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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 ) ) Barnco, Inc. ) (Assignor) ) File No. BALH-980721EA ) and ) ) Waitt Radio, Inc. ) (Assignee) ) ) For Assignment of Licenses of ) KOLK(FM), Onawa, Iowa ) MEMORANDUM OPINION AND ORDER Adopted: March 25, 1999 Released: March 26, 1999 By the Commission: Commissioner Tristani dissenting and issuing a statement. 1. The Commission has under consideration: (1) the above-captioned applications for assignment of the licenses of KOLK(FM), Onawa, Iowa from Barnco, Inc. to Waitt Radio, Inc. ("Waitt); (2) Waitt's related request for a 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; (3) a timely Petition to Deny the application from Saga Communications, Inc. ("Saga"), licensee of WNAX(AM) and WNAX-FM, Yankton, South Dakota; and (4) various responsive and supplemental pleadings. For the reasons set forth below, we deny the Petition and grant the application and waiver request. 2. Waitt Broadcasting, Inc., whose ownership is identical to that of Waitt Radio, Inc., is the licensee of UHF television station KMEG(TV) (CBS affiliate), Sioux City, Iowa. Grant of the instant assignment applications would create a new radio-television combination because the 1 mV/m contour of KOLK(FM) entirely encompasses Sioux City, Iowa, KMEG(TV)'s city of license. In its Petition to Deny, Saga asserts that Waitt's waiver showing is insufficient to show that the transaction would be consistent with competition and with the public interest. See 47 U.S.C.  309(a). Request for Waiver and Opposition Thereto 3. Waitt bases its waiver request on the one-to-a-market waiver 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 case-by-case approach. See 47 C.F.R.  73.3555, note 7. 4. We shall review Waitt's waiver request under the case-by-case standard because Sioux City, Iowa is the 141st largest Designated Market Area ("DMA") in the country and there is no claim that KOLK(FM) is a "failed station," as defined by the Commission. 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, Waitt submits a showing which addresses each of the five factors. Saga's Petition to Deny challenges several of these showings. 5. Benefits of Joint Operation. Waitt estimates direct annual savings of approximately $159,000 resulting from the sharing of technical facilities and consolidation of staffs. Specifically, these cost savings include $96,000 in reduced payroll expenses from combining and consolidating the stations' administrative and staff functions; $23,000 through elimination of interest expense; $25,000 in professional fees to station staff now on salary or retainer; $5,000 in rent through co-location of KMEG and KOLK offices and studios; and $10,000 by consolidating the stations' news and weather functions. Waitt states that it will put these savings back into the stations through major upgrades to their technical, production, and operational facilities. Waitt states that it plans to construct a new studio and production complex for the FM/TV combination, using the cost savings as well as an additional investment of approximately five million dollars. The new facilities would include a state-of-the-art news production facility for both KMEG(TV) and KOLK(FM). According to Waitt, KOLK(FM) does not currently offer local news or weather, and KMEG(TV) broadcasts minimal news and weather. Waitt says that it will enhance both stations' informational programming and community service efforts by providing, for the first time, regular, daily, live, local news and weather on the radio station, and by initiating more in-depth coverage of local news and consumer issues and affairs on the television station. Waitt also states that the technical enhancements will enable both stations to instantaneously provide information on breaking news of community interest and on weather-related and other local emergencies. Further, Waitt states that it will make the stations available to sponsor and promote community events and will meet regularly with local leaders to design and refine issue-responsive public affairs programs for the community. The Petitioner, Saga, questions whether the combined programming functions of the two stations would distance KOLK(FM) from its obligation to serve the needs and interests of the residents of Onawa. 6. Types of Facilities/Other Media Outlets. KOLK(FM), the radio station that Waitt seeks to acquire, is a Class C1 FM station licensed to operate on 102.3 MHz at 100 kW effective radiated power ("ERP") from an antenna at 196 meters height above average terrain ("HAAT"). Waitt has been brokering the station since August 1, 1998 pursuant to a Time Brokerage Agreement with the current licensee. KMEG(TV), a CBS affiliate, is a UHF station which is currently operating on channel 14 at 380 kW visual ERP from an antenna at 351 meters HAAT. On November 24, 1998 the Commission approved an upgrade of KMEG's facilities to 5,000 kW at 596 meters HAAT. Waitt maintains that, even with the upgrade, KMEG's UHF facilities will be inferior to the two VHF network affiliated stations in the Sioux City DMA. Waitt states that KMEG's upgraded facilities will be essentially identical to the other UHF commercial station, but will exceed the facilities of the noncommercial educational television stations in the DMA. Waitt reports that it is also the licensee of the following three translator-low power stations, used to rebroadcast KMEG's signal in the surrounding area: K40CO, Storm Lake, Iowa; K55FL, Spencer, Iowa; and K30BP, Norfolk, Nebraska. Waitt reports that it holds no other media interests in the Sioux City DMA, the 141st largest. 7. Economic Status. Waitt indicates that none of the stations in its proposed combination is a "failed station," as defined by the Commission. It indicates, however, that KOLK(FM) is experiencing financial difficulties. It states that the station, which began operating in November 1995, has never operated at a profit, and is currently losing about $20,000 per month. Waitt thus maintains that, although KOLK(FM), is currently operating, it could not continue to operate much longer were it not for the proposed sale. In the Petition to Deny, Saga contests Waitt's assertions that KOLK(FM) is experiencing financial difficulties. According to Saga, Waitt has not provided adequate documentation of its claims of station losses. Saga also believes there is an inconsistency between Waitt's claims of station losses and Waitt's willingness to invest considerable monies to purchase the station and to improve its facilities. 8. Competition and Diversity in the Market. Waitt asserts that its acquisition of KOLK(FM) will not affect diversity and competition in the relevant market. Waitt, says that there are seven full powered television stations, including KMEG(TV) in the Sioux City DMA. Waitt states that two of the other television stations are commercial VHF network affiliated television stations, and that one is a commercial UHF station that recently affiliated with the Fox network. The remaining three television stations are noncommercial educational. With respect to radio stations, KOLK(FM) is located in Monona County, which is part of the Sioux City DMA but is not part of any defined television metro market. Under these circumstances we count as the market for radio stations, those radio stations in the Sioux City DMA that are licensed to communities in Monona County or that place a principal community service contour over Monona County. See Gadsden Broadcasting Co., 10 FCC Rcd 8741, 8743 and n.4 (1995); Triad Skywaves, Inc., 12 FCC Rcd 6102, 6105 (MMB 1997). Waitt had originally counted stations pursuant to a different method, but amended its showing at the staff's request. According to Waitt's amended showing, there are 13 radio stations, including KOLK(FM), that provide principal community service within Monona County, Iowa, in which KOLK(FM) is located. Waitt states that after the proposed transaction there would be a total of 20 broadcast stations licensed to 16 separate owners. Waitt also indicates that there is a variety of other media available. Specifically, Waitt reports that the television DMA is served, in whole or in part, by 34 newspapers including the daily Sioux City Journal and the weekly Sioux City Globe. It maintains that at least two cable television companies serve the immediate Sioux City metropolitan area, with a 66.1% cable penetration rate. With regard to the impact on advertising revenue shares in the market, Waitt states that KMEG(TV)'s share of advertising revenue is 17.4%, as reported by the National Association of Broadcasters in 1996. Waitt maintains that KMEG(TV) is not dominant because it ranks third among the three Sioux City commercial network affiliates and received an audience share of 9%. With respect to radio, Waitt's waiver request is silent as to KOLK(FM)'s advertising revenue share. Waitt maintains nondominance in radio because, in the Spring 1998 Arbitron survey, KOLK received a 4.1% audience share and was tied for eighth place among 14 stations in the Arbitron Sioux City radio market. 9. Saga objects to an earlier showing by Waitt, which counted all 39 radio stations within the TV DMA as competitive with KOLK(FM). Saga argues that the number of relevant radio competitors is closer to 14, the number of radio stations within the Sioux City Radio Market, as reported by BIA Research, Inc. Thus, according to Saga, Waitt's original data does not provide an accurate picture of radio competition, and the Commission was correct to request additional information. Saga's supplemental comments do not, however, focus on the factual merits of Waitt's revised showing which, using a different method of counting, arrives at fewer radio stations than originally counted by either Saga or Waitt. Discussion 10. One-to-a-Market Waiver. In evaluating a request for a permanent waiver of the one-to-a-market rule, the Commission's goal "is to permit the public to benefit from such efficiencies of operation as may be achieved through the use of common facilities and staff, consistent with the maintenance of diversity and vigorous competition within the market areas involved." Second Report and Order Recon., 4 FCC Rcd at 6491. The Commission has recognized that "[i]n smaller markets, where competition is usually more limited, of particular importance would be demonstrated financial difficulties and the practical question of whether a waiver grant . . . would in fact increase or decrease the vigor of competition and diversity in the market." Id. at 6491-6492. We conclude that Waitt's showing in support of a waiver of the one-to-a-market rule meets our case-by-case criteria, and that a permanent waiver in this instance is consistent with the public interest and would not have an adverse effect on diversity and competition in the Sioux City DMA. 11. Waitt demonstrates that common ownership and joint operation of KMEG(TV) and KOLK(FM) will result in significant cost savings and programming and service benefits. Waitt has projected annual savings of approximately $159,000 resulting from the consolidation of operating facilities and personnel. Waitt has represented that these cost savings will enable it to improve TV and radio programming, especially in the areas of local news and weather, which have been minimal or absent from the stations at issue. Waitt will also improve the facilities and equipment of both stations, making it possible for both stations to provide more live programming in response to local emergencies. Finally, Waitt states that with the combined resources of its proposed TV and radio combination, it will expand its participation in local community events by increasing its support of area civic and nonprofit groups. We note Saga's concern that Waitt's resulting programming might be aimed exclusively at Sioux City, the television station's city of license and the location of the radio station's current and future studios, rather than at Onawa, the radio station's city of license, which it is required to serve. However, we find no support for that allegation, and we will not otherwise presume that the radio station's proposed enhanced informational programming including news, weather, and coverage of community events, will not address issues and problems of concern to the residents of Onawa. KOLK(FM), like all broadcast stations, is obliged to maintain quarterly issue-responsive programming lists documenting its service to its community of license. Moreover, KOLK(FM)'s performance with respect to the community of Onawa would be subject to Commission review at the time of license renewal. See 47 C.F.R.  73.3526(a)(8) 12. With regard to technical facilities, the Commission aims to predict and avoid any significant adverse effects on diversity or competition from too powerful a combination. See Great American Television and Radio Co., Inc., 4 FCC Rcd 6347, 6349 (1989). Our independent analysis of Waitt's showing indicates that KOLK(FM), is a Class C1 FM station and that there are at least 4 comparable or superior Class C1 FM stations providing principal community service in Monona County. As for KMEG(TV), a UHF TV station (CBS affiliate) operating on channel 14, and recently authorized to upgrade its facilities, our independent analysis indicates that there are two VHF stations that are affiliates of NBC and ABC, and a UHF station that recently became affiliated with Fox, all with facilities that are comparable or superior to the technical facilities of KMEG(TV). The proposed waiver would give Waitt control of one radio station and one full power TV statio. Waitt's only other broadcast interests in the Sioux City market are low power, i.e. low power television stations that rebroadcast the signal of its full power TV station. We conclude that the technical capabilities of the proposed combination does not present issues of market dominance inconsistent with the public interest. 