******************************************************** 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 ) ) Butler Broadcasting Co., Ltd. ) (Assignor) ) ) File Nos. BAL-980107EC, BALH-980107ED, and ) BAPLH-980107EE ) SFXTX, L.P. ) (Assignee) ) ) For Assignment of Licenses of ) KVET(AM), KVET-FM and KASE-FM ) Austin, Texas ) MEMORANDUM OPINION AND ORDER Adopted: May 26, 1998 Released: May 26, 1998 By the Chief, Mass Media Bureau: 1. The Commission, by the Chief, Mass Media Bureau, acting pursuant to delegated authority, has before it: (1) the above-captioned applications for assignment of the licenses of KVET(AM), KVET-FM and KASE-FM, Austin, Texas from Butler Broadcasting Co., Ltd. ("Butler") to SFXTX, L.P. ("SFXTX"); and (2) a related request for permanent waiver of 47 C.F.R.  73.3555(c), the Commission's one-to-a-market rule, which restricts common radio and television station ownership in the same market. The applications and the waiver request are unopposed. For the reasons set forth below, we grant the assignment applications and a temporary conditional waiver of our one-to-a-market rule. 2. SFXTX is an indirect subsidiary of SFX Broadcasting, Inc. which is directly owned 100% by SBI Holdings Corp. ("SBI"). SBI is indirectly owned 100% by Capstar Broadcasting Corp. an entity that is ultimately controlled by Thomas Hicks. In addition to the proposed acquisition of the three Austin radio stations, Thomas Hicks through LIN Holdings Corp. ("LIN") ultimately controls UHF station KXAN-TV, (NBC affiliate), Channel 36, Austin, Texas. Additionally, LIN brokers UHF station KNVA(TV) (WB affiliate), Channel 54, Austin, Texas, pursuant to a local marketing agreement ("LMA"). 3. Thomas Hicks' brother R. Steven Hicks ("Steven Hicks") is president, chief executive officer, and director of SBI, as well as the president, chief executive officer, director, and 2.259% voting shareholder of its indirect parent Capstar Broadcasting Corp. Steven Hicks is the permittee in his own name of a construction permit for a new FM radio station in Round Rock, Texas on Channel 290C2. Steven Hicks is also the president of SFXTX, the proposed assignee of KVET(AM), KVET-FM and KASE-FM. Steven Hicks is not an officer, director or attributable stockholder in the licensee of KXAN-TV. 4. Grant of the instant assignment application would create a new radio-television station combination because the Grade A contour of KXAN-TV encompasses the entire communities of license of KVET(AM), KVET-FM and KASE-FM in Austin, Texas. SFXTX's proposed acquisition of these stations and Steven Hicks' ownership interest in the FM construction permit in Round Rock also implicate the radio local ownership rules. Consequently, SFXTX has submitted a showing to demonstrate that its acquisition of KVET(AM), KVET-FM and KASE- FM and Steven Hicks' ownership of the Round Rock FM construction permit comply with the radio local ownership rules. It has also requested a permanent one-to-a-market rule waiver to permit common ownership in the Austin, Texas DMA, the 60th largest, of one TV, one AM and two FM stations all in Austin. One-to-a-Market Waiver Showing 5. SFXTX bases its request for the waiver of the one-to-a-market rule on the 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. 6. We shall review SFXTX's waiver request under the case-by-case standard because Austin is the 60th largest DMA in the country and there is no claim that KVET(AM), KVET-FM or KASE-FM is a "failed station," as defined by the Commission. Moreover, evaluation of the waiver request under the case-by-case standard is appropriate because the proposed transactions involve the common ownership of more than one same-service radio station with a television station. See Memorandum Opinion and Order, MM Docket 91-140, 7 FCC Rcd 6387, 6394 n. 40 (1992). 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, SFXTX submits a showing which addresses each of the five factors. 7. Public Service Benefits of Joint Operation. SFXTX contends that the proposed combination of KVET(AM), KVET-FM, KASE-FM, and KXAN-TV would create operating efficiencies through staff and technical consolidations, joint advertising, and cross promotions, that would save up to $316,906 per year. Among the specific savings projected by SFXTX are the approximately $207,714 in personnel savings resulting from the consolidation of programming and administrative services. Additionally, SFXTX projects $47,334 in annual savings to be derived from the radio stations shifting their television advertising to KXAN-TV and an additional $21,400 annual savings in reduced television advertising costs derived from the radio stations' use of KXAN-TV's production facilities. Other cost savings include approximately $11,358 per year from the utilization of one traffic airplane by the TV and radio stations instead of the maintenance of separate outside services for traffic coverage of special events throughout the year. 8. SFXTX plans to use a portion of the projected savings to enhance the news operations of KXAN-TV through increased staffing and additional equipment purchases. The improved news operations of KXAN-TV will be made available to the radio stations, enabling the stations to provide comprehensive reporting of local, national, and international news without incurring the expense of developing and maintaining its own news staff and facilities. The radio stations will benefit from access to the audio feeds of KXAN-TV's news and weather bulletins and live coverage of local emergencies, including storm-related emergencies via fiber optic links to KXAN-TV's doppler radar for state-of-the-art weather information. Additionally, the news programming on the radio stations will be enhanced by radio simulcasting or delayed rebroadcast of local political candidate debates covered by KXAN-TV. SFXTX also pledges to use projected savings to upgrade the radio stations' equipment by purchasing and installing digital audio systems. Additionally, SFXTX states that there will be a combined effort by the TV and radio stations to sponsor and promote community events including fund raising activities for charitable causes. Lastly, the TV and radio stations will work together to improve their equal employment opportunities by sharing information on job openings, recruitment sources, and applicant referrals. 9. Types of Facilities. KVET(AM) is a Class B station that operates on 1300 kHz at 5 kW effective radiated power ("ERP") daytime and at 1 kW ERP nighttime. SFXTX states that there are two other Class B AM stations with comparable facilities and one other Class B AM station with facilities superior to KVET(AM) in the Austin market. With regard to the two FM stations SFXTX proposes to acquire, KVET-FM is a Class C1 FM station that operates on 98.1 MHz at 100 kw ERP from an antenna at 686 feet height above average terrain ("HAAT") while KASE-FM is a Class C FM station that operates on 100.7 MHz at 100 kW ERP from an antenna at 1,191 feet HAAT. According to SFXTX, there are two stations with facilities comparable to KVET-FM and four stations with superior facilities in the Austin market. As for technical comparisons to KASE-FM, there are two other stations with comparable facilities and one station with superior facilities. With regard to television stations, KXAN-TV is a UHF station operating on Channel 36, as an NBC network affiliate, and is licensed to operate at 2000 kW ERP visual from an antenna at 1,227 feet HAAT. SFXTX states that there are two other UHF television stations with comparable facilities and two stations with superior facilities, one of which is a VHF station. 10. Other Media Outlets. In addition to the proposed combination, Thomas Hicks controls the licensees of the following low power TV stations in the Austin, Texas Market: KHPM-LP, San Marcos; KBVO-LP, Austin; KHPL-LP, La Grange; KHPG-LP, Giddings; KHPX, Georgetown, KHPZ-LP, Round Rock; KHPB-LP, Bastrop. 11. Economic Status. SFXTX states that none of the stations in its proposed combination is in financial distress or is a failed station. However, SFXTX points out that the Commission has granted numerous one-to-a-market waiver requests even though there was no finding that any of the stations were in financial distress. 12. Competition and Diversity in the Market. The final factor in SFXTX's showing is the nature of the relevant market in light of the Commission's concerns about diversity and competition. SFXTX states that following the consummation of its proposed combination, there will be 25 radio stations and 6 television stations licensed to 21 separate owners. Additionally, SFXTX states that there are 13 low power television stations and 29 cable operators reaching 66% of the total TV households. The market is also served by print media which includes 3 daily newspapers and 30 weekly newspapers. Discussion 13. Radio Ownership Rules. We turn first to SFXTX's compliance with our local radio ownership rules. 47 C.F.R. 73.3555(a)(1). Our analysis of the data SFXTX has submitted indicates that the radio market formed by the mutually overlapping contours of its proposed commonly owned radio stations consists of 25 commercial radio stations. Under our rules, in a radio market with 15-29 commercial radio stations, a party may own, operate, or control up to six commercial radio stations, not more than four of which are in the same service (AM or FM). SFXTX's proposed ownership of three commercial radio stations, one AM and two FM, and SFXTX president Steven Hicks' ownership of the FM Round Rock construction permit in this market complies with the numerical local ownership cap for radio stations. Moreover, our review of the record in this case reveals no other circumstances that would preclude grant of the applications under the radio ownership rules. We conclude that, with respect to local radio ownership, SFXTX's acquisition of KVET(AM), KVET-FM and KASE-FM and Steven Hicks' ownership of the FM Round Rock construction permit would serve the public interest. 14. Local Marketing Agreement. Before considering SFXTX's request for a waiver of the one-to-a-market rule, we must determine what weight, if any, we should accord SFXTX's existing LMA with KNVA(TV) in assessing that request. Currently, television LMAs are not attributable to the brokering station, nor, taken alone, are they considered a "meaningful" relationship within the scope of the cross-interest policy. At present, therefore, we will not accord significance to SFXTX's existing television LMA in evaluating its waiver request. We note, however, that we have proposed to attribute television LMAs to the brokering station where the stations involved are in the same market and the brokerage arrangement includes more than 15 percent of the brokered station's weekly broadcast hours. Further Notice of Proposed Rulemaking, MM Docket Nos. 94-150, 92-51 and 87-154, 11 FCC Rcd 19895, 19908-09 (1996). Further, we have proposed that any LMA which would be attributable for duopoly rule purposes under this approach "would also count in applying our other ownership rules, including, for example . . . the one-to-a-market rule (or radio-television cross-ownership rule)." Id. (footnotes omitted). And, while we have proposed to grandfather those LMAs -- such as the LMA here -- that were entered into prior to the November 5, 1996, adoption date of the Second Further Notice of Proposed Rulemaking, MM Docket Nos. 91-221 and 87-8, 11 FCC Rcd 21655 (1996) ("Second Further NPR"), we have also indicated that we would "reserve the right . . . to invalidate an otherwise grandfathered LMA in circumstances that raise particular competition and diversity concerns, such as those that might be presented in very small markets." Id. at 21693- 94. Our decision here in no way prejudges the resolution of LMA attribution in our pending ownership and attribution proceedings. Thus, if we establish final rules for attributing and grandfathering LMAs, we would also assess whether the class of transactions involving radio, television and LMA interests, such as those involved in this case, should be permitted to continue. Consistent with our treatment of transactions raising similar issues, we will condition the one-to-a-market waiver we grant here on the outcome of these rulemakings. See REP WWBB G.P., 11 FCC Rcd 19689, 19693-94 (1996); S.E. Licensee, G.P., 11 FCC Rcd at 16732. 15. One-to-a-Market Waiver. We now turn to consideration of SFXTX's one-to-a-market waiver request. As to the first criterion, the potential public service benefits of joint ownership, the Commission considers the public service benefits that could result from the proposed radio- television combination, such as projected economies of scale, cost savings, program and service benefits. Second Report and Order, 4 FCC Rcd at 1753. SFXTX has demonstrated that combining the operations of KVET(AM), KVET-FM, KASE-FM and KXAN-TV will result in substantial cost savings of up to $316,906 to be derived annually from the consolidation of staffs and technical operations, and cross promotions. With these projected savings, SFXTX plans to improve technology and equipment for KVET(AM), KVET-FM and KASE-FM. These cost savings will also translate into public service and programming improvements. In this regard, KVET(AM), KVET-FM and KASE-FM will have access to the newsgathering and weather forecasting resources of KXAN-TV including the availability of the state-of-the-art doppler radar via fiber optic links. News and public information programming will also be enhanced on the radio stations by simulcasting or delayed rebroadcast of local political candidate debates covered by KXAN-TV. Additionally, there will be joint sponsorship and promotion of major community events and charitable causes as well as enhanced equal employment opportunities at the stations through collaborative efforts at information sharing and cross-referrals. 16. With regard to the technical facilities of the proposed combination, the Commission's "concern with the types of facilities merging under the authority of a one-to-a-market waiver reflects our interest in assessing the potential impact of a proposed combination of stations in a given market in order that we might predict and avoid any significant adverse effect on diversity or competition from too powerful a combination." Great American Television and Radio Co., Inc., 4 FCC Rcd at 6349-50. Our independent analysis indicates that there are two other Class B AM stations that have technical facilities that are comparable to KVET(AM), a Class B AM station, and one other Class B AM station with superior daytime facilities. Regarding the other two radio stations SFXTX proposes to acquire, there are three other Class C FM station with technical facilities that are comparable to KASE-FM, and one other Class C1 FM station with technical facilities superior to KVET-FM. With regard to TV stations, our independent analysis indicates that there is one other UHF station, KNVA-TV, a WB affiliate, with technical facilities that are identical to KXAN-TV. In addition, SFXTX's UHF TV station KXAN-TV, an NBC affiliate, competes with another UHF station that is an affiliate of ABC, and with a VHF station that is an affiliate of FOX. Although the technical facilities of the stations involved are significant, we find that the proposed combination does not present issues of market dominance inconsistent with the public interest. 17. With respect to financial conditions, as stated earlier, none of the stations, KVET(AM), KVET-FM and KASE-FM, is a failed station nor has any demonstrated financial distress. However, we previously have indicated that not all five factors need be present to justify grant of a waiver. Second Report and Order Recon., 4 FCC Rcd at 6491. We also have granted a number of one-to-a-market waivers where there was no finding that any of the stations was in financial distress. See, e.g., DeArias, 11 FCC Rcd at 3662; Alta Gulf FM, Inc., FCC Rcd 7750, 7751 (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). 18. Regarding SFXTX s media holdings, we find that the proposed combination would not create undue concentration of ownership and control in the Austin market, the 60th largest DMA. Our independent analysis indicates that there are at least 24 commercial and noncommercial radio stations in the Nielson TV Metro Market, 20 of which are separately owned (20 "voices"). There are also 7 commercial and noncommercial television stations, 6 of which are separately owned. After the proposed transaction, these 31 stations would be operated by 20 separate broadcast owners. Additionally, SFXTX states that there are several other media outlets in the market, including 6 low power television stations, 3 daily newspapers, and 30 weekly newspapers. We also note that the cable penetration rate for the Austin market has reached 66% of TV households. This level of diversity is consistent with the level we have approved in previous waiver requests. See, e.g., Friendship Broadcasting, LLC, DA 97-2139, (MMB rel. Oct. 6, 1997) (23 voices in 59th ranked market, 12 daily newspapers, 63.1% cable penetration); Sunnyside Communications, Inc., 12 FCC Rcd 24443 (MMB 1997) (27 voices in 50th ranked market, 4 newspapers, 65% cable penetration); Concrete River Associates, L.P., 12 FCC Rcd 6614 (1997) (20 voices in 74th ranked market, two daily newspapers, 62.7% cable penetration). 19. With respect to economic concentration and competition, our independent analysis indicates that KXAN-TV garners 24.7% of television advertising revenue in the Austin DMA, and the three radio stations in SFXTX's proposed combination garner 23.7% of radio advertising revenues. Together, the stations in the proposed combination have a combined television and radio advertising revenue share of 24.3%, a figure consistent with revenue levels approved in other temporary, conditional one-to-a-market waivers. See, e.g., REP WWBB G.P., 11 FCC Rcd at 19695-96 (24.9% of combined TV and radio advertising in 46th ranked market where temporary, conditional one-to-a-market waiver granted for combination consisting of one TV, two FM radio, and TV LMA); NewCity Communications, Inc., 12 FCC Rcd 3929, 3939, 3944-45 (1997) (29% of combined TV and radio advertising revenues in 22nd ranked market where temporary, conditional one-to-a-market waiver granted for combination consisting of one TV, 2 AM, 5 FM, and TV LMA); Shareholders of Citicasters, Inc., 11 FCC Rcd 19135, 19145-46 (1996) (32.3% of combined TV and radio advertising revenues in 29th ranked market where temporary, conditional one-to-a-market waiver granted for combination consisting of one TV, two AM, and 4 FM; 21.3% of combined TV and radio advertising revenues in 15th ranked market where temporary, conditional one-to-a-market waiver granted for combination consisting of one TV, one AM, and four FM). 20. Based on the record, we conclude that grant of a conditional waiver will result in economic efficiencies and facilitate enhanced public interest programming without undue adverse effect on competition or diversity in the Austin market. ORDERING CLAUSES 21. Accordingly, IT IS ORDERED, that the request for permanent waiver of the Commission's one-to-a-market rule, 47 C.F.R. 73.3555(c), to permit common ownership of stations KXAN-TV, KVET(AM), KVET-FM and KASE-FM, all Austin, Texas, IS HEREBY DENIED. 22. IT IS FURTHER ORDERED, that a temporary waiver to permit common ownership of stations KXAN-TV, KVET(AM), KVET-FM and KASE-FM, all Austin, Texas, IS GRANTED subject to the outcome with respect to attributability and grandfathering of television LMAs in the pending broadcast attribution proceeding, Further Notice of Proposed Rulemaking, MM Docket Nos. 94-150, 92-51 and 87-154, 11 FCC Rcd 19895 (1996) and in the pending television broadcast ownership rulemaking proceeding, Second Further Notice of Proposed Rulemaking, MM Docket Nos. 91-221 and 87-8, 11 FCC Rcd 21655 (1996). Should divestiture be required as a result of those proceedings, SFXTX, L.P., is directed to file an application for Commission consent to sell the necessary station(s) within six months from the release of the Orders in those proceedings. Should SFXTX, L.P. find it necessary to request an extension for any reason, it must make any such request no less than 45 days before the end of the divestiture period. 23. IT IS FURTHER ORDERED, that, having found the applicants fully qualified and that grant of the applications would serve the public interest, the applications to assign the licenses of KVET(AM) (File No. BAL-980107EC), KVET-FM (File No. BALH-980107ED), and KASE-FM (File No. BAPLH-980107EE), all Austin, Texas, from Butler Broadcasting Co., Ltd. to SFXTX, L.P., ARE HEREBY GRANTED, subject to the condition that the transaction whereby SFX Broadcasting, Inc., is merging into SBI Holding Corp., See SFX Broadcasting, Inc., DA 98-970, (MMB rel. May 21, 1998), is consummated prior to, or concurrently with, the instant transaction. FEDERAL COMMUNICATIONS COMMISSION Roy J. Stewart Chief, Mass Media Bureau