Before the Iowa State University ) Broadcasting Corporation
Before the FBDKRAL COMMUNICATIONS COMMISSION FCC 93-548 Washington, D.C. 20554
In re Application of ) > Iowa State University ) Broadcasting Corporation ) BALCT-921006KF (Assignor) ) } and ) ) Capital Communications ) Company, Inc. ) (Assignee) ) ) For Assignment of License of ) Television Station WOI-TV, ) Ames, Iowa )
MEMORANDUM OPINION AND ORDHR
Adopted: December 15, 1993 Released: December 15, 1993
By the Commission: Chairman Hundt not participating; Commissioners Barrett and Duggan concurring and issuing separate statements.
1. The Commission has before it for consideration: (a) an application to assign the license of station WOI-TV (Channel 5, ABC), Ames, Iowa, from Iowa State University Broadcasting Corporation (Iowa State) to Capital Communications Company, Inc. (Capital); (b) a petition to deny filed by Neil Harl, President, lowans for WOI-TV, Inc. (petitioner); (c) a joint opposition filed by Iowa State and Capital; and (d) other responsive pleadings. Capital is controlled by Philip Lombardo (Lombardo), who also controls Citadel Communications; Ltd., the licensee of television station KCAU-TV (channel 9, ABC), Sioux City, Iowa. Because the Grade B contours of the television stations overlap, Capital has requested waiver of Section 73.3555(b) of the Commission©s Rules, the duopoly rule, which generally prohibits common ownership of television stations when their respective Grade B contours overlap.
Petition to Deny
2. In assessing the merits of a Petition to Deny, the Commission is guided by Section 309(d)(1) and (2) of the Communications Act, as analyzed in Astroline
Citadel is also the licensee of television stations WVNY, Burlington, Vermont; KCAN, Albion, Nebraska; and WMGC, Binghampton, New York.
481 Communications Co. v. F.C.C.. 857 P.2d 1556 (D.C. Cir. 1988). First the Commission determines whether the petitioner has made specific allegations of fact that, if true, would demonstrate that grant of the application would be prima facie inconsistent with the public interest. If so, then the Commission proceeds to examine and weigh all of the material before it, including information provided by the applicants, to determine whether there is a substantial and material question of fact requiring resolution in a hearing. Finally, the Commission must determine whether grant or denial of the application would serve the public interest.
3. In the petition to deny, the petitioner argues that if the sale were to be approved, Iowa State University and its students would be deprived of valuable educational experiences in broadcast journalism, meteorology education, electronic media studies, advertising, theatre and engineering. The petitioner notes, in that regard, that Capital will not provide the studio time and production experience that the television station routinely has made available for these activities. The petitioner also points out that the revenues the station produces would be lost to the University.
4. In their joint opposition, Iowa State and Capital assert that the petitioner©s concern that the University will lose valuable support for its educational programs is not within the province of the Commission, nor does the Commission determine whether a sale of a broadcast station to a qualified buyer should be denied so that the current licensee may be forced to continue its operation on the assumption that it will continue to provide a superior nonbroadcast service than the proposed buyer. Further, they state that Section 310(d) of the Act specifically precludes the Commission from considering any party other than the proposed purchaser. MMM Holdings. Inc., 4 FCC Red 8243, 8244 (1989). In any event, the applicants note, as disclosed in their asset purchase agreement, Capital has made commitments to continue a variety of programs for the benefit of the University and its students. Discussion
5. While it appears that the operations of WOI-TV will not be as closely associated with the activities and programs of the University, we find that chis fact does not raise a prima facie question as to whether a grant of the instant application would deserve the public interest. We agree with Iowa State and Capital that the loss or gain of educational opportunities for University students or the loss of financial assistance to the University as a
Initially, the petitioner noted that the Iowa District Court of Judicial District 2B held that the contract for the sale of WOI-TV was null and void and ordered that the action taken by the Iowa State Board of Regents regarding the sale be reversed and that the agreement be stricken. However, the District Court©s ruling was appealed to and, on November 24, 1993, was reversed by the Iowa Supreme Court. Accordingly, the State©s legal ability to sell WOI-TV is not in question here.
