[Federal Register Volume 79, Number 69 (Thursday, April 10, 2014)]
[Proposed Rules]
[Pages 19849-19860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-08114]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[MB Docket No. 10-71; FCC 14-29]
Network Non-Duplication and Syndicated Exclusivity Rules
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: In this document, the Commission seeks comment on whether to
eliminate or modify the network non-duplication and syndicated
exclusivity rules in light of changes in the video marketplace in the
more than 40 years since these rules were adopted. The Commission seeks
comment on whether the exclusivity rules are still needed to protect
broadcasters' ability to compete in the video marketplace and to ensure
that program suppliers have sufficient incentives to develop new and
diverse programming and on the impact of eliminating of the exclusivity
rules.
DATES: Comments for this proceeding are due on or before May 12, 2014;
reply comments are due on or before June 9, 2014.
ADDRESSES: You may submit comments, identified by MB Docket No. 10-71,
by any of the following methods:
Federal Communications Commission's Web site: http://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting
comments.
Mail: Filings can be sent by hand or messenger delivery,
by commercial overnight courier, or by first-class or overnight U.S.
Postal Service mail (although the Commission continues to experience
delays in receiving U.S. Postal Service mail). All filings must be
addressed to the Commission's Secretary, Office of the Secretary,
Federal Communications Commission.
People With Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by email: [email protected] or phone: (202) 418-
0530 or TTY: (202) 418-0432.
For detailed instructions for submitting comments and additional
information on the rulemaking process, see the SUPPLEMENTARY
INFORMATION section of this document.
FOR FURTHER INFORMATION CONTACT: For additional information, contact
Kathy Berthot, [email protected], of the Media Bureau, Policy
Division, (202) 418-7454.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's
Further Notice of Proposed Rulemaking, FCC 14-29, adopted on March 31,
2014 and released on March 31, 2014. The full text is available for
public inspection and copying during regular business hours in the FCC
Reference Center, Federal Communications Commission, 445 12th Street
SW., CY-A257, Washington, DC 20554. This document will also be
available via ECFS (http://www.fcc.gov/cgb/ecfs/). Documents will be
available electronically in ASCII, Word 97, and/or Adobe Acrobat. The
complete text may be purchased from the Commission's copy contractor,
445 12th Street SW., Room CY-B402, Washington, DC 20554. To request
this document in accessible formats (computer diskettes, large print,
audio recording, and Braille), send an email to [email protected] or call
the Commission's Consumer and Governmental Affairs Bureau at (202) 418-
0530 (voice), (202) 418-0432 (TTY).
This document contains no proposed information collection
requirements.
SUMMARY:
I. Introduction
1. We are issuing this FNPRM to solicit additional comment on
whether we should eliminate or modify our network non-duplication and
syndicated exclusivity rules. We received numerous comments on this
issue in response to the NPRM. However, the record developed in this
proceeding to date is not sufficient for us to yet make a determination
whether the exclusivity rules are still needed in today's competitive
video marketplace or to assess the potential impact on affected parties
of eliminating these rules. Given the complex issues involved, we
believe it is necessary and appropriate to undertake a more
comprehensive review of the exclusivity rules and to compile a more
complete record.
II. Background
2. A broadcaster may carry network and syndicated programming on
its local television station(s) only with the permission of the
networks or syndicators that own or hold the rights to that
programming, as reflected in network/affiliate agreements or
syndication agreements. In addition, the ability of broadcasters to
grant retransmission consent for MVPD carriage may be constrained by
the network/affiliate agreement or by the syndication agreement because
such agreements generally limit the geographical area in which the
station holds exclusive rights to network or syndicated programming.
The Commission's network non-duplication and syndicated exclusivity
rules are designed to serve as a means of enforcing contractual
exclusivity agreements entered into between broadcasters, which
purchase the distribution rights to programming, and networks and
syndicators, which supply the programming. Thus, the network non-
duplication and syndicated exclusivity rules require that the
broadcaster have contractual exclusivity rights and provide proper
notice to the relevant MVPD, requesting that an MVPD delete duplicative
network or syndicated programming. The rules may be invoked by stations
that elect retransmission consent in their local markets, even if they
are not actually carried by the MVPD, to prevent an MVPD from carrying
programming of a distant station that duplicates local broadcast
station programming. By requiring MVPDs to delete duplicative network
or syndicated programming
[[Page 19850]]
carried on any distant signals they import into a local market, the
Commission's network non-duplication and syndicated exclusivity rules
provide an extra-contractual mechanism for broadcasters to enforce
their contractual exclusivity rights against MVPDs, which are not
parties to those exclusivity agreements.
A. Network Non-Duplication
3. The network non-duplication rules protect a local commercial or
non-commercial broadcast television station's right to be the exclusive
distributor of network programming within a specified zone, and require
programming subject to the rules to be blacked out on request when
carried on another station's signal imported by an MVPD into the local
station's zone of protection. A television station's rights under the
network non-duplication rules are governed by the terms of the
contractual agreement between the station and the holder of the rights
to the program. The Commission's rules allow commercial and non-
commercial television stations to protect the exclusive distribution
rights they have negotiated with broadcast networks, not to exceed a
specified geographic zone of 35 miles (55 miles for network programming
in smaller markets). For purposes of these rules, it is these specified
zones that distinguish between ``local'' and ``distant.''
4. Cable. Network non-duplication rules for cable were first
promulgated by the Commission in 1965. Throughout the 1960s and 1970s
the Commission continually refined the rules, but the policy behind
them remained the same. The purpose of the rules was to protect the
exclusive contractual rights of local broadcasters in network
programming from the importation of non-local network stations by cable
systems, thereby protecting local stations from what was perceived as
the potential harm from the growth of cable systems. In this regard,
the Commission was concerned that because broadcasters and cable
systems were on an unequal footing with respect to the market for
programming, a cable system's duplication of local programming via the
signals of distant stations was not a fair method of competition with
broadcasters. Prior to 1988, network non-duplication protection applied
only to programming being broadcast simultaneously in the local market
by a distant signal. In 1988, the Commission modified the rule to
extend exclusivity protection to any time period specified in the
contractual agreement between the network and the affiliate.
5. The Commission's rules contain several exceptions to application
of the network non-duplication rules. First, because of the cost of the
equipment necessary to delete programming, the Commission exempts cable
systems having fewer than 1,000 subscribers. The rule also does not
apply if the out-of-market station's signal is deemed ``significantly
viewed'' in a relevant community. This latter exception was intended to
prevent the deletion of programs on stations which the viewers could
receive off-the-air.
6. Satellite. The Satellite Home Viewer Improvement Act of 1999
(``SHVIA'') directed the Commission to apply the cable network non-
duplication rules to direct broadcast satellite (``DBS''), but only
with respect to the retransmission of nationally distributed
superstations. These nationally distributed superstations may be
offered to any satellite subscriber, without the ``unserved household''
restriction that applies to other distant network stations. SHVIA
directed the Commission to implement new exclusivity rules for
satellite that would be ``as similar as possible'' to the rules
applicable to cable operators. In general, the network non-duplication
rules apply when a satellite carrier retransmits a nationally
distributed superstation to a household within a local broadcaster's
zone of protection and the nationally distributed superstation carries
a program to which the local station has exclusive rights. In contrast
to the mileage-based specified zones used in the cable context, zip
codes are used to determine the areas to which the zone of protection
applies for satellite carriers. As in the cable context, the broadcast
station licensees may exercise their network non-duplication rights in
accordance with the terms specified in a contractual agreement between
the network and its affiliate within the zone of protection. The rules
for satellite carriers also have exceptions for significantly viewed
stations and for areas in which the satellite carrier has fewer than
1,000 subscribers in a protected zone.
7. Open Video Systems. The Telecommunications Act of 1996 (the
``1996 Act'') established the open video system as a new framework for
entry into the video programming distribution market. Congress's intent
in establishing the open video system framework was ``to encourage
telephone companies to enter the video programming distribution market
and to deploy open video systems in order to `introduce vigorous
competition in entertainment and information markets' by providing a
competitive alternative to the incumbent cable operator.'' As an
incentive for telephone company entry into the video programming
distribution market, the 1996 Act provides for reduced regulatory
burdens for open video systems subject to the systems' compliance with
certain non-discrimination and other requirements. However, the 1996
Act directed the Commission to extend its network non-duplication rules
to the distribution of video programming over open video systems.
