4 FCC Red No.4 Federal Communications Commission Record FCC 88·407

SUMMARY 98 Before the Federal Communications Commission FINAL REGULATORY FLEXIBILITY ANALYSIS Washington, D.C. 20554 PAPERWORK REDUCTION ACT STATEMENT

MM Docket No. 87·7 APPENDIX

In the Matter of INTRODUCTION 1. By this action. the Commission is relaxing its pro­ Amendment of Section 73.3555 hibition against the common ownership of radio and tele~ of the Commission's Rules, the vision stations in the same television market, which is Broadcast Multiple Ownership Rules contained in Section 73.3555(b) of the Commission's Rules 1 (also known as the "one-to-a-marketll or "radio­ television cross-ownership II rule). Although we are ~etain­ SECOND REPORT AND ORDER ing the rule, we are adopting a waiver policy under which we will look with favor upon certain waiver,.... requests Adopted: December 12, 1988; Released: February 23, 1989 when the criteria specified herein are met. First, we will tend to look favorab.ly upon waiver applications involving By the Commission: Commissioner Dennis dissenting radio and television station c;ombinations in the top 25 in part and concurring in part with statement at later television markets where there will be· at least 30 sepa­ date. rately owned. operated and controlled broadcast licensees or "voices" after the proposed merger. Second, we will also look favorably upon requests involving "failed" sta­ TABLE OF CONTENTS tions that have not been operated for a substantial period of time or that are involved in bankruptcy proceedings. Subject Paragraph We will consider other waiver applications on a more rigorous case-by-case, basis which will place particular INTRODUCTION I emphasis on the potential benefits of the combination, the types of facilities ,involved, the number of stations already BACKGROUND 5 owned by the applicant, the financial difficulties of the station(s), and the nature of the market in light of our DISCUSSION 7 diversity and competition concerns. In the context of a waiver of the radio-TV cross-ownership rule. we will not PART ONE - POLICY CONCERNS UNDERLYING grant any application if the proposed combination would THE LOCAL OWNERSHIP RULES 8 result in anyone entity holding an attributable interest in more than one AM and one FM radio station within any single television "metro" market, as defined by Arbitron I. Viewpoint Diversity and Economic Ratings Company. This limitation is not intended to pre­ Competition Concerns 9 clude the acquisition of stations when no waiver is re­ quire,d. A. Availability of Media Outlets II 2. Our decision to establish this new waiver policy is B: Viewpoint Diversity 15 based on our experience in implementing the one-to­ C. Economic Competition 25 a-market rule, the substantial growth in the number of media outlets in markets of all sizes since the rule was II. Benefits from Joint Ownership of ""'- adopted, and data submitted by commenters concerning the benefits of joint station ownership. We conclude that Stations in the Same Market 38 the public interest would best be served by facilitating waivers of the rule under certain circumstances. particu­ A. Efficiency Benefits 39 larly for combinations located in markets with many com­ B. Programming Benefits 54 peting voices or involving "failed" stations. We believe C. Other Service Benefits '64 that this modest new policy sufficiently meets the needs of the present while permitting us over time to assess the PART TWO -- MODIFICATION OF THE RADIO-TV -'general ramifications of mOdifying the rule. Furthermore, this incremental appro3:ch best serves the public interest CROSS-OWNERSHIP RULE 69 and best achieves our continuing goals of encouraging diversity and competition because it takes into account I. Top 25 Markets and Failed Station the fact that at some point the benefits of allowing com­ Waiver Standards 75 bined station operations may outweigh the costs of relax­ ing such ownership restriction"s with respect to our A. "Top 25 Marketsl30 Voices" Standard 76 traditional diversity and competition goals. B. "Failed Station" Standard 86 3. The NOIiee of Proposed Rule .Waking in this proceed­ -'. ing (Noliee), 2 released on February 20. \987. set forth II. Case-by-Case Review . 90 several rather narrow .proposals for relaxing two local ownership rules. The first proposal. to modify the radio

1741 fCC 88·407 Federal Communications Commission Record 4 FCC Red No.4

I'duopoly" rule to allow a greater degree of overlap be­ activation'of an unused TV allocation and/or would result tween station- contours. was recently adopted in the First in a first ·or second TV station in a community or mar­ Report and Order in this proceeding. ] Specifically, we ket' relaxed the radio ·'duopolyl1 cute to a principal-city con­ 6. Based on our experience in implementing this rule tour standard (the 5 mV/m standard for AM stations and and the record in this proceeding, we have decided to 3.16 mV/m standard for FM stations). Second. the Notice liberalize the cross-ownership prohibition to a modest proposed relaxing the radio-TV cross-ownership rule to degree by adopting a policy regarding waivers of the rule allow the common ownership of certain radio-TV COm- on a case-by-case basis for proposed radio-TV combina· binations. . tions if certain specified factors are met. This relaxed 4. As we stated in the First Report and Order. more than standard is discLlssed in more detail in Part Two, i"nfra. fifty parties filed comments and reply comments in re­ sponse to the Notice. Although four commenters opposed the proposed modifications to the radio-TV -cross-owner­ DISCUSSION ship rule,4 the overwhelming majority of commenters 7. Our discussion is divided into two parts. In Part One provided strong support for relaxing the rule. In fact, we will address the basic policy c'oncerns underlying; the many commenters supported complete elimination of radio-TV cross-ownership rule. Specifically, we. will dis­ both rules, despite the fact that such an approach was not cuss the substantial growth in local media markets and among the options set forth in the Notice. Having care­ the effects that this growth has had on economic competi­ fully reviewed all of these comments, which are summa­ tion and viewpoint diversity throughout different sized rized in Part One, we find that the current radio-TV local markets. We will also consider the 'costs and benefits cross-ownership rule should be· relaxed to a limited de­ of mOdifying the radio-TV cross-ownership rule, in~luding gree. However, we have decided not to pursue our origi­ three important types of benefits resulting from the group nal proposal to eliminate the rule partially for all or most ownership dfstations on a lodd level -... economic efficien­ AM radio-TV combinations. Instead, we are adopting a cies and cost savings resulting therefrom. service benefits new, more relaxed case-by-case waiver policy for all po­ to the public, and programming benefits.. In Part Two we tential radio-TV combinations under which we' will look will apply these general considerations to the radio-TV favorably upon waiver requests that meet either of two cross-ownership ,rule to determine whether we should standards set forth below and review all other applications adopt a new policy for waivers of the rule on a case­ based on the public interest criteria specified herein. This by-case basis. decision reflects our desire to act cautiously to weigh the benefits and costs of proposed mergers and to continue to obtain evidence concerning the ramifications of modifying PART ONE •• POLICY CONCERNS this long-standing rule. UNpERLYING THE LocAL OWNERSHIP RULES 8. In view,;oLthe record in this proceeding and the overwhelming support of the comments received, we con­ BACKGROUND clude that the, prohibition against commoil ownership of 5. Six years after tne fixed overlap standard of the radio and TV stations in the saine market should .be "duopolyll rule was adopted in 1964, the Commission liberalized by the adoption of a new waiver policy. We promulgated its "one-to-a-market" or radio-TV cross-.own­ believe that this action reflects the substantial growth and s ership rule. In essence, the rule prohibits a party from availability of media outlets in local markets, as well as owning a commercial radio station (or an AM-FM com­ the significant efficiencies and public service benefits tha,t bination) and a commercial television station in the same can be obtained from joint ownership. This approach market. The rule accomplishes this goal by prohibiting sufficiently meets the needs of the present while the common ownership of radio and TV stations if the 2 permitting us to take a second look to ensure that any mVIm groundwave contour of an AM station or the 1 further modification or elimination of t-his rule is fully mV/m contour of an FM station encompasses the entire warranted. The following section discusses our specific community of license of a television station, or, con­ findings" in this proceeding in light of our traditional versely, if the Grade A contour of a television station diversity and competition concerns. including the costs of encompasses the entire community of license of an AM this approach, and the subsequent section describes the or FM station. However, in order to foster the develop­ substantial benefits resulting from joint station ownership. ment of UHF television, the Commission also created an exception to the rule under which proposed combinations of radio and UHF television stations in any given market I. Viewpoint Diversity and would be considered on a case-by-case basis to determine Economic Competition Concerns whether common ownership of such stations would be in 6 9. As we stated in the [""'Olice in this proceeding, the the public interest. As a result, combinations of radio ultimate Objective of the radio-television cross-ownership and UHF TV stations have been permitted in markets for fule is to enhance consumer welfare through the promo­ a variety of reasons. For example, in many cases we have tion of economic competition and diversity of program­ relied upon economic showings that revenues from a min'g and viewpoints. Although we have found that commonly-owned AM Or FM station are necessary to diversity of ownership on either the lot:al or national level support a UHF station or that cost savings from joint is a means to achieve these goals. we continue to r.ecog­ radio/UHF TV operations would help a UHF station to nize that economic competition and diverSity of program­ survive.' In addition. we have permitted' ·these combina­ ming and viewpoints are not the nn!y goals, and diversity tions where this joint ownership would result in the of ownership is not the onl\' consideration. in the licens­ ing of broadcast stations in~ {he puhlic interest.q Particu­ larly in light of the substantial growth in media outlets

1742 FCC Red No.4 Federal Communications. Commission Record FCC 88·407 ver recent years, the Commission has found in certain tions. 41.9 programmed cable channels in use with a 44% .rcumstances that the benefits of relaxing various Qwner­ penetration rate, 2.8 locally published or" significantly-read lip rules far outweigh any minimal impact on the. num­ newspapers. 12 significantly-read magazines, and a VCR ~rof ·separate voices in a market. For example. we have penetration rate of 54.1. l9 Second, there are'-still many .lowed some multiple ownership of stations on [he local, outlets even in the smallest markets. For example, the ~gional, and national levels in recognition of the demon­ smallest markets (201-209) have ..about nine radio and rable benefits resulting from the joint ownerShip of sta­ television outtets.20 Third, because ,of cable penetration, ons, such as improving the quality and nature of even in the smallest markets, viewers have access to an rogramming, promoting the development of new broad­ average of over 20 cable channels. Fourth, the VCR pene­ 1st services, and enabling marginal station,S to remain on tration rate. outside the top 25 markets, is about 42% \e air. tO '. averaged over the other market groups.21 Finally, al­ 10. The commenters in' this proceeding have provided a though the number of significantly-read daily newspapers ~eat deal of evidence concerning the explosive growth in declines from an average ,of 2.8 dailies in the top 25 Ie number of media outlets, including the effect of this markets to 0.7 in markets 201-209, the average number of ~owth ,on our diversity and competition concerns, as well significantly read magazines remains relatively constant at ; data regarding the specific financial and other benefits about 11 for each market group.22 ~sulting from group ownerShip on a local level. The 1110wing sections discuss these findings in greater detail. B. Viewpoint Diversity 15. It is important to realize that we are retaining our A. Availability of Media Outlets traditional concern for encouraging diversity"of program­ 11. As reflected in 'the First Report and Order in this ming and viewpoints in this proceeding. The following roceeding, significant growth has occurred in both the section reviews the diversity rationale behind the radio-TV 'aditional broadcast services and alternative media deliv­ cross-ownership rule and examines the impact of -in­ ry systems 'since the local ownership rules were"-adop'ted. creased media outlet availability on our traditional con­ or example, from the adoption of the radio"TV cross­ cern for viewpoi~t diversity. wnership rule in 1970 to the present. the total number 16. Diversity Goal. One of the structural purposes f AM, FM, and television station~ has increased by underlying all of our multiple ownership rules is to en­ 0.2%.1.1 In addition, the number of TV stations grew by courage diversity in the ownership of broadcast stations so 3%, as the UHF television service matured and became as to foster viewpoint diversity. As we stated when t.he rofitable during this period. 12 radio-TV cross-ownership rule was adopted in 1970, this 12. Likewise, there has been a substantial increase in goal is based on the belief that the "widest possible, dis­ le availability of alternative media delivery systems dur­ semination of information from diverse and antagonistic 19 this time, which has added to viewpoint diversity and sources is essential to the welfare of the public. ,,23 At the as stimulated economic competition in the marketplace. same time, we note that diversity of ownerShip per se is rom 1970 to the present, the number of cable television not an end in itself. Rather, the Commission has encour­ (stems has more than tripled, and the number of sub­ aged diversity of ownership simply as a means to achieve ~ribers has expanded almost tenfold. 13 Similarly, ther'e the public interest goal' of promoting diversity of as been a rapid and widespread acceptance of VCR's, viewpoints. 'hich were virtually nonexistent in 1970. The number of 17. 'In addition,. both ,the Commission and the courts :Ievision households with VCR's jumped from 40.4 mi1­ have recognized that pursuing ownership or viewpoint on In 1987 to 48.63 million In 1988, an increase of more diversity is not the only consideration in licensing broad­ lan 20% in just one year. 14 The number of subscribers cast stations. For example, in comparative hearings among ) satellite master antenna systems. multipoint distribution mutually exclusive appUcants for new broadcast stations, {st~ms and multichannel MDS systems has also increased we accord great importance to the goal of promoting lpidly, and the print media have also continued to make diversification of ownership, but we also. consider other, nportant contributions to viewpoint diversity 'and pro­ sometimes potentially conflicting, -factors that are intended 1l24 ide further econ'ornic competition in local markets. 15 to ensure "the best practicable service to the pUblic. [owever, our findings in this proceeding are based pri­ Likewise, in the Rule Mak'ing context, we have concluded larily on the increased- availability of traditional broad­ that, pursuing maximum ownership diversity per se is not ast outlets in local markets, as discussed further below. always in the public interest. For example, when we 13. Local Media Outlets. In the past 18 years. the adopted the radio-TV cross':ownership rule; we did not umber of broadcast outlets at the local level' has in­ require divestiture of existing combinations because the reased dramatically throughout different sized media policy of promoting ownership diversity must sometimes larkets -- large, medium; and small. We noted in the give way to a policy of avoiding undue disruption of 'irst Report and Order that many commenters provided existing service. Therefore, although pursuing diversity of tatistics on the number of media outlets available in viewpoints and programming within individual markets is ~lected television ·and radio markets,16 and others com­ a key goal of our local ownership rules, it must be iled data ,on the number of media outlets in more broad­ remembered that it is always balanced with other public ased categories of markets, such as the'top twenty, fifty, interest objectives. And indeed, as we discuss further be­ 17 nd seventy-five television markets. . low, our concern about the impact on diversity of a 14. Specifically, as reported in the First Report and proposed merger between a radio and TV station in the )rder, NAB's· study of the number of media outlets in all same market will be far different in a market with only 09 televiSion markets18 reveals the significant number of three or four licensees than in a market with 50 or 60 :tedia outlets in local markets of all sizes. First. the top licensees. 5 markets average 13.4 over-the-air television signals, 9.8 commercial AM stations, 29.2 commercial FM sta-

1743 FCC 88-407 Federal Communications·CommisSion Record 4 FCC Red No: 4

18. Moreover, the joint ownership of two or more . substantial variety of viewpoints.,,3o For example; 'Jet uses media outlets ,In the same market does not necessarily market #138 _. Erie,- Pennsylvania .;. as support for this· lead to a commonality of viewpoints by those outlets. proposition. According to Jet, 'Erie 'has 5' TV 'stations Commenters in this proceeding have indicated that group (including on'e non- commercial station), an average of40 owners of broadcast stations; even in the same market, do cable channels with a cable penetration of 51.3%, and 12 not necessarily have a t1 mon'olithic viewpointll'at all of radio stations within the Erie metro area (one of which. is their stations. For- example, CBS states lIthat in 45% of a noncommercial station). Moreover. let states that two the instances in' which- CBS-owned television and radio additional fM allocations' have' been. made in ~he Erie stations in the same market made endorsements in 'elec­ area due to Docket 80-90: and, within. the three-county toral races· from 1980 to 1983, they endorsed opposing Erie TV AD1, there are 7 more. radio sta,tions. candidates.,,25 CBS adds that these opposing endorsements 21. In light of these findings. we believe that our diver­ have occurred in "key ,political 'races such as the Wash­ sity concerns have become somewhat attenuated since the, ington-Byrne-Daley mayoral primary in Chicago in 1983. radio-TV cross-ownership rule was adopted in 1970, espe­ the Deukmejian-Bradley gubernatorial race in California cially in mar.i(ets with many, separate licensees, and thus in 1982, and the Cuomo-Koch gubernatorial primary in may be outweighed by benefits that could be achieved by New York .in 1982.,,26 In addition. CBS-o~!1ed stations ·in modifying the current rule:. As we stated in the Notice" in the same market have taken -different editor:ial positions a market with 50 media voices, a 51st voice may increase on significant issues such as prayer, in- the 'puqlic schools viewpoint diversity lO some degree,. However, ,a broad-' and abortion. Simil~rly. NBC states that, even among its caster who seeks to operate a sec0t:ld station in the market stations located in the same market. editorial and pro­ 'may, because of economies of scale and cost- savings in­ gramming decisions are" made independently from. other herent in radio-television combinations in the same mar­ NBC-owned stations, resulting in its c:ommonly owned ke-t, .. produce or purchase more infQrma~ion~1 stations making ,different editoria.l or programming de­ prog~amming ,~hus, 27 than would rwo s.eparate stations.. •..,as cisions. , Accordingly, we conclude that relaxing the the number of voices increases. we believe it is.appro­ cross-ownership rule. shoul.d not significantly.affect diver­ priate to balance the be~efits of an additional voice sity of viewpoints and should further programming and against the benefits of the effici~ncies from allo~ing cer­ other public inter~st goals, as we discuss infra.. tain radio-TV co~binations. 19. Effect of Increased Outlet Availability. Having care­ 22. Opposition Comments. ,As noted in the First Report fully reviewed the data submitted in this proceeding on and Order. three commenters. CFA, UCC, and NBMC, the availability.of media outlets in loc~} television mar­ have questioned our legal authority to change the local kets, we find that" there has been a dramatic increase in ownership rules on the grounds that such a change Vfould the number of media outlets in markets of all sizes, which be inconsistent with recent precede'!ta.nd policy state­ has enhanced both viewpoint and programming diversity ments concerning our diversity goal. Specifically. these on a local level. In large marke.ts, the degree of diversity commenters observe that we relied heavily on the exis­ is tremendous. For example, according to NAB's Media tence of .the local ownership restrictions in eliminating Outlet Study, ,within the number one ranked DMA -­ the regional concentration rule and relaxing the national New York -City - in, 1987 there were' 19 television sta­ multiple ownership restrictions. The limited action that tions, an average of 41.6 programmed cable .channels in we are taking in this proceeding, however. retains the use (depending on location). with a sable penetration rate current radio-TV cross-ownership rule in full effect. In­ of 41.6%, and 99 commercial radio stations:, There were deed, in an abundance of caution. we have decided to also 41 total newspapers available, includ,ing 5' ~ig~ificant re,lax only Our cross-ownership waiver policy in brder to newspapers with ,circu,lation in excess of 5% of total tele­ look favorably upon certain radio-TV combinations.3l The vision households, 10 significant. magazines.. and a VCR restrictioqs on multiple ownership at the local level re- . penetration rate of 58.2%.28 Moreover, even using the main substantial. , smaller market definition of Metropolitan SJatistical Area 23. Two commenters· in this prQceeding' ha~e also (MSA) radio-markets, in 1987 there were 47 commercial claimed that this diversification policy was established to radio stations in the New York MSA, of which 25 are AM H 29 maximize tithe number of voices on theair or edito.rial and 22 are FM. These nu.mbers do not' eyen include viewpoi-nts •. and that we have mischaracterized this· objec­ non-commercial educational FM stations within the New tive in our Notice as the promotion of diversity of pro­ York market or other radio and televisiQn stations which gramming.32 Those arguments misrepresent our position, operate outside of the New York radio/TV market but however, because we continue to recognize the impor­ which actually provide service to portions of the market. < tance of viewpoint diversity.. Indeed, the minor c!lange 20. 'As one would· expect, ~he. degree of diversity in that we are making does not significantly affect that diver­ other large markets is less than in New York but is still sity goal. Instead, we have found that in some circ.um­ quite large. For example, in the 25th ranked DMA -­ stanc;es. the benefits of allowing joint radio-TV operations Portland, Oregon -- there are 7 television stations, 40 may outweigh the lIcosts" to diversity of ownership or 3J commercial radio stations, an average of 40.5 cable chan­ viewpoints from permitting such combinations. : nels in use (depending on location) with a cable penetra­ 24. In this regard. we note that two commenters argued tion of 48.9%, 6 newspapers, 5 significant newspapers, 13 that the Commission adopted the radio.,TV cross-owner­ significant magazines,. and a VCR penetration of 47.5%. ship rule in 1970 after considering evidence' of the large Moreover,' this high levei of diversity does, not drop off number of media outlets and the benefits of multiple after the 25th market or even at the 50th market. Indeed, station ownership similar to that submitted in this pro­ as Jet Broadcasting observes, "[wlhile it is true that the ceeding.34 Even though the Commission's adoption of ~he number of radio and TV stations are roughly proportional rule may have been based upon valid policy decisions· in to market size, markets below the first 50 to around the 1970. we must conclude that circumstances have changed ISO-ranked area tend to be intensely competitive with a substantially in the eighteen years since 'then. As discussed

1744 4 FCC Red No.4 Federal Communications Commission Record FCC 88·407 in, Section A, supra. today there are many· more outlets for risk that relaxing the radio-TV cross-ownership rule will information and viewpoints throughout all types of mar­ significantly decrease the level of competition in local kets than there were in 1970.35 Furthermore, the markets. \ commenters in this proceeding submitted a substantial 29. The most extensive study on the competitive effect am(jun~ of evidence concerning the benefits of joint radio­ of allowing joint ownership of radio and television sta­ TV operations, discussed infra in Section II. tions in various types of markets was done by CBS, based on the Department of Justice (DOJ) Merger Guidelines. C.' Economic Competition Specifically, CBS first calculated the Herfindahl­ 25. We have also considered \the effect that this in­ Hirschmann Index (HHI)JI vaiues for the top 20 markets JZ creased media outlet availability has had on the radio-TV under present market conditions. Because advertising cross-ownership rule's complementary goal of promoting revenues were not available, CBS used audience shares economic competition among media outlets in order to from the November. 1986 sweeps rating period as a sub­ encourage the efficient provision of broadcast services. stitute. specifically focusing on whether, in local markets of vary­ 30. The results of this study reveal that, at'the present ing sizes, relaxing t,he radio-TV cross-ownership rule time, the top 20 markets are largely unconcentrated under would significantly reduce the benefits from competition DOJ's Merger Guidelines. In doing these calculations, CBS now being achieved. This section discusses the competi­ took into accOunt the fact that in 15 of those markets tion rationale' underlying the local ownership rule.s and there were a total of 35 cross-ownerShip combinations of our findings concerning the extent of competition in loc::al TV and radio stations. This means that' there' were 35 television markets. instances in which a radio and TV~station were attributed 26. As we discuss in further detail below, it is axiomatic to the saine -owner, and the audience reached by the that the degree of comp~tition always increases somewhat stations in an average quarter was added together. Accord­ when new competitors enter a market and conversely ing to CBS, the HHI figures for 15 of the markets are diminishes whenever the number of competitors dimin­ below 1.000 and are. therefore. considered· ishes due to merger or bankruptcy. However. many stud':' tlunconcentrated." Of the remaining five markets, all have ies have suggested that unconcentrated markets with a HHI's on the low end of the "moderately concentrated" number of firms will tend to operate quite competitive­ category, with three of these markets having HHI's which ly.36 In that case, additional competitors in such already are below l.l00.J3 competitive markets are likely to have relatively little 31. However, because one of the principal purposes· of impact on the degree' of competition. Indeed, there is the i\.1erger Guidelines is to determine post-merger HHI's, economic evidence indicating that after a certain number CBS undertOOk a further analysis of the effect on market of competitors enter a' market, additional competitors concentration if the radio-television crosS-ownership· rUle have a relatively small effect on the degree of competi­ were relaxed. In particular, CBS hypothesized a "worst tion.37 This implies that mergers which reduce -the num­ easel! scenario in which the non-commonly,· owned televi­ ber of competitors in markets with many firms will have sion network affiliates were to merge with the leading little impact on the degree of competition. For. that rea­ radio stations 'in each of the top 20 markets. If this were son, in a market with many separate owners. a number of to happen. then 37 mergers would occur. CBS then cal­ mergers Can take place without any measurable culated post-merger HHI's for each of these markets. anticompetitive consequences. In addition, the empirical 32. Based on the results. antitrust concerns would not studies which have looked at-, the- impact of joint station likely be raised in these markets. Specifically. after the ownership are genera:lly inconclusive or do not find any hypothethicaI mergers, the HHI"s would be under 1,000 conVincing evidence that such ownership creates market in 11 markets, indicating that these markets are still power.38 "unconcentrated". Furthermore, even though· the post­ 27. Competition Goal. As we stated in our First Report merger HHI's in the remaining 9 markets range from and Order, besides promoting 'diversity of viewpoint, the 1.000 toi.415, mergers would most likely not be chal­ local ownership rules also seek to prevent undue con­ lenged by DOl because the incremental HHI increase centration of economic power contrary to the public in­ would be less than tOO. in eight of these nine inarkets'.44 terest. Our concernsin this area were not based upon any Even in the remaining: market-- Pittsburgh -- the HHI evidence- that group ownership would necessarily lead to increase was only 103 points and was due to the hy­ anticompetitive practices In local markets but, rather, pothetical merger of the number one' radio statio~ and upon the potencial for such practices to occur.J9 Indeed, the CBS TV affiliate; however. if the CBS affiliate were to in enacting the radio-TV cross-ownership rule, the Com­ merge with any other radio station~ the HHI would' in­ mission found that "[oln an overall basis. t.here has been crease by les? than 100 points. Moreover. even ill: cases no showing that single stations cannot compete effectively where the incremental HHI increase is over 100, DOl with combination owners."40 Nevertheless, the Commis­ would still evaluate on a case-by..case basis the' relative sion concluded in both the radio "duopoly"and in the merits of the proposed merger and would take into ac­ radio-television cross-ownership rule makings that it was count other factors, including the efficiencies from joint not ,necessary to -find specific evidence of anticompetitive ownersl}ip. abuses in order to adopt local ownership restrictions and 33. Simiiarly. NBC examined three major markets -­ that, on balance, at that time, the public interest would be New York, Chicago, and Washington. D.C. -- to ·deter-. served by adopting the rules in question. mine the effect on market concentration if the most­ 28. Effect. of Increased Outlet Availability. After review­ watched television station and the most-listened" to AM ing the various studies and data submitted on economic and FM radio stations were to merge. Specifically, based concentration throughout television' markets of different upon the audience shares of these stations and the avail­ sizes,"as described below,. we conclude that the increased able data on the total advertising "re"venues in 'each of availability of media outlets has substantia(Jy reduced the these markets for radio and television stations in 1987,

1745 FCC 88·407 Federal Communications Commission Record· 4 FCC Red No.4

NBC estimated the share of the total broadcast advertising and Order, "In fulfulling our responsibility under Sections revenues that each of these leading stations has in its 301, 307(b), and 309, we believe the public interest re­ respective market. Based upon this analysis, NBC deter­ quires that free, local. over;.the-air broadcasting be given mined that the leading television stations in each of these full opportunity to meet its public interestobligations. An markets did not have large enough·shares of the total essential element of this resp.onsibility .is' 'to create a local broadcast advertising revenues to exercise undue control television market that allows local. broadcasters to coin­ of the market. Indeed, the shares of these TV stations pete fully and fairly with other marketplace participants.. ranged from 15.46% to 18.56%. Our regulatory scheme should not be structured so a~ to 34. MOreover. NBC concluded that even if the leading impair a local broadcaster's ability to compete. thereby TV stations and the leading AM and FM stations merged hindering its ability to serve .its community of license." in each market. this would increase the TV stations' share Report and Order in Gen. Docket No. 87-24, 3 FCC Rcd of their respective markets by onl¥ 2 to 6 percentage 5299, 5311 (1988), points, depending upon the market.' Consequently, NBC believes that, even under this worst case scenario, these hypothetical mergers would not result in an· undue con­ n, Benefits From Joint Owpership centration of economic p'ower in these major markets. of Stations in the Same Market 35. In this regard, it is also worth noting that on a 38. Most significantly. as previously discussed in the nationwide basis, audience share of. the three major TV First Report and Order, we have found that the common networks has been declining. while Jthe audience 'share of ownership of broadcast stations in the saine market results independent TV stations and cable TV networks has been in many public interest or consumer welfare benefits. We rising. For example, the prime time audience share of the have divided our discussion of these benefits into three three major TV networks declined from 91% in 1977 to main categories. First. we will examine the economies of 67% in 1987." This trend will likely continue, which scale and efficiencies inherent in the ownership and op­ implies that in the future mergers between the top radio eration of radio-television combinations in the same mar­ and TV stations in individual markets should have an ket and 'the actual cost savings resulting therefrom.. even smaller impa<;t on the share of··/a:tl TV viewing Second. we will review the data submitted pn the pro­ audience controlled by individual group-owners and thus gramming benefits to the public resulting from the com­ on the overall level of competition in the TV advertising mon ownership of broadcast stations.in the same market. market. Third, we will address how joint ownership of broadcast 36. Based on these studies, we conclude that the in- stations in the same market produces other potential 'Ser­ .creased· availability of broadcast outlets in large local mar­ vice benefits such as the activation of unused channels or kets' has reduced the potential risk of harm to competition the improvement of the facilities of.existing'stations. that would be caused by relaxing or modifying the radio­ television cross-ownership rule in such markets. The CBS A. Efficiency Benefits and NBC studies referred to the largest TV markets.· 39. The record in this proceeding reveals that there are where there are a. great number of competing radio and significant efficiencies inherent in the joint ownership and TV outlets. Many commenters in this proceeding believe operation of radio and television stations in the same that the same conclusion can be reached in other cate­ market. which in turn lead to cost savings. These savings gories 'of markets, such as the top 50 or 75 markets,47 and can lead to programming and other service benefits. as some parties believe that the increased availability of me­ outlined in Sections Band C infra, thus ~nhancing con­ dia outlets, justifies eliminating the ruIe in all TV markets. sumer welfare and the public interest. Many of the After reviewing" all of the evidence, howev.er, we have commenters have drawn upon their experience in operat­ decided to retain the existing radio-TV cross-ownership ing radio-television combinations in the same market rule, but to adopt a policy regarding waivers of the rule which we're either grandfathered under Our rules or au­ for proposed combinations under certain circumstances. thorized pursuant to the grant of wai~er requests. They Our rationale for adopting this approach rather than an have identified essentially six areas in which radio-telev.i­ across-the-board relaxation is discussed in Part Two. infra. sion combinations produce efficiencies, as set forth below. 37. With respect to broadcast competition in general. it 40. Foremost among these efficiencies is the ability to is also important to remember that rio rules similar to the co-locate the studio and office fa.cilities of radio and tele­ broadcasting "one-to-a-market" rules apply to cable TV vision stations in the same building, thus obviating the systems. [n particular, there are no Commission restric­ need to own or rent two separate buildings.-l8 As a result tions on the right' of cable systems to own one or more of having co-located physical facilities. many owners of AM or FM radio stations that serve the same co.mmunities radio-television combinations also reported the sharing of as the 9able system. Given the Commission's desire to studio facilities and equipment. For example, a television continue to encourage 'the provision of over-the-air station may use the audio facilities of a co-owned radio advertiser-supported and nivity Report owned radio and television slations.-l Q Most typically. ra-

1746 4 FCC Rcd No.4 Federal Communications Commission Record FCC 88·407

dio-television combinations share staffs from the account­ of which were jointly operated with television stations in ing and bookkeeping departments and thereby consolidate the same market - and a like number of stand-alone AM payroll. billing. and accounting operations under the di­ stations, FM stations, _and AM-FM: combinations. The rection of a single business manager or controller. Indeed, samples included a cross-section of stations. reflecting dif­ many commenters indicated that this is the easiest way to ferent market sizes, radio formats,and gr.oup and in­ consolidate radio-TV station operations and that this pro­ dependently owned stations.53 duces significant economies of operation. To a lesser ex­ 47. Several inferences may be drawn from this study. tent. other administrative and technical employees are , First. based upon the sample of the stations considered, an shared. For example. commonly owned radio and televi­ AM or FM station operated jointly with a television sta­ sion stations may share a chief engineer as well as other tion may be more profitable than a stand.,.alone radio technical personnel, especially in smaller markets. station. Specifically. the average "return on revenuell or 42. Another area in which radio-TV combinations re­ profitability of the AM or FM stations operated with alize efficiencies is from the sharing of professional ser­ television stations in the same market appeared to be vices such as attorneys, accountants. financial institutions, 'significantly higher than those of the stand-alone radio and insurance carriers. Such services are typically ob~ stations" In addition, the study found that, aithough tained at thecoqiorate level by the joint owner, resulting AM-FM combinations operated with or without television in lower costs than if the services were purchased sepa­ stations in the same market were profitable, the latter rately by the radio and television stations. "category had a 5% higher return on revenue than the 43. Fourth, jointly owned radio and television stations former. This may be due [Q special efficiencies inherent may take adva.ntage of efficiencies in advertising and pro­ in radio-radio combinations themselves, motion. Most notably, such stations may cross-promote 48. Second, stand-alone radio stations apparently spend each other, which has the beneficial effect of attracting a greater proportion of their budgets -- from 28% to 46% both audiences and advertisers. Indeed. according to a more -- on general and administrative eXRenses than do survey of 35 senior executives of existing radio-television radio stations co-owned with TV stations.55 As a result, combinations conducted on behalf of NAB, this was con­ these stand-alone radio stations may have less money to sidered to be one of the most significant benefits of the spend on other expenses such as programming and news joint ownership of radio and television stations in the than radio stations jointly owned with TV stations. As same market.5o In addition, many commenters reported descr~bed earlier. this latter category of stations may re­ that commonly owned radio and television stations may alize significant cost savings by consolidating general and jointly sponsor community events or participate in com­ administrative functions like payroll and billing and' in­ bined publiC service campaigns. vesting these cost savings into other areas. 44. A fifth potential area of efficiencies involves news 49. Third, the study found that radio stations operating gathering operations. In this regard. vie note that, of the in conjunction with a TV station generally have larger 35 radio-television combinations surveyed by NAB, very staffs 'than do the stand-alone radio stations, but that the few have combined news staffs. However, they typically staffs are used more efficiently. Indeed,the average rev­ share wire -and news services, which reduces their costs. enue per employee for the radio stations jointly owned Mor'eover, as Gillett Holdings, Inc. points out, television with TV stations were almost double that of the stand­ stations typically produce more news stories than they can alone radio stations. air, thereby enabling their co·owned radio stations to air 50. Finally, there appeared to he greater sales efficien­ the audio portions of unused news stories.51 This may be cies at the radio stations co-owned with TV stations than especially beneficial to AM broadcasting stations, many of at the stand-alone radio stations. In this regard. the study which have experienced declining\revenues and ratings. revealed that the selling effort. as measured by sales costs Furthermore, radio and .TV stations will typically share as a percentage of total advertising revenues, was 47% news tips. more efficient at an AM station operating with a TV 45. Finally. radio and television stations could poten­ station and 22% more efficien{ at an FM station 'operating tially take advantage of efficiencies in their sales depart­ with a TV station than at comparable stand-alone radio ments. However, we note that many radio-TV stations.56 combinations apparently maintain separate sales staffs be­ 51. This study suggests that there are significant efficien­ cause of the apparent differences in the advertisers who cies that can result from owning and operating radio and utilize radio and television. Nevertheless, radio and TV television stations in the same market. We recognize that stations will frequently share sales leads and may share a NAB's study qlay somewhat overestimate these efficiences single sales representative for soliciting national or re­ because it is comparing averages of financial perfor­ gionalspot advertising, mances of different. stations in the same or similar mar­ 46. Having identified six types of efficiencies -which are kets, apparently without controlling"- for other factors, inherent or potentially inherent in the joint operation of such as station size, that may' contrihute to these different radio and teleyision stations in the sa,me market, we next performances. Nevertheless. we still believe that this consider the specific cost savings that may b~ generated by study, as well as the observatiuns and experiences of those these efficiencies. The most extensive data on this issue broadcasters who have operated rmjio-TV combinations, were contained in ·a study submitted by NAB.52 Based suggests that there are efficiencies and related cost savings upon financial data for the year 1985 submitted to NAB, inherent in owning radio and television stations in the the study compared the financial performance, staffing same market and that this is a valid factor to consider in levels, and sales efficiencies of radio stations operating this proceeding. with television stations and comparable stand-alone radio 52. Opposition Comments. There were some stations in the same or similar markets. Specifically. the commenters in this proceeding who asserted that our study compared a representative sample of 11 AM sta­ statements in the Notice concerning the henefits of joint tions, 5 FM stations, and 30 AM-FM combinations -- ali ownership were purely speculative and without founda-

1747 4 FCC Red No.4 Federal Communications Commission Record FCC 88-407

Average Percent of Time Devoted to not adversely affected the news or pUblic affairs operations Particular Program Types, 1979 at most television stations. Specifically, the 1987 survey Average found that 83.4% and 81.7% of all television stations arTV responding had experienced no changes in their news or Stations public affairs operations, respectiveLy. Indeed, many TV Top 2S Capital news directors stated that the Commission's elimination of Markets ABC CBS' Group W. Cities Cox the processing guidelines actually enabled them to do a 6AM- better job in. these areas because they did not feel con­ Midnight. strained by any quantitative standard and, as a result, Total 14.3% 19.H%" 19.24% 20.40% L8.23% 15.08% could allocate their resources in the best manner they saw News fit. Although the 1987 RTNDA survey did reveal cutbacks and Public and other negative effects for news at 4.9% of the re­ Affairs sponding stations, this-appeared to be offset by positive changes, such as larger news staffs, at 3.8% of the stations. Local 08.7 13.50 11.30 12.48 to.05 09.S0 We remain convinced by the record in this proceeding News that economic incentives induce the -owners of two or and Public Affairs more stations in the same market to offer varied program­ ming of the type that our rules were designed to encour­ 6PM. age. It is in the best interest of broadcasters to provide .llPM high quality programming because_this leads to greater Total 15.1 . 25.04 25,42 25.51 20A) 10.34 audience shares and higher returns.6/ News andP.ublic C.-Other Service Benefits Affairs 64. Finally, the record reveals that there would also be Local 09.3 15.84 14.58 L5.56 11.15 L3.38 othe~ putflic service benefits resulting from relaxing our News prohibition against the common ownership of radio and and ~tiblic TV stations in addition to the programming benefits out­ Affairs lined above: These service benefits can generally be grouped i~Jo three categories, as set' forth below. 68 61. Recognizing, however, that the Commission no 65. First. permitting combined radio-television 9per­ longer collects or publishes the programming data ations in the same market may, benefit the public by underlying this analysis, many commenters referred to enabling struggling radio or televi~ion stations tq continue other studiessubtnitted within our. national multiple own­ to provide service to the pUblic. This could occur because ership proceeding, which utilized more recent program­ the superior resources of one station or the cost savings ming data. The most notable of these was a study resulting from cOt:nbinedoperations may contribute to the submitted by NAB." Therein, NAB surveyed the pro­ economic viability of a struggling station in the same or a gramming from the 1982-1983 television season of a re­ different broadcast service, enabling the latter .to stay on presentative sample of 107 group-owned and the air.69 This may be- especially true with respect tp AM non-group-owned· commercial television stations in 29 broadcast stations, which" as a whot-e, have b~en exper­ markets. Specifically, NAB compared the average amount iencing declfning audience ratings and revenues 'in recent of informational, local, and total non-entertainment pro­ years as compared to FM stations.70 For ex~mple, a mar­ grammingbroadcast by group-owned and non-group­ ginal AM station could become stronger by·'merging with owned stations. They found that the group-owned statIOns a profitable television station. The superior resources of offered a greater percentage of each of these types of the television station, as well as the efficiencies inherent programming. than the non-group-owned stations, lending in joint radio-TV operations, may well inure to the eco­ further support to the proposition that group-owned sta­ nomic benefit of the AM station and ultimately to the tions '8ctuallyenhance the 'availability of informational public, which woul<). continue to receive service by the 63 programming. , AM station. . 62. Opposition Comments. Despite these specific find­ 66. A second service benefit would be the possible ings, CFA has argued that there is no assurance that any activation of unused commercial UHF or VHF television cost savings attained through common ownership will be or FM radio allocations, providing new broadcast service directed towards programming. Instead, CFA contends to the public. As we stated in the First Report and Order, that such windfalls will be invested in non-programming many of these vacant allotments are located in small or endeavors, such as debt-financing or the purchase of more 64 rural markets. For 'example. there are approximately 103 broadcast properties. According to CFA, broadcasters vacant commercial UHF television -allocations and 39 va­ have not reinvested the COst savings associated with cant commercial VHF television allocations. Of these va­ deregulation into news and public affairs programming, cant aHocations, 75 of the jJHF channels and 33 of the citing 1985 and 1987 studies by the Radio and Television VHF channels are located in markets below the top 50 News Directors Association (RTNDA)6s to demonstrate markets. 71 In s~ch markets, activation of these allocations the IIcontinuing drop in the number of full-time news may not be possible absent the cost savings ~esulting from personnelII and the reduction in informational program­ combined operations. Indeed. we have recognized this ming. benefit in .permitting the cross-ownership of radio and 63. To the extent that these RTNDA surveys are even UHF TV stations in the same market.72 66 relevant to the radio-TV cross-ownership rule. however, 67. Third, the efficiencies and related cost savings in our review of the same surveys reveals that those surveys joint radio-television operations may also lead to improve­ ·showed that the Commission's deregulatory actions have ment in the technical facilities of existing stations, such as

1749 FCC 88-407 Federal Communications Commission Record 4 FCC Red No.4 tion.s7 For example, Jacar Communications questioned combined radio-television operations revealed that, on. the whether economies of scale in fact result from combined average. AM or FM stations jointly operated with a televi­ radio-radio and radio-television operations, and suggested sion station spent 36.2% and 21.6%, respectively, of their that our statements in the Notice to this effect were rather budgets on overall programming, while stand-alone AM tentative. In addition. vee contended that VHF TV sta­ or FM stations spent only 30.8% and i6.7% on program, tions and AM radio stations are "two wholly different mingo Similarly, the AM or FM stations that were co­ animals," with completely divergent approaches to news owned with a TV station in the'," same market spent a and informational programming. Therefore. they argued significantly higher percentage of their budgets on news that the current "waiver" approach is most appropriate, than did the stand- alone stations.59 These results may permitting joint ownership only in certain narrow cir­ welt be due to the fact that these radio stations had cumstances within our discretion. smaller general and administrative expenses than the sum 53. We disagree. As we stated in the First Report and of those expenses, for two stand-alone radio stations sur­ Order, we find that the record in this proceeding more veyed, enabling the former to divert cost savings into than dispels any doubts concerning the benefits of com­ other areas such as programming or news. mon ownership, particularly as to the efficiencies inher­ 57: Second, group-owned stations appear to air more ent in combined station operation. for example, Gillett informational programming than non-group-owned sta­ Holdings, has shown that, contrary to UCC's assertions, tions. In this regard, using the last published Commissio"n AM radio is well situated to benefit from the economies report on television programming during a composite of scale and other efficiencies generated by joint radio-TV week,6o NBC compared the average amount of time the ownership,. particularly in the area of radio news. 58 Under NBC-owned "television stations devoted to informational joint ownership, an AM station would gain access to the programming (i.e., news and public affairs) and the aver­ TV station's large news-gathering operation. while the TV age amount of time devoted to this type of programming station would benefit by gaining an additional outlet for by all television stations in the 25 largest markets during its news-gathering efforts, thus spreading the cost of such prime time and during the period 6 a.m. to i2 p.m. The operations over two facilities. Needless to say. the increas­ study also made a simila"r comparisoh of the average ingly mobile pubiic would also benefit by gaining broader amount of local news and public affairs programming access to the information gathered by the joint news done by the NBC television stations and the average of­ operation, including the ability to listen to 'the ne~s when fered by all television stations in the top 25 markets they cannot physically stop to view a television set. The during these same time periods. opposition comments failed to refute these and the other 58. The results of the study indicated tha\ in both time findings of the studies outlined above, and offered no periods, the NBC television stations, on the average, aired contradictory evidence of their own on these points. more informational programming than did the average of Therefore, we remain unconvinced by their unsupported all television stations in the largest 2S' markets. The same arguments. However, we have nevertheless determined result also occurred with respect to local news and public that a cautious approach is appropriate in relaxing the affairs.61 radio-TV' cross-ownership rule for the reasons set forth 59. To put these results into perspective, we also com~ below. The limited refinements we are making to the rule pared the average amount of informational programming will enable the public 'and broadcasters to take advantage aired by the other two major commercial TV networks '? of the benefits of joint ownership, where appropriate, and three group owners and the average amount of such while retaining the substance of the current rule. programming aired by television stations in the top 2S markets during the same period. [n making this compari­ B. Progr~mming Benefits son, we utilized the same p"rogramming data that was used 54. Besides producing the above-described efficiency in NBC's study. Although the information is somewhat benefits, the cost savings and aggregated resources of com­ dated, ~evertheless it represents the most recent program­ bined radio-television operations may also contribute to ming data collected by the Commission· and we believe programming,benefits to the extent that there may be that it provides additional useful information concerning more news, public affairs and other non-entertainment the level of informational programming provided by var­ programming. ious stations. 55. Of course, information on existing "group owner­ ·60. As a result of this analysis, we found that the shipll does not necessarily involve ownership in the same average amount of information~l programming aired by market. Nevertheless, data on existing patterns of group each of these group owners exceeded the average amount ownership provide useful information( concerning the of such programming aired by all of the TV stations in benefits of cross-ownership in the same market. This sec­ the largest 25 markets in both time periods studied. Spe- tion focuses on the data submitted on this point. In cifically, the results are as follows: " essence, the commenters believe that group ownership will enhance programming diversity, especially with re­ gard to the type of programming that the multiple owner­ ship rules were intended to encourage -- news, public affairs, and non-entertainment programming. In .particu- . lar, they have identified three reasons why these benefits are likely to occur with respect to radio-television station combinations. 56'. First, the record reveals that existing group-owned) stations spend a larger percentage of their budgets on news and overall programming than independent stations. For example, NAB's ,study on cost savings resulting from

1748 FCC 88-407 Federal Communications Commission Record 4 FCC Red No.4 increasing a station's power. For example, many daytime­ combinations, (3) partially eliminating the rule in large only AM stations could become fulltime stations if they markets; or (4) keeping the rule in its present form. A had additional resources to purchase directional antennas large number of commenters supported th;e first of these i3 and/or a new transmitter site. This may have the benefi­ other options, to eliminate the radio-television cross-own4 cial effect of expanding a station's service to unserved or ership rule completely in all markets." Although this underserved areas or times of day, as well as improving approach would give broadcasters the most flexibility in the signal quality for those listeners or viewer-s who al­ station acquisition and. taking advantage of joint owner­ ready receive service. ship· efficiencies in all size markets, some commenters 68. As the foregoing discussion indicates. commenters argued that this option would abandon our traditional have provided us with a substantial record of the benefits method of safeguarding viewpoint diversity and economic of common Qwnershipof broadcast stations in the same competition.76 In the interest of caution. we have decided market. Consequ'ently, we find that the record supports not to eliminate the rule, but instead to adopt a new relaxing the radio-TV cross-ownership prohibition to case-by-case waiver policy at this time in order to assess adopt our new, more lenient waiver policy. In Part Two. the effects of relaxing the one-to-a-market policy. we will describe this waiver policy and explain why we 72. The second option we considered was to permit adopted this alternative rather than the other options AM-VHF. AM-UHF. and AM-FM-UHF combinations in considered. all television markets or. alternatively, to permit these combinations only in large markets and to entertain re· quests for such combinations in other markets on a case­ PART TWO -- MODIFICATION OF THE by-case basis. The main advantage of this option, which RADIO - TV CROSS - OWNERSHIP RULE was proposed in the Notice and supported by a number of 69. Having discussed the record regarding changing the commenters,i7 is that it could assist AM and UHF broad­ local ownership rules, we now will .apply these general casters, particularly by allowing AM broadcasters to merge findiIJ.gs to the radio-television cross-ownership rule. The with profitable television stations with greater financial rule currently prohibits the common ownership of com­ resources.78 However, we found that this option overem­ mercial radio and television stations in the same market if phasizes the possible adverse impact that local FM-VHF the 2 mV/m 'groundwave contour of an AM station or the TV combinations would have on economic competition 1 mV/m contour of an FM station encompasses the entire or viewpoint diversity relative to that of AM and UHF TV community of license of a television station or, con:­ combinations and. in that sense. would unjustifiably pre­ versely. if the Grade A contour of a television station vent the public and broadcasters from taking,advantage of encompasses the entire community of license of an AM the efficiencies inherent in joint FM-VHF TV oper­ or ·FM station. In applying the general findings from Part ations.i9 The record does not provide a basis for conclud­ One to the radio-TV cross-ownership rule". we find that ing that it would be desirable to treat these stations the record shows that the public interest benefits of the differently in this way. ' rule in its current form have been reduced by the in­ 73. A third option considered. supported by a large creased availability of media outlets. especially in markets group of commenters,80 was to eliminate the radio-TV with the largest numbe~ of owners or voices. We have also cross-ownership rule only in large markets, such as the found that there would be significant efficiencies in sta­ top 20. SO, or 100 markets. and to allow radio-TV com­ tion operations from relaxing this common ownership binations on a case-by-case basis in all other markets. This prohibition under certain circumstances. Consequently, in approach. in some ways not unlike the waiver approach balancing OUf continuing desire to retain the public inter­ we are adopting today, would give broiildcasters greater est benefits .from competition and diversity against the freedom in.station acquisitions, and might not materially potential benefits from joint ownership of stations, we undermine our traditional policy concerns because there conclude that the public interest would be served by some are a sufficient number of media outlets in large markets modification of the present proscription on radio-TV to prevent any outlet from obtaining undue economic cross-ownership. power or undue sway over public opinion. However, 70. After carefully evaluating all the possible options, some commenters suggested that the benefits of joint own­ we have decided to relax this rule rather narrowly by ership are equally if not more attainable in small markets, adopting a new case-by-case waiver policy.74 In particular, and that carving out an exception' to the rule based on an we will look favorably upon waiver applications involving arbitrary cut-off point would unjustifiably deny these stations in those top 25 television markets .where there benefits to the public and broadcasters in smaller mar­ 8 will be 30 separate broadcast licensees after the combina­ kets. ! In an abundance of caution, we have decided that tion; and in situations involving Ilfailed" stations, as de­ it would be preferable to review proposed radio-TV com­ scribed further below. We anticipate that this approach binations on a case-by-case basis, even in large markets, in will lead to a limited· number of additional radio-televi­ order to have a period of time in which to assess the sion combinations within the same market, enabling us to ramifications of relaxing the radio-TV cross-ownership obtain further evidence regarding the advantages and dis­ prohibition. advantages of maintaining the cross-ownership rule. This 74. Finally, we considered the option of leaving the section explains the new waiver standards in more detail radio-TV cross-ownership rule in its present form, which and sets forth the rationale for adopting this approach was supported by four of the commenters. However, this rather than the .other options considered. option would retain an overly restrictive regulation on 71. In the course of deciding on this waiver approach. station ownership despite the strong record in this pro­ we gave careful consideration to the other options sug­ ceeding supporting some relaxation of the rule. In par­ gested by the commenters, namely: (1) eliminating the ticular, this option would f~il to recognize the substantial radio-TV cross-ownership rule compl.etely in all television markets; (2) partially eliminating this rule for AM-TV

1750 4 FCC Red No, 4 Federal Communications Commission Record FCC 88·407 growth in media outlets in markets of all sizes and the main in these large markets. thereby preventing any single significant public interest benefits of joint station owner­ outlet or fi~m from obtaining undue economic power or ship. undue sway over public opinion. Indeed, we believe that our "top 2S markets/30voices" standard is conservative and may far exceed the market size and the number of 1. Top 25 Markets and voices necessary to ensure diversity and prevent competi­ Failed Station Waiver Standards tive abuses. 75. Having reviewed the various options outlined above. 78. Rationale. This waiver standard is a logical out­ we have -determined that the public interest would best be growth of the number of stations/market size standard served at this time by retaining the radio-TV ctoss-owner­ suggested in the· Notice. 90 After reViewing the comments ship rule while adopting a case-by-case waiver policy un­ in this proceeding, we determined that permitting radio­ der which we would look with favor upon certair waiver TV combinations in the very largest or top 2S markets, on requests when the criteria described herein are met.82 a case-by-case basis. would not significantly undermine Under this approach, we will be predisposed towards our diversity and competition concerns while allowing the waiver applications involving either the top 25 television public and broadcasters to realize the benefits of common markets or Ilfailedll broadcast stations, as outlined in the ownership. As noted earlier, a number of commenters in next section. In situations where these two standards can­ this proceeding proposed that we use a market size cut-off not be met. however, we will consrder waiver applications point in determining where to allow radio~TV combina­ on a more rigorous case-by-case basis. placing the burden tions. For example. CBS proposed that we eliminate the on the waiver applicant to demonstrate that the purported ownership restriction in the largest markets, implying that benefits of the combination outweigh our traditional con­ they would include at least the top 20 markets.91 Simi­ cerns for promoting diversity and competition. Recogniz­ larly, Group Wand Capital Cities/ABC argued that we ing the burdens that a general waiver approach imposes should eliminate the restrictions on radio-TV combina­ on petitioners in submitting waiver requests and on the tions in the largest 50 markets. In addition, we have used 'agency in reviewing them, we have outlined specific cri­ market definitions such as the top 50 or 100 markets in a teria for the ,Commission's consideration in granting the number of our radio. television, and cable television particular waiver request.83 Thi!? approach also permits us rules. to evaluate each potential radio-TV combination using 79. We have struggled long and hard to determine what traditional antitrust and other factors to assess the impact should be the appropriate market cut-off for this waiver on competition and viewpoint and programming diversity. standard. As reported in NAB's Media Outlet Study," both· the top 25 and top 50 markets contain a large A, "Top 25 Marketsl30 Voices" Standard number of media outlets,·with an average of 72.4 broad­ 76. Fir'st. we will look favorably upon waiver requests cast outlets in markets 1-25 and 36.8 outlets in markets when the radio and television stations invo lved are lo­ 25-50. While we have used the top 50 markets standard, cated in the top 25 AD! television markets as defined by as pro~osed by Capital Cities/ABC and Group W, in other Arbitron Ratings Company and in addition where, follow­ rules,9 we believe that we should take an extremely care­ ing the proposed combination, there will remain at least ful approach in liberalizing our radio-TV cross-ownership 30 separately owned, operated and controlled broadcast waiver policy. TherefOre, out of an abundance of caution, ll licensees Or "voices • In determining the numbet of we have decided to limit the markets i'n which we will broadcast licensees in a particular market. we will count look with favor upon waiver applications meeting the all full-power TV stations, both commercial and non­ independent voices criteria to only the largest 25 markets. commercial, licensed to the relevant ADI television mar­ 80. There is a correlation between market rank and the ket84 and operating AM and FM radio stations licensed to number of stations or station owners, as reflected in the the relevant TV 'metropolitan market,8S including an~ on­ data outlined in Part One, supra. The largest markets tend air stations operating under a construction permit. b In to have the largest number of radio and TV stations and establishing this count, only primary authorizations will the largest number of distinct owners, whereas smaller be assessed. Thus, for these purposes we will include markets tend to have fewer radio and TV stations and satellite and non-commercial or educational stations. but fewer separate owners. However, this correlation is not not low power stations, translators, or class D FM stations. perfect. Some smaller markets may have more TV or Furthermore, we will use the attribution ·provisions of our radio stations or owners than markets ranked higher. In local ownership rules87 to determine the number of sepa­ terms of both our diversity and competition concerns, the rately owned, operated, and con,trotled broadcast licensees number of separate owners in the market may be the best or voices'in the relevant television or metro market.88 An measure of potential competition among stations and of applicant requesting a waiver under this standard would the likelihood of diversity of editorial viewpoints and be expected to prOVide documentation .showing that this program formats. In addition. although we do not believe test has been met.89 this is plausible pr likely. it is possible that in a large 77. We will be predisposed to grant waiver requests that market which presently contains. more than 30 licensees, meet this standard, and we generally do not intend to a series of mergers' and bankruptcies might reduce the scrutinize these applications for economic efficiencies be­ total number of voices to 30 or below. To guard against cause we have already determined that such efficiencies that pOSSibility, and thus ensure that our general ~iversity generally exist and that the benefits of permitting radio­ goals are not compromised. we have decided to include TV combinations in these markets with many competing the 1130 voices" requirement in addition to our "top 25 ll voices will generally not undermine the benefits flOWing market.s standard before we will look favorably upon from our traditional procompetitive and diversity policies. proposed radio-TV combinati"ons. We believe that using This conclusion is based on the fact that a very large number of broadcast outlets and separate voices will re-

1751 FCC 88-407 Federal Communications Commission Record 4 FC,C R~d No.4

fl the number of separate Ilvo ices as an additional restric­ fewer than 30 voices or owners. diyersity and competi~ion tion or IIflaarll in applying this waiver standard best satis­ exist to such an extent that it. is. appropri~te to take -into fies our public policy interests at this time. account the efficiency and other benefits 9f allowing joint 81.. OUf 1130 voices" standard parallels the station operations. As described more fully below, in these recommendation of the National Telecommunications and markets we will examine waiver requests on a case-by-case Information Administration that we allow certain AM-TV basis to determine whether the ben.efits of joint operation combinations by using a benchmark that takes into con­ outweigh the diversity costs. We believe, moreover, that sid~rationthe number of independently owned stations in our "top 25 markets/3D voices" -stahdard is stringent the market of the broadcast station to be acquired,'l4 This enough to provide a "safety net" in teq:ns ·of our fun­ standard is also somewhat similar to the approach sug­ damental diversity and competition concerns. That is, we gested by NBC in its comments. which would permit are confident that where that standard is met,. the poten~ cross-ownership in markets with 15 different owners of tial benefits from joint ownership will generally outweigh broadcast stations and daily newspapers or more than 3D any diversity gains from separate ownership.. radio and TV stations. According to NBC, such markets 84. We also note that this new waiver standard is even would be sufficiently diverse and competitive at· the local more limited and restrictive than it might· at first appear. leyel so that common ownership of radio and TV stations First, our determination that a television market has-3D or in these markets should raise no regulatory concerns.95 more voices will be based upon application of our attribu­ We believe that NBC's suggestion to differentiate markets tion rules. Thus, if an individual owns even 5%, in each by at least the number of different,' media owners is a of two different radio stations. then those st~tions will be useful framework that addresses qur concerns with respect considered commonly owned. Second. we will look sepa-· to ,both economic competition and diversity. We also rately at each waiver request to allow a merger of a radio agree with NBC that different types of media, such as and a TV station. Thus. in a market with 31 voices, we cable television, VCRs, SMATV. MMDS. newspapers and might approve the first merger request, which would de­ other print media, all provide sources of competition and crease the number of voices to 3D, but- further mergers media diversity for radio and TV stations. Nevertheless. in thereafter would be precluded under the "top 25 mar­ the interest of caution and because the radio-TV CrosS­ k~tsl3D voices" criteria. Third. the number. of possible ownership rule deals only with traditional broadcast out­ radio-TV mergers is limited hy the number of TV stations lets. we have decided to include only radio and TV in a market that are not presently jointly owned withJa stations in our standard for markets with many competing radio station.':l7 ' voices.96 85. While we will be inclined to grant waivers that meet 82. After careful consideration. we have also decided our "top 25 markets/3D voices" standard, we leave open not to use a market share measure or the HHI analysis in the possibility that peti,tioDers who submit petitions (0 deiermining which markets appear to be competitive and deny might be able to requt the request for a waiver. In which do not. ,First, we believe that the "top 25 mar­ addition, we will not grant any application if the proposed kets/3D voices" standard represents a degree of competi­ combination would result in any Qne entity holding .an tion sufficiently robust so that the markets involved attributable interest in more than one AM and FM statioJ;l would be unconcentrated or mod,erately concentrated. as­ within any single television metro area. suming that the HHI could be properly measured. More importantly, we believe that the numbers chosen are so B. "Failed Station" Standard clear and unam!?iguous that our own staff, waiver ap­ 86. A second situation in which we will be predisposed plicants, and other parties will be readily able to calculate to grant applications will occur where waiving the rule and easily ascertain the results. In contrast,. we fear that would either: (a) allow a TV or radio station that has ·I)ot this would not be the case if we chose to. use concentra­ been operating for a substantial period,of time98 to broad.,.. tion measures because of the increased complexity of cast; or (b) allow a TV or radio station that is involved in making and verifying the calculations. The administrative voluntary or involuntary bankruptcy pro<;:eedings to con­ burdens of such an approach would be substantial for all tinue to operate. In either of these situations•. an applicant parties concerned, and in light of the cautious approach requesting a waiver of the rule would first be required to taken herein, we see no need to impose such additional provide relevant documentation. i.e., proof of the length burdens. of time that the station has heen off-air. or proof that it is 83. We wish to reiterate that in adopting this new involved in bankruptcy proceedings. waiver standard, we are not abandoning our continuing 87. Rationale. The rationale for this standard is similar concerns for encouraging diversity of voice.s and eco­ to that of the current Note .f exception to the radio-TV nomic competition. Although liberalizing the radio-TV cross-ownership rule. Under'this exception we have al­ cross-ownership ·rul~ may affect diversity of ownership to lowed certain radio-UHF comhinations, primarily in cases some minimal degree even in. markets with many separate of economic hardship or when joint ownershi~ would licensees, we believe tha't any such effect must be weighed result in activation of an unused TV allqcation. 9 Under against the efficiency gains, cost savings and other benefits these circumstances, the benefits to the public of joint of allowing such 'combinations. To the extent that these owner.ship outweigh any costs to diversity. The "failed" goals may conflict to some extent, our decisions about station standard we are {ldopting touay is much mo~~ when to allow joint ownership of radio and TV stations conservative, however, because' only two specific. condi­ inevitably involve trade-offs and the weighing of costs and tions will satisfy this. test. lllU rurthermore. we, anticipate benefits. As the number...of stations and separate owners that petitioners who submir petirions to deny might be increases within a market, the potential detriments from able to rebut the waiver rcyuest. In addition. as we noted any individual radio and TV combination decline. Hence, in our discussion of the "top. 25 markets/3D voices" stan­ the relative benefits tend to increase. It is our view that dard, we will not grant any application if the proposed even below the top 25 markets or in a market with far

