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 Federal  Communications  Commission  FCC  06-  93 
 1 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 
 In  the  Matter  of 
 2006  Quadrennial  Regulatory  Review    Review  of  the  Commissions  Broadcast  Ownership  Rules  and 
 Other  Rules  Adopted  Pursuant  to  Section  202  of  the  Telecommunications  Act  of  1996 


 2002  Biennial  Regulatory  Review    Review  of  the  Commissions  Broadcast  Ownership  Rules  and 
 Other  Rules  Adopted  Pursuant  to  Section  202  of  the  Telecommunications  Act  of  1996 


 Cross-  Ownership  of  Broadcast  Stations  and  Newspapers 
 Rules  and  Policies  Concerning  Multiple  Ownership  of  Radio  Broadcast  Stations  in  Local 
 Markets 
 Definition  of  Radio  Markets 


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 MB  Docket  No.  06-  121 
 MB  Docket  No.  02-  277 
 MM  Docket  No.  01-  235 
 MM  Docket  No.  01-  317 


 MM  Docket  No.  00-  244 
 FURTHER  NOTICE  OF  PROPOSED  RULE  MAKING 
 Adopted:  June  21,  2006  Released:  July  24,  2006 
 Comment  Date:  September  22,  2006  Reply  Comment  Date:  November  21,  2006 


 By  the  Commission:  Chairman  Martin  and  Commissioners  Tate  and  McDowell  issuing  separate  statements;  Commissioners  Copps  and  Adelstein  concurring  in  part,  dissenting  in 
 part  and  issuing  separate  statements. 


 TABLE  OF  CONTENTS 
 Paragraph  # 
 I.  INTRODUCTION..................................................................................................................................  1  II.  DISCUSSION  ........................................................................................................................................  4 
 A.  Local  TV  Ownership  Rule  .............................................................................................................  11  1.  Revisions  Adopted  in  the  2002  Biennial  Review  Order..........................................................  11 
 2.  Remand  Issues.........................................................................................................................  15  3.  Request  for  Comment..............................................................................................................  18 
 B.  Local  Radio  Ownership  Rule.........................................................................................................  20  1.  Revisions  Adopted  in  the  2002  Biennial  Review  Order..........................................................  20 
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 Federal  Communications  Commission  FCC  06-  93 
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 2.  Remand  Issues.........................................................................................................................  21  3.  Request  for  Comment..............................................................................................................  22 
 C.  Cross-  Media  Limits  .......................................................................................................................  23  1.  Revisions  Adopted  in  the  2002  Biennial  Review  Order..........................................................  23 
 2.  Remand  Issues.........................................................................................................................  28  3.  Request  for  Comment..............................................................................................................  32 
 D.  Dual  Network  Rule  ........................................................................................................................  33  E.  UHF  Discount  ................................................................................................................................  34 
 III.  PETITIONS  FOR  RECONSIDERATION...........................................................................................  36  IV.  PROCEDURAL  MATTERS................................................................................................................  37 
 A.  Comment  Information....................................................................................................................  37  B.  Regulatory  Flexibility  Act  .............................................................................................................  38 
 C.  Paperwork  Reduction  Act  ..............................................................................................................  39  D.  Ex  Parte  Information......................................................................................................................  40 
 V.  ORDERING  CLAUSES.......................................................................................................................  42  APPENDIX  A-  Pleadings  Filed  in  Reconsideration  Proceeding 
 APPENDIX  B-  Supplemental  Initial  Regulatory  Flexibility  Analysis 
 I.  INTRODUCTION 
 1.  With  this  Further  Notice  of  Proposed  Rulemaking  (  Further  Notice),  we  seek  comment  on  how  to  address  the  issues  raised  by  the  opinion  of  the  U.  S.  Court  of  Appeals  for  the  Third  Circuit  in 


 Prometheus  v.  FCC  1  and  on  whether  the  media  ownership  rules  are  necessary  in  the  public  interest  as  the  result  of  competition.  2  On  June  2,  2003,  the  Commission  adopted  a  Report  and  Order  in  its  third 
 biennial  review  of  its  broadcast  ownership  rules  (the  2002  Biennial  Review  Order).  The  2002  Biennial  Review  Order  addressed  all  six  of  the  Commissions  broadcast  ownership  rules:  the  national  television 
 multiple  ownership  rule,  3  the  local  television  multiple  ownership  rule,  4  the  radio/  television  cross-ownership  rule,  5  the  dual  network  rule,  6  the  local  radio  ownership  rule,  7  and  the  newspaper/  broadcast 


 1  See  2002  Biennial  Regulatory  Review    Review  of  the  Commissions  Broadcast  Ownership  Rules  and  Other 
 Rules  Adopted  Pursuant  to  Section  202  of  the  Telecommunications  Act  of  1996,  18  FCC  Rcd  13620,  13711-  47  (2003)  (  2002  Biennial  Review  Order),  affd  in  part  and  remanded  in  part,  Prometheus  Radio  Project,  et  al.  v. 


 F.  C.  C.,  373  F.  3d  372  (2004)  (  Prometheus),  stay  modified  on  rehearing,  No.  03-  3388  (3d  Cir.  Sept.  3,  2004)  (  Prometheus  Rehearing  Order),  cert.  denied,  73  U.  S.  L.  W.  3466  (U.  S.  June  13,  2005)  (Nos.  04-  1020,  04-  1033, 
 04-  1036,  04-  1045,  04-  1168,  and  04-  1177).  2 
 See  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  110  Stat.  56,    202(  h)  (1996)  (  1996  Act);  Consolidated  Appropriations  Act,  2004,  Pub.  L.  No.  108-  199,    629,  118  Stat.  3  (2004)  (  Appropriations  Act) 


 (amending  Sections  202(  c)  and  202(  h)  of  the  1996  Act). 
 3  47  C.  F.  R.    73.3555(  d)  (2005). 


 4  47  C.  F.  R.    73.3555(  b)  (2005)  (allowing  the  combination  of  two  television  stations  in  the  same  Designated 
 Market  Area  (  DMA),  as  determined  by  Nielsen  Media  Research  or  any  successor  entity,  provided:  (1)  the  Grade  B  contours  of  the  stations  do  not  overlap;  or  (2)  (a)  at  least  one  of  the  stations  is  not  among  the  four  highest-ranked 


 stations  in  the  market,  and  (b)  at  least  eight  independently  owned  and  operating  full  power  commercial  and  noncommercial  television  stations  would  remain  in  that  market  after  the  combination). 
 5  47  C.  F.  R.    73.3555(  c)  (2005)  (allowing  common  ownership  of  one  or  two  TV  stations  and  up  to  six  radio 
 stations  in  any  market  in  which  at  least  20  independent  voices  would  remain  post-  combination;  two  TV  stations  and  up  to  four  radio  stations  in  a  market  in  which  at  least  ten  independent  voices  would  remain  post-combination; 


 and  one  TV  and  one  radio  station  notwithstanding  the  number  of  independent  voices  in  the  (continued.) 
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 cross-  ownership  rule.  8  The  2002  biennial  ownership  review  was  conducted  pursuant  to  Section  202(  h)  of  the  Telecommunications  Act  of  1996,  which  requires  the  Commission  to  periodically  review  its  media 
 ownership  rules  to  determine  whether  any  of  such  rules  are  necessary  in  the  public  interest  as  the  result  of  competition  and  to  repeal  or  modify  any  regulation  it  determines  to  be  no  longer  in  the  public 
 interest.  9  Section  202(  h)  requires  that  the  next  quadrennial  review  of  the  media  ownership  rules  commence  this  year.  Accordingly,  we  initiate  a  comprehensive  review  of  the  media  ownership  rules  in 
 this  Further  Notice.  In  the  2002  Biennial  Review  Order,  the  Commission  concluded  that  neither  the  newspaper/  broadcast  cross-  ownership  rule  nor  the  radio/  television  cross-  ownership  rule  remained 
 necessary  in  the  public  interest.  Accordingly,  it  replaced  those  rules  with  new  cross-  ownership  regulations  called  the  Cross  Media  Limits  (  CML).  The  Commission  also  revised  its  market  definition 
 and  the  way  it  counts  stations  for  purposes  of  the  local  radio  ownership  rule,  revised  the  local  television  multiple  ownership  rule,  modified  the  national  television  ownership  cap,  and  retained  the  dual  network 
 rule. 
 2.  Several  parties  sought  appellate  review  of  various  aspects  of  the  2002  Biennial  Review  Order;  others  filed  petitions  for  reconsideration.  The  court  challenges  were  consolidated  into  a  single 


 proceeding,  and  on  June  23,  2004,  the  U.  S.  Court  of  Appeals  for  the  Third  Circuit  issued  its  decision  on  review  of  the  2002  Biennial  Review  Order,  affirming  some  Commission  decisions  and  remanding  others 
 for  further  Commission  justification  or  modification.  10  On  June  13,  2005,  the  U.  S.  Supreme  Court  denied  petitions  for  certiorari  which  had  sought  review  of  Prometheus. 


 (Continued  from  previous  page)  market.  If  permitted  under  the  local  radio  ownership  rules,  where  an  entity  may  own  two  commercial  TV  stations 
 and  six  commercial  radio  stations,  it  may  own  one  commercial  TV  station  and  seven  commercial  radio  stations.  For  this  rule,  a  voice  includes  independently  owned  and  operating  same-  market,  commercial  and 
 noncommercial  broadcast  TV  stations,  radio  stations,  independently  owned  daily  newspapers,  and  cable  systems  (all  cable  systems  within  the  DMA  are  counted  as  a  single  voice). 
 6  47  C.  F.  R.    73.658(  g)  (permitting  a  television  broadcast  station  to  affiliate  with  a  network  that  maintains  more 
 than  one  broadcast  network,  unless  the  dual  or  multiple  networks  are  created  by  a  combination  between  ABC,  CBS,  Fox,  or  NBC). 


 7  47  C.  F.  R.    73.3555(  a)  (2005).  The  local  radio  ownership  rule  was  the  subject  of  a  separate  proceeding  which 
 was  incorporated  into  the  2002  Biennial  Review.  Rules  and  Policies  Concerning  Multiple  Ownership  of  Radio  Broadcast  Stations  in  Local  Markets,  16  FCC  Rcd  19861  (2001)  (  Local  Radio  Ownership  NPRM);  Definition 


 of  Radio  Markets,  15  FCC  Rcd  25077  (2000)  (  Definition  of  Radio  Markets  NPRM).  8 
 47  C.  F.  R.    73.3555(  c)  (2005)  (prohibiting  common  ownership  of  a  daily  newspaper  and  a  broadcast  station  in  the  same  market).  The  newspaper/  broadcast  cross-  ownership  rule  was  the  subject  of  a  separate  proceeding  which 


 was  incorporated  into  the  2002  Biennial  Review.  See  Cross-  Ownership  of  Broadcast  Stations  and  Newspapers,  16  FCC  Rcd  17283  (2001)  (  Newspaper/  Broadcast  Cross-  Ownership  NPRM). 
 9  1996  Act,    202(  h);  Appropriations  Act,    629. 
 10  Prometheus,  373  F.  3d  372.  The  court  had  earlier  stayed  the  effectiveness  of  the  Commissions  decision  pending 
 review.  See  Prometheus  Radio  Project,  et  al.  v.  FCC,  No.  03-  3388  (3rd  Cir.  Sept.  3,  2003)  (per  curiam).  In  Prometheus,  the  court  continued  the  stay  pending  its  review  of  the  Commissions  action  on  remand.  On 


 September  3,  2004,  in  response  to  the  Commissions  petition  for  rehearing,  the  court  allowed  certain  revisions  to  its  local  radio  ownership  rules    specifically,  using  Arbitron  Metro  markets  to  define  local  markets,  including 
 noncommercial  stations  in  determining  the  size  of  a  market,  attributing  stations  whose  advertising  is  brokered  under  a  Joint  Sales  Agreement  to  a  brokering  stations  permissible  ownership  totals,  and  imposing  a  transfer 
 restriction  (collectively,  the  Approved  Changes)    to  go  into  effect,  but  continued  its  stay  of  the  other  revisions.  Prometheus  Radio  Project,  et  al.  v.  FCC,  No.  03-  3388  (3d  Cir.  Sept.  3,  2004)  (  Prometheus  Rehearing 
 (continued.) 
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 3.  In  this  Further  Notice,  we  discuss  each  rule  that  was  remanded  individually  11  and  invite  comment  on  how  we  should  address  the  issues  remanded  by  the  court  in  the  Prometheus  decision.  We 
 encourage  commenters  to  buttress  their  arguments  with  current  empirical  evidence  and  sound  economic  theory. 


