Rural communities – do their radio stations need government protection? The FCC seems to think so, proposing a series of new rules and policies that restrict the ability of the owners of rural radio stations to move their stations into Urban areas. These rules would make it harder for entrepreneurs to do “move in” applications – taking stations from less populated areas and moving them to communities where they can serve larger populations in nearby cities. The Commission states that it is making these proposals to attempt to live up to its obligations under Section 307(b) of the Communications Act to ensure a “fair, efficient and equitable” distribution of radio services to the various states and communities in the country. While this may be a noble goal, one wonders if it is a solution in search of a problem. Are there really rural communities that have an unmet demand for missing radio services – and which can economically support such services? And do these proposals conflict with other goals of the new Commission, by effectively decreasing the opportunities for minorities and other new entrants from acquiring stations in major markets – by taking away move-in stations that are often the only stations that these broadcast station owners can afford in urban markets? These are questions that the FCC will need to resolve as part of this proceeding.
A Section 307(b) analysis is done by the FCC when it faces conflicting proposals, specifying different communities of license, for new AM stations or requests for new FM allotments. It is also required when an applicant proposes to move a station from one community to another, as the applicant must demonstrate that the move to the new community would better serve the objectives of Section 307(b) than would the current location of the station. In the past, the 307(b) analysis looks at several factors, or “Priorities.” These include:
- Service to white areas – when a proposed station will serve “white area,” an area where residents currently receive no predicted radio service (no “reception service” in FCC parlance).
- Service to gray areas – when a proposed station will serve areas that currently receive only a single reception service
- Provision of a first local “transmission” service – where the proposed station will be the first station licensed to a particular community, and thus the first station that has the primary responsibility to serve the needs of that community
- Other public interest factors – usually meaning which proposal will provide the service to the most people (with service to “underserved areas,” i.e. those that receive 5 or fewer “reception services,” getting somewhat more weight).
Service to white areas is the most important of the criteria, with the Second and Third Priorities having equal weight. Where there is a tie among the various criteria, the Fourth Priority is used to decide the case. The Commission’s concern is that service to Urban areas will, in most cases, win out in this analysis. Given the number of radio stations around the country, few proposals for new stations will propose coverage to white and gray areas. Applicants for new stations routinely propose to serve communities that have no other stations, even finding suburban communities without a local transmission service near to Urban centers so as to balance out any first transmission service that may be proposed outside of those areas. As a suburban station proposal that serves an Urban area will almost always, by definition, serve greater populations than a proposal for a more rural area, the proposals for an Urban station will almost always win in a 307(b) analysis under the Fourth Priority.
To combat this perceived loss of service to rural areas, the Commission has advanced a number of proposals and asked a number of questions. These include:
- Eliminating the Priority 4 preference in cases where there are mutually exclusive proposals for AM stations, meaning that more cases would end up tied under Priorities 1-3, and would have their cases decided by auction
- If the Priority 4 preference is used in AM cases, what exceptional circumstances would justify its use?
- A Proposal to consider all applications that cover more than 50% of an Urbanized area, or which could, by a change in facilities, could cover more than 50% of an Urbanized area, as proposals for service to the Urbanized area as a whole – meaning that they would get no credit for a first local transmission service credit under Priority 3, and lose any 307(b) evaluation to a proposed first local transmission service in a rural area
- If an exception is made to adopt the rule set out above, when would such an exception apply to a community in or near an Urban area so that an applicant could show that the community needed a radio service? Would the “Tuck” factors that are currently being used to show the independence of a suburban community from the Urban area in which it is located have any continuing validity?
- Should there be a “service value index” developed to consider the weight to be accorded to proposals that involve third, forth and fifth reception services?
- A proposal to ban any move of a station’s city of license that would create white or gray areas
- Should policies be adopted that would prohibit the abandonment of service to areas getting less than 5 services?
- Should a new priority be adopted for stations proposing to serve Native American tribal lands?
- A proposal to prohibit the change in the facilities of a new AM station in such a way as to decrease service to underserved areas when it received a 307(b) preference for service to those areas
- Create a new review standard for auction applications that would reject applications that are technically flawed before the auction, rather than waiting to see if the applicant is the tentative selectee
- A proposal to cap the number of AM applications that can be filed in any Auction window – similar to the caps that have been adopted in many other FCC auction windows in other services
These and a number of other technical proposals are designed to make it harder to move stations into metropolitan areas. But is this really an issue that the FCC needed to address? How often are there rural communities that have real unmet needs when a station moves into a metropolitan area? In most cases, if there is a real need for a station in the rural area, and there are the economics to support it, a new station can be located to fill that need – as it is much easier to put a new station in a rural area than in a metropolitan one. The Commission cannot force stations to operate in rural areas – if there is no demand and no economic benefit in doing so, a station will go out of business or stop local programming. If there is a need and an economic benefit to operating the station in the rural area, someone will do it.
The move-in stations that the FCC is attempting to ban are often those that promote diversity in the metropolitan markets. Minority owners, noncommercial operators, and other new entrants have financing as their biggest obstacle to acquiring a station in a major market. The few stations that do become available in major markets are often priced far too high for new entrants. But move-in stations, with no cash flow or established business, are often priced so as to be attractive to new buyers (and as most big group owners are close to their ownership limits in many markets, and preserving cash in these economic times, there is often little competition for the purchase of such stations from the established market operators). Cutting off the supply of move-in stations in the manner suggested by the Commission may well conflict with the Commission’s stated goal of increasing minority ownership (see our post here on the Commission’s recent attempts to promote minority ownership).
These issues will no doubt be addressed when the Commission receives comments on this proceeding – 60 days after it is published in the Federal Register. Reply Comments are due 30 days after that. Interested parties should be now considering their filings in this important new proceeding.