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 Federal  Communications  Commission  FCC  00-  191 
 Before  the 
 Federal  Communications  Commission 
 Washington,  D.  C.  20554 

 In  the  Matter  of 
 1998  Biennial  Regulatory  Review    Review  of  ) 
 the  Commissions  Broadcast  Ownership  Rules  )  MM  Docket  No.  98-  35 
 and  Other  Rules  Adopted  Pursuant  to  Section  ) 
 202  of  the  Telecommunications  Act  of  1996.  ) 

 BIENNIAL  REVIEW  REPORT 
 By  the  Commission:  Chairman  Kennard  and  Commissioner  Ness  issuing  separate 
 statements;  Commissioners  Furchtgott-  Roth  and  Powell  concurring 
 in  part,  dissenting  in  part,  and  issuing  separate  statements; 
 Commissioner  Tristani  approving  in  part,  dissenting  in  part  and 
 issuing  a  statement. 

 Adopted:  May  26,  2000  Released:  June  20,  2000 
 TABLE  OF  CONTENTS 
 Paragraph 
 I.  Introduction  1 
 II.  Background  5 
 III.  Status  of  Media  Marketplace  7 
 IV.  Rules 
 A.  National  TV  Ownership  Rule  and  UHF  Discount  14 
 B.  Local  Radio  Ownership  Rules  39 
 C.  Dual  Network  Rule  69 
 D.  Daily  Newspaper/  Broadcast  Cross-  ownership  Rule  79 
 E.  Cable/  Television  Cross-  ownership  Rule  97 
 F.  Experimental  Broadcast  Station  110 
 V.  Constitutional  Issues  115 
 VI.  Conclusion  119 
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 I.  INTRODUCTION 
 1.  This  Report  reviews  our  broadcast  ownership  rules  as  required  by  Section 
 202(  h)  of  the  Telecommunications  Act  of  1996  ("  Telecom  Act").  1  That  section  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.  2 

 More  recently,  Congress  has  prescribed  a  period  of  180  days  from  November  29,  1999,  in 
 which  the  Commission  is  to  complete  the  1998  biennial  review  of  its  broadcast  ownership 
 rules.  3  The  Conference  Report  for  this  1999  Act  states  that  within  the  subject  period  the 
 Commission  shall  issue  a  report  and  if  it  concludes  that  it  should  retain  any  of  the  rules 
 unchanged,  it  shall  issue  a  report  that  includes  a  full  justification  of  the  basis  for  so 
 finding.  4 

 2.  Six  rules  are  reviewed  in  this  Report:  (1)  the  national  TV  ownership  rule 
 (including  the  "UHF  discount");  (2)  the  local  radio  ownership  rules;  (3)  the  dual  network 

 1  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  110  Stat.  56  (1996).  The  context  of 
 Section  202(  h)  of  the  Telecom  Act  makes  clear  that  the  scope  of  the  required  ownership  review  relates  to 
 the  Commission's  broadcast  ownership  rules,  both  those  adopted  under  Section  202  and  our  other 
 broadcast  ownership  rules.  In  this  regard,  we  note  that  Section  202  is  entitled  "Broadcast  Ownership,"  as 
 is  the  corresponding  section  of  the  Conference  Report.  House  Rep.  104-  458,  104th  Cong.,  2d  Sess.  161 
 (1996).  Also  required  by  Section  202(  h)  is  the  biennial  review  of  rules  adopted  pursuant  to  Sections 
 202(  a)-(  f)  of  the  Telecom  Act.  These  include  rules  pertaining  to  cable  as  well  as  broadcast  cross-ownership. 

 2  Section  11(  a)  of  the  Communications  Act  of  1934,  as  amended,  similarly  provides  that  under  the 
 statutorily  required  review,  the  Commission  "shall  determine  whether  any  such  regulation  is  no  longer 
 necessary  in  the  public  interest  as  a  result  of  meaningful  economic  competition"  and  requires  that  the 
 Commission  "shall  repeal  or  modify  any  regulation  it  determines  to  be  no  longer  necessary  in  the  public 
 interest."  47  USC    161. 

 3  Section  5003,  Pub  L.  106-  113,  113  Stat.  1501  (1999),  Making  consolidated  appropriations  for  the 
 fiscal  year  ending  September  30,  2000,  and  for  other  purposes. 
 4  Joint  Explanatory  Statement  of  the  Committee  of  Conference  on  the  Intellectual  Property  and 
 Communications  Omnibus  Reform  Act  of  1999,  at  59. 
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 rule;  (4)  the  daily  newspaper/  broadcast  cross-  ownership  rule;  (5)  the  cable/  television 
 cross-  ownership  rule;  and  (6)  an  experimental  broadcast  station  ownership  rule.  The 
 Report  provides  a  regulatory  history  of  each  rule,  followed  by  a  discussion  of  the 
 competitive  and  diversity  issues  that  justify  our  decision  as  to  whether  the  rule  remains  in 
 the  public  interest. 

 3.  On  March  12,  1998,  we  adopted  a  Notice  of  Inquiry  (  NOI)  5  in  this 
 proceeding  seeking  comment  on  the  six  rules  included  in  this  biennial  ownership  report. 
 The  NOI  did  not  seek  comment  on  the  local  television  ownership  rule  or  one-  to-  a-  market 
 ownership  rule  because  these  rules  were  already  the  subject  of  pending  proceedings  and 
 we  reasoned  that  their  examination  in  those  proceedings  complied  with  Congress 
 mandate  that  we  review  all  of  our  ownership  rules  biennially  beginning  in  1998.  6  On 
 August  5,  1999,  we  adopted  a  Report  and  Order  7  relaxing  our  local  television  ownership 
 rule  and  one-  to-  a-  market  ownership  rule.  Those  decisions  provided  broadcasters  with 
 expanded  opportunities  to  realize  the  efficiencies  of  television  duopolies  and  local 
 radio/  television  combinations  in  markets  where  an  essential  level  of  competition  and 
 diversity  would  be  preserved.  More  specifically,  we  narrowed  the  geographic  scope  of  the 
 television  duopoly  rule  from  the  Grade  B  contour  approach  to  a  DMA  test.  This  new 
 approach  allows  the  common  ownership  of  two  television  stations  without  regard  to 
 contour  overlap  if  the  stations  are  in  separate  Nielsen  Designated  Market  Areas 
 (  DMAs).  Additionally,  it  allows  the  common  ownership  of  two  television  stations  in  the 
 same  DMA  if  their  Grade  B  contours  do  not  overlap  or  if  eight  independently  owned,  full-power 
 and  operational  television  stations  will  remain  post  merger,  and  one  of  the  stations 
 is  not  among  the  top  four  ranked  stations  in  the  market  based  on  audience  share. 
 Furthermore,  we  adopted  waiver  criteria  presuming,  under  certain  circumstances,  that  a 
 waiver  to  allow  common  local  television  station  ownership  is  in  the  public  interest  where 
 one  of  the  stations  is  a  failed  station,  is  a  failing  station,  or  where  the  applicants  can 
 show  that  the  combination  will  result  in  the  construction  and  operation  of  an  authorized 
 but  as  yet  unbuilt  station.  We  also  substantially  relaxed  the  radio/  television  cross-ownership 
 (  one-  to-  a-  market)  rule  to  permit  more  such  combinations,  including  allowing 
 a  party  to  own  as  many  as  one  TV  station  and  seven  radio  stations  under  certain 
 circumstances.  These  actions  were  taken  in  fulfillment  of  our  obligations  under  Section 
 202(  h)  of  the  Telecom  Act  and  satisfy  its  requirements  as  to  the  subject  rules.  8 

 5  Notice  of  Inquiry,  13  FCC  Rcd  11276  (1998)  ("  NOI"). 

 6  NOI,  supra  at  11279-  80. 
 7  Report  and  Order  in  MM  Docket  Nos.  91-  221  &  87-  8,  14  FCC  Rcd  12903  (1999)  (hereinafter 
 "TV  Ownership  Order"). 

 8  The  Conference  Report  accompanying  the  Telecom  Act,  states  that  the,  "conferees  are  aware  that 
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 4.  In  the  instant  phase  of  our  biennial  review  of  broadcast  ownership  rules,  we 
 conclude  that  the  local  radio  ownership  rules,  the  national  television  ownership  rule 
 (including  the  UHF  discount),  and  cable/  TV  cross-  ownership  rule  continue  to  serve  the 
 public  interest  and  so  retain  these  rules.  As  noted  above,  we  have  just  recently 
 substantially  relaxed  our  local  television  ownership  and  one-  to-  a-  market  rules.  It  is 
 currently  too  soon  to  tell  what  effect  this  will  have  on  consolidation,  competition  and 
 diversity.  Until  we  have  further  information  in  this  regard  we  believe  that  these  rules 
 remain  necessary  in  the  public  interest  in  their  current  form.  However,  we  will  issue 
 Notices  of  Proposed  Rule  Making  proposing  modification  of  the  dual  network  and 
 newspaper/  broadcast  cross-  ownership  rules.  Additionally,  in  the  case  of  the  local  radio 
 ownership  rule,  we  will  issue  a  Notice  seeking  comment  on  alternative  methods  of 
 correcting  certain  anomalies  in  the  way  we  currently  define  radio  markets  and  the  way  we 
 count  the  number  of  stations  in  a  radio  market  and  the  number  of  radio  stations  that  an 
 entity  owns  in  a  market.  Finally,  we  conclude  that  the  experimental  broadcast  station 
 multiple  ownership  rule  may  no  longer  be  in  the  public  interest  and  will  issue  a  Notice  of 
 Proposed  Rule  Making  proposing  its  elimination. 

 II.  BACKGROUND 
 5.  For  more  than  a  half  century,  the  Commission's  regulation  of  broadcast  service 
 has  been  guided  by  the  goals  of  promoting  competition  and  diversity.  9  These  goals  are 
 separate  and  distinct,  yet  also  related.  Indeed,  as  recently  as  1997,  the  Supreme  Court 
 noted  that  "[  f]  ederal  policy  .  .  .  has  long  favored  preserving  a  multiplicity  of  broadcast 
 outlets  regardless  of  whether  the  conduct  that  threatens  it  is  motivated  by  anticompetitive 
 animus  or  rises  to  the  level  of  an  antitrust  violation."  10  The  Supreme  Court  has  also  held 
 that  both  of  these  goals  are  important  and  substantial  public  policies  for  First  Amendment 
 purposes.  11  Competition  is  an  important  part  of  the  Commission's  public  interest  mandate, 

 the  Commission  already  has  several  broadcast  deregulation  proceedings  underway.  It  is  the  intention  of 
 the  conferees  that  the  Commission  continue  with  these  proceedings  and  conclude  them  in  a  timely 
 manner."  H.  R.  Rep.  104-  458,  at  164. 

 9  For  a  more  extensive  discussion  of  the  Commission's  competition  and  diversity  goals  see  TV 
 Ownership  Order,  supra  at  12910-  12924. 

 10  Turner  Broadcasting  System,  Inc.  v.  FCC,  520  U.  S.  180,  117  S.  Ct.  1174  (1997)(  Turner  II). 
 (Citations  omitted.) 

 11  Turner  Broadcasting  System  v.  FCC,  512  U.  S.  622,  662  (1997)(  Turner  I). 
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 because  it  promotes  consumer  welfare  and  the  efficient  use  of  resources  and  is  a  necessary 
 component  of  diversity.  12  Diversity  of  ownership  fosters  diversity  of  viewpoints,  and  thus 
 advances  core  First  Amendment  principles.  As  the  Supreme  Court  has  said,  the  First 
 Amendment  "rests  on  the  assumption  that  the  widest  possible  dissemination  of  information 
 from  diverse  and  antagonistic  sources  is  essential  to  the  welfare  of  the  public  .  .  .  ."  13 
 Promoting  diversity  in  the  number  of  separately  owned  outlets  has  contributed  to  our  goal 
 of  viewpoint  diversity  by  assuring  that  the  programming  and  views  available  to  the  public 
 are  disseminated  by  a  wide  variety  of  speakers. 

 6.  This  Report  uses  the  framework  for  reviewing  competition  and  diversity 
 outlined  in  the  NOI  to  evaluate,  as  required  by  the  Telecom  Act,  whether  the  six  rules 
 included  in  this  biennial  review  continue  to  be  in  the  public  interest.  14  Thus,  we  assess 
 current  levels  of  competition  in  the  market  for  delivered  video  programming,  the 
 advertising  market,  and  the  program  production  market  to  determine  whether  such 
 competition  has  eliminated  the  need  for  the  six  rules.  Our  diversity  analysis  focuses  upon 
 the  degree  to  which  broadcast  and  non-  broadcast  media,  operating  within  the  framework 
 of  our  ownership  rules,  advance  the  three  types  of  diversity  (i.  e.,  viewpoint,  outlet  and 
 source)  that  our  broadcast  ownership  rules  have  attempted  to  foster.  Viewpoint  diversity 
 refers  to  the  range  of  diverse  and  antagonistic  opinions  and  interpretations  presented  by 
 the  media.  Outlet  diversity  refers  to  a  variety  of  delivery  services  (e.  g.,  broadcast  stations, 
 cable  and  DBS)  that  select  and  present  programming  directly  to  the  public.  Source 
 diversity  refers  to  the  variety  of  program  or  information  producers  and  owners.  15 

 III.  STATUS  OF  MEDIA  MARKETPLACE 
 7.  Our  decision  here  concerning  the  broadcast  ownership  rules  takes  account  of 
 the  ongoing  changes  in  the  structure  of  the  broadcast  industry.  The  UHF  television 
 discount,  the  daily  newspaper/  broadcast  cross-  ownership  rule,  the  cable/  television  cross-ownership 
 rule,  and  the  experimental  broadcast  station  ownership  rule  have  not  been 
 examined  for  many  years.  In  reviewing  these  rules,  we  recognize  that  there  has  been 

 12  Revision  of  Radio  Rules  and  Policies,  7  FCC  Rcd  2755  (1992),  recon.  granted  in  part,  7  FCC  Rcd 
 6387  (1992),  further  recon.,  9  FCC  Rcd  7183  (1994). 

 13  Associated  Press  v.  United  States,  326  U.  S.  1,  20  (1945);  accord  Federal  Communications 
 Commission  v.  National  Citizens  Committee  for  Broadcasting,  436  U.  S.  775  (1978). 

 14  NOI,  supra  at  11277-  78. 

 15  See  TV  Ownership  Order,  supra  at  12911-  12,  n.  29;  see  also  TV  Ownership  Further  Notice,  10 
 FCC  Rcd  3524,  3549-  50  (1995). 
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 substantial  growth  in  the  number  and  variety  of  media  outlets  in  local  markets.  In 
 contrast,  the  national  television  ownership  rule,  the  local  radio  ownership  rules,  and  the 
 dual  network  rule  were  modified  in  1996  in  accordance  with  Section  202  of  the  Telecom 
 Act.  While  there  has  been  growth  in  the  number  and  variety  of  media  outlets  since  the 
 Telecom  Act,  there  have  also  been  significant  changes  in  the  ownership  structure  of  the 
 broadcast  industry  during  that  period,  chiefly  consisting  of  extensive  consolidation  in  the 
 radio  and  television  industries. 

 8.  Section  202(  h)  of  the  Telecom  Act  requires  us  to  determine  whether  any  of  our 
 broadcast  ownership  rules  are  necessary  in  the  public  interest  as  the  result  of 
 competition."  We  note  that  some  commenters  express  the  belief  that  this  limits  our  review 
 only  to  competitive  matters  and  that  our  analysis  must  be  devoid  of  diversity 
 considerations.  Because  the  statutory  language  requires  reference  to  the  public  interest 
 standard,  and  because  diversity  and  competition  have  both  been  critical  components  of 
 that  standard,  16  our  review  must  consider  diversity  issues  as  well.  Indeed,  the  United 
 States  Supreme  court  has  identified  as  a  governmental  purpose  of  the  highest  order 
 ensuring  the  publics  access  to  a  multiplicity  of  information  sources.  17  Also,  there  is 
 support  for  our  consideration  of  diversity  in  this  context  in  the  legislative  history  of  the 
 Telecom  Act  itself.  As  discussed  in  our  recent  local  television  ownership  decision,  18 
 Congress  expressed  diversity  concerns  with  regard  to  at  least  two  of  our  rules  and,  with 
 respect  to  our  review  of  the  radio/  television  cross-  ownership  rule,  expressly  instructed  the 
 Commission  to  take  into  account  not  only  the  increased  competition  facing  broadcasters 
 but  also  the  need  for  diversity  in  todays  radio  marketplace.  19  Finally  in  this  regard,  the 
 statutory  language  appears  to  focus  on  whether  the  public  interest  basis  for  the  rule  has 
 changed  as  a  result  of  competition,  and  does  not  appear  to  be  intended  to  limit  the  factors 
 we  should  consider.  Therefore,  our  public  interest  determination  for  each  rule  is  based  on 
 an  examination  of  both  competition  and  diversity  issues  in  light  of  competitive  market 
 conditions.  The  material  below  provides  a  brief  overview  of  the  number  of  outlets, 
 ownership  structure,  and  other  information  relevant  to  the  current  status  of  competition  in 
 the  video,  audio,  and  newspaper  industries.  The  numbers  alone,  of  course,  are  not 
 sufficient  to  determine  whether  particular  media  compete  with  one  another  in  relevant 
 markets  or  whether  different  media  are  adequate  substitutes  for  one  another  from  a 
 diversity  perspective. 

 16  See,  e.  g.,  United  States  v.  Storer  Broadcasting  Company,  351  U.  S.  192,  203  (1956);  FCC  v. 
 National  Citizens  Committee  For  Broadcasting,  346  U.  S.  775,  780-  81,794  (1978). 
 17  Turner  II,  supra  at  190. 

 18  TV  Ownership  Order,  supra  at  12913. 
 19  S.  Conf.  Rep.  104-  230,  104  th  Cong.  2d  Sess.  163  (1996). 
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 9.  Video.  There  are  currently  over  100  million  TV  households  in  the  U.  S.  20 
 served  by  a  variety  of  video  outlets.  Over-  the-  air  outlets  include:  1,243  commercial  TV 
 stations  (682  UHF,  561  VHF);  373  non-  commercial,  educational  TV  stations  (248  UHF, 
 125  VHF);  and,  over  2,100  low-  power  TV  stations.  21  Sixty  percent  of  commercial  TV 
 stations  are  affiliated  with  one  of  the  top  four  networks  (ABC,  CBS,  Fox,  &  NBC). 
 Another  18  percent  are  affiliated  with  the  newer  national  networks:  United  Paramount 
 (UPN),  Warner  Brothers  (WB)  and  the  Paxson  Network  (Paxnet).  22  The  remaining 
 commercial  stations  are  affiliated  with  smaller  networks  or  are  independents.  The  average 
 TV  household  in  the  U.  S.  can  receive  13  over-  the-  air  TV  stations,  while  36  percent  of  all 
 homes  can  receive  15  or  more  stations  and  9  percent  can  receive  20  or  more  stations  over 
 the  air.  23 

 10.  There  are  over  10,400  cable  systems  passing  96+  million  homes  and  serving 
 almost  67  million  TV  households.  24  This  represents  sixty-  six  percent  cable  penetration.  25 
 Sixty-  four  percent  of  all  subscribers  have  at  least  54  channels  and  over  98%  have  a 
 minimum  of  30  channels.  26  Today  there  are  over  170  national  cable  programming 
 networks  and  50  regional  networks.  27  Many  cable  systems  offer  PEG  access  channels, 
 and  some,  albeit  fewer  than  a  dozen,  offer  local  cable  news,  educational  and  public  affairs 
 programming.  Most,  if  not  all,  of  these  latter  type  of  channels  are  owned  by  a  local 
 television  station  or  newspaper. 

 20  U.  S.  Television  Household  Estimates,  Nielsen  Media  Research,  September  1999. 
 21  FCC  Press  Release,  Broadcast  Station  Totals  as  of  September  30,  1999,  (issued  November  22, 
 1999). 

 22  BIA  Research  Inc.,  MEDIA  Access  Pro  Data  Base,  May  22,  2000. 

 23  Nielsen  Media  Research,  Television  Audience  1996,  1997. 
 24  Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of  Video 
 Programming,  CS  Docket  99-  230,  (  Sixth  Cable  Report),  15  FCC  Rcd  978,  Appendix  B  (2000). 

 25  Broadcasting  &  Cable,  April  24,  2000,  at  62. 

 26  Id.  at  Table  B-  4. 

 27  NCTA,  Cable  Television  developments,  Fall  1998/  Winter  1999,  at  28-  136. 
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 11.  Other  video  providers  include  Direct  Broadcast  Satellite  (DBS),  which 
 currently  provides  up  to  350  channels  to  over  10  million  subscribers.  Multichannel 
 Multipoint  Distribution  Service  (MMDS)  serves  over  800,000  subscribers;  Satellite 
 Master  Antenna  Television  (SMATV)  has  approximately  1.  5  million  subscribers;  Home 
 Satellite  Dishes  (HSD)  serve  over  1.  7  million  households;  Open  Video  Systems  (OVS) 
 have  60  thousand  subscribers.  28  By  1999,  fifty  percent  of  households  owned  a  PC  and 
 over  100  million  Americans  were  Internet  users.  29 

 12.  Audio.  Over  12,600  radio  stations  are  currently  on  the  air  (4,  783  AM,  5,766 
 commercial  FM  and  2,066  educational  FM).  30  The  average  radio  market  has  22 
 commercial  radio  stations.  Of  270  Arbitron  radio  markets,  128  markets  (47  percent)  are 
 served  by  more  than  20  stations  and  90  percent  of  markets  (244  of  270  )  have  over  10 
 stations.  31 

 13.  Newspapers.  In  1998,  there  were  1,489  daily  newspapers  in  the  U.  S.  The 
 total  circulation  for  those  dailies  was  about  56  million.  32  There  were  also  8,193  weekly 
 newspapers  with  a  combined  circulation  of  over  74  million,  and  a  Sunday  circulation  of 
 over  60  million.  33  There  are  also  a  number  of  special  interest  newspapers  available  to 
 readers,  catering  to  a  wide  variety  of  audiences.  There  are  185  African-  American 
 newspapers  in  35  states  and  the  District  of  Columbia,  107  Hispanic  newspapers  published 
 in  35  states  and  the  District  of  Columbia,  98  Jewish  newspapers  in  31  states,  159  other 
 "ethnic"  newspapers  published  in  the  U.  S.,  43  gay  and  lesbian  newspapers  published  in  24 
 states  and  the  District  of  Columbia,  134  military  newspapers  published  in  38  states,  132 
 religious  newspapers  published  in  40  states  and  the  District  of  Columbia,  and  1,236 
 college  newspapers  published  in  all  50  states  and  the  District  of  Columbia.  34  Many  of 

 28  Sixth  Cable  Report,  supra  at  Table  C-  1. 

 29  Id.  at  p.  8. 
 30  FCC  Press  Release,  Broadcast  Station  Totals  as  of  September,  30,  1999,  (issued  November  22, 
 1999). 

 31  These  station  counts  include  all  in-  market  stations  and  selected  out-  of-  market  stations  based  on 
 BIAs  Investing  in  Radio,  1999  Market  Report,  4  th  Edition. 
 32  Newspaper  Association  of  America,  Facts  About  Newspapers  1999,  at  15. 

 33  Id.  at  16,  27,  31. 
 34  Editor  and  Publisher  Yearbook  1998,  at  II-  1  to  II  124. 
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 these  newspapers,  however  are  not  published  daily,  are  not  in  the  English  language,  and 
 are  not  circulated  generally  in  the  community  of  publication,  or  have  insufficient 
 circulation  in  the  DMA. 

 IV.  RULES 
 A.  National  TV  Ownership  Rule  and  UHF  Discount 
 1.  Regulatory  History 
 14.  Section  73.3555(  e)(  1)  sets  forth  the  current  national  TV  ownership  rule.  That 
 section  states: 

 No  license  for  a  commercial  TV  broadcast  station  shall  be  granted,  transferred  or 
 assigned  to  any  party  (including  all  parties  under  common  control)  if  the  grant, 
 transfer,  or  assignment  of  such  license  would  result  in  such  party  or  any  of  its 
 stockholders,  partners,  members,  officers  or  directors,  directly  or  indirectly, 
 owning,  operating  or  controlling,  or  having  a  cognizable  interest  in  TV  stations 
 which  have  an  aggregate  national  audience  reach  exceeding  thirty-  five  (35) 
 percent.  35 

 15.  Section  73.3555(  e)(  2)  sets  forth  the  "UHF  discount."  That  section  explains 
 that  "national  audience  reach"  is  based  on  the  number  of  TV  households  in  Nielsen 
 Designated  Market  Areas  (DMA),  and  that  UHF  TV  stations  are  attributed  with  only  50% 
 of  the  TV  households  in  the  DMA.  36 

 16.  The  Commission  first  adopted  a  national  ownership  limit  for  television 
 broadcast  stations  in  the  1940s  by  imposing  numerical  caps  on  the  number  of  stations  that 
 could  be  commonly  owned,  and  originally  limited  common  ownership  to  no  more  than 
 three  stations  nationwide.  37  Several  years  later  this  was  expanded  to  allow  ownership  of 
 no  more  than  five  stations.  38  In  retaining  the  five  station  rule  in  1953,  the  Commission 

 35  47  C.  F.  R.    73.3555(  e)(  1). 

 36  47  C.  F.  R.    73.3555(  e)(  2).  The  UHF  discount  is  intended  to  recognize  the  deficiencies  in  over-the- 
 air  UHF  reception  vis-  a-  vis  VHF  reception.  As  a  result,  UHF  stations  are  not  credited  with  reaching 
 their  entire  market  but,  instead,  their  coverage  is  discounted  by  50  percent. 

 37  6  FR  2284-  85  (Tuesday,  May  6,  1941). 

 38  9  FR  5442  (Tuesday,  May  23,  1944). 
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 explained: 
 The  purpose  of  the  multiple  ownership  rules  is  to  promote  diversification 
 of  ownership  in  order  to  maximize  diversification  of  program  and  service 
 viewpoint  as  well  as  to  prevent  any  undue  concentration  of  economic 
 power  contrary  to  the  public  interest  and  thus  to  carry  out  the  underlying 
 purpose  of  the  Communications  Act  to  effectuate  the  policy  against 
 monopolization  of  broadcast  facilities  and  the  preservation  of  the 
 broadcasting  system  on  a  free  competitive  basis.  39 

 17.  In  1954,  the  Commission  adopted  the  "Seven  Station  Rule"  by  raising  the 
 multiple  ownership  limit  from  five  stations  to  seven,  with  no  more  than  five  being  VHF 
 stations.  40  The  Commission  believed  that  the  more  rapid  and  effective  development  of  the 
 UHF  band  warranted  permitting  the  ownership  of  additional  UHF  stations.  41  The 
 Commission  noted  that  it  was  aware  of  the  serious  problems  confronting  the  development 
 of  the  UHF  service,  especially  in  markets  with  VHF-  only  set  saturation,  and  that  it  was  in 
 these  areas  particularly  where  the  prestige,  capital,  and  know-  how  of  the  networks  and 
 other  multiple  owners  would  be  most  effective  in  aiding  UHF.  42 

 18.  Thirty  years  later,  in  1984,  the  Commission  eliminated  the  Seven  Station  Rule 
 and  established  a  six-  year  transitional  period  during  which  common  ownership  of  twelve 
 television  broadcast  stations  would  be  permitted.  43  The  Commission  determined  that 
 repeal  of  the  Seven  Station  Rule  would  not  adversely  affect  the  Commission's  traditional 
 policy  objectives  of  promoting  viewpoint  diversity  and  preventing  economic 
 concentration.  44  The  Commission  explained  that:  1)  changes  in  the  broadcasting  and 

 39  Amendment  of  Multiple  Ownership  Rules,  9  RR  1563  (1953).  See  Federal  Communications 
 Commission  v.  Sanders  Brothers  Radio  Stations,  309  U.  S.  470  (1940). 

 40  Amendment  of  Multiple  Ownership  Rules,  43  FCC  2797  (1954). 

 41  Id.  at  2801. 
 42  Id. 
 43  Amendment  of  Multiple  Ownership  Rules,  (Gen.  Docket  83-  1009)  100  FCC  2d  17  (1984). 
 44  See  id.  at  24-  46  for  a  discussion  of  the  effects  of  eliminating  the  rule  on  viewpoint  diversity  and 
 economic  competition. 
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 communications  markets,  45  2)  new  evidence  of  the  positive  effects  of  group  ownership  on 
 the  quality  and  quantity  of  public  affairs  and  other  programming  responsive  to  community 
 needs,  46  and  3)  the  lack  of  relevance  of  a  national  ownership  rule  to  the  availability  of 
 diverse  and  independently  owned  radio  and  TV  voices  to  individual  consumers  in  their 
 respective  local  markets  47  led  to  the  conclusion  that  the  rule  was  unnecessary  to  ensure 
 diversity  of  viewpoints.  48  The  Commission  determined  that  the  better  focus  for  addressing 
 viewpoint  diversity  and  economic  competition  concerns  was  the  number  and  variety  of 
 information  and  advertising  outlets  in  local  markets.  49  Nevertheless,  the  Commission 
 recognized  the  concerns  of  some  commenters  that,  if  the  rule  were  repealed  immediately 
 and  in  its  entirety,  a  significant  restructuring  of  the  broadcast  industry  might  occur  before 
 all  ramifications  of  such  a  change  became  apparent.  Therefore,  the  Commission 
 established  a  transitional  limit  of  twelve  television  broadcast  stations.  50  The  transitional 
 limit  would  automatically  sunset  in  six  years  unless  experience  showed  that  continued 
 Commission  involvement  was  warranted. 

 19.  On  reconsideration,  the  Commission,  modified  its  decision.  51  Specifically,  the 
 Commission  1)  established  an  audience  reach  cap  of  25  percent,  52  in  addition  to  the  twelve 

 45  Id.  at  18,  28. 

 46  Id.  at  20. 
 47  Id.  at  37. 
 48  Id.  at  19. 
 49  Id.  at  20.  Regarding  the  possibility  of  competitive  harm,  the  Commission  noted  the  conclusions 
 of  the  Department  of  Justice  that  "elimination  of  the  Seven  Station  Rule  will  raise  little  risk  of  adverse 
 competitive  effects  in  any  market."  The  Department  concluded  that  elimination  of  the  rule  would  not 
 increase  concentration  in  the  national  network  advertising  market,  because  each  network  has  already 
 achieved  access  to  almost  every  local  market  through  its  affiliation  agreements.  In  the  local  spot  market, 
 the  Department  concluded  that  "[  s]  ince  spot  advertising  is  sold  in  local  geographic  markets,  and  the  rule 
 does  not  address  concentration  in  those  markets,  a  rule  change  should  not  affect  competition  in  spot 
 advertising."  Id.  at  38,  41.  The  Commission  also  noted  that  elimination  of  the  rule  may  allow  group 
 owned  television  stations  to  exploit  important  efficiencies.  Id.  at  44. 

 50  Id.  at  18,  55. 

 51  Memorandum  Opinion  and  Order  in  MM  Docket  No.  83-  1009,  100  FCC  2d  74  (1985). 
 52  Defined  as  25  percent  of  the  national  audience,  calculated  as  a  percentage  of  all  Arbitron  ADI 
 television  households. 
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 station  limit,  to  better  account  for  the  effect  that  relaxation  of  the  rule  would  have  on 
 population  penetration;  2)  attributed  owners  of  UHF  stations  with  only  50  percent  of  their 
 ADI  audience  reach  to  take  cognizance  of  the  limitations  inherent  in  UHF  broadcasting;  3) 
 permitted  common  ownership  of  an  additional  two  television  stations,  provided  that  they 
 were  minority  controlled;  and  4)  eliminated  the  automatic  sunset  provision.  The  stated 
 objective  was  to  permit  reasonable  expansion  so  as  to  capture  the  benefits  of  group 
 ownership  while  avoiding  the  possibility  of  potential  disruptive  restructuring  of  the 
 national  broadcast  industry.  53  The  Commission  explained  that  a  numerical  cap  would 
 prevent  the  acquisition  of  a  tremendous  number  of  stations  in  the  smaller  markets,  thus 
 reducing  the  possibility  of  disruptive  restructuring  in  small  markets,  while  an  audience 
 reach  cap  would  temper  dramatic  changes  in  the  ownership  structure  by  the  largest  group 
 owners  in  the  largest  markets.  54  The  Commission  noted  that  its  decision  to  use  both  a 
 numerical  cap  and  an  audience  reach  cap  was  also  predicated  on  concerns  regarding  the 
 potential  impact  on  industry  structure.  55  The  Commission  further  explained  that 
 attributing  UHF  stations  with  50  percent  of  an  ADI  market's  audience  reach  was  intended 
 to  address  the  fundamental  disadvantage  of  UHF  television  in  reaching  viewers.  56  The 
 Commission  found  it  inadvisable  to  terminate  the  multiple  ownership  rules  for  television 
 broadcast  stations  automatically  at  the  end  of  six  years.  The  Commission  explained  that  1) 
 it  was  appropriate  to  proceed  cautiously  in  relaxing  the  rules  and  2)  an  automatic  sunset  of 
 the  ownership  rules  was  unnecessary  to  achieve  the  Commission's  policy  objectives.  57 

 20.  On  March  7,  1996,  the  Commission  amended  the  national  television  station 
 multiple  ownership  rules  to  conform  to  the  provisions  in  Section  202(  c)(  1)  of  the  Telecom 
 Act.  58  Specifically,  the  Commission  eliminated  the  numerical  limit  on  the  number  of 
 broadcast  television  stations  a  person  or  entity  could  own  nationwide  and  increased  the 

 53  Memorandum  Opinion  and  Order,  (Gen.  Docket  83-  1009)  supra  at  98. 

 54  Id.  at  89  and  91. 
 55  Id.  at  87-  88  n.  38. 
 56  The  UHF  Comparability  Task  Force  found  that:  "Due  to  the  physical  nature  of  the  UHF  and 
 VHF  bands,  delivery  of  television  signals  is  inherently  more  difficult  at  UHF.  It  should  be  recognized  that 
 actual  equality  between  these  two  services  cannot  be  expected  because  the  laws  of  physics  dictate  that  UHF 
 signal  strength  will  decrease  more  rapidly  with  distance  than  does  VHF  signal  strength."  Id.  at  93. 

 57  Id.  at  96-  97. 

 58  Order,  11  FCC  Rcd  12374  (1996). 
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 audience  reach  cap  on  such  ownership  from  25  percent  to  35  percent  of  television 
 households. 

 21.  In  our  Notice  of  Inquiry  in  this  proceeding  we  sought  comment  on  this  rule. 
 Particularly,  we  asked  about  its  effect  on  competition  in  the  national  advertising  market 
 and  the  program  production  market  at  the  national  level.  We  also  sought  comment  on  the 
 rules  effect  on  existing  television  networks  and  the  formation  of  new  networks  and 
 sought  information  on  the  economies  of  scale  that  may  have  been  realized  as  a  result  of 
 the  consolidation  permitted  by  the  Telecom  Act.  59  Finally,  we  asked  whether  the  UHF 
 discount  should  be  retained,  modified  or  eliminated  in  view  of  the  decreasing  disparity 
 between  VHF  and  UHF  television  and,  in  the  event  of  a  decision  to  modify  the  rule, 
 whether  and,  if  so,  how  group  owners  that  exceed  any  new  limits  should  be  grandfathered.  60 

 2.  Comments  on  National  TV  Ownership  Rule 
 22.  All  of  the  major  networks  (ABC,  CBS,  Fox,  and  NBC)  support  total  repeal  of 
 the  national  television  ownership  rule.  These  networks  argue  that  abolition  of  the  rule 
 would  have  no  effect  on  the  level  of  diversity  and  competition  in  local  markets,  61  and 
 retention  of  the  rule  hinders  broadcasters  from  achieving  economic  efficiencies.  62  These 
 networks  maintain  that  group  owned  stations  provide  more  news  and  public  affairs 
 programming  than  non-  group  owned  stations.  63  They  also  argue  that  removal  of  the 
 audience  reach  cap  would  promote  the  development  of  new  broadcast  television  networks.  64  Finally,  they  argue  that  the  only  two  markets  that  may  be  affected  by 

 elimination  of  the  rule,  the  national  advertising  market  and  the  market  for  national 

 59  NOI,  supra  at  11281. 
 60  Id.  at  11285. 
 61  ABC  Comments  at  5,  CBS  Comments  at  8,  Fox  and  USA  Broadcasting  Comments  at  13,  and 
 NBC  Comments  at  11. 

 62  ABC  Comments  at  6,  CBS  Comments  at  13,  Fox  and  USA  Broadcasting  Comments  at  i-  ii,  and 
 NBC  Comments  at  15-  16. 

 63  ABC  Comments  at  7,  CBS  Comments  at  14-  15,  Fox  and  USA  Broadcasting  Comments  at  16-  19, 
 NBC  Comments  at  15. 

 64  Fox  and  USA  Broadcasting  Comments  at  i-  ii,  and  NBC  Comments  at  14-  15. 
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 exhibition  rights  to  video  programming,  would  remain  unconcentrated.  65 
 23.  Two  group  owners  (Paxson  and  Council  Tree)  support  relaxation  of  the  rule. 
 Paxson  proposes  facilitating  the  construction  of  new  television  stations  by  allowing  group 
 owners  to  take  an  equity  interest  in  the  new  stations  in  exchange  for  financing  the 
 construction  of  new  stations.  66  The  ownership  interest  would  not  count  for  purposes  of 
 the  audience  reach  cap.  Council  Tree  suggests  permitting  group  owners  that  have  reached 
 the  35  percent  cap  to  take  an  equity  interest  in  additional  stations,  as  long  at  the  stations 
 are  controlled  by  small  businesses.  67  Again,  the  ownership  interest  would  not  count  for 
 purposes  of  the  audience  reach  cap. 

 24.  A  number  of  commenters  support  retaining  the  national  television  ownership 
 rule.  68  NAB  argues  that  the  new  television  ownership  limits  have  not  been  in  effect  long 
 enough  to  warrant  any  modification  at  this  time.  69  Network  Affiliated  Stations  Alliance 
 (NASA)  asserts  that  an  increase  in  the  audience  reach  cap  will  increase  the  bargaining 
 power  of  networks  and,  therefore,  diminish  localism  by  making  it  more  difficult  for 
 affiliates  to  program  their  stations  in  the  interests  of  the  communities  they  are  licensed  to 
 serve.  70  Center  for  Media  Education  (CME),  et  al.,  contend  that  the  recent  increase  in 
 the  cap  has  led  to  unprecedented  concentration  and  diminished  competition  that  may 
 enable  networks  to  exercise  monopsony  power  in  the  program  production  market.  71 
 According  to  CME,  et.  al.,  the  public  is  receiving  less  news  and  information  from  fewer 

 65  CBS  Comments  at  iv. 
 66  Paxson  Communications  Corporation's  Proposal  to  the  FCC  to  Increase  Broadcast  Diversity 
 (submitted  July  24,  1998). 

 67  Council  Tree  Communications  Comments  at  9. 

 68  National  Association  of  Broadcasters  (NAB)  Comments  at  11-  12;  Network  Affiliated  Stations 
 Alliance  (NASA)  at  6-  15;  Center  for  Media  Education  (CME),  et.  al.  Comments  at  2-  17;  Office  of 
 Communication,  Inc.,  United  Church  of  Christ,  and  Black  Citizens  for  a  Fair  Media  Comments  at  4-  6; 
 American  Federation  of  Television  and  Radio  Artists  (AFTRA)  Comments  at  3-  6;  and  Gallium 
 Communications,  Inc.  Comments  at  2  and  Reply  Comments  at  2-  3. 

 69  NAB  Comments  at  11. 

 70  NASA  Comments  at  2,  5,  12  and  14. 
 71  CME,  et.  al.  Comments  at  14-  16. 
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 sources.  72  American  Federation  of  Television  and  Radio  Artists  (AFTRA)  asserts  that 
 maintaining  the  existing  35  percent  cap  will  not  harm  competition  and  is  essential  to 
 protect  diversity  on  the  airwaves.  73  AFTRA  argues  that  group  owners  recycle  news  and 
 public  affairs  programming  from  one  reporter  or  news  writer,  whereas  the  public  interest 
 is  better  served  by  having  different  reporters  and  news  writers  in  separate  markets  provide 
 different  angles  and  perspective  on  the  news.  74  One  commenter  wants  the  Commission  to 
 increase  viewpoint  diversity  by  reducing  the  number  of  stations  a  company  may  own  if 
 group  owners  do  not  spin  off  properties  on  a  voluntary  basis.  75 

 3.  Discussion  of  National  TV  Ownership  Rule 
 25.  We  believe  that  the  audience  reach  cap  should  be  retained  at  its  current  level 
 for  the  present.  As  an  initial  matter,  Congress  prescribed  an  increase  in  the  cap  from  25% 
 to  35%  in  the  Telecom  Act.  Several  considerations  motivate  our  decision  not  to  change 
 the  national  TV  ownership  rule.  First,  we  believe  that  the  effects  of  our  recent  change  to 
 the  local  television  ownership  rule  should  be  observed  and  assessed  before  we  make  any 
 alteration  to  the  national  limit.  Second,  the  existing  reach  cap  has  already  resulted  in  many 
 group  owners  acquiring  large  numbers  of  stations  nationwide  since  the  cap  was  increased 
 to  35  percent  in  1996.  We  also  believe  that  this  trend  needs  further  observation  prior  to 
 any  change  in  the  cap.  76 

 72  Id.  at  16.  As  examples,  CME,  et  al.  point  to  situations  in  Florida  and  Pennsylvania  where 
 commonly  owned  affiliates  of  different  networks  air  the  same  local  newscasts. 

 73  AFTRA  Comments  at  3. 

 74  Id.  at  4-  5. 
 75  Gallium  Communications,  Inc.  Comments  at  2-  3. 
 76  We  note,  however,  that  on  November  18,  1999,  Fox  Television  Stations,  Inc.,  filed  an 
 Emergency  Petition  for  Relief  and  Supplemental  Comments  in  this  proceeding  seeking,  among  other 
 things,  repeal  of  the  national  broadcast  ownership  rule.  Also,  on  November  19,  1999,  Viacom  Inc.  filed 
 Comments  in  this  proceeding  seeking  repeal  of  the  same  rule  and,  additionally,  the  dual  network  rule. 
 The  original  deadline  for  filing  comments  in  this  proceeding  was  May  22,  1998,  with  June  22,  1998, 
 being  the  reply  comment  deadline.  These  deadlines  were  later  extended,  pursuant  to  the  request  of  the 
 National  Association  of  Broadcasters,  to  July  21,  1998,  and  August  21,  1998,  for  comments  and  reply 
 comments,  respectively.  Order  in  MM  Docket  No.  98-  35,  DA  98-  854  (released  May  7,  1998).  The  Fox 
 and  Viacom  filings,  having  been  submitted  nearly  18  months  subsequent  to  these  deadlines  will  not  be 
 considered  in  this  proceeding.  Simply,  to  do  so  would  provide  a  precedent  for  subjecting  our  biennial 
 review  proceedings  to  unceasing  comment  cycles,  and  would  deprive  other  parties  of  an  ability  to  respond 
 to  these  new  matters  absent  establishment  of  new  pleading  cycles.  Accordingly,  they  will  not  be 
 considered  herein  but  will  be  included  in  the  record  of  our  2000  biennial  review  of  broadcast  ownership 
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 26.  One  factor  in  our  decision  is  the  recent  relaxation  of  our  local  television 
 ownership  rules.  77  As  noted  above,  those  decisions  provided  increased  flexibility  for  the 
 creation  of  television  duopolies  and  television/  radio  combinations  in  local  markets  while 
 safeguarding  an  essential  level  of  competition  and  diversity.  We  conclude  that  prudence 
 dictates  that  we  should  monitor  the  impact  of  our  recent  decisions  regarding  local 
 television  ownership  and  any  impact  they  may  have  on  diversity  and  competition  prior  to 
 relaxing  the  national  reach  cap.  Commenters  supporting  relaxation  or  elimination  of  the 
 cap  make  credible  arguments  in  favor  of  their  position.  These  arguments  include  the 
 contention  that  elimination  of,  or  increase  in,  the  cap  would  allow  additional  economic 
 efficiencies  and  more  news  and  public  affairs,  increase  minority  ownership  by  removing 
 the  cap  as  an  impediment  to  broadcasters  obtaining  attributable  equity  interests  in 
 minority-  owned  television  stations,  and  promote  the  development  of  new  broadcast 
 television  networks.  We  believe,  however,  that  the  competitive  concerns  of  opponents  of 
 relaxation  or  elimination  of  the  cap  78  are  more  convincing  under  current  circumstances. 
 Until  we  gain  experience  under  the  new  local  television  ownership  rules  we  are  disinclined 
 to  correspondingly  relax  them  on  the  national  level.  While  we  will  reexamine  this  decision 
 in  our  future  biennial  reviews  of  broadcast  ownership  rules,  we  intend  to  proceed 
 cautiously  in  this  area  at  the  present  time. 

 27.  Also,  elimination  of  the  12  station  numerical  cap  has  already  permitted  group 
 owners  to  acquire  a  large  number  of  stations.  79  The  Appendix  to  this  Report  provides  a 
 snapshot  view  of  the  restructuring  that  has  taken  place  in  the  broadcast  television  industry 
 since  enactment  of  the  Telecom  Act  in  February  1996.  The  table  lists  the  number  of 
 commercial  television  stations  owned  by  the  top  25  group  television  owners  for  1996  and 
 2000  ranked  by  the  national  audience  reach  of  these  television  owners.  The  data  show 
 that  many  group  owners  have  acquired  additional  stations  and  increased  their  audience 
 reach  since  the  Telecom  Acts  passage. 

 issues. 
 77  See  TV  Ownership  Order,  supra. 

 78  These  arguments  are  that  eliminating  or  expanding  the  reach  cap  would  increase  the  bargaining 
 power  of  networks  over  their  affiliates,  reduce  the  number  of  viewpoints  expressed  nationally,  increase 
 concentration  in  the  national  advertising  market,  and  enlarge  the  potential  for  monopsony  power  in  the 
 program  production  market. 

 79  The  current  rule  permits  a  group  owner  to  acquire  a  VHF  station  in  every  market  below  DMA  47 
 (i.  e.,  DMA  48  through  DMA  210,  a  total  of  163  stations)  and  still  remain  below  the  35  percent  audience 
 reach  cap.  By  holding  UHF  stations  only,  a  group  owner  could  acquire  a  station  in  every  market  below 
 DMA  10  (i.  e.,  DMA  11  through  DMA  210,  a  total  of  200  stations)  and  still  remain  below  the  35  percent 
 audience  reach  cap. 
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 28.  Moreover,  consolidation  is  a  feature  of  other  video  media.  In  cable,  the  seven 
 largest  operators  now  serve  almost  90  percent  of  all  U.  S.  cable  subscribers,  which  is  up 
 from  63  percent  being  served  by  the  top  10  multiple  system  operators  (  MSO)  in  1990.  80 
 Thirty-  seven  percent  of  satellite-  delivered  national  programming  networks  are  now 
 vertically  integrated  with  a  cable  MSO.  In  1999,  for  example,  one  or  more  of  the  top  six 
 cable  MSOs  held  an  ownership  interest  in  each  of  101  vertically  integrated  national 
 programming  services.  In  addition,  a  significant  percentage  of  the  top  national 
 programming  services  are  controlled  by  approximately  eleven  companies,  including  cable 
 MSOs,  broadcasters  and  other  media  entities.  81  Of  the  top  50  programming  services  in 
 terms  of  subscribership,  46  are  owned  by  one  or  more  of  these  11  companies.  82 

 29.  The  evidence  suggests  that  the  television  broadcast  industry  is  still  adapting  to 
 the  recent  relaxation  of  the  national  and  local  ownership  rules  and  we  wish  to  avoid 
 actions  with  the  potential  for  disruptive  restructuring.  For  example,  applications  for 
 duopolies  under  our  new  local  television  ownership  rule  were  only  filed  this  past 
 November  and  we  believe  that  we  should  monitor  developments  under  this  new  rule  prior 
 to  making  any  changes  to  the  national  television  ownership  reach  cap. 

 30.  We  also  intend  to  proceed  cautiously  because  the  Commission  has  previously 
 recognized  that  a  change  in  the  audience  reach  cap  may  well  influence  the  bargaining 
 positions  between  broadcast  television  networks  and  their  affiliates.  83  We  noted  that  in 
 some  situations,  relaxation  of  the  national  ownership  limits  could  increase  the  bargaining 
 power  of  networks  by  expanding  their  option  to  own  rather  than  affiliate  with  broadcast 
 television  stations.  In  other  situations,  however,  relaxation  of  the  national  ownership 
 limits  could  increase  the  bargaining  position  of  group-  owned  affiliates  by  creating  larger, 
 more  powerful  groups.  In  its  comments,  NASA  asserts  that  the  national  ownership  rule  is 

 80  Sixth  Cable  Report,  supra  at  986;  Annual  Assessment  of  the  Status  of  Competition  in  the  Market 
 for  the  Delivery  of  Video  Programming,  CS  Docket  No.  94-  48,  (  First  Cable  Report),  9  FCC  Rcd  7442, 
 7514  (1994). 

 81  Sixth  Cable  Report,  supra  at  1058.  The  eleven  are:  ABC/  Disney,  General  Electric,  CBS/  Viacom, 
 News  Corp.,  Time  Warner,  Discovery,  Rainbow  Media  Liberty  Media,  USA  Networks,  E.  W.  Scripps  and 
 Comcast. 

 82  Id.  The  four  unaffiliated  services  among  the  top  50  are  C-  SPAN  and  C-  SPAN2  (both  of  which 
 are  almost  wholly  funded  by  the  cable  industry),  WGN  and  The  Weather  Channel. 

 83  Review  of  the  Commission's  Regulations  Governing  Programming  Practices  of  Broadcast 
 Television  Networks  and  Affiliates,  10  FCC  Rcd  11951,  11960  (1995). 
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 the  essential  mechanism  for  maintaining  the  balance  between  networks  and  their  affiliates 
 to  ensure  that  affiliates  can  program  their  stations  in  the  interests  of  the  communities  they 
 are  licensed  to  serve.  84  NASA  argues  that  an  increase  in  the  audience  reach  cap  will 
 increase  the  bargaining  power  of  networks.  85  We  believe  that  in  considering  relaxation  of 
 the  national  ownership  rule  we  should  act  cautiously  in  light  of  the  potential  impact  of  this 
 rule  on  the  bargaining  positions  of  networks  and  affiliates,  particularly  given  the 
 restructuring  that  may  be  taking  place  concurrently  on  the  local  level.  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  programming,  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  interests  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.  We  do  not  believe  that  the  role  played  by  independently  owned  affiliates  is 
 any  less  important  today  than  it  was  four  years  ago  when  Congress  determined  that  the 
 public  interest  was  served  by  maintaining  a  national  ownership  limit,  albeit  it  at  a  slightly 
 relaxed  (35%  rather  than  25%)  level. 

 4.  Comments  on  the  UHF  Discount 
 31.  A  number  of  commenters  advocate  elimination  or  substantial  modification  of 
 the  UHF  discount.  86  These  groups  argue  that  the  original  basis  for  the  discount  appears  to 
 have  fallen  away.  Specifically,  the  deficiencies  in  UHF  reception  that  existed  in  the  early 
 years  of  television  have  largely  been  ameliorated  by  improved  television  receiver  design 
 and  the  fact  that  more  than  two-  thirds  of  all  television  homes  now  receive  local  signals  via 
 cable.  87  ABC  maintains  that  the  only  television  households  that  might  have  trouble 
 receiving  UHF  signals  are  the  32  percent  that  do  not  subscribe  to  cable.  ABC  contends 
 that  if  half  of  those  households  cannot  receive  UHF  signals,  a  50  percent  discount  is  being 

 84  NASA  Comments  at  2. 

 85  Id.  at  5. 
 86  ABC  Comments  at  18-  23;  NBC  Comments  at  16;  Press  Broadcasting  and  Greater  Media 
 Comments  at  4-  6;  and  CME,  et  al.  Comments  at  17-  19. 

 87  NBC  Comments  at  16;  ABC  Comments  at  19;  Press  Broadcasting  and  Greater  Media  Comments 
 at  5;  CME,  et  al.  Comments  at  17-  18. 
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 applied  to  rectify  a  16  percent  disparity.  88  ABC  suggests  replacing  the  50  percent 
 discount  with  an  approach  that  estimates  coverage  disparities  on  a  market-  by-  market 
 basis.  Press  Broadcasting  and  Greater  Media  suggest  that  all  stations  that  reach  at  least 
 51  percent  of  their  market  households  be  treated  exactly  the  same  for  multiple  ownership 
 purposes.  Only  those  stations  that,  as  a  matter  of  demonstrable  fact,  are  unable  to  reach 
 (either  over-  the-  air  or  by  cable  carriage)  at  least  51  percent  of  the  households  in  their 
 markets  should  be  accorded  some  special  treatment.  89  CME,  et  al.  argue  that  the  UHF 
 discount  contributes  to  the  lack  of  competition  and  diversity  in  the  national  television 
 market.  According  to  CME,  et  al.,  the  UHF  discount  provides  an  unfair  competitive 
 advantage  by  allowing  UHF  owners  to  evade  national  ownership  reach  caps.  90  They  warn 
 that  retaining  the  UHF  discount  will  reduce  the  diversity  of  sources  available  to  the  public 
 and  potentially  allow  a  handful  of  owners  to  control  the  national  news  agenda.  91 

 32.  A  number  of  commenters,  however,  support  retention  of  the  UHF  discount.  92 
 These  commenters  argue  that  the  original  basis  for  the  discount  remains.  Specifically, 
 these  commenters  maintain  that  cable  carriage,  must-  carry  rules,  and  improved  receiver 
 design  have  not  created  a  level  playing  field  between  UHF  and  VHF  stations.  They  argue 
 that  economic  and  technical  disparities  between  UHF  and  VHF  stations  continue  to 
 disadvantage  UHF  stations.  These  disparities  include  UHF  stations  having  weaker  signals, 
 inferior  propagation  characteristics,  higher  operating  costs,  lower  ratings,  and  lower 
 profits,  relative  to  VHF  stations.  Many  of  these  commenters  also  contend  that  the  UHF 
 discount  is  critical  to  the  continued  growth  of  the  emerging  broadcast  networks.  93  Fox 
 and  USA  Broadcasting  maintain  that  VHF  stations  typically  have  a  signal  reach  of  72  to 
 76  miles,  while  UHF  stations'  signal  reach  is  44  miles.  94  Fox  and  USA  Broadcasting  argue 

 88  ABC  Comments  at  19. 
 89  Press  Broadcasting  and  Greater  Media  Comments  at  6. 
 90  CME,  et  al.,  Comments  at  18. 
 91  Id.  at  19. 
 92  Fox  and  USA  Broadcasting  Comments  at  19-  22,  NAB  Comments  at  12-  13,  ALTV  Comments  at 
 2-  30,  Paxson  Comments  at  4-  27,  Telemundo  Comments  at  5-  17,  and  Univision  Comments  at  2-  16. 

 93  Paxson  Comments  at  16-  21,  ALTV  Comments  at  27-  29,  and  Telemundo  Comments  at  15. 

 94  Fox  and  USA  Broadcasting  Comments  at  21. 
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 that  the  signal  reach  disparity  results  in  similar  inequalities  in  Grade  B  coverage,  with  UHF 
 stations  typically  achieving  approximately  55  to  75  percent  of  the  Grade  B  area  coverage 
 of  VHF  stations.  95  Two  studies  submitted  by  NAB  conclude  that  UHF  stations  continue 
 to  face  a  penalty  in  ratings  and  financial  performance.  96  ALTV  contends  that  despite 
 must-  carry  provisions,  many  smaller  UHF  stations  are  not  carried  throughout  their  local 
 area.  97  ALTV  explains  that  stations  must  provide  a  Grade  B  quality  signal  to  the  cable 
 system's  headend  in  order  to  qualify  for  carriage  but,  in  most  instances,  the  Grade  B  of  a 
 UHF  facility  does  not  extend  as  far  as  the  Grade  B  contour  of  a  VHF  facility.  As  a  result 
 UHF  stations  are  carried  on  fewer  cable  systems.  Univision  asserts  that  if  the  UHF 
 disparity  no  longer  exists,  then  group  owners  would  be  taking  advantage  of  the  UHF 
 discount  by  selling  their  VHFs  and  buying  UHFs.  98  Univision  notes  that  this  has  not 
 occurred. 

 33.  Commenters  seeking  elimination  or  modification  of  the  UHF  discount 
 advocate  differing  grandfathering  options.  For  example,  ABC  opposes  grandfathering,  99 
 while  CME,  et  al.,  favor  phasing  out  grandfather  rights  over  a  three-  year  period.  100  In 
 contrast,  commenters  favoring  retention  of  the  UHF  discount  argue  that  if  the  discount  is 
 eliminated,  existing  ownership  interests  should  be  grandfathered.  For  example,  Paxson 
 contends  that  forced  divestiture  could  threaten  its  ability  to  compete  with  other  networks 
 and  threaten  the  many  stations  that  would  lose  access  to  Paxson's  financial  resources  and 
 programming.  101 

 34.  Commenters'  responses  were  sharply  divided  on  whether  it  makes  sense  to 
 retain  the  UHF  discount  once  we  have  transitioned  to  digital  television  transmission. 
 Commenters  advocating  elimination  of  the  UHF  discount  argue  that  retention  of  the  UHF 

 95  Id. 
 96  NAB  Comments  at  12-  13. 
 97  ALTV  Comments  at  18. 
 98  Univision  Comments  at  6. 
 99  ABC  Comments  at  23. 
 100  CME,  et  al.,  Comments  at  19. 
 101  Paxson  Comments  at  21-  27. 
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 discount  serves  no  legitimate  purpose  when  a  large  majority  of  DTV  stations  operate  on 
 UHF  frequencies.  102  In  contrast,  commenters  favoring  retention  of  the  UHF  discount 
 argue  that  the  conversion  to  digital  television  broadcasting  will  not  eliminate  the 
 UHF/  VHF  disparity.  Paxson,  and  Fox  and  USA  Broadcasting  note  that  DTV  allotments 
 are  based  primarily  on  replication  of  existing  analog  service,  and  VHF  NTSC  stations  that 
 have  been  assigned  a  UHF  channel  for  digital  service  have  been  allotted  higher  power 
 levels  precisely  in  recognition  of  the  UHF  handicap.  103  NAB  and  Paxson  argue  that  digital 
 carriage  rights  and  the  number  of  television  stations  choosing  to  remain  on  the  UHF  band 
 following  the  digital  transition  are  still  undetermined,  and  these  factors  should  be  solidified 
 before  the  Commission  makes  any  changes  to  the  UHF  discount  rule.  104 

 5.  Discussion  of  the  UHF  Discount 
 35.  We  believe  that,  for  the  present  time,  the  UHF  discount  remains  necessary  in 
 the  public  interest.  As  commenters  note,  there  remains  a  UHF  handicap  that  has  not  yet 
 been  overcome.  Although  roughly  two-  thirds  of  American  viewers  obtain  their  local 
 television  stations  over  a  cable  television  system,  still  roughly  one  third  do  not.  They  rely 
 on  over-  the-  air  reception.  UHF  stations  have  greater  difficulty  in  reaching  these  viewers 
 and  cable  headends  --  thereby  hindering  their  ability  to  obtain  cable  carriage  --  because  of 
 their  weaker  signal.  While  the  Commission  has  observed  in  other  contexts  that  this  UHF 
 signal  disparity  has  been  ameliorated  over  the  years  105  it  has  not  yet  been  eliminated. 
 Additionally,  because  of  the  higher  operating  costs  of  UHF  stations,  particularly  due  to 
 their  higher  power  requirements,  even  when  they  can  reach  these  viewers  they  still  incur 
 greater  expenses  than  VHF  stations  in  doing  so  and,  thus,  remain  under  a  competitive 
 handicap  warranting  a  50  percent  discount. 

 36.  As  Univision  points  out  in  its  comments,  if  there  were  no  competitive  disparity 
 between  VHF  and  UHF  television,  we  would  expect  group  owners  to  take  advantage  of 

 102  See,  e.  g.,  NBC  Comments  at  16,  Press  Broadcasting  and  Greater  Media  Comments  at  5. 
 103  Paxson  Comments  at  14,  Fox  and  USA  Broadcasting  Comments  at  22. 
 104  NAB  Comments  at  13,  Paxson  Comments  at  12-  16. 
 105  See  Report  and  Order  in  MM  Docket  No.  94-  123,  11  FCC  Rcd  546,  583-  86  (1995)  (repealing  the 
 prime  time  access  rule);  Report  and  Order  in  MM  Docket  No.  87-  68,  3  FCC  Rcd  638  (1988),  clarified  4 
 FCC  Rcd  2276  (1989)  (eliminating  the  policy  under  which  applications  to  initiate  or  improve  VHF  service 
 were  considered  contrary  to  the  public  interest  if  they  threatened  adverse  economic  impact  on  existing  or 
 potential  UHF  stations). 
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 the  UHF  discount  by  selling  their  VHFs  and  buying  UHFs.  The  fact  that  few,  if  any, 
 group  owners  have  used  this  strategy  suggests  that  the  market  recognizes  a  continuing 
 competitive  disparity  between  the  two  services.  Accordingly,  we  cannot  say  the  discount 
 is  no  longer  in  the  public  interest  as  a  result  of  competition. 

 37.  While  the  technical  and  engineering  evidence  submitted  by  commenters 
 continues  to  support  the  UHF  discount,  we  believe  that  it  will  likely  not  continue  to  do  so 
 in  the  future.  The  information  received  in  the  proceeding  suggests  that  the  reach  disparity 
 between  VHF  and  UHF  stations  differs  from  market-  to-  market  and  station-  to-  station.  In 
 addition,  we  agree  with  commenters  arguing  that  advances  in  technology  now  provide  us 
 with  the  tools  to  more  accurately  measure  the  household  reach  for  each  UHF  station.  106 

 38.  In  this  regard,  we  note  that  the  existing  UHF  discount  will  likely  not  work 
 well  for  DTV.  Our  efforts  to  replicate  existing  signal  coverage  provide  DTV  stations  the 
 ability  to  reach  approximately  the  same  number  of  television  households  they  currently 
 reach  with  NTSC  stations.  Thus,  it  is  not  clear  that  a  VHF  NTSC  station  assigned  a  UHF 
 DTV  channel  should  be  permitted  a  UHF  discount  if  the  station  reaches  the  same  number 
 of  households  as  did  its  NTSC  counterpart.  Nor  is  it  clear  that  a  UHF  NTSC  station 
 assigned  a  VHF  DTV  channel  should  lose  the  discount  if  the  DTV  station  does  not  reach 
 more  households.  In  this  regard,  however,  we  note  that,  pursuant  to  Section  5009(  c)  of 
 Pub.  Law  106-  113,  113  Stat.  1501,  Appendix  I  (1999),  the  Commission,  on  December  7, 
 1999,  issued  a  Public  Notice  giving  DTV  licensees  until  December  31,  1999,  in  which  to 
 file  notice  that  they  intend  to  seek  maximization  of  their  DTV  service  area.  107  One 
 thousand  three  hundred  and  sixteen  letters  of  notification  manifesting  the  intent  to  file  to 
 maximize  DTV  stations  service  areas  were  filed  by  that  deadline.  Accordingly,  DTV 
 licensees,  including  those  operating  on  UHF  channels,  have  been  given  the  opportunity  to 
 maximize  their  DTV  coverage  areas,  and  not  merely  replicate  their  analog  coverage.  This 
 should  ameliorate  at  least  some  of  the  disparities  between  UHF  and  VHF  stations  access 
 to  viewership  in  the  digital  context.  Additionally,  unlike  analog  signal  reception,  where 
 picture  quality  gets  progressively  worse  as  distance  from  the  antenna  increases,  digital 
 reception  is  characterized  by  the  so-  called  cliff  effect.  That  effect  is  characterized  by 
 DTV  television  receivers  obtaining  the  same  quality  of  reception  at  a  distance  from  the 
 transmitting  antenna  as  is  obtained  close  to  it  until  such  a  point  as  the  data  stream  is  no 
 longer  useable  by  the  receiver.  At  that  point  reception  falls  off  a  cliff  and  no  picture  or 

 106  The  Commission  has  previously  recognized  that  the  best  indicator  of  the  reach  handicap  is  one 
 that  measures  the  actual  coverage  limitation  inherent  in  the  UHF  signal.  100  FCC  2d  at  93. 

 107  Public  Notice,  Community  Broadcasters  Protection  Act  of  1999  Sets  Deadline  of  December 
 31,  1999  for  Full  Service  TV  Stations  to  File  Letters  of  Intent  to  Maximize  Their  DTV  Facilities,  DA  99- 
 2739  (released  December  7,  1999). 
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 sound  is  produced.  In  other  words,  the  reception  quality  remains  high  when  an  adequate 
 signal  is  available.  Effectively,  as  the  average  DTV  signal  strength  gets  weaker  at  the 
 edge  of  a  stations  service  area,  the  picture  and  sound  will  be  produced  for  smaller 
 percentages  of  time,  until  reception  is  considered  unacceptable.  Generally,  DTV  UHF 
 viewers  should  have  better  quality  reception  at  greater  distances  from  the  station  than  is 
 currently  the  case  with  respect  to  analog  UHF  reception.  This,  too,  should  allow  DTV 
 UHF  stations  to  obtain  better  access  to  off-  the-  air  viewers  and  should  rectify  the 
 VHF/  UHF  disparity  to  an  extent.  We  believe  that  under  these  circumstances,  the  eventual 
 modification  or  elimination  of  the  discount  for  DTV  will  be  appropriate.  Accordingly,  at 
 such  time  near  the  completion  of  the  transition  to  digital  television  we  will  issue  a  Notice 
 of  Proposed  Rulemaking  proposing  a  phased-  in  elimination  of  the  discount.  108 

 B.  Local  Radio  Ownership  Rules 
 1.  Regulatory  History 
 39.  In  1996,  the  Commission  amended  the  local  radio  ownership  rules  to  conform 
 to  provisions  in  Section  202(  b)  of  the  Telecommunications  Act  of  1996.  109  Section 
 73.3555(  a)(  1)  of  the  Commission's  rules  sets  forth  the  current  local  radio  ownership  rules. 
 These  rules  currently  allow:  (1)  combinations  of  up  to  8  commercial  radio  stations,  not 
 more  than  5  of  which  are  in  the  same  service  (AM  or  FM),  in  markets  with  45  or  more 
 commercial  radio  stations;  (2)  combinations  of  up  to  7  commercial  radio  stations,  not 
 more  than  4  of  which  are  in  the  same  service,  in  markets  with  between  30  and  44 
 commercial  radio  stations;  (3)  combinations  of  up  to  6  commercial  radio  stations,  not 
 more  than  4  of  which  are  in  the  same  service,  in  markets  with  between  15  and  29 
 commercial  radio  stations;  (4)  combinations  of  up  to  5  commercial  radio  stations,  not 
 more  than  3  of  which  are  in  the  same  service,  if  no  party  controls  more  than  50  per  cent  of 
 the  stations  in  the  radio  market,  in  radio  markets  with  14  or  fewer  commercial  radio 
 stations. 

 40.  In  1938,  the  Commission  adopted  a  strong  presumption  against  granting  radio 
 licenses  that  would  create  duopolies  (i.  e.,  common  ownership  of  more  than  one  station  in 

 108  We  previously  stated  that  until  the  UHF  discount  was  addressed  in  the  proceedings  where  it  was 
 under  review,  any  entity  that  acquired  stations  during  the  interim  period  between  the  revision  of  the 
 national  reach  cap  pursuant  to  the  Telecom  Act,  and  a  Commission  decision  on  the  UHF  discount,  and 
 which  complied  with  the  35  percent  reach  cap  only  by  virtue  of  the  UHF  discount,  would  be  subject  to  our 
 eventual  decision  on  the  discount.  Order,  11  FCC  Rcd  12374,  12375  (1996).  This  has  remained  the  case 
 during  the  pendancy  of  the  instant  proceeding  and  we  will  continue  to  follow  this  policy  until  such  time  as 
 the  UHF  discount  is  modified  or  eliminated. 

 109  Order,  11  FCC  Rcd  12368  (1996). 
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 the  same  service  in  a  particular  community)  based  largely  on  the  principle  of 
 "diversification  of  service."  110  In  the  early  1940s  this  presumption  against  duopoly 
 ownership  became  an  absolute  prohibition  when  the  Commission  1)  adopted  rules 
 governing  commercial  FM  service  and  2)  prohibited  the  licensing  of  two  AM  stations  in 
 the  same  area  to  a  single  network.  111  The  AM  rule  barred  overlap  of  AM  stations  where  a 
 "substantial  portion  of  the  applicant's  existing  station's  primary  service  area"  would  receive 
 service  from  the  station  in  question,  except  upon  a  showing  that  the  public  interest  would 
 be  served  through  such  multiple  ownership;  and  the  FM  rule  prohibited  the  licensing  of  a 
 new  station  which  would  serve  "substantially  the  same  area"  as  another  station  owned  or 
 operated  by  the  same  licensee.  112  The  Commission  explained  that  the  radio  duopoly  rules 
 sought  to  promote  economic  competition  and  diversity  of  programming  viewpoints 
 through  station-  ownership  diversity. 

 41.  In  1964,  the  Commission  abandoned  its  case-  by-  case  adjudication  approach 
 and  barred  common  ownership  of  radio  stations  when  the  predicted  1  mV/  m  contours  of 
 the  stations  overlapped.  113  In  adopting  the  rule,  the  Commission  stated:  "When  two 
 stations  in  the  same  broadcast  service  are  close  enough  together  so  that  a  substantial 
 number  of  people  can  receive  both,  it  is  highly  desirable  to  have  the  stations  owned  by 
 different  people."  114  The  Commission  explained  that  this  objective  flowed  logically  from 
 two  basic  principles  underlying  the  multiple  ownership  rules. 

 First,  in  a  system  of  broadcasting  based  upon  free  competition,  it  is  more 
 reasonable  to  assume  that  stations  owned  by  different  people  will  compete  with 
 each  other,  for  the  same  audience  and  advertisers,  than  stations  under  the  control 
 of  a  single  person  or  group.  Second,  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 

 110  The  Commission's  duopoly  policy  was  first  articulated  in  Genesee  Radio  Corp.,  5  FCC  183 
 (1938). 
 111  See  Federal  Communications  Commission,  Sixth  Annual  Report  Fiscal  Year  1940  (1941)  at  68; 
 and  6  FR  2282  (Tuesday,  May  6,  1941). 
 112  See  Report  and  Order  in  Docket  14711,  45  FCC  1476  n.  1  (1964). 

 113  Id.  at  1476.  The  Commission  cited  the  end  of  the  pioneering  era  of  broadcasting,  the  large 
 number  of  applicants  for  licenses,  combined  with  the  increasing  importance  of  the  editorial  functions  of 
 radio  stations,  as  justifications  for  the  timing  of  the  introduction  of  a  numerical  standard  which  was  "more 
 restrictive  in  content  and  more  extensive  in  application"  than  the  standard  it  replaced.  Id.  at  1478. 

 114  Id.  at  1477. 
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 opinion  at  the  regional  level.  115 
 The  Commission  concluded  that  the  rules  were  based  upon  the  view  of  the  First 
 Amendment  to  the  Constitution  articulated  by  the  Supreme  Court  in  the  Associated  Press 
 case  -  i.  e.,  a  notion  that  the  Amendment  "rests  on  the  assumption  that  the  widest  possible 
 dissemination  of  information  from  diverse  and  antagonistic  sources  is  essential  to  the 
 welfare  of  the  public."  116 

 42.  In  1988,  the  Commission  replaced  the  1  mV/  m  contour-  overlap  duopoly 
 standard,  which  prohibited  the  common  ownership  of  stations  with  overlapping  1  mV/  m 
 signal  contours,  with  a  more  relaxed  "principal  city"  contour-  overlap  standard  that 
 prohibited  common  ownership  of  AM  stations  when  the  predicted  5  mV/  m  contours 
 overlapped  and  common  ownership  of  FM  stations  when  the  predicted  3.16  mV/  m 
 contours  overlapped.  117  As  such,  the  rule  prohibited  combinations  of  2  AM  or  2  FM 
 stations  in  the  same  "principal  city"  but  permitted  AM/  FM  combinations  within  the  same 
 community.  The  Commission  explained  that  efficiencies  of  common  ownership  might  be 
 realized  by  allowing  radio  broadcasters  to  own  two  or  more  radio  stations  in  the  same 
 geographic  area,  although  not  in  the  same  principal  city.  The  Commission  also  explained 
 that  the  goals  of  the  duopoly  rule  remained  the  same:  to  promote  economic  competition 
 and  diversity  of  programming  and  viewpoints  through  local  ownership  diversity.  The 
 Commission  noted  a  changed  marketplace,  with  an  increased  number  of  broadcast 
 stations,  the  introduction  of  new  services  and  technologies,  and  the  abundance  of 
 competition  in  local  markets,  as  the  compelling  reasons  to  relax  the  local  ownership 
 regulation.  118 

 43.  In  1992,  the  Commission  again  cited  changed  economic  conditions  in  radio 
 markets  as  a  basis  for  further  relaxing  the  local  radio  ownership  rules.  119  Specifically,  the 
 Commission  permitted  combinations  of  up  to  (i)  3  AM  and  3  FM  in  markets  with  40  or 
 more  stations,  (ii)  3  AM  and  2  FM  in  markets  with  30  to  39  stations,  (iii)  2  AM  and  2  FM 
 in  markets  with  15  to  29  stations  and  (iv)  3  stations  (with  no  more  than  2  in  the  same 

 115  Id. 
 116  Associated  Press  v.  United  States,  326  U.  S.  1,  10  (1945). 
 117  First  Report  and  Order  in  MM  Docket  No.  87-  7,  4  FCC  Rcd  1723  (1989).  The  1988  rule 
 recognized  that  AM  service  has  a  larger  audience  reach  than  FM  and  therefore  might  have  been 
 discriminated  against  under  the  previous  definition  that  used  the  same  contour  for  both  services. 

 118  Id.  at  1726-  27. 

 119  Revision  of  Radio  Rules  and  Policies,  supra. 
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 service)  in  markets  with  14  or  fewer  stations.  120  Under  cases  (i)-(  iii),  combinations  were 
 permitted  if  the  combined  audience  share  did  not  exceed  25  percent.  In  case  (iv),  the 
 combination  was  permitted  if  it  would  not  result  in  a  single  party  controlling  50  percent  or 
 more  of  the  stations  in  the  market.  The  Commission  noted  growth  in  the  number  of  radio 
 stations  and  increased  competition  from  non-  radio  outlets  such  as  cable  and  MTV.  The 
 Commission  noted  that  stations  faced  declining  growth  in  radio  revenues  and  concluded 
 that  economic  circumstances  threatened  radio's  ability  to  serve  the  public  interest.  The 
 Commission  explained  that  consolidation  within  the  industry  would  allow  radio 
 broadcasters  to  realize  economies  of  scale  that  would  then  generate  greater  programming 
 investment  and  increase  radio  stations  competitiveness. 

 44.  In  response  to  petitions  for  reconsideration,  the  Commission  moderated  the 
 relaxation  of  its  rules  permitting  combinations  of  up  to  (i)  2  AM/  2  FM  in  markets  with  15 
 or  more  stations,  if  the  combined  audience  share  did  not  exceed  25  percent;  and  (ii)  3 
 stations  in  markets  of  14  or  fewer  stations,  with  no  more  than  2  in  the  same  service,  if  the 
 combination  would  not  control  50  percent  or  more  of  the  stations  in  the  market.  121  The 
 Commission  concluded  that  adopting  more  moderate  increases  .  .  .  in  the  permissible 
 level  of  station  ownership  in  certain  local  markets  at  this  time  will  provide  necessary  relief 
 while  enabling  us  to  monitor  marketplace  developments  as  they  unfold.  122 

 45.  Pursuant  to  the  Telecommunications  Act  of  1996,  the  Commission  further 
 relaxed  its  local  radio  ownership  rules  in  March  1996,  as  set  forth  above.  123  The 
 Commission  did  not  change  from  its  1992  reconsideration  decision,  however,  how  it 
 defined  the  relevant  radio  market  or  which  stations  it  counted.  124 

 120  The  Commission  based  the  count  of  radio  stations  on  the  number  of  commercial  radio  stations 
 meeting  minimum  audience  survey  reporting  standards  within  an  Arbitron  designated  radio  metro  market, 
 or  on  overlapping  principal  community  contours  outside  designated  radio  markets. 

 121  Memorandum  Opinion  and  Order  and  Further  Notice  of  Proposed  Rule  Making  in  MM  Docket 
 91-  140,  7  FCC  Rcd  6387,  at  6388,  6393-  6395  (1992).  The  Commission  decided  to  count  radio  stations 
 with  reference  to  a  contour  overlap  standard  in  all  situations,  not  just  those  outside  of  Arbitron  designated 
 radio  markets.  Thus,  the  Commission  defined  the  radio  market  as  that  area  encompassed  by  the  principal 
 community  contours  .  .  .  of  the  mutually  overlapping  stations  proposing  to  have  common  ownership.  The 
 number  of  stations  in  the  market  will  be  determined  based  on  the  principal  community  contours  of  all 
 commercial  stations  whose  principal  community  contours  overlap  or  intersect  the  principal  community 
 contours  of  the  commonly-  owned  and  mutually  overlapping  stations. 

 122  Id.  at  6388. 

 123  Implementation  of  Sections  202(  a)  and  202(  b)(  1)  of  the  Telecommunications  Act  of  1996 
 (Broadcast  Radio  Ownership),  11  FCC  Rcd  12368  (1996). 
 124  Id.  at  12370. 
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 46.  In  our  biennial  review  NOI,  we  asked  for  comment  on  how  the  relaxation  of 
 local  radio  ownership  rules  under  the  Telecom  Act  has  impacted  competition,  diversity 
 and  economic  efficiencies  within  local  radio  markets.  We  noted  that  since  the  passage  of 
 the  Telecom  Act,  the  radio  industry  has  experienced  an  ongoing  trend  towards  increasing 
 ownership  concentration,  both  in  terms  of  local  and  national  radio  markets;  although  the 
 number  of  radio  stations  has  increased,  the  number  of  owners  has  decreased.  The  NOI 
 asked  for  comment  on  whether  this  trend  has  had  a  significant  impact  on  local  market 
 competition  among  radio  stations,  and  with  other  local  media  outlets,  in  terms  of  the 
 program  delivery  and  local  advertising  markets.  125  The  NOI  also  asked  for  comment  on 
 whether  radio  ownership  concentration  has  had  a  significant  influence  over  the  expression 
 of  viewpoint  diversity  and  the  level  of  news  coverage  within  local  radio  markets.  126  We 
 noted  in  the  NOI  that  the  NTIAs  1997  annual  report  on  minorities  and  broadcasting 
 showed  that  there  has  been  a  drop  in  the  number  of  minority-  owned  broadcast  stations, 
 and  sought  comment  on  the  relationship  between  our  ownership  limits  and  the 
 opportunities  for  minority  and  female  broadcast  station  ownership.  127  In  addition,  the  NOI 
 sought  comment  on  whether  our  current  counting  method  for  purposes  of  applying  the 
 local  radio  ownership  rules  should  be  modified  to  more  realistically  account  for  the 
 number  of  stations  in  a  radio  market.  128 

 2.  Comments 
 47.  Commenters  were  divided  on  whether  the  current  local  radio  ownership  rules, 
 mandated  by  the  Telecommunications  Act,  have  produced  positive  or  negative  results. 
 Commenters  concerned  about  the  effects  of  the  rules  on  the  marketplace  ask  the 
 Commission  to  maintain  or  strengthen,  the  current  rules.  129  CME,  for  example,  argues  that 

 125  NOI,  supra  at  11282. 
 126  Id.  at  11283. 
 127  Id.  at  11283. 
 128  Id.  at  11283. 
 129  See,  e.  g.,  American  Federation  of  Television  and  Radio  Artists  Comments  at  8,  10-  12  (stating 
 that  it  is  essential  that,  at  the  very  least,  the  current  radio  ownership  restrictions  remain  in  place);  W. 
 Russell  DiBello  Comments  at  5  (urging  FCC  to  return  to  the  traditional  "Seven  AM,  Seven  FM,  One  TV, 
 One  Group  Per  Market);  CBI  Comments  at  3,  6,  9  (urging  Commission  to  return  to  2AM/  2FM  radio 
 duopoly  in  markets  below  Top-  100  radio  markets,  with  existing  superduopolies  required  to  divest);  CME 
 Comments  at  24-  26  (stating  that  the  local  radio  ownership  rules  should  be  strengthened);  Gilliam  Reply 
 at  2-  4  (urging  the  Commission  to  issue  a  statement  supporting  viewpoint  diversity,  and  to  issue  a  notice  of 
 proposed  rulemaking  to  propose  specific  reductions  in  the  local  and  national  ownership  limits,  and  states 
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 radio  market  consolidations  have  increased  the  market  power  of  group  owners,  and 
 explains  that  by  November  1997  all  top-  250  radio  markets  were  above  1800  on  the 
 Herfindahl-  Hirschmann  Index,  implying  substantial  market  concentration.  130  Some 
 commenters  further  contend  that  consolidation  has  increased  radio  owners'  influence  over 
 local  advertising  rates.  Americans  for  Radio  Diversity  (ARD)  explains  that  the  cost  of 
 radio  advertising  is  accelerating  at  roughly  triple  the  rate  of  inflation,  and  that  it  is 
 common  for  two  or  three  radio  station  owners  to  receive  80%  to  90%  of  the  advertising 
 revenues  in  a  local  market.  ARD  further  argues  that  consolidation  has  negatively  impacted 
 small  business  owners  who  cannot  afford  the  inflated  advertising  costs  which  the  current 
 conditions  help  create.  131 

 48.  Commenters  concerned  about  ownership  consolidation  also  state  that  such 
 consolidation  has  diminished  local  viewpoint  diversity.  While  group  owners  may  have 
 greater  resources  to  invest  in  local  news  and  public  affairs  programming,  ARD  and  CME 
 argue  that  the  scale  economies  from  concentrated  radio  ownership  arise  in  part  from  a 
 homogenization  of  news  reporting.  132  Similarly,  Greater  Media,  Inc.,  and  Press 
 Communications  LLC  believe  that  radio  consolidation  has  reduced  viewpoint  diversity  in 
 broadcasting.  133 

 49.  Other  commenters,  however,  rejoin  that  consolidation  was  the  intent  behind 
 deregulation  of  local  radio  ownership  restrictions,  and  that  any  resulting  problems  that 

 that  until  greater  ownership  diversity  is  achieved,  the  Commission  should  refuse  to  recommend  any 
 further  lessening  of  the  ownership  rules);  UCC/  Black  Citizens  Comments  at  5-  6  (stating  that  further 
 relaxation  of  the  radio  ownership  rules  is  not  warranted  at  this  time). 

 130  CME  Comments  at  25. 

 131  ARD  Comments  at  3-  4.  ARD  also  asserts  that  its  members  have  experienced  salary  ceilings  in 
 markets  where  a  few  stations  have  market  dominance.  ARD  Comments  at  12.  Commenters  such  as  ARD 
 and  Gilliam  also  argue  that  radio  consolidations  have  created  barriers  to  entry  for  minorities.  ARD  cites 
 the  decline  in  minority  ownership  from  3.  1%  to  2.  8%,  since  passage  of  the  Telecom  Act.  ARD  Comments 
 at  3.  Other  commenters,  however,  disagree.  Connoisseur  comments  at  7-  8;  Elyria-  Lorain  comments  at 
 23-  24;  Freedom  of  Expression  Foundation  comments  at  7-  8;  West  Virginia  comments  at  25  (stating  that 
 "while  it  may  be  true  that  the  number  of  radio  stations  owned  by  minorities  declined  between  1995  and 
 1997,  there  is  nothing  to  suggest  that  opportunities  for  minorities  to  acquire  stations  that  might  otherwise 
 have  existed  were  eliminated  as  a  result  of  consolidation  acquisitions"). 

 132  CME  Comments  at  22-  24;  AFTRA  also  argues  that  such  consolidation  and  economies  of  scale 
 are  inherently  adverse  to  the  public  interest  because  they  tend  to  homogenize  news  programming. 
 AFTRA  Comments  at  11. 

 133  Greater  Media,  Inc.  and  Press  Communications  LLC  Joint  Comments  at  5. 
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 may  arise  with  market  power  should  be  left  to  antitrust  authorities.  134  Commenters 
 opposing  strengthening  the  local  radio  ownership  rules  also  state  that  anti-  competitive 
 effects  are  unlikely  in  local  advertising  markets.  For  example,  CBS  argues  that 
 competitive  effects  of  changes  in  the  local  radio  ownership  limits  must  be  evaluated  in  the 
 context  of  the  broad  advertising  markets  where  radio  competes,  and  cites  the  fierce  inter-media 
 and  intra-  radio  competition  that  occurs  in  advertising  markets,  the  willingness  of 
 stations  to  change  formats  and  the  sharp  fluctuations  in  listener  preferences  as  evidence 
 that  radio  incumbents  can  easily  be  challenged.  135  NAB  asserts  that  higher  ratings  and 
 higher  quality  service  resulting  from  ownership  consolidation  account  for  the  higher 
 advertising  rates.  136  Commenters  supporting  further  relaxation  of  the  local  radio 
 ownership  rules  also  argue  that  consolidation  has  produced  economic  gains  that  reflect 
 improved  economies  of  scale,  in  terms  of  operating  cost  reductions  and  the  improved 
 quality  and  quantities  of  radio  services  offered.  CBS  cites  transactional  efficiencies  that 
 occur  when  a  group  owner  can  offer  "one  stop  shopping"  for  advertisers,  with  benefits  for 
 both  buyer  and  sellers  of  advertising  time.  Cumulus  cites  lower  costs  and  improved  radio 
 service,  and  asserts  that  the  improved  economies  of  scale  from  group  ownership  allows 
 radio  stations  in  small  and  mid-  sized  markets  to  compete  against  local  newspaper  and 
 television  stations,  which  in  many  cases  have  enjoyed  near-  monopoly  status  with  respect 
 to  their  service  to  major  local  advertisers.  137  A.  H.  Belo  and  CBS  also  state  that  common 
 ownership  of  multiple  media  sources  results  in  greater  format  diversity.  138 

 50.  Commenters  also  differed  on  the  Commissions  methodology  for  counting 
 stations  in  determining  compliance  with  the  ownership  rules.  Commenters  such  as  Air 
 Virginia,  Americans  for  Radio  Diversity  (ARD),  Greater  Media,  Inc.,  Press 
 Communications,  LLC,  and  Gross  Communications  Corporation  argue  that  too  many 
 stations  are  counted  under  the  Commission's  current  methodology.  These  commenters 
 proposed  to  use  an  Arbitron  or  other  rating  service  market  definition,  139  taking  into 

 134  ABC  Comments  at  28;  Connoisseur  Comments  at  7;  Cumulus  Comments  at  25;  Elyria-  Lorain 
 Comments  at  23;  Freedom  of  Expression  Foundation  Comments  at  7;  West  Virginia  Comments  at  24. 

 135  CBS  Comments  at  35,  37,  38  and  42.  Cf.  Fuller-  Jeffrey  Comments  at  4-  5  (arguing  that  radio  is 
 at  most  a  minor  player  in  advertising  industry). 

 136  NAB  Reply  Comments  at  9. 

 137  Cumulus  Comments  at  20-  21. 
 138  A.  H.  Belo  Comments  at  9  and  10.  CBS  Comments  at  43. 
 139  Air  Virginia  Comments  at  9  and  Greater  Media,  Inc.  and  Press  Communications,  LLC.  Joint 
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 account  listener  audience  and  station  power,  140  and  to  include  only  those  stations  that 
 place  a  1mV/  m  (FM)  or  2  mV/  m  (AM)  primary  service  contour  over  the  furthest  city  limit 
 of  the  market's  principal  city,  141  or  using  Department  of  Commerce  MSA  definitions  in 
 place  of  Arbitron.  142 

 51.  In  contrast,  some  commenting  parties  urged  the  Commission  to  retain,  or  even 
 expand,  its  current  radio  market  definition  and  station  count  method.  CBS  points  to 
 Congress'  awareness  of  how  the  Commission  defines  a  market  in  setting  the  current 
 regulations,  and  opposes  any  changes.  143  ABC  proposes  using  an  all-  inclusive  measure 
 that  includes  television,  radio,  cable,  DBS,  newspapers,  video  cassettes,  yellow  pages, 
 direct  mail  and  the  Internet,  and  would  substitute  antitrust  enforcement  for  the 
 Commission's  current  local  ownership  regulation.  144  Cumulus  would  allow  parties  to 
 supplement  their  applications  with  findings  prepared  in  accordance  with  Technical  Note 
 101  of  the  National  Bureau  of  Standards  (now  National  Institute  of  Standards  and 
 Technology),  arguing  that  this  alternative  approach  generally  provides  a  more  accurate 
 method  for  predicting  the  location  of  signal  contours.  145 

 3.  Discussion 
 52.  Overview.  We  conclude  that  our  current  local  radio  ownership  rules,  as 
 mandated  by  the  Telecommunications  Act  of  1996,  generally  continue  to  serve  the  public 
 interest.  The  longstanding  goal  of  the  Commission's  local  radio  ownership  restrictions 
 has  been  to  promote  competition  and  viewpoint  diversity  within  local  radio  markets. 
 While  some  commenters  argued  that  consolidation  has  had  a  positive  impact  on  the 
 economic  viability  of  the  radio  industry,  in  terms  of  improved  station  profitability  and 

 Comments  at  4-  5. 
 140  Americans  for  Radio  Diversity  Comments  at  5. 

 141  Gross  Communications  Corporation  Comment  at  9-  10. 
 142  John  W.  Barger  Comments  at  1-  2. 
 143  CBS  Reply  Comments  at  8. 
 144  ABC  Comments  at  29. 
 145  Cumulus  Reply  Comments  at  5-  6. 
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 increased  value  of  radio  ownership,  and  has  also  yielded  potential  benefits  for  both  the 
 listening  public  and  advertisers,  others  raised  significant  concerns  about  the  impact  of 
 radio  ownership  consolidation  on  both  our  competition  and  diversity  goals. 

 53.  We  recognize  that  the  industry  has  undergone  significant  consolidation  since 
 1996.  Moreover,  we  expect  further  consolidation  as  a  result  of  our  recent  ownership 
 decisions  relaxing  the  television  duopoly  and  one-  to-  a-  market  rules.  We  intend  to  monitor 
 the  consolidation  and  gather  information  regarding  the  overall  impact  on  competition  and 
 diversity.  As  discussed  more  fully  below,  although  we  will  maintain  our  current  local 
 radio  ownership  rules  for  the  time  being,  we  are  persuaded  that  further  proceedings  are 
 warranted  to  address  certain  definitional  and  methodological  issues  affecting  our  local 
 radio  ownership  rules.  Specifically,  we  will  commence  a  proceeding  to  seek  comment  on 
 alternative  means  of  defining  radio  markets  and  alternative  methods  of  calculating  the  total 
 number  of  stations  in  a  market  and  the  number  owned  by  a  particular  party  in  a  market 
 to  correct  anomalies  in  our  current  methodology.  We  believe  that  proceeding  will  lead  to 
 rules  and  procedures  that  will  be  easier  to  apply,  provide  more  certainty  for  entities 
 contemplating  acquisitions,  and  result  in  a  more  rational  and  consistent  application  of  our 
 multiple  ownership  limits. 

 54.  Competition.  Relaxation  of  the  ownership  limits  under  the  Telecom  Act  has 
 produced  financial  benefits  for  the  broadcast  radio  industry.  Financial  data  indicate  that 
 the  industry  has  made  significant  gains  since  passage  of  the  Telecom  Act.  For  the  industry 
 as  a  whole,  station  profitability  has  increased  and  station  values  have  reached  new  heights. 
 However,  it  is  not  clear  whether  these  gains  are  the  result  of  greater  efficiencies,  enhanced 
 market  power,  or  both. 

 55.  We  are  concerned  that  increasing  consolidation  may  be  having  adverse  effects 
 on  competition,  especially  in  the  local  radio  advertising  market.  Current  data  show  that  in 
 85  out  of  a  total  of  270  Arbitron  radio  markets,  two  entities  already  control  more  than 
 80%  of  advertising  revenue;  in  143  markets  two  entities  control  more  than  70  percent  of 
 such.  146  We  recognize  that  many  advertisers  consider  alternative  media  to  be  good 
 substitutes  for  radio  advertising.  However,  the  Department  of  Justice  (DOJ)  has 
 concluded  that  there  are  a  significant  number  of  advertisers  that  do  not.  In  distinguishing 
 radio  advertising  as  a  distinct  market  from  that  of  television  and  newspaper  advertising, 
 the  DOJ  explains  that  1)  radio  advertising  is  unique  in  reaching  a  mobile  broadcast 
 audience;  2)  radio  has  a  greater  ability  to  target  particular  audience  segments;  and  3)  radio 
 can  be  more  cost  effective  and  more  flexible  in  responding  to  changes  in  local  advertising 

 146  There  are  approximately  270  Arbitron  radio  markets.  Revenue  estimates  are  derived  from  BIA 
 Database  (November  1999). 
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 conditions.  147  Additionally,  as  we  noted  in  our  recent  TV  Ownership  Order,  [  a]  recent 
 econometric  study  finds  that  other  advertising  media  are  not  good  substitutes  for  radio 
 advertising  and  that  radio  advertising  probably  constitutes  a  separate  antitrust  market.  148 
 Thus,  for  certain  advertisers,  newspapers,  cable,  and  broadcast  television  stations  do  not 
 constitute  an  effective  substitute  for  radio  stations.  For  these  advertisers,  the 
 consolidation  of  local  radio  markets  may  raise  significant  competitive  concerns. 

 56.  Diversity.  Consolidation  of  radio  stations  under  group  ownership  might  allow 
 owners  to  increase  investment  in  news  coverage,  through  the  acquisition  of  more 
 sophisticated  news  coverage  equipment  and  by  maintaining  larger,  more  efficient  news 
 staffs.  Some  commenters  thus  suggest  that  ownership  concentration  has  fostered 
 viewpoint  diversity.  For  example,  Fuller-  Jeffrey  Broadcasting  Companies,  Inc.  believes 
 that  viewpoint  diversity  is  "alive  and  well,"  and  that  pre-  Telecom  Act  ownership  limits  had 
 placed  a  severe  economic  strain  on  small  to  medium-  sized  companies.  It  also  believes  that 
 the  present  level  of  consolidation  should  allow  the  radio  industry  to  enjoy  unprecedented 
 success  and  stability,  which  will  allow  it  to  better  contribute  to  the  public  interest.  One 
 impact  of  consolidation,  it  argues,  has  been  to  reduce  unnecessary  format  duplication  and 
 to  minimize  audience  overlap.  149  Commenters  such  as  NAB  assert  that  the  Commission 
 should  look  at  all  media,  including  television,  radio,  cable,  DBS,  Internet  and  newspapers, 
 along  with  smaller  services  such  as  MMDS  and  SMATV,  when  judging  program  diversity. 
 NAB  also  finds  that  group  owners  do  not  impose  their  views  on  audiences.  150 

 57.  The  scale  and  scope  efficiencies  discussed  above  might  in  part  arise  from  the 
 consolidation  of  news  coverage  at  commonly-  owned  stations,  leading  to  a  lessening  of 
 viewpoint  diversity  and  to  a  smaller  local  market  for  news  talent.  If  this  were  the  case, 
 this  would  conflict  with  the  longstanding  intent  of  the  radio  multiple  ownership  rules  to 
 promote  viewpoint  diversity  through  independently  owned  local  stations.  Viewpoint 
 diversity  has  traditionally  been  viewed  in  terms  of  the  number  of  independent  viewpoints 
 expressed  in  local  markets,  in  which  case  ownership  consolidation  could  have  a  negative 
 impact  on  both  viewpoint  and  source  diversity.  A  related  concern  is  that  even  without  the 

 147  United  States  of  America  v.  Jacor  Communications,  Inc.  and  Citicasters,  Inc.  (C-  1-  96-  757)  (S.  D. 
 Ohio,  Aug.  5,  1996),  Competitive  Impact  Statement  at  4-  5. 

 148  TV  Ownership  Order,  supra  at  12919,  citing  Robert  K.  Ekelund,  George  S.  Ford,  and  John  D. 
 Jackson,  Is  Radio  Advertising  a  Distrinct  Local  Market?  An  Empirical  Analysis,  14  Review  of 
 Industrial  Organization,  239-  256  (May  1999). 

 149  Fuller-  Jeffrey  Broadcasting  Companies,  Inc.,  Comments  at  2-  3. 

 150  NAB  Reply  Comments  at  4-  6  and  8. 
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 loss  of  news  staffs,  viewpoint  expression  might  become  homogenized  within  a  commonly 
 owned  group  of  radio  stations  as  a  result  of  the  sharing  of  common  news  facilities  and  a 
 common  corporate  culture. 

 58.  Several  commenters  lend  support  to  these  notions.  Air  Virginia  notes  a  trend 
 by  large  group-  owned  stations  towards  less  news  and  public  affairs  and  more  revenue-generating 
 entertainment  programming,  particularly  with  local  marketing  agreements 
 ("  LMAs").  151  Americans  for  Radio  Diversity  (ARD)  believes  that  independent 
 broadcasters  are  more  likely  to  provide  diverse  and  unbiased  programming,  and  that  group 
 owners  tend  to  ignore  public  service  to  demographic  groups  deemed  to  be  small  or 
 unprofitable,  which  often  impacts  minorities  and  those  of  lower  economic  status.  152  CME 
 believes  that  consolidation  has  led  to  reduced  public-  affairs  and  local-  news  programming, 
 since  group  owners  increasingly  use  syndicated  programming  and  out-  sourcing  to  produce 
 news  and  public  affairs  programs,  often  with  the  same  production  company  as  is  used  by 
 competitors.  153  It  reports  that,  for  example,  Metro  Networks  Inc.,  a  Houston-  based 
 company,  provides  all  of  the  news  programming  to  10  Washington,  D.  C.,  radio  stations. 
 Metro,  it  states,  is  one  of  the  fastest  growing  companies  in  the  United  States  and  its 
 growth,  according  to  one  of  its  executives,  has  been  due  to  the  out-  sourcing  his 
 company  has  found  at  many  radio  stations.  154  Similarly,  CME  reports  that  Capstar 
 Broadcasting  uses  ten  announcers  based  in  Austin,  Texas,  to  record  all  between-  song 
 breaks  and  weather  and  traffic  breaks  for  37  of  its  stations  in  Texas,  Arkansas  and 
 Louisiana.  155 

 59.  In  view  of  the  large-  scale  consolidation  in  the  radio  industry,  we  believe  that 
 the  existing  local  radio  ownership  limitations  remain  necessary  to  prevent  further 
 diminution  of  competition  and  diversity  in  the  radio  industry.  It  appears  that  while  there 
 may  have  been  a  number  of  salutary  effects  flowing  from  the  consolidation  that  has  taken 
 place  since  1996,  largely  in  financial  strength  and  enhanced  efficiencies,  it  cannot  be  said 
 that  consolidation  has  enhanced  competition  or  diversity,  and,  indeed,  may  be  having  the 
 opposite  effect.  There  currently  are  hundreds  of  fewer  licensees  than  there  were  four 

 151  Air  Virginia  Comments  at  2-  4. 
 152  Americans  for  Radio  Diversity  Comments  at  2-  3. 
 153  Center  for  Media  Education  Comments  at  22-  24. 
 154  Id.  at  23. 
 155  Id.  at  23-  24. 
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 years  ago  and,  in  many  communities,  far  fewer  radio  licensees  compete  against  each  other. 
 60.  Our  competition  and  diversity  concerns  outlined  above  lead  us  to  conclude  that 
 the  local  radio  ownership  rules  should  not  be  further  relaxed  at  this  time.  The  industry  is 
 still  adapting  to  the  substantial  relaxation  of  local  ownership  rules  that  followed  enactment 
 of  the  1996  Act,  and  we  expect  consolidation  to  continue  under  our  current  ownership 
 limits.  While  some  commenters  argue  that  we  should  tighten  the  ownership  limits,  we  do 
 not  believe  this  appropriate  given  that  Congress  directed  the  Commission  to  adopt  these 
 limits  in  1996. 

 61.  Market  Definition  and  Counting  Methodology.  Although  we  have  decided  to 
 retain  our  ownership  rule,  our  experience  in  administering  the  rule  since  its  implementation 
 in  1996  suggests  several  concerns  that  should  be  addressed,  including  our  method  of 
 defining  markets,  counting  the  number  of  stations  within  them  and  counting  the  number  of 
 stations  owned  by  a  party  in  a  radio  market.  These  definitions  and  methodologies  may  be 
 undermining  Congress  intent  in  adopting  the  1996  Act. 

 62.  Our  definition  of  a  radio  market  and  our  method  for  counting  the  number  of 
 stations  in  a  market  were  adopted  in  1992.  156  These  were  not  altered  when  we  amended 
 our  rules  to  implement  Section  202  of  the  1996  Act.  157  To  evaluate  whether  a  proposed 
 transaction  complies  with  our  ownership  rules,  we  first  determine  the  boundaries  of  each 
 market  created  by  the  transaction.  158  Our  rules  define  a  radio  market  as  the  area 
 encompassed  by  the  principal  community  contours  (i.  e.,  predicted  or  measured  5  mV/  m 
 for  AM  stations  and  predicted  3.16  mV/  m  contour  for  FM  stations)  of  the  mutually 
 overlapping  stations  proposed  to  have  common  ownership.  159  Thus,  we  look  to  all 
 stations  that  will  be  commonly  owned  after  the  proposed  transaction  is  consummated  and 
 group  these  stations  into  markets  based  on  which  stations  have  mutually  overlapping 
 signal  contours.  A  market  is  defined  as  the  area  within  the  combined  contours  of  the 

 156  Memorandum  Opinion  and  Order  and  Further  Notice  of  Proposed  Rule  Making  in  MM  Docket 
 No.  91-  140,  7  FCC  Rcd  6387  (1992). 
 157  Order,  In  the  Matter  of  Implementation  of  Sections  202(  a)  and  202(  b)(  1)  of  the 
 Telecommunications  Act  of  1996  (Broadcast  Radio  Ownership),  11  FCC  Rcd  12368,  12370  (1996). 

 158  A  transaction  may  create  more  than  one  radio  market. 

 159  Memorandum  Opinion  and  Order  and  Further  Notice  of  Proposed  Rule  Making  in  MM  Docket 
 No.  91-  140,  supra  at  6395.  Under  our  rules,  a  radio  market  is  created  by  a  proposed  transaction.  In 
 addition,  our  rules  define  a  market  as  a  geographic  area.  The  particular  geographic  area(  s)  created  by 
 proposed  transactions  often  differs  from  the  economic  and  business  conception  of  the  relevant  geographic 
 market. 
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 stations  to  be  commonly  owned  that  have  a  common  overlap.  For  example,  suppose  an 
 applicant  proposes  to  own  stations  A,  B,  C  and  D.  The  contours  of  stations  A,  B  and  C 
 each  overlap  the  contours  of  the  other  two  stations    that  is,  there  is  some  area  which  the 
 contours  of  all  three  stations  have  in  common.  Station  D,  on  the  other  hand,  overlaps  the 
 principal  community  contour  of  station  A,  but  not  those  of  stations  B  or  C.  Under  our 
 current  definitions,  the  area  encompassed  by  the  combined  contours  of  stations  A,  B  and 
 C  form  one  market  and  the  area  within  the  combined  contours  of  stations  A  and  D  form 
 another  market.  160 

 63.  To  determine  the  total  number  of  stations  in  the  market,  as  defined  above, 
 we  count  all  stations  whose  principal  community  contours  overlap  the  principal 
 community  contour  of  any  one  or  more  of  the  stations  whose  contours  define  the  market. 
 Thus,  in  the  market  formed  by  the  contours  of  stations  A,  B  and  C,  any  station  whose 
 contour  overlapped  the  contour  of  A,  B  or  C  would  be  counted  as  in  the  market.  We 
 use  a  different  methodology,  however,  to  determine  the  number  of  stations  that  any  single 
 entity  is  deemed  to  own  in  a  given  market.  For  this  purpose,  we  only  count  those  stations 
 whose  principal  community  contours  overlap  the  common  overlap  area  of  all  of  the 
 stations  whose  contours  define  the  market.  Thus,  a  station  owned  by  the  applicant  that  is 
 counted  as  being  "in  the  market"  because  its  contour  overlaps  the  contour  of  at  least  one 
 of  the  stations  that  create  the  market  will  not  be  counted  as  a  station  owned  by  the 
 applicant  in  the  market  unless  its  contour  overlaps  the  area  which  the  contours  of  all  of  the 
 stations  that  define  the  market  have  in  common.  Referring  to  our  example  of  the  market 
 formed  by  the  contours  of  stations  A,  B  and  C,  station  D  would  be  counted  as  in  the 
 market  because  its  contour  overlaps  the  contour  of  station  A.  But,  station  D  would  not 
 be  counted  as  a  station  owned  by  the  applicant  in  the  ABC  market  because  station  Ds 
 contour  does  not  also  overlap  the  contours  of  stations  B  and  C.  In  short,  the  applicants 
 ownership  of  station  D  would  not  be  counted  against  it  in  determining  compliance  with  the 
 ownership  cap  in  the  ABC  market. 

 64.  These  definitions  and  methodologies  may  be  producing  unintended  results  that 
 are  contrary  to  Congress  intent.  In  the  1996  Act,  Congress  directed  us  to  adopt  radio 
 ownership  limits  that  increase  as  the  size  of  the  market  increases.  Implicit  in  Congress 
 statutory  directive  is:  (1)  a  rational  definition  of  radio  market  that  reflects  the  number 
 of  stations  to  which  listeners  in  a  particular  community  actually  have  access;  and  (2)  a 
 consistent  definition  of  radio  market  when  counting  the  number  of  stations  in  a  market  and 
 when  counting  the  number  of  stations  an  entity  owns  within  that  market. 

 160  This  example  assumes  that  stations  A  and  D  are  same-  service  stations,  and  that  at  least  one  other 
 station,  B  or  C,  is  also  in  the  same  service  as  station  A.  See  47  CFR    73.3555(  a)(  2)([  o]  verlap  between 
 two  stations  in  different  services  is  permissible  if  neither  of  those  two  stations  overlaps  a  third  station  in 
 the  same  service). 
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 65.  The  Commissions  current  policies  raise  concerns  on  both  counts.  First,  the 
 Commissions  use  of  overlapping  signal  contours  to  assess  the  number  of  stations  in  the 
 market  can  produce  unrealistic  results.  161  In  other  contexts,  such  as  our  television 
 duopoly  and  one-  to-  a-  market  rules,  we  recently  opted  for  market  definitions  based  on 
 commercial  reality    as  measured  by  ratings  services  like  Arbitron  and  Nielsen    rather 
 than  contour  overlaps.  In  changing  our  duopoly  rule  from  a  contour-  based  restriction  to  a 
 DMA-  based  restriction,  we  stated  that  the  DMAs  are  a  better  measure  of  actual 
 television  viewing  patterns,  and  thus  serve  as  a  good  measure  of  the  economic 
 marketplace  in  which  broadcasters,  program  suppliers  and  advertisers  buy  and  sell  their 
 services  and  products.  162  We  believe  that  the  same  reasoning  could  apply  to  radio 
 markets.  Arbitron  markets  reflect  the  number  of  stations  that  actually  target  listeners  in  a 
 particular  community  because  they  are  the  listeners  that  advertisers  pay  to  reach.  We  will 
 issue  a  Notice  of  Proposed  Rulemaking  seeking  comment  on  whether  Arbitron  markets 
 (or  a  proxy  in  non-  Arbitron  areas)  would  be  a  more  accurate  measure  of  marketplace 
 reality  than  our  current  approach. 

 66.  Second,  our  current  methodology  for  counting  the  number  of  stations  a  party 
 owns  in  a  market  may  result,  as  in  the  example  discussed  above,  in  a  station  being  counted 
 in  the  market  for  purposes  of  establishing  the  number  of  stations  in  the  market  but  not 
 being  counted  against  a  licensees  cap  on  the  number  of  stations  it  may  own  in  that 
 market.  In  one  case,  this  would  have  led  to  a  party  being  permitted,  in  effect,  to  own 
 three  stations  in  a  four-  station  market  because  our  method  of  counting  the  stations  it 
 owned  in  the  market  excluded  one  of  its  stations.  163 

 161  For  example,  in  a  recent  case  in  Wichita,  Kansas,  a  24-  station  market  according  to  the 
 commercial  Arbitron  rating  service,  the  contour  overlap  approach  counted  52  radio  stations  in  the  market, 
 including  several  Oklahoma  stations  whose  signals  did  not  even  reach  Kansas. 

 162  See  TV  Ownership  Order,  supra  at  12926. 

 163  See  In  re  Application  of  Pine  Bluff  Radio,  Inc.,  14  FCC  Rcd  6594  (1999).  In  Pine  Bluff,  a 
 station  that  was  logically  in  a  market  in  terms  of  listenership  and  advertiser  support,  and,  in  fact,  was 
 counted  for  purposes  of  determining  the  total  number  of  stations  in  that  market  was  not  counted  against  a 
 partys  ownership  cap  in  that  market  because  its  principal  city  contour  did  not  overlap  the  principal 
 community  contours  of  all  stations  that  defined  the  market.  In  the  1996  Act,  Congress  provided  that  in 
 markets  with  14  or  fewer  commercial  radio  stations  a  party  may  own  up  to  five  commercial  radio  stations, 
 but  may  not  own,  operate,  or  control  more  than  50  percent  of  the  stations  in  such  market.  (See  Section 
 202(  b)(  1)(  D)  of  the  Telecommunications  Act  of  1996.)  Yet,  in  Pine  Bluff,  application  of  our  established 
 policies  led  to  one  party  owning  three  stations  in  what  could  reasonably  be  considered  a  four-  station 
 market.  In  Pine  Bluff  we  recognized  that  this  may  appear  to  be  an  anomalous  result  but  pointed  out  that  it 
 was  produced  by  a  methodology  that  had  been  consistently  utilized  since  1992  and  that  subsequent  events 
 in  the  market  had  rendered  harmless  the  impact  of  this  anomaly  in  that  case. 
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 67.  This  shifting  market  definition  appears  illogical  and  contrary  to  Congress 
 intent.  For  instance,  in  the  1996  Act,  Congress  provided  that: 

 in  a  radio  market  with  14  or  fewer  commercial  radio  stations,  a  party  may  own, 
 operate,  or  control  up  to  5  commercial  radio  stations,  not  more  than  3  of  which 
 are  in  the  same  service  (AM  or  FM),  except  that  a  party  may  not  own,  operate,  or 
 control  more  than  50  percent  of  the  stations  in  such  market.  164 

 Thus,  the  plain  language  of  the  statute  seems  to  require  us  to  look  at  the  same  market  -- 
 i.  e.,  to  use  the  same  definition  of  "market"  --  when  determining  the  number  of  radio 
 stations  in  the  market  and  when  counting  the  number  of  stations  that  an  entity  owns, 
 operates,  or  controls  within  that  market.  As  a  logical  matter,  if  a  station  has  sufficient 
 presence  that  it  should  be  counted  as  contributing  to  the  number  of  stations  "in  the 
 market,"  it  seems  appropriate  to  count  it  as  being  "in  the  market"  for  purposes  of 
 calculating  the  ownership  cap. 

 68.  We  tentatively  conclude  that  our  definitions  and  methodologies  in  this  area 
 may  be  having  effects  inconsistent  with  what  Congress  intended.  In  addition,  they  may  be 
 undermining  the  legitimate  expectations  of  broadcasters,  advertisers  and  the  public  as  to 
 the  size  of  their  market,  the  number  of  stations  in  their  market,  and  the  number  of  stations 
 that  can  be  owned  by  an  individual  party  in  that  market.  To  consider  appropriate  changes 
 to  our  rules,  we  will  issue  a  Notice  of  Proposed  Rule  Making  soliciting  comment  on 
 proposed  modifications  of  our  rules  in  this  area. 

 C.  Dual  Network  Rule 
 1.  Regulatory  History 
 69.  Section  73.658(  g)  sets  forth  the  Commission's  current  dual  network  rule.  It 
 directly  reflects  the  provisions  of  Section  202(  e)  of  the  Telecom  Act,  which  permits  a 
 television  broadcast  station  to  affiliate  with  a  person  or  entity  that  maintains  two  or  more 
 networks  of  television  broadcast  stations  unless  such  networks  are  composed  of:  1)  two 
 or  more  persons  or  entities  that  were  "networks"  on  the  date  the  Telecom  Act  was 
 enacted;  165  or  2)  any  such  network  and  an  English-  language  program  distribution  service 
 that  on  the  date  of  the  Telecom  Act's  enactment  provided  4  or  more  hours  of 

 164  1996  Act,  Section  202(  b)(  1)(  D)  (emphasis  added). 

 165  A  "network"  is  defined  with  reference  to  47  C.  F.  R.    73.3613(  a)(  1)  for  this  purpose.  As  of  the 
 date  the  Telecom  Act  was  enacted,  those  networks  were  NBC,  CBS,  ABC  and  Fox. 
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 programming  per  week  on  a  national  basis  pursuant  to  network  affiliation  arrangements 
 with  local  television  broadcast  stations  in  markets  reaching  more  than  75  percent  of 
 television  households.  The  Conference  Report  identified  with  precision  the  networks  to 
 which  these  definitions  were  to  apply.  It  stated  that  the  Commission  was  being  directed  to 
 revise  its  dual  network  rule, 

 to  permit  a  television  station  to  affiliate  with  a  person  or  entity  that  maintains  two 
 or  more  networks  unless  such  dual  or  multiple  networks  are  composed  of  (1)  two 
 or  more  of  the  four  existing  networks  (ABC,  CBS,  NBC,  Fox)  or,  (2)  any  of  the 
 four  existing  networks  and  one  of  the  two  emerging  networks  (WBTN,  UPN). 
 The  conferees  do  not  intend  these  limitations  to  apply  if  such  networks  are  not 
 operated  simultaneously,  or  if  there  is  no  substantial  overlap  in  the  territory  served 
 by  the  group  of  stations  comprising  each  such  networks.  166 

 70.  The  Commission  first  adopted  a  dual  network  rule  for  broadcast  radio 
 networks  in  1941  following  an  investigation  to  determine  whether  the  public  interest 
 required  "special  regulations"  for  radio  stations  engaged  in  chain  or  other  broadcasting.  167 
 The  rule  provided  that  no  license  would  be  issued  to  a  broadcast  station  affiliated  with  a 
 network  organization  that  maintained  more  than  one  broadcast  network.  168  The 
 Commission  extended  the  dual  network  rule  to  television  networks  in  1946.  169  The 
 Commission  believed  that  permitting  an  entity  to  operate  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 

 166  S.  Rep.  No.  230,  104th  Cong.,  2d  Sess.  at  163. 

 167  6  FR  at  2282  (Tuesday,  May  6,  1941). 
 168  Id.  The  dual  network  rule  did  not  apply  if  the  networks  were  not  operated  simultaneously  or  if 
 there  was  no  substantial  overlap  in  the  territories  served  by  each  network.  The  rule  was  directed  at  NBC, 
 the  only  company  then  with  two  radio  networks.  The  Commission  found  that  operation  of  the  "Red"  and 
 "Blue"  networks  gave  NBC  excessive  control  over  its  affiliates  because  their  contracts  did  not  specify 
 whether  a  station  was  part  of  the  "Red"  or  "Blue"  Network.  Further,  the  Commission  concluded  that 
 operation  of  two  networks  gave  NBC  an  unfair  competitive  advantage  over  other  networks  and  protected  it 
 against  future  competition.  Commission  Order  No.  37,  Report  on  Chain  Broadcasting  at  70-  73.  The 
 Commission  indefinitely  suspended  the  rule  in  1941  noting  that  voluntary  separation  of  the  Red  and  Blue 
 networks  would  soon  occur.  FCC,  Supplemental  Report  on  Chain  Broadcasting  14  (1941).  After  NBC 
 sold  its  Blue  network  in  1943,  the  prohibition  was  readopted.  8  Fed.  Reg.  16,005  (1943). 

 169  Amendment  of  Part  3  of  the  Commission's  Rules,  11  FR  33  (Jan.  1,  1946). 
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 market  power.  The  dual  network  prohibition,  therefore,  was  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.  170  The  dual  network  rule  for  broadcast 
 television  remained  unchanged  until  1996,  when  the  Commission  amended  the  rule,  as 
 noted  above,  to  conform  with  the  provisions  in  Section  202(  e)  of  the  Telecom  Act.  171 

 2.  Comments 
 71.  Four  parties  (ABC,  CBS,  Paxson  and  WB)  submitted  comments  regarding  the 
 dual  network  rule;  all  favored  repeal.  These  four  broadcast  networks  argue  that  the  rule 
 constrains  their  ability  to  restructure  and  achieve  efficiencies  of  common  ownership.  172 
 They  also  argue  that  antitrust  enforcement  would  be  sufficient  to  address  any 
 anticompetitive  concerns  that  might  arise  in  the  absence  of  the  dual  network  rule.  173  ABC 
 and  CBS  argue  that  broadcast  networks  are  in  poor  economic  health  and  struggling  to 
 compete  with  cable  and  satellite.  174  CBS,  Paxson,  and  WB  maintain  that  competition 
 among  broadcast  networks  and  between  networks  and  other  video  media  has  never  been 
 more  intense  and  mergers  between  networks,  especially  those  involving  an  emerging 
 network  and  an  established  network,  would  seldom  raise  competitive  concerns.  175  CBS 
 argues  that  only  the  national  advertising  and  program  production  markets  are  relevant  to 
 competition  analysis  of  the  rule  and  both  markets  are  sufficiently  competitive  so  as  not  to 
 warrant  a  per  se  prohibition  of  any  and  all  mergers  between  certain  broadcast  networks.  176 

 72.  With  respect  to  diversity,  ABC  maintains  that  a  network  combination  would 
 not  harm  local  news  and  public  affairs.  ABC  argues  that  a  network  combination  operating 

 170  Notice  of  Proposed  Rule  Making,  10  FCC  Rcd  11951,  11967  (1995). 
 171  Order,  11  FCC  Rcd  12374  (1996). 
 172  ABC  Comments  at  25,  CBS  Comments  at  18-  19,  Paxson  Reply  Comments  at  26-  27,  WB  Reply 
 Comments  at  13-  14. 

 173  ABC  Comments  at  25,  CBS  Comments  at  19,  Paxson  Reply  Comments  at  25. 

 174  ABC  Comments  at  25,  CBS  Comments  at  19-  20. 
 175  CBS  Comments  at  23-  28,  Paxson  Reply  Comments  at  27,  WB  Reply  Comments  at  13-  14. 
 176  CBS  Comments  at  26-  28. 
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 two  networks  would  provide  national  programming  while  local  news  and  information 
 programming  would  remain  in  the  hands  of  the  affiliates.  177  Paxson  maintains  that  the 
 diversity  of  local  programming  outlets  has  never  been  greater  and  WB  asserts  that  repeal 
 of  the  dual  network  rule  would  increase  both  diversity  and  competition  because 
 combinations  involving  an  emerging  network  and  an  established  network  could  produce 
 efficient  economies  of  scale  and  marketing  advantages.  178 

 73.  These  four  networks  maintain  that  the  rule  discriminates  against  broadcast 
 networks,  as  opposed  to  cable,  by  allowing  mergers  between  broadcast  networks  and 
 cable  networks,  while  limiting  mergers  between  broadcast  networks  themselves.  179  CBS 
 contends  that  the  rule  is  a  "striking  example  of  regulatory  inconsistency."  180  CBS  argues 
 that  there  is  a  diminishing  difference  between  networking  and  syndication  and  every  major 
 syndicator,  except  All  American  and  Hearst,  produces  at  least  four  hours  of  programming 
 per  week  with  at  least  75  percent  audience  reach  and  yet  remains  uncovered  by  the  rule.  181 

 3.  Discussion 
 74.  The  current  dual  network  rule  differs  markedly  from  the  dual  network  rule  that 
 remained  unchanged  from  1946  to  1996.  The  latter  prohibited  a  broadcast  station  from 
 affiliating  with  a  network  organization  that  maintained  more  than  one  broadcast  network. 
 In  contrast,  the  current  rule  effectively  permits  a  broadcast  station  to  affiliate  with  a 
 network  organization  that  maintains  more  than  one  broadcast  network,  unless  such 
 networks  are  created  by  a  merger  between  ABC,  CBS,  Fox,  or  NBC,  or  a  merger  between 
 one  of  these  four  established  networks  and  UPN  or  WB.  Thus,  the  current  rule  supports 
 common  ownership  of  multiple  broadcast  networks  created  through  internal  growth  and 
 new  entry,  and  discourages  common  ownership  of  multiple  broadcast  networks  created  by 
 mergers  between  specific  network  organizations. 