482 result of the subject sale are matters beyond the scope of relevant issues in this proceeding. 6. Additionally, the petitioner contends that a major source of funds for Capital©s purchase of WOI-TV is reported to be Mario Gabelli, a media investor who is the subject of a Federal Communications Commission proceeding. Since the petitioner is unsure of the precise nature of Mr. Gabelli©s ownership in Capital, it believes that Mr. Gabelli©s involvement with Capital in conjunction with the Commission©s proceeding raising questions concerning whether his present ownership interests violate the multiple ownership rules in turn raise serious questions regarding the financial and character qualifications of the applicant. 7. in response, the applicants contend that the petitioners have cited no rule or statute that demonstrates that there would be a violation of federal law by Mr. Gabelli. With respect to his involvement in the acquisition of WOI-TV, they note that Mr. Gabelli is minority shareholder in Capital by virtue of his interest as an officer, director and shareholder of Lynch Corporation, which owns Lynch Entertainment Corporation II, which in turn will own 49 percent of Capital. They state that the controlling 51-percent interest in Capital will be held by Lombardo Communications, which is 100 percent owned by Philip Lombardo. As a result, they maintain that Mr. Gabelli©s interest is nonattributable pursuant to Note 2 (b) of Section 73.3555 of the Commission©s Rules, no matter the outcome of the Commission©s investigation of Mr. Gabelli. 8. Regarding Mr. Gabelli, we note that he was the subject of a Commission proceeding concerning his attributable ownership interests in broadcast media that exceed limitations imposed by the Commission©s multiple ownership rules. Pinelands. Inc.. 7 FCC Red 6058 (1992); Mario Gabelli. Order to Show Cause, 7 FCC Red 5594 (1992). However, that proceeding has been terminated based on a Memorandum of Understanding entered into by the Mass Media Bureau and Mr. Gabelli and approved by the presiding Administrative Law Judge. That memorandum required Mr. Gabelli to come into compliance with the Commission©s Rules by September of 1993. Mario Gabelli. MM Docket No. 92-201, FCC 92M- 1066 and FCC 92M-1067. By letter dated September 7, 1993,. counsel for Mr.Gabelli informed the Mass-Media Bureau that he and his respective investment funds now were in compliance with the Commission©s multiple ownership rules. 9. Further, the petitioner has not set forth any facts suggesting that Mr. Gabelli©s existing media interests are not in full compliance with our rules. Moreover, we find that the acquisition of WOI-TV by Capital is not prohibited
We note, nonetheless, that Capital has agreed in the contract of purchase to continue to provide the facilities of WOI-TV for training internships and educational opportunities to graduate and undergraduate students of the University. Capital has also represented that it and the University will meet no less than annually to review the effectiveness of these activities and make any changes or improvements that might be beneficial to Capital and the University.
483 because of Mr. Gabelli©s proposed minority stock interest in Capital. In amending the Commission©s multiple ownership rules in 1984, the Commission determined that when there is a single majority shareholder that controls a corporate applicant for a broadcast license, the minority shareholder©s or shareholders© interests are not considered attributable for multiple ownership purposes. Note 2(b) of Section 73.3555 of the Commission©s Rules. The Commission concluded that in these circumstances the minority shareholder or shareholders, even acting together, would not be able to direct the affairs or activities of the licensee. Attribution of Ownership Interests. 97 FCC2d 997, 1008-9 (1984), recon. in part, 58 RR2d 604, 621-22 (1985), further recon., 1 FCC Red 802 (1986).
