Comments of the National Association of Broadcasters

Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) 2018 Quadrennial Regulatory Review -- ) MB Docket No. 18-349 Review of the Commission’s Broadcast ) Ownership Rules and Other Rules Adopted ) Pursuant to Section 202 of the ) Telecommunications Act of 1996 ) COMMENTS OF THE NATIONAL ASSOCIATION OF BROADCASTERS Rick Kaplan Jerianne Timmerman Erin Dozier Patrick McFadden Larry Walke Emily Gomes Daniel McDonald Theresa Ottina Loren White NAB Research September 2, 2021 TABLE OF CONTENTS I. INTRODUCTION AND SUMMARY .................................................................................... 1 II. THE FCC SHOULD FOCUS IN THS PROCEEDING ON ENSURING THE COMPETITIVE VIABLITY OF LOCAL STATIONS ....................................................................................... 6 III. THE FCC’S DECADES-OLD OWNERSHIP RULES HAVE NEVER SUCCESSFULLY PROMOTED DIVERSE OWNERSHIP OF RADIO AND TELEVISION STATIONS .................. 9 The FCC’s Rules Do Not Address The Central Challenge To New Entry And Diverse Ownership In Broadcasting, Which Is Access To Capital .................... 10 The FCC’s Ownership Rules Affirmatively Undermine Investment In Broadcasting And New Entry ............................................................................ 15 IV. REFORM OF THE OWNERSHIP RULES WOULD PROMOTE LOCALISM BY SAFEGUARDING THE VIABILITY OF LOCAL BROADCAST JOURNALISM IN TODAY’S BIG TECH-DOMINATED MARKETPLACE .............................................................................. 19 The FCC Cannot Ignore The Growing Crisis In Local Journalism ..................... 20 The Tech Giants’ Dominance Of The Advertising Market Places Local Stations And Their News Operations Under Increasing Duress ..................................... 23 Particularly Given The High Cost Of News Production, Economies Of Scale Are Vital To Local News Operations’ Success ........................................................ 29 Stations In Smaller Markets With Limited Advertising Bases Struggle To Maintain Their Economic Viability And Their Local News Operations ............. 31 V. SECTION 202(h) REQUIRES THE FCC TO UNDERTAKE A COMPETITION-CENTRIC ANALYSIS, WITH AN EYE TOWARD DEREGULATION ..................................................... 38 The Text, Structure, Purpose And History Of Section 202 Of The 1996 Act Show That Congress Intended Section 202(h) To Continue The Process Of Deregulation It Began ...................................................................................... 38 The Text, Structure, Purpose and History Of Section 202 Cannot Be Properly Read To Impose Only Standard Administrative Law Obligations On The FCC, Let Alone To Justify Reregulation Of Broadcast Stations ................................. 42 1. Attempting to Justify Reregulation by Misinterpreting the Term “Modify” in Isolation Is Contrary to the Full Text of Section 202(h), the Structure of Section 202 and Congressional Intent ............................................ 43 2. The “Public Interest as the Result of Competition” Does Not Have the Same Meaning as the “Public Interest,” and the FCC Must Give Full Effect to Congress’s Specific Choice of Words ..................................... 47 3. In its Section 202(h) Reviews, the FCC Should Test Each Rule’s Public Interest Rationale Against Competition to Assess its Continued Necessity .............................................................................................. 51 II The Supreme Court Left Open Broader Questions About Section 202(h), But Set A High Bar As To The Type Of Evidence Needed To Show That Changes To The Structural Ownership Rules Would Impair Diverse Ownership ................. 53 VI. THE FCC CAN NO LONGER MAINTAIN THAT RADIO AND TV STATIONS COMPETE IN A MARKET LIMITED TO ONLY BROADCAST STATIONS, THEREBY UNDERMINING THE BASIS FOR THE CURRENT LOCAL OWNERSHIP RULES ............................................... 55 New Evidence Makes Clear Yet Again That Broadcast Stations Compete In A Broad Advertising Market, Which Includes Digital Platforms .......................... 55 The FCC Cannot Retain The Current Local Ownership Limits Based On Outdated And Erroneous Assumptions About Competition In Local Markets . 61 VII. RECENT EVENTS AND MARKETPLACE DEVEOPMENTS HAVE ACCELERATED ADVERTISER AND CONSUMER USE OF DIGITAL PLATFORMS AND OUTLETS AND EXACERBATED AD-SUPPORTED BROADCASTERS’ FINANCIAL CHALLENGES.............. 64 The Pandemic Dealt A Severe Blow To The Radio Industry, With Stations Not Expected To Regain Their Pre-COVID Position In The Marketplace, Making Reform Of The Local Radio Rule More Urgent And Important ......................... 68 1. Consumer Adoption of Digital Devices and Competing Audio Services Continues Apace ................................................................................... 69 2. Radio Industry Advertising Revenues Are Not Projected to Regain Their Pre-Pandemic Levels ............................................................................ 75 The Continuing Transformation Of The Media And Advertising Markets, Including The Rapid Growth Of Ad-Supported Video Streaming Services, Presents Additional Significant Challenges To Local TV Stations .................... 84 1. Local TV Stations Compete for Audiences Against a Vast and Still Growing Number of Other Outlets, Accessible Via a Range of Devices, in a Fragmented Marketplace ............................................................. 87 2. TV Broadcasters Compete for Vital Advertising Dollars Against Many Other Outlets in a Marketplace Increasingly Dominated by Digital Platforms .............................................................................................. 95 VIII. IN TODAY’S HYPER-COMPETITIVE MARKETPLACE, NO BASIS EXISTS FOR RETAINING – AND CERTAINLY NOT FOR INCREASING – THE CURRENT OWNERSHIP RESTRICTIONS ON TV STATIONS .......................................................................................................... 99 Multicast Streams And Satellite And Low Power TV Outlets Continue To Serve The Public Interest And Do Not Warrant Treatment As Full-Service Stations Under The Local TV Rule .................................................................................. 99 TV Stations’ Voluntary Adoption Of ATSC 3.0 Provides No Rational Basis For Retaining Analog-Era Ownership Rules .......................................................... 106 III Completion Of The Broadcast TV Incentive Auction And Repack Provides No Basis For Failing To Reform The Local TV Rule .............................................. 107 IX. CONCLUSION ............................................................................................................. 111 ATTACHMENTS IV Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) 2018 Quadrennial Regulatory Review – Review ) MB Docket No. 18-349 of the Commission’s Broadcast Ownership Rules ) and Other Rules Adopted Pursuant to Section ) 202 of the Telecommunications Act of 1996 ) ) COMMENTS OF THE NATIONAL ASSOCIATION OF BROADCASTERS INTRODUCTION AND SUMMARY When the Commission first adopted rules prohibiting common ownership of more than one AM, FM or television station serving substantially the same area, Franklin D. Roosevelt occupied the White House. Now in the third decade of the 21st century, FCC rules still prevent ownership of more than one TV station in small markets and significantly restrict local common ownership of AM and FM stations separately by service and in total. The National Association of Broadcasters (NAB)1 and many radio and TV broadcasters have previously demonstrated the absurdity of imposing analog-era ownership restrictions in a media and advertising marketplace completely upended by digital technology. In response to the Public Notice seeking to update the record in this quadrennial review,2 NAB provides additional information and data showing the substantial and growing pressures on ad-supported broadcast stations in a radically altered competitive landscape and the resulting need to modernize the FCC’s rules. As documented below, marketplace 1 NAB is a nonprofit trade association that advocates on behalf of local radio and television stations and broadcast networks before Congress, the Federal Communications Commission and other federal agencies, and the courts. 2 FCC, Media Bureau Seeks to Update the Record in the 2018 Quadrennial Regulatory Review, Public Notice, MB Docket No. 18-349, DA 21-657 (June 4, 2021) (Public Notice). changes since early 2019, including but not limited to the COVID-19 pandemic and recession, have made reform of the local ownership rules more urgent than ever. To begin, NAB reminds the FCC that the broadcast “industry’s ability to function in the ‘public interest, convenience and necessity’ is fundamentally premised on its economic viability.”3 Indeed, to fulfill Congress’s intent in the Communications Act and subsequent legislation, the FCC must ensure that its broadcast regulatory framework, including its ownership rules, enable radio and TV stations to operate as viable private enterprises in a competitive market and to effectively serve the public interest and their local communities. As Congress found in a much less competitive marketplace, permitting “common ownership of stations will promote the public interest” and “increas[e] competition and diversity.”4 The FCC’s long-standing ownership restrictions in fact have failed for decades to meaningfully promote diverse ownership of broadcast stations. The primary cause

Load more