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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In re: ) ) Time Warner Entertainment-Advance/ CSR-5002-A) Newhouse Partnership ) ) For Modification of the ADI of ) Television Broadcast Station KZKI) MEMORANDUM OPINION AND ORDER Adopted: September 9, 1997 Released: September 15, 1997 By the Deputy Chief, Cable Services Bureau: INTRODUCTION 1. Time Warner Entertainment-Advance/Newhouse Partnership ("Time Warner") has filed the above-captioned petition which seeks to delete the communities served by Time Warner's Santa Clarita Valley, California cable system from the television market of Television Broadcast Station KZKI (Ind., Channel 30), San Bernardino, California ("KZKI"), for purposes of the mandatory carriage requirements. KZKI has opposed Time Warner's petition, and Time Warner has replied. BACKGROUND 2. Pursuant to 614 of the Communications Act and implementing rules adopted by the Commission in its Report and Order in MM Docket No. 92-259, a commercial television broadcast station is entitled to assert mandatory carriage rights on cable systems located within the station's market. A station's market for this purpose is its "area of dominant influence," or ADI, as defined by the Arbitron audience research organization. An ADI is a geographic market designation that defines each television market exclusive of others, based on measured viewing patterns. Essentially, each county in the United States is allocated to a market based on which home-market stations receive a preponderance of total viewing hours in the county. For purposes of this calculation, both over-the-air and cable television viewing are included. 3. Under the Act, however, the Commission is also directed to consider changes in market areas. Section 614(h)(1)(C) provides that the Commission may: with respect to a particular television broadcast station, include additional communities within its television market or exclude communities from such station's television market to better effectuate the purposes of this section. In considering such requests, the Act provides that: the Commission shall afford particular attention to the value of localism by taking into account such factors as-- (I) whether the station, or other stations located in the same area, have been historically carried on the cable system or systems within such community; (II) whether the television station provides coverage or other local service to such community; (III) whether any other television station that is eligible to be carried by a cable system in such community in fulfillment of the requirements of this section provides news coverage of issues of concern to such community or provides carriage or coverage of sporting and other events of interest to the community; and (IV) evidence of viewing patterns in cable and noncable households within the areas served by the cable system or systems in such community. 4. The legislative history of this provision indicates that: where the presumption in favor of ADI carriage would result in cable subscribers losing access to local stations because they are outside the ADI in which a local cable system operates, the FCC may make an adjustment to include or exclude particular communities from a television station's market consistent with Congress' objective to ensure that television stations be carried in the areas which they serve and which form their economic market. * * * * * [This subsection] establishes certain criteria which the Commission shall consider in acting on requests to modify the geographic area in which stations have signal carriage rights. These factors are not intended to be exclusive, but may be used to demonstrate that a community is part of a particular station's market. 5. The Commission provided guidance in its Report and Order in MM Docket No. 92-259, supra, to aid decision making in these matters, as follows: For example, the historical carriage of the station could be illustrated by the submission of documents listing the cable system's channel line-up (e.g., rate cards) for a period of years. To show that the station provides coverage or other local service to the cable community (factor 2), parties may demonstrate that the station places at least a Grade B coverage contour over the cable community or is located close to the community in terms of mileage. Coverage of news or other programming of interest to the community could be demonstrated by program logs or other descriptions of local program offerings. The final factor concerns viewing patterns in the cable community in cable and noncable homes. Audience data clearly provide appropriate evidence about this factor. In this regard, we note that surveys such as those used to demonstrate significantly viewed status could be useful. However, since this factor requires us to evaluate viewing on a community basis for cable and noncable homes, and significantly viewed surveys typically measure viewing only in noncable households, such surveys may need to be supplemented with additional data concerning viewing in cable homes. 6. As for deletions of communities from a station's market, the legislative history of this provision indicates that: The provisions of [this subsection] reflect a recognition that the Commission may conclude that a community within a station's ADI may be so far removed from the station that it cannot be deemed part of the station's market. It is not the Committee's intention that these provisions be used by cable systems to manipulate their carriage obligations to avoid compliance with the objectives of this section. Further, this section is not intended to permit a cable system to discriminate among several stations licensed to the same community. Unless a cable system can point to particularized evidence that its community is not part of one station's market, it should not be permitted to single out individual stations serving the same area and request that the cable system's community be deleted from the station's television market. 7. In adopting rules to implement this provision, the Commission indicated that requested changes should be considered on a community-by-community basis rather than on a county-by-county basis, and that they should be treated as specific to particular stations rather than applicable in common to all stations in the market. The rules further provide, in accordance with the requirements of the Act, that a station not be deleted from carriage during the pendency of an ADI change request. MARKET FACTS AND ARGUMENTS OF THE PARTIES 8. In support of its petition, Time Warner argues that KZKI should be excluded from carriage on Time Warner's system because the station fails to meet any of the market factors set forth in the Communications Act and the Commission's rules. First, Time Warner states that KZKI has no history of carriage on the cable system, even though KZKI has been operational since early 1994. Time Warner further states that it never carried KZKI's predecessor licensee. According to Time Warner, the communities it serves are located substantially beyond the scope of KZKI's natural market, both in terms of signal coverage and programming of particular interest or appeal to Time Warner's subscribers. 9. Second, Time Warner states that KZKI fails to provide local service to the Santa Clarita Valley. Time Warner notes that San Bernardino, KZKI's city of license, is approximately 75 miles distant from Santa Clarita, and that numerous separate and discrete communities separate San Bernardino from the Santa Clarita Valley. Time Warner further notes that the Santa Clarita Valley is surrounded by mountainous terrain: the San Gabriel Mountains to the southeast (in the direction of San Bernardino), the Sierra Pelona and Tehachapi Mountains to the north, and the Sierra Madre and Santa Susanna Mountains to the west. Time Warner states that this mountainous terrain precludes off-air reception of KZKI in the Santa Clarita Valley, and notes that KZKI has installed a microwave feed to deliver its signal to Time Warner's system. Time Warner argues, however, that delivery by microwave does not establish that KZKI is a local signal. To the contrary, Time Warner argues that the distance between KZKI and the Santa Clarita Valley indicates that the communities are not part of the station's market. Time Warner further maintains that KZKI's programming has no local nexus to the Santa Clarita Valley, but is dominated by program-length commercials of national businesses and organizations. Time Warner states that although it has no evidence of KZKI's specific programming, program-length commercials are the standard program schedule of licensees of Paxson Communications, Inc. ["Paxson"], which is KZKI's parent organization. Time Warner further states that the Commission has previously found such a program schedule not sufficient to demonstrate specific ties to particular cable communities that are as distant from the station in question as are Time Warner's communities. In addition, Time Warner notes that the Los Angeles edition of TV Guide (noncable) does not include KZKI scheduling information, nor does the Los Angeles Times Sunday TV weekly magazine, or the Daily News. Time Warner states that this is also true of The Sun in San Bernardino and The Signal in Santa Clarita. Time Warner acknowledges that Santa Clarita and Canyon Country are located at the fringe of KZKI's Grade B contour, but argues that this should carry little weight in view of all the factual circumstances of this case. 10. Third, Time Warner states that it carries eleven television broadcast stations licensed to Los Angeles, and that these stations cover news, sporting events, and public affairs designed to meet the specific needs and interests of subscribers in Santa Clarita and Canyon Country. Finally, with regard to the fourth criterion, Time Warner argues that Nielsen reports no off-air viewing of KZKI in Los Angeles County, in which Time Warner's communities are located. 11. In opposition to Time Warner, KZKI argues that Time Warner has failed to demonstrate that deletion of its communities from KZKI's ADI would promote local broadcast service and foster diversity and competition in the Los Angeles ADI, which were Congress' goals in enacting the must-carry statutory scheme. KZKI further argues that this was recognized by the Supreme Court in its recent decision upholding the constitutionality of the rules in Turner Broadcasting System, Inc. v. FCC. KZKI notes that it is not only part of the Los Angeles ADI, in which Time Warner's communities are located, but also that the Commission has determined that San Bernardino -- KZKI's city of license -- is an integral part of the hyphenated television market that includes Los Angeles, San Bernardino, Corona, Riverside, and Anaheim, California. KZKI argues that this determination should weigh heavily against grant of Time Warner's market modification request. KZKI maintains that Congress rejected mileage-based and geographic approaches for determining stations' carriage rights, and contends that these criteria should not be the basis for modifying a station's ADI, on which its carriage rights are based. KZKI argues that carriage throughout its ADI is necessary to foster a local station's viability, and provides equitable treatment to similarly situated broadcast stations. KZKI notes that Time Warner, while seeking to deny KZKI carriage, is carrying KVEA from San Bernardino. KZKI contends that it provides coverage and programming that is of local interest to residents throughout the Los Angeles ADI, including the Santa Clarita Valley. KZKI claims that its programming fulfills Congress' intent that stations -- particularly independent stations such as KZKI -- be carried through their ADI. KZKI argues that in contrast, Time Warner is seeking to discriminate among San Bernardino licensees by carrying KVEA while attempting to delete KZKI. According to KZKI, Time Warner is not seeking to fine tune KZKI's ADI but rather to eviscerate it, despite the fact that the Commission has already recognized that San Bernardino forms part of an integrated economic market with Los Angeles. 