Order Code RL31925
FCC Media Ownership Rules:
Current Status and Issues for Congress
Updated December 13, 2006
Charles B. Goldfarb
Specialist in Industrial Organization and Telecommunications Policy
Resources, Science, and Industry Division

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FCC Media Ownership Rules:
Current Status and Issues for Congress
Summary
On June 2, 2003, the Federal Communications Commission modified five of its
media ownership rules, easing restrictions on the ownership of multiple television
stations (nationally and in local markets) and on local media cross-ownership, and
tightening restrictions on the ownership of multiple radio stations in local markets.
The new rules have never gone into effect. Sec. 629 of the FY2004 Consolidated
Appropriations Act (P.L. 108-199) instructs the FCC to modify its new National
Television Ownership rule to allow a broadcast network to own and operate local
broadcast stations that reach, in total, at most 39% of U.S. television households. On
June 24, 2004, the United States Court of Appeals for the Third Circuit (“Third
Circuit”), in Prometheus Radio Project vs. Federal Communications Commission,
found the FCC did not provide reasoned analysis to support its specific local
ownership limits and therefore remanded portions of the new local ownership rules
back to the FCC and extended its stay of those rules. Several media companies and
media associations sought appeals at the Supreme Court, based in part on challenging
the continued viability of the spectrum scarcity rationale for broadcast regulation, but
on June 13, 2005 the Court declined to consider the appeals. In June 2006, the FCC
adopted a Further Notice of Proposed Rulemaking seeking comment on how to
address the issues raised by the Third Circuit and initiating a statutorily-required
quadrennial review of all of its media ownership rules, but did not propose specific
rule changes. In November 2006, the FCC announced that it had commissioned 10
economic studies of media ownership. In the 109th Congress, the Senate Commerce
Committee reported out a bill that would have required the FCC to issue another
Notice detailing the specific proposed changes to the rules prior to adopting any new
rules, and also to complete its proceeding on small business, women, and minority
ownership of media before promulgating new media ownership rules, but the bill was
not taken up by the full Senate. Until the FCC crafts new rules approved by the Third
Circuit:
! common ownership of a full-service broadcast station and a daily
newspaper is prohibited when the broadcast station’s service contour
encompasses the newspaper’s city of publication. Combinations that
pre-date 1975 are grandfathered.
! radio-television cross ownership is allowed subject to specific
thresholds established in 1999; the number of jointly owned stations
increases as the size of the market increases.
! a company can own two television stations in the same Designated
Market Area if their Grade B contours do not overlap or if only one
is among the top four in the market and there are at least eight
independent television stations in the market.
! the number of radio stations that a company can own in a local
market is incorporated in the Telecommunications Act of 1996 and
varies according to the total number of stations in the market. (On
rehearing, the Court allowed the FCC to implement its new
methodology for defining local radio markets.)
This report will be updated as events warrant.

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Contents
Overview of Current Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Underlying Issues: Standard of Review and Bright Line Tests . . . . . . . . . . . . . . . 8
Standard of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Bright Line Tests and the Diversity Index . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Specific Media Ownership Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
National Television Ownership (% Cap) . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Current Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Recent History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Dual Network Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Local Television Multiple Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Current Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Recent History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Local Radio Multiple Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Current Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Recent History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Cross-Media Limits: Newspaper-Broadcast and Television-Radio . . . . . . . 30
Current Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Recent History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Transferability of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Legislative Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

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FCC Media Ownership Rules:
Current Status and Issues for Congress
Overview of Current Status
The Federal Communications Commission (“FCC” or “Commission”) adopted
an order on June 2, 2003 that modified five of its media ownership rules and retained
two others.1 The new rules have never gone into effect. Sec. 629 of the FY2004
Consolidated Appropriations Act (P.L. 108-199) instructs the FCC to modify one of
the rules — the National Television Ownership rule. On June 24, 2004, the United
State Court of Appeals for the Third Circuit (“Third Circuit”), in Prometheus Radio
Project vs. Federal Communications Commission, found:
The Commission’s derivation of new Cross-Media Limits, and its modification
of the numerical limits on both television and radio station ownership in local
markets, all have the same essential flaw: an unjustified assumption that media
outlets of the same type make an equal contribution to diversity and competition
in local markets. We thus remand for the Commission to justify or modify its
approach to setting numerical limits.... The stay currently in effect will continue
pending our review of the Commission’s action on remand, over which this panel
retains jurisdiction.2
The current status of the rules is as follows:
! National Television Ownership: a broadcast network may own and
operate local broadcast stations that reach, in total, up to 39% of
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 (“Report and Order” or “June 2, 2003 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 Prometheus Radio Project v. Federal Communications Commission, 2004 U.S. App.
LEXIS 12720 (3rd Cir. 2004) (“Prometheus”), Slip op. At 124-125. The court’s slip opinion
is available at [http://www.ca3.uscourts.gov/opinarch/033388p.pdf]; all citations to the case
in this report reference the slip opinion. For a legal perspective on the Prometheus decision,
see CRS Report RL32460, Legal Challenge to the FCC’s Media Ownership Rules: An
Overview of Prometheus Radio v. FCC, by Angie A. Welborn.

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U.S. television households; entities that exceed the 39% cap must
divest as needed to come into compliance within two years; the FCC
may not forbear on applying the 39% cap; and the FCC is prohibited
from performing the quadrennial review of the 39% cap.3 In
calculating a network’s reach, UHF stations continue to be treated
as if they reach only 50% of the households in the market.4
! Until the FCC crafts new rules approved by the Third Circuit, the
ownership rules in effect prior to June 2, 2003 remain in effect:5
! Local Television Multiple Ownership: a company can own
two television stations in the same Designated Market Area
(“DMA”)6 if the stations’ Grade B contours7 do not overlap or
if only one is among the four highest-ranked (in terms of
audience) in the market and at least eight independent
television stations would remain in the market after the
proposed combination.8 An existing licensee of a failed,
failing, or unbuilt television station can seek a waiver of the
rule if it can demonstrate that the “in-market” buyer is the only
reasonably available entity willing and able to operate the
subject station, and that selling the station to an out-of-market
buyer would result in an artificially depressed price for the
station.9
3 This is required by the FY2004 Consolidated Appropriations Act (P.L. 108-109, 118 Stat.
3 et seq.), Section 629. The relevant FCC rule is 47 C.F.R. 73.3555(d)(1).
4 The Third Circuit concluded that challenges to the FCC’s decision to retain the 50% UHF
“discount” were moot “because reducing or eliminating the discount for UHF station
audiences would effectively raise the audience reach limit ... [which] would undermine
Congress’s specification of a precise 39% cap.” (Prometheus, Slip op. at 44-45). The
relevant FCC rule is 47 C.F.R. 73.3555(d)(2)(i).
5 “The stay currently in effect will continue pending our review of the Commission’s action
on remand, over which the panel retains jurisdiction.” (Prometheus, Slip op. at 124-125.)
6 Designated Market Areas are geographic designations developed by Nielsen Media
Research. A DMA is made up of all the counties that get the preponderance of their
broadcast programming from a given television market. The Nielsen DMAs are both
complete (all counties in the United States are in a DMA) and exclusive (DMAs do not
overlap).
7 Grade B is a measure of signal intensity associated with acceptable reception. The FCC’s
rules define this contour, often a circle drawn around the transmitter site of a television
station, in such a way that 50 percent of the locations on that circle are statistically predicted
to receive a signal of Grade B intensity at least 90 per cent of the time. Although a station’s
predicted signal strength increases as one gets closer to the transmitter, there will still be
some locations within the predicted Grade B contour that do not receive a signal of Grade
B intensity.
8 47 C.F.R. 73.3555(b).
9 47 C.F.R. 73.3555 n. 7.

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CRS-3
! Local Radio Multiple Ownership: the number of radio
stations that a company can own in a local market varies
according to the total number of stations in the market, as
follows: in a radio market with 45 or more full power
commercial and noncommercial 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 market with between 30 and 44 (inclusive) full
power commercial and noncommercial 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;
in a market with between 15 and 29 (inclusive) full power
commercial and noncommercial 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; and in a
radio market with 14 or fewer full power commercial and
noncommercial 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, except that a party may
not own, operate, or control more than 50% of the stations in
any market.10
! Broadcast-Newspaper Cross Ownership: common
ownership of a full-service broadcast station and a daily
newspaper is prohibited when the broadcast station’s service
contour encompasses the newspaper’s city of publication.
Combinations that pre-date 1975 are grandfathered.11
! Television-Radio Cross Ownership: An entity may own up
to 2 television stations (provided it is permitted under the
Local Television Multiple Ownership rule) and up to 6 radio
stations (provided it is permitted under the Local Radio
Multiple Ownership rule) in a market where at least 20
independently owned media voices would remain post-merger.
Where entities may own a combination of 2 television stations
and 6 radio stations, the rule allows an entity alternatively to
own 1 television station and 7 radio stations. An entity may
own up to 2 television stations (as permitted under the Local
Television Multiple Ownership rule) and up to 4 radio stations
(as permitted under the Local Radio Multiple Ownership rule)
10 As explained below, the Third Circuit, in rehearing, lifted its stay of the portion of the
FCC rules that modified the methodology used to define local radio markets, and thus the
current rule language, 47 C.F.R. 73,3555(a), is as it appears in Appendix H of the Report
and Order. The statutory language and FCC rule also provide an exception to these
ownership limits whereby the FCC may permit a person or entity to own, operate, or control,
or have a cognizable interest in radio broadcast stations that exceed the limit if that will
result in an increase in the number of radio broadcast stations in operation.
11 47 C.F.R. 73.3555(d) as it existed prior to the FCC’s June 2, 2003 Order.

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CRS-4
in markets where, post-merger, at least 10 independently
owned media voices would remain. A combination of 1
television station and 1 radio station is allowed regardless of
the number of voices remaining in the market.12
Although the Third Circuit remanded the FCC’s specific cross-media
ownership, local television multiple ownership, and local radio multiple ownership
rules, and extended the stay, it upheld many of the FCC’s findings, including
! not to retain a ban on newspaper-broadcast cross ownership;13
! to retain some limits on common ownership of different-type media
outlets;14
! to retain the restriction on owning more than one top-four television
station in a market;15
! the Commission’s new definition of local radio markets;16
! to include non-commercial stations in determining the size of local
radio markets;17
! the Commission’s restriction on the transfer of radio stations;18
! to count radio stations brokered under a Joint Sales Agreement
toward the brokering station’s permissible ownership totals;19 and
! to use numerical limits in its ownership rules (though not the
specific numerical limits adopted by the Commission).20
Since the Third Circuit had upheld the FCC’s findings as they applied to the
methodology underlying the revised local radio ownership rules, the FCC filed a
narrowly focused petition for panel rehearing, asking the Third Circuit to reconsider
its extension of the stay of the revised Local Radio Multiple Ownership rule, arguing
that the “stay prevents the Commission from implementing regulatory changes that
12 47 C.F.R. 73.3555(c) as it existed prior to the FCC’s June 2, 2003 Order. For this rule,
media “voices” include independently owned and operating full-power broadcast
television stations, broadcast radio stations, English-language newspapers (published
at least four times a week), one cable system located in the market under scrutiny,
plus any independently owned out-of-market broadcast radio stations with a
minimum share as reported by Arbitron.
13 Prometheus, Slip op. at 48-52.
14 Id., Slip op. at 52-57.
15 Id., Slip op. at 86-90.
16 Id., Slip op. at 99-106.
17 Id., Slip op. at 106-107
18 Id., Slip op. at 107-112.
19 Id., Slip op. at 112-115.
20 Id., Slip op. at 117-119.

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this Court has upheld as a reasonable exercise of the Commission’s public interest
authority.”21 The Third Circuit approved a partial lifting of the stay:
Inasmuch as we held in our Opinion and Judgment of June 24, 2004, that certain
changes to the local radio ownership rule proposed by the Federal
Communications Commission (the “Commission”) in its Report and Order and
Notice of Proposed Rulemaking, 18 F.C.C.R. 13,620 (2003) — specifically,
using Arbitron Metro markets to define local markets, including noncommercial
stations in determining the size of a market, attributing stations whose
advertising is brokered under a Joint Sales Agreement to a brokering station’s
permissible ownership totals, and imposing a transfer restriction (collectively, the
“Approved Changes”) — are constitutional and/or consistent with the
Administrative Procedure Act, 5 U.S.C. Section 706(2), and Section 202(h) of
the Telecommunications Act of 1996, the foregoing motion by the Commission
is granted to the extent that it requests a partial lifting of the stay to allow the
Approved Changes to go into effect. All other aspects of the Commission’s
motion, including matters pertaining to numerical limits on local radio ownership
and AM “subcap” are hereby denied.22
Several media companies and media associations (The Tribune Company, FOX,
NBC Universal, Viacom, the National Association of Broadcasters, and the
Newspaper Association of America) formally sought appeals of the Third Circuit
decision at the Supreme Court.23 As part of their legal challenge to the Prometheus
decision, they challenged the continued viability of the spectrum scarcity rationale
that the Supreme Court relied upon in its 1969 Red Lion decision24 permitting
government regulation of broadcasters. (That Supreme Court decision permits
regulations that impose minimally intrusive restrictions on broadcasters’ First
Amendment rights on the grounds that the airwaves, which are public assets, are
scarce and thus licensees can be subject to requirements to serve in “the public
interest.”) The media companies claimed that the FCC acknowledges that the prior
cross-ownership rule and local ownership restrictions inhibit diversity of viewpoints,
that the FCC’s order confirms that broadcast channels are no longer uniquely
important sources of information, and that actions of Congress and the FCC signal
that industry conditions have changed sufficiently to justify reconsideration of
whether broadcast speech deserves lesser First Amendment protection.25 On June 13,
2005, the Supreme Court declined to consider the appeals.
21 Prometheus Radio Project v. Federal Communications Commission, Petition of the FCC
and the United States for Panel Rehearing, August 6, 2004.
22 USCA3 Docket Sheet for 03-3388, Prometheus Radio v. FCC, 9/3/04.
23 See Tania Panczyk-Collins, “Media Group Asks Supreme Court to Hear Ownership
Case,” Communications Daily, January 31, 2005, at pp. 4-5, and also Communications
Daily, February 2, 2005, at p. 8.
24 Red Lion Broadcasting Co, Inc. v. Federal Communications Commission, Supreme Court
of the United States, 395 U.S. 367, decided June 9, 1969.
25 Tania Panczyk-Collins, “Media Group Asks Supreme Court to Hear Ownership Case,”
Communications Daily, January 31, 2005, at p. 4.

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CRS-6
The FCC adopted on June 21, 2006, and released on July 24, 2006, a Further
Notice of Proposed Rulemaking that seeks comment on how to address the issues
raised by the Third Circuit’s Prometheus decision.26 The Further Notice also initiates
a comprehensive quadrennial review of all of its media ownership rules, as required
by statute.27 The Further Notice does not propose any specific rules. Rather, the
FCC seeks comment on the following rules: the local television ownership limit, the
local radio ownership limit, the newspaper-broadcast cross-ownership ban, the radio-
television cross-ownership limit, the dual network ban, and the UHF discount on the
national television ownership limit. Two of the commissioners dissented in part
from the order adopting the Further Notice.28 On November 22, 2006, the FCC
announced that it had commissioned (or had begun conducting internally) 10
economic studies as part of its review of the media ownership rules.29 The two
commissioners who had dissented in part from the order adopting the Further Notice
each issued statements raising questions about the transparency of the process by
26 In the Matter of 2006 Quadrennial Review – Review of the Commission’s Broadcast
Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the
Telecommunications Act of 1996; 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; Cross-Ownership of Broadcast Stations and
Newspapers; Rules and Policies Concerning Multiple Ownership of Radio Broadcast
Stations in Local Markets; Definition of Radio Markets, MB Dockets No. 06-121 and 02-
277 and MM Dockets No. 01-235, 01-317, and 00-244, Further Notice of Proposed
Rulemaking, adopted June 21, 2006, and released July 24, 2006.
27 Section 629 of the FY2004 Consolidated Appropriations Act, P.L. 108-199, modifies the
Communications Act to instruct the FCC to perform a quadrennial review of all of its media
ownership rules, except the National Television Ownership rule.
28 “Statement of Commissioner Michael J. Copps, Concurring in Part, Dissenting in Part,”
June 21, 2006, available at [http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-
266033A3.pdf], viewed on December 12, 2006, and “Statement of Commissioner Jonathan
S. Adelstein, Concurring in Part, Dissenting in Part,” June 21, 2006, available at
[http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-266033A4.pdf], viewed on
December 12, 2006.
29 “FCC Names Economic Studies to be Conducted as Part of Media Ownership Rules
Review,” FCC Public Notice, November 22, 2006, available at [http://hraunfoss.fcc.gov/
edocs_public/attachmatch/DOC-268606A1.pdf], viewed on December 12, 2006. The ten
studies are: (1) “How People Get News and Information,” by Nielsen Research; (2)
“Ownership Structure and Robustness of Media,” by C. Anthony Bush, Kiran Duwadi, Scott
Roberts, and Andrew Wise, of the FCC; (3) “Effects of Ownership Structure and Robustness
on the Quantity and Quality of TV Programming,” by Gregory Crawford of the University
of Arizona; (4) “News Operations,” by Kenneth Lynch, Daniel Shiman, and Craig Stroup
of the FCC; (5) “Station Ownership and Programming in Radio,” by Tasneem Chipty of
CRAI; (6) “News Coverage of Cross-Owned Newspapers and Television Stations,” by
Jeffrey Milyo of the University of Missouri; (7) “Minority Ownership,” by Arie Bersteanu
and Paul Ellickson of Duke University; (8) “Minority Ownership,” by Allen Hammond of
Santa Clara University and Barbara O’Connor of the California State University at
Sacramento; (9) “Vertical Integration,” by Austin Goolsbee of the University of Chicago;
and (10) “Radio Industry Review: Trends in Ownership, Format, and Finance,” by George
Williams of the FCC.

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CRS-7
which the contractors were selected and the peer review process that would be used.
30 In the 109th Congress, the Senate Commerce Committee reported out a bill
(initially numbered S. 2686 and then renumbered H.R. 5252) that would have
required the FCC to issue another Notice detailing the specific proposed changes to
the media ownership rules prior to adopting any new rules,31 and also would have
required the FCC to complete regulatory action in a proceeding it initiated in 2004
to foster small business, minority, and women ownership of media before
promulgating new media ownership rules. But the full Senate never took up the bill.
The Commission continues to consider waiver requests from media companies
that wish to do transactions that do not meet the rules currently in place, but would
meet the rules that the FCC adopted on June 2, 2003.32 Several media companies
have filed petitions with the FCC for permanent waivers of the FCC rules. As part
of its license renewal application for WBTW, Florence, SC, Media General seeks a
permanent waiver of the cross-ownership rules, allowing it to own both that station
and the town’s daily newspaper, the Morning News.33 News Corp., which already
has been granted a permanent waiver of the rules to allow it to own both a television
station and a newspaper in the New York market, has filed a petition seeking an
expansion of that permanent waiver to allow it also to own a second television station
in the market.34 Even if the Commission will consider waiver requests from parties
proposing mergers that would not meet the media ownership rules now in effect,
however, the Third Circuit’s remand and extended stay of the FCC rules is widely
expected to retard merger activity in the media sector until final rules are approved
by the courts.35

30 “Commissioner Michael J. Copps Comments on the FCC’s Media Ownership Studies,”
FCC News, November 22, 2006, available at [http://hraunfoss.fcc.gov/edocs_public/
attachmatch/DOC-268611A1.pdf], viewed on December 12, 2006, and “Commissioner
Jonathan S. Adelstein Says Public Notice on Media Ownership Economic Studies is ‘Scant’
and ‘Undermines Public Confidence’,” FCC News, November 22, 2006, available at
[http://hraunfoss.fcc.gov/edocs_public/ attachmatch/DOC-268616A1.pdf], viewed on
December 12, 2006.
31 The provision also would have explicitly declared the cross-media ownership rules
adopted on June 2, 2003 null and void.
32 See, for example, “Ferree Sees Issues That Could Interest the Supreme Court,”
Communications Daily, July 1, 2004, at pp. 1-3, and In the matter of Counterpoint
Communications, Inc. (Transferor) and Tribune Television Company (Transferee) Request
for Extension of Waiver of Section 73.3555(d) of the Commission’s Rules for Station
WTXX(TV, Waterbury, CT, File No. BTCCT-19991116AJW, Facility ID No. 14050,
Memorandum Opinion and Order, adopted and released April 13, 2005.
33 “Holding On,” Broadcasting & Cable, August 23, 2004, at p. 17.
34 In the matter of Fox Television Stations and the News Corporation Limited, Request for
Waiver of the Newspaper-Broadcast Cross-Ownership Rule Relating to WNYW(TV),
WWOR-TV, and the New York Post, Petition for Modification of Permanent Waiver,
September 22, 2004.
35 For example, Mark Fratrik, vice president of BIA Financial Network, reportedly stated
that “Until the ownership rules are finally resolved, television station sales activity will
continue to be weak.” See Communications Daily, August 18, 2004, at pp. 10-11.

