achieve the Commission's interest in viewpoint diversity; as the Court has noted, any means other than ownership regulation would likely present a more difficult avenue to achieve the goal of viewpoint diversity, because "'[d]iversity and its effects are . . . elusive concepts, not easily defined let alone measured without making  {O'qualitative judgments objectionable on both policy and First Amendment grounds.'" National Citizens  {O'Committee for Broadcasting, 436 U.S. at 797 (quoting lower court's opinion).  but seek only to ensure a sufficient number of independently owned" f 10*%%ZZD" outlets to attempt to maximize the available independent viewpoints in a given local market.  S'  k~25.` ` Promoting Competition. As we stated in the TV Ownership Further Notice, an important  |$part of the Commission's public interest mandate is to promote competition, because competition promotes  Sb' |$consumer welfare and the efficient use of resources.g2bf e {Oh'ԍTV Ownership Further Notice, 10 FCC Rcd at 3532.g Competitive markets serve the public interest  |$because such markets generally result in lower prices, higher output, more choices for buyers, and more  S' |$Etechnological progress than markets that are less competitive.3 e {O'ԍSee F. M. Scherer and David Ross, Industrial Market Structure and Economic Performance, Third Edition, Houghton Mifflin Co., Boston, 1990 at 1928. To encourage competition, the  |$Commission's structural ownership rules and policies have been aimed at precluding broadcasters from  |$obtaining and exercising market power. We have concluded that local ownership rules serve the public  |$Qinterest by preventing broadcasters from "dominat[ing] television and radio markets and wield[ing] power  Sr'to the detriment of small owners, advertisers, and the public interest."J4^rR e {Od'ԍSee, e.g., Second Report and Order, In the Matter of Amendment of Section 73.3555 of the  {O.'Commission's Rules, the Broadcast Multiple Ownership Rules, MM Docket No. 877, 4 FCC Rcd 1741, 1745  {O'(1989) (Second Report and Order).J  S" '  kd26.` ` Competition is likely to be greater in markets where many separate firms vie to serve the  S ' |$ycustomer than in markets where few firms serve the market.5 xe {O'ԍSee Joseph E. Stiglitz, Economics, Second Edition, 1997, W. W. Norton & Company, New York at 346. In general, the intensity of price  |$competition in a given market is directly related to the number of independent firms that compete for the  |$patronage of consumers. A larger rather than a smaller number of firms competing in the same market  |$usually results in lower unit price to consumers, all other things remaining the same. Conversely, as the  |$number of firms declines from many to few, price competition is diminished, and the unit price paid by consumers may be expected to increase.  S'  kF27.` ` As both the radio and television broadcast industries consolidate to achieve operating  |$efficiencies and improvements in the scope and quality of services available to consumers, effective  |$kconstraints on the possible attenuation of price competition in broadcasting advertising markets will derive" 50*%%ZZ"  |$Qincreasingly from the growing availability of substitute products and services that compete with television  |$advertising and programming. To the extent that such competing media and programming are, or will,  |$Ebecome effective constraints on the possible exercise of market power by incumbent television  |$broadcasters, then concerns about the possible adverse effects of increasing concentration on competition in the television broadcasting industry will be substantially diminished.  S'  k28.` ` Broadcasters compete in numerous markets: the markets for delivered video and audio  |$programming, the national and local advertising markets, and geographically diverse (perhaps worldwide  S' |$in scope) markets for programming.k6e {O( 'ԍSee TV Ownership Further Notice, 10 FCC Rcd at 3535.k In each of these markets, the Commission has taken steps to  |$increase competition and the range of choices for consumers. For example, we have increased the number  |$Dof licensed broadcast television and radio stations to benefit viewers, listeners, and advertisers. Similarly,  |$we have facilitated the development of alternative technologies such as cable television, direct broadcast  |$satellite ("DBS") service, digital audio radio satellite ("DARS") service, multichannel multipoint  |$distribution service ("MMDS"), and open video systems ("OVS") to increase the range of choices open  |$to advertisers, viewers and listeners. We have also adopted various rules and regulations to permit and  |$promote the development of new networks to increase competition to longtime broadcast networks and  |$Ithus increase viewer options. In each market, we have tried to increase the number and variety of  SX'suppliers to benefit customers.7XZe yOR'ԍIn the programming market, the Commission's rules and regulations have tended to increase the number of potential buyers for such programming and thus increase the demand for programming.  S'  k29.` ` Increased Consumer Choice. Numerous commenters in this proceeding have provided  |$evidence concerning the continued growth in the number of mass media delivery systems. For example,  |$there are currently 11,600 cable systems passing more than 94 million homes and serving almost 65  S' |$"million TV households.c8e {O'ԍBroadcasting & Cable, July 15, 1999, at 40. c Aside from cable, there are also a number of other multichannel delivery  |$systems, although many are still establishing themselves in the marketplace and generally do not provide  |$3an independent source of local news and informational programming. They include: Direct Broadcast  |$Satellite (DBS), which currently provides up to 240 channels to over 7 million subscribers; MMDS, which  |$Qserves 1 million subscribers; SMATV, which has almost 1 million subscribers. In addition, over 2 million  |$households have Home Satellite Dishes (HSD), and Open Video Systems (OVS) has 66 thousand  S' |$subscribers.N9\De {O'ԍSee In the Matter of Annual Assessment of the Status of Competition in the Market for the Delivery of  {ON 'Video Programming, CS Docket No. 98102, FCC 98335 (released Dec. 23, 1998) ("Fifth Annual Report"), at Appendix C, Table C1.N In addition to these alternative media, there has been an increase in the number of  |$Qtraditional broadcast outlets since adoption of our ownership rules. Since 1970, when the radiotelevision  |$Qcrossownership rule was adopted, the total number of radio and television stations has increased by over"Ph 90*%%ZZ"  S' |$85 percent.y:^e {Oh'ԍ See "Record of Radio Station Growth Since Television Began" and "Record of Television Station  {O2'Growth Since Television Began," Broadcasting & Cable Yearbook 1996, pp. B671 and C244, respectively. See  {O'also "Broadcast Station Totals as of May 31, 1999," June 18,1999. y This increase is attributable largely to increased popularity of FM radio and maturation of  |$3the UHF television service. The Commission has also adopted a DTV standard, a Table of Allotments  |$ for DTV, and DTV service rules which include a timetable for construction of DTV facilities. Taken  |$together, these actions provide the opportunity to increase the number of program services provided by broadcast television.  S'  kA30.` ` In the TV Ownership Further Notice and Second Further Notice, we requested commenters  |$to provide us with evidence regarding the degree to which these and other alternative media serve as  |$7economic substitutes for broadcast television and radio in the program delivery, advertising, and program  |$production markets. Although most commenters agreed that various media substitute for each other to some extent in these markets, we received no evidence quantifying intermedia substitutability.  S" '  k31.` ` We are aware of no definitive empirical studies that quantify the extent to which the  |$various media are substitutable in local markets. The most extensive study in the record of this proceeding  |$is provided by National Economic Research Associates, Inc. ("NERA") in support of comments filed by  |$the Local Station Ownership Coalition ("LSOC"), and indicates that broadcast television competes in the  |$local spot advertising market with a wide variety of media, including radio, cable, direct mail, newspapers,  SZ' |$Emagazines, yellow pages, and billboards.;&Ze {O'ԍSee P. Kitt and Phillip A. Beutel, National Economic Research Associates, An Economic Analysis of the Relevant Advertising Market(s) within Which to Assess the Likely Competitive Effects of the Proposed Time  {Oz'Brokerage Arrangement between WUAB Channel 43 and WOIO Channel 19 (filed on behalf of Malrite in  {OD'response to the TV Ownership Further Notice), July 15, 1994, at 23 ("NERA Study").  NERA's study was conducted in response to a U.S.  |$Department of Justice request pertaining to the degree of crosselasticity of demand between local spot  |$advertising on television and other media. NERA analyzed the boundaries of the relevant product market  |$for local advertising within the Cleveland DMA and the nature of competition for the purchase and sale  |$pof advertising there. For evidence on substitutability, NERA looked at information from sellers and  |$buyers, the academic and trade press, and general trends in rates and advertising purchasers. NERA  |$xreaches two conclusions relevant to this discussion. First, because local spot television prices result from  |$Qbilateral oral negotiations between advertising buyers and sellers, the data required to construct the formal  |$statistical estimates of crosselasticities of demand within the Cleveland DMA the Commission asked for  |$Qare not available. Second, NERA believes that other information, including a survey of advertising buyers  |$in Cleveland and a survey of the academic and trade literature, is sufficient to conclude that the relevant  |$+product market includes electronic media (radio, broadcast television, and cable television) and nonelectronic media (direct mail, newspapers, magazines, yellow pages and billboards).  S*'  k32.` ` Economists Incorporated ("Economists Inc.") also submitted an economic study in response"*;0*%%ZZJ"  S' |$}to the TV Ownership Further Notice.<e {Oh'ԍSee Economists Inc, An Economic Analysis of the Broadcast Television National Ownership, Local  {O2'Ownership and Radio CrossOwnership Rules, May 17, 1995 ("Economists Inc. Study"). Economists Inc. contends that reliance on current antitrust  |$enforcement standards will protect the public from the creation of market power in local advertising  |$gmarkets. Similar to the NERA study, Economists Inc. analyzed the boundaries of the relevant product  |$gmarket for local advertising and submits illustrative competitive calculations in five DMAs (New York,  |$VCleveland, Portland, Richmond and Amarillo). Economists Inc. concludes that the product market  |$proposed by the Commission includes broadcast stations, cable systems, radio stations, local newspapers,  |$as well as yellow pages, outdoor and direct mail. In support of its conclusion, Economists Inc. states that  |$there is abundant evidence of competition between different types of advertising media. As is typically  |$Vthe case, they assert, there are no econometric studies that demonstrate quantitatively the extent of  |$substitution by advertisers among various types of advertising in response to changes in relative prices.  |$It would be very difficult to conduct such a study because transaction prices for alternative media, as well  |$cas nonprice terms, are negotiated for each advertising contract and are not publicly available. The  |$3practice in antitrust analysis is to rely on other types of information. Relevant advertising markets are  |$cdefined with the assistance of information obtained in interviews with advertisers and executives at  |$advertising agencies. To obtain the relevant information, Economists Inc. interviewed seven advertising  |$agency executives and one media consultant on a confidential basis to obtain information on competition  |$between advertising sold to local advertisers by broadcast television stations and other advertising media  |$Zin a certain urban area. The individuals interviewed were at advertising agencies that spend significant sums of money on broadcast television advertising in that urban area.  S'  kq 33.` ` The weight of the evidence in this record supports the general conclusion that there may  |$tbe some intermedia substitutability in the markets served by broadcasters. As to competitive concerns  |$underlying our ownership rules, this evidence justifies some relaxation of our local television ownership  |$rules, as it suggests that consumers and advertisers may have more viable alternatives to broadcast stations  |$than they once had. The evidence, however, does not support more extensive relaxation or elimination  |$7of the rules at this time because it is insufficient to characterize generally the degree of the substitutability  |$Qof different media. This is a critical issue, for many of the arguments for greater relaxation or elimination  |$of our ownership rules are premised on the assertion that consumers and advertisers have the option of  |$Qturning to a large number of nonbroadcast media. Yet there remain unresolved questions about the extent  |$^to which these alternatives are widely accessible and provide meaningful substitutes to broadcast stations.  |$A recent econometric study finds that other advertising media are not good substitutes for radio advertising  S*' |$^and that radio advertising probably constitutes a separate antitrust market.a=*$e {O'ԍSee Robert K. Ekelund, George S. Ford, and John D. Jackson, "Is Radio Advertising a Distinct Local  {O'Market? An Empirical Analysis," 14 Review of Industrial Organization, 239256 (May 1999). While the conclusions of this study should be considered tentative, the analysis is consistent with a cautious approach toward modification of our ownership rules until the efficacy of product substitutes as a constraint on the possible exercise of market power in the advertisersupported television industry is better understood.a In future biennial reviews we  |$will ask parties to submit more evidence on the extent to which intermedia competition can be relied on"=0*%%ZZ"  S'to constrain anticompetitive behavior and provide additional outlets for diverse viewpoints to the public.>e yOh'ԍFor a discussion of those media that we will count as voices with respect to our revised duopoly and  {O0'radio/TV crossownership rules, see infra  6870, 111114.  S'  k!34.` ` Benefits of Common Ownership. Economic theory suggests, and the record in this  |$proceeding largely confirms, that there may be certain efficiencies inherent in joint ownership and  |$operation of television stations in the same market, and of radiotelevision combinations. These  |$efficiencies can in turn lead to cost savings, which can lead to programming and other service benefits  |$that enhance the public interest. Much of the evidence regarding the efficiencies of common ownership  |$ is anecdotal and is provided by broadcasters drawing upon their own experience in operating a same |$market television LMA or a radiotelevision combination. The efficiencies mentioned by these  |$broadcasters include the ability to colocate and share the studio and office facilities of samemarket  |$stations, sharing of administrative and technical staffs, efficiencies in advertising and promotion, and  SH ' |$efficiencies involving news gathering and sales operations.9?H "e yO 'ԍNumerous parties cited costsavings resulting from colocation and sharing of station operations between  {O'LMAed television stations in the same market. See, e.g., Comments in response to the Commission's LMA Public Notice ("LMA Comments") of Pegasus Communications Corporation, River City Limited Partnership, Sinclair Broadcasting Group, Inc., LIN Television Corporation, WJZYTV, Inc., Capitol Broadcasting, Inc., Carolina Broadcasting System, Inc., Kelly Broadcasting Company, Channel 58, Inc., Waterman Broadcasting Corp., Montclair Communications, Inc., New Mexico Broadcasting Company, Inc., Ramar Communications, Inc., RKM Media, Inc., Max Television of Syracuse, L.P., Cannell Cleveland, L.P., Whitehead Media of Florida, Inc., and MAC America Communications, Inc. With respect to the cost savings and related programming benefits of joint operation of radio and TV  {O'stations in the same market, see Group W Comments in response to theàTV Ownership Further Notice at 4142. According to Group W, the decision to place its Boston radio/television operations under one general manager allowed it to double the number of minutes of news aired on the radio station. Similarly, Group W states that, after adding an AM/FM combination to its ownership of a television station in San Francisco, it was able to provide an additional allnews radio service in the San Francisco Bay area. Group W asserts that developing this service was substantially less difficult and time consuming in San Francisco than when Group W developed a  {O'standalone radio news service in another market some years previous. See also Communications Corporation of  {OX'America, ("CCA") Comments in response to the TV Ownership Further Notice at 2225. According to CCA, its radiotelevision combination in Lafayette, LA enabled its UHF station there to survive, and its UHFAM combination in Mansfield, OH enabled both these stations to remain on the air.9 Although the greatest benefits of common  |$ownership likely occur between stations located in the same market, efficiencies are also possible among  S 'stations located in separate markets.T@z e {O* 'ԍSee, e.g., Viacom, Inc. LMA Comments at 34 (regarding the LMA linking its station WBFS of Miami with WTVX of West Palm Beach); TV Alabama, Inc. and RKZ Television, Inc. LMA Comments (regarding LMA between WCFT in Tuscaloosa, AL and WJSU in Anniston, AL). According to TV Alabama and RKZ Television, their "enhanced coverage LMA" permits two UHF stations to provide ABC network service to three markets by maintaining a combined production studio presence that delivers simulcasted programming to Birmingham, Tuscaloosa and Anniston, Alabama in addition to production facilities in the communities of license. According to these commenters, the LMA extends the reach of the ABC service to previously"$?0*%%$" underserved areas, thereby enhancing diversity. T " X@0*%%ZZ "Ԍ S'  k=ԙ"35.` ` Two commenters provided estimates of the specific cost savings that may be generated  |$by these efficiencies. According to Pegasus Communications Corporation ("Pegasus"), construction of  |$a new standalone TV station costs at least $5 million, with an additional $12 million required for locally  S' |$produced programming or news.ABXe {O'ԍSee Pegasus Comments at 9. According to Pegasus, to amortize the cost of construction, a broadcaster must anticipate an annual operating income of at least $750,000 (or $1 million if an investment in local news is also made). The costs of station operation are both variable (programming and sales costs) and fixed (overhead, utilities, and general and administrative expenses). Pegasus estimates that variable expenses are approximately 4050% of station revenues. In addition, fixed costs for a standalone station (exclusive of news or local programming) will exceed $11.5 million per year (an additional $1 million if local news is offered). Therefore, for a standalone television station to cover its fixed costs and generate sufficient operating income, the station must generate annual revenues of $34 million ($57 million with local news), according to Pegasus. Pegasus estimates that combining a second new station with an already  |$existing facility will reduce the fixed operating costs of the second station by up to twothirds, cut required  |$capital investment for the second station by as much as twothirds, and make it possible for local news  |$production costs to be shared by the two stations (possibly creating two news efforts where there was  S' |$previously none).,Bzb e {O'ԍSee Pegasus Comments at 9, 1314. Pegasus argues that these cost savings are especially significant in smaller markets. For example, in New York Pegasus claims that a station can be profitable without exceeding  yO|'1% of total market revenues. However, in a smaller market, a standalone station without news would require a market share of 10% to 12.5% to justify construction (20% with news). Even smaller markets may result in minimallyprofitable market shares higher than 2530%. The cost reductions associated with common ownership would enable the creation of new stations in markets with relatively small total market revenue (as little as $18 million according to Pegasus), thereby promoting competition in these markets., ALTV asserts that colocation of facilities in a single market can produce cost savings  S' |$Rof approximately 25%.OCe {O'ԍSee ALTV Comments at 30.O Other evidence of cost savings and efficiencies came from numerous  |$broadcasters' descriptions of the benefits of samemarket LMAs. According to many of these reports,  |$LMAs have saved failing stations, and permitted them to invest in more expensive programming and updated facilities.  S '  k`#36.` ` The cost savings of joint station ownership may contribute to programming benefits,  |$including more news, public affairs, and other nonentertainment programming as well as enhanced  |$entertainment programming choices for viewers and listeners. Again, the evidence in the record of such  |$benefits was largely anecdotal and related to samemarket LMAs. Examples of the benefits broadcasters  |$gclaimed resulted from such arrangements include firsttime presentation of local news on the brokered  |$kstation, change of the brokered station format from infomercials to one with other entertainment and non |$@entertainment programming, acquisition by the brokered station of a network affiliation, and improved"6C0*%%ZZ"  S' |$news and public affairs programming on both stations.De yOh'ԍCommenters provided numerous examples of the benefits of television LMAs. For example, ALTV cited two broadcasting combinations: (1) Cleveland LMA between WOIO and WUAB led to an increase in the quantity and quality of informational and entertainment programming on both stations and permitted the creation of a number of new jobs; and (2) Naples, FL LMA between WEVU and WBBHTV permitted WEVU to provide its first local news. ALTV Comments at 17. According to A.K. Media, LMA agreement pursuant to which KCBATV in MonterreySalinas provides programming to KCCN in that community saved a failing station, permitted improvement of KCCN's signal quality, and permitted plans to increase the quantity of news and children's educational programming broadcast on the brokered station. A.K. Media Comments at 89. Glencairn, Ltd. provided a number of examples of the benefits of LMAs including: (1) WTTOTV brokerage of programming on WABMTV in Birmingham, AL pulled WABM out of bankruptcy and permitted it to air children's educational and informational programming; (2) WPGHTV's brokerage of programming on WPTTTV in Pittsburgh permitted WPTT to change from an exclusively homeshopping format to one that includes 20 hours/day of entertainment programming and core children's programming; (3) LMA between WLFLTV and WRDCTV in Durham permitted WRDC to engage a public affairs director and to improve its public affairs programming and to air children's programming. In addition, Gannett provided an example of the beneficial results of a television duopoly. According to Gannett, its temporary joint ownership of WXIATV in Atlanta and WMAZTV in Macon has permitted the Macon station to improve its news and public affairs programming, to hire a community affairs director, to apply for a license to operate a weather radar station, and to use a news helicopter to provide aerial footage of stories of local interest. Gannett Comments at 23.  In addition to programming benefits, other  |$&possible benefits of joint station ownership include enabling a struggling station to continue to provide  |$@service to the public or returning a dark station to the air, possible activation of a new or unused radio  |$or TV allocation, and improvement in the technical facilities of the stations, and creation of new jobs in the community.  S'  k$37.` ` Need for Relaxation of Ownership Limits. We believe the considerations we have  |$described above warrant relaxation to some extent of our local television ownership restrictions. The  |$record reflects that there has been an increase in the number and types of media outlets available to local  |$communities. With respect to cable television, we recognize that clustering of systems in the major  |$population centers enables cable to compete more effectively for advertising dollars. In markets with many  |$pseparate licensees and a variety of other media outlets, we believe the benefits of joint ownership in  |$tcertain instances outweigh the cost to diversity from permitting such combinations. There is evidence  |$concerning the efficiencies inherent in joint ownership and operation of television stations in the same  |$market, and of radiotelevision combinations. These efficiencies can lead to cost savings, which in turn can lead to programming and other service benefits that serve the public interest.  SX'  k0%38.` ` At the same time, we do not agree with those parties that argue for greater relaxation or  |$&elimination of the local television ownership rules due to the important competition and diversity goals  |$Qat stake. As discussed above, there is insufficient evidence regarding the extent of substitutability and the  |$availability of local programming among the different media now available to consumers. In addition,  |$there already has been a high degree of consolidation in the broadcast industry since passage of the 1996  |$Act, which liberalized the radio and national television ownership rules. Over 2,100 radio stations"hD0*%%ZZ"  S' |$changed hands in 1996 and again in 1997, and 1740 changed hands in 1998.yEe {Oh'ԍBIA Companies, State of the Radio Industry 1999, May 1999, at 127.y At the national level, the  |$number of owners of commercial radio stations has declined by 12.1 percent from 5,133 to 4,512. This  S'decline is primarily due to mergers between existing owners.XFZe yO'ԍFCC staff review of BIA database.X  S`'  k&39.` ` At the local level, there has also been a downward trend in the number of radio station  |$owners per market. Since passage of the 1996 Act, the average number of radio station owners across  |$all radio metro markets declined from 14 to 11, a loss of about three owners per market. The top 10 radio  |$metro markets experienced an average loss of 5 owners per market, from about 33 owners to about 28  |$7owners per market. The smallest radio metro markets (markets 101268) experienced an average loss of  |$about two owners per market, from about 10 owners to 8 owners. Further, the top owners in each metro  |$^market generally account for an increasing share of total radio advertising revenues in these markets. For  |$example, the top four radio owners in each metro market, on average, account for more than 91 percent  S ' |$of their metro market's total revenues, compared to about 83 percent in March 1996.G| e yO'ԍFCC staff review of BIA database. Examples of growing concentration in the local radio marketplace include Louisville, KY, the 53rd ranked market, where three companies own or operate 18 of the 34 stations, including the top 14rated stations, and one company now controls at least 32 percent of the radio advertising market in six of the nation's ten largest markets. Increases in national ownership concentration have also occurred in the television industry. As of April 1999, the nation's top 25 television station groups owned almost  {O'40% of the commercial television stations in the U.S., more than twice the 17% they owned in 1995. See  {O\'Broadcasting and Cable, April 18, 1999, at 38.  This increasing  |$level of ownership concentration suggests that it is appropriate for us to move prudently so that we can monitor consolidation to prevent harm to competition and diversity.  S '  k '40.` ` Our decision today is an exercise in line drawing perennially one of the most difficult  SX' |$*yet inevitable challenges facing a government agency."HX. e yO&'ԍJustice Holmes once observed, "[n]either are we troubled by the question where to draw the line . . .  {O'[t]hat is the question in pretty much everything worth arguing in the law." Irwin v. Gavit, 268 U.S. 161 (1925)." On the one hand, we want to allow broadcasters  |$and the public to realize additional economic efficiencies and public interest benefits generated by  |$Zcommon ownership. On the other hand, we must ensure that diversity and competition are protected,  |$3especially in view of the vital role played by broadcast television in our society. Currently, 98 percent  |$Qof the population owns a television set and thus has access to the entertainment, sports, local and national  |$news, election results, weather advisories, access for candidates, children's educational programming, and  |$Zother public interest programming it provides. Although the number of video competitors to television  |$continues to increase, broadcast television remains the primary source of news and information for most  S'Americans.eI e {O@#'ԍSee "America's Watching," supra note 34.e  S'  k(41.` ` Balancing these competing considerations based on the record before us, and recognizing"I0*%%ZZ1"  |$Dthe continuing dominant role played by broadcasting in society and the continuing importance of ensuring  |$that diversity and competition are protected, we believe that the revisions we make today to our rules  |$/reflect the degree of relaxation warranted by the growth of alternatives to broadcast television, the  |$tdemonstrated benefits of common ownership, and our objective of ensuring diversity and competition.  |$Of course, we will monitor the effects of our changes on our competition and diversity goals, as well as  |$ongoing changes in the media environment, and we will adjust our ownership rules as needed in the context of future biennial reviews.  S' E IV. THE LOCAL TELEVISION OWNERSHIP RULE ă  SH ' A.Geographic Scope of the Rule  S '  kq )42.` ` Background. Our local television ownership rule presently prohibits common ownership  S ' |$Dof two television stations whose Grade B signal contours overlap.J  e yO8'ԍ47 C.F.R.  73.3555(b) ("No license for a TV broadcast station shall be granted to any party (including all parties under common control) if the grant of such license will result in overlap of the Grade B contour of that station (computed in accordance with 47 C.F.R.  73.684) and the Grade B contour of any other TV broadcast station directly or indirectly owned, operated, or controlled by the same party."). In the TV Ownership Further Notice,  |$we sought comment on whether the geographic scope of the rule should be changed to Grade A signal  S ' |$contours or to Designated Market Areas ("DMAs").K e yO'ԍDMAs are unique, countybased geographic areas designated by Nielsen Media Research, a television audience measurement service, based on television viewership in the counties that make up each DMA. Nielsen assigns counties to DMAs on the basis on audience viewership as recorded in diaries placed in television households. Counties are assigned to a DMA if the majority or, in the absence of a majority, the preponderance,  {O'of viewing in the county is recorded for the programming of the television stations located in that DMA. See  {O'also infra  48. Based on the comments we received, we tentatively  SZ' |$concluded in the Second Further Notice that the geographic scope of the local television ownership rule  |$should be based on a combination of DMAs and Grade A contours. We sought comment on that tentative  S ' |$conclusion in the Second Further Notice, as well as comment about possible exceptions to and waivers  |$of the rule to permit television duopolies in certain circumstances where they would serve the public  S'interest.  Sn'  kJ*43.` ` Comments. While a few of the broadcasters that commented on the issue of the proper  |$Zgeographic scope of the television duopoly rule supported the Commission's proposal to rely on a joint  S' |$7DMA/Grade A test,L, e {O 'ԍSee Comments of NAB, ABC, AK Media, Kentuckiana, Max Media, and PostNewsweek. the majority of broadcasters urged the Commission to define the geographic market  S' |$by DMA only, without reference to Grade A signal contours.M e {OT#'ԍSee Comments of ALTV, Benedek, CBS, Gannett, HSN, LIN, LSOC, Malrite, NBC, Pappas, Paxson, Sinclair, Viacom, and Waterman. Those advocating a DMAonly test argued  |$Qgenerally that the DMA is the best single measure of the relevant geographic market for television stations"M0*%%ZZ>" because it defines the market in which stations compete for viewers, ratings, programming, and advertisers.  S'  kW+44.` ` Those broadcasters that supported the Commission's tentative proposal to rely on a joint  |$DDMA/Grade A test generally concurred with other broadcasters that the DMA component of the test best  |$creflects a station's economic market. These commenters gave different reasons for supporting the  |$*additional Grade A component of the test. ABC and NAB stated that a combined DMA/Grade A standard  |$is appropriate since differentmarket stations with Grade A overlaps may in some cases compete for  S' |$viewers and advertisers.!NZe {OP'ԍSee ABC Comments at 3; NAB Comments at 4. NAB stated, however, that the Commission should be careful to recognize that there may be situations where two stations have overlapping Grade A contours, but in fact serve different markets.! Two other commenters expressed the view that a DMA standard alone could  S'lead to a level of consolidation that would threaten the Commission's diversity and competition goals.rOe {OJ 'ԍSee PostNewsweek Comments at 4; Kentuckiana Comments at 3.r  Sp'  k,45.` ` Two broadcasters, Jet Broadcasting Co., Inc. ("Jet") and Sunbelt Communications  |$Company ("Sunbelt"), supported replacing the existing Grade B contour measure with a Grade A measure,  |$without reference to DMAs. Jet argues that the Grade A contour best represents the area in which stations  S ' |$compete because it includes the area in which viewers can regularly expect to receive a station's signal.MP |e {O'ԍSee Jet Comments at 4.M  |$kJet and Sunbelt raise a number of arguments against relying on DMAs for the new duopoly rule, including  |$tthe fact that DMA boundaries are subject to change thereby creating some uncertainty, and that use of  |$DMA to determine the permissibility of multiple ownership penalizes stations that are not carried on a  SX'cable system.uQBXe {O'ԍSee Jet Comments at 3; Sunbelt Comments at 56, 912. In addition, Sunbelt claims that DMAs vary widely in geographic size and population. As a result, a single broadcaster could acquire six stations in Montana, which has six separate, sparselypopulated DMAs, but would be limited to only one station in more populous Utah. The difference in the size of these DMAs, and hence the impact on common ownership of stations within these states under our rules, is related to the location of residents of those states and not the size of their respective populations. Montana is larger than Utah and its population is widely dispersed, thereby accounting for the fact that it is divided into more than one DMA. Utah's population is more concentrated in the major urban area, Salt Lake City, and hence is treated as a single DMA. u  S'  k-46.` ` Finally, four commenters supported retaining the Grade Bbased duopoly rule. The NTIA,  |$Media Access Project, which filed jointly with nine other public interest groups (jointly referred to herein  S' |$as "MAP et al."),Re yOp!'ԍMAP filed on behalf of itself and the following groups: Black Citizens for a Fair Media, Center for Media Education, Minority Media and Telecommunications Council, National Association for Better Broadcasting, Office of Communication of the United Church of Christ, Philadelphia Lesbian and Gay Task Force, Telecommunications Research and Action Center, Washington Area Citizens Coalition Interested in Viewers' Constitutional Rights, and Women's Institute for Freedom of the Press.  Centennial Communications, Inc. ("Centennial") and BET Holdings, Inc. ("BET")"R0*%%ZZD"  |$generally argued that relaxation of the current duopoly rule would increase concentration in the television  S' |$market and adversely affect diversity.Se {O@'ԍSee NTIA Comments at 45; MAP et al. Comments at 1112; Centennial Comments at 47; BET Comments at 13, 56. Centennial argued that relaxation of the duopoly rule would  |$reduce the number of independent sources of programming to viewers and increase the advantage of group  S' |$owners in bidding for programming, thus narrowing access to programs for independent stations.VT"e {OJ'ԍSee Centennial Comments at 67.V NTIA  |$argued that relaxation of the duopoly rule would increase the demand for television properties and impair  |$the ability of minorities to enter the broadcast industry. NTIA cites a recent study which shows a positive  |$3relationship between minority broadcast ownership and the supply of minorityoriented programming.  S' |$ NTIA also argued that the Commission's DTV proceedings offer the prospect of increasing diversity by  |$expanding the number of broadcast channels, but that relaxation of the ownership rules at this time may  |$permit consolidation that would foreclose this opportunity. Before the duopoly rule is relaxed, NTIA  |$believes that the Commission should study the cumulative impact of recent changes in the television  SH 'market on competition and diversity.PUH e {O'ԍSee NTIA Comments at 46.P  S '  k .47.` ` Discussion. After careful analysis of the record in this proceeding, we have decided to  |$narrow the geographic scope of the television duopoly rule so as to permit common ownership of  S ' |$television stations provided they are in different DMAs without regard to contour overlap.V Fe yO'ԍFor purposes of this rule, a broadcast station is considered to be in the DMA to which Nielsen assigns it. We will also  |$^continue to allow common ownership of stations within the same DMA as long as their Grade B contours  |$do not overlap. We have chosen this DMA test based on our belief that, compared to the current Grade  |$B signal contour standard, DMAs are a better measure of actual television viewing patterns, and thus serve  |$as a good measure of the economic marketplace in which broadcasters, program suppliers and advertisers  |$buy and sell their services and products. Changing the geographic scope of the duopoly rule will  |$consequently more accurately define a local television market and permit mergers of stations in different  |$Qmarkets without harming local competition and diversity. Moreover, we believe that the mergers that will be allowed under our new rule can lead to improved television service and viewer choice.  S'  k/48.` ` There are several benefits to defining the geographic dimensions of the local television  |$market by reference to DMAs. Most importantly, unlike a rule relying on predicted field strength  |$tcontours, DMAs reflect actual television viewing patterns and are widely used by the broadcasting and  |$Qadvertising industries. DMAs reflect the fact that a station's audience reach, and hence its "local market,"  |$is not necessarily coextensive with the area of its broadcast signal coverage. For example, a station's  |$^overtheair reach can be extended by carriage on cable systems and other multichannel delivery systems,"PV0*%%ZZ"  S' |$as well as through such means as satellite and translator stations.9WXe yOh'ԍFor example, Salt Lake City television stations are located in the northeast corner of the state of Utah. However, because of extensive use of microwave and translators, the Salt Lake City DMA encompasses the entire state of Utah and portions of other states. 9 In designating DMAs and compiling  |$DMAbased ratings of television programs, Nielsen Media Research, a TV audience measuring service,  |$collects viewing data from diaries placed in television households four times a year. Nielsen assigns  S' |$counties to DMAs annually on the basis of television audience viewership as recorded in those diaries.Xe {O'ԍSee Nielsen Station Index, NSI Reference Supplement 19941995, at 1.  |$MCounties are assigned to a DMA if the majority or, in the absence of a majority, the preponderance, of  S8' |$viewing in the county is recorded for the programming of the television stations located in that DMA.kY8ze {OR 'ԍSee TV Ownership Further Notice, 10 FCC Rcd at 3540.k  |$Nielsen uses its DMA viewing data to compile DMAbased audience ratings for television programs.  |$These data are used by television stations in deciding which programming should be aired, and by  S'advertisers and stations in negotiating advertising rates.Z e {Ol'ԍThe economic studies submitted by Economists Inc. and NERA in response to the TV Ownership  {O6'Further Notice also employed DMAs as the relevant geographic market in local advertising and in delivered  {O'video programming markets. See Economists Inc. Study, supra note 60, at 14, 2932 and Appendices B and F;  {O'NERA Study, supra note 59, at 23. See also Sumanth Addanki, Phillip A. Beutel, and Howard P. Kitt, NERA,  {O'Regulating Television Station Acquisitions: An Economic Assessment of the Duopoly Rule (filed on behalf of the Local Station Ownership Coalition), May 17, 1995, at Tab K.  Sp'  k 049.` ` The Commission traditionally has employed DMAs or a similar geographic measure in  |$Dother rules. Such a geographic measure is the Area of Dominant Influence ("ADI"), used by the Arbitron  |$Company to define a television station's geographic market according to audience viewing patterns. In  |$the past, we have used ADIs for purposes of calculating an entity's national television audience reach  S ' |$3under our national television ownership rule. In the National TV Ownership Report and Order we are  |$Qissuing today, we are adopting our proposal to use DMAs instead of ADIs in calculating national audience  |$reach because Arbitron stopped updating its ADI market data in 1993. For the same reason, the  |$Commission is now using DMAs rather than ADIs to define the market within which a broadcast  S2' |$television station is entitled to cable mustcarry or retransmission consent.[2 e {O`'ԍReport and Order and Further Notice of Proposed Rule Making, In the Matter of Definition of Markets for Purposes of the Cable Television Mandatory Television Broadcast Signal Carriage Rules, Implementation of  {O'Section 301(d) of the Telecommunications Act of 1996, Market Determinations, CS Docket No. 95-178, 11 FCC  {O'Rcd 6201 (1996). We have shifted our reliance on ADIs to DMAs in other contexts as well. See, e.g., Brissette  {O 'Broadcasting 11 FCC Rcd 6319 (1996) (temporary waiver of the duopoly rule); Media Communications Partners  {OP!'L.P., 10 FCC Rcd 8116, 8116 note 3 (1995) (waiver of the onetoamarket rule).  Commercial market  |$measurements such as DMAs are presently used by the Commission to define markets in other contexts  S'as well, e.g., waivers of the onetoamarket rule in the top 25 television markets.U\e yO$'ԍ47 C.F.R. 73.3555 Note 7. U "\0*%%ZZ"Ԍ S'  kԙ150.` ` We recognize that we proposed in the Second Further Notice to supplement the DMA test  |$with a Grade A contour standard to prohibit common ownership of stations with Grade A signal contour  |$overlap even when they are in separate DMAs. However, after considering the comments in response to  |$@this proposal, we believe a "DMAonly" test is more appropriate. Although a station may attract some  |$viewers who live outside its designated DMA, the preponderance of its audience will reside within its  |$DMA. As CBS noted in its comments, local advertisers use DMAbased ratings to make their purchases  |$of advertising time on local television stations, television networks generally have only one affiliate in  |$peach DMA, and stations target their programming to viewers inside the DMA because these are the  S' |$viewers that advertisers pay to reach.]Ze {O* 'ԍSee CBS Comments at 3941. CBS also noted that it grants network nonduplication protection to its affiliates only for that portion of the zone permitted by the Commission's rules that falls within the station's DMA. The record also indicates that there are a fair number of stations  |$that lie in different DMAs and serve wholly different markets even though they may have slightly  Sr' |$overlapping Grade A contours.^re {O 'ԍSee Letter of Kurt A. Wimmer, Counsel to Benedek Broadcasting, to Magalie Roman Salas, FCC Secretary, May 21, 1999. In addition, a DMAonly standard is more straightforward and easy to  |$@apply in terms of administering the rule. We consequently will not adopt a Grade A component in our new definition of the geographic scope of the duopoly rule.  S '  k251.` ` This new definition will generally be less restrictive than the current Grade B signal  |$contour test. There may be some situations, however, in which this is not the case, particularly in some  |$geographically large DMAs west of the Mississippi River. In these situations, the DMA may be large  |$enough that two stations situated in the DMA do not have overlapping Grade B contours. Common  |$^ownership of the two stations would be permitted under the existing rule but not under a strict application of the new DMA standard.  S'  k352.` ` In the Second Further Notice, we noted our belief that there are currently few stations  |$Qwithin the same DMA that could be commonly owned under the existing Grade B signal contour standard  |$that are not already jointly owned. We sought comment on whether we should, if we adopted a  |$DDMA/Grade A rule, grandfather existing joint ownership combinations that conform to our current Grade  |$tB test. We also sought comment on an alternative approach of adopting a twotiered rule under which  |$we would permit common ownership both under the new test using DMAs and in situations where there  |$is no Grade B overlap. Commenters addressing this issue agreed with our proposal to adopt a twotiered  S'rule that would permit sameDMA stations with no Grade B overlap to combine._De {O'ԍSee ABC Comments at 3; CBS Comments at 43; Gannett Comments at 23, 78; GCC Comments at 3; Kentuckiana Comments at 45.  ST'  k453.` ` It is our intention in this proceeding to relax the duopoly rule consistent with our  |$competition and diversity objectives. It is not our intention to restrict combinations that would be  |$permitted under our present Grade B signal contour test. To avoid this result, we will continue to permit  |$common ownership of television stations in the same DMA where there is no Grade B overlap between"_0*%%ZZ"  S' |$@those stations.n`e yOh'ԍThe Commission's policy has been to issue waivers of the television duopoly rule upon application  {O0'showing mergers between television stations with de minimis Grade B contour overlap, i.e., an area of overlap  {O'that encompasses less than one percent of the area and population of the Grade B contour of each station. See,  {O'e.g., WNNE Licensee, Inc. et al., 13 FCC Rcd 12677 (1998); Hubbard Broadcasting Inc,  2 FCC Rcd 7374 (1987). This policy will continue under the new rules.n Although such stations may compete to some extent for viewers and advertisers, we  |$believe any harm to diversity and competition from permitting such combinations will be minimal and we  |$wish to avoid instances in which application of our new rule would be more restrictive than our current  |$duopoly rule. In addition, this approach avoids disrupting current ownership arrangements involving  S`'stations in the same DMA with no Grade B overlap.a `~e yO~ 'ԍOur decision to permit same DMA/no Grade B overlap combinations by rule moots the need to adopt a provision grandfathering such existing ownership combinations. Under our new rule, as long as the same DMA/no Grade B overlap test is met, there is no restriction on the transfer of such combinations or the creation of new combinations.   S' B.Permitting Television Duopolies in the Same Local Market  S'  k554.` ` Background. In both the TV Ownership Further Notice and the Second Further Notice,  |$we invited comment on whether, in certain situations, we should allow entities to acquire more than one  |$television station in the same geographic market. We sought comment both on exceptions to our "one |$Dstation" local ownership rule, including the exception currently provided in our rules for television satellite  S" ' |$tstations, as well as on a number of possible waiver criteria. In the Second Further Notice, we outlined  |$<five specific waiver criteria for evaluation: (1) combinations involving at least one UHF station; (2)  |$Mcombinations involving a "failed" station; (3) applications to acquire vacant or new channel allotments;  |$ (4) combinations involving stations with a small market share or where a minimum number of voices  |$Qwould remain postmerger; and (5) showings of significant public interest benefits that would result from  |$the merger. In so doing, we requested evidence of the projected benefits of television duopolies, as well as evidence regarding the relationship between ownership concentration and diversity.  S'  kA655.` ` Comments. Most broadcasters supported permitting samemarket duopolies in some form,  |$arguing that common ownership can produce significant efficiencies and public interest benefits. Views  |$differed regarding the extent to which mergers should be permitted and whether they should be allowed  |$Iby exception to the rule, presumptive waiver, or casebycase waiver. Many commenters favored  SD' |$lcombinations in which at least one of the parties is a UHF station.bDf e {OJ'ԍSee, e.g., ALTV Comments at 2429; A.K. Media Comments at ii; Granite Comments at 35; HSN Comments at 912. Some advocated UHF/UHF  S' |$Zcombinations only, while others would also permit a UHF to combine with a VHF station.)cZ e yO|"'ԍKentuckiana opposed a blanket exception to the duopoly rule for VHF/UHF or UHF/UHF combinations,  {OD#'but supported a failed station waiver that would answer the needs of struggling UHF stations. See Kentuckiana Comments at 5.) A number  |$of commenters also supported permitting VHF/VHF combinations in Hawaii, Alaska, or Puerto Rico, and"c0*%%ZZa"  S'in circumstances involving a failed station or vacant allotment.RdZe {Oh'ԍSee, e.g., LSOC Comments at 7980; Malrite Comments at 14; Pappas Comments at 79; Telemundo Comments at 2. Telemundo also advocated that the Commission permit combinations involving at least one Spanishlanguage station in order to promote and preserve Spanish language programming.R  S'  k 756.` ` A number of other commenters opposed television duopolies on the ground they would  |$threaten competition and diversity in local markets. Bahakel Communications ("Bahakel") and Centennial  |$Communications, Inc. ("Centennial") expressed concern that combinations of samemarket stations would  |$increase the already considerable disadvantages faced by independentlyowned stations in competing  S' |$Magainst groupowned stations in purchasing programming.oee {O 'ԍSee Bahakel Comments at 12; Centennial Comments at 67.o PostNewsweek Stations, Inc. generally  |$topposes samemarket duopolies because of the dangers to competition and diversity, but would permit  S' |$waivers in the case of a failed station or unused frequency.Yf|e {O 'ԍSee PostNewsweek Comments at 56.Y MAP et al. expressed the view that while  |$samemarket duopolies may increase program diversity, they threaten viewpoint diversity, which is a more  Sr' |$fundamental concern._gre {O 'ԍSee MAP et al. Comments at 811. _ BET and AWRT express concern that relaxation of the television ownership rules  SJ 'could raise the barriers to entry for women and minorities in the broadcasting industry.hZJ e {O'ԍSee BET Comments at 2; AWRT Comments at 12. AWRT supports establishment of waiver criteria for the ownership rules that would be based on a station owner's incubation of women or minorityowned stations.  S '  k857.` ` Costs and Benefits of Broadcast TV Station Duopolies. We believe that the demonstrated  |$Rbenefits of samemarket television station combinations support allowing the formation of such  |$7combinations in certain cases where competition and diversity will not be unduly diminished. The record  |$in this proceeding shows that there are significant efficiencies inherent in joint ownership and operation  |$of television stations in the same market, including efficiencies related to the colocation and sharing of  |$Dstudio and office facilities, the sharing of administrative and technical staff, and efficiencies in advertising  S ' |$and news gathering.Ii  e {Ol'ԍSee supra  34.I These efficiencies can contribute to programming and other benefits such as  |$increased news and public affairs programming and improved entertainment programming, and, in some  S' |$"cases, can ensure the continued survival of a struggling station.IjT e {O 'ԍSee supra  36.I In markets with many separate  |$*television licensees, the public interest benefits of common ownership can outweigh any cost to diversity and competition of permitting combinations.  S'  k958.` ` While we conclude that the public interest would be served by permitting television  |$duopolies in certain circumstances, we are not eliminating or relaxing the rule to the extent a number of"j0*%%ZZ{"  |$Ecommenters advocate given the important diversity and competition issues at stake. Television  |$broadcasting plays a very special role in our society. It is the primary source of news and information,  S' |$as well as video entertainment to most Americans,Ike {O'ԍSee supra note 34.I and we must continue to ensure that the broadcast  |$Mtelevision industry has a diverse and competitive ownership structure. Moreover, as discussed above,  |$^because the communications industry is undergoing rapid change and increasing consolidation, significant  |$yet measured relaxation of the television duopoly rule is appropriate to allow us to monitor the results of these sweeping changes.  S'  k=:59.` ` In light of these considerations, we have decided to adopt a modification to our duopoly  |$rule, and three waiver tests, that are targeted to promote the public interest without appreciable harm to  |$tour competition and diversity goals. In particular, as described below, we will modify the TV duopoly  |$rule to allow common ownership of two stations in the same DMA, if eight independently owned and  |$Moperating commercial and noncommercial television stations will remain in the DMA postmerger, and  |$&at least one of the stations is not among the top fourranked stations in the market, based on audience  |$7share, as measured by Nielsen or by any comparable professional and accepted rating service, at the time  |$Mthe application is filed. In addition, we will presume that a waiver of the rule is in the public interest if  |$"the applicant satisfies a "failed" or "failing" station test, or involves the construction of an "unbuilt"  |$station. We will monitor the impact that our new rules and waiver policies have on our competition and  |$diversity goals and adjust them as appropriate, as part of future biennial reviews of our ownership rules under the 1996 Act.  S' 1.` ` Modification of the Rule: Eight Voice/Top FourRanked Station Standard (#`  Sh'  k;60.` ` Background. In the Second Further Notice, the Commission sought comment on whether  |$gwe should entertain joint ownership of stations that (1) have very small audience or advertising market  |$^shares and (2) are located in a very large market where (3) a specified minimum number of independently  |$owned voices remain postmerger. We stated that the purpose of such a standard would be to enhance  |$competition and diversity in the local market by allowing small stations to share costs and thereby compete  |$more effectively. We further stated that such joint ownership could potentially serve the public interest  |$if such stations were to use their economic savings to produce new and betterquality programming or  |$/related enhancements. Such advantages may be particularly helpful to small and independent UHF  |$stations. We invited comment on the circumstances under which joint ownership should be permitted, and  |$on the size of the market share we might adopt, the number and kinds of voices we should count in any minimum voice criterion, and whether we should include a market rank test.  S'  k<61.` ` Comments. While broadcasters were generally supportive of the concept of samemarket  |$mergers, their comments on the specific criteria for them were mixed. ALTV is skeptical about reliance  |$xon market share standards. It notes that the Department of Justice already uses market share measures in  |$kits antitrust enforcement, and asserts that Commission duplication is unnecessary. ALTV also argues that  |$3market share measurement is complex and that its use could act as a disincentive to improve program" Zk0*%%ZZ"  S'quality.Ole {Oh'ԍSee ALTV Comments at 31.O NAB, LSOC, and other broadcasters also oppose using a test based on market share.~mZe {O'ԍSee NAB Comments at 12; LSOC Comments at 56; Paxson Comments at 1419.~  S'  k=62.` ` ALTV is also skeptical about reliance on "minimum number of voices" standards since  |$the number of voices is lowest in the small markets that would, in their opinion, benefit most from local  |$}station combinations. Other broadcasters echoed this concern about prohibiting mergers in smaller  S8' |$markets.\n8e {O 'ԍSee, e.g., Granite Comments at 1317.\ If the Commission uses a "minimum number of voices" standard, ALTV advocates that the  |$Commission count a variety of media as voices including radio, cable, MMDS, DBS, telephone company  |$ video platforms, newspapers, magazines, video cassette rentals, and other nonbroadcast information  S' |$7sources such as the Internet.Oo~e {O 'ԍSee ALTV Comments at 31.O LSOC and Pappas also advocate counting all media voices in the market,  S'both broadcast and nonbroadcast.hpe {OH'ԍSee LSOC Comments at 56; Pappas Comments at 79.h  SH '  k0>63.` ` BET is opposed to allowing mergers based on market share, market size, or the number  S ' |$of voices for the same reasons that it opposes the use of a failed station waiver, i.e., that it will unfairly  S ' |$advantage incumbents against entrants, particularly minority entrants, and harm diversity.Oq e {O<'ԍSee BET Comments at 56.O MAP et al.  |$Margues that a small market share/minimum number of voices policy permits elimination of competitors  S ' |$tserving niche needs. If mergers are granted under this criterion, MAP et al. asks that the Commission  |$require a specific showing about what kinds of enhanced programming will result and ensure that these  S^'promises are met.^r^4 e {O2'ԍSee MAP et al. Comments at 2124.^   S'  k?64.` ` Discussion. After considering the record, and our competition and diversity goals, we  |$xhave decided to modify the duopoly rule to permit any two television stations in the same market to merge if:  Sn' G6!Xat least eight independently owned and operating fullpower commercial and noncommercial TV  G6!stations would remain postmerger in the DMA in which the communities of license of the TV  S'stations in question are located,RsX e yO"'ԍWhere there is no Nielsen DMA (e.g, Puerto Rico), parties may use data associated with a "functionally equivalent" TV market. Parties may demonstrate that a particular geographical area constitutes a functionally equivalent TV market based on viewing statistics or signal contour overlap.R and(# "s0*%%ZZ{"Ԍ S' G6! Xthe two merging stations are not both among the top fourranked stations in the market, as  S'measured by audience share.-te yO@'ԍWe are aware of some unusual situations involving two stations that are within, but at the periphery of, the same DMA, and which simulcast the same programming pursuant to an attributable LMA as a means of providing full coverage to the center market. In these cases, Nielsen apparently reports the share of the simulcasting stations together, making it impossible to determine whether both of the stations are ranked among the top four in their market. Because it is very unlikely that both stations in such an arrangement would be ranked among the top four stations were they rated separately, we will not require such stations, should they seek to merge, to demonstrate compliance with the top four ranking component of the eightvoice test of our new duopoly rule. Stations in these arrangements that seek to combine ownership under the voicetest component of the new rule will still be required, however, to establish that eight separately owned broadcast voices would remain in their market after their merger.-(#  |$gIf any entity acquires a duopoly under this standard, it will not later be required to divest if the number  |$of operating television voices within the market falls below eight or if the two merged stations  |$subsequently are both ranked among the top four stations in the market; however, a duopoly may not  |$^automatically be transferred to a new owner if the market does not satisfy the eight voice/top fourranked  |$^standard. In such a case, the transaction must either meet one of the waiver standards enunciated below,  |$Ior involve a sale to separate parties. We will not include a market rank component in our new rule  |$@because we believe such a test is unnecessary given the station rank and minimum number of stations  |$criteria we are adopting. We adopt this "eight voice/top fourranked station" standard as a modification  |$ of the rule as opposed to the adoption of a waiver criterion in order to fashion a brightline test, bring  |$tcertainty to the permissibility of these transactions, and expedite their consummation, given that we do  |$ not believe as a general matter that they unduly compromise our competition and diversity goals. We  |$Ddelegate to the Mass Media Bureau the authority to grant any application that satisfies the eight station/top four ranked station standard, and presents no new or novel issues.  SX'  k=@65.` ` This standard provides measured relaxation of the television duopoly rule, particularly in  |$^the larger television markets. It will allow weaker television stations in the market to combine, either with  |$each other or with a larger station, thereby preserving and strengthening these stations and improving their  |$ability to compete. These station combinations will allow licensees to take advantage of efficiencies and  |$cost savings that can benefit the public, such as in allowing the stations to provide more local  |$programming. At the same time, the station rank and voice criteria are designed to protect both our core competition and diversity concerns.  S'  kA66.` ` The "top four ranked station" component of this standard is designed to ensure that the  |$largest stations in the market do not combine and create potential competition concerns. These stations  |$@generally have a large share of the audience and advertising market in their area, and requiring them to  |$operate independently will promote competition. In addition, our analysis has indicated that the top four |$ranked stations in each market generally have a local newscast, whereas lowerranked stations often do  |$not have significant local news programming, given the costs involved. Permitting mergers among these  |$two categories of stations, but not among the top fourranked stations, will consequently pose less concern  |$over diversity of viewpoints in local news presentation, which is at the heart of our diversity goal. Indeed,"` t0*%%ZZ "  |$by allowing mergers between large and small stations, this prong of our new rule responds to those  |$broadcasters who argued that the best way to improve the ability of small stations to compete is to allow  |$them to combine with the largest stations in the market. According to these broadcasters, large stations  |$are better positioned to provide the financial and other assistance required by many small stations to  |$improve their technical facilities and programming to allow them to compete more effectively in the market.  S'  kFB67.` ` The "eight independent voice" component of the rule provides a clear benchmark for  |$ensuring a minimum amount of diversity in a market. The Commission has historically used voice count  S' |$Dtests in other contexts (i.e., in waiver standards for the radiotelevision crossownership rule) as a means  |$of promoting diversity. Taking into account current marketplace conditions, the eight voice standard we  |$adopt today strikes what we believe to be an appropriate balance between permitting stations to take  |$advantage of the efficiencies of television duopolies while at the same time ensuring a robust level of  |$diversity. Thus, under our new rule, at least eight independently owned and operating fullpower  |$commercial and noncommercial broadcast television stations must remain in the DMA postmerger. We  |$will not include in our count of independently owned television stations those that are brokered pursuant  |$to an attributable samemarket LMA because a substantial portion of the programming of brokered stations  SZ' |$is furnished by the brokering station.uZe yO'ԍOur decision that stations with attributable LMAs do not constitute independent separate voices applies equally to those we conclude to grandfather in Section VI below. This gives the brokering station a significant degree of influence  |$over the brokered station's operations and programming such that it should not be counted as an  |$independent source of viewpoint diversity; indeed, it is for this reason we have decided to attribute such  S'TV LMAs in our attribution proceeding._vZ e yO'ԍSatellite stations will be included in our count, as they are full service stations, if they are separately  {Oj'owned, operated, and controlled (i.e., the parent station is not in the same market and the satellite is not owned by an entity that holds another voice in the market)._  S'  kC68.` ` We believe that an "eight station" test that focuses only on the number of fullpower  |$broadcast television outlets in the market is necessary for two reasons. First, we believe that broadcast  |$3television, more so than any other media, continues to have a special, pervasive impact in our society  S' |$given its role as the preeminent source of news and entertainment for most Americans.wBe yO'ԍAs noted above, close to 70 percent of Americans report that television is their primary source of news  {O'almost twice the number that rely mainly on newspapers for information. See supra note 34. As the Supreme  |$Court recently stated, "[b]roadcast television is an important source of information to many Americans.  |$kThough it is but one of many means for communication, by tradition and use for decades now it has been  |$an essential part of the national discourse on subjects across the whole broad spectrum of speech, thought,  Sz'and expression."1xZze {O"'ԍTurner II, 520 U.S. at 194 (1997) . See also Arkansas Educational Television Commission v. Forbes, 118 S.Ct.1633, 1640 (1998) (noting that a majority of the population cites television as its primary source of election information).1 "z x0*%%ZZ"Ԍ S'  kqԙD69.` ` Second, as described above,Pye {Oh'ԍSee supra  3033.P we are unable to reach a definitive conclusion at this time  |$Qas to the extent to which other media serve as readily available substitutes for broadcast television. In the  S' |$TV Ownership Further Notice and Second Further Notice, we sought information about the extent to  |$which other media serve as substitutes for television in the advertising and delivered video programming  Sb' |$Qmarkets, and for purposes of diversity. For example, in the TV Ownership Further Notice, we stated that  |$for the purpose of competition analysis, we would tentatively consider local advertising markets to include  S' |$broadcast and cable television advertising, radio advertising, and newspaper advertising.kzZe {O 'ԍSee TV Ownership Further Notice, 10 FCC Rcd at 3543.k For delivered  |$video programming, we tentatively included commercial and noncommercial television stations and cable  S' |$Itelevision.C{e {OP 'ԍId. at 3538.C While we expressed our inclination to tentatively include MMDS, DBS, and television  |$Idelivered by telephone companies, we expressed concern about the extent to which the latter three  |$alternatives were actually available to most Americans and sought quantitative, behavioral studies  |$estimating the extent to which broadcast television actually faced substitutes from any and all sources in  S$ ' |$the marketplace.<|$ ~e {OB'ԍId. < Although we have received voluminous materials debating such substitutability, we  |$}have not received the quantitative, empirical studies that we sought in order to assess this issue in a  |$complete and accurate fashion. Nor does there seem to be a consensus on the extent to which various  |$media are substitutes for purposes of diversity. Thus, while we agree with those commenters who argued  |$that different types of media, such as radio, cable television, VCRs, MMDS, and newspapers, may to some  |$3extent be substitutes for broadcast television, in the absence of the factual data we requested we have  |$decided to exercise due caution by employing a minimum station count that includes only broadcast television stations.  S'  kE70.` ` Our "eight voice/top four ranked station" standard provides significant relaxation of the  |$"television duopoly rule while at the same time ensures that markets remain sufficiently diverse and  |$competitive at the local level so that common ownership of two television stations in these markets does  |$pnot threaten our core diversity concerns. We recognize that stations in markets with less than nine  |$independent voices will not be able to take advantage of this standard. But we believe this is appropriate  |$given that these markets start with fewer broadcast television outlets, and thus a lower potential for  |$providing robust diversity to viewers in such markets. While we recognize, as several commenters argued,  |$that smaller markets also benefit from the efficiency gains and cost savings associated with joint station  |$townership, it is in these small markets that consolidation of broadcast television ownership could most  |$undermine our competition and diversity goals. Moreover, the three waiver standards we adopt today  |$Zthe failed and failing station criteria, and the unbuilt station test will, consistent with our competition  |$7and diversity goals, provide relief in a more tailored fashion for stations in smaller markets that are unable to compete effectively.  S' 2.` ` Waiver Criteria (#` "!|0*%%ZZ"Ԍ S'ԙ ` ` a. Failed Stations  S'  kF71.` ` Background. We invited comment in the Second Further Notice on whether, if an  |$gapplicant can show that it is the only viable suitor for a failed station, the Commission should grant the  |$application regardless of contour overlap or DMA designations. We noted that for purposes of our oneto |$Zamarket rule waiver standard, a "failed" station is a station that has not been operated for a substantial  S' |$period of time, e.g., four months, or that is involved in bankruptcy proceedings. We asked whether this standard should be used in evaluating a request to waive the television duopoly rule.  S'  kFG72.` ` Comments. There was considerable support among broadcasters for a failed station  |$waiver. These commenters argued generally that some service, even if it is duplicative of another voice  SL ' |$in the market, is better than no service at all.}L e {O 'ԍSee, e.g., Kentuckiana Comments at 34; PostNewsweek Comments at 56; Shockley Comments at 45. In contrast, BET and MAP et al. opposed granting a  |$failed station waiver on the ground it would hinder the ability of new entrants, particularly minorities and  |$women, to enter the television industry, thereby diminishing opportunities to increase diversity of  S ' |$tbroadcast ownership.v~ Ze {O'ԍSee BET Comments at vii, 5; MAP et al. Comments at 1718.v BET advocated awarding failed station licenses to new entrants via auction or  S 'comparative hearing.M e {O:'ԍSee BET Comments at 5.M  S^'  kmH73.` ` Discussion. We are persuaded that the public interest would be served by adopting a  |$failed station waiver standard for our revised television duopoly rule. A station that is off the air or in  |$involuntary bankruptcy or insolvency proceedings can contribute little, if anything, to any type of diversity  |$in a local market. Nor does such a station constitute a viable alternative in the local advertising market.  |$As we concluded in adopting our current failed station waiver standard for the onetoamarket rule, the  |$benefits to the public of joint ownership under these circumstances outweigh the costs to diversity. In  |$fact, dark or bankrupt stations actually disserve our goal of efficient use of the spectrum because those  SF' |$Mstations are holding valuable frequencies without providing service to the public.lF~e {Od'ԍSee Second Report and Order, 4 FCC Rcd at 1753.l Permitting another  |$/local station to acquire a failed station will result in additional programming, perhaps an increase in diversity in the market, and more advertising time available for sale in larger quantities.  S'  kI74.` ` Although we share the concern expressed by NTIA, MMTC, BET, MAP et al., and  |$AWRT about new entry into broadcasting, the apparent decline in minority and female ownership of  SX' |$broadcast facilities, and the need to encourage broadcast ownership diversity,YXe {O"'ԍSee supra  13, 56, 63, 72.Y we are not convinced that  |$that concern undermines our reasons for establishing a failed station waiver policy. We believe the benefit  |$to the public of keeping a failed station on the air or returning a dark station to service is significant. We  |$Qfurther note that the economies of scale that result from common ownership may in many circumstances""0*%%ZZ"  |$be the only viable means of rejuvenating a failed station in an expeditious manner. Moreover, as  |$discussed below, to qualify for the waiver, an applicant must demonstrate that the inmarket buyer is the  |$Zonly reasonably available candidate willing and able to operate the station, and that selling the station to  |$an outofmarket buyer would result in an artificially depressed price. To satisfy this element of the  |$waiver standard, applicants will be required to give public notification that the station is for sale. Thus,  |$minorities and women interested in purchasing a station will have an opportunity to bid. We remain very  |$concerned about the more general problem of the decline in minority broadcast ownership and possible  S' |$@mechanisms to increase minority and female ownership in broadcasting,Ie {OP'ԍSee supra  13.I but nonetheless believe our  |$&failed station waiver criteria serve the public interest. The Commission has made a number of efforts  |$separate from this proceeding to address minority and female ownership issues, and we hope to take  Sp'further steps in this area., pZe yOj 'ԍWe are now guided in considering initiatives to encourage greater minority and female ownership in the  {O2 'mass media by the Supreme Court's 1995 decision in Adarand, 515 U.S. 200 (1995). We are presently conducting studies that will allow us to address this issue in the context of our broadcast licensing and ownership  yO'policies. In the meantime, we have adopted measures in other proceedings designed to promote ownership opportunities for small businesses, including those owned by women and minorities. For example, as part of our recently adopted competitive bidding procedures for commercial analog broadcast services, we have adopted a "new entrant" bidding credit designed to further the goals of the designated entity provisions of Section 309(j) of  {O'the Communications Act of 1934. See Competitive Bidding First Report and Order, 13 FCC Rcd at 1599315996,  186190. Section 309(j) directs the Commission, in implementing competitive bidding for broadcast licenses, to ". . . disseminate licenses among a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women. . . ." 47 U.S.C.  309(j)(3). The bidding credits adopted for broadcast licenses will be provided to entities that hold no or few mass media licenses.  S '  kJ75.` ` We have decided to define a "failed station" for purposes of our television duopoly rule  |$yas one that has been dark for at least four months or is involved in courtsupervised involuntary  |$bankruptcy or involuntary insolvency proceedings. In addition, we will require that the waiver applicant  |$demonstrate that the "inmarket" buyer is the only reasonably available entity willing and able to operate  |$}the failed station, and that selling the station to an outofmarket buyer would result in an artificially depressed price for the station.  S'  kK76.` ` This standard is stricter than the failed station standard used in the context of our current  S' |$onetoamarket rule.N e {O'ԍSee 47 C.F.R.  73.3555 Note 7; Second Report and Order, 4 FCC Rcd at 1752. First, we are limiting our TV duopoly failed station waiver to stations in court S' |$supervised involuntary bankruptcy and insolvency proceedings. By excluding voluntary bankruptcy and  |$insolvency proceedings, we hope to avoid the issue of whether an owner has filed for bankruptcy or  |$insolvency simply in order to qualify for a waiver. We will extend our failed station waiver here to apply  |$to both insolvency and bankruptcy proceedings, as the former are a stateregulated mechanism similar to  |$bankruptcy. Second, we are requiring applicants to make a serious attempt to sell the troubled station to  |$an entity that would not require a waiver of our revised duopoly rule. Waiver applicants must demonstrate"#0*%%ZZG"  |$3that the "inmarket" buyer is the only reasonably available entity willing and able to operate the station,  |$3and that selling to another buyer would lead to an artificially depressed price for the station. One way  |$to make this showing will be to provide an affidavit from an independent broker affirming that active and  |$serious efforts have been made to sell the station, and that no reasonable offer from an entity outside the  S`' |$market has been received.`e yO'ԍHowever, we wish to emphasize that waiver applicants cannot satisfy the requirement to demonstrate that there is no outofmarket buyer without making a serious, goodfaith effort to attempt to sell the station. In this regard, we will not accept a statement that there was no attempt to sell the station based on opinions of appraisers or brokers that the station would be unmarketable and thus that it would be futile even to advertise the station for sale. We believe that a strict failed station waiver standard is warranted in view  |$of the other steps we are taking today to relax the television duopoly rule. While there are now other  |$limited criteria pursuant to which samemarket television stations may combine, we hope to limit the  |$7special relief awarded to failed stations to those situations where this relief is clearly needed. As with our  |$current onetoamarket failed station waiver standard, we will be predisposed to grant applications that meet the waiver standard, but will entertain petitions to deny seeking to rebut the waiver request.  SH '  kL77.` ` To qualify for a waiver under the failed station standard, we will require the waiver  S ' |$applicant to provide relevant documentation, i.e., proof of the length of time that the station has been off  |$<the air, or proof that the station is involved in bankruptcy or insolvency proceedings. We will also  |$require, in the case of a silent station, a statement that the failed station went dark due to financial distress,  |$not because of other, nonfinancial reasons. This documentation will ensure that the waiver standard is  S ' |$applied only to stations facing financial difficulties.u xe {O'ԍSee Spectrum Radio, Inc., 12 FCC Rcd 1667, 1671 (1997). u We will not require the waiver applicant to  |$*demonstrate that the market will contain postmerger a minimum number of voices. As noted above, we  |$have concluded that the benefits to the public of preventing a station from going dark or bringing a dark  |$station back on the air cannot harm and may help diversity and competition, regardless of the number of  |$3broadcast and other voices in the local market. Any combination formed as a result of a failed station  |$&waiver may be transferred together only if the combination meets our new duopoly rule or one of our three waiver standards at the time of transfer.  SB' ` ` b. "Failing" Stations  S'  kM78.` ` Background and Comments. The Second Further Notice also invited comment on whether  |$we should adopt a failing station waiver criteria, and, if so, the appropriate definition of a failing station.  |$Many broadcasters supported adopting a waiver policy for failing stations, contending that the Commission  S|'should not wait for a local station to go dark or bankrupt before permitting a merger.| e {O&!'ԍSee, e.g., ALTV Comments at 30; LSOC Comments at 8384; NAB Comments at 1112.  S,'  kN79.` ` Discussion. We will adopt a "failing" station waiver standard. It will permit two stations  |$to merge where at least one of the stations has been struggling for an extended period of time both in  |$terms of its audience share and in its financial performance. Permitting such stations to merge should pose"$0*%%ZZ"  |$*minimal harm to our diversity and competition goals, since their financial situation typically hampers their  |$Qability to be a viable "voice" in the market. These stations rarely have the resources to provide local news  |$programming, and often struggle to provide significant local programming at all. Allowing a "failing"  |$station to join with a stronger station in the market can greatly improve its ability to improve its facilities  |$and programming operations, thus benefitting the public interest. This waiver standard may be of  |$particular assistance to struggling stations in smaller markets that are not covered by the eight voice/top four ranked station test.  S'  k=O80.