FCC Modifies Broadcast Ownership Rules
As expected, the FCC met this morning to modify the broadcast ownership rules pursuant to its third biennial ownership review required by the 1996 Communications Act. The rules were modified by a 3-2 vote, with strong dissents from Democratic Commissioners Copps and Adelstein. Specifically, the FCC looked at the following six broadcast ownership rules: newspaper-broadcast cross-ownership; radio-TV cross-ownership; local TV ownership; local radio ownership; national TV ownership cap; and dual TV network ownership. Subject to judicial review, which is expected, the new rules are as follows:
I) Newspaper-Broadcast and Radio-TV Cross-Ownership Rules – Both of these rules will be eliminated in favor of new Cross-Media Limits, as follows:
1) In markets with nine or more TV stations, there are no cross-ownership limits. In other words, one entity could own a local daily newspaper as well as the full permitted complement of TV and radio stations.
2) In markets with four to eight full power TV stations, an entity may own one of the following media combinations:
(a) a local daily newspaper, one TV station and up to half of the radio stations otherwise permitted under the FCC’s local radio ownership cap;
(b) a local daily newspaper and the full radio station limit for the market (i.e., no TV stations); or
(c) two TV stations and the full radio station limit for the market (i.e., no daily newspaper).
3) In markets with three or fewer full power TV stations, there will be no permitted cross-ownership between newspaper and broadcast stations or between TV and radio stations in the market.
II) Local TV Ownership – The Commission will allow one entity to own two TV stations in any market that has at least five stations, since no combinations will be permitted among the top four stations in a market.
1) In markets with 17 or fewer full power stations, one entity may own up to two stations, only one of which may be among the top four rated stations in the market.
2) In markets with 18 or more full power TV stations, one entity may own as many as three TV stations, but again, only one may be among the top four stations in the market.
The Commission will use Nielsen Designated Market Areas (“DMAs”) to determine a station’s market, without regard to the station’s contour.
III) Local Radio Ownership – The Commission is leaving the local radio ownership rule essentially unchanged. The current rule permits ownership of up to eight radio stations in the largest markets (i.e., those with 45 or more stations). The one change being made to this rule is the definition of a station’s geographic “market” used to determine the number of stations within a market. Whereas the former rule looked at the overlapping contours of commonly owned stations, the Commission will now use Arbitron metro markets to determine the number of stations in a market, without regard to any station’s contour. In counting the number of stations within a metro market, the FCC will count both stations licensed to communities within that metro market as well as stations that consider the market to be their “home” market, regardless of the community of license.
The Commission will initiate a rulemaking proceeding to determine the market definition outside of the Arbitron metro markets. Until the rulemaking is completed, however, the FCC will use a modified contour overlap rule in those areas. The modified contour overlap rule will ignore stations located more than 58 miles from the perimeter of the overlap area, even if there is contour overlap with such stations.
Although the new rules are expected to decrease the number of stations one entity may own within certain markets, the Commission is grandfathering all existing ownership combinations, until such time as the stations are sold. At that time, the new owner would have to come into compliance with the revised rules, unless the stations are sold to a small business entity. The Commission hopes the small business exception will promote radio ownership among minority and female-owned businesses.
IV) National TV Ownership Cap – The Commission’s 35% cap on national audience reach will be increased to 45% in view of the Commission’s finding that TV stations compete with cable and DBS. Audience reach is determined by counting the number of TV households in a station’s market, regardless of the station’s actual ratings or audience share. In cases where an entity owns two stations within the same market, the market is only counted once. The FCC will retain the 50% UHF discount, meaning that the market audience of a UHF station will be counted as only half of the actual audience for cap purposes, on the grounds that UHF stations have both smaller contours and smaller viewing shares than VHF stations. The UHF discount will be terminated or “sunset” for the top four TV networks following the transition to digital TV. The Commission will determine at a later date whether to sunset the UHF discount for other networks and group owners.
V) Dual TV Network Ownership – The Commission is retaining the dual network ownership rule that prohibits the four largest TV networks (ABC, NBC, CBS and Fox) from merging with each other. However, the expansion of the national audience cap may permit one of these four networks to merge with one of the smaller networks.
It is anticipated that the Commission’s new broadcast ownership rules will be challenged in court and it remains to be seen whether the parties appealing these rules will be able to obtain a stay of the rules pending the outcome of their appeal.
Please contact us if you have any questions concerning these rules. The text of the Commission’s decision should be released within the next few weeks.