iHeartMedia 2002 Annual Report Download - page 14

own nationally any number of AM or FM broadcast stations. Other FCC rules mandated by the 1996 Act greatly eased local radio ownership
restrictions. The maximum allowable number of radio stations that may be commonly owned in a market varies depending on the total number
of radio stations in that market, as determined using a method prescribed by the FCC. In markets with 45 or more stations, one company may
own, operate or control eight stations, with no more than five in any one service (AM or FM). In markets with 30-44 stations, one company
may own seven stations, with no more than four in any one service. In markets with 15-29 stations, one entity may own six stations, with no
more than four in any one service. In markets with 14 stations or less, one company may own up to five stations or 50% of all of the stations,
whichever is less, with no more than three in any one service. These new rules permit common ownership of more stations in the same market
than did the FCC’s prior rules, which at most allowed ownership of no more than two AM stations and two FM stations even in the largest
markets.
Irrespective of FCC rules governing radio ownership, however, the Antitrust Division of the United States Department of Justice and the
Federal Trade Commission have the authority to determine that a particular transaction presents antitrust concerns. Following the passage of
the 1996 Act, the Antitrust Division has become more aggressive in reviewing proposed acquisitions of radio stations, particularly in instances
where the proposed purchaser already owns one or more radio stations in a particular market and seeks to acquire additional radio stations in
the same market. The Antitrust Division has, in some cases, obtained consent decrees requiring radio station divestitures in a particular market
based on allegations that acquisitions would lead to unacceptable concentration levels. The FCC has also been more aggressive in
independently examining issues of market concentration when considering radio station acquisitions. The FCC has delayed its approval of
numerous proposed radio station purchases by various parties because of market concentration concerns, and generally will not approve radio
acquisitions when the Antitrust Division has expressed concentration concerns, even if the acquisition complies with the FCC’s numerical
station limits. Moreover, in recent years the FCC has followed a policy under which it gives specific public notice of its intention to conduct
additional ownership concentration analysis, and solicits public comment on “the issue of concentration and its effect on competition and
diversity,”with respect to certain applications for consent to radio station acquisitions based on estimated advertising revenue shares or other
criteria. This policy, which the FCC formally adopted as an “interim policy”in November 2001, has delayed approval of a number of our radio
acquisitions.
With respect to television, the 1996 Act directed the FCC to eliminate the then-existing 12-station national limit for station ownership and
increase the national audience reach limitation from 25% to 35%. The 1996 Act left local TV ownership restrictions in place pending further
FCC review, and in August 1999 the FCC modified its local television ownership rule. Under the current rule, permissible common ownership
of television stations is dictated by Nielsen Designated Market Areas, or “DMAs.”A company may own two television stations in a DMA if
the stations’Grade B contours do not overlap. Conversely, a company may own television stations in separate DMAs even if the stations’
service contours do overlap. Furthermore, a company may own two television stations in a DMA with overlapping Grade B contours if (i) at
least eight independently owned and operating full-power television stations, the Grade B contours of which overlap with that of at least one of
the commonly owned stations, will remain in the DMA after the combination; and (ii) at least one of the commonly owned stations is not
among the top four stations in the market in terms of audience share. The FCC will presumptively waive these criteria and allow the acquisition
of a second same-market television station where the station being acquired is shown to be “failed”or “failing”(under specific FCC definitions
of those terms), or authorized but unbuilt. A buyer seeking such a waiver must also demonstrate, in most cases, that it is the only buyer ready,
willing, and able to operate the station, and that sale to an out-of-market buyer would result in an artificially depressed price. Since the revision
of the local television ownership rule, we have acquired a second television station in each of five DMAs where we previously owned a
television station.
The FCC has adopted rules with respect to so-called local marketing agreements, or “LMAs,”by which the licensee of one radio or
television station provides substantially all the programming for another licensee’s station in the same market and sells all of the advertising
within that programming. Under these rules, an entity that owns one or more radio or television stations in a market and programs more than
15% of the broadcast time on another station in the same service (radio or television) in the same market pursuant to an LMA is generally
required to count the LMA station toward its media ownership limits even though it does not own the station. As a result, in a market where we
own one or more radio or television stations, we generally cannot provide programming under an LMA to another station in the same service
(radio or television) if we cannot acquire that station under the various rules governing media ownership.
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