In the Matter of AMENDMENT OF PART 74, SUBPART K, OF THE COMMISSION'S RULES AND REGULATIONS RELATIVE TO DIVERSIFICATION OF CONTROL OF COMMUNITY ANTENNA TELEVISION SYSTEMS; AND INQUIRY WITH RESPECT THERETO TO FORMULATE REGULATORY POLICY AND RULEMAKING AND/OR LEGISLATIVE PROPOSALS.
Docket No. 18891
FEDERAL COMMUNICATIONS COMMISSION
23 F.C.C.2d 833
RELEASE-NUMBER: FCC 70-674
July 1, 1970 Released;
Adopted June 24, 1970
BY THE COMMISSION: COMMISSIONER ROBERT E. LEE DISSENTING AND ISSUING A STATEMENT; COMMISSIONER COX CONCURRING IN THE RESULT; COMMISSIONER JOHNSON CONCURRING AND ISSUING A STATEMENT; COMMISSIONER WELLS DISSENTING.
[*833] 1. In the Second Report and Order in Docket 18397, released on July 1, 1970 (FCC 70-673), the Commission stated that it would issue a further notice of proposed rule making and of inquiry in which it would treat several matters, relating to diversification of control of CATV and other media, which were not dealt with in that report and order. Persons interested in commenting on the matters discussed and rules proposed herein are referred to that Second Report for discussion of some of the policies and background pertaining to this notice. See, also, the First Report and Order in Docket 18397, released on October 27, 1969 (FCC 69-1170, 24 Fed. Reg. 17651); and the Notice of Proposed Rule Making and Notice of Inquiry in that docket, released on December 13, 1968 (15 FCC 2d 417, 33 Fed. Reg. 19028). All Docket 18397 matters relating to diversification of control of CATV and other media which were not disposed of in the aforementioned [**2] Second Report and Order are reassigned to this new docket to facilitate Commission consideration of future comments. Interested parties filing comments regarding that subject are directed to limit them to that subject, and to deal with other CATV questions in comments separately filed for consideration in other dockets.
2. In the Second Report, the Commission adopted rules prohibiting cross-ownership of CATV systems, and national television networks [*834] or local television broadcast or translator stations. n1 Some of the comments received by the Commission advocated a cross-ownership prohibition extending to local radio stations as well -- on the ground that in some respects radio stations are even more competitive with CATV systems than are television stations. Unlike TV, it was argued, radio and CATV are locally oriented, relatively low-cost advertising media; some added that radio-CATV cross-ownership would "reduce the number of 'voices' having proprietary control over the media facilities in the community." On the other hand, several parties thought that local cross-ownership of CATV systems and radio stations should be permitted on the ground that common use [**3] of studio facilities, equipment, and personnel would facilitate CATV program origination. The Pennsylvania CATV Association reported that some of its members thought association with a local radio station or newspaper might be helpful, but cautioned against turning cablecasting over to either since they might regard it as just an adjunct.
n1 Although the Commission is not at this time favorably disposed toward exemption of noncommercial educational television stations from these cross-ownership strictures, it invites, and will fully consider, further comments concerning the desirability and possible specific provisions of such an exemption. The Commission is, of course, aware that operation of a local CATV system might be financially beneficial to the ETV station. At the same time, however, it desires to provide local television audiences with a multiplicity of separately controlled "voices"; and notes that a CATV system in the same locality is not the only potential source of funds needed to operate an ETV station.
3. The Commission recognizes the significance of the contention that radio stations and CATV systems are directly competitive in their emphasis on local programming [**4] and as low-cost advertising outlets. On the other hand, however, it notes that in many areas a multiplicity of radio "voices" exists; and it is not certain that it would be undesirable to permit program-origination working arrangements between CATV systems and local radio stations. In many cases, a local radio station may be the best available, most experienced source of CATV local-programming assistance. n2 Additional comments on this subject would be welcomed. Thus, we request comment on whether there should be a total proscription (e.g., within the 1 mV/m contour of the FM station or the primary service area of the AM station), no ban, or one tailored to communities having only a small number of AM outlets (e.g., five or less) assigned to them. In this connection, we also request comments on what regulations, if any, would be appropriate with respect to a shared use of technical facilities and personnel between the system and a local radio station.
n2 There is also the possibility that local broadcast stations might be among those eligible to make use of common carrier channels on CATV systems to supplement their local broadcast originations.
4. Numerous comments were [**5] received concerning cross-ownership of local daily newspapers and CATV systems. In view of the fact, however, that the related question of cross-ownership of newspapers and local broadcast stations is currently under study in another rulemaking proceeding, the Commission deems it appropriate to defer consideration of this question temporarily to permit it to weigh both of these newspaper cross-ownership matters at the same time. n3 In the [*835] meantime, the Commission would welcome additional comments regarding relations between CATV systems and neighborhood and small-community weekly newspapers in their service areas.
n3 Some of the parties who filed comments in favor of daily newspaper-local CATV system cross-ownership argued that newspaper ownership of CATV facilities would be essential in the event of a conversion to facsimile delivery of newspapers. This is a matter regarding which immediate Commission comment is appropriate. The Commission is of the view that whatever decisions may be reached regarding newspaper-catv/ crossownership, CATV operators should not be permitted to deal unfairly with newspapers seeking use of cable facilities for facsimile delivery.
Multiple [**6] Owership
5. In paragraph 24 of the December 1968 Notice, the Commission proposed rule making in the area of multiple ownership of CATV systems. Those opposed to such rules, aside from challenging our jurisdiction, asserted principally that there is no need for multiple ownership rules since all existing CATV systems taken together do not serve nearly as many homes as are served by television stations under common ownership. NCTA, pointing out that the largest multiple CATV owner serves only 231,385 subscribers, urged that rule making be deferred until the largest CATV operator reaches as many homes as are covered by the stations owned and operated by the ABC network. Others asserted that the Commission should not "so perpetuate the shibboleth of localism" as to prevent inter-connection on a national basis or prejudice the CATV industry's ability to compete with the telephone company in the provisions of other services via cable.
6. We are not persuaded by the argument that multiple ownership rules should be postponed until large-scale CATV operations under common ownership have come into being. While the remedy of divestiture is available, it is far easier and much less disruptive [**7] to all concerned to prevent vast chains in the first place rather than to attempt to break them up after they have become established. The comparatively small number of CATV subscribers now served by commonly owned systems may be attributable to the circumstance that CATV operations have in the past been centered in smaller and more remote communities rather than in the nation's larger metropolises -- perhaps in part because of the top 100 market provisions of Section 74.1107 of the rules. We are now seeking to encourage CATV operations in the larger markets on a basis consistent with the public interest (e.g., with program origination, local signals, and perhaps other services), and are hopeful that such entry will soon become common. We have adopted rules to facilitate CATV construction in major cities and to expand CATV service areas through the use of microwave radio. Report and Order in Docket No. 18452, FCC 69-1241 (released November 14, 1969). Since large-scale CATV operations may well be imminent, we think that the ground rules on multiple ownership should be established now, when little or no divestiture may be necessary.
7. The contention that multiple ownership [**8] rules might prevent national inter-connection of CATV systems for network operations or prejudice the provision of other services via cable also seems to lack merit. As previously emphasized, we are against any restrictions that might preclude inter-connection of CATV systems on a national or regional basis or CATV network operations. Moreover, we are exploring in Part V of this proceeding the possibility that the cable technology might be utilized to provide other services to the public on an inter-connected basis, either in competition with or supplementary to [*836] services that may be provided by the telephone companies, including the question of how best to achieve diversity of ownership and/or control. However, we see no reason to conclude that common ownership of all the facilities is essential to such operations. The broadcast networks do not own all or even a major portion of the broadcast and common carrier facilities used in their network operations. Nor is there any apparent reason why any common carrier services that might be provided via interconnected CATV cable would necessitate common ownership of the facilities and/or carrier in each locality. In the event that some [**9] good reason should appear when such common carrier operations materialize, the Commission could reexamine the appropriateness of the multiple ownership rules. The only CATV activity (apart from carriage of broadcast signals) presently facing us is program origination, and for that purpose we think that limitations on multiple ownership would serve the public interest.
8. In view of the absence of helpful suggestions in the record before it as to the precise nature of the limitations that might be appropriate, the Commission has undertaken to formulate specific proposed standards in the first instance. The proposed standards set forth below are tentative only, and, indeed, are stated in alternative forms, so as to stimulate comment. It is hoped that they will lead to constructive counterproposals and helpful suggestions from the public as to appropriate modifications or refinements. Since we anticipate that the record as supplemented pursuant to this further notice will afford a basis for the adoption of definitive rules, parties are advised to give full treatment to any counterproposals in their reply comments.
9. The Commission's first proposal as to multiple ownership [**10] of CATV systems is as follows:
(a) For the purposes of this proposal --
(1) Where a CATV system (including all parties under common control) directly or indirectly owns, operates, controls, or has an interest in other CATV systems within the same SMSA (Standard Metropolitan Statistical Area, as defined by the U.S. Census Bureau), all of the related CATV systems within the same SMSA shall be collectively viewed as one system; and
(2) Systems with fewer than 1000 subscribers need not be counted. n4
n4 We note that the record in this proceeding reflects that almost 70 percent of all existing CATV systems had fewer than 1,000 subscribers in 1969. However, we raise the question of whether the exemption for systems to be counted should not be 3,500 -- the number selected for mandatory origination.
(b) No CATV system (including all parties under common control) shall be permitted to carry the signal of any television broadcast station if such system directly or indirectly owns, operates, controls, or has an interest in more than 50 CATV systems, of which --
(1) No more than 1 may be located within the top 3 SMSA's;
(2) No more than 2 may be located within the top 10 SMSA's; [**11]
(3) No more than 3 may be located within the top 25 SMSA's;
(4) No more than 4 may be located within the top 50 SMSA's;
(5) No more than 7 may be located within the top 100 SMSA's;
(6) No more than 10 may be located within adjoining States; and
[*837] (7) No more than 5 may be located within the same State, only 1 of which may be located within a top-100 SMSA.
(c) Where the CATV system (including all parties under common control) owns, operates, controls, or has an interest in more than 1 television broadcast station or more than 2 AM or FM stations or more than 2 newspapers, the maximum number of CATV shall not exceed 25, and the maximums within SMSA's and States are --
(1) No more than 1 within the top 10 SMSA's;
(2) No more than 2 within the top 50 SMSA's;
(3) No more than 4 within the top 100 SMSA's;
(4) No more than 5 within the same State or adjoining States; and
(5) No more than 1 within a top-100 SMSA in the same State.
10. In the alternative (or as a companion provision), the Commission proposes that --
(a) No CATV system (including all parties under common control) shall be permitted to carry the signal of any television broadcast station if such system alone, or [**12] together with other CATV systems which it directly or indirectly owns, operates, controls, or has an interest in, serves more than 2,000,000 subscribers: Provided, however, That --
(b) Where such a system, or group of systems, has acquired that number of subscribers, it may increase its roster of subscribers up to an additional 10 percent -- but only within the communities which it already serves. (The purpose of this proviso is to avoid a situation in which a group of systems, having reached an arbitrary limit nationwide, would be prevented from extending service to residents of a community in which it already is operating. The additional leeway of 200,000 should give ample opportunity to avoid such a situation -- and to provide time for voluntary divestiture of systems and their subscribers in certain communities in order to permit further expansion in others.)
11. We stress again that the foregoing proposals are put forth as a starting point to stimulate concrete suggestions as to a specific standard, and may be modified in light of information submitted as to existing ownership patterns -- information which we now lack in large part. Thus, in the first alternative proposal, [**13] the number might be 75 or 100 instead of 50. It is contemplated that notes similar to those contained in the local cross-ownership rules adopted in the Second Report would be appended, defining the terms "control," "interest," and the kind of stock ownership that must be considered in corporations with more than 50 stockholders. We raise again the question of whether there should be divestiture of systems to achieve compliance with any rules adopted and, if so, what kind of grace period should be afforded.
12. The rules adopted in the Second Report prohibited television broadcast networks from having cross-ownership interests in any CATV system, no matter where located within the United States. However, the Commission would be willing to explore in these further proceedings the question of whether successful CATV network cablecasting operations would hinge on ownership and operations of CATV systems, particularly in the nation's largest cities. It is our tentative [*838] belief that such ownership and operation is not fundamentally necessary to network operations, which may be conducted through affiliation with independently owned systems. To the extent that it is claimed that CATV [**14] system ownership would facilitate experimentation and innovation in program production, it would appear that CATV networks could accomplish this within the framework of the proposed multiple ownership provisions set forth in paragraphs 9 and/or 10 above. We are proposing to make such provisions applicable across-the-board to CATV networks as well as others. Interested parties urging a more lenient standard for CATV network owners should support their position by a substantial showing of need.
13. We have, in part, characterized this document as a notice of inquiry because, aside from the specific rule-making proposals herein, we seek to elicit from all interested persons information and suggestions as to whether other CATV-ownership patterns warrant consideration under the public interest standard (e.g., ownership of CATV systems by microwave carriers, CATV-equipment manufacturers, national news magazines, advertising agencies). Persons submitting comments in this respect should set forth all pertinent information which they have in support of their views. Since we have here reached no conclusions, even of a tentative nature, we are advancing no rulemaking proposals [**15] but rather are facilitating a broad-ranging inquiry to determine whether there are further problems.
14. Authority for the rule making proposed herein is contained in Sections 2, 3, 4(i) and (j), 301, 303, 308, 309, and 403 of the Communications Act. All interested parties are invited to file written comments on such proposals on or before October 7, 1970, and reply comments on or before October 28, 1970. In reaching its decisions in this matter, the Commission may also take into account any other relevant information before it, in addition to the comments invited by this Further Notice.
15. In accordance with the provisions of Section 1.419 of the Commission's Rules and Regulations, an original and 14 copies of all comments, replies, pleadings, briefs, or other documents filed in this proceeding shall be furnished to the Commission.
FEDERAL COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.
[*839] CONCURRING STATEMENT OF COMMISSIONER NICHOLAS JOHNSON
In this Notice of Rule Making the Commission proposes to get further comments on the ownership of cable systems in this country. Specifically, we are asking for information on the cross-ownership in the same market of a [**16] cable system and either a newspaper or a radio station, and information on multiple ownership of cable systems nationally. I concur in this action; I think that these are areas in which the FCC must take action. I believe, however, that the present docket contains sufficient comments upon which to base our cross-ownership action, and there appears to me to be no good reason to wait.
While the Commission puts off making this decision, the concentration of the media in this country gets worse. In 1968,225 newspapers owned cable television interests. In the few short years of the industry's existence, the competing print media have begun to exercise significant control over this new medium of communication. And during this time, newspaper ownership also became more concentrated. In 1945 there were 117 cities with separately-owned dailies, but in 1966 only 43 remained.
Of course, no one, to my knowledge, has ever questioned the desirability of providing (even insuring) the nondiscriminatory access of newspapers to cable systems for the distribution of their product -- if and when that alternative becomes economically viable. Ownership of such systems by newspapers, however, [**17] raises altogether different issues.
In conclusion, then, I support the Commission majority in their effort to gain more information about the problem of media concentration in the United States. These are tough issues, my mind is open, and I welcome all the information we can get. I especially support this first effort into the area of multiple ownership. But I cannot support these actions if they are merely efforts at delay with the hope that political events will dictate a different result when the issues are eventually considered. The resulting uncertainty serves no one's interests. I would have preferred to have acted so that the industry and the public would have known the future of the growth of cable television.
DISSENTING STATEMENT OF COMMISSIONER ROBERT E. LEE
I do not find that consideration of divestiture of newspapers at this time to be in the public interest. There is no more reason to single out newspapers for such special adverse treatment than any other business in the same city as a CATV system. The single-industry city or substantial employer or advertiser in the area is in a position to exact as much, or more, control over CATV programming. I believe [**18] that such matters are better considered on a case-by-case basis and we should not consider barring a class of owners, such as newspapers, from CATV ownership in the same city.