12. Turning to the statutory factors for market modification, KZKI contends that because Time Warner is seeking to delete communities from the station's ADI, KZKI's inability to establish a history of carriage should not be given great weight, especially as KZKI had been dark for a substantial amount of time prior to 1994. KZKI argues that it provides valuable local service as an outlet for local advertisers, businesses, and community organizations, and as a conduit of information to Time Warner's subscribers, particularly since Paxson acquired the station in May 1995. For example, KZKI notes that the Perot/Choate '96 campaign purchased a daily thirty-minute slot on KZKI for two months during the 1996 presidential campaign. KZKI states that it airs presentations by businesses and community organizations during the day, and religious programming through the night (nineteen hours weekly). KZKI states that each week it also airs two and one-half hours of locally originated news and public affairs programming Monday through Friday, two hours of children's program in the mornings, and an hour of Vietnamese language news programming. KZKI further states that its news and program-length presentations are designed to address the needs and interests not only of Time Warner's subscribers, but also those of residents throughout the Los Angeles ADI. KZKI notes that this programming includes traffic and weather reports, and segments on national issues and their impact on Los Angeles County. KZKI further notes that its public affairs program, "Southern Exposures," focuses on local community issues and groups that are active in the San Bernardino area. KZKI states that it has presented programming by local businesses and doctors, and also a local talk show, "Talk of the Town." KZKI pledges that it is committed to continuing to serve the Los Angeles ADI, including the Santa Clarita Valley, with local programming efforts, and that this should be given credence. KZKI contends that focusing exclusively on past programming is unreliable in KZKI's case, as the station was dark for a significant period of time prior to its purchase by its current licensee. In addition, KZKI maintains that Congress designed the must-carry provisions of the Communications Act to "help new stations and stations that target special audiences to obtain carriage, thus increasing diversity of local programming available to viewers." KZKI argues that San Bernardino is an integral part of the Los Angeles ADI, and notes that Santa Clarita and Canyon Country are encompassed by the station's Grade B contour. KZKI also notes that it has spent over $28,000 to ensure delivery of a good quality signal to Time Warner by means of a microwave feed. 13. With regard to station coverage, KZKI argues that the fact that Time Warner carries other Los Angeles ADI stations on its system is not relevant as a basis for deleting Santa Clarita and Canyon Country from KZKI's ADI. Finally, in addressing the factor of audience share in the communities, KZKI argues that Congress did not set a minimum viewership standard for carriage rights, which would weigh particularly heavily against any struggling independent station, particularly one such as KZKI which was only recently acquired by its licensee. 14. In reply, Time Warner argues that KZKI's reliance on the Commission's hyphenation of San Bernardino with the Los Angeles market misconstrues the relevant factors of an ADI modification proceeding, which focuses not on the local market's competitive structure as a whole, but on whether a particular community is beyond a particular station's actual service area. Time Warner maintains that the distance and topographical factors between KZKI and the Santa Clarita Valley demonstrate that, despite the presence of Grade B contour coverage, the communities are not part of the station's ADI. Time Warner argues that KZKI's own evidence reveals that the station's programming is merely general in content, with no particular connection or relevance to the Santa Clarita Valley. Time Warner notes that KZKI describes its public affairs show "Southern Exposures" specifically as focusing on San Bernardino, the station's city of license, and not on the Santa Clarita Valley. Time Warner also argues that KZKI's stated plans to continue its local programming efforts do not rebut Time Warner's demonstration that the station does not carry programming of local interest to its subscribers. Time Warner questions, therefore, whether KZKI's commitment is meaningful in this context, and argues that in any event it is actual performance that must be measured and evaluated. 15. Time Warner contends that it is not singling out KZKI for disparate treatment. Time Warner notes that, unlike KZKI, the predominantly foreign-language programming of KVEA is listed in the Los Angeles edition of TV Guide, the Los Angeles Times Sunday TV schedule, Santa Clarita's The Signal, and San Bernardino's The Sun. Time Warner's petition merely seeks to reflect the market realities already in evidence. ANALYSIS AND DECISION 16. We have previously had occasion to address the question of the appropriate bounds of the ADI of KZKI. In ML Media Partners, L.P. ["ML Media"], the Bureau denied the cable operator's request to delete Hermosa Beach, Manhattan Beach, Anaheim, Villa Park, and unincorporated portions of Orange County, California from KZKI's ADI. In Paragon Cable, the Bureau denied the cable operator's request to delete the Los Angeles County communities of Torrance, El Segundo, Gardena, Hawthorne, and Lawndale from KZKI's ADI. In The Chronicle Publishing Company d/b/a Ventura County Cablevision ["The Chronicle"], the Bureau denied the cable operator's request to delete Thousand Oaks, Fillmore, Moorpark, Newbury Park, Westlake Village, Agoura Hills, Oak Park, and Calabasas from KZKI's ADI. At the same time, the Bureau granted the cable operator's deletion request with respect to the communities of Santa Paula, Camarillo, Ojai, and Somis. In Avenue TV Cable Service, Inc. ["Avenue Cable"], the Bureau granted the cable operator's request to delete the community of Ventura, California, and unincorporated portions of western Ventura County from KZKI's ADI. Most recently, in West Valley Cablevision Industries, Inc. ["West Valley"], the Bureau denied the cable operator's request to delete Canoga Park, Chatsworth, Encino, Granada Hills, Northridge, Reseda, Sepulveda, Sherman Oaks, Tarzana, Van Nuys, West Hills, and Woodland Hills from KZKI's ADI. It is against this background that we address Time Warner's request today. 17. As did the petitioning cable operators in the cases referenced above, Time Warner focuses on the four factors specifically referenced in the statute, and presses the argument that KZKI is not entitled to carriage for several reasons. First, KZKI has no record of historical carriage. Second, KZKI provides no programming specifically for the communities, and is blocked from off-air reception in the communities by intervening mountainous terrain. Third, Time Warner's communities receive service from, and the systems carry the signals of, other stations that do provide coverage of issues of concern to the communities. Fourth, KZKI has no audience in the communities. Because to some extent the exclusionary evidence relied upon by Time Warner applies throughout the entire Los Angles ADI, its application in the manner suggested generally does not help to identify the shape of KZKI's particular market. These factors are of relevance as a means to distinguish among communities within a market -- to define the boundaries of the market -- not to excuse specific cable systems from compliance with the rules. 18. Based on the general geography and structure of the market, it appears at the outset that the Santa Clarita Valley communities are logically part of KZKI's ADI. Focusing on the specific factors referenced in the statute, we are unable to conclude that any of Time Warner's arguments distinguish these cable communities from the rest of the market. While the evidence submitted relating to these factors provides some guidance as to the scope of KZKI's market, the evidence does not sweep as broadly as Time Warner argues. With respect to the question of historical carriage patterns, Time Warner states that it has not historically carried the signal of KZKI. However, we do not believe that historical carriage should be given great weight in the context of a deletion request such as this. To do so would tend to defeat the underlying purposes of the carriage requirements, unless carriage patterns for KZKI serve to delineate the shape of its market. KZKI's carriage patterns do not indicate the shape of the market because it ceased operations for two years prior to 1994, and as a result, was not providing service to, or being carried by operators in, communities clearly within its Grade A and Grade B contours. In any event, we do not agree that the historical carriage factor should, by itself, be given significant weight in these circumstances because such an interpretation of the 1992 Cable Act would, in effect, prevent weaker or newer stations that cable systems had previously declined to carry, from ever being carried. 19. Moreover, we find that the station's signal contour coverage of the communities satisfies the local service factor. Although Time Warner refers to the communities as being at the fringe of KZKI's Grade B contour, KZKI has submitted station contour maps that show that Santa Clarita and Canyon Country are within the station's Grade A contour. Grade B contour coverage guides us in the market modification analysis because it is a reliable indicator of the economic reach of a particular television station's signal. The Commission recognized this approach in its Report and Order in MM Docket No. 92-259, supra, and has frequently noted the importance of signal contour coverage as an indicator that a community is served by a particular station. We recognize that Time Warner has submitted some evidence that suggests that KZKI may not be programming specifically for the Santa Clarita Valley. Nevertheless, the Commission has expressed considerable reluctance to delete communities within an ADI that are within the broadcast service contours of the stations involved. In addition, KZKI is not as geographically distant as Time Warner argues. The Santa Clarita Valley is closer to San Bernardino, KZKI's city of license than are the communities that were at issue in The Chronicle, supra, most of which were retained within KZKI's ADI. We note as well that Time Warner states that it is carrying two other stations -- Riverside's KRCA and San Bernardino's KVEA -- that transmit from the same transmitter site atop Sunset Ridge as does KZKI. In addition, in contrast to the situation in The Chronicle, in which the Santa Monica mountains were a delineating geographic factor dividing the eastern and western portions of Ventura County for must carry purposes, an analysis of the terrain in this case does not persuade us that there is a basis for distinguishing the communities in the Santa Clarita Valley from the rest of the Los Angeles market. 