iHeartMedia 2006 Annual Report Download - page 17

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In its third biennial review, which commenced in September 2002, the FCC undertook a comprehensive review
and reevaluation of all of its media ownership rules, including incorporation of a previously commenced separate
rulemaking on the radio ownership rules. This biennial review culminated in a decision adopted by the FCC in June
2003, in which the agency made significant changes to virtually all aspects of the existing media ownership rules.
Among other things:
• The FCC relaxed the local television ownership rule, allowing common ownership of two television
stations in any DMA® with at least five operating commercial and non-commercial television stations.
Under the modified rule, a company may own three television stations in a DMA® with at least 18
television stations. In either case, no single entity may own more than one television station that is among
the top four stations in a DMA® based on audience ratings. In markets with eleven or fewer television
stations, however, the modified rule would allow parties to seek waivers of the “top four” restriction and
permit a case-by-case evaluation of whether joint ownership would serve the public interest, based on a
liberalized set of waiver criteria.
• The FCC eliminated its rules prohibiting ownership of a daily newspaper and a broadcast station, and
limiting ownership of television and radio stations, in the same market. In place of those rules, the FCC
adopted new “cross-media limits” that would apply to certain markets depending on the number of
television stations in the relevant television DMA®. These limits would prohibit any cross-media
ownership in markets with three or fewer television stations. In markets with between four and eight
television stations, the cross-media limits would allow common ownership of one of the following three
combinations: (1) one or more daily newspapers, one television station, and up to half of the radio stations
that would be permissible under the local radio ownership limits; (2) one or more daily newspapers and as
many radio stations as can be owned under the local radio ownership limits (but no television stations); and
(3) two television stations (provided that such ownership would be permissible under the local television
ownership rule) and as many radio stations as can be owned under the local radio ownership limits (but no
daily newspapers). No cross-media ownership limits would exist in markets with nine or more television
stations.
• The FCC relaxed the limitation on the nationwide percentage of television households a single entity is
permitted to reach, raising the cap from 35% to 45%.
With respect to local radio ownership, the FCC’s June 2003 decision left in place the existing tiered numerical
limits on station ownership in a single market. The FCC, however, completely revised the manner of defining local
radio markets, abandoning the existing definition based on station signal contours in favor of a definition based on
“metro” markets as defined by Arbitron. Under the modified approach, commercial and non-commercial radio stations
licensed to communities within an Arbitron metro market, as well as stations licensed to communities outside the metro
market but considered “home” to that market, are counted as stations in the local radio market for the purposes of
applying the ownership limits. For geographic areas outside defined Arbitron metro markets, the FCC adopted an
interim market definition methodology based on a modified signal contour overlap approach and initiated a further
rulemaking proceeding to determine a permanent market definition methodology for such areas. The further proceeding
is still pending. The FCC grandfathered existing combinations of owned stations that would not comply with the
modified rules. However, the FCC ruled that such noncompliant combinations could not be sold intact except to certain
“eligible entities,” which the agency defined as entities qualifying as a small business consistent with Small Business
Administration standards.
In addition, the FCC’s June 2003 decision ruled for the first time that radio joint sales agreements, or “JSAs”,
by which the licensee of one radio station sells substantially all of the advertising for another licensee’s station in the
same market (but does not provide programming to that station), would be considered attributable to the selling party.
Furthermore, the FCC stated that where the newly attributable status of existing JSAs and LMAs resulted in
combinations of stations that would not comply with the modified rules, termination of such JSAs and LMAs would be
required within two years of the modified rules’ effectiveness.
Numerous parties, including us, appealed the modified ownership rules adopted by the FCC in June 2003.
These appeals were consolidated before the United States Court of Appeals for the Third Circuit. In September 2003,
shortly before the modified rules were scheduled to take effect, that court issued a stay preventing the rules’
implementation pending the court’s decision on appeal. In June 2004, the court issued a decision that upheld the
modified ownership rules in certain respects and remanded them to the FCC for further justification in other respects.
Among other things: