In Re Application of THE TWIN STATES BROADCASTING CO., ASSIGNOR and CSRA BROADCASTERS, INC., ASSIGNEE and THE WARNER GROUP, INC., ASSIGNEE For Assignment of License of Station WFNL, North Augusta, S.C. and WGAC, August, Ga.
BAL-7596 and BAL-7597
FEDERAL COMMUNICATIONS COMMISSION
39 F.C.C.2d 835
RELEASE-NUMBER: FCC 73-153
FEBRUARY 7, 1973.
OPINION:
[*835] MR. GEORGE G. BEASLEY, President, CSRA Broadcasters, Inc., Post Office Box 3286, Augusta, Ga. 30904.
DEAR MR. BEASLEY: This is with reference to the applications (1) for assignment of the license of Station WGAC, Augusta, Georgia, from The Twin States Broadcasting Company to CSRA Broadcasters, Inc. (BAL-7596) and (2) for assignment of the license of Station WFNL, North Augusta, South Carolina, from CSRA Broadcasters, Inc. to The Warner Group, Inc. (BAL-7597).
In connection with its review of the above applications, the Commission considered the fact that the Complaints and Compliance Division of its Broadcast Bureau is currently conducting an investigation into possible licensee misconduct which may have occurred at Station WFMC, Goldsboro, North Carolina, which you control. The Commission also considered the cross-interest problem which would be raised by the fact that, as a result of the above applications, CSRA Broadcasters, Inc. would be licensee of WGAC and a creditor of the licensee of WFNL, which is in the same market. You have represented that the note which is to be received from The Warner Group, Inc. would be discounted to a disinterested, bona fide third party in order to obviate this problem.
In view of the above, please be advised that the Commission has granted the above applications: (1) subject to the outcome of the WFMC investigation and (2) on the condition that The Warner Group note be discounted prior to consummation of the WGAC application, BAL-7596.
Commissioner Johnson dissenting and issuing a statement. Commissioner H. Rex Lee absent.
BY DIRECTION OF THE COMMISSION, BEN F. WAPLE, Secretary.
DISSENT:
[*836] DISSENTING OPINION OF COMMISSIONER NICHOLAS JOHNSON
Today the Federal Communications Commission grants authority to CSRA Broadcasters, Inc., to rid itself of one standard broadcast station (WFNL, North Augusta, South Carolina) and to purchase another (WGAC, Augusta, Georgia). At least for purely pedagogical purposes, this is a beautifully illustrative decision: it demonstrates graphically -- to broadcasters, scholars and legislators alike -- how law-lessly this Commission can and does act. Because the majority makes an utter mockery of our rules and of our process, I dissent.
The majority recognizes that these assignments pose some problems. The majority's resolution of those problems raises serious questions. But the decision is probably most remarkable for what it completely ignores.
First, the majority approves CSRA Broadcasters' right to purchase a new AM radio station despite the fact that CSRA's principals currently own and control a sizeable number of other broadcast interests -- all in the Southern portion of this country.
Mr. George G. Beasley currently owns a 55% interest in CSRA, the present licensee of WFNL. Beasley also owns majority interests in five other standard broadcast stations: WFMC, Goldsboro, North Carolina; WASC, Spartansburg, South Carolina; WMOO, Mobile, Alabama; WFAI, Fayetteville, North Carolina; and WANC, Henderson, North Carolina. He also owns a 35% interest in an additional AM station, WKGX, Lenoir, North Carolina; is majority owner of two FM stations, WFMC-FM and WHNC-FM; and has a 51% interest in a pending FM application for Mobile, Alabama. Including his ownership interest in WFNL, then, Mr. Beasley has substantial interests in seven AM stations, two FM's, and one potential FM station -- all located in the same region of the country.
