******************************************************** 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. ***************************************************************** April 29, 1999 Kevin F. Reed, Esq. Elizabeth A. McGeary, Esq. Dow, Lohnes & Albertson, P.L.L.C. 1200 New Hampshire Ave., N.W., Ste. 800 Washington, D.C. 20036-6802 Richard J. Bodorff, Esq. Gregory L. Masters, Esq. Wiley, Rein & Fielding 1776 K St., N.W. Washington, D.C. 20006 In re: WBBS(FM), Fulton, WHEN(AM), WSYR(AM), WYYY(FM) and WWHT(FM), Syracuse, New York File Nos. BAL, BALH-990208FN-FR Dear Counsel: 1. This letter concerns the application of CXR Holdings, Inc., a wholly-owned subsidiary of Cox Radio, Inc. ("Cox"), for consent to assign the above-referenced stations to Clear Channel Broadcasting Licenses, Inc., a wholly-owned subsidiary of Clear Channel Communications, Inc. ("Clear Channel"). The Radio Corporation ("Radio Corp."), licensee of stations WTKW(FM), Bridgeport, WTLA(AM) and WKRL-FM, North Syracuse, New York, filed a timely petition to deny the application on April 2, 1999. For the reasons set forth below, we shall deny the petition to deny and grant the assignment application. 2. Background. The Commission approved common ownership of Cox's five-station Syracuse group on March 26, 1997, in connection with Cox's acquisition of control of NewCity Communications, Inc. NewCity Communications, Inc., 12 FCC Rcd 3929, 3954-55 (1997). The Commission noted that the group's combined radio advertising revenue market share was 52.4 percent. Id. at 3955. The Commission concluded that Cox's common ownership of the stations would not be contrary to the public interest, however, reasoning that (1) this market share would be only incrementally greater than the 49 percent share approved in Shareholders of Citicasters, Inc., 11 FCC Rcd 19135, 19145 (1996), (2) the Department of Justice ("DOJ") had investigated the matter and decided not to object to Cox's common ownership of the stations, and (3) no objections had been received from other broadcasters, advertisers or the public. NewCity, 12 FCC Rcd at 3955. 3. Radio Corp. argues that the Commission should not permit continued common ownership of the Cox group because of its dominant market power. Radio Corp. contends that the level of ownership concentration in the Syracuse radio market is similar to levels at which courts and DOJ have presumed antitrust violations. Radio Corp. alleges that the Cox group commands a 46 percent share of radio advertising revenue in the market and that another group owner, Pilot Communications L.L.C. ("Pilot"), commands a 29 percent share. Radio Corp. argues that the Cox group has an additional competitive advantage because it includes three of the four most powerful FM station signals in the market and the two top AM signals. Furthermore, Radio Corp. argues that Cox has engaged in predatory or anticompetitive business practices by (1) giving away advertising time on station WWHT(FM) when advertisers buy time on station WYYY(FM) and (2) changing the format of WWHT(FM) from country to CHR/Top 40 in order to eliminate competition with Cox's station WBBS(FM), which has a country format, and challenge a Pilot station with a CHR/Top 40 format, WNTQ(FM), Syracuse. Radio Corp. maintains that DOJ would not have cleared Cox's common ownership of the group had it been aware of these facts in 1997 when it investigated the Cox-NewCity merger, and had Radio Corp. then been willing "to take an aggressive stand against the merger[.]" 4. In its opposition, Cox asserts that Radio Corp.'s petition is without merit and should be dismissed summarily. Citing a provision in the Merger Guidelines that transfers which do not increase ownership concentration in a market are "unlikely to have adverse competitive consequences and ordinarily require no further analysis[,]" United States Department of Justice and Federal Trade Commission Horizontal Merger Guidelines, 57 Fed. Reg. 41552 (1992), revised, 4 Trade Reg. Rep. (CCH)  13104 (April 8, 1997), at  1.51(c), Cox points out that the proposed assignment will have no effect on the level of concentration in the Syracuse radio market because the subject stations already are commonly owned and Clear Channel currently controls no stations there. Cox maintains that the market is "growing and robustly competitive" because the subject group's market share has declined from 52 percent to 46 percent since 1997. In addition, Cox asserts that the Commission has approved common ownership of station groups with similar market shares and that DOJ has reviewed and cleared radio transactions involving similar post-merger market shares. With regard to Radio Corp.'s allegations of anticompetitive business practices, Cox argues that changing format is a standard business practice in the radio industry that in this case did not reduce format diversity, and that offering free advertising spots also is a standard business practice that does not violate antitrust laws and harms neither advertisers nor competing stations. Cox mischaracterizes Radio Corp.'s argument regarding the signal strength of Cox's stations, suggesting it is directed to the appropriate radio market definition, rather than the competitive situation in Syracuse. Cox also states that it controls only three of the six Class B FM stations and two of the five five-kilowatt daytime-power AM stations serving the Syracuse market. 5. In its reply, Radio Corp. asserts that the circumstances relevant to the Commission's approval of common ownership of the subject stations have changed significantly. Radio Corp. emphasizes that the Commission's approval depended in part on the lack of any opposition to common ownership of the subject stations, see NewCity, 12 FCC Rcd at 3955; supra,  2, opposition which Radio Corp. is now voicing. Radio Corp. also argues that assignment of the group to Clear Channel will increase the regional level of ownership concentration because Clear Channel also controls station groups in the Utica, Albany, and Rochester areas, all within 150 miles of Syracuse. According to Radio Corp., "[m]any of the major advertisers have the same decision-maker in charge of at least three if not all four markets[, including] Coca-Cola, Budweiser, HSBC (bank) and Pepsi-Cola. Clear Channel could implement a program that could leverage one market against the other, which would in essence create an unfair advantage in all four . . . markets." Radio Corp. offers anecdotal evidence of an instance in which Pepsi-Cola allegedly chose to advertise in the Utica radio market exclusively on one of the subject stations, WWHT(FM), Syracuse, and prospective Clear Channel station WSKS(FM), Rome, a Utica home-market station, see infra,  7, based on WWHT(FM)'s "19.0 share in Pepsi's target demographic in Utica." Furthermore, Radio Corp. states that the Cox Syracuse group has a combined five percent audience share in the Utica Arbitron radio metro market. With regard to Cox's practice of offering free advertising spots, Radio Corp. points out that the ability to compete with this practice is limited by the number of stations a competitor controls in the market, which number in turn is regulated by the Commission. As "licensees are not operating in a 'free market' environment[,]" Radio Corp. argues that the Commission's public interest analysis must go beyond a strict determination of whether the practice in question violates antitrust laws. 6. Discussion. The Commission's local radio ownership rules restrict the number of radio stations in the same service and the number of radio stations overall that may be commonly owned in any given local radio market. 47 C.F.R.  73.3555(a). A local radio market is defined by the area encompassed by the mutually overlapping principal community contours of the stations proposed to be commonly owned. Id.; see Implementation of Sections 202(a) and 202(b)(1) of the Telecommunications Act of 1996, 11 FCC Rcd 12368 (1996). Under the rules, as amended by the Telecommunications Act of 1996, in a local radio market with 45 or more commercial radio stations, a single entity may own up to eight commercial radio stations, no more than five of which are in the same service; in a market with 30 to 44 commercial radio stations, one owner may hold up to seven commercial radio stations, no more than four of which are in the same service; in a market with 15 to 29 stations, a single owner may own up to six stations, no more than four of which are in the same service; and, in markets with 14 or fewer stations, one owner may hold up to five stations, no more than three of which are in the same service, except that no single entity may control more than 50 percent of the stations in a market. 47 C.F.R.  73.3555(a)(1). 7. Clear Channel controls no stations in the Syracuse area at the present time. However, as part of its proposed acquisition of control of Dame Media, Inc. ("Dame Media") (File Nos. BTC, BTCH-980617GN- HH), Clear Channel has applications on file to acquire control of three stations whose principal community contours overlap those of stations in the subject Syracuse group: WRNY(AM), WSKS(FM), Rome and WOUR(FM), Utica. Clear Channel has submitted a showing which demonstrates that its common ownership of the subject group and the three Dame Media stations is numerically permissible under the Commission's local radio ownership rules. 47 C.F.R.  73.3555(a). Radio Corp. does not challenge that showing. At issue here, therefore, is whether the transaction nevertheless would be contrary to the public interest due to the competitive concerns raised by Radio Corp. See 47 U.S.C.  310(d) (requiring Commission to make a determination whether the proposed transfer or assignment of a broadcast license would be in the public interest). 8. In considering issues of radio concentration pursuant to a public interest analysis, the Commission generally looks at the combined advertising revenue share of the proposed station group in the relevant Arbitron radio metro market, as reported in BIA Publications, Inc.'s Master Access database ("BIA database"). See KIXK, Inc., 13 FCC Rcd 15685, 15687 (1998). In this regard, Radio Corp.'s argument that the combined Albany, Rochester, Syracuse and Utica metropolitan areas constitute a relevant market within which to assess the competitive effect of the proposed assignment lacks merit. Other than Radio Corp.'s allegation that certain large advertisers assign the same manager to the markets, there is nothing in the record to suggest that the combined markets should be treated as a single economic unit. Radio Corp. does assert that the subject station group in Syracuse garners a five percent audience share in Utica, and that one station in the group attracted a Utica advertiser. Without more, however, these allegations are insufficient to demonstrate that the combined Syracuse and Utica markets should be treated as a single economic unit. We find, therefore, that Radio Corp.'s allegations are insufficient to demonstrate that we should consider an area larger than the Syracuse Arbitron market in analyzing the competitive effect of the proposed transfer. 9. We turn, then, to a competitive analysis of the proposed assignment's effect in the Syracuse Arbitron market. Clear Channel would control no stations in this market other than the stations in the existing five-station group. The assignment would not increase the group's advertising revenue share of 42.1 percent, a level which is consistent with levels previously approved in other cases. See NewCity, 12 FCC Rcd at 3954-55; Shareholders of Citicasters, 11 FCC Rcd at 19145. Thus, there is no evidence that the assignment would increase radio ownership concentration in the Syracuse market. Radio Corp. also identifies the combined 72.7 percent share of the subject stations and the Pilot group as a competitive problem. Under the circumstances, however, including the fact that the proposed transaction would not increase ownership concentration in the market and the lack of evidence of coordinated behavior between the group owners, this single competitive factor does not raise a substantial competitive concern warranting further inquiry. Radio Corp. also argues that the Cox group has an unfair competitive advantage because it includes most of the best station signals in the market. Our analysis, however, indicates that the three Class B FM and two Class B AM stations in the subject station group compete with four other Class B FM stations and numerous other Class B AM stations in the Syracuse radio market. 10. With regard to Radio Corp.'s allegations that Cox has engaged in unfair competition, the Commission previously has declined to designate cases for hearing where the conduct in question has not been found to violate the antitrust laws. See Louis C. DeArias, Receiver, 11 FCC Rcd 3662, 3666 (1996) (allegation that group owner refused to accept advertising for competing FM station on its television station in order to protect its own, similarly-formatted FM station). Nothing in the record suggests that the conduct Radio Corp. challenges here has been found to violate the antitrust laws. Moreover, Radio Corp. has submitted no evidence that the effect of the conduct is anticompetitive or otherwise contrary to the public interest. Finally, Radio Corp.'s allegation that DOJ would not have cleared, and the Commission would not have approved, common ownership of the subject stations in 1997 but for Radio Corp.'s failure to object thereto is purely speculative and does not warrant discussion. In sum, therefore, based on our consideration of the record as a whole, including Radio Corp.'s allegations and the above-stated advertising revenue data, we find no substantial and material question of fact warranting further inquiry as to the effect of the proposed transaction on economic competition and diversity. See Astroline Communications Co. v. FCC, 857 F.2d 1556 (D.C.Cir. 1988). 11. Clear Channel has demonstrated that its common ownership of the subject stations would comply with the Commission's local radio ownership rules, and that it is otherwise qualified to acquire the stations. Accordingly, the above-referenced application to assign stations WBBS(FM), Fulton, WHEN(AM), WSYR(AM), WYYY(FM) and WWHT(FM), Syracuse, New York (File Nos. BAL, BALH-990208FN- FR) IS GRANTED, subject to the condition that the assignment of WBBS(FM) must be consummated concurrently with or following, but not prior to, the proposed merger of Jacor and Clear Channel approved in Shareholders of Jacor Communications, Inc., DA 99-803 (M.M.Bur. April 29, 1999). Sincerely, Roy Stewart, Chief Mass Media Bureau cc: James L. Oyster, Esq. 108 Oyster Lane Castleton, Virginia 22716-9720