Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 FCC96-111

In re Application of ) ) SAN DIEGO TELEVISION, INC., ) DEBTOR-IN-POSSESSION ) (Assignor) ) ) and ) File No. BALCT-950908KE ) KTTY, INC. ) (Assignee) ) > For Assignment of the License of ) Station KTTY(TV), San Diego, ) California )

MEMORANDUM OPINION AND ORDER

Adopted: March 14, 1996 Released: March IS, 1996

By the Commission: Commissioner Barrett issuing a statement

1. The Commission has before it for consideration the unopposed application by San Diego Television, Inc., Debtor-in-Possession (SDT), to assign the license for KTTY(TV), Channel 69 (Ind.), San Diego, California, to KTTY, Inc. KTTY, Inc. is wholly-owned by Tribune Broadcasting Company (Tribune) which owns all of the capital stock of KTLA, Inc., licensee of KTLA(TV), Channel 5 (Ind.), Los Angeles, California. Because the Grade B contour of KTTY(TV) overlaps with the Grade B contour of KTLA(TV), the applicant seeks a permanent waiver of Section 73.3555(b) of the Commission©s rules, the duopoly rule, to allow common ownership of the two stations. BACKGROUND 2. The instant assignment application has been filed pursuant to an order issued by the United States Bankruptcy Court for the Central District of California on August 29, 1995. Order. No. 94-14176-CA (Bankr. C.D. Cal.). The order approved Tribune as the successful bidder following an auction held pursuant to a Second Amended Creditor©s Plan of Reorganization that had been adopted earlier by the same court.

3. KTTY(TV) commenced operation in 1984. In 1991, SDT became unable to meet its bank loan obligation due, it states, to a downturn in San Diego©s economy that began when

14689 its large U.S. Navy contingent was shipped out to serve in Operation Desert Storm. As a new, comparatively less powerful, independent television station in the market, KTTY(TV) was particularly affected by the decreased revenues resulting from this economic downturn.

4. In 1992, the bank commenced an action in U.S. District Court against two of SDT©s major shareholder-guarantors to obtain judgment on the guaranty and to obtain the appointment of a receiver to take control of the shares of stock. In 1994, SDT filed a voluntary Chapter 11 petition with the U.S. Bankruptcy Court in Los Angeles and applied for injunctive relief to prevent the bank©s guaranty action from going to trial. However, the Bankruptcy Court refused to grant the requested relief to SDT; judgment was entered in favor of the bank; and a receiver was appointed to take control of the shares in SDT owned by the two shareholders. Thereafter, bom SDT and the bank filed competing plans for reorganization in SDT©s Chapter 11 proceeding. SDT©s plan was withdrawn in January of 1995. The bank©s plan, which provided for an auction sale of SDT©s assets, was confirmed by the Bankruptcy Court. The auction was held on August 29, 1995, and, as discussed above, Tribune was the successful bidder.

DUOPOLY WAIVER REQUEST

5. KTTY, Inc. argues that, pursuant to past Commission precedent, a waiver of the multiple ownership rules is appropriate in this instance because the public interest benefits gained from waiving the rule outweigh any detrimental effects resulting from the overlap. To support its request, KTTY, Inc. notes several factors it believes weigh in favor of waiving the rule, including diversity in-the overlap area* the size of the overlap, the resuscitation of a bankrupt station, the separateness of the markets, and other public interest factors.

6. First, KTTY, Inc. asserts that although the Grade B contour overlap area is not de minimis. "it is not so large as to require a finding that the...stations serve substantially the same area." Paramount Stations Group of Philadelphia, Inc., 10 FCC Red 10963, 10966 (1995). The size of the Grade B contour overlap between KTLA(TV) and KTTY(TV) covers 2723 square kilometers, representing 7.5 percent and 19.2 percent of the land area within the KTLA(TV) and KTTY(TV) Grade B contours, respectively, and 450,409 people, representing 3.1 percent and 13.4 percent of the populations within the Grade B contours of KTLA(TV) and KTTY(TV), respectively. KTTY, Inc. contends that the Commission has approved permanent waivers of the television duopoly rule in circumstances where the size of the Grade B contour overlap was comparable to or greater than the size of the overlap area here. Id.

