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Small Broadcasters Push Big Change

When Montclair Communications bought WZVN-TV Fort Myers, Fla., in 1996, the ABC affiliate was finally experiencing a turnaround. After having been flipped by three owners in the previous four years and nearly losing its local newscast, it was seeing a payoff from a local marketing agreement with Waterman Broadcasting, owner of local NBC affiliate WBBH-TV.

WZVN-TV expanded local programming, secured $2.6 million for new equipment and beefed up its news staff to 33 people.

But the profitable venture with Waterman, which supplies programming and advertising, is under FCC orders to unwind next year. The FCC said Waterman's involvement makes it the de facto owner of WZVN-TV and Fort Myers, the 70th-ranked market, isn't big enough to permit ownership of two stations in a market.

Because of scores of situations like that in Fort Myers, plus the lure of creating even more smaller-market pairs, TV-station groups are stepping up the pressure for new rules that would allow ownership of two stations in medium and small markets.

Winning duopoly rights in smaller markets has been a top goal of broadcasters since the FCC allowed large-market duopolies in 1999. Broadcast lobbyists think they have a pretty good shot at getting their wish, saying it is one of the less controversial rules under review.

"All we want is the right to compete with cable and newspaper monopolies in our markets," said Stuart Beck, president of Granite Broadcasting. Granite owns six stations in mid-size Buffalo, N.Y.; Fresno, Calif.; Syracuse, N.Y.; Fort Wayne, Ind.; Peoria, Ill.; and Superior, Wis., as well as large-market outlets in Detroit and the San Francisco Bay area.

In smaller markets, he said, advertising often is too scarce to support standalone news operations, especially if a station isn't affiliated with one of the Big Four networks. Unlike the larger nets, The WB, UPN and Pax don't pay the affiliate compensation that can constitute as much as 80% of a small-market station's revenue.

"What we're seeing now is significant erosion of viewer base because of competition from cable and satellite," Beck said. "That's causing a significant decline in local television margins. Inevitably, local news will decline in quality or, as we're seeing around the country, will be eliminated in local markets."

Current FCC rules permit duopolies only when eight separately owned stations would remain. Neither paired station may be among the top four in local ratings either. Typically, the restrictions limit TV pairs to big markets.

The FCC is reviewing the duopoly limit as part of its broad review of all media-ownership rules. Privately sponsored and FCC-backed hearings on proposed changes will take place in New York, Los Angeles and Richmond during the next two months (See Capital Watch, this page). FCC Chairman Michael Powell aims to bring revisions to a vote this spring.

"I can't find any justification for continuing these rules," Beck said. "They don't make sense. The court said repeatedly there should be no rules unless you can give a rational reason for retaining them."

While nearly all station groups want duopoly relaxation, there is no unanimity on how far to go.

Instead of elimination of duopoly restrictions as Granite has asked, the National Association of Broadcasters and a coalition of four stations propose separate plans that would permit more mid- and small-market duopolies but still retain some limits.

NAB urged the FCC to permit duopolies when a station with a viewing share of 10 or more is paired with one generating less than a 10 share. This "10/10" approach (B&C, Jan. 6) would "provide needed financial relief for struggling lower-rated stations, especially those in medium and small markets," NAB said in comments filed with the FCC. In addition, NAB reiterated its call for elimination of restrictions on local broadcast/newspaper and radio/TV crossownership.

LIN Television, Raycom Media, Waterman Broadcasting and Montclair, which together own more than 70 stations primarily in small and medium markets, offered a more lenient two-option plan.

Under one option, the FCC could allow ownership of two stations in any market as long as the pairing didn't put all of a market's TV outlets into the hands of one company. Under the second option, pairings would be permitted when the weaker station controls less than 15% of local viewing. An even higher threshold should be considered in markets smaller than the top 50, they said.

Beck said the proposed limits would be too little too late. "Who can wait for share to go down to 10%? That's like waiting until you have cancer in all of your organs."

Andrew Schwartzman, president of Media Access Project, said there's no reason to expect that viewers will benefit from pairs in small markets: "We have too much concentration already, and the liberalization of duopolies has not accomplished what the industry said it would do."