March 30, 2017 FCC FACT SHEET* Amendment of the National Television Multiple Ownership Rule UHF Discount Order on Reconsideration – MB Docket No. 13-236 Background: The national television multiple ownership rule (47 CFR § 73.3555(e)) prohibits a single entity from owning commercial broadcast television stations that collectively reach more than 39 percent of the total television households in the nation. Previously, the rule allowed stations broadcasting in the UHF spectrum to count only 50 percent of the television households in their market when determining compliance with the national cap (the so-called “UHF discount”). In August 2016, the Commission adopted by a 3-2 vote the UHF Discount Order, which eliminated the UHF discount and grandfathered existing station groups that would exceed the national audience reach cap without the benefit of the discount. Such grandfathering, however, was not transferable to a future owner. In November 2016, ION Media Networks and Trinity Christian Center of Santa Ana, Inc. jointly filed a Petition for Reconsideration contending that the Commission’s elimination of the discount without simultaneously analyzing whether the national audience reach cap should be adjusted was unlawful and resulted in an unwarranted tightening of the cap. A similar challenge to the FCC’s decision is pending in the U.S. Court of Appeals for the District of Columbia Circuit. What the Order Would Do: ? Grant in part, and dismiss as moot in part, the Petition for Reconsideration, thus reinstating the UHF discount. ? Find that the UHF discount and national audience reach cap are inextricably linked, and that the Commission’s elimination of the UHF discount without considering whether the cap should be modified was in error. The Commission’s action had the effect of substantially tightening the national cap for some companies without any analysis of whether such a tightening was warranted given current marketplace conditions. ? Reinstate the UHF discount and indicate that the Commission will open a proceeding later this year to consider whether it is in the public interest to retain the UHF discount and/or modify the national television ownership rule. ? Dismiss as moot portions of the Petition that seek transferability of grandfathered station groups. Reinstatement of the UHF discount would eliminate the need for the grandfathering of non- compliant station groups, as well as render moot the issue of whether such grandfathering should be transferable. ___________________________ * This document is being released as part of a “permit-but-disclose” proceeding. Any presentation or views on the subject expressed to the Commission or its staff, including by email, must be filed in MB Docket No. 13-236, which may be accessed via the Electronic Comment Filing system (https://www.fcc.gov/ecfs/). Federal Communications Commission FCC-CIRC1704-05 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Amendment of Section 73.3555(e) of the Commission’s Rules, National Television Multiple Ownership Rule ) ) ) ) ) ) MB Docket No. 13-236 ORDER ON RECONSIDERATION ? Adopted: [] Released: [] By the Commission: [ ] TABLE OF CONTENTS Heading Paragraph # I.  INTRODUCTION .................................................................................................................................. 1  II.  BACKGROUND .................................................................................................................... ................ 2  III. DISCUSSION ...................................................................................................................................... 10  A.  The UHF Discount and National Cap Should Have Been Considered In Tandem ........................ 11  B.  Grounds for Reconsideration ......................................................................................................... 17  IV.  PROCEDURAL MATTERS ............................................................................................................ .... 19  A.  Supplemental Final Regulatory Flexibility Analysis ..................................................................... 19  B.  Paperwork Reduction Analysis ...................................................................................................... 20  C.  Congressional Review Act ............................................................................................................. 21  V.   ORDERING CLAUSES .............................................................................................................. ......... 22  APPENDIX A – Final Rule APPENDIX B – Supplemental Final Regulatory Flexibility Analysis I. INTRODUCTION 1. This Order on Reconsideration (Order) grants in part a Petition for Reconsideration (Petition) filed by ION Media Networks, Inc. (ION) and Trinity Christian Center of Santa Ana, Inc. ? This document has been circulated for tentative consideration by the Commission at its April open meeting. The issues referenced in this document and the Commission’s ultimate resolution of those issues remain under consideration and subject to change. This document does not constitute any official action by the Commission. However, the Chairman has determined that, in the interest of promoting the public’s ability to understand the nature and scope of issues under consideration by the Commission, the public interest would be served by making this document publicly available. The FCC’s ex parte rules apply and presentations are subject to “permit-but-disclose” ex parte rules. See, e.g., 47 CFR §§ 1.1205, 1.1200(a). Participants in this proceeding should familiarize themselves with the Commission’s ex parte rules. (continued….) Federal Communications Commission FCC-CIRC1704-05 (Trinity) (together, the Petitioners)1 of the Report and Order eliminating the UHF discount2 and reinstates the UHF discount. The UHF discount allows commercial broadcast television station owners to discount the audience reach of UHF stations when calculating their compliance with the national television ownership rule.3 It is thus inextricably linked to the national ownership cap. When the Commission voted to get rid of the discount, however, it failed to consider whether this de facto tightening of the national cap was in the public interest and justified by current marketplace conditions. This mistake renders our past action arbitrary and capricious. It also means that it was unwise from a public policy perspective. We thus are reinstating the UHF discount for the time being and will launch a comprehensive rulemaking proceeding later this year to determine whether to retain it and/or modify the national