FCC grudgingly approves Raycom Honolulu TV triple play


Raycom and MCG Capital struck a local marketing agreement in 2009 that put Raycom more or less in the driver’s seat at three Honolulu television stations, including being the owner and operator of two of the top four stations in the market. Despite howls of protests by activists led by Media Council Hawaii, the FCC has approved the LMA arrangement – but also stated MCH has a point and may look at this and other similar arrangements again through one of two different prisms. It also issued a $10K public file fine to MCG’s HITV License Subsidiary.

The deal between the two broadcasters has left with ownership of NBC KHNL-TV and CBS KGMB-TV, and Raycom also provides various services for MCG’s MNT KFVE-TV under an SSA. Raycom further holds a purchase option on KFVE which it could exercise under a favorable change in the local cap rules.

The FCC is required to rule in matters such as this based on the letter of the law, and all attempts by MCH to demonstrate that the arrangement was illegal were unsustainable. Most importantly on the LMA side, MCG still arranges for most of the programming for KFVE — Raycom is well below the 15% limit, providing only a relatively small amount of local news – and one of MCG’s employees personally delivers editorials at least four times weekly over the station. It also retains its required financial interest and staff presence at the station as necessary to comply with the rules.

The area where the FCC gave in to support of the arrangement grudgingly was in the matter of combining two top four local stations in the Raycom portfolio, which was done after the LMA was formed by an agreement under which Raycom and MCG simply swapped call letters and network affiliations with no change of ownership.

The FCC said that when it allowed television duopolies under certain conditions back in 1999, it required no combinations involving two top-fours, along with at least eight remaining independent ownership voices after the duopoly was formed. This only applied to the top four ranking as it existed at the time the stations were combined, however, and did not require a break-up should the station below the top four improve and enter that group.

The FCC said that it could have dismissed an application to sell the MCG station to Raycom, but there was no application involved in the call/affiliation swap, leaving it with nothing it could clearly approve or disapprove regardless of its opinion.

The it made its opinion clear. FCC wrote: “Nonetheless, we agree with Media Council insofar as it suggests that the net effect of the transactions in this case – an extensive exchange of critical programming and branding assets with an existing in-market, top-four, network affiliate – is clearly at odds with the purpose and intent of the duopoly rule.  For this reason, we will include in the ongoing 2010 quadrennial review proceeding the duopoly rule issues that this and similar cases raise.”

In addition to taking up the matter in the quadrennial review, FCC also said it could consider whether the Raycom/MCG arrangement was in the public interest during the license renewal process.

MCG was hit with a $10K fine for missing issues/program lists in its public file that covered a period of time in advance of the current issue. Failure of the stations to allow access immediately after the deal was announced was attributed to the temporary absence of a manger with the appropriate key, was not found to be a deliberate attempt to hide the files, and resulted only in an admonishment.

The Media Council is expected to appeal the Media Bureau decision on the case to the full Commission.
The FCC document can be viewed here.