` ` We agree with the commenters that argued that it makes little sense to force a station to  |$go dark or declare bankruptcy before considering whether it should receive a waiver of the duopoly rule  |$Dto permit it to merge with another station in the market. Of course, determining when a station is "failed"  SH ' |$is a more straightforward task, since there are clear, objective criteria for identifying such a status, i.e.,  |$ca station is dark or in bankruptcy. A "failing" station standard, by contrast, will involve more of an  |$individualized, casebycase assessment to determine when a station is struggling to such an extent that  |$permitting it to merge with another station will not undermine our competition and diversity goals and may in fact promote them.  SZ'  kP81.` ` With these considerations in mind, and based on the record before us, we establish the  |$following criteria for granting waivers under a "failing" station waiver standard. We will presume such  S 'a waiver is in the public interest if the applicant satisfies each of these criteria:  S'X(1)X` ` One of the merging stations has had low allday audience share (i.e., 4% or lower).(#`  Sn'  kX(2)X` ` The financial condition of one of the merging stations is poor. A waiver is more likely   kto be granted where one or both of the stations has had a negative cash flow for the   kzprevious three years. The applicant will need to submit data, such as detailed income   kzstatements and balance sheets, to demonstrate this. Commission staff will assess the   kreasonableness of the applicant's showing by comparing data regarding the station's expenses to industry averages.(#`  SV'  kmX(3)X` ` The merger will produce public interest benefits. A waiver will be granted where the   kapplicant demonstrates that the tangible and verifiable public interest benefits of the   kmerger outweigh any harm to competition and diversity. At the end of the stations'   kJlicense terms, the owner of the merged stations must certify to the Commission that the   kpublic interest benefits of the merger are being fulfilled, including a specific, factual   kshowing of the programrelated benefits that have accrued to the public. Cost savings or other efficiencies, standing alone, will not constitute a sufficient showing.(#`  S '  kqX(4)X` ` The inmarket buyer is the only reasonably available candidate willing and able to acquire   kand operate the station; selling the station to an outofmarket buyer would result in an   kOartificially depressed price. As with the showing required of failed station waiver   kdapplicants, one way to satisfy this fourth criterion will be to provide an affidavit from an   kindependent broker affirming that active and serious efforts have been made to sell the station, and that no reasonable offer from an entity outside the market has been received.(#` "N$%0*%%ZZ""Ԍ |$ԙAny combination formed as a result of a failing station waiver may be transferred together only if the  S'combination meets our new duopoly rule or one of our three waiver standards at the time of transfer.  S'  k(Q82.` ` We believe these criteria provide a reasonable means of providing relief from our  |$Mtelevision duopoly rule consistent with our competition and diversity goals. If necessary we will tailor these criteria further as we gain experience in administering the "failing" station standard.  S'` ` c. Unbuilt Stations  S'  k=R83.` ` Background. In the Second Further Notice, wWAIVERVACANTCHANNELe invited comment on whether we should  |$<entertain requests to waive the local television ownership rule to permit a local broadcast television  |$Zlicensee to apply for a television channel allotment that has remained vacant or unused for an extended  S" ' |$period of time. We stated there that it may not be in the public interest to allow allotted broadcast  |$}channels to lie fallow particularly in markets where it might be possible to allow additional NTSC  |$kstations to come on the air without adversely affecting the DTV allotment table and the transition to digital  |$television. Similarly, we asked whether, if it is possible to create new channel allotments in a market  |$&without interfering with nearby channels and without adversely affecting the DTV allotment table, the  |$Commission should entertain applications by an incumbent television licensee to establish a new channel in its market.  S' PS84.` ` Discussion.GSince we adopted the Second Further Notice, the rationale for a vacant  S' |$ allotment waiver policy has become less relevant. In the DTV Sixth Report and Order, we eliminated  |$Zvacant NTSC allotments in order to better achieve our DTV objectives of full accommodation, service  Sn' |$replication and spectrum recovery.ne {O'ԍSixth Report and Order in MM Docket No. 87268, In the Matter of Advanced Television Systems and  {O'Their Impact upon the Existing Television Broadcast Service, 12 FCC Rcd 14588 (1997) at  112. We further stated that new television stations should be operated  |$as DTV stations, and that there would be no need to maintain vacant NTSC allotments that were not the  S' |$&subject of a pending application or rule making proceeding.$e {O'ԍId. We stated that we would treat existing vacant allotments that are not the subject of pending NTSC  {O'proposals as deleted. In the DTV Sixth Further Notice, we established July 25, 1996 as the last opportunity to file petitions to add channels to the TV Table of Allotments, and we provided that we would not accept additional applications for new NTSC stations (other than applications responding to cutoff lists) after 30 days  {O'from the publication of that Notice (September 20, 1996). Sixth Further Notice of Proposed Rule Making in MM Docket No. 87268, 11 FCC Rcd 10968 (1996). Thus, with the licensing of new NTSC  |$service coming to an end, we believe that the proposed rationale for a vacant allotment waiver policy has  |$been largely vitiated because there would be few, if any, situations where that basis for a waiver would  S' |$apply. As the development of DTV continues, it is possible that new channels may again become  |$available for licensing. If so, we may reconsider this issue at that time or in the context of our biennial review of our multiple ownership rules.  S'  kT85.` ` Although we no longer find it appropriate to adopt a vacant allotment waiver standard,  |$ we have concluded that the public interest would be served at this time by adopting a duopoly waiver"&0*%%ZZ"  |$standard for "unbuilt" television stations. The unbuilt station waiver we adopt is premised on essentially  |$Qthe same logic as supports our failed and failing station waiver standards. A station that has gone unbuilt,  |$like a built station that has gone dark, cannot contribute to diversity or competition. On the other hand,  |$activation of a construction permit and construction of a station, even by the owner of another television  |$}station in the market if that is the only viable means to obtain service, increases program choice for  |$viewers, may increase outlet diversity, and increases the amount of advertising time available for sale in  |$xthe market We believe that the benefits to the public of construction and operation of such a station, even  |$if through joint ownership, rather than allowing the channel to remain unused, outweigh any costs to diversity and competition.  Sp'U86.` ` To qualify for a duopoly waiver under this standard, we will require that applicants satisfy each of these criteria:  S '(1)` ` The combination will result in the construction of an authorized but as yet unbuilt station. (#`  S '(2)` ` The permittee has made reasonable efforts to construct, and has been unable to do so.(#`  SX'  kq(3)` ` The inmarket buyer is the only reasonably available candidate willing and able to acquire   kthe construction permit and build the station and selling the construction permit to an out  k9ofmarket buyer would result in an artificially depressed price. As with the showing   krequired of failed and failing station waiver applicants, one way to satisfy this criterion   kwill be to provide an affidavit from an independent broker affirming that active and   kserious efforts have been made to sell the permit, and that no reasonable offer from an entity outside the market has been received.(#`  |$Any combination formed as a result of an unbuilt station waiver may be transferred together only if the  S'combination meets our new duopoly rule or one of our three waiver standards at the time of transfer.  S'  kV87.` ` We believe our criteria for unbuilt station waivers will ensure that they will only be  |$available in situations in which allowing purchase by an inmarket buyer is consistent with our competition  |$and diversity goals. If necessary we will tailor these criteria further as we gain experience in administering this standard.  S'` ` d. UHF Combinations  S'  k#W88.` ` Background and Comments. In the Second Further Notice, we invited comment on the  |$textent to which the Commission should distinguish between UHF and VHF stations in applying our TV  |$Mduopoly rule. A number of parties have argued that the Commission should adopt a UHF exception or  |$waiver policy for the duopoly rule. Many broadcaster commenters in this proceeding advocated permitting  S ' |$UHF combinations, either by rule or waiver.Z e yOR#'ԍThese commenters generally argued that UHF stations are at a disadvantage as compared to VHF  {O$'stations because of their weaker signal strength and greater costs of operation. See, e.g., Jet Comments at 45; ALTV Comments at 2429; Granite Comments at 35. They also argued generally that permitting UHF/UHF or"$0*%%$" UHF/VHF combinations would permit the weaker station to become a more viable competitor, thus increasing  {OX'competition and diversity in the market. See, e.g., Granite Comments at 67; HSN Comments at 912. Other commenters disagreed, arguing that the historical" '"0*%%ZZ"  |$&disadvantage of UHF stations has diminished, in part as a result of increased cable penetration and the  S' |$increased competition for affiliates among major and emerging networks.-Z"e {O'ԍSee, e.g., Kentuckiana Comments at 5; PostNewsweek Comments at 45, MAP et al. Comments at 12 15. Kentuckiana notes that in many markets there is no UHF disadvantage since most or all local stations are  yO,'UHF. - They also pointed out that  |$ the implementation of DTV may substantially mitigate, if not entirely eliminate, the technical handicap  S'of UHF stations.iDe {Ol 'ԍSee DOJ Comments at 20, n. 25; NTIA Comments at 7.i  S8'  kX89.` ` After careful consideration of the comments, we have decided not to create a UHF  |$}exception or UHF waiver policy for several reasons. First, a UHF exemption or waiver policy is an  S' |$overbroad means of promoting the public interest. As we noted in our Report and Order eliminating the  |$kprime time access rule for television networks, many UHF stations are financially successful, are network  S' |$*affiliates, and are part of large station groups.e {O'ԍSee Report and Order, Review of the Prime Time Access Rule, MM Docket No. 94123, 11 FCC Rcd 546, 595596 (1995). Thus, a blanket exception or waiver for all UHF stations  |$would unfairly benefit more powerful affiliates as well as struggling stations. Second, cable carriage  |$compensates for many of the technical disadvantages faced by UHF stations visavis their VHF  |$counterparts. Cable penetration is near 70 percent nationwide. Moreover, the Supreme Court's decision  |$3upholding the statutory mustcarry rights of television stations removes a major source of uncertainty  S ' |$among UHF stations about their ability to obtain cable carriage.T 0 e {O'ԍTurner I1, 520 U.S. at 185. T Third, deployment of DTV should  |$eliminate, over the next several years, many of the remaining disadvantages of UHF stations. The  |$gCommission's power limitations for DTV licensees will likely reduce the technical discrepancy of UHF  |$gand VHF stations, and the multichannel capabilities of digital transmission should enhance the ability of  |$UHF stations to compete in the video marketplace. Fourth, licensees may continue to take advantage of  |$the satellite station exception to the TV duopoly rule, which is designed to assist financially struggling  |$stations that cannot operate as standalone fullservice stations. Finally, we believe that the financial  |$problems faced by particular UHF stations can more appropriately be addressed, at least to some extent,  |$by the other duopoly waiver criteria we are adopting today. As discussed above, these criteria are targeted  |$to assist stations facing financial hardships. We therefore will not create a waiver policy or exception to  SB'the TV duopoly rule based on whether a station is in the UHF or VHF band.j\B e yO!'ԍIn addition, we note that the issue of whether UHF stations should continue to retain a "discount" for  {Ol"'purposes of our national ownership rules is under consideration in our pending biennial review. See Biennial  {O6#'Review NOI, 13 FCC Rcd at 1128411285,  2527.j  S' ` ` 3. Satellite Stations "(0*%%ZZa"Ԍ S'  k ԙY90.` ` Background. Generally, television satellite stations retransmit all or a substantial part of  |$the programming of a commonlyowned parent station. Satellite stations are generally exempt from our  S' |$broadcast ownership restrictions. In the Second Further Notice, we noted that the Commission first  |$authorized TV satellite operations in small or sparsely populated areas with insufficient economic bases  Sb' |$to support fullservice operations.mbe {O'ԍSee Second Further Notice, 11 FCC Rcd at 671,  36.m Later we authorized satellite stations in smaller markets already  |$7served by fullservice operations but not reached by major networks. More recently, we have authorized  |$satellite stations in larger markets where the applicant has demonstrated that the proposed satellite could  S' |$not operate as a standalone fullservice station.Ze {O 'ԍSee Report and Order, Television Satellite Stations, 6 FCC Rcd 4212 (1991) (petition for reconsideration  {O 'pending) ("TV Satellite Stations Report and Order"). We stated in the Second Further Notice that we saw  |$3no reason to alter our policy of exempting satellite stations from our local ownership rules, but invited  |$comment on this conclusion. All the commenters that addressed this issue supported continuing the  St'exception of satellite stations from the duopoly rule.te {O'ԍSee ABC Comments at 5; Malrite Comments at 22; Paxson Comments at 13; SCC Comments at 3.  S$ '  kZ91.` ` Discussion. We believe that continued exception of satellite stations from the duopoly  S ' |$&rule is appropriate. As we stated in the Second Further Notice, our satellite station policy rests in part  S ' |$on the questionable financial viability of the satellite as a standalone facility.^ He yO'ԍTo qualify for television satellite status, the applicant must demonstrate that no alternative operator is ready and able to construct or to purchase and operate the satellite as a fullservice station. This criteria is strong evidence that a standalone facility is not viable. The other criteria for satellite status are (1) no City Grade overlap between the parent and the satellite, and (2) the proposed satellite would provide service to an  {O'underserved area. See TV Satellite Stations Report and Order, 6 FCC Rcd at 4212. ^ As such, our policy has  |$furthered the underlying goals of our ownership restrictions by adding additional stations to local television  |$markets where these stations otherwise would not have been established. In addition, the other criteria  |$we use to evaluate satellite operations, including service to underserved areas, ensure that satellite operations are consistent with our goals of promoting diversity and competition.  S'  V. RADIOTELEVISION CROSSOWNERSHIP RULE l  Sn'  k[92.` ` Background. The radiotelevision crossownership rule, or the "onetoamarket" rule,  SF' |$forbids joint ownership of a radio and a television station serving substantial areas in common.^XF e yO 'ԍAs noted earlier, the onetoamarket rule is triggered by encompassment of one station's city of license  yO!'by a specified service contour of the other station, not by simple overlap of contours. In most cases, this will mean that the stations are fairly close to one another.^ In 1989,  |$/the Commission amended the rule to permit, on the basis of a presumptive waiver, radiotelevision  |$ mergers involving one television and one AM and one FM station, in the Top 25 television markets if,  |$Mpostmerger, at least 30 independently owned broadcast voices remain in the relevant market, or if the")0*%%ZZ>"  |$merger involves a failed station. Our current policy also permits waivers on a casebycase basis if the  S'merger satisfies a group of five separate criteria.e yO@'ԍThese criteria include the potential public service benefits of joint operation of the facilities involved in the merger, the types of facilities involved, the number of stations already owned by the applicant, the financial situation of the station(s), and the nature of the postmerger market in light of our diversity and competition  {O'concerns. See Second Report and Order, 4 FCC Rcd at 1753 (1989). Not all five criteria must be met under the current waiver test.  S'  k\93.` ` In the TV Ownership Further Notice, we proposed to eliminate the crossownership  |$*restriction in its entirety or replace it with an approach under which crossownership would be permitted  |$&where a minimum number of postacquisition, independently owned broadcast voices remained in the  |$relevant market. We tentatively concluded there were two alternative approaches toward modifying the  |$rule. If radio and television stations do not compete in the same local advertising, program delivery, or  |$diversity markets, we proposed to eliminate the rule entirely and rely on our radio and television local  |$Zownership rules to ensure competition and diversity at the local level. Under the local radio ownership  |$7rules in effect at that time, this would have permitted entities to own one AM, one FM, and one television  |$station in even the smallest markets, and up to 2 AM, 2 FM, and one television station in larger markets.  |$In contrast, if we concluded that radio and television did compete in some or all of the local markets, we  |$Mproposed to modify the onetoamarket rule to permit radiotelevision combinations in markets where  |$Rthere are a sufficient number of remaining independent voices to ensure sufficient diversity and competition.  SZ'  k]94.` ` After adoption of the Further Notice, Congress passed the 1996 Act, which affects the  |$tradiotelevision crossownership rule in at least two ways. First, Section 202(d) of the Act directs the  |$Commission to extend the radiotelevision crossownership presumptive waiver policy to the top 50, rather  |$than top 25, television markets "consistent with the public interest, convenience and necessity." Second,  |$Section 202(b)(1) of the Act liberalized the local radio ownership rules. Now, a party may own up to 8  |$commercial radio stations, not more than five of which are in the same service (AM or FM), in radio  |$markets with 45 or more commercial radio stations, up to 7 commercial radio stations, not more than 4  |$of which are in the same service, in radio markets with 3044 commercial radio stations, and up to 6  |$Dcommercial radio stations, not more than 4 of which are in the same service, in radio markets with 1529  |$commercial radio stations. In radio markets with 14 or fewer commercial radio stations, one party can  |$own up to 5 commercial radio stations, not more than 3 of which are in the same service, provided that no party may own, operate or control more than 50% of the stations in the market.  ST'  k^95.` ` In our Second Further Notice, based on the statutory changes to the local radio ownership  |$rules, we requested further comment on our radiotelevision crossownership rule proposals. First, we  |$Vsought further comment on whether the rule should be eliminated based on a finding that radio and  |$television stations do not compete in the same market. Second, even if we consider television and radio  |$stations to be competitors, we asked if the radiotelevision crossownership rule could be eliminated  |$because the respective radio and television ownership rules alone can be relied upon to ensure sufficient  |$Vdiversity and competition in the local market. We also sought to update the record on a number of  |$specific options for modifying, but not eliminating, the rule. In this regard, and consistent with Section">*z0*%%ZZ"  |$^202(d) of the 1996 Act, we proposed, at a minimum, to extend the Top 25 market/30 voice waiver policy  |$gto the Top 50 markets. However, we also invited comment on a number of options to change the rule  |$beyond what was contemplated by Section 202(d) of the 1996 Act. For example, we asked whether the  |$cpresumptive waiver policy should be extended further to any television market where the minimum  |$number of independent voices would remain after the merger. We also invited comment on whether the  |$presumptive waiver policy should be extended to entities that seek to own more than one FM and/or AM  |$radio station, and whether the Commission should reduce the number of required independently owned  |$voices that must remain after a merger. Finally, we asked whether our "five factors" test should be changed or refined to be more effective in protecting competition and diversity.  Sp'  k_96.` ` Comments. The commenting broadcasters, with a few exceptions, favored elimination of  |$the onetoamarket rule or, failing that, substantial relaxation of the rule. These broadcasters generally  |$3pointed to the large number of media, both broadcast and nonbroadcast, that compete with radio and  |$+television in the local market as evidence that elimination of the rule would not adversely affect  S ' |$competition and diversity.p e {O8'ԍSee, e.g., NAB Comments at 1315; CBS Comments at 13, 18.p They also argued that allowing radio/television combinations leads to cost  |$xsavings that enhance the ability of broadcasters to compete with their multichannel video competitors, and  |$permits investment in better quality programming and facilities that improve service to the public. In  |$taddition, some broadcasters argued that in circumstances where concerns about competition exist, the  S0'Department of Justice should exercise jurisdiction to stem abuses, rather than the FCC.Q0Ze {O*'ԍSee Paxson Comments at 20.Q  S'  kd`97.` ` Public interest groups, joined by a few broadcasters, advocated that the onetoamarket  |$_rule be retained. These parties argued generally that the rule is necessary to retain diversity and  |$competition in the local market and to prevent an increase in the barriers to entry into broadcast ownership  |$yfaced by minorities, women, and small businesses. Black Citizens for a Fair Media, joined in its  S@' |$xcomments by thirteen other public interest groups (BCFM et al.), argued that the local radio and television  |$ownership rules alone cannot be relied upon to ensure diversity and competition in the local market, and  |$Qthat the radiotelevision crossownership rule is more important now to protect diversity as a result of the  |$1996 Act's relaxation of the radio and television ownership limits and the consolidation in the industry  S' |$that has followed.ze {O.'ԍSee BCFM Comments at 24. BCFM filed its comments jointly with the Center for Media Education, Chinese for Affirmative Action, Communications Task Force, League of United Latin American Citizens, Minority Media Telecommunications Council, National Association for Better Broadcasting, NOW Legal Defense and Education Fund, Office of Communication of the United Church of Christ, Philadelphia Lesbian and Gay Task Force, Telecommunications Research Action Center, Washington Area Citizens Coalition Interested in Viewers' Constitutional Rights, Wider Opportunities for Women, and Women's Institute for Freedom of the Press. AWRT, BET, and MAP et al. urged the Commission to proceed cautiously in any  |$@effort to relax its ownership rules and to evaluate fully the increasing concentration of control in mass"|+. 0*%%ZZ"  S'media ownership.kZe {Oh'ԍSee BET Comments at i; AWRT Comments at 12; MAP Comments at 2. BET argues that minorityowned businesses hold only 3% of all television licenses, and that empirical studies have demonstrated a strong correlation between ownership by minority businesses and diversity of programming. BET Comments at viii.k  S'  k#a98.` ` With respect to the Commission's specific proposals for modifying, but not eliminating,  |$ the onetoamarket rule, most broadcasters supported extending the presumptive waiver policy to all  |$markets that satisfy a minimum independent voice test. Although broadcasters generally believed there  |$pis no reason to retain the onetoamarket rule, if the rule is retained they argue that the thirtyvoice  S' |$3presumptive waiver policy should be extended to apply to all markets regardless of market rank.e {O 'ԍ#X\  P[G;ɒP#See, e.g., ABC Comments at 910; Pappas Comments at 15; SCC Comments at 6; Sinclair Comments at 1213. In  |$addition, most broadcasters supported extending the presumptive waiver policy to permit entities to own  S' |$Vthe maximum number of stations permitted by the separate radio and television ownership limits. De {O'ԍ#X\  P]G;ɒP#See, e.g., ABC Comments at 1213; CBS Comments at 26; Jacor Comments at 1112; Pappas Comments at 17; Paxson Comments at 22; Sinclair Comments at 1213; SCC Comments at 6.   |$Several commenters pointed out that television owners are now treated less favorably than radio owners  |$*for no rational reason in that a radio owner may own multiple stations up to the maximum allowed by the  |$radio limits, while a television owner may own only one AM and one FM station in the same market,  |$where 30 independent voices remain postmerger, without making a showing under the current five factors  |$Itest. In the absence of a finding that the latter combination threatens localmarket competition and  S ' |$gdiversity more than the former, these commenters argued the difference in treatment is unjustifiable.| e {O'ԍ#X\  P_G;ɒP#See, e.g., ABC Comments at 10.|  |$^Many broadcasters also supported reducing the minimum number of independent voices that must remain  S ' |$after a merger under the presumptive waiver policy and expanding the list of media counted as voices.  0 e {OP'ԍ#X\  PaG;ɒP#See, e.g., Paxson Comments at 237 (require 20, rather than 30, independent voices under a minimum voices test and include in the independent voice analysis commercial and noncommercial radio and television stations, daily newspapers, cable television systems, and MMDS systems); CBS Comments at 28 (reduce number of voices to 20); Jacor Comments at i, 89 (15 voices "more than adequate" to preserve diversity and prevent accumulation of power in the local advertising market; in applying a voice test, at a minimum count all radio stations licensed or with a significant penetration within the market and every cable operator, DTH provider, and Internet provider); ABC Comments at 11 (in applying a 30 voices test, count all independentlyowned daily and weekly newspapers, television stations, radio stations, and cable channels that have the capacity to act as local outlets in the market).  S'  kAb99.` ` Public interest groups, joined by a few broadcasters, generally opposed relaxing the oneto |$amarket rule further than directed by Congress, citing the same diversity and competition concerns they  |$*raised in opposing elimination of the rule. BCFM also opposed expanding the definition of independently |$gowned voices to include media forms that are not yet widely available and do not carry local news and",0*%%ZZ!"  S'public affairs programming.Le yOh'ԍBCFM Comments at 24.L  S' A. Modification of the Rule  S`'  kc100.` ` Discussion. We have determined that the public interest would be best served at this time  |$by relaxing the radiotelevision crossownership rule to permit samemarket joint ownership of radio and  |$Qtelevision facilities up to a level that permits broadcasters and the public to realize the benefits of common  |$kownership while not undermining our competition and diversity concerns. Our new rule consists of three  |$parts. First, we will permit a party to own up to two television stations (provided this is permitted under  |$our modified TV duopoly rule or TV LMA grandfathering policy) and up to six radio stations (any  |$combination of AM or FM stations, to the extent permitted under our local radio ownership rules) in any  |$market where at least 20 independently owned media voices remain in the market after the combination  |$tis effected. In those markets where our revised rule will allow parties to own a total of eight outlets in  |$the form of two TV stations and six radio stations, we will also permit them instead to own eight outlets  |$in the form of one TV station and seven radio stations. Second, we will permit common ownership of  |$up to two television stations and up to four radio stations (any combination of AM or FM stations, to the  |$extent permitted under our local radio ownership rules) in any market where at least 10 independently  |$<owned media voices remain after the combination is effected. And, third, we will permit common  |$8ownership of up to two television stations and one radio station notwithstanding the number of  |$independent voices in the market. In determining which stations are subject to the new rule, we will use  S' |$the same contour overlap standards used in our present rule.BXe yO'ԍThe current onetoamarket rule, and the rule we adopt today, is triggered by the degree of contour overlap among the stations involved. In particular, the rule is triggered where the predicted or measured 2 mV\m contour of the AM station encompasses the entire community of license of the television station, or the Grade A contour of the television station encompasses the entire community of license of the AM station. With  {O'respect to FM stations, the relevant contour is the predicted 1 mV\m contour. See 47 C.F.R.  73.3555(c)(1) & (2). The contour overlap standards determine which stations or transactions are subject to the radiotelevision crossownership rule. If application of the contour overlap standards indicates the transaction is subject to the rule, the focus shifts to the three prongs of the new rule to determine what level of ownership is permitted. We delegate to the Mass Media Bureau  |$the authority to grant any application that satisfies the new radio/TV crossownership rule, and presents  S' |$no new or novel issues. If a voice test is required to acquire a given combination (i.e., any combination  |$that includes more than one radio/TV combination), that combination will not later be required to be  |$}undone if the number of independent voices in the market later falls below the applicable voice test.  |$However, a radio/TV combination may not be transferred to a new owner if the market does not satisfy the applicable voice standard at the time of sale.  S'  kd101.` ` As described below, we will eliminate our five factor casebycase waiver standard.  |$}Waivers of our new threepart rule will be granted only in situations involving a failed station and in"z-b 0*%%ZZ"  S' |$extraordinary circumstances in which the proponent of the waiver will face a high hurdle.Ze {Oh'ԍSee WAIT Radio v. FCC, 418 F.2d 1153, 1157 (D.C. Cir. 1969, cert. denied, 409 U.S. 1027 (1972) (noting that agency rules are presumed valid, and that "an applicant for waiver faces a high hurdle even at the starting gate"). We will  |$7define a failed station for purposes of our new radio/TV crossownership rule in the same manner as that  |$term is defined for purposes of the failed station waiver we adopt today in connection with our television  |$duopoly rule. Any combination formed as a result of a failed station waiver may be transferred together  |$only if the combination meets our new radio/TV crossownership rule or our failed station waiver standard at the time of transfer.  S'  k~e102.` ` Rationale for Modified Rule. We relax our radio/TV crossownership rule to balance our  |$3traditional diversity and competition concerns with our desire to permit broadcasters and the public to  |$realize the benefits of radiotelevision common ownership. We believe that the revised rule reflects the  |$*changes in the local broadcast media marketplace. The relaxed rule recognizes the growth in the number  |$and types of media outlets, the clustering of cable systems in major population centers, the efficiencies  |$inherent in joint ownership and operation of both television and radio stations in the same market, as well  |$as the public service benefits that can be obtained from joint operation. At the same time, the voice test  |$components of the revised rule also ensure that the local market remains sufficiently diverse and competitive.  SX'  kf103.` ` The new threepart rule also ensures the application of a clear, reasoned standard. One  |$*of our primary goals in this proceeding is to provide concrete guidance to applicants and the public about  |$the permissibility of proposed transactions. This minimizes the burdens involved in complying with and  |$enforcing our rules. It also promotes greater consistency in our decisionmaking. Since development of  |$the Commission's waiver policy in 1989, the Commission has granted a significant number of waivers in  |$order to provide broadcasters relief from the onetoamarket rule, which prohibited any common  |$ownership of television and radio stations in the same market. Indeed, some commenters argue that this  |$waiver process has come to govern regulation of samemarket radiotelevision crossownership, rather than  S' |$Mthe rule itself.ie {O'ԍSee, e.g., Spectrum Detroit Comments at 12 15. i Today, we redirect our approach by amending the rule to provide a greater degree of  |$gcommon ownership of radio and television stations while at the same time limiting waivers of this new  |$rule to only extraordinary circumstances. In addition, the new rule will ease administrative burdens and will provide predictability to broadcasters in structuring their business transactions.   SP'  k`g104.` ` A number of commenters argued that we should eliminate our radiotelevision cross S(' |$gownership rule entirely. We do not believe that course is appropriate at this time. We stated in the TV  S' |$Ownership Further Notice that elimination of the rule might be warranted if we concluded that radio and  |$television stations do not compete in the same local advertising, program delivery, or diversity markets.  S' |$Although radio and television stations may or may not compete in different advertising markets,P|e {O#'ԍSee supra  3133.P we  |$/believe a radiotelevision crossownership rule continues to be necessary to promote a diversity of".0*%%ZZ"  |$@viewpoints in the broadcast media. The public continues to rely on both radio and television for news  |$and information, suggesting the two media both contribute to the "marketplace of ideas" and compete in  |$the same diversity market. As these two media do serve as substitutes at least to some degree for diversity  |$purposes, we will retain a relaxed onetomarket rule to ensure that viewpoint diversity is adequately protected.  S'  kh105.` ` Although we decline to eliminate our radiotelevision crossownership rule, the  |$demonstrated benefits of samemarket broadcast combinations support relaxing the rule and allowing such  |$^combinations in circumstances where we find that diversity and competition remain adequately protected.  |$The record in this proceeding demonstrates that there are significant efficiencies inherent in joint  |$*ownership and operation of broadcast stations in the same market, even when the stations are in separate  SH ' |$^services (i.e., radioTV combinations).PH e {O 'ԍSee supra  3436.P Among other benefits, these efficiencies often lead to improved  |$programming and can help stations in financial difficulty remain on the air. The revised radio/TV cross |$7ownership rule we adopt today will establish clear guidelines that will permit common ownership of radio and television stations in markets where diversity and competition are preserved.  S '  ki106.` ` We will monitor the impact on the broadcast industry of this and other changes to our  |$ownership rules being made today, as well as the changes to the television industry associated with the  |$conversion to digital television and the increase in the number of media outlets available to the public.  |$7In light of these observations, we will have a further opportunity to consider relaxing the radio/TV cross |$Zownership rule as we evaluate ongoing changes in the television and radio markets in conjunction with future biennial reviews. ` `  Sj'  kSj107.` ` Turning to the specifics of the first two prongs of the new rule, we will use a "voice  |$Dcount" approach rather than also applying a market rank restriction as with our current top 25 market, 30  |$voice presumptive waiver policy. In particular, the first prong of our new rule, which permits a party to  |$own up to two television stations (provided this is permitted under our modified TV duopoly rule or TV  |$LMA grandfathering policy) and up to six radio stations (any combination of AM or FM stations, to the  |$extent permitted under our local radio ownership rules) in any market with at least twenty independently  |$*owned media voices, focuses on the number of independent voices remaining in the market postmerger,  SR' |$rather than market rank (e.g., the top 100 markets). A rule based on the number of independent voices  |$more accurately reflects the actual level of diversity and competition in the market. As a number of  |$commenters in this proceeding noted, a marketsize restriction is unnecessary for purposes of competition  |$Mand diversity as long as there are a minimum number of independent sources of news and information  S' |$available to listeners, and a minimum number of alternative outlets available to advertisers.wZe {O 'ԍSee, e.g., Paxson Comments at 23 24; Pappas Comments at 1516.w Two  |$broadcasters specifically urged us to allow TV/radio combinations as a matter of course in any market that  Sd' |$^satisfies a minimum independent voice test.cde {O#'ԍSee CBS Comments at 26; Jacor Comments at 7.c In addition, unlike a rule based on market rank, our revised  |$Irule will account for changes in the number of voices in a market resulting from consolidation, the"</~0*%%ZZ7"  |$addition of new voices, or the loss of any outlets. Mergers will be permitted only when the voice count  |$is satisfied, thereby ensuring the preservation of a minimum level of diversity and competition in the market.  S`'  kk108.` ` In markets where the voice count component of our revised duopoly and radio/TV cross |$ownership rule would allow parties to own two TV stations and six radio stations, for a total of eight  |$outlets, we will also permit parties to own the same total number of outlets in the form of one TV station  |$and seven radio stations. As we have explained above, broadcast television is the single most important  |$source of news for the majority of Americans. We therefore believe that, in markets where there is  S' |$*sufficient competition and diversity to justify combinations involving two television stations and six radio  Sr' |$stations, broadcasters should have the flexibility to purchase an additional radio station instead of a second television station.  S '  kl109.` ` The second prong of our new rule permits a party to own up to two television stations  |$t(provided this is permitted under our modified TV duopoly rule or TV LMA grandfathering policy) and  |$up to four radio stations (any combination of AM or FM stations, to the extent permitted under our local  |$radio ownership rules) in any market with at least ten independently owned media voices. This standard  |$also focuses on the number of independent voices remaining in the market postmerger rather than market  |$*rank, and extends the benefits of common ownership to smaller markets. In this regard, our revised rule  |$permits broadcasters and the public in these markets to realize the same benefits of common ownership we have concluded are worthwhile for the largest markets.   S'  km110.` ` The third prong of our new rule will allow common ownership of up to two television  |$@stations (provided that is permissible under our rules or TV LMA grandfathering policy) and one radio  SD' |$station notwithstanding the number of independent voices in the market. Based on the record before us,  |$@we find that the service benefits and efficiencies achieved from the joint ownership and operation of a  |$television/radio combination in local markets further the public interest and outweigh the cost to diversity  S'in these instances.(xe yO4'ԍAs noted above, Section 202(d) of the 1996 Act directed the Commission to "extend its [onetoamarket top 25/30 voice] waiver policy to any of the top 50 markets, consistent with the public interest, convenience, and necessity." Given that we find that the public interest will be served by permitting at least one TV station (or two, if permitted by our new TV duopoly rule) to combine with one radio station in every market, regardless of market rank or voice counts, we believe that our new waiver policies satisfy Section 202(d) requirements. Indeed, staff analysis suggests that all of the top fifty markets have at least twenty voices, such that at least one combination of two TV stations and six radio stations would be permitted in these markets.(  S'  S|'  k#n111.` ` Applying the Voice Count Tests. We will apply the voice test under both prongs of our new radio/TV crossownership rule that include such a test as follows:  S'  kX(1)X` ` We will count all independently owned and operating fullpower commercial and   knoncommercial broadcast television stations licensed to a community in the DMA in"00*%%ZZ"  S'which the community of license of the television station in question is located.Se yOh'ԍWe will not include in our count of voices broadcast stations that are programmed by other stations in the market pursuant to attributable local marketing or time brokerage agreements. A substantial portion of the programming of these "time brokered" or "LMAed" stations is furnished by the brokering station and cannot be deemed an independent source of viewpoint diversity; indeed, such brokering constitutes an ownership interest  {O'under our attribution rules. See Attribution Report and Order, section III.C. S (#`  S'  kX(2)X` ` We will also count all independently owned and operating commercial and noncommercial   kqbroadcast radio stations licensed to a community within the radio metro market in which  S`'  kthe community of license of the television station in question is located.J`ze yOz 'ԍA radio market, as delineated by Arbitron, generally reflects the geographic area in which a cluster of radio stations serves a population that advertisers seek to reach. Arbitron radio markets generally correspond to Metropolitan Statistical Areas as defined by the U.S. Government Office of Management and Budget ("OMB").  {O 'See Bureau of the Census, Geographic Areas Reference Manual, November 1994, Chapter 13, pp. 113. Arbitron has delineated 268 radio metro markets throughout the U.S. J In addition,   kwe will count broadcast radio stations outside the radio metro market that Arbitron or   kWanother nationallyrecognized audience rating service lists as having a reportable share in  S'  kJthe metro market.VB, e yO'ԍFor purposes of counting the broadcast licensees in the market, we will include only primary authorizations. Thus, we will not include low power stations, translators, or class D FM stations. We will also exclude from our count any nonoperational or dark stations. We will count, however, any onair stations operating under a construction permit. This is consistent with the method used to count independent voices for purposes of our current top 25 market/30 voices presumptive waiver standard. Satellite stations will be included  {O'in our count, as they are full service stations, if they are separately owned, operated, and controlled (i.e., the parent station is not in the same market and the satellite is not owned by an entity that holds another voice in the market).V In areas in which there is no radio metro market, the party seeking   kthe waiver may count the radio stations present in an area that would be the functional  S'equivalent6e yOn'ԍ We believe that, in most cases, the radio voice count will be based on Arbitron radio markets. Approximately 56 percent of all commercial radio stations are located within Arbitron's 268 radio markets.  yO' Where there is no recognized Arbitron radio metro market, parties may use data associated with a "functionally equivalent" radio market. Parties may demonstrate that a geographical area such as a county or group of contiguous counties constitute a functionally equivalent radio market based on the listening statistics of the populace in the counties that make up that geographical area. Parties may also demonstrate a functionally equivalent radio market based on signal contour overlap. For purposes of demonstrating a functionally equivalent market based on signal contour overlap, we will look at contours (2 mV/m for AM stations or 1 mV/m for FM stations) that encompass the community of license of the TV station in question. of a radio market.(#`  SH '  kX(3)X` ` We will count all independently owned daily newspapers that are published in the DMA"H 10*%%ZZ$ "  S'at issue and that have a circulation exceeding 5% of the households in the DMA.e yOh'ԍConsistent with the newspaper/broadcast crossownership rule, to be considered "daily" a newspaper  {O0'must be published four or more days per week and in the English language. See 47 C.F.R.  73.3555(d), Note 6.(#`  S'  kmX(4)X` ` We will count cable systems provided cable service is generally available to television   khouseholds in the DMA. For DMAs in which cable service is generally available, cable   kJwill count as a single voice for purposes of our voice analysis, regardless of the number of cable systems within the DMA, their ownership, and any overlap in service area.(#`  S'  k'o112.` ` In counting broadcast television and radio stations as "voices" we are being consistent with  |$Qthe voice count analysis used in our current "top 25 market/30 voice" presumptive waiver standard. That  S' |$Dstandard, however, counts radio stations licensed to the relevant television metropolitan market."e {OZ 'ԍ47 C.F.R. Section 37.3555 Note 7; Second Report and Order, 4 FCC Rcd at 1751. For purposes of applying our current "top 25 market/30 voice" presumptive waiver, we count fullpower commercial and noncommercial television stations licensed to the relevant ADI television market as well as operating AM and  {O'FM radio stations licensed to the relevant TV metropolitan market. See Second Report and Order, 4 FCC Rcd at 1751. Under  Sr' |$our new rule, we will instead use the radio metropolitan market, and will include both radio stations  SL ' |$licensed within the radio metro market and stations with a reportable share in that market.zL e yO'ԍ Many DMAs have more than one Arbitron metro radio market located within them. To qualify under our twenty voice count criterion, where a merger involves stations in different radio markets, the voice requirement must be met in each of those radio metro markets. For example, assume television station A and radio station B (in the same DMA) wish to merge, where station A is in radio metro market C and station B is in radio metro market D. In order to be approved under this waiver standard, the voice count requirement must  {O'be satisfied in each of the radio metro markets, C and D. Thus, the radio metro market with the fewer voices would control.  We believe  |$Qit is important to count radio stations with a reportable share in the relevant market because those stations  |$clearly serve as a source of information and entertainment programming for the relevant market. We have  |$chosen to use the radio metro market rather than the television metro market for counting the number of  |$independent radio voices because the former more accurately reflect the competitive and core signal  |$3availability realities for radio service in the market. All independently owned radio stations in the radio  S\' |$market can be presumed to be available to residents of that market because of signal reach.@\e yO'ԍArbitron has delineated 268 different local geographic areas, or metros, to reflect the audiences reached by local radio stations. This delineation of a local radio market has value for buyers and sellers of radio advertising. Arbitron metros generally correspond to Metropolitan Statistical Areas as defined by OMB. Generally, a Metropolitan Statistical Area consists of one or more counties that contain a city of 50,000 or more inhabitants, or contain a Census Bureaudefined urbanized area with a total population of at least 100,000. About 56 percent of all commercial stations are licensed to communities in the 268 markets. The 268 radio markets consist of a total of about 800 counties representing about 25 percent of all counties in the U.S. More than threefourths of the U.S. population of at least 12 years of age reside in the 268 radio markets. Radio  |$stations outside the radio metro market may also be presumed to be available to all residents of the radio"42 0*%%ZZ"  |$market if Arbitron, or another nationally recognized audience rating service, lists them as having a  S' |$@reportable audience share in the radio metro.xe yO@'ԍIn determining the number of commercial radio stations in the radio metro, we will rely on the most recent audience share and home station data available at the time the application for the assignment or transfer of license is filed. In determining the number of noncommercial radio stations licensed in the radio metro market, we will rely on data contained in the most recent Commission ownership records. Similarly, we will rely on the most recent Nielsen data to determine the number of commercial television stations licensed within a DMA, and on the Commission's most recent ownership records to determine the number of noncommercial television stations in the DMA. Reportable audience share information is not generally  |$available for television metro markets. Thus, use of radio markets will ease the burden on applicants  |$tseeking approval of assignment and transfer applications, and on the Commission staff reviewing such applications.  S'  kp113.` ` As advocated by many commenters,se {O 'ԍSee, e.g., CBS Comments at 28; Paxson Comments at 23. s we will also include in our voice count daily  |$newspapers and cable systems because we believe that such media are an important source of news and  |$information on issues of local concern and compete with radio and television, at least to some extent, as  |$advertising outlets. Although we have not previously explicitly counted cable and newspapers as voices  |$*under our current top 25 market/30 voice presumptive waiver standard, we have counted these outlets in  SH ' |$applying the casebycase, five factor waiver standard. \H e {O'ԍSee, e.g., Illinois Valley Broadcasters, Inc., 11 FCC Rcd 13028, 13032 (1996); WWNE Licensee, Inc.,  {OL'13 FCC Rcd 12677, 12691, 1269596 (MMB 1998); Triad Skywaves, Inc., 12 FCC Rcd 6102, 6107 (MMB 1997).  While we will count these media outlets in  |$applying our amended rule, we will restrict the number of newspapers we will include and limit the weight  |$we will ascribe to cable. Specifically, we will include all independently owned daily newspapers that are  |$@published in the DMA that have a circulation exceeding 5 percent of the households in the DMA. Our  |$7intent in this regard is to include those newspapers that are widely available throughout the DMA and that  |$provide coverage of issues of interest to a sizeable percentage of the population. Although we recognize  |$Qthat other publications also provide a source of diversity and competition, many of these are only targeted  |$7to particular communities and are not accessible to, or relied upon by, the population throughout the local  |$pmarket. We will also include wired cable television in the DMA as one voice, since cable service is  |$generally available to households throughout the U.S. We believe it is appropriate to include at least one  |$voice for cable, where cable passes most of the homes in the market, because there are PEG and other  |$channels on cable systems that present local informational and public affairs programming to the public.  |$At this time we count cable as no more than one voice since most cable subscribers have only one cable  |$Msystem to choose from. In addition, despite a multiplicity of channels provided by each cable system,  |$most programming is either originated or selected by the cable system operator, who thereby ultimately  |$controls the content of such programming. As most cable programming available to a household is  |$tcontrolled by a single entity, we believe cable should be counted as a single voice in applying our voice test.  Sx'  kSq114.` ` Various parties have urged the Commission to expand the types of media included as"x3 0*%%ZZ"  |$Dvoices for competition and diversity purposes beyond those we have decided to include. Numerous such  |$Qmedia have been urged upon us: DBS, wireless cable, OVS, the Internet, etc. We have not adopted such  |$gexpansive proposals. DBS and wireless cable generally do not currently provide local news and public  S' |$affairs programming.>|e yO'ԍDBS operators do have a public interest obligation to reserve between 4 and 7 percent of their channel  {O'capacity for noncommercial programming. See Time Warner Entertainment Co., L.P. v. FCC, 93 F.3d 957, 97577 (D.C. Cir. 1996) (finding that this obligation, as a condition of being allowed to use a scarce public commodity, was in the public interest by assuring public access to diverse sources of information). DBS companies have commented in the past that they have a competitive disadvantage due to not being able to distribute local broadcast signals, including news programming, due to technological and copyright law obstacles.  {O 'For a discussion of recent developments, see Fifth Annual Report, at  6172.> Moreover, we will not count any media that are not widely available within the  |$_community. OVS is at a very early stage of development and OVS systems have relatively few  S8' |$tsubscribers within the communities they serve.+8 e yO 'ԍThere are three operational OVS systems in the nation. Bell Atlantic operates an OVS system in Dover,  {O 'New Jersey; and RCN operates OVS systems in Boston and New York.  See Fifth Annual Report, at  117.