Posted on May 25, 2010 by David Oxenford

FCC Issues Multiple Ownership Notice of Inquiry - Formally Begins Quadrennial Review With Lots of Questions To Assess the Impact of Media Consolidation

The FCC yesterday released a Notice of Inquiry, formally beginning its Quadrennial Review of the Multiple Ownership Rules.  While the FCC informally began the process of the Congressionally-mandated review of the ownership rules last November through a series of informational panels and workshops, the Notice of Inquiry ("NOI") provides the first formal opportunity for the public to comment on the ownership rules.  The FCC will take the comments that it receives in response to the NOI, and formulate some more specific proposals on how it plans to change the current rules (if at all), which will then be released for additional comments in a Notice of Proposed Rulemaking.  The NOI is a broad-ranging document that gives little indication of the FCC's final direction in this proceeding - though it does go into detail as to how the media marketplace has changed in recent years, citing declining advertising revenues, and more media outlets providing competition to broadcasters for both audience and advertising revenues.   The NOI posed dozens of detailed questions asking how the Commission should assess the various aspects of the ownership rules, and what impact the changes in the media marketplace should have on its consideration of rule changes.

The FCC is concerned with all aspects of its media ownership rules.  Thus, it sets out that it will explore the following rules:

  • The Local Television Ownership cap, which limits owners to two stations in markets where there are at least 8 competing television owners and operators, and which forbids combinations of the top 4 stations in any market.  Television operators, particularly in smaller markets, have been urging the Commission to allow more consolidation in those markets so that stations can provide better service to their communities.  They argue that the current limits preclude small market consolidation, which is most needed in these markets where the costs of operation are not significantly lower than in large markets, but where revenue opportunities are far more limited.
  • The Local radio ownership caps, that currently limit owners to 8 stations in the largest markets, no more than 5 of which can be in any single service (i.e. AM or FM).  Some radio owners contend that these limits no longer make sense given the competition for audio listening from so many sources (including satellite and Internet radio, who can provide unlimited formats in any market).  Other issues include whether AM and FM still need to be treated separately, and even whether AM should be counted to the same degree as FM in a multiple ownership analysis.
  • The Newspaper-Broadcast cross-ownership rule, that forbids cross-ownership of broadcast stations and daily newspapers without a waiver - which, as the result of changes in the cross-ownership rules in 2007, will be granted on a more liberal basis, but only in the top 20 markets.  Given the economic state of the newspaper industry, many seek the repeal of this rule in its entirety. As we have written before, will the newspaper cross-ownership rule outlive the newspaper?
  • The Radio-Television cross-ownership rule, which limits the number of radio and television stations that can be owned by a single party in a single market
  • The Dual Network Rule, that prohibits the common ownership of any of the top 4 television networks.

Each of these rules is up for review, and numerous questions have been asked, and issues identified, for consideration in this proceeding. 

In assessing the continued effectiveness of its rules or, as the Communications Act puts it, whether these rules "are necessary in the public interest as the result of competition," the Commission set out the multiple goals that these rules are supposed to serve, and asked for comments as to how each such goal should be assessed, and how conflicts between these goals should be resolved.  The goals which the Commission seeks to serve by its ownership rules, and some of the issues addressed in connection with each of those goals, include:

  • Competition - the Commission asks for comments on how to measure whether competition exists in a marketplace, how to define the market in which the competition is being evaluated, and what sort of competition it should be assessing.  The Commission suggests many different types of competition which may be relevant to its analysis, including: 
    • Competition between stations for the same viewers or listeners
    • Competition between services (e.g. radio, TV, etc) for the attention and time of the audience
    • Competition between stations for advertising revenue
    • Competition as it affects program providers
  • Localism - the Commission asks many questions about localism and the impact of media ownership regulation on localism, including:
    • Whether the traditional focus of localism - the selection of programming responsive to local needs and interests and the quantity and responsiveness of local news - are all that the Commission should look at in assessing localism.  The Commission even asks how "news" should be defined, if news is indeed the appropriate measure of localism.
    • What other metrics can be used to asses localism?
    • Should the Commission attempt to measure the consumer's interest in "local" programming in making its decisions as to whether goals of localism are met by particular rules?
    • Should the Internet and other sources of information be assessed in determining local needs for programming from broadcasters?
    • How exactly do structural ownership regulations contribute to assuring localism?
    • Are the needs of advertisers and program content creators relevant to an analysis of the localism factor?
    • Whether minorities and other identifiable groups within a community are served by local stations, and to what extent each such group needs a separate voice in order to be served
  • Diversity - many of the same questions that are considered under the Competition and Localism factors are also discussed under the Diversity criterion.  The Commission asks about various kinds of diversity, and seeks comments on how these various measures of diversity can be assessed, and which are the most important to the FCC's analysis.  Some of the differing diversity issues include:
    • Program diversity - maximizing the difference in programming on stations, which might actually be aided by common ownership, as a common owner is likely to program different things so as to not compete with itself
    • Viewpoint diversity - getting independent viewpoints on important issues to a community
    • Source diversity - whether the source of viewpoints needs to itself be different to serve the public interest, e.g. the same owner could program a conservative talk radio station and a modern rock radio station that might have different viewpoints on issues, but does the fact that one company is behind both have a public interest impact?
    • Outlet diversity - should the Commission be looking to maximize the number of independently owned stations in a market, and should diversity of the owners of these stations be an important goal (i.e. should minority ownership be a goal of the ownership rules)?

These are but highlights of the issues raised in connection with each of the Commission's identified goals.  Many more specific questions about how each of these goals can be best achieved, how to measure the achievement of the goals, and what factors need to be considered in connection with each of these goals, are all part of the NOI.  To get the full impact of the questions being asked, you need to read the full NOI.

The Commission also recognizes that these goals may at times conflict, and asks how these conflicts should be resolved.  It also asks what other issues should be considered.  For instance, should the impact of ownership rules on the status of "investigative journalism" be an important goal in the proceeding?  If so, how is this to be measured and defined. 

The Commission asks what kinds of rules are best to achieve the FCC's goals.  Which of the following types of rules should it choose?

  • Bright line rules - these would be rules like those currently in place for local ownership.  If you meet certain numerical limits, your application is granted, no matter what other factors may be in place.  It has the advantage of ease of application and certainty for the parties, but may not take into account all public interest factors
  • Case-by-case analysis - this would require that the FCC adopt policies, but not specific numerical rules.  The FCC would have to evaluate each proposed combination on its own merits, and independently assess whether that combination would serve the public interest.  While having the advantage of being flexible enough to catch any issues, it would also be time-consuming and costly, both for applicants and the Commission, and outcomes would not be certain
  • Hybrid approach - this approach would use bright line limits, but allow public interest factors to be applied in certain cases to permit or deny certain combinations, regardless of their compliance with the numerical limits, if there are special circumstances.

In addition, that FCC asks if it should apply a broad, cross-media approach - looking at all media in a market, not just analyzing radio with other radio, or TV with other TV.  If so, how would a broader analysis work?

Two other questions were tossed into the end of the NOI.  One asked how the transition to digital operations should affect the rules, as TV no longer has the Grade A and Grade B contours that are specified in the current rules.  The Commission also asks about the National Broadband Plan, and how the FCC's interest in reclaiming some of the TV spectrum, and in the expansion of broadband generally, should impact the multiple ownership analysis.

This is obviously a very broad inquiry, requiring very detailed analysis and much thought to answer the many questions raised by the Commission, but which we have only touched on here. Yet the FCC provides only 30 days for comments, and 15 days for replies (all dates measured from the Federal Register publication, which will occur at some point in the near future).  So get your thinking caps on, and let the FCC know your opinions, so they can figure out where to go from here. 
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Posted on October 10, 2008 by David Oxenford

NY and NJ State Attorneys General Sue to Stop Roll Out of PPM - What's A Station to Do?

We recently wrote about the controversy before the FCC about Arbitron's roll-out of the Portable People Meter ("PPM").  A number of broadcast groups, particularly those who target minority audiences with their programming, have requested that the FCC hold a hearing as to whether the introduction of the PPM in a number of major radio markets should be allowed, arguing that it has the potential to discriminate against minority audiences and to decrease diversity in the media.  Arbitron and other broadcast groups have opposed the initiation of that proceeding, arguing that the regulation of a ratings service exceeds the FCC's regulatory authority.  Now, the opponents of the PPM have sough relief from a number of state and local governments, with the Attorneys General of New York and New Jersey filing suit to prevent the initiation of service by Arbitron.  The office of New York Attorney General Andrew Cuomo issued this Press Release, and that of New Jersey Attorney General Anne Milgram issued this Release, citing the reasons for the suit.  Both claim that the use of PPM technology, which they claim has methodological flaws, is a deceptive trade practice by a monopoly provider of services.  The NJ suit goes on to claim that the disparate effect of the claimed inaccurate measurements on minority and ethnic stations violated the state's anti-discrimination laws.  Arbitron of course denies these claims.

The lawsuits have received substantial coverage in both the popular and trade press.  Today's Washington Post has an article discussing the controversy.  Citing an interview with Alfred Liggins of Radio One, a leading radio group targeting African American listeners, the article suggests that the PPM may take a while for stations to adapt to, but once they do, even minority-targeted stations can obtain valuable programming feedback from the new methodology, as it allows feedback as the ratings information in days rather than the months that that the current diary system requires.  This rapid feedback allows broadcasters to make programming adjustments that will allow them to maintain or improve their ratings position.  Mark Ramsey's Hear 2.0 blog looks at some anomalies in the PPM in specific demographics, but in another post concludes that despite whatever shortcomings the PPM may have, the industry needs to work with Arbitron on insuring that the PPM works - as an automated system is inherently more reliable than the diary method that relies on listeners recalling and accurately writing down their radio listening.