Mr. Sammy E. Floyd currently owns 10% of CSRA. He also owns a greater than 1% interest in four other AM stations, one FM station, and the pending Mobile FM application. (All of these stations are currently controlled by Mr. Beasley.) Mr. Edward J. McKeown, 10% owner of CSRA, also owns more than 1% of three AM stations and the pending Mobile FM application. Mr. D. E. Gwaltney, owner of 25% of CSRA, also owns well over 1% of two AM stations and 10% of the pending Mobile FM applications. Mr. Beasley's wife, Shirley who is vice-president and director of CSRA, is also an officer in several of the stations owned by her husband, McKeown, Floyd, and Gwaltney.
In effect, then, the assignment the majority today approves will leave the owners of CSRA with well over a majority interest in seven AM stations, and two (and soon three) FM stations. n1 It might be observed, of course, that CSRA's principals already own this number of stations (if WFNL is included) and, hence, by replacing WFNL with WGAC, it could be argued that CSRA's principals are merely maintaining the status quo. However, that is not the case because [*837] WFNL is a 500 watt day time-only station serving the small North Augusta Community, while WGAC is a 5,000 watt, full time station serving the entire Augusta metropolis. As the majority itself concedes, WGAC "is a vastly superior facility to WFNL." Thus, by this assignment, the CSRA principals are obviously increasing their broadcast interests and influence.
n1 It is, of course, conceivable that the Federal
Communications Commission will refuse to approve the pending Mobile FM
application. However, given today's decision, such a possibility seems --
if not hilarious -- at least highly unlikely.
Though the majority alludes to these ownership patterns, it does not even pause to note that such patterns raise very serious multiple ownership problems under our rules and decisions.
In order to prevent the growth of monolithic control over the nation's airwaves -- and access to the minds of the audience -- the Federal Communications Commission has promulgated rules which limit the number of television and radio stations which may be controlled by the same institutions or individuals. Thus, 47 C.F.R. § 73.35(b) bars an individual or institution from owning a greater than 1% interest in more than one AM station if such ownership would result in an "undue concentration of control" contrary to the public interest; 47 C.F.R. § 73.240(a)(2) applies the same prohibition to FM stations.
In determining whether the grant of a license will result in such an undue concentration of control, the rules require the Commission to consider "the facts of each case." But, in no event do these rules permit an individual or institution to own a greater than 1% interest in more than seven AM's and seven FM's.
As I have suggested on at least two prior occasions, see my dissenting opinions in Application of Cosmos Broadcasting Co., FCC 2d (1972), and Application of Muskegon Heights Broadcasting Co., FCC 2d (1973), the intent of these rules is clear: While the seven station limit is an absolute, or per se, maximum, acquisition of any additions to one AM or FM station obviously merits careful Commission scrutiny. Indeed, if the FCC is to consider the "facts of each case" as our rules clearly demand, a hearing might well be warranted in every case where an institution or individual seeks to acquire an additional AM or FM station. (The same rule applies to the acquisition of television stations. (See 47 C.F.R. § 73.636 and Cosmos Broadcasting, supra.)
As I have also suggested on prior occasions, even if such a hearing is not deemed necessary in the general case -- for reasons which can only be termed politically expedient -- a hearing is surely required where, as here, an acquisition results in increased regional concentration of control. See Cosmos Broadcasting, supra; Muskegon Heights Broadcasting, supra. See also my dissent in Assignment of Station WNUL, 21 RR 2d 77 (1971).
The majority does not allude to this problem of regional concentration. n2 Shockingly, the majority does not even recognize the broader [*838] problem of undue concentration posed by these assignments. It is one thing to recognize a problem and then to attempt to resolve it in a disingenuous fashion. It is quite another thing simply to ignore the problem. In the former case, our rules suffer from gross mis-reading -- surely a serious difficulty. But in the latter case, our process suffers from cruel insult and from what can only be termed lawlessness.
n2 It is important to distinguish between undue
regional concentration and cross-ownership of overlapping stations. Both
are prohibited by our rules, but in the former case an individual or
institution owns or controls stations whose signals do not overlap but,
nevertheless, cover the same general geographic region of the country. In
the latter case, an individual or institution owns stations so close together
that their signals overlap -- thus reaching the same viewers or
listeners. The majority notes that CSRA cannot own both WGAC and WFNL
because such ownership would result in the sort of signal overlap precluded by
our rules against cross-ownership. The majority, however, does not even
speak to the related and equally serious problem of undue regional
concentration.
The second problem raised by these assignments -- and again completely ignored by the majority -- lies in CSRA's efforts at ascertaining the needs of the Augusta community.
Before this Commission can grant an application to acquire a station's license, we must first find that such assignment serves the public interest, convenience and necessity. See § 309 of the Communications Act of 1934. And, in making this determination the Commission must find that the applicant has adequately ascertained the needs of its community. See, e.g., Sioux Empire Broadcasting Co., 16 FCC 2d 995 (1969); Application of City of Camden, 18 FCC 2d 412 (1969); Stone v. Federal Communications Commission, 24 RR 2d 2105, F.2d (D.C. Cir. 1972).
Based on CSRA's own demographic study, 50% of Augusta's population of 60,000 is black. In conducting its ascertainment of the general population, CSRA consulted with 160 individuals, 23 of whom were black. In other words, though 50% of Augusta is black, only 14% of those persons consulted from the general public were black. While the Commission has stated in its Primer on Ascertainment that "statistical accuracy is not required" in this area, 27 FCC 2d 650, 667 (1971), this does not mean that a licensee can virtually ignore significant groups in its community. See Application of City of Camden, supra. Indeed, our Primer on Ascertainment requires that the applicant consult with a random sample of its community, and the fact that CSRA consulted with so small a percentage of blacks in such a heavily black-populated city strongly suggests that the applicant's ascertainment study may not have been based upon a random sample.
The majority completely ignores this possible defect in the applicant's ascertainment study. Presumably, the majority is of the view that because no complaint has been officially leveled against this ascertainment survey, there is no reason for FCC exploration. However, as I have observed in the past, if this Commission is serious about injecting integrity into its own rules, it must accept the obligation of enforcing those rules on its own motion. See, e.g., my dissent in Application of the Meredith Corporation (WOW), FCC 2d (1972).
Here, however, the majority reveals that it has no intention of enforcing its own rules, and, in so doing, it robs those rules of their vitality. Not only does it sap its ascertainment requirements of their force, but it also flouts the law as set forth by the United States Court of Appeals by ignoring the problems inherent in CSRA's proposed format change for WGAC.
The assignee plans to change WGAC's format from contemporary, middle-of-the road music to one of Country and Western combined with "standard pop" and some gospel music. Again, the majority makes nothing of this fact, presumably because it does not appear that [*839] any citizens have objected. It is, of course, possible that the citizens of Augusta have not been apprised of CSRA's proposed format change. But, irrespective of the reasons for this lack of citizen objection, I believe that this Commission is under an obligation to investigate -- on its own -- proposed format changes in the context of license assignment proceedings.
In Citizens Committee v. FCC, 436 F. 2d 263 (D.C. Cir. 1970), the Court of Appeals reversed a Commission grant of an application for a transfer of WKGY-AM-FM in another Georgia city, Atlanta. In that case the Commission had granted the transfer application without a hearing on the question of the public interest impact of the proposed change of format from classical music to a "blending of popular favorites, Broadway hits, musical standards, and light classical music." The Court of Appeals held, in substance, that the Commission could not make the necessary factual determinations from the record as developed without a hearing.
A hearing was ordered by the Citizens court at least in part to determine whether the licensee would, by changing its format, reduce the degree of programming diversity in the community. See my dissenting opinion in Application of Zenith Radio Corp., FCC 2d (1972). Properly read, such diversity is the key to the Citizens decision; if the court were not concerned that the public interest would suffer from such a reduction in diversity, then it would not have been concerned with the Commission's failure to determine the salient facts.
