Source: http://www.fcc.gov/print/node/37257
Timestamp: 2014-08-31 04:41:22
Document Index: 782585031

Matched Legal Cases: ['§ 8', '§ 8', '§ 0', '§ 3', '§ 73', '§ 3', '§ 5', '§ 8', '§ 8', '§ 8', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 632', '§ 6', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73', '§ 73']

LPFM Economic Study and Report to Congress.
DA 12-2
Economic Impact of Low-Power
FM Stations on Commercial FM Radio:
Adopted: January 4, 2012
II. EXECUTIVE SUMMARY OF REPORT AND ECONOMIC STUDY................................................ 3III. LEGAL AND REGULATORY BACKGROUND .............................................................................. 11IV. SUMMARY OF THE RECORD IN THIS PROCEEDING ................................................................ 22V. RESULTS OF THE ECONOMIC STUDY ......................................................................................... 41VI. CONCLUSION .................................................................................................................................... 64APPENDIX A – Economic Study of the Impact of LPFM Stations on Full-Service Commercial FM Stations
APPENDIX B – List of Commenters
The Local Community Radio Act of 2010 (“LCRA”), signed into law by President Obama on January 4, 2011, seeks to expand licensing opportunities for low-power FM (“LPFM”) stations. Section 8 of the LCRA requires the Commission to conduct an economic study assessing the impact that LPFM stations will have on full-service commercial FM stations and to submit a report to the appropriate Congressional committees on the study by January 4, 2012.1 Today, the Media Bureau (“Bureau”) fulfills the directive of Section 8. Specifically, the Bureau has conducted an economic study, entitled “Economic Study of the Impact of LPFM Stations on Full-Service Commercial FM Stations” (“Economic Study”), and, pursuant to its delegated authority, adopts this Report describing the Economic 1 Local Community Radio Act of 2010, § 8, Pub. L. No. 111-371, 124 Stat. 4072 (2011). Because Congress refers to “full-power” radio stations as “full-service” stations in the LCRA, we also use that terminology in this Report and the Economic Study. See id. § 8(a). Appendix B contains a list of parties that filed comments and reply comments in this docket and includes abbreviations used in this document to reference those parties.
Study and its findings.2 The Report and the attached Economic Study concurrently are being submitted to Congress as required by the LCRA.
As explained below and demonstrated in the Economic Study, the results of our analysis show that, on the whole, LPFM stations do not currently have, and in the future are unlikely to have, a demonstrable economic impact on full-service commercial FM radio stations. II.
EXECUTIVE SUMMARY OF REPORT AND ECONOMIC STUDY
The Economic Study is comprised of four sections, each of which is attached to this Report in Appendix A. After describing the history of the LPFM service and the public record that was developed in this proceeding, this Report provides an overview of the approach to, and a summary of the findings of, each part of the Economic Study. The Report concludes with a determination that LPFM stations generally do not have, and in the future are unlikely to have, a demonstrable economic impact on full-service commercial FM radio stations.
In Section III of this Report, we provide an overview of the relevant legal and regulatory background, including: (1) an explanation of the statutory scope and requirements of Section 8 of the LCRA; (2) a description of the significant differences in the regulations governing low-power and full-service commercial FM stations; and (3) a summary of the legal and regulatory history of the LPFM service since its creation in 2000. Among other things, the Report explains regulations governing LPFM service that are more restrictive than those governing full-service commercial FM radio.
Section IV summarizes the public comments in this proceeding. Commenters provided input on, among other subjects, what metrics to consider in the study, which geographic measures to use, whether to assess interference from LPFM stations, and whether and how to make predictive judgments about the likelihood of an economic impact of LPFM stations licensed in the future as a result of the LCRA’s implementation.
Section V of this Report summarizes the approach and results of each of the four parts of the Economic Study. The first section of the study (“Overview of the LPFM and Full-Service Radio Industries”) provides a broad overview of the current state of LPFM stations by comparing the key statistics for LPFM stations to those of full-service stations, and of full-service commercial FM stations in particular. We found, after compiling information from the Commission’s Consolidated Database System (“CDBS”) and the BIA/Kelsey (“BIA”) commercial database, that LPFM stations serve primarily small and rural markets and have geographic and population reaches that are many magnitudes smaller than those of full-service commercial FM stations. In addition, LPFM stations generally have not been in operation as long as full-service commercial FM stations, have less of an Internet presence, and offer different programming formats. We also found that the average LPFM station located in an Arbitron Radio Metro Market (“Arbitron Metro”) has negligible ratings by all available measures and has an audience size that lags far behind those of most full-service stations in the same market. Notably, however, evidence suggests that the most popular LPFM stations have a fan base that, albeit small, is comprised of loyal listeners. Specifically, a number of the LPFM stations with Arbitron ratings achieved high values of Time Spent Listening (“TSL”), indicating that the listeners of those LPFM stations tend to tune in for long periods of time.
The second part of the Economic Study (“Case Study Analysis”) consists of in-depth case studies of eight LPFM stations. Although the sample size of eight stations is small and not intended to be statistically representative of the entire LPFM industry, the case studies enabled us to achieve a level of understanding regarding the operations of the selected LPFM stations that could not have been gleaned solely from a database review. Using an extensive questionnaire, Media Bureau staff conducted a detailed interview with the manager of each selected LPFM station. Although each of the stations differs considerably in its individual characteristics, the results of the case studies show that the selected LPFM 2 47 C.F.R. § 0.283.
stations generally broadcast a variety of programming continuously throughout the day, operate with very small budgets, rely on mostly part-time and volunteer staff, do not have measurable ratings, have limited population reach, and do not generate significant underwriting earnings. All but one of the station managers that we interviewed stated that the LPFM station is not competing directly for listeners with any specific full-service stations.
The third section of the Economic Study (“Analysis of the Likely Impact of LPFM Entry on Full-Service Commercial FM Stations”) assesses the potential ability of LPFM stations to compete with full-service commercial FM stations based on their relative positions of economic strength in the radio marketplace. We evaluate the likelihood that LPFM stations could have an economic impact in the two interrelated markets in which full-service commercial FM stations participate – the market for audience and the market for advertising. We conclude that, given their regulatory and operational constraints, LPFM stations are unlikely to have more than a negligible economic impact on full-service commercial FM stations. Therefore, this section of the study provides predictions and guidance for the subsequent statistical analysis.
The fourth section of the Economic Study (“Statistical Analysis of the Economic Impact of LPFM Stations on Full-Service Commercial FM Stations””) provides summary statistics as well as regression analyses in order to evaluate whether the presence of LFPM stations affects the audience ratings and advertising revenues of full-service commercial FM stations. In order to measure the presence of LPFM stations, we define their common listening areas with full-service commercial FM stations in three different ways: (1) Arbitron Metro assignments; (2) the full-service commercial FM stations’ predicted signal contours; and (3) a combination of both of the foregoing methods, which defines an LPFM station as sharing the service area of a full-service commercial FM station only if it is both in the same Arbitron Metro as and has a tower location that overlaps the contour of the full-service station. 10.
The first part of our Statistical Analysis presents a series of simple tables that, among other things, compare the economic health of full-service commercial FM stations that have LPFM stations in their broadcast areas with full-service commercial FM stations that do not. The tables make the same comparisons for specific groups of commercial FM stations, comparing stations in large and small Arbitron Metros and stations within the same format. The results of our summary statistics are inconclusive and do not provide a consistent view of an economic effect based on the presence of LPFM stations. We believe that market and station characteristics correlated with both the presence of LPFM stations and the economic health of full-service commercial FM stations are causing the inconsistent results observed in this part of our analysis. The regression analyses that follow permit us to control for many of these market and station characteristics and, therefore, to determine more accurately any economic impact of LPFM stations on full-service commercial FM stations. As explained further in Section V and Appendix A.4., our regression analyses yield reasonably consistent results from which we conclude that the presence of LPFM stations has no measurable effect on the economic performance of the average full-service commercial FM station. III.
In enacting the LCRA, Congress sought to increase the number of licenses available for LPFM stations by relaxing certain restrictions that limit the placement of LPFM stations, particularly in urban areas.3 Most significantly, the LCRA requires the elimination of third-adjacent minimum distance separation requirements between LPFM stations and full-service FM stations, FM translator stations, and FM booster stations.4 In addition, the LCRA permits the Commission to waive second-adjacent channel distance separation requirements if the proposed operations of an LPFM station will not create 3 See H.R. REP. NO. 111-706, at 48 (2011).4 LCRA § 3(a). See 47 C.F.R. § 73.807.
interference for any authorized radio service.5 The statute requires that the Commission, in licensing LPFM stations, FM translator stations, and FM booster stations, ensure the availability of licenses foreach of those types of stations in accordance with their equal status.6 As a first step toward implementing the LCRA’s directives, the Commission recently proposed to modify its procedures for processing pending FM translator applications and sought comment on whether to open an LPFM-only window no later than the summer of 2012.7
This Report and Economic Study further implement the statute. Specifically, Section 8 of the LCRA directs the Commission to “conduct an economic study on the impact that low-power FM stations will have on full-service commercial FM stations.”8 The Commission is required to submit a report on the study to the Committee on Commerce, Science, and Transportation of the Senate and the Committee on Energy and Commerce of the House of Representatives within one year of the LCRA’s enactment (i.e., by January 4, 2012).9 The statute clarifies that the requirement to conduct a study will not affect the licensing of new LPFM stations.10 Because Section 8 specifies that the Commission study the potential economic impact of LPFM stations on “full-service commercial FM stations,” this Report and the Economic Study focus exclusively on full-service commercial FM stations and do not analyze the potential impact of LPFM service on other types of commercial or non-commercial radio stations, advertisers, or consumers.11 The LCRA directs that our study focus on only one aspect of competition in the radio marketplace – how the presence of LPFM stations may affect the economic health of full-service commercial FM stations – and does not ask us to consider how competition from LPFM stations may benefit consumers or otherwise serve the public interest.
The rules governing LPFM service are in a number of respects different from, and generally more restrictive than, those applicable to full-service commercial FM stations. For example, unlike full-service commercial FM stations, LPFM stations may be licensed only to local entities and must operate on a non-commercial educational (“NCE”) basis.12 Therefore, LPFM stations are prohibited from broadcasting commercial advertisements or promotional announcements, although they may acknowledge contributions stemming from sponsorship or underwriting arrangements.13 LPFM stations operate on a secondary basis and so are prohibited from causing unacceptable interference to full-service FM stations.14 As described below, the power and antenna height restrictions that the Commission imposes on LPFM stations limit their range to 3.5 miles, which is substantially less than the 26-mile range of the median full-service commercial FM station.15 Further, unless the purpose of the licensed entity is public safety, only one LPFM license may be granted per entity, and licensees may not hold attributable 5 LCRA § 3(b)(2).6 Id. § 5.7 Creation of A Low Power Radio Service and Amendment of Service and Eligibility Rules for FM Broadcast Translator Stations, Third Further Notice of Proposed Rule Making, 26 FCC Rcd 9986 (2011) (“Third Further Notice”). 8 LCRA § 8(a).9 Id. § 8(b).10 Id. § 8(c).11 But see NAB Comments at 4 n.8 (suggesting that the Commission also consider the impact of LPFM stations on AM stations).
12 47 C.F.R. § 73.853.13 47 C.F.R. §§ 73.801, 73.503(d).14 See 47 C.F.R. §§ 73.809, 73.810.15 See Appendix A.1. 4
interests in any other regulated media entity, including broadcast stations.16 By comparison, there is no national limit on ownership of full-service radio stations, and licensees may own as many as eight commercial radio stations within the largest radio markets.17 In addition, licensees of full-service commercial radio stations may hold attributable interests in commercial television stations, consistent with the rules governing media ownership.18 Finally, although the Commission does not impose greater programming restrictions on LPFM stations than other types of stations, the Commission awards a licensing preference to LPFM applicants that commit to broadcasting at least eight hours of local origination programming daily.19
The Commission created the LPFM service in 2000 to “enhance locally focused community-oriented radio broadcasting” in order to serve “very localized communities or underrepresented groups within communities.”20 Specifically, the Commission adopted rules to establish two classes of LPFM facilities: (a) the LP100 class, consisting of stations with a maximum power of 100 watts effective radiated power (“ERP”) at 30 meters antenna height above average terrain (“HAAT”), providing an FM service radius (1 mV/m or 60 dBu) of approximately 3.5 miles (5.6 kilometers); and (b) the LP10 class, consisting of stations with a maximum of 10 watts ERP at 30 meters HAAT, providing an FM service radius of approximately one to two miles (1.6 to 3.2 kilometers).21 The LPFM Orderestablishing the service imposed separation requirements for LPFM stations to protect full-service FM stations operating on the co-, first-, and second-adjacent channels, as well as stations operating on intermediate frequency channels.22 The LPFM Order concluded, however, that imposition of a third-adjacent channel separation requirement would restrict unnecessarily the number of LPFM stations that could be authorized, and therefore declined to impose that requirement.23 As discussed below, Congress later directed the Commission to adopt such a restriction.
The LPFM Order also established ownership and eligibility rules for the LPFM service. In addition to restricting LPFM service to NCE operations and restricting licensee eligibility to applicants with no attributable interests in any other media subject to the Commission’s ownership rules, the Commission prohibited the assignment or transfer of LPFM construction permits and licenses.24 It further determined that, during the two years following the first LPFM filing window, no entity would be permitted to own more than one LPFM station and ownership would be restricted to local entities.25 To 16 47 C.F.R. § 73.855 (allowing not-for-profit organizations and governmental entities with a public safety purpose to own multiple LPFM licenses if one of the multiple licenses is submitted as a priority application and the remaining non-priority applications do not face a mutually exclusive challenge).
17 47 C.F.R. § 73.3555(a)(1).18 47 C.F.R. § 73.3555(c), (e).19 47 C.F.R. § 73.872(b)(3).20 Creation of Low Power Radio Service, Report and Order, 15 FCC Rcd 2205, 2208, ¶¶ 3, 4 (2000) (“LPFM Order”).
21 Id. at 2211-12, ¶¶ 13-14; see also 47 C.F.R. § 73.811. No stations currently exist in the LP10 class. The Commission has not opened an application filing window for the class of LPFM stations authorized to operate at a maximum of 10 watts. 22 LPFM Order, 15 FCC Rcd at 2233-34, 2246 ¶¶ 70-71, 104; see 47 C.F.R. § 73.807.23 LPFM Order, 15 FCC Rcd at 2246, ¶ 104.24 Id. at 2213-15, 2217-18, 2269 ¶¶ 17-20, 29, 163.25 Id. at 2219-20, 2222, ¶¶ 33, 39. The LPFM Order permitted entities to own up to five LPFM stations nationwide after the first two years of LPFM service and up to ten LPFM stations nationwide after the first three years of LPFM service. Id. at 2222, ¶ 39. In 2007, the Commission reinstated the prohibition on owning more than one LPFM station nationwide, unless the licensee has a public safety purpose. See 47 C.F.R. § 73.855. The rule permitting (continued….)
choose among entities filing mutually exclusive applications for LPFM licenses, the LPFM Order also set forth a point system that favors local ownership and locally-originated programming.26 Finally, the LPFM Order directed the then-Mass Media Bureau to establish filing windows for LP100 applications.27
The Commission revised and clarified some of its LPFM rules in a September 2000 Memorandum Opinion and Order on Reconsideration.28 The Reconsideration Order declined to adopt the more restrictive channel separation requirements urged by certain petitioners. Instead, the Commission adopted complaint and license modification procedures to address unexpected third-channel interference problems caused by LPFM stations.29 In addition to addressing these interference issues, the Commission increased the flexibility for universities, state and local governments, and entities operating public safety or transportation services to own LPFM stations.30
After the Commission declined to impose third-adjacent channel separation requirements on LPFM stations in the Reconsideration Order, Congress directed it to do so in the Government of the District of Columbia Appropriations Act, FY 2001 (“2001 DC Appropriations Act”).31 In that legislation, Congress instructed the Commission to prescribe third-adjacent channel spacing standards for LPFM stations and to deny LPFM applications of parties that previously had engaged in the unlicensed operation of a radio station.32 The 2001 DC Appropriations Act also directed the Commission to evaluate the likelihood of interference to existing FM stations if LPFM stations were not subject to the third-adjacent channel spacing requirement.33 As a result of the spacing requirement imposed by the new law, a number of facilities proposed in otherwise technically grantable applications became short-spaced to existing full-service FM stations or translators, leading to the amendment or dismissal of those applications.34
(Continued from previous page) only local entities to apply for LPFM licenses sunset in 2002, but it also was reinstated in 2007. See 47 C.F.R. § 73.853(b). 26 Under the point system, ties between competing applicants are resolved by either voluntary time-sharing agreements between such applicants or, in the event that they cannot so agree, the imposition of “involuntary time-sharing,” with each tied and grantable applicant awarded an equal, successive and non-renewable license term of no less than one year, for a combined total eight-year term. LPFM Order, 15 FCC Rcd at 2258-64, ¶¶ 136-51; see 47 C.F.R. § 73.872. The point system also favors LPFM applicants that pledge to operate at least 12 hours per day. LPFM Order, 15 FCC Rcd at 2261, ¶ 143; 47 C.F.R. § 73.872(b)(2). 27 LPFM Order, 15 FCC Rcd at 2256-57, ¶¶ 130-33. In March 2000, the Mass Media Bureau announced five separate filing windows for accepting LP100 applications, with each window limited to an application group of ten states and at least one other United States jurisdiction. See FCC Announces Five-Stage National Filing Window for Low Power FM Broadcast Station Applications, Public Notice, 15 FCC Rcd 18621 (MMB 2000). The last of those windows closed on June 15, 2001. Low Power FM Filing Window, Public Notice, 16 FCC Rcd 7915 (MMB 2001). 28 Creation of Low Power Radio Service, Memorandum Opinion and Order on Reconsideration, 15 FCC Rcd 19208 (2000) (“Reconsideration Order”). 29 Id. at 19232-35, ¶¶ 58-68; see 47 C.F.R. § 73.809. The Reconsideration Order also modified spacing standards to require LPFM stations to protect radio reading services for the blind. Reconsideration Order, 15 FCC Rcd at 19218-19, ¶ 23-24. 30 Reconsideration Order, 15 FCC Rcd at 19239-42, ¶¶ 79-84. The Reconsideration Order also addressed a numberof technical and ownership issues and clarified the eligibility rules for certain groups. See, e.g., id. at 19237-39, ¶¶ 72-77.
31 Pub. L. No. 106-553, § 632, 114 Stat. 2762, 2762A-111 (2000). 32 Id.33 Id.34 See Creation of a Low Power Radio Service, Second Report and Order, 16 FCC Rcd 8026, 8028-30, ¶¶ 5-9 (2001) (“Second LPFM Order”). 6
To evaluate the likelihood of interference in the absence of a third-adjacent channel distance separation requirement, the Commission selected an independent third party – The MITRE Corporation (“MITRE”) – to conduct field tests. MITRE’s engineering study, which was released by the Commission in 2003,35 concluded that LPFM third-adjacent channel minimum distance separation requirements could be eliminated, subject to certain stipulations, without creating an interference risk for full-service stations.36 In early 2004, the Commission submitted its report to Congress, recommending that, based on the MITRE study, Congress modify the statute to eliminate the third-adjacent channel distance separation requirements for LPFM stations.37
In a Second Reconsideration Order and Further Notice of Proposed Rulemaking issued in 2005, the Commission reexamined some of the rules governing the LPFM service, noting that the rules might need adjustment in light of the experiences of LPFM applicants and licensees.38 For example, the Commission sought comment on whether the prohibition on assignments and transfers of LPFM licenses should be relaxed or eliminated and on whether the temporary restrictions on multiple ownership of LPFM stations and on non-local ownership should be extended or allowed to sunset.39 To provide some immediate regulatory relief to LPFM broadcasters, the Commission delegated to the Media Bureau the authority to consider, on a case-by-case basis, requests to assign or transfer an LPFM station.40 Noting that thousands of FM translator applications remained pending from a filing window that had been opened in 2003, the Commission also froze the processing of those applications and sought comment on possible adjustments to the co-equal status of LPFM stations and FM translators.41
35 The Commission subsequently sought public comment on MITRE’s reported findings. See Comment Sought on The MITRE Corporation’s Technical Report, “Experimental Measurements of the Third-Adjacent-Channel Impacts of Low-Power FM Stations,” Public Notice, 18 FCC Rcd 14445 (MB 2003).
36 Experimental Measurements of the Third-Adjacent Channel Impacts of Low-Power FM Stations, The MITRE Corp. (May 2003) at xxvi-xxvii, 2-16 to 2-18, 5-1 to 5-4. The MITRE Report found an interference potential in certain limited circumstances, particularly to FM translators, unless recommended technical requirements are met. Id. The LCRA instructs the Commission to address the potential interference that the MITRE Report predicted to FM translator input signals. LCRA § 6. 37 Report to the Congress on the Low Power FM Interference Testing Program (rel. Feb. 19, 2004). 38 Creation of a Low Power Radio Service, Second Order on Reconsideration and Further Notice of Proposed Rule Making, 20 FCC Rcd 6763, ¶ 1 (2005) (“Second Reconsideration Order” and “Further Notice”). 39 Further Notice, 20 FCC Rcd at 6769-73, ¶¶ 16-23. 40 Id. at 6772, ¶ 20; see 47 C.F.R. § 73.865. In so doing, the Commission cited examples of circumstances in which a waiver of Section 73.865 might be appropriate, including “a sudden change in the majority of a governing board with no change in the organization’s mission; development of a partnership or cooperative effort between local community groups, one of which is the licensee; and transfer to another local entity upon the inability of the current licensee to continue operations.” Further Notice, 20 FCC Rcd at 6772, ¶ 20. The Commission noted, however, that “until we have further considered the transferability issue, we do not believe that waiver is appropriate to permit the for-profit sale of an LPFM station to any entity or the transfer of an LPFM station to a non-local entity or an entity that owns another LPFM station.” Id.
41 Further Notice, 20 FCC Rcd at 6776-80, ¶¶ 29-36. In the Further Notice, the Commission also proposed certain changes to the rules governing the formation and duration of voluntary and involuntary time-sharing arrangements among mutually exclusive LPFM applicants. Id. at 6774, ¶¶ 24-25. In addition, the Commission considered a number of changes to the LPFM technical rules. The Commission proposed to extend the construction period for LPFM stations and to allow time-sharing applicants greater flexibility to amend their applications to relocate the transmitter to a central location. Id. at 6774-76, ¶¶ 26-28. It also sought comment on the relationship between the LPFM and full-service FM services, including on whether LPFM stations should be required to prevent interference to subsequently authorized FM stations on second- and third-adjacent channels. Id. at 6780-81, ¶¶ 37-39. Finally, the Commission declined to schedule “regular” filing windows for LPFM new station applications and major modification applications. Id. at 6781, ¶ 40.
In 2007, the Commission adopted a Third Report and Order and Second Further Notice of Proposed Rule Making.42 The Commission reinstated its initial rule that LPFM licensees may not own more than one station, thereby reversing its phased-in approach that had allowed multiple ownership of LPFM stations beginning two years after the first LPFM filing window.43 It also reinstated its rule that LPFM licensees must be locally based, which had sunset in 2002.44 In order to ensure adequate licensing opportunities for LPFM stations, the Commission capped at ten the number of short-form applications that an FM translator applicant could pursue in Auction No. 83, an FM non-reserved band translator-only window that opened in 2003.45 It also eliminated the responsibility of LPFM stations to resolve interference caused to full-service stations subsequently authorized on second-adjacent channels46 and decided to allow transfers of LPFM licenses under limited conditions.47 In the accompanying Second Further Notice, the Commission sought comment on various rule changes that could benefit LPFM stations and expand LPFM licensing opportunities.48 In addition, the Commission recommended to Congress that it remove the requirement that LPFM stations protect full-service stations operating on third-adjacent channels.49
Following the LCRA’s enactment in January 2011, the Commission sought comment regarding the LCRA’s impact on the processing of pending translator applications. The Commission tentatively concluded that its prior proposal to allow applicants from the 2003 FM translator window to pursue as many as ten applications would be inconsistent with the statutory mandate in the LCRA to ensure the availability of spectrum for LPFM stations.50 In particular, the Commission expressed concern that the nationwide limit would not ensure sufficient LPFM licensing opportunities in larger spectrum-
42 Creation of a Low Power Radio Service, Third Report and Order and Second Further Notice of Proposed Rule Making, 22 FCC Rcd 21912 (2007) (“Third LPFM Order” and “Second Further Notice”).
43 Id. at 21921-22, ¶¶ 21-23; see 47 C.F.R. § 73.855 (restricting ownership to one station per LPFM licensee, unless the licensee has a public safety purpose).
44 For the top 50 urban markets, an LPFM applicant is deemed local if it is physically headquartered or has a campus within ten miles of the proposed transmitter site, or if 75 percent of its board members live within ten miles of the proposed transmitter site. The location restriction is 20 miles for LPFM applicants outside the top 50 urban markets. Third LPFM Order, 22 FCC Rcd at 21921-23, ¶¶ 21-25; see 47 C.F.R. § 73.853(b).
45 Third LPFM Order, 22 FCC Rcd at 21929-35, ¶¶ 43-57. The Commission directed the Media Bureau to resume processing the applications of applicants in compliance with the cap. Id. at 21935, ¶ 56. The Media Bureau permitted Auction No. 83 applicants with more than ten pending short-form applications to identify applications for voluntary dismissal. Media Bureau Invites Applicants to Select FM Translator Applications for Voluntary Dismissal to Comply with Processing Cap, Public Notice, 23 FCC Rcd 3707 (MB 2008). Shortly thereafter, the Bureau suspended dismissal of short-form applications pending review of petitions for reconsideration of the ten-application limit. The Bureau continued processing the forms of applicants with ten or fewer pending applications. Media Bureau Suspends Dismissal of FM Translator Applications Related to Processing Cap, Public Notice, 23 FCC Rcd 5629 (MB 2008). 46 Third LPFM Order, 22 FCC Rcd at 21938, ¶ 63; see 47 C.F.R. § 73.809. Additionally, the Commission established interim procedures for considering waivers of Section 73.807 to allow short-spacing when LPFM stations located on second-adjacent channels face the risk of displacement. It also created a framework for determining when it could serve the public interest to waive the secondary status of an LPFM. Third LPFM Order, 22 FCC Rcd at 21939-42, ¶¶ 64-71; see 47 C.F.R. § 73.807. 47 Third LPFM Order, 22 FCC Rcd at 21918-20, ¶¶ 14-17. In addition, among other things, the Commission clarified that repetitious automated programming does not meet the local origination requirement and encouraged voluntary time-sharing agreements between applicants. Id. at 21922-23, 21923-27, 21929, ¶¶ 24, 26-36, 41-42.
48 Second Further Notice, 22 FCC Rcd at 21942-46, ¶¶ 72-84.49 Id. at 21942, ¶ 72.50 Third Further Notice, 26 FCC Rcd at 9989-91, ¶¶ 7-10.
limited markets because translator applicants most likely would retain their applications proposing service to densely populated areas.51 Among other things, the Commission proposed a market-tiered approach whereby all pending applications for new FM translators within a market would be dismissed if the minimum number of channels available for LPFM stations in that market did not meet the proposed “channel floor” for that market tier.52 The Commission also intends to initiate a separate proceeding to seek comment on other LCRA implementation issues, such as eliminating third-adjacent channel LPFM protection requirements, establishing LPFM interference remediation procedures, and establishing LPFM protection requirements for translator input signals on third-adjacent channels.53 The Commission set a goal of opening an LPFM-only window by summer 2012 after the adoption of rules implementing those LCRA provisions.54 IV.
SUMMARY OF THE RECORD IN THIS PROCEEDING
Public Notice: The Media Bureau issued a notice in May 2011 seeking public comment on potential approaches to the Economic Study and on the ways in which LPFM stations may have an economic impact on full-service commercial FM stations.55 Because the deadline for the Economic Study required its completion before the LCRA is implemented fully, the Bureau first asked whether and, if so, how it should make predictive judgments concerning any economic impact that could result from the statute’s implementation.56 The Bureau next sought comment on its initial view that the key metrics to consider in the Economic Study are audience ratings and advertising revenues, noting its proposal to examine whether LPFM stations cause full-service commercial FM stations to experience any changes with respect to these metrics.57 The Bureau also invited commenters to identify relevant resources or data for evaluating these metrics and to provide any evidence or information that would inform its review.58 In addition, the Bureau sought comment on its plan to use two different geographic measures in the Economic Study: (1) the economic effect of LPFM stations on full-service commercial FM stations with signal contours that either significantly overlap or encompass one or more LPFM stations and (2) the economic impact of LPFM stations on full-service commercial FM stations based on geographic markets as defined by Arbitron, regardless of contour overlap.59 Finally, the Bureau sought comment on its intent not to include an assessment of the potential economic impact on full-service stations due to interference from LPFM stations.60
Predictive Judgments: In response to the Bureau’s inquiry in the Public Notice regarding whether the Economic Study should include predictive judgments about the potential effect of future LPFM stations on full-service commercial FM stations, NAB argues that Congress expects the Commission to assess the impact of LPFM stations licensed after the LCRA modifications are implemented.61 It reasons that Congress contemplated the need to make reasonable predictions given that 51 Id.52 Id. at 9996-99, ¶¶ 25-31.53 See id. at 9986, ¶ 1 n.2.54 Id. at 9997-98, ¶ 29. 55 Media Bureau Seeks Comment on the Economic Impact of Low-Power FM Stations on Full-Service Commercial FM Stations, Public Notice, 26 FCC Rcd 6565 (MB 2011) (“Public Notice”).
56 Id. at 6566.57 Id. at 6566-67.58 Id.59 Id. at 6567-68.60 Id. at 6568-69.61 NAB Comments at 2-3.
the study is due before most LPFM stations will be authorized under the revised rules. NAB presumes that Congress required a study to enable it to consider further legislative changes if an adverse impact is predicted and that there would be little value to a study assessing the impact of licensing rules that no longer apply. Commenter Don Schellhardt agrees with NAB that the Commission’s analysis should include predictions about the impact of future LPFM stations, but he cautions that predictions about the future are necessarily speculative and should be discounted accordingly.62 Several commenters point out the difficulties inherent in using data regarding current LPFM stations to make predictive judgments about LPFM stations yet to be licensed.63 CCB, for example, argues that such predictions are likely to be problematic because economic, technological, and behavioral conditions are rapidly changing; there are too many potential variables; spectrum utilization issues may arise for radio; and the scope and timeline for a future analysis are ill-defined.64
We agree that we have limited ability to assess the economic effects of stations not yet in existence. We do not know how many potential station owners will pursue LPFM licenses after the LCRA is implemented, where they will locate, or what programming formats they will choose. As explained in Section V below and demonstrated in the Economic Study, the current economic impact of LPFM stations on full-service commercial FM stations appears to be minimal. We believe that the regulatory restrictions imposed upon LPFM stations, such as 100 watt maximum power levels and non-commercial operating status, will continue to constrain their ability to have a significant economic impact on full-service commercial FM stations after the implementation of the LCRA. In addition, we believe that the current low levels of LPFM listenership in comparison to full-service commercial FM listenership as well as the limited amounts of underwriting on most LPFM stations indicate that their economic impact on full-service commercial stations will continue to be small in the future. Therefore, we believe we can conclude with some confidence that the economic effects of future LPFM stations likely will be similar to those of LPFM stations currently in operation.
Audience Ratings: Several commenters question the Commission’s proposal to examine the potential impact of LPFM stations on the audience ratings of full-service commercial FM stations. Commenter Wesli Dymoke contends that audience ratings data should carry little weight in the Commission’s analysis because ratings changes experienced by full-service commercial FM stations may not be clearly or directly attributable to LPFM stations.65 CCB argues that audience ratings would not be a useful metric in the Commission’s economic impact analysis because changes in a station’s ratings are not necessarily correlated with changes in the station’s revenues.66 Prometheus reiterates the Commission’s observation that there is a limited amount of data available regarding LPFM audiences because over half of LPFM stations are located outside of Arbitron Metros.67
NAB, however, agrees with the Commission that it should examine changes in the audience size of full-service commercial FM stations.68 NAB suggests that, for non-Arbitron stations, the 62 Schellhardt Reply at 2-3 (noting that Congress always has the option to legislate and the LCRA contains no automatic triggers requiring either Congress or the Commission to act on the study’s findings).
63 REC Networks Comments at 3; CCB Comments at 1-2; Prometheus Comments at 1; Dymoke Reply at 3-4. 64 CCB Comments at 1-2; see also Dymoke Reply at 3-4. 65 Dymoke Reply at 5, 14.66 CCB Comments at 2-3. 67 Prometheus Comments at 1; see Public Notice, 26 FCC Rcd at 6567.68 NAB Comments at 4.
population within a station’s protected contour could serve as a proxy for audience size.69 Dymoke supports NAB’s suggestion to use population data for non-Arbitron stations.70
In addition, several commenters express doubt that LPFM stations have an appreciable impact on the audience ratings of full-service commercial FM stations. For example, REC Networks asserts that no LPFM stations ever have been shown to affect commercial ratings.71 Prometheus cites a 2010 study concluding that increased advertising is the primary reason why listenership on stations owned by large networks has been eroding since the late 1990s.72 Commenters also argue that LPFM stations are not likely to have an adverse effect on commercial audience ratings because they generally target underserved and niche audiences.73 Prometheus urges the Commission to consider the possibility that LPFM stations attract new listeners, and so are not drawing listeners away from commercial stations.74 Similarly, other commenters surmise that LPFM stations may be attracting listeners from alternative media, such as the Internet and MP3 players.75 Some commenters argue that by potentially drawing a larger overall audience to the radio dial, LPFM stations may even increase the audiences of commercial stations. Schellhardt & Leggett point to enterprises, such as shopping malls and multiplex cinemas, which attract a larger group of consumers by offering more choices.76 They argue that by creating a larger “pie” for the market to share, co-located competitors can generate higher revenues. REC Networks and Dymoke support this shopping mall analogy and agree that LPFM stations may benefit commercial stations by bringing listeners to, or back to, the radio dial.77
We continue to believe that audience ratings data are one of the best available sources for analyzing whether LPFM stations have or will have an economic impact on full-service commercial FM stations and, accordingly, our Economic Study includes an examination of audience ratings to the extent such data were available. We are cognizant of the difficulty, noted by Dymoke, of isolating the causes of ratings changes. Our Statistical Analysis (Appendix A.4.) attempts to address this concern. Our regression analyses, in particular, are designed to isolate the impact of LPFM stations from other potential factors that may be having an impact on the ratings of full-service commercial FM stations. In addition, both our summary statistics and our regression analyses enabled us to examine the possibility that LPFM stations have a positive impact on the ratings of full-service commercial FM stations.
We were not persuaded by CCB’s suggestion to exclude ratings data on the grounds that a station’s ratings are not necessarily correlated with the station’s revenues. While we agree that ratings may not correlate with revenues in all cases, we nonetheless believe that both metrics are highly relevant to the economic well-being of commercial radio stations and therefore are relevant to the study that 69 Id. at 4 n.9.70 Dymoke Reply at 4-5.71 REC Networks Comments at 2.72 Prometheus Comments at 2 (citing Catherine Tyler Mooney, Turn On, Tune In, Drop Out: Radio Listening, Ownership Policy, and Technology, 23 J. of Media Econ. 231-248 (2010)).
73 Prometheus Comments at 3-4; REC Networks Comments at 2; Dymoke Reply at 8; Schellhardt & Leggett Comments at 8.
74 Prometheus Comments at 3-4.75 REC Networks Comments at 2; Dymoke Reply at 10; Schellhardt & Leggett Comments at 8.76 Schellhardt & Leggett Comments at 5-8; see also Schellhardt Reply at 2.77 REC Networks Reply at 1-2; Dymoke Reply at 12-13. On the other hand, NAB contends that it is likely that LPFM stations will have an adverse economic impact on certain types of “niche-formatted” full-service FM commercial stations. NAB Comments at 3-4. We address this argument in our discussion of Other Issues, at the end of Section IV.
Congress asked us to conduct. With respect to NAB’s suggestion for non-Arbitron stations, it appears that the population within a station’s protected contour could serve as a proxy only for the potential audience size of a station at a given moment. Population shifts within an area are not likely to be useful in determining the relative changes in popularity of the area’s radio stations and would not, in any case, isolate the impact that LPFM stations have on the popularity of full-service commercial FM stations.78 Accordingly, we have not incorporated this suggestion into our analysis. However, several aspects of our Economic Study, including our Overview of the LPFM and Full-Service Radio Industries (Appendix A.1.) and our Case Study Analysis (Appendix A.2.), provide some analysis of the impact of LPFM stations on full-service commercial FM stations that are not located in Arbitron Metros.
Advertising Revenues: In the Public Notice, we recognized that LPFM stations are prohibited from competing for advertising. We sought comment, however, on whether sponsorship and underwriting of LPFM stations divert advertising revenues from full-service commercial FM stations.79 NAB supports the Commission’s proposal to examine the impact that LPFM stations may have on the advertising revenues of full-service commercial FM stations, using the BIA database as a resource.80 Prometheus provides the results of a recent survey of LPFM stations it conducted and argues that they support its view that underwriting on LPFM stations is unlikely to have a detrimental economic impact on full-service commercial FM stations.81 Prometheus states that most of the LPFM stations responding to its survey rely on underwriting to fund 25 percent or less of their annual budget.82 Moreover, the average
78 NAB also suggested using population reach to estimate the advertising revenues of a full-service station. NAB Comments at 4. Given that we are most interested in the fluctuations in a station’s advertising revenues, and any causal relationship with the presence of an LPFM station, we find it unlikely that population reach would be a useful tool for assessing the potential connection between an LPFM station and changes in another station’s advertising revenues.
79 Public Notice, 26 FCC Rcd at 6567.80 NAB Comments at 4, 6. NAB and CCB suggest that the Commission conduct a confidential survey of LPFM stations to determine their revenues and financial sources. NAB Comments at 6; CCB Comments at 4. Prometheus cautions that, if the Commission were to conduct such a survey, it would need a large sample size in order to isolate the impact of LPFM stations on full-service stations, given all the other variables that have negatively affected the financial health of radio stations. Prometheus Comments at 2-3. Dymoke asserts that a large sample size is essential for any findings to be statistically valid, but he is skeptical that a Commission survey of LPFM revenues and financial sources would reveal useful information about any direct economic effects. Dymoke Reply at 5. A survey of LPFM revenues would not help us determine the economic impact, if any, of LPFM stations because the revenue increase of an LPFM station does not lead necessarily to a revenue decrease for a full-service commercial FM station. Nevertheless, to gain a more complete understanding of the LPFM industry, we obtained financial information from the LPFM stations in our Case Study Analysis, which was based on a detailed survey of eight LPFM stations. See Appendix A.2. Because regulatory and procedural constraints prevented us from surveying a larger number of LPFM stations within the time frame provided under the LCRA, we analyzed that information as well as other financial information available to us, including commercially accessible ratings and advertising data.
81 Prometheus Supplemental Comments at 4. For purposes of its survey, Prometheus reports that it attempted to contact every LPFM station between March and August 2011 and that it received 144 valid survey responses, representing 17 percent of LPFM licensees. Id. at 5-6. Prometheus conducted the survey in collaboration with Keith Brand, Associate Professor of Radio, Television and Film at Rowan University. The survey was concluded in October 2011, and the results are included in Prometheus’ Supplemental Comments, filed November 10, 2011. Id.at 2, App. B. Prometheus provides the results of this 2007 study to update findings from a 2004 study, which it cited in its original comments. See Prometheus Comments at 5-6 (citing Keith Brand, The Rebirth of Low-Power FM Broadcasting in the U.S., 11 J. of Radio Studies 153-68 (2004)).
82 Prometheus identifies grants, both government and private, and donations from listeners as other sources of LPFM funding. Prometheus Supplemental Comments at 3 (finding that for 73 percent of its survey respondents, underwriting funds less than 50 percent of their annual budget, and for 63 percent of the respondents, underwriting funds 25 percent or less of their annual budget). 12
annual budget reported by respondents to the Prometheus survey is $19,402.50, and the median annual budget is $10,000.83 Prometheus argues that, if the underwriting revenues reported in its study are extrapolated to the rest of the LPFM industry, then the underwriting revenues of the LPFM service as a whole would total $7,284,615, which would represent only 0.0005 percent of the $15 billion in revenue for U.S. commercial radio in 2010.84
Several commenters agree with Prometheus that underwriting arrangements do not harm full-service commercial FM stations and argue that, in fact, they may benefit local economies because most LPFM underwriters are small, local businesses that cannot afford to advertise on full-service stations and otherwise would not have an opportunity to reach the FM radio market.85 In addition, CCB reasons that LPFM underwriting arrangements are unlikely to affect commercial revenues given that there is no evidence of an impact from underwriting on full-service NCE stations. It contends that the Commission first should assess the effects of NCE underwriting arrangements on the revenues of full-service commercial stations because LPFM stations “obviously” would have less impact than NCE stations.86 In addition, CCB argues that there is no need to track advertising revenue data unless there is a way to attribute advertising losses on full-service commercial stations to LPFM underwriting.87 NAB argues that, even if LPFM underwriting arrangements do not directly siphon advertising dollars from full-service stations, a loss of listeners due to competition from LPFM stations will have a negative effect on their advertising revenues.88
As proposed in the Public Notice, our Economic Study includes advertising revenues as a metric for assessing the potential economic effects of LPFM stations on full-service commercial FM stations, and it relies on the BIA database for the relevant information. The BIA database provides estimated revenue figures; broadcasters generally do not provide station-level revenue information. As we stated in the Public Notice, advertising revenues are a relevant indicator for evaluating the effects of LPFM stations on full-service commercial FM stations because commercial stations derive the vast majority of their earnings from advertising.89 With regard to NAB’s contention that LPFM stations may have a negative impact on the advertising revenues of full-service stations by depleting their listenership, we note that our Economic Study addresses this possibility by analyzing both audience ratings and 83 Id. at 2-3 (stating that 54 of its survey respondents reported an annual budget between $1,000 and $10,000 and that 89 percent reported an annual budget under $50,000).
84 Id. at 3.85 Schellhardt & Leggett Comments at 8 (additionally noting that LPFM stations may benefit local economies by providing revenue-enhancing coverage of local community events); WITG-LP Comments at 1-2 (arguing that advertising revenues of full-service stations are not diminished by LPFM underwriters, which consist of small, local businesses that cannot afford commercial advertising rates); Frank Vela Comments at 1 (asserting that larger businesses prefer to use full-service stations to market their goods and services); Dymoke Reply at 5-7 (asserting that advertising rates are too expensive for the typical LPFM underwriter and questioning the likelihood that commercial advertisers would consider underwriting on LPFM stations, given their limited reach). See alsoPrometheus Comments at 4-5 (providing examples of how LPFM underwriting opportunities benefit local businesses);
86 CCB Comments at 3.87 Id.; see also Dymoke Reply at 14. 88 NAB Comments at 5. NAB notes that LPFM stations have sold commercial advertising in violation of the rules and argues that the Commission’s report should address enforcement issues. Id. at 5-6. Schellhardt states that the three LPFM stations cited by NAB represent a tiny fraction of existing LPFM stations. Schellhardt Reply at 4-5. Dymoke asserts that those few instances are not worth considering for purposes of the study. Dymoke Reply at 7. We find enforcement issues to be beyond the scope of this study and report. Specific complaints alleging violations of the Commission’s rules governing LPFM stations should be addressed to the Commission’s Enforcement Bureau. 89 Public Notice, 26 FCC Rcd at 6566.
advertising revenues. As noted above, we seek to isolate any impact that LPFM stations may have on the revenues of full-service commercial FM stations through regressions in the Statistical Analysis section of the Economic Study. Finally, the analysis of NCE stations requested by CCB is beyond the scope of the economic study required by Section 8 of the LCRA, and underwriting data for NCE stations are not necessary to complete an analysis of the economic impact of LPFM stations.
Geographic Measures: NAB supports the Commission’s proposal to examine the impact of LPFM stations on both: (1) full-service commercial FM stations with overlapping coverage areas and (2) all full-service commercial FM stations in the same Arbitron Metros.90 NAB argues that the Commission also should study the likely impact on full-service stations in Arbitron Metros where new LPFM stations could be licensed under the revised rules, even if no LPFMs currently exist in those markets. In contrast, CCB contends that the Commission’s analysis should be national in scope.91 CCB argues that the Commission should not consider geographic measures because: (1) LPFM stations cannot have an economic impact on other stations in areas with no overlapping coverage; (2) most commercial stations engulf LPFM stations, with audience sizes many times larger; (3) stations with different formats do not have an economic impact on one another, even if they are in the same geographic area; and (4) there is no way to predict the number, location, coverage, format, or distribution of future LPFM stations.92
After full consideration of the comments before us, we determined to include both measures proposed in the Public Notice; thus, our study examines the possible impacts of LPFM stations on full-service commercial FM stations both within overlapping coverage areas and within Arbitron Metros. As explained in Appendix A.4, we also determined to include a third geographic measure of the presence of LPFM stations. We combined the first two measures to create a contour/market measure in order to examine the impact of LPFM stations that are both within the same Arbitron Metro as and have a tower location that overlaps the contour of a full-service commercial FM station. Given the extremely limited reach of LPFM stations, we believe that imposing geographic parameters on our analysis is logical and appropriate and that the geographic measures we chose were the most accurate available for purposes of our analysis.
Interference Remediation: As explained in the Public Notice, the Commission initially determined that an assessment of LPFM interference issues was not necessary or intended by Congress in the LCRA. The Commission based its view on the absence of an explicit instruction to study interference in the language of Section 8, the extensive interference remedies included in other sections of the LCRA, the results of the MITRE study, and the history of LPFM service and prior legislation governing the service. Commenters addressing interference issues generally agree with this initial conclusion.93 NAB does not disagree with the Commission in this regard, although it emphasizes that the Commission should enforce LCRA’s interference protections promptly and vigorously.94 Accordingly, for the reasons set forth in the Public Notice, the Economic Study does not assess any potential economic impact on full-service commercial FM stations due to interference from LPFM stations.95
90 NAB Comments at 6.91 CCB Comments at 2.92 Id. at 3.93 CCB Comments at 3-4; Prometheus Comments at 6; Dymoke Reply at 10-12; see also REC Networks Comments at 2. 94 NAB Comments at 7.95 A few commenters suggest that the Commission consider the interference problems that full-service stations pose for LPFM stations. Dymoke Reply at 11-12; REC Networks Reply at 3-4; WITG-LP Comments at 3; WRLE-LP Comments at 1. But see Suzanne Goucher Comments at 1 (noting that interference from an LPFM station has forced the realignment of Maine’s EAS Alternative State Primary Network and urging the Commission to make (continued….)
Other Issues: NAB argues that the Commission’s economic analysis should focus on the potential harm that the implementation of the LCRA could cause to full-service stations targeted to niche audiences, particularly in urban areas where there are few LPFM stations currently.96 NAB asserts that these niche-formatted stations are serving listeners that new LPFM stations may target and so an increase in LPFM licenses is especially likely to affect them adversely. NAB alleges that these stations are already economically fragile. Its comments include a study concluding that full-service stations that are niche-formatted generally have smaller potential audiences and low revenues, which make them especially vulnerable if they experience a decline in listenership. According to that study, median 2010 revenues ranged from $288,000 to $650,000 for full-service stations with various niche formats.97 NAB points out that if a full-service, niche-formatted station is forced to shut down or adopt a mainstream format as a result of new LPFM competition, then even listeners beyond the area served by the LPFM station will suffer reduced service.98
Dymoke questions NAB’s conclusion that niche-formatted FM stations are economically fragile, given their substantial revenues relative to LPFM revenues.99 In addition, he considers it unlikely that an LPFM licensee would choose to compete with a niche-formatted FM station covering a much larger area, or that an LPFM station would have the ability to siphon revenues or listeners away from commercial stations. REC Networks agrees that the presence of an LPFM station is unlikely to deter advertisers targeting niche consumers from doing business with full-service commercial FM stations.100 Schellhardt argues that even if two niche-formatted stations broadcast in the same area, they are unlikely to serve the same niche audience, and that, regardless, any such competition between an LPFM station and a full-service commercial station would occur in only part of the full-service station’s service area.101
We do not agree with NAB that it is necessary for us to tailor our study to give greater attention to niche-formatted full-service commercial FM stations. NAB provides no examples of situations in which an LPFM station currently duplicates or previously duplicated the format of a niche-oriented full-service commercial FM station in the same market, and it provided no clear explanation why LPFM stations would have an incentive to choose a duplicative format in the future. Nevertheless, as explained in more detail in Section V, the regression analyses that we provide in Appendix A.4 specifically examine the impact of LPFM entry on the audience ratings and advertising revenues of full-service commercial FM stations with formats that seem most likely to overlap with those of LPFM stations. Based on these regressions, we find no evidence that LPFM stations adversely affect the ratings of full-service commercial FM stations with such formats. By contrast, our regressions suggest that the entry of an LPFM station may cause full-service commercial FM stations with one type of specialized format, a religious format, to experience a statistically significant decline in revenue. However, for the reasons explained in Section V, we believe that this result, which is inconsistent with the remainder of our format-specific regression results, is caused by spurious correlation rather than the impact of LPFM entry.
(Continued from previous page) license assignments “on the ground” rather than rely on computer-model predictions of interference). Although we are sensitive to the interference concerns of LPFM station owners, that issue is beyond the scope of the economic study and report required by Section 8 of the LCRA.
96 NAB Comments at 3-4. NAB contends that the Commission also should consider the impact on AM stations that serve urban niche audiences, even though the LCRA requires a study only of FM stations. Id. at 4 n.8.
97 Id. at Att.98 Id. at 5.99 Dymoke Reply at 8-10.100 REC Networks Reply at 5.101 Schellhardt Reply at 4.
Radio Dalhart, a full-service licensee in Dalhart, Texas, argues that LPFM stations will threaten the viability of locally owned and operated full-service commercial stations in very small markets.102 It questions the need for LPFM stations in small markets that already are served by local broadcasters. Radio Dalhart warns that LPFM stations could harm localism in the same way that, it argues, FM translators transmitting signals from distant stations located far from the local community have harmed localism. As noted above, there is a limited amount of data available regarding LPFM and full-service radio stations located outside of Arbitron Metros. Non-Arbitron areas generally include the nation’s most rural and smallest radio markets. However, several sections of our Economic Study consider the impact of LPFM stations on all full-service commercial FM stations that are located in Arbitron Metros, including those in the smallest markets rated by Arbitron, and our Case Study Analysis includes an analysis of LPFM stations in non-Arbitron areas. As described below, we found in the Economic Study that LPFM stations do not pose an economic threat to full-service stations, including those in small markets. Further, contrary to the assertions of Radio Dalhart, our Case Study Analysis demonstrates that many LPFM stations choose locally-oriented formats and accordingly serve, rather than thwart, our localism goals.
Schellhardt & Leggett argue that the Commission’s study should analyze LPFM stations that broadcast locally originated programming independently of its analysis of LPFM stations that broadcast satellite programming.103 Dymoke agrees that the Commission should treat LPFM stations with locally produced programming separately from LPFM stations airing satellite programming, and he urges the Commission to emphasize the importance of local service and origination when comparing stations.104 The Commission recognizes the value of local origination programming. For example, when there are mutually exclusive LPFM applications, the Commission awards a licensing preference to an applicant that commits to broadcasting at least eight hours of local origination programming a day.105 As discussed in Appendix A.2., our Case Study Analysis examined the origin of programming broadcast on the sampled LPFM stations. However, we generally did not structure our Economic Study in terms of programming origination because it would have been impracticable to identify the origin of programming for all of the LPFM stations included in our analyses. Regardless, many LPFM stations broadcast, in differing proportions, a combination of locally originated programming and syndicated programming.106 Therefore, LPFM stations cannot be categorized readily in terms of programming origination. Moreover, the difficulties involved in quantifying the variances in their amounts of locally originated and satellite programming would have made independent analyses unworkable.
102 Radio Dalhart Comments at 1. In contrast, WITG-LP argues that LPFM stations have limited ability to compete with full-service stations given their more stringent regulatory environment, their lack of participation in listener market share services, and their lack of representation by professional organizations. WITG-LP Comments at 2-4. Schellhardt & Leggett assert that LPFM stations indeed could benefit full-service stations by serving as a source of trained personnel or as a proving ground for innovative technologies and experimental programming. Schellhardt & Leggett Comments at 2-4. Prometheus argues that the premise for the study is flawed because the Commission’s goals would be well served if LPFM stations are providing competition to the radio industry and because incumbents do not have a right to be protected from competition. Prometheus Comments at 6-8.
103 Schellhardt & Leggett Comments at 8-9. They further recommend that the Commission discontinue licensing LPFM stations that broadcast only satellite-fed programming. They posit that LPFM stations, after a two-year ramp-up period, should broadcast locally originated programming eight hours every day or be relegated to a lower-priority status. Id. at 4-5.
104 Dymoke Reply at 7-8, 16.105 47 C.F.R. § 73.872(b)(3).106 See Appendix A.2.
Overview of the LPFM and Full-Service Radio Industries: To achieve the most informed analysis, our review begins with a broad understanding of the LPFM industry. To that end, the first section of the Economic Study provides a comprehensive analysis of the current state of the LPFM industry by comparing the key statistics for LPFM stations to those of full-service stations, and of full-service commercial FM stations in particular.107 It examines the technical parameters, geographic distribution, format characteristics, and other operational aspects of LPFM stations and compares them to full-service stations. It then focuses specifically on Arbitron ratings data, again comparing LPFM stations to full-service stations.
To compile this comparative overview, economists in the Media Bureau gathered and analyzed data available from the Commission’s CDBS public database and the BIA commercial database. Using that data, they identified a total of 835 active LPFM stations, as compared to a total of 6,468 full-service commercial FM stations. They also found that LPFM stations tend to be located in small markets and rural areas. Only 2.2 percent of LPFM stations are located in the 10 largest Arbitron Metros, which collectively contain 26.2 percent of the U.S. population. Roughly half of LPFM stations are located outside of Arbitron Metros, in mostly rural areas covering only 19.2 percent of the U.S. population. By contrast, full-service commercial FM stations are more heavily concentrated in urban areas.
Not surprisingly, we also found that full-service stations generally reach many more people than LPFM stations. For example, full-service commercial FM stations have a median coverage area population (number of people reached by the station’s contour coverage) of 76,778, which is ten times greater than LPFM stations’ median coverage area population of 7,672, and an average coverage population of 415,083, which is more than 30 times greater than LPFM stations’ average coverage population of 13,561. Due to their higher power levels and antenna heights, the geographic coverage of full-service commercial FM stations is about 55 times larger than LPFM stations based on the median station. In addition, most full-service commercial FM stations are considerably more established than LPFM stations: while almost all existing LPFM stations first started broadcasting between 2002 and 2008, the average year that full-service commercial FM stations began broadcasting is 1981.
This section of the Economic Study also demonstrates that there are significant differences between the programming formats of LPFM stations and those of full-service stations. Whereas almost half of the LPFM stations with an identified programming format are characterized as having a religious format, only five percent of full-service commercial FM stations fall into that category. In addition, 83 percent of full-service commercial FM stations broadcast some type of music format, as compared to only 12.6 percent of LPFM stations. Moreover, LPFM stations appear to be much more likely to carry a variety of programming genres than full-service commercial FM stations. According to BIA data, a large proportion of LPFM stations carry “varied” or “miscellaneous” formats, while full-service commercial FM stations overwhelmingly tend to broadcast a single or specialized format. The percentage of full-service commercial FM stations with their own websites is roughly twice as high as that for LPFM stations, and the percentage of full-service commercial FM stations that stream their signals on the Internet is approximately three times higher than the percentage of LPFM stations that do so.
Perhaps the most significant findings in this section of the Economic Study are based on a comparative analysis of LPFM and full-service radio ratings data. Our examination of Fall 2009 Arbitron ratings data for LPFM revealed that LPFM stations are listened to by less than 0.2 percent of the radio-listening population and that LPFM listening represents less than 0.1 percent of total radio listening. The average LPFM station located in an Arbitron Metro has negligible ratings by all available measures, and its listenership lags far behind the large majority of full-service stations in the market. In no single market did the combined average share of listeners per quarter hour for all LPFM stations in that market 107 See Overview of the LPFM and Full-Service Radio Industries at Appendix A.1.
exceed 3.5 percent. Further, the vast majority of LPFM stations located in Arbitron Metros did not even achieve sufficient listenership to qualify for inclusion in the Arbitron reports we reviewed. Although a small number of LPFM stations had a significant ratings presence, the LPFM station with by far the highest listenership was ranked only 18th in its market. Notably, however, many of the LPFM stations with Arbitron ratings achieved high values of Time Spent Listening (“TSL”). It appears that, relative to full-service stations, the top-rated LPFM stations tend to have high TSL values and low Cume Person values (measuring how many different people listen to the station in a week). These measures suggest that the popular LPFM stations tend to attract a small but loyal fan base, which tunes in for long periods of time and/or switches stations less frequently than the average full-service station listener.
Case Study Analysis: The second component of the Economic Study is a set of case studies, which we conducted to supplement the information available from statistical databases.108 The case studies consisted of in-depth interviews with the managers of eight individual LPFM stations. Particularly because LPFM radio is a relatively new service and little information about the LPFM industry has been gathered to date, we determined that case studies could provide us with useful insight into the operations and status of LPFM stations, including institutional and behavioral details that could not be elicited from a strictly statistical or engineering analysis of LPFM stations. More specifically, we hoped to discover, among other things, the factors affecting LPFM stations’ motivation and ability to provide programming that attracts listeners, their incentives and ability to attract financing, including underwriting support, and the kinds of services they seek to provide. We also sought additional information about the impact that various technical considerations, marketplace factors, and legal and regulatory restrictions have on the behavior and performance of LPFM stations. Thus, the case study approach was intended to inform and improve the other components of our Economic Study.
The eight stations in the sample were chosen to represent different types of LPFM stations and the different sizes and locations of markets within which they operate. From an examination of the CDBS and BIA databases, we identified five major types of licensees that appear most frequently among LPFM stations: religious stations, community stations, stations run by educational institutions, stations operated by state and local government agencies, and music stations. Based on the distribution of these station types in the database, we selected three religious stations, two community stations, one music station, one station licensed to a university, and one station licensed to a county agency. We also selected stations located in different geographic regions and in markets of varying size. The chosen sample was not designed to be statistically representative of the entire LPFM industry, and we were cautious in extrapolating our findings to the whole LPFM service. Whenever possible, we supplemented our analysis of the case studies with independent evidence, including broad statistical evidence regarding the LPFM and full-service radio industries.
For each LPFM station in our sample, we obtained data on its service area, format, and ratings (if any) from our internal databases, BIA, and Arbitron. In addition, we conducted a detailed phone interview with a manager at each station. Each of the interviews was based on a survey consisting of a number of questions regarding the station’s structure, goals, and operations. Specifically, the survey questions were designed to obtain information regarding: (1) the identity of the licensee and the reason the station was created; (2) the station’s current broadcast status and the number of hours it broadcasts per week; (3) the transmitting power and reach of the station; (4) the station’s programming format and its target audience; (5) the goals of the station and the services it provides; (6) the station’s use of a website; (7) the station’s staffing; (8) the costs and revenues of the station and its policies regarding underwriting/sponsorships; and (9) any operational difficulties the station faces. The questions were designed to help us understand the extent to which these stations are potentially competing with full-service commercial FM stations for listeners and sponsors and the factors affecting their ability and desire to do so.
108 See Case Study Analysis at Appendix A.2.
We then examined and compared the information we gathered about the eight stations in the following categories: (1) status, coverage, and location; (2) goals and services; (3) programming and audience; (4) budget and financing; (5) staffing; (6) online offerings; (7) operational difficulties; and (8) competition with full-service stations for audience and sponsors. We found that all but two of the sample stations broadcast programming continuously 24 hours per day, seven days per week. We also found that the stations tend to provide a variety of programming throughout their schedules, including different genres of music, talk, and news, as opposed to offering a single format. In addition, several of the stations rely heavily on syndicated programming, while some provide little or none. Although the managers described a large number of station goals during their interviews, we determined that these goals generally fall into four major categories: (1) to provide a particular kind of programming, often reflecting a religious or philosophical theme; (2) to provide services that address a specific community need; (3) to provide locally-originated programming, in many cases regardless of the specific content; and (4) to provide training or experience in broadcasting.
The stations in our sample generally have very small budgets; the median annual budget of all eight stations is $10,600. All but two of the stations have annual budgets that range from $5,000 to $15,000. One of the stations that falls outside of this range has a budget of $2,000 or less per year. Although the other station outside of this range reported a much larger budget of $120,000 to $130,000 per year, that total budget funds not only the radio station, but also other non-profit ventures owned by the station’s parent company. In comparison, the median annual revenue for a full-service FM commercial station was $723,000 for the year 2010. The funding sources reported by the stations fall into three general categories: (1) organizational support from a sponsoring organization or government agency; (2) donations, membership dues, and revenues from other fundraising activities (e.g., merchandise sales); and (3) underwriting from local businesses. Only three of the sample stations accept underwriting from local businesses, and two of those stations earn $12,000 or less in underwriting revenues per year. Moreover, the local businesses that underwrite on the sample stations reportedly tend to be too small to purchase advertising from commercial stations.
Notably, only one of the sample stations has measurable ratings. Because none of the other stations appears in the Arbitron ratings or has access to ratings reports, the managers generally do not know the size of their station’s audience. The stations have a wide range of population reaches, ranging from about 1,600 to 40,000 people, according to BIA data. In addition, the staff sizes of the sample stations differ greatly, ranging from a station essentially run by one person up to larger operations with five to seven managers and 30 program hosts. Most of the staffers are part-time volunteers, and only one station has a full-time paid employee.
Generally, the station managers believe that their station is not competing for listeners with specific full-service stations. A number of managers stated that their station may be competing in a limited way with full-service stations, in the sense that some listeners who tune in to their LPFM station otherwise might be listening to full-service stations. The manager of only one sample station thought that the station directly competes with a particular full-service station.
Analysis of the Likely Impact of LPFM Entry on Full-Service Commercial FM Stations: In this section of the Economic Study, we assessed the potential ability of LPFM stations to compete with full-service commercial FM stations by observing their relative positions of economic strength in the radio marketplace.109 We considered the likelihood that LPFM stations have an economic impact in the two interrelated markets in which full-service commercial FM stations participate – the market for audience and the market for advertising. We concluded that, given their regulatory and operational constraints, LPFM stations are unlikely to have more than a negligible economic impact on full-service commercial FM stations. Therefore, this section provides predictions and guidance for the subsequent Statistical Analysis.
109 See Analysis of the Likely Impact of LPFM Entry on Full-Service Commercial FM Stations at Appendix A.3.
We assessed the potential for LPFM entry to affect the profits of full-service commercial FM stations by: (1) reducing their audience size and (2) drawing away their advertisers by offering underwriting announcements. We found that, barring exceptional circumstances, neither of these effects is likely to occur. We believe that three important legal restrictions on LPFM stations significantly reduce the competitive threat they pose to full-service commercial FM stations in the markets for audience and advertising: (1) the requirement that LPFM stations operate at a maximum power of 100 watts;110 (2) the requirement that they operate on an NCE basis;111 and (3) the prohibition on broadcasting commercial advertisements or promotional announcements. The requirement that LPFM stations operate at a maximum power of 100 watts substantially constrains the number of potential listeners they can serve and, therefore, the number of listeners they are likely to divert from full-service commercial FM stations. In addition, the inferior quality and propagation characteristics of LPFM signals reduce the ability of LPFM stations to attract listeners.
We also found that LPFM underwriting opportunities are not likely to divert advertising revenue from full-service commercial FM stations to a degree that would cause a substantial economic impact. The NCE entities eligible to serve as LPFM licensees – such as churches, community organizations, public safety organizations, and educational institutions – generally have listenership and revenue-earning goals that differ from those of for-profit licensees. Their need for underwriting may be limited due to the availability of institutional financial support and/or an ability to operate the station on a small budget. In any event, the rule prohibiting LFPM stations from promoting the products or services of their underwriters significantly reduces the incentives of sponsors to substitute underwriting announcements for commercial advertisement spots on full-service commercial FM stations. In addition, we found that the tendency of LPFM stations to offer programming that is not a close substitute to that of full-service commercial FM stations further constrains their ability to compete with those stations. The next section of the Economic Study employs statistical techniques to explore and confirm the assessments made in this section of the study.
Statistical Analysis of the Economic Impact of LPFM Stations on Full-Service Commercial FM Stations: We used two methods of statistical analysis in the final section of the Economic Study: summary statistics and regression analyses.112 This part of our analysis is based on an extensive dataset with information from CDBS, BIA, and Arbitron about LPFM stations, full-service commercial FM stations, and radio markets. We compiled a list of current and former LPFM stations over a time period ranging from 2005 to 2009 and identified which Arbitron Metros, if any, each LPFM station was serving during this period. In addition, our dataset includes information regarding all individual full-service commercial FM radio stations as well as a wide range of data regarding the demographics and structure of individual Arbitron Metros. Most of our data regarding full-service radio stations covers the years 2005 to 2009 and originally was purchased and compiled for purposes of the Commission’s 2010 Quadrennial Review of its media ownership rules.
In order to measure the presence of LPFM stations, we defined their common listening areas with full-service commercial FM stations in three ways. First, we used Arbitron Metro assignments as a basis for determining which full-service commercial FM stations may be affected by the presence of an LPFM station. In other words, we assumed that every full-service commercial FM station potentially is affected by the presence of an LPFM station within the same Arbitron Metro, even when its coverage area does not overlap with that of the LPFM station. Because advertisers rely on audience ratings 110 See 47 C.F.R. § 73.811. There also is a class of LPFM stations that is permitted to operate at a maximum power of 10 watts; however, no stations currently exist in the LP10 class. 47 C.F.R. § 73.811(b). The Commission has not opened an application filing window for the class of LPFM stations authorized to operate at a maximum of 10 watts.
111 See 47 C.F.R. § 73.853.112 See Statistical Analysis of the Economic Impact of LPFM Stations on Full-Service Commercial FM Stations at Appendix A.4.
information that is provided on the basis of Arbitron Metros, we deemed it appropriate to use Arbitron Metros to define common listening areas even where there is no coverage overlap with an LPFM station. Second, using the Commission’s signal contour database, we determined which full-service commercial FM stations’ predicted signal contours overlap the tower location of every LPFM station. Third, in order to create a more concentrated measure of the presence of LPFM stations, we combined the first two measures. This contour/market measure defines an LPFM station as sharing the service area of a full-service commercial FM station only if it is both in the same Arbitron Metro as and has a tower location that overlaps the contour of the full-service station. We compared the characteristics of full-service commercial FM stations according to how many LPFM stations are in their broadcast area, using all three measures of LPFM station availability. 58.
To provide a basis for comparison, we examined audience ratings and advertising revenues, the two performance metrics that we believe are most closely correlated with the economic well-being of full-service commercial FM stations. With respect to ratings, we focus on the average number of listeners 12 years or older that a full-service commercial FM stations had in a quarter hour, as measured by Arbitron. In order to assess the impact of entry of LPFM stations on the advertising revenues of full-service commercial FM stations, we analyzed the annual revenue estimates BIA has provided for full-service commercial FM stations during the period 2005 to 2009. We reported information on these metrics only for those full-service commercial FM radio stations assigned to Arbitron Metros for which there are reported audience ratings and/or reported annual revenues.
In our analysis of summary statistics, we present a series of simple tables designed to gauge whether full-service commercial FM stations are affected by the presence of LFPM stations. The tables first provide summary data regarding the number of LPFM stations across several different years and based on various Arbitron Metro groupings. Next the tables compare the economic health of full-service commercial FM stations that have LPFM stations in their broadcast area with full-service commercial FM stations that do not. In addition, the tables make these same comparisons for specific groups of commercial FM stations, comparing stations in large and small Arbitron Metros and stations within the same format. The results of this part of our study were inconclusive. The tables do not provide a consistent view of the effect of the presence of LPFM stations on the economic health of full-service commercial FM stations. Although the tables indicate that there may be some measurable effects for certain Arbitron Metro groupings and LPFM station counts, these effects are not demonstrated consistently. In some cases, the effects are positive, and in other cases they are negative. Further, in those instances in which there appears to be an effect, other factors not represented in the tables may be causing those results. The varying effects in the tables suggest that spurious correlations may be occurring in our analysis. Therefore, as described below, we also performed regression analyses, which enabled us to control for other influences and reduce such bias.
In our regression analyses, we first examined ratings data and, in most cases, we found that LPFM entry does not have a statistically significant impact on the Arbitron ratings of full-service commercial FM stations. In those cases in which we did find a statistically significant impact, it appears to be trivial. For example, one of our regressions suggests that, if an additional LPFM station enters the same Arbitron Metro as the average full-service commercial FM station and is within the contour of that station, the full-service station would experience a ratings decline of 0.008 ratings points for the full week among persons aged 12 years or older. Arbitron ratings are reported in increments of 0.1. Thus, our results indicate that 13 LPFM stations would need to enter both the Arbitron Metro and contour of the average full-service commercial FM station before the effect on Arbitron ratings would become discernible. Moreover, when we specify the regressions in different ways, our results suggest that the impact on ratings would be either smaller or statistically insignificant. Based on our analysis of LPFM station formats in Appendix A.1., we also examined the impact of LPFM entry on the ratings of full-service commercial FM stations with formats that seem most likely to overlap with those of LPFM stations. Using these more specific regressions, we found no evidence that LPFM stations adversely affect the ratings of full-service commercial FM stations.
Next we used regression analyses to estimate the effect of the presence of LPFM stations on the revenues of full-service commercial FM stations. Several of our regressions found that, when an LPFM station enters the service area of a full-service commercial FM station, the full-service station will experience a small, statistically significant increase in revenue. However, when we use other regression specifications or measures of LPFM entry, no statistically significant effects are observed. 62.
Finally, we examined the revenues of full-service commercial FM stations with a variety of specific formats that seem most similar to those of LPFM stations. Notably, our regressions suggest that the entry of an LPFM station may cause full-service commercial FM stations with a religious format to experience a statistically significant decline in revenue. Specifically, our analysis indicates that, if an LPFM station enters the Arbitron Metro of a full-service commercial FM station with a religious format, that entry will reduce the full-service station’s revenue per adult in the market by $0.124 per year –representing approximately 10 percent of the estimated revenue of the average religious full-service commercial FM station in 2009. However, we have reason to believe that this result is caused by spurious correlation. For example, when we compared the estimated effect of the entry of an LPFM station to that of the entry of another full-service radio station, our analysis suggests that the impact that the LPFM station has on the revenue of the religious full-service station would be much greater than that of the additional full-service station. Because this result seems implausible, we believe that our results in this regard most likely are being driven by our inability to fully control for other station and market effects that are correlated with LPFM entry. Moreover, we note that our regressions for other format types did not yield similar results.
Based on the totality of our regression results, we found no statistically reliable evidence that LPFM stations have a substantial or consistent economic impact on full-service commercial FM stations. Thus, combining our regression analyses with the other sections of our Economic Study, we conclude that LPFM stations generally do not have, and in the future are unl