******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. 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 ) ) E.W.S. NEWS CORP. ) (Assignor) ) ) and ) File Nos. BALCT-970918IA ) BAL-970918IB BHI SUB, INC. ) (Assignee) ) ) For Consent to Assign the Licenses of) Stations KENS-TV and KENS(AM), ) San Antonio, Texas ) MEMORANDUM OPINION AND ORDER Adopted: December 2, 1997 Released: December 3, 1997 By the Chief, Mass Media Bureau: 1. The Commission, by the Chief, Mass Media Bureau, acting pursuant to delegated authority, has before it the above-captioned applications to assign the licenses of stations KENS-TV, Channel 5 (CBS) and KENS(AM), San Antonio, Texas, from E.W.S. News Corp. ("E.W.S.") to BHI Sub, Inc. ("BHI"). In order to continue the common ownership and operation of the stations, BHI seeks a permanent waiver of 47 C.F.R.  73.3555(c), the Commission's one-to-a-market rule, which generally proscribes the common ownership of television and radio stations in the same market. 2. Stations KENS-TV and KENS(AM) have been jointly owned and operated since 1993, when the Commission granted Harte-Hanks Television, Inc., then-licensee of KENS-TV, a waiver of the one-to-a-market rule to permit its acquisition of KENS(AM). Hispanic Radio Broadcasters, 8 FCC Rcd 6406 (1993). Most recently, we granted The E.W. Scripps Company ("Scripps"), E.W.S.'s corporate parent, a waiver of the rule in connection with the grant of the applications to transfer control of the television and radio stations from the shareholders of Harte-Hanks Communications, Inc. to Scripps. Houston H. Harte, DA 97-1913 (released Sept. 5, 1997). As we noted in Houston H. Harte, although no new one-to-a-market combination will be created here, the proposed assignment requires a renewed one-to-a-market showing based on current market conditions. Id. at  2. For the reasons discussed below, we will grant the waiver request and the assignment applications. REQUEST FOR WAIVER OF THE ONE-TO-A-MARKET RULE 3. BHI bases its waiver request on the one-to-a-market waiver standards adopted in the Second Report and Order in MM Docket 87-7, 4 FCC Rcd 1741 (1989) ("Second Report and Order"), recon. granted in part and denied in part, 4 FCC Rcd 6489 (1989) ("Second Report and Order Recon."). In accordance with these standards, the Commission presumptively favors waiver requests involving: (a) stations serving the top 25 markets where at least 30 separately owned, operated and controlled stations will remain following the proposed combination ("top 25 market/30 voice standard"); or (b) "failed" stations, i.e., stations which have not been operating for a substantial period of time (four months or more) or are involved in bankruptcy proceedings. Otherwise, waiver requests must be evaluated under the more rigorous case-by-case standard. See 47 C.F.R.  73.3555(c), Note 7. BHI submits its waiver request pursuant to the case-by-case standard because San Antonio is the 38th largest DMA in the country and KENS-TV and KENS(AM) are not failed stations. 4. Under the case-by-case standard, the Commission makes a public interest determination by weighing five factors: (1) the potential public benefits of joint operation of the facilities, such as economies of scale, cost savings, and programming and service benefits; (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. 5. Benefits of Joint Operation. With respect to the benefits of joint operation of KENS-TV and KENS(AM), BHI reiterates many of the points made by Scripps in support of its request for waiver of the one-to-a-market rule. Like Scripps, BHI asserts that common ownership and operation of the stations has resulted in substantial economic efficiencies. Adopting the findings of the report submitted by Harte-Hanks Television, Inc. CFO Susan Lynch in connection with the previous waiver request, BHI maintains that joint operation achieves cost savings of approximately $225,000 per year. Houston H. Harte, supra at  5. BHI asserts that joint operation has allowed KENS(AM) to enjoy other economic benefits as well. For example, KENS(AM) previously operated with no full- time technical staff, but now has the benefit of ten technical staff employees of KENS-TV, valued at approximately $300,000. KENS(AM) also enjoys regular free promotions on KENS-TV, valued at approximately $88,000 annually. Additionally, BHI notes that KENS(AM) has access to the 59- person staff of KENS-TV's "Eyewitness News", whereas as a stand-alone facility KENS(AM) had a news staff of only one person. According to BHI, supporting a staff of 59 people would cost KENS(AM) an estimated $3.6 million per year if the station were operated independently. BHI also states that KENS(AM) shares KENS-TV's news subscription services, including Associated Press, CBS Southwest, Conus and Bloomberg News, valued at approximately $215,000 per year. 6. BHI points out that these cost savings benefit the residents of San Antonio by enabling KENS(AM) to produce more and better public interest programming. BHI notes, as did Scripps in the previous waiver request, that the amount of air time devoted to locally-produced news and public affairs programming increased from 10 hours per week when KENS(AM) was operated as a stand- alone, to its current level of 71 hours per week, including a simulcast of the audio portion of KENS- TV's local news, as well as shows addressing health issues, sports, parenting, travel, gardening, physical disabilities, and aging. BHI states that it intends to continue these and similar local programming initiatives when it acquires KENS-TV and KENS(AM). Additionally, BHI maintains that under its ownership, the stations will benefit from its commitment to "journalistic excellence" and public affairs programming. To illustrate, BHI notes that in 1996, its parent company Belo produced a series of television programs in conjunction with the Public Broadcasting Service which addressed key issues in the campaigns of candidates for the U.S. Senate, House of Representatives and governor. BHI further states that Belo maintains a news bureau in Washington, D.C. which serves as a resource for all Belo stations. 7. Types of Facilities. KENS-TV, an affiliate of the CBS television network, is a VHF television station operating on Channel 5 with 100 kW ERP visual and 10 kW ERP aural at an antenna height above average terrain of 1,401 feet. KENS(AM) is a full-time Class B facility licensed to operate with 10 kW daytime and one kW nighttime, both with a directional pattern. BHI contends that as a directional AM station with limited nighttime power, KENS(AM) is an inherently weaker radio competitor than the other types of radio facilities which could comprise a television- radio combination under the one-to-a-market waiver policy. BHI maintains that there is "no danger" that the proposed combination could dominate the market from a technical standpoint. 8. Other Media Outlets. BHI asserts that neither it nor its parent company Belo owns any broadcast stations in the San Antonio area, nor do they hold any ownership interest in any cable system, newspaper, or other mass media outlet in the San Antonio area. 9. Financial Difficulties. BHI does not contend that KENS-TV is experiencing financial hardship. With respect to KENS(AM), BHI refers to Houston H. Harte in which we noted that after many years of operating in the red, the station is projecting a net gain for 1997. Houston H. Harte, supra at  15. Additionally, BHI points out that we found the station's profits insufficient to replicate the economic benefits produced as a result of common ownership. Id. Finally, BHI quotes our conclusion that "[e]ven if KENS(AM) could survive as a stand-alone station, we believe that the additional costs it would incur if the joint operation and ownership with KENS-TV were not continued would prevent it from maintaining its current level of local programming." Id. 10. Effect on Diversity and Competition. BHI contends that the proposed acquisition will have no significant effect on either the diversity of available media outlets or the level of economic competition in the San Antonio market. San Antonio is the 38th largest DMA, consisting of 641,740 television households. According to BHI, after consummation of the proposed transactions, San Antonio would continue to be served 11 television stations (5 VHF, 6 UHF) and 43 radio stations (20 AM, 23 FM) operated by at least 34 independent entities. BHI further states that a wide variety of other media are available in San Antonio, including 21 cable operators reaching 65% of total households, five daily newspapers, 36 weekly newspapers, and six MDS and MMDS operators. Lastly, BHI asserts that the Commission has previously approved one-to-a-market waivers under similar market conditions. 11. Discussion. The Commission's goal in evaluating a case-by-case request for waiver of the one-to-a-market rule 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." Second Report and Order Recon., 4 FCC Rcd at 6491. We believe that BHI's showing in support of its request for waiver of that rule satisfies our case-by-case criteria. Additionally, we are persuaded that continued common ownership of KENS-TV and KENS(AM) would serve the public interest without adversely affecting competition and diversity in the San Antonio market. 12. As to the first criterion, the potential public benefits of joint operation, the Commission considers whether the proposed radio-television combination will create, inter alia, economies of scale, cost savings, and programming and service benefits. Second Report and Order, 4 FCC Rcd at 1753. BHI's showing on this point largely incorporates the showing made by Scripps in the previous waiver request, and we once again find that the evidence adequately demonstrates the economic efficiencies and public service benefits of common ownership. We note that BHI intends to continue the local programming initiatives which have allowed KENS(AM) to increase its local programming from 10 to 71 hours per week and to broadcast shows on a variety of topics of interest to the San Antonio community. As we stated in Houston H. Harte, we believe "that at least some portion of the programming benefits achieved through the common ownership of KENS(AM) and KENS-TV would be lost should we require KENS(AM) to be operated apart from KENS-TV." Houston H. Harte, supra at  12. 13. With respect to the second criterion, the types of facilities at issue, we reiterate our finding that although the facilities of KENS(AM) and KENS-TV are not insubstantial, "[a]s the level of diversity and competition in a market increases, our concern with this aspect of a proposed combination diminishes." Id. at  13 (quoting Great American Television and Radio Co., 4 FCC Rcd 6347, 6350 (1989)). We believe that the levels of diversity and competition in San Antonio allay any concern we might have over continued joint ownership of the stations. As to the third prong of the analysis, we note that BHI does not own any other media outlets in the San Antonio market, further evidence that the proposed acquisition will not have a significant adverse effect on diversity or competition in the market. Id. at  14 (citing Second Report and Order, 4 FCC Rcd at 1753). 14. In regard to the fourth criterion, the financial condition of the stations, we find, as we did in Houston H. Harte, that KENS-TV and KENS(AM) are not currently financially distressed stations. Id. at  15. However, in evaluating waiver requests under the case-by-case criteria, "[n]ot all of the factors mentioned will be relevant in every case." Id. (quoting Second Report and Order Recon., 4 FCC Rcd at 6491). We continue to recognize, however, that KENS(AM) has a "long history of losing money" and, even if the radio station could survive as a stand-alone station, the additional costs of operating independently would prevent the station from maintaining its current level of local programming. Id. 15. Moreover, BHI has demonstrated that continued joint ownership and operation of the stations will not diminish competition or diversity in the San Antonio market. Indicia of the level of diversity 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. We have independently verified that there are 11 television stations (5 VHF, 6 UHF) and 38 radio stations (19 AM, 19 FM, including six non-commercial stations) in the San Antonio market. After consummation of the proposed transaction, more than 30 independent voices will continue to serve San Antonio. We continue to believe that there are more than enough independent broadcast voices in San Antonio to assuage concern over the continued joint ownership and operation of the stations. Id. at  16. In addition, we find that San Antonio is well-served by daily and weekly newspapers, cable and wireless cable. Finally, since grant of this application will preserve an existing combination, we do not believe that continued joint ownership of the stations will decrease the level of diversity and competition in the market. Id. (citing The Glyn Wyler and Karl O. Wyler, Sr. Foundation, 12 FCC Rcd 10493 (1997)). 16. With respect to economic concentration and competition, our independent study of the market indicates that BHI will have a significant share of the radio and television advertising revenue in San Antonio after consummation of the proposed acquisition. Although KENS(AM) has only a .32% share of the radio advertising revenue in the market, KENS-TV has an 18.85% share of the television advertising revenue, the third highest share in the San Antonio market. Together, KENS- TV and KENS(AM) receive a combined television and radio advertising share of 12.53%. Since BHI does not own any other broadcast media in the market, after consummation of the proposed transaction, BHI will have a 12.53% combined advertising share for radio and television. As we stated in Houston H. Harte, this level of concentration, while not insubstantial, does not pose a risk to competition that would warrant denial of BHI' requested waiver. Houston H. Harte, supra at  17. See Samuel M. Altdoerffer, III, 12 FCC Rcd 9945 (1997) (13.5% combined advertising share). For the foregoing reasons, we believe that the public interest benefits of continuing common ownership and operation of KENS-TV and KENS(AM) justify granting BHI's request for waiver of the one-to-a-market rule. CONCLUSION 17. Having determined that BHI Sub, Inc. is qualified in all respects, we find that grant of the assignment applications will serve the public interest, convenience and necessity. 18. Accordingly, IT IS ORDERED, That the request for a permanent waiver of the Commission's one-to-a-market rule, 47 C.F.R.  73.3555(c), to allow BHI common ownership and operation of KENS-TV and KENS(AM) IS GRANTED. 19. IT IS FURTHER ORDERED, That the above-captioned applications to assign the licenses of stations KENS-TV and KENS(AM), San Antonio, Texas, from E.W.S. News Corp. to BHI Sub, Inc. (File Nos. BALCT-970918IA and BAL-970918IB ) ARE GRANTED. FEDERAL COMMUNICATIONS COMMISSION Roy J. Stewart Chief, Mass Media Bureau