In the instant case, the majority does not ask whether CSRA's proposed format change will decrease the diversity of programming in Augusta. It is at least possible that WGAC's contemporary music format was the only such format in Augusta, and that CSRA's proposed format is identical to the formats of most other stations in the community. It is, of course, equally possible that CSRA's proposed format will actually introduce greater diversity of programming into the Augusta area. The point is that the majority simply does not know and does not bother to inquire. By declining to make such an inquiry the majority ignores the command of the Court of Appeals.
As I have suggested, the majority's refusal even to recognize possible rule violations makes an utter mockery of our process. However, given the majority's treatment of those problems which it does perceive, the question whether it is worse to treat our rules disingenuously than it is to ignore them altogether is a close one.
What the majority does do is to first grant CSRA a waiver of our three-year rule. 47 C.F.R. § 1.597. That rule precludes a licensee from selling a station within three years of the date the licensee acquired that station. The purpose of the rule is to prevent licensees from "trafficking" in broadcast licenses, from obtaining licenses "for sale rather than for service." Folkways Broadcasting Co. Inc., v. FCC, 375 F. 2d 299 (D.C. Cir. 1967). The presumption is that the licensee who sells a station within three years is trafficking, Harriman Broadcasting Co. v. FCC, 399 F. 2d 569 (D.C. Cir. 1968), and by such trafficking, the licensee serves personal profits over and above the public interest. See, e.g., Harriman Broadcasting Co. (WXXL), 9 FCC 2d 731 (1967).
[*840] Section 1.597 therefore demands that this Commission designate for hearing all applications to assign station licenses prior to the expiration of the three-year limit. In the instant case, the majority not only resolves the trafficking question in the licensee's favor absent a hearing, but -- more remarkably -- it does so in the face of evidence strongly suggesting the presence of the very evil the three-year rule is designed to prevent.
The majority concedes that within the last couple of years CSRA's primary stockholder -- Mr. George Beasley -- has sold three of his broadcast interests, two of which were majority interests. However, the majority contends that these prior sales, when coupled with the instant sale and acquisition, do not present a trafficking issue because CSRA is merely attempting to improve its broadcast facilities in the Augusta area. Yet, the majority admits, at the same time, that CSRA will make a $90,000 profit through the sale of WFNL, and surely the majority must recognize that licensees do not achieve such instant profit through the mere improvement of facilities.
Indeed, this Commission has held that the sale of a station within three years of acquisition will not constitute trafficking per se where no profit is made, Romac Baton Rouge Corp., 7 FCC 2d 564 (1967), thus suggesting that the existence of a profitable sale should indicate the likelihood of trafficking. The majority apparently attempts to dismiss that suggestion with the bizarre statement that CSRA will use the profits made on the WFNL sale to help purchase WGAC. I fail to see how that has any relevance at all.
To conclude from these facts -- as the majority does -- that Mr. Beasley "is a prudent broadcaster" is simply preposterous (unless one is speaking about Beasley's investment acumen). Only one conclusion is possible from these facts, and that is that Mr. Beasley and his colleagues have engaged in conduct (trafficking) which is prima facie inconsistent with the public interest. See Folkways Broadcasting Co., supra; Harriman Broadcasting Co. v. FCC, supra. In such circumstances, a hearing must be held under § 309 of the Communications Act of 1934 before the Commission may rule on this assignment. Compare Stone v. FCC, supra. For the majority to waive its three year rule in these circumstances is -- even to one who has witnessed a lot of FCC lawlessness -- unbelievable.
The majority also grants these assignments despite the fact that CSRA's basic qualifications as a licensee currently are in grave doubt. CSRA's principals are the principals of, among other stations, WFMC in Goldsboro, North Carolina. WFMC currently is being investigated by this Commission to determine whether that station has over-commercialized and falsified its logs in order to conceal this fact from the FCC. The investigation is also exploring allegations that WFMC has engaged in double billing.
The majority admits that, while the investigation is not yet completed, "WFMC has in fact been logging its commercials at approximately 50% of time actually broadcast." In other words, the facts currently reveal that WFMC's principals have lied to this Commission. And, while the double billing analysis has not been completed, preliminary analysis reveals that WFMC has, indeed, engaged in such [*841] unlawful conduct. The majority apparently wishes to reward such deception by permitting WFMC's principals to profit from the sale of one station (in violation of one rule) and to purchase yet another (in violation of another).
At this stage of the proceedings, with Mr. Beasley's qualifications as a licensee subject to such serious question, the majority's approval of these assignments raises major problems.
First, the majority asserts that because Mr. Beasley's alleged misconduct relates only to WFMC, that misconduct does not reflect upon Beasley's other broadcast holdings, and, hence, there is nothing wrong with allowing him either to profit from the sale of WFNL or to purchase a new, larger station. Such an assertion completely mis-states the law.
In Friendly Broadcasting Co., 35 FCC 2d 84 (1972), the FCC refused to reconsider an earlier order designating two of Friendly's renewal applications for hearing. Friendly had applied to renew its licenses for WJMO (AM) and WLYT (FM), both in Cleveland, Ohio. The Commission ordered a hearing on Friendly's WJMO application because the licensee's qualifications with respect to that station were in serious question due to numerous alleged rule violations and charges of misrepresentation. The Commission also designated a hearing on the FM application, and Friendly argued that since no wrong-doing had been alleged against that station, no hearing should be held with respect to it.
The Commission unanimously disagreed with Friendly's argument. We held that, even if the allegations of misconduct related solely to WJMO, those allegations went to Friendly's basic qualifications as a licensee and thus went to its qualifications to hold any broadcast license, See also Vinita Broadcasting Co., 30 FCC 2d 458 (1971), where the Commission denied one AM renewal application and declined to issue a construction permit to the licensee for still another station because the licensee's character qualifications had been found severely wanting with respect to a third, unrelated station.
Indeed, just two weeks ago this Commission voted to designate for hearing the renewal application of WOIC, Columbia, South Carolina, at least in part because the licensee's character qualifications had been drawn into serious question with respect to its operation of another, unrelated, station. Application of WOIC, Inc., FCC 2d (1973).
How can this Commission designate a licensee's renewal application for hearing based on the licensee's alleged conduct with regard to another station at one meeting, and then, just two weeks later, deny that another licensee's conduct with respect to one of its stations is even relevant to that licensee's application to sell another station and to purchase an even larger one?
The two holdings cannot possibly be reconciled. At the very least, given Friendly Broadcasting, Vinita Broadcasting, and WOIC, Inc., a hearing must be designated in the instant case before the Commission can determine whether CRSA should be allowed to retain the license to WFNL -- let alone whether CRSA should be allowed to sell that [*842] license at a substantial profit in return for the purchase of a superior broadcast facility.
The majority notes rather gratuitously that CSRA's acquisition of WGAS is granted subject to the outcome of the WFMC investigation. The majority does not state unequivocally -- though this is the least it could do -- that CSRA will have to divest itself of WGAC if the WFMC investigation proves adverse to that station's principals. Could this be because the majority has no intention of finding against WFMC no matter what the facts reveal?
But perhaps more serious is the fact that by granting today's assignment to CSRA, the majority has, in effect, made a "public interest" determination which cannot possibly be made on this record.
As I have noted earlier, section 309 of the Communications Act of 1934 requires that before we grant an application to purchase a station's license, we first determine that such a grant will serve the public interest, convenience and necessity. That determination cannot possibly be made where -- as here -- the proposed assignee's character qualifications are open to serious doubt. See my dissents in Application of RKO General, FCC 2d (1972), and Application of Sumter Broadcasting, FCC 2d (1973). And, as I have also suggested, the lawlessness of such a grant is by no means cured when that grant is made only conditionally. See RKO, supra, where I noted that such conditional grants tend to place the Commission in a decidedly non-neutral position in violation of the principles set forth by the Supreme Court in Ashbacker Radio Co. v. FCC, 326 U.S. 327 (1945).
I dissent because I believe the decision in this case is clearly erroneous. I write at such length because the majority's opinion illustrates so fully how bad things really are at the FCC. For those academicians, researchers and reformers who want another example, here it is.