[Federal Register Volume 60, Number 75 (Wednesday, April 19, 1995)]
[Proposed Rules]
[Pages 19564-19566]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9569]



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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 73

[MM Docket No. 95-40; FCC 95-145]


Broadcast Services; Network/Affiliate rule

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This Notice of Proposed Rule Making proposes to eliminate or 
modify the Commission's requirement that broadcast television stations 
file their network affiliation agreements with the Commission and that 
these filings be publicly available. This action is needed to determine 
if the costs of this rule exceed its benefits.

DATES: Comments are due by June 12, 1995, and reply comments are due by 
July 12, 1995.

ADDRESSES: Federal Communications Commission, Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT:
Robert Kieschnick (202-739-0770) or Paul Gordon (202-776-1653), Mass 
Media Bureau.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Notice of Proposed Rule Making in MM Docket No. 95-40, FCC 95-145, 
adopted April 5, 1995 and released April 5, 1995. The complete text of 
this NPRM is available for inspection and copying during normal 
business hours in the FCC Reference Center (Room 239), 1919 M Street, 
N.W., Washington, D.C., and also may be purchased from the Commission's 
copy contractor, International Transcription Service, (202) 857-3800, 
2100 M Street, NW., Suite 140, Washington, DC 20037.

Synopsis of Notice of Proposed Rule Making

    1. With this Notice of Proposed Rule Making (NPRM), the Commission 
continues its examination of rules regulating broadcast television 
network/affiliate relations in light of changes in the video 
marketplace. This NPRM proposes repeal or modification of 47 C.F.R. 
Sec. 73.3613(a) (the ``filing of affiliation contracts'' rule). This 
rule requires television broadcast licensees to file copies of network 
affiliation contracts, agreements, and understandings with the 
Commission. The contract must be reduced to one written document, 
including the substance of any oral agreements, without reference to 
any other document. However, the rule does allow subsequent renewals, 
changes, or amendments to the contract to be set forth in separate 
filings that refer to the original contract. Notification of 
cancellation or termination of the filed contracts is also required. 
This rule applies only to agreements with broadcast television networks 
that offer 15 or more hours of programming per week to 25 or more 
affiliates in 10 or more states. Thus, while ABC, CBS, NBC, and Fox are 
subject to the rule, the United Paramount Network and the Warner 
Brothers Network are not.
    2. The primary purpose of requiring broadcast television stations 
to file their affiliation agreements with the Commission has been to 
give the Commission the ability to monitor these contractual 
relationships and ensure that the Commission's restrictions on these 
relationships are not violated in affiliation agreements. Also, by 
requiring affiliates to file their affiliation agreements with the 
Commission, the rule may chill any desire to engage in misbehavior, 
thereby reducing the likelihood that these agreements will contain 
provisions that violate the Commission's underlying network/affiliate 
rules.
    3. Since 1985, when we last examined this rule, the video 
marketplace has changed dramatically. As pointed out in our recent 
Further Notice of Proposed Rule Making in MM Docket No. 91-221 (60 FR 
6490, February 2, 1995) addressing broadcast television ownership, 
there has been an increase in the number of broadcast stations 
available for affiliation with a broadcast network in nearly every 
market. Moreover, new, aspiring networks have emerged.\1\ As a result 
of these changes, the bargaining positions of broadcast television 
networks and commercial broadcast television stations have changed and 
differ market by market. The recent affiliate switches demonstrate the 
increased competition between broadcast networks for affiliation with 
broadcast television stations in different markets, and thus suggest 
that broadcast networks' market power over their affiliates has 
diminished to some extent.

    \1\Fox now competes with ABC, CBS, and NBC. Further, United 
Paramount Network and Warner Brothers Network are beginning to 
develop as competitors to these networks.
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    4. Given the recent increased competition between broadcast 
networks for affiliates in different markets, we solicit comment on 
whether or not there is a continuing need for the Commission to monitor 
network/affiliate relationships through mandatory filings of their 
affiliation agreements. We also seek comment on the extent to which 
filing these contracts with the Commission is necessary to deter 
violations of the [[Page 19565]] network/affiliate rules. If we 
conclude that routine filing of agreements is not necessary to deter 
violations of the rules, we could relieve licensees of the duty to file 
affiliation agreements routinely, and instead simply require the 
production of such agreements upon Commission request.
    5. Separate and apart from the issue of whether contracts should be 
filed with the Commission is the issue of whether licensees should be 
required to make these contracts available to the public. Making these 
agreements publicly available allows the general public to inspect them 
and to file complaints where abuses of the public interest are 
discovered. It also allows third parties (e.g., advertisers), whose 
commercial interests are affected by these agreements, to determine if 
their interests are harmed by these agreements. We solicit comment on 
the importance of these purposes and examples of the general public's 
use of these filings that illustrate the extent of the benefits from 
making these filings publicly available.
    6. Turning to the possible costs of the rule, we note that there 
are direct and indirect costs to be considered. The direct costs of 
filing these agreements are the additional expenses incurred to prepare 
and submit the filings to the Commission over the expenses incurred to 
prepare affiliation agreements for their original purpose. We solicit 
evidence on the size of these costs incurred by filing affiliates.
    7. The indirect costs of filing these agreements are more difficult 
to quantify, potentially more serious, and a result of our requirement 
that the filings be publicly available. First, networks must bargain 
with broadcast stations serving different markets to gain access to 
their potential audiences through affiliation agreements. As mentioned 
earlier, the number of potential parties to such contracts differs 
market by market, but generally represents a few potential parties on 
either side. By making compensation or other data in these filings 
publicly available, the Commission may facilitate the ability of 
parties either seeking or offering affiliation to avoid competition. 
For example, in markets where there are more commercial stations than 
broadcast networks interested in seeking affiliation agreements, 
networks might seek, through parallel action, to lower the compensation 
they pay potential affiliates and could use the public filings to 
ensure each party is performing as agreed.\2\ Alternatively, in markets 
where there are more broadcast networks seeking affiliation agreements 
than commercial broadcast stations available, commercial stations could 
seek to ensure that the compensation that each of them receives is 
higher than the compensation any one of them alone was willing to 
accept. In either example, the public availability of the affiliation 
compensation data facilitates joint monitoring to ensure similar 
behavior.\3\ The Commission solicits comment on the potential for such 
behavior in light of current market conditions, estimates of the size 
of these indirect costs, and their consequences, if any, for viewers.

    \2\See B. M. Owen and S. S. Wildman, Video Economics, Harvard 
University Press, (1992) at 166-172 for a discussion of influences 
on the bargaining position of broadcast television networks and 
commercial broadcast television stations in negotiating affiliation 
agreements.
    \3\For a general overview of the manner in which data 
dissemination among competitors may facilitate cartel-like behavior, 
see N.R. Prance, Price Data Dissemination as a Per Se Violation of 
the Sherman Act, 45 U. Pitt. L. Rev. (1983) at 68-78; see also 
Donald S. Clark, Price-Fixing without Collusion: An Antitrust 
Analysis of Facilitating Practices after Ethyl Corp., 1983 Wis. L. 
Rev. 887, 900-901; see also MCI Telecom. Corp. v. AT&T, 114 S. Ct. 
2223, 2233 (1994) for an example of the Commission's concern over 
this issue.
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    8. Second, making these filings publicly available alters the 
dynamic of the contracting process. For example, the requirement 
reduces a network's ability and willingness to craft contractual 
arrangements with one affiliate to recognize special market conditions 
of that affiliate. By way of illustration, a network may discern that a 
new affiliate requires improved local news coverage in order to compete 
against other television stations in its market and may wish to help 
fund such improvement because of the financial constraints that the new 
affiliate faces. However, the network may be reluctant to do so if its 
other affiliates can discover such improved or different terms and are 
likely to demand similar terms. Thus, by requiring contracts to be 
publicly available, our rules make it less likely that the terms are 
tailored to best suit the needs of the parties to the contract. 
Confidentiality of the financial terms of affiliates' contracts would 
break the linkage between concessions offered to one affiliate and 
negotiations with other affiliates. Networks would be able to tailor 
affiliation contracts solely to local conditions with less concern for 
repercussions in other markets. On the other hand, as the Commission 
previously concluded, public filing of these contracts enables weaker 
affiliates to attempt to ensure that they receive comparable or 
competitive compensation to other affiliates of a network, thereby 
strengthening their overall financial condition and ability to serve 
the public. Consequently, we solicit comments on the advantages and 
disadvantages of a network's being able to tailor its contracts versus 
affiliates' desire to ensure comparable contracts, particularly in 
terms of the Commission's competition and diversity concerns.
    9. We propose to eliminate the filing requirement and require 
broadcast television stations to make their affiliation agreements 
available to the Commission upon request. We will adopt this proposal 
if we conclude that the benefits of continuous monitoring of broadcast 
television station's affiliation agreements with broadcast television 
networks no longer exceed their costs. We tentatively conclude that we 
can continue to enforce our network/affiliate rules through a system of 
complaint initiated requests for affiliation contract information. Such 
a system would relieve licensees of the paperwork burden of filing 
contracts with the Commission, and would reduce the potential 
anticompetitive effects of general public disclosure. We solicit 
comment on this tentative conclusion and on whether we can rely on 
affiliates, or members of the public, to file such complaints.
    10. Alternatively, we could continue to require contracts to be 
filed with the Commission, but maintain the confidentiality of the 
contracts by limiting access to authorized FCC employees. This 
modification of our rule would allow us to continue to monitor network/
affiliate relations to protect the public interest, while at the same 
time reducing the indirect costs of the current filing requirement 
which arise from the public availability of these agreements. However, 
the Freedom of Information Act requires agencies to disclose documents 
in certain circumstances. Given that we did not exempt these filings 
from the Freedom of Information Act in our 1969 Report and Order in 
Docket No. 14710 (34 FR 5947, May 1, 1969), we also solicit comment on 
whether or not this proposal is a viable option.
    11. Another alternative would be to continue the filing requirement 
but modify it to require that only redacted copies of contracts be made 
available to the public. These copies would omit any references to the 
values which determine the affiliate compensation and, possibly, other 
business sensitive terms. In this way, the public could continue to 
monitor the issues affecting program diversity in their community and 
we could continue to monitor the network-affiliate relationship. This 
option would preserve the benefit of general public scrutiny of these 
[[Page 19566]] agreements, but reduce their potential negative effects 
on the competition for affiliations.
    12. We could, of course, also maintain the rule as it currently 
stands. We would adopt this option only if we determine that the direct 
and indirect costs associated with these filings continue to be less 
than their benefits. We request that comments on the above proposals 
weigh the benefits and costs in a manner which justifies the particular 
recommendation a commenter makes.

Administrative Matters

    13. Pursuant to applicable procedures set forth in Sections 1.415 
and 1.419 of the Commission's Rules, 47 C.F.R. Sections 1.415 and 
1.419, interested parties may file comments on or before June 12, 1995, 
and reply comments on or before July 12, 1995. To file formally in this 
proceeding, you must file an original plus five copies of all comments, 
reply comments, and supporting comments. If you want each Commissioner 
to receive a personal copy of your comments, you must file an original 
plus nine copies. You should send comments and reply comments to Office 
of the Secretary, Federal Communications Commission, Washington, DC 
20554. Comments and reply comments will be available for public 
inspection during regular business hours in the FCC Reference Center 
(Room 239), 1919 M Street, NW., Washington, DC 20554.
    14. This is a non-restricted notice and comment rulemaking 
proceeding. Ex parte presentations are permitted, except during the 
Sunshine Agenda period, provided they are disclosed as provided in the 
Commission Rules. See generally 47 C.F.R. Sections 1.1202, 1.1203, and 
1.1206(a).

Initial Regulatory Flexibility Act Statement

    15. Reason for the Action: This proceeding was initiated to review 
and update the Commission's rule concerning the filing of broadcast 
television network affiliation contracts.
    16. Objective of this Action: The actions proposed in this Notice 
are intended to reduce concerns over the potential deleterious effects 
of making some or all the substance of broadcast television affiliation 
agreements publicly available.
    17. Legal Basis: Authority for the actions proposed in this Notice 
may be found in Sections 4 and 303 of the Communications Act of 1934, 
as amended, 47 U.S.C. Secs. 154 and 303.
    18. Recording, Recordkeeping, and Other Compliance Requirements 
Inherent in the Proposed Rule: The proposals may reduce existing 
requirements.
    19. Federal Rules that Overlap, Duplicate, or Conflict with the 
Proposed Rules: None.
    20. Description, Potential Impact, and Number of Small Entities 
Involved: Approximately 1,500 existing television broadcasters of all 
sizes may be affected by the proposals contained in this decision.
    21. Any Significant Alternatives Minimizing the Impact on Small 
Entities and Consistent with the State Objectives: The proposals 
contained in this NPRM are intended to simplify and ease the regulatory 
burden currently placed on commercial television broadcasters.
    22. As required by Section 603 of the Regulatory Flexibility Act, 
the Commission has prepared the above Initial Regulatory Flexibility 
Analysis (IRFA) of the expected impact on small entities of the 
proposals suggested in this document. Written public comments are 
requested on the IRFA. These comments must be filed in accordance with 
the same filing deadlines as comments on the rest of this Notice of 
Proposed Rule Making, but they must have a separate and distinct 
heading designating them as responses to the Initial Regulatory 
Flexibility Analysis. The Secretary shall send a copy of this Notice of 
Proposed Rule Making, including the Initial Regulatory Flexibility 
Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration in accordance with paragraph 603(a) of the Regulatory 
Flexibility Act. Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C. Section 
601 et seq. (1981).
    23. This Notice of Proposed Rule Making is issued pursuant to 
authority contained in Sections 4(i) and 303 of the Communications Act 
of 1934, as amended, 47 U.S.C. Secs. 154(i), 303.

List of Subjects in 47 CFR Part 73

    Television broadcasting.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 95-9569 Filed 4-18-95; 8:45 am]
BILLING CODE 6712-01M