Order Code RL31925
CRS Report for Congress
Received through the CRS Web
FCC Media Ownership Rules:
Issues for Congress
Updated August 28, 2003
Charles B. Goldfarb
Specialist in Industrial Organization and Telecommunications Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

FCC Media Ownership Rules: Issues for Congress
Summary
The Federal Communications Commission adopted an order on June 2, 2003
that modified five of its media ownership rules and retained two others. The action
was taken to meet the requirement in the 1996 Telecommunications Act to perform
a biennial review and to be responsive to Court rulings that the Commission had
failed to provide sufficient justification for specific thresholds incorporated in two
of the rules. The modified media ownership rules are as follows:
(1) A broadcast network can now own and operate local broadcast stations that
reach, in total, up to 45 percent of U.S. television households (National
Television Ownership Rule). The old limit was 35 percent.
(2) Both newspaper-broadcast cross-ownership and television-radio cross-
ownership are: unrestricted in markets with nine or more television
stations; allowed subject to certain restrictions in markets with between
four and eight television stations; and prohibited in markets with three or
fewer television stations.
(3) A company can own three television stations in markets with 18 or more
television stations, and two television stations in markets with five or more
television stations, but in either case only one of the two stations can be
among the top four in ratings at time of purchase.
(4) The number of radio stations that a company can own in a local market,
which varies according to the total number of stations in the market,
remains the same, but the market is now defined in terms of the Arbitron
geographic market and non-commercial stations are included in the station
count.
The 50 percent “UHF discount” used to calculate market share for the National
Television Ownership Rule was retained, as was the prohibition on mergers among
the four major broadcast networks.
A number of bills have been introduced in the 108th Congress that reflect a range
of positions on many of these rules. The Commerce-Justice-State-Judiciary
Appropriations bill passed by the House (H.R. 2799) includes Section 624
prohibiting the FCC from using funds to grant, transfer, or assign a license that would
result in an entity having stations with an aggregate national audience reach
exceeding 35% of U.S. television households. S. 1046 would reverse the June 2,
2003 FCC actions on the national television ownership cap and cross-ownership rules
and give the FCC explicit authority to re-regulate as well as deregulate. S. 1264
would eliminate the UHF discount for license transfers occurring after June 2, 2003,
sunset the UHF discount in 2008, give the FCC the authority to re-regulate, and
require the FCC to review its ownership rules every four years. H.R. 1035 would
increase the national television ownership cap to 45 percent, codify the 50 percent
UHF discount, eliminate the newspaper-broadcast cross-ownership rule, and allow
for ownership of two television stations in markets with six stations. H.R. 2052
would explicitly keep the national television ownership cap at 35 percent. H.R. 1763
and S. 221 have a number of provisions to tighten up the radio multiple ownership
rules. This report will be updated as events warrant.

Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
National Ownership Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
National Television Ownership (% Cap) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dual Network Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Local Ownership Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Local Television Multiple Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Local Radio Ownership and Radio Market Definition . . . . . . . . . . . . . . . . 10
Cross-Media Limits: Newspaper-Broadcast and Television-Radio . . . . . . . 14
Transferability of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Legislative Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

FCC Media Ownership Rules:
Issues for Congress
The Federal Communications Commission adopted an order on June 2, 2003
that modified five of its media ownership rules and retained two others.1 The new
rules will go into effect on September 4, 2003 – thirty days after their appearance in
the Federal Register. Because of the potential that changes in these rules – which set
limits on national television ownership, newspaper-broadcast and radio-television
cross-ownership in a market, and ownership of multiple television or radio stations
in a market – could have far-reaching effects, a number of bills have been introduced
in the 108th Congress that reflect a range of positions on these issues. This report
analyzes each of the areas that have changed as a result of the FCC action or may
change as a result of congressional action. The various positions in the debate also
are summarized.
Background
The Commission had to revisit several of its broadcast ownership rules as a
result of Court rulings that the Commission had failed to provide sufficient
justification for specific thresholds incorporated into the rules. In addition, pursuant
to Section 202(h) of the Telecommunication Act of 1996,2 the FCC had to conduct
a biennial review of all of its broadcast ownership rules and repeal or modify any
regulation it determined to be no longer in the public interest.
1 Report and Order and Notice of Proposed Rulemaking, 2002 Biennial Regulatory
Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted
Pursuant to Section 202 of the Telecommunications Act of 1996,
MB Docket 02-277; Cross-
Ownership of Broadcast Stations and Newspapers,
MM Docket 01-235; Rules and Policies
Concerning Multiple Ownership of Radio Broadcast Stations in Local Markets,
MM Docket
01-317; Definition of Radio Markets, MM Docket 00-244; Definition of Radio Markets for
Areas Not Located in an Arbitron Survey Area,
MB Docket 03-130, adopted June 2, 2003
and released July 2, 2003. [Hereinafter, “Report and Order”] The Report and Order was
adopted in a three to two vote. All five commissioners released statements on June 2, 2003,
the day that the Commission voted to adopt the item, and also released statements that
accompanied the July 2, 2003 release of the Report and Order. The Report and Order was
published in the Federal Register on September 5, 2003, at 68 FR 46285.
2 Telecommunications Act of 1996, P.L. No. 104-104, 110 Stat. 56, § 202(h) states: “The
Commission shall review its rules adopted pursuant to this section and all of its ownership
rules biennially as part of its regulatory reform review under section 11 of the
Communications Act of 1934 and shall determine whether any of such rules are necessary
in the public interest as the result of competition. The Commission shall repeal or modify
any regulation it determines to be no longer in the public interest.”