1752 4 FCC Red No.4 "Federal Communications Commission Record FCC 88·407

·combination would result in anyone entity holding an tion involves a UHF or VHF TV station or an AM or FM attributable interest in more than one AM and one FM radio station. as well as the size or the' class of the stations station within any single metro area. involved. For example. combinations involving UHF TV, 88. We also anticipate that this strict standard, while small AM, or class A FM stations may provide relatively difficult ~o meet, is one that can be easily documented by greater public interest benefits and impose relatively fewer the waiver applicant and verified by our staff or other public interest costs. parties. This standard will thus impose few administrative 92. Third, waiver requests forwarded by applicants who burdens. -In addition, we do not expect that any broad­ already own a number of media outlets in the relevant caster would undergo the financial hardships of filing for market will face a higher hurdle than those from ap­ bankruptcy or taking a station off the air for several plicants with few outlets. Moreover, as stated earlier, we months in order to qualify under this rather onerous will not grant any application if the proposed combina· standard. tion would result in anyone entity holding an attrib­ 89. vie fully.expect that preserving these bankrupt or utable interest in more than -one AM and one FM station inoperational stations through joint ownership will not in the same metro area. Fourth, in reviewing the financial adversely affect our diversity and competition concerns. difficulties of any station(s), we will consider information Once a station has been off the air fora substantial period related to whether a station has long been offered for sale, L03 or has become involved in bankruptcy proceedfngs (so to no avail. Finally, we will. review the nature of the that it is likely to go off the air), competition or diversity relevant market in light of our traditional diversity and in a' particular local market cannot be improved by for­ competition concerns, especially with respect to the .num­ bidding joint -ownership of that station with another local ber of broadcast outlets and separate "voices" that would station. In fact, dark or bankrupt stations actually disserve exist if the merger were approved, as well as the "degree of the diversity and competition goals of the radio-TV cross­ cable penetration and the availability of other non-broad­ ownership rule, bec,ause these stations ate holding valu­ cast media. In this regard, proof of substantial cable pene­ able frequencies without providing service to the pliblic. tration in the relevant market may enhance an applicant's Our assumption is that two healthy. commonly owned waiver request. stations in a market clearly serve the public better than 93. In light of the burdens that a standard-less waiver one operating station and one inoperational' station or approa~h can impose on both the petitioners and the frequency providing no service to the public ata11. agency, we have articulated criteria which the Commis­ sion intends to utilize in evaluating waiver requests not covered under the specific criteria of the "top 25 mar­ II. Case· by • Case Review kets/30 voices" or "failed-" station standards. We also note 90. If a' waiver request does not satisfy either of these that this new waiver approach will replace the current two standards, then we will conduct a further, more rigor­ radio-UHF exception in Note 4 of Section 73.3555, so that ous review of the application to determine if the proposed such combinations -- to the extent that they are not combination serves the public interest based upon an covered by the "top 25 markets/30 voices ll or "failed~' evaluation and balancing of other specific factors, includ­ station' standards -- will also be evaluated under the same ing the types of facilities involved, the potential benefits of criteria outlined above to determine whether common the combination, the number of stations already owned by ownership of these stations would be in the public inter­ the applicant, the financial difficulties of the station(s), est. 104 and the nature of the market lOl in light of our diversity . 94.' Rationale. As stated previously, we believe that this and competition concerns. In looking at these various case-by-case waiver approach for situations not meeting factgrs, we-will balance them against our continuing goals the two specific waiver standards promotes the public of encouraging diversity of voices and economic competi­ interest by allowing for the formation of some additional tion'. We also ,anticipate that these waiver applications will radio-TV combinations in certain cases while still retain­ be subject to much closer scrutiny than was the case ing a rule that promotes ou'r concerns for diversity and under the Note 4 radio-UHF exception ·to the radio-TV economic competition. The record shows' that the number cross-ownership rule. The following section explains these of media outlets, pa,rticularly TV and radio stations,. are factors in more detail. rising rapidly and that cable TV penetration and VCR 91. First'i in assessing the potential benefits of the com-" ownership are similarly increasing in all markets. In addi­ bination, v,{e will consider public service benefits such as . tion, commenters have demonstrated the benefits of joint the economies of scale, cost savings, and programming ownership, including cost savings and other efficiencies. and service benefits -discussed in Section II of Part One, In particular, the NAB study showed that real efficiencies supra. For example, some broadcasters in relatively small can result from owning radio and TV stations in the same markets may be most able to take advantage of the econo­ market, as discussed earli~r. mies of scal~ inherent in joint radio-TV operations, and 95. Although a majority of commenters supported com­ could thus funnel their cost savings into better program pletely eliminating the radio-TV cross-ownership rule in service or technical facilities. However, applicants will all markets, lOS we have chosen to adopt a more limited face a heavy burden in relying on these benefits, because approach for the following reasons. First. we find that this we ,will evaluate any potential benefits in the context of option ensures. that our traditional policy goals are pre­ our'otqer public interest criteria, particularly as to wheth­ served as we continue to obtain further evidence regard­ er the.....combination would threaten our traditional diver­ ing the need for the radio-TV cross-ownership rule. A few sity arid' competition concerns in the markeL 102 We also commenters, including CFA and Jacor Communications, expect applicants to outline these potential benefits with argued that eliminating the rule will only help large great specificity in their waiver requests. Second. with conglomerates and could lead to dangerous concentrations -respect to the types of facilities involved, we will consider of econOtuic and political power in some markets.106 such factors as whether the proposed radio-TV combina- Rather than modify or eliminate the rule. they suggested

1753 FCC 88·407 Federal Communications COlnmission Record 4 FCC Red No.4 that the Commission retain the current rule and its waiv­ number and the variety of media outlets in recent years. er approach, thus enabling the Commission to assess the Thus. we believe that the more relaxed waiver policy is merits of each proposed combination on a case-by-case appropriate. basis. In response, we acknowledge that inasmuch as the effects of cross-ownership can best be analyzed empiri­ II. Summary of Issues Raised by the Public Comments in cally, we think that until there are a significant number Response to the Initial Regulatory Flexibility Analysis: of radio-television combinations in the marketplace, a No comments were received in response to the Initial cautious approach is more prudent. However, we are Regulatory Flexibility Analysis. adopting a different type of waiver approach than that suggested by those commenters, whereby we will be pre­ disposed to grant applications meeting one of two specific. III. Significant Alternatives Considered and Rejected: rather strict standards (discussed in the previous section) We considered four alternatives before adopting the aI').d all others will be evaluated based on certain public approach set forth in this Second Report and Order, The interest factors described in this section. first option, to leave the radi~-television cross-ownership .96. Second, because the communications industry is rule in its present form, would retain an unnecessary and undergoing such' rapid change, we feel that prudence calls overly stifling restriction on station ownership. This op­ for an incremental approach that avoids any sharp depar­ tion also fails to recognize the substantial growth in the tures from the current rule. ~ stated previously, we communications marketplace and the significant public believe that it. is best to err on Ithe side of caution, benefits of joint station ownership. particularly when a' longstanding policy such as the radio­ The second option, to completely eliminate the rule, TV cross-ownership rule is involved. This waiver ap­ would give broadcasters the maximum flexibility in ac­ proach will also avoid the· possibility of rapid quiring, broadcast stations. However, this approach might restructuring in the communications industry as broad­ be view~d by some as an abandonment of our traditional casters seek to take advantage of any ,rule change. diversity and competition concerns, which could result in 97. Third, by adopting this new waiver policy, we can numerous radio-TV combinations before the Commission assess the effect of any" previously granted broadcast sta­ has assessed the ramifications of such consolidations. tion mergers or preexisting media outlet combinations in The third option involves permitting AM-VHF. AM­ a given market before allowing new radio-TV combina­ UHF, and AM-FM-UHF combinations in all markets, and tions. In other words, we will be able to Hmit common allowing other radio-TV combinations on a case-by-case ownership of radio and TV stations to those situations basis. The main advantage of this option is that it helps to where it. will not measurably diminish competition and revitalize the faltering AM broadcast service, enabling AM diversity: .broadcasters to combIne With- profitable television' stations with greater financial resource. On the other hand, this option denies the same benefits to FM broadcasters and SUMMARY may overemphasize the possible adverse impact that local 98. In sum, we find that the record supports 'our initial FM-TV combinations would have on economic competi­ evaluation in the Notice that the radio-TV cross-ownership tion and viewpoint or programming diversity, thus pre­ prohibition should be' relaxed to allow common owner­ venting the public from realizing the significant benefits ship of radio and television stations in the same market to of such combinations. some degree. Therefore, we are adopting a policy of being The fourth option is to eliminate the radio-TV cross­ disposed to grant such -combinations when our II top 25 ownership rule only in large television markets, and to markets/30 voicesll or l'failedll station waiver standards are allow radio-TV combinations on a case-by- case basis in met, and have set forth general criteria for a case-by-case all other markets. However, this option would deny the approach ~or all other waivers. This' action is appropriate benefits of joint ownership to broadcasters in smaller in light of the substantial growth in media outlets in markets and could also cause significant structural markets of all sizes and the efficiencies of scale inherent changes in the industry before the Commission can study in joint ownership of stations, which may lead to more all of the effects of such an approach. news and public affairs programming. We find that this The action which we are adopting in this decision is to modification best balances the benefits inherent in the retain the rule but to adopt new policies for evaluating joint o'wnership of stations against our concerns regarding waiver requests. Such an incremental approach will best diversity and economic competition. protect our traditional competition and, diversity concerns while enabling the public and broadcasters to realize the benefits of common ownership. FINAL REGULATORY FLEXIBILITY ANALYSIS The Secretary shaIl send a copy of this Second Report and Order, including the Final Regulatory Elexibility Ana­ I. Need for and Purpose of this Action: lysis, to the Chief Counsel for Advocacy of the Small This action is taken to establish a new waiver policy for Business Administration in accordance with paragraph the "one-to-a-markee' or radio-TV cross-ownership' rule, 603(a) of the Regulatory Flexibility Act (Pub. L. No. thus recognizing the substantial public interest 'benefits of 96-354,94 Stat. 1164,5 U.S.c. § 601 et seq., (1981)). common station ownership while fostering maximum competition in broadcasting and diversification of pro­ gramming and viewpoints. Although this rule was PAPERWORK REDUCTION ACT STATEMENT originally adopted to ensure diversifIcation of viewpoints The decision 'contained herein has been analyzed with and programming, that purpose is now adequately served respect to the Paperwork Reduction Act ·of 1980, and in many situations by the tremendous growth in the found to impose a new or modified information collec­ tion requirement on the public. Implementation of any

1754 4 FCC Red No.4 Federal Communications Commission Record FCC 88-407 new or modified requirement will be subject to approval application if the proposed combination would result in by the Office of Management and BUdget as prescribed anyone entity holding an attributable interest in more the Act. than one AM and FM station within any single television 99. Authority for the rule changes adopted herein is metropolitan market. contained in Sections 4(i) and G), and 301, 303, 308 and 309 of the Communications Act of 1934, as amended. 100. Accordingly, it is ORDERED that the amend­ FOOTNOTES ments to the Commission's Rules and Regulations herein, '47 C.F.R. Section 73.3555(b). as set forth in the Appendix belo'w, ARE ADOPTED, to 2 2 FCC Rcd ll38 (1987), summarized. 52 Fed. Reg. 8086 become effective March 31, 1989. In addition, it is OR­ (March 16. t987). DERED that this proceeding is TERMINATED. J First Report and Order in Docket No. 87-7, FCC No. 88-343. 4 These commenters were the Consumer Federation of Amer­ FEDERAL COMMUNICATIONS COMMISSION ica (CFA), the National Black Media Coalition (NBMC), the United Church of Christ (UCC), and Jacor Communications, Inc. Their arguments are addressed infra at paras. 22-24, 52-53. and 62·63. . 5 As we stated in the Notice. the "one-to-a-market" provisions Donna R. Searcy of the broadcast multiple ownership rules were adopted in two Secretary stages. In the first stage. a party was restricted to one AM-PM combination or to one television station in a market. See First Report and Order in Docket No. 18110, 22 FCC 2d 306 (1970). APPENDIX recon. granted in part, 28 FCC 2d 662 (1971). In the second stage, the rule was extended to cover newspapers. See Second Report 47 CFR Part 73 of the Commission's Rules are amend­ and Order in Docket No. 18110. 50 FCC 2d 1046 (1975), r~con. ed to read as follows: granted in part. 53 FCC 2d 589 (1975), affd sub nom. FCC v. National Citizens Committee for Broadcasting. 436 U.S. 775 1. The authority citation for Part 73 continues to read (1978). In a separate proceeding. the COf!lmission adopted cable­ as follows: broadcast cross-ownership rules which, inter alia. prohibited the common ownership _of a cable television System and a television broadcast station whose predicted Grade B contour covers any AUTHORITY: Sees. 1, 5, 4 and 303. portion of the service area of the cable television system. 47 C.P.R. Section 76.501(a)(2). See Second Report and Order in 2. Section 73.3555 is amended by deleting the fifth and Docket No. 18397, 23 FCC 2d 816 (1970). recon. denied, 39 FCC sixth sentences of Note 4 which begin with the words 2d 377 (1973). Neither the broadcast-newspaper nor the broad­ ll "This section and end with the words lI public interest" cast-cable cross-ownership provisions are at issue in this pro­ and by adding a new Note 7 to read as follows: ceeding. 647 C.F.R. Section 73.3555. Note 4 (t986). .73.3555 Multiple ownership. 7 See, e.g., Central Broadcasting Co .. /n'c.• 21 R.R. 2d 482 (1971); American Public Life Broadcasting Co .. 36 R.R. 2d 1181 Note 7: The Commission will entertain requests to waive (1976); Wilton E. Hall. 43 R.R. 2d 91 (t978); WOIO (TV), I FCC the restrictions of paragraph (b) of this section on a Rcd293 (1986). . case-by~case basis. The Commission will look favorably 8 See, e.g., Windmill Broadcasting Co .. 44 R.R. 2d 475 (1978); upon" waiver applications that meet either of the following John H. Garabedian, 47 R.R. 2d l-l-l-l (t980). two standards: (1) those inyolving radio and television station combinations in the top 25 television markets 9'See First Report and Order in Docket No. 87-7 at para. 7. See where lhere will be at least 30 separately owned, operated also para. 16 infra. . and controlled broadcast licensees after the proposed com­ 10 For instance, on the national level, we allow a person or bination, as determined by counting television licensees in entity to have cog:nizabl~ ownership interests in 12 commercial the relevant ADI television market and radio licensees in broadcast stations in each of the three major broadcast services the relevant television metropolitan market; or (2) those (AM, FM, and television). 47 C.F.llj Section 73.3555(d)(I), Lo­ involving "failed" broadcast stations that have not been cally, we permit the common ownership of commercial AM and operated for a substantial period of time, e.g., four FM stations in the same community or market and also have months, or that are involved in bankruptcy proceedings. allowed, on a case-hy-case basis. the joint ownership of commer­ For the purposes of determining the top 25 ADl televi­ cial radio and UHF television stations in the same market upon sion markets, the relevant AD! television market, and the a showing that such combinations would promote the public r~levant television metropolitan market for each prospec­ interest. tive combination, we will use the most recent' Arbitron II These percentages, as well as others discussed infra. are Ratings Television ADI Market 'Guide. We will determine based upon station totals contained in the following chart, illus­ the number of radio stations in the relevant television trating growth in various categories of stations for 1970 and metropolitan market and the number of television li­ i988. . censees within the relevant AD! television market based on the most recent Commission ownership records. Other Year AM FM TV Total waiver requests· will be evaluated on a more rigorous 1970 4,370 2,722 1.035 8.127 case-by-case basis, as set forth in the .Second Report and 1988 4,923 5.493 1,791 12,207 Order in MM Docket No. 87-7, FCC 88-407. In im­ plementing this new waiver policy, we will not grant any

1755 FCC 88·407 Federal Communications Commission Record 4 FCC Red No: 4

The figures for 1970 are- derived from FCC Annual Report ­ Market TV AM FM Total FY 1970, at 141. The 1988 station totals are based upon Commis­ 1-25 13.4 29.8 29.2 72.4 sion records as of October 31. 1988. 26-50 7.6 15.8 13.4 36.8 51-75 7.5 14.1 12.1 33.7 12 fn addition to the growth in the traditional broadcast 76-100 6.7 10.5 9.0 26.2 services, there has been a rapid expansion in the new low po.wer 101-125 5.6 7.6 8.1 21.3 television service. Established in 1982, there were 410 licensed 126-150 5.7 9.2 9.0 23.9 low power stations (301 UHF and 109 VHF stations) as of \51-175 3.9 4.8 5.0 13.7 October 31, 1988. 176-200 2.8 3.6 3.8 10.2 13 The estimated growth of the cable television industry for 201-209 3.1 2.5 3.3 8.9 the years in question are as follows: NAB Media Outlet Study, Figure I. We 'note that there appear Operating Cable Total to be slight mathematical errors in a few of these averages. but Year Systems Subscribers we do not believe that these errors affect the study's general 1970 2,490 -/..500,000 conclusions in any way. 1987 8,000 .0.279.980 2\ Id. at Figure VI. These statistics are c;ierived from Television and Cable 22 Id. at Figure III. Faclbook, Cable and Services Volume, 19K7 Edition. Number 23 First Report and Order in Docket No. 18110. 2_ FCC 2d at 55, at A-40. 310. quoting Associated Press v. United States. 326 U.S. I, 20 ( (945).

(4 The Kagan Media Index. Paul Kagan Associates, Inc., May 24 See Policy Statement on Comparative Broadcast Hearings

17. 1988 at 3. c (1965 Policy Sialement). I FCC 2d 393, 394 (1965). These factors

15 See Notice, 2 FCC Red at 1140. paras. 15-16. include the I extent to which owners are integrated into or participate in the management of a station, the degree to .whfch 16 See, e.g., Comments of Bonneville International at 6M 10 (Salt Lake City, Utah (market 41), Anchorage. Alaska (market there will be (ocal ownership. and a consideration of which 157). and Fairbanks, Alaska (market 205»; Comments of Capital proposal will most efficiently utilize the broadcast spectrum. Cities/ABC at 14-21 (New York -'(market 1l. Portland '(market 2S Comments of CBS at 21. 25), and M~mphis (market 43»; Comments of Taft Broadcasting 26 Id. Cfaft's 12 markets); and Comments of Fisher Broadcasting at 5-6 27 As an example, NBC points out that its stations have taken (Fisher) (Seattle-Tacoma, Washington. and Po.rtland. Oregon). different approaches to the question of contraceptive advertising All market ranks referred to in this, note are based upon A.C. -- two of its owned TV stations have decided to accept such ads, Nielsen's ranking of Designated Market Areas. while three of its other stations, have refused. Meanwhile, the 17 See" e.g., Comments of CBS, Inc. (CBS) (top twenty TV NBC owned radio stations have d

DMA TV markets); Comments of National Broadcasting Com M broad-based public service effort. . pany (NBC) (top 75 radio markets and top 75 television mar­ 28 NAB Media Outlet Study, Appendix 11. Market Level Data. kets); and Jet Broadcasting (top 150 radio markets). 29 See First Report and Order in Docket No. 87-7 at para. 30. 18 Comments of NAB. Appendix B, "An Analysis of Media 30 Comm.ents of Jet Broadcasting at 2. Outlets by Market" (June (987) (NAB Media Outlet Study). Using A.e. Nielsen's Designated Market Areas (I?MA's) as the 31 UCC and CFA have also maintained tha'tthe language of relevant markets, the study counted the following media outlets: the 1984 Cable Act, 47 V.S.c. § 553(a), and tbe 1982 lottery (1) the total number of television stations within each DMA; (2) amendments 'to the Communications Act. 47 U.S.c. § the number of commercial radio statIons (AM. FM. and com­ 309(i)(3)(A). suggests Congressional intent to codify existing lo­ binations) which have a reportable audience share and are lo­ cal ownership rules. However, with respect to the' lottery law. cated within each 'DMA's recognized "metro" area; (3) the the preference for diversity contained in section 309(i) does not number of new:spapers published within each DMA: (4) the imply a legal barrier to modifying our multiple ownership rules: number of significant newspapers and periodicals within each indeed, t_he louery law itself does not preclude grants to DMA -- i.e., those whose circulation figures equal at least 5% of nondiverse owners. In addition. the broadcast ownership pro­ the households; (5) cable penetration (the percentage of televi­ hibitions· of the Cable Act app.ly'only to cable·broadcast com­ sion households within each DMA that subscribe to cable televi­ mon ownership, and we are not Jddressing that area in this sion) and the average number of cable channels in use in each proceeding. . market; and (6) th~ VCR penetration within each DMA (the 32 See Comments of CFA at 7-8 and Comments of UCC at 3. percentage of television households with VCR's). 33 The UCC notes that in our 1970 First Report and Order we 19 NAB Media Outlet Study at 1. stated that "60 different licensees are more desirable than 50, and even 51 are more desirable than 50." See Comments of UCC 20 The following table sets forth the average number of broad M ~d cast outlets in different market categories: at 3. citing 22 FCC at 311. As 'stated previously. however, we find that diversity of viewpoint is only one 'factor to consider in achieving our ultimate public interest objectives. Diversity must be balanced against other public interest goals and the result of that balance may shift as the number of voices in a market increases. 34 See Comments of CFA at to-II: Comments of UCC at 6,9. 3S We acknowledged in our First Report and Order that there continues~to be a scarcity 'of available frequencies relative to demand in many markets. as noted by CFA in its comments.

1756 4 FCC Red No.4 Feder'lll .Commtiniclltions .Commission Record FCC 88-407

Comments of CFA at 5-6. However. the argument that such Share of Total Broadcast Share of Total Broadcast scarcity implies that no modification of our cross~ownership Advertising Revenue of Advertising Revenue of rule is justified rests on the faulty premise that economic scar­ Most ~ Watched TV Station Most - Listened To AM and city is a reliable indicator of the degree of'viewpoint or pro­ FM Stations gramming diversity. For example, that logic suggests that there FM AM New York 15.46% L32% 1.07% would be no diversity problems in a small market with one or Chicago \8.56% 3.01% 2.55 twO media outlets and a frequency lying fallow, whereas there Washington, 15.99% 2.9% 2.9% would be an absence of viewpoint diversity in New York City D.C. because there are no unused frequencies but maf.l.Y media out­ See Comments of NBC at 18 and ~xhibit 2~ appended thereto. lets. 36 See, e.g., F.M. Scherer. Industrial ,:\;tarkel Structure a.ni 46 Nielsen Television Index, 1l}77, 1987.. Economif,: Performance 276-95 (2d ed. 1980). . 47 See, e.g., Comments of Capital Cities/ABC, Inc. (ABC) at Share~Distribution 37 John E. Kwoka, "The .Effect of Market 22-24. on Industry Performance," _Review of Economics and_ StatistiCs,· 48 See, e.g., Comments of CBS at 10; Comments of Westing­ vol. LXI, No.1. February. 1979 at lO l-lO9. house Broadcasting Company, Inc. (Group W) at 11. 38 There are, in fact, some studies which suggest that some modest increase in the level of concentration similar to what we 49 See, e.g., Comments of Group Wat 12. contemplate herein may actually be associated with an increase so See Harrison, Bond. & f:lecaro. "Benefits from Joint Owner­ in the economic efficiencies in the market. See, e.g.. Leland L. ship of a Radio and Television Station in the Same Market," Johnson, Regulation of Media Ownership by the Federal Commu­ attached as Appendix C to Comments of NAB. nications Commission: An Assessment (Santa Monica: The Rand S! See Comments of Gillett Holdings. Inc. at 5; Comments of Co"rporation, December 1984) at 46-54. ABC at 29-32. 39 First Report and Order in Docket No. 18110, 22 FCC 2d at 52 See Frazier, Gross, & Kadlec, "Financial Analysis of Poten­ 314. .. tial Efficiencies of Radiorrelevision Combinations in the Same 40 ld.at 314•• Market," attached as Appendix 0 to Comments of NAB (FGK Study). 41 HHI is one of several screening devices used by OOJ to measure market concentration in order to assess the effect on' S3 It should be noted that this stu'dy includes only stations competition of the merger of two or more firms in the same that reported their 1985 financial performance to the NAB. The industry by considering the relative market shares of all the study indicates that.a cross-section of station'S was used, but does firms -before' and after the propos~d merger.. More specifically. not indicate how the sample was taken. In addition, the study the- HHI is defined· as' the sum of the. squ~re of the shares of does not indicate whether adjustments were made to take into some measure of output (such as sales Or revenu'es or assets or account differences in station sizes and -market sizes, i.e., wheth­ audience) accounted for by all the firms in the market. In er the combination stations were of equal power and in equal­ eSsence, under the Merger Guidelines, markets with an HHI sized markets as the individual stand~alone AM or FM stations. below 1,000 are· Classified as "unconcentrated." while markets While these factors might affect the accuracy of, the specific with HHl's betw'een 1,000 and 1,800 are "moderately concen· numerical estimates in the study. we do not believe that they irated," and markets with HHl's over 1.800 are considered to be would change the overall conclusions which this study draws, "highly concentrated". Department of Justice, Revised Merger because it seems likely that even after ·adjusting for station Guidelines. 49 Fed. Reg. 26823 (June 29. (984). power and market size, the_ profitabili,ty of jointly operated stations would exceed that of stand-alone stations. 42 ,CBS based its HHI's on "the number of people reached during the average quarter-hour ,for each television station. 54 A comparison of the average return on revenues for the radio station, superstation. major cable network, and VCR view· stations analyzed in this study is as follows: fng of prerecorded material in each of the top 20 markets" in 1987. Wilkofsky GrJ.!.en Associates Inc.,· Market Concentration Average Return on Average Return on (April 14, 1987) (CBS Concentration Study), attached Revenue ror Radio Revenue ror Stand ~ Analysis Stations Jointly alone Radio as Appendix p to Comments of CBS. at l.. . Operated Stations 43 See CBS, Concentration Study, Table 1. with TV Stations AM Stations 25.2% (tJ.6%) 44 In analyzing potential mergers, DOJ first looks at the HHI FM Stations 30.3% (8.8%) pre-merger and post-merger. Generally DOJ will not challenge AM-FM 12.0% 17.9% mergers in unconcentrated industries, that is, -industries in Combinations which the HHI after the merger would be below 1000. Even if DOJ finds that the merger would take place in a moderately 55 The following is a comparison of the average percentages of concentrated market or a highly concentrated market, DOJ is station budgets allocated to general and administrative (G&A), unlikely to challenge the merger if the HHI rises by less than programming, news, sales, and other categories of expenses for 100 in a moderately concentrated market or less than 50 in a· the stations analyzed in the FGK Study: . ' , highly concentrated market. DOJ, Revised Merger Guidelines. 49 Fed. Reg. 26823 (June 29. 1984). 45. The results of the NBC concentration analysis are as fol· lows: .

1757 FCC 88·407 Federal Communications Commission Record 4 FCC Red No.4

AM with Stand - FMwith' Stand - Group. Owned Non· Group· Owned TV alorie TV alone TV Stations TV Stations AM FM (nformational Programming L8A% 12.9% Program~ ming 36.2% 30.8% 21.6% 16.7% Local Programming 1O.L% 6.9% Technical 7.7% 5.6% 4.6% 5.1% News 9.3% 5.0% 4.7% 1.9% Total Non­ Entertainment Sales 17.0% 20.3% 30.2% 24.-1-% Programming 32.1% 24.8% Adv. & Promo 9.3 8.6% 11.8% l2.2% 64 See CFA Comments at to-B. G&A 20.5% 29.7% 27.1% 39.7% 6S The 1985 study is reported in the New York Times, Septem­ ber 17, 1985 at C17: the 1987 study is. summarized in See FGK Study, Exhibits 3 and 5, attached as Appendix 0 to Broadcasting. June 15. 1987 at 61. We note that these studies Comments of NAB. were not attached or included in CFA's comments; instead, CFA merely attempted to restate some of the conclusions of 56 Based on the FGK Study, the following is a comparison of these studies. More importantly, the RTNDA studies did not sales costs as a percentage of total time sales for radio stations specifically compare news personnel and informational pro~ operating with or without television stations in the 'same mar­ gramming on commonly owned radio and TV stations with that ket. These figures represent averages for each category of sta­ of separately owned stations. Therefore, whatever the signifi­ tions used in the study. cance of the RTNDA studies, they plainly do not provide evi­ dence to disprove the idea that radio-TV combinations may do Radio Stations Stand - alone more news and public affairs programming than separate sta­ Operating with Radio Stations tions. TV Stations AM Stations 11.0% 20.7%- 66 In this proceeding, we addr~ss only whether relaxing our FM Stations 18.4% 23.5% restrictions on group ownership (in cOntrast to deregulation AM·FM 15.5% ~ 15.0 generally) is likely to provide programming benefits. See paras. Combinations 56-61 supra, addressing the evidence on group ownership and programming practices. 57 See, e.g., Comments of Jacor Communications at 2-3; Comments of UCC at 9-10: and Comments of CFA at 9-11. 67 Finally. CFA and NBMC argue that changing the· local ownership rules 'would raise the prices of broadcast stations and S8 See Comments of Gillett Holdings, Inc. at 2-7. thus impede new entrants into the broadcast industry. particu­ S? See supra note 55. Specifically, AM and FM stations owned larly minorities and women. It is true that relaxing the. radio­ and operated with a TV station spent, on.the average. 9.3% and TV cross-ownership rule may lead to cost savings and increased 4.7% of their budgets on news, whereas stand-alone AM or FM efficiencies in station operation. which could increase the value stations devoted, on average, 5.0% and 1.9% of their budgets to and thus raise the selling price of such combinations. If that this category, respectively. happens, then higher station prices would reflect the efficiencies 60 FCC. Television B~oadcast Programming Data. 1979. Mimeo of joint ownership and thus may be viewed as a desirable rather No. 01505, released December 15, 1980. than an undesirable result. Moreover, because -we have adopted 61 Th~ results of NBC's com.parison of the airing of informa­ a modest waiver PQ)icy with a minimum voice standard, there tional programming in 1979 is as follows: are only a limited number of combinations that may occur in each market. Thus, one would not expect there to be more than Average of TV Stations Average of NBC's a minimal price increase for radio or television stations. Fur· in .Top 25 Markets TV Stations thermore, we do not believe that the goal of the multiple 6 a.m•• Midnight ownership rules is to control broadcast station prices. In any Total News and Public Affairs 14.3% 20.7% event, to the extent that this may affect minorities and women, we believe that these concerns can be addressed by our other Local News and policies, such as distress sales, tax certificates. and comparative Public Affairs 8.7% 12.0% or lottery preferences, which are not affected by this decision. 6 p.m.• 11 p.m. 68 See also First Report and Order in Docket No. 87-7 at para. Total News and 37. Public Affairs 15.1% 22.3% 69 We have utilized this rationale in permitting. on a case­ Local News and by-case basis, the common own,ership of certain radio and UHF Public Affairs 9.3% 13.2% television stations in the same market. See.. e.g., American Public Life Broadcasting Co., 36 R.R. 2d 1181 (1976); and Central 62 NAB Research and Planning Department. "Public Service Broadcasting Co., Inc., 21 R.R. 2d 482 (1971). Programming by Group-Owned and Non-Group-Owned Televi­ 70 See generally Report on the Status of the AM Broadcast sion Stations." attached as Appendix A to Comments of NAB in Rules, prepared by Mass M.edia Bureau, Gen. Docket No. 87-26, Gen. Docket No. 83-1009. released April 23, 1986. 63 According to the NAB study, the following is a summary of 7t See Report on Television Channel Utilization, Marc~ 11. the percentage of an average broadcast day in 1982-83 devoted to 1988, Mimeo No. 1945, Table 1. In addition. we estimate that various categories of programming by group-owned and non­ there are approximately 180 unused or vacant FM radio alloca­ group-owned stations surveyed: tions. 72 See,'e.g., Windmill Broadcasting Co., 44 R.R. 2d 475 (1978). 73 See Reply Comments of Nelson Enterprises, Inc. and Nelson Broadcasting, Inc. at 4.

1758 4 FCC Red No.4 Federal Communications Commission Record FCC 88·407

74 We will not grant a tax certificate under Section 73.4255 of 84 Under this standard, we will rely on data in the most our Rules to any entity that sells a-station acquired under this recent volume of the Arbitron Ratings Television ADl Market waiver policy or through any other waiver of Our multiple Guide in determining market size and the relevant ADI televi­ ownership rules. In addition. for station sales involving the sion market and TV metropolitan market. break-up of grandfathered station combinations, we will con· 85 For the purposes of this standard. we will rely on data tinue to grant tax certificates only if these sales are consistent contained in the most recent Commission ownership records in with the policies underlying our multiple ownership rules, i.e., order to determine the number of television stations in the they will not result in another radio-TV combination or an relevant ADI TV market and the number of radio stations AM-AM or FM~FM combination in the same market. located in the relevant TV metropolitan market for each pro­ 7S See Comments of NAB. Tribune Broadcasting. Washington spective combination. As stated earlier, we will rely on data in Legal Foundation, Bonneville International Corporation, Fisher the most recent volume o"f the ADl Market Guide to determine Broadcasting. Transwestern Communications, Inc.. Clear Chan­ the relevant ADI TV market and TV metropolitan market for nel Communications. Golden Empire Broadcasting Co.. and each combination. NBC. 86 Conversely, we will not include any non-operational or 76 in addition, one COmmenter claimed that this option may dark stations for the purposes of this count. exceed the scope of the Notice. See Comments of CF A at 1-2 n.2. 87 Under these provisions, an individual has a "cognizable" Because we are not adopting this option. however. and are imerest in a broadcast station if the individual is an officer. instead retaining the rule as is and setting forth a general director. partner, or owner of 5% or more of the voting stock of statement of policy with respect to waivers. the issue is moot. the station. 47 C.F.R. Section 73.3555, Note 2 (1986). There are, 77 See, e.g., Comments of Shamrock Broadcasting. Inc., West­ however. several notable exceptions to these attribution limits. ern Broadcasting -Corporation of Puerto Rico, Midwest Family See 47 C.F.R. Section 73.3555. Note 2. Mary~and-DC-Delaware Broadcasting, Broadcasters Association. 88 We note that in the First Report and Order we modified our and Gillett Holdings, Inc. radio duopoly rule in such a way that it would be possible for 78 This approach was also based on the assumption that typi­ one licensee to own two or more radio stations in the same cally an FM or VHF TV station may not benefit as much from service within the same geographic market iftheir principal city the' financial assistance of a commonly owned local radio or contours do not overlap. However, because our "top 25 mar­ television station, because FM and VHF TV stations tend to ketsl30 voices" waiver standard incorporates the number of li­ have greater advertising revenues and listening audiences than censees or "voices" in a market. a licensee operating two AM or AM and UHF TV stations. two' FM stations within the same market under our revised 79 Indeed. the FTC staff stated in its reply comments that. radio duopoly rule would count as only one "voice" against our "Common ownership of an FM station and a VHF or UHF 30 voices requirement. Thus. our waiver standard would take television station is likely to gener..ate efficiencies similar to into account the effect of our modified duopoly rule in deter­ those that result froni common ownership of an AM station and minin-g whether a particular market is sufficiently competitive a VHF or a UHF television station." Reply Comments of Bu­ to permit a waiver of the radio-TV cross-ownership rule. reaus of Competition, Consumer Protection and Economics of 89 If "any organization receives a waiver under this standard. it the Federal Trade Commission at 11. will not later be required to divest if the market drops below 80 See, e.g., Comments of CBS, Taft Broadcasting. Group W, the tOP 25 or the number of voices within the market later falls Capital Cities/ABC Inc., and Jet Broadcasting. In addition, NBC below 30., However. if an entity decides to sell stations acquired suggested that, if the Commission decides not to eliminate,the under this waiver and the market no longer satisfies the "top 25 radio-TV rule in all markets. then twO appropriate cut-off markets/30 voices" standard, the waiver will not automatically mechanisms would be to not apply the rule in a market with 30 transfer with the stations. different broadcast stations or with 15 separate owners of broad­ 90 Notice, 2 FCC Rcd at 1141. cast stations ,and daily newspapers. Similarly, Jet Broadcasting 9\ Altho~gh the CBS media concentration or HHI study. stated that the rule can be eliminated in most markets subject described supra at paragraph 28, reviewed only the top 20 mar­ to whatever criteria may be necessary to prevent undue con­ kets, we note that the remaining five of the top 25 markets have centration in lesser served markets. For example. jet suggested very similar characteristics and are largely unconcentrated. Fur­ restricting radio-TV cross-ownership in markets with an unusu­ thermore, we anticipate that any anticompetitive behavior by ally small number of licensees or less than three television broadcasters in these"markets would be brought to the attention stations. of the Commission or antitrust authorities. 81 See, e.g., Comments of Jacor Communications, Inc. at 4-5; 92 See supra para. 14. Comments of the Maryland-District of Columbia-Delaware ll3 See, e.g., 47 C.F.R. Section 73.658(k) (prime time access Broadcasters Association, Inc. at 3. rUle). By its terms. the prime time access rule. which limits the 82 Under this policy, all waiver requests will be referred amount of network or offwnetwork programming that a station directly to the Commission en bane for disposition. can broadcast in a day, applies only to stations in the tOP 50 83 These specific criteria are also intended to address the markets. concerns raised by the U.S. Court of Appeals for the D.C. 94 See Comments of NTIA at 9. In pa.rticular. NTTA noted that Circuit in Astroline Communications Company Limited Partner­ because radio and television markets are not equivalent, it is ship v. FCC, 857 F.2d 1556 (D.C. Cir. 1988) (Astro/in,). In that important to use_the market of the station to be acquired in case, the court instructed the Commission to articulate or de­ order to accurately reflect the broadcast services available in the velop standards to govern its public interest evaluation of waiver community involved. Specifically, NTIA recommended using requests under the Note 4 UHF TV exception to Section the number of independently owned AM stations in the radio 73.3555, 47 C.F.R. Section 73.3555. We intend to set forth herein market where the station to be acquired is located in order to clear and easily applied criteria. We will, of course. address the determine the impact ofthe proposed combination on diversity specific matter remanded to us in ASlroline in a separate order in that community. We have taken this concern about using the on remand in that proceeding. appropt:iate geographic market into account by totalling thi;

1759 FCC 88·407 Federal Communications CommissioIl Re!=ord

number of television stations in the'relevant ADI TV market tOJ Applicants relying on this ground should supply appro· and radio stations in the relevant TV metro market for the priate documentation, including a history of the station's past purposes of a'llr "30 voices" standard. financial losses and, predictions of projected ,losses for the next This waiver standard is based upon market rank and a mini­ several years. Information to demonstrate that the station has mum number of separate station voices in order to assess the been offered for sale for a reasonable time period at a reasonable number of potential competitors in a particular-local area. Al­ price will be particularly important. Furthermore, it would be though we stated in our recent Firsl Report and Order that most helpful to have information about the size, demographics, and radio listening occurS within a station's principal city contour, economic 'condition of the market so we can consider whether other stations located with-in the same local area but outside the market could support the failing station absent cross-owner· that contour may nevertheless provide competition for arid be .ship. receivable by some portion of the station's audience. In addition, t04 In addition, we will address the specific concerns raised by because' every station in a local market may have a different the court in Aseroline in reviewing these Note 4 waiver requests. area of signal and audience coverage from every other station, £os See supra at para. 7l. using a principal city contour standard in this context would 106 See Comments of Jacor Communications at 5; Comments seem unduly burdensome. For the. purposes of administrative of CFA at 10, 14. ease and in order to provide certainty to our licensees and license applicants, it is important ~that we use a definition of the geographic market area which will not vary with each new proposed merger in the same city. 95 Comments of NBC at 38. 96 NBC suggested usi_ng 30 stations per market. Our standard will be 30 voices, which is substantially more restrictive than that proposed by NBC, since the number of stations usually significantly exceeds the number of separate owners in a mar· ket. Unlike NBC's proposal, our sta,ndard will be implemented on a case·by·case basis rather than as an outright exception to the radio-TV cross-ownership rule. In addition, as explained in more detail above, our standard will encompass all television stations within the ADI television market but only radio sta­ tions located within the TV metro market, which is a smaller geographic area than the ADI. Finally; unlike NBC's proposal, the standard we are adopting is limited to conventional broad­ cast outlets. 97 For example, in New York, the largest television market as measured by population. we estimate that there are currently 117 separate voices, including 12 commercial and 6 non·com­ mercial TV stations. Of the 12 commercial stations, 4 are ·al­ ready combined with an AM station or an AM-FM radio combination. Hence, under this waiver criteria, although some . existing combinations could potentially be expanded, at most 8 TV stations not now combined with a radio station would be able to combine with one or two radio stations. 98 Although we will not specifically define what constitutes a "substantial period of time" in this regard, we anticipate that this criteria will not be satisfied unless the station has been off the air for at least several months, e.g., four months. We. believe that it is unlikely that a station would remain off .the air for such a length of time absent serious financial difficulties. 99 See supra para. 5.

(00 In particular, a showing of negative cash flow will not be considered adequate proof that a station meets our "failed" station test. 101 For the purposes of this determination, we intend to use the same geographic market definition as for the "top 25 mar· ketsl30 voices" standard, i.e., the relevant TV metro market for radio stations and the relevant ADI TV market for TV stations.

(02 In this regard, we would look more favorably upon waiver requests if the proposed combination would in fact strengthen competition or diversity in the market. For example, allowing joint' ownership of a low·ranking radio and television station may enable the new combination to compete effectively with a particularly dominant media outlet in the market, thereby ere· ating incentives for both outlets to improve their programming and service to the public.

1760