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FCC Adopts Presumptive Waiver for Big Markets

O’Rielly hopes for action on radio subcaps too

The FCC did not tackle the issue of AM/FM “subcaps” when it lifted bans on cross-media ownership last week. But it did carve out a small tweak to its rules on “embedded markets” by adopting a presumptive waiver for New York City and Washington.

That policy change, pitched by Jeff Warshaw’s Connoisseur Media LLC among others, was a surprise bit of additional good news for radio broadcasters in this most recent media ownership revamp.

Under the current rules, the total number of radio stations that may be commonly owned in a local radio market is tiered, depending on the overall number of full-power commercial and noncommercial radio stations in the market. For example, in markets with 45 or more radio stations, an entity can own no more than eight commercial radio stations, no more than five of which may be in the same service (AM or FM). The FCC didn’t change this rule but it adopted a presumption in favor of a waiver in certain circumstances involving New York and Washington.

Connoisseur Media, which owns 39 radio stations in 11 markets, wrote a letter to FCC Chairman Ajit Pai this summer outlining its reasons why the embedded market rule should be changed at least in some cases. Warshaw proposed that “the acquisition of a radio station located in an embedded market be analyzed not only for multiple ownership compliance with the ownership limits in the embedded market to which the station is home, but also for compliance in the greater parent market in which the station’s home market is embedded.”

Connoisseur owns stations on Long Island and in Trenton, N.J., and more in neighboring Connecticut.

The broadcaster presented data on how “the revenues of broadcast stations licensed to these embedded markets are significantly worse than those of stations in similarly sized markets because so much revenue if drawn out of these markets by the central-city stations.”

It continued, “Only by allowing stations in multiple embedded markets to be combined under common ownership, to become a more significant competitive force in order to attract regional and national advertisers, can the economics of these markets approach what they otherwise should be.”

Meanwhile, the bigger issue of the “subcaps” also came up during last week’s FCC meeting. Commissioner Mike O’Rielly is pushing for more deregulation and wants the “subcaps” question to be reviewed during the next quadrennial review of FCC media ownership policy in 2018.

“Beyond the issue of embedded markets,” he said in a statement, “I am disappointed that this item did very little to unburden the radio industry. While I was pleased to see the elimination of the radio/television cross-ownership rule, I wish the commission would have gone further in addressing our local radio ownership rules. For starters, it’s time to review the commission’s AM/FM subcaps. However, I recognize that the commission was confined to the petitions for reconsideration before us and that there will be an opportunity to reexamine our rules once again during the 2018 quadrennial review.”

The commission’s new rules on media ownership, including the presumptive waiver caveat, will take effect 30 days after publication in the Federal Register, which is expected soon.