cap. Because we are reinstating the UHF discount, requests to reconsider and modify the grandfathering provisions applicable to broadcast station combinations affected by elimination of the discount are dismissed as moot.4 For the same reason, the claim that failure to consider the need for a VHF discount in conjunction with elimination of the UHF discount is in error is also dismissed as moot.5 II. BACKGROUND 2. The national television ownership rule prohibits a single entity from owning television stations that, in the aggregate, reach more than 39 percent of the total television households in the United States.6 “Reach” is defined as the number of television households in the television Designated Market Area (DMA) to which each owned station is assigned.7 No market is counted more than once, even if a station owner holds more than one station in the market.8 In determining compliance with the 39 percent national audience reach cap, stations broadcasting in the VHF spectrum have been attributed with all television households in their DMAs, while UHF stations have been attributed with only 50 percent of the households in their DMAs (i.e. , the “UHF discount”), in recognition of technical limitations that restricted the audience reach of analog UHF stations. 3. The Commission first adopted national ownership restrictions for television broadcast stations in 1941, with the imposition of a numerical cap on the number of stations that could be commonly owned.9 The numerical cap was increased several times, and the Commission eventually established a 12 station multiple ownership rule in 1984. 10 1 Amendment of Section 73.355 5 (e) of the Commission’s Rules, National Television Multiple Ownership Rule , Petition for Reconsideration of ION Media Networks and Trinity Christian Center of Santa Ana, Inc., MB Docket No. 13-236 (filed Nov. 23, 2016) (Petition). See also A mendment of Section 73.3555 (e) of the Commission’s Rules, National Television Multiple Ownership Rule , Public Notice, 81 Fed. Reg. 89421 (Dec. 12, 2016). 2 Amendment of Section 73.355 5 (e) of the Commission’s Rules, National Television Multiple Ownership Rule , MB Docket No. 13-236, Report and Order, 31 FCC Rcd 10213 (2016) (UHF Discount Order). 3 47 CFR § 73.3555(e)(1). 4 Petition at 5-9; Univision Communications Inc., Reply Co mments in Support of Petition for Reconsideration at 7-9 (filed Jan. 27, 2017) (Univision Reply). 5 Sinclair Broadcast Group, Inc., Reply to Oppositions to, and in Support of Petition for Reconsideration of ION Media Networks, Inc. and Trinity Christian Center of Santa Ana, Inc. at 5 (filed Jan. 27, 2017) (Sinclair Reply). 6 47 CFR § 73.3555(e)(1). 7 Id. § 73.3555(e)(2)(i). 8 Id. § 73.3555(e)(2)(ii). 9 Broadcast Services Other Than Standard Broadcast , 6 Fed. Reg. 2282, 2284-85 (May 6, 1941) (prohibiting common ownership of more than three television stations). 10 Amendment of Section 73.355 5 [formerly Sections 73.35, 73.240 , and 73.63 6] of the Commission’s Rules Relating to Multiple Ownership of AM, FM and Television Broadcast Stations, Report and Order, 100 FCC 2d 17, 54-56, paras. 108-12 (1984). (continued….) Federal Communications Commission FCC-CIRC1704-05 4. In 1985, the Commission determined that both a station limit, restricting the total number of television stations a single entity could own, and a national television audience reach limit were necessary to protect localism, diversity, and competition.11 Thus, in addition to reaffirming its prior decision to limit the number of television stations that a single entity could own, operate, or control to 12 stations, the Commission revised the national television multiple ownership rule to prohibit a single entity from owning television stations that collectively exceeded 25 percent of the total nationwide audience.12 At the same time, the Commission adopted a 50 percent UHF discount to reflect the coverage limitations faced by analog UHF stations.13 The discount was intended to mitigate the competitive disadvantage that UHF stations suffered in comparison to VHF stati ons, as UHF stations were technically inferior, producing weaker over-the-air signals, reaching smaller audiences, and costing more to build and operate.14 This technical inferiority, inherent in analog television broadcasting, was significant in 1985 because the vast majority of viewers received programming from broadcast television stations via over- the-air signals. 5. Eleven years later, in the Telecommunications Act of 1996 (1996 Act), Congress directed the Commission to modify its national television multiple ownership rule to increase the national audience reach cap from 25 percent to 35 percent.15 Congress also directed the Commission to eliminate the restriction on the number of stations that an entity could own, operate or control nationwide.16 Subsequently, the Commission reaffirmed the 35 percent national audience reach cap in its 19 9 8 Biennial Review Order , reasoning that it was premature to revise the cap until it had more time to observe the effects of raising the cap from 25 to 35 percent.17 The United States Court of Appeals for the District of Columbia (D.C. Circuit) later remanded the 1 9 9 8 Biennial Review Order after finding that the decision to retain the national ownership rule was arbitrary and capricious. The D.C. Circuit found the Commission’s “wait-and-see” approach to be inconsistent with its mandate to determine on a biennial basis whether the rules were in the public interest. In addition, the court found that the Commission failed to demonstrate that the national audience reach cap advanced competition, diversity, or localism.18 In the 2 0 02 Biennial Review Order , the Commission determined the cap should be raised to 45 percent.19 In both of these Orders, the Commission also considered and retained the UHF discount. 11 A mendment of Section 73.355 5 [formerly Sections 73.35, 73.240 and 73.636] of the Commission’s Rules Relating to Multiple Ownership of AM, FM and Television Broadcast Stations, Memorandum Opinion and Order, 100 FCC 2d 74, 87-92, paras. 30-41 (1985) (explaining that a numerical cap would prevent the acquisition of a substantial number of stations in small markets, while an audience reach cap would temper the ability of a single group owner to increase its audience base substantially by acquiring stations in the largest markets). 12 Id. at 90-92, paras. 38-40. 13 Id. at 88-94, paras. 33-44. 14 Id. 15 Telecommunications Act of 1996, Pub. L. No. 104-04, § 202(c)(1), 110 Stat. 56, 111 (1996) (1996 Act); see also Implementation of Sections 202(c)(1 ) and 202(e) of the Telecommunications Act of 1996 (National Broadcast Television Ownership and Dual Network Operations) , Order, 11 FCC Rcd 12374 (1996). The 1996 Act did not direct the Commission to amend the UHF discount. Id. at 12375, para. 4. 