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File how2ftp (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** $//MO&O, Prime Time Access Rule, FCC 95-384//$ $/73.658(k), Prime Time Access Rule/$ $/0.283(b)(4), Waiver of Commission Rules/$ ///newjob/// FCC 95-384 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) ) Requests of ACT III ) File Nos. 950425A Broadcasting License, Corp., ) 950623A Licensee of Station WRNW-TV, ) Winston-Salem, N.C. and ) Scripps Howard Broadcasting ) Company, Licensee of Stations ) KSHB-TV, Kansas City, MO, ) WFTS-TV, Tampa, FL, and ) KNXV-TV, Phoenix, AZ ) ) For Temporary Waivers of ) 47 CFR Section 73.658(k) ) MEMORANDUM OPINION AND ORDER Adopted: September 1, 1995; Released: September 1, 1995 By the Commission: 1. The Commission has before it: (1) a petition for a temporary waiver of the prime time access rule (PTAR), 47 C.F.R. 73.658(k), filed on April 25, 1995, by ACT III Broadcasting License Corp. ("ACT III"), licensee of Station WNRW-TV, Winston-Salem, North Carolina ("Petitioner"); (2) a request for a waiver of PTAR filed on June 23, 1995, by Scripps Howard Broadcasting Company ("Scripps"), licensee of Stations KSHB-TV, Kansas City, Missouri, WFTS-TV, Tampa, Florida, and KNXV-TV, Phoenix, Arizona ("Petitioner"); (3) objections to the waiver requests filed by competitors in the affected markets ("Respondents"); and (4) answers to the objections. 2. PTAR generally prohibits television stations in the top 50 markets that are affiliated with ABC, CBS, and NBC, from broadcasting more than three hours of network programs (the "network restriction") or former network programs (the "off-network restriction") during the four prime time viewing hours (i.e., 7 to 11 p.m. Eastern and Pacific Times and 6 to 10 p.m. Central and Mountain times). Petitioners are former affiliates of the Fox television network that were not subject to PTAR at the time they contracted for the programming that is now the subject of their waiver requests. All Petitioners have involuntarily lost their Fox affiliations and either have or will become affiliates of ABC or NBC by September 1995. At that point, Petitioners' stations will become subject to PTAR. 3. Specifically, Petitioners state that as a result of an agreement between Fox and New World Communications, Fox decided to terminate its affiliation with Petitioners and to affiliate with other stations in Petitioners' markets. According to ACT III, the chronology of events relating to WNRW-TV's loss of its Fox affiliation began on or about May 24, 1994, when New World announced a transaction with Fox under which New World would change the affiliation of all of its stations, including WGHP-TV in Greensboro-High Point, North Carolina, to Fox. ACT III received a letter from Fox dated June 13, 1994, stating that WNRW-TV might lose its Fox affiliation on a date not sooner than sixty days from the date of the letter. On or about February 17, 1995, New World notified ABC that it would terminate WGHP-TV's affiliation with ABC, effective August 17, 1995. After negotiations with ABC, WNRW-TV then reached an agreement in April 1995 providing that if WGHP-TV switched its affiliation from ABC to Fox, then WNRW-TV would become the ABC affiliate in the market. In May 1995, WNRW-TV and ABC agreed that WNRW-TV would in fact become an ABC affiliate, effective September 3, 1995. 4. Similarly, the three Scripps affiliates in question lost their Fox affiliation soon after Fox announced its affiliation agreement with New World in May 1994. Within a few weeks of the termination of these agreements, WFTS-TV and KNXV-TV affiliated with ABC, and KSHB-TV affiliated with NBC. 5. To effectuate programming strategies devised while still Fox affiliates and before they knew of Fox's intent to disaffiliate them, Petitioners either purchased or agreed to purchase substantial amounts of syndicated off-network programming specifically for the prime time access period. Petitioners now seek permission to air this programming during prime time, despite the PTAR bar. Specifically, ACT III seeks a waiver to permit it to air during prime time the following programs:  Home Improvement, contracted for on May 5, 1994, with rights held through 2000;  Fresh Prince, contracted for on July 14, 1993, with rights held through 1998 (plus more if additional episodes are produced);  Coach, contracted for on January 24, 1993, with rights held through 1998;  Cheers, contracted for on September 24, 1987, with rights through 2002; and  Blossom, contracted for on April 29, 1994, with rights through 1998. ACT III also seeks a waiver to permit it to air, during prime time, other programs for which it might contract before the expiration of PTAR on August 30, 1996. Scripps seeks a waiver to permit it to air during prime time only the following program:  Home Improvement, contracted for in Fall of 1993, with rights through 1999. Both Petitioners point out that in their negotiations with syndicators for access period programming, they paid premium prices based on projections of the likely ratings and revenues for that particular time period. These acquisitions were made as much as two years in advance of the syndication premiere date and the contracts extend well beyond the September 3, 1995 date after WRNW-TV, the last of Petitioners' stations to lose its Fox affiliation, will become affiliated with ABC. Petitioners assert that if they become subject to the off-network provisions of PTAR and are required to broadcast this programming in less profitable time periods, the stations will suffer serious financial losses since they cannot realize an adequate return on their investments. They also maintain that any disruption in their revenue for the 6:00 to 8:00 p.m. period -- their most lucrative time slots -- could seriously undermine their competitive positions in their respective markets. 6. Petitioners also assert that the equities of their situations require grant of the waiver requests. They emphasize that they lost their Fox affiliations involuntarily due to network transactions that were beyond their control. They further emphasize that it would be unfair to subject them to PTAR restrictions that they were not subject to at the time they entered their programming contracts. Petitioners point out that Note 4 which follows the text of 47 C.F.R. Section 73.658(k) allows a so-called "burn-off" period for stations affiliated with an entity that becomes a "network" for purposes of PTAR coverage, and that under analogous circumstances they should be allowed a similar period to "burn off" the programming inventory in question. 7. Furthermore, Petitioners assert that comparable alternate programming is unavailable and that they therefore will be unable to remain competitive in the time period responsible for so much of their revenues. Petitioners note that programming contracts typically are negotiated well in advance of the actual broadcast of programming, thus removing much of the available inventory over the short-term from the market. Similarly, they emphasize that the strongest performing first-run syndicated programming is already under long-term contract with larger VHF stations in the market. ACT III claims that its acquisition problems would be exacerbated by the fact that it has never been required to buy first-run syndicated programming and has not had the opportunity to establish working relationships with such suppliers. ACT III fears that it could take at least several months to develop contacts and negotiate agreements for first-run programming, and even then, such programming might not be available for airing for an additional substantial period. Both Petitioners also argue that since PTAR has been repealed effective August 30, 1996, it would be unfair to force them to suddenly comply with PTAR and then just as suddenly no longer be subject to it. They argue that it was just this sort of regulatory inconsistency and disruption that the Commission sought to avoid by scheduling a sunset for PTAR rather than making the repeal effective immediately. 8. In their oppositions to the waiver requests, Respondents argue that even though the loss of the Fox affiliations may have been involuntary, Petitioners voluntarily chose to affiliate with one of the established networks that would bring them within the ambit of PTAR. These voluntary decisions to affiliate were, according to respondents, based solely on private business considerations and entail the duty to comply with PTAR just like the other network affiliates in their respective markets. In other words, they believe that Petitioners should not be allowed to reap the benefits associated with network affiliation and then be excused from the corresponding restrictions imposed on network affiliates. 9. Respondents also claim that there are no public interest factors involved in presenting the programming in question to the public. They contend that petitioners' motives are purely economic in that they paid premium prices for this programming and they want to maximize valuable advertising revenue by showing the programming in preferred time slots. They further argue that the public interest will not suffer if viewers cannot watch this particular programming on petitioners' stations during prime time. In essence, the respondents argue that the economic self-interest of the petitioners is not necessarily synonymous with the public interest. 10. In addition, Respondents argue that granting the waiver requests would confer an unfair competitive advantage on the petitioners at the expense of the other network affiliates in their markets who must still comply with PTAR until August 1996. According to Respondents, the waiver requests are thinly veiled attempts by Petitioners to get a one-year head start on the post-PTAR era of programming. Similarly, Respondents argue that Petitioners could obtain other prime time programming from the variety of suppliers and distributors cited by the Commission in the PTAR Notice of Proposed Rule Making and Report and Order. Respondents recognize that this programming might not be as lucrative as the programming in question, but they maintain that is a business risk Petitioners must assume by becoming affiliates of networks subject to PTAR. Furthermore, Respondents argue that since PTAR will no longer be in effect as of August 30, 1996, any economic losses suffered by Petitioners as a result of denying their waiver requests would be very short term. Discussion 11. Although an applicant for a waiver faces a heavy burden of persuasion, the Commission must give a "hard look" to meritorious waiver requests and may grant such requests where the waiver will not undermine the policy of the general rule and where public interest considerations require the waiver. City of Angels Broadcasting, Inc. v. FCC, 745 F.2d 656 (D.C. Cir. 1984); WAIT Radio v. FCC, 418 F.2d 1153 (D.C. Cir. 1969); aff'd, 459 F.2d 1203 (D.C. Cir (1972), cert. denied, 409 U.S. 1027 (1972). In this case, we believe that a temporary waiver of PTAR for each Petitioner is warranted to the extent indicated below. 12. As a threshold matter, we note the unusual stance of a request to waive this particular rule: the Commission has recently determined that the rule no longer serves the public interest and that it is repealed effective August 30, 1996. The reason we adopted a one-year transition to repeal of the rule was to minimize whatever disruptive effects might occur as the market adjusted to a more deregulated environment. Thus, the critical consideration in evaluating Petitioners' requests is not whether the policy objective of PTAR itself would be undermined by waiving the rule, but whether the policy objectives of the transition period would thereby be undermined. Based upon the limited circumstances of the case before us, we conclude that grant would be fully consistent with the goals of the one-year transition period by minimizing undue contracting and scheduling disruption that would occur were the rule to be applied to programming already acquired. In this regard, the disruption that would occur in the absence of a waiver, is analogous to that which we sought to avoid by establishing a transition period. 13. Moreover, there are a number of equities favoring grant of the waiver requests. First, Petitioners lost their affiliation due to affiliation changes beyond their control. While still Fox affiliates, and before knowing that they would lose their Fox affiliation, Petitioners contracted for programming in good faith, paying premium prices for such shows based on the reasonable belief they would be able to air programming at certain times. In addition, Petitioners will suffer significant scheduling difficulties and a likely reduction in economic return due to the last minute rush to replace programming and the required shifting of the more expensive program fare to a less lucrative time slot. Admittedly, Petitioners have attempted to ameliorate the negative impact of the Fox disaffiliations by seeking out affiliations with one of the major three networks. However, the voluntary nature of these subsequent affiliations derives directly from the involuntary nature of the initial losses of affiliation. 14. In contrast, the only reason we can see not to grant these waiver requests is that the major network competitors in the market will be operating under PTAR's constraints while Petitioners -- as major network affiliates -- will not. This competitive disadvantage, if any, however, is outweighed by the discernible impact that our failure to grant Petitioners' waivers will have. Petitioners will have to negotiate for new programming -- within a very short time frame -- in a market where the standard practice is to secure a station's prime time schedule much further in advance than the time available to Petitioners. This dynamic will increase costs and reduce Petitioners' opportunity for program selection. Moreover, Petitioners will earn significantly less revenue on the programs originally scheduled for the access period, if such programs are barred from prime time and aired during another time period. We note that in crafting Note 4 accompanying Section 73.658(k) of the Commission's Rules which created a 36-month "burn-off" exception for affiliates of new networks, we implicitly found that the detriment to these affiliates of applying PTAR immediately outweighed the detriment to the competitors in the market who would have to compete under the rule's restrictions against these unrestricted, new but full-fledged, network affiliates. 15. Denial of the waiver requests will also deprive the public of viewing Petitioners' programs at the times Petitioners have determined most viewers want to watch. While PTAR prevents Respondents from serving the public in similarly responsive fashion, we previously determined that the benefit of allowing such responsiveness across the industry was outweighed by the disruption that immediate repeal of PTAR might cause. Since a grant of the waiver requests in the limited fashion described above would not have the same disruptive effects, there is no reason to deny the public of these benefits now. 16. To ensure that the goals of the transition period are met and that the public interest is also served, we have decided to grant the waiver requests only insofar as they relate to the programs that Petitioners contracted for before they knew of their disaffiliation from Fox. We find that the equities favoring grant of the waivers for programming acquired by Petitioners before they knew of their disaffiliation from Fox, are simply not present with regard to any programming after Petitioners had such knowledge. Such a limited grant will neither itself undo the transition period's goal of minimizing the impact of repeal, nor precipitate a rush of waiver requests that could undermine the one-year transition period. 17. Accordingly, we grant the limited waivers of the Prime Time Access Rule to allow ACT III and Scripps to air during the access period on Stations WNRW-TV, KSHB- TV, WFTS-TV, and KNXV-TV, the specific programs set forth above in Paragraph 5. On August 30, 1996, PTAR expires and these waivers will become moot. We note that the waivers are narrow in scope and are limited to that programming acquired by Petitioners before May 24, 1994, when they became aware of Fox's intent to disaffiliate them. In this same vein we do not, however, believe that the unique circumstances of this case warrant granting ACT III's open-ended request for waiver of PTAR for any programming acquired after WNRW-TV became aware of its disaffiliation from Fox. Accordingly, we deny ACT III's request for a more expansive waiver. In view of the foregoing, the Petition for Temporary Waiver of the Prime Time Access Rule filed by ACT III IS GRANTED IN PART only for the specific programming described above AND DENIED in all other respects. The Request for Waiver filed by Scripps IS GRANTED. 18. For additional information regarding this proceeding, contact Robert Somers or Alan Aronowitz, Mass Media Bureau, Policy and Rules Division, Legal Branch, (202) 776- 1653. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary