[Federal Register Volume 79, Number 97 (Tuesday, May 20, 2014)]
[Rules and Regulations]
[Pages 28996-29007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-10874]
[[Page 28995]]
Vol. 79
Tuesday,
No. 97
May 20, 2014
Part II
Federal Communications Commission
-----------------------------------------------------------------------
47 CFR Part 73
2014 Quadrennial Regulatory Review; Final Rule
Federal Register / Vol. 79 , No. 97 / Tuesday, May 20, 2014 / Rules
and Regulations
[[Page 28996]]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 73
[MB Docket Nos. 14-50, 09-182, 07-294, and 04-256; FCC 14-28]
2014 Quadrennial Regulatory Review
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document completes the Commission's proceeding regarding
the attribution of television joint sales agreements (JSAs)--in which a
``brokering station'' sells the advertising time for a ``brokered
station''--for purposes of applying the broadcast ownership rules. The
Commission, consistent with its prior decision to attribute radio JSAs,
attributes to the brokering station same-market television JSAs that
cover more than 15 percent of the weekly advertising time for the
brokered station.
DATES: Effective June 19, 2014, except for the amendment to Sec.
73.3613, which contains information collection requirements that are
not effective until approved by the Office of Management and Budget
(OMB). The Commission will publish a document in the Federal Register
announcing the effective date of these changes. A separate notice will
be published in the Federal Register soliciting public and agency
comments on the information collections and establishing a deadline for
accepting such comments.
FOR FURTHER INFORMATION CONTACT: Hillary DeNigro, Industry Analysis
Division, Media Bureau, FCC, (202) 418-2330. For additional information
concerning the information collection requirements contained in the
Report and Order, contact Cathy Williams at (202) 418-2918, or via the
Internet at [email protected].
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Report and Order, in MB Docket Nos. 14-50, 09-182, 07-294, and 04-256;
FCC 14-28, was adopted on March 31, 2014, and released on April 15,
2014. The complete text of the document is available for inspection and
copying during normal business hours in the FCC Reference Center, 445
12th Street SW., Washington, DC 20554, and may also be purchased from
the Commission's copy contractor, BCPI, Inc., Portals II, 445 12th
Street SW., Washington, DC 20554. Customers may contact BCPI, Inc. at
their Web site http://www.bcpi.com or call 1-800-378-3160.
Synopsis
I. Introduction
Attribution of Television JSAs
1. The Commission finds that it has sufficient information to act
with respect to the attribution of television JSAs, an issue on which
comment was sought previously and renewed in the NPRM, 77 FR 2867, Jan.
19, 2012, FCC 11-186, rel. Dec. 22, 2011, in the 2010 Quadrennial
Review proceeding. It has looked closely at its standards for defining
the kinds of agreements between stations that confer a sufficient
degree of influence or control so as to be considered an attributable
ownership interest under the Commission's ownership rules. Consistent
with the Commission's earlier findings regarding radio joint sales
agreements (JSAs), it finds that certain television JSAs convey
sufficient influence to warrant attribution. As discussed below, the
ability of a broker to control a brokered television station's
advertising revenue, its principal source of income, affords the broker
the opportunity, ability, and incentive to exert significant influence
over the brokered station. For that reason, the Commission will count
television stations brokered under a same-market television JSA that
encompasses more than 15 percent of the weekly advertising time for the
brokered station toward the brokering station's permissible ownership
totals, just as it long has done with respect to radio stations. The
Commission will not count same-market JSAs toward the brokering
licensee's national ownership cap to the extent that it would result in
double-counting (i.e., counting the same local population twice toward
the national reach limit).
2. The Commission finds that a transition period is appropriate to
permit licensees that entered into television JSAs of this type prior
to the release of the Report and Order to conform their practices to
its requirements. In addition, the Commission clarifies that the JSA
attribution rules (radio and television) do not apply to national
advertising representation agencies. It finds that the benefits of its
decision to count certain television JSAs as attributable interests for
purposes of the ownership rules outweigh any costs or other burdens
that may result from this action.
II. Background
3. A JSA is an agreement that authorizes a broker to sell some or
all of the advertising time on the brokered station. JSAs generally
give the broker authority to hire a sales force for the brokered
station, set advertising prices, and make other decisions regarding the
sale of advertising time, subject to the licensee's preemptive right to
reject the advertising. By contrast, a local marketing agreement (LMA),
also referred to as a time brokerage agreement (TBA), involves ``the
sale by a licensee of discrete blocks of time to a `broker' that
supplies the programming to fill that time and sells the commercial
spot announcements in it.'' Based on its ongoing review of television
JSAs and the comments in the TV JSA proceeding, the Commission finds
that television JSAs often involve the sale of significant portions of
advertising time, and many involve the sale of 100 percent of the
advertising time on the brokered station. In addition, in 2012 and
2013, Commission staff reviewed 22 transactions involving the sale of
31 television stations in which a JSA was part of the proposed
transaction. In each case, the JSA provided for the sale of 100 percent
of the brokered station's advertising time. These agreements may
provide the brokered station a flat fee, compensation based on a
percentage of revenues, or a mixture of both. Of the commenters that
described their fee arrangements under their JSAs, none described fee
arrangements that were solely based on a flat fee to the licensee. The
Commission does not exclude this possibility since such arrangements
appear in radio JSAs and since the Commission did not receive
information about fee arrangements in every existing television JSA, or
even the arrangements in the JSAs held by commenters in the TV JSA
proceeding. Indeed, the JSA in Shareholders of the Ackerley Group,
Inc., 17 FCC Rcd 10828 (2002) (Ackerley), involved the payment of a
flat fee to the licensee. The agreements are often of substantial
duration--typically five years or more, with provisions for renewal and
cancellation by either party. Further, they are often multifaceted
agreements that include, or are accompanied by, other agreements that
involve the provision of programming, technical support, and/or
operational services. In particular, the record indicates that
television JSAs are often accompanied by various sharing agreements
between the broker and the licensee, such as agreements that provide
for technical assistance, sharing of studio or office space, accounting
and bookkeeping services, or administrative services. Many television
JSA brokers also provide programming or production services to their
brokered stations under the JSA or related sharing agreements. In
addition, television JSAs are often executed in conjunction with
[[Page 28997]]
an option, right of first refusal, put/call arrangement, or other
similar contingent interest, or a loan guarantee. For example, of the
22 transactions involving television JSAs reviewed by Commission staff
in 2012 and 2013 all involved some type of contingent interest
agreement. Over time, the Commission has seen an increase in the
prevalence of television JSAs, and recently such agreements have
received more attention in broadcast television transactions.
4. The Commission's attribution rules seek to identify those
interests in licensees that confer on their holders a degree of
``influence or control such that the holders have a realistic potential
to affect the programming decisions of licensees or other core
operating functions.'' For purposes of the multiple ownership rules,
the concept of ``control is not limited to majority stock ownership,
but includes actual working control in whatever manner exercised.''
Influence and control are important criteria in applying the
attribution rules because these rules define which interests are
significant enough to be counted for purposes of the Commission's
multiple ownership rules. An interest that confers influence is an
interest that is less than controlling, but through which the holder
may obtain the ability to induce a licensee to take actions to protect
the interests of the holder, and/or where a realistic potential exists
to affect a station's programming and other core operational decisions.
The attribution rules determine what interests are cognizable under the
Commission's broadcast ownership rules; they are not ownership limits
in themselves.
5. The Commission first adopted attribution rules for LMAs
involving radio stations in the same geographic market in 1992. The
Commission was concerned that absent such rules significant time
brokerage under such agreements could undermine the Commission's
competition and diversity goals. The Commission found that the ability
to control the programming on a non-commonly owned in-market radio
station allowed the brokering party the ability to unduly influence the
brokered station. In 1999, the Commission extended the attribution of
time brokerage agreements to include LMAs between television stations,
finding that the rationale for attributing same-market radio LMAs
applied equally to same-market television LMAs. In its 1999 Attribution
Order, 64 FR 50622, Sept. 17, 1999, FCC 99-207, rel. Aug. 6, 1999, the
Commission considered also whether to attribute certain radio and
television JSAs. The Commission acknowledged that same-market JSAs
could raise competitive concerns but stated that, at that time, it did
not believe that such agreements conveyed a sufficient degree of
influence or control over station programming or core operations to
warrant attribution, adding that JSAs could promote diversity by
``enabling smaller stations to stay on the air.'' In the 2002 Biennial
Review Order, 68 FR 46286, Aug. 5, 2003, FCC 03-127, rel. July 2, 2003,
however, the Commission revisited its earlier decision not to attribute
same-market radio JSAs. It concluded, on reexamination, that influence
or control over the advertising revenue of a brokered station,
generally the principal source of a licensee's income, afforded the JSA
broker, like the LMA broker, the potential to exercise sufficient
influence over the core operations of a station to warrant attribution.
As it had with respect to both radio and television LMAs, the
Commission adopted a 15 percent weekly threshold for determining
whether to attribute same-market radio JSAs. It also concluded that
same-market radio JSAs may sufficiently undermine the Commission's
interest in broadcast competition to warrant limitation under the
multiple ownership rules. As the Commission had not explicitly included
the issue of attribution of television JSAs in the underlying Notice of
Proposed Rulemaking, it did not address television JSAs in the 2002
Biennial Review Order, but rather indicated that it would issue a
further Notice of Proposed Rulemaking to seek comment on whether or not
to attribute television JSAs. It subsequently did so in the TV JSA
NPRM, 69 FR 52464, Aug. 26, 2004, FCC 04-173, rel. Aug. 2, 2004.
6. In the TV JSA NPRM, the Commission tentatively concluded that
television JSAs have the same effects in local television markets that
radio JSAs do in local radio markets and that the Commission should
therefore attribute television JSAs. The Commission noted that it had
no reason to believe that the terms and conditions of television JSAs
differ substantially from those of radio JSAs. The Commission asked,
however, whether differences existed between television and radio JSAs
such that it should not attribute television JSAs, and it asked whether
television JSAs should be grandfathered if they were deemed
attributable.
7. The commenters in response to the TV JSA NPRM consist entirely
of broadcasters, nearly all of whom urge the Commission not to
attribute television JSAs. Commenters urge the Commission to reaffirm
the 1999 determination that television JSAs, unlike LMAs, do not convey
a sufficient degree of influence or control over broadcast stations to
warrant attribution. They argue that the record does not support a
change in policy, and that the Commission must give a reasoned account
if it now rejects the previous conclusion.
8. The Commission sought comment generally on attribution of
agreements among co-market stations in the Notice of Proposed
Rulemaking in the 2010 Quadrennial Review proceeding, specifically
referencing the Commission's ongoing proceeding regarding the proposed
attribution of television JSAs. Many parties addressed attribution of
television JSAs in that proceeding. For example, UCC et al.'s comments
in the 2010 Quadrennial Review proceeding support the Commission's
tentative conclusion in the TV JSA NPRM that certain same-market
television JSAs should be attributed. Numerous public interest groups,
trade associations, and unions support the Commission's proposed
attribution of certain television JSAs and its inquiry into SSAs. Many
broadcast commenters, however, assert that television JSAs should not
be attributable or urge the Commission to seek additional comment on
television JSAs before issuing a decision on attribution.
9. On February 20, 2014, DOJ submitted ex parte comments strongly
supporting the Commission's tentative conclusion to attribute
television JSAs. DOJ, noting its extensive and growing experience
reviewing television JSAs in the context of its antitrust analysis of
broadcast television transactions, asserts that television JSAs provide
incentives similar to common ownership and should be made attributable
under the Commission's rules. DOJ asserts that failure to attribute
such agreements could result in circumvention of the Commission's media
ownership limits and frustrate competition in local markets.
III. Discussion
10. The Commission believes that the record compiled in response to
the TV JSA NPRM, as informed by its ongoing transaction review and
comments in the 2010 Quadrennial Review proceeding, provides it with
relevant and sufficient information from which to act. Since the
release of the TV JSA NPRM, the Commission has continued to review
JSAs, often in conjunction with applications for approval to transfer
or assign a television station license. The Commission notes that
during the pendency of this rulemaking proceeding, the Media Bureau
[[Page 28998]]
continued to consider and approve applications for the assignment of
license or transfer of control of broadcast television licenses that
complied with the Commission's rules in effect at the time of the
transfer or assignment, some of which included television JSAs. In the
absence of a Commission rule attributing television JSAs, the Bureau
reviewed and approved transactions that it determined did not raise
questions of de facto control and where, in its opinion, the licensee
of the brokered station retained a sufficient interest in the
advertising revenue received from a JSA such that it retained control
and remained invested in the successful operation of the station.
However, there has never been a Media Bureau policy generally
applicable to JSAs that the television licensee receive a specified
percentage of the revenues under a JSA and, indeed, there is no
requirement that JSAs even be approved by the Commission. The Bureau's
approval of particular transactions in no way limits the Commission's
ability to change its attribution rules going forward or to adopt a
reasonable transition period for parties to ensure that existing
television JSAs comply with the new attribution standard. Therefore,
reliance on the Media Bureau's approval of transactions that included a
JSA during a period when there was no television JSA attribution rule
is misplaced. The Media Bureau applied the attribution rules in effect
at the time it processed those applications. Indeed, the Bureau's
decisions in cases involving television JSAs often referred to the
pending TV JSA proceeding and reminded parties that the Bureau's
actions were subject to any subsequent Commission action in that
proceeding. Even assuming that the Bureau's past decisions could be
read to mean that same-market television JSAs, generally speaking, do
not confer influence over programming decisions if the brokered station
retains at least 70 percent of the station's advertising revenues, the
Commission rejects that premise and reaches a different conclusion in
the Report and Order. The Media Bureau's review of future transactions
will be guided by the new rule adopted herein. Based on the
Commission's ongoing experience reviewing JSAs, it observes that
neither the terms and conditions of JSAs as described in the comments
nor their competitive impact on markets appear to have changed
significantly. In addition, the submissions in the 2010 Quadrennial
Review proceeding regarding television JSAs are consistent with the
comments filed in the television JSA proceeding. Furthermore, some of
those more recent submissions that advocate an additional formal
comment period primarily seek an opportunity to provide additional
argument about the potential public interest benefits associated with
combined station operation under television JSAs and the existence of
increased competition for broadcast television stations from non-
broadcast video alternatives. The Commission finds, however, that those
arguments bear on the issue of liberalization of the local television
ownership rules and not on the question of whether JSAs give the
brokering station a degree of influence and control that rises to the
level of attribution, which is the sole focus of the inquiry here. As
discussed below, the asserted public interest benefits of common
ownership, operation, or control of stations in the same local market,
and the issue of whether competition from other video alternatives
warrants relaxation of the ownership rules, are appropriately raised
and considered in the context of setting the terms of the local
television ownership rule. Moreover, the record already includes
numerous comments on those points with regard to television JSAs. In
addition, the Commission's decision is informed by its experience with
the attribution of radio JSAs, which has operated to ensure that the
goals of the radio ownership rules are not undermined by
nonattributable agreements conferring the potential for significant
influence over a station's core operating functions. Accordingly, the
Commission finds that the existing record provides a sufficient basis
on which to make the decision herein.
11. On further examination of the issue, the Commission finds that
television JSAs, like radio JSAs and radio and television LMAs, have
the potential to convey significant influence over a station's
operations such that they should be attributable. This is consistent
with the Commission's more recent determination in 2003 to attribute
same-market radio JSAs, which reversed the Commission's earlier
determination in the 1999 Attribution Order that same-market radio JSAs
should not be attributable. In Prometheus Radio Project v FCC, 373 F.3d
372 (3d Cir. 2004) (Prometheus I), the Third Circuit upheld the
Commission's change of course with respect to the attribution of radio
JSAs, finding that the Commission's reexamination of the potential for
a radio JSA to convey the ability for a brokering station to influence
a brokered station satisfied the Commission's obligation to provide a
``reasoned analysis'' for the change in policy. Consistent with the
Commission's analysis supporting attribution of radio JSAs and with the
tentative conclusion in the TV JSA NPRM, it now finds that television
JSAs involving a significant portion of the brokered station's
advertising time convey the incentive and potential for the broker to
influence program selection and station operations. Thus, as the
Commission concluded in 2003 with respect to radio JSAs, it concludes
that the Commission's previous view that television JSAs do not convey
sufficient influence to warrant attribution was incorrect. Whether a
JSA provides the brokered station a fixed fee or a percentage fee, the
broker's revenues depend on its ability to sell the ad time for the
brokered station, which depends in turn on the popularity of the
brokered station's programming. The broker therefore has a strong
incentive to influence the brokered station's programming decisions. As
Hubbard states, ``the assumption of market risk associated with local
advertising sales, and the ability to create greater market strength in
sales, necessarily influences programming decisions. In commercial
broadcasting, programming and sales are inextricably connected.'' In
addition, to the extent it transfers market risk to the brokering
station, the licensee of the brokered station will have less incentive
to maintain or attain significant ratings share in the market. In
upholding the Commission's attribution rules in the past, courts have
held that the Commission reasonably designed those rules to identify
interests that provide the holder with the incentive and ability to
influence or control the programming or other core operational
decisions of the licensees, rather than to address individual instances
of actual influence or control.
12. The Commission finds that JSAs provide incentives for joint
operation that are similar to those created by common ownership. For
example, when two stations are commonly owned, the paired stations may
benefit by winning advertising accounts that are new to both of them
(rather than by having one co-owned station win an account from the
other) and, possibly, by being able to raise advertising prices above
those that they would obtain if the stations were independently owned.
A broker selling advertising time on two stations, one of which is
owned by the broker, has incentives similar to those of an owner of two
stations to coordinate advertising activity between the two stations.
JSAs thus provide strong incentives for coordination of
[[Page 28999]]
advertising activities rather than competition for advertising revenue.
13. In addition, contrary to some commenters' claims, the
Commission's experience indicates that television JSAs can be used to
coordinate the operations of two ostensibly separately owned entities.
For example, in Ackerley, the Commission found that the intertwined
non-attributable television JSA and time brokerage agreement were
``substantively equivalent'' to an attributable LMA. Many commenters
assert that their agreements are structured so that the brokered
station maintains control of its programming and other core operations.
This argument misses the point. The issue in this proceeding is whether
sufficient influence exists such that the interest should be counted in
applying the ownership rules, which is a separate issue from whether
the licensee has maintained ultimate control over its programming and
core operations so as to avoid the potential for an unauthorized
transfer of control or the existence of an undisclosed or unauthorized
real party in interest.
14. Several commenters acknowledge that a JSA broker may have some
influence over a brokered station, but they argue that the level of
influence is minimal because the broker is involved only in non-network
advertising sales. They note that television JSAs differ from radio
JSAs because television stations typically have network affiliations,
and in such cases the network influences programming. For example,
Entravision argues that television station affiliations are motivated
by the economic arrangements between the licensee and the network and
have little relationship to non-network advertising; that affiliations
do not tend to change; that the broker cannot control the network
arrangement; and that, given the affiliation agreements, it is
questionable whether a JSA broker could ever control the programming
decisions of a network-affiliated licensee. Entravision contrasts this
with radio, where format changes occur regularly and where network
affiliations are generally uncommon. Entravision asserts that, because
television stations produce little of their own programming other than
news and public affairs, there is little room for the JSA broker to
control anything except how advertising is sold. Accordingly,
commenters argue, a television JSA does not convey influence over
selection of programming or other core operations.
15. The Commission disagrees. It is possible for multiple parties
to influence the programming decisions of a station. Television
stations provide local and/or syndicated programming, not merely
network programming. Thus, the fact that a station may air network
programming does not prevent the broker from influencing the selection
of non-network programming, be it local programming that the licensee
of the brokered station produces or syndicated programming that it
acquires to fill the rest of the broadcast day. The Commission notes
further that not all stations are affiliated with national networks,
and even among those that are, the amount of programming time provided
by a national network can vary widely. Accordingly, the amount of non-
network advertising time available on a station is not uniformly small,
as some commenters would suggest, and the broker's ability to influence
the brokered station may not be meaningfully constrained, even if the
Commission accepted commenters' arguments regarding the impact of
network programming. Furthermore, Sec. 73.658(e) of the Commission's
rules prohibits a station from entering into an affiliation agreement
that does not permit the affiliate to preempt network programming that
it finds ``unsatisfactory or unsuitable or contrary to the public
interest'' and to substitute ``a program which, in the station's
opinion, is of greater local or national importance.'' The JSA broker
can potentially influence the brokered station's decision whether or
not to pre-empt network programming, as well as its choice of non-
network programs, and has an incentive to do so given the strong
relationship between programming decisions and sale of advertising time
discussed above. In addition, a JSA broker can potentially influence
the brokered station's choice of network affiliation. A broker has a
strong incentive to ensure that the brokered station provides
programming--and an audience--that is complementary to that offered by
its own station in order to maximize the attractiveness of the two
stations to advertisers. As a result, the effects of a JSA extend even
to programming in dayparts in which the broker does not sell the
advertising time. The more time the broker sells, the more likely it
becomes that the broker will have the ability to act on that incentive
and influence the selection of the brokered station's programming.
Thus, the fact that some television stations have network affiliations
does not undermine the finding that television JSAs confer sufficient
influence that they should be attributed.
16. In addition, many commenters argue that different treatment of
radio and television JSAs is warranted because radio and television
markets are different. They contend that television stations incur
special costs (such as greater programming and equipment costs) that
radio stations do not, and also face more competition than radio
stations, because television stations compete with a greater variety
and increasing number of alternative media outlets. Commenters also
contend that television stations depend less on local advertisers than
radio stations. Hubbard disagrees that market differences between radio
and television justify different treatment of JSAs. According to
Hubbard, there are fewer television outlets than radio outlets and
fewer television programming networks than radio networks, so that
``economic arrangements that tie local television stations together
represent greater harm to diversity of programming and to competition
than in radio.''
17. The Commission does not agree that market or service
differences support treating radio and television JSAs differently.
While television stations may depend less on local advertisers than
radio stations as a percentage of overall advertising revenue,
advertising revenue data demonstrate that television stations do depend
on local advertising for revenues to a significant degree. Also,
arguments that television stations need JSAs to survive in a
competitive television market are properly addressed in the context of
setting the applicable ownership limits rather than in deciding whether
television JSAs confer influence such that they should be attributed in
the first place. Ultimately, the Commission finds that the fundamental
nature of television JSAs and radio JSAs is the same, in that they both
allow an in-market, same-service competitor the right to sell
advertising time on an independently owned station and give rise to the
same types of incentives and opportunities to influence the programming
and operations of the brokered station. The Commission finds that the
fee structure associated with the JSA does not change this conclusion.
In deciding to attribute radio JSAs, the Commission made clear that the
sine qua non of attribution is an interest ``through which the holder
is likely to induce a licensee to take actions to protect the interests
of the holder.'' And the Commission has calibrated attribution levels
``based on our judgment regarding what interests in a licensee convey a
realistic potential to affect its programming and other core
[[Page 29000]]
operational decisions.'' To be sure, the Commission has noted that some
licensee/broker arrangements, such as radio JSAs providing for payment
of a flat fee to the licensee, not only provide the broker with the
incentive and ability to influence station operations and programming,
but also deprive the licensee of a financial stake in its own station.
The Commission has never stated, however, that the licensee must be
deprived of all financial stake in its station to warrant attribution.
Regardless of the fee structure, the television JSA broker has the
ability and incentive to influence the brokered station. Accordingly,
the Commission finds that these agreements should receive the same
treatment for attribution purposes. In deciding to change the
attribution policy with respect to radio JSAs, the Commission stated
that its reexamination of the issue had led it to find that, because of
the broker's control over advertising revenues of the brokered station,
JSAs ``have the same potential as LMAs to convey sufficient influence
over core operations of a station'' to warrant attribution. The
Commission believes that the same finding applies to television JSAs,
notwithstanding any market differences, including the presence of
network agreements.
18. Schurz asserts that the Commission should refrain from making
television JSAs attributable without also relaxing the ownership limits
in the local television ownership rule. According to Schurz, it has
typically been the Commission's practice to find certain agreements
attributable at the same time as or after relaxing the relevant
ownership limits. The attribution standards are not conditioned,
however, on specific numerical ownership limits but instead help to
ensure that the limits are not evaded. It is therefore necessary and
appropriate to identify practices and agreements that confer a
sufficient degree of influence that they should be counted toward the
ownership limits. Although at times the Commission has acted to modify
ownership limits at the same time it has revised its attribution rules,
this has not always been the case. Ultimately, it is not necessary to
relax the television ownership limits in conjunction with the
determination that television JSAs are attributable.
19. Finally, some commenters acknowledge that television JSAs
confer at least some influence over the programming of the brokered
station, but argue that their public interest benefits outweigh these
other considerations. Similarly, commenters in the 2010 Quadrennial
Review proceeding fail to acknowledge the potential for influence over
the programming of the brokered station, and argue that the Commission
should refrain from attributing television JSAs because of the public
interest benefits that result from the efficiencies that arise from
sharing, including allegedly facilitating minority and female ownership
and increasing diverse programming. While the Commission recognizes
that cooperation among stations may have public interest benefits under
some circumstances, particularly in small to mid-sized markets, these
potential benefits do not affect the assessment of whether television
JSAs confer significant influence such that they should be attributed.
Rather, any such benefits should be assessed in determining where to
set the applicable ownership limit, i.e., how many television stations
a single entity should be permitted to own, operate, or control in a
local television market. The Commission's reexamination of the issue
leads it to conclude that the contention that JSAs may rescue
struggling stations by enabling smaller stations to stay on the air is
not relevant to the question of whether JSAs confer the potential for
significant influence, warranting attribution. Rather, it is an
argument that is relevant to the determination of where to set the
ownership limits and potentially to whether a waiver of the ownership
rules is warranted in a particular case. The same holds true for any
other asserted public interest benefits of television JSAs.
Nonetheless, the Commission will afford transitional relief to stations
that are party to existing television JSAs, as discussed below.
20. The Commission does not wish to imply that all JSAs are
harmful. The Commission has recognized that common ownership may have
public interest benefits in some circumstances, and it believes that
the same may be true of JSAs. JSAs may, for example, facilitate cost
savings and efficiencies that could enable the stations to provide more
locally oriented programming. JSAs, however, should not be used to
circumvent the local broadcast television ownership rules, which are
designed to promote competition. Some assert that it is unfair to
attribute television JSAs while allowing multichannel video programming
distributors (MVPDs) to engage in similar conduct through local
``interconnects.'' While there are various Commission rules relating to
MVPD ownership, there is no counterpart in the MVPD context to the
local television ownership rule. And the broadcast attribution rules
are designed to ensure that parties cannot circumvent the broadcast
ownership rules. Further, the issue of MVPD local interconnects was not
subject to notice in either the NPRM in the 2010 Quadrennial Review or
the TV JSA NPRM, and is beyond the scope of this proceeding. If
interested parties perceive a problem that would be remedied by
attribution of MVPD joint advertising arrangements, they may file a
petition for rulemaking, which the Commission will consider. Because
television JSAs encompassing a substantial portion of the brokered
station's advertising time create the potential to influence the
brokered station and provide incentives for joint operation that are
similar to those created by common ownership, the Commission finds that
television JSAs that permit the sale of more than 15 percent of the
advertising time per week of the brokered station, as described in
greater detail below, should be cognizable interests for purposes of
applying the ownership rules.
21. Paxson submits a declaration of Mark Fratrik, Ph.D., Vice
President of BIA Financial Network discussing the impact on the
Herfindahl-Hirschman Index (HHI)--a measure used to analyze a proposed
merger's potential impact on competition--of attribution of certain of
Paxson's own television JSAs and other television JSAs it identified in
publicly available records. According to Paxson, the combinations
reviewed would produce only a small increase in the HHI below the 100
point threshold that typically implicates DOJ antitrust issues. The
analysis, however, does not address the ability and incentive for the
brokering station to exert influence over the brokering stations core
operating functions. Rather, Paxson's analysis goes to the
appropriateness of the Commission's local television ownership limits
(or the appropriateness of a waiver of those limits), which are not
based simply on a structural antitrust analysis, but rather on a
broader concern with promoting competition, localism, and diversity.
22. The Commission has consistently applied a 15 percent threshold
to determine whether to attribute JSAs in radio markets and LMAs in
both television and radio markets, and it finds that it is appropriate
to use that same threshold here. This threshold was most recently
applied in the Commission's decision to attribute certain same-market
radio JSAs, a decision that was upheld by the Third Circuit in
Prometheus I. A 15 percent advertising time threshold will allow a
station to broker a small amount of
[[Page 29001]]
advertising time through a JSA with another station in the same market
without triggering attribution, yet will fall short of providing the
broker a significant incentive or ability to exert influence over the
brokered station's programming or other core operating functions
because it will not be selling the advertising time in a substantial
portion of the station's programming. Just as in the radio context, the
Commission believes that a 15 percent advertising time threshold will
identify the level of control or influence that would realistically
allow holders of such influence to affect core operating functions of a
station, including programming choices, and give them an incentive to
do so.
23. Sinclair asserts that applying the 15 percent threshold used
for radio and television LMAs and radio JSAs would be arbitrary and
capricious because of differences in the radio and television
marketplace. Sinclair's reference to comments DOJ filed in a prior
attribution proceeding could be read to mean that DOJ determined that
it was not appropriate to treat radio and television markets the same
for attribution purposes. In fact, the cited comments merely pointed
out that the agency had not analyzed television JSAs and therefore
limited its comments to radio JSAs. The recent ex parte submission from
DOJ strongly supporting the Commission's decision to attribute
television JSAs confirms that Sinclair's reading of DOJ's earlier
comments was mistaken. In addition, Sinclair is misguided in asserting
that television JSAs cannot be attributed in the absence of detailed
definitions of categories of station's advertising and programming
time. Such elements would apply equally to radio and television LMAs
and/or radio JSAs and have not proved necessary as components of the
rule for successful implementation in those attribution rules. As
discussed herein, the Commission finds that the differences between the
radio and television markets do not warrant different treatment of
radio and television JSAs. In addition, as discussed above, the
Commission finds that the ability of the brokering station to control
the advertising revenue of the brokered stations, the common component
of JSAs and LMAs, gives the brokering station under a JSA the same
incentive and ability to influence the brokered station's core
operating functions as a brokering station under an LMA. For example,
while an LMA gives the brokering station the direct ability to
influence programming on the brokered station because the LMA broker
provides the programming to the brokered station, the Commission has
found that the sale of advertising time pursuant to a JSA provides the
brokering station with the indirect ability to influence the brokered
station's programming. As the amount of advertising revenue controlled
by the brokering station increases, so too does its incentive and
ability to influence brokered station's programming--including
programming in dayparts in which the broker does not sell the
advertising time. The Commission can see no benefit to permitting
greater indirect influence over the brokering station's programming
than could be achieved directly through an LMA; accordingly, the
Commission reject Sinclair's assertion that applying the 15 percent
threshold to television JSAs would be arbitrary and capricious. Were
the Commission to establish a higher limit for JSAs, licensees and
brokers could be expected to simply choose to enter into JSAs instead
of LMAs because of the higher attribution threshold, thus creating a
ready avenue for evading the LMA attribution rule and the ownership
limits.
24. In addition, Paxson briefly offers two proposals of its own:
(1) A 35 percent all-market advertising sales standard and (2) a ``JSA-
Plus'' standard that would result in attribution in situations
involving various levels of advertising sales, ownership options, and
programming rights. Paxson's brief discussion, however, does not
provide any empirical or theoretical basis upon which to adopt either
of these proposals, both of which appear to focus primarily on the
impact of the brokerage agreement on the competitive market rather than
the broker's incentive and ability to influence the brokered station's
core operating functions. Further, Paxson appears to have devised the
thresholds, at least in the first option, in order to avoid the
attribution of its own television JSAs. Ultimately, the record does not
support the adoption of either of these alternatives, and the
Commission believes that a broker has the ability and incentive to
exert influence over a brokered station's programming and operations
well below the threshold or combination of interests that Paxson
proposes.
25. The rationale for attributing LMAs and JSAs is the same for
radio and television: To prevent the circumvention of the ownership
limits. Ultimately, in attributing these other agreements, the
Commission determined that the 15 percent threshold was the appropriate
threshold, as below that threshold the Commission has found that a
broker will lack significant incentive or ability to exert influence
over the brokered station's programming or other core operating
functions; and, as discussed above, the Commission finds no evidence
that television JSAs are sufficiently unique as compared to other
attributable agreements to justify a different attribution threshold.
Thus, where an entity that owns or has an attributable interest in one
or more television stations in a local television market sells more
than 15 percent of the advertising time per week of another television
station in the same market, it will be deemed to hold an attributable
interest in the brokered station and such station will be counted
toward the brokering licensee's ownership compliance.
26. Finally, the Commission notes that parties that believe that
the application of the attribution rules to their particular
circumstances would not serve the public interest always have the
ability to seek a waiver. The Commission has an obligation to take a
hard look at whether enforcement of a rule in a particular case serves
the rule's purpose or instead frustrates the public interest. Thus, for
example, a party seeking waiver of the attribution rule could attempt
to demonstrate that a particular television JSA in context--including
any related agreements or interests--does not provide the brokering
entity with the opportunity, ability, and incentive to exert
significant influence over the programming or operations of the
brokered station. In considering a request for waiver of attribution,
the Commission will take into account the totality of the circumstances
in order to assess whether strict compliance with the rule is
inconsistent with the public interest. For example, to make such a
showing, an applicant may provide the JSA together with any other
agreements, documents, facts, or information concerning the operation
and management of a brokered station that demonstrate that the
underlying public interest considerations supporting the Commission's
decision to attribute JSAs, as discussed herein, are not present in the
particular case. The relevant factors may include, without limitation:
(i) Specific facts that show a lack of incentive or ability for the
broker station to influence the brokered station's programming or
operations, and (ii) specific facts that demonstrate that the brokered
station has the incentive and ability to maintain independent
operations and programming decisions that are not influenced by the
broker
[[Page 29002]]
station and the incentive and ability to exclude the broker station
from exerting influence over programming and operations. A waiver
request for a JSA that is limited in scope (i.e., percentage of the
station's advertising sales) and duration so as to minimize or
eliminate any influence on operations or programming is more likely to
be successful than an open-ended request. Similarly, if a licensee
believes that application of the local television ownership rule in a
particular situation would adversely affect competition, diversity, or
localism, it may seek a waiver of that rule. For example, an applicant
may be able to demonstrate that a waiver would enable a school,
community college, other institution of higher education, or other
community support organization or entity to own a station and that the
public interest benefits of such ownership outweigh the harms the
Commission has identified with common ownership in support of the local
television ownership limits. The Commission will carefully review and
consider any such request on an expedited basis. The Commission
recognizes that broadcast transactions are time sensitive and that
Commission action on assignment and transfer applications, including
any associated waiver requests, must be taken promptly without
unnecessary delay. The Commission directs the Bureau to prioritize
review of any applications for waiver necessitated by attribution of
JSAs and to complete their review within 90 days of the record closing
on such waiver petitions provided there are no circumstances requiring
additional time for review.
A. Filing Requirements and Transition Procedures
27. First, subject to OMB approval, the Commission will require
going forward that attributable television JSAs be filed with the
Commission within 30 days after the JSA is entered into. Currently,
commercial television stations are required under Sec. 73.3526 of the
Commission's rules to place a copy of any JSA involving the station in
the local public inspection file, but are not required to file such
agreements with the Commission. With the adoption of the Report and
Order, commercial television stations that are party to an attributable
JSA will now be required to file a copy of the agreement with the
Commission pursuant to Sec. 73.3613, consistent with requirements for
attributable LMAs and attributable radio JSAs. Second, the Commission
will require parties to existing attributable television JSAs and/or
parties to attributable television JSAs entered into after the release
of the Report and Order but before the filing requirement becomes
effective to file a copy of such agreements with the Commission within
30 days after the filing requirement becomes effective. The Commission
will seek OMB approval for the filing requirement, and, upon receiving
approval, the Commission will release a document specifying the date by
which television JSAs must be filed. Third, the Commission directs the
Media Bureau to take the necessary steps to modify the relevant
application forms to conform to the rule changes adopted in the Report
and Order, including the reporting of attributable television JSAs, for
example, in connection with a request for authority to transfer or
assign a station license. Such forms would include, inter alia, FCC
Form 314, Application for Consent to Assignment of Broadcast Station
Construction Permit or License, and FCC Form 315, Application for
Consent to Transfer Control of Entity Holding Broadcast Station
Construction Permit or License.
28. The Commission rejects arguments that it should automatically
grandfather all television JSAs permanently or indefinitely. In these
circumstances, the Commission finds that such grandfathering would
allow arbitrary and inconsistent changes to the level of permissible
common ownership on a market-by-market basis based not necessarily on
where the public interest lies, but rather on the current existence or
nonexistence of television JSAs in that market when the new attribution
rule becomes effective. Instead, consistent with the Commission's
treatment of existing radio JSAs when the Commission first made such
agreements attributable, and as discussed in the TV JSA NPRM, parties
to existing, same-market television JSAs whose attribution results in a
violation of the ownership limits will have two years from the
effective date of the Report and Order to terminate or amend those JSAs
or otherwise come into compliance with the local television ownership
rule. The Commission finds that such a transition period is necessary
to avoid undue disruption to current business arrangements, and it
believes that the two-year compliance period will give licensees
sufficient time to make alternative arrangements. No transition period
is granted with regard to new television JSAs that would cause the
broker to exceed the media ownership limits. In order to avoid undue
disruption, however, parties may renew existing television JSAs even if
renewal would cause the broker to exceed the media ownership limits,
provided that the renewal period shall not exceed the two-year
transition period provided for in the Report and Order. The Commission
notes that parties to television JSAs have long been on notice of the
possibility that the Commission's would attribute certain same-market
television JSAs. Moreover, as noted above, licensees may seek a waiver
of the Commission's rules if they believe strict application of the
rules would not serve the public interest.
29. In the TV JSA NPRM, the Commission sought comment on whether it
should take the same approach for television JSAs that it had taken
when radio JSAs became attributable, noting that pre-existing radio
JSAs were not grandfathered but affected licensees were given a two-
year compliance period. In contrast, when the Commission proposed
making television LMAs attributable, it proposed grandfathering LMAs
entered into before the further notice of proposed rulemaking was
issued. Moreover, as with the Commission's radio JSA decision, the
Commission is providing a two-year transition period for licensees to
come into compliance. Thus, the Commission disagrees with Paxson that
equitable considerations warrant the same grandfathering approach here
as the Commission adopted for television LMAs. Likewise, the
Commission's decision not to grandfather existing television JSAs does
not conflict with the grandfathering of non-compliant ownership
combinations. Broadcasters have been on notice since 2004 of the
Commission's tentative conclusion that certain television JSAs should
be attributed and that existing television JSAs would not necessarily
be grandfathered. Thus, any broadcaster that entered into or renewed a
JSA after the TV JSA NPRM was released knew the risk of doing so.
Moreover, broadcasters are not required to obtain prior approval of
JSAs, and JSAs are not reviewed at all unless they are part of a
transaction requiring approval. The Commission also rejects Paxson's
claim that failure to grandfather pre-existing television JSAs for at
least five years would result in impermissible retroactive rulemaking.
The Commission's decision to make television JSAs attributable alters
the future effect, not the past legal consequences, of television JSAs.
It does not alter the past legality of television JSAs, does not impose
liability for past actions, and does not introduce any retrospective
duties for past conduct.
[[Page 29003]]
B. National Sales Representatives
30. Sinclair sought clarification that the Commission would not
attribute television and radio stations that are represented by
national advertising representative firms (rep firms) where a rep firm
is co-owned with a broadcaster, and the parent owns a same-market
station. Rep firms bring national advertisers who want to buy
commercial time in selected markets together with the individual
stations in those markets. For the reasons discussed below, the
Commission finds that the record does not support attribution of a rep
firm's client stations to a rep firm.
31. Some commenters argue that the Commission must reconcile its
decision to eliminate the former Golden West Broadcasters, 16 FCC 2d
918 (1969) (Golden West), cross-interest policy with respect to the
attribution decision herein. Since eliminating the former cross-
interest policy (by which a licensee was prohibited from having an
interest in more than one station in the same service in the same
area), the Commission consistently has held that advertising
representation does not constitute an attributable interest. Under the
Commission's former Golden West policy, the Commission prohibited
representation of a radio or television station by a national sales
representative owned wholly or partially by the licensee of a competing
station in the same service in the same community or service area.
However, the Commission abolished that policy with respect to
attribution in 1981, holding that market forces and the remedies
available under antitrust laws were sufficient to deter the
anticompetitive practices the policy was meant to address. The
Commission also noted ``that the potential for impairment of economic
competition that Golden West was designed to guard against will be
mitigated by the incentive of the unaffiliated station to seek the
sales representative that will most vigorously serve its interest.''
Since 1981, the Commission has consistently refused to prohibit or
attribute sales rep agreements. The Commission believes the decision to
eliminate the Golden West policy was sound, and the JSA attribution
rules should not be read to disturb that decision.
32. In this regard, the Commission notes that some commenters claim
that attribution of television JSAs would be discriminatory and
inconsistent with the Commission's previous decision not to attribute
national advertising agreements, because both types of agreements
provide one firm with the ability to influence an unaffiliated
station's operations. As explained in the Report and Order, the
Commission is attributing same-market television JSAs because they
convey a sufficient degree of influence to warrant attribution.
National advertising agreements do not raise the same concerns. Unlike
JSAs involving competing stations in the same local market, national
advertising agreements do not combine ownership of a local, competing
television station with the potential for significant influence over
programming. Therefore, the Commission disagrees with commenters that
the decision today to attribute same-market television JSAs is
inconsistent with previous attribution decisions.
33. Given the unique nature of national advertising sales firms, as
discussed below, the Commission clarifies that it will not generally
apply the rules attributing television or radio JSAs to national
advertising sales representation agencies. It observes that typically,
national rep firms that are commonly owned with broadcast stations are
operated separately from the commonly owned broadcast stations. With
hundreds, if not thousands, of clients and a narrow business focus
(namely, the sale of national spot advertising), rep firms are not
involved in the day-to-day operations of their client stations,
commonly owned or otherwise. In addition, there are fundamental
differences in the relationship between a local station and a rep firm,
and between local stations that are party to a JSA. For example, when a
station contracts with a rep firm, it typically provides only enough
information about its operations to enable the rep firm to sell
national advertising spots on the station. Because of the way rep firms
are structured and the contractual protections available to a local
station, station-specific information is not provided to the competing
stations in the market that also contract with the rep firm. By
contrast, in a JSA involving multiple local stations, the advertising
rate information and other otherwise confidential station information
is shared between the parties. Moreover, as noted above, JSAs are often
executed in conjunction with other types of sharing agreements, which
leads to higher levels of common operation that are not present in
relationships with rep firms. Ultimately, the Commission concludes that
the relationship between a rep firm and its client station, as
described herein, does not confer the same potential and incentives for
the rep firm to influence a licensee that are present in a traditional
JSA relationship. Therefore, national rep firms should not generally be
subject to the television and radio JSA attribution rules. While the
Commission is not aware of any instances of non-national advertising
sales firms (e.g., regional advertising sales firms) that are commonly
owned with a broadcast licensee, the rationale adopted in the Report
and Order for excluding national rep firms from the television and
radio JSA attribution rules would apply to such non-national rep firms
to the extent these firms are operated in the same manner as national
rep firms (i.e., completely separate and independent from the operation
of the local broadcast stations).
34. At the present time, the Commission has no evidence to suggest
that a national advertising representation firm that has a commonly
owned broadcast station in a local market in which it also represents a
client for advertising services would have the incentive or ability to
exert significant influence over the programming or other core
activities of its client. Nevertheless, the Commission will entertain
complaints based on a showing that a rep firm that is commonly owned
with a broadcast licensee has not insulated the business of operating
its commonly owned broadcast station from the business of providing
advertising representation services in a market in which the rep firm
has a commonly owned broadcast station. In such cases, the Commission
will make a case-by-case determination of whether attribution is
appropriate.
IV. Procedural Matters
A. Final Regulatory Flexibility Analysis
35. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the TV JSA NPRM in MB Docket No. 04-256. The Commission
sought written public comment on the proposals in the TV JSA NPRM,
including comment on the IRFA. The Commission received no comments in
direct response to the IRFA. This present Final Regulatory Flexibility
Analysis (FRFA) conforms to the RFA.
1. Need for, and Objectives of, the Report and Order
36. Consistent with the Commission's earlier findings regarding
radio joint sales agreements JSA), the Report and Order finds that
television JSAs similarly convey sufficient influence over the brokered
station's finances, personnel, and programming decisions to warrant
attribution. A JSA is an agreement that authorizes a broker to
[[Page 29004]]
sell some or all of the advertising time on the brokered station. In
particular, the Report and Order finds that television JSAs provide
incentives--including incentives for stations to coordinate advertising
activities and avoid competing with each other--that are in some cases
similar to those created by common ownership. Accordingly, the Report
and Order concludes to count television stations brokered under a same-
market television JSA toward the brokering station's permissible
ownership totals under the Commission's broadcast ownership rules
consistent with the treatment of radio JSAs. Specifically, where an
entity owns or has an attributable interest in one or more stations in
a local television market, joint advertising sales of another
television station in that market for more than 15 percent of the
brokered station's weekly advertising time will create a cognizable
interest for the brokering station for purposes of applying the
broadcast ownership rules. The 15 percent threshold is the same
threshold adopted by the Commission for radio JSAs and will allow a
station to broker a small amount of advertising time through a JSA with
another station in the same market without triggering attribution, yet
will fall short of providing the broker a significant incentive or
ability to exert influence over the brokered station's programming or
other core operating functions because it will not be selling the
advertising time in a substantial portion of the station's programming.
The Report and Order finds that a two-year transition period is
appropriate to permit licensees that entered into television JSAs of
this type prior to the release of the Report and Order to address those
circumstances. In addition, parties to existing, attributable
television JSAs, and/or parties to attributable television JSAs entered
into after the release of the Report and Order but before the filing
requirement becomes effective, must file a copy of such agreements with
the Commission within 30 days after the filing requirement becomes
effective. Stations are already required to include these agreements in
their public inspection file. Going forward, parties to attributable
television JSAs must file copies of such agreements with the Commission
within 30 days after execution.
37. The Commission finds in the Report and Order that the
attribution of television JSAs is necessary because these agreements
can be used to coordinate the operations of two ostensibly separately
owned entities and can provide incentives that are similar to those
created by common ownership. While the Commission has previously
recognized the potential benefits of common ownership, and believes
that JSAs may provide similar benefits, such as facilitating cost
savings and efficiencies that could enable the stations to provide more
locally oriented programming, the Commission finds that television JSAs
should not be used to circumvent the local broadcast television
ownership rule, which is designed to promote competition. Additionally,
the Report and Order finds that television JSAs provide the brokering
stations the ability and incentive to influence the selection of non-
network programming on the brokered stations. In addition, the
Commission finds that a JSA broker can influence the brokered station's
choice of network affiliation. The Report and Order concludes that a
broker has a strong incentive to ensure that the brokered station
provides programming--and an audience--that is complementary to that
offered by its own station in order to maximize the attractiveness of
the two stations to advertisers. Thus, the fact that some television
stations have network affiliations does not undermine the Commission's
finding that television JSAs confer sufficient influence that they
should be attributed.
38. The Commission finds no support for treating radio and
television JSAs differently. While the Report and Order finds that
television stations may depend less on local advertisers than radio
stations as a percentage of overall advertising revenue, advertising
revenue data demonstrate that television stations do depend on local
advertising for revenues to a significant degree. Also, the Commission
finds that arguments that television stations need JSAs to survive in a
competitive television market are properly addressed in the context of
setting the applicable ownership limits rather than in deciding whether
television JSAs confer influence such that they should be attributed in
the first place. In addition, the Report and Order concludes that
fundamental nature of television JSAs and radio JSAs is the same and
that these agreements should be treated the same for attribution
purposes. In deciding to change its attribution policy with respect to
radio JSAs, the Commission stated that its reexamination of the issue
had led it to find that, because of the broker's control over
advertising revenues of the brokered station, JSAs have the same
potential as LMAs to convey sufficient influence over core operations
of a station to warrant attribution. The Report and Order finds that
the same finding applies to television JSAs, notwithstanding any market
differences, including the presence of network agreements.
39. Because television JSAs can create the potential to influence
the brokered station and provide incentives for joint operation that
are similar to those created by common ownership, as described in the
Report and Order, the Commission finds that same-market television JSAs
that permit the sale of more than 15 percent of the advertising time
per week of the brokered station should be cognizable interests for
purposes of applying the broadcast ownership rules.
40. The Report and Order also clarifies that the radio and
television JSA attribution requirements do not apply to national sales
representative firms (rep firms). The Commission concludes that the
relationship between a rep firm and its client station as understood by
the Commission does not raise the same issues of control that are
present in a traditional JSA relationship. Therefore, national rep
firms should not generally be subject to the television and radio JSA
attribution rules. However, the Commission will entertain complaints
based on a showing that a rep firm that is commonly owned with a
broadcast licensee has not insulated the business of operating its
commonly owned broadcast station from the business of providing
advertising representation services in a market in which the rep firm
has a commonly owned broadcast station. In such cases, the Commission
will make a case-by-case determination of whether attribution is
appropriate.
2. Legal Basis
41. The Report and Order is adopted pursuant to sections 1, 2(a),
4(i), 303, 307, 309, 310, and 403 of the Communications Act of 1934, as
amended, 47 U.S.C. 151, 152(a), 1544(i), 303, 307, 309, 310, and 403,
and section 202(h) of the Telecommunications Act of 1996.
B. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
42. The Commission received no comments in direct response to the
IRFA.
[[Page 29005]]
C. Description and Estimate of the Number of Small Entities to Which
Rules Will Apply
43. The RFA directs the Commission to provide a description of and,
where feasible, an estimate of the number of small entities that will
be affected by the rules 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 Small Business
Administration (SBA). The final rules adopted herein affect small
television and radio broadcast stations and small entities that operate
daily newspapers. A description of these small entities, as well as an
estimate of the number of such small entities, is provided below.
44. Television Broadcasting. The SBA defines a television
broadcasting station that has no more than $35.5 million in annual
receipts as a small business. The definition of business concerns
included in this industry states that establishments are 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. These
establishments also produce or transmit visual programming to
affiliated broadcast television stations, which in turn broadcast the
programs to the public on a predetermined schedule. Programming may
originate in their own studio, from an affiliated network, or from
external sources. Census data for 2007 indicate that 2,076 such
establishments were in operation during that year. Of these, 1,515 had
annual receipts of less than $10.0 million per year and 561 had annual
receipts of more than $10.0 million per year. Based on this data and
the associated size standard, the Commission concludes that the
majority of such establishments are small.
45. The Commission has estimated the number of licensed commercial
television stations to be 1,387. According to Commission staff review
of the BIA Kelsey Inc. Media Access Pro Television Database (BIA) as of
November 26, 2013, 1,294 (or about 90 percent) of an estimated 1,387
commercial television stations in the United States have revenues of
$35.5 million or less and, thus, qualify as small entities under the
SBA definition. The Commission has estimated the number of licensed
noncommercial educational (NCE) television stations to be 396. The
Commission notes, however, that, in assessing whether a business
concern qualifies as small under the above definition, business
(control) affiliations must be included. This estimate, therefore,
likely overstates the number of small entities that might be affected
by this action, because the revenue figure on which it is based does
not include or aggregate revenues from affiliated companies. The
Commission does not compile and otherwise does not have access to
information on the revenue of NCE stations that would permit it to
determine how many such stations would qualify as small entities.
46. In addition, an element of the definition of ``small business''
is that the entity not be dominant in its field of operation. The
Commission is 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 do not exclude any television
station from the definition of a small business on this basis and are
therefore over-inclusive to that extent. Also, as noted, an additional
element of the definition of ``small business'' is that the entity must
be independently owned and operated. The Commission notes that it is
difficult at times to assess these criteria in the context of media
entities and the estimates of small businesses to which they apply may
be over-inclusive to this extent.
D. Description of Reporting, Recordkeeping, and Other Compliance
Requirements for Small Entities
47. The Report and Order adopts a requirement that parties to
existing, attributable television JSAs, and/or parties to attributable
television JSAs entered into after the release of the Report and Order
but before the filing requirement becomes effective, must file a copy
of such agreements with the Commission within 30 days after the filing
requirement becomes effective. Going forward, parties to attributable
television JSAs must file copies of such agreements with the Commission
within 30 days after execution. The Report and Order directs the Media
Bureau to take the necessary steps to modify the relevant application
forms to require applicants to file attributable television JSAs at the
time an application is filed using the forms.
