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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In re: Applications of ) ) VIACOM INTERNATIONAL, INC. ) Transferor ) ) and ) ) EVERGREEN MEDIA CORPORATION ) Transferee ) ) For Consent to the Transfer of Control of ) ) Riverside Broadcasting Co., Inc., ) File No. BTCH-970221GE Licensee of WLTW(FM), New York, NY ) ) WAQX, Inc. ) File No. BTCH-970221GJ Licensee of WAQX(FM), New York, NY ) ) WMZQ, Inc. ) Licensee of WMZQ-FM, Washington, D.C.) File Nos. BTCH-970221GG and WZHF(AM), Arlington, Virginia ) and BTC-970221GF ) Viacom Broadcasting East, Inc. ) WBZS(AM), Alexandria, Virginia ) File Nos. BTC-970221GH and WJZW-FM, Woodbridge, Virginia ) and BTCH-970221GI ) and ) ) EVERGREEN MEDIA CORPORATION ) Transferor ) ) and ) ) CHANCELLOR MEDIA CORPORATION ) Transferee ) ) For Consent to Transfer of Control of) ) WMZQ, Inc. ) File No. BTCH-970430HA WMZQ-FM, Washington, D.C. ) ) and ) ) VIACOM BROADCASTING EAST, INC. ) Assignor ) ) and ) ) WMAL, INC. ) Assignee ) ) For Consent to Assignment of License of) ) WJZW(FM), Woodbridge, Virginia ) File No. BALH-970421GE ) MEMORANDUM OPINION AND ORDER Adopted: June 27, 1997 Released: June 27, 1997 By the Chief, Mass Media Bureau: 1. Viacom International, Inc. ("Viacom") seeks to transfer to Evergreen Media Corporation ("Evergreen") control of six radio stations -- four in the Washington, D.C. area and two in New York City. The Rainbow-PUSH Coalition ("Rainbow") filed timely petitions against the Washington, D.C. transactions. Rainbow contests the transfer of the Washington area stations from Viacom to Evergreen, and also Evergreen's further transfer of two of those stations -- WMZQ-FM, Washington, D.C. to Chancellor Media Corporation and WJZW(FM), Woodbridge, Virginia to WMAL, Inc., a subsidiary of ABC, Inc. ("ABC"). Inner City Press/Community on the Move ("ICP") filed a timely petition against the New York applications. 2. In addition to Viacom's sale of radio stations to Evergreen, we also have the following related matters pending: (1) Viacom's proposed transfer of four radio stations to Chancellor Broadcasting Company ("Chancellor"), which is uncontested; (2) a proposed merger between Evergreen and Chancellor; and (3) several spin-off applications, including the proposed sale of WJZW(FM), Woodbridge, Virginia to ABC. Those sales applications, filed in anticipation of the potential merger, propose to spin-off stations located in certain markets where the combined holdings of Evergreen and Chancellor would otherwise violate local radio ownership limits (47 C.F.R.  73.3555). This document addresses only the contested sales of stations currently controlled by Viacom. Settlement agreements seeking to withdraw the petitions have now been filed. For the reasons discussed below, we approve the settlement agreements and grant the applications to (1) transfer control of the Viacom stations in New York and in the Washington, D.C. area to Evergreen, and (2) assign the license of WJZW(FM), Woodbridge, Virginia from Viacom Broadcasting East, Inc. to ABC. The application for transfer of WMZQ-FM, Washington, D.C. to Chancellor Media Corporation is part of the proposed Evergreen/Chancellor merger and will remain deferred pending our consideration of the entire merger proposal. Washington, D.C. Transactions 3. Evergreen currently controls 2 AM and 2 FM stations licensed to Washington, D.C. [WTOP(AM), WWRC(AM), WGAY(FM), and WASH(FM)]. It proposes to acquire control from Viacom of the following additional 2 AM and 2 FM stations in the Washington, D.C. area: WZHF(AM), Arlington, Virginia; WBZS(AM), Alexandria, Virginia; WMZQ-FM, Washington, D.C.; and WJZW-FM, Woodbridge, Virginia. Evergreen's proposed control of 4 AM and 4 FM stations in the Washington, D.C. area is consistent with our local ownership rules. 4. Rainbow filed a Petition for Special Relief, which asked us to deny the sale of the four Washington, D.C. stations from Viacom to Evergreen. It also made similar requests against Evergreen's application to spin-off WJZW-FM to ABC, and against the application for Chancellor Media Corporation to acquire WMZQ-FM as part of the Evergreen/Chancellor merger. Rainbow argued that Viacom may have misrepresented itself to the Commission, by failing to satisfy a promise it made in 1994 when it first acquired the Washington, D.C. stations. Specifically, in seeking a temporary waiver of the one-to-a-market rule to permit Viacom to control a TV/2AM/2FM combination, and to expedite action on Viacom's applications to merge with Paramount Communications Inc., Viacom stated that it would divest one of the AM and one of the FM stations in the Washington, D.C. area. In so doing, Viacom also pledged to "undertake an affirmative action effort to increase the possibility of purchase of one or both of the stations by a minority-controlled entity." The Commission relied on that promise in granting Viacom a temporary 18-month waiver of our one-to-a-market rule, 47 C.F.R.  73.355(c), and in approving the Paramount merger. See Viacom, Inc., 9 FCC Rcd 1577 (1994) ("Paramount Decision"). Viacom subsequently requested an extension of the 18-month waiver to a period of six months after the conclusion of our pending proceeding