S. Rept. 108-141 - 108th Congress (2003-2004)
September 03, 2003, As Reported by the Commerce, Science, and Transportation Committee

Report text available as:

Formatting necessary for an accurate reading of this legislative text may be shown by tags (e.g., <DELETED> or <BOLD>) or may be missing from this TXT display. For complete and accurate display of this text, see the PDF.




Senate Report 108-141 - PRESERVATION OF LOCALISM, PROGRAM DIVERSITY, AND COMPETITION IN TELEVISION BROADCAST SERVICES ACT OF 2003




[Senate Report 108-141]
[From the U.S. Government Printing Office]



108th Congress                                                   Report
                                 SENATE
 1st Session                                                    108-141
_______________________________________________________________________

                                     

                                                       Calendar No. 270


    PRESERVATION OF LOCALISM, PROGRAM DIVERSITY, AND COMPETITION IN 
               TELEVISION BROADCAST SERVICES ACT OF 2003

                               __________

                              R E P O R T

                                 OF THE

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                                S. 1046

                             together with

                            ADDITIONAL VIEWS


<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>



      
DATE deg.September 3, 2003.--Ordered to be printed


       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
                      One Hundred Eighth Congress
                             first session

                                 ------                                
                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey
           Jeanne Bumpus, Staff Director and General Counsel
                   Ann Begeman, Deputy Staff Director
                  Robert W. Chamberlin, Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel



                                                       Calendar No. 270
108th Congress                                                   Report
                                 SENATE
 1st Session                                                    108-141

======================================================================



 
    PRESERVATION OF LOCALISM, PROGRAM DIVERSITY, AND COMPETITION IN 
               TELEVISION BROADCAST SERVICES ACT OF 2003

                                _______
                                

               September 3, 2003.--Ordered to be printed

                                _______
                                

       Mr. McCain, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 1046]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 1046) to amend the 
Communications Act of 1934 to preserve localism, to foster and 
promote the diversity of television programming, to foster and 
promote competition, and to prevent excessive concentration of 
ownership of the nation's television broadcast stations, having 
considered the same, reports favorably thereon 
without 
amendment deg. with an amendment 
with an amendment (in 
the nature of a substitute) deg. and recommends that the bill 

joint resolution deg. as amended do pass.

                          Purpose of the Bill

    The purpose of this legislation is to prevent any one 
entity from owning, operating, controlling, or having a 
cognizable interest in broadcast television stations that have 
an aggregate national audience reach exceeding 35 percent. The 
legislation also would require entities that own, operate, 
control, or have a cognizable interest in broadcast television 
stations that have an aggregate national audience reach 
exceeding 35 percent to divest such stations within one year 
after the date of enactment of this legislation. Further, this 
legislation would change the standard used by the Federal 
Communications Commission (FCC or Commission) to review its 
media ownership rules; require broadcast radio station group 
owners that exceed local ownership limits to divest such 
stations within one year after the date of enactment of this 
legislation; reinstate the FCC's broadcast-newspaper and radio-
television cross ownership bans; require the Commission to hold 
five public hearings in different areas in the United States 
before it renders any decision in conjunction with its mandated 
review of media ownership rules; and provide a small market 
exemption from the Commission's broadcast-newspaper cross 
ownership ban.

                          Background and Needs

    For over seventy years, the FCC's regulation of broadcast 
service has sought to ensure that the allocation of broadcast 
licenses serves the public interest and promotes the core 
values of competition, diversity, and localism that are 
essential to the fabric of American democracy. Indeed, as was 
noted by the Supreme Court over 50 years ago, our First 
Amendment ``rests on the assumption that the widest possible 
dissemination of information from diverse and antagonistic 
sources is essential to the welfare of the public.'' Associated 
Press v. United States, 326 U.S. 1 (1945).
    In the earliest days of broadcast regulation, the FCC 
reviewed common ownership issues on a case by case basis and 
denied proposed combinations that would result in one owner 
holding multiple licenses in a local market as inconsistent 
with the ``public interest, convenience, and necessity.'' Over 
time, the FCC has also sought to protect the public interest 
through the adoption of bright line rules that limit license 
ownership and guard against the accumulation of market power in 
national and local media markets. Such limits have included 
restrictions on the total numbers of radio stations and 
television stations that a single entity could own in local and 
national markets. However, with the passage of the 
Telecommunications Act of 1996 (``1996 Act''), Congress 
significantly loosened media ownership limits, and established 
a requirement that the FCC review these limits every two years. 
The Act itself repealed the prohibition on telephone-cable 
cross ownership; overrode the remaining regulatory limits upon 
cable-broadcast cross ownership; eliminated the national radio 
ownership cap; relaxed restrictions on local radio ownership; 
and eased the ``dual network'' rule. The 1996 Act also mandated 
that the FCC review its media ownership rules biennially to 
``determine whether any of such rules are necessary in the 
public interest as the result of competition.''
    On June 2, 2003, the FCC completed its 2002 biennial review 
of its media ownership rules as required by section 202(h) of 
the 1996 Act. In its recent decision, the FCC increased the 
national ownership limits affecting the number of broadcast 
television stations that one entity may own, operate, control 
or in which an entity may hold a cognizable interest to 45 
percent. It also relaxed its cross ownership rules, which limit 
the ability of one entity to own a daily newspaper and multiple 
radio and television stations in the same market.
    There has been significant consolidation in the media 
marketplace over the last decade. In the broadcast television 
industry, the number of television station owners has dropped 
40 percent since 1995. In radio, the number of commercial radio 
station owners has declined by 34 percent since 1996, and the 
top station group has increased its size from a total of 39 
stations with annual revenues of $495 million, to over 1200 
stations with annual revenues of almost $3.2 billion. 
Similarly, media consolidation has resulted in substantial 
changes to the broadcast television programming market. One 
recent study by Tom Wolzien of Bernstein Research, notes that 
five media conglomerates control ``about a 75 percent share of 
prime-time viewing'' and are on pace to soon control roughly 
``the same percentage of TV households in prime time as the 
three networks did 40 years ago.'' Accordingly, while 
technology has provided a number of new media outlets, these 
outlets are largely controlled by the same large media 
conglomerates. This increasing influence over programming and 
distribution outlets has generated an outpouring of concern 
among many groups and private citizens who believe that robust 
structural safeguards are needed to protect the public interest 
and to promote competition, diversity, and localism in 
broadcasting.
    Moreover, increased media consolidation has also fueled 
public concern about efforts to relax the commission's cross-
ownership restriction. Changes that would allow a single entity 
to own or control a variety of media properties in local 
markets (e.g. a newspaper, television and radio stations, cable 
systems, Internet web sites) raise significant concerns about 
the preservation of diverse and antagonistic sources of news 
and information in local markets.

                I. THE NATIONAL TELEVISION OWNERSHIP CAP

    For several decades, the FCC's national television 
ownership limits focused on restricting the number of 
television stations an entity could own. Then, in 1985, the FCC 
adopted an additional ownership limit based on audience reach. 
This rule allowed entities to acquire interests in television 
stations as long as the combined reach of those stations did 
not exceed 25 percent of the national audience determined by 
market rankings. See Memorandum Opinion and Order, Gen. Docket 
No. 83-1009, FCC 84-638 (adopted Dec. 19, 1984).
    Under section 202 of the 1996 Act, Congress directed the 
FCC to eliminate the restriction on the total number of 
television stations that an entity could own (which at the time 
prohibited common ownership of more than 12 television 
stations), and increased the national audience cap from 25 
percent to 35 percent. See Telecommunications Act of 1996, Pub. 
L. No. 104-104, 110 Stat. 56 (1996). In its 1998 Biennial 
Review, the FCC decided to retain the 35 percent cap so it 
could: (1) observe the effects of recent changes in the rules 
required by the 1996 Act; (2) observe the effects of the 
national ownership cap having been raised to 35 percent; and 
(3) preserve the power of local affiliates to bargain with 
their networks in order to promote diversity of programming. 
1998 Biennial Regulatory Review, Biennial Review Report, 15 FCC 
Rcd 11058 (adopted May 26, 2000).
    After the 1998 Biennial Review was released, three of the 
national networks, FOX, NBC, and CBS, challenged the FCC's 
decision to retain the 35 percent cap. The D.C. Circuit, while 
rejecting the networks' constitutional challenges, held that 
the FCC's decision to retain the 35 percent cap was arbitrary 
and capricious, finding the FCC had provided ``no valid reason 
to think the [national TV ownership rule] is necessary to 
safeguard competition'' or ``to advance diversity.'' 
Furthermore, the court determined the FCC had failed to comply 
with the review required by 202(h) byproviding ``no analysis on 
the state of competition in the television industry to justify its 
decision''. Fox Television Stations, Inc. v. FCC, 280 F.3d 1027, 
rehearing granted, 293 F.3d 537 (D.C. Cir. 2002); Sinclair Broadcast 
Group, Inc. v. FCC, 284 F.3d 148 (D.C. Cir. 2002), rehearing denied 
Aug. 13, 2002.
    While the networks asked the court to vacate the 35 percent 
cap, the D.C. Circuit expressly declined this invitation. 
Instead the court chose to remand the rule to the Commission 
for further consideration. As the court explained,

          ``Although the Commission's decision to retain the 
        rule was, as written, arbitrary and capricious and 
        contrary to 202(h), we cannot say with confidence that 
        the Rule is likely irredeemable . . . . We note that 
        although the Commission in its 1998 Report failed to 
        develop any affirmative justification for the rule 
        based on competitive concerns, it did, albeit, somewhat 
        cryptically, advert to possible competitive problems in 
        the national markets for advertising and program 
        production . . . . In sum, we cannot say it is unlikely 
        that the Commission will be able to justify a future 
        decision to retain the Rule. Fox, 293 F.3d at 1048-
        49.''

    As a result of the Court's directive, the Commission 
invited comment on whether to retain, eliminate, or modify the 
35 percent national ownership rule as part of its 2002 Biennial 
Review of the Commission's media ownership rules.
    FCC Decision. In its June 2, 2003 decision, the Commission 
found that although evidence in the record before it supported 
the retention of a national ownership cap, it did not support a 
cap of 35 percent. Therefore the FCC raised the cap on the 
number of broadcast television stations one party may own from 
stations constituting 35 percent of the national audience share 
to station constituting 45 percent of the national audience 
share. The national audience share is calculated by adding the 
number of TV households in each market in which a company owns 
a station divided by the total number of United States 
television households.
    The Commission found that a national television cap serves 
the policy goal of localism by preserving a balance of power 
between the networks and their affiliates serving local needs 
and interests by ensuring that affiliates can play a meaningful 
role in selecting programming suitable for their communities. 
The Commission also found that a modest relaxation of the cap 
would help networks compete more effectively with cable and DBS 
operators and would promote free, over-the-air television by 
deterring migration of expensive programming to cable networks.
    Independent stations affiliated with the networks argue 
that retention of the 35 percent cap is essential to the 
preservation of localism and diversity over the airwaves. 
Affiliates argue that raising the cap above 35 percent could 
potentially silence the voices of local independently-owned and 
operated outlets and cause a flurry of media mergers and 
further consolidation of national networks. They also argue 
that the national ownership cap ensures that programming 
decisions remain in the hands of local broadcasters, not in the 
hands of national networks.

                 II. RULES PROHIBITING CROSS OWNERSHIP

    Local Radio/TV Cross Ownership. In 1970, the FCC adopted 
rules limiting the common ownership of local radio and 
television broadcast stations (``Local Radio/TV Cross Ownership 
Rule'') in a single market. In 1989, the FCC adopted a 
presumptive waiver policy to permit certain radio/TV 
combinations. The Commission then relaxed the rule in 1999 to 
balance the FCC's diversity and competition concerns with its 
desire to permit broadcasters and the public to realize the 
economic efficiencies enjoyed by common ownership of radio and 
television stations. Prior to the FCC's recent action, its 
rules allowed the common ownership of:
          2 television stations and up to 6 radio stations in 
        any market where at least 20 independent ``voices'' 
        would remain post-combination or 1 television station 
        and up to 7 radio station (where such entity could own 
        2 television stations and 6 radio stations);
          2 television stations and up to 4 radio stations in 
        any market where at least 10 independent ``voices'' 
        would remain post-combination;
          1 television station and 1 radio station no matter 
        the number of independent ``voices'' that would remain 
        post-combination. See 47 C.F.R. Sec.  73.3555(c).
                  --``Voices'' included local broadcast 
                television stations, cable systems, radio 
                stations, and daily newspapers of a certain 
                circulation.
    Newspaper/Broadcast Cross Ownership. In 1975, the FCC 
adopted a rule prohibiting the common ownership of a full-
service broadcast station and a daily newspaper when the 
broadcast station's service contour encompasses the newspaper's 
city of publication (``Newspaper/Broadcast Cross Ownership 
Rule''). See 47 C.F.R. Sec.  73.3555(d). When the Commission 
adopted the rule, it grandfathered newspaper/broadcast 
combinations in many markets (so long as the ownership of the 
combination remained the same), but required divestiture of 
properties in highly concentrated markets. Currently, more than 
70 ``grandfathered'' newspaper/broadcast combinations exist.
    FCC Decision. In its June 2, 2003, decision, the FCC 
concluded that neither the Local Radio/TV Cross Ownership Rule 
nor the Newspaper/Broadcast Cross Ownership Rule could be 
justified for larger markets, finding that citizens rely on an 
abundance of sources for news. Additionally, the FCC found 
these rules did not promote competition because radio, TV, and 
newspapers generally compete in different economic markets. The 
FCC found that greater participation by newspaper publishers in 
the television and radio business would improve the quality and 
quantity of news available to the public.
    As a result, the FCC replaced the cross ownership rules 
with a new set of cross-media limits. In establishing these new 
restrictions, the FCC developed a Diversity Index to measure 
the presence of key media outlets in markets of various sizes. 
According to the Commission, the index suggested that there 
were three types of markets in terms of ``viewpoint diversity'' 
concentration, each warranting different regulatory treatment. 
The Commission replaced the newspaper/broadcast and the local 
radio/TV cross ownership rules with the following cross-media 
limits for the three market types:
          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 four and eight 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 six, the company can only own three);
                  --(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 local radio/TV cross ownership ban.
    Significant concerns have been raised before the Committee 
that the FCC's new rules allowing greater media cross ownership 
will permit excessive consolidation in local markets, which 
could threaten the diversity of viewpoints offered to a local 
community, stifle democracy, and reduce competition among media 
outlets to put forth the best news product. Some critics 
believe the prohibition on cross ownership is also necessary to 
protect advertisers that substitute between newspapers, 
broadcast television, and broadcast radio. Without robust 
competition for advertising dollars, many small businesses will 
be forced to pay higher advertising rates, which may result in 
consumers paying more for products in a market with commonly 
owned newspapers and broadcast stations as such costs are 
passed on to them.
    Cross-ownership threatens localism as well, according to 
the concerned parties. When one entity is allowed to own more 
than one media outlet in a community, critics fear large 
corporations will buy several media outlets there and ``pipe 
in'' news and programming feeds from a central distribution 
facility, rather than airing locally-originated news and 
programming. Such consolidation may also decrease the number of 
opinions and viewpoints that are provided to a community by its 
media outlets if a consolidated media company, for example, 
only has one editorial board instead of an editorial board for 
each media property.

                   III. THE LOCAL RADIO OWNERSHIP CAP

    The origins of local radio ownership limits can be traced 
back to 1938. At that time, the FCC denied an application for a 
new AM station based on the fact that the parties who 
controlled the applicant also controlled another AM station in 
the same community. The FCC believed that two stations in the 
same community owned by the same party would not compete with 
each other, and thereby the ``public convenience, interest and 
necessity'' would not be served. Genesee Radio Corp., 5 FCC 183 
(1938).
    In the 1950s, the FCC placed this policy decision in its 
rules stating, ``AM licensees are prohibited from owning 
another AM station that would provide `primary service' to a 
`substantial portion' of the `primary service area' of a 
commonly owned AM station, except where the public interest 
would be served by multiple ownership''. See Amendment of 
sections 3.35, 3.240 and 3.636 of the Rules and Regulations 
Relating to Multiple Ownership of AM, FM and Television 
Broadcast Stations, Report and Order, 18 FCC 288 at 295-296 
(1953). FM licensees were similarly restricted. From 1940 to 
1964, the FCC enforced this rule on a case-by-case basis.
    In 1964, the FCC developed a new local ownership rule using 
a signal contour-based definition that only looked at the 
overlap of the radio stations' signals, rather than using a 
``primary service area'' definition. The new rule prohibited 
common ownership of same service stations when any overlap of 
signal contours occurred. The rule was designed to ``promote 
maximum diversification of program and service viewpoints and 
to prevent undue concentration of economic power contrary to 
the public interest''. See Amendment of sections 73.35, 73.240 
and 73.636 of the Commission's Rules, First Report and Order, 
22 F. C. C. 2d 339, 344 (1970).
    In 1992, the FCC found that the increasing number of media 
outlets (TV, radio, cable, etc.) justified a relaxation of its 
local radio ownership rule. Therefore, the FCC changed its 
rules to allow a single party to own multiple stations in the 
same local market. Specifically, for markets with more than 15 
radio stations, a single licensee was permitted to own up to 
two AM Stations and two FM stations, provided that the combined 
audience share of the stations did not exceed 25 percent. For 
stations in markets with fewer than 15 radio stations, a single 
licensee was permitted to own up to three stations, (of which 
no more than two could be AM or FM stations), provided that the 
owned stations represented less than 50 percent of the total 
number of radio stations in the market.
    Shortly thereafter, the most profound change in local radio 
ownership limits occurred with the enactment of the 
Telecommunications Act of 1996, which eliminated the national 
ownership limit (then prohibiting a single entity from owning 
more than 40 radio stations nationwide) and directed the FCC to 
further revise its local ownership rule by allowing the 
following combinations:
          --In local radio 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 local radio 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 local radio markets with 15-29 radio stations, a 
        company may own 6 stations, only 4 of which may be in 
        one class, AM or FM; and
          --In local radio 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, except that a party may 
        not own, operate, or control more than 50 percent of 
        the stations in such market. See 47 U.S.C. 202(b).
    FCC Decision. In its June 2, 2003, decision, the Commission 
found that local limits on radio ownership remained necessary 
to further the public interest. However, it changed its 
methodology for implementing the local radio ownership rule.
    As noted above, the FCC previously used a signal contour 
methodology to define a ``local radio market'' for purposes of 
determining whether a station owner was in compliance with the 
local ownership limits. This methodology led to some anomalous 
results that appeared to frustrate the local ownership limits 
in the 1996 Act. The most commonly cited example is Minot, 
North Dakota, where one entity owns six of the seven commercial 
stations that directly serve the Minot area. In its recent 
decision, the Commission eliminated the use of the signal 
contour methodology and replaced it with a geographic market 
methodology. Under this new methodology, all radio stations 
licensed to communities in an Arbitron Metro market are counted 
as being in that ``local radio market'' regardless of their 
signal reach. Under the new market definition, certain station 
groups will exceed the limits on local radio ownership. The FCC 
decided to ``grandfather'' these existing clusters under its 
news rules, rather than requiring the owners to come into 
compliance with the limits under the new market definition.

                          Legislative History

    Senators Stevens, Hollings, Burns, Lott, Dorgan, and Wyden 
introduced S. 1046 on May 13, 2003. The Committee held hearings 
regarding media ownership on January 30, May 6, May 13, May 22, 
and June 4, 2003. All five FCC Commissioners attended the 
hearing on June 4, 2003, during which the participants 
discussed the FCC's new rules.
    On June 19, 2003, the Senate Commerce, Science, and 
Transportation Committee held an executive session at which S. 
1046 was considered. The bill was approved by voice vote and 
was ordered reported with amendments including: an amendment by 
Senator McCain to clarify Congressional intent with respect to 
the media ownership rules review standard to be used by the 
FCC; an amendment by Senator McCain to vitiate the FCC's 
grandfathering of radio broadcast station ownership under the 
new local radio ownership rules; an amendment offered by 
Senators Dorgan, Hollings, Hutchinson, Snowe, Wyden, and 
Cantwell to restore the cross ownership media rules to their 
pre-June 2, 2003, status, as well as a second degree amendment 
by Senator Stevens providing small markets with an exemption to 
the newspaper/broadcast cross ownership rule under certain 
circumstances; and an amendment by Senator Boxer to require the 
FCC to hold five geographically diverse public hearings before 
concluding its media ownership rules review.

                            Estimated Costs

    In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 25, 2003.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1046, the 
Preservation of Localism, Program Diversity, and Competition in 
Television Broadcast Service Act of 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Melissa E. 
Zimmerman (for federal costs): Theresa Gullo (for the state and 
local impact); and Jean Talarico (for the impact on the private 
sector).
            Sincerely,
                                         Robert A. Sunshine
                               (For Douglas Holtz-Eakin, Director.)
    Enclosure.

               Congressional Budget Office Cost Estimate


S. 1046--Preservation of Localism, Program Diversity, and Competition 
        in Television Broadcast Service Act of 2003

    Summary: S. 1046 would change current law and existing 
regulations concerning ownership of television, radio, and 
newspapers. The bill also would clarify the frequency and 
nature of the Federal Communication Commission's (FCC's) 
reviews of those regulations. CBO estimates that implementing 
S. 1046 would cost the FCC less than $500,000 over the 2004-
2008 period.
    S. 1046 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would not affect 
the budgets of state, local, or tribal governments.
    S. 1046 would impose private-sector mandates on the owners 
of radio stations, television stations, and newspapers. The 
most costly mandate would be imposed on the owners of radio 
stations. Based on information from several industry experts, 
CBO expects that the cost of all the private-sector mandates in 
the bill would exceed the annual threshold for such mandates 
established by UMRA ($117 million in 2003, adjusted annually 
for inflation).
    Estimated cost to the Federal Government: S. 1046 would 
void regulations issued by the FCC on June 2, 2003, pertaining 
to the ownership of television stations, radio stations, and 
newspapers. The bill would reinstate the regulations concerning 
ownership of multiple media outlets that were in effect before 
that date. S. 1046 also would direct the FCC not to grant or 
transfer a television license if that act would result in an 
entity owning or controlling television stations that reach an 
aggregate national audience of more than 35 percent. CBO 
estimates that those changes would not have a significant 
effect on federal spending.
    In addition, sections 5 and 6 of the bill would clarify 
existing law regarding how the FCC reviews its regulations on 
broadcast ownership. Under the bill, the FCC would have to 
review its regulations every two years and hold at least five 
public hearings in different areas of the United States in 
conjunction with each review. Based on information provided by 
the FCC, CBO estimates that those provisions would cost less 
than $500,000 each year over the 2004-2008 period, subject to 
the availability of appropriated funds.
    Estimated impact on state, local, and tribal governments: 
S. 1046 contains no intergovernmental mandates as defined in 
UMRA and would not affect the budgets of state, local, or 
tribal governments.
    Estimated impact on the private sector: S. 1046 would 
impose private-sector mandates as defined in UMRA on the owners 
of radio stations, television stations, and newspapers. The 
most costly mandate would be imposed on the owners of radio 
stations. Based on information from several industry experts, 
CBO expects that the cost of all mandates in the bill would 
exceed the annual threshold for private-sector mandates 
established by UMRA ($117 million in 2003, adjusted annually 
for inflation).

Ownership of Radio Stations

    The FCC adopted a Report and Order on media ownership on 
June 2, 2003. That decision would maintain the current 
limitation on radio ownership. At the same time, however, the 
FCC's decision would change the methodology for defining local 
radio markets to a market-based approach using Arbitron Metro 
rating boundaries. That change would reduce the number of 
stations a company may own in a local market. Consequently, 
many owners of radio stations would exceed the ownership limit 
if the FCC's new rules become effective. To avoid requiring 
those owners to sell their stations, the FCC's June 2 decision 
included a ``grandfather'' provision that would exclude those 
owners from the new ownership limit. Section 4 of this bill 
would revoke that ``grandfather'' provision. As a result, those 
owners of radio stations not in compliance with the local 
market caps under the new market definitions would be required 
to sell some properties within one year after enactment of this 
bill.
    The cost of this mandate on owners of radio stations would 
be incurred in the form of diminished value for the stations 
they would be required to sell. Based on information 
fromindustry sources, CBO estimates that the cost would exceed the 
annual threshold for private-sector mandates. Bear, Stearns & Company 
estimates that owners of radio stations would be required to sell over 
200 stations to comply with the removal of the ``grandfather'' 
provision. The consensus of industry experts is that the owners of 
those stations would be able to sell them only at prices considerably 
below recently recorded market prices. Two reasons are cited. First, 
the bill's mandate would create a buyer's market in which many stations 
would be on the market at the same time. The bargaining power of 
potential buyers would grow as the deadline approached for the owner of 
stations to meet the ownership limitations. Second, in some instances, 
current owners enjoy economic advantages in operating and marketing the 
clusters of stations that they own; potential new owners of some of 
those stations would be unlikely to capture such benefits and thus 
would not account for them in their offers.

Ownership of Commercial Television Broadcast Stations

    Currently, a broadcast network can own and operate local 
broadcast stations that reach up to 35 percent of households 
nationwide. The FCC increased the ownership cap to 45 percent 
in its June 2 decision, and that new cap is likely to become 
effective within a few months. Section 3 of S. 1046 would 
restore the current national television ownership cap of 35 
percent. The bill also would require any party that holds 
licenses for commercial television broadcast stations that 
exceed the 35 percent limit to sell some of their stations to 
comply with this limit within one year from the date of 
enactment.
    According to the FCC, two companies would exceed the cap: 
Viacom Inc. (the owner of CBS) and News Corps. (the owner of 
Fox). Based on information from government and industry 
sources, CBO estimate that Viacom, Inc. and News Corps. would 
likely be able to sell their stations at a fair market value. 
Therefore, the cost of this mandate would be only the 
transaction cost involved in the sale.

Cross-Ownership of Media Outlets

    Prior to June 2, 2003, the FCC prohibited companies from 
owning a television station and newspaper in a single market 
and limited the combined number of radio and television 
stations that companies could own in a single market. The FCC's 
June 2 decision relaxed those restrictions. As a result, under 
current law, companies will be able to request approval from 
the FCC to own additional cross-media properties. Section 7 of 
S. 1046 would reinstate the more restrictive broadcast-
newspaper and radio-television cross-ownership rules that were 
in effect on June 1, 2003, retroactively to June 2, 2003. The 
costs to the private-sector of reinstating the cross-ownership 
rules would be the loss in profits that would otherwise be 
earned by those who would purchase additional media properties 
under the relaxed restrictions. CBO has no basis for estimating 
that loss.
    Further, if media owners purchase properties during the 
period that the FCC's relaxed restrictions are in effect that 
are not in compliance with the requirements of S. 1046, those 
owners would be required to sell such properties. Given the 
strong possibility that the more restrictive cross-media rules 
will be reinstated, it is very unlikely that any parties would 
apply for or receive licenses under the relaxed rules prior to 
enactment of this legislation.
    Estimate prepared by: Federal Costs: Melissa E. Zimmerman; 
impact on state, local, and tribal governments: Theresa Gullo; 
impact on the private sector: Jean Talarico.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis.

                      Regulatory Impact Statement

    In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported:

                       NUMBER OF PERSONS COVERED

    S. 1046 would restore the FCC's 35 percent national 
broadcast television ownership cap and its cross ownership 
rules, and would make other changes to the Communications Act 
of 1934. The number of persons covered by this legislation 
should be consistent with current levels of individuals 
affected.

                            ECONOMIC IMPACT

    S. 1046 would restrict consolidation of media companies in 
the United States. Although the legislation may have an adverse 
economic impact on those companies, it is expected to help 
ensure an environment conducive to economic opportunity for 
diverse, local programming and advertising.

                                PRIVACY

    S. 1046 is not expected to have an adverse effect on the 
personal privacy of any individuals that will be impacted by 
this legislation.

                               PAPERWORK

    S. 1046 is expected to have a minimal impact on current 
paperwork levels.

                      Section-by-Section Analysis


Section 1. Short title

    This section would provide that the legislation may be 
cited as the ``Preservation of Localism, Program Diversity, and 
Competition in Television Broadcast Service Act of 2003''.

Sec. 2. Congressional findings and purposes

    This section states that the principle of localism has been 
the ``pole star'' for regulation of the broadcast industry by 
the FCC for nearly 70 years, and that any increase in the 
national television multiple ownership cap may harm this 
principle. In addition, this section states that retaining the 
national television multiple ownership cap at 35 percent would 
prevent further national concentration that may occur, the 
pernicious effects of which may be difficult to eradicate once 
begun, and would ensure the independence of non-network owned 
stations from becoming passive conduits for network 
transmissions.

Sec. 3. National television multiple ownership limitations

    This section would eliminate Section 202(c)(1)(B) of the 
1996 Act, which directs the Commission to modify its rules for 
multiple ownership to increase the national television multiple 
ownership cap to 35 percent. In its place, the bill would 
codify the 35 percent cap by adding a new Section 340 to the 
Communications Act of 1934. Section 340 would prevent any 
license for a commercial broadcast television station to be 
granted, transferred or assigned to a party if it would result 
in a party owning, operating, controlling or having a 
cognizable interest in television stations having an aggregate 
national audience reach exceeding 35 percent.
    The bill would define ``audience reach'' using the same 
terms that the Commission set forth in 47 C.F.R. Sec. 73.3555, 
except this definition would allow the Commission to substitute 
any successor definition it may adopt to delineate television 
markets for the purpose of imposing the 35 percent cap. The 
bill would define ``cognizable interest'' using the same terms 
as the Commission has set forth in 47 C.F.R. Sec. 73.3555.
    This section would also require divestiture of broadcast 
stations by any party whose holdings exceed the 35 percent cap. 
Section 340(b) would require this divestiture to take place 
within one year after the date of the enactment of this bill. 
Currently, two networks are over the 35 percent cap and would 
be required to divest--Viacom/CBS at just over 39 percent and 
FOX/News Corp. at 37.8 percent.
    Lastly, Section 340(c) would prevent the FCC from using its 
forbearance authority in Section 10 of the Communications Act 
of 1934 to prevent this new Section 340 from taking effect.

Sec. 4. No grandfathering

    This section would prevent the FCC from grandfathering 
owners of existing radio station clusters that exceed the local 
radio ownership cap under the FCC's new market definition. As a 
result, those owners with station clusters in excess of the 
local limits would be required to come into compliance within 
one year after the date of enactment of the Act.

Sec. 5. Clarification of Congressional intent with respect to ownership 
        rules review

    This section would modify Section 202(h) to specifically 
allow the FCC to repeal, strengthen, limit, or retain its media 
ownership rules during its next 202(h) review if it determines 
such changes to be in the public interest. Courts have 
interpreted Section 202(h) to carry ``with it a presumption in 
favor of repealing or modifying ownership rules'' as part of 
``a process of deregulation'' set in place by the 
Telecommunication Act 1996 Act. Fox Television Stations Inc. v. 
FCC, 280 F.3d 1027, 1048 (D.C. Cir. 2002); Sinclair Broad. 
Group, Inc. v. FCC, 284 F.3d 148, 152 (D.C. Cir. 2002). When 
the FCC Commissioners appeared before the Committee on June 4, 
2003, several Commissioners agreed that section 202(h) allows 
the FCC to strengthen or repeal its broadcast ownership rules, 
but requested clarification from Congress. This section would 
provide such clarification.

Sec. 6. Public hearing requirement

    This section would require the Commission to hold five 
public hearings in different areas of the United States before 
it renders any decision in conjunction with its media ownership 
review pursuant to 202(h) of the Communications Act of 1934.

Sec. 7. Restoration of cross ownership rules

    This section would reinstate the Commission's Newspaper/
Broadcast and Local Radio/TV Cross Ownership Rules that were in 
place on June 1, 2003.
    This section would also provide an exemption to the 
Newspaper/Broadcast Cross Ownership Rule under certain 
conditions for small markets with a Designated Market Area 
(DMA) of 150 or higher. If a broadcast station and a newspaper 
in such a community wish to come under common ownership, the 
potential common owner could petition the public utility 
commission in the community's State or States for a 
recommendation approving the transaction. If a respective 
public utility commission finds that such a transaction would 
enhance the community's local news and information, promote the 
financial stability of the newspaper or broadcast station or 
generally promote the public interest, then the public utility 
commission may refer the transaction to the FCC which may grant 
a waiver of compliance with the cross ownership rules. The FCC 
may grant the waiver approving the transaction within 60 days 
after the FCC receives it unless the Commission finds there is 
compelling evidence that the transaction would be contrary to 
the public interest. If approved, the newspaper and the 
broadcast station covered by the waiver must maintain separate 
editorial boards. Additionally, if the broadcast station or the 
newspaper issues an editorial viewpoint via broadcast or print, 
respectively, the other commonly owned media outlet should 
broadcast or print their respective viewpoint if one has been 
established.

                      ROLLCALL VOTES IN COMMITTEE

    In accordance with paragraph 7(c) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following description of the record votes during its 
consideration of S. 1239:
    Senator Sununu (for himself and Senator Breaux) offered an 
amendment to provide conditional grandfathering of licenses 
granted in excess of the national audience reach limitation 
that would be imposed by new section 340 of the Communications 
Act of 1936. By rollcall vote of 7 yeas and 16 nays as follows, 
the amendment was defeated:

        YEAS--7                       NAYS--16
Mr. Brownback                       Mr. Stevens \1\
Mr. Smith \1\                       Mr. Burns
Mr. Fitzgerald \1\                  Mr. Lott
Mr. Ensign                          Mrs. Hutchison \1\
Mr. Allen \1\                       Ms. Snowe
Mr. Sununu                          Mr. Hollings
Mr. Breaux                          Mr. Inouye \1\
                                    Mr. Rockefeller \1\
                                    Mr. Kerry \1\
                                    Mr. Dorgan
                                    Mr. Wyden
                                    Mrs. Boxer
                                    Mr. Nelson
                                    Ms. Cantwell
                                    Mr. Lautenberg \1\
                                    Mr. McCain

    \1\ By proxy
    Mr. Stevens offered a second degree amendment to the 
amendment offered by Mr. Dorgan to provide for a small market 
exemption from the cross ownership rules. By rollcall vote of 
14 yeas and 9 nays as follows, the amendment was adopted:
        YEAS--14                      NAYS--9
Mr. Stevens                         Mr. Lott
Mr. Burns                           Ms. Snowe
Mrs. Hutchison                      Mr. Rockefeller
Mr. Brownback                       Mr. Kerry \1\
Mr. Smith                           Mr. Dorgan
Mr. Fitzgerald \1\                  Mr. Wyden
Mr. Ensign \1\                      Mr. Nelson
Mr. Allen                           Ms. Cantwell
Mr. Sununu                          Mr. McCain
Mr. Hollings
Mr. Inouye \1\
Mr. Breaux
Mrs. Boxer
Mr. Lautenberg

    \1\ By proxy

    Mr. McCain offered an amendment to vitiate the Commission's 
grandfathering of radio broadcasting station ownership under 
its new broadcast media ownership rules. By rollcall vote of 12 
yeas and 11 nays as follows, the amendment was adopted:
        YEAS--12                      NAYS--11
Mr. Stevens \1\                     Mr. Burns
Ms. Snowe                           Mr. Lott
Mr. Hollings                        Mrs. Hutchison \1\
Mr. Inouye \1\                      Mr. Brownback
Mr. Kerry \1\                       Mr. Smith \1\
Mr. Dorgan                          Mr. Fitzgerald \1\
Mr. Wyden                           Mr. Ensign
Mrs. Boxer                          Mr. Allen \1\
Mr. Nelson                          Mr. Sununu
Ms. Cantwell                        Mr. Rockefeller \1\
Mr. Lautenberg                      Mr. Breaux
Mr. McCain

    \1\ By proxy


                            ADDITIONAL VIEWS

   Additional Views of Senators Dorgan, Hutchison, Hollings, Snowe, 
                  Inouye, Lott, Boxer, and Lautenberg

    During the Executive Session on June 19, 2003, several 
issues were raised during the consideration of S. 1046. As 
drafted, S. 1046 would maintain the current national television 
ownership limit at 35 percent. However, the Committee also 
adopted by voice vote a Dorgan/Snowe/Hutchison/Hollings 
amendment to restore the newspaper-broadcast cross ownership 
ban in most major markets. We are providing these additional 
remarks to explain why the Committee took this action.
    One of the things the FCC did in its June 2nd Report and 
Order on media ownership was to largely eliminate the ban on 
new newspaper-broadcast cross ownership combinations. We 
disagree with that decision because we fear the negative impact 
that additional newspaper-broadcast combinations will have on 
localism, diversity, and competition in those markets. 
Inevitably the merging of broadcasters and newspapers reduces 
the number of voices in individual markets and threatens to 
place too much control over local news and information in the 
hands of too few companies.
    The Committee received testimony and statistical evidence 
underscoring the dangers inherent in the FCC's order lifting 
the cross ownership ban. If the FCC order lifting the ban were 
allowed to remain, broadcast-newspaper mergers could occur in 
nearly 200 markets, meaning that 98 percent of the American 
public could effectively lose many of the most relied upon 
independent voices in their community.
    This would allow almost two-thirds of the markets in the 
country to have only four local news sources (from television 
stations and newspapers). And, it would make it possible for 
individual markets to be dominated by a single newspaper/TV 
conglomerate which could control well over half the news 
audience and two-thirds of the reporters in a given local 
market.\1\ Clearly, this would be devastating for local 
competition and diversity in local news.
---------------------------------------------------------------------------
    \1\ Analysis of June 2nd FCC Order, ``Mass Deregulation of Media 
Threatens to Undermine Democracy,'' Consumer Federation of America and 
Consumers Union, June 2, 2003.
---------------------------------------------------------------------------
    Numerous witnesses before the Committee demonstrated that 
new technologies, such as the Internet and cable television, 
have--so far--failed to replace local broadcast and newspapers 
as the major sources of news and information for citizens. The 
FCC's own studies show that 80 percent of consumers still rely 
upon television and newspapers for their local and national 
news, and when asked, (in comparison to broadcast television 
and newspapers) consumers do not cite the Internet or cable 
television as a significant source of local news.\2\ As a 
result, the growth of the Internet and other new technologies 
has not created a significant enough change in consumer 
behavior to warrant relaxation of the cross ownership ban.
---------------------------------------------------------------------------
    \2\ Nielsen Media Research, Consumer Survey On Media Usage (FCC 
Media Ownership Working Group Study No. 8, September 2002).
---------------------------------------------------------------------------
    The Federal courts have previously acknowledged that this 
cross ownership ban reflects an appropriate legislative and 
regulatory tool to promote competition and diversity of 
ownership,\3\ yet the FCC's proposed relaxation of this rule is 
likely to undermine these democratic principles. Furthermore, 
as Frank Blethen, Publisher of the Seattle Times testified to 
this Committee, ``There is no business justification that I'm 
aware of--other than monopolization--for lifting any of the 
current rules or for allowing any entity to engage in cross-
media ownership.'' \4\
---------------------------------------------------------------------------
    \3\ FCC v. National Citizens Comm. for Broadcasting, 436 US 775, 
802 (1978)
    \4\ Frank Blethen, Testimony before the Senate Commerce Committee, 
``Media Ownership (Broadcast),'' May 13, 2003.
---------------------------------------------------------------------------
    Recognizing the significant role broadcast stations and 
newspapers still play in local communities, we know of no 
better tool to ensure that the public airwaves are used to 
promote the important principles of localism, diversity, and 
competition. Therefore, the committee agreed that it is 
imperative to reinstate the FCC's previous ban on newspaper-
broadcast cross ownership in the same communities.

                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
material is printed in italic, existing law in which no change 
is proposed is shown in roman):

                       COMMUNICATIONS ACT OF 1934


                Title III--Provisions Relating to Radio


                       PART I. GENERAL PROVISIONS

SEC. 340. NATIONAL TELEVISION MULTIPLE OWNERSHIP LIMITATIONS.

    (a) National Audience Reach Limitation.--The Commission 
shall not permit any license for a commercial television 
broadcast station to 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, or members, 
officers, or directors, directly or indirectly, owning, 
operating or controlling, or having a cognizable interest in 
television stations which have an aggregate national audience 
reach exceeding 35 percent.
    (b) No Grandfathering.--The Commission shall require any 
party (including all parties under common control) that holds 
licenses for commercial television broadcast stations in excess 
of the limitation contained in subsection (a) to divest itself 
of such licenses as may be necessary to come into compliance 
with such limitation within one year after the date of 
enactment of this section.
    (c) Section Not Subject to Forbearance.--Section 10 of this 
Act shall not apply to the requirements of this section.
    (d) Definitions.--
          (1) National audience reach.--The term `national 
        audience reach' means--
                  (A) the total number of television households 
                in the Nielsen Designated Market Area (DMA) 
                markets in which the relevant stations are 
                located, or as determined under a successor 
                measure adopted by the Commission to delineate 
                television markets for purposes of this 
                section; divided by
                  (B) the total national television households 
                as measured by such DMA data (or such successor 
                measure) at the time of a grant, transfer, or 
                assignment of a license.
        No market shall be counted more than once in making 
        this calculation.
          (2) Cognizable interest.--Except as may otherwise be 
        provided by regulation by the Commission, the term 
        `cognizable interest' means any partnership or direct 
        ownership interest and any voting stock interest 
        amounting to 5 percent or more of the outstanding 
        voting stock of a licensee.

                     TELECOMMUNICATIONS ACT OF 1996


SEC. 202. BROADCAST OWNERSHIP.

