*Pages 1--8 from Microsoft Word - 10404.doc* Federal Communications Commission FCC 01- 207 Before the Federal Communications Commission Washington, D. C. 20554 In re Applications of ) ) Paxson Communications of San Juan, Inc. ) (Transferor) ) ) and ) File Nos. BTCCT- 20000530ABW- ABY ) FIN: 58340, 58341 & 58342 LIN Television Corporation ) (Transferee) ) ) For Consent to the Transfer of Control of ) S & E Network, Inc. ) Licensee of Television Stations ) WJPX( TV), San Juan, Puerto Rico ) WJWN- TV, San Sebastian, Puerto Rico ) WKPV( TV), Ponce, Puerto Rico ) MEMORANDUM OPINION AND ORDER Adopted: July 19, 2001 Released: July 20, 2001 By the Commission: 1. Before the Commission are the above- captioned applications seeking consent to the transfer of control of S& E Network, Inc., licensee of WJPX( TV), Channel 24 (PAX), San Juan, Puerto Rico; and its satellites WJWN- TV, Channel 38 (PAX), San Sebastian, Puerto Rico; and WKPV( TV), Channel 20 (PAX), Ponce, Puerto Rico; from Paxson Communications of San Juan, Inc., to LIN Television Corporation (LIN). For the reasons set forth below, we grant these applications. I. Background 2. Our broadcast multiple ownership rules provide that one entity may own two television stations in the same Nielsen Designated Market Area (DMA) if eight full- power independent television stations (commercial and noncommercial) will remain post- merger and one of the stations is not among the top four- ranked stations in the market based on audience share. 1 In addition, our broadcast attribution rules provide that time brokerage of another television station in the same market, for more than 15% of the brokered station’s broadcast hours per 1 See 47 C. F. R. § 73.3555( b); see also Review of the Commission’s Regulations Governing Television Broadcasting, MM Docket No. 91- 221, Report and Order, 14 FCC Rcd 12903 (1999) (Local Ownership R& O). 1 Federal Communications Commission FCC 01- 207 2 week, will result in attribution of the brokered station to the brokering station for purposes of determining compliance with our ownership rules. 2 3. Through wholly owned subsidiaries, LIN is currently the licensee of two television stations on the island of Puerto Rico - WAPA- TV, Channel 4 (IND), San Juan, Puerto Rico, and WNJX- TV, Mayaguez, Puerto Rico. LIN operates WNJX- TV as a satellite of WAPA- TV. LIN also has an attributable interest in a second television station, WTIN( TV), Channel 14 (IND), Ponce, Puerto Rico, through its agreement with that station to rebroadcast the signal of WAPA-TV on WTIN( TV). LIN proposes to continue to operate WJWN- TV and WKPV( TV) as satellites of WJPX( TV) pursuant to the Note 5 exemption set forth in the Commission’s broadcast multiple ownership rule. 3 II. Determination of Television Market 4. Nielsen has not developed DMA markets for the island of Puerto Rico. However, in past television duopoly cases involving stations on different parts of the island of Puerto Rico, we have implicitly treated the entire island of Puerto Rico as one television market. 4 For example, in JEM Communications, Inc., we granted satellite exceptions to permit common ownership of television stations in San Juan (northeast), Ponce (south central) and San Sebastian (northwest), implicitly recognizing that, despite the fact that the stations were located on opposite parts of the island, they were part of a single television market and common ownership could only be accomplished through the grant of satellite exceptions. 5. Furthermore, as LIN points out, for purposes of the mandatory cable carriage rules, Puerto Rico is treated as a single market. 5 Finally, LIN represents that advertisers who buy time on Puerto Rican television stations consider the island to be a single market. LIN maintains that the financial viability of television stations licensed to Puerto Rico depends upon reliable island-wide coverage. This is accomplished by operating one financially successful full- service television station in a larger market like San Juan and owning additional satellite television stations or maintaining rebroadcast agreements or LMAs with other stations located throughout the island. 2 See 47 C. F. R. § 73.3555 Note 2; see also Review of the Commission’s Regulations Governing Attribution of Broadcast and Cable/ MDS Interests, MM Docket No 94- 150, Report and Order, 14 FCC Rcd 12559 (1999) (Attribution R& O). 3 See 47 C. F. R. § 73.3555( b) Note 5. 4 See Milton S. Maltz, 13 FCC Rcd 15527 (1998); JEM Communications, Inc. 9 FCC Rcd 4874 (1994); and Hector Nicolau, 5 FCC Rcd 6370 (1990). 5 See, e. g., Definition of Market for Purposes of Cable Television Broadcast Signal Carriage Rules, 14 FCC Rcd 14007 (1999) (designating the island of Puerto Rico as a single market for purposes of mandatory carriage rules). 2 Federal Communications Commission FCC 01- 207 3 6. Discussion. We conclude that past precedent and local economic and market conditions support continued treatment of the island of Puerto Rico as one television market for purposes of our television duopoly rule. Therefore, under our rules, an entity such as LIN may have an attributable interest in two television stations in the Puerto Rico television market if it is able to meet the criteria set forth in the television duopoly rule. If this transaction were approved, LIN would have an attributable interest in two stations – WAPA- TV and WJPX- TV and could claim continued satellite status for WKPV( TV), WJWN- TV and WNJX( TV). Because there will be eight independently owned television stations in the Puerto Rico market after the merger and WAPA- TV or WJPX- TV are not both ranked among the top four stations in the market, this combination is permissible, if as we find below, continued satellite status is warranted for WKPV( TV), WJWN- TV and WNJX( TV). However, LIN also proposes to continue its rebroadcast agreement with WTIN( TV) making that station attributable to LIN and, absent waiver or other relief, putting LIN in violation of the local television ownership rule. 6 III. Satellite Exception for WTIN( TV) 7. LIN argues that the Commission should permit it to claim a satellite exception for its rebroadcast agreement with WTIN( TV). LIN explains that, if it could, it would simply purchase WTIN( TV) and seek a sat ellit e except ion direct ly. However, LIN argues, in this unique sit uat ion, the owner is not willing to sell the st at ion. The licensee, Ms. Laura Nicolau, is the wife of the lat e Hect or Nicolau who built the station and owned it for many years. LIN states that, for personal reasons, she is not willing to sell it, despit e the st at ion’s marginal financial performance and the fact that it has rebroadcast the programming of WAPA- TV and other Puerto Rico stations for several years. In these circumstances, LIN maintains that the Commission should allow it to seek a satellite exception despite the fact that it does not actually own WTIN( TV). 8. LIN argues that, if it owned the station, it could avoid attribution of the station by seeking a satellite exception. LIN questions why the Commission should be more concerned about it seeking a satellite exception for a station that it does not own but for which it has an attributable interest through a rebroadcast agreement. LIN argues that by its express terms the satellite exception to the television multiple ownership rule is not limited to situations in which stations are commonly owned. LIN cites to the Note 5 exception which states that satellite cases will be determined by the Commission’s Satellite Report and Order 7 in order to determine “whether common ownership, operation or control of the stations in question would be in the public interest.” 8 LIN argues that the satellite exception applies equally to facilities that are 6 LIN also argued that, because its rebroadcast agreement with WTIN( TV) is grandfathered, we should not treat that interest as attributable with respect to its proposed ownership combination. See Local Ownership R& O at ¶ 133. In light of our decision herein granting the applications on separate grounds, we need not and do not reach this issue. 7 6 FCC Rcd 4212 (1991) (subsequent citations omitted). 8 47 C. F. R. § 73.3555 Note 5. 3 Federal Communications Commission FCC 01- 207 4 independently owned but are under common operation and/ or control. LIN argues further that, because the Commission’s satellite policy and new attribution rule for television LMAs apply, by their express terms, to precisely the same attributable interests – “ownership, operation or control,” of two same- market television stations, then stations that are attributable to a licensee by virtue of the new LMA rule must also be eligible for satellite treatment upon a proper showing. 9. LIN further argues that the Commission has repeatedly recognized that the island of Puerto Rico is a geographically small and highly concentrated broadcast market that presents unique and difficult challenges to television licensees. 9 As LIN notes, these challenges stem from extreme topography on the island; the unusually large number of broadcast stations licensed to a comparatively small area (approximately 100 radio stations and 30 television stations are located on the island which is only 125 miles long and 30 miles wide); and the generally poor economic conditions prevalent in many parts of the island. As a result of these factors, LIN notes that the Commission has created a unique body of law applicable only to Puerto Rico recognizing the necessity for satellite operation or rebroadcasting agreements among Puerto Rico television stations. 10. Service by television stations on the island is constrained by mountainous terrain which limits over- the- air coverage. Furthermore, there are generally poor economic conditions in the population centers beyond San Juan. This makes it difficult for entities to maintain full service stations in areas other than San Juan. Nevertheless, LIN contends, advertisers, when purchasing time on full service Puerto Rico television stations, expect that their message will reach all of the island’s population centers. Because no single television station can reach the entire island, station owners have developed the practice of owning a single powerful, full service television in the population center of San Juan, and operating satellite stations or entering into rebroadcast agreements with stations in the remaining areas of the island. LIN argues that Ponce is one of the poorer areas of Puerto Rico that cannot sustain a stand alone full- service television station. We have recognized this fact in prior decisions granting satellite status to Ponce television stations. 10 In fact, each of the five commercial television stations licensed to Ponce rebroadcasts the programming of another island station. 11. LIN maintains that this transaction, which would allow it to acquire additional television stations while maintaining its rebroadcast agreement with WTIN( TV), offers it the opportunity to compete more effectively with other station combinations on the island. Currently, Telemundo Group, Inc., and Raycom Media, Inc., each have station combinations that allow them to reach almost all of the island. LIN claims that the coverage from its current television combination is substantially inferior, particularly with respect to the western portion of the island. 9 See Hector Nicolau, 5 FCC Rcd at 6371; see also JEM Communications, Inc., 9 FCC Rcd at 4875. 10 Id; see also Canal 48, Inc., 8 FCC Rcd 2193, 2194 (1993); and Seglares Iglesia Catolica, Inc., 2 FCC Rcd 7539 (1987). 4 Federal Communications Commission FCC 01- 207 5 The stations it proposes to acquire from Paxson in this transaction, LIN argues, will help to fill in some of the gaps in coverage. 12. Discussion. Ordinarily, satellite status has been afforded stations that are owned by their parent and that could not operate independently because their communities are unable to support a fully independent facility. 11 Satellite status allows a parent entity to own a station that it otherwise would not be able to own under our multiple ownership rules by affording them an exception to those rules. This allows the parent entity to provide economic support necessary to preserve the continued operation of the station without running afoul of the multiple ownership restrictions. We have developed standards for evaluating whether a commonly- owned station should be considered a satellite, including a presumptive test and an ad hoc approach that considers unusual circumstances that might justify the satellite exception despite non- conformance with the presumptive criteria. 12 13. In this case, certain aspects of LIN’s request for satellite status for WTIN( TV) are unusual and do not fit neatly into our traditional satellite case law. Perhaps first among these is the fact that LIN does not propose to own WTIN( TV) but will simply continue an attributable reprogramming agreement with the station. This distinction, however, does not persuade us that the relief LIN seeks should not be considered. In past cases involving television stations in the island of Puerto Rico, a unique set of circumstances have persuaded us to waive our certain of our technical and ownership rules. LIN has shown that those same unique circumstances exist in this case and support its request for satellite exception to allow it to maintain its existing attributable rebroadcasting agreement with WTIN( TV). 14. Underlying this case are the circumstances that have driven many of our past satellite cases on the island of Puerto Rico – the mountainous topography and poor economic conditions outside of the population center of San Juan. As we recognized in Siete Grande Television, Inc., 13 the combination of the island’s topography and its geographic isolation places Puerto Rico in a highly unusual position. The island’s topography significantly obstructs local broadcast signals, and limits the ability of television stations in San Juan to provide service to portions of the island for which service would ordinarily be received. Therefore, in order for San Juan stations to reach audiences in the outer portions of the island, they must rely on some type of ownership combination or alternative engineering solution. 14 Similarly, the service area of television stations in communities such as Ponce is severely limited by topography and the population within these stations’ terrain- limited service areas is small and relatively poor. This 11 See, e. g., Hector Nicolau, supra; see also JEM Communications, Inc., supra. 12 See Satellite Report and Order, 6 FCC Rcd 4212 (1991) (subsequent citations omitted). 13 Siete Grande Television, Inc., 7 FCC Rcd 5299, 5300 (1992). 14 See Siete Grande Television, Inc., supra, where we granted waivers of our technical rules to permit an unusual series of boosters to support a television station in Ponce, Puerto Rico. 5 Federal Communications Commission FCC 01- 207 6 makes it unlikely that television stations outside of San Juan will be able to survive financially without the support of a full service San Juan station. Because it is located in Ponce, WTIN( TV) faces the same set of circumstances as other Ponce stations for which we have previously granted satellite status. In fact, every television broadcast station licensed to Ponce is operated as a satellite or rebroadcasts the programming of a San Juan station. In order for WTIN( TV) to continue operation, it must rely on a San Juan television station such as LIN’s WAPA- TV for support. Therefore, forcing LIN to terminate its existing rebroadcasting agreement with WTIN( TV) may result in the loss of programming and could threaten the viability of WTIN( TV). That would not serve the public interest. 15. Another factor which we have considered in past satellite cases and which continues to be present in this case is the fact that Puerto Rico is a geographically small media market. 15 The successful television stations are located in the larger city of San Juan while stations on the remainder of the island have been unable to successfully operate on a stand alone basis. This has resulted in group ownership combinations with entities owning a full service San Juan station and either owning additional satellite stations or securing rebroadcasting agreements with other stations in order to provide coverage to the remainder of the island. LIN’s competitors on the island already have such arrangements in place and are able to provide service to most of the island. Advertisers expect to be able to reach the entire island when they purchase time on a San Juan television station. Therefore, allowing LIN to continue to rebroadcast its programming on WTIN( TV), while at the same allowing the transfer of the stations proposed herein, will place LIN on an equal footing with other island broadcasters that seek to create an island- wide service that is critical to their success. 16. Finally, the current licensee of WTIN( TV) wishes to continue to rebroadcast the programming of LIN’s San Juan station, and indeed believes that this arrangement is vital to WTIN( TV) ’s continued operation. Yet, for apparently personal rather than economic reasons, the licensee will not sell the station to LIN. Ordinarily, licensees in such circumstances (with stations that are not financially successful) would choose to sell their station to the broker, assuming the broker can own the station under the multiple ownership rules. Here, it appears that LIN could own WTIN( TV) under our a satellite exception to our television duopoly rule but, absent the relief requested herein, would not be able to continue to rebroadcast its programming on the very same station because of our attribution rules. We believe that this result would not be in the public interest and, therefore, we will permit LIN to continue its existing rebroadcasting agreement with WTIN( TV). IV. Continuing Satellite Showings for WKPV( TV) and WJWN- TV 17. LIN also seeks continued satellite exceptions for WKPV( TV) and WJWN- TV. Pursuant to the Commission's television satellite policy, an applicant for satellite status is entitled to a presumption that the proposed satellite operation is in the public interest if it meets three 15 See Hector Nicolau, 5 FCC Rcd at 6371; see also JEM Communications, Inc., 9 FCC Rcd at 4875. 6 Federal Communications Commission FCC 01- 207 7 criteria: (1) there is no City Grade overlap between the parent and the satellite; (2) the proposed satellite would provide service to an underserved area; and (3) no alternative operator is ready and able to construct or to purchase and operate the satellite as a full- service station. 16 Applications meeting these criteria, when unrebutted, will be viewed favorably by the Commission. If an applicant cannot qualify for the presumption, the Commission will evaluate the proposal on an ad hoc basis, and grant the application if there are compelling circumstances that warrant approval. 18. WKPV( TV) and WJWN- TV were originally granted satellite status in 1994 and that authority was continued in 1996. As was the case then, LIN is able to meet the first criterion because there is no City Grade overlap between WJPX- TV, San Juan, and either WKPV( TV) or WJWN- TV. While the predicted City Grade contours of the two satellites overlap, we have previously found that there is no actual overlap when terrain is considered. 17 As for the second criterion, San Sebastian, the community of license of WJWN- TV, continues to be “underserved” under our transmission test. While Ponce, the community of license of WKPV( TV), is not “underserved,” as previously noted, we have not previously considered this fact to be an obstacle to satellite status given the unique circumstances on the island. 18 19. As for the third criterion, LIN submits a Declaration of Mr. Seth Grossman, the Chief Financial Officer and Senior Vice President of Paxson Communications Corporation, the parent licensee entity of these stations. Mr. Grossman notes that the three stations that are the subject of this transaction have continued to operate at a financial loss. As stand- alone stations, with increased costs of purchasing individual programming, Mr. Grossman states that WKPV( TV) and WJWN- TV would sustain even greater losses. Mr. Grossman concludes that continued satellite operation of these stations is crucial to the stations’ financial viability. Mr. Grossman states that, when the stations were listed for sale with a media broker in September 1999 and widely advertised, no potential purchaser stepped forward expressing an interest in either satellite station as a stand- alone facility, and that each potential purchaser was interested only in the three stations as a package. LIN also includes a Declaration of W. Lawrence Patrick, President of Patrick Communications, LLC, the listing broker in this case, who confirms Mr. Grossman’s observations. According to Mr. Patrick, no potential purchaser has ever emerged expressing an interest in either satellite as a stand- alone facility. Given these facts, we find that LIN has demonstrated that a grant of continued satellite exceptions for WKPV( TV) and WJWN-TV would serve the public interest. 16 See Satellite Report and Order, 6 FCC Rcd at 4213- 14. 17 See JEM Communications, Inc., 9 FCC Rcd at 4874. 18 Id. 7 Federal Communications Commission FCC 01- 207 8 V. Conclusion 20. In sum, we find that, based upon its representations and showing set forth in its application, LIN has demonstrated that it should be permitted to acquire the above- captioned stations while continuing its attributable rebroadcasting agreement with WTIN( TV). Thus, we find that LIN’s ownership of WAPA- TV and WJPX- TV, together with its continued rebroadcast of WAPA- TV on WTIN( TV) would be in the public interest. Further, we find that LIN has adequately supported a determination that grant of continued satellite exception for WKPV( TV) and WJWN-TV would be in the public interest. 19 In view of the foregoing, and having determined that the applicant is qualified to operate the station as proposed, we find that a grant of the above-captioned applications will serve the public interest, convenience and necessity. 21. ACCORDINGLY, IT IS ORDERED, That the petition to deny filed by Pegasus Communications Corporation is DISMISSED. 22. IT IS FURTHER ORDERED, That the request of LIN Television Corporation for the continued operation of stations WJWN- TV, San Sebastian, Puerto Rico, and WKPV( TV), Ponce, Puerto Rico, as satellite stations, and the treatment of WTIN( TV), Ponce, Puerto Rico, as a satellite station, ARE GRANTED. 23. IT IS FURTHER ORDERED, That the applications for consent to transfer of control of WJPX( TV), San Juan, Puerto Rico; WJWN- TV, San Sebastian, Puerto, Rico; and WKPV( TV), Ponce, Puerto Rico (File Nos. BTCCT- 20000530ABW- ABY), from Paxson Communications of San Juan, Inc., to LIN Television Corporation, ARE GRANTED. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary 19 On July 10, 2000, Pegasus Communications Corporation (Pegasus) filed a Petition to Deny the transfer of control applications of WJPX- TV, WKPV( TV) and WJWN- TV. However, on July 17, 2000, Pegasus filed a Request for Approval of Withdrawal of Petition to Deny. Pegasus’ request complies with Section 73.3588 in that its Vice President certified that neither Pegasus nor any of its principals received or will receive any money or other consideration in exchange for the withdrawal of the Petition to Deny. While we will grant Pegasus’ request, it should be noted that, as indicated herein, we do not find that LIN’s interest in or connection with these six television stations is inconsistent with our multiple ownership rules, as argued by Pegasus. 8