Typically, households receive television programming through over-the- air broadcasts or a subscription video service. Broadcast television provides free over-the-air programming to the public through local television stations; according to FCC, almost 10 percent of households exclusively rely on over-the-air television. In contrast, consumers pay fees to video providers, including cable operators, satellite providers, or telecommunications companies—collectively referred to as multichannel video programming distributors (MVPD)—for subscription video service that includes local television stations as well as cable networks, such as CNN and ESPN. Television broadcast stations are licensed by FCC and are permitted to transmit a video broadcast signal on a specific radio frequency in a particular area and at a particular strength. Television stations produce, acquire, and distribute programming. Some stations are owned by or affiliated with one of the four major broadcast networks (ABC, CBS, FOX, and NBC). If a local station is owned and operated by a network, it is referred to as an “owned and operated” station; if it is independently owned but affiliated with the network, it is referred to as an affiliate station. Owned and operated and affiliated stations carry network programming and network-inserted advertisements during specific time periods. For example, a station that is affiliated with FOX has an agreement with the network that allows it to show FOX programs at particular times of the day. Aside from the network-furnished programming, including prime time shows, afternoon soap operas, national news programs, and sports, local stations fill in the rest of the week’s programming time with local programming (such as local news) and syndicated programming. In addition, there are independent stations that are neither owned by nor affiliated with a broadcast network. Figure 1 illustrates how television programming is distributed, including broadcast and cable network programming. Local commercial television stations earn the majority of their revenue by selling advertising time. In particular, advertising aired during local news represents a substantial portion of a local commercial station’s revenue. According to the 2013 Radio Television Digital News Association (RTDNA)/Hofstra University survey of 1,377 television stations, news represented an average of about 49 percent of station revenue, with that percentage increasing as market size decreased.4 The survey also found that of the stations surveyed, a total of 717 stations provided their own local news programming, and 235 stations received and aired news produced by another station. Many stations also receive compensation from MVPDs, known as retransmission consent, which is discussed later in this section. 2013 RTDNA/Hofstra University Survey. RTDNA is a professional organization serving the electronic news profession. RTDNA members include local and network news executives, news directors, producers, reporters, digital news professionals, educators, and students. The RTDNA/Hofstra University Survey is an annual survey of operating television stations. percent of Americans said they used a desktop or laptop computer to access news, whereas 54 percent said they accessed it on a mobile device (cell phone or tablet). FCC assigns licenses for television stations to use the airwaves expressly on the condition that licensees serve the public interest and are responsive to the needs of the local community. Section 310 of the Communications Act of 1934 outlines the limitations on holding and transferring broadcast licenses. For example, section 310(d) requires prior Commission approval before a license is assigned or transferred; when FCC is reviewing an application for a license assignment or transfer, it must determine whether the public interest, convenience, and necessity will be served by granting the application.9 Toward this end, FCC has established three policy goals: Competition. FCC seeks to create a marketplace in which broadcast programming meets the needs of consumers and has stated that competition drives stations to invest in better local programming. When reviewing competition in local television markets, FCC considers competition for viewers and advertisers. Localism. FCC seeks to ensure that each station meets the needs and issues of the community that it is licensed to serve with the programming that it offers. Diversity. FCC seeks to maintain and enhance diversity based on the idea that diverse ownership among media outlets increases the number of viewpoints in broadcast content compared to what would otherwise be the case in a more concentrated ownership structure. 47 U.S.C. §310(d). 47 C.F.R. § 73.3555(d). A “failed” station is one that has been dark for at least 4 months or is involved in court- supervised involuntary bankruptcy or involuntary insolvency proceedings. Under the standard for “failing” stations, a waiver is presumed to be in the public interest if the applicant satisfies each of the following criteria: (1) one of the merging stations has had an all-day audience share of 4 percent or lower, (2) the financial condition of one of the merging stations is poor, and (3) the merger will produce public interest benefits. Under the standard for “unbuilt” stations, a waiver is presumed to be in the public interest if an applicant meets each of the following criteria: (1) the combination will result in the construction of an authorized but as yet unbuilt station and (2) the permittee has made reasonable efforts to construct the licensed facility and has been unable to do so. (47 C.F.R. § 73.3555 Note 7 and In the Matter of Review of the Commission’s Regulations Governing Television Broadcasting, ¶ 86, 14 FCC Rcd. 12903, 12941 (1999) (Local TV Ownership Report and Order). See 1996 Act, § 202(c), as amended by Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, § 629, 118 Stat. 3, 99. example, the newspaper/broadcast cross-ownership rule prohibits ownership of a daily newspaper and television stations that serve the same market. FCC developed attribution rules to determine what interests should be counted when applying these media ownership limits. FCC’s attribution rules seek to identify those interests in or relationships to licensees that confer on their holders a degree of influence such that the holders have a realistic potential to affect the programming decisions or other core operating functions of licensees. If an entity, such as a station ownership group, is found to have an attributable interest in a station, that station would be included when determining whether the entity has exceeded FCC’s ownership limits. FCC has several carriage and programming rules that are designed to support the provision of local content by local television stations. These rules set forth the conditions under which MVPDs carry stations’ content. Some key rules that affect carriage and programming include: Must carry and carry-one carry-all. The must carry and carry-one carry-all rules address the right of television broadcast stations to have their signals carried by MVPDs serving their markets. Stations that select must-carry or carry-one carry-all status must be carried by the MVPDs serving the station’s market, but receive no compensation from the MVPDs. Retransmission consent. Retransmission consent refers to permission allowing an MVPD to retransmit a station’s signal when the station chooses not to elect carriage through the must carry or carry-one carry-all rules. By opting for retransmission consent, stations give up the guarantee of carriage in exchange for the right to negotiate for the terms of carriage, including potential compensation. Retransmission rights are negotiated directly between a station and the MVPD. We have previously found that after the 1992 Act was enacted, negotiations for retransmission consent generally involved “in kind” compensation to local broadcasters, such as carriage of new, affiliated cable networks. However, in recent years, financial compensation has become more common and retransmission fees received by local stations have increased. By statute, FCC is required to review its media ownership rules every 4 years—the quadrennial review—and determine whether any such rules remain necessary in the public interest. Television stations can enter into agreements with other stations to share or provide a variety of services. The agreements between stations can involve either two or more stations sharing a resource or one station providing a service to another station. Common services that can be shared or provided between stations include: News resources. Stations can enter into an agreement to share news- gathering resources, such as helicopters, reporters, cameramen, video footage, and graphics. For example, in 2009, three television stations in Phoenix, Arizona, entered into an agreement to share one news helicopter for aerial footage of news stories and traffic reporting. Production and delivery of programming. Two stations can enter into an agreement wherein one station produces another station’s local news. For example, in West Palm Beach, Florida, E.W. Scripps Company station WPTV-TV (an NBC affiliate) produces newscasts for Raycom-owned WFLX (a FOX affiliate) at 7:00 to 9:00 a.m., 4:00 to 4:30 p.m., and 10:00 to 11:00 p.m. Program acquisition. Stations can enter into an agreement wherein the licensee or owner of one station can negotiate another station’s affiliation agreement with a broadcast network. For example, one station group owner told us that it negotiated the renewal of affiliation agreements at the request of the station owners that it has agreements with. Joint retransmission consent negotiations. A station owner can contract out its retransmission consent negotiations with MVPDs to another station owner, meaning that the retransmission consent fees are handled during one negotiation, despite the fact that the stations are not owned by the same company. As discussed later in this report, in March 2014, FCC prohibited such arrangements if they involve two or more separately owned top-four stations (based on audience share) in the same market. Advertising sales. A licensee or owner of a station can authorize another station to sell its advertising time. Station engineering. One station can provide technical support for another station.