 II.  DISCUSSION 
 4.  In  the  2002  Biennial  Review  Order,  the  Commission  determined  that  its  long-  standing  goals  of  competition,  diversity,  and  localism  would  continue  to  guide  its  actions  in  regulating  media 


 ownership.  12  These  policy  objectives  also  will  guide  our  actions  on  remand.  In  addition  to  the  other  requests  for  comment  discussed  below,  we  ask  that  commenters  address  whether  our  goals  would  be 
 better  addressed  by  employing  an  alternative  regulatory  scheme  or  set  of  rules. 
 5.  The  Prometheus  court  noted  that  the  Commission  deferred  consideration  of  certain  proposals  for  advancing  ownership  by  minorities.  The  court  stated  that  the  Commissions  rulemaking 


 process  in  response  to  our  remand  order  should  address  these  proposals  at  the  same  time.  13  We  therefore  seek  comment  on  the  proposals  to  foster  minority  ownership  advanced  by  MMTC  in  its  filings  in  the 
 2002  biennial  review  proceeding,  including  those  that  were  listed  in  the  2002  Biennial  Review  Order  and  referenced  by  the  court.  14  Are  any  of  these  proposals  effective  and  practical  ways  to  increase  minority 
 ownership?  If  so,  how  could  they  best  be  implemented?  Do  we  have  the  statutory  authority  to  adopt  them?  Are  there  any  constitutional  impediments  to  adoption?  Are  there  any  other  alternatives  that  we 
 should  consider  that  would  be  more  effective  and/  or  would  avoid  any  statutory  or  constitutional  impediments?  15 


 6.  More  generally,  we  urge  commenters  to  explain  the  effects,  if  any,  that  their  ownership  rule  proposals  will  have  on  ownership  of  broadcast  outlets  by  minorities,  women  and  small  businesses.  We 
 also  urge  commenters  to  discuss  the  potential  effects,  if  any,  of  the  broadcast  ownership  rules  currently  in  effect,  and  any  changes  proposed  in  this  proceeding  on:  advertising  markets,  the  ability  of  independent 
 stations  to  compete,  the  availability  of  family-  friendly  and  childrens  programming,  the  amount  of 
 (Continued  from  previous  page)  Order).  Accordingly,  except  for  the  Approved  Changes,  the  ownership  rules  that  were  in  effect  prior  to  the  2002 


 Biennial  Review  Order  remain  in  effect.  11 
 The  national  television  ownership  limit  and  the  dual  network  rule  were  not  remanded  to  the  Commission.  Petitioners  did  not  appeal  the  Commissions  decision  regarding  the  dual  network  rule.  The  court  held  that 


 challenges  to  the  Commissions  decision  to  raise  the  national  TV  ownership  limit  to  45  percent  were  moot  because  Congress  subsequently  directed  the  Commission  by  statute  to  set  the  cap  at  39  percent  and  stated  that  the 
 quadrennial  review  requirement  does  not  apply  to  this  limitation.  Prometheus,  373  F.  3d  at  396.  Because  of  this  statutory  directive,  we  do  not  address  the  national  television  ownership  limit  in  this  Further  Notice. 
 12  2002  Biennial  Review  Order,  18  FCC  Rcd  at  13627  para.  17.  See  also,  Prometheus,  373  F.  3d  at  446-  47. 
 13  Prometheus,  373  F.  3d  at  421  n.  59. 
 14  2002  Biennial  Review  Order,  18  FCC  Rcd  at  13634,  13636  paras.  46,  50.  See  also,  e.  g.,  MMTC  Jan.  2,  2003 
 Comments,  MMTC  Feb.  3,  2003  Reply  Comments.  15 
 For  example,  the  Advisory  Committee  on  Diversity  for  Communications  in  the  Digital  Age  has  submitted  recommendations  regarding  policies  and  practices  intended  to  enhance  the  ability  of  minorities  and  women  to 


 participate  in  telecommunications  and  related  industries.  See  Letter  from  Julia  Johnson,  Chairperson,  Federal  Advisory  Committee  on  Diversity  in  the  Digital  Age  to  Kevin  J.  Martin,  Chairman,  FCC  (June  8,  2006)  (filed  in 
 MB  Docket  02-  277). 
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 indecent  and/  or  violent  content  broadcast  over-  the-  air,  and  the  availability  of  independent  programming. 
 7.  The  Commission  has  a  long-  standing  policy  to  foster  broadcast  localism,  which  it  has  defined  as  the  airing  of  programming  that  is  responsive  to  the  needs  and  interests  of  their  communities  of 


 license.  16  In  its  2002  Biennial  Review,  the  Commission  invited  comment  on  the  extent  to  which  its  broadcast  ownership  rules  were  necessary  to  foster  localism.  17  Subsequently,  the  Commission  established 
 its  Localism  Task  Force  (  Task  Force)  to  study  the  issue  of  localism  and  advise  the  Commission  on  whether  any  new  rules  or  policies  were  required  to  promote  it.  18  The  Task  Force  conducted  a  series  of 
 public  hearings  around  the  country,  including  in  Monterey,  CA,  Rapid  City,  SD,  Charlotte,  NC,  and  San  Antonio,  TX,  in  which  numerous  members  of  the  public  and  others  representing  interested  parties 
 expressed  their  views.  In  addition,  the  Commission  issued  a  Notice  of  Inquiry  (  NOI)  seeking  comment  from  the  public  on  how  broadcasters  are  serving  the  interests  and  needs  of  their  communities;  whether  the 
 Commission  needs  to  adopt  new  policies,  practices,  or  rules  designed  to  promote  localism  in  broadcast  television  and  radio;  and  what  those  policies,  practices,  or  rules  should  be.  19  The  NOI  also  asked,  in  the 
 alternative,  whether  the  Commission  should  continue  to  rely  on  market  forces  and  the  existing  issue-responsive  programming  rules  to  encourage  broadcasters  to  meet  their  obligations.  20 


 8.  The  record  compiled  in  the  localism  docket,  MB  Docket  No.  04-  233,  is  extensive.  The  four  hearings  included  52  formal  presentations  and  remarks  from  community  and  broadcaster  representatives, 
 as  well  as  elected  and  appointed  officials  from  state  and  federal  government.  The  proceedings  also  included  testimony  from  52  witnesses  and  from  278  additional  participants  during  the  open  microphone 
 sessions.  In  response  to  the  NOI,  the  Commission  as  of  June  2006  has  received  more  than  82,000  written  comments  from  broadcasters,  broadcast  industry  organizations,  public  interest  groups,  and  members  of 
 the  public.  Many  broadcast  entities  submitted  information  with  their  comments  outlining  the  process  that  each  follows  to  determine  the  needs  and  interests  of  people  within  their  respective  communities  of 
 license.  Licensee  commenters  also  provided  detailed  data  concerning  the  amount,  nature,  and  variety  of  the  programming  that  each  airs  to  meet  those  needs  and  problems.  A  number  of  public  interest 
 organizations  submitted  with  their  comments  studies  of  various  aspects  of  the  nature  and  quality  of  localism  broadcast  programming. 


 9.  The  Media  Bureau  will  compile  a  summary  of  the  comments  in  the  localism  proceeding  and  submit  it  into  this  docket.  The  Commission  will  consider  the  evidence  received  in  MB  Docket  No.  04-  233 
 as  it  moves  forward  with  this  rulemaking. 
 10.  Finally,  we  note  that  the  media  marketplace  continues  to  evolve.  We  seek  comment  on  the  impact  of  new  technologies  and  providers  such  as  digital  video  recorders,  video-  on-  demand,  and  the 


 availability  of  television  programming  and  music  on  the  Internet  on  media  consumption  and  ownership  issues. 


 16  Broadcast  Localism  (MM  Docket  No.  04-  233),  Notice  of  Inquiry,  19  FCC  Rcd  12425  (2004)  (the  Broadcast 
 Localism  NOI),  para.  1. 
 17  2002  Biennial  Review  Order,  18  FCC  Rcd  at  136643  para.  73. 


 18  Public  Notice,  FCC  Chairman  Powell  Launches  Localism  in  Broadcasting  Initiative  (rel.  Aug.  20,  2003). 
 19  Broadcast  Localism  NOI,  19  FCC  Rcd  at  12425. 
 20  Id.  at  12427-  28,  para.  7. 
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 A.  Local  TV  Ownership  Rule 
 1.  Revisions  Adopted  in  the  2002  Biennial  Review  Order 
 11.  The  Commissions  local  TV  ownership  rule,  as  currently  in  effect,  provides  that  an  entity  may  own  two  television  stations  in  the  same  designated  market  area  (  DMA)  if  (1)  the  Grade  B 


 contours  of  the  stations  do  not  overlap;  or  (2)  at  least  one  of  the  stations  in  the  combination  is  not  ranked  among  the  top  four  stations  in  terms  of  audience  share,  and  at  least  eight  independently  owned  and 
 operating  commercial  or  non-  commercial  full-  power  broadcast  television  stations  would  remain  in  the  DMA  after  the  combination.  To  determine  the  number  of  voices  remaining  after  the  merger,  the 
 Commission  counts  those  broadcast  television  stations  whose  Grade  B  signal  contours  overlap  with  the  Grade  B  signal  contour  of  at  least  one  of  the  stations  that  would  be  commonly  owned.  21 


 12.  In  Sinclair  Broadcast  Group,  Inc.  v.  FCC,  the  U.  S.  Court  of  Appeals  for  the  District  of  Columbia  Circuit  found  that  the  Commission  had  not  justified  its  exclusion  of  non-  broadcast  media  from 
 its  count  of  independent  owners  for  the  eight-  voice  threshold  under  the  local  TV  ownership  rule.  22  After  analyzing  the  rule  in  the  2002  Biennial  Review  Order,  the  Commission  determined  that  non-  broadcast 
 media  compete  with  broadcast  television  stations  23  and  contribute  to  viewpoint  diversity  in  local  markets  and  that  the  local  TV  ownership  rule  could  not  be  justified  because  it  did  not  account  for  these 
 contributions.  24  Given  the  abundance  of  viewpoint  diversity  in  most  local  markets,  the  Commission  decided  that  the  existing  rule  was  not  necessary  to  promote  viewpoint  diversity.  25  Moreover,  the 
 Commission  found  that  the  restrictions  did  not  foster,  and  might  even  hamper,  its  goals  of  localism  and  program  diversity.  26  The  Commission  cited  evidence  that  owners  of  more  than  one  station  in  a  market  are 
 better  able  to  preserve,  or  even  raise,  their  level  of  local  news  and  public  affairs  programming  due  to  the  increased  efficiencies  that  multiple  ownership  affords.  27  The  Commission  concluded,  however,  that 
 restrictions  on  local  television  ownership  were  necessary  to  promote  competition.  28 
 13.  The  Commission  revised  the  local  TV  ownership  rule  to  permit  an  entity  to  own  up  to  two  television  stations  in  markets  with  17  or  fewer  television  stations,  and  up  to  three  television  stations  in 


 markets  with  18  or  more  television  stations.  29  These  numerical  limits  on  television  station  ownership  were  intended  to  ensure  that  there  would  be  at  least  six  equal-  sized  owners  of  television  broadcast  outlets 


 21  See  2002  Biennial  Review  Order,  18  FCC  Rcd  at  13668  para.  132  and  cites  therein. 
 22  Sinclair  Broadcast  Group,  Inc.  v.  FCC,  284  F.  3d  148,  163-  65  (D.  C.  Cir.  2002)  (  Sinclair). 
 23  The  Commissions  competition  analysis  focused  not  on  competition  for  advertising,  but  on  competition  for 
 viewers  in  the  delivered  video  programming  market,  which  includes  television  broadcast  stations  as  well  as  multichannel  video  programming  distributors  (  MVPDs).  2002  Biennial  Review  Order,  18  FCC  Rcd  at  13671- 


 74  paras.  141-  46.  24 
 Id.  at  13668  para.  133.  25 
 Id.  at  13686  para.  171.  26 
 Id.  at  13668  para.  133.  27 
 Id.  at  13685  para.  169.  28 
 Id.  at  13668  para.  133.  29 
 Id.  at  13668  para.  134. 
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 in  most  markets.  30  The  Commission  retained  the  prohibition  on  combinations  involving  more  than  one  station  ranked  among  the  top  four  in  the  market,  thus  prohibiting  combinations  in  markets  with  four  or 
 fewer  television  stations.  31  For  purposes  of  setting  its  numerical  limits,  the  Commission  defined  firm  size  in  terms  of  the  number  of  licenses  held,  rather  than  some  other  measure  such  as  market  share,  because  of 
 the  fluidity  of  market  share  in  the  markets  in  which  television  broadcast  stations  compete.  32  The  Commission  added  that  as  a  broadcast  station  requires  a  license,  the  number  of  licenses  that  a  firm 
 controls  is  the  measure  of  its  capacity  to  deliver  programming.  33  The  Commission  also  eliminated  consideration  of  overlapping  Grade  B  contours,  34  and  decided  to  look  instead  only  at  whether  a  station  is 
 assigned  by  Nielsen  to  a  DMA.  35  All  full-  power  commercial  and  non-  commercial  television  stations  within  the  DMA  would  be  counted  for  purposes  of  applying  the  rule.  36 


 14.  The  2002  Biennial  Review  Order  also  modified  the  Commissions  criteria  for  waiver  of  the  local  TV  ownership  rule.  37  Although  the  Commission  stated  that  it  would  continue  to  allow  entities  to 
 seek  a  waiver  if  at  least  one  of  the  stations  in  the  proposed  combination  is  failed,  failing,  or  unbuilt,  38  it  removed  the  requirement  that  the  waiver  applicant  demonstrate  that  there  is  no  buyer  outside  the  market 
 willing  to  purchase  the  station  at  a  reasonable  price.  39 


 30  Id.  at  13693  paras.  192-  93.  The  Commissions  decision  to  set  limits  that  would  result  in  six  firms  was  partly 
 based  upon  the  horizontal  merger  guidelines  used  by  the  Department  of  Justice  (  DOJ)  and  Federal  Trade  Commission  (  FTC)  in  antitrust  analysis.  Id.  (citing  Horizontal  Merger  Guidelines  issued  by  the  U.  S. 


 Department  of  Justice  and  the  Federal  Trade  Commission,  57  Fed.  Reg.  41552  (dated  Apr.  2,  1992,  revised,  Apr.  8,  1997)  (  DOJ/  FTC  Merger  Guidelines)).  Under  these  guidelines,  markets  with  Herfindahl-  Hirschmann  Index 
 (  HHI)  levels  between  1000  and  1800  are  considered  moderately  concentrated.  The  HHI  score  of  a  market  with  six  equal-  sized  competitors  is  below  the  DOJ/  FTC  Merger  Guidelines  1800  threshold  for  highly  concentrated 
 markets.  Id.  31 
 2002  Biennial  Review  Order,  18  FCC  Rcd  at  13668  para.  134.  As  under  the  existing  rule,  the  revised  rule  provided  that  a  stations  rank  would  be  based  on  the  stations  most  recent  all-  day  audience  share,  as  measured  by 


 Nielsen  or  any  comparable  professional  and  accepted  rating  service,  at  the  time  an  application  for  transfer  or  assignment  of  license  is  filed.  Id.  at  13692  para.  186. 
 32  Id.  at  13694  para.  193. 
 33  Id. 
 34  Id.  at  13692  para.  187.  Combinations  in  existence  as  of  the  time  of  the  2002  Biennial  Review  Order  were 
 grandfathered.  2002  Biennial  Review  Order,  18  FCC  Rcd  at  13807-  08  paras.  482-  84.  35 
 Id.  at  13692  para.  186-  87  n.  399.  36 
 Id.  at  13691-  92  para.  186.  Satellite  stations,  which  retransmit  all  or  a  substantial  part  of  the  programming  of  a  commonly-  owned  parent  station,  are  exempted  from  the  rule.  Id.  at  13710  para.  233. 


 37  Id.  at  13708  para.  225  (eliminating  requirement  to  show  that  no  out-  of-  market  buyer  is  available  for  failed, 
 failing  and  unbuilt  station  waivers);  Id.  at  13710  para.  231  (stating  that  the  Commission  also  would  consider  waivers  of  the  local  TV  ownership  rule  where  the  stations  at  issue  are  in  the  same  DMA,  but  are  not  available 


 over-  the-  air  or  via  MVPDs  in  any  of  the  same  geographic  areas);  Id.  at  13708-  10  paras.  227-  30  (in  markets  with  11  or  fewer  stations,  parties  can  seek  a  waiver  of  the  top  four-  ranked  restriction  by  making  certain  showings). 
 38  2002  Biennial  Review  Order,  18  FCC  Rcd  at  13708  para.  225.  See  47  C.  F.  R.  73.3555  Note  7  (setting  forth  the 
 criteria  that  must  be  met  in  order  for  a  station  to  qualify  as  failed,  failing,  or  unbuilt).  39 
 2002  Biennial  Review  Order,  18  FCC  Rcd  at  13708  para.  225. 
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 2.  Remand  Issues 
 15.  On  review,  the  Prometheus  court  upheld  the  Commissions  determination  that  broadcast  media  are  not  the  only  media  outlets  contributing  to  viewpoint  diversity  in  local  markets.  40  In  light  of  its 


 decision  to  remand  the  Commissions  numerical  limits,  the  court  found  that  it  need  not  decide  the  degree  to  which  non-  broadcast  media  compensate  for  lost  viewpoint  diversity  to  justify  the  modified  [local  TV] 
 rule.  41  The  court  nonetheless  noted  that  it  seems  that  the  degree  to  which  the  Commission  can  rely  on  cable  or  the  Internet  to  mitigate  the  threat  that  local  station  consolidations  pose  to  viewpoint  diversity  is 
 limited.  42  In  addition,  in  light  of  evidence  in  the  record,  including  evidence  that  commonly  owned  television  stations  are  more  likely  to  carry  local  news  than  other  stations  and  studies  showing  that 
 consolidation  generally  improved  audience  ratings,  the  court  rejected  petitioners  contention  that  the  Commissions  finding  of  localism  benefits  from  consolidation  was  unsupported.  43  The  court  also  upheld 
 the  Commissions  decision  to  retain  the  top  four-  ranked  station  restriction,  stating  that  it  must  uphold  an  agencys  line-  drawing  decision  when  it  is  supported  by  evidence  in  the  record.  44  It  found  ample 
 evidence  in  the  record  to  support  the  Commissions  reliance  on  a  cushion  of  audience  share  percentage  points  between  the  fourth  and  fifth-  ranked  stations  in  most  markets  to  restrict  combinations  among  the  top 
 four-  ranked  stations  as  opposed  to  the  top  three  or  some  other  number.  45 
 16.  The  court,  however,  remanded  the  numerical  limits  of  the  new  rule  for  further  justification.  As  explained  above,  the  limits  were  based  on  a  benchmark  of  six  equal-  sized  competitors.  The  size  of  an 


 owner  was  tied  to  the  number  of  stations  owned,  rather  than  the  audience  shares  of  those  stations.  The  court  held  that  the  Commission  had  unreasonably  failed  to  consider  the  audience  shares  of  stations  in 
 setting  its  numerical  limits,  finding  that  [  n]  o  evidence  supports  the  Commissions  equal  market  share  assumption,  and  no  reasonable  explanation  underlies  its  decision  to  disregard  actual  market  share.  46 
 Further,  although  the  court  recognized  that  the  Commission  did  not  intend  the  numerical  limits  to  be  a  mechanical  application  of  the  DOJ/  FTC  Merger  Guidelines,  it  concluded  that  the  rule  was  unreasonable 
 because  it  would  allow  levels  of  concentration  exceeding  the  1800  HHI  benchmark  relied  upon  by  the  Commission  in  setting  its  numerical  limits,  a  result  which  it  called  a  glaring  inconsistency  between 
 rationale  and  result.  47 
 17.  The  court  also  remanded  for  further  consideration  the  Commissions  elimination  of  the  requirement  to  demonstrate  that  no  out-  of-  market  buyer  is  reasonably  available  when  seeking  a  failed, 


 failing,  or  unbuilt  television  station  waiver.  The  Court  found  that  .  .  .  in  repealing  the  rule  without  any  discussion  of  the  effect  of  its  decision  on  minority  television  station  ownership,  the  Commission 
 entirely  failed  to  consider  an  important  aspect  of  the  problem.  48  The  court  also  noted  that  the 


 40  Prometheus,  373  F.  3d  at  414. 
 41  Id.  at  415. 
 42  Id.  at  415. 
 43  Id.  at  415. 
 44  Id.  at  417-  18  (citing  Sinclair,  284  F.  3d  at  162;  AT&  T  Corp.  v.  FCC,  220  F.  3d  607,  627  (D.  C.  Cir.  2000). 
 45  Id.  at  417-  18. 
 46  Id.  at  418-  19. 
 47  Id.  at  419-  20. 
 48  Id.  at  421. 
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 Commission  deferred  consideration  of  certain  proposals  for  advancing  broadcast  ownership  by  minority  and  disadvantaged  businesses  and  for  promoting  diversity  in  broadcasting  for  a  future  Notice  of  Proposed 
 Rulemaking.  49  The  court  stated  that  the  Commissions  rulemaking  process  in  response  to  our  remand  order  should  address  these  proposals  at  the  same  time.  50 


 3.  Request  for  Comment 
 18.  We  invite  comment  on  all  of  the  issues  remanded  by  the  Prometheus  court  regarding  the  local  TV  ownership  rule.  Should  the  limits  on  the  number  of  stations  that  can  be  commonly  owned 


 adopted  in  the  2002  Biennial  Review  Order  be  revised,  or  is  there  additional  evidence  or  analysis  upon  which  the  Commission  can  rely  to  further  justify  the  limits  it  adopted?  How  should  we  address  the 
 courts  concern  that  the  revised  numerical  limits  allow  concentration  to  exceed  the  1800  HHI  benchmark  relied  upon  by  the  Commission  in  setting  the  limits?  Is  there  additional  evidence  to  support  the 
 Commissions  decision  to  treat  capacity  as  an  important  factor  in  measuring  the  competitive  structure  of  television  markets?  Is  there  evidence  to  support  fluidity  of  television  station  market  shares?  Should  the 
 limits  vary  depending  on  the  size  of  the  market?  How  would  any  changes  impact  the  need  for  the  top  four-  ranked  restriction?  We  urge  commenters  to  consider  and  discuss  whether  their  proposals  with 
 respect  to  the  local  TV  ownership  rule  also  would  be  consistent  with  the  Sinclair  decision. 
 19.  We  also  invite  comment  on  the  courts  remand  of  the  elimination  of  the  requirement  that  waiver  applicants  demonstrate  that  there  is  no  reasonably  available  out-  of-  market  buyer.  Should  we 


 reinstate  this  requirement?  Is  it  unduly  burdensome?  Are  there  less  burdensome  means  of  ensuring  that  unnecessary  concentration  of  ownership  does  not  occur?  Has  the  requirement  had  an  effect  on  minority 
 and/  or  female  ownership  of  broadcast  stations? 
 B.  Local  Radio  Ownership  Rule 
 1.  Revisions  Adopted  in  the  2002  Biennial  Review  Order 
 20.  In  the  2002  Biennial  Review  Order,  the  Commission  retained  the  local  radio  numerical  limits  and  the  AM/  FM  service  caps  that  Congress  adopted  in  the  1996  Act.  51  Under  these  limits,  an  entity 


 may  own,  operate,  or  control  (1)  up  to  eight  commercial  radio  stations,  not  more  than  five  of  which  are  in  the  same  service  (i.  e.,  AM  or  FM),  in  a  radio  market  with  45  or  more  radio  stations;  (2)  up  to  seven 
 commercial  radio  stations,  not  more  than  four  of  which  are  in  the  same  service,  in  a  radio  market  with  between  30  and  44  (inclusive)  radio  stations;  (3)  up  to  six  commercial  radio  stations,  not  more  than  four 
 of  which  are  in  the  same  service,  in  a  radio  market  with  between  15  and  29  (inclusive)  radio  stations;  and  (4)  up  to  five  commercial  radio  stations,  not  more  than  three  of  which  are  in  the  same  service,  in  a  radio 
 market  with  14  or  fewer  radio  stations,  except  that  an  entity  may  not  own,  operate,  or  control  more  than  50  percent  of  the  stations  in  such  a  market.  52  The  Commission  determined  that  its  contour-  overlap 


 49  Prometheus,  373  F.  3d  at  421  n.  59.  In  the  2002  Biennial  Review  Order,  the  Commission  stated  that  it  would 
 commence  a  separate  proceeding  to  examine  proposals  to  advance  broadcast  ownership  opportunities  for  minorities  and  women.  2002  Biennial  Review  Order,  18  FCC  Rcd  at  13634,  13636  paras.  46,  50. 


 50  Prometheus,  373  F.  3d  at  421  n.  59. 
 51  2002  Biennial  Review  Order,  18  FCC  Rcd  at  13712,  13733-  34  paras.  239,  294.  The  Commission  maintained 
 the  AM  and  FM  ownership  limits  due  to  technical  and  marketplace  disparities  between  the  two  services.  Id.,  18  FCC  Rcd  at  13733-  34  para.  294. 


 52  See  1996  Act    202(  b);  47  C.  F.  R.    73.3555(  a). 
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 methodology  for  defining  radio  markets  and  counting  stations  in  the  market  was  flawed  as  a  means  to  protect  competition  in  local  radio  markets.  53  The  Commission  therefore  modified  the  definition  of  a  local 
 radio  market  by  replacing  the  contour-  overlap  approach  with  an  Arbitron  Metro  market  definition,  where  Arbitron  markets  exist.  54  The  Commission  initiated  a  rulemaking  proceeding,  MB  Docket  No.  03-  130,  to 
 seek  comment  on  how  to  define  local  radio  markets  in  geographic  areas  that  are  not  defined  by  Arbitron.  55  In  addition,  the  Commission  decided  to  include  non-  commercial  stations  when  determining  the  number 
 of  radio  stations  in  a  market  for  purposes  of  the  ownership  rules.  56  The  Commission  also  decided  to  attribute  certain  radio  station  Joint  Sales  Agreements  (  JSA).  57  Recognizing  that  there  could  be  some 
 existing  combinations  of  broadcast  stations  that  would  exceed  the  revised  ownership  limits,  the  Commission  grandfathered  existing  combinations  of  radio  stations,  existing  combinations  of  television 
 stations,  and  existing  combinations  of  radio/  television  stations.  58 
 2.  Remand  Issues 
 21.  The  Prometheus  court  concluded  that  the  Commissions  decision  to  replace  contour-overlap  methodology  with  Arbitron  radio  metro  markets  was  in  the  public  interest  within  the  meaning  of 


 202(  h)  and  that  the  decision  was  a  rational  exercise  of  rulemaking  authority.  59  The  court  also  upheld  the  Commissions  attribution  of  JSAs.  60  The  court  further  held  that  the  Commission  had  justified  its 
 decisions  to  count  noncommercial  stations  in  defining  the  size  of  a  market  and  to  restrict  the  transfer  of  grandfathered  combinations  except  to  certain  eligible  entities.  61  Although  it  affirmed  the  Commissions 
 rationale  that  numerical  limits  help  guard  against  consolidation  and  foster  opportunities  for  new  entrants  and  therefore  upheld  the  use  of  numerical  limits,  the  court  remanded  the  Commissions  decision  to  retain 
 the  existing  specific  local  radio  ownership  limits.  The  court  held  that  the  limits  were  unsupported  by  the 


 53  2002  Biennial  Review  Order,  18  FCC  Rcd  at  13712,  13724-  28  paras.  239,  273-  81. 
 54  Id.  at  13712,  13724-  28  paras.  239,  273-  81. 
 55  Id.  at  13729,  13870-  73  paras.  282-  83,  657-  70.  For  areas  not  covered  by  Arbitron  Metros,  the  Commission 
 adopted  a  modified  contour-  overlap  methodology  pending  the  outcome  of  the  rulemaking.  This  interim  contour-based  rule  excludes  from  a  market  radio  stations  that  have  transmitter  sites  farther  than  92  kilometers  (58  miles) 


 away  from  the  perimeter  of  the  overlapping  area  that  defines  the  radio  market.  The  interim  rule  does  not  count  as  in  the  market  any  commonly  owned  stations  that  are  not  counted  against  an  owner  in  a  market  for  purposes  of 
 applying  the  local  radio  ownership  rule.  Id.  at  13717-  28,  13729-  30  paras.  250-  54,  284-  86.  The  issues  raised  in  the  non-  Arbitron  market  proceeding  will  be  addressed  separately. 
 56  Id.  at  13713  para.  239.  The  Commission  held  that  its  prior  exclusion  of  these  stations  failed  to  account  for  their 
 competitive  impact  on  a  radio  market.  Id.  at  13730  para.  287.  The  Commission  found  that  although  they  do  not  compete  in  the  radio  advertising  market,  noncommercial  stations  exert  competitive  pressure  in  the  radio  listening 


 and  radio  program  production  markets.  Id.  at  13734  para.  295.  57 
 Id.  at  13742-  46  paras.  316-  25.  58 
 2002  Biennial  Review  Order,  18  FCC  Rcd  at  13807-  09  paras.  482-  86.  59 
 Prometheus,  373  F.  3d  at  425.  60 
 Id.  at  429-  30.  61 
 Id.  at  421-  30.  Although  the  Commission  did  not  require  owners  to  divest  their  interests  in  stations,  it  held  that  parties  would  have  to  comply  with  the  ownership  rules  at  the  time  a  transfer  of  control  or  assignment  application  is 


 filed,  unless  the  entity  acquiring  control  of  the  combination  was  an  eligible  entity,  which  was  defined  as  an  entity  that  would  qualify  as  a  small  business  consistent  with  Small  Business  Administration  (  SBA)  standards  for  its 
 industry  grouping.  2002  Biennial  Review  Order,  18  FCC  Rcd  at  13809-  12  paras.  487-  90. 
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 Commissions  rationale  that  they  ensure  five  equal-  sized  competitors  in  most  markets.  62  The  court  held  that  the  Commission  had  failed  to  justify  five  as  the  appropriate  benchmark  and  did  not  reconcile  that 
 benchmark  with  the  DOJ/  FTC  Merger  Guidelines  it  had  used  to  derive  the  local  TV  ownership  limits.  The  court  also  stated  that  the  Commission  had  failed  to  show  that  the  limits  ensured  that  five  equal-  sized 
 competitors  have  emerged  or  would  emerge  under  the  numerical  limits.  63  The  court  further  faulted  the  Commission  for  not  explaining  why  it  could  not  take  actual  market  share  into  account  when  deriving 
 the  numerical  limits.  Finally,  the  court  held  that  the  Commission  did  not  support  its  decision  to  retain  the  AM  subcaps.  64 


