FOR IMMEDIATE RELEASE
June 2, 2003
Unprecedented Public Record Results in Enforceable and Balanced Broadcast Ownership Rules
Washington, D.C. – The Federal
Communications Commission (FCC) today adopted new broadcast ownership rules
that are enforceable, based on empirical evidence and reflective of the current
media marketplace. Today’s action represents the most comprehensive review of
media ownership regulation in the agency’s history, spanning 20 months and
encompassing a public record of more than 520,000 comments.
The FCC stated that its new limits
on broadcast ownership are carefully balanced to protect diversity, localism,
and competition in the American media system.
The FCC concluded that these new broadcast ownership limits will foster
a vibrant marketplace of ideas, promote vigorous competition, and ensure that
broadcasters continue to serve the needs and interests of their local
communities.
FCC Responds to
Congressional and Court Directives
In the 1996
Telecommunications Act, Congress mandated that the FCC review its broadcast
ownership rules every two years to determine “whether any of such rules are
necessary in the public interest as a result
of competition.” The Act requires the FCC to repeal or modify any
regulation it determines to be no longer in the public interest. The FCC’s decision today found that all of
the broadcast ownership rules continue to serve the public interest either in their
current form or in a modified form.
Recent court decisions
reversing FCC ownership rules emphasized that any limits must be based on a
solid factual record and must reflect changes in the media marketplace. In the Fox
v. FCC decision, for example, the court said the FCC had “provided no
analysis of the state of competition in the television industry” or even an
explanation as to why the rule in question was necessary to either safeguard
competition or enhance competition.
The Report and Order adopted today is based on a thorough assessment of
the impact of ownership rules on promoting competition, diversity, and
localism. This careful calibration of
each rule reflects the FCC’s determination to establish limits on broadcast
ownership that will withstand future judicial scrutiny.
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New Limits Protect Viewpoint Diversity
The
FCC strongly affirmed its core value of limiting broadcast ownership to promote
viewpoint diversity. The FCC stated that
“the widest possible dissemination of information from diverse and antagonistic
sources is essential to the welfare of the public.” The FCC said multiple independent media
owners are needed to ensure a robust exchange of news, information, and ideas
among Americans.
The
FCC developed a “Diversity Index” in order to permit a more sophisticated
analysis of viewpoint diversity in this proceeding. The index is “consumer-centric” in that it is
built on data about how Americans use different media to obtain news. Importantly, this data also enabled the FCC
to establish local broadcast ownership rules that recognize significant
differences in media availability in small versus large markets. The objective is to ensure that citizens in
all areas of the country have a diverse array of media outlets available to
them.
New Rules Promote Competition and Choice for Americans
The FCC affirmed
its longstanding commitment to promoting competition by ensuring
pro-competitive market structures. The
FCC said it is clear that competition is a policy that is intimately tied to
its public interest responsibilities and one that the FCC has a statutory
obligation to pursue. The FCC said consumers
receive greater choice and more innovative services in competitive markets than
they do in markets where one or more firms exercise market power.
Although the primary concern of antitrust analysis is
in ensuring economic efficiency through the operation of a competitive market
structure, the FCC’s public interest standard brings a closer focus to the American
public. Thus, the FCC has a public
interest responsibility to ensure that broadcasting markets remain competitive
so that the benefits of competition, including lower prices, innovation and improved
service are made available to Americans.
The
FCC acknowledged that cable and satellite TV service compete with traditional
over-the-air broadcasting. Today
Americans enjoy a significant amount of choice for seeking news and information
and thus the new rules limiting local and national TV ownership are designed to
better reflect this additional competition. The FCC found that pro-competitive ownership limits
must account for the fact that broadcast TV revenue relies exclusively on
advertising; whereas cable and satellite TV service have both advertising and
subscription revenue streams.
The FCC also explained that because viewpoint
diversity is fostered when there are multiple independently owned media
outlets, the FCC’s competition-based limits on local radio and local TV
ownership also advance the goal of promoting the widest dissemination of
viewpoints.
Localism Affirmed as Important Policy
Goal
The FCC strongly reaffirmed its goal of promoting
localism through limits on ownership of broadcast outlets. Localism remains a
bedrock principle that continues to benefit Americans in important ways. The FCC has sought to promote localism to the
greatest extent possible through its broadcast ownership limits that are
aligned with stations’ incentives to serve the needs and interests of their
local communities.
To analyze localism in broadcasting
markets, the FCC relied on two measures: local stations’ selection of
programming that is responsive to local needs and interests, and local news
quantity and quality. Program selection
is an important function of broadcast television licensees and the record
contains data on how different types of station owners perform. A second measure of localism is the quantity
and quality of local news and public affairs programming by different types of
television station owners. This data helped
the FCC assess which ownership structures will ensure the strongest local focus
by station owners to the needs of their communities.
FCC Reiterates
Importance of Promoting Minority and Female Ownership
The FCC strongly reaffirmed its
longstanding objective of encouraging greater ownership of broadcast stations
by minorities and women. The FCC said
this will benefit radio and television audiences by promoting greater diversity,
innovation, and competition. The FCC furthered
its objective of creating greater opportunities for new entrants in the
broadcasting industry by carving out special transactional opportunities for
small businesses, many of which are owned by minorities and women.
Limits on
Concentration Serve the Public Interest
In sum,
the modified ownership rules adopted today provide a new, comprehensive
national and local regulatory framework that will serve the public interest by promoting
competition, diversity and localism. Today's Report and Order adopts a set of cross-media limits to replace the
newspaper/broadcast and radio/television cross-ownership rules; modifies the
local television multiple ownership rule; strengthens the local radio ownership
rule by modifying the local radio market definition; incrementally modifies the
national television ownership rule; and retains the dual network rule. A summary
of the broadcast ownership rules adopted today is attached.
The FCC also adopted a Notice of Proposed Rulemaking on
defining non-Arbitron radio markets.
Details are included in the attached summary.
Action by the Commission,
June 2, 2003, by Report and Order (FCC 03-127) and Notice of Proposed
Rulemaking . Chairman Powell,
Commissioners Abernathy, and Martin with Commissioners Copps and Adelstein
dissenting. Separate statements issued
by Chairman Powell, Commissioners Abernathy, Copps, Martin, and Adelstein.
-FCC-
MB Dockets 02-277, 01-235, 01-317, 00-244
MB Docket (NPRM)
Comments due: 30 days after publication in the Federal
Register
Replies due: 45 days after publication in
the Federal Register
Media Bureau contacts: Paul Gallant, Mania Baghdadi, Judith Herman at
202-418-7200.
News
and information about the Federal Communications Commission and its media
ownership limits can also be found on the FCC's web site www.fcc.gov/ownership.
Summary of the Broadcast Ownership Rules adopted
on June 2, 2003
Dual Network
Ownership Prohibition: (originally adopted 1946)
The FCC
retained its ban on mergers among any of the top four national broadcast
networks.
Prohibition Promotes
Competition and Localism
The FCC
determined that its existing dual network prohibition continues to be necessary
to promote competition in the national television advertising and program
acquisition markets. The rule also
promotes localism by preserving the balance of negotiating power between
networks and affiliates. If the rule was
eliminated and two of the top four networks were to merge, affiliates of those
two networks would have fewer networks to turn to for affiliation.
Local TV Multiple
Ownership Limit: (originally
adopted in 1964)
The new rule
states:
· In markets with
five or more TV stations, a company may own two stations, but only one of these
stations can be among the top four in ratings.
· In markets with
18 or more TV stations, a company can own three TV stations, but only one of
these stations can be among the top four in ratings.
· In deciding how
many stations are in the market, both commercial and non-commercial TV stations
are counted.
· The FCC adopted
a waiver process for markets with 11 or fewer TV stations in which two top-four
stations seek to merge. The FCC will
evaluate on a case-by-case basis whether
such stations would better serve their local communities together rather than
separately.
TV Limit Enhances
Competition and Preserves Viewpoint Diversity
The FCC
determined that its prior local TV ownership rule could not be justified on
diversity or competition grounds. The FCC
found that Americans rely on a variety of media outlets, not just broadcast
television, for news and information. In
addition, the prior rule could not be justified as necessary to promote
competition because it failed to reflect the significant competition now faced
by local broadcasters from cable and satellite TV services. This is the first local TV ownership rule to
acknowledge that competition.
The new rule
permits local television combinations that are proven to enhance competition in
local markets and to facilitate the transition to digital television through
economic efficiencies. Finally, the new
rule’s continued ban on mergers among the top-four stations will have the
effect of preserving viewpoint diversity in local markets. The record showed that the top four stations
each typically produce an independent local newscast.
Because viewpoint diversity
is fostered when there are multiple independently owned media outlets, the
FCC’s competition-based limits on local TV ownership also advance the goal of promoting
the widest dissemination of viewpoints.
National TV
Ownership Limit: (originally
adopted in 1941)
The FCC
incrementally increased the 35% limit to a 45% limit on national
ownership.
National Cap Protects
Localism and Preserves Free Television
The FCC
determined that a national TV ownership limit is needed to protect localism by
allowing a body of network affiliates to negotiate collectively with the
broadcast networks on network programming decisions.
The FCC also
found that the current 35% level did not strike the right balance of promoting
localism and preserving free over-the-air television for several reasons.
Record Supports
Maintaining UHF Discount
Local Radio
Ownership Limit: (originally adopted in 1941):
The FCC found that
the current limits on local radio ownership continue to be necessary in the
public interest, but that the previous methodology for defining a radio market
did not serve the public interest. The
radio caps remain at the following levels:
· In markets with
45 or more radio stations, a company may own 8 stations, only 5 of which may be
in one class, AM or FM.
· In markets with
30-44 radio stations, a company may own 7 stations, only 4 of which may be in
one class, AM or FM.
· In markets with
15-29 radio stations, a company may own 6 stations, only 4 of which may be in
one class, AM or FM.
· In markets with
14 or fewer radio stations, a company may own 5 stations, only 3 of which may
be in one class, AM or FM.
Radio Limit Promotes
Competition and Viewpoint Diversity
Although
Americans rely on a wide variety of outlets in addition to radio for news, the FCC
found that the current radio ownership limits continue to be needed to promote competition
among local radio stations. Competitive
radio markets ensure that local stations are responsive to local listener needs
and tastes. By guaranteeing a
substantial number of independent radio voices, this rule will also promote
viewpoint diversity among local radio owners.
Geographic
Arbitron Markets Implemented
The FCC
replaced its signal contour method of defining local radio markets with a
geographic market approach assigned by Arbitron. The FCC said that its signal contour method
created anomalies in ownership of local radio stations that Congress could not
have intended when it established the local radio ownership limits in
1996. The FCC closed that loophole by
applying a more rational market definition than radio signal contours. The FCC said applying Arbitron’s geographic
markets method will better reflect the true markets in which radio stations
compete.
Cross-Media Limits:
This rule
replaces the broadcast-newspaper and the radio-television cross-ownership
rules. The new rule states:
(A)
A daily newspaper; one TV station; and up to half of the radio station limit for
that market (i.e. if the radio limit
in the market is 6, the company can only own 3) OR
(B)
A daily newspaper; and up to the radio station limit for that market; (i.e. no TV stations) OR
(C)
Two TV stations (if permissible under local TV ownership rule); up to the radio
station limit for that market (i.e.
no daily newspapers).
In
markets with nine or more TV stations, the FCC eliminated the
newspaper-broadcast cross-ownership ban and the television-radio
cross-ownership ban.
Promotes
Diversity and Localism
The FCC concluded that neither the newspaper-broadcast prohibition nor
the TV-radio cross-ownership prohibition could be justified for larger markets in
light of the abundance of sources that citizens rely on for news. Nor were those rules found to promote
competition because radio, TV and newspapers generally compete in different
economic markets. Moreover, the FCC
found that greater participation by newspaper publishers in the television and
radio business would improve the quality and quantity of news available to the
public.
Therefore, the FCC replaced those rules with a set of Cross-Media Limits
(CML). These limits are designed to protect viewpoint diversity by ensuring
that no company, or group of companies, can control an inordinate share of
media outlets in a local market.
The FCC developed a Diversity Index to measure the availability of key
media outlets in markets of various sizes.
The FCC concluded that there were three tiers of markets in terms of
“viewpoint diversity” concentration, each warranting different regulatory
treatment.
·
In the tier of smallest markets (3 or fewer TV
stations), the FCC found that key outlets were sufficiently limited such that
any cross-ownership among the three leading outlets for local news – broadcast
TV, radio, and newspapers – would harm viewpoint diversity.
·
In the medium-sized tier (4-8 TV stations), markets were
found to be less concentrated today than in the smallest markets and that
certain media outlet combinations could safely occur without harming viewpoint
diversity. Certain other combinations
would threaten viewpoint diversity and are thus prohibited.
·
In the largest tier of markets (9 or more TV stations),
the FCC concluded that the large number of media outlets, in combination with
ownership limits for local TV and radio, were more than sufficient to protect
viewpoint diversity.
Radio and TV
Transferability Limited to Small Businesses
The FCC’s new
TV and radio ownership rules may result in a number of situations where current
ownership arrangements exceed ownership limits.
The FCC grand-fathered owners of those clusters, but generally
prohibited the sale of such above-cap clusters.
The FCC made a limited exception to permit sales of grand-fathered
combinations to small businesses as defined in the Order.
In
taking this action, the FCC sought to respect the reasonable expectations of
parties that lawfully purchased groups of local radio stations that today,
through redefined markets, now exceed the applicable caps. The FCC also attempted to promote competition
by permitting station owners to retain any above-cap local radio clusters but
not transfer them intact unless there is a compelling public policy
justification to do so. The FCC found
two such justifications: (1) avoiding
undue hardships to cluster owners that are small businesses; and (2) promoting
the entry into the broadcasting business by small businesses, many of which are
minority- or female-owned.
Diversity Index - Summary
The FCC’s Diversity Index (DI) reflects the degree of
concentration in viewpoint diversity in local markets. Consistent with First Amendment concerns, the
DI does not assess diversity by looking to the specific views expressed over a
media outlet. Instead it measures the
availability of outlets of various types and assigns a weight to each class of
outlet (radio, newspaper, television, etc.) based on their relative value to
consumers. The Diversity Index is
modeled on the Herfindahl-Hirschmann Index (HHI), which is used in antitrust
analysis to measure the degree concentration in an economic market. Both the HHI and the DI are derived by adding
together the sum of squared market shares of competitors in each local
market. The end result of the DI is an
assessment of the degree of media diversity concentration taking into account
all of the media outlets in the market.
How to read the table on
the next page:
Columns A
and B: Column A assigns weights to different types
of media based on Nielsen’s nationwide survey of 3,136 people who were asked
what sources they use for local news and current affairs (FCC MOWG Study No.
8). As a source of local news, broadcast
television stations were listed by 33.8% of respondents; radio was listed by
24.9% of respondents; newspapers by 28.8%; and the Internet was listed by 12.5%
of respondents. Column B breaks out the
categories within each medium (80.3% of “newspaper” respondents specified daily
newspapers; 29.3% said weekly newspapers).
Because this was a national survey, these percentage “weights” remain
constant across all local markets in applying the Diversity Index.
Column C: The company names of the owners of each type
of outlet in a local market.
Column D: Lists the number of outlets owned by each
company in a local market.
Column E: Each type of media (TV, newspaper, radio,
etc.) has a universe of 100% market share.
Specifically, the entries in column E for each broadcast TV station show
each outlet’s share of the broadcast universe only. They add up to 100% so that we can assign a
share to each owner of that type of outlet in the market. In this example, there are 8 TV stations, so
each one has a 12.5% share of the broadcast TV universe. “TV owner A” owns 2 TV stations in the market, so they are credited
with a 25% share (12.5% x 2).
Column F: This column translates each outlet into a
share of the total viewpoint market in that particular locality. For example, in our sample city, Column F
converts Radio Owner B’s 23.1% share of the radio universe into a 5.7%
share of the total media market. (23.1% x 24.9%)
Column G: Captures the effect of a company owning more
than one type of outlet in a market. In
this sample city, “TV-Radio owner A”
(Voice 1) has 2 TV stations and 3 radio stations. To accurately assess “TV-Radio Owner A’s” role in the city’s viewpoint market, column G
simply identifies common ownership among different media outlets. The shares of commonly-owned outlets must be
added together before squaring them. The
increase in the Diversity Index from cross-owned outlets is shown at the bottom
of the page. In the sample city, the
“Voice 1, Total Shares” row near the bottom of the page shows that the combined
effect of “TV-Radio owner A’s” ownership of TV stations and radio stations in
this city is an additional 130 points.
Column H: Represents the square of each outlet’s share
of the viewpoint market (which is shown in Column F).
The last row on the table shows the level of
viewpoint diversity concentration for this sample market.
As
with the HHI, a DI below 1000 = unconcentrated for viewpoint diversity; DI
between 1000-1800 = moderately concentrated for viewpoint diversity; DI of 1800
or above = highly concentrated for viewpoint diversity.
Diversity
Index Example – “Anytown, USA” |
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|
Media Market |
Ownership Shares within Medium |
|
|
Percent Share of Media Market |
|||
|
% of Media |
% of Medium |
Parent Company |
# of Stations |
% Share |
% Share (AxBxE) |
Cross Ownership |
Column F Squared |
|
A |
B |
C |
D |
E |
F |
G |
H |
|
|
|
TV owner A (Voice 1) |
2 |
25.0 |
8.5 |
Voice 1 |
--- |
|
Broadcast |
|
TV owner B (Voice 2) |
1 |
12.5 |
4.2 |
|
17.9 |
|
Television |
|
TV owner C (Voice 3) |
1 |
12.5 |
4.2 |
|
17.9 |
|
Stations |
|
TV owner D (Voice 4) |
1 |
12.5 |
4.2 |
|
17.9 |
|
(8
total) |
|
TV owner E (Voice 5) |
1 |
12.5 |
4.2 |
|
17.9 |
|
33.8% |
100.0% |
TV owner F (Voice 6) |
1 |
12.5 |
4.2 |
|
17.9 |
|
|
|
TV owner G (Voice 7) |
1 |
12.5 |
4.2 |
|
17.9 |
|
|
|
Radio owner A (Voice 1) |
3 |
11.5 |
2.9 |
Voice
1 |
--- |
|
|
|
Radio
owner B (Voice 8) |
6 |
23.1 |
5.7 |
|
33.0 |
|
|
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