Accordingly, the Commission amended its rules in 1996 to directly apply
the existing network non-duplication rules to open video systems.
B. Syndicated Exclusivity
8. The syndicated exclusivity rules are similar in operation to the
network non-duplication rules, but they apply to exclusive contracts
for syndicated programming, rather than for network programming. In
addition, the syndicated exclusivity rules apply only to commercial
stations. The syndicated exclusivity rules allow a local commercial
broadcast television station or other distributor of syndicated
programming to protect its exclusive distribution rights within a 35-
mile geographic zone surrounding a television station's city of
license, although the zone may not be greater than that provided for in
the exclusivity contract between the station and syndicator. Unlike the
network non-duplication rule, however, the zone of protection is the
same for smaller markets as it is for the top-100 markets. With only a
few exceptions, a station that has obtained syndicated exclusivity
rights in a program may request a cable operator to black out that
program as broadcast by any other television station, and may request a
satellite operator to provide such protection against any nationally
distributed superstation. The cable or satellite system must comply if
properly notified in accordance with the rules.
9. Cable. The Commission adopted the first syndicated exclusivity
rules in 1972, consistent with a ``Consensus Agreement'' that was
negotiated among the cable, broadcast, and program production
industries in order to facilitate the passage of copyright legislation.
These rules were considered necessary to ``protect local broadcasters
and to ensure the continued supply of television programming.'' Shortly
after Congress established a copyright compulsory license system in
1976, the Commission began an inquiry to review the ``purpose, effect,
and desirability of'' the syndicated exclusivity rules. In 1979, the
Commission adopted the Report on Cable Television Syndicated
[[Page 19851]]
Exclusivity Rules, which performed a cost-benefit analysis to determine
whether retaining the syndicated exclusivity rules would be in the
public interest. The Commission found that eliminating the rules would
have negligible effects on the size of local station audiences and
consequently would not significantly harm any broadcaster. The
Commission concluded that, when weighed against the minimal negative
impact on broadcasters and program supply, the increase in diversity
and number of new cable systems that the rules' elimination would allow
supported their repeal. Therefore, in 1980, the Commission repealed the
syndicated exclusivity rules.
10. In 1988, however, the Commission reversed its decision, finding
that the reasoning that shaped the 1980 decision to repeal the
syndicated exclusivity rules was flawed in two significant respects.
First, the Commission found that its prior inquiry had incorrectly
examined the effects of repeal or retention on individual competitors
rather than how the competitive process operates. Second, the
Commission found that it had failed to analyze the effects on the local
television market of denying broadcasters the ability to enter into
contracts with enforceable exclusive exhibition rights when they had to
compete with cable operators, who could enter into such contracts. The
Commission concluded that the absence of syndicated exclusivity rules
both hurt the supply of programs to broadcasters and unfairly
handicapped competition between broadcasters and cable systems to meet
viewers' preferences in the distribution of existing programming. The
Commission therefore reinstated its syndicated exclusivity rules.
11. The Commission's current cable syndicated program exclusivity
rules allow commercial stations to protect their exclusive distribution
rights for syndicated programming against local cable systems in a
local market. Distributors of syndicated programming are allowed to
seek protection for one year from the initial licensing of such
programming anywhere in the United States, except where the relevant
programming has already been licensed. The exceptions to application of
the syndicated program exclusivity rules are similar to those that
apply to the network non-duplication rules. Cable systems with fewer
than 1,000 subscribers are exempt because of the cost of the equipment
necessary to carry out deletions. The rules also do not apply if the
distant station's signal is ``significantly viewed'' in a relevant
cable community. In addition, the syndicated programming of a distant
station need not be deleted if that station's Grade B signal
encompasses the relevant cable community.
12. Satellite. SHVIA directed the Commission to apply its cable
syndicated exclusivity rules to DBS providers only with respect to
retransmission of nationally distributed superstations. The Commission
implemented this using zip codes rather than community units to
determine zones of protection. The rules for satellite carriers also
provide exceptions for significantly viewed stations and for areas in
which the satellite carrier has fewer than 1,000 subscribers in a
protected zone.
13. Open Video Systems. The 1996 Act also directed the Commission
to apply its cable syndicated exclusivity rules to the distribution of
video programming over open video systems. The Commission amended its
rules in 1996 to apply the existing cable syndicated exclusivity rules
directly to open video systems.
C. The Compulsory Copyright License
14. Under the Copyright Act, unlicensed retransmission of the
copyrighted material in a broadcast signal constitutes copyright
infringement. At the time the Commission initially adopted the
exclusivity rules, cable systems were permitted under the Copyright Act
to retransmit the signals of broadcast television stations without
incurring any copyright liability for the copyrighted programs carried
on those signals. In 1976, Congress enacted amendments to the Copyright
Act which impose copyright liability on cable systems for
retransmission of broadcast signals, but also create a permanent
compulsory license under which cable systems may retransmit the signals
of all local broadcast stations and distant broadcast stations to the
extent that carriage of such distant stations is permitted under FCC
rules. In 1988, Congress amended the Copyright Act to create a
temporary compulsory license for satellite carriers. In 1999, a new
temporary compulsory license was enacted to permit satellite carriers
to retransmit the signals of local stations to any subscriber within a
station's local market (``local-into-local'' service). The temporary
compulsory license granted to satellite carriers under the Copyright
Act for distant stations is more limited than that granted to cable
systems. Satellite carriers may retransmit signals of nationally
distributed superstations to any household but may retransmit the
signals of distant network stations to subscribers only if local
network stations are unavailable to the subscribers as part of a
satellite carrier's local-into-local package and over the air, and only
to the extent that carriage of such superstations and distant stations
is permitted under the FCC rules.
D. Petitions for Rulemaking
15. In 2005, ACA filed a rulemaking petition asserting that
broadcasters use exclusivity and network affiliation agreements to
extract ``supracompetitive prices'' for retransmission consent from
small companies, and that this practice harms competition and
consumers. Similarly, the 2010 Petition argued that the network non-
duplication and syndicated exclusivity rules provide broadcasters with
a ``one-sided level of protection'' that is no longer justified. The
NPRM in this proceeding sought comment on the potential benefits and
harms of eliminating the Commission's rules concerning network non-
duplication and syndicated programming exclusivity. While the
Commission received numerous comments on this issue, the record in this
proceeding to date does not provide a sufficient basis on which to make
a determination whether the exclusivity rules are still needed in
today's video marketplace and whether these rules should be eliminated.
Accordingly, we are issuing this FNPRM to compile a more complete
record on whether the exclusivity rules should be eliminated.
III. Discussion
16. We seek further comment on whether we should eliminate or
modify the network non-duplication and syndicated exclusivity rules.
Settled case law confirms that the Commission has jurisdiction under
the Communications Act to impose the cable exclusivity rules. We
tentatively conclude that Congress has not withdrawn from the
Commission the authority to amend or repeal the cable rules. In
addition, we tentatively conclude that the Commission has the authority
to eliminate the exclusivity rules for satellite carriers and open
video systems. We request comment on whether the exclusivity rules are
still needed to protect broadcasters' ability to compete in the video
marketplace and to ensure that program suppliers have sufficient
incentives to develop new and diverse programming. We seek comment on
whether the Commission should eliminate these rules as an unnecessary
regulatory intrusion in the marketplace if we determine that they are
no longer needed to serve their intended purposes. In particular, we
seek comment on the impact that elimination
[[Page 19852]]
of the exclusivity rules would have on all interested parties,
including broadcasters, MVPDs, program suppliers, and consumers.
A. Legal Authority
17. We tentatively conclude that the Commission has authority to
eliminate the exclusivity rules for cable operators, satellite
carriers, and open video systems. As discussed above, Congress did not
explicitly mandate that the Commission adopt the network non-
duplication and syndicated exclusivity rules for cable. Rather, the
Commission adopted these rules to provide a mechanism for broadcasters
to enforce their exclusive contractual rights in network and syndicated
programming by preventing cable systems from importing distant network
station programming. Case law confirms that the Commission has the
authority to impose exclusivity rules on cable operators under its
broad grant of authority under the Communications Act. Section
653(b)(1)(D) of the Act, as codified by the 1996 Act, directed the
Commission to extend to open video systems ``the Commission's
regulations concerning . . . network non-duplication (47 CFR 76.92 et
seq.), and syndicated exclusivity (47 CFR 76.151 et seq.).'' Similarly,
Section 339(b) of the Communications Act, as codified by SHVIA in 1999,
directed the Commission to ``apply network nonduplication protection
(47 CFR 76.92) [and] syndicated exclusivity protection (47 CFR 76.151)
. . . to the retransmission of the signals of nationally distributed
superstations by satellite carriers.'' Reflecting the language used in
these statutory provisions, the legislative history of Section 339(b)
states that Congress's intent was to place satellite carriers on an
equal footing with cable operators with respect to the availability of
television programming.
18. Some broadcasters argue that eliminating the exclusivity rules
for cable operators would be inconsistent with congressional intent and
beyond the Commission's authority, given the longstanding Commission
precedent involving the rules and a statement in the legislative
history of the Cable Television Consumer Protection and Competition Act
of 1992 (``1992 Act'') that the exclusivity rules were integral to
achieving congressional objectives. As the Commission has previously
stated, however, ``[i]f the [exclusivity] rules should ultimately prove
unnecessary or need modification in light of the passage of time,
congressional action or other factors, they can be modified or
rescinded.'' And we see no statutory provision that requires the
Commission to keep the exclusivity rules on the books. Indeed, over the
years, the Commission has made significant adjustments to the
exclusivity regulatory scheme based on changed circumstances, for
example, promulgating the syndicated exclusivity rules in 1972,
repealing the syndicated exclusivity rules in 1980, and then
reinstating the syndicated exclusivity rules in 1988. We tentatively
conclude that, with full knowledge of these regulatory shifts, Congress
nonetheless left intact the Commission's general rulemaking power with
respect to the cable exclusivity rules, including the authority to
revisit its rules and modify or repeal them should it conclude such
action is appropriate. We seek comment on this tentative conclusion. We
also tentatively conclude that we have the authority to eliminate the
exclusivity rules for DBS and OVS and seek comment on this tentative
conclusion. We note that, in enacting Sections 339(b) and 653(b)(1)(D)
of the Act, Congress directed the Commission to apply to DBS and OVS
the non-duplication and syndicated exclusivity protections that the
Commission applied to cable, set forth in 47 CFR 76.92 and 76.151,
rather than simply enacting exclusivity protection for those services
or even directing the Commission to adopt exclusivity rules for those
services. The statute does not withdraw the Commission's authority to
modify its cable exclusivity rules at some point in the future, nor is
there any indication in the legislative history that Congress intended
to withdraw this authority. Given that the DBS and OVS provisions are
expressly tied to the cable exclusivity rules, we tentatively conclude
that this evinces an intent on the part of Congress that the Commission
should accord the same regulatory treatment to DBS and OVS as cable,
and seek comment on that tentative conclusion. Alternatively, are
Congress's directives to the Commission regarding the application of
network non-duplication and syndicated exclusivity protections to open
video systems and to satellite carriers best interpreted to mean that
the Commission does not have the authority to repeal the exclusivity
rules for these types of entities, even if we decide to eliminate these
rules for cable? Would elimination of the exclusivity rules for cable
but not for DBS and/or OVS create undue regulatory disparities or
disadvantages for these entities?
B. Assessing the Continued Need for Network Non-Duplication and
Syndicated Exclusivity Rules
19. In this section, we seek comment on the extent to which the
network non-duplication and syndicated exclusivity rules are still
needed to serve their intended purposes in light of changes in the
video marketplace and the legal landscape in the decades since their
adoption. As discussed above, the network non-duplication and
syndicated exclusivity rules were both intended in part to facilitate
broadcasters' ability to compete in the video marketplace by protecting
their exclusive contractual rights in network and syndicated
programming from cable systems' importation of distant stations. We
seek comment on how changes in the video marketplace have impacted
local broadcasters' ability to compete fairly with cable operators and
other MVPDs. At the time the exclusivity rules were adopted, the
Commission was concerned that cable systems' importation of distant
stations carrying network or syndicated programming would adversely
impact local broadcast stations by diverting the station's audience to
the distant station, resulting in a reduction of the local station's
advertising revenues, essentially the only source of revenue for the
stations at the time. To what extent would local broadcast stations'
audiences likely be diverted to distant stations carried on cable
systems if the exclusivity rules were eliminated? In this regard, we
note that when the exclusivity rules were initially adopted, the
Communications Act prohibited a broadcast station from rebroadcasting
another station's signal without permission, but did not prohibit cable
retransmission of broadcast stations without permission. In the 1992
Cable Act, Congress extended this restriction on unauthorized
retransmission of broadcast stations to cable operators. The
restriction on unauthorized retransmission of broadcast stations was
later extended to all MVPDs. Thus, in general, an MVPD may not carry a
broadcast station's signal today without the consent of the
broadcaster. We seek comment on whether, given the extension of the
prohibition on unauthorized retransmission of broadcast stations to
MVPDs, the exclusivity regulations continue to be necessary or whether
the retransmission consent requirement adequately addresses the
Commission's regulatory goals and thus undercuts the basis for the
exclusivity rules. Commenters argue that MVPDs are unlikely to seek to
import a distant station's signal today unless they are
[[Page 19853]]
faced with the blackout of a local station as a result of a
retransmission dispute, and that any such importation would likely be
limited in duration. We seek comment on this view, and we request that
commenters quantify or estimate any costs associated with importation
of a distant station's signal and submit data supporting their
positions. If MVPDs are unlikely to import distant stations except
during an impasse in retransmission consent negotiations, does this
support the view that the exclusivity rules are no longer needed? We
further note that, given the prohibition on unauthorized retransmission
of broadcast stations, a distant station would have to agree to be
imported in such circumstances and that contractual arrangements
between networks and their affiliates may bar a broadcaster from
agreeing to the importation of its distant signal. To what extent do
existing network/affiliate agreements prohibit a local broadcaster from
allowing its signal to be imported by a distant cable operator without
reference to the existence of a Commission prohibition? Similarly, we
seek comment on whether judicial enforcement of an exclusivity
provision in a network affiliation or syndication agreement would be
sufficient to protect the interests of local broadcasters and whether
the public interest would be served by requiring such enforcement to
proceed through normal contractual means, subject to the normal grounds
on which the enforcement of exclusive contracts can be challenged.
Additionally, broadcasters have increasingly sought and received
monetary compensation in exchange for retransmission consent. Would
such demands for compensation or higher copyright license fees
associated with carrying distant stations discourage an MVPD from
importing duplicative programming? To the extent that an MVPD can
import a distant station in an adjacent market for a lower
retransmission consent fee, is the MVPD likely to carry that station
instead of the local station? If an MVPD did choose to import
duplicative programming, to what extent would such duplication likely
result in diversion of the local station's audience?
20. We also seek comment on the likely impact that any diversion of
a local station's audience to a distant station would have on the
station's advertising revenues. Would any such impact be different for
a distant station in an adjacent market than for a distant station in a
market that is very far away and with no connection to the local area?
To the extent possible, we request that commenters quantify or estimate
the likely effect of any such audience diversion on a station's
advertising revenues and provide data supporting their positions.
Moreover, we seek comment on the extent to which changes in the sources
of local broadcast station revenues may impact the need for retaining
the exclusivity rules. At the time the exclusivity rules were adopted,
on-air advertising revenues were essentially the only source of revenue
for broadcasters. Today, on-air advertising revenues still constitute
about 85 percent of broadcasters' revenues, but they are increasingly
turning to additional revenue sources, including retransmission consent
fees from MVPDs and advertising sold on their Web sites. Do the
existence of those alternative revenue sources provide any new basis
for either the abolition or retention of the exclusivity rules? That
is, what effect, if any, do these changes in local broadcasters'
sources of revenue have on the need for the exclusivity rules? What
effect would repeal of the exclusivity rules have on the retransmission
consent fees received by broadcasters and what are the public interests
implications of any such effect?
21. As discussed above, the exclusivity rules were based in part on
the Commission's concern that a cable system's duplication of local
programming via the signals of distant stations was not a fair method
of competition with broadcasters because broadcasters and cable systems
were on an unequal footing with respect to the market for programming.
Is this reasoning still valid today, given that MVPDs now do compete
with broadcasters for access to programming? Additionally, we invite
comment on whether and how the growth in the number of video
programming options available to consumers since the exclusivity rules
were first adopted impacts the need for the exclusivity rules.
Specifically, while a consumer seeking to purchase video programming
service previously had one cable operator as the only video service
option, today consumers may choose among several MVPDs and also may
access video programming on the Internet. Do broadcasters' demands for
larger retransmission consent fees from the MVPDs in their market
suggest a significant increase in their leverage in the marketplace?
Would such an increase in broadcasters' leverage and market power
suggest that the exclusivity rules are no longer needed to protect
broadcasters' ability to compete with MVPDs? Why or why not? Would
broadcasters' increase in leverage and market power be attributed to
the exclusivity rights broadcasters have with respect to network and
syndicated programming? Are there any other changes in the video
marketplace that are relevant to whether the exclusivity rules are
still needed to ensure fair and open competition between broadcasters
and MVPDs?
22. Further, we seek comment on the extent to which the exclusivity
rules are still needed to provide incentives for program suppliers to
produce syndicated and network programming and promote program
diversity. In reinstating the syndicated exclusivity rules in 1988, the
Commission concluded that financial incentives for program suppliers to
develop new programming are greater with syndicated exclusivity rules
than they are without them. Specifically, the Commission found that
duplication of syndicated programming diverts a substantial portion of
the local broadcast audience to a distant station carried on a cable
system, thereby lessening the value of syndicated programming to
broadcast stations and lowering the price that syndicated program
suppliers receive for their programming, which in turn reduces
incentives for syndicated program suppliers to develop new programs.
Such reduced incentives, the Commission stated, translate into a
reduction in the diversity of programming available to the public. Are
the Commission rules still necessary to the effectuation of that goal,
or are alternative remedies available to private parties?
23. Commenters have argued that MVPDs would be unlikely to seek to
import a distant station's signal unless they are faced with a blackout
situation during an impasse in retransmission consent negotiations and
that any such importation would probably be of limited duration. If
this argument is valid, we would not expect to see significant
duplication of syndicated programming if we repeal our exclusivity
rules. We seek comment on this view and the extent to which it should
inform the Commission's decision. To the extent that duplication of
syndicated and network programming is unlikely in today's competitive
marketplace, are the exclusivity rules still needed to provide
incentives for program suppliers to produce syndicated and network
programming? In particular, we seek input from suppliers of syndicated
programming on how elimination of our exclusivity rules would affect
their incentives to develop new and diverse programming. One
[[Page 19854]]
commenter notes that, unlike when the exclusivity rules were adopted,
some program suppliers today ``dilute'' broadcasters' exclusive rights
by selling DVDs or downloads of popular programs, by making programming
available on mobile devices and online, in some cases at no charge to
the audience but with associated advertising, and by licensing programs
for distribution over cable networks at the same time they are
distributed through broadcast stations. We seek comment on the extent
to which program suppliers currently dilute broadcasters' exclusive
rights by making their programming available through multiple outlets.
Does this existing duplication of programming undercut arguments that
repeal of the exclusivity rules would adversely affect program
suppliers' incentives to produce new and diverse programming? Are there
other factors that we should consider in determining whether
eliminating the exclusivity rules would adversely impact the diversity
and supply of syndicated and network programming? Are there any factors
or theories that would support retention of one set of exclusivity
rules and not the other?
24. We note that the Commission previously relied in part on
economic studies and other empirical data in considering the need for
the syndicated exclusivity rules. We seek evidence to assist in our
determination as to whether the exclusivity rules are still needed
today and to assess the potential impact of eliminating the exclusivity
rules. To the extent commenters support repealing or maintaining the
rules, we seek empirical data and other evidence to support elimination
or retention of the exclusivity rules. To the extent that economic
studies or other empirical data relevant to our inquiries in this
proceeding are available, we urge commenters to submit such data.
C. Impact of Eliminating Network Non-Duplication and Syndicated
Exclusivity Rules
25. If we determine that the network non-duplication and syndicated
exclusivity rules are no longer needed to ensure fair competition
between local broadcasters and MVPDs and to ensure the diversity and
supply of syndicated programming, would there be any reason to retain
these rules? In particular, we seek comment on the costs and benefits
of eliminating the exclusivity rules on all interested parties,
including broadcasters, MVPDs, and program suppliers, and, of course,
consumers. To the extent possible, commenters are requested to quantify
any costs or benefits and submit supporting data. How should we weigh
the costs and benefits of eliminating the exclusivity rules? Would any
costs associated with eliminating the exclusivity rules outweigh the
benefits of eliminating unnecessary or obsolete rules?
26. We seek comment on the impact of eliminating the exclusivity
rules on retransmission consent negotiations. Would eliminating the
rules merely eliminate a government-imposed barrier to free market
negotiations? We note, in this regard, that broadcasters assert that
eliminating the exclusivity rules would give MVPDs unfair leverage in
retransmission consent negotiations. The Commission has previously
found that ``Congress intended that local stations electing
retransmission consent should be able to invoke network nonduplication
protection and syndicated exclusivity rights, whether or not these
stations are actually carried by a cable system.'' In support of this
finding, the Commission cited the legislative history of the 1992 Act,
which states that
the Committee has relied on the protections which are afforded local
stations by the FCC's network non-duplication and syndicated
exclusivity rules. Amendments or deletions of these rules in a
manner which would allow distant stations to be submitted [sic] on
cable systems for carriage or [sic] local stations carrying the same
programming would, in the Committee's view, be inconsistent with the
regulatory structure created in [the 1992 Act].
We seek comment on the relationship between exclusivity protection and
the retransmission consent regime and whether elimination of the
exclusivity rules would be ``inconsistent with the regulatory structure
created in [the 1992 Act].'' As discussed above, Congress appeared to
be concerned with the importation of distant programming that would
compete with local programming carried by the cable system. Arguably,
that concern does not extend to retransmission consent negotiation
impasses, where the local broadcaster pulls its station from a cable
system or other MVPD. We seek comment on this proposition. What effect
would the compulsory licenses have on broadcasters' ability to obtain
through market-based negotiations the same exclusivity protection
currently provided by our rules? One commenter suggests that, because
most broadcast network affiliation and syndicated exclusivity
agreements grant exclusivity in the entire Designated Market Area,
which is beyond the scope of exclusivity protected by the FCC rules,
elimination of the exclusivity rules would likely result in a
substantial expansion of exclusivity. We seek comment on this view. If
elimination of the exclusivity rules would likely result in expansion
of exclusivity, does this argue in favor of or against elimination?
27. We seek comment on how elimination of the exclusivity rules
would affect existing exclusivity contracts and broadcasters' ability
to enforce those contracts. We note that upon elimination of our
exclusivity rules, free market negotiations between broadcasters and
networks or syndicated program suppliers would continue to determine
the exclusivity terms of affiliation and syndicated programming
agreements, and broadcasters and MVPDs would continue to conduct
retransmission consent negotiations in light of these privately
negotiated agreements, but without Commission intrusion in the form of
a regulatory enforcement mechanism. Thus, parties seeking to enforce
contractual network non-duplication and syndicated exclusivity
provisions would need to seek recourse from the courts (or, if
contracts permit, alternative dispute resolution mechanisms) rather
than the Commission. While some commenters assert that judicial
enforcement of exclusive arrangements would be too difficult or costly,
they have not provided specific, detailed data in support of their
assertions. To the extent that commenters assert that judicial
enforcement of exclusivity agreements would be too difficult or costly,
we request that they quantify or estimate any costs associated with
judicial enforcement and submit data supporting their positions. We
also specifically request comment on the impact that broadcasters' lack
of direct privity of contract with MVPDs with respect to the
exclusivity rights arising from network affiliation or syndication
agreements would likely have on broadcasters' judicial recourse. As a
practical matter, in the absence of the exclusivity rules, how would a
local station seeking to enforce an exclusivity agreement proceed
against an MVPD that is importing the duplicative programming of a
distant station, and how difficult and costly would that be? In this
regard, one commenter suggests that a local station seeking to enforce
an exclusivity agreement would have to proceed against the network or
distant station (assuming that all network affiliates are made parties
to all affiliation agreements with that network), which in turn would
have to proceed against the MVPD. Is this accurate? What costs would
the local station incur? Could the local station instead, if made a
party to
[[Page 19855]]
other stations' affiliation agreements, bring a court action against
the distant station that allowed its signal to be carried in the local
station's market? If the record demonstrates that judicial enforcement
of exclusivity agreements is too unwieldy and expensive, is there some
other enforcement mechanism that could serve in the Commission's stead?
Is there any legitimate reason that the Commission should provide a
regulatory mechanism for enforcement of private exclusivity agreements?
28. Time Warner Cable suggests that exclusivity agreements could be
viewed as unreasonable restraints on trade under traditional antitrust
principles if subjected to judicial scrutiny. We seek comment on how
application of antitrust principles might impact exclusivity
agreements. Would the prospect of antitrust review of exclusivity
agreements make broadcasters reluctant to seek recourse from the
courts? And, if so, should this be a factor in our consideration of
whether to retain these rules? Or should the possibility that
exclusivity agreements could be anti-competitive in some circumstances
militate against providing an enforcement mechanism that bypasses
judicial review?
29. The NBC Affiliates assert that exclusivity rights are not free-
standing rights that affiliates could enforce in the courts because
network affiliation agreements grant exclusivity rights in terms of the
Commission's rules. Specifically, the NBC Affiliates state that its
standard affiliation agreement provides that an affiliate is ``entitled
to invoke protection against the simultaneous duplication of NBC's
network programming . . . to the maximum geographic extent from said
community of license permitted under the present Sections 76.92 and
73.658(m) of the FCC's Rules and in accordance with the terms and
conditions of said Rules.'' The NBC Affiliates note, in this regard,
that the Commission requires specific language referencing its rules in
order for broadcasters to obtain network non-duplication and syndicated
exclusivity rights with respect to DBS and to obtain syndicated
exclusivity rights with respect to cable. We seek comment on the impact
of eliminating the exclusivity rules on such language in existing
exclusivity agreements. To what extent do contracts for network and
syndicated programming include such language? To what extent do such
contracts include change of law provisions? If we eliminate the
exclusivity rules, would it be necessary or appropriate to grandfather
existing exclusivity contracts to ensure that such contracts are
enforceable by the Commission for a period of time sufficient to allow
existing contracts to be reformed, if the parties wish to retain the
exclusivity provisions? If we grandfather existing exclusivity
contracts, what would be a reasonable period of time to accord such
contracts grandfathered status? Should we allow a period of time for
renegotiation of contracts before the rule goes into effect? On the
other hand, does the reference to Commission rules signal an intent by
the contracting parties that exclusivity provisions should not exist if
the Commission concludes that the exclusivity rules should not be
maintained? Additionally, we seek comment on whether network
affiliation agreements typically grant broadcasters exclusive
distribution rights for any multicast streams of network programming
that they air and how these multicast streams should figure in our
analysis of whether to eliminate the exclusivity rules.
30. We also seek comment on whether and how our analysis of the
issues should differ for any subset of the affected parties, such as
small market stations. Should the costs and benefits of eliminating the
exclusivity rules be weighed differently for different sized broadcast
stations? Two commenters assert that elimination of the exclusivity
rules would be particularly harmful to small market stations, many of
which operate in communities adjacent to larger markets with powerful
stations. We seek comment on the impact of elimination of the
exclusivity rules on small market stations. We request that commenters
quantify or estimate any costs of eliminating the exclusivity rules on
small market stations and provide data supporting their submission. If
we decide to eliminate the exclusivity rules, should the rules be
retained, either permanently or for some period of time, for a class of
smaller market stations? If so, how should we define that class and for
what period of time should we retain the rules? Are there other classes
of entities that warrant different treatment? We further note that the
exclusivity rules currently exempt certain small MVPDs. Should those
exemptions be retained if we decide to retain the exclusivity rules? We
also seek comment on how these exemptions have worked in practice. Do
small systems often import distant broadcast stations? Does the
experience of small systems shed any light on what is likely to happen
if we eliminate our exclusivity rules? If so, does that experience
suggest that the rules should be eliminated or retained?
31. In addition, we request comment on the impact of eliminating
the exclusivity rules on localism. A number of broadcasters have
suggested that eliminating the exclusivity rules would have a negative
impact on localism. For example, the NBC Affiliates assert that ``the
loss of exclusivity would severely impair local broadcasters' ability
to underwrite the costs associated with providing news and other
locally responsive programming. This, in turn, would harm local
businesses and local economies generally, given the importance of local
broadcasting in connecting businesses with potential customers.'' As
discussed above, however, commenters claim MVPDs would be unlikely to
seek to import a distant station's signal unless they are faced with a
blackout situation in the context of a retransmission consent
negotiation impasse. If this is the case, is localism likely or
unlikely to suffer if we eliminate the exclusivity rules? We invite
comment on arguments in the record that elimination of the exclusivity
rules is unlikely to harm localism. We ask commenters to quantify as
specifically as possible the economic impact, if any, of the
elimination of the exclusivity rules on broadcasters' ability to
provide news and other locally responsive programming. Moreover, we
seek comment on whether elimination of the exclusivity rules would lead
to migration of network and syndicated programming to non-broadcast
networks and what that would mean in practical terms for local
broadcasters, syndicators, networks, MVPDs, and consumers.
32. We seek comment on whether there are any other entities that
would be impacted by elimination of the exclusivity rules. If so, what
are the benefits and costs of eliminating the rules for those entities?
In particular, we seek comment on the potential impact on consumers of
elimination of the exclusivity rules. We request that commenters
quantify any benefits and costs to the extent possible and submit
supporting data.
33. Under the Satellite Home Viewer Extension and Reauthorization
Act of 2004, Congress authorized satellite carriers to carry out-of-
market significantly viewed stations and applied the exclusivity rules
insofar as local stations could challenge the significantly viewed
status of the out-of-market station and thus prevent its carriage, just
as in the cable context. We seek comment on whether new rules would be
needed to permit local stations to challenge the significantly viewed
status of an out-of-market station if the exclusivity rules are
eliminated or modified. We also seek
[[Page 19856]]
comment on whether we should make any modifications to the process for
obtaining or challenging significantly viewed status if we retain the
exclusivity rules.
34. Finally, we request comment on whether, as an alternative to
elimination of the exclusivity rules, we should make modifications to
these rules. ACA and BCI suggest that if we do not eliminate the
exclusivity rules, we should harmonize these rules by applying the
Grade B or noise limited service contour exception for syndicated
exclusivity to the network non-duplication rules. Under the Grade B
service contour exception, a station may not obtain syndicated
exclusivity protection against another station if such station places a
Grade B signal over the cable community. According to ACA,
``[b]roadcast stations should have no reasonable expectation of
exclusivity against adjacent-market stations receivable in the
community over-the-air, as the Commission intended the exclusivity
rules to prevent importing duplicative distant signals that are not
available over-the-air in the community.'' We seek comment on this
proposal. We also seek comment on whether we should modify the network
non-duplication and syndicated exclusivity rules to apply only where
the local station has granted retransmission consent to, and is carried
by, the MVPD. Under this approach, a television station would only be
permitted to assert network non-duplication or syndicated exclusivity
protection if it is actually carried on the cable system. What effect
would this approach have in situations where a cable system and
broadcast station reach an impasse in retransmission consent
negotiations? We observe that retransmission by an MVPD of the signal
of certain superstations is not subject to retransmission consent
requirements. Does the fact that the statute exempts this class of
stations from retransmission consent requirements militate in favor of
or against eliminating the network non-duplication and syndicated
exclusivity rules? Should the Commission modify its exclusivity rules
in light of the Middle Class Tax Relief and Job Creation Act of 2012,
which provides full power and Class A television stations an
opportunity to relinquish their existing channels by auction in order
to channel share with another television licensee? Commenters that
support these or any other such modifications should quantify the
benefits and costs of the proposed modifications and provide supporting
data. Are there any other modifications that we should consider if we
decide to retain the exclusivity rules?
IV. Procedural Matters
A. Initial Regulatory Flexibility Act Analysis
35. As required by the Regulatory Flexibility Act of 1980, as
amended (``RFA'') the Commission has prepared this present Initial
Regulatory Flexibility Analysis (``IRFA'') concerning the possible
significant economic impact on small entities by the policies and rules
proposed in this FNPRM). Written public comments are requested on this
IRFA. Comments must be identified as responses to the IRFA and must be
filed by the deadlines for comments provided on the first page of the
FNPRM. The Commission will send a copy of the FNPRM, including this
IRFA, to the Chief Counsel for Advocacy of the Small Business
Administration (``SBA''). In addition, the FNPRM and IRFA (or summaries
thereof) will be published in the Federal Register.
Need for, and Objectives of, the Proposed Rules
36. The FNPRM seeks comment on whether the Commission should
eliminate or modify the network non-duplication and syndicated
exclusivity rules for cable systems, satellite carriers, and open video
systems. The network non-duplication rules permit a station with
exclusive rights to network programming to assert those contractual
rights, using notification procedures set forth in the Commission's
rules, to prohibit an MVPD from carrying within a specified geographic
zone the same network programming as broadcast by any other station.
Similarly, under the syndicated exclusivity rules, a station may assert
its contractual rights to exclusivity within a specified geographic
zone to prevent an MVPD from carrying the same syndicated programming
aired by another station.
37. Petitions for rulemaking filed in 2005 and in 2010 raised
questions about the continued need for the exclusivity rules. The NPRM
in this proceeding sought comment on the potential benefits and harms
of eliminating the exclusivity rules. While the Commission received
numerous comments on this issue, the record in this proceeding to date
does not provide a sufficient basis on which to make a determination as
to whether the exclusivity rules are still needed today and to assess
the potential impact on affected parties of eliminating these rules.
Accordingly, we have concluded that is necessary and appropriate to
issue a FNPRM to undertake a more comprehensive review of the
exclusivity rules and to compile a more complete record.
38. The FNPRM requests comment on whether the exclusivity rules are
still needed to protect broadcasters' ability to compete in the video
marketplace. In particular, the FNPRM seeks comment on the extent to
which local broadcast stations' audiences would likely be diverted to
distant stations carried on MVPDs if the exclusivity rules were
eliminated; the argument that MVPDs are unlikely to seek to import a
distant station's signal today unless they are faced with the blackout
of a local station as a result of a retransmission dispute and that any
such importation would likely be limited in duration; the likely impact
that any diversion of a local station's audience to a distant station
would have on the local station's advertising revenues and the extent
to which changes in the sources of local station revenues may impact
the need for retaining the exclusivity rules; and concerns that an
MVPD's duplication of local programming via the signals of distant
stations was not a fair method of competition with broadcasters are
still valid today, given that MVPDs now do compete with broadcasters
for access to programming. The FNPRM also invites comment on the extent
to which the exclusivity rules are still needed to provide incentives
for program suppliers to produce syndicated and network programming and
promote program diversity.
39. The FNPRM seeks comment on the impact of eliminating the
exclusivity rules on all interested parties, including broadcasters,
MVPDs, program suppliers, and consumers. The FNPRM seeks comment on the
impact of eliminating the exclusivity rules on retransmission consent
negotiations. Additionally, the FNPRM invites comment on how
elimination of the exclusivity rules would affect existing exclusivity
contracts and broadcasters' ability to enforce those contracts. Upon
elimination of the exclusivity rules, broadcasters and networks or
syndicated program suppliers would continue to determine the
exclusivity terms of affiliation and syndicated programming agreements
through free market negotiations, but without a Commission enforcement
mechanism. Instead, parties seeking to enforce contractual exclusivity
provisions would need to seek recourse from the courts. The FNPRM seeks
comment on the costs and difficulty of pursuing judicial enforcement of
exclusive arrangements. Further, the FNPRM asks whether, if we
eliminate the exclusivity rules, it would be necessary or
[[Page 19857]]
appropriate to grandfather existing exclusivity contracts to ensure
that such contracts are enforceable by the Commission for a period of
time sufficient to allow existing contracts to be reformed, if the
parties wish to retain the exclusivity provisions. To the extent that
we grandfather existing exclusivity contracts, the FNPRM invites
comment on what would be a reasonable period of time to accord such
contracts grandfathered status and whether we should allow a period of
time for renegotiation of contracts before repeal of the rules takes
effect.
40. The FNPRM seeks comment on whether and how the Commission's
analysis of the impact of eliminating the exclusivity rules should
differ for any subset of the affected parties, such as small market
stations. The FNPRM asks whether, if the Commission decides to
eliminate the exclusivity rules, these rules be retained, either
permanently or for some period of time, for a class of smaller market
stations. If so, the FNPRM seeks comment on how we should define that
class and for what period of time we should retain the rules. The FNPRM
also asks whether the existing exemptions from of certain small MVPDs
from the exclusivity rules should be retained if we decide to retain
the exclusivity rules. In addition, the FNPRM requests comment on the
impact of eliminating the exclusivity rules on localism.
41. Finally, the FNPRM seeks comment on whether, as an alternative
to elimination of the exclusivity rules, the Commission should make
modifications to the rules. Specifically, the FNPRM invites comment on
whether the Commission should (1) extend the Grade B service or noise
limited service contour exception for syndicated exclusivity to the
network non-duplication rules; (2) modify the network non-duplication
and syndicated exclusivity rules to apply only where the local station
has granted retransmission consent to, and is carried by, the MVPD; or
(3) modify the exclusivity rules in light of the Middle Class Tax
Relief and Job Creation Act of 2012, which provides full power and
Class A television stations an opportunity to relinquish their existing
channels by auction in order to channel share with another television
licensee.
Legal Basis
42. The proposed action is authorized pursuant to Sections 4(i),
4(j), 301, 303(r), 307, 339, 340, and 653 of the Communications Act of
1934, as amended, 47 U.S.C. 154(i), 154(j), 301, 303(r), 307, 339, 340,
and 573.
Description and Estimate of the Number of Small Entities to Which the
Proposed Rules Will Apply
43. The RFA directs agencies to provide a description of, and where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted. The RFA generally defines
the term ``small entity'' as having the same meaning as the terms
``small business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act. A small business concern is one which: (1) Is independently owned
and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the SBA. Below, we
provide a description of such small entities, as well as an estimate of
the number of such small entities, where feasible.
44. Cable Television Distribution Services. Since 2007, these
services have been defined within the broad economic census category of
Wired Telecommunications Carriers, which was developed for small
wireline businesses. This category is defined as follows: ``This
industry comprises establishments primarily engaged in operating and/or
providing access to transmission facilities and infrastructure that
they own and/or lease for the transmission of voice, data, text, sound,
and video using wired telecommunications networks. Transmission
facilities may be based on a single technology or a combination of
technologies. Establishments in this industry use the wired
telecommunications network facilities that they operate to provide a
variety of services, such as wired telephony services, including VoIP
services; wired (cable) audio and video programming distribution; and
wired broadband Internet services.'' The SBA has developed a small
business size standard for this category, which is: all such businesses
having 1,500 or fewer employees. Census data for 2007 shows that there
were 31,996 establishments that operated that year. Of this total,
30,178 establishments had fewer than 100 employees, and 1,818
establishments had 100 or more employees. Therefore, under this size
standard, we estimate that the majority of such businesses can be
considered small entities.
45. Cable Companies and Systems. The Commission has also developed
its own small business size standards, for the purpose of cable rate
regulation. Under the Commission's rules, a ``small cable company'' is
one serving 400,000 or fewer subscribers nationwide. Industry data
shows that there were 1,100 cable companies at the end of December
2012. Of this total, all but ten cable operators nationwide are small
under this size standard. In addition, under the Commission's rate
regulation rules, a ``small system'' is a cable system serving 15,000
or fewer subscribers. Current Commission records show 4,945 cable
systems nationwide. Of this total, 4,380 cable systems have less than
20,000 subscribers, and 565 systems have 20,000 or more subscribers,
based on the same records. Thus, under this standard, we estimate that
most cable systems are small entities.
46. Cable System Operators (Telecom Act Standard). The
Communications Act of 1934, as amended, also contains a size standard
for small cable system operators, which is ``a cable operator that,
directly or through an affiliate, serves in the aggregate fewer than 1
percent of all subscribers in the United States and is not affiliated
with any entity or entities whose gross annual revenues in the
aggregate exceed $250,000,000.'' There are approximately 56.4 million
incumbent cable video subscribers in the United States today.
Accordingly, an operator serving fewer than 564,000 subscribers shall
be deemed a small operator if its annual revenues, when combined with
the total annual revenues of all its affiliates, do not exceed $250
million in the aggregate. Based on available data, we find that all but
ten incumbent cable operators are small entities under this size
standard. We note that the Commission neither requests nor collects
information on whether cable system operators are affiliated with
entities whose gross annual revenues exceed $250 million. Although it
seems certain that some of these cable system operators are affiliated
with entities whose gross annual revenues exceed $250,000,000, we are
unable at this time to estimate with greater precision the number of
cable system operators that would qualify as small cable operators
under the definition in the Communications Act.
47. Television Broadcasting. This Economic Census category
``comprises establishments primarily engaged in broadcasting images
together with sound. These establishments operate television
broadcasting studios and facilities for the programming and
transmission of programs to the public.'' The SBA has created the
following small business size standard for such businesses: those
having $35.5 million or less in annual receipts. The 2007 U.S.
[[Page 19858]]
Census indicates that 2,076 television stations operated in that year.
Of that number, 1,515 had annual receipts of $10,000,000 dollars or
less, and 561 had annual receipts of more than $10,000,000. Since the
Census has no additional classifications on the basis of which to
identify the number of stations whose receipts exceeded $35.5 million
in that year, the Commission concludes that the majority of television
stations were small under the applicable SBA size standard.
48. Apart from the U.S. Census, the Commission has estimated the
number of licensed commercial television stations to be 1,388. In
addition, according to Commission staff review of the BIA Advisory
Services, LLC's Media Access Pro Television Database on March 28, 2012,
about 950 of an estimated 1,300 commercial television stations (or
approximately 73 percent) had revenues of $14 million or less. We
therefore estimate that the majority of commercial television
broadcasters are small entities.
49. We note, however, that in assessing whether a business concern
qualifies as small under the above definition, business (control)
affiliations must be included. Our estimate, therefore, likely
overstates the number of small entities that might be affected by our
action because the revenue figure on which it is based does not include
or aggregate revenues from affiliated companies. In addition, an
element of the definition of ``small business'' is that the entity not
be dominant in its field of operation. We are unable at this time to
define or quantify the criteria that would establish whether a specific
television station is dominant in its field of operation. Accordingly,
the estimate of small businesses to which rules may apply does not
exclude any television station from the definition of a small business
on this basis and is therefore possibly over-inclusive to that extent.
50. In addition, the Commission has estimated the number of
licensed noncommercial educational (NCE) television stations to be 396.
These stations are non-profit, and therefore considered to be small
entities.
51. Direct Broadcast Satellite (DBS) Service. DBS service is a
nationally distributed subscription service that delivers video and
audio programming via satellite to a small parabolic ``dish'' antenna
at the subscriber's location. DBS, by exception, is now included in the
SBA's broad economic census category, Wired Telecommunications
Carriers, which was developed for small wireline businesses. Under this
category, the SBA deems a wireline business to be small if it has 1,500
or fewer employees. Census data for 2007 shows that there were 31,996
establishments that operated that year. Of this total, 30,178
establishments had fewer than 100 employees, and 1,818 establishments
had 100 or more employees. Therefore, under this size standard, the
majority of such businesses can be considered small entities. However,
the data we have available as a basis for estimating the number of such
small entities were gathered under a superseded SBA small business size
standard formerly titled ``Cable and Other Program Distribution.'' The
definition of Cable and Other Program Distribution provided that a
small entity is one with $12.5 million or less in annual receipts.
Currently, only two entities provide DBS service, which requires a
great investment of capital for operation: DIRECTV and DISH Network.
Each currently offer subscription services. DIRECTV and DISH Network
each report annual revenues that are in excess of the threshold for a
small business. Because DBS service requires significant capital, we
believe it is unlikely that a small entity as defined under the
superseded SBA size standard would have the financial wherewithal to
become a DBS service provider.
52. Satellite Master Antenna Television (SMATV) Systems, also known
as Private Cable Operators (PCOs). SMATV systems or PCOs are video
distribution facilities that use closed transmission paths without
using any public right-of-way. They acquire video programming and
distribute it via terrestrial wiring in urban and suburban multiple
dwelling units such as apartments and condominiums, and commercial
multiple tenant units such as hotels and office buildings. SMATV
systems or PCOs are now included in the SBA's broad economic census
category, Wired Telecommunications Carriers, which was developed for
small wireline businesses. Under this category, the SBA deems a
wireline business to be small if it has 1,500 or fewer employees.
Census data for 2007 show that there were 31,996 establishments that
operated that year. Of this total, 30,178 establishments had fewer than
100 employees, and 1,818 establishments had 100 or more employees.
Therefore, under this size standard, the majority of such businesses
can be considered small entities.
53. Home Satellite Dish (HSD) Service. HSD or the large dish
segment of the satellite industry is the original satellite-to-home
service offered to consumers, and involves the home reception of
signals transmitted by satellites operating generally in the C-band
frequency. Unlike DBS, which uses small dishes, HSD antennas are
between four and eight feet in diameter and can receive a wide range of
unscrambled (free) programming and scrambled programming purchased from
program packagers that are licensed to facilitate subscribers' receipt
of video programming. Because HSD provides subscription services, HSD
falls within the SBA-recognized definition of Wired Telecommunications
Carriers. The SBA has developed a small business size standard for this
category, which is: All such businesses having 1,500 or fewer
employees. Census data for 2007 show that there were 31,996
establishments that operated that year. Of this total, 30,178
establishments had fewer than 100 employees, and 1,818 establishments
had 100 or more employees. Therefore, under this size standard, the
majority of such businesses can be considered small entities.
54. Open Video Systems. The open video system (OVS) framework was
established in 1996, and is one of four statutorily recognized options
for the provision of video programming services by local exchange
carriers. The OVS framework provides opportunities for the distribution
of video programming other than through cable systems. Because OVS
operators provide subscription services, OVS falls within the SBA small
business size standard covering cable services, which is ``Wired
Telecommunications Carriers.'' The SBA has developed a small business
size standard for this category, which is: All such businesses having
1,500 or fewer employees. Census data for 2007 shows that there were
31,996 establishments that operated that year. Of this total, 30,178
establishments had fewer than 100 employees, and 1,818 establishments
had 100 or more employees. Therefore, under this size standard, we
estimate that the majority of these businesses can be considered small
entities. In addition, we note that the Commission has certified some
OVS operators, with some now providing service. Broadband service
providers (BSPs) are currently the only significant holders of OVS
certifications or local OVS franchises. The Commission does not have
financial or employment information regarding the other entities
authorized to provide OVS, some of which may not yet be operational.
Thus, again, at least some of the OVS operators may qualify as small
entities.
55. Cable and Other Subscription Programming. The Census Bureau
defines this category as follows: ``This industry comprises
establishments
[[Page 19859]]
primarily engaged in operating studios and facilities for the
broadcasting of programs on a subscription or fee basis. . . . These
establishments produce programming in their own facilities or acquire
programming from external sources. The programming material is usually
delivered to a third party, such as cable systems or direct-to-home
satellite systems, for transmission to viewers.'' The SBA has developed
a small business size standard for this category, which is: All such
businesses having $35.5 million dollars or less in annual revenues.
Census data for 2007 show that there were 659 establishments that
operated that year. Of that number, 462 operated with annual revenues
of $9,999,999 dollars or less. One hundred ninety-seven (197) operated
with annual revenues of between $10 million and $100 million or more.
Thus, under this size standard, the majority of such businesses can be
considered small entities.
56. Motion Picture and Video Production. These entities may be
indirectly affected by our action. The Census Bureau defines this
category as follows: ``This industry comprises establishments primarily
engaged in producing, or producing and distributing motion pictures,
videos, television programs, or television commercials.'' We note that
establishments in this category may be engaged in various industries,
including cable programming. The SBA has developed a small business
size standard for this category, which is: All such businesses having
$30 million dollars or less in annual revenues. Census data for 2007
show that there were 9,478 establishments that operated that year. Of
that number, 9,128 had annual receipts of $24,999,999 or less, and 350
had annual receipts ranging from not less than $25,000,000 to
$100,000,000 or more. Thus, under this size standard, the majority of
such businesses can be considered small entities.
57. Motion Picture and Video Distribution. The Census Bureau
defines this category as follows: ``This industry comprises
establishments primarily engaged in acquiring distribution rights and
distributing film and video productions to motion picture theaters,
television networks and stations, and exhibitors.'' We note that
establishments in this category may be engaged in various industries,
including cable programming. The SBA has developed a small business
size standard for this category, which is: All such businesses having
$29.5 million dollars or less in annual revenues. Census data for 2007
show that there were 477 establishments that operated that year. Of
that number, 448 had annual receipts of $24,999,999 or less, and 29 had
annual receipts ranging from not less than $25,000,000 to $100,000,000
or more. Thus, under this size standard, the majority of such
businesses can be considered small entities.
Description of Projected Reporting, Recordkeeping, and Other Compliance
Requirements
58. The FNPRM does not propose any recordkeeping requirements. The
FNPRM seeks comment on whether the Commission should eliminate the
network non-duplication and syndicated exclusivity rules. If the
Commission eliminates the exclusivity rules, broadcasters and networks
or syndicated program suppliers would continue to determine the
exclusivity terms of affiliation and syndicated programming agreements
through free market negotiations, but there would be no Commission
enforcement mechanism for such exclusivity provisions. Instead, parties
seeking to enforce contractual exclusivity provisions would need to
seek recourse from the courts.
Steps Taken To Minimize Significant Impact on Small Entities, and
Significant Alternatives Considered
59. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its proposed approach,
which may include the following four alternatives (among others): (1)
The establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities.
60. The FNPRM seeks comment on whether, if we eliminate the
exclusivity rules, it would be necessary or appropriate to grandfather
existing exclusivity contracts to ensure that such contracts are
enforceable by the Commission for a period of time sufficient to allow
existing contracts to be reformed, if the parties wish to retain the
exclusivity provisions. To the extent that the Commission grandfathers
existing exclusivity contracts, the FNPRM asks what would be a
reasonable period of time to accord such contracts grandfathered status
and whether the Commission should allow a period of time for
renegotiation of contracts before repeal of the rule takes effect. Such
grandfathering might reduce any adverse economic impact of eliminating
the exclusivity rules on broadcast stations, including small broadcast
stations.
61. The FNPRM also asks whether, if the Commission decides to
eliminate the exclusivity rules, the rules should be retained, either
permanently or for some period of time, for a class of smaller market
broadcast stations. If so, the FNPRM seeks input on how we should
define that class and for what period of time should we retain the
exclusivity rules. Retaining the exclusivity rules permanently or for
some period of time for small broadcast stations might reduce any
adverse economic impact of eliminating the exclusivity rules on small
broadcast stations.
62. Further, the FNPRM notes that the exclusivity rules currently
exempt certain small MVPDs and asks whether those exemptions should be
retained if the Commission decides to retain the exclusivity rules.
Retaining the existing exemption for small MVPDs might be appropriate
to avoid any adverse economic impact on small MVPDs if the exclusivity
rules are retained.
Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
63. None.
C. Paperwork Reduction Act
64. This FNPRM proposes no new or modified information collection
requirements. In addition, therefore, it does not propose any new or
modified ``information collection burden for small business concerns
with fewer than 25 employees,'' pursuant to the Small Business
Paperwork Relief Act of 2002.
D. Ex Parte Rules
65. Permit-But-Disclose. The proceeding this FNPRM initiates shall
be treated as a ``permit-but-disclose'' proceeding in accordance with
the Commission's ex parte rules. Persons making ex parte presentations
must file a copy of any written presentation or a memorandum
summarizing any oral presentation within two business days after the
presentation (unless a different deadline applicable to the Sunshine
period applies). Persons making oral ex parte presentations are
reminded that memoranda summarizing the presentation must (1) list all
persons attending or otherwise participating in the meeting at which
the ex parte presentation was made, and (2) summarize all data
presented and arguments made during the presentation. If the
presentation
[[Page 19860]]
consisted in whole or in part of the presentation of data or arguments
already reflected in the presenter's written comments, memoranda or
other filings in the proceeding, the presenter may provide citations to
such data or arguments in his or her prior comments, memoranda, or
other filings (specifying the relevant page and/or paragraph numbers
where such data or arguments can be found) in lieu of summarizing them
in the memorandum. Documents shown or given to Commission staff during
ex parte meetings are deemed to be written ex parte presentations and
must be filed consistent with rule Sec. 1.1206(b). In proceedings
governed by rule Sec. 1.49(f) or for which the Commission has made
available a method of electronic filing, written ex parte presentations
and memoranda summarizing oral ex parte presentations, and all
attachments thereto, must be filed through the electronic comment
filing system available for that proceeding, and must be filed in their
native format (e.g., .doc, .xml, .ppt, searchable .pdf). Participants
in this proceeding should familiarize themselves with the Commission's
ex parte rules.
E. Filing Requirements
66. Pursuant to Sec. Sec. 1.415 and 1.419 of the Commission's
rules, 47 CFR 1.415, 1.419, interested parties may file comments and
reply comments on or before the dates indicated on the first page of
this document. Comments may be filed using the Commission's Electronic
Comment Filing System (ECFS).
Electronic Filers: Comments may be filed electronically
using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
Paper Filers: Parties who choose to file by paper must
file an original and one copy of each filing. If more than one docket
or rulemaking number appears in the caption of this proceeding, filers
must submit two additional copies for each additional docket or
rulemaking number.
Filings can be sent by hand or messenger delivery, by commercial
overnight courier, or by first-class or overnight U.S. Postal Service
mail. All filings must be addressed to the Commission's Secretary,
Office of the Secretary, Federal Communications Commission.
All hand-delivered or messenger-delivered paper filings
for the Commission's Secretary must be delivered to FCC Headquarters at
445 12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours
are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together
with rubber bands or fasteners. Any envelopes and boxes must be
disposed of before entering the building.
Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to 9300 East Hampton
Drive, Capitol Heights, MD 20743.
U.S. Postal Service first-class, Express, and Priority
mail must be addressed to 445 12th Street SW., Washington, DC 20554.
67. People With Disabilities: To request materials in accessible
formats for people with disabilities (braille, large print, electronic
files, audio format), send an email to [email protected] or call the
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).
68. For additional information on this proceeding, contact Kathy
Berthot, [email protected], of the Media Bureau, Policy Division,
(202) 418-2120.
V. Ordering Clauses
69. Accordingly, it is ordered that, pursuant to the authority
found in sections 1, 4(i), 4(j), 301, 303(r), 307, 339(b), 340, and
653(b) of the Communications Act of 1934, as amended, 47 U.S.C. 151,
154(i), 154(j), 301, 303(r), 307, 339(b), and 573(b) this Further
Notice of Proposed Rulemaking is adopted.
70. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Further Notice of Proposed Rulemaking in MB Docket No. 10-
71, including the Initial Regulatory Flexibility Analysis, to the Chief
Counsel for Advocacy of the Small Business Administration.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 2014-08114 Filed 4-9-14; 8:45 am]
BILLING CODE 6712-01-P