******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In re Applications of ) ) Chancellor Media Illinois License Corp.) (Assignor) ) ) and ) File No. BAL-980904EA ) ABC, Inc. ) (Assignee) ) ) For Assignment of License of ) Station WMVP(AM), Chicago, Illinois) ) and ) ) Illinois Lotus Corp. ) (Assignor) ) ) and ) File No. BAL-980812GY ) File No. BAL-980812GZ ABC, Inc. ) (Assignee) ) ) For Assignment of Licenses of ) Station WRDZ(AM), La Grange, Illinois) Station WDDZ(AM), Zion, Illinois) ) MEMORANDUM OPINION AND ORDER Adopted: March 30, 1999 Released: April 1, 1999 By the Chief, Mass Media Bureau: 1. The Commission, by the Chief, Mass Media Bureau, acting pursuant to delegated authority, has under consideration: (1) the above-captioned applications for assignment of the license of: station WMVP(AM), Chicago, Illinois, from Chancellor Media Illinois License Corp. to ABC, Inc. ("ABC"); and stations WRDZ(AM), La Grange, Illinois (formerly WTAQ(AM)) and WDDZ(AM), Zion, Illinois, (formerly WTAU(AM)) from Illinois Lotus Corp. to ABC; and (2) related requests for temporary conditional waivers of 47 C.F.R.  73.3555(c), the Commission's one-to-a-market rule, which restricts common radio and television ownership in the same market. The applications and waiver requests are unopposed. For the reasons set forth below, we grant the assignment applications and temporary conditional waivers of our one-to-a-market rule. Background 2. In addition to the proposed acquisition of WMVP(AM), WRDZ(AM) and WDDZ(AM), ABC is also the licensee, through subsidiaries, of VHF television station WLS-TV, Chicago, Illinois and radio stations WLS(AM) and WXCD(FM), Chicago, Illinois. Grant of the subject assignment applications would create a new radio-television station combination because the predicted 2 mV/m contours of WMVP(AM) and WRDZ(AM) both completely encompass Chicago, the community of license of WLS-TV. We note that there is no one-to-a-market issue involving WDDZ(AM) as WDDZ(AM)'s 2 mV/m contour does not encompass any part of Chicago, and WLS-TV's Grade A contour does not encompass any part of Zion, Illinois. Accordingly, ABC requests a waiver of the Commission's rules to permit common ownership of WLS-TV, WXCD(FM), WLS(AM), WMVP(AM), and WRDZ(AM). If ABC's proposed acquisitions are approved, it will control a combination of one TV, one FM and three AM stations in the Chicago, Illinois DMA, the 3rd largest DMA in the country. One-to-a-Market Waiver Showings 3. ABC bases its requests on the one-to-a-market waiver standards adopted in the Second Report and Order in MM Docket No. 87-7, 4 FCC Rcd 1741 (1989) ("Second Report and Order"), recon. granted in part and denied in part, 4 FCC Rcd 6489 (1989) ("Second Report and Order Recon."). Under these criteria, the Commission presumptively favors waiver requests involving station combinations serving the top 25 markets where there are at least 30 separately owned, operated, and controlled broadcast licensees or "voices" after the proposed combination ("top 25 market/30 voice standard"). The Commission also favors waiver requests involving "failed" broadcast stations, that is, stations that have not been operating for a substantial period of time or that are in bankruptcy proceedings. Otherwise, waiver requests must be evaluated under a case-by-case approach. See 47 C.F.R.  73.3555, note 7. 4. Although the DMA implicated here is the third largest in the country, we will consider the subject waiver requests under the case-by-case standard because the proposed transactions involve the common ownership of more than one same-service radio station with a television station. See Revision of Radio Rules and Policies, Memorandum Opinion and Order, MM Docket 91-140, 7 FCC Rcd 6387, 6394 n. 40 (1992). Under the case-by-case standard, the Commission makes a public interest determination based upon the following five criteria: (1) the potential public service benefits that will arise from the joint operation of the facilities involved, such as economies of scale, cost savings and programming and service benefits; (2) the types of facilities involved; (3) the number of media outlets owned by the applicant in the relevant market; (4) the financial difficulties of the stations involved; and (5) the nature of the relevant market in light of the level of competition and diversity after joint operation is implemented. Second Report and Order, 4 FCC Rcd at 1753- 54. In enunciating the five factors to be considered under the case-by-case standard, the Commission noted that not all five factors must be satisfied in each case, but rather the overall consideration of these factors must weigh in favor of granting the waiver request. Second Report and Order Recon., 4 FCC Rcd at 6491. In support of its waiver requests, ABC has submitted a showing which addresses each of the five factors. 