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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 Application of ) ) Pacific FM, Inc. ) (Assignor) ) ) File No. BAPL-971209EC and ) ) KGO-AM Radio, Inc. ) (Assignee) ) ) For Assignment of License of ) KMKY(AM), Oakland, California ) MEMORANDUM OPINION AND ORDER Adopted: May 11, 1998 Released: May 11, 1998 By the Chief, Mass Media Bureau: 1. The Commission, by the Chief, Mass Media Bureau, acting pursuant to delegated authority, has before it: (1) the above-captioned application for assignment of the license of KMKY(AM), Oakland, California from Pacific FM, Inc. ("Pacific FM") to KGO-AM Radio, Inc. ("KGO Radio"); and (2) a related request for permanent waiver of 47 C.F.R.  73.3555(c), the Commission's one-to-a-market rule, which restricts common radio and television station ownership in the same market. The application and the waiver request are unopposed. For the reasons set forth below, we grant the assignment application and a conditional waiver of our one-to-a-market rule. 2. KGO Radio is the licensee of KGO(AM) and KSFO(AM), both of which are licensed to San Francisco, California. KGO Radio's sister corporation, KGO Television, Inc., is the licensee of VHF station KGO-TV, San Francisco, California, an ABC affiliate. KGO Radio and KGO Television are both subsidiaries of ABC, Inc., ("ABC") which in turn is a subsidiary of the Walt Disney Company ("Disney"). In 1997, the Commission approved the merger of Disney with Capital Cities, Inc./ABC ("CC/ABC") and granted applications approving the transfer of control of the broadcast licenses and permits of CC/ABC to Disney. See Capital Cities/ABC, Inc., 11 FCC Rcd 5841 (1996). Prior to the CC/ABC and Disney merger, KGO Radio, which was then a wholly-owned subsidiary of CC/ABC, was granted a one-to-a- market waiver in 1989 to retain common ownership of KGO(AM) and KGO-TV. See Capital Cities/ABC, Inc., 4 FCC Rcd 5498 (1989). In 1995, KGO Radio was granted another permanent one-to-a-market waiver to acquire KSFO(AM), San Francisco, California, to be commonly owned by its parent corporation, ABC, Inc., with VHF station KGO-TV, and KGO(AM), San Francisco. See First Broadcasting Co., 10 FCC Rcd 2904 (1995). 3. Grant of the instant assignment application would create a new radio-television station combination because the Grade A contour of KGO-TV encompasses the entire community of license of KMKY(AM) in Oakland, California. KGO Radio's proposed acquisition of this station also implicates the radio local ownership rules because the principal community contours of KGO(AM), KSFO(AM) and KMKY(AM) overlap. Consequently, KGO Radio has submitted a showing to demonstrate that its acquisition of KMKY(AM) complies with the radio local ownership rules and has requested a permanent one-to-a-market rule waiver to permit common ownership of one TV and three AM stations in the San Francisco-Oakland-San Jose DMA, the 5th largest. One-to-a-Market Waiver Showing 4. KGO Radio bases its request 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. See 47 C.F.R.  73.3555, note 7. Waiver requests not eligible for consideration under either the "top 25 market/30 voice" standard or the "failed station" standard are evaluated under the more rigorous case-by-case standard, as set forth in the Second Report and Order. 5. KGO Radio contends that it is entitled to a presumptive waiver under the top 25 market/30 voice standard, but in the alternative submits a case-by-case showing. As we have stated previously, in light of the Commission's ongoing consideration of possible revisions to the one-to-a-market prohibition, including the impact of the revised ownership limits, we will consider one-to-a-market waiver requests under the case-by-case standard where the proposed transaction involves the common ownership of a television station and more than one same-service radio station. See Memorandum Opinion and Order in MM Docket 91-140, 7 FCC Rcd 6387, 6394 n.40 (1992); see also Moosey Communications, Inc., 8 FCC Rcd 5247 (1993) (consideration of one-to-a-market waivers under the case-by-case standard still appropriate where new radio-TV combinations are created, pending the possible revision of the one-to-a- market rule in the outstanding TV ownership proceeding in MM Docket No. 91-221). We note further that KGO Radio itself concedes that, "[w]ith the proposed combination, KGO Radio would own three AM stations in the market and thus fall[s] under the case-by-case analysis." 6. 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 request, KGO Radio submits a showing which addresses each of the five factors. 7. Public Service Benefits of Joint Operation. KGO Radio states that economic efficiencies would be derived by joint radio-TV ownership. Specifically, KGO Radio anticipates $90,000 annually in savings through reduced rent and utilities costs by moving the KMKY operation, upon the expiration of its present lease, to the studio building owned by KGO-TV from which the existing KGO radio facilities operate. KGO Radio also anticipates savings of approximately $280,000 annually from merging KMKY's engineering, traffic and business staff functions with KGO's radio personnel and through the sharing of a general manager among the three AM stations. Other cost efficiencies of approximately $100,000 would result from KMKY's affiliation with ABC through access to ABC's management and financial personnel, sale of advertising time through ABC's use of Katz Media, and volume discounts on supplies and equipment. 8. According to KGO Radio, these cost efficiencies will help improve programming and public service benefits. Specifically, plans are underway for KMKY to adopt a children's radio format as an affiliate of Radio Disney, a children's radio network that KGO Radio claims is dedicated to high quality, wholesome programming. The Radio Disney format includes virtually around-the clock entertainment, music, educational, and informational programs and call-in shows specifically designed for children under 12 and their parents. KGO Radio states that given the nature and relatively small size of the potential audience for radio children's programming, the success of the venture is heavily dependent upon providing the service in the most efficient manner possible. Although KMKY will be operated separately because of its unique format, KGO Radio asserts that the efficiencies flowing from joint ownership with KGO-TV, KGO(AM) and KSFO(AM) will play a vital role in this regard. KGO Radio asserts further that with the addition of KMKY to the existing radio-TV combination, there would be opportunities for cross-promotion with KGO-TV's successful morning children's TV schedule. Additionally, KMKY could draw upon KGO- TV's award winning expertise to implement community events and public service announcement campaigns dedicated to literacy, drugs and seat belt safety. There would also be opportunities for joint TV and radio sponsorship of charitable and community events and joint ascertainment of community needs. 9. Types of Facilities. Among the two AM stations owned by KGO Radio, KGO(AM) is a Class A AM station that operates full time on 810 kHz at 50 kW using a full time directional antenna and KSFO(AM) is a Class B AM station that operates on 560 kHz at 5 kW using a nondirectional antenna daytime and with 5 kW using a directional antenna nighttime. KMKY(AM), the station KGO Radio proposes to acquire, is a Class B AM station that operates on 1310 kHz at 5 kW using a full time directional antenna. KMKY(AM) was granted a construction permit to increase power to 20 kW, File No. BP-960213AB. KGO Radio states that there are two AM stations, KNBR and KCBS, whose coverage approaches or exceeds KGO(AM)'s coverage. Additionally, there are at least 18 AM stations with comparable coverage to that of KSFO's daytime coverage. There are also at least 14 Class B FM stations licensed to San Francisco. With regard to the technical facilities of its television station, KGO-TV, an ABC affiliate, is a VHF television station operating on Channel 7 at 316 kW visual at an antenna height of 1,670 feet above average terrain. KGO Radio states that there are 5 other VHF television stations with facilities comparable to KGO-TV that serve the market. 10. Other Media Outlets. As noted above, ABC, Inc. through its subsidiaries owns and operates KGO-TV, KGO(AM) and KSFO(AM). Neither ABC, Inc. nor its related corporations own other broadcast or print interests operating in the San Francisco-Oakland-San Jose market. 11. Economic Status. KGO Radio does not address this factor, or claim that any of the stations in the proposed combination are in financial distress. 12. Competition and Diversity in the Market. KGO Radio contends that its proposed combination of one TV station with three AM radio stations will not have an adverse effect on the level of diversity and competition in the 5th largest DMA. Moreover, the audience shares of the three radio stations combined would be only 10.6% according to Arbitron Radio, Summer 1997 Survey. According to KGO Radio, this "robust media market" is served by 22 TV stations and at least 80 radio stations with a combined television and radio voice count of at least 63 voices. Additionally, KGO Radio states that the cable penetration rate for the San Francisco-Oakland-San Jose DMA is high at 71% and that the market is served by 24 daily newspapers. Discussion 13. Radio Ownership Rules. We turn first to KGO Radio's compliance with our local radio ownership rules. 47 C.F.R. 73.3555(a)(1). Our analysis of the data KGO Radio has submitted indicates that the radio market formed by the mutually overlapping contours of its proposed commonly owned radio stations consists of 86 commercial radio stations. Under our rules, in a radio market with 45 or more commercial radio stations, a party may own, operate, or control up to eight commercial radio stations, not more than five of which are in the same service (AM or FM). KGO Radio's proposed ownership of three commercial AM radio station in this market complies with the numerical local ownership cap for radio stations. 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, KGO Radio's acquisition of KMKY(AM) would serve the public interest. 14. One-to-a-Market Waiver. Turning to the substance of KGO Radio's one-to-a-market waiver request, we will follow the policy established in recent one-to-a-market waiver cases where the radio component to a proposed combination exceeds those permitted prior to the adoption of the Telecommunications Act of 1996. See Maximum Media, Inc., 12 FCC Rcd 3391, 3395-96 (1997); see also S.E. Licensee G.P., 11 FCC Rcd, 16727, 16732-33 (1996); Shareholders of Citicasters, Inc., 11 FCC Rcd 19135, 19143 (1996). In such cases, the Commission declined to grant permanent waivers of the one-to-a-market rule, and instead granted temporary waivers conditioned on the outcome of related issues raised in the television ownership rulemaking proceeding. Second Further NPRM, 11 FCC Rcd at 21689. Similarly, we conclude that a permanent, unconditional waiver would not be appropriate here. KGO Radio has, however, demonstrated sufficient grounds for us to grant a temporary waiver conditioned on the outcome of the rulemaking proceeding. 15. KGO Radio has demonstrated that joint ownership of KMKY with its existing radio-TV combination will result in substantial cost savings of approximately $280,000 to $470,000 annually. Specifically, these savings will be derived from reduced rent and utility costs for KMKY by moving its operations to a studio building owned by KGO-TV and the sharing of radio personnel. These cost savings will translate into public service and programming improvements. In this regard, KGO Radio's ownership of KMKY(AM), as an affiliate of the Radio Disney network, will enhance children's programming by providing educational programming specifically tailored to children, ages 12 and under. KMKY will be operated separately because of its unique format. However, given the nature and relatively small size of the potential audience for radio children's programming, the efficiencies flowing from joint ownership with KGO-TV, KGO(AM) and KSFO(AM) will play a vital role in the success of the venture. Moreover, there will be opportunities for cross-promotion of KMKY's children's programming with KGO-TV's popular children's programming. Additionally, the proposed TV and radio combination will provide opportunities for joint sponsorship of charitable and community events with KMKY augmenting its public service programming with input from KGO-TV's award winning staff. 16. The second factor of our analysis takes into consideration the types of facilities of the stations involved in the proposed radio-television 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 at 6349-50. As we have previously acknowledged, KGO Radio's present station combination in the San Francisco market includes stations with substantial technical facilities including a VHF station and a Class A AM station operating at 50 kW of power. First Broadcasting Co., 10 FCC Rcd 2904, 2906 (1995). Moreover, we have acknowledged that San Francisco, the fifth largest television market in the country, enjoys robust competition and diversity. Id. There is no basis to alter this conclusion in light of KGO Radio's request to acquire KMKY(AM). In addition, our independent analysis confirms that there are competing stations with facilities that are comparable to KGO Radio's proposed combination including at least one other VHF station with technical facilities that are identical to KGO-TV and at least one other AM station with technical facilities that are identical to KGO(AM), the most powerful AM station in KGO Radio's proposed combination. 17. With regard to the third factor, KGO Radio will not own any other media outlets in the San Francisco-Oakland-San Jose market besides those stations specified in the proposed combination. Fourth, KGO-Radio does not state that KMKY(AM) is a failed station or that it is experiencing financial distress. However, we previously have indicated that not all five factors need be present to justify grant of a waiver. Second Report and Order Recon., 4 FCC Rcd at 6491. We also have granted a number of one- to-a-market waivers where there was no finding that any of the stations were in financial distress. See, e.g., DeArias, 11 FCC Rcd at 3666; Alta Gulf FM, Inc., 10 FCC Rcd 7750, 7751 (1995); Secret Communications Ltd., 10 FCC Rcd 6874, 6877-79 (1995). 18. Finally, the fifth factor relates to the level of diversity and competition in the market. Indicia of the level of diversity include the number of broadcast outlets, the number of separately owned and operated "voices" in the market, and the presence of cable and non-broadcast media. The San Francisco- Oakland-San Jose market is ranked 5th in the country and, according to our independent analysis, there are 54 commercial and noncommercial radio stations (18 AMs and 36 FMs) and 22 commercial and noncommercial television stations in the market. These 76 broadcast stations will represent 46 separately owned broadcast "voices" following consummation of KGO Radio's acquisition of KMKY(AM). Additionally, the market is served by numerous daily newspapers and has a substantial cable penetration of 71% of TV households. Therefore, the record demonstrates that the robust competition and diversity in the San Francisco market will not be adversely affect by the proposed combination. See Buckley Broadcasting Corp., 9 FCC Rcd 1930 (1994). 19. With respect to economic concentration and competition, our independent analysis indicates that KGO-TV garners 19.6 percent of television advertising revenue in the San Francisco-Oakland-San Jose DMA, and the three AM radio stations in KGO Radio's proposed combination garner 14.7 percent of radio advertising revenues in the San Francisco Radio Metro Market. Together, the stations in the proposed combination have a combined television and radio advertising revenue share of 18 percent, a figure consistent with temporary one-to-a-market waiver requests previously approved. See Greater Los Angeles Radio, Inc., 12 FCC Rcd 10501 (1997) (31 percent of radio advertising revenue and 17.6 percent of combined television and radio advertising revenues in 2nd ranked market). 20. We conclude, based on the record, that grant of a temporary, conditional waiver is appropriate. Grant of the waiver will result in economic efficiencies and facilitate enhanced public interest programming without undue effect on competition or diversity in the San Francisco-Oakland-San Jose market. Ordering Clauses 21. Accordingly, IT IS ORDERED that KGO-AM Radio, Inc.'s request for a permanent waiver of the Commission's one-to-a-market rule, 47 C.F.R. 73.3555(c), IS HEREBY DENIED. 22. IT IS FURTHER ORDERED, that a temporary conditional waiver of the one-to-a-market rule, 47 C.F.R. 73.3555(c), to permit common ownership of stations KGO-TV, KGO(AM), and KSFO(AM), all San Francisco, California, and KMKY(AM), Oakland, California IS HEREBY 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 & 87-8, 11 FCC Rcd 21655 (1996). Should divestiture be required as a result of that proceeding, KGO-AM Radio, Inc. 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. 23. IT IS FURTHER ORDERED, that, having found the applicants fully qualified and that grant of the application would serve the public interest, the application to assign the license of KMKY(AM), Oakland, California from Pacific FM, Inc. to KGO-AM Radio, Inc. (BAPL-971209EC) IS HEREBY GRANTED. FEDERAL COMMUNICATIONS COMMISSION Roy J. Stewart Chief, Mass Media Bureau