+ In addition, at this time we believe it is premature to  |$consider the Internet a "voice" for purposes of our new rule. Although the Internet is growing in  |$&popularity, many still do not have access to this new medium, and there is insufficient evidence in the  |$record to support a conclusion that it should be included as a voice at this time. Finally, we do not have  S' |$evidence that other media cited by some commenters (e.g., direct mail, yellow pages, billboards) contribute  |$in any substantive way to viewpoint diversity on local issues. We will have an opportunity to review our  |$decision on this issue periodically in our biennial review process, and will revise the conclusion we have reached today if changing circumstances warrant.  S ' B. Waiver Criteria  S '` ` 1. Failed Stations  S2'  kr115.` ` We will continue to grant waivers of our radiotelevision crossownership rule, on a  |$presumptive basis, in situations involving a failed station. However, we will adopt the definition of a  |$failed station used in the context of our television duopoly failed station waiver standard. In order to  |$qualify as "failed" a station must be dark for at least four months or involved in courtsupervised  |$involuntary bankruptcy or involuntary insolvency proceedings. In addition, we will require that the waiver  |$3applicant demonstrate that the "in market" buyer is the only reasonably available entity willing and able  |$Vto operate the failed station and that selling the station to an outofmarket buyer would result in an  |$7artificially depressed price for the station. As in the past, we will require the applicant seeking the waiver  S' |$tto provide relevant documentation, i.e., proof of the length of time that the station has been off the air,  |$Dor proof that the station is involved in bankruptcy proceedings. In addition, in the case of a silent station,  |$kwe will require a statement that the failed station went dark due to financial distress, not because of other,  |$nonfinancial reasons. Any combination formed as a result of a failed station waiver may be transferred  ST' |$*together only if the combination meets our radio/TV crossownership rule, or failed station waiver, at the time of transfer. "4f 0*%%ZZ4"Ԍ S'  k s116.` ` Our new waiver standard is significantly stricter than the failed station standard used in  |$tthe context of our current onetoamarket rule. As we stated in adopting our television duopoly failed  |$station waiver, we are limiting the waiver to involuntary bankruptcy and insolvency proceedings to avoid  |$the risk that an owner has filed for bankruptcy or insolvency simply to qualify for a waiver. We will  |$textend the waiver to include stations in insolvency as well as bankruptcy proceedings, as the former is  |$a stateregulated mechanism similar to bankruptcy. Finally, we are requiring that applicants make a  |$serious effort to sell the troubled station to an outofmarket buyer in order to limit the relief afforded by  |$kthe waiver to those situations in which it is clearly needed. In view of the other steps we are taking today  |$pto relax our radio/TV crossownership rule, we believe that it is appropriate to ensure that the relief  |$goffered by our failed station waiver is directed to stations that are clearly facing financial difficulty and that cannot be sold absent a waiver of our rule.  S '  kt117.` ` Our rationale for this waiver standard is the same as that of the failed station waiver  |$standard we are adopting today for the television duopoly rule. We believe that the benefits to the public  |$Mof joint ownership, namely preserving a bankrupt station or allowing a dark station to return to the air,  |$do not pose costs from a diversity perspective. Once a station has been off the air for a substantial period  |$}or has become involved in involuntary bankruptcy proceedings (so that it is likely to go off the air),  |$competition and diversity in a local market cannot be improved by forbidding joint ownership of that  |$station with another station in the market. It is our view that two operating, commonlyowned stations  |$Qserve the public better than one operational station and one nonoperational station that provides no service  |$to the public at all. We note that Congress reached the same conclusion in the 1996 Act when it  |$authorized an exception to the local radio ownership limits to permit an entity to exceed those limits if  S' |$so doing would result in an increase in the number of stations in operation.ze yO'ԍ#X\  P}G;ɒP#Section 202(b)(2) of the 1996 Act.z Increasing the number of  |$stations in a market provides additional voices to address community needs and issues and increases listeners' programming choices.  S'  ku118.` ` This waiver will not be extended to failing or unbuilt stations. Thus, evidence that a  S' |$station is losing money (i.e., a negative cash flow) is not adequate to qualify for the waiver. We do not  |$believe that it is necessary at this time to permit such additional waivers in view of the measured  |$liberalization of our radio/TV crossownership rule and the 1996 Act's liberalization of the local radio ownership limits.  S' ` ` 2. "Five Factors" Waiver Standard  S'  kv119.` ` Background. We invited comment in the Second Further Notice on whether our "five  |$factors" casebycase waiver standard should be changed or refined to be more effective in protecting our  |$tcompetition and diversity concerns. Under this standard, we make a public interest determination on a  |$Zcasebycase basis currently using the following five criteria: 1) the potential public service benefits of  |$common ownership of the facilities, such as economies of scale, cost savings, and programming benefits;  |$t2) the types of facilities involved; 3) the number of media outlets already owned by the applicant in the  |$relevant market; 4) any financial difficulties involving the station(s); and 5) issues pertaining to the level of diversity and competition within the affected market. ""5X0*%%ZZj!"Ԍ S'  kԙw120.` ` Comments. A number of commenters argued that our present five factors test should  |$peither be eliminated or substantially revised. For example, ABC argued that the Commission should  |$permit an applicant for waiver under the five factors test to justify joint radioTV ownership on the basis  |$+of economic efficiencies alone, without having to make explicit programming or public service  S`' |$commitments.Q`e {O'ԍSee ABC Comments at 1314.Q Shockley believes the showings concerning cost savings, programming and service  |$&benefits, and types of facilities should be eliminated, and consideration limited to the number of media  |$goutlets already owned in the market by the applicant, any financial difficulties, and data concerning the  S' |$Qlevel of diversity, competition, and unusual geography within the market.OZe yO 'ԍSee Shockley Comments at 7 8.O Spectrum Detroit argued that  |$the fivefactors test, as applied by the Commission, has effectively rendered the current radioTV cross |$*ownership rule a nullity. It supports either eliminating the waiver standard altogether, or replacing it with  Sp' |$a waiver provision favoring local owners, small businesses, minorities, and women.bpe {O 'ԍSee Spectrum Detroit Comments at 24 26. b BCFM supported  |$pretaining the five factors test, but requiring all waiver applicants to promise concrete public interest  S 'benefits of common ownership, which promises would be enforced by the Commission.N |e {O<'ԍSee BCFM Comments at 8.N  S '  k9x121.` ` Discussion. In light of the modifications we are making today in the radiotelevision  |$kcrossownership rule and our goals of protecting competition and diversity, we will eliminate the caseby |$Qcase, "five factors" waiver test we have previously employed. Our amended rule goes beyond the criteria  |$7pursuant to which we have delegated authority to the Commission staff to act on onetoamarket waiver  S0' |$7requests, most of which have been approved under the five factors standard.%Z0e {O'ԍSee Louis DeArias, 11 FCC Rcd 3662, 3667 (1996) (delegating to staff authority to rule on uncontested onetoamarket waiver requests that involve a proposed combination of 1 TV, 2 AM, and 2 FM stations in the top 100 television markets).% We have revised the rule  |$based on our recognition that the benefits of joint ownership in many circumstances outweigh the harm  |$Zto diversity, and have based that conclusion in large part on an assessment of the same general criteria  |$identified in our current five factor waiver standard. In the event that extraordinary evidence exists that  |$&a waiver of our revised rule is warranted, the Commission will consider that evidence pursuant to our  Sh' |$<general waiver authority.h0 e {O8'ԍSee 47 C.F.R.  1.3. Wait Radio v. FCC, 418 F.2d 1153 (D.C. Cir. 1969), cert. denied, 409 U.S. 1027 (1972). Given the significant relaxation of our radioTV crossownership rule,  |$applicants seeking combinations that exceed the new rule will bear a substantially heavier burden than in the past in justifying joint ownership.  S'  k=y122.` ` We are eliminating the fivefactor waiver standard because it has been difficult to apply.  |$After a number of years of experience in applying this test, we have come to conclude that the standard"6 0*%%ZZ"  |$does not sufficiently protect our competition and diversity goals. We believe that our new, threepart rule,  |$along with our failed station waiver, will be easier to administer, better protect the Commission's  S'competition and diversity goals, and therefore further the public interest.Xe yO'ԍAny existing combination based on a fivefactor waiver can be transferred together only if the combination meets our revised radio/TV crossownership rule or failed station waiver standard, at the time of transfer.  S`'` ` 3. Existing Conditional Waivers  S'  kz123.` ` In a number of rulings since passage of the 1996 Act, the Commission has granted,  |$}conditioned on the outcome of this proceeding, applications for waiver of the radiotelevision cross  |$ownership rule where the number of radio stations exceeded the radio limits in existence prior to the  S' |$Act.e {O 'ԍSee, e.g., S.E. Licensee G.P., FCC 96464 (released Nov. 27, 1996) (one TV, three AM, and four FM  {O 'stations in Memphis); and Stockholders of Infinity Broadcasting Corp., FCC 96495 (released Dec. 26, 1996) (one TV, one AM, and five FM stations in Boston; one TV, three AM, and four FM stations in Detroit; one TV, three AM, four FM stations in San Francisco; one TV, three AM, and three FM stations in Philadelphia; one TV, three AM, and five FM stations in Chicago; one TV, two AM, and five FM stations in Los Angeles; and one  yO 'TV, four AM, and three FM stations in New York City). The conditional waiver grantees are directed to file with the Commission within sixty days of  Sp' |$publication of this Report and Order in the Federal Register a showing sufficient to demonstrate their  |$compliance or noncompliance with our new rule. In situations where the revised rule is met, we delegate  |$to the Mass Media Bureau the authority to replace the conditional waiver with permanent approval of the  S 'relevant assignment or transfer of license.  S '  km{124.` ` A number of the conditional waivers that have been granted will not comply with our  |$Inewly revised radiotelevision cross ownership rule. In particular, there are approximately thirteen  SZ' |$tconditional waivers involving joint ownership of a television station and seven or more radio stations in  |$Qa single market. Although the parties that received these waivers were placed on specific notice that their  |$Dproposed station transactions were subject to the outcome of this rulemaking proceeding, we nonetheless  |$will extend these conditional waivers, until the conclusion of our biennial review in 2004, during which  |$Mwe will review the radio/TV crossownership rule itself. We will also extend this grandfathering relief  |$to any pending application for conditional waiver, if filed on or before July 29, 1999 (the date of the  Sj' |$M"sunshine" notice for this Report and Order), and ultimately granted by the Commission. In 2004, the  |$Commission will review these waivers, on a casebycase basis, as part of its biennial review and  |$determine the appropriate treatment of them beyond that point in time. In order to qualify for permanent  |$grandfathering relief after 2004, conditional waiver grantees will be required to demonstrate that such  |$&relief is in the public interest, based upon, to the extent applicable to radio/TV combinations, the same  |$criteria that we will use to review the LMAs that we have concluded to grandfather for a similar period  S|' |$of time.J|d e {O#'ԍSee infra  148.J As is the case with the grandfathered LMAs, if conditional waiver grantees wish to establish  |$greater certainty about the status of their waiver prior to the 2004 biennial review, they may make a"T7 0*%%ZZ"  S' |$&showing using the 2004 biennial review criteria, beginning one year after the date that this Report and  S' |$xOrder is published in the Federal Register. Any transfer of a grandfathered combination after the adoption  S' |$pdate of this Report and Order (whether during the initial grandfathering period or after a permanent  |$grandfathering decision has been made) must meet the radio/TV crossownership rule or waiver policy in effect at the time of transfer.  S'  k|125.` ` We believe this additional relief is appropriate. In many of these cases significant periods  |$tof time up to several years have transpired since the grant of the conditional waivers. During this  |$ktime the licensees in question have invested substantial resources in their stations, upgrading their facilities  |$and program offerings. We do not wish to unduly disrupt these investments, and the public interest benefits they created, after such a passage of time.  S '   VI. TELEVISION LOCAL MARKETING AGREEMENTS Đl  S '  k}126.` ` Background. A television local marketing agreement ("LMA") or time brokerage  |$@agreement is a type of contract that generally involves the sale by a licensee of discrete blocks of time  |$to a broker that then supplies the programming to fill that time and sells the commercial spot  S6' |$announcements to support the programming.6e {O'ԍTV Ownership Further Notice, 10 FCC Rcd. at 3581. This is the definition we also use for LMAs in  {Oh'the context of radio. See 47 C.F.R.  73.3555(a)(4)(iii). Our current data indicate that there are at least 70 existing  |$LMAs where the brokering and brokered station are in the same DMA. Most of these LMAs are in the  |$top 50 television markets. With respect to about 90% of these samemarket LMA arrangements, the  |$ brokering party is an affiliate of ABC, CBS, Fox, or NBC. In addition to these "samemarket" LMAs,  |$there are at least 35 other time brokerage arrangements where the brokering and brokered stations are in  Sn'different DMAs or the programming is supplied by an entity other than a television station.Dn$e yO2'ԍIn the case of many outofmarket LMAs, an entity other than a television station brokers advertising/programming time for a television station. Some companies, such as Clear Channel, Sinclair, and Paxson, serve as the broker in a number of LMAs, both in markets where the company owns another television station and in markets where the company does not own a station. FCC staff analysis of information filed by  {OR'parties to television LMAs in response to Public Notice, DA 971246, "Commission Seeks Further Information Regarding Television LMAs" (June 17, 1997). ALTV and Pegasus each filed an analysis of this information and  {O'noted the positive contributions provided by television LMAs. See ALTV Supplemental Comments (May, 1998); Pegasus Communications Corporation Supplemental Comments (June, 1998).  S'  kF~127.` ` In our companion Attribution Report and Order,m0 e {O 'ԍSee Attribution Report and Order, section III.C.m we have decided to attribute time  |$brokerage of another television station in the same market for more than fifteen percent of the brokered  |$station's broadcast hours per week and to count LMAs that fall in this category toward the brokering  S' |$licensee's ownership limits. In the Second Further Notice, we stated that we would decide in this  |$proceeding how to treat existing television LMAs under any new attribution rules that we might adopt in"8 0*%%ZZ"  S' |$the Attribution proceeding.te {Oh'ԍSee TV Ownership Second Further Notice, 11 FCC Rcd. at 21691.t In this Report and Order, we adopt policies to afford "grandfather" rights to existing television LMAs according to the provisions discussed below.  S'  k~128.` ` In the Second Further Notice, we stated that, in the event that we found television LMAs  |$attributable, we were inclined to extend some grandfathering relief to all television LMAs entered into  S<' |$before the November 5, 1996 adoption date of the Second Further Notice for purposes of compliance with  |$our ownership rules. We sought comment on an approach whereby such LMAs would not be disturbed  |$during the pendency of the original term of the LMA in the event the cognizability of the LMA would  |$result in violation of an ownership rule. We also tentatively concluded that television LMAs entered into  S' |$on or after the adoption date of the Second Further Notice, if they resulted in violation of any ownership  Sx' |$rule, would not be grandfathered and would be accorded only a brief period within which to terminate.DxZe {Or 'ԍId. at 21694.D  |$We also reserved the right to invalidate an otherwise grandfathered LMA in circumstances raising  S( 'particular competition and diversity concerns, such as might occur in very small markets.G( e {O'ԍId. at 2169394.G  S '  k0129.` ` After reviewing the comments received in response to the Second Further Notice in this  S ' |$3proceeding and the Further Notice of Proposed Rule Making in our related attribution proceeding, the  |$<Commission concluded that the commenters had not provided sufficient information on a range of  |$Qimportant factual issues related to television LMAs. To provide a more complete record, the Commission  S<' |$Mreleased a Public Notice on June 17, 1997 requesting parties to any existing television LMA to provide  S' |$xcertain information regarding the terms and characteristics of these agreements to help us determine, inter  S' |$alia, the number of existing television LMAs, the date of origination and duration of these arrangements,  S'and the efficiencies or public interest benefits that may have resulted from the LMA.~e {O'ԍSee Public Notice, DA 971246, "Commission Seeks Further Information Regarding Television LMAs"  {O'(June 17, 1997) ("LMA Public Notice").  Sz'  k=130.` ` Comments. The majority of broadcasters who commented on this issue contended that  |$our grandfathering proposal was too restrictive. For example, Sullivan, SJL, and Lockwood argued that  S*' |$LMAs should be permanently grandfathered.*e {O'ԍ SJL Comments at 1920, Attribution Proceeding, MM Docket Nos. 94150, 9251 and 87154; Sullivan Comments at 46; Sullivan Reply Comments at 5; Lockwood Reply Comments at 4. Clear Channel Communications ("Clear Channel")  |$3contended that permanent grandfathering is the equitable way to treat broadcasters that, in good faith,  S' |$made substantial investments in LMAs and generated substantial public interest benefits.z4 e {O"'ԍClear Channel Reply Comments at 2. See also Pappas Comments at 14.z A number of  |$broadcasters, including Pappas, Benedek, Glencairn, ALTV, LIN, and Malrite, advocated that, in addition"9 0*%%ZZ"  S' |$to permanently grandfathering LMAs, we should relax the duopoly rule.%Xe yOh'ԍSee, e.g., Pappas Comments at 1014; Pappas Reply Comments at 1214; ALTV Comments at 3337; ALTV Reply Comments at 14; AK Comments at 20; Benedek Reply Comments at 78; Glencairn Comments at 2; LIN Comments at 20; Malrite Comments at 1719.% Several broadcasters also  S' |$argued that Congress intended, under the 1996 Act, that existing LMAs would continue to existpe {O`'ԍSee Paxson Comments at 3036; Sinclair Comments at 49. p and to  S'be transferrable and renewable.ze {O'ԍPappas Comments at 13. See also, e.g., ALTV Comments at 3536; Malrite Comments at 1921; NAB Comments at 1617.  S`'  k131.` ` Broadcasters supporting adoption of our proposed general grandfathering policy included  |$ABC, NAB, Miller Broadcasting, Inc. ("Miller"), and Montclair Communications, Inc. ("Montclair").  |$7ABC, for example, stated that it had no objection to our proposal, provided that we limited grandfathering  S' |$to the original parties to an LMA and for the original term of the agreement only.De yO\'ԍABC Comments at 15.D NAB supported  |$kgrandfathering LMAs in the event that we do not change the duopoly rule, or if the changes that we adopt  S' |$would not permit some existing LMAs to be converted to ownership.Dd e yO'ԍNAB Comments at 16.D Miller contended that those who  Sp' |$trelied on our existing regulations ought not to be prejudiced in the process of our crafting new rules,p e {O'ԍMiller Comments at 67, 9. See also Mt. Mansfield Reply Comments at 56.  SH 'while Montclair urged that we not disrupt its threeyearold LMA.XH e yOn'ԍMontclair asserted that any disruption of its LMA would be detrimental to the public that is receiving improved service, as well as to the licensee's efforts to build a viable femaleowned enterprise. Montclair Comments at 12.  S '  kS132.` ` A number of commenters suggested that we adopt stricter regulations than those we  S ' |$proposed for television LMAs. BET and CCI advocated "sunsetting" LMAs after 24 months,UX e yO'ԍBET and CCI proposed that grandfathering be limited to a twoyear sunset provision, after which the grandfathering provisions would expire and all LMAs that were not in compliance with our ownership rules would be terminated. BET Comments at 4; BET Reply Comments at 67; CCI Comments at 10.U while  |$Saga Communications, Inc. ("Saga") proposed terminating existing LMAs in six months, particularly in  S ' |$duopoly situations. e yO!'ԍSaga also argued that LMAs are contrary to the public interest and should be prohibited in the future.  {O"'Saga Comments at 11, Attribution Proceeding, MM Docket Nos. 94150, 9251 & 87154. Jet Broadcasting Co. ("Jet") advocated that, in small television markets with four  |$or fewer stations, LMAs that allow onehalf or more of the television market's stations to be operated by  |$a single entity, and that existed before the February 8, 1996 adoption of 1996 Act, should not be"0: 0*%%ZZ"  S' |$7grandfathered.e yOh'ԍJet also advocated that such LMAs be terminated within 90 days of the effective date of the Commission's rules, and forbidden in the future. Jet Comments at 1213; Jet Reply Comments at 1415. Retlaw and the public interest group MAP et al. both argued that existing LMAs should  |$not be grandfathered except in compelling circumstances and only upon a showing that the LMA serves  S' |$Dthe public interest.$ e yOr'ԍRetlaw also proposed requiring television LMAs to come into compliance with the new attribution  {O:'standards within the shorter of one year from the adoption date of this Report and Order, or the termination date  {O'of the current LMA. Retlaw Reply Comments at 67. See also MAP et al. Comments at 2728; MAP et al.  yO'Reply Comments at 2223; McGillen Comments at 3. PostNewsweek Stations, Inc. ("PNS") also opposed grandfathering existing LMAs  S' |$gexcept on a casebycase basis,X e yO6 'ԍPostNewsweek noted that there are at least 50 LMAs in existence, with 40 of them in the top 100 markets. PostNewsweek Comments at 78 in MM Docket No. 96222, 91221, & 878 (national ownership proceeding). while Westwind contended that we should not grandfather LMAs at  Sb'all.Ob, e yO.'ԍWestwind Reply Comments at 12.O  S'  k133.` ` Discussion. We adopt our proposal in the Second Further Notice to grandfather television  S' |$LMAs entered into prior to November 5, 1996, the adoption date of that Notice, for purposes of  |$compliance with our ownership rules. Television LMAs entered into on or after that date will have two  S' |$years from the adoption date of this Report and Order to come into compliance with our rules or  Sx' |$7terminate. LMAs entered into before November 5, 1996 will be grandfathered until the conclusion of our  |$2004 biennial review, a period of approximately five years. As part of that review, the Commission will  |$*conduct a general review of the TV duopoly rule and a casebycase review of grandfathered LMAs, and  |$assess the appropriateness of extending the initial grandfathering period. Parties who wish the  |$ Commission to conduct this review prior to 2004 may apply for such relief, using the biennial review  S ' |$criteria, beginning one year after the date the Report and Order is published in the Federal Register. We now turn to a more detailed explanation of our decision on this issue.  S:'  k134.` ` Section 202(g) of the 1996 Act. Some commenters argue that the 1996 Act directs us to  |$grandfather television LMAs permanently. Section 202(g) of the 1996 Act addresses the construction of  |$Section 202 with respect to LMAs. Section 202(g) states that "[n]othing in this section shall be construed  S' |$3to prohibit the origination, continuation, or renewal of any television local marketing agreement that is  S' |$^in compliance with the regulations of the Commission."N e yO'ԍ47 U.S.C.  202(g). N  (Emphasis added.) As we stated in the Second  Sv' |$Further Notice, the plain language of this provision states that Section 202 shall not be construed to  SP'prohibit any television LMA that is in compliance with the Commission's rules.rPL e {O<#'ԍTV Ownership Second Further Notice, 11 FCC Rcd. at 21691. r  S'  kz 135.` ` We do not regard Section 202(g) as limiting our ability to promulgate attribution rules";0*%%ZZn"  |$under Title I and Title III of the Communications Act affecting the status of television LMAs. As a result,  |$we do not see Section 202(g) of the 1996 Act as posing a legal restraint in resolving questions raised in  S' |$the TV Ownership Further Notice as to 1) whether television LMAs in which a broker obtains the ability  |$to program 15% or more of a broadcast television station's weekly broadcast output should be deemed  Sb' |$an attributable interest (which has been decided in our companion Attribution Report and Order);^be {O'ԍSee Attribution Report and Order.^ and  |$2) whether grandfathering existing television LMAs from any applicable ownership rules that would follow  S'from that attribution decision is appropriate.kZe {O 'ԍTV Ownership Further Notice, 10 FCC Rcd. at 358384.k  S'  kd136.` ` We recognize that the Conference Report states that " . . . [Section 202(g)] grandfathers  S' |$*LMAs currently in existence upon enactment of this legislation [i.e., February 8, 1996] and allows LMAs  Sx' |$in the future, consistent with the Commission's rules. The conferees note the positive contributions of  |$^television LMAs and this subsection assures that this legislation does not deprive the public of the benefits  |$of existing LMAs that were otherwise in compliance with Commission regulations on the date of  S ' |$}enactment." e {O'ԍS. Conf. Rep. 104230, 104th Cong. 2d Sess. 163, 164 (1996) ("Conference Report"). We do not believe that this statement necessarily requires the Commission to extend  S ' |$permanent grandfathering rights to television LMAs that would result in a violation of our ownership  |$rules. As one commenter stated, grandfather provisions do not necessarily involve the permanent  S ' |$exemption from a regulation's reach.E ~e {O'ԍSee Letter of G. William Ryan, Pres. & CEO of PostNewsweek Stations, to Commissioners, March 2,  {Ov'1999, at 3, citing Wisconsin Wine & Spirit Institute v. Ley, 416 N.W.2d 914, 919 (Wis. Ct. App. 1987) (stating  {O@'that a grandfather clause may "permit[] a temporary right to do a prohibited thing); Minnesota v. Closer Leaf  {O 'Creamery Co., 449 U.S. 456, 468 (1981) (noting that the legislation grandfathered existing entities "at least  {O'temporarily"); Environmental Defense Fund v. EPA, 82 F.3d 451, 45556 (D.C. Cir.) (analyzing a grandfather  {O'provision that temporarily exempted entities from provisions of the Clean Air Act), amended, 92 F.3d 1209 (D.C. Cir. 1996).E As we explain above, the plain language of the statute does not  |$require us to grandfather LMAs permanently. Rather, we believe that the language of the 1996 Act gives  |$7us the discretion to adopt policies that avoid undue disruption of existing LMA arrangements while, at the  |$Qsame time, promote our competition and diversity goals. As PostNewsweek Stations has stated, Section  |$202(g) "makes clear what the legislation was not intended to do, i.e., prohibit grandfathering; it does not  |$address what the Commission should do. It left to the Commission to decide whether and how to regulate  |$them, including as appropriate prohibiting them, phasing them out, grandfathering them or permitting  Sv'them."v e yO 'ԍLetter of G. William Ryan, Pres. & CEO of PostNewsweek Stations, to Commissioners, March 2, 1999, at 2.  S&'  ki137.` ` While the Balanced Budget Act of 1997 is silent regarding television LMAs,&"e {O$'ԍSee H.R. 2015, 105th Cong., 1st Sess, H6033 (1997); Pub. L.10533 (Aug. 5, 1997). the"&<0*%%ZZ"  |$Conference Report to this legislation states that, with respect to the Commission's current broadcast  S' |$ownership proceedings, the conferees " . . . expect that the Commission will provide additional relief (e.g.,  |$<VHF/UHF combinations) that it finds to be in the public interest, and will implement the permanent  |$grandfathering requirement for local marketing agreements as provided in the Telecommunications Act  Sb' |$Dof 1996."wbe yO'ԍH. Conf. Rep., 105th Cong. 1st Sess., 143 Cong. Rec. at H6175 (1997). w In light of recent Supreme Court decisions, we do not believe that we should rely upon such  S:' |$post hoc legislative history to construe Section 202(g) of the 1996 Act.):Xe {O2'ԍSee O'Gilvie v. U.S., 519 U.S. 79, 90 (1996), citing United States v. Price, 361 U.S. 304 (1960);  {O'Higgins v. Smith, 308 U.S. 473 (1940). See also Reno v. Bossier, 520 U.S. 471, 48485 (1997).) As PostNewsweek Stations  |$points out, "longstanding rules of statutory construction prohibit the Commission from relying on a  |$passing reference to a statute made in the legislative history of an unrelated, subsequent piece of  S'legislation."e yO 'ԍLetter of G. William Ryan, Pres. & CEO of PostNewsweek Stations, to Commissioners, March 2,  {O '1999, at 23, citing Consumer Prod. Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 117 n.13 (1980) (Rehnquist, J.) (stating that a "mere statement" in a subsequent committee report provides "an extremely  {Or'hazardous basis for inferring the meaning of a congressional enactment"); South Carolina v. Regan, 465 U.S. 367, 380 n.17 (1984).  St'  k138.` ` We consequently believe that the 1996 Act left the Commission with the discretion to  |$adopt a grandfathering policy with respect to television LMAs that appropriately addresses the equity,  |$competition, and diversity issues these arrangements raise. Having said that, we fully recognize the need  |$Dto avoid undue disruption of television LMAs that were entered into in good faith reliance on our previous  |$}rules at the time, and that these arrangements may in fact have resulted in significant public interest benefits. We now turn to striking the appropriate balance regarding these factors.  S\'  k#139.` ` Grandfathering CutOff Date. We will adopt our proposal in the Second Further Notice  S6' |$&to grandfather television LMAs entered into before the adoption date of that Notice, i.e., November 5,  |$ 1996. It was on this date that the Commission gave clear notice that it intended to attribute television  |$tLMAs in certain circumstances, and that LMAs entered into on or after that date that violated our local  |$^television ownership rule would not be grandfathered and would be accorded only a fixed period in which  S'to terminate.kh e {O'ԍSecond Further Notice, 11 FCC Rcd at 21694,  89.k A number of commenters supported this decision. e yO2'ԍDC Comments at 7; LSOC Comments at 13; Pappas Comments at 14; Shockley Comments at 12; Waterman Comments at 2.  SH'  kq140.` ` We will not adopt the suggestion of some commenters to adopt the date of enactment of  |$the 1996 Act as the grandfathering date, for, as we explain above, we do not interpret the statute as  S' |$Mintending that outcome. Neither will we follow the suggestion of MAP et al., to adopt, at a minimum,  S' |$the December 15, 1994 adoption date of the TV Further Ownership Notice. That Notice was superseded"=R 0*%%ZZ$"  S' |$7by the Second Further Notice, in which we sought further comment reflecting the enactment of the 1996  |$Act and the full range of the grandfathering issues regarding television LMAs. We therefore believe that  |$November 5, 1996 the adoption date of the Second Further Notice is the more equitable grandfathering date.  S:'  k141.` ` Finally, we will not designate, as suggested by Miller and Sinclair, the adoption date of  S' |$"this Report and Order as the grandfathering date for television LMAs. As we stated in the Second  S' |$^Further Notice, television LMAs entered into on or after the adoption date of that Notice would be entered  |$into at the risk of the contracting parties and, if in violation of any ownership rule, would not be  S' |$grandfathered and would be accorded only a limited period in which to terminate.ke {O 'ԍSecond Further Notice, 11 FCC Rcd at 21694,  89.k We are not  |$persuaded that we now should designate a later date in order to grandfather such LMAs knowingly entered  SN 'into in the face of the clear notice we gave in the Second Further Notice.  S '  kS142.` ` Treatment of LMAs Entered Into on or After November 5, 1996. LMAs that are not  S ' |$eligible for grandfathering relief i.e., those LMAs entered into on or after November 5, 1996, that are  |$attributable under the new attribution criteria and that would violate the TV duopoly rule will be given  |$^two years from the adoption date of this Report and Order to terminate. Even though the holders of such  |$LMAs entered into after our grandfathering date could not have a legitimate expectation of being eligible  |$for the grandfathering rights we adopt today, we believe that such a transition is appropriate to avoid  |$undue disruption of existing arrangements and will allow the holders of LMAs to order their affairs. For  |$ example, the licensee of a brokered station may need time to arrange for programming to replace that  |$provided under the LMA; a twoyear transition to do this will allow the licensee to avoid disruption of  |$its service to the public. In addition, stations with nongrandfathered LMAs could, of course, apply for  |$a TV duopoly under our new rule or waiver criteria, just as any other station owner in the market could.  |$tApplications based on a waiver may be based on circumstances as they existed at the time just prior to  S"'the parties entering into the LMA.  S' G6!+143. Scope of Grandfathering Relief. We received a wide range of comments regarding what  |$type of grandfathering relief television LMAs should receive. The majority of broadcasters generally  |$favored grandfathering LMAs for their full terms and allowing unlimited transferability and renewability  SZ' |$}of LMAs.nZZe {OT'ԍSee, e.g., Blade Comments at 6; Sinclair Comments at 9.n Other parties supported shorter grandfathering terms and limiting the transferability of  S2'LMAs.~2e {O'ԍSee, e.g., Mt. Mansfield Reply Comments at 56; Shockley Comments at 2.~ Still others opposed any grandfathering relief or only in limited cases.2~e {OP!'ԍSee, e.g., PostNewsweek Comments at 78; Westwind Reply Comments at 12.  S'  k144.` ` After examining the record in this proceeding, we believe television LMAs entered into  S' |$prior to the November 5, 1996 adoption date of the Second Further Notice should receive significant  |$grandfathering relief. The parties to these LMAs entered into these arrangements when there was no">0*%%ZZ"  |$ Commission rule or policy prohibiting them. There consequently are strong equities against requiring  |$them to divest their interests in these LMAs and upset the settled expectations established by these plans and investments. Doing so could impose an unfair hardship on these parties.  S`'  k~145.` ` In addition to these equities, the record shows that a number of television LMAs resulted  |$in public interest benefits. ALTV submitted a study showing that LMAs helped some struggling stations  |$complete construction of their facilities or upgrade them, allowed others to add a local newscast or other  |$Dlocal programming to their schedule, and more generally permitted stations to take advantage of operating  S'efficiencies to serve their viewers better.Ee yO( 'ԍALTV Comments at 16.E We do not wish to disrupt these public interest benefits.  Sp'  kS146.` ` We consequently will grandfather television LMAs entered into prior to November 5,  |$@1996, conditioned on the Commission's 2004 biennial review. During this initial grandfathering period  |$and during the pendency of the 2004 review, these LMAs may continue in full force and effect, and may  |$talso be transferred and renewed by the parties, though the renewing parties and/or transferees take the  |$LMAs subject to the review of the status of the LMA as part of the 2004 biennial review. At that time,  |$Dthe Commission will reevaluate these grandfathered television LMAs, on a casebycase basis, to examine  |$the competition, diversity, equities, and public interest factors they raise and to determine whether these  |$LMAs should continue to be grandfathered. In order to qualify for permanent grandfathering relief after  |$2004, parties to LMAs entered into before November 5, 1996 will be required to demonstrate that such relief is in the public interest based upon the biennial review factors described below.  S'  k147.` ` We believe that reevaluation of the LMAs is reasonable as the record shows that many  |$gparties entered into television LMAs, and made substantial investments in these arrangements, with the  Sh' |$&belief that they could be renewed or transferred.phXe {O`'ԍDC Comments at 7. See also Malrite Comments at 1920. p If any party to an LMA wishes the Commission to  |$Zdetermine the status of its agreement prior to the 2004 biennial review, it may request the Commission  S' |$to do so at any time beginning one year after this Report and Order is published in the Federal Register,  |$using the biennial review factors noted below, to demonstrate that continuation of the LMA is in the  |$public interest. (In addition, at any time the parties to an LMA may seek, just as any other applicant, to  |$form a duopoly or justify an LMA indefinitely under our new rule and waiver policies. A showing based  |$Zon voice counts must meet our new rule at the time the showing is filed; a showing based on a waiver  |$&may be based on the circumstances existing just prior to the parties entering into the LMA.) Whether  |$LMA holders obtain a duopoly outright or permanent grandfathering relief for arrangements that do not  |$comply with our new TV duopoly rule and waiver policies, such relief will not be extended to any  |$transfers subsequent to 2004; any transfer of permanently grandfathered arrangements after that time must meet our duopoly rule or waiver policies in effect at the time of transfer. ` `  Sb'  k 148.` ` As part of the 2004 biennial review, the Commission will examine the following factors to assist in its review of grandfathered television LMAs:  S ' G6!XPublic Interest Factors The FCC will assess the extent to which parties, by virtue of their joint" ?0*%%ZZ"  G6!Noperation, have achieved certain efficiencies allowing them, in turn, to produce specific and  G6!Edemonstrable benefits to the public. For example, the Commission may consider, among other  G6!things, the following: the extent to which broadcasters involved have fostered the regulatory goal  G6!of promoting localism, including locallyoriginated programming, such as news and public affairs  G6!programming; the extent to which the joint operations have made possible capital investments and  G6!technical improvements that have improved service; the extent to which the joint operations have  G6!increased the amount and investment in children's educational programming; and the extent to  G6!which the joint operations have otherwise produced specific and demonstrable benefits to the viewing public; (#  Sp' G6!lXDTV Conversion The FCC will evaluate the extent to which the samemarket joint operations  G6!are on or ahead of schedule to convert to DTV and digital service. We will examine the extent  G6!hto which one station has enabled the other to convert to digital operations, and whether joint  G6!operation has expedited that conversion, as well as has produced more overtheair programming using digital transmission.(#  S ' G6!XMarketplace Conditions The FCC will evaluate the status of competition and diversity in the marketplace.(#  S' G6!"XEquities In considering the appropriateness of grandfathering beyond the initial fiveyear period,  G6!the FCC will take into account the capital investments the broadcasters involved have already  G6!made to improve the quality of the technical facilities of the stations involved, and weigh these equities against the competition and diversity issues involved.(#  S@'  k 149.` ` Filing Existing LMAs. Those parties with existing LMAs that are attributable under our  |$new attribution rules are directed to file a copy of the LMA with the Commission with thirty days of the publication of this Report and Order in the Federal Register.  Sx'nc VII. NEW APPLICATIONS Đl  S('  k150.` ` Applications filed pursuant to this Report and Order will not be accepted by the  S' |$@Commission until the effective date of this Report and Order. We realize that the rules adopted in this  S' |$*Report and Order could result in two or more applications being filed on the same day relating to stations  |$in the same market and that due to the voice count all applications might not be able to be granted. We will address how to resolve such conflicts in a subsequent action. X(#  S ' VIII. CONCLUSION Đl  S!' G6!151. For the reasons discussed above, we adopt this Report and Order revising our local  |$television ownership rules. We intend by these revisions to improve the ability of television broadcasters  |$Qto realize the efficiencies and cost savings of common station ownership, and to strengthen their potential  |$xto serve the public interest. We believe that our decision strikes the appropriate balance between common"P$@0*%%ZZ #"  |$pownership and our fundamental competition and diversity concerns, and ensures that our television ownership restrictions appropriately reflect ongoing changes in the broadcast television industry.  S`'U IX. ADMINISTRATIVE MATTERS ă  S'  k152.` ` Paperwork Reduction Act of 1995 Analysis. This Report and Order has been analyzed  |$with respect to the Paperwork Reduction Act of 1995 and found to impose new reporting requirements  |$ on the public. Implementation of these new reporting requirements will be subject to approval by the  |$Office of Management and Budget as prescribed in the Act. The new reporting requirements contained in this Report and Order have been submitted to OMB for emergency clearance.  S" '  k153.` ` Regulatory Flexibility Analysis. Pursuant to the Regulative Flexibility Act of 1980, as  S ' |$@amended, 5 U.S.C.  601 et seq., the Commission's Final Regulatory Flexibility Analysis in this Report and Order is attached as Appendix A.  S ' G6!154. Ordering Clauses. Accordingly, IT IS ORDERED that, pursuant to the authority contained  |$Qin Sections 4(i) & (j), 303(r), 308, 310 and 403 of the Communications Act of 1934, 47 U.S.C.  154(i)  |$& (j), 303(r), 308, 310 and 403, as amended, Part 73 of the Commission's Rules, 47 C.F.R. Part 73 IS AMENDED as set forth in Appendix B below.  S'  k0155.` ` IT IS FURTHER ORDERED that, pursuant to the Contract with America Advancement  |$Act of 1996, the amendment set forth in Appendix B SHALL BE EFFECTIVE 60 days after publication in the Federal Register.  S ' G6!156. IT IS FURTHER ORDERED that the Commission's Office of Public Affairs, Reference  S' |$Operations Division, SHALL SEND a copy of this Report and Order, including the Final Regulatory  S'Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.  S'157. IT IS FURTHER ORDERED that this proceeding is terminated."A0*%%ZZ"  S' G6!/158. Additional Information. For addition information concerning this proceeding, please contact Eric Bash, Mass Media Bureau, (202) 4182130.  ` `  GFEDERAL COMMUNICATIONS COMMISSION ` `  GMagalie Roman Salas ` `  GSecretary"B0*%%ZZ"  S' APPENDIX A   S'  FINAL REGULATORY FLEXIBILITY ACT ANALYSIS Đ S'l  l  S`' G6!lAs required by the Regulatory Flexibility Act (RFA),`Z`e {O'ԍSee 5 U.S.C.  603. The RFA, see 5 U.S.C.  601 et. seq., has been amended by the Contract With America Advancement Act of 1996, Pub. L. No. 104121, 110 Stat. 847 (1996) (CWAAA). Title II of the CWAAA is the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).` an Initial Regulatory Flexibility Analysis  S8' |$(IRFA) was incorporated in the Second Further Notice of Proposed Rule Making in this proceeding.^8e {O 'ԍSecond Further Notice of Proposed Rulemaking, In the Matter of Review of the Commission's  {O 'Regulations Governing Television Broadcasting, Television Satellite Stations Review of Policy and Rules, MM  {OV 'Docket Nos. 91221 & 878, 11 FCC Rcd. 21655, 2169821703 (1996) (Second Further Notice).  S' |$The Commission sought written public comment on the proposals in this Notice, including comment on  |$"the IRFA. The comments received are discussed below. This present Final Regulatory Flexibility  S'Analysis (FRFA) conforms to the RFA.Oe {Ot'ԍSee 5 U.S.C.  604. O  St'  SL 4 I.XX` ` Need For, and Objectives of, Report and Order (#`  G6! In February 1996, the Telecommunications Act of 1996 ("1996 Act") was signed into law.  |$&Section 202 of the 1996 Act directed the Commission to make a number of significant revisions to its  |$broadcast media ownership rules. Section 202 also requires us to review aspects of our local ownership  S ' |$rules which were the subject of the TV Ownership Further Notice in this docket.v^ e {O'ԍFurther Notice of Proposed Rulemaking, In the Matter of Review of the Commission's Regulations  {O'governing television Broadcasting, Television Satellite Stations, Review of Policy and Rules, MM Docket Nos.  {O['91221 & 877, 10 FCC Rcd. 3524 (1995) (TV Further Ownership Notice).v Specifically, Section  |$8202 requires the Commission to: 1) conduct a rulemaking proceeding concerning the retention,  |$modification, or elimination of the duopoly rule; and 2) extend the Top 25 market/30 independent voices  |$onetoamarket waiver policy to the Top 50 markets, "consistent with the public interest, convenience,  |$and necessity." In view of the 1996 Act's directives regarding broadcast multiple ownership, the  S' |$ Commission in 1996 adopted a Second Further Notice in this proceeding inviting comment on several  |$^issues prompted by the 1996 Act. We seek to foster both competition and diversity in the changing video  Sq'marketplace, and this Report and Order modifies the local ownership rules consistent with these goals.  S' II.XX` ` Significant Issues Raised by the Public in Response to the Initial Analysis (#`  G6!Media Access Project, et al. ("MAP et al.") submitted the only set of comments that was filed  S' |$Qdirectly in response to the IRFA contained in the Second Further Notice. MAP et al. argues that relaxation"C 0*%%ZZ"  |$@of the Commission's multiple ownership rules will harm small businesses that own broadcast stations,  |$which it argues are disproportionately owned by minorities, women, and new entrants into the video  |$programming market. Specifically, MAP et al. contends that increased group ownership by large  |$Mbusinesses will put small broadcasters at a competitive disadvantage with larger stations that can offer  |$advertisers lower and/or greater exposure. MAP et al. also states that relaxation of the rules will drive up  S8' |$the cost of stations, eliminating the ability of small businesses to purchase stations.W8e {O'ԍMAP et al. IRFA Comments at 34.W Several other parties  S' |$make arguments essentially similar to MAP's in their general comments (e.g., small broadcasters' ability  S'to acquire attractive programming will diminish if the local ownership rules are liberalized).Ze {O 'ԍSee, e.g., Centennial Comments at 6; Sunbelt Comments at 1, 67; BET Reply Comments at 45.  G6!RAddressing the duopoly rule in particular, MAP et al. opposes a failed station waiver, because it  |$opposes television duopolies in general. It argues that such a waiver would be anticompetitive, would not  SJ ' |$promote viewpoint diversity, and would keep out new entrants, particularly minorities and women.TJ e {O'ԍMAP et al. Comments at 1718.T  |$Sunbelt asserts that grandfathering existing common ownership arrangements would deny new entrants  |$the efficiency advantages of multiple ownership enjoyed by existing broadcasters. This, it claims, would  S 'inhibit the entrance of new voices, particularly those of women and minorities, into the market.L ~e yO'ԍSunbelt Comments at 1, 67.L  SZ' III.XDescription and Estimate of the Number of Small Entities to Which the Rules Will Apply (#  G6!IThe amended rules will affect commercial television and radio broadcast licensees, permittees, and  |$Dpotential licensees. MAP asserts that the estimate contained in the IRFA of the number of broadcast radio  S'and television licensees that qualify as "small entities" is flawed.Je yOh'ԍMAP IRFA Comments at 23.J  Sj'1.` ` Definition of a "Small Business"(#`  G6!Under the RFA, small entities may include small organizations, small businesses, and small  |$governmental jurisdictions. 5 U.S.C.  601(6). The RFA, 5 U.S.C.  601(3) defines the term "small  |$xbusiness" as having the same meaning as the term "small business concern" under the Small Business Act,  |$15 U.S.C.  632. A small business concern is one which: (1) is independently owned and operated; (2)  |$gis not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration ("SBA").  G6!The Small Business Administration defines a television broadcasting station that has no more than"D0*%%ZZN"  S' |$$10.5 million in annual receipts as a small business.te yOh'ԍ13 C.F.R.  121.201, Standard Industrial Code (SIC) 4833 (1996).t Television broadcasting stations consist of  |$Destablishments primarily engaged in broadcasting visual programs by television to the public, except cable  S' |$and other pay television services.XXe yO'ԍEconomics and Statistics Administration, Bureau of Census, U.S. Department of Commerce, 1992 Census of Transportation, Communications and Utilities, Establishment and Firm Size, Series UC92S1, Appendix A9 (1995). Included in this industry are commercial, religious, educational, and  S' |$other television stations.Bxe {O 'ԍId. See Executive Office of the President, Office of Management and Budget, Standard Industrial Classification Manual (1987), at 283, which describes "Television Broadcasting Stations (SIC Code 4833)" as: XEstablishments primarily engaged in broadcasting visual programs by television to the public, except cable and other pay television services. Included in this industry are commercial, religious, educational and other television stations. Also included here are establishments primarily engaged in television broadcasting and which produce taped television program materials. ƕ Also included are establishments primarily engaged in television broadcasting  S`' |$and which produce taped television program materials.X` e yO'ԍEconomics and Statistics Administration, Bureau of Census, U.S. Department of Commerce, 1992 Census of Transportation, Communications and Utilities, Establishment and Firm Size, Series UC92S1, Appendix A9 (1995). Separate establishments primarily engaged in  S8'producing taped television program materials are classified under another SIC number.8e {Oz'ԍId.; SIC 7812 (Motion Picture and Video Tape Production); SIC 7922 (Theatrical Producers and Miscellaneous Theatrical Services (producers of live radio and television programs).  G6!The SBA defines a radio broadcasting station that has no more than $5 million in annual receipts  S' |$as a small business.Re yO\'ԍ13 C.F.R.  121.201, SIC 4832.R A radio broadcasting station is an establishment primarily engaged in broadcasting  S' |$aural programs by radio to the public.e yO'ԍEconomics and Statistics Administration, Bureau of Census, U.S. Department of Commerce, Appendix A-9. Included in this industry are commercial religious, educational,  Sp' |$Qand other radio stations.:pe {O'ԍId.: Radio broadcasting stations which primarily are engaged in radio broadcasting  SH ' |$and which produce ratio program materials are similarly included.:H ve {O^"'ԍId.: However, radio stations which are  |$separate establishments and are primarily engaged in producing radio program material are classified under" E0*%%ZZ5 "  S'another SIC number.:e {Oh'ԍId.:  G6!hPursuant to 5 U.S.C.  601(3), the statutory definition of a small business applies "unless an  S' |$Iagency after consultation with the Office of Advocacy of the SBA and after opportunity for public  |$comment, establishes one or more definitions of such term which are appropriate to the activities of the  S8'agency and publishes such definition(s) in the Federal Register."8Ze yO2'ԍ While we tentatively believe that the SBA's definition of "small business" greatly overstates the number of radio and television broadcast stations that are small businesses and is not suitable for purposes of determining  {O 'the impact of the new rules on small television and radio stations, for purposes of this Report and Order, we utilize the SBA's definition in determining the number of small businesses to which the rules would apply, but we reserve the right to adopt a more suitable definition of "small business" as applied to radio and television  {O 'broadcast stations or other entities subject to the rules adopted in this Report and Order and to consider further the issue of the number of small entities that are radio and television broadcasters or other small media entities in  {O 'the future. See Report and Order, Policies & Rules Concerning Children's Television Programming, Revision of  {Ox'Programming Policies for Television Broadcast Stations, MM Docket No. 93-48, 11 FCC Rcd 10660, 1073738  yOB'(1996) (citing 5 U.S.C.  601(3).  S'2.` ` Issues in Applying the Definition of a "Small Business"(#`  G6!As discussed below, we could not precisely apply the foregoing definition of "small business" in  |$developing our estimates of the number of small entities to which the rules will apply. Our estimates reflect our best judgments based on the data available to us.  G6!An element of the definition of "small business" is that the entity not be dominant in its field of  |$operation. We are unable at this time to define or quantify the criteria that would establish whether a  |$@specific radio or television station is dominant in its field of operation. Accordingly, the estimates that  |$Qfollow of small businesses to which the new rules will apply do not exclude any radio or television station  |$&from the definition of a small business on this basis and are therefore overinclusive to that extent. An  |$*additional element of the definition of "small business" is that the entity must be independently owned and  |$operated. As discussed further below, we could not fully apply this criterion, and our estimates of small  |$businesses to which the rules may apply may be overinclusive to this extent. The SBA's general size  |$standards are developed taking into account these two statutory criteria. This does not preclude us from taking these factors into account in making our estimates of the numbers of small entities.  G6!With respect to applying the revenue cap, the SBA has defined "annual receipts" specifically in  |$13 C.F.R  121.104, and its calculations include an averaging process. We do not currently require  |$submission of financial data from licensees that we could use in applying the SBA's definition of a small  |$business. Thus, for purposes of estimating the number of small entities to which the rules apply, we are  |$limited to considering the revenue data that are publicly available, and the revenue data on which we rely may not correspond completely with the SBA definition of annual receipts. "PF 0*%%ZZz"Ԍ G6!Under SBA criteria for determining annual receipts, if a concern has acquired an affiliate or been  |$acquired as an affiliate during the applicable averaging period for determining annual receipts, the annual  |$greceipts in determining size status include the receipts of both firms. 13 C.F.R.  121.104(d)(1). The  |$SBA defines affiliation in 13 C.F.R.  121.103. In this context, the SBA's definition of affiliate is  |$analogous to our attribution rules. Generally, under the SBA's definition, concerns are affiliates of each  |$other when one concern controls or has the power to control the other, or a third party or parties controls  |$Vor has the power to control both. 13 C.F.R.  121.103(a)(1). The SBA considers factors such as  |$ownership, management, previous relationships with or ties to another concern, and contractual  |$relationships, in determining whether affiliation exists. 13 C.F.R.  121.103(a)(2). Instead of making an  |$gindependent determination of whether television stations were affiliated based on SBA's definitions, we relied on the databases available to us to provide us with that information.  S '3.` ` Estimates Based on Census Data (#`  S 'The rules adopted in this Report and Order will apply to full service television and radio stations.  S ' G6!"There were 1,509 television stations operating in the nation in 1992. e yO'ԍFCC News Release No. 31327, Jan. 13, 1993; Economics and Statistics Administration, Bureau of Census, U.S. Department of Commerce, Appendix A9. That number has remained  |$gfairly constant as indicated by the approximately 1,594 operating television broadcasting stations in the  S2' |$&nation as of June 1999.2 e yO'ԍFCC News Release, Broadcast Station Totals as of June 30, 1999 (released July 19, 1999). For 19922e {O'ԍCensus for communications establishments are performed every five years ending with a "2" or "7". See Economics and Statistics Administration, Bureau of Census, U.S. Department of Commerce, III. the number of television stations that produced less than $10.0  S ' |$million in revenue was 1,155 establishments.jX  e yO'ԍThe amount of $10 million was used to estimate the number of small business establishments because the relevant Census categories stopped at $9,999,999 and began at $10,000,000. No category for $10.5 million existed. Thus, the number is as accurate as it is possible to calculate with the available information.j Thus, the new rules will affect approximately 1,594  S' |$ television stations; approximately 77%, or 1,227 of those stations are considered small businesses.* e yO'ԍWe use the 77 percent figure of TV stations operating at less than $10 million for 1992 and apply it to the 1999 total of 1594 TV stations to arrive at 1,227 stations categorized as small businesses.  |$These estimates may overstate the number of small entities since the revenue figures on which they are based do not include or aggregate revenues from nontelevision affiliated companies.  G6!+The new rule will also affect radio stations. The 1992 Census indicates that 96 percent (5,861  S' |$of 6,127) of radio station establishments produced less than $5 million in revenue in 1992. e yO<#'ԍThe Census Bureau counts radio stations located at the same facility as one establishment. Therefore, each co-located AM/FM combination counts as one establishment. Official"G0*%%ZZ"  S' |$Commission records indicate that 11,334 individual radio stations were operating in 1992.[e yOh'ԍFCC News Release No. 31327, Jan. 13, 1993.[ As of June  S'1999, official Commission records indicate that 12,560 radio stations are currently operating.Xe yO'ԍFCC News Release, Broadcast Station Totals as of June 30, 1999 (released July 19, 1999).  S'  S`'IV.XDescription of Projected Reporting, Recordkeeping, and Other Compliance Requirements (#  S' G6!The Report and Order imposes compliance requirements. Pursuant to the Report and Order,  S' |$applicants will be required to file with the Commission upon the effective date of the rules showings to  |$convert conditional waivers to permanent license grants under the new rules or waiver standards. In  |$addition, licensees with existing local marketing agreements (LMA) that are attributable under the revised  |$&rules will be required to file a copy of the LMA with the Commission within thirty days of publication  SJ 'of the Report and Order in the Federal Register.  S$ '  S ' G6!V.XSteps Taken to Minimize Significant Economic Impact on Small Entities and Significant  S 'Alternatives Considered (#  G6!We believe that our revised TV duopoly rule, radio/TV crossownership rule, and related waiver  |$Zpolicies strike the appropriate balance between allowing broadcast stations to realize the efficiencies of  |$combined operations, and furthering our policy goals of competition and diversity. Both of our revised  |$rules and their associated waiver policies allow small stations to reduce expenses through shared  |$operations, but at the same time protect them from acquisition that could eliminate their voice, and from the exercise of undue market power.  G6!In addition to having amended the geographic scope of our TV duopoly rule, we have also  |$modified the rule to permit common ownership of two stations in the same DMA if at least eight  |$independently owned and operated full power TV stations (commercial and noncommercial) will remain  |$postmerger, and both of the stations are not in the top fourranked stations in the DMA. The new rule  |$ensures that small stations may combine operations, reduce expenses, and perhaps diversify programming.  |$EAt the same time, both the market rank and the voice count components of the rule further our  |$Dcompetition goal and protect small stations from their competitors. The market rank test ensures that the  |$/two largest stations cannot combine to dominate and exercise market power in the advertising and  |$programming markets in which TV stations compete; the voice count test ensures that more than eight  |$xcompetitors must exist in the market before any two of them may combine to increase their market share.  |$gBoth components of the new rule also further our diversity goal and preserve small stations in markets with less than eight voices.  Sd'  G6!We have revised our radio/TV crossownership rule to permit common ownership of one or two  |$DTV stations and up to six radio stations if twenty independent voices will remain postmerger; one or two  |$ZTV stations and up to four radio stations if at least ten voices will remain postmerger; and one or two" H0*%%ZZ% "  |$ZTV stations and one radio station regardless of the number of voices that will remain postmerger. As  |$with our amended TV duopoly rule, the modified radio/TV crossownership rule will allow stations,  |$&including small stations, to realize economies of scale, but at the same time ensure that no market will  |$become concentrated to such an extent that any one or series of combinations will dominate the markets in which broadcasters compete, or monopolize the media and sources of information for their audiences.  G6!Our TV duopoly waiver policies, based on a showing of a "failed" station, a "failing" station, and  |$3the construction of an authorized but as yet unbuilt station, and our radio/TV crossownership waiver  |$policies, based on a showing of a "failed" station, likewise accommodate small stations, while protecting  |$*our competition and diversity goals. Each of these waiver policies was designed to ensure that only truly  |$financially distressed, which are typically smaller, stations, can benefit from them. The waiver policies  |$^also ensure that more financially successful inmarket stations, which are typically larger and likely would  |$Zvalue samemarket broadcast assets more highly than outofmarket stations, cannot foreclose outof |$market buyers. The inmarket buyer must demonstrate that it is the only purchaser ready, willing, and able  |$to operate the station, and that sale to an outofmarket buyer would result in an artificially depressed price.  G6!VWe also believe that our grandfathering policies for conditional radio/TV crossownership waivers,  |$ and TV LMAs, may help small stations. For example, the record suggested that TV LMAs may have  |$helped smaller, struggling stations to remain on or return to the air, and to diversity and expand their  S' |$^programming. The Report and Order grandfathers all LMAs entered into prior to November 5, 1996, and  |$therefore permits them to remain in full force and effect, subject to further review in the Commission's biennial review in 2004.  G6!For the above reasons, we believe that the Commission has taken steps not only to reduce the  |$economic impact on small entities, but also to assist them realize the benefits of common operations, and to protect them from undue market power.   Sz' VI.XReport to Congress (#  SR'  S*' G6!RThe Commission will send a copy of this Report and Order, including this FRFA, in a report to  S' |$be sent to Congress pursuant to the Small Business Regulatory Enforcement Fairness Act of 1996, see 5  S' |$DU.S.C.  801(a)(1)(A). In addition, the Commission will send a copy of this  Report and Order, including  S' |$FRFA, to the Chief Counsel for Advocacy of the Small Business Administration. A copy of this  Report  S' |$and Order and FRFA (or summaries thereof) will also be published in the Federal Register. See 5 U.S.C.  Sl' 604(b). "lI0*%%ZZM"  S' APPENDIX B   S'RULES Đl Part 73 of Title 47 of the U.S. Code of Federal Regulations is amended as follows: Part 73 RADIO BROADCAST SERVICES  S'1. ` ` The authority citation for Part 73 continues to read as follows: AUTHORITY: 47 U.S.C.  154, 303, 334.  S '  kz2.` ` Section 73.3555 is amended by revising paragraphs (b) and (c) and Note 7 to read as follows:  73.3555 Multiple Ownership. * * * * *l  S' |$(b) Local television multiple ownership rule. An entity may directly or indirectly own, operate, or control  S' |$Mtwo television stations licensed in the same Designated Market Area (DMA) (as determined by Nielsen Media Research or any successor entity) only under one or more of the following conditions: (1) the Grade B contours of the stations (as determined by  73.684) do not overlap; or  S' G6!(2)X(i) at the time the application to acquire or construct the station(s) is filed, at least one of the  G6!ystations is not ranked among the top four stations in the DMA, based on the most recent allday  G6!=(9:00 a.m.midnight) audience share, as measured by Nielsen Media Research or by any comparable professional, accepted audience ratings service; and(#  G6!X(ii) at least 8 independently owned and operating fullpower commercial and noncommercial TV  G6!stations would remain postmerger in the DMA in which the communities of license of the TV  G6!stations in question are located. In areas where there is no Nielsen DMA, count the TV stations present in an area that would be the functional equivalent of a TV market.(#  S'(c) Radiotelevision cross ownership rule. (1) This rule is triggered when:  G6!X(i) the predicted or measured 1 mV/m contour of an existing or proposed FM station (computed  G6!in accordance with  73.313) encompasses the entire community of license of an existing or  G6!proposed commonly owned TV broadcast station(s), or the Grade A contour(s) of the TV  G6!broadcast station(s) (computed in accordance with  73.684) encompasses the entire community of license of the FM station; or(# "L$J0*%%ZZ#"  G6!hX(ii) the predicted or measured 2 mV/m groundwave contour of an existing or proposed AM  G6!station (computed in accordance with  73.183 or  73.386), encompasses the entire community  G6!of license of an existing or proposed commonly owned TV broadcast station(s), or the Grade A  G6!pcontour(s) of the TV broadcast station(s) (computed in accordance with  73.684) encompass(es) the entire community of license of the AM station.(#  |$(2) An entity may directly or indirectly own, operate, or control up to 2 commercial TV stations (if  |$permitted by paragraph (b) of this section, the local television multiple ownership rule) and 1 commercial  |$radio station situated as described above in paragraph (1). An entity may not exceed these numbers, except as follows:  G6!X(i) if at least 20 independently owned media voices would remain in the market postmerger, an entity can directly or indirectly own, operate, or control up to:(#   k` ` {a} 2 commercial TV and 6 commercial radio stations (to the extent permitted by paragraph (a) of this section, the local radio multiple ownership rule); or(#`   k` ` {b} 1 commercial TV and 7 commercial radio stations (to the extent that an entity would   k=be permitted to own 2 commercial TV and 6 commercial radio stations under paragraph   k (c)(2)(i)(a) of this section, and to the extent permitted by paragraph (a) of this section, the local radio multiple ownership rule)(#`  G6!X(ii) if at least 10 independently owned media voices would remain in the market postmerger, an  G6!<entity can directly or indirectly own, operate, or control up to 2 commercial TV and 4 commercial  G6!radio stations (to the extent permitted by paragraph (a) of this section, the local radio multiple ownershiprule).(# (3) To determine how many media voices would remain in the market, count the following:  Sx' G6!X(i) TV stations: independently owned full power operating broadcast TV stations within the DMA of the TV station's (or stations') community (or communities) of license;(#  S'X(ii) radio stations:(#  S' XX` ` (A)X {1} independently owned operating primary broadcast radio stations that are in  the radio metro market (as defined by Arbitron or another nationally recognized audience rating service) of:(#  ?XX` ` X XG{a} the TV station's (or stations') community (or communities) of license; or(#  XX` ` X XG{b} the radio station's (or stations') community (or communities) of license; and(# "H$K0*%%ZZ""Ԍ XX` ` X {2} independently owned outofmarket broadcast radio stations with a minimum  Kshare as reported by Arbitron or another nationally recognized audience rating service.(#   kq` ` (B) When a proposed combination involves stations in different radio markets, the voice   krequirement must be met in each market; the radio stations of different radio metro markets may not be counted together.(#`   k~` ` (C) In areas where there is no radio metro market, count the radio stations present in an area that would be the functional equivalent of a radio market(#`  SH ' G6![X(iii) newspapers: Englishlanguage newspapers that are published at least four days a week  G6!Ewithin the TV station's DMA and that have a circulation exceeding 5% of the households in the DMA; and(#  S ' G6!X(iv) one cable system: if cable television is generally available to households in the DMA.  G6!8Cable television counts as only one voice in the DMA, regardless of how many individual cable systems operate in the DMA.(# * * * * *l  |$NOTE 7: The Commission will entertain applications to waive the restrictions in subsections (b) and (c)  |$of this section (the TV duopoly and TVradio crossownership rules) on a case-by-case basis. In each  |$case, we will require a showing that the inmarket buyer is the only entity ready, willing, and able to  |$operate the station, that sale to an outofmarket applicant would result in an artificially depressed price,  |$Mand that the waiver applicant does not already directly or indirectly own, operate, or control interest in  |$ttwo television stations within the relevant DMA. One way to satisfy these criteria would be to provide  |$an affidavit from an independent broker affirming that active and serious efforts have been made to sell  |$&the permit, and that no reasonable offer from an entity outside the market has been received. We will entertain waiver requests as follows:  SP'  kX(1)X` ` if one of the broadcast stations involved is a "failed" station that has not been in operation   k`due to financial distress for at least four consecutive months immediately prior to the   kapplication, or is a debtor in an involuntary bankruptcy or insolvency proceeding at the time of the application.(#`  S'  kJX(2)X` ` for subsection (b) only, if one of the television stations involved is a "failing" station that   kdhas an allday audience share of no more than four per cent; the station has had negative   kcash flow for three consecutive years immediately prior to the application; and   kmconsolidation of the two stations would result in tangible and verifiable public interest benefits that outweigh any harm to competition and diversity.(#`  S '  kX(3)X` ` for subsection (b) only, if the combination will result in the construction of an unbuilt  S!'  kstation. The permittee of the unbuilt station must demonstrate that it has made reasonable efforts to construct but has been unable to do so.(#`  Sp#' * * * * *"H$L0*%%ZZ""  S'  l  APPENDIX C  S' COMMENTS  S'X filed in response to Second Further Notice l ABC, Inc. (ABC) AK Media Group, Inc. (AK Media) American Women in Radio and Television, Inc. (AWRT) Association of Local Television Stations (ALTV) Bahakel Communications (Bahakel) Barnstable Broadcasting, Inc. (Barnstable) Benedek Broadcasting Corporation (Benedek) BET Holdings, Inc. (BET)  S" 'Black Citizens for a Fair Media et al. (BCFM et al.) Blade Communications, Inc. (Blade) Canwest Global Communications Corp. (CanWest) Bill Carpenter, Jr. (Carpenter) CBS Inc. (CBS) Centennial Communications, Inc. (Centennial) Frances Dillard (Dillard) Diversified Communications (Diversified) Gannett Co., Inc. (Gannett) Glencairn, Ltd. and WPTT, Inc. (Glencairn/WPTT) Glenwood Communications Corporation (Glenwood) Granite Broadcasting Corporation (Granite) HSN, Inc. (HSN) Jacor Communications, Inc. (Jacor) Jet Broadcasting Co., Inc. (Jet) Kentuckiana Broadcasting, Inc. (Kentuckiana) LIN Television Corporation (LIN) Local Station Ownership Coalition (LSOC) Malrite Communications Group, Inc. (Malrite) Max Media Properties LLC (Max Media) Cynthia L. McGillen and James P. McGillen (McGillen)  S'Media Access Project et al. (MAP et al.) Miller Broadcasting, Inc. (Miller) Minority Media and Telecommunications Council (MMTC) Montclair Communications, Inc. (Montclair) National Association of Broadcasters (NAB) National Broadcasting Company, Inc. (NBC) National Telecommunications and Information Administration (NTIA) Network Affiliated Stations Alliance (NASA) Newspaper Association of America (NAA) Pappas Stations Partnership (Pappas) Paxson Communications Corporation (Paxson)"N$L0*%%ZZ #"ԌPegasus Communications Corporation (Pegasus) PostNewsweek Stations, Inc. (PostNewsweek) Press Broadcasting Company, Inc. (Press) George Reading (Reading)  S`'Mark Roberts (Roberts)Ghh} Saga Communications, Inc. (Saga) Shockley Communications Corporation (Shockley) Sinclair Broadcast Group, Inc. (Sinclair) SJL Communications, Inc. (SJL) Spectrum Detroit, Inc. (Spectrum Detroit) Sullivan Broadcasting Company, Inc. (Sullivan) Sunbelt Communications Company (Sunbelt) Telemundo Group, Inc. (Telemundo) U.S. Department of Justice (DOJ) U.S. Small Business Administration (SBA) Viacom, Inc. (Viacom) Waterman Broadcasting Corporation (Waterman)" M0*%%ZZ "  S't REPLY COMMENTS  S'filed in response to  Q'Second Further Notice  lA. K. Media Group, Inc. (A.K. Media) Association of Local Television Stations (ALTV) Bahakel Communications, Ltd. (Bahakel) BET Holdings, Inc. (BET)  S'Black Citizens for a Fair Media et al. (BCFM et al.) Clear Channel Communications, Inc. (Clear Channel) HSN, Inc. (HSN) Jacor Communications, Inc. (Jacor) Jet Broadcasting Co., Inc. (Jet) LIN Television Corporation (LIN) Lockwood Broadcasting, Inc. (Lockwood) Local Station Ownership Coalition (LSOC) Malrite Communications Group, Inc. (Malrite)  SZ'Media Access Project, et al. (MAP et al.) Mt. Mansfield Television, Inc. (Mt. Mansfield) National Broadcasting Company, Inc. (NBC) Pappas Stations Partnership (Pappas) Pegasus Communications Corporation (Pegasus) Retlaw Enterprises, Inc. (Retlaw) SJL Communications, Inc. (SJL) Spectrum Detroit, Inc. (Spectrum Detroit) Sullivan Broadcasting Company, Inc. (Sullivan) Telemundo Group, Inc. (Telemundo) Time Warner, Inc. (Time Warner) Tribune Broadcasting Company (Tribune) Westwind Communications, LLC (Westwind)"|N0*%%ZZ"   August 5, 1999  X4  m#XP\  P6QynXP# SEPARATE STATEMENT OF Sl CHAIRMAN WILLIAM E. KENNARD wAUGUST 5, 1999 MEETING  44Today, we are bringing to a close proceedings that have been pending since 1991. These rule changes are long overdue. For far too long it's been a case of administration by waiver, not by rule. Parties have presented us with a variety of business arrangements and combinations, and we have not been able to set a bright line test as to what's permitted and what's not, and so the problem just keeps getting worse. 44Today we are cleaning up our rules and providing the certainty that the market needs. 44But more than that, we are adopting commonsense rules that recognize the dramatic changes that the media marketplace has undergone since our broadcast ownership rules were adopted 30 years ago. Back then, there were three broadcast networks; cable was still a novelty; and interactive TV meant yelling at your kids to turn it down. Now, cable systems serve almost 65 million TV households; other multichannel video programmers such as Direct Broadcast Satellite offer hundreds of channels to viewers; since 1970, the number of radio and television stations has increased by more than 85 percent; and people are watching everything from hipreplacement surgery to the local weather on their PC's linked to the Internet. As we cross over into the next millennium, we are clearly entering a new media age. 44In such an age, we need to provide broadcasters with flexibility to seize opportunities and compete in this increasingly dynamic media marketplace. These items will not only help them compete with the growing number of alternative media. They will also help preserve free local broadcast service. It is this localism that makes broadcasters so special. That is why we are taking steps, for example, to allow a television licensee to buy another station in the same market, as long as the market will continue to be served by at least eight independentlyowned television stations and at least one of the merging stations is not one of the top four stations in the market. It is also why we will waive the rule in situations involving financiallytroubled and unbuilt stations. In these cases, allowing a small station to combine with another station in the market and take advantage of shared costs and operating efficiencies will increase competition and outlet diversity in the local market and at times keep a station on the air that otherwise would go dark. For these same reasons, we are also relaxing our radiotelevision crossownership rule. 44This is not, however, the time to completely deregulate broadcast ownership. Our ownership rules have always reflected core values of competition, diversity, and"'O0*((%" localism. The changes we are making today are tailored to grant broadcasters more flexibility while at the same time ensuring that consolidation will only occur in markets where these core values will not be undermined. Our action today thus strikes an appropriate balance, by relaxing the rules but maintaining a diversity floor. 44 We are also taking steps to better identify broadcasters' real ownership interests in media properties, which will make our ownership rules more meaningful and easier to apply. Our new "equity/debt plus" attribution rule, for example, will ensure that our rules take account of the ways that debt instruments can be a source of influence over a licensee. And by making LMA's attributable, our rules will prevent the use of time brokerage agreements to circumvent our ownership limits. 44Many existing LMA's will meet our new television duopoly rules. But as to the others, we do not wish to upset established business relationships entered into before we made clear our proposal to attribute LMA's. We are, therefore, providing significant grandfathering relief for those LMA's entered into before November 1996, and we are allowing those entered into after that date two years to comply with our new rules. We are also providing significant grandfathering relief to parties holding conditional waivers of our radiotelevision cross ownership rule or with a pending application for such a waiver. These steps reflect our concern that parties' established business interests not be unduly upset, and a balance between the need to maintain a diversity floor in local markets and the recognition that in some cases LMA's have enhanced competition and outlet diversity in local markets. 44That being said, I think we need to consider more broadly the role of LMAs in broadcasting. While they have no doubt produced some benefit, they represent a kind of artifice. I believe we need to consider whether the benefits of LMAs could be attained through other arrangements, such as actual joint ownership, that do not raise questions concerning the responsibility and accountability of the actual licensee of a station. 44It may well be that as a result of our action today, most of these problems will fade away because LMAs will be converted into duopolies. But I will be watching what happens in this regard, because I'm concerned about the degree of control that is conferred by an LMA. 44In sum, our actions today will provide broadcasters with the certainty they need to make rational business judgments in the marketplace. These items recognize the competitive realities of the new media age while honoring our nation's oldest values. For these reasons, I am pleased to bring these longpending proceedings to a conclusion. "Q%P0*((e#"  X4 #XP\  P6QynXP# August 5, 1999  X'    X'Separate Statement #C\  P6QɒP##XP\  P6QynXP# of  Xv'lCommissioner Susan Ness  p3_4endnote textX` hp x (#%'0*,.8135@8: