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NEWHOUSE B/CASTING CORP. Stations

KOIN AM-FM-TV, Portland, Oregon

 

October 1, 1971

 


JUDGES:

Commissioners Burch (Chairman), Robert E. Lee, Wells and Houser, with Commissioners Johnson and H. Rex Lee dissenting and issuing statements.


OPINION:

 

An application for transfer of a 50% interest (Class A common stock) in Mount Hood Radio and Television Broadcasting Corporation, licensee of Stations KOIN AM-FM-TV, Portland, Ore., from Moe M. Tonkon and Harvey S. Benson, Voting Trustees, and 32 voting trust certificate holders, to Newhouse Broadcasting Corporation, has been granted by the FCC (BTC-6523). Newhouse Broadcasting previously owned 50% (all Class B common stock) of the licensee corporation.

 

The purchase price was $ 8,100,000 with adjustments based on 1971 net earnings.

 

The transferee, a New York corporation, is owned by four members of the Newhouse family. S.I. Newhouse, 100% owner of Advance Publications, Inc. and subsidiaries, owns 100% of The Oregonian and The Oregon Journal, daily newspapers published in Portland. He also owns 100% of daily newspapers in Staten Island, Syracuse and Jamaica, N.Y.; Jersey City and Newark, N.J.; St. Louis, Mo.; Harrisburg, Pa.; Birmingham, Huntsville and Mobile, Ala.; New Orleans, La.; Springfield, Mass.; and Pascagoula, Miss.

 

In addition to its interest in KOIN AM-FM-TV, Newhouse Broadcasting is licensee of WSYR AM-FM-TV, Syracuse, and WSYE-TV, Elmira, N.Y.; WAPI AM-FM-TV, Birmingham, Ala.; WTPA FM-TV, Harrisburg, Pa.; and KTVI(TV), St. Louis, Mo. Advance Publications owns 20% of the stock of Denver Post, Inc., which holds a construction permit for KHBC(TV), Denver, Colo.

 

Through subsidiaries, Newhouse Broadcasting owns and operates CATV systems in 12 cities in New York and one in Alabama, holds CATV franchises for 11 New York cities, and operates microwave systems in New York, Pennsylvania and Alabama.

 

Officers and directors of Newhouse Broadcasting are E.R. Vadeboncoeur, president, director; S.I. Newhouse (44.44% stockholder), treasurer, director; Mitzi E. Newhouse (2.22%), vice president, secretary, director; S.I. Newhouse, Jr. (26.67%), director. William V. Rothrum and Donald D. Wear are vice presidents. Donald E. Newhouse holds a 26.67% stock interest.

 

Station KOIN operates on 970 kHz with 5kw power, directionalized at night. KOIN-FM, which operates on Channel 266 (101.1 MHz) with 100 kw power, duplicates programming of the AM station about 66 hours per week. Station KOIN-TV operates on TV Channel 6. All are CBS affiliates.

 

Action by the Commission September 29, 1971, by letter. Commissioners Burch (Chairman), Robert E. Lee, Wells and Houser, with Commissioners Johnson and H. Rex Lee dissenting and issuing statements.


DISSENTBY: NICHOLAS JOHNSON; H. REX LEE

 

DISSENT:

DISSENTING OPINION OF COMMISSIONER NICHOLAS JOHNSON

 

I join with Commissioner H. Rex Lee's dissent in this case.

 

In addition, I would like to make the following additional points.

 

Under   310(b) of the Communications Act we have the power to lay conditions on the transfer of control of broadcast licenses. Our concern over the joint ownership of newspapers and broadcast licenses has been amply expressed over the past several years. n1

 

n1 Midwest Radio-Television, Inc., 24 FCC 2d 625 [19 RR 2d 861] (1970); see also, In the Matter of Amendment of   73.35, 73.240, and 73.636 of the Commission's Rules Relating to Multiple Ownership of Standard FM and Television Broadcasting Stations. Further Notice of Proposed Rulemaking, 22 FCC 2d 339 (1970).

 

Recently we announced proposed rules whereby, within five years, owners of newspapers, AM-FM and TV stations will be forced to choose between the three properties and divest themselves of one. n2 Today we turn our backs on this whole concern for media concentration and approve the transfer of an AM-FM-TV combination to the owners of the daily newspapers in the same city.

 

n2 Further Notice of Proposed Rulemaking, 22 FCC 2d 339 (1970).

 

If we are willing to allow Newhouse Broadcasting, through the tenuous loophole so effectively closed by Commissioner Lee in his dissenting statement, to purchase full control of KOIN-AM-FM-TV, I, for one, believe we ought to attach strict conditions on Newhouse: they should be ordered to sell either the AM-FM, the TV, or the newspapers. By what we do today we allow Newhouse Broadcasting Corporation to achieve an unhealthy degree of control over the minds of citizens of the Portland area by reason of their total ownership of a high-rating AM station, a high-rating TV station, an FM station, and two daily newspapers. This kind of media domination is precisely the sort of condition we have sought to change in our extended rule making involving multiple ownership; it is the kind of situation the Department of Justice has traditionally and vigorously opposed - and opposes in this case. I sincerely hope that today's decision does not signal the beginning of a backward movement by the FCC. I can see no reason for the majority action and wish to express my vigorous dissent thereto.


DISSENTING STATEMENT OF COMMISSIONER H. REX LEE

 

I must dissent to the majority's action in approving the application for transfer of control of Mount Hood Radio & Television Broadcasting Corporation, licensee of Stations KOIN, KOIN-FM and KOIN-TV, Portland, Oregon. Newhouse Broadcasting Corporation now owns 50 percent (15,000 shares) of the voting stock of Mount Hood; the other 15,000 shares are held under a voting trust with 32 beneficial shareholders owning the voting trust certificates. Newhouse seeks to acquire 100 percent of Mount Hood's voting stock through the purchase of the 15,000 shares held under the voting trust for $ 8,100,000, plus one-half of Mount Hood's net earnings for the period January 1, 1971, to the last day of the month next preceding the month in which the closing takes place. In addition to its 50 percent interest in KOIN-AM-FM-TV, Newhouse owns The Oregonian and The Oregon Journal, the only daily newspapers published in Portland; is the licensee of radio and/or television stations in Syracuse and Elmira, New York, Birmingham, Alabama, Harrisburg, Pennsylvania, and St. Louis, Missouri; and, through subsidiaries, operates cable and microwave systems in New York, Pennsylvania and Alabama.

 

In this context, a substantial question is raised as to whether the Commission's multiple ownership rules effectively preclude this transfer of control. Newhouse takes the position that, by virtue of its 50 percent interest in Mount Hood, it does not approach the Commission as a new owner or licensee and that this transaction is more analogous to the situation whereby a majority stockholder purchases the interests of a minority stockholder - a situation which is exempt from the provisions of the multiple ownership rules. Apparently, the majority adopts this position since it sees no impediment to a grant of the transfer application other than the proposed rule making in Docket No. 18110 concerning newspaper-broadcasting combinations and pending civil antitrust actions, which will be handled through the imposition of conditions on the grant. I simply cannot agree with such a position.

 

First, it should be noted that our newly-revised multiple ownership rules (   73.35, 73.240 and 73.636) do apply to applications for assignment of license and transfer of control of existing stations. See First Report and Order in Docket No. 18110, 22 FCC 2d 306, 18 RR 2d 1735 (1970); also see 28 FCC 2d 662, 21 RR 2d 1551 (1971). Only involuntary or pro forma assignments and transfers, as defined in   1.540(b) and 1.541(b) of the rules, are exempted from the duopoly provisions of the multiple ownership rules. Since the transfer here is voluntary and the interest to be transferred is a controlling one (50 percent), whereby Newhouse will gain total ownership of the licensee, I must assume that our multiple ownership rules are applicable and that the parties to the transaction were correct in filing their transfer request on FCC Form 315. Clay Broadcasters, Inc., FCC 71-264, 21 RR 2d 442. While I may concede that the situation here is one that was not specifically considered when we revised our multiple ownership rules, I cannot agree that the transfer of negative control to the other 50 percent owner is so unique that it should not concern the Commission in its regulation of the multiple ownership of broadcast facilities.

 

While it may be true that Newhouse has enjoyed the exercise of a veto power over corporate decisions in the past, the fact remains that its acquisition of the remaining voting stock of Mount Hood will give it positive and complete control over the policies and programming of the Portland stations - a power which it has not possessed in the past. In such circumstances, it cannot be seriously argued that the goals of our expanded duopoly rules, i.e., to promote competition and to increase the diversification of program and service viewpoints, are promoted by a further concentration of control of the licensee in the hands of Newhouse. Therefore, I would apply our multiple ownership regulations to this transaction. While the decision is not an easy one to make in light of Newhouse's existing 50 percent interest, I do not believe that such an interest should, in effect, be treated as a majority interest or that we should avoid our carefully-conceived plan to bring new competition and viewpoints to broadcasting. Our approach in situations like the present one should be in favor of the broad application of our diversification policies rather than the creation of an additional exemption that emasculates the literal meaning of our regulations. Since I am unable to find other compelling public interest considerations which would outweigh the importance of diversifying the control of broadcast facilities, I can only conclude that our multiple ownership rules prohibit this transfer, which would further concentrate the control of an AM-FM-TV combination in the hands of a single entity who is also the publisher of the only two daily newspapers in Portland. As a result, I would either deny the transfer application or approve a grant subject to Newhouse's divestiture of either the AM-FM facilities or the television station.

 

One other matter deserves some comment. In our Report and Order in Docket No 16068, FCC 68-135, 12 RR 2d 1501, we evidenced a serious concern about the degree of ownership concentration in the top 50 television markets where a high proportion of the country's population resided and where there appeared to be ample economic support for the local ownership of television stations. While we did not adopt specific rules directed to this concern, we did announce that we would carefully consider situations on an ad hoc basis where an entity seeks to acquire more than three television stations (or more than two VHF stations) in the top 50 markets. We also stated that parties in such situations would be required to make a compelling showing that the public interest would be served by grant, i.e., the benefits inherent in such proposals would outweigh the obvious detriments with respect to the diversification of mass media sources. Here, Newhouse, already the licensee of three VHF stations (and two UHF stations) in the top 50 television markets, will gain complete control of the licensee of another VHF station in a top 50 market upon approval of the transfer application. Nevertheless, the majority ignores the applicability of the Commission's policy in this regard. It is no answer, as Newhouse suggests, that since it has negative control of Mount Hood, the top 50 market policy should not be considered when it acquires all of the licensee's stock. To the contrary, the most appropriate time for an examination of our diversification policies as they pertain to the Newhouse transfer is now.

 

For all of these reasons, I must respectfully dissent to an action that effectively engrafts an exemption onto the multiple ownership rules, which is both unwise from a practical standpoint insofar as the advancement of our diversification goals is concerned and unsound in terms of the specific language used to implement those goals. Moreover, it is an action that ignores a policy designed to foster those goals in the major television markets.


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