Report No. DC-95-104ACTION IN DOCKET CASE July 28, 1995 FCC REPEALS PTAR RULE (MM Docket 94-123) The Commission today eliminated a 25-year old regulation that affects television programming during the prime time viewing hours. The regulation -- known as the Prime Time Access Rule ("PTAR") -- generally prohibits television stations affiliated with the ABC, CBS or NBC networks in the top 50 prime time markets from broadcasting more than three hours of network programming or off- network programming (i.e., reruns of programs formerly shown on the networks) during the four hours of prime time. The Commission adopted this rule in 1970 when the three networks were viewed as dominating the television marketplace. By establishing the so-called "access hour" during prime time, the Commission sought to promote independent sources of television programming and prevented the networks from dictating affiliate programming choices during the whole of prime time. PTAR also has been seen as furthering the growth of independent stations by providing them greater access to popular off-network programming. Based on an extensive record, including economic analyses submitted by various parties, the Commission concluded that PTAR is not necessary under today's market conditions. The networks can no longer be said to dominate the television marketplace, and the rule imposes costs by placing artificial restraints on what programming network affiliates in the top 50 prime time markets can show during the access period. For example by prohibiting network programming during this period, it prevents the possible use of network efficiencies to produce high-budget programs for the access period. These productions are typically popular among viewers in that they use talented actors, writers, and directors, as well as sophisticated special effects. - more - - 2 - The costs imposed by the rule are not outweighed by any public interest benefits resulting from PTAR. In particular, þ PTAR is no longer necessary to promote independent sources of television programming. The three networks can no longer be viewed as a "funnel" through which all independent programming must pass. The dramatic increase in the number of independent stations and the growth in cable and other new media such as Direct Broadcast Satellite (DBS) and Multi- Channel Multi-Point Distribution Service (MMDS) have greatly increased the market opportunities. þ PTAR is not necessary to promote the growth of independent stations or new networks. The number of independent stations has grown by nearly 450 percent since the rule was adopted. There is insufficient evidence in the record that the repeal of PTAR will reverse the trends that lead to the growth of these stations, or that the station base of the new emerging networks will be threatened by repeal. þ PTAR is not necessary to safeguard affiliate autonomy. Network affiliates have greater bargaining power relative to the networks than was the case in 1970. To the extent there continue to be concerns in this area, they are best addressed in the context of the ongoing proceedings pertaining to the Commission's network-affiliate rules. In its decision, the Commission made repeal of PTAR effective August 30, 1996, retaining the rule in its present form until that date. This will provide a one- year transition period to moderate any potential disruption to the marketplace caused by the repeal of this 25-year rule. During this time period, stations affected by the rule may be able to adjust their business plans and programming arrangements prior to the effective date of repeal. This short transition period should not impose an undue burden on the networks or their affiliates. Network affiliates in the top-50 prime time markets will be free to contract during the transition period for the rights to air network or off-network programming after the effective date of PTAR repeal. Action by the Commission July 28, 1995 by Report and Order (FCC 95-314). Chairman Hundt and Commissioners Quello, Barrett, Ness and Chong. - FCC - News Media contact: Audrey Spivack and Kara Palamaras at (202) 418-0500. Mass Media Bureau contact: Charles W. Logan and Alan E. Aronowitz at (202) 776- 1653; Alan Baughcum at (202) 739-0770. July 28, 1995 Separate Statement of Commissioner Rachelle B. Chong Re: Review of the Prime Time Access Rule, Section 73.638(k) of the Commission's Rules, MM Docket No. 94-123 The prime time access rule is a rule whose time has come and gone. When I evaluate an FCC rule, I first focus on the original purpose of the rule to see if the rule still serves the regulatory goal envisioned for it. In looking back to 1970 when the FCC first promulgated the prime time access rule ("PTAR"), the Commission was concerned with the dominance of the three television networks as to production and programming. The Commission believed that the networks' dominance was inhibiting the development of competing program sources. The Commission thought that the PTAR rule (and the financial interest and syndication rule implemented at the same time) would be a "modest action" providing a "healthy impetus to the development of independent program sources, with concomitant benefits in an increased supply of programs for independent (and, indeed, affiliated) stations." Diversity of programming and benefits to the development of UHF television stations were also expressed goals. Thus, the prime time access rule was put in place as a structural mechanism that indirectly promoted program diversity by trying to increase the variety of program sources. The rule did appear to forward its expressed goals during its tenure, by helping foster programming by independent producers. But the rule has also received a healthy share of criticism, including charges that the rule has lowered the quality and diversity of access-period programming. During the last 25 years, however, significant developments have taken place that have greatly altered the video marketplace. We have seen the number of independent commercial TV stations increase by almost 450% between 1970 and 1994, not to mention three new networks entering the fray. Cable, for example, has became much more than just a method of retransmission to geographic areas who cannot receive over-the-area broadcast signals; it is now a rich new source of innovative programming. In addition, many other new program outlets are on the horizon, such as Direct Broadcast Satellite, wireless cable, and video dialtone systems. In this proceeding, I have evaluated the prime time access rule in today's multichannel video world. In considering the arguments of the many parties who stand to economically benefit in this proceeding, I have made my primary concern the public interest. I have perused the evidence keeping in mind the original purpose of the rule. I have been convinced by the evidence in the record that PTAR is placing artificial restrictions on the marketplace. While the parties disagree about whether the three networks still dominate television programming, our analysis leads me to conclude that the networks no longer control video programming distribution or the video programming production market. Thus, I have come to believe that a total repeal of PTAR is warranted. I believe that government ought to get rid of a rule that restrains what the top 50 market TV network affiliates can show during the access hour, based solely on who produced the program. It is time for the marketplace -- in this case, the television viewers -- to determine what programs should be seen in the access time period. I do recognize the concerns of the independent stations and one of the new networks, who both express serious concerns about the effect of the repeal of PTAR on their profitability and viability. While I am sympathetic to their concerns, I agree with my colleagues that PTAR is not necessary to provide independent stations a competitive advantage relative to the network-affiliated television stations in the top 50 television markets. I do not believe that PTAR is the appropriate vehicle to balance any inherent inequities between the UHF and VHF stations, but would welcome discussion of more narrowly-tailored methods that would level the playing field. I cannot accept the argument that the repeal of PTAR will significantly slow the development of newly-launched television networks. I believe that the parties asserting this position have not demonstrated the nexus between the continuation of PTAR and the development of new networks. While I would have preferred to discontinue the prime time access rule immediately, I have agreed to a very short transition period. This transition period does offer some benefits, namely, minimizing the disruption of the wholesale elimination of the rule. I would like to make it clear, however, that the adoption of the transition period in no way suggests any uncertainty on my part about our conclusion to repeal PTAR.