16 Telecommunications Act of 1996, Pub. L. No. 104-04, § 202(c)(1), 110 Stat. 56, 111 (1996). 17 1998 Biennial Review Order – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996 , Biennial Review Report, 15 FCC Rcd 11058, 11072-75, paras. 25-30 (2000) (1998 Biennial Review Order ). 18 See Fox Television Stations, Inc. v. FCC , 280 F.3d 1027, 1040-49, modified on reh’g , 293 F.3d 537 (D.C. Cir. 2002). 19 2002 Biennial Review Order – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996 , Report and Order and Notice of Proposed Rulemaking, 18 FCC Rcd 13620, 13814, para. 499 (2003) ( 2002 Biennial Review Order ). (continued….) Federal Communications Commission FCC-CIRC1704-05 6. Following adoption of the 2 0 0 2 Biennial Review Order and while an appeal of that order was pending, Congress rolled back the cap increase by including a provision in the 2004 Consolidated Appropriations Act (CAA) directing the Commission to modify its rules to set the cap at 39 percent of national television households.20 The CAA further amended Section 202(h) of the 1996 Act to require a quadrennial review of the Commission’s broadcast owne rship rules, rather than the previously mandated biennial review. In doing so, however, Congress excluded consideration of “any rules relating to the 39 percent national audience reach limitation” from the quadrennial review requirement. 21 7. Prior to the enactment of the CAA, several parties had appealed the Commission’s 20 0 2 Biennial Review Order to the U.S. Court of Appeals for the Third Circuit (Third Circuit). In June 2004, the Third Circuit found that the challenges to the Commission’s actions with respect to the national audience reach cap and the UHF discount were moot as a result of Congress’s action.22 Specifically, the court held that the CAA rendered moot the challenges to the Commission’s decision to retain the UHF discount.23 The court found that the CAA insulated the national audience reach cap, including the UHF discount, from the Commission’s quadrennial review of its media ownership rules.24 In February 2008, the Commission similarly concluded in the 2 0 0 6 Quadrennial Review Order that “the UHF discount is insulated from review under Section 202(h)” as a result of the CAA, and thus beyond the parameters of the quadrennial review requirement. 25 8. On June 13, 2009, the Commission completed the transition from analog to digital television broadcasting for full-power stations. Wh ile UHF channels were inferior for purposes of broadcasting in analog, the DTV transition affirmed the Commission’s longstanding belief that digital broadcasting would eliminate the technical disparity between UHF and VHF signals. In fact, experience has confirmed that UHF channels are equal, if not superior, to VHF channels for the transmission of digital television signals.26 Therefore, the Commission opened this proceeding to consider eliminating the UHF discount in 2013.27 Then-Commissioner Pai dissented from the UHF Discount NPRM . He contended that while it was appropriate to examine eliminating the UHF discount, any such rulemaking should and must also evaluate whether the national cap should be modified.28 The UHF Discount NPRM , however, did not seek comment on that topic. 9. The Commission eliminated the UHF discount in August 2016, finding that UHF stations are no longer technically inferior to VHF stations fo llowing the digital television transition and that the competitive disparity between UHF and VHF stations had disappeared. Then-Commissioner Pai and Commissioner O’Rielly dissented from this decision. Then-Commissioner Pai noted, “It is undeniable 20 Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, § 629, 118 Stat. 3, 99-100 (2004) (CAA). 21 Id. 22 Prometheus Radio Project v. FCC , 373 F.3d 372, 395-97 (3d Cir. 2004) ( Prometheus I ). 23 Id. 24 Prometheus I , 373 F. 3d at 396-97. 25 20 06 Quadrennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996 , Report and Order and Order on Reconsideration, 23 FCC Rcd 2010, 2084-85, para. 143 (2008) ( 200 6 Quadrennial Review Order ), a ff’d in part, rev’d in part sub nom. Prometheus Radio Project v. FCC , 652 F.3d 431 (3d Cir. 2011). 26 See, e.g. , Innovation in the Broadcast Television Bands: A llocations, Channel Sharing and Improvements to VHF , Notice of Proposed Rulemaking, 25 FCC Rcd 16498, 165 11, para. 42 (2010) (recognizing the utility of the digital UHF band while seeking comment on ways to improve reception of digital VHF channels); 20 02 Biennial Review Order , 18 FCC Rcd at 13847, para. 591; 19 98 Biennial Review Order , 15 FCC Rcd at 11080, para. 38. 27 See Amendment of Section 73.3555 (e) of the Commission’s Rules, National Television Multiple Ownership Rule , Notice of Proposed Rulemaking, 28 FCC Rcd 14324, 14327, para. 9 (2013) ( UHF Discount NPRM ). 28 Id. at 14344. (continued….) Federal Communications Commission FCC-CIRC1704-05 that eliminating the UHF discount has the effect of expanding the scope of the national cap rule. Companies . . . that are currently in compliance with the national cap ownership rule will be above the cap once the UHF discount is terminated. Yet, the Co mmission has refused to review whether the current national cap ownership rule is sound or whether there is a need to make it more stringent, which is precisely what [the UHF Discount Order] does.” 29 On November 23, 2016, ION and Trinity filed their Petition for Reconsideration (Petition).30 Free Press, the National Hispanic Media Coalition, Common Cause, Media Alliance and the United Church of Christ Office of Communication, Inc. (Public Interest Opponents) and the American Cable Association (ACA) filed Oppositions to the Petition on January 10, 2017.31 The National Association of Broadcasters (NAB), Sinclair Broadcast Group, Inc. (Sinclair), Nexstar Broadcasting, Inc. (Nexstar), Univision Communications Inc. (Univision), and various TV licensees filed comments or replies supporting the Petition32 on January 10 and 23, 2017. 33 III. DISCUSSION 10. We find that the Petitioners and their supporte rs provide valid reasons to reconsider our decision to eliminate the UHF discount. The UHF discount and the national audience reach cap are closely linked, and we find that the Commission failed to provide a reasoned basis to eliminate the discount in isolation without also fully considering whether the cap should be modified. Accordingly, we reinstate the UHF discount. We will open a rulemaking proceeding later this year to consider whether the national audience reach cap should be modified and the UHF discount should be eliminated. A. The UHF Discount and National Cap Should Have Been Considered In Tandem 11. Petitioners and others supporting reconsideration assert that the Commission should not have eliminated the UHF discount without adducing further evidence that this action would be in the public interest.34 The Petitioners argue that in eliminating the discount the Commission actually harmed the public interest by increasing the competitive disparity between broadcasters and other video programming distributors.35 CBS and Sinclair point further to a lack of evidence that the public interest would be harmed by retaining the UHF discount.36 In addition, NAB argues that, by eliminating the UHF 29 UHF Discount Order, 31 FCC Rcd at 10248. 30 See supra note 2. 31 Free Press, the National Hispanic Media Coalition, Common Cause, Media Alliance and the United Church of Christ Office of Communication, Inc., Opposition of Public Interest Commenters to Petition for Reconsideration of ION Media Networks and Trinity Christian Center of Santa Ana, Inc. (filed Jan. 10, 2017) (Public Interest Opp.); American Cable Association, Opposition to Reconsideration (filed Jan. 10, 2017) (ACA Opp.). 32 National Association of Broadcasters, Reply to Oppositions to Petition for Reconsideration (filed Jan. 27, 2017) (NAB Reply); Nexstar Broadcasting Inc ., Comments in Support of Petition for Reconsideration (filed Jan. 10, 2017) (Nexstar Comments), Reply Comments in Support of Petition for Reconsideration (filed Jan. 27, 2017) (Nexstar Reply); Mountain Licenses, L.P., Broadcasting Licenses, L.P., Stainless Broadcasting L.P., and Bristlecone Broadcasting LLC (TV Licensees), Comments (file d Jan. 10, 2017) (TV Licensee Comments). See also Sinclair Reply, Univision Reply. 33 Separate from this proceeding, Twenty-First Century Fox filed two petitions for review of the UHF Discount Order with the District of Columbia Circuit Court of Appeals. Twenty-First Century Fox, Inc. v. FCC , No. 16-1324, D.C. Cir. (filed Sept. 16, 2016); Twenty-First Century Fox, Inc. v. FCC , No. 16-1375, D.C. Cir. (filed Oct. 28, 2016). The Court has granted the Commission’s motion to hold its review in abeyance until the Commission acts on this Petition. Order, T wenty-First Century Fox, Inc. v. FCC , No. 16-1375, D.C. Cir. (Dec. 21, 2016). 34 Petition at 4. See also Nexstar Reply at 4. 35 Letter from Robert M. McDowell, Counsel to ION Media Networks to Marlene H. Dortch, Secretary, FCC, MB Docket No. 13-236 at 2 (filed Jan. 11, 2017) (ION Jan. 11, 2017, Ex Parte Letter). 36 Letter from Anne Lucey, CBS Government Affairs to Ma rlene H. Dortch, Secretary, FCC, MB Docket No. 13- 236 at 1 (filed Jan. 17, 2017) (CBS Jan. 17, 2017, Ex Parte Letter), Letter from Anne Lucey, CBS Government (continued….) Federal Communications Commission FCC-CIRC1704-05 discount in isolation, the Commission was not able to determine whether the change promotes the public interest purposes of the cap itself.37 12. The history of the UHF discount and national audience reach cap demonstrates that, with the exception of the UHF Discount Order, the Commission has always considered the UHF discount together with the national cap.38 Referring to this history, Nexstar argues that, because the cap establishes a limit and the discount defines how to calculate whether the limit is reached, the cap and discount are “inextricably intertwined.”39 Petitioners assert that the national cap and discount “go hand-in-hand; the FCC has no authority to change one without at least reviewing the impact that the change will have on the other.”40 Sinclair similarly asserts that the Commission erred in eliminating the UHF discount without reviewing the national audience reach cap, and urges the Commission, in any review of the cap, to eliminate it entirely.41 13. While the Commission determined in the UHF Discount Order that it should eliminate the discount without simultaneously reassessing the cap,42 arguments presented by Petitioners and their supporters persuade us that the Commission erred. Any adjustment to the UHF discount affects compliance with the national audience reach cap, and the elimination of the discount has the effect of substantially tightening the cap in some cases.43 In the UHF Discount Order, however, the Commission never explained why tightening the cap was in the public interest or justified by current marketplace conditions. It presented no examples of how the current cap, including the UHF discount, was harming competition, diversity, or localism. We therefor e believe that eliminating the UHF discount on a piecemeal basis, without considering the national cap as a whole, was arbitrary and capricious. We also conclude that it was unwise from a public policy perspective. 14. This is particularly true because the Commission itself has never concluded that the 39 percent cap that Congress directed the Commission to adopt back in 2004 is necessary in the public interest. In fact, the last time that the Commission reviewed the merits of the national cap, it concluded that a 45 percent cap was justified.44 Affairs to Marlene H. Dortch, Secretary, FCC, MB Docket No. 13-236 at 1 (filed Jan. 23, 2017) (CBS Jan. 23, 2017, Ex Parte Letter); Sinclair Reply at 2, 4. 37 NAB Reply at 2-3; Letter from Rick Kaplan, General Co unsel and Executive Vice Pres ident, National Association of Broadcasters to Marlene H. Dortch, Secretary, FCC at 1 (filed Feb. 9, 2017) (NAB Feb. 9, 2017, Ex Parte Letter). 38 See supra paras 2-8; NAB Reply at 3. 39 Nexstar Reply at 7; see also Nexstar Comments at 2-3; NAB Reply at 3, NAB Feb. 9, 2017, Ex Parte Letter at 1; Univision Reply at 4-5. 40 Petition at 2. 41 Sinclair Reply at 1-2. We dismiss as moot the further claim that the Third Circuit’s recent decision vacating the Commission’s joint sales agreement (JSA) attribution rule requires the Commission to review the discount and cap together. Petition at 3-4; NAB Reply at 4; Sinclair Reply at 6-7; Nexstar Reply at 8; TV Licensee Comments at 4; UHF Discount Order, dissenting statement of then-Commissioner Pai, 31 FCC Rcd at 10247-48, dissenting statement of Commissioner O’Reilly, 31 FCC Rcd at 10251, citing Prometheus Radio Project v. FCC , 824 F. 3d 33 (3d Cir. 2016) (Prometheus III ). As we intend to review the discount and cap together as a matter of sound policy and logic, we need not reach the question of whether we are required do so as a result of Prometheus III. 42 UHF Discount Order, 31 FCC Rcd at 10232-33, para. 40 (“Continued application of the discount absent its technical justification simply distorts the operation of the national audience reach cap by exempting the portions of the audience that are receiving a signal from being counted and allowing licensees that operate on UHF channels to reach more than 39 percent of viewers nationwide. Removal of the analog-era discount thus maintains the efficacy of the national cap.”). 43 See UHF Discount Order, dissenting statement of then-Commissioner Pai, 31 FCC Rcd at 10248. 44 2002 Biennial Review Order , 18 FCC Rcd at 13842, 13843-44, paras. 578, 580-83. (continued….) Federal Communications Commission FCC-CIRC1704-05 15. Contrary to ACA’s claims that consideration of the discount without consideration of the cap was appropriate,45 we find that the Commission erred by eliminating the discount and thus substantially tightening the impact of the cap, without considering whether the cap should be raised to mitigate the regulatory impact of eliminating the UHF discount. While we do not disagree with Opponents’ assertion that the UHF discount no longer has a sound technical basis following the digital television transition,46 the Commission failed to provide a reasoned explanation for eliminating the discount without conducting a broader review of the cap, which it deferred indefinitely. Reliance on the self-imposed narrow scope of the UHF Discount NPRM was not a sound basis for the Commission to conclude that it could not consider the broader public interest issues posed by retaining the national cap while eliminating the UHF discount, which had the effect of substantially tightening the national cap.47 Nothing prevented the Commission from issuing a broader notice at the outset or broadening the scope of the proceeding by issuing a further notice to consider whether the public interest would be served by retaining the cap while eliminating the UHF discount.48 Indeed, one Commissioner at the time asked for these issues to be teed up in the UHF Discount NPRM .49 16. This error is all the more problematic because, as Univision notes, the Commission has acknowledged, both in the record of this proceeding and in the most recent quadrennial media ownership review, the greatly increased options for consumers in the selection and viewing of video programming since Congress directed the Commission to modify the cap in 2004.50 The UHF Discount Order, however, failed to adequately consider the impact of those changes on the appropriateness of eliminating the UHF discount while not adjusting the national cap. We agree with Ne xstar that the Commission should have considered these changes and assessed the current need for a 39 percent national cap before eliminating the UHF discount and tightening the cap for some station groups, particularly in view of the industry’s reliance on the UHF discount to develop long-term business strategies.51 Although the Commission concluded that the digital transition eliminated the audience reach disadvantage for UHF stations, it failed to consider current marketplace conditions or whether taking an action that would have the impact of substantially tightening the cap was in the public interest. Accordingly, we find it necessary to rectify the Commission’s error by reinstating the discount so that we can consider it as part of a broader reassessment of the national audience reach cap, which we will begin later this year.52 45 ACA Opp. at 5, 8-10, citing UHF Discount Order, 31 FCC Rcd at 10232-33, para 40. 46 Public Interest Opp. at 1, 6; ACA Opp. at 6, 9-10. 47 See UHF Discount Order, 31 FCC Rcd at 10232, para. 40, 10249, dissenting statement of then-Commissioner Pai. 48 NAB Reply at 7-8; Sinclair Reply at 4-5; Nexstar Reply at 4-6, 7-8, Nexstar Comments at 2, 4. See also UHF Discount Order, dissenting statement of then-Commissioner Pai, 31 FCC Rcd at 10247-48. 49 See supra para. 8. 50 Univision Reply at 5-6, citing 20 14 Quadrennial Regulatory Review – Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996 , Second Report and Order, 31 FCC Rcd 9864 (2016). Univision claims that consideration of this competition would be consistent with the D.C. Circuit ruling overturning the Commission’s ownership limit for cable operators. Univision Reply at 6-7, citing Comcast Corp. v. FCC , 579 F. 3d 1 (D.C. Cir. 2009). See also Petition at 3-4; Sinclair Reply at 2; Nexstar Comments at 5, Nexstar Reply at 4. 51 Nexstar Comments at 5-6, citing UHF Discount Order, dissenting statement of then-Commissioner Pai, 31 FCC Rcd at 10249; ION Jan. 11, 2017, Ex Parte Letter at 1 (asserting that the elimination of the UHF discount without adequate grandfathering relief “was entirely inconsistent with the Commission’s decades-long policy of encouraging competition and diversity in the video marketplace by allowing and urging groups such as ION and Trinity to utilize the UHF Discount to create new broadcast stations and networks to challenge the big established players”). 52 We note that this is consistent with the approach advo cated by CBS and Univision to avoid delay in reinstating the UHF discount, but still consider the discount and the national audience reach cap in tandem. CBS Jan. 17, 2017, Ex Parte Letter at 1, CBS Jan. 23, 2017, Ex Parte Letter at 1; Univision Reply at 7. See also NAB Feb. 9, 2017, Ex Parte Letter at 1. (continued….) Federal Communications Commission FCC-CIRC1704-05 B. Grounds for Reconsideration 17. The record in response to the Petition demonstrates disagreement on the factors that can support granting a petition for reconsideration. The Opponents claim that the Petition must be denied because it fails to present new facts or arguments not already considered and answered by the Commission in the underlying UHF Discount Order.53 On the other hand, Nexstar claims that Section 1.429 of our rules, which governs petitions for reconsideration, should not be interpreted to “preclude a petitioner for reconsideration from raising any argument that was mentioned in the underlying Commission order or a dissenting statement.”54 Neither the Communications Act nor Commission rules preclude the Commission from granting petitions for reconsideration that fail to rely on new arguments.55 Commission precedent establishes that reconsideration is generally appropriate where the petitioner shows either a material error or omission in the original order or raises additional facts not known or not existing until after the petitioner’s last opportunity to respond.56 18. The Petition, while reiterating some arguments made in response to the UHF NPRM , nonetheless provides valid grounds for the Commission to reconsider its previous action eliminating the UHF discount.57 As discussed above, we find that the Commission failed to fully consider important arguments and lacked a reasoned basis for its conclusion that action on the discount should not be combined with a broader review of the national cap. These are sufficient grounds under Section 1.429 for 53 Public Interest Opp. at 1, 6, 7; ACA Opp. at 2, 4-5, 8, 11. 54 Nexstar Reply at 2. 55 See 47 U.S.C. §405 (“[I]t shall be lawful for . . . the Commission . . ., in its discretion, to grant such a reconsideration if sufficient reason therefor be made to appear. . . . The Commission, or designated authority within the Commission, shall enter an order, with a concise statement of the reasons therefor, denying a petition for reconsideration or granting such petition, in whole or in part, and ordering such further proceedings as may be appropriate . . . .”); 47 CFR § 1.429 (i) (“The Commission may grant the petition for reconsideration in whole or in part or may deny or dismiss the petition. Its order will contain a concise statement of the reasons for the action taken.”). 56 See, e.g., Petition for Reconsideration by Acadiana Cellular General Partnership , Order on Reconsideration, 20 FCC Rcd 8660, 8663, para. 8 (2006); Universal Serv. Contribution Methodology Fed.-State Joint Bd. on Universal Serv. Glob. Conference Partners, A+ Conference Lt d., Free Conferencing Corp., & the Conference Grp ., 27 FCC Rcd 898, 901 (2012), rev. dismissed in part and denied in part, Conference Grp., LLC v. FCC , 720 F.3d 957, 958 (D.C. Cir. 2013) (“Reconsideration of a Commission's decision may be appropriate when the petitioner demonstrates that the original order contains a material error or omission, or raises additional facts that were not known or did not exist until after the petitioner' s last opportunity to present such matters. If a petition simply repeats arguments that were previously considered and rejected in the proceeding, the Commission may deny them for the reasons already provided.”). Even if a petition is repetitious, the Commission can, in its discretion, consider it. See id. (Commission “may deny” repetitious petition); Ap p lication of Paging Sys., Inc. , 22 FCC Rcd 4602, 4604 n.23 (WTB 2007) (considering repetitious petition on the merits, even though staff could dismiss it); Sequoia Cablevision , 58 FCC 2d 669 (1976) (decision by the full Commission partially granting a repetitious petition for reconsideration of an order denying reconsideration despite the alleged procedural defect because “the language of Section 1.106(k)(3) of the Rules [applicable to petitions fo r reconsideration of orders denying reconsideration] is permissive, not mandatory”). See also NAB Reply at 8 (stating that dismissal of “repetitious” petitions is permissive, not mandatory). 57 We note that NAB, Sinclair and Nexs tar analyze Section 1.429(l) of the Commission’s rules, which states that, among other reasons, petitions for reconsideration may be denied by the relevant bureau if they “[f]ail to identify any material error, omission, or reason warranting reconsideration”, or “[r]ely on arguments that have been fully considered and rejected by the Commission within the same proceeding.” 47 CFR § 1.429(l). The parties supporting reconsideration argue that this section permits, but does not require, Commission bureaus and offices to deny petitions on such procedural grounds. NAB Reply at 8; Sinclair Reply at 3-4; Nexstar Reply at 2-3. Section 1.429(l) delegates authority to the relevant bureau or office to dismiss petitions for reconsideration of Commission action “that plainly do not warrant consideration by the Commission,” and provides examples of such petitions. That section has no relevance here, where the full Commission is reviewing a petition for reconsideration and finds that it provides valid reasons for reconsideration. (continued….) Federal Communications Commission FCC-CIRC1704-05 the Commission to reconsider its previous action even absent new facts or arguments.58 We therefore reinstate the UHF discount,59 and will open a proceeding later this year to consider whether it is in the public interest to modify the national audience reach rule, including the UHF discount. IV. PROCEDURAL MATTERS A. Supplemental Final Regulatory Flexibility Analysis 19. As required by the Regulatory Flexibil ity Act of 1980, as amended (RFA), 60 the Commission has prepared a Supplemental Final Regulatory Flexibility Analysis (FRFA) relating to this Report and Order in MB Docket No. 13-236. The Supplemental FRFA is set forth in Appendix B. B. Paperwork Reduction Analysis 20. This document does not contain proposed information collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. In addition, therefore, it does not contain any new or modified information collection burden for small business concerns with fewer than 25 employees, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. § 3506(c)(4). C. Congressional Review Act 21. The Commission will send a copy of this Order on Reconsideration to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. § 801(a)(1)(A). V. ORDERING CLAUSES 22. Accordingly, IT IS ORDERED that, pursuant to the authority contained in Section 405(a) of the Communications Act of 1934, 47 U.S.C. § 405(a), and Section 1.429 of the Commission's rules, 47 C.F.R. § 1.429, the Petition for Reconsideration filed by ION Media Networks, Inc. and Trinity Christian Center of Santa Ana, Inc. on November 23, 2016, IS GRANTED IN PART and otherwise IS DISMISSED AS MOOT, to the extent provided herein. 2 3 . IT IS FURTHER ORDERED that pursuant to the authority contained in Sections 1, 2(a), 4(i), 4(j), 303(r), 307, 309, and 310 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 152(a), 154(i), 154(j), 303(r), 307, 309, and 310, this Order on Reconsideration IS ADOPTED . The rule modification discussed in this Order on Reconsideration and set forth in Appendix A attached hereto shall be effective thirty (30) days after publication of the text or summary thereof in the Federal Register. 24. IT IS FURTHER ORDERED that the Commission SHALL SEND a copy of this Order on Reconsideration to Congress and to the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. § 801(a)(1)(A). 25. IT IS FURTHER ORDERED that the Commission’s Consumer and Governmental Affairs Bureau, Reference Information Center, SHALL SEND a copy of this Order on Reconsideration, including the Supplemental Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration. FEDERAL COMMUNICATIONS COMMISSION 58 47 CFR § 1.429. 59 Because we are reinstating the UHF discount, we also consider moot and do not address in this Order the suggestion made in Sinclair’s Reply to Opposition that we establish a VHF discount in connection with the elimination of the UHF discount. Sinclair Reply at 5. 