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August 14, 1998


Station KBYB(FM), El Dorado, Arkansas
File Nos. BALH-961217GH and GI

In the Telecommunications Act of 1996, Congress significantly relaxed the Commission-established caps on local radio ownership. The Commission has faithfully executed that directive and will continue to do so. However, Congress also set clear limits on the level of permissible consolidation, such as the prohibition on any entity owning or controlling more than fifty percent of the radio stations in smaller markets. See 1996 Act, Section 202(b)(1)(D). Unfortunately, we believe that our current rules for defining radio markets hamper our ability to fulfill Congress' mandate. Under our rules, for instance, it is entirely possible that one entity could own all of the radio stations that serve a particular community.

As the item notes, the issue of market definition has been raised in our biennial ownership proceeding and we look forward to addressing it there. For the time being, this case properly applies our rules as they exist and we therefore accept the result.

Our current broadcast ownership rules stumble on one of the critical steps in any meaningful competitive analysis: a clear definition of the scope of the "market" in question. For purposes of counting the number of stations in the "market," the rules count any station whose principal community contour intersects with any mutually overlapping station in the proposed combination. But then when counting the number of stations a particular entity may own within that market, the "market" is limited to only those stations that overlap with every station proposing to have common ownership. The end result is that there can be no meaningful assessment of market concentration because there is no consistent definition of the relevant market.

In this case, for instance, the Commission has found that Noalmark will own four stations in a 15-station market, well within the six stations permitted. But this comparison is apples to oranges: the four stations that count against Noalmark are only those that overlap with every other station in the proposed combination; the other 11 stations that make up the total market by overlapping with at least one of the four stations are ignored regardless of who owns them. Conceivably, Noalmark could own several of those stations as well (and thus violate the six station limit), but because those 11 do not overlap with every other Noalmark station in the proposed combination, our rules disregard them.

It is also clear that our practice of treating any station whose principal community contour intersects with any mutually overlapping station in the proposed combination as part of the same "market" can lead to unrealistic results. In one case, for instance, two 50 kW Class A AM stations, licensed to Memphis, Tennessee, with principal community contours that overlapped the principal community contour of one of the stations in a proposed radio combination in Jonesboro, Arkansas -- approximately 68 miles away in an entirely different Arbitron market -- were counted for purposes of determining the number of stations in the relevant radio market. See Patteson Brothers, Inc., 8 FCC Rcd 7595 (1993).

We do not have any definitive answers at this point, but a logical starting point would be to apply the same market definition both to the number of stations in the market and to the number of stations a particular entity actually owns within that market. Again, we look forward to addressing this market definition issue in the context of our biennial ownership proceeding.

In addition to the above market definition issues, this decision is troubling because it offers no guidance as to the type of evidence the Commission will consider in analyzing competition in a market. Published market analysis is available for most, but not all, markets. In this case, the petitioner simply asserted that Noalmark, the assignee, would receive eighty percent of the available advertising revenue in the market if the transaction were approved. We might have found the petitioner's argument more convincing if the petitioner had supplemented this statement with documents upon which such predictions were based, or with verified statements from advertisers and others familiar with advertising shares in the market.

Such evidence would be especially important in smaller markets. Approximately half of all radio stations are located outside of Arbitron-rated markets in communities with populations of 50,000 or less. Revenue estimates compiled by organizations such as BIA Research, Inc. are generally not available for the stations in these areas. For the Commission to be able to fulfill its statutory requirement to conclude that a license assignment or transfer is in the public interest (see Section 310(d) of the Communications Act), it is vital that parties provide us with fact-specific information about the effect of the proposed transaction on diversity and competition in the market.