*Pages 1--10 from Microsoft Word - 28289.doc* NEWS News media Information 202 / 418- 0500 Fax- On- Demand 202 / 418- 2830 TTY 202/ 418- 2555 Internet: http:// www. fcc. gov ftp. fcc. gov Federal Communications Commission 445 12 th Street, S. W. Washington, D. C. 20554 This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D. C. Circ 1974). FOR IMMEDIATE RELEASE NEWS MEDIA CONTACTS: June 2, 2003 Michelle Russo 202- 418- 2358 David Fiske 202- 418- 0513 Richard Diamond 202- 418- 0506 FCC SETS LIMITS ON MEDIA CONCENTRATION Unprecedented Public Record Results in Enforceable and Balanced Broadcast Ownership Rules Washington, D. C. – The Federal Communications Commission (FCC) today adopted new broadcast ownership rules that are enforceable, based on empirical evidence and reflective of the current media marketplace. Today’s action represents the most comprehensive review of media ownership regulation in the agency’s history, spanning 20 months and encompassing a public record of more than 520,000 comments. The FCC stated that its new limits on broadcast ownership are carefully balanced to protect diversity, localism, and competition in the American media system. The FCC concluded that these new broadcast ownership limits will foster a vibrant marketplace of ideas, promote vigorous competition, and ensure that broadcasters continue to serve the needs and interests of their local communities. FCC Responds to Congressional and Court Directives In the 1996 Telecommunications Act, Congress mandated that the FCC review its broadcast ownership rules every two years to determine “whether any of such rules are necessary in the public interest as a result of competition.” The Act requires the FCC to repeal or modify any regulation it determines to be no longer in the public interest. The FCC’s decision today found that all of the broadcast ownership rules continue to serve the public interest either in their current form or in a modified form. Recent court decisions reversing FCC ownership rules emphasized that any limits must be based on a solid factual record and must reflect changes in the media marketplace. In the Fox v. FCC decision, for example, the court said the FCC had “provided no analysis of the state of competition in the television industry” or even an explanation as to why the rule in question was necessary to either safeguard competition or enhance competition. The Report and Order adopted today is based on a thorough assessment of the impact of ownership rules on promoting competition, diversity, and localism. This careful calibration of each rule reflects the FCC’s determination to establish limits on broadcast ownership that will withstand future judicial scrutiny. - more - 1 2 New Limits Protect Viewpoint Diversity The FCC strongly affirmed its core value of limiting broadcast ownership to promote viewpoint diversity. The FCC stated that “the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public.” The FCC said multiple independent media owners are needed to ensure a robust exchange of news, information, and ideas among Americans. The FCC developed a “Diversity Index” in order to permit a more sophisticated analysis of viewpoint diversity in this proceeding. The index is “consumer- centric” in that it is built on data about how Americans use different media to obtain news. Importantly, this data also enabled the FCC to establish local broadcast ownership rules that recognize significant differences in media availability in small versus large markets. The objective is to ensure that citizens in all areas of the country have a diverse array of media outlets available to them. New Rules Promote Competition and Choice for Americans The FCC affirmed its longstanding commitment to promoting competition by ensuring pro-competitive market structures. The FCC said it is clear that competition is a policy that is intimately tied to its public interest responsibilities and one that the FCC has a statutory obligation to pursue. The FCC said consumers receive greater choice and more innovative services in competitive markets than they do in markets where one or more firms exercise market power. Although the primary concern of antitrust analysis is in ensuring economic efficiency through the operation of a competitive market structure, the FCC’s public interest standard brings a closer focus to the American public. Thus, the FCC has a public interest responsibility to ensure that broadcasting markets remain competitive so that the benefits of competition, including lower prices, innovation and improved service are made available to Americans. The FCC acknowledged that cable and satellite TV service compete with traditional over-the- air broadcasting. Today Americans enjoy a significant amount of choice for seeking news and information and thus the new rules limiting local and national TV ownership are designed to better reflect this additional competition. The FCC found that pro- competitive ownership limits must account for the fact that broadcast TV revenue relies exclusively on advertising; whereas cable and satellite TV service have both advertising and subscription revenue streams. The FCC also explained that because viewpoint diversity is fostered when there are multiple independently owned media outlets, the FCC’s competition- based limits on local radio and local TV ownership also advance the goal of promoting the widest dissemination of viewpoints. Localism Affirmed as Important Policy Goal The FCC strongly reaffirmed its goal of promoting localism through limits on ownership of broadcast outlets. Localism remains a bedrock principle that continues to benefit Americans in important ways. The FCC has sought to promote localism to the greatest extent possible through its broadcast ownership limits that are aligned with stations’ incentives to serve the needs and interests of their local communities. 2 3 To analyze localism in broadcasting markets, the FCC relied on two measures: local stations’ selection of programming that is responsive to local needs and interests, and local news quantity and quality. Program selection is an important function of broadcast television licensees and the record contains data on how different types of station owners perform. A second measure of localism is the quantity and quality of local news and public affairs programming by different types of television station owners. This data helped the FCC assess which ownership structures will ensure the strongest local focus by station owners to the needs of their communities. FCC Reiterates Importance of Promoting Minority and Female Ownership The FCC strongly reaffirmed its longstanding objective of encouraging greater ownership of broadcast stations by minorities and women. The FCC said this will benefit radio and television audiences by promoting greater diversity, innovation, and competition. The FCC furthered its objective of creating greater opportunities for new entrants in the broadcasting industry by carving out special transactional opportunities for small businesses, many of which are owned by minorities and women. Limits on Concentration Serve the Public Interest In sum, the modified ownership rules adopted today provide a new, comprehensive national and local regulatory framework that will serve the public interest by promoting competition, diversity and localism. Today's Report and Order adopts a set of cross- media limits to replace the newspaper/ broadcast and radio/ television cross- ownership rules; modifies the local television multiple ownership rule; strengthens the local radio ownership rule by modifying the local radio market definition; incrementally modifies the national television ownership rule; and retains the dual network rule. A summary of the broadcast ownership rules adopted today is attached. The FCC also adopted a Notice of Proposed Rulemaking on defining non- Arbitron radio markets. Details are included in the attached summary. Action by the Commission, June 2, 2003, by Report and Order (FCC 03- 127) and Notice of Proposed Rulemaking . Chairman Powell, Commissioners Abernathy, and Martin with Commissioners Copps and Adelstein dissenting. Separate statements issued by Chairman Powell, Commissioners Abernathy, Copps, Martin, and Adelstein. -FCC- MB Dockets 02- 277, 01- 235, 01- 317, 00- 244 MB Docket (NPRM) Comments due: 30 days after publication in the Federal Register Replies due: 45 days after publication in the Federal Register Media Bureau contacts: Paul Gallant, Mania Baghdadi, Judith Herman at 202- 418- 7200. News and information about the Federal Communications Commission and its media ownership limits can also be found on the FCC's web site www. fcc. gov/ ownership. 3 8 RADIO AND TV TRANSFERABILITY LIMITED TO SMALL BUSINESSES The FCC’s new TV and radio ownership rules may result in a number of situations where current ownership arrangements exceed ownership limits. The FCC grand- fathered owners of those clusters, but generally prohibited the sale of such above- cap clusters. The FCC made a limited exception to permit sales of grand- fathered combinations to small businesses as defined in the Order. In taking this action, the FCC sought to respect the reasonable expectations of parties that lawfully purchased groups of local radio stations that today, through redefined markets, now exceed the applicable caps. The FCC also attempted to promote competition by permitting station owners to retain any above- cap local radio clusters 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. 8 9 DIVERSITY INDEX - SUMMARY The FCC’s Diversity Index (DI) reflects the degree of concentration in viewpoint diversity in local markets. Consistent with First Amendment concerns, the DI does not assess diversity by looking to the specific views expressed over a media outlet. Instead it measures the availability of outlets of various types and assigns a weight to each class of outlet (radio, newspaper, television, etc.) based on their relative value to consumers. The Diversity Index is modeled on the Herfindahl- Hirschmann Index (HHI), which is used in antitrust analysis to measure the degree concentration in an economic market. Both the HHI and the DI are derived by adding together the sum of squared market shares of competitors in each local market. The end result of the DI is an assessment of the degree of media diversity concentration taking into account all of the media outlets in the market. How to read the table on the next page: Columns A and B: Column A assigns weights to different types of media based on Nielsen’s nationwide survey of 3,136 people who were asked what sources they use for local news and current affairs (FCC MOWG Study No. 8). As a source of local news, broadcast television stations were listed by 33.8% of respondents; radio was listed by 24. 9% of respondents; newspapers by 28.8%; and the Internet was listed by 12.5% of respondents. Column B breaks out the categories within each medium (80.3% of “newspaper” respondents specified daily newspapers; 29.3% said weekly newspapers). Because this was a national survey, these percentage “weights” remain constant across all local markets in applying the Diversity Index. Column C: The company names of the owners of each type of outlet in a local market. Column D: Lists the number of outlets owned by each company in a local market. Column E: Each type of media (TV, newspaper, radio, etc.) has a universe of 100% market share. Specifically, the entries in column E for each broadcast TV station show each outlet’s share of the broadcast universe only. They add up to 100% so that we can assign a share to each owner of that type of outlet in the market. In this example, there are 8 TV stations, so each one has a 12.5% share of the broadcast TV universe. “TV owner A” owns 2 TV stations in the market, so they are credited with a 25% share (12.5% x 2). Column F: This column translates each outlet into a share of the total viewpoint market in that particular locality. For example, in our sample city, Column F converts Radio Owner B’s 23.1% share of the radio universe into a 5.7% share of the total media market. (23.1% x 24. 9%) Column G: Captures the effect of a company owning more than one type of outlet in a market. In this sample city, “TV- Radio owner A” (Voice 1) has 2 TV stations and 3 radio stations. To accurately assess “TV- Radio Owner A’s” role in the city’s viewpoint market, column G simply identifies common ownership among different media outlets. The shares of commonly- owned outlets must be added together before squaring them. The increase in the Diversity Index from cross- owned outlets is shown at the bottom of the page. In the sample city, the “Voice 1, Total Shares” row near the bottom of the page shows that the combined effect of “TV- Radio owner A’s” ownership of TV stations and radio stations in this city is an additional 130 points. Column H: Represents the square of each outlet’s share of the viewpoint market (which is shown in Column F). The last row on the table shows the level of viewpoint diversity concentration for this sample market. As with the HHI, a DI below 1000 = unconcentrated for viewpoint diversity; DI between 1000- 1800 = moderately concentrated for viewpoint diversity; DI of 1800 or above = highly concentrated for viewpoint diversity. 9 10 Diversity Index Example – “Anytown, USA” Media Market Ownership Shares within Medium Percent Share of Media Market % of Media % of Medium Parent Company # of Stations % Share % Share (AxBxE) Cross Ownership Column F Squared A B C D E F G H TV owner A (Voice 1) 2 25. 0 8.5 Voice 1 --- Broadcast TV owner B (Voice 2) 1 12. 5 4.2 17. 9 Television TV owner C (Voice 3) 1 12. 5 4.2 17. 9 Stations TV owner D (Voice 4) 1 12. 5 4.2 17. 9 (8 total) TV owner E (Voice 5) 1 12. 5 4.2 17. 9 33. 8% 100.0% TV owner F (Voice 6) 1 12. 5 4.2 17. 9 TV owner G (Voice 7) 1 12. 5 4.2 17. 9 Radio owner A (Voice 1) 3 11. 5 2.9 Voice 1 --- Radio owner B (Voice 8) 6 23. 1 5.7 33. 0 Radio owner C (Voice 9) 2 7.7 1.9 3.7 Radio owner D (Voice 10) 1 3.8 1.0 0.9 Radio owner E (Voice 11) 1 3.8 1.0 0.9 Radio owner F (Voice 12) 1 3.8 1.0 0.9 Radio owner G (Voice 13) 1 3.8 1.0 0.9 Radio Radio owner H (Voice 14) 1 3.8 1.0 0.9 Stations Radio owner I (Voice 15) 1 3.8 1.0 0.9 (26 total) Radio owner J (Voice 16) 1 3.8 1.0 0.9 24. 9% 100.0% Radio owner K (Voice 17) 1 3.8 1.0 0.9 Radio owner L (Voice 18) 1 3.8 1.0 0.9 Radio owner M (Voice 19) 1 3.8 1.0 0.9 Radio owner N (Voice 20) 1 3.8 1.0 0.9 Radio owner O (Voice 21) 1 3.8 1.0 0.9 Radio owner P (Voice 22) 1 3.8 1.0 0.9 Radio owner Q (Voice 23) 1 3.8 1.0 0.9 Radio owner R (Voice 24) 1 3.8 1.0 0.9 Daily owner A (Voice 25) 1 50. 0 11. 6 133.7 Daily owner B (Voice 26) 1 50. 0 11. 6 133.7 Daily (80.3%) Weekly owner A (Voice 27) 1 100.0 8.6 73. 2 Newspapers (28.8%) Weekly (29.7%) 18. 3% Cable Internet owner A (Voice 28) 1 100.0 2.3 5.2 Internet (12.5%) 81. 7% Dial- up/ other owner A (Voice 29) 1 100.0 10. 2 104.3 Voice 1, Total Share TV- Radio owner A (add 2.9 + 8.5) 11.4 130.0 Diversity Index of “Anytown, USA” (Sum of Column H) 738 In this market, there are a total of 39 different media outlets (8 TV, 26 radio, 2 daily newspapers, 1 weekly newspaper, and two different Internet providers). Due to multiple ownership by several companies, and cross- ownership by one company (“ TV- Radio owner A”), this market has 29 voices. This is intuitively consistent with a DI rating of 738 for this market. 10