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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In re Application of ) ) NORTHWOODS EDUCATIONAL ) TELEVISION ASSOCIATION ) (Assignor) ) ) and ) File No. BALCT-980617IC ) SHOCKLEY COMMUNICATIONS ) CORPORATION ) (Assignee) ) ) For Consent to Assign the License of) Station WYOW(TV), Eagle River, Wisconsin) MEMORANDUM OPINION AND ORDER Adopted: December 11, 1998 Released: December 15, 1998 By the Chief, Mass Media Bureau: 1. The Commission, by the Chief, Mass Media Bureau, acting pursuant to delegated authority, has before it the above-captioned, unopposed application seeking consent to assign the license of station WYOW(TV) (Channel 34, ABC), Eagle River, Wisconsin, from Northwoods Educational Television Association (Northwoods) to Shockley Communications Corporation (SCC). SCC is the licensee of station WAOW-TV (Channel 9, ABC), Wausau, Wisconsin, whose predicted Grade B contour overlaps that of station WYOW(TV). To permit common ownership of stations WYOW(TV) and WAOW-TV, SCC proposes to operate station WYOW(TV), which is currently operating as a full-service station, as a satellite of station WAOW-TV, and requests grant of its assignment application pursuant to Note 5 of Section 73.3555 of the Commission's rules, which exempts from application of the multiple ownership rules those television stations that are "satellite" operations. REQUEST FOR SATELLITE STATUS 2. Pursuant to the Commission's television satellite policy, as set forth in Television Satellite Stations, 6 FCC Rcd 4212 (1991), an applicant for television satellite status is entitled to a presumption that the proposed satellite operation is in the public interest if it meets three criteria: (1) there is no City Grade overlap between the parent and the satellite; (2) the proposed satellite would provide service to an underserved area; and (3) no alternative operator is ready and able to construct or to purchase and operate the satellite as a full-service station. Id. at 4213-14. Applications meeting this criteria, when unrebutted, will be viewed favorably by the Commission. If an applicant cannot qualify for the presumption, the Commission will evaluate the proposal on an ad hoc basis, and grant the application if there are compelling circumstances that warrant approval. SCC contends that its proposed operation of station WYOW(TV) presumptively qualifies for satellite status and that, should the Commission find otherwise, compelling circumstances warrant approval of a parent-satellite relationship between stations WAOW-TV and WYOW(TV) on an ad hoc basis. 3. Regarding the first criterion, SCC submits an engineering study which demonstrates that no City Grade contour overlap exists between stations WYOW(TV) and WAOW-TV. Based on this showing, we find that SCC has satisfied the first prong of the presumptive satellite standard. For the purposes of the second criterion, an area is deemed underserved if, under the "transmission test," there are two or fewer full-service stations already licensed to the proposed satellite community of license, or, under the "reception test," 25 percent or more of the area within the proposed satellite's Grade B contour, but outside the parent's Grade B contour, receives four or fewer services, not including the proposed satellite service. Id. at 4215. Here, SCC maintains that station WYOW(TV) meets the transmission test, as it is the only station licensed to Eagle River. We agree with SCC that station WYOW(TV) provides service to an underserved community, thereby meeting the second presumptive criterion. 4. With respect to the third criterion, an applicant must show that no alternative operator is ready and able to construct, or to purchase and operate, the proposed satellite as a full-service station. In support of its satellite request, SCC submits a statement from Lyle R. Evans, a principal of Northwoods. Evans describes station WYOW(TV) as a small UHF facility located on the northern edge of the Wausau-Rhinelander, Wisconsin Designated Market Area (DMA), ranked the 136th largest television market, which has operated pursuant to a time brokerage agreement (LMA) with SCC since it began broadcast operations in January 1997. He claims that "[t]he competition from VHF network-affiliated stations elsewhere in the market and the smallness of station WYOW(TV)'s audience and advertising base make stand-alone operation realistically impossible . . . . " Evans remarks, too, that since station WYOW(TV) began program tests in early January 1997, no one has approached Northwoods to purchase the station as a stand-alone facility. While Evans' statements do not satisfy the third criterion, we find the applicants' overall showing sufficient to justify satellite operation under our ad hoc analysis. 