iHeartMedia 2002 Annual Report Download - page 15

In adopting its rules concerning television LMAs, however, the FCC provided “grandfathering”relief for LMAs that were in effect at the
time of the rule change in August 1999. Television LMAs that were in place at the time of the new rules and were entered into before
November 5, 1996, were allowed to continue at least through 2004. Such LMAs entered into after November 5, 1996 were allowed to continue
until August 5, 2001 at which point they were required to be terminated unless they complied with the revised local television ownership rule.
We provide substantially all of the programming under LMAs to television stations in two markets where we also own a television station.
Both of these television LMAs were entered into before November 5, 1996. Therefore, under the FCC’s August 1999 decision, both of these
television LMAs are permitted to continue through at least the year 2004. Moreover, we may seek permanent grandfathering of these television
LMAs by demonstrating to the FCC, among other things, the public interest benefits the LMAs have produced and the extent to which the
LMAs have enabled the stations involved to convert to digital operation.
A number of cross-ownership rules pertain to licensees of television and radio stations. FCC rules, the Communications Act or both
generally prohibit an individual or entity from having an attributable interest in a radio or television station and a daily newspaper located in the
same market.
Prior to August 1999, FCC rules also generally prohibited common ownership of a television station and one or more radio stations in the
same market, although the FCC in many cases allowed such combinations under waivers of the rule. In August 1999, however, the FCC
comprehensively revised its radio/television cross-ownership rule. The revised rule permits the common ownership of one television and up to
seven same-market radio stations, or up to two television and six same-market radio stations, if the market will have at least twenty separately
owned broadcast, newspaper and cable “voices”after the combination. Common ownership of up to two television and four radio stations is
permissible when ten “voices”will remain, and common ownership of up to two television stations and one radio station is permissible in all
markets regardless of voice count. The radio/television limits, moreover, are subject to the compliance of the television and radio components
of the combination with the television duopoly rule and the local radio ownership limits, respectively. Waivers of the radio/television cross-
ownership rule are available only where the station being acquired is “failed”(i.e., off the air for at least four months or involved in court-
supervised involuntary bankruptcy or insolvency proceedings). 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.
There are 22 markets where we own both radio and television stations. In the majority of these markets, the number of radio stations we
own complies with the limit imposed by the revised rule. Our acquisition of television stations in five markets in our 2002 merger with The
Ackerley Group resulted in our owning more radio stations in these markets than is permitted by the revised rule. The FCC has given us a
temporary period of time to divest the necessary radio or television stations to come into compliance with the rule. In the other markets where
our number of radio stations exceeds the limit under the revised rule, we are nonetheless authorized to retain our present television/radio
combinations at least until 2004, when the FCC is scheduled to undertake a comprehensive review and re-evaluation of its broadcast ownership
rules. As with grandfathered television LMAs, we may seek permanent authorization for our non-compliant radio/television combinations by
demonstrating to the FCC, among other things, the public interest benefits the combinations have produced and the extent to which the
combinations have enabled the television stations involved to convert to digital operation.
Under the FCC’s ownership rules, an officer or director of our company or a direct or indirect purchaser of certain types of our securities
could cause us to violate FCC regulations or policies if that purchaser owned or acquired an “attributable”interest in other media properties in
the same areas as our stations or in a manner otherwise prohibited by the FCC. All officers and directors of a licensee and any direct or indirect
parent, general partners, limited partners and limited liability company members who are not properly “insulated”from management activities,
and stockholders who own five percent or more of the outstanding voting stock of a licensee or its parent, either directly or indirectly, generally
will be deemed to have an attributable interest in the licensee. Certain institutional investors who exert no control or influence over a licensee
may own up to twenty percent of a licensee’s or its parent’s outstanding voting stock before attribution occurs. Under current FCC regulations,
debt instruments, non-voting stock, minority voting stock interests in corporations having a single majority shareholder, and properly insulated
limited partnership and limited liability company interests as to which the licensee certifies that the interest holders are not “materially
involved”in the management and operation of the subject media property generally are
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