1. Second, KTTY, Inc. notes the great variety of media voices available in both the San Diego and Los Angeles markets. The Los Angeles market, the second largest television market in the United States, is served by 21 television stations while the San Diego market is served by seven television stations. KTTY, Inc. asserts that 21 television stations serve some portion of the overlap area with a Grade.B or better signal, while 16 English-language, daily newspapers have general circulation throughout the overlap area. KTTY, Inc. states that cable penetration in the Los Angeles and San Diego markets is 61 percent and 82 percent,

14690 respectively.

8. Furthermore, ©KTTY, Inc. claims that the two stations serve separate and distinct markets. Los Angeles and San Diego are Jocated in separate Designated Market Areas, and the two cities have different demographic profiles., While the population of Los Angeles is similar to .that of a typical American city, San Diego relies on the presence of the United States Navy facilities to support its economy and enjoys the retail spending of the roughly two. million consumers who cross over from Mexico annually. In addition, KTTY, Inc. asserts that KTTY(TV) and KTLA(TV) will be run autonomously. Each station will have its own general manager, who -will make programming decisions based on the needs of the local community.

9. KTTY, Inc. also contends that two other public interest factors weigh in favor of waiving the duopoly .rule. First, KTTY(TV) has been in Chapter 11 proceedings for nearly two years and has been unable to meet its payment obligations since 1991. KTTY, Inc. asserts that these financial circumstances have been a drain on the operations of KTTY(TV). KTTY, Inc. notes that the Commission has previously recognized that the resuscitation of a financially distressed station is a public interest factor supporting a duopoly waiver that may outweigh potential detriment to diversity or competition. Second, KTTY, Inc. states that it already has plans to upgrade the programming of KTTY(TV), including the broadcast of a local newscast on KTTY(TV) in San Diego.

DISCUSSION

10. The ultimate objective of the duopoly rule is to promote diversity of programming sources and viewpoints, as well as to prevent any undue concentration of economic power contrary,to the public interest. Multiple Ownership Rules, 22 FCC 2d 306, 311 (1970), recon. granted in part, 28 FCC 2d 662 (1971). In adopting the duopoly rule©s fixed standard of a prohibited overlap of Grade B service contours, the Commission sought to provide a greater degree of certainty than under its prior rule, which prohibited the common ownership of television stations serving "substantially the same service area." Multiple Ownership of Standard, FM and Television Broadcast Stations, 45 FCC 1476, n. 1, recon. granted in part, 3 RR 2d 1554 (1964). The Commission maintains a policy of "flexibility," however, noting that the rule could be waived in cases where its application would be "inappropriate." Id. at 1479, n. 12.

11. In adopting the duopoly rule©s fixed standard of prohibiting overlap of Grade B service contours, the Commission also acknowledged the need for "flexibility" in that rule©s application, noting that waivers should be granted where rigid conformance to the rule would be "inappropriate." Multiple Ownership of Standard, FM and Television Broadcast Stations (Multiple Ownership), 45 FCC 2d 1476 n.l, recon. granted in part, 3 RR 2d 1554 (1964). To that end, the Commission has developed a set of factors to be considered when evaluating an applicant©s request for waiver of the duopoly rule, including the extent of the overlap, the number of media voices available in the overlap area, the distinctness of the respective

14691 markets, the independence of the stations© operations, and the concentration of economic power resulting from the combination. See Iowa State University Broadcasting Corporation, 9 FGC Red 481, 487-88 (1993), off©d sub nom. lowansfor WOI-TV, Inc. v. FCC, 50 F.3d 1096 (D.C. Cir. 1995); H&C Communications, Inc., 9 FCC Red 144, 146 (1993). After weighing the factors, the Commission considers any public interest benefits proposed by the applicant to determine whether, hi light of the overlap, the benefits outweigh any detriment which may occur from grant of the waiver. See, e.g., Iowa State University, 9 FCC Red at 487-88. As with any waiver, it will only be granted if the Commission concludes that the waiver is hi the public interest. It is against this standard that we will evaluate KTTY©s waiver request. In past decisions, public interest benefits have included the enhancement of a bankrupt station©s financial viability, see Weigel Broadcasting Company, 4 FCC Red 6200 (1989), the activation of a dark station, see Thomas J. Flatley,! FCC Red 4242 (1992), and greater public interest programming made possible by economies of scale, see First Report and Order in MM Docket No. £7-7 (Broadcast Multiple Ownership Rules), 4 FCC Red 1723, n. 46 (1989). We find, for the reasons discussed below, that a permanent waiver of the duopoly rule is warranted.

12. Although not de minimis. the degree of Grade B overlap in this situation is not so large as to require a finding that the stations serve substantially the same area. While the degree of overlap for KTTY(TV) is somewhat larger than in the typical duopoly waiver case, it is well within the range of Grade B overlap figures that have been approved hi previous Commission cases involving the New York and Philadelphia television markets. Capital Cities/ABC, Inc., FCC 96-48 at.^35 (released February 8, 1996) (overlap area represents 14.6 percent of the population located within the Grade B contour of the New York station and 27.5 percent of that within the Grade B contour of the Philadelphia station); Stockholders of CBS, Inc., FCC 95-469 at f 59 (released November 22, 1995) (overlap area represents 14.8 percent of the population of the Grade B contour of WCBS-TV in New York and 28.5 percent of the population of that within the Grade B contour of KYW-TV hi Philadelphia); and Station PNew Jersey and Delaware. They are, nonetheless, helpful precedent because here, as hi New York-Philadelphia, we are presented with relatively proximate major urban markets which,are clearly separate and distinct in nature. And, despite the absence of the New Jersey or Delaware service issue, there is here a persuasive public interest consideration based on resolving the longstanding bankruptcy of KTTY(TV)- We believe that effectuation of the bankruptcy court©s plan by revitalizing the station hi the hands of a new licensee would serve, hi the circumstances of this case, the diversity and economic competition policies the duopoly rule is designed to promote. Indeed, where bankruptcy and financial distress threaten the service or even the viability of a station, rigid insistence on enforcing our multiple ownership rules could, in the long run, undermine the very objectives those rules were meant to serve by precluding the revitalization of the station at risk.

14692 13. We have previously given weight to the findings of a bankruptcy court in dealing with aspects of our multiple ownership rule. See Telemundo, Inc. v. F.C.C., 802 F.2d 513 (D.C. Cir. 1986). We are cognizant of our obligations under the public interest mandate to consider the national policy underlying other federal laws, such as the bankruptcy laws pertinent here. See LaRose v. FCC, 494 F.2d 1145, 1146 n.2 (D.C. Or. 1974). As the Commission has noted, the objectives underlying the bankruptcy law are three-fold: equality of distribution among creditors, a fresh start for debtors, and the efficient and economical administration of cases. Fox Television Stations, Inc., 8 FCC Red 5341, 5343-44, recon. denied, 8 FCC Red 8744 (1993); see also Channel 33, Inc., 4 FCC Red 7674, 7680 (1988) (waiver of duopoly rule "premised largely on accommodating policies underlying the bankruptcy laws and the protection of innocent creditors . . .") In this case, KTTY(TV) has been in Chapter 11 for two years and has been unable to meet its payment obligations on a multi-million dollar line of credit since 1991. These financial circumstances have clearly been a hinderance to KTTY(TV)©s operations. We believe that we can accommodate the subject bankruptcy policies here without undue countervailing harm to the diversity and competition policies supporting our own multiple ownership rules.

14. With regard to the diversity of voices present in the overlap area, there are abundant media available to viewers to make it unlikely that permitting the overlap will result in the exercise of an inordinate or dominant influence by KTTY, Inc. on public opinion. In addition to KTTY(TV) and KTLA(TV), there are currently 21 television stations that provide predicted Grade B service to at least some portion of the overlap area. Further, cable system penetration is 61 percent and 82 percent hi the Los Angeles and San Diego markets, respectively. This variety of voices mitigates against any appreciable adverse impact on diversity.

