FCC Media Bureau Denies Complaint Against Raycom in Honolulu, But Says Combo Violates 'Intent' of Rules

Signals it violates the spirit of local ownership caps, and could take that into account at license renewal time

By John Eggerton -- Broadcasting & Cable, 11/27/2011 7:33:32 PM

The FCC's Media Bureau has rejected Media Council Hawaii's (MCH) challenge to Raycom's combination of a duopoly and shared services agreement involving three stations in Honolulu, but it also signaled it agreed with MCH that the station combo violated the intent of FCC rules.

That came in an order issued Friday (Nov. 25), according to a copy supplied to B&C/Multi.

The FCC's Media Bureau signaled it thought the move did violate the spirit, if not the letter, of the FCC's local ownership caps, said it could take that into account at license renewal time and pointed out that the FCC was planning to look at shared services agreements in its quadrennial media ownership review. The bureau also fined Raycom $10,000 for not making its public inspection file available for public inspection on a timely basis.

More than two years ago, MCH asked the FCC to block Raycom and MCG Capital's shared service agreement, in which Raycom, which owns NBC affiliate KHNL and CBS affiliate KGMB, would also provide some operational services to MyNetworkTV affiliate KFVE, including producing its local news and providing some back-office services. That came after Raycom had traded affiliations and call letters with KFVE in an earlier move. MCH argued that Raycom's resulting ownership of two of the top four stations in the market, and operational responsibilities at a third station, violated duopoly rules and had an adverse impact on diversity and competition. Raycom had countered that it had violated no rules and that the economy was such that the market would not support five traditionally separate stations.

"Rather than experiencing the loss of one, or possibly two, stations in Hawaii, we intend to preserve three stations that provide important and valuable local, national and international programming to viewers in Hawaii," Raycom said at the time of the agreement.

In the FCC decision, the bureau concluded that the operational agreement with the third station did not violate FCC rules because Raycom had not acquired control of a new license "under applicable Commission and staff precedent." And even though Raycom's control of KGMB gave Raycom control of two of the top four TV stations in the market, since it was not an acquisition (but through a swap of affiliations and programming) it did not violate the FCC's prohibition on owning two of the top four stations in a market.

But the bureau agreed with MCH that the "net effect" of the transactions was "clearly at odds with the purpose and intent of the duopoly rule." As a result, it said, "we will include in the ongoing 2010 quadrennial review proceeding the duopoly rule issues that this and similar cases raise." Then it suggested it might not be done with the issue from the bureau angle, either. "Our decision here does not preclude us from considering whether this or similar transactions are consistent with the public interest within the context of individual licensing proceedings."

As to the fine, KFVE acknowledged that it had failed to make its issues/programs lists available for timely inspection because the person with the key to the filing cabinet was temporarily unavailable.

The bureau's suggestion that Raycom had used a loophole the FCC needed to address, or that the bureau could still consider the transactions at renewal time little comfort to MCH's attorney.

"Media Council Hawaii is very disappointed with the Bureau's decision and will likely seek review by the full Commission," said Angela Campbell, counsel for the group. "The Bureau's failure to enforce the ownership limits here will been seen as a "green light" for others to evade the TV duopoly rule by entering into similar sharing arrangements. The commitment to address the issue of shared services in the 2010 quadrennial review, while welcome, is likely to come too late to prevent the significant loss of diversity and competition from these shared service agreements.