5. Public Service Benefits of Joint Operation. ABC contends that the proposed combination of WRDZ(AM) with WLS(AM), WXCD(FM) and WLS-TV would create efficiencies that would generate substantial cost savings. ABC has identified several specific areas of potential savings, totaling more than $353,000 per year for WRDZ(AM). Specifically, for WRDZ(AM), ABC estimates annual cost savings of approximately $225,000 from centralization of the management, $28,000 savings in insurance and utility costs and $100,000 in cost efficiencies resulting from WRDZ(AM)'s access to the WLS(AM)\WXCD(FM) Radio New Business Development Department and to the experienced management, financial, auditing, accounting and legal personnel available through ABC headquarters. Further, ABC identifies an additional $855,000 in savings that would occur from combining WMVP(AM) with these other stations. This sum derives from $300,000 saved in rent by co-locating WMVP(AM) in the WLS-TV building, approximately $455,000 in personnel cost savings and another $100,000 in cost efficiencies resulting from WMVP(AM)'s access to the WLS(AM)\WXCD(FM) Radio New Business Development Department. Additionally, ABC declares that WMVP(AM) will benefit from the experienced management, financial, auditing, accounting and legal personnel available through ABC headquarters; WMVP(AM)'s sale of advertising time through ABC Radio Sales, a division of Interep; the possibility of volume discounts on large orders of supplies and equipment or joint purchases of group insurance or other employee benefits; and WMVP(AM)'s access to ABC's substantial knowledge of the local labor pool and recruitment sources, derived from its ownership of both television and radio stations in the market. 6. ABC states that the Chicago community will benefit from the economic efficiencies created by the proposed combination through improved programming and public service benefits. Concerning WRDZ(AM), ABC states that these substantial cost savings will allow ABC to introduce the new Radio Disney programming format to provide music, educational and informational programs and call-in shows specifically designed for children under 12 and their parents. ABC also contends that the proposed combination will allow WRDZ(AM) and its sister stations in Chicago to jointly sponsor charitable and community events and to cooperate in ascertaining community needs. 7. ABC recites that WMVP(AM), will become the flagship station of the ESPN Radio Network, and thus will bring to the market a 24-hour sports format which combines national, regional and local sports. According to ABC, the efficiencies and resulting cost savings will permit WMVP(AM) to invest in both increased coverage of local high school sports and local public affairs programming, as well as programming geared toward educating and informing the public on topics such as drug use in sports, sportsmanship, and ethics in sports. WMVP(AM) also expects to engage in health and fitness-related fundraising community events such as marathons, walkathons, bikeathons and bowling parties geared to raising money for charity. In serving its community, WMVP(AM) plans to draw upon its sister ABC stations' expertise in public affairs programming and in implementing community events and public service announcement campaigns. There will also be opportunities for WMVP(AM) and its sister stations in Chicago to jointly sponsor charitable and community events and to cooperate in ascertaining community needs. 8. Types of Facilities/Other Media Outlets. ABC reports that: WRDZ(AM) is a Class B station licensed to operate on 1300 kHz with direction patterns day and night with a daytime power of 4.5 kW; and WMVP(AM) is a Class A station that operates on 1000 kHz with a power of 50 kW, day and night, with a three tower directional antenna. With respect to the stations currently owned by ABC, ABC reports that: WLS(AM) is a Class A station that operates full time on 890 kHz with a power of 50 kW using a nondirectional antenna; WXCD(FM) is a Class B station that operates full time on 94.7 MHz with an effective radiated power ("ERP") of 4.4 kW using a non-directional antenna at 466 meters antenna height above average terrain ("HAAT"); and WLS-TV is a VHF station, operating on Channel 7 as an ABC Network affiliate, that operates with 55 kW effective radiated visual power at 515 meters antenna HAAT. 9. ABC states that these facilities are comparable in size and power to many other stations in the radio market. Specifically, ABC's showing indicates that there are at least eleven AM stations (ten commercial and one noncommercial) owned by other parties with daytime power equivalent to that of WRDZ(AM); 4 commercial AM stations with daytime power equivalent to or exceeding that of WMVP(AM) and WLS(AM), and 27 Class B FM stations (22 commercial and 5 noncommercial) comparable in size and power to WXCD(FM). With respect to television stations serving the market, ABC contends that there are 12 commercial stations and one noncommercial station in the Chicago DMA metropolitan market with facilities comparable to those of WLS-TV. 10. Economic Status. Although ABC does not argue that WRDZ(AM) or WMVP(AM) are failed stations, it contends that WMVP(AM) lost approximately $3.7 million in calendar year 1996, approximately $4 million in calendar year 1997 and is projected to lose approximately $3.5 million in calendar year 1998. ABC expects that its acquisition of WMVP(AM), with the introduction of the ESPN 24-hour sports format, will turn the station to profitability within a three-year time period. 11. Competition and Diversity in the Market. The final factor in ABC's showing is the nature of the relevant market in light of the Commission's concerns about diversity and competition. ABC asserts that Chicago has a deep, robust media market, the strength and variety of which would not be diluted by the proposed addition of WRDZ(AM) and WMVP(AM) to its existing radio-television combination. ABC states that in the Chicago market there are at least 58 AM stations, 62 FM stations, for a total of 120 radio stations, and 16 television stations, licensed to at least 88 separate owners (57 commercial and 31 noncommercial). Additionally, ABC reports that the cable penetration in the Chicago television market is 63% and that the Chicago market is served by 35 daily newspapers and 24 national magazines. In light of the large number of independent voices, ABC contends that its proposed ownership of these stations will not negatively affect diversity or competition in the market. Discussion 12. Radio Ownership Rules. We turn first to ABC's compliance with our local radio ownership rules. 47 C.F.R.  73.3555(a)(1). Our analysis of the data submitted indicates that ABC's proposed common ownership of WLS(AM), WXCD(FM), WRDZ(AM), WDDZ(AM) and WMVP(AM) creates two separate radio markets under the Commission's rules. The first radio market (Market #1) is defined by the principal community contours of radio stations WXCD(FM), WMVP(AM), WLS(AM) and WRDZ(AM). There are 120 commercial radio stations, including 58 AM and 62 FM stations whose principal community contours overlap Market #1. The second radio market (Market #2) is defined by the principal community contours of WMVP(AM), WLS(AM) and WDDZ(AM). The principal community contours of 120 commercial radio stations, including 58 AM and 62 FM stations, overlap Market #2. In markets of this size, Commission rules permit ABC to own up to eight radio stations, no more than five of which may be in the same service. 47 C.F.R.  73.3555(a)(1)(i). Here, ABC's radio holdings will not exceed four stations in either market - one FM and three AM radio stations in Market #1 and three AM stations in Market #2. Accordingly, ABC's proposed radio ownership complies with the numerical local ownership cap for radio stations in both Market #1 and Market #2. Moreover, our review of the record in this case reveals no other circumstances that would preclude grant of the applications under the radio ownership rules. We conclude that, with respect to local radio ownership, ABC's acquisition of WRDZ(AM), WDDZ(AM) and WMVP(AM) would serve the public interest. 13. One-to-a-Market Waivers. In evaluating a request for a temporary conditional waiver of the one-to-a- market rule, the Commission's goal "is to permit the public to benefit from such efficiencies of operation as may be achieved through the use of common facilities and staff, consistent with the maintenance of diversity and vigorous competition within the market areas involved." Second Report and Order Recon., 4 FCC Rcd at 6491. We conclude that ABC's showings in support of a waiver of the one-to-a-market rule meets our case-by- case criteria, and that a waiver in this instance is consistent with the public interest and is not likely to unduly diminish diversity and competition in the Chicago market. 14. As to the first criterion, the potential public service benefits of joint ownership, the Commission considers the public service benefits that would result from the proposed radio-television combination, such as projected economies of scale, cost savings and program and service benefits. Second Report and Order, 4 FCC Rcd at 1753. ABC demonstrates that common ownership and operation of WRDZ(AM), WMVP(AM), WLS(AM), WXCD(FM) and WLS-TV creates efficiencies and cost savings which inure to the public benefit. ABC has shown that combined operation of the stations will generate approximately $1,200,000 in annual savings which will be used to enhance children-oriented programming on WRDZ(AM) and increased coverage of local high school sports and local public affairs programming, as well as programming geared toward educating and informing the public on topics like drug use in sports, sportsmanship, and ethics in sports on WMVP(AM). ABC has further demonstrated that WMVP(AM) and WRDZ(AM) will benefit from the knowledge and experience of ABC's existing stations and that joint ownership of these stations and the stations in the existing combination will allow it to sponsor additional events to benefit charitable and community needs. 15. With regard to technical facilities, our independent analysis verifies the existence of competing facilities in the market that are generally technically comparable to the proposed combination. The Commission's "concern with the types of facilities merging under the authority of a one-to-a-market waiver reflects our interest in assessing the potential impact of a proposed combination of stations in a given market in order that we might predict and avoid any significant adverse effect on diversity or competition from too powerful a combination." Great American Television and Radio Co., Inc., 4 FCC Rcd 6347, 6349-50 (1989). According to our review, WLS(AM)-- a station that ABC already owns-- is a Class A clear channel station, the most powerful class of AM radio stations. However, there are four AM stations in the Chicago market with technical facilities comparable to WMVP(AM) and at least ten commercial Class B AM stations whose facilities are comparable to WRDZ(AM)'s facilities. With respect to the other stations in the proposed combination, there are at least 24 other Class B FM stations with technical facilities comparable to WXCD(FM) -- also a station that ABC currently owns. Our independent analysis also indicates that aside from ABC owned WLS-TV, which is a VHF station, there are 15 other television stations licensed to the Chicago market, four of which are VHF stations. One of these VHF stations is a noncommercial station. Thus, although some of the stations in ABC's proposed combination have significant facilities, from a technical standpoint, given the existence of these competing television and radio facilities in the market, the proposed combination does not present issues of market dominance inconsistent with the public interest. 16. With respect to ownership of other stations in the market, ABC also proposes to acquire WDDZ(AM), a station in the Chicago market. However, as discussed above, ABC's ownership of this station in combination with WLS-TV does not come within the one-to-a-market rule's contour encompassment provisions. See, e.g., Fouce Amusement Enterprises, 12 FCC Rcd 22009 (MMB 1997). 17. With respect to financial condition, WRDZ(AM) and WMVP(AM) are not failed stations, although ABC has indicated that WMVP(AM) has suffered financial losses in the past several years. Even absent such a showing, however, the Commission has held that "not all of the [five] factors mentioned will be relevant in every case," Second Report and Order, 4 FCC Rcd at 6491, and has granted one-to-a-market waivers in the absence of a showing of financial distress. See, e.g., Greater Muskegon Broadcasters, Inc., 11 FCC Rcd 15464, 15470 (1996); Alabama Universal Corporation, 12 FCC Rcd 7556, 7563 (1997). 18. Finally, we have carefully considered whether the proposed combination would create undue concentration of ownership or control in the Chicago market. The Chicago market is the 3rd largest television market in the United States. We have independently verified that, following consummation of the subject transaction, there will be 47 AM stations, 74 FM stations (for a total of 121 radio stations -- 89 commercial and 32 noncommercial) and 16 television stations (13 commercial and 3 noncommercial), licensed to 85 separate owners. A wide variety of other media outlets are available in the market as well, including 55 daily newspapers, and cable television reaching 61 percent of the households in the market. This level of diversity is consistent with the level we have approved in previous conditional waiver requests. See, e.g., Citicasters Co., 13 FCC Rcd 19645 (MMB 1998) (41 "voices" in 14th largest market); Shareholders of American Radio Systems Corporation, 13 FCC Rcd 12430 (MMB 1998) (63 "voices" in 6th largest market); S.E. Licensee G.P., 11 FCC Rcd 16728 (1996) (27 "voices" in 42nd largest market). 19. Regarding economic concentration and competition, our independent analysis indicates that WLS-TV garners 21.5 percent of television advertising revenues in the Chicago DMA. Stations WXCD(FM), WLS(AM), WMVP(AM), and WRDZ(AM) have a total of 8.4 percent of radio advertising revenues in the BIA/Arbitron Chicago radio metro market. Together, the stations in the proposed combination have a combined television and radio advertising share of 17.1 percent, a figure substantially lower than combined television and radio advertising shares previously approved by the Commission. See, e.g., Shareholders of Citicasters, Inc., 11 FCC Rcd at 19135 (1996) (32.03 percent combined television and radio advertising revenues in the 29th ranked market); NewCity Communications, Inc., 12 FCC Rcd 3929 (1997) (29 percent of combined television and radio advertising revenues in 22nd ranked market); Triathlon Broadcasting of Little Rock Licensee, Inc., 12 FCC Rcd 13907 (1997) (24.97 percent of combined advertising revenues in the 57th ranked market). 20. Based on the record, we conclude that grant of temporary conditional one-to-a-market waivers will result in economic efficiencies and facilitate enhanced public interest programming without undue adverse effect on competition or diversity in the Chicago market. ORDERING CLAUSES 21. Accordingly, IT IS ORDERED, that temporary conditional waivers of the Commission's one-to-a- market rule, 47 C.F.R.  73.3555(c), to permit common ownership of stations WRDZ(AM), La Grange, Illinois, and WLS-TV, WXCD(FM), WLS(AM) and WMVP(AM), Chicago, Illinois, ARE GRANTED, subject to the outcome in the pending television ownership rulemaking proceeding, Review of the Commission's Regulations Governing Television Broadcast Ownership, Second Further Notice of Proposed Rulemaking, MM Docket Nos. 91-221 and 87-8, 11 FCC Rcd 21655 (1996). Should divestiture be required as a result of that proceeding, ABC is directed to file an application for Commission consent to sell the necessary station(s) within six months from the release of the final Order in that proceeding. Any request to extend this conditional waiver should be filed at least 45 days prior to the end of the six-month period and would be closely scrutinized. 22. IT IS FURTHER ORDERED, that, having found the applicants fully qualified and that grant of the applications would serve the public interest, the applications to assign the license of station WMVP(AM) from Chancellor Media Illinois License Corp. to ABC, Inc. (File No. BAL-980904EA), and the licenses of stations WRDZ(AM), La Grange, Illinois (File No. BAL-980812GY) and WDDZ(AM), Zion, Illinois (File No. BAL-980812GZ) from Illinois Lotus Corp. to ABC, Inc. ARE GRANTED. FEDERAL COMMUNICATIONS COMMISSION Roy J. Stewart Chief, Mass Media Bureau