******************************************************** 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 Application of ) ) Pennino Broadcasting Corp. ) (Assignor) ) ) and ) File Nos. BAL-970304EA ) BALH-970304EB Gulf-California Broadcast Co. ) (Assignee) ) ) For Assignment of Licenses of ) Stations KUNA(AM), Indio, California and) KUNA-FM, La Quinta, California ) ) MEMORANDUM OPINION AND ORDER Adopted: July 17, 1997 Released: July 23, 1997 By the Commission: 1. The Commission has before it: (1) the above-captioned unopposed applications for assignment of licenses of KUNA(AM), Indio, California and KUNA-FM, La Quinta, California from Pennino Broadcasting Corp. ("Pennino") to Gulf-California Broadcast Company ("GCBC"); and (2) a related request for a waiver of the Commission's one-to-a-market rule, which restricts common radio and television station ownership in the same market. 2. GCBC is the licensee of UHF television station KESQ-TV, channel 42, Palm Springs, California, an ABC affiliate. Grant of the instant assignment application would create a new radio-television combination because the grade A contour of KESQ-TV encompasses the entire cities of license of KUNA(AM) in Indio and KUNA-FM in La Quinta. For the reasons stated below, we grant the permanent waiver request and the assignment application. Request for Waiver of the One-to-a-Market Rule 3. GCBC bases its request on the one-to-a-market waiver standards adopted in the Second Report and Order in MM Docket No. 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."). 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"). The Commission also favors waiver requests involving "failed" broadcast stations, that is, stations that have not been operating for a substantial period of time or that are in bankruptcy proceedings. Otherwise, the requests must be evaluated under a more rigorous case-by-case approach. See 47 C.F.R.  73.3555, note 7. 4. We shall review GCBC's waiver request under the case-by-case standard because Palm Springs is the 164th largest Designated Market Area ("DMA") in the country and there is no claim that KUNA(AM) or KUNA-FM is a "failed station," as defined by the Commission. Under the case-by-case standard, the Commission makes a public interest determination based upon the following five criteria: (1) the potential public service benefits that will arise from the joint operation of the facilities involved, 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 joint operation is implemented. Second Report and Order, 4 FCC Rcd at 1753-54. In enunciating the five factors to be considered under the case-by-case standard, the Commission noted that not all five factors must be satisfied in each case, but rather the overall consideration of these factors must weigh in favor of granting the waiver request. Second Report and Order Recon., 4 FCC Rcd at 6491. In support of its waiver request, GCBC submits a showing which addresses each of the five factors. 5. Benefits of Joint Operation. GCBC estimates that consolidation of the staffs and studios of KESQ-TV and KUNA-AM-FM will result in annual cost savings of $160,000 which will result in public interest benefits. GCBC asserts that KUNA-AM-FM, which have been operating at a loss, could be transformed into a profitable operation by gaining access to KESQ- TV's state of the art broadcast facilities, its trained sales staff, its award winning news staff, and its experienced administrative support staff. Specifically, GCBC plans to improve the news programming of KUNA-AM-FM by utilizing the bilingual (Spanish/English) on-air talent of KESQ-TV to provide spot news coverage and expand daily news broadcasts. The bilingual news operations of KESQ-TV would also be expanded. GCBC notes that KUNA-AM-FM currently lacks full-time news personnel. The savings would also enable GCBC to better address the community needs of the growing number of Hispanic-Americans in the Cochella Valley community. GCBC plans to appoint a minority affairs advisor for KESQ-TV and KUNA-AM- FM, continue KUNA-FM's Spanish-language programming, increase the number of public service announcements on KUNA-AM-FM, and fund student internships for KUNA-AM-FM. Community needs would be further addressed in regular meetings between the general manager of KUNA-AM-FM and KESQ-TV and a community advisory board. 6. Types of Facilities/Other Media Outlet. GCBC reports that (1) KESQ-TV broadcasts with 316 kW visual with an antenna height above average terrain of 192 meters, (2) KUNA(AM) is a Class C AM station operating at 1400 kHz with one kilowatt of power, and (3) KUNA-FM is a Class A FM station operating at 96.7 MHz with 650 watts. GCBC states that KESQ-TV and KUNA-AM-FM face numerous competitors with comparable if not superior technical facilities. According to GCBC, KESQ-TV, a UHF station affiliated with ABC, competes in the Palm Springs DMA with another UHF station that is affiliated with NBC and five low power TV ("LPTV") stations including affiliates of Fox and Univision, as well as a Trinity-owned LPTV station. GCBC also states KUNA-AM-FM faces competition in the Palm Springs market from 17 other radio stations. Additionally, GCBC contends that the proposed acquisition of KUNA- AM-FM is necessary in order for the stations to remain viable in a market undergoing rapid consolidation of radio stations. GCBC points to the 1996 acquisition of KDES-FM, the number three station in the market, by the owner of KPSI-FM, the number one station in the market, and a more recent transaction involving the acquisition of KLCX(FM) by the owner of KPLM(FM). GCBC reports that its owner holds no other media interests in the Palm Springs DMA, the 164th largest. 