Merger most Powell - Broadcasting & Cable

Merger most Powell

FCC removes controversial radio consolidation block, clears 62 sales
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In his three years as FCC commissioner, Michael Powell's repeated deregulatory mantras made him appear as some sort of iconoclastic Gregorian monk. Two months after taking the chairman's pulpit, his theology is now agency dogma.

By ordering FCC staffers to remove the logjam on sales of 62 radio stations last week, Powell made his first significant move toward lessening the telecommunications industry's regulatory burdens and speeding up the FCC's administrative functions.

The agency last week approved sales of 32 radio transactions in 26 markets across the country, clearing most of a backlog of license transfers caused by a controversial FCC policy intended to slow industry consolidation.

The merger approvals will put more stations into the hands of Cumulus Media and Clear Channel, two of the country's largest station groups, but many smaller station groups also received the go-ahead to buy stations.

The radio approvals reverse a policy instigated in 1998 by former Chairman William Kennard that required public comment when radio mergers would result in a market's ad revenue being heavily controlled by one or two station groups. The policy was opposed by the radio industry because the FCC never established procedures for evaluating the reviews. Although more than half of the flagged deals had been approved before last week's action, industry attorneys complained that many of the delayed deals created no more concentration than others that received quicker approval.

Although the FCC will continue to explore ways to prevent the consolidation wave launched by the 1996 Telecommunications Act from swamping broadcast diversity, Powell said the delays were not acceptable. "I do not believe the public interest is served by inaction," he said.

Powell hasn't decided whether to stop "flagging" similar merger requests but promised that the FCC will review whether it has authority to conduct merger analysis beyond the specific local ownership limits set by Congress.

In 1996, lawmakers capped the number of stations an owner may control in a market according to a sliding scale based on the total number of local stations. In the largest markets, the number tops off at eight.

Of the nearly 200 so-called "red-flagged" deals that the FCC designated for public comment during the past three years, more than 80 were still pending before last week's en masse approval. Still in the pipeline are 10 radio transactions covering the sales of 24 stations.

Deals were flagged when they would have resulted in one company's controlling 50% of a market's ad revenue or two companies' controlling 70%.

Broadcast industry officials were thrilled to see Powell living up to his promise of deregulation. "There was no reason to hold up these license transfers other than the FCC's own internal reasons," said Gary Smithwick, a Washington attorney representing clients whose deals were among those approved last week.

The FCC's decision was "welcome news," said Eddie Fritts, president of the National Association of Broadcasters.

Reaction among the other three FCC commissioners varied widely. Republican Harold Furchtgott-Roth applauded an end to what he considered gross overreaching by regulators. Frustrated that the FCC imposed the policy without going through the standard rulemaking process, he called the flagging policy "government at its worst."

Commissioner Susan Ness agreed that the overdue decisions needed to be moved forward but stressed that the agency must quickly issue rules that would make it easier to judge when mergers cause too much local concentration, especially in small and midsize markets. "Consumers in Charleston are just as entitled to robust markets as those who live on the Charles," she said. Fellow Democrat Gloria Tristani said the agency approved too many of the deals and should have designated some for hearing before agency administrative law judges. Tristani also criticized Powell's decision to let the Mass Media Bureau approve the mergers without a vote of the commissioners.

With the bulk of the red-flagged deals resolved and the remainder to be completed in the next couple of weeks, the radio industry now turns its attention to an ongoing rulemaking that could change the way the FCC measures local markets. The FCC proposal would replace a complex formula based on the number of stations in a market with overlapping signals and replace it with Arbitron's standard-market definition. Tristani and Ness have argued for years that the different measuring sticks used by the FCC often over-count the number of total stations in a market or under-count the number of stations one company owns.

Said Powell, "To the extent that the commission's existing rules.have led to higher levels of ownership than Congress intended, we will fix that problem."

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