15. In addition, we find that KTLA(TV) and KTTY(TV) serve separate and distinct markets. See, e.g., Capital Cities, 59 R.R. 2d at 465. Station KTTY(TV) hi the San Diego DMA and KTLA(TV) in the Los Angeles DMA are located over 100 miles from each other. San Diego and Los Angeles are demographically different cities with distinct service needs. As KTTY, Inc. also notes, neither KTTY(TV) nor KTLA(TV) is the dominant station hi its market. Furthermore, KTTY, Inc. states that each station will have its own general manager and will be run autonomously, with each station seeking separate local programming decisions. In addition, KTTY, Inc. has made a commitment to ah- new local programming to be broadcast on KTTY(TV), including a local news broadcast. Under the circumstances noted above, we find that grant of a waiver of the duopoly rule will mure to the public interest.

16. Having determined that the applicants are qualified in all respects, we find that grant of the application to assign the license held by SDT to KTTY, Inc. will serve the public interest, convenience and necessity.

17. Accordingly, IT IS ORDERED, That the request for permanent waiver of the duopoly rule, Section 73.3555(b) of the Commission©s Rules, to permit common ownership of stations KTTY(TV) and KTLA(TV) IS GRANTED; and the application to assign the license

14693 of KTTY(TV) from San Diego Television, Inc.rDebtor-in-Possession, to KTTY, Inc. IS GRANTED,

18. IT IS FURTHER ORDERED, That the staff of the Mass Media Bureau shall send copies of this decision to the parties herein by certified mail, return receipt requested.

FEDERAL COMMUNICATIONS COMMISSION

William F. Caton Acting Secretary

14694 CONCURRING STATEMENT

OF

COMMISSIONER ANDREW C. BARRETT

RE: Application for Assignment of License of KTTY(TV) from San Diego Television, Inc., Debtor-in-Possession, to KTTY, Inc. By this action, the Commission grants the applications for assignment of license of KTTY(TV) from San Diego Television, Inc. to KTTY, Inc. While approving the assignment, the Commission has granted a permanent waiver of the television duopoly rule to allow for common ownership of KTTY(TV) and KTLA{TV) by Tribune Broadcasting Company. 1 I write separately to express the reason why I concur in this transaction. I have previously expressed my concern about modifying the Commission©s rules by way of a waiver. 2 Although I reiterate my concern in this regard, I support this transaction because the Commission©s grant of a waiver in this instance would resuscitate a bankrupt station. KTTY(TV) has been in Chapter 11 for two years and has been unable to meet its payment obligations since 1991. As a result, I believe that rigid enforcement of the duopoly rule in this instance may undermine some of the rule©s objectives. The Commission has previously given weight to the findings of a bankruptcy court in dealing with aspects of our multiple ownership rule. 3 I remain concerned about the Commission©s continued willingness to modify its rules through the waiver process. Therefore, I concur in this action.

, Inc. is wholly-owned by Tribune Broadcasting Company which owns all of the capital stock of KTLA, Inc., licensee of KTLA(TV). 2 See Peeasus Broadcasting. 7 FCC Red 8625 (1992) (Dissenting Statement of Commissioner Andrew C. Barrett). See also In re: ACT III Broadcasting of Buffalo. 8 FCC Red 885 (1993) (Dissenting Statement of Commissioner Andrew C. Barrett); Sunshine Television. Inc.. 8 FCC Red 4428 (1993) (Statement of Commissioner Andrew C. Barrett - Concurring in Part); H&C Communications. Inc.. 9 FCC Red 144 (1993) (Concurring Statement of Andrew C. Barrett); WOI-TV. 9 FCC Red 481 (1993) (Concurring Statement of Commissioner Andrew C. Barrett); In re Application of Salt of the Earth Broadcasting. Ltd.. 9 FCC Red 3621(1994) (Concurring Statement of Commissioner. Andrew C. Barrett).

3 See Telemundo. Inc. v. FCC. 802 F.2d 513 (D.C. Cir. 1986); Channel 33. Inc.. 4 FCC Red 7674, 7680 (1988).

14695