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Notice to the Judicial Panel on Multidistrict Litigation

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Released: June 4, 2014
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Case MCP No. 122 Document 2 Filed 06/03/14 Page 1 of 4

NOTICE TO THE JUDICIAL PANEL

ON MULTIDISTRICT LITIGATION

OF MULTICIRCUIT PETITIONS FOR REVIEW

IN RE: Federal Communications Commission, MCP-________

2014 Quadrennial Regulatory Review – Review of

the Commission’s Broadcast Ownership Rules and

Other Rules Adopted Pursuant to Section 202 of

the Telecommunications Act of 1996, Further Notice

of Proposed Rulemaking and Report and Order,

FCC 14-28 (released April 15, 2014 and published in

the Federal Register on May 20, 2014)

NOTICE OF MULTICIRCUIT PETITIONS FOR REVIEW

Pursuant to 28 U.S.C. § 2112(a)(3) and the Rules of Procedure of the

Judicial Panel on Multidistrict Litigation, the Federal Communications

Commission hereby notifies the Judicial Panel on Multidistrict Litigation of three

petitions for review of the same final agency action. See 2014 Quadrennial

Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and

Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of

1996, Further Notice of Proposed Rulemaking and Report and Order, FCC 14-28

(released April 15, 2014). The challenged agency order was published in the

Federal Register on May 20, 2014. See 79 Fed. Reg. 28996. The petitions for

review of this order were filed in two different courts of appeals and were received

by the FCC’s Office of General Counsel from the petitioners within ten days after

the order’s publication in the Federal Register. As required by Panel Rule 25.2, we

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Case MCP No. 122 Document 2 Filed 06/03/14 Page 2 of 4

submit with this notice: (1) a schedule (Attachment A) listing the three petitions

for review; (2) copies of each petition (Attachment B); and (3) a copy of the order

the petitioners are challenging (Attachment C). In accordance with Panel Rule

25.3, as indicated in the attached certificate of service, the FCC is serving this

notice on the clerks of the courts where petitions for review have been filed as well

as on counsel for all parties.

Respectfully submitted,

Jonathan B. Sallet

General Counsel

David M. Gossett

Acting Deputy General Counsel

/s/ Richard K. Welch

Richard K. Welch

Deputy Associate General Counsel

James M. Carr

Counsel

Federal Communications Commission

445 Twelfth Street, S.W.

Washington, D.C. 20554

Phone: (202) 418-1762

Fax: (202) 418-2819

Email: James.Carr@fcc.gov

June 3, 2014

2 

 

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Case MCP No. 122 Document 2 Filed 06/03/14 Page 3 of 4

IN THE JUDICIAL PANEL ON MULTIDISTRICT LITIGATION

CERTIFICATE OF SERVICE

I, Richard K. Welch, hereby certify that on June 3, 2014, I electronically filed the

foregoing Notice to the Judicial Panel on Multidistrict Litigation of the Multicircuit

Petitions for Review with the Clerks of the United States Courts of Appeals for the

Third and D.C. Circuits by using the CM/ECF system. Participants in the case who

are registered CM/ECF users will be served by the CM/ECF system.

Jane E. Mago

Helgi C. Walker

Jerianne Timmerman

Ashley S. Boizelle

National Association of Broadcasters

Lindsay S. See

1771 N Street, NW

Gibson, Dunn & Crutcher LLP

Washington D.C. 20036

1050 Connecticut Ave., NW

Counsel for: National Association of

Washington, D.C. 20036

Broadcasters

Counsel for: National Association of

Broadcasters

Angela J. Campbell

Patrick F. Philbin

Andrew Jay Schwartzman

John S. Moran

Eric G. Null

Kirkland & Ellis LLP

Institute for Public Representation

655 15th Street, NW

Georgetown University Law Center

Washington, D.C. 20005

600 New Jersey Ave., NW

Counsel for: Nexstar Broadcasting, Inc.

Washington, D.C. 20001

Counsel for: Prometheus Radio Project

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Case MCP No. 122 Document 2 Filed 06/03/14 Page 4 of 4

Jay P. Lefkowitz

Kirkland & Ellis LLP

601 Lexington Ave.

New York, NY 10022

Counsel for: Nexstar Broadcasting, Inc.

/s/ Richard K. Welch

James M. Carr

Federal Communications Commission

445 Twelfth Street, S.W.

Washington, D.C. 20554

Phone: (202) 418-1762

Fax: (202) 418-2819

Email: James.Carr@fcc.gov

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Case MCP No. 122 Document 2-1 Filed 06/03/14 Page 1 of 1

ATTACHMENT A

1. Date the agency order was published in the Federal Register: May 20, 2014

2. Petitions for review filed:

Prometheus Radio Project v. FCC & USA

Third Circuit No. 14-2814

Filed: May 22, 2014

Received by the FCC: May 23, 2014

Nexstar Broadcasting, Inc. v. FCC & USA

D.C. Circuit No. 14-1091

Filed: May 30, 2014

Received by the FCC: May 30, 2014

National Association of Broadcasters v. FCC & USA

D.C. Circuit No. 14-1092

Filed: May 30, 2014

Received by the FCC: May 30, 2014

 

 

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Case MCP No. 122 Document 2-3 Filed 06/03/14 Page 1 of 10

In the

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

PROMETHEUS RADIO PROJECT,

Petitioner,

No 14- 2V4

V.

FEDERAL COMMUNICATIONS

COMMISSION and UNITED

STATES OF AMERICA,

Respondents.

PETITION FOR REVIEW OR, IN THE PARTIAL ALTERNATIVE,

A PETITION FOR A WRIT OF MANDAMUS

Pursuant to 47 U.S.C. §402(a), 28 U.S.C. §2342(1) and 2344, and Rule

15(a) of the Federal Rules of Appellate Procedure, Prometheus Radio Project

("Prometheus") seeks review of 2014 Quadrennial Regulatory Review, Further

Notice of Proposed Rulemaking, 79 Fed. Reg. 29010 (May 20, 2014), and 2014

Quadrennial Regulatory Review, Report and Order, 79 Fed. Reg. 28996 (May 20,

2014) ("2010/2014 QR").

The two Orders were published by the Federal

Communications Commission ("Commission") in a single document, a copy of

which is attached.

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Case MCP No. 122 Document 2-3 Filed 06/03/14 Page 2 of 10

In the 2010/2014 QR, the Commission initiated the 2014 Quadrennial

Review of its broadcast ownership limits without concluding the pending 2010

Quadrennial Review. The 2010 Quadrennial Review sought comment on certain

issues that this Court remanded for further consideration after reversing aspects of

the Commission's two prior ownership orders. In each case, this Court retained

jurisdiction over the remand.

Prometheus Radio Project v. FCC, 373 F.3d 372,

435 (3d Cir. 2003) ("Prometheus 1"); Prometheus Radio Project v. FCC, 652 F.3d

431, 472 (3d Cir. 2011) ("Prometheus Ii").

The Commission also adopted a rule

attributing Joint Sales Agreements but not Shared Services Agreements between

television stations in the same market under certain conditions.

Because the Commission failed to comply with this Court's prior orders on

remand, Prometheus seeks to compel agency action unlawfully withheld or

unreasonably delayed under 5 U.S.C. §706(1), or in the alternative, the issuance of

a writ of mandamus pursuant to 28 U.S.C. § 1361. Prometheus also asks the Court

to hold unlawful and set aside parts of the Commission's action that are arbitrary,

capricious or an abuse of discretion, or otherwise not in accordance with law, as

required by 5 U.S.C. § 706(2).

Venue in this Court is proper under 28 U.S.C. §2343 because Prometheus'

principal offices are in Pennsylvania.

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Case MCP No. 122 Document 2-3 Filed 06/03/14 Page 3 of 10

Background

In 2002, the Commission initiated a review of its broadcast media ownership

rules, as directed by Congress, to determine whether those rules continued to be

necessary in the public interest.

2002 Biennial Regulatory Review, Notice of

ProposedRulemaking, 17 FCCRcd 18503, 18504-05 (2002). The Commission

adopted an order modifying many of its media ownership rules.

2002 Biennial

Regulatory Review, Report and Order and Notice of Proposed Rulemaking,

17

FCCRcd 13620 (2003) ("2003 Order").

Prometheus and other Citizen Petitioners

sought review of this order.

In Prometheus I, this Court held that the Commission's repeal of part of the

1999 Duopoly Rule, known as the failed station solicitation rule (FSSR), was

arbitrary and capricious. The Court found that because the Commission failed "to

mention anything about the effect this change would have on potential minority

station owners, the Commission has not provided 'a reasoned analysis indicating

that prior policies and standards are being deliberately changed, not casually

ignored." 373 F.3d at 420-21. This Court also held that the Commission's failure

to acknowledge the decline of minority ownership notwithstanding the prior

existence of the FSSR was arbitrary and capricious because the commission

"entirely failed to consider an important aspect of the problem."

Id.

at 421. Thus,

this Court remanded for correction of these omissions. It further instructed the

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Case MCP No. 122 Document 2-3 Filed 06/03/14 Page 4 of 10

Commission to consider proposals for enhancing ownership opportunities for

women and minorities which the Commission had deferred for future

consideration.

Id.

at 435, n.82. Finally, it directed the Commission to consider

these proposals at the same time it responded to the Court's remand order on other

issues.

Id.

at 421, n.59.

The Commission subsequently issued two orders as part of the 2006

Quadrennial Review. In 2006 Quadrennial Regulatory Review, Report and Order

and Order on Reconsideration, 23 FCCRcd 2010 (2008) ("2008 QR Order"), the

Commission retained most of the ownership limits, while modifying the

newspaper/broadcast cross-ownership rule. In Promoting Divers flcation of

Ownership in the Broadcasting Services, Report and Order and Third Further

Notice of Proposed Rulemaking, 23 FCCRcd 5922 (2008) ("Diversity Order"), the

Commission adopted measures to increase ownership opportunities for "eligible

entities." It defined "eligible entities" using the SBA definition of small businesses.

Diversity Order at 5950.

Prometheus sought judicial review of both orders.

This Court consolidated the petitions for review and issued a single decision

in 2011 in "Prometheus II."

It upheld the Commission's decision to retain most of

the ownership limits, but found that the Commission had failed to "explain how the

eligible entity definition adopted would increase broadcast ownership by minorities

and women."

Prometheus II, 373 F.3d at 470. Because the Commission had

4

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Case MCP No. 122 Document 2-3 Filed 06/03/14 Page 5 of 10

offered no data showing a connection between the definition chosen and the goal,

"the eligible entity definition adopted in the Diversity Order lack{ed] a sufficient

analytical connection to the primary issue that Order was intended to address."

Id.

at 471.

The Court noted that "[d]espite our prior remand requiring the Commission

to consider the effect of its rules on minority and female ownership, and

anticipating a workable SDB definition well before this rulemaking was

completed, the Commission has in large part punted yet again on this important

issue."

Id. at 471. Further, "the Commission appears yet to have gathered the

information required" to adopt policies promoting ownership diversity.

Id.

at 472.

Thus, the Court specifically emphasized that "the actions required on remand

should be completed within the course of the Commission's 2010 Quadrennial

Review of its media ownership rules."

Id.

The Court further directed that "[i]f the

Commission require[d] more and better data to complete the necessary Adarand

studies, it must get the data and conduct up-to-date studies."

Id.

at 471, n.42.

The Court thus vacated and remanded "those provisions of the

Diversity

Order that rely on the existing eligible entity definition, and the FCC's decision to

defer consideration of proposed SDB definitions, so that it may justify or modify

its approach to advancing broadcast ownership by minorities and women during its

2010 Quadrennial Review."

Id.

at 472.

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Case MCP No. 122 Document 2-3 Filed 06/03/14 Page 6 of 10

The Commission's Response on Remand

The Commission has not complied with the Court's order in Prometheus II.

It has neither justified nor modified its proposed use of the revenue-based eligible

entity definition that was previously vacated, even while admitting that the record

does not show that this definition will promote ownership by minorities or women.

2010/2014 QR, ¶J243, 267-72. Nor did the Commission collect the data or

conduct the studies necessary to meet the Adarand test.

Rather, it concluded once

again that it lacked sufficient evidence.

Id. at ¶J282, 298. Finally, the

Commission did not propose any new measures to increase ownership by

minorities and women. Instead, it proposes to retain the FSSR, even though it

admits that it collects no data that would allow it to evaluate whether the FSSR

actually promotes ownership by minorities and women.

Id.

at n.300.

The Commission's Treatment of Sharing Agreements

The Commission does address whether to attribute sharing agreements that

are often used to circumvent the Commission's local ownership rules. In the

2010

Quadrennial Review NPRM, the Commission sought comment on whether to

attribute a variety of different types of sharing agreements including Joint Sales

Agreements (JSAs), in which one stations sells advertising on another station in the

same market, Shared Services Agreements (SSAs), in which one in-market station

provides operational support and programming for another in-market station, and

6

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Case MCP No. 122 Document 2-3 Filed 06/03/14 Page 7 of 10

Local News Service (LNS) agreements, in which multiple local broadcast

television stations contribute news staff and equipment to a joint news gathering

effort coordinated by a single managing editor.

2010 Quadrennial Regulatory

Review, Notice of Proposed Rulemaking, 26 FCCRcd 17489, 17569-70, ¶J204-08

(2011) ("2010 Quadrennial Review NPRM').

In the 2010/2014 QR, the Commission adopted a new rule that attributes

ownership when two stations operate under a JSA where one television station

sells more than

15% of the advertising time for another television station in the

same market.

2010/2014 QR, ¶340. The 15% threshold is the same used to

attribute radio JSAs.

2003 Order, ¶323. Although the Commission explains that

selling more than 15% of advertising time gives the brokering station incentive and

potential to influence the other station's programming and operations, 2010/2014

QR ¶350, it does not explain why the 15% threshold is appropriate for television

given the significant differences between the radio and television.

While attributing certain JSAs, the Commission took no final action

regarding similar, yet even more troubling, SSAs. After publication of the

2010

Quadrennial Review NPRM, the Commission received extensive comments and ex

parte presentations about SSAs from both public interest groups and the

broadcasting industry. Prometheus and others described how some broadcasters

used SSAs to operate other stations in the same market that they could not acquire

7

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Case MCP No. 122 Document 2-3 Filed 06/03/14 Page 8 of 10

outright under the local television limits.

Moreover, in many cases, SSAs allowed

for one television station to produce all or substantially all of the local news for

one or more other stations in the same market. As a result, these agreements

reduce viewpoint diversity, competition, and quality of service to the local

community.

See generally Comments of UCC et al. at 3-14, 2010 Quadrennial

Regulatory Review, MB Dkt. 09-182, March 5, 2012.

Despite this evidence, and claiming that it lacked sufficient information to

thoroughly analyze the impact of these agreements on its rules and policies, the

Commission did not attribute SSAs.

2010/2014 QR ¶J32O, 327. And, instead of

requiring disclosure of existing SSAs to obtain more information, it merely sought

comment on whether and how to require disclosure.

Id.

at ¶J335-338.

Review and Relief Sought

Prometheus seeks review of the 2010/2014 QR on the following grounds:

(1) The Commission's failure to comply with this Court's remand in

Prometheus II regarding minority and women's ownership constitutes agency

action unreasonably delayed or unlawfully withheld under

5 U.S.C. §706(1), or in

the alternative, the Court should issue a writ of mandamus compelling prompt

compliance with its prior remand under 28 U.S.C. §136l, 1651(a);

8

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Case MCP No. 122 Document 2-3 Filed 06/03/14 Page 9 of 10

(2) The Commission's decision to adopt a rule attributing television stations

JSAs using the same 15% threshold for radio JSAs is arbitrary and capricious

under 5 U.S.C. §706(2)(A);

(3) The Commission's decision to attribute television JSAs without also

attributing SSAs is arbitrary and capricious under

5 U.S.C. §706(2)(A);

(4) The Commission's failure to require public disclosure of SSAs is

arbitrary and capricious under 5 U.S.C. §706(2)(A).

Prometheus requests that the Court direct the Commission to comply with its

prior remand, to hold unlawful, vacate, enjoin, and set aside the portions of the

2010/2014 QR found to be arbitrary and capricious, and to grant all other just and

proper relief.

Respectfully submitted,

Angela'J. Cathpbell

Andrew Jay Schwartzman

Eric G. Null

Institute for Public Representation

Georgetown University Law Center

600 New Jersey Avenue, NW

Washington, DC 20001

(202) 662-9535

Dated: May 22, 2014

Counsel for Prometheus Radio Project

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Case MCP No. 122 Document 2-3 Filed 06/03/14 Page 10 of 10

CERTIFICATE OF SERVICE

I, Eric Null, hereby certify that on May 22, 2014, I sent copies of the foregoing

Petition for Review via first class mail to the following parties:

Jonathan Sallet

Jacob M. Lewis

Federal Communications Commission

l2

Street, SW, Room 8-A741

Washington, DC 20554

The Honorable Eric Holder

Attorney General

U.S. Department of Justice

950 Pennsylvania Ave., NW

Washington, DC 20530

/

LA

Eric Null

Institute for Public Representation

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Case MCP No. 122 Document 2-4 Filed 06/03/14 Page 1 of 7

SCOURT OF APPEALS

OF COLUM

CPCUtT

FOR

MAY

0 2U

UNITED STATES COURT OF APP

FE DISTRICT OF COI4UIVLBIA CIR

MAY .0 2q14

CLERK

NEXSTAR BROADCASTING, INC.,

Petitioner,

V.

CASE NO.

FEDERAL COMMUNICATIONS

COMMISSION,

and UNITED STATES OF AMERICA,

Respondents.

PETITION FOR REVIEW

Pursuant to 47 U.S.C. § 402(a), 28 U.S.C. § 2342 and 2344, and Rule 15(a)

of the Federal Rules of Appellate Procedure, Nexstar Broadcasting, Inc.

("Nexstar") hereby petitions this Court for review of the final order of the Federal

Communications Commission ("FCC" or "Commission") captioned

In the Matter

of 2014 Quadrennial Regulatory Review - Review of the Commission 's Broadcast

Owners hip Rules and Other Rules Adopted Pursuant to Section 202 of the

Telecommunications Act of 1996; 2010 Quadrennial Regulatory Review - Review

of the Commission 's Broadcast Ownership Rules and Other Rules Adopted

Pursuant to Section

202

of the Telecommunications Act of 1996; Promoting

Divers Ulcation of Ownership in the Broadcasting Industry; Rule and Policies

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Case MCP No. 122 Document 2-4 Filed 06/03/14 Page 2 of 7

Concerning Attribution of Joint Sales Agreements in Local Television Markets,

Further Notice of Proposed Rulemaking and Report and Order, FCC 14-28, 2014

WL 1466887 (rel. Apr.

15, 2014) ("Order").

Specifically, Nexstar seeks review of

that portion of the

Order in which the FCC adopted rules relating to joint sales

agreements described below.

A copy of the full text of the

Order is attached as

Exhibit A. A synopsis of the

Order was published in the Federal Register on May

20, 2014. 79 Fed. Reg. 28996.

In the

Order,

the FCC formally adopts rules that treat certain joint sales

agreements ("JSAs") between television broadcasters as creating attributable

ownership interests for purposes of applying broadcast ownership rules.

Adopted

over the dissent of two Commissioners, the Order rejects the Commission's prior

view that JSAs do not provide brokering stations with sufficient influence over

brokered stations to warrant attribution, see Order ¶ 350, and adopts a "15 percent

threshold" rule under which a JSA will give rise to an attributable ownership

interest if the JSA gives one station the ability to sell more than 15 percent of an

in-market brokered station's weekly advertising time,

see

Order ¶ 360.

The

Commission failed to provide any adequate justification for that change in course.

Indeed, although the rule adopted in the Order effectively expands the scope of the

Commission's ownership restrictions, the Commission did not even determine that

the new rule was in the public interest. Instead, the Commission concluded that

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Case MCP No. 122 Document 2-4 Filed 06/03/14 Page 3 of 7

issues concerning the public interest benefits of JSAs "are appropriately raised and

considered in the context of setting the terms of the local television ownership

rule,"

Order ¶ 349, which the Commission left for another day.

The

Order

provides that JSAs that run afoul of the ownership restrictions must be unwound or

modified to come into compliance within two years. Order ¶ 367.

In

dissent,

Commissioner Pai rightly criticized the Commission for

"arbitrarily singl[ing] out one aspect of those regulations [under review]-our

treatment of joint sales agreements (JSAs)-and chang[ingj our policies in a way

that ignores the realities of the modern media marketplace, will harm localism and

diversity, and will drive many television stations out of business."

Order at 217.

He further noted that "the Commission is unable to reach a decision as to whether

the local television ownership rule remains in the public interest," but "[s]omehow,

notwithstanding our inability to reach a decision on any other topic, we are able to

and do in fact decide that JSAs should be attributable for purposes of our local

television ownership rule."

Order at 220.

He noted that "[t]he record is replete

with evidence that JSAs promote localism and diversity," Order at 222, but that the

Commission "essentially ignores it," Order at 226.

He correctly characterized the

Order as "the epitome of arbitrary and capricious decision-making," and expressed

his "hope that our nation's courts will not countenance this cynical maneuver by

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Case MCP No. 122 Document 2-4 Filed 06/03/14 Page 4 of 7

the Commission to wipe JSAs off the books without taking into consideration the

resulting public interest harms." Order at 226.

This Court has jurisdiction to determine the validity of the

Order under 28

U.S.C.

§ 2342(1) because the

Order

is

a

"final

order

of the Federal

Communications Commission made reviewable by section 402(a) of title 47."

Nexstar is currently a party to multiple JSAs that would run afoul of the

regulations adopted in the

Order

and has pending before the Commission

applications for license transfers to acquire additional stations that are currently

parties to JSAs that would have to be unwound under the

Order.

Accordingly,

Nexstar is aggrieved by the

Order

and has standing to challenge it.

Venue is

proper in this Court under 28 U.S.C. § 2343.

Nexstar seeks relief on the grounds (i) that the

Order

exceeds the

Commission's statutory authority; (ii) that it is arbitrary, capricious, and an abuse

of discretion within the meaning of the Administrative Procedure Act; (iii) that it is

contrary to constitutional right; and (iv) that it is otherwise contrary to law.

See 5

U.S.C. § 706(2).

For the foregoing reasons, Nexstar respectfully asks this Court to hold

unlawful, vacate, enjoin, and set aside the

Order, and to provide such other relief

as may be appropriate.

4

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Case MCP No. 122 Document 2-4 Filed 06/03/14 Page 5 of 7

Dated:

May 30, 2014

Respectfully submitted,

Patrick F. Philbin

Counsel of Record

John S. Moran

KIRKLAND & ELLIS LLP

655 15th Street, NW

Washington, DC 20005

Tel: (202) 879-5030

Fax: (202) 879-5200

patrick.philbin@kirkland. corn

Jay P. Lefkowitz

KIRKLAND & ELLIS LLP

601 Lexington Ave

New York, NY 10022

Tel: (212) 446-4970

Fax: (212) 446-4900

Counsel for Nexstar Broadcasting,

Inc.

5

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Case MCP No. 122 Document 2-4 Filed 06/03/14 Page 6 of 7

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure and

Circuit Rule 26.1, Nexstar Broadcasting, Inc. ("Nexstar") submits the following as

its Corporate Disclosure Statement.

Nexstar is a wholly owned subsidiary of Nexstar Finance Holdings, Inc.

Nexstar Finance Holdings, Inc. is a wholly owned subsidiary of Nexstar

Broadcasting Group, Inc., which is a publicly held corporation. No other publicly

held company has more than 10 percent or greater ownership interest in Nexstar

Broadcasting Group, Inc.

Dated:

May 30, 2014

Respectfully submitted,

Patrick F. Philbin

KIRKLAND & ELLIS LLP

655 15th Street, NW

Washington, DC 20005

Tel: (202) 879-5030

Fax: (202) 879-5200

patrick.philbin@kirkland.com

Counsel for Nexstar Broadcasting,

Inc.

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Case MCP No. 122 Document 2-4 Filed 06/03/14 Page 7 of 7

CERTIFICATE OF SERVICE

I hereby certify that on May 30, 2014, I caused a true and correct copy of the

foregoing Petition for Review and Corporate Disclosure Statement to be served by

Federal Express on the following persons:

Jon Sallet

Hon. Eric Holder

Acting General Counsel

Attorney General

Federal Communications Commission

U.S. Department of Justice

Room 8-A741

950 Pennsylvania Avenue, N.W.

445 12th Street, S.W.

Washington, DC 20530

Washington, DC 20554

Kristen C. Limarzi

Counsel for the Federal Communications

Chief, Appellate Section

Commission

Antitrust Division

U.S. Department of Justice

Room 3224

950 Pennsylvania Avenue, N.W.

Washington, DC 20530

Counsel for the United States of

America

Dated:

May 30, 2014

Patrick F. Philbin

KIRKLAND & ELLIS LLP

655 15th Street, NW

Washington, DC 20005

Tel: (202) 879-5030

Fax: (202) 879-5200

patrick.philbin@kirkland.com

Counsel for Nexstar Broadcasting,

Inc.

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Case MCP No. 122 Document 2-5 Filed 06/03/14 Page 1 of 9

TRT c

jit

UIT

THE UNITED STATES COURT OF APPELL&

RECEcVEO

'''

"

R THE DISTRICT OF COLUMBIA CIRCUIT

NATIONAL ASSOCIATION OF

BROADCASTERS,

Petitioner,

V.

CaseNo.14-_i-i092

FEDERAL COMMUNICATIONS

COMMISSION and UNITED STATES OF

AMERICA,

Respondents.

PETITION FOR REVIEW

Pursuant to Section 402(a) of the Communications Act of 1934, 47 U.S.C.

§ 402(a), 28 U.S.C. § 2342 and 2344, and Rule 15(a) of the Federal Rules of

Appellate Procedure, the National Association of Broadcasters ("NAB") hereby

petitions this Court for review of the Federal Communications Commission's 2014

Quadrennial Regulatory Review

-

Review of the Commission 's Broadcast

Owners hip Rules and Other Rules Adopted Pursuant to Section 202 of the

Telecommunications Act of 1996; 2010 Quadrennial Regulatory Review

- Review

of the Commission 's Broadcast Ownership Rules and Other Rules Adopted

NAB is a nonprofit trade association that advocates for free local television and

radio

stations

and

broadcast

networks

before

Congress,

the

Federal

Communications Commission ("Commission") and other agencies, and the courts.

NAB and its member broadcasters actively participated in the proceedings below.

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Case MCP No. 122 Document 2-5 Filed 06/03/14 Page 2 of 9

Pursuant to Section

202

of the Telecommunications Act of 1996, Promoting

Divers 'flcation of Ownership in the Broadcasting Industiy; Rule and Policies

Concerning Attribution of Joint Sales Agreements in Local Television Markets,

Further Notice of Proposed Rulemaking and Order, FCC No. 14-28, 2014 WL

1466887 (rel. Apr. 15, 2014) ("Order"). A synopsis of the Order was published in

the Federal Register on May 20, 2014.

See 79 Fed. Reg. 28996. A copy of the

Order is attached to this Petition as Exhibit A. Venue lies in this Court pursuant to

28 U.S.C. § 2343.

According to Section 202(h) of the Telecommunications Act of 1996, the

Commission "shall" review its broadcast ownership rules every four years,

"determine whether any of [those] rules are necessary in the public interest as the

result of competition," and "repeal or modify any regulation it determines to be no

longer in the public interest." Pub. L. No. 104-104, § 202(h), 110 Stat. 111-12.

Despite these unambiguous commands, the Commission failed to complete its

required 2010 quadrennial review, which began in 2009, and has failed to

determine whether its existing broadcast ownership regulations serve the public

interest or to "repeal or modify" any of those regulations. Instead, the Order

announces that the Commission will merge its prior quadrennial review into a new

2014 proceeding, thereby thwarting its statutory obligations and kicking the

proverbial can down the road.

See

Order ¶ 1 ("incorporating the existing 2010

2

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Case MCP No. 122 Document 2-5 Filed 06/03/14 Page 3 of 9

record" into the new proceedings "and seeking new and additional information and

data" before determining whether existing rules remain in the public interest). By

refusing to complete its 2010 quadrennial review, the Commission's Order

unlawfully

withholds agency action required by Congress and arbitrarily and

capriciously retains burdensome regulations that are no longer in the public

interest.

See

Dissenting Statement of Commissioner Ajit Pai ("Pai Dissent"),

Order at 219-20.

Although the Commission failed to make any final determination about the

need for its existing broadcast ownership rules, despite having studied them for the

last

five years, the Order adopts a new rule restricting joint sales agreements

("JSAs") between broadcasters.2

Specifically, and contrary to long-standing

Commission policy and practice, the agency determined that JSAs for more than

15% of a television station's weekly advertising time will now be attributable for

purposes of the Commission's broadcast ownership rules.

See Order ¶ 340. The

Commission's only justification for this further limitation of broadcasters' rights is

its unsubstantiated assertion that certain television JSAs "convey the incentive and

potential for the broker to influence program selection and station operations."

Id

350.

In stark contrast, for all other shared service agreements--of which JSAs

2 JSAs authorize a broker to sell some or all of the advertising time on a brokered

station.

See Order ¶ 342.

3

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Case MCP No. 122 Document 2-5 Filed 06/03/14 Page 4 of 9

are a subset-the Commission expressly declined to adopt any regulation on the

ground that the Commission lacked sufficient information to "formulate sound

public policy."

Id.

¶ 327.

Further, despite a conspicuous lack of evidence of harm associated with

television JSAs or reasoned explanation for the new policy, the Order arbitrarily

and capriciously declines to grandfather existing television JSAs for more than

15%

of the brokered station's advertising time.

See id.

¶ 367. Instead, the

Commission requires that broadcasters that are parties to covered JSAs unwind

those transactions

within the next two years in order to comply with the

Commission's broadcast ownership rules-an arbitrary window that closes before

the

Commission can be expected to make a determination that its existing

ownership rules do, in fact, serve the public interest.

See Pai Dissent, Order at 226

(observing that the Media Bureau is expected to provide a recommendation to the

Commission on ownership rules by June 30, 2016).

The Order is final agency action that has significant and immediate adverse

consequences for NAB and the broadcasters whose interests it represents.3

The Commission's JSA rule constitutes final agency action subject to judicial

review.

See 5 U.S.C. § 551(13). Insofar as the remainder of the Order reflects the

Commission's refusal to act within the four-year period prescribed by Congress, it

is subject to judicial review as a failure to take a required agency action.

See id.

("agency action" includes "failure to act"); see also Norton v. S. Utah Wilderness

(Cont'd on next page)

4

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Case MCP No. 122 Document 2-5 Filed 06/03/14 Page 5 of 9

Specifically, the Order subjects NAB's members to onerous regulations that do not

serve the public interest, in violation of Congress's express command in Section

202(h) of the Telecommunications Act, and imposes new legal obligations that

render previously legitimate transactions invalid, require costly restructuring of

existing business arrangements, and restrict broadcasters' ability to enter into

advantageous joint sales agreements in the future.

NAB now seeks relief from the Order on the grounds that: (1) the

Commission has withheld or unreasonably delayed the quadrennial review required

by law; (2) the Order is arbitrary, capricious, and an abuse of discretion under

5

U.S.C. § 706; (3) the Order is contrary to constitutional right; and (4) the Order is

otherwise contrary to law.

Accordingly, NAB requests that this Court hold unlawful, vacate, and set

aside the Order and grant such additional relief as may be necessary and

appropriate.

(Cont'd from previous page)

Alliance, 542

U.S.

55,

62-63 (2004) ("failure to act" includes "failure to

promulgate a rule or take some decision by a statutory deadline").

5

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Case MCP No. 122 Document 2-5 Filed 06/03/14 Page 6 of 9

Dated:

May 30, 2014

Respectfully submitted,

Jane E. Mago

Helgi

Ia1ker

.

Jerianne Timmerman

Counsel of Record

NATIONAL ASSOCIATION OF

Ashley S. Boizelle

BROADCASTERS

Lindsay S. See

1771 N Street, N.W.

GIBSON, DUNN & CRUTCHER LLP

Washington, D.C. 20036

1050 Connecticut Ave., N.W.

Telephone: (202) 429-5430

Washington, D.C. 20036

Telephone: (202) 955-8500

Facsimile: (202) 467-0539

Attorneys for Petitioner National

Association of Broadcasters

6

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Case MCP No. 122 Document 2-5 Filed 06/03/14 Page 7 of 9

IN THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

NATIONAL ASSOCIATION OF

BROADCASTERS,

Petitioner,

V.

Case No. 14-

FEDERAL COMMUNICATIONS

COMMISSION and UNITED STATES OF

AMERICA,

Respondents.

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure and D.C.

Circuit Rule 26.1, Petitioner National Association of Broadcasters ("NAB") states

as follows:

NAB is a nonprofit, incorporated association of radio and television stations.

It has no parent company, and has not issued any shares or debt securities to the

public; thus no publicly-held company owns ten percent or more of its stock. As a

continuing association of numerous organizations operated for the purpose of

promoting the interests of its membership, the coalition is a trade association for

purposes of D.C. Circuit Rule 26.1.

image30-00.jpg612x792

Case MCP No. 122 Document 2-5 Filed 06/03/14 Page 8 of 9

CERTIFICATE OF SERVICE

I hereby certif' that on this 30th day of May, 2014, I caused copies of the

foregoing Petition for Review and Corporate Disclosure Statement to be delivered

by hand to the following parties:

Jon Sallet

The Honorable Eric Holder

Office of General Counsel

Attorney General

Federal Communications Commission

U.S. Department of Justice

445 12th Street, S.W.

950 Pennsylvania Ave., N.W.

Room 8-A741

Washington, D.C. 20530-0001

Washington, D.C. 20554

Kristen C. Limarzi

Counsel for Federal

Chief, Appellate Section,

Communications Commission

Antitrust Division

U.S. Department of Justice

Room 3222

950 Pennsylvania Ave., N.W.

Washington, D.C. 20530-0000 1

Counsel for United States ofAmerica

Lindsay S. See

(Application for admission pending)

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Ave., N.W.

Washington, D.C. 20036

image31-00.jpg612x792

Case MCP No. 122 Document 2-5 Filed 06/03/14 Page 9 of 9

Dated:

May3O,2014

Respec lly submitted,

C

Jane E. Mago

Heg C. alker

Jerianne Timmerman

Counsel of Record

NATIONAL ASSOCIATION OF

Ashley S. Boizelle

BROADCASTERS

Lindsay S. See

1771 N Street, N.W.

GIBSON, DUNN & CRUTCHER LLP

Washington, D.C. 20036

1050 Connecticut Ave., N.W.

Telephone: (202) 429-5430

Washington, D.C. 20036

Telephone: (202) 955-8500

Facsimile: (202) 467-0539

Attorneys for Petitioner National

Association of Broadcasters

2

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Case MCP No. 122 Document 2-6 Filed 06/03/14 Page 1 of 236

Federal Communications Commission

FCC 14-28

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of

)

)

2014 Quadrennial Regulatory Review – Review of

)

MB Docket No. 14-50

the Commission’s Broadcast Ownership Rules and

)

Other Rules Adopted Pursuant to Section 202 of

)

the Telecommunications Act of 1996

)

)

2010 Quadrennial Regulatory Review – Review of

)

MB Docket No. 09-182

the Commission’s Broadcast Ownership Rules and

)

Other Rules Adopted Pursuant to Section 202 of

)

the Telecommunications Act of 1996

)

)

Promoting Diversification of Ownership

)

MB Docket No. 07-294

In the Broadcasting Services

)

)

Rules and Policies Concerning

)

MB Docket No. 04-256

Attribution of Joint Sales Agreements

)

In Local Television Markets

)

)

FURTHER NOTICE OF PROPOSED RULEMAKING AND REPORT AND ORDER

Adopted: March 31, 2014

Released: April 15, 2014

Comment Date: [45 days after publication in the Federal Register]

Reply Comment Date: [75 days after publication in the Federal Register]

By the Commission: Chairman Wheeler and Commissioners Clyburn and Rosenworcel issuing separate

statements; Commissioners Pai and O’Rielly dissenting and issuing separate statements.

TABLE OF CONTENTS

Heading

Paragraph #

I. INTRODUCTION.................................................................................................................................. 1

II. BACKGROUND.................................................................................................................................... 9

III. MEDIA OWNERSHIP RULES........................................................................................................... 15

A. Local Television Ownership Rule ................................................................................................. 15

B. Local Radio Ownership Rule......................................................................................................... 74

C. Newspaper/Broadcast Cross-Ownership Rule............................................................................. 113

D. Radio/Television Cross-Ownership Rule..................................................................................... 200

E. Dual Network Rule ...................................................................................................................... 226

IV. DIVERSITY ORDER REMAND ...................................................................................................... 242

A. Introduction.................................................................................................................................. 242

B. Background.................................................................................................................................. 246

C. Discussion.................................................................................................................................... 263

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V. DISCLOSURE OF SHARED SERVICE AGREEMENTS................................................................. 320

A. Introduction.................................................................................................................................. 320

B. Background.................................................................................................................................. 321

C. Discussion.................................................................................................................................... 328

VI. REPORT AND ORDER..................................................................................................................... 340

A. Attribution of Television JSAs .................................................................................................... 340

B. Filing Requirements and Transition Procedures.......................................................................... 366

C. National Sales Representatives.................................................................................................... 368

VII. PROCEDURAL MATTERS............................................................................................................. 373

VIII. ORDERING CLAUSES .................................................................................................................. 383

APPENDIX A - Final Rule Changes

APPENDIX B - Proposed Rule Changes

APPENDIX C - Final Regulatory Flexibility Analysis

APPENDIX D - Supplemental Initial Regulatory Flexibility Analysis

I.

INTRODUCTION

1.

Today we take another major step in our review of our broadcast ownership rules. Our

ongoing 2010 Quadrennial Review has generated a high level of interest and participation, creating an

extensive record that continues to attract significant and substantive input well after the formal comment

periods have expired. Such participation demonstrates that our broadcast ownership rules continue to be

of importance and interest to market participants, public watchdogs, and consumers alike. We wish to

build on that record to resolve the ongoing 2010 proceeding, and we are cognizant of our statutory

obligation to review the broadcast ownership rules every four years.

To accomplish both objectives, with

this Further Notice of Proposed Rulemaking (“FNPRM”) we are initiating this 2014 Quadrennial Review;

incorporating the existing 2010 record into this proceeding; proposing rules that are formulated based on

our evaluation of that existing record; and seeking new and additional information and data on market

conditions and competitive indicators as they exist today.

Ultimately, the rules we adopt in this 2014

proceeding will be based on a comprehensive, refreshed record that reflects the most current evidence

regarding the media marketplace. We also consider related issues posed in our 2010 Quadrennial Review

proceeding concerning the attribution and disclosure of agreements between broadcast stations, and in the

accompanying Report and Order (“Order”), we determine that certain television joint sales agreements

(“JSAs”) are attributable.

2.

The existing record demonstrates not only the dynamic changes that are taking place in

the media marketplace but also the continued and vital importance of traditional media outlets to local

communities. The proliferation of broadband Internet connections and other technological advances have

changed the ways in which many consumers access entertainment, news, and information programming.

Yet traditional media outlets are still essential to achieving the Commission’s goals of competition,

localism, and viewpoint diversity. In particular, the record demonstrates that broadcast television and

newspapers continue to be the most significant sources of local news content.1 And while the popularity

of news websites unaffiliated with traditional media is increasing, the overwhelming majority of local

news content available online originates from newspapers and local broadcast television stations.2

3.

In addition, the record demonstrates that some broadcasters continue to generate

significant and increasing local advertising revenue and improve their bottom lines with online

advertising revenue. While nearly every industry struggled through the recent global financial crisis,

some broadcasters have rebounded in a significant way and appear poised to grow stronger. At the same

time, other broadcasters are less well positioned and continue to struggle, often in crowded major

1 See infra ¶¶ 130-131.

2 See infra ¶¶ 130-131.

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markets.

The forthcoming voluntary incentive auction of broadcast television spectrum, which is

critically important to the Commission’s efforts to unleash the full transformative potential of broadband

Internet, will provide those and other broadcasters with a new and unique financial opportunity.3 We

anticipate that the incentive auction will both free up significant spectrum for mobile broadband and

result in an even healthier broadcast industry.4

4.

While broadband Internet has impacted the lives of many consumers in myriad ways,

including access to media content, millions of Americans continue to lack access to broadband at speeds

necessary to take advantage of online content available via streaming or download.5 For these Americans

— disproportionately those in rural areas, in low-income groups, on Tribal lands, and in U.S. Territories

— traditional media still may be their only source of entertainment and local news and information

content.6

5.

It is clear that the impact of new technologies on the media marketplace is already

significant. If broadband penetration continues to rise, which is a policy priority of the Commission, it

may have major implications for a future review of our broadcast ownership rules. At this time, however,

we believe that the broadcast ownership rules proposed herein remain necessary to protect and promote

the Commission’s policy goals in local markets.

6.

With these considerations in mind, we issue this FNPRM to seek additional comment on

the appropriateness of the broadcast ownership rules to today’s evolving marketplace. We seek comment

on whether to eliminate two rules that under prevailing market conditions no longer appear to be

supported by their original rationales, and we propose to modernize and streamline additional rules.

Specifically, as explained in greater detail below, we seek comment on whether to eliminate restrictions

on newspaper/radio combinations because, on the record developed in the 2010 Quadrennial Review

proceeding, the link between those limitations and the Commission’s goal of promoting viewpoint

diversity appears to be too tenuous to justify retaining the limitations. We seek comment on whether to

eliminate the radio/television cross-ownership rule in favor of reliance on the local radio rule and the local

television rule. We propose to retain the current local television ownership rule with a minor

modification to update the previous analog contour provision in light of the digital transition. We seek

comment on whether to retain the prohibition on the cross-ownership of newspapers and television

stations, and if so, should we reform the restriction to consider waivers for newspaper/television

combinations. We propose to retain the current local radio ownership rule and the dual network rule

without modification. We seek comment on these proposals.

3 See Expanding the Economic and Innovative Opportunities of Spectrum Through Incentive Auctions, GN Docket

No. 12-268, Notice of Proposed Rulemaking, 27 FCC Rcd 12357, 12359, 12364, ¶¶ 4, 16 (2012) (“Incentive

Auctions NPRM”).

4 See id. at 12359, ¶ 4. The incentive auction is likely to affect the broadcast television industry in a number of

respects, and, as discussed herein, we seek comment on the significance of these potential changes in the context of

this quadrennial review proceeding. We anticipate being able to conduct the incentive auction in 2015.

5 See Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a

Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the

Telecommunications Act of 1996, as Amended by the Broadband Data Improvement Act, GN Docket No. 11-121,

Eighth Broadband Progress Report, 27 FCC Rcd 10342, 10369, ¶ 44 (2012) (“Eighth Broadband Progress Report”)

(finding that approximately 19 million Americans lack access to fixed broadband meeting the 4 Mbps/1 Mbps speed

benchmark).

6 Id.

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7.

Also, we seek additional comment on issues referred to us in the Third Circuit’s remand

in Prometheus II of certain aspects of the Commission’s 2008 Diversity Order.7 Specifically, we

tentatively conclude that the revenue-based eligible entity standard should be reinstated, as well as the

associated measures to promote the Commission’s goal of encouraging small business participation in the

broadcast industry, which we believe will cultivate innovation and enhance viewpoint diversity. As

directed by the court, we consider the socially and economically disadvantaged business definition as a

possible basis for favorable regulatory treatment, as well as other possible definitions that would

expressly recognize the race and ethnicity of applicants.8 We tentatively conclude that the record from

the 2010 Quadrennial Review proceeding does not satisfy the demanding legal standards the courts have

said must be met before the Government may implement preferences based on such race- or gender-

conscious definitions and we seek further comment. We discuss the Commission’s recent initiatives to

foster diversity, including efforts to promote minority and female participation in communications

industries, the release of minority and female broadcast ownership data, the ongoing study of Hispanic

television, and the recent clarification of the Commission’s policies and procedures for evaluating

potential foreign investment in broadcast licensees. We seek comment on these proposals and

conclusions.

8.

Finally, we take steps herein to address concerns about the use of a variety of sharing

agreements between independently owned television stations. First, this FNPRM proposes to define a

category of sharing agreements designated as Shared Service Agreements (“SSAs”) and proposes to

require commercial television stations to disclose those SSAs. We believe that this action will lead to

more comprehensive information about the prevalence and content of SSAs between television stations.

The current lack of information impedes the Commission’s and the public’s assessment of the level of

influence and control that these agreements may confer over independent stations. In addition, in the

Order, we adopt attribution standards for a specific category of sharing agreements, television JSAs.

Consistent with Commission precedent with respect to radio JSAs, as well as radio and television local

marketing agreements (“LMAs”), we find that certain agreements convey sufficient influence to be akin

to ownership and we will therefore attribute to the brokering station same-market television JSAs that

cover more than 15 percent of the weekly advertising time for the brokered station.

II.

BACKGROUND

9.

The media ownership rules subject to this quadrennial review are the local television

ownership rule, the local radio ownership rule, the newspaper/broadcast cross-ownership rule, the

radio/television cross-ownership rule, and the dual network rule.9 Congress requires the Commission to

review these rules every four years to determine whether they “are necessary in the public interest as the

result of competition” and to “repeal or modify any regulation [the Commission] determines to be no

longer in the public interest.”10 The Third Circuit has instructed that “necessary in the public interest” is a

‘“plain public interest’ standard under which ‘necessary’ means ‘convenient,’ ‘useful,’ or ‘helpful,’ not

7 Prometheus Radio Project v. FCC, 652 F.3d 431, 437 (3d Cir. 2011) (“Prometheus II”); see also Promoting

Diversification of Ownership in the Broadcasting Services, MB Docket No. 07-294, Report and Order and Third

Further Notice of Proposed Rulemaking, 23 FCC Rcd 5922 (2008) (“Diversity Order” and “Diversity Third

FNPRM”).

8 Prometheus II, 652 F.3d at 471-73.

9 These rules are found, respectively, at 47 C.F.R. §§ 73.3555(b), (a), (d), and (c) and 47 C.F.R. § 73.658(g).

10 Telecommunications Act of 1996, Pub. L. No. 104-104, § 202(h), 110 Stat. 56, 111-12 (1996); Consolidated

Appropriations Act, 2004, Pub. L. No. 108-199, § 629, 118 Stat. 3, 99-100 (2004) (“Appropriations Act”)

(amending Sections 202(c) and 202(h) of the 1996 Act). In 2004, Congress revised the then-biennial review

requirement to require such reviews quadrennially. See Appropriations Act § 629, 118 Stat. at 100.

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‘essential’ or ‘indispensable.’”11 There is no “‘presumption in favor of repealing or modifying the

ownership rules.’”12 Rather, the Commission has the discretion “to make [the rule] more or less

stringent.”13 This 2014 Quadrennial Review will focus on identifying a reasoned basis for retaining,

repealing, or modifying each rule consistent with the public interest.14

10.

The Commission began the 2010 proceeding with a series of workshops held between

November 2009 and May 2010. Participants in the workshops discussed the scope and content of the

review process. Thereafter the Commission released a Notice of Inquiry (“NOI”) on May 25, 2010,

seeking comment on a wide range of issues to help determine whether the current media ownership rules

continue to serve the Commission’s policy goals.15 Subsequently, the Commission commissioned eleven

economic studies, conducted by outside researchers and Commission staff, which were peer reviewed and

then released to the public, in order to provide data on the impact of market structure on the

Commission’s policy goals of competition, localism, and diversity.16

11.

After the release of the NOI, the Court of Appeals for the Third Circuit issued its opinion

in Prometheus II, which considered appeals from the Commission’s review of the media ownership rules

in the 2006 Quadrennial Review Order.17 The court affirmed the Commission’s decision to retain the

11 Prometheus Radio Project v. FCC, 373 F.3d 372, 394 (3d Cir. 2004) (“Prometheus I”). The court also concluded

that the Commission is required “to take a fresh look at its regulations periodically in order to ensure that they

remain ‘necessary in the public interest.’” Id. at 391.

12 CBS NPRM Comments at 3 (citing Fox Television Stations v. FCC, 280 F.3d 1027, 1048 (D.C. Cir. 2002);

Sinclair Broad. Group, Inc. v. FCC, 284 F.3d 148, 159 (D.C. Cir. 2002)). The court in Prometheus I determined

that Section 202(h) does not carry a presumption in favor of deregulation. See Prometheus I, 373 F.3d at 395

(rejecting the “misguided” findings in Fox and Sinclair regarding a ‘“deregulatory presumption’” in Section 202(h));

see also Prometheus II, 652 F.3d at 444-45 (confirming the standard of review under Section 202(h) adopted in

Prometheus I).

13 Prometheus I, 372 F.3d at 395; see also Prometheus II, 652 F.3d at 445.

14 See Prometheus I, 373 F.3d at 395; Prometheus II, 652 F.3d at 445.

15 See 2010 Quadrennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other

Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MB Docket No. 09-182, Notice of

Inquiry, 25 FCC Rcd 6086 (2010) (“NOI”).

16 Media Bureau Announces the Release of Requests for Quotation for Media Ownership Studies and Seeks

Suggestions for Additional Studies in Media Ownership Proceeding, MB Docket No. 09-182, Public Notice, 25 FCC

Rcd 7514 (Med. Bur. 2010); FCC Releases Five Research Studies on Media Ownership and Adopts Procedures For

Public Access to Underlying Data Sets, MB Docket No. 09-182, Public Notice, 26 FCC Rcd 8472 (Med. Bur. 2011);

FCC Releases Three Additional Research Studies on Media Ownership, MB Docket No. 09-182, Public Notice, 26

FCC Rcd 10240 (Med. Bur. 2011); FCC Releases the Final Three Research Studies on Media Ownership, MB

Docket No. 09-182, Public Notice, 26 FCC Rcd 10380 (Med. Bur. 2011). The media ownership studies for the 2010

Quadrennial Review proceeding are available at http://www.fcc.gov/encyclopedia/2010-media-ownership-studies.

In the NPRM, the Commission sought formal comment on the studies. 2010 Quadrennial Regulatory Review –

Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the

Telecommunications Act of 1996, MB Docket No. 09-182, Notice of Proposed Rulemaking, 26 FCC Rcd 17489,

17556-64, ¶¶ 171-93 (2011) (“NPRM”). Few commenters provided specific criticisms of individual studies, though

the University of Southern California Annenberg School for Communications & Journalism (“USC”) provided an

all-around critique of the studies. USC NPRM Comments at 5 (submitted on behalf of the Communication Policy

Research Network). Overall, we find that the studies provide useful data and analysis regarding the impact of

market structure on the Commission’s policy goals, and we will discuss the studies in the context of the relevant rule

sections below.

17 Prometheus II, 652 F.3d at 431; 2006 Quadrennial Regulatory Review – Review of the Commission’s Broadcast

Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MB

Docket No. 06-121, Report and Order and Order on Reconsideration, 23 FCC Rcd 2010, 2016-17, ¶ 9 (2008) (“2006

Quadrennial Review Order”).

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local television and radio rules in order to protect competition in local media markets.18 The court also

affirmed the Commission’s retention of the dual network rule based on potential harm to competition that

would result from mergers among the top four networks.19 In addition, the court affirmed the

Commission’s conclusion to retain the radio/television cross-ownership rule based on its contribution to

the Commission’s diversity goal.20 The Third Circuit vacated and remanded the newspaper/broadcast

cross-ownership rule as modified by the Commission in the 2006 Quadrennial Review Order on

procedural grounds, concluding that the Commission had failed to comply with the notice and comment

provisions of the Administrative Procedure Act (“APA”).21 Finally, the court vacated and remanded a

number of measures adopted in the Commission’s 2008 Diversity Order.22 Specifically, the court vacated

and remanded measures adopted in the Diversity Order that were designed to increase ownership

opportunities for “eligible entities,” including minority- and women-owned entities, because it determined

that the Commission’s revenue-based eligible entity definition was arbitrary and capricious.23 The court

directed the Commission to address this issue in the course of the 2010 Quadrennial Review.

12.

On December 22, 2011, the Commission released the NPRM, in which the Commission

proposed modest, incremental changes to the broadcast ownership rules and sought comment on those

changes. The Commission also sought comment in the NPRM on the aspects of the Commission’s 2008

Diversity Order that the Third Circuit had remanded in Prometheus II, as well as other actions that the

Commission might take to increase the level of broadcast station ownership by minorities and women.

Finally, the Commission sought comment on various attribution issues that define which interests in a

licensee must be counted in applying the broadcast ownership rules. In particular, the Commission

sought comment on the impact of certain programming or other sharing agreements between stations and

whether it should modify the broadcast attribution rules to account for such agreements or adopt

disclosure requirements. In doing so, the Commission referenced its pending proceeding regarding the

potential attribution of television JSAs. In that proceeding, the Commission had tentatively concluded

that television JSAs have the same effects in local television markets that radio JSAs do in local radio

markets and that the Commission should therefore attribute television JSAs.

13.

On November 14, 2012, the Media Bureau released a report on the ownership of

commercial broadcast stations (“2012 323 Report”).24 Consistent with other data and extensive comment

already in the record, the 2012 323 Report confirmed low levels of broadcast station ownership by

women and minorities — a fact long recognized by the Commission.25 On December 3, 2012, the

18 Prometheus II, 652 F.3d at 460-61, 462-63. The local radio rule was also retained, in part, to help promote the

Commission’s diversity goal. See id. at 462-63.

19 Id. at 463-64.

20 Id. at 456-58.

21 Id. at 453. The court did not address the substantive modifications to the rule.

22 Id. at 471.

23 Id.

24 See 2010 Quadrennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other

Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MB Docket No. 09-182, Report on

Ownership of Commercial Broadcast Stations, 27 FCC Rcd 13814 (Med. Bur. 2012) (“2012 323 Report”). The

2012 323 Report is based on ownership information, as of November 1, 2009, and October 1, 2011, submitted by

broadcasters in their biennial Form 323 filings. See FCC Form 323, Ownership Report for Commercial Broadcast

Stations, available at http://transition.fcc.gov/Forms/Form323/323.pdf; see also 47 C.F.R. § 73.3615.

25 See, e.g., Diversity Order, 23 FCC Rcd at 5924, ¶ 1 (noting that “minority- and women-owned businesses”

historically have not been “well-represented in the broadcasting industry”); Policies and Rules Regarding Minority

and Female Ownership of Mass Media Facilities, MM Docket No. 94-149, Notice of Proposed Rulemaking, 10

FCC Rcd 2788, 2789, ¶ 5 (1995) (“[D]espite the Commission’s efforts to increase minority ownership of broadcast

and cable facilities, minorities today remain significantly underrepresented among mass media owners.”).

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Commission granted the request of several parties for “an additional, formal opportunity to comment on

the [2012 323 Report].”26

On May 30, 2013, the Minority Media and Telecommunications Council

(“MMTC”) submitted a study titled “The Impact of Cross Media Ownership on Minority/Women Owned

Broadcast Stations” (“MMTC Cross-Ownership Study”).27 The Commission sought comment on this

study during the summer of 2013.28

14.

Policy Goals. The media ownership rules have consistently been found to be necessary

to further the Commission’s longstanding policy goals of fostering competition, localism, and diversity.

We seek additional comment on the NPRM’s tentative conclusion that these policy goals continue to be

the appropriate framework within which to evaluate and address minority and female interests as they

relate to the broadcast ownership rules.29

III.

MEDIA OWNERSHIP RULES

A.

Local Television Ownership Rule

1.

Introduction

15.

Based on the record that was compiled for the 2010 Quadrennial Review, we tentatively

conclude that the current local television ownership rule remains necessary in the public interest and

should be retained with a limited modification.30 As discussed below, we believe that, based on the

current media marketplace and the record in this proceeding, the public interest would be best served by

replacing the Grade B contour overlap test used to determine when to apply the local television ownership

rule with a digital noise limited service contour (“NLSC”) test, rather than the DMA-based approach

proposed in the NPRM. We believe that the local television ownership rule is necessary to promote

competition. We further believe that the competition-based rule we propose in this FNPRM also would

promote viewpoint diversity by helping to ensure the presence of independently owned broadcast

television stations in local markets and would be consistent with our localism goal.31 We find that the

26 See Commission Seeks Comment on Broadcast Ownership Report, MB Docket No. 09-182, Public Notice, 27

FCC Rcd 15036 (Med. Bur. 2012) (“2012 323 Report Comments PN”).

27 Letter from David Honig, President, MMTC, to Chairwoman Mignon Clyburn, Commissioner Ajit Pai, and

Commissioner Jessica Rosenworcel, FCC (May 30, 2013) (attaching Mark Fratrik, BIA/Kelsey, The Impact of

Cross Media Ownership on Minority/Women Owned Broadcast Stations (May 30, 2013) (“MMTC Cross-

Ownership Study”)) (“MMTC May 30, 2013 Ex Parte Letter”).

28 Media Bureau Invites Comments on Study Submitted by the Minority Media and Telecommunications Council in

2010 Quadrennial Review of Broadcast Ownership Rules, Public Notice, 28 FCC Rcd 8244 (Med. Bur. 2013)

(“Public Notice Seeking Comment on MMTC Cross-Ownership Study”).

29 26 FCC Rcd at 17497, ¶ 21. Based on the record developed in response to the NPRM, we continue to believe that

the longstanding policy goals of competition, localism, and diversity are broadly defined to promote the core

responsibilities of broadcast licensees. See id. We are not persuaded by the comments in the record that it would be

appropriate to adopt any additional formal policy goals. See, e.g., Diversity and Competition Supporters (“DCS”)

NPRM Comments at 5 (proposing that the Commission adopt the goals of remedying the present effects of past

discrimination and preventing future discrimination); Don Schellhardt (“Schellhardt”) NPRM Comments at 6

(urging the Commission to add promoting “robust employment” as a policy goal); Writers Guild of America, East,

AFL-CIO (“WGAE”) NPRM Comments at 2-3 (asserting that the Commission must add the additional goal of

increasing the resources devoted to diverse local news programming in order to effectively promote the core policy

goals of competition, localism, and diversity). We seek comment on this tentative conclusion.

30 Section 202(h) of the 1996 Act, 47 U.S.C. § 303 note; NPRM, 26 FCC Rcd at 17498, ¶ 26; see also 2006

Quadrennial Review Order, 23 FCC Rcd at 2060, ¶ 87.

31 Consistent with the Commission’s finding in the 2006 Quadrennial Review Order, we tentatively find that the

evidence in the record fails to demonstrate that the local television ownership rule threatens local programming. 23

FCC Rcd at 2067, ¶ 103. For example, broadcasters assert that eliminating the rule would promote localism, as the

efficiencies of common ownership allow broadcasters to initiate or retain local news and public interest

(continued….)

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local television ownership rule we propose in this FNPRM would be consistent with our goal of

promoting minority and female ownership of broadcast television stations. Finally, we believe that our

proposed limited modification of the rule will better promote competition, and that this benefit would

outweigh any burdens, which would be minimized by our proposal to grandfather combinations as

described herein.

16.

We propose to modify the local television ownership rule to allow an entity to own up to

two television stations in the same DMA if: (1) the digital NLSCs of the stations (as determined by

section 73.622(e) of the Commission’s rules) do not overlap; or (2) at least one of the stations is not

ranked among the top-four stations in the market and at least eight independently owned television

stations would remain in the DMA following the combination.32 In calculating the number of stations

remaining post-merger, only those stations whose digital NLSC overlaps with the digital NLSC of at least

one of the stations in the proposed combination would be considered, which would be consistent with the

contour overlap provision of the current rule. In addition, we propose to retain the existing failed/failing

station waiver policy. We seek comment on these proposed modifications to the local television

ownership rule and ask whether there have been any developments since the NPRM that we should take

into account in our review of the rule. We seek comment on the costs and benefits of our proposed local

television ownership rule.

To the greatest extent possible, commenters should quantify the expected costs

or benefits of the proposed rule and provide detailed support for any actual or estimated values provided,

including the source of such data and/or the method used to calculate reported values.

2.

Background

17.

In the NPRM, the Commission proposed to retain the local television ownership rule,

with one modification. Specifically, the NPRM proposed to retain the top-four prohibition, eight-voices

test, and numerical limits of the existing rule, while proposing to replace the Grade B contour overlap

provision with a DMA-based approach, under which the Commission would prohibit ownership of two

stations in the same DMA unless at least one of the stations is not rated in the top four and at least eight

independent voices would remain after the transaction.33 The NPRM also invited comment on whether to

adopt a market size waiver standard, the impact of multicasting on the local television ownership rule, and

the impact of the proposed rule on minority and female ownership.34

18.

Multiple commenters supported the Commission’s proposal to retain the local television

ownership rule to promote competition.35 Many commenters also asserted that the rule remains necessary

to protect the Commission’s localism and viewpoint diversity goals and to promote minority and female

(Continued from previous page)

programming. See, e.g., Grant Group NPRM Comments at 10; LIN NPRM Comments at 4; National Association of

Broadcasters (“NAB”) NPRM Comments at 18-20. By contrast, public interest commenters assert that while

common ownership may produce efficiencies, such efficiencies do not always result in increased local content. See,

e.g., Free Press NPRM Comments at 46-48 (citing Danilo Yanich, Ownership Matters: Localism, Local Television

News, and the FCC (May 20, 2009) (presented at the International Communication Association annual meeting)).

We note that the court in Prometheus II upheld the Commission’s rationale in the 2006 Quadrennial Review Order

for retaining the local television ownership rule. See Prometheus II, 652 F.3d at 458-62.

32 See Appendix B; see also 47 C.F.R. § 73.622(e).

33 NPRM, 26 FCC Rcd at 17502-07, ¶¶ 36-51.

34 Id. at 17508-11, ¶¶ 52-59.

35 See American Cable Association (“ACA”) NPRM Comments at 12; DISH Network (“DISH”) NPRM Reply at 1;

Free Press NPRM Comments at 44-45; National Telecommunications Cooperative Association (“NTCA”) NPRM

Reply at 5.

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ownership.36 Others, particularly public advocacy commenters, urged the Commission not only to retain

the television ownership limits, but to tighten them.37 Free Press and UCC et al. argued that the ability to

multicast has eliminated the need for common ownership of multiple stations, and they asserted that

returning to the single-license rule could create ownership opportunities for minorities and women.38

19.

In contrast, broadcast industry commenters asserted that the local television ownership

rule should be eliminated or substantially relaxed as a result of competition for viewers and advertising

revenue from non-broadcast video alternatives.39 Many broadcasters argued that such relief is particularly

warranted in small and mid-sized markets, where the current rule generally does not allow any common

ownership.40 Broadcasters asserted also that eliminating the rule would promote localism, as the

efficiencies of common ownership would allow broadcasters to initiate or retain local news and public

interest programming, which requires significant capital investment.41 In addition, broadcasters asserted

that common ownership can benefit the Commission’s viewpoint diversity goals, as owners of station

combinations have natural incentives to counterprogram their stations to maximize audience and revenue

share.42

3.

Discussion

20.

Market. As proposed in the NPRM, we tentatively find that the local television

ownership rule continues to be necessary to promote competition among broadcast television stations in

local television viewing markets.43 ACA and WGAW supported the Commission’s decision in the

NPRM to focus its analysis on the promotion of competition among local broadcast television stations.44

In particular, WGAW asserted that the Internet is not a substitute for local television stations, primarily

because the Internet is not yet an independent source of local news, and cannot be considered a

competitor in local television markets.45 Conversely, many broadcasters opposed the Commission’s

36 Communications Workers of America (“CWA”) NPRM Comments at 4-6; CWA NPRM Reply at 5-6; DCS

NPRM Comments at 38; WGAE NPRM Comments at 3; Writers Guild of America, West, Inc. (“WGAW”) NPRM

Comments at 3.

37 Schellhardt NPRM Comments at 2, 7; Free Press NPRM Comments at 44-45; Free Press NPRM Reply at 18-22;

National Hispanic Media Coalition (“NHMC”) et al. NPRM Comments at 3-5; Office of Communication of United

Church of Christ (“UCC”) et al. NPRM Comments at 24.

38 Free Press NPRM Comments at 44-45; Free Press NPRM Reply at 20-21; UCC et al. NPRM Comments at 24.

39 Belo NPRM Comments at 3-4; CBS NPRM Comments at 10; Entravision NPRM Comments at 4; Cedar Rapids

Television (“CRT”) NPRM Comments at 13; Grant Group NPRM Comments at 7-10; Gray NPRM Comments at 6-

7; LIN NPRM Comments at 3-4; NAB NPRM Comments at 11-12; Nexstar NPRM Comments at 8-10. In addition,

Sinclair asserted that the Commission could allocate more stations if it wants to promote competition in local

television markets. See Sinclair NPRM Comments at 11.

40 See Coalition of Smaller Market Television Stations (“Small Market Coalition”) NPRM Reply at 7; CRT NPRM

Comments at 13; Grant Group NPRM Comments at 7-10; Gray NPRM Comments at 6-7; Nexstar NPRM

Comments at 9-10.

41 See Grant Group NPRM Comments at 10; Gray NPRM Comments at 7-8; LIN NPRM Comments at 4; NAB

NPRM Comments at 18-20; Nexstar NPRM Comments at 22-23.

42 See Gray NPRM Comments at 7; Nexstar NPRM Comments at 15.

43 NPRM, 26 FCC Rcd at 17500, ¶ 33; see also Prometheus II, 652 F.3d at 458-61 (upholding the Commission’s

decision to retain the local television ownership rule in order to promote competition among broadcast television

stations in local markets).

44 ACA NPRM Comments at 12; WGAW NPRM Comments at 2.

45 WGAW NPRM Comments at 2-3 (citing findings from Media Ownership Study 6, Less of the Same: The Lack

of Local News on the Internet 10, by Matthew Hindman (2011) (“Media Ownership Study 6”)); but see Nexstar

(continued….)

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decision to focus on competition among local broadcast television stations and asserted that stations face

competition for audience share and advertising revenue from non-broadcast video alternatives, such as

multichannel video programming distributors (“MVPDs”) and the Internet.46 According to these

commenters, the Commission is compelled to consider such competing sources of video programming in

its local television ownership rule and, as a result, must eliminate or substantially relax the rule.47

Although we believe the record in the 2010 Quadrennial Review proceeding supports our view of the

appropriate parameters for defining the market, we seek comment on whether developments since the

NPRM should cause us to shift the focus of our analysis.

21.

First, we believe that the video programming market remains the relevant market for

review of the local television ownership rule.48 We also believe that the video programming market is

distinct from the radio listening market. While multiple broadcast commenters argued in favor of an

expansive market definition that would include nearly all forms of media, we tentatively find such

arguments to be unpersuasive.49 The Commission has previously found that the video programming

market is distinct from other media markets because consumers do not view non-video entertainment

options (e.g., listening to music or reading) and non-delivered video options (e.g., DVDs or movie

theaters) as good substitutes for watching television, and there is no evidence in the current record that

would cause us to disturb these findings.50

(Continued from previous page)

NPRM Reply at 5 (stating that 202(h) does not require a media alternative to be a perfect substitute to be considered

a competitor).

46 See Belo NPRM Comments at 3, 6; CBS NPRM Comments at 11; CRT NPRM Comments at 12-13; Entravision

NPRM Comments at 4-5; Grant Group NPRM Comments at 8; NAB NPRM Comments at 12; NAB NPRM Reply

at 9-10; Nexstar NPRM Comments at 6-9; Nexstar NPRM Reply at 3-4; Sinclair NPRM Comments at 9-10. In

addition, many broadcasters asserted that they compete for advertising revenue with non-video sources of

information and entertainment, such as radio stations, newspapers, billboards, and magazines. See, e.g., Belo

NPRM Comments at 3, 6; CRT NPRM Comments at 12-13; NAB NPRM Comments at 12.

47 See, e.g., Belo NPRM Comments at 3-4; CBS NPRM Comments at 10; NAB NPRM Comments at 11-12; NAB

NPRM Reply at 9-10; see also The Walt Disney Company (“Disney”) NPRM Reply at 2-3 (arguing that the

Commission should consider growth of new media outlets and, instead of regulating the broadcast industry, should

find ways to incent ownership of broadcast stations).

48 See NPRM, 26 FCC Rcd at 17500-01, ¶ 33; 2006 Quadrennial Review Order, 23 FCC Rcd at 2064, ¶ 97

(analyzing the local television ownership rule in the context of the video programming market); 2002 Biennial

Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to

Section 202 of the Telecommunications Act of 1996, MB Docket No. 02-277, Report and Order and Notice of

Proposed Rulemaking, 18 FCC Rcd 13620, 13672-73, ¶¶ 142-145 (2003) (referring to the video programming

market as the “delivered video programming market”) (“2002 Biennial Review Order”). Although the video

programming market broadly speaking also includes video programming delivered via MVPDs and the Internet, as

discussed in paragraphs 22-25 and consistent with Commission precedent cited here, we tentatively conclude that

non-broadcast sources of video programming should not be included in our analysis of the local television

ownership rule at this time. See 2006 Quadrennial Review Order, 23 FCC Rcd at 2064, ¶ 97; 2002 Biennial Review

Order, 18 FCC Rcd at 13673, ¶ 145.

49 See, e.g., Belo NPRM Comments at 3, 6; CRT NPRM Comments at 12-13; NAB NPRM Comments at 12.

50 2002 Biennial Review Order, 18 FCC Rcd at 13672-73, ¶ 142. In addition, we note the NPRM’s tentative

conclusion that it is not now appropriate to expand the relevant product market beyond video programming to

include non-video information sources of local news and information. NPRM, 26 FCC Rcd at 17501, ¶ 35. This

tentative conclusion was based on evidence that Internet-only websites provide only a small amount of local news

content and a lack of evidence that non-video information sources modify their programming decisions based on the

actions of local broadcast television stations or vice versa. Id. We did not receive significant comment on this

specific issue in the 2010 proceeding, and we seek comment on whether we should confirm the NPRM’s tentative

conclusion for the reasons discussed therein. Id.

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22.

Second, we believe that our analysis regarding the local television ownership rule should

continue to focus on promoting competition among broadcast television stations in local television

viewing markets.51 In order to compete effectively in its local market, and thereby gain market share, a

broadcast television station must invest in better programming and provide programming tailored to the

needs and interests of the local community, including local news and public interest programming.52 By

strengthening their position in the local market, television broadcasters are better able to compete for

advertising revenue and retransmission consent fees, an increasingly important source of revenue for

many stations. Viewers in the local market benefit from such competition among numerous strong rivals

in the form of higher quality programming.53

23.

While we are keenly aware of the growing popularity of video programming delivered

via MVPDs and the Internet, we tentatively find that competition from such video programming providers

is currently of limited relevance for the purposes of our analysis. These programming alternatives

compete largely in national markets — cable network programming is generally uniform across all

markets, as is video programming content available via the Internet — and, unlike local broadcast

stations, such programming providers are not likely to respond to conditions in local markets.54 Though

certain broadcast commenters disputed this notion, we tentatively find their arguments to be unsupported

by evidence of non-broadcast video programmers modifying their programming decisions based on the

competitive conditions in a particular local market.55

24.

In addition, we tentatively find that broadcast television’s strong position in the local

advertising market supports our view that non-broadcast video programmers are not yet meaningful

substitutes in local television markets. Broadcasters asserted that we should expand the relevant market,

in part because of increased competition for advertising from non-broadcast sources of video

programming, particularly in the local advertising market.56 The data do not support this claim. From

2008 through 2011, though overall local advertising spending was down from its highs in 2005 and 2006,

local broadcast television’s market share actually increased and achieved the highest levels since 2004.57

51 2006 Quadrennial Review Order, 23 FCC Rcd at 2064, ¶ 97.

52 Id.

53 Id.

54 Id.

55 Entravision NPRM Comments at 4-5 (claiming that the Commission should not focus on whether non-broadcast

video providers alter their behavior based on changes in the local market, but whether local television stations can

survive the loss of audience share and advertising revenue resulting from viewers’ reliance on non-broadcast video

alternatives); NAB NPRM Comments at 15 (asserting that platforms such as cable, satellite, and new media — as

distinguished from program networks — have incentives to compete in local markets to gain subscribers and local

advertising revenue); Sinclair NPRM Comments at 9-10 (asserting that cable news channels should be considered

competitors to local newscasts, even though cable news is generally national in scope, because many viewers watch

local newscasts to obtain national news); Nexstar NPRM Reply at 5 (suggesting that broadcasters must compete

with national cable networks even if the cable network does not react to competitive changes in local markets).

56 See, e.g., NAB NPRM Comments at 12-16.

57 SNL KAGAN, ADVERTISING FORECASTS: U.S. MARKET TRENDS & DATA FOR ALL MAJOR MEDIA 25-26 (2011)

(“SNL KAGAN ADVERTISING FORECASTS 2011”). For the election years in this time period, broadcast television’s

advertising revenue market share increased from 13.6 percent in 2008 to 15.8 percent in 2010; for non-election

years, the market share increased from 13.4 percent in 2009 to 14.9 percent in 2011. Id. In addition, market share in

2012, an election year, is expected to rise to 16.0 percent. Id. at 26. We note also that broadcast television’s share

of national advertising revenue has remained relatively consistent since 2008, and the industry has seen significant

gains in retransmission consent fees and online revenue. In fact, total broadcast television revenue for 2012 is

predicted to reach its highest level since 2000. See id. at 147 (reporting approximately $26.3 billion in total revenue

for 2000); SNL KAGAN, ECONOMICS OF BROADCAST TV RETRANSMISSION REVENUE 2 (2012) (“SNL KAGAN

BROADCAST TV RETRANSMISSION REVENUE”) (predicting approximately $24.8 billion in total revenue for 2012).

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While the shares of local advertising on cable television and the Internet also increased during this time

period, those gains do not appear to be at the expense of broadcast television stations.58 We seek

comment on whether there have been any significant changes since these figures became available.

25.

For the foregoing reasons, we believe that broadcast television stations continue to play a

unique and vital role in local communities that is not meaningfully duplicated by non-broadcast sources

of video programming. In addition to providing viewers with the majority of the most popular

programming on television,59 broadcast television stations remain the primary source of local news and

public interest programming.60 Moreover, millions of U.S. households lack broadband access at speeds

sufficient to stream or download video programming available via the Internet.61 Accordingly, we

tentatively find that the record continues to support a local television ownership rule designed to promote

58 SNL KAGAN ADVERTISING FORECASTS 2011 at 25-26. NAB asserted that the recent growth in television station

advertising revenue is temporary and not likely to “address the structural changes that have taken place in the

[television] market” because the predicted 2012 advertising revenues for the broadcast television industry are below

the levels achieved in 2006. NAB NPRM Reply at 10 & n.36. While advertising revenues for broadcast television

stations were lower during this period, we believe the evidence does not support the conclusion that this was the

result of a unique change in the television marketplace; instead, the total advertising market for all media

experienced a significant contraction, which was most likely the result of the global financial crisis that impacted

nearly all markets. SNL KAGAN ADVERTISING FORECASTS 2011 at 20. Moreover, total station revenue for 2012 was

predicted to exceed the total station revenue for 2006 and to grow steadily through 2017. Id. at 147; SNL KAGAN

BROADCAST TV RETRANSMISSION REVENUE at 2. However, we seek comment on whether any structural changes

have occurred in the television marketplace and, if so, whether to adjust our 2014 Quadrennial Review analysis to

account for such changes.

59 See paragraphs 234 and 235, infra, for a discussion of the popularity of broadcast network programming relative

to cable network programming in the context of the dual network rule. See also National Association of

Broadcasters, Testimony of Hearst Television President and CEO David Barrett on "The Future of Video" (press

release), June 27, 2012 (“[A]pproximately 96 . . . of the top 100 shows are on broadcast television.”).

60 The current record demonstrates that, at present, alternative video programmers do not generate significant

amounts of original local content. While the growth of local and hyperlocal websites may change our analysis in the

future, currently many communities lack access to broadband connections to take advantage of such websites. Also,

currently the vast majority of original content on the Internet is generated by traditional media outlets such as

broadcast television stations or newspapers, and may be repackaged by other web outlets. See, e.g., PEW RESEARCH

CENTERS PROJECT FOR EXCELLENCE IN JOURNALISM, HOW NEWS HAPPENS: A STUDY OF THE NEWS ECOSYSTEM OF

ONE AMERICAN CITY (2010) (“PEW BALTIMORE STUDY”), available at

http://www.journalism.org/files/legacy/Baltimore%20Study_Jan2010_0.pdf; STEVE WALDMAN AND THE WORKING

GROUP ON INFORMATION NEEDS OF COMMUNITIES, FCC, THE INFORMATION NEEDS OF COMMUNITIES: THE

CHANGING MEDIA LANDSCAPE IN A BROADBAND AGE 123-24 (2011) (“INFORMATION NEEDS OF COMMUNITIES”),

available at http://transition.fcc.gov/osp/inc-report/The_Information_Needs_of_Communities.pdf (referencing

several studies to support the conclusion that “the growing number of web outlets relies on a relatively fixed, or

declining, pool of original reporting provided by traditional media”). These studies were cited in the record earlier

in this proceeding and no evidence was submitted to refute their validity or otherwise demonstrate that alternate

video programmers are producing a significant amount of original local content. In addition, the findings of these

studies are consistent with Media Ownership Study 6, which found that, in the top 100 markets, there is a very

limited amount of local news content available on the Internet that is not provided by traditional media organizations

(e.g., broadcasters or print media). Media Ownership Study 6 at 29-30.

61 See Eighth Broadband Progress Report, 27 FCC Rcd at 10369, ¶ 44 (finding that approximately 19 million

Americans lack access to fixed broadband meeting the 4 Mbps/1 Mbps speed benchmark). Some broadcasters

inferred from the NPRM that the Commission will not consider the impact of the Internet until there is 100 percent

access to broadband — a position that these commenters challenged. See, e.g., Belo NPRM Comments at 5; Nexstar

NPRM Comments at 12; Nexstar NPRM Reply at 6. It is not our position that broadband deployment and adoption

must be universal to warrant inclusion in this rule; however, the current level of access to and adoption of such

service are certainly relevant when considering the extent to which video programming provided via the Internet is a

meaningful substitute for broadcast television stations in local television viewing markets.

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competition among broadcast television stations.62 We believe the 2010 Quadrennial Review record

supports the use of this approach, and we seek comment on whether this market definition should apply

for purposes of our 2014 Quadrennial Review.

26.

Contour Overlap. The NPRM proposed to eliminate the Grade B contour overlap test

and rely solely on Nielsen DMAs to determine when to apply the local television ownership rule.63 The

NPRM recognized that the DMA approach could have a disproportionate impact in certain DMAs and

sought comment on the impact of such a change.64 As discussed below, we tentatively find that the public

interest is best served by retaining the contour-based approach of the previous rule but by replacing the

analog Grade B contour with the digital NLSC. We seek comment on whether any developments have

occurred since the NPRM that should cause us to reconsider our proposed approach.

27.

No commenter specifically supported the Commission’s tentative proposal to adopt a

DMA-based approach. According to NAB, adopting the DMA-based approach proposed in the NPRM

could unduly prohibit common ownership in certain markets, such as geographically large markets in the

western United States, where such ownership is currently permissible under the existing rule.65 To avoid

this outcome, NAB recommended that the Commission replace the Grade B contour with the digital

NLSC, which NAB stated more closely delineates a particular station’s service area than the station’s

DMA.66

28.

Based on the comments in the 2010 Quadrennial Review record, we believe that the

proposed DMA-only approach would unnecessarily expand the reach of the local television ownership

rule in certain DMAs and thus would be overbroad. Therefore, we tentatively decline to adopt that

approach. NAB argues that relying instead on the digital NLSC, which the Commission has treated as the

functional equivalent of the Grade B contour,67 would serve the purpose of establishing a trigger that

62 We note that our proposal to limit the relevant market to broadcast television stations in local television viewing

markets is consistent with current Department of Justice (“DOJ”) precedent. See, e.g., Complaint at ¶¶ 14-22,

United States v. Gannett Co., Inc., et al., No. 1:13-cv-01984 (D.D.C. Dec. 16, 2013) (finding the relevant markets

for analysis to be broadcast television spot advertising (product market) in the St. Louis DMA (geographic market));

Complaint at ¶¶ 38-44, United States v. Comcast Corp., No. 1:11-cv-00106 (D.D.C. Jan. 18, 2011) (excluding

broadcast television from the “video programming distribution” market, which included MVPDs and Online Video

Programming distributors (“OVDs”)); see also DOJ February 20, 2014 Ex Parte Comments at 5, 8 (confirming that

the relevant markets for antitrust review are the broadcast television spot advertising market in the stations’ specific

geographic market); Timothy J. Brennan & Michael A. Crew, Gross Substitutes vs. Marginal

Substitutes:

Implications for Market Definition in the Postal Sector, in THE ROLE OF THE POSTAL AND DELIVERY

SECTOR IN A DIGITAL AGE 1-15 (Michael A. Crew & Timothy J. Brennan eds. 2013) (arguing that the loss of

customers to a new technology does not necessarily mean that the new technology should be included in the market

definition of the existing technology).

63 NPRM, 26 FCC Rcd at 17502, ¶ 37.

64 Id. at 17503, ¶ 39.

65 NAB NPRM Comments at 29-30.

66 See id.; NAB NPRM Reply at 16.

67 See, e.g., Stephen Diaz Gavin, Esq., Letter, 25 FCC Rcd 1851, 1857-58 (Med. Bur. 2010); Advanced Television

Systems and their Impact Upon the Existing Television Broadcast Service, MB Docket No. 87-268, Seventh Report

and Order and Eighth Further Notice of Proposed Rulemaking, 22 FCC Rcd 15581 (2007) (discussion of “DTV

Power” in DTV Table Appendix B treats the Grade B and NLSC contours as comparable by using the Grade B

contour for stations that did not have a DTV channel); Implementation of the Satellite Home Viewer Extension and

Reauthorization Act of 2004, MB Docket No. 05-49, Report and Order, 20 FCC Rcd 17278, 17292, ¶ 31 (2005);

Second Periodic Review of the Commission’s Rules and Policies Affecting the Conversion to Digital Television, MB

Docket No. 03-15, Report and Order, 19 FCC Rcd 18279, 18311, ¶ 72 (2004); Review of the Commission’s Rules

and Policies Affecting the Conversion to Digital Television, MM Docket No. 00-39, Report and Order and Further

Notice of Proposed Rulemaking, 16 FCC Rcd 5946, 5956, ¶ 22 (2001). By contrast, there is no digital counterpart

(continued….)

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would accurately reflect current digital service areas while avoiding any potential disruptive impact, and

we believe that approach is reasonable. In addition, consistent with previous Commission decisions, we

tentatively find that retaining a contour-based approach would serve the public interest by promoting local

television service in rural areas.68 In particular such an approach would continue to allow station owners

in rural areas to build or purchase an additional station in remote portions of the DMA, so long as there is

no digital NLSC overlap.69 It is important that our local television ownership rule take into account the

current digital service area of a station. We confirm that the digital NLSC is an accurate measure of a

station’s current service area and thus would be an appropriate standard. Thus, under the modified rule

we propose today, we would continue to define the geographic dimensions of the local television market

by reference to DMAs, but we would replace the analog Grade B contour with the digital NLSC, such that

within a DMA an entity could own or operate two stations in a market if the digital NLSCs of those

stations did not overlap.70 To the extent that the digital NLSC of two stations in the same DMA

overlapped, then the stations serve the same area, even if there was no analog Grade B contour overlap

prior to the digital transition, and in that case the combination would be permitted only if it satisfied the

top-four prohibition and the eight-voices test.

29.

The NPRM described the potential benefits of a DMA-based approach, including

correlation with DMA-wide carriage of broadcast signals pursuant to mandatory carriage requirements

and benefits similar to those realized by the geographic market definition in the radio rule. For the

reasons discussed above, however, that approach could have a negative impact in certain DMAs. We

seek comment on our tentative conclusion that the alternative approach we propose in this FNPRM would

avert the negative impact of the DMA-based approach, accurately reflect current digital service areas, and

appropriately balance our public interest goals.

30.

Grandfathering. We tentatively affirm the NPRM’s proposal to grandfather existing

ownership combinations that would exceed the numerical limits under the revised contour approach,

though we tentatively find that the sale of such combinations must comply with the local television

(Continued from previous page)

to a station's analog city grade contour.

Accordingly, consistent with case law developed after the digital transition,

we would continue to evaluate all future requests for new or continued satellite status on an ad hoc basis.

See, e.g.,

HBK NV LLC, Memorandum Opinion and Order, 25 FCC Rcd 2354 (Med. Bur. 2010); see also Television Satellite

Stations Review of Policies and Rules, MM Docket No. 87-8, Report and Order, 6 FCC Rcd 4212, 4215 (1991)

(subsequent history omitted).

68 See Review of the Commission’s Regulations Governing Television Broadcasting, MM Docket No. 91-221,

Report and Order, 14 FCC Rcd 12903, 12928-29, ¶¶ 51-53 (1999) (“1999 Ownership Order”); 2006 Quadrennial

Review Order, 23 FCC Rcd at 2067-68, ¶ 104. In the 2002 Biennial Review Order, in which the local television

ownership rule was relaxed, the Commission eliminated the contour overlap provision. 18 FCC Rcd at 13691-92,

¶¶ 185-87. However, in recognition of the unique circumstances involving stations without Grade B contour

overlap, the Commission adopted waiver criteria that would permit common ownership if the applicant could

demonstrate “that the stations have no Grade B overlap and that the stations are not carried by any MVPD to the

same geographic area.” Id. at 13692, ¶ 187. The revised rule adopted in the 2002 Biennial Review Order was

overturned on appeal. Prometheus I, 373 F.3d at 474-77. We believe our proposal to adopt the digital NLSC

standard is in the public interest and is supported by the record, and we decline to propose alternate possible

solutions, such as waiver criteria similar to those adopted in the 2002 Biennial Review Order. However, we invite

commenters to propose alternate solutions if they object to our approach.

69 See 2006 Quadrennial Review Order, 23 FCC Rcd at 2068, ¶ 104.

70 The Commission previously determined that the DMA is the most appropriate definition of the geographic

dimensions of the local television market, and we do not intend to disturb that finding.

1999 Ownership Order, 14

FCC Rcd at 12926, ¶ 47. We note that the approach we propose here is consistent with our approach under the prior

local television ownership rule.

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ownership rule then in effect.71 We seek comment on whether we should adopt this approach in our 2014

quadrennial proceeding.

31.

Multiple broadcast commenters in the 2010 Quadrennial Review proceeding supported

the Commission’s tentative conclusion to grandfather existing ownership combinations.72 These

commenters asserted that requiring divestiture would be fundamentally unfair to existing licensees that

acquired station combinations in good faith based on existing rules.73 In addition, some commenters

recommended that grandfathered combinations should be freely transferable. Grant Group asserted that

sales of grandfathered combinations should be permissible in perpetuity because, according to Grant

Group, the proposed rule change results from a change in technology, the digital transition, and not a

change in policy concerning common ownership.74

32.

UCC et al., however, opposed the Commission’s tentative decision to grandfather

existing combinations, and they asserted that grandfathered combinations should not be freely

transferable.75 According to UCC et al., requiring divestitures within a reasonable compliance period

would create ownership opportunities for new entrants, including minorities and women.76 UCC et al.

urge the Commission — in the event grandfathering is permitted — to “follow its usual practice” and

require compliance with the local television ownership rule at the time of sale of a grandfathered

combination.77

33.

We tentatively find that the concerns raised by those in favor of permitting

grandfathering and the transfer of grandfathered combinations would largely be addressed by our

proposal to retain a contour overlap provision in the local television ownership rule and to substitute the

digital NLSC for the Grade B contour. The contour element of the rule would effectively maintain the

status quo for most, if not all, owners of duopolies formed as a result of the previous Grade B contour

overlap provision. Consistent with the tentative conclusion in the NPRM, however, we propose to

grandfather ownership of existing combinations of television stations, if any, that would exceed the

ownership limit as a result of the change to the digital NLSC test we propose herein. Even in limited

circumstances, compulsory divestiture is disruptive to the marketplace and is a hardship for individual

71 NPRM, 26 FCC Rcd at 17503, ¶ 39. In addition, we propose that all permanent waivers from the prior rule that

previously have been granted would continue in effect under the new rule, but, like any newly grandfathered

combinations, could not be transferred/assigned intact unless the combination complies with the local television

ownership rule in effect at the time of the transfer/assignment.

72 Grant Group NPRM Comments at 11; NAB NPRM Reply at 16; Sinclair NPRM Comments at 13.

73 Grant Group NPRM Comments at 11; Sinclair NPRM Comments at 13.

74 Grant Group NPRM Comments at 12; see also NAB NPRM Reply at 16. In addition, Grant Group asserted that

prohibiting the sale of grandfathered combinations would require the unwinding of successful station combinations

and, as a result of the loss of joint efficiencies, there would be a danger that such forced divestiture could result in

failed stations. Grant Group NPRM Comments at 12; see also NAB NPRM Reply at 16-17 (asserting that

disallowing transfers of grandfathered combinations could result in loss of station value and require the unwinding

of successful joint operations). Also, it asserted that the inability to transfer the station combination intact could

discourage continued investment in existing combinations, as the licensee could not recapture the investment at the

time of sale. Grant Group NPRM Comments at 13; see also Sinclair NPRM Comments at 13 (asserting that

prohibiting the sale of grandfathered combinations would “significant[ly] impact . . . the value of the stations”).

75 UCC et al. NPRM Comments at 25.

76 Id. They asserted also that permitting the sale of grandfathered combinations would compound the harm

associated with grandfathering because minorities and women are less likely to be able to obtain financing for

duopolies. Id.

77 Id.

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owners; we believe any benefits to our policy goals (including promoting ownership diversity) would be

outweighed by these countervailing equitable considerations.78

34.

We propose, however, to require that the sale of any such grandfathered combination

comply with the local television ownership rule in place at the time the transfer of control or assignment

application is filed.79 As stated above, the digital NLSC is an accurate measure of a station’s digital

service area. If the digital NLSC of two stations in the same DMA overlap, then the stations serve the

same area, even if there was no Grade B contour overlap prior to the digital transition. Accordingly,

requiring that the sale of a grandfathered combination comply with the new standard would be consistent

with our rationale for adopting the digital NLSC-based standard and would not cause hardship by

requiring premature divestiture. Consistent with the Commission’s previous decisions, we tentatively

find that the public interest would not be served by allowing grandfathered combinations to be freely

transferable in perpetuity where a combination does not comply with the local television ownership rule

at the time of transfer/assignment.80 We seek comment on this tentative conclusion.

35.

Numerical Limits. The Commission proposed in the NPRM to retain the current

numerical limits in the local television ownership rule.81 We seek comment on whether to adopt that

proposal, thereby permitting a licensee to own up to two stations (i.e., a duopoly) in a market, subject to

the other requirements proposed in this FNPRM.

36.

In the 2010 Quadrennial Review proceeding, ACA agreed with the Commission’s

assessment that there have not been sufficient changes in the marketplace to disturb the justification in the

2006 Quadrennial Review Order for retaining the existing numerical limit, and other commenters

supported generally the Commission’s decision not to modify the rule to permit additional

consolidation.82 Certain public advocacy commenters, however, urged the Commission to tighten the

numerical limits and return to the previous single-station rule.83 According to Free Press and UCC et al.,

additional restrictions are warranted because of broadcasters’ multicast capabilities.84 Moreover, Free

Press asserted that permitting duopolies has not served the public interest; in particular, it asserted that

consolidation has not led to increased local news programming.85 In addition, NHMC et al. and UCC et

78 See, e.g., Amendment of Sections 73.34, 73.240, and 73.636 of the Commission's Rules Relating to Multiple

Ownership of Standard, FM, and Television Broadcast Stations, Docket No. 18110, Second Report and Order, 50

FCC 2d 1046, 1080, ¶ 112 (1975) (“1975 Second Report and Order”) (stating that “divestiture should be limited to

use in only the most egregious cases”); see also 2002 Biennial Review Order, 18 FCC Rcd at 13808, ¶ 484.

79 See, e.g., 2002 Biennial Review Order, 18 FCC Rcd at 13809-10, ¶ 487.

80 1975 Second Report and Order, 50 FCC 2d at 1076, ¶ 103; see also 2002 Biennial Review Order, 18 FCC Rcd at

13809-10, ¶ 487 (finding that allowing grandfathered combinations to be freely transferable “would hinder [the

Commission’s] effort to promote and ensure competitive markets” and that “[g]randfathered combinations, by

definition, exceed the numerical limits that . . . promote the public interest as related to competition”). Under our

proposed approach, we would continue to allow pro forma changes in ownership and involuntary changes of

ownership due to death or legal disability of the licensee. 1975 Second Report and Order, 50 FCC 2d at 1076, ¶

103.

81 NPRM, 26 FCC Rcd at 17507, ¶ 51.

82 ACA NPRM Comments at 12; see also CWA NPRM Comments at 4-5; WGAW NPRM Comments at 3.

83 Free Press NPRM Comments at 44-45; Free Press NPRM Reply at 18-22; NHMC et al. NPRM Comments at 3-5;

UCC et al. NPRM Comments at 24.

84 Free Press NPRM Comments at 44-45; Free Press NPRM Reply at 20-21; UCC et al. NPRM Comments at 24.

85 Free Press NPRM Reply at 18-19. To support this assertion, Free Press cited (1) research it conducted, in

conjunction with Consumers Union and Consumer Federation of America, that was submitted in the 2006

Quadrennial Review proceeding that purported to show that duopolies do not “exhibit statistically significant

increases in either market share or hours of news”; and (2) a 2009 study conducted by Dr. Danilo Yanich concluding

that duopoly stations provided less local content in their newscasts than independently owned stations. Id. at 19

(continued….)

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al. stated that returning to the single-station rule would increase ownership opportunities for minorities

and women.86

37.

As explained in greater detail in the paragraphs below on multicasting, many broadcast

commenters objected to any proposal to tighten the existing local television rule that is premised on

multicasting capabilities. In addition, NAB and the Small Market Coalition challenged allegations that

duopolies have not served the public interest.87 According to these commenters, the record demonstrates

that common ownership has resulted in increased local news and public interest programming, as well as

diverse program offerings that would not be possible without the operational efficiencies achieved

through common ownership.88 NAB asserted also that there is “extensive empirical evidence” that

demonstrates that local station combinations have served the Commission’s public interest goals.89 And,

according to the Small Market Coalition, duopolies have provided advertisers with improved advertising

options and, in some circumstances, preserved stations that would have failed absent common ownership

thus benefitting competition.90

38.

In addition, CBS and Entravision urged the Commission to relax the ownership

restrictions and allow a licensee to own up to three television stations (a “triopoly”) in a local market.91

CBS asserted that such an increase is warranted, in part, because of the Commission’s action in the 2002

biennial ownership review allowing triopolies in certain markets.92 Entravision asserted that such changes

would be reasonable in light of increased competition from non-broadcast video alternatives —

particularly in larger markets — and the public interest benefits that result from common ownership of

local television stations.93

39.

We seek comment on our preliminary view that the local television marketplace has not

changed significantly since the NPRM to justify either tightening or loosening the current numerical limits

of the local television rule. Ownership of a second in-market station can create substantial efficiencies,

which may allow a local broadcast station to invest in programming that meets the needs of its local

(Continued from previous page)

(citing Consumers Union et al. Jan. 16, 2007 Reply, MB Docket No. 06-121, at 95; Danilo Yanich, Ownership

Matters: Localism, Local Television News, and the FCC (May 20, 2009) (presented at the International

Communication Association annual meeting)).

86 NHMC et al. NPRM Comments at 3-5; UCC et al. NPRM Comments at 24; see also Free Press NPRM

Comments at 44 (asserting that tightening the television ownership limits could promote ownership diversity by

creating ownership opportunities for new entrants); Free Press NPRM Reply at 19.

87 NAB NPRM Reply at 7-8; Small Market Coalition NPRM Reply at 5-7.

88 NAB NPRM Reply at 7-8; Small Market Coalition NPRM Reply at 5-7.

89 NAB NPRM Reply at 8 (citations omitted); see also NAB NPRM Comments at 20 n.79 (citing multiple studies

submitted in previous reviews, including studies commissioned by the Commission, that, according to NAB,

demonstrate that commonly owned stations are more likely to offer local news and public interest programming, to

offer more news programming, and/or to be more popular with viewers than independently owned stations).

90 Small Market Coalition NPRM Reply at 7.

91 CBS NPRM Comments at 12-13 (asserting that triopolies should be permitted in the nation’s largest media

markets); Entravision NPRM Comments at 9-10 (asserting that duopolies should be permitted in all markets, with

triopolies allowed in markets with 18 or more television stations, subject to certain behavioral measures to mitigate

potential anticompetitive impact of additional consolidation).

92 CBS NPRM Comments at 12 (citing 2002 Biennial Review Order, 18 FCC Rcd at 13677, ¶ 153). We note that

the numerical limits adopted in the 2002 biennial review proceeding were overturned on appeal. Prometheus I, 373

F.3d at 418-20.

93 Entravision NPRM Comments at 9-10.

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community, such as local news or other public interest programming.94 Notably, we tentatively find that

there is substantial evidence in the record that the duopolies permitted subject to the restrictions of the

current rule have created tangible public interest benefits for viewers in local television markets that more

than offset any potential harms that are associated with common ownership.95 Moreover, as discussed in

greater detail in the paragraphs below on multicasting, we believe that the ability to multicast is not a

substitute for common ownership of multiple stations and, therefore, would not justify tightening the

existing numerical limits. We seek comment on these tentative findings.

40.

Similarly, we do not believe there have been sufficient changes in the local television

marketplace to justify ownership of a third in-market station. We seek comment on this tentative

conclusion. The primary “change” in the marketplace cited by those commenters in favor of loosening

the rule is competition from non-broadcast alternatives. As discussed above, however, we believe the

local television ownership rule is designed to promote competition among broadcast television stations in

local television markets, and we have tentatively concluded that it is not yet appropriate to consider

competition from non-broadcast sources in evaluating whether the rule remains necessary. Even if we

were to consider such competition, Entravision, which supported ownership of up to two stations in all

markets and up to three stations in markets with 18 or more television stations, conceded that such

consolidation is likely to threaten our competition and diversity goals by jeopardizing small and mid-

sized broadcasters.96 Without significant evidence of the public interest benefits that could result from the

ownership of three stations in a local market, we do not believe that there is adequate justification at this

time for increasing the numerical limits.

41.

Top-Four Prohibition. We propose to continue to prohibit mergers between two top-

four-rated stations in a local market, consistent with the tentative conclusion in the NPRM.97 We

tentatively find that the top-four prohibition remains necessary to promote competition in the local

94 2006 Quadrennial Review Order, 23 FCC Rcd at 2064-65, ¶ 98.

95 See, e.g., Belo NOI Comments at 6-9 (providing evidence of increased local news and information programming,

including increased news staff in certain markets, that Belo asserted are the result of efficiencies gained from

common ownership); LIN NPRM Comments at 17-19, Att. 1 (providing evidence of increased local news and public

interest programming, including locally produced local sports programming, and niche programming that LIN

asserted are the result of efficiencies gained from common ownership); Nexstar NPRM Comments at 15, 18, 23-24

(providing evidence of increased local news and information programming that Nexstar asserted are the result of

efficiencies gained from common ownership); see also NAB NPRM Reply at 7-8; Small Market Coalition NPRM

Reply at 5-7; but see Free Press NPRM Reply at 18-19 (asserting that common ownership does not serve the public

interest and citing evidence that, according to Free Press, demonstrates that common ownership does not result in

increased local news content).

96 Entravision NPRM Comments at 9-10. To combat these harms, Entravision proposed a series of “behavioral

regulations” that the Commission could adopt in tandem with loosening the ownership restrictions. Id. at 10-12.

The Commission declined to adopt this proposal in the 2006 Quadrennial Review proceeding, a decision that was

upheld in Prometheus II, and we see no changes in the local television marketplace that would warrant

reconsideration of the Commission’s previous decision. See Prometheus II, 652 F.3d at 458-61 (upholding the

Commission’s decision to retain the pre-2003 local television ownership rule). The Commission has long applied

structural local media ownership rules and has previously rejected proposals for instituting behavioral rules. See,

e.g., 2002 Biennial Review Order, 18 FCC Rcd at 13859-60, ¶¶ 623-26 (retaining the structural ownership rules

approach and rejecting proposed behavioral rules that failed to address the Commission’s public interest goals); see

also 2002 Biennial Regulatory Review – Review of the Commission's Broadcast OwnershipRules and Other Rules

Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MB Docket No. 02-277, Notice of

Proposed Rulemaking, 17 FCC Rcd 18503, 18520-21, 18522, ¶¶ 49, 55 (2002) (seeking comment regarding whether

to replace the structural ownership rules with a different approach, such as behavioral rules). We propose to affirm

this approach, as we continue to believe that behavioral rules are not appropriate substitutes for our structural local

media ownership rules. We seek comment on this proposal.

97 NPRM, 26 FCC Rcd at 17503-04, ¶ 40.

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television marketplace. We seek comment on whether there have been any developments since the

NPRM that we should consider with regard to this issue.

42.

In the 2010 Quadrennial Review proceeding, ACA and WGAW supported the

Commission’s decision to retain the top-four prohibition.98 ACA stated that the marketplace had not

changed since the Commission preserved the prohibition in the 2006 Quadrennial Review Order;

therefore, the rationale for the prohibition still held.99 In addition, WGAW disputed broadcasters’ claims

that top-four mergers would produce increases in local news programming.100 WGAW supported the

Commission’s findings regarding the likelihood that top-four stations already provide local news, and, in

WGAW’s experience, the merger of two stations with existing, independent news operations resulted not

in more original news content but in the repurposing of the same news content across the commonly

owned stations.101

43.

Conversely, broadcast commenters asserted that the top-four prohibition was no longer

necessary as a result of competition from alternative sources of video programming, and they disputed the

Commission’s rationale for upholding the prohibition.102 For example, NAB asserted that there was not a

natural break in the audience share between the fourth- and fifth-rated stations, particularly in small and

mid-sized markets that often have only one or two dominant stations in the market.103 In addition, NAB

stated that permitting top-four combinations in such markets would allow the combined stations to

compete more effectively against the dominant market station(s), as well as non-broadcast video

alternatives.104 And, according to NAB and Nexstar, stations have natural incentives to compete in order

to maximize revenue, regardless of market rank or station ownership.105 Finally, broadcasters asserted

that eliminating the top-four prohibition would benefit localism through increased local news and local

public interest programming, and they urged the Commission to find that the top-four prohibition is not

necessary to promote viewpoint diversity.106

44.

Consistent with previous Commission decisions, we propose to continue to prohibit

mergers involving two of the top-four stations in a market because we believe such combinations would

98 ACA NPRM Comments at 12; WGAW NPRM Comments at 4.

99 ACA NPRM Comments at 12.

100 WGAW NPRM Comments at 4.

101 Id. at 3-4.

102 See CRT NPRM Comments at 13; NAB NPRM Comments at 23-24; Nexstar NPRM Comments at 16-17;

Sinclair NPRM Comments at 13-14.

103 See, e.g., NAB NPRM Comments at 23; NAB NPRM Reply at 11. To support its challenge of the Commission’s

top-four rated station threshold, NAB submitted a market revenue analysis that found that there are many markets

with “substantial gaps” in revenue other than between the fourth and fifth ranked stations. NAB NPRM Reply Att.

A at 2 (Mark Fratrik, Reforming Local Ownership Rules: Station and Market Analyses (Apr. 17, 2012)). We note,

however, that this analysis evaluates revenue share, and therefore does not disturb the Commission’s previous

determination that audience share is the appropriate metric for purposes of the top-four prohibition — a

determination that we tentatively affirm. See, e.g., 2002 Biennial Review Order, 18 FCC Rcd at 13695, ¶ 195 n.407.

104 NAB NPRM Comments at 23.

105 See id. at 24; Nexstar NPRM Comments at 16-17.

106 See, e.g., NAB NPRM Comments at 24-25; Nexstar NPRM Comments at 17-18. Given that we tentatively find

that it is necessary to retain the top-four prohibition in order to promote competition, we do not feel the need to

consider whether it is also necessary to do so in order to promote our localism or viewpoint diversity goals, but

commenters are invited to offer their views on this approach.

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be the most deleterious to competition.107 The Commission has previously identified potential harms

associated with top-four combinations, and we found no evidence in the 2010 Quadrennial Review record

to disturb the Commission’s previous findings.108 Accordingly, we continue to believe that top-four

combinations would often result in a single firm obtaining a significantly larger market share than other

firms in the market and that such combinations could create welfare harms.109 Top-four combinations

have been found to reduce incentives for local stations to improve their programming, as once strong

rivals suddenly have incentives to coordinate their programming in order to minimize competition

between the commonly owned stations.110 In addition, in general, there remains a significant “cushion” of

audience share points that separates the top-four stations in a market from the fifth-ranked station.111

Accordingly, we tentatively find that the public interest is best served by retaining the top-four

prohibition. We seek comment on this tentative conclusion.

45.

The NPRM also sought comment on certain circumstances in which a licensee is able to

obtain control over two of the top-four stations in a market through a transaction or series of transactions,

sometimes referred to as “affiliation swaps,” that do not require prior Commission approval.112 Based on

our review of the 2010 Quadrennial Review record, we tentatively find that such transactions should be

subject to the top-four prohibition because we believe they circumvent the intent of our rule and are not in

the public interest. We seek comment on whether we should adopt this approach.

46.

Mediacom/Suddenlink asserted that such transactions should be prohibited because the

harms associated with a single entity owning two top-four stations are the same, regardless of when the

107 2006 Quadrennial Review Order, 23 FCC Rcd at 2066-67, ¶ 102; 2002 Biennial Review Order, 18 FCC Rcd at

13694, ¶ 194. We note that each decision to retain the top-four prohibition was subsequently upheld on appeal. In

each instance, the court found that the Commission’s line-drawing was supported by “ample evidence in the record.”

See Prometheus II, 652 F.3d at 460-61; Prometheus I, 373 F.3d at 417-18.

108 See 2006 Quadrennial Review Order, 23 FCC Rcd at 2066-67, ¶ 102; 2002 Biennial Review Order, 18 FCC Rcd

at 13694, ¶ 194. Indeed, the primary argument that such combinations would not harm competition rests on the

purported existence of competition from non-broadcast video alternatives. However, as discussed above, we have

tentatively determined that it is not yet appropriate to consider such alternatives in the local television ownership

rule; accordingly, we propose to decline to do so here.

109 2006 Quadrennial Review Order, 23 FCC Rcd at 2066, ¶ 102; 2002 Biennial Review Order, 18 FCC Rcd at

13695, ¶ 194.

110 2006 Quadrennial Review Order, 23 FCC Rcd at 2066, ¶ 102; 2002 Biennial Review Order, 18 FCC Rcd at

13695, 13697, ¶¶ 194, 200. Previous research has found little risk that these competitive harms would result from

mergers that do not involve two of the top-four stations. 2002 Biennial Review Order, 18 FCC Rcd at 13695, ¶ 194.

111 The Nielsen Company (“Nielsen”), All-Day Audience Share Data for May 2012 (9 a.m.–midnight) (“Nielsen

Audience Share Data May 2012”) (evaluation of ratings share data for the fourth- and fifth-rated broadcast

television stations in each DMA with at least five full-power television stations). Multiple broadcast commenters

asserted that the top-four prohibition should be rejected because the ratings cushion between the fourth- and fifth-

rated station does not exist in every market. See, e.g., NAB NPRM Comments at 23. The Commission has never

based the top-four prohibition solely on the existence of the ratings cushion in every market; nor do we propose to

do so today. Notably, in the 2002 Biennial Review Order, the Commission determined that the cushion existed in

two-thirds of the markets with five or more full-power commercial television stations. 18 FCC Rcd at 13694-95,

¶ 195. The court in Prometheus I cited specifically to this finding as evidence to support the Commission’s line-

drawing decision. 373 F.3d at 418; see also Prometheus II, 652 F.3d at 460-61 (upholding, again, the Commission’s

rationale for retaining the top-four prohibition). Therefore, we tentatively reject any claim that the top-four

prohibition cannot be supported because the ratings cushion is not present in every market. The cushion continues

to exist in most markets and, as such, it continues to support our tentative decision to retain the top-four prohibition.

112 NPRM, 26 FCC Rcd at 17505, ¶ 45.

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duopoly is created.113 Accordingly, these commenters asserted that the top-four prohibition should apply

both to station acquisitions and to subsequent affiliation swaps.114 Broadcast commenters, however,

opposed extending application of the top-four prohibition beyond the initial station acquisition. These

commenters asserted that the rule would punish existing duopoly owners that improve station

performance and would require extensive Commission involvement in station programming and

personnel decisions.115 Many broadcast commenters also insisted this prohibition would violate the First

Amendment.116

47.

In general, national network affiliation is a significant driver of a station’s audience

share. The Commission has previously found that, nationally, the Big Four networks (i.e., ABC, CBS,

Fox, and NBC) are the highest rated networks and that, in general, the national audience statistics are

reflected in the rankings in the local markets.117 Recent Nielsen data confirm this finding.118

Accordingly, an affiliation swap involving a top-four station and a non-top-four station will nearly always

result in the non-top-four station becoming a top-four station after the swap. Because such affiliation

swaps do not involve the assignment or transfer of a station license, the transaction is not subject to prior

Commission approval under Section 310(d) of the Communications Act of 1934. Thus, by engaging in

an affiliation swap, parties can achieve a top-four station combination that would otherwise have been

prohibited by the Commission’s rules.

48.

This fact is evidenced in the Honolulu, Hawaii, DMA, where an affiliation swap between

a top-four station and a non-top-four station — which was commonly owned with a different top-four

station in the market — was executed.119 In addition to the affiliation swap, the parties swapped certain of

the stations’ non-network programming and the stations’ call signs, purportedly to avoid viewer

confusion.120 Thus, the stations (though not the licenses) effectively changed hands without prior

Commission approval — approval that was not technically required.121 Consistent with our observation

113 Mediacom Communications Corp. and Cequel Communications LLC d/b/a/ Suddenlink Communications

(“Mediacom/Suddenlink”) NPRM Comments at 18.

114 Id.

115 CBS NPRM Comments at 14-15 (asserting that regulation of affiliation swaps would run counter to the

Commission’s recent history of deregulation in matters involving network affiliations, including elimination of the

prohibition on network ownership of television stations in small markets and repeal of the “secondary affiliation

rule”); LIN NPRM Comments at 20; Sinclair NPRM Comments at 16.

116 LIN NPRM Comments at 20-21; Nexstar NPRM Comments at 17 n.32; Sinclair NPRM Comments at 18.

117 See, e.g., 2002 Biennial Review Order, 18 FCC Rcd at 13695, ¶ 196; see also infra ¶¶ 234-235 (discussing the

ratings of the top-four national networks).

118 See Nielsen Audience Share Data May 2012 (evaluation of network affiliation data for the top-four rated

broadcast television stations by DMA).

119 See KHNL/KGMB License Subsidiary, LLC, Memorandum Opinion and Order and Notice of Apparent Liability

for Forfeiture, 26 FCC Rcd 16087, 16091, ¶ 14 (Med. Bur. 2011), application for review pending. The Media

Bureau was highly critical of the transactions at issue in this case, but ultimately determined that, based on the

existing rules, it could not find a violation of the local television ownership rule. Id. at 16095, ¶ 23. In noting its

concerns about such transactions, the Media Bureau stated that its decision did not preclude consideration of these

issues in the context of individual licensing proceedings and that the Commission would explore affiliation swaps in

the context of the ongoing media ownership proceeding. Id. We share the Media Bureau’s earlier concerns, and our

proposal here would prevent licensees from circumventing the top-four prohibition in this manner in the future.

120 Id. at 16088, ¶ 3.

121 Indeed, in that example, the amount of consideration paid for the then higher-rated station’s network affiliation

and other non-license assets suggests that not only was the creation of a top-four duopoly the likely result of the

transaction, but the intended result. Id. at 16088, ¶ 4 (noting that Raycom, which acquired the network affiliation

associated with the higher-rated station, paid $22 million under the terms of the agreements).

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above regarding the correlation between affiliation with a Big Four network and market rank, following

the affiliation swap, the non-top-four station became a top-four station.122 By structuring these

transactions so as to evade Commission review, a single entity was able to acquire control over a second

top-four station in the market, a result that is prohibited under the local television ownership rule.

49.

We tentatively find that transactions involving the sale or swap of network affiliations

between in-market stations that result in an entity holding an attributable interest in two top-four stations

can be used to evade the top-four prohibition. Accordingly, in order to close this loophole, we propose to

clarify that such transactions must comply with the top-four prohibition at the time the agreement is

executed. Specifically, we believe an entity should not be permitted to directly or indirectly own, operate,

or control two television stations in the same DMA through the execution of any agreement (or series of

agreements) involving stations in the same DMA, or any individual or entity with a cognizable interest in

such stations, in which a station (the “new affiliate”) acquires the network affiliation of another station

(the “previous affiliate”), if the change in network affiliations would result in the licensee of the new

affiliate, or any individual or entity with a cognizable interest in the new affiliate, directly or indirectly

owning, operating, or controlling two of the top-four rated television stations in the DMA at the time of

the agreement.123 We propose to find any party that has control over two top-four stations in the same

DMA as a result of such transactions to be in violation of the top-four prohibition and subject to

enforcement action.124 We seek comment on these proposals. In addition, we seek comment on whether

and how station owners are attempting to circumvent the top-four prohibition, or any other of the media

ownership rules, through the invention of similar devices.125

50.

We seek comment on whether this application of the top-four prohibition is consistent

with the Commission’s policy to avoid constraints on commercial activities that are designed to effect

station improvements.126 We continue to encourage licensees to improve the quality of the programming

122 See id. at 16094, ¶ 21; see also Nielsen, All-Day Audience Share Data for May 2009 and November 2009 (9

a.m.–midnight) (confirming that, following the transaction, the non-top four station became a top-four station, and

vice versa).

123 47 C.F.R. § 73.3555(b)(1)(i). In addition, we propose that, for purposes of making this determination, the new

affiliate’s post-consummation ranking would be the ranking of the previous affiliate at the time the agreement is

executed, determined in accordance with section 73.3555(b)(1)(i) of the Commission’s rules. Id.

124 Application of this rule would be prospective, and parties that acquired control over a second in-market top-four

station by engaging in such transactions prior to the release date of a decision to adopt such a rule would not be

subject to divestiture or enforcement action. Consistent with KHNL/KGMB License Subsidiary, such transactions

that would not be subject to such a rule could still be considered in the context of individual licensing proceedings.

26 FCC Rcd at 16092, ¶ 15 (citing 47 U.S.C. § 309(k)(1)(A)). All future transactions would be required to comply

with the Commission’s rules then in effect. We seek comment on this approach.

125 While we have tentatively determined that the present circumstances support prospective application of this rule,

parties are on notice that similar efforts to evade the media ownership rules could be subject to enforcement action.

126 See 1999 Ownership Order, 14 FCC Rcd at 12933-34, ¶¶ 64-66. While certain commenters argued to the

contrary, for the reasons discussed herein, acquiring control over a second in-market top-four station through the

transactions described above is easily distinguishable from other, legitimate actions a station may undertake to

increase ratings at the expense of a competitor. In addition, Sinclair cautioned the Commission against interfering in

the free market negotiation of affiliation agreements — which it asserted occur often and for valid business reasons

— based upon a single instance where the Commission believes an affiliation swap constituted an “end run” around

the top-four prohibition.

See Sinclair NPRM Comments at 16-18 (referencing KHNL/KGMB License Subsidiary).

Contrary to Sinclair’s assertion, we do not believe that it is necessary, or wise, to permit additional parties to evade

the top-four prohibition before we act, nor do we believe that our proposal today is likely to have a significant

impact on the negotiation of affiliation agreements. Consistent with Sinclair’s comments, we believe that the

negotiation of affiliation agreements typically does not involve affiliation swaps and, therefore, would be unaffected

by our proposal today. And while such swaps may not occur often, given the potential of such transactions to

undermine the local television ownership rule, we believe that the application of the top-four prohibition to such

(continued….)

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and operation of their stations in ways that are consistent with the Commission’s rules and policies.

Moreover, we do not believe that closing this loophole in the top-four prohibition violates the First

Amendment. Indeed, recent constitutional challenges to the media ownership rules have been rejected,

and we tentatively find that this application of the top-four prohibition withstands First Amendment

scrutiny for the same reasons.127

51.

Eight-Voices Test. Consistent with the proposal in the NPRM, we tentatively conclude

that a merger between two in-market stations with overlapping contours should not be permitted unless

there would be at least eight independently owned commercial and noncommercial television stations

remaining in the market post-merger, and at least one station is not a top-four station.128 We tentatively

find that the eight-voices test continues to be necessary to promote competition in local television

markets. We seek comment on these tentative conclusions.

52.

In the 2010 Quadrennial Review proceeding, WGAW supported retaining the eight-

voices test, stating that the test promotes competition by ensuring a minimum number of competitors.129

According to WGAW, this competition encourages diversity, as stations must offer diverse programming

and viewpoints in order to compete effectively.130

53.

However, broadcast commenters asserted that the eight-voices test is not necessary to

promote competition.131 Broadcasters asserted that the test prevents stations in small and mid-sized

markets from achieving financial benefits and operating efficiencies that could be passed on to consumers

in the form of increased local news and locally oriented programming.132

Furthermore, many broadcast

(Continued from previous page)

transactions would be necessary. We do not believe there is a reliable marketplace solution that would restrain the

use of affiliation swaps to evade the top-four prohibition. We seek comment on these views.

127 In Prometheus II, the court, under the rational basis standard of review, found that the media ownership rules do

not violate the First Amendment “because they are rationally related to substantial government interests in

promoting competition and protecting viewpoint diversity.” 652 F.3d at 464. The court rejected broadcasters’

claims that the rules “are impermissible attempts by the FCC to manipulate content” and rejected Sinclair’s

argument that the local television ownership rule “violates the First Amendment because it ‘singles out television

stations.’” Id. at 465; see also Sinclair, 284 F.3d at 168-69 (finding that the local television ownership rule does not

violate the First Amendment under the rational basis review standard and rejecting arguments that the rule should be

subject to either intermediate or strict scrutiny). The approach we propose today would clarify that the top-four

prohibition would apply to certain agreements that are the functional equivalent of a transfer of control or

assignment of license. Accordingly, this application of the top-four prohibition would be subject to the same

constitutional analysis. Pursuant to that constitutional analysis, as noted above, courts have repeatedly found that

the local television ownership rule, which includes the top-four prohibition, does not violate the First Amendment.

128 NPRM, 26 FCC Rcd at 17506, ¶ 46.

129 WGAW NPRM Comments at 5.

130 Id.

131 See Belo NPRM Comments at 8-9; CRT NPRM Comments at 13; NAB NPRM Comments at 27; NAB NPRM

Reply at 15; Nexstar NPRM Comments at 19-20; Sinclair NPRM Comments at 4, 21. NAB stated also that the

eight-voices test should be rejected because it cannot guarantee that each voice in the market will provide “diverse

viewpoints.” NAB NPRM Reply at 15. We note that the eight-voices test is designed to promote competition, and

not viewpoint diversity, though we do believe that promoting competition can indirectly promote viewpoint

diversity.

132 See Belo NPRM Comments at 8-9; Grant Group NPRM Comments at 9; NAB NPRM Comments at 27; NAB

NPRM Reply at 15; Nexstar NPRM Comments at 21. According to NAB, reducing the voices count to six or seven

(as discussed in the NPRM) would still not provide relief to stations in small markets that NAB alleged are impacted

disproportionately by the ownership restrictions and are less able to support local news operations. NAB NPRM

Comments at 28-29 (asserting that a six-voices test would only allow new combinations in ten markets in DMAs

101-210); see also Tribune NPRM Reply at 34 (asserting that adopting a six- or seven-voices threshold would have

(continued….)

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commenters argued that, based on the Sinclair decision, the definition of “voices” should be expanded to

include other media such as MVPDs, the Internet, and newspapers.133

54.

Our view is that the 2010 Quadrennial Review record does not reveal sufficient changes

in the local television marketplace to warrant modification of the eight-voices test at this time. Consistent

with the Commission’s prior position, we tentatively find that, in order to permit common ownership of

two in-market stations with digital NLSC overlap, there should be a minimum of eight independently

owned and operated television stations in the market post-merger.134 We believe this minimum threshold

would help ensure robust competition among local television stations in the markets where common

ownership is permitted under our proposed rule, as it would increase the likelihood that each such market

would be served by stations affiliated with each of the Big Four networks as well as at least four

independently owned and operated stations unaffiliated with these major networks. Indeed, nearly every

market with eight or more full-power television stations — absent a waiver of the local television

ownership rule or unique circumstances — is served by each of the Big Four networks and at least four

independent competitors unaffiliated with a Big Four network.135 Competition among these

independently owned stations is important, as it serves to improve the programming offered both by the

major network stations and the independent stations, including increased local news and public interest

programming.136 We note that this competition is perhaps most valuable during the parts of the day in

which local broadcast stations do not transmit the programming of affiliated broadcast networks.

Moreover, because there continues to be a significant gap in audience share between the top-four stations

in a market and the remaining stations in most markets, we continue to believe that it is appropriate to

retain the eight-voices test, which helps to promote at least four independent competitors before common

ownership is allowed.137 We seek comment on our tentative conclusion that, in light of this concentration

and consistent with the 2006 Quadrennial Review Order, it remains prudent to require the presence of at

least four additional independently owned and operated competitors in the market in order to promote

competition in the local television market before permitting any common ownership in that market.138 We

are most interested in learning whether any new information has become available since the NPRM that

we should take into account in considering this issue.

55.

We tentatively find that it is appropriate to include only full-power television stations in

the voice count. The primary purpose of the rule is to promote competition among broadcast television

stations in local television viewing markets; therefore, we tentatively find that it would be inappropriate to

include other types of media when counting voices. We note that in the 2006 Quadrennial Review Order

the Commission addressed the Sinclair court’s criticisms of the eight-voices test, specifically the rationale

for defining voices differently in the radio-television cross ownership rule and the local television

ownership rule.139 The Commission detailed its rationale for limiting voices in the television rule to only

(Continued from previous page)

only a minimal impact on competition). Similarly, Grant Group argued in favor of a four-voices test, which it

asserted would allow incremental relief to television broadcasters in small markets while retaining a “diversity

floor” in each market. Grant Group NPRM Comments at 9.

133 See CRT NPRM Comments at 13; Grant Group NPRM Comments at 10; NAB NPRM Comments at 28; NAB

NPRM Reply at 14; Sinclair NPRM Comments at 2; Tribune NPRM Comments at 70-71; see also Sinclair, 284

F.3d at 162-65.

134 2006 Quadrennial Review Order, 23 FCC Rcd at 2065, ¶ 99.

135 See BIA/Kelsey, BIA Media Access Pro 4.6 Television Database as of Aug. 30, 2012 (evaluation of the network

affiliation data for stations in DMAs with eight or more full-power television stations).

136 2006 Quadrennial Review Order, 23 FCC Rcd at 2065, ¶ 99.

137 See id.

138 Id.

139 Id. at 2066, ¶ 100; see also Sinclair, 284 F.3d at 162-65.

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full-power television stations, a rationale that was subsequently upheld on appeal in Prometheus II, and to

which we propose to continue to adhere herein.140 We seek comment on our view that Sinclair does not

compel us to include additional voices in the eight-voices test.

56.

Market Size Waivers. The NPRM sought comment on whether the Commission should

adopt a waiver standard for markets where the rules would otherwise limit ownership to a single

television station, and, if so, how such a waiver standard should be structured.141 The NPRM sought

comment also on whether such a market size waiver, which could even allow combinations between top-

four stations, would promote additional local news offerings in small markets that are less able to support

four local news operations.142 Based on our review of the 2010 Quadrennial Review record, we

tentatively conclude that a market size waiver standard is not necessary. Instead, we tentatively conclude

that retention of the existing failed/failing station waiver policy would serve the public interest and we

seek additional comment on whether we should relax the waiver criteria or establish additional grounds

for waiver.143

57.

CWA and Free Press opposed relaxation of the waiver criteria in response to the

NPRM.144 Broadcast commenters, however, supported adoption of a more flexible waiver standard for

small and mid-sized markets. Many such commenters advocated elimination of the failed/failing

requirement from the existing standard and recommended that we place a greater emphasis on the ability

of the waiver applicant to initiate or sustain local news and public affairs programming.145 LIN and New

Vision/TTBG offered detailed alternative waiver standards that would be more permissive than the

criteria under the existing policy.146

58.

We seek comment on our tentative conclusion that establishing a new market size waiver

standard is not needed. Having evaluated the various proposed waiver standards proffered by

commenters, we are concerned that many of the proposed waiver criteria would be difficult to monitor or

140 2006 Quadrennial Review Order, 23 FCC Rcd at 2066, ¶ 100; see also Prometheus II, 652 F.3d at 460. The

Commission determined that the primary goal of the local television ownership rule was to promote competition

among local television stations, and not to foster viewpoint diversity because there were other outlets for diversity of

viewpoint in local markets; therefore, although other types of media contribute to viewpoint diversity, the

Commission determined that they should not be counted as voices under the local television ownership rule. 2006

Quadrennial Review Order, 23 FCC Rcd at 2066, ¶ 100.

141 NPRM, 26 FCC Rcd at 17508, ¶ 52.

142 Id. at 17508, ¶ 53.

143 Under this policy, an applicant must demonstrate that one of the broadcast television stations involved in the

proposed transaction is either failed or failing and that the in-market buyer is the only reasonably available candidate

willing and able to acquire and operate the station; and selling the station to an out-of-market buyer would result in

an artificially depressed price. 47 C.F.R. § 73.3555, Note 7; see also NPRM, 26 FCC Rcd at 17509, ¶ 54 (seeking

comment on whether to readopt some or all of the current failed/failing station waiver policy).

144 CWA NPRM Comments at 4; Free Press NPRM Reply at 18.

145 See Belo NPRM Comments at 9-10; Gray NPRM Comments at 9; Sinclair NPRM Comments at 16; see also

NAB NPRM Reply at 16 n.53 (asserting that the current waiver standard is too restrictive because of the

failed/failing requirement and the audience share limit, which is difficult to satisfy due to the popularity of network

programming). In addition, Sinclair asserted that the waiver standard should permit the proposed combination

unless it can be definitively shown that the combination would harm the public interest. Sinclair NPRM Comments

at 16.

146 LIN NPRM Comments at 22-23 (providing distinct waiver criteria for the eight-voices test and the top-four

prohibition); New Vision/TTBG NPRM Comments at 15-16 (proposing a “Market Position Standard” and a “Likely

to Increase News Programming Standard”). The Small Market Coalition, in its reply comments, supported the

waiver criteria proposed by LIN and stated that the criteria proposed by New Vision/TTBG also deserve

consideration. Small Market Coalition NPRM Reply at 8-9.

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enforce, are not rationally related to the ability of each station to compete in the local market, and could

be manipulated in order to obtain a waiver. Ultimately, we predict that such standards would significantly

expand the circumstances in which a waiver of the local television ownership rule would be granted. We

are concerned that such relaxation would be inconsistent with our tentative conclusion that the public

interest is best served by retaining the existing television ownership limits. Moreover, we believe that the

existing waiver standard is not unduly restrictive and that it provides appropriate relief in markets of all

sizes.147 Waiver of our rules is meant to be exceptional relief, and we tentatively find that the existing

waiver criteria strike an appropriate balance between enforcing the ownership limits and providing relief

from the rule on a case-by-case basis.

59.

In addition, we tentatively find that it is not necessary to modify the existing waiver

standard in order to promote additional local news, as the current policy already indirectly takes this into

consideration in cases involving failing stations. Indeed, parties frequently pledge to continue and/or

increase local news offerings in order to demonstrate that the proposed transaction would produce public

interest benefits.148 Our commitment to promoting increased local news remains strong, and we believe

that the existing waiver policy helps further that goal. We seek comment on whether there is new

information since the NPRM that would alter our preliminary views on this issue.

60.

We seek comment on our tentative conclusion that maintaining the failed/failing station

waiver policy will serve the public interest. While we propose to retain the existing failed/failing station

waiver policy, we acknowledge that some industry participants have argued that certain elements of the

existing policy are too restrictive. Accordingly, we seek comment on potential changes to the policy to

address those circumstances. For example, are there circumstances in which we should refrain from

applying the four-percent all-day audience share requirement or adopt a higher threshold? If so, what

circumstances would justify such a change? Are any other changes appropriate? We encourage

commenters to provide alternative waiver criteria for our consideration, including specific justifications

for such criteria, as well as the potential impact on our policy goals.

61.

Multicasting. The NPRM sought comment on whether the transition to digital television,

and specifically a station’s ability to multicast multiple program streams has eliminated the need to permit

common ownership of two stations in local television markets, as the local television ownership rule does.

The 2010 Quadrennial Review record does not persuade us that multicasting justifies imposition of a

single-station ownership restriction or other tightening of the current ownership limits. We seek comment

on whether there have been any developments since the NPRM that should cause us to reevaluate this

position.

147 A survey of recent transactions demonstrates that waiver under the failed/failing station policy is frequently

granted in small and mid-sized markets. See, e.g., Freedom Broadcasting of New York Licensee, L.L.C., Letter, 27

FCC Rcd 2498 (Med. Bur. 2012) (granting waiver under the failed/failing station policy in the Albany-Schenectady-

Troy, New York, DMA – DMA #58); Riverside Media, LLC, Letter, 26 FCC Rcd 16038 (Med. Bur. 2011) (granting

waiver under the failed/failing station policy in the Ft. Smith-Fayetteville-Springdale-Rogers, Arkansas, DMA –

DMA #101); ACME Television, Inc., Letter, 26 FCC Rcd 5189 (Med. Bur. 2011) (granting waiver under the

failed/failing station policy in the Green Bay-Appleton, Wisconsin, DMA – DMA #69); Estes Broadcasting, Inc.,

Letter, 25 FCC Rcd 7956 (Med. Bur. 2010) (granting waiver under the failed/failing station policy in the Tyler-

Longview, Texas, DMA – DMA #107); Borger Broadcasting, Inc., Debtor in Possession, Letter, DA 10-209 (MB,

rel. Jan 29, 2010) (granting waiver under the failed/failing station policy in the Amarillo, Texas, DMA – DMA

#130); Davis Television Clarksburg, LLC, Memorandum Opinion and Order, 23 FCC Rcd 5472 (Med. Bur. 2008)

(granting waiver under the failed/failing station policy in the Clarksburg-Weston, West Virginia, DMA – DMA

#170).

148 See, e.g., Freedom Broadcasting, 27 FCC Rcd at 2500; ACME Television, 26 FCC Rcd at 5193-94; Davis

Television, 23 FCC Rcd at 5474, ¶ 7.

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62.

In response to the NPRM, Free Press and UCC et al. asserted that, because multicasting

offers stations the ability to provide multiple programming streams without owning a second station, the

duopoly rule should be eliminated in favor of the previous single-station rule.149 These commenters

asserted that, in light of the ability to multicast, allowing a broadcaster to acquire a second in-market

station is an inefficient use of spectrum.150

63.

Broadcasters, however, asserted that the ability to multicast does not justify tightening (or

failing to loosen) the local television ownership rule. According to broadcasters, multicasting has

provided significant benefits to local markets, as stations are now providing programming that was not

previously available over-the-air.151 These broadcasters stated, however, that the ability to multicast does

not replicate the benefits of common ownership of a second in-market station. For example, multicast

channels do not have must-carry rights and, according to broadcasters, it is difficult to obtain carriage for

multicast channels on satellite and cable systems.152 Broadcasters asserted that because an estimated 90

percent of households receive broadcast signals via a subscription service, the lack of carriage translates

to decreased advertising revenues on the multicast stream.153 Moreover, instead of multicasting, many

broadcasters are utilizing their digital spectrum to offer a higher quality HD signal on their main

programming feed or other innovative services, such as mobile DTV.154

64.

We tentatively concur with the broadcast commenters that, while multicasting has

produced public interest benefits, the ability to multicast does not justify tightening the current numerical

limits. Based on evidence in the 2010 Quadrennial Review record, broadcasting on a multicast stream

does not — at present — produce the cost savings and additional revenue streams that can be achieved by

owning a second in-market station.155 Therefore, tightening the numerical limits might prevent those

broadcasters in markets where common ownership is permitted under the existing rule from achieving the

efficiencies and related public interest benefits associated with common ownership. Accordingly, our

view based on the most recent record is that it is not appropriate to adjust the numerical limits as a result

149 Free Press NPRM Comments at 44; Free Press NPRM Reply at 20-21; UCC et al. NPRM Comments at 24.

150 Free Press NPRM Comments at 44-45; UCC et al. NPRM Comments at 24-25.

151 This additional programming includes local news and public interest programming, niche programming,

programming targeted to African-American audiences, Spanish-language programming, and national networks

(including Big Four networks that have been made available in small markets only though dual affiliations enabled

by multicasting). See Belo NPRM Comments at 13-14; Gray NPRM Comments at 12-13; NAB NPRM Comments

at 30; NAB NPRM Reply at 18; New Vision/TTBG NPRM Comments at 18-19; Small Market Coalition NPRM

Reply at 12-13; but see CWA NPRM Comments at 4 (asserting that broadcasters have failed to make sufficient use

of their multicast channels to provide local news and public interest programming).

152 Belo NPRM Comments at 11-12; Gray NPRM Comments at 13-14; New Vision/TTBG NPRM Comments at 17;

NAB NPRM Comments at 31; NAB NPRM Reply at 17-18; Nexstar NPRM Reply at 13 (noting that when carriage

is negotiated, the station is not likely to be compensated by the MVPD for such carriage); Tribune NPRM Reply at

36. New Vision/TTBG stated that they have been successful in obtaining carriage of multicast streams on some

cable systems but were having difficulties in obtaining carriage on smaller cable systems that lack channel capacity.

New Vision/TTBG NPRM Comments at 17. They also stated that in many small and mid-sized markets, DISH

Network and DIRECTV do not carry any multicast channels. Id.

153 Belo NPRM Comments at 11-12; Gray NPRM Comments at 13-14; New Vision/TTBG NPRM Comments at 17;

NAB NPRM Comments at 31 (asserting that in 2010, for television stations across all markets, multicast revenue

represented, on average, 0.4 percent of total station revenue); NAB NPRM Reply at 18; Nexstar NPRM Reply at 13.

154 Belo NPRM Comments at 12-13; Gray NPRM Comments at 14; NAB NPRM Comments at 31; NAB NPRM

Reply at 17; Nexstar NPRM Reply at 13.

155 Belo NPRM Comments at 11-12; Gray NPRM Comments at 13-14; New Vision/TTBG NPRM Comments at 17;

NAB NPRM Comments at 31; NAB NPRM Reply at 17-18; Nexstar NPRM Reply at 13; Tribune NPRM Reply at

36.

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of stations’ multicasting capability.156 We seek comment, however, on whether we should reconsider our

position within the context of the 2014 Quadrennial Review proceeding.

65.

Moreover, as discussed above, we tentatively find that the public interest is served by

retaining the current numerical ownership limits; we believe that doing so would promote competition in

local television markets.157 Therefore, as the court noted in Prometheus II, even if multicasting did

generate cost savings and new revenue streams similar to owning a second in-market station — though

we believe that at present it does not — we are not required “to promulgate a more restrictive rule just

because entities may gain similar economies of scale and generate new revenue by multicasting.”158

Indeed, for the reasons discussed herein, we propose not to make such a change, and we seek comment on

the potential consequences of such an approach for purposes of the 2014 Quadrennial Review.

66.

The NPRM sought comment also on the impact of dual network affiliations on local

markets and whether the Commission should limit the ability of stations to utilize their multicast capacity

to form dual affiliations with certain networks.159 As discussed below, we propose to decline to regulate

such dual affiliations in the context of the media ownership rules at this time, and we seek comment on

this proposal.

67.

In the 2010 Quadrennial Review proceeding, cable commenters asserted that allowing

stations to utilize their multicast capability to form dual affiliations with multiple Big Four networks

creates an end-run around the local television ownership rule, particularly the top-four prohibition, and

they urged the Commission to regulate this practice.160 These commenters asserted that dual affiliations

involving two Big Four networks harm competition and give such stations unfair bargaining power in

retransmission consent negotiations.161 In addition, Mediacom/Suddenlink asserted that dual affiliations

involving two Big Four networks harms diversity and localism, as the station’s multicast capacity is not

being used for new, innovative programming.162

68.

By contrast, broadcast commenters asserted that dual affiliations via multicasting,

including multiple Big Four affiliations, serve the public interest and should not be regulated by the

Commission.163 These commenters noted that many small markets do not have enough full-power

156 We note that the Commission has authorized channel sharing by broadcast television stations in connection with

the incentive auction of broadcast television spectrum and that the statutory provision mandating the incentive

auction protects the must-carry rights of stations that voluntarily relinquish spectrum usage rights in order to channel

share. See Innovation in the Broadcast Television Bands, ET Docket No. 10-235, Report and Order, 27 FCC Rcd

4616, 4621-24, ¶¶ 11-18 (2012); Middle Class Tax Relief and Job Creation Act of 2012, Pub. L. No. 112-96,

§ 6403(a)(4), 126 Stat. 156 (2012). We seek comment on the potential impact of this aspect of the incentive auction

for purposes of the media ownership rules.

157 See supra ¶¶ 39-40.

158 652 F.3d at 461.

159 NPRM, 26 FCC Rcd at 17510, ¶ 57; see also Letter from Matthew A. Brill, Latham & Watkins LLP, Counsel for

Time Warner Cable, to Marlene H. Dortch, Secretary, FCC, at 4 (Aug. 3, 2011) (citing Price Colman, D2 Offers A1

Opportunity for Big Four Nets, TVNEWSCHECK, Apr. 20, 2011, http://www.tvnewscheck.com/article/50699/d2-

offers-a1-opportunity-for-big-four-nets) (asserting that multicasting enables the creation of virtual duopolies, in

which a single station affiliates with more than one national network and multicasts dual programming) (visited Jan.

30, 2014).

160 Mediacom/Suddenlink NPRM Comments at 18; Time Warner Cable Inc. (“TWC”) NPRM Comments at 20;

TWC NPRM Reply at 12-16.

161 Mediacom/Suddenlink NPRM Comments at 18-19; TWC NPRM Comments at 21; TWC NPRM Reply at 13-14.

162 Mediacom/Suddenlink NPRM Comments at 18-19.

163 CBS NPRM Comments at 14-15 (asserting that regulation of dual affiliations would run counter to the

Commission’s recent history of deregulation in matters involving network affiliations, including elimination of the

(continued….)

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stations to affiliate with each of the national networks, and absent the use of multicast capability to form

dual affiliations, such markets would not have access to the programming of all Big Four networks.164

Gray asserted also that dual affiliation benefits local communities by increasing the availability of local

newscasts through the multicast stream and by replacing distant network affiliates on subscription

services with a local affiliate that is better able to provide programming responsive to the local market.165

Moreover, according to Sinclair, any efforts by the Commission to regulate affiliations on multicast

streams would “raise serious First Amendment concerns” and would frustrate a station’s ability to provide

programming that could better serve the community.166 Sinclair asserted also that it would be “illogical”

to prohibit broadcasters in larger, more competitive markets from affiliating with multiple Big Four

networks while permitting stations in smaller markets to do so.167 Finally, multiple broadcasters

cautioned that efforts to regulate multicast programming could conflict with the Commission’s efforts to

repurpose UHF Band spectrum for flexible use through the incentive auction of broadcast television

spectrum.168 We seek comment on these multicasting issues in general and, in particular, on any potential

impact on the incentive auction.

69.

We do not believe the 2010 Quadrennial Review record supports regulation within the

context of our media ownership rules to restrict the use of multicast capability to form dual affiliations.

The commenters were primarily concerned with such dual affiliations involving two Big Four networks.

Evidence available during the 2010 proceeding indicates that dual affiliations involving two Big Four

networks via multicasting are generally — if not exclusively — limited to smaller markets with an

insufficient number of full-power commercial television stations to accommodate each Big Four

network169 or where other unique marketplace factors are responsible for creating the dual affiliation

(Continued from previous page)

prohibition on network ownership of television stations in small markets and repeal of the “secondary affiliation

rule”); Gray NPRM Comments at 14-15; Sinclair NPRM Comments at 18-19; Small Market Coalition NPRM Reply

at 11-12 (asserting that a multicast stream is not another station and should not be subject to the local television

ownership rule).

164 Gray NPRM Comments at 14-15; NAB NPRM Comments at 30; Sinclair NPRM Comments at 18-19.

165 Gray NPRM Comments at 15. Gray’s KXII-TV, Sherman, Texas, an affiliate of both CBS and Fox, offers

individually branded newscasts on each programming stream. Id. According to Gray, the CBS newscast is a more

traditional news program, while the Fox newscast focuses on issues of interest to younger viewers. Id.

166 Sinclair NPRM Comments at 18; see also Small Market Coalition NPRM Reply at 13-14.

167 Sinclair NPRM Comments at 19.

168 See Belo NPRM Comments at 14 (asserting that it was the intent of Congress in the legislation authorizing the

incentive auction to promote channel sharing); CBS NPRM Comments at 16 (asserting that dual affiliations using

multicast capability may become necessary to preserve service to local markets as a result of the loss of full-power

stations in the incentive auction).

169 BIA data from 2012 indicate that there are approximately 40 instances of dual affiliation via multicasting

involving multiple Big Four networks. Each market in which we identified such dual affiliation was outside the top-

100 ranked DMAs, with the vast majority of such markets — approximately 73 percent — containing three or fewer

full-power commercial television stations. See BIA/Kelsey, BIA Media Access Pro 4.6 Television Database as of

Mar. 31, 2012 (evaluation of instances of dual network affiliations via multicasting). These findings are consistent

with the data and estimates provided by cable commenters, as a significant majority of the dual affiliations identified

in these comments involved a Big Four network and a “Little Two” network (i.e., The CW or MyNetworkTV). See,

e.g., Mediacom/Suddenlink NPRM Comments at 19 n.37 (referencing article that identified approximately 70 dual

affiliations involving either two Big Four networks or a Big Four network and a Little Two network as of April

2011, and estimating that, as of the filing of the comments, there were approximately 150 Big Four/Little Two dual

affiliations). We tentatively find that Big Four/Little Two dual affiliations via multicasting, regardless of market

rank, do not raise sufficient competitive concerns to justify an amendment to our local television ownership rule.

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arrangements.170 While there may be potential harms that result from certain dual network affiliations, we

tentatively agree with broadcast commenters that the potential benefits of dual affiliation via multicasting

in these smaller markets, including dual affiliation with more than one Big Four network, outweigh any

potential harms to our policy goals. Indeed, we believe that a significant benefit of the multicast

capability is the ability to bring more local network affiliates to smaller markets, thereby increasing

access to popular network programming and local news and public interest programming tailored to the

specific needs and interests of the local community.171 Based on the 2010 Quadrennial Review record, it

appears that marketplace incentives operate to limit the occurrence of dual affiliations via multicasting

involving multiple Big Four networks to these smaller markets.172 For these reasons, we tentatively

decline to regulate dual affiliations at this time, and we seek comment on this approach within the context

of any marketplace changes that may have occurred since the NPRM.

70.

Minority and Female Ownership. The Commission sought comment on the impact of the

proposed local television ownership rule on minority and female ownership opportunities, as well as the

impact of diverse television ownership on viewpoint diversity.173 We tentatively find that the local

television ownership rule proposed in this FNPRM is consistent with our goal to promote minority and

female ownership of broadcast television stations. We seek comment on this tentative conclusion.

71.

In response to the NPRM, public interest commenters asserted that minorities and women

continue to be underrepresented in broadcast television ownership and argued that the Commission

should not relax the local television ownership rule, as additional consolidation could reduce the already

low levels of minority and female ownership.174 In addition, NHMC et al. and UCC et al. suggested the

Commission tighten the television ownership limits in order to create new ownership opportunities for

minorities and women.175 With respect to the impact of diverse ownership on viewpoint diversity, NHMC

et al. argued that station ownership impacts the issues covered by a station and the way in which those

issues are covered.176 They asserted that, because station ownership does not generally reflect the

diversity of local communities, television programming inadequately represents issues of importance to

170 For example, in some markets a local station has chosen not to affiliate with a Big Four network in favor of

providing religious, foreign language, or locally oriented programming, and all remaining full-power commercial

television stations in the market are already affiliated with a different Big Four network. Therefore, dual affiliation

of more than one Big Four network is necessary for a local affiliate of each Big Four network to serve that market.

We seek comment on our belief that there is no benefit in either encouraging an independent station to carry network

programming it does not want or in depriving a market of a local affiliate of a Big Four network.

171 For example, a local network affiliate is more likely to carry local emergency information (e.g., storm warnings

or school closings) and/or local news programming tailored to the needs of the local community than a distant

market affiliate imported by an MVPD.

172 Larger markets generally have more full-power commercial television stations that will compete for a Big Four

or other national network affiliation. Therefore, if a current network affiliate declines to renew or loses its network

affiliation, dual affiliation would not be necessary in order to preserve a local network affiliate in the market. Such

competition has likely contributed to the lack of Big Four dual affiliations in larger markets.

173 NPRM, 26 FCC Rcd at 17511, ¶ 59; see also 2012 323 Report Comments PN (requesting comment on the

ownership data in the 2012 323 Report).

174 See Alliance for Women in Media, Inc. (“AWM”) NPRM Comments at 3; DCS NPRM Comments at 7; Free

Press NPRM Comments at 19-20; Free Press NPRM Reply at 47-48; The Leadership Conference on Civil and

Human Rights (“LCCHR”) NPRM Comments at 2; NHMC et al. NPRM Comments at 2-3.

175 See NHMC et al. NPRM Comments at 3-5; UCC et al. NPRM Comments at 24; see also Free Press NPRM

Comments at 44 (asserting that tightening the television ownership limits could promote ownership diversity by

creating ownership opportunities for new entrants ); Free Press NPRM Reply at 19.

176 NHMC et al. NPRM Comments at 2-3.

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minorities and rural Americans; they argued that, therefore, the Commission should adopt rules to

promote diverse television ownership.177

72.

Commenters also have expressed concern that the Commission’s forthcoming incentive

auction will lead to increased consolidation and a decrease in the number of television stations owned by

minorities and women.178 Moreover, UCC et al. contended that the incentive auction is likely to have a

negative impact on ownership diversity and that therefore the Commission should assess the impact of the

incentive auction in the context of this quadrennial review or, at a minimum, maintain the existing

ownership rules until the impact of the incentive auction is fully established.179 By contrast, other

commenters asserted that the incentive auction will have no more than a collateral impact on television

ownership and does not provide a basis for deferring action on our ownership rules.180

73.

As discussed above, we tentatively find that the 2010 Quadrennial Review record

demonstrates that the existing local television ownership rule remains necessary to promote competition

among broadcast television stations in local markets. Moreover, we believe the competition-based rule

would also indirectly advance our viewpoint diversity goal by helping to ensure the presence of

independently owned broadcast television stations in the local market, thereby increasing the likelihood of

a variety of viewpoints.181 In addition, while we do not propose to retain the rule with the specific

purpose of preserving the current levels of minority and female ownership, we tentatively find that

retaining the existing rule would effectively address the concerns of those commenters who suggested that

additional consolidation would have a negative impact on minority and female ownership of broadcast

television stations.182 We seek comment on how any developments since the NPRM may affect these

tentative findings. In addition, we seek comment on whether the incentive auction has the potential to

177 See id.

178 See NHMC et al. NPRM Comments at 34-35; Free Press 323 Report Comments at 23; LCCHR 323 Report

Comments at 3; Media Alliance 323 Report Comments at 2-3; National Association of Black-Owned Broadcasters

(“NABOB”) 323 Report Comments at 14 n.30; UCC et al. 323 Report Comments at ii, 17-22; Association of Free

Community Papers (“AFCP”) et al. 323 Report Reply at 4.

179 UCC et al. 323 Report Comments at 16-18, 22-24; see also AFCP et al. 323 Report Reply at 5 (urging the

Commission to publish “analysis on projected Spectrum Auction participation, license transfer and subsequent

market-specific valuations”).

180 See Bonneville International Corporation and The Scranton Times, L.P. (“Bonneville/Scranton”) 323 Report

Reply at 10.

181 See Media Ownership Study 9, A Theoretical Analysis of the Impact of Local Market Structure on the Range of

Viewpoints Supplied 2-3, by Isabelle Brocas, Juan D. Carrillo, and Simon Wilkie (2011) (“Media Ownership Study

9”) (finding, based on theoretical analysis, that the presence of more independently owned outlets can increase

viewpoint diversity in a market). Premised on the reasonable assumption that there is more than one viewpoint on

many issues, Media Ownership Study 9 supports the related conclusion that information transmission is improved

when there is competition among firms with similar viewpoints.

Id. at 26-27. Similarly, Media Ownership Study 2

examines the effects of media market structure on consumer demand and welfare, finding that “the representative

consumer values different viewpoints in the reporting of information on news and current affairs, more information

on community news, and more information that reflects the interests of women and minorities.” Media Ownership

Study 2, Consumer Valuation of Media as a Function of Local Market Structure 0, by Scott J. Savage and Donald

M. Waldman (2011) (“Media Ownership Study 2”). It finds, using simulation techniques, that any negative effects

on diversity associated with common ownership of television stations in a market are smaller in markets with

multiple independent television voices. See Media Ownership Study 2 at 49.

182 We note also that we propose to retain without modification the current failed/failing station waiver policy,

including the out-of-market-buyer solicitation requirement — the failed station solicitation rule (“FSSR”) — which

promotes new entry in a market by ensuring that out-of-market entities interested in purchasing a station, including

minorities and women, will have an opportunity to bid. See 1999 Ownership Order, 14 FCC Rcd at 12937, ¶ 74.

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impact minority and female broadcast ownership and whether any such impacts should affect our 2014

Quadrennial Review.183

B.

Local Radio Ownership Rule

1.

Introduction

74.

Based on the 2010 Quadrennial Review record, we tentatively find that the current local

radio ownership rule remains necessary in the public interest and should be retained without

modification.184 We believe that the rule is necessary to promote competition. In addition, we believe

that the radio ownership limits promote viewpoint diversity “by ensuring a sufficient number of

independent radio voices and by preserving a market structure that facilitates and encourages new entry

into the local media market.”185 Similarly, we tentatively find that a competitive local radio market helps

to promote localism, as a competitive marketplace will lead to the selection of programming that is

responsive to the needs and interests of the local community.186 We tentatively find also that the local

radio ownership rule is consistent with our goal of promoting minority and female ownership of broadcast

television stations. Finally, we believe that these benefits outweigh any burdens that may result from our

proposal to retain the rule without modification. We seek comment on these tentative conclusions.

75.

In accordance with these tentative conclusions, we propose that an entity may continue to

own: (1) up to eight commercial radio stations in radio markets with 45 or more radio stations, no more

than five of which can be in the same service (AM or FM); (2) up to seven commercial radio stations in

radio markets with 30-44 radio stations, no more than four of which can be in the same service (AM or

FM); (3) up to six commercial radio stations in radio markets with 15-29 radio stations, no more than four

of which can be in the same service (AM or FM); and (4) up to five commercial radio stations in radio

markets with 14 or fewer radio stations, no more than three of which can be in the same service (AM or

FM), provided that an entity may not own more than 50 percent of the stations in such a market, except

that an entity may always own a single AM and single FM station combination.187

We seek comment on

the costs and benefits of our proposal to retain the existing local radio ownership rule.

To the greatest

extent possible, commenters should quantify the expected costs or benefits of retaining the rule and

provide detailed support for any actual or estimated values provided, including the source of such data

and/or the method used to calculate reported values.

183 The Commission released the Incentive Auctions NPRM in September 2012 and has not yet adopted final rules

for the incentive auction. We contemplate conducting the auction itself sometime in 2015. The Commission has

recognized the potential for the incentive auction to impact broadcasters’ ongoing compliance with our media

ownership rules. See Incentive Auctions NPRM, 27 FCC Rcd at 12474, ¶ 356. Accordingly, the Commission

proposed, in the Incentive Auctions NPRM, to grandfather any station combinations that would no longer comply

with our media ownership rules as a result of the auction. Id. In addition, the Commission invited comment, in the

context of the incentive auction proceeding, on “measures that the Commission might take outside of the context of

the multiple ownership rules to address any impact on diversity that may result from the incentive auction.” Id. at

12474, ¶ 357.

184 Section 202(h) of the 1996 Act, 47 U.S.C. § 303 note.

185 2006 Quadrennial Review Order, 23 FCC Rcd at 2077, ¶ 127 (citing 2002 Biennial Review Order, 18 FCC Rcd

at 13739, ¶¶ 305-06).

186 2006 Quadrennial Review Order, 23 FCC Rcd at 2075, ¶ 124; 2002 Biennial Review Order, 18 FCC Rcd at

13738, ¶ 304 (citing generally Revision of Radio Rules and Policies, MM Docket No. 91-140, Report and Order, 7

FCC Rcd 2755 (1992) (“1992 Radio Ownership Order”); Amendment of Section 73.3555 of the Commission’s

Rules, the Broadcast Multiple Ownership Rules, MM Docket No. 87-7, First Report and Order, 4 FCC Rcd 1723

(1989)).

187 47 C.F.R. § 73.3555(a).

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2.

Background

76.

In the NPRM, the Commission proposed to retain the local radio ownership rule without

modification, including the AM/FM subcaps, and sought comment on this tentative conclusion.188 The

Commission also sought comment on whether and, if so, how, to incorporate new audio platforms into the

rule and on the impact of such platforms on the broadcast radio industry.189 In addition, the NPRM sought

comment on whether to adopt a specific waiver standard for the local radio ownership rule and on how

the proposed rule would affect minority and female ownership opportunities.190

77.

In response, public advocacy commenters and Mt. Wilson agreed that the Commission

should continue to regulate broadcast radio ownership, and they supported the Commission’s proposal to

retain the existing rule and/or urged the Commission to tighten the radio ownership limits.191 In support

of this position, certain of these commenters pointed to increased levels of consolidation that occurred

following the adoption of the current ownership limits by Congress in the 1996 Act.192 According to

these commenters, consolidation has led to decreased competition in local radio markets, which has

produced homogenous programming that is not responsive to local communities.193 Many commenters

also asserted that any additional loosening of the local radio ownership restrictions could negatively

impact minority and female ownership of broadcast radio stations.194

78.

By contrast, broadcast commenters generally opposed the Commission’s proposal to

retain the existing local radio ownership rule, instead arguing that the radio ownership limits should be

eliminated or, at the very least, loosened.195 They asserted that the current rule is no longer necessary to

promote competition due to increased competition from non-broadcast audio platforms, such as satellite

radio and Internet-based audio services (including via mobile devices).196 CBS and NAB197 stated also

188 NPRM, 26 FCC Rcd at 17511-12, ¶¶ 61-62.

189 Id. at 17514, ¶¶ 68-69.

190 Id. at 17518, ¶¶ 81-83.

191 AWM NPRM Comments at 2-3; American Association of Independent Music (“A2IM”) NPRM Comments at 3;

Schellhardt NPRM Comments at 2-3, 7; Future of Music Coalition (“FMC”) NPRM Comments at 4; Mt. Wilson

FM Broadcasters, Inc. (“Mt. Wilson”) NPRM Comments at 4-5; musicFIRST Coalition NPRM Comments at 1-2;

NHMC et al. NPRM Comments at 4; UCC et al. NPRM Comments at 28.

192 AWM NPRM Comments at 2; A2IM NPRM Comments at 2; Mt. Wilson NPRM Comments at 5; musicFIRST

Coalition NPRM Comments at 1-2.

193 See AWM NPRM Comments at 2; A2IM NPRM Comments at 2; Mt. Wilson NPRM Comments at 5;

musicFIRST Coalition NPRM Comments at 1-2; NHMC et al. NPRM Comments at 3, 12-16, 20-21. In its reply,

NAB disputed this assertion, citing data provided in its comments to the NPRM regarding format diversity, as well

as evidence from Media Ownership Studies 7 and 8B that consolidation often promotes format diversity. NAB

NPRM Reply at 21-22; see also Media Ownership Study 7, Radio Station Ownership Structure and the Provision of

Programming to Minority Audiences: Evidence from 2005- 2009, by Joel Waldfogel (2011) (“Media Ownership

Study 7”); Media Ownership Study 8B, Diversity in Local Television News, by Lisa M. George and Felix

Oberholzer-Gee (2011) (“Media Ownership Study 8B”).

194 See AWM NPRM Comments at 3; Free Press NPRM Comments at 23; LCCHR NPRM Comments at 2-3;

NHMC et al. NPRM Comments at 3-5; UCC et al. NPRM Comments at 28.

195 ARSO NPRM Comments at 5; CBS NPRM Comments at 18-19; M. Kent Frandsen (“Frandsen”) NPRM

Comments at 2-3; NAB NPRM Comments at 32-33; NAB NPRM Reply at 19-21; but see Mt. Wilson NPRM

Comments at 4-5 (a broadcast radio station owner arguing that the radio ownership limits, including the AM/FM

subcaps, should be tightened in order to promote the Commission’s competition, localism, and diversity goals); Mt.

Wilson NPRM Reply at 2-3.

196 ARSO NPRM Comments at 5; CBS NPRM Comments at 18-19; Frandsen NPRM Comments at 2-3; NAB

NPRM Comments at 32-33; NAB NPRM Reply at 19-21; see also Disney NPRM Reply at 2-3 (arguing that the

(continued….)

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that the rule is not necessary to promote our localism and diversity goals and noted that the Commission

has previously stated that the primary purpose of the local radio ownership rule is to promote

competition.198 We invite commenters to provide any updated information concerning these issues.

3.

Discussion

79.

Market. In the NPRM, the Commission tentatively concluded that the relevant market for

review of the local radio ownership rule is the radio listening market and that it is not appropriate, at this

time, to expand that market to include non-broadcast sources of audio programming.199 Based on our

review of the 2010 Quadrennial Review record, we believe this approach is appropriate, and we seek

comment on whether we should maintain this market definition.200

80.

Public advocacy commenters supported the Commission’s tentative conclusions in the

NPRM. These commenters asserted that new audio platforms often serve different audiences than

traditional broadcast radio stations, which continue to play an important role in local communities.201 In

addition, musicFIRST noted that NAB has previously asserted that the Sirius/XM merger would result in

a satellite radio “monopoly,” which is inconsistent with NAB’s position that broadcast radio stations

compete with non-broadcast audio platforms.202

81.

Many broadcast commenters opposed our proposal to exclude non-broadcast sources of

audio programming from the radio listening market. According to these broadcasters, broadcast radio

stations compete for listeners and advertising revenue with non-broadcast sources of audio programming,

such as satellite radio and Internet-based audio services. Therefore, these broadcasters advocated

loosening or eliminating the local radio ownership limits to take account of this competition.203

82.

Despite broadcasters’ claims to the contrary, we tentatively find that, for purposes of the

Commission’s ownership rules, non-broadcast sources of audio programming are not yet meaningful

substitutes for broadcast radio stations with respect to either listeners or advertisers.204 While alternate

(Continued from previous page)

Commission should consider growth of new media outlets and, instead of regulating broadcast industry, should find

ways to incent ownership of broadcast stations).

197 Mt. Wilson asserted in its reply comments that NAB does not speak for the entire broadcast radio industry, or

even the entirety of the NAB membership. Mt. Wilson NPRM Reply at 3-4. Instead, according to Mt. Wilson,

NAB’s comments reflect the position of group owners at the expense of independent station owners. See id. at 4.

198 CBS NPRM Comments at 18-19; NAB NPRM Comments at 33-38.

199 NPRM, 26 FCC Rcd at 17513-14, ¶ 68; see also 2006 Quadrennial Review Order, 23 FCC Rcd at 2071, ¶ 114

(confirming the geographic and product markets for local radio ownership rule relied on in the 2002 Biennial Review

Order); 2002 Biennial Review Order, 18 FCC Rcd at 13705, ¶ 245 (declining to include non-broadcast sources of

delivered audio media, such as Internet audio streaming and satellite radio, in the radio listening market). Although

the radio listening market broadly speaking might be defined to include satellite radio or Internet audio streaming,

this tentative conclusion is consistent with Commission decisions not to expand the market and rule to include non-

broadcast sources of audio programming. See 2006 Quadrennial Review Order, 23 FCC Rcd at 2071, ¶ 114; 2002

Biennial Review Order, 18 FCC Rcd at 13705, ¶ 245.

200 See NPRM, 26 FCC Rcd at 17514-15, ¶¶ 69, 71, 74.

201 See A2IM NPRM Comments at 2; FMC NPRM Comments at 6.

202 musicFIRST Coalition NPRM Comments at 3-4.

203 CBS NPRM Comments at 18-19; Frandsen NPRM Comments at 2-3; NAB NPRM Comments at 32-33; NAB

NPRM Reply at 19-21.

204 See, e.g., NAB NPRM Reply at 20-21. While NAB cited multiple sources that demonstrate that consumer

interest in non-broadcast audio platforms is increasing — a conclusion we do not doubt — NAB failed to

demonstrate that this increased interest was at the expense of broadcast radio listening or that these alternative

platforms were meaningful substitutes for broadcast radio. Other commenters asserted that these alternate

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platforms such as satellite radio and Internet-delivered audio are growing in popularity, broadcast radio

remains the dominant radio technology. In 2012, 92 percent of Americans age 12 or older listened to

broadcast radio, a figure that has remained essentially constant over the last decade.205 Satellite radio still

serves only a small portion of the population, even though its subscription rates continue to climb.206 And

though recent data suggest that a significant portion of adult U.S. broadband households (42 percent)

listen to Internet-delivered audio programming, we note that millions of U.S. households continue to lack

broadband connections.207 In addition, only 14 percent of Internet radio listeners listen in their cars,

where most broadcast radio listening occurs.208 Thus, we tentatively conclude that Internet-delivered

audio programming is not yet a meaningful substitute for broadcast radio listening for most listeners. We

seek comment on this tentative conclusion and invite commenters to provide any more recent relevant

information and data.

83.

We believe, moreover, that satellite radio and content delivered via the Internet generally

are national platforms that are not likely to respond to competitive conditions in local markets. Satellite

radio content is uniform nationally, and there is no evidence in the record that content decisions are made

based on competitive conditions in local markets. Similarly, there is no evidence in the record that

Internet radio stations and other Internet-delivered audio programming providers (excluding streams of

local broadcast radio stations) modify their programming decisions to respond to competitive conditions

in local markets. Ultimately, we tentatively find that only local broadcasters provide programming based

on the unique characteristics of their respective local markets. As the Commission has stated previously,

it is the competition between such rivals that most benefits listeners in a local market and serves the

public interest — competition that is currently lacking from non-broadcast audio alternatives.209

(Continued from previous page)

platforms, while important, have not yet replaced broadcast radio stations. See A2IM NPRM Comments at 2

(asserting that alternate audio platforms often serve different markets and that broadcast radio remains an important

platform for independent labels and artists); FMC NPRM Comments at 6 (citing research that demonstrates that

young people continue to rely on broadcast radio for exposure to new music).

205 The PEW RESEARCH CENTERS PROJECT FOR EXCELLENCE IN JOURNALISM, THE STATE OF THE NEWS MEDIA

2013: AN ANNUAL REPORT ON AMERICAN JOURNALISM, Audio Data (2013), available at

http://stateofthemedia.org/; see also The PEW RESEARCH CENTERS PROJECT FOR EXCELLENCE IN JOURNALISM, THE

STATE OF THE NEWS MEDIA 2012: AN ANNUAL REPORT ON AMERICAN JOURNALISM, Audio Essay (2012) (“STATE

OF THE NEWS MEDIA 2012”), available at http://stateofthemedia.org/overview-2012/ (finding that 93 percent of

Americans age 12 or older listened to broadcast radio); NPRM, 26 FCC Rcd at 17514, ¶ 69 n.155.

206 See Sirius XM Radio Inc., SEC Form 10-Q for the Quarterly Period Ended March 31, 2012, at 29 (stating that as

of March 31, 2012, there were 22,297,420 total subscribers, compared to 20,564,028 as of March 31, 2011).

207 TargetSpot, TargetSpot Issues 2012 Digital Audio Benchmark and Trend Study (press release), May 9, 2012

(“TargetSpot Press Release”); Eighth Broadband Progress Report, 27 FCC Rcd at 10369, 10387, ¶ 44, Table 17

(finding that approximately 19 million Americans lack access to fixed broadband meeting the 4 Mbps/1 Mbps speed

benchmark and that the adoption rate for the U.S. as a whole for broadband connections of at least 3 Mbps/768 kbps

is approximately 40.4 percent). It is not our position that broadband deployment and adoption must be universal

before we will consider Internet-delivered audio programming to be a competitor in the local radio listening market;

however, the current level of penetration of broadband service is certainly relevant when considering the extent to

which this platform is a meaningful substitute for broadcast radio stations.

208 TargetSpot Press Release; see also STATE OF THE NEWS MEDIA 2012 at Audio Essay (“Two-thirds of traditional

radio listening occurs away from home, largely in automobiles.”). We note that in-car options for accessing

Internet-delivered audio programming are increasing. See STATE OF THE NEWS MEDIA 2012 at Audio Essay; see

also NAB NPRM Reply at 20-21.

209 2002 Biennial Review Order, 18 FCC Rcd at 13716, ¶ 246.

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Therefore, we propose to continue to limit the relevant market for our local radio ownership rule to

broadcast radio stations in local radio listening markets,210 and we seek comment on this proposal.

84.

In addition, broadcast radio’s consistently strong position in both local and national

advertising markets appears to support our tentative finding that non-broadcast sources of audio

programming are not significant competitors at this time. Broadcasters asserted that we should expand

the relevant market for review, in part, because of competition for advertising revenue from non-

broadcast audio sources; however, recent advertising data do not support this contention.211 From 2008

through 2011, broadcast radio’s local advertising revenue market share increased each year, reaching 16.6

percent in 2011.212 In the national advertising market during that same time period, broadcast radio’s

market share remained stable (between 1.8 and 2.0 percent).213 By contrast, satellite radio’s advertising

revenue market share in both the local and national markets did not exceed 0.1 percent.214 And while

“Internet advertising” has seen significant gains in advertising revenue market share both locally and

nationally, evidence suggests that the revenue is not attributable in any significant portion to providers of

Internet-delivered audio programming.215 For example, in 2011, online-only audio programming

providers were estimated to have earned approximately $295 million in advertising revenue.216 By

contrast, in 2011, the total broadcast radio advertising revenue market was projected at approximately

$17.8 billion.217 We seek comment on whether there have been any significant changes since these

figures became available.

210 We note that our proposal to limit the relevant market to broadcast radio stations in local radio listening markets

is consistent with current DOJ precedent in evaluating proposed mergers involving broadcast radio stations. See,

e.g., Complaint at ¶ 9, United States v. Cumulus Media Inc., No. 1:11CV01619 (D.D.C. Sept. 8, 2011) (“The

relevant markets. . . are the sale of radio advertising time to advertisers targeting listeners in two separate Arbitron

Metro Survey Areas (‘MSAs’) by radio stations in those MSAs.”); see also DOJ February 20, 2014 Ex Parte

Comments at 5, 8 (confirming that the relevant markets for antitrust review are the broadcast radio spot advertising

market in the stations’ specific geographic market); Timothy J. Brennan & Michael A. Crew, Gross Substitutes vs.

Marginal Substitutes:

Implications for Market Definition in the Postal Sector, in The Role of the Postal and

Delivery Sector in a Digital Age 1-15 (Michael A. Crew & Timothy J. Brennan eds. 2013) (arguing that the loss of

customers to a new technology does not necessarily mean that the new technology should be included in the market

definition of the existing technology).

211 See, e.g., NAB NPRM Comments at 32-33.

212 SNL KAGAN ADVERTISING FORECASTS 2011 at 25-26.

213 Id.

214 Id.

215 See id. at 25, 79-87. In its analysis of Internet advertising, SNL Kagan breaks down the various types of Internet

advertising by category (e.g., display ads or search), including subcategories of display ads, such as social networks,

online video, and other. Id. at 82. There is no category or subcategory associated with online audio. So while some

portion of Internet advertising may be associated with online audio providers, the amount does not appear to be

significant enough to warrant independent classification. Moreover, the stability of broadcast radio’s advertising

revenue market share suggests that the revenue associated with online audio is not having a significant impact, if any

at all, on local broadcast radio stations.

216 Suzanne Vranica & Ethan Smith, Internet Radio Wants More Ad Dollars, THE WALL STREET JOURNAL ONLINE,

Dec. 22, 2011, http://online.wsj.com/article/SB10001424052970203686204577112981195732246.html (visited Jan.

30, 2014). Pandora, the Internet’s most popular audio service, earned approximately $240 million in advertising

revenue in its fiscal year ended January 31, 2012. Pandora Media, Inc., SEC Form 10-K for the Annual Period

Ended January 31, 2012, at 40. Pandora acknowledges that it may have difficulty increasing its advertising revenue

at the expense of local broadcasters, stating that “[a]dvertisers may be reluctant to migrate advertising dollars [from

terrestrial broadcast stations] to our internet-based platform.” Id. at 8.

217 SNL KAGAN ADVERTISING FORECASTS 2011 at 132. We note that NAB conceded that local radio broadcasting

revenues have improved in recent years, but it argued that there has been a “structural change in the audio

(continued….)

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85.

Market Size Tiers. The NPRM proposed to retain the current approach of setting

numerical limits based on market size tiers and determining the market size based on the number of

commercial and noncommercial radio stations in the local market.218 We tentatively conclude that we

should adopt these proposals and seek comment on this approach.

86.

In the 2010 Quadrennial Review proceeding, no commenters objected to the proposal to

retain the market size tiers approach. The Commission’s experience in applying the local radio ownership

rule supports retention of the existing framework in order to promote competition. Consistent with

previous decisions, we tentatively find that setting numerical ownership limits based on market size tiers

helps prevent the formation of market power in local radio markets by ensuring that one or a few station

owners cannot “lock up” the limited available radio spectrum. We believe that the bright-line approach

benefits transaction participants by expediting the processing of assignment/transfer of control

applications and by providing clear guidance in terms of which transactions comply with the local radio

ownership limits. We seek comment on whether the existing framework should continue to apply in the

2014 Quadrennial Review proceeding.

87.

Some commenters sought modifications to the way in which the number of stations

owned by a licensee is calculated within the existing tiers. For instance, Mid-West Family asserted that

the current mechanism is inconsistent with Prometheus I because it counts each station as equal in an

Arbitron-defined market and thus fails to take into account differences in coverage area, revenue, and

audience share.219 Mid-West Family suggested the Commission assign different values to stations based

on station class (e.g., Class C FM stations = 1 station; Class A FM stations = .5 station).220 Alternatively,

Mt. Wilson asserted that digital multicast streams should be counted toward the numerical limits where

the station is using the multicast stream to broadcast a commonly owned out-of-market station.221

88.

We tentatively decline to modify the current rule’s method of calculating the number of

stations a licensee owns. We seek comment on Mid-West Family’s assessment that the Prometheus I

decision mandates an adjustment, in light of the court’s Prometheus II decision upholding the existing

rule’s methodology.222 Our preliminary view is that adopting Mid-West Family’s approach would permit

potentially significant consolidation in local radio markets, which would be inconsistent with the rationale

for our proposal, discussed in greater detail below, to retain the existing numerical ownership limits.

Finally, we propose to reject Mt. Wilson’s proposal. As discussed in greater detail below in the context

of the AM/FM subcaps, digital radio is still a growing technology; there is no mandate requiring its

adoption; and it has not yet achieved widespread deployment or consumer acceptance. Therefore, we

(Continued from previous page)

marketplace” because overall revenues were below levels earned in 2005 and 2006 and are not expected to reach

those levels until 2015. NAB NPRM Comments at 34 n.130. While total advertising revenue for local radio

stations did decline from 2006-2009, with the most significant declines in 2008 and 2009, the evidence does not

support the conclusion that this was a result of a unique change in the audio marketplace; instead, the total

advertising market for all media experienced a significant contraction that was most likely the result of the global

financial crisis that impacted nearly all markets. SNL KAGAN ADVERTISING FORECASTS 2011 at 20. Moreover,

overall advertising revenues for the broadcast radio industry have steadily improved since 2010 and are predicted to

grow through 2020. Id. at 20. However, we seek comment on whether any structural changes have occurred in the

audio marketplace and, if so, whether to adjust our 2014 Quadrennial Review analysis to account for such changes.

218 NPRM, 26 FCC Rcd at 17514-15, ¶¶ 70-71.

219 Mid-West Family NPRM Comments at 10.

220 Id. at 10-13.

221 Mt. Wilson NPRM Comments at 9-11.

222 See Prometheus II, 652 F.3d at 462-63.

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tentatively find that it is premature to amend our local radio ownership rule as a result of digital

technology, and we seek comment on this approach.223

89.

Numerical Limits. The NPRM proposed to retain the existing numerical limits.224 As

discussed above, many commenters in the 2010 Quadrennial Review proceeding supported the

Commission’s proposal to retain its existing limits, while other commenters argued in favor of loosening

or tightening the existing limits.225 However, no commenters proposed specific numerical limits to

replace the existing limits. For the reasons discussed below, we propose to adopt the tentative conclusion

in the NPRM to retain the existing numerical ownership limits for each existing market size tier.

90.

In the 2006 Quadrennial Review Order, the Commission rejected calls to relax the

numerical ownership limits, finding instead that retaining the existing limits was necessary to protect

against excessive market concentration.226 The Commission noted that, following the relaxation of the

local radio ownership limits by Congress in the 1996 Act, there had been substantial consolidation of

radio ownership both nationally and locally.227 Evidence in the record demonstrated that, in local

markets, the largest firms often dominated the market in terms of audience and revenue share.228 The

Commission ultimately concluded not only that the existing limits were not unduly restrictive, but also

that permitting additional consolidation would not be in the public interest.229 The Prometheus II court

upheld the Commission’s decision.230

91.

The Commission determined also in the 2006 Quadrennial Review Order that tightening

the radio ownership limits was not justified based on the record.231 The Commission held that tightening

the ownership limits would be inconsistent with Congress’s decision to relax the limits in the 1996 Act

and would ignore the financial stability that consolidation brought to the radio industry.232 In addition, the

Commission determined that tightening the rule would require significant divestitures that would disrupt

the radio marketplace and could undermine the ability of local stations to provide quality programming to

their local markets.233 While acknowledging that grandfathering was an option to avoid the disruptive

223 See infra ¶ 103.

224 NPRM, 26 FCC Rcd at 17515, ¶ 72. In addition, the NPRM sought comment on Clear Channel’s proposal to

allow increased ownership in larger markets by creating additional tiers. Id. at 17515, ¶ 73. Clear Channel

suggested an increase from eight to ten in the number of stations a single entity may own in markets with between

55 and 64 stations and from eight to twelve in the number of stations that a single entity may own in markets with 65

or more stations. Clear Channel NOI Comments at 33. No party provided comments on this proposal and, as

discussed below, we tentatively find that the record supports retaining the existing numerical limits (i.e., the existing

number of tiers and the numerical limits associated with each); therefore, we tentatively decline to adopt the new

ownership tiers proposed by Clear Channel.

225 See supra ¶¶ 77-78

226 See 2006 Quadrennial Review Order, 23 FCC Rcd at 2072, ¶ 118.

227 Id. at 2072-73, ¶ 118

228 Id. at 2073, ¶ 118.

229 Id. at 2073-74, ¶ 118.

230 Prometheus II, 652 F.3d at 462.

231 2006 Quadrennial Review Order, 23 FCC Rcd at 2074, ¶ 119.

232 Id. at 2072, 2074, ¶¶ 117, 119.

233 Id. at 2074, ¶ 120.

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impact of divestitures, the Commission determined that grandfathering in this instance would not be in

the public interest.234

92.

Based on the 2010 Quadrennial Review record, we tentatively find that the competitive

conditions in the radio marketplace that supported the Commission’s decision to retain the existing

numerical limits in the 2006 Quadrennial Review Order are essentially unchanged.235 Evidence from

2012 shows that in local markets, the largest commercial firms continue to enjoy substantial advantages in

revenue share — on average, the largest firm in each Arbitron Metro market has a 45 percent share of the

market’s total radio advertising revenue, with the largest two firms accounting for 73 percent of the

revenue.236 In more than a third of all Arbitron Metro markets, the top two commercial station owners

control at least 80 percent of the radio advertising revenue.237 With respect to ratings, the top-four firms

continue to dominate audience share.238 Therefore, we do not believe the public interest would be served

by relaxing the existing numerical limits. We seek comment on whether there are any more recent data

that point toward a different conclusion.

93.

We note also that the record in the 2010 Quadrennial Review proceeding does not reflect

changes in the marketplace that warrant reconsideration of the Commission’s previous decision not to

234 Id. at 2074-75, ¶ 121; but see 2002 Biennial Review Order, 18 FCC Rcd at 13808-09, ¶¶ 484-86 (finding in favor

of grandfathering under the circumstances presented in that proceeding following modification of the local radio

ownership rule).

235 2006 Quadrennial Review Order, 23 FCC Rcd at 2073, ¶ 118. According to BIA data, the number of

commercial station owners nationally has decreased approximately 39 percent between 1996 and 2012 — the same

decrease reported in the 2006 Quadrennial Review Order — though the rate of consolidation has slowed in recent

years. See BIA/Kelsey, BIA Media Access Pro 4.6 Radio Database as of March 1, 2012 (evaluation of national

ownership data for the 1996 through 2012 time period); see also NOI, 25 FCC Rcd at 6087-88, ¶ 4; 2006

Quadrennial Review Order, 23 FCC Rcd at 2073, ¶ 118 (“The number of commercial radio station owners declined

by 39 percent between 1996 and 2007, with most of the decline occurring during the first few years after the 1996

Act.”).

236 See BIA/Kelsey, BIA Media Access Pro 4.6 Radio Database as of March 31, 2012 (“BIA Media Access Pro

Database March 31, 2012”) (evaluation of advertising revenue market share data for all Arbitron Metro markets).

237 According to BIA data, in the 50 largest markets, on average, the top two firms account for 60 percent of radio

advertising revenue in the market; in the 100 smallest markets, on average, the top two firms account for 79 percent

of market revenue. See id. (evaluation of advertising revenue market share data for all Arbitron Metro markets).

Additionally, we note that the Commission previously found that consolidation had resulted also in an “appreciable,

albeit small” increase in radio advertising rates. 2006 Quadrennial Review Order, 23 FCC Rcd at 2073, ¶ 118.

Consistent with the tentative conclusion in the NPRM, we propose to focus on competition in the radio listening

market, the market that has a direct impact on listeners. NPRM, 26 FCC Rcd at 17514, ¶ 68 n.153. We note,

however, that current advertising data support the Commission’s finding in the 2006 Quadrennial Review Order,

upheld by the court in Prometheus II, that consolidation in the radio market leads to an increase in advertising rates.

According to SQAD data, since the 1996 Act was passed through June 2011, the cost of radio advertising nearly

doubled. See SQAD, SQAD Spot Radio Database as of June 26, 2012 (monthly advertising sales data across all

markets from February 1996 through June 2011). By contrast, data from the Bureau of Labor Statistics show that

the consumer price index (“CPI”) increased 43 percent during the same time period. See Bureau of Labor Statistics,

Consumer Price Index, http://www.bls.gov/cpi/ (All Items Indexes from February 1996 through June 2011) (visited

Jan. 30, 2014). Stated differently, the CPI increased approximately 3 percent per year during this time period, while

the annual growth rate in radio prices was approximately 6.5 percent.

238 Ownership concentration among the top-four firms in a market is very high, which provides these firms with a

significant advantage in attracting audience share. BIA data indicate that the four firm market concentration ratios

(i.e., the percentage of audience share attributed to the four largest firms in the market) average 94 percent in smaller

markets and 84 percent in the 50 largest markets. See BIA Media Access Pro Database March 31, 2012 (evaluation

of ratings share data for all Arbitron Metro markets).

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make the limits more restrictive, as some commenters recommended.239 We believe that tightening the

restrictions would disregard the previously identified benefits of consolidation in the radio industry and

would be inconsistent with the 1996 Act.240 Further, tightening the rule would require divestitures that we

believe would be disruptive to the radio industry and would upset the settled expectations of individual

owners. We seek comment on whether any benefits derived from tightening the limits would outweigh

these countervailing considerations.241 In addition, we seek comment on our continued belief that, for the

reasons stated in the 2006 Quadrennial Review Order, tightening the limits while grandfathering existing

combinations would not be in the public interest and should be avoided.242

94.

Clarification of Application of Local Radio Ownership Rule.

In the 2002 Biennial

Review Order, the Commission adopted the current standard of using Arbitron Metro areas, where

available, for the application of the numerical radio ownership limits.243 At that time, the Commission

also adopted certain procedures and safeguards designed to guide the implementation of the revised local

radio ownership rule and to deter parties from attempting to circumvent the rule through the manipulation

of Arbitron market definitions.244 Years of e