Waiver of the Duopoly Rule, Section 73.3555
10. Capital requests waiver of Section 73.3555(b) of the Commission©? Rules, the duopoly rule. As noted above, KCAU-TV (Channel 9, ABC), Sioux City, Iowa and WOI-TV (Channel 5, ABC) Ames, Iowa, will be commonly controlled by Lombardo if Capital©s acquisition of WOI-TV is approved. Capital notes that the Grade B contours of KCAU-TV and WOI-TV overlap and that Section 73.3555(b) of the Commission©s Rules prohibits ownership of television stations when their respective Grade B contours overlap. Capital asserts that because the nature of the overlap is de minimis.and because the requested assignment would increase the diversity of broadcast voices in Ames, waiver of the rule is appropriate, citing Shareholders of Storer Communications, Inc.. 59 RR2d 611 (1985); Thomas J. Flatlev. 7 FCC Red 4242 (1992).
11. In support of its request for waiver, Capital has submitted an engineering study demonstrating that the stations are licensed to communities that are approximately J.65 miles apart, that the overlap area is more than 60 miles from the community of license of each television station, that the overlap area only encompasses 236 square miles (1.3% of the area within KCAU- TV 1 s Grade B contour, and. 1.2% of the area within WOI-TV 1 s Grade B contour), and that the overlap area,only encompasses 3,665 people (0.6% of the population within KCAU-TV©s Grade B contour and 0.4% of the population within WOI-TV©s Grade B contour).
12. Regarding the overlap area, Capital notes that there are a significant number of competing television stations serving the overlap area of WOI-TV and KCAU-TV, which it characterizes as rural in nature and sparsely populated. The overlap area, according to Capital, comprises small portions of Calhoun and Crawford counties and even smaller portions of Sac and Carroll counties small parts of which are included within three Arbitron ADI©s. Calhoun and Carroll are part of the Des Moines ADI, Sac is part of the Sioux City ADI and Crawford is part of the Omaha ADI (Omaha, is the 73rd largest television market). Capital asserts that the overlap area is served, in whole or in part with Grade B contour coverage by the following stations: KTIV, Sioux City (NEC); KTIN, Fort Dodge (noncommercial); KCCI-TV, Des Moines (CBS); KDIN-TV, Des Moines (noncommercial); WHO-TV, Des Moines (NBC); WOWT, Omaha (NEC); KETV, Omaha (ABC); and KMTV, Omaha (CBS). Thus, Capital contends, the overlap area is served by a number of competing television stations and the people located in the overlap area have access to goods and markets in Des Moines, Omaha and Sioux City.
484 13. Additionally, Capital avers that KCAU-TV and WOI-TV serve separate and distinct markets where there are other competing stations; Sioux City is ranked as the 138th largest television market and Ames-Des Moines is ranked as the 66th largest television market. Capital notes that in Sioux City, KCAU- TV competes with KMEG (Channel 14, CBS), KTVI (Channel 4, NBC) and KSIN (Channel 27, PBS}; and in Ames, which is part of the Des Moines area of dominant influence, WOI-TV competes with KCCI-TV (Channel 8, CBS), KDSM-TV (Channel 17, Fox), WHO-TV (Channel 13, NBC), and KDIN-TV" (Channel 11, PBS). In addition, Sioux City is served by 9 radio stations and Des Moines is served by 19 radio stations.
14. Further, Capital believes that no detriment should arise from the common ownership because both television stations presently are ABC affiliates and already broadcast virtually the same programming comprising the bulk of each station©s general program fare. Capital also notes that another ABC affiliate (KETV, Omaha) provides service to the overlap area. Moreover, because the overlap area is very minor, Capital contends that any loss of diversity would be offset by significant benefits to all viewers in both markets because the stations will continue to broadcast "material of local interest to their discrete markets (such as public service announcements and news programming). As a further benefit, Capital argues that common ownership would allow each television station to perform more of the market-specific services more effectively because the stations can share certain administrative and news gathering costs. Even though there will be cost sharing, Capital represents that "both stations will operate independently with full studio facilities and that local management will independently make day-to-day decisions regarding programming and advertising." In this later regard, Capital represents that neither KCAU-TV or WOI-TV will solicit advertisers in the overlap area.
15. The petitioner submits that the overlap is not de minimis and that Capital©s showing falls short of the standard used by the Commission in approving duopoly waivers in the past. Specifically, the petitioner contends that Capital has provided no support for its claim that substantial service benefits will accrue from increased efficiency and cost savings as a. result of sharing certain administrative and news gathering costs. It avers that there is no indication that the cost savings to be realized will be used to increase public service programming. The fact that WOI-TV and KCAU-TV are ABC affiliates, the petitioner argues, means that they will target their programming to an ABC audience (youngsters and young adults) and that common ownership will result in duplication and reduction of voices in the overlap area and a reduction in WOI-TV 1 s local programming. In that regard, the petitioner points out that presently (TV Guide, week of September 18, 1993) KCAU-TV broadcasts 9 hours of locally produced programming per week and WOI- TV broadcasts 18 hours of locally produced programming per week. The locally produced programming, the petitioner asserts, includes local news and public affairs, as well as children©s and teen programming. Apparently relying on the assertedly fewer number of hours of local programming aired by the assignee©s station; KCAU-TV, the petitioner believes that the amount of news, public affairs and children©s programming broadcast by WOI-TV would be reduced if the subject assignment application were granted.
485 16. Additionally, the petitioner asserts that the waiver should not be approved because the circumstance presented here does not involve a failing station, Taft Broadcasting Partners Limited Partnership. 7 FCC Red 2854 (1992), Thomas J. Flatley. 7 FCC Red 4242(1992). Likewise, the petitioner argues, this is not a case of two independent stations having no group ownership features proposing to merge, Weiael Broadcasting. 4 FCC Red 6200 (1989); a waiver to permit a facility improvement for one of the stations, Southern Oregon Broadcasting Co., 3 FCC2d 241 (1967); or a case where the resulting diminution of diversity and competition is outweighed by the public interest benefits to be achieved, Citadel Communications Company. Ltd., 8 FCC Red 855 (1993).
17. Further, the petitioner notes that the Commission has undertaken an inquiry regarding changes in the video market place, citing Review of the Commission©s Regulations Governing Television Broadcasting. Notice of Proposed Rulemaking, 7 FCC Red 4111 (1992). The petitioner believes that, until the proposed changes in the rules become final, waivers should only be granted when there is a clear showing that it is in the public interest. The petitioner contends that this has not been shown here and that the application should be denied.
18. In its opposition, Capital states that the "insignificant Grade B overlap in a sparsely-populated area," which is more than sixty miles distant from each of WOI-TV©s and KCAU-TV©s communities of license, poses no threat to diversity or competition. According to Capital, University publishes a student newspaper which is circulated not only among the University©s 27,000 students, but also among Ames 1 approximate 20,000 nonstudent residents. The University also owns or control three noncommercial educational radio stations located in Ames. Capital argues that the instant assignment of WOI-TV would reduce the media reach of state-controlled University. Capital also denies the allegation that there will be no cost savings and increased efficiencies and asserts that the allegation is unfounded. Moreover, it asserts that it will meet its programming obligations as licensee of WOI-TV, broadcasting a variety of news, public affairs, childrens and other programming responsive to the needs and interests o-f its community. With respect to the belief that WOI-TV, under Capital©s operation, will not broadcast the same level of news and informational programs as presently televised, Capital maintains that such comparison is incompatible with Section 310(d) of the Communications Act, citing Vallev Telecasting Co. v. F.C.C., 338 F.2d278, 279 (D.C. Cir. 1964), and MMM Holdings. Inc.. above.
