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


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


=======================================================================
-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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, Brendan.Holland@fcc.gov (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 fcc504@fcc.gov 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