Salina yes, Salinas no! FCC approves Newport TV with conditions and over Copps' protest

"No one should be under any illusion that Clear Channel's sale of its 35 full-power television stations strikes a blow for de-consolidation," thundered FCC commissioner Michael J. Copps in his dissent to the approval of the sale of those CCTV stations to Newport Television.

Whether Copps likes it or not, however, the deal is done, as was announced late Thursday. So now the Fox station serving 70 percent of Kansas, as well as stations serving some two dozen other markets from coast to coast, will fall under the control of Newport TV, which will manage the stations for Providence Equity Partners out of its new Kansas City headquarters. The deal is subject to multiple and confusing conditions, but it appears Newport has six months to divest TV stations in California and elsewhere that put it in violation of the FCC's cross-ownership ban.

There will be more to hash out next week as details become clearer and I'm able to get a word with Sandy DiPasquale of Newport TV. But for now here's what I know.

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For those of you who enjoy reading legalese, here is the full FCC M&O authorizing the transfer and the conditions under which Providence Equity Partners — let's call them PEP like the commission does — may take control of the stations and manage them through Newport.

The key paragraph is at the end, explaining the conditions. I don't claim to understand any of this except to note that the stations I've bolded are in play:

IT IS FURTHER ORDERED, that the applications for consent to assign the licenses of the stations listed in the Appendix ARE GRANTED, SUBJECT TO THE FOLLOWING CONDITIONS: (1) Newport Television LLC shall come into compliance with the local television ownership rule in the Bakersfield, California; San Francisco-Oakland-San Jose, California; Santa Barbara-Santa Maria-San Luis Obispo, California; Salt Lake City, Utah; Fresno-Visalia, California; San Antonio, Texas and Monterey-Salinas, California markets within six months of consummation of the proposed transaction by Providence Equity Partners, Inc., either divesting its interest in Univision Communications, Inc., or the post-merger Newport otherwise divesting those broadcast station licenses necessary to come into compliance with the local television ownership rule in the above seven markets. To ensure that Newport and/or PEP has brought itself into compliance with the local television ownership rule in the above seven markets following expiration of the six-month period, the parties must ensure either that: (A) within 60 days of release of this order, PEP files evidence of a binding commitment to transfer its interest in Univision to a divestiture trust within 6 months of consummation, including a copy of the trust agreement, if full compliance with the local television ownership rule has not been achieved within six months of consummation; or (B) within 60 days of release of this order, Newport files applications seeking to assign those broadcast licenses necessary to come into compliance with the local television ownership rule in each of the affected markets to a divestiture trust, along with a copy of the trust agreement, which the Commission shall entertain, if full compliance with the local television ownership rule has not been otherwise achieved within six months of consummation; (2) Newport shall come into compliance with the local television ownership rule in the Jacksonville, Florida, market within six months of consummation of the instant transaction by divestiture of either station WAWS(TV), Jacksonville, Florida, or station WTEV-TV, Jacksonville, Florida. To ensure that Newport does not hold television stations in violation of the local television ownership rule in the Jacksonville market following expiration of the six-month period, Newport must file an application seeking to assign the license of either station WAWS(TV) or WTEV-TV to a divestiture trust, along with a copy of the trust agreement, within 60 days of release of this order, which the Commission shall entertain if full compliance with the local television ownership rule has not been otherwise achieved within 6 months of consummation; and (3) PEP must come into compliance with the condition placed in the 2007 Univision Order, 22 FCC Rcd 5842, 5860 (2007), prior to consummation.

We also learned why PEP filed for an extension of time on Oct. 31, sending tremors through the investment market (and, no doubt, the offices of Newport TV, which had already signed a lease to move from Wichita to KC). Turns out that it was unable to unload its interest in Freedom Newspapers, which would violate the cross-ownership rule in seven markets, "due to extraordinarily volatile conditions in the credit market and the newspaper industry in general." Tell me about it!

Interestingly, as John Eggerton notes, a key advisor to PEP is former FCC chairman (and son of Colin) Michael Powell, who tried to get rid of the cross-ownership ban. Not that it matters, but I'm all in favor of getting rid of that rotten old regulation. I mean, if our sales managers in the 1950s hadn't committed criminal antitrust, my newspaper would still own the city's oldest TV license and two of its strongest radio signals. C'mon, if a rule like that was so necessary, why would they grandfather in the Tribune Company?

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Here is Copps' dissent in full:

No one should be under any illusion that Clear Channel’s sale of its 35 full-power television stations strikes a blow for de-consolidation. After this transaction closes and all divestitures have occurred, Providence Equity Partners will have attributable interests in a whopping 86 television stations and 99 radio stations in the United States, as well as interests in media companies around the world such as MGM studios (largest shareholder), Yes Network, Hallmark Channel, and Warner Music Group. You will search this Order in vain, however, for any mention of the scope of Providence’s holdings or how they potentially affect our public interest analysis.

What makes this case particularly different than other license transfers from one media giant to another is the fact that this one involves private equity. In the Univision Order last March, I urged the Commission to examine the impact of private equity on our ability to ensure that licensees protect, serve and sustain the public interest. Unfortunately, that has not happened. Instead, we close our eyes and pretend that nothing has changed. We proceed without knowing how segments of the conglomerate are controlled and managed. How, amid such murky shadows, does a regulator protect the public interest? Why doesn’t the Commission have enough curiosity to even ask?

I don’t claim to have all the answers here, but I have plenty of questions. What are the financial and public interest implications of private equity investment? Can our attribution rules can keep up with these complex and opaque ownership structures? Why haven’t we studied what happens to long-term investment in communications when a private equity firm takes control? Do such entities usually take the longer view because they are not subject to the pressures of Wall Street, or are we beginning to see more of a “strip it and flip it” pattern? How will a purchaser’s assumption of massive amounts of debt affect its stewardship of the airwaves? For broadcast stations, what happens to newsgathering and other programming of local interest? There are many other questions. Our lack of answers to them, coupled with Commission willingness to plunge ahead in spite of its appalling unawareness, is chilling. When we proceed without adequate information to approve this new kind of media consolidation, we are heading into dangerous waters.

Doing our job depends on our ability to assess who actually influences licensees’ editorial decisions and financial strategy. As Chairmen Dingell and Markey noted in a July 12, 2007 letter to Chairman Martin:

History also suggests that private equity ownership is marked by a management structure that is not overly transparent and by fluid asset management where actual holdings and control may vary significantly, as properties are bought and sold. These historical styles may not be consistent with many of the core public interest and localism values that Congress has assigned to local media and may implicitly undermine the Commission’s media ownership rules.

We need to heed such counsel. Many industries, not just communications, have gotten themselves into serious difficulties by heading off on seemingly promising and fashionable tangents without asking the questions they should have asked. The outcomes have often been disastrous to the businesses themselves, to customers, and to the country’s well-being. It’s time to get serious about this. Because we proceed down such a blind alley, I must dissent from today’s decision.

More reporting next week as people in the know help me chew this. Comments, as always, are most welcome.

Earlier: KC business community alive with pleasure over Newport