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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 ) ) ARGYLE TELEVISION, INC. ) (Transferor) ) ) and )File Nos.BTCCT-970407IG-IN, IP )BTCTTV-970407IQ THE HEARST CORPORATION ) (Transferee) ) ) For Consent to the Transfer of Control of) Licenses of Stations: ) WLWT(TV), Cincinnati, Ohio ) KOCO-TV, Oklahoma City, Oklahoma) WNAC-TV, Providence, Rhode Island) KITV(TV), Honolulu, Hawaii ) WAPT(TV), Jackson, Mississippi ) KHBS(TV), Ft. Smith, Arkansas ) KHOG-TV, Fayetteville, Arkansas ) KMAU-TV, Wailuku, Hawaii ) KHVO-TV, Hilo, Hawaii ) K51BB, Lihue, Hawaii ) MEMORANDUM OPINION AND ORDER Adopted: July 15, 1997 Released: July 16, 1997 By the Commission: 1.The Commission has before it for consideration the above-captioned applications seeking consent to the transfer of control of Argyle Television, Inc. (Argyle) to The Hearst Corporation (Hearst). Pursuant to a plan of merger, Argyle Television, Inc. will become Hearst- Argyle Television, Inc., a wholly-owned subsidiary of Hearst. These applications are not opposed. 2.Hearst is the licensee of the following six television stations: WCVB-TV, Channel 5 (ABC), Boston, Massachusetts; WTAE-TV, Channel 4 (ABC), Pittsburgh, Pennsylvania; WBAL- TV, Channel 11 (NBC), Baltimore, Maryland; KMBC-TV, Channel 9 (ABC), Kansas City, Missouri; WDTN(TV), Channel 2 (ABC), Dayton, Ohio; and WISN-TV, Channel 12 (ABC), Milwaukee, Wisconsin. Argyle controls nine television stations, including WNAC-TV, Channel 64 (FOX), Providence, Rhode Island and WLWT(TV), Channel 5 (NBC), Cincinnati, Ohio. After the proposed transfer of control, the Grade B contours of certain stations controlled by Hearst will overlap in a manner conflicting with the Commission's television duopoly rule, Sections 73.3555(b), which proscribes common ownership of stations whose Grade B contours overlap. Specifically, the Grade B contours of WCVB-TV and Argyle's WNAC-TV, Providence, RI, overlap; and the Grade B contour of WDTN(TV) overlaps with the Grade B contour of Argyle's WLWT(TV). Accordingly, Hearst has requested a temporary six month waiver of that rule to divest WNAC-TV and WDTN(TV). In addition, Argyle operates stations KMAU-TV, Wailuku, Hawaii and KHVO-TV, Hilo, Hawaii as satellites of station KITV(TV), Honolulu, Hawaii; and KHOG-TV, Fayetteville, Arkansas as a satellite of KHBS(TV), Fort Smith, Arkansas. Accordingly, Hearst also requests Commission approval to continue these satellite operations. DUOPOLY WAIVERS 3. The Hearst-Argyle merger will result in common ownership of 15 television stations. Generally, Hearst contends that the proposed temporary waivers will promote the public interest by facilitating a multi-station transaction. Further, as detailed below, Hearst asserts that grant of the requested temporary waivers would be consistent with prior duopoly waivers the Commission has found to be in the public interest. Waiver Showing Boston/Providence 4. Station WCVB-TV, Channel 5 (ABC), is located in the Boston DMA, the sixth largest television market, while WNAC-TV, Channel 64 (FOX), is located in the Providence, RI- New Bedford, MA DMA, the 47th ranked television market. Although located in separate DMAs, as demonstrated in the Hearst engineering exhibit, the overlap area created by the intersection of the Grade B contours of WCVB-TV, Boston, Massachusetts and WNAC-TV, Providence, Rhode Island, constitutes 97.6% of the population and 94.2% of the area within the Grade B contour of WNAC-TV and 61% of the population and 44.2% of the area within the Grade B contour of WCVB-TV. Further, the stations Grade A and City Grade contours overlap substantially. Hearst acknowledges that a substantial overlap exists; however, it points to the limited duration of the waiver and contends that the Commission has "consistently granted temporary waivers of the duopoly rule notwithstanding the extent of the overlap." 5. Regarding the concentration of economic power in the overlap area, Hearst contends that the stations are licensed to communities that are 52 miles apart and serve separate markets that are geographically and economically distinct. Hearst pledges to continue to operate the stations independently. Each station will continue to have its own local sales staff, maintain separate programming and news staffs, and generally "operate in a manner that reflects the two stations' current separate operating status." 6.Hearst also states that the proposed overlap area is served by a "multitude" of competing media voices. Within the overlap area, 34 television stations provide Grade B service and all of the overlap receives at least six other Grade B Services, with a maximum in any one area of 23 services. Additionally, ten or more Grade B signals are received by 88% of the overlap area. In addition to WCVB-TV, 19 other television stations serve the Boston DMA and the market's cable penetration is 77%. In the Providence DMA, a total of seven television stations serve the market, which also enjoys a cable penetration of 76%. Finally, Hearst notes that the Commission has previously recognized the diversity within the Boston and Providence DMAs and has approved a temporary duopoly waiver under very similar circumstances, citing Stockholders of CBS, Inc., 11 FCC Rcd 3733 (1995). Dayton/Cincinnati 7. Station WLWT(TV), Channel 5 (NBC), is located in the Cincinnati DMA, the 30th ranked television market and WDTN(TV), Channel 2 (ABC), is located in the Dayton DMA, the 53rd ranked television market. Notwithstanding the location of the stations in separate DMAs, the Grade B overlap of WDTN(TV) and WLWT(TV) is also quite large. The engineering exhibit submitted by the applicants reflects that the overlap encompasses 90.2% of the population and 57.1% of the area of the WDTN(TV) Grade B contour, and 90.7% of the population and 57.2% of the area of the WLWT(TV) Grade B contour. Again, Hearst stresses the temporary nature of the waiver request and notes that the Commission has found the extent of the overlap of "more critical concern" when the waiver request is permanent, citing Telemundo Group, Inc., Debtor-in-Possession, 10 FCC Rcd 1104, 1106 (1994). 8.Hearst asserts that the stations serve separate and distinct geographic and economic markets. According to Hearst, the stations are not direct competitors, as Dayton and Cincinnati are 44 miles apart. Also, Hearst represents that the stations will continue to operate separately, including the continued use of their own local sales, programming and news staffs. 9.According to Hearst, the overlap area is served by a "multitude" of competing media voices. In addition to WDTN(TV) and WLWT(TV), 33 other television stations provide Grade B service to the overlap area. All of the overlap area receives at least four other Grade B services, with a maximum in any one area of 15 services. Additionally, the stations' DMAs are also served by numerous other media voices. There are 37 radio stations serving the Dayton DMA and the community has a 69% cable penetration. With regard to the Cincinnati DMA, 40 radio stations are licensed to communities in the metropolitan area and Cincinnati enjoys a 62% cable penetration. Discussion 10.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 2d 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 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, Inc., 9 FCC Rcd 144, 146 (1993). 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. The Commission has found the size of the proposed overlap to be of "more critical concern" in cases involving requests for a permanent waiver of the multiple ownership rules. With regard to temporary waiver requests, such as here, the Commission is not constrained from granting a temporary waiver where circumstances "will not significantly frustrate the policies underlying the multiple ownership rules." Telemundo Group, Inc., Debtor in Possession, 10 FCC Rcd 1104, 1106 (1994)(quoting Family Television Corp., 59 RR 2d 1344, 1348 (1986)). As with any waiver, it will only be granted if the Commission concludes that the waiver is in the public interest. 11.Currently, the Commission is reexamining its broadcast television ownership policies, including the duopoly rule. In January 1995, the Commission proposed a new analytical framework within which to evaluate our broadcast television ownership rules. See Review of the Commission's Regulations Governing Television Broadcasting, Further Notice of Proposed Rule Making, 10 FCC Rcd 3524 (1995) (Television Ownership Further Notice). Subsequent to the release of that Television Ownership Further Notice, Congress directed the Commission to conduct a rulemaking proceeding to determine whether to retain, modify or eliminate existing limitations on the number of television stations that an entity may control within the same television market. See Section 202(c) of the Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (Feb. 8, 1996) (Telecomm Act). In response to this Congressional directive in the Telecomm Act and to update the record, the Commission released a Second Further Notice in its pending television ownership rulemaking proceeding. Second