Federal Communications Commission Record Ii FCC Red No.5

DA 96-176 Federal Communications Commission Record ii FCC Red No.5

both of these stations in 1991. See Letter to Duffy I! Cor- Before the poration, 6 FCC Rcd 1812 (1991). By the instant applica- Federal Communications Commission tion, MAC seeks to acquire a second FM station, Washington, D.C. 20554 KTWC(FM), in the Phoenix market. The transaction would comply with the Commission's revised local radio ownership rules.4 However, grant of the subject assignment application would create a new radio-television combina- In re Application of tion that requires waiver of the one-to-a-market rule because the I mV/rn service contour of KTWC(FM) Newmountain Broadcasting II Corp. encompasses Phoenix, KTVK(TV)'s city of license. See 47 (Assignor) C.F.R. § 73.3555(c). Accordingly, MAC requests waiver of the one-to-a-market rule pursuant to the "case-by-case" and BALH-950821GF standard.

MAC America Communications, Inc. (Assignee) Request for Waiver of the One-to-a-Market Rule 3. MAC bases its waiver request on the one-to-a-market standards enunciated in the For Assignment of License of Second Report and Order in MM Docket 87-7, 4 FCC Rcd 1741 (1989)("Second Report KTWC(FM), Glendale, Arizona and Order",), recon. denied in part and granted in part ("Second Report and Order Recon.'), 4 FCC Rcd 6489 (1989). Under these standards, the Commission presump- MEMORANDUM OPINION AND ORDER tively favors requests involving (1) stations serving the top 25 markets where at least 30 separately owned, operated, Adopted: February 12, 1996; Released: February 22, 1996 and controlled stations will remain following the proposed combination; or (2) "failed" stations (stations that have not By the Chief, Mass Media Bureau: been operational for a substantial period of time or are involved in bankruptcy proceedings). Otherwise, the re- 1. The Commission, by the Chief, Mass Media Bureau. quests must be evaluated under the more rigorous case- acting pursuant to delegated authority,' has before it the by-case standard. 47 C.F.R. § 73.3555(c) note 7. above-captioned application for assignment of license of 4. While the proposed combination is located in a top 25 KTWC(FM), Glendale, Arizona, from Newmountain market -- Phoenix is the 19th largest Designated Market Broadcasting II Corp. ("Newmountain") to MAC America Area (DMA) and the 21st largest Area of Dominant Influ- Communications, Inc. ("MAC"), and a related request for ence (ADI) in the country -- MAC's waiver request must waiver of 47 C.F.R. § 73.3555(c), the Commission's one- be reviewed under the case-by-case standard because the to-a-market rule.2 The application is unopposed. For the proposed transaction involves the local radio ownership reasons stated below, we will grant the waiver request and rules.5 Under the case-by-case standard, the Commission the assignment application. makes a public interest determination based upon the fol- 2. MAC is currently the licensee of KESZ(FM) and lowing five criteria: (1) the public service benefits that will KTVK(TV), Channel 3,3 both licensed to Phoenix, Arizona. arise from the joint operation of the facilities such as The Commission granted MAC a permanent waiver to own economies of scale, cost savings and programming and