19. As to competition in the overlap area, itself, Capital states that eight other stations serve all or part of this area, which comprises portions of four counties and three Arbitron areas of dominant influence. It also reiterates that there will be no solicitation for advertisers in the overlap area by either WOI-TV or KCAU-TV in the future, noting that there has not been any in the past.
486 Discussion
20. The ultimate objective of the duopoly rule, as well as of the other multiple ownership rules, is to promote maximum diversification of program and service viewpoints and to prevent undue concentration of economic power. Multiple Ownership Rules, 22 FCC2d 306, 307 (1970), recon. granted in part. 28 FCC2d 662 (1971). In adopting the duopoly rule©s fixed standard of prohibited overlap of Grade B service contours, the Commission sought to provide a greater degree of certainty than under its prior rule, which prohibited common ownership of television stations serving "substantially the same service area." Multiple Ownership of Standard, FM and Television Broadcast Stations. 45 FCC2d 1476, 1476 n.l, recon. in part, 3 RR2d 1554 (1964). However, the Commission maintained a policy of "flexibility," noting that the rule could be waived in cases where its application would be "inappropriate." Id. at 1479 n.12; John Hav Whitnev. 28 FCC2d 736, 752 (1971). Accordingly, the Commission has granted waivers of the duopoly rule where signal overlap is de minimis. see, e.g., Hubbard Broadcasting, Inc.. 2 FCC Red 7374 (1987), or where the © public interest benefits to be gained from waiving the rule would be greater than any detrimental effects resulting from the overlap. See, e.g., Capital Cities Communications. Inc.. 59 RR2d 451, 465 (1985)(applicant proposed to provide special programming to areas without their own local VHF service). The fact that we have released a Notice of Proposed Rulemaking regarding changes in the video market place does not require us to defer action on this waiver request.
21. As for the de minimis overlap standard, our past waiver cases have generally characterized this as an overlap area representing less than one percent of both the area and the population within the Grade B contour of each station. E.g... Hubbard Broadcasting. Inc.. 2 FCC Red at 7374; Acadian Television Corp.. 51 RR2d 743, 746 (1982); KSOO-TV Inc.. 43 FCC2d 879, 880 (1973) . In the case before us, we note that the extent of the overlap area, as determined by the standard prediction model, falls short of our strict definition of de minimis. However, the geographic area is well within the range of our past waiver cases, while the corresponding populations are each less than one percent, one of the smaller percentage combinations of any non- de minimis duopoly case in which we have granted a waiver. See, e.g.. Sunshine Television. Inc.. 8 FCC Red 4428 (1993)(overlap encompasses 0.52% and 0.45% of the area and .62% and 1.15% of the population within the respective Grade B contours of the stations); Thomas J. Flatlev. 7 FCC Red 4242 (1992)(where the overlap accounted for .99% of the area and .27% of the population of one station and 2% of the area and 1.13% of the population of the other station). Thus, while not constituting a strict de minimis overlap situation, this combination would fall well within the Commission©s recent decisions regarding the minimum overlap permitted in a duopoly context.
22. We find that any detrimental effect of the minimal overlap present here is outweighed by the public interest benefits to be gained from a waiver of the duopoly rule. The separation of commercial station WOI-TV and University©s three noncommercial educational radio outlets will increase the number of separately owned broadcast voices available in Antes, Iowa, an area with a population of approximately 47,000 people. In making our determination, we also consider such factors as the number of media voices in
487 the overlap area, the distinctiveness of the respective markets, the independence of the stations© operations with regard to programming and advertising, and the concentration of economic power. First, viewers in the overlap area will receive a diversity of voices, specifically another ABC, three NEC, and two CBS affiliates, in addition to two noncommercial stations. Seven of these stations serve various parts of the overlap area, whereas KTIV provides a competing commercial service to all of the overlap area. And Capital©s pledge to maintain both WOI-TV and KCAU-TV as separate ABC affiliates further protects the Commission©s diversity objective.
23. We are also persuaded that another Commission objective, the prevention of undue concentration of economic power, will not be compromised by the common ownership of WOI-TV, Ames (the 66th largest television market), with KCAU-TV, Sioux City (the 138th largest television market), which is 144 miles away. It does not appear that either ABC affiliate has competed for viewers in the overlap area and Capital has pledged that neither will do so in the future. In any event, the presence of another ABC affiliate providing Grade B service to the overlap area should ensure continued competition in the area. Consequently, we are persuaded that granting Capital a waiver is clearly in accord with factors developed in past duopoly cases and fully consistent with the objectives of the multiple ownership rules. We further find that the applicants are fully qualified and that a grant of this application would serve the public interest, convenience and necessity.
24. Accordingly, IT IS ORDERED that the petition to deny filed by Neil E. Harl on behalf of lowans for WOI-TV, Inc. IS DENIED; that the request of Capital Communications Company, -Inc. for waiver of the duopoly rules, Section 73.3555(b), to permit common ownership of television stations WOI-TV and KCAU- TV, is GRANTED; and that the application for consent to the assignment of license for WOI-TV from Iowa State University Broadcasting Corporation to Capital Communications Company, Inc. (BALCT-921006KF) IS GRANTED.
FEDERAL COMMUNICATIONS COMMISSION
William F. Caton Acting Secretary
We find petitioner©s beliefs as to the possible reduction in the amount of time devoted by WOI-TV to news and other informational programming to be predicated on conjecture and surmise. Most importantly, Capital has acknowledged its obligations, as a broadcast licensee, to be attentive and responsive to the issues confronting the Ames, Iowa community.
488 CONCURRING STATEMENT OP COMMISSIONER ANDREW C. BARRETT
RE: Assignment of Television Station License WOI-TV, Ames, Iowa This Memorandum Opinion and Order grants a request for waiver of the Commission©s television duopoly rules in order to allow common ownership of WOI-TV in Ames, Iowa and KCAU-TV in Sioux City, Iowa. Prior to Pegasus1 , waivers were only granted in instances where: (i) the overlap of the relevant service area was de minimis; (ii) the combination would improve service to an unserved or underserved area; or (iii) the waiver would preserve a failing system. I am troubled that in recent matters2 , we have manipulated our ownership rules in order to carve out exceptions to the Commission©s pre-Pegasus policy. In effect, the Commission continues to circumvent -its rulemaking proceeding via the waiver process. In my opinion, the Commission©s efforts are misplaced. I continue to believe that our rulemaking proceeding is the proper forum for considering modifications to the Commission©s pending multiple ownership rules. Despite my misgivings, the circumstances in this case sufficiently mirror past de minimis matters. Therefore, I concur in the decision in the Memorandum Opinion and Order.
1See Pegasus Broadcasting. 7 FCC Red 8625 (1992) (Dissenting Statement of Commissioner Andrew C. Barrett) 2See In re: Act III Broadcasting of Buffalo. 8 FCC Red 885 (1993) (Dissenting Statement of Commissioner Andrew C. Barrett). See also Sunshine Television. Inc.. 8 FCC Red 4428 (1993) (Statement of Commissioner Andrew C. Barrett- Concurring in Part) and H & C Communications. Inc.. 73 RR2d 1108 (1993)(Concurring Statement of Commissioner Andrew C. Barrett)
489 Concurring Statement of Commissioner Ervin S. Duggan
In Re Applications of Iowa State University Broadcasting Corporation and Capital Communications Company, Inc., for Assignment of License of Television Station WOI-TV, Ames, Iowa
While the diversity interests served by approving this duopoly waiver are not as substantial as in previous instances, I am willing to support the grant of this application because of the minimal overlap of the Grade B contours of the television stations involved. Therefore, for the reasons that I stated in Sunshine Television. Inc.. 8 FCC Red 4428, 4443 (1993) (Separate Statement of Commissioner Ervin S. Duggan), I concur in the result.
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