iHeartMedia 2007 Annual Report Download - page 22

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:
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 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:
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• 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%.
• The court upheld the provision of the modified rules prohibiting common ownership of more than one top-four ranked television
station in a market, but remanded the FCC’s modified numerical limits applicable to same-market combinations of television stations.
It also remanded the FCC’s elimination of the requirement that, in a transaction that seeks a “failing” or “failed” station waiver of the
television duopoly rule, the parties demonstrate that no out-of-market buyer is willing to purchase the station.
• The court affirmed the FCC’s repeal of the newspaper/broadcast cross-ownership rule, while also upholding the FCC’s determination
to retain some limits on cross-media ownership. However, the court remanded the FCC’s “cross-media limits” for further explanation,
finding that the FCC had failed to provide a reasoned analysis for the specific limitations it adopted.