Further Notice of Proposed Rule Making, FCC 96-438 (released November 7, 1996). In that Second Further Notice, the Commission tentatively concluded to authorize common ownership of television stations that are in separate DMAs and whose Grade A contours do not overlap, conditioned on coming into compliance with the outcome of the proceeding within six months of its conclusion. Second Further Notice at 57. The Commission also stated that in the interim it would be disinclined to grant waiver requests not consistent with this proposed standard, absent extraordinary circumstances. Id. at 58. The applicants' waiver requests are not consistent with our interim policy and we must, therefore, determine whether the requisite extraordinary circumstances exist that would warrant grant of their requests. 12.Based on the totality of the circumstances before us, we find Hearst's requests for temporary waiver to be warranted. We recognize that these duopoly waiver proposals do not fall within our interim waiver policy. However, as we have stated in the past "in situations such as multiple-station transaction[s] . . . we believe facilitating such a transaction by temporary waiver of our multiple ownership rules will 'promote commerce, encourage investment in the broadcast industry, and allow for the free transferability of broadcast licenses.'" Brissette Broadcasting Corp., 11 FCC Rcd 6319, 6325 (1996)(quoting Stockholders of CBS Inc., 11 FCC Rcd at 3744). In fact, we recently waived our multiple ownership rules to facilitate a multiple station transaction closely resembling the case here. See, e.g., The Providence Journal Company, FCC 97-67 (released: February 28, 1997). In The Providence Journal Company, Inc., the Commission granted duopoly waiver to allow common ownership of two stations in the Seattle DMA to facilitate a merger involving 11 full-service television stations and 38 translator stations. The multi-station transaction before us involves a total of nine full-service television stations, as well as one translator station. 13.Furthermore, while the degree of contour overlap involved in the two duopolies is substantial, our concerns regarding diversity are mitigated by the stations' location in separate DMAs and by the multiple competing media outlets in the overlap areas. With regard to the Boston/Providence duopoly, our review has confirmed that 34 television stations provide Grade B service to the overlap area and all of the overlap receives at least six other Grade B signals. Further, the Boston market is served by nineteen other full-service television stations with a cable penetration of 77%, while the Providence market is served by seven full-service television stations and a cable penetration of 76%. Likewise, the Dayton/Cincinnati duopoly overlap area receives Grade B service from 33 other full-service television stations and all of the overlap receives at least four other Grade B services, with a maximum in any one area of 15 services. The Dayton market is served by six other full-service television stations and has a cable penetration of 69%; while the Cincinnati market is served by eight other full-service television stations, with a cable penetration of 62%. In view of the multiplicity of media outlets serving the overlap and surrounding areas of each duopoly, we do not believe that an undue concentration of the media would occur during this brief temporary period, especially in view of the continued separate operations of the stations pledged by Hearst. Under these circumstances, we will grant Hearst six-month temporary waivers in order to divest its conflicting interests and come into compliance with our television duopoly rule. Any request to extend this temporary period should be filed at least 45 days prior to the end of the six-month period and would be closely scrutinized in light of the extensive nature of these duopolies. SATELLITE PROPOSALS 14.Hearst also seeks authority to continue the following satellite operations: 1) stations KHVO-TV, Channel 13 (ABC) Hilo, Hawaii and KMAU-TV, Channel 12 (ABC) Wailuku, Hawaii as satellites of KITV(TV), Channel 4 (ABC) Honolulu, Hawaii, and; 2) station KHOG-TV, Channel 29 (ABC) Fayetteville, Arkansas as a satellite of KHBS(TV), Channel 40 (ABC) Fort Smith, Arkansas. Hearst plans to maintain the satellite status of these stations after the proposed transfer of control. The Commission requires all applicants seeking to transfer existing satellite stations and to continue those stations' satellite status to demonstrate that the stations meet our satellite