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There has been some controversy surrounding the standard to be used in
reaching this public interest determination. The United States Court of Appeals for
the District of Columbia Circuit, in Fox Television Stations, Inc., v. Federal
Communications Commission, stated “Section 202(h) carries with it a presumption
in favor of repealing or modifying the ownership rules.”3 Further, in response to
petitions for rehearing, the Court stated “[T]he statute is clear that a regulation should
be retained only insofar as it is necessary in, not merely consonant with, the public
interest.”4 But in the same decision, the Court stated that “[t]he Court’s decision did
not turn at all upon interpreting ‘necessary in the public interest’ to mean more than
‘in the public interest’” and added “we think it better to leave unresolved precisely
what § 202(h) means when it instructs the Commission first to determine whether a
rule is ‘necessary in the public interest’ but then to ‘repeal or modify’ the rule if it is
simply ‘no longer in the public interest.’”5
The Commission majority took this sometimes inconsistent language to mean
that the Commission must overcome a high burden to retain any ownership rule.
Responding to a question from Senator McCain in the June 4, 2003 Senate
Commerce Committee hearing, Chairman Powell stated that the Court interprets the
Act to be “biased toward deregulation” and added that for the Commission to be in
concert with that interpretation it “cannot re-regulate.” In response to a question
from Senator Dorgan, Commissioner Abernathy stated that the Court’s interpretation
directs the Commission to minimize regulation as competition develops, not to
regulate to maximize the number of voices. In response to another question from
Senator McCain, all five commissioners agreed that it would be useful for Congress
to provide both the Court and the Commission guidance on the standard to use for
reviewing ownership rules and on whether the Act allows the Commission to re-
regulate broadcast ownership.
The FCC’s 2002 Biennial Review was initiated on September 12, 2002;6 review
of the Commission’s broadcast-newspaper cross-ownership rule and waiver policy
was initiated on September 13, 2001;7 and review of the Commission’s local radio
ownership rule and radio market definition rule was initiated on November 8, 2001.8
The FCC sought comment on whether each specific rule continued to serve the
3 280 F.3d at 1048.
4 293 F.3d 539.
5 293 F.3d 540.
6 Notice of Proposed Rule Making, 2002 Biennial Regulatory Review – Review of the
Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section
202 of the Telecommunications Act of 1996
, MB Docket No. 02-277, released September
23, 2002.
7 Order and Notice of Proposed Rule Making, Cross-Ownership of Broadcast Stations and
Newspapers,
MM Docket No. 01-235 and Newspaper/Radio Cross-Ownership Waiver
Policy
, MB Docket No. 96-197, released September 20, 2001.
8 Notice of Proposed Rule Making and Further Notice of Proposed Rule Making, Rules and
Policies Concerning Multiple Ownership of Radio Broadcast Stations in Local Market,
MM
Docket No. 01-317 and Definition of Radio Markets, MM Docket No. 00-244, released
November 9, 2001.

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Commission’s goals of diversity, competition, and localism – and if the rule served
some purposes while disserving others, whether the balance of the effects argued for
maintaining, modifying, or eliminating the rule.9
Partly as a result of the court remands, the FCC reviewed the advantages and
disadvantages of implementing rules that incorporate specific market share or
number of competitor threshold levels that are applicable across the board to all
entities vs. implementing some sort of flexible, yet quantifiable “diversity index” that
would allow for case-by-case reviews that more readily take into account market-
specific or company-specific characteristics. The Commission ultimately chose to
adopt a hybrid of the two approaches. It constructed a “diversity index” that it used
as the basis for setting the threshold levels in its new rules, but does not plan to use
as the basis for case-by-case reviews of proposed mergers. Unlike the Herfindahl-
Hirschmann Index, which the antitrust agencies apply to the actual market shares of
specific companies to make an initial determination of whether a proposed merger
merits further scrutiny, the Commission’s diversity index is not based on the actual
market shares of companies, but rather on the assumption that each television station
in a market provides the same diversity impact, and the same for each newspaper,
each radio station, etc.10 The Commission justified not using actual market shares
by arguing that it would be impossible to determine what portion of a television
station’s viewers, a radio station’s listeners, or a newspaper’s readers was actually
using that media outlet as a source of local news.
In the section of the order on policy goals, the Commission added a fourth
policy goal – regulatory certainty – to the three traditional goals of diversity,
competition, and localism.11 The Commission stated:12
The bright line rules we establish in this Order will protect diversity,
competition, and localism while providing greater regulatory certainty for the
affected companies than would a case-by-case review. Any benefit to precision
of a case-by-case review is outweighed, in our view, by the harm caused by a
lack of regulatory certainty to the affected firms and to the capital markets that
fund the growth and innovation in the media industry.
It concluded that the adoption of bright line rules rather than case-by-case analysis
provides certainty to outcomes, conserves resources, reduces administrative delays,
lowers transactions costs, increases transparency of process, and ensures consistency
in decisions, all of which foster capital investment in broadcasting. The Commission
conceded that bright line rules preclude a certain amount of flexibility. It is not clear
how the Commission would weigh the goal of regulatory certainty vis-a-vis the
traditional goals of diversity, competition, and localism, if the former were to be in
conflict with one or more of the latter. On one hand, the Commission stated that it
would continue to have discretion to review particular cases, and would have an
9 See, e.g., 67 FR 65751, ¶ 75.
10 On a purely mathematical basis, the assumption of equal diversity impact minimizes the
size of the diversity index and thus provides the highest estimate of the level of diversity.
11 Report and Order at ¶ 80-85.
12 Id. at ¶ 83.

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obligation to take a hard look both at waiver requests (where a bright line ownership
limit would proscribe a particular transaction) and at petitions to deny a license
transfer (where a bright line ownership limit would allow a particular transaction).
At the same time, however, it suggested it would not look favorably upon some
petitions:13
Bright lines provide the certainty and predictability needed for companies to
make business plans and for capital markets to make investments in the growth
and innovation in media markets. Conversely, case-by-case review of even
below-cap mergers on diversity grounds would lead to uncertainty and
undermine our efforts to encourage growth in broadcast services. Accordingly,
petitioners should not use the petition to deny process to relitigate the issues
resolved in this proceeding.
Because most of the rule modifications relax ownership restrictions, they are
widely expected to lead to substantial merger activity in the media sector.14
As explained below, several bills and resolutions have been introduced relating
to a number of these ownership rules.
National Ownership Rules
National Television Ownership (% Cap)
The Commission modified its National Television Ownership Rule15 by
increasing the maximum aggregate national audience reach of an entity owning
multiple television stations from 35 percent to 45 percent. In practice, this rule
applies to the major broadcast networks, limiting them to ownership and operation
of local broadcast stations that reach, in total, 45 percent of U.S. television
households. The old rule had codified statutory language from the 1996
Telecommunications Act that set the 35 percent cap.16 In 2002, the United States
Court of Appeals for the District of Columbia Circuit remanded the rule to the
13 Id. at ¶ 453, fn. 980.
14 See, e.g.,Yochi J. Dreazen and Joe Flint, “FCC Eases Media-Ownership Caps, Clearing
the Way for New Mergers,” Wall Street Journal, June 3, 2003, p. A1; Alec Klein and David
A. Vise, “Media Giants Hint That They Might Be Expanding,” Washington Post, June 3,
2003, p. A6; Frank Ahrens, “FCC Eases Media Ownership Rules,” Washington Post, June
3, 2003, p. A1; David Lieberman, Paul Davidson, and Michael McCarthy, “TV station will
be bought, but probably not quickly,” USA Today, June 3, 2003, p. 1B; David Lieberman
and Paul Davidson, “Five ways FCC altered the media landscape,” USA Today, June 3,
2003, p. 3B.
15 47 C.F.R. 73.3555(d)(1), previously 47 C.F.R. 73.3555(e)(1).
16 Telecommunications Act of 1996, P.L. No. 104-104, 110 Stat. 56, § 202(c)(1)(B).

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Commission on the grounds that the Commission had failed to provide a justification
for the 35 percent level.17
In addition to increasing the cap, the Commission retained the so-called “UHF
discount” applied when calculating the total audience reached by an entity’s stations;
audiences of UHF stations are given only half-weight. That is, if an entity owns a
UHF station in a market with an audience of two million households, that audience
would only be counted as one million households when calculating the entity’s
market reach. This discount initially was implemented because UHF signals tend to
have a smaller geographic reach than, and are of inferior quality to, VHF signals.
The Commission explicitly retained the UHF discount, finding that UHF stations
continue to face a technical and market disadvantage.18
The Commission determined that a national TV ownership rule is not relevant
to its competition goal in the three relevant economic markets it investigated: the
national television advertising market, the national program acquisition market, and
the local video delivery market.19 But it determined that a national TV ownership
rule is needed to protect localism by allowing a body of network affiliates to
negotiate collectively with the broadcast networks on network programming
decisions.20 It found that the 35 percent level did not strike the right balance of
promoting localism and preserving free over-the-air TV for several reasons:
! the 35 percent cap did not have any meaningful effect on the
negotiating power between individual networks and their affiliates
with respect to program-by-program preemption levels;21
! the broadcast network owned-and-operated stations served their
local communities better with respect to local news production.
Network-owned stations aired more local news programming, and
higher quality local news programming, than did affiliates.22
17 See Fox Television Stations, Inc. v. Federal Communications Commission, 280 F.3rd
1027 (DC Cir. 2002).
18 Report and Order at ¶ 586.
19 Id. at ¶ 508-509.
20 Id. at ¶ 501.
21 One measure of the relative balance of negotiating strength between networks and
affiliates is the rate at which affiliates preempt network programming to show alternative
programming. The Commission found that there was no difference in the preemption rates
among those network affiliates affiliated to networks whose audience reach was less than
the 35 percent cap and those network affiliates affiliated to the two networks whose
audience reach exceeded the 35 percent cap. Report and Order at ¶ 558.
22 Report and Order at ¶ 575-576.

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! the public interest is served by regulations that encourage the
networks to keep expensive programming, such as sports, on free,
over-the-air TV.23
Opponents of changing the cap from 35 percent to 45 percent argued that:
! locally owned and operated stations are more likely to be responsive
to local needs and interests than network owned and operated
stations (for example, they are more likely to preempt network
programming when non-network programming of special local
interest, such as local sports events, is available or when network
programming does not meet community standards);
! if there are fewer independently owned and operated affiliates, they
will be under much greater pressure from the networks not to pre-
empt network programming even if programming of special local
interest is available;
! some broadcast networks that also own cable networks have refused
to give local cable systems permission to retransmit their local
broadcast stations’ signals unless they also carried the integrated
company’s cable networks; if these broadcast networks could own
and operate additional local broadcast stations, they could extend
this practice to those stations.
In its order, the Commission did not provide quantitative analysis in support of
adoption of the 45 percent cap. It explained that the available data demonstrated no
difference in behavior between the two networks that reach just under 40 percent of
national television households and the other networks that reach fewer than 35
percent of national television households. At the same time, the Commission found
that preserving a balance of power between the broadcast television networks and
their affiliates serves local needs by ensuring that affiliates can play a meaningful role
in selecting programming suitable for their communities. The 45 percent cap thus
represented the balancing of competing interests.24 At the June 4, 2003 Senate
Commerce Committee hearing, Chairman Powell reflected that while the
Commission believes its order provides a justification for the 45 percent cap, given
the very high standard set by the Court he could not have total confidence the
23 The broadcast networks had claimed in their comments that broadcast networks are less
profitable than local broadcast stations, so to help broadcast networks compete against cable
networks for rights to expensive sports programming (and keep such programming free to
the public), the networks must be able to own and operate more local broadcast stations.
The dissenting FCC commissioners questioned broadcast network needs given the record
$9.4 billion in advertising revenues for the 2003-2004 season, an increase of 13 percent,
they contracted for in the four-day “up-front” market in May of this year. (See Steve
McClellan, “Extraordinary: Fast and furious, network advertisers spend record $9.4B,”
Broadcasting & Cable, May 26, 2003.)
24 Report and Order at ¶ 501.

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Commission’s rule would survive judicial review and that if Congress believed a
specific percentage cap is “inviolate,” it should codify that percentage in the Act.
Some parties have called for elimination of the UHF discount. They claim that
the UHF discount in effect raises the current cap to as high as 70 percent and if
retained while the cap was increased to 45 percent would raise the effective cap to
as high as 90 percent.25 The provision in the Balanced Budget Act of 1997 relating
to digital television requires all television stations that currently broadcast over the
VHF band to migrate to the UHF band by December 31, 2006 unless certain
conditions are not met. If those conditions are met, all stations will then be UHF
stations. The Commission’s decision took this into account by ruling that when the
transition to digital television is complete, the UHF discount would be eliminated for
the stations owned by the four largest broadcast networks. It chose to retain the UHF
discount in other situations because it believes the discount could foster creation of
additional broadcast networks.
Several bills have been introduced in the 108th Congress that address the
National Television Ownership Rule. The Commerce-Justice-State-Judiciary
Appropriations bill passed by the House (H.R. 2799) includes Section 624
prohibiting the FCC from using funds to grant, transfer, or assign a license that would
result in an entity having stations with an aggregate national audience reach
exceeding 35% of U.S. television households. Senator Stevens has introduced the
Preservation of Localism, Program Diversity, and Competition in Television
Broadcast Service Act of 2003 (S. 1046) that would explicitly re-impose the 35
percent limitation on the national television household reach of any entity. The bill
was amended during markup in the Senate Commerce Committee to also require any
entities that currently exceed the 35 percent limitation to divest themselves of
holdings to meet the limitation. The FCC Reauthorization Act of 2003 (S. 1264), as
marked up by the Senate Commerce Committee, would eliminate the 50 percent UHF
discount for license transfers that occur after June 2, 2003 and sunset the UHF
discount in 2008. Rep. Stearns has introduced the Broadcast Ownership for the 21st
Century Act (H.R. 1035) that would amend the Telecommunications Act of 1996 by
raising the ownership cap to 45 percent and by incorporating the 50 percent UHF
discount. Rep. Burr has introduced the Preservation of Localism, Program Diversity,
and Competition in Television Broadcast Service Act of 2003 (H.R. 2052) that would
explicitly re-impose the 35 percent limitation on the national television household
reach of any entity. Rep. Sanders has introduced the Protect Diversity in Media Act
(H.R. 2462) that would invalidate the June 2, 2003 action raising the national
ownership cap to 45 percent and reinstate the 35 percent cap.
Dual Network Ownership
The Commission retained the Dual Network Ownership rule, which prohibits
the four major networks – ABC, CBS, Fox, and NBC – from merging with one
25 The dissenting FCC commissioners stated that the Commission’s new cross-ownership
and television ownership rules do not provide a 50 percent discount for UHF stations and
that this inconsistent weighting of UHF in different rules cannot be justified.

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another.26 The Commission found that the rule continues to be necessary to promote
competition in the national television advertising and program acquisition markets,
and that the rule promotes localism by preserving the balance of negotiating power
between networks and affiliates.
In 2001, as part of its previous biennial review of media ownership rules, the
FCC modified this rule to allow the four major networks to own, operate, maintain,
or control broadcast networks other than the four majors. With this change, Viacom,
the owner of CBS, was allowed to purchase UPN, and NBC was able to purchase
Telemundo, the second largest Spanish-language network in the U.S.
At the Senate Commerce Committee hearing, Commissioner Adelstein stated
that while he supported retention of the prohibition on mergers among the four major
broadcast networks, he dissented from the rule because the Commission should have
expanded it to provide a similar merger prohibition on Spanish language broadcast
networks, which are currently experiencing consolidation.
Local Ownership Rules
Local Television Multiple Ownership
As modified by the Commission, under this rule:27
! In markets with five or more TV stations, a company may own two
TV stations, but only one of these stations can be among the top four
in ratings;
! In markets with 18 or more stations, a company may own three TV
stations, but only one of these stations can be among the top four in
ratings;
! In deciding how many stations are in the market, both commercial
and non-commercial TV stations are counted;
! There is an eased waiver process for markets with 11 or fewer TV
stations in which two top-four stations seek to merge.28 The FCC
26 The rule “permits broadcast networks to provide multiple program streams (program
networks) simultaneously within local markets, and prohibits only a merger between or
among [the four major networks].” 67 FR 65751 at ¶ 156.
27 47 C.F.R. § 73.3555(b).
28 Under the waiver standard that applies for all markets, the FCC will consider permitting
otherwise banned two-station combinations or three-station combinations if one station is
“failed, failing, or unbuilt.” In the order, the FCC liberalized that standard by removing the
requirement that an applicant for such a waiver “demonstrate that it has tried and failed to
secure an out-of-market buyer for the failed station.” In addition, in markets with 11 or
(continued...)

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will evaluate on a case-by-case basis whether such stations would
better serve their local communities together rather than separately.
In the 1996 Telecommunications Act, Congress directed the Commission to
“conduct a rulemaking proceeding to determine whether to retain, modify, or
eliminate its limitations on the number of television stations that a person or entity
may own, operate, or control, or have a cognizable interest in, within the same
television market.”29 In 1999, the Commission performed a review and modified the
rule. In 2002, that local ownership rule was remanded to the Commission by the
United States Court of Appeals for the District of Columbia Circuit,30 which ruled
that the Commission failed to justify why it only included TV stations among the
voices in the voice test, excluding other media.
In its order, the Commission determined that its prior local TV ownership rule31
could not be justified based on diversity or competition grounds.32 It found that
Americans rely on a variety of media outlets, not just broadcast television, for news
and information. In addition, it determined that the prior rule could not be justified
as necessary to promote competition because it failed to reflect the significant
competition now faced by local broadcasters from cable and satellite TV services.
28 (...continued)
fewer stations, the FCC will consider waivers of the “top-four” restriction if the proposed
combination meets one or more of the following criteria: reduces a “significant competitive
disparity between the merging stations and the dominant station” in the market; facilitates
the stations’ transition from analog to digital broadcasting; produces such public interest
benefits as more news and local programming; involves a UHF station or two; or the
stations’ outer, or “grade B,” signals do not overlap and have not been carried, via direct
broadcast satellite or cable, to any of the same geographic areas within the past year. See
Report and Order at ¶ 221-232. Combinations achieved by waiver of the “top-four”
restriction, however, could not be transferred or assigned to another party without obtaining
another waiver. LIN Television lobbyist Greg Schmidt criticizes this requirement for a
second waiver, claiming that television owners will lose one of the major justifications for
expending capital to buy and improve a second station if the return on that investment
cannot be recouped by selling the stations as a pair. See Bill McConnell, “FCC Does the
Waive,” Broadcasting & Cable, July 7, 2003, at p. 1.
29 1996 Act, § 202(c)(2).
30 See Sinclair Broadcast Group, Inc. v. Federal Communications Commission, 284 F.3rd
148 (DC Cir. 2002)
31 Under this rule, sometimes referred to as the “TV duopoly” rule, an entity could own two
television stations in the same Designated Market Area (DMA) only if the following
requirements were met: either
(1) the Grade B contours of the stations do not overlap, or
(2) (a) at least one of the stations is not ranked among the four highest-ranked
stations in the DMA, and (b) at least eight independently owned and operating
commercial or non-commercial full-power broadcast television stations would
remain in the DMA after the proposed combination were consummated. The
latter is sometimes referred to as the “top four ranked/eight voices test.”
32 Report and Order at ¶ 133.

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The Commission concluded that the new rule permits television combinations
that are proven to enhance competition in local markets33 and to facilitate the
transition to digital television34 through economic efficiencies. It determined that the
new rule’s continued ban on mergers among the top-four stations will have the effect
of preserving viewpoint diversity in local markets.35 The record showed that the top
four stations each typically produce an independent local newscast. The Commission
also concluded that because viewpoint diversity is fostered when there are multiple
independently owned media outlets, the rules also advance the goal of promoting the
widest dissemination of viewpoints.

The proponents of retaining the old rule argued that the rule safeguarded the
number of independent local news voices in the market, given that broadcast
television is the primary source of local news for Americans; that cable and satellite
companies provide virtually no local news; and that radio news is not a substitute for
television news. They also claimed that the rule protected against a combination
attaining market power in the local television advertising market.
Proponents of replacing the old rule with a rule requiring a case-by-case review
of proposed mergers based on a diversity index claimed that only such an approach
could accurately weight the diversity impact of the individual television stations in
a specific market to make informed case-by-case public interest determinations about
a proposed merger. But opponents of such a diversity index claimed it would not
allow firms to plan mergers with regulatory certainty.
Rep. Stearns has introduced the Broadcast Ownership for the 21st Century Act
(H.R. 1035) that would direct the FCC to revise its local television multiple
ownership rule to allow an entity to own, operate, or control two TV stations in the
same market if the grade B contours of such stations: (1) do not overlap, or (2) do
overlap and at least six independent broadcast or cable television voices would
remain in the market after transfer of the license of the station in question. Rep.
Sanders has introduced the Protect Diversity in Media Act (H.R. 2462) that would
invalidate the FCC’s June 2, 2003 changes in the Local Television Multiple
Ownership rule and reinstate the rule in effect prior to that date. A proposed
amendment to the House Commerce-Justice-State-Judiciary Appropriations bill,
which would have prohibited the FCC from using any funds to grant, transfer, or
assign a license that would result in an entity that would not have met the old Local
Television Multiple Ownership rule but would meet the new Local Television
Multiple Ownership rule, was defeated in Committee.
Local Radio Ownership and Radio Market Definition
The FCC’s current local radio ownership rule36 codifies the language in Section
202(b)(1) of the 1996 Telecommunications Act, entitled “Local Radio Diversity –
33 Id. at ¶ 147.
34 Id. at ¶ 148.
35 Id. at ¶ 196-200.
36 47 C.F.R. 73.3555(a).

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Applicable Caps,” which required the Commission to revise its local radio ownership
rules to provide that:
! in a radio market with 45 or more commercial radio stations, a party
may own, operate, or control up to eight commercial radio stations,
not more than five of which are in the same service (AM or FM);
! in a radio market with between 30 and 44 (inclusive) commercial
radio stations, a party may own, operate, or control up to seven
commercial radio stations, not more than four of which are in the
same service (AM or FM);
! in a radio market with between 15 and 29 (inclusive) commercial
radio stations, a party may own, operate, or control up to six
commercial radio stations, not more than four of which are in the
same service (AM or FM);
! in a radio market with 14 or fewer commercial radio stations, a party
may own, operate, or control up to five commercial radio stations,
not more than three of which are in the same service (AM or FM),
except that a party may not own, operate, or control more than 50
percent of the stations in such market.37
The Commission found that these numerical ownership limits continue to be
needed to promote competition among local radio stations;38 that competitive radio
markets ensure that local stations are responsive to local listener needs and tastes;
and that the rule, by guaranteeing a substantial number of independent radio voices,
also will promote viewpoint diversity among local radio owners.
The Commission did, however, make several changes to the current rules:
! It replaced its complex signal contour methodology for defining
local radio geographic markets with a market-based approach using
Arbitron rating boundaries that better identify actual competitors in
the marketplace.39 The signal contour methodology had yielded
several anomalous situations with very expansive geographic market
definitions that included distant stations and therefore allowed
concentration to occur in more narrowly – but also more accurately
– defined markets.
37 Section 202(b) also provides that the Commission may permit a party to exceed these
limits “if the Commission determines that [it] will result in an increase in the number of
radio broadcast stations in operation.” 1996 Act, § 202(b)(2), 110 Stat. at 10-11.
38 Report and Order at ¶ 239.
39 Report and Order at ¶ 239. It also adopted a notice of proposed rule making to determine
how to define geographic markets in those small markets for which there are no Arbitron
market definitions and adopted procedures to follow during the interim.

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! It also modified its market definition methodology to include non-
commercial as well as commercial radio stations in its count of
stations in a market.40
! It eliminated its policy of “flagging” those radio station transactions
that, based on an initial analysis by the staff, would result in one
entity controlling 50 percent or more of the radio advertising
revenues in the relevant Arbitron radio market or two entities
controlling 70 percent or more of such advertising revenues;
conducting further competitive review of the flagged transaction;
and inviting interested parties to file comments addressing the
competitive impact of the proposed merger.41
Most observers believe that the overall effect of these three changes would be
to reduce radio merger opportunities because the impact of the first change would
outweigh the combined impact of the other two changes.42
The proponents of retaining the old ownership limits as is or eliminating them
entirely argued that the rule, and the resultant consolidation in the industry, has
turned around the industry financially, from one in which more than half the radio
stations were losing money to one that is very profitable and attracting an increasing
share of the total advertising market. They also claimed that the number of program
formats has increased.
The proponents of modifying the rule to tighten ownership limits claimed that
the rule has led to both horizontal and vertical consolidation (e.g., ownership of
concert promotion companies, concert venues) that has resulted in anticompetitive
behavior by the large vertically integrated companies that has reduced competition
in the radio, advertising, music, and concert markets, reduced program format
diversity, and reduced local programming. The dissenting FCC commissioners claim
that elimination of the “50/70 screen” takes away the opportunity for the Commission
to undertake case-by-case reviews of mergers that, though they meet the bright line
test, do not meet a market screen that is a good predictor of potential market power
in the advertising market.
Sen. Feingold has introduced the Competition in Radio and Concert Industries
Act of 2003 (S. 221) that, among other things, would (1) prohibit the FCC from
40 Id. at ¶ 239.
41 Id. at ¶ 300-301.
42 At the July 8, 2003 Senate Commerce Committee hearing on radio consolidation, Lewis
Dickey, Jr., Chairman, President, and CEO of Cumulus Broadcasting, Inc., and Alex
Kolobielski, President and CEO of First Media Radio, testified that the new methodology
for defining radio markets would restrict opportunities for acquisitions and therefore harm
competition. Mr. Dickey claimed that it would restrict radio groups from growing as large
as market leader Clear Channel was able to grow under the old methodology and thus would
deny competitors the opportunity to compete on an equal footing. Mr. Kolobielski claimed
that it would not allow small companies to put together clusters of stations in small markets
to exploit economies of scale.

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loosening the current limitations on multiple ownership of radio stations and exclude
these radio ownership rules from the required biennial review; (2) require the
Commission to designate for hearing any license application that would result in an
entity having as aggregate national radio audience reach exceeding 60 percent; and
(3) require the Commission to prescribe regulations to prohibit the transfer or
assignment to operate, or the use of, a local marketing agreement with respect to a
commercial radio station if the transfer or assignment, or such agreement, will permit
the applicant, or brokers of such agreement, to own, operate, or have an attributable
interest in commercial radio stations that are in aggregate more than 35 percent of the
audience of the local market of such radio stations or more than 35 percent of the
radio advertising revenue in the local market of such radio stations. Rep. Weiner has
introduced an identical bill (H.R. 1763). The Preservation of Localism, Program
Diversity, and Competition in Television Broadcast Services Act of 2003 (S. 1046),
as amended in markup in the Senate Commerce Committee, would require entities
that own multiple radio stations that would no longer conform with the FCC
ownership limitations once the new geographic market definitions adopted by the
FCC on June 2, 2003 were in place to divest themselves of holdings as needed to
meet the new limitations. Rep. Sanders has introduced the Protect Diversity in
Media Act (H.R. 2462) that would invalidate the FCC’s June 2, 2003 actions
regarding local radio ownership and market definitions and reinstate the rules in
effect prior to that date.

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Cross-Media Limits: Newspaper-Broadcast and Television-
Radio

The FCC replaced its rules prohibiting newspaper-broadcast cross-ownership43
and limiting television-radio cross-ownership44 within a market with a single rule on
cross-media limits:45
! In markets with three or fewer television stations, no cross-
ownership is permitted among television, radio, and newspapers.46
! In markets with between four and eight television stations,
combinations are limited to one of the following:
One daily newspaper, one television station, and up to half of
the radio station limit under the local radio ownership rule for
that market (e.g., if the radio limit in the market is six, the
company can only own three); OR
43 The old newspaper/broadcast cross-ownership rule prohibited common ownership of a
full-service broadcast station and a daily newspaper when the broadcast station’s service
contour encompasses the newspaper’s city of publication. When it adopted the rule in 1975,
the Commission not only prohibited future newspaper/broadcast combinations, but also
required existing combinations in highly concentrated markets to divest holdings to come
into compliance within five years. The Commission grandfathered combinations in less
concentrated markets, so long as the parties to the combination remained the same. The
Commission adopted a policy of waiving the rule, for existing or future combinations, if
(1)
a combination could not sell a station;
(2)
a combination could not sell a station except at an artificially depressed
price;
(3)
separate ownership and operation of a newspaper and a station could not
be supported in a locality; or
(4)
for whatever reason, the purposes of the rule would be disserved.
44 The old radio/television cross-ownership rule allowed common ownership of at least one
television station and one radio station in a market. In larger markets, a single entity could
own additional radio stations depending on the number of other voices in the market. The
rule generally allowed common ownership of one or two television stations and up to six
radio stations in any market where at least twenty independent “voices” would remain post-
combination; two televison stations and up to four radio stations in a market where at least
ten independent “voices” would remain post-combination; and one television and one radio
station notwithstanding the number of independent “voices” in the market. For this rule, a
“voice” included independently owned and operating same-market, commercial and non-
commercial broadcast television, radio stations, independently owned daily newspapers of
a certain circulation, and cable systems providing generally available service to television
households in a DMA, provided that all cable systems within the DMA are counted as a
single voice. The rule was initially implemented in 1970. The Commission adopted a
presumptive waiver policy to permit certain radio/television combinations in 1989, and
relaxed the rule to its current form in 1999.
45 47 C.F.R. 73.3555(c), replacing the old 47 C.F.R. 73.3555(c) and 47 C.F.R. 73.3555(d).
46 A company may obtain a waiver of this ban if it can show that the television station does
not serve the area served by the cross-owned property.

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One daily newspaper, and up to the radio station limit under the
local radio ownership rule for that market (i.e., no television
stations); OR
Two television stations (if permissible under the local television
ownership rule) and up to the radio station limit under the local
radio ownership rule for that market (i.e., no daily newspapers).
! In markets with nine or more television stations, the FCC eliminated
the newspaper-broadcast cross-ownership ban and the television-
radio cross-ownership ban.
The Commission determined that neither the newspaper-broadcast prohibition
nor the television-radio cross-ownership limitations could be justified for large
markets in light of the abundance of sources that citizens rely on for news.47 It also
found that the old rules did not promote competition because radio, television, and
newspapers generally compete in different economic markets.48 Moreover, the FCC
found that greater participation by newspaper publishers in the television and radio
business would improve the quality and quantity of news available to the public.49
The Commission therefore replaced the old rules with the new cross-media
limits intended to protect viewpoint diversity by ensuring that no company, or group
of companies, can control an inordinate share of media outlets in a local market. The
Commission developed a Diversity Index to measure the availability of key media
outlets in markets of various sizes. It concluded that there were three tiers of markets
in terms of “viewpoint diversity” concentration, each warranting different regulatory
treatment:50
! In the tier of smallest markets (three or fewer television stations), the
FCC found that key outlets were sufficiently limited that any cross-
ownership among the three leading outlets for local news –
broadcast television, radio, and newspapers – would harm diversity
viewpoint.
! In the medium-sized tier (four to eight television stations), markets
were found to be less concentrated today than in the smallest
markets and thus certain media outlet combinations could safely
occur without harming viewpoint diversity. Certain other
combinations would threaten viewpoint diversity and are thus
prohibited.
! In the largest tier of markets (nine or more television stations), the
FCC concluded that the large number of media outlets, in
47 Report and Order at ¶ 365.
48 Id. at ¶ 332.
49 Id. at ¶ 342.
50 Id. at ¶ 443 ff.

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combination with ownership limits for local television and radio,
were more than sufficient to protect viewpoint diversity.
The arguments of proponents of retaining the old rules included:
! any cross-ownership reduces the number of independent voices in
the community, especially in small markets with only a small
number of voices;
! the merged entities, facing less competition for local news service
and in the name of cost savings, will reduce the total amount of
resources going to produce local news in the community;
! satellite and Internet voices are not local and therefore do not
contribute to local diversity;
! newspaper-broadcast or television-radio cross-ownership will give
the merged company a competitive advantage in the advertising
market over its non-cross-owned competitors.
Commissioner Adelstein stated that he could have supported modification of the
cross-ownership rules if the new rule employed a diversity index applied on a case-
by-case basis by measuring the actual diversity impact of individual media voices in
the market under scrutiny.51 But the Commission majority rejected such case-by-case
merger review because it would add uncertainty in the market and would impose an
administrative burden on the Commission.
These cross-ownership rules represent a situation where economic and diversity
goals can be in strong conflict. On one hand, it is in small markets, where resources
are limited, that individual broadcasters are most likely to lack the wherewithal to
produce local news programming on their own, so that cross-ownership might allow
for a broadcast news voice that would not otherwise exist. On the other hand, it is
exactly in these small markets that there are very few voices to begin with, so that
cross-ownership might reduce what little diversity already exists.
The Preservation of Localism, Program Diversity, and Competition in
Television Broadcast Service Act of 2003 (S. 1046), as amended in markup in the
Senate Commerce Committee, would declare null and void the cross-ownership rules
that the Commission adopted on June 2, 2003 and reinstate the cross-ownership rules
in effect prior to that date, with the exception that in small markets with a Designated
Market Area of 150 or higher, the FCC may grant a waiver of its rules if the public
utility commission of a state recommends such a waiver, on a case-by-case basis,
based on a finding that the proposed transaction would enhance local news and
information, promote the financial stability of a newspaper, radio station, or
television station, or otherwise promote the public interest. Rep. Stearns has
introduced the Broadcast Ownership for the 21st Century Act (H.R. 1035) that would
51 Statement of Commissioner Jonathan S. Adelstein Dissenting, FCC News Release, June
2, 2003.

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direct the FCC to eliminate its newspaper-broadcasting cross-ownership rule. Rep.
Sanders has introduced the Protect Diversity in Media Act (H.R. 2462) that would
invalidate the FCC cross-ownership rules adopted on June 2, 2003 and reinstate the
cross-ownership rules in effect prior to that date. A proposed amendment to the
House Commerce-Justice-State-Judiciary Appropriations bill, which would have
prohibited the FCC from using any funds to grant, transfer, or assign a license that
would result in an entity that would not have met the old Cross Ownership rules but
would meet the new Cross-Media Limits rule, was defeated in Committee.
Rep. Hinchey has introduced a resolution (H. Res. 218) that it is the sense of the
House of Representatives that the FCC should not weaken any current media
ownership rules and should allow for extensive public review and comment on any
proposed changes to current rules before issuing a final rule. Senator Pryor has
introduced a resolution (S.Res. 159) that it is the sense of the Senate that the June 2,
2003 ruling of the FCC weakening the nation’s media ownership rules is not in the
public interest and should be rescinded.
Transferability of Ownership
The FCC’s new television and radio ownership rules may result in a number of
situations where current ownership arrangements exceed ownership limits. The FCC
grandfathered owners of those clusters, but generally prohibited the sale of such
above-cap clusters. The FCC made a limited exception to permit sales of
grandfathered combinations to small businesses as defined in the Order. In taking
this action, the FCC sought to respect the reasonable expectations of parties that
lawfully purchased groups of local radio stations that today, through redefined
markets, now exceed the applicable caps. The FCC also attempted to promote
competition by permitting station owners to retain any above-cap local radio stations
but not transfer them intact unless there is a compelling public policy justification to
do so. The FCC found two such justifications: (1) avoiding undue hardships to
cluster owners that are small businesses; and (2) promoting the entry into the
broadcasting business by small businesses, many of which are minority- or female-
owned.
The National Association of Black Owned Broadcasters and other critics of this
Commission rule complain that the rule will not foster minority or female ownership
because (1) the large radio groups are unlikely to sell their clusters as long as they
receive grandfathered rights, and (2) even if these clusters were placed on sale, they
are likely to command such a high price that minority- or female-owned small
businesses are unlikely to be able to obtain the financing needed to make the
acquisitions.
Legislative Policy Issues
As explained above, a number of bills have been introduced in the 108th
Congress that reflect a range of positions on media ownership issues. Other
Members of Congress have announced their intentions of introducing legislation
related to media ownership.

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During the debates in the June 4, 2003 and July 8, 2003 Senate Commerce
Commission hearings, Senators, FCC commissioners, and industry representatives
raised a number of potential legislative policy issues relating to media ownership
rules.
! Noting that it took 20 months for the FCC to complete its biennial
review of the ownership rules, Senators Stevens and McCain as well
as the commissioners agreed that it might make sense to change the
statutory review requirement from every two years to every five
years. When the FCC Reauthorization Act of 2003 (S. 1264) was
marked up in the Senate Commerce Committee, it was amended to
require the Commission to review all of its media ownership rules
at least once every four years, instead of the current two years.
! Chairman Powell suggested that if Congress views certain
ownership rules as inviolate, it might be better for Congress to
incorporate those rules in the statute rather than delegating to the
Commission the responsibility for constructing rules, since any rules
so constructed would be subject to more intensive review by the
Courts.52 Senator Stevens, among others, supported this approach,
but Senator Sununu thought it might be best to leave construction of
rules to the specialized expertise of the Commission.
! Chairman Powell stated that many media ownership concerns are not
driven by the broadcasters subject to FCC regulation, but rather by
ownership concentration among the content providers on pay
platforms (cable and satellite) not subject to public interest
regulation. Current rules do not address these concerns. In a similar
vein, Senator McCain indicated that many concerns are driven by
media vertical integration that is not addressed by the current rules.
These comments suggest that it may be appropriate for Congress to
explore the need for different rules that focus more heavily on
vertical relationships.
! As explained above, all five commissioners and several Senators
agreed that it would be useful for Congress to provide both the Court
and the Commission guidance on the standard to use for reviewing
ownership rules and on whether the Act allows the Commission to
re-regulate broadcast ownership. In markup of both S. 1046 and S.
1264, amendments were added to clarify that in its periodic review
of ownership rules, the FCC is authorized to re-regulate as well as
deregulate.
52 Similarly, Chairman Powell suggested that if Congress had a particular goal in mind
relating to local programming, it might be preferable to impose a rule requiring a certain
level or percentage of local programming rather than attempting to foster local programming
through structural ownership limits.

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! Senator Boxer and the FCC commissioners who dissented in the
June 2, 2003 decision claimed that the Commission did not hold
enough public hearings prior to reaching the decision, with the result
that industry interests had greater access to commissioners than did
the general public. The commissioners who voted for the changes
countered that the proceeding generated more than half a million
comments, demonstrating that the general public fully participated
in the proceeding. In markup in the Senate Commerce Committee,
S. 1046 was amended to require the Commission to hold at least five
public hearings prior to making any determination involving an
ownership rule or requirement.
! At the July 8, 2003 Senate Commerce Committee hearing, two
witnesses claimed that the new methodology adopted by the FCC to
define radio markets would harm competition – by constraining
radio groups from growing to a size that would allow them to
compete effectively with the largest radio group (Clear Channel) and
by not allowing small station owners in small markets to acquire
station clusters and attendant scale economies needed to be efficient.
They proposed that the FCC reinstate the old market definition
methodology. These arguments suggest further consolidation is
beneficial where it strengthens competitors vis-a-vis the strongest
market player, but do not address the impact of such consolidation
on the diversity of voices in a single market.