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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 COLUMBIA MONTOUR ) BROADCASTING CO., INC. ) (ASSIGNOR) ) ) and ) File No. BAL - 970701EA ) COMMUNITY COMMUNICATIONS, INC. ) (ASSIGNEE) ) ) For Consent to the Assignment of License of) Station WCNR(AM), Bloomsburg, PA) MEMORANDUM OPINION AND ORDER Adopted: June 9, 1998; Released: June 11, 1998 By the Commission: 1. The Commission has under consideration: (1) the above-captioned application for assignment of the license of Station WCNR(AM), Bloomsburg, Pennsylvania from Columbia Montour Broadcasting Co., Inc. to Community Communications, Inc. ("Community"); and (2) an unopposed request for a permanent waiver of the newspaper/radio cross-ownership rule. 2. Community is a subsidiary of Press Enterprise, Inc. ("Press"), which publishes a daily newspaper, the Press-Enterprise, in Bloomsburg, Pennsylvania. Community requests a waiver of the newspaper/radio cross-ownership rule because the 2 mV/m contour of WCNR encompasses the entire community of Bloomsburg. 3. Community, in its waiver request, submits two reasons that the Commission should grant a waiver in this instance: (1) the application proposes to return ownership of WCNR to family members of the original station owners; and (2) WCNR is a "failing" station. For the following reasons, we grant Community's request for a permanent waiver. Waiver Request 4. Community asserts that the facts of this case are similar to the facts of the only two cases where the Commission has granted permanent waivers of the daily newspaper cross-ownership rule, both involving combined ownership of television stations and daily newspapers. See Fox Television Stations, Inc., 8 FCC Rcd 5341 (1993) aff'd sub nom. Metropolitan Council of NAACP Branches v. FCC, 46 F.3d 1154 (D.C. Cir. 1995) ("Fox") (allowing Rupert Murdoch to continue to control the licensee of WNYW, New York, New York, after acquisition of the failing New York Post); Field Communications Corp., 65 FCC 2d 959 (1977) ("Field") (giving consent to Field Enterprises, Inc., publisher of two daily newspapers in Chicago, to reacquire control of WFLD-TV, Chicago). Community points out that in each of these cases, a media property was being reacquired by a former owner. 5. In this case, Press was founded by Paul R. Eyerly in 1902. It is now owned and operated by Paul R. Eyerly III, whose two sons, Paul R. Eyerly IV and Brandon R. Eyerly, are non-voting shareholders. Paul R. Eyerly, Jr., and other members of the Eyerly family were the original owners of WCNR when it went on the air in 1947. The Eyerly family owners assigned the license of WCNR in 1966 to a predecessor corporation of the present licensee, Columbia, which has continuously operated the station since that time. The above-captioned application proposes a transfer from Columbia to a subsidiary of Press, which is owned by the son and grandsons of Paul R. Eyerly, Jr., one of the original owners of WCNR. Community makes the argument that reacquisition of the license of WCNR by members of the Eyerly family thus "does not present a new ownership pattern in Bloomsburg." 6. Community also requests a waiver of the newspaper/radio cross-ownership rule on the grounds that WCNR is a "failing" station and that Community is the station's only prospective purchaser. Community asserts that its own strong financial condition will help, through combined ownership, to insure the survival of this "small market" AM station, which is "financially strapped." Community further asserts that combined ownership of WCNR and the Press-Enterprise will not significantly impact the diversification of radio and newspapers in the market. 7. Financial Losses. According to copies of tax returns provided by Community, Columbia reported operating losses of $22,864 in 1996; $79,580 in 1995; and $64,762 in 1994. Community adds that Columbia's return for the 1993 tax year reported a loss of $43,601. The station's net sales revenues have steadily dropped from $159,529 in 1994, to $132,501 in 1995, to $90,687 in 1996. Community reports that Columbia's liabilities exceeded assets by $55,343 in 1995; $48,571 in 1994; and $17,131 in 1993. Community states that, although the licensee has not gone bankrupt, "it can no longer sustain these losses and is forced to sell its assets back to the Eyerly family." 8. Columbia's President, Joseph Darlington, states that WCNR has experienced "serious financial problems" for the past 15 years, but has survived due to the personal commitments of the Darlington family, whose members have sold their assets, mortgaged their personal and business real estate and loaned funds to Columbia that have not been repaid. Darlington provides copies of checks and minutes from shareholder meetings between 1987 and the present, indicating that Darlington family members loaned funds to Columbia and forgave interest at times. Darlington also provides numerous copies of mortgage and loan agreements involving Columbia that were executed between 1983 and 1997. Community notes that there has been no appreciable compensation paid to any stockholder by Columbia, and that it was only through the recent sale of the corporation's real estate that Columbia has been able to keep from going bankrupt. Darlington states that the real estate was sold "to obtain operating funds to keep the business solvent." 