Federal Register / Vol. 60, No. 167 / Tuesday, August 29, 1995 / Rules and Regulations 44773

# Depth in Dated: August 22, 1995. stations in the top 50 prime-time feet above Richard T. Moore, television markets (‘‘Top 50 Market ground. Associate Director for Mitigation. Affiliates’’) from broadcasting more than Source of flooding and location *Elevation in feet [FR Doc. 95–21397 Filed 8–28–95; 8:45 am] three hours of network programs (the (NGVD) BILLING CODE 6718±03±M ‘‘network restriction’’) or former network programs (the ‘‘off-network At confluence with Horse restriction’’) during the four prime time Creek ...... *1,348 FEDERAL COMMUNICATIONS viewing hours (i.e., 7 to 11 p.m. Eastern 50 feet downstream of State COMMISSION and Pacific times; 6 to 10 p.m. Central Highway 16 ...... *1,360 and Mountain times). The rule exempts 200 feet downstream of con- 47 CFR Part 73 certain types of programming (e.g., fluence with Tributary 2 ...... *1,370 runovers of live sports events, special 200 feet downstream of con- [MM Docket No. 94±123; FCC 95±314] news, documentary and children’s fluence with South Fork of programming, and certain sports and Indian Creek ...... *1,375 Radio Broadcast Services; Television network programming of a special 100 feet downstream of Indian Program Practices Creek Drive ...... *1,390 nature) which are not counted toward At corporate limits ...... *1,393 AGENCY: Federal Communications the three hours of network 1 South Fork of Indian Creek: Commission. programming. PTAR was promulgated At confluence with Indian ACTION: Final rule. in 1970 in response to a concern that the Creek ...... *1,376 three major television networks—ABC, 50 feet upstream of Indian SUMMARY: This Report and Order repeals CBS and NBC—dominated the program Creek Drive ...... *1,391 the Commission’s Rules regarding the production market, controlled much of At western corporate limits ...... *1,416 Prime Time Access Rule. The the video fare presented to the public, Horse Creek: Commission had invited comments in a and inhibited the development of At confluence with Indian rulemaking proceeding to assess the competing program sources. The Creek ...... *1,348 legal and policy justifications, in light of Commission believed that PTAR would At upstream face of Summit current economic and technological increase the level of competition in Avenue ...... *1,360 conditions, for the Prime Time Access program production, reduce the At southern corporate limits .... *1,374 Rule and to consider the continued need networks’ control over their affiliates’ Tributary 1: for the rule in its current form. Based on programming decisions, and thereby At confluence with Indian the comments received from interested increase the diversity of programs Creek ...... *1,342 parties, including economic and available to the public. PTAR also came 50 feet upstream of Central empirical analyses of the effects of to be viewed as a means of promoting Avenue (U.S. Highway 67) .. *1,361 repealing or retaining the rule, the the growth of independent stations in 100 feet upstream of Walcott Commission concludes that the public that they did not have to compete with Avenue ...... *1,374 interest warrants the repeal of PTAR. In Top 50 Market Affiliates in acquiring At downstream face of Austin off-network programs to air during the Street ...... *1,394 repealing the rule, the Commission access period. Tributary 2: believes a one-year transition period is appropriate to provide parties time to 2. On October 20, 1994, the At confluence with Indian Commission adopted a Notice of Creek ...... *1,371 adjust their programming strategies and Proposed Rule Making (‘‘Notice’’), 59 FR 50 feet upstream of Central business arrangements. 55402 (November 7, 1994), in this Avenue (U.S. Highway 67) .. *1,381 EFFECTIVE DATE: August 30, 1996. docket to conduct an overall review of 100 feet upstream of State FOR FURTHER INFORMATION CONTACT: Highway 36 ...... *1,395 the continuing need for PTAR given the Charles W. Logan or Alan E. Aronowitz, profound changes that have occurred in 1,000 feet upstream of FM Mass Media Bureau, Policy and Rules 1689 ...... *1,420 the television industry since 1970. In Division, Legal Branch, (202) 776–1663, Tributary 3: response to the Notice, we received a or Alan Baughcum, Mass Media Bureau, At confluence with Indian substantial number of comments from Creek ...... *1,372 Policy and Rules Division, Policy interested parties, including economic 100 feet upstream of Indian Analysis Branch, (202) 739–0770. and empirical analyses of the effects of Creek Drive ...... *1,390 SUPPLEMENTARY INFORMATION: This is a repealing or retaining the rule. At southern corporate limits .... *1,428 synopsis of the Commission’s Report 3. Based on this record, the Tributary 4: and Order in MM Docket No. 94–123, Commission concludes that PTAR At confluence with Tributary 3 . *1,420 adopted July 28, 1995, and released July should be extinguished. The three major At limit of study ...... *1,435 31, 1995. The complete text of this networks do not dominate the markets Tributary 5: document is available for inspection relevant to PTAR. There are large At downstream face of State and copying during normal business numbers of sellers and buyers of video Highway 16 ...... *1,351 hours in the FCC Reference Center programming. Entry, even by small 100 feet upstream of airport (Room 239), 1919 M Street NW., business, is relatively easy. There are a runway ...... *1,373 Washington, D.C. 20554, and may be substantially greater number of At limit of study ...... *1,401 purchased from the Commission’s copy broadcast programming outlets today Maps are available for inspec- contractor, International Transcription than when PTAR was adopted in 1970 tion at City Hall, City of Co- Service, (202) 857–3800, 2100 M Street due to the growth in numbers of manche, 114 West Central, NW., Washington, D.C. 20037. independent stations. In addition, Comanche, Texas. nonbroadcast media have proliferated. Synopsis of the Report and Order We also find, given these market (Catalog of Federal Domestic Assistance No. 1. The Commission’s Prime Time conditions, and the record before us, 83.100, ‘‘Flood Insurance.’’) Access Rule (‘‘PTAR’’) generally prohibits network-affiliated television 1 47 CFR 73.658(k)(1)–(6). 44774 Federal Register / Vol. 60, No. 167 / Tuesday, August 29, 1995 / Rules and Regulations that the rule is not warranted as a means A. Video Programming Distribution 10. Nor is it likely that affiliates in a of promoting the growth of independent 8. PTAR applies to ABC, CBS, and local Top 50 PTAR Market would stations and new networks, or of NBC affiliates in the Top 50 PTAR dominate as a group since video safeguards affiliate autonomy. Indeed, Markets. These networks and their programming distribution is only the rule generates costs and affiliates display or ‘‘distribute’’ moderately concentrated. In its 1993 inefficiencies that are not now offset by television programming to viewers and decision setting a timetable for repeal of substantial, if any, benefits. sell air time to customers seeking to the fin/syn rules, the Commission stated 4. The Commission thus finds that the advertise. In program distribution, that ‘‘inter-network competition for public interest warrants the repeal of networks and their affiliates compete programming is ‘intense.’ ’’ Nothing in PTAR. In scheduling repeal of the rule, with programs broadcast by the record before us calls this a one-year transition period is independent stations. The list of conclusion into doubt, as the networks appropriate to provide parties time to economic substitutes for network continue to wage a ratings war that has adjust their programming strategies and broadcasts may also include cable only been heightened with the business arrangements prior to the programs, programs over satellite emergence of the Fox network. elimination of a regulatory regime that 11. The Commission thus concludes television systems, videocassette has been in place for 25 years. that, even focusing narrowly on local rentals, and other alternatives. For Consequently PTAR will be repealed broadcast video programming purposes of its review of PTAR, the effective August 30, 1996. distribution, the three networks and Commission will focus on program 5. This conclusion is consistent with their affiliates cannot singly or jointly distribution comprising only broadcast the Commission’s 1993 decision to dominate video program distribution in schedule the repeal of the financial television station operators and their the Top 50 PTAR Markets. This is a interest and syndication rules ((‘‘fin/ networks. This is a conservative, strong conclusion because the inclusion syn’’), which was upheld on appeal by perhaps overly narrow, approach given of additional television alternatives the U.S. Court of Appeals for the that a good case can be made that, from such as cable, satellite systems, video Seventh Circuit. See Capital Cities/ABC, the viewers’ perspectives, cable system dialtone, etc., would serve to make Inc. V. FCC, 29 F.3d 309 (7th Cir. 1994). operators inter alia are economically domination by the networks and their We determined that repeal of the fin/syn relevant alternative distributors of video affiliates even less likely. rules was warranted given the increased programming. Since PTAR constrains competition facing the networks and the the market activities of affiliates of the B. The Video Programming Production conditions in the television three major networks in the Top 50 Market programming marketplace. Based upon PTAR Markets, the Commission’s 12. Defining the relevant video these findings we eliminated a number primary focus in this section is whether programming production market begins of the fin/syn rules immediately and set these network affiliates would be able to by focusing on the products produced a timetable for repeal of the remainder. exercise undue market power in the by beneficiaries of PTAR. Entertainment 6. The Commission reaches its delivery of video programming in their series, news magazine shows, and game conclusion to PTAR by analyzing the respective local markets. shows are examples of the programs following factors: First, it evaluates 9. Based on the record, it is clear that, sold by independent producers and whether the networks dominate the in the Top 50 PTAR Markets, the three syndicators of prime-time programs to markets relevant to the rule, or would be original networks and their affiliates network affiliates and independents. likely to dominate them in the absence face more competition for viewers than The list can be extended to include of PTAR. Second, it assesses the costs they did in 1970 or even in 1980. There movies (whether for television, imposed by the rule. Third, taking into are substantially greater numbers of theatrical presentation, or cassette account its findings regarding whether television stations than there were in rental), sports programs, talk shows, the networks dominate and the costs of 1970. For example, the number of news programming (local and national), the rule, it analyzes whether the rule is independent stations has grown by 450 musical variety, dramas, arts necessary as a means of pursuing the percent during this time. The effects of presentations, etc. Suppliers of these benefits of fostering independent this competition are readily apparent in programs include not only those programming, promoting the growth of examining the networks’ audience suppliers that actually are employed in independent stations and new networks, shares over the years. Looking at prime a given year to produce programming and safeguarding affiliate autonomy. time alone, the time period when the for network prime time but also those networks’ viewing shares are the producers willing and able to produce I. The Networks and Their Affiliates Do highest, each network’s average share of such programming in the event that Not Dominate Markets Relevant to the prime time audience declined from market price increased above the PTAR a 31.1 viewing share during the 1971/72 competitive level. The list of suppliers 7. The Commission’s adoption of season to a 20.2 share during the 1993/ will include television networks, PTAR in 1970 was premised on a view 94 season, a loss of almost one-third of independent syndicators, Hollywood that the three networks dominated each network’s audience. ABC, CBS, movie studios, and international video television programming. The NBC, and Fox had individual 1993/94 producers. Buyers of such programming Commission’s analysis of the record prime-time audience shares of 20.1 , are not limited to television leads it to conclude that neither the 22.7, 17.8 and 11.4 percent, broadcasters but will include other networks nor their affiliates dominate respectively. The Commission’s purchasers of video programming such video programming distribution or the calculation of affiliate audience shares as cable networks and operators, direct video programming production market. in each of the Top 50 PTAR Markets is broadcast satellite operators, The Commission reaches this consistent with network audience videocassette distributers and, most conclusion by employing a two-step shares nationally. No single network or recently, video programming affiliates of market power analysis which involves network affiliate would seem to have local telephone companies, which defining the relevant market and the ability to dominate video propose to offer video dialtone service. examining evidence of undue market programming distribution in any of This market is clearly national and power. these local markets. perhaps international in scope, because Federal Register / Vol. 60, No. 167 / Tuesday, August 29, 1995 / Rules and Regulations 44775 television broadcasters obtain a large delivery of television programming. to viewers that are larger than the portion of their programs from national Examination of video programming benefits, if any, of PTAR to viewers. providers. distribution and the video programming 18. In addition, PTAR as a whole 13. There is no evidence in the record production market is thus directly prevents the networks and their that the networks exercise monopsony relevant to whether PTAR is necessary affiliates from taking advantage of or oligopsony power in the video under today’s market conditions. The network efficiencies during the access programming production market, i.e., Commission cannot say the same for the hour. Networks can deliver large that one (monopsony) or several firms television advertising market, nor are audiences to advertisers, which in turn (oligopsony) artificially restrict the we persuaded that PTAR is the allows the networks and their affiliates consumption of programming and appropriate mechanism for addressing to provide higher cost programming that depress the market price paid for the networks’ role in these markets. is quite popular among audiences programming. Aside from the growth in II. The Costs of PTAR during prime time. While the parties the broadcast industry described above, dispute the size of the economic cost there are nearly 150 national and 16. In assessing the continuing need due to the loss of network efficiencies, regional cable networks, most of which for PTAR, the Commission must take the Commission concludes that this cost transmit original, non-network into account the costs the rule imposes far exceeds PTAR’s economic benefits. programming. Also, other nonbroadcast on the networks, their affiliates, video program distributors—such as producers of network programming, III. Analyzing the Public Interest Need cable, wireless cable, and satellite television viewers, and the efficient for PTAR services—have grown. Finally, first-run functioning of the market. One obvious A. Increasing Opportunities for syndicators are quite active as buyers cost of the rule is that it restricts the Independent Programmers (and sellers). According to the record, in programming choices of Top 50 Market 1994 the video entertainment Affiliates. They cannot air either 19. PTAR’s principal purpose was to programming purchased by each of the network or off-network programming promote source diversity by three networks accounted for during the access period. One set of strengthening existing independent approximately 9.4 percent of aggregate comments describes how the off- television program producers and expenditures on video programming in network restriction interferes with the encouraging entry of new producers. In the United States, after taking into smooth functioning of the network- adopting PTAR, the Commission account distribution fees associated affiliate relationship by raising the predicted that the rule would increase with syndicated programming and home overall costs of network broadcasting. the net amount of diverse programming videos. These market shares indicate With PTAR in place, the affiliate must available to the viewing public and that demand for video programming is either make investments to produce induce the entry of new program not concentrated, and that the networks programs itself, or it must purchase suppliers into the market. clearly cannot be said to exercise undue first-run programs from syndicators. In 20. A number of parties argue that market power in the video programming the latter case, the affiliate bears the PTAR has failed to promote these goals. production market, either individually transaction costs of establishing They point out that four companies— or together. The record also shows that relationships with syndicators and Paramount, Warner Brothers, Fox, and the supply side of the video independent programmers. In either King World—distribute over 95 percent programming production market is no case, the affiliate bears the added risk of of the first-run syndicated programming more concentrated than the demand how first-run programming will perform aired during the PTAR access period. side. relative to known-to-be popular network Putting aside the question of who 14. The Commission therefore reruns. As a result of these higher costs, distributes access period programming, concludes that no buyers or sellers, the total of net revenues to be shared opponents of the rule also argue that acting alone or together, are likely to be among networks and affiliates is made PTAR has failed to increase diversity in able to exercise undue market power in smaller by PTAR. terms of who produces such the video programming production 17. PTAR harms not only networks programming. Moreover, the rule has market. In addition, entry barriers are and affiliates, but the producers of been criticized for actually lowering low. In particular, it is unlikely that the network programming. The off-network program quality and diversity. Without three networks will be able to exercise restrictions has had the unintended judging the quality of particular market power in the video programming effect of discouraging investment in programs, the Commission agrees that production market, either on the prime-time programming. Producers PTAR, by eliminating network demand or supply side, if PTAR is rely to a great extent on their ability to programming during the access hour, repealed. sell reruns of their programs—i.e., off- may have resulted in the loss of network programs—to recoup their costs efficiencies that the networks and their C. The National Television Advertising and to earn a profit. The license fee the affiliates may have enjoyed in the Market networks pay for the right to air prime- absence of the rule. The Commission 15. Several proponents of PTAR argue time entertainment programs often does notes, however that there are many that the three networks dominate the not cover the costs of producing these variables that affect the number of television advertising market. But these programs. The off-network restriction, program producers and program types parties do not present sufficient however, diminishes producers’ ability in the market, with or without PTAR. evidence to support this argument. to recoup unrecovered costs by Nevertheless, we recognize the limits of Moreover, PTAR was not adopted to artificially restraining the prices of off- regulatory efforts to promote program address the structure or performance of network programming. It does so by diversity, and realize that PTAR the advertising industry. This is why the eliminating the Top 50 Market Affiliates prevents the use of network efficiencies Notice did not explicitly seek from the range of potential purchasers of during the access hour. information on television advertising this programming. By reducing demand, 21. Mindful of these issues, the markets. The Commission adopted the prices for off-network shows are Commission turns to the critical PTAR due to concerns that the three reduced. The Commission believes that question of whether PTAR is necessary networks dominated the production and PTAR produces costs and inefficiencies today as a means of promoting the 44776 Federal Register / Vol. 60, No. 167 / Tuesday, August 29, 1995 / Rules and Regulations growth of independent programmers B. Fostering the Growth of Independent inequitable to provide a competitive and source diversity. In answering this Stations and New Networks advantage to independent stations over question, it is important to remember 24. PTAR provides independent network affiliates in today’s that in adopting PTAR, the Commission stations greater access to off-network marketplace. The networks and their cautioned that it was not its intention to programming and prevents them from affiliates, like independents, face carve out a competition free haven for having to compete against network growing competition from non- syndicators or to smooth the path for programming during the access hour. broadcast media. 27. The Commission reaches this existing syndicators. Rather, the central Proponents of PTAR argue that the rule conclusion by addressing three objective of the rule was to provide is necessary to promote the questions raised by the commenters: opportunity for the competitive Commission’s outlet diversity goals by First, does the record show that the development of alternate sources of fostering the growth of independent ‘‘UHF handicap’’ warrants affording television programs. The Commission stations and new networks. But the independent stations a competitive record does not conclusively show that no longer believes PTAR is necessary to advantage in the form of PTAR? Second, repeal of either the off-network provide this opportunity under today’s does the record demonstrate that PTAR market conditions. The Commission provision or the network restriction of is needed to support independent reached a similar conclusion in PTAR will undo the growth of television stations’ ratings and eliminating the fin/syn rules’ restriction independent stations since the rule was profitability and that repeal of PTAR on network acquisition of financial adopted. Nor will repeal of the rule would significantly harm outlet interest and syndication rights in likely undermine the development of diversity? Third, does the record network prime time entertainment new broadcast networks, or otherwise support the argument that the repeal of programming. In reaching this harm the Commission’s outlet diversity PTAR will frustrate the development of conclusion, the Commission dealt with goals. new networks? the same source diversity concerns and 25. The number of independent 1. The UHF Handicap stated that if profits are competitive, television stations has grown by almost 450 percent since PTAR was adopted, then the only reason to employ 28. Proponents of the rule seek to from 82 stations in 1970 to over 450 regulatory devices to protect producer justify PTAR by pointing to the signal today. The record indicates that profits is if we determined that, for reach disadvantage of UHF stations advances in television design, the some reason, the public required a relative to VHF stations. They maintain growth of cable penetration, and the that this ‘‘UHF handicap’’ places greater array of producers than the growth in demand for television market would normally bear. As in the independent stations at a structural advertising all have strengthened disadvantage since most of them are in fin/syn proceeding, no party has independent television. Independents the UHF band. Affiliates of the three provided any reasoned justification for also have a robust supply of major networks are predominantly VHF such a result here. programming to turn to under today’s stations. 22. Repeal of PTAR will subject market conditions. The repeal of PTAR 29. The Commission’s review of the suppliers of first-run syndicated is unlikely to threaten these record, however, as well as Commission programming to greater competition advancements. Nor is there sufficient findings in other proceedings, leads it to during the access period. This basis in the record to conclude that conclude that the UHF handicap has competition in today’s marketplace can repeal will so undermine the ratings and been reduced to some extent. First, provide incentives to provide more profits of independent stations that our Congress and the Commission have innovative, higher quality programming, outlet diversity goals will be implicated. taken a number of steps over the years all of which benefits the consumer. It is likely that repeal of the rule will to ameliorate this handicap by requiring Repeal of PTAR will also eliminate the subject these stations to greater television equipment improvements. costs generated by the rule. Most competition in acquiring off-network Second, the growth of cable has resulted importantly, prices for off-network programming and in attracting in a reduction in the UHF handicap programming will no longer be audiences during the access hour and with respect to those viewers that artificially constrained, which we prime time. But there is not sufficient subscribe to cable. However, although expect will encourage investment in the evidence in the record to support the cable has reduced the UHF handicap, production of network programming. claims that this competition will result the Commission understands that it may in dramatic ratings declines and still affect some portion of viewers who 23. Proponents of the rule have not revenue losses to an extent that are not cable subscribers. provided any evidence to support their threatens the overall viability of 30. While the UHF disparity claims that this competition will destroy independent stations and their ability to continues for some viewers, we do not the market for first-run non-network satisfy their public interest obligations. think the public interest is served by syndicated programming. The record Relatedly, there is no reliable evidence tying PTAR to its complete elimination. indicates that first-run programming is to indicate that repeal of PTAR will The rule does not and cannot address often quite popular among audiences, jeopardize the station base of the new the technical disparities that still exist and may very well be carried by networks or threaten their further between some stations. Moreover, the network affiliates during the access hour development. rule has never been tailored to the UHF/ in the Top 50 PTAR markets even after 26. The Commission consequently VHF distinction. Rather, PTAR provides repeal of the rule. To the extent off- concludes that PTAR is not warranted a competitive advantage to independent network or network programming as a means of ensuring the growth of stations by limiting the programming would displace first-run syndicated independent television stations or new options available to Top 50 Market programs from the Top 50 Market networks. This is especially the case Affiliates, even in cases where the Affiliates, first-run programs should be given the costs of the rule. The off- affected network affiliates are able to find a place on independent network provision discourages themselves UHF stations. The stations, not to mention other outlets investment in network programming. Commission does not believe this is such as cable. Moreover, it is becoming increasingly appropriate given today’s market Federal Register / Vol. 60, No. 167 / Tuesday, August 29, 1995 / Rules and Regulations 44777 conditions and the costs imposed by the decline for independent stations are responsible for significant growth in the rule. The handicap has been reduced. statistically distinguishable from zero. number of independent stations, albeit Affiliates, like independents, are facing 33. The Commission further observes not until 5–15 years later. However, a increased competition in the television that while independent stations will be study submitted by Economics, Inc. marketplace from non-broadcast forced to pay competitive prices for off- (‘‘EI’’), shows that LECG’s model can be sources. The Commission thus network programming in the absence of used to demonstrate that PTAR is not concludes that the UHF handicap that PTAR, they will not necessarily be responsible for the increase in the remains does not warrant continuation outbid for such programming. In market number of independent stations. Thus, of PTAR. 51–100, 76 percent of syndicated the Commission cannot conclude that programs aired by network affiliates is PTAR’s adoption caused a significant 2. PTAR and the Ratings, Growth, and first-run rather than off-network. increase in the number of independent Profitability of Independent Television Moreover, in 1993, two of the top five stations. Nor can the Commission Stations off-network programs broadcast in therefore conclude that PTAR’s repeal 31. The Impact of PTAR on Ratings markets 51–100 were aired more often will cause the large reduction in the and Station Growth. Proponents of the on independent stations than on number of independent stations claimed rule rely on a regression analysis set affiliates. It is also unlikely that all by the rule’s proponents. forth in the comments submitted by the network affiliates in a market will flock 36. The impact of PTAR on Profits Law and Economics Consulting Group to off-network shows, given the and Programming. Even if the (‘‘the LECG Study’’) to support their incentive to counter-program with Commission assumes that PTAR claims regarding the importance of different program formats. In addition, proponents are correct in their PTAR to independent stations. The in the event the networks and their prediction of a ratings decline for LECG analysis attempts to demonstrate affiliates opt to run network independent stations in the event PTAR that the adoption of each of the two programming during the access hour, is repealed, they have not demonstrated components of PTAR (the three-hour off-network fare will continue to be how that would affect independent network restriction and the off-network available to independents. Finally, in stations and the future development of restriction) increased the ratings of the event an off-network program is new networks. In particular, LECG has independent stations. The same analysis displaced from an independent station, not provided any convincing estimate of also seeks to show that repealing PTAR the station can turn to first-run how a decline in audience share during will result in a 58 percent drop in access syndicated programming. First-run 1 or 2 hours of prime time, would lead period ratings and in a carry-over 67 programming can generate higher to a large decline in station revenues percent drop in the ratings for the first ratings than off-network shows, with and a resulting decline in station profits. (following) prime-time hour for associated carryover ratings benefits. Proponents of the rule have thus not independent television stations. 34. The Commission also notes that provided any reliable basis to find that 32. After an extensive review of the the argument advanced in favor of the profits of independent stations LECG Study, the Commission concludes giving a competitive advantage to would decline significantly. More that the LECG Study, and the arguments independent stations, taken to its logical importantly, there is no reliable advanced by parties based on this study, conclusion, would suggest that PTAR evidence in the record to support these do not provide sufficient evidence to coverage be redefined so that it applies parties’ claims that repeal of the rule demonstrate that repeal of PTAR will to smaller, and less financially secure, will so affect the financial health of result in significant ratings declines for markets. Yet no party has proposed such independent stations as to force stations independent stations. For the same a result. To the contrary, PTAR’s off the air or undermine their ability to reasons, the study does not provide benefits appear to flow mainly to the provide public interest programming, reliable evidence that PTAR has as a stronger independent stations in the including news and other public affairs historical matter increased independent country. In fact, these stations generally programming. station ratings. There are numerous have affiliated with one of the new 37. What the record does show is a flaws in LECG’s analysis that lead the networks or are part of a jointly owned generally healthy financial picture for Commission to this conclusion, station group. According to comments independent stations. Profit data including the following: (1) LECG does submitted by NBC, there is not a single published by the National Associate of not link its econometric model to an independent station in the top 50 Broadcasters (‘‘NAB’’) indicate that the underlying conceptual model of markets showing a top-five rated off- average independent station has behavior in the television industry; (2) network program that is (1) a UHF generally been profitable, at least since LECG ignores to problem of hysteresis station that is (2) not affiliated with Fox, the mid-1980s. The average UHF station (i.e., even if PTAR caused certain UPN, or WB, and/or (3) not owned by has been profitable since 1992 after a changes in the past, there is no a company owning three or more number of unprofitable years through guarantee that its elimination will stations. Thus, the impact of repeal of the 1980s. This strong financial picture reverse those changes); (3) LECG’s the rule may primarily be felt by the extends to the independent stations not statistical methodology links changes in stronger independent stations. In affiliated with the largest of the new independent station’s ratings PTAR addition, these stations participate in networks, Fox. These stations reported, solely to PTAR, and does not take into joint purchasing or production on average, 1993 profits of four million account other regulations that have arrangements that may ameliorate some dollars per station. UHF non-Fox benefited these stations; (4) There are of the effects of PTAR’s repeal on affiliated independents reported average errors and gaps in LECG’s data sets; (5) program prices. annual profits of $1.5 million per station There seem to be problems with LECG’s 35. Growth in Numbers of in 1993. Also, these average profits specifications of its equations and their Independents. One of the reasons that understate profitability in the largest estimation; and (6) LECG’s analysis the LECG Study and INTV claim as markets, those to which PTAR applies. reports point estimates for regression support for the proposition that repeal 38. Conclusions. The Commission coefficients without confidence of PTAR will substantially hurt UHF thus concludes that PTAR, which has intervals, making it impossible to independent stations is that the become overly broad and inequitable, is confirm that LECG’s predicted ratings adoption of PTAR allegedly was not necessary to provide independent 44778 Federal Register / Vol. 60, No. 167 / Tuesday, August 29, 1995 / Rules and Regulations stations a competitive advantage relative small firms with many producers only recently launched and presently to the Top 50 Market Affiliates. actively seeking outlets for their offering a minimal program schedule, Independent stations may face greater programs. Third, the numbers of may not yet provide a competitive competition in programming the access independent stations remain large alternative to affiliation with one of the hour without PTAR. But there is no enough to make it possible for new other four networks. reliable evidence that this will so networks to add affiliates and expand 43. On balance, however, the jeopardize the financial health of audience reach. Finally, at the present Commission does not believe PTAR’s independent stations as to implicate time, virtually all categories of network restriction is the appropriate public interest concerns, particularly television broadcast stations are, on mechanism under current market those relating to outlet diversity. average, profitable. The repeal of PTAR conditions to address the issue of the will reduce costs imposed by the rule’s 3. Repeal of PTAR and New Broadcast relative bargaining power between restrictions on affiliates, network Networks networks and affiliates. As an initial program producers, and viewers who matter, high clearance rates do not 39. According to proponents of PTAR, prefer high-cost programming, and will necessarily indicate undue network one of the major reasons why PTAR has not create significant problems for leverage; they may simply reflect the been and continues to be important is independent stations and new networks. popularity and efficiencies of network that by promoting the health of programming. There is also evidence in independent stations, it has helped C. Reducing Network Ability to Dictate Affiliate Programming Choices the record indicating greater affiliate create an important and necessary bargaining power today. The emergence condition for the development of the 41. PTAR prohibits the Top 50 Market of the Fox network certainly can be said new networks—Fox, UPN and WB. Affiliates from obtaining network- to have improved affiliate bargaining Proponents of the rule argue that repeal provided programs or off-network power by creating a viable affiliation will severely harm independent stations programs during the access period. In alternative to ABC, CBS, and NBC. The and, in turn, harm the growth of UPN 1970, when it adopted PTAR, the networks also point to the fact that the and WB. These parties, however, have Commission concluded that this was a total amount of network programming not demonstrated the link between the reasonable method of protecting during non-prime time dayparts has asserted harm to independent stations affiliates against the power of the declined over the years as evidence of as a result of the repeal of PTAR and the networks. Under this reasoning, the the inability of networks to dictate to decreased likelihood of the affiliates did not have sufficient affiliates. Finally, there are today many development of new networks. In their bargaining power to refuse to run more options for obtaining programming analysis concerning PTAR and the network programs, even when doing so even without having a network improving position of those stations and was not in their economic self-interest. new networks, PTAR proponents seem Thus, although the rule limited the affiliation. to suggest that the profitability of programming options available to 44. The Commission notes that it is independent stations has been affiliates during one hour and not concerned with the relative responsible for the growth of newly consequently limited to the same extent bargaining position of networks and emerging networks, especially the Fox the viewing options available to their affiliates to the extent it merely network. However, it is equally viewers, nonetheless the affiliates may affects the distribution of profits plausible that many affiliates of the Fox have believed they were better off with between the parties. Rather, the public network owe their improved profit the rule than without the rule, given the interest is implicated where network position to their affiliation with Fox. dominant position of the three leverage prevents an affiliate from Regardless of the possible importance of networks. The view was that while a fulfilling its public interest obligations, both parts of this interaction, parties network would dictate one program such as broadcasting programming favoring continuation of PTAR have not shown nationally for the access period, responsive to local interests, or distorts demonstrated in any convincing way the rule would permit the affiliate to the normal market incentive to air that PTAR itself is ultimately choose instead from a range of choices programming according to viewer responsible for the development of (i.e., in-house or independently preferences. newly emerging networks. produced programs). 45. The Commission thinks these 40. The Commission does not believe 42. While advocating repeal of the off- issues are best addressed in the context that repeal of PTAR will create the network provision of PTAR, proponents of our rules governing a station’s right grounds for failure of newly-launched of the network restriction argue that to reject network programming, the television networks nor for significant there are some indications that the filing of affiliation agreements, and its slowing in their development. Some networks continue to have significant other rules regarding the network- independent stations may find their bargaining leverage over their affiliates. affiliate relationship. The Commission profits reduced as the industry adjusts Prime time clearance levels are very has initiated a comprehensive review of to this change and other regulatory and high. The record also shows that these rules. In doing so, it will address technological changes. However, the affiliates rarely preempt prime time the issues the parties have raised here, Commission concludes that the network programming, and that affiliate including whether networks have the prospects for independent stations and agreements are often structured to capability and the incentive to exercise new networks overall are good. First, discourage preemption. In addition, the undue market or bargaining power in the Commission believes that the UHF increase in the number of independent the absence of these rules and the public signal disparity has been reduced, albeit stations may have increased the demand interest concerns any such capability not entirely. This permits competition and competition for the most lucrative and incentive would raise. These rules, for programming on more even terms network affiliations. This may therefore and their corollary rulemaking between similarly situated UHF and reduce, at least to some degree, the proceedings, are better tailored to weigh VHF stations, most of which are now increased leverage the network affiliates these public interest issues and strike network affiliates. Second, the video appear to have gained as a result of the the appropriate balance regarding programming production market emergence of the Fox network. regulation of the network-affiliate appears to be open to entry by large and Moreover, the WB and UPN networks, relationship. PTAR, in contrast, is an Federal Register / Vol. 60, No. 167 / Tuesday, August 29, 1995 / Rules and Regulations 44779 imprecise, indiscriminate response to an indefinite or overly long period of the application of PTAR. In any event, these concerns. time. Such proposals, if adopted, would the rule will expire in a year and would impose costs that outweigh any possible have little if any impact on an entity IV. Summary of Findings and benefits of a longer transition. The that became a ‘‘network’’ during that Transition record in this proceeding demonstrates time period given the grandfathering 46. The record shows that the three that continuation of the rule in the provisions presently set forth in the networks now face greater competition public interest; prolonging PTAR simply rule. Finally, given the Commission’s than they did in 1970. There has been as a means of continuing to confer decision to repeal the rule, we will not dramatic growth in the number of competitive benefits on independent modify the current exemptions to PTAR independent stations, and broadcasters stations therefore cannot be justified. as proposed by a number of now must compete for audiences with 49. Nor does the Commission believe commenters. The proposed revisions to the increasing numbers of non-broadcast the scheduled repeal of the remaining the definition of a ‘‘network’’ and the outlets, especially cable service. The fin/syn rules calls for a longer transition rule’s exemptions are not appropriate networks can no longer be viewed as a period for PTAR. A number of the fin/ for the one-year transition the funnel through which all television syn rules, including restrictions on Commission has established. Indeed, programming must pass. PTAR is thus network acquisition of financial modifying these provisions of the rule not necessary to promote independent interests in prime time programming, could run directly counter to the program sources, PTAR’s primary goal. were eliminated over two years ago; the purposes of the transition by creating The record shows that the large number marketplace thus should have had time uncertainty and disruption during a of video programming outlets today to adjust to the elimination of these period that is intended to provide creates a healthy demand for non- rules. No party has made a convincing parties time to adjust for repeal of network programs. The record further case that the upcoming planned repeal PTAR. The Commission will shows that there is no public interest of the remainder of these rules will lead consequently retain PTAR in its existing reason for continuing PTAR as a means to any anticompetitive activities by the form during the one-year transition of providing independent stations or networks or undue disruption of the period. new broadcast networks a competitive marketplace so as to warrant postponing advantage relative to network affiliates PTAR repeal beyond a year. The V. Administrative Matters in programming the access hour. Commission also does not believe it is 51. Reason for the Action: This action Finally, the Commission finds that necessary to take a staggered approach is taken to repeal the prime time access PTAR is not an appropriate mechanism to repeal or schedule a final review of rule, 47 C.F.R. § 73.658(k), in response for safeguarding affiliate autonomy. The the rule prior to its scheduled to changes in the communications Commission thus finds that the public expiration, as it did in the fin/syn marketplace, and to better adjust to the interest does not warrant the proceeding. The record in this needs of the public. continuation of PTAR, especially given proceeding clearly supports repeal of 52. Objective of this Action: The the costs the rule imposes. PTAR, and the three networks can be Commission believes that this action 47. The Notice sought comment on said to be facing even more competition will remove barriers to competition in whether, in the event the Commission today than they were when the the markets for video programming and concluded that PTAR should be Commission established its fin/syn enhance program diversity for television eliminated, it should repeal the rule transition in 1993. Phased deregulation viewers. The rule will be repealed on immediately or adopt a transition is less useful when the transition period August 30, 1996, which will give mechanism that would sunset the rule is used as a means of minimizing affected parties time to adjust their after a certain period of time. As noted disruption in repealing a regulation as business plans and contractual above, the record provides strong opposed to taking several cautionary arrangements in order to avoid an support for repeal of the rule. A steps in order to confirm the planned unnecessarily abrupt impact associated transition consequently is not necessary elimination of an entire rule. The with repeal to viewer and industry to take a ‘‘wait and see’’ approach in transition plan the Commission has structures that have developed in the 25 order to test, and possibly revisit, the adopted is not motivated by any years that the subject rule has been in Commission’s conclusion to repeal the uncertainty over its conclusion to repeal place. rule. The Commission does, however, PTAR, but rather by a concern that 53. Legal Basis: Authority for the believe a short transition period is immediate repeal could be actions taken in this Report and Order appropriate to allow industry unnecessarily disruptive. The may be found in Section 4(i) and 303(r) participants to adjust to the changing Commission will thus schedule repeal of the Communications Act of 1934, as economic conditions that might result of the rule in its entirety for August 30, amended, 47 U.S.C. Section 154(i) and from repeal of PTAR. The PTAR 1996. 303(r). regulatory scheme has been in place for 50. Other Issues. Given the 54. Any Significant Alternatives over two decades, during which time Commission’s conclusion that PTAR no Minimizing the Impact on Small Entities members of the industry have come to longer serves the public interest and and Consistent with the Stated rely on the structure imposed by that should be repealed, the Commission Objectives: The Commission determined scheme. Eliminating that structure need not address the argument that, based on the record developed in precipitously may have disruptive advanced by a number of parties that this proceeding and existing effects as the marketplace adjusts to the the rule is contrary to the First marketplace conditions, the public deregulated environment. A one-year Amendment. The Commission also does interest will be served by repeal of transition will give parties time to adjust not believe it is appropriate to alter the PTAR. Proponents of retaining the rule their business plans and contractual definition of ‘‘network’’ to include the failed to establish that it remains arrangements prior to repeal of the rule new networks as urged by some parties. necessary to ensure the diversity of and moderate an unnecessarily abrupt The Commission is not persuaded that programming sources and outlets impact on affected stations. this definition is inequitable or that it contemplated by adoption of PTAR. 48. The Commission rejects transition causes new networks to curtail their Moreover, these parties have not proposals that would continue PTAR for prime time offerings in order to evade demonstrated convincingly that PTAR 44780 Federal Register / Vol. 60, No. 167 / Tuesday, August 29, 1995 / Rules and Regulations itself is ultimately responsible for the Atmospheric Administration (NOAA), threatened under the Endangered development of newly emerging Commerce. Species Act of 1973 (ESA). The Kemp’s networks or that repeal of the rule will ACTION: Temporary additional ridley (Lepidochelys kempii), threaten the station base of the new restrictions on fishing by shrimp leatherback (Dermochelys coriacea), and networks. Those favoring repeal of the trawlers in the inshore and nearshore hawksbill (Eretmochelys imbricata) are rule established that the rule waters off Texas and a portion of listed as endangered. Loggerhead unnecessarily limits the programming Louisiana to protect sea turtles; request (Caretta caretta) and green (Chelonia choices of network-affiliated stations in for comments. mydas) turtles are listed as threatened, the Top 50 television markets and except for breeding populations of green discourages investment in network SUMMARY: NMFS is imposing temporary turtles in Florida and on the Pacific programming, without off-setting public additional restrictions on shrimp coast of Mexico, which are listed as interest benefits. trawlers fishing in all inshore waters and offshore waters out to 12 nautical endangered. List of Subjects in 47 CFR Part 73 miles (nm) (22.2 km) from the COLREGS The incidental take and mortality of Radio broadcasting, Television line, between the United States-Mexico sea turtles as a result of shrimp trawling broadcasting. border and 93° W. long. This area activities have been documented in the includes all of the Texas coast and the Rule Changes Gulf of Mexico and along the Atlantic western portion of the Louisiana coast, seaboard. Under the ESA and its Part 73 of Title 47 of the Code of and includes NMFS shrimp fishery implementing regulations, taking sea Federal Regulations is amended as statistical Zones 17 through 21. The turtles is prohibited, with exceptions set follows: restrictions include prohibitions on the forth at 50 CFR 227.72. The incidental use by shrimp trawlers of: Soft turtle taking of turtles during shrimp trawling PART 73ÐRADIO BROADCAST excluder devices (TEDs); try nets with a in the Gulf and Atlantic Areas (defined SERVICES headrope length greater than 15 ft (4.6 in 50 CFR 217.12) is excepted from the 1. The authority citation for Part 73 m), unless the try nets are equipped taking prohibition, if the sea turtle continues to read as follows: with approved TEDs other than soft TEDs; and a webbing flap that conservation measures specified in the Authority: 47 U.S.C. Sections 154, 303, sea turtle conservation regulations (50 334. completely covers the escape opening in NMFS-approved top-opening TEDs. CFR part 227, subpart D) are employed. § 73.658 [Amended] This action is based upon a ruling from The regulations require most shrimp 2. Section 73.658 is amended by U.S. District Judge, Southern District of trawlers operating in the Gulf and removing and reserving paragraph (k). Texas, Galveston Division, in Center for Atlantic Areas to have a NMFS- Federal Communications Commission. Marine Conservation v. Brown, No. G– approved TED installed in each net rigged for fishing, year round. William F. Caton, 94–660 (S.D. TX, Aug. 1, 1995) in order Acting Secretary. to facilitate administration and The conservation regulations provide enforcement of the court order. [FR Doc. 95–21319 Filed 8–28–95; 8:45 am] a mechanism to implement further DATES: This action is effective August BILLING CODE 6712±01±M restrictions of fishing activities, if 24, 1995 until 30 minutes past sunset necessary to avoid unauthorized takings (local time) on September 10, 1995. of sea turtles that may be likely to Comments on this action must be DEPARTMENT OF COMMERCE jeopardize the continued existence of submitted by September 26, 1995. listed species or that would violate the National Oceanic and Atmospheric ADDRESSES: Comments on this action terms and conditions of an incidental Administration and requests for a copy of the take statement (ITS) or incidental take supplemental biological opinion (BO) permit. Upon a determination that 50 CFR Parts 217 and 227 prepared for this action should be incidental takings of sea turtles during [Docket No.950427119±5214±06; I.D. addressed to the Chief, Endangered fishing activities are not authorized, Species Division, Office of Protected 081495A] additional restrictions may be imposed Resources, NMFS, 1315 East-West to conserve listed species and to avoid RIN 0648±AH98 Highway, Silver Spring, MD 20910. unauthorized takings that may be likely FOR FURTHER INFORMATION CONTACT: Sea Turtle Conservation; Restrictions to jeopardize the continued existence of Charles A. Oravetz, 813–570–5312, or Applicable to Shrimp Trawling a listed species. Restrictions may be Phil Williams, 301–713–1401. Activities; Additional Turtle Excluder effective for a period of up to 30 days SUPPLEMENTARY INFORMATION: Device Requirements Within Certain and may be renewed for additional Fishery Statistical Zones Background periods of up to 30 days each (50 CFR AGENCY: National Marine Fisheries All sea turtles that occur in U.S. 227.72(e)(6)). Service (NMFS), National Oceanic and waters are listed as either endangered or