    (a) National Radio Station Ownership Rule Changes 
Required.--The Commission shall modify section 73.3555 of its 
regulations (47 C.F.R. 73.3555) by eliminating any provisions 
limiting the number of AM or FM broadcast stations which may be 
owned or controlled by one entity nationally.
    (b) Local Radio Diversity.--
          (1) Applicable caps.--The Commission shall revise 
        section 73.3555(a) of its regulations (47 C.F.R. 
        73.3555) to provide that--
                  (A) in a radio market with 45 or more 
                commercial radio stations, a party may own, 
                operate, or control up to 8 commercial radio 
                stations, not more than 5 of which are in the 
                same service (AM or FM);
                  (B) in a radio market with between 30 and 44 
                (inclusive) commercial radio stations, a party 
                may own, operate, or control up to 7 commercial 
                radio stations, not more than 4 of which are in 
                the same service (AM or FM);
                  (C) in a radio market with between 15 and 29 
                (inclusive) commercial radio stations, a party 
                may own, operate, or control up to 6 commercial 
                radio stations, not more than 4 of which are in 
                the same service (AM or FM); and
                  (D) in a radio market with 14 or fewer 
                commercial radio stations, a party may own, 
                operate, or control up to 5 commercial radio 
                stations, not more than 3 of which are in the 
                same service (AM or FM), except that a party 
                may not own, operate, or control more than 50 
                percent of the stations in such market.
          (2) Exception.--Notwithstanding any limitation 
        authorized by this subsection, the Commission may 
        permit a person or entity to own, operate, or control, 
        or have a cognizable interest in, radio broadcast 
        stations if the Commission determines that such 
        ownership, operation, control, or interest will result 
        in an increase in the number of radio broadcast 
        stations in operation.
    (c) Television Ownership Limitations.--
          (1) National ownership limitations.--The Commission 
        shall modify its rules for multiple ownership set forth 
        in section 73.3555 of [its regulations (47 C.F.R. 
        73.3555)--
                  (A) by eliminating] its regulations (47 CFR 
                73.3555) by eliminating the restrictions on the 
                number of television stations that a person or 
                entity may directly or indirectly own, operate, 
                or control, or have a cognizable interest in, 
                nationwide[; and] .
                  [(B) by increasing the national audience 
                reach limitation for television stations to 35 
                percent.]
          (2) Local ownership limitations.--The Commission 
        shall conduct a rulemaking proceeding to determine 
        whether to retain, modify, or eliminate its limitations 
        on the number of television stations that a person or 
        entity may own, operate, or control, or have a 
        cognizable interest in, within the same television 
        market.
    (d) Relaxation of One-To-A-Market.--With respect to its 
enforcement of its one-to-a-market ownership rules under 
section 73.3555 of its regulations, the Commission shall extend 
its waiver policy to any of the top 50 markets, consistent with 
the public interest, convenience, and necessity.
    (e) Dual Network Changes.--The Commission shall revise 
section 73.658(g) of its regulations (47 C.F.R. 658(g)) to 
permit a television broadcast station to affiliate with a 
person or entity that maintains 2 or more networks of 
television broadcast stations unless such dual or multiple 
networks are composed of--
          (1) two or more persons or entities that, on the date 
        of enactment of the Telecommunications Act of 1996, are 
        ``networks'' as defined in section 73.3613(a)(1) of the 
        Commission's regulations (47 C.F.R. 73.3613(a)(1)); or
          (2) any network described in paragraph (1) and an 
        English-language program distribution service that, on 
        such date, provides 4 or more hours of programming per 
        week on a national basis pursuant to network 
        affiliation arrangements with local television 
        broadcast stations in markets reaching more than 75 
        percent of television homes (as measured by a national 
        ratings service).
    (f) Cable Cross Ownership.--
          (1) Elimination of restrictions.--The Commission 
        shall revise section 76.501 of its regulations (47 
        C.F.R. 76.501) to permit a person or entity to own or 
        control a network of broadcast stations and a cable 
        system.
          (2) Safeguards against discrimination.--The 
        Commission shall revise such regulations if necessary 
        to ensure carriage, channel positioning, and 
        nondiscriminatory treatment of nonaffiliated broadcast 
        stations by a cable system described in paragraph (1).
    (g) Local Marketing Agreements.--Nothing in this section 
shall be construed to prohibit the origination, continuation, 
or renewal of any television local marketing agreement that is 
in compliance with the regulations of the Commission.
    [(h) Further Commission Review.--The Commission shall 
review its rules adopted pursuant to this section and all of 
its ownership rules biennially as part of its regulatory reform 
review under section 11 of the Communications Act of 1934 and 
shall determine whether any of such rules are necessary in the 
public interest as the result of competition. The Commission 
shall repeal or modify any regulation it determines to be no 
longer in the public interest.]
    (h) Further Commission Review.--
          (1) In general.--The Commission shall review its 
        rules adopted pursuant to this section, and all of its 
        ownership rules biennially as part of its regulatory 
        reform review under section 11 of the Communications 
        Act of 1934 and shall determine whether--
                  (A) any rule requires strengthening or 
                broadening;
                  (B) any rule requires limiting or narrowing;
                  (C) any rule should be repealed; or
                  (D) any rule should be retained.
          (2) Change, repeal, or retain.--The Commission shall 
        change, repeal, or retain such rules pursuant to its 
        review under paragraph (1) as it determines to be in 
        the public interest.
Before making any determination under this subsection 
concerning an ownership rule or regulation, the Commission 
shall hold no less than 5 public hearings in different areas of 
the United States with respect to that rule or regulation.
    (i) Elimination of Statutory Restriction.--Section 613(a) 
(47 U.S.C. 533(a)) is amended--
          (1) by striking paragraph (1);
          (2) by redesignating paragraph (2) as subsection (a);
          (3) by redesignating subparagraphs (A) and (B) as 
        paragraphs (1) and (2), respectively;
          (4) by striking ``and'' at the end of paragraph (1) 
        (as so redesignated);
          (5) by striking the period at the end of paragraph 
        (2) (as so redesignated) and inserting ``; and''; and
          (6) by adding at the end the following new paragraph:
          ``(3) shall not apply the requirements of this 
        subsection to any cable operator in any franchise area 
        in which a cable operator is subject to effective 
        competition as determined under section 623(l)''.