Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C
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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.