 3.  Request  for  Comment 
 22.  We  invite  comment  on  the  issues  remanded  by  the  Prometheus  court  with  respect  to  the  local  radio  ownership  limits.  In  order  to  address  the  courts  concerns,  should  the  numerical  limits  be 


 revised,  or  is  there  additional  evidence  that  could  be  used  to  further  justify  the  limits?  If  the  Commission  should  revise  the  limits,  what  revisions  are  appropriate?  Should  we  create  additional  tiers?  How  should 
 the  Commission  address  the  courts  concern  that  the  limits  adopted  do  not  account  for  actual  market  share?  Should  the  rule  still  seek  to  ensure  a  specific  number  of  competitors  in  a  market,  and,  if  so,  what  is 
 the  appropriate  benchmark  for  that  number?  Finally,  should  we  retain  the  AM/  FM  subcaps?  Lastly,  we  seek  comment  on  whether  the  local  radio  ownership  rule  currently  in  effect  is  necessary  in  the  public 
 interest  as  a  result  of  competition. 
 C.  Cross-  Media  Limits 
 1.  Revisions  Adopted  in  the  2002  Biennial  Review  Order 
 23.  In  the  2002  Biennial  Review  Order,  the  Commission  concluded  that  neither  the  newspaper/  broadcast  cross-  ownership  rule  nor  the  radio/  television  cross-  ownership  rule  was  necessary  in 


 the  public  interest  as  the  result  of  competition.  65  The  Commission  replaced  these  rules  with  a  single  set  of  cross-  media  limits,  as  discussed  below. 


 24.  The  newspaper/  broadcast  cross-  ownership  rule  prohibits  common  ownership  of  a  full-service  broadcast  station  and  a  daily  newspaper  if  the  broadcast  stations  service  contour  completely 
 62  Prometheus,  373  F.  3d  at  432-  34  (Because  the  Commission  has  in  the  past  extolled  the  value  of  audience  share 
 data  for  measuring  diversity  and  competition  in  local  markets,  its  reliance  on  the  fiction  of  equal-  sized  competitors,  as  opposed  to  measuring  their  actual  competitive  power,  is  even  more  suspect  in  the  context  of  the 


 local  radio  rule.).  63 
 The  court  noted  that  the  Commission's  decision  to  rely  on  a  five  firm  theory  for  purposes  of  the  local  radio  ownership  rule  conflicts  with  the  DOJ/  FTC  Merger  Guidelines,  under  which  a  market  with  five  equal-  sized 


 competitors  is  considered  highly  concentrated.  The  court  held  this  conflict  suspect  because,  elsewhere  in  the  2002  Biennial  Review  Order,  the  Commission  had  relied  on  the  DOJ/  FTC  Merger  Guidelines  to  derive  its  local 
 TV  ownership  limits.  The  court  directed  the  Commission  to  address  this  apparent  discrepancy  on  remand.  Prometheus,  373  F.  3d  at  433.  In  addition,  the  Commission  had  cited  game  theory  articles  to  support  its  finding 
 that  a  market  that  has  five  or  more  relatively  equal-  sized  firms  can  achieve  a  level  of  market  performance  comparable  to  a  fragmented,  structurally  competitive  market.  The  court  directed  the  Commission  to  respond  to 
 the  argument  that  these  game  theory  articles  do  not  rule  out  market  structures  other  than  equal-  sized  competitors  (such  as  one  large  firm  and  many  small  ones)  as  equally  competitive  markets.  Id.  at  432-  33. 
 64  Id.  at  434-  35. 
 65  2002  Biennial  Review  Order,  18  FCC  Rcd  at  13747  para.  327. 
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 encompasses  the  newspapers  city  of  publication.  66  In  the  2002  Biennial  Review  Order,  the  Commission  concluded  that  this  rule,  which  does  not  account  for  either  market  size  or  the  availability  of  other  media 
 outlets  that  may  serve  a  market,  was  not  necessary  to  promote  competition,  diversity,  or  localism.  67  The  Commission  held  that,  because  newspapers  and  broadcast  stations  do  not  compete  in  the  same  economic 
 market,  elimination  of  the  ban  could  not  harm  competition.  68  The  Commission  found  that  efficiencies  resulting  from  common  ownership  of  a  newspaper  and  a  television  station  can  actually  promote  localism, 
 because  newspaper-  owned  television  stations  tend  to  produce  local  news  and  public  affairs  programming  in  greater  quantity  and  of  a  higher  quality  than  non-  newspaper-  owned  stations.  69  Furthermore,  the 
 Commission  determined  that  the  blanket  ban  on  cross-  ownership  was  not  needed  to  promote  viewpoint  diversity  given  that  (1)  a  vast  array  of  media  outlets  is  available  in  many  markets  today,  (2)  the 
 Commissions  revised  local  cross-  media  ownership  rules  will  protect  diversity  sufficiently,  and  (3)  common  ownership  efficiencies  can  facilitate  the  broadcasting  of  higher  quality  programming.  70 


 25.  Similarly,  the  Commission  found  that  the  existing  radio/  television  cross-  ownership  rule  could  not  be  justified  under  Section  202(  h).  71  As  with  the  newspaper/  broadcast  cross-  ownership  rule,  the 
 Commission  found  that  the  radio/  television  cross-  ownership  rule  was  not  necessary  to  promote  competition,  localism,  or  diversity  because  radio  and  television  compete  in  distinct  product  markets;  the 
 efficiencies  of  common  ownership  can  enhance  localism  and  diversity;  the  multitude  of  media  outlets  in  most  local  markets  renders  the  rule  obsolete;  the  Commissions  revised  intra-  service  ownership  rules  (i.  e., 
 the  local  TV  and  local  radio  rules)  afford  sufficient  protection  with  regard  to  competition;  and  the  new  CML  were  targeted  more  precisely  at  specific  types  of  markets  in  which  particular  combinations  could 
 harm  diversity.  72 
 26.  To  determine  the  availability  of  media  outlets  in  markets  of  various  sizes,  the  Commission  developed  a  Diversity  Index  (the  DI),  which  it  used  to  analyze  and  measure  the  availability  of  outlets 


 that  contribute  to  viewpoint  diversity  in  local  media  markets.  73  The  DI,  which  was  modeled  after  the  HHI  used  in  economic  and  antitrust  analyses,  measured  the  availability  of  various  media  outlets  and  assigned  a 
 weight  to  each  type  of  outlet  based  on  its  relative  use  by  consumers.  74  The  Commission  stated  that  the  DI  would  not  be  used  to  measure  viewpoint  diversity  in  particular  local  markets.  Rather,  it  was  used  to 
 evaluate  in  the  aggregate  the  contributions  to  diversity  of  various  media  outlets  in  order  to  determine 


 66  The  service  contour  for  AM  radio  stations  is  the  2mV/  m  contour;  the  service  contour  for  FM  radio  stations  is 
 the  1mV/  m  contour;  and  the  service  contour  for  TV  stations  is  the  Grade  A  contour.  The  previous  definition  of  a  daily  newspaper  was  one  that  was  published  at  least  four  times  a  week  in  English.  See  2002  Biennial  Review 


 Order,  18  FCC  Rcd  at  13747  para.  328;  Id.  at  n.  717.  In  the  2002  Biennial  Review  Order,  the  Commission  revised  this  definition  to  include  non-  English  newspapers  published  in  the  primary  language  of  the  market.  Id.  at 
 13799-  800  paras.  457-  58.  67 
 Id.  at  13747-  48  paras.  328-  30.  68 
 Id.  at  13748-  49  paras.  331-  32.  69 
 Id.  at  13753-  60  paras.  342-  54.  70 
 Id.  at  13760-  62  paras.  355-  59.  71 
 Id.  at  13768  para.  371.  72 
 Id.  at  13775  para.  390.  73 
 Id.  at  13775-  76  para.  391.  74 
 Id.  at  13776-  79  paras.  393-  400. 
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 which  size  markets  are  most  at  risk  for  viewpoint  concentration.  75 
 27.  Reasoning  that  small  markets  are  at  greater  risk  for  diversity  concentration,  the  Commissions  CML  were  tiered  according  to  the  size  of  the  market.  The  Commission  prohibited 


 newspaper/  broadcast  and  radio/  television  cross-  ownership  in  markets  with  three  or  fewer  television  stations.  76  In  markets  with  between  four  and  eight  stations,  the  Commission  held  that  an  entity  may  own 
 a  combination  that  includes  a  newspaper  and  either  (a)  one  television  station  and  up  to  50  percent  of  the  radio  stations  that  may  be  commonly  owned  under  the  applicable  radio  cap,  or  (b)  up  to  100  percent  of 
 the  radio  stations  allowed  under  the  applicable  radio  cap.  77  In  markets  with  nine  or  more  television  stations,  cross-  media  combinations  would  be  permitted  without  limit,  so  long  as  they  comply  with  the 
 applicable  local  television  and  local  radio  caps.  78  In  the  2002  Biennial  Review  Order,  the  Commission  held  that  parties  may  seek  a  waiver  of  these  limits  if  they  can  demonstrate  that  an  otherwise  impermissible 
 combination  would  enhance  the  quality  and  quantity  of  broadcast  news  available  in  their  market.  79 
 2.  Remand  Issues 
 28.  The  Prometheus  court  affirmed  the  Commissions  decision  to  eliminate  the  newspaper/  broadcast  cross-  ownership  rule,  80  holding  that  reasoned  analysis  supports  the  Commissions 


 determination  that  the  blanket  ban  on  newspaper/  broadcast  cross-  ownership  was  no  longer  in  the  public  interest.  81  The  court  rejected  attacks  on  the  Commissions  conclusion  that  the  newspaper/  broadcast 
 cross-  ownership  ban  undermined  localism.  82  The  court  upheld  the  Commissions  determination  that  the  prohibition  was  not  necessary  to  protect  diversity,  agreeing  that  the  Commission  reasonably  concluded 
 that  it  did  not  have  enough  confidence  in  the  proposition  that  commonly  owned  outlets  have  a  uniform  bias  to  warrant  sustaining  the  prohibition  83  and  that  it  was  acceptable  for  the  Commission  to  find  that 
 cable  and  the  Internet  contribute  to  viewpoint  diversity  in  local  markets.  84  The  court  found  the  Commission  did  not  violate  Section  202(  h)  by  concluding  that  (1)  repealing  the  cross-  ownership  ban  was 
 necessary  to  promote  competition  and  localism,  and  (2)  retaining  some  limits  was  necessary  to  ensure  diversity.  The  court  also  held  that  the  Commissions  continued  regulation  of  cross-  ownership  was 
 constitutionally  sound.  85 


 75  Id.  at  13776  para.  392. 
 76  Id.  at  13797-  801  paras.  452-  61.  The  revised  rules  do  not,  however,  bar  a  broadcast  station  from  starting  a  new 
 newspaper  in  its  market.  Id.  at  13799  para.  456.  For  purposes  of  counting  the  number  of  stations  in  a  market  under  the  cross  media  limits,  the  Commission  counts  both  commercial  and  noncommercial  full  power  television 


 stations  assigned  to  the  DMA.  Id.  at  13798  para.  454.  77 
 Id.  at  13803  para.  466.  78 
 Id.  at  13804  paras.  472-  73.  79 
 Id.  at  13806-  07  para.  481.  80 
 Prometheus,  373  F.  3d  at  398-  400.  81 
 Id.  at  398.  82 
 Id.  at  399.  83 
 Id.  at  399-  400.  84 
 Id.  85 
 Prometheus,  373  F.  3d  at  400-  02  (citing  FCC  v.  Natl  Citizens  Comm.  for  Broad.,  436  U.  S.  775,  801-  02  (1978)  (  NCCB)). 
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 29.  The  court  concluded,  however,  that  the  specific  limits  selected  by  the  Commission  were  not  supported  by  reasoned  analysis,  and  remanded  the  CML  to  the  Commission  for  further  justification  or 
 modification.  The  court  stated  that  it  did  not  object  to  the  Commissions  reliance  on  the  HHI  as  a  starting  point  for  measuring  diversity,  but  found  that  the  Commission  placed  too  much  weight  on  the  Internet  in 
 its  DI,  irrationally  assigned  outlets  of  the  same  media  type  equal  market  shares,  and  inconsistently  derived  the  CML  from  its  DI  results.  86 


 30.  With  regard  to  the  Commissions  inclusion  and  weighting  of  the  Internet  in  the  DI,  the  court  held  that  the  Commissions  decision  to  count  the  Internet  as  a  source  of  viewpoint  diversity,  while 
 discounting  cable,  was  not  rational.  87  The  court  also  distinguished  several  sources  of  information  available  via  the  Internet  from  media  outlets,  stating  that  the  media  provides  (to  different  degrees 
 depending  on  the  outlet)  accuracy  and  depth  in  local  news  in  a  way  that  an  individual  posting  in  a  chat  room  on  a  particular  issue  of  local  concern  does  not.  88  The  court  also  contrasted  certain  Internet  sites 
 with  media  outlets  by  stating  that  media  have  an  aggregator  function  as  well  as  a  distillation  function  (making  a  judgment  as  to  what  is  interesting,  important,  entertaining,  etc.),  while  the  websites  of,  for 
 example,  political  candidates  or  local  governments  do  not  aggregate  or  distill  information.  89 
 31.  The  court  also  remanded  for  further  consideration  the  Commissions  decision  to  assign  all  outlets  within  the  same  media  type  equal  market  shares  in  constructing  the  DI.  The  court  held  that  the 


 assumption  of  equal  market  shares  is  inconsistent  with  the  Commissions  overall  approach  to  its  DI,  and  also  makes  unrealistic  assumptions  about  media  outlets  relative  contributions  to  viewpoint  diversity  in 
 local  markets.  90  The  court  determined  that  the  Commissions  efforts  to  justify  this  approach  were  not  persuasive.  91  The  court  rejected  the  Commissions  rationale  that  actual-  use  data  are  not  relevant  in 
 predicting  future  behavior,  noting  that  the  Commission  employed  actual-  use  data  in  assigning  relative  weight  to  different  types  of  media,  even  as  it  used  equal  market  shares,  rather  than  actual  market  shares, 
 for  outlets  within  a  media  type.  The  court  also  rejected  the  Commissions  assertion  that  consumer  preferences  for  particular  media  outlets  are  more  fluid  than  their  preferences  for  different  types  of  media 
 because  the  outlets  format  or  content  can  be  easily  changed,  stating  that  the  Commission  provided  no  evidence  to  show  that  media  outlets  actually  or  regularly  undergo  a  content  change.  Lastly,  the  court 
 rejected  the  Commissions  claim  that  relying  on  actual  audience  share  data  would  require  it  to  make  a  constitutionally  problematic  categorization  of  programming  as  news  or  non-  news  because  the 
 Commission  obtained  actual-  use  data  by  asking  respondents  where  they  got  their  local  news.  92  Finally,  the  court  held  the  Commission  did  not  rationally  derive  its  CML  from  the  DI,  because  the  CML  would 
 allow  certain  broadcast  combinations  where  the  increases  in  the  DI  scores  were  generally  higher  than  for  other  combinations  that  are  not  allowed.  93 


 86  Id.  at  402-  03 
 87  Id.  at  405. 
 88  Id.  at  407. 


 89  Id.  at  407-  08. 
 90  Id.  at  408. 
 91  Id.  at  402-  12. 
 92  Id.  at  408-  09. 
 93  Id.  at  409-  11. 
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 3.  Request  for  Comment 
 32.  We  invite  comment  on  all  of  the  issues  remanded  by  the  Prometheus  court  regarding  cross-ownership.  Many  of  these  issues  relate  to  the  DI.  In  light  of  the  courts  extensive  and  detailed  criticism 


 of  the  DI,  we  tentatively  conclude  that  the  DI  is  an  inaccurate  tool  for  measuring  diversity.  Moreover,  we  recognize  that  some  aspects  of  diversity  may  be  difficult  to  quantify.  To  the  extent  that  we  will  not  use 
 the  DI  to  justify  changes  to  the  existing  cross-  ownership  rules,  we  seek  comment  on  how  we  should  approach  cross-  ownership  limits.  Should  limits  vary  depending  upon  the  characteristics  of  local  markets? 
 If  so,  what  characteristics  should  be  considered,  and  how  should  they  be  factored  into  any  limits?  We  seek  comment  on  the  newspaper/  broadcast  cross-  ownership  rule  and  the  radio/  television  cross-  ownership 
 rule.  Are  there  aspects  of  television  and  radio  broadcast  operations  that  make  cross-  ownership  with  a  newspaper  different  for  each  of  these  media?  If  so,  should  limits  on  newspaper/  radio  combinations  be 
 different  from  limits  on  newspaper/  television  combinations?  Lastly,  are  the  newspaper/  broadcast  cross-ownership  rule  and  the  radio/  television  cross-  ownership  rule  necessary  in  the  public  interest  as  a  result  of 
 competition? 
 D.  Dual  Network  Rule 
 33.  The  Commissions  dual  network  rule  provides  A  television  broadcast  station  may  affiliate  with  a  person  or  entity  that  maintains  two  or  more  networks  of  television  broadcast  stations  unless  such 


 dual  or  multiple  networks  are  composed  of  two  or  more  persons  or  entities  that,  on  February  8,  1996,  were  networks  as  defined  in  Section  73.3613(  a)(  1)  of  the  Commissions  regulations  (that  is,  ABC,  CBS, 
 Fox,  and  NBC).  94  Thus,  the  rule  permits  common  ownership  of  multiple  broadcast  networks,  but  prohibits  a  merger  between  or  among  the  top  four  networks.  In  the  2002  Biennial  Review  Order,  the 
 Commission  determined  that  the  dual  network  rule  was  necessary  in  the  public  interest  to  promote  competition  and  localism  and  retained  the  rule.  95  The  Petitioners  in  Prometheus  did  not  appeal  the 
 Commissions  retention  of  the  rule.  We  seek  comment  on  whether  the  dual  network  rule  remains  necessary  in  the  public  interest  as  a  result  of  competition. 


 E.  UHF  Discount 
 34.  In  Prometheus,  the  Third  Circuit  held  that  challenges  to  the  Commissions  national  television  ownership  rule  were  moot  following  Congressional  action  that  set  the  national  cap  at  39 


 percent.  96  In  so  doing,  the  court  also  addressed  the  Commissions  UHF  discount  rule,  which  we  have  used  in  calculating  a  UHF  stations  audience  reach  under  the  national  TV  cap.  97  The  court  stated  that  the 
 UHF  discount  rule  is  insulated  from  this  and  future  periodic  review  requirements  and  yet  also  noted  that  the  Commission  is  now  considering  its  authority  going  forward  to  modify  or  eliminate  the  discount  and 
 recently  took  public  comment  on  the  issue.  98  The  court  then  concluded  that  that  Commission  may  decide 
 94  47  C.  F.  R.    73.658(  g). 


 95  2002  Biennial  Review  Order,  18  FCC  Rcd  at  13850  para.  599. 
 96  Prometheus,  373  F.  3d  at  395-  97.  As  noted  above,  the  court  held  that  challenges  to  the  Commissions  the 
 national  TV  ownership  rule  were  moot  because  Congress  subsequently  directed  the  Commission  by  statute  to  set  the  cap  at  39  percent.  See  Appropriations  Act,    629. 


 97  47  C.  F.  R.    73.3555(  d)(  2)(  i). 
 98  Prometheus,  373  F.  3d  at  397  (citing  the  FCC  Public  Notice  published  at  69  Fed.  Reg.  9216-  17  (Feb.  27,  2004)). 
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 as  provided  in  the  Commissions  Rules.  102 
 41.  Contact  Information.  The  Media  Bureau  contact  for  this  proceeding  is  Mania  Baghdadi  at  (202)  418-  7200.  Press  inquiries  should  be  directed  to  Rebecca  Fisher  at  (202)  418-  2330,  TTY:  (202) 


 418-  7365  or  (888)  835-  5322. 
 V.  ORDERING  CLAUSES 
 42.  Accordingly,  IT  IS  ORDERED,  that  pursuant  to  the  authority  contained  in  sections  1,  2(  a),  4(  i),  303,  307,  309,  and  310  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    151,  152(  a), 


 154(  i),  303,  307,  309,  and  310,  and  section  202(  h)  of  the  Telecommunications  Act  of  1996,  this  Further  Notice  of  Proposed  Rulemaking  IS  ADOPTED. 


 43.  IT  IS  FURTHER  ORDERED  that,  pursuant  to  the  authority  contained  in  sections  1,  2(  a),  4(  i),  303,  307,  309,  and  310  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    151,  152(  a), 
 154(  i),  303,  307,  309,  and  310,  and  section  202(  h)  of  the  Telecommunications  Act  of  1996,  NOTICE  IS  HEREBY  GIVEN  of  the  proposals  described  in  this  Further  Notice  of  Proposed  Rulemaking. 


 44.  IT  IS  FURTHER  ORDERED  that  MB  Docket  No.  03-  130  SHALL  BE  severed  from  this  proceeding. 
 45.  IT  IS  FURTHER  ORDERED  that  the  Commissions  Consumer  and  Governmental  Affairs  Bureau,  Reference  Information  Center,  SHALL  SEND  a  copy  of  this  Further  Notice  of  Proposed 
 Rulemaking,  including  the  Supplemental  Initial  Regulatory  Flexibility  Analysis,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration. 


 FEDERAL  COMMUNICATIONS  COMMISSION 


 Marlene  H.  Dortch  Secretary 


 102  See  generally  47  C.  F.  R.    1.1202,  1.1203,  1.1206(  a). 
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 APPENDIX  A 
 PLEADINGS  FILED  IN  RECONSIDERATION  PROCEEDING 
 PETITIONS  FOR  RECONSIDERATION 
 Amherst  Alliance  and  the  Virginia  Center  for  the  Public  Policy  ARSO  Radio  Corporation 
 Bennco,  Inc.  Capitol  Broadcasting  Company,  Inc. 
 Center  for  the  Creative  Community  and  the  Association  of  Independent  Video  and  Filmmakers  Consumer  Federation  of  America  and  Consumers  Union 
 Cumulus  Media,  Inc.  Diversity  and  Competition  Supporters  (filed  by  Minority  Media  and  Telecommunications  Council  on 
 behalf  of  American  Hispanic  Owned  Radio  Association;  Civil  Rights  Forum  on  Communications  Policy;  League  of  United  Latin  American  Citizens;  Minority  Business  Enterprise  Legal  Defense 
 and  Education  Fund;  National  Asian  American  Telecommunications  Association;  National  Association  of  Latino  Independent  Producers;  National  Coalition  of  Hispanic  Organizations; 
 National  Council  of  La  Raza;  National  Hispanic  Media  Coalition;  National  Indian  Telecommunications  Institute;  National  Urban  League;  Native  American  Public 
 Telecommunications,  Inc.;  PRLDEF-  Institute  for  Puerto  Rican  Policy;  UNITY:  Journalists  of  Color,  Inc.;  Womens  Institute  for  Freedom  of  the  Press)* 
 Duff,  Ackerman  &  Goodrich,  LLC  Entercom  Communications  Corporation 
 Free  Press  Future  of  Music  Coalition 
 Galaxy  Communications,  L.  P.  Great  Scott  Broadcasting 
 LIN  Television  Corporation  and  Raycom  Media,  Inc.  Main  Street  Broadcasting  Company,  Inc. 
 Mid-  West  Family  Broadcasting  Monterey  Licenses,  LLC 
 Mt.  Wilson  FM  Broadcasters,  Inc.  National  Association  of  Black  Owned  Broadcasters,  Inc.  and  the  Rainbow/  PUSH  Coalition,  Inc. 
 National  Organization  for  Women  Nexstar  Broadcasting  Group,  LLC 
 Office  of  Communication  of  the  United  Church  of  Christ,  Inc.;  Black  Citizens  for  a  Fair  Media;  Philadelphia  Lesbian  and  Gay  Task  Force;  and  Womens  Institute  for  Freedom  of  the  Press 
 Saga  Communications,  Inc.  Treasure  and  Space  Coast  Radio 
 WJZD,  Inc.  WTCM  Radio,  Inc. 


 *  withdrew  Petition  for  Reconsideration  on  April  7,  2004 
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 COMMENTS  TO  PETITIONS  FOR  RECONSIDERATION 
 Bonneville  International  Corporation  Diversity  and  Competition  Supporters 
 MBC  Grand  Broadcasting,  Inc.  National  Association  of  Broadcasters 
 Newspaper  Association  of  America  Paxson  Communications  Corporation 
 Office  of  Communication  of  the  United  Church  of  Christ,  Inc.;  Black  Citizens  for  a  Fair  Media;  Philadelphia  Lesbian  and  Gay  Task  Force;  and  Womens  Institute  for  Freedom  of  the  Press 
 University  of  Southern  California/  KUSC(  FM)  Viacom,  Inc. 
 Vinson  &  Elkins  LLP 
 REPLIES  TO  PETITIONS  FOR  RECONSIDERATION 
 Cumulus  Media,  Inc.  Diversity  and  Competition  Supporters 
 Entercom  Communications  Corporation  Mt.  Wilson  FM  Broadcasters,  Inc. 
 National  Association  of  Broadcasters  Sinclair  Broadcast  Group,  Inc. 
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 APPENDIX  B 
 SUPPLEMENTAL  INITIAL  REGULATORY  FLEXIBILITY  ANALYSIS 
 46.  As  required  by  the  Regulatory  Flexibility  Act  (RFA),  1  the  Commission  incorporated  an  Initial  Regulatory  Flexibility  Analysis  (IRFA)  in  the  Notice  of  Proposed  Rulemaking  (NPRM)  in  MB 
 Docket  No.  02-  277.  2  Additionally,  the  Commission  has  prepared  this  Supplemental  Initial  Regulatory  Flexibility  Analysis  (Supplemental  IRFA)  of  the  possible  significant  economic  impact  on  small  entities  of 
 the  proposals  in  this  Further  Notice  of  Proposed  Rulemaking  (Further  Notice).  Written  public  comments  are  requested  on  this  Supplemental  IRFA.  Comments  must  be  identified  as  responses  to  the  Supplemental 
 IRFA  and  must  be  filed  by  the  deadlines  for  comments  on  the  Further  Notice.  The  Commission  will  send  a  copy  of  the  Further  Notice,  including  this  Supplemental  IRFA,  to  the  Chief  Counsel  for  Advocacy  of 
 the  Small  Business  Administration  (SBA).  3  In  addition,  the  Further  Notice  and  the  Supplemental  IRFA  (or  summaries  thereof)  will  be  published  in  the  Federal  Register.  4 


 A.  Need  for,  and  Objectives  of,  the  Proposed  Rules 
 47.  The  Further  Notice  invites  comment  on  how  to  address  the  issues  raised  by  the  opinion  of  the  U.  S.  Court  of  Appeals  for  the  Third  Circuit  in  Prometheus  Radio  Project  v.  FCC,  5  and,  pursuant  to 


 Section  202(  h)  of  the  Telecommunications  Act  of  1996,  on  whether  the  media  ownership  rules  are  necessary  in  the  public  interest  as  the  result  of  competition.  6  In  the  Prometheus  Remand  Order,  the 
 court  affirmed  some  Commission  decisions  and  remanded  others  for  further  Commission  justification  or  modification.  7  We  issue  this  Supplemental  IRFA  due  to  the  passage  of  time  since  the  release  of  the  NPRM 


 1  See  5  U.  S.  C.    603.  The  RFA,  see  5  U.  S.  C.    601-  612,  has  been  amended  by  the  Contract  With  America 
 Advancement  Act  of  1996,  Pub.  L.  No.  104-  121,  110  Stat.  847  (1996)  (CWAAA).  Title  II  of  the  CWAAA  is  the  Small  Business  Regulatory  Enforcement  Fairness  Act  of  1996  (SBREFA). 


 2  2002  Biennial  Regulatory  Review    Review  of  the  Commissions  Broadcast  Ownership  Rules  and  Other  Rules 
 adopted  Pursuant  to  Section  202  of  the  Telecommunications  Act  of  1996,  Cross-  Ownership  of  Broadcast  Stations  and  Newspapers,  Rules  and  Policies  Concerning  Multiple  Ownership  of  Broadcast  Stations  in  Local  Markets, 


 Definition  of  Radio  Markets,  17  FCC  Rcd  18503,  18558  App.  A  (2002). 
 3  See  5  U.  S.  C.    603(  a). 


 4  See  id. 
 5  Prometheus  Radio  Project,  et  al.  v.  F.  C.  C.,  373  F.  3d  372  (2004)  (  Prometheus),  stay  modified  on  rehearing, 
 No.  03-  3388  (3d  Cir.  Sept.  3,  2004)  (  Prometheus  Rehearing  Order),  cert.  denied,  73  U.  S.  L.  W.  3466  (U.  S.  June  13,  2005)  (Nos.  04-  1020,  04-  1033,  04-  1036,  04-  1045,  04-  1168  and  04-  1177). 


 6  See  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  110  Stat.  56,    202(  h)  (1996)  (  1996  Act); 
 Consolidated  Appropriations  Act,  2004,  Pub.  L.  No.  108-  199,    629,  118  Stat.  3  (2004)  (  Appropriations  Act)  (amending  Sections  202(  c)  and  202(  h)  of  the  1996  Act).  Section  202(  h)  requires  the  Commission  to  periodically 


 review  its  media  ownership  rules  to  determine  whether  any  of  such  rules  are  necessary  in  the  public  interest  as  the  result  of  competition  and  to  repeal  or  modify  any  regulation  it  determines  to  be  no  longer  in  the  public 
 interest. 
 7  See  Prometheus  Rehearing  Order.  Accordingly,  except  for  revisions  to  the  local  radio  ownership  rule,  the 
 preexisting  ownership  rules  remain  in  effect.  See  Further  Notice,  supra,  at  para.  2  and  n.  10. 
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 in  this  proceeding  and  in  order  to  invite  comment  on  the  effect  on  small  entities  of  the  proposals  in  this  Further  Notice.  We  particularly  solicit  comment  from  all  small  business  entities,  including  minority-owned 
 and  women-  owned  small  businesses.  We  especially  solicit  comment  on  whether,  and  if  so,  how,  the  particular  interests  of  these  small  businesses  may  be  affected  by  the  rules. 


 48.  The  Further  Notice  discusses  the  local  TV  ownership  rule,  the  local  radio  ownership  rule,  Cross-  Media  Limits  and  the  Dual  Network  rule;  details  the  issues  raised  in  the  Prometheus  Order 
 regarding  the  Commissions  decision  with  respect  to  each  of  these  rules;  and  invites  comment  on  how  to  address  those  issues. 


 B.  Legal  Basis 
 49.  This  Further  Notice  is  adopted  pursuant  to  sections  1,  2(  a),  4(  i),  303,  307,  309,  310,  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    151,  152(  a),  154(  i),  303,  307,  309,  310,  and 


 Section  202(  h)  of  the  Telecommunications  Act  of  1996. 
 C.  Description  and  Estimate  of  the  Number  of  Small  Entities  To  Which  the  Proposed  Rules  Will  Apply 


 50.  The  RFA  directs  agencies  to  provide  a  description  of,  and,  where  feasible,  an  estimate  of  the  number  of  small  entities  that  may  be  affected  by  the  proposed  rules,  if  adopted.  8  The  RFA  defines  the 
 term  small  entity  as  having  the  same  meaning  as  the  terms  small  business,  small  organization,  and  small  governmental  entity  under  Section  3  of  the  Small  Business  Act.  9  In  addition,  the  term  small 
 business  has  the  same  meaning  as  the  term  small  business  concern  under  the  Small  Business  Act.  10  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.  11 
 51.  Television  Broadcasting.  In  this  context,  the  application  of  the  statutory  definition  to  television  stations  is  of  concern.  The  Small  Business  Administration  defines  a  television  broadcasting 
 station  that  has  no  more  than  $13  million  in  annual  receipts  as  a  small  business.  Business  concerns  included  in  this  industry  are  those  primarily  engaged  in  broadcasting  images  together  with  sound.  12 


 8  5  U.  S.  C.    603(  b)(  3). 
 9  Id.    601(  3)  (incorporating  by  reference  the  definition  of  small  business  concern  in  15  U.  S.  C.    632). 
 Pursuant  to  the  RFA,  the  statutory  definition  of  a  small  business  applies,  unless  an  agency,  after  consultation  with  the  Office  of  Advocacy  of  the  SBA  and  after  opportunity  for  public  comment,  establishes  one  or  more  definitions 


 of  the  term  where  appropriate  to  the  activities  of  the  agency  and  publishes  the  definition(  s)  in  the  Federal  Register. 


 10  Id. 
 11  15  U.  S.  C.    632. 
 12  OMB,  North  American  Industry  Classification  System:  United  States,  1997,  at  508-  09  (1997)  (NAICS  Code 
 51320  which  was  changed  to  51520  in  October  2002).  This  category  description  continues,  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.  Separate  census  categories  pertain  to  businesses 
 primarily  engaged  in  produced  programming.  See  id.  at  502-  505,  NAICS  code  512110.  Motion  Picture  and  Video  Production;  Code  512120,  Motion  Picture  and  Video  Distribution,  code  512191,  19  FCC  Rcd  15238 
 (continued.) 
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 According  to  Commission  staff  review  of  the  BIA  Financial  Network,  Inc.  Media  Access  Pro  Television  Database  as  of  June  6,  2005,  about  852  (66  percent)  of  the  1,286  commercial  television  stations  in  the 
 United  States  have  revenues  of  $12  million  or  less.  However,  in  assessing  whether  a  business  entity  qualifies  as  small  under  the  above  definition,  business  control  affiliations  13  must  be  included.  Our 
 estimate,  therefore,  likely  overstates  the  number  of  small  entities  that  might  be  affected  by  any  changes  to  the  attribution  rules,  because  the  revenue  figures  on  which  this  estimate  is  based  do  not  include  or 
 aggregate  revenues  from  affiliated  companies. 
 52.  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  and  in  this  context  to  define  or  quantify  the 
 criteria  that  would  establish  whether  a  specific  television  station  is  dominant  in  its  market  of  operation.  Accordingly,  the  foregoing  estimate  of  small  businesses  to  which  the  rules  may  apply  does  not  exclude 
 any  television  stations  from  the  definition  of  a  small  business  on  this  basis  and  is  therefore  over-  inclusive  to  that  extent.  An  additional  element  of  the  definition  of  small  business  is  that  the  entity  must  be 
 independently  owned  and  operated.  It  is  difficult  at  times  to  assess  these  criteria  in  the  context  of  media  entities,  and  our  estimates  of  small  businesses  to  which  they  apply  may  be  over-  inclusive  to  this  extent. 


 53.  Radio  Broadcasting.  The  Small  Business  Administration  defines  a  radio  broadcasting  entity  that  has  $6.5  million  or  less  in  annual  receipts  as  a  small  business.  14  Business  concerns  included  in 
 this  industry  are  those  primarily  engaged  in  broadcasting  aural  programs  by  radio  to  the  public.  15  According  to  Commission  staff  review  of  the  BIA  Financial  Network,  Inc.  Media  Access  Radio  Analyzer 
 Database  as  of  June  6,  2005,  about  10,425  (95  percent)  of  11,000  commercial  radio  stations  in  the  United  States  have  revenues  of  $6  million  or  less.  We  note,  however,  that  in  assessing  whether  a  business  entity 
 qualifies  as  small  under  the  above  definition,  business  control  affiliations  16  must  be  included.  Our  estimate,  therefore,  likely  overstates  the  number  of  small  entities  that  might  be  affected  by  any  changes  to 
 the  ownership  rules,  because  the  revenue  figures  on  which  this  estimate  is  based  do  not  include  or  aggregate  revenues  from  affiliated  companies. 


 54.  In  this  context,  the  application  of  the  statutory  definition  to  radio  stations  is  of  concern.  An  element  of  the  definition  of  small  business  is  that  the  entity  not  be  dominant  in  its  field  of  operation. 
 We  are  unable  at  this  time  and  in  this  context  to  define  or  quantify  the  criteria  that  would  establish  whether  a  specific  radio  station  is  dominant  in  its  field  of  operation.  Accordingly,  the  foregoing  estimate 
 of  small  businesses  to  which  the  rules  may  apply  does  not  exclude  any  radio  station  from  the  definition  of  a  small  business  on  this  basis  and  is  therefore  over-  inclusive  to  that  extent.  An  additional  element  of  the 
 definition  of  small  business  is  that  the  entity  must  be  independently  owned  and  operated.  We  note  that  it  is  difficult  at  times  to  assess  these  criteria  in  the  context  of  media  entities,  and  our  estimates  of  small 


 (Continued  from  previous  page)  (2004).  Teleproduction  and  Other  Post-  Production  Services,  and  code  512199,  Other  Motion  Picture  and  Video 
 Industries. 
 13  [  Business  concerns]  are  affiliates  of  each  other  when  one  business  concern  controls  or  has  the  power  to  control 
 the  other  or  a  third  party  or  parties  controls  or  has  the  power  to  control  both.  13  C.  F.  R.    121.103(  a)(  1). 
 14  See  NAICS  code  515112. 


 15  Id. 
 16  [  Business  concerns]  are  affiliates  of  each  other  when  one  business  concern  controls  or  has  the  power  to 
 control  the  other  or  a  third  party  or  parties  controls  or  has  the  power  to  control  both.  13  C.  F.  R.    121.103(  a)(  1). 
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 businesses  to  which  they  apply  may  be  over-  inclusive  to  this  extent. 
 55.  Daily  Newspapers.  The  SBA  has  developed  a  small  business  size  standard  for  the  census  category  of  Newspaper  Publishers;  that  size  standard  is  500  or  fewer  employees.  17  Census  Bureau  data 
 for  2002  show  that  there  were  5,159  firms  in  this  category  that  operated  for  the  entire  year.  18  Of  this  total,  5,065  firms  had  employment  of  499  or  fewer  employees,  and  an  additional  42  firms  had  employment  of 
 500  to  999  employees.  Therefore,  we  estimate  that  the  majority  of  Newspaper  Publishers  are  small  entities  that  might  be  affected  by  our  action. 


 D.  Description  of  Projected  Reporting,  Recordkeeping,  and  Other  Compliance  Requirements 
 56.  Depending  on  the  rules  adopted  as  a  result  of  this  Notice  of  Proposed  Rule  Making,  the  Report  and  Order  (R&  O)  ultimately  adopted  in  this  proceeding  may  contain  new  or  modified  information 


 collections.  We  anticipate  that  none  of  the  changes  would  result  in  an  increase  to  the  reporting  and  recordkeeping  requirements  of  broadcast  stations,  newspapers,  or  applicants  for  licenses.  As  noted  above, 
 we  invite  small  business  entities  to  comment  in  response  to  the  Further  Notice. 
 E.  Steps  Taken  to  Minimize  Significant  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered 


 57.  The  RFA  requires  an  agency  to  describe  any  significant  alternatives  that  it  has  considered  in  reaching  its  proposed  approach,  which  may  include  the  following  four  alternatives  (among  others):  (1)  the 
 establishment  of  differing  compliance  or  reporting  requirements  or  timetables  that  take  into  account  the  resources  available  to  small  entities;  (2)  the  clarification,  consolidation,  or  simplification  of  compliance  or 
 reporting  requirements  under  the  rule  for  small  entities;  (3)  the  use  of  performance,  rather  than  design,  standards;  and  (4)  an  exemption  from  coverage  of  the  rule,  or  any  part  thereof,  for  small  entities.  19 


 58.  We  are  directed  under  law  to  describe  any  alternatives  we  consider,  including  alternatives  not  explicitly  listed  above.  20  This  Further  Notice  initiates  the  next  quadrennial  review  of  the  media 
 ownership  rules  and  seeks  public  comment  on  the  issues  raised  by  the  Prometheus  Remand  Order.  Thus,  it  invites  comment  on  how  to  address  the  courts  decisions  in  the  Prometheus  Remand  Order  with  respect 
 to  the  local  TV  ownership  rule,  the  local  radio  ownership  rule,  and  the  cross-  media  limits.  In  addition,  the  Further  Notice  asks  for  comment  on  whether  the  dual  network  rule  remains  necessary  in  the  public 
 interest  as  a  result  of  competition.  21  The  Further  Notice  also  seeks  comment  on  the  minority  ownership  proposals  made  by  Minority  Media  and  Telecommunications  Council  in  comments  in  the  2002  biennial 


 17  13  C.  F.  R.    121.201;  NAICS  code  511110. 
 18  U.  S.  Census  Bureau,  2002  Economic  Census,  Subject  Series:  Information,  Establishment  and  Firm  Size 
 (Including  Legal  Form  of  Organization),  Table  5,  NAICS  code  511110  (issued  Nov.  2005). 
 19  5  U.  S.  C.    603(  c). 


 20  5  U.  S.  C.    603(  b). 
 21  The  Petitioners  in  Prometheus  did  not  appeal  the  Commissions  retention  of  the  rule 
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 ownership  proceeding.  22  Parties  discussions  of  alternatives  that  are  in  their  submitted  comments  will  be  fully  considered.  We  especially  encourage  small  entity  comment. 
 F.  Federal  Rules  that  May  Duplicate,  Overlap,  or  Conflict  With  the  Proposed  Rules  None. 


 22  See  Further  Notice  at  paragraph  5.  In  the  2002  Biennial  Review  Order,  the  Commission  said  that  it  would 
 commence  a  separate  proceeding  specifically  aimed  at  increasing  ownership  opportunities  in  the  media  industry  for  minorities  and  females.  2002  Biennial  Review  Order,  18  FCC  Rcd  13634,  13636  paras.  46,  50. 
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 STATEMENT  OF  CHAIRMAN  KEVIN  J.  MARTIN 
 Re:  2006  Quadrennial  Regulatory  Review    Review  of  the  Commissions  Broadcast  Ownership  Rules  and  Other  Rule  Adopted  Pursuant  to  Section  202  of  the  Telecommunications  Act  of  1996;  2002  Biennial 
 Regulatory  Review    Review  of  the  Commissions  Broadcast  Ownership  Rules  and  Other  Rules  Adopted  Pursuant  to  Section  202  of  the  Telecommunications  Act  of  1996;  Cross-  Ownership  of  Broadcast  Stations 
 and  Newspapers;  Rules  and  Policies  Concerning  Multiple  Ownership  of  Radio  Broadcast  Stations  in  Local  Markets;  Definition  of  Radio  Markets  (MB  Docket  Nos.  06-  121,  02-  277,  and  MM  Docket  Nos.  01- 
 235,  01-  317  and  00-  244). 
 Today,  the  Commission  opens  a  process  to  review  its  media  ownership  rules,  a  topic  of  vital  importance  to  our  democracy.  We  begin  this  dialog  in  a  neutral  and  even-  handed  fashion.  The  action 
 responds  to  the  Third  Circuits  decision  in  Prometheus  Radio  Project  v.  FCC. 
 It  has  been  nearly  three  years  since  the  Third  Circuit  stayed  the  Commissions  previous  rules  1  and  nearly  two  years  since  the  Third  Circuit  instructed  the  Commission  to  respond  to  the  court  with  further 
 justification  or  amended  rules.  2 
 As  we  embark  upon  this  comprehensive  review,  the  Commission  should  take  into  account  the  competitive  realities  of  the  media  marketplace  while  also  ensuring  the  promotion  of  the  important  goals  of 
 localism  and  diversity.  As  the  item  indicates,  the  Commission  will  look  carefully  at  the  relationship  between  media  ownership  and  localism  as  it  moves  forward  with  this  rulemaking.  To  that  end,  the 
 Commission  will  incorporate  into  this  proceeding  the  efforts  undertaken  on  this  issue  since  the  last  examination  of  our  media  ownership  rules. 


 Public  input  is  integral  to  this  process.  The  Commission  has  adopted  an  extended  comment  period  of  120  days.  Over  the  next  several  months,  the  Commission  will  hold  half  a  dozen  public  hearings 
 around  the  country  on  the  topic  of  media  ownership  to  more  fully  involve  the  American  people.  I  look  forward  to  hearing  from  the  American  people  on  a  variety  of  subjects  at  these  hearings  such  as  the  impact 
 of  the  Commissions  rules  on  localism,  campaigns  and  community  event  coverage,  minority  ownership,  and  various  types  of  programming  like  childrens  and  family-  friendly  programming  and  independent  and 
 religious  programming.  The  Commission  also  is  creating  a  new  webpage  on  this  topic  that  will  further  contribute  to  making  this  an  open  and  transparent  process. 


 Finally,  the  Commission  will  initiate  studies  to  address  unanswered  questions  about  the  impact  of  media  ownership.  We  will  seek  the  resources  necessary  for  comprehensive  studies.  They  will  be  on  a 
 variety  of  topics  that  will  incorporate  issues  including  how  the  public  gets  its  news  and  information,  competition  across  media  platforms,  marketplace  changes  since  we  last  reviewed  our  ownership  rules, 
 localism,  independent  and  diverse  programming  and  the  production  of  childrens  and  family-  friendly  programming. 


 1  Prometheus  Radio  Project  v.  FCC,  No.  03-  3388,  2003  WL  22052896  (3d  Cir.  Sept.  3,  2003). 
 2  Prometheus  Radio  Project,  et  al.  v.  F.  C.  C.,  373  F.  3d  372  (2004). 
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 I  look  forward  to  working  with  my  colleagues  on  each  of  these  efforts  and  on  these  issues  of  great  importance  to  the  industry  and  the  listening  and  viewing  public. 
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 STATEMENT  OF  COMMISSIONER  MICHAEL  J.  COPPS, 
 CONCURRING  IN  PART,  DISSENTING  IN  PART 
 Re:  2006  Quadrennial  Regulatory  Review  &  2002  Biennial  Regulatory  Review  Review  of  the  Commissions  Broadcast  Ownership  Rules  and  Other  Rules  Adopted  Pursuant  to  Section  202  of 
 the  Telecommunications  Act  of  1996,  Cross-  Ownership  of  Broadcast  Stations  and  Newspapers,  Rules  and  Policies  Concerning  Multiple  Ownership  of  Radio  Broadcast  Stations  in  Local 
 Markets  Definition  of  Radio  Markets  (MB  Docket  Nos.  06-  121,  02-  277,  MM  Docket  Nos.  01-  235,  01-  317,  00-  244) 


 One  thing  we  can  probably  all  agree  on  is  the  need  to  start  this  proceeding.  It  has  been  two  years  since  the  Third  Circuit  sent  back  to  us  the  misguided  handiwork  of  the  previous  Commission.  We  owe 
 the  court  a  response  to  its  instruction  to  revisit  this  proceeding  and  to  do  it  right  this  time.  Additionally,  Congress  instructed  us  to  review  all  our  media  ownership  rules  in  a  quadrennial  review,  which  by  statute 
 must  commence  this  year  another  reason  why  we  should  proceed.  Meanwhile,  the  rush  to  consolidation  continues.  Since  we  last  voted  on  this  issue  three  years  ago,  there  have  been  more  than  3300  TV  and 
 radio  stations  that  have  had  their  assignment  and  transfer  grants  approved.  So  even  under  the  old  rules,  consolidation  grows,  localism  suffers  and  diversity  dwindles.  For  these  reasons,  I  agree  that  we  need  to 
 start  this  proceeding  now. 
 But  in  Washington,  things  arent  always  what  they  seem.  In  fact,  this  innocuous-  looking  document  initiates  the  single  most  important  public  policy  debate  that  the  FCC  will  tackle  this  year. 
 Dont  let  its  slimness  fool  you.  It  means  that  this  Commission  has  begun  to  decide  on  behalf  of  the  American  people  the  future  of  our  media.  It  means  deciding  whether  or  not  to  accelerate  media 
 concentration,  step  up  the  loss  of  local  news  and  change  forever  the  critical  role  independent  newspapers  perform  for  our  Country. 


 Its  tempting  to  see  this  debate  as  important  only  to  giant  media  moguls.  Some  companies  want  the  government  to  make  the  decision  to  rush  into  more  media  concentration  behind  closed  doors  in 
 sequestered  Washington  bureaucracies.  But  I  believe  that  Americans  need  to  know  what  the  FCC  is  doing  and  that  we  have  a  solemn  obligation  to  encourage  public  participation  in  the  decision.  Its 
 important  because  if  we  make  the  wrong  decision  our  communities  and  our  country  will  suffer.  This  debate  will  have  far  reaching  implications  for  the  credibility  of  information  Americans  get  from  the 
 media  for  the  vitality  of  the  civic  dialogue  that  determines  the  direction  of  our  democracy  and  for  whether  TV  and  radio  offer  entertainment  that  is  creative,  uplifting  and  local  or  degrading,  banal  and 
 homogenized. 
 Lets  review  some  history.  We  all  know  that  in  2003  the  FCC  tried  to  eliminate  important  safeguards  that  protected  media  diversity,  localism  and  competition.  A  majority  of  Commissioners 
 approved  stunning  there  is  no  other  word  for  it  rules  that  would  allow  one  corporation  to  own,  in  a  single  community,  up  to  three  TV  stations,  eight  radio  stations,  the  cable  system,  the  only  daily 
 newspaper  and  the  biggest  Internet  provider.  How  can  it  be  good  for  our  Country  to  invest  such  sweeping  power  in  one  media  mogul  or  one  giant  corporation? 


 Three  years  ago  the  FCC  tried  to  inflict  this  massive  wave  of  further  consolidation  onto  an  already  highly  concentrated  media  industry.  The  majority  of  the  Commission  voted  to  do  so  without 
 seeking  adequate  input  from  the  American  people,  without  conducting  adequate  studies  and  without  even  revealing  to  the  country  what  the  new  rules  would  be  before  forcing  a  vote.  I  pleaded  with  the  majority  to 
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 for  our  Country  for  distant  powers  in  New  York  or  Los  Angeles  to  dictate  so  much  of  what  we  see,  hear  and  read  in  our  hometown?  These  are  important  questions  that  go  right  to  the  heart  of  this  proceeding. 
 But  you  wont  find  them  asked  here.  Instead,  the  Commission  goes  to  great  lengths  to  isolate  our  stalled  localism  proceeding  from  todays  media  ownership  proceeding.  The  most  this  Notice  does  is  commit  our 
 staff  to  compiling  a  summary  of  the  dated  record  we  have  in  our  localism  docket.  Though  there  is  bipartisan  support  for  completing  our  localism  proceeding  before  revving  up  media  ownership,  the 
 Commission  will  apparently  choose  to  leave  localism  stuck  at  the  starting  gate. 
 I  am  also  disappointed  that  this  item  fails  to  commit  to  specific  efforts  to  advance  ownership  by  minorities.  The  Third  Circuit  took  the  Commissions  earlier  decision  to  the  woodshed  for  sidelining 
 proposals  to  advance  minority  ownership.  Despite  this,  all  we  can  muster  up  here  are  a  few  questions  about  this  glaring  challenge.  Why  wont  we  commit  to  studying  the  state  of  minority  media  ownership  in 
 this  country  and  the  impact  that  consolidation  has  had?  Are  we  afraid  of  what  the  facts  might  show?  It  is  no  excuse  to  argue  that  many  of  the  nations  broadcast  licenses  were  given  away  decades  ago  when 
 women  and  people  of  color  were  unlikely  to  obtain  them.  Those  sins  of  omission  need  to  be  excised  and  new  strategies  to  encourage  diversity  in  ownership  and  jobs  and  programming  need  to  be  put  in  place. 
 While  people  of  color  make  up  over  30  percent  of  our  population,  they  own  only  4.2  percent  of  the  nations  radio  stations  and  1.5  percent  of  the  nations  TV  stations!  More  recent  statistics  suggest  that 
 even  these  numbers  are  in  free  fall.  I  believe  the  ownership  of  our  media  should  look  more  like  the  diversity  of  our  people.  But  if  all  the  Commission  does  is  ask  a  few  pat  questions  and  then  sweep  this 
 issue  under  the  rug  one  more  time,  we  are  not  laying  the  groundwork  for  progress. 
 Let  me  conclude  with  a  challenge  to  our  nations  media  to  take  up  this  issue,  highlight  it,  give  it  the  attention  it  merits,  inform  the  debate  and  spark  a  national  conversation  on  these  issues  all  across  this 
 broad  land  of  ours.  With  relatively  few  exceptions,  the  media  big  media  especially  failed  the  test  last  time,  and  failed  it  badly.  I  hope  that  was  not  because  some  very  important  media  enterprises  have 
 financial  interests  riding  on  the  outcome  of  the  ownership  proceeding.  Major  media  companies  are  at  pains  to  assure  us  their  newsgathering  operations  are  independent  of  their  corporate  interests.  Here  is  an 
 excellent  opportunity  to  test  that  proposition.  Because  ignoring  the  issue  of  media  concentration  is  not  going  to  make  it  go  away. 


 Launching  this  proceeding  is  the  easy  part.  Now  comes  the  hard  work.  So  much  hangs  in  the  balance.  If  we  are  serious  about  it  and  do  not  treat  this  proceeding  as  business-  as-  usual,  if  we  approach 
 these  issues  with  receptivity  on  all  sides  to  hard  facts  and  compelling  evidence  and  if  we  reach  out  really  reach  out  to  people  all  across  this  land,  I  believe  the  Commission  can  arrive  at  a  decision  that  will 
 withstand  judicial  and  Congressional  scrutiny  and  more  importantly,  the  scrutiny  of  the  American  people.  I  for  one  am  ready  to  roll  up  my  sleeves  and  work  with  my  colleagues  to  get  the  job  done  and  done  right 
 this  time.  The  American  people  have  a  right  to  expect  more  from  this  Commission  than  they  got  from  the  previous  one. 
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 STATEMENT  OF  COMMISSIONER  JONATHAN  S.  ADELSTEIN 
 CONCURRING  IN  PART,  DISSENTING  IN  PART 
 Re:  2006  Quadrennial  Review  &  2002  Biennial  Regulatory  Review    Review  of  the  Commissions  Broadcast  Ownership  Rules  and  Other  Rules  Adopted  Pursuant  to  Section  202  of  the 
 Telecommunications  Act  of  1996,  Cross-  Ownership  of  Broadcast  Stations  and  Newspapers,  Rules  and  Policies  Concerning  Multiple  Ownership  of  Radio  Broadcast  Stations  in  Local  Markets 
 Definitions  of  Radio  Markets,  Notice  of  Proposed  Rule  Making 
 We  are  required  by  law  and  by  the  Third  Circuit  Court  of  Appeals  to  launch  this  proceeding.  It  is  entirely  necessary  that  we  do  so.  Congress  requires  a  quadrennial  review  of  all 
 of  our  media  ownership  rules,  and  we  must  respond  to  the  Third  Circuit  remand  of  our  2003  ownership  decision.  Appropriately,  this  broad  inquiry  responds  to  both  requirements. 


 Unfortunately,  the  manner  in  which  the  Commission  is  launching  this  critical  proceeding  is  totally  inadequate.  It  is  like  submitting  a  high-  school  term  paper  for  a  Ph.  D.  thesis.  This 
 Commission  failed  in  2003,  and  if  we  dont  change  course,  we  will  fail  again. 
 The  large  media  companies  wanted,  and  today  they  get,  a  blank  check  to  permit  further  media  consolidation.  The  Notice  is  so  open-  ended  that  it  will  permit  the  majority  of  the 
 Commission  to  allow  giant  media  companies  to  get  even  bigger  at  the  time,  place  and  manner  of  their  choosing.  That  is  the  reason  I  have  refused  to  support  launching  this  proceeding  until  now, 
 and  it  is  why  I  am  dissenting  from  the  bulk  of  this  Notice.  This  Notice  is  thin  gruel  to  those  hoping  for  a  meaty  discussion  of  media  ownership  issues. 


 In  particular,  this  item  lacks  commitment  to  three  basic  building  blocks  of  a  successful  rulemaking  on  media  ownership    an  issue  that  affects  the  daily  lives  of  every  single  American. 
 First,  the  process  does  not  commit  to  giving  the  public  an  opportunity  to  comment  on  specific  proposals  before  any  changes  to  the  rules  are  finalized.  Second,  it  does  not  commit  to  completing 
 the  localism  proceeding  and  rulemaking  before  changing  the  ownership  rules.  Finally,  it  does  not  commit  to  making  any  final  decision  in  a  comprehensive  manner.  Given  the  history  of  this 
 proceeding,  these  failings  are  astonishing. 
 Our  ill-  fated  June,  2003,  decision  was  rejected  by  Congress,  the  courts  and  the  public.  The  United  States  Senate  voted  on  a  bipartisan  basis  to  reject  the  bulk  of  Order  and  have  us  start 
 from  scratch.  The  court  found  that  the  Commission  fell  short  of  its  obligation  to  justify  its  decisions  to  retain,  repeal,  or  modify  its  media  ownership  regulations  with  reasoned  analysis.  1 
 Three  million  citizens,  from  right  to  left  and  virtually  everyone  in  between,  weighed  in  to  oppose  our  decision.  It  is  my  sincere  hope  that  we  can  avoid  failing  the  test  again,  but  doing  better  will 
 require  a  commitment  to  openness  and  the  democratic  process  that  is  largely  absent  from  todays  Notice. 


 It  is  all  the  more  inexcusable  in  the  wake  of  the  unprecedented  rejection  of  the  Commissions  2003  decision  that  we  launch  such  a  shallow  process  today.  The  Third  Circuit 
 gave  us  explicit  suggestions  on  how  to  meet  the  challenge,  which  we  ignore  today  at  our  own 
 1  Prometheus  Radio  Project  v.  FCC,  373  F.  3d  373,  436  (3  rd  Cir.  2004),  cert.  denied,  73  U.  S.  L.  W.  (U.  S. 
 June  13,  2005). 
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 peril.  In  its  opinion,  the  court  specifically  decided  to  remand,  in  part,  to  give  the  Commission  an  opportunity  to  cure  its  questionable  notice.  2  In  clear  and  certain  terms,  the  court  said  it  is 
 advisable  that  any  new  metric  for  measuring  diversity  and  competition  in  a  market  be  made  subject  to  public  notice  and  comment  before  it  is  incorporated  into  a  final  rule.  3 


 I  believe  success  or  failure  of  this  proceeding  will  depend  to  a  large  extent  on  the  Commissions  willingness  to  listen  to  American  people.  Consequently,  I  am  deeply  troubled  by 
 the  majoritys  refusal  to  provide  assurance  that  the  public  will  have  an  opportunity  to  comment  on  specific  proposals  before  new  rules  are  finalized.  The  Court,  common  sense  and  simple 
 fairness  all  demand  that  we  allow  public  comment  on  the  specific  rules  that  are  likely  to  change  the  media  landscape  for  generations  to  come. 


 If  the  Commission  had  released  its  proposals  in  2003  for  further  public  comment,  as  I  advocated  at  that  time,  we  could  have  avoided  many  of  the  problems  that  led  to  the  Courts 
 rejection  of  our  rules.  This  time,  we  have  no  excuse.  This  time,  we  have  been  warned.  We  cannot  slip  rule  changes  through  quietly,  based  on  a  vague  notice,  to  avoid  controversy.  It  is  too 
 late  for  that.  Our  process  for  deciding  these  rules  should  be  open  and  transparent.  The  goal  of  this  proceeding  should  be  to  do  the  job  right    not  pull  a  fast  one  on  the  American  people. 


 Second,  it  would  be  unacceptable  to  finalize  any  decisions  regarding  media  ownership  until  we  complete  our  localism  proceeding,  which  began  in  2003  in  direct  response  to  the 
 millions  of  Americans  who  expressed  outrage  at  the  Commissions  relaxation  of  media  ownership  rules.  Then-  Chairman  Michael  Powell  said  the  Commission  heard  the  voice  of  public  concern 
 about  the  media  loud  and  clear.  Localism  is  at  the  core  of  these  concerns.  4  Unanimously,  the  Commission  launched  the  localism  proceeding  because  we  had  failed  to  use  the  structural  media 
 ownership  rules  to  address  the  publics  concerns. 
 Now,  three  years  later,  the  localism  proceeding  has  languished  in  the  bowels  of  the  Commission.  We  have  failed  to  complete  the  field  hearings  we  promised  the  American  people. 
 We  have  failed  to  complete  important  research  studies  on  the  extent  to  which  there  is  sufficient  coverage  of  local  civic  affairs,  music  and  programming  on  radio  and  television.  We  have  failed 
 to  produce  final  rules  on  any  aspect  of  localism,  including  minimum  public  interest  standards  or  license  renewal  processing  guidelines.  Simply  put,  we  have  failed  to  protect  the  interests  of  the 
 American  people. 
 Third,  the  rules  are  intended  to  work  together,  regulating  the  ownership  of  media  assets  in  all  urban,  suburban  and  rural  markets  in  the  United  States.  On  this  point,  I  am  profoundly 
 disappointed  that  there  is  no  commitment  to  handle  any  final  rule  changes  in  a  comprehensive  manner.  It  is  especially  discouraging  that  this  Notice  does  not  specifically  seek  comment  on  how 
 all  the  media  ownership  rules  work  together,  in  tandem.  .  If  the  Commission  decides  to  allow  further  consolidation  in  one  field,  such  as  newspaper/  broadcast  cross-  ownership,  we  need  to 
 know  at  the  same  time  how  we  might  move  on,  for  example,  the  duopoly  rule.  To  split  them,  and  operate  in  a  vacuum,  is  to  willfully  ignore  our  responsibility  to  regulate  the  number  of  outlets  a 


 2  Id.  at  411 
 3  Id.  at  412  (emphasis  added). 
 4  FCC  Press  Release,  FCC  Chairman  Powell  Launches  Localism  in  Broadcasting  Initiative,  August  20, 
 2003.  http://  hraunfoss.  fcc.  gov/  edocs_  public/  attachmatch/  DOC-  238057A1.  pdf 
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 single  owner  can  control  in  any  given  community.  Moreover,  the  courts  have  asked  us  to  ensure  the  consistency  of  our  rules,  and  we  cannot  do  so  without  a  comprehensive  final  order.  Any 
 attempt  to  modify  the  rules  individually  may  be  good  politics,  but  it  would  be  poor  public  policy  and  a  great  disservice  to  the  American  people. 


 There  are  many  other  infirmities  in  this  Notice.  Given  the  circuit  courts  admonishment  that  there  must  be  a  rational  connection  between  the  facts  found  and  the  choice  made,  5  there  is 
 an  urgent  need  for  the  Commission  to  complete  research  papers  and  reports,  which  provide  professional  and  objective  information  about  current  market  conditions,  trends  and  future 
 expectations  of  the  radio,  television  and  newspaper  sectors.  The  urgent  need  for  this  research  is  much  more  pronounced  in  light  of  the  compelling  public  interest  in  promoting  diversity  and 
 localism  the  media  marketplace. 
 There  are  many  key  issues  that  deserve  their  own  separate  hearing,  including  the  impact  of  media  consolidation  on  minorities,  children,  the  elderly,  Americans  with  disabilities,  and  those 
 who  live  in  rural  areas.  We  should  also  hold  hearings  on  the  potential  effects  of  rule  changes  on  indecency  and  family-  friendly  fare,  religious  broadcasting,  independent  programming,  coverage 
 of  campaign  and  community  events,  music  and  the  creative  arts  and  the  growth  of  the  Internet,  to  name  a  few. 


 It  was  my  hope  that  by  issuing  this  Notice  today  the  Commission  would  seriously  endeavor  to  review  the  media  ownership  rules,  in  accordance  with  the  statutory  mandate  to 
 promote  diversity,  localism  and  competition.  Instead,  we  seem  to  be  repeating  past  mistakes.  Regrettably,  this  Notice  contains  major  flaws  that  could  set  the  stage  for  another  destructive 
 rollback  of  consumer  protection  rules. 
 The  task  ahead  requires  transparency,  leadership,  bipartisanship,  consensus  building,  thoughtful  deliberation,  and  genuine  participation  by  the  American  people.  Fortunately,  there  is 
 still  time  to  get  it  right.  I  remain  hopeful  the  Commission  will  change  course  and  conduct  a  process  that  fulfills  our  legal  responsibilities  and  reflects  the  best  interests  of  the  public.  The 
 American  people  deserve  nothing  less. 


 5  Prometheus,  373  F.  3d  at  390  (quoting  Burlington  Truck  Ones,  Inc  v.  U.  S.,  371  U.  S.  156,  168  (1962)). 
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 STATEMENT  OF  COMMISSIONER  DEBORAH  TAYLOR  TATE 
 Re:  2006  Quadrennial  Regulatory  Review  and  2002  Biennial  Regulatory  Review    Review  of  the  Commissions  Broadcast  Ownership  Rules  and  Other  Rules  Adopted  Pursuant  to 
 Section  202  of  the  Telecommunications  Act  of  1996,  et  al.,  MB  Docket  Nos.  06-  121  and  02-  277,  MM  Docket  Nos.  01-  235,  01-  317  and  00-  244. 


 With  todays  Further  Notice  of  Proposed  Rulemaking  (Further  Notice),  we  invite  the  public  to  comment  on  how  to  address  the  issues  raised  by  the  U.  S.  Court  of  Appeals  for  the  Third 
 Circuit  in  the  Prometheus  decision  and  concurrently  initiate  the  next  quadrennial  review  of  the  media  ownership  rules  as  required  by  Section  202(  h)  of  the  Telecommunications  Act  of  1996. 


 The  future  is  under  construction  right  now,  and  we  need  to  be  addressing  issues  like  this  one  in  order  to  create  an  environment  that  allows  markets  to  work  while  still  protecting  the 
 interests  of  consumers.  My  recent  trip  to  China  drove  home  how  interconnected  todays  media  world  really  is.  As  China  prepares  for  the  2008  Olympic  Games,  I  now  realize  how  Americans 
 will  have  the  instantaneous  experience  of  these  games  from  a  world  away  not  just  from  the  American  media  but  from  the  global  media.  As  we  move  forward,  we  must  realize  that  the  world 
 is  indeed  interconnected  and  that  American  companies  must  be  able  to  compete  in  order  to  continue  to  be  global  leaders  in  the  media  marketplace. 


 Moreover,  I  believe  that  it  is  critical  that  we,  as  policymakers,  do  not  lose  touch  with  how  communications  technology,  and  the  decisions  we  make  in  this  arena,  may  serve  to  improve, 
 enhance,  educate,  and  maybe  even  inspire  the  lives  of  all  Americans.  Media  ownership  will  affect  issues  as  diverse  as  the  quality  and  quantity  of  childrens  television,  the  diversity  of 
 opinions  in  our  nations  political  discourse,  or  how  we  get  important  information  in  the  event  of  an  emergency.  I  look  forward  to  the  publics  input  on  the  issues  presented  by  this  Further  Notice. 
 In  particular,  I  hope  that  we  can  help  consumers  understand  the  importance  of  the  issues  we  are  discussing  and  give  them  an  opportunity  to  make  their  voices  heard.  I  am  committed  to  working 
 with  my  FCC  colleagues  to  ensure  that  our  actions  further  competition,  localism,  and  diversity  in  the  global  media  marketplace. 
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 STATEMENT  OF  COMMISSIONER  ROBERT  M.  MCDOWELL 
 Re:  2006  Quadrennial  Regulatory  Review  and  2002  Biennial  Regulatory  Review    Review  of  the  Commissions  Broadcast  Ownership  Rules  and  Other  Rules  Adopted  Pursuant  to 
 Section  202  of  the  Telecommunications  Act  of  1996,  et  al.,  MB  Docket  Nos.  06-  121  and  02-  277,  MM  Docket  Nos.  01-  235,  01-  317  and  00-  244 


 With  this  Further  Notice,  we  embark  on  the  Commissions  next  comprehensive  review  of  the  broadcast  ownership  rules.  Our  rules  must  take  into  account  the  dramatic  changes  that  have 
 occurred  in  the  media  landscape  since  the  Commission  adopted  them.  At  the  same  time,  we  must  ensure  that  the  rules  continue  to  promote  the  long-  standing  values  of  competition,  diversity  and 
 localism  that  lie  at  the  foundation  of  our  nations  broadcasting  system. 
 I  hope  that  our  review  will  result  in  a  reasoned  framework  that  answers  the  legal  and  evidentiary  issues  posed  to  us  by  the  Third  Circuit  in  the  Prometheus  decision  and  resolves  the 
 regulatory  uncertainty  that  followed  the  appeal  of  the  Commissions  2002  order  through  the  courts.  The  questions  asked  in  the  Further  Notice  provide  a  solid  start  to  our  inquiry. 


 As  our  experience  with  the  2002  biennial  review  revealed,  the  debate  over  broadcast  ownership  is  a  debate  about  the  vitality  of  our  democracy  and  the  appropriate  balance  among 
 competitive  efficiencies,  diversity  of  voices  and  local  focus.  The  debate  elicits  the  opinions  and  passions  of  people  from  all  walks  of  life  from  all  over  the  country.  I  am  eager  to  learn  more 
 about  the  issues  from  the  perspectives  of  all  of  the  interested  parties,  be  they  broadcasters,  consumers,  academics,  artists  or  others. 


 I  thank  Donna  Gregg  and  the  Media  Bureau  staff  for  their  hard  work  on  this  important  proceeding.  I  support  the  Further  Notice  and  commend  the  Chairman  on  his  strong  leadership  in 
 this  area. 
36