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How Eliminating FM Subcaps Could Undo AM Radio Revitalization Efforts

Some broadcasters say FCC must tread carefully when reviewing ownership rule changes

Radio broadcasters have opinions to share when it comes to the changes being proposed as part of the upcoming 2018 Quadrennial Review — particularly as it relates to the potential elimination of FM subcaps and the impact that move could have on AM stations.

A number of broadcaster have said the elimination of those subcaps had to the potential to decimate AM station values and potentially drive many independent AM owners out of business.

In comments recently submitted to the Federal Communications Commission, CRC Broadcasting made clear that it endorses retention of FM service subcaps within the Local Radio Ownership Rule. Eliminating the FM subcap will not only increase the irrelevance of AM service when it comes to advertisers, CRC said, but would also “divert any traction that AM broadcasters have begun to make through the AM Revitalization proceedings with advertisers by being able to jointly offer an AM signal and an FM translator signal to advertisers.”

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CRC was responding specifically to the call for comments in the official Notice of Proposed Rulemaking about whether the AM/FM subcaps should be retained or modified and whether they are still necessary to facilitate AM revitalization. The debate is part of the every-four-years Quadrennial Review that reviews broadcast ownership rules and is used to determine whether current rules continue to be in the public interest. In this go-round, three rules are subject to review: the Local Radio Ownership Rule, the Local Television Ownership Rule and the Dual Network Rule.

In comments submitted to the FCC, CRC said that if FM subcaps are eliminated or modified, FM stations owned by independent broadcasters “would be irreparably damaged as the major radio groups would consolidate their holdings in their markets and buy out independent broadcasters, thus diminishing diversity and localism on the FM dial.”

Add to that the fact that the same large group owners may then sell their AM holdings in the same markets where they are acquiring FM stations, CRC said, “decimating AM station values and driving many independent AM owners out of business, contrary to the stated policy to encourage AM revitalization.”

CRC pointed to its own experience in the Phoenix market. As an AM licensee in the market since 1988, CRC said that FM group owners have dominated the advertising revenues over the last five years in Phoenix. This has made CRC’s business viability tenuous and has simultaneously driven down AM station valuations. “Although the AM Revitalization proceeding has helped stem some of the bleeding, the underlying issues still remain and make it virtually impossible to engage in the type of capital investments which could serve to improve AM facilities,” the company said.

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Given all the efforts that the FCC has engaged in to revitalize AM radio, relaxing the subcaps now, as contemplated in the 2018 NPRM, “would undo all the advances that the FCC has made in the AM Revitalization proceeding to enable AM broadcasters to better compete in their radio markets,” CRC said.

CRC said that if the commission is looking to make a change, it has an idea: The only appropriate subcap relaxation should be for AM ownership in a radio market.

“Eliminating the subcaps on AM ownership in a radio market would enable large group owners to increase their presence if desired in that market and offer an opportunity to stabilize AM radio valuations by increasing demand for same,” CRC said in its comment filing.

“This would permit the commission to test its theory that the disparity between FM and AM stations has been suitably narrowed to permit elimination of subcaps entirely without adversely affecting AM licensees — as it would seem unlikely that FM licensees would divest holdings in a rush to acquire AM facilities.”

Similar comments were shared by Salem Media Group, which expressed concern about the impact that the removal of subcaps would have on AM radio. “With the prospect of FM ownership caps moving to eight in the top markets and no caps in smaller markets, dominant radio groups will likely move much of their talk programming to the FM band,” said Edward G. Atsinger, CEO and David P. Santrella, president of Salem Media in comments to the FCC. “If the AM band ceases to be the destination for popular programming, AM traffic will greatly diminish and the value of AM radio will collapse.”

“You have spent considerable time and energy to revive AM radio but doing away with subcaps cannot possible further that end,” the two said specifically to FCC Chairman Ajit Pai in the letter. “Using great care and restraint on subcaps is critical.”

The NPRM released in December FCC requested comments on whether it should retain, modify or eliminate any specific rules. Those comments are being accepted through the ECFS database using Docket Number 18-349 through April 29, 2019.