June 10, 1999
|Re:||Application of Great Empire Broadcasting, Inc. and Journal Broadcast Corp. for Assignment of WOW(AM) and WOW(FM), Omaha, Nebraska File Nos. BTC-980831GH and BTCH-980831GI|
In the Telecommunications Act of 1996, Congress significantly relaxed the Commission-established caps on local radio ownership. However, Congress also set clear limits on the level of permissible consolidation in a radio market. For example, in markets with 45 or more commercial radio stations, an entity may own, operate or control no more than eight stations. In a market that has between 15 and 29 commercial radio stations, an entity may own, operate or control no more than six stations. I have previously described the concerns I have regarding our definition of the relevant radio "market" for purposes of applying these local radio ownership caps.(1) I have discussed the fact that our rules apply different definitions of the relevant "market" for purposes of counting the total number of stations in the market and for purposes of determining the number of stations that count toward the ownership cap.
In this case, my concern centers on the method we use to determine the number of stations contributing to the market. To arrive at that number, we count any station whose principal community contour intersects with any mutually overlapping station in the proposed combination. This case demonstrates again how that method creates illogical results and fails to allow a meaningful assessment of market concentration.
In this case, Journal, the licensee of six stations in the Omaha area, proposes to acquire two additional stations, for a total of eight. All of the Journal stations will place a principal community contour over the city limits of Omaha. The Order finds this combination permissible based on the conclusion that there are 53 stations in the radio market. However, this figure includes a number of distant stations that do not provide real service to the Omaha marketplace. The composite principal community contour of two of the stations in the proposed combination, WOW(AM) and KESY(AM), extends approximately 20-30 miles beyond the principal community contours of the other stations Journal will own. At the outer edges of their contours, WOW(AM) and KESY(AM) intersect with a number of distant stations, some more than 50 miles from Omaha. As Commissioner Tristani points out, no listener, advertiser, or economist would consider these distant stations to be a competitor in the Omaha market. Without these distant stations, there would be fewer than 45 stations in the market, and Journal's proposed combination of eight radio stations would not be approved under our rules.
This case also illustrates another problem with the current rules. Under the method employed by the Commission, the number of stations considered to contribute to the market varies depending upon the particular stations involved in the proposed combination. Journal's own particular radio market in this case is considered to contain 53 stations under our rules because the large WOW(AM) contour brings stations from far outside of Omaha into the definition of the market. This methodology could lead to anomalous results if the licensee of the most powerful stations, or those with the furthest reach, in the market are permitted to own a greater number of stations than competitors owning less powerful signals. This is unfair and not what the law envisions.
The order refers to another definition of a radio market. This definition encompasses only those radio stations with which the station is competing for advertising revenue and ratings. This definition may make the most sense in this case. The ownership caps are intended to prevent the harm that may come to diversity and competition with too much consolidation. In this case, only 23 stations are included in the BIA data for the Omaha market. If there are only 23 stations in the market, then Journal is only allowed to own and operate 6 stations and the transfer should not be permitted.
Because today's Order applies the rules as they currently exist, I reluctantly concur. I do not believe that Journal's post-merger share of the advertising revenue in the market, approximately 40%, is by itself evidence of a disqualifying level of consolidation. In addition, although Journal and Central Star, the next largest group owner in the Omaha market, will together account for a 74.1 % revenue share, that figure also does not by itself indicate a level of concentration that requires denial of the application. I note, however, that the Order fails to address whether a third group exists or could emerge in the market to compete with Journal and Central Star. A third strong radio group could present a challenge to the top two owners that reduces the likelihood of competitive harm. I would like to see this addressed as part of the competitive analysis used in applying our ownership rules. Finally, while I agree with the petitioner that it is important that we review the facilities involved in the merger, I do not believe that the proposed combination in this case creates an excessive concentration of the powerful signals in the market.
Today's Order should not serve as precedent for future Commission action in radio cases. Instead, it is high time that the Commission revised its radio ownership rules to incorporate a coherent and consistent definition of a radio market to ensure meaningful consideration of market concentration. My goal in this endeavor is not to be restrictive, but to rationalize our process. Only by making our rules logical and internally consistent will we be able to reasonably carry out our statutory obligation to analyze transfer and assignment applications in the public interest. Moreover, it is critical that our rules be clear so that parties can structure transactions with confidence that they are in compliance with our rules. I again urge the Commission to address these issues.