The Bureau has delegated authority to rule on uncontested in that market and the proposed combination does not lead to one-to-a-market cases that involve stations in the top 100 televi- "excessive concentration in the local market." Excessive con- sion markets and present no new or novel issues. See Louis C. centration will be presumed where the stations to be jointly DeArias, Receiver, FCC 96-15, released February 2, 1996. 2 owned have a combined audience share exceeding 25 percent. 47 Section 73.3555(c) of the Commission's rules prohibits the C.F.R. 73.3555(a)(l)(ii); In re Revision of Radio Rules and common ownership of radio and television stations in the same Policies, 7 FCC Rcd 2755 (1992), market if the 2 mV/rn contour of an AM station or the I mV/rn recon. granted in part and denied in part ("Radio Rules Recon."), 7 FCC Rcd 6387, 6393 contour of an FM station encompasses the entire community of (1992). MAC has demonstrated that there are more than 15 license of a television station or, conversely, if the Grade A commercial radio stations within the Phoenix metro market contour of a television station encompasses the entire commu- and the combined audience share of KTWC(FM) and nity of license of an AM or FM station. See 47 C.F.R. § KESZ(FM) is 4.4 percent. Accordingly, the proposed combina- 73.3555(c). tion of radio stations satisfies the local radio ownership provi- KTVK(TV) was an ABC affiliate from 1955 until January of sions of our rules. 1995. MAC states that, due to a multi-market agreement be- Because MAC's proposed acquisition of KTWC(FM) involves tween Capital Cities-ABC and Scripps Howard Broadcasting, the potential ownership of 2 FMs in the Phoenix market, we licensee of KNXV-TV, Phoenix, Arizona, MAC lost the ABC require evaluation of the waiver request under the case-by-case affiliation and recently began operation as an independent sta- standard, regardless of the size of the market involved. tion. See " Radio Rules Recon., 7 FCC Rcd 6387, 6394 at n.40; see also Because the principal community contours of KTWC(FM) Moosey Gommunications, Inc., 8 FCC Red 5247, 5247 (1993) and KESZ(FM) overlap, MAC must demonstrate that the pro- (consideration of one-to-a-market waivers under the case-by- posed transaction complies with the requirements of the local case standard appropriate where new radio-television combina- radio ownership rules. The Commission's revised radio contour tions are created, pending the possible revision of the overlap rule, 47 C.F.R. § 73.3555(a), permits a single entity to one-to-a-market rule in the outstanding television ownership own up to two AM and two FM commercial radio stations in a proceeding). single market if there are 15 or more commercial radio stations

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11 FCC Red No.5 Federal Communications Commission Record DA 96-176

service benefits; (2) the types of facilities involved; (3) the classes. MAC further argues that KTWC(FM)'s recruitment number of media outlets owned by the applicant in the of women and minorities will be strengthened and made relevant market; (4) the financial difficulties of the stations more efficient by the assistance of MAC's experienced involved; and (5) the nature of the relevant market in light management staff and minority training programs targeting of the level of competition and diversity after joint opera- this area. Specifically, MAC points to its Minority Intern tion is implemented. See Second Report and Order, 4 FCC Training Program, which pays minority students to work at Red 1741, 1753 (1989). We also note that not all five of the MAC's stations and maintains that it will expand this pro- factors mentioned are necessarily relevant in each case. gram to provide additional employment opportunities for Second Report and Order Recon., 4 FCC Rcd at 6491, para. students at KTWC(FM). According to MAC, permitting its 18; South Central Communications Corporation, 5 FCC Rcd waiver request will "assist MAC to continue its commit- 6697, 6698 (1990). In support of its request, MAC submits ment to public service by widening the base of advertisers a showing which addresses each of the five case-by-case necessary to underwrite the quality and quanlity, as well as factors. continued growth of MAC's public service." Waiver Re- 5. Benefits of Joint Operation. MAC contends that signifi- quest at 11. cant public service and programming benefits, cost savings, 7. MAC anticipates combining KTWC(FM)'s operations and economies of scale will be realized if the Commission with its existing management and staffing structures. MAC allows the proposed combination. First, MAC indicates that estimates that combining the operations of KTWC(FM) the consolidation of KTWC(FM) with KESZ(FM) and with those of KESZ(FM) and KTVK(TV) will save in ex- KTVK(TV) will allow MAC to enhance and strengthen the cess of $3 million annually. Specifically, MAC anticipates programming aired on KTWC(FM). For example, that joint operation of KTWC(FM) and KESZ(FM) will KTVK(TV) produces 7 hours of news and public affairs result in estimated annual savings of $500,000 through programs every day and employs over 200 people to re- reduction in air staff, consultants, research services, news search, write and produce these programs. To deliver this personnel, and live remote vehicles and operators; information to the people of the state, MAC has purchased $500,000 in combined management and administrative a jet helicopter, KU band satellite uplinkidownlink system, teams;6 $90,000 through the reduction of the promotion and maintains the most extensive inter-city microwave sys- staff and budget; and $150,000 in combined sales force. tem in the state which allows KTVK(TV) to cover news With respect to benefits arising from the proposed owner- events live throughout the state. Upon grant of the applica- ship of KTWC(FM) and KTVK(TV), MAC estimates annual tion, KTWC(FM) will have access to these facilities. In cost savings of $120,000 through access to KTVK(TV)'s addition, MAC is developing the first regularly scheduled news department: $500,000 from not having to operate and public affairs program for the African-American commu- staff a news helicopter for local traffic reports; $40,000 for nity in Phoenix and would expand this program to serve a the salaries of meteorologists; $500,000 through free pro- wider audience through KTWC(FM). MAC currently promotional production services (i.e., television corñmercials duces a public affairs program for the Native American •for KTWC(FM)); $150,000 for print, billboard, and other community and has a full-time Department of Children's advertising; $500,000 for cross-promotional airtime on Services dealing specifically with children's issues, both of KTVK(TV); $100,000 through the reduction of salaries for which can be adapted for use on KTWC(FM). Further, promotion and research staff; and $80,000 in combined KTWC(FM)'s news gathering capabilities will be greatly engineering functions. enhanced through access to MAC's existing news services 8. Other i'Iedia Outlets/Types of Facilities. MAC is the and facilities. MAC will give KTWC(FM) access to its licensee of stations KESZ(FM) and KTVK(TV). both li- full-time news bureau in Flagstaff (150 miles north of censed to Phoenix, Arizona. Other than these facilities, it Phoenix) to enable it to better cover breaking news in the has no other media interests in the market although MAC northern half of the state. KTWC(FM) will also have access has entered into a local marketing agreement with Brooks to MAC's three full-time weather people -- two of which Broadcasting, L.L.C., the permittee of KASW(TV), Phoenix, are trained meteorologists. Arizona, under which MAC will provide programming to 6. Additionally, MAC argues that combined operations the new television station which signed on the air this year. will result in increased public service programming and KESZ(FM) is a Class C FM station operating on 99.9 MHz non-broadcast public service efforts for KTWC(FM) -- ser- with 100 kw effective radiated power (ERP) from an an- vices that, as a stand-alone FM station, it would not be able tenna height of at 1,670 feet above average terrain (HAAT). to provide. In support of this point, MAC asserts that it KTVK(TV), an independent VHF television station, op- provides effective public service with a real impact on the erates on Channel 3 with 100 kw ERP from an antenna at community through long term, community-wide projects 1,778 feet 1-IAAT. KTWC(FM) is a Class C FM station and would expand these programs to include KTWC(FM)'s operating on 103.5 MHz with 61.5 kw ERP from an an- participation. Such programs include, hut are not limited tenna height of 2,428 feet HAAT. MAC asserts that, since to: The Volunteer Center -- which places volunteers in there are four other television stations and twelve other community organizations; The Silver Apple Awards -- FM stations with comparable or greater facilities, there is which honors superior teachers; Arizona's Family Holiday no danger that the proposed combination will dominate Food Drive -- which provides food to needy families: The the market from a technical standpoint. Christmas Angel Project -- which gives gifts to needy children; and Save a Life Saturday -- which provides free CPR

6 According to MAC, the proposed combination will result in processing services, insurance, office rent, telephone, utilities, savings in management and administrative areas such as: traffic, mail room services, postage, and equipment rental. accounting, reception, secretarial services, business planning, According to MAC, the television stations with comparable dues, subscriptions, auditing services, legal representation, data or greater facilities are: KPI-lO-TV, KPNX, KSAZ-TV and

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DA 96-176 Federal Communications Commission Record ii FCC Red No.5

9. Economic Status. While MAC concedes that none of 12. Significant cost savings and economies, of scale are the stations involved in the proposed transaction is suffer- "precisely the type of public interest benefit from common ing financial difficulties, it notes that the Commission does station ownership which [the Commission] envisioned as not require that all five criteria be satisfied as a precondi- warranting a waiver of the one-to-a-market rules . . ." Great tion to the grant of such a waiver. MAC further argues that American Television and Radio Co., Inc., 4 FCC Rcd 6347,' while the Spring 1995 audience share median for the Phoe- 6349 (1989). As noted in paras. 5-7 above, MAC has exten- nix market was a 2.7 percent share, KTWC only achieved sively documented the substantial cost savings and eco- an Arbitron rating of 1.3 percent, making it "virtually nomic benefits to be derived from joint operation of impossible to sell advertising time on KTWC at rates which KTWC(FM), KESZ(FM), and KTVK(TV). Specifically, would allow it,,as a free-standing FM station in the Phoe- MAC has shown that joint operation of the stations will nix market, to compete and provide community service." result in cost savings in excess of $3 million annually. Waiver Request at 14. MAC proposes to use KESZ's pro- MAC has also demonstrated the potential for enhanced gram expertise, market recognition and promotion re- programming and service benefits. For example, sources to help •KTWC develop more marketable KTWC(FM)'s access to MAC's existing resources will programming, increased advertising revenues, and im- strengthen KTWC(FM)'s coverage of news and weather and proved ratings and financial performance. will permit increased coverage of live events throughout 10. Competition and Diversity in the Market. The fifth the state. The proposed combination will also result in factor is the nature of the relevant market in light of the increased local programming due to KTVK(TV)'s produc- Commission's concerns about diversity and competition. tion of seven hours of news and public affairs programs MAC asserts that the Phoenix Designated Market Area every day. Further, KTWC(FM) will have access to MAC's (DMA), which is ranked 19th in the country by Nielsen, existing public affairs programs -- which include such pro- contains 12 television stations, 22 FM stations, and 20 AM grams as those dealing with children's issues, as well as stations, for a total of 54 stations, comprising 37 separately those dealing with issues of importance to the African- owned and operated broadcast "voices." MAC also submits American and the Native American communities. Addi- that Phoenix TV metropolitan market is served by 9 daily tionally, the proposed combination will result in increased newspapers and 3 separate cable systems with cable pene- public service programming and involvement in long term, tration of 53.5 percent. Further, MAC maintains that the community-wide projects. Finally, KTWC(FM) will gain combined audience share of KESZ(FM)/KTWC(FM) would access to MAC's experienced management staff and only be 4.4 percent, a figure matched or exceeded by a recruitment methods which, in turn, will facilitate number of other radio station combinations in the Phoenix KTWC(FM)'s hiring of women and minorities. market.8 MAC concludes that the "combination of KTVK, 13. With respect to the types of facilities involved, the KESZ and KTWC would in no way dominate the Phoenix Commission's "concern with the types of facilities merging market or otherwise create undue concentration of owner- under the authority of a one-to-a-market waiver reflects ship or control of the broadcast media . . ." Waiver Re- our interest in assessing the potential impact of a proposed quest at is. combination of stations in a given market in order that we might predict and avoid any significant adverse effect on diversity or competition from too powerful a combina- DISCUSSION tion." Great American Television and Radio Co., Inc., 4 11. In analyzing a case-by-case request for a waiver of the FCC Rcd at 6349. In this instance, we find that MAC has one-to-a-market rule, the Commission's "goal in all situ- demonstrated that the level of competition and diversity in ations is to permit the public to benefit from such efficien- the Phoenix market will remain high due to the number of cies of operation as may be achieved through the use of remaining "voices" in the market. See para. 14, below. common facilities and staff, consistent with the mainten- Thus, while the technical facilities of the stations involved ance of diversity and vigorous competition within the mar- are significant, we find that given the substantial competi- ket areas involved." Second Report and Order Recon., 4 tion in the Phoenix market, the proposed combination FCC Rcd at 6491. We conclude that, on balance, MAC's does not present issues of market dominance inconsistent showing in support of a waiver of the one-to-a-market rule with the public interest.'0 Further, while none of the sta- meets our case-by-case criteria, and that a waiver in this tions involved in the transaction are experiencing financial instance would not adversely affect competition and diver- difficulties, not all five of the case-by-case factors men- sity in the Phoenix market. tioned are relevant in every case. See Second Report and

