$// MO&O, KMPC(AM), Los Angeles, CA, FCC 94-361 //$ $/ 73.3555(a) "one-to-a-market" rule /$ $/ 73.3555(b) "one-to-a-market" rule /$ Before the Federal Communications Commission FCC 94-361 Washington, D.C. 20554 In re Application of ) ) Golden West Broadcasters ) (Assignor) ) ) and ) File No. BAL-940503EA ) KABC-AM Radio, Inc. ) (Assignee) ) ) For Assignment of License of ) KMPC(AM), Los Angeles, California ) MEMORANDUM OPINION AND ORDER Adopted: December 30, 1994 Released: By the Commission: 1. The Commission has before it the above-captioned application for assignment of license of KMPC(AM), Los Angeles, California, from Golden West Broadcasters ("Golden West") to KABC-AM Radio, Inc., and a related request for waiver of 47 C.F.R. 73.3555(b), the Commission's one-to-a-market rule. On June 1, 1994, the Commission received an informal objection to grant of the subject application from Thomas K. Van Amburg ("Van Amburg"). Van Amburg contends that the proposed assignment of license contravenes prior Commission rulings regarding ownership of local radio/television combinations by KABC-AM Radio, Inc.'s parent corporation, Capital Cities/ABC, Inc. ("Cap Cities"), as well as the "spirit and intent" of the Commission's radio ownership rule, 47 C.F.R. 73.3555(a)(1). 2. KABC-AM Radio, Inc. is a wholly-owned subsidiary of Cap Cities, which also owns the corporate licensees of KABC(AM), KLOS(FM) and KABC-TV, all licensed to Los Angeles, California. The Commission authorized Cap Cities to retain common ownership of these three stations in 1989 on the basis of Cap Cities' showing that the Los Angeles market satisfied the Commission's criteria for waiver of the one-to-a-market rule. See Capital Cities/ABC, Inc., 4 FCC Rcd 5498 (1989); see also In re Amendment of Section 73.3555 of the Commission's Rules, the Broadcast Multiple Ownership Rules ("Second Report and Order"), 4 FCC Rcd 1741 (1989), recon. granted in part and denied in part ("Second Report and Order Recon."), 4 FCC Rcd 6489 (1989). Because the Grade A contour of KABC-TV encompasses all of Los Angeles, grant of the above-captioned application requires waiver of the one-to-a-market rule. 3. Cap Cities bases its waiver request on the one-to-a-market waiver standards adopted in the Second Report and Order. Under these criteria, the Commission presumptively favors waiver requests involving station combinations serving the top 25 markets where there are at least 30 separately owned, operated and controlled broadcast licensees or "voices" after the proposed combination ("top 25 market/30 voice standard"). See 47 C.F.R. 73.3555, n. 7. It also favors requests involving "failed" broadcast stations, that is, stations that have not been operating for a substantial period of time, e.g., four months, or that are involved in bankruptcy proceedings. Id. Other waiver requests are evaluated on a more rigorous case-by- case basis, as set forth in the Second Report and Order. While Cap Cities' waiver request meets the top 25 market/30 voice standard, it nevertheless must be reviewed under the case- by-case standard because, as noted, the proposed assignment of license also relies upon the revised local radio ownership limits. Under this standard, the Commission makes a public interest determination based upon the following criteria: (1) the potential public service benefits of joint operation of the facilities; (2) the types of facilities involved; (3) the number of media outlets owned by the applicant in the relevant market; (4) the financial difficulties of the stations involved; and (5) the nature of the relevant market in light of the level of competition and diversity after the joint operation is implemented. See Second Report and Order, 4 FCC Rcd at 1753-54. 4. In support of its waiver request, Cap Cities submits a showing that addresses each of the five case-by-case factors. Cap Cities first asserts that the proposed combination of KMPC(AM), KABC(AM), and KLOS(FM) will create efficiencies by combining management personnel, as well as news, programming, and production staffs. Cap Cities contends that savings will be realized by consolidating radio station sales offices, equipment sharing, and securing volume discounts on purchases of supplies and programming services. Cap Cities also notes its intention to consolidate its Los Angeles radio operations at the existing facilities of KABC(AM) and KLOS(FM), reducing rent and utility expenses. With respect to benefits arising from its proposed ownership of KMPC(AM) and KABC-TV, Cap Cities maintains that although it intends to operate KMPC(AM) and KABC-TV separately, KMPC(AM)'s affiliation with KABC-TV will enable KMPC(AM) to avail itself of KABC-TV's experience in the local employment market, particularly KABC-TV's access to recruitment sources and knowledge of hiring conditions. Cap Cities further maintains that KMPC(AM)'s affiliation with Cap Cities' ABC Radio Network and the radio network's affiliation with ABC Television Network news operations will strengthen the news gathering resources of both KMPC(AM) and KABC-TV. In sum, Cap Cities estimates projected savings of $5.8 million annually from the proposed combination. With respect to related public service and programming benefits, Cap Cities notes its intention to institute a format at KMPC(AM) that would include enhanced public affairs programming analogous to that offered by KABC(AM), which Cap Cities indicates airs both daily public affairs programming and regular public service announcements. Cap Cities further notes that combining KMPC(AM) with KABC(AM) would enable KMPC(AM) to avail itself of KABC(AM)'s community relations department, which Cap Cities notes has received numerous awards for outstanding public service. 5. Second, regarding the technical facilities involved, Cap Cities affirms that KABC- TV is a VHF television station operating on Channel 7 with 141 kW effective radiated power ("ERP") and an antenna height of 3210 feet above average terrain ("HAAT"). KLOS(FM) is a Class B FM station operating on Channel 238 (95.5 MHz) with 50 kW ERP and an antenna height of 1200 feet HAAT. KABC(AM) is a Class B AM station operating full time on 790 kHz with a power of 5 kW using a directional antenna system during nighttime hours only. KMPC(AM) is a Class B AM station operating full time on 710 kHz with a power of 50 kW during daytime hours and 10 kW during nighttime hours using a directional antenna system during nighttime hours only. In support of its contention that the subject facilities do not dominate the market, Cap Cities notes the presence of six other VHF television stations in the Los Angeles market, as well as at least three other Class B FM stations and eleven AM stations with facilities comparable to KABC(AM) and KMPC(AM). 6. Third, with respect to the number of other media outlets the applicant already owns in the relevant market, Cap Cities affirms it does not own any broadcast stations in the Los Angeles market other than KABC-TV, KLOS(FM), and KABC(AM). As previously noted, Cap Cities demonstrates that for purposes of the Commission's local radio ownership rule, there are at least 15 radio stations whose contours overlap the proposed commonly-owned radio stations and that the combined audience share of KLOS(FM), KABC(AM), and KMPC(AM) in the Los Angeles metro market is 7.0 percent. See note 4, supra. 7. Fourth, with regard to the economic status of the stations involved in the proposed combination, Cap Cities and Golden West state that KMPC(AM) sustained operating losses of $3.4 million in 1991, approximately $6.5 million in 1992, and $6.9 million in 1993. Cap Cities and Golden West also indicate that KMPC(AM)'s losses continued at a similar rate in 1994, and note that the station continued to sustain losses notwithstanding Golden West's implementation of a new program format in 1992. 8. The fifth factor relates to the nature of the relevant market in light of the Commission's concerns about diversity and competition. Relevant indicia include the number of broadcast outlets, the number of separately-owned and operated "voices" in the market, and the presence of cable and non-broadcast media. As to the number of broadcast stations, the Commission has held that, in the context of a one-to-a-market waiver, it will consider the "relevant TV metro market for radio stations and the relevant ADI [Area of Dominant Influence] TV market for TV stations." See Second Report and Order, 4 FCC Rcd at 1760, n. 101. Cap Cities represents that the Los Angeles ADI is ranked 2nd in the country and contains 32 AM stations, 36 FM stations, 24 TV stations, and over 30 daily newspapers. Cap Cities further represents that the broadcast stations in the market are owned and operated by 73 different "voices." Additionally, Cap Cities notes that the Los Angeles market is served by 126 separate cable systems having a penetration rate of 59 percent, and that over 81 percent of households have VCRs. Cap Cities argues that viewpoint diversity in Los Angeles exceeds that of any other market in the United States, and that the Los Angeles market has a greater number of independent broadcast "voices" than markets in which the Commission has recently granted requests for waiver of the one-to-a-market rule under the case-by-case factors. 9. Van Amburg asserts that he offered to purchase KMPC(AM) from Golden West for $15 million, $2.5 million less than the purchase price agreed upon between Golden West and Cap Cities. Van Amburg contends that had the Commission enforced its previous rulings, which originally required Cap Cities to divest itself of radio station ownership in markets in which it also owns television stations, Cap Cities would be otherwise precluded from increasing its radio ownership in the subject market. Van Amburg further contends that radio ownership rules permitting common ownership of same-market radio stations conferred an "unfair advantage" on Cap Cities in structuring its offer to purchase KMPC(AM) by enabling Cap Cities to base it valuation of the radio station on projected joint operating efficiencies unavailable to prospective buyers such as Van Amburg who own no other media outlets in the market. 10. Discussion. In evaluating a request for waiver of the one-to-a-market rule, the Commission's goal "is to permit the public to benefit from such efficiencies of operation as may be achieved through the use of common facilities and staff, consistent with the maintenance of diversity and vigorous competition within the market areas involved." See Second Report and Order Recon., 4 FCC Rcd at 6491. We conclude that Cap Cities' showing in support of a waiver of the one-to-a-market rules meets the Commission's case-by case criteria, and that a waiver in this instance is consistent with the public interest and would not have an adverse effect on diversity and competition in the Los Angeles market. Cap Cities has shown that common ownership of KMPC(AM), KABC(AM), KLOS(FM), and KABC-TV will create efficiencies resulting in significant cost savings and the potential for enhanced programming and service benefits. In particular, joint operation of KMPC(AM) and KABC(AM) will enable KMPC(AM) to avail itself of KABC(AM)'s public affairs programming and community relations department, resources that could enhance KMPC(AM)'s ability to air public service and public affairs programming, as well as its ability to assess the needs of listeners in the Los Angeles community. Additionally, the affiliation of KMPC(AM) with Cap Cities' ABC Radio Network and the radio network's affiliation with ABC Television Network news operations could strengthen the news gathering resources of KMPC(AM), enabling KMPC(AM) to better serve its community. Moreover, Cap Cities affirms that the proposed combination enhances prospects for profitable operation of KMPC(AM), which Cap Cities and Golden West note has incurred operating losses during each of the past three years under its present ownership. Cap Cities also demonstrates that the proposed combination will not create any undue concentration of ownership or control of broadcast media in the Los Angeles market, which comprises the country's second largest ADI. Following the proposed acquisition of KMPC(AM), the market will be served by 67 radio stations and 26 television stations. Those 93 stations will be owned and operated by 78 separate entities. Other "voices" in the market include at least four major daily newspapers and cable television, which has a penetration rate of 58.9 percent. While the technical facilities of the stations involved are significant, we note that the proposed combination does not present issues of market concentration inconsistent with the public interest given the highly competitive environment in the Los Angeles market, both in terms of the number of other broadcast stations and the relevant market shares of the stations involved in this transaction. Thus, we are persuaded that the public benefits of common ownership and joint operation of KMPC(AM), KABC(AM), KLOS(FM), and KABC-TV outweigh any negative effect on diversity and competition in the Los Angeles market that the combination might engender. As Cap Cities observes, the Commission has granted waivers of the one-to- a-market rule under similar circumstances. See note 12, supra. 11. We find no merit to Van Amburg's contention that the Commission's "failure" to enforce prior divestiture conditions with respect to Cap Cities' ownership of radio stations in the Los Angeles market should preclude the proposed acquisition. As previously indicated, the Commission authorized Cap Cities to retain common ownership of KABC-TV, KABC(AM), and KLOS(FM) following a 1985 merger between Capital Cities Communications, Inc. and American Broadcasting Companies, Inc., on the basis of Cap Cities' prior showing that the proposed combination qualified for waiver of the one-to-a- market rule under the "top 25 market/30 voices" waiver standard adopted by the Commission in 1989. See note 13, supra. Van Amburg's contention that operating efficiencies available to multiple station owners such as Cap Cities enable such owners to value radio stations within their respective markets higher than prospective owners who do not currently own a station in the relevant market may be true, but we do not see this as a reason to deny this waiver request. Rather, as explained above, in this context, where there will be 77 other "voices" in the market following the proposed sale of KMPC(AM), we find the efficiencies created by this combination will result in tangible public service benefits. Indeed, in both the one-to-a-market rulemaking proceeding and the radio ownership rulemaking proceeding, the Commission expressly determined that combinational efficiencies derived from common ownership of radio and television stations in local broadcast markets and from common ownership of same service radio stations in local markets were presumptively beneficial and would strengthen the competitive standing of combined stations, a circumstance that would enhance the quality of viewpoint diversity by enabling such stations to invest additional resources in programming and other service benefits provided to the public. As noted, Cap Cities has demonstrated that its proposed ownership of radio stations in the Los Angeles market complies with the Commission's radio ownership rules in all relevant respects, and Van Amburg has submitted no evidence to the contrary. 12. Accordingly, IT IS ORDERED, That the informal objection to grant of the above- captioned application filed by Thomas K. Van Amburg IS DENIED. Further, the request for a waiver of the Commission's one-to-a-market rule, 47 C.F.R. 73.3555(b), IS HEREBY GRANTED, and, having found the parties thereto otherwise qualified, the application (BAL-940503EA) for assignment of license of KMPC(AM), Los Angeles, California, from Golden West Broadcasters to KABC-AM Radio, Inc. IS HEREBY GRANTED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary