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Where the Deals are

BIA: New FCC rules would make room for TV duopolies in 72 markets 6/01/2003 08:00:00 PM Eastern

Cincinnati's WB affiliate is not the most watched station, but it may soon be drawing a lot of interest from other broadcasters in town. Thanks to the FCC's vote on media deregulation today, Sinclair Broadcasting's WSTR-TV is the only station eligible to become the junior partner in Cincinnati's first two-station TV duopoly.

Open the Door
DMA Markets
Source: BIA Financial
21 Pittsburgh
24 Baltimore
27 Hartford, Conn.
29 Raleigh-Durham, N.C.
32 Cincinnati
33 Kansas City, Mo.
34 Columbus, Ohio
38 Grand Rapids, Mich.
40 Birmingham, Ala.

In a wide-ranging modification of broadcast-ownership rules, the FCC today is slated to open the doors for new TV duopolies in 72 markets, including Cincinnati and 43 other towns where pairings were previously forbidden, according to BIA Financial Network.

"There will be a rush to pick up stations in markets where only one station is available [for duopolies] under the FCC's new limitations," predicts Mark Fratrik, a BIA analyst.

With a vote to permit broadcast/newspaper clusters as well, the FCC is set to open local markets to unprecedented levels of concentration. The new rules will ease the prohibition on ownership of both a daily newspaper and broadcast station in the same market, allowing such crossownership in roughly 160 of the country's 210 TV markets. Today, such combinations exist in just 46 markets.

Additionally, the FCC will, for the first time, allow three-station combos in New York, Los Angeles, Philadelphia, San Francisco, Boston and Dallas, in which 18 or more stations are on the air. Two of the four big broadcast networks, NBC and ABC, will also get extra room to grow with an increase in the cap on one TV group's national reach from 35% of television households to 45%.

The changes are expected to be approved by the commission's three Republicans after a rancorous debate with their Democratic colleagues.

Depending on whom you believe, the changes are either an insignificant tweaking that will have little impact on the media landscape beyond a few station swaps allowing media companies to beef up local clusters or an outright evisceration of the traditional safeguards of diverse ownership and viewpoints in news coverage and entertainment.

"The investment impact of the FCC's review is likely to be minimal," says the Precursor Group's Rudy Baca. Disappointed networks and other TV groups are likely to turn their attention to court challenges rather than crafting deals, he predicted.

Consumer Union Director Gene Kimmelman, though, said the FCC is abolishing "most of the ownership rules that make our media markets competitive."

The new duopoly rule would permit TV pairs in any market as long as the four top-rated stations don't combine. The restriction replaces the FCC's "eight-voice" test imposed in 1999, which limited duopolies to markets where eight separately owned stations would remain post-merger. The old rule allowed companies to establish pairs or convert joint partnerships in roughly 74 markets.

In addition to Cincinnati, TV pairs can be established for the first time in Louisville, Ky.; Providence, R.I.; and Des Moines, Iowa, among other markets. Some, like Richmond, Va., and Flint, Mich., will have room for only one duopoly. Other markets, such as Pittsburgh and Baltimore, already have duopolies but will have room for at least one more.

The smallest markets where broadcasters will be able to form a duopoly are Billings, Mont., DMA 170, and Marquette, Mich., DMA 177. Both have room for one pairing. Duopolies would still be banned in 92 markets.

The revisions, particularly relaxation in the duopoly rule, please almost no one and are likely to trigger years of petitions for FCC reconsideration and court challenges by both pro- and anti-deregulation forces.

Broadcasters say TV duopolies will remain forbidden in the smallest markets, where struggling third- and fourth-place stations risk going dark without the opportunity to pair up.

The argument is getting some sympathy among the FCC Republicans, who were said to be still debating late Friday over the possibility of additional relief in small markets.

"The more shackles you put on stations in small markets, the more resources they must put toward surviving and the fewer they will put into serving the public with local news and children's programming," says Peter Tannenwald, attorney for Montclair Communications, whose WZVN-TV Naples, Fla., is an ABC affiliate and part of a two-station combo with the NBC affiliate.

Deregulation opponents, however, deride the "dying-station" argument as a gross exaggeration offered to justify letting big media gobble up profits in local markets.

"How are they getting killed?" asked Mark Cooper, research director for the Consumer Federation of America. "Very few stations are going dark, and TV broadcasters just had the biggest advertising upfront in history."

As for crossownership of newspapers with local broadcasters, combos would be permitted in markets with at least four TV stations. Those can be as small as 200-ranked Casper, Wyo., and 203-ranked Fairbanks, Alaska. Small-market combos have operated since the advent of broadcasting, when the federal government urged newspapers to get into the fledgling business as a way to bring stations on the air. Same-market crossownership was banned in 1975, when government officials were persuaded by the notion that newspaper companies would dominate public-affairs coverage in their markets.

Rather than break up the 140 combos that then existed, they were allowed to continue. Of those grandfathered clusters, 46 remain today.