7. Economic Status. GCBC indicates that although KUNA-AM-FM are not "failed" stations, both are nevertheless small stations that have experienced financial difficulties. The current licensee states that during the period of its ownership neither station has ever earned an operating profit. 8. Competition and Diversity in the Market. GCBC asserts that its acquisition of KUNA- AM-FM will not affect diversity and competition in the Palm Springs market. According to GCBC, there are 11 FM stations and 8 AM stations licensed to communities in the Palm Springs television metro market, and 2 UHF stations and 5 LPTV stations (three of which are network affiliates) licensed to communities in the Palm Springs DMA. GCBC reports that after the proposed acquisition, there will be 17 other radio stations, two network affiliated UHF stations, two network affiliated LPTV stations, and three other non-network affiliated LPTV stations. GCBC also indicates that a wide variety of other media are available. Specifically, GCBC reports that the market is served by five separately owned cable systems with a 90% cable penetration rate. As a result of the high cable penetration, KESQ-TV faces direct competition from the nearby Los Angeles area TV stations, most of which are carried on the cable systems. GCBC also indicates that the market is served by three daily newspapers. Discussion 9. At the outset, we note that the pending television ownership proceeding, in which the Commission is considering eliminating or modifying the one-to-a- market rule, does not preclude consideration of GCBC's request for a permanent one-to-a-market waiver. In the Second Further Notice of Proposed Rulemaking in the television ownership proceeding, we stated that waiver requests submitted pending resolution of the proceeding will be considered under the current criteria for evaluating such requests. Second Further Notice of Proposed Rulemaking, in MM Docket Nos. 91-221 and 87-8, slip op. at 35 and n.130 (Nov. 7, 1996). Thus, the Second Further Notice of Proposed Rulemaking contemplates approval of permanent, unconditional waivers to allow radio-television combinations that do not propose common ownership of stations exceeding a combination of one television station, two AM stations and two FM stations, as long as the requested waivers are clearly consistent with Commission precedent. See Second Further Notice of Proposed Rulemaking, in MM Docket Nos. 91-221 and 87-8, slip op. at 35 and n.130 (Nov. 7, 1996). GCBC's proposed combination of one television station and one AM station and one FM station is consistent with that standard. See, e.g., Alabama Universal Corporation, FCC 97- 13 (Apr. 18, 1997). 10. In evaluating a request for a permanent 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." Second Report and Order Recon., 4 FCC Rcd at 6491. The Commission has recognized that "[i]n smaller markets, where competition is usually more limited, of particular importance would be demonstrated financial difficulties and the practical question of whether a waiver grant . . . would in fact increase or decrease the vigor of competition and diversity in the market." Id. at 6491-6492. We conclude that GCBC's showing in support of a waiver of the one-to-a-market rule meets our case-by-case criteria, and that a permanent waiver in this instance is consistent with the public interest and would not have an adverse effect on diversity and competition in the Palm Springs market. 11. GCBC has shown that common ownership and joint operation of KESQ-TV and KUNA-AM-FM will result in significant cost savings, operating efficiencies, and programming benefits. GCBC has projected annual savings of $160,000 resulting from the consolidation of the studio facilities and staff functions. GCBC has represented that these savings will enable it to enhance and expand the public service programming of KUNA-AM-FM. In this regard, GCBC states that the on-air talent of KESQ-TV will provide spot news coverage and increase daily newscasts on KUNA-AM-FM, which currently lack full-time news staff. GCBC also indicates that the proposed combination will enable it to more easily procure programming of interest to listeners and viewers in the Palm Springs community, particularly the growing Hispanic-American population. Additionally, GCBC indicates that KUNA-AM-FM may become competitive economically by gaining access to KESQ-TV's state of the art facilities and by benefiting from its seasoned advertising, administrative and award winning news staffs. 12. With regard to technical facilities, the Commission aims to predict and avoid any significant adverse effects on diversity or competition from too powerful a combination. See Great American Television and Radio Co., Inc., 4 FCC Rcd 6347, 6349 (1989). KESQ-TV is a UHF station (an ABC affiliate) operating in a market with one other UHF station (an NBC affiliate). Our independent analysis of GCBC's showing indicates that the one other UHF station, KMIR-TV, channel 36, an NBC affiliate, operates with facilities of 490 kW visual power with an antenna height above average terrain of 207 meters that are comparable to KESQ-TV's facilities of 316 kW visual power with an antenna height above average terrain of 192 meters. As for KUNA(AM), a 1,000 watt AM station operating at a frequency of 1400 kHz, our independent analysis of GCBC's showing indicates that there are five other AM stations with better daytime coverage and more power and two other AM stations with comparable coverage and the same power. As for KUNA-FM, a 650 watt Class A FM station, our independent analysis shows that there are five Class B FM stations and one class B1, all of which have coverage areas that significantly exceed that of KUNA-FM. Additionally, there are four other Class A FM stations, two of which provide substantially more coverage than KUNA-FM, with the remaining two FM stations currently providing comparable coverage. Therefore, we find that the proposed combination does not present issues of market dominance from a technical standpoint that would be inconsistent with the public interest. In fact, the Commission has been predisposed to grant waivers of its one-to-a-market rule in cases, such as this, involving a UHF TV, small AM or Class A FM station that in terms of power and competitive position may have difficulty surviving in a competitive market. Second Report and Order, 4 FCC Rcd at 1753; See, e.g., Spectrum Radio, Inc., FCC 97-13 (Feb. 4, 1997); Salt of the Earth Broadcasting, Ltd., 9 FCC Rcd 3621 (1994). Moreover, aside from KESQ-TV, GCBC holds no other broadcast interests in the Palm Springs market. 