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FOR RECORD ONLY $// 73.3555-Multiple Ownership FCC 95-360 //$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 FCC 95-360 In re Application of ) ) PARAMOUNT STATIONS GROUP ) OF PHILADELPHIA INC. ) (Assignor) ) ) and ) FCC File No. BALCT-940928KF ) FOX TELEVISION ) STATIONS INC. ) (Assignee) ) ) ) For Assignment of ) License of WTXF(TV), ) Philadelphia, Pennsylvania ) MEMORANDUM OPINION AND ORDER Adopted: August 14, 1995 Released: By the Commission: 1. The Commission has before it an application seeking consent to the assignment of television station WTXF(TV), Channel 29 (Fox), Philadelphia, Pennsylvania, from Paramount Stations Group of Philadelphia Inc. (Paramount) to Fox Television Stations Inc. (Fox). Because the Grade B contour of WTXF(TV) overlaps with that of television station WNYW, Channel 5 (Fox), New York, New York, which is licensed to Fox, Fox also requests waiver of the duopoly rule, Section 73.3555(b) of the Commission's Rules, which generally proscribes common ownership of two television stations whose Grade B contours overlap. National Broadcasting Company, Inc. (NBC) and the Philadelphia Lesbian and Gay Task Force (Task Force) each filed a petition to deny the application, Paramount and Fox separately opposed the petitions, and NBC replied. NBC's Petition to Deny 2. NBC essentially argued that Commission action in this proceeding might "prejudge and limit the Commission's option" in resolving two other sets of proceedings, one involving assignment applications and pertaining to Fox's attributable status in its joint venture with Savoy Pictures Entertainment, Inc., and the other involving the renewal application of Fox's WNYW(TV), New York, New York, and pertaining to Fox's level of alien ownership. Having reviewed NBC's dual allegations, we find they are without merit. First, as to whether Fox holds an attributable interest in its venture with Savoy, the Commission determined that until it rules in its ongoing rule making proceeding concerning attribution rules in MM Docket No. 94-150, 10 FCC Rcd 3606 (1995), Fox's interest in the venture is not attributable. BBC License Subsidiary L.P., FCC 95-179 (released April 27, 1995); BBC License Subsidiary L.P., FCC 95-364 (released August 18, 1995). Based on that holding, grant of this application, therefore, will not place Fox in violation of the Commission's national ownership rule, Section 73.3555(e) of the Rules, which limits a party to ownership and/or control of twelve television stations. Second, in the recently concluded inquiry into Fox's alien ownership, the Commission held that although Fox's level of alien ownership exceeds the 25-percent statutory benchmark of Section 310(b), the unique equities of the case supported a determination that its ownership was in the public interest. See Fox Television Stations, Inc., FCC 95-188 (released May 4, 1995); Fox Television Stations, Inc., FCC 95- 313 (released July 28, 1995). Accordingly, NBC's concern that our action in this proceeding would "prejudge and limit" our action in the alien ownership inquiry is moot. In sum, we find that NBC raises no substantial and material questions of fact so as to preclude grant of the application before us. Task Force's Petition to Deny 3. The Task Force requests that the Commission: (1) hold full evidentiary hearings on WTXF(TV)'s compliance with the Commission's equal employment opportunity (EEO) policy and rules during Paramount's last renewal term; (2) seek clarification of an adverse adjudication involving Irwin Schloss, a former director on the board of Paramount's immediate parent company, and appearing to relate, the Task Force alleges, "to fraud and misrepresentation"; (3) conduct a "public inquiry" into a judgment against Paramount affiliate Blockbuster Entertainment Corporation (Blockbuster), which, according to the Task Force, "seems related to misrepresentation and fraud"; and (4) evaluate at a full evidentiary hearing the allegations of lack of candor raised against Fox in two other proceedings. 4. First, with respect to EEO matters, we note that all of the allegations raised by the Task Force in this proceeding are nearly identical to those raised by the Task Force and others in a joint informal objection against the renewal application of WTXF(TV). See File No. BRCT-940401L3. Those allegations were fully addressed in that proceeding, and the informal objection was denied. See Paramount Stations Group of Philadelphia Inc., MMB, released March 16, 1995. Accordingly, we also deny here the Task Force's EEO-related allegations. 