File No. BAPCT-399
FEDERAL COMMUNICATIONS COMMISSION
10 F.C.C.2d 100 (1967); 11 Rad. Reg. 2d (P & F) 211
RELEASE-NUMBER: FCC 67-1050
September 19, 1967 Adopted
BY THE COMMISSION: COMMISSIONER COX DISSENTING AND ISSUING A STATEMENT IN WHICH COMMISSIONERS BARTLEY AND JOHNSON JOIN; COMMISSIONERS LOEVINGER AND WADSWORTH CONCURRING AND ISSUING STATEMENTS.
[*100] 1. The Commission has before it the above-captioned assignment application, which proposes to assign the construction permit for station WAFT-TV, Cleveland, Ohio, to WKBF, Inc. Assignee's stock is equally owned by the assignor and present permittee, the Superior Broadcasting Corp. and Kaiser Broadcasting Corp. In view of Kaiser Broadcasting Corp.'s other interests in television stations in the top 50 television markets, the application comes within the purview of the Interim Policy Concerning Acquisition of Television Stations (5 R.R. 2d 271), enunciated June 21, 1965.
2. The Commission is of the view that the applicants have affirmatively and compellingly shown that a grant of the application would be consistent with the interim policy.
Accordingly, it is ordered, That the application for the assignment of the construction permit for station WAFT-TV, Cleveland, Ohio, from the Superior Broadcasting Corp. to WKBF, Inc., Is granted.
FEDERAL COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.
CONCUR BY: LOEVINGER; WADSWORTH
CONCURRING STATEMENT OF COMMISSIONER LEE LOEVINGER
This proceeding involves an application for approval of a transaction that will, in effect, make the Kaiser Broadcasting Corp. a 50-percent owner of an UHF construction permit for Cleveland, Ohio. There is no question as to the qualifications of Kaiser and the transaction would probably be routinely approved but for the proposed Commission rule to prohibit acquisition of more than two VHF or three UHF television stations in the top 50 markets by any one licensee. [*105] I agree with the dissenting opinion that this case involves the underlying considerations and policy of our proposed multiple ownership rule. Unfortunately, circumstances having no relevance to this proceeding have precluded full Commission consideration and disposition of the proposed multiple ownership rule prior to this and there is no prospect of such consideration and disposition in the immediate future.
Developments, facts, and arguments coming to attention since the June 1965 proposal of the rule regarding television station ownership in the top 50 markets have caused me to doubt that the rule in the form proposed is the best means of achieving the objectives sought. I do not wish to commit myself to any position on this issue until we have had an opportunity for full discussion and consideration within the Commission, and, therefore, will not discuss the merits other than to say that for reasons indicated by Commissioner Lee's dissenting opinion in the proposed rulemaking and my own prior opinion in a similar situation it seems particularly dubious that we should impose a more restrictive rule on the expansion of UHF interests at the time that we are seeking to encourage the development of UHF.
In any event, I am unwilling to penalize the applicants here for the Commission's delay in disposition of the basic rulemaking. In view of my own doubts as to the basic policy, I am, therefore, concurring in Commission approval of the proposed transfer, without committing myself to a position on multiple ownership rule revision when that issue finally comes before the Commission for plenary consideration and disposition.
CONCURRING STATEMENT OF COMMISSIONER JAMES J. WADSWORTH
I am concurring in a grant of this assignment because I believe that the inauguration of a new television service in Cleveland at the earliest possible date is in the public interest. I express my reservations that the filing of an application, or multiple applications, by financially qualified entities might be the vehicle for acquiring "paper CP's" for resale to entities which would not have been able to acquire them in the first place (because of lack of comparative qualifications, or otherwise), which could result in a misuse (not necessarily abuse) of the Commission's processes.
I dissent. This represents the most extreme departure the majority has made thus far from our interim policy against increasing concentration in the major markets. It seems to me that this is almost a point of no return insofar as our pending rulemaking is concerned.
It should be remembered that we instituted our rulemaking proceedings in docket No. 16068 over 2 years ago because of our concern over the increasingly narrow concentration of control over television facilities [*101] in the largest markets. We found it difficult, if not impossible, to stem this trend in the course of case-by-case consideration of individual transfer applications. We, therefore, decided to attack the problem on an overall basis through rulemaking. Furthermore, we were so concerned about the accelerating trend toward tighter and tighter control of the stations serving the great bulk of our people that we took the unusual step, some 6 months before issuing our rulemaking proposal, of announcing that as a matter of interim policy we would not authorize the acquisition of a second VHF station in the top 50 markets without a hearing unless "a compelling affirmative showing" were made that the transfer would be in the public interest. When we later issued our now pending proposal for changing our rules, we relaxed this interim policy to the extent of permitting the holding of two VHF stations in the major markets before applying the hearing requirement.
That has been our stated policy for over 2 years. We have granted four waivers in that period (all but one of them over my dissent). But all of those cases involved stations which had lost substantial sums and were in precarious condition -- and one was actually off the air. Furthermore, at least some showing was made in each case that the transferor had first tried to sell to a party whose acquisition of the station would not violate the interim policy before completing a sale to multiple owner. Thus, in these past cases it could be argued that the public was assured a service which otherwise was, or might be, unavailable to it but for the transfer.
However, neither of these conditions exists here. The station has never been built, so has suffered no losses which might imperil its continued operation. The Commission has always been concerned about the transfer of bare construction permits, and that concern should certainly be present here. I believe that WAFT-TV's pending application for extension of completion date, file No. BMPCT-6410, should be set for evidentiary hearing to determine first whether valid reasons exist for such extension of the construction permit and, accordingly, whether there is a valid and subsisting construction permit which WAFT-TV could transfer. As to the merits of the proposed transfer, certainly no showing has been made that the transferor tried to sell to parties already owning not more than one station in the top 50 markets. It presumably decided to sell to Kaiser because this was the most favorable arrangement it could make for the disposition of its permit, even though this brings it into conflict with our interim policy.
It should be noted that there were originally three applicants for this channel. The other two dismissed their applications -- one of them, United Artists, presumably because it realized that it would be at a comparative disadvantage vis-a-vis Superior on grounds of diversity, local residence, and integration of ownership and management. Even though this left Superior as the only applicant, we required the latter to go through a hearing to establish its financial qualifications. After the Commission has thus gone to the trouble and expense of determining that Superior has the resources to build and operate its proposed station in Cleveland, the applicant now comes in and say s that its proposal was not substantial enough to serve the public properly and that it should, therefore, be allowed to sell its permit to Kaiser, which [*102] has greater resources and can put together a more elaborate broadcast operation. In fact, this is one of the main reasons urged in support of the parties' request for a waiver of our interim policy. On the contrary, however, it seems to me that if Superior -- while still in permittee status -- is saying that its proposal was inadequate and that it is not financially qualified to build and operate the kind of station which is needed, then it should be found to be unqualified and its permit should be canceled. We would then be in a position to accept further applications from parties able to build the kind of facility Superior now says is needed -- and hopefully some of them might meet our interim policy.
It seems highly unlikely that Kaiser would apply in such a situation. It already has stations or construction permits in the Los Angeles, Philadelphia, Boston, Detroit, and San Francisco television markets. It thus has present holdings in the top 50 markets far in excess of those permitted under our interim policy, by virtue of the fact that it applied for a number of these facilities before we adopted the policy and because the Commission has already waived the policy for Kaiser once to permit it to acquire a half interest in a UHF station in Boston. n1 It really seems to me that it is rather presumptuous in pressing for still further erosion of our policy on diversification.
n1 See my dissent to that action. Public notice of Oct. 21, 1966, report No. 6193.
But our interim policy aside, these holdings would place Kaiser at a serious comparative disadvantage if it were to seek to compete with local applicants or with smaller multiple owners. Thus, we have here the situation which has plagued us so often -- and has recently caused expressions of concern in Congress -- namely, the transfer of a permit or license to a party who could not have prevailed in a comparative proceeding, and here the transfer takes place before the station has been built. If the parties are correct in saying that the public interest requires the initial construction of extremely high powered UHF stations, and that only multiple owners with strong financing and previous UHF experience can build and operate such facilities, then it seems to me the majority should move to amend our rules to increase the minimum power required for UHF operation and to modify our comparative hearing criteria to delete all demerit for concentration of control of the mass media. I am quite sure that my colleagues are not prepared thus unequivocally to make big city UHF operation exclusively a millionaires' preserve, but if they intend to give others the benefit of the precedent here established, I think this is exactly what they will accomplish by indirection.
Maybe Superior cannot build as powerful a station alone as it can in association with Kaiser -- and with the latter providing nearly all the money. But when we issued our proposed rulemaking we expressly stated that the resources of the multiple owners are not needed to bring UHF service to the major markets, and in this case we have a full hearing record to establish that Superior can build and operate a station which would serve the public interest. I submit that the public in Cleveland would be better served in the long run by a locally owned and oriented station which started slowly and built as it went along, [*103] than it will be by a better financed initial operation controlled by an absentee corporation with significant other broadcast interests. Similarly, the national interest in a diversely owned broadcast system would be better served by denial of this application. Once the all-channel law achieves 100 percent UHF penetration, then presumably a high-powered UHF station will be competitively equal to a VHF station. When that day comes, Kaiser will have -- if this acquisition is approved -- stations in six of the top eight markets in the country, which is more than any other entity now controls. And when that comes about, it is highly unlikely that the Commission will require divestiture of such highly concentrated holdings, so that we will be faced with an irreversible centralization of control over our vital mass media. I think this is of critical importance, and that we must look ahead and consider this future before we take the easy route of approving this application on the ground that it will help UHF n2 or that it will provide better service quicker than would otherwise be the case.
n2 I favor expanded UHF service like my colleagues, but I think we sometimes fall into the error of allowing almost anything in the name of UHF. We should not be emotionally predisposed to accept every argument which seeks to use UHF's cause for short-range private benefit.
Furthermore, the parties argue their case in a way which makes it clear
that they think what we do here will have important precedental effect.
In a letter of July 3, 1967, to the Commission from counsel for WKBF, Inc.,
The Commission's action on the WKBF, Inc., application will speak loudly and clearly to others who may be contemplating investment in independent UHF as to the degree to which the Commission encourages or discourages initiative of the kind displayed by Kaiser.
I am quite willing to recognize -- and applaud -- the commitment and the contributions which Kaiser has made to independent UHF operation. But I am not willing to give it as many stations as it may desire in the top markets, nor to issue ringing assurances to others that, if only they have the money to take the initial risks, they, too, can count on a handful of stations in the largest markets available. We initiated our interim policy on December 18, 1964, because of the high degree of concentration then existing in the top 50 markets, with 111 (or 71 percent) of the 156 VHF stations in those markets licensed to multiple owners, while 17 of the remaining 45 were owned by local newspapers. It is clear that our principal drive was to prevent a repetition of this in UHF, yet this and our earlier waivers are taking us down that same road. I am advised that there are only 28 channels still available in the top 50 markets. It seems to me that we must act -- and quickly -- if we are to maintain a desirable diversity of control of our television system.
The parties' other principal argument is that approval of this transfer will improve the possibility of Kaiser's developing a fourth network. This is concededly speculative, and I do not think it can serve as a basis for our action here. Clearly, we cannot select Kaiser as a chosen instrument for the creation of a new network. Therefore, if this argument has any validity we would be compelled to let all other multiple owners who indicated that they were exploring network possibilities have as many stations as Kaiser. Furthermore, this argument is not [*104] cast in terms of need for revenues from owned and operated stations but rather in terms of obtaining clearances for network programming. This obviously applies to more than six markets, so could be made the basis for still further acquisitions. I agree that we should pursue policies which would permit the development of additional networks as they are needed and feasible. But this does not mean that we should subvert other policies on the off chance that an applicant before us may at some indefinite time desire to form a network. If such a network comes into existence, an independent station in Cleveland operated by Superior would have strong incentives to affiliate with it and clear for its programs. We do not have to permit Kaiser to control another station in a major market to achieve that result.
I have referred to the parties' contentions at some length because the majority's order does not even recite them. It simply announces the conclusion "that the applicants have affirmatively and compellingly shown that a grant of the application would be consistent with the interim policy," without any supporting explanation whatsoever. I think this is not a proper way to dispose of matters of this importance.
I wish to emphasize again that this action goes further than the majority has ever gone before in these waiver cases. It allows Superior to avoid the risks of implementing the permit we have granted it, and at the same time permits it to acquire a half interest in a much more substantial venture for much less money than it originally committed to this enterprise. It sanctions the acquisition by Kaiser of a franchise it probably could not otherwise obtain. It distorts our comparative hearing rules. But, above all, I think it undercuts, if it does not destroy, our pending rulemaking proposal in the critical area of diversity of control of the broadcast media. Perhaps the majority will eventually abandon that proposal but, if so, that action should be taken consciously and for stated reasons after full consideration of the problem. It should not be slipped into, without explanation, in the course of disposing of particular applications on an ad hoc basis, thereby creating precedents which must control future actions, unless we are to be completely arbitrary and treat others differently than we treat Kaiser.
I think this matter is of great importance, far transcending the interests of these parties, the interest of the people of Cleveland in maximum service at the earliest moment, or the interest of the public generally in a strictly speculative fourth network. I do not think the majority has addressed itself to the long-range problem of increasingly centralized control of the makers of American opinion. I, therefore, dissent.