Definition of Markets for Purposes of the Cable Television Broadcast Signal Carriage Rules

[Federal Register Volume 64, Number 121 (Thursday, June 24, 1999)]
[Rules and Regulations]
[Pages 33788-33796]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15959]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 95-178; FCC 99-116]


Definition of Markets for Purposes of the Cable Television 
Broadcast Signal Carriage Rules

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission dismisses petitions for 
reconsideration of the First Report and Order filed by Blackstar of Ann 
Arbor, Inc., licensee of WBSX-TV and by Costa de Oro Television, Inc., 
licensee of KSTV, that ask for special treatment for certain kinds of 
situations during the transition from ADIs to DMAs. The Commission has 
found that special relief is not warranted for these stations as they 
have taken advantage of the market modification process. Also addressed 
are possible ways to ease the transition for both broadcasters and 
cable operators, and the viewers they serve, as the Commission moves 
from an ADI to a DMA-based market structure. The Commission has set 
forth several procedural and evidentiary mechanisms to ameliorate the 
impact the change in market definitions may have on cable operators and 
broadcasters. The principal goal of the measures taken is to reduce, to 
the maximum extent feasible, cable subscriber confusion, and disruption 
in viewing patterns, that may arise because of the change. The 
Commission also improves the functioning of the ad hoc market 
modification process mandated by the Communications Act. New rules have 
been implemented encapsulizing the evidence necessary for filing market 
modification petitions.

DATES: These rules are effective July 26, 1999. Public comments on the 
modified information collection requirements are due on or before July 
14, 1999.

ADDRESSES: A copy of any comments on the modified information 
collection requirements should be submitted to Judy Boley, Federal 
Communications Commission, Room 1-C804, 445 12th Street, SW, 
Washington, DC 20554, and to Timothy Fain, OMB Desk Officer, 10236 
NEOB, 725--17th Street, NW, Washington, DC 20503.

FOR FURTHER INFORMATION CONTACT: Ben Golant, Consumer Protection and 
Competition Division, Cable Services Bureau, at (202) 418-7111. For 
additional information concerning the information collection contained 
herein, contact Judy Boley at (202) 418-0214, or via the Internet at 
jboley@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's Order 
on Reconsideration and Second Report and Order, CS Docket No. 95-178, 
FCC 99-116 adopted May 21, 1999 and released May 26, 1999. The full 
text of this decision is available for inspection and copying during 
normal business hours in the FCC Reference Center, 445 12th St. SW, 
Washington, DC 20554, and may be purchased from the Commission's copy 
contractor, International Transcription Service, (202) 857-3800, 445 
12th St. SW, Washington, DC 20554.

Synopsis of the Order on Reconsideration and Second Report and 
Order

    1. The First Report and Order and Further Notice of Proposed 
Rulemaking (``First Order''), 61 FR 29312, in this proceeding 
established new television market definitions for purposes of the cable 
television signal carriage and retransmission consent rules. The 
Commission concluded that it was appropriate to change market 
definitions from Arbitron areas of dominant influence (``ADIs'') to 
Nielsen Media Research designated market areas (``DMAs'') for must-
carry/retransmission consent elections. That action was necessary 
because the Arbitron market definition mechanism previously relied on 
was no longer available. However, the Commission continued to use

[[Page 33789]]

Arbitron's 1991-1992 Television ADI Market Guide designations for the 
1996-1999 must-carry/retransmission consent election period and 
postponed the switch to DMAs until the third must-carry/retransmission 
consent cycle that is to commence on January 1, 2000.
    2. The First Order delayed the transition to DMAs because of 
concerns related to the transition from one market definition to 
another and the relationship of such a transition to the ad hoc market 
boundary change process provided for in Section 614(h) of the 
Communications Act. For this reason, the Further Notice of Proposed 
Rulemaking was issued to solicit additional information and provide 
parties an opportunity to further consider issues relating to the 
transition to market designations based on DMAs. It also sought comment 
on procedures for refining the Section 614(h) market modification 
process.
    3. Our task in this Order on Reconsideration and Second Report and 
Order is twofold. First, we consider the arguments raised in petitions 
for reconsideration of the First Report and Order filed by Blackstar of 
Ann Arbor, Inc., licensee of WBSX-TV (ch. 31--Ann Arbor, MI) (``WBSX-
TV''), and by Costa de Oro Television, Inc., licensee of KSTV (ch. 57--
Ventura, CA) (``KSTV-TV''), that ask for special treatment for certain 
kinds of situations during the transition from ADIs to DMAs. For the 
reasons discussed below, we conclude that no special treatment for 
these petitioners is warranted.
    4. Second, we address the issues raised in the Further Notice, and 
by the comments filed in response to that Notice, regarding possible 
ways to ease the transition for both broadcasters and cable operators, 
and the viewers they serve, as we move from an ADI to a DMA-based 
market structure. We also take this opportunity to improve the 
functioning of the ad hoc market modification process mandated by 
Section 614(h) of the Communications Act. Our principal goal is to 
reduce, to the extent feasible, cable subscriber confusion and 
disruption in viewing patterns that may arise because of the switch 
from ADIs to DMAs. Another goal is to clarify the procedures for 
determining markets for must carry purposes so that the administration 
of Section 614 by the Commission is efficient and workable.
    5. Under provisions added to the Act by the Cable Television 
Consumer Protection and Competition Act of 1992 (``1992 Cable Act''), 
local commercial broadcast television stations may elect whether they 
will be carried by local cable television systems, and open video 
systems, under the mandatory carriage (``must-carry'') or 
retransmission consent rules. A station electing must carry rights is 
entitled to insist on cable carriage in its local market. Should a 
local station choose retransmission consent, it and the cable system 
negotiate the terms of a carriage agreement and the station is 
permitted to receive compensation in return for carriage. Stations are 
required to make this election once every three years. The current 
cycle commenced on January 1, 1997, with elections having been made by 
October 1, 1996.
    6. For the purposes of these carriage rights, a station is 
considered local on all cable systems located in the same television 
market as the station. As enacted, Section 614(h)(1)(C) of the Act 
specifies that a station's market shall be determined in the manner 
provided in section 73.3555(d)(3)(i) of the Commission's rules, in 
effect on May 1, 1991. Section 73.3555(d)(3)(i), now redesignated as 
section 73.3555(e)(2)(i), is a separate rule concerned with broadcast 
station ownership issues that refers to Arbitron's ADIs. An ADI is a 
geographic market designation that defines each television market based 
on measured viewing patterns. Essentially, each county or portion of a 
county in the contiguous areas of the United States is allocated to a 
discrete market based on which home-market stations receive a 
preponderance of total viewing hours in the county. For the purposes of 
this calculation, both over-the-air and cable television viewing are 
included. Because of the topography involved, certain counties are 
divided into more than one sampling unit. Also, in certain 
circumstances, a station may have its home county assigned to an ADI 
even though it receives less than a preponderance of the audience in 
that county.
    7. Moreover, under the ``home county rule,'' the county in which 
the station's community of license is located is considered within its 
market. Under Arbitron, a station's city of license, and its home 
county, may be located in one ADI but assigned by Arbitron to another 
ADI for ratings reporting purposes. The station may assert its must 
carry rights, or elect retransmission consent, against cable operators 
in its home county and all of the cable operators in the ADI to which 
the station is assigned.
    8. In addition to ADIs that generally define the area in which a 
station is entitled to insist on carriage, Section 614(h) of the Act 
directs the Commission to consider individual requests for changes 
through a market modification process, including the determination that 
particular communities may be part of more than one television market. 
The Act provides that the Commission may ``With respect to a particular 
television broadcast station, include additional communities within its 
television market or exclude communities from such station's television 
market to better effectuate the purposes of this section.''
    9. Section 614(h)(1)(C)(ii) states that in deciding requests for 
market modifications, the Commission shall consider several factors: 
(I) whether the station, or other stations located in the same area, 
have been historically carried on the cable system or systems within 
such community; (II) whether the television station provides coverage 
or other local service to such community; (III) whether any other 
television station that is eligible to be carried by a cable system in 
such community in fulfillment of the requirements of this section 
provides news coverage of issues of concern to such community or 
provides carriage or coverage of sporting and other events of interests 
to the community; and (IV) evidence of viewing patterns in cable and 
noncable households within the areas served by the cable system or 
systems in such community. Section 76.59 of the rules provides that 
broadcast stations and cable operators shall submit requests for market 
modifications in accordance with the procedures for filing petitions 
for special relief.
    10. Arbitron discontinued its television ratings and research 
business after the Commission established the mechanism for determining 
a station's local market for purposes of the triennial must carry/
retransmission consent election. Thus, future editions of the 
publications referred to in the rules are no longer available and new 
procedures for defining market areas for must carry purposes had to be 
established.
    11. Historically, Arbitron and Nielsen have been the primary 
national television ratings services. Conceptually, their market 
designations--ADIs and DMAs--are the same. They both use audience 
survey information from cable and noncable households to determine the 
assignment of counties to local television markets based on the market 
whose stations receive the largest share of viewing in the county. The 
differences in their assignments of specific counties to particular 
markets reflect a number of factors, including slightly different 
methodologies and criteria as well as normal sampling and statistical 
variations. Each company also has a policy for determining what 
constitutes a separate market based on a complex

[[Page 33790]]

statistical formula. For example, Arbitron considers some areas, such 
as Hagerstown, Maryland, or Sarasota, Florida, as separate markets, 
compared to Nielsen, which includes Hagerstown in the Washington, DC. 
DMA and Sarasota in the Tampa DMA. In addition, these services reserve 
the right to take into account other considerations. Nielsen, in 
particular, ``reserves the right not to create a DMA if there is a lack 
of sufficient financial support of Nielsen Service in that potential 
DMA.''
    12. Nielsen has established a system to determine which stations 
are considered ``local'' for ratings reporting purposes. This is the 
``Market-Of-Origin'' assignment process and involves several 
statistical calculations based upon viewership and other factors. 
However, a station may petition Nielsen to change its Market-Of-Origin 
assignment if both its transmitter and the majority of its Grade B 
service contour are located in a different DMA than the DMA in which 
the station's community of license is located. Such a petition must 
include relevant information on which the petitioning station bases its 
request for a change in Market-Of-Origin including, but not limited to, 
community of license, present transmitter location, signal coverage 
(including FCC coverage maps), audience data from previous 
measurements, and/or competitive considerations. Nielsen reserves the 
right to use its best judgment based upon the information available to 
it in considering whether the change sought by the petition reflects 
the reality of the market affected. The station's assignment is then 
made available in Nielsen's Directory of Stations publication. Thus, it 
appears that the home county rule applies in the DMA context as it had 
in the ADI context.
    13. In the First Order, the Commission concluded that Nielsen's DMA 
market assignments provide the most accurate method for determining the 
areas serviced by local stations, recognizing that over time the 1992-
92 ADI market list, if relied upon, would become outdated. Moreover, we 
continued to believe that our 1993 decision to use updated market 
designations for each election cycle to account for changing markets 
was appropriate. Nielsen currently provides the only generally 
recognized source of information on television markets that would 
permit us to retain this policy. Thus, we concluded that Nielsen's DMA 
market designations will provide the best method of ``delineat[ing] 
television markets based on viewing patterns'' in the future.
    14. We observed, however, that a shift to a DMA-based market 
definition standard could result in some stations currently on local 
cable systems being replaced, some other programming services (i.e., 
cable networks) being dropped to accommodate situations where the 
number of stations entitled to carriage increases, and some channel 
line-ups needing to be reconfigured to accommodate the channel 
positioning requests of stations with new must-carry rights. The 
Commission also voiced concern about the impact the change to DMAs 
would have on the Section 614(h) market modification decisions already 
in force. The consensus of commenters was that prior market 
modification decisions should remain in effect. It was unclear, 
however, whether cable operators could face conflicting obligations or 
be subject to carriage of signals from multiple markets based on a 
revised market standard when these modifications are considered in 
conjunction with a new market definition. We did not receive any 
information regarding the effect that such decisions, in conjunction 
with a change to a DMA standard, would have on the must-carry 
obligations of cable operators. In addition, we were unable to 
determine the burden on the Commission to remedy conflicts that might 
result from an immediate switch to DMAs. The complexity of such 
situations and the administrative burden on the Commission and others 
to resolve possible conflicts could, the Commission believed, disrupt 
the orderly provision of local television service to subscribers.
    15. Based on these considerations, the Commission postponed the 
switch in market designation until the next must-carry/retransmission 
consent takes effect on January 1, 2000, to ensure that potential 
transitional problems could be addressed. We reasoned that the phased-
in approach would assist parties who expressed concerns that a switch 
in market definitions would result in administrative burdens and costs 
for cable operators, including small cable operators, and would impede 
the entry of new market entrants, such as local exchange carriers 
planning to operate cable systems under Title VI or the OVS provisions. 
Thus, the Commission decided to continue to use the 1991-1992 ADI 
market list for the 1996 election and to establish a framework that 
uses updated DMA markets lists for the 1999 and subsequent elections.
    16. Two parties, Blackstar of Ann Arbor, Inc., licensee of WBSX-TV 
(channel 31, Ann Arbor, Michigan) (``WBSX-TV'') and Costa de Oro 
Television, Inc., licensee of KSTV (channel 57, Ventura, California) 
(``KSTV-TV'') filed petitions for reconsideration of the First Order 
generally arguing that the Commission did not adequately consider 
updated market information, unique to their situations, when 
considering the transition from ADIs to DMAs.
    17. We believe there is no reason to make special exceptions for 
these two stations. The individual circumstances that apply to WBSX-TV 
and KSTV-TV are most appropriately dealt with through the market 
modification process, which takes into consideration their future DMA 
assignments. Both stations have used the market modification process to 
seek significant expansion of their ADI markets for must carry 
purposes. WBSX-TV has already added 55 communities to its current ADI, 
and KSTV-TV has added 22 communities. The Commission has specifically 
indicated that information regarding DMAs could be useful in resolving 
individual ad hoc market modification requests filed pursuant to 
Section 614(h). The stations may therefore use the modification process 
to change their DMAs, in the future, if the situation so warrants.
    18. The Further Notice of Proposed Rulemaking sought comment on 
mechanisms for facilitating the transition from a market definition 
system based on ADIs to one based on DMAs. Commenters were asked to 
consider whether special provisions should be made for particular types 
of systems (e.g., systems with fewer than a specified number of 
subscribers) to minimize the disruptions that could occur due to a 
switch to DMAs. The Commission is also concerned about the potential 
impact on consumers who are cable subscribers.
    19. We are not making the change suggested by Southern. Its concern 
about non-network territorial exclusivity arrangements appears to be 
misplaced and are better left addressed in Gen. Docket No. 87-24, which 
focuses on the network rules of concern to Southern. The change from 
ADIs to DMAs for must carry purposes in section 76.55 affects neither 
of the market listings referenced in Section 73.658(m) for purposes of 
territorial exclusivity in non-network arrangements. Section 73.658(m) 
provides that exclusivity may be secured in hyphenated markets included 
in the top 100 markets listed in section 76.51 or, if the market in 
question is not in the top 100 list, then Section 73.658(m) makes 
reference to the ARB Television Market Analysis. Even though Arbitron's 
television market analysis is no longer published,

[[Page 33791]]

there has been no change in the reference, and the Nielsen DMA list has 
not been substituted theretofore. Because section 73.568(m) refers to 
section 76.51, the reference to DMAs in section 76.55 is not relevant 
to territorial exclusivity in non-network arrangements, and Southern's 
objection to the switch to DMAs on this basis is unwarranted.
    20. We agree with those commenters that continue to express concern 
about the potentially disruptive consequences of switching to DMAs. A 
comparison of the ADI markets currently used with the DMA markets that 
will be used after the current election cycle is over, reveals that 135 
counties change markets because of the switch from ADIs to DMAs. A 
sampling of these counties suggests that, in certain instances, the 
changes will have serious impact, even though a relatively small number 
of cable systems and broadcasters would be involved. And, though a 
strong case could be made for reversing the market shift based on the 
ad hoc market evaluation factors contained in Section 614(h), this 
statutory mechanism, in and of itself, may not significantly lessen the 
impact of the change. Thus, we believe that some general relief is 
warranted. We note that the change in market definition from ADI to DMA 
will take effect on January 1, 2000, which prompts us to consider on 
our own motion whether this timing would create a Year 2000 (``Y2K'') 
problem, particularly for the cable systems that will experience 
carriage or channel line-up changes. Commission staff has confirmed 
with relevant industry representatives that cable systems' headend 
signal processing equipment is not dependent on date or time, and, 
therefore, the market definition change would not raise Y2K 
considerations.
    21. A cable system currently within a particular station's ADI, but 
outside that station's DMA, may want to continue carrying that station 
after the transition to DMAs because the station serves the local 
interests of its subscribers. We believe that when the cable system 
wants to carry a particular station, it is a strong indication that the 
community it serves continues to be within the station's local market 
notwithstanding the change in market definition. Therefore, to minimize 
programming disruptions, we adopt a policy whereby a cable system 
within a television station's ADI (but outside its DMA) that currently 
carries the station on its channel line-up may continue to carry the 
station, without being subject to copyright liability, even after the 
transition to DMAs. We note that the Act's one-third channel capacity 
cap, and related closest network affiliate provision, apply in this 
particular situation. This policy adheres to the Commission's goals of 
providing cable subscribers with television programming that serves the 
interests of localism, while also reducing the possibility of channel 
line-up disruptions and subsequent subscriber confusion. Our approach 
also takes into account the Commission's need for current market 
information that only Nielsen can provide while, at the same time, 
ensuring that cable subscribers are not deprived of valued broadcast 
services. In these cases, the commercial television station is, and 
will continue to be, local with respect to this cable system, in 
conformance with section 76.55 of the Commission's rules. This policy 
applies to stations that elected retransmission consent or must carry.
    22. As stated earlier, one of the principal goals in this 
proceeding is to reduce channel line-up disruptions whenever possible. 
The rule changes we are adopting, which permit individual fact-specific 
Commission adjustments prior to the shift to DMAs, seek to accomplish 
that goal. The new rules, amending sections 76.55(e) and 76.59, will 
include the following features:

--In the absence of any mandatory carriage complaint or market 
modification petition, cable operators in communities that change from 
one market to another will be permitted to treat their systems as 
either in the new market, or with respect to the specific stations 
carried prior to the market change, as in both markets.
--If any dispute is triggered by a change in markets that results in 
the filing of a mandatory carriage complaint, any affected party may 
respond to that complaint by filing a market modification request. The 
market modification request and the carriage complaint will then be 
addressed simultaneously. All broadcast signal carriage issues, such as 
channel positioning matters, would be addressed in the same proceeding. 
Pending complaints and petitions will be disposed of in a single 
proceeding whenever practicable.

    23. We also find that where a broadcast station is dissatisfied 
with a final market modification decision issued by the Commission, and 
then successfully petitions Nielsen to change its market-of-origin in 
response to the Commission's adverse decision, the Commission's market 
modification decision remains controlling.
    24. In Section 614(h) market modification cases, where issues are 
raised as to which market the cable communities are properly 
associated, the Commission will pay particular attention to the 
following considerations:

--Where persuasive evidence exists showing that two markets have been 
merged into a single market because there was insufficient financial 
support from purchasers of the rating report available from the rating 
service to maintain separate markets, or for other reasons unrelated to 
market definitions relevant to the purposes of the Commission's 
broadcast signal carriage rules, it will be presumed, in the absence of 
a demonstration to the contrary, that the previous demarcation points 
between the markets should be maintained. A failure of financial 
support for the ratings service shall not be regarded as indicative of 
a market change for purposes of the rules. Such evidence, as letters to 
the station from Nielsen explaining the change, would fulfill the 
burden of proof in this context.
--Where a county is shifted into a noncontiguous market (e.g., a county 
in State A is considered part of a DMA in State B, which is not 
geographically contiguous with the county in State A), in considering 
whether that shift should be followed or revised through the Section 
614(h) process, localism as reflected in over-the-air audience ratings, 
will be given particular attention. That is, because over-the-air 
audience data is a more accurate and reliable indication of local 
viewership, greater evidentiary weight will be given to over-the-air 
audience data than to cable audience data. Careful attention will be 
given to unique market situations, like those in the Rocky Mountain 
area, where counties are sometimes hundreds of miles away from the core 
of the market. In considering a requested market modification, the 
Commission will closely examine whether the challenged market 
redesignation resulted from audience change due to cable carriage of 
the signals in question as opposed to resulting from changes in the 
local market.
--Where Nielsen's market redesignation is the result of potentially 
transitory programming popularity shifts on particular stations rather 
than from significant changes in the facilities or locations of such 
stations, the Commission may, upon request, resurrect the former market 
structure. Thus, for example, if a county were shifted to market A 
because the stations in that market garnered a 52% share of the 
audience and

[[Page 33792]]

deleted from market B because its stations garnered only a 48% share, 
the Commission would consider leaving the market unchanged because 
stability is in the public interest and the underlying structure of the 
market has not been significantly altered to warrant the difficulties 
associated with the change.
--We will also consider factors such as changes in the time zone from 
the old market to the new market, as well as significant disruptions to 
subscribers. Evidence of significant disruptions to subscribers could 
include extensive changes in channel line-ups and subscriber objections 
to the change.
--Where a cable operator or broadcaster seeks to remain associated with 
a smaller market rather than be shifted to a larger market, the 
Commission will give weight to this consideration in a market 
modification proceeding. Supporting the smaller market is consistent 
with the Section 614(h) policy of paying ``particular attention to the 
value of localism.'' In general, small cable system and small broadcast 
station concerns will be given careful attention. In this regard, the 
Commission will review whether such a change supports the policy of 
localism. In this situation, we will also take into consideration 
broadcasters' costs to deliver signals to cable system headends in the 
market and the costs to cable systems to receive local market stations.
--Separate from the specifics of the market modification process, the 
four statutory criteria, and other evidence considered in that process, 
the Commission will consider whether extreme hardship is imposed on 
small cable systems or small broadcast stations, often those 
unaffiliated with the top networks, by the DMA conversion process. Such 
hardship would include disproportionate expense to the system and 
programming disruption to subscribers that is exacerbated by the small 
size of the system. Evidence of such hardship would include reliable 
cost estimates for carrying the new stations and channel position 
conflicts between old and new stations. We believe this hardship scheme 
will address the concerns raised by small cable operators in their 
comments, and are more closely aligned with the Act's localism tenets 
than the small operators' opt out and reimbursement proposals 
discussed.

    25. We noted concern about the effect of changing to a DMA market 
definition on previous Section 614(h) decisions and petitions pending 
before the Commission. Specifically, we requested commenting parties to 
address the consequences of a shift in definitions on the more 
particularized market boundary redefinition process contained in 
Section 614(h), the decisions that have been made under that section, 
and the proceedings under it that would result from shifting market 
definitions.
    26. We conclude that market modification requests filed prior to 
the effective date of the change from ADI to DMA, including petitions, 
petitions for reconsideration, and applications for review, will be 
processed under Arbitron's ADI market definitions. We do not believe 
that the petitions for reconsideration and applications for review 
currently pending will be affected by the conversion to DMAs because, 
in most of these cases, the market assignment will not change. In cases 
in which the conversion to DMAs will have a direct consequence, we will 
take the future DMA assignment into account, as we have done since the 
First Order was released. We will also leave intact final market 
modification cases that have not been appealed and/or cases that have 
been subject to final Commission review so as to avoid disturbing 
settled expectations.
    27. In addition, we agree with NCTA's argument that where the 
Commission has previously decided to delete a community from a 
station's ADI market, that deletion will remain in effect after the 
conversion to DMAs. We also recognize NCTA's concern that stations 
should not be able to assert carriage rights in its former market while 
a market modification deletion request is pending. Generally, a cable 
operator may not delete a commercial television station from carriage 
during the pendency of a market modification proceeding. However, if 
conversion to DMAs moves a station out of the ADI that is the subject 
of a pending deletion request, the deletion request is effectively 
moot, and the cable operator may drop the station. We believe that few, 
if any, pending proceedings will fall within this factual pattern. 
Nevertheless, we agree with NCTA that, as we stated earlier, the Act 
and our rules cannot be read to allow a television station to claim 
carriage rights in more than one DMA, barring a modification by the 
Commission.
    28. We also sought comment on what changes in the modification 
process may be warranted given that administrative resources available 
to process Section 614(h) requests are limited and the Act established 
a 120-day time period for action on these petitions. We stated that new 
techniques may be needed to increase the efficiency of the decision 
making process. Under the existing process, a party is free to make its 
case using whatever evidence it deems appropriate. One suggested means 
of expediting the modification process was to establish more focused 
and standardized evidentiary specifications. Therefore, we proposed to 
establish specific evidentiary requirements in order to support market 
modification petitions under Section 614(h) of the Act. We requested 
comment on the following specific information submission requirements 
and sought alternatives that would assist the Commission in its review 
of individual requests. In particular, we proposed that each filing 
include exhibits showing:

--A map detailing the relevant community locations and geographic 
features, disclosing station transmitter sites, cable system headend 
locations, terrain features that would affect station reception, and 
transportation and other local factors influencing the shape of the 
economic market involved. Relevant mileage would be clearly disclosed;
--Historical cable carriage, illustrated by the submission of 
documents, such as rate cards, listing the cable system's channel line-
ups for a period of several years.
--Coverage provided by the stations, including maps of the areas in 
question with the universe of involved broadcast station contours and 
cable system franchise areas clearly delineated with the same level of 
specificity as the maps filed with the Commission for broadcast 
licensing proceedings;
--Information regarding coverage of news or other programming of 
interest to the community as demonstrated by program logs or other 
descriptions of local program offerings, such as detailed listings of 
the programming provided in a typical week that address issues of 
importance in the community in question and not the market in general;
--Other information that demonstrates a nexus between the station and 
the cable community, including data on transportation, shopping, and 
labor patterns;
--Published audience data for the relevant stations showing their 
average all day audience (i.e., the reported audience averaged over 
Sunday-Saturday, 7 a.m.-1 a.m., or an equivalent time period) for both 
cable and noncable households over a period of several years.


[[Page 33793]]


    29. We will adopt the standardized evidence approach with regard to 
market modification petitions and amend the rules accordingly. 
Petitions that do not provide the evidence required by the rule will be 
dismissed without prejudice. This option has distinct advantages. 
First, it promotes administrative efficiency. Commission staff would no 
longer have to spend time tracking down the appropriate maps, ratings 
data, and carriage records that are missing from the record. Nor would 
Commission staff need to contact the relevant party to request the 
information that should have been included in the filing in the first 
place. With the relevant evidence available, the resources needed to 
process modification requests would be reduced. It now takes almost the 
entire 120-day statutory period to research, draft, adopt, and release 
a market modification decision. The interests of both broadcasters and 
cable operators will be advanced by a standardized evidentiary approach 
that will facilitate the decision-making process. By adopting the 
standardized evidence option, we may be able to bring greater 
uniformity and certainty to the process and avoid unnecessary 
reconsideration petitions and appeals, which will enable us to redirect 
administrative resources that would have been devoted to those 
proceedings.
    30. In addition to the evidence delineated above, we encourage 
petitioners to provide a more specific technical coverage showing, 
through the submission of service coverage prediction maps that take 
terrain into account, particularly maps using the Longley-Rice 
prediction methodology. In situations involving mountainous terrain or 
other unusual geographical feature, the Commission will consider 
Longley-Rice propagation studies in determining whether or not a 
television station actually provides local service to a community under 
factor two of the market modification test. We will view such studies 
as probative evidence in our analysis and a proper tool to augment 
Grade B contour showings. The Longley-Rice model provides a more 
accurate representation of a station's technical coverage area because 
it takes into account such factors as mountains and valleys that are 
not specifically reflected in a traditional Grade B contour analysis. 
Since both the Commission and the broadcasting industry have relied 
upon the Longley-Rice model in determining the digital television Table 
of Allocations, these studies will become increasingly useful in 
defining market areas for digital television stations as they come on 
the air.
    31. We do not find merit in the argument that the standardized 
evidence option would pose an unreasonable financial burden on 
petitioners. We believe that the requested evidence should be 
obtainable without unreasonable difficulty and is in any case the kind 
of information that should be reviewed in determining whether a filing 
is appropriate. Most of the requested information has been included by 
more careful petitioners in the past without complaint about costs or 
administrative difficulties. Our decision here simply standardizes the 
type of evidence we find relevant in processing market modification 
petitions. However, if a requested item is in the exclusive control of 
the opposing party, and the opposing party refuses to provide the 
information, we will take into consideration which party is responsible 
for the absence of the requested information.
    32. ALTV contends that the standardized evidence approach conflicts 
with the Act because Section 614(h) specifies a limited range of 
evidence needed to support a market modification petition. We disagree. 
The language of Section 614(h) provides that in considering market 
modification requests, ``the Commission shall afford particular 
attention to the value of localism by taking into account such factors 
as * * *'' (emphasis added), indicating that the factors are non-
exclusive. Likewise, the legislative history accompanying Section 
614(h) indicates that the four factors are non-exclusive, and we have 
interpreted this language to mean that the parties may submit any 
additional evidence they believe is appropriate. The approach we adopt 
today adds substance to this directive by clearly indicating what kind 
of evidence is necessary for a modification petition to be deemed 
complete. Parties may continue to submit whatever additional evidence 
they deem appropriate and relevant.
    33. The second proposal proffered by the Commission to increase the 
efficiency of the decision making process was to alter to some extent 
the burden of producing the relevant evidence. Thus, for example, 
Section 614(h) establishes four statutory factors to govern the ad hoc 
market change process, including historical carriage, local service, 
service from other station, and audience viewing patterns. These 
factors are intended to provide evidence as to a particular station's 
market area, but they are not the only factors considered. These 
factors must be considered in conjunction with other relevant 
information to develop a result that is designed to ``better effectuate 
the purposes'' of the must-carry requirements. The Notice sought 
comment on whether the process could be expedited by permitting the 
party seeking the modification to establish a prima facie case based on 
historical carriage, technical signal coverage of the area in question, 
and off-air viewing. Such factors track the statutory provision and are 
relatively free from factual dispute. The presentation of such a prima 
facie case could then trigger an obligation on the part of any 
objecting entity to complete the factual record by presenting 
conflicting evidence as to the actual scope of the economic market 
involved. This could include, for example, programming information and 
other evidence as to the local advertising market involved. Dividing 
the obligations in this fashion, the Notice suggested, would force the 
party with the best access to relevant information to disclose that 
information at the earliest possible point in the process.
    34. We find that the prima facie option is not the proper approach 
because it seems likely to create another area for procedural disputes. 
In contrast to the standardized evidence approach, which provides a 
framework that should expedite review, we are concerned that the prima 
facie approach, while possibly streamlining the process, would 
sacrifice the flexibility to consider all useful evidence. We also 
reject the market deletion plan proposed by Paxson. Under this 
approach, the Commission need only find that the cable system and the 
broadcaster share a DMA, and the cable system still has capacity for 
the carriage of local signals, in order to dismiss a market deletion 
petition. We believe this plan is contrary to the plain meaning of the 
Act because it ignores the four statutory factors that we must take 
into account when reviewing market deletion requests.
    35. With regard to WRNN-TV and Paxson's request that programming 
should be given more weight in the modification analysis, we believe 
that it is inappropriate to state that one factor is universally more 
important than any other, as each is valuable in assessing whether a 
particular community should be included or excluded from a station's 
local market, and the relative importance of particular factors will 
vary depending on the circumstances in a given case. Programming is 
considered in the context of Section 614(h) proceedings only insofar as 
it serves to demonstrate the scope a station's existing market and 
service area, not as

[[Page 33794]]

a quid pro quo that guarantees carriage or an obligation that must be 
met to obtain carriage. However, we do find that such information is 
particularly useful in determining if the television station provides 
specific service to the community subject to modification. As such, we 
will include programming of local interest in the analysis along with 
mileage, Grade B contour coverage, and physical geography, when 
reviewing the local service element of the market modification test.
    36. We continue to believe that our interpretation of Section 
614(h), and the evidence we have used to analyze local service and 
adjust markets is reasonable and consistent with the language of the 
Act and statutory intent. We note that the arguments Paxson and WRNN 
raise were addressed at length in the New York ADI Appeals Memorandum 
Opinion and Order, (``New York ADI Order''), 12 FCC Rcd 12262 (1997), 
which disposed of numerous separate must carry/market modification 
appeals involving seven New York ADI cable operators and five 
television stations. The Commission's decision, subsequently affirmed 
by the United States Court of Appeals for the Second Circuit, WLNY v. 
FCC, 163 F.3d 187 (2d Cir. 1998), generally affirmed a staff decision 
to retain certain communities, and to delete other communities, from 
each of the stations' markets based on the four statutory factors, with 
particular attention paid to the local service factor as measured by 
Grade B contours and geographic distance, as well as other 
considerations. The Court's opinion fully endorsed the Commission's 
approach to market modifications and agreed that our careful balancing 
of the enumerated statutory factors, and other important 
considerations, are entirely consistent with the language and intent of 
the Act.
    37. We note that Section 614(h) prohibits cable operators from 
deleting from carriage commercial broadcast stations during the 
pendency of a market modification request but does not address 
maintaining the status quo with respect to additions. Given the absence 
of a parallel statutory directive with respect to channel additions, we 
see no reason to depart from the general presumption that a decision is 
valid and binding until it is stayed or overruled. To the extent the 
process aids broadcast stations in both retaining and obtaining cable 
carriage rights, that appears to be the result intended by the 
statutory framework adopted.

Market Entry Analysis

    38. Section 257 of the Act requires the Commission to complete a 
proceeding to identify and eliminate market entry barriers for 
entrepreneurs and other small businesses in the telecommunications 
industry. The Commission is directed to promote, inter alia, a 
diversity of media voices and vigorous economic competition. We believe 
that this Order is consistent with the objectives of Section 257 in 
that it promotes a smooth transition to DMAs for both cable operators 
and broadcasters.

Paperwork Reduction Act

    The requirements adopted in this Report and Order have been 
analyzed with respect to the Paperwork Reduction Act of 1995 (the 
``1995 Act'') and would impose modified information collection 
requirements on the public. The Commission has requested Office of 
Management and Budget (``OMB'') approval, under the emergency 
processing provisions of the 1995 Act (5 CFR 1320.13), of the modified 
information collection requirements contained in this Report and Order. 
Public comments are due on or before 20 days after date of publication 
of this Notice in the Federal Register. OMB comments are due on or 
before 30 days after date of publication of this Notice in the Federal 
Register. Comments should address: (a) whether the proposed collection 
of information is necessary for the proper performance of the functions 
of the Commission, including whether the information would have 
practical utility; (b) the accuracy of the Commission's burden 
estimates; (c) ways to enhance the quality, utility, and clarity of the 
information collected; and (d) ways to minimize the burden of the 
collection of information on the respondents, including the use of 
automated collection techniques or other forms of information 
technology.
    OMB Approval Number: 3060-0546.
    Title: Definition of Markets for Purposes of the Cable Television 
Broadcast Signal Carriage Rules.
    Type of Review: Revision of existing collection.
    Respondents: Business and for-profit entities.
    Number of Respondents: 150.
    Estimated Time per Response: 4-40 hours.
    Frequency of Response: On occasion filing requirement.
    Total Estimated Annual Burden to Respondents: 1,680 hours.
    Total Estimated Annual Cost to Respondents: $721,500.
    Needs and Uses: This collection (OMB 3060-0546) accounts for the 
paperwork burden imposed on entities when undergoing the market 
modification request process. Information furnished in market 
modification filings is used by the Commission to deem that the 
television market of a particular commercial television broadcast 
station should include additional communities within its television 
market or exclude communities from such station's television market.

Final Regulatory Flexibility Act Analysis

    39. As required by Section 603 of the Regulatory Flexibility Act, 5 
U.S.C. Section 603 (RFA), an Initial Regulatory Flexibility Analysis 
(IRFA) was incorporated in the First Order and Further Notice of 
Proposed Rulemaking, 61 FR 29312. The Commission sought written public 
comments on the proposals in the Further Notice including comments on 
the IRFA. The FRFA conforms to the RFA, as amended by the Contract with 
America Advancement Act of 1996 (CWAAA), Pub. L. 104-121, 110 Stat. 
847.
    40. Need and Purpose of this Action: This action is necessary 
because the procedure for determining local television markets for 
signal carriage purposes relies on a market list no longer published by 
the Arbitron Ratings Company. Moreover, action is required to mitigate 
disruptions in cable channel line-ups that will be caused by the shift 
to a new television market paradigm.
    41. Summary of Issues Raised by the Public in Response to the 
Initial Regulatory Flexibility Analysis: SCBA filed comments in 
response to the Initial Regulatory Flexibility Analysis. SCBA states 
that the Commission's objective of a smooth transition from a market 
definition based on ADIs to one based on DMAs can be accomplished with 
respect to small cable systems by creating special transition rules. 
SCBA has submitted small cable transition rules that allegedly will 
help minimize regulatory burdens on small cable systems. SCBA first 
proposes rules that allow qualified small cable systems to opt out of 
the change in market definitions for the 1999 election. According to 
SCBA, this will allow certain small cable systems an additional three 
years to prepare for the impact of market redefinition. In the 
alternative, SCBA suggests transition rules, detailed in paragraphs 29-
30, above, that will protect existing programming and shift certain 
costs associated with market redefinition to the broadcasters that 
benefit from those costs. These comments are addressed in the Order.

[[Page 33795]]

    42. Description and Estimate of the Number of Small Entities 
Impacted. The RFA defines the term ``small entity'' as having the same 
meaning as the terms ``small business,'' ``small organization,'' and 
``small governmental jurisdiction,'' and the same meaning as the term 
``small business concern'' under Section 3 of the Small Business Act.'' 
A small 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 Small Business Administration 
(SBA).
    43. Cable Operators. The Communications Act at 47 U.S.C. Section 
543 (m) (2) defines a small cable operator as ``a cable operator that, 
directly or through an affiliate, serves in the aggregate fewer than 1 
percent of all subscribers in the United States and is not affiliated 
with any entity or entities whose gross annual revenues in the 
aggregate exceed $250,000,000.'' The Commission has determined that 
there are 61,700,000 subscribers in the United States. We have found 
that an operator serving fewer than 617,000 subscribers shall be deemed 
a small operator, if its annual revenues, when combined with the total 
annual revenues of all of its affiliates, do not exceed $250 million in 
the aggregate. Based on available data, we find that the number of 
cable operators serving 617,000 subscribers or less totals 1,450. 
Although it seems certain that some of these cable system operators are 
affiliated with entities whose gross annual revenues exceed 
$250,000,000, we are unable at this time to estimate with greater 
precision the number of cable system operators that would qualify as 
small cable operators under the definition in the Communications Act. 
We are likewise unable to estimate the number of these small cable 
operators that serve 50,000 or fewer subscribers in a franchise area. 
We can, however, assume that the number of cable operators serving 
617,000 subscribers or less that (1) are not affiliated with entities 
whose gross annual revenues exceed $250,000,000 or (2) serve 50,000 or 
fewer subscribers in a franchise area, is less than 1450.
    44. SBA has developed a definition of small entities for cable and 
other pay television services, which includes all such companies 
generating less than $11 million in revenue annually. This definition 
includes cable systems operators, closed circuit television services, 
direct broadcast satellite services, multipoint distribution systems, 
satellite master antenna systems and subscription television services. 
According to the Census Bureau, there were 1,323 such cable and other 
pay television services generating less than $11 million in revenue 
that were in operation for at least one year at the end of 1992.
    45. Open Video System (``OVS''). To date the Commission has 
certified 23 OVS systems, at least two of which are known to be 
currently providing service. Little financial information is available 
for entities authorized to provide OVS that are not yet operational. We 
believe that one OVS licensee may qualify as a small business concern. 
Given that other entities have been authorized to provide OVS service 
but have not yet begun to generate revenue, we conclude that at least 
some of the OVS operators qualify as small entities.
    46. Television Stations. The proposed rules and policies will apply 
to television broadcasting licensees, and potential licensees of 
television service. The Small Business Administration defines a 
television broadcasting station that has no more than $10.5 million in 
annual receipts as a small business. Television broadcasting stations 
consist of establishments primarily engaged in broadcasting visual 
programs by television to the public, except cable and other pay 
television services. Included in this industry are commercial, 
religious, educational, and other television stations. Also included 
are establishments primarily engaged in television broadcasting and 
which produce taped television program materials. Separate 
establishments primarily engaged in producing taped television program 
materials are classified under another SIC number. There are 
approximately 1,589 operating full power television broadcasting 
stations in the nation as of April 30, 1999. Approximately 1,200 of 
those stations are considered small businesses.
    47. In addition to owners of operating television stations, any 
entity who seeks or desires to obtain a television broadcast license 
may be affected by the rules contained in this item. The number of 
entities that may seek to obtain a television broadcast license is 
unknown.
    48. Reporting, Recordkeeping and Other Compliance Requirements. The 
rules adopted in this Order will affect broadcast stations, cable 
operators, and OVS system operators, including those that are small 
entities. The rules adopted in this Order require broadcasters, cable 
operators, and OVS operators to provide specific forms of evidence to 
support market modification petitions. We do not believe that the rules 
adopted here today will require any specialized skills beyond those 
already used by broadcasters and cable operators.
    49. Steps Taken to Minimize the Significant Economic Impact on 
Small Entities and Significant Alternatives Rejected. While declining 
to adopt SCBA's proposals, the Commission has implemented a procedural 
mechanism allowing small cable systems to file hardship petitions, if 
certain conditions are met. Specifically, the Commission will consider, 
in a case-by-case adjudicatory proceeding, whether extreme hardship 
would be imposed on small cable systems by requiring a transition to a 
new DMA market. Such hardship would include disproportionate expense to 
the system and programming disruption to subscribers exacerbated by the 
small size of the system. Evidence of such hardship would include 
reliable cost estimates for carrying the new stations; channel position 
conflicts between old and new stations; or an extensive change in 
channel line-ups. This mechanism should allay the concerns proffered by 
small cable operators.
    50. Report to Congress. The Commission shall send a copy of this 
Final Regulatory Flexibility Analysis, along with this Order, in a 
report to Congress pursuant to the Small Business Regulatory 
Enforcement Fairness Act of 1996, 5 U.S.C. Section 801(a)(1)(A). A copy 
of this FRFA will also be published in the Federal Register.

Ordering Clauses

    51. Accordingly, it is ordered that, pursuant to Section 4(i), 
4(j), 614 and 653 of the Communications Act of 1934, as amended, 47 
U.S.C. 154(i), 154(j), 534 and 573, and Section 301 of the 
Telecommunications Act of 1996, Pub. L. 104-104 (1996), part 76 is 
amended as set forth in the rule changes, effective July 26, 1999.
    It is further ordered that the commission's Office of Public 
Affairs, Reference Operations Division, Shall send a copy of this Final 
Report and Order, including the Final Regulatory Flexibility Analysis, 
to the Chief Counsel for Advocacy of the Small Business Administration 
in accordance with paragraph 603(a) of the Regulatory Flexibility Act. 
Pub. L. 96-354, 94 Stat. 1164, 5 U.S.C. 601 et. seq. (1981).

List of Subjects in 47 CFR Part 76

    Cable television.


[[Page 33796]]


Federal Communications Commission.
William F. Caton,
Deputy Secretary.

Rule Changes

    Part 76 of Title 47 of the U.S. Code of Federal Regulations is 
amended as follows:

PART 76--CABLE TELEVISION SERVICE

    1. The authority citation for part 76 continues to read as follows:

    Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a, 
307, 308, 309, 312, 315, 317, 325, 503, 521, 522, 531, 532, 533, 
534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 552, 554, 556, 
558, 560, 561, 571, 572, 573.

    2. Section 76.55 is amended by revising paragraphs (e)(1) through 
(e)(6) to read as follows:


Sec. 76.55  Definitions applicable to the must-carry rules.

* * * * *
    (e) Television market. (1) Until January 1, 2000, a commercial 
broadcast television station's market, unless amended pursuant to 
Sec. 76.59, shall be defined as its Area of Dominant Influence (ADI) as 
determined by Arbitron and published in the Arbitron 1991-1992 
Television ADI Market Guide, as noted, except that for areas outside 
the contiguous 48 states, the market of a station shall be defined 
using Nielsen's Designated Market Area (DMA), where applicable, as 
published in the Nielsen 1991-92 DMA Market and Demographic Rank 
Report, and that Puerto Rico, the U.S. Virgin Islands, and Guam will 
each be considered a single market.
    (2) Effective January 1, 2000, a commercial broadcast television 
station's market, unless amended pursuant to Sec. 76.59, shall be 
defined as its Designated Market Area (DMA) as determined by Nielsen 
Media Research and published in its DMA Market and Demographic Rank 
Report or any successor publication.
    (i) For the 1999 election pursuant to Sec. 76.64(f), which becomes 
effective on January 1, 2000, DMA assignments specified in the 1997-98 
DMA Market and Demographic Rank Report, available from Nielsen Media 
Research, 299 Park Avenue, New York, NY, shall be used.
    (ii) The applicable DMA list for the 2002 election pursuant to 
Sec. 76.64(f) will be the DMA assignments specified in the 2000-2001 
list, and so forth for each triennial election pursuant to 
Sec. 76.64(f).
    (3) In addition, the county in which a station's community of 
license is located will be considered within its market.
    (4) A cable system's television market(s) shall be the one or more 
ADI markets in which the communities it serves are located until 
January 1, 2000, and the one or more DMA markets in which the 
communities it serves are located thereafter.
    (5) In the absence of any mandatory carriage complaint or market 
modification petition, cable operators in communities that shift from 
one market to another, due to the change in 1999-2000 from ADI to DMA, 
will be permitted to treat their systems as either in the new DMA 
market, or with respect to the specific stations carried prior to the 
market change from ADI to DMA, as in both the old ADI market and the 
new DMA market.
    (6) If the change from the ADI market definition to the DMA market 
definition in 1999-2000 results in the filing of a mandatory carriage 
complaint, any affected party may respond to that complaint by filing a 
market modification request pursuant to Sec. 76.59, and these two 
actions may be jointly decided by the Commission.
* * * * *
    3. Section 76.59 is amended by revising paragraphs (b) and (c) to 
read as follows:


Sec. 76.59  Modification of television markets.

* * * * *
    (b) Such requests for modification of a television market shall be 
submitted in accordance with Sec. 76.7, petitions for special relief, 
and shall include the following evidence:
    (1) A map or maps illustrating the relevant community locations and 
geographic features, station transmitter sites, cable system headend 
locations, terrain features that would affect station reception, 
mileage between the community and the television station transmitter 
site, transportation routes and any other evidence contributing to the 
scope of the market.
    (2) Grade B contour maps delineating the station's technical 
service area and showing the location of the cable system headends and 
communities in relation to the service areas.

    Note to paragraph (b)(2): Service area maps using Longley-Rice 
(version 1.2.2) propagation curves may also be included to support a 
technical service exhibit.

    (3) Available data on shopping and labor patterns in the local 
market.
    (4) Television station programming information derived from station 
logs or the local edition of the television guide.
    (5) Cable system channel line-up cards or other exhibits 
establishing historic carriage, such as television guide listings.
    (6) Published audience data for the relevant station showing its 
average all day audience (i.e., the reported audience averaged over 
Sunday-Saturday, 7 a.m.-1 a.m., or an equivalent time period) for both 
cable and noncable households or other specific audience indicia, such 
as station advertising and sales data or viewer contribution records.
    (c) Petitions for Special Relief to modify television markets that 
do not include such evidence shall be dismissed without prejudice and 
may be refiled at a later date with the appropriate filing fee.

[FR Doc. 99-15959 Filed 6-23-99; 8:45 am]
BILLING CODE 6712-01-P