5. In addition to Evans' statement, SCC provides a statement from Richard L. Beesemyer, Vice President of Kalil & Co., Inc., a media brokerage firm dealing in television, radio and cable properties, who has 47 years of experience, including 15 years as an officer of the ABC television network. Beesemyer asserts that he is "especially familiar with the economics and demographics of the Eagle River market," and believes that station WYOW(TV) could not successfully operate as a stand-alone television station. He states that station WYOW(TV)'s community of license has a population of 1,400, and the Wausau-Rhinelander DMA consists of 11 counties with a total population of 409,843 and 162,820 television households. Though it is ranked the 136th largest television market in the country, Beesemyer maintains that substantial media competition exists in the Wausau-Rhinelander DMA, which, excluding stations WYOW(TV) and WAOW-TV, is served by two full-service commercial television stations, WSAW-TV (Channel 7, CBS), Wausau, WJFW-TV (Channel 12, NBC), Rhinelander. Furthermore, 14 FM and 10 AM radio stations, along with five daily and four weekly newspapers, serve station WYOW(TV)'s coverage area. Given these facts, it is Beesemyer's opinion that any full-service station in a small, but competitive, market such as the Wausau-Rhinelander DMA, must have a coverage area which serves substantially all of the market. In this regard, he states that station WYOW(TV) reaches only approximately 19.7 percent of the television households in its market. Beesemyer believes that, due to its small viewer and advertising base, station WYOW(TV) would not be economically viable as a stand-alone station, pointing out that the station's CBS and NBC competitors in the market, stations WSAW-TV and WJFW-TV, respectively, currently operate television translator stations to serve the "expansive 11-county DMA" and increase their audiences. In view of these considerations, Beesemyer also believes that it is highly unlikely that any reasonable, prospective buyer of station WYOW(TV) would be willing to purchase it for operation as a stand-alone station. Rather, he asserts, authorizing station WYOW(TV) to operate as a satellite of station WAOW-TV will allow competing ABC network programming to continue to reach communities in the northern counties of the Wausau-Rhinelander DMA which otherwise would not receive over-the-air ABC service, and will enable station WYOW(TV) to offer news and public service programming which would not otherwise be economically possible. 6. To supplement the remarks of Evans and Beesemyer, Terry Shockley, SCC's president, provides a statement which expands upon the economics, market conditions and community service goals attendant to the satellite request. According to Shockley, from the beginning of its operational planning for station WYOW(TV), Northwoods sought a strong LMA partner with particular expertise in "sign-on" strategies and a special focus on service to communities in Northern Wisconsin. This search, Shockley maintains, stemmed from Northwoods' recognition that, due to the remoteness and sparse population of its proposed service area, station WYOW(TV) would have a difficult, if not impossible, time becoming a viable UHF station in Northern Wisconsin without a solid LMA partner. Shockley asserts that Northwoods found such a partner in SCC, whose station, WAOW-TV, is located in the same Wausau-Rhinelander DMA as station WYOW(TV), has been serving the southern and middle parts of that market since 1965, and "has a long standing tradition of excellent community service to Central Wisconsin . . . ." 7. Shockley also claims that station WYOW(TV) has been financially challenged since it went on the air. To wit, he asserts that audited financial reports for 1997, the first full year of its operation, indicate that station WYOW(TV) incurred a loss of $94,000 against revenues of $214,808, and that through July 1998, the station has incurred a $51,720 loss against revenues of $127,970. According to Shockley, "it is obvious that the losses WYOW[-TV] has been experiencing would be much more substantial if WYOW[-TV] did not have substantial programming assistance from WAOW-TV through their LMA." Even with the benefits of the LMA with station WAOW-TV, he maintains, station WYOW(TV)'s net revenue is "well below" the break-even point, and its first 18 months of operations support Beesemyer's conclusion that the station would not be able to thrive, or even survive, as a stand-alone facility. 8. With respect to the station's future, Shockley states that revenue will largely have to come from small retailers located in a series of small cities, and that revenue development will require a long-term commitment and considerable resources. In addition, he contends, the socio-economic facts in the Eagle River area of Northern Wisconsin present an apparent insurmountable challenge to the survival of a station like WYOW(TV) as a stand-alone facility. Specifically, the Eagle River area of Northern Wisconsin is largely a resort destination, and station WYOW(TV)'s coverage area contains little industry and no major cities, the largest cities and their populations being Rhinelander (8,000), Minocqua (3,700), Tomahawk (3,400), Three Lakes (2,100) and Eagle River (1,400). Shockley points out, moreover, that station WYOW(TV) currently reaches only 31,915 (or 19.7 percent) of the 162,820 television households in the Wausau-Rhinelander DMA, and refers to Beesemyer's opinion regarding the need for a station like WYOW(TV) in a small, competitive market to have a coverage area which serves substantially all of the market. As station WYOW(TV) cannot increase its coverage five-fold, Shockley claims that Northwoods and SCC "joined forces" via an LMA so that WYOW(TV) "could become viable on a non-stand-alone basis." 9. Shockley also maintains that, by working together pursuant to the LMA, station WYOW(TV) has realized benefits which would not have been possible but for its LMA with station WAOW-TV. In particular, he asserts that station WAOW-TV's affiliation with ABC since 1965 helped Northwoods secure a primary ABC network affiliation for station WYOW(TV). He contends, moreover, that ABC agreed to the affiliation with station WYOW(TV), viewing it as an extension of station WAOW-TV's coverage of Central and Northern Wisconsin. In addition, he claims that station WYOW(TV)'s "ambitious" programming is only possible because of station WAOW-TV's resources, and specifically refers to: (1) the considerable news, public affairs and community service programming assistance station WAOW(TV) has provided to station WYOW(TV), including a full- time on the scene news reporter and dedicated weather reports which provide the viewers in Northern Wisconsin with 24-hour weather conditions and emergency weather; (2) station WAOW-TV's provision of total news programming to Eagle River, including four daily news programs; and (3) a satellite uplink truck, which is a partnership of SCC and ABC, that has originated many news and program features from the Eagle River area. 10. Should the Commission grant its waiver request, Shockley represents that station WYOW-TV will continue to have a full-time news reporter and access to station WAOW-TV's news gathering resources, including the satellite uplink truck, thereby ensuring coverage of major news stories and community events "to viewers throughout Wisconsin's Northwoods . . . [which] would be virtually impossible without SCC's supporting news organization." Further, Shockley states that SCC will maintain a main studio for WYOW(TV) at Eagle River for the purpose of originating programming, and that the station will broadcast local community interest programming, the telecast of "town hall meetings," breaking news and live coverage of severe weather. He notes, moreover, that SCC is in the process of installing a Super Doppler weather radar unit, which will scan the skies of northern Wisconsin and beyond and has the capacity to warn residents of approaching severe weather. Shockley adds that SCC is currently planning both a quarterly program in cooperation with Nicolet College to provide reports on current economic, environmental and community issues, and a community partnership venture with station WXPR(FM), Rhinelander, to broadcast issue-oriented programming to the area, and contends that grant of the satellite request will provide SCC with even greater incentive to invest further resources and programming expertise in station WYOW-TV. Finally, he claims that SCC's satellite request is consistent with Commission policy and precedent. See, e.g., KS Family Television, Inc., 12 FCC Rcd 11562 (MMB 1997) (a full service, UHF station in the 105th ranked market granted satellite status pursuant to an ad hoc analysis when, inter alia, the station: (1) was unable to cover its entire market with its signal, but competed with three network-affiliated VHF stations, all of which covered nearly the entire market; (2) operated under a programming agreement with its proposed parent station for almost five years; (3) was not offered for general sale due to an option purchase agreement with its proposed licensee; (4) garnered a "miniscule" audience share while rebroadcasting Fox network broadcasting; and (5) was projected to lose nearly 2.3 million dollars over five years due to its competitive disadvantages in the market). 11. In a Second Supplement to its satellite request, SCC submits a special economic study, prepared by William Redpath, a Vice President of BIA Consulting, Inc., a financial consulting and valuation firm which appraises broadcasting, cable and telecommunications properties. Among other things, the study indicates that Eagle River is located in a rural area of northern Wisconsin, near the Upper Peninsula of Michigan, and is the county seat of Vilas County, Wisconsin. Redpath states that Eagle River and Vilas County, as a whole, have low population, no heavy industry and little light industry, with tourism being the major industry and the other major employers being the Vilas County government, hospital and health care professionals and grocery stores. In support, tables filed with the study show, inter alia, that: (1) Vilas County covers an 873 square mile area and has a population of 19,400, with 22 people per square mile versus the national average of 76 people per square mile; (2) 86.3 percent of the household incomes are under $50,000, with 32.3 percent of the households having incomes between $49,000 and $25,000, 25.4 percent having incomes between $15,000 and $24,000 and 28.6 percent having incomes below $15,000; (3) the effective buying income per household is approximately 70 percent of the national average; and (4) the number of households are expected to increase from 8,000 in 1997, to 9,000 in the year 2002. 12. With respect to station WYOW(TV)'s viability as a stand-alone and as the fourth commercial station in the Wausau-Rhinelander DMA, Redpath points out that the station has a weak UHF signal compared to the much stronger VHF signals of its proposed parent station, WAOW-TV, and the two other commercial stations in the market, stations WSAW-TV and WJFW-TV. He also states that, based on the Nielsen rating books from November 1997, through July 1998, stations WAOW-TV and WSAW-TV averaged a combined 84.36 percent share of viewing among local commercial stations, and station WJFW-TV averaged a 15.64 percent share. According to Redpath, given station WYOW(TV)'s relatively weak signal, its local commercial audience share, i.e., audience share among only local commercial television stations, could be as low as zero and would unlikely ever exceed three percent or four percent. This estimated local commercial audience share, based on the Wausau-Rhinelander DMA's current gross revenues of about $18 million, translates into annual gross revenues of between $540,000 and $720,000. Redpath compares these projected annual gross revenues for station WYOW(TV) to estimated operating expenses of $1.7 million to $2.1 million, and concludes that it is highly unlikely that station WYOW(TV) would ever achieve economic viability as a stand-alone. 13. In Redpath's opinion, moreover, to have any chance of becoming a self-sufficient station in the Wausau-Rhinelander DMA, station WYOW(TV) would have to install a series of translators in order to reach viewers in the more populous Marathon, Wood and Portage counties and to reach cable systems to get cable carriage. However, he estimates the average cost (installed) of each translator to be between $80,000 and $100,000, and argues that, even if such a substantial capital investment were made, once station WYOW(TV)'s signal reaches the cable system headends, the market's low cable penetration poses another problem to making that station competitive with the other stations in the Wausau-Rhinelander DMA. According to Redpath, only seven of the 212 DMAs in the country have a lower cable penetration rate than that of the Wausau-Rhinelander DMA, at 53 percent, and Vilas County has an even lower cable penetration rate at 27 percent. Given this low penetration rate, he claims that station WYOW(TV) would not be helped by cable carriage in the Wausau-Rhinelander DMA as it would in the typical television market. Finally, Redpath asserts that off-air reception of station WYOW(TV) is difficult due to the station's weak signal and because it transmits from a different site than the other three commercial stations in the market, including station WAOW-TV, thereby creating a serious antenna orientation problem for non-cable households. For all of these reasons, Redpath concludes that, "[e]ven making optimistic assumptions, there is no reasonable likelihood that WYOW(TV) will be able to sustain itself financially as a stand-alone, full service station, and no prudent businessperson would be willing to buy WYOW(TV) for the purpose of operating it as one." 14. Based on our review of the information provided, we believe that SCC has convincingly demonstrated that structural market conditions would likely prevent station WYOW(TV) from operating successfully on a stand-alone basis without the assistance that has been afforded it pursuant to the LMA with station WAOW-TV. SCC has shown that, because it reaches only 19.7 percent of the television households in the Wausau-Rhinelander DMA, ranked 136th in size, station WYOW(TV) has a small audience and advertising base which makes stand-alone operations unrealistic. In particular, station WYOW(TV)'s community of service, Eagle River, is located in a remote, northern section of the Wausau-Rhinelander DMA and is the county seat of Vilas County, which has a low, spread-out population and an economy that relies largely on tourism. Generally, household incomes in Vilas County are low, almost one-third fall below $15,000, and the effective buying income per household falls significantly below the national average. Though the number of households in Vilas County are expected to increase by 1,000 over five years, when considered in view of the existing, low population, this does not appear to make station WYOW(TV)'s viability as a stand-alone more realistic. 15. In addition, station WYOW(TV) not only faces significant competition in the small, Wausau-Rhinelander DMA, but two of its market competitors operate television translator stations to serve the market and increase their audiences. The efficacy of station WYOW(TV) following suit and expending the significant monies necessary to install several translators is questionable in light of the substantial off-air competition, low population density and the low cable penetration rate in the market and, in particular, in Vilas County. Given its limited coverage area and the small, competitive nature of the Wausau-Rhinelander DMA, we believe it unlikely that station WYOW(TV) would survive as a stand-alone facility. Therefore, we conclude that operation of station WYOW(TV) as a satellite of station WAOW-TV, which will ensure the continuation of ABC television service to communities in the northern counties of the Wausau-Rhinelander DMA, would be in the public interest and is consistent with Commission policy and precedent. See Plains Television Partnership, 9 FCC Rcd 4435 (1994); see also KS Family Television, Inc., 12 FCC Rcd 11562. We note, however, that among the matters being reexamined in the Commission's broadcast television ownership policies in the Television Ownership Second Further Notice is the continued exemption of satellite stations from broadcast ownership restrictions. Accordingly, we will condition the grant of this satellite proposal on whatever action is taken in that proceeding. CONCLUSION 16. Having determined that the applicants are qualified in all respects, we find that grant of the application to assign the license for station WYOW(TV) from Northwoods Educational Television Association to Shockley Communications Corporation will serve the public interest, convenience and necessity. 17. Accordingly, IT IS ORDERED, That the request of Shockley Communications Corporation to operate station WYOW(TV), Eagle River, Wisconsin pursuant to the satellite exemption of Note 5 to 47 C.F.R.  73.3555, IS GRANTED, subject to the outcome of the Commission's pending television ownership rulemaking in MM Docket Nos. 91-221 and 87-8. 18. IT IS ORDERED, That the above-captioned application to assign the license of station WYOW(TV) from Northwoods Educational Television Association to Shockley Communications Corporation, File No. BALCT-980617IC, IS GRANTED. FEDERAL COMMUNICATIONS COMMISSION Roy J. Stewart Chief, Mass Media Bureau