Regardless of the issues, PPM is a reality in many markets as Arbitron has discontinued the diaries - so the industry will have to work out the issues with the surveys.  Until issues are resolved, what are stations in affected markets to do?  Obviously, they need to tread carefully to avoid being pulled into the lawsuits and consider the issues with their counsel.  But perhaps, as the principal issues identified by the Attorneys General seems to be disclosure of the limitations of the surveys, stations may want to do some disclosure to advertisers on their own of the pending controversies about the methodologies to avoid any claims that they are engaging in any sort of deceptive trade practice.

Watch for more on these lawsuits and the FCC's own proceedings in the next few weeks.
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Posted on December 13, 2007 by David Oxenford

Moving Forward Back to 1980 - The FCC Set to Conclude that Specific Public Interest Obigations are Required for Broadcasters

As we wrote earlier this week, the FCC is to consider at its meeting next Tuesday a Report on the results of its "Localism" proceeding, and a Notice of Proposed Rulemaking seeking public comment on the findings contained in the Report.  From rumors going around Washington today, that Notice may ask for comments on tentative findings that would roll back of much of the broadcast deregulation of the last 25 years.   Rumors are that the Commission will be issuing "tentative conclusions" determining that the FCC should re-impose specific ascertainment requirements of some sort (requiring that broadcasters regularly meet with specific types of community leaders to get their input on station programming).  Also, the Commission will tentatively conclude that there should be quantitative programming requirements - that each station do a specific amount of local programming and perhaps specific amounts of news, public affairs other types of programs each week. If a licensee does not meet the requirements, the station's license renewal application would not be granted routinely by the FCC's staff, but instead would be subject to an additional level of scrutiny by the full Commission. The Commission is also apparently proposing that it return to the old rules that all stations have a manned main studio during all hours of operation. There is reportedly also a proposal that stations report to the FCC about how they decide what music they play.

Staring in the early 1980s, the FCC did away with many of the specific, detailed programming requirements that had previously bound broadcasters.  These requirements were quite burdensome, especially for small stations and stations in small markets with limited staffs.  Rather than spending their time on broadcast operations, station staff had to make sure that their operations met programming standards imposed from Washington, dictating the government's ideas of what was good for the station's audience, even if the station might feel, because of its format or the demographics of its audience that a particular type of programming did not serve the needs of its community.  In the mid-1980s, the FCC concluded that these rules were no longer necessary, as it was concluded that there was enough media diversity that the marketplace would dictate that broadcasters serve their audiences with appropriate content that met the needs of that audience as, if they did not, some other broadcaster would.  The economic incentive of the fear of the loss of audience to a competitor who better served the public was deemed enough to insure that the broadcaster acted responsibly.
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Now, here we are 25 years later, when the number of broadcast stations has doubled from the mid-1980s, and when there is all sorts of other competition that forces the broadcaster to serve its community, and the FCC is looking to reimpose a paternalistic regime where all stations have to broadcast specific types of content to avoid license renewal difficulties?  In today's world, with satellite and Internet radio and video and all of the other digital choices of entertainment, the broadcaster is forced by his or her self-interest to address what the local audience finds relevant, or the broadcaster will have that audience abandon the station for some other medium.  Now, more than ever, specific quantitative standards for broadcast programs are not needed. 

While the FCC and others seem to yearn for the "good old days", what really did the old rules mandate?  They required specific amounts of public affairs programs, so that usually meant that every radio station in a market was doing boring talk programs on a Sunday morning to satisfy the requirements.  And no one listened, and there was no choice of what to hear during those hours.  Every station was required to do specifically labeled "news" programs.  In the old days, most stations ran network newscasts to help fulfill these requirements, even though the audience of a particular station might not care about hard news.  Now, broadcasters use many different methodologies to determine the needs of their audiences, and meet those needs though "information" about local events supplied by the broadcaster  but maybe not in a traditional format, but perhaps as part of an entertainment format, but in a way that nevertheless builds up a  bond with the local community.  Do we want to do away with that flexibility so that someone in Washington can dictate the type of programming that best serves the public?

These findings by the Commission have not been made, and broadcasters can still submit letters or comments before the end of the comment period at 5:30 Eastern time on Friday, December 14. And then whatever proposals are ultimately adopted by the Commission will be available for comment as part of the Notice of Proposed Rulemaking.  Clearly, this is a proceeding in which all broadcasters should participate. 

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