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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 Applicatio n of) ) STEPHENS COUNTY ) BROADCASTING COMPANY ) (Assignor) ) ) and ) File No. BALCT-970730KH ) SPARTAN COMMUNICATIONS, INC. ) (Assignee) ) ) For Consent to the Assignment of the ) License for Television Station ) WNEG-TV, Toccoa, Georgia ) ) MEMORANDUM OPINION AND ORDER Adopted: October 28, 1997 Released: October 30, 1997 By the Chief, Mass Media Bureau: 1. The Commission, by the Chief, Mass Media Bureau, acting pursuant to delegated authority, has before it for consideration the above-captioned unopposed application for consent to the assignment of the license for television station WNEG-TV, Channel 32 (CBS), Toccoa, Georgia ("WNEG"), from Stephens County Broadcasting Company ("Stephens Broadcasting") to Spartan Communications, Inc. ("Spartan"). Spartan is the licensee of WSPA-TV, Channel 7 (CBS) Spartanburg, South Carolina ("WSPA"), whose Grade B contour overlaps the Grade B contour of WNEG. To permit common ownership of WNEG and WSPA, Spartan proposes to operate WNEG, which is currently a full-service station, as a satellite of WSPA, and requests grant of its assignment application pursuant to Note 5 of Section 73.3555 of the Commission's rules, which exempts satellite stations from the duopoly prohibition. Request for Satellite Status 2. Under our television satellite policy, set forth in Television Satellite Stations Review of Policy and Rules, Report and Order, 6 FCC Rcd 4212 (1991) ("Television Satellite Order"), 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 contour 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. If an applicant is unable to qualify for the presumption, the Commission will evaluate the satellite proposal on an ad hoc basis and grant the application if there are other compelling circumstances that warrant approval. Id. at 4214. 3. Spartan asserts that its proposed operation of WNEG as a satellite of WSPA satisfies each of the three elements of the Commission's "presumption" test set forth above. As to the first criterion of the presumption, Spartan has submitted an engineering study which demonstrates that there is no City Grade contour overlap between WSPA and proposed satellite WNEG. Based on this showing, we find that Spartan has satisfied the first prong of the presumptive satellite standard. With regard to the second criterion, an applicant may show that a proposed satellite provides service to an underserved area by demonstrating compliance with the "transmission test." Under the transmission test, a proposed satellite's community of service is underserved if there are two or fewer full-service stations licensed to it. Spartan asserts that Toccoa is underserved under the transmission test because WNEG is the only television station licensed to the community and the only other channel allotted to Toccoa has long remained vacant. We believe that Spartan has demonstrated that WNEG provides service to an underserved community, in satisfaction of the second prong of the presumption test. 4. With respect to the third criterion, Spartan contends that despite years of searching for a qualified buyer, Stephens Broadcasting has been unable to locate a buyer ready and able to operate WNEG as a full-service stand-alone station. The declaration of Roy E. Gaines, president of Stephens Broadcasting, recounts the unsuccessful efforts to find a qualified buyer of the financially struggling station. Gaines states that WNEG has been suffering losses for years because the area it serves cannot support a full-service television station. Gaines asserts that WNEG, which is located in the Greenville-Spartanburg-Anderson-Asheville Designated Market Area ("DMA"), serves only sparsely-populated, rural counties. In fact, WNEG's community of license, Toccoa, Georgia, has a population of under 9,000, and the largest community in WNEG's service area, Anderson, South Carolina, has a population of only approximately 25,000. According to Gaines, the station has been losing money for years. Indeed, WNEG's monthly expenses have regularly exceeded its monthly revenues since 1988. Additionally, two of the larger cable systems have replaced WNEG's signal with Turner TNT Cable Network, resulting in the loss of about $100,000 per year in revenue. Gaines states that to save costs, Stephens Broadcasting has laid off staff, reduced local programming and relied on barter syndicated programming. However, because Stephens Broadcasting was forced to bid for syndicated programming against the much larger stations in the market that serve populous areas, the higher quality, more popular syndicated programming was acquired by these larger stations. Gaines asserts that despite these cost- saving measures, the station continues to lose money. 5. Gaines avers that in 1990 Stephens Broadcasting retained the media brokerage firm Chapman & Associates to locate a buyer for the station, but was warned by the firm that WNEG would be a "hard sell." Indeed, despite the preparation of a prospectus, mailings, advertising and direct contacts with group owners, not a single interested buyer was found. In 1991, when its agreement with Chapman & Associates expired, Stephens Broadcasting retained the services of another brokerage firm, The Jesse Neal Bowder Company, to find a buyer of the station. This firm also prepared a prospectus, advertised, and contacted group owners. However, Gaines states that the few interested prospects lacked the necessary funding, and no buyer was located. 6. From 1993 to early 1995, Stephens Broadcasting retained yet another broker, Dan Wilcox of REMAX of Atlanta, Commercial Division, who located a potential buyer who indicated that it might offer $1 million for the station. However, according to Gaines, this figure represented a fraction of the funds that had been invested in the station, and the owners of Stephens Broadcasting would have suffered a "terrific financial loss" had the offer been formally made and accepted. Wilcox subsequently located another prospective buyer, Omni Management Associates ("Omni"). Omni and Stephens Broadcasting entered into a letter of intent in March 1994 for the sale of the station, and several meetings were held in Omni's offices to negotiate an asset purchase agreement. But Gaines asserts that when he called Omni's CEO to arrange for signing the agreement, he quickly learned that the company's telephones had been disconnected, the company evicted from its offices for nonpayment of rent, and the CEO placed in the county jail. On further investigation, Gaines discovered that the financial information provided by Omni through Wilcox was bogus, including a forged letter of credit from an Atlanta bank. According to Gaines, throughout the period in which Stephens Broadcasting was attempting to find a suitable buyer, the station continued to sustain losses. Spartan contends that as a "last resort," in August 1995, Stephens Broadcasting entered into a time brokerage agreement and asset purchase agreement with Spartan, under which Spartan committed to seeking the authority to acquire the station as a satellite of WSPA within two years. 7. Spartan maintains that it continues to be infeasible to locate an alternative buyer to purchase and operate WNEG as a full-service station. In support, Spartan submits a statement by James H. Rosenfield, a managing director of Veronis, Suhler & Associates, a firm specializing in acquisitions and mergers in the communications field. Rosenfield has been in the television broadcasting business for over 40 years and has held executive positions with two national networks. Rosenfield was also the chairman and CEO of John Blair Communications, a television station national sales rep firm serving stations across the country. Rosenfield states that he is very familiar with the Greenville-Spartanburg-Anderson- Asheville DMA. He notes that WNEG's service area comprises only rural towns on the edge of the Greenville-Spartanburg-Anderson-Asheville and Atlanta television markets, and that the station covers only a small fraction of the households in its own DMA. He "unequivocally" states that it is "impossible to generate any national advertising sales revenue for a station in that configuration," and adds that "it is not surprising that, even in the current active market, the owners have been unable to find a single viable buyer to operate WNEG-TV as a full-service station." Rosenfield concludes that it is "unreasonable to expect that the owners of WNEG could ever locate a qualified buyer to operate the station as a full- service station, especially in the current environment where buyers are aware of the impending need to expend large sums of money in the near future to convert the station from NTSC to DTV service." He also notes that the marginal size of the potential local television market in the rural areas served by the station lessens WNEG's viability as a full-service station. 8. According to the declaration of John W. West, executive vice president of Spartan, Spartan proposes to maintain WNEG's local studio and management presence in Toccoa and is committed to broadcasting locally-oriented programming. Spartan has assigned WSPA's program director to Toccoa to oversee Spartan's efforts to supply programming to WNEG, including overseeing a six-person Toccoa news department. According to West, Spartan has already improved WNEG's local news by supplying the station with half-hour local newscasts and by airing local special events programs. Spartan also pledges to provide weather forecasting service via microwave feed from WSPA, and to make available to WNEG state- of-the-art equipment such as ENG cameras, studio cameras, a news studio video switcher, a newsroom computer system, and remote production vehicles. Additionally, West avers that Spartan is prepared to make the financial commitment to facilitate WNEG's transition to digital television, a transition that Stephens Broadcasting cannot afford to make. Finally, Spartan asserts that satellite operations will allow the station to restore CBS programming to approximately 72,000 people in rural northeastern Georgia who lost their only off-air CBS service when WAGA-TV, Channel 5 (FOX), Atlanta, Georgia, ceased its affiliation with CBS in 1994, and to provide CBS programming to nearly 70,000 people in the Toccoa area who did not previously receive off-air CBS service. 9. Based on the foregoing, we conclude that Spartan has satisfied the third component of the satellite presumption. Spartan has provided detailed information regarding the extensive but futile efforts of Stephens Broadcasting to sell WNEG, including the retention of three different brokerage firms to find a buyer who would operate it as a full-service station. We also note that WNEG has apparently operated at a financial loss since 1988, resulting in a substantial reduction in staffing and local programming. Accordingly, after review of the representations made herein, we believe that Spartan has adequately demonstrated the unlikelihood of finding an alternative buyer willing and able to operate WNEG as a full- service stand-alone facility. We conclude that Spartan has complied with the three elements of the presumption test and that grant of waiver of the duopoly rule pursuant to Note 5 to Section 73.3555 would serve the public interest. However, in a recent Notice of Proposed Rulemaking, the Commission has undertaken a reexamination of its broadcast television ownership policies, including the continued exemption of satellite stations from broadcast ownership restrictions. See Second Further Notice of Proposed Rule Making in MM Docket Nos. 91-221 and 87-8, FCC 96-438 (released November 7, 1996). Accordingly, we will condition the grant of this satellite waiver on whatever action is taken in that proceeding. In view of the foregoing, and having determined that the applicant is qualified to operate the stations as proposed, we find that a grant of these applications will serve the public interest, convenience and necessity. Conclusion 10. Having determined that the applicants are qualified in all respects, we find that grant of the assignment application filed by the parties will serve the public interest. 11. Accordingly, IT IS ORDERED, That the request by Spartan Communications, Inc. for operation of WNEG-TV, Toccoa, Georgia, pursuant to the satellite exemption to the duopoly rule, Section 73.3555 of the Commission's rules, IS GRANTED, subject to the outcome of the Commission's pending television ownership rulemaking in MM Docket Nos. 91-221 and 87-8. 12. IT IS FURTHER ORDERED, That the application for assignment of license of television station WNEG-TV, Toccoa, Georgia, from Stephens County Broadcasting Company to Spartan Communications, Inc. (BALCT-970730KH) IS GRANTED. FEDERAL COMMUNICATIONS COMMISSION Roy J. Stewart Chief, Mass Media Bureau