KAET. The FM stations with comparable or greater facilities decreased, diversity in the Phoenix market through the advent are: KOOL, KDKB, K1-ITC, KKFR, KKLT, KMLE, KNIX, of a new children and family-oriented television station -- KSLX, KUPD, KVRY, KYOT, and KZON. KASW(TV). According to MAC, KASW(TV) provides an outlet MAC argues that the stations that match or exceed the for the programming of the Fox Kids Network and Warner combined share of its proposed combination are: (I) Brothers Kids Network, as well as local public service program- KNIX(FM)/KCWW(AM) with a combined market share of 8.1 ming specifically targeting children's and family issues. percent; (2) KUPD(FM)/KDKB(FM)/KUKO(AM) with a com- We note that our independent staff artalysis confirms that bined market share of 8.6 percent; (3) KOOL(AM)-FM have a there are 4 additional VHF television stations and 12 additional combined share of 4.9 percent; (4) KKFR(FM)/KFYI(FM) have a Class C FM stations in the Phoenix market which have tech- combined market share of 10.5 percent: (5) nical facilities that match or exceed the technical facilities of KOY(AM)/KZON(FM)/KYOT(FM)/KISO(AM) with a combined KTWC(FM), KESZ(FM), and KTVK(TV). Further, one four- share of 11 percent; and (6) KKLT(FM)/KTAR(AM) have a station radio combination (2 AM and 2 FM) and one three- combined share of 13.3 percent. Waiver Request at 15-16. station radio combination (2 FM and I AM) in the Phoenix MAC also maintains that the local marketing agreement market have technical facilities that match or exceed the tech- between KTVK(TV) and KASW(TV) has increased, rather than nical facilities of the proposed radio combination herein. Fi-

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Order Recon., 4 FCC Rcd 6489 (1989); South Central Coin- munications Corporation, 5 FCC Rcd 6697 (1990) (all five criteria need not be satisfied as a precondition to grant of a waiver). 14. Finally, we find that the market will be served by a number of media "voices" and that the proposed combination will not create any undue concentration of ownership or control of broadcast media in the Phoenix market. To determine the number of broadcast outlets in the market the Commission considers the number of separately owned and operated "voices" and the degree of cable and other non-broadcast media penetration. As to the market defini- tion within which to count the number of broadcast stations, in the context of a one-to-a-market waiver, the Commission has traditionally considered "the relevant TV metro market for radio stations and the relevant ADI {Arbitron Area of Dominant Influericel TV market for TV stations." Second Report and Order, 4 FCC Rcd at 1760, n.101. However, since Arbitron no longer compiles television ADI data, we will accept instead MAC's showing using the Nielsen Designated Market Area (DMA) in determin- ing the number of broadcast "voices" in the Phoenix market. See Media/Communications Partners Li,nited Partnership, 10 FCC Rcd 8116, 8116 n.3 (1995); see also Further Notice of Proposed Rule Making in MM Docket No. 91-221 and MM Docket No. 87-8, 10 FCC Rcd 3524, 3539 n.59 (1995). Our independent analysis indicates that after the assignment is approved, the Phoenix DMA -- ranked 19th in the country -- will continue to be served by 20 AM stations, 24 FM stations, 9 VHF television stations and 5 UHF television stations. Of those stations, 26 radio stations and 13 television stations will remain separately owned and operated, for a total of 39 separately ow.ned and operated broadcast "voices" in the market. In addition, other "voices" in the market include 9 daily newspapers and 3 separate cable systems with cable penetration of 53.5 percent. In light of the above, we are persuaded that the public benefits of common ownership of KTWC(FM). KESZ(FM), and KTVK(TV) outweigh any negative effect on competition and diversity in the Phoenix market that the combination will engender and that a waiver of the one-to-a-market rule is therefore warranted.' 15. Accordingly, IT IS ORDERED, That the request for a waiver of the Commission's one-to-a-market rule, 47 C.F.R. § 73.3555(c), IS HEREBY GRANTED; and having found the applicant fully qualified, the application for assignment of license (BALH-950821GF) of KTWC(FM), Glendale, Arizona from Newmountain Broadcasting II Corp. to MAC America Communications, Inc. IS HERE- BY GRANTED.

FEDERAL COMMUNICATIONS COMMISSION

nally, we note that there are six other radio combinations in the The local marketing agreement between KTVK(TV) and Phoenix market whose audience share match or exceed the KASW(TV) -- an arrangement which under our current owner- combined audience shares of the proposed radio combination ship rules does not present a violation -. does not alter our herein. See footnote 7, infra. conclusion.

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