The Notice of Proposed Rulemaking in the next Quadrennial Review of the FCC’s ownership rules was adopted in December and was published today in the Federal Register, starting the 60 day period for public comments. Comments on the NPRM will be due on April 29 with reply comments due on May 29. The FCC is looking at numerous issues, including one issue, the rules setting out the limits on the number of radio stations that one company can own in a market, that has not been reviewed in depth in recent Quadrennial Reviews. On the TV side, the FCC is again looking at local TV ownership (specifically combinations of Top 4 stations in a market and shared services agreements) and also at the dual network rule restricting common ownership of two of the Top 4 TV networks. In addition, the FCC is reviewing additional ideas on how to increase diversity in broadcast ownership. Today, let’s look at the FCC’s questions on the local radio ownership rules.
The review of the radio ownership rules may well be the most fundamental issue facing the Commission in this proceeding, as no real changes have been made in those rules since they were adopted as part of the 1996 Telecommunications Act. As we wrote here, the marketplace has certainly changed since 1996 – which was at least a decade before Google and Facebook became the local advertising giants that they now are; and before Pandora, Spotify, YouTube and many other web services offered by tech giants became competitors for the audience for music entertainment. And spoken word entertainment competition was also virtually non-existent – “audiobooks” were a niche product and the concept of a “podcast” would have been totally foreign when the current rules were written. So what are some of the questions about the radio ownership rules that are being asked by the FCC?
The current rules allow one entity to own up to 8 stations (no more than 5 of which can be in one “service” – either AM or FM – the “subcaps“) in the largest markets – markets with 45 or more stations. The limits on station ownership, and ownership in any service, decrease in steps depending on the number of stations in the market. In any market no matter how small, one owner can hold an AM and an FM, but once past that minimum, in the smallest markets, one owner cannot own more than half the stations in the market. Most fundamentally, the FCC asks in the NPRM if these limits are still justified or whether some other limits would be more appropriate. The NAB, for instance, has proposed that there be no limits on AM ownership at all, nor any limits on ownership of stations in markets below the Top 75 rated markets. In the Top 75 markets, the NAB proposes that one owner be allowed to own up to 8 FM stations, and up to 2 more if it successfully incubates a new broadcast owner (see our article here for more on the NAB proposal, and our article here for more on the FCC’s incubator rules).
In connection with this broader question of the limits to adopt, the FCC asks for comments on many more specific issues including:
- Most fundamentally, the FCC asks whether “broadcast radio” is the relevant market to review when assessing whether the ownership limits still operate in the public interest, or if radio is no longer its own silo, but instead part of a broader media marketplace. In short, do radio stations only compete against other radio stations, or do they compete for listeners and advertising dollars with other media?
- How do consumers view digital media? Do they see it as a substitute for local radio? Is it just free digital services that compete with radio, or are subscription services also competitors?
- Would greater consolidation give broadcasters the ability to compete with other media, particularly digital media for listeners and advertisers? If so, how would more consolidated ownership promote more competition with the new media?
- Would allowing one owner to acquire more stations in a market promote local programming or would it result in less localism?
- Does In-Band-On-Channel Radio (more commonly known as HD radio, allowing one station to broadcast multiple digital program streams) already provide an effective way for broadcasters to get more voices in a market?
- If the current limits on ownership are not retained, what limits should be substituted? Should ownership limits be based on numerical caps in markets with a particular number of stations, or should some other limitation (e.g. market or revenue share) be used? Should all stations count the same toward any limits (e.g. should a lower power Class A station count the same as a high power Class C FM station)? Should AM count the same as FM?
- What effect would any change have on minority ownership of broadcast stations?
- What would be the costs and financial benefits of allowing one owner to own more stations in a single market?
Obviously, the FCC is raising many issues in this proceeding, and parties have 60 days to provide the FCC with information to help guide its decision. The FCC asks for specific examples to illustrate the changes in the marketplace, and empirical data to back up assertions made in the proceeding. Expect the review of the radio ownership rules, where many broadcasters feel very strongly about the issues and the need for reform, to be a hot topic in Washington for the remainder of the year.
And watch for our summary of the other issues in the Quadrennial Review NPRM in the next few days.