reexamining the one-to-a-market rule. See Further Notice of Proposed Rule Making, MM Docket No. 91-221, 10 FCC Rcd 3524 (1995). Rainbow, in the present proceeding, expressed concern that Viacom held the stations beyond 18 months and sought to transfer all of its Washington, D.C. area stations to Evergreen without having marketed the stations to minorities. It believed that the transactions in question would, therefore, negatively impact the potential for minority ownership of Washington, D.C. broadcast stations. Since the filing of Rainbow's initial petition, Evergreen has filed applications proposing to sell to a minority purchaser two of the Washington, D.C. area AM stations that it would acquire from Viacom (WZHF(AM), Arlington, Virginia and WBZS(AM), Alexandria, Virginia). As noted, a settlement agreement seeking to withdraw the petitions is now before us. Washington Settlement 5. Viacom, Evergreen, and Chancellor have entered into a settlement agreement with Rainbow, whereby the companies agree to spend two million dollars to enhance opportunities for minority participation in broadcasting. There are five major components of the settlement agreement. (1) Research. First, the companies would fund three research studies on minority broadcast ownership to be performed by independent universities at a total cost of $400,000. (2) Public Education and Advocacy. Second, the companies would provide $600,000 to fund a public education and advocacy effort on the subject of minority media entrepreneurship. This would involve the participation of the business community, and would be accomplished through a newly-created entity, tentatively called the Minority Broadcast Education and Advocacy Fund. The organization's board of directors will be composed equally of minority broadcasters and non-minority broadcasters. Rainbow could participate without compensation but could not control the board. (3) Conferences and Implementation. Third, the companies would initiate a national campaign to educate the public about the value of minority media entrepreneurship in promoting diversity and First Amendment values. This would be accomplished primarily by holding several large conferences. The companies would provide $880,000 to an Independent Trustee, who would have the sole discretion to administer the funds and to choose an organization or organizations that would plan and produce the conferences. The Honorable David Dinkins, former Mayor of the City of New York, has agreed to serve as the trustee. Some of the funds would also be available for various steps that may be needed to implement other provisions of the settlement, such as providing assistance to the research universities if they request access to minority media entreprenuers or related documents. (4) Scholarships. Fourth, the companies would provide $80,000 in scholarship assistance to the African American Media Incubator, an existing nonprofit Washington, D.C. broadcast training school that is not affiliated with Rainbow. (5) Reimbursement of Expenses. Finally, the companies would partially reimburse Rainbow for its reasonable and prudent expenses in prosecuting this case. The settlement allocates $40,000 for this purpose. Rainbow has submitted documentation demonstrating reasonable and prudent expenses greater than those that would be reimbursed ($48,646 of legal fees for its two attorneys who worked on this case, and $3,956 of out-of-pocket expenses). 6. In deciding whether to approve any settlement, we are guided by Section 73.3588 of our rules, which was designed to prevent the use of petitions as vehicles for undue enrichment of petitioners at the expense of broadcast licensees. See Abuses of the Commission's Processes, 5 FCC Rcd 3911 (1990). Under the rule and the policy on which it is based, no petitioner nor any persons related to a petitioner may receive a direct monetary payment, an indirect financial benefit, or any combination thereof in excess of the petitioner's legitimate and prudent expenses. Id. at 3913. See 47 C.F.R.  73.3588. We also consider whether reforms in station programming, employment, or other non-financial policies resulting from a settlement will inure to the financial benefit of a petitioner. If an unrelated third party will be carrying out the reform, the Commission presumes that the reform is consistent with the public interest, i.e., is not an abuse of our processes. However, if the petitioner or a person related to the petitioner will be receiving a benefit or carrying out a service for a fee, there is a rebuttable presumption that the arrangement is contrary to the public interest. Abuses of the Commission's Processes, 5 FCC Rcd at 3913. That presumption may be rebutted on a case-by-case basis, by clear and convincing evidence that the agreement does, in fact, comport with the public interest. Id. 7. We find that the Settlement Agreement between Rainbow, Viacom, Evergreen, and Chancellor is consistent with our policies and with the public interest. The settlement enhances the potential for minority broadcast ownership, which we have in the past recognized as furthering the public interest. We also find the settlement consistent with our policies against settlement abuse. The research efforts will be conducted by independent universities. The advocacy efforts will be conducted by a new organization in which Rainbow may participate without compensation, but cannot control. The funds for conference planning and related educational activities will be administered by an independent trustee, with no business or familial relationship to Rainbow, who in his sole discretion will select the people or organizations he believes would be most effective to administer these activities. The scholarship assistance will benefit an established nonprofit minority training school unrelated to petitioners. The reimbursement for legal costs does not exceed Rainbow's legitimate and prudent expenses. Accordingly, we have no objection to the terms of the Settlement Agreement, and will allow Rainbow to withdraw its petitions. Underlying Issues 8. Although Rainbow has satisfied the requirements for withdrawal of its petitions, it is our policy to review independently issues raised in such filings if they may be relevant to a broadcast applicant's basic qualifications. Here, Rainbow raises two primary issues directed at Viacom's basic qualifications. First, it questions whether Viacom made a pledge to us, in the Paramount proceeding, without an intent to carry it out. Second, it questions whether Viacom lacked candor in filing a request for extension of its waiver without disclosing its previous pledge concerning the marketing of stations to minorities. 9. Rainbow raises potentially serious questions about Viacom's conduct. Based on the totality of the circumstances in this case, however, we find no misrepresentation or lack of candor. Viacom submits sworn affidavits of Viacom officers, establishing that its managers held internal discussions during the first week following the Paramount Decision to establish a time line for marketing its Washington, D.C. stations to minorities. Viacom claims that it planned to operate the Washington, D.C. stations for about one year to improve them, and then to market the stations to minorities within the last six months of the waiver period. Viacom concedes that it never undertook such marketing efforts, but attributes this to changed circumstances, including various Commission decisions and proposals occurring after the Paramount Decision. For example, the Commission proposed to possibly eliminate or modify the one-to-a-market rule in a television ownership rule making proceeding. See Further Notice of Proposed Rule Making, MM Docket No. 91-221, 10 FCC Rcd 3524 (1995). The Commission also issued its first permanent waiver to allow another party to own a TV/2AM/2FM combination. BREM Broadcasting, 9 FCC Rcd 1333 (1994) (released one week after the Viacom/Paramount waiver). Viacom filed a request for extension of the temporary waiver five months prior to expiration, in which it brought these circumstances to the Commission's attention without specifically noting the earlier pledge. As a matter of practice, a better course would have been for Viacom to disclose the pledge in its extension request. Its failure to do so, however, does not rise to a lack of candor. Although Viacom's extension request was silent about the pledge to market to minorities, that information was a matter of record, and there is no indication that the non- inclusion of this information in the extension request was intended to deceive the Commission. Considering all of these factors, we do not believe a substantial and material question of fact has been raised concerning the genuineness of Viacom's initial intent in pledging to market its stations to minorities, or concerning its intent in failing to specifically note its minority pledge in its extension request. See generally Fox Television Stations, Inc., 10 FCC Rcd 8452 (1995) 10. Although Viacom's specific undertaking described in its waiver request has not been fully realized, Viacom (with the assistance of Evergreen and Chancellor) has now taken several important steps to accomplish the purpose of its original pledge by furthering the potential for minority broadcast ownership in Washington, D.C., as well as nationwide. We remain concerned as a general matter, however, that specific undertakings recited to the Commission and relied upon as the basis for Commission action not go unrealized without express Commission consent. Accordingly, we underscore the importance that we place on commitments or promises made to the Commission. A licensee operating under such conditions is not relieved of its obligations, even in light of changed circumstances, unless the Commission expressly removes the condition or it is removed by operation of law. We note that we are monitoring and intend to continue monitoring any request to extend the time for coming into compliance with Commission or Bureau imposed conditions on authorizations. New York Transactions 11. Next, we turn to Evergreen's proposed New York City radio acquisitions. Evergreen currently controls WKTU(FM), Lake Success, New York and is seeking herein to acquire control of WLTW(FM) and WAQX(FM), New York, New York. Evergreen's proposed control of three New York City FM stations is consistent with our local ownership rules. 