******************************************************** 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 ) ) PETRACOM EQUITY PARTNERS, L.P. ) (Transferor) ) ) and ) File Nos. BTCCT-970813IG ) BTCCT-970813IH PHI HOLDINGS, INC. ) BTCCT-970813II (Transferee) ) BTCCT-970813IJ ) BTCCT-970813IL For Consent to the Transfer of Control of ) BTCTTV-970813IK Licenses of Stations: ) BTCTT-970813IM WQRF-TV, Rockford, Illinois ) BTC-971024EK WTVW(TV), Evansville, Indiana ) BTCH-971024EL KARD(TV), West Monroe, Louisiana ) BTC-971024EM KDEB-TV, Springfield, Missouri ) BTCH-971024EN KLBK-TV, Lubbock, Texas ) K08GN, Kimberling City, Missouri ) K67EP, Snyder, Texas ) KAYD(AM), Beaumont, Texas ) KAYD-FM, Beaumont, Texas ) KQHN(AM), Nederland, Texas ) KQXY(FM), Beaumont, Texas ) MEMORANDUM OPINION AND ORDER Adopted: May 4, 1998 Released: May 6, 1998 By the Chief, Mass Media Bureau: 1. The Commission, by the Chief, Mass Media Bureau, acting pursuant to delegated authority, has before it for consideration the above-captioned unopposed applications seeking consent to transfer control of Petracom Holdings, Inc. ("Petracom") from Petracom Equity Partners, L.P. ("PEP") to PHI Holdings, Inc. ("PHI"). These applications are unopposed. 2. Petracom, through various subsidiaries, wholly owns the licensees of the following television stations and associated translator facilities: WQRF-TV, Channel 39 (FOX), Rockford, Illinois; WTVW(TV), Channel 7 (FOX), Evansville, Indiana; KARD(TV), Channel 14 (FOX), West Monroe, Louisiana; KDEB-TV, Channel 27 (FOX), Springfield, Missouri; KLBK-TV, Channel 13 (CBS), Lubbock, Texas; K08GN, Kimberling City, Missouri; and K67EP, Snyder, Texas. Royce Yudkoff, the president and 100% shareholder of PHI's ultimate corporate parent, indirectly controls the licensees of WMSN-TV, Channel 47 (FOX), Madison, Wisconsin; KSNF(TV), Channel 16 (NBC), Joplin, Missouri; and WTWO(TV), Channel 2 (NBC), Terre Haute, Indiana. After the proposed transfer of control, PHI will hold an attributable interest in stations WMSN-TV, KSNF(TV) and WTWO(TV), whose Grade B contours will respectively overlap the Grade B contours of stations WQRF-TV, KDEB-TV and WTVW(TV), in contravention of the Commission's television duopoly rule, 47 C.F.R.  73.3555(b). Accordingly, PHI requests a six-month waiver of that rule to permit common ownership of WMSN-TV and WQRF-TV, during which period it pledges to divest WMSN-TV. In addition, PHI seeks waivers of the duopoly rule to permit common ownership of KSNF(TV) and KDEB-TV, as well as WTWO(TV) and WTVW(TV), subject to the outcome of the pending broadcast television ownership rulemaking concerning the duopoly and other multiple ownership rules. See Review of the Commission's Regulations Governing Television Broadcasting, Second Further Notice of Proposed Rule Making in MM Docket Nos. 91-221 and 87-8, 11 FCC Rcd 21655 (1996) ("Television Ownership Second Further Notice"). 3. Furthermore, the proposed transaction triggers the Commission's one-to-a-market rule, 47 C.F.R.  73.3555(c), in the Rockford and Evansville markets. PHI has an attributable interest in WXXQ(FM), Freeport, Illinois; WROK(AM), Rockford, Illinois; and WZOK(FM), Rockford, Illinois (the "Rockford radio stations"), and WGBF(AM), Evansville, Indiana; WGBF(FM), Henderson, Kentucky; WTRI-FM, Mt. Carmel, Illinois; and WYNG-FM, Evansville, Indiana (the "Evansville radio stations"). In violation of the one-to-a-market rule, the 2 mV/m groundwave contour of WROK(AM) and the 1 mV/m contours of WZOK(FM) and WXXQ(FM) encompass the entire community of license of WQRF-TV, Rockford, Illinois, and the predicted Grade A contour of WTVW(TV) encompasses the entire communities of license of the Evansville radio stations. In its latest amendment on April 28, 1998 to its initial waiver requests, PHI seeks a temporary waiver of the one-to-a-market rule in the Rockford and Evansville markets so that it may own WQRF-TV and WTVW(TV) and have a simultaneous attributable interest in the Rockford and Evansville radio stations. 4. Additionally, after the proposed transfer of control, PHI would hold the license of stations KAYD(AM), KAYD-FM, and KQXY(FM), Beaumont, Texas, and KQHN(AM), Nederland, Texas (the "Beaumont radio stations"). ABRY Holdings, Inc., which is owned by Mr. Yudkoff, wholly owns Nexstar Management Group, L.P., the licensee of KJAC-TV, Channel 4 (NBC), Port Arthur, Texas. The Grade A contour of KJAC-TV encompasses the communities of license of the Beaumont radio stations. Therefore, PHI's attributable interest in KJAC-TV, coupled with its indirect ownership of the Beaumont radio stations, would also be prohibited by the one-to-a- market rule. However, the Commission recently granted applications to assign the Beaumont radio stations to Cumulus Licensing Corporation ("Cumulus"), File Nos. BAL-971219GE, BALH- 971219GF, BAL-971219GG, and BALH-971219GH. Moreover, PHI has indicated that it will accept a condition requiring the assignment of the Beaumont radio stations to Cumulus prior to or simultaneously with the consummation of the proposed transfer of control. The imposition of such a condition will permit us to act on the subject transfer of control without a waiver of the one-to-a-market rule. Accordingly, our action herein will be conditioned on the consummation of the sale of the Beaumont radio stations to Cumulus. 5. In sum, we have before us the following waiver requests: (1) temporary, six-month waiver of the duopoly rule to allow common ownership by PHI of WMSN-TV, Madison, Wisconsin, and WQRF-TV, Rockford, Illinois; (2) conditional waiver of the duopoly rule to allow common ownership by PHI of KSNF(TV), Joplin, Missouri and KDEB-TV, Springfield, Missouri; (3) conditional waiver of the duopoly rule to allow common ownership by PHI of WTWO(TV), Terre Haute, Indiana and WTVW(TV), Evansville, Indiana; (4) temporary waiver of the one-to-a-market rule to allow common ownership by PHI of WQRF-TV, Rockford, Illinois and the Rockford radio stations; and (5) temporary waiver of the one-to-a-market rule to allow common ownership by PHI of WTVW(TV), Evansville, Indiana and the Evansville radio stations. DUOPOLY WAIVERS Standard 6. 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, 45 FCC 2d 1476, 1479 n.12, recon. granted in part, 3 RR 2d 1554 (1964). To that end, the Commission has developed the following set of factors to be considered when evaluating an applicant's request for waiver of the duopoly rule: the extent of the overlap, the number of media voices available in the overlap area, the distinctiveness 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. As with any waiver, it will only be granted if the Commission concludes that the waiver is in the public interest. 7. 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 its 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 the 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) ("Telecom Act"). In response to this Congressional directive in the Telecom Act and to update the record, the Commission released the Television Ownership Second Further Notice. 8. The Commission stated in the Television Ownership Second Further Notice that it will be inclined, during the pendency of the television ownership proceeding, to grant temporary duopoly waivers to authorize common ownership of television stations that are in separate Designated Market Areas ("DMA") 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. Television Ownership Second Further Notice, 11 FCC Rcd at 21681. It also noted there its tentative conclusion that the record in that proceeding "supports relaxation of the geographic scope of the duopoly rule from its current Grade B overlap standard to a standard based on DMA's supplemented with a Grade A overlap criterion." The Commission further stated that "we do not believe granting waivers satisfying the proposed standard, and conditioning them on the outcome of this proceeding, will adversely affect our competition and diversity goals in the interim." Id. Additionally, the Commission stated that it would be disinclined, during the pendency of the rulemaking proceeding, to grant waiver requests not falling into this category, absent extraordinary circumstances. Id. 9. WMSN-TV, Madison, Wisconsin/WQRF-TV, Rockford, Illinois. PHI requests a temporary six-month waiver of the television duopoly rule to permit common ownership of WMSN-TV, Madison, Wisconsin, and WQRF-TV, Rockford, Illinois. PHI states that it will divest all interest in WMSN-TV during the waiver period. 10. In support of its waiver request, PHI has submitted an engineering exhibit which shows that the Grade B overlap area consists of 188,671 individuals and 4,003 square kilometers, representing 22.1% of the population and 19.2% of the area within the Grade B contour of WMSN-TV and 27.1% of the population and 34.4% of the area within the Grade B contour of WQRF-TV. The engineering exhibit demonstrates Grade A contour overlap as well, comprising 7.2% of the population and 6.5% of the area within the Grade A contour of WMSN-TV and 9.2% of the population and 11.6% of the area within the Grade A contour of WQRF-TV. PHI contends that the extent of the overlap is within the range that the Commission has permitted in previously approved waivers. 11. PHI contends that the overlap area is served by a variety of media voices. According to the engineering report submitted by PHI, ten other television stations serve all or part of the overlap area, including four stations serving 100% and one station serving 81% of the overlap area. In addition, PHI maintains that all or a portion of the overlap area is served by 36 radio stations (15 AM, 21 FM), 12 cable systems, and four daily newspapers. Finally, PHI points to Brissette Broadcasting Corp., 11 FCC Rcd 6319, 6322 (1996), in which the number of media voices serving the overlap area of two other television stations licensed to Madison and Rockford were deemed sufficient to allay our concerns with respect to diversity. 12. With respect to the distinctiveness of the respective markets, PHI notes that WMSN-TV, Channel 47 (FOX), is located in the Madison DMA (ranked 84th), while WQRF-TV, Channel 39 (FOX), is located in the Rockford DMA (ranked 135th). Additionally, says PHI, the stations are licensed to communities 57 miles apart, and their respective markets are economically and demographically distinct. PHI describes Rockford as an industrial, blue collar market whose principal industries are machine and tool production, compared with Madison, which PHI describes as a more white collar market whose principal industries are government, agribusiness and research. Further, PHI maintains that the two stations do not compete for advertising, noting that the stations offer some of the same programming during non-network time periods. 13. Regarding the concentration of economic power in the overlap area, PHI asserts that after the proposed transfer, WMSN-TV and WQRF-TV will continue to be operated independently, each with its own general manager, general sales manager and program director. PHI also pledges that local advertising time on the stations will not be sold in combination during the waiver period. PHI asserts that the stations, which are currently ranked fourth in revenue and audience share in their respective markets, will remain in non-dominant positions after the proposed combination. Additionally, PHI maintains that most of the residents of the overlap area live in the Madison DMA, and notes that the Commission has found no undue concentration of economic power where the viewers in the overlap area are predominantly located in one market, citing Pegasus Broadcasting, Inc., 7 FCC Rcd 8625, 8627 (1992). Finally, PHI claims that the separate and distinct nature of the markets served by WMSN-TV and WQRF-TV and the number of media outlets serving the overlap areas should alleviate any concerns regarding undue concentration of economic control. Discussion 14. Although WMSN-TV and WQRF-TV are located in separate DMA's, the waiver request is not consistent with our interim policy because the Grade A contours of the stations overlap. As noted above, we have stated that we will be disinclined, during the pendency of the broadcast television ownership rulemaking proceeding, to grant waiver requests that do not meet the specified criteria, absent extraordinary circumstances. However, as discussed below, we believe that a short-term, temporary waiver of the duopoly rule is warranted here. 15. Applying the traditional waiver factors, we begin with a discussion of the extent of the overlap. The overlap in this case is substantial, involving not only significant Grade B contour overlap, but also 7.2% of the population and 6.5% of the area within the WMSN-TV Grade A contour and 9.2% of the population and 11.6% of the area within the WQRF-TV Grade A contour. However, we have found that the extent of overlap is of "more critical concern" in cases involving requests for a permanent waiver of our rules. Telemundo Group, Inc., Debtor in Possession, 10 FCC Rcd 1104, 1106 (1994) (quoting Family Television Corp., 59 RR 2d 1344, 1348 (1986)). We are not constrained, therefore, from granting a temporary waiver where the overlap is large, so long as ownership of the given combination "will not significantly frustrate the policies underlying the multiple ownership rules." Id. Accord John H. Phipps, Inc., 11 FCC Rcd 13053, 13064 (1996). 16. We thus turn to the next factor in our traditional analysis, which considers the number of media voices available in the overlap area. PHI's engineering exhibit reflects that the overlap area is served by 46 broadcast stations, including ten television stations (four of which serve the entire overlap area), 15 AM stations and 21 FM stations, as well as numerous cable systems and daily newspapers. Our independent study of the four stations identified by PHI as serving the entire overlap area discloses that three of these stations -- WIFR(TV), Rockford; WTVO(TV), Rockford; and WKOW-TV, Madison, Wisconsin -- are affiliated with a major television network. Furthermore, the number of media outlets in the WMSN-TV/WQRF-TV overlap area is within the range of other cases in which the Commission has granted temporary waivers of the duopoly rule, including Brissette Broadcasting, 11 FCC Rcd 6319 (1996) (six-month temporary waiver granted for another Madison/Rockford television duopoly where overlap area was served by seven television stations, eight commercial radio stations, 15 cable systems and two daily newspapers). 17. As to the third factor in our analysis, the distinctiveness of the markets involved, we note that WQRF-TV and WMSN-TV are located in separate DMA's (Rockford and Madison) which differ significantly in size (135th versus 84th). Further, as noted by PHI, the stations' communities of license are located in different states and are separated by 57 miles. With respect to the fourth and fifth factors, the independence of the stations' operations and the concentration of economic power, we rely on the applicant's representation that WQRF-TV and WMSN-TV will continue to be operated independently during the waiver period. This pledge mitigates our concern about the effect that temporary common ownership of the stations might have on competition. Based on PHI's commitment to continue separate operation of the stations, as well as the number of media outlets available in the overlap area, we are persuaded that a brief period of common ownership will not result in increased economic concentration in the market. 18. After considering the traditional factors, the Commission examines the public interest benefits offered by the applicant in order to determine whether these benefits weigh in favor of granting a duopoly waiver. See, e.g., John H. Phipps, Inc., 11 FCC Rcd 13053, 13059 (1996); Stockholders of CBS Inc., 11 FCC Rcd 3733, 3762 (1995). In this regard, we have stated that "in situations such as multiple-station transaction[s] . . . 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, 11 FCC Rcd at 6325 (quoting Stockholders of CBS, 11 FCC Rcd at 3755). Since the release of the Television Ownership Second Further Notice, the Commission has approved temporary waivers of the duopoly rule in transactions that did not meet the interim waiver policy, but involved the transfer of multiple television stations. See, e.g., AFLAC Broadcasting Group, Inc., 12 FCC Rcd 3907 (1997); The Providence Journal Co., 12 FCC Rcd 2883 (1997). We also note that in AFLAC Broadcasting and Providence Journal, the stations not only had overlapping Grade A contours, but were located in the same DMA as well. In each of these cases, we considered the facilitation of a multi-station transaction to be a compelling circumstance weighing in favor of a temporary duopoly waiver, despite the fact that the proposals were inconsistent with the Commission's interim waiver policy. Here, too, the facilitation of a transaction involving five full-service television stations and two translator facilities tips the scale in favor of a temporary waiver. In fact, the subject waiver request involves two stations in separate DMA's, placing it well within the parameters of previously granted temporary duopoly waivers. E.g., Argyle Television, Inc., 12 FCC Rcd 10737 (1997); AT&T Corporation, DA 98- 424 (MMB, March 2, 1998). 19. Given the totality of the circumstances presented here, we believe that a short-term waiver of the duopoly rule would serve the public interest, convenience, and necessity. Accordingly, we will grant PHI a six-month temporary waiver in order to divest its interest in WMSN-TV or otherwise come into compliance with our television duopoly rule. This will provide an imminent, certain end to the temporary common ownership permitted by our decision here. In this regard, we rely on PHI's assurances that "the Commission should not anticipate that an extension of the waiver will be requested." 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 the duopoly. 20. WTWO(TV), Terre Haute, Indiana and WTVW(TV), Evansville, Indiana; and KDEB-TV, Springfield, Missouri and KSNF(TV), Joplin, Missouri. PHI also seeks waivers of the duopoly rule to allow the common ownership of WTWO(TV) and WTVW(TV), as well as KDEB-TV and KSNF(TV). PHI requests that such common ownership be permitted subject to the outcome of the pending broadcast television ownership rulemaking proceeding. 21. In support of its waiver requests, PHI has submitted an engineering exhibit which shows that the population within the Grade B overlap area of WTWO(TV) and WTVW(TV) consists of 153,365 individuals, representing 16.1% of the population within the Grade B contour of WTWO(TV), and 19.1% of the population within the Grade B contour of WTVW(TV). Additionally, the WTWO(TV)/ WTVW(TV) overlap covers an area of 6,596 square kilometers, comprising 19.9% of the area within the Grade B contour of WTWO(TV), and 22.6% of the area within the Grade B contour of WTVW(TV). With respect to the KSNF(TV)/KDEB-TV Grade B overlap, PHI's engineering report states that the overlap area encompasses 39,038 individuals, representing 10.5% of the population within the Grade B contour of KSNF(TV) and 7.9% of the Grade B contour of KDEB-TV, and covers an area of 2,614 square kilometers, comprising 13.3% and 10.1% of the land area within the KSNF(TV) and KDEB-TV Grade B contours, respectively. According to PHI, there is no Grade A contour overlap between WTWO(TV) and WTVW(TV), or between KDEB-TV and KSNF(TV). 22. Regarding the number of media voices available in the WTWO(TV)/WTVW(TV) overlap area, PHI claims that 12 other television stations provide service to the area, including one station serving 78% and another serving 46% of the overlap area. Other media outlets include 37 radio stations (17 AM, 20 FM), 15 cable systems and three daily newspapers, according to PHI. Noting that WTWO(TV) is an NBC affiliate, whereas WTVW(TV) is a FOX affiliate, PHI further states that the Commission has held that maintaining separate network affiliations advances its diversity goals, citing AFLAC Broadcasting Group, Inc., 12 FCC Rcd 3907 (1997). As to the KDEB-TV/KSNF(TV) overlap, PHI asserts that eight other television stations provide service to all or some of the overlap area, including five stations serving 100% and the remaining stations serving more than 50% of the area. According to PHI, 33 radio stations (14 AM, 19 FM), four cable systems, and two daily newspapers also serve the overlap area. Additionally, PHI notes that KDEB-TV and KSNF(TV) are affiliated with different networks (FOX and NBC, respectively). 23. PHI maintains that the stations each serve separate and distinct markets such that waiver of the duopoly rule will not frustrate the Commission's goal of ensuring competition. The stations are located in separate DMA's (WTWO(TV) in the Terre Haute DMA, ranked 140th, and WTVW(TV) in the Evansville DMA, ranked 95th), and, according to PHI, the communities of license are separated by 100 miles. PHI also contends that the Terre Haute and Evansville markets differ demographically, noting that Evansville has a higher percentage of residents who attended college, a higher percentage of minorities, and a higher average household income. KDEB-TV and KSNF(TV) are also located in separate DMA's (KDEB-TV in the Springfield DMA, ranked 77th, and KSNF(TV) in the Joplin-Pittsburg DMA, ranked 146th), and, says PHI, the communities of license are 50 miles apart. 24. Regarding the concentration of economic power, PHI contends that it will not gain any market power from the common ownership of the stations. According to PHI, WTWO(TV), WTVW(TV), KDEB-TV and KSNF(TV) will continue to be operated independently, with each station having its own general manager, general sales manager and program director. Additionally, PHI asserts that the assets of WTVW(TV) will be held and managed by an entity that is structurally separate from the licensee of WTWO(TV) and headed by a different CEO. A similar representation is made with respect to KSNF(TV) and KDEB-TV. PHI also claims that neither WTWO(TV) and WTVW(TV), nor KDEB-TV and KSNF(TV) compete for local advertising, Further, PHI pledges that it will not sell advertising time on the stations in combination, and adds that different national advertising sales firms will represent the stations. 25. After examining the traditional factors, the Commission considers any public interest benefits proposed by the applicant to determine whether the benefits outweigh any detriment which may occur from grant of the waiver. In this respect, PHI pledges to commit managerial and financial resources to enhance the public affairs programming and community outreach efforts of the stations. PHI also points to its parent company's track record of offering locally produced public affairs programs and providing live coverage of community events. Discussion 26. Given the clearly articulated policy in the Television Ownership Second Further Notice, we believe that grant of waivers of the duopoly rule, subject to the outcome of the pending ownership proceeding, is justified. See WHOA-TV, Inc., 11 FCC Rcd at 20046-47, 20051. The conditional common ownership of WTWO(TV) and WTVW(TV), as well as KDEB-TV and KSNF(TV), would be consistent with the interim policy set forth in the Television Ownership Second Further Notice, as the stations are in separate DMA's and there is no Grade A overlap between WTWO(TV) and WTVW(TV), or between KDEB-TV and KSNF(TV). Moreover, our examination of the record presented here uncovers nothing suggesting that we should not follow the established interim policy in this case. The extent of the Grade B overlap, although not de minimis, falls well within the range of those we have approved in previous cases. See NWCG Holdings Corp., 11 FCC Rcd 16318 (1996) (granting waiver where Grade B population overlap was 29.4% and 10.2% and area overlap was 14.7% and 16.5%); Benedek Broadcasting Corporation, 12 FCC Rcd 12087 (1997) (granting waiver where Grade B population overlap was 10.5% and 24.6% and area overlap was 10.8% and 27.2%). We note also that the stations serve different markets, and that PHI has pledged to operate the stations independently. Additionally, a moderate number of other stations will continue to provide service to the overlap areas after the proposed transfer. Accordingly, we believe that, consistent with our interim policy, grant of the requested waivers conditioned on the applicants coming into compliance with the outcome of the pending television ownership rulemaking proceeding within six months of its conclusion, would serve the public interest, convenience, and necessity. Any requests to extend these conditional waivers should be filed at least 45 days prior to the end of the six-month period and would be closely scrutinized. ONE-TO-A-MARKET WAIVERS The Rockford Market: WQRF-TV, Rockford, Illinois WROK(AM), Rockford, Illinois WXXQ(FM), Freeport, Illinois WZOK(FM), Rockford, Illinois The Evansville Market: WTVW(TV), Evansville, Indiana WGBF(AM), Evansville, Indiana WGBF-FM, Henderson, Kentucky WTRI-FM, Mt. Carmel, Illinois WYNG-FM, Evansville, Indiana Standard 27. PHI's proposed acquisition of WQRF-TV and WTVW(TV) implicates the Commission's one-to-a-market rule, 47 C.F.R.  73.3555(c), in the Rockford and Evansville markets. As discussed above (supra at  3 and n.4), PHI has a 35% attributable interest in Connoisseur, the licensee of WXXQ(FM), WROK(AM) and WZOK(FM) in the Rockford market, and the licensee (or approved licensee) of WGBF(AM), WGBF(FM), WTRI-FM and WYNG-FM in the Evansville market. In the Rockford market, the 2 mV/m groundwave contour of WROK(AM) and the 1 mV/m contours of WZOK(FM) and WXXQ(FM) (the "Rockford radio stations") encompass the entire community of license of WQRF-TV. As to the Evansville market, the predicted Grade A contour of WTVW(TV) covers the entire communities of license of WGBF(AM), WGBF(FM), WTRI-FM and WYNG-FM (the "Evansville radio stations"). PHI requests a temporary waiver of the one-to-a-market rule so that it may own WQRF-TV and WTVW(TV) and have a simultaneous attributable interest in the Rockford and Evansville radio stations. By letter dated April 28, 1998, PHI commits to file, within 60 days of consummation of the proposed transaction, appropriate sales applications which will cause PHI to come into compliance with the one-to-a-market rule in the Rockford and Evansville markets. 28. PHI bases its waiver requests on the one-to-a-market waiver standards adopted in the Second Report and Order in MM Docket 87-7, 4 FCC Rcd 1741 ("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. PHI submits its waiver requests pursuant to the case-by-case standard because the subject television and radio stations are not failed stations and Rockford and Evansville are not among the top 25 markets. 29. 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. PHI submits a showing which addresses each of the five criteria. One-to-a-Market Waiver Showing 30. Benefits of Joint Operations. Addressing the first factor of the one-to-a-market analysis, PHI acknowledges that its proposed acquisition of WQRF-TV, Rockford, Illinois, and WTVW(TV), Evansville, Indiana, will not result in any of the "traditional efficiencies" of television-radio ownership. PHI states that although it has a 35% attributable interest in the Rockford and Evansville radio stations, it does not control the radio stations. According to PHI, it has no role in the day-to-day management of the stations and does not oversee the stations' programming, marketing or sales decisions. PHI states that since it does not have a controlling interest in the subject radio stations, it cannot propose to jointly operate the radio and television stations or to consolidate the stations' facilities. 31. However, PHI contends that grant of the requested one-to-a-market waivers will result in cost savings for both the radio and television stations through consolidated public affairs programming and community outreach efforts in the Evansville and Rockford markets. PHI proposes to establish a joint television and radio internship program for college students interested in broadcasting careers. A principal goal of the program, says PHI, will be to recruit qualified women and minority students. Under the proposed internship programs, the management of the television and radio stations will make hiring decisions jointly and will contribute equally to providing work assignments for the students, but the cost of the programs will be borne entirely by PHI. PHI states that it will cover the costs for administering the internship programs, including advertising, interviewing, training and personnel management responsibilities, allowing Connoisseur to realize a cost savings of $25,000 annually. 32. Additionally, in Evansville, PHI pledges that WTVW(TV) will produce and broadcast a weekly half-hour local public affairs program which will also air weekly on at least one of the three Evansville radio stations. PHI avers that this will result in annual savings of approximately $62,500, the amount Connoisseur would have to spend to produce the show independently. In Rockford, PHI states that WQRF-TV, which currently offers very little public affairs programming, will cooperate with WROK(AM), an established public affairs programming provider, to produce and air on WQRF-TV a weekly half-hour public affairs program. PHI asserts that it will realize annual savings of approximately $95,000, the cost it would incur to produce and air a weekly public affairs program on its own. Under PHI ownership, WTVW(TV) and WQRF-TV will share their ascertainment reports and studies with the management of the Evansville and Rockford radio stations, thereby saving Connoisseur $14,000 per year. Overall, PHI calculates that grant of the one-to-a-market waiver requests will result in annual cost savings of approximately $95,000 to PHI and $101,500 to Connoisseur. 33. PHI states that all five television stations at issue will benefit from its ownership because PHI intends to make substantial capital improvements to the stations. According to PHI, the television stations are in great need of such improvements because financial constraints have precluded significant capital investment in recent years. PHI commits to make at least $500,000 in capital expenditures in 1998 for WTVW(TV), including renovating the station's main studio, purchasing digital electronic equipment, upgrading other general studio equipment, remodeling the news set and purchasing a new character generator. Similarly, PHI pledges to invest at least $570,000 in 1998 to improve the facilities of WQRF-TV, including a new digital production site, a new AS400 computer system that will link all station operations, an upgraded traffic software system, and a new Beta machine for production activities. Finally, PHI maintains that the requested waivers will inure to the public benefit by facilitating a multiple station transaction. 34. Types of facilities. Regarding the Rockford market, PHI states that WQRF-TV operates on UHF channel 39 with authorized power of 525 kW maximum visual from 174 meters height above average terrain ("HAAT"). PHI also notes that WXXQ(FM) and WZOK(FM) are 50 kW stations, while WROK(AM) operates on 1440 kHz with daytime power of 5 kW and nighttime power of 0.27 kW. PHI asserts that there are two television stations in the Rockford market operating with facilities that are superior to the currently authorized facilities for WQRF-TV, and two AM radio stations that are comparable or superior to WROK(AM). WXXQ(FM) and WZOK(FM) are the most powerful FM stations in the Rockford market, although, says PHI, neither station is the highest ranked in terms of audience shares or revenues. In light of the types of facilities in question, PHI maintains that there is "little danger" that PHI will dominate the Rockford market during the period of common ownership. 35. As to the Evansville market, PHI states that WTVW(TV) operates on VHF channel 7 with authorized power of 316 kW maximum visual from 174 meters HAAT. The applicant avers that WTRI-FM operates at 50 kW, WGBF(FM) at 3.2 kW, and WGBF(AM) at 5 kW (day) and 1 kW (night). According to PHI, several FM stations in the Evansville market are comparable or superior in power to WTRI-FM and WGBF(FM), and one AM station is comparable to WGBF(AM). PHI submits that, given the types of facilities at issue, the proposed combinations will not allow PHI to dominate the broadcasting market in Evansville. 36. Number of media outlets owned by applicant in the market. PHI asserts that, other than its attributable interest in the Rockford and Evansville radio stations, it does not hold any media outlets in those markets. 37. Financial difficulties of the stations. PHI states that the television stations have a history of financial difficulties, including a previous licensee which defaulted on a loan and was taken over by the lender. However, while the effects of the stations' past financial problems linger, PHI advises that none of the television stations are currently in financial distress. 38. Level of competition and diversity in the market. PHI contends that after the proposed transfer, the Rockford market will be served by four commercial television stations (including WQRF-TV) and 15 radio stations (including WZOK(FM) and WROK(FM)). According to the applicant, ten separate broadcast voices, in addition to PHI's operation of WQRF-TV and Connoisseur's operation of stations WZOK(FM) and WROK(AM), will continue to provide service to the area. Furthermore, PHI notes that 71% of the households in the market receive cable service, 86% have VCR's, and some number receive DBS service. PHI adds that the market is served by one daily and three weekly newspapers. 39. With respect to Evansville, PHI avers that following the proposed transaction, five commercial television stations (including WTVW(TV)), three noncommercial educational television stations and 17 commercial radio stations (including WGBF-FM, WGBF(AM) and WYNG-FM) will continue to serve the market. PHI claims that Evansville will continue to be served by 14 separate broadcast voices (eight commercial radio voices and six television voices), in addition to PHI's operation of WTVW(TV) and Connoisseur's operation of WGBF-FM, WGBF(AM) and WYNG-FM. PHI also notes that 63% of households receive cable service, 83% have VCRs, and some number receive DBS and wireless cable service. At least two daily newspapers are circulated in the Evansville market, according to PHI. 40. Additionally, says PHI, the proposed common ownership of WQRF-TV and the Rockford radio stations does not present issues of market dominance because none of WQRF-TV, WXXQ(FM), and WZOK(FM) are ranked first in their respective markets in terms of audience share and revenue. In fact, PHI states that WQRF-TV is ranked last in its market in these areas. PHI asserts that, although WROK(AM) is the highest ranked AM station in the Rockford market, it competes with three other AM stations, all of which are part of commonly-owned AM/FM combinations. PHI maintains that the proposed combination will not have an anti-competitive effect on the Rockford market because of the "highly competitive" character of the market. Similarly, PHI contends that the proposed acquisition of WTVW(TV) will not allow PHI to dominate the Evansville market. PHI submits that although WTVW(TV) is the only VHF station in the market, it is fourth in audience share and third in revenue, according to BIA's Investing in Television Market Report '97. Additionally, says PHI, the Evansville radio stations face "vigorous competition" in the market. PHI asserts that none of the Evansville FM stations enjoy a dominant market position in either revenues or ratings. While acknowledging that WGBF(AM) shares the number one position with another AM station for estimated 1997 revenues, PHI notes that WGBF(AM) is third among AM stations in Fall 1997 audience share. PHI further argues that South Central Communications Corp. is the dominant force in the Evansville television metro market, owning four radio stations and controlling the largest share of estimated 1997 combined station revenue. 41. Lastly, PHI avers that since it is not actively involved in the management of the Rockford or Evansville radio stations, the proposed combination will not afford PHI any special advantages in the market, such as the ability to engage in combined advertising sales. In a similar vein, PHI maintains that diversity of programming will not be harmed since PHI does not make decisions regarding the content of the material broadcast on the subject radio stations. Discussion 42. We utilize a five-part test to evaluate one-to-a-market waiver requests under the case-by- case standard. While not all five factors are relevant in every case, the overall showing must favorably demonstrate that waivers are warranted. Second Report and Order, 4 FCC Rcd at 1753. Based on PHI's showing, we find that temporary waivers are justified in this proceeding. 43. With respect to the strength of the technical facilities of the stations, "we will consider such factors as whether the proposed radio-TV combination involves a UHF or VHF TV station or an AM or FM radio station, as well as the size or class of the stations involved." Second Report and Order, 4 FCC Rcd at 1753. The Commission's concern with the strength of the technical facilities of the stations at issue reflects a continuing concern regarding the potential impact the proposed station combination may have on diversity and competition in the affected market. See, e.g., Louis C. DeArias, Receiver, 11 FCC Rcd 3662, 3666 (1996). The Commission also considers the existence of comparable competing facilities as part of its analysis. See, e.g., Maximum Media, Inc., 12 FCC Rcd 3391, 3396 (1997). According to our independent engineering study of the Rockford market, the facilities of WROK(AM) (5 kW day, 0.27 kW night) are comparable to those of at least one other AM station in the market. Furthermore, although the two Rockford radio stations, WXXQ(FM) and WZOK(FM), are both 50 kW Class B stations, they compete against 13 other radio stations in the market (excluding WROK(AM)) (see discussion infra at  45), thereby assuaging our concern about the effect of the combination on the market. WQRF-TV, the Rockford television station to be acquired, is a UHF station operating at 1050 kW which competes with a network-affiliated VHF station providing greater signal coverage. Concerning the Evansville market, our engineering analysis reveals that the facilities of WGBF(AM), a Class B station operating at 5 kW in the daytime and 1 kW at night, are comparable to those of at least one other AM station in the market. Likewise, the Evansville FM stations, WTRI-FM and WYNG-FM (50 kW Class B stations) and WGBF-FM (3.2 kW Class A station), compete with stations having superior facilities. We note that WTVW-TV, the television station to be acquired, is the only commercial VHF station in the Evansville DMA. However, the market is also served by seven other television stations, including one noncommercial educational VHF station (see discussion infra at  45). In this instance, we find that while the technical facilities of the stations involved are significant, there are comparable competing facilities in the market and the proposed combination does not present issues of market dominance inconsistent with the public interest. 44. As to the number of media outlets owned by PHI in the relevant markets, we note that "applicants who already own a number of media outlets in the relevant market will face a higher hurdle than those . . . applicants with few outlets." Second Report and Order, 4 FCC Rcd at 1753. PHI already has attributable interests in three radio stations in the Rockford market, and four radio stations in the Evansville market. However, since PHI does not have a controlling interest in those stations, we conclude that PHI does not face a "higher hurdle" in this regard. With respect to the financial condition of the subject stations, PHI states that, although the television stations still feel the effects of past financial difficulties, the stations are not currently in economic distress. In this respect, the Commission has held that "not all of the [five] factors mentioned will be relevant in every case" (Second Report and Order, 4 FCC Rcd at 6491), and has granted one-to-a-market waivers in the absence of a showing of financial distress. See, e.g., S.E. Licensee G.P., 11 FCC Rcd 16727, 16734 (1996); Stockholders of Infinity Broadcasting, 12 FCC Rcd 5012, 5052 (1996). 45. With regard to the level of diversity and competition in the relevant markets, we consider the number of broadcast outlets, the number of separately-owned and operated "voices," and the presence of cable and non-broadcast media. PHI has shown that the proposed television-radio station combinations will not create any undue concentration of ownership or control of the broadcast media in the affected markets. According to our independent review, the Rockford DMA, the 135th largest in the country, is served by three television stations (one VHF; two UHF) licensed to three separate owners, in addition to WQRF-TV, the station to be acquired. The television metro market is served by 13 radio stations (five AM; eight FM) licensed to seven separate owners, in addition to the three radio stations in which PHI has an attributable interest. As to the Evansville market, our review discloses that the Evansville DMA, the 95th largest in the country, is served by seven television stations (one VHF; six UHF) owned, operated and controlled by seven separate entities, in addition to WTVW(TV), the station to be acquired. The television metro market is served by 15 radio stations (eight AM; seven FM) owned, operated and controlled by ten separate entities, in addition to the four radio stations in which PHI has an attributable interest. We note that the number of independent broadcast voices serving the markets is consistent with previously-approved one-to-a-market waiver requests. See, e.g., Westar Broadcasting Group, Ltd., 11 FCC Rcd 11221 (1996) (15 broadcast voices); Burt H. Oliphant, 10 FCC Rcd 2708 (1995) (eight broadcast voices). 46. With respect to non-broadcast media, we have independently verified that the Rockford market is served by cable (69% penetration), DBS and at least one daily newspaper. We have also confirmed that 61% of the total households in Evansville receive cable service, and that the market is served by DBS, wireless cable, and at least two daily newspapers. 47. Finally, we have examined the advertising revenue attributable to the subject television and radio stations in each market. We recognize that PHI will not control the advertising dollars for the Rockford and Evansville radio stations because PHI only has a 35% equity interest in those stations. However, even taking into account the advertising revenue for the radio stations, we find that WTVW(TV) and the four Evansville radio stations will receive a combined television and radio advertising revenue share of 22.96%, and WQRF-TV and the three Rockford radio stations will receive a combined television and radio advertising revenue share of 24.25%. These levels of combined advertising revenue are consistent with previously-approved one-to-a- market waiver requests. See, e.g., Concrete River Associates, L.P., 12 FCC Rcd 6614 (1997) (one-to-a-market waiver granted where stations received combined advertising share of 25%). 48. The remaining factor relevant to our determination is the public interest benefits of the proposed combinations. PHI concedes that economies of scale cannot be established because, as the holder of a non-controlling interest in the radio stations, PHI cannot propose joint operation of the television and radio stations or consolidation of their facilities. Instead of proposing economic efficiencies, PHI commits to a variety of initiatives which will benefit both the television and radio stations. PHI offers to establish and fund a joint television-radio internship program for women and minority students in Rockford and Evansville, which would otherwise cost Connoisseur approximately $25,000 per year. Additionally, PHI states that the proposed combination will result in the addition of two new weekly public affairs programs to the stations' schedules. One show, to be produced by WTVW(TV), will be aired on both WTVW(TV) and at least one of the three Evansville radio stations. According to PHI, Connoisseur would have to spend $62,500 to produce the show on its own. The other program, to be aired on WQRF-TV, will be produced by one of the Rockford radio stations in cooperation with the television station. PHI estimates that producing the program independently would cost $95,000. Additional savings will be realized from the sharing of ascertainment reports and studies, says PHI. In total, we find that PHI and Connoisseur will realize cost benefits of approximately $102,000 and $94,500, respectively. 49. Upon careful review of PHI's showing under the case-by-case standard, we conclude that PHI has demonstrated that a temporary one-to-a-market waiver in the Rockford and Evansville markets is justified. We find that the subject broadcast stations, while not insignificant in technical terms, face sufficient competition in their respective markets such that a limited period of common ownership of the television and radio stations will not allow PHI to unduly dominate the markets. Our concerns regarding any adverse impact on competition and diversity are mitigated by the fact that PHI does not have a controlling interest in the radio stations in either market, and by PHI's pledge to file, within 60 days of consummation, applications which will cause PHI to come into compliance with the one-to-a-market rule in the Rockford and Evansville markets. Moreover, we believe that grant of the requested waivers would also serve the public interest by facilitating a multiple station transaction. See Stockholders of CBS, supra. Accordingly, we will grant PHI's requests for a temporary waiver of the one-to-a-market rule in the Rockford and Evansville markets. Conclusion 50. Having determined that the applicants are qualified in all respects, we find that grant of the above-captioned transfer of control applications will serve the public interest, convenience and necessity. 51. Accordingly, IT IS ORDERED, That the request for a temporary waiver of the Commission's duopoly rule, 47 C.F.R.  73.3555(b) to permit the common ownership by PHI Holdings, Inc. of WMSN-TV, Madison, Wisconsin and WQRF-TV, Rockford, Illinois IS GRANTED, subject to the condition that within six months of the consummation of this transaction, an application is filed with the Commission to dispose of such station as would be necessary for PHI Holdings, Inc. to come into full compliance with 47 C.F.R.  73.3555(b). 52. IT IS FURTHER ORDERED, That the requests for waiver of the Commission's duopoly rule, 47 C.F.R.  73.3555(b), to permit the common ownership by PHI Holdings, Inc. of WTWO(TV), Terre Haute, Indiana and WTVW(TV), Evansville, Indiana, and the common ownership of KDEB-TV, Springfield, Missouri and KSNF(TV), Joplin, Missouri, ARE GRANTED, subject to the outcome of the Commission s pending broadcast television ownership rulemaking (MM Docket Nos. 91-221 and 87-8). Should divestiture be required as a result of that proceeding, the licensee is directed to file, within six months from the release of the final order in MM Docket Nos. 91-221 and 87-8, applications for Commission consent to dispose of such stations as would be necessary for PHI Holdings, Inc. to come into compliance with the rules as provided in the final order. 53. IT IS FURTHER ORDERED, That the requests for temporary waiver of the Commission's one-to-a-market rule, 47 C.F.R.  73.3555(c), to permit common ownership of stations WQRF-TV, Rockford, Illinois; WXXQ(FM), Freeport, Illinois; WROK(AM), Rockford, Illinois; and WZOK(FM), Rockford, Illinois; and to permit common ownership of stations WTVW(TV), Evansville, Indiana; WGBF(AM), Evansville, Indiana; WGBF(FM), Henderson, Kentucky; WTRI-FM, Mt. Carmel, Illinois, and WYNG-FM, Evansville, Indiana, ARE GRANTED, subject to the condition that within six months of the consummation of this transaction, applications are filed with the Commission that are necessary for PHI Holdings, Inc. to come into full compliance with 47 C.F.R.  73.3555(c). 54. IT IS FURTHER ORDERED, That the applications to transfer control of Petracom Equity Partners, L.P.'s aforementioned radio, television and television translator stations to PHI Holdings, Inc. (File Nos. BTCCT/BTCTTV/BTCTT-970813IG-IM; BTC/BTCH-971024EK-EN) ARE GRANTED, subject to the condition that prior to or simultaneous with consummation of the instant transaction, the approved assignment of the licenses of KAYD(AM), Beaumont, Texas, KAYD-FM, Beaumont, Texas, KQHN(AM), Nederland, Texas, and KQXY(FM), Beaumont, Texas, to Cumulus Licensing Corporation (File Nos. BAL/BALH-971219GE-GH) is consummated. FEDERAL COMMUNICATIONS COMMISSION Roy J. Stewart Chief, Mass Media Bureau