Federal Communications Commission FCC 16-107 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) 2014 Quadrennial Regulatory Review – Review of ) MB Docket No. 14-50 the Commission’s Broadcast Ownership Rules and ) Other Rules Adopted Pursuant to Section 202 of ) the Telecommunications Act of 1996 ) ) 2010 Quadrennial Regulatory Review – Review of ) MB Docket No. 09-182 the Commission’s Broadcast Ownership Rules and ) Other Rules Adopted Pursuant to Section 202 of ) the Telecommunications Act of 1996 ) ) Promoting Diversification of Ownership ) MB Docket No. 07-294 In the Broadcasting Services ) ) Rules and Policies Concerning Attribution of Joint ) MB Docket No. 04-256 Sales Agreements in Local Television Markets ) ) SECOND REPORT AND ORDER Adopted: August 10, 2016 Released: August 25, 2016 By the Commission: Commissioner Clyburn issuing a statement; Commissioners Pai and O’Rielly dissenting and issuing separate statements. TABLE OF CONTENTS Heading Paragraph # I. INTRODUCTION.................................................................................................................................. 1 II. BACKGROUND.................................................................................................................................... 6 III. MEDIA OWNERSHIP RULES ........................................................................................................... 17 A. Local Television Ownership Rule.................................................................................................. 17 B. Local Radio Ownership Rule......................................................................................................... 82 C. Newspaper/Broadcast Cross-Ownership Rule ............................................................................. 129 D. Radio/Television Cross-Ownership Rule..................................................................................... 198 E. Dual Network Rule ...................................................................................................................... 216 IV. DIVERSITY ORDER REMAND....................................................................................................... 234 A. Commission Diversity Initiatives and Data Collection Efforts.................................................... 237 B. Remand Review of the Revenue-Based Eligible Entity Standard ............................................... 271 C. Remand Review of a Race- or Gender-Conscious Eligible Entity Standard ............................... 287 D. Additional Proposals Related to Minority and Female Ownership.............................................. 317 V. SHARED SERVICE AGREEMENTS ................................................................................................ 337 A. Introduction.................................................................................................................................. 337 B. Background .................................................................................................................................. 339 C. Discussion.................................................................................................................................... 341 VI. PROCEDURAL MATTERS .............................................................................................................. 378 VII. ORDERING CLAUSES.................................................................................................................... 381 Federal Communications Commission FCC 16-107 APPENDIX A - Final Rule Changes APPENDIX B - Final Regulatory Flexibility Analysis I. INTRODUCTION 1. With this Second Report and Order (Order), we bring to a close the 2010 and 2014 Quadrennial Review proceedings.1 In this Order, we maintain strong media ownership rules, take steps to help promote small business participation in the broadcast industry, and adopt rules that will help to promote transparency in local television markets. The Commission has built a substantial record that evidences both the existence of a dynamic media marketplace and the continuing importance of traditional media outlets in their local communities. We recognize that broadband Internet and other technological advances have changed the ways in which many consumers access entertainment, news, and information programming. Traditional media outlets, however, are still of vital importance to their local communities and essential to achieving the Commission’s goals of competition, localism, and viewpoint diversity. This is particularly true with respect to local news and public interest programming, with traditional media outlets continuing to serve as the primary sources on which consumers rely. 2. Moreover, for television broadcasters, theirs is an industry on the precipice of great change. The ongoing voluntary incentive auction of broadcast television spectrum, which is critically important to the Commission’s efforts to unleash the full transformative potential of broadband Internet, provides television broadcasters with a new and unique financial opportunity. We anticipate that the auction will both free up significant spectrum for mobile broadband and result in an even healthier broadcast industry. While the auction may have a dramatic impact on the television landscape in many local markets, based on our assessment of the record and the ongoing nature of the auction, we find that it is too soon to quantify this impact; accordingly, it would be premature to change our media ownership rules in anticipation of the incentive auction’s impact at this time.2 We will soon commence our evaluation of the broadcast marketplace post-auction, and we expect that these issues will feature prominently in future media ownership reviews. 3. Based on our careful review of the record, we find that the public interest is best served by retaining our existing rules, with some minor modifications. These rules promote competition and a diversity of viewpoints in local markets, thereby enriching local communities through the promotion of distinct and antagonistic voices. Ideally, our media landscape should be diverse because our population is diverse, and retaining the existing media ownership rules is one way in which the Commission can help to promote such diversity. The record in this proceeding leads us to conclude that retaining the existing rules is the best way to promote our policy goals in local markets at this time. In addition, following the Third Circuit’s decision in Prometheus III, we are readopting the Television Joint Sales Agreement (JSA) Attribution Rule adopted in the Report and Order in this proceeding.3 1 See 2014 Quadrennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996 et al., MB Docket No. 14-50, Further Notice of Proposed Rulemaking and Report and Order, 29 FCC Rcd 4371 (2014) (FNPRM and Report and Order); 2010 Quadrennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996 et al., MB Docket No. 09-182, Notice of Proposed Rulemaking, 26 FCC Rcd 17489 (2011) (NPRM); 2010 Quadrennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MB Docket No. 09-182, Notice of Inquiry, 25 FCC Rcd 6086 (2010) (NOI). 2 For additional discussion of the incentive auction, see paragraphs 79-81, infra. 3 See infra para. 15. 2 Federal Communications Commission FCC 16-107 4. We also address in this Order the Third Circuit’s remand in Prometheus II of certain aspects of the Commission’s 2008 Diversity Order.4 Specifically, we reinstate the revenue-based eligible entity standard, as well as the associated measures to promote the Commission’s goal of encouraging small business participation in the broadcast industry, which we believe will cultivate innovation and enhance viewpoint diversity. Also, as directed by the court, we have considered the socially and economically disadvantaged business definition as a possible basis for favorable regulatory treatment, as well as other possible definitions that would expressly recognize the race and ethnicity of applicants.5 However, we find that the demanding legal standards the courts have said must be met before the Government may implement preferences based on such race- or gender-conscious definitions have not been satisfied. 5. Finally, we take steps to address concerns about the use of a variety of sharing agreements between independently owned commercial television stations. Specifically, we adopt a definition of Shared Service Agreements (SSAs) and require commercial television stations to disclose those SSAs by placing the agreements in each station’s online public inspection file. This action will lead to more comprehensive information about the prevalence and content of SSAs between television stations, which will improve the Commission’s and the public’s ability to assess the potential impact of these agreements on the Commission’s rules and policies. II. BACKGROUND 6. The media ownership rules subject to this Quadrennial Review are the Local Television Ownership Rule, the Local Radio Ownership Rule, the Newspaper/Broadcast Cross-Ownership Rule, the Radio/Television Cross-Ownership Rule, and the Dual Network Rule.6 Congress requires