13. The Commission has advised applicants relying on the financial difficulties factor to submit "appropriate documentation, including a history of the station's past financial losses and predictions of projected losses for the next several years." Second Report and Order, 4 FCC Rcd at 1760, n. 103. Although GCBC has made reference to the operating losses of KUNA-AM-FM, it has not provided any documentation to substantiate its assertion that these radio stations are experiencing financial difficulties. We can, therefore, accord this contention little weight. However, not all five factors need be present to justify grant of a waiver. Second Report and Order Recon., 4 FCC Rcd at 6491. We have granted a number of one-to-a-market waivers where there was no finding that any of the stations were in financial distress. See, e.g., Louis C. DeArias, 11 FCC Rcd 3662 (1996); Alta Gulf FM, Inc., 10 FCC Rcd 7750 (1995); Henry Broadcasting Co., 11 FCC Rcd 1175 (1995); Atlantic Morris Broadcasting, Inc., 10 FCC Rcd 9495 (1995); Secret Communications Ltd., 10 FCC Rcd 6874 (1995). 14. With regard to the potential impact of the waiver on diversity and competition, our independent analysis indicates that in the Palm Springs market, KUNA-AM-FM garner 6.6% of the radio advertising revenue and KESQ-TV garners 55.3% of the television advertising revenue. Together, KESQ-TV and KUNA-AM-FM would receive a combined television and radio station advertising share of 31.4%. Although the combined stations would thus garner a significant percentage of advertising revenue in the Palm Springs market, this is mainly because the proposed assignee already owns KESQ-TV, the leader in television advertising revenues for the market. The acquisition of KUNA-AM-FM would result in a 3.2% gain in total radio and TV advertising revenues for GCBC. Moreover, the percentage of KUNA-AM-FM's radio advertising share is comparable if not smaller than the advertising shares of the six other AM-FM radio combinations operating in this small market. 15. Our independent analysis of GCBC's showing, based on a count of the full-powered television stations licensed to the DMA and radio stations licensed to the television metro market, confirms that after the assignment is approved, Palm Springs will be served by 2 UHF stations, and 19 radio stations (11 FM and 8 AM). There is also a noncommercial educational FM station serving the market, which we include in the count of voices. Upon consummation of the proposed transaction, these 22 broadcast stations will be licensed to 12 separate owners. Our analysis further shows that there are three cable systems, achieving a cable penetration rate of 90% and five low power TV stations (including a Univision affiliate, another that is affiliated with both UPN/FOX, and a Trinity owned station). And, according to GCBC, the community is served by three daily newspapers. This level of competition and diversity that would be present in the Palm Springs market after the proposed combination is consistent with the level we have approved in previous waiver cases involving similar markets. See, e.g. Twenty First Century Broadcasting, Inc., FCC 97-174, (rel. May 18, 1997) (12 "voices" in the 140th DMA); Westar Broadcasting Group, Ltd., 11 FCC Rcd 11,221 (1996) (15 "voices" in the 188th ranked market); Perry Television, Inc., 5 FCC Rcd 1667 (Rev. Bd. 1990) (14 "voices" in the 130th ranked market). 16. Furthermore, as demonstrated above, the radio stations involved in the proposed radio-TV combination are not powerful stations. In this regard, nearly all of the other radio stations in the market have comparable or greater technical facilities. Although the Palm Springs market is only served by two UHF stations, we have determined that combinations involving small or weak stations, such as the small AM or Class A FM stations involved here, decrease the potential for negative concentration. See Second Report and Order, 4 FCC Rcd at 1753. Overall, GCBC has demonstrated that economic efficiencies and public interest benefits will be gained and such benefits support the grant of a permanent waiver. Based on the totality of circumstances, and our treatment of waiver requests from licensees serving similar size markets, we conclude that grant of the one-to-a-market, permanent waiver request would be in the public interest. 17. Accordingly, IT IS ORDERED, that the request for waiver of the Commission's one-to-a-market rule, 47 C.F.R. Section 73.3555(c), to permit common ownership of KUNA(AM), Indio, California and KUNA-FM, La Quinta, California, and KESQ-TV, Palm Springs, California, IS HEREBY GRANTED; 18. IT IS FURTHER ORDERED, that, having found the applicants fully qualified, the above-captioned applications to assign the licenses of KUNA(AM), Indio, California and KUNA- FM, La Quinta, California, from Pennino Broadcasting Corp. to Gulf-California Broadcast Company, ARE HEREBY GRANTED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary