**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

+----------------------------------+----+------------------------------+
| In the Matter of                 | *  |                              |
|                                  | *) |                              |
| Network Affiliated Stations      | ** |                              |
| Alliance (NASA)                  |    |                              |
|                                  | *  |                              |
| Petition for Inquiry into        | *) |                              |
| Network Practices and            | ** |                              |
|                                  |    |                              |
| Motion for Declaratory Ruling    | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
|                                  |    |                              |
|                                  | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
|                                  |    |                              |
|                                  | *  |                              |
|                                  | *) |                              |
|                                  | ** |                              |
+----------------------------------+----+------------------------------+

**DECLARATORY RULING**

**Adopted: August 20, 2008 Released: September 3, 2008**

By the Commission:

# INTRODUCTION

1.  The Commission has before it a Petition for Inquiry into Network
    Practices ("Petition"),[^1] a Motion for Declaratory Ruling
    ("Motion")[^2] and a Joint Request of Network Affiliated Stations
    Alliance ("NASA") and the ABC, CBS, NBC and Fox Television Networks
    ("Networks") to Resolve NASA Petition.[^3] NASA and the Networks
    request that the Commission affirm a number of basic principles
    relating to the Commission rules governing network/affiliate
    relationships to avoid future disputes. Pursuant to section 1.2 of
    the Commission's rules,[^4] we grant NASA's request for declaratory
    ruling in part and grant the Joint Request in full.

# BACKGROUND

2.  In its Petition, NASA asked the Commission to institute an inquiry
    as to whether certain alleged practices of the Networks regarding
    their affiliates were consistent with the Commission's network
    rules, the Communications Act, and the public interest.[^5] NASA
    subsequently filed the Motion, in which it sought a declaratory
    ruling that certain specified practices engaged in by the Networks
    are inconsistent with the Communications Act and the Commission's
    rules and policies.[^6] In response, the Networks contended that it
    would be improper for the Commission to involve itself in the
    private contractual relationships between networks and affiliates.
    [^7]

3.  On January 19, 2005, NASA filed a Third Update of Record and
    Continued Request that Commission Issue Declaratory Ruling on Basic
    Principles in which it stated that each of the Networks has reformed
    its contracts to address the central issues raised by NASA. At the
    same time, NASA asked the Commission to clarify the meaning of the
    existing network/affiliate rules, consistent with the reformed
    affiliation agreements. In response, the Networks asked the
    Commission to reject NASA's request and to close this proceeding,
    arguing that there is no longer any basis for Commission action.[^8]

4.  On June 9, 2008, NASA and the Networks filed the Joint Request,
    stating that they had revised their standard affiliation agreements
    to address the issues raised by NASA with respect to particular
    contractual provisions, and that a Commission ruling regarding the
    resolved contractual issues is unnecessary. Nevertheless, they state
    that "NASA and the Networks have a mutual interest in avoiding
    future controversies regarding the meaning of the Commission\'s
    network/affiliate rules and in assuring that the rules of the road
    for the network/affiliate relationship are clear."[^9] The parties
    thus request that the Commission issue an order ratifying a number
    of principles "with which both NASA and the Networks agree,
    consistent with the revisions to the standard affiliation agreements
    by the Networks and the amendments negotiated by the Networks and
    their affiliates to their current affiliation agreements."[^10]

# DISCUSSION

5.  Under section 1.2 of the rules, the Commission "may \... issue a
    declaratory ruling terminating a controversy or removing
    uncertainty."[^11] The Commission has broad discretion whether to
    issue such a ruling.[^12] We agree with NASA and the Networks that
    additional guidance concerning licensee control, the right-to-reject
    rule, and the option-time rule would be helpful to avoid future
    disputes, and that the principles identified below are consistent
    with the Act and our rules.

## Licensee Control

6.  Section 310(d) of the Communications Act prohibits the direct or
    indirect transfer of control of any station license to another
    entity without a Commission finding that "the public interest,
    convenience, and necessity will be served thereby."[^13] We affirm
    that the following principle identified in the Joint Request is
    consistent with the Act and the Commission's rules:

-   Affiliates, as the licensees of local television stations, must
    retain ultimate control over station programming, operations and
    other critical decisions with respect to their stations, and network
    affiliations must not undercut this basic control. Retention of this
    control by Commission licensees is required by Section 310(d) of the
    Communications Act and the Commission's Rules.

## Right-to-Reject Rule

7.  To ensure that licensees retain sufficient control over programming
    to fulfill their obligation to operate in the public interest, the
    Commission's right-to-reject rule prohibits a television broadcast
    station from entering into "any contract, arrangement, or
    understanding, express or implied, with a network organization" that
    prevents or hinders the station from "\[r\]ejecting or refusing
    network programs which the station reasonably believes to be
    unsatisfactory or unsuitable or contrary to the public interest" or
    from "\[s\]ubstituting a program which, in the station's opinion, is
    of greater local or national importance."[^14]

8.  We affirm that the following principles relating to the
    right-to-reject rule identified in the Joint Request are consistent
    with the Act and the Commission's rules:

-   Pursuant to Section 73.658(e) of the Commission's Rules, networks
    and their affiliates are prohibited from "having any contract . . .
    which, with respect to programs offered or already contracted for
    pursuant to an affiliation contract, prevents or hinders the station
    from: (1) Rejecting or refusing network programs which the station
    reasonably believes to be unsatisfactory or unsuitable or contrary
    to the public interest, or (2) Substituting a program which, in the
    station\'s opinion, is of greater local or national importance."
    This language does not give an affiliate the unfettered right to
    preempt network programs, but where a preemption is made pursuant to
    one of the two prongs of the right-to-reject rule, the economic
    consequence to the affiliate is irrelevant.

-   Consistent with the Commission's right-to-reject rule, affiliation
    agreements should not include provisions that limit right-to-reject
    preemptions for "greater local or national importance" to breaking
    news events or any other specific type of programming. Affiliation
    agreements should not include provisions that prevent affiliates
    from rejecting a program as "unsatisfactory or unsuitable or
    contrary to the public interest" because they have carried a similar
    network program in the past. Affiliation agreements should not
    include provisions that impose monetary or non-monetary penalties on
    affiliates based on preemptions protected by the right-to-reject
    rule. Affiliation agreements should not include provisions that
    subject right-to-reject preemptions to, or count them against,
    contractual preemption limits (or "baskets") (though baskets are
    perfectly appropriate for preemptions not protected by the
    right-to-reject rule).

    **C. Option-Time Rule**

9.  The Commission's option-time rule proscribes any clause in an
    affiliation agreement that "prevents or hinders the station from
    scheduling programs before the network agrees to utilize the time
    during which such programs are scheduled, or which requires the
    station to clear time already scheduled when the network
    organization seeks to utilize the time."[^15] In its Petition, NASA
    argued that certain contract provisions, with respect to both analog
    and digital broadcasting, violated the option-time rule by allowing
    networks to reserve an option to use an affiliate's broadcast time
    without committing to supply programming for the optioned time.[^16]
    To clarify the reciprocal obligations of networks and affiliates
    under the Commission's option-time rule, we affirm that the
    following principles set forth in the Joint Request are consistent
    with the Act and our rules:

-   Consistent with the option-time rule, affiliation agreements should
    not include provisions that result in the optioning of the
    station\'s time to the network organization or that have the same
    restraining effect as time optioning. Network affiliation agreements
    may not, under the Commission\'s option-time rule, obligate stations
    to carry a network\'s programming or other content during certain
    time periods without reciprocally obligating the network to provide
    the content for those time periods. Similarly, network affiliation
    agreements may not require affiliates to carry, at some unspecified
    future date, unspecified digital content that the network may (or
    may not) choose to offer.

# Ordering clauseS. 

10. Accordingly, IT IS ORDERED that the Network Affiliated Stations
    Alliance's Motion for Declaratory Ruling filed June 22, 2001 IS
    GRANTED IN PART as discussed above.

11. IT IS FURTHER ORDERED that the Joint Request IS GRANTED and that
    this proceeding IS TERMINATED.

    FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch Secretary

[^1]: Petition for Inquiry into Network Practices ("Petition") filed by
    Network Affiliated Stations Alliance (Mar. 8, 2001).

[^2]: Motion for Declaratory Ruling ("Motion") filed by Network
    Affiliated Stations Alliance (June 22, 2001).

[^3]: Joint Request of NASA and the ABC, CBS, NBC and Fox Television
    Networks to Resolve NASA Petition ("Joint Request") filed by NASA
    and the ABC, CBS, NBC and Fox Television Networks (June 9, 2008).
    These four networks will be referred to herein as "the Networks."
    The Joint Request is attached to this Declaratory Ruling.

[^4]: 47 C.F.R. § 1.2.

[^5]: Petition at 1.

[^6]: In order to permit a full exchange of views on the multiple issues
    raised in the Petition, and given NASA's clarification that it was
    seeking a declaratory ruling rather than specific enforcement
    action, the Commission classified this proceeding as
    permit-but-disclose under the *ex parte* rules, permitting
    interested parties to make *ex parte* presentations to the
    Commissioners and Commission employees and requiring that these
    presentations be disclosed in the record of the proceeding. *See
    Public Notice*, Comment sought on "Petition for Inquiry into Network
    Practices" filed by Network Affiliated Stations Alliance; "Permit
    But Disclose" *Ex Parte* Status Accorded, DA 01-1264 (rel. May 22,
    2001).

[^7]: *See*, *e.g.*, Comments of Walt Disney Company on behalf of ABC at
    8, 13, 15, 24-27; Comments of Viacom, on behalf of CBS at 21, 27;
    NBC Comments at 6-8, 12, 15-18; Fox Comments at 7-9, 11-14, 24-27.

[^8]: Networks' Response to NASA's Continued Request, filed jointly by
    the Networks (Feb. 24, 2005).

[^9]: Joint Request at 1.

[^10]: *Id.* at 2.

[^11]: 47 C.F.R. § 1.2.

[^12]: *See Yale Broadcasting Co. v. FCC*, 478 F.2d 594, 602 (D.C. Cir.
    1973); *Telephone Number Portability*, Order, CC Docket No. 95-116,
    19 FCC Rcd 6800, 6810 ¶ 20 (2004).

[^13]: 47 U.S.C. § 310(d).

[^14]: 47 C.F.R. § 73.658(e).

[^15]: 47 C.F.R. § 73.658(d).

[^16]: Petition at 12, 17.