(By Robert Lee) One of the hottest and most controversial topics currently swirling through the radio broadcasting industry is the National Association of Broadcasters’ proposal to allow dramatically increased station ownership, especially with regard to FM properties. The NAB recommends totally eliminating the cap on AM ownership in all markets, and a potential doubling of FM stations allowed in the top 75 radio markets. Even a few of the largest broadcast radio companies think – publicly, anyway – that this idea goes too far.
I, also, am skeptical of the NAB proposal, and would modify its rather breathtaking deregulatory scheme. Instead of embracing the organization’s seemingly random or arbitrary bifurcated dividing line of Markets 1–75 and 76+, I would base the increased FM station ownership cap on a more specific service population method. Perhaps the following population-based formula would be more suitable:
— 5,000,000+: 8 FMs. Only 6 of the FMs could be full Class C or B.
— 1,000,000 – 4,999,999: 7 FMs. Only 5 of the FMs could be full Class C or B.
— 500,000 – 999,999: 6 FMs. Only 4 of the FMs could be full Class C or B. Licensees that currently have more than 4 full Class C or B FMs would be “grandfathered in” and allowed to keep their fifth full Class C or B FM.
— 100,000 – 499,999: 5 FMs. Only 3 of the FMs could be full Class C or B. Licensees that currently have more than 3 full Class C or B FMs would be “grandfathered in” and allowed to keep their fourth full Class C or B FM.
— 25,000 – 99,999: 4 FMs. Only 3 of the FMs could be full Class C or B. Licensees that currently have more than 3 full Class C or B FMs would be “grandfathered in” and allowed to keep their fourth full Class C or B FM.
— Less than 25,000: 3 FMs. Only 2 of the FMs could be full Class C or B. Licensees that currently have more than 2 full Class C or B FMs would be “grandfathered in” and allowed to keep their third full Class C or B FM.
While I have previously argued that all AM stations in the U.S. should be shut down and migrated to an FM allocation, I can accept the idea of total ownership deregulation of all AM stations as put forth in the NAB proposal. From a technical standpoint, AM station signals have been severely degraded through electrical and electronic noise interference. In my view, AM stations no longer possess the engineering and business value that FM stations do; so, if there are companies or non-profit entities, who want AM stations, let them have all they want. I wish them well.
Next, and very significantly, the “incubator” program should not be used to award additional FM stations. Rather, the previously used “minority tax credit” program could be reinstated as a better option to incentivize the sale of FM stations to small business and women- or minority-owned companies.
While my idea is more detailed and complex, the ostensible simplicity of the current NAB proposal would dramatically reduce ownership diversity in the largest of the “Major” radio markets, such as New York City and Los Angeles. Examining the selection of full Class B FMs in the top three markets of New York City, Los Angeles, and Chicago, there are 20 stations, on the following frequencies: 92.3, 93.1, 93.9, 94.7, 95.5, 96.3, 97.1, 97.9, 98.7, 99.5, 100.3, 101.1, 101.9, 102.7, 103.5, 104.3, 105.1, 105.9, 106.7, and 107.5. Under the NAB proposal, in these top three markets, a commercial broadcaster that participates in the incubator program could own up to 10 FM stations. In theory, that could reduce the number of commercial FM broadcasters to just two companies.
However, if we look closer at the largest market, New York City, four of those 20 “non-reserved” FM frequencies – 93.9, 95.5, 99.5, and 105.9 – are owned and operated by non-commercial entities. So, in the New York City market, that means that an incubator program “mentor company” would control more than 50% of the remaining commercial frequencies; 62.5% control, to be specific. Even if only one other company owned and operated all of the remaining six full Class B commercial stations in New York City, that second operator would effectively possess just one-third of those commercial frequencies. That is not diversity of ownership, on what are supposed to be the limited-availability, publicly-owned airwaves. Indeed, under the NAB’s present deregulatory proposal, the mentor broadcaster does not have to divest or support either a large-market or a full Class B or C station to a “mentee” broadcaster. Again, that is not a genuine or meaningful benefit to a small business or minority operator, which could still be relegated to a lesser-status FM radio property.
Even my idea, which I feel is more equitable than the NAB’s “two sizes fits all” proposal, does not fundamentally do anything to diminish or neutralize or equalize the competition that the terrestrial radio industry is experiencing at the hands of social media, audio streaming, and other digital platforms. Knowing this, two of the largest traditional radio broadcasters, iHeart and Entercom, aggregate their local signals, along with audio podcasts, on their respective online and mobile phone apps. These two broadcast giants would still benefit enormously from increased ownership control of FM stations. Yet again, that would not be diversity of ownership in any sense of the term, if allowed to happen.
(Yes, publicly, iHeart opposes the NAB proposal. However, immediately after the NAB announced its deregulatory plan, top iHeart executives also stated that, if the FCC wholly adopted the NAB proposal, iHeart would have no choice but to fully join in and maximize its FM station acquisitions wherever it chose to. To be sure, if iHeart proceeds with its announced plans to again become a public company, it would be obligated to its shareholders to increase its broadcast holdings in a deregulated market. I do not believe that iHeart is being in any way hypocritical or two-faced by currently opposing the NAB scheme, but vowing to participate completely in a newly deregulated market. To the contrary, a publicly traded iHeart would arguably be committing mismanagement by putting itself at a competitive disadvantage in not bulking up with as many FM stations as it could, short of again slipping into bankruptcy by engaging in imprudent or excessive acquisitions.)
The NAB or my alternate proposal aside, the broadcast radio industry is most harmed and disadvantaged by two of its own destructive business practices: abandoning or diminishing localism in its programming and community involvement, and recklessly cutting its spot rates in order to underprice its competitors. Fixing these two damaging behaviors would dramatically improve the bottom line of radio broadcasters. Simply continuing these negative practices, on even more FM stations, will do nothing to improve the fortunes of the radio companies.
In any event, we must get any resulting broadcast radio deregulation right. If and when the FCC adopts looser ownership limits, and companies undertake implementation of a new policy, it will be too late to turn the proverbial ship around. Terrestrial broadcasting is not an entirely free market, and the right balance must be struck between ownership diversity on a scarcity of bandwidth, on the one hand, and not overly constraining commercial owner-operators, on the other hand, who have invested millions or even billions of dollars in an admittedly competitive environment.
Robert Lee is the owner and President of QXZ MediaWorks LLC in Waco, Texas.