 75.  Under  the  current  dual  network  rule,  all  existing  network  organizations,  and  all 
 new  network  organizations,  may  create  and  maintain  multiple  broadcast  networks.  There 

 177  ABC  Comments  at  25-  26. 

 178  Paxson  Reply  Comments  at  27,  WB  Reply  Comments  at  13. 
 179  CBS  Comments  at  21-  22,  Paxson  Reply  Comments  at  25,  WB  Reply  Comments  at  14. 
 180  CBS  Comments  at  23. 
 181  Id. 
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 are  no  limits  on  the  number  of  broadcast  networks  that  may  be  maintained  by  a  network 
 organization,  or  the  number  of  television  stations  that  may  affiliate  with  a  network 
 organization.  As  such,  it  is  theoretically  possible  for  a  network  organization  with 
 sufficient  programming  to  enter  into  affiliation  agreements  with  every  broadcast  television 
 station,  in  every  market,  and  supply  all  of  their  programming.  The  opportunity  to  create 
 and  maintain  multiple  broadcast  networks  places  broadcast  networks  on  more  equal 
 footing  with  cable,  satellite  and  other  multichannel  video  programming  distributors. 

 76.  While  the  dual  network  rule  gives  all  network  organizations  the  opportunity  to 
 pursue  any  economic  efficiencies  that  may  arise  from  the  maintenance  of  multiple 
 broadcast  networks,  it  restricts  the  manner  in  which  specific  network  organizations 
 become  multiple  broadcast  networks.  Specifically,  the  rule  permits  ABC,  CBS,  Fox  and 
 NBC  to  develop  multiple  broadcast  networks  by  (1)  creating  new  broadcast  networks,  (2) 
 acquiring  new  broadcast  networks  created  after  passage  of  the  Telecom  Act,  and  (3) 
 acquiring  video  networks  from  nonbroadcast  media  (e.  g.,  cable  or  satellite)  and  moving 
 them  to  broadcast,  assuming  they  could  find  additional  local  stations  with  which  to 
 affiliate.  However,  the  rule  prohibits  ABC,  CBS,  Fox,  and  NBC  from  developing  multiple 
 broadcast  networks  by  merging  with  one  another  or  UPN  or  WB. 

 77.  We  believe  that  the  rule  as  it  applies  to  UPN  and  WB  may  no  longer  be 
 necessary  in  the  public  interest.  Accordingly,  we  will  adopt  a  Notice  of  Proposed  Rule 
 Making  seeking  comment  on  modifying  the  dual-  network  rule.  We  recognize  that 
 program  production  and  broadcast  networking  are  complementary  inputs  with  economic 
 characteristics  (e.  g.,  large  sunk  costs  and  large  transaction  costs)  that  make  vertical 
 integration  desirable.  Since  UPN  and  WB  are  nascent  subsidiaries  of  large,  well-established 
 program  producers,  a  merger  of  ABC  or  CBS  or  Fox  or  NBC  with  UPN  or 
 WB  may  be  characterized  as  a  merger  of  an  established  broadcast  network  with  an 
 established  program  producer.  We  believe  that  allowing  such  mergers  may  permit 
 realization  of  substantial  economic  efficiencies  without  undue  harm  to  our  diversity  and 
 competition  goals.  182  However,  because  we  are  concerned  about  the  effect  of  such  a 
 merger  on  our  diversity  goals,  that  Notice  seeks  comment  on  what,  if  any,  safeguards 
 should  be  imposed  to  assure  a  minimal  reduction  in  diversity  assuming  we  alter  the  rule  in 
 some  fashion. 

 78.  We  do  not,  however,  believe  that,  at  the  present  time,  the  dual  network  rule 
 should  be  eliminated  in  its  entirety.  While  there  may  be  some  economic  efficiencies 

 182  Section  202(  e)  of  the  1996  Act  directed  the  Commission  to  adopt  the  current  dual  network. 
 However,  it  did  not  preclude  us  from  later  changing  it.  Indeed,  Section  202(  h)  of  the  1996  Act  directs  the 
 Commission  to  review  the  rules  it  adopted  pursuant  to  Section  202  in  its  biennial  reviews  and  to  change 
 them  if  they  are  determined  no  longer  to  be  in  the  public  interest. 
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 associated  with  mergers  between  established  broadcast  networks,  we  believe  such  mergers 
 would  raise  significant  competition  and  diversity  concerns.  As  such,  our  forthcoming 
 Notice  of  Proposed  Rule  Making  concerning  the  dual  network  rule  will  not  propose 
 elimination  of  that  portion  of  the  rule  that  prevents  mergers  between  ABC,  CBS,  Fox,  and 
 NBC. 

 D.  Daily  Newspaper/  Broadcast  Cross-  Ownership  Rule 
 1.  Regulatory  History 
 79.  Section  73.3555(  d)  of  the  Commission's  rules  sets  forth  the 
 newspaper/  broadcast  cross-  ownership  rule.  That  section  states: 

 No  license  for  an  AM,  FM  or  TV  broadcast  station  shall  be  granted  to  any  party 
 (including  all  parties  under  common  control)  if  such  party  directly  or  indirectly 
 owns,  operates  or  controls  a  daily  newspaper  and  the  grant  of  such  license  will 
 result  in:  (1)  The  predicted  or  measured  2  mV/  m  contour  of  an  AM  station, 
 computed  in  accordance  with  73.183  or  73.186,  encompassing  the  entire 
 community  in  which  such  newspaper  is  published;  or  (2)  The  predicted  1  mV/  m 
 contour  for  an  FM  station,  computed  in  accordance  with  73.313,  encompassing 
 the  entire  community  in  which  such  newspaper  is  published;  or  (3)  The  Grade  A 
 contour  of  a  TV  station,  computed  in  accordance  with  73.684,  encompassing  the 
 entire  community  in  which  such  newspaper  is  published.  183 

 80.  The  Commission  adopted  the  newspaper/  broadcast  cross-  ownership  rule  in 
 1975.  184  Like  all  of  the  Commission's  cross-  ownership  and  multiple  ownership  rules  in  the 
 broadcast  context,  the  newspaper/  broadcast  cross-  ownership  rule  rests  on  "the  twin  goals 
 of  promoting  diversity  of  viewpoints  and  economic  competition."  185  In  adopting  the  rule, 
 the  Commission  made  clear  that  its  diversity  goal  is  paramount;  sometimes  competition 
 must  "yield  .  .  .  to  the  even  higher  goals  of  diversity  and  the  delivery  of  quality 

 183  47  C.  F.  R.    73.3555(  d). 
 184  Amendment  of  Sections  73.34,  73.240,  and  73.636  of  the  Commission's  Rules  Relating  to 
 Multiple  Ownership  of  Standard,  FM,  and  Television  Broadcast  Stations,  Docket  No.  18110,  Second 
 Report  and  Order  in  Docket  18110,  50  FCC  2d  1046  (1975),  recon.  53  FCC  2d  589  (1975),  aff'd  sub  nom. 
 FCC  v.  National  Citizens  Committee  for  Broadcasting,  436  U.  S.  775  (1978). 

 185  50  FCC  2d  at  1074. 
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 broadcasting  service  to  the  American  people."  186  The  Commission  explained  that 
 diversification  of  ownership  promoted  diversification  of  viewpoint  in  that  "it  is  unrealistic 
 to  expect  true  diversity  from  a  commonly  owned  station-  newspaper  combination.  The 
 divergence  of  their  viewpoints  cannot  be  expected  to  be  the  same  as  if  they  were 
 antagonistically  run."  187  Thus,  the  Commission  determined  that,  as  a  general  rule,  granting 
 a  broadcast  license  to  an  entity  in  the  same  community  in  which  the  entity  also  publishes  a 
 newspaper  would  harm  local  diversity,  and  should  be  prohibited.  188  The  Commission  did 
 not  foreclose,  however,  waiver  requests  under  certain  circumstances,  189  although  it  has 
 only  granted  three  waiver  requests  on  a  permanent  basis.  190  In  Fox  and  Field 
 Communications,  essentially,  former  owners  of  a  newspaper  were  reacquiring  ownership 
 and,  accordingly,  new  broadcast/  newspaper  combinations  were  not  being  created. 
 Additionally,  in  Fox  the  Commission  found  that  without  a  waiver  there  was  substantial 
 risk  to  the  continued  viability  of  the  New  York  Post  newspaper.  In  Columbia  Montour,  a 
 waiver  was  granted  because  there  were  documented,  unsuccessful  efforts  to  sell  the 
 broadcast  station  separately,  the  broadcast  station  was  a  financially  troubled  small  AM 
 station,  the  common  ownership  would  only  involve  a  newspaper  and  a  small  AM  station, 
 there  was  already  a  high  level  of  media  diversity  in  the  market  where  the  facilities  were 
 located,  the  AM  station  was  not  a  significant  competitive  force  in  the  market,  and  the 
 proposed  combination  was  unlikely  to  have  an  adverse  effect  on  media  competition  in  the 
 market 

 81.  In  1978,  the  Supreme  Court,  in  FCC  v.  National  Citizens  Committee  for 
 Broadcasting,  191  upheld  the  Commission's  rules  and  waiver  policies  in  their  entirety.  The 

 186  Id.  at  1074. 

 187  Id.  at  1079-  1080. 
 188  Id.  at  1075. 
 189  The  circumstances  are:  (1)  where  there  is  an  inability  to  dispose  of  an  interest  in  order  to 
 conform  to  the  rules;  (2)  where  the  only  sale  possible  is  at  an  artificially  depressed  price;  (3)  where 
 separate  ownership  and  operation  of  the  newspaper  and  the  station  cannot  be  supported  in  the  locality; 
 and  (4)  where,  for  whatever  reason,  the  purposes  of  the  rule  would  be  disserved  by  divestiture.  50  FCC  2d 
 at  1085. 

 190  Fox  Television  Stations  Inc.,  8  FCC  Rcd  5341,  5349  (1993);  aff'd  sub  nom.  Metropolitan  Council 
 of  NAACP  Branches  v.  FCC,  46  F.  3d  1154  (D.  C.  Cir.  1995);  Field  Communications  Corp.,  65  FCC  2d 
 959  (1977);  Columbia  Montour  Broadcasting  Co.,  Inc.,  13  FCC  Rcd  13007  (1998). 

 191  FCC  v.  National  Citizens  Committee  for  Broadcasting,  supra. 
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 Supreme  Court  found  the  Commission's  diversity  goal  an  important  public  policy  that 
 furthered  the  First  Amendment  values  of  public  access  to  diverse  and  antagonistic  sources 
 of  information.  192  Although  the  Supreme  Court  noted  the  arguments  of  opponents  of  the 
 rule  to  the  contrary,  it  stated  that  notwithstanding  the  inconclusiveness  of  the  rulemaking 
 record,  the  Commission  acted  rationally  in  finding  that  diversification  of  ownership  would 
 enhance  the  possibility  of  achieving  greater  diversity  of  viewpoints."  193  The  Supreme 
 Court  approvingly  cited  the  lower  court's  observation  that  [  d]  iversity  and  its  effects  are  .  . 
 .  elusive  concepts,  not  easily  defined  let  alone  measured  without  making  qualitative 
 judgments  objectionable  on  both  policy  and  First  Amendment  grounds.  194  It  also 
 confirmed  the  Commissions  opinion  in  the  Second  Report  and  Order  in  Docket  18110 
 that  "'it  is  unrealistic  to  expect  true  diversity  from  a  commonly-  owned  station-  newspaper 
 combination.  The  divergency  of  their  viewpoint  cannot  be  expected  to  be  the  same  as  if 
 they  were  antagonistically  run.  '"  195  The  Supreme  Court  noted  the  availability  of  waivers  to 
 underscore  the  reasonableness  of  the  rule.  196 

 82.  For  several  years  in  the  1980s  and  early  1990s,  Congress  precluded  the 
 Commission  from  spending  authorized  funds  "to  repeal,  retroactively  apply  changes  in,  or 
 to  begin  or  continue  a  reexamination  of  the  rules  and  the  policies  established  to 
 administer"  the  newspaper/  broadcast  cross-  ownership  rule.  197  In  the  Commission's  1994 
 appropriation,  however,  Congress  provided  that  the  Commission  could  amend  policies 
 with  respect  to  waivers  of  the  newspaper/  broadcast  cross-  ownership  rule  as  it  applied  to 
 radio.  198  Subsequently,  Congress  dropped  all  restrictive  language  concerning  the  rule 

 192  Id.  at  795. 

 193  Id.  at  796. 
 194  Id.  at  796-  97,  citing  181  U.  S.  App.  D.  C.  at  24,  555  F.  2d  at  961. 
 195  Id.  at  797,  citing  Second  Report  and  Order  in  Docket  18110,  50  FCC  2d  1046,  1079-  80  (1975). 

 196  Id.  at  802  n.  20. 
 197  See,  e.  g.,  Department  of  Justice  and  Related  Agencies,  Appropriations  Act,  1993,  Pub.  L.  No. 
 102-  395,  106  Stat.  1828  (1992).  These  appropriations  restrictions  on  eliminating  the  rule  were  continued 
 in  effect  through  subsequent  appropriations  legislation  and  continuing  resolutions  that  funded  the  agency 
 until  April  26,  1996,  when  a  budget  was  enacted.  See  Omnibus  Consolidated  Rescissions  and 
 Appropriations  Act  of  1996,  Pub.  L.  No.  104-  134,  110  Stat.  1321  (1996). 

 198  Departments  of  Commerce,  Justice,  and  State,  the  Judiciary,  and  Related  Agencies 
 Appropriations  Act,  1994,  Pub.  L.  No.  103-  121,  107  Stat.  1153,  1167  (1993). 
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 from  the  Commission's  appropriations,  and  thus  removed  the  statutory  ban  on  the 
 Commission's  review  of  the  rule  itself.  199 

 83.  Although  the  Telecommunications  Act  of  1996  addresses  various  broadcast 
 cross-  ownership  issues,  it  does  not  address  newspaper/  broadcast  cross-  ownership  issues; 
 indeed,  the  legislative  history  of  that  Act  reveals  that  the  House  of  Representatives 
 explicitly  considered  and  rejected  changes  to  the  newspaper/  broadcast  cross-  ownership 
 rule.  200  Thus,  while  the  Commission  now  has  the  authority  and  obligation  to  reevaluate 
 the  newspaper/  broadcast  cross-  ownership  rule,  and  its  policy  regarding  waivers  thereof, 
 there  is  no  explicit  Congressional  guidance  on  how  that  authority  should  be  exercised. 
 However,  we  believe  that  there  may  be  certain  circumstances  in  which  the  rule  may  not  be 
 necessary  to  achieve  the  rules  public  interest  benefits.  We,  therefore,  will  initiate  a 
 rulemaking  proceeding  to  consider  tailoring  the  rule  accordingly. 

 84.  As  a  result  of  issues  raised  in  the  merger  of  The  Walt  Disney  Company  and 
 Capital  Cities/  ABC,  Inc.,  201  in  September  1996  we  issued  a  Notice  of  Inquiry  soliciting 
 comment  on  the  possible  revision  of  our  waiver  policy  as  to  newspaper/  radio 
 combinations.  202  In  that  Notice  we  asked  whether  we  should  revise  our  waiver  policy  in 
 ways  that  might  make  it  less  stringent  and/  or  more  objective,  such  as  by  adopting  a  voice 
 count  test. 

 85.  Subsequently,  in  the  instant  proceeding,  we  solicited  comment  on  whether  the 
 overall  newspaper/  broadcast  cross-  ownership  rule  should  be  retained,  modified  or 
 eliminated.  203  In  the  biennial  review  NOI  we  expressed  the  view  that  permitting  the  owner 

 199  Omnibus  Consolidated  Rescission  and  Appropriations  Act  of  1996,  Pub.  L.  104-  134,  110  Stat. 
 1321  (1996). 

 200  141  Cong.  Rec.  E-  1571  (August  1,  1995). 

 201  Capital  Cities/  ABC,  Inc.,  11  FCC  Rcd  5841  (1996). 
 202  Notice  of  Inquiry  in  MM  Docket  No.  96-  197,  11  FCC  Rcd  13003  (1996). 
 203  NOI,  supra  at  11288.  During  the  pendency  of  the  newspaper/  radio  waiver  policy  proceeding,  the 
 Newspaper  Association  of  America  filed  a  petition  for  rulemaking  to  eliminate  the  newspaper/  broadcast 
 cross-  ownership  rule.  See  Newspaper  Association  of  America,  Petition  for  Rulemaking  in  the  Matter  of 
 Amendment  of  Section  73.3555  of  the  Commission's  Rules  to  Eliminate  Restrictions  on 
 Newspaper/  Broadcast  Station  Cross-  Ownership  (filed  April  27,  1997).  In  our  NOI  in  the  instant 
 proceeding,  we  stated  that  we  would  incorporate  NAA's  petition  in  this  proceeding,  and  invited  comment 
 on  it.  Id.  at  11286.  Additionally,  on  August  23,  1999,  NAA  filed  an  Emergency  Petition  for  Relief.  This 
 petition,  like  NAAs  prior  Petition  for  Rulemaking,  argues  in  favor  of  repeal  of  the  newspaper/  broadcast 
 cross-  ownership  rule,  although  in  this  pleading  NAAs  arguments  are  based  in  part  on  the  Commissions 
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 of  a  broadcast  TV  or  radio  station  to  own  a  newspaper,  or  visa  versa,  could  give  a 
 common  owner  the  market  power  to  unilaterally  raise  local  radio,  television,  and/  or 
 newspaper  advertising  rates.  204  However,  we  also  expressed  the  belief  that  the  broadcast 
 media  and  newspapers  were  not  likely  to  compete  in  the  markets  for  delivered 
 programming  or  program  production  and,  accordingly,  elimination  of  the  rule  would  likely 
 not  have  adverse  competitive  impact  in  these  markets.  205  We  asked  for  comment  on 
 alternatives  to  elimination  of  the  rule  and  other  possible  economic  effects  from  such 
 elimination  (e.  g.,  benefits  to  the  public  from  efficiencies  to  be  realized  from  joint 
 operations).  206  Finally,  we  solicited  comment  on  the  effects  elimination  of  the  rule  might 
 have  on  our  diversity  concerns  and  specifically  solicited  comment  on  the  arguments  made 
 in  a  Petition  for  Rulemaking  filed  by  the  Newspaper  Association  of  America  seeking 
 repeal  of  the  rule.  207 

 2.  Comments 
 86.  Opponents  of  the  rule  claim  that  the  Commission  has  never  empirically 
 demonstrated  that  the  rule  furthers  its  competition  and  diversity  objectives.  208  In  any 
 event,  they  assert,  media  markets  are  dramatically  more  competitive  and  diverse  now  than 
 when  the  Commission  adopted  the  rule,  such  that  the  rule  is  no  longer  in  the  public 
 interest,  209  and  perhaps  is  even  unconstitutional  on  First  Amendment  or  other  grounds.  210 

 action  in  the  TV  Ownership  Order.  As  with  the  pleadings  filed  by  Fox  and  Viacom,  see  supra  n.  76,  this 
 pleading  will  be  treated  as  a  late-  filed  comment  and  not  considered  in  this  proceeding.  Rather,  we  will 
 include  these  comments  in  the  record  of  the  2000  biennial  review. 

 204  Id.  at  11288. 

 205  Id.  at  11288-  89. 
 206  Id.  at  11288-  89. 
 207  Id.  at  11289-  90. 

 208  See,  e.  g.,  Lee  Enterprises  Comments  at  3-  4;  NAA  Comments  at  17. 

 209  See,  e.  g.,  ABC  Comments  at  26-  27;  ALTV  Comments  at  36;  Lee  Enterprises  Comments  at  4; 
 NAA  Comments  at  17;  Gregory  Sidak  Comments  at  8-  11. 

 210  Elyria/  Lorain  Comments  at  16-  17;  Freedom  of  Expression  Comments  at  22-  23;  Hearst 
 Comments  at  31;  Gregory  Sidak  Comments  at  45-  61;  Media  Institute  Comments  at  11-  13;  NAA 
 Comments  at  83-  84;  Tribune  Comments  at  14-  15;  West  Virginia  Radio  Comments  at  14  (all  First 
 Amendment  grounds).  See  also  Cox/  Media  General  Comments  at  25-  29  (equal  protection  grounds). 
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 Opponents  explain  that  the  efficiencies  of  grandfathered  combinations  have  enabled  them 
 to  air  more  extensive  and  in-  depth  news  and  public  affairs  programming  than  their 
 competitors,  and  to  develop  new  media  ventures,  and  therefore  suggest  that  the 
 efficiencies  of  combinations  promote  outlet  diversity.  211  They  claim  that  efficiencies  are 
 better  realized  through  combinations  than  non-  attributable  joint  ventures,  212  and  are  not 
 driven  by  consolidation  of  content  or  editorial  decisions  and  so  do  not  compromise 
 viewpoint  diversity.  213  Opponents  also  contend  that  combinations  would  not  affect 
 competition  in  the  advertising  market,  because  the  market  share  of  newspapers  is 
 overstated  in  that  it  includes  classified  advertising,  a  market  in  which  broadcast  radio  and 
 television  do  not  compete.  214  For  these  reasons,  many  commenters  urged  the  Commission 
 to  repeal  the  newspaper/  broadcast  cross-  ownership  rule,  or  modify  it  to  allow 
 combinations  if  a  certain  number  of  independent  voices  remain  after  consummation  of  the 
 transaction.  215 

 87.  Proponents  of  the  rule  counter  that  many  of  the  new  media  outlets,  such  as  the 
 Internet,  OVS  and  DBS,  do  not  add  to  viewpoint  diversity  on  the  local  level.  216  They  also 
 point  out  that  new  programs  by  the  same  broadcasters  do  not  add  to  viewpoint  diversity.  217  Rule  proponents  also  state  that  the  rule  does  not  prohibit  all  combinations, 

 211  A.  H.  Belo  Comments  at  11-  13;  Chronicle  Comments  at  16;  Chronicle  Reply  Comments  at  2.  See 
 also  Hearst  Reply  Comments  at  6-  8;  Hearst/  Argyle  Reply  Comments  at  2-  5;  NAB  Reply  Comments  at  9- 
 12.  Stated  another  way,  the  rule  discourages  optimal  performance  and  stifles  new  voices.  ALTV  Reply 
 Comments  at  25-  26;  NAB  Comments  at  9-  10  (noting  that  combinations  could  save  distressed  newspapers 
 and  therefore  facilitate  diversity);  Tribune  Comments  at  60-  65. 

 212  Chronicle  Comments  at  25-  27;  Hearst  Reply  Comments  at  5-  6. 

 213  Hearst  Comments  at  16-  20.  Cf.  Lee  Enterprises  Comments  at  3-  5  (explaining  unlikelihood  that 
 combination  would  consolidate  viewpoints  because  reporters  and  viewers  would  object);  NAB  Comments 
 at  7-  8  (observing  that  most  grandfathered  combinations  have  kept  operations  separate  because 
 unprofitable  to  combine);  Schermer  Reply  Comments  at  1-  4  (stating  that  consumers  will  obtain  news  from 
 other  sources  if  combination  denigrated  journalistic  integrity). 

 214  Hearst  Comments  at  18-  19;  NAA  Petition  at  36. 

 215  Elyria/  Lorain  Comments  at  19-  20  (Commission  should  allow  newspaper/  radio  combinations  if 
 two  independent  voices  would  remain);  Freedom  of  Expression  Comments  at  25-  26  (two  voices);  Gannett 
 Comments  at  38  (thirty  voices);  West  Virginia  Radio  Comments  at  21-  22  (two  voices). 

 216  CME  Comments  at  26-  28. 

 217  CME  Comments  at  26-  28;  OCC/  UCC  Comments  at  6-  7. 
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 but  rather  only  those  in  the  same  market;  moreover,  existing  waiver  policies  allow 
 combinations  where  a  broadcaster  or  newspaper  publisher  is  failing  and  cannot  survive  but 
 for  the  combination.  218  Proponents  also  state  that  the  broadcast  and  newspaper  industries 
 are  already  highly  concentrated,  219  and  that  efficiencies  could  be  realized  from  joint 
 ventures  rather  than  attributable  combinations.  220  Proponents  further  claim  that 
 newspapers  dominate  the  local  advertising  market,  particularly  in  smaller  markets,  such 
 that  combinations  would  harm  competition  in  that  market.  221 

 3.  Discussion 
 88.  We  believe  the  newspaper/  broadcast  cross-  ownership  rule  continues  to  serve 
 the  public  interest  because  it  furthers  our  important  and  substantial  policy  of  viewpoint 
 diversity.  We  therefore  conclude  that,  as  a  general  matter,  the  rule  should  be  retained. 
 However,  we  believe  that  there  may  be  circumstances  in  which  the  rule  may  not  be 
 necessary  to  achieve  its  intended  public  interest  benefits.  We,  therefore,  will  initiate  a 
 rulemaking  proceeding  to  consider  tailoring  the  rule  accordingly. 

 89.  Effects  on  Diversity.  While  the  media  marketplace  has  changed  since  we 
 adopted  the  rule,  we  find  that  the  changes  are  insufficient  to  justify  repeal  and  we  will 
 need  to  gather  a  more  complete  record  to  determine  what  modifications  may  be 
 appropriate.  First,  many  of  the  new  media  outlets  do  not  yet  appear  to  be  substitutes  for 
 broadcast  stations  and  newspapers  on  the  local  level  for  diversity  purposes.  222  As  we  have 
 stated  in  the  biennial  review  NOI  and  elsewhere,  we  are  most  concerned  with  viewpoint 
 diversity  at  the  local  level.  This  is  because  "[  m]  onopolization  on  the  means  of  mass 
 communication  in  a  locality  assures  the  monopolist  control  of  information  received  by  the 
 public  and  based  upon  which  it  makes  elective,  economic,  and  other  choices."  223  New 

 218  Independent  Free  Papers  Comments  at  2-  4. 

 219  CME  Comments  at  26-  28. 
 220  Independent  Free  Papers  Comments  at  2-  4. 
 221  Id.  at  3-  4. 
 222  See,  e.  g.,  CME  Comments  at  26-  28;  Independent  Free  Papers  Comments  at  1.  See  also  Black 
 Citizens  for  a  Fair  Media  Comments  in  MM  Docket  No.  96-  197  at  18-  19. 

 223  Further  Notice  of  Proposed  Rule  Making  in  MM  Docket  Nos.  92-  221  and  87-  8,  10  FCC  Rcd 
 3524,  3559  (1995)(  hereinafter  TV  Further  Ownership  Notice). 
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 outlets  such  as  DBS  and  MMDS,  however,  typically  do  not  provide  locally  originated 
 programming.  In  addition,  even  though  cable  systems  may  originate  local  programming, 
 they  are  required  to  dedicate  PEG  channels  only  if  their  franchise  authorities  require  them 
 to  do  so,  and  to  provide  leased  access  channels  only  as  a  function  of  their  activated 
 channels.  224  There  is  no  requirement  that  the  material  offered  on  cable  access  channels  be 
 locally  originated  or  oriented.  By  contrast,  as  part  of  their  public  interest  obligations, 
 broadcasters  are  required  to  air  programming  that  is  responsive  to  issues  facing  their 
 communities  of  license,  and,  although  they  are  not  required  to  do  so,  local  daily 
 newspapers  typically  cover  local  issues,  endorse  local  candidates,  and  provide  a  platform 
 for  the  presentation  of  local  opinion.  225  Thus,  the  fact  remains  that  broadcast  services,  in 
 particular  broadcast  television,  and  newspapers  have  been  and  continue  to  be  the  dominant 
 sources  of  local  news  and  public  affairs  information  in  any  given  market.  226  Importantly, 
 while  the  number  of  broadcast  stations  has  increased  in  the  past  several  years,  the  number 
 of  daily  newspapers  has  decreased.  227  On  one  hand,  some  commenters  argue  that  this 
 warrants  the  Commission  allowing  newspapers  to  combine  with  local  broadcast  stations  in 
 order  to  realize  the  economies  of  joint  operation,  helping  them  to  preserve  their 
 newspaper.  On  the  other  hand,  to  the  extent  that  this  suggests  that  the  survival  of  some 
 newspapers  may  depend  on  their  joint  operation  with  local  broadcast  stations,  we  have  a 
 waiver  standard  that  can  accommodate  such  instances.  228 

 90.  Second,  we  note  that  not  all  of  the  new  media  in  a  given  market  are  available 
 to  all  consumers  in  the  market  to  the  same  extent  as  broadcast  services  and  newspapers. 
 Broadcast  radio  and  TV  are  available  free  of  charge  to  anyone  who  makes  an  investment 
 in  receiving  equipment,  and  much  of  the  public  have  such  equipment;  for  example,  98.2% 

 224  47  U.  S.  C.    531,  532. 
 225  TV  Further  Ownership  Notice,  supra  at  3557. 
 226  Id.  at  3555-  57.  The  Commission  has  distinguished  broadcast  television  from  radio  as  having 
 more  visual  impact  and  serving  more  people  as  a  primary  source  of  news.  See,  e.  g.,  TV  Further 
 Ownership  Notice,  supra.  at  3557-  3558.  Almost  70%  of  American  adults  surveyed  indicated  that  they  use 
 television  as  their  primary  source  of  news.  The  Roper  Organization,  Americas  Watching:  Public 
 Attitudes  Toward  Television,  1997,  (New  York,  1998). 

 227  Independent  Free  Papers  Comments  at  5  (noting  that  in  1975,  there  were  1,756  daily  newspapers 
 in  the  United  States,  and  in  1997,  there  were  1,520). 

 228  See  Fox  Television  Stations  Inc.,  8  FCC  Rcd  5341(  1993),  affd  sub  nom.  Metropolitan  Council  of 
 NAACP  Branches  v.  FCC,  46  F.  3d  1154  (D.  C.  Cir.  1995). 
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 of  Americans  own  a  TV  set.  229  Similarly,  newspapers  are  available  to  anyone  for  a 
 nominal  charge.  DBS,  MMDS,  and  the  Internet,  however,  are  available  only  to  those  who 
 both  purchase  or  rent  equipment  and,  except  in  the  case  of  the  Internet  where  some 
 Internet  Service  Providers  offer  Internet  connections  free  of  direct  charge,  subscribe  to  a 
 service,  the  monthly  fees  for  which  services  are  typically  several  times  the  cost  of  a 
 newspaper  subscription.  230  In  addition,  in  the  case  of  the  Internet,  the  sunk  cost  of  a 
 computer  and  the  software  necessary  to  browse  the  Internet  is  typically  several  times  that 
 of  a  radio  or  TV. 

 91.  Third,  although  some  grandfathered  combinations  report  that  efficiencies  they 
 have  derived  therefrom  have  enabled  them  to  air  more  news  and  public  affairs 
 programming  than  their  competitors  such  additional  programming  does  not  necessarily 
 enhance  our  policy  goal  of  viewpoint  diversity  if  the  additional  programs  all  come  from 
 the  same  source.  The  Commission  has  previously  explained  that  its  cross-  ownership  and 
 multiple  ownership  rules  encourage  "outlet"  and  "source"  diversity  as  an  indirect  means  to 
 achieve  viewpoint  diversity:  231 

 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.  232 

 92.  Thus,  as  the  Commission  stated  when  it  adopted  the  newspaper/  broadcast 
 cross-  ownership  rule:  "it  is  unrealistic  to  expect  true  diversity  from  a  commonly-  owned 
 newspaper  combination.  The  divergence  of  their  viewpoints  cannot  be  expected  to  be  the 

 229  National  Association  of  Broadcasters  Internet  website  at:  http:  www.  nab.  org/  irc/  Virtual/  faqs.  asp 
 (citing  National  Bureau  of  Advertising,  TVB  Basics    Cyber  Edition  which  cites  Nielsen  Media 
 Research). 

 230  For  example,  the  Washington  Post  advertises  a  monthly  subscription  for  $2.  65  a  week  or, 
 approximately,  $10.60  per  month,  while  Internet  service  can  be  obtained  for  free  (supported  by 
 advertising)  or  by  monthly  subscription  for  approximately  $15-  20.  DirecTV  can  cost  from  approximately 
 $20  per  month  to  over  $80  per  month,  depending  on  the  package  of  programming  ordered. 

 231  TV  Further  Ownership  Notice,  supra.  at  3549-  3550.  "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."  10  FCC  Rcd.  at  3549-  3550. 

 232  Id.  at  3550-  3551. 
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 same  as  if  they  were  antagonistically  run."  233 
 93.  We  also  emphasize  that  media  markets  are  undergoing  significant  changes, 
 occasioned  by  the  Telecommunications  Act  of  1996  and  our  decision  to  relax  other  cross-ownership 
 and  multiple  ownership  rules  and  waiver  policies.  The  Telecommunications 
 Act  directed  the  Commission  to  modify  its  radio  ownership  rules.  Between  the  enactment 
 of  the  Telecom  Act  and  March  2000,  the  number  of  radio  station  owners  declined  by  22 
 percent  from  approximately  5,100  owners  in  March  1996,  to  about  4,000  in  March  2000. 
 In  addition,  we  have  recently  amended  our  "TV  duopoly"  and  "one-  to-  a-  market"  rules  and 
 waiver  policies  and  we  propose  other  changes  to  still  other  broadcast  ownership  rules  or 
 policies  as  a  result  of  this  biennial  review.  The  response  of  the  market  to  these  rule 
 changes  will  provide  us  concrete,  empirical  information  about  their  impact  on  our  public 
 policy  goals  for  use  in  our  future  biennial  reviews.  Therefore,  the  dominance  of  broadcast 
 services  and  newspapers  in  providing  local  news  and  public  affairs  information,  may 
 suggest  that  a  measured  approach  to  modifying  the  newspaper/  broadcast  cross-  ownership 
 rule  is  appropriate  at  this  time. 

 94.  Effects  on  Competition.  With  respect  to  competition,  we  also  emphasize  that 
 the  record  was  not  clear  on  several  points.  First,  it  was  not  clear  that  grandfathered 
 combinations  derived  efficiencies  only  from  co-  located  combinations.  For  example, 
 Chronicle  provided  information  that  its  combination  aired  more  news  and  public  affairs 
 programming  than  its  competitors  in  a  given  market,  but  the  combination  that  produced 
 these  benefits  included  both  co-  located  and  non-  co-  located  broadcast  stations  and 
 newspapers.  The  newspaper/  broadcast  cross-  ownership  rule  only  prohibits  combinations 
 in  the  same  market.  Second,  it  was  not  clear  that  the  efficiencies  grandfathered 
 combinations  derived  could  not  be  realized  from  non-  attributable  joint  ventures.  Managers 
 of  existing  newspaper/  broadcast  combinations,  as  well  as  other  commenters,  report  that 
 the  broadcast  station  and  the  newspaper  keep  separate  news  staffs  in  combination 
 situations  because  the  combination  does  not  derive  efficiencies  from  consolidation  of  such 
 staff.  Accordingly,  it  does  not  appear  that  mergers  of  newspapers  and  broadcast  stations 
 would  produce  such  efficiencies.  Third,  it  was  not  clear  that  the  efficiencies  of 
 newspaper/  broadcast  combinations  produced  any  meaningful  benefits  for  advertisers,  and 
 therefore  for  viewers  as  consumers  of  the  advertisers'  goods.  As  indicated  above,  some 
 commenters  explain  that  grandfathered  combinations  have  provided  more  news  and  public 
 affairs  programming,  and  one  could  extrapolate  that  this  translates  into  more  advertising 
 and  viewing  options.  There  was  no  evidence,  however,  that  any  of  these  additional 
 options  translated  into  benefits  for  advertisers  in  the  form  of  reduced  rates,  or 
 corresponding  benefit  for  viewers  in  the  form  of  reduced  prices  for  advertised  products 

 233  50  FCC  2d  at  1079-  1080. 
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 and  services.  Accordingly,  we  conclude  that  the  newspaper/  broadcast  cross-  ownership 
 rule  continues  to  provide  important  public  interest  benefits  and  that  its  elimination  would 
 not  necessarily  provide  any  offsetting  benefits  to  competition. 

 95.  Notwithstanding  our  general  conclusion  that  the  rule  should  be  retained,  we 
 recognize  that  there  may  be  situations  in  which  the  rule  may  not  be  necessary  to  protect 
 the  public  interest  in  diversity  and  competition.  We  wish  to  examine  in  greater  detail  such 
 situations.  There  may  be  instances,  for  example,  in  which,  given  the  size  of  the  market  and 
 the  size  and  type  of  the  newspaper  and  broadcast  outlet  involved,  sufficient  diversity  and 
 competition  would  remain  if  a  newspaper/  broadcast  combination  were  allowed.  While  the 
 record  contains  several  proposals  for  tailoring  the  rule  to  address  this  issue,  we  believe 
 that  a  more  complete  record  can  and  should  be  developed  regarding  the  circumstances  in 
 which  the  rule  may  not  be  necessary  to  achieve  its  intended  public  interest  benefits.  We 
 will  examine  whether  the  rule  needs  to  be  tailored  to  address  contemporary  market 
 conditions.  We  will  issue  a  notice  of  proposed  rulemaking  seeking  comment  on  these  and 
 other  potential  modifications  of  our  rule.  While  we  generally  believe  that  the 
 newspaper/  broadcast  cross-  ownership  rule  should  be  retained,  this  rulemaking  will  ensure 
 that  the  rule  is  tailored  to  cover  only  those  circumstances  in  which  it  is  necessary  to 
 protect  the  public  interest. 

 96.  Additional  Matter.  In  1996,  the  Tribune  Company,  which  publishes  a 
 newspaper  in  Fort  Lauderdale,  Florida,  agreed  to  merge  with  Renaissance 
 Communications  Corporation,  which  owned  six  television  stations  including  one  in  Miami, 
 Florida.  Although  Tribune  sought  a  permanent  waiver  of  the  newspaper/  broadcast  cross-ownership 
 rule  to  permit  this  combination,  the  Commission  granted  the  license  transfer 
 subject  to  the  condition  that  Tribune  divest  itself  of  either  the  Ft.  Lauderdale  newspaper  or 
 the  Miami  television  station  within  one  year,  expiring  March  22,  1998.  On  March  6, 
 1998,  Commission  staff  granted  an  extension  of  Tribunes  temporary  waiver  subject  to  the 
 review  of  the  newspaper/  broadcast  cross-  ownership  in  the  instant  proceeding  and  required 
 that  it  come  into  compliance  within  six  months  of  the  completion  of  the  1998  biennial 
 review  (unless,  of  course,  Tribunes  combination  was  in  compliance  with  any  new  cross-ownership 
 rule  adopted  as  a  consequence  of  that  review).  234  We  explained  that  an 
 extension  was  appropriate  because  it  would  be  unduly  harsh  for  Tribune  not  to  receive 
 further  interim  relief  given  the  confusion  that  may  have  resulted  from  the  Commissions 
 initial  waiver  decision  with  respect  to  its  policy  on  interim  waivers  pending  rulemaking. 
 We  also  stated  that  an  extension  would  not  so  compromise  our  diversity  and  competition 
 interests  as  to  outweigh  the  substantial  equitable  considerations  favoring  the  grant.  235 

 234  Stockholders  of  Renaissance  Communications  Corporation,  13  FCC  Rcd  4717  (1998). 
 235  Id.  at  4718. 
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 Given  our  decision  here  to  issue  a  Notice  of  Proposed  Rulemaking  seeking  comment  on 
 possible  modifications  of  the  newspaper/  broadcast  cross-  ownership  rule,  and  the  unusual 
 circumstances  that  led  to  the  prior  extension  of  Tribunes  waiver,  236  we  will  extend  that 
 temporary  waiver,  under  the  same  terms  and  conditions  now  applicable,  until  the 
 completion  of  the  rulemaking. 

 E.  Cable/  Television  Cross-  Ownership  Rule 
 1.  Regulatory  History 
 97.  Section  76.501(  a)  of  the  Commission's  rules  sets  forth  the  "cable/  TV  cross-ownership 
 rule."  That  section  states: 

 No  cable  television  system  (including  all  parties  under  common  control)  shall 
 carry  the  signal  of  any  television  broadcast  station  if  such  system  directly  or 
 indirectly  owns,  operates,  controls,  or  has  an  interest  in  a  TV  broadcast  station 
 whose  predicted  Grade  B  contour  .  .  .  overlaps  in  whole  or  in  part  the  service 
 area  of  such  system  (i.  e.,  the  area  within  which  the  system  is  serving  subscribers).  237 

 The  Commission  adopted  the  cable/  TV  cross-  ownership  rule  in  1970.  238  In  doing  so, 
 the  Commission  noted  its  concerns  about  concentration  in  the  broadcast  industry,  239 
 and  stated  that  the  rule  would  further  the  Commission's  policy  favoring  diversity  of 
 control  over  local  mass  communications  media,  and  thereby  lead  to  diverse  sources  of 
 programming.  240  The  Commission  noted  that  it  wished  to  avoid  over-  concentration 

 236  We  note  particularly  the  withdrawal  of  the  waiver  opponents  opposition  to  the  joint  operation  as 
 long  as  Tribune  continues  to  operate  the  newspaper  and  television  station  separately  and  the  fact  that  we 
 have  found  the  joint  operation  does  not  so  compromise  our  diversity  and  competition  interests  as  to 
 outweigh  the  substantial  equitable  considerations  favoring  the  grant  of  an  interim  waiver. 

 237  47  CFR    76.501(  a). 

 238  Amendment  of  Part  74,  Subpart  K,  of  the  Commission's  Rules  and  Regulations  Relative  to 
 Community  Antenna  Television  Systems,  and  Inquiry  into  the  Development  of  Communications 
 Technology  and  Services  to  Formulate  Regulatory  Policy  and  Rulemaking  and/  or  Legislative  Proposals, 
 Docket  No.  18397,  Second  Report  and  Order,  23  FCC  2d  816  (1970),  recon.,  39  FCC  2d  377  (1973). 

 239  Second  Report  and  Order,  supra.  at  819-  820. 

 240  Id.  at  820. 
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 of  media  control.  241  On  reconsideration,  the  Commission  reiterated  that  its  "adoption 
 of  these  provisions  --  designed  to  foster  diversification  of  control  of  the  channels  of 
 mass  communication  --  was  guided  by  two  principal  goals,  both  of  which  have  long 
 been  established  as  basic  legislative  policies.  One  of  these  goals  is  increased 
 competition  in  the  economic  marketplace;  the  other  is  increased  competition  in  the 
 marketplace  of  ideas."  242 

 98.  Congress  codified  and  then  repealed  a  statutory  prohibition  on  cable/  TV 
 cross-  ownership.  On  October  30,  1984,  the  Cable  Communications  Policy  Act  of 
 1984  became  law.  243  Section  613(  a)(  1)  of  the  Cable  Act  of  1984  codified  the 
 cable/  TV  cross-  ownership  rule.  244  Section  202(  i)  of  the  Telecommunications  Act  of 
 1996,  however,  eliminated  section  613(  a)(  1)  of  the  Cable  Act  of  1984,  245  thereby 
 ending  the  statutory  bar  to  cable/  TV  cross-  ownership.  In  eliminating  the  bar, 
 however,  Congress  stated:  "The  conferees  do  not  intend  that  this  repeal  of  the 
 statutory  prohibition  should  prejudge  the  outcome  of  any  review  by  the  Commission 
 of  its  rules."  246  The  instant  proceeding  is  the  first  one  in  which  the  Commission  has 
 reviewed  the  rule  since  its  adoption. 

 99.  In  the  Biennial  Review  NOI  we  solicited  comment  on  the  cable/  TV  cross-ownership 
 rule.  Specifically  we  asked  for  comment  on  the  possible  effects  that  repeal 
 or  relaxation  of  the  rule  might  have  on  various  markets,  including  the  market  for 

 241  Id.  at  821. 
 242  Amendment  of  Part  74,  Subpart  K,  of  the  Commission's  Rules  and  Regulations  Relative  to 
 Community  Antenna  Television  Systems;  and  Inquiry  into  the  Development  of  Communications 
 Technology  and  Services  to  Formulate  Regulatory  Policy  and  Rulemaking  and/  or  Legislative  Proposals, 
 Memorandum  Opinion  and  Order,  39  FCC  2d  377,  391  (1973). 

 243  Pub.  L.  No.  98-  549,  98  Stat  2779  (1984). 

 244  Section  613(  a)(  1)  stated:  "It  shall  be  unlawful  for  any  person  to  be  a  cable  operator  if  such 
 person,  directly  or  through  1  or  more  affiliates,  owns  or  controls,  the  licensee  of  a  television  broadcast 
 station  and  the  predicted  grade  B  contour  of  such  station  covers  any  portion  of  the  community  served  by 
 such  operator's  cable  system."  The  Commission  found  no  need  to  modify  Section  76.501(  a)  of  its  Rules  as 
 a  result  of  this  codification.  Report  and  Order  in  MM  Docket  No.  84-  1296,  58  RR  2d  1,  14  (1985). 

 245  47  USC    533(  a)(  1). 

 246  H.  R.  Conf.  Rep.  No.  458,  104th  Cong.,  2d  Sess.  165  (1996). 
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 delivered  programming,  on  the  appropriate  scope  of  the  product  and  geographic 
 advertising  markets  in  which  cable  and  broadcast  television  compete,  and  on  whether 
 cable/  broadcast  television  combinations  could  exercise  monopsony  power  247  in  the 
 program  production  markets.  Additionally,  we  sought  comment  on  the  impact  on 
 diversity  of  both  the  increased  number  of  video  outlets  and  allowing  cable/  television 
 cross-  ownership. 

 2.  Comments 
 100.  Twelve  parties  commented  on  the  cable/  TV  cross-  ownership  rule;  seven 
 supported  retention  of  the  rule,  248  and  five  supported  repeal  or  modification.  249 
 Opponents  of  the  rule  note  that  relevant  markets  are  more  competitive  and  diverse  than 
 when  the  Commission  adopted  the  rule,  and  state  that  the  rule  no  longer  serves  the  public 
 interest,  250  and  perhaps  is  even  unconstitutional.  251  Opponents  explain  that  the  current 
 delivered  programming  market  now  includes  more  broadcast  television  stations,  DBS, 
 MMDS,  SMATV,  OVS,  VCRs,  and  even  the  Internet.  252  They  contend  that  the 
 advertising  market  is  competitive  and  that  the  market  share  of  broadcasters  is  significantly 
 larger  than  that  of  cable.  253  Opponents  also  suggest  that  the  program  production  market 
 would  not  be  affected  by  repeal  of  the  rule,  because  most  cable  systems  that  provide  local 
 programming  produce  it  themselves;  very  few  cable  systems  buy  syndicated  programming 
 for  their  own  local  channels.  Opponents  also  claim  that  carriage  and  channel  positioning 
 rules,  and  the  incentive  of  cable  operators  to  provide  their  customers  with  the  television 
 stations  that  they  desire  on  channel  positions  that  work  best  for  customers  ensure  that 
 cable/  TV  combinations  would  not  discriminate  in  favor  of  their  owned  stations.  254 

 247  We  defined  this  power  in  this  context  as  the  ability  of  the  cable/  television  combination  to 
 artificially  restrict  the  price  paid  for  programming.  NOI,  supra  at  11292-  93. 
 248  The  seven  commenters  are  ABC,  ALTV,  CME,  NASA,  NAB,  OCC/  UCC,  and  Univision. 

 249  The  five  commenters  are  Ameritech,  NBC,  NCTA,  Time  Warner,  and  Warner  Brothers. 
 250  See,  e.  g.,  NCTA  Comments  at  5-  12. 
 251  See,  e.  g.,  Time  Warner  Comments  at  6-  7;  Time  Warner  Reply  Comments  at  7. 
 252  NCTA  Comments  at  5-  6. 
 253  Id.  at  8. 
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 Opponents  further  suggest  that  repeal  of  the  cable/  TV  cross-  ownership  rule  would  not 
 impact  diversity.  They  explain  that  consumers  of  news  and  public  affairs  information  have 
 numerous  alternatives  from  which  to  choose,  and  they  point  out  that  cable  operators 
 provide  local  programming  through  leased-  access  and  PEG  channels,  and  in  many 
 instances  do  not  have  control  over  that  programming.  255  For  these  reasons,  opponents  of 
 the  rule  contend  that  its  economic  costs  outweigh  its  benefits;  256  some  claim  that  repeal 
 would  increase  competition  and  diversity  by  facilitating  the  development  of  new  broadcast 
 networks,  and  suggest  that  if  the  Commission  repeals  the  rule,  it  could  accomplish  its 
 competition  and  diversity  objectives  through  certain  conditions  and  safeguards.  257 

 101.  Proponents  of  the  rule  claim  that  the  rule  continues  to  serve  the  public 
 interest  because  cable  is  the  dominant  competitor  in  the  multichannel  video  programming 
 distribution  market,  and  thus  serves  as  a  "gatekeeper"  to  the  delivered  programming 
 market.  258  Proponents  also  contend  that  a  cable/  TV  combination  could  harm  competition 
 in  the  advertising  market  by  discriminating  in  favor  of  its  television  station  and  cable 
 programming  services,  manipulating  carriage  and  channel  positioning  and  offering  joint 
 advertising  rates,  realizing  economies  of  scale,  driving  competitors  out  of  the  market  and 
 frustrating  new  entrants.  259  Proponents  also  explain  that  our  carriage  and  channel 
 positioning  rules  are  not  sufficient  to  deter  anticompetitive  discriminatory  conduct  as  a 
 joint  owner  could  still  offer  joint  advertising  opportunities  and  joint  cross-  promotions 
 unavailable  to  other  competitors.  260  Additionally,  absent  the  cable/  TV  cross-  ownership 

 254  Id.  at  10;  Time  Warner  Comments  at  18.  See  also  NBC  Comments  at  17-  18  (contending  that 
 rule  was  motivated  by  concern  that  cable  operator  might  not  carry  programming  of  non-  affiliated 
 broadcast  station,  but  must-  carry  rules  address  this  and  have  been  affirmed  by  Supreme  Court). 

 255  NCTA  Comments  at  12-  13;  Time  Warner  Comments  at  16. 

 256  NCTA  Reply  Comments  at  8. 
 257  Ameritech  Comments  at  23;  Warner  Brothers  Reply  Comments  at  4,  8.  Additionally,  we  note 
 that  on  January  27,  2000,  the  WB  Television  Network  filed  Supplemental  Comments  and  a  Request  for 
 Leave  to  File.  The  Supplemental  Comments  argued  for  elimination  of  cable/  TV  cross-  ownership  rule. 
 We  will  treat  this  filing  in  accord  with  our  treatment  of  the  late-  filed  Fox  and  Viacom  comments,  as  set 
 forth  above. 

 258  ABC  Comments  at  29-  30;  NAB  Comments  at  15;  NAB  Comments  at  15;  NASA  Comments  at 
 15. 

 259  NASA  Comments  at  18. 

 260  ALTV  Comments  at  38;  NASA  Comments  at  18-  20;  OCC/  UCC  Comments  at  8;  Univision 
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 rule,  they  contend  that  there  would  be  no  structural  regulatory  impediment  to  combined 
 ownership  of,  for  example,  AT&  T/  TCI,  GE  and  NBC  by  a  single  entity,  creating  a 
 combination  with  unique  competitive  advantages.  261  Proponents  suggest  that  cable/  TV 
 combinations  would  compromise  diversity,  and  explain  that  a  combination  would  reduce 
 the  number  of  independent  sources  of  local  news.  262 

 3.  Discussion 
 102.  As  explained  more  fully  below,  we  agree  with  proponents  of  the  rule  that 
 it  continues  to  serve  the  public  interest  because  it  furthers  our  important  public  policies  of 
 fostering  competition  and  viewpoint  diversity.  The  cable/  TV  cross-  ownership  rule 
 promotes  competition  and  diversity  and  prevents  unfair  discrimination  against 
 competitors,  including  in  forms  not  covered  by  existing  law.  We  therefore  retain  the  rule. 

 103.  Effects  on  Competition.  We  conclude  that  the  rule  continues  to  serve  the 
 public  interest  because  it  furthers  our  goal  of  competition  in  the  delivered  video 
 programming  market.  263  This  market  includes  an  array  of  participants,  such  as  operators 
 or  providers  of  broadcast  television,  cable  systems,  DBS,  MMDS,  OVS,  SMATV,  and 
 possibly  even  the  Internet  and  videocassettes  for  VCRs.  Sixty-  seven  percent  of  American 
 television  households,  however,  subscribe  to  cable.  264  In  the  context  of  discussing  the 
 status  of  competition  in  the  market  for  the  delivery  of  multichannel  video  programming, 
 the  Commission  stated  in  its  most  recent  Cable  Competition  Report  that  "[  t]  he  market  for 
 the  delivery  of  video  programming  to  households  continues  to  be  highly  concentrated  and 
 characterized  by  substantial  barriers  to  entry.  265  Under  these  circumstances,  we  agree 
 with  proponents  of  the  rule  that  cable,  in  many  instances,  functions  as  the  "gatekeeper"  to 

 Comments  at  6-  14. 
 261  NASA  Comments  at  19. 
 262  CME  Comments  at  28-  29;  NASA  Comments  at  16;  OCC/  UCC  Comments  at  8.  CME  also 
 contends  that  a  cable/  TV  combination  would  have  an  incentive  to  discontinue  the  programming  of  local 
 news  altogether  on  the  cable  system  in  order  to  avoid  competition  with  its  broadcast  affiliate.  CME 
 Comments  at  28-  29. 

 263  As  discussed  below,  the  record  was  unclear  on  whether  the  rule  continues  to  serve  the  public 
 interest  as  a  result  of  competition  in  the  advertising  and  program  production  markets. 

 264  13  FCC  Rcd.  at  18. 

 265  Sixth  Cable  Report,  supra  at  1044. 
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 local  markets  for  delivered  video  programming.  266  As  commenters  point  out,  this  status 
 gives  cable  system  operators  both  the  incentive  and  the  means  to  discriminate  against  their 
 competitors  with  respect  to  such  core  issues  as  carriage  and  channel  positioning  267  as  well 
 as  in  areas  not  covered  by  statute  or  Commission  rule  such  as  joint  advertising  rates  and 
 promotions.  As  commenters  also  point  out,  a  cable/  TV  combination  would  have  even 
 greater  incentive  and  means  to  discriminate  against  others  and  in  favor  of  its  own 
 broadcast  affiliate  in  this  fashion,  and  both  the  broadcast  station  and  the  cable  system 
 would  stand  to  unfairly  benefit.  268 

 104.  The  record  indicates  that  current  carriage  and  channel  position  rules 
 prevent  some  of  the  discrimination  problems,  but  not  all  of  them.  For  example,  opponents 
 of  relaxing  the  rule  note  that  current  law  would  not  prevent  discrimination  through  joint 
 advertising  sales  and  rates  practices  and  joint  promotions  unavailable  to  competitors. 
 Additionally,  although  section  614(  b)(  6)  of  the  Communications  Act  entitles  a  local 
 commercial  television  station  to  be  carried  by  a  cable  system  on  the  same  channel  as  it 
 broadcasts  over  the  air,  269  Univision  describes  protracted  disputes  with  a  cable  system  in 
 securing  its  "on  air"  channel,  with  one  cable  system  shuffling  Univision's  channel  position 
 four  times  in  four  years.  270  Univision  also  claims  that  a  cable  system  abruptly  changed  the 
 channel  position  of  one  of  Univision's  stations  in  order  to  provide  that  position  to  the  cable 
 systems  own  local  news  channel.  271  Univision  further  claims  that  cable  system  operators 

 266  ALTV  Comments  at  38;  NAB  Comments  at  16;  Univision  Comments  at  8-  9. 

 267  ALTV  Comments  at  38;  NASA  Comments  at  18;  UCC  Comments  at  8;  Univision  Comments  at 
 10-  11,  14. 

 268  ALTV  Comments  at  38;  NASA  Comments  at  18;  Univision  Comments  at  12. 

 269  47  U.  S.  C.    614(  b)(  6). 
 270  Univision  reports  that  the  controversy  remains  protracted  because  although  the  Cable  Services 
 Bureau  recently  resolved  the  controversy  in  Univision's  favor,  the  cable  system  has  filed  a  petition  for 
 review  by  the  full  Commission.  Univision  Comments  at  10-  11.  In  its  Order  on  Reconsideration  (see 
 WXTV  License  Partnership,  G.  P.,  15  FCC  Rcd  3308  (2000)),  the  Commission  granted  reconsideration  as 
 to  four  of  the  twenty-  one  cable  systems  involved  but  agreed  with  the  Cable  Services  Bureau  that  channel 
 positioning  violations  had  occurred  with  regard  to  the  other  seventeen  cable  systems  and  that  a  forfeiture 
 proceeding  should  commence.  A  Notice  of  Apparent  Liability  for  $127,500  was  released  concurrently 
 with  the  Order  on  Reconsideration  (Notice  of  Apparent  Liability,  Cablevision  Systems  Corporation,  15 
 FCC  Rcd  3269  (2000)). 

 271  Id.  at  12-  13. 
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 sometimes  otherwise  delay  carriage  by  denying  that  they  receive  an  adequate  signal  from  a 
 station,  which  forces  the  broadcast  station  to  divert  resources  away  from  obtaining  quality 
 programming  and  toward  obtaining  carriage  and  channel  position.  272  Other  commenters 
 also  emphasize  that  cable  systems  can  delete  broadcasters  from  carriage  through  waiver, 
 and  that  cable/  TV  combinations  will  be  unlikely  to  offer  retransmission  consent 
 agreements.  273  Univision  emphasizes  that  all  of  this  anti-  competitive  behavior  occurred  in 
 spite  of  the  cable/  TV  cross-  ownership  rule,  and  claims  that  such  behavior  will  only  be 
 exacerbated  by  cable/  TV  combinations  that  seek  to  favor  their  own  broadcast  affiliate  over 
 others.  274 

 105.  Although,  as  we  noted  in  the  NOI,  DTV  holds  the  potential  to  enable 
 broadcasters  to  compete  better  with  cable  in  the  multichannel  video  programming 
 distribution  market,  the  reality  is  that  DTV  is  now  nascent.  In  addition,  because  of  the 
 advent  of  DTV,  our  DTV  must-  carry  rules  are  the  subject  of  a  pending  proceeding.  275 
 Modification  of  the  cable/  TV  cross-  ownership  rule  at  this  time  could  frustrate  and 
 undermine  the  potential  that  DTV  holds  for  broadcasters  if,  as  suggested  by  ALTV,  a 
 cable/  TV  combination,  in  order  to  give  its  own  broadcast  station  a  competitive  advantage, 
 denied  carriage  to  a  competitor  and  inhibited  its  DTV  roll-  out.  276  We  believe  that  it  is 
 particularly  important  to  ensure  stability  and  a  level  playing  field  as  the  technology  of 
 DTV  reaches  the  marketplace  and  competitive  forces  determine  its  fate  in  the  marketplace. 
 Cable/  DTV  competition  may  ultimately  provide  a  basis  for  some  modification  of  the 
 cable/  TV  cross-  ownership  rule,  but  we  believe  that  time  has  not  yet  arrived. 

 106.  Effects  on  Diversity.  We  also  conclude  that  the  cable/  TV  cross-  ownership 
 rule  is  necessary  to  further  our  goal  of  diversity  at  the  local  level.  As  we  noted  above, 
 current  media  markets  include  a  variety  of  participants;  as  we  also  noted  above  in  our 
 discussion  of  the  newspaper/  broadcast  cross-  ownership  rule,  however,  many  new  media 
 do  not  contribute  to  diversity  at  the  local  level.  Broadcasters  contribute  to  local  diversity 

 272  Id.  at  14-  15. 

 273  NASA  Comments  at  19. 
 274  Univision  Comments  at  11.  NCTA,  however,  contends  that  there  is  no  evidence  that  a  combined 
 cable/  television  station  operation  would  diminish  competition  in  the  local  market  or  that  it  could  skew  the 
 market  in  a  manner  that  adversely  affects  advertising  rates.  NCTA  Comments  at  7. 

 275  Notice  of  Proposed  Rule  Making  in  CS  Docket  No.  98-  120,  13  FCC  Rcd  15092  (1998). 

 276  ALTV  Comments  at  39. 
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 through  the  fulfillment  of  their  public  interest  obligations  to  air  programming  responsive  to 
 the  issues  facing  their  communities  of  license;  cable  contributes  through  PEG  and  leased 
 access  channels  and  to  some  degree  through  origination  of  local  cable  news  channels.  In 
 the  TV  Further  Ownership  Notice,  the  Commission  thus  tentatively  concluded  that 
 broadcast  television  and  cable  are  to  a  certain  extent  substitutes  for  diversity  purposes,  277 
 but  also  stated: 

 [w]  e  tentatively  see  no  reason  to  include  in  our  diversity  analysis  the  other 
 electronic  video  media  [beyond  cable],  such  as  MMDS,  VCRs,  and  VDT,  as 
 substitutable  for  a  broadcast  television  station.  None  of  these  has  nearly  the 
 ubiquity  of  cable  and  most  do  not  have  the  capability  for  local  origination  that 
 cable  has.  All  provide  similar  entertainment  programming;  however,  our  core 
 concern  with  respect  to  diversity  is  news  and  public  affairs  programming  especially 
 with  regard  to  local  issues  and  events.  278 

 107.  More  recently,  we  reaffirmed  this  view  in  the  TV  Ownership  Order  where 
 we  stated  that  many  of  these  alternative  video  delivery  systems  are  still  establishing 
 themselves  in  the  marketplace  and  generally  do  not  provide  an  independent  source  of  local 
 news  and  informational  programming.  279  While  newspapers  and  radio  contribute  to  local 
 diversity,  broadcast  television  and  cable  television  are  the  only  participants  in  the  market 
 for  delivered  news  and  public  affairs  video  programming  at  the  local  level.  The 
 Commission  has  distinguished  the  influence  of  television  from  that  of  newspapers  as  being 
 more  immediate,  and  from  that  of  both  newspapers  and  radio  as  having  more  visual  impact 
 and  serving  more  people  as  a  primary  source  of  news.  280  The  Commission  has  also  noted 
 that  the  public  receives  more  news  from  television  than  from  any  other  source;  281  while 
 broadcast  television  is  the  more  dominant  source  of  local  news  and  public  affairs 
 programming,  cable  functions  as  the  "gatekeeper"  to  broadcast  television,  as  we  have 
 noted  above.  282  Cable/  TV  combinations  thus  would  represent  the  consolidation  of  the 

 277  TV  Further  Ownership  Notice,  supra.  at  3556-  3557. 

 278  Id.  at  3557. 
 279  TV  Ownership  Order,  supra  at  12917-  18. 
 280  TV  Further  Ownership  Notice,  10  FCC  Rcd  at  3557-  3558. 

 281  Id.  at  3555  (citing  The  Roper  Organization,  "America's  Watching:  Public  Attitudes  Towards 
 Television,  1997"  (New  York,  1997)). 

 282  In  the  TV  Ownership  Order  we  concluded  that  cable  would  not  count  as  an  independent  local 
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 only  participants  in  the  video  market  for  local  news  and  public  affairs  programming,  and 
 would  therefore  compromise  diversity. 

 108.  Opponents  of  rule  retention  argue  that  cable  does  not  control  the  content 
 of  its  PEG  channels  and,  therefore,  contend  that  cable/  TV  combinations  do  not  threaten 
 diversity  at  the  local  level.  283  However,  PEG  programming  typically  is  not  the  cable 
 programming  that  provides  the  closest  substitute  for  broadcast  local  news  and  public 
 affairs  programming.  The  cable  programming  that  is  the  closest  substitute  for  such 
 broadcast  programming  is  originated  by  local  cable  systems.  NCTA  suggests  that  it  is  the 
 efficiencies  and  synergies  that  could  be  derived  from  combining  just  this  type  of 
 programming  that  makes  the  combinations  desirable,  and,  in  fact,  contends  that  these 
 efficiencies  and  synergies  would  enable  combinations  to  produce  more  local  news  and 
 public  affairs  programming,  perhaps  targeted  at  niche  markets.  284  Such  cable/  TV 
 combinations,  however,  would  erode  the  number  of  independent  local  news  and  public 
 affairs  voices  in  the  market.  As  CME  explains,  "[  e]  ven  if  the  common  owner  created  a 
 local  cable  news  station,  it  would  not  be  providing  a  diverse  source  of  local  news 
 programming  because  of  the  common  ownership."  285 

 109.  The  television  industry  has  just  begun  adapting  to  the  recent  relaxation  of 
 our  local  television  ownership  rule.  Further  consolidation  of  local  television  broadcast 
 stations  will  reduce  the  number  of  independent  voices  providing  local  news  and  public 
 affairs  programming.  Prudence  dictates  that  we  monitor  and  ascertain  the  impact  of  these 
 changes  on  diversity  and  competition  before  relaxing  the  cable/  TV  cross-  ownership  rule. 

 F.  Experimental  Broadcast  Stations 
 1.  Regulatory  History 
 110.  The  multiple  ownership  rule  for  experimental  broadcast  stations  was 
 initially  adopted  in  1946  in  Part  4  (4.  134),  and  generally  limited  ownership  to  one  station.  286  In  1963  this  rule  was  redesignated  as  Part  74  (74.134)  with  no  changes.  In 

 voice  for  the  duopoly  rule  because  there  was  an  absence  of  factual  data  in  the  record  indicating  that  cable 
 is  a  substitute  for  broadcast  television.  TV  Ownership  Order,  supra  at  12935. 

 283  See,  e.  g.,  NCTA  Comments  at  12-  14. 

 284  NCTA  Comments  at  13-  14. 

 285  CME  Comments  at  29. 
 286  An  exception  is  allowed  when  a  showing  is  made  that  the  program  of  research  requires  the 
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 1984  the  Commission  combined  Parts  74  A  (Experimental  TV),  74  B  (Experimental 
 Facility)  and  74  C  (Developmental  Broadcast  Stations)  into  the  present  subpart,  74  A 
 (Experimental  Broadcast  Stations)  without  changing  the  ownership  limits.  The  rule 
 currently  reads: 

 74.134  Multiple  ownership.  No  persons  (including  all  persons  under  common 
 control)  shall  control,  directly  or  indirectly,  two  or  more  experimental  broadcast 
 stations  unless  a  showing  is  made  that  the  program  of  research  requires  a 
 licensing  of  two  or  more  separate  stations. 

 2.  Comments 
 111.  Only  one  comment  was  filed.  NAB  recommends  repeal  of  this  rule  stating 
 that  broadcast  auxiliary  facilities  are  facing  regulatory  change  and  dislocation  and, 
 accordingly,  there  is  now  ever  greater  need  for  responsible  use  of  experimental  stations  to 
 develop  solutions  to  these  problems.  While  supporting  elimination  of  what  it  characterizes 
 as  this  arbitrary  restriction,  287  it  urges  the  Commission  to  ensure  that  such  stations  not 
 endanger  the  interference-  free  service  provided  by  other  broadcasters.  288 

 3.  Discussion 
 112.  The  rules  authorizing  experimental  broadcast  facilities  seek  to  encourage 
 experimentation  and  innovation  in  the  provision  of  broadcast  service  to  the  public.  A 
 license  for  an  experimental  broadcast  station  will  be  issued  for  the  purposes  of  carrying  on 
 research  and  experimentation  for  the  development  and  advancement  of  new  broadcast 
 technology,  equipment,  systems  or  services  which  are  more  extensive  or  require  other 
 modes  of  transmission  than  can  be  accomplished  by  using  a  licensed  broadcast  station 
 under  an  experimental  authorization  ((  74.102)  Uses  of  experimental  broadcast  stations.). 
 Most  of  the  related  rules  are  intended  to  prevent  interference  to  existing  services. 

 113.  Experimental  broadcast  licenses  are  also  subject  to  a  broad  variety  of 
 operating  and  reporting  requirements,  as  well  as  a  requirement  that  prohibits  their 
 commercial  use.  The  licensee  of  an  experimental  broadcast  station  may  make  no  charges 
 nor  ask  for  any  payment,  directly  or  indirectly,  for  the  production  or  transmission  of  any 
 programming  or  information  used  for  experimental  broadcast  purposes  (  74.182(  b).  Nor 
 may  it  transmit  program  material  unless  it  is  necessary  to  the  experiments  being 

 licensing  of  two  or  more  separate  stations. 
 287  NAB  Comments  at  16. 

 288  Id.  at  16. 
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 conducted,  and  no  regular  program  service  may  be  broadcast  unless  specifically  authorized 
 (  74.182(  a)).  These  commercial  restrictions  prevent  entities  from  exploiting  an 
 experimental  broadcast  station  for  commercial  purposes  while  functioning  under  the  guise 
 of  an  experimental  authorization.  The  supplementary  statement  to  be  filed  with  an 
 application  for  a  construction  permit  (  74.112),  supplementary  reports  filed  with  an 
 application  for  renewal  of  license  (  74.113),  and  the  requirement  to  make  a  satisfactory 
 showing  of  compliance  with  the  general  requirements  of  the  Communications  Act  of  1934, 
 as  amended,  to  satisfy  the  licensing  requirement  (  74.131),  allow  for  the  oversight 
 necessary  to  protect  the  goals  of  competition  and  diversity. 

 114.  We  find  that  elimination  of  the  rule  will  have  no  adverse  impact  on  our 
 diversity  and  competition  goals.  Repeal  of  this  multiple  ownership  rule  would  not  affect 
 the  Commission's  ability  to  ensure  that  experimental  stations  are  used  solely  for  their 
 avowed  purposes,  which  is  separately  covered  under  74.102.  Neither  would  it  imply  that 
 any  petitioner  will  necessarily  be  able  to  control  multiple  frequencies,  since  a  license  of  an 
 experimental  broadcast  station  will  not  authorize  the  exclusive  use  of  any  frequency,  under 
 74.131.  The  multiple  ownership  rule  for  experimental  broadcast  stations  appears  to  have 
 been  originally  adopted  to  limit  the  opportunities  for  the  commercial  use  of  experimental 
 stations.  289  We  believe  that  the  current  requirement  that  such  stations  operate  for  research 
 purposes  and  the  proscriptions  on  the  broadcast  of  a  regular  program  service  and  the 
 imposition  of  charges  for  the  transmission  of  programming  or  information  on  experimental 
 broadcast  stations  are  sufficient  to  assure  that,  even  absent  the  multiple  ownership  rule, 
 licensees  do  not,  under  the  guise  of  experimentation,  obtain  sufficient  experimental 
 stations  to  create,  sub  rosa,  commercial  broadcast  services.  These  stations  operate  for 
 research  purposes  and,  thus,  do  not  compete  in  the  marketplace  for  programming  or 
 advertising  and  existing  rules  will  provides  safeguards  against  abuse  in  the  absence  of  the 
 experimental  station  multiple  ownership  rule.  There  existing  no  competitive  bar  to  the 
 elimination  of  the  multiple  ownership  rule  applicable  to  them,  we  believe  that  the  multiple 
 ownership  rule  governing  experimental  broadcast  stations  may  no  longer  be  in  the  public 
 interest.  We  will  issue  an  NPRM  proposing  elimination  of  the  rule. 

 289  The  early  history  of  the  Federal  Radio  Commission  and,  later,  the  Federal  Communications 
 Commission  with  regard  to  commercial  use  of  experimental  stations  demonstrates  an  ambivalence  with 
 regard  to  such  use  of  these  stations.  The  FRC  initially  permitted  commercial  use  but,  in  1933,  prohibited 
 any  further  commercial  use  of  such  stations.  The  FCC  also  initially  prohibited  their  commercial  use,  then, 
 in  1935,  permitted  some  commercial  use,  and,  still  later  (1936)  again  prohibited  their  commercial  use. 
 Rules  for  experimental  stations  adopted  in  the  late  1930s,  were  intended  to  prevent  commercial  operations 
 from  predominating  and  interfering  with  experimentation.  Our  current  rules  prohibit  the  licensee  of  an 
 experimental  broadcast  station  from  making  charges  or  asking  for  payment,  directly  or  indirectly,  for  the 
 production  or  transmission  of  any  programming  or  information  used  for  experimental  broadcast  purposes. 
 (See  47  CFR    74.182.) 
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 V.  Constitutional  Issues 
 115.  Commenters  raised  Constitutional  arguments  with  respect  to  two  of  our 
 rules.  The  newspaper/  broadcast  cross-  ownership  rule  is  objected  to  by  several 
 commenters  on  the  grounds  that  it  violates  the  First  Amendment.  290  Additionally,  both 
 that  rule  and  the  dual  network  rule  are  said  to  discriminate.  In  the  case  of  the 
 newspaper/  broadcast  cross-  ownership  rule,  the  discrimination  is  alleged  to  be  between 
 newspaper  owners  and  other  media  owners.  291  The  dual  network  rule  is  claimed  to 
 discriminate  against  broadcast  networks  as  opposed  to  cable  networks  as  it  allows  mergers 
 between  broadcast  and  cable  networks  but  not  between  broadcast  networks  themselves.  292 

 116.  As  an  initial  matter,  our  newspaper/  broadcast  cross-  ownership  rule  has 
 already  been  sustained  by  the  Supreme  Court.  293  Beyond  that,  it  is  well-  established  that  a 
 content-  neutral  regulation,  such  as  the  subject  rule,  will  be  sustained  against  claims  that  it 
 violates  the  First  Amendment  if:  1)  it  advances  important  governmental  interests  unrelated 
 to  the  suppression  of  free  speech;  and  2)  does  not  burden  substantially  more  speech  than 
 necessary  to  further  those  interests  (the  OBrien  test).  294 

 117.  As  we  noted  previously,  the  Supreme  Court  has  determined  that  the 
 preservation  of  media  diversity  is  a  government  interest  that  is  not  only  important,  but  is 
 of  the  highest  order  295  and  is  unrelated  to  the  suppression  of  free  speech.  Therefore,  the 
 rule  meets  the  first  prong  of  the  OBrien  test.  Even  were  one  to  conclude  that  it  confines 
 free  speech  of  newspaper  owners  by  limiting  their  ownership  of  co-  located  broadcast 
 stations,  that  burden  is  the  minimum  necessary  to  accomplish  the  diversity  goal.  It  does 
 not  prevent  newspaper  publishers  from  owning  broadcast  outlets.  It  does  not  prevent 
 them  from  entering  into  joint  venture  agreements  with  broadcasters  in  their  community. 
 Rather,  it  simply  precludes  them  from  owning  --  and  therefore  having  ultimate  editorial 
 control  over  --  broadcast  and  newspaper  outlets  in  the  same  community  due  to  the  impact 
 of  such  common  ownership  on,  especially,  local  viewpoint  diversity.  Accordingly,  we 
 believe  that  the  newspaper/  broadcast  cross-  ownership  rule,  to  the  extent  it  burdens  free 

 290  See  n.  210,  supra. 
 291  Cox/  Media  General  Comments  at  25-  29. 
 292  CBS  Comments  at  21-  22;  Paxson  Reply  Comments  at  25;  WB  Reply  Comments  at  14. 
 293  FCC  v.  National  Citizens  Committee  for  Broadcasting,  436  U.  S.  775  (1978). 
 294  Turner  II,  520  U.  S.  at  189,  citing  U.  S.  v.  OBrien,  391  U.  S.  367,  377  (1968). 
 295  Turner  I,  512  U.  S.  at  663;  Turner  II,  520  U.  S.  at  190. 
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 speech  at  all,  does  so  to  the  minimum  extent  necessary.  It  therefore  passes  the 
 constitutional  test  for  such  rules. 

 118.  As  to  commenters  claims  of  discrimination,  the  Supreme  Court  has 
 repeatedly  held  that  a  classification  neither  involving  fundamental  rights  nor  proceeding 
 along  suspect  lines  .  .  .  cannot  run  afoul  of  the  Equal  Protection  Clause  if  there  is  a 
 rational  relationship  between  disparity  of  treatment  and  some  legitimate  governmental 
 purpose.  296  As  we  noted  above,  protecting  media  diversity  has  been  determined  by  the 
 Supreme  Court  to  be  a  governmental  interest  of  the  highest  order.  297  We  believe  that  the 
 classifications  inherent  in  both  the  newspaper/  broadcast  and  cable/  television  cross-ownership 
 restrictions  are,  under  current  conditions,  necessary  to  promote  that 
 governmental  interest  and,  therefore,  do  not  violate  the  rights  of  any  party  to  equal 
 protection  of  the  law. 

 VI.  Conclusion 

 119.  In  this,  the  first  of  our  biennial  reviews  of  our  broadcast  ownership  rules, 
 we  conclude  that  some  regulations  are  no  longer  in  the  public  interest  in  their  current 
 forms  as  a  result  of  competition.  298  We  are,  therefore,  proposing  to  modify  or  eliminate 
 these  rules  in  Notices  we  will  issue.  We  also  conclude,  however,  that,  for  now,  the  other 
 ownership  rules  considered  in  this  proceeding  warrant  retention.  We  will,  of  course, 
 revisit  our  ownership  rules  biennially,  as  directed  by  the  1996  Act.  Our  future  biennial 
 reviews  will  be  informed  by  the  impact  of  the  substantial  changes  we  made  to  our 
 television  duopoly  and  one-  to-  a-  market  rules  this  past  August. 

 FEDERAL  COMMUNICATIONS  COMMISSION 

 296  Central  State  University  v.  American  Association  of  University  Professors,  Central  State 
 University,  (per  curiam),  526  U.  S.  124.  119  S.  Ct.  1162,  1163  (1999),  citing  Heller  v.  Doe,  509  U.  S.  312, 
 319-  321,  (1993),  FCC  v.  Beach  Communications,  Inc.,  508  U.  S.  307,  313-  314  (1993),  Nordlinger  v. 
 Hahn,  505  U.  S.  1,  11  (1992).  We  do  not  concede  that  a  fundamental  right  is  involved  in  the  instant 
 matter.  It  is  well  established  that  there  is  no  unabridgeable  First  Amendment  right  to  a  broadcast  license. 
 See,  e.  g.,  FCC  v.  National  Citizens  Committee  for  Broadcasting,  436  U.  S.  775,  798-  802  (1978); 
 Columbia  Broadcasting  System  v.  Democratic  National  Committee,  412  U.  S.  94,  101  (1973);  United 
 States  v.  Weiner,  701  F.  Supp.  14  (U.  S.  D.  C.  Mass.,  1988). 

 297  Turner  I,  512  U.  S.  at  663;  Turner  II,  520  U.  S.  at  190. 

 298  These  are:  the  dual  network  rule  and  the  limitation  on  the  multiple  ownership  of  experimental 
 broadcast  stations.  We  will  also  adopt  a  Notice  to  explore  the  manner  in  which  we  define  radio  markets 
 and  determine  both  the  number  of  stations  in  a  radio  market  and  the  number  of  radio  stations  owned  by  a 
 party  in  such  a  market. 
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 Magalie  Roman  Salas 
 Secretary 
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 STATEMENT  OF  CHAIRMAN  WILLIAM  E.  KENNARD 
 In  the  Matter  of  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 

 In  Section  202(  h)  of  the  Telecommunications  Act  of  1996,  Congress  directed  the 
 Commission  to  evaluate  its  ownership  rules  every  two  years.  In  this  first  review,  we 
 developed  a  comprehensive  record  and  undertook  a  careful  review  of  these  vitally 
 important  rules,  as  required  by  Congress. 

 This  Biennial  Review  Report  balances  the  public  interest  in  diversity  of  ownership  with  the 
 demands  of  a  changing  marketplace  and  the  broadcast  industries'  need  to  realize  economic 
 efficiencies  and  remain  competitive.  We  reviewed  our  rules  to  determine  whether 
 competition,  not  simply  an  increase  in  programming  options  available  to  viewers,  render 
 our  current  rules  unnecessary.  I  write  separately  to  emphasize  that  the  proposed 
 modifications  to  the  dual  network  and  newspaper/  broadcast  cross-  ownership  rules,  and 
 the  technical  changes  to  our  radio  market  definition  policies  are  appropriately  careful, 
 deliberate,  and  forward  looking. 

 I.  Competition,  Diversity,  and  Changes  in  the  Media  Marketplace 
 In  the  course  of  our  review,  we  recognized  three  critical  facts.  First,  the  majority  of 
 Americans  still  get  most  of  their  news  and  public  affairs  information  from  broadcast 
 stations.  Our  structural  ownership  restrictions,  therefore,  seek  to  promote  critical  First 
 Amendment  principles  because  in  a  participatory  democracy,  it  is  vitally  important  that  we 
 encourage  the  widest  possible  dissemination  of  this  information  from  diverse  and 
 antagonistic  sources.  1 

 Second,  the  media  marketplace  has  become  increasingly  dynamic,  with  an  expanding 
 number  of  information  outlets  and  media  platforms.  However,  although  new  technologies 
 like  the  Internet  and  satellite  delivery  may  be  fundamentally  changing  the  communications 
 landscape,  they  do  not  yet  command  the  time  and  attention  of  most  consumers.  The 
 average  American  still  spends  seven  hours  per  day  watching  television,  but  only  eight 
 hours  a  month  on-  line.  In  addition,  even  as  programming  choices  expand,  owners  of 

 1  See  Associated  Press  v.  United  States  326  U.  S.  1,  10  (1945)(  noting  that  the  First  Amendment  rests  on 
 the  assumption  that  the  widest  possible  dissemination  of  information  from  diverse  and  antagonistic 
 sources  is  essential  to  the  welfare  of  the  public). 
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 media  outlets  continue  to  dwindle.  For  example,  after  Congress  relaxed  the  radio 
 ownership  limits  in  1996,  the  number  of  independent  owners  in  commercial  radio  markets 
 decreased  from  5,133  in  March  1996,  to  4,004  in  March  2000.  2  In  85  of  the  270  Arbitron 
 radio  markets,  two  entities  already  control  more  than  80  percent  of  radio  advertising 
 revenue;  in  143  markets,  two  entities  control  more  than  70  percent  of  such  revenue.  3 

 Third,  over  the  last  18  months,  the  FCC  has  provided  significant  regulatory  relief  to  the 
 broadcast  industry  and  the  industry  is  in  the  process  of  responding  to  this  new  regulatory 
 environment.  Although  the  marketplace  is  still  in  flux,  we  do  know  that  the  regulatory 
 changes  have  allowed  broadcasters  in  large  markets  to  respond  to  competitive  dynamics, 
 without  sacrificing  our  long-  cherished  diversity  and  competition  principles.  The  changes 
 we  propose  today  provide  similar  advantages. 

 Commenters  who  oppose  retention  of  our  ownership  rules  emphasize  the  substantial 
 growth  in  media  outlets  and  programming  choices  relative  to  twenty  years  ago,  but 
 essentially  ignore  the  countertrend  toward  ownership  consolidation  in  the  broadcast  and 
 cable  industries.  This  asymmetry  is  problematic  for  two  reasons.  First,  more  choice  does 
 not  necessarily  yield  more  competition  in  viewpoint.  Indeed,  economic  theory  teaches  that 
 a  monopolist  may  offer  viewers  more  programming  variety  than  a  more  competitively 
 structured  market.  4  However,  such  an  industry  structure  yields  only  one  point  of  view. 
 Therefore,  our  assessment  of  the  nature  and  extent  of  competition  in  broadcast  markets 
 necessarily  must  go  beyond  mere  observations  of  the  expanded  programming  and  format 
 choices  available  to  consumers. 

 Second,  this  approach  ignores  the  common  sense,  real-  world  predicate  that  undergirds  our 
 concern  about  viewpoint  diversity:  that  who  is  in  control  matters.  Simply  multiplying  the 
 number  of  pipes  into  the  home  (i.  e.,  moving  from  a  3-  network  world  to  a  500-  channel 
 world)  does  little  to  promote  independent  viewpoints  if  all  the  pipes  are  controlled  by  a 
 very  few.  Instead,  it  may  provide  consumers  with  the  proverbial  Hobsons  choice  in 

 2  BIA  Master  Access  Database,  adjusted  to  include  completed  (not  pending)  mergers  and  attributing 
 ownership  of  LMAs  to  owners  entering  into  the  LMA  rather  than  to  the  station  licensee. 
 3  Id. 

 4  The  modern  economics  literature  on  program  choice  carefully  examines  the  special  circumstances  where 
 fewer  broadcasters  may  broaden  the  variety  of  programming.  For  example,  a  monopoly  television  station 
 that  is  totally  advertiser-  supported  will  tend  to  avoid  duplicated  programs  and  may  provide  a  wider  range 
 of  program  types  compared  to  a  market  with  multiple,  competing  stations.  For  a  survey,  see  Bruce  M. 
 Owen  and  Steven  S.  Wildman,  Video  Economics  (Cambridge,  Mass.:  Harvard  University  Press,  1992), 
 Chapters  3  and  4. 
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 terms  of  independent  viewpoints.  5 
 I  am  not  convinced  by  the  record  in  this  proceeding  that  a  single  individual  or  corporation 
 who  serves  as  the  only  conduit  for  news  and  public  affairs  information  in  a  community 
 would  have  sufficient  incentive  to  act  against  its  self-  interest  in  maximizing  profits  and 
 maintaining  a  favorable  corporate  image  and  provide  the  same  level  of  independent 
 viewpoints  as  would  competitively  and  independently-  run  outlets.  Our  ownership  rules 
 significantly  increase  the  likelihood  that  consumers  will  receive  independent  viewpoints  on 
 issues  of  public  importance. 

 II.  Proposed  Changes  to  Broadcast  Ownership  Rules 
 I  support  the  careful,  but  forward  looking  rule  changes  we  propose  in  this  Report.  6  First, 
 the  dual  network  rule  continues  to  promote  viewpoint  diversity  and  should  not  be 
 eliminated  as  it  applies  to  the  four  major  networks.  I  am  persuaded  that  there  may  be 
 powerful  arguments  for  modifying  the  rule  to  allow  common  ownership  of  an  emerging 
 and  established  network.  For  that  reason,  I  support  a  Notice  that  examines  the  diversity 
 costs  and  efficiency  benefits  of  such  a  rule  change. 

 Similarly,  the  newspaper/  broadcast  cross-  ownership  rule  well  serves  our  public  interest 
 goals.  However,  there  may  be  certain  circumstances  in  which,  given  the  specifics  of  the 
 market  and  of  the  newspaper  and  broadcast  outlet  involved,  sufficient  diversity  and 
 competition  would  remain  even  if  a  newspaper  and  broadcast  station  were  commonly 
 owned.  For  example,  a  combination  between  a  single  radio  station  in  a  large  market  and  a 
 small,  suburban  newspaper  might  raise  fewer  concerns  than  other  potential  combinations. 

 I  also  fully  support  the  decision  to  commence  a  proceeding  to  examine  the  way  we  define 
 5  The  notion  that  program  diversity  and  viewpoint  diversity  are  essentially  the  same  would  turn  50  years 
 of  policymaking  on  its  head.  For  example,  more  than  twenty  years  ago,  the  Supreme  Court  upheld  the 
 Commissions  prohibition  of  cross-  ownership  on  the  basis  that  one  could  not  expect  viewpoint  diversity 
 from  commonly-  owned  entities  to  mirror  that  from  antagonistically  run  entities.  FCC  v.  National  Citizens 
 Committee  for  Broadcasting  436  U.  S.  775,  797  (1978). 

 6  I  also  support  our  decision  to  retain  the  national  television  ownership  rule  and  the  cable/  television  cross-ownership 
 rule.  Contrary  to  the  suggestion  of  the  dissenting  Commissioners,  there  is  nothing 
 procedurally  inappropriate  in  making  revisions,  substantive  or  non-  substantive,  to  the  biennial  review 
 report  after  adoption  in  order  to  further  elucidate  the  rationale  for  the  decision  to  retain  the  national 
 ownership  rule.  Such  revisions  are  permissible  when  all  non-  dissenting  Commissioners  concur  in  the 
 revisions.  Here,  all  the  Commissioners  who  supported  the  relevant  sections  agreed  to  the  post-adoption 
 edits.  Post-  adoption  edits  are  not  uncommon.  Furthermore,  the  Commission  made  the 
 determination  required  by  Section  202(  h)  of  the  Telecom  Act  by  the  statutory  deadline,  and  the  post-adoption 
 edits  did  not  alter  that  determination. 
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 a  radio  market  and  the  way  we  count  the  number  of  stations  in  a  market  for  the  purpose 
 of  our  local  ownership  rules.  In  Section  202(  b)(  1)  of  the  Telecommunications  Act  of 
 1996,  Congress  directed  the  Commission  to  expand  the  limit  on  how  many  stations  a  party 
 could  own  in  a  market.  Congress  specified  a  sliding  scale  of  numerical  limits  depending 
 on  the  size  of  the  market  that,  for  example,  would  allow  a  party  to  own  up  to  8 
 commercial  radio  stations  in  a  market  with  45  stations,  up  to  7  stations  in  a  market  with 
 30-  44  stations,  and  so  on.  7  None  of  these  standards  contemplate  (or  approach)  a  duopoly 
 or  monopoly  in  local  markets,  and  I  am  unwilling  to  ascribe  such  an  intent  to  Congress. 

 Some  parties  have  argued  that  the  Commission  has  no  remaining  authority  to  consider 
 these  issues.  However,  when  Congress  raised  the  ceilings  on  local  radio  ownership,  it  did 
 not  eliminate  the  requirement  that  the  Commission  find  that  license  transfers  and 
 assignments  serve  the  public  interest,  convenience  and  necessity,  pursuant  to  Section 
 310(  d)  of  the  Communications  Act.  Absent  such  action,  our  statutory  responsibility  is  to 
 continue  to  ascertain  that  such  transactions  comply  with  the  public  interest  prior  to 
 granting  license  transfers  or  assignments. 

 In  addition,  Congress  did  not  directly  address  the  market  definition  aspects  of  the 
 Commissions  rules  in  the  1996  Act.  Although  the  Commission  has  used  one  method  of 
 defining  markets  and  counting  the  number  of  stations  in  a  market  since  1992,  the  potential 
 of  this  methodology  to  produce  unanticipated  and  anti-  competitive  results  in  particular 
 cases  did  not  become  apparent  until  the  methodology  was  used  in  conjunction  with  the 
 increased  ownership  limits  adopted  pursuant  to  the  1996  Act. 

 We  should  not  shy  away  from  beginning  a  proceeding  to  resolve  these  important  and 
 controversial  questions,  on  the  record,  after  opportunity  for  public  comment.  The  public 
 interest  would  not  be  served  by  anything  less. 

 7  Pub.  L.  No.  104-  104,  110  Stat.  56  (1996).  See  Order,  In  the  Matter  of  Implementation  of  Sections 
 202(  a)  and  202(  b)(  1)  of  the  Telecommunications  Act  of  1996,  11  FCC  Rcd  12368,  12370  (1996). 
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 SEPARATE  STATEMENT  OF  COMMISSIONER  SUSAN  NESS 
 Re:  1998  Biennial  Review    Review  of  the  Commissions  Broadcast  Ownership  Rules 
 and  Other  Rules  Adopted  Pursuant  to  Section  202  of  the  Telecommunications  Act  of 
 1996 

 I  write  separately  regarding  the  Commissions  review  of  the  newspaper/  broadcast 
 cross-  ownership  rule  1  to  explain  why  I  support  commencing  a  rulemaking  proceeding  to 
 modify  but  not  eliminate  that  rule.  I  also  write  separately  regarding  the  Commissions 
 decision  to  commence  a  rulemaking  to  revise  the  methodology  for  calculating  both  the 
 total  number  of  radio  stations  in  a  market  and  the  number  of  stations  owned  by  a  party,  to 
 underscore  that  any  modifications  must  be  applied  prospectively  only. 

 Newspaper/  Broadcast  Cross-  ownership  Rule 
 The  question  presented  to  the  Commission  in  this  biennial  review  is  whether  any 
 rule  is  necessary  in  the  public  interest  as  the  result  of  competition  and,  if  not,  whether 
 the  Commission  shall  repeal  or  modify  that  rule.  2  The  rule  was  crafted  in  1975  to 
 achieve  the  noble  goal  of  ensuring  that  local  markets  enjoy  not  just  competition  for 
 advertising  dollars  but  also  diversity  of  viewpoints    a  diversity  that  can  come  only  from  a 
 healthy  number  of  independently-  owned  outlets.  In  its  decision  adopting  the  rule,  the 
 Commission  sought  to  promote  the  widest  possible  dissemination  of  information  from 
 diverse  and  antagonistic  sources,  3  which  the  Supreme  Court  had  found  is  essential  to  the 
 welfare  of  the  public.  4  The  Commissions  rules,  therefore,  were  designed  to  ensure  that 
 the  public  had  access  to  a  critical  threshold  of  local  viewpoint  diversity.  The  Commission 
 recognized  that,  at  that  time,  broadcast  services    especially  television  --  and  newspapers 
 were  the  dominant  sources  of  local  news  and  information.  5 

 There  have  been  sweeping  changes  in  the  media  marketplace  since  the  rule  was 
 adopted  in  1975.  Back  then,  there  were  only  three  commercial  broadcast  networks; 
 today,  there  are  six  or  seven.  In  1975,  many  UHF  stations  were  just  initiating  broadcast 
 service  and  they  were  limited  in  number;  today,  the  number  of  UHF  television  stations  has 
 nearly  tripled.  In  the  early  1970s,  FM  radio  was  a  relatively  new  service;  today,  there  are 

 1  47  C.  F.  R.    73.3555(  d)  (the  rule). 
 2  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  110  Stat.  56,    202(  h)  (1996). 
 3  Multiple  Ownership  of  Standard,  FM  and  Television  Broadcast  Stations,  Second  Report  and  Order,  50 

 F.  C.  C.  2d  1046,  1048  (1975),  affd  sub  nom.  FCC  v.  National  Citizens  Committee  for  Broadcasting,  436 
 U.  S.  775  (1978).  4 
 Associated  Press  v.  United  States,  326  U.  S.  1,  20  (1945).  5 
 See,  e.  g.,  Second  Report  and  Order,  50  F.  C.  C.  2d  at  1065. 
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 approximately  6,000  FM  radio  stations  in  operation.  When  the  rule  was  adopted,  the  big 
 boom  in  cable  television  franchising  had  not  yet  begun;  today,  cable  television  passes  more 
 than  97%  of  households,  of  which  approximately  two-  thirds  subscribe.  At  the  time  the 
 Commission  adopted  the  rule,  DBS  had  not  yet  been  launched;  today,  DBS  is  ubiquitously 
 available,  with  more  than  10  million  subscribers.  The  rule  was  adopted  decades  before  the 
 Internet  would  become  available  for  public  use;  today,  the  Internet  is  rapidly  capturing  the 
 American  imagination  and  consumers  free  time.  Given  such  profound  changes,  it  is  not 
 only  timely,  but  essential  for  the  Commission  to  revisit  the  newspaper/  broadcast  cross-ownership 
 rule  to  ensure  that  it  reflects  contemporary  marketplace  realities,  preserving 
 local  viewpoint  diversity  while  still  tailoring  the  rule  to  be  restrictive  only  where  necessary. 

 Ironically,  the  rules  underlying  purpose  of  preserving  diversity  and  competition  in 
 local  markets  may  be  undermined  in  some  situations  by  the  rules  current  structure.  For 
 example,  radio  stations  that  do  not  have  their  own  local  news  organizations  are  prohibited 
 from  being  co-  owned  with  daily  newspapers,  thus  reducing  the  potential  number  of  news 
 outlets  in  a  given  community.  Similarly,  independent  UHF  television  stations  might 
 provide  more  local  news  and  information,  if  they  could  realize  efficiencies  from  co-ownership 
 with  a  local  newspaper.  Struggling  daily  newspapers  might  stand  a  better 
 chance  of  contributing  to  public  discourse  and  the  dissemination  of  local  news  and 
 information  if  they  were  allowed  to  combine  with  local  broadcast  licensees,  thereby 
 maintaining  viewpoint  diversity.  At  the  very  least,  the  Commission  should  consider 
 changes  to  the  rule  that  would  address  these  potentially  counter-  productive  effects. 

 At  the  same  time,  the  rule  has  performed  a  necessary  function  in  maintaining  a 
 critical  threshold  of  local  viewpoint  diversity.  The  Commission  has  recognized  that 
 broadcast  services,  particularly  television,  and  newspapers  still  are  the  dominant  sources  of 
 local  news  and  information  in  any  given  market.  6  Particularly  in  small  markets  with  a 
 single  daily  newspaper  and  less  than  a  handful  of  broadcast  stations,  the  combination  of 
 newspaper  and  broadcast  assets  might  well  severely  and  significantly  reduce  viewpoint 
 diversity.  And  keep  in  mind  that  most  cable  and  DBS  services  do  not  independently 
 provide  local  news  and  information  so  vital  to  an  informed  public.  Thus,  they  may  not  yet 
 be  adequate  substitutes  for  broadcast  stations  or  newspapers.  Therefore,  the  rule  has 
 served  and,  in  my  opinion,  continues  to  serve  an  important  function  in  maintaining  local 
 viewpoint  diversity  and  competition. 

 I  do  not  believe  that  the  rapidly  changing  media  landscape,  on  the  one  hand,  and 
 the  preservation  of  viewpoint  diversity,  on  the  other,  present  a  binary  choice  between 
 eliminating  the  rule  or  maintaining  the  status  quo.  Rather,  I  believe  that  the  Commission 
 should  carefully  and  methodically  consider  modifying  the  rule  to  make  it  more  relevant  to 

 6  Further  Notice  of  Proposed  Rule  Making  in  Television  Ownership,  10  FCC  Rcd.  3524,  3555-  57  (1995). 
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 contemporary  circumstances.  For  example,  commenters  ask  whether  the  same  rule  apply 
 to  a  top-  ten  market  like  New  York  City  or  Chicago,  with  dozens  of  independent  media 
 voices,  and  to  a  small  city  with  only  one  daily  newspaper  and  a  few  TV  stations.  Should 
 radio  licensees  face  the  same  newspaper  cross-  ownership  restrictions  as  television 
 licensees,  or  are  these  two  media  sufficiently  distinguishable  to  apply  the  newspaper 
 broadcast  cross-  ownership  ban  differently  to  each?  Should  the  rule,  in  its  current  or 
 modified  form,  be  consistently  applied  to  all  merging  combinations  of  newspapers  and 
 broadcast  stations  under  a  similar  timeframe?  Some  commenters  suggested  that  the  rule 
 could  apply  to  varying  degrees  depending  on  market  size  by,  for  example,  counting 
 newspapers  as  a  voice  and  allowing  newspaper  and  broadcast  cross-  ownership  where  a 
 certain  number  of  independent  voices  remained  in  a  market.  7 

 While  the  record  reflects  a  continued  need  to  restrict  newspaper/  broadcast  cross-ownership 
 in  some  fashion,  I  believe  that  the  questions  concerning  the  possible 
 modifications  to  the  rule  deserve  a  full  airing  and  spirited  debate.  I  have  not  made  up  my 
 mind  regarding  the  merits  of  any  of  these  proposals;  my  only  conclusion  at  this  point  is 
 that  an  absolute  ban  is  not  necessary  to  achieve  the  purpose  of  the  rule.  It  is  time  for  the 
 Commission  to  engage  in  a  robust  debate  on  the  most  appropriate  ways  to  modify  the  rule 
 to  best  serve  the  public  in  this  information  age. 

 Radio  Market  Definition 
 I  have  long  supported  revising  our  rules  to  correct  our  convoluted  definition  of 
 radio  markets  and  look  forward  to  reviewing  comments  filed  in  the  rulemaking  proceeding 
 we  will  initiate  shortly.  I  believe,  however,  that  any  changes  the  Commission  might  make 
 should  be  prospective  only  and  should  not  undermine  the  legitimate  investment 
 expectations  of  parties  who  hold  combinations  lawfully  assembled  under  our  current  rules. 
 Whatever  definition  we  adopt  should  also  remain  consistent  with  the  intent  of  Congress 
 under  the  Telecommunications  Act  of  1996  in  relaxing  the  radio  ownership  restrictions. 

 7  See,  e.  g.,  Elyria/  Lorain  Comments  at  19-  20;  Freedom  of  Expression  Comments  at  25-  26;  Gannett 
 Comments  at  38;  West  Virginia  Radio  Comments  at  21-  22;  Newspaper  Association  of  America, 
 Emergency  Petition,  August  23,  1999. 
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 DISSENTING  STATEMENT  OF 
 COMMISSIONER  HAROLD  FURCHTGOTT-  ROTH 

 In  the  Matter  of  1998  Biennial  Regulatory  Review:  Review  of  the  Commission's 
 Broadcast  Ownership  Rules  and  Other  Rules  Adopted 
 Pursuant  to  Section  202  of  the  Communications  Act 

 I  respectfully  dissent  from  the  Commissions  decision  to  retain  the  national 
 television  ownership  and  cable/  television  cross-  ownership  rules  and  from  its  refusal  to 
 even  consider  repeal  of  the  newspaper/  broadcast  cross-  ownership  rule.  1  For  the  reasons 
 that  follow,  I  believe  that  the  Commissions  rationale  for  refusing  to  repeal  or  modify 
 these  rules  is  fatally  flawed.  In  my  view,  these  rules  simply  should  be  repealed.  2 

 I.  The  Commissions  Rationale  For  Refusing  To  Repeal  Or  Modify  The 
 Regulations  Is  Fatally  Flawed 

 The  Commission  claims  that  it  should  not  take  any  action  on  the  national  television 
 ownership  and  crossownership  rules  chiefly  because  it  needs  to  assess  the  effects  of  last 
 years  relaxation  of  local  broadcast  ownership  rules.  See  Biennial  Review  Report 
 (  Report)  at  para.  4,  25-  26,  93,  109.  This  rationale  for  refusing  to  deregulate  suffers 
 from  fatal  flaws.  As  discussed  below,  this  reasoning  fails  to  respond  to  the  actual  question 
 posed  by  the  statute;  is  weak  as  a  factual  and  logical  matter;  and  constitutes,  at  least  with 
 respect  to  nationally  applicable  rules,  an  unexplained  departure  from  past  policy 
 assessments  of  such  rules. 

 A.  The  Commission  Fails  To  Apply  The  Statutory  Test  For  Repeal  or  Modification 
 The  main  problem  with  the  Commissions  argument    that  it  needs  to  study  the 
 effects  of  last  Augusts  limited  local  deregulation  --  is  that  it  is  utterly  nonresponsive  to 

 1  Specifically,  I  do  not  believe,  for  the  reasons  persuasively  given  by  Commissioner  Powell,  that 
 the  Commission  has  carried  its  burden  of  showing  that  competition  has  not  eroded  the  very  foundation  of 
 the  newspaper/  broadcast  rule.  I  thus  cannot  sign  on  to  the  Commissions  general  conclusion  that  the  rule 
 should  be  retained.  Report  at  para.  95. 

 2  I  agree,  however,  that  the  experimental  license  limit  should  be  eliminated.  I  also  concur  in  the 
 decision  to  cut  back  on  the  reach  of  the  dual  network  rule,  but  I  would  have  gone  further  and  asked 
 whether  the  rule  remains  necessary  at  all.  Finally,  I  concur  in  the  rulemaking  on  the  radio  rules  for  the 
 limited  purpose  of  rationalizing  our  arguably  arbitrary  and  capricious  methodology  of  counting  radio 
 stations  of  section  202(  h);  my  purpose  is  not,  as  the  Report  unfortunately  suggests,  to  cut  back  by 
 rulemaking  on  the  concentration  levels  that  Congress  expressly  set. 
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 the  statute.  Under  section  202(  h),  the  Commissions  job  is  to  explain  why  changes  in 
 competition  have  not  rendered  broadcast  ownership  rules  superfluous  in  promoting  the 
 public  interest.  See  47  U.  S.  C.  section  202(  h)  (Commission  shall  determine  whether  any 
 of  [its  broadcast  ownership]  rules  are  necessary  in  the  public  interest  as  the  result  of 
 competition).  This  Report  does  not  fulfill  that  obligation. 

 As  I  explained  in  the  Notice  of  Inquiry,  a  helpful  analytical  approach  for  answering 
 the  statutory  question  posed  by  section  202(  h)  would  be  to  consider: 

 (i)  the  original  purpose  of  the  particular  rule  in  question;  (ii)  the  means  by  which 
 the  rule  was  meant  to  further  that  purpose;  (iii)  the  state  of  competition  in  the 
 relevant  market  at  the  time  the  rule  was  promulgated;  (iv)  the  current  state  of 
 competition  as  compared  to  that  which  existed  at  the  time  of  the  rule's  adoption; 
 (v)  and,  finally,  how  any  changes  in  competitive  market  conditions  between  the 
 time  the  rule  was  promulgated  and  the  present  might  obviate,  remedy,  or  otherwise 
 eliminate  the  concerns  that  originally  motivated  the  adoption  of  the  rule. 

 Separate  Statement  of  Commissioner  Harold  W.  Furchtgott-  Roth,  Notice  of  Inquiry,  1998 
 Biennial  Regulatory  Review,  13  FCC  Rcd  11,276  (1998). 

 In  its  analysis  of  whether  to  repeal  or  modify  the  national  cap  or  crossownership 
 rules,  however,  the  Commission  never  analyzes  the  continued  utility  of  the  rules  as  the 
 result  of  competition,  as  the  statute  requires.  Instead  of  considering  the  effect  of 
 competition  on  the  need  for  the  rules,  the  Commission  myopically  discusses  the  effect  of 
 regulatory  action  on  the  rules    namely,  the  impact  of  its  1999  local  broadcast  rulemaking. 
 See  Report  at  paras.  25-  29  (concluding  that  national  television  ownership  rule  should  be 
 retained  because  effects  of  local  changes  should  be  observed  and  last  increase  in  cap 
 resulted  in  acquisitions  that  need  to  be  studied  as  well);  paras.  95-  102  (concluding  that 
 cable/  television  crossownership  rule  should  be  retained  because  it  furthers  policies  of 
 competition  and  diversity  and  prevents  discrimination  against  competitors). 

 This  discussion  fails  to  broach  --  much  less  answer  in  a  persuasive  way  --  the 
 question  asked  by  the  statute.  Section  202(  h)  says  nothing  about  basing  decisions 
 regarding  deregulation  on  past  regulatory  action.  Rather,  it  requires  us  to  consider 
 changes  in  the  market  landscape  in  deciding  whether  to  keep  the  rules.  That  the 
 Commission  simply  has  not  done.  And  the  analysis  that  it  does  provide  gets  the  statute 
 exactly  backwards;  the  question  is  not  what  are  the  effects  of  the  rule  on  competition?, 
 see,  e.  g.,  id.  at  para.  94,  but  what  are  the  effects  of  competition  on  the  continued  need 
 for  the  rule?.  This  latter  question  is  never  asked  or  answered  in  the  discussion  of  the 
 decision  to  retain  any  of  these  rules. 
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 Finally,  and  for  the  record,  I  feel  compelled  to  note  that  the  Report  that  the 
 Commission  actually  voted  to  adopt  on  May  26,  2000,  did  not  include  any  findings  of 
 facts  on  the  state  of  competition  in  the  services  relevant  to  the  national  cap.  Cf.  Report  at 
 para.  28  &  nn.  80-  82.  Thus,  not  only  did  the  Commission  fail  to  ask  and  answer  the 
 statutory  question,  it  did  not  discuss  competition  at  all.  The  Report  likewise  did  not 
 include  the  (x-  ray  thin)  public  interest  analysis  of  the  lifting  of  the  cap.  See  id.  at  para. 
 30.  It  gave  only  its  wait  and  see  reason  in  connection  with  local  deregulation  and 
 Congress  1996  increase  in  the  cap.  These  are  not  just  ministerial  or  non-  substantive 
 changes.  Rather,  this  material  provides  an  entirely  new  rationale  and  makes  new  findings 
 of  fact  to  support  the  decision  to  keep  the  cap. 

 This  language  was  added  more  than  two  weeks  after  the  Commission  formally 
 voted  to  adopt  the  Report  and  publicly  announced  its  action.  3  Not  coincidentally,  these 
 revisions  immediately  followed  one  prominent  broadcasting  companys  public 
 announcement  of  its  intent  to  appeal  the  national  cap  decision.  4  Putting  aside  the  related 
 issue  whether  a  majority  of  the  Commission  can  agree  to  make  these  sorts  of  changes 
 before  an  adopted  document  is  officially  released,  I  question  here  which  Report  it  is  that 
 the  Commission  actually  voted  to  adopt. 

 For  we  cast  only  one  set  of  votes,  and  it  was  on  the  first  Report,  which  we  then 
 publicly  announced  as  adopted.  There  was  no  withdrawal  of  those  votes  or  a  revote  on 
 the  materially  revised  version.  If  the  first  document  represents  the  officially  adopted 
 Report  of  the  Commission,  then  the  original  analysis,  absent  the  findings  of  facts  on 

 3  See  www.  fcc.  gov/  Bureaus/  Mass_  Media/  News_  Releases/  2000/  nrmm0028.htm  (describing  Report 
 as  [  a]  ction  by  the  Commission,  May  26,  2000).  Although  the  press  release  certainly  does  not  represent 
 a  formal  decision  of  the  Commission,  it  does  faithfully  summarize  the  relevant  content  of  the  Report  that 
 was  before  the  Commissioners  at  the  time  we  cast  our  votes: 

 The  Commission  determined  to  retain  the  35%  aggregate  national  television  audience  reach 
 of  a  television  group.  It  said  the  effects  of  recent  FCC  changes  to  the  local  television  "duopoly" 
 rule  should  be  observed  and  assessed  before  making  any  alteration  to  the  national  limit.  It  also 
 said  the  trend,  since  the  cap  was  increased  to  35%  in  1996,  of  many  group  owners  acquiring 
 large  numbers  of  stations  nationwide  needs  further  observation  before  making  any  changes  in  the 
 cap. 

 Id.  at  para.  10.  This  reasoning  is  based  solely  on  the  wait  and  see  argument.  Our  press  office,  of 
 course,  had  no  way  of  knowing  that  the  voted  and  adopted  document  from  which  it  was  working  would 
 change  so  substantially  as  to  render  its  release  inaccurate. 

 4  See  20  Comm.  Daily  105  (May  31,  2000),  2000  WL  4695422  (  Fox  TV  immediately  said  it  will 
 challenge  national  ownership  cap  in  federal  court.  .  .  .  Fox  said  it  will  appeal  as  soon  as  FCC  issues  final 
 decision.). 
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 competition  and  explication  of  the  public  interest,  controls.  And  if  the  second,  materially 
 retooled  document  is  the  official  one,  then  the  Report  issued  today  violates  the  statutory 
 deadline  5  and  thus  may  well  be  invalid  for  that  procedural  reason  alone.  6  In  the  end, 
 however,  the  Commission  cannot  have  it  both  ways:  it  must  either  claim  the  benefit  (such 
 as  it  is)  of  the  new  rationale  and  findings  of  fact,  or  it  must  confess  error  in  transgressing 
 the  statutory  deadline. 

 For  the  foregoing  reasons,  I  do  not  think  the  Commission  adequately  justifies  the 
 decision  to  retain  the  rules  in  their  present  form.  See  Motor  Vehicle  Mfrs.  Assn  v.  State 
 Farm  Mut.  Auto  Ins.  Co.,  463  U.  S.  29,  43  (1983)  (agency  acts  in  arbitrary  and  capricious 
 fashion  if  it  has  relied  in  factors  which  Congress  has  not  intended  it  to  consider  [or] 
 entirely  failed  to  consider  an  important  aspect  of  the  problem).  The  to-  ing  and  fro-  ing  on 
 why  to  keep  the  cap  and  post-  adoption  backfilling  of  the  Report  well  illustrate  the 
 capricious,  results-  oriented  nature  of  the  Commissions  decisionmaking. 

 B.  The  Commissions  Rationale  For  Retaining  The  Ownership  Rules  Is  Weak 
 Apart  from  failing  to  address  the  inquiry  required  by  the  statute,  the  Commissions 
 wait  and  see  reasoning  suffers  from  several  factual  and  logical  infirmities. 

 First,  although  the  Commission  and  most  commentators  generally  anticipated  a 
 flood  of  applications  under  the  newly  revised  local  broadcast  rules,  the  fact  is  that  the 
 Mass  Media  Bureau  has  received  very  few  such  applications.  Specifically,  since  the  rules 
 went  into  effect,  broadcast  interests  have  filed  a  total  of  101  television  station  assignment 
 or  transfer  applications.  Of  those  100  applications,  however,  only  42  were  duopoly 
 requests  and  19  of  those  requests  involved  the  purchase  of  television  stations  already 
 programmed  by  the  buyer  pursuant  to  local  marketing  or  time  brokerage  agreements. 
 Thus,  the  Commission  has  received  just  23  applications  to  create  new  television  duopolies 
   even  assuming  that  every  application  is  granted,  this  is  hardly  the  sort  of  seismic  change 
 in  the  broadcast  landscape  that  requires  extensive  study.  As  for  radio  and  television  cross-ownership 
 requests,  broadcasters  have  filed  about  30  of  those;  this  is  likewise  not  a  surge 
 towards  consolidation.  7  Simply  put,  the  reality  is  that  there  is  very  little  of  an  effect  to 

 5  Section  5003,  Pub.  L.  106-  113  Stat.  1501  (1999). 

 6  See  5  U.  S.  C.  section  706  (under  the  Administrative  Procedure  Act,  a  reviewing  court  shall.  .  . 
 hold  unlawful  and  set  aside  agency  action,  findings  or  conclusions  found  to  be  .  .  .  without  observance  of 
 procedure  required  by  law). 

 7  This  filing  phenomenon  (or  the  lack  of  one)  is  probably  explained  by  the  fact  that  the  changes  in 
 the  ownership  rules  were  actually  quite  marginal  and,  in  any  event,  the  market  had  already  ordered  itself 
 fairly  efficiently  under  the  Commissions  previously  liberal  waiver  process. 
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 be  assessed  here,  which  deprives  the  Commissions  rationale  of  much  persuasive  force. 
 Second,  even  if  the  amount  of  filings  under  the  newly  loosened  rules  had  been 
 numerous,  I  fail  to  see  why  we  could  not  have  satisfactorily  reviewed  their  impact  in  this 
 Report.  Far  from  being  unavailable,  the  information  necessary  to  evaluate  consolidation 
 ensuing  from  the  new  rules  is  uniquely  in  the  Commissions  possession.  We  need  only 
 have  pulled  the  filings  described  above  in  order  to  find  facts  about  that  consolidation. 
 Surely  we  have  had  enough  time  to  perform  such  an  assessment:  this  Report  is  being 
 issued  well  into  the  second  year  since  the  release  of  the  Notice  of  Inquiry. 

 Third,  if  one  accepts  the  assertion  that  the  Commission  lacks  sufficient  information 
 to  assess  the  effect  of  the  new  local  rules,  that  rationale  applies  with  equal  force  to  the 
 other  ownership  rules  included  in  the  Report.  Today  the  Commission  decides  to  change 
 some  of  those  other  rules,  for  example,  the  dual  network  rule  or  the  experimental  license 
 rule.  But  the  Commission  never  explains  why  it  lacks  sufficient  information  on  the  effect 
 of  the  1999  changes  in  order  to  modify  the  national  cap  and  cross-  ownership  rules  but 
 why  it  has  enough  such  information  to  go  forward  with  these  others.  This  flat 
 inconsistency  suggests,  to  me  at  least,  that  the  argument  from  lack  of  information  is 
 pretextual. 

 Finally,  even  assuming  that  I  am  wrong  about  all  of  the  foregoing,  there  remains 
 the  question  of  the  relevance  of  changes  in  local  rules  to  national  rules  such  as  the 
 broadcast  cap.  As  the  Commission  itself  has  often  recognized,  local  information  is  not 
 pertinent  to  a  discussion  of  nationally  applicable  rules.  See,  e.  g.,  Amendment  of  Multiple 
 Ownership  Rules,  100  FCC  2d  17,  37  (1984)  (noting  irrelevance  of  national  rules  to 
 diversity  in  local  markets).  If  this  is  so,  as  Commission  precedent  has  it,  then  I  fail  to  see 
 how  local  deregulation  rationally  could  bear  on  our  decisions  with  respect  to  national 
 deregulation. 

 The  Commissions  reason  for  maintaining  the  subject  rules  boils  down  to  this:  it 
 feels  that  it  has  deregulated  enough  for  the  time  being  and  simply  does  not  want  to  go  any 
 further.  This  rationale  is  wholly  unsatisfying  to  those  regulated  entities  whose  rulemaking 
 happened  to  come  second  in  time.  They  possess  a  statutory  right  to  regulatory  review 
 and,  if  warranted  by  the  effect  of  competition  on  regulation,  deregulatory  action.  To  say 
 that  other,  tangentially-  related  deregulation  occurred  first,  and  therefore  they  can  not  have 
 any  regulatory  relief,  is  a  sorely  inadequate  response. 

 C.  The  Commission  Departs  Without  Explanation  From  Prior  Findings  Regarding 
 The  Necessity  of  National  Ownership  Limits  and  The  State  of  Competition  In  The 
 Broadcast  Industry 
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 The  Commissions  refusal  to  modify  the  national  broadcast  ownership  cap  in  even 
 in  the  smallest  way  contradicts  its  prior  conclusions  about  the  utility  of  national  ownership 
 limits.  Specifically,  in  an  Order  repealing  the  former  Seven  Stations  rule,  the 
 Commission  found  that  as  a  policy  matter,  the  total  elimination  of  presumptive  national 
 ownership  rule[  s]  would  benefit  the  public  interest.  Amendment  of  the  Commissions 
 Rules  Relating  to  Multiple  Ownership,  100  FCC  2d  74  at  para.  50  (1984). 

 The  Commission  based  this  conclusion  on  the  fact  that,  while  competition  and 
 diversity  are  traditional  broadcast  policy  goals,  national  ownership  rules  are  irrelevant  to 
 viewpoint  diversity  and  unnecessary  to  prevent  competitive  harm.  Amendment  of  the 
 Commissions  Rules  Relating  to  Multiple  Ownership,  100  FCC  2d  17  at  paras.  63,  73. 
 The  more  correct  focus  for  addressing  viewpoint  diversity  and  economic  competition 
 concerns  is  the  number  and  variety  of  information  and  advertising  in  local  markets.  Id.  at 
 para.  10.  In  addition,  multiple  ownership  of  broadcast  stations  can  foster  news  gathering, 
 editorializing  and  public  affairs  programming,  and  the  development  of  independent 
 programming  by  regional  or  national  ad  hoc  networks.  Id.  at  para.  82. 

 Moreover,  in  the  Order  deregulating  local  broadcast  markets,  the  Commission 
 expressly  recognized  the  dramatic  shifts  in  the  competitive  position  of  the  industry  as  a 
 general  matter.  See  Review  of  the  Commissions  Regulations  Governing  Television 
 Broadcasting,  Television  Satellite  Stations  Review  of  Policy  and  Rules,  14  FCC  Rcd 
 12,903  at  para.  1  (1999)  (  The  new  rules  we  adopt  today  reflect  a  recognition  of  the 
 growth  in  the  number  of  and  variety  of  media  outlets  in  local  markets,  as  well  as  the 
 significant  efficiencies  and  public  service  benefits  that  can  be  obtained  from  joint 
 ownership.).  But  here  the  Commission  refuses  even  to  engage  in  that  analysis.  Having 
 found  enough  evidence  of  increased  competition  and  market  changes  in  the  industry  to 
 warrant  deregulation  of  local  broadcast  markets,  the  Commission  will  be  hard  pressed  to 
 explain  why  those  findings  do  not  carry  over  to  the  national  context.  This  differing 
 approach  is  especially  hard  to  justify  when,  as  the  Commission  has  found,  diversity  and 
 competition  concerns  are  foremost  in  the  local,  not  the  national,  context. 

 These  flat  inconsistencies  with  respect  to  the  Commissions  assessment  of 
 nationally  applicable  broadcast  ownership  rules  and  the  competitive  nature  of  the 
 broadcast  industry  leave  us  open  to  legitimate  charges  of  arbitrary  decisionmaking.  See 
 generally  Sangre  de  Cristo  Communications,  Inc.,  v.  FCC,  139  F.  3d  953,  958  (D.  C.  Cir. 
 1998)  (agency  cannot  inexplicably  act  inconsistently  with  prior  decisions).  Although  the 
 Commission  has  a  duty  to  explain  this  disparate  treatment,  cf.  Radio  and  Television  News 
 Directors  Association  v.  FCC,  184  F.  3d  872,  886  (1999)  (where  there  is  agency 
 precedent  for  declining  to  use  the  FCCs  power  to  redress  a[  n]  [alleged]  market  failure  in 
 provision  of  [broadcast  services].  .  .  the  agency  must  offer  clear,  cogent  explanations  for 
 treating  the  two  cases  differently),  it  has  not  even  attempted  to  do  so. 
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 II.  The  Rules  Impose  Heavy  Burdens  On  Speech  In  Potential  Contravention  of  the 
 First  Amendment 

 There  is  a  final  reason  to  be  wary  of  these  rules:  they  impose  a  direct  and 
 substantial  burden  on  speech  and  thus  run  the  risk  of  violating  the  First  Amendment. 

 To  be  sure,  the  Supreme  Court  in  the  past  has  affirmed  the  constitutionality  of 
 some  of  these  rules.  See,  e.  g,  FCC  v.  National  Citizens  Committee  for  Broadcasting,  436 
 U.  S.  775  (1978)(  rejecting  First  Amendment  challenge  to  newspaper/  broadcast 
 crossownership  rule).  At  the  same  time,  however,  the  Court  has  observed  that  balancing 
 First  Amendment  interests  in  the  broadcast  context  is  not  a  static  enterprise:  [  B]  ecause 
 the  []  industry  is  dynamic  in  terms  of  technological  change;  solutions  adequate  a  decade 
 ago  are  not  necessarily  so  now,  and  those  acceptable  today  may  well  be  outmoded  10 
 years  hence.  Columbia  Broad.  Sys.,  Inc.  v.  Democratic  National  Commn,  412  U.  S.  94, 
 102  (1972). 

 I  believe  that  the  ownership  limits  now  have  become  constitutionally  outmoded, 
 as  the  Court  itself  suggested  might  happen.  If  rules  restricting  ownership  of  broadcast 
 stations  were  ever  a  justifiable  infringement  of  speech,  it  was  because  of  the  relative 
 dominance  of  that  medium  in  the  communications  industry.  See,  e.  g.,  FCC  v.  Pottsville 
 Broadcasting  Co.,  309  U.  S.  134,  137  (1940)  (ownership  rules  justified  by  a  widespread 
 fear  that  in  the  absence  of  governmental  control  the  public  interest  might  be  subordinated 
 to  monopolistic  domination);  see  also  Red  Lion  Broadcasting  Co.  v.  FCC,  395  U.  S.  367 
 (1969)  (justifying  less  rigorous  standard  of  First  Amendment  scrutiny  on  basis  of 
 spectrum  scarcity). 

 The  facts  underlying  this  justification  are  simply  no  longer  true,  however,  as  the 
 Commission  has  repeatedly  recognized.  See  1985  Fairness  Report,  102  FCC  2d  145,  198- 
 221  (1985);  Syracuse  Peace  Council,  2  FCC  Rcd  5043,  5053  (1985).  Today, 
 broadcasters  face  such  a  fierce  array  of  competitors    from  cable  operators,  cable 
 overbuilders,  cable  networks,  internet  service  providers,  wireless  video  systems,  and  direct 
 satellite  systems    that  their  previously  supposed  ability  to  influence  the  content  and 
 control  the  flow  of  information  is  greatly  diffused.  See  Joint  Statement  of  Commissioners 
 Powell  and  Furchtgott-  Roth,  In  re  Personal  Attack  and  Political  Editorial  Rules,  FCC 
 Gen.  Docket  No.  83-  484,  at  5  and  n.  15  (citing  statistics  on  boom  in  communications 
 outlets).  Moreover,  the  number  of  broadcasters  alone  has  grown  exponentially  since  the 
 time  the  rule  was  adopted.  8  In  sum,  over  time,  as  alternative  means  of  communication 

 8  The  total  number  of  broadcasters  increased  by  more  than  50%  between  1975  and  1990,  and 
 independent  broadcast  stations  increased  by  more  than  400%.  See  Broadcast  Television  in  a 
 Multichannel  Marketplace,  FCC  Office  of  Plans  and  Policy  Working  Paper  No.  26,  6  FCC  Rcd  3996, 
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 and  even  other  broadcasters  have  proliferated  in  the  marketplace,  the  burdens  imposed  on 
 broadcasters  by  these  restrictions  have  increased  dramatically  relative  to  the  benefits  that 
 they  produce. 

 For  these  reasons,  I  think  that  the  lenient  standard  of  review  for  regulation  of 
 broadcast  speech  formally  announced  in  Red  Lion  rests  today  on  a  shaky  empirical 
 foundation.  As  I  noted  in  the  Notice  of  Inquiry,  such  an  assertion  is  not  only  an 
 appropriate  one  for  this  Commission  to  make,  but  in  fact  has  been  affirmatively  invited  by 
 the  Supreme  Court: 

 [T]  he  Supreme  Court  has  clearly  indicated  that  it  might  revisit  its  constitutional 
 jurisprudence  in  this  area  if  the  FCC  "signal[  ed]  .  .  .  that  technological 
 developments  have  advanced  so  far  that  some  revision  of  the  system  of  broadcast 
 regulation  may  be  required."  FCC  v.  League  of  Women  Voters,  468  U.  S.  364,  377 
 n.  11  (1984);  see  also  Telecommunications  Research  and  Action  Center,  801  F.  2d 
 at  509  n.  5  (explaining  that,  in  League  of  Women  Voters,  "the  [Supreme]  Court  .  .  . 
 suggested  that  the  advent  of  cable  and  satellite  technologies  may  soon  render  the 
 scarcity  doctrine  obsolete.").  [And]  [t]  he  D.  C.  Circuit  recently  ventured  to  say 
 that  the  Court's  "suggestion"  in  League  of  Women  Voters  "may  impose  an  implicit 
 obligation  on  the  Commission  to  review  the  spectrum  scarcity  rationale."  Tribune 
 Co.  v.  FCC,  133  F.  3d  61,  68  (1998). 

 Separate  Statement  of  Commissioner  Harold  W.  Furchtgott-  Roth,  Notice  of  Inquiry,  1998 
 Biennial  Regulatory  Review,  13  FCC  Rcd  11,276  (1998)  (footnote  omitted);  see  also 
 RTNDA  v.  FCC,  184  F.  3d  at  887  n.  19  (noting  that  Supreme  Court  in  Red  Lion 
 recognized  that  changed  circumstances  might  be  salient  in  future  cases  and  that  since 
 Red  Lion  the  Court  has  increasingly  focused  on  the  editorial  discretion  of  broadcasters 
 indicating  that  while  the  Red  Lion  framework  may  still  be  good  law,  its  application  .  .  . 
 may  require  updating). 

 While  I  personally  have  come  to  the  conclusion  that  technology  has  advanced  to 
 the  point  where  revision  of  broadcast  regulation  is  now  warranted,  if  not  overdue,  I  note 
 that  the  Commission  itself  has  already  come  to  this  conclusion.  Specifically,  the 

 4011(  1991);  see  also  Michael  L.  Katz,  Old  Rules  and  New  Rivals:  An  Examination  of  Broadcast 
 Television  Regulation  and  Competition,  at  34  (Sept.  1999)  (attachment  to  comments  of  Fox)  (in  1946 
 there  were  only  six  authorized  television  stations,  and  today  there  are  over  1,200  such  stations).  During 
 that  period,  the  number  of  over-  the-  air  broadcast  stations  available  to  the  median  household  increased 
 from  six  to  ten  stations.  See  FCC  Working  Paper,  6  FCC  Rcd  at  4011;  see  also  Assessment  of  the  Status 
 of  Competition  in  Markets  for  the  Delivery  of  Video  Programming,  13  FCC  Rcd  1034,  1090  (1998);  Katz 
 Paper  at  39  (  In  1979,  only  33  markets  had  seven  or  more  television  stations.  Today,  114  markets    more 
 than  half  of  all  television  markets    have  seven  or  more  television  stations.). 
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 Commission  has  found  that  [  t]  he  scarcity  rationale  developed  in  the  Red  Lion  decision 
 and  successive  cases  no  longer  justifies  a  different  standard  of  First  Amendment  review  for 
 the  electronic  press.  Syracuse  Peace  Council,  2  FCC  Rcd.  5043  at  para.  65.  In  my 
 view,  the  administrative  basis  for  challenging  this  constitutional  framework  has  been  well 
 laid,  and  the  issue  is  ripe  for  review. 

 *** 
 In  this  first  biennial  review  of  broadcast  ownership  regulations,  many  of  which  are 
 over  fifty  years  old,  this  Commission  can  ultimately  find  only  one,  obscure  rule  to  be 
 repealed.  To  my  mind,  however,  it  is  simply  untenable  to  assert,  in  the  face  of  the  record 
 before  us  on  competitive  change  since  the  adoption  of  ownership  regulations,  that 
 retention  of  the  vast  majority  is  warranted.  This  Report,  which  regrettably  turns  section 
 202(  h)  on  its  head  by  asking  how  the  rules  promote  diversity  and  competition  instead  of 
 asking  how  the  forces  of  competition  itself  produce  those  results  and  thus  obviate  the  need 
 for  the  rules,  disserves  the  concept  of  regulatory  reform  embodied  in  section  202(  h).  This 
 is  not  an  effort  at  meaningful  reform,  but  agency  retrenchment  in  the  face  of  a 
 deregulatory  provision.  I  therefore  concur  only  in  part  and  dissent  in  part. 
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 SEPARATE  STATEMENT  OF 
 COMMISSIONER  MICHAEL  K.  POWELL 

 Re:  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. 

 The  majority  of  the  rules  we  review  today  are  old.  The  National  Ownership  Cap 
 rule  was  first  adopted  in  1941.  The  Newspaper/  Broadcast  1  and  Cable/  Television  Cross-Ownership  2 
 rules  were  adopted  in  the  1970s.  Though  some  of  these  rules  have  been 
 modified  slightly  over  the  years,  their  predicates  have  remained  the  same,  namely,  that 
 networks  and  stations  enjoy  tremendous  market  power  that  can  lead  to  anticompetitive 
 effects.  Moreover,  the  goals  of  our  structural  rules  also  remain  largely  unchanged:  (1)  to 
 guard  against  ill-  effects  in  advertising  and  programming  markets,  (2)  to  promote  diversity 
 in  programming,  and  (3)  to  promote  locally-  originated  content. 

 Time  does  not  stand  still,  however,  and  the  highly  concentrated  video 
 entertainment,  news  and  information  markets  of  the  past,  with  their  attendant  limited 
 programming  offerings,  have  changed  dramatically.  Congress  recognition  of  this 
 dramatically  changed  and  changing  landscape  stands  behind  the  Biennial  Review  process 
 where  we  are  charged  to  determine  whether  any  of  such  rules  are  necessary  in  the  public 
 interest  as  a  result  of  competition.  3  My  dissatisfaction  with  the  present  review  is  its 
 stubborn  refusal  to  fully  consider  the  competitive  landscape  today  and  validate  that  these 
 structural  rules  still  serve  their  stated  purposes  particularly  in  light  of  significant 
 evidence  that  the  rules  are  unnecessary  to  protect  competition  (and  may  even  be  causing 
 competitive  harm)  and  that  diversity  and  localism  are  prospering  as  a  consequence  of  new 
 venues  and  greater  capacity  available  to  consumers.  For  these  reasons,  I  concur  in  part  and  dissent 

 1  Amendments  of    73.34,  73.240  and  73.636  of  the  Commissions  Rules  Relating  to  Multiple 
 Ownership  of  Standard,  FM,  and  Television  Broadcast  Stations,  Docket  No.  18110,  Second  Report  and 
 Order  in  Docket  18110,  50  FCC  2d  1046  (1975),  recon.,  53  FCC  2d  589  (1975),  affd  sub  nom.  FCC  v. 
 National  Citizens  Committee  for  Broadcasting,  436  U.  S.  775  (1978). 

 2  Amendment  of  Part  74,  Subpart  K,  of  the  Commissions  Rules  and  Regulations  Relative  to  Community 
 Antenna  Television  Systems,  and  Inquiry  into  the  Development  of  Communications  Technology  and 
 Services  to  Formulate  Regulatory  Policy  and  Rulemaking  and/  or  Legislative  Proposals,  Docket  No.  18397, 
 Second  Report  and  Order,  23  FCC  2d  816  (1970),  recon.,  39  FCC  2d  377  (1973). 

 3  Telecommunications  Act  of  1996,  Pub.  L.  No.  104,  110  Stat.  56  (1996). 
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 in  part  from  this  Order. 
 I.  GENERAL  CRITIQUE  OF  STRUCTURAL  BROADCAST  REGULATIONS 
 Before  turning  to  my  critique  of  particular  rules,  I  first  will  sketch  the  breadth  of 
 change  that  should  compel  a  more  fulsome  review  of  the  rules  than  is  represented  by  this 
 Biennial  Review.  Second,  I  will  generally  outline  the  governments  stated  interest  in  these 
 rules  and  challenge  some  of  their  underpinnings  in  light  of  the  dramatically  altered  video 
 landscape. 

 The  Video  Marketplace:  Take  the  Mask  off  the  Old  Lone  Ranger 
 Return  with  us  now  to  those  thrilling  days  of  yesteryear.  4  A  time  when  there 
 were  three  television  networks  that  dominated  the  land  (NBC,  CBS  and  ABC).  A  time 
 when  there  were  only  six  television  stations.  A  time  before  cable  television,  before  direct 
 broadcast  satellite  (DBS),  before  VCRs,  before  the  Internet.  It  was  a  time  of  highly 
 concentrated  video  markets  in  which  only  one  medium  television  reigned.  It  was  a 
 time  of  nascent  video  advertising  markets,  and  of  very  limited  program  sources.  In  this 
 era,  there  were  few  around  to  curtail  the  power  of  these  rustlers.  There  was  only  one 
 Lone  Ranger  to  discipline  the  dominance  of  the  Network  Gang  of  Three.  But  who  was 
 that  masked  man?  A  fiery  horse  with  the  speed  of  light,  a  cloud  of  dust  and  a  hearty  Hi-Yo 
 Silver.    The  FCC! 

 Today,  over  fifty  years  after  The  Lone  Ranger  television  show  filled  the  bubbled 
 screens  of  our  black  and  white  sets,  the  Lone  Ranger  rides  again  in  an  episode  entitled  The 
 1998  Biennial  Regulatory  Review  of  the  Commissions  Broadcast  Ownership  Rules.  So 
 much  has  changed  since  the  days  that  Tootsie  Roll,  Americas  favorite  candy,  and 
 General  Mills  brought  to  Americans  the  Ranger  and  his  companion  Tonto.  Yet,  the 
 nostalgic  FCC  Ranger  cannot  bring  itself  to  take  full  cognizance  of  this  change  and  face 
 whether  it  is  time  to  retire  the  mask  and  let  other  forces  do  the  job.  Instead,  we  continue 
 to  sprint  ahead  kicking  these  rules  forward,  while  being  chased  by  a  growing  multitude  (of 
 new  media,  of  economic  change,  of  logic). 

 By  any  measure,  the  market,  and  thus  the  foundation  of  the  FCCs  structural 
 ownership  rules,  has  changed  dramatically  in  ways  that  should  lessen  the  dangers  we 

 4  This  is  the  opening  line  of  the  television  series  The  Lone  Ranger  which  ran  from  1949  to  1950,  1954-  56. 
 See  <http://  www.  geocities.  com/  TelevisionCity/  7286>. 
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 purport  to  address  that  are  associated  with  market  dominance.  The  actor  Clayton  Moore 
 starred  in  The  Lone  Ranger  television  series  from  1949  to  1956.  Mr.  Moore  passed  away 
 just  last  year,  and  in  his  name  I  couch  my  argument  for  a  more  thorough  examination. 
 Simply  put,  there  is  MORE,  more  of  everything: 

 MORE  Broadcast  Networks:  In  the  1940s  and  1950s  there  were  only  three 
 networks  (NBC,  CBS  and  ABC).  Today,  those  three  are  joined  by  Fox,  WB, 
 UPN,  and  PAX  to  yield  seven  networks  competing  for  programming  and 
 advertising  dollars. 

 MORE  Broadcast  Stations:  Most  households  live  in  a  television  market  served  by 
 eleven  or  more  local  stations.  In  1946  there  were  only  six  stations  nationwide.  5 
 Today  there  are  over  1,600.  6 

 MORE  Video  Outlets:  Today  approximately  81  percent  of  all  Americans  subscribe 
 to  either  cable,  DBS,  or  another  multi-  channel  service  provider,  rather  than  receive 
 their  signal  free  and  over  the  air.  7  That  is,  the  invention  and  ubiquitous 
 deployment  of  cable  and  DBS  services  have  given  advertisers,  programmers  and 
 Americans  substantial  alternatives  to  broadcast.  These  systems  offer  viewers  a 
 plethora  of  options  unimagined  when  many  of  the  rules  reviewed  in  the  Order 
 were  adopted.  The  average  cable  subscriber  has  54  channels  available  to  him.  8 

 5  See  Warren  Publishing,  Inc.,  Television  &  Cable  Factbook:  Services  Volume  No.  68,  2000  Ed.,  at  I-  45. 
 6  According  to  the  FCC's  most  recent  broadcast  station  tabulation,  there  were  1,616  television  stations 
 (VHF,  UHF,  and  educational)  licensed  on  September  30,  2000.  See  Station  Totals  prepared  by  Mass 
 Media  Bureau,  Audio  Services  Division  (rel.  Nov.  22,  1999)  at 
 <http://  www.  fcc.  gov/  mmb/  asd/  totals/  bt990930.html>. 

 7  According  to  the  FCC's  sixth  annual  report  on  the  competitive  status  of  markets  for  the  delivery  of  video 
 programming,  a  total  of  80.  9  million  households  subscribed  to  multichannel  video  programming  services 
 (i.  e.,  cable  and  noncable  MVPDs)  as  of  June  1999,  up  5.5%  over  the  76.6  million  households  subscribing 
 to  MVPDs  in  June  1998.  This  subscriber  growth  translates  into  a  3.  2  percentage  point  increase  in 
 multichannel  video  programming  subscribership  to  81.4%  as  of  June  1999,  i.  e.,  99.  4  million  U.  S.  homes 
 with  at  least  one  television  divided  by  80.  9  million  households  subscribed  to  multichannel  video 
 programming  services.  See  Annual  Assessment  of  the  Status  of  Competition  in  Markets  for  the  Delivery 
 of  Video  Programming,  CS  Docket  No.  99-  230,  Sixth  Annual  Report  [  1999  Report],  15  FCC  Rcd  978, 
   6,  19  (2000). 

 8  The  1999  Report  noted  98.  6%  of  all  cable  customers  subscribed  to  systems  with  capacities  of  30 
 channels  or  more,  and  64.  2%  of  all  subscribers  were  served  by  systems  with  capacities  of  54  or  more 
 channels  in  October  1999.  Id,    23.  In  addition,  4.  8%  of  all  subscribers  are  reportedly  served  by  systems 
 with  capacities  of  91  or  more  channels.  Id. 
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 The  average  DBS  subscriber  has  hundreds  of  channels  available  to  her.  9 
 Additionally,  50%  of  Americans  have  access  to  the  Internet.  10  Moreover,  the 
 ubiquity  of  VCRs,  DVD  players  and  other  video  medium  offer  consumers 
 additional  entertainment,  news  and  information  sources.  And,  more  recently  the 
 Internet  is  adding  yet  another.  Most  importantly,  there  is  no  end  in  sight  to  this 
 trend. 

 MORE  Programming:  There  are  more  sources  of  programming  than  any  time  in 
 history.  There  are  170  cable  networks  and  seven  broadcast  networks.  11  The 
 programs  are  also  more  diverse  than  in  the  golden  age  of  television,  when 
 Americans  sat  around  watching  the  same  basic  shows.  It  was  inconceivable  in 
 days  of  old  that  there  would  be  channels  dedicated  to  news  24  hours  a  day  like 
 CNN  or  Fox  News.  Or,  that  there  would  be  channels  dedicated  not  only  to  sports, 
 like  ESPN,  but  single  sports  like  the  Golf  Channel.  Or,  that  hundreds  of  movie 
 channels  would  be  available  on  their  televisions,  many  on  demand,  with  hundreds 
 more  titles  in  their  local  video  store.  Even  on  pure  broadcast  stations,  there  are 
 more  sports,  movies,  drama,  and  national  and  local  news  than  at  any  time 
 previously. 

 With  so  much  more  in  the  market,  one  can  expect  to  find  more  competition  and 
 more  diversity.  Advertisers  have  many  more  choices  to  display  their  products.  And, 
 consumers  have  many  more  options  to  choose  from  as  sources  for  entertainment, 
 information,  and  news.  If,  as  I  believe,  the  good  and  plenty  of  outlets  and  programming  is 
 fertile  ground  for  a  healthy  marketplace,  there  is  clear  reason  to  question  why  such  forces 
 (where  consumers  and  producers  interact)  will  not  produce  competitive  prices, 
 competitive  opportunities  for  programming,  and  robust  options  for  viewers.  Yet,  the 
 Commission  continues  to  place  unsupportable  faith  in  the  concept  that  such  things  can 

 9  The  1999  Report  noted  DBS  operators  DirecTV  and  EchoStar  offer  up  to  350  channels  of  video 
 programming  and  serve  more  than  ten  million  subscribers.  Id.,    69. 

 10  It  is  currently  estimated  that  roughly  50  percent  of  American  homes  possess  a  personal  computer  and 
 nearly  50  percent  have  Internet  access.  See,  e.  g.,  Consumer  Electronics  Manufacturer  Association,  U.  S. 
 Consumer  Electronic  Industry  Today,  1999  Ed.,  at  5  ("  Computers  now  are  in  almost  half  of  all  American 
 households,  45  percent,  and  some  60  percent  of  those  homes  have  two  machines  in  use.");  Christine 
 Doherty,  Online  Market  Is  Hotting  Up,  Sunday  Business  Post,  May  14,  2000  (currently  "49  percent  of 
 Americans  enjoy  internet  access  from  their  homes");  Business  Wire,  Internet-  Connected  Households  Soar 
 to  60  Percent  in  2000,  Mar.  28,  2000  (consultancy  notes  "majority  of  U.  S.  household,  approximately  60 
 percent,  will  have  personal  Internet  access  in  the  year  2000"). 

 11  The  1999  Report  noted  a  total  of  171  basic,  premium  and  pay-  per-  view  cable  networks.  See  1999 
 Report,  supra  inote  6,    25. 
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 only  happen  by  government  fiat  and  not  by  the  natural  forces  of  the  market. 
 To  Question  the  Rules  is  not  to  Question  the  Venerable  Goals  of  Broadcast  Regulation 
 The  goals  of  our  broadcasting  rules  are  laudable.  They  seek:  (1)  to  constrain 
 undue  economic  power,  (2)  to  promote  diversity  and  (3)  to  promote  locally  originated 
 programming.  There  may  have  been  a  time  in  which  such  objectives  could  not  be 
 achieved  without  regulatory  intervention  (though  I  question  it).  But,  surely  these  values 
 are  not  incompatible  with  market  forces,  or  market  failures  in  the  classic  sense.  Thus,  one 
 does  not  abandon  these  objectives  by  calling  on  the  Commission  to  consider  if  the  rules 
 are  necessary  at  all  or  in  their  present  form,  particularly  in  the  face  of  substantial  evidence 
 that  they  are  unsupported  by  the  facts,  and  that  they  may  actually  in  some  instances  harm 
 producers,  suppliers  and  consumers.  For  an  outstanding  overview  of  the  current  market 
 conditions  and  public  harms  being  caused  by  some  of  our  structural  rules,  I  would  direct 
 the  reader  to  Old  Rules  and  New  Rivals:  An  Examination  of  Broadcast  Television 
 Regulation  and  Competition,  12  by  Michael  L.  Katz,  which  is  included  in  the  record  of  this 
 proceeding. 

 Broadcast  Economic  Power  in  the  Video  Market 
 Video  producers  make  money  by  inducing  viewers  to  watch  their  products.  If  one 
 follows  the  broadcast  model,  the  product  is  free  to  viewers  and  revenue  is  generated 
 through  advertising.  The  game  here  is  to  get  the  most  eyeballs  you  can,  regardless  of  the 
 type  of  program.  Where  one  can  charge  for  subscribers,  as  can  cable,  DBS  and  MMDS, 
 you  can  make  money  both  through  advertising  and  by  inducing  viewers  to  pay  for 
 programming. 

 If  the  video  market  was  highly  concentrated,  leaving  few  avenues  to  reach 
 audiences,  that  unquestionably  could  result  in  harm.  For  instance,  as  is  assumed  by  many 
 of  our  broadcast  structural  rules,  if  a  broadcaster  enjoyed  undue  market  power  it  could 
 theoretically  raise  advertising  rates  to  non-  competitive,  monopolistic  levels,  thereby 
 harming  advertisers.  Similarly,  if  broadcasters  (individually  or  collectively)  could 
 monopolize  audiences  they  could  harm  suppliers  of  programming  by  demanding 
 uneconomically  low  program  prices. 

 Yet,  again,  if  one  notes  the  dramatic  change  in  the  market  (which  the  majority  only 
 12  Michael  L.  Katz,  Old  Rules  and  New  Rivals:  An  Examination  of  Broadcast  Television  Regulation  and 
 Competition  (  Old  Rules  and  New  Rivals),  Sept.  1999. 
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 does  superficially)  one  can  see  how  questionable  many  of  the  suppositions  are  that 
 undergird  our  ownership  rules.  For  example,  television  networks  have  lost  a  substantial 
 share  of  the  national  viewing  audience.  Between  1952  and  1991,  the  prime  time  ratings  of 
 the  three  major  networks  fell  from  75  to  37.5,  and  by  1998  had  fallen  another  25  percent 
 to  28.3  percent.  13  Are  todays  broadcast  shares  large  enough  to  allow  broadcasters  to 
 unilaterally  raise  advertising  rates  without  constraint?  This  is  just  one  question  that 
 deserves  review  if  we  wish  to  continue  to  justify  ownership  restraints  on  our  fear  of  the 
 impact  on  advertising  markets.  14 

 Additionally,  there  has  been  an  explosion  of  media  outlets  to  which  both 
 advertisers  and  programmers  may  turn,  lessening  the  ability  and  incentives  of  broadcasters 
 to  unilaterally  dictate  rates.  With  regard  to  cable  service,  67  percent  of  all  Americans 
 subscribe  to  this  medium  and  nearly  97  percent  have  cable  available.  15  Another  12.5 
 percent  subscribe  to  DBS,  which  is  virtually  available  to  100%  of  Americans  within  the 
 continental  U.  S.  16  Consequently,  advertisers  now  have  other  options  from  which  to 
 choose  in  reaching  a  national  audience.  In  the  vernacular  of  antitrust,  there  are 
 substitutes.  If  a  network  or  station  owner  attempted  to  extract  monopoly  rents, 
 advertisers  would  have  other  options  for  reaching  consumers.  Moreover,  other  medium 
 may  prove  more  attractive  to  advertisers  who  can  more  carefully  tailor  their  messages  to 
 particular  demographics  on  media  like  cable  or  DBS.  At  a  minimum,  there  is  reason  to 
 question  the  blind  assumption  that  advertisers  would  be  harmed  without  the  protections  of 
 our  ownership  rules,  given  the  increased  availability  of  other  outlets. 

 The  proliferation  of  other  distribution  outlets  has  also  constrained  broadcast 
 program  purchasers  from  depressing  the  prices  program  suppliers  get.  In  fact,  with  more 
 outlets,  high  quality  programming  can  shop  for  the  highest  rents.  This  explains  the  trend 
 we  see  toward  cable  and  DBS  capturing  marquee  programming  such  as  sporting  events, 
 top  movies  and  increasingly  major  news,  history,  public  affairs,  and  arts  programming. 
 Indeed,  contrary  to  what  should  be  predicted  if  network  concentration  were  substantial, 

 13  Id.  at  11  (citing  Paul  Kagan  Associates,  The  Economics  of  TV  programming  and  Syndication,  1999  at 
 21-  22). 
 14  I  would  add  that  I  have  always  questioned  why  the  FCC  should  concern  itself  with  advertising  rates. 
 We  do  not  regulate  advertising  and  the  price  impacts  there  do  not  have  a  secondary  effect  on  viewers  in  a 
 manner  cognizable  by  the  Communications  Act.  The  antitrust  statutes  adequately  address  advertising 
 concerns  as  they  do  generally  for  all  markets. 

 15  1999  Report,  supra.  Note  6,    19-  20 

 16  Id.    15. 
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 programmers  are  able  to  command  a  premium  for  shows  like  E.  R.,  17  NFL  Football,  18  and 
 NHL  Hockey.  19  In  short,  it  is  hard  to  defend  the  assumption  that  broadcasters  have 
 sufficient  market  power  to  command  monopoly  rents  for  advertisements  or  to  deflate 
 prices  for  programming.  Surely,  one  sees  no  evidence  to  justify  a  standing  structural  rule, 
 rather  than  rely  on  antitrust  enforcement. 

 Diversity  in  the  Market 
 Diversity  is  also  an  admirable  goal,  yet,  it  is  an  elusive  concept.  It  has  come  to 
 mean  many  things.  Limiting  ownership  concentration  does  one  obvious  thing;  it  increases 
 or  maintains  the  number  of  different  owners.  Limiting  ownership  and  allowing  more 
 owners  has  three  primary  diversity  effects:  For  one,  there  are  more  broadcast  properties 
 and  more  ownership  opportunities  available  for  more  people.  Protecting  opportunity  is 
 one  way  of  promoting  minority  and  female  ownership.  This  is  sometimes  called  source 
 diversity.  20  I  will  not  discuss  this  point  in  this  statement.  Second,  more  owners  might 
 mean  more  from  which  to  choose.  Viewers  will  be  able  to  see  the  different  programming 
 choices  of  different  owners,  and  it  is  hoped  that  these  programs  will  vary  in  content  and 
 style.  This  is  what  we  often  call  program  diversity.  The  third  point  is  a  subtle  variation 
 on  the  second.  Proponents  often  urge  rules  to  promote  not  just  different  program  genres 
 or  styles  to  capture  viewer  interest,  but  different  viewpoints.  That  is,  by  the  fact  that 
 owners  are  different  people  or  institutions,  one  might  expect  to  see  different  perspectives 

 17  See  id.    26.  See  also  Kyle  Pope,  Network  Makes  $850  Million  Deal  with  Warner  Bros.,  Wall  St.  J., 
 Jan.  15,  1998,  at  B1  (NBC  strikes  "a  record  $850  million  deal  to  keep  the  nation's  top-  rated  show,  ER); 
 Peter  Kaplan,  NBC  Pays  Top  Dollar  to  Keep  No.  1-  Rated  "ER"  on  Board,  Wash.  Times,  Jan.  15,  1998,  at 
 B6  (same);  Brian  Lowry,  NBC's  Prescription  for  Success:  Keep  "ER"  TV,  L.  A.  Times,  Jan.  15,  1998,  at  A1 
 (same). 

 18  See,  e.  g.,  NFL  Buyers,  Sellers  Could  Butt  Heads  on  Rates,  Multichannel  News,  Jan.  26,  1998,  at  28 
 ("  Fox  Broadcasting,  ABC,  CBS  and  ESPN  will  shell  out  a  combined  $17.6  billion  across  eight  [NFL] 
 seasons.");  John  M.  Higgins,  Cable  Operators  Blast  ESPN  for  NFL  Megabid,  Broadcasting  &  Cable,  Jan. 
 19,  1998,  at  10  (Of  $17.6  billion  total,  ESPN  "agreed  to  pay  $600  million  per  season  for  18  Sunday  night 
 games");  MSOs  Await  Bill  as  ESPN  Grabs  NFL,  Multichannel  News,  Jan.  19,  1998,  at  1  (same). 

 19  See  Disney  Offer  Would  Triple  NHL's  Current  TV  Deal,  Palm  Beach  Post,  Aug.  6,  1998,  at  8C  (Walt 
 Disney  Co.  offered  "to  pay  the  [NHL]  almost  $600  million  for  exclusive  U.  S.  broadcast  rights  for  five 
 years".  .  .the  deal  "would  triple  the  amount  Fox  Sport  and  ESPN  [paid]  the  league"  under  the  prior  deal). 

 20  Source  diversity  refers  to  promoting  a  variety  of  program  or  information  producers  and  owners.  In 
 the  matter  of  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,  Notice  of 
 Inquiry,  MM  Docket  98-  35,  rel.  Mar.  13,  1998,    6. 
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 that  are  antagonistic  to  those  of  other  programmers.  Let  me  first  make  some  general 
 observations  about  the  number  of  distinct  program  choices  available  to  consumers. 

 It  is  said,  beauty  is  in  the  eye  of  the  beholder.  21  The  same  could  be  said  for 
 television.  It  is  difficult  and  perhaps  constitutionally  impermissible  for  government  to 
 impose  its  conception  of  worthiness  or  beauty  on  viewers.  22  Yet,  it  is  understandable  to 
 craft  rules  that  promote  the  widest  swath  of  programming  choice  to  match  the  infinite 
 variety  of  interests  of  the  American  consumer.  Whether  your  taste  runs  to  WWF 
 wrestling  (perhaps  the  most  popular  programming  on  television  today),  the  symphony, 
 sports,  comedy,  news,  drama,  feature  film,  cartoons,  music  videos,  history,  public  affairs, 
 or  shopping,  the  video  marketplace  has  more  of  it,  in  more  colors  and  flavors,  than  ever 
 before. 

 To  make  my  point  I  highlight  a  powerful  and  persistent  trend  in  programming 
 movement  from  broadcasting  to  narrowcasting.  In  the  early  period  of  television, 
 broadcasting  was  the  primary  means  of  receiving  video  content  (excluding  the  movie 
 theatre).  Broadcast  is  a  medium  that  provides  one  signal  to  many  people.  That  is  its 
 central  virtue,  but  also  its  central  limitation.  Because  it  can  only  serve  up  one  program  at 
 any  given  moment  in  time,  it  has  to  find  a  program  that  appeals  to  the  broadest  possible 
 audience.  This  is  particularly  the  case  since  broadcasting  is  solely  advertiser  supported. 
 Thus,  almost  by  its  nature,  broadcast  has  trouble  being  diverse  that  is,  serving  a  more 
 narrow,  particularized  community  of  interest  is  difficult,  both  in  technical  terms  (the  signal 
 goes  everywhere)  and  in  economic  terms  (to  remain  viable  a  station  must  maximize 
 eyeballs,  i.  e,  aggregate  interests).  When  broadcasting  dominated  video  programming  the 
 challenges  of  program  diversity  were  quite  acute. 

 Cable,  and  later  DBS,  brought  to  the  marketplace  a  new  medium  that  had 
 characteristics  that  clearly  enhanced  program  diversity  and  choice.  A  cable  system  offers 

 21  Apparently,  "beauty  is  in  the  eye  of  the  beholder"  is  a  misinterpretation  of  the  following  aphorism  by 
 Plato: 

 "Remember  how  in  that  communion  only,  beholding  beauty  with  the  eye  of  the  mind,  he  will  be 
 enabled  to  bring  forth,  not  images  of  beauty,  but  realities  (for  he  has  hold  not  of  an  image  but  of 
 a  reality),  and  bringing  forth  and  nourishing  true  virtue  to  become  the  friend  of  God  and  be 
 immortal,  if  mortal  man  may." 

 See  Quoteland.  com  <http://  www.  quoteland.  com>. 
 22  See  United  States  v.  Playboy  Entertainment  Group,  Inc.,  529  U.  S.  ___,  2000  WL  646196,  at  *13  (2000) 
 (Asserting  that  the  Constitution  exists  to  grant  the  people,  rather  than  the  Government,  the  ability  to 
 evaluate  moral,  artistic,  and  intellectual  content.) 
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 subscribers  multiple  channels.  A  subscriber  that  hungers  for  sports  might  watch  a  channel 
 dedicated  to  that  genre  (e.  g.,  ESPN,  Fox  Sports).  A  history  buff  the  same  (e.  g,  History 
 Channel).  A  movie  fanatic  the  same  (e.  g.,  HBO,  Showtime,  Cinemax).  A  news  and  public 
 affairs  junkie  the  same  (e.  g.,  CNN,  MSNBC,  Fox  News,  C-  Span),  and  WWF  fans  can 
 watch  all  day  and  night  to  their  hearts  content.  A  system  operator  can  offer  this  diverse 
 programming  economically  because  he  draws  both  from  advertising  and  subscription 
 revenue.  Subscription  fees  also  allow  a  program  producer  to  gauge  a  viewers  preference. 
 Programs  that  are  strongly  desired  are  more  valuable  and  thus  more  can  be  charged. 
 (This  is  why  there  are  tiers  and  programming  packages  offered.)  Additionally,  the 
 technical  nature  of  the  system  allows  for  this  variety.  Because  cable  is  not  hindered  by 
 interference  problems,  like  broadcasters,  the  system  can  be  upgraded  continually  to 
 increase  capacity  and  thus  provide  more  channels.  23  The  importance  of  cable,  DBS  and 
 other  systems  is  not  just  to  increase  video  competition.  These  mediums  also  have  ushered 
 in  greater  diversity,  for  they  can  program  to  distinct  parochial  interest  on  a  daily  basis  in  a 
 manner  that  is  challenging  for  broadcasting.  The  ability  to  program  to  a  wider  variety  of 
 interests  is  what,  in  part,  accounts  for  the  fact  that  the  majority  of  Americans  (nearly  80 
 percent)  subscribe  to  some  multichannel  service. 

 Of  late,  the  trend  toward  tailored  programming  is  getting  finer  with  the  advent  of 
 digitalization  and  the  Internet.  Perhaps  the  penultimate  expression  of  diversity  is  the 
 ability  to  program  for  a  single  individuals  unique  interest.  The  video  landscape  is  moving 
 in  this  direction.  On  the  Internet  one  clearly  sees  the  trend:  My  Yahoo  and  My  AOL 
 for  example.  Products  like  WebTV,  AOL  TV,  Geocast,  and  Excite@  Home,  all  promise 
 to  enhance  traditional  television  product  with  personalized,  tailored  content.  These  trends 
 show  clearly  that  the  breadth  of  unique  and  different  programming  has  exploded  and  is 
 growing  exponentially.  Under  the  weight  of  such  trends,  I  cannot  begin  to  see  how  one 
 can  claim  the  loss  or  fear  of  loss  of  diverse  programs  and  choices  for  consumers. 

 23  Bear,  Stearns  &  Co.,  Inc.,  Byte  Fight!:  Cable  TV  &  Broadband  Report  (rel.  Apr.  2000),  at  59  (With 
 hybrid  fiber  optic-  coaxial  upgrade,  "[  a]  cable  operator  with  750  MHz  system  can  ultimately  offer  the 
 equivalent  of  240  channels  (both  analog  and  digital)  while  having  50  MHz,  or  the  equivalent  of  80-  100 
 digital  channels  held  in  reserve."  With  eventual  digitalization  of  cable  plant,  operator  "will  be  able  to 
 offer  the  equivalent  of  1,100-  1,600  digital  channels")  (emphasis  added). 
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 Viewpoint  Diversity 
 The  strongest  proponents  of  diversity  in  programming  will  insist  that  it  is  not 
 multiple,  different  choices  that  matter,  but  viewpoint  diversity.  Given  the  facts  of  the 
 marketplace,  I  believe  this  to  really  be  the  crux  of  the  governments  purported  diversity 
 interest.  The  goal  is  not  simply  to  provide  choices  that  appeal  to  diverse  interests.  The 
 proponents  want  shows  that  are  antagonistic  to  each  other.  24  The  first  problem  with  this 
 conception  is  that  it  is  unclear  that  a  market  that  produces  programming  that  serves  the 
 interests  of  a  broad  and  varied  audience  does  not  also  represent  a  sufficient  number  of 
 viewpoints  from  which  consumers  can  choose. 

 Secondly,  I  question  what  the  concept  means  for  the  vast  majority  of  programs 
 consumers  watch.  Is  NBCs  Friends  antagonistic  to  WBs  Dawsons  Creek?  Is  ABCs 
 Who  Wants  to  be  a  Millionaire  antagonistic  to  CBS  Touched  by  an  Angel?  Or,  is  ABCs 
 Monday  Night  Football  antagonistic  to  Foxs  Football  Sunday?  Its  hard  to  see  the 
 relevance  of  this  concept.  Perhaps,  the  viewpoint  interest  is  reserved  for  public  affairs  and 
 news  programs,  where  issues  might  be  presented  and  debated.  But,  here,  too,  one 
 questions  its  meaning.  Local  news  programs  rarely  editorialize,  or  pick  political 
 candidates,  or  take  stands  on  major  issues  such  as  abortion  or  gun  control.  The  reason  is 
 simple  enough:  because  consumers  do  not  pay  to  watch,  broadcasters  make  money  by 
 reaching  the  largest  possible  audience.  They  rarely  take  the  kind  of  risks  that  might  endear 
 them  to  some  in  the  viewing  area  and  raise  the  ire  of  others.  They  are  not  in  the 
 antagonizing  business.  Moreover,  I  am  not  sure  why  we  are  certain  antagonistic 
 programs  do  not  sell.  I  see  plenty  of  evidence  of  opinionated  programming:  Crossfire, 
 Face  the  Nation,  Hardball,  Larry  King  Live,  and  why  not  Jerry  Springer,  for  examples. 
 Are  we  to  believe  all  of  this  would  vanish  absent  our  structural  ownership  rules? 

 I  also  fail  to  see  how  ownership  restrictions  in  themselves  do  much  to  promote  the 
 goal  of  antagonism.  Different  owners  may  have  different  perspectives,  but  they  probably 
 have  more  in  common  as  commercial  interests  than  not,  for  each  must  compete  for 
 maximum  audience  share  to  remain  profitable.  Moreover,  the  ownership  class  may 
 include  different  people,  but  it  is  hard  to  see  how  that  ensures  that  they  are  different  in 
 their  viewpoints.  We  do  not  and  could  not  possibly  insist  there  be  Republican  owners  and 
 Democratic  owners,  pro-  gun  and  anti-  gun  owners,  etc.  I  would  suggest  some  amount  of 
 antagonism  sells.  Controversy  and  conflict  are  the  stuff  of  good  story.  If  different 
 viewpoints  are  to  be  found,  I  think  they  will  be  the  products  of  the  commercial  market 

 24  The  First  Amendment  rests  on  the  assumption  that  the  widest  possible  dissemination  of  information 
 from  diverse  and  antagonistic  sources  is  essential  to  the  welfare  of  the  public  .  .  .  Order  (quoting 
 Associated  Press  v.  U.  S.,  326  U.  S.  1,  20  (1945)). 
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 much  more  than  by  our  rules  and  our  adherence  to  the  high-  brow  ideal  we  used  to  defend 
 them. 

 Localism 
 Finally,  I  would  like  to  say  a  brief  word  about  localism,  which  is  often  subtly 
 distinguished  from  diversity  in  general.  The  principle  is  that  the  government  favors  locally 
 originated  programming  because  that  is  the  programming  most  likely  to  serve  the  interests 
 of  those  viewers  and  listeners  in  the  community  of  the  licensed  station.  The  majority  of 
 stations  are  affiliated  with  a  national  network.  Because  the  broadcasting  business  seeks  to 
 maximize  viewers,  there  has  always  been  concern  that  a  powerful  network  would  force 
 local  stations  to  carry  their  national  program,  theoretically  to  the  detriment  of  local 
 viewers  and  local  interests.  For  decades,  the  Commission  has  pursued  rules  intended  to 
 ensure  networks  do  not  dominate  local  stations  and  their  programming  preferences.  25 

 One  central  failing  of  regulations  intended  to  promote  localism  is  that  they  assume 
 that  such  programming  would  not  flower  if  networks  and  stations  were  too  large.  One  is 
 hard  pressed,  however,  to  see  why,  in  a  healthy  marketplace,  if  the  public  values  local 
 programming,  producers  would  not  supply  it.  If  a  local  audience  desires  a  program,  and  is 
 willing  to  watch  the  program,  that  program  will  attract  advertising  dollars  and  thus  a 
 station  or  network  will  have  an  incentive  to  produce  and  provide  that  show.  Indeed,  since 
 most  consumers  purchase  advertised  product  in  their  local  towns  and  communities, 
 advertisers  even  national  ones  with  local  franchises  would  favor  programs  that  appeal 
 to  local  audiences. 

 I  remain  struck  how  often  we  simply  assume  that  such  programming  will  vanish  if 
 we  do  not  require  it.  Of  course,  if  consumers  do  not  want  certain  kinds  of  local 
 programming  and  it  is  not  provided  as  a  consequence,  there  is  no  justification  for  the 
 government  to  compel  it.  Where  government  attempts  to  promote  the  messages  and 
 images  that  it  prefers,  even  where  consumers  themselves  do  not,  we  are  no  longer  in 
 America  and  the  First  Amendment  has  been  abandoned.  26 

 II.  CRITIQUE  OF  THE  BIENNIAL  REVIEW 
 I  will  now  turn  and  address  the  specifics  of  todays  Order.  The  Commission  has 
 25  One  example  is  the  right  to  reject  rule.  See  generally,  47  C.  F.  R.    73.658. 
 26  See  Playboy,  2000  WL  646196,  at  *13  (Stating  that  "these  judgments  are  for  the  individual  to  make, 
 not  for  the  Government  to  decree,  even  with  the  mandate  or  approval  of  the  majority.") 
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 taken  steps  today  to  modify  some  of  its  broadcast  ownership  rules  in  an  attempt  to  make 
 our  regulations  more  consistent  with  current  marketplace  conditions.  While  I  support 
 these  steps,  I  believe  they  are  too  limited  in  scope  and  reflect  a  continuing  reluctance  to 
 examine  in  a  meaningful  way  the  legacy  of  our  broadcast  regulations.  As  a  result,  I  concur 
 in  part  and  dissent  in  part  to  the  Order  released  today.  I  will  address  the  rules  to  which  I 
 dissent  or  concur  below. 

 Before  doing  so,  I  wish  to  state  my  approach  to  the  Biennial  Review  of  structural 
 ownership  rules.  Since  our  charge  is  to  examine  whether  a  rule  continues  to  serve  the 
 public  interest  in  light  of  competition,  I  feel  it  imperative  to  always  fully  examine  the  state 
 of  the  video  market  market  share,  number  of  competitors,  competitive  effects,  ease  of 
 entry  and  inefficiencies  and  challenge  the  continued  validity  of  prophylactic  ownership 
 rules  in  light  of  this  examination.  27  I  believe  the  clear  bent  of  the  biennial  review  process 
 set  out  by  Congress  is  deregulatory,  in  recognition  of  the  pace  of  dramatic  change  in  the 
 marketplace  and  the  understanding  that  healthy  markets  can  adequately  advance  the 
 governments  interests  in  competition  and  diversity.  Thus,  contrary  to  the  approach  of  the 
 majority,  I  start  with  the  proposition  that  the  rules  are  no  longer  necessary  and  demand 
 that  the  Commission  justify  their  continued  validity.  Against  that  backdrop,  I  turn  to 
 todays  decision. 

 National  Television  Ownership  Rule  and  UHF  Discount 
 I  respectfully  dissent  from  the  majoritys  conclusion  that,  based  on  the  record 
 before  us,  the  national  ownership  cap  still  serves  the  public  interest.  The  Order  contains 
 no  meaningful  examination  of  the  market  or  the  state  of  competition,  a  glaring  omission 
 given  Section  202(  h)  s  directive  to  consider  whether  competition  obviates  the  need  for 
 such  rules.  This  is  particularly  disturbing,  since  serious  questions  have  been  raised  (but 
 not  adequately  addressed)  as  to  whether  this  rule  is  substantially  related  to  the  stated 
 government  interests  of  protecting  local  competition  and  promoting  local  diversity,  and 
 evidence  has  been  presented  that  the  rule  may  actually  cause  harm  to  the  public  interest.  28 

 In  the  Notice  of  Proposed  Rulemaking,  we  asked  for  comment  on  the  effect  of  the 
 rule  on  competition  in  the  national  advertising  and  program  production  markets.  We  also 
 asked  about  the  effect  of  the  rule  on  existing  television  networks  and  the  formation  of  new 
 networks.  These  points  of  inquiry  go  to  issues  of  competition  in  the  national  markets. 

 27  I  believe  the  guiding  principles  articulated  in  Commissioner  Furchtgott-  Roths  separate  statement  have 
 merit. 
 28  See  Old  Rules  and  New  Rivals,  supra  note  11. 
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 One  would  expect  to  see  an  examination  of  market  concentration,  advertising  and 
 programming  price  effects,  etc.  The  Order,  however,  lacks  any  meaningful  discussion  of 
 either  of  the  national  markets  or  the  formation  of  new  networks.  If  it  had,  it  would  have 
 noted  the  substantial  change  that  has  occurred  offering  greater  competitive  discipline  and 
 substantially  increased  diversity.  See  Section  I,  supra. 

 Instead,  the  Order  validates  the  rule  on  two  other  grounds:  It  states  that  (1) 
 additional  time  is  needed  to  assess  the  impact  of  the  local  ownership  rule  changes  made 
 last  August;  29  and  (2)  expresses  concern  about  the  growing  number  of  large  group  owners 
 and  the  potential  for  disruptive  restructuring.  None  of  these  articulated  reasons  address 
 the  national  programming  or  advertising  markets,  or  the  rules  impact  on  new  or  existing 
 networks. 

 Indeed,  the  justifications  appear  to  focus  almost  exclusively  on  competition  and 
 diversity  at  the  local  level.  30  It  is  not  intuitive  why  national  ownership  restrictions  have 
 any  meaningful  impact  on  local  competition  or  local  diversity.  We  have  very  detailed  rules 
 limiting  the  number  of  stations  one  may  own  in  a  given  local  market.  Thus,  no  matter  how 
 many  stations  one  owns  nationally,  he  cannot  increase  concentration  in  the  local  market, 
 by  operation  of  our  local  ownership  rules.  Indeed,  these  rules  were  modified  less  than  a 
 year  ago  to  reflect  our  present  views  on  local  competition  and  diversity.  Consequently,  I 
 fail  to  see  the  relationship  between  the  national  cap  and  the  stated  government  interest  in 
 local  competition  and  diversity.  Further,  the  Order  does  not  offer  a  meaningful 
 explanation.  I  would  note  that  on  many  previous  occasions  the  Commission  has  itself 
 squarely  expressed  doubt  about  the  linkage  between  the  national  cap  and  its  stated  goals.  31 

 Not  only  are  the  stated  rationales  for  retaining  the  rule  in  its  current  form  not 
 persuasive,  but  the  Order  lacks  any  meaningful  discussion  of  the  potential  harms  posed  by 
 the  rule.  For  example,  the  study  completed  by  Professor  Michael  Katz  raises  the 
 possibility  of  some  non-  trivial  harms  associated  with  this  rule.  The  study  finds  that  the 
 rule:  (1)  limits  economies  of  scale  associated  with  common  ownership,  thus  raising  costs 

 29  Review  of  the  Commissions  Regulations  Governing  Television  Broadcasting;  Television  Satellite 
 Stations  Review  of  Policies  and  Rules,  14  FCC  Rcd  12903  (1999). 
 30  The  Order  finds  that  applications  for  duopolies  under  our  new  local  television  ownership  rule  were  only 
 filed  this  past  November  and,  as  a  result,  they  should  monitor  developments  under  this  new  rule  prior  to 
 making  any  changes  to  the  national  television  ownership  reach  cap. 

 31  See,  e.  g.,  Amendment  of  Multiple  Ownership  Rules,  100  FCC  2d  17,  37  (1984)  (noting  irrelevance  of 
 national  rules  to  diversity  in  local  markets).  See  also  Old  Rules  and  New  Rivals  supra  note  x,  at  61 
 (discussing  Department  of  Justice  opinion  in  1983  that  eliminating  the  national  multiple  ownership  rules 
 would  raise  little  risk  of  adverse  competitive  effects  in  any  market). 
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 and  reducing  incentives  to  invest  in  over  the  air  television;  (2)  blocks  the  expansion  of 
 particularly  well-  run  station  groups;  and  (3)  limits  the  ability  of  broadcast  networks  to 
 own  stations,  an  arrangement  that  would  improve  coordination  and  lower  the  risks 
 associated  with  investing  in  high-  quality,  innovative  programming.  32  These  harms  are  not 
 small  concerns  to  an  industry  in  the  midst  of  remaking  itself  in  digital  form  and  for  whom 
 every  day  the  number  of  competitors  increases  while  total  viewership  declines. 

 These  concerns  are  also  strikingly  similar  to  those  raised  by  the  Commission  in  its 
 decision  to  modify  the  Dual  Network  Rule.  In  the  Notice  of  Proposed  Rulemaking  in  that 
 proceeding,  also  issued  today,  the  Commission  reviews  with  some  specificity  the  current 
 economies  of  the  network  broadcasting  market.  As  noted  in  the  NPRM,  networks  are  in 
 the  business  of  producing  mass  audiences,  and  the  size  of  that  audience  is  facing 
 continuing  erosion  from  cable  and  DBS.  The  NPRM  finds  that  in  order  for  networks  to  be 
 economically  viable  they  must  be  larger  rather  than  smaller  as  measured  in  terms  of 
 affiliated  stations  and  the  viewers  produced  and  sold  to  advertisers.  33  In  the  dual 
 network  context,  the  Commission  finds  that  contract  negotiations  between  program 
 producers  and  networks  are  extremely  complex  and,  as  a  result,  the  costs  of  these 
 contracts  are  high.  Integration  allows  for  lower  costs  and  better  allocation  of  risks.  34 
 The  NPRM  also  points  to  the  amount  of  integration  that  has  occurred  in  this  market  after 
 the  repeal  of  our  financial  interest  and  syndicated  exclusivity  rules  (fin/  syn)  as  reflective  of 
 the  difficulty  in  negotiating  contracts.  35 

 I  would  argue  that  these  same  economic  costs  and  efficiencies  accrue  to  a 
 networks  affiliate  relationships  as  well.  Contract  negotiations  between  networks  and 
 affiliates  are  also  complex  and  the  costs  high.  And  as  in  the  case  of  the  fin/  syn  rules,  I 
 would  point  to  the  number  of  networks  that  are  either  closing  in  or  at  the  cap  as  evidence 
 of  the  difficulty  and  costs  associated  with  contracting  with  affiliates.  36  For  those 
 companies  that  are  at  the  cap,  these  costs  are  a  direct  result  of  our  rules.  But  the  Order 
 not  only  fails  to  analyze  these  costs,  but  also  whether  the  costs  associated  with  the  rule  are 
 justified  on  the  basis  of  our  interest  in  preserving  competition  in  the  national  programming 
 or  advertising  markets,  or  even  competition  or  diversity  at  the  local  level. 

 32  See  Old  Rules  and  New  Rivals,  supra.,  note  12,  at  ii-  iv. 
 33  Amendment  of  Section  73.658(  g)  of  the  Commissions  Rules    The  Dual  Network  Rule,  Notice  of 
 Proposed  Rulemaking,  FCC  #00-  213,  Adopted  Jun.  8,  2000,  Rel.  Jun.  20,  2000,  at    12. 
 34  Id.,  at    18. 

 35  Id.,  at    15. 
 36  CBS  is  currently  at  40  percent  audience  reach,  FOX  at  35  percent,  PAX  at  34  percent  and  Tribune  at  29 
 percent.  See  Special  Report  Top  25  Television  Groups,  Broadcasting  and  Cable,  Apr.  10,  2000,  at  72-  98. 
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 The  Order  also  states  that  a  change  in  the  cap  may  well  influence  the  bargaining 
 positions  between  broadcast  television  networks  and  their  affiliates,  and  that  we  should 
 proceed  cautiously,  particularly  given  the  restructuring  that  may  be  taking  place 
 concurrently  on  the  local  level.  However,  we  do  not  have  evidence  of  a  massive 
 restructuring  taking  place  at  the  local  level.  Only  42  applications  for  duopolies  in  local 
 markets  have  been  filed  since  we  modified  our  local  ownership  rules,  and  19  of  those 
 reflect  purchases  of  television  stations  that  the  buyer  already  programs  through  local 
 marketing  or  time  brokerage  agreements.  And,  while  I  am  sensitive  to  the  shifts  currently 
 taking  place  in  the  network/  affiliate  relationship,  I  am  unconvinced  that  these  concerns 
 necessarily  implicate  issues  of  diversity  and  competition  at  the  local  level.  Protecting  one 
 group  of  station  owners  over  another  for  its  own  sake  is  not  a  valid  function  of 
 government.  Nonetheless,  I  would  have  liked  to  hear  much  more  about  the  impact  on 
 local  stations  and  how  that  impact  undermines  the  public  interest  in  an  NPRM  that  would 
 more  comprehensively  examine  the  35  percent  audience  reach  cap. 

 In  short,  the  Commissions  decision  is  deficient  in  several  ways.  It  fails  to  fully 
 examine  the  video  market  and  consider  the  changes  in  that  market.  It  merely  assumes  a 
 valid  link  between  a  national  limit  and  local  competition  and  diversity,  despite  fairly 
 substantial  evidence  to  the  contrary.  And,  it  fails  to  consider  the  public  interest  harms  that 
 may  flow  from  the  rule.  I  believe  there  is  more  than  enough  on  the  record  of  this 
 proceeding  to  call  into  question  whether  the  public  is  being  served  by  the  35  percent 
 audience  reach  cap,  and  I  would  have  supported  a  Notice  to  examine  more  thoroughly  the 
 possibility  of  its  modification  or  repeal.  Further,  I  support  the  Commissions  decision  not 
 to  amend  the  UHF  discount.  Any  action  on  the  discount  should  be  considered  in 
 conjunction  with  a  thorough  analysis  of  the  cap. 

 Newspaper/  Broadcast  Cross-  Ownership  Rule 
 I  also  must  respectfully  dissent  from  the  majoritys  conclusion  that  the 
 newspaper/  broadcast  cross-  ownership  rule  continues  to  serve  the  public  interest.  While  I 
 welcome  the  decision  to  issue  an  NPRM  to  look  at  the  impact  of  the  rule  in  particular 
 circumstances,  I  am  disappointed  that  the  Commission  appears  unwilling  to  engage  in  a 
 broader  debate  about  the  continuing  validity  of  this  25-  year-  old  rule,  which  has  never  been 
 modified.  This  rule  raises  significant  First  Amendment  concerns,  and,  as  a  result,  requires 
 rigorous  analysis  in  support  of  its  continuing  validity.  To  my  mind,  the  Order  falls  short 
 of  that  bar,  and  I  cannot  conclude  that  the  rule  continues  to  serve  the  public  interest  as  a 
 result  of  competition. 

 As  I  predicted  in  my  separate  statement  to  the  NOI,  the  pivotal  issues  in  this  entire 
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 proceeding  evolve  around  the  issue  of  diversity.  Nowhere  is  this  more  the  case  than  in  the 
 analysis  surrounding  the  newspaper/  broadcast  cross-  ownership  rule.  With  respect  to  this 
 rule,  the  Commission  relies  heavily  on  its  goal  of  promoting  viewpoint  diversity,  which 
 looks  specifically  at  the  amount  of  local  programming  in  a  market.  While  the  Order 
 considers  the  effect  of  the  rule  on  competition,  it  limits  its  discussion  to  whether 
 meaningful  efficiencies  derive  from  existing  combinations.  A  more  thorough  competitive 
 analysis  would  also  discuss,  for  example,  the  relationship  between  the  advertising  markets 
 for  broadcasting  and  newspapers  and  the  substitutability  of  the  television  and  newspaper 
 products.  If  they  are  the  same  products,  then  the  Commission  should  justify  its  decision  to 
 permit  television  duopolies  but  not  newspaper/  television  combinations  in  local  markets.  If 
 they  are  different  products,  then  the  Commission  should  justify  why  it  will  continue  to 
 apply  a  complete  ban  on  cross-  ownership  between  the  mediums,  based  simply  on  their 
 character. 

 The  heart  of  the  newspaper/  broadcast  cross-  ownership  rule  is  the  Commissions 
 belief  that  these  two  mediums  are  the  only  two  suited  to  providing  content  oriented 
 toward  the  local  community.  37  This  Order  retains  that  thesis  by  rejecting  the  proposition 
 that  the  explosion  in  alternate  sources  of  programming  obviates  the  need  for  the  rule.  It 
 finds  that:  (1)  new  outlets  (DBS/  MMDS)  are  not  substitutes  for  newspapers  or 
 broadcasters  on  the  local  level;  and  (2)  that  cable  is  a  poor  substitute  because  it  is  not 
 required  by  law  to  provide  locally  originated  content,  even  though  some  systems  do.  By 
 contrast,  the  Order  places  faith  in  broadcasting,  because  broadcasters  are  required, 
 pursuant  to  their  public  interest  obligations,  to  provide  programming  responsive  to  the 
 needs  of  the  local  community,  and  newspapers,  even  though  they  are  not  required  to, 
 typically  cover  local  issues.  From  these  observations,  the  Order  concludes  that  broadcast 
 television  and  newspapers  continue  to  be  the  dominant  source  of  local  news  and  public 
 affairs  information  in  any  given  market.  Let  me  address  each  of  these  two  propositions. 

 As  configured  today,  it  is  true  that  most  satellite  and  wireless  based  video 
 providers  offer  primarily  national  programming.  The  central  reason  for  this  is  technical. 
 Satellite  technology  has  had  difficulty  beaming  unique  programming  into  local 
 communities  from  hundreds  of  miles  in  space.  The  technology  is  changing,  however,  and 
 with  spot  beam  technology  DBS  providers  are  pursuing  localized  carriage.  Indeed,  they 
 fought  aggressively  to  modify  the  Satellite  Home  Viewer  Act  to  allow  them  to  carry  local 
 broadcast  signals,  feeling  that  it  was  a  competitive  disadvantage  not  to  have  local  content.  38  Some  companies  appear  to  be  pursuing  a  satellite  service  that  would  include 

 37  See  Amendment  of    73.34,  73.240,  and  73.636  of  the  Commissions  Rules  Relating  to  Multiple 
 Ownership  of  Standard,  FM,  and  Television  Broadcast  Stations,  Docket  No.  18110,  Second  Report  and 
 Order  in  Docket  18110,  50  FCC  2d  1046,  1057-  58  (1975).  38 
 See,  e.  g.,  Audio  Notes,  Audio  Week,  Nov.  15,  1999,  available  in  1999  WL  7563749  (  CEA  Pres.  Gary 
 Shapiro  .  .  .  said  CE  companies  have  long  believed  that  the  ability  of  DBS  subscribers  to  receive  local 
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 multiple  channels  of  tailored  24  hour  local  programming,  including  weather,  sports,  traffic, 
 arts  and  community  affairs.  Thus,  as  competition  increases  in  providing  national 
 programming  content  (broadcast,  cable,  DBS,  MMDS,  Internet)  carriers  will  naturally 
 push  into  local  content  to  differentiate  their  offerings.  It  is  clear,  in  my  view,  that  content 
 as  an  important  competitive  offering.  So,  while  I  would  concede  that  these  services 
 provide  limited  local  programming  today,  it  is  clear  that  video  competition  is  driving  them 
 to  provide  localized  content  and  they  should  not  be  dismissed  as  viable  alternatives  out  of 
 hand. 

 The  majoritys  rejection  of  cable  as  a  viable  medium  for  local  content  is  more 
 baffling.  The  fact  is  that  many  cable  systems  are  offering  local  programming,  perhaps  for 
 more  concentrated  periods  than  broadcast  television.  News  Channel  8  in  our  own  area 
 offers  just  one  example.  Cablevisions  New  York  Metro  service  offering  local  news, 
 weather,  traffic,  sports  and  community  affairs  is  another.  Most  cable  systems  offer 
 community  PEG  channels.  Many  systems  offer  local  high  school  sports,  such  as  the  Home 
 Team  Sports  channel.  HTS  is  apparently  valuable  enough  to  consumers  that  it  costs  extra 
 to  have  access  to  it.  Moreover,  cable  systems  are  operated  locally,  just  as  stations  are, 
 and  I  see  no  real  impediment  to  them  offering  local  services  if  their  community  wishes  to 
 have  them.  In  fact,  local  cable  systems  are  regulated  by  local  franchises  that  often  extract 
 local  community  services  as  a  condition  of  receiving  a  local  franchise.  Broadcast  stations 
 have  no  local  regulatory  oversight.  Despite  all  of  this,  the  Commission  turns  a  blind  eye, 
 refusing  to  survey  the  breadth  of  local  cable  programming  and  dismissing  the  argument  by 
 holding  that  because  federal  law  does  not  mandate  local  content,  we  cannot  count  on  such 
 systems  providing  it. 

 The  Commission,  however,  repeats  the  same  error  I  note  in  Section  I.  It  seems 
 unwilling  to  recognize  that  localism  sells.  There  are  a  bevy  of  commercial  motivations  for 
 offering  such  fare:  advertisers  want  to  target  groups  with  similar  demographics  and 
 interests.  National  programmers  want  to  differentiate  their  products.  Multichannel 
 systems  want  to  increase  the  value  of  subscription  fees.  I  find  it  a  bit  remarkable  we  will 
 not  look  to  or  credit  competitive  content,  where  there  is  not  a  regulation  compelling  it, 
 when  reviewing  the  market  to  see  if  competition  has  obviated  the  need  for  a  regulation! 
 Moreover,  the  Order  refuses  to  consider  local  content  in  cable  systems,  because  it  is  not 
 required,  but  in  direct  contradiction  is  unobstructed  in  crediting  regulation-  free  local 
 newspaper  coverage  because  that  medium  typically  covers  local  issues.  This  is 
 unquestionably  arbitrary  analysis. 

 network  signals  is  critical  to  the  success  of  the  home  satellite  market.    );  Capitol  Hill,  Warrens  Cable 
 Regulation  Monitor,  Nov.  29,  1999,  available  in  1999  WL  6826333  (DirecTV  and  EchoStar  planned  to 
 provide  local  broadcast  network  channels  to  their  customers  as  soon  as  President  Clinton  signed  SHVA 
 into  law). 
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 In  defending  this  rule,  the  Commission  again  trumpets  the  value  of  antagonistic 
 voices,  or  viewpoint  diversity.  I  question  generally  some  aspects  of  this  governmental 
 interest,  which  I  discussed  more  fully  in  Section  I.  I  would  only  add  a  few  points.  For 
 one,  I  do  not  see  how  one  can  demonstrate  that  newspapers,  by  their  very  nature,  are 
 antagonistic  to  broadcasters  and,  thus,  their  combination  would  frustrate  our  stated  goal. 
 I  have  not  observed  or  been  shown  any  particular  give  and  take  between  these  two 
 mediums.  I  don't  believe  we  have  even  genuinely  examined  this  proposition.  Surely,  one 
 can  hypothesize  that  if  a  local  paper  and  local  station  combined,  there  may  be  some 
 homogenization  of  news  and  information.  But,  one  can  equally  imagine  that  the  combined 
 resources  may  allow  for  greater  and  more  efficient  coverage  of  local  events  that  could  not 
 be  covered  by  the  two  individually.  (There  is  some  evidence  of  this  where  certain 
 combinations  have  been  grandfathered).  Second,  I  would  note  that  a  broadcast  station  is 
 the  most  likely  candidate  to  take  views  antagonistic  to  another  station,  since  they  directly 
 compete  for  audience  share.  Yet,  we  allow  a  single  entity  to  own  two  broadcast  stations 
 in  many  markets,  if  enough  voices  remain  in  the  market.  I  do  not  see  why 
 newspaper/  broadcast  combinations  could  not  be  regulated  the  same  way. 

 Based  on  the  above  considerations,  I  cannot  support  the  conclusion  that  the 
 newspaper/  broadcast  cross-  ownership  restrictions  continue  to  serve  the  public.  I  would 
 support  a  proceeding  that  would  look  critically  at  how  the  significant  and  far  reaching 
 changes  in  the  video  marketplace  since  1975  have  eviscerated  the  need  for  what  is  an 
 extremely  prohibitive  regulation. 

 The  Cable/  Broadcast  Cross-  Ownership  Rule 
 I  also  dissent  from  the  Orders  decision  to  retain  the  Cable/  Broadcast 
 Cross-  Ownership  rule.  The  rule  is  30  years  old,  and,  as  in  the  case  of  the  rules 
 discussed  above,  I  believe  there  have  been  sweeping  and  pervasive  changes  in  the 
 local  video  programming  market  that  warrant  a  more  critical  analysis  of  the 
 benefits  associated  with  this  rule  than  has  been  undertaken  in  the  context  of  the 
 instant  NOI.  I  believe  that  many  of  the  harms,  such  as  channel  positioning, 
 asserted  in  the  context  of  this  rule  may  be  adequately  addressed  by  other  rules  the 
 Commission  regularly  enforces.  For  example,  I  would  observe  that  even  if  one 
 were  concerned  that  cable  might  have  an  incentive  in  favoring  its  own  local  station 
 on  its  cable  system,  the  must  carry  rules  would  largely  deny  it  the  ability  to  do 
 so. 

 Finally,  I  find  it  ironic  that  the  majority  is  concerned  that  it  will  lose  an 
 antagonistic  voice  if  a  local  cable  system  is  co-  owned  with  a  broadcast  station, 
 but  is  unwilling  to  count  that  same  voice  as  viable  in  the  broadcast/  newspaper 
 cross-  ownership  context.  For  all  of  the  above  reasons,  I  would  have  supported  a 
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 rulemaking  to  more  adequately  and  thoroughly  examine  whether  this  rule  is  still 
 necessary  to  promote  the  publics  interest. 

 The  Dual  Network  Rule 
 I  concur  in  the  Orders  conclusion  that  the  Dual  Network  Rule  as  it  applies  to 
 UPN  and  the  WB  may  no  longer  serve  the  public  interest  and  the  decision  to  issue  an 
 NPRM  to  evaluate  possible  modifications  to  the  rule.  While  I  would  support  an  NPRM 
 that  would  also  consider  repeal  of  the  current  rule  as  it  applies  to  the  top  four  networks,  I 
 believe  that  the  record  supports  this  more  limited  NPRM  as  an  adequate  first  step.  I  look 
 forward,  however,  to  continuing  to  review  this  rule  in  our  upcoming  biennial  reviews. 

 Local  Radio  Ownership 
 I  also  concur  in  the  decision  today  to  retain  the  current  local  radio  ownership  rules. 
 However,  I  am  unconvinced  that  the  further  proceeding  contemplated  by  the  Order  is 
 warranted,  nor  do  I  believe,  as  a  general  matter,  that  consolidation  in  the  industry  has 
 threatened  local  competition  and  diversity  in  a  manner  inconsistent  with  the  intent  of 
 Congress. 

 The  Order  contemplates  a  Notice  of  Proposed  Rulemaking  (NPRM)  to  address 
 several  radio  market  issues.  One  issue  is  how  to  harmonize  the  counting  methods  we  use 
 to  determine  both  the  size  of  the  market  and  the  number  of  stations  in  the  market  that 
 count  toward  the  cap.  To  the  extent  that  this  NPRM  addresses  what  may  be  an  arbitrary 
 distinction  between  counting  methods,  I  support  its  issuance. 

 The  NPRM  will  also  ask  whether  the  Commission  should  adopt  a  different  (and 
 more  restrictive)  method  for  determining  the  relevant  market  because  our  current 
 definition  may  be  producing  unintended  results  that  are  contrary  to  Congress  intent. 
 My  single  greatest  problem  with  the  proposed  action  here  is  one  of  statutory 
 interpretation.  The  effect  of  its  proposal  would  be  to  shrink  markets  and  thereby 
 substantially  limit  the  number  of  stations  that  one  could  own.  When  Congress  adopted  its 
 radio  ownership  provision,  Commission  regulations  defined  these  markets  in  a  particular 
 way.  That  way  was  the  law  of  the  land.  The  Arbitron  market  definitions  were  in 
 existence,  but  they  were  not  used  for  regulatory  purposes,  and  Congress  did  not 
 specifically  incorporate  them.  I  believe  that  it  is  disingenuous  to  suggest  at  this  late  date 
 that  only  by  changing  the  market  definition  to  Arbitron  can  we  effectuate  what  Congress 
 really  meant.  I  believe  proper  statutory  interpretation  would  lead  one  to  conclude  that 
 Congress  set  its  numerical  limits  against  the  market  definition  that  prevailed  in  regulation 
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 at  the  time,  and  not  a  definition  that  had  not  been  used  for  this  purpose  previously.  39 
 Moreover,  if  Congress  did  not  mean  to  set  the  appropriate  level  of  concentration,  or  the 
 acceptable  level  of  diversity,  what  on  earth  are  the  numerical  market  levels  meant  to  do? 

 III.  CONCLUSION 
 In  conclusion,  I  do  not  believe  that  the  Commission  has  justified  its  decision  that 
 the  35  percent  audience  reach  cap,  the  newspaper/  broadcast  cross-  ownership  rule  or  the 
 cable/  broadcast  cross-  ownership  rule  continue  to  serve  the  public  interest  as  a  result  of 
 competition  as  Section  202(  h)  requires.  With  respect  to  each  of  these  rules,  I  would  have 
 supported  further  proceedings  to  more  thoroughly  evaluate  the  pervasive  changes  that 
 have  occurred  in  the  video  marketplace,  and  whether  these  rules  continue  to  achieve  the 
 goals  for  which  they  were  intended.  I  think  such  an  analysis  is  critical  in  light  of  the 
 challenges  facing  the  broadcasting  industry,  especially  the  reality  that  the  technical 
 advances  in  digital  capabilities  will  allow  more  and  more  platforms  to  deliver  video 
 programming.  This  Commission  must  look  forward  if  it  is  to  foster,  and  not  stand  in  the 
 way  of,  the  digital  revolution  that  is  occurring  across  all  of  the  communications  industries. 
 The  approach  taken  by  the  Commission  today,  however,  continues  to  look  to  the  days  of 
 yesteryear,  to  justify  its  rules.  It  is  time  to  take  the  mask  off  this  old  Lone  Ranger  and 
 look  more  deeply  into  the  face  of  change. 

 ADDENDUM 
 The  purpose  of  this  Addendum  is  to  address  material  that  was  added  by  the 
 majority  to  the  item  after  its  adoption  and  after  the  preceding  statement  was  completed. 
 Specifically,  the  facts  in  paragraph  28  and  the  analysis  contained  in  the  last  four  sentences 
 in  paragraph  30  were  circulated  two  weeks  after  the  item  was  adopted.  As  a  procedural 
 matter,  I  am  concerned  that  the  changes,  which  I  believe  are  substantive,  have  been 
 inappropriately  added  after  the  items  adoption  on  May  26,  2000  and  may  change  the 
 adoption  date  of  the  item  to  no  sooner  than  June  13,  2000,  well  past  the  statutory 
 deadline.  40  In  any  case,  I  will  respond  to  the  newly  added  material  below. 

 39  It  is  a  commonplace  of  statutory  construction  that  the  specific  governs  the  general,  Morales  v.  Trans 
 World  Airlines,  504  U.  S.  374,  384-  385  (1992)  (citing,  Crawford  Fitting  Co.  v.  J.  T.  Gibbons,  Inc.,  482 
 U.  S.  437,  445  (1987). 

 40  Section  5003,  Pub.  L.  106-  113  Stat.  1501  (1999).  See  also  Dissenting  Statement  of  Commissioner 
 Harold  W.  Furchtgott-  Roth. 
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 The  majority  now  maintains  that  elimination  or  relaxation  of  the  national  cap  rule 
 would  lead  to  the  consolidation  of  ownership  of  all  or  most  of  the  television  stations  in 
 the  country  in  the  hands  of  a  few  national  networks.  41  This  apocalyptic  pronouncement 
 is  without  foundation.  As  the  Order  itself  points  out,  large  numbers  of  stations  are 
 currently  owned  by  group  owners  and  there  is  not  even  a  hypothesis  proffered  as  to  why 
 such  major  commercial  interests  would  suddenly  sell  their  full  complement  of  stations  to 
 the  networks.  42 

 While  it  may  be  a  valid  hypothesis  that  network-  owned  stations  have  an  incentive 
 to  clear  the  majority  of  their  network  programming,  it  is  far  from  clear  that  they  would  not 
 also  have  economic  incentives  to  program  local  content  that  would  attract  both  viewers 
 and  advertisers.  Clearly,  competitive  video  service  providers  believe  local  content  is  key 
 to  the  success  of  their  product.  43  Moreover,  every  station,  regardless  of  ownership,  is 
 required  to  serve  its  local  community,  a  point  relied  on  by  the  majority  in  distinguishing 
 broadcasters  from  other  providers  of  programming,  44  Thus,  network-  owned  stations 
 could  not,  arguably,  run  national  programming  exclusively. 

 The  majority  also  now  for  the  first  time  says  that  we  should  be  concerned  that 
 there  is  a  loss  of  an  outlet  for  non-  network  programming  sources,  but  I  am  not  sure  that 
 this  concern  comports  with  the  facts.  Do  the  current  network  owned  and  operated 
 stations  have  higher  clearance  rates  for  network  programming?  Do  they  serve  their  local 
 communities  with  less  local  content  than  affiliated  stations?  Do  national  programmers  find 
 themselves  blocked  from  distributing  their  product  through  stations  owned  and  operated 
 by  the  networks?  Who  knows?  We  certainly  have  not  bothered  to  look. 

 The  majority  is  correct  in  noting  that  Congress  chose  not  to  eliminate  the  cap,  but 
 only  to  liberalize  it  in  the  1996  Telecom  Act.  But  Congress  also  clearly  instructed  the 
 Commission  to  continually  evaluate  market  and  competitive  conditions  to  determine 
 whether  rules  remain  in  the  public  interest.  Failing  to  have  done  so  fully,  it  cannot  glibly 
 escape  its  responsibility  by  deferring,  without  more,  to  a  judgment  Congress  made  four 
 years  ago  and  one  that  Congress  specifically  directed  us  to  continually  revisit. 

 41  See  Order,  30. 
 42  The  Commissions  Order  at  the  Appendix  indicates  that  the  top  25  group  owners  own  527  of  the  over 
 1600  television  stations  operating  today.  The  average  number  of  stations  owned  by  the  top  25  group 
 owners  is  21.  NBC  owns  13  stations,  ABC  owns  10,  Fox  owns  23  and  the  newly  merged  Viacom/  CBS 
 owns  35,  but  is  subject  to  divestiture  conditions  to  come  into  compliance  with  the  35%  cap. 

 43  See  p.  15,  infra. 

 44  See  p.  14,  infra. 
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 STATEMENT  OF  COMMISSIONER  GLORIA  TRISTANI, 
 DISSENTING  IN  PART 

 In  the  Matter  of  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  MM  Docket  No.  98-  35 

 I  dissent  from  the  majoritys  conclusion  that  the  dual  network  rule  should  be 
 modified  to  permit  ABC,  CBS,  Fox,  or  NBC  to  combine  with  UPN  or  WB.  Such  a 
 modification  is  unsupported  by  the  record  and,  if  ultimately  adopted,  would  further  erode 
 the  already  tenuous  level  of  diversity  available  on  the  public  airwaves. 

 Congress  itself  modified  the  dual  network  rule  only  four  years  ago,  as  part  of  the 
 Telecommunications  Act  of  1996.  In  describing  the  networks  covered  by  its  amended 
 rule,  Congress  expressly  referred  to  emerging  networks  (WBTN,  UPN),  a  fact  recently 
 relied  on  by  the  Commission  in  applying  the  rule  to  UPN  in  connection  with  the  CBS-Viacom 
 merger.  1  Thus,  in  1996,  Congress  found  that  the  state  of  competition  warranted 
 continued  application  of  the  dual  network  rule  to  UPN  and  WB.  Admittedly,  the 
 Commission  may  change  the  rule  adopted  by  Congress  pursuant  to  the  biennial  review 
 provisions  of  the  1996  Act.  But  nothing  has  occurred  in  the  past  four  years  that  should 
 lead  us  to  question  Congress  judgment. 

 To  the  contrary,  all  of  the  arguments  advanced  by  the  majority  as  justifying 
 modification  of  the  rule  were  as  true,  if  not  more  true,  in  1996  than  they  are  today.  First, 
 the  majority  asserts  that  program  production  and  networking  are  complementary  inputs 
 that  make  vertical  integration  desirable,  and  that  a  merger  of  one  of  the  top  four  networks 
 with  UPN  or  WB  could  be  characterized  as  a  merger  of  an  established  broadcast  network 
 with  an  established  program  producer.  Leaving  aside  the  factual  inaccuracies  of  this 
 argument  (e.  g.,  ABC  and  Fox  are  affiliated  with  major  production  studios  just  like  UPN 
 and  WB),  this  characterization  was  equally  true  in  1996.  Second,  the  majority  argues  that 
 the  rule  should  be  retained  for  the  top  four  networks  but  repealed  for  UPN  and  WB 
 because  the  former  are  established  broadcast  networks,  while  the  latter  are  still 
 nascent.  Again,  however,  even  assuming  that  UPN  and  WB  are  still  nascent 
 networks,  they  were  far  more  nascent  in  1996,  when  Congress  specifically  decided  that 
 they  should  fall  within  the  dual  network  rules  application. 

 1  See  Mem.  Op.  and  Order,  FCC  00-  155  (rel.  May  3,  2000)  at  para.  10,  citing  142  Cong.  Rec.  H1078-  03, 
 *H1121. 
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 It  is  not  hard  to  anticipate  the  effect  that  modification  of  the  rule  will  have.  It  will 
 reduce  diversity  on  the  public  airwaves  by  reducing  the  number  of  outlets  available  to 
 independent  program  producers.  Independent  programmers  are  already  having  a  difficult 
 time  gaining  network  carriage.  For  the  new  television  season,  a  record  24  of  37  new 
 series  are  either  owned  or  co-  owned  by  the  television  networks  which  will  air  them.  2 
 Disney  will  own  or  co-  own  an  interest  in  3  out  of  4  of  ABCs  new  programs;  CBS  owns 
 an  interest  in  6  of  7  new  shows;  NBC  owns  an  interest  in  4  of  7  new  shows;  20  th  Century 
 Fox  will  own  or  co-  own  5  of  Foxs  9  new  shows;  Paramount  will  produce  2  of  UPNs  4 
 new  series;  Warner  Brothers  will  own  or  co-  own  4  of  6  new  shows  for  WB.  3  Far  from 
 demonstrating  that  the  rule  has  outlived  its  usefulness,  the  marketplace  shows  that  the  rule 
 may  be  needed  more  today  than  ever. 

 The  Order  emphasizes  the  economic  efficiencies  that  would  accrue  to  incumbent 
 networks  by  modifying  the  rule.  This  I  do  not  doubt.  But  we  have  a  higher  duty  than 
 helping  broadcasters  maximize  their  private  gain.  Our  first  duty  is  to  manage  the  airwaves 
 in  a  manner  that  promotes  the  publics  interest  in  competition  and  diversity.  In  the 
 absence  of  evidence  that  more  than  four  independent  networks  are  not  economically 
 feasible,  we  should  be  cautious  about  changing  our  priorities. 

 2  Joe  Schlosser  and  Steve  McClellan,  Moneyphilia,  Broadcasting  and  Cable,  May  22,  2000  at  17. 
 3  Id. 
105