In November 1996, the FCC released Notices of Proposed Rulemaking addressing a number of local ownership and attribution issues of critical significance to broadcasters. Some of the proposals in these proceedings could have far-reaching implications, particularly for television broadcasters.
Television Duopoly
The FCC proposed to adopt a revised television duopoly rule that would permit the common ownership of two or more television stations with overlapping Grade B contours, provided that the stations are in different designated market areas ("DMAs") and there is no Grade A overlap. The FCC also requested comment on the extent to which exceptions and waivers to such a revised duopoly rule would be appropriate, including exceptions and waivers that would allow the following combinations of stations in a single market:
- Two UHF stations or a UHF and a VHF station.
- An existing station and a failed station where the existing station is the only viable acquiror of the failed station.
- Stations that (i) have a small audience or revenue share, and (ii) are located in a large market in which a specified minimum number of broadcast voices will remain following the combination.
- An existing station and a new station that will operate on a channel allotment that has remained vacant for a period of time (e.g., five years), or on a new channel allotment that can be created without adversely impacting the FCC's proposed digital TV allotment table.
- Stations that would, following the combination, provide public interest programming that would not be provided if the stations were owned separately.
Attribution of Television LMAs
The FCC proposed to attribute television local marketing agreements ("LMAs") on the same basis as radio LMAs; i.e., a television LMA would be deemed to be an attributable ownership interest if more than 15% of the station's time is brokered and the broker has an attributable interest in a station in the same market. The FCC also proposed to grandfather existing television LMAs entered into before November 5, 1996 for the remainder of their initial terms, but not for any renewal terms.
Equity or Debt Plus Proposal
Citing its concern that certain non-attributable interests, such as non-voting equity and debt, could nevertheless vest their holders with a degree of control over a broadcast licensee, the FCC proposed to make equity and debt holdings in a station in excess of a certain threshold attributable if held by (i) a program supplier to the station, or (ii) a broadcaster, newspaper or cable television operator in the same market as the station. The FCC proposed that the threshold be set at 33%, i.e., a program supplier or same-market broadcaster, newspaper or cable operator holding 33% or more of the total equity or of the total debt of a television or radio station would be considered to have an attributable interest in that station.
One-to-a-Market Rule
The one-to-a-market rule prohibits an entity from having an attributable interest in a television station and a radio station in the same market. The FCC, however, generally waives the rule where a single entity seeks to own a television station and an FM and/or AM radio station in one of the top 25 television markets and can show that there will be at least 30 independently-owned media voices (i.e., television or radio stations) in the market after the proposed combination.
The Telecommunications Act of 1996 required the FCC to extend its waiver policy to the top 50 television markets, and the FCC has indicated that it plans to implement this change as part of the current rulemaking. The FCC also requested comment on whether to further extend its waiver policy, and specifically requested comment on the following four options:
- Whether to extend the waiver policy to any market that satisfies a minimum "independent-voices" test.
- Whether to extend the waiver policy to an entity that seeks to own more than one FM and/or AM station in a market where that entity also owns a television station.
- Whether to reduce the number of independent voices necessary for a waiver.
- Whether to change the "five factors " test used by the FCC to determine whether to grant a waiver to an applicant not satisfying the Top 50 markets/30 independent-voices test.
Other Attribution Issues
The FCC is still considering a number of other attribution issues and invited parties to update the record on these issues:
- Whether to increase the voting stock attribution threshold from 5% to 10% (and from 10% to 20% for certain passive investors).
- Whether to revise the insulation criteria that enable certain limited partnership interests to be non-attributable.
- How to treat interests in limited liability companies.
- Whether to eliminate the cross-interest policy (which attributes certain meaningful but otherwise non-attributable interests) and the single majority shareholder exception (which provides that voting stock interests otherwise considered attributable will be deemed non-attributable where the corporation has a single shareholder owning a majority of the voting stock).
Newspaper/Radio Cross Ownership
In September 1996, the FCC launched a proceeding to explore relaxation of its waiver policies with respect to its rule prohibiting newspaper/radio cross ownership. The FCC requested comment on, among other things, whether its waiver policy should take into account the size of the relevant market and/or the number of independent media voices in that market, and how to define the relevant geographic market.
Industry Views
While the broadcast industry, including the National Association of Broadcasters, generally supported relaxation of the FCC's local ownership restrictions, some broadcasters took a contrary view. Post-Newsweek Stations, for example, opposed relaxation of the duopoly rule beyond the FCC's proposal to move to a standard based on DMAs and Grade A overlap, and supported attribution of LMAs, with grandfathering only on a case-by-case basis. Relaxation of local ownership restrictions was also opposed by a number of public interest groups. The FCC's proposed equity- or debt-plus rule was generally opposed by broadcasters and supported by public interest organizations.