5. Second, in two, since-granted, long-form applications to which Paramount's immediate parent company, Paramount Communications Inc. (Paramount Communications), was a party, it was reported that on July 10, 1989 Marcus Schloss & Company, Inc. was convicted, in United States of America v. Marcus Schloss & Company, Inc. and D. Ronald Yagoda, U.S.D.C. Southern District of New York, Docket No. 88-00796-01 (CSH)(1989), of one count of violating 18 U.S.C. 371 (conspiracy) and of one count of violating 15 U.S.C. 78j(b), 78n(e) and 78ff (securities fraud). See File Nos. BALCT-930621KE (assignment of license of WKBD(TV), Detroit, Michigan, to Paramount affiliate) and BTCCT-930921KG - KM (transfer of control of licenses of all Paramount Communications stations to Viacom Inc.). According to the applications, Irwin Schloss, then a director of Paramount Communications, was president of Marcus Schloss & Company, Inc., but he was not a named defendant in the litigation. Paramount states that since March 10, 1994, when Viacom Inc. assumed control of Paramount Communications, Schloss ceased serving as a director of Paramount Communications. In light of Schloss' departure, therefore, his level of participation in that misconduct, if any, is irrelevant and his impact on Paramount decision-making is moot. Thus, we decline the Task Force's request to seek further clarification of this litigation and find that it will not adversely affect Paramount's qualifications to assign the license for WTXF(TV). 6. Third, in connection with two other, since-granted applications to which Paramount affiliates were party, Viacom Inc. (Viacom), the ultimate parent company of Paramount, notified the Commission, via letter of October 21, 1994, that Blockbuster had recently been merged into Viacom and that Blockbuster had been a co-defendant in an adjudicated civil lawsuit. See File Nos. BALCT-940817KE (long-form assignment of license of WLFL(TV), Raleigh, North Carolina from Paramount affiliate) and BALH-940830GF and BAL- 940830GE) (pro forma assignment of licenses of WJZW(FM), Woodbridge, Virginia, and WCPT, Alexandria, Virginia from Viacom to a subsidiary). The plaintiffs in the suit, according to the Viacom letter, asserted causes of action against Blockbuster for breach of fiduciary duty, conspiracy, breach of contract and intentional interference with contract arising out of the August 1989 acquisition by Blockbuster of the business operations of two limited partnerships. Blockbuster, the letter reported, was found to be jointly and severally liable for compensatory damages, interest and attorneys' fees of approximately $14.8 million and separately liable for exemplary damages of $36.3 million. Viacom also noted that the judge had determined that certain statements related to the acquisition of the two limited partnerships contained in prospectuses prepared by Blockbuster, and incorporated by reference in various filings with the Securities and Exchange Commission (SEC), were false. 7. In this proceeding, Viacom now suggests that the Blockbuster merger into Viacom renders unwarranted any further Commission examination of the litigation or its impact on Viacom's character qualifications because Blockbuster no longer exists as an autonomous entity. Further, it asserts that it reported the adjudication "out of an abundance of caution" even though the Blockbuster litigation is the type of case "that need not be cited in FCC applications." The trial judge's factual findings, Viacom contends, were made in support of the civil judgment for damages awarded to the plaintiff and not as an adjudication of securities law claims. "Importantly," Viacom adds, "the Securities and Exchange Commission has not raised any question about whether any statements in the prospectus might be false or misleading." 8. In determining the character qualifications of broadcast applicants, we consider "adjudications of both criminal and civil violations of law. . . in which a specific finding of fraudulent representation to another governmental unit is made." Policy Regarding Character Qualifications in Broadcast Licensing, (1986 Character Policy Statement) 102 FCC 2d 1179, 1195-96, on reconsideration, 1 FCC Rcd 421 (1986), modified (1990 Character Policy Statement), 5 FCC Rcd 3252 (1990), on reconsideration, 6 FCC Rcd 3448 (1991). Such adjudications also encompass those involving fraudulent statements contained in a filing furnished to a governmental unit, such as a prospectus submitted to the SEC or to one of its state counterparts. Fairness, however, requires that we limit the scope of relevant adjudications to those in which the issue of fraudulent representation to another governmental unit has been adequately raised and thoroughly litigated. Thus, the adjudication must arise out of a claim or cause of action pled by a plaintiff, a charge brought by the state or federal government, or an inquiry or proceeding initiated by a governmental agency directly tied to statements in the securities filings. We believe this construction of "adjudicated," for purposes of determining a licensee's character qualifications, will avoid giving unwarranted effect to the dicta or incidental findings of fact in a court's or agency's judgment or decision. 9. We find that the Blockbuster litigation does not constitute a relevant adjudication. In the Blockbuster litigation, the court made 214 findings of fact, one of which was that Blockbuster "issued a prospectus which contained numerous misrepresentations." Fraud or misrepresentation before the SEC were not, however, among the claims pled by the plaintiff, whose causes of action were limited to breach of fiduciary duty, conspiracy, breach of contract and intentional interference with contract. Rather, the finding was incidentally made to support the court's conclusions of law relating to the plaintiff's claims. Accordingly, we are unable to find that the issue of fraudulent representation was adequately raised and thoroughly adjudicated in the Blockbuster litigation. The Blockbuster litigation, therefore, does not constitute an adjudicated fraudulent representation to a governmental unit and was, therefore, not reportable. Thus, the Blockbuster case raises no substantial and material questions of fact regarding Viacom's basic qualifications and we deny the Task Force's request that we conduct a "public inquiry" into the Blockbuster litigation, which, as pointed out by Viacom, has been appealed by the defendants. 10. Finally, with respect to the Task Force's assertions regarding Fox's alleged misrepresentations to the Commission, we note that those allegations reference issues raised by the Caucus for Media Diversity in two other proceedings: one involving Fox's request for waiver of the broadcast-newspaper cross-ownership rule for its WNYW-TV, New York, New York, and the New York Post; and one involving the renewal of KTTV(TV), Los Angeles. Not only have those allegations been fully addressed and denied by the Commission in the two separate proceedings, but the United States Court of Appeals for the District of Columbia Circuit has reviewed and affirmed both Commission determinations. Fox Television Stations Inc., 8 FCC Rcd 5341, denied on recon., 8 FCC Rcd 8744 (1993), aff'd sub nom. Metropolitan Council of NAACP Branches v. FCC, 46 F.3d 1154 (D.C. Cir. 1995), and Fox Television Stations Inc., 9 FCC Rcd 62 (1993), aff'd sub nom. Rainbow Broadcasting, Inc. v. FCC, No. 94-1060 (D.C. Cir. March 20, 1995). Thus, the request by Task Force for a full evidentiary hearing with respect to Fox's conduct is denied. Request for waiver of duopoly rule 11. In support of its uncontested request for waiver of the duopoly rule, Fox asserts that with respect to the Philadelphia and New York markets, the Commission has "routinely" granted duopoly waivers. Specifically, Fox cites the Commission's approval of the five pairs of Philadelphia-New York television combinations, arguing that approval of the waiver requests in each of those cases was predicated upon the separate, highly competitive Philadelphia and New York markets, the numerous alternative television outlets in the overlap area, the advancement of diversity and economic competition, and the "continuation or improvement of existing service." The factors justifying waiver in those cases, Fox contends, are all present here. 12. First, Fox argues that its WNYW(TV), New York, and WTXF(TV) operate in the separate, competitive markets of Philadelphia and New York, the nation's fourth and first largest television markets, respectively. The overlap area, comprising 5,266 square kilometers and 1.49 million persons, represents 23 percent of the area and 19% of the population of the Grade B contour of WTXF(TV), and 24 percent of the area and eight percent of the population of the Grade B contour of WNYW(TV). This overlap, asserts Fox, is "within the range" of those in previous Philadelphia-New York waiver cases and contains "an abundance" of competitive television services. Based upon its engineering exhibit, Fox states that a total of 35 television stations, in addition to WTXF(TV) and WNYW(TV), serve all or part of the overlap area with a Grade B or better signal. Of these 35 over-the-air signals, notes Fox, 26 will be available to some of the overlap area, while no fewer than nine, excluding WTXF(TV) and WNYW(TV), will be available to any given portion of that area. With respect to the impact on diversity and economic competition, Fox contends that because the two commonly owned stations are not direct competitors and because it will operate the stations in response to the specific needs of their respective markets, grant of the waiver will not "in any way diminish the diversity of local voices or economic competition in either market." Further mitigating any adverse effects of the overlap of the two stations, Fox argues, is the fact that neither WTXF(TV) nor WNYW(TV) is the dominant station in its market, unlike the circumstances present in Capital Cities Communications, Inc., 59 RR 2d 451 (1985), which also involved a Philadelphia-New York combination, but with two dominant, VHF, ABC network-affiliated stations. 13. Finally, as for the "improvement" of service by WTXF(TV), Fox states that it will expand existing coverage by both WTXF(TV) and WNYW(TV) of topics, issues and events that influence or pertain to residents of central and southern New Jersey, particularly those viewers in Camden, a city, Fox maintains, that is one of the nations' poorest. The predominantly African-American population of that city, asserts Fox, is also "impoverished in terms of media service" in that Camden has licensed to it no commercial television station and only two commercial radio stations. To fulfill that objective, Fox pledges that it will establish a position for a New Jersey special reporter dedicated exclusively to coverage of issues and events pertaining to Camden, which is located within the Grade A contour of WTXF(TV), and to central and southern New Jersey. The reporter will be utilized by both stations. Additionally, Fox represents that it will launch, within six months of consummation of WTXF(TV), a weekly, 30-minute public affairs program covering topics of particular interest to African-American and other minority residents of New Jersey. The program, Fox states, will be broadcast on Sunday mornings during the 8:00 a.m.-to-noon time period. 14. Other improvements Fox states that it intends to implement include upgrading WTXF(TV)'s existing transmitter system in order to improve coverage in metropolitan Philadelphia, exploring the feasibility of launching a daily full-service morning news magazine program in the Philadelphia market, and enhancing its newsgathering and news production. Fox concludes that not only will these efforts enhance diversity in Philadelphia and New Jersey, but they will also result in public interest benefits "comparable in scope and significance" to those relied upon by the Commission in Capital Cities, 59 RR 2d at 459, in which the applicant pledged to "enhance" the existing news capability, in H&C Communications, Inc., 9 FCC Rcd 144, 146 (1993), in which the applicant proposed to expand existing local news programming, and in Taft Broadcasting Partners Limited Partnership, 7 FCC Rcd 2854, 2855 (1992), in which the applicant proposed an "increase in resources dedicated to local programming." 15. 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 1476, 1476 n.1, 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 markets, the independence of the stations' operations, and the concentration of economic power resulting from the combination. See, e.g., Iowa State University Broadcasting Corporation, 9 FCC Rcd 481, 487-88 (1993), aff'd sub nom. Iowans for WOI- TV, Inc. v. FCC, 50 F.3d 1096 (D.C. Cir. 1995); H&C Communications, 9 FCC Rcd at 146. After weighing the factors, the Commission considers any public interest benefits proposed by the applicant to determine whether, in 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 Rcd at 487-88. 16. Applying those factors here, we observe first that although the overlap of the Grade B contours of WTXF(TV) and WNYW(TV) is not minimal, nor is it so large as to require a finding that the Philadelphia station and the New York station "serve substantially the same area." See Capital Cities, 59 RR 2d at 465 (quoting WTAR Radio-TV Corp., 31 FCC 2d 812, recon. denied, FCC 70-1251, released December 7, 1970). Further, the overlap area in this case is consistent with that in other duopoly cases involving the Philadelphia and New York markets. See, e.g., Channel 33, Inc., 4 FCC Rcd 7674, 7677 (1988)(overlap area represents 16% of the population located in the Grade B contour of the Philadelphia station and 6% of the population located in the Grade B contour of the New York station); Capital Cities, 59 RR 2d at 461 n.17 (overlap area represents 24.7% of the population located in the Grade B contour of the Philadelphia station and 12.4% of the population located in the Grade B contour of the New York station). 17. Collectively, viewers residing in the WTXF(TV)-WNYW(TV) overlap area have available 35 other broadcast television Grade B or better signals, more than have been available to similarly situated viewers in any other waiver request before the Commission, including those in the commensurately large overlap area of other Philadelphia and New York television stations. See, e.g., Taft Broadcasting, 7 FCC Rcd at 2855 (34 television signals available in overlap area); Channel 33, 4 FCC Rcd at 7678 (22 television signals available); Silver King, 2 FCC Rcd 324, 324 (1986) recon. denied sub nom. Press Broadcasting Co., 3 FCC Rcd 6640 (1988), aff'd sub nom. Office of Communications of United Church of Christ v. FCC, 911 F.2d 803 (D.C. Cir. 1990)(25 television signals available); and Capital Cities, 59 RR 2d at 461 n.17 (32 television signals available). Moreover, all viewers in the overlap area will have available the Grade B or better signals of eleven television stations. Such a tally does not take into account the plethora of other broadcast and nonbroadcast media available in the WTXF(TV)-WNYW(TV) overlap area. As for the separateness of the markets, the Commission has previously determined that the Philadelphia and New York markets are distinct, each with its own "unique service needs . . . ." See, e.g., Taft Broadcasting, 7 FCC Rcd at 2855. 18. Finally, with respect to the public interest benefits proposed, we have, as Fox asserts, found programming commitments to be a factor weighing in favor of grant of a duopoly waiver. H&C Communications, 9 FCC Rcd 144, 146 (1993). However, contrary to Fox's suggestion that the Commission has "routinely" granted waiver requests involving the Philadelphia and New York markets, which result in a large overlap area, we note that the Commission has relied upon the applicant's pledge to expand its programming and physical presence in New Jersey and Delaware, see Capital Cities, 59 RR 2d at 464-65, or upon the sought-after station's financial/bankrupt status, e.g., Taft Broadcasting, 7 FCC Rcd at 2585, Channel 33, Inc., 4 FCC Rcd at 7674. In this case, Fox does not argue that WTXF(TV) is struggling financially, but it does pledge that it will dedicate a news reporter to cover the New Jersey and Camden areas for both stations and will broadcast a 30-minute program on WTXF(TV) each week devoted to topics of interest to African-American and other minority residents of New Jersey. 19. We find that the public interest proposal set forth by the applicant in Capital Cities was more considerable than the one offered here by Fox. However, in addition to the traditional duopoly waiver factors, we acknowledge, as we did in Station Partners, FCC 95- 304 (released July 24, 1995), the unique nature of the combined markets of Philadelphia and New York City. The geographic proximity of the two markets is unmatched by any other combination in the nation's top fifteen markets, yielding an expansive array of television signals in the overlap area of the Grade B contours of a television station in the Philadelphia market, the nation's fourth largest, and a television station in the New York City market, the nation's largest. This proximity renders unavoidable a conflict with the Commission's duopoly rule for an applicant seeking to own and operate a television station in each of these separate and distinct markets. The presence of this additional factor, the uniqueness of the combined markets, in conjunction with Fox's showings with respect to our traditional duopoly waiver factors discussed above, and its tangible public interest proposals, tilt the balance of interests in favor of granting waiver of the duopoly rule in this case. 20. In conclusion, we conclude that the benefits realized from waiving the duopoly rule outweigh any detrimental effects caused by the signal overlap. See Multiple Ownership Rules, 2 RR 2d at 1476-77. We emphasize, however, that our acknowledgement here of the uniqueness of the Philadelphia and New York markets does not signify that we will routinely grant waivers for those markets. Rather, we expect that in addition to satisfying the several factors evaluated in a duopoly waiver request, the applicant will offer concrete public interest benefits, such as expanded and quantifiable local or public affairs programming and/or an increased and substantial physical presence in an underserved area, see, e.g., Capital Cities, 59 RR 2d 451. Thus, on the basis of Fox's representations, which we expect will be fully executed, we find that waiver of the duopoly rule in this case is in the public interest and consistent with the objectives of the duopoly rule, to foster diversity and economic competition. See Multiple Ownership Rules, 2 RR 2d at 1476-77. 21. We further find that the applicants are fully qualified and that a grant of this application would serve the public interest, convenience and necessity. Accordingly, IT IS ORDERED that the petition to deny filed by NBC, IS DISMISSED; and that the petition to deny filed by the Task Force IS DENIED. 22. IT IS FURTHER ORDERED that the request of Fox for waiver of the duopoly rule, Section 73.3555(b), to permit common ownership of television stations WTXF(TV) and WNYW(TV), IS GRANTED; and that the application for consent to the assignment of license for WTXF(TV) from Paramount Stations Group of Philadelphia Inc. to Fox Television Stations Inc., BALCT-940928KF, IS GRANTED, subject to the condition that the transaction underlying this application not be consummated unless acquisition by Fox of WTXF(TV) is consistent with the Commission's national ownership cap of twelve stations, Section 73.3555(e) of the Commission's Rules. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary