America’s Federal Communications Commission (FCC) this week adopted new broadcast ownership rules that “provide a new, comprehensive national and local regulatory framework that will serve the public interest by promoting competition, diversity and localism”.

The new rules are “the most comprehensive review of media ownership regulation in the agency’s history” and may have implications for Australia’s new media Bill, which is planned to be back in the Australian Parliament at the next sitting.

Importantly for the litigious Americans the new rules are “enforceable, based on empirical evidence and reflective of the current media marketplace,” meaning that they will withstand legal challenges, which weakened the previous rules. The US review spanned 20 months and accepted more than 520,000 public comments.

The FCC believes the 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.”

Background to the decision published by the FCC shows that media markets around the US have changed significantly in the past 40 years. In New York for example, in 1960 there were 89 media outlets and 60 owners, while in 2000 there were 184 outlets and 114 owners.

In a comment that could be significant for Australia’s consideration of these issues, the chairman of the FFC Michael Powell said: “Keeping the rules exactly as they are, as some so stridently suggest, was not a viable option. Without today’s surgery, the rules would assuredly meet a swift death. As the only member of this Commission here during the last biennial review, I watched first hand as we bent to political pressure and left many rules unchanged. Nearly all were rejected by the court because of our failure to apply the statute faithfully. I have been committed to not repeating that error, for I believe the stakes are perilously high.”

Some of the highlights of the Bill include:

DIVERSITY

The FCC strongly affirmed its core value of limiting broadcast ownership to promote viewpoint diversity. The FCC said: “the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public… multiple independent media owners are needed to ensure a robust exchange of news, information, and ideas among Americans.”

The FCC has 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. 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.”

COMPETITION

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… 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

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.”

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.

RADIO OWNERSHIP LIMITS

Concerning Local Radio Ownership Limits, the FCC found that “the current limits on local radio ownership continue to be necessary in the public interest, but that the previous methodology for defining a radio market did not serve the public interest.” The radio caps remain at the following levels:

* In markets with 45 or more radio stations, a company may own 8 stations, only 5 of which may be in one class, AM or FM.

* In markets with 30-44 radio stations, a company may own 7 stations, only 4 of which may be in one class, AM or FM.

* In markets with 15-29 radio stations, a company may own 6 stations, only 4 of which may be in one class, AM or FM.

* In markets with 14 or fewer radio stations, a company may own 5 stations, only 3 of which may be in one class, AM or FM.

Although Americans rely on a wide variety of outlets in addition to radio for news, the FCC found that the current radio ownership limits continue to be needed to promote competition among local radio stations. Competitive radio markets ensure that local stations are responsive to local listener needs and tastes. By guaranteeing a substantial number of independent radio voices, this rule will also promote viewpoint diversity among local radio owners.

Geographic Approach

The FCC replaced its “signal contour method” of defining local radio markets with a “geographic market approach” assigned by Arbitron.

The FCC said that its signal contour method created anomalies in ownership of local radio stations that Congress could not have intended when it established the local radio ownership limits in 1996. The FCC closed that loophole by applying a more rational market definition than radio signal contours. The FCC said applying Arbitron’s geographic markets method will better reflect the true markets in which radio stations compete.

* All radio stations licensed to communities in an Arbitron market are counted in the market as well as stations licensed to other markets but considered “home” to the market.

* Both commercial and noncommercial stations are counted in the market. The FCC determined that the current rule improperly ignores the impact that noncommercial stations can have on competition for listeners in radio markets.

* For non-Arbitron markets, the FCC will conduct a short-term rulemaking to define markets comparable to Arbitron markets. These new markets will be specifically designed to prevent any unreasonable aggregation of station ownership by any one company.

* As an interim procedure for non-Arbitron markets, the FCC will apply a modified contour method for counting the number of stations in the market. This modified contour approach minimizes the potential for additional anomalies to occur during this transition period, while providing the public a clear rule for determining the relevant radio markets.

* In using the contour-overlap market definition on an interim basis, the FCC made certain adjustments to minimize the more notorious anomalies of that system. Specifically, the FCC will exclude from the market any radio station whose transmitter site is more than 92 kilometers (58 miles) from the perimeter of the mutual overlap area. This will alleviate some of the gross distortions in market size that can occur when a large signal contour that is part of a proposed combination overlaps the contours of distant radio stations and thereby brings them into the market.

CROSS-MEDIA LIMITS

This rule replaces the broadcast-newspaper and the radio-television cross-ownership rules.

The new rule states:

· In markets with three or fewer TV stations, no cross-ownership is permitted among TV, radio and newspapers. A company may obtain a waiver of that ban if it can show that the television station does not serve the area served by the cross-owned property (i.e. the radio station or the newspaper).

· In markets with between 4 and 8 TV stations, combinations are limited to one of the following:

(A) A daily newspaper; one TV station; and up to half of the radio station limit for that market (i.e. if the radio limit in the market is 6, the company can only own 3) OR

(B) A daily newspaper; and up to the radio station limit for that market; (i.e. no TV stations) OR

(C) Two TV stations (if permissible under local TV ownership rule); up to the radio station limit for that market (i.e. no daily newspapers).

In markets with nine or more TV stations, the FCC eliminated the newspaper-broadcast cross-ownership ban and the television-radio cross-ownership ban.

The FCC retained its BAN on MERGERS among any of the TOP 4 national broadcast networks.

TRANSFERABILITY OF LICENCES

The FCC’s new TV and radio ownership rules may result in a number of situations where current ownership arrangements exceed ownership limits, most high profile of these in radio was the Clear Channel network. 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.

Concerning LOCAL TV MULTIPLE OWNERSHIP LIMITS, The new rule says: in markets with five or more TV stations, a company may own two stations, but only one of these stations can be among the top four in ratings and; in markets with 18 or more TV stations, a company can own three TV stations, but only one of these stations can be among the top four in ratings. The FCC adopted a waiver process for markets with 11 or fewer TV stations.

The FCC incrementally increased the 35% limit to a 45% limit on national ownership so that a company can own TV stations reaching no more than a 45% share of U.S. TV households.

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 found that all of the broadcast ownership rules continue to serve the public interest either in their current form or in a modified form.