free press' petition to block gannett-belo deal

7/27/2019 Free Press' petition to block Gannett-Belo deal

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Before the

FEDERAL COMMUNICATIONS COMMISSION

Washington, DC 20554

In the Matter of

Application for Consent to Assignment ofBroadcast Station Licenses from Belo Corp.To Gannett Co., Inc., Sander Operating Co.and Tucker Operating Co.

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BALCDT-20130619ADJ;BALCDT-20130619AEZ;BALCDT-20130619AFA;BALCDT-20130619AFJ;BALCDT-20130619AFL;BALCDT-20130619AFM;BALCDT-20130619AFN;BTCDTT-20130619ABI;BTCDTT-20130619ABJ;BTCDTT-20130619ABK;BTCCDT-20130619AAM;BTCCDT-20130619AAN;BTCCDT-20130619AAP;BTCCDT-20130619AAQ;BTCCDT-20130619AAR;BTCCDT-20130619AAS;BTCCDT-20130619AAV;BTCCDT-20130619AAW;BTCCDT-20130619AAX;BTCCDT-20130619AAY;BTCCDT-20130619AAZ;BTCCDT-20130619ABA;BTCCDT-20130619ABE

PETITION TO DENY

Matthew WoodAndrew Jay SchwartzmanLauren WilsonFree Press1025 Connecticut Ave. NW, Suite 1110Washington, D.C. 20036(202) 265-1490

Eric G. Null*Angela J. CampbellInstitute for Public Representation+Georgetown University Law Center600 New Jersey Avenue, NWWashington, DC 20001(202) 662-9535

Counsel for NABET-CWA, TNG-CWA,National Hispanic Media Coalition, CommonCause, Office of Communication, Inc. of theUnited Church of Christ

* Admitted to the New York bar only; DC bar membership pending. Practice supervised bymembers of the DC bar.+ IPR would like to thank Sean Vitka, Google Policy Fellow, for his research and drafting help.


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Table of Contents

SUMMARY ..................................................................................................................................... iI. Petitioners .............................................................................................................................. 1II. The Transaction ..................................................................................................................... 5III.The Full Commission Should Act on the Proposed Applications ......................................... 8IV.The Public Interest Is Not Served by Authorizing the Transfer of Broadcast Licenses from

Belo to Sander and Tucker Where Gannett Will Provide Operational and ProgrammingServices to the Licensees and Will Simultaneously Own Newspapers and/or BroadcastStations in the Same Local Markets..................................................................................... 12A. License Transfers Must Meet the Public Interest Standard ........................................... 12B. A Transfer May Comply with Bureau Precedent but Still Be Inconsistent with the

Public Interest ................................................................................................................ 13C. The Commission Should Deny the Following License Assignments Because They Are

Inconsistent with the Public Interest .............................................................................. 141. Phoenix, AZ............................................................................................................... 142. Louisville, KY ........................................................................................................... 193. Tucson, AZ ................................................................................................................ 234. Portland, OR .............................................................................................................. 275. St. Louis, MO ............................................................................................................ 31

CONCLUSION ............................................................................................................................. 35


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SUMMARY

Free Press, NABET-CWA, TNG-CWA, National Hispanic Media Coalition, Common

Cause, and Office of Communication, Inc., of the United Church of Christ petition to deny the

proposed assignments of licensees from Belo to Sanders and/or Tucker that are contemplated as

part of the Gannett Companys acquisition of the Belo Corporation.

Gannetts outright acquisition of the Belo-owned stations in Phoenix, AZ, Louisville,

KY, Tucson, AZ, Portland, OR and St. Louis, MO, is prohibited because it would violate the

newspaper-broadcast cross-ownership (NBCO) rule and/or the local television ownership

(duopoly) rule. As a result, Gannett and