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FCC revisits red flag

The FCC is taking a new look at a three-year-old policy that subjects many radio mergers to an extra layer of regulatory scrutiny.

Next month, the commission is expected to propose guidelines for settling deals and will ask for public input on whether the policy should be continued, sources say.

The controversial policy was implemented to stem the radio-consolidation wave unleashed by the 1996 Telecommunications Act. Many media companies complain, however, that the FCC is abusing its power by blocking deals indefinitely.

Under the policy, the agency actively seeks public comment, including petitions to block deals, when a merger would create heavy concentration of local ad revenue. Generally, the FCC solicits comment only when a media merger violates the number of stations one company can own and the parties are asking for a government waiver.

Forcing mergers that are within the ownership limits over an added hurdle is bad enough, say industry attorneys. But worse, they say, is the lack of established guidelines for resolving these "flagged" mergers.

"I have clients with transactions just sitting at the FCC unopposed," says Richard Bodorff, who represents radio clients for Washington firm Wiley, Rein & Fielding.

The policy was established by former FCC Chairman William Kennard, a Democrat, and was thought headed for extinction under Republican Chairman Michael Powell. But its chances brightened after Democrats took control of the Senate in June and installed Ernest Hollings as Commerce Committee chairman. The South Carolina lawmaker has opposed much of the deregulatory Republican agenda.

The lack of guidelines for flagged deals created a huge backlog at the FCC. In March, most of the embarrassing logjam was cleared when the commission approved sales of 62 stations in a single day. The practice continued, however.

Since the policy was established in 1998, more than 200 mergers have been designated for public comment. Deals are flagged when they would result in one company's controlling 50% of a market's ad revenue or two companies' controlling 70%.

Congress has capped the number of stations an owner may control in a market on a sliding scale based on total of local stations. In the largest markets, the cap is eight.

Also facing an uncertain fate is an effort to alter the way the FCC measures radio markets. At the urging of former Commissioners Susan Ness and Gloria Tristani, the FCC began examining whether to replace a complex formula based on number of stations with overlapping signals with Arbitron's standard market definition. They argued that the method now used often allows station groups to hold more properties in a market than Congress intended.

Several sources outside the commission predicted the rulemaking would be killed.