Yale Journal on Regulation Vol.19:171.2002 partners. As a result, the economic literature cautions against compelling access whenever the bottleneck resource is available from another source even if it is only available at significant cost and in the relatively long run This is particularly true in technologically dynamic industries in which the prospects of developing new ways either to circumvent or to compete directly with the bottleneck are the highest Part Ill employs the lens of the open access debate to add another layer to the economic analysis. In addition to applying the analytical frameworks developed in the previous parts to the problem of open access to cable modem systems, this Part will respond to the New economy- based arguments raised by Professors Lemley, Lessig, and others that restrictions on vertical integration are necessary to preserve and promot technological innovation. In particular, it examines a complex web of arguments involving the extent to which innovation is affected by market concentration, standardization, and network externalities. a close review of the economic literature on these subjects reveals that these arguments are considerably more ambiguous than open access advocates would have us believe. While the sensitivity of these theories to the factual context might possibly provide support for prohibiting a particular instance of vertical integration on a case-by-case basis, it seems unlikely that these theories would support the type of simple policy inference needed to justify holding a specific practice illegal without any particularized inquiry the facts. Part IV offers an analysis of the intel obstacles for adopting a more comprehensive economic perspective It should be noted that the Article's focus on the policy question leads to two caveats. First, in focusing on the economic desirability of permitting vertical integration, I set aside, for the time being any extended analysis of the important question of whether regulation of vertical integration is either permitted or even compelled under the current regulatory regime. I thus take no position on whether open access permitted or mandated under current law.Second, this Article does not ddress questions of constitutionality. This is not because statutory authorization is unimportant or because regulation of vertical integration does not raise any First Amendment concerns. It is because both of those 25 For detailed assessments of the statutory status of ote 13: Howard A Shelanski, The Speed Gap: Broadband infrast and Electronic Commerce 14 BERKELEY TECH LJ. 721, 740-42(1999), and Speta, Handicapping, supra note 21, at 61-75 26 I thus disagree with Lemley and Lessig's suggestion that open access does not implicate the First Amendment. See Lemley Lessig, regulation of speech at issue here. ) For discussions of the First Amendment impli Stuart Minor Benjamin, Proactive Legislation and the First Amendment, 99 MICH. L REv. 81(2000) Harold Feld, Whose Line Is It Anyway? The First Amendment and Cable Open Access, 8 COMMLAW CONSPECTUS 23(2000); and Raymond Shih Ray Ku, Open Internet Access and Freedom of speech: A First Amendment Catch-22, 75 TUL. L REv. 87(2000 180
Yale Journal on Regulation Vol. 19:171, 2002 180 partners. As a result, the economic literature cautions against compelling access whenever the bottleneck resource is available from another source, even if it is only available at significant cost and in the relatively long run. This is particularly true in technologically dynamic industries in which the prospects of developing new ways either to circumvent or to compete directly with the bottleneck are the highest. Part III employs the lens of the open access debate to add another layer to the economic analysis. In addition to applying the analytical frameworks developed in the previous parts to the problem of open access to cable modem systems, this Part will respond to the New Economybased arguments raised by Professors Lemley, Lessig, and others that restrictions on vertical integration are necessary to preserve and promote technological innovation. In particular, it examines a complex web of arguments involving the extent to which innovation is affected by market concentration, standardization, and network externalities. A close review of the economic literature on these subjects reveals that these arguments are considerably more ambiguous than open access advocates would have us believe. While the sensitivity of these theories to the factual context might possibly provide support for prohibiting a particular instance of vertical integration on a case-by-case basis, it seems unlikely that these theories would support the type of simple policy inference needed to justify holding a specific practice illegal without any particularized inquiry into the facts. Part IV offers an analysis of the intellectual and institutional obstacles for adopting a more comprehensive economic perspective. It should be noted that the Article’s focus on the policy question leads to two caveats. First, in focusing on the economic desirability of permitting vertical integration, I set aside, for the time being, any extended analysis of the important question of whether regulation of vertical integration is either permitted or even compelled under the current regulatory regime. I thus take no position on whether open access is permitted or mandated under current law.25 Second, this Article does not address questions of constitutionality. This is not because statutory authorization is unimportant or because regulation of vertical integration does not raise any First Amendment concerns.26 It is because both of those 25 For detailed assessments of the statutory status of open access, see generally Chen, supra note 13; Howard A. Shelanski, The Speed Gap: Broadband Infrastructure and Electronic Commerce, 14 BERKELEY TECH. L.J. 721, 740-42 (1999); and Speta, Handicapping, supra note 21, at 61-75. 26 I thus disagree with Lemley and Lessig’s suggestion that open access does not implicate the First Amendment. See Lemley & Lessig, supra note 16, at 955 (“There is no governmental regulation of speech at issue here.”). For discussions of the First Amendment implications of open access, see Stuart Minor Benjamin, Proactive Legislation and the First Amendment, 99 MICH. L. REV. 281 (2000); Harold Feld, Whose Line Is It Anyway? The First Amendment and Cable Open Access, 8 COMMLAW CONSPECTUS 23 (2000); and Raymond Shih Ray Ku, Open Internet Access and Freedom of Speech: A First Amendment Catch-22, 75 TUL. L. REV. 87 (2000)
Vertical Integration and Media Regulation in the New Economy inquiries focus on what policy makers can do under the law. In so doing, they to elide over the more fundamental questions about what policy makers should do. In the absence of an affirmative policy justification for imposing vertical structural regulation, the First Amendment question I. The Chain Broadcasting rules and the basic Economics of vertical Integration This Part will use the FCC's first major initiative designed to regulate vertical relationship in media industries to lay out the basic economi analysis of vertical integration. Section a begins by outlining the structure of the broadcast television industry and then describes the relevant regulatory scheme, known as the Chain Broadcasting Rules. It then identifies the primary economic arguments upon which the Chain Broadcasting Rules are based, determining that the fCC was motivated by the same concerns that underlay the major judicial decisions on vertical integration: the problems of leveraging and foreclosure Section B then reviews the historical development of vertical integration theory, tracing both the Chicago School's critique of the courts' hostility towards vertical integration during the 1950s and 1960s, as well as the post-Chicago reaction to that critique. Although these two approaches differ on many of the particulars of competition policy, a close reading of the literature reveals the existence of some common ground Both approaches recognize the existence of certain structural preconditions that must be satisfied before vertical integration poses any threat to competition. In addition, both approaches acknowledge, for the most part, that vertical integration can yield certain efficiencies that may make vertical integration economically desirable The resulting analytical framework is applied to the broadcast television industry in Section C. This analysis reveals that the relevant markets are simply too unconcentrated and too unprotected by barriers to entry for vertical integration to represent a plausible threat to competition In addition, a review of the cost structure of producing television programming suggests that it is quite possible that vertical integration in the broadcast television industry will yield significant efficiency benefits Specifically, the existence of significant up-front, fixed-cost investments and minimal marginal costs of transmission make producers of television programming extremely dependent on their ability to reach guaranteed audiences and leave them vulnerable to post-investment opportunistic behavior. Under these circumstances, the limits on vertical integration imposed by the Chain Broadcasting Rules appear to make little sense 181