60 See 5 U.S.C. § 603. The RFA, see 5 U.S.C. § 601 et seq. , has been amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No . 104-121, Title II, 110 Stat. 857 (1996). The SBREFA was enacted as Title II of the Contract with America Advancement Act of 1996 (CWAAA). Federal Communications Commission FCC-CIRC1704-05 Marlene H. Dortch Secretary Federal Communications Commission FCC-CIRC1704-05 APPENDIX A Final Rule PART 73 – RADIO BROADCAST SERVICES 1. The authority citation for Part 73 continues to read as follows: AUTHORITY : 47 U.S.C. 154, 303, 334, 336 and 339. 2. Amend § 73.3555 by revising paragraph (e) to read as follows: § 73.35 5 5 Multiple ownership. * * * * * (e) National television multiple ownership rule. (1) No license for a commercial television broadcast station shall be granted, transferred or assigned to any party (including all parties under common control) if the grant, transfer or assignment of such license would result in such party or any of its stockholders, partners, members, officers or directors having a cognizable interest in television stations which have an aggregate national audience reach exceeding thirty-nine (39) percent. (2) For purposes of this paragraph (e): (i) National audience reach means the total number of television households in the Nielsen Designated Market Areas (DMAs) in which the relevant stations are located divided by the total national television households as measured by DMA data at the time of a grant, transfer, or assignment of a license. For purposes of making this calculation, UHF television stations shall be attributed with 50 percent of the television households in their DMA market. * * * * * Federal Communications Commission FCC-CIRC1704-05 12 APPENDIX B Supplemental Final Regulatory Flexibility Analysis 1. In compliance with the Regulatory Flexibility Act (RFA),1 this Supplemental Final Regulatory Flexibility Analysis (SFRFA) supplements the Final Regulatory Flexibility Analysis (FRFA) included in the UHF Discount Order,2 to the extent that changes adopted on reconsideration require changes in the conclusions reached in the FRFA. As required by the RFA, 3 the FRFA was preceded by an Initial Regulatory Flexibility Analysis (IRFA) incorporated in the UHF Discount NPRM , which sought public comment on the proposals in the UHF Discount NPRM .4 A. Need for, and Objective of, the Order 2. This Order on Reconsideration reinstates the UHF discount in the Commission’s national television multiple ownership rule. The national television multiple ownership rule currently prohibits a single entity from owning television stations that, in the aggregate, reach more than 39 percent of the total television households in the nation.5 At the time the cap was first established, when all broadcasting used analog technology, UHF broadcasting was considered technically inferior to VHF broadcasting. Therefore, the UHF discount provided television stations broadcasting in the UHF spectrum with a discount by attributing those stations with only 50 percent of the television households in their Designated Market Areas.6 The UHF Discount Order eliminated the UHF discount, finding that UHF stations are no longer technically inferior to VHF stations following the transition to digital television broadcasting, and that the competitive disparity between UHF and VHF stations had disappeared. 7 3. In this Order on Reconsideration we reinstate the UHF discount, finding that it impacts the 39 percent national audience reach cap established by Congress in 2004.8 We further determine that, because the UHF discount affects calculation of compliance with the national audience reach cap, the discount and cap are linked and the public interest is better served by considering the discount and cap in tandem.9 Rather than potentially tightening the national audience reach cap in some cases by eliminating the UHF discount, the reinstatement of the discount returns broadcasters to the status quo ante for purposes of calculating their compliance with the cap. The Commission will initiate a rulemaking proceeding later this year to consider whether it is in the public interest to modify the national audience reach rule, including the UHF discount. 1 See 5 U.S.C. § 604. 2 UHF Discount Order, 31 FCC Rcd at 10242-45, App. B, paras 1-13. 3 5 U.S.C. § 603. 4 UHF Discount NPRM , 28 FCC Rcd at 14337-40, App. B, paras. 1-11. 5 47 CFR § 73.3555(e)(1). 6 See Amendment of Section 73.3555 [formerly Sections 73.35, 73.240 and 73.636] of the Commission’s Rules Relating to Multiple Ownership of AM, FM and Television Broadcast Stations, Memorandum Opinion and Order, 100 FCC 2d 74, 92-94, paras. 42-44 (1985). 7 UHF Discount Order, 31 FCC Rcd at 10213, para. 1, 10214, para. 3, 10219, para.14, 10220, para. 16, 10226, para. 28, 10227-28, para. 33, 10230-31, para. 37. 8 Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, § 629, 118 Stat. 3, 99-100 (2004) (CAA). See also supra para. 11. 9 See supra para. 11. (continued….) Federal Communications Commission FCC-CIRC1704-05 13 B. Summary of Significant Issues Raised by Pub lic Comments in Response to the IRFA and FRFA 4. No public comments were submitted in response to the IRFA or FRFA. C. Response to Comments by the Chief Coun sel for Advocacy of the Small Business Administration 5. The Chief Counsel did not file any comments in response to the proposed rules in this proceeding. D. Description and Estimate of the Number of Small Entities to Which this Order will Apply 6. The RFA directs the Commission to provide a description of and, where feasible, an estimate of the number of small entities that will be affected by the rules adopted in this Order on Reconsideration.10 The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.”11 In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act.12 A small business concern is one which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satis fies any additional criteria established by the SBA.13 The FRFA accompanying the UHF Discount Order described and estimated the number of small entities that would be affected by elimination of the UHF discount.14 Reinstatement of the UHF discount in this Order on Reconsideration applies to the same entities affected by elimination of the discount. 7. Television Broadcasting . This Economic Census category “comprises establishments primarily engaged in broadcasting images together with sound.”15 These establishments operate television broadcast studios and facilities for the programming and transmission of programs to the public.16 These establishments also produce or transmit visual programming to affiliated broadcast television stations, which in turn broadcast the programs to the public on a predetermined schedule. Programming may originate in their own studio, from an affiliated network, or from external sources. The SBA has created the following small business size standard for such businesses: those having $38.5 million or less in annual receipts.17 The 2012 Economic Census reports that 751 firms in this category operated in that year. Of that number, 656 had annual receipts of $25,000,000 or less, 25 had annual receipts between $25,000,000 and $49,999,999 and 70 had annual receipts of $50,000,000 or more. 18 10 5 U.S.C. § 603(b)(3). 11 Id. § 601(6). 12 Id. § 601(3) (incorporating by reference the definition of “small business concern” in 15 U.S.C. § 632). Pursuant to the RFA, the statutory definition of a small business applies “unless an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition(s) in the Federal Register.” 5 U.S.C. § 601(3). 13 15 U.S.C. § 632. 14 31 FCC Rcd at 10243-44, App. B, paras. 7-9. 15 U.S. Census Bureau, 2017 NAICS Definitions, “515120 Television Broadcasting,” http://www.census.gov./cgi- bin/sssd/naics/naicsrch (last viewed Feb. 28, 2017). 16 Id . 17 13 CFR. § 121.201; 2017 NAICS code 515120. 18 U.S. Census Bureau, Table No. EC1251SSSZ4, Information: Subject Series - Establishment and Firm Size: Receipts Size of Firms for the United States: 2012 (515120 Television Broadcasting). (continued….) Federal Communications Commission FCC-CIRC1704-05 14 Based on this data we therefore estimate that the majority of commercial television broadcasters are small entities under the applicable SBA size. 8. The Commission has estimated the number of licensed commercial television stations to be 1,384. 19 Of this total, 1,275 stations (or about 92 percent) had revenues of $38.5 million or less, according to Commission staff review of the BIA Kelsey Inc. Media Access Pro Television Database (BIA) on February 24, 2017, and therefore these licensees qualify as small entities under the SBA definition. In addition, the Commission has estimated the number of licensed noncommercial educational (NCE) television stations to be 394.20 Notwithstanding, the Commission does not compile and otherwise does not have access to information on the revenue of NCE stations that would permit it to determine how many such stations would qualify as small entities. 9. We note, however, that in assessing whether a business concern qualifies as small under the above definition, business (control) affiliations21 must be included. Our estimate, therefore, likely overstates the number of small entities that might be affected by our action because the revenue figure on which it is based does not include or aggregate revenues from affiliated companies. In addition, an element of the definition of “small business” is that the entity not be dominant in its field of operation. We are unable at this time to define or quantify the criteria that would establish whether a specific television station is dominant in its field of operation. Accordingly, the estimate of small businesses to which rules may apply does not exclude any television station from the definition of a small business on this basis and is therefore possibly over-inclusive. E. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements 10. The FRFA accompanying the UHF Discount Order stated that elimination of the UHF discount modified calculation of compliance with the national audience reach cap and would affect reporting, recordkeeping, or other compliance requirements. 22 Specifically, the Commission would have potentially needed to modify FCC forms or related instructions pursuant to the UHF Discount Order.23 This Order on Reconsideration reinstates the UHF discount, thereby maintaining the current methodology for calculating compliance with the cap. Therefore, no changes to FCC forms or instructions will be necessary and the reporting, recordkeeping, and other compliance requirements will not be affected. Thus, reinstatement of the UHF discount will not impose additional obligations or expenditure of resources on small businesses. F. Steps Taken to Minimize the Significant Ec onomic Impact on Small Entities, and Significant Alternatives Considered 11. In this Order on Reconsideration we reinstate our previous rule allowing television stations broadcasting in the UHF spectrum a discount in calculating compliance with the national https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ECN_2 012_US_51SSSZ4&prod Type=table (visited Feb. 28, 2017). 19 Broadcast Station Totals as of December 31, 2016 , Press Release (MB, rel. January 5, 2017) https://www.fcc.gov/document/broadcast-station-totals-december-31-2016 (visited Feb. 28, 2017). 20 Id. 21 “[Business concerns] are affiliates of each other when one [concern] controls or has the power to control the other, or a third party or parties controls or has to power to control both.” 13 CFR § 121.103(a)(1). 22 UHF Discount Order, 31 FCC Rcd at 10243, App. B, para. 10. The FRFA further stated that the impact of these changes would be the same on all entities, compliance was not anticipated to require the expenditure of any additional resources, or place any additional obligations on small businesses. Id. 23 Id. (continued….) Federal Communications Commission FCC-CIRC1704-05 15 audience reach cap. This action reinstates prior reporting, recordkeeping and other compliance requirements for all television broadcasters, including small entities. 12. We will open a new proceeding within the year to consider the UHF discount and national cap in tandem. We determ ined in this Order on Reconsideration that the discount and cap were linked and that considering them in tandem would better serve the public interest than simply eliminating the discount alone.24 We anticipate that examining the discount and cap together will positively impact broadcasters, including small entities, and avoid the potential harms described by Petitioners and their supporters.25 G. Report to Congress 13. The Commission will send a copy of this Order on Reconsideration, including this Supplemental FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act26 and to the Chief Counsel for Advocacy of the Small Business Administration. A copy of this Order on Reconsideration and Supplemental FRFA (or summaries thereof) will also be published in the Federal Register. 27 24 See supra paras. 11, 14-15. 25 See supra paras. 14-15. We note that one of the two Petitioners, Trinity, may qualify as a small entity. See Small Business Size Standards: Information, 77 Fed. Reg. 72702, 72705 (Dec. 6, 2012). See also 13 CFR § 121.201, NAICS code 515120. 26 5 U.S.C. § 801(a)(1)(A). 27 5 U.S.C. § 604(b).