FCC trusts KFWB trustee despite programming covenant


CBS long ago placed KFWB-AM Los Angeles in a trust – after doubling its collection of television stations in the market, it was required to divest one of seven radio stations to remain in compliance with local ownership caps. The trust agreement was revised in 2010, local radio competitor Mt. Wilson FM Broadcasters objected, and the FCC upheld the terms of the trust.

Mt. Wilson felt it had the goods on the trust since the contract included covenants prohibiting the trustee from changing the format, among other things. Mt. Wilson said that violated long-standing policy which requires that a licensee exercise ultimate control over a station’s programming. In fact, MWFMB said the presence of this covenant amounted to CBS continuing to have a cognizable interest in the station.

Here is why the FCC disagreed: Although MWFMB would have been correct if the relationship between CBS and the Trust was a form of local marketing agreement.

However, the FCC said it has never treated a programming covenant the same way in a divestiture trust. The reason is that the trustee is expected to sell the station for the best price possible, and a format change could very well damage that value. The trustee, in fact, is compelled to maintain assets in their current condition (other than normal wear and tear), and operate it within full licensed parameters, while trying to find a buyer.