48. In addition, the following FCC forms and/or their instructions
will be modified to require the reporting of attributable television
JSAs: (1) FCC Form 301, Application for Construction Permit For
Commercial Broadcast Station; (2) FCC Form 314, Application for Consent
to Assignment of Broadcast Station Construction Permit or License; (3)
FCC Form 315, Application for Consent to Transfer Control of
Corporation Holding Broadcast Station Construction Permit or License;
(4) FCC Form 323, Ownership Report for Commercial Broadcast Station.
The impact of these changes will be the same on all entities, and
compliance will likely require only the expenditure of de minimis
additional resources.
E. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
49. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its 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.
50. The Report and Order finds that television JSAs convey
sufficient influence to warrant attribution, such that the Commission
will count television stations brokered under a same-market television
JSA toward the brokering station's permissible ownership totals if the
amount of time jointly sold is equal to or greater than 15 percent of
the station's advertising time. This rule brings the Commission's
policy regarding JSAs in the television market in line with the
existing rules regarding radio markets. While the Report and Order
recognizes that JSAs may have public interest benefits, particularly in
small- to mid-sized markets, these potential benefits do not affect the
assessment of whether television JSAs confer significant influence such
that they should be attributed. The rule adopted in the Report and
Order protects local markets--including small businesses operating in
local markets, as opposed to regional or national markets--from
exposure to competitive harms that might result from contractual
agreements between stations for control
[[Page 29006]]
of advertising. Therefore, the Commission believes that in many cases
the attribution of a same-market television JSA will protect small
businesses, as well as large, from the adverse impacts of competing
stations' coordination of advertising sales.
51. Nonetheless, the Report and Order finds that a transition
period during which parties are required to come into compliance is
necessary to avoid undue disruption to current business arrangements.
Such a transition period will be especially helpful to small television
stations that do not have the same financial and technical resources as
large stations. Accordingly, parties to existing, same-market
television JSAs whose attribution results in a violation of the
ownership limits will have two years from the effective date of the
Report and Order to terminate or amend those JSAs or otherwise come
into compliance with the local television ownership rule. No transition
period is granted with regard to new television JSAs that would cause
the broker to exceed the media ownership limits. However, parties may
renew existing television JSAs even if renewal would cause the broker
to exceed the media ownership limits, provided that the renewal period
shall not exceed the two-year transition period provided for in the
Report and Order. The Report and Order finds that this transition
period will give licensees with television JSAs sufficient time to make
alternative arrangements--such as revise the agreement to limit the
amount of advertising time sold to 15 percent of the weekly advertising
time or enter into an agreement with another entity that would not
result in an impermissible attributable interest--or to seek waiver
relief from the Commission's rules, if appropriate. Parties that
believe that the application of the attribution rules to their
particular circumstances would not serve the public interest always
have the ability to seek a waiver. These steps will minimize the
adverse impact on small entities.
52. In addition, parties to existing, attributable television JSAs,
and/or parties to attributable television JSAs entered into after the
release of the Report and Order but before the filing requirement
becomes effective, must file a copy of such agreements with the
Commission within 30 days after the filing requirement becomes
effective. Going forward, parties to attributable television JSAs must
file copies of such agreements with the Commission within 30 days after
execution. The impact of this filing requirement will be minimal and
uniform for all entities. The Commission anticipates that compliance
will only require the expenditure of de minimis additional resources,
and believes, therefore, that the filing requirement is the least
economically burdensome alternative. In addition, entities may be
required to report attributable television JSAs on certain FCC Forms,
for example, in connection with a request for authority to transfer or
assign a station license. The Commission anticipates that compliance
will only require the expenditure of de minimis additional resources.
Accordingly, adverse economic impact on small entities will be minimal,
at most, and in many cases non-existent.
F. Report to Congress
53. The Commission will send a copy of the Report and Order,
including this FRFA, in a report to be sent to Congress pursuant to the
Congressional Review Act. In addition, the Commission will send a copy
of the Report and Order, including this FRFA, to the Chief Counsel for
Advocacy of the SBA. A copy of the Report and Order and FRFA (or
summaries thereof) will also be published in the Federal Register.
V. Ordering Clauses
54. Accordingly, it is ordered, that pursuant to the authority
contained in sections 1, 2(a), 4(i), 303, 307, 309, 310, and 403 of the
Communications Act of 1934, as amended, 47 U.S.C. 151, 152(a), 154(i),
303, 307, 309, 310, and 403, and section 202(h) of the
Telecommunications Act of 1996, the Report and Order is adopted. The
rule modifications shall be effective June 19, 2014, except for those
rules and requirements involving Paperwork Reduction Act burdens, which
shall become effective on the effective date announced in the Federal
Register notice announcing OMB approval. Changes to FCC Forms required
as the result of the rule amendments adopted herein will become
effective on the effective date announced in the Federal Register
notice announcing OMB approval.
55. It is further ordered, that the proceeding MB Docket No. 04-256
IS terminated.
56. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of the Report and Order, including the Final Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
Business Administration.
List of Subjects 47 CFR part 73
Radio, Reporting and recordkeeping requirements, Television.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
For the reasons discussed in the preamble, the Federal
Communications Commission amends 47 CFR part 73 as follows:
PART 73--RADIO BROADCAST SERVICES
0
1. The authority citation for part 73 continues to read as follows:
Authority: 47 U.S.C. 154, 303, 334, 336 and 339.
0
2. Section 73.3555 is amended by redesignating paragraph k.2. as k.3.,
in Note 2 to Sec. 73.3555, adding new paragraph k.2., and revising
newly redesignated paragraph k.3. to read as follows:
Sec. 73.3555 Multiple ownership.
* * * * *
Note 2 to Sec. 73.3555: * * *
k. * * *
2. Where two television stations are both located in the same
market, as defined for purposes of the local television ownership rule
contained in paragraph (b) of this section, and a party (including all
parties under common control) with a cognizable interest in one such
station sells more than 15 percent of the advertising time per week of
the other such station, that party shall be treated as if it has an
interest in the brokered station subject to the limitations set forth
in paragraphs (b), (c), (d), and (e) of this section.
3. Every joint sales agreement of the type described in this Note
shall be undertaken only pursuant to a signed written agreement that
shall contain a certification by the licensee or permittee of the
brokered station verifying that it maintains ultimate control over the
station's facilities, including, specifically, control over station
finances, personnel and programming, and by the brokering station that
the agreement complies with the limitations set forth in paragraphs
(b), (c), and (d) of this section if the brokering station is a
television station or with paragraphs (a), (c), and (d) of this section
if the brokering station is a radio station.
* * * * *
0
3. Section 73.3613 is amended by revising paragraph (d)(2) to read as
follows:
Sec. 73.3613 Filing of contracts.
* * * * *
(d) * * *
(2) Joint sales agreements: Joint sales agreements involving radio
stations
[[Page 29007]]
where the licensee (including all parties under common control) is the
brokering entity, the brokering and brokered stations are both in the
same market as defined in the local radio multiple ownership rule
contained in Sec. 73.3555(a), and more than 15 percent of the
advertising time of the brokered station on a weekly basis is brokered
by that licensee; joint sales agreements involving television stations
where the licensee (including all parties under common control) is the
brokering entity, the brokering and brokered stations are both in the
same market as defined in the local television multiple ownership rule
contained in Sec. 73.3555(b), and more than 15 percent of the
advertising time of the brokered station on a weekly basis is brokered
by that licensee. Confidential or proprietary information may be
redacted where appropriate but such information shall be made available
for inspection upon request by the FCC.
* * * * *
[FR Doc. 2014-10874 Filed 5-19-14; 8:45 am]
BILLING CODE 6712-01-P