Vertical Integration and Media Regulation in the New Economy 181 inquiries focus on what policy makers can do under the law. In so doing, they tend to elide over the more fundamental questions about what policy makers should do. In the absence of an affirmative policy justification for imposing vertical structural regulation, the First Amendment question never arises. I. The Chain Broadcasting Rules and the Basic Economics of Vertical Integration This Part will use the FCC’s first major initiative designed to regulate vertical relationship in media industries to lay out the basic economic analysis of vertical integration. Section A begins by outlining the structure of the broadcast television industry and then describes the relevant regulatory scheme, known as the Chain Broadcasting Rules. It then identifies the primary economic arguments upon which the Chain Broadcasting Rules are based, determining that the FCC was motivated by the same concerns that underlay the major judicial decisions on vertical integration: the problems of leveraging and foreclosure. Section B then reviews the historical development of vertical integration theory, tracing both the Chicago School’s critique of the courts’ hostility towards vertical integration during the 1950s and 1960s, as well as the post-Chicago reaction to that critique. Although these two approaches differ on many of the particulars of competition policy, a close reading of the literature reveals the existence of some common ground. Both approaches recognize the existence of certain structural preconditions that must be satisfied before vertical integration poses any threat to competition. In addition, both approaches acknowledge, for the most part, that vertical integration can yield certain efficiencies that may make vertical integration economically desirable. The resulting analytical framework is applied to the broadcast television industry in Section C. This analysis reveals that the relevant markets are simply too unconcentrated and too unprotected by barriers to entry for vertical integration to represent a plausible threat to competition. In addition, a review of the cost structure of producing television programming suggests that it is quite possible that vertical integration in the broadcast television industry will yield significant efficiency benefits. Specifically, the existence of significant up-front, fixed-cost investments and minimal marginal costs of transmission make producers of television programming extremely dependent on their ability to reach guaranteed audiences and leave them vulnerable to post-investment opportunistic behavior. Under these circumstances, the limits on vertical integration imposed by the Chain Broadcasting Rules appear to make little sense
Yale Journal on Regulation Vol.19:171.2002 A. The Chain Broadcasting Rules: Context, Substance, and rationale The Structure of the Broadcasting Industry Although the structure of the broadcasting industry may at times seem mysterious, when viewed from a certain perspective, it is in fact quite ordinary basic organization differs little from that of the typical manufacturing industry, which is divided into a three-stage chain of production and distribution comprised of manufacturers, wholesalers, and retailers. The first and last stages are easiest to understand. The first stage is manufacturing, which is occupied by the companies that create the actual products to be sold. Retailers, who are responsible for final delivery of the products to end-users, occupy the last stage. Although it is theoretically possible for retailers to obtain products directly from manufacturers, in practice, the logistics of doing so have become complicated that it is often necessary for an intermediate stage to develop between manufacturers and retailers. Firms operating at this intermediate and assemble them into complete product lines for retailers to purchase ers stage, known as wholesalers, purchase goods directly from manufacturers The broadcasting industry can, for the most part, be mapped onto this three-stage framework. For most of the history of the television industry studios,which create the television programs in the first instance. 7e the manufacturing stage has been populated principally by the me wholesale stage is occupied by the networks, which purchase the broadcast rights to programs from the studios, aggregate them into program packages, and redistribute them via satellite to local broadcast stations The networks in turn sell- these program packages to the local broadcast 7 Although for urposes of program distribution, it is to regard networks and local broadcast stations tages in a vertical chain of complicated by the fact that, with regard to advertising, networks and local broadcast stations can be rs have the choice of either spending their adver money in the national market govemed by the networks or in the spot market governed by the local broadcast stations. Although this dimension of competition is also important, this Article will limit its focus to the more vertical aspects of broadcast regulation relating to program distribution. 28 In one sense, it may seem strange to say that networks"sell" program packages to the local broadcast stations. In the typical purchase transaction, one party offers a cash payment in es provided by another party. In such cases, the cash and the goods travel in opposite directions. In the typical transaction between a network and its broadcast affili network provides both the program packages and additional money to the station. In other word cash and the goods are traveling in the same direction, with the network seemingly receiving in return. The solution to this apparent anomaly is well explained by the Report of the FCCs Network Inquiry Special Staff: The relationships between the commercial broadcast television network affiliated stations can be cha zed in two equivalent ways. The an be described as buying access to the time of stations, paying the oth in cash 182
Yale Journal on Regulation Vol. 19:171, 2002 182 A. The Chain Broadcasting Rules: Context, Substance, and Rationale 1. The Structure of the Broadcasting Industry Although the structure of the broadcasting industry may at times seem mysterious, when viewed from a certain perspective, it is in fact quite ordinary. Its basic organization differs little from that of the typical manufacturing industry, which is divided into a three-stage chain of production and distribution comprised of manufacturers, wholesalers, and retailers. The first and last stages are easiest to understand. The first stage is manufacturing, which is occupied by the companies that create the actual products to be sold. Retailers, who are responsible for final delivery of the products to end-users, occupy the last stage. Although it is theoretically possible for retailers to obtain products directly from manufacturers, in practice, the logistics of doing so have become so complicated that it is often necessary for an intermediate stage to develop between manufacturers and retailers. Firms operating at this intermediate stage, known as wholesalers, purchase goods directly from manufacturers and assemble them into complete product lines for retailers to purchase. The broadcasting industry can, for the most part, be mapped onto this three-stage framework.27 For most of the history of the television industry, the manufacturing stage has been populated principally by the movie studios, which create the television programs in the first instance. The wholesale stage is occupied by the networks, which purchase the broadcast rights to programs from the studios, aggregate them into program packages, and redistribute them via satellite to local broadcast stations. The networks in turn sell28 these program packages to the local broadcast 27 Although, for the purposes of program distribution, it is proper to regard networks and local broadcast stations as successive stages in a vertical chain of production, that relationship is complicated by the fact that, with regard to advertising, networks and local broadcast stations can be viewed as horizontal competitors. Advertisers have the choice of either spending their advertising money in the national market governed by the networks or in the spot market governed by the local broadcast stations. Although this dimension of competition is also important, this Article will limit its focus to the more vertical aspects of broadcast regulation relating to program distribution. 28 In one sense, it may seem strange to say that networks “sell” program packages to the local broadcast stations. In the typical purchase transaction, one party offers a cash payment in exchange for goods or services provided by another party. In such cases, the cash and the goods travel in opposite directions. In the typical transaction between a network and its broadcast affiliate, the network provides both the program packages and additional money to the station. In other words, the cash and the goods are traveling in the same direction, with the network seemingly receiving nothing in return. The solution to this apparent anomaly is well explained by the Report of the FCC’s Network Inquiry Special Staff: The relationships between the commercial broadcast television networks and their affiliated stations can be characterized in two equivalent ways. The broadcast networks can be described as buying access to the time of stations, paying the stations both in cash and by making time available within and between programs for sale by stations directly
Vertical Integration and Media Regulation in the New Economy stations that comprise the retail stage of production responsible for delivering the program packages to the end users As with other consumer goods markets, however, regulators became concerned that integration between the different levels of the chain of production might pose a threat to competition. In order to address these concerns, the fcc enacted rules designed to limit the extent to which such vertical integration could occur as one of its first major regulatory Initiatives 2. The Chain broadcasting Concerned by the increasing dominance that the three major radio networks-NBC, CBS, and the Mutual Broadcasting System-were exerting over their broadcast affiliates, the FCC launched an investigation in 1938 to determine what, if any, restrictions should be placed upon them. This investigation culminated three years later with the issuance of the Report on Chain broadcasting and the enactment of the Chain ldcasting rules to which networks could vertically integrate into local broadcasting ttent The Chain Broadcasting Rules placed direct restrictions on the ex to advertisers. Altematively, one can think of nasing programs from the hin programs and to retain a portion of the thereby obtained. Under ither view, the relationship between networks and their outlets is principally vertical with regard to pro exhibitio I FCC NETWORK INQUIRY SPECIAL STAFF, NEW TELEVISION NETWORKS: ENTRY, JURISDICTION, OwNERSHIP, AND REGULATION 395(1980)[hereinafter NEW TELEVISION NETWORKS](footnote :9 It should be noted that not all broadcast programming passes through all three stages of n For example, broadcast networks on occasion bypass the manufacturing stage by creating tent, such as news and sports programs. Similarly, local broadcast stations at time bypass both upstream stages by creating local news broadcasts and other original programming. In ddition, some programs in effect bypass the network stage and move directly from the movie studios to the local broadcast stations through syndication. Notwithstanding these variations, the basic three- stage model is useful to capture the basic structure of the broadcast industry. Indeed, the variations discussed above are largely consistent with the focus of this Article, since the fact that two stages are often collapsed into one can be seen as a form of vertical integration. See 3 Fed. Reg. 637(Mar 26, 1938) 31 FEDERAL COMMUNICATIONS COMMISSION, REPORT ON CHAIN BROADCASTING(1941) 32 For useful overviews of the Chain Broadcasting Rules, see Emord 20,at 11: NEW TELEVISION NETWORKS, supra note 28, at 445-49: STANLEY M. BESEN ET AL. MISREGULATING TELEVISION 32-35(1984)[ hereinafter MISREGULATING TELEVISION ]; and Chen, 33 Specifically, the FCC prohibited networks from owning more than one station in any stations in markets with so few stations that competition would be substantially restrained. REPORT ON CHAIN BROADCASTING, supra note 31, at 92(Rule 3. 106), pealed by Review of the Comm'n's Regulations Governing Television Broad, 10 F C C.R. 4538, 540,. 10(1995)(Report and Order). The former provision has been largely overshadowed by the FCC's duopoly rule, which prohibits all owners, networks and non-networks alike, from owning more an one station in any market See 47 C F, R $73.355(1999) 183
Vertical Integration and Media Regulation in the New Economy 183 stations that comprise the retail stage of production responsible for delivering the program packages to the end users.29 As with other consumer goods markets, however, regulators became concerned that integration between the different levels of the chain of production might pose a threat to competition. In order to address these concerns, the FCC enacted rules designed to limit the extent to which such vertical integration could occur as one of its first major regulatory initiatives. 2. The Chain Broadcasting Rules Concerned by the increasing dominance that the three major radio networks—NBC, CBS, and the Mutual Broadcasting System—were exerting over their broadcast affiliates, the FCC launched an investigation in 1938 to determine what, if any, restrictions should be placed upon them.30 This investigation culminated three years later with the issuance of the Report on Chain Broadcasting31 and the enactment of the Chain Broadcasting Rules.32 The Chain Broadcasting Rules placed direct restrictions on the extent to which networks could vertically integrate into local broadcasting.33 The to advertisers. Alternatively, one can think of stations as purchasing programs from the networks, paying for these programs by permitting the networks to sell advertising time within programs and to retain a portion of the revenue that is thereby obtained. Under either view, the relationship between networks and their outlets is principally vertical with regard to program exhibition. 1 FCC NETWORK INQUIRY SPECIAL STAFF, NEW TELEVISION NETWORKS: ENTRY, JURISDICTION, OWNERSHIP, AND REGULATION 395 (1980) [hereinafter NEW TELEVISION NETWORKS] (footnote omitted). 29 It should be noted that not all broadcast programming passes through all three stages of production. For example, broadcast networks on occasion bypass the manufacturing stage by creating their own content, such as news and sports programs. Similarly, local broadcast stations at times bypass both upstream stages by creating local news broadcasts and other original programming. In addition, some programs in effect bypass the network stage and move directly from the movie studios to the local broadcast stations through syndication. Notwithstanding these variations, the basic threestage model is useful to capture the basic structure of the broadcast industry. Indeed, the variations discussed above are largely consistent with the focus of this Article, since the fact that two stages are often collapsed into one can be seen as a form of vertical integration. 30 See 3 Fed. Reg. 637 (Mar. 26, 1938). 31 FEDERAL COMMUNICATIONS COMMISSION, REPORT ON CHAIN BROADCASTING (1941). 32 For useful overviews of the Chain Broadcasting Rules, see Emord, supra note 20, at 405- 11; NEW TELEVISION NETWORKS, supra note 28, at 445-49; STANLEY M. BESEN ET AL., MISREGULATING TELEVISION 32-35 (1984) [hereinafter MISREGULATING TELEVISION]; and Chen, supra note 21, at 1451-54. 33 Specifically, the FCC prohibited networks from owning more than one station in any market and from owning stations in markets with so few stations that competition would be substantially restrained. REPORT ON CHAIN BROADCASTING, supra note 31, at 92 (Rule 3.106), repealed by Review of the Comm’n’s Regulations Governing Television Broad., 10 F.C.C.R. 4538, 4540, ¶ 10 (1995) (Report and Order). The former provision has been largely overshadowed by the FCC’s duopoly rule, which prohibits all owners, networks and non-networks alike, from owning more than one station in any market. See 47 C.F.R. § 73.355 (1999)
Yale Journal on Regulation Vol.19:171.2002 C later bolstered this limit to vertical integration by promulgating rules limiting the number of television stations that any one person could own. 4 Although the initial rule banned any person from owning more than three stations,this number increased steadily over the years. Current lay permits ownership of any number of stations so long as the total reach of the group does not exceed thirty-five percent of the national audience Although not targeted towards the networks specifically, the national ownership rules serve as the primary limit on network ownership of broadcast stations The Chain Broadcasting Rules also included a number of restrictions on the networks' ability to use vertical contractual restraints, banning use of contract provisions requiring exclusive dealing, territorial exclusivity, and long affiliation terms. In addition, the rules guaranteed local stations' right to reject any programs that they deemed unsatisfactory* and restricted the use of contract provisions granting networks guaranteed access to affiliates'time during certain portions of the broadcast day(a practice known as"option time").4 In the landmark case of NBC v. United States,the Supreme Court upheld the Chain Broadcasting Rules as a proper exercise of the FCCs statutory obligation to regulate broadcasting in accordance with the public 34 For reviews of the history of the group ownership rules, see Chen, supra note 21 1445-46; and Glen O. Robinson, The"New"Communications Act: A Second Opinion, 29 CoNN, L. Rules and Regulations Governing Experimental Television Broad Stations& 4.226, 6 Fed.Reg2282,2284-85(May6,1941) ee Multiple Ownership, 9 Fed. Reg. 5442 (May 23, 1944)(authorizing group ownership of up to five radio stations); Amendment of Sections 3.35, 3. 240 and 3.636 of the Rules and 288 ations Relating to the Multiple Ownership of AM, FM, and Television Broad Stations, 18F.CC Amendment of Multiple Ownership Rules, 43 F.C. C. 2797(1954)(Report and Order)(authorizing ng as two stations were UHF); Amendment of Sect 3555 [formerly Sections 73.35, 73.240 and 73.636] of the Comm'n's Rules Relating to Multi f and televisie ad Stations Amendment of Multiple Ownership Rules, 100 FCC2d 17(1984)(Memorandum Opinion and Order)(authorizing group ownership of up to twelve stations), on reconsideration, 100 F.C. C 2d 74(1985)(Memorandum Opinion and Order)(adding the 37 Telecommunications Act of 1996, Pub. L. No. 104-104, 8 202(c), 110 Stat. 56, 110 (codified as 47 C F.R. $733555(e)(1)(1999). Interestingly, the FCC had already signaled its illingness to consider raising the cap to as high as fifty percent by the time the Act was passed. See Robinson, supra note 34, at 292(citing Broad Servs., Television Stations, 60 Fed. Reg. 6490(1995)) 38See100FCC.2dat50-54,"97-107. minimum notice period for the exercise of option time ys and limiting the number of hours that could be reserved through option time). The option time altogether in 196 Option Time and the Stations Right to Reject Netwe 34FCC.1103,1130(1963 (Second Report and Order)(codified at 47 C F.R. 73.658(d)(1999)) 42319Us.190(1943) 184
Yale Journal on Regulation Vol. 19:171, 2002 184 FCC later bolstered this limit to vertical integration by promulgating rules limiting the number of television stations that any one person could own.34 Although the initial rule banned any person from owning more than three stations,35 this number increased steadily over the years.36 Current law permits ownership of any number of stations so long as the total reach of the group does not exceed thirty-five percent of the national audience.37 Although not targeted towards the networks specifically, the national ownership rules serve as the primary limit on network ownership of broadcast stations.38 The Chain Broadcasting Rules also included a number of restrictions on the networks’ ability to use vertical contractual restraints, banning the use of contract provisions requiring exclusive dealing, territorial exclusivity, and long affiliation terms.39 In addition, the rules guaranteed the local stations’ right to reject any programs that they deemed unsatisfactory40 and restricted the use of contract provisions granting networks guaranteed access to affiliates’ time during certain portions of the broadcast day (a practice known as “option time”).41 In the landmark case of NBC v. United States, 42 the Supreme Court upheld the Chain Broadcasting Rules as a proper exercise of the FCC’s statutory obligation to regulate broadcasting in accordance with the public 34 For reviews of the history of the group ownership rules, see Chen, supra note 21, at 1445-46; and Glen O. Robinson, The “New” Communications Act: A Second Opinion, 29 CONN. L. REV. 289, 292 (1996). 35 See Rules and Regulations Governing Experimental Television Broad. Stations § 4.226, 6 Fed. Reg. 2282, 2284-85 (May 6, 1941). 36 See Multiple Ownership, 9 Fed. Reg. 5442 (May 23, 1944) (authorizing group ownership of up to five radio stations); Amendment of Sections 3.35, 3.240 and 3.636 of the Rules and Regulations Relating to the Multiple Ownership of AM, FM, and Television Broad. Stations, 18 F.C.C. 288 (1953) (Report and Order) (limiting any one owner to five television stations nationwide); Amendment of Multiple Ownership Rules, 43 F.C.C. 2797 (1954) (Report and Order) (authorizing group ownership of up to seven stations so long as two stations were UHF); Amendment of Section 73.3555 [formerly Sections 73.35, 73.240 and 73.636] of the Comm’n’s Rules Relating to Multiple Ownership of AM, FM and Television Broad. Stations Amendment of Multiple Ownership Rules, 100 F.C.C.2d 17 (1984) (Memorandum Opinion and Order) (authorizing group ownership of up to twelve stations), on reconsideration, 100 F.C.C.2d 74 (1985) (Memorandum Opinion and Order) (adding the additional requirement that the group reach no more than twenty-five percent of the national audience). 37 Telecommunications Act of 1996, Pub. L. No. 104-104, § 202(c), 110 Stat. 56, 110 (codified as 47 C.F.R. § 73.3555(e)(1) (1999)). Interestingly, the FCC had already signaled its willingness to consider raising the cap to as high as fifty percent by the time the Act was passed. See Robinson, supra note 34, at 292 (citing Broad. Servs.; Television Stations, 60 Fed. Reg. 6490 (1995)). 38 See 100 F.C.C.2d at 50-54, ¶¶ 97-107. 39 47 C.F.R. § 73.658(a)-(c) (1999). 40 Id. § 73.658(e). 41 The FCC rejected the Chain Broadcasting Report’s call for an outright ban of option time, opting instead to place additional restrictions on it. 6 Fed. Reg. 5258 (1941) (extending the minimum notice period for the exercise of option time to fifty-six days and limiting the number of hours that could be reserved through option time). The FCC banned option time altogether in 1963. Option Time and the Station’s Right to Reject Network Programs, 34 F.C.C. 1103, 1130 (1963) (Second Report and Order) (codified at 47 C.F.R. § 73.658(d) (1999)). 42 319 U.S. 190 (1943)