Radio Rereg Would Limit Clear Channel

A new report suggests that the FCC's June 2 rule rewrite could put the bite on Big Radio. For example, 82 stations in 31 markets owned by radio giant Clear Channel do not comply with new ownership rules.

While the majority of those are grandfathered, Clear Channel will have to sell at least 16 stations or unwind joint sales agreements (JSAs) there. In addition, "the real damage [of the rules] will be to block Clear Channel's ability to grow in large markets," said Arthur Belendiuk, a Washington attorney who has petitioned the FCC to block some Clear Channel acquisitions.

Clear Channel and other owners complain that, by forbidding them from selling entire clusters intact, the FCC is also significantly reducing the value of each station in the group.

Although passage is a long shot, legislation passed by the Senate Commerce Committee could force companies to sell all their non-complying stations.

The FCC's new ownership rules are deregulatory for TV broadcasters, but the opposite is largely the case for radio, where two new rules will force owners to divest stations and will forbid them from selling others as part of intact local clusters. Industrywide, 215 of the country's nearly 11,000 commercial radio stations are affected by the changes, according to a report supplied to BROADCASTING & CABLE by Bear, Stearns & Co.

The FCC's rule changes were motivated in large part by the growth of Clear Channel into a supergroup that combined market-leading radio holdings with a concert-promotion business (the Justice Department is conducting an antitrust investigation).

The changes also were an answer to complaints that, because of a loophole, Clear Channel and others were able to own more stations in small communities than the government intended.

The FCC's local ownership limits allow one company to own eight stations in markets with at least 45 stations; that drops according to a sliding scale, bottoming out at five in markets with 14 or fewer stations. Under the previous method of determining the number of stations in market, a complex mapping of stations' overlapping signal contours tended to overstate the total and, therefore, the number any one company could own.

"There are a hell of a lot of markets that once allowed ownership of eight stations but now permit only seven," said report author, Victor Miller. The FCC said it will rely on Arbitron's geographic boundaries to decide which stations are in a market. The FCC is still reviewing how to add up stations in markets not rated by Arbitron.

A more immediate impact is likely to be felt by the FCC decision to attribute many JSAs to a station's ownership tally. Previously, JSAs didn't count; now they do when the brokering company accounts for 15% or more of the ad time sold a station. Any JSAs that push a brokering company past a local ownership cap must be disbanded within two years. Of Clear Channel's 75 JSAs, 16 are in markets where the company would exceed ownership limits.