policy at the time of transfer of control. See Television Satellite Stations, 6 FCC Rcd 4212, 4215 (1991), on reconsideration Second Further Notice of Proposed Rulemaking in MM Docket No. 87-8, 6 FCC Rcd 5010 (1991), on further reconsideration Review of the Commission's Regulations Governing Television Broadcasting, 10 FCC Rcd 3524 (1995). Pursuant to the Commission's satellite policy, an applicant is entitled to a presumption that its proposed satellite operation is in the public interest if it meets three criteria: (1) no City Grade contour overlap exists between the parent and the satellite; (2) the proposed satellite would provide service to an underserved area; and (3) no alternative operator is ready and able either to construct or to purchase and operate the satellite as a full-service station. Id. at 4212. If an applicant cannot qualify for the presumption, we will evaluate the proposal on an ad hoc basis to determine whether other compelling circumstances warrant grant of the application. Id. at 4214. Satellite stations KHVO-TV and KHOG-TV meet each of the three presumptive criteria, but satellite station KMAU-TV does not. However, as detailed below, we find compelling circumstances exist that warrant continued satellite authority. 15.With regard to the first criterion of the presumption, Hearst has submitted an engineering study which demonstrates that the City Grade contours of KITV(TV) and its two satellites, KHVO(TV) and KMAU-TV, do not overlap. Moreover, the engineering study demonstrates that there is no City Grade contour overlap between KHVO(TV) and KMAU-TV, the two satellite stations. Additionally, the City Grade contours of KHOG-TV and KHBS(TV) do not overlap. Thus, all of the proposed satellite operations meet the first component of the presumption. 16.With respect to the second criterion, the Commission utilizes one of two methods to determine whether the area where each satellite station is located is underserved. The first is a "transmission" test, which defines as "underserved" an area with two or fewer full-service stations already licensed to the community. Hearst has shown that station KHOG-TV is located in an underserved area because it is one of only two full-service stations licensed to Fayetteville, Arkansas. By using our second method, the "reception" test, Hearst has also demonstrated that the area where satellite station KHVO-TV is located is underserved. That test deems an area as underserved if 25 percent or more of the area located within the satellite's Grade B contour, but outside the parent's Grade B contour, receives four or fewer services other than the service provided by the satellite. Id. at 4215. The engineering exhibit indicates that four or fewer services are received in 94.2 percent of that portion of KHVO's Grade B contour located outside the KITV(TV) Grade B contour. Thus, KHVO-TV serves an "underserved" area. With regard to KMAU-TV, the other Hawaii satellite station, Hearst acknowledges that the station does not serve an "underserved" area as defined by the Commission in Television Satellite Stations. However, Hearst contends that the limited population outside of Honolulu and the geographic constraints existing in the State of Hawaii constitute compelling circumstances warranting continued satellite authority. According to Hearst, because no other non-satellite commercial television station provides service to the KMAU(TV) coverage area, the termination of the station's satellite status could result in Wailuku losing service which would not otherwise be provided by a stand-alone station. 17.As to the third criterion to qualify for the presumption, an applicant must demonstrate that no alternative operator is ready and able to construct or to purchase and operate the proposed satellite as a full-service stand-alone station. Hearst has submitted statements from Brian E. Cobb, a partner in Media Venture Partners, a media brokerage firm, who states that he would have no interest in listing stations KHOG(TV), KMAU-TV or KHVO-TV for sale on a stand-alone basis. Regarding KHOG(TV), he states that the station would be a difficult property to market. Even if a buyer were willing to operate it on a stand-alone basis, he believes it is very likely that the station would be financially unsuccessful and at a competitive disadvantage to the other stations which cover Fort Smith, Arkansas, the major population center of the designated market area. He further states that even if KHOG-TV could serve a greater portion of the market, it would have no prospect of receiving an