82 FR 21124 - National Television Multiple Ownership Rule

FEDERAL COMMUNICATIONS COMMISSION

Federal Register Volume 82, Issue 86 (May 5, 2017)

An Order on Reconsideration reinstates the UHF discount, which allows commercial broadcast television station owners to discount the audience reach of their UHF stations when calculating compliance with the national television ownership rule. With the reinstatement of the discount, the Commission will commence a proceeding later this year to consider whether the national television audience reach cap, including the UHF discount, remains in the public interest. The Order on Reconsideration finds that the UHF discount is inextricably linked to the national cap, and when the Commission voted previously to eliminate the discount, it failed to consider whether this de facto tightening of the national cap was in the public interest and justified by current marketplace conditions. The Order on Reconsideration grants in part the Petition for Reconsideration (Petition) filed by ION Media Networks and Trinity Christian Center of Santa Ana, Inc. (Petitioners), and dismisses as moot requests to reconsider the grandfathering provisions applicable to broadcast station combinations affected by elimination of the discount and the decision to forego a VHF discount.

[Federal Register Volume 82, Number 86 (Friday, May 5, 2017)]
[Rules and Regulations]
[Pages 21124-21127]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-09001]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MB Docket No. 13-236; FCC 17-40]


National Television Multiple Ownership Rule

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: An Order on Reconsideration reinstates the UHF discount, which 
allows commercial broadcast television station owners to discount the 
audience reach of their UHF stations when calculating compliance with 
the national television ownership rule. With the reinstatement of the 
discount, the Commission will commence a proceeding later this year to 
consider whether the national television audience reach cap, including 
the UHF discount, remains in the public interest. The Order on 
Reconsideration finds that the UHF discount is inextricably linked to 
the national cap, and when the Commission voted previously to eliminate 
the discount, it failed to consider whether this de facto tightening of 
the national cap was in the public interest and justified by current 
marketplace conditions. The Order on Reconsideration grants in part the 
Petition for Reconsideration (Petition) filed by ION Media Networks and 
Trinity Christian Center of Santa Ana, Inc. (Petitioners), and 
dismisses as moot requests to reconsider the grandfathering provisions 
applicable to broadcast station combinations affected by elimination of 
the discount and the decision to forego a VHF discount.

DATES: Effective June 5, 2017.

FOR FURTHER INFORMATION CONTACT: Brendan Holland, Industry Analysis 
Division, Media Bureau, [email protected] (202) 418-2757.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
on Reconsideration in MB Docket No. 13-236, FCC 17-40, adopted April 
20, 2017, and released April 21, 2017. The full text of this document 
is available for public inspection during regular business hours in the 
FCC Reference Center, 445 12th Street SW., Room CY-A257, Washington, DC 
20554, or online at https://www.fcc.gov/ecfs/filing/0426267477284. To 
request this document in accessible formats for people with 
disabilities (e.g. braille, large print, electronic files, audio 
format, etc.) or to request reasonable accommodations (e.g. accessible 
format documents, sign language interpreters, CART, etc.), send an 
email to [email protected] or call the FCC's Consumer and Governmental 
Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

Synopsis

    1. Background. In 1985, when the Commission revised the national 
television multiple ownership rule to prohibit a single entity from 
owning television stations that collectively exceeded 25 percent of the 
total nationwide audience, it also adopted a 50 percent UHF discount to 
reflect the coverage limitations faced by analog UHF stations. The 
discount was intended to mitigate the competitive disadvantage that UHF 
stations suffered in comparison to VHF stations, as UHF stations were 
technically inferior, producing weaker over-the-air signals, reaching 
smaller audiences, and costing more to build and operate. This 
technical inferiority, inherent in analog television broadcasting, was 
significant in 1985 because the vast majority of viewers received 
programming from broadcast television stations via over-the-air 
signals.
    2. Eleven years later, in the Telecommunications Act of 1996, 
Congress directed the Commission to increase the national audience 
reach cap from 25 percent to 35 percent. Subsequently, the Commission 
reaffirmed the 35 percent national cap in its 1998 Biennial Review 
Order. The United States Court of Appeals for the District of Columbia 
later remanded the 1998 Biennial Review Order after finding that the 
decision to retain the national cap was arbitrary and capricious. In 
addition, the court found that the Commission failed to demonstrate 
that the national cap advanced competition, diversity, or localism. In 
the 2002 Biennial Review Order, the Commission determined the cap 
should be raised to 45 percent. In both of these Orders, the Commission 
also considered and retained the UHF discount.
    3. Following adoption of the 2002 Biennial Review Order and while 
an appeal of that order was pending, Congress revised the cap by 
including a provision in the 2004 Consolidated Appropriations Act (CAA) 
directing the Commission to modify its rules to set the cap at 39 
percent of national television households. The CAA further amended 
Section 202(h) of the 1996 Act to require a quadrennial review of the 
Commission's broadcast ownership rules, rather than the previously 
mandated biennial review. In doing so, Congress excluded consideration 
of any rules relating to the 39 percent national audience reach 
limitation from the quadrennial review requirement.
    4. Prior to the enactment of the CAA, several parties had appealed 
the Commission's 2002 Biennial Review Order to the U.S. Court of 
Appeals for the Third Circuit (Third Circuit). In June 2004, the Third 
Circuit found that the challenges to the Commission's actions with 
respect to the national audience reach cap and the UHF discount were 
moot as a result of Congress's action. Specifically, the court held 
that the CAA rendered moot the challenges to

[[Page 21125]]

the Commission's decision to retain the UHF discount. The court found 
that the CAA insulated the national cap, including the UHF discount, 
from the Commission's quadrennial review of its media ownership rules. 
In February 2008, the Commission similarly concluded in the 2006 
Quadrennial Review Order that, the UHF discount is insulated from 
review under Section 202(h) as a result of the CAA, and thus beyond the 
scope of the quadrennial review.
    5. On June 13, 2009, the Commission completed the transition from 
analog to digital television broadcasting for full-power stations. 
While UHF channels were inferior for purposes of broadcasting in 
analog, the DTV transition affirmed the Commission's longstanding 
belief that digital broadcasting would eliminate the technical 
disparity between UHF and VHF signals. In fact, experience has 
confirmed that UHF channels are equal, if not superior, to VHF channels 
for the transmission of digital television signals. Therefore, in 2013, 
the Commission adopted a Notice of Proposed Rulemaking (Notice) to 
consider eliminating the UHF discount. Then-Commissioner Pai dissented 
from the Notice, contending that any such rulemaking should also 
evaluate whether the national cap itself should be modified. The 
Notice, however, did not seek comment on the national cap broadly.
    6. In a Report and Order adopted in August 2016, the Commission 
eliminated the UHF discount, finding that UHF stations are no longer 
technically inferior to VHF stations following the DTV transition and 
that the competitive disparity between UHF and VHF stations had 
disappeared. Then-Commissioner Pai and Commissioner O'Rielly dissented 
from the decision, with then-Commissioner Pai noting, It is undeniable 
that eliminating the UHF discount has the effect of expanding the scope 
of the national cap rule. Companies . . . that are currently in 
compliance with the national cap ownership rule will be above the cap 
once the UHF discount is terminated. Yet, the Commission has refused to 
review whether the current national cap ownership rule is sound or 
whether there is a need to make it more stringent, which is precisely 
what [the Report and Order] does. On November 23, 2016, ION and Trinity 
filed their Petition seeking reconsideration of the decision. Free 
Press, the National Hispanic Media Coalition, Common Cause, Media 
Alliance and the United Church of Christ Office of Communication, Inc. 
(Public Interest Opponents) and the American Cable Association (ACA) 
filed Oppositions to the Petition; the National Association of 
Broadcasters (NAB), Sinclair Broadcast Group, Inc. (Sinclair), Nexstar 
Broadcasting, Inc. (Nexstar), Univision Communications Inc. 
(Univision), and various TV licensees filed comments or replies 
supporting the Petition.
    7. The UHF Discount and National Cap Should Have Been Considered in 
Tandem. The Order on Reconsideration finds that the Petitioners and 
their supporters provide valid reasons to reconsider the decision to 
eliminate the UHF discount. The UHF discount and the national audience 
reach cap are closely linked, and the Commission failed to provide a 
reasoned basis to eliminate the discount in isolation without also 
fully considering whether the cap should be modified. Accordingly, the 
Order on Reconsideration reinstates the UHF discount, and the 
Commission will open a proceeding later this year to consider whether 
the national audience reach cap, including the UHF discount, should be 
modified.
    8. Petitioners and their supporters assert that the Commission 
should not have eliminated the UHF discount without adducing further 
evidence that the action would be in the public interest. The 
Petitioners argue that in eliminating the discount the Commission 
actually harmed the public interest by increasing the competitive 
disparity between broadcasters and other video programming 
distributors. CBS and Sinclair also point to a lack of evidence that 
the public interest would be harmed by retaining the UHF discount. NAB 
argues that, by eliminating the UHF discount in isolation, the 
Commission was not able to determine whether the change promotes the 
public interest purposes of the cap itself.
    9. The history of the UHF discount and national audience reach cap 
demonstrates that, with the exception of the Report and Order, the 
Commission has always considered the UHF discount together with the 
national cap. Referring to this history, Nexstar argues that, because 
the cap establishes a limit and the discount defines how to calculate 
whether the limit is reached, the cap and discount are inextricably 
intertwined. Petitioners assert that the national cap and discount go 
hand-in-hand; the FCC has no authority to change one without at least 
reviewing the impact that the change will have on the other. Sinclair 
agrees, and urges the Commission, in any review of the cap, to 
eliminate it entirely.
    10. While the Commission determined in the Report and Order that it 
should eliminate the discount without simultaneously reassessing the 
cap, on reconsideration, the Commission agrees with the arguments 
presented by Petitioners and their supporters that the Commission's 
prior decision was in error. The Commission finds that any adjustment 
to the UHF discount affects compliance with the national cap, and the 
elimination of the discount has the effect of substantially tightening 
the cap in some cases. In the Report and Order, however, the Commission 
never explained why tightening the cap was in the public interest or 
justified by current marketplace conditions. It presented no examples 
of how the current cap, including the UHF discount, was harming 
competition, diversity, or localism. Eliminating the UHF discount on a 
piecemeal basis, without considering the national cap as a whole, was 
arbitrary and capricious, and unwise from a public policy perspective.
    11. Contrary to ACA's claims that consideration of the discount 
without consideration of the cap was appropriate, the Commission erred 
by eliminating the discount and thus substantially tightening the cap 
without considering whether the cap should be raised to mitigate the 
regulatory impact of eliminating the UHF discount. While it is true 
that the UHF discount no longer has a sound technical basis following 
the DTV transition, the Commission failed to provide a reasoned 
explanation for eliminating the discount without conducting a broader 
review of the cap, which it deferred indefinitely. Reliance on the 
self-imposed narrow scope of the Notice was not a sound basis for the 
Commission to conclude that it could not consider the broader public 
interest issues posed by retaining the national cap while eliminating 
the UHF discount. Nothing prevented the Commission from issuing a 
broader Notice at the outset or broadening the scope of the proceeding 
by issuing a further notice to consider whether the public interest 
would be served by retaining the cap while eliminating the UHF 
discount.
    12. This error is problematic because the Commission has 
acknowledged, both in the record of this proceeding and in the most 
recent quadrennial media ownership review, the greatly increased 
options for consumers in the selection and viewing of video programming 
since Congress directed the Commission to modify the cap in 2004. The 
Report and Order, however, failed to adequately consider the impact of 
those changes on the appropriateness

[[Page 21126]]

of eliminating the UHF discount while not adjusting the national cap. 
The Commission should have considered these changes and assessed the 
current need for a 39 percent national cap before eliminating the UHF 
discount and tightening the cap for some station groups, particularly 
in view of the industry's reliance on the UHF discount to develop long-
term business strategies. Although the Commission considered the effect 
of the DTV transition, it failed to consider current marketplace 
conditions or whether tightening the cap was in the public interest. 
Thus, it is necessary to rectify the Commission's error by reinstating 
the discount so that it can be considered as part of a broader 
reassessment of the national audience reach rule, which will begin 
later this year.
    13. Grounds for Reconsideration. The record in response to the 
Petition demonstrates disagreement on the factors that can support 
granting a petition for reconsideration. The Opponents claim that the 
Petition must be denied because it fails to present new facts or 
arguments not already considered and answered by the Commission in the 
underlying Report and Order. On the other hand, Nexstar claims that 
Section 1.429 of our rules, which governs petitions for 
reconsideration, should not be interpreted to preclude a petitioner for 
reconsideration from raising any argument that was mentioned in the 
underlying Commission order or a dissenting statement. Neither the 
Communications Act nor Commission rules preclude the Commission from 
granting petitions for reconsideration that fail to rely on new 
arguments. Commission precedent establishes that reconsideration is 
generally appropriate where the petitioner shows either a material 
error or omission in the original order or raises additional facts not 
known or not existing until after the petitioner's last opportunity to 
respond.
    14. The Petition, while reiterating some arguments made in response 
to the Notice, nonetheless provides valid grounds for the Commission to 
reconsider its previous action. The Commission failed to fully consider 
important arguments and lacked a reasoned basis for concluding that it 
could eliminate the discount without a broader review of the national 
cap. These are sufficient grounds under Section 1.429 for the 
Commission to reconsider its previous action even absent new facts or 
arguments.
    15. Procedural Matters. As required by the Regulatory Flexibility 
Act of 1980, as amended (RFA), the Commission has prepared a 
Supplemental Final Regulatory Flexibility Analysis (SFRFA) relating to 
this Order on Reconsideration.
    16. This Order on Reconsideration does not contain proposed 
information collection(s) subject to the Paperwork Reduction Act of 
1995 (PRA). In addition, therefore, it does not contain any new or 
modified information collection burden for small business concerns with 
fewer than 25 employees, pursuant to the Small Business Paperwork 
Relief Act of 2002.
    17. Supplementary Regulatory Flexibility Analysis. In compliance 
with the Regulatory Flexibility Act (RFA), this Supplemental Final 
Regulatory Flexibility Analysis (SFRFA) supplements the Final 
Regulatory Flexibility Analysis (FRFA) included in the Report and Order 
to the extent that changes adopted on reconsideration require changes 
in the conclusions reached in the FRFA. As required by the RFA, the 
FRFA was preceded by an Initial Regulatory Flexibility Analysis (IRFA) 
incorporated in the Notice which sought public comment on the proposals 
in the Notice.
    18. This Order on Reconsideration reinstates the UHF discount in 
the Commission's national television multiple ownership rule. That rule 
currently prohibits a single entity from owning television stations 
that, in the aggregate, reach more than 39 percent of the total 
television households in the nation. When the cap was established and 
stations broadcast using analog technology, UHF broadcasting was 
considered technically inferior to VHF broadcasting. Therefore, the UHF 
discount allowed television stations broadcasting in the UHF spectrum 
to attribute those stations with only 50 percent of the television 
households in their Designated Market Areas. The Report and Order 
eliminated the UHF discount, finding that UHF stations are no longer 
technically inferior or competitively disadvantaged relative to VHF 
stations following the DTV transition.
    19. The Order on Reconsideration finds that, because the UHF 
discount affects calculation of compliance with the national audience 
reach cap, the discount and cap are linked and the public interest is 
better served by considering the discount and cap in tandem. Rather 
than potentially tightening the national cap in some cases by 
eliminating the UHF discount, the reinstatement of the discount returns 
broadcasters to the status quo prior to August 2016 for purposes of 
calculating their compliance with the cap. The Commission will begin a 
rulemaking proceeding later this year to consider whether it is in the 
public interest to modify the national cap, including the UHF discount.
    20. The RFA directs the Commission to provide a description of and, 
where feasible, an estimate of the number of small entities that will 
be affected by the rules adopted in this Order on Reconsideration. The 
RFA generally defines the term small entity as having the same meaning 
as the terms small business, small organization, and small governmental 
jurisdiction. In addition, the term small business has the same meaning 
as the term small business concern under the Small Business Act. A 
small business concern is one which: (1) Is independently owned and 
operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the SBA. The FRFA 
accompanying the Report and Order described and estimated the number of 
small entities that would be affected by elimination of the UHF 
discount. Reinstatement of the UHF discount in this Order on 
Reconsideration applies to the same entities affected by elimination of 
the discount.
    21. Television Broadcasting. This Economic Census category 
comprises establishments primarily engaged in broadcasting images 
together with sound. These establishments operate television broadcast 
studios and facilities for the programming and transmission of programs 
to the public. These establishments also produce or transmit visual 
programming to affiliated broadcast television stations, which in turn 
broadcast the programs to the public on a predetermined schedule. 
Programming may originate in their own studio, from an affiliated 
network, or from external sources. The SBA has created the following 
small business size standard for such businesses: Those having $38.5 
million or less in annual receipts. The 2012 Economic Census reports 
that 751 firms in this category operated in that year. Of that number, 
656 had annual receipts of $25,000,000 or less, 25 had annual receipts 
between $25,000,000 and $49,999,999 and 70 had annual receipts of 
$50,000,000 or more. Based on this data we therefore estimate that the 
majority of commercial television broadcasters are small entities under 
the applicable SBA size.
    22. The Commission has estimated the number of licensed commercial 
television stations to be 1,384. Of this total, 1,275 stations (or 
about 92 percent) had revenues of $38.5 million or less, according to 
Commission staff review of the BIA Kelsey Inc. Media Access Pro 
Television Database (BIA) on February 24, 2017, and therefore these

[[Page 21127]]

licensees qualify as small entities under the SBA definition. In 
addition, the Commission has estimated the number of licensed 
noncommercial educational (NCE) television stations to be 394. 
Notwithstanding, the Commission does not compile and otherwise does not 
have access to information on the revenue of NCE stations that would 
permit it to determine how many such stations would qualify as small 
entities.
    23. The Commission notes, however, that in assessing whether a 
business concern qualifies as small under the above definition, 
business (control) affiliations must be included. The estimate, 
therefore, likely overstates the number of small entities that might be 
affected by our action because the revenue figure on which it is based 
does not include or aggregate revenues from affiliated companies. In 
addition, an element of the definition of ``small business'' is that 
the entity not be dominant in its field of operation. The Commission is 
unable at this time to define or quantify the criteria that would 
establish whether a specific television station is dominant in its 
field of operation. Accordingly, the estimate of small businesses to 
which rules may apply does not exclude any television station from the 
definition of a small business on this basis and is therefore possibly 
over-inclusive.
    24. The FRFA accompanying the Report and Order stated that 
elimination of the UHF discount modified calculation of compliance with 
the national audience reach cap and would affect reporting, 
recordkeeping, or other compliance requirements. Specifically, the 
Commission would have potentially needed to modify FCC forms or related 
instructions pursuant to the Report and Order. This Order on 
Reconsideration reinstates the UHF discount, thereby maintaining the 
current methodology for calculating compliance with the cap. Therefore, 
no changes to FCC forms or instructions will be necessary and the 
reporting, recordkeeping, and other compliance requirements will not be 
affected. Thus, reinstatement of the UHF discount will not impose 
additional obligations or expenditure of resources on small businesses.
    25. The Order on Reconsideration determined that the discount and 
cap were linked and that considering them in tandem would better serve 
the public interest than simply eliminating the discount alone. 
Examining the discount and cap together in a rulemaking proceeding to 
be opened later this year will positively impact broadcasters, 
including small entities, and avoid the potential harms described by 
Petitioners and their supporters at paragraphs 8 and 10, above.
    26. Ordering Clauses. Accordingly, it is ordered that, pursuant to 
the authority contained in Section 405(a) of the Communications Act of 
1934, as amended, and Section 1.429 of the Commission's rules, the 
Petition for Reconsideration filed by ION Media Networks, Inc. and 
Trinity Christian Center of Santa Ana, Inc. on November 23, 2016, is 
granted in part and otherwise is dismissed as moot, to the extent 
provided herein.
    27. It is further ordered that pursuant to the authority contained 
in Sections 1, 2(a), 4(i), 4(j), 303(r), 307, 309, and 310 of the 
Communications Act of 1934, as amended, this Order on Reconsideration 
is adopted. The rule modification discussed in this Order on 
Reconsideration shall be effective June 5, 2017.
    28. It is further ordered that the Commission shall send a copy of 
this Order on Reconsideration to Congress and to the Government 
Accountability Office pursuant to the Congressional Review Act.
    29. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Order on Reconsideration, including the Supplemental Final 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

List of Subjects in 47 CFR Part 73

    Television; Radio.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rule

    For the reasons discussed in the preamble, the Federal 
Communication Commission amends 47 CFR part 73 as follows:

PART 73--RADIO BROADCAST SERVICES

0
1. The authority citation for part 73 continues to read as follows:

    Authority:  47 U.S.C. 154, 303, 334, 336 and 339.


0
2. Amend Sec.  73.3555 by revising paragraph (e)(1) and (e)(2)(i) to 
read as follows:


Sec.  73.3555  Multiple ownership.

* * * * *
    (e) National television multiple ownership rule. (1) No license for 
a commercial television broadcast station shall be granted, transferred 
or assigned to any party (including all parties under common control) 
if the grant, transfer or assignment of such license would result in 
such party or any of its stockholders, partners, members, officers or 
directors having a cognizable interest in television stations which 
have an aggregate national audience reach exceeding thirty-nine (39) 
percent.
    (2) * * *
    (i) National audience reach means the total number of television 
households in the Nielsen Designated Market Areas (DMAs) in which the 
relevant stations are located divided by the total national television 
households as measured by DMA data at the time of a grant, transfer, or 
assignment of a license. For purposes of making this calculation, UHF 
television stations shall be attributed with 50 percent of the 
television households in their DMA market.
* * * * *
[FR Doc. 2017-09001 Filed 5-4-17; 8:45 am]
 BILLING CODE 6712-01-P