9. Efforts to Sell Station. Community avers that the proposed sale of station assets for $130,000 is at a "depressed price" since Community is the only interested party. Darlington states that shareholders of Columbia first decided to try to sell WCNR in the spring of 1995. Darlington says that he answered an advertisement in Broadcasting and Cable, an industry trade publication, that was placed by a prospective purchaser who was looking to buy a station in New Jersey or Pennsylvania. Darlington states that he met and negotiated with the prospective purchaser throughout the summer and early fall of 1995, and that despite entering into an agreement for the sale of WCNR, the purchaser failed to pursue the sale. 10. In January 1997, Columbia was presented with two offers for WCNR that Darlington characterizes as "serious." One was Community's offer of $130,000 cash at closing. The other was an offer from Red Rose Broadcasting, Inc., which called for a total of $150,000 to be paid in installments over 37 and one-half months. Darlington states that Columbia's stockholders did not consider the offer from Red Rose to be a viable offer for several reasons. The first reason, according to Darlington, was that the proposed agreement of sale provided for Red Rose management and staff to immediately "take over" the day-to-day operation of WCNR, but the agreement did not provide for assignment of WCNR's license to Red Rose for another 18 months. According to Darlington, Columbia's stockholders were concerned that the transfer as outlined by Red Rose might be construed as an unauthorized transfer of control. The second reason the Red Rose offer was rejected was that Columbia's stockholders were not given any indication or financial statements to assure them of Red Rose's ability to fulfill the terms of the proposed sale agreement. Red Rose offered a deposit of only $4,000 (less than 3% of the purchase price), which Darlington characterizes as "minimal." He adds that neither Red Rose nor its president offered "any collateral, security, or any personal guarantee of payment," leading Columbia's stockholders to conclude that Red Rose intended to make its monthly installment payments of $4,000 from the operation of WCNR. The third reason that the Red Rose offer was rejected was that Darlington believed that the president of Red Rose "ran a relatively small skeletal operation" at another radio station in Pennsylvania, and that his associate, who would be involved in the operation of WCNR, had previously taken a station off the air because of financial difficulties. In summary, Darlington states that Columbia's board felt that the offer from Red Rose was "very high risk and had a large potential for failure." 11. Darlington states that Columbia's board of directors preferred to pursue Community's offer of full payment in cash at closing. He states that the board was certain of the financial soundness of Community, which was a well-established local business, which had been in operation for four generations, and with which Columbia had a relationship dating back 50 years. Darlington adds that, after its experience with the previous prospective purchaser, the board was more wary of entering into an agreement for an installment purchase with a lesser known entity, where payments may have been dependent upon the earnings from WCNR. 12. Community submits a statement from Michael E. Hamilton, a broker with the Lutz Real Estate Agency, indicating that he was retained by Columbia to find a buyer for the station in October 1996. Hamilton states that in late 1996 and 1997, he undertook a mailing campaign to more than 500 radio stations throughout Pennsylvania in an effort to find an interested buyer for WCNR. Additionally, Hamilton states that he contacted several local investors, sent packages to media brokers in Pennsylvania, and placed classified advertisements in Broadcasting and Cable. Hamilton reports that his efforts resulted in approximately 10 showings of the property, but that Community's was the only "legitimate" or "serious" offer. Community also submits a statement from Ray H. Rosenblum, a media broker and consultant, who states that he worked in tandem with Hamilton to find a buyer for WCNR, which was originally listed for $165,000. According to Mr. Rosenblum, no potential buyer would commit to a price as high as $120,000 because the station is a small and failing AM station in a county with five local commercial stations. Rosenblum adds that the alternative to the sale of WCNR to Community would probably be for the station to go off the air. 13. Effect of Waiver on Competition and Diversity. Community provides an analysis prepared by its consultant to establish that media diversity and competition would not be harmed by the common ownership of WCNR and the Press Enterprise in Bloomsburg. The consultant concludes that Columbia County, Pennsylvania, where Bloomsburg is located, and where the Press Enterprise is circulated, is well-served by 35 radio stations, seven television stations and cable television with 75% penetration, as well as multiple local and national newspapers. Columbia County is included in the Wilkes-Barre/Scranton, Pennsylvania DMA, the 49th largest, with approximately 550,000 television households (23,500 in Columbia County). Columbia County is also included in the Wilkes-Barre/Scranton Radio Metro Market, the 62nd largest. Columbia County is served by two cable systems: Service Electric in Bloomsburg, and Cable TV, Inc. in Berwick. Community also notes that Penn Advertising of Williamsport, Pennsylvania provides billboard advertising along the highways in Columbia County. 14. There are five radio stations licensed to Columbia County, in addition to WCNR, an AM station licensed to broadcast at 1 kW daytime/23 watts nighttime. These include WHLM(FM), Bloomsburg, a 36.5 kW Class B station co-owned with WJMW(AM), Bloomsburg, a 1 kW station. Other stations are WKAB(FM), a 4.1 kW Class A station, Berwick, Pennsylvania; WSQV(AM), Berwick, a station licensed to broadcast at 1 kW daytime/164 watts nighttime; and WKXP(FM), Benton, Pennsylvania, a 6 kW Class A station. Community also produces an engineering study which indicates that 11 commercial radio stations (including WCNR) place a principal community contour over some portion of Columbia County. In addition, Community asserts that 24 non-local radio stations have a measurable listenership in Columbia County, according to a 1996 Arbitron study. 15. With regard to newspapers, Community submits that the Press-Enterprise is the only locally-based daily newspaper in Columbia County, with a daily circulation there of 14,891 (58% of 23,800 households) and a Sunday circulation of 13,440 (52%). Community points out that 12 competing newspapers have a combined circulation in the county of 2,510 daily (10% of households) and 5,627 Sunday (22%). Community states that the Press-Enterprise's total daily circulation is 22,000, but that its total Sunday circulation is only 19,000, due in large part to competition from Sunday newspapers published in nearby cities, including Wilkes-Barre, Harrisburg, Reading, Philadelphia and New York. Community notes that more than 30 periodicals are circulated within Columbia County, totaling in excess of 50,000 copies. The Press-Enterprise owns a monthly business publication, the Northeastern Pennsylvania Business Journal, which serves the Wilkes- Barre/Scranton area, and is the only additional media property owned by either Community or Columbia. 16. With regard to competition, Community states that WCNR's annual gross revenue was only $93,000 in 1996, which is approximately four percent of estimated radio station revenues for the entire county. Community also supplies Arbitron data for Columbia County, which indicates that WCNR is ranked seventh, with an audience share of 3.9. By contrast, WHLM, an FM station licensed to Bloomsburg, has a countywide audience share of 18.6. Community cites estimates that commonly-owned WHLM(FM) and WJMW(AM), Bloomsburg, produce approximately $1 million in annual revenues. Discussion 17. The daily newspaper cross-ownership rule was instituted to promote diversity of viewpoint and economic competition. Newspaper/Radio NOI, 11 FCC Rcd at 13004. Of these two goals, the Commission has stated that it places added emphasis on fostering diverse viewpoints from antagonistic sources. See id. In adopting the rule, the Commission determined that, as a general rule, granting a broadcast license to an entity in the same community as that in which the entity also publishes a newspaper would harm local diversity. Id. The Commission also foresaw the need for waivers of the rule in certain circumstances: (1) where a licensee is unable to sell a station; (2) where the only sale possible would be at an artificially depressed price; (3) where separate ownership and operation of the newspaper and the broadcast station could not be supported in the locality; and (4) where, for whatever reason, the purposes of the rule would be disserved by its application. Id. These waiver standards were originally designed to govern divestiture of combinations formed prior to implementation of the rule, but they have also been applied to "new" combinations such as the one proposed here. Fox, 8 FCC Rcd at 5348 & n.19; see Newspaper/Radio NOI, 11 FCC Rcd at 13004- 05. 18. Community requests a permanent waiver of the Commission's rule, which entails a "considerably heavier" burden of justification than a temporary waiver. See Fox, 8 FCC Rcd at 5348 (citing News America Publishing, Inc. v. FCC, 844 F.2d 800, 803 (D.C. Cir. 1988); Health and Medicine Policy Research Group v. FCC, 807 F.2d 1038, 1042-43 (D.C. Cir. 1986)). The Commission has only granted permanent waivers of the rule in two instances, both involving television stations. The Commission granted a permanent waiver to allow Field Enterprises, Inc., publisher of two daily newspapers in Chicago, to reacquire control of WFLD-TV, Chicago. Field, 65 FCC 2d at 961. The Commission held that Field's reacquisition of the station did not constitute a new ownership pattern, and thus was similar to ownership patterns grandfathered under the daily newspaper cross-ownership rule. Additionally, the Commission perceived the need for the UHF station to be maintained as part of a five-station group of UHF stations (that was being assigned to Field) in order to ensure that the entire group remained financially viable. See id. The only other permanent waiver of the rule was granted to allow Rupert Murdoch to continue to control the licensee of WNYW, New York, New York, after acquisition of the failing New York Post. There was evidence that Murdoch's ownership might be "pivotal to the newspaper's survival." Fox, 8 FCC Rcd at 5350. As in Field, Murdoch had previously controlled the entity to be acquired, and had a continuing financial interest in the property. See Fox, 8 FCC Rcd at 5342; Field, 65 FCC 2d at 961. 19. In examining waiver requests under the fourth category, the Commission will consider any "special circumstances" advanced by a party as having bearing on the appropriateness of granting a waiver. Id. at 1085 & n.47. We note that Community's attempt to analogize the past ownership of WCNR with the former ownership of WFLD-TV by Field Enterprises, Inc., and the former ownership of the New York Post by Rupert Murdoch, is unpersuasive. In those cases, the media property was actually formerly owned by the acquiring party, who had extensive and relatively recent experience in operating the property, and who had maintained a continuing financial interest in the property. See Fox, 8 FCC Rcd at 5341-42 (stating that Murdoch had sold the New York Post five years before requesting a waiver to reacquire it pursuant to a right of first refusal); Field, 65 FCC 2d at 961 (explaining that Field had assigned a controlling interest in WFLD-TV to Kaiser Broadcasting Co., and later decided to exercise a right of first refusal in order to reacquire control). It was believed that such experience would prove valuable in helping to salvage a failing media voice. See Fox, 8 FCC Rcd at 5350 & n.30 (citing evidence that Murdoch's ownership might be pivotal to the newspaper's survival because of his expertise in the newspaper business); Field, 65 FCC 2d at 961 (perceiving the need to maintain a Chicago UHF station as part of a group of five Field-owned UHF stations in order to ensure the group's continued financial viability). In this case, Community is asserting that ownership of WCNR more than 30 years ago by Paul R. Eyerly, Jr., the father and grandfather of the present-day owners of Community, is a similar factual circumstance. We do not agree that this is a similar ownership pattern to that in Fox and Field, because the former owner is not reacquiring control in this case, and the acquiring party has never had a financial interest in the property. More importantly, we do not believe that past ownership of WCNR by a family member, or the family in general, makes it more likely that the station will be revived by the owners of Community, who have not demonstrated any relevant broadcast experience. 20. We are persuaded, however, that unique circumstances are present in this case that are worthy of consideration under the fourth waiver category. We find that grant of a waiver is warranted by: (1) Columbia's documentation of its unsuccessful efforts to sell WCNR; (2) the financially troubled status of this small AM station; (3) the fact that the proposed common ownership involves a newspaper and only a single AM station; (4) the relatively high level of media diversity in the market where these facilities are located; (5) the fact that the AM station is not a significant competitive force in the market; and (6) our determination that the proposed newspaper/small AM combination is unlikely to have an adverse effect on media competition in the market. 21. We are persuaded to take the requested action based upon the combination of factors, a combination that does not fit squarely into any of the first three specific waiver categories. Furthermore, we find that the twin purposes of the newspaper/radio cross-ownership rule -- promoting media diversity and competition -- would be disserved by denial of Community's waiver request. The record suggests that failure to grant a waiver in this instance would likely lead to a diminution in the level of competition and diversity among media outlets in Columbia County. We are cognizant that the Press-Enterprise is the leading newspaper in Columbia County, and that granting a waiver necessarily decreases the count of media voices by one in this market. However, the evidence in this case indicates that denial of the requested waiver would likely lead to the failure of WCNR and thus the loss of an AM radio station providing service to its local community. We note that a 1 kW AM station in Columbia County with facilities similar to WCNR -- WSQV(AM), Berwick, Pennsylvania -- has recently gone silent. See, e.g., Nos, Inc., 12 FCC Rcd 4620 (1997) (granting waiver of "one-to-a-market" radio-TV cross-ownership rule where viability of stand-alone AM station was threatened by aggregate revenue losses of $121,113 in one year and $43,000 during first six months of the following year); Burt H. Oliphant, 10 FCC Rcd 2708 (granting one-to-a- market waiver where FM station was in a "precarious financial position" and AM station had sustained losses of more than $50,000 over 11 months). 22. Community has demonstrated that WCNR has been struggling financially in recent years. Columbia's tax returns for the years 1994 through 1996 indicate that the station has consistently lost money. WCNR's sales revenues have steadily declined in recent years, at the same time that the licensee's operating losses have grown, except for 1996, when the corporation sold off the station's real estate "to obtain operating funds to keep the business solvent." Columbia's net operating loss "carry forward" stood at $420,096 in its 1996 tax return, while 1996 station gross revenues totaled $93,000. Columbia's President has stated for the record that no appreciable compensation has been paid to any Columbia stockholder in recent years, either as a stockholder or an employee. Furthermore, it is evident that the family members who own the licensee are no longer willing to provide financial support for the station, and that reasonable, but unsuccessful efforts have been made to find a buyer for the station over a period of several years, with the help of more than one broker. In this regard, we have carefully considered the fact that Columbia was presented with an offer to purchase the station from an entity other than Community -- an entity that would not have encountered the newspaper/broadcast cross-ownership conflict Community presents. Ordinarily such an alternative offer would strongly undermine any contention that waiver of the newspaper/broadcast cross-ownership rule is warranted to permit sale of that station to a party with a conflicting newspaper ownership interest. Given the totality of the circumstances, however, we are persuaded by Columbia's argument that the alternative offer was not truly viable and that Community's offer was, in fact, the only realistic means by which WCNR might be sold and thus might survive. We base this conclusion on several considerations, including the facts that the prospective purchaser failed to provide a sufficient escrow deposit, did not provide information to demonstrate that it had the financial ability to purchase the station, and did not offer any collateral, security or personal guarantee of payment from any of its principals. We also note Columbia's assertion that it had received what it considered reliable information with respect to financial difficulties experienced by the prospective purchaser's principals in operating another broadcast station and that this factor also raised concerns regarding that entity's ability to sucessfully complete the proposed purchase of WCNR. 23. The Commission has previously determined, in cases involving requests for waiver of the newspaper/radio cross-ownership rule, that the relevant market for analyzing the effects of a waiver on diversity and competition is the common area served by the newspaper and the 2 mV/m contour of an AM station (or the 1 mV/m contour of an FM station). See Newspaper/Radio NOI, 11 FCC Rcd at 13011; Capital Cities/ABC, Inc., 11 FCC Rcd 5841, 5890 (1996); Hopkins Hall Broadcasting, Inc., 10 FCC Rcd 9764, 9766 (1995); Kargo Broadcasting, Inc., 5 FCC Rcd 3442, 3442 (1990). Community's waiver request assumes that Columbia County is the relevant market in this case. We will accept Community's showing because the boundaries of Columbia County approximate the common area served by the newspaper and the 2 mV/m contour of the AM station in this case. 24. Considering the impact of the proposed combination on local diversity, our independent analysis indicates that the relevant market is served by a wide variety of media, including broadcast outlets. There are four independently-owned commercial television stations, all network affiliates, and one noncommercial television station licensed to communities in the Wilkes-Barre/Scranton DMA, where Columbia County is located. All of the commercial television stations place a Grade A signal over Columbia County. There are 49 commercial and noncommercial radio stations licensed to 28 additional broadcast owners in communities located in (or with a reportable audience share in) the Wilkes-Barre/Scranton Radio Metro Market, which includes Columbia County. Community has demonstrated that 11 of these stations (including WCNR) place a principal community contour over at least a portion of Columbia County. In addition, cable television penetration throughout the Wilkes-Barre/Scranton DMA is 75%, and there are two cable television systems that serve Columbia County. Community has also shown that 12 daily newspapers and more than 30 periodicals published outside of Columbia County are circulated within the county on a regular basis. 25. Considering the effect of the proposed waiver on local media competition, we note that Community is the leading newspaper in Columbia County, with circulation far in excess of its nearest competitor. However, WCNR's 1996 revenues totaled only $93,000, which constitutes less than 0.4 percent of total radio station revenues ($23.5 million) in the Wilkes-Barre/Scranton Radio Metro Market, and only four percent of estimated radio revenues for Columbia County. We find it unlikely, given the large number of media outlets, that the addition of this station's revenues/resources to those of the Press-Enterprise would have a significant negative impact on local media competition. 26. Accordingly, IT IS ORDERED, That a permanent waiver of the newspaper/radio cross- ownership rule, 47 C.F.R. Section 73.3555(d)(2), IS HEREBY GRANTED to Community Communications, Inc., to permit common ownership of WCNR(AM), Bloomsburg, Pennsylvania, and the Press-Enterprise. 27. IT IS FURTHER ORDERED, That, having found the parties fully qualified, the application to assign the license of WCNR(AM), Bloomsburg, Pennsylvania, from Columbia Montour Broadcasting Co., Inc. to Community Communications, Inc., IS HEREBY GRANTED., subject to the condition that the transaction may not be consummated prior to the grant of the pending license renewal application (BR-980401X5) for WCNR(AM). FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary