Federal Communications Commission DA 96-1320

Before the Federal Communications Commission Washington, D.C. 20554

) In re Petition of ) ) KTEN Television Limited Partnership ) CSR-4675-A ) For Modification of Market of ) Station KTEN-TV )

:MEMORANDUM OPINION AND ORDER

Adopted: August 15, 1996 Released: August 23, 1996

By the Deputy Chief, Cable Services Bureau:

INTRODUCTION

I. KTEN Television Limited Partnership ("KTEN")., filed the above-captioned petition, pursuant to 47 C.F.R §§ 76.7 and 76.59, requesting that the television market of its KTEN-TV (Channel 10, Ada, ) ("KTEN-TV") be modified to include Grayson County, for purposes of determining must-carry rights under 47 U.S.C. § 534 on those cable systems. The petition was subsequently amended to request that KTEN-TV's market be modified to include the following communities located in Grayson County, Texas: Bells, Collinsville, Denison, West Denison, East Denison, Gordonville, Howe, Pottsboro, Preston Peninsula, .Sadler, Sherman, Sherwood Shores, Tom Bean, Van Alstyne, Whitesboro, and Whitewright, Texas (herein "Grayson Communities.") The petition and amended petition are unopposed. 1

BACKGROUND

2. Pursuant to Section 614 of the Communications Act of 1934, as amended by the Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act"),2 and implementing rules adopted by the Commission in its Report and Order in MM Docket 92- 259,3 commercial television broadcast stations are entitled to assert mandatory carriage rights on cable systems located within the station's market. A station's market for this purpose is its "area of dominant influence" or ADI as defined by the Arbitron audience research

1Public notice of the filing of KTEN's petition was given on March 1, 1996. See Public Notice - Service Registration; Special Relief and Show Cause Petitions, Report No. 1068, dated March 1, 1996.

=Pub. L. No. 102-385, 106 Stat. 1460 (1992).

;8 FCC Red 2965, 2976-2977 (1993). 10355 Federal Communications Commission DA 96-1320 organization. 4 An ADI is a geographic market designation that defines each television market exclusive of others, based on measured viewing patterns. Essentially, each county in the United States is allocated to a market based on which home-market stations receive a preponderance of total viewing hours in the county. For purposes of this calculation, both over-the-air and cable television viewing are included. 5

3. Under the Act, however, the Commission is also directed to consider changes in market areas. Section 4 provides that the Commission may:

with respect to a particular television broadcast station, include additional communities within its television market or exclude communities from such station's television market to better effectuate the purposes of this section.

In considering such requests, the Act provides that:

the Commission shall afford particular attention to the value of localism by taking into account such factors as --

(I) whether the station, or other stations located in the same area, have been historically carried on the cable .system or systems within such community;

(II) whether the television station provides coverage or _other local service to such community;

(III) whether any other television station that is eligible to be carried by a cable system in such community in fulfillment of the requirements of this section provides news coverage of issues of concern to such community or provides carriage or coverage of sporting and other events of interest to the community; and

4Section 614(h)(l)(C) of the 1992 Cable Act specifies that a broadcasting station's market shall be determined in the manner provided in §73.3555(d)(3)(i) of the Commission's Rules, as in effect on May 1, 1991. This section of the rules, now redesignated §73.3555(e)(3)(i), refers to Arbitron's ADI for purposes of the broadcast multiple ownership rules. Section 76.55(e) of the Commission's Rules provides that the ADis to be used for purposes of the initial implementation of the mandatory carriage rules are those published in Arbitron' s 1991-1992 Television Market Guide.

5Because of the topography involved, certain counties are divided into more than one sampling unit. Also, in certain circumstances, a station may have its home county assigned to an ADI even though it receives less than a preponderance of the audience in that county. For a more complete description of how counties are allocated, see Arbitron' s Description of Methodology.

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(IV) evidence of viewing patterns in cable and noncable households within the areas served by the cable system or systems in such community. 6

4. The legislative history of this provision indicates that:

where the presumption in favor of ADI carriage would result in cable subscribers losing access to local stations because they are outside the ADI in which a local· cable system operates, the FCC may make an adjustment to include or exclude particular communities from a television station's market consistent with Congress' objective to ensure that television stations be carried in the areas which they serve and which form their economic market.

* * * * *

[This subsection] establishes certain criteria which the Commission shall consider in acting on requests to modify the geographic area in which stations have signal carriage rights. These factors are not intended to be exclusive, but may be used to demonstrate that a community is part of a particular station's market.7

5. The Commission provided guidance in its Report and Order in MM Docket 92- 259, supra, to aid decision making in these matters, as follows:

For example, the historical carriage of the station could be illustrated by the submission of documents listing the cable system's channel line-up (e.g., rate cards) for a period ofyears. To show that the station provides coverage or other local service to the cable community (factor 2), parties may demonstrate that the stat.ion places at least a Grade B coverage contour over the cable community or is located close to the community in terms of mileage. Coverage of news or other programming of interest to the community could be demonstrated by program logs or other descriptions of local program offerings. The final factor concerns viewing patterns in the cable community in cable and noncable homes. Audience data clearly provide appropriate evidence about this factor. In this regard, we note that surveys such as those used to demonstrate significantly viewed status could be useful. However, since this factor requires us to evaluate viewing on a community basis for cable and noncable homes, and significantly viewed surveys typically measure viewing only in noncable

6Communications Act of 1934, as amended, §614(h)(l)(C)(ii), 47 U.S.C. §534(h)(l)(C)(ii).

7H.R. Rep. No. 628, 102d Cong .• 2d Sess. 97 (1992).

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households, such surveys may need to be supplemented with additional data concerning viewing in cable homes. 8

6. In adopting rules to implement this provision, the Commission indicated that changes requested should be considered on a community-by-community basis rather than on a county-by-county basis and that they should be treated as specific to particular stations rather than applicable in common to all stations in the market 9 The rules further provide, in accordance with the requirements of the Act, that a station not be deleted from carriage during the pendency of a market change request.10

7. Adding communities to a station's market generally entitles that station to insist on cable carriage in those communities. However, this right is subject to several conditions: 1) a cable system operator is generally required to devote no more than one-third of its activated channel capacity to compliance with the mandatory signal carriage obligations, 11 2) the station is responsible for delivering a good quality signal to the principal headend of the system, 12 3) indemnification may be required for any increase in copyright liability resulting from carriage, 13 and 4) the system operator is not required to carry the signal of any station whose signal substantially duplicates the signal of any other local signal carried or the signals of more than one local station affiliated with a particular broadcast network. 14 If, pursuant to these requirements, a system operator elects to carry the signal of only a single affiliate of a broadcast network, it is obliged to carry the affiliate from within the market whose is closest to the principal headend of the cable system. 15 Accordingly, based on the specific circumstances involved, the addition of communities to a stati_on' s market may guarantee it cable carriage and specific channel position rights, or it may simply provide the system operator with an expanded list of must-carry signals from which to choose. The latter case may arise when the cable system has used up its channel capacity mandated for broadcast signals carriage, or when duplicating network affiliated stations become entitled to carriage.

88 FCC Red at 2977 (emphasis in original).

98 FCC Red at 29'77 n.139. Viewership data cited herein is county data rather than community-specific data. However, absent evidence that such data is not fairly reflective of viewing in the actual communities in question, we accept such data as probative in cases of this type.

1047 C.F.R. §76.59.

11 See 47 U.S.C. § 534(b)(I)(B).

12See 47 U.S.C. § 534(h)(l)(B)(iii).

13See 47 U.S.C. § 534(h)(l)(B)(ii).

14See 47 U.S.C. § 534(b)(5).

15 8 FCC Red at 2981. 10358 Federal Communications Commission DA 96-1320

Also, the removal of a community from a station's market will defeat a station's cable carriage and channel position rights on a cable system serving the community.

MARKET FACTS AND ARGUMENT

8. KTEN-TV is a television station licensed to Ada, Oklahoma. It is located in the Ardmore-Ada, Oklahoma ADI, as defined in Arbitron's 1991-1992 Television ADI Market Guide. KTEN asserts that the Grayson Communities, which are located in Grayson County, Texas just across the Oklahoma-Texas border but adjacent to the Ardmore-Ada ADI, are a vital part of KTEN-TV' s market area and for that reason should be included in the station's television market for must-carry purposes. KTEN points out that KTEN-TV is also located in Nielsen's Sherman, Texas-Ada, Oklahoma DMA (Market #159), which has essentially the same boundaries as KTEN~ TV's ADI, but which since November 1994 has also included Grayson County, Texas and the Grayson Communities.

9. KTEN contends that, since Arbitron stopped publication of market data at the end of 1993, the broadcast industry has generally used Nielsen DMAs and other market statistics published by Nielsen to gauge viewing patterns for individual stations. According to KTEN, the Nielsen DMAs have come to be the most reliable and current television market area indicator available for use by the broadcast industry. It notes in this connection that the Commission is currently addressing, in a recently initiated rulemaking proceeding, the question of whether Nielsen DMAs would better define television markets. 16 KTEN states that, under the three year cycle of must-carry election periods, its station will not benefit from any Commission decision to use Nielsen DMAs until January l, 1997: It therefore requests that relief be granted immediately.

1.0. The requested relief is needed, KTEN alleges, to preserve the economic vitality of its station and to ensure that all viewers in KTEN-TV's broadcast area have opportunity to view the station. KTEN contends that considering the Grayson Communities part of KTEN­ TV' s local market is consistent with changes in viewing patterns and general regional growth that has occurred in the Sherm.an, Texas-Ada, Oklahoma area recently, a change that the recent inclusion by Nielsen of Grayson County in the Sherman, Texas-Ada, Oklahoma DMA recognizes: Grayson County is a full fifty four percent of the size of the entire Ardmore-Ada ADI as measured by 1994 television household statistics, KTEN asserts, and Grayson Communities viewers account for more than a third of the Sherman-Ada DMA total. It notes, too, that sixty nine percent of Grayson Communities households subscribe to cable service. However, KTEN says its station cannot reach those cable subscribers, because the station cannot assert must-carry rights on any cable system in the Grayson Communities.

16 Definition of Markets for Purposes of the Cable Television Mandatory Television Broadcast Signal Carriage Rules, Notice of Proposed Rule Making, CS Docket No. 95-178, FCC 95-489, released December 8, 1996 ("Market Determinazions").

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11. KTEN contrasts its circumstances with that of station KXII-TV, with whom it competes for viewing audience. KTEN notes that, although the signal contours of KXII-TV reach further south of Grayson County than does that of KTEN-TV, KTEN-TV' s Grade B signal also extends past the southern border of the county and its Grade A signal covers almost half of Grayson County. 17 KTEN therefore contends that KTEN-TV's signal coverage area, including coverage of Grayson County, is substantially similar to that provided by IOCII­ TV. 18 KTEN asserts that despite having substantially similar coverage areas and thus competing for viewers, the two stations are achieving substantially dissimilar results. It attributes the different results to the fact that KTEN-TV cannot reach many of the nearly seventy percent of viewers on cable systems in the Grayson Communities. However, KXII­ TV, whose city of license was changed to Sherman, Texas in 199219 and thus gained must­ carry rights on cable systems in the Grayson Communities located in Grayson County, does reach viewers in those Grayson Communities. KTEN asserts that KTEN-TV's ratings have dropped an average of thirty five percent for key revenue programs since November 1994. KTEN translates that loss of ratings to a loss to KTEN-TV of more than 25,000 viewers in the Grayson Communities. KTEN estimates that such ratings loss equates to an advertising revenue loss of some $500,000 annually.

12. KTEN contends that when the two station competed on equal footing in the Ardmore-Ada ADI, the stations' ratings were consistently close,. with KTEN leading KXII-TV by three to five points during 1987 and 1988. KTEN asserts that·the two stations compete for viewers and advertising in the same way any two stations in the same local market would ordinarily compete. However, with its change of city of license, KXII-TV gained entitlement to carriage on cable systems in the ADI, which includes Sherman, Texas, the county seat of Grayson County. KTEN notes further that KXII-TV is still carried on cable systems in the Ardmore-Ada ADI, although no longer entitled to mandatory carriage there. KTEN attributes a loss of thirty five rating points since 1994 to KTEN-TV's not having access to carriage on cable systems in the Grayson Communities in the same manner as does KXII-TV.

13. KTEN asserts that access to viewers on cable systems located in the Grayson Communities would permit KTEN-TV to compete more evenly with KXII-TV, to whom it has lost substantial ground in share ratings since KXII-TV changed its city of license. In support of this assertion, KTEN submitted information showing that its market share was less than a third of that of KXII-TV in 1994. KTEN argues that if it is not permitted to compete more evenly with KXII-TV, continued revenue losses may force it to decrease service to

n Id.

18Compare Television and Cable Factbook, Station Vol. No. 63, 1995 Ed., at p. A-876 (KTEN-TV) with p. A- 1118 (KXII-TV).

19See Amendment of Section 73.606(b), Report and Order, MM Docket No. 91-342, 7 FCC Red 4846, 4847 (1992).

10360 Federal Communications Commission DA 96-1320

ORDER

19. Accordingly, IT IS ORDERED, pursuant to Section 614(h)(l)(C) of the Communications Act of 1934, as amended, 47 U.S.C. §534(h)(l)(C), and Section 76.59 of the Commission's Rules, 47 C.F.R. §76.59, that the petition for special relief filed on February 12, 1996, as amended on June 28, 1996, by KTEN Television Limited Partnership in File No. CSR 4675-A IS GRANTED. This change shall be effective in accordance with the following schedule: KTEN-TV shall notify the cable systems in question in 'Miting of its carriage and channel position elections (§§76.56, 76.57, and 76.64(f) of the Commission's rules) within 30 days of the release date of this Memorandum Opinion and Order. The affected cable systems shall come into compliance with the applicable rules within 60 days of the above notice.

20. This Action is taken pursuant to authority delegated by Section 0.321 of the Commission's rules, 47 C.F.R. § 0.321.

FEDERAL COMMUNICATIONS COMMISSION

William H. Johnson . Deputy Chief, Cable Services· Bureau

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