affiliation agreement with any meaningful compensation from any of the existing major networks. Therefore, he concludes, as an independent station, KHOG-TV most likely would be unable to succeed. Likewise, he does not believe that KMAU-TV and KHVO-TV could be economically successful on their own, nor does he believe the stations would be likely to obtain a network affiliation. Neither station covers Honolulu, the dominant population, retail and financial center for the designated market area. Such coverage is crucial because, in Mr. Cobb's opinion, to be successful a television station must serve all of the major cities in its market. Instead, he contends that KMAU-TV and KHVO-TV provide "good examples" of stations that should be satellites because (1) financially they are not viable on a stand-alone basis and (2) they provide free network television to outlying communities which would otherwise be deprived of such service. As we similarly found persuasive in The Providence Journal Company, which also involved a continuation of the satellite stations of two other Wailuku and Hilo, Hawaii stations, we believe the foregoing adequately demonstrates the unlikelihood of finding an alternative operator willing and able to operate KHOG(TV), KMAU-TV and KHVO-TV as full-service stand-alone facilities. Based on Mr. Cobb's analysis, we also find that KHOG(TV) has satisfied the third presumption criterion. See Kelso Partners IV, L.P., 11 FCC Rcd 8764 (MMB, 1996). Thus, we conclude that all three satellite proposals have met the third criterion of the presumption. 18.The above representations establish that KHOG-TV and KHVO-TV comply with the three-part "presumptive" satellite exemption standard and we shall grant the stations continued satellite status. Although station KMAU's satellite operation fails to meet the second criterion of the presumptive standard, we believe "other compelling circumstances" warrant the Wailuku station's continued satellite status. Both KMAU-TV and KHOG(TV) have been operated as satellites of KITV(TV) for over 30 years. As we have stated in the past, satellite status is warranted in Wailuku and Hilo because "Hawaii's geographical constraints and limited population outside of Honolulu constitute. . . compelling circumstances." BBC License Subsidiary, 10 FCC Rcd 10968, 10976 (1995). We note that the eight islands comprising the State of Hawaii are separated by large expanses of water and mountainous terrain. As a result, the nine stand-alone stations in Hawaii, all licensed to Honolulu, serve the islands through a structure of satellite stations. All of the outer markets are served via satellite stations of the Honolulu licensees. Thus, the termination of continued satellite status to KMAU-TV could deprive Wailuku of service that would not likely be provided by a stand-alone operation. Given the unique situation in the State of Hawaii, combined with KMAU-TV's satisfaction of the first and third criteria of the presumptive standard, grant of continued satellite status is warranted. Accordingly, we conclude that allowing continued satellite operation of KHOG(TV), KMAU-TV and KHVO-TV would be in the public interest. CONCLUSION 19.Having determined that each of the applicants is qualified in all respects, we conclude that grant of the proposed transfer of control would serve the public interest, convenience and necessity. Accordingly, IT IS ORDERED, That the requests for temporary waiver of the Commission's television duopoly rule, Section 73.3555(b), to permit the common ownership of WCVB-TV, Boston, Massachusetts and WNAC-TV, Providence, Rhode Island, and to permit the common ownership of WDTN(TV), Dayton, Ohio and WLWT(TV), Cincinnati, Ohio ARE GRANTED, subject to the condition that, within six months from the consummation of this transaction, Hearst files applications with the Commission to bring it into full compliance with Section 73.3555(b) of the Commission's Rules. 20.IT IS FURTHER ORDERED, That the requests for continued operation of KHVO- TV, Hilo, Hawaii and KMAU(TV), Wailuku, Hawaii as satellites of KITV(TV), Honolulu, Hawaii, and for continued operation of KHOG(TV), Fayetteville, Arkansas as a satellite of KHBS(TV), Fort Smith, Arkansas, pursuant to the satellite exception to Section 73.3555 of the Commission's Rules, ARE GRANTED 21.IT IS FURTHER ORDERED, That the applications for transfer of control of Argyle Television, Inc.'s aforementioned television and television translator broadcast stations to The Hearst Corporation, ARE GRANTED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary