In Re
Application of CHANNEL 3, INC., ASSIGNOR and VALLEY BROADCASTERS, INC.,
ASSIGNEE
For
Assignment of Station KVDO-TV,
Salem, Oreg.
BALCT-448
FEDERAL COMMUNICATIONS COMMISSION
37 F.C.C.2d 613
RELEASE-NUMBER: FCC 72-872
SEPTEMBER 29, 1972
OPINION:
[*613] VALLEY
BROADCASTERS, INC., 2225 Coburg Road, Eugene, Oreg.
GENTLEMEN: This is with reference to
the pending application for Commission consent to the voluntary assignment of
license for television Station KVDO-TV, Salem, Oregon, from Channel 3, Inc. to
Valley Broadcasters, Inc. (BALCT-448).
The application states that Valley's
parent, Liberty Television, Inc., is the licensee of television Station
KEZI-TV, Eugene, Oregon; 50% owner of the permittee for television Station
KSYS-TV, Medford, Oregon; owner of several CATV systems within KVDO-TV's Grade
B contour; and licensee of several television translator stations in
Oregon. In addition, the application shows that the Grade A and B
contours of Stations KEZI-TV and KVDO-TV overlap to a significant extent.
Waiver of the Commission's duopoly rule (Section 73.636 (a) (1)) was requested
in the application. Liberty's CATV holdings within KVDO-TV's Grade B
contour would act to prohibit a grant of the subject application according to
Section 76.501(b) of the Commission's Rules. Liberty has requested what
amounts to a waiver of Section 76.501(b) since the acquisition of KVDO-TV would
be prohibited without a waiver.
The Commission has given careful
consideration to your application and has determined that, in view of the nature
and extent of the prohibited overlap involved and the size and nature of the
Salem television market, the public interest would not be served by a waiver of
the above-cited multiple ownership rules and an outright grant of this
application. However, because of the financial plight of the station and
the danger of its going off the air thereby depriving Salem, the capital city,
of its only television station until another buyer can be found, the Commission
has concluded that the public interest would be served by a grant of the
application subject to the following condition: "that the licensee assign
the license of Station KVDO-TV to a fully qualified applicant within three
years from the release date of this letter."
To ensure the timely and orderly compliance
with this condition you are directed to file with the Commission a contract for
the sale of the station by April 1, 1975 and to file the application for
Commission consent to the transaction within two months thereafter. You
are hereby notified that the Commission does not contemplate the [*614]
granting of any extensions of these specified filing dates. You are
also notified that the Commission does not contemplate the issuance of a tax
certificate in connection with your sale of KVDO-TV in accordance with the
above condition.
We note that, in addition to a
limited waiver of Section 73.636 of our multiple ownership rules, our action
here also involves a waiver of Section 76.501 of our Rules because of Liberty's
existing CATV interests within the KVDO-TV Grade B contour. You are
advised that Tax Certificates will not be issued in connection with the future
divestiture of your media interests as required by Section 76.501.
The grant of the above assignment
application (BALCT-448) is also made subject to future determination of the
grant fee.
Commissioners Burch, Chairman,
Robert E. Lee and Reid concurring in the result; Commissioner
H. Rex Lee dissenting and issuing a statement in which Commissioner Nicholas Johnson
joins; and Commissioner Wiley dissenting.
BY
DIRECTION OF THE COMMISSION, BEN F. WAPLE, Secretary.
DISSENTBY:
LEE
DISSENTING STATEMENT OF COMMISSIONER
H. REX LEE IN WHICH COMMISSIONER NICHOLAS JOHNSON JOINS
I must dissent to the conditional
grant of the application for assignment of the license of Station KVDO-TV,
Salem, Oregon, from Channel 3, Inc., to Valley Broadcasters, Inc. By this
assignment, Liberty Television, Inc., through its wholly-owned subsidiary,
Valley Broadcasters, Inc., seeks to acquire the KVDO-TV license and all of the
properties of Channel 3 in exchange for common stock of Liberty. By
virtue of the transaction, the assignor's shareholders will receive Liberty
stock equal in value to their investment in Channel 3 ($411,000) and to certain
liabilities of the assignor ($190,500), which will be retired.
In the original assignment
application (accepted for filing on August 24, 1971), the assignee proposed to
operate KVDO-TV as a semi-satellite of KEZI-TV, Liberty's VHF television
station at Eugene, Oregon, which is located some 65 miles south of Salem.
As proposed in 1971, the assignee would originate some 5 1/2 hours of local
public affairs programming at KVDO-TV and would expand the station's broadcast
day by over 50% to permit the carriage of ABC network and other programming via
KEZI-TV. However, on September 23, 1971, two Oregon ABC affiliates,
KOBI-TV in Medford and KATU-TV in Portland, filed petitions to deny the
assignment application, alleging, inter alia, that the assignor had not
complied with the three-year rule (Section 1.597); that the proposed operation
of KVDO-TV does not qualify as a semi-satellite of KEZI-TV and that grant would
therefore be proscribed by the Commission's duopoly rule (Section 73.636(a) (1));
and that grant will result in an undue regional concentration of control of
mass media in contravention of Section 73.636(a) (2) of the rules.
On April 18, 1972, the assignee
informed the Commission that ABC would not grant a network affiliation to KVDO-TV
or consent to the rebroadcast of network programs via the Eugene station.
As a result, on May 19, 1972, Valley Broadcasters filed an amendment to
[*615] the assignment application by which the semi-satellite operation
was eliminated and a proposal to operate KVDO-TV as an independent station was
substituted. The independent proposal contemplated a reduction in weekly
operating hours from the assignor's present 68 1/2 to 60. Shortly
thereafter, KOBI-TV and KATU-TV withdrew their objections to the assignment
application. On July 28, 1972, Liberty's counsel advised the Commission
that Liberty would file an application to dispose of its interest as
co-venturer in the permittee of Channel 8 in Medford (KSYS-TV) n1 and that the assignee was prepared to
accept grant of the KVDO-TV assignment application subject to Liberty's
disposition of the Medford broadcast interest. Counsel has also indicated
that "the grant of the assignment will be accepted subject to divestiture
by Liberty of any interest in KVDO-TV, when and if the Commission finds that
such station can operate as a financially viable independent entity in
Salem."
n1 The contract to sell
KSYS-TV to Southern Oregon Education Co. was apparently signed on July 27,
1972, by Liberty Television, a joint venture.
The assignment application raises
several serious public interest questions, which effectively preclude my
approval of even a conditional grant. First, since Liberty owns and
operates numerous cable television systems within the predicted Grade B contour
of KVDO-TV, Valley Broadcasters' acquisition of the station is proscribed by
Section 76.501 of the rules. Liberty had originally requested that grant
of the assignment application be conditioned on its petition for
reconsideration in the cable rule making proceeding (Docket No. 18397) and that
if divestiture is to be required, it be permitted to comply by August 10,
1973. However, in our Memorandum Opinion and Order on Reconsideration of
the Cable Television Report and Order, FCC 72-530, 25 RR 2d 1501, released June
26, 1972, we did not modify the provisions of the cable cross-ownership
rules. Liberty's request for conditional grant now amounts to a plea for
waiver of Section 76.501, which prohibits the acquisition, after July 1, 1970,
of a television station whose Grade B contour overlaps the service area of a
cable system.
Since no showing was made by the
assignee to support such a request, I would not grant waiver of Section 76.501,
which action is inconsistent with the Commission's announced desire to limit
the participation of television licensees in cable systems located within their
stations' service areas. While I agree with the majority's position that
tax certificates should not be issued in connection with the future divestiture
of media interests under Section 76.501. I would avoid the entire problem
by not granting a waiver in the first place.
Grant of the assignment application
also requires waiver of the duopoly provisions of our multiple ownership rules
(Section 73.636 (a)(1)) since there is substantial overlap of the Grade A and
Grade B contours of KVDO-TV and KEZI-TV. The essence of the assignee's
waiver request in this regard is as follows: (1) Salem has an insufficient
economic base to support a local independent station, especially in light of
the strong position of the Portland stations in the market; (2) KVDO-TV has
suffered substantial operating losses in its brief history; (3) Channel 3 has
had no success in selling the station to others; and (4) state political leaders
have expressed their desire to retain a local broadcast outlet in Salem,
Oregon's capital city. While it may be true that the Commission has
applied the duopoly restrictions in less than a consistent or rigid fashion in
the past, waiver is [*616] obviously not justified here. For
one thing, the degree of prohibited overlap is of considerable magnitude as the
following table illustrates:
|
|
Area (percent) |
Square miles |
Population |
Number |
|
|
|
|
(percent) |
|
|
KVDO-TV: |
|
|||
|
Grade A
overlap |
32.8 |
800.8 |
32.8 |
50,198 |
|
Grade B
overlap |
61.6 |
5,950.4 |
38.0 |
307,373 |
|
KEZI-TV: |
|
|||
|
Grade A
overlap |
9.2 |
792.7 |
15.0 |
50,198 |
|
Grade B
overlap |
37.3 |
6,038.5 |
91.0 |
307,313 |
Grant of the assignment will result
in Grade A overlap consisting of 32.8% of KVDO-TV's Grade A population and 15%
of KEZI-TV's Grade A population. Each station's Grade B contour will
totally encompass the other station's city of license, and the combined Grade B
contours of the two stations will serve over 50% of Oregon's total population
(i,091,385). To my knowledge, no waiver of the duopoly rule has ever been
granted where 91% of one station's Grade B population would be overlapped by a
commonly-owned station.
While the information submitted by
the parties here does indicate a serious deterioration of KVDO-TV's economic
condition, it is insufficient to overcome the extensive overlap problem posed
by the assignment. Moreover, it appears that, contrary to the assignee's
claim, the Salem market has experienced a dynamic growth in terms of
population, income and sales and that the state capital is capable of
supporting an independent television station. This latter conclusion is
reinforced by the fact that KVDO-TV nearly reached the break-even point during
the pendency of the assignment application; that the assignee has made
strenuous efforts to acquire the Salem station, including the recent agreement
to dispose of Liberty's Medford interest and the late offer to dispose of
KVDO-TV once it has become financially viable; and that no serious effort was
made to sell the station to anyone other than the proposed assignee (whose
counsel also represents the assignor). Therefore, it cannot be concluded
that the present the assignor). Therefore, it cannot be concluded that
the present application represents the only means by which the operation of a
television station in Salem can be assured. While I do appreciate the
importance of a local outlet in Oregon's capital city, the fact remains that
the assignor made no serious attempt to find another buyer for the Salem
station. n2 In regard to the claim of the
possible loss of the KVDO-TV service, it should be noted that the four
commercial stations in Portland provide Salem with either city grade or Grade A
service and that the Salem market is included in the area of dominant influence
of all these stations. Since the parties to the assignment application
have failed to present a compelling showing in support of waiver of the duopoly
rule, the proposal should be denied outright.
n2 In a September 18, 1972,
amendment to the assignment application, the assignor supplied further
information regarding its efforts to sell KVDO-TV to someone other than the
proposed assignor. In the amendment, Channel 3 conceded that:
The station was not formally listed with a broker
and its availability was not generally advertised in the trade press.
KVDO-TV believed that prospective purchasers were limited and could be
approached directly. Moreover, the station was deeply in debt, and if the
possibility of a sale leaked out, it was feared that the staff might defect and
that creditors might institute legal action to protect their interests.
In addition to the cable
cross-ownership and duopoly problems inherent in the assignment, the proposal
also raises a serious policy question regarding the regional concentration of
control of mass [*617] media. With the acquisition of
KVDO-TV, Liberty (the assignee's parent) will assume a dominant position along
the Pacific coastline of Oregon. In the northwest section of the state,
Liberty's influence will be felt through KVDO-TV and numerous cable
systems. The southwestern portion of Oregon is already served by KEZI-TV
and by an AM-FM combination in Eugene, 70% of which is owned by Liberty
principals. n3 In addition,
Liberty owns five translator stations in areas adjacent to its television
facilities. In effect, the assignee will control mass media serving over
50% of the state's population with the approval of the KVDO-TV
assignment. Such regional concentration of control by a licensee should
be explored in an evidentiary hearing before any grant of the KVDO-TV proposal
is made.
n3 KSYS-TV in Medford is also located in the
southwestern portion of the state, but its effect is discounted here because of
the recent agreement to sell the station to Southern Oregon Education Co.
It should be noted that the majority does not condition grant of the KVDO-TV
assignment on the disposition of KSYS-TV by Liberty even though the assignee
has indicated its consent to such a condition.
In summary, I would deny the
assignment application since it runs counter to the diversification policies
embodied in our cable cross-ownership and duopoly rules and since no adequate
showing has been made to justify waivers of the Commission's rules. If
waivers were appropriate, then a serious question is raised concerning
Liberty's regional concentration of control, which would require further
inquiry. These considerations preclude my approval of even a conditional
grant. While I am aware of the serious financial condition of the Salem
station, I do not find that factor to be dispositive here. The present
plight of KVDO-TV is due, in part, to the assignor's voluntary action in
contracting to sell the station and in curtailing programming expenditures to
minimize losses during the pendency of the assignment application. As
I've already indicated, the prospects fro an independent television station in
Salem appear to be better than the assignee would have us believe. In any
event, I would find the loss of the KVDO-TV service to be an alternative
preferable to the wholesale waiver of our rules and the emasculation of our
diversification policies. I must admit that I have some serious doubts
that the Commission will ever enforce the conditional grant now made,
especially if the assignee invests substantial amounts of working capital in
the Salem station and is unable to recover such an investment in three
years. On the other hand, if Liberty accepts a conditional grant as just
that, it may very well be forced into the position of withholding necessary
funds from KVDO-TV for fear of losing its investment by a forced sale.