Attorneys for Connoisseur Media talked with staffers at the Media Bureau of the Federal Communications Commission this month about the methodology used by the commission when it does a multiple ownership analysis of stations in so-called “embedded markets.”
This is a specialized issue, but one of interest to broadcasters in two of the nation’s largest markets and to proposed buyers and sellers in specific situations. David Oxenford was one of the attorneys from Wilkinson Barker Knauer on the phone call on behalf of Connoisseur; Radio World asked him to summarize the issue for our readers:
RW: Can you explain briefly what the central issue is and why it might be important to other broadcasters?
Oxenford: This is actually a very narrow issue, applicable only to owners in the N.Y. and D.C. Nielsen Audio Markets. In the areas surrounding these two markets, there are a number of Nielsen radio markets that are rated independently by Nielsen. However, stations located in those markets are also included as being “home” to the greater metropolitan market. These are the “embedded markets” — markets that have their own independent existence and also are considered part of the greater metropolitan Nielsen market.
Under FCC ownership rules, an owner of a station in one of these suburban markets must not only comply with the ownership limits for the suburban market, but also for the greater metropolitan market.
So, in the D.C. market, an owner of stations in one suburban market (Fredericksburg, Va.) who wants to buy stations in the other D.C. embedded market (Frederick, Md.) needs to comply with the ownership limits not only for Frederick but also for D.C.
The same thing would occur in New York. If an owner in the Long Island embedded market wants to buy stations in the Hudson Valley or in Monmouth County, N.J. (part of the Monmouth-Ocean Nielsen market) or in the NW N.J. market Middlesex/Somerset/Union, the prospective owner would have to comply with the ownership rules not only in the market where they want to buy, but also in the greater New York City market.
What this means is that a prospective owner in one embedded market may not be able to expand to another embedded market — not because they do not comply with the ownership limits in that embedded market, but because the rules would say that they have too many stations in the New York City market, as stations in each embedded market, whether or not they get any significant ratings share in NYC, will count toward the overall numerical limit of stations that one owner can hold in the greater NYC market.
Connoisseur has shown that the embedded market stations really don’t compete in the central city markets, nor do the embedded market stations compete in other embedded markets.
In fact, in most cases, their signals don’t even reach into the adjacent markets, and they get miniscule ratings in adjacent markets. Even in the overall central city market, virtually all the listening to these stations occurs in the counties in the embedded market itself, not to counties in the central city or in any other embedded market.
We even showed that if one owner owned every station in every embedded market in the greater NYC market (which could never be done, as that would far exceed the ownership limits in each embedded market), that owner would have about half the market share in the NYC market of either iHeart or CBS, which hold the biggest clusters in the NYC market.
The central city stations do compete in these outlying markets, and have technical coverage that reaches into multiple embedded markets, so the current rule makes sense for those central city stations. The rules properly limit the ownership of the central city stations in the embedded markets. But this dual analysis makes no sense for the stations that are actually located in these embedded markets and don’t compete in the central city or in the other embedded markets.
RW: What are the specific stations and markets where Connoisseur is affected by this?
Oxenford: At this point, the rule is in place, so Connoisseur and other similarly situated owners can’t expand into other embedded markets. While the FCC, in its order, held out the possibility for a waiver, there were no standards for a waiver that were set out, nor even a recognition that Connoisseur had a point that these stations really don’t compete with each other or in the central market. So it makes it virtually impossible to really do any deals to expand into other embedded markets, as a seller is unlikely to commit to sell to a buyer who may or may not be able to actually acquire their station, as any acquisition would all be dependent on whether the FCC adopts a waiver of a rule that they never waived.
RW: How does the example of Puerto Rico play into the discussion?
Oxenford: Connoisseur had asked for the FCC to adopt a presumptive waiver — a determination that, in most cases, a waiver would be in order if one embedded market station went to buy another unless it appeared that there was some attempt to game the system. We noted that, in the FCC’s Quadrennial Review order, the FCC did allow stations in Puerto Rico to ignore the Nielsen Audio definition of a Puerto Rico market and instead use the contour method of determining ownership rule compliance. The FCC recognized that stations on one side of the island of Puerto Rico don’t really compete with those on the other side of the Puerto Rico market, even though Nielsen lumps them all in one market. We argue that, just like the mountain in the middle of Puerto Rico that prevent stations there from competing with each other, the central city of N.Y. (or D.C.) present the same kind of barricade that prevents the stations in the embedded markets from competing with each other. Thus, we have suggested that the embedded markets themselves be evaluated using the contour methodology as allowed by the FCC for Puerto Rico.
RW: You indicated you were considering filing a petition for reconsideration of this part of the FCC’s ownership orders. What change would you request?
Oxenford: If we file for reconsideration, we would request the relief described above.
RW: What else should broadcasters know about this, or do to express a viewpoint?
Oxenford: Again, this is a very specialized issue that affects only N.Y. and D.C. area stations located in embedded markets. So there probably are not that many stations that will care about this issue. For those that do, if we file a reconsideration petition, they could file supporting comments
You can read Oxenford’s letter to the commission summarizing its phone call here (PDF).