13. With respect to financial conditions, as stated earlier, Waitt does not claim that either of the stations in its proposed combination is a failed station. In view of the fact that neither station is considered failed, we do not give great import to the ancillary disagreement between Waitt and Saga over the extent to which the radio station may or may not nevertheless be experiencing financial difficulties. As we previously have indicated, not all five factors need be present to justify grant of a waiver, and have granted a number of waivers in the absence of financial distress. Second Report and Order Recon., 4 FCC Rcd at 6491. See, e.g., DeArias, 11 FCC Rcd at 3666; Alta Gulf FM, Inc., 10 FCC Rcd 7750, 7751 (1995); Secret Communications Ltd., 10 FCC Rcd 6874, 6877-79 (1995). 14. Regarding Waitt's media holdings, we find that the proposed combination would not create any undue concentration of ownership in the relevant market. Our independent analysis of Waitt's showing, indicates that, after the assignment is approved, the relevant market will be served by 4 commercial television stations (2 VHF and 2 UHF), 3 noncommercial educational television stations (1 VHF and 2 UHF), 9 commercial radio stations (6 FM and 3 AM), and 1 noncommercial educational FM radio station. The number of radio stations that we find eligible for inclusion in this count is fewer than that claimed either by Waitt or by Saga, but the overall media diversity in the relevant market is nevertheless sufficient. Upon consummation of the proposed transaction, there will be a total of 17 broadcast stations licensed to 13 separate owners in the 141st largest DMA. Our analysis further shows that in the Sioux City DMA there is a cable penetration rate of 65% and five daily newspapers. This level of competition after the proposed combination is consistent with the level we have approved in previous waiver cases involving similar markets. See, e.g. Pennino Broadcasting Corp., 12 FCC Rcd 10752 (1997) (12 "voices" in 164th DMA); Twenty First Century Broadcasting, Inc., 12 FCC Rcd 6974 (1997) (12 "voices" in the 140th DMA); Perry Television, Inc., 5 FCC Rcd 1667 (Rev. Bd. 1990) (14 "voices" in the 130th ranked market). 15. With respect to economic concentration and competition, we usually consider the combined advertising revenue share of the proposed radio/television combination in the relevant market. See, e.g. Stockholders of Infinity Broadcasting Corp., 12 FCC Rcd 5012 (1996). Our independent analysis indicates that KMEG(TV) garners 21.2% of the TV advertising revenues, as reported in the BIA Publications, Inc.'s ("BIA") Television Master Access Database. KOLK(FM), gets less than 1% of the radio advertising revenues in the Arbitron radio market, as reported in the BIA Radio Master Access Database. The combined radio/TV advertising revenue share for Waitt's proposed combination would be approximately 16.3%. This figure is consistent with one-to-a-market waiver requests previously approved. E.g., S.e. Licensee G.P., 11 FCC Rcd at 16,734 (1996) (24.2% combined television and radio advertising share). Based on the advertising revenue share in the present case, and the fact that the stations at issue compete with comparable or technically superior facilities, we conclude that the proposed combination will not have an adverse effect on competition in this area. Overall, Waitt has demonstrated that economic efficiencies and public interest benefits will be gained and such benefits support the grant of a permanent waiver. Based on the totality of circumstances, and our treatment of waiver requests from licensees serving similar size markets, we conclude that grant of the one-to-a-market permanent waiver request would be in the public interest. 16. Accordingly, IT IS ORDERED, that the Petition to Deny filed against the above-captioned assignment applications filed by Saga Communications, Inc. IS HEREBY DENIED. 17. IT IS FURTHER ORDERED, that the request for permanent waiver of the Commission's one-to-a-market rule, 47 C.F.R. Section 73.3555(c), to permit common ownership of KOLK(FM), Onawa, Iowa and KMEG(TV), Sioux City, Iowa IS HEREBY GRANTED. 18. IT IS FURTHER ORDERED, that having found the applicants fully qualified, the above-captioned application to assign the license of KOLK(FM), Onawa, Iowa from Barnco, Inc. to Waitt Radio, Inc. IS HEREBY GRANTED. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary DISSENTING STATEMENT OF COMMISSIONER GLORIA TRISTANI In re Applications of Barnco, Inc. and Waitt Radio, Inc., File No. BALH-980721EA For the reasons set forth in my dissenting statement in In Re Applications of United Broadcasting Company, Inc, et al., 13 FCC Rcd 21563 (1998), I do not believe that the Commission applies the five-part permanent waiver standard with sufficient rigor. I therefore respectfully dissent. I do note, however, that my concerns are somewhat ameliorated by the applicant's specific and laudable commitment to provide, for the first time, regular, daily, live local news and weather on KOLK(FM).