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CRS-8
Although media ownership issues were the subject of a number of hearings and
bills in the 108th and 109th Congresses, the only media ownership-related legislation
enacted was the 39% national television ownership cap. Specifically, Sec. 629 of the
FY2004 Consolidated Appropriations Act (P.L. 108-199, 118 Stat. 3 et seq.) instructs
the FCC to modify its National Television Ownership rule by setting a 39% cap,
requires entities that exceed the 39% cap to divest as needed to come into compliance
within two years, prohibits the FCC from forbearing on application of the 39% cap,
requires the FCC to review its rules every four years instead of two years, and
excludes the 39% cap from that periodic review.
This report analyzes each of the areas that has changed as a result of the FCC
actions and Court decisions. The various positions in the debate also are
summarized.
Underlying Issues: Standard of
Review and Bright Line Tests
In 2001-2003, the Commission had to revisit several of its broadcast ownership
rules as a result of rulings by the U.S. Court of Appeals for the District of Columbia
Circuit (“D.C. Circuit”) that the Commission had failed to provide sufficient
justification for specific thresholds incorporated into its National Television
Ownership and Local Television Multiple Ownership rules.36 In addition, pursuant
to Section 202(h) of the 1996 Act, 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.37
The FCC’s 2002 Biennial Review was initiated on September 12, 2002;38 review
of the Commission’s broadcast-newspaper cross-ownership rule and waiver policy
36 Fox Television Stations, Inc. v. Federal Communications Commission, 280 F.3d 1027,
1044 (D.C. Cir. 2002) (“Fox Television”), rehearing granted, 293 F.3d (D.C. Cir. 2002)
(“Fox Television Re-Hearing”) (addressing the National Television Ownership rule) and
Sinclair Broadcast Group, Inc. v. Federal Communications Commission, 284 F.3d 148
(D.C. Circuit) (“Sinclair”) (addressing the Local Television Ownership rule).
37 The 1996 Act, § 202(h), as in effect at the time the FCC undertook its rulemaking, stated:
“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.” Subsequently, Congress
passed the FY2004 Consolidated Appropriations Act (P.L. 108-199), Sec. 29 of which
changes the biennial review to a quadrennial review.
38 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.

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CRS-9
was initiated on September 13, 2001;39 and review of the Commission’s local radio
ownership rule and radio market definition rule was initiated on November 8, 2001.40
The FCC sought comment on whether each specific rule continued to serve the
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.41
In its rulemaking, the Commission raised two fundamental administrative issues
that have potentially significant policy implications. First, what is the relevant
standard for reviewing existing ownership rules? And second, what are the
advantages and disadvantages of using bright line tests vs. case-by-case evaluations
when reviewing proposed ownership transactions that would increase media
concentration?
Standard of Review
There has been some controversy surrounding the standard to be used in
reaching a public interest determination about the existing rules. The D.C. Circuit,
in Fox Television, stated “Section 202(h) carries with it a presumption in favor of
repealing or modifying the ownership rules.”42 Further, in response to petitions for
rehearing, the D.C. Circuit 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.”43 But in the same decision, the D.C. Circuit 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.’”44
In its June 2, 2003 Order, the Commission majority took this 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, then-chairman Powell stated that the D.C. Circuit
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
39 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.
40 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.
41 See, e.g., 67 FR 65751, ¶ 75.
42 280 F.3d at 1048.
43 293 F.3d 539.
44 293 F.3d 540.

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CRS-10
response to a question from Senator Dorgan, Commissioner Abernathy stated that the
D.C. Circuit’s interpretation directs the Commission to minimize regulation as
competition develops, not to regulate to maximize the number of voices.
At that same hearing, 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.45
Subsequently, in its Prometheus decision, the Third Circuit found:
While we acknowledge that § 202(h) was enacted in the context of deregulatory
amendments (the 1996 Act) to the Communications Act, see Fox I, 280 F.3d at
1033; Sinclair, 284 F.3d at 159, we do not accept that the “repeal or modify in
the public interest” instruction must therefore operate only as a one-way ratchet,
i.e., the Commission can use the review process only to eliminate then-extant
regulations. For starters, this ignores both “modify” and the requirement that the
Commission act “in the public interest.” ...
Rather than “upending” the reasoned analysis requirement that under the APA
ordinarily applies to an agency’s decision to promulgate new regulations (or
modify or repeal existing regulations), see State Farm, 463 U.S. at 43, § 202(h)
extends this requirement to the Commission’s decision to retain its existing
regulations. This interpretation avoids a crabbed reading of the statute under
which we would have to infer, without express language, that Congress intended
to curtail the Commission’s rulemaking authority to contravene “traditional
administrative law principles.”46
Bright Line Tests and the Diversity Index
In its June 2, 2003 Order, the FCC reviewed the advantages and disadvantages
of implementing bright line rules that incorporate specific limits on the number of
media outlets a company can own in a local market, without regard to the market-
specific share of the post-merger company vs. implementing flexible, yet quantifiable
rules that would allow for case-by-case reviews that more readily take into account
market-specific or company-specific market shares and characteristics.
The Commission chose the bright line approach, in large part because it
identified regulatory certainty as an important policy goal in addition to the three
traditional goals of diversity, competition, and localism.47 The Commission stated:
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
45 In markup of two bills introduced during the 108th Congress, amendments were added
that would have clarified that in its periodic review of ownership rules, the FCC is
authorized to re-regulate as well as deregulate. But neither of those bills was enacted.
46 Prometheus, Slip op. at 41-42 (emphasis in original).
47 Report and Order at ¶ 80-85. In the section on Policy Goals, there are four subsections
— Diversity, Competition, Localism, and Regulatory Certainty.

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CRS-11
capital markets that fund the growth and innovation in the media industry.
Companies seeking to enter or exit the media market or seeking to grow larger
or smaller will all benefit from clear rules in making business plans and
investment decisions. Clear structural rules permit planning of financial
transactions, ease application processing, and minimize regulatory costs.48
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 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:
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.49
Once it determined that a bright line test is preferable to case-by-case review,
the Commission created bright line tests for its media cross ownership and local
ownership rules by constructing a “Diversity Index” that it used as the basis for
setting the threshold ownership limits in its new rules.50 The Diversity Index is
intended to measure “viewpoint concentration” and thereby identify “at risk” markets
where limits on media ownership should be retained. It is constructed by
! identifying all the local media voices in a market.
! assigning a diversity “market share” to each of those voices by first
assigning different weights to each of the media categories based on
an Arbitron study of the sources consumers use for local news and
information — television, 33.8%; radio, 24.9%; newspapers, 28.8%,
and Internet, 12.5% — and then assigning each media outlet within
a media category the same weight (so that, for example, if there were
48 Id. at ¶ 83, footnote omitted.
49 Id. at ¶ 453, fn. 980.
50 Id. at ¶¶ 391-481.

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CRS-12
three radio stations in a market each one would be assigned a market
share of 8.3%). If a single entity owns more than one media outlet
in a market, for example if it owns both a television station and a
radio station, then its diversity market share would be the sum of the
two individual market shares.
! adding up the sum of the squares of each of the diversity market
shares to yield a Diversity Index value.
A larger Diversity Index value denotes greater viewpoint concentration (less diversity
of viewpoints). The Commission calculated the Diversity Index for a sample of
large, medium, and small markets, as well as the Diversity Index for those markets
if certain mergers were allowed to occur (for example, a television station purchasing
a newspaper or a television station purchasing a radio station) to determine which
markets were “at risk” for significant loss of diversity if particular ownership
combinations were allowed. It concluded that in markets with three or fewer
television stations there was significant danger of loss of viewpoint diversity if a
television station were allowed to combine with a newspaper or a radio station and
therefore maintained the cross ownership ban in those markets. It also concluded that
certain combinations would unduly harm viewpoint diversity in markets with four to
eight television stations and therefore set certain cross ownership restrictions in those
markets as well.51 The Commission also used the Diversity Index as the basis for
setting its limits on local television multiple ownership.52
The Commission stated that its Diversity Index was “inspired by” the
Herfindahl-Hirschmann Index (“HHI”)53 used by the Department of Justice and
Federal Trade Commission to identify those proposed mergers that, based on
historical merger experience, might have a deleterious effect on competition in the
affected markets and therefore merit additional scrutiny. (Proposed mergers that
would result in markets exceeding the HHI threshold levels automatically trigger
further review.) Analogously, the Diversity Index is intended to identify those
markets in which additional concentration in media ownership might have a
deleterious effect on viewpoint diversity in the affected market. The Diversity Index,
like the HHI, is calculated by squaring the market shares of each market participant.
But there are three significant differences between these two indices and how they
are applied.
First, the HHI is calculated using the actual market shares of the providers in the
market under consideration. If one or more providers have large market shares, the
HHI is very large because that market share figure is squared. In contrast, the
Diversity Index is calculated using the assumption that every provider within a media
category (for example, newspapers or television stations) has equal diversity market
share. Thus, in the New York City market the New York Times and the Nowy
Dziennik-Polish Daily News are accorded the same weight; the local CBS television
51 These limits are discussed in the sections on the specific rules below.
52 See Report and Order at ¶¶ 192 ff.
53 Id. at ¶ 396.

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CRS-13
station and the Dutchess Community College television station (in suburban New
York) are accorded the same weight. On a purely mathematical basis, the assumption
of equal diversity impact minimizes the sum of the squared market shares, thus
minimizing the size of the Diversity Index and providing the lowest possible estimate
of viewpoint concentration.
Second, the antitrust agencies apply the HHI directly to the proposed merger,
on a case-by-case basis, to determine if further scrutiny is merited. The actual market
shares of each of the market participants are calculated — and squared — and the
resulting HHI is compared to threshold levels to determine if additional scrutiny is
required. In contrast, the FCC does not intend to apply the Diversity Index to any
specific proposed change in media ownership. Rather, it used the Diversity Index
(calculated for sample markets by assuming that each media outlet within the same
media category, for example, television stations, has the same “diversity market
share”) as the basis for setting the maximum number (or combination) of media
outlets that any provider could own in a market. A proposed media merger then
would be approved or disapproved based on the number (or combination) of media
outlets the post-merger company would have in the market, regardless of its actual
post-merger diversity market share.54
Third, the threshold levels of the HHI that trigger antitrust agency scrutiny were
based on many years of Department of Justice and Federal Trade Commission
experience reviewing mergers and a body of economic literature about the
relationship between market structure and market conduct. The FCC used those HHI
trigger points as the starting point for scrutinizing viewpoint concentration, but
without a historical record or body of literature demonstrating that the same trigger
points for economic concentration are applicable to viewpoint concentration.
In Prometheus, the Third Circuit did not question the concept of a Diversity
Index or of bright line rules. It did
not object in principle to the Commission’s reliance on the Department of Justice
and Federal Trade Commission’s antitrust formula, the Herfindahl-Hirschmann
Index (“HHI”), as its starting point for measuring diversity in local markets.55
Moreover, the Third Circuit found that the Commission’s decision to retain a
numerical limits approach to radio station ownership regulation is “rational and in
the public interest.”56 (In the case of the Commission’s Local Cross Ownership and
Local Television Multiple Ownership rules, it did not explicitly conclude that the
numerical limits approach was rational and in the public interest, but did frame its
remand of the numerical limits adopted in terms of the specific limits chosen, not of
the concept of numerical limits.)
54 As indicated earlier, although the Commission maintained processes for firms that would
not meet a bright line test to seek a waiver and for interested parties that wanted to challenge
a merger that met a bright line test to file a petition to deny a license transfer, it stated that
it would not look favorably upon some petitions.
55 Prometheus, Slip Op. at 58.
56 Id., Slip Op. at 118.

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CRS-14
However, the Third Circuit found that the FCC’s methodology for converting
the HHI to a measure for diversity in local markets was irrational and inconsistent.
Specifically, the Third Circuit found
[the Commission’s] decision to count the Internet as a source of viewpoint
diversity, while discounting cable, was not rational.57
The Commission’s decision to assign equal market shares to outlets within a
media type does not jibe with the Commission’s decision to assign relative
weights to the different media type themselves, about which it said “we have no
reason to believe that all media are of equal importance.” Order ¶ 409; see also
id. ¶ 445 (“Not all voices, however, speak with the same volume.”) It also
negates the Commission’s proffered rationale for using the HHI formula in the
first place — to allow it to measure the actual loss of diversity from
consolidation by taking into account the actual “diversity importance” of the
merging parties, something it could not do with a simple “voices” test. Id. ¶
396.58
Although the Commission is entitled to deference in deciding where to draw the
line between acceptable and unacceptable increases in markets’ Diversity Index
scores, we do not affirm the seemingly inconsistent manner in which the line was
drawn.... [T]he Cross-Media Limits allow some combinations where the
increases in Diversity Index scores were generally higher than for other
combinations that were not allowed.59
In remanding the rules, the Court has given the Commission the opportunity “to
justify or modify its approach to setting numerical limits.”60
Then-chairman Powell reportedly stated in an interview after the Court decision
was released,
It may not be possible to line-draw. Part of me says maybe the best answer is to
evaluate on a case-by-case basis. The commission may end up getting more
pushed in that direction.61
Given that the Third Circuit did not challenge the concept of using a Diversity Index
to set specific numerical limits, however, it is not apparent that the Third Circuit has
indicated any preference for a case-by-case approach rather than a bright line rule.
57 Id., Slip Op. at 62. The Court found it inconsistent that the FCC chose not to include
cable television as an alternative local news and information voice because most of that
news was actually provided by the local television broadcast stations carried on the cable
systems and yet chose to include the Internet as a significant alternative local news and
information voice despite the fact that most local news and information found on the
Internet is on the websites of the local television stations and newspapers. (Id. at pp. 62-64.)
58 Id. at pp. 69-70.
59 Id. at pp. 74-75.
60 Id. at p. 124.
61 Frank Ahrens, “Powell Calls Rejection of Media Rules a Disappointment,” Washington
Post, June 29, 2004, at pp. E1 and E5.

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CRS-15
The task of implementing bright line rules that can withstand court review may
be challenging, but that may have more to do with the inherent complexity and
ambiguity of measuring viewpoint diversity consistently across heterogeneous
geographic markets than in constraints placed by the courts. As indicated above, the
Third Circuit identified three problems with the existing rules: (1) the inconsistent
treatment of cable television and the Internet; (2) the assignment of equal weight to
all media outlets within a media category rather than actual market shares; and (3)
allowing some combinations where the increases in Diversity Index scores were
generally higher than for other combinations that were not allowed. In remand, the
Commission should be able to modify its Diversity Index to treat cable television and
the Internet the same or to provide empirical evidence for why they should be treated
differently. Similarly, the Commission should be able to construct a Diversity Index
using actual market share data (though admittedly that would be a more difficult task
and might generate challenges to the market share figures). It may prove to be
difficult, however, to construct bright line media ownership limits — in terms of the
specific number of media outlets that a single entity could own in a market — that
all are based on a consistent application of the Diversity Index (the Third Circuit’s
third concern).
The Commission potentially could get around this problem in several ways,
though these might be construed as case-by-case solutions. For example, the
Commission could set its bright line rules in terms of specific Diversity Index levels
(prohibiting any consolidation that would result in a Diversity Index that exceeded
a particular level) rather than using the Diversity Index to identify media ownership
levels that are bright lines. Alternatively, the Commission could use the Diversity
Index to identify media ownership limits that are bright lines in the sense that they
trigger further scrutiny, but also explicitly identify further criteria that would be used
to evaluate proposed consolidations that yield Diversity Index levels within a range
of “potential concern.” For example, it might construct a multi-part rule that would
allow all proposed license transfers that would result in a market-wide Diversity
Index below 1000 and an increase in the Diversity Index of less than 200; trigger
further scrutiny (of explicitly identified diversity criteria) for any proposed license
transfer that would result in a Diversity Index between 1000 and 1800 or result in an
increase in the Diversity Index of between 200 and 400; and prohibit any proposed
license transfer that would result in a Diversity Index that exceeded 1800 or that
increased by more than 400.62
62 The Diversity Index levels used in this example are intended to be descriptive only and
should not be construed as endorsement by CRS of any particular approach. If it were to
choose to construct a rule of this sort, the FCC would have to provide an empirical basis for
the threshold levels in its rules.

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CRS-16
Specific Media Ownership Rules
National Television Ownership (% Cap)
Current Status.
In practice, the National Television Ownership rule applies to the major
broadcast networks, limiting them to ownership and operation of local broadcast
stations that reach, in total, the prescribed percentage of U.S. television households.
Section 629 of the FY2004 Consolidated Appropriations Act (P.L. 108-199, 118 Stat.
3 et seq.) instructs the FCC to modify its National Television Ownership rule by
setting a 39% cap,63 requires entities that exceed the 39% cap to divest as needed to
come into compliance within two years, prohibits the FCC from forbearing on
application of the 39% cap,64 requires the FCC to review its rules every four years
instead of two years, and excludes the 39% cap from that periodic review.
When calculating the total audience reached by an entity’s stations, the so-
called “UHF discount” is applied — audiences of UHF stations are given only half-
weight. For example, 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.
The National Television Ownership rule and the UHF discount were not
immediately affected by the appeal of the FCC’s June 2, 2003 Order. In deciding that
appeal in Prometheus, the Third Circuit found that
Because the Commission is under a statutory directive to modify the national
television ownership cap to 39%, challenges to the Commission’s decision to
raise the cap to 45% are moot.65
Although the 2004 Consolidated Appropriations Act did not expressly mention
the UHF discount, challenges to the Commission’s decision to retain it are
likewise moot.66
But the UHF discount portion of the FCC’s June 2, 2003 National Television
Ownership rule included a section stating that when the transition to digital television
is complete, the UHF discount would be eliminated for those stations owned by the
63 By setting the cap at 39%, two entities — Viacom (CBS) and News Corp. (FOX) — that
had recently acquired stations that gave them total national audience reach of approximately
39% and 38% respectively did not have to divest themselves of any of their stations.
64 Section 10 of the Communication Act of 1934 (47 U.S.C. 160) allows the FCC to forbear
from applying some regulations and provisions to a telecommunications carrier,
telecommunications service, or class of telecommunications services under certain
conditions. It is unlikely that this section of the act would apply to broadcast stations, in any
case, because broadcasters are not telecommunications carriers and broadcasting is not a
telecommunications service.
65 Prometheus, Op. Slip at 44.
66 Id., Op. Slip at 44.

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CRS-17
four largest broadcast networks.67 This section presumably would be moot, based on
the following language in the Prometheus decision requiring the rules adopted in the
FCC’s biennial review proceeding to adhere to the 39% cap mandated by Congress:
because reducing or eliminating the discount for UHF station audiences would
effectively raise the audience reach limit, we cannot entertain challenges to
Commission’s decision to retain the 50% UHF discount. Any relief we granted
on these claims would undermine Congress’s specification of a precise 39%
cap.68
At the same time, the Third Circuit, aware that the FCC has sought public comment
on its authority going forward to modify or eliminate the UHF discount through a
proceeding that is outside the proscribed quadrennial review,69 stated that
we do not intend our decision to foreclose the Commission’s consideration of its
regulation defining the UHF discount outside the context of Section 202(h) [the
mandatory quadrennial review of ownership rules that Congress has prohibited
the FCC from performing on the National Television Ownership rule].70
Recent History.
The FCC has limited the national ownership reach of television broadcast
stations since 1941, modifying its rules several times since then. In 1984, the
Commission repealed its rule, and instituted a six-year transitional ownership limit
of 12 television stations nationwide. In 1985, on reconsideration, the Commission
affirmed its conclusion, but eliminated the sunset provision, retaining the 12-station
limit and, in addition, prohibiting an entity from reaching more than 25% of the
country’s television households through the stations it owned.71
In 1996, the Commission adopted a 35% cap in response to the directive in the
1996 Telecommunications Act to raise the cap from 25% to 35% and to eliminate the
rule that any entity could not own more than 12 stations nationwide.72 The
Commission subsequently affirmed the 35% cap as part of the 1998 biennial review
67 Report and Order at ¶ 591.
68 Prometheus, Op. slip at p. 45.
69 “Media Bureau Seeks Additional Comment on UHF Discount in Light of Recent
Legislation Affecting National Television Ownership Cap,” FCC Media Bureau Public
Notice, DA 04-320, MB Docket No. 02-277, February 19, 2004. The deadline for receipt
of reply comments was March 29, 2004; the Commission has not yet taken any action
relating to issues for which comment was sought in the Public Notice.
70 Prometheus, Op. slip at 46.
71 Report and Order at ¶ 502.
72 Implementation of Sections 202(c)(1) and 202(e) of the Telecommunications Act of 1996
(National Broadcast Television Ownership and Dual Network Operations), 11 FCC Rcd
12374 (1996).

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CRS-18
of media ownership rules.73 This decision was challenged by several broadcast
networks and in 2002 the D.C. Circuit, in Fox Stations, remanded the rule to the
Commission on the grounds that the Commission had failed to provide a justification
for the 35% level.74
In its June 2, 2003 Order, the Commission modified its National Television
Ownership rule75 by increasing the maximum aggregate national audience reach of
an entity owning multiple television stations from 35% to 45%. In addition to
increasing the cap, the Commission retained the UHF discount. 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.76
In the Report and Order, the Commission determined that a national television
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.77 But it determined
that a national television 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.78 It found that the 35% level did not strike the right
balance of promoting localism and preserving free over-the-air television for several
reasons:
! the 35% 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;79
! the broadcast network owned-and-operated stations served their
local communities better with respect to local news production.
73 1998 Biennial Review Report, 15 FCC Rcd 11072-75 ¶¶ 25-30.
74 See Fox Television Stations, Inc. v. Federal Communications Commission, 280 F.3rd
1027 (DC Cir. 2002).
75 47 C.F.R. 73.3555(d)(1), previously 47 C.F.R. 73.3555(e)(1).
76 Report and Order at ¶ 586.
77 Report and Order at ¶ 508-509.
78 Id. at ¶ 501.
79 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.

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CRS-19
Network-owned stations aired more local news programming, and
higher quality local news programming, than did affiliates.80
! the public interest is served by regulations that encourage the
networks to keep expensive programming, such as sports, on free,
over-the-air television.81
Opponents of increasing the cap from 35% to 45% had 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 a local sports event, 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 Report and Order, the Commission did not provide quantitative analysis
in support of adoption of the 45% cap. It explained that the available data
demonstrated no difference in behavior between the two networks that reach just
under 40% of national television households and the other networks that reach fewer
than 35% 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% cap thus
80 Report and Order at ¶ 575-576.
81 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%, 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.)

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CRS-20
represented the balancing of competing interests.82 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% cap, given the
very high standard set by the Court he could not have total confidence the
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% and if retained
while the cap was increased to 45% would raise the effective cap to as high as 90%.83
The provision in the Balanced Budget Act of 1997 relating to digital television
requires all analog television stations, both those on the VHF band and those on the
UHF band, to convert to digital transmission by December 31, 2006 unless certain
conditions are not met. When the digital transition is complete, both VHF and UHF
stations will have the same transmission capabilities and therefore UHF stations will
no longer be at a disadvantage with respect to audience reach. 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.84 It chose to retain the UHF discount in other
situations because it believes the discount could foster creation of additional
broadcast networks. But as mentioned above, although the Third Circuit’s
Prometheus decision maintained the UHF discount, it also did not foreclose the
Commission from reviewing that discount outside the scope of the biennial review
of ownership rules.
Dual Network Ownership
In its June 2, 2003 Order, the FCC retained the existing Dual Network
Ownership rule, which prohibits the four major networks — ABC, CBS, Fox, and
NBC — from merging with one another.85 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 had 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.
82 Report and Order at ¶ 501.
83 The dissenting FCC commissioners stated that the Commission’s new cross-ownership
and television ownership rules do not provide a 50% discount for UHF stations and that this
inconsistent weighting of UHF in different rules cannot be justified.
84 Report and Order at ¶ 591.
85 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.

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At the June 4, 2003 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 Television Multiple Ownership
Current Status.
As a result of the Third Circuit’s Prometheus decision remanding and extending
its stay of the Local Television Multiple Ownership rule that the FCC adopted on
June 2, 2003, the rule currently in place is the one the FCC adopted in 1999,
sometimes referred to as the “TV duopoly” rule. Under this rule, an entity can own
two television stations in the same Designated Market Area (DMA) only if the
following requirements are met:
! either the Grade B contours of the stations do not overlap,
! or (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.86 This second
option is sometimes referred to as the “top four ranked/eight voices
test.”
The rule also includes a standard for approving a waiver of the ownership limits
where a proposed combination involves at least one station that is failed, failing, or
unbuilt.87 For each type of waiver, the waiver applicant must demonstrate that the
“in-market” buyer is the only reasonably available entity willing and able to operate
the subject station, and that selling the station to an out-of-market buyer would result
86 47 C.F.R. 73.3555(b); Local TV Ownership Report and Order, 14 FCC Rcd at 12907-08,
¶ 8.
87 A “failed” station is one that has been dark for at least four months or is involved in
court-supervised involuntary bankruptcy or involuntary insolvency proceedings. Under the
standard for “failing” stations, a waiver is presumed to be in the public interest if the
applicant satisfies each of the following criteria: (1) one of the merging stations has had all-
day audience share of 4% or lower; (2) the financial condition of one of the merging stations
is poor; (3) and the merger will produce public interest benefits. Under the standard for
“unbuilt” stations, a waiver is presumed to be in the public interest if an applicant meets
each of the following criteria: (1) the combination will result in the construction of an
authorized but as yet unbuilt station; and (2) the permittee has made reasonable efforts to
construct, and has been unable to do so. (47 C.F.R. 73.3555, Note 7 (1) and Local Television
Ownership Report, 14 FCC Rcd at 12941 ¶ 86.

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in an artificially depressed price for the station.88 Any combination formed as a result
of a failed, failing, or unbuilt station waiver may be transferred together only if the
combination meets the Local Television Multiple Ownership rule or one of the three
waiver standards at the time of transfer.89
Recent History.
The FCC adopted a rule prohibiting common ownership of two television
stations with intersecting Grade B contours in 1964. 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.”90 In 1999, the Commission performed a review and modified the rule,
creating the television duopoly rule that is in effect today. In 2002, that local
ownership rule was remanded to the Commission by the D.C. Circuit,91 which ruled
that the Commission failed to justify why it only included TV stations among the
voices in the voice test, excluding other media.
The FCC modified the rule in its June 2, 2003 Order, to set the following
ownership limits:92
! 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.93 The FCC
88 47 C.F.R. 73.3555, Note 7.
89 Local TV Ownership Report and Order, 14 FCC Rcd at 12938-41 ¶¶ 77, 81, 86.
90 1996 Act, § 202(c)(2).
91 See Sinclair Broadcast Group, Inc. v. Federal Communications Commission, 284 F.3rd
148 (DC Cir. 2002)
92 47 C.F.R. 73.3555(b).
93 In markets with 11 or 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
(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.
! 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.” The standard is liberalized 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 its June 2, 2003 Order, the Commission determined that the 1999 Television
Duopoly rule could not be justified based on diversity or competition grounds.94 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.
The Commission concluded that the new rule permits television combinations
that are proven to enhance competition in local markets95 and to facilitate the
transition to digital television96 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.97 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
93 (...continued)
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 reportedly 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.
94 Report and Order at ¶ 133.
95 Id. at ¶ 147.
96 Id. at ¶ 148.
97 Id. at ¶ 196-200.

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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 claimed that only such an approach could accurately weigh 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 a case-by-case approach claimed it would not allow firms to plan
mergers with regulatory certainty.
Many aspects of the FCC’s 2003 Local Television Multiple Ownership rule
were appealed. In its Prometheus decision, the Third Circuit found:
! limiting local television station ownership is not duplicative of
antitrust regulation;98
! media other than broadcast television may contribute to viewpoint
diversity in local markets;99
! consolidation can improve local programming;100 and
! the Commission’s decision to retain the restriction on owning more
than one of the top-four television stations in a market is supported
by record evidence.101
But the Third Circuit remanded:
! the specific numerical limits on television station ownership in local
markets, because the record evidence does not support reliance on
an assumption of all stations having an equal market share and the
Commission provided no reasonable explanation for its decision to
disregard actual market shares;102 and
! the repeal of the requirement in its waiver standard that the applicant
demonstrate that the “in-market” buyer is the only reasonably
available entity willing and able to operate the subject station,
because the Commission failed to address the original purpose of the
requirement — to ensure that qualified minority broadcasters had a
98 Prometheus, Op. slip at 81-82.
99 Id., Op. slip at 82-84.
100 Id., Op. slip at 84-85.
101 Id., Op. slip at 86-90.
102 Id., Op. slip at 90-94.

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CRS-25
fair chance to learn that certain financially troubled, and
consequently more affordable, stations were for sale.103
Local Radio Multiple Ownership
Current Status.
The ownership limits currently in place are those that the Commission adopted
in 1996 to codify the language in Section 202(b)(1) of the 1996 Act, but, as a result
of the Third Circuit agreeing in rehearing to lift the portion of its stay relating to the
FCC’s new methodology for defining local radio markets, those markets are defined
using that new methodology. Specifically, the current rules provide that:
! in a radio market with 45 or more full power commercial and
noncommercial 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) full power
commercial and noncommercial 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) full power
commercial and noncommercial 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 full power commercial and
noncommercial 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.104
These numerical limits are applied to geographic markets that are defined
according to Arbitron rating boundaries, which are based on market factors rather
than on the signal transmission contours that previously were used to define
markets.105 Since Arbitron boundaries do not cover small radio markets, the FCC
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
103 Id., Op. slip at 94-96
104 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.
105 Report and Order at ¶ 239.

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CRS-26
and adopted procedures (involving a modified version of the FCC’s historic signal
transmission contour rule) to follow during the interim.106
Also, under current rules, when a “brokering” station has a Joint Sales
Agreement (“JSA”) with a “brokered” station — typically this authorizes one station
acting as a broker to sell advertising time for the brokered station in return for a fee
— the brokered stations counts toward the number of stations the brokering licensee
may own in a local market.107
The FCC, however, has discontinued following its old policy of “flagging”
public notices of proposed radio station transactions that, based on an initial analysis
by the staff, would result in one entity controlling 50% or more of the advertising
revenues in the relevant Arbitron radio market or two entities controlling 70% or
more of the advertising revenues in the market.108 Previously, those flagged
transactions were subject to further competitive analysis.109
Most observers believe that the overall effect of these changes will be to reduce
radio merger opportunities.110
Recent History.
Until 1992, entities were prohibited from owning two same-service (AM or FM)
radio stations whose signal contours overlapped. In 1992, the FCC relaxed the Local
Radio Multiple Ownership rule by establishing numerical limits on radio station
ownership based on the total number of commercial radio stations in a market.
Under the 1992 rules, an entity could own 2 AM and 2 FM radio stations in markets
with 15 or more commercial radio stations, and three radio stations (of which no
more than 2 could be AM or FM stations) in smaller markets. The 1992 rule also
imposed an audience share limit on radio station combinations in the larger market.111
106 Id. at ¶ 239.
107 Id. at ¶ 239.
108 See Application of Shareholders of AMFM, Inc. (Transferor) and Clear Channel
Communication, Inc. (Transferee), 15 FCC Rcd 16062, 16066 ¶ 7 n. 10 (2000).
109 The scope of that analysis is embodied in the interim policy set forth in the FCC’s Local
Radio Ownership Notice of Proposed Rulemaking, 16 FCC Rcd at 19894-97 ¶¶ 84-89.
110 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.
111 See 47 C.F.R. 73.3555(a)(1) (1995).

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CRS-27
In the 1996 Telecommunications Act, Congress directed the Commission to
revise those numerical limits to provide the limits that are in place today.112 The act
also repealed national limits on radio station ownership.113
In its June 2, 2003 Order, the Commission retained the numerical limits in the
1996 Act, finding that those numerical ownership limits continue to be needed to
promote competition among local radio stations;114 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 then-current rules:
! It replaced its complex signal contour methodology for defining
local radio geographic markets with a market-based approach using
Arbitron rating boundaries.115
! It modified its market definition methodology to include non-
commercial as well as commercial radio stations in its count of
stations in a market.116
! It counted stations brokered under a Joint Sales Agreement toward
the brokering station’s permissible ownership totals as long as (1)
the brokering entity owns or has an attributable interest in one or
more stations in the local market, and (2) the joint advertising sales
amount to more than 15% of the brokered station’s advertising time
per week.
! It grandfathered existing radio combinations that would not meet the
limits under the new market definitions, but prohibited the future
transfer or sale of these grandfathered combinations except to certain
“eligible entities” that qualify as small businesses.
! It eliminated its policy of (a) “flagging” those radio station
transactions that, based on an initial analysis by the staff, would
result in one entity controlling 50% or more of the radio advertising
revenues in the relevant Arbitron radio market or two entities
controlling 70% or more of such advertising revenues; (b)
conducting further competitive review of the flagged transaction;
112 1996 Act, § 202(b).
113 Id., § 202(a).
114 Report and Order at ¶ 239.
115 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.
116 Id. at ¶ 239.

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CRS-28
and (c) inviting interested parties to file comments addressing the
competitive impact of the proposed merger.117
In the FCC’s rulemaking proceeding, 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 — had 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 had led to both horizontal and vertical consolidation (for example, 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
claimed 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.
In its rulemaking proceeding, the Commission found the overlapping signal
contour methodology used to define radio markets 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. For example, under the market definition
methodology, a single entity was able to own all 6 of the commercial radio stations
in Fargo, North Dakota because a long chain of rural stations with overlapping signal
contours were included in the geographic market definition.118 The FCC therefore
chose to replace the overlapping contour methodology with a methodology based on
market-driven factors identified by Arbitron.
Many aspects of the FCC’s 2003 Local Radio Multiple Ownership rule were
appealed, and most were upheld by the Third Circuit. In its Prometheus decision, the
Third Circuit:
117 Id. at ¶ 300-301.
118 Jennifer Lee, “On Minot, N.D., Radio, a Single Corporate Voice,” New York Times,
March 29, 2003. To understand how this occurred, it may be simplest to think of a station’s
principal community contours as being, as an approximation, a circle around the station’s
transmitter. Radio stations’ transmitters and principal community contours, though
concentrated to some extent in urbanized areas, are geographically dispersed. A geographic
market defined by overlapping contours can result in a series of contours overlapping one
another to create a very extended market — sort of a daisy chain effect. Thus, the contours
of stations in Fargo overlapped with stations in several directions outside Fargo, all in an
extended chain, resulting in a such a large number of stations being included in the market
that a single entity was allowed to own 6 of them, all located in close proximity to one
another rather than being spread across the large geographic market created by the
overlapping contour methodology.

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! upheld the Commission’s use of market-based Arbitron Metro
markets instead of the contour-overlap methodology to define local
radio markets;119
! upheld the inclusion of noncommercial radio stations when
performing the station count in a market;120
! found the FCC’s transfer restriction is in the public interest;121
! affirmed the attribution of Joint Sales Agreements, counting stations
brokered under a JSA toward the brokering station’s permissible
ownership totals; 122 and
! found the FCC’s numerical limits approach rational and in the public
interest.123
But, the Third Circuit
! remanded the specific numerical limits in the rule to the
Commission for further justification;124 and
! found the Commission did not justify its decision to retain “sub-
caps” on the number of AM and number of FM stations an entity
could own in a local market .125
In particular, the Third Circuit found that the Commission failed to provide a
justification for basing its bright line numerical benchmark on the use of a Diversity
Index based on the assumption of five equal-sized competitors, rather than on actual
market shares.126
Since the Third Circuit had upheld the FCC’s findings as they applied to the
methodology underlying the revised local radio ownership rules, the FCC filed a
narrowly focused petition for panel rehearing, asking the Third Circuit to reconsider
its extension of the stay of the revised Local Radio Multiple Ownership rule, arguing
that the “stay prevents the Commission from implementing regulatory changes that
119 Prometheus, Slip Op. at 100-106.
120 Id., Slip Op. at 106-107.
121 Id., Slip Op. at 107-112.
122 Id., Slip Op. at 112-115.
123 Id., Slip Op. at 117-118.
124 Id., Slip Op. at 115-123.
125 Id., Slip op. at 124.
126 Id., Slip op. at 122.

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this Court has upheld as a reasonable exercise of the Commission’s public interest
authority.”127 The Third Circuit approved a partial lifting of the stay:
Inasmuch as we held in our Opinion and Judgment of June 24, 2004, that certain
changes to the local radio ownership rule proposed by the Federal
Communications Commission (the “Commission”) in its Report and Order and
Notice of Proposed Rulemaking, 18 F.C.C.R. 13,620 (2003) — specifically,
using Arbitron Metro markets to define local markets, including noncommercial
stations in determining the size of a market, attributing stations whose
advertising is brokered under a Joint Sales Agreement to a brokering station’s
permissible ownership totals, and imposing a transfer restriction (collectively, the
“Approved Changes”) — are constitutional and/or consistent with the
Administrative Procedure Act, 5 U.S.C. Section 706(2), and Section 202(h)
of the Telecommunications Act of 1996, the foregoing motion by the
Commission is granted to the extent that it requests a partial lifting of the
stay to allow the Approved Changes to go into effect. All other aspects of
the Commission’s motion, including matters pertaining to numerical limits
on local radio ownership and AM “subcap” are hereby denied.128
The Third Circuit was silent on the FCC’s elimination of its policy to “flag” and
conduct further competitive review to those radio station transactions that would
result in one entity controlling 50% or more of the radio advertising revenues in the
relevant Arbitron radio market or two entities controlling 70% or more of such
advertising revenues. The Commission no longer flags those transactions.
Cross-Media Limits: Newspaper-Broadcast and Television-
Radio
Current Status.
As a result of the Third Circuit’s Prometheus decision remanding and extending
its stay of the Cross-Media rule that the FCC adopted on June 2, 2003, the
Newspaper-Broadcast Cross Ownership rule and the Television-Radio Cross
Ownership rule that were in force on June 2, 2003 remain in place.
! Newspaper-Broadcast Cross Ownership: common ownership of
a full-service broadcast station and a daily newspaper is prohibited
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
127 Prometheus Radio Project v. Federal Communications Commission, Petition of the FCC
and the United States for Panel Rehearing, August 6, 2004.
128 USCA3 Docket Sheet for 03-3388, Prometheus Radio v. FCC, 9/3/04.

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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.129
! Television-Radio Cross Ownership: An entity may own up to 2
television stations (provided it is permitted under the Local
Television Multiple Ownership rule) and up to 6 radio stations
(provided it is permitted under the Local Radio Multiple Ownership
rule) in a market where at least 20 independently owned media
voices would remain post-merger. Where entities may own a
combination of 2 television stations and 6 radio stations, the rule
allows an entity alternatively to own 1 television station and 7 radio
stations. An entity may own up to 2 television stations (as permitted
under the Local Television Multiple Ownership rule) and up to 4
radio stations (as permitted under the Local Radio Multiple
Ownership rule) in markets where, post-merger, at least 10
independently owned media voices would remain. A combination
of 1 television station and 1 radio station is allowed regardless of the
number of voices remaining in the market.130
In the interim, the Commission has considered waiver requests from media
companies that wish to do transactions that do not meet the rules currently in place,
but would meet the rules that the FCC adopted on June 2, 2003.131 Several media
companies have filed petitions with the FCC for permanent waivers of the FCC
media ownership rules. As part of its license renewal application for WBTW,
Florence, SC, Media General seeks a permanent waiver of the cross-ownership rules,
allowing it to own both that station and the town’s daily newspaper, the Morning
129 Amendment of Sections 73.34, 73.240,and 73.636 of the Commission’s Rules Relating
to Multiple Ownership of Standard, FM, and Television Broadcast Stations, Docket No.
18110, Second Report and Order, 50 FCC 2d at 1085.
130 47 C.F.R. 73.3555(c) as it existed prior to the FCC’s June 2, 2003 Order. For this rule,
media “voices” include independently owned and operating full-power broadcast
television stations, broadcast radio stations, English-language newspapers (published
at least four times a week), one cable system located in the market under scrutiny,
plus any independently owned out-of-market broadcast radio stations with a
minimum share as reported by Arbitron.
131 See, for example, “Ferree Sees Issues That Could Interest the Supreme Court,”
Communications Daily, July 1, 2004, at pp. 1-3, and In the matter of Counterpoint
Communications, Inc. (Transferor) and Tribune Television Company (Transferee) Request
for Extension of Waiver of Section 73.3555(d) of the Commission’s Rules for Station
WTXX(TV, Waterbury, CT, File No. BTCCT-19991116AJW, Facility ID No. 14050,
Memorandum Opinion and Order, adopted and released April 13, 2005.

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News.132 News Corp., which already has been granted a permanent waiver of the
rules to allow it to own both a television station and a newspaper in the New York
market, has filed a petition seeking an expansion of that permanent waiver to allow
it also to own a second television station in the market.133

Recent History.
The newspaper-broadcast cross ownership ban has been in place since 1975.
In 1970, the Commission restricted the combined ownership of radio and television
stations in local markets.134 In 1989 the Commission adopted a liberalized waiver
policy for stations in the top 25 markets, and Section 202(d) of the 1996
Telecommunications Act instructed the Commission to extended its liberalized
waiver policy to the top 50 markets. In 1999, the Commission modified the
television-radio cross ownership rule to its current form.135
In its June 2, 2003 Order, the FCC replaced its rules prohibiting newspaper-
broadcast cross ownership and limiting television-radio cross ownership within a
market with a single rule on cross media limits:136
! In markets with three or fewer television stations, no cross
ownership is permitted among television, radio, and newspapers.137
! 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 (for
example, if the radio limit in the market is six, the company can only own
three); OR
— One daily newspaper, and up to the radio station limit under the Local Radio
Multiple Ownership rule for that market, but no television stations; OR
132 “Holding On,” Broadcasting & Cable, August 23, 2004, at p. 17.
133 In the matter of Fox Television Stations and the News Corporation Limited, Request for
Waiver of the Newspaper-Broadcast Cross-Ownership Rule Relating to WNYW(TV),
WWOR-TV, and the New York Post, Petition for Modification of Permanent Waiver,
September 22, 2004.
134 Amendment of Section 73.35, 73.340, and 73.630 of the Commission’s Rule Relating to
Multiple Ownership of Standard, FM, and Television Broadcast Stations, 22 F.C.C.2d at
306 ff.
135 Report and Order at ¶¶ 372-373.
136 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).
137 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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— Two television stations (if permissible under the Local Television Multiple
Ownership rule) and up to the radio station limit under the Local Radio
Multiple Ownership rule for that market, but 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.138 It also
found that the old rules did not promote competition because radio, television, and
newspapers generally compete in different economic markets.139 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.140
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:141
! 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
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
138 Report and Order at ¶ 365.
139 Id. at ¶ 332.
140 Id. at ¶ 342.
141 Id. at ¶ 443 ff.

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! 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 had 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.142 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.
Many aspects of the FCC’s 2003 Cross Media Ownership rule were appealed,
and while the Third Circuit upheld the conceptual basis for the rule, it remanded and
extended the stay of the rule because of it found the Commission did not provide
reasoned analysis to support the specific cross media limits that it chose.
Specifically, in its Prometheus decision, the Third Circuit found that:
! the Commission’s decision not to retain a ban on newspaper/
broadcast cross ownership is justified;143and
142 “Statement of Commissioner Jonathan S. Adelstein Dissenting,” FCC News Release,
June 2, 2003, available at [http://hraunfoss.gov.fcc/edocs_public/attachmatch/DOC-
235047A8.pdf], viewed on December 12, 2006.
143 Prometheus, Slip op. at 48-52.

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! the Commission’s decision to retain some limits on common
ownership of different-type media outlets was constitutional and in
the public interest;144 but
! the Commission did not provide reasoned analysis to support the
specific cross media limit it chose.145
As explained earlier, the Third Circuit identified three problems with the
methodology underlying the Commission’s bright line rules: (1) the inconsistent
treatment of cable television and the Internet; (2) the assignment of equal weight to
all media outlets within a media category rather than actual market shares; and (3)
allowing some combinations where the increases in Diversity Index scores were
generally higher than for other combinations that were not allowed.
Transferability of Ownership
If the stay is lifted and the FCC’s new radio ownership rules are implemented,
it 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
Report and 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.
These transfer restrictions were appealed both by parties that claimed the
transfer restrictions were an unconstitutional holding and by parties that claimed the
transfers should have been restricted to socially and economically disadvantaged
businesses rather than to small businesses. The National Association of Black
Owned Broadcasters and other critics of this Commission rule complained 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.
144 Prometheus, Slip op. at 52-57.
145 Prometheus, Slip op. at 57-78.

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The Third Circuit upheld the transfer restriction set by the FCC as “in the public
interest,”146 and in rehearing explicitly allowed the FCC to implement the transfer
restriction.147
Legislative Policy Issues
Bills relating to the FCC’s media ownership rules are likely to be introduced in
the 110th Congress. To the extent those bills include specific instructions on
individual media ownership rules (for example, explicitly allowing or prohibiting
certain multiple ownership or cross ownership combinations), most observers do not
expect further legislative action at least until the 10 economic studies relating to
media ownership commissioned by the FCC have been submitted and made available
for public comment and perhaps until the FCC puts its proposed rule changes out for
public comment. But many observers do expect there will be legislative action
providing guidance on how the Commission should proceed with its media
ownership rulemaking akin to the provisions in the bill that was voted out of the
Senate Commerce Committee in the 109th Congress. Those provisions would have
required the FCC to issue another Notice detailing the specific proposed changes to
the media ownership rules prior to adopting any new rules and also would have
required the FCC to complete regulatory action in a proceeding it initiated in 2004
to foster small business, minority, and women ownership of media before
promulgating new media ownership rules.
The FCC’s media ownership rules are intended to foster the three major policy
goals of competition, diversity, and localism. Since there are other public policies
also intended to foster competition, diversity, and localism — for example, utilizing
the spectrum more efficiently to create additional voices, fostering the development
and deployment of new technologies that may provide additional voices, maintaining
public interest obligations on existing broadcast licensees to foster localism and
diversity of voices — one part of the debate has been how the ownership rules and
these other policies can work to reinforce, supplement, or substitute for one another.
At the June 4, 2003 Senate Commerce Committee hearing, members of the
committee and all five FCC commissioners discussed the appropriate standard to use
for reviewing ownership rules and whether the 1996 Act allows the Commission to
re-regulate broadcast ownership. All five commissioners stated they would benefit
from clarification by Congress. Subsequently, the Third Circuit, in its Prometheus
decision, explicitly rejected the view that the “repeal or modify” instruction in the
1996 Act requires the Commission to use the review process only to eliminate
existing regulations.148 Given that the language in the Prometheus decision differs
from that in the earlier Fox and Sinclair decisions by the D.C. Circuit, the FCC
commissioners likely still seek explicit congressional guidance.
146 Id., Slip op. at 107-112.
147 USCA3 Docket Sheet for 03-3388, Prometheus Radio v. FCC, September 3, 2004.
148 Id., Slip op. at 41-42.

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After the Third Circuit reached its Prometheus decision, then-chairman Powell
reportedly stated that he was not sure if the courts will allow the FCC to continue to
pursue a bright line approach to media ownership rules rather than a case-by-case
approach.149 As discussed earlier, the Third Circuit did not reject the concept of
bright line rules, only the way the FCC constructed its bright line rules. But it is
possible that a bright line rule might not address some of the ownership issues that
have been of concern to Congress. In the June 4, 2003 Senate Commerce Committee
hearing, Mr. 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. In a similar vein, Senator McCain indicated at that hearing that
many ownership concerns are driven by media vertical integration. Current
ownership rules do not address these concerns.

Even if the FCC were to meet the requirements of the Third Circuit by
constructing broadcast media ownership limits based on the local market shares of
the broadcasters and other media outlets, there might be concern that the simple
market shares do not reflect actual economic market power or diversity market
power. For example, if a locally-owned stand-alone television station has the same
ratings in a local market as another local station that is owned and operated by a
media giant that also owns multiple cable networks that are shown on the cable and
satellite systems serving that local market (and perhaps also owns a national DBS
system), some observers would argue that the two local stations should not be
accorded the same diversity market share. This highlights the conflict between those
who argue for case-by-case analysis of all proposed media ownership transactions in
order to have an in-depth picture of the impact on the specific market affected and
those who argue that as soon as one gets away from bright line tests and into case-by-
case analysis, regulatory uncertainty becomes so great that all merger activity —
including mergers that are clearly beneficial to consumers — may be discouraged.
More broadly, this raises the issue of whether and how Congress might craft
legislation focused on media market structure beyond the basically horizontal media
ownership rules now in effect.
In congressional hearings, a number of policies besides ownership limits have
been identified that affect the goals of media competition, diversity, and localism.150
The discussions in those hearings suggested that the ownership rules represented just
a subset of those existing policies that were implemented before the widespread
occurrence of media consolidation and vertical integration and might merit review.
For example, small cable companies and consumer groups claimed that the media
conglomerates that own both broadcast television stations and multiple cable
149 Frank Ahrens, “Powell Calls Rejection of Media Rules a Disappointment,” Washington
Post, June 29, 2004, at pp. E1 and E5.
150 See, for example, prepared testimony and transcripts from the Telecommunications and
the Internet Subcommittee of the House Energy and Commerce Committee hearing on
Competition and Consumer Choice in the MVPD Marketplace — Including an Examination
of Proposals to Expand Consumer Choice, such as a la Carte and Theme-Tiered Offerings,
July 14, 2004.

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networks have taken advantage of their retransmission consent rights to require cable
companies to carry their full suite of cable networks in order to have access to their
broadcast signals.151 This may restrict diversity of voices. The small cable operators
called on Congress to revise the retransmission consent requirement to prohibit large
integrated broadcasters from imposing such tying arrangements.152 The media giants
responded that they do make their broadcast signals available for rebroadcast
transmission at a stand-alone price and, moreover, it was the cable companies that
originally preferred to offer cable carriage of the conglomerates’ cable networks
rather than cash to obtain retransmission consent.153 In the Satellite Home Viewer
Extension and Reauthorization Act, Congress instructed the FCC to complete an
inquiry and report to Congress by September 8, 2005 regarding the impact of the
current retransmission consent rules (and also the current network non-duplication,
syndicated exclusivity, and sports blackout rules) on competition in the multi-channel
television market, including the ability of rural cable operators to compete with
satellite television providers in the provision of digital television signals to
consumers.154 The FCC submitted a report that did “not recommend any changes at
this time to the statutory provisions relating to Commission rules under consideration
in this Report.”155
Policies aiming to utilize the spectrum more efficiently in order to create
additional voices also can foster the policy goals of diversity, localism, and
competition, and perhaps reduce the need for ownership limits. For example, in
January 2000, the FCC, recognizing that there was broadcast spectrum going unused
that could provide locally-oriented programming, created a new low power FM radio
service, limited to noncommercial operations and to maximum radiated power of 100
151 See the testimony of Bennett Hooks, chief executive officer, Buford Media Group,
before the Telecommunications and the Internet Subcommittee of the House energy and
Commerce Committee hearing on Competition and Consumer Choice in the MVPD
Marketplace — Including Examination of Proposals to Expand Consumer Choice, such as
a la Carte and Theme-Tiered Offerings, July 14, 2004. See, also, American Cable
Association Petition for Inquiry into Retransmission Consent Practices, filed with Federal
Communications Commission on October 1, 2002 (“ACA Petition”).
152 See testimony of James M. Gleason, chairman of the American Cable Association and
president and chief operating officer of CableDirect, before the Senate Commerce, Science,
and Transportation Committee hearing on Media Ownership and Transportation, May 6,
2003.
153 See, for example, the testimony of Ben Pyne, executive vice president of Disney and
ESPN Affiliate Sales and Marketing, before the Subcommittee on Telecommunications and
the Internet of the House Energy and Commerce Committee hearing on Competition and
Consumer Choice in the MVPD Marketplace — Including an Examination of Proposals to
Expand Consumer Choice, such as a la Carte and Theme-Tiered Offerings, July 14, 2004.
154 Satellite Home Viewer Extension and Reauthorization Act, passed as Title IX of the
FY2005 Consolidated Appropriations Act (H.R. 4818, P.L. 108-447), § 208.
155 “Retransmission Consent and Exclusivity Rules: Report to Congress Pursuant to Section
208 of the Satellite Home Viewer Extension and Reauthorization Act of 2004,” Federal
Communications Commission, September 8, 2005, at p. 41, para. 86.

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watts.156 In response to complaints from existing broadcasters that the new low
power FM stations might create harmful radio interference to the reception of
existing FM stations, in December 2000 Congress passed the FY2001 District of
Columbia Appropriations Act, Section 632 of which157 required the FCC to impose
third-adjacent channel minimum distance separation requirements on low power FM
stations,158 and also to conduct independent field tests and an experimental program
to determine whether the elimination of these third-adjacent channel protection
requirements would result in low power FM stations causing harmful interference to
existing FM stations operating on third-adjacent channels.159 The FCC hired the
Mitre Corporation to perform the study. Mitre delivered its final report to the FCC
on June 2, 2003, with the finding that third adjacent locations without distance
separation requirements would not create harmful interference. The FCC sought
comment on the Mitre report. The National Association of Broadcasters (“NAB”)
filed comments critical of the report and its findings. Based on the Mitre study and
all the comments filed in the proceeding, the FCC reported back to Congress on
February 19, 2004, with the recommendation that Congress eliminate the existing
third-adjacent minimum distance separation requirements between low power FM
and existing full-service FM stations and FM translators and boosters. This would
allow many additional low power FM stations to be constructed. In the 109th
Congress, S. 2868 (renamed H.R. 5252), as reported out of the Senate Commerce
Committee, included an amendment introduced by Senator McCain that would have
directed the FCC to modify its rules to eliminate the third-adjacent minimum distance
separation requirements between low power FM stations and full-service FM
stations, clarify that the FCC should retain its rules that provide third-adjacent
channel protection for full-power non-commercial FM stations that broadcast radio
reading services via a subcarrier frequency from a potential low-power FM station,
and require the FCC, when licensing FM translator stations, to guarantee that licenses
are available to both FM translator stations and low power FM stations and that such
decisions are made based on the needs of the local community. But that bill was
never taken up by the full Senate.
The NAB claims that a new broadcast service created by the FCC to provide
national radio programming, satellite digital radio, threatens the provision of local
programming on broadcast radio stations because the national licensees have begun
to offer local weather reports and other informational programming that compete
head-on with the programming of local radio broadcasters. The satellite radio
providers (XM and Sirius) claim their local programming is limited in scope and
meets the needs of mobile listeners who seek weather reports and other information
as they travel from one location to another.
156 Rules were adopted on January 20, 2000 and appeared in the Federal Register on
February 15, 2000.
157 P.L. 106-55, § 632, 114 Stat. 2762, 2762A-111 (2000).
158 If an existing radio station is at 97.1 on the dial, then the first adjacent stations are at
96.9 and 97.3, the second adjacent stations are at 96.7 and 97.5, and the third adjacent
stations are at 96.5 and 97.7.
159 All radio station signals create some level of interference, but in most situations that
interference is so limited that it does not affect reception.

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The transition to digital television will allow for more efficient utilization of the
spectrum, providing additional spectrum for public safety and wireless broadband
and also allowing broadcasters to use digital technology to offer more programming
than they can using analog technology. As valuable as the UHF band is for public
safety and wireless purposes, it is inferior to the VHF band for the analog
transmission of broadcast signals. After the digital transition, the current
technological inferiority of UHF to VHF will no longer be an issue. Ownership of a
UHF station will not bring with it more limited audience reach. The rationale for
treating UHF stations differently from VHF stations will disappear. In its June 2,
2004 Order, the FCC adopted a rule to end the UHF discount for stations owned by
the four major television networks — but not for other stations — when the transition
to digital television has been completed. When that transition is completed (and
likely long before its completion), the current UHF and VHF licensees will have the
ability to multicast as many as five channels of programming over their licensed
spectrum. This will increase the amount and perhaps diversity of programming
available, though it may not result in an increase in the diversity of voices or
localism. Congress may want to review the UHF discount — and its impact on the
goals of competition, diversity, and localism — in light of the digital transition and
in light of some of the policies it develops for that transition. For example, Congress
might be concerned that a network comprised entirely of UHF stations offering five
channels of broadcast programming could reach 78% of all U.S. television
households.
With the advent of digital technology, individual broadcasters are able to
broadcast as many as six video streams over the spectrum they have been licensed to
use. Under sections 614(b)(3)(A) and 615(g)(1) of the Communications Act,160 cable
operators are required to carry the primary signals of qualified local commercial and
noncommercial television stations. The FCC has recently ruled that when a
broadcaster transmits multiple video streams, cable systems are required to carry only
the broadcaster’s primary signal, not all the signals.161 Broadcasters claim that this
ruling will undermine their ability to use multicasting to offer additional local news
and weather programming — citing, in particular, the potentially negative impact on
a project by ABC affiliates to use a secondary signal to offer ABC News Now, a mix
of international, national, and local news, and on NBC Weather Plus, NBC-
Universal’s new digital 24-hour national and local weather network if cable systems
are not required to carry those signals.162 But in its September 8, 2005 Report to
Congress on Retransmission Consent and Exclusivity Rules, the FCC found that
“since the Commission’s decision to deny broadcasters the ability to assert dual and
160 47 U.S.C. 534, 535.
161 In the Matter of Carriage of Digital Television Broadcast Signals: Amendments to Part
76 of the Commission’s Rules, CS Docket No. 98-120, Second Report and Order and First
Order on Reconsideration, adopted February 10, 2005 and released February 23, 2005, at
¶ 3.
162 See Communications Daily, February 4, 2005, at p. 4.

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multicast must-carry, broadcasters have begun using their retransmission consent
negotiations to negotiate carriage of their digital signals.”163
Some observers have suggested that a more nuanced rule on multicast must
carry could help to serve the goals of diversity and localism, and reduce the need for
strict ownership limits. For example, policy makers might want to consider the pros
and cons of granting multiple must carry rights to those broadcasters whose coverage
area overlaps multiple states (a very frequent occurrence since state lines often follow
rivers that have large population centers on either side of the river) for each of the
multicast channels that provides state-jurisdiction-specific local coverage. That is,
an argument in favor of multicast must carry might be that, with associated local
programming requirements, it could foster localism. On the other hand, if a local
programming requirement is imposed on broadcasters that choose to use digital
technology to multicast, this might artificially incent broadcasters to choose to use
their spectrum for HDTV or other purposes, rather than multicasting, just to avoid
the burden of providing additional local programming.
More broadly, the FCC in 2004 adopted a Notice of Inquiry on broadcast
localism,164 seeking information on broadcasters’ responsibilities with respect to
communication with their local communities, the nature and amount of community-
responsive programming, political programming, underserved audiences, disaster
warnings, network-affiliation rules, payola and sponsorship identification, voice-
tracking, national playlists, and license renewals. As the FCC proceeds with this
inquiry, Congress may choose to provide guidance. It is possible that more stringent
or more well-defined localism requirements on all broadcasters might reduce
concerns about the impact of media ownership consolidation on local
programming.165
Some observers have been concerned with the impact of media ownership
consolidation on control of programming — and hence on the diversity of voices.
When television was dominated by three networks, the FCC had financial
syndication and network program ownership rules that restricted the ownership stake
that networks could have in the programming they carried. These rules were
eliminated in the 1990s, after which the networks integrated backward into program
production. Some independent program producers allege that, as a result of that
vertical integration, they are not able to control the programming they produce, with
the consequence that creative programming has been discouraged. For example, they
claim if they produce a program for a network and then the network decides not to
air the programming, the independent producer is not allowed to try to sell that
programming to another network. The large media conglomerates deny that their
vertical reach has any harmful effect on consumers or competition.
163 “Retransmission Consent and Exclusivity Rules: Report to Congress Pursuant to Section
208 of the Satellite Home Viewer Extension and Reauthorization Act of 2004,” Federal
Communications Commission, September 8, 2005, at p. 25, para. 45.
164 In the Matter of Broadcast Localism, Notice of Inquiry, MB. Docket No. 04-233,
adopted on June 7, 2004, released on July 1, 2004.
165 For a more detailed discussion, see CRS Report RL32641,”Localism”: Statutes and
Rules Affecting Local Programming on Broadcast, Cable, and Satellite Television.

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This legislative policy discussion has at least implicitly assumed that the
underlying Supreme Court rationale for government regulation of broadcasting —
spectrum scarcity — will remain. As indicated earlier, several broadcasting
companies, in seeking to appeal the Prometheus decision at the Supreme Court,
challenge that rationale. They claim that, even if spectrum is scarce, such scarcity
does not restrict the diversity of voices available or the ability of non-licensees to
present their views on an alternative medium. On June 13, 2005, the Supreme Court
declined to consider the appeal. It is possible that broadcasters or other parties
currently subject to broadcast regulation will use that same argument when
challenging other rules. If their argument were to prevail, Congress might have to
reconsider the legal basis for many of its statutory policies and rules, including those
related to media ownership.

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