12. ICP raised three issues in its Petition to Deny the New York transfers: (1) that Evergreen lacks the character qualifications to be a Commission licensee because its president allegedly engaged in insider trading; (2) that Evergreen's proposed control of two more radio stations will create anticompetitive market concentration; and (3) that Viacom's existing and Evergreen's proposed methods for hiring minorities are insufficient under our Equal Employment Opportunity (EEO) Rule, 47 C.F.R.  73.2080. On May 27, 1997, ICP, Viacom, Evergreen, and Chancellor filed a settlement agreement, to resolve these matters between the parties. 13. The settlement agreement provides for Evergreen and Chancellor to: (1) expand their recruitment sources for the New York stations with ICP's unpaid help in identifying sources; (2) establish internship and training programs in connection with Hostos College and Morris High School, which are not affiliated with ICP; (3) present weekly public affairs programming and public service announcements focused on issues of concern to the minority community; (4) provide a discounted bank of advertising time for businesses located in the South Bronx and Upper Manhattan; and (5) reimburse ICP for $6,125 of expenses incurred in this proceeding. 14. We find the settlement agreement consistent with our policies on settlements which, as described earlier, provide for reimbursement of a petitioner's legitimate expenses and for non- financial reforms in which petitioners will not receive a benefit. We note that there is no specific prohibition on ICP members availing themselves of various advertising and internship opportunities created in the settlement, but because any such benefits would be incidental to the availability of those benefits to the entire minority population of the Bronx and Upper Manhattan regions of New York, we find the settlement consistent with precedent. See WPGC, DA 94-533 (MMB, May 20, 1994). Accordingly, we will approve the settlement. 15. As discussed earlier, regardless of any settlement, it is our policy to consider whether issues raised in a petition would be an impediment to grant. We find no such impediment. Specifically, we note that the allegations of insider trading involves unadjudicated non-FCC matters falling outside the scope of our character policy. See Policy Regarding Character Qualifications in Broadcast Licensing, Gen Docket No. 81-500, 102 FCC 2d 1179, 1204-05 (1986), modified 5 FCC Rcd 3252 (1990). With regard to allegations of media concentration, the Federal Trade Commission, pursuant to its responsibilities under the Hart-Scott-Rodino Act, has expressed no objection to the transaction. Moreover, with respect to local ownership, our review of the record in this case reveals no circumstances that would preclude grant of the application. Finally, with respect to EEO matters, we ordinarily review a licensee's performance under our EEO Rule at renewal time, and not when evaluating transfer applications. Metromedia Inc., 98 FCC 2d 300, 302 n.2 (1984). Nevertheless, we have considered the allegations here to satisfy ourselves that they do not justify a departure from our usual practice. Based on our review of the arguments in the petition and responsive pleadings, Viacom's annual employment reports, and Evergreen's EEO Model Program Report, we conclude that ICP has not raised specific allegations of discrimination or a violation of our EEO Rule sufficient to show that a grant of the New York applications would be prima facie inconsistent with the public interest, as required by 47 U.S.C.  309(d)(1). See Astroline Communications Co. v. FCC, 857 F.2d 1556 (D.C. Cir. 1988). As such, the issues raised by ICP do not bear on Viacom's ability to sell or Evergreen's qualifications to acquire the subject New York stations. ORDERING CLAUSES 16. Accordingly, IT IS ORDERED that settlement agreements filed by the Rainbow- PUSH Coalition and Inner City Press/Community on the Move ARE APPROVED and their petitions ARE DISMISSED. 17. IT IS FURTHER ORDERED that, having found the applicants qualified and that the transactions would serve the public interest, the applications to transfer control of WLTW(FM) and WAQX(FM), New York, New York from Viacom International to Evergreen Media Corporation (File Nos. BTCH-970221GE and BTCH-970221GJ) ARE GRANTED. 18. IT IS FURTHER ORDERED that, having found the applicants qualified and that the transactions would serve the public interest, the applications to transfer control of Washington, D.C. area stations WMZQ-FM, WZHF(AM), WBZS(AM), and WJZW-FM from Viacom International to Evergreen Media Corporation (File Nos. BTCH-970221GF through GI) ARE GRANTED. 19. IT IS FURTHER ORDERED that, having found the applicants qualified and that the transaction would serve the public interest, the application to assign the license of WJZW(FM), Woodbridge, Virginia from Viacom Broadcasting East, Inc. to WMAL, Inc. (File No. BALH-970421GE) IS GRANTED contingent on the prior consummation of the transfer of control of Viacom Broadcasting East, Inc. to Evergreen (File No. BTCH- 970221GI). 20. IT IS FURTHER ORDERED that Viacom's May 5, 1995 request for extension of its Washington, D.C. one-to-a-market waiver IS DISMISSED AS MOOT. FEDERAL COMMUNICATIONS COMMISSION Roy J. Stewart Chief, Mass Media Bureau