Federal Communications Commission (FCC) Media Ownership Rules
Released: 2018-10-09T00:00:00

Why Regulate Media Ownership?

From the ear liest days of commercial radio, the Federal Communications Commission (FCC) and its predecessor, the Federal Radio Commission, have encouraged diversity in broadcasting.

The FCC's policies seek to encourage four distinct types of diversity in local broadcast media:

diversity of viewpoints, as reflected in the availability of media content reflecting a variety of perspectives; diversity of programming, as indicated by a variety of formats and content, including programming aimed at various minority and ethnic groups; outlet diversity, to ensure the presence of multiple independently owned media outlets within a geographic market; and minority and female ownership of broadcast media outlets.

In addition to promoting diversity, the FCC aims, with its broadcast media ownership rules, to promote localism and competition by restricting the number of media outlets that a single entity may own or control within a geographic market and, in the case of broadcast television stations, nationwide. Localism addresses whether broadcast stations are responsive to the needs and interests of their communities. In evaluating the extent of competition, the FCC considers whether stations have adequate commercial incentives to invest in diverse news and public affairs programming tailored to serve viewers within their communities.

Authority and Directives

Quadrennial Reviews

Section 202(h) of the Telecommunications Act of 1996 ( P.L. 104-104 ) directs the FCC to review its media ownership rules every four years to determine whether they are "necessary in the public interest as a result of competition," and to "repeal or modify any regulation it determines to be no longer in the public interest." Section 257(b) of the act directs the FCC to promote policies favoring the diversity of media voices and vigorous economic competition.

In 2004, 2011, and 2016, the U.S. Court of Appeals for the Third Circuit directed the FCC to review its broadcast ownership diversity policies in conjunction with the media ownership rules.

In August 2016, the FCC completed the 2014 Quadrennial Review of its media ownership rules and diversity policies (2016 Diversity Order). The decision contained rules related to (1) the determination and disclosure of media ownership (attribution rules); (2) limits on the type and number of media properties a single entity may own (media ownership rules); and (3) rules designed to enhance media ownership diversity. The new media ownership rules became effective December 1, 2016. The National Association of Broadcasters, Nexstar Broadcasting Inc. (an operator of broadcast television stations), and Connoisseur Media (an operator of radio stations) filed petitions with the FCC requesting that the agency reconsider its 2016 decision by repealing and/or relaxing the media ownership rules, and adopting rules creating a new "incubator program" to enhance ownership diversity.

In November 2017, acting in response to the reconsideration petitions, the FCC repealed and/or relaxed several rules and adopted rules creating an incubator program while asking for additional comments on how to implement it (2017 Reconsideration Order). Most of the changes became effective in February 2018, while others, related to the FCC's collection of data, became effective in March 2018 following approval of the Office of Management and Budget (OMB). In August 2018, the FCC issued rules governing a new incubator program. Parties, including the Prometheus Radio Project, have appealed these orders. The U.S. Court of Appeals for the Third Circuit is scheduled to hear arguments regarding the legal challenges to all of the FCC's recent broadcast media ownership rule changes.

The FCC's next quadrennial media ownership review is scheduled to begin in 2018.

National Ownership Rule

The Consolidated Appropriations Act, 2004 ( P.L. 108-199 ) directed the FCC to adopt rules that would cap the reach of a single company's television stations at 39% of U.S. television households. In addition, Congress exempted this national ownership cap from the FCC's required review of its media ownership rules every four years. In December 2017, the FCC initiated a rulemaking proceeding in which it proposed to eliminate or modify that national audience reach cap. In the proceeding, the FCC sought comments on whether the agency has the authority to modify or eliminate the national cap, and noted that previously the agency had rejected arguments that Congress precluded the FCC from making any adjustment. For more information about the history of the national ownership rule, see Table A-1 .

News Consumption Trends

The debate over media ownership rules is occurring against the background of sweeping changes in news consumption patterns. Figure 1 illustrates these general trends. Based on surveys conducted by Pew Research Center, the percentage of adults citing local broadcast television as a news source declined from 65% in 1996 to 37% in 2017. The percentage of respondents who stated that they "got news yesterday" from online sources grew from 2% in 1996 to 43% in 2017, marking the first time that online sources outranked local broadcast television. In contrast, those citing printed newspapers as a source they "read yesterday" or use regularly declined from 50% in 1996 to 18% in 2016. Broadcast radio also has declined in importance as a source of news. These trends raise questions as to whether common ownership of multiple media outlets in the same market might limit diversity of viewpoints as much today as two decades ago.

Consolidation Trends

As broadcast stations face competition for viewers' attention from other media outlets, and thereby financial pressures, some have sought to strengthen their bargaining relative to program suppliers (i.e., broadcast networks), advertisers, and/or programming distributors (i.e., cable and satellite operators) by consolidating. For example, in an agreement that was subsequently rescinded, Sinclair Broadcast Group proposed to acquire Tribune Media Company, thereby making it the largest owner of broadcast television stations in the United States. In November 2017, Entercom Communications completed its merger with CBS Radio Inc., making it the largest radio operator in the United States in terms of revenue. In June 2018, Gray Television announced that it would purchase Raycom Media Inc. in a $3.65 billion transaction that would enable Gray to reach one-fourth of U.S. households. The extent to which such media consolidation can occur is directly related to the FCC media ownership and attribution rules in place at the time.

Application of Local Ownership Rules

Station Characteristics

Two characteristics of broadcast television and broadcast radio stations determine whether or not the media ownership rules described in later sections of this report are triggered: (1) the geographic range (or contours ) of their signals, and (2) the limits of their media markets as determined by the Nielsen Company, a market research firm. The FCC uses Designated Market Areas (DMAs) to determine the geographic regions that apply to the duopoly rule, and uses broadcast television signals to determine when the rules are triggered within DMAs.

Television Signal Contours

Following the transition of broadcast stations from analog to digital signals in 2009, the FCC modified the media ownership rules to reflect two digital television service contours:

1. The digital "principal community contour" (digital PCC). This contour specifies the signal strength required to provide television service to a station's community of license. The FCC sought, when defining the digital PCC, to provide television stations with flexibility in siting and building their facilities while still preventing stations from straying too far from their respective communities of license. 2. The digital "noise limited service contour" (digital NLSC). The FCC designed this contour to define a geographic area in which at least 50% of residents can receive the signal a majority of the time. The FCC wanted to ensure that after the digital transition, broadcasters would be able to reach the same audiences they served previously with analog transmissions.

Television Markets

The FCC uses DMAs created by the Nielsen Company to define local television markets. Nielsen has constructed 210 DMAs by assigning each county in the United States to a specific DMA, based on the predominance of viewing of broadcast television stations licensed to operate in a given metropolitan statistical area, defined by the OMB.

Radio Signal Contours

FM Primary Service Area

The 1 millivolt-per-meter (1 mv/m) contour for FM radio represents a signal that will result in satisfactory service to at least 70% of the locations on the outer rim of the contour at least 90% of the time.

AM Primary Service Area

In its rules for AM radio stations, the FCC delineates three types of service areas: (1) primary, (2) secondary, and (3) intermittent. Some classes of radio stations render service to two or more areas, while others usually have only primary service areas. The FCC defines the primary service area of an AM broadcast radio station as the service area in which the groundwave is not subject to objectionable interference or fading. The signal strength required for a population of 2,500 or more to receive primary service is 2 millivolts per meter (2 mv/m). For communities with populations of fewer than 2,500, the required signal strength is 0.5 mv/m.

When the FCC first proposed incorporating AM contour signals in its media ownership rules, it noted that "a one mv/m AM signal is somewhat less than the signal intensity needed to provide service to urban populations, but somewhat greater than the signal at the outer limit of effective non-urban service."

Radio Markets

The FCC also relies on the Nielsen Company to define local radio markets. These markets, called "Metros," generally correspond to the metropolitan statistical areas defined by the OMB, but are subject to exceptions based on historical industry usage or other considerations at the discretion of Nielsen. In contrast to television markets, radio markets do not include every U.S. county. To determine the number of radio stations within a radio market, the FCC uses a database compiled and updated by BIA Kelsey, another market research firm.

Local Attribution Rules

Many licensees of commercial broadcast television and radio stations have relationships that allow others to exert substantial influence over the operation and finances of those licensees' stations. FCC rules prohibit unauthorized transfers of control of licenses, including de facto transfers of control.

To help it enforce its media ownership rules, the FCC has developed attribution rules "to identify those interests in or relationships to licensees that confer a degree of influence or control such that the holders have a realistic potential to affect the programming decisions of licensees or other core operating functions." In such cases, the FCC may deem an entity to influence a broadcast station's operations and finances to a degree that triggers the FCC's media ownership rules, even when the FCC does not consider the entity to be the official licensee.

The following summarizes the media attribution rules, as described and modified in the 2017 Reconsideration Order, and related FCC policies.

Joint Sales Agreements

Joint sales agreements (JSAs) enable the sales staff of one broadcast station to sell advertising time on a separately owned station within the same local market. In 2016, the FCC adopted rules specifying that television JSAs allowing the sale of more than 15% of the weekly advertising time on a competing local broadcast television station are attributable as ownership or control.

Congress subsequently twice extended the period by which parties must terminate a television JSA in order to comply with the FCC's rule limiting ownership of multiple television stations within a DMA (see " Local Television Ownership Rule (Television Duopoly Rule) "), ultimately extending the deadline to September 30, 2025. The FCC's rules also specified that stations must file copies of attributable television JSAs with the commission.

In its 2017 Reconsideration Order, the FCC eliminated the television JSA attribution rule. The FCC determined that

JSAs can promote the public interest, and that this provides an independent reason for eliminating the Television JSA Attribution Rule.... [They] have created efficiencies that benefit local broadcasters—particularly in small- and medium-sized markets—and have enabled these stations to better serve their communities."

With the repeal of the JSA attribution rule, broadcast television stations are no longer required to file copies of their JSAs with the FCC. However, broadcast television stations must still make copies of JSAs available in their public inspection files. These files are available for review on the FCC website. A JSA among commercial radio stations, whereby one station sells 15% or more of another same-market station's advertising time, is attributable for the purpose of applying the local radio ownership rule.

Disclosure of Sharing Agreements

In August 2016, the FCC adopted new disclosure requirements for all joint operating agreements, broadly encompassed by the term shared services agreements (SSAs) among broadcast television stations. In its 2017 Reconsideration Order, the FCC upheld the SSA disclosure rule, which became effective in March 2018 following approval from the OMB.

The FCC defines an SSA as

any agreement or series of agreements, whether written or oral, in which

(1) a station provides any station-related services including, but not limited to, administrative, technical, sales, and/or programming support, to a station that is not directly or indirectly under common de jure control permitted under the [FCC's] regulations; or

(2) stations that are not directly or indirectly under common de jure control permitted under the [FCC's] regulations collaborate to provide or enable the provision of station-related services, including, but not limited to, administrative, technical, sales, and/or programming support, to one or more of the collaborating stations.

In this definition, the term station includes the licensee, including any subsidiaries and affiliates, and any other individual or entity with an attributable interest in the station.

Each station that is a party to an SSA, whether in the same or different television markets, must file a copy of the SSA in its online public inspection file. The stations may redact confidential or proprietary information. The stations must also report the substance of oral SSAs in writing to the FCC. SSA disclosure requirements do not apply to noncommercial television stations, radio stations, and newspapers.

The FCC declined to make SSAs attributable, and emphasized that its action "was not a pretext for future regulation of SSAs." The FCC stated that any consideration of the regulatory status of these agreements in the future must reflect "significant study and understanding of the impact of these agreements on station operations and a complete account of the public interest benefits these agreements help facilitate."

Rescission of Media Bureau's Sidecar Policy Statement

Broadcast stations that outsource management to other stations are known as sidecars . In March 2014, the FCC's Media Bureau issued a public notice stating that it would closely scrutinize any proposed transaction that includes sidecar agreements in which two (or more) broadcast stations in the same market enter into an arrangement to share facilities, employees, and/or services, or to jointly acquire programming or sell advertising and enter into an option, right of first refusal, put/call arrangement, or other similar contingent interest, or a loan guarantee. In February 2017, the FCC's Media Bureau rescinded this guidance.

Application of National Ownership Rules

Households Within Television Markets

Nielsen ranks each DMA by the estimated number of television households. It estimated that as of January 2018, the New York DMA contained more than 7 million television households, reaching 6.309% of U.S. television households, making it the number one DMA in the country. In contrast, Nielsen estimated that the Glendive, MT, market was the smallest DMA in the country (ranked number 210), with 4,030 television households, representing 0.004% of U.S. television households. The FCC uses Nielsen's estimates of television households to determine the national audience reach of broadcast television station group owners, for the purpose of applying the national ownership cap.

UHF Discount

In 1985 the FCC adopted a rule that, for the purpose of applying its national ownership rule, discounted the number of television households reached within a DMA by stations operating in the Ultra High Frequency (UHF) band by half in measuring a station owner's reach. This adjustment reflected the physical limitations of UHF signals, which generally provided poorer picture quality than signals in the Very High Frequency (VHF) band at the time the rule was adopted.

However, on June 12, 2009, broadcast television stations completed a transition from analog to digital service pursuant to a statutory mandate. As a result of this switch, UHF stations had a technological advantage, and more broadcast television licenses began to operate on these frequencies. By December 2009, 73% of the 1,392 commercial stations operated in the UHF band.

In September 2013, under then-Acting FCC Chairwoman Mignon Clyburn, the FCC proposed eliminating the UHF discount, citing the completed transition to digital broadcasting.

In September 2016, the FCC, under then-Chairman Thomas Wheeler, eliminated the UHF discount effective November 2016. In a dissenting statement, then-Commissioner Ajit Pai contended that the FCC lacked the authority to review the UHF discount without simultaneously reviewing the national audience cap. In April 2017, after Commissioner Pai became chairman, the FCC reinstated the UHF discount. With the discount, a single entity that owns exclusively UHF stations could effectively reach 78% of U.S. television households, or double the current national ownership cap of 39% of U.S. television households. In December 2017, the FCC launched a new rulemaking proceeding to examine whether to modify or rescind the UHF discount and national ownership cap. For more information about the history of the UHF discount and national ownership cap, see Table A-1 .

Remote Shared Services, Joint Sales, Operating, and Financial Agreements

When parties request that the FCC allow them to transfer broadcast television licenses, they must ensure that they comply with all FCC rules, including the FCC's media ownership rules. In the event of a transfer of operational and financial agreements involving broadcast stations, rather than an actual license, the parties need not discuss how such arrangements relate to the national ownership rule. In contrast to its attribution rules regarding local media ownership, the FCC has not issued a formal rulemaking regarding its treatment of sharing, sales, operating, and financial agreements, with respect to national media ownership. Instead, it has either articulated its policy on an ad hoc basis in reviewing merger applications, or remained silent.

For example, in 2013, when Local TV LLC applied to the FCC to transfer control of its broadcast television station licenses to Tribune Media Company and Dreamcatcher Broadcasting LLC, Tribune proposed that Dreamcatcher would be the new licensee of Local TV's stations in the Norfolk-Portsmouth-Newport News, VA, and Wilkes Barre-Scranton-Hazelton, PA, television markets. Tribune, however, would operate the stations pursuant to shared services agreements (but not joint sales agreements). The FCC's media bureau (but not the full commission)

[d]isagree[d] with [opponents of the proposed arrangement] that the facts here show that Tribune will be operating the Dreamcatcher Stations as though it owned them outright. Dreamcatcher will be run by a highly experienced broadcaster, with established independence from Tribune.

Because Tribune already owned newspapers in those markets, it did not attempt to take control of the broadcast licenses in those markets in order to comply with the FCC's now-defunct rule prohibiting common ownership of newspapers and television stations within the same DMA (described in " Newspaper/Broadcast Cross-Ownership Rule "). FCC's Media Bureau staff did not, however, directly address how this determination applied to the national ownership rule.

Four years later, when Tribune applied to the FCC to transfer control of its broadcast licenses to Sinclair Broadcast Group, the FCC commissioners raised concerns, and in July 2018 they designated the proposed transaction for a hearing before an FCC administrative law judge. Among their concerns was that Sinclair's proposed sale of Tribune's Chicago station WGN-TV could effectively be a "sham" transaction because (1) the proposed buyer had no previous experience in broadcasting, (2) the proposed buyer served as CEO of a company in which Sinclair's executive chairman had a controlling interest, (3) the proposed buyer would have purchased the station at a price that appeared to be significantly below market value, (4) Sinclair would have had an option to buy back the station in the future, (5) Sinclair would have owned most of WGN-TV's assets, and (6) pursuant to a number of agreements, Sinclair would have been responsible for many aspects of the station's operation.

The FCC commissioners stated, "Such facts raise questions about whether Sinclair was the real party in interest under Commission rules and precedents and attempted to skirt the Commission's broadcast ownership rules."

The FCC commissioners were silent, however, with respect to how, post-transaction, Sinclair's potential remote operation of four television stations within the Wilkes-Barre-Scranton-Hazleton, PA, television market might cause it to breach the national ownership cap.

In Wilkes Barre-Scranton-Hazelton alone, Sinclair operates three stations remotely and Tribune operates one. While Sinclair's and Tribune's investor presentation about their transaction highlighted Wilkes Barre as a market common to the two companies, the FCC's designated hearing order did not. As the FCC has been addressing attribution on a case-by-case basis, it is unclear how it would treat such relationships with respect to enforcing national ownership limits in the future. For example, this matter may arise again when the FCC reviews Gray Television's proposed acquisition of stations from Raycom. In the Ottumwa, IA-Kirksville, MO television market, Raycom operates, but is not the licensee of, a station that airs programming from the FOX and NBC networks. Gray does not own any stations in the market. In Gray's investor presentation regarding its proposed merger with Raycom, it highlights Ottumwa as a "Raycom" market, thus implying that it intends to operate the station upon completion of the transaction. It is unclear whether Gray's operation of the station would cause control to be attributed to Gray if future transactions might enable Gray's stations to reach 39% of all U.S. television households, the national limit for a single owner.

This issue also would have arisen had Sinclair pursued its proposed merger with Tribune. In Sinclair's final amendment to its merger application, it offered to sell certain stations in order to comply with the national ownership cap (assuming the UHF discount remained in place). Sinclair would nonetheless have reached more than 39% of U.S. television households if the four Wilkes Barre stations, which it would have operated but would not have owned, had been included in the calculation.

Ownership Rules Subject to Quadrennial Review

The FCC has five distinct sets of rules governing ownership of multiple media outlets in a single market: (1) local television ownership rules (known as the television duopoly rules); (2) local radio ownership rules; (3) radio/television cross-ownership rules; (4) newspaper/broadcast cross-ownership rules; and (5) the dual network rule.

Local Television Ownership Rule (Television Duopoly Rule)

The local television ownership rule (known as the television duopoly rule) limits common ownership of television stations serving the same geographic region. An entity may own or control two television stations in the same television market, so long as the overlap of the stations' signals is limited and the joint control does not include two of the four most widely watched stations within the market. The FCC may, however, make exceptions to the "top four" prohibition on a case-by-case basis, depending on the conditions of a particular DMA.

The FCC initially adopted a TV duopoly rule in 1941, barring a single entity from owning two or more broadcast television stations that "would substantially serve the same area." In 1964, the FCC adopted the signal overlap component of the rules. The FCC sought to limit "future ownership to a maximum of two stations in most states and, thus ... act indirectly to curb regional concentrations of ownership as well as overlap itself."

In 1999, the FCC adopted the "top four ranked/eight voice" test, under which it would approve a merger among two of the "top four" stations so long as at least eight independently owned and operating commercial or noncommercial full-power broadcast television stations would remain in the DMA after the proposed combination was consummated. It also adopted the waiver criteria. The "top four ranked" stations in a local market generally are the local affiliates of the four major English-language broadcast television networks—ABC, CBS, Fox, and NBC. The rules apply to the stations' ranking at the time they apply for common ownership. While making some technical modifications, the FCC retained the television duopoly rules in 2016.

In its 2017 Reconsideration Order, the FCC eliminated the "eight voices" component of the test. Furthermore, it decided that in applying the restriction on ownership of two top-four-ranked stations in the same market, it would conduct case-by-case evaluations to account for circumstances in which the application of the prohibition may be unwarranted. The FCC found that the modification to the television duopoly rule would not be likely to harm minority and female ownership of broadcast stations.

Table 1 summarizes the rules, including waiver circumstances.

Relief from Rule

In 2016, the FCC retained its "failed station/failing station" waiver test. Under this policy, to obtain a waiver of the local television (duopoly) rule, an applicant must demonstrate that (1) one of the broadcast television stations involved in the proposed transaction is either failed or failing; (2) the in-market buyer is the only reasonably available candidate willing and able to acquire and operate the station; and (3) selling the station to an out-of-market buyer would result in an artificially depressed price. The FCC declined to relax its criteria for determining whether a station is failing or failed, stating that parties might be able to manipulate the data used to determine the criteria.

Local Radio Ownership Rule

The local radio ownership rule limits ownership of radio stations serving the same geographic area. In 2017, the FCC adopted a presumptive waiver of the local radio ownership rule in limited circumstances. In contrast to the television duopoly rule, the FCC does not have failed/failing station waiver criteria for the local radio ownership rule.

FCC first adopted rules limiting ownership of FM radio stations serving "substantially the same service area" in 1940. In 1943, the FCC adopted a rule limiting ownership of AM radio stations "where such station renders or will render primary service to a substantial portion of the primary service area of another [AM] broadcast station." In 1964, the FCC amended the rule to use the service contours of FM and AM stations to define the service area. The FCC first adopted a rule limiting ownership of AM and FM stations serving the same area in 1970 and amended them in 1989.

In 1992, to address the fact that many radio stations were facing difficult financial conditions, the FCC relaxed the radio ownership rule to establish numerical limits on radio station ownership based on the total number of commercial stations within a market, rather than on whether their signals overlapped. Congress directed the FCC to set new caps, according to instructions laid out in Section 202(b) of the Telecommunications Act of 1996. These limits, described in Table 2 , remain in place today. In 2016, the FCC retained the local radio ownership rule, asserting the following:

This competition-based rule indirectly advances our diversity goal by helping to ensure the presence of independently owned broadcast radio stations in the local market, thereby increasing the likelihood of a variety of viewpoints and preserving ownership opportunities for new entrants.

Clarifications

In 2016, the FCC clarified certain aspects of its local radio ownership rule. One of the clarifications related to the application of the rule in cases when Nielsen changes the boundaries of radio markets (i.e., Nielsen Audio Metros). In another clarification, the FCC stated that in Puerto Rico, the FCC will use radio station signal contour overlaps, rather than the Nielsen Audio Metro, to apply the local radio ownership rule due to topographical and market conditions.

Radio/Television Cross-Ownership Rule

In 2017, the FCC eliminated the radio/television cross-ownership rule. This rule prohibited an entity from owning more than two television stations and one radio station within the same DMA, unless the DMA met certain criteria.

The FCC found that it could no longer justify retention of the rule in light of broadcast radio's diminished contributions to viewpoint diversity and the variety of other media outlets that contribute to viewpoint diversity in local markets. The FCC reaffirmed its previous conclusion in 2016 that the radio/television cross-ownership rule is not necessary to promote competition or localism. The FCC also determined that the elimination of the rule would not likely have a negative impact on minority and female ownership.

Newspaper/Broadcast Cross-Ownership Rule

The FCC repealed the newspaper/broadcast cross-ownership (NBCO) rule in 2017. The rule prohibited common ownership of a daily print newspaper and a full-power broadcast station (AM, FM, or TV) if the station's service contour encompassed the newspaper's community of publication. The FCC found that prohibiting newspaper/broadcast combinations was no longer necessary to serve the agency's goal of promoting viewpoint diversity in light of the multiplicity of sources of news and information in the current media marketplace and the diminished role of daily print newspapers, and therefore did not serve the public interest. The FCC noted that given its conclusion in 2003 that the rule was not necessary to promote the goals of competition or localism, and could potentially hinder localism, viewpoint diversity had remained its principal rationale for maintaining the NBCO rule.

The FCC determined repealing the NBCO rule could potentially promote localism by enabling local news outlets to achieve efficiencies by combining resources needed to gather, report, and disseminate local news and information. Furthermore, the FCC concluded that eliminating the NBCO rule would not have a material impact on minority and female ownership.

Dual Network Rule

The dual network rule (described in detail at 47 C.F.R. §73.658(g)) prohibits common ownership of two of the "top four" networks but otherwise permits common ownership of multiple broadcast networks. Generally, the four broadcast networks covered by this definition are ABC, CBS, Fox, and NBC. The FCC did not address the dual network rule in its 2017 Reconsideration Order, and the rule therefore remains in effect.

The FCC first adopted this rule, which originally prohibited ownership of any two networks, with respect to radio in 1941, as part of the Chain Broadcasting Report . The FCC directed the rule at NBC, the only company at that time with two radio networks. The FCC found that the operation of two networks gave NBC excessive control over its affiliated broadcast radio stations, and an unfair competitive advantage over other broadcast radio networks. The FCC extended the dual network rule to television networks in 1946.

Section 202(e) of the Telecommunications Act of 1996 directed the FCC to revise its dual network rule. Per the act, the FCC modified the rule to enable common ownership of two networks, as long as one of the networks was not among the top four networks (i.e., ABC, CBS, FOX, and NBC). In 2001, the FCC revised the rule to permit one of the four major networks to jointly own one of those emerging networks, which have since merged into the CW network. Today, the CBS Corporation has a partial ownership interest in the CW broadcast network. In 2016, the FCC retained the "dual network" rule without modification, in order to foster its goals of preserving competition and localism.

Table 3 summarizes the public-interest rationales for each of the media ownership rules.

Ownership Diversity

2016 FCC Diversity Order

The FCC has a long history of attempts to adopt rules to encourage diverse broadcast station ownership, including ownership by women and members of minority groups.

Examples of the FCC's attempts are described within several of its past media ownership reviews, including the adoption of the Failed Station Solicitation Rule and the establishment of a class of "eligible entities" that could qualify for relaxed ownership rules, attribution rules, and more flexible licensing policies than their counterparts.

As a result of this history, and appeals of previous FCC actions imposing rules to foster diversity of broadcast ownership, the Third Circuit Court of Appeals is overseeing the FCC's efforts to foster diversity of broadcast station ownership.

In 2016, the FCC adopted a new order (2016 Diversity Order) containing rules designed to increase broadcast ownership diversity. In accordance with a Third Circuit directive, the agency submitted the rules to the court.

Revenue-Based Eligible Entity Standard

In its 2016 Diversity Order, the FCC reinstated the revenue-based eligible entity standard, using the Small Business Administration's definition of a "small business." The FCC had also used this revenue-based eligible entity standard in its previous 2008 ownership diversity rulemaking (2008 Diversity Order). Under this definition, entities that own broadcast stations and have total annual revenue of $38.5 million or less qualify for certain construction, licensing, transaction, and auction measures, described below.

Measures Specific to Small Businesses

The FCC adopted six measures in the 2016 Diversity Order that are designed to enable eligible entities to abide by less restrictive media ownership and attribution rules, and more flexible licensing policies, than their counterparts. Table 4 describes the six measures.

Similar to the reinstated definition of eligible entities, these measures are the same as those previously adopted in the FCC's 2008 Diversity Order. To justify this decision, the FCC reasoned that "we continue to believe that enabling more small businesses to participate in the broadcast industry will encourage innovation and promote competition and viewpoint diversity." It added that whether or not such measures would specifically lead to increased broadcast ownership by women and minorities has no bearing on whether the measures will promote small business participation in the broadcast industry.

Interested parties have appealed the 2016 Diversity Order to the Third Circuit.

Incubator Program

As part of its reconsideration of the Quadrennial Media Ownership order in 2017, the FCC established a new incubator that provides a broadcast radio ownership rule waiver to a broadcaster that establishes a program to help facilitate station ownership for a certain class of owners. In addition, the FCC launched a new rulemaking proceeding seeking comment on how to implement the program.

The FCC issued rules governing the incubator program in August 2018. Most of the rules became effective on September 27, 2018. Information collection requirements are subject to review by the OMB, pursuant to Section 3507(d) of the Paperwork Reduction Act of 1995 ( P.L. 104-13 ).

Under the incubator program, an established radio broadcaster will provide financial and operational support, including training and mentoring, to a new or small radio broadcaster. At the end of a successful incubation relationship, the new or small broadcaster will either own and operate a new station independently, or be on a firmer financial footing. Once an incubation relationship is completed successfully, the established broadcaster will be eligible to receive a waiver of the FCC's Local Radio Ownership Rule, subject to certain requirements.

In the order, the FCC did not foreclose the possibility of eliminating or further relaxing its local radio ownership rule in the 2018 Quadrennial Review. The FCC noted that Congress would be able to adopt legislation either authorizing or mandating tax certificates and tax credits in the agency's incubator program, either in addition to or in lieu of the FCC local radio ownership rule waiver.

Furthermore, the FCC stated that following the completion of the 2018 Quadrennial Review, it might consider expanding the incubator program to apply to television stations. In addition, it stated that "were Congress to provide an alternative benefit for incubating broadcasters, we would be strongly inclined to expand the program to include television stations."

Appendix.

National Ownership Rule History