[Federal Register Volume 64, Number 121 (Thursday, June 24, 1999)]
[Rules and Regulations]
[Pages 33788-33796]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15959]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[CS Docket No. 95-178; FCC 99-116]
Definition of Markets for Purposes of the Cable Television
Broadcast Signal Carriage Rules
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In this document, the Commission dismisses petitions for
reconsideration of the First Report and Order filed by Blackstar of Ann
Arbor, Inc., licensee of WBSX-TV and by Costa de Oro Television, Inc.,
licensee of KSTV, that ask for special treatment for certain kinds of
situations during the transition from ADIs to DMAs. The Commission has
found that special relief is not warranted for these stations as they
have taken advantage of the market modification process. Also addressed
are possible ways to ease the transition for both broadcasters and
cable operators, and the viewers they serve, as the Commission moves
from an ADI to a DMA-based market structure. The Commission has set
forth several procedural and evidentiary mechanisms to ameliorate the
impact the change in market definitions may have on cable operators and
broadcasters. The principal goal of the measures taken is to reduce, to
the maximum extent feasible, cable subscriber confusion, and disruption
in viewing patterns, that may arise because of the change. The
Commission also improves the functioning of the ad hoc market
modification process mandated by the Communications Act. New rules have
been implemented encapsulizing the evidence necessary for filing market
modification petitions.
DATES: These rules are effective July 26, 1999. Public comments on the
modified information collection requirements are due on or before July
14, 1999.
ADDRESSES: A copy of any comments on the modified information
collection requirements should be submitted to Judy Boley, Federal
Communications Commission, Room 1-C804, 445 12th Street, SW,
Washington, DC 20554, and to Timothy Fain, OMB Desk Officer, 10236
NEOB, 725--17th Street, NW, Washington, DC 20503.
FOR FURTHER INFORMATION CONTACT: Ben Golant, Consumer Protection and
Competition Division, Cable Services Bureau, at (202) 418-7111. For
additional information concerning the information collection contained
herein, contact Judy Boley at (202) 418-0214, or via the Internet at
jboley@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's Order
on Reconsideration and Second Report and Order, CS Docket No. 95-178,
FCC 99-116 adopted May 21, 1999 and released May 26, 1999. The full
text of this decision is available for inspection and copying during
normal business hours in the FCC Reference Center, 445 12th St. SW,
Washington, DC 20554, and may be purchased from the Commission's copy
contractor, International Transcription Service, (202) 857-3800, 445
12th St. SW, Washington, DC 20554.
Synopsis of the Order on Reconsideration and Second Report and
Order
1. The First Report and Order and Further Notice of Proposed
Rulemaking (``First Order''), 61 FR 29312, in this proceeding
established new television market definitions for purposes of the cable
television signal carriage and retransmission consent rules. The
Commission concluded that it was appropriate to change market
definitions from Arbitron areas of dominant influence (``ADIs'') to
Nielsen Media Research designated market areas (``DMAs'') for must-
carry/retransmission consent elections. That action was necessary
because the Arbitron market definition mechanism previously relied on
was no longer available. However, the Commission continued to use
[[Page 33789]]
Arbitron's 1991-1992 Television ADI Market Guide designations for the
1996-1999 must-carry/retransmission consent election period and
postponed the switch to DMAs until the third must-carry/retransmission
consent cycle that is to commence on January 1, 2000.
2. The First Order delayed the transition to DMAs because of
concerns related to the transition from one market definition to
another and the relationship of such a transition to the ad hoc market
boundary change process provided for in Section 614(h) of the
Communications Act. For this reason, the Further Notice of Proposed
Rulemaking was issued to solicit additional information and provide
parties an opportunity to further consider issues relating to the
transition to market designations based on DMAs. It also sought comment
on procedures for refining the Section 614(h) market modification
process.
3. Our task in this Order on Reconsideration and Second Report and
Order is twofold. First, we consider the arguments raised in petitions
for reconsideration of the First Report and Order filed by Blackstar of
Ann Arbor, Inc., licensee of WBSX-TV (ch. 31--Ann Arbor, MI) (``WBSX-
TV''), and by Costa de Oro Television, Inc., licensee of KSTV (ch. 57--
Ventura, CA) (``KSTV-TV''), that ask for special treatment for certain
kinds of situations during the transition from ADIs to DMAs. For the
reasons discussed below, we conclude that no special treatment for
these petitioners is warranted.
4. Second, we address the issues raised in the Further Notice, and
by the comments filed in response to that Notice, regarding possible
ways to ease the transition for both broadcasters and cable operators,
and the viewers they serve, as we move from an ADI to a DMA-based
market structure. We also take this opportunity to improve the
functioning of the ad hoc market modification process mandated by
Section 614(h) of the Communications Act. Our principal goal is to
reduce, to the extent feasible, cable subscriber confusion and
disruption in viewing patterns that may arise because of the switch
from ADIs to DMAs. Another goal is to clarify the procedures for
determining markets for must carry purposes so that the administration
of Section 614 by the Commission is efficient and workable.
5. Under provisions added to the Act by the Cable Television
Consumer Protection and Competition Act of 1992 (``1992 Cable Act''),
local commercial broadcast television stations may elect whether they
will be carried by local cable television systems, and open video
systems, under the mandatory carriage (``must-carry'') or
retransmission consent rules. A station electing must carry rights is
entitled to insist on cable carriage in its local market. Should a
local station choose retransmission consent, it and the cable system
negotiate the terms of a carriage agreement and the station is
permitted to receive compensation in return for carriage. Stations are
required to make this election once every three years. The current
cycle commenced on January 1, 1997, with elections having been made by
October 1, 1996.
6. For the purposes of these carriage rights, a station is
considered local on all cable systems located in the same television
market as the station. As enacted, Section 614(h)(1)(C) of the Act
specifies that a station's market shall be determined in the manner
provided in section 73.3555(d)(3)(i) of the Commission's rules, in
effect on May 1, 1991. Section 73.3555(d)(3)(i), now redesignated as
section 73.3555(e)(2)(i), is a separate rule concerned with broadcast
station ownership issues that refers to Arbitron's ADIs. An ADI is a
geographic market designation that defines each television market based
on measured viewing patterns. Essentially, each county or portion of a
county in the contiguous areas of the United States is allocated to a
discrete market based on which home-market stations receive a
preponderance of total viewing hours in the county. For the purposes of
this calculation, both over-the-air and cable television viewing are
included. Because of the topography involved, certain counties are
divided into more than one sampling unit. Also, in certain
circumstances, a station may have its home county assigned to an ADI
even though it receives less than a preponderance of the audience in
that county.
7. Moreover, under the ``home county rule,'' the county in which
the station's community of license is located is considered within its
market. Under Arbitron, a station's city of license, and its home
county, may be located in one ADI but assigned by Arbitron to another
ADI for ratings reporting purposes. The station may assert its must
carry rights, or elect retransmission consent, against cable operators
in its home county and all of the cable operators in the ADI to which
the station is assigned.
8. In addition to ADIs that generally define the area in which a
station is entitled to insist on carriage, Section 614(h) of the Act
directs the Commission to consider individual requests for changes
through a market modification process, including the determination that
particular communities may be part of more than one television market.
The Act provides that the Commission may ``With respect to a particular
television broadcast station, include additional communities within its
television market or exclude communities from such station's television
market to better effectuate the purposes of this section.''
9. Section 614(h)(1)(C)(ii) states that in deciding requests for
market modifications, the Commission shall consider several factors:
(I) whether the station, or other stations located in the same area,
have been historically carried on the cable system or systems within
such community; (II) whether the television station provides coverage
or other local service to such community; (III) whether any other
television station that is eligible to be carried by a cable system in
such community in fulfillment of the requirements of this section
provides news coverage of issues of concern to such community or
provides carriage or coverage of sporting and other events of interests
to the community; and (IV) evidence of viewing patterns in cable and
noncable households within the areas served by the cable system or
systems in such community. Section 76.59 of the rules provides that
broadcast stations and cable operators shall submit requests for market
modifications in accordance with the procedures for filing petitions
for special relief.
10. Arbitron discontinued its television ratings and research
business after the Commission established the mechanism for determining
a station's local market for purposes of the triennial must carry/
retransmission consent election. Thus, future editions of the
publications referred to in the rules are no longer available and new
procedures for defining market areas for must carry purposes had to be
established.
11. Historically, Arbitron and Nielsen have been the primary
national television ratings services. Conceptually, their market
designations--ADIs and DMAs--are the same. They both use audience
survey information from cable and noncable households to determine the
assignment of counties to local television markets based on the market
whose stations receive the largest share of viewing in the county. The
differences in their assignments of specific counties to particular
markets reflect a number of factors, including slightly different
methodologies and criteria as well as normal sampling and statistical
variations. Each company also has a policy for determining what
constitutes a separate market based on a complex
[[Page 33790]]
statistical formula. For example, Arbitron considers some areas, such
as Hagerstown, Maryland, or Sarasota, Florida, as separate markets,
compared to Nielsen, which includes Hagerstown in the Washington, DC.
DMA and Sarasota in the Tampa DMA. In addition, these services reserve
the right to take into account other considerations. Nielsen, in
particular, ``reserves the right not to create a DMA if there is a lack
of sufficient financial support of Nielsen Service in that potential
DMA.''
12. Nielsen has established a system to determine which stations
are considered ``local'' for ratings reporting purposes. This is the
``Market-Of-Origin'' assignment process and involves several
statistical calculations based upon viewership and other factors.
However, a station may petition Nielsen to change its Market-Of-Origin
assignment if both its transmitter and the majority of its Grade B
service contour are located in a different DMA than the DMA in which
the station's community of license is located. Such a petition must
include relevant information on which the petitioning station bases its
request for a change in Market-Of-Origin including, but not limited to,
community of license, present transmitter location, signal coverage
(including FCC coverage maps), audience data from previous
measurements, and/or competitive considerations. Nielsen reserves the
right to use its best judgment based upon the information available to
it in considering whether the change sought by the petition reflects
the reality of the market affected. The station's assignment is then
made available in Nielsen's Directory of Stations publication. Thus, it
appears that the home county rule applies in the DMA context as it had
in the ADI context.
13. In the First Order, the Commission concluded that Nielsen's DMA
market assignments provide the most accurate method for determining the
areas serviced by local stations, recognizing that over time the 1992-
92 ADI market list, if relied upon, would become outdated. Moreover, we
continued to believe that our 1993 decision to use updated market
designations for each election cycle to account for changing markets
was appropriate. Nielsen currently provides the only generally
recognized source of information on television markets that would
permit us to retain this policy. Thus, we concluded that Nielsen's DMA
market designations will provide the best method of ``delineat[ing]
television markets based on viewing patterns'' in the future.
14. We observed, however, that a shift to a DMA-based market
definition standard could result in some stations currently on local
cable systems being replaced, some other programming services (i.e.,
cable networks) being dropped to accommodate situations where the
number of stations entitled to carriage increases, and some channel
line-ups needing to be reconfigured to accommodate the channel
positioning requests of stations with new must-carry rights. The
Commission also voiced concern about the impact the change to DMAs
would have on the Section 614(h) market modification decisions already
in force. The consensus of commenters was that prior market
modification decisions should remain in effect. It was unclear,
however, whether cable operators could face conflicting obligations or
be subject to carriage of signals from multiple markets based on a
revised market standard when these modifications are considered in
conjunction with a new market definition. We did not receive any
information regarding the effect that such decisions, in conjunction
with a change to a DMA standard, would have on the must-carry
obligations of cable operators. In addition, we were unable to
determine the burden on the Commission to remedy conflicts that might
result from an immediate switch to DMAs. The complexity of such
situations and the administrative burden on the Commission and others
to resolve possible conflicts could, the Commission believed, disrupt
the orderly provision of local television service to subscribers.
15. Based on these considerations, the Commission postponed the
switch in market designation until the next must-carry/retransmission
consent takes effect on January 1, 2000, to ensure that potential
transitional problems could be addressed. We reasoned that the phased-
in approach would assist parties who expressed concerns that a switch
in market definitions would result in administrative burdens and costs
for cable operators, including small cable operators, and would impede
the entry of new market entrants, such as local exchange carriers
planning to operate cable systems under Title VI or the OVS provisions.
Thus, the Commission decided to continue to use the 1991-1992 ADI
market list for the 1996 election and to establish a framework that
uses updated DMA markets lists for the 1999 and subsequent elections.
16. Two parties, Blackstar of Ann Arbor, Inc., licensee of WBSX-TV
(channel 31, Ann Arbor, Michigan) (``WBSX-TV'') and Costa de Oro
Television, Inc., licensee of KSTV (channel 57, Ventura, California)
(``KSTV-TV'') filed petitions for reconsideration of the First Order
generally arguing that the Commission did not adequately consider
updated market information, unique to their situations, when
considering the transition from ADIs to DMAs.
17. We believe there is no reason to make special exceptions for
these two stations. The individual circumstances that apply to WBSX-TV
and KSTV-TV are most appropriately dealt with through the market
modification process, which takes into consideration their future DMA
assignments. Both stations have used the market modification process to
seek significant expansion of their ADI markets for must carry
purposes. WBSX-TV has already added 55 communities to its current ADI,
and KSTV-TV has added 22 communities. The Commission has specifically
indicated that information regarding DMAs could be useful in resolving
individual ad hoc market modification requests filed pursuant to
Section 614(h). The stations may therefore use the modification process
to change their DMAs, in the future, if the situation so warrants.
18. The Further Notice of Proposed Rulemaking sought comment on
mechanisms for facilitating the transition from a market definition
system based on ADIs to one based on DMAs. Commenters were asked to
consider whether special provisions should be made for particular types
of systems (e.g., systems with fewer than a specified number of
subscribers) to minimize the disruptions that could occur due to a
switch to DMAs. The Commission is also concerned about the potential
impact on consumers who are cable subscribers.
19. We are not making the change suggested by Southern. Its concern
about non-network territorial exclusivity arrangements appears to be
misplaced and are better left addressed in Gen. Docket No. 87-24, which
focuses on the network rules of concern to Southern. The change from
ADIs to DMAs for must carry purposes in section 76.55 affects neither
of the market listings referenced in Section 73.658(m) for purposes of
territorial exclusivity in non-network arrangements. Section 73.658(m)
provides that exclusivity may be secured in hyphenated markets included
in the top 100 markets listed in section 76.51 or, if the market in
question is not in the top 100 list, then Section 73.658(m) makes
reference to the ARB Television Market Analysis. Even though Arbitron's
television market analysis is no longer published,
[[Page 33791]]
there has been no change in the reference, and the Nielsen DMA list has
not been substituted theretofore. Because section 73.568(m) refers to
section 76.51, the reference to DMAs in section 76.55 is not relevant
to territorial exclusivity in non-network arrangements, and Southern's
objection to the switch to DMAs on this basis is unwarranted.
20. We agree with those commenters that continue to express concern
about the potentially disruptive consequences of switching to DMAs. A
comparison of the ADI markets currently used with the DMA markets that
will be used after the current election cycle is over, reveals that 135
counties change markets because of the switch from ADIs to DMAs. A
sampling of these counties suggests that, in certain instances, the
changes will have serious impact, even though a relatively small number
of cable systems and broadcasters would be involved. And, though a
strong case could be made for reversing the market shift based on the
ad hoc market evaluation factors contained in Section 614(h), this
statutory mechanism, in and of itself, may not significantly lessen the
impact of the change. Thus, we believe that some general relief is
warranted. We note that the change in market definition from ADI to DMA
will take effect on January 1, 2000, which prompts us to consider on
our own motion whether this timing would create a Year 2000 (``Y2K'')
problem, particularly for the cable systems that will experience
carriage or channel line-up changes. Commission staff has confirmed
with relevant industry representatives that cable systems' headend
signal processing equipment is not dependent on date or time, and,
therefore, the market definition change would not raise Y2K
considerations.
21. A cable system currently within a particular station's ADI, but
outside that station's DMA, may want to continue carrying that station
after the transition to DMAs because the station serves the local
interests of its subscribers. We believe that when the cable system
wants to carry a particular station, it is a strong indication that the
community it serves continues to be within the station's local market
notwithstanding the change in market definition. Therefore, to minimize
programming disruptions, we adopt a policy whereby a cable system
within a television station's ADI (but outside its DMA) that currently
carries the station on its channel line-up may continue to carry the
station, without being subject to copyright liability, even after the
transition to DMAs. We note that the Act's one-third channel capacity
cap, and related closest network affiliate provision, apply in this
particular situation. This policy adheres to the Commission's goals of
providing cable subscribers with television programming that serves the
interests of localism, while also reducing the possibility of channel
line-up disruptions and subsequent subscriber confusion. Our approach
also takes into account the Commission's need for current market
information that only Nielsen can provide while, at the same time,
ensuring that cable subscribers are not deprived of valued broadcast
services. In these cases, the commercial television station is, and
will continue to be, local with respect to this cable system, in
conformance with section 76.55 of the Commission's rules. This policy
applies to stations that elected retransmission consent or must carry.
22. As stated earlier, one of the principal goals in this
proceeding is to reduce channel line-up disruptions whenever possible.
The rule changes we are adopting, which permit individual fact-specific
Commission adjustments prior to the shift to DMAs, seek to accomplish
that goal. The new rules, amending sections 76.55(e) and 76.59, will
include the following features:
--In the absence of any mandatory carriage complaint or market
modification petition, cable operators in communities that change from
one market to another will be permitted to treat their systems as
either in the new market, or with respect to the specific stations
carried prior to the market change, as in both markets.
--If any dispute is triggered by a change in markets that results in
the filing of a mandatory carriage complaint, any affected party may
respond to that complaint by filing a market modification request. The
market modification request and the carriage complaint will then be
addressed simultaneously. All broadcast signal carriage issues, such as
channel positioning matters, would be addressed in the same proceeding.
Pending complaints and petitions will be disposed of in a single
proceeding whenever practicable.
23. We also find that where a broadcast station is dissatisfied
with a final market modification decision issued by the Commission, and
then successfully petitions Nielsen to change its market-of-origin in
response to the Commission's adverse decision, the Commission's market
modification decision remains controlling.
24. In Section 614(h) market modification cases, where issues are
raised as to which market the cable communities are properly
associated, the Commission will pay particular attention to the
following considerations:
--Where persuasive evidence exists showing that two markets have been
merged into a single market because there was insufficient financial
support from purchasers of the rating report available from the rating
service to maintain separate markets, or for other reasons unrelated to
market definitions relevant to the purposes of the Commission's
broadcast signal carriage rules, it will be presumed, in the absence of
a demonstration to the contrary, that the previous demarcation points
between the markets should be maintained. A failure of financial
support for the ratings service shall not be regarded as indicative of
a market change for purposes of the rules. Such evidence, as letters to
the station from Nielsen explaining the change, would fulfill the
burden of proof in this context.
--Where a county is shifted into a noncontiguous market (e.g., a county
in State A is considered part of a DMA in State B, which is not
geographically contiguous with the county in State A), in considering
whether that shift should be followed or revised through the Section
614(h) process, localism as reflected in over-the-air audience ratings,
will be given particular attention. That is, because over-the-air
audience data is a more accurate and reliable indication of local
viewership, greater evidentiary weight will be given to over-the-air
audience data than to cable audience data. Careful attention will be
given to unique market situations, like those in the Rocky Mountain
area, where counties are sometimes hundreds of miles away from the core
of the market. In considering a requested market modification, the
Commission will closely examine whether the challenged market
redesignation resulted from audience change due to cable carriage of
the signals in question as opposed to resulting from changes in the
local market.
--Where Nielsen's market redesignation is the result of potentially
transitory programming popularity shifts on particular stations rather
than from significant changes in the facilities or locations of such
stations, the Commission may, upon request, resurrect the former market
structure. Thus, for example, if a county were shifted to market A
because the stations in that market garnered a 52% share of the
audience and
[[Page 33792]]
deleted from market B because its stations garnered only a 48% share,
the Commission would consider leaving the market unchanged because
stability is in the public interest and the underlying structure of the
market has not been significantly altered to warrant the difficulties
associated with the change.
--We will also consider factors such as changes in the time zone from
the old market to the new market, as well as significant disruptions to
subscribers. Evidence of significant disruptions to subscribers could
include extensive changes in channel line-ups and subscriber objections
to the change.
--Where a cable operator or broadcaster seeks to remain associated with
a smaller market rather than be shifted to a larger market, the
Commission will give weight to this consideration in a market
modification proceeding. Supporting the smaller market is consistent
with the Section 614(h) policy of paying ``particular attention to the
value of localism.'' In general, small cable system and small broadcast
station concerns will be given careful attention. In this regard, the
Commission will review whether such a change supports the policy of
localism. In this situation, we will also take into consideration
broadcasters' costs to deliver signals to cable system headends in the
market and the costs to cable systems to receive local market stations.
--Separate from the specifics of the market modification process, the
four statutory criteria, and other evidence considered in that process,
the Commission will consider whether extreme hardship is imposed on
small cable systems or small broadcast stations, often those
unaffiliated with the top networks, by the DMA conversion process. Such
hardship would include disproportionate expense to the system and
programming disruption to subscribers that is exacerbated by the small
size of the system. Evidence of such hardship would include reliable
cost estimates for carrying the new stations and channel position
conflicts between old and new stations. We believe this hardship scheme
will address the concerns raised by small cable operators in their
comments, and are more closely aligned with the Act's localism tenets
than the small operators' opt out and reimbursement proposals
discussed.
25. We noted concern about the effect of changing to a DMA market
definition on previous Section 614(h) decisions and petitions pending
before the Commission. Specifically, we requested commenting parties to
address the consequences of a shift in definitions on the more
particularized market boundary redefinition process contained in
Section 614(h), the decisions that have been made under that section,
and the proceedings under it that would result from shifting market
definitions.
26. We conclude that market modification requests filed prior to
the effective date of the change from ADI to DMA, including petitions,
petitions for reconsideration, and applications for review, will be
processed under Arbitron's ADI market definitions. We do not believe
that the petitions for reconsideration and applications for review
currently pending will be affected by the conversion to DMAs because,
in most of these cases, the market assignment will not change. In cases
in which the conversion to DMAs will have a direct consequence, we will
take the future DMA assignment into account, as we have done since the
First Order was released. We will also leave intact final market
modification cases that have not been appealed and/or cases that have
been subject to final Commission review so as to avoid disturbing
settled expectations.
27. In addition, we agree with NCTA's argument that where the
Commission has previously decided to delete a community from a
station's ADI market, that deletion will remain in effect after the
conversion to DMAs. We also recognize NCTA's concern that stations
should not be able to assert carriage rights in its former market while
a market modification deletion request is pending. Generally, a cable
operator may not delete a commercial television station from carriage
during the pendency of a market modification proceeding. However, if
conversion to DMAs moves a station out of the ADI that is the subject
of a pending deletion request, the deletion request is effectively
moot, and the cable operator may drop the station. We believe that few,
if any, pending proceedings will fall within this factual pattern.
Nevertheless, we agree with NCTA that, as we stated earlier, the Act
and our rules cannot be read to allow a television station to claim
carriage rights in more than one DMA, barring a modification by the
Commission.
28. We also sought comment on what changes in the modification
process may be warranted given that administrative resources available
to process Section 614(h) requests are limited and the Act established
a 120-day time period for action on these petitions. We stated that new
techniques may be needed to increase the efficiency of the decision
making process. Under the existing process, a party is free to make its
case using whatever evidence it deems appropriate. One suggested means
of expediting the modification process was to establish more focused
and standardized evidentiary specifications. Therefore, we proposed to
establish specific evidentiary requirements in order to support market
modification petitions under Section 614(h) of the Act. We requested
comment on the following specific information submission requirements
and sought alternatives that would assist the Commission in its review
of individual requests. In particular, we proposed that each filing
include exhibits showing:
--A map detailing the relevant community locations and geographic
features, disclosing station transmitter sites, cable system headend
locations, terrain features that would affect station reception, and
transportation and other local factors influencing the shape of the
economic market involved. Relevant mileage would be clearly disclosed;
--Historical cable carriage, illustrated by the submission of
documents, such as rate cards, listing the cable system's channel line-
ups for a period of several years.
--Coverage provided by the stations, including maps of the areas in
question with the universe of involved broadcast station contours and
cable system franchise areas clearly delineated with the same level of
specificity as the maps filed with the Commission for broadcast
licensing proceedings;
--Information regarding coverage of news or other programming of
interest to the community as demonstrated by program logs or other
descriptions of local program offerings, such as detailed listings of
the programming provided in a typical week that address issues of
importance in the community in question and not the market in general;
--Other information that demonstrates a nexus between the station and
the cable community, including data on transportation, shopping, and
labor patterns;
--Published audience data for the relevant stations showing their
average all day audience (i.e., the reported audience averaged over
Sunday-Saturday, 7 a.m.-1 a.m., or an equivalent time period) for both
cable and noncable households over a period of several years.
[[Page 33793]]
29. We will adopt the standardized evidence approach with regard to
market modification petitions and amend the rules accordingly.
Petitions that do not provide the evidence required by the rule will be
dismissed without prejudice. This option has distinct advantages.
First, it promotes administrative efficiency. Commission staff would no
longer have to spend time tracking down the appropriate maps, ratings
data, and carriage records that are missing from the record. Nor would
Commission staff need to contact the relevant party to request the
information that should have been included in the filing in the first
place. With the relevant evidence available, the resources needed to
process modification requests would be reduced. It now takes almost the
entire 120-day statutory period to research, draft, adopt, and release
a market modification decision. The interests of both broadcasters and
cable operators will be advanced by a standardized evidentiary approach
that will facilitate the decision-making process. By adopting the
standardized evidence option, we may be able to bring greater
uniformity and certainty to the process and avoid unnecessary
reconsideration petitions and appeals, which will enable us to redirect
administrative resources that would have been devoted to those
proceedings.
30. In addition to the evidence delineated above, we encourage
petitioners to provide a more specific technical coverage showing,
through the submission of service coverage prediction maps that take
terrain into account, particularly maps using the Longley-Rice
prediction methodology. In situations involving mountainous terrain or
other unusual geographical feature, the Commission will consider
Longley-Rice propagation studies in determining whether or not a
television station actually provides local service to a community under
factor two of the market modification test. We will view such studies
as probative evidence in our analysis and a proper tool to augment
Grade B contour showings. The Longley-Rice model provides a more
accurate representation of a station's technical coverage area because
it takes into account such factors as mountains and valleys that are
not specifically reflected in a traditional Grade B contour analysis.
Since both the Commission and the broadcasting industry have relied
upon the Longley-Rice model in determining the digital television Table
of Allocations, these studies will become increasingly useful in
defining market areas for digital television stations as they come on
the air.
31. We do not find merit in the argument that the standardized
evidence option would pose an unreasonable financial burden on
petitioners. We believe that the requested evidence should be
obtainable without unreasonable difficulty and is in any case the kind
of information that should be reviewed in determining whether a filing
is appropriate. Most of the requested information has been included by
more careful petitioners in the past without complaint about costs or
administrative difficulties. Our decision here simply standardizes the
type of evidence we find relevant in processing market modification
petitions. However, if a requested item is in the exclusive control of
the opposing party, and the opposing party refuses to provide the
information, we will take into consideration which party is responsible
for the absence of the requested information.
32. ALTV contends that the standardized evidence approach conflicts
with the Act because Section 614(h) specifies a limited range of
evidence needed to support a market modification petition. We disagree.
The language of Section 614(h) provides that in considering market
modification requests, ``the Commission shall afford particular
attention to the value of localism by taking into account such factors
as * * *'' (emphasis added), indicating that the factors are non-
exclusive. Likewise, the legislative history accompanying Section
614(h) indicates that the four factors are non-exclusive, and we have
interpreted this language to mean that the parties may submit any
additional evidence they believe is appropriate. The approach we adopt
today adds substance to this directive by clearly indicating what kind
of evidence is necessary for a modification petition to be deemed
complete. Parties may continue to submit whatever additional evidence
they deem appropriate and relevant.
33. The second proposal proffered by the Commission to increase the
efficiency of the decision making process was to alter to some extent
the burden of producing the relevant evidence. Thus, for example,
Section 614(h) establishes four statutory factors to govern the ad hoc
market change process, including historical carriage, local service,
service from other station, and audience viewing patterns. These
factors are intended to provide evidence as to a particular station's
market area, but they are not the only factors considered. These
factors must be considered in conjunction with other relevant
information to develop a result that is designed to ``better effectuate
the purposes'' of the must-carry requirements. The Notice sought
comment on whether the process could be expedited by permitting the
party seeking the modification to establish a prima facie case based on
historical carriage, technical signal coverage of the area in question,
and off-air viewing. Such factors track the statutory provision and are
relatively free from factual dispute. The presentation of such a prima
facie case could then trigger an obligation on the part of any
objecting entity to complete the factual record by presenting
conflicting evidence as to the actual scope of the economic market
involved. This could include, for example, programming information and
other evidence as to the local advertising market involved. Dividing
the obligations in this fashion, the Notice suggested, would force the
party with the best access to relevant information to disclose that
information at the earliest possible point in the process.
34. We find that the prima facie option is not the proper approach
because it seems likely to create another area for procedural disputes.
In contrast to the standardized evidence approach, which provides a
framework that should expedite review, we are concerned that the prima
facie approach, while possibly streamlining the process, would
sacrifice the flexibility to consider all useful evidence. We also
reject the market deletion plan proposed by Paxson. Under this
approach, the Commission need only find that the cable system and the
broadcaster share a DMA, and the cable system still has capacity for
the carriage of local signals, in order to dismiss a market deletion
petition. We believe this plan is contrary to the plain meaning of the
Act because it ignores the four statutory factors that we must take
into account when reviewing market deletion requests.
35. With regard to WRNN-TV and Paxson's request that programming
should be given more weight in the modification analysis, we believe
that it is inappropriate to state that one factor is universally more
important than any other, as each is valuable in assessing whether a
particular community should be included or excluded from a station's
local market, and the relative importance of particular factors will
vary depending on the circumstances in a given case. Programming is
considered in the context of Section 614(h) proceedings only insofar as
it serves to demonstrate the scope a station's existing market and
service area, not as
[[Page 33794]]
a quid pro quo that guarantees carriage or an obligation that must be
met to obtain carriage. However, we do find that such information is
particularly useful in determining if the television station provides
specific service to the community subject to modification. As such, we
will include programming of local interest in the analysis along with
mileage, Grade B contour coverage, and physical geography, when
reviewing the local service element of the market modification test.
36. We continue to believe that our interpretation of Section
614(h), and the evidence we have used to analyze local service and
adjust markets is reasonable and consistent with the language of the
Act and statutory intent. We note that the arguments Paxson and WRNN
raise were addressed at length in the New York ADI Appeals Memorandum
Opinion and Order, (``New York ADI Order''), 12 FCC Rcd 12262 (1997),
which disposed of numerous separate must carry/market modification
appeals involving seven New York ADI cable operators and five
television stations. The Commission's decision, subsequently affirmed
by the United States Court of Appeals for the Second Circuit, WLNY v.
FCC, 163 F.3d 187 (2d Cir. 1998), generally affirmed a staff decision
to retain certain communities, and to delete other communities, from
each of the stations' markets based on the four statutory factors, with
particular attention paid to the local service factor as measured by
Grade B contours and geographic distance, as well as other
considerations. The Court's opinion fully endorsed the Commission's
approach to market modifications and agreed that our careful balancing
of the enumerated statutory factors, and other important
considerations, are entirely consistent with the language and intent of
the Act.
37. We note that Section 614(h) prohibits cable operators from
deleting from carriage commercial broadcast stations during the
pendency of a market modification request but does not address
maintaining the status quo with respect to additions. Given the absence
of a parallel statutory directive with respect to channel additions, we
see no reason to depart from the general presumption that a decision is
valid and binding until it is stayed or overruled. To the extent the
process aids broadcast stations in both retaining and obtaining cable
carriage rights, that appears to be the result intended by the
statutory framework adopted.
Market Entry Analysis
38. Section 257 of the Act requires the Commission to complete a
proceeding to identify and eliminate market entry barriers for
entrepreneurs and other small businesses in the telecommunications
industry. The Commission is directed to promote, inter alia, a
diversity of media voices and vigorous economic competition. We believe
that this Order is consistent with the objectives of Section 257 in
that it promotes a smooth transition to DMAs for both cable operators
and broadcasters.
Paperwork Reduction Act
The requirements adopted in this Report and Order have been
analyzed with respect to the Paperwork Reduction Act of 1995 (the
``1995 Act'') and would impose modified information collection
requirements on the public. The Commission has requested Office of
Management and Budget (``OMB'') approval, under the emergency
processing provisions of the 1995 Act (5 CFR 1320.13), of the modified
information collection requirements contained in this Report and Order.
Public comments are due on or before 20 days after date of publication
of this Notice in the Federal Register. OMB comments are due on or
before 30 days after date of publication of this Notice in the Federal
Register. Comments should address: (a) whether the proposed collection
of information is necessary for the proper performance of the functions
of the Commission, including whether the information would have
practical utility; (b) the accuracy of the Commission's burden
estimates; (c) ways to enhance the quality, utility, and clarity of the
information collected; and (d) ways to minimize the burden of the
collection of information on the respondents, including the use of
automated collection techniques or other forms of information
technology.
OMB Approval Number: 3060-0546.
Title: Definition of Markets for Purposes of the Cable Television
Broadcast Signal Carriage Rules.
Type of Review: Revision of existing collection.
Respondents: Business and for-profit entities.
Number of Respondents: 150.
Estimated Time per Response: 4-40 hours.
Frequency of Response: On occasion filing requirement.
Total Estimated Annual Burden to Respondents: 1,680 hours.
Total Estimated Annual Cost to Respondents: $721,500.
Needs and Uses: This collection (OMB 3060-0546) accounts for the
paperwork burden imposed on entities when undergoing the market
modification request process. Information furnished in market
modification filings is used by the Commission to deem that the
television market of a particular commercial television broadcast
station should include additional communities within its television
market or exclude communities from such station's television market.
Final Regulatory Flexibility Act Analysis
39. As required by Section 603 of the Regulatory Flexibility Act, 5
U.S.C. Section 603 (RFA), an Initial Regulatory Flexibility Analysis
(IRFA) was incorporated in the First Order and Further Notice of
Proposed Rulemaking, 61 FR 29312. The Commission sought written public
comments on the proposals in the Further Notice including comments on
the IRFA. The FRFA conforms to the RFA, as amended by the Contract with
America Advancement Act of 1996 (CWAAA), Pub. L. 104-121, 110 Stat.
847.
40. Need and Purpose of this Action: This action is necessary
because the procedure for determining local television markets for
signal carriage purposes relies on a market list no longer published by
the Arbitron Ratings Company. Moreover, action is required to mitigate
disruptions in cable channel line-ups that will be caused by the shift
to a new television market paradigm.
41. Summary of Issues Raised by the Public in Response to the
Initial Regulatory Flexibility Analysis: SCBA filed comments in
response to the Initial Regulatory Flexibility Analysis. SCBA states
that the Commission's objective of a smooth transition from a market
definition based on ADIs to one based on DMAs can be accomplished with
respect to small cable systems by creating special transition rules.
SCBA has submitted small cable transition rules that allegedly will
help minimize regulatory burdens on small cable systems. SCBA first
proposes rules that allow qualified small cable systems to opt out of
the change in market definitions for the 1999 election. According to
SCBA, this will allow certain small cable systems an additional three
years to prepare for the impact of market redefinition. In the
alternative, SCBA suggests transition rules, detailed in paragraphs 29-
30, above, that will protect existing programming and shift certain
costs associated with market redefinition to the broadcasters that
benefit from those costs. These comments are addressed in the Order.
[[Page 33795]]
42. Description and Estimate of the Number of Small Entities
Impacted. The RFA defines the term ``small entity'' as having the same
meaning as the terms ``small business,'' ``small organization,'' and
``small governmental jurisdiction,'' and the same meaning as the term
``small business concern'' under Section 3 of the Small Business Act.''
A small 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).
43. Cable Operators. The Communications Act at 47 U.S.C. Section
543 (m) (2) defines a small cable operator as ``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.'' The Commission has determined that
there are 61,700,000 subscribers in the United States. We have found
that an operator serving fewer than 617,000 subscribers shall be deemed
a small operator, if its annual revenues, when combined with the total
annual revenues of all of its affiliates, do not exceed $250 million in
the aggregate. Based on available data, we find that the number of
cable operators serving 617,000 subscribers or less totals 1,450.
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.
We are likewise unable to estimate the number of these small cable
operators that serve 50,000 or fewer subscribers in a franchise area.
We can, however, assume that the number of cable operators serving
617,000 subscribers or less that (1) are not affiliated with entities
whose gross annual revenues exceed $250,000,000 or (2) serve 50,000 or
fewer subscribers in a franchise area, is less than 1450.
44. SBA has developed a definition of small entities for cable and
other pay television services, which includes all such companies
generating less than $11 million in revenue annually. This definition
includes cable systems operators, closed circuit television services,
direct broadcast satellite services, multipoint distribution systems,
satellite master antenna systems and subscription television services.
According to the Census Bureau, there were 1,323 such cable and other
pay television services generating less than $11 million in revenue
that were in operation for at least one year at the end of 1992.
45. Open Video System (``OVS''). To date the Commission has
certified 23 OVS systems, at least two of which are known to be
currently providing service. Little financial information is available
for entities authorized to provide OVS that are not yet operational. We
believe that one OVS licensee may qualify as a small business concern.
Given that other entities have been authorized to provide OVS service
but have not yet begun to generate revenue, we conclude that at least
some of the OVS operators qualify as small entities.
46. Television Stations. The proposed rules and policies will apply
to television broadcasting licensees, and potential licensees of
television service. The Small Business Administration defines a
television broadcasting station that has no more than $10.5 million in
annual receipts as a small business. Television broadcasting stations
consist of establishments primarily engaged in broadcasting visual
programs by television to the public, except cable and other pay
television services. Included in this industry are commercial,
religious, educational, and other television stations. Also included
are establishments primarily engaged in television broadcasting and
which produce taped television program materials. Separate
establishments primarily engaged in producing taped television program
materials are classified under another SIC number. There are
approximately 1,589 operating full power television broadcasting
stations in the nation as of April 30, 1999. Approximately 1,200 of
those stations are considered small businesses.
47. In addition to owners of operating television stations, any
entity who seeks or desires to obtain a television broadcast license
may be affected by the rules contained in this item. The number of
entities that may seek to obtain a television broadcast license is
unknown.
48. Reporting, Recordkeeping and Other Compliance Requirements. The
rules adopted in this Order will affect broadcast stations, cable
operators, and OVS system operators, including those that are small
entities. The rules adopted in this Order require broadcasters, cable
operators, and OVS operators to provide specific forms of evidence to
support market modification petitions. We do not believe that the rules
adopted here today will require any specialized skills beyond those
already used by broadcasters and cable operators.
49. Steps Taken to Minimize the Significant Economic Impact on
Small Entities and Significant Alternatives Rejected. While declining
to adopt SCBA's proposals, the Commission has implemented a procedural
mechanism allowing small cable systems to file hardship petitions, if
certain conditions are met. Specifically, the Commission will consider,
in a case-by-case adjudicatory proceeding, whether extreme hardship
would be imposed on small cable systems by requiring a transition to a
new DMA market. Such hardship would include disproportionate expense to
the system and programming disruption to subscribers exacerbated by the
small size of the system. Evidence of such hardship would include
reliable cost estimates for carrying the new stations; channel position
conflicts between old and new stations; or an extensive change in
channel line-ups. This mechanism should allay the concerns proffered by
small cable operators.
50. Report to Congress. The Commission shall send a copy of this
Final Regulatory Flexibility Analysis, along with this Order, in a
report to Congress pursuant to the Small Business Regulatory
Enforcement Fairness Act of 1996, 5 U.S.C. Section 801(a)(1)(A). A copy
of this FRFA will also be published in the Federal Register.
Ordering Clauses
51. Accordingly, it is ordered that, pursuant to Section 4(i),
4(j), 614 and 653 of the Communications Act of 1934, as amended, 47
U.S.C. 154(i), 154(j), 534 and 573, and Section 301 of the
Telecommunications Act of 1996, Pub. L. 104-104 (1996), part 76 is
amended as set forth in the rule changes, effective July 26, 1999.
It is further ordered that the commission's Office of Public
Affairs, Reference Operations Division, Shall send a copy of this Final
Report and Order, including the Final Regulatory Flexibility Analysis,
to the Chief Counsel for Advocacy of the Small Business Administration
in accordance with paragraph 603(a) of the Regulatory Flexibility Act.
Pub. L. 96-354, 94 Stat. 1164, 5 U.S.C. 601 et. seq. (1981).
List of Subjects in 47 CFR Part 76
Cable television.
[[Page 33796]]
Federal Communications Commission.
William F. Caton,
Deputy Secretary.
Rule Changes
Part 76 of Title 47 of the U.S. Code of Federal Regulations is
amended as follows:
PART 76--CABLE TELEVISION SERVICE
1. The authority citation for part 76 continues to read as follows:
Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a,
307, 308, 309, 312, 315, 317, 325, 503, 521, 522, 531, 532, 533,
534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 552, 554, 556,
558, 560, 561, 571, 572, 573.
2. Section 76.55 is amended by revising paragraphs (e)(1) through
(e)(6) to read as follows:
Sec. 76.55 Definitions applicable to the must-carry rules.
* * * * *
(e) Television market. (1) Until January 1, 2000, a commercial
broadcast television station's market, unless amended pursuant to
Sec. 76.59, shall be defined as its Area of Dominant Influence (ADI) as
determined by Arbitron and published in the Arbitron 1991-1992
Television ADI Market Guide, as noted, except that for areas outside
the contiguous 48 states, the market of a station shall be defined
using Nielsen's Designated Market Area (DMA), where applicable, as
published in the Nielsen 1991-92 DMA Market and Demographic Rank
Report, and that Puerto Rico, the U.S. Virgin Islands, and Guam will
each be considered a single market.
(2) Effective January 1, 2000, a commercial broadcast television
station's market, unless amended pursuant to Sec. 76.59, shall be
defined as its Designated Market Area (DMA) as determined by Nielsen
Media Research and published in its DMA Market and Demographic Rank
Report or any successor publication.
(i) For the 1999 election pursuant to Sec. 76.64(f), which becomes
effective on January 1, 2000, DMA assignments specified in the 1997-98
DMA Market and Demographic Rank Report, available from Nielsen Media
Research, 299 Park Avenue, New York, NY, shall be used.
(ii) The applicable DMA list for the 2002 election pursuant to
Sec. 76.64(f) will be the DMA assignments specified in the 2000-2001
list, and so forth for each triennial election pursuant to
Sec. 76.64(f).
(3) In addition, the county in which a station's community of
license is located will be considered within its market.
(4) A cable system's television market(s) shall be the one or more
ADI markets in which the communities it serves are located until
January 1, 2000, and the one or more DMA markets in which the
communities it serves are located thereafter.
(5) In the absence of any mandatory carriage complaint or market
modification petition, cable operators in communities that shift from
one market to another, due to the change in 1999-2000 from ADI to DMA,
will be permitted to treat their systems as either in the new DMA
market, or with respect to the specific stations carried prior to the
market change from ADI to DMA, as in both the old ADI market and the
new DMA market.
(6) If the change from the ADI market definition to the DMA market
definition in 1999-2000 results in the filing of a mandatory carriage
complaint, any affected party may respond to that complaint by filing a
market modification request pursuant to Sec. 76.59, and these two
actions may be jointly decided by the Commission.
* * * * *
3. Section 76.59 is amended by revising paragraphs (b) and (c) to
read as follows:
Sec. 76.59 Modification of television markets.
* * * * *
(b) Such requests for modification of a television market shall be
submitted in accordance with Sec. 76.7, petitions for special relief,
and shall include the following evidence:
(1) A map or maps illustrating the relevant community locations and
geographic features, station transmitter sites, cable system headend
locations, terrain features that would affect station reception,
mileage between the community and the television station transmitter
site, transportation routes and any other evidence contributing to the
scope of the market.
(2) Grade B contour maps delineating the station's technical
service area and showing the location of the cable system headends and
communities in relation to the service areas.
Note to paragraph (b)(2): Service area maps using Longley-Rice
(version 1.2.2) propagation curves may also be included to support a
technical service exhibit.
(3) Available data on shopping and labor patterns in the local
market.
(4) Television station programming information derived from station
logs or the local edition of the television guide.
(5) Cable system channel line-up cards or other exhibits
establishing historic carriage, such as television guide listings.
(6) Published audience data for the relevant station showing its
average all day audience (i.e., the reported audience averaged over
Sunday-Saturday, 7 a.m.-1 a.m., or an equivalent time period) for both
cable and noncable households or other specific audience indicia, such
as station advertising and sales data or viewer contribution records.
(c) Petitions for Special Relief to modify television markets that
do not include such evidence shall be dismissed without prejudice and
may be refiled at a later date with the appropriate filing fee.
[FR Doc. 99-15959 Filed 6-23-99; 8:45 am]
BILLING CODE 6712-01-P
