In Re Applications of: A. H. BELO CORP. (WFAA-TV), DALLAS, TEX.
For Renewal of Broadcast License; WADECO, INC., DALLAS, TEX.
For Construction Permit for New Television Broadcast Station
Docket No. 19744 File No. BRCT-33; Docket No. 19745 File No. BPCT-4453
FEDERAL COMMUNICATIONS COMMISSION
40 F.C.C.2d 1131
RELEASE-NUMBER: FCC 73-542
May 24, 1973 Released
Adopted May 23, 1973
BY THE COMMISSION: COMMISSIONER JOHNSON CONCURRING IN PART AND DISSENTING IN PART AND ISSUING A STATEMENT; COMMISSIONER H. REX LEE CONCURRING AND ISSUING A STATEMENT; COMMISSIONER HOOKS ABSENT
[*1131] 1. The Commission has before it for consideration the above-captioned applications, one requesting a renewal of license to operate on channel 8, Dallas, Texas, and the other requesting a construction permit for a new television broadcast station to operate on channel 8, Dallas, Texas.
2. Based on the information contained in the application of WADECO, Inc., cash in the amount of $2,799,000 will be needed for the construction and first three months cost of operation of the proposed station, consisting of down payment on equipment -- $625,000; two months principal and interest payments on equipment -- $93,750; other items -- $417,000; three months cost of operation -- $1,618,250; n1 and grant fee -- $45,000. To meet its cash needed requirement, the applicant relies upon paid-in stock subscriptions, stock subscription agreements and a $2,500,000 bank loan from the Castle Trust Company Limited. In an amendment filed November 2, 1972, the applicant indicated in section II, paragraph 11, FCC Form 301, that 118,940 shares have been subscribed and 78,060 shares had been issued, for a total of 197,000 shares. The information contained in the application demonstrates that the stock subscribers can meet their respective stock subscription commitments to the applicant. However, on May 8, 1973, the applicant submitted a balance sheet dated February 28, 1973, which conflicts with the information contained in section II, paragraph 11 in that different amounts of stock issued and subscribed are specified. [*1132] Moreover, the balance sheet appears to be internally inconsistent since on the asset side, stock subscriptions receivable of 116,055 are listed whereas, on the liabilities side, capital stock subscribed, but not issued, is shown as 116,250. With respect to the stock subscriptions already paid in, the applicant's balance sheet shows $2,783.51 in cash and $78,541.47 in pre-paid expenses. Since the pre-paid expenses have not been itemized in order to show that they relate to the total construction costs set forth in section III, paragraph 1(a), it cannot be determined whether the applicant can receive credit for these pre-paid expenses.
n1 As in similar cases in the past, we will not apply the standard set forth in Ultravision Broadcasting Co., 1 FCC 2d 544 (1965). Rather we will apply our former standard which required an applicant to demonstrate that it has sufficient funds to construct and operate the proposed station for three months without revenues. Orange Nine, Inc., 7 FCC 2d 788 (1967). In this connection, it is noted that the Commission's TV Broadcast Financial Data Report for 1972 reveals that the Dallas-Fort Worth television broadcast stations generated revenues on an average in excess of the applicant's anticipated first year operating costs ($6,473,000).
3. With respect to the proposed $2,500,000 bank loan, since the Castle Trust Company Limited has stated that it is "willing to arrange for a loan", this does not constitute a commitment by the bank to provide the funds. n2 In the event that the applicant is able to satisfactorily demonstrate the availability of all of the funds upon which it relies, the applicant will still need additional funds in order to be considered financially qualified. Consequently, appropriate financial issues have been specified.
n2 In this connection, it should be noted that the proposed bank loan adequately sets forth the terms of principal repayment, the security required and the rate of interest to be charged.
4. Except as indicated by the issues set forth below, WADECO, Inc., is qualified to construct, own and operate the proposed new television broadcast station. Except for the matters discussed in paragraph 5 below, A. H. Belo Corporation is qualified to own and operate television broadcast station WFAA-TV. The applications are, however, mutually exclusive in that operation by the applicants as proposed would result in mutually destructive interference. The Commission is, therefore, unable to make the statutory finding that a grant of the applications would serve the public interest, convenience and necessity, and is of the opinion that they must be designated for hearing in a consolidated proceeding on the issues set forth below.
5. It should be noted that on September 9, 1970, UHF, Inc., instituted a civil suit in the United States District Court for the Northern District of Texas, Dallas Division (Civil Action No. 3-4156-A), charging, among others, the A. H. Belo Corporation, the licensee of WFAA-TV, and The Times Herald Printing Company, the licensee of station KDFW-TV, Dallas, Texas, with violations of the Sherman Anti-trust Act by entering into a contract, combination or conspiracy in restraint of trade, by attempting to and monopolizing the television broadcast industry in the Dallas-Fort Worth metropolitan area, and by seeking to and precluding the plaintiff from competing in such market. The complainant further charges that in furtherance of the alleged restraint of trade the above defendants have (1) opposed the granting of cable television (CATV) rights to their parties, attempted to delay CATV development in the Dallas metropolitan area and, at the same time, sought to maintain the exclusive right to provide CATV services at a date of their choosing, if ever; and (2) discriminated against UHF television broadcast station KMEC, Dallas, Texas, by failing to provide in their respective newspapers of general circulation program listings equivalent to those accorded VHF television broadcast stations in the Dallas-Fort Worth metropolitan area. On July 1, 1971, the principals of UHF, Inc., acting through Civic Telecasting Corporation [*1133] formally petitioned to deny the license renewal applications of A. H. Belo Corporation (BR-395), BRH-1192, BRCT-33), Beaumont Television Corporation (BRCT-556), The Times Herald Printing Company (BRCT-85), and Carter Publications, Inc. (BR-404, BRH-539, BRCT-27), essentially on the same grounds raised in their civil antitrust complaint (CA-3-4156-A). Action on the aforenoted license renewal applications has been deferred pending the Commission's consideration of the allegations set forth in the petition to deny. See FCC 73-543 adopted this date. Depending upon our disposition of the petition to deny, however, further orders in this proceeding may be appropriate. n3
n3 Moreover, when action is taken on the petition to deny, we will also consider the allegations raised by Mr. James T. Maxwell, President of Civic Telecasting Corporation that A. H. Belo Corporation has engaged in prohibited ex parte presentations.
6. A dispute also arose in this case concerning possible changes in the integration of ownership and management picture of station WFAA-TV. This dispute has caused us to focus on the relationship between past record and integration of ownership and management in the evaluation of the renewal applicant. See Letter to Mr. Thomas M. P. Christensen, FCC 73-545. As we made clear, WFAA-TV as a renewal applicant is judged solely on its past record -- not its integration. Whether that record warrants a "plus of major significance" ( Citizens Communications Center v. FCC, 145 U.S. App. D.C. 32, 447 F 2d 1201, decided June 11, 1971) is of crucial importance in the judgmental process. As the Court there noted, the incumbent licensee with such a "plus" can normally expect renewal in any comparative challenge. In short, in the case of the renewal applicant there is no need to rely upon presumptions (e.g., integration, local residence) as to how the applicant will perform in this critical area of serving the needs and interests of his area -- that whether his integration is zero or 100%, the actual past performance speaks for itself and is the factor to be considered in the evaluation of the renewal applicant in this respect.
7. Accordingly, IT IS ORDERED, that pursuant to section 309(e) of the Communications Act of 1934, as amended, the above-captioned applications ARE DESIGNATED FOR HEARING IN A CONSOLIDATED PROCEEDING at a time and place to be specified in a subsequent Order, upon the following issues:
1. To determine with respect to the application of WADECO, Inc.:
(a) The number of shares of the applicant corporation which have been issued and the number of shares which have been subscribed.
(b) The extent to which the applicant's pre-paid expenses are attributable to construction costs set forth in section III, paragraph 1(a), FCC Form 301.
(c) Whether the applicant will have available a $2,500,000 bank loan from the Castle Trust Company Limited, Nassau, Bahamas.
(d) Assuming that all of the funds upon which the applicant relies will be available to it, how the applicant will obtain sufficient additional funds to be used for the construction and first three months operation of the station.
(e) Whether, in view of the evidence adduced under the preceding issues, the applicant is financially qualified.
2. To determine which of the proposals would better serve the public interest.
3. To determine, in the light of the evidence adduced pursuant to the foregoing issues, which of the applications should be granted.
8. IT IS FURTHER ORDERED, That, in the event of a grant of the renewal application of A. H. Belo Corporation, its application will be subject to the following condition:
[*1134] That the grant of this application is without prejudice to whatever action, if any, the Commission may deem appropriate as a result of final action in the civil antitrust proceeding entitled UHF, Inc. v. The Times Herald Printing Company, T. H. Liquidating Company and The A. H. Belo Corporation, Civil Action No. 3-4156-A, filed September 9, 1970, in the United States District Court for the Northern District of Texas, Dallas Division.
9. IT IS FURTHER ORDERED, That to avail themselves of the oportunity to be heard, the applicants herein pursuant to section 1.221(c) of the Commission's rules, in person or by attorney, shall within twenty (20) days of the mailing of this Order, file with the Commission, in triplicate, a written appearance stating an intention to appear on the date fixed for the hearing and present evidence on the issues specified in this Order.
10. IT IS FURTHER ORDERED, That, the applicants herein shall pursuant to section 311(a)(2) of the Communications Act of 1934, as amended, and section 1.594 of the Commission's rules, give notice of the hearing within the time and the manner prescribed in such rule, and shall advise the Commission of the publication of such notice as required by section 1.594(g) of the rules.
FEDERAL COMMUNICATIONS COMMISSION, BEN. F. WAPLE, Secretary.
CONCURBY: LEE; JOHNSON (In Part)
CONCURRING STATEMENT OF COMMISSIONER H. REX LEE
I concur in the Order which designates for hearing in a consolidated proceeding the renewal application of A. H. Belo Corporation for Station WFAA-TV (Channel 8, Dallas, Texas) and the mutually exclusive application of WADECO, Inc. for the Channel 8 facilities. I also concur in the further Order which conditions grant of Belo's renewal application on whatever action the Commission may deem appropriate as a result of the Court's decision in a civil antitrust [*1135] suit brought against Belo and other parties, charging the defendants with monopolizing the television industry in the Dallas-Fort Worth area. n1
n1 See UHF Inc. v. The Times Herald Printing Company, T. H. Liquidating Company and the A. H. Belo Corporation, Civil Action No. 3-4156-A, filed September 9, 1970, in the United States District Court for the Northern District of Texas, Dallas Division, Civic Telecasting Corporation has petitioned to deny the license renewal applications of Belo for Stations WFAA-AM-FM-TV on essentially the same grounds raised in the antitrust action. Action on the petition to deny is being deferred until the Commission has received sufficient information relating to the allegations made in the civil antitrust suit and the petition to deny to permit the discharge of its statutory responsibilities.
However, I am concerned by the inclusion of certain language in the designation Order, which attempts to clarify an aspect of Commission policy applicable to a renewal-new applicant comparative proceeding. In paragraph six of the Order, the Commission indicates that WFAA-TV, as a renewal applicant, is to be judged solely on its past broadcast record (citing Citizens Communications Center v. F.C.C., 145 U.S. App. D.C. 32, 447 F. 2d 1201 (1971)) and not on any "presumption" as to the licensee's integration of ownership and management. While I may concur with the general statement of policy that a licensee's actual past performance is of crucial importance in a comparative proceeding and with the need to clarify the scope of the comparative issue in a renewal-new applicant proceeding, I cannot agree that an isolated designation Order is the proper vehicle for the delineation of major policy by the Commission. The general inquiry raised in Docket No. 19154 n2 is whether we can formulate some definitive guidelines for application in a comparative proceeding involving a regular renewal applicant and one or more competing applicants for the same facilities. The Commission has already received numerous comments in Docket No. 19154 and has held oral argument in the proceeding to determine what factors will be used to evaluate a renewal applicant (e.g., past performance, integration of ownership and management, diversification), and it seems obvious that any major policy pronouncements in this important area of broadcast regulation should be contained in a Report and Order in Docket No. 19154.
n2 See Notice of Inquiry in Docket No. 19154, 27 FCC 2d 580, adopted February 17, 1971. On August 4, 1971, the Commission adopted a Further Notice of Inquiry (31 FCC 2d 443) in light of the Citizens Communications Center decision and indicated that the Court of Appeals' decision reinforces the need to resolve the matters at issue in Docket No. 19154.
Moreover, the Commission fails to indicate whether the policy contained in the WFAA-TV designation Order applies to all pending renewal-new applicant proceedings. If it does, it apparently undercuts the approach employed in moline Television Corporation, 31 FCC 2d 263, 22 RR 2d 745 (1971), which was adopted by the Commission after the Court of Appeals' decision in Citizens Communications Center and which considered the integration factor to be relevant in the evaluation of a renewal applicant. It seems unfair to both renewal and competing applicants to modify important comparative criteria on an ad hoc basis rather than in the context of a well-publicized Policy Statement. Therefore, while I may concede that paragraph six of the designation Order is consistent with the thrust of the Citizens Communications Center case and our proposals in Docket No. 19154, I cannot agree that an individual hearing order is the appropriate vehicle to enunciate such far-reaching policy. I would prefer to conclude the inquiry in Docket No. 19154, which has been pending since February, 1971.
OPINION OF COMMISSIONER NICHOLAS JOHNSON, CONCURRING IN PART AND DISSENTING IN PART
While I concur with that portion of the majority's opinion which designates a comparative hearing on the mutually exclusive application of A. H. Belo Corporation and WADECO, Inc., to operate on channel 8, Dallas, Texas, I cannot agree with the majority that the accompanying assignments and transfers of control serve the public interest.
Rather, I tend to agree with WADECO that these intricate assignments appear designed as a means to improve the comparative position of the current WFAA-TV licensee. I can perceive no other cogent purpose for these assignments, and despite the majority's language suggesting that the position of WFAA's licensee will not be so improved, I must admit that I have my doubts. For, sadly, such assurances are often mere words -- words whose intent is easily lost through the months of hearings which follow FCC designation orders.
In short, while I am not at all persuaded that these assignment transactions serve the "public interest, convenience or necessity, I am also fearful that their real intent will return to haunt not only WADECO and not only those parties who have filed petitions to deny against WFAA's license renewal applications, but also this Commission.