Radio Deals Jammed by FCC

Local consolidation under fire as lengthy reviews return

Michael Powell wants to put the brakes on radio consolidation. Under intense pressure from Congress and FCC Democrats cranky about media consolidation, the FCC chairman has taken aim at radio. He has resurrected a controversial policy that halts acquisitions that put most of a market's radio ad revenue in the hands of one or two owners.

When the five FCC commissioners deem a deal too concentrated, they send it to an agency administrative judge, who can block it. Deals are flagged when they meet the FCC's local ownership limits but allow one owner in a market to control 50% of local ad revenue or two owners to gobble up 75%. The policy had been dropped in June.

The prospect of renewing a controversial policy that bogged down hundreds of deals and damned countless others over five years is raising industry hackles. "That's not good for the economy, and that's not good for the country," says Clear Channel lobbyist Andrew Levin, whose company previously had four deals designated for a judge's review.

Since 1996, the average number of radio owners in each market has dropped from 13.5 to 10.3. The number nationally has plunged 25%, from 5,100 to 3,800.

But FCC Audio Division Chief Peter Doyle says the latest flagging policy won't cause the teeth-gnashing the previous version did. Under the original policy, set in 1998, flagged deals could be delayed indefinitely. The FCC would ask for public comment on the impact of the acquisition—but never establish policies for bringing reviews to a close. At times, the FCC had nearly 80 deals stalled.

This time, Doyle promises, the review process will be quicker because the public won't be invited to give input. Deals will be eyed by the Audio Division staff and FCC economists. Deals they don't like will be turned over to an administrative judge.

Broadcasters insist that local reviews are the job of the Department of Justice's antitrust team and that the FCC has no right to block deals complying with local ownership limits. Since 1996, local caps have been based on a sliding scale limiting one owner to eight radio outlets in markets with at least 45 stations. In markets with 14 or fewer, owners may control only five.

Clear Channel shrewdly asked that its four flagged deals be dismissed—and then resubmitted three of them for FCC approval. The radio giant already has won approval for the purchase of KFLX(FM) Nolanville, Texas, and a buy in Youngstown, Ohio, that was reworked into a three-station purchase, from a four-station deal. It dropped the flagged agreement to buy WSKW(AM) and WHQO(FM) Skowhegan, Maine. The company's proposal to buy WUMX(FM) Charlottesville, Va., has been resubmitted and is pending.

Former FCC Chairman William Kennard, alarmed by the pace of radio mergers after the 1996 Telecommunications Act eliminated caps on national radio ownership, invented the review process. But it was too little too late. Massive consolidation in radio allowed Clear Channel Chairman Lowry Mays to transform his reasonably large group of just under 100 outlets into a 1,200-station behemoth.

Whether the latest version of the FCC roadblock is strong enough to stop another consolidation wave is a big question, says Washington radio attorney Art Belendiuk. "Powell doesn't want to look like he's giving up on consolidation, but it would be hard to find a deal so outrageous the FCC wouldn't permit it."

That may be the FCC's real agenda: thwarting egregious deals by threatening a lengthy and expensive review. Months before Clear Channel's day in court, Anderson Broadcasting was headed for an identical fight. So it canceled the sale of five North Dakota stations to Cumulus.

Many owners, it seems, would rather switch than fight.