20. Another factor to consider in deletion cases is the availability of other broadcasters in the market. Where a cable operator is seeking to delete a station's mandatory carriage rights in certain communities within its ADI, and it is clear that the station is not providing local service to those communities, the issue of local coverage by other stations becomes a factor to which we will give greater weight than in cases where a party is seeking to add communities. A cable operator's deletion request will not be automatically granted whenever it can show that it carries other local stations. Rather, carriage of other local stations may be used as an enhancement factor to support a cable operator's deletion request when there is other evidence in the record that the communities at issue are outside of the station's market. We find that the presence of other stations does not weigh in favor of granting the deletion request because it is clear that KZKI covers the Santa Clarita Valley cable communities with a Grade A contour. Moreover, we note that Time Warner acknowledges that it is carrying KVEA, which is another San Bernardino licensee and which, like KZKI, transmits from Sunset Ridge. In addition, Time Warner states that it carries KRCA from Riverside, which also broadcasts from KZKI's transmitter site at Sunset Ridge. Time Warner has not sufficiently demonstrated why it is necessary to remove itself from its own ADI, vis-a-vis KZKI, yet remain in the same market with regard to the station's competitors. The carriage of these similarly situated small independent UHF stations, but not KZKI, is contrary to Congress' stated policy that cable operators should not be permitted to use the market modification process to single out individual stations serving the same area and request that the cable system's community be deleted from the station's television market. This is particularly notable in this instance where Time Warner is carrying numerous other television stations from the Los Angeles market, including other stations broadcasting from the same, or almost the same, transmitter site. 21. With regard to the fourth statutory factor, we also find Time Warner's arguments regarding KZKI's lack of ratings to be unpersuasive. We recognize that stations such as home shopping stations, or religious or foreign language stations ("specialty stations"), are capable of "offer[ing] desirable diversity of programming . . . ," yet typically attract limited audiences. We continue to believe, as the Commission did in its specialty station rules, that the fact that such stations attract a smaller audience share must be taken into account in determining the equities concerning a station's right to cable carriage. In addition, as we have noted above, KZKI ceased operations for two years prior to 1994, and as a result, was not providing service to, or being carried by operators in, communities clearly within its Grade A and Grade B contours, which also likely affected its ability to attract audience shares. Further, no evidence is before us in this proceeding that would permit us to distinguish these communities from the rest of the communities in the ADI through the use of ratings data. 22. We also note that the Commission has long considered Los Angeles and San Bernardino (together with other area communities) to form a hyphenated market. While the hyphenation of a television market is not identical in purpose with an ADI market modification proceeding undertaken pursuant to 614(h) of the Act, the two determinations nevertheless involve a considerable overlap of objectives and decisional criteria. The Commission's decision to join markets takes into consideration the economic ties between the communities to be hyphenated and the subject station. Each explores the competitive relationships between television stations in an area and seeks to define the shape of the local market in which stations compete for programming, advertisers, and viewers. The market hyphenation process and the ADI market modification provision are similar in that each may be used to lower the barriers to cable carriage. The hyphenation process, the Commission has stated, was adopted "to assure that stations will have access to cable subscribers in the market and that cable subscribers will have access to all stations in the market." The hyphenation of Los Angeles and San Bernardino reflects the Commission's judgment that stations in the two communities are competitive, at least in the core communities of the combined market area. The hyphenation decision is thus suggestive evidence of the Commission's belief, notwithstanding the distances between Los Angeles and San Bernardino, that stations from both communities are local to significant overlapping portions of the same market area. "[W]hile the grant of a market hyphenation weighs heavily in favor of denying a request to exclude communities under the market modification process, the hyphenation in and of itself is not controlling in every circumstance of the type exemplified in this case." Nevertheless, "[r]edesignation of the market reflects in the rules the general competitive situation that in fact exists in the local area, allowing the application of the more specific rules, including those relating to 'area of dominant influence' changes, to be addressed from the perspective of a properly defined market area." 23. In view of the foregoing, we find that grant of Time Warner's market modification petition is not in the public interest. ORDERING CLAUSES 24. Accordingly, IT IS ORDERED, pursuant to 614(h) of the Communications Act of 1934, as amended, 47 U.S.C. 534, and 76.59 of the Commission's Rules, 47 C.F.R. 76.59, that the petition for special relief (CSR-5002-A) filed May 1, 1997 by Time Warner Entertainment-Advance/Newhouse Partnership IS DENIED. 25. This action is taken pursuant to authority delegated by 0.321 of the Commission's Rules. 47 C.F.R. 0.321. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau