*Pages 1--68 from  Microsoft Word - 21972.doc*
 Federal  Communications  Commission  FCC  02-  249 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 
 In  the  matter  of 
 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  No.  02-  277 
 MM  Docket  No.  01-  235 
 MM  Docket  No.  01-  317 

 MM  Docket  No.  00-  244 

 NOTICE  OF  PROPOSED  RULE  MAKING 
 Adopted:  September  12,  2002  Released:  September  23,  2002 
 Comment  Date:  60  days  after  Commission  release  of  the  Media  Ownership  Working  Group  Studies  Reply  Comment  Date:  90  days  after  Commission  release  of  the  Media  Ownership  Working  Group 
 Studies 
 By  the  Commission:  Commissioner  Copps  concurring  and  issuing  a  statement,  Commissioner  Martin  approving  in  part,  concurring  in  part  and  issuing  a  statement. 

 TABLE  OF  CONTENTS  para 
 I.  INTRODUCTION  ...........................................................................................................................  1 
 II.  LEGAL  FRAMEWORK  FOR  BIENNIAL  OWNERSHIP  REVIEW............................................  9 
 III.  THE  MODERN  MEDIA  MARKETPLACE.................................................................................  23 
 IV.  POLICY  GOALS...........................................................................................................................  29 
 A.  Diversity............................................................................................................................  33 
 B.  Competition  ......................................................................................................................  51 
 C.  Localism............................................................................................................................  69 
 V.  LOCAL  OWNERSHIP  RULES  ....................................................................................................  72 
1
 Federal  Communications  Commission  FCC  02-  249 
 2 
 A.  Local  TV  Multiple  Ownership  Rule  .................................................................................  73  1.  The  Sinclair  Decision  ..........................................................................................  76 
 2.  Diversity  ..............................................................................................................  78  3.  Competition  .........................................................................................................  84 
 4.  Localism  ..............................................................................................................  95 
 B.  Radio/  TV  Cross-  Ownership  Rule  .....................................................................................  98  1.  Viewpoint  Diversity...........................................................................................  102 

 2.  Localism  ............................................................................................................  103  3.  Competition  .......................................................................................................  104 

 C.  Alternative  Means  to  Achieve  Goals  ..............................................................................  106 
 D.  Voice  or  Other  Test  .....................................................................................................  112  1.  Creating  a  New  Metric.......................................................................................  113 

 2.  Weighting  the  Voices.........................................................................................  115  3.  Accounting  for  Diversity  and  Competition  Via  MVPDs  and  the  Internet.........  119 

 VI.  NATIONAL  OWNERSHIP  RULES...........................................................................................  125 
 A.  National  TV  Ownership  Rule  .........................................................................................  126  1.  Diversity  ............................................................................................................  132 

 2.  Competition  .......................................................................................................  138  3.  Localism  ............................................................................................................  147 
 4.  Audience  Measurement  .....................................................................................  155 
 B.  Dual  Network  Rule  .........................................................................................................  156  1.  Diversity  ............................................................................................................  160 

 2.  Competition  .......................................................................................................  164  3.  Localism  ............................................................................................................  168 

 VII.  ADMINISTRATIVE  MATTERS................................................................................................  169 
 A.  Procedural  Provisions  .....................................................................................................  169  1.  Notice  and  Comment  Provisions  .......................................................................  169 

 2.  Ex  Parte  Provisions............................................................................................  173 
 B.  Initial  Regulatory  Flexibility  Analysis............................................................................  179 
 VIII.  ORDERING  CLAUSES..............................................................................................................  180 

 I.  INTRODUCTION 
 1.  This  Notice  of  Proposed  Rulemaking  (  Notice)  initiates  a  comprehensive  review  of  the  Commissions  media  ownership  rules.  The  law  governing  our  media  ownership  policies  and  the  media 

 market  has  undergone  substantial  changes  since  our  ownership  rules  were  adopted.  As  a  result,  this  proceeding  will  include  a  careful  analysis  of  our  policy  goals  and  the  development  and  implementation  of 
 a  regulatory  framework  that  best  serves  to  achieve  those  goals. 
 2.  The  Commission  has  long  regulated  media  ownership  as  a  means  of  promoting  diversity,  competition,  and  localism  in  the  media  without  regulating  the  content  of  broadcast  speech.  The 

 Commission  has  adopted  these  regulations  pursuant  to  sections  307,  308,  309(  a),  and  310(  d)  of  the  Communications  Act,  which  authorize  the  Commission  to  grant  and  renew  broadcast  station  licenses  in 
2
 Federal  Communications  Commission  FCC  02-  249 
 3 
 the  public  interest.  1  The  existing  rules  were  adopted  largely  on  a  rule-  by-  rule  basis  and  evolved  incrementally  over  the  years.  During  these  evolutions,  courts  generally  approved  our  rules  as  long  as  they 
 were  rationally  related  to  achieving  their  stated  purpose  and  our  decisions  complied  with  administrative  procedure  requirements. 

 3.  The  Telecommunications  Act  of  1996  (  the  Act)  2  fundamentally  changed  broadcast  3  ownership  law.  Section  202(  h)  of  the  1996  Act  directs  the  Commission  to  re-  examine  its  broadcast 
 ownership  rules  every  two  years  and  repeal  or  modify  any  regulation  it  determines  to  be  no  longer  in  the  public  interest.  Recent  court  decisions  have  held  that  section  202(  h)  changes  the  way  the  Commission 
 must  evaluate  its  broadcast  ownership  rules.  The  courts  have  stated  that  section  202(  h)  carries  with  it  a  presumption  in  favor  of  repealing  or  modifying  the  ownership  rules.  The  court  decisions  interpreting 
 section  202(  h)  require  a  Commission  decision  to  retain  or  modify  its  media  ownership  regulations,  in  its  biennial  review,  to  be  based  on  a  solid  factual  record  and  a  consistent  analytical  framework. 

 4.  The  regulatory  structure  best  suited  to  promote  the  public  interest  is  not  static.  Thus,  the  Commissions  media  ownership  rules  must  be  reassessed  on  an  ongoing  basis  to  ensure  that  they  are 
 grounded  in  the  current  realities  of  the  media  marketplace.  It  is  only  through  this  reevaluation  that  the  Commission  can  be  assured  that  its  media  ownership  rules  actually  advance,  rather  than  undermine,  our 
 policy  goals.  In  this  regard,  we  recognize  that  the  marketplace  has  changed  dramatically  over  the  last  few  decades,  with  both  greater  competition  and  diversity,  and  increasing  consolidation. 

 5.  In  conducting  this  reassessment  of  our  broadcast  ownership  regulatory  framework,  we  must  clearly  define  our  objectives  as  we  strive  to  promote  the  public  interest.  The  Commissions 
 ownership  policies  traditionally  have  focused  on  advancing  three  broadly  defined  goals:  (1)  diversity,  (2)  competition,  and  (3)  localism.  This  proceeding  will  review  these  policy  objectives  in  light  of  the 
 current  media  marketplace  and  determine  whether  Commission  intervention  is  necessary  to  achieve  these  objectives.  In  addition,  we  will  consider  whether  there  are  additional  objectives  that  the  Commission 
 should  strive  to  achieve  through  our  media  ownership  rules.  One  such  goal  may  be  increased  innovation  of  media  platforms  and  services.  In  defining  these  objectives,  this  proceeding  will  consider  whether  the 
 Commission  should  prioritize  these  policy  objectives  and,  if  so,  how.  By  determining  the  relative  weight  of  each  objective,  the  Commission  will  be  well  positioned  to  address  those  instances  in  which  there  is 
 tension  between  our  policy  goals. 
 6.  This  Notice  initiates  review  of  four  ownership  rules:  the  national  television  multiple  ownership  rule;  4  the  local  television  multiple  ownership  rule;  5  the  radio-  television  cross-  ownership  rule;  6 

 1  47  U.  S.  C.    307,  308,  309(  a),  310(  d). 
 2  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  110  Stat.  56  (1996). 
 3  By  broadcasters  we  refer  to  UHF  and  VHF  television  and  AM  and  FM  radio  licensees,  and  not  to  cable 
 operators,  Direct  Broadcast  Satellite  (  DBS)  operators,  or  satellite  Digital  Audio  Radio  Service  operators.  4 
 47  C.  F.  R.    73.  3555(  e).  The  national  TV  ownership  rule  prohibits  any  entity  from  controlling  television  stations  the  combined  audience  reach  of  which  exceeds  35%  of  the  television  households  in  the  United  States. 

 5  47  C.  F.  R.    73.  3555(  b).  The  local  TV  ownership  rule  allows  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.  For  this  rule, 
 a  voice  includes  only  broadcast  television  stations  in  the  market.  6 
 47  C.  F.  R.    73.  3555(  c).  The  radio/  TV  cross-  ownership  rule  generally  allows  common  ownership  of  one  or  two  TV  stations  and  up  to  six  radio  stations  in  any  market  where  at  least  twenty  independent  voices  would  remain 

 post-  combination;  two  TV  stations  and  up  to  four  radio  stations  in  a  market  where  at  least  ten  independent  voices  (continued....) 
3
 Federal  Communications  Commission  FCC  02-  249 
 4 
 and  the  dual  network  rule.  7  The  first  two  rules  have  been  reviewed  and  remanded  to  the  Commission  by  the  U.  S.  Court  of  Appeals  for  the  District  of  Columbia  Circuit.  We  address  the  issues  on  remand  in  this 
 proceeding.  8 
 7.  The  Commission  previously  has  initiated  proceedings  on  the  local  radio  ownership  rule  9  and  the  newspaper/  broadcast  cross-  ownership  rule.  10  The  local  radio  ownership  rule  sets  forth  the  number 

 of  radio  stations  that  an  entity  may  own  in  a  single  radio  market.  11  The  local  radio  ownership  proceeding  examines  the  effects  of  market  consolidation,  the  proper  definition  of  a  radio  market,  and  possible 
 changes  to  our  local  radio  ownership  rules  and  policies  to  reflect  the  current  radio  marketplace.  The  newspaper/  broadcast  cross-  ownership  rule,  which  prohibits  the  common  ownership  of  a  daily  newspaper 
 and  a  broadcast  station  in  the  same  market,  12  is  currently  under  review  in  the  newspaper/  broadcast  cross-ownership  proceeding.  Comments  filed  in  those  proceedings  will  be  incorporated  in  this  proceeding.  We 
 seek  additional  comment  on  those  rules  to  the  extent  necessary  to  address  issues  raised  for  the  first  time  in  this  Notice.  13 

 8.  Our  local  ownership  rules,  which  include  the  newspaper/  broadcast  cross-  ownership 
 (...  continued  from  previous  page)  would  remain  post-  combination;  and  one  TV  and  one  radio  station  notwithstanding  the  number  of  independent 
 voices  in  the  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,  radio  stations,  independently  owned  daily  newspapers  of  a  certain 
 circulation,  and  cable  systems  providing  generally  available  service  to  television  households  in  a  DMA,  provided  that  all  cable  systems  within  the  DMA  are  counted  as  a  single  voice. 
 7  47  C.  F.  R.    73.  658(  g).  The  dual  network  rule  permits  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. 

 8  Fox  Television  Stations,  Inc.  v.  FCC,  280  F.  3d  1027  (  Fox  Television),  rehearing  granted,  293  F.  3d  537  (D.  C. 
 Cir.  2002)  (  Fox  Television  Re-  Hearing),  addressed  the  national  TV  ownership  rule.  Sinclair  Broadcast  Group,  Inc.  v.  FCC,  284  F.  3d  148  (D.  C.  Cir.  2002)  (  Sinclair),  rehearing  denied  Aug.  13,  2002,  addressed  the  local  TV 

 ownership  rule.  9 
 Rules  and  Policies  Concerning  Multiple  Ownership  of  Radio  Broadcast  Stations  in  Local  Markets,  MM  Docket  No.  01-  317,  Definition  of  Radio  Markets,  16  FCC  Rcd  19861  (2001)  (  Local  Radio  Ownership  NPRM). 

 Comments  and  replies  in  this  proceeding  were  due,  respectively,  on  March  27,  2002  and  May  8,  2002.  10 
 Cross-  Ownership  of  Broadcast  Stations  and  Newspapers,  MM  Docket  No.  01-  235,  Newspaper/  Radio  Cross-Ownership  Waiver  Policy,  MM  Docket  No.  96-  197,  Order  and  Notice  of  Proposed  Rule  Making,  16  FCC  Rcd  17283 

 (2001)  (  Newspaper/  Broadcast  Cross-  Ownership  NPRM).  Comments  and  replies  in  this  proceeding  were  due,  respectively,  on  December  3,  2001  and  February  15,  2002. 
 11  47  C.  F.  R.    73.3555(  a).  The  rule  was  amended  to  comply  with  Section  202(  b)  of  the  1996  Act. 
 12  47  C.  F.  R.    73.3555(  d). 
 13  We  do  not  contemplate  a  change  in  the  broadcast  attribution  rules,  except  to  the  extent  that  the  single  majority 
 shareholder  exemption  is  under  consideration  in  the  cable  proceeding.  Implementation  of  Section  11  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992;  Implementation  of  Cable  Act  Reform  Provisions  of 

 the  Telecommunications  Act  of  1996,  CS  Docket  No.  98-  82,  Further  Notice  of  Proposed  Rulemaking,  16  FCC  Rcd  17,  312  (2001).  We  note  in  this  regard  that  the  attribution  rules  do  not  themselves  prohibit  or  restrict  ownership  of 
 interests  in  any  entity,  but  rather  determine  what  interests  are  cognizable  under  those  ownership  rules.  Furthermore,  the  focus  of  the  biennial  review  process  is  whether  the  ownership  rules  "are  necessary  in  the  public  interest  as  the 
 result  of  competition."  The  media  attribution  limits  are  set  at  the  level  the  Commission  believes  conveys  influence  over  the  affairs  of  the  company  in  which  the  interest  is  held.  This  level  is  not  related  to  any  changes  in  competitive 
 forces,  and  hence  the  limits  are  not  reviewed  on  a  biennial  basis. 
4
 Federal  Communications  Commission  FCC  02-  249 
 5 
 rule,  14  the  local  TV  ownership  rule,  15  the  radio/  TV  cross-  ownership  rule,  16  and  local  radio  ownership  rule,  17  are  interrelated.  Each  is  intended  to  foster  competition  and  diversity  in  the  local  media 
 marketplace.  As  a  result,  it  is  appropriate  for  the  Commission  to  consider  these  rules  collectively,  as  any  change  to  one  rule  may  affect  the  need  for  other  rules  to  be  retained,  modified,  or  eliminated.  In  addition, 
 by  evaluating  our  local  ownership  rules  collectively,  we  facilitate  consistent  analysis  of  policy  questions  that  are  common  to  multiple  rules.  For  example,  all  of  our  local  rules  are  predicated  to  some  extent  on 
 assumptions  about  the  types  of  media  that  Americans  rely  on  for  news  and  current  affairs.  We  are  better  able  to  analyze  and  apply  our  findings  in  areas  such  as  these  by  considering  the  rules  collectively  rather 
 than  separately.  Assessing  these  rules  collectively  also  avoids  the  problem  in  sequential  decision  making  whereby  early  decisions  can  inadvertently  predetermine  --  or  preclude  certain  approaches  in  --  later 
 decisions. 
 II.  LEGAL  FRAMEWORK  FOR  BIENNIAL  OWNERSHIP  REVIEW 
 9.  Section  202(  h)  of  the  1996  Act  provides: 
 The  Commission  shall  review  its  rules  adopted  pursuant  to  this  section  and  all  of  its  ownership  rules  biennially  as  part  of  its  regulatory  reform  review  under  section 

 11  of  the  Communications  Act  of  1934  and  shall  determine  whether  any  of  such  rules  are  necessary  in  the  public  interest  as  the  result  of  competition.  The 
 Commission  shall  repeal  or  modify  any  regulation  it  determines  to  be  no  longer  in  the  public  interest.  18 

 10.  The  1996  Act  repealed  the  prohibition  on  common  ownership  of  cable  and  telephone  systems,  19  overrode  the  few  remaining  regulatory  limits  upon  cable/  network  cross-  ownership,  20 
 eliminated  the  national  and  relaxed  the  local  restrictions  upon  radio  ownership,  21  eased  the  dual  network  rule  for  television,  22  and  directed  the  Commission  to  eliminate  the  cap  upon  the  number  of 
 television  stations  any  one  entity  may  own  23  and  to  increase  to  35  from  25  the  maximum  percentage  of  American  households  a  single  TV  broadcaster  may  reach.  24  These  enactments,  together  with  section 

 14  47  C.  F.  R.    73.3555(  d). 
 15  47  C.  F.  R.    73.3555(  b). 
 16  47  C.  F.  R.    73.3555(  c). 
 17  47  C.  F.  R.    73.3555(  a). 
 18  1996  Act,    202(  h).  Section  11  of  the  Communications  Act  of  1934,  as  amended  (  the  1934  Act),  provides  for 
 the  biennial  review  of  regulations  that  apply  to  the  operations  or  activities  of  any  provider  of  telecommunications  services.  Pursuant  to  section  11,  the  Commission  "shall  determine  whether  any  such  regulation  is  no  longer 

 necessary  in  the  public  interest  as  a  result  of  meaningful  economic  competition."  Section  11  further  requires  that  the  Commission  "shall  repeal  or  modify  any  regulation  it  determines  to  be  no  longer  necessary  in  the  public  interest." 
 47  U.  S.  C.    161.  19 
 The  1996  Act  repealed  former    613(  b),  which  prohibited  a  common  carrier  from  providing  video  programming  directly  to  subscribers  in  its  telephone  service  area.  See  1996  Act,    302(  b)(  1).  Section  652  of  the  Act  (47  U.  S.  C.   

 572)  now  contains  the  prohibition  of  buyouts  vis-  a-  vis  cable  systems  and  local  exchange  carriers. 
 20  1996  Act,    202(  f)(  1). 

 21  1996  Act,  202(  a),  (b). 
 22  1996  Act,  202(  e). 
 23  1996  Act,  202(  c)(  1)(  A). 
 24  1996  Act,  202(  c)(  1)(  B). 
5
 Federal  Communications  Commission  FCC  02-  249 
 6 
 202(  h),  set  in  motion  a  process  to  deregulate  the  structure  of  the  broadcast  and  cable  television  industries  as  both  competition  and  diversity  among  media  voices  increase.  25 
 11.  This  is  our  third  biennial  review.  As  a  result  of  the  1998  biennial  review  proceeding,  the  first  review,  the  Commission  relaxed  the  dual  network  rule,  26  eliminated  the  experimental  broadcast 
 station  multiple  ownership  rule,  27  and  initiated  a  proceeding  with  respect  to  the  newspaper/  broadcast  cross-  ownership  rule.  28  The  Commission  decided  to  retain  the  local  radio  ownership  rule,  29  the  national 
 TV  ownership  rule  (including  the  UHF  discount),  30  and  the  cable/  broadcast  cross-  ownership  rule.  31  Prior  to  completing  the  1998  biennial  review,  the  Commission  had  substantially  relaxed  the  local  TV 
 ownership  and  radio/  TV  cross-  ownership  rules  in  the  separate  local  television  ownership  proceeding.  32  In  the  2000  biennial  review  proceeding,  a  Commission-  wide  comprehensive  proceeding,  the  Commission 
 endorsed  the  results  of  the  1998  biennial  review  of  its  broadcast  ownership  rules.  33 
 12.  Court  Decisions  Reviewing  1998  Biennial  Review.  The  Commissions  decisions  in  the  1998  Biennial  Report  relating  to  the  cable/  broadcast  cross-  ownership  rule  and  the  national  TV  ownership 

 rule  were  challenged  in  the  United  States  Court  of  Appeals  for  the  District  of  Columbia  Circuit.  34  In  Fox  Television,  the  court  vacated  the  cable/  broadcast  cross-  ownership  rule,  and  remanded  the  decision  to 
 retain  the  national  TV  ownership  rule,  holding  that  the  Commissions  decision  to  retain  these  rules  was  arbitrary  and  capricious  and  contrary  to  section  202(  h)  of  the  1996  Act.  35  The  court  stated  that  the 
 Commission  had  no  valid  reason  to  think  the  [national  TV  ownership  rule]  is  necessary  to  safeguard  competition  36  or  to  advance  diversity  37  and  had  given  no  reason  to  depart  from  the  conclusion  the 
 Commission  had  reached  in  1984  that  the  rule  was  no  longer  necessary.  38  The  court  observed  that  the  Commission  had  provided  no  analysis  of  the  state  of  competition  in  the  television  industry  to  justify  its 
 decision  to  retain  the  national  TV  ownership  rule.  In  addition,  the  court  faulted  the  Commissions  decision  to  retain  the  national  TV  ownership  rule  while  it  observed  the  effects  of  changes  in  the  local  TV 

 25  Fox  Television,  280  F.  3d  at  1033. 
 26  Amendment  of  Section  73.  658(  G)  of  the  Commissions  Rules    The  Dual  Network  Rule,  16  FCC  Rcd  11114, 
 11131  (2001)    37  (  Dual  Network  Order).  27 
 Elimination  of  Experimental  Broadcast  Ownership  Restrictions,  16  FCC  Rcd  7457  (2001).  28 
 1998  Biennial  Regulatory  Review    Review  of  the  Commissions  Broadcast  Ownership  Rules  and  Other  Rules  Adopted  Pursuant  to  Section  202  of  the  Telecommunications  Act  of  1996,  15  FCC  Rcd  11058,  11099-  109  (2000)   

 79-  95  (  1998  Biennial  Report);  Newspaper/  Broadcast  Cross-  Ownership  NPRM,  supra  note  10.  29 
 47  C.  F.  R.    73.3555(  a);  1998  Biennial  Report,  15  FCC  Rcd  at  11086-  87,    50.  30 
 47  C.  F.  R.    73.3555(  e);  1998  Biennial  Report,  15  FCC  Rcd  at  11072,  11078,    25,  35.  31 
 47  C.  F.  R.    76.  501(  a);  1998  Biennial  Report,  15  FCC  Rcd  at  11114,    102.  As  discussed  below,  the  cable/  broadcast  cross-  ownership  rule  has  been  vacated  by  the  Court  of  Appeals  in  Fox  Television.  The  Commission 

 will  implement  the  courts  order  in  a  separate  order.  32 
 See  Review  of  the  Commissions  Regulations  Governing  Television  Broadcasting,  Television  Satellite  Stations  Review  of  Policy  and  Rules,  14  FCC  Rcd  12903  (1999)  (  Local  TV  Ownership  Report  and  Order),  clarified  in 

 Memorandum  Opinion  and  Second  Order  on  Reconsideration,  16  FCC  Rcd  1067  (2001)  (  Local  TV  Ownership  Reconsideration  Order),  on  appeal,  Sinclair,  supra  note  8. 
 33  Biennial  Regulatory  Review  2000,  16  FCC  Rcd  1207  (2001). 
 34  Fox  Television,  supra  note  8. 
 35  Fox  Television,  280  F.  3d  at  1048,  1053. 
 36  Id.  at  1042. 
 37  Id  at  1043. 
 38  Id.  at  1043-  45. 
6
 Federal  Communications  Commission  FCC  02-  249 
 7 
 ownership  rule.  The  court  concluded  that  this  wait-  and-  see  approach  could  not  be  squared  with  section  202(  h),  which  carries  with  it  a  presumption  in  favor  of  repeal  or  modification  of  ownership  rules.  39 
 13.  In  retaining  the  national  TV  ownership  rule,  the  Commission,  in  part,  reasoned  that  the  rule  was  necessary  to  strengthen  the  bargaining  power  of  the  network  affiliates,  thereby  promoting 
 localism  and  diversity.  Although  the  court  in  Fox  Television  rejected  the  networks  argument  that  this  justification  was  inconsistent  with  the  requirements  of  section  202(  h),  the  court  determined  that  the 
 Commissions  reliance  on  this  justification  was  invalid  because  it  did  not  have  sufficient  record  support.  In  particular,  the  court  held  that  the  Commission  had  failed  to  justify  its  departure  from  the  1984  Multiple 
 Ownership  Order,  where  the  Commission  said  it  had  no  evidence  indicating  that  stations  which  are  not  group-  owned  better  respond  to  community  needs,  or  expend  proportionately  more  of  their  revenues  on 
 local  programming.  40  Nonetheless,  the  court  held  that  the  Commission  could  conceivably  distinguish  --  as  incorrect  or  inapplicable  because  of  changed  circumstances    its  views  in  the  1984  Multiple  Ownership 
 Order.  The  court  also  noted  that  the  Commission  did  advert  to  possible  competitive  problems  in  the  national  markets  for  advertising  and  program  production,  and  that  the  intervenors,  including  the  National 
 Association  of  Broadcasters  and  National  Affiliated  Stations  Alliance,  made  a  plausible  argument  that  the  national  television  ownership  rule  furthers  competition  in  the  national  television  advertising  market.  41 

 14.  Based  on  these  findings,  the  court  remanded  for  further  consideration  the  issue  of  whether  to  repeal  or  modify  the  national  TV  ownership  rule,  holding  that  the  probability  that  the 
 Commission  will  be  able  to  justify  retaining  the  Rule  is  sufficiently  high  that  vacatur  of  the  Rule  is  not  appropriate.  42  The  court  also  held  that  the  Commissions  decision  to  retain  the  national  TV  ownership 
 rule  did  not  violate  the  First  Amendment,  reaffirming  that  the  review  of  broadcast  regulations  under  First  Amendment  jurisprudence  is  more  deferential  than  review  of  cable  or  print  media  regulations.  43  The 
 court  also  rejected  the  networks  claim  that  section  202(  h)  does  not  allow  the  Commission  to  regulate  broadcast  ownership  in  the  interest  of  diversity  alone.  The  court  held  that  in  the  context  of  broadcast 
 regulation,  the  public  interest  has  historically  embraced  both  diversity  and  localism,  that  protecting  diversity  is  a  permissible  policy  for  the  agency  to  seek  to  advance,  and  that  nothing  in  section  202(  h) 
 indicated  that  Congress  had  departed  from  that  approach.  44  The  court  then  held  that  whatever  the  virtues  may  be  of  a  free  market  in  television  stations,  Congress  may,  in  the  regulation  of  broadcasting, 
 constitutionally  pursue  values  other  than  efficiency  --  including  in  particular  diversity  in  programming,  for  which  diversity  of  ownership  is  perhaps  an  aspirational  but  surely  not  an  irrational  proxy.  45 

 15.  The  court  also,  in  Fox  Television,  vacated  the  cable/  broadcast  cross-  ownership  rule,  finding  that  the  Commission  had  failed  to  justify  its  retention  of  the  rule  as  necessary  to  safeguard 
 competition.  In  the  1998  Biennial  Report,  the  Commission  attempted  to  justify  the  retention  of  the  rule  by  arguing  that  a  cable  operator  that  also  owns  a  broadcast  station  has  the  incentive  to  discriminate 
 against  other  broadcasters  by:  (1)  offering  joint  advertising  sales  and  promotions,  and  (2)  not  carrying,  or  carrying  on  undesirable  channels,  broadcast  signals  of  competing  stations.  The  court  found  that  the 

 39  Id.,  280  F.  3d  at  1042,  1048. 
 40  Fox  Television,  280  F.  3d  at  1043,  quoting  Amendment  of  Section  73.  3555,  [formerly  Sections  73.  35,  73.  240,  and 
 73.  636]  of  the  Commissions  Rules  Relating  to  Multiple  Ownership  of  AM,  FM  and  Television  Broadcast  Stations,  100  F.  C.  C.  2d  17,  35  (1984)    53  (  1984  Multiple  Ownership  Order). 

 41  Fox  Television,  280  F.  3d  at  1048-  49. 
 42  Id  at  1049. 
 43  Id.  at  1047. 
 44  Id.  at  1042. 
 45  Id.  at  1047. 
7
 Federal  Communications  Commission  FCC  02-  249 
 8 
 Commission  had  not  shown  a  substantial  enough  probability  of  discrimination  to  deem  reasonable  a  broad  cross-  ownership  rule,  especially  in  light  of:  (1)  existing  conduct  rules,  such  as  must-  carry,  ensuring  access 
 to  cable  systems,  and  (2)  competition  from  DBS  providers,  which  would  make  discrimination  against  competing  broadcasters  unprofitable.  Further,  the  court  found  that  the  Commission  had  failed  to  justify 
 its  departure  from  a  1992  Report  and  Order,  46  in  which  it  had  concluded  that  the  rule  was  not  necessary  to  prevent  carriage  discrimination.  The  court  also  found  that  the  Commission  had  failed  to  justify  the  rule 
 based  on  its  diversity  concerns.  Based  on  its  assessment  that  there  was  little  chance  that  the  Commission  would  be  able  to  justify  retaining  the  cable/  broadcast-  cross-  ownership  rule,  and  that  the  disruption  caused 
 by  vacatur  would  be  insubstantial,  the  court  vacated  the  rule.  47 
 16.  With  respect  to  the  standard  of  review  generally  under  section  202(  h),  the  court  noted,  in  the  context  of  discussing  the  cable/  broadcast  cross-  ownership  rule,  that  the  Commission  had  applied  too 

 lax  a  standard  and  that  [  t]  he  statute  is  clear  that  a  regulation  should  be  retained  only  insofar  as  it  is  necessary  in,  not  merely  consonant  with,  the  public  interest.  48  The  Commission  petitioned  for  rehearing 
 as  to  this  issue,  arguing  that  the  courts  interpretation  of  the  statutory  language  would  impose  a  higher  standard  in  deciding  whether  to  retain  a  rule  than  that  which  applied  to  the  adoption  of  the  rule  in  the  first 
 place.  On  rehearing,  the  court  deleted  the  paragraph  in  its  earlier  opinion  holding  the  Commission  to  a  higher  necessary  standard  in  biennial  review  proceedings,  finding  that  the  cable/  broadcast  cross-ownership 
 rule  could  not  pass  muster  even  under  the  more  relaxed  consonance  standard  and  that  determining  the  applicability  of  a  stricter  standard  of  review  therefore  was  not  necessary.  The  court 
 decided  to  leave  unresolved  precisely  what  section  202(  h)  means  when  it  instructs  the  Commission  first  to  determine  whether  a  rule  is  necessary  in  the  public  interest  but  then  to  repeal  or  modify  the  rule  if  it 
 is  simply  no  longer  in  the  public  interest.    49 
 17.  In  Sinclair  Broadcast  Group,  Inc.  v.  FCC,  50  the  court  reviewed  the  Commissions  decision  relaxing  the  local  TV  ownership  rule.  51  That  rule  allows  the  combination  of  two  television 

 stations  in  the  same  market  if:  (1)  the  Grade  B  contours  of  the  stations  do  not  overlap,  or  (2)  (a)  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  non-  commercial  television  stations,  or  voices,  would  remain  in  that  market  after  the  combination.  52  Under  the  rule,  voices  are  defined  to 
 include  only  broadcast  television  stations  in  the  market.  53  In  Sinclair,  the  court  held  that  the  Commission  adequately  explained  how  the  [local  TV  ownership  rule]  furthers  diversity  at  the  local  level  and  is 
 necessary  in  the  public  interest  under    202(  h)  of  the  1996  Act.  54  The  court  also  upheld  the  local  TV 
 46  Amendment  of  Part  76,  Subpart  J,  Section  76.  501  of  the  Commissions  Rules  and  Regulations  to  Eliminate  the 
 Prohibition  on  Common  Ownership  of  Cable  Television  Systems  and  National  Television  Networks,  7  FCC  Rcd  6156  (1992). 

 47  Fox  Television,  280  F.  3d  at  1053. 
 48  Id.  at  1050. 
 49  Fox  Television  Re-  Hearing,  293  F.  3d  at  540.  The  court  also  rejected  the  petitions  for  rehearing  of  intervenors 
 National  Affiliated  Stations  Alliance  and  National  Association  of  Broadcasters,  which  argued  that  the  court  erred  in  failing  to  defer  to  the  decision  of  Congress  to  set  the  national  TV  ownership  rule  at  35%  and  in  vacating  rather  than 

 remanding  the  cable/  broadcast  cross-  ownership  rule.  Id.  at  540-  41.  50 
 See  supra  note  8.  51 
 In  Sinclair,  the  court  reviewed  challenges  to  the  local  TV  ownership  rule  as  well  as  to  grandfathering  provisions  related  to  local  marketing  agreements. 

 52  47  C.  F.  R.    73.3555(  b)(  2)(  i). 
 53  Id.  at    73.  3555(  b)(  2)(  ii). 
 54  Sinclair,  284  F.  3d  at  160. 
8
 Federal  Communications  Commission  FCC  02-  249 
 9 
 ownership  rule  against  a  First  Amendment  challenge,  applying  the  rational-  basis  standard  of  review.  55  The  court  held  that  there  was  a  rational  relationship  between  the  Local  TV  Ownership  Report  and  Order 
 and  our  diversity  and  competition  goals.  The  court  noted  that  choosing  the  number  eight  and  defining  voices  are  quintessentially  matters  of  line  drawing  invoking  the  Commissions  expertise  in  projecting 
 market  results,  and  did  not  decide  the  issue  of  whether  eight  is  the  appropriate  numerical  limit.  The  court  invalidated,  however,  the  Commissions  definition  of  voices  under  the  rule  because  it  did  not 
 adequately  explain  its  decision  to  include  only  broadcast  television  stations  as  voices.  The  court  pointed  out  that  the  definition  was  inconsistent  with  the  definition  of  voices  for  the  radio/  TV  cross-  ownership 
 rule,  56  which  also  considers  major  newspapers  and  cable  television  to  be  voices.  The  court  observed  that  [  o]  n  remand,  the  Commission  conceivably  may  determine  to  adjust  not  only  the  definition  of  voices 
 but  also  the  numerical  limit.  57 
 18.  We  seek  comment  on  the  statutory  language  of  section  202(  h)  of  the  1996  Act  and  the  courts  interpretations  of  that  language  in  Fox  Television  and  Sinclair.  We  specifically  invite  comment  on 

 the  standard  we  should  apply  in  determining  whether  to  modify,  repeal,  or  retain  our  rules  under  section  202(  h)  of  the  1996  Act.  For  example,  does  the  phrase,  necessary  in  the  public  interest,  mean  we  must 
 repeal  a  rule  unless  we  find  it  to  be  indispensable?  Or  does  the  phrase  mean  that  we  can  retain  a  rule  if  we  would  be  justified  under  the  current  circumstances  in  adopting  it  in  the  first  instance  because  the 
 record  shows  that  it  serves  the  public  interest?  Or  is  the  standard  somewhere  in  between?  The  Commission  argued  in  its  rehearing  petition  in  Fox  Television  that  necessary  in  the  public  interest, 
 when  viewed  in  the  context  of  the  rest  of  the  1934  and  1996  Acts,  means  in  the  public  interest,  or  useful  or  appropriate.  58  The  very  next  sentence  of  the  statute  uses  the  term  no  longer  in  the  public  interest, 
 thus  appearing  to  equate  a  rules  being  necessary  in  the  public  interest  with  its  being  in  the  public  interest.  The  Commission  argued  that  other  provisions  of  the  Communications  Act  contain  similar 
 language  using  the  terms,  necessary,  required,  and  necessity,  but  those  provisions  have  been  construed  to  require  the  Commission  to  demonstrate  that  the  rules  we  adopt  advance  legitimate  regulatory 
 objectives,  not  that  they  are  necessary  in  the  sense  of  being  indispensable.  Others  might  argue,  however,  that  necessary  in  the  public  interest  connotes  that  a  rule  must  be  essential  or  indispensable  in  order  for 
 us  to  retain  it.  59  What  light  do  the  statutory  context  and  other  case  law  cast  on  the  meaning  of  the  term?  We  invite  comment  on  any  other  factors  we  should  consider  with  respect  to  the  meaning  of  the  statutory 
 term  necessary  in  the  public  interest  as  it  bears  on  our  review  of  the  ownership  rules  at  issue  in  this  proceeding. 

 19.  In  both  Fox  Television  and  Sinclair,  the  court,  noting  that  "Section  202(  h)  carries  with  it  a  presumption  in  favor  of  repealing  or  modifying  the  ownership  rules,"  60  faulted  the  Commissions 
 justification  of  its  rules  as  lacking  supporting  factual  evidence.  61  Accordingly,  with  respect  to  the  rules  under  consideration,  we  strongly  encourage  commenters  to  provide  empirical  evidence  to  buttress  their 
 assertions.  Our  Media  Ownership  Working  Group  is  engaged  in  a  number  of  studies  that  are  intended  to 
 55  Id.  at  167-  69  (  the  only  question  is  whether  the  Local  TV  Ownership  Report  and  Order  is  rationally  connected  to 
 its  goals  of  ensuring  a  diversity  of  voices  and  adequate  competition  in  television  broadcasting).  56 
 47  C.  F.  R.    73.3555(  c)(  iii,  iv).  57 
 Sinclair,  284  F.  3d  at  162.  58 
 Commission  Petition  for  Rehearing  or  Rehearing  En  Banc  at  4-  13,  filed  Apr.  19,  2002,  in  Fox  Television,  supra  note  8. 

 59  Cf.  Fox  Television,  280  F.  3d  at  1048. 
 60  Fox  Television,  280  F.  3d  at  1048;  Sinclair,  284  F.  3d  at  159. 
 61  Fox  Television,  280  F.  3d  at  1041-  44;  Sinclair,  284  F.  3d  at  163  (pointing  to  an  evidentiary  gap  in  the 
 Commissions  reasoning). 
9
 Federal  Communications  Commission  FCC  02-  249 
 10 
 inform  the  2002  biennial  review.  These  studies,  which  will  be  released  separately  for  comment,  concern  the  following  subjects:  (1)  inter-  media  substitutability  among  local  media  outlets  from  the  perspective  of 
 local  advertisers;  (2)  the  effect  of  broadcast  media  concentration  on  the  level  of  non-  advertising  content  produced  and  consumed;  (3)  the  status  of  broadcast  television  in  the  multichannel  marketplace;  (4)  a 
 comparison  of  local  news  quantity  and  quality  on  network-  owned  stations  and  network  affiliates;  (5)  past  consumer  substitution  patterns  across  various  media;  (6)  the  effect  of  common  ownership  of  same-  market 
 newspapers  and  television  stations  on  news  coverage;  (7)  a  survey  of  American  consumers  regarding  outlets  used  for  news  and  current  affairs;  (8)  an  examination  of  program  diversity  on  prime  time  network 
 television  between  1966  and  2002;  (9)  a  survey  of  changes  in  the  availability  of  media  outlets  over  time  in  ten  select  cities;  and  (10)  the  effect  of  local  radio  market  concentration  on  program  diversity  and 
 advertising  prices.  Given  the  importance  of  this  data  to  the  proceeding,  and  in  order  to  streamline  the  review  process,  comments  will  be  due  60  days  after  Commission  release  of  the  studies;  reply  comments 
 will  be  due  90  days  after  release  of  the  studies.  We  intend  to  use  the  evidence  collected  in  the  studies,  as  well  as  the  comments,  to  guide  and  support  our  decisions  in  this  proceeding. 

 20.  The  First  Amendment.  Any  media  ownership  rules  we  ultimately  adopt  in  this  proceeding  must  be  consistent  not  only  with  the  legal  standard  of  section  202(  h),  but  also  with  the  First  Amendment 
 rights  of  the  affected  media  companies  and  of  consumers.  The  Fox  Television  and  Sinclair  cases  recently  applied  the  rational-  basis  standard  to  broadcast  ownership  rules.  62  The  court  held  in  Fox  Television  that 
 the  Commissions  decision  to  retain  the  national  TV  ownership  rule  did  not  violate  the  First  Amendment,  63  and  it  held  in  Sinclair  that  the  local  TV  ownership  rule  complies  with  the  First 
 Amendment.  64  The  court  reaffirmed  in  both  cases  that  the  rational-  basis  standard  of  First  Amendment  scrutiny  is  applicable  to  broadcast  television  rather  than  the  higher  intermediate  scrutiny  applicable  to 
 cable  operators  or  the  strict  scrutiny  applicable  to  print  media.  65  As  the  court  noted  in  Sinclair,  there  is  no  unabridgeable  First  Amendment  right  to  hold  a  broadcast  license  when  a  would-  be  broadcaster  does  not 
 satisfy  the  public  interest  by  meeting  the  Commission  criteria  for  licensing,  including  ownership  limitations.  66 

 21.  In  general,  ownership  limits  on  cable  operators  have  been  subject  to  the  OBrien,  67  or  intermediate  scrutiny,  test.  68  Under  this  standard,  government  regulation  of  speech  will  be  upheld  only  if: 
 (1)  it  furthers  an  important  or  substantial  governmental  interest;  (2)  the  government  interest  is  unrelated  to  the  suppression  of  free  expression;  and  (3)  the  incidental  restriction  on  alleged  First  Amendment 

 62  In  the  1998  Biennial  Report,  the  Commission  did  apply  the  OBrien  or  intermediate  scrutiny  test  to  the 
 newspaper/  broadcast  cross-  ownership  rule,  15  FCC  Rcd  at  11121,    116-  18  (applying  United  States  v.  OBrien,  391  U.  S.  367  (1968)  (  OBrien)).  Also,  in  considering  the  application  of  the  First  Amendment  to  the 

 newspaper/  broadcast  cross-  ownership  rule,  in  the  Newspaper/  Broadcast  NPRM,  supra  note  10,  which  was  released  before  the  Fox  Television  and  Sinclair  cases,  we  asked  about  the  significance  of  Time  Warner  Entertainment  Co.  v. 
 FCC,  240  F.  3d  1126  (D.  C.  Cir.),  cert.  denied,  122  S.  Ct.  644  (2001)  (  Time  Warner  II),  in  which  intermediate  scrutiny  was  applied  to  cable  regulations.  Newspaper/  Radio  Cross-  Ownership  NPRM,  16  FCC  Rcd  at  17296-  97,   
 31-  33.  63 
 Fox  Television,  280  F.  3d  at  1045-  47.  64 
 Sinclair,  284  F.  2d  at  166-  69.  65 
 Id.  at  167-  68;  Fox  Television,  280  F.  3d  at  1045-  46.  66 
 Sinclair,  284  F.  3d  at  168  (citing  FCC  v.  National  Citizens  Committee  for  Broadcasting,  436  U.  S.  775,  795-  97  (1978)(  NCCB)). 

 67  See  supra  note  62. 
 68  Time  Warner  Entertainment  Co.  v.  United  States,  211  F.  3d  1313,  1316-  22  (D.  C.  Cir.  2000)  (  Time  Warner  I), 
 cert.  denied,  121  S.  Ct.  1167  (2001);  Satellite  Broadcasting  &  Commun.  Assn  v.  FCC,  275  F.  3d  337,  346,  355  (4  th  Cir.  2001),  cert.  denied,  122  S.  Ct.  2588  (2002). 
10
 Federal  Communications  Commission  FCC  02-  249 
 11 
 freedoms  is  no  greater  than  is  essential  to  the  furtherance  of  that  interest.  69  The  Supreme  Court  has  determined  that  promoting  the  widespread  dissemination  of  information  from  a  multiplicity  of  sources  70 
 is  a  government  interest  that  is  not  only  important,  but  is  of  the  highest  order  71  and  is  unrelated  to  the  suppression  of  free  speech.  72 

 22.  Courts  have  consistently  applied  the  rational-  basis  test  when  faced  with  First  Amendment  challenges  to  Commission  ownership  restrictions  on  broadcast  media.  This  is  true  even  when  the 
 ownership  regulation  effectively  limits  what  a  non-  broadcast  media  firm,  such  as  a  newspaper  or  a  cable  company,  can  own.  73  In  other  words,  when  the  rule  prevents  a  newspaper  from  owning  an  in-  market 
 radio  station,  the  courts  do  not  apply  the  strict  scrutiny  test  applicable  to  newspapers  as  newspapers,  but  rather  the  rational-  basis  test  used  for  evaluating  broadcast  regulations.  We  will  explore  a  variety  of 
 options  for  a  new  media  ownership  framework.  We  seek  comment  on  the  standard  of  review  that  would  apply  to  these  options. 

 III.  THE  MODERN  MEDIA  MARKETPLACE 
 23.  Section  202(  h)  requires  the  Commission  to  consider  whether  any  of  its  ownership  rules  are  necessary  in  the  public  interest  as  a  result  of  competition.  As  noted,  the  Fox  Television  court  faulted 

 the  Commission  for  failing  to  provide  any  analysis  of  the  state  of  competition  in  the  television  industry  to  justify  its  retention  of  the  national  TV  ownership  rule.  74  Therefore,  our  evaluation  of  the  broadcast 
 ownership  rules  must  take  into  account  the  current  status  of  competition  in  the  media  marketplace.  Throughout  this  proceeding,  we  seek  comment  on  how  changes  and  developments  in  the  media 
 marketplace  affect  our  analysis  and  decision  making.  For  example,  in  Section  IV  we  explore  the  definition  of  the  product  market  and  seek  comment  on  whether  the  proliferation  of  programming  outlets 
 and  services  requires  the  Commission  to  redefine  the  product  market  to  include  media  other  than  broadcasting.  The  data  below  provides  a  brief  overview  of  the  number  of  outlets  and  potential 
 competitors  in  the  video,  audio,  and  newspaper  industries.  We  seek  comment  on  the  significance  of  this  data  to  our  biennial  review  of  the  ownership  rules  as  well  as  any  other  competitive  data  that  would  be 
 useful  to  our  analysis. 
 24.  Video.  There  are  currently  over  106  million  TV  households  in  the  U.  S.  75  served  by  a  variety  of  video  outlets.  Over-  the-  air  outlets  include:  1,331  commercial  TV  stations  (752  UHF,  579 

 VHF);  381  non-  commercial,  educational  TV  stations  (254  UHF,  127  VHF);  554  Class  A  TV  stations  (451  UHF,  103  VHF);  76  and,  over  2,100  other  low-  power  TV  stations.  77  Over  sixty  percent  of  commercial  TV 

 69  Turner  Broadcasting  System  v.  FCC,  520  U.  S.  180,  185-  86  (1997)  (  Turner  II)  (citing  O'Brien,  391  U.  S.  at  377- 
 78).  70 
 Turner  Broadcasting  System,  Inc.  v.  FCC,  512  U.  S.  622,  662  (1994)  (  Turner  I)  (quotation  marks  omitted)). 
 71  Id.  at  663. 
 72  Id.  (citing  O'Brien,  391  U.  S.,  at  377);  Turner  II,  520  U.  S.  at  190.  On  the  other  hand,  the  Commission  may  not 
 burden  cable  operators  speech  with  illimitable  restrictions  in  the  name  of  diversity.  Time  Warner  II,  240  F.  3d  at  1136.  In  Time  Warner  II,  the  D.  C.  Circuit  held  that  the  Commission  could  not  rely  on  its  diversity  goal  alone  to 

 support  the  horizontal  and  vertical  restraints  at  issue  in  that  case  because  of  a  specific  limitation  on  the  Commissions  statutory  authority  for  those  restraints.  Time  Warner  II,  240  F.  3d  at  1135-  1136. 
 73  See,  e.  g.,  NCCB,  436  U.  S.  at  798-  802  (rational-  basis  test  applied  to  broadcast-  newspaper  rule);  Fox  Television, 
 280  F.  3d  at  1045-  46  (rational-  basis  test  applied  to  television-  cable  cross-  ownership  ban).  74 
 Fox  Television,  480  F.  3d  at  1041-  42.  75 
 U.  S.  Television  Household  Estimates,  Nielsen  Media  Research  (Sept.  2002).  76 
 A  Class  A  television  license  is  available  to  a  low  power  television  station  licensee  meeting  the  qualifications  set  forth  in  the  Commissions  rules  in  Part  73,  Subpart  J  (  Class  A  Television  Broadcast  Stations).  A  Class  A  station 

 (continued....) 
11
 Federal  Communications  Commission  FCC  02-  249 
 12 
 stations  are  affiliated  with  one  of  the  top  four  networks  (ABC,  CBS,  Fox  and  NBC).  Another  19  percent  are  affiliated  with  the  smaller  national  networks:  United  Paramount  (UPN),  Warner  Brothers  (WB),  and 
 Paxson  Network.  78  The  remaining  commercial  stations  are  affiliated  with  other  smaller  networks  or  are  independents. 

 25.  Cable  TV  is  available  to  the  vast  majority  of  TV  households  in  the  U.  S.  79  There  are  69  million  households  that  subscribe  to  cable.  80  There  are  over  230  national  cable  programming  networks 
 and  more  than  50  regional  networks.  81  Many  cable  systems  offer  access  channels  for  public  affairs,  educational  and  governmental  (  PEG)  programming  and  a  few  offer  local  cable  news,  educational  and 
 public  affairs  programming.  Direct  broadcast  satellite  (  DBS)  is  available  nationwide  and  has  over  18  million  subscribers.  82  In  addition  to  the  national  cable  programming  networks,  DBS  offers  regional  sports 
 networks.  DBS  may  also  retransmit  the  signals  of  local  and  network  affiliate  television  stations  to  subscribers  in  their  local  markets.  DBS  is  also  required  to  reserve  not  less  than  4  percent  of  its  channel 
 capacity  exclusively  for  noncommercial  programming  of  an  educational  or  informational  nature.  Other  Multi-  channel  Video  Program  Distributors  (  MVPDs)  include:  satellite  master  antenna  systems 
 (SMATV),  with  1.5  million  subscribers;  home  satellite  dishes,  which  serve  about  1  million  homes;  and  multipoint  distribution  service  (MDS),  with  about  700,  000  subscribers.  83 

 26.  Audio.  Over  13,260  radio  stations  are  currently  on  the  air  (4,811  AM,  6,147  commercial  FM  and  2,303  educational  FM).  84  The  average  radio  market  has  23  commercial  stations.  Of  the  285 
 Arbitron  radio  markets,  almost  one-  half  of  the  markets  are  served  by  more  than  20  stations  and  90%  of  the  markets  are  served  by  more  than  10  stations.  85  In  addition  to  broadcast  radio,  audio  music,  talk,  and 
 news  channels  are  provided  by  many  cable  and  DBS  operators.  Two  Digital  Audio  Radio  Service  (  DARS)  systems  with  over  140,000  subscribers  offer  almost  100  audio  channels  nationwide  using 
 satellite  transmission.  86  Even  more  audio  channels  are  available  through  Internet  streaming. 
 27.  Newspapers.  In  2001,  there  were  1,  468  daily  newspapers  in  the  U.  S.  The  total  circulation  for  those  newspapers  was  about  56  million.  87  There  were  also  about  7,  700  weekly  newspapers 

 (...  continued  from  previous  page)  is  subject  to  the  same  license  terms  and  renewal  standards  as  a  full-  power  station,  and  is  accorded  primary  status  as 
 long  as  it  continues  to  meet  the  requirements  for  a  qualifying  low-  power  station.  77 
 FCC  Press  Release,  Broadcast  Station  Totals  as  of  June  30,  2002  (issued  Aug.  26,  2002).  78 
 BIA  Financial  Network  Inc.,  MEDIA  Access  Pro  data  base  (Mar.  2002).  79 
 Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of  Video  Programming,  17  FCC  Rcd  1244,  1254-  55  (2002)    17  (  Eighth  Annual  MVPD  Competition  Report)  (  Based  on  data  from  Paul  Kagan 

 Associates,  homes  passed  as  a  percentage  of  TV  households  was  estimated  to  be  97.  1  percent  as  of  June  2001.    [The  National  Rural  Telecommunications  Cooperative]  suggests  that  the  number  of  homes  passed  as  a  percentage  of 
 TV  households  could  be  as  low  as  81  percent.),  1330  App.  B,  Table  B-  1  (Kagan  data  showing  that  as  of  June  2001,  cable  television  was  subscribed  to  by  64%  of  homes  that  had  at  least  one  television). 
 80  Eighth  Annual  MVPD  Competition  Report,  17  FCC  Rcd  at  1330,  App.  B,  Table  B-  1. 
 81  National  Cable  Telecommun.  Assn,  Cable  Developments  2002,  at  27-  194. 
 82  Sky  Report,  http://  www.  skyreport.  com/  dth_  counts.  htm  (visited  Sept.  10,  2002). 
 83  Eighth  Annual  MVPD  Competition  Report,  17  FCC  Rcd  at  1338,  App.  C,  Table  C-  1. 
 84  FCC  Press  Release,  Broadcast  Station  Totals  as  of  June  30,  2002  (Aug.  26,  2002). 
 85  BIA  Financial  Network  Inc.,  MEDIA  Access  Pro  data  base  (May  2002). 
 86  XM  Satellite  Radio,  Second  Quarter  Report  ending  June  30,  2002,  shows  XM  with  136,718  subscribers.  Sirius 
 Satellite  Radio,  Second  Quarter  Report  ending  June  30,  2002,  shows  Sirius  with  3,  347  subscribers.  87 
 Newspaper  Association  of  America,  Facts  About  Newspapers  2002,  at  14. 
12
 Federal  Communications  Commission  FCC  02-  249 
 13 
 with  a  combined  circulation  of  about  71  million.  88  Sunday  newspaper  circulation  collectively  reaches  over  59  million  per  week.  89  Many  of  these  newspapers  are  available  over  the  Internet. 
 28.  Internet  and  other  media.  Almost  60%  of  the  U.  S.  population  has  Internet  access  at  home.  90  Over  40  million  residential  Web  users  have  accessed  streaming  video.  91  Also,  about  90%  of 
 households  have  at  least  one  VCR  and  more  than  one-  half  of  those  own  at  least  two  VCRs.  92  Over  14  million  homes  have  DVD  players.  93  Personal  Video  Recorders  (  PVR)  sales  have  reached  500,000  since 
 they  were  introduced  two  years  ago.  94 
 IV.  POLICY  GOALS 
 29.  Each  of  the  rules  under  review  in  this  proceeding  seeks  to  further  one  or  more  of  three  important  public  interest  goals  --  diversity,  competition  and  localism.  The  Commission  long  has 

 embraced  these  values  as  the  foundation  of  its  ownership  rules  and  policies.  In  this  proceeding  the  Commission  seeks  to:  (1)  define  more  precisely  the  Commissions  policy  goals;  (2)  determine  how  to 
 best  promote  these  goals  in  todays  media  market  consistent  with  our  statutory  mandate;  (3)  establish  the  best  measure  for  diversity,  competition,  and  localism;  and  (4)  establish  a  balancing  test  to  prioritize  the 
 goals  if  tension  exists  between  them. 
 30.  The  courts  have  recognized  the  Commissions  legitimate  interest  in  promoting  these  policy  goals  through  ownership  limits.  95  Media  ownership  may  be  limited  in  order  to  promote  the  First 

 Amendment  interests  of  consumers  of  the  electronic  media  and  to  promote  diversity  and  competition.  96  The  Court  has  upheld  the  Commissions  predominant  reliance  on  the  diversity  rationale  to  support  its 
 newspaper/  broadcast  cross-  ownership  policies.  97  In  Sinclair,  the  Court  of  Appeals  noted  that  ownership  limits  encourage  diversity  in  the  ownership  of  broadcast  stations,  which  can  in  turn  encourage  a  diversity 
 of  viewpoints  in  the  material  presented  over  the  airwaves.  The  court  added  that  diversity  of  ownership  as  a  means  to  achieving  viewpoint  diversity  has  been  found  to  serve  a  legitimate  government  interest,  and 
 has,  in  the  past,  been  upheld  under  rational  basis  review.  98  The  interests  that  government  may  promote  through  content  neutral  rules  also  include  competition    both  the  promotion  of  competition  and  the 
 prevention  of  anti-  competitive  practices  and  results. 
 31.  Section  202(  h)  requires  the  Commission  to  determine  whether  its  ownership  rules  remain 

 88  Id.  at  13. 
 89  Id.  at  14. 
 90  Id.  at  8. 
 91  Eighth  Annual  MVPD  Competition  Report,  17  FCC  Rcd  at  1285-  86,    89. 
 92  Id.  at  1288,    95. 
 93  Id.  1288-  89,    96. 
 94  Id.  1290,    98. 
 95  NCCB,  436  U.  S.  at  795-  97;  Metro  Broadcasting,  Inc.  v.  FCC,  497  U.  S.  547,  571  at  n.  16  (1990),  overruled  on 
 other  grounds,  Adarand  Constructors,  Inc.  v.  Pena,  515  U.  S.  200  (1995);  Sinclair,  284  F.  3d  at  160;  Fox  Television,  280  F.  3d  at  1042,  1053. 

 96  Turner  II,  520  U.  S.  at  190  (quoting  Turner  I,  512  U.  S.  at  662-  63  (  governmental  purpose  of  the  highest  order  in 
 ensuring  public  access  to  a  multiplicity  of  information  sources);  Turner  I,  512  U.  S.  at  662  (this  purpose  is  unrelated  to  the  suppression  of  free  expression). 

 97  NCCB,  436  U.  S.  at  797. 
 98  Sinclair,  284  F.  3d  at  160. 
13
 Federal  Communications  Commission  FCC  02-  249 
 14 
 necessary  in  the  public  interest  as  a  result  of  competition.  Therefore,  we  must  first  determine  whether  the  marketplace  provides  a  sufficient  level  of  competition  to  protect  and  advance  our  policy  goals.  If  not,  we 
 must  determine  whether  the  existing  rules  or  revisions  to  those  rules  are  required  to  protect  and  advance  diversity,  competition,  and  localism  in  the  media  marketplace. 

 32.  The  following  paragraphs  briefly  discuss  the  Commissions  policy  goals  and  invite  comment  on  each.  We  welcome  the  submission  of  any  relevant  empirical  studies  for  quantifying  benefits 
 and  harms,  as  well  as  comments  based  on  well-  established  economic  theory  and  empirical  evidence.  In  that  regard,  we  are  especially  interested  in  receiving  comments  that  provide  not  only  the  theoretical 
 justifications  for  adopting  a  particular  regulatory  framework,  but  also  empirical  data  on  the  effect  that  competition  and  consolidation  in  the  media  industry  have  on  our  policy  goals. 

 A.  Diversity 
 33.  Diversity  is  one  of  the  guiding  principles  of  the  Commissions  multiple  ownership  rules.  It  advances  the  values  of  the  First  Amendment,  which,  as  the  Supreme  Court  stated,  rests  on  the 

 assumption  that  the  widest  possible  dissemination  of  information  from  diverse  and  antagonistic  sources  is  essential  to  the  welfare  of  the  public.  99  The  Commission  has  elaborated  on  the  Supreme  Courts  view, 
 positing  that  the  greater  the  diversity  of  ownership  in  a  particular  area,  the  less  chance  there  is  that  a  single  person  or  group  can  have  an  inordinate  effect,  in  a  political,  editorial,  or  similar  programming 
 sense,  on  public  opinion  at  the  regional  level.  100 
 34.  The  Commission  has  considered  four  aspects  of  diversity:  viewpoint  diversity,  outlet  diversity,  source  diversity,  and  program  diversity.  101  Viewpoint  diversity  ensures  that  the  public  has 

 access  to  a  wide  range  of  diverse  and  antagonistic  opinions  and  interpretations.  102  It  attempts  to  increase  the  diversity  of  viewpoints  ultimately  received  by  the  public  by  providing  opportunities  for 
 varied  groups,  entities  and  individuals  to  participate  in  the  different  phases  of  the  broadcast  industry.  103  Outlet  diversity  is  the  control  of  media  outlets  by  a  variety  of  independent  owners.  Source  diversity 
 ensures  that  the  public  has  access  to  information  and  programming  from  multiple  content  providers,  104  while  program  diversity  refers  to  a  variety  of  programming  formats  and  content.  Each  of  these 
 components  of  diversity  is  described  below. 
 35.  Viewpoint  Diversity.  Viewpoint  diversity  has  been  the  touchstone  of  the  Commissions  ownership  rules  and  policies.  We  remain  fully  committed  to  preserving  citizens  access  to  a  diversity  of 

 viewpoints  through  the  media.  105  The  Supreme  Court  has  stated  that  "it  has  long  been  a  basic  tenet  of 
 99  Associated  Press  v.  United  States,  326  U.  S.  1,  20  (1945)  (  Associated  Press). 
 100  Amendment  of  Sections  73.  35,  73.  240,  and  73.  636  of  the  Commissions  Rules  Relating  to  Multiple  Ownership  of 
 Standard,  FM  and  Television  Broadcast  Stations,  45  F.  C.  C.  1476,  1477  (1964)    3.  101 
 Local  Radio  Ownership  NPRM,  16  FCC  Rcd  at  19874,    30;  Report  and  Statement  of  Policy  Re:  Commission  en  banc  Programming  Inquiry  (  1960  Programming  Policy  Statement),  44  F.  C.  C.  2303  (1960). 

 102  1998  Biennial  Regulatory  Review    Review  of  the  Commissions  Broadcast  Ownership  Rules  and  Other  Rules 
 Adopted  Pursuant  to  Section  202  of  the  Telecommunications  Act  of  1996,  13  FCC  Rcd  11276,  11278  (1998)  (  1998  Biennial  NOI)    6. 

 103  Review  of  the  Commissions  Regulations  Governing  Television  Broadcasting  (  TV  Ownership  FNPRM),  10 
 FCC  Rcd  3524,  3549  (1995)    60.  104 
 1998  Biennial  NOI,  13  FCC  Rcd  at  11278,    6.  For  example,  if  many  stations  create  their  broadcast  news  by  gathering  their  news  from  the  same  information  source,  there  is  outlet  diversity,  but  no  source  diversity. 

 105  See,  e.  g.,  Turner  I,  512  U.  S.  at  663  ("[  I]  t  has  long  been  a  basic  tenet  of  national  communications  policy"  that  "the 
 widest  dissemination  of  information  from  diverse  and  antagonistic  sources  is  essential  to  the  welfare  of  the  public,;  (continued....) 
14
 Federal  Communications  Commission  FCC  02-  249 
 15 
 national  communications  policy  that  the  widest  possible  dissemination  of  information  from  diverse  and  antagonistic  sources  is  essential  to  the  welfare  of  the  public."  106  The  diversity  of  viewpoints,  by 
 promoting  an  informed  citizenry,  is  essential  to  a  well-  functioning  democracy.  107  The  principal  means  by  which  the  Commission  has  fostered  diversity  of  viewpoints  is  through  the  imposition  of  ownership 
 restrictions.  108  In  Sinclair,  the  Court  of  Appeals  noted  that  ownership  limits  encourage  diversity  in  the  ownership  of  broadcast  stations,  which  can  in  turn  encourage  a  diversity  of  viewpoints  in  the  material 
 presented  over  the  airwaves.  The  court  added  that  diversity  of  ownership  as  a  means  to  achieving  viewpoint  diversity  has  been  found  to  serve  a  legitimate  government  interest,  and  has,  in  the  past,  been 
 upheld  under  rational-  basis  review.  109 
 36.  Outlet  Diversity.  The  control  of  media  outlets  by  a  variety  of  independent  owners  is  referred  to  as  outlet  diversity.  Outlet  diversity  ensures  that  the  public  has  access  to  multiple, 

 independently-  owned  distribution  channels  (e.  g.,  radio,  broadcast  television,  and  newspapers)  from  which  it  can  access  information  and  programming.  We  have  long  assumed  that  diffusing  ownership  of  outlets 
 promotes  a  wide  array  of  viewpoints.  Thus  outlet  diversity  was  a  key  mechanism  for  promoting  viewpoint  diversity.  In  attempting  to  foster  viewpoint  diversity  through  structural  regulation,  our  content-neutral 
 method  does  not  seek  to  evaluate  the  substance  of  any  stations  editorial  decisions.  Indeed,  a  major  benefit  of  content-  neutral  structural  regulation  is  that  we  avoid  making  inescapably  subjective 
 judgments  about  editorial  decisions,  viewpoints  and  content.  Rather,  we  attempt  only  to  preserve  a  sufficient  number  of  independently  owned  outlets  to  increase  the  likelihood  that  independent  viewpoints 
 will  be  available  in  local  markets.  The  Supreme  Court  has  upheld  the  Commissions  judgment  that  diversification  of  ownership  enhances  the  possibility  of  achieving  greater  diversity  of  viewpoints.  110 

 37.  Source  Diversity.  A  related  concept  is  source  diversity,  which  refers  to  the  availability  of  content  to  consumers  from  a  variety  of  content  producers.  Source  diversity  ensures  that  the  public  has 
 access  to  information  and  programming  from  multiple  content  providers  and  producers.  A  wide  array  of  content  producers  can  contribute  both  to  viewpoint  diversity  (particularly  where  the  content  is  news  and 
 public  affairs  programming)  and  program  diversity.  A  number  of  government  efforts,  both  past  and  present,  have  been  aimed  at  promoting  source  diversity  on  mass  media  distribution  platforms.  Our  efforts 
 centered  initially  on  broadcast  television,  111  but  have  broadened  in  scope  more  recently  to  focus  on 
 (...  continued  from  previous  page)  47  U.  S.  C.    257  (one  of  the  "policies  and  purposes"  of  the  Communications  Act  favors  a  "diversity  of  media 
 voices");  Fox  Television,  280  F.  3d  at  1042  (In  the  context  of  broadcasting,  the  public  interest  has  historically  embraced  diversity). 
 106  Turner  Broadcasting  System,  Inc.  v.  FCC,  512  U.  S.  622,  663-  64  (1994)  (internal  quotation  marks  omitted) 
 (quoting  United  States  v.  Midwest  Video  Corp.,  406  U.  S.  649,  668  n.  27  (1972)  (plurality  opinion)  (quoting  Associated  Press,  supra  note  99)). 

 107  See  Richard  D.  Brown,  Early  American  Origins  of  the  Information  Age  in  Alfred  D.  Chandler,  Jr.,  and  James  W. 
 Cortada,  Eds.,  A  NATION  TRANSFORMED  BY  INFORMATION:  HOW  INFORMATION  HAS  SHAPED  THE  UNITED  STATES  FROM  COLONIAL  TIMES  TO  THE  PRESENT  (Oxford  Univ.  Press,  New  York  NY,  2000)  at  44-  49  passim  (  Because 

 people  widely  believed  that  republican  government  required  an  informed  citizenry,  they  scrambled  to  make  sure  that  they,  and  often  their  neighbors,  were  properly  informed.). 
 108  NCCB,  436  U.  S.  at  795  (quoting  Associated  Press,  supra  note  99). 
 109  Sinclair,  284  F.  3d  at  160  (Court  upheld  the  Commission  finding  that  diversification  of  ownership  would 
 enhance  the  possibility  of  achieving  greater  diversity  of  viewpoint);  see  also  Fox  Television,  280  F.  3d  at  1047  (not  irrational  to  relate  diversity  of  ownership  to  diversity  of  programming). 

 110  NCCB,  436  U.  S.  at  796-  97. 
 111  See,  e.  g.,  Review  of  the  Prime  Time  Access  Rules,  Section  73.  658(  K)  of  the  Commissions  Rules,  11  FCC  Rcd  546 
 (1995)  (repealing  the  Prime  Time  Access  Rule,  which  generally  prohibited  network-  affiliated  television  stations  in  the  top  50  television  markets  from  broadcasting  more  than  three  hours  of  network  programs  during  prime  time). 
15
 Federal  Communications  Commission  FCC  02-  249 
 16 
 MVPDs  such  as  cable  operators  and  DBS  service.  112 
 38.  Program  Diversity.  Program  diversity  refers  to  a  variety  of  programming  formats  and  content.  Examples  of  program  categories  include  formats  such  as  dramas,  situation  comedies,  reality 

 television  shows,  and  newsmagazines,  as  well  as  content,  such  as  health,  nature,  foreign  language/  ethnic,  and  cooking.  In  1960,  when  broadcast  television  was  a  more  dominant  mass  communications  medium  in 
 this  country,  we  sought  to  promote  program  diversity  through  direct  means.  113 
 39.  More  than  twenty  years  later,  the  Commission  has  indicated  that  markets  may  serve  Americans  demand  for  diverse  programming  more  effectively  than  government  regulation.  114  In  the 

 Dual  Network  Order,  the  Commission  allowed  common  ownership  of  a  major  broadcast  network  and  an  emerging  broadcast  network  in  part  because  if  two  networks  are  owned  by  a  single  entity,  the  entity  has 
 an  incentive  to  attract  an  array  of  viewers  with  differing  interests  to  produce  the  largest  combined  audience  for  the  overall  enterprise.  This  allows  for  the  major  network  to  pursue  programming  suitable  to 
 mass  tastes,  with  the  smaller  network  programming  to  minority  and  niche  tastes.  115 
 40.  Diversity  Issues  for  Comment.  We  seek  comment  on  several  aspects  of  diversity,  including  how  the  specific  terms  should  be  defined.  The  airing  of  news  and  public  affairs  programming 

 has  traditionally  been  the  focus  of  viewpoint  diversity.  We  seek  comment  on  whether  we  should  consider  non-  traditional  news  programming  as  contributing  to  viewpoint  diversity.  For  example,  do  magazine 
 shows  such  as  Sixty  Minutes  and  talk  shows  such  as  Hardball  contribute  to  viewpoint  diversity  as  much  as  (or  less  or  more  than)  straightforward  news  broadcasts? 

 41.  Viewpoint  diversity  has  been  a  central  policy  objective  of  the  Commissions  ownership  rules.  We  seek  comment  on  whether  viewpoint  diversity  should  continue  to  be  a  primary  goal  of  the 

 112  47  U.  S.  C.    611  (carriage  of  public,  educational  and  governmental  programming),  47  U.  S.  C.    612  (cable 
 systems  requires  to  lease  channels  to  unaffiliated  entities);  47  U.  S.  C.    335  (DBS  operators  required  to  reserve  four  percent  of  their  channel  capacity  exclusively  for  use  by  qualified  programmers  for  noncommercial  programming  of 

 an  educational  or  informational  nature);  47  U.  S.  C.    533(  f)(  1)(  B)  (Commission  required  to  prescribe  rules  and  regulations  establishing  reasonable  limits  on  the  number  of  channels  on  a  cable  system  that  can  be  occupied  by  a 
 video  programmer  in  which  a  cable  operator  has  an  attributable  interest).  113 
 See,  e.  g.,  1960  Programming  Policy  Statement,  44  F.  C.  C.  at  2314: 
 [  t]  he  major  elements  usually  necessary  to  meet  the  public  interest,  needs,  and  desires  of  the  community  in  which  the  station  is  located,  .  .  .  have  included:  (1)  opportunity  for  local  self-expression, 

 (2)  the  development  and  use  of  local  talent,  (3)  programs  for  children,  (4)  religious  programs,  (5)  educational  programs,  (6)  public  affairs  programs,  (7)  editorialization  by 
 licensees,  (8)  political  broadcasts,  (9)  agricultural  programs,  (10)  news  programs,  (11)  weather  and  market  reports,  (12)  sports  programs,  (13)  service  to  minority  groups,  [and]  (14) 
 entertainment  programs. 
 The  1960  Programming  Policy  Statement  has  not  formally  been  superseded,  but  in  recent  decades  the  Commission  has  relied  more  on  competition  and  marketplace  mechanisms  to  determine  the  mix  of  programs  available  to  viewers. 

 See,  e.  g.,  Erwin  G.  Krasnow  &  Jack  N.  Goodman,  The  Public  Interest  Standard:  The  Search  for  the  Holy  Grail,  50  FED.  COMM.  L.  J.  605,  615-  19  (describing  the  history  of  the  1960  Programming  Policy  Statement  and  more 
 recent  decisions).  114 
 See,  e.  g.,  FCC  v.  WNCN  Listeners  Guild,  540  U.  S.  582  (1981)  (upholding,  against  challenges  under  the  1934  Act  and  the  First  Amendment,  Commission  policy  that  public  interest  is  best  served  by  promoting  program  diversity 

 through  market  forces,  and  not  by  considering  station  formats  in  ruling  on  applications  for  license  renewal  or  transfer);  Committee  to  Save  WEAM  v.  FCC,  808  F.  2d  113,  117-  18  (D.  C.  Cir.  1986)  (finding  that  the  Commission 
 had  reasonably  articulated  its  policy).  115 
 Dual  Network  Order,  16  FCC  Rcd  at  11131,    37  (footnote  omitted). 
16
 Federal  Communications  Commission  FCC  02-  249 
 17 
 Commissions  decision-  making.  The  Commission  has  not  viewed  source  and  outlet  diversity  as  policy  goals  in  and  of  themselves,  but  as  proxies  for  viewpoint  diversity.  116  Should  the  Commission  continue  to 
 use  source  and  outlet  diversity  as  proxies  to  protect  and  advance  viewpoint  diversity?  Or  should  each  type  of  diversity  be  an  explicit  goal  of  the  Commissions  policymaking?  Parties  advocating  that  source 
 and/  or  outlet  diversity  should  be  a  goal  of  Commission  ownership  policies  should  address  how  priorities  would  be  set  among  these  types  of  diversity. 

 42.  Once  we  define  our  diversity  goal,  we  must  then  ask  whether  the  marketplace  will  protect  and  advance  diversity  without  regulatory  requirements.  As  set  forth  in  Section  III,  the  current  media 
 marketplace  appears  robust  in  terms  of  the  aggregate  number  of  media  outlets.  Consumers  generally  have  access  to  news,  public  affairs,  and  entertainment  programming  from  a  variety  of  media  outlets   
 broadcast,  cable,  satellite,  newspapers  and  the  Internet.  What  has  been  the  effect  of  this  proliferation  of  new  media  outlets  on  the  Commissions  diversity  goals?  What  effects,  if  any,  do  these  outlets  have  on 
 our  objective  of  promoting  diversity  and  the  means  by  which  we  can  best  achieve  those  goals?  How  should  these  or  other  outlets  be  considered  for  the  purposes  of  analyzing  viewpoint  diversity?  Are  there 
 unique  attributes  of  broadcasting  that  should  lead  us  to  define  and  measure  diversity  without  reference  to  other  media?  Commenters  should  provide  empirical  data  on  consumer  substitutability  among  the  various 
 media  outlets  or  programs. 
 43.  In  considering  these  questions,  we  are  particularly  interested  in  the  actual  experience  of  the  media  industry.  Has  consolidation  in  local  markets  led  to  less  or  greater  diversity?  Commenters  are 

 encouraged  to  submit  empirical  data  and  analysis  demonstrating  both  the  change  (either  decrease  or  increase)  in  diversity  levels  and  the  causal  link,  as  opposed  to  mere  correlation,  between  those  changes 
 and  greater  consolidation  in  local  markets.  Evidence  comparing  the  levels  of  diversity  in  local  communities  with  different  levels  of  media  concentration  would  be  especially  useful. 

 44.  If  the  market  alone  does  not  satisfy  the  Commissions  goal  of  protecting  and  advancing  viewpoint  diversity,  we  must  then  consider  the  appropriate  regulatory  framework  for  achieving  that  goal. 
 Traditionally,  the  Commission  has  focused  on  the  number  of  independent  owners  on  the  theory  that  a  larger  number  of  owners  would  help  provide  greater  viewpoint  diversity.  Commission  policy  presumes 
 that  multiple  owners  are  more  likely  to  provide  "divergent  viewpoints  on  controversial  issues,"  which  the  Commission  has  stated  is  "essential  to  democracy.  117  We  invite  comment  as  to  this  policy.  Although 

 116  TV  Ownership  FNPRM,  10  FCC  Rcd  at  3549-  50,    61  (  The  indirect  technique  for  encouraging  viewpoint 
 diversity  (i.  e.,  structural  rules)  fosters  two  other  kinds  of  diversity  that  the  Commission  has  regarded  as  integral  to  the  ultimate  goal  of  providing  the  public  with  a  variety  of  viewpoints.  First,  certain  of  the  Commission's  structural 

 rules,  such  as  the  ownership  limits,  promote  outlet  diversity,  which  refers  to  a  variety  of  delivery  services  (e.  g.,  broadcast  stations)  that  select  and  present  programming  directly  to  the  public.  Second,  other  Commission  behavioral 
 rules,  such  as  the  Prime  Time  Access  Rule  and  the  Financial  Interest  and  Syndication  Rule,  were  designed  to  foster  source  diversity,  which  refers  to  ensuring  a  variety  of  program  producers  and  owners.  The  Commission  has  felt 
 that  without  a  diversity  of  outlets,  there  would  be  no  real  viewpoint  diversity  --  if  all  programming  passed  through  the  same  filter,  the  material  and  views  presented  to  the  public  would  not  be  diverse.  Similarly,  the  Commission  has 
 felt  that  without  diversity  of  sources,  the  variety  of  views  would  necessarily  be  circumscribed.)  followed  in  Amendment  of  Section  73.  658(  G)  of  the  Commissions  Rules    The  Dual  Network  Rule  (  Dual  Network  NPRM), 
 15  FCC  Rcd  11253,  11265  n.  37  (2000)  (  Both  outlet  and  source  diversity  provide  the  means  for  promoting  viewpoint  diversity.  Outlet  diversity  refers  to  a  variety  of  delivery  services  (e.  g.,  broadcast  stations)  that  select  and 
 present  programming  directly  to  the  public;  source  diversity  refers  to  a  variety  of  program  producers  and  owners.  Both  outlet  and  source  diversity  are  integral  to  the  ultimate  goal  of  providing  the  public  with  a  variety  of  viewpoints 
 .  .  .)  (internal  quotation  marks  and  citations  omitted)  and  Local  TV  Ownership  Report  and  Order,  14  FCC  Rcd  at  12910-  11  n.  29  (1999)    17. 

 117  Rules  and  Policies  Concerning  Multiple  Ownership  of  Radio  Broadcast  Stations  in  Local  Markets,  16  FCC  Rcd 
 19861,  19877  (2001)    37,  quoting  Amendment  of  Sections  73.  34,  73.  240  and  73.  636  of  the  Commissions  Rules  (continued....) 
17
 Federal  Communications  Commission  FCC  02-  249 
 18 
 courts  have  affirmed  the  Commissions  ability  to  limit  ownership  in  pursuit  of  a  diversity  of  viewpoints,  118  they  recently  have  required  that  we  demonstrate  a  close  connection  between  the  ownership 
 rules  and  diversity.  119  Therefore,  we  must  examine  whether  ownership  limits  are  in  fact  necessary  to  promote  diversity  in  the  media.  If  we  are  to  maintain  ownership  limits  predicated  on  preserving  diversity, 
 we  must  inquire  into  whether  our  traditional  theory  of  diffused  ownership  policy  is  in  fact  more  likely  to  preserve  diversity  than  a  policy  that  relies  on  market  forces  or  other  measures  to  foster  diversity. 

 45.  If  the  Commission  continues  to  rely  on  an  independent  voice  test  as  a  measure  for  ensuring  the  appropriate  level  of  diversity,  what  media  outlets  or  programming  services  should  be 
 included  in  the  independent  voice  test?  For  example,  should  we  include  cable  or  DBS?  Should  commonly-  owned  media  outlets  be  considered  a  single  media  voice  in  evaluating  diversity?  Should 
 cable  television  count  as  one  voice  because  the  cable  operator  exercises  editorial  control  over  the  content  that  is  distributed  over  that  platform?  Or  should  the  Commission  look  to  the  number  of  independent 
 programming  entities  as  separate  and  distinct  voices? 
 46.  What  other  measures  of  diversity,  quantitative  or  qualitative,  should  we  consider,  and  what  tools  do  we  have  to  measure  diversity  with  a  reasonable  degree  of  accuracy?  Are  audience 

 demographics  an  appropriate  measure  of  diversity?  Is  competition  an  appropriate  proxy  for  diversity,  such  that  the  presence  of  a  competitive  local  market  will  assuage  our  concerns  about  diversity?  Should 
 we  take  ratings  figures  or  other  measures  of  consumer  usage  into  account  in  measuring  diversity,  and  if  so,  how?  In  considering  the  various  potential  ways  to  measure  diversity,  we  seek  comment  on  how  their 
 use  comports  with  the  values  and  principles  embodied  in  the  First  Amendment. 
 47.  We  also  must  consider  the  appropriate  geographic  area  over  which  to  measure  diversity.  Although  radio  ownership  restrictions  are  limited  to  the  local  market,  television  ownership  is  restricted 

 both  on  the  local  level  and  nationally.  Does  the  appropriate  geographic  area  for  measuring  diversity  differ  based  on  whether  the  programming  is  local  or  national  in  nature?  Should  the  appropriate 
 geographic  area  for  measuring  diversity  be  the  same  as  the  relevant  geographic  market  for  competition  purposes? 

 48.  We  also  seek  comment  on  whether  the  level  of  diversity  that  the  public  enjoys  varies  among  different  demographic  or  income  groups.  Although  access  to  broadcasting  services  is  available  to 
 all  individuals  in  a  community  with  the  appropriate  receiving  equipment,  access  to  other  forms  of  media  typically  requires  the  user  to  incur  a  recurring  charge,  generally  in  the  form  of  a  subscription  fee.  Does 
 this  or  any  other  differences  between  broadcasting  and  other  media  reduce  the  level  of  diversity  that  certain  demographic  or  income  groups  enjoy?  Does  the  fact  that  86%  of  American  households  pay  for 
 television  impact  this  analysis?  What  is  the  extent  of  any  disparity  in  access  to  diversity,  and  how  should  we  factor  in  that  disparity  in  our  diversity  analysis? 

 49.  Would  one  or  more  kinds  of  diversity  be  better  promoted  by  alternatives  to  structural  regulation,  such  as  behavioral  requirements?  We  invite  comment  on  whether  we  should  promulgate 
 behavioral  regulations.  What,  if  any,  behavioral  requirements  should  be  imposed  and  how  should  they  be  administered?  How  is  diversity  served,  if  at  all,  by  existing  behavioral  rules  such  as  those  that  require 

 (...  continued  from  previous  page)  Relating  to  Multiple  Ownership  of  Standard,  FM,  and  Television  Broadcast  Stations,  50  F.  C.  C.  2d  1046,  1074 
 (1975)  at    99. 
 118  See,  e.  g.,  NCCB,  436  U.  S.  at  796-  97  (holding  that  the  Commission,  in  limiting  the  common  ownership  of 
 newspapers  and  broadcast  stations  in  the  same  community,  acted  rationally  in  finding  that  diversification  of  ownership  would  enhance  the  possibility  of  achieving  greater  diversity  of  viewpoints). 

 119  See  Fox  Television,  280  F.  3d  at  1041-  44;  Sinclair,  284  F.  3d  at  163. 
18
 Federal  Communications  Commission  FCC  02-  249 
 19 
 broadcasters  to  provide  political  candidates  access  to  their  facilities  under  certain  conditions,  120  or  those  that  require  cable  systems  to  set  aside  channel  capacity  for  certain  uses  (e.  g.,  PEG,  leased  access)?  121 
 What  kind  of  programs  and  content  contribute  to  viewpoint  diversity? 
 50.  In  addition  to  seeking  to  foster  the  policy  goals  discussed  above,  the  Commission  has  historically  used  the  ownership  rules  to  foster  ownership  by  diverse  groups,  such  as  minorities,  women 

 and  small  businesses.  122  In  the  context  of  this  comprehensive  review  of  our  ownership  rules,  we  invite  comment  on  whether  we  should  consider  such  diverse  ownership  as  a  goal  in  this  proceeding.  If  so,  how 
 should  we  accommodate  or  seek  to  foster  that  goal?  In  addition,  we  invite  comment  as  to  our  legal  authority  to  adopt  measures  to  foster  that  goal.  123 

 B.  Competition 
 51.  Competition  is  the  second  principle  underlying  the  Commissions  local  ownership  rules  and  policies.  In  this  proceeding,  we  seek  to:  (1)  define  the  Commissions  competition  policy  goal;  (2) 

 determine  whether  the  market  alone  can  achieve  that  goal;  and  if  not,  (3)  establish  the  appropriate  regulatory  framework  to  protect  and  advance  a  competitive  media  market. 

 52.  We  must  first  consider  the  Commissions  underlying  policy  objectives  in  examining  competition.  The  Commission  has  relied  on  the  principle  that  competitive  markets  best  serve  the  public 
 because  such  markets  generally  result  in  lower  prices,  higher  output,  more  choices  for  buyers,  and  more  technological  progress  than  markets  that  are  less  competitive.  124  In  general,  the  intensity  of  competition 
 in  a  given  market  is  directly  related  to  the  number  of  independent  firms  that  compete  for  the  patronage  of  consumers.  We  seek  comment  on  how  the  Commission  should  define  our  competition  policy  goal.  In 

 120  47  U.  S.  C.    312(  a)(  7)  (authorizing  the  Commission  to  revoke  a  broadcaster's  license  for  failure  to  provide  legally 
 qualified  candidates  for  federal  office  access  to  its  facilities);  47  U.  S.  C.    315(  a)  (requiring  a  licensee  to  provide  equal  opportunities  to  all  legally  qualified  candidates  for  a  political  office  to  use  its  facilities). 

 121  See,  e.  g.,  47  U.  S.  C.    531  (local  franchise  authority  may  require  cable  company  to  provide  one  or  more  channels 
 for  PEG  use).  122 
 When  the  Commission  awarded  broadcasting  licenses  by  comparative  hearing,  it  awarded  applicants  a  minority  enhancement  credit  for  their  minority  origin.  See,  e.  g.,  Rivertown  Commun.  Co.,  8  FCC  Rcd  7928,  7938  (ALJ 

 1993)    110.  In  1984,  when  the  Commission  established  a  12  TV  station  limit,  it  also  established  a  minority  "bubble,"  which  increased  the  limit  to  14  for  minorities.  Persons  acquiring  cognizable  interests  in  minority  owned 
 and  controlled  broadcast  stations  were  also  entitled  to  this  higher  limit,  and  the  aggregate  reach  of  TV  stations  was  raised  to  30%  of  the  national  audience,  provided  that  at  least  5%  of  that  reach  was  contributed  by  minority 
 controlled  stations.  Amendment  of  Section  73.  3555,  [formerly  Sections  73.  35,  73.240,  and  73.  636]  of  the  Commissions  Rules  Relating  to  Multiple  Ownership  of  AM,  FM  and  Television  Broadcast  Stations,  100  F.  C.  C.  2d 
 74,  94-  95,  97-  98  (1985)    45,  53  (  1985  Multiple  Ownership  Reconsideration  Order).  Also,  the  Commission  has  given  tax  certificates,  which  are  a  preferential  tax  treatment  available  upon  the  sale  of  broadcast  stations  and  cable 
 systems  to  minorities.  See,  e.  g.,  Office  of  the  Chairman,  Studies  Indicate  Need  to  Promote  Wireless  &  Broadcast  License  Ownership  by  Small,  Women-  and  Minority-  Owned  Businesses,  Press  Release,  Dec.  12,  2000,  available  at 
 2000  WL  1808326  (F.  C.  C.).  Finally,  the  Commission  has  applied  a  distress  sale  policy,  permitting  a  licensee  whose  license  has  been  designated  for  revocation  hearing,  or  whose  renewal  application  has  been  designated  for 
 hearing  on  basic  qualifications  issues,  to  assign  its  license  prior  to  commencement  of  the  hearing  to  a  minority  controlled  entity.  Martin  W.  Hoffman,  15  FCC  Rcd  22086,  22087  (2000)  3. 
 123  See  Adarand  Constructors  Inc.  v.  Pena,  515  U.  S.  200  (1995);  MD/  DC/  DE  Broadcasters  Assn  v.  FCC,  236  F.  3d 
 13,  rehearing  denied,  253  F.  3d  732  (D.  C.  Cir.  2001),  cert.  denied,  122  S.  Ct.  920  (2002);  Lutheran  Church-  Missouri  Synod  v.  FCC,  141  F.  3d  344,  rehearing  denied,  154  F.  3d  487,  rehearing  en  banc  denied,  154  F.  3d  494  (D.  C.  Cir. 

 1998). 
 124  See  F.  M.  Scherer  and  David  Ross,  INDUSTRIAL  MARKET  STRUCTURE  AND  ECONOMIC  PERFORMANCE,  (3d  ed.)  at 
 19-  28  (Houghton  Mifflin  Co.,  Boston  MA,  1990). 
19
 Federal  Communications  Commission  FCC  02-  249 
 20 
 addition  to  the  diversity  component  of  our  public  interest  analysis,  should  the  Commission  specifically  analyze  the  competitive  nature  of  the  market?  Or  should  we  rely  on  the  diversity  component  of  our 
 analysis  such  that  a  certain  level  of  diversity  would  alleviate  our  competition  concerns?  Additionally,  as  discussed  below,  we  seek  comment  on  the  various  types  of  competition  (i.  e.,  competition  for 
 viewers/  listeners  or  advertisers)  and  the  appropriate  standards  and  measures  to  be  used. 
 53.  Once  we  define  our  competition  policy  goal,  we  must  then  determine  whether  the  market  will  protect  and  advance  competition  without  regulatory  requirements.  As  set  forth  in  Section  III,  the 

 current  media  market  appears  robust  in  terms  of  the  aggregate  number  of  outlets.  Today,  broadcasters  operate  in  an  increasingly  crowded  and  dynamic  media  market.  During  the  past  twenty  years,  the 
 broadcast  television  industry  has  faced  increasing  competition  both  from  additional  television  stations  and  from  other  video  delivery  systems.  The  number  of  full-  power  television  stations  has  increased  68%  since 
 1980,  from  1,000  to  almost  1,700,  125  and  the  number  of  broadcast  networks  has  grown  from  three  to  seven.  During  that  same  period,  there  has  been  an  enormous  increase  in  the  supply  of  non-  broadcast  video 
 programming  available  to  Americans.  Cable  television  and  DBS  carry  dozens,  and  often  hundreds,  of  channels  and  have  taken  significant  market  share  from  broadcast  TV  stations.  126  Furthermore,  Americans 
 have  demonstrated  an  increased  willingness  to  pay  for  information  and  programming.  Cable  television  and  other  MVPDs,  including  DBS,  have  reached  an  86.4%  penetration  rate  in  American  homes. 

 54.  What  has  been  the  effect  of  this  proliferation  of  new  media  outlets  on  the  Commissions  competition  goals?  What  effects,  if  any,  do  these  outlets  have  on  our  objective  to  promote  competition 
 and  the  means  by  which  we  can  best  achieve  this  goal?  How  should  these  and  other  outlets  be  considered  for  the  purposes  of  analyzing  competition?  Are  there  unique  attributes  of  broadcasting  that  should  lead  us 
 to  define  and  measure  competition  without  reference  to  other  media? 
 55.  If  the  market  alone  does  not  satisfy  the  Commissions  goal  of  protecting  and  advancing  competition,  we  must  then  consider  the  appropriate  regulatory  framework  for  achieving  that  goal.  The 

 Commission  has  traditionally  relied  on  structural  ownership  rules,  which  focus  on  the  number  of  independent  owners,  on  the  theory  that  a  larger  number  of  owners  would  enhance  competition.  While  our 
 local  ownership  rules  were  based  largely  on  preserving  viewpoint  diversity,  the  Commission  also  found  that  these  rules  would  serve  the  public  interest  by  preventing  broadcasters  from  dominat[  ing]  television 
 and  radio  markets  and  wielding  power  to  the  detriment  of  small  owners,  advertisers,  and  the  public  interest.  127  Are  structural  ownership  limits  the  best  means  to  promote  competition  in  the  media?  If  we 
 are  to  maintain  ownership  limits  predicated  on  preserving  competition,  is  our  traditional  theory  of  diffused  ownership  policy  more  likely  to  preserve  competition  than  a  policy  that  relies  on  market  forces 
 or  other  measures  to  foster  competition? 
 56.  If  we  determine  that  a  competition  analysis  is  necessary,  we  must  define  the  relevant  product  and  geographic  markets  in  which  broadcast  TV  and  radio  stations  compete,  as  well  as  the  market 

 share  of  the  participants  within  the  relevant  market,  and  then  weigh  the  benefits  of  consolidation  against  the  harms  to  consumers.  For  example,  although  ownership  consolidation  can  produce  efficiencies  that 
 result  in  stronger  stations  and  improved  services  to  the  public,  excessive  concentration  may  reduce 

 125  Compare  Revision  of  Radio  Rules  and  Policies,  MM  Docket  No.  91-  140,  Report  and  Order,  7  FCC  Rcd  2755, 
 2758  (1992)    5  with  Commission  Press  Release,  http://  www.  fcc.  gov/  Bureaus/  MassMedia/  News_  Releases/  2001/  nrmm0112.  txt,  visited  July  31,  2002. 

 126  Nielsen  Media  Research  reports  that  the  broadcast  television  networks  share  of  the  national  audience  slid  to 
 50.  1%  in  May  2002  from  85%  in  1981,  while  cable  networks  share  has  increased  to  46.0%.  Nielsens  numbers  for  May  2002  are  reported  in  Allison  Romano,  Nibbling  Away  at  Broadcast,  BROADCASTING  &  CABLE  (June  3,  2002)  at 

 11.  The  figure  for  1981  is  from  Nielsen  Media  Research,  Primetime  Network  Rating  and  Shares  (Apr.  17,  2001).  127 
 1984  Multiple  Ownership  Order,  100  F.  C.  C.  at  38,    64. 
20
 Federal  Communications  Commission  FCC  02-  249 
 21 
 competition  for  viewers/  listeners  and  lessen  incentives  to  innovate  and  improve  services  to  the  public. 
 57.  We  must  first  determine  the  relevant  product  markets.  Generally,  broadcast  stations  compete  to  attract  viewers/  listeners  and  advertising  dollars,  and  they  compete  as  buyers  of  programming. 

 In  past  examinations  of  our  ownership  rules,  we  have  focused  on  the  program  delivery  market,  the  advertising  market,  and  the  program  production  market.  These  individual  product  markets  vary  in 
 significance  depending  upon  the  particular  rule  under  examination.  In  addition,  these  product  markets  are  interrelated,  since  advertising  revenue  is  often  used  to  finance  program  acquisition,  which  in  turn  helps  to 
 attract  viewers/  listeners,  which  then  enables  media  owners  to  charge  advertisers.  We  have  not,  however,  resolved  the  issue  of  the  relative  weights  we  should  accord  each  of  these  product  markets  for  purposes  of 
 our  competition  analysis.  128  We  seek  comment  on  whether  our  competition  analysis  should  focus  on  competition  for  advertising  revenue,  competition  for  viewers/  listeners,  a  combination  of  the  two, 
 competition  for  programming,  or  some  other  factor. 
 58.  We  first  address  the  delivered  programming  market.  Viewers/  listeners  seeking  delivered  programming  may  choose  among  various  providers,  including  broadcasters,  cable  systems,  DBS,  and 

 DARS.  Viewers/  listeners,  however,  may  also  obtain  programming  from  videos,  DVDs,  CDs,  and  the  Internet.  Viewers/  listeners  may  also  attend  movie  theaters,  stage  theaters,  and  music  concerts.  While  the 
 Commission  previously  concluded  that  delivered  video  programming  could  be  a  relevant  market,  we  seek  comment  on  whether  the  relevant  market  should  be  broader.  The  answer  depends  on  the  degree  of 
 substitutability  between  delivered  programming  and  these  other  options.  Do  viewers/  listeners  consider  these  other  options  to  be  good  substitutes  for  delivered  programming?  Commenters  are  encouraged  to 
 produce  studies  and  empirical  data  to  support  their  views  regarding  the  relevant  product  market.  If  delivered  programming  is  the  relevant  product  market,  should  we  measure  market  concentration  by  using 
 the  number  of  separately  owned  outlets,  or  some  other  metric?  If  the  relevant  product  market  is  broader  than  delivered  programming,  how  should  we  measure  market  concentration? 

 59.  Next,  we  address  the  advertising  market.  As  the  steward  of  the  Communications  Act,  the  Commission  is  charged  with  evaluating  the  potential  benefits  and  harms  to  the  viewing  and  listening 
 public,  not  to  advertisers.  129  We  first  seek  comment  on  whether  our  authority  under  the  Communications  Act  justifies  our  basing  broadcast  ownership  regulation  on  the  level  of  competition  in  the  advertising 
 market.  We  also  seek  comment  on  whether,  as  a  policy  matter,  the  Commission  should  be  concerned  with  advertising  rates,  or  whether  competition  concerns  in  advertising  markets  are  more  appropriately 
 governed  by  the  antitrust  agencies.  What  precisely  are  the  harms  viewers  and  listeners  would  suffer  if  advertising  prices  were  to  rise  as  a  result  of  more  concentrated  media  markets,  and  what  empirical 
 evidence  of  these  harms  is  available? 
 60.  The  vast  majority  of  American  households  now  pay  for  information  and  programming  by  subscribing  to  cable  television  or  satellite  services.  Does  this  change  in  consumer  viewing  habits  suggest 

 that  the  advertising  market  may  not  be  the  best  product  market  to  analyze  because  we  do  not  capture  this  factor  as  part  of  the  competitive  analysis?  For  instance,  people  who  subscribe  to  DBS  often  watch  non-broadcast 
 channels.  By  reducing  viewership  of  local  broadcast  channels,  non-  broadcast  channels  may  reduce  advertising  revenues  flowing  to  local  television  stations.  How  can  we  capture  the  impact  of  a  rule 
 change  on  viewers  if  we  are  using  a  product  definition  (e.  g,.  advertising)  that  does  not  account  for  these  viewers/  listeners.  A  recent  study  indicated  that  Internet  users  spend  approximately  25%  less  time 

 128  Local  Radio  Ownership  NPRM,  16  FCC  Rcd  at  19878,    40. 
 129  Hillco  Commun.,  Inc.,  MB  Docket  No.  02-  236,  Hearing  Designation  Order  FCC  02-  236  at    13  (rel.  Sept.  5, 
 2002),  available  at  2002  WL  2030952;  Local  Radio  Ownership  NPRM,  16  FCC  Rcd  at  19865-  66,    9. 
21
 Federal  Communications  Commission  FCC  02-  249 
 22 
 watching  television  stations  than  non-  Internet  users.  130  This  phenomenon  suggests  that  the  Internet  may  compete  with  television  for  viewers,  which  could  reduce  advertising  revenues  for  both  broadcast  and  non-broadcast 
 channels.  Competitive  developments  such  as  these  are  not  reflected  in  past  Commission  evaluations  of  the  advertising  market,  yet  they  may  have  a  meaningful  effect  on  broadcasters  ability  to 
 compete  in  todays  media  market.  We  seek  comment  on  how  trends  such  as  these  should  impact  our  analysis.  In  light  of  market  developments,  would  a  direct  analysis  of  competition  for  viewers/  listeners  be 
 a  more  appropriate  means  for  advancing  our  competition  goal?  If  so,  how  should  we  measure  entities  market  power?  Commenters  are  encouraged  to  produce  studies  and  empirical  data  to  support  or  refute 
 claims. 
 61.  If  the  Commission  determines  that  competition  in  advertising  markets  is  an  important  component  of  our  competitive  analysis,  we  must  then  determine  the  relevant  advertising  product  market. 

 Historically,  the  Commission  has  focused  only  on  broadcast  advertising.  131  We  seek  comment  on  whether,  in  todays  marketplace,  we  should  broaden  the  relevant  advertising  product  market  to  include 
 other  media  advertising. 
 62.  To  what  extent  do  non-  broadcast  media  compete  with  broadcasters  for  advertising  dollars?  For  example,  the  cable  television  industry  has  undergone  consolidation  at  both  the  national  and 

 local  level.  In  addition  to  competing  for  audience  share,  132  cable  television  now  appears  to  be  a  more  formidable  competitor  to  broadcasters  for  national  and  local  advertising.  In  1980,  broadcast  TV  captured 
 virtually  all  of  the  national  and  local  TV  ad  market  (over  99%),  whereas  cable  had  less  than  one  percent.  In  2000,  broadcast  TV  share  declined  to  70%  of  national  TV  ad  revenue  and  about  80%  of  local  TV  ad 
 revenue,  and  cable  increased  to  30%  and  20%,  respectively.  133  How  do  these  and  other  developments  in  the  media  advertising  market  affect  our  decision-  making?  Parties  are  asked  to  provide  empirical  data  on 
 the  substitutability  for  advertisers  among  all  media  outlets  and  to  comment  on  how  this  data  should  impact  how  we  would  define  the  relevant  advertising  product  markets.  How  should  the  differences 
 between  local,  regional,  and  national  advertising  markets  factor  into  our  analysis? 
 63.  We  also  seek  comment  on  the  extent,  if  any,  to  which  our  competition  analysis  should  consider  the  programming  purchasing  market.  Broadcasters,  broadcast  networks,  cable  networks,  cable 

 operators,  DBS  networks,  and  DBS  operators  create,  purchase,  or  barter  for  programming.  Would  relaxation  or  elimination  of  the  broadcast  ownership  rules  enable  broadcasters  to  exercise  monopsony 
 power  in  the  purchase  of  programming,  or  is  there  sufficient  competition  from  other  program  buyers  (e.  g., 
 130  UCLA  Center  for  Communication  Policy,  Surveying  the  Digital  Future,  THE  UCLA  INTERNET  REPORT  2001  at 
 32,  available  at  http://  www.  ccp.  ucla.  edu/  pages/  internet-  paper.  asp  (visited  on  Sept.  11,  2002).  131 
 Amendment  of  Section  73.  3555  of  the  Commission's  Rules,  the  Broadcast  Multiple  Ownership  Rules,  4  FCC  Rcd  1723,  1727,  1732  &  n.  42  (1989)  (  commercial  radio  stations  have  begun  to  face  significant  competition  from  local 

 cable  television  systems  which  sell  advertising  on  an  interconnected  basis  under  which  the  same  ad  would  appear  on  numerous  local  cable  systems;  [  t]  he  products  involved  in  competition  analysis  of  broadcast  media  are  the 
 listening  or  viewing  audiences,  which  are  in  effect  sold  by  radio  and  television  stations  to  advertisers.  .  .  .  The  relevant  product  market  is  thus  measured  by  the  substitutability  of  different  media  (i.  e.,  radio,  .  .  .)  for  the  purposes 
 of  purchasing  advertising.);  1984  Multiple  Ownership  Order,  100  F.  C.  C.  2d  at  39-  40    66-  69  (  While  we  question  whether  the  product  market  should  exclude  all  other  advertising  media  .  .  .  ,  for  purposes  of  analyzing  the  effects  of 
 eliminating  the  Seven  Station  Rule  we  will  .  .  .  treat  the  TV  and  radio  advertising  markets  as  separate  product  markets.). 
 132  Nielsen  Media  Research  reports  that  the  broadcast  television  networks  share  of  the  national  audience  slid  to 
 50.  1%  in  May  2002  from  85%  in  1981,  while  cable  networks  share  has  increased  to  46.0%  Nielsens  numbers  for  May  2002  are  reported  in  Allison  Romano,  Nibbling  Away  at  Broadcast,  Broadcasting  &  Cable  (June  3,  2002)  at  11. 

 The  figure  for  1981  is  from  Nielsen  Media  Research,  Primetime  Network  Rating  and  Shares  (Apr.  17,  2001).  133 
 Universal  McCann,  Estimated  U.  S.  Annual  Advertising  Volume  1980-  2001. 
22
 Federal  Communications  Commission  FCC  02-  249 
 23 
 cable  and  DBS)  or  from  other  distribution  streams  (e.  g.,  Internet  or  international)  to  prevent  the  exercise  of  such  power? 
 64.  Our  competition  analysis  must  also  define  the  geographic  market  for  delivered  programming  and  advertising.  The  geographic  extent  of  the  market,  the  area  where  buyers  can  purchase  a 
 particular  product  or  service  from  sellers,  is  sometimes  difficult  to  determine,  since  different  media  outlets  serve  different  geographic  areas.  What  are  the  implications  of  these  different  geographic  market 
 definitions  for  our  competition  analysis?  Would  the  appropriate  geographic  market  be  different  if  we  focused  on  viewership/  listenership  rather  than  advertising? 

 65.  Innovation.  Change  permeates  virtually  every  aspect  of  the  organization  of  media  markets  and  the  operation  of  media  companies.  In  both  broadcast  and  cable  industries,  analog 
 transmission  technologies  are  giving  way  to  digital  transmission  technologies  that  will  greatly  increase  operators  ability  to  offer  new,  more  and  better  services.  In  addition  to  broadcast  and  cable,  consumers 
 also  have  access  to  multi-  channel  video  and  audio  programming  from  DBS  and  the  Internet  and  multi-channel  audio  programming  from  DARS.  Each  of  these  distribution  technologies  are  expanding  the 
 number  of  program  choices  and  developing  program  content  for  increasingly  specialized  audiences.  All  of  these  changes  reflect  innovation,  i.  e.,  the  development  of  new  products  or  services  or  new,  less  costly 
 ways  of  producing  or  delivering  existing  services. 
 66.  Innovation  reflects  developments  in  technology  that  affect  the  modern  media  marketplace.  Innovation  brings  significant  benefits  to  consumers  through  the  creation  of  new  media 

 products  and  services,  but  it  can  destabilize  established  business  practices  and  customer  relationships.  Markets  in  which  innovation  is  a  prominent  attribute  differ  from  traditional  markets,  largely  because  the 
 focal  point  of  competitive  rivalry  is  shifted  more  toward  innovation,  which  may  fundamentally  alter  the  behavior  of  firms  competing  in  the  market.  In  traditional  markets  (where  product  differentiation  is  not 
 extensive),  firms  compete  for  customers  primarily  based  on  price  and  terms  of  sale  of  an  existing  (substitutable)  product  or  service.  By  contrast,  competitors  in  markets  where  innovation  is  an  important 
 force  face  a  more  dynamic  and  uncertain  market.  Innovation  competition  involves  intense  competition  for  the  market  such  that  a  successful  innovation  may  result  in  the  sudden  economic  obsolescence  of  an 
 existing  product  or  technology  (and  sometimes  the  demise  of  the  firms  that  produce  it).  Innovation  competition  tends  to  produce  market  leaders  that  dominate  a  market  for  a  period  of  time  until  supplanted 
 by  another  innovation  introduced  by  the  market  leader  or  a  competitor.  134 
 67.  We  seek  comment  on  this  analysis.  To  what  extent  does  innovation  competition  characterize  rivalry  in  contemporary  delivered  programming,  broadcast  advertising,  and  program 

 production  markets?  In  which  media  markets  does  price  competition  seem  to  predominate  over  innovation  competition?  If  innovation  competition  is  pervasive  in  media  markets  today,  how  should  our 
 ownership  rules  be  modified  to  encourage  rivalry  focused  on  innovation? 
 68.  Congress  has  directed  the  Commission  to  make  the  introduction  of  new  technologies  and  services  a  priority.  135  We  seek  comment  on  whether  innovation  is  a  valid  policy  goal  in  the  consideration 

 of  the  competitive  effects  of  our  ownership  rules.  In  this  regard,  we  invite  comment  on  how  our  media  ownership  policies  and  rules  affect  the  incentives  to  innovate  among  broadcasters  and  other  media  market 

 134  David  S.  Evans  and  Richard  Schmalensee,  Some  Economic  Aspects  of  Antitrust  Analysis  in  Dynamically 
 Competitive  Industries,  National  Bureau  of  Economic  Research  (May  2001),  available  at  http://  papers.  nber/  org/  papers/  w8268.  pdf  (visited  July  10,  2002). 

 135  It  shall  be  the  policy  of  the  United  States  to  encourage  the  provision  of  new  technologies  and  services  to  the 
 public.  47  U.  S.  C.    157.  The  preamble  to  the  Telecommunications  Act  of  1996  states  AN  ACT  To  promote  competition  and  reduce  regulation  in  order  to  secure  lower  prices  and  higher  quality  services  for  American 

 telecommunications  consumers  and  encourage  the  rapid  deployment  of  new  telecommunications  technologies. 
23
 Federal  Communications  Commission  FCC  02-  249 
 24 
 competitors.  For  example,  how  do  our  broadcast  ownership  rules  affect  innovation  in  the  form  of  digital  television,  digital  cable,  Internet  access,  and  other  new  technologies?  Do  our  ownership  rules  hinder 
 continued  innovation?  Should  the  Commission  actively  seek  to  promote  innovation  through  its  ownership  rules,  or  merely  avoid  interfering  with  firms  ability  to  innovate?  If  the  former,  what  changes 
 to  the  ownership  rules,  if  any,  would  promote  innovation? 
 C.  Localism 
 69.  The  Commission  has  historically  pursued  policies  aimed  at  encouraging  localism.  One  statutory  basis  of  the  Commissions  promotion  of  localism  in  broadcasting  is  Section  307  of  the  1934  Act, 

 which  dates  from  the  Radio  Act  of  1927  and,  in  its  present  form,  states:  In  considering  applications  for  licenses,  and  modifications  and  renewals  thereof,  when  and  insofar  as  there  is  demand  for  the  same,  the 
 Commission  shall  make  such  distribution  of  licenses,  frequencies,  hours  of  operation,  and  of  power  among  the  several  States  and  communities  as  to  provide  a  fair,  efficient,  and  equitable  distribution  of 
 radio  service  to  each  of  the  same.  136  Another  is  the  Congressional  Findings  and  Policy  in  connection  with  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992,  which  include  the  finding 
 that  "[  a]  primary  objective  and  benefit  of  our  nation's  system  of  regulation  of  broadcast  television  is  the  local  origination  of  programming."  137  We  invite  comment  on  the  goal  of  localism  as  we  have  defined  it 
 and  whether  we  should  define  it  more  narrowly  or  more  broadly. 
 70.  From  the  earliest  days  of  broadcasting,  federal  regulation  has  sought  to  foster  the  provision  of  programming  that  meets  local  communities'  needs  and  interests.  138  Thus,  the  Commission 

 has  licensed  stations  to  serve  local  communities,  pursuant  to  section  307(  b)  of  the  1934  Act,  and  it  has  obligated  them  to  serve  the  needs  and  interests  of  their  communities.  139  Stations  may  fulfill  this  obligation 
 by  presenting  local  news  and  public  affairs  programming  and  by  selecting  programming  based  on  the  particular  needs  and  interests  of  the  stations  community.  Further,  as  the  Fox  Television  court  recognized, 
 one  of  the  Commissions  purposes  in  retaining  the  national  TV  ownership  rule  was  to  preserve  the  power  of  affiliates  in  bargaining  with  their  networks  and  thereby  allow  the  affiliates  to  serve  their  local 
 communities  better.  140 
 71.  Localism  remains  an  important  attribute  of  the  broadcast  media  industry.  We  request 
 136  47  U.  S.  C.    307(  b). 
 137  Pub.  L.  102-  385,    2(  a)  (10),  Oct.  5,  1992,  106  Stat.  1460. 
 138  See,  e.  g.,  ANNUAL  REPORT  OF  THE  FEDERAL  RADIO  COMMISSION  TO  THE  CONGRESS  OF  THE  UNITED  STATES  FOR 
 THE  YEAR  ENDED  JUNE  30,  1927,  at  8-  9  (  the  commission  found  it  possible  to  reassign  the  stations  to  frequencies 
 which  would  .  .  .  serve  as  a  basis  for  the  development  of  good  broadcasting  to  all  sections  of  the  country  .  .  .  .;  New  York  City  and  Chicago  stations  were  not  allowed  to  dominate  the  situation;  SECOND  ANNUAL  REPORT  OF 

 THE  FEDERAL  RADIO  COMMISSION  TO  THE  CONGRESS  OF  THE  UNITED  STATES  FOR  THE  YEAR  ENDED  JUNE  30,  1928, 
 at  9-  14  passim  (describing  preliminary  enforcement  of  the  Davis  Amendment,  ch.  263,    5,  45  Stat.  373  (1928),  repealed,  Act  of  June  5,  1936,  ch.  511,    1,  49  Stat.  1475,  which,  as  amended,  survives  today  in  the  form  of  47 

 U.  S.  C.    307(  b)).  139 
 Revision  of  Programming  and  Commercialization  Policies,  Ascertainment  Requirements,  and  Program  Log  Requirements  for  Commercial  Television  Stations,  98  F.  C.  C.  2d  1075,  1091-  92  (1984)    32,  reconsideration  denied, 

 104  F.  C.  C.  2d  357,  affirmed  in  part  and  reversed  in  part  on  other  grounds,  Action  for  Childrens  Television  v.  FCC,  821  F.  2d  741  (D.  C.  Cir.  1987);  Deregulation  of  Radio,  84  F.  C.  C.  2d  968,  982  (1981)    34  ,  reconsideration  denied  in 
 part,  87  F.  C.  C.  2d  797  (1981),  affirmed  in  part  and  remanded  in  part  on  other  grounds,  Office  of  Communication  of  the  United  Church  of  Christ  v.  FCC,  707  F.  2d  1413  (D.  C.  Cir.  1983);  Amendment  of  Section  3.606  of  the 
 Commissions  Rules  and  Regulations,  Amendment  of  the  Commissions  Rules,  Regulations  and  Engineering  Standards  Concerning  the  Television  Broadcast  Service,  Utilization  of  Frequencies  in  the  Band  470  to  890  Mcs. 
 For  Television  Broadcasting,  41  F.  C.  C.  148,  172  (1952)    79.  140 
 Fox  Television,  280  F.  3d  at  1036. 
24
 Federal  Communications  Commission  FCC  02-  249 
 25 
 comment  whether,  and  to  what  extent,  it  is  related  to  ownership  limits.  For  example,  do  ownership  limits  tend  to  ensure  an  adequate  supply  of  local  information  intended  to  meet  local  needs  and  interests?  Is  such 
 news,  public  affairs,  and  other  programming  likely  to  be  available  in  the  current  marketplace  without  ownership  limits?  To  what  extent  do  consumers  access  to  local  news  and  information  on  non-  broadcast 
 media  (e.  g.,  newspapers,  cable  television,  DBS,  and  the  Internet)  impact  this  analysis?  How  much  local  news  and  information  is  available  on  a  typical  cable  system  and  on  the  Internet,  other  than  news  that 
 originates  on  broadcast  stations?  141  Would  some  combination  of  market  mechanisms  and  ownership  limits,  rather  than  one  or  the  other,  best  promote  localism?  Are  consolidation  and  efficiency  innovations 
 likely  to  reduce  the  level  of  local  programming  or  reduce  the  amount  of  programming  that  is  locally  produced? 

 V.  LOCAL  OWNERSHIP  RULES 
 72.  In  this  section,  we  discuss  and  invite  comment  on  possible  changes  to  our  multiple  ownership  rules  concerning  local  broadcasting  (the  local  TV  multiple  ownership  rule  and  the  radio/  TV 

 cross-  ownership  rule).  We  also  invite  suggestions  of  how  we  could  achieve  our  goals  of  diversity,  competition,  and  localism  by  means  other  than  broadcast  ownership  rules.  The  options  include  case-  by- 
 case  determinations  of  multiple  ownership  and  a  single  ownership  rule  that  would  apply  to  all  media  outlets.  We  invite  comment  on  how  best  to  define  a  voice  or  other  measurement  of  viewpoint  diversity 
 in  our  local  rules.  In  this  latter  regard  we  focus  especially  on  relatively  new  media  such  as  DBS  and  the  Internet,  which  have  become  powerful  forces  in  recent  years  but  are  not  reflected  in  our  current  rules. 

 A.  Local  TV  Multiple  Ownership  Rule 
 73.  The  local  TV  ownership  rule  allows  an  entity  to  own  two  television  stations  in  the  same  DMA,  provided:  (1)  the  Grade  B  contours  of  the  stations  do  not  overlap;  or  (2)  (a)  at  least  one  of  the 

 stations  is  not  ranked  among  the  four  highest-  ranked  stations  in  the  DMA,  and  (b)  at  least  eight  independently  owned  and  operating  commercial  or  non-  commercial  full-  power  broadcast  television 
 stations  would  remain  in  the  DMA  after  the  proposed  combination  (  top  four  ranked/  eight  voices  test).  142  In  counting  the  number  of  independently  owned  and  operating  full-  power  stations  that  count  as  voices 
 under  the  rule,  only  those  stations  whose  Grade  B  signal  contours  overlap  with  the  Grade  B  contour  of  at  least  one  of  the  stations  in  the  proposed  combination  are  counted.  143 

 74.  The  Commission  adopted  a  rule  prohibiting  common  ownership  of  two  TV  stations  with  intersecting  Grade  B  contours  in  1964.  144  The  rule  was  based  in  part  on  the  Commissions  earlier 
 diversification  of  service  rationale,  which  suggests  that  the  Commission  believed  its  diversity  concerns  were  better  promoted  by  a  greater  number  rather  than  a  lesser  number  of  separately  owned  outlets.  145  In 

 141  Cable  operators  must  carry  local  channels;  some  cable  operators  have  developed  regional  news  and  public  affairs 
 programming.  For  example,  Comcast  has  stated  that  it  runs  Comcast  Local  Edition,  a  five-  minute  program  delivered  every  half-  hour  on  its  Washington,  D.  C.,  area  cable  system  that  includes  interviews  with  local  government 

 officials  and  discussions  of  local  and  regional  issues,  among  other  things;  and  local  franchise  authorities  often  require  that  cable  operators  carry  locally  originated  programming  on  PEG  channels.  Applications  for  Consent  to  the 
 Transfer  of  Control  of  Licenses,  Comcast  Corp.  and  AT&  T  Corp.,  Transferor,  to  AT&  T  Comcast  Corp.,  Transferee,  MB  Docket  No.  02-  70,  Applications  and  Public  Interest  Statement  (  AT&  T  Comcast  Public  Interest  Statement)  at 
 43-  44  (filed  Feb.  28,  2002).  142 
 47  C.  F.  R.    73.3555(  b);  Local  TV  Ownership  Report  and  Order,  14  FCC  Rcd  at  12907-  08,    8.  143 
 Local  TV  Ownership  Reconsideration  Order,  16  FCC  Rcd  at  1072-  73,    16-  18.  144 
 Amendment  of  Sections  73.  35,  73.  240,  and  73.  636  of  the  Commissions  Rules  Relating  to  Multiple  Ownership  of  Standard,  FM  and  Television  Broadcast  Stations,  45  F.  C.  C.  1476  (1964). 

 145  Genessee  Radio  Corp.,  5  F.  C.  C.  183  (1939). 
25
 Federal  Communications  Commission  FCC  02-  249 
 26 
 1996,  Congress  directed  the  Commission  to  conduct  a  rulemaking  proceeding  to  determine  whether  to  retain,  modify,  or  eliminate  its  limitations  on  the  number  of  television  stations  that  a  person  or  entity  may 
 own,  operate,  or  control,  or  have  a  cognizable  interest  in,  within  the  same  television  market.  146  The  Commission  revised  the  rule  to  its  current  form  in  1999,  citing  as  reasons  growth  in  the  number  and 
 variety  of  local  media  outlets  and  the  efficiencies  and  public  service  benefits  that  can  be  obtained  from  joint  ownership.  147  Additionally,  the  Commission  sought  to  facilitate  further  development  of 
 competition  in  the  video  marketplace  and  to  strengthen  the  potential  of  broadcasters  to  serve  the  public  interest.  148  The  Commission  made  relatively  minor  changes  to  the  rule  on  reconsideration.  149  In  its 
 remand  of  the  Commissions  1999  Order,  the  court  found  the  Commissions  explanation  of  its  decision  to  include  only  broadcast  television  stations  as  voices  insufficient,  although  it  concluded  that  the 
 Commission  had  adequately  explained  how  the  local  TV  ownership  rule  furthers  diversity  at  the  local  level  and  is  necessary  in  the  public  interest  under    202(  h)  of  the  1996  Act.  150 

 75.  Below  we  ask  for  comment  whether  the  local  TV  ownership  rule  is  necessary  in  the  public  interest  as  the  result  of  competition.  Does  it  continue  to  serve  its  original  purposes  of  furthering 
 diversity  and  facilitating  competition  in  the  marketplace?  Does  the  rule  promote  the  other  goals  we  set  forth  above,  including  all  the  various  forms  of  diversity,  competition,  and  localism?  If  the  rule  serves 
 some  of  our  purposes  and  disserves  others,  does  the  balance  of  its  effects  argue  for  keeping,  revising,  or  abolishing  the  rule?  In  the  following  paragraphs,  we  explore  these  questions  in  more  detail. 

 1.  The  Sinclair  Decision 
 76.  The  voice  test  that  applies  to  the  current  local  TV  ownership  rule  includes  only  TV  stations.  As  discussed  above,  in  Sinclair,  the  court  invalidated  the  definition  of  voices  because  the 

 Commission  had  not  adequately  explained  its  decision  to  exclude  other  media.  The  court  noted  that  the  Commissions  decision  was  inconsistent  with  the  definition  of  voices  for  the  radio/  TV  cross-  ownership 
 rule,  which  also  considers  daily  newspapers,  radio  stations,  and  incumbent  cable  operators  to  be  voices.  The  court  noted  that,  having  found  for  purposes  of  TV/  radio  cross-  ownership  that  counting  other  media 
 voices  more  accurately  reflects  the  actual  level  of  diversity  and  competition  in  the  market,  the  Commission  had  not  explained  why  such  diversity  and  competition  should  not  also  be  reflected  in  its 
 definition  of  voices  for  the  local  TV  ownership  rule.  The  court  noted  that  on  remand,  the  Commission  may  adjust  not  only  the  definition  of  voices,  but  also  the  numerical  limit,  given  that  there  is  a  relationship 
 between  the  definition  of  voices  and  the  choice  of  a  numerical  limit.  151 
 77.  We  invite  comment  on  how  to  apply  a  voice  test  for  a  local  TV  ownership  rule,  if  we  decide  to  apply  one.  Should  we  continue  to  count  only  independently  owned  and  operating  full  power 

 commercial  and  non-  commercial  television  stations,  or  should  we  expand  the  media  included  in  the  definition  of  a  voice?  For  example,  should  we  include  radio  stations,  daily  newspapers,  cable  systems, 
 DBS  and  DARS,  the  Internet,  and  perhaps  other  media?  To  what  extent  do  consumers  view  these  other  media  as  sources  of  local  news  and  information?  In  addition,  we  invite  comment  as  to  what  numerical  or 
 other  limit  we  should  set  for  the  number  of  voices.  In  current  marketplace  conditions,  what  number  of  voices  would  preserve  our  competition  and  diversity  goals?  Finally,  we  invite  comment  as  to  whether 
 any  definition  of  voices  we  adopt  for  the  local  TV  ownership  rule  should  be  used  in  other  rules,  or 
 146  1996  Act,    202(  c)(  2). 
 147  Local  TV  Ownership  Report  and  Order,  14  FCC  Rcd  at  12930-  31,    57-  58. 
 148  Id.  at  12903,    1. 
 149  See  Local  TV  Ownership  Reconsideration  Order,  supra  note  32. 
 150  Sinclair,  284  F.  3d  at  160.  See  Section  V  for  a  more  detailed  discussion  of  Sinclair. 
 151  Id.  at  162. 
26
 Federal  Communications  Commission  FCC  02-  249 
 27 
 whether  there  is  adequate  justification  for  distinguishing  between  voices  relevant  to  one  rule  and  those  relevant  to  another. 
 2.  Diversity 
 78.  The  rule  barring  ownership  of  two  TV  stations  in  the  same  market  was  intended  to  preserve  viewpoint  diversity  and  promote  competition  in  local  markets.  152  With  respect  to  viewpoint 

 diversity,  the  prohibition  against  common  ownership  of  two  top-  four-  ranked  stations  in  the  same  market  was  intended  to  avoid  combinations  of  two  stations  offering  separate  local  newscasts.  153  The 
 Commissions  analysis  indicated  that  the  top-  four-  ranked  stations  in  each  market  generally  had  a  local  newscast,  while  lower-  ranked  stations  frequently  did  not.  The  Commission  reasoned  that  permitting 
 combinations  between  these  two  categories  of  stations,  but  not  among  the  top  four-  ranked  stations,  would  better  preserve  the  possibility  for  different  viewpoints  in  local  news  presentation,  which  is  at  the  heart  of 
 our  diversity  goal.  154 
 a.  Nature  of  viewpoints  on  local  television 
 79.  We  seek  evidence  on  the  extent  to  which  local  television  stations  express  viewpoints  in  local  newscasts  and,  if  so,  whether,  and  to  what  extent,  those  newscasts  provide  diverse  points  of  view. 

 What  are  a  stations  incentives  regarding  the  expression  of  a  viewpoint,  both  explicitly  through  editorializing  and  implicitly  through  decisions  on  whether  and  how  to  cover  particular  events?  It  is  our 
 understanding  that  TV  stations  have  largely  abandoned  editorials  because  they  fear  that  viewers  who  disagree  with  the  viewpoint  expressed  will  temporarily  or  permanently  elect  to  watch  another  channel.  Is 
 this  accurate?  If  so,  what  is  the  effect  of  this  change?  News  organizations  argue  that  they  have  a  strong  economic  incentive  to  keep  their  news  coverage  and  reporting  as  balanced  and  unbiased  as  possible.  155  On 
 the  other  hand,  it  appears  that  news  periodicals  and  other  print  media  may  have  defined  and  distinct  viewpoints.  If  so,  are  different  viewpoints  explained  or  represented  in  their  news  reporting?  What  effects 
 have  national,  regional,  and  local  cable  news  had  on  the  expression  of  viewpoints  in  local  markets?  We  seek  comment  on  these  issues,  including  whether  local  TV  ownership  regulations  are  necessary  to  foster 
 viewpoint  diversity. 
 80.  We  have  already  suggested  that  market  incentives  may  preserve  program  diversity  as  effectively  as  more  diffused  ownership  structures.  156  We  seek  comment  on  whether  owners  of  broadcast 

 stations  have  similar  incentives  with  respect  to  diverse  viewpoints.  Our  understanding  is  that,  when  both  television  stations  in  a  duopoly  carry  local  news,  the  newscast  typically  is  produced  by  a  single  set  of 
 personnel  using  one  set  of  facilities.  Are  there  different  economic  incentives  among  stand-  alone  stations, 
 152  Local  TV  Ownership  Report  and  Order,  14  FCC  Rcd  at  12910-  11,    15. 
 153  Id.  at  12933,    66. 
 154  Id. 
 155  See  Comments  of  News  Corporation  Limited  and  Fox  Television  Holdings,  Inc.,  at  18  (citing  1998  Biennial 
 Report,  15  FCC  Rcd  at  11149  (Separate  Statement  of  Commr  Powell)  (  Local  news  programs  rarely  editorialize,  or  pick  political  candidates,  or  take  stands  on  major  issues  .  .  .  .));  Doug  Halonen,  TV  Editorials  Merit  Endangered 

 Status,  ELECTRONIC  MEDIA,  June  8,  1998,  at  3  (noting  that  [  general]  managers  feared  they  (editorials)  could  offend  viewers,  and  that  in  this  clicker  world,  theyll  be  gone).  See  also  Comments  of  Media  General,  Inc.,  at  31-  34 
 (asserting  that  commonly-  owned  broadcast  stations,  even  in  the  same  market,  may  take  different  editorial  stances  to  maximize  the  stations  overall  audience  share),  MM  Docket  Nos.  01-  235  and  96-  197,  filed  Dec.  3,  2001. 
 156  See,  e.  g.,  FCC  v.  WNCN  Listeners  Guild,  540  U.  S.  582  (1981)  (upholding,  against  challenges  under  the  1934  Act 
 and  the  First  Amendment,  Commission  policy  that  public  interest  is  best  served  by  promoting  program  diversity  through  market  forces,  and  not  by  considering  station  formats  in  ruling  on  applications  for  license  renewal  or 

 transfer);  Dual  Network  Order,  16  FCC  Rcd  at  11131,    37. 
27
 Federal  Communications  Commission  FCC  02-  249 
 28 
 duopolies,  or  triopolies  to  produce,  in  a  single  newscast,  a  diversity  of  viewpoints?  What  other  evidence  or  economic  theories  would  shed  light  on  the  viewpoint  incentives  of  commonly-  owned  local 
 broadcast  outlets?  Are  different  viewpoints  produced  by  one  editor  the  equivalent  for  diversity  purposes  of  different  viewpoints  produced  by  multiple  editors? 

 b.  Connection  between  ownership  and  viewpoint 
 81.  In  the  1984  Multiple  Ownership  Order,  the  Commission  cited  evidence  that  at  least  some  TV  station  owners  allowed  local  management  to  make  news  reporting  decisions.  157  In  addition,  according 

 to  testimony  before  Congress  by  the  President  and  Chief  Operating  Officer  of  Viacom,  Inc.,  CBS  TV  stations  determine  locally  how  much  news  to  air,  what  stories  are  run,  and  when  they  are  aired.  158  To 
 what  extent  are  station  owners  or  the  local  news  departments  responsible  for  those  viewpoints  expressed  through  local  newscasts?  What  evidence  is  available  on  this  point?  Do  station  owners  have  formal  or 
 informal  policies  that  determine  the  involvement  of  station  owners  in  news  coverage  and  reporting  decisions?  Commenters  are  requested  to  provide  information  bearing  on  the  connection  between  editorial 
 judgment  or  news  selection  and  station  ownership.  If  the  record  indicates  a  lack  of  connection  between  ownership  and  viewpoint  expressed  via  local  news  programming,  we  seek  comment  on  the  weight  that 
 finding  should  be  accorded  in  our  determination  of  whether  the  local  TV  ownership  rule  continues  to  be  supportable  in  its  present  form. 

 c.  Program  diversity 
 82.  The  Commission  previously  has  noted  that  a  single  owner  of  multiple  outlets  may  have  stronger  incentives  to  provide  diverse  entertainment  formats,  programs,  and  content  on  its  multiple  outlets 

 than  would  separate  station  owners.  159  An  entity  that  owns  multiple  stations  in  a  market  may  have  the  incentive  to  target  its  programming  to  appeal  to  a  variety  of  interests  in  an  effort  to  maximize  audiences, 
 rather  than  program  its  multiple  outlets  with  the  same  format  or  programming,  thereby  competing  with  itself.  While  acknowledging  this  viewpoint  in  the  TV  Ownership  FNPRM,  the  Commission  questioned 
 whether  this  model  would  promote  a  variety  of  viewpoints  with  regard  to  news  and  public  affairs  programming,  but  sought  comment  on  whether  it  may  indeed  promote  diversity  of  entertainment  formats 
 and  programs.  160  We  invite  comment  on  whether,  and  if  so  how,  common  ownership  leads  to  provision  of  more  diverse  programming  with  respect  to  both  entertainment  and  news  and  public  affairs 
 programming  in  order  to  maximize  audience  share.  If  common  ownership  of  multiple  stations  promotes  program  diversity,  how  does  this  affect  the  need  for  the  current  local  TV  ownership  rule?  Absent  a  rule, 

 157  1984  Multiple  Ownership  Order,  100  F.  C.  C.  2d  at  34,    52. 
 158  Testimony  of  Mel  Karmazin,  president  and  chief  operating  officer,  Viacom  Inc.,  Before  the  Senate  Committee  on 
 Commerce,  Science  and  Transportation  (July  17,  2001),  2001  WL  808306  at  7  (F.  D.  C.  H.)  (  Karmazin  Testimony)  (  Our  stations  news  directors  have  complete  freedom  locally.  This  is  a  fundamental  CBS  policy.  And  it  is  good 

 business.).  159 
 TV  Ownership  FNPRM,  10  FCC  Rcd  at  3550-  51,    62-  63  (  While  this  model  may,  indeed,  promote  diversity  of  entertainment  formats  and  programs,  we  question  whether  it  would  act  similarly  with  regard  to  news  and  public 

 affairs  programming.)  The  argument  that  a  monopoly  broadcaster  might  deliver  more  diversity  than  broadcasters  in  a  competitive  market  originates  with  Peter  Steiner,  Program  Patterns  and  Preferences  and  the  Workability  of 
 Competition  in  Radio  Broadcasting,  66(  2)  Q.  J.  ECON.  194  (1952).  Steiners  result  does  not  hold  under  other  specifications.  He  assumes  that  viewers  prefer  only  one  type  of  programming.  Allowing  viewers  to  have  lesser 
 preferred  substitutes  leads  to  a  different  result.  Competition  maximizes  diversity  and  welfare  as  long  as  channel  space  is  unlimited.  See  Jack  Beebe,  Institutional  Structure  and  Program  Choices  in  Television  Markets,  91(  1)  Q.  J. 
 ECON.  15  (1977).  More  recent  work  suggests  that  incorporating  advertising  may  also  change  Steiners  outcome.  See  Simon  Anderson  &  Steve  Coate,  Market  Provision  of  Public  Goods:  The  Case  of  Broadcasting,  2001  Working 
 Paper,  Univ.  of  Virginia  and  Cornell  Univ.  160 
 TV  Ownership  FNPRM,  10  FCC  Rcd  at  3550-  51,    63. 
28
 Federal  Communications  Commission  FCC  02-  249 
 29 
 would  market  forces  alone  lead  to  increased  program  diversity  on  commonly-  owned  stations? 
 83.  A  second,  more  fundamental,  issue  regarding  program  diversity  is  raised  by  the  dramatic  advances  in  video  delivery  technology  in  the  past  quarter  century.  Cable  television  systems  and  DBS 

 providers  offer  dozens,  and  often  hundreds,  of  channels  to  subscribers.  Entire  channels  are  devoted  to  particular  formats  or  specialized  subjects.  The  increase  in  the  variety  of  programming  available  to  many 
 American  consumers  today  suggests  that  limits  on  TV  station  ownership  may  no  longer  be  needed  to  promote  program  diversity  in  the  video  market.  We  seek  comment  on  this  analysis  in  connection  with  the 
 local  TV  multiple  ownership  rule. 
 3.  Competition 
 84.  In  the  TV  Ownership  FNPRM,  issued  in  1995,  the  Commission  identified  three  product  markets  in  which  television  broadcasters  operate:  the  market  for  delivered  programming;  the  advertising 

 market;  and  the  program  production  market.  161  Further,  the  Commission  segmented  the  advertising  market  into  national,  national  spot,  and  local  markets,  based  on  the  nature  of  the  geographic  area 
 advertisers  wish  to  reach.  162  The  Commission  tentatively  concluded  that  cable  television  directly  competes  with  broadcast  television  stations  in  each  of  these  markets,  and  that  broadcast  radio  and 
 newspapers  compete  with  television  in  the  local  advertising  market.  163  The  Commission  sought  comment  on  whether  other  suppliers  of  video  programming  (e.  g.,  multichannel  multipoint  distribution  service  164 
 and  DBS  compete  with  broadcast  television  stations.  The  Commission  stated  that  it  may  not  be  appropriate  to  include  them  because  their  market  penetration  was  so  low  that  they  were  not  relevant 
 substitutes  to  a  majority  of  Americans.  165  The  record  compiled  in  the  1998  Biennial  Report  suggested 

 161  Product  markets  are  identified  through  examining  the  extent  of  substitutability  among  various  products.  A 
 standard  method  for  defining  the  boundaries  of  the  product  market  a  particular  firm  operates  in  is  to  ask:  if  a  hypothetical  monopolist  raised  the  price  of  its  product,  to  what  degree  would  consumers  continue  to  purchase  that 

 product  or  turn  to  products  of  other  firms?  If  consumers  readily  turn  to  other  firms  products,  then  those  products  are  substitutes  for  the  first  firms  products,  and  all  are  in  the  same  product  market.  See  U.  S.  Dep't  of  Justice  and  FTC, 
 1992  Horizontal  Merger  Guidelines,    1.11,  57  Fed.  Reg.  41552  (dated  Apr.  2,  1992,  as  revised,  Apr.  8,  1997).  In  applying  antitrust  law,  DOJ  and  FTC  define  a  product  market  by  postulating  demand-  side  responses  to  a  small  but 
 significant  and  nontransitory  increase  in  price  by  a  hypothetical  monopolist.  162 
 See  TV  Ownership  FNPRM,  10  FCC  Rcd  at  3541,    35.  See  also  B.  M.  Owen  and  S.  S.  Wildman,  VIDEO  ECONOMICS  at  11-  13  (Harv.  Univ.  Press,  Cambridge  MA,  1992). 

 163  In  the  Local  TV  Ownership  Report  and  Order,  the  Commission  concluded  that  the  evidentiary  record  supported 
 the  general  conclusion  that  there  may  be  some  intermedia  substitutability  in  the  markets  served  by  broadcasters.  The  evidence,  however,  was  insufficient  to  characterize  generally  the  degree  of  the  substitutability  of  different 

 media.  See  Local  TV  Ownership  Report  and  Order,  14  FCC  Rcd  at  12919-  20,    33.  In  our  competitive  analysis  of  recent  radio  transactions,  we  have  presumed  that  the  relevant  product  market  is  radio  advertising.  However,  we 
 have  asked  whether  we  should  continue  focusing  on  the  radio  advertising  market  as  a  separate  media  market.  Local  Radio  Ownership  NPRM,  16  FCC  Rcd  at  19895,    86. 
 164  The  predominant  use  of  the  2500-  2690  MHZ  band  is  by  the  Fixed  Service  for  Multipoint  Distribution  Service 
 (  MDS),  Multichannel  Multipoint  Distribution  Service  (  MMDS),  and  Instructional  Television  Fixed  Service.  Traditionally,  MMDS  spectrum  has  been  used  to  deliver  multichannel  video  programming  (known  as  wireless  cable 

 service)  to  residential  customers.  In  1998,  however,  the  Commission  released  the  Two-  Way  Order  permitting  MMDS  licensees  to  construct  digital  two-  way  systems  that  could  provide  high-  speed,  high-  capacity  broadband 
 service,  including  two-  way  Internet  service  via  cellularized  communication  systems.  In  Amendment  of  Parts  21  and  74  to  Enable  Multipoint  Distribution  Service  and  Instructional  Television  Fixed  Service  Licensees  to  Engage  in 
 Fixed  Two-  Way  Transmissions,  13  FCC  Rcd  19112  (1998),  recon.,  14  FCC  Rcd  12764  (1999),  further  recon.,  15  FCC  Rcd  14566  (2000). 
 165  TV  Ownership  FNPRM,  10  FCC  Rcd  at  3538,    29. 
29
 Federal  Communications  Commission  FCC  02-  249 
 30 
 that  this  situation  may  have  changed.  166  We  encourage  comment  on  which  types  of  firms  compete  in  these  markets  today.  Are  there  media  outlets  other  than  those  discussed  here,  e.  g.,  the  Internet,  that  should  be 
 considered  to  be  competitors  in  these  product  markets?  We  seek  information  on  the  local  market  share  of  DBS  and  multichannel  multipoint  distribution  service,  as  we  generally  only  have  aggregate  national 
 subscription  data  for  these  services.  If  broadcast  TV  competes  with  cable  and  other  media,  do  our  local  broadcast  ownership  rules  affect  broadcasters  ability  to  effectively  compete? 

 85.  The  Commission  tentatively  concluded  in  the  TV  Ownership  FNPRM  that  the  geographic  market  for  delivered  programming  was  local;  the  geographic  markets  for  advertising  were  both  national 
 and  local;  and  the  geographic  market  for  program  production  was  national/  international  in  scope.  Local  geographic  markets  are  particularly  difficult  to  define  because  the  local  footprint  of  a  broadcast  outlet  is 
 likely  to  be  different  than  the  geographic  area  covered  by  other  media  outlets,  such  as  cable  systems.  We  seek  comment  on  how  we  should  define  the  local  geographic  media  market.  Commenters  are  encouraged 
 to  submit  data  that  we  could  use  to  identify  relevant  competitors  within  geographic  markets. 
 a.  Advertising  Market 
 86.  For  our  competitive  analysis  of  the  local  TV  ownership  rule,  we  seek  comment  on  advertising  markets.  167  Advertising  markets  are  both  national  and  local  in  scope  because  of  the  differing 

 geographic  areas  advertisers  wish  to  reach.  Certain  advertisers  wish  to  reach  the  entire  nation  at  once  with  their  advertisements  and  therefore  seek  out  media  outlets  with  a  national  footprint.  The  sources  of 
 media  with  a  national  footprint  include  broadcast  television  networks,  program  syndicators,  cable  television  networks,  DBS  and  possibly  cable  multiple  system  operators  (  MSOs).  168  Other  advertisers 
 are  only  interested  in  paying  for  advertisements  that  reach  viewers  in  a  specific,  local  area.  These  advertisers  seek  out  media  with  a  local  footprint.  These  local  media  include  individual  broadcast 
 television  stations,  individual  cable  system  operators,  individual  broadcast  radio  stations,  and  local  newspapers.  The  national  spot  market  is  a  subset  of  the  local  advertising  market.  In  this  market, 
 national  advertisers  buy  advertising  time  on  certain  specific  local  media  outlets  in  order  to  bring  a  specialized  advertising  message  to  only  some  regions  of  the  country.  Generally,  the  national  advertisers 
 work  with  national  advertising  representative  firms  to  place  these  advertisements.  With  newer  technology,  however,  the  television  networks  are  able  to  place  national  spot  advertisements  into  their  own 
 feeds.  We  ask  for  comment  on  this  analysis  of  advertising  markets,  and  on  the  policy  implications  of  this  or  other  analyses  for  our  ownership  rules.  Our  goal  is  to  ascertain  whether  the  local  TV  ownership  rule, 
 as  currently  formulated,  continues  to  be  needed  to  promote  competition  in  these  advertising  markets. 
 87.  Broadcast  television  stations  compete  most  directly  in  the  local  advertising  market.  We  seek  to  identify  the  relevant  competitors  in  this  market.  Has  the  consolidation  of  cable  systems  into  local 

 and  regional  clusters  improved  the  ability  of  cable  operators  to  compete  with  television  broadcasters  in  the  local  advertising  market?  At  a  minimum,  we  expect  that  local  cable  operators  that  can  offer  an 
 advertising  product  comparable  to  that  of  local  television  stations  should  be  included  in  our  analysis.  If  we  conclude  that  cable  operators  do  compete  in  the  local  television  advertising  market,  that  would  suggest 
 that  the  rule  as  currently  structured  may  not  be  necessary  to  promote  competition  in  local  television  advertising  markets  and  that  a  more  relaxed  ownership  limit  may  be  appropriate.  If  we  conclude  that 

 166  1998  Biennial  Report,  15  FCC  Rcd  at  11112-  13,    100. 
 167  We  ask  whether  examination  of  advertising  competition  is,  or  should  be,  relevant  to  our  analysis  of  the  ownership 
 rules  in  Section  IV  of  this  Notice.  168 
 AT&  T  and  Comcast  state  in  their  license  transfer  applications  that  their  combination  will  enable  them  to  reach  viewers  in  8  of  the  top  10  DMAs  and  thereby  become  the  first  cable  multiple  system  operator  that  can  viably 

 compete  with  broadcast  and  cable  networks  for  national  advertising  dollars.  AT&  T  Comcast  Public  Interest  Statement,  supra  note  141,  at  45-  46. 
30
 Federal  Communications  Commission  FCC  02-  249 
 31 
 cable  operators  and  television  stations  constitute  the  relevant  market  participants,  we  propose  counting  each  outlet  equally  for  purposes  of  assessing  local  advertising  competition.  We  seek  comment  on  this 
 analysis,  including  whether  a  metric  other  than  outlet  counting  is  more  appropriate  in  this  area,  and  on  the  maximum  level  of  concentration  among  these  outlets  that  would  ensure  competition  in  local  television 
 advertising  markets.  We  encourage  commenters  to  submit  empirical  analyses  of  whether  advertisers  view  different  advertising  media  as  substitutes  for  local  television.  Such  data  might  include  advertiser 
 spending  patterns  or  information  from  firms  that  purchase  advertising  for  clients. 
 88.  It  is  also  possible  that  radio  stations,  daily  newspapers,  and/  or  direct  mail  may,  for  some  advertisers,  exert  competitive  pressure  on  local  television  advertising  rates.  If  one  or  more  of  such  media 

 are  substitutes  for  some  advertisers  but  not  for  others,  we  seek  comment  on  whether  to  include  such  other  competing  outlets  in  our  advertising  competition  analysis.  For  instance,  if  daily  local  newspapers  are 
 substitutes  with  local  television  advertising  for  only  some  advertisers,  including  local  newspapers  as  a  fully  competing  outlet  in  our  analysis  might  overstate  the  true  competitive  impact  of  newspapers  on 
 television  advertising  rates.  Conversely,  the  exclusion  of  daily  local  newspapers  from  our  analysis  could  result  in  a  local  television  ownership  rule  that  is  unduly  restrictive  from  a  competitive  perspective.  We 
 strongly  encourage  commenters  to  address  this  issue  of  how  our  local  media  ownership  rules  should  account  for  this  issue  of  partial  substitutability. 

 b.  Delivered  Video  Market 
 89.  For  our  competitive  analysis  of  the  local  TV  ownership  rule,  we  also  seek  comment  on  the  market  for  delivered  video  programming.  In  the  TV  Ownership  FNPRM,  the  Commission  observed 

 that  the  time  Americans  spent  viewing  television  remained  steady  between  1970  and  1988.  The  Commission  concluded  from  this  stability  of  television  viewing  over  time  that  delivered  video 
 programming  could  be  a  relevant  market.  169  We  wish  to  revisit  the  evidence  on  this  issue,  including  updated  data  on  Americans  television  viewing.  If  such  data  shows  comparable  levels  of  television 
 viewing  from  1988  to  the  present,  should  we  continue  to  define  delivered  video  market  programming  as  a  relevant  market?  If  delivered  video  programming  is  a  relevant  market,  we  must  determine  how  to 
 measure  market  concentration.  The  Commission  has  traditionally  used  the  number  of  separately  owned  stations  or  outlets  serving  a  market.  We  seek  comment,  however,  on  other  potential  measures  of 
 concentration,  such  as  audience  share. 
 90.  Consumers  have  entertainment  alternatives  to  watching  television  (i.  e.,  delivered  video  programming  from  broadcast  TV,  cable  TV,  and  DBS).  These  options  include  video  programming  from 

 VCRs/  DVDs,  movie  theaters  and  the  Internet,  as  well  as  non-  video  entertainment  such  as  listening  to  audio  programming,  reading,  and  virtually  any  other  activity  that  a  large  number  of  people  find 
 entertaining.  To  what  extent  do  consumers  find  these  entertainment  alternatives  to  be  good  substitutes  for  television  viewing?  If  there  is  substantial  substitution  between  these  alternatives  and  television  viewing, 
 this  may  suggest  that  the  relevant  market  is  broader  than  delivered  video  programming.  How  should  this  affect  our  analysis  of  the  need  for  a  local  TV  ownership  rule  or  how  such  a  rule  should  be  drawn? 

 91.  Assuming  that  the  delivered  video  market  is  a  relevant  product  market  for  our  competition  analysis,  the  Commission  has  tentatively  included  commercial  broadcast  television  operators, 
 public  broadcast  television  station  operators,  and  cable  system  operators  to  be  economically  relevant  alternative  suppliers  of  delivered  video  programming.  170  The  rapid  growth  of  DBS  since  1995  requires  us 
 to  include  DBS  as  a  strong  participant  in  the  delivered  video  market.  We  seek  comment  on  other  media  that  should  be  included  in  the  delivered  video  market.  For  example,  in  our  Eighth  Annual  MVPD 

 169  TV  Ownership  FNPRM,  10  FCC  Rcd  at  3536,    24. 
 170  Id.  at  3538,    29. 
31
 Federal  Communications  Commission  FCC  02-  249 
 32 
 Competition  Report,  we  detailed  the  status  of  additional  potential  competitors,  including:  wireless  cable  systems,  SMATV  systems,  local  exchange  carriers,  open  video  systems,  Internet  video,  home  video  sales 
 and  rentals,  electric  utilities,  and  broadband  service  providers.  171  Some  of  these  media  are  not  available  in  many  markets  and,  thus,  may  not  be  relevant  substitutes  to  a  majority  of  Americans.  172  Should  a  level  of 
 market  penetration  be  deemed  at  which  a  non-  broadcast  video  delivery  media  directly  competes  with  broadcast  television  stations?  How  does  the  fact  that  there  are  no  consumer  fees  for  broadcast  TV  affect 
 our  analysis? 
 92.  While  some  video  delivery  media  may  be  considered  good  substitutes  for  entertainment  programming,  are  the  same  media  good  substitutes  for  local  news  and  public  affairs  programming?  What 

 measures  should  we  use  to  determine  whether  consumers  view  different  media  as  substitutes  for  entertainment  programming  or  news  programming?  Although  cable  systems  carry  local  broadcast 
 stations  and  therefore  may  be  considered  good  substitutes  for  both  entertainment  programming  and  local  news  and  public  affairs  programming,  DBS  systems  and  other  media  may  carry  less  local  news  and  public 
 affairs  programming.  To  what  extent,  if  any,  should  our  analysis  of  competition  in  the  market  for  delivered  programming  differ  from  our  analysis  of  viewpoint  and  program  diversity? 

 c.  Video  Program  Production  Market 
 93.  Television  stations,  along  with  TV  networks,  cable  networks,  cable  operators,  DBS  networks  and  DBS  operators  purchase  or  barter  for  video  programming.  The  program  production  market 

 could  be  affected  if  relaxation  of  the  local  TV  ownership  rule  permits  a  broadcaster  to  exercise  significant  market  power  in  the  purchase  of  video  programming.  The  result  might  be  that  suppliers  of  video 
 programming  would  be  forced  to  sell  their  product  at  below  competitive  market  prices  in  order  to  gain  access  to  the  local  market  controlled  by  one  or  a  few  local  group  owners.  The  potential  for  the  exercise  of 
 such  market  power,  however,  depends  critically  on  the  absence  of  a  sufficient  number  of  competitors.  The  ever-  increasing  number  of  alternative  providers  of  delivered  video  programming  in  virtually  every 
 major  market  may  mitigate  the  potential  for  distorting  the  prices  of  video  programming  by  providing  program  producers  with  additional  outlets  for  their  product.  We  solicit  comment  on  this  point  and 
 evidence  on  the  potential  market  power  in  the  purchase  of  video  programming  if  we  were  to  relax  the  local  ownership  rule. 

 d.  Innovation 
 94.  We  seek  comment  on  the  impact  that  the  local  TV  ownership  limits  may  have  on  innovation  in  the  media  marketplace.  Does  our  current  rule  promote  innovation?  Would  relaxation  of  the 

 local  TV  ownership  rule  increase  incentives  or  resources  to  provide  innovative  broadcast  programming  or  new  broadcast-  based  technologies  or  services?  What  effect,  if  any,  would  a  relaxed  local  ownership  rule 
 have  on  the  transition  to  digital  television,  or  the  provision  of  other  services  by  a  local  TV  station?  Examples  of  innovations  that  have  been  withheld  from  the  media  marketplace  as  a  direct  result  of  local 

 171  Eighth  Annual  MVPD  Competition  Report,  17  FCC  Rcd  at  1271-  97,    55-  115.  Local  telephone  companies  may 
 provide  video  programming  services  in  their  telephone  service  areas  through  radio  communications,  as  a  cable  system,  or  by  means  of  an  open  video  system.  In  addition,  telephone  companies  may  provide  transmission  of  video 

 programming  on  a  common  carrier  basis.  Electric  utilities  possess  characteristics,  such  as  ownership  of  fiber  optic  networks  and  access  to  public  rights-  of-  way,  that  could  make  them  distributors  of  multichannel  video  programming. 
 172  While  competitive  satellite  alternatives  to  the  incumbent  wireline  MVPDs  are  developing  and  attracting  an 
 increasing  proportion  of  MVPD  subscribers,  most  consumers  have  limited  choices  among  video  distributors.  A  relatively  small  percentage  of  consumers  have  a  second  wireline  alternative,  such  as  an  OVS  or  overbuild  cable 

 system.  Among  the  several  wireless  technologies  used  to  provide  video  programming  service,  DBS  is  the  only  wireless  technology  currently  available  to  a  majority  of  subscribers  nationwide.  Eighth  Annual  MVPD  Competition 
 Report,  17  FCC  Rcd  at  1298,    119. 
32
 Federal  Communications  Commission  FCC  02-  249 
 33 
 TV  ownership  limits  would  be  particularly  useful  to  our  competitive  analysis. 
 4.  Localism 
 95.  We  seek  comment  on  whether  and  if  so,  how  the  local  TV  ownership  rule  affects  localism.  Does  the  local  TV  ownership  rule  affect  either  the  quantity  or  quality  of  local  news  and  other 

 programming  of  local  interest  produced  and  aired  by  local  stations?  Does  it  affect  the  local  selection  of  news  content  that  is  aired?  We  request  that  commenters  provide  data  on  the  impact  that  TV  duopolies 
 and  Local  Marketing  Agreements  (  LMAs)  173  have  had  on  the  production  of  local  programming  by  stations  involved  in  such  combinations  or  arrangements.  According  to  testimony  before  Congress  by  the 
 President  and  Chief  Operating  Officer  of  Viacom,  Inc.,  after  CBS  combination  with  Viacom,  which  resulted  in  six  duopoly  markets,  CBS  had,  or  planned  to  have,  half-  hour  news  spots  or  hourly  updates  on 
 stations,  in  five  different  markets,  that  had  not  run  such  programming  before.  174  We  invite  comment  on  whether  these  assertions  reflect  industry-  wide  trends.  We  ask  commenters  to  provide  empirical  data  that 
 demonstrates  increased  or  decreased  levels  of  local  programming  as  a  result  of  consolidation. 
 96.  In  the  1984  Multiple  Ownership  Order,  the  Commission  cited  awards  received  by  TV  stations  from  leading  professional  organizations  and  community  organizations  as  one  relevant  indicator 

 of  local  news  quality.  175  If  such  awards  are  a  reasonable  barometer  of  news  quality,  we  request  empirical  analyses  of  whether  these  awards  tend  to  be  earned  systematically  more  or  less  often  by  TV 
 duopolies  and/  or  LMAs. 
 97.  Local  TV  newscasts  and  local  public  affairs  shows  are  an  important  service  provided  by  local  television  stations.  The  cost  of  producing  those  programs  may  represent  a  significant  portion  of  a 

 stations  budget,  particularly  in  small  markets  where  the  fixed  costs  of  production  are  spread  over  a  relatively  small  customer  base.  We  seek  comment  on  whether  the  current  local  TV  ownership  rule  affects 
 the  viability  of  existing  local  newscasts  and/  or  potential  newscasts,  particularly  for  small  stations.  Commenters  asserting  that  a  relaxation  of  the  local  TV  ownership  rule  will  result  in  more  local  news  are 
 requested  to  specifically  address  whether  such  greater  output  outweighs  the  potential  loss  of  diverse  voices  among  stations  that  previously  had  separate  newscasts.  Are  there  other  factors  or  policy  goals  we 
 should  consider  in  determining  whether  to  retain,  modify  or  eliminate  the  local  TV  ownership  rule? 
 B.  Radio/  TV  Cross-  Ownership  Rule 
 98.  The  radio/  TV  cross-  ownership  rule  limits  the  number  of  commercial  radio  and  television  stations  one  entity  may  own  in  a  market.  The  rule  allows  common  ownership  of  at  least  one  television 

 station  and  one  radio  station  in  a  market.  In  larger  markets,  a  single  entity  may  own  additional  radio  stations  depending  on  the  number  of  other  voices  in  the  market.  176 

 173  An  LMA  or  a  time  brokerage  agreement  is  a  type  of  contract  that  generally  involves  the  sale  by  a  licensee  of 
 discrete  blocks  of  time  to  a  broker  that  then  supplies  the  programming  to  fill  that  time  and  sells  the  commercial  spot  advertisements  that  support  the  programming.  Local  TV  Ownership  Report  and  Order,  14  FCC  Rcd  at  12958,   

 126.  174 
 Karmazin  Testimony,  supra,  note  158,  at  9.  175 
 1984  Multiple  Ownership  Order,  100  F.  C.  C.  2d  at  32-  33,    48-  50.  176 
 47  C.  F.  R.    73.  3555(  c).  The  radio/  TV  cross-  ownership  rule  generally  allows  common  ownership  of  one  or  two  TV  stations  and  up  to  six  radio  stations  in  any  market  where  at  least  twenty  independent  voices  would  remain 

 post-  combination;  two  TV  stations  and  up  to  four  radio  stations  in  a  market  where  at  least  ten  independent  voices  would  remain  post-  combination;  and  one  TV  and  one  radio  station  notwithstanding  the  number  of  independent 
 voices  in  the  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 
 (continued....) 
33
 Federal  Communications  Commission  FCC  02-  249 
 34 
 99.  The  original  rule,  which  prohibited  radio/  TV  cross-  ownership,  was  adopted  in  1970.  In  adopting  the  rule,  the  Commission  stated  explicitly  that  the  principal  purpose  of  the  proposed  rules  is  to 
 promote  diversity  of  viewpoints  in  the  same  area    [W]  e  think  it  clear  that  promoting  diversity  of  ownership  also  promotes  competition.  177  The  Commission  adopted  a  presumptive  waiver  policy  to 
 permit  certain  radio/  TV  combinations  in  1989,  and  relaxed  the  rule  to  its  current  form  in  1999.  178  The  Commission  relaxed  the  radio/  TV  cross-  ownership  rule  to  balance  its  traditional  diversity  and 
 competition  concerns  with  its  desire  to  permit  broadcasters  and  the  public  to  realize  the  benefits  of  radio-television  common  ownership.  The  modifications  were  intended  to  ease  administrative  burdens  and 
 provide  predictability  to  broadcasters  in  structuring  their  business  transactions.  179  In  the  1998  Biennial  Report,  the  Commission  concluded  that  no  further  changes  were  warranted  because  the  radio/  TV  cross-ownership 
 rule  had  been  so  recently  relaxed,  but  it  committed  to  monitor  the  market  effects  of  our  deregulatory  actions  to  determine  whether  further  changes  are  warranted.  180 

 100.  We  ask  parties  to  comment  on  whether  the  radio/  TV  cross-  ownership  rule  is  necessary  in  the  public  interest  as  the  result  of  competition.  Does  it  continue  to  serve  its  original  purposes  of 
 promoting  economic  competition  and  diversity,  particularly  viewpoint  diversity?  Does  the  rule  promote  the  other  goals  we  set  forth  above,  including  the  various  forms  of  diversity  and  localism?  If  the  rule 
 serves  some  of  our  purposes  and  disserves  others,  does  the  balance  of  its  effects  argue  for  keeping,  revising,  or  abolishing  the  rule?  In  the  following  paragraphs,  we  explore  these  questions  in  more  detail. 

 101.  Some  of  the  issues  and  requests  for  data  contained  in  the  preceding  section  on  the  local  TV  ownership  rule  overlap  with  our  analysis  of  the  radio/  TV  cross-  ownership  rule.  For  example,  our 
 request  for  comment  on  consumers  sources  for  news  and  information  is  directly  relevant  to  both  the  local  TV  ownership  rule  and  radio/  TV  cross-  ownership  rule.  Issues  of  viewpoint  diversity  and  localism,  and 
 issues  of  competition  in  the  advertising  market  and  innovation,  are  also  relevant  to  both  the  local  TV  ownership  rule  and  the  radio/  TV  cross-  ownership  rule.  Where  appropriate,  we  will  apply  data  and 
 analysis  from  that  section  to  our  analysis  of  the  radio/  TV  cross-  ownership  rule. 
 1.  Viewpoint  Diversity 
 102.  The  current  radio/  TV  cross-  ownership  rule  counts  as  a  media  voice  each  independently  owned  and  operating  same-  market  full-  power  commercial  and  noncommercial  broadcast  television  and 

 radio  station.  It  also  counts  certain  types  of  daily  newspapers  and  cable  systems  because  such  media  are  an  important  source  of  news  and  information  on  issues  of  local  concern  and  compete  with  radio  and 
 television,  at  least  to  some  extent,  as  advertising  outlets.  181  Thus,  the  current  rule  implies  that  only  these 

 (...  continued  from  previous  page)  commercial  radio  stations.  For  this  rule,  a  voice  includes  independently  owned  and  operating  same-  market, 
 commercial  and  noncommercial  broadcast  TV,  radio  stations,  independently  owned  daily  newspapers  of  a  certain  circulation,  and  cable  systems  providing  generally  available  service  to  television  households  in  a  DMA,  provided 
 that  all  cable  systems  within  the  DMA  are  counted  as  a  single  voice.  Local  TV  Ownership  Report  and  Order,  14  FCC  Rcd  at  12950-  52,    111. 
 177  Amendment  of  Sections  73.  35,  73.  240  and  73.  636  of  the  Commissions  Rules  Relating  to  Multiple  Ownership  of 
 Standard,  FM  and  Television  Broadcast  Stations,  22  F.  C.  C.  2d  306,  313  (1970)    25,  recon.  granted  in  part,  28  F.  C.  C.  2d  662  (1971). 

 178  The  presumptive  waiver  policy  originally  applied  in  the  top  25  television  markets. 
 179  Local  TV  Ownership  Report  and  Order,  14  FCC  Rcd  at  12948,    102-  03. 
 180  1998  Biennial  Report,  15  FCC  Rcd  at  11073,    26. 
 181  Local  TV  Ownership  Report  and  Order,  14  FCC  Rcd  at  12953,  113. 
34
 Federal  Communications  Commission  FCC  02-  249 
 35 
 particular  types  of  media  contribute  to  viewpoint  diversity.  182  The  rule  does  not  account  for  news  available  on  Internet  web  sites,  DBS,  cable  overbuilds,  magazines  or  weekly  newspapers.  In  our  1984 
 review  of  the  national  TV  ownership  rule,  however,  we  concluded  that,  with  respect  to  viewpoint  diversity,  the  market  includes  a  wide  variety  of  media  types  engaged  in  the  dissemination  of  ideas, 
 including  not  only  television  and  radio  outlets,  but  also  cable,  other  video  media,  and  numerous  print  media  as  well.  183  Should  those  media  be  counted  in  a  new  voice  test  for  radio/  TV  cross-  ownership,  and 
 if  so,  to  what  extent?  Should  we  count  each  independently  owned  cable  network  carried  by  a  cable  system  in  a  market  as  one  voice?  Does  competition  among  these  media  render  the  current  restriction 
 unnecessary?  Finally,  we  seek  comment  on  any  alternatives  to  a  voice  test. 
 2.  Localism 
 103.  In  1989,  the  Commission  concluded  that  the  cost  savings  and  aggregated  resources  of  combined  radio-  television  operations  appeared  to  contribute  to  more  news,  public  affairs  and  other  non-entertainment 

 programming.  Based  in  part  on  that  finding,  the  Commission  adopted  a  new  presumptive  waiver  policy  allowing  increased  radio-  television  ownership  in  the  top-  25  television  markets  and  in 
 certain  situations  involving  the  acquisition  of  failed  stations.  It  anticipated  that  this  policy  would  lead  to  a  limited  number  of  additional  radio-  television  combinations  that  would  enable  the  Commission  to 
 obtain  additional  evidence  regarding  the  advantages  and  disadvantages  of  maintaining  the  cross-ownership  rule.  184  We  seek  comment  on  the  quantities  of  local  news  and  public  affairs  programming 
 provided  by  TV-  radio  combinations  and  stand-  alone  TV  and  radio  stations  in  those  same  markets.  Are  combinations  and  stand-  alone  stations  providing  comparable  quantities  of  such  programming?  If  TV-radio 
 combinations  produce  a  greater  quantity  of  news  programming  than  non-  combined  stations,  does  that  suggest  that  greater  cross-  ownership  among  TV  and  radio  stations  would  produce  more  news  and/  or 
 public  affairs  programming?  If  the  quantity  of  news  and  public  affairs  is  the  same  or  less  on  cross-  owned  stations,  does  it  suggest  the  opposite? 

 3.  Competition 
 104.  In  analyzing  the  relationship  of  the  radio/  TV  cross-  ownership  rule  and  our  goal  of  competition,  the  key  issue  under  our  traditional  competition  framework  is  the  extent  to  which  radio  and 

 television  stations  compete  with  each  other  to  attract  advertising  revenue.  The  stronger  the  competition  between  these  two  outlets,  the  more  relevant  a  cross-  ownership  limit  may  be.  Relaxation  or  elimination 
 of  the  rule  may  not  harm  competition  if  the  record  shows  that  there  is  weak  substitution  between  radio  and  television  advertising.  We  welcome  comment,  as  well  as  any  empirical  studies,  on  the  substitution 
 between  radio  and  television  advertising.  We  also  wish  to  consider  what  bearing  advertising  substitution  between  radio,  television,  and  other  outlets,  such  as  newspapers,  magazines,  and  Internet  websites,  may 
 have  on  this  rule.  Any  empirical  work  demonstrating  such  advertising  substitution  is  strongly  encouraged. 

 105.  We  are  also  concerned  with  the  impact  that  radio/  TV  cross-  ownership  limits  may  have  on  innovation  in  the  media  marketplace.  Does  our  current  rule  promote  innovation?  Would  relaxation  of  the 
 radio/  TV  cross-  ownership  rule  increase  incentives  to  provide  innovative  broadcast  programming  or  new  broadcast-  based  technologies  or  services?  Examples  of  innovations  that  have  been  withheld  from  the 

 182  The  rule  also  excludes  non-  English  language  daily  newspapers    for  example,  El  Diario  La  Prensa  in  New  York 
 City  and  La  Opinion  in  Los  Angeles    notwithstanding  that  the  rule  counts  Spanish-  language  or  other  non-  English-language  radio  and  television  stations. 

 183  1984  Multiple  Ownership  Order,  100  F.  C.  C.  2d  at  25,    25. 
 184  Amendment  of  Section  73.  3555  of  the  Commissions  Rules,  the  Broadcast  Multiple  Ownership  Rules,  4  FCC  Rcd 
 1741  (1989). 
35
 Federal  Communications  Commission  FCC  02-  249 
 36 
 media  marketplace  as  a  direct  result  of  radio/  TV  cross-  ownership  limits  would  be  particularly  useful  to  our  competitive  analysis.  Are  there  other  factors  or  policy  goals  we  should  consider  in  determining 
 whether  to  retain,  modify,  or  eliminate  the  radio/  TV  cross-  ownership  rule? 
 C.  Alternative  Means  to  Achieve  Goals 
 106.  If  the  record  demonstrates  that  the  current  ownership  rules  are  no  longer  necessary  to  actually  serve  the  stated  goals  and  the  public  interest,  we  seek  comment  on  the  most  appropriate  means  to 

 achieve  the  stated  goals.  We  see,  at  a  minimum,  three  alternatives:  (1)  case-  by-  case  approach;  (2)  outlet  specific  rules;  and  (3)  a  single  local  media  ownership  rule  covering  all  outlets.  Often,  bright  line 
 structural  regulations  have  the  effect  of  being  both  over-  inclusive  and  under-  inclusive.  That  is,  a  prophylactic  structural  rule  may  prohibit  a  combination  that  poses  little  competitive  or  consumer  harm,  or 
 entails  substantial  consumer  benefits.  Or,  such  a  limit  may  allow  anti-  competitive  combinations  that  nevertheless  satisfy  the  rule.  We  ask  whether  our  structural  regulations  should  be  replaced  with  a  case-by- 
 case  review  of  transactions  so  that  a  fact-  specific  analysis  of  the  impact  on  our  policy  goals  can  be  conducted.  In  the  alternative,  or  in  conjunction  with  a  case-  by-  case  review,  should  the  Commission  rely 
 solely  on  the  unfettered  marketplace  to  achieve  its  stated  policy  goals?  If  we  decide  to  retain  structural  rules,  should  the  Commission  retain  a  set  of  outlet  specific  rules  similar  in  form  to  our  current  rules? 

 107.  We  recognize  that  a  pure  case-  by-  case  approach  could  create  an  unnecessary  level  of  uncertainty  among  media  firms.  Such  uncertainty  could  be  mitigated  by  one  or  more  soft  ownership 
 caps.  A  soft  cap  would  identify  a  certain  level  of  ownership  concentration  below  which  a  transaction  would  be  presumed  lawful,  and  above  which  the  transaction  would  be  unlikely  to  be  permitted,  but  would 
 be  reviewed  by  the  Commission  on  a  case-  by-  case  basis.  If  we  adopted  one  or  more  soft  caps,  we  anticipate  identifying  the  factors  we  would  consider  in  evaluating  proposed  above-  cap  transactions.  We 
 seek  comment  on  these  matters. 
 108.  If  we  decide  to  retain  structural  rules,  should  the  Commission  retain  a  set  of  outlet  specific  rules  similar  in  form  to  our  current  rules?  This  type  of  ownership  rule  structure  may  permit  the 

 Commission  to  limit  specific  harms  and  promote  specific  benefits  in  a  more  targeted  fashion  than  would  case-  by-  case  review.  For  example,  if  we  found  that  two  outlet  types  were  both  the  undisputed  leaders  in 
 contributing  to  viewpoint  diversity  and  were  the  only  two  competitors  in  a  particular  advertising  market,  we  would  explore  whether  a  cross-  ownership  limitation  was  necessary  to  preserve  viewpoint  diversity 
 and  economic  competition. 
 109.  As  suggested  by  this  hypothetical,  however,  such  an  outlet  specific  method  could  require  persuasive  evidence  that  particular  outlets  are  sufficiently  unique  that  they  merit  treatment  separate  from 

 other  outlets.  The  Sinclair  court  held  that  we  failed  to  justify  applying  disparate  voice  tests  to  broadcast  television  stations  in  the  local  TV  multiple  ownership  and  the  radio/  TV  cross-  ownership  rules.  For  this 
 reason,  should  the  Commission  adopt  a  local  single  media  ownership  rule  that  is  applicable  to  all  or  some  media  outlets  and  dependent  on  the  number  of  independent  voices  in  any  particular  market?  This  single 
 rule  option  is  intended  to  address  only  those  instances  in  which  the  ownership  of  multiple  media  outlets  included  a  broadcast  station.  A  single  rule  applicable  to  all  media  might  help  avoid  the  type  of 
 inconsistency  criticized  by  the  Sinclair  court.  The  goal  of  a  single  rule  would  be  to  replace  outlet  specific  rules  that  no  longer  may  be  justified  by  themselves  but  which,  viewed  collectively,  may  continue  to  be 
 necessary  in  some  form  to  promote  competition,  diversity  and  localism.  We  seek  comment  on  these  proposals. 

 110.  A  key  factor  in  whether  we  pursue  a  single  framework  or  more  outlet  specific  policies,  or  other  options,  is  the  feasibility  of  synthesizing  the  results  of  our  various  inquiries.  We  have  identified  the 
 promotion  of  diversity,  competition,  and  localism  as  potential  guiding  principles  in  setting  ownership  policies.  It  is  conceivable  that  certain  media  outlets  are  substitutes  for  diversity  purposes,  but  are  not 
 substitutes  from  the  perspective  of  advertisers  or  program  producers.  In  that  situation,  one  option  might 
36
 Federal  Communications  Commission  FCC  02-  249 
 37 
 be  to:  (1)  maintain  same-  outlet  restrictions  (e.  g.,  a  limit  on  the  number  of  commonly-  owned  radio  stations  per  market),  perhaps  based  on  market  size,  in  order  to  preserve  economic  competition  among  those 
 outlets  that  directly  compete  with  each  other;  and  (2)  eliminate  the  cross-  ownership  rules  based  on  clear  evidence  that  Americans  today  rely  on  a  far  wider  array  of  media  outlets  than  they  did  decades  ago,  when 
 the  cross-  ownership  rules  were  first  adopted.  Or,  if  the  evidence  supported  a  finding  that  certain  different  types  of  outlets  were  particularly  important  news  sources,  we  might  replace  the  cross-  ownership  limits 
 with  an  overall  per-  market  cap  on  media  outlets.  We  seek  comment  on  whether  this  type  of  ownership  framework  would  be  an  appropriate  response  to  a  record  that  showed  that  the  markets  for  advertising  and 
 viewpoint  diversity  are  not  coterminous.  If  we  adopt  such  a  framework,  should  we  adopt  grandfathering  provisions,  and  if  so,  what  limits  should  we  set? 

 111.  Another  approach  to  setting  a  single  ownership  rule  would  be  to  focus  on  promoting  viewpoint  diversity.  Such  a  rule  might  be  appropriate  if  evidence  in  the  record  were  to  show  that  certain 
 media  constitute  an  "essential  class"  of  news  outlets  for  Americans  today.  If  the  evidence  before  us  were  to  show,  for  example,  that  local  television  stations,  local  cable  operators,  and  daily  newspapers  were  a 
 distinct  group  of  influential  news  outlets,  we  might  consider  a  local  media  ownership  rule  that  permitted  one  entity  to  own  up  to  a  certain  percentage  of  such  outlets  in  a  local  market.  Such  a  rule  could  limit  the 
 common  ownership  of  cable  systems  and  broadcast  stations  in  a  market.  We  seek  comment  on  the  implications  of  such  a  result.  In  setting  the  appropriate  percentage  cap,  we  would  rely  partly  on  the  extent 
 to  which  the  evidence  indicated  that  all  other  media  --  such  as  radio,  the  Internet,  weekly  newspapers,  magazines,  cable  and  DBS  --  were  significant  (though  not  "essential")  outlets  for  Americans  to  obtain 
 news  and  information.  We  seek  comment  on  this  option  and,  in  particular,  on  whether  such  a  rule  aimed  at  promoting  viewpoint  diversity  would  effectively  promote  competition  in  local  media  markets  as  well. 
 By  limiting  application  of  this  rule  to  only  those  instances  in  which  the  ownership  of  multiple  media  outlets  includes  a  broadcast  station,  would  we  impair  broadcasters  ability  to  compete  in  todays  media 
 marketplace? 
 D.  Voice  or  Other  Test 
 112.  We  next  address  three  subjects  related  to  a  so-  called  voice  test  to  assure  competition  and  diversity  in  a  given  market:  (1)  how  to  reformulate  our  mechanism  for  measuring  diversity  and 

 competition  in  a  market;  (2)  how  to  accord  different  weights  to  different  media  types  to  the  extent  that  they  are  relied  on  by  consumers  differently;  and  (3)  how  to  account  for  diversity  and  competition  via 
 MVPDs  and  the  Internet  in  a  revised  voice  test. 
 1.  Creating  a  New  Metric 
 113.  In  this  section,  we  explore  how  to  reformulate  our  mechanism  for  measuring  diversity  and  competition  in  a  given  market.  All  four  of  our  existing  local  broadcast  ownership  rules  are  aimed  at 

 preserving  diversity  and  competition.  The  radio/  TV  cross-  ownership  rule  employs  a  voice  test  that  allows  varying  levels  of  broadcast  ownership  based  on  the  number  of  broadcast  stations,  major  newspapers  and 
 cable  systems  in  the  market.  Such  market-  specific  mechanisms,  properly  implemented,  represent  an  effective  mechanism  for  addressing  media  ownership  limits  in  widely  divergent  market  conditions. 

 114.  Thus,  we  initially  explore  whether  to  continue  to  use  a  voice  test  to  guarantee  a  minimum  level  of  diversity  and  competition  in  a  given  market.  The  two  current  voice  tests  collectively  include 
 television  stations,  cable  systems,  radio  stations,  and  daily  newspapers  as  "voices."  185  Other  media  that  we  could  consider  include  Internet  web  sites  (including  video  services  and  online  radio  stations),  DARS, 
 magazines,  DBS  operators,  weekly  newspapers,  and  national  newspapers.  We  request  comment,  including  empirical  evidence,  on  whether  each  of  these  additional  outlets  should  be  counted  in  a  revised 

 185  For  a  description  of  the  two  current  voice  tests,  see  supra  Section  V. 
37
 Federal  Communications  Commission  FCC  02-  249 
 38 
 voice  test. 
 2.  Weighting  the  Voices 
 115.  If  data  show  that  consumers  rely  to  varying  degrees  on  different  types  of  outlets  for  news  and  public  affairs,  we  seek  comment  on  how  we  might  design  a  test  that  accords  different  weights  to 

 different  outlet  types.  For  example,  it  may  be  appropriate  to  consider  using  weights  based  on  such  factors  as  audience  reach,  ownership  structure,  the  percent  of  programming  or  print  content  devoted  to  local 
 news,  and/  or  consumer  use  patterns.  Such  an  approach  could  be  a  more  accurate  measure  of  diversity  and  competition  than  the  binary  voice  model  (i.  e.,  an  outlet  either  is  or  is  not  a  voice),  but  may  be  difficult 
 to  design  and  administer  over  time  as  industry  conditions  change.  This  raises  the  question  of  how  to  account  for  such  changes  in  a  manner  that  does  not  undermine  certainty  and  predictability. 

 116.  If  we  pursue  a  weighted  approach  to  measuring  diversity  and  competition  in  a  given  market,  we  would  need  a  way  to  quantify  the  relative  contributions  of  each  type  of  outlet.  We  are 
 uncertain  whether  traditional  all-  news  programming  should  continue  to  be  the  only  measure  of  an  outlet's  role  in  the  market,  or  whether  other  types  of  information  that  people  obtain  from  the  media  should  count 
 as  well.  Such  quasi-  news  sources  might  include  cable  and  DBS  channels  covering  business  or  sports,  and  websites  devoted  to  those  subjects.  In  addition,  some  non-  news  programming  on  broadcast  television, 
 such  as  60  Minutes,  may  be  similar  to  news  programming  in  certain  respects.  We  seek  comment  on  the  relevance  of  these  sources  of  news  and  information  to  a  weighting  system  for  various  media  outlets. 

 117.  We  also  seek  comment  on  the  relevance  of  current  MVPD  and  Internet  penetration  levels  in  considering  the  contributions  of  MVPDs  and  the  Internet  to  diversity  and  competition.  Broadcast 
 television  and  radio  are  available  to  virtually  all  Americans  who  purchase  a  television  or  radio,  but  the  Internet,  DBS,  and  cable  require  monthly  subscriptions.  Does  this  fact  support  a  difference  in  the 
 treatment  of  these  media,  such  as  a  rule  that  counts  only  broadcast  television  and  radio?  Or  is  the  fact  that  some  media  are  free  and  others  require  subscriptions  immaterial  to  their  impact  on  the  American 
 people?  In  the  past  decade,  non-  broadcast  media  have  become  widely  available  and  have  been  subscribed  to  by  the  majority  of  American  homes.  186  Are  they  now  ubiquitous?  Do  the  Americans  who  still 
 consume  only  broadcast  television  and  radio  have  any  distinguishing  features,  such  as  location  or  level  of  income  or  education? 

 118.  Traditional  voice  tests  do  not  consider  the  entire  range  of  news  sources  available  to  the  public.  A  vast  majority  of  people  may  choose  to  receive  news  and  information  from  a  single  source  (e.  g., 
 a  local  television  broadcast).  However,  this  fact  does  not  necessarily  imply  that  the  public  has  limited  access  to  many  other  sources  of  news  and  information  (including  the  Internet,  for  example).  In  other 
 words,  a  lack  of  diversity  in  the  outlets  that  consumers  typically  view  or  listen  to  does  not  necessarily  imply  that  consumers  have  limited  access  to  diverse  viewpoints  or  to  multiple  sources  of  news  and 
 information.  We  seek  recommendations  on  how  to  accurately  capture  the  vibrancy  and  variety  of  todays 
 186  Eighth  Annual  MVPD  Competition  Report,  17  FCC  Rcd  at  1254-  55,    17  (between  80%  and  97%  of  homes  are 
 passed  by  cable  systems),  1330  App.  B,  Table  B-  1  (subscription  to  cable  service  is  64%),  1338  App.  C,  Table  C-  1  (DBS  subscription  is  16%  and  rising).  Narrowband  Internet  access  is  now  almost  universally  available,  see  Inquiry 

 Concerning  the  Deployment  of  Advanced  Telecommunications  Capability  to  All  Americans  in  a  Reasonable  and  Timely  Fashion,  and  Possible  Steps  to  Accelerate  Such  Deployment  Pursuant  to  Section  706  of  the 
 Telecommunications  Act  of  1996,  14  FCC  Rcd  2398,  2432  (1999)    64.  About  60%  of  American  homes  subscribe  to  Internet  access.  Eighth  Annual  MVPD  Competition  Report,  17  FCC  Rcd  at  1285-  86,    89.  Broadband  Internet 
 access  is  widely  available  and  more  than  10%  of  homes  subscribe.  Inquiry  Concerning  High-  Speed  Access  to  the  Internet  Over  Cable  and  Other  Facilities,  Internet  Over  Cable  Declaratory  Ruling,  Appropriate  Regulatory 
 Treatment  for  Broadband  Access  to  the  Internet  Over  Cable  Facilities,  17  FCC  Rcd  4798,  4803  (2002)    9  &  n.  24,  appeal  pending  sub  nom.  Brand  X  Internet  Services  v.  FCC,  9th  Cir.  No.  02-  70518  (and  consolidated  cases)  (filed 
 Mar.  22,  2002). 
38
 Federal  Communications  Commission  FCC  02-  249 
 39 
 media  market  in  a  framework  that  is  predictable,  adaptable  to  future  marketplace  changes,  and  judicially  sustainable. 
 3.  Accounting  for  Diversity  and  Competition  Via  MVPDs  and  the  Internet 
 119.  MVPDs  and  the  Internet  have  posed  unique  challenges  under  past  formulations  of  the  voice  test.  Unlike  TV  and  radio  stations,  MVPDs  and  the  Internet  are  single  outlets  furnishing  access  to 

 multiple  news  sources.  In  analyzing  whether  and  how  MVPDs,  such  as  cable  systems,  should  be  counted  as  voices,  we  must  examine  not  only  how  much  content  is  available,  but  also  who  controls  viewers 
 access  to  it.  We  decided  in  1999,  in  the  context  of  the  radio/  TV  cross-  ownership  rule,  to  count  a  cable  system  as  one  voice  because  most  programming  is  either  originated  or  selected  by  the  cable  system 
 operator,  who  thereby  ultimately  controls  the  content  of  such  programming.  187  However,  cable  systems  also  give  viewers  access  to  much  information  on  matters  of  public  concern.  For  example,  it  appears  that  a 
 typical  household  that  subscribed  to  cable  (or  DBS)  service  could  find    on  CNN,  CNBC,  MSNBC,  Fox  News,  and  C-  SPAN    at  least  as  many  sources  of  information  about  national  issues  as  it  would  find  on 
 multiple  broadcast  TV  and  radio  stations.  It  also  appears,  however,  that  most  MVPDs  carry  largely  the  same  all-  news  channels  and  other  channels  with  specialized  news  and  information  such  as  business, 
 sports,  and  weather.  Thus,  under  one  possible  approach,  we  could  choose  to  count  CNN  as  one  voice  even  if  it  were  carried  in  a  community  by  the  largest  cable  operator,  an  overbuilder,  and  two  or  more  DBS 
 providers. 
 120.  Another  approach  would  be  to  count  each  independent  owner  as  a  voice,  so  that  if  one  entity  owned  a  broadcast  station,  a  cable  system  and  several  channels  on  it,  an  Internet  access  service,  and 

 a  web  page  in  the  same  area,  it  would  count  as  one  voice  instead  of  many.  Although  we  have  listed  many  sources  of  media  programming  and  distribution,  industry  consolidation  and  the  reduction  in  the  number  of 
 owners  could  diminish  diversity  and  competition  across  these  outlets. 
 121.  We  invite  comment  on  DBSs  contribution  to  diversity  and  competition,  and  whether  DBS  should  be  considered  a  voice  in  any  rule  we  adopt.  At  a  minimum,  DBS  contributes  to  viewpoint 

 diversity  through  its  editorial  control  over  channel  selection.  In  addition,  DBS  systems  are,  like  cable  systems,  platforms  and  outlets  for  far  more  channels  and  programs  than  can  be  presented  by  broadcasters. 
 In  the  past  we  have  not  counted  DBS  as  a  voice  because  it  did  not  then  provide  local  programming.  188  We  invite  comment  as  to  whether  that  rationale  is  still  valid  today.  Should  we  consider  DBS  a  voice 
 because  of  the  range  of  programs  and  channels  it  provides?  Do  these  systems  contribute  to  diversity  and  competition  regardless  of  the  extent  to  which  DBS  provides  local  programming? 

 122.  In  addition,  DBS  operators  transmission  of  local  broadcast  channels  has  greatly  increased  since  the  enactment  of  the  Satellite  Home  Viewer  Improvement  Act  of  1999  (  SHVIA),  which 
 permitted  DBS  operators  to  retransmit  local  broadcast  signals  into  local  markets.  189  We  ask  whether,  in  light  of  SHVIA,  DBS  can  fairly  be  classified  as  an  outlet  for  the  purpose  of  any  new  voice  test.  Does  the 
 local  programming  available  on  DBS  merely  reproduce  the  information  obtainable  via  over-  the-  air  television  and  cable?  Does  DBS  provide  a  source  of  diversity  and  competition  to  consumers  in  rural 
 areas  that  are  not  served  by  local  TV  stations  or  cable? 
 123.  We  request  comment  on  whether  the  foregoing  analysis  of  cable  and  DBS  is  correct. 

 187  Local  TV  Ownership  Report  and  Order,  14  FCC  Rcd  at  12953,    113. 
 188  Id.  at  12954,    114. 
 189  Pub.  L.  No.  106-  113,  113  Stat.  1501,  app.  I  at  1501A-  523  and  544;  17  U.  S.  C.    122;  47  U.  S.  C.    338.  At 
 present,  EchoStar  and  DirecTV  each  provide  local-  into-  local  service  to  approximately  40  of  210  DMAs.  See,  e.  g.,  Dish  Network  DirecTv  Satellite  TV,  http://  satellite-  dish.  virtualave.  net/  local-  networks.  htm  (visited  July  10,  2002). 
39
 Federal  Communications  Commission  FCC  02-  249 
 40 
 Based  on  that  analysis,  should  we  count  these  media  as  voices,  and  if  so,  how?  For  example,  where  there  are  two  cable  systems  serving  the  same  area,  should  we  count  each  as  a  voice?  Or,  should  we  count,  as 
 independent  voices,  each  independently  owned  source  of  news  and  public  affairs  programming  that  is  made  available  to  cable  and  DBS  subscribers?  When  the  same  programming  is  made  available  in  a 
 community  by  more  than  one  MVPD,  e.  g.,  if  each  one  provides  CNN,  should  that  count  as  one  voice  or  more?  How,  if  at  all,  should  the  same  question  be  answered  for  broadcast  stations  in  the  same  area  that 
 carry  programs  from  the  same  source,  such  as  a  single  news  broadcast?  On  an  AOL  Time  Warner  cable  system,  for  example,  should  CNN  count  as  a  voice  independent  of  AOL  Time  Warner?  Should  we  count 
 each  independently  owned  network  carried  by  a  cable  system  or  DBS  provider  in  a  market  as  one  voice?  On  cable  television,  do  PEG  channels  carry  enough  information  and  viewpoints  to  count  as  one  or  more 
 voices?  How  common  are  locally  or  regionally  oriented  cable  offerings  such  as  New  England  Cable  News,  190  the  borough-  specific  cable  channels  in  New  York  City,  191  and  NorthWest  Cable  News  that 
 serves  Seattle  and  the  Pacific  Northwest?  192  Finally,  we  seek  comment  on  the  ability  of  cable  operators  and  DBS  providers  to  act  as  content  gatekeepers  by  choosing  which  programming  is  selected  to  fill  the 
 available  channel  capacity.  Should  their  status  as  gatekeepers  affect  whether  or  how  we  count  them  as  voices? 

 124.  Like  cable  and  DBS,  the  Internet  also  presents  unique  challenges  in  the  context  of  diversity  and  competition.  In  1999,  we  decided  not  to  count  the  Internet  as  a  voice,  in  part  because  many 
 still  do  not  have  access  to  this  new  medium.  193  Is  the  Internet  now  so  widely  accessible  that  it  should  count  as  a  voice?  Are  there  characteristics  of  the  acquisition  of  information  on  the  Internet,  such  as  the 
 need  to  click  a  hyperlink  or  key  in  a  websites  Internet  address,  that  make  it  different  from  broadcasting  such  that  we  should  not  count  it?  194  Or,  should  these  characteristics  of  the  Internet  affect  the  significance 
 we  give  the  Internet?  If  so,  should  it  count  as  one  voice  or  many?  On  the  Internet,  how  much  news  and  how  many  viewpoints  are  original;  that  is,  not  merely  re-  purposed  content  that  also  is  available  from  local 
 and  national  media  outlets,  such  as  TV  stations,  networks,  and  newspapers?  We  assume  that  the  Internet  permits  the  user  to  access  any  news  source  having  a  presence  on  the  World  Wide  Web.  Is  there  any 
 instance  of  an  Internet  service  provider  (  ISP)  or  other  entity  acting  as  an  Internet  gatekeeper  by  denying  a  subscriber  access  to  a  news  source  on  the  World  Wide  Web?  Is  the  role  of  a  gatekeeper 
 different  between  the  Internet  and  cable  or  DBS?  We  also  assume  that,  unlike  cable  or  DBS,  the  Internet  has  unlimited  capacity  such  that  there  is  no  limit  on  the  number  of  news  sources  that  a  user  can  reach.  On 
 the  other  hand,  some  ISPs  feature  particular  news  sources  on  their  home  pages.  195  We  seek  comment  on  these  assumptions  and  their  relevance  to  our  analysis  of  diversity  and  competition. 

 VI.  NATIONAL  OWNERSHIP  RULES 
 125.  In  this  section  we  consider  whether  the  national  TV  ownership  rule  196  and  the  dual 

 190  See  New  England  Cable  News,  http://  www.  necn.  com  (visited  July  10,  2002). 
 191  See  NY1  News,  http://  www.  ny1.  com/  Boroughs/  bronx.  html  (visited  July  10,  2002). 
 192  See  NWCN,  http://  www.  nwcn.  com,  (visited  July  10,  2002).  See  generally  Non-  Stop  News,  http://  www. 
 rtnda.  org/  resources/  nonstopnews/  index.  html  (visited  July  10,  2002).  193 
 Local  TV  Ownership  Report  and  Order,  14  FCC  Rcd  at  12953,    114.  194 
 See  Bruce  M.  Owen,  THE  INTERNET  CHALLENGE  TO  TELEVISION  at  8  (  Internet  television  requires  that  one  pay  close  attention.  There  is  nothing  passive  about  it.  Like  a  video  game,  highly  interactive  programs  on  Internet  TV 

 require  as  much  focused  attention  as  work  or  active  sports.)  (Harvard  Univ.  Press,  Cambridge  MA,  1999).  195 
 For  example,  Comcasts  broadband  Internet  access  first  page  includes  Associated  Press  news  stories.  See  Comcast  High-  Speed  Internet,  http://  www.  comcast.  net/  comcast.  html  (visited  Aug.  6,  2002). 

 196  47  C.  F.  R.    73.3555(  e). 
40
 Federal  Communications  Commission  FCC  02-  249 
 41 
 network  rule  197  continue  to  meet  the  statutory  standard.  198  Unlike  the  local  TV  ownership  rule  and  the  radio/  TV  cross-  ownership  rule,  these  two  rules  do  not  directly  limit  local  media  ownership,  although  they 
 may  indirectly  affect  viewpoint  diversity  in  a  given  local  market  by  limiting  network  ownership  across  markets.  As  such,  they  appear  to  play  a  less  direct  role  in  our  core  policy  concern  of  viewpoint  diversity, 
 although  we  invite  comment  on  this  issue. 
 A.  National  TV  Ownership  Rule 

 126.  The  national  TV  ownership  rule  prohibits  an  entity  from  owning  television  stations  that  collectively  would  reach  more  than  35%  of  U.  S.  television  households.  Reach  is  defined  as  the  number  of 
 television  households  in  the  TV  DMA  to  which  each  owned  station  is  assigned.  199  VHF  stations  are  attributed  with  all  TV  households  in  the  DMA;  UHF  stations  are  attributable  with  50%  of  the  DMA 
 households  (the  UHF  discount).  200 
 127.  The  Commission  first  adopted  national  ownership  restrictions  for  television  broadcast  stations  in  1941  by  imposing  numerical  caps  on  the  number  of  stations  that  could  be  commonly-  owned.  201 

 The  rule  was  amended  a  number  of  times  thereafter  to  increase  the  cap  on  the  number  of  television  stations.  202  In  1985,  the  station  cap  was  raised  from  7  to  12  and  an  audience  reach  limit  of  25%  was 
 added.  203  The  stated  purposes  of  these  early  national  TV  ownership  limits  were,  in  general,  to  balance  several  goals.  On  the  one  hand,  the  Commission  wanted  to  promote  competition  and  diversification  of 
 program  and  service  viewpoints.  204  On  the  other  hand,  common  ownership  of  stations  in  different  areas  allows  efficiencies  to  be  realized,  205  and  the  Commission  raised  numerical  limits  as  the  number  of 

 197  47  C.  F.  R.    73.658(  g). 
 198  1996  Act,    202(  h). 
 199  47  C.  F.  R.    73.  3555(  e)(  1).  In  the  1999  National  Television  Ownership  Report  and  Order,  the  Commission 
 clarified  that  no  market  will  be  counted  more  than  once  when  calculating  the  35%  cap.  DMAs,  rather  than  Arbitrons  Areas  of  Dominant  Influence,  are  used  to  define  a  stations  market  for  the  purpose  of  calculating  national 

 audience  reach.  Broadcast  Television  National  Ownership  Rules,  Review  of  the  Commissions  Regulations  Governing  Television  Broadcasting,  Television  Satellite  Stations  Review  of  Policy  and  Rules,  15  FCC  Rcd  20743 
 (1999).  200 
 47  C.  F.  R.    73.  3555(  e)(  2).  Section  73.  3555(  e)(  2)  explains  that  national  audience  reach  is  based  on  the  number  of  television  households  in  DMAs,  and  that  UHF  television  stations  are  credited  with  reaching  only  50%  of  the 

 television  households  in  the  DMA.  201 
 Broadcast  Services  Other  Than  Standard  Broadcast,  6  Fed.  Reg.  2282,  2284-  85  (May  6,  1941).  202 
 Rules  Governing  Broadcast  Services  Other  Than  Standard  Broadcast,  9  Fed.  Reg.  5442  (May  23,  1944)  (raising  the  ownership  limit  from  three  to  five  stations);  Amendment  of  Multiple  Ownership  Rules,  43  F.  C.  C.  2797,  2801-  02 

 (1954)    14  (raising  the  ownership  limit  from  five  to  seven  stations);  1984  Multiple  Ownership  Order,  100  F.  C.  C.  2d  at  18,    5  (establishing  a  six-  year  transitional  period  during  which  common  ownership  of  up  to  twelve  stations 
 would  be  permitted).  203 
 See  1985  Multiple  Ownership  Reconsideration  Order,  100  F.  C.  C.  2d  at  88-  92,    34-  41  (  The  audience  reach  cap  was  defined  as  25%  of  the  national  audience,  calculated  as  a  percentage  of  all  Arbitron  ADI  television 

 households.).  204 
 See  1985  Multiple  Ownership  Reconsideration  Order,  100  F.  C.  C.  2d  at  97    50-  52;  1984  Multiple  Ownership  Order,  100  F.  C.  C.  2d  at  21-  23  &  nn.  8-  10,  17,    13-  17;  Amendment  of  Sections  73.  35,  73.  240,  and  73.636  of  the 

 Commission's  Rules  Relating  to  Multiple  Ownership  of  AM,  FM  and  Television  Broadcast  Stations,  95  F.  C.  C.  2d  360,  361-  62  &  nn.  7-  9,  366  &  nn.  24-  25  (1983)    3,  11. 

 205  Amendment  of  Multiple  Ownership  Rules,  43  F.  C.  C.  at  2801-  02,    14. 
41
 Federal  Communications  Commission  FCC  02-  249 
 42 
 television  stations  increased.  206 
 128.  In  the  1996  Act,  Congress  directed  the  Commission  to  eliminate  the  station  cap  and  raise  the  national  reach  limit  from  25%  to  35%.  207  In  the  1998  Biennial  Report,  the  Commission  addressed  the 

 issue  of  whether  or  not  to  modify  or  eliminate  the  35%  national  audience  reach  limit.  The  Commission  determined  that  the  changes  made  in  1999  to  the  local  television  ownership  rule  should  be  observed  and 
 assessed  before  making  any  further  changes  to  the  national  limit.  It  also  found  that  many  group  owners  had  acquired  large  numbers  of  stations  nationwide,  and  that  this  trend  needed  further  observation.  208  The 
 Commission  stated  that  consolidation  of  ownership  of  television  stations  in  the  hands  of  a  few  national  networks  would  not  serve  the  pubic  interest.  The  Commission  reasoned  that  national  networks  have  a 
 strong  economic  interest  in  having  their  affiliates  clear  (that  is,  decide  to  broadcast)  all  network  programming,  and  independently  owned  affiliates  play  a  valuable  counterbalancing  role  because  they 
 have  the  right  to  decide  whether  to  clear  network  programming  or  to  air  instead  programming  from  other  sources  that  they  believe  better  serves  the  needs  and  interests  of  the  local  communities  to  which  they  are 
 licensed.  It  also  said  that  independent  ownership  of  stations  increases  the  diversity  of  programming  by  providing  an  outlet  for  non-  network  programming.  209  Additionally,  the  Commission  referred  to  possible 
 competitive  problems  in  the  national  markets  for  advertising  and  program  production.  210  As  discussed  below,  the  court  in  Fox  Television  has  remanded  the  Commissions  decision  in  the  1998  Biennial  Review 
 not  to  consider  further  changes  in  the  national  TV  ownership  rule.  In  this  section,  we  invite  comment  on  whether  to  retain,  eliminate,  or  modify  the  national  TV  ownership  rule. 

 129.  We  ask  for  comment  about  whether  the  current  national  TV  ownership  rule  is  necessary  in  the  public  interest  as  the  result  of  competition.  Does  it  continue  to  serve  its  original  purposes  of 
 promoting  competition  and  viewpoint  and  programming  diversity?  Does  the  rule  promote  the  other  goals  in  described  Section  IV  above,  including  localism  and  the  various  other  forms  of  diversity  and 
 competition?  If  the  rule  serves  some  of  our  purposes  and  disserves  others,  does  the  balance  of  its  effects  argue  for  keeping,  revising,  or  abolishing  the  rule?  In  the  following  paragraphs,  we  explore  these 
 questions  in  more  detail. 
 130.  In  addition,  we  invite  comment  on  the  relevance  and  continued  efficacy  of  the  UHF  discount.  The  UHF  discount  is  intended  to  recognize  the  deficiencies  in  over-  the-  air  UHF  reception  in 

 comparison  to  VHF  reception.  The  Commission  retained  the  50%  UHF  discount  in  the  1998  Biennial  Report,  concluding  that  the  signal  disparity  between  UHF  and  VHF  had  not  yet  been  eliminated.  Noting 
 that  the  signal  disparity  should  be  rectified  to  some  extent  by  digital  television,  however,  the  Commission  stated  in  the  1998  Biennial  Report  that  when  the  transition  to  digital  television  is  near  completion,  we 
 would  issue  a  notice  of  proposed  rulemaking  proposing  a  phased-  in  elimination  of  the  discount.  211 
 131.  We  ask  the  parties  to  comment  on  the  extent  of  the  UHF  handicap  in  todays  marketplace.  In  particular,  over  86%  of  consumers  receive  video  programming  from  MVPDs  where  UHF 

 signal  quality  is  largely  equalized  with  that  of  VHF  channels.  In  addition,  cable  has  must  carry  obligations  with  respect  to  UHF  stations  and  DBS  operators  carry  UHF  stations  in  any  local  market  where 
 they  elect  to  carry  at  least  one  local  broadcast  signal.  We  seek  comment  on  whether  the  UHF  discount  continues  to  be  necessary  in  light  of  the  effect  of  MVPDs  on  UHF  signal  issues. 

 206  1984  Multiple  Ownership  Order,  100  F.  C.  C.  2d  at  19,  7. 
 207  1996  Act,    202(  c)(  1). 
 208  1998  Biennial  Report,  15  FCC  Rcd  at  11072-  75,    25-  30. 
 209  Id.  at  11075,    30. 
 210  Id.  at  11073,    26  n.  78. 
 211  Id.  at  11079-  80,    38. 
42
 Federal  Communications  Commission  FCC  02-  249 
 43 
 1.  Diversity 
 132.  In  1984,  the  Commission  concluded  that  the  relevant  geographic  market  for  considering  viewpoint  diversity  is  local,  not  national.  Thus,  in  the  1984  Multiple  Ownership  Report  and  Order,  the 

 Commission  relaxed  the  national  ownership  restrictions.  It  raised  the  station  cap  from  seven  stations  to  twelve  stations  and  said  that  the  entire  rule  would  be  eliminated  (or  sunset)  in  six  years.  In  explanation, 
 the  Commission  stated  that: 
 A  primary  goal  of  the  Commission  in  adopting  the  [ownership  restrictions]  was  to  encourage  a  diversity  of  independent  viewpoints.  .  .  .  In  brief,  we  conclude  that  a  national 

 rule  is  irrelevant  to  the  number  of  diverse  viewpoints  in  any  particular  community  and  that  even  if  we  believed  that  radio  and  television  were  the  only  media  relevant  to 
 diversity  of  viewpoint,  the  phenomenal  growth  in  both  television  and  radio  since  the  rule  was  adopted  in  1953  provides  sufficient  basis  for  raising  the  [ownership  restrictions].  212 

 The  Commission  reasoned  that  the  area  from  which  consumers  can  select  the  relevant  mass  media  alternatives  is  generally  the  local  community  in  which  they  work  and  live,  where  radio  and  TV  signals  are 
 available  in  discrete  local  markets,  and  other  local  media  outlets  are  abundantly  available.  It  determined  that  the  lack  of  relevance  of  the  rule  to  local  viewpoint  diversity  persuades  us  that  elimination  of  the 
 national  ownership  rule  is  unlikely  to  have  an  adverse  impact  on  the  number  of  independent  viewpoints  available  to  consumers.  213  It  also  determined  that  elimination  of  the  national  TV  ownership  rule  posed 
 no  threat  to  the  diversity  of  independent  viewpoints  in  the  information  and  entertainment  markets,  because  a  wide  range  of  media  outlets  existed  and  because  the  rule  did  not  affect  the  number  of 
 viewpoints  in  the  relevant  local  markets.  214 
 133.  On  reconsideration,  the  Commission  added  a  25%  audience  reach  limit  to  the  12  station  cap  and  eliminated  the  sunset  provision  adopted  in  the  1984  Multiple  Ownership  Order,  concluding  that 

 the  complete  and  abrupt  elimination  of  our  national  multiple  ownership  rules  might  engender  a  precipitous  and  potentially  disruptive  restructuring  of  the  broadcast  industry.  215  The  Commission 
 reiterated  that  diversity  of  viewpoint  was  determined  at  the  local  level.  The  Commission  also  affirmed  that  the  1984  decision: 

 balanced  the  need  for  a  presumptive  rule  equating  ownership  diversity  at  the  national  level  with  viewpoint  diversity  against  the  demonstrable  benefits  of  group  ownership.  In 
 the  context  of  this  balancing  process,  we  found  that  national  ownership  diversity  is  not  of  primary  relevance  in  promoting  viewpoint  diversity.  In  this  regard  we  noted  that  the  most 
 important  idea  markets  are  local  .  .  .  [N]  ational  broadcast  ownership  limits,  as  opposed  to  local  ownership  limits,  ordinarily  are  not  pertinent  to  assuring  a  diversity  of  views  to  the 
 constituent  elements  of  the  American  public.  216 
 134.  In  the  1998  Biennial  Report,  the  Commission  reconsidered  its  views  regarding  the  relationship  between  the  national  TV  ownership  rule  and  viewpoint  diversity.  It  asserted  that 

 independently-  owned  affiliates  play  a  valuable  role  by  counterbalancing  the  networks  strong  economic  incentive  in  clearing  all  network  programming  because  they  have  the  right  .  .  .  to  air  instead 

 212  1984  Multiple  Ownership  Order,  100  F.  C.  C.  2d  at  24-  25,    24. 
 213  Id.  at  27,    31-  32. 
 214  Id.  at  30-  31,    43. 
 215  1985  Multiple  Ownership  Reconsideration  Order,  100  F.  C.  C.  2d  at  76,    3. 
 216  Id.  at  81-  82,    18  (footnote  omitted)  (citing  1984  Multiple  Ownership  Order,  100  F.  C.  C.  2d  at  38,    62  ). 
43
 Federal  Communications  Commission  FCC  02-  249 
 44 
 programming  more  responsive  to  local  concerns.  217  Thus,  in  determining  not  to  modify  or  eliminate  the  rule,  it  noted  that  the  competitive  concerns  of  opponents  of  relaxing  or  eliminating  the  [national  TV 
 ownership  rule],  including  the  concern  that  the  number  of  viewpoints  expressed  nationally  would  be  reduced,  were  more  convincing  than  the  comments  in  support  of  relaxation  or  elimination.  218 

 135.  In  Fox  Television,  the  D.  C.  Circuit  remanded  the  decision  in  the  1998  Biennial  Report  to  retain  the  national  TV  ownership  rule,  holding  that  the  decision  to  retain  it  was  arbitrary  and  capricious. 
 The  court  took  note  of  the  Commissions  1984  Multiple  Ownership  Order,  which  concluded  that  the  rule  should  be  repealed  because  it  focuses  on  national,  rather  than  local,  markets  and  thus  has  an  insignificant 
 effect  on  viewpoint  diversity.  It  also  took  note  of  the  Commissions  1984  assertion  that  it  had  no  evidence  suggesting  that  stations  which  are  not  group-  owned  better  respond  to  community  needs,  or 
 spend  more  of  their  revenues  on  local  programming.  219  When  the  Commission  changed  course  by  retaining  the  limit  in  the  1998  Biennial  Report,  it  failed  to  explain  why  it  no  longer  considered  the 
 reasoning  in  its  1984  Multiple  Ownership  Order  to  be  persuasive.  According  to  the  court,  the  Commissions  failure  to  explain  this  significant  deviation  from  its  earlier  conclusions  rendered  its  1998 
 decision  arbitrary  and  capricious.  220 
 136.  It  appears  that  the  national  TV  ownership  rule  is  not  directly  relevant,  and  perhaps  not  relevant  at  all,  to  the  goal  of  promoting  viewpoint  diversity.  Consumers  generally  do  not  travel  to  other 

 cities  to  obtain  viewpoints.  Instead,  they  rely  on  outlets  for  news  sources,  such  as  TV,  radio,  newspapers,  Internet,  cable,  DBS,  and  magazines  that  are  available  in  their  own  cities.  As  a  result,  the  expression  of 
 viewpoints  by  television  stations  in  one  city  does  not  appear  to  affect  in  any  meaningful  way  the  viewpoints  available  to  people  located  in  other  cities.  We  seek  comment  on  this  analysis  as  well  as  on  the 
 general  question  whether  our  national  TV  ownership  rule  is  relevant  to  our  goal  of  promoting  viewpoint  diversity  on  a  local  level.  Is  there  a  relationship  between  the  national  ownership  rule  and  the  dual  network 
 rule  with  regard  to  viewpoint  diversity?  For  example,  could  we  safely  repeal  the  national  ownership  rule  as  long  as  we  maintain  the  dual  network  rule  because  the  latter  renders  more  likely  the  preservation  of  at 
 least  four  different  newscasts  in  each  market?  Does,  as  the  Commission  concluded  in  the  1998  Biennial  Report,  independent  ownership  of  stations  increase  diversity  of  programming  by  providing  outlets  for 
 non-  network  programming?  221  Do  commenters  believe  that  the  broadcast  of  non-  network  programming  promotes  our  goal  of  source  diversity? 

 137.  We  also  seek  comment  on  the  role  of  independently  owned  and  operated  stations.  In  deciding  not  to  relax  the  national  ownership  rule  in  the  1998  Biennial  Report,  the  Commission  said: 
 We  do  not  believe  that  consolidation  of  ownership  of  all  or  most  of  the  television  stations  in  the  country  in  the  hands  of  a  few  national  networks  would  serve  the  public  interest. 
 The  national  networks  have  a  strong  economic  interest  in  clearing  all  network  programs,  and  we  believe  that  independently  owned  affiliates  play  a  valuable  counterbalancing  role 
 because  they  have  the  right  to  decide  whether  to  clear  network  programming  or  to  air  instead  programming  from  other  sources  that  they  believe  better  serves  the  needs  and 

 217  1998  Biennial  Report,  15  FCC  Rcd  at  11075,    30. 
 218  Id.  at  11073,    26  n.  78.  The  arguments  raised  by  the  parties  in  support  of  retaining  the  rule  were  that  the 
 bargaining  power  of  networks  over  their  affiliates  would  increase,  the  number  of  viewpoints  expressed  nationally  would  be  reduced,  concentration  in  the  national  advertising  market  would  increase,  and  the  potential  for  monopsony 

 power  in  the  program  production  market  would  be  enlarged.  219 
 Fox  Television,  280  F.  3d  at  1043.  220 
 Id.  at  1043-  44.  221 
 See  1998  Biennial  Report,  15  FCC  Rcd  at  11,  074-  75,    30. 
44
 Federal  Communications  Commission  FCC  02-  249 
 45 
 interest  of  the  local  communities  to  which  they  are  licensed.  Independent  ownership  of  stations  also  increases  the  diversity  of  programming  by  providing  an  outlet  for  non-network 
 programming.  222 
 In  Fox  Television,  the  court  found  our  explanation  to  be  a  plausible  justification  for  the  national  ownership  rule  and  consistent  with  the  requirements  in  section  202(  h).  The  court  stated,  however,  that  the 
 Commissions  conclusion  was  not  adequately  supported  by  the  record: 
 Although  we  do  not  agree  with  the  networks  that  this  reason  is  unresponsive  to    202(  h)    we  must  agree  that  the  Commissions  failure  to  address  itself  to  the  contrary  views  it 
 expressed  in  the  1984  Report  effectively  undermines  its  rationale.    The  [1998  Biennial  Report]  does  not  indicate  the  Commission  has  since  received  such  evidence  or  otherwise 
 found  reason  to  repudiate  its  prior  decision.  223 
 We  seek  comment  on  whether  independently  owned,  network-  affiliated  stations  offer  more  diverse  programming  and/  or  programming  from  more  diverse  sources  than  affiliated  stations  that  are  owned  and 
 operated  by  their  network.  We  ask  parties  to  provide  evidence  supporting  their  comments  on  this  issue.  Are  there  other  factors  or  policy  goals  we  should  consider  in  determining  whether  to  retain,  modify,  or 
 eliminate  the  national  TV  ownership  rule? 
 2.  Competition 
 138.  We  seek  comment  on  how  the  national  TV  ownership  rule  affects  the  ability  of  TV  station  group  owners  to  compete  against  other  video  providers.  We  are  interested  in  the  impact  this  rule 

 may  have  on  the  program  production  market  and  the  advertising  market.  We  also  ask  whether  examination  of  advertising  competition  is,  or  should  be,  relevant  to  this  analysis.  Commenters  are  asked 
 to  analyze  the  impact  of  the  transaction  costs  and  uncertainties  associated  with  network-  affiliate  relationships  as  well  as  any  pro-  competitive  benefits  of  the  current  national  television  ownership  rule. 
 We  also  seek  comment  on  whether  the  national  television  ownership  rule  artificially  constrains  the  largest  group  owners  from  employing  their  skills  in  additional  markets,  and  whether  and  how  this  operates  to  the 
 detriment  of  consumers  in  those  markets. 
 a.  Program  Production  Market 
 139.  Broadcast  television  stations  organize  a  schedule  of  video  programming  which  they  either  produce  themselves  or  purchase  from  others  in  a  national  market.  The  TV  Ownership  FNPRM 

 expressed  a  competitive  concern  about  the  ability  of  large  purchasers  of  video  programming  to  exercise  monopsony  power  and  artificially  restrict  the  price  paid  for  programming.  224  The  market  for  program 
 production  appears  to  consist  of  firms  that  produce  niche  and  general  entertainment  programming  for  sale  to  program  packagers.  Program  packagers  include  cable  networks,  broadcast  television  networks, 
 program  syndicators,  and  individual  owners  of  television  stations  (regardless  of  whether  the  station  also  carries  network  programming). 

 140.  We  seek  comment  on  whether  the  national  TV  ownership  rule  promotes  or  hinders  competition  in  the  program  production  market.  We  ask  commenters  to  address  whether  raising  the 
 national  ownership  cap  would  facilitate  monopsony  power.  Our  answer  to  this  question  depends  significantly  on  the  identification  of  market  participants.  For  example,  if  program  producers  are 

 222  Id. 
 223  Fox  Television,  280  F.  3d  at  1043. 
 224  TV  Ownership  FNPRM,  10  FCC  Rcd  at  3544,    46. 
45
 Federal  Communications  Commission  FCC  02-  249 
 46 
 constrained  by  the  cost  structure  of  their  products  to  selling  programming  exclusively  to  broadcast  television  stations,  that  might  suggest  that  raising  the  35%  cap  would  harm  program  production    and 
 possibly  program  diversity    by  increasing  the  negotiating  power  of  the  remaining  television  group  owners  vis-  -  vis  program  producers.  But  if  the  market  for  purchasing  programming  included  not  just 
 local  television  stations,  but  also  cable  networks,  we  would  be  less  concerned  that  raising  the  35%  cap  would  create  or  exacerbate  monopsony  power  in  the  program  acquisition  market.  Therefore,  we 
 encourage  parties  addressing  the  35%  cap  issue  to  submit  evidence  of  the  relevant  market  participants  and  the  likely  impact  of  raising  the  national  cap  on  program  producers. 

 141.  In  addition,  regulatory  changes  have  occurred  in  the  past  six  years  that  may  have  affected  the  program  production  market.  Prior  to  the  1996  increase  in  the  national  TV  ownership  cap,  the 
 Commission  eliminated  the  financial  interest  and  syndication  rules  (  fin-  syn)  and  the  prime  time  access  rule  (  PTAR).  225  Can  the  effects  of  the  1996  change  in  the  national  ownership  cap  be  separated  from  the 
 effects  of  the  repeal  of  the  fin-  syn  and  PTAR  rules?  If  so,  we  ask  commenters  to  identify  those  effects  and  to  address  whether  the  35%  cap  continues  to  be  necessary  to  promote  a  robust  and  diverse  program 
 production  market. 
 b.  Advertising  Markets 
 142.  We  have  considered  national  television  advertising  as  a  relevant  market  based  on  the  different  nature  of  advertisers  seeking  a  national  audience  rather  than  ones  purchasing  time  for  local 

 markets.  226  More  recently,  we  identified  a  strategic  group  among  the  programming  networks  that  consisted  of  ABC,  NBC,  CBS,  and  Fox.  227  This  assessment  was  based  on  findings  that:  (1)  the  relatively 
 few  local  stations  available  with  which  to  affiliate  constituted  a  meaningful  entry  barrier  into  the  strategic  group;  and  (2)  prime  time  viewership  ratings  were  significantly  higher  for  the  strategic  group  networks 
 than  for  other  broadcast  television  networks.  If  our  prior  identification  of  this  strategic  group  continues  to  be  accurate  today,  the  existence  of  this  group  likely  restrains  competition  for  national  advertising  among 

 225  See  Review  of  the  Prime  Time  Access  Rule,  Section  73.  658  (k)  of  the  Commissions  Rules,  11  FCC  Rcd  546 
 (1995)  (repealing  the  Prime  Time  Access  Rule,  which,  in  order  to  stimulate  the  production  of  programs  by  producers  independent  of  networks,  had  generally  prohibited  network-  affiliated  television  stations  in  the  top  50  television 

 markets  from  broadcasting  more  than  three  hours  of  network  programs  during  prime  time);  Review  of  the  Syndication  and  Financial  Interest  Rules,  Sections  73.  659    73.  663  of  the  Commissions  Rules,  10  FCC  Rcd  12165 
 (1995).  226 
 See,  e.  g.,  Amendment  of  Sections  73.  35,  73.  240,  and  73.  636  of  the  Commissions  Rules  Relating  to  Multiple  Ownership  of  AM,  FM,  and  Television  Broadcast  Stations,  95  F.  C.  C.  2d  360,  386  (1983)    43  (  In  this  regard,  as  to 

 economic  concentration  the  traditional  Commission  approach  to  national  ownership  requires  that  the  relevant  market  be  a  national  broadcast  market  for  viewers  and  listeners  (who  are  the  products  in  an  advertiser-  supported  system).). 
 227  See  Dual  Network  Order,  16  FCC  Rcd  at  11122-  23,    20.  A  strategic  group  refers  to  a  cluster  of  independent 
 firms  within  an  industry  that  pursue  similar  business  strategies.  For  example,  the  major  networks  supply  programming  to  their  affiliated  local  stations  that  is  intended  to  attract  mass  audiences  and  advertisers  that  want  to 

 reach  such  large,  nationwide  audiences.  By  contrast,  the  emerging  networks  target  more  specialized,  niche  audiences  similar  to  cable  television  networks.  The  conceptual  basis  for  a  strategic  group  is  developed  in  R.  E. 
 Caves  and  M.  E.  Porter,  From  Entry  Barriers  to  Mobility  Barriers:  Conjectural  Decisions  and  Contrived  Deterrence  to  New  Competition,  91  Q.  J.  ECON.  241  (May  1977).  See  also  Michael  E.  Porter,  COMPETITIVE  STRATEGY: 
 TECHNIQUES  FOR  ANALYZING  INDUSTRIES  AND  COMPETITION  at  ch.  7  (The  Free  Press,  New  York  NY,  1980).  For  additional  references  on  the  application  of  the  strategic  group  concept,  see  F.  M.  Scherer  and  David  Ross, 
 INDUSTRIAL  MARKET  STRUCTURE  AND  ECONOMIC  PERFORMANCE  (3  rd  ed.)  at  284-  85  (Houghton  Mifflin,  Boston  MA,  1990).  When  properly  applied,  the  concept  of  a  strategic  group  ordinarily  implies  that  only  a  relatively  few 
 firms  will  be  included  within  its  boundaries  so  that  competitive  rivalry  will  be  oligopolistic  in  nature,  although  the  number  of  firms  actually  populating  the  industry  aggregated  over  all  strategic  groups  may  be  quite  numerous. 
46
 Federal  Communications  Commission  FCC  02-  249 
 47 
 the  broadcasters.  228 
 143.  We  seek  comment  on  whether  this  analysis  continues  to  be  an  accurate  characterization  of  the  national  advertising  market  and  the  participants  in  the  market.  First,  we  request  comment  on 

 whether  the  key  participants  in  the  national  television  advertising  market  should  be  defined  more  broadly  to  include  broadcast  TV  networks  outside  the  strategic  group.  If  so,  what  are  the  factors  that  should  be 
 considered  in  identifying  the  members  of  the  strategic  group?  Should  the  participants  in  the  national  television  advertising  market  also  include  other  outlets  such  as  non-  broadcast  television  networks  (ESPN, 
 CNN,  etc.)?  Cable  networks  and  the  other  broadcast  networks  such  as  The  WB  and  UPN  have  national  coverage  and  carry  national  advertising,  which  may  suggest  they  serve  as  substitutes  from  the  perspective 
 of  at  least  some  advertisers. 
 144.  Second,  regardless  of  whether  we  also  include  non-  broadcast  networks  in  the  national  television  advertising  market,  we  seek  information  on  the  extent  to  which  national  spot  advertisements 

 and/  or  syndicated  programming  are  fungible  with  network  television  advertising  from  the  perspective  of  advertisers.  If  group  owners  compete  in  the  national  advertising  market,  it  would  appear  that  increasing 
 the  35%  ownership  cap  could  diminish  competition  by  allowing  broadcast  networks  to  acquire  additional  stations,  thereby  reducing  the  effectiveness  of  non-  network  group  owners  in  the  national  advertising 
 market.  We  request  market  share  data  and  analysis  on  this  important  point.  Technology  changes  in  advertising  delivery  may  also  allow  the  broadcast  television  networks  to  effectively  provide  national  spot 
 advertising.  That  is,  a  national  network  may  deliver  different  advertisements  targeted  to  different  regions  of  the  country  simultaneously.  We  seek  comment  on  this  development  and  its  relevance,  if  any,  to 
 competition  in  the  national  advertising  market.  Third,  a  recent  study  suggests  that  the  national  advertisers  do  not  readily  substitute  between  alternative  media.  229  We  seek  comment  on  this  analysis. 

 145.  The  national  TV  ownership  rule  does  not  appear  to  have  a  direct  effect  on  the  number  of  competitors  in  the  local  advertising  market.  The  rule  affects  primarily  the  total  number  of  national 
 households  one  group  owner  can  reach,  not  the  number  within  a  single  market.  Of  course,  we  recognize  that  the  35%  limit  could  inhibit  the  participation  of  a  group  owner  in  a  particular  local  TV  market  and 
 thereby  affect  competition  in  that  market.  In  particular,  we  seek  comment  on  whether  additional  scale  economies  could  be  realized  by  group  owners  and  whether  the  current  rule  prevents  especially  skilled 
 management  from  entering  additional  local  markets.  We  seek  comment  on  this  general  issue,  and  whether  limiting  the  size  of  group  owners  nationally  can  have  an  impact  on  competition  in  the  local 
 advertising  market. 
 c.  Innovation 
 146.  We  are  also  concerned  with  the  impact  that  the  national  TV  ownership  rule  may  have  on  innovation  in  the  media  marketplace.  Does  our  current  rule  promote  or  hinder  innovation?  Does  a 

 traditional  competition  analysis  adequately  capture  the  beneficial  effects  of  innovation?  What  effect,  if  any,  would  a  relaxed  national  TV  ownership  rule  have  on  the  ability  of  a  broadcast  network  to  develop 
 innovative  programming  or  services,  or  to  effectuate  the  transition  to  digital  television?  Does  the  answer  depend  on  whether  the  group  owner  plans  to  provide  purely  high  definition  television  or  standard 
 definition  television  plus  ancillary  services?  Would  relaxation  of  the  national  TV  ownership  rule  increase  the  ability  and  incentives  of  market  participants  (the  large  group  owners  in  particular)  to  develop 
 innovative  technologies  and/  or  new  types  of  video  programming?  Examples  of  innovations  that  have  been  withheld  from  the  media  marketplace  as  a  direct  result  of  national  TV  ownership  limits  would  be 

 228  Dual  Network  NPRM,  15  FCC  Rcd  at  11261-  62,    22-  24. 
 229  Alvin  Silk,  Lisa  Klein,  &  Ernst  Berndt,  Intermedia  Substitutability  and  Market  Demand  By  National  Advertisers, 
 REVIEW  OF  INDUSTRIAL  ORGANIZATION  (2002).  The  national  advertising  categories  studied  are:  magazine,  network  TV,  outdoor,  spot  radio,  network  radio,  spot  TV,  newspapers  and  direct  mail. 
47
 Federal  Communications  Commission  FCC  02-  249 
 48 
 particularly  useful  to  our  competitive  analysis. 
 3.  Localism 
 147.  The  Commission  has  said  in  the  past  that  a  national  TV  ownership  rule  strengthens  localism  by  creating  a  class  of  non-  network  station  owners  that  can  decide  whether  to  preempt  network 

 programming  in  favor  of  programming  that  would  better  serve  the  needs  and  interests  of  that  stations  community.  230  In  Fox  Television,  the  court  affirmed  that  localism  is  a  potentially  relevant  consideration 
 in  deciding  whether  to  retain,  modify,  or  eliminate  the  national  TV  ownership  rule.  231  Given  this  statement  by  the  court  and  fact  that  the  national  ownership  rule  may  have  the  most  direct  impact  of  our 
 rules  on  the  attainment  of  localism,  our  evaluation  of  the  continued  need  for  this  rule  will  rely  heavily  on  our  findings  regarding  its  effectiveness  in  promoting  localism. 

 148.  The  production  of  local  news  and  public  affairs  programming  may  represent  one  form  of  localism.  We  seek  to  understand  whether  the  national  TV  ownership  rule,  by  preserving  a  class  of 
 affiliates,  may  have  the  effect  of  increasing  or  decreasing  the  quantity  and/  or  quality  of  local  news  and  public  affairs  programming.  We  would  be  particularly  interested  in  any  clear  correlation  between  the 
 status  of  stations  as  affiliates  or  network-  owned  and  the  quantity  of  local  news  and  public  affairs  produced  by  those  stations.  We  request  that  commenters  submit  evidence  addressing  the  relative  output 
 of  affiliates  and  networks  in  this  regard  and  address  the  appropriate  weight  of  such  data  in  our  evaluation  of  localism  and  the  national  ownership  rule. 

 149.  The  national  TV  ownership  rule  may  also  promote  localism  by  creating  economic  incentives  for  non-  network  station  owners  regarding  the  preemption  of  network-  delivered  programs  with 
 station-  selected  programming.  Networks  incur  costs  in  producing  or  purchasing  programming  for  distribution  on  their  networks.  Since  the  networks  initially  bear  these  costs,  network-  owned  and  operated 
 stations  may  have  a  stronger  economic  incentive  than  affiliates,  all  else  being  equal,  to  distribute  network  programming  rather  than  replacing  it  on  a  station-  by-  station  basis  in  response  to  community  interests.  It 
 is  also  possible,  however,  that  the  local  programming  preference  in  a  particular  instance  may  be  sufficiently  strong  that  even  a  network-  owned  station  would  find  it  profitable  to  replace  its  own 
 programming  with  alternative  programming.  Parties  commenting  on  this  issue  are  asked  to  address  specifically  the  allocation  of  advertising  revenues  between  networks  and  affiliates  on  preempted 
 programming.  We  seek  comment  on  these  observations  and  on  any  other  economic  incentives  affecting  the  preemption  of  network  programming  by  local  stations. 

 150.  In  addition,  television  stations  are  obligated  to  serve  the  needs  and  interests  of  their  local  communities.  232  We  ask  commenters  to  address  the  extent  to  which  affiliates  and/  or  network-  owned 
 stations  could  be  expected  to  preempt  network  programming  when  it  is  not  in  their  economic  interest  to  do  so.  According  to  testimony  before  Congress  by  the  President  and  Chief  Operating  Officer  of  Viacom, 
 Inc.,  CBS  owned-  and-  operated  stations  have  complete  freedom  locally,  even  preempting  primetime  network  programming  to  air,  for  example,  an  emergency  weather  newscast,  a  local  telethon,  and  other 
 events  of  local  interest.  233  If  the  principal  category  of  such  unprofitable  preemption  is  breaking  news  or 
 230  See,  e.  g.,  1998  Biennial  Report,  15  FCC  Rcd  at  11074-  75,    30. 
 231  Fox  Television,  280  F.  3d  at  1043. 
 232  Revision  of  Programming  and  Commercialization  Policies,  Ascertainment  Requirements,  and  Program  Log 
 Requirements  for  Commercial  Television  Stations,  98  F.  C.  C.  2d,  1075,  1091-  1092  (1984).  233 
 Karmazin  Testimony,  supra  note  158,  at  8-  9  (stating  that  WVCC-  TV  in  Minneapolis  preempted  three  hours  of  primetime  network  programming  in  May  2001  to  run  an  emergency  weather  newscast;  WBZ  in  Boston  has 

 preempted  primetime  network  shows  annually  for  the  past  20  years  to  air  the  Boston  Childrens  Hospital  Telethon,  and  preempted  daytime  programming  to  air  complete  coverage  of  Congressman  Joe  Moakleys  funeral.). 
48
 Federal  Communications  Commission  FCC  02-  249 
 49 
 other  emergency  information,  should  we  expect  networks  and  affiliates  to  respond  similarly  with  respect  to  such  situations? 
 151.  A  key  aspect  of  the  argument  that  the  national  TV  ownership  rule  promotes  localism  is  that  affiliates  serve  local  needs  more  effectively  than  network  station  owners  because  affiliates  are  more 
 likely  to  replace  network  programming  with  programming  more  suited  to  local  needs.  There  are,  however,  significant  portions  of  the  American  public  that  already  receive  broadcast  programming  through 
 stations  owned  and  operated  by  broadcast  networks.  Is  there  evidence  that  consumers  served  by  network-owned  stations  have  either  benefited  or  been  harmed  by  the  lack  of  a  non-  network  owner  as  a  check  on 
 network-  provided  programming? 
 152.  It  is  also  possible  that  localism  may  be  furthered  by  the  national  TV  ownership  rule  by  preserving  a  sufficiently  large  class  of  network  affiliates  that  collectively  can  influence  network 

 programming  decisions.  This  may  be  the  case  where  networks  plan  to  air  a  particular  program  that  a  large  percentage  of  its  affiliates  disfavor.  Negotiations  between  a  sufficiently  large  group  of  affiliates 
 may  cause  the  network  to  revise  its  programming  decision.  By  contrast,  if  the  national  television  ownership  cap  were  raised  or  eliminated,  a  smaller  group  of  affiliates  raising  the  same  concern  might  be 
 less  able  to  persuade  the  network  to  alter  is  programming  plans.  We  ask  commenters  to  address  the  frequency  and  efficacy  of  such  discussions,  to  the  extent  they  occur  in  practice,  and  the  value  of  this  form 
 of  localism  compared  with  station-  by-  station  preemption  issues  discussed  above. 
 153.  We  also  seek  comment  on  whether  the  national  TV  ownership  rule  continues  to  be  necessary  to  preserve  affiliate  bargaining  power  regarding  preemption.  Would  increasing  the  cap  shift 

 bargaining  power  to  the  networks  such  that  local  rights  would  be  lost  as  a  practical  matter? 
 154.  Separate  from  the  selection  of  programming,  our  goal  of  promoting  localism  may  be  addressed  through  rules  that  promote  the  production  of  local  news  and  public  affairs  programming  The 

 1984  Multiple  Ownership  Order  relied  on  news  ratings  as  an  indicator  of  the  quality  of  local  news  produced  by  group-  owned  stations  versus  that  produced  by  stand-  alone  stations.  234  The  Commission 
 reasoned  that  higher  ratings  indicated  a  greater  responsiveness  to  local  needs.  235  Should  we  compare  the  quality  of  local  news  produced  by  network  owned  and  operated  stations  and  that  of  affiliates  using  ratings 
 as  a  measure  of  quality?  Are  there  alternative  measures  for  this  comparison? 
 4.  Audience  Measurement 
 155.  The  national  TV  ownership  rule  is  calculated  based  on  the  number  of  television  households  a  station  can  reach.  The  number  of  households  reached  nationwide  is  the  sum  of  the  number 

 of  households  in  each  DMA  in  which  a  group  owner  owns  a  television  station.  The  number  of  households  in  a  DMA  is  halved  for  UHF  stations.  The  national  TV  ownership  rule  is  thus  based  on 
 homes  passed,  not  homes  actually  viewing  the  stations  of  a  group  owner.  This  potential  audience  measure  is  at  odds  with  the  way  we  calculate  a  national  ownership  audience  reach  limit  for  cable 
 television.  A  home  is  attributed  to  a  multi-  system  cable  operator  only  if  that  MSO  actually  serves  the  home,  not  simply  because  it  is  available  to  that  home.  We  seek  comment  on  which  measurement  method 
 is  appropriate  given  the  policy  objectives  of  the  national  TV  ownership  rule,  and  the  differences  between 
 234  1984  Multiple  Ownership  Order,  100  F.  C.  C.  2d  at  31,    44.  Also  relevant  is  whether  repeal  of  the  rule  would 
 remove  barriers  to  the  flow  of  information.  This  might  be  true  if  group-  owned  stations  provide  a  different  mix  of  programming  that  better  matches  consumer  preferences.  A  study  by  Professor  Parkman  shows  that  local  news 

 programming  of  group-  owned  stations  have  higher  ratings,  suggesting  that  group-  owned  stations  are  more  responsive  to  viewer  demand  for  news.  Parkman,  The  Effects  of  Television  Station  Ownership  on  Local  News 
 Ratings,  64  REV.  ECON.  &  STATS.  289  (1982).  235 
 1984  Multiple  Ownership  Order,  100  F.  C.  C.  2d  at  31,    44. 
49
 Federal  Communications  Commission  FCC  02-  249 
 50 
 cable  and  broadcast  television  in  the  ease  with  which  the  potential  service  can  be  accessed  (switching  off  and  on  channels  versus  subscription  and  installation).  Is  the  current  method  of  measuring  the  broadcast 
 audience  appropriate  because  broadcast  is  a  non-  subscription  service?  Is  there  an  alternative  measurement  method  that  would  be  preferable  to  either  of  these  existing  approaches? 

 B.  Dual  Network  Rule 
 156.  The  dual  network  rule  currently  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    73.3613(  a)(  1)  of  the  Commission's  regulations  (that  is,  ABC,  CBS,  Fox, 
 and  NBC).  236  Thus,  the  rule  in  its  current  form  permits  broadcast  networks  to  provide  multiple  program  streams  (program  networks)  simultaneously  within  local  markets,  and  prohibits  only  a  merger  between  or 
 among  these  four  networks. 
 157.  The  dual  network  rule  was  originally  adopted  over  sixty  years  ago  and  flatly  prohibited  any  entity  from  maintaining  more  than  a  single  radio  network.  237  A  few  years  later,  the  rule  was  extended 

 to  television  networks.  238  The  Commission  believed  that  an  entity  that  operated  more  than  one  network  might  preclude  new  networks  from  developing  and  affiliating  with  desirable  stations  because  those 
 stations  might  already  be  tied  up  by  the  more  powerful  network  entity.  In  addition,  the  Commission  expressed  concern  that  dual  networking  could  give  a  network  too  much  market  power.  The  rule  was 
 therefore  also  intended  to  remove  barriers  that  would  inhibit  the  development  of  new  networks,  as  well  to  serve  the  Commission's  more  general  diversity  and  competition  goals.  239 

 158.  After  Congress,  in  the  1996  Act,  directed  the  Commission  to  amend  the  rule,  the  Commission  amended  the  rule  for  the  first  time  since  it  was  adopted  to  permit  a  broadcast  station  to 
 affiliate  with  a  network  organization  that  maintains  more  than  one  broadcast  network  unless  the  multiple  network  combination  was  created  by  a  combination  among  ABC,  CBS,  Fox,  or  NBC,  or  a  combination 
 between  one  of  these  four  networks  and  UPN  or  WB.  240  In  the  Dual  Network  Order  last  year,  the  Commission  further  relaxed  the  rule  to  permit  a  top  four  network  to  merge  with  or  acquire  UPN  or  WB. 
 The  Commission  found  that:  (1)  competition  in  the  national  advertising  market  would  not  be  harmed  by  this  rule  change;  241  (2)  greater  vertical  integration  of  the  sort  contemplated  by  this  rule  change  was 
 potentially  an  efficient,  pro-  competitive  response  to  increasing  competition  in  the  video  market;  242  and  (3)  program  diversity  would  not  be  harmed  because  the  two  combined  networks  would  have  strong  economic 
 incentives  to  diversify  their  program  offerings.  243  We  ask  for  comment  whether  the  relaxation  of  the  dual  network  rule  has  had  the  effects  that  we  foresaw  in  the  Dual  Network  Order. 

 159.  We  ask  for  comment  about  whether  the  present  dual  network  rule  is  necessary  in  the  public  interest  as  the  result  of  competition.  Does  it  promote  the  goals  we  set  forth  above    diversity, 
 competition,  and  localism?  If  the  rule  serves  some  of  our  purposes  and  disserves  others,  does  the  balance 
 236  47  C.  F.  R.    73.658(  g). 
 237  Dual  Network  Order,  16  FCC  Rcd  at  11114,    2. 
 238  Id. 
 239  1998  Biennial  Report,  15  FCC  Rcd  at  11095-  96,    70. 
 240  Dual  Network  Order,  16  FCC  Rcd  at  11115,    4. 
 241  Id.  at  11125,    25. 
 242  Id.  at  11124-  25,    24. 
 243  Id.  at  11131,    37. 
50
 Federal  Communications  Commission  FCC  02-  249 
 51 
 of  its  effects  argue  for  keeping,  revising,  or  abolishing  the  rule?  In  the  following  paragraphs,  we  explore  these  questions  in  more  detail. 
 1.  Diversity 
 a.  Program  Diversity 
 160.  In  the  Dual  Network  Order,  the  Commission  found  that  program  diversity  at  the  national  level  would  not  likely  be  harmed  by  the  combination  of  an  emerging  network  (i.  e.,  UPN  or  WB)  with  one 

 of  the  four  major  networks.  The  Commission  found  it  likely  that  their  common  owner  would  have  strong  incentives  to  produce  a  diverse  schedule  of  programming  for  each  set  of  local  TV  outlets  in  the  same 
 market.  244  After  the  Dual  Network  Order,  Viacom,  parent  of  CBS,  acquired  UPN.  245  Has  the  Commissions  expectation  proved  correct?  We  also  seek  comment  on  the  effect  that  consolidation 
 between  and  among  top  four  networks  likely  would  have  on  program  diversity.  Additionally,  we  seek  comment  on  whether,  and  if  so  how,  the  increased  competition  that  television  stations  face  from  cable 
 networks  and  other  media  affects  the  diversity  of  programming  on  all  national  program  networks. 
 b.  Viewpoint  Diversity 
 161.  With  respect  to  the  combination  of  two  or  more  top  four  networks,  we  see  several  potential  viewpoint  diversity  issues.  The  first  is  the  loss  of  an  independently  owned  and  produced  local 

 newscast  in  cities  where  the  two  networks  each  own  local  television  stations.  246  We  seek  comment  on  the  impact  of  such  a  development  on  viewpoint  diversity.  Even  if  we  were  to  eliminate  the  dual  network  rule 
 entirely,  that  does  not  necessarily  mean  that  the  merged  company  could  actually  own  all  the  stations  previously  owned  by  the  two  networks.  The  local  TV  ownership  rule  could  limit  the  degree  to  which  one 
 entity,  including  a  network,  could  own  multiple  TV  stations  in  one  market,  assuming  we  retain  that  rule.  247  We  seek  comment  on  whether  we  should  address  the  loss  of  an  independent  local  newscast  as  a 
 result  of  a  combination  of  two  or  more  of  the  four  major  networks  in  the  dual  network  rule,  in  the  local  TV  ownership  rule,  or  in  some  alternative  new  rule. 

 162.  The  second  possible  viewpoint  diversity  concern  relating  to  the  elimination  of  the  dual  network  rule  is  the  potential  loss  of  one  or  more  independent  national  television  news  operations.  The 
 primary  focus  of  networks  national  news  operations  appears  to  be  on  the  nightly  newscasts  by  ABC,  CBS,  and  NBC.  We  ask  for  comment,  in  light  of  other  sources  of  news  and  current  public  affairs, 
 whether  the  loss  of  one  or  more  of  those  nightly  newscasts  as  an  independent  source  of  news  would  significantly  reduce  sources  of  news  and  current  affairs  and  thus  injure  the  public  interest.  Should  the  fact 
 that  the  national  broadcast  networks  alone  reach  virtually  all  households  in  the  country  affect  our  analysis?  Would  a  reduction  in  the  number  of  independently-  owned  national  television  networks  give  the 

 244  Id.  at  11131,    37. 
 245  Shareholders  of  CBS  Corp.  and  Viacom,  Inc.,  for  Transfer  of  Control  of  CBS  Corporation  and  Certain 
 Subsidiaries,  Licensees  of  KCBS-  TV,  Los  Angeles,  CA,  et  al.,  15  FCC  Rcd  8230  (2000). 
 246  In  the  Dual  Network  Order,  we  found  that  eliminating  the  emerging  network  portion  of  the  rule  would  not 
 adversely  affect  the  provision  of  news  and  public  affairs  programming  because  emerging  networks  typically  do  not  carry  local  news  and  public  affairs  programming.  We  noted  statements  of  Viacom  that  emerging  networks  have  not 

 yet  been  in  a  position  to  absorb  the  full  costs  of  developing  news  departments  offering  regularly  scheduled  news  programming.  Thus,  we  concluded,  a  combination  of  a  top  four  network  and  an  emerging  network  would  not  cause 
 a  reduction  of  diversity  in  news  or  public  affairs  programming.  Dual  Network  Order,  16  FCC  Rcd  at  11131-  32,    38. 

 247  For  example,  if  a  network  owned  the  maximum  number  of  stations  in  any  market,  our  local  TV  ownership  rule 
 would  prohibit  it  from  purchasing  a  station  owned  by  another  network  in  the  market. 
51
 Federal  Communications  Commission  FCC  02-  249 
 52 
 remaining  networks  undue  power  and  influence,  such  as  during  national  elections? 
 163.  Third,  in  the  Dual  Network  Order,  we  noted  evidence  in  the  record  from  Network  Affiliated  Stations  Alliance  (  NASA)  that  eliminating  the  dual  network  prohibition  against  combinations 

 of  two  of  the  top  four  major  networks  would  increase  the  networks  economic  leverage  over  their  affiliates.  248  NASA  stated  that  the  big  four  broadcast  networks  still  had  by  far  the  largest  concentration  of 
 viewers  and  economic  power,  undiminished  by  new  media  and  audience  fragmentations.  We  seek  comment  on  how  the  combination  of  two  top  four  networks  would  affect  the  balance  of  negotiating  power 
 between  networks  and  affected  affiliates.  Commenters  should  identify  with  precision  how  any  such  leverage  affects  viewpoint  diversity  in  terms  of  program  selection.  We  also  seek  comment  on  whether 
 combinations  of  major  networks  would  affect  the  quantity  or  quality  of  diverse  viewpoints  on  the  merged  companys  owned  and  operated  stations.  Are  there  other  factors  or  policy  goals  we  should  consider  in 
 determining  whether  to  retain,  modify  or  eliminate  the  dual  network  rule? 
 2.  Competition 
 164.  The  Dual  Network  Order  did  not  resolve  whether  the  dual  network  rule  should  be  eliminated.  249  We  did  note,  however,  that  commenters  were  divided  on  whether  a  merger  of  two  major 

 networks  would  create  or  enhance  market  power.  250  Some  commenters  pointed  to  new  broadcast  and  non-  broadcast  competitors  and  argued  that  a  merger  of  two  major  networks  would  not  unduly  affect  the 
 level  of  diversity  and  competition.  Other  commenters  argued  that  major  networks  continue  to  have  market  power  and  relaxation  of  the  rule  would  have  an  adverse  impact  on  competition.  We  invite  updates 
 of  these  arguments.  We  also  seek  comment  on  whether  the  dual  network  rule  promotes  or  retards  innovation. 

 165.  In  the  Dual  Network  Order,  we  found  that  the  merger  of  an  emerging  network  and  a  major  network  may  benefit  viewers  and  advertisers  by  lowering  the  risk  associated  with  the  creation  of 
 new  network  programming  by  giving  one  company  a  larger  potential  audience  for  the  programming  produced  by  the  network.  251  This  spreads  the  fixed  costs  of  program  creation  over  a  larger  number  of 
 viewers,  thereby  lowering  the  per-  viewer  cost  of  producing  the  programming.  If  there  are  potential  efficiencies  of  eliminating  the  rule  for  emerging  networks,  as  we  concluded  last  year,  will  comparable 
 efficiencies  accrue  if  two  or  more  top  four  networks  were  permitted  to  merge? 
 166.  In  the  Dual  Network  Order,  we  found  that  the  combination  of  an  emerging  network  and  one  of  the  four  major  networks  would  not  harm  the  national  television  advertising  market  because  the  two 

 networks  would  compete  in  different  strategic  groups.  252  We  now  seek  comment  on  the  effect  of  mergers  among  the  four  major  networks  on  the  program  production  market.  If  the  four  major  networks  constitute 
 a  strategic  group  within  the  national  advertising  market,  do  they  also  operate  as  a  strategic  group  within  the  program  production  market?  We  seek  comment  on  how  competition  in  the  program  production 
 market  and  program  diversity  would  be  affected,  if  at  all,  by  a  merger  among  two  or  more  of  the  four  major  networks. 

 248  Dual  Network  Order,  16  FCC  Rcd  at  11126,    28.  The  Commission  did  not  address  the  arguments  because  the 
 issue  of  eliminating  the  dual  network  rule  in  its  entirety  was  not  before  the  Commission  at  that  point.  249 
 Id.  at  11126-  27,    29  (  The  questions  presented  in  the  Notice  related  solely  to  the  emerging  networks  portion  of  the  dual  network  rule;  the  question  of  eliminating  the  rule  in  its  entirety  was  not  squarely  presented  to  this 

 Commission  for  review.  Therefore,  we  will  not  address  that  issue  in  this  proceeding.)  (footnote  omitted).  250 
 Id.  at  11125-  27,    26-  29.  251 
 Id.  at  11124-  25,    24.  252 
 We  ask  whether  examination  of  advertising  competition  is,  or  should  be,  relevant  to  our  analysis  of  the  ownership  rules  in  Section  IV  of  this  Notice. 
52
 Federal  Communications  Commission  FCC  02-  249 
 53 
 167.  We  are  also  concerned  with  the  impact  that  the  dual  network  rule  may  have  on  innovation  in  the  media  marketplace.  Does  our  current  rule  promote  innovation?  Would  relaxation  of  the  dual 
 network  rule  increase  incentives  to  provide  innovative  broadcast  programming  or  new  broadcast-  based  technologies  or  services?  Examples  of  innovations  that  have  been  withheld  from  the  media  marketplace 
 as  a  direct  result  of  the  dual  network  rule  would  be  particularly  useful  to  our  competitive  analysis. 
 3.  Localism 
 168.  The  Dual  Network  Order  did  not  address  localism  as  a  policy  goal  per  se.  It  did  address  localism  in  the  context  of  a  discussion  of  diversity.  Thus,  it  noted  that  retention  of  the  then-  existing  dual 

 network  rule  might  affect  the  financial  viability  of  the  UPN  network.  If  UPN  were  no  longer  viable,  then  some  stations  that  had  been  affiliated  with  it  might  not  be  able  to  survive  without  the  benefits  of 
 affiliation.  That  is,  without  network-  obtained  programming  and  a  recognized  brand,  the  affiliates  might  not  be  able  to  sustain  the  increases  in  the  cost  of  programming  that  they  would  have  to  bear  to  attract 
 viewers,  which  could  result  in  the  cessation  of  operations.  This  could  have  cascading  adverse  consequences  on  diversity  at  the  local  level.  253  We  seek  to  expand  our  understanding  of  the  relationship 
 between  localism  and  the  dual  network  rule.  We  invite  comment  as  to  whether  the  current  rule  promotes  localism  and,  if  so,  whether,  modification  or  elimination  of  the  rule  would  have  any  effect.  We  also  seek 
 comment  on  whether  combinations  among  major  networks  would  affect  the  quantity  or  quality  of  local  news  provided  by  the  merged  companys  owned  and  operated  stations.  Are  there  any  other  factors  we 
 should  consider  in  determining  whether  to  retain,  modify,  or  eliminate  the  dual  network  rule? 
 VII.  ADMINISTRATIVE  MATTERS 
 A.  Procedural  Provisions 
 1.  Notice  and  Comment  Provisions 
 169.  Pursuant  to  applicable  procedures  set  forth  in  Sections  1.415  and  1.419  of  the  Commissions  rules,  254  interested  parties  may  file  comments  on  this  item  on  or  before  60  days  after 

 Commission  release  of  the  Media  Ownership  Working  Group  studies,  and  reply  comments  on  or  before  90  days  after  Commission  release  of  the  Media  Ownership  Working  Group  studies. 

 170.  Parties  may  submit  their  comments  using  the  Commissions  Electronic  Comment  Filing  System  (  ECFS)  or  by  filing  paper  copies.  255  Comments  may  be  filed  as  an  electronic  file  via  the 
 Internet  at  http://  www.  fcc.  gov/  e-  file/  ecfs.  html.  Generally,  only  one  copy  of  an  electronic  submission  must  be  filed.  If  multiple  docket  or  rulemaking  numbers  appear  in  the  caption  of  this  proceeding, 
 however,  commenters  must  transmit  one  electronic  copy  of  the  comments  to  each  docket  or  rulemaking  number  referenced  in  the  caption.  In  completing  the  transmittal  screen,  commenters  should  include  their 
 full  name,  Postal  Service  mailing  address,  and  the  applicable  docket  or  rulemaking  number.  Parties  may  also  submit  an  electronic  comment  by  Internet  e-  mail.  To  obtain  filing  instructions  for  e-  mail  comments, 
 commenters  should  send  an  e-  mail  to  ecfs@  fcc.  gov,  and  should  include  the  following  words  in  the  body  of  the  message:  get  form  <your  e-  mail  address>.  A  sample  form  and  directions  will  be  sent  in  reply. 
 Additional  information  on  ECFS  is  available  at  http://  www.  fcc.  gov/  e-  file/  ecfs.  html. 
 171.  Filings  may  also  be  sent  by  hand  or  messenger  delivery,  by  commercial  overnight  courier,  or  by  first-  class  or  overnight  U.  S.  Postal  Service  mail  (although  we  continue  to  experience  delays 

 253  Dual  Network  Order,  16  FCC  Rcd.  at  11128-  29,    33-  35. 
 254  47  C.  F.  R.    1.415,  1.  419. 
 255  See  Electronic  filing  of  Documents  in  Rulemaking  Proceedings,  63  Fed.  Reg.  24121  (1998). 
53
 Federal  Communications  Commission  FCC  02-  249 
 54 
 in  receiving  U.  S.  Postal  Service  mail).  Parties  who  choose  to  file  by  paper  must  file  an  original  and  four  copies  of  each  filing.  If  more  than  one  docket  or  rulemaking  number  appear  in  the  caption  of  this 
 proceeding,  commenters  must  submit  two  additional  copies  for  each  additional  docket  or  rulemaking  number.  The  Commissions  contractor,  Vistronix,  Inc.,  will  receive  hand-  delivered  or  messenger-delivered 
 paper  filings  for  the  Commissions  Secretary  at  236  Massachusetts  Avenue,  N.  E.,  Suite  110,  Washington,  D.  C.  20002.  The  filing  hours  at  this  location  are  8:  00  a.  m.  to  7:  00  p.  m.  All  hand  deliveries 
 must  be  held  together  with  rubber  bands  or  fasteners.  Any  envelopes  must  be  disposed  of  before  entering  the  building.  Commercial  overnight  mail  (other  than  U.  S.  Postal  Service  Express  Mail  and  Priority  Mail) 
 must  be  sent  to  9300  East  Hampton  Drive,  Capitol  Heights,  MD  20743.  U.  S.  Postal  Service  first-  class  mail,  Express  Mail,  and  Priority  Mail  should  be  addressed  to  445  12th  Street,  SW,  Washington,  D.  C. 
 20554.  All  filings  must  be  addressed  to  the  Commissions  Secretary,  Office  of  the  Secretary,  Federal  Communications  Commission. 

 172.  We  also  request  that  parties  send  two  paper  copies  of  each  pleading  to  Qualex  International,  Portals  II,  445  12  th  Street,  S.  W.,  Room  CY-  B402,  Washington,  D.  C.  20554,  telephone 
 (202)  863-  2893,  facsimile  (202)  863-  2898,  or  email  at  qualexint@  aol.  com.  Parties  must  also  send  one  electronic  copy  via  email,  plus  eight  paper  copies  of  their  filing,  to  Linda  Senecal,  Industry  Analysis 
 Division,  Media  Bureau,  Federal  Communications  Commission,  445  12  th  Street,  S.  W.,  Room  2-  C438,  Washington,  D.  C.  20554,  email  lsenecal@  fcc.  gov  . 

 2.  Ex  Parte  Provisions 
 173.  Because  this  proceeding  involves  broad  public  policy  issues,  the  proceeding  will  be  treated  as  permit  but  disclose  for  purposes  of  the  Commissions  ex  parte  rules.  See  generally  47  C.  F.  R. 

   1.1200-  1.1216.  Ex  parte  presentations  will  be  governed  by  the  procedures  set  forth  in  Section  1.1206  of  the  Commissions  rules  applicable  to  non-  restricted  proceedings.  256  Should  circumstances  warrant,  this 
 proceeding  or  any  related  proceeding  may  be  designated  as  restricted. 
 174.  Parties  making  oral  ex  parte  presentations  are  directed  to  the  Commissions  statement  re-emphasizing  the  publics  responsibility  in  permit-  but-  disclose  proceedings  and  are  reminded  that 

 memoranda  summarizing  the  presentation  must  contain  the  presentations  substance  and  not  merely  list  the  subjects  discussed.  257  More  than  a  one  or  two  sentence  description  of  the  views  and  arguments 
 presented  is  generally  required.  See  47  C.  F.  R.    1.1206(  b)(  2),  as  revised.  Other  rules  pertaining  to  oral  and  written  presentations  are  set  forth  in  Section  1.1206  (b)  as  well. 

 175.  We  urge  persons  submitting  written  ex  parte  presentations  or  summaries  of  oral  ex  parte  presentations  in  this  proceeding  to  use  ECFS  in  accordance  with  the  Commission  rules.  Parties  using 
 paper  ex  parte  submissions  must  file  an  original  and  one  copy  with  the  Commissions  Secretary,  Marlene  H.  Dortch.  As  applicable,  please  follow  the  procedures  set  forth  in  the  paragraphs  above  for  sending  your 
 submission  by  mail,  or  for  hand  delivery  of  your  submission  to  the  Commissions  filing  location  in  downtown  Washington,  D.  C. 

 176.  In  addition,  we  request  that  parties  provide  two  paper  copies  of  each  ex  parte  submission  to  Qualex  International,  Portals  II,  445  12  th  Street,  S.  W.,  Room  CY-  B402,  Washington,  D.  C.  20554, 
 telephone  (202)  863-  2893,  facsimile  (202)  863-  2898,  or  email  at  qualexint@  aol.  com.  We  ask  parties  to 

 256  An  ex  parte  presentation  is  any  communication  (spoken  or  written)  directed  to  the  merits  or  outcome  of  a 
 proceeding  made  to  a  Commissioner,  a  Commissioners  assistant,  or  other  decision-  making  staff  member,  that,  if  written,  is  not  served  on  other  parties  to  the  proceeding  or,  if  oral,  is  made  without  an  opportunity  for  all  parties  to  be 

 present.  47  C.  F.  R.    1.1201.  257 
 See  Commission  Emphasizes  the  Publics  Responsibilities  in  Permit-  But-  Disclose  Proceedings,  15  FCC  Rcd  19945  (2000). 
54
 Federal  Communications  Commission  FCC  02-  249 
 55 
 serve  one  electronic  copy  via  email,  plus  one  paper  copy  of  each  ex  parte  submission,  to  (1)  Linda  Senecal,  Industry  Analysis  Division,  Media  Bureau,  Federal  Communications  Commission,  445  12  th 
 Street,  S.  W.,  Room  2-  C438,  Washington,  D.  C.  20554,  email  lsenecal@  fcc.  gov  ;  and  (2)  Mania  Baghdadi,  Industry  Analysis  Division,  Media  Bureau,  Federal  Communications  Commission,  445  12  th  Street,  S.  W., 
 Room  2-  C267,  Washington,  D.  C.  20554,  email  mbaghdad@  fcc.  gov. 
 177.  This  document  is  available  in  alternative  formats  (computer  diskette,  large  print,  audio  record,  and  Braille).  Persons  with  disabilities  who  need  documents  in  these  formats  may  contact  Brian 

 Millin  at  (202)  418-  7426  (voice),  (202)  418-  7365  (TTY),  or  via  email  at  bmillin@  fcc.  gov. 
 178.  The  Media  Bureau  contacts  for  this  proceeding  are  Paul  Gallant,  (202)  418-  2380,  and  Debra  Sabourin,  (202)  418-  2330.  Press  inquiries  should  be  directed  to  Michelle  Russo  at  (202)  418-  2358 

 (voice),  (202)  418-  7365  (TTY)  or  (888)  835-  5322  (TTY). 
 B.  Initial  Regulatory  Flexibility  Analysis 
 179.  As  required  by  the  Regulatory  Flexibility  Act,  258  the  Commission  has  prepared  an  Initial  Regulatory  Flexibility  Analysis  (  IRFA)  of  the  possible  significant  economic  impact  on  a 

 substantial  number  of  small  entities  of  the  proposals  addressed  in  this  Notice.  The  IRFA  is  set  forth  in  Appendix  A.  Written  public  comments  are  requested  on  the  IRFA.  These  comments  must 
 be  filed  in  accordance  with  the  same  filing  deadlines  for  comments  on  this  Notice,  and  they  should  have  a  separate  and  distinct  heading  designating  them  as  responses  to  the  IRFA. 

 VIII.  ORDERING  CLAUSES 
 180.  IT  IS  ORDERED  that,  pursuant  to  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  Notice  of  Proposed  Rulemaking  is  ADOPTED. 

 181.  IT  IS  FURTHER  ORDERED  that  the  Commissions  Consumer  and  Governmental  Affairs  Bureau,  Reference  Information  Center,  SHALL  SEND  a  copy  of  this  Notice,  including  the  Initial 
 Regulatory  Flexibility  Analysis,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration. 

 FEDERAL  COMMUNICATIONS  COMMISSION 
 Marlene  H.  Dortch  Secretary 

 258  See  5  U.  S.  C.    603.  The  RFA,  5  U.  S.  C.    601  et.  seq.,  has  been  amended  by  the  Small  Business  Regulatory 
 Enforcement  Fairness  Act  of  1996,  Pub.  L.  No.  104-  121,  Title  II,  110  Stat.  847  (1996). 
55
 Federal  Communications  Commission  FCC  02-  249 
 56 
 APPENDIX  A 
 Initial  Regulatory  Flexibility  Act 

 As  required  by  the  Regulatory  Flexibility  Act  (  RFA),  259  the  Commission  has  prepared  this  Initial  Regulatory  Flexibility  Analysis  (  IRFA)  of  the  possible  significant  economic  impact  on  small  entities  by 
 the  policies  and  rules  proposed  in  this  Notice  of  Proposed  Rulemaking  (  Notice),  provided  in  sections  IV,  V  and  VI  of  the  item.  Written  public  comments  are  requested  on  this  IRFA.  Comments  must  be 
 identified  as  responses  to  the  IRFA  and  must  be  filed  by  the  deadlines  for  comments  on  the  Notice.  The  Commission  will  send  a  copy  of  the  Notice,  including  this  IRFA,  to  the  Chief  Counsel  for  Advocacy  of 
 the  Small  Business  Administration  (  SBA).  260  In  addition,  the  Notice  and  the  IRFA  (or  summaries  thereof)  will  be  published  in  the  Federal  Register.  261 

 A.  Need  for,  and  Objectives  of,  the  Proposed  Rules 
 Section  202(  h)  of  the  Telecommunications  Act  of  1996  (  1996  Act)  requires  the  Commission  to  review  all  of  its  broadcast  ownership  rules  every  two  years  commencing  in  1998,  and  to  determine  whether  any 
 of  these  rules  are  necessary  in  the  public  interest  as  the  result  of  competition.  The  1996  Act  also  requires  the  Commission  to  repeal  or  modify  any  regulation  it  determines  to  be  no  longer  in  the  public  interest.  At 
 the  time  these  ownership  rules  were  adopted,  there  were  fewer  local  media  outlets  and  fewer  types  of  media  than  there  are  today.  The  ownership  rules  in  their  current  form  therefore  may  need  revision  to 
 ensure  that  they  accurately  reflect  current  media  marketplace  conditions.  The  goal  of  this  proceeding  is  to  solicit  comment  on  the  modification  of  the  subject  policies  and  rules. 

 In  this  Notice,  we  seek  comment  on  both  local  and  national  ownership  rules.  The  local  rules  are  the  local  TV  multiple  ownership  rule  and  the  radio/  TV  cross-  ownership  rule.  The  national  ownership  rules 
 are  the  national  TV  multiple  ownership  rule  and  the  dual  network  rule.  These  four  rules  are  described  in  Sections  V  and  VI  of  this  Notice.  Additionally,  open  proceedings  concerning  the  newspaper/  broadcast 
 cross-  ownership  rule  and  the  local  radio  ownership  rule  are  incorporated  into  this  proceeding. 
 Section  202(  h)  of  the  1996  Telecommunications  act  directs  the  Commission  to  re-  examine  its  broadcast  ownership  rules  every  two  years  and  either  repeal,  retain  or  modify  them.  Additionally,  two  recent  court 
 decisions  by  the  U.  S.  Court  of  Appeals  for  the  District  of  Columbia  Circuit  state  that  section  202(  h)  carries  with  it  a  presumption  in  favor  of  repealing  or  modifying  the  ownership  rules.  In  the  Fox 
 Television  case,  discussed  in  Section  II  of  the  item,  the  court  vacated  the  cable/  broadcast  cross-  ownership  rule  and  remanded  for  further  consideration  the  Commissions  decision  in  its  1998  biennial  review  to 
 retain  then  national  TV  multiple  ownership  rule.  In  the  Sinclair  case,  discussed  in  Section  II  of  the  item,  the  same  court  invalidated  the  Commissions  definition  of  voices  under  the  local  TV  ownership  rule, 
 stating  the  Commission  had  failed  to  justify  its  decision  to  include  only  TV  broadcast  stations  as  voices. 
 In  light  of  the  mandate  in  section  202(  h)  and  these  recent  court  decisions,  the  Commission  seeks  comment  from  parties  concerning  ownership  rules  discussed  in  the  Notice.  The  Commission  believes  that  a  broad 
 range  of  comments  must  be  received  to  ensure  we  fulfill  our  mandate  to  further  the  public  interest,  convenience  and  necessity. 

 259  See  5  U.  S.  C.    603.  The  RFA,  see  5  U.  S.  C.    601  et  seq.,  has  been  amended  by  the  Small  Business  Regulatory 
 Enforcement  Fairness  Act  of  1996  (  SBREFA),  Pub.  L.  No.  104-  121,  110  Stat.  847  (1996).  260 
 See  5  U.  S.  C.    603(  a).  261 
 See  id. 
56
 Federal  Communications  Commission  FCC  02-  249 
 57 
 We  are  required  under  the  Regulatory  Flexibility  Act  to  demonstrate  a  flexible  and  responsive  awareness  of  the  interests  of  small  business  entities  that  are  subject  to  the  rules  under  review  in  this  Notice. 
 Accordingly,  we  solicit  comment  from  all  small  businesses  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. 
 B.  Legal  Basis 
 This  Notice  is  adopted  pursuant  to  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. 
 C.  Description  and  Estimate  of  the  Number  of  Small  Entities  To  Which  the  Proposed  Rules  Will  Apply 

 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  any  proposed  rules,  if  adopted.  262  The  RFA  generally  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.  263  In  addition,  the  term  small 
 business  has  the  same  meaning  as  the  term  small  business  concern  under  the  Small  Business  Act.  264  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.  265 
 In  this  context,  the  application  of  the  statutory  definition  to  television  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  to  define  or  quantify  the  criteria  that  would  establish  whether  a  specific  television  station  is  dominant  in  its  field  of  operation.  Accordingly,  the  estimates  that  follow  of  small  businesses  to 
 which  rules  may  apply  do  not  exclude  any  television  station  from  the  definition  of  a  small  business  on  this  basis  and  are  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  businesses  to  which  they  apply  may  be  over  inclusive  to  this  extent. 
 Television  Broadcasting.  The  Small  Business  Administration  defines  a  television  broadcasting  station  that  has  no  more  than  $12  million  in  annual  receipts  as  a  small  business.  266  Television  broadcasting 
 consists  of  establishments  primarily  engaged  in  broadcasting  images  together  with  sound,  including  the  production  or  transmission  of  visual  programming  which  is  broadcast  to  the  public  on  a 
 predetermined  schedule.  267  Included  in  this  industry  are  commercial,  religious,  educational,  and  other 

 262  5  U.  S.  C.    603(  b)(  3). 
 263  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.  264 
 Id.  265 
 15  U.  S.  C.    632.  266 
 13  C.  F.  R.    121.  201  (North  American  Industry  Classification  System  (  NAICS)  Code  513120).  267 
 Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1997  Economic  Census,  Subject  Series    Source  of  Receipts,  Information  Section  51,  App.  B  at  B-  7-  8  (2000). 
57
 Federal  Communications  Commission  FCC  02-  249 
 58 
 television  stations.  268  Also  included  are  establishments  primarily  engaged  in  television  broadcasting  and  which  produce  programming  in  their  own  studios.  269  Separate  establishments  primarily  engaged  in 
 producing  programming  are  classified  under  other  NAICS  numbers.  270 
 According  to  Commission  staff  review  of  the  BIA  Publications,  Inc.,  Master  Access  Television  Analyzer  Database  on  August  22,  2002,  about  870  (70%)  of  1,250  commercial  television  broadcast  stations  have 
 revenues  of  $12  million  or  less.  We  note,  however,  that  under  SBAs  definition,  revenues  of  affiliates  that  are  not  television  stations  should  be  aggregated  with  the  television  station  revenues  in  determining  whether 
 a  concern  is  small.  Our  estimate,  therefore,  likely  overstates  the  number  of  small  entities  that  might  be  affected  by  any  changes  to  the  ownership  rules,  because  the  revenue  figure  on  which  it  is  based  does  not 
 include  or  aggregate  revenues  from  non-  television  affiliated  companies. 
 Radio  Broadcasting.  The  SBA  defines  a  radio  station  that  has  $6  million  or  less  in  annual  receipts  as  a  small  business.  271  According  to  Commission  staff  review  of  BIA  Publications  Inc.  Master  Access  Radio 
 Analyzer  Database  on  August  22,  2002,  about  10,800  (96%)  of  11,320  commercial  radio  stations  have  revenue  of  $6  million  or  less.  We  note,  however,  that  many  radio  stations  are  affiliated  with  much  larger 
 corporations  with  much  higher  revenue.  Our  estimate,  therefore,  likely  overstates  the  number  of  small  entities  that  might  be  affected  by  any  changes  to  the  ownership  rules.  272 

 Cable  and  Other  Program  Distribution.  The  SBA  has  developed  a  small  business  size  standard  for  cable  and  other  program  distribution  services,  which  includes  all  such  companies  generating 
 $12.5  million  or  less  in  revenue  annually.  273  This  category  includes,  among  others,  cable  operators,  direct  broadcast  satellite  (  DBS)  services,  home  satellite  dish  (  HSD)  services,  multipoint 
 distribution  services  (  MDS),  multichannel  multipoint  distribution  service  (  MMDS),  Instructional  Television  Fixed  Service  (  ITFS),  local  multipoint  distribution  service  (  LMDS),  satellite  master 
 antenna  television  (  SMATV)  systems,  and  open  video  systems  (  OVS).  According  to  the  Census  Bureau  data,  there  are  1,311  total  cable  and  other  pay  television  service  firms  that  operate 
 throughout  the  year  of  which  1,180  have  less  than  $10  million  in  revenue.  274  We  address  below  each  service  individually  to  provide  a  more  precise  estimate  of  small  entities. 

 268  Id.  See  Executive  Office  of  the  President,  Office  of  Management  and  Budget,  Standard  Industrial  Classification 
 Manual  (1987),  at  283,  which  describes  Television  Broadcasting  Stations  (SIC  Code  4833)  as: 
 Establishments  primarily  engaged  in  broadcasting  visual  programs  by  television  to  the  public,  except  cable  and  other  pay  television  services.  Included  in  this  industry  are  commercial,  religious, 

 educational  and  other  television  stations.  Also  included  here  are  establishments  primarily  engaged  in  television  broadcasting  and  which  produce  taped  television  program  materials. 

 NAICS  Code  513120,  by  its  terms,  supercedes  the  former  SIC  Code  4833,  but  incorporates  the  foregoing  inclusive  definitions  of  different  types  of  television  stations.  See  Economics  and  Statistics  Administration,  Bureau  of  Census, 
 U.  S.  Department  of  Commerce,  1997  Economic  Census,  Subject  Series    Source  of  Receipts,  Information  Section  51,  App.  B  at  B-  7-  8  (2000). 
 269  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1997  Economic 
 Census,  Subject  Series    Source  of  Receipts,  Information  Sector  51,  App.  B  at  B-  7  (2000).  270 
 NAICS  Code  512110  (Motion  Picture  and  Video  Production);  NAICS  Code  512120  (Motion  Picture  and  Video  Distribution);  NAICS  Code  512191  (Teleproduction  and  Other  Post-  Production  Services);  NAICS  Code  512199 

 (Other  Motion  Picture  and  Video  Industries).  271 
 NAICS  Code  513112.  272 
 Id.  273 
 13  C.  F.  R.    121.201  (NAICS  Code  513220).  This  NAICS  Code  applies  to  all  services  listed  in  this  paragraph.  274 
 Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1997  Economic  Census,  Subject  Series    Establishment  and  Firm  Size,  Information  Sector  51,  Table  4  at  50  (2000).  The  amount  of 

 $10  million  was  used  to  estimate  the  number  of  small  business  firms  because  the  relevant  Census  categories  stopped  (continued....) 
58
 Federal  Communications  Commission  FCC  02-  249 
 59 
 Cable  Operators.  The  Commission  has  developed,  with  SBA's  approval,  our  own  definition  of  a  small  cable  system  operator  for  the  purposes  of  rate  regulation.  Under  the  Commission's  rules,  a  "small  cable 
 company"  is  one  serving  fewer  than  400,000  subscribers  nationwide.  275  We  last  estimated  that  there  were  1,439  cable  operators  that  qualified  as  small  cable  companies.  276  Since  then,  some  of  those 
 companies  may  have  grown  to  serve  over  400,000  subscribers,  and  others  may  have  been  involved  in  transactions  that  caused  them  to  be  combined  with  other  cable  operators.  Consequently,  we  estimate  that 
 there  are  fewer  than  1,439  small  entity  cable  system  operators  that  may  be  affected  by  the  decisions  adopted  in  this  Notice. 

 The  Communications  Act,  as  amended,  also  contains  a  size  standard  for  a  small  cable  system  operator,  which  is  "a  cable  operator  that,  directly  or  through  an  affiliate,  serves  in  the  aggregate  fewer  than  1%  of 
 all  subscribers  in  the  United  States  and  is  not  affiliated  with  any  entity  or  entities  whose  gross  annual  revenues  in  the  aggregate  exceed  $250,000,000.  277  The  Commission  has  determined  that  there  are 
 68,500,000  subscribers  in  the  United  States.  Therefore,  an  operator  serving  fewer  than  685,000  subscribers  shall  be  deemed  a  small  operator  if  its  annual  revenues,  when  combined  with  the  total  annual 
 revenues  of  all  of  its  affiliates,  do  not  exceed  $250  million  in  the  aggregate.  278  Based  on  available  data,  we  find  that  the  number  of  cable  operators  serving  685,  000  subscribers  or  less  totals  approximately 
 1,450.  279  Although  it  seems  certain  that  some  of  these  cable  system  operators  are  affiliated  with  entities  whose  gross  annual  revenues  exceed  $250,000,000,  we  are  unable  at  this  time  to  estimate  with  greater 
 precision  the  number  of  cable  system  operators  that  would  qualify  as  small  cable  operators  under  the  definition  in  the  Communications  Act. 

 DBS  Service.  Because  DBS  provides  subscription  services,  DBS  falls  within  the  SBA-  recognized  definition  of  cable  and  other  program  distribution  services.  280  This  definition  provides  that  a  small 
 entity  is  one  with  $12.5  million  or  less  in  annual  receipts.  281  The  Commission,  however,  does  not  collect  annual  revenue  data  for  DBS  and,  therefore,  is  unable  to  ascertain  the  number  of  small 
 DBS  licensees  that  could  be  impacted  by  these  proposed  rules.  DBS  service  requires  a  great  investment  of  capital  for  operation,  and  we  acknowledge,  despite  the  absence  of  specific  data  on 
 this  point,  that  there  are  entrants  in  this  field  that  may  not  yet  have  generated  $12.5  million  in  annual  receipts,  and  therefore  may  be  categorized  as  a  small  business,  if  independently  owned 
 and  operated. 
 Home  Satellite  Dish  (  HSD)  Service.  Because  HSD  provides  subscription  services,  HSD  falls  within  the  SBA-  recognized  definition  of  cable  and  other  program  distribution  services.  282  This 

 (...  continued  from  previous  page)  at  $9,999,999  and  began  at  $10,000,000.  No  category  for  $12.5  million  existed.  Thus,  the  number  is  as  accurate  as 
 it  is  possible  to  calculate  with  the  available  information.  275 
 47  C.  F.  R.    76.  901(  e).  The  Commission  developed  this  definition  based  on  its  determinations  that  a  small  cable  system  operator  is  one  with  annual  revenues  of  $100  million  or  less.  Sixth  Report  and  Order  and 

 Eleventh  Order  on  Reconsideration,  10  FCC  Rcd.  7393  (1995).  276 
 Paul  Kagan  Associates,  Inc.,  CABLE  TV  INVESTOR,  Feb.  29,  1996  (based  on  figures  for  Dec.  30,  1995).  277 
 47  U.  S.  C.    543(  m)(  2).  278 
 47  C.  F.  R.    76.1403(  b).  279 
 Paul  Kagan  Associates,  Inc.,  CABLE  TV  INVESTOR,  Feb.  29,  1996  (based  on  figures  for  Dec.  30,  1995).  280 
 13  C.  F.  R.    121.  201  (NAICS  Code  513220).  281 
 Id.  282 
 Id. 
59
 Federal  Communications  Commission  FCC  02-  249 
 60 
 definition  provides  that  a  small  entity  is  one  with  $12.5  million  or  less  in  annual  receipts.  283  The  market  for  HSD  service  is  difficult  to  quantify.  Indeed,  the  service  itself  bears  little  resemblance 
 to  other  MVPDs.  HSD  owners  have  access  to  more  than  265  channels  of  programming  placed  on  C-  band  satellites  by  programmers  for  receipt  and  distribution  by  MVPDs,  of  which  115 
 channels  are  scrambled  and  approximately  150  are  unscrambled.  284  HSD  owners  can  watch  unscrambled  channels  without  paying  a  subscription  fee.  To  receive  scrambled  channels,  however, 
 an  HSD  owner  must  purchase  an  integrated  receiver-  decoder  from  an  equipment  dealer  and  pay  a  subscription  fee  to  an  HSD  programming  package.  Thus,  HSD  users  include:  (1)  viewers  who 
 subscribe  to  a  packaged  programming  service,  which  affords  them  access  to  most  of  the  same  programming  provided  to  subscribers  of  other  MVPDs;  (2)  viewers  who  receive  only  non- 
 subscription  programming;  and  (3)  viewers  who  receive  satellite  programming  services  illegally  without  subscribing.  Because  scrambled  packages  of  programming  are  most  specifically  intended 
 for  retail  consumers,  these  are  the  services  most  relevant  to  this  discussion.  285 
 Multipoint  Distribution  Service  (  MDS),  Multichannel  Multipoint  Distribution  Service  (  MMDS),  Instructional  Television  Fixed  Service  (  ITFS)  and  Local  Multipoint  Distribution 
 Service  (  LMDS).  MMDS  systems,  often  referred  to  as  wireless  cable,  transmit  video  programming  to  subscribers  using  the  microwave  frequencies  of  the  MDS  and  ITFS.  286  LMDS  is  a  fixed  broadband 
 point-  to-  multipoint  microwave  service  that  provides  for  two-  way  video  telecommunications.  287 
 In  connection  with  the  1996  MDS  auction,  the  Commission  defined  small  businesses  as  entities  that  had  an  annual  average  gross  revenues  of  less  than  $40  million  in  the  previous  three  calendar  years.  288  This 
 definition  of  a  small  entity  in  the  context  of  MDS  auctions  has  been  approved  by  the  SBA.  289  The  MDS  auctions  resulted  in  67  successful  bidders  obtaining  licensing  opportunities  for  493  Basic  Trading  Areas 
 (  BTAs).  Of  the  67  auction  winners,  61  met  the  definition  of  a  small  business.  MDS  also  includes  licensees  of  stations  authorized  prior  to  the  auction.  As  noted,  the  SBA  has  developed  a  definition  of 
 small  entities  for  pay  television  services,  which  includes  all  such  companies  generating  $12.5  million  or  less  in  annual  receipts.  290  This  definition  includes  multipoint  distribution  services,  and  thus  applies  to 
 MDS  licensees  and  wireless  cable  operators  that  did  not  participate  in  the  MDS  auction.  Information  available  to  us  indicates  that  there  are  approximately  850  of  these  licensees  and  operators  that  do  not 
 generate  revenue  in  excess  of  $12.5  million  annually.  Therefore,  for  purposes  of  the  IRFA,  we  find  that  there  are  approximately  850  small  MDS  providers  as  defined  by  the  SBA  and  the  Commissions  auction 
 rules. 
 The  SBA  definition  of  small  entities  for  cable  and  other  program  distribution  services,  which  includes  such  companies  generating  $12.5  million  in  annual  receipts,  seems  reasonably  applicable  to  ITFS.  291 

 283  Id. 
 284  Annual  Assessment  of  the  Status  of  Competition  in  Markets  for  the  Delivery  of  Video  Programming,  12 
 FCC  Rcd  4358,  4385  (1996).  285 
 Id.  at  4385.  286 
 Amendment  of  Parts  21  and  74  of  the  Commissions  Rules  with  Regard  to  Filing  Procedures  in  the  Multipoint  Distribution  Service  and  in  the  Instructional  Television  Fixed  Service  and  Implementation  of  Section  309(  j)  of  the 

 Communications  Act    Competitive  Bidding,  10  FCC  Rcd  9589,  9593  (1995)(  ITFS  Order).  287 
 See  Local  Multipoint  Distribution  Service,  12  FCC  Rcd  12545  (1997)(  LMDS  Order).  288 
 47  C.  F.  R.    21.961  (b)(  1).  289 
 See  ITFS  Order,  10  FCC  Rcd  at  9589.  290 
 13  C.  F.  R.    121.  201  (NAICS  Code  513220).  291 
 Id. 
60
 Federal  Communications  Commission  FCC  02-  249 
 61 
 There  are  presently  2,032  ITFS  licenses.  All  but  100  of  these  licenses  are  held  by  educational  institutions.  Educational  institutions  are  included  in  the  definition  of  a  small  business.  292  However,  we  do  not 
 collect  annual  revenue  data  for  ITFS  licensees,  and  are  not  able  to  ascertain  how  many  of  the  100  non-  educational  licensees  would  be  categorized  as  small  under  the  SBA  definition.  Thus,  we 
 tentatively  conclude  that  at  least  1,932  licensees  are  small  businesses. 
 Additionally,  the  auction  of  the  1,030  LMDS  licenses  began  on  February  18,  1998,  and  closed  on  March  25,  1998.  The  Commission  defined  small  entity  for  LMDS  licenses  as  an  entity  that  has  average  gross 
 revenues  of  less  than  $40  million  in  the  three  previous  calendar  years.  293  An  additional  classification  for  very  small  business  was  added  and  is  defined  as  an  entity  that,  together  with  its  affiliates,  has  average 
 gross  revenues  of  not  more  than  $15  million  for  the  preceding  calendar  years.  294  These  regulations  defining  small  entity  in  the  context  of  LMDS  auctions  have  been  approved  by  the  SBA.  295  There  were 
 93  winning  bidders  that  qualified  as  small  entities  in  the  LMDS  auctions.  A  total  of  93  small  and  very  small  business  bidders  won  approximately  277  A  Block  licenses  and  387  B  Block  licenses.  On  March  27, 
 1999,  the  Commission  re-  auctioned  161  licenses;  there  were  40  winning  bidders.  Based  on  this  information,  we  conclude  that  the  number  of  small  LMDS  licenses  will  include  the  93  winning  bidders  in 
 the  first  auction  and  the  40  winning  bidders  in  the  re-  auction,  for  a  total  of  133  small  entity  LMDS  provides  as  defined  by  the  SBA  and  the  Commissions  auction  rules. 

 In  sum,  there  are  approximately  a  total  of  2,  000  MDS/  MMDS/  LMDS  stations  currently  licensed.  Of  the  approximate  total  of  2,000  stations,  we  estimate  that  there  are  1,595  MDS/  MMDS/  LMDS  providers  that 
 are  small  businesses  as  deemed  by  the  SBA  and  the  Commissions  auction  rules. 
 Satellite  Master  Antenna  Television  ("  SMATV")  Systems.  The  SBA  definition  of  small  entities  for  cable  and  other  program  distribution  services  includes  SMATV  services  and,  thus,  small  entities  are 
 defined  as  all  such  companies  generating  $12.5  million  or  less  in  annual  receipts.  296  Industry  sources  estimate  that  approximately  5,200  SMATV  operators  were  providing  service  as  of 
 December  1995.  297  Other  estimates  indicate  that  SMATV  operators  serve  approximately  1.5  million  residential  subscribers  as  of  July  2001.  298  The  best  available  estimates  indicate  that  the  largest 
 SMATV  operators  serve  between  15,000  and  55,000  subscribers  each.  Most  SMATV  operators  serve  approximately  3,000-  4,000  customers.  Because  these  operators  are  not  rate  regulated,  they  are  not 
 required  to  file  financial  data  with  the  Commission.  Furthermore,  we  are  not  aware  of  any  privately  published  financial  information  regarding  these  operators.  Based  on  the  estimated  number  of  operators 
 and  the  estimated  number  of  units  served  by  the  largest  ten  SMATVs,  we  believe  that  a  substantial  number  of  SMATV  operators  qualify  as  small  entities. 

 292  SBREFA  also  applies  to  nonprofit  organizations  and  governmental  organizations  such  as  cities,  counties,  towns, 
 townships,  villages,  school  districts,  or  special  districts,  with  populations  of  less  than  50,  000.  5  U.  S.  C.    601  (5).  293 
 See  LMDS  Order,  12  FCC  Rcd  at  4403-  4.  294 
 Id.  295 
 See  Letter  to  Daniel  Phythyon,  Chief,  Wireless  Telecommunications  Bureau  (FCC)  from  A.  Alvarez,  Administrator,  SBA  (January  6,  1998). 

 296  13  C.  F.  R.    121.201  (NAICS  Code  513220). 
 297  See  Third  Annual  Report,  12  FCC  Rcd  at  4403-  4. 
 298  See  Annual  Assessment  of  the  Status  of  Competition  in  Markets  for  the  Delivery  of  Video  Programming,  17  FCC 
 Rcd  1244,  1281  (2001). 
61
 Federal  Communications  Commission  FCC  02-  249 
 62 
 Open  Video  Systems  (  OVS).  Because  OVS  operators  provide  subscription  services,  299  OVS  falls  within  the  SBA-  recognized  definition  of  cable  and  other  program  distribution  services.  300  This  definition 
 provides  that  a  small  entity  is  one  with  $12.5  million  or  less  in  annual  receipts.  301  The  Commission  has  certified  25  OVS  operators  with  some  now  providing  service.  Affiliates  of  Residential 
 Communications  Network,  Inc.  ("  RCN")  received  approval  to  operate  OVS  systems  in  New  York  City,  Boston,  Washington,  D.  C.  and  other  areas.  RCN  has  sufficient  revenues  to  assure  us  that 
 they  do  not  qualify  as  small  business  entities.  Little  financial  information  is  available  for  the  other  entities  authorized  to  provide  OVS  that  are  not  yet  operational.  Given  that  other  entities  have 
 been  authorized  to  provide  OVS  service  but  have  not  yet  begun  to  generate  revenues,  we  conclude  that  at  least  some  of  the  OVS  operators  qualify  as  small  entities. 

 Daily  newspapers.  The  SBA  defines  a  newspaper  publisher  with  less  than  500  employees  as  a  small  business.  302  According  to  the  1997  Economic  Census,  8,620  of  8758  newspaper  publishers  had  less  than 
 500  employees.  303  The  data  does  not  distinguish  between  newspaper  publishers  that  publish  daily  and  those  that  publish  less  frequently,  and  the  latter  are  more  likely  to  be  small  businesses  than  the  former 
 because  of  the  greater  expense  to  publish  daily.  The  newspaper/  broadcast  cross-  ownership  rule  applies  only  to  daily  newspapers.  It  is  likely  that  not  all  of  the  8,620  small  newspaper  publishers  are  affected  by 
 the  current  rule. 
 D.  Description  of  Projected  Reporting,  Recordkeeping,  and  Other  Compliance  Requirements 
 We  anticipate  that  none  of  the  proposals  presented  in  the  Notice  will  result  in  an  increase  to  the  reporting  and  recordkeeping  requirements  of  broadcast  stations,  newspapers,  or  cable  television  stations.  However, 
 one  alternative  available  to  the  Commission  in  this  Notice  is  retention  of  the  current  rules. 
 E.  Steps  Taken  to  Minimize  Significant  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered 

 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.  304 

 We  are  directed  under  law  to  consider  alternatives,  including  alternatives  not  explicitly  listed  above.  305  This  Notice  invites  comment  on  a  number  of  alternatives  to  retain,  modify,  or  eliminate  the  individual 
 ownership  rules.  The  Commission  will  also  consider  additional  significant  alternatives  developed  in  the  record. 

 299  See  47  U.  S.  C.    573. 
 300  13  C.  F.  R.    121.  201  (NAICS  Code  513220). 
 301  Id. 
 302  NAIC  Code  511110. 
 303  http://  www.  census.  gov/  prod/  ec97/  97m5111a.  pdf,  visited  9/  12/  02. 
 304  5  U.  S.  C.    603(  c)(  1)-(  c)(  4). 
 305  5  U.  S.  C.    603(  b). 
62
 Federal  Communications  Commission  FCC  02-  249 
 63 
 In  this  context,  we  highlight  below  certain  aspects  of  this  Notice  in  which  we  have  asked  commenters  to  discuss  alternative  means  of  achieving  our  goals.  Parties  discussions  of  alternatives  that  are  in  their 
 submitted  comments  will  be  fully  considered  in  our  evaluation  of  whether  to  retain,  modify  or  eliminate  our  media  ownership  rules. 

 Our  local  ownership  rules  include  the  newspaper/  broadcast  cross-  ownership  rule,  the  radio/  TV  cross-ownership  rule,  the  local  radio  ownership  rule,  and  the  local  TV  multiple  ownership  rule.  These  rules  are 
 interrelated.  Each  is  intended  to  foster  competition  and  diversity  in  the  local  media  marketplace.  One  approach  under  consideration  is  to  consider  these  rules  collectively  and  thus  adopt  a  single  rule  that  would 
 foster  diversity,  competition,  and  localism.  An  alternative  option  is  to  retain  the  current  regulatory  scheme,  in  which  we  apply  individual,  media-  specific  local  ownership  rules.  We  ask  for  comment  on 
 how  best  to  choose  among  these  or  other  alternatives. 
 We  also  ask  about  alternative  approaches  to  identifying  and  weighting  voices  if  the  Commission  adopts  a  new  voice  test.  Should  the  Commission  develop  a  new  voice  test,  according  weights  to  different 
 outlet  types,  or  considering  factors  such  as  audience  reach,  ownership  structure,  percentage  of  programming  or  print  content  devoted  to  local  news,  and/  or  consumer  use  patterns?  Should  the 
 Commission  consider  an  alternative  that  would  count,  or  not  count,  certain  types  of  media  outlets  as  a  voice? 

 In  this  Notice,  the  Commission  explores  the  underpinnings  of  three  principles  underlying  the  regulation  of  the  broadcast  industry,  namely  diversity,  competition  and  localism.  These  principles  are  of  particular 
 import  to  small  entities.  Thus,  we  seek  comment  to  promote  on  the  general  advantages  and  disadvantages  of  relying  on  our  current  ownership  rules  to  promote  the  public  interest  versus  developing  a  single  local 
 ownership  rule  or  conducting  a  case-  by-  case  analysis. 
 In  addition  to  seeking  to  foster  the  policy  goals  discussed  above,  the  Commission  has  historically  used  the  ownership  rules  to  foster  ownership  by  diverse  groups,  such  as  minorities,  women  and  small  businesses. 
 In  the  context  of  this  comprehensive  review  of  our  ownership  rules,  we  invite  comment  on  whether  we  should  consider  such  diverse  ownership  as  a  goal  in  this  proceeding.  If  so,  how  should  we  accommodate 
 or  seek  to  foster  that  goal?  In  addition,  we  invite  comment  as  to  our  legal  authority  to  adopt  measures  to  foster  that  goal. 

 F.  Federal  Rules  that  May  Duplicate,  Overlap,  or  Conflict  With  the  Proposed  Rules 
 None. 
63
 Federal  Communications  Commission  FCC  02-  249 
 64 
 CONCURRING  STATEMENT  OF  COMMISSIONER  MICHAEL  J.  COPPS 
 In  the  matter  of  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, 
 MB  Docket  No.  02-  277  Cross-  Ownership  of  Broadcast  Stations  and  Newspapers,  MB  Docket  No.  01-  235 
 Rules  and  Policies  Concerning  Multiple  Ownership  of  Radio  Broadcast  Stations  in  Local  Markets,  MB  Docket  No.  01-  317 
 Definition  of  Radio  Markets,  MB  Docket  No.  00-  244 
 Let  me  begin  by  saying  that  I  dont  know  of  any  issue  before  the  Commission  that  is  more  fraught  with  serious  consequences  for  the  American  people  than  the  media  ownership  rules.  There  is  the 
 potential  in  the  ultimate  disposition  of  this  issue  to  remake  our  entire  media  landscape,  for  better  or  for  worse.  At  stake  is  how  radio  and  television  are  going  to  look  in  the  next  generation  and  beyond.  At  stake 
 are  old  and  honored  values  of  localism,  diversity,  competition,  and  the  multiplicity  of  voices  and  choices  that  undergirds  our  American  democracy.  At  stake  is  equal  opportunity  writ  large    the  opportunity  to 
 hear  and  be  heard;  the  opportunity  to  nourish  the  diversity  that  makes  this  country  great  and  which  will  determine  its  future;  the  opportunity  for  jobs  and  careers  in  our  media  industries;  and  the  opportunity  to 
 make  this  country  as  open  and  diverse  and  creative  as  it  can  possibly  be. 
 The  Nineties  brought  new  rules  permitting  increased  consolidation  in  the  broadcasting  industry,  on  the  premise  that  broadcasters  needed  more  flexibility  in  order  to  compete  effectively.  These  rules 
 paved  the  way  for  tremendous  consolidation  in  the  industry    going  far  beyond,  I  think,  what  anyone  expected  at  the  time.  These  changes  created  efficiencies  that  allowed  some  media  companies  to  operate 
 more  profitably  and  on  a  scale  unimaginable  just  a  few  years  ago.  They  may  even  have  kept  some  companies  in  business,  allowing  stations  to  remain  on  the  air  when  they  otherwise  might  have  gone  dark. 
 But  they  also  raise  profound  questions  of  public  policy.  How  far  should  such  combinations  be  allowed  to  go?  What  is  their  impact  on  localism,  diversity  and  the  availability  of  choices  to  consumers?  Does 
 consolidation  always,  generally  or  only  occasionally  serve  the  interests  of  the  citizenry?  How  do  we  judge  these  things? 

 Answering  these  and  many  other  questions  requires  more  than  just  personal  impressions  or  philosophical  ideas  about  government  regulation  or  deregulation.  Among  other  things,  it  demands 
 detailed  information  on  current  realities  in  specific  media  markets,  and  far-  ranging  economic  and  market  structure  surveys.  It  also  compels  a  look  at  consumer  consumption  habits.  I  commend  Chairman  Powell 
 for  putting  together  a  Media  Ownership  Task  Force  to  study  the  many  ramifications  of  this  issue.  But  I  would  emphasize  that  its  a  lot  to  study,  and  doing  it  right  requires  significant  resources  of  labor  and 
 money  and  time.  I  hope  the  Task  Force  will  have  the  resources  it  needs  to  conduct  studies  that  must  be  both  very  broad  and  very  deep.  Then  I  hope  we  might  even  consider,  as  a  Commission,  holding  hearings 
 here  and  around  the  country,  to  speak  with  Americans  and  better  gauge  what  the  reality  of  particular  media  markets  is.  I  dont  want  to  vote  on  final  rules    and  I  would  be  reluctant  to  vote  on  final  rules   
 unless  and  until  I  feel  comfortable  that  we  have  the  information  and  the  analysis  needed  to  inform  our  votes.  We  need  as  many  stakeholders  as  we  can  find  to  take  part  in  this  proceeding.  I  want  to  hear  more 
 from  industry,  from  labor,  from  consumers,  from  academe,  from  artists  and  entertainers,  from  anybody  who  has  a  stake  in  how  this  is  resolved.  And  I  think  just  about  everyone,  if  he  or  she  stops  to  think  about 
 it,  has  an  interest  and  a  stake. 
 I  also  want  to  emphasize  that  commenters  should  not  feel  they  have  to  limit  themselves  to  the  questions  posed  in  this  item.  The  Commission  labors  under  no  illusion  that  we  have  asked  every  possible 
 question;  indeed,  we  may  have  overlooked  some  that  cry  out  for  response,  so  I  urge  those  who  respond  to  look  at  every  aspect  of  these  issues  that  you  deem  relevant  to  our  decision-  making  process. 
64
 Federal  Communications  Commission  FCC  02-  249 
 65 
 I  will  concur  with  this  Notice  both  because  it  fulfills  our  statutory  mandate  to  review  the  ownership  rules,  and  because  it  asks  some  important  questions  that  should  help  us  to  determine  whether 
 the  public  interest  continues  to  be  served  by  these  rules.  However,  though  I  would  have  preferred  to  have  this  Notice  be  a  truly  clean  slate  for  our  analysis,  I  have  some  concerns  that  the  timing  and  tone  of  the 
 Notice  may  be  seen  as  prejudging  these  very  important  issues.  Indeed,  some  analysts  have  already  concluded  that  the  ownership  caps  and  limits  are  history.  Just  yesterday,  the  Precursor  Group  issued  a 
 release  predicting  that  the  result  of  our  review  in  this  proceeding  will  likely  permit  the  convergence,  vertical  integration  and  consolidation  of  the  media  sector,  and  that  [  o]  wnership  caps  and  bars  on  cross 
 ownership  are  highly  likely  to  be  repealed  .  .  .  At  this  stage  of  the  process    in  the  absence  of  the  hard  information  we  need  to  make  informed  decisions  and  in  the  absence  of  any  finding  that  our  rules  no 
 longer  serve  the  public  interest    I  think  such  conclusions  are,  at  the  very  least,  premature.  They  are  also  dangerous. 

 Our  Media  Ownership  Working  Group  is  engaged  in  a  number  of  studies  on  a  variety  of  media  issues  related  to  or  affected  by  the  ownership  rules.  These  have  not  yet  been  completed.  My  preference 
 was  to  move  forward  with  this  review  of  our  ownership  rules  only  after  those  studies  are  completed.  That  would  have  simplified  life  for  our  stakeholders  and  probably  saved  folks  the  cost  of  filing  more  than  one 
 set  of  comments.  However,  I  believe  the  decision  to  link  the  comment  periods  for  this  Notice  and  the  studies  mitigates  the  problem  somewhat,  and  that  it  will  allow  commenters  to  make  use  of  the  data  that 
 the  studies  produce  before  they  give  us  their  final  input. 
 Congress  mandated  review  of  our  media  ownership  rules  insists  that  we  only  eliminate  such  rules  if  doing  so  is  in  the  public  interest.  Some  still  argue  that  public  interest  shouldnt  count  for 
 much  in  our  ownership  reviews,  and  that  this  is  just  about  picking  a  number  and  letting  business  build  up  to  the  limit.  I  think  this  Commission  has  moved  beyond  any  such  narrow  approach  to  the  public  interest 
 and  that  none  of  us  embraces  the  concept  that  the  public  interest  means  anything  other  than  the  traditional  Commission  public  interest  standard.  Thus,  under  the  statute,  even  after  Fox  Television,  we  should 
 change  our  media  ownership  rules  only  if  real  evidence  demonstrates  that  the  public  interest  continues  to  be  served  by  doing  so.  And  I  believe  that  the  courts  are  still  amenable  to  keeping  most  of  our  rules,  if  we 
 provide  appropriate  justification  and  evidence  to  support  them.  Some  observers  act  as  though  the  court  has  decided  to  be  rid  of  all  our  rules.  They  have  said  nothing  of  the  sort. 

 Because  the  stakes  here  are  so  incredibly  high,  it  is  far  more  important  that  we  get  this  done  right  than  that  we  get  it  done  quickly.  I  keep  coming  back  to  the  high  stakes  involved  in  what  we  are  doing. 
 Suppose  for  a  moment  that  the  Commission  decides  to  remove  or  significantly  change  current  limits  on  media  ownership  --  and  suppose  our  decision  turns  out  to  be  a  mistake.  How  do  we  put  the  genie  back  in 
 the  bottle  then?  No  way. 
 Nevertheless,  we  are  launched  now  on  this  fateful  journey.  Much  hangs  in  the  balance.  But  if  we  approach  these  proceedings  with  an  open  mind,  with  receptivity  on  all  sides  to  hard  facts  and  compelling 
 evidence,  and  if  we  reach  out,  really  reach  out,  to  stakeholders  all  across  this  land,  I  believe  the  Commission  can  arrive  at  decisions  that  will  serve  the  public  interest  and  build  our  own  credibility  in  the 
 process. 
65
 Federal  Communications  Commission  FCC  02-  249 
 66 
 SEPARATE  STATEMENT  OF  COMMISSIONER  KEVIN  J.  MARTIN  APPROVING  IN  PART,  CONCURRING  IN  PART 
 Re:  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,  MB  Docket  No.  02-  277 
 Today  we  begin  the  2002  Biennial  Review  of  our  broadcast  ownership  regulations.  I  support  this  Notice,  and  commend  the  Chairman  for  his  strong  leadership  in  this  area.  With  this  action  today,  we 
 begin  the  most  comprehensive  review  of  our  broadcast  ownership  regulations  that  I  believe  the  Commission  has  ever  conducted.  We  will  examine  the  goals  our  rules  are  intended  to  achieve,  the  current 
 marketplace  in  which  they  operate,  and    pursuant  to  our  statutory  mandate    the  extent  to  which  each  rule  continues  to  be  necessary  in  the  public  interest  as  the  result  of  competition.  We  also  consider 
 whether  a  different  regulatory  framework  might  better  serve  the  Commissions  policy  goals  in  todays  marketplace.  While  this  task  will  be  challenging,  I  am  hopeful  that  we  will  end  this  process  with  a  clear, 
 reasoned  and  justified  approach  to  ownership  restrictions  that  will  withstand  judicial  scrutiny. 
 I  think  it  is  important  to  note  that  the  media  landscape  has  changed  dramatically  since  our  ownership  rules  were  adopted.  These  rules  are,  frankly  speaking,  old.  Our  long-  standing  goals  of 
 competition,  diversity,  and  localism,  however,  do  not  lose  their  importance  with  age.  These  goals  remain  critical.  But  the  import  of  these  goals  does  not  relieve  us  of  our  statutory  obligation  to  review  our  rules. 
 We  therefore  embark  on  this  biennial  review  to  ensure  that  whatever  ownership  rules  we  retain  or  adopt,  they  fulfill  these  goals  in  a  manner  that  reflects  the  current  marketplace. 

 I  write  separately  to  express  a  few  concerns.  First,  I  am  troubled  by  the  Notices  articulation  of  the  legal  standard  inherent  in  section  202(  h)  of  the  Telecommunications  Act  of  1996  (the  basis  for  this 
 biennial  review).  That  provision  instructs  the  Commission  to  review  its  broadcast  ownership  rules  every  two  years  to  determine  whether  they  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.  1  This  Notice  invite[  s]  comment  on  the  standard  the  Commission  should  apply  in  determining  whether  to  modify, 
 repeal,  or  retain  our  rules  pursuant  to  this  provision.  Yet,  the  Notice  also  notes  that  the  Commission  already  articulated  an  interpretation  of  this  standard  before  the  D.  C.  Circuit,  arguing  in  its  rehearing 
 petition  in  Fox  Television  that  necessary  in  the  public  interest  in  202(  h)  means  merely  useful  or  appropriate.  As  I  have  said  previously,  I  disagree  with  this  interpretation.  I  believe  interpreting 
 necessary  in  the  public  interest  as  meaning  merely  in  the  public  interest  inappropriately  reads  the  critical  word  necessary  out  of  the  statute.  Congress  included  the  term,  and  I  believe  we  must  give  it 
 more  significance.  Necessary  in  the  public  interest  must  mean  more  than  useful  or  appropriate.  I  believe  the  term  necessary  should  be  read  in  accordance  with  its  plain  meaning  to  mean  something 
 closer  to  essential.  Accordingly,  I  concur  in  the  Notices  discussion  of  the  legal  standard  of  section  202(  h). 

 I  also  would  have  preferred  that  this  Notice  provide  more  guidance  to  industries  and  consumers  regarding  our  direction.  For  instance,  I  believe  we  could  have  provided  more  guidance  on 
 newspaper/  broadcast  cross-  ownership.  Unlike  every  other  one  of  our  major  broadcast  ownership  regulations,  the  newspaper/  broadcast  cross-  ownership  rule  has  not  been  modified  since  its  adoption  in 
 1970s.  Today,  newspapers  are  treated  differently  from  all  other  forms  of  business  that  disperse  information  (including  broadcast  television  stations,  which  generally  are  permitted  to  combine  in  large 
 markets).  In  short,  only  newspapers  remain  caught  in  a  1970s  atmosphere. 
 1  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  110  Stat.  56  (196),  202(  h). 
66
 Federal  Communications  Commission  FCC  02-  249 
 67 
 Almost  seven  years  ago,  the  Commission  expressed  its  belief  that  the  newspaper/  broadcast  cross-ownership  rule  needed  to  be  reviewed,  and  possibly  revised,  to  reflect  marketplace  changes  since  the 
 1970s.  The  Commission  committed  to  commence  an  appropriate  proceeding  to  obtain  a  fully  informed  record  in  this  area  and  to  complete  that  proceeding  expeditiously.  2  The  then-  Chairman  emphasized  that: 
 there  is  no  reason  to  wait    especially  when  there  is  reason  to  believe  that  .  .  .  the  newspaper/  broadcast  cross-  ownership  rule  is  right  now  impairing 
 the  future  prospects  of  an  important  source  of  education  and  information:  the  newspaper  industry.  3 

 Unfortunately,  despite  this  rhetoric,  the  Commission  followed  that  decision  not  with  a  rulemaking,  but  merely  with  a  Notice  of  Inquiry  into  the  waiver  policy  for  newspaper/  radio  combinations.  And  the 
 Commission  has  never  completed  this  proceeding. 
 In  its  1998  biennial  report,  the  Commission  again  concluded  that  the  newspaper/  broadcast  cross-ownership  rule  should  be  modified:  We  recognize  that  there  may  be  situations  in  which  the  rule  may  not 
 be  necessary  to  protect  the  public  interest  in  diversity  and  competition.  4  Again  the  Commission  promised  to  initiate  a  rulemaking  proceeding  to  begin  this  process. 

 For  a  third  time  in  the  2000  biennial  report,  the  Commission  again  committed,  this  time: 
 in  the  near  future,  [to]  issue  a  notice  of  proposed  rulemaking  seeking  comment  on  whether  we  need  to  modify  the  daily  newspaper/  broadcast 
 cross-  ownership  rule  in  order  to  address  contemporary  market  conditions.  5 

 Thanks  to  Chairman  Powells  leadership,  the  current  Commission  finally  complied  last  September,  issuing  another  Notice.  We  now  have  a  full  record  on  the  extent  to  which  the  newspaper/  broadcast  rule 
 should  be  retained,  modified  or  eliminated,  and  we  have  had  almost  a  year  to  review  the  record.  Regardless  of  what  the  Commission  concludes  is  the  appropriate  action  to  take,  the  affected  parties 
 deserve  to  be  spared  further  delay  in  knowing  that  answer.  I  believe  we  could  have  concluded  this  proceeding  by  the  end  of  the  year.  6 

 2  Capital  Cities/  ABC,  Inc.,  Memorandum  Opinion  &  Order,  11  FCC  Rcd  5841,  87  (1996). 
 3  Id.  at  Separate  Statement  of  Chairman  Reed  E.  Hundt. 
 4  1998  Biennial  Regulatory  Review  -  Review  of  the  Commission's  Broadcast  Ownership  Rules  and  Other  Rules 
 Adopted  Pursuant  to  Section  202  of  the  Telecommunications  Act  of  1996,  MM  Docket  No.  98-  35,  Report,  15  FCC  Rcd  11058,  95  (2000). 

 5  2000  Biennial  Regulatory  Review,  CC  Docket  No.  00-  175,  Report,  16  FCC  Rcd  1207,  32  (2001). 
 6  Contrary  to  claims  that  acting  on  this  one  rule  would  be  unfair  to  other  relevant  industries,  the  Commission  long 
 ago  gave  an  advantage  to  other  licensees  by  relaxing  their  local  ownership  restrictions.  Since  1996,  the  TV/  radio  cross-  ownership  rule  was  relaxed,  the  TV  duopoly  rule  was  relaxed,  the  dual  network  ban  was  relaxed,  the  national 

 radio  cap  was  eliminated,  the  cable/  network  cross-  ownership  ban  was  eliminated,  and  the  local  radio  caps  were  increased.  As  a  result,  the  number  of  radio  and  television  licenses  one  entity  could  own  in  a  local  market  was 
 significantly  increased    as  long  as  the  entity  did  not  also  own  a  newspaper.  Indeed,  it  is  the  newspaper  industry  that  has  been  prejudiced  by  the  Commissions  failure  to  act  on  the  1998  and  2000  Biennial  Review  Reports 
 conclusions  that  this  rule  should  be  reviewed  and  likely  modified.  Moreover,  I  do  not  believe  that  addressing  the  newspaper-  broadcast  rule  separately  would  prejudice  the  outcome  of  this  proceeding.  Broadcasters  and  newspapers 
 would  still  be  considered  voices  in  a  local  media  marketplace,  and  the  Commission  could  still  regulate  ownership  of  these  entities  as  deemed  appropriate  in  this  rulemaking. 
67
 Federal  Communications  Commission  FCC  02-  249 
 68 
 In  light  of  this  history,  I  would  have  preferred  we  go  further  in  explaining  our  direction  with  regard  to  the  newspaper/  broadcast  rule.  For  instance,  while  there  may  be  disagreement  on  what  steps  the 
 Commission  should  take  in  smaller  markets,  I  believe  there  is  less  disagreement  regarding  whether  some  change  might  be  appropriate  in  the  largest  markets.  I  would  have  preferred  to  tentatively  conclude  that 
 some  change  was  warranted.  We  also  could  have  provided  some  form  of  interim  relief,  at  least  until  this  rulemaking  is  complete.  For  example,  we  could  have  provided  broadcast  stations  and  newspapers  the 
 same  opportunity  to  combine  that  two  television  stations  have  in  the  largest  markets,  as  long  as  a  significant  number  of  independent  voices  remain  in  the  marketplace. 

 Accordingly,  for  the  reasons  discussed  above,  I  approve  in  part  and  concur  in  part  on  this  Notice. 
68