Before the FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 In the Matter of ) ) Revision of ) MM Docket No. 91-140 Radio Rules and Policies ) OPPOSITION TO PETITIONS FOR RECONSIDERATION The National Telecommunications and Information Administration (NTIA), as the Executive branch agency principally responsible for the development and presentation of domestic and international telecommunications and information policy, respectfully submits this opposition to various petitions for reconsideration of the Federal Communications Commission's (Commission) Report and Order filed in the above-captioned proceeding.[1] I. INTRODUCTION In the Report and Order, the Commission liberalized its national and local multiple ownership rules for the AM and FM radio services. It raised the national multiple ownership limit from twelve to thirty stations for each service.[2] In addition, the Commission revised its local ownership rules to permit a single firm to own from three to six radio stations within a local market, depending on market size.[3] The Report and Order demonstrated that much of the radio industry is facing, and will likely continue to face, serious financial difficulty, as its economic base has been eroded by increased competition for audiences and advertising from numerous media sources, including cable, broadcast television, and other radio stations.[4] The Commission concluded that the industry, particularly small radio stations, would benefit from being able to consolidate administrative, sales, programming, promotion, production, and other functions. The efficiencies realized would, in turn, enable such stations to improve the diversity of programming provided to the public, including news and public affairs programming.[5] The Commission's decision has been controversial, particularly with respect to the national ownership rules. Congressional interest has been substantial, with some members arguing for tighter ownership limitations and criticizing the Commission's decision-making process. Several parties have petitioned the Commission for reconsideration of its decision. Some of these parties requested that the Commission reduce its newly-adopted limits,[6] or vacate its decision and reinstate the prior national multiple ownership rule ("Twelve Station Rule"), and the prior local ownership rule.[7] II. DISCUSSION NTIA supports the Commission's deregulatory actions in this proceeding and the economic and industry analyses on which they are based. Given the current state of the radio industry and the increased competition, both within the industry and from other forms of mass media, the Commission's actions modifying the radio ownership rules serve the public interest and could, in fact, be expanded. The Report and Order reflects a measured approach toward permitting more efficient business organization within the industry, while minimizing the likelihood of undue concentration. A. The Commission's Modified National Multiple Ownership Rule Is Justified on Policy Grounds The national ownership rule adopted in the Report and Order is more than adequate to address the issues of competition and diversity of greatest importance in the radio industry. Indeed, those issues are primarily of local, not national, concern. As the Commission states, the likelihood of a single firm exerting dominance over the radio industry on a national level is highly unlikely. The radio industry, historically extremely unconcentrated under traditional antitrust analysis, has become even less so over the years.[8] Moreover, viewpoint diversity has increased dramatically since the Twelve Station Rule was adopted in 1984.[9] As the Commission notes, the number of radio stations and other mass media outlets has continued to grow dramatically.[10] For instance, there are currently over 11,000 radio broadcast stations in the United States, and radio increasingly faces competition from audio services delivered by cable, and video services -- namely, broadcast television and cable.[11] For these reasons, NTIA supports the Commission's decision to modify significantly the rule for the AM and FM radio services; indeed, we believe that the national diversity and competition conditions described in the Report and Order could warrant simply eliminating the national ownership cap altogether. We see no convincing arguments in the record that the public would be harmed -- either economically or in its access to diverse, high quality programming -- by such an action. Moreover, if the industry trends began developing in ways that threatened excessive concentration,[12] the Commission could reassert its regulatory authority and, based on actual developments in the industry, establish a precisely focused set of regulatory safeguards. Thus, in light of current industry conditions, the Commission's new national rule represents a very measured and cautious deregulatory approach. Based on the compelling need for radio broadcasters, particularly smaller stations, to attract investment capital and operate more efficiently, as demonstrated in the Report and Order, tightening the current national ownership limits would not only be unnecessary, but potentially harmful to the future health of the radio industry. B. Major Revisions to The Commission's Modified Local Ownership Rules Are Not Necessary NTIA believes the Commission has demonstrated that local markets in the radio industry are sufficiently diverse and competitive to warrant the changes in the local ownership rules made in the Report and Order. In fact, as the Commission notes, relaxation of the rules may enhance competition and diversity by allowing smaller stations, some of which are currently in financial difficulty, to realize cost savings through consolidation with other stations.[13] We agree with the Commission's analysis that these cost savings are likely to result in better programming to the benefit of listeners.[14] The Commission's structure for allowing ownership of three to six stations per market, which depends on the size of the market, coupled with a twenty-five percent audience reach cap, strikes an appropriate balance that will permit scale economies that should improve the quality of radio offerings, preserve diversity, and prevent undue concentration of control. Some commenters have argued that the new local ownership rules, because they rely on market share and Arbitron data, are unduly burdensome for the Commission to enforce and for radio broadcasters to follow.[15] Given these potential difficulties, the Commission may wish to consider proposals to simplify the local rules so long as they retain the benefits promised by the current rules. III. CONCLUSION For the foregoing reasons, NTIA supports the Commission's decision to liberalize the national and local multiple ownership radio rules and opposes petitions for reconsideration arguing to the contrary. Respectfully submitted, Gregory F. Chapados Assistant Secretary for Phyllis E. Hartsock Communications and Information Acting Chief Counsel Thomas J. Sugrue Deputy Assistant Secretary for Communications and Information William F. Maher, Jr. Associate Administrator Cheryl R. Glickfield Office of Policy Analysis and Development National Telecommunications and Information Administration U.S. Department of Commerce Room 4713 14th Street and Constitution Ave., N.W. Washington, D.C. 20230 (202) 377-1816 July 2, 1992 ---------------------------------------------------------------------------- ENDNOTES [1] Revision of Radio Rules and Policies, 7 FCC Rcd 2755 (1992) (Report and Order). [2] Report and Order, 7 FCC Rcd at 2770-71. [3] Id. at 2776. Moreover, the Commission adopted an additional "audience share" safeguard such that no licensee may acquire a station if the combined audience share of all radio stations owned by the licensee in a local market exceeds 25%. Id. at 2776, 2779-80. The 25% audience share cap does not apply in markets with fewer than 15 radio stations. Id. at 2782. The Commission's former local rule (known as the "duopoly rule") prohibited ownership of two (or more) stations in the same service in the same market. 47 C.F.R.  73.3555(b) (1991). The rule permitted common ownership of one AM and one FM station in a local market. [4] Id. at 2757-58. [5] Id. at 2760. [6] The National Association of Broadcasters (NAB) urged the Commission to lower the national multiple ownership limit to 25 stations for the AM and FM radio services. Petition for Partial Reconsideration and Clarification of NAB in MM 91-140, at 5 (filed May 29, 1992) (NAB Petition for Partial Reconsideration). NAB called for further modification of the rule to encourage minority ownership by allowing "common ownership of an additional five stations in each service if they are minority controlled[.]" Id. NAB also asked the Commission to simplify the local multiple ownership rules by allowing ownership of two AM and two FM stations in markets with 30 or more stations, and ownership of two AM and one FM station in markets with fewer than 30 stations. Id. at 5. Moreover, NAB requested that the Commission eliminate the use of audience share caps to limit the number of stations a broadcaster may own in a local market, and that the Commission not rely on Arbitron data to ascertain the number of stations in a market. Id. at 4. [7] See, e.g., Petition for Reconsideration of United Church of Christ in MM 91-140 at 1, 16 (filed May 29, 1992); Petition for Reconsideration of Media Access Project in MM 91-140 at 1, 23 (filed May 29, 1992); Petition for Reconsideration of National Association of Black Owned Broadcasters and the National Black Media Coalition in MM 91-140 at 2, 14 (filed May 11, 1992). [8] Report and Order, 7 FCC Rcd at 2765-66. [9] Id. at 2757-58. [10] Id. at 2765. [11] Id. [12] Given the current highly unconcentrated state of radio ownership, it would take at least some time for such a trend to develop. [13] Id. at 2774. [14] Id. at 2776. [15] NAB Petition for Partial Reconsideration at 5, 17; Joint Petition for Reconsideration and Clarification of Adventure Communications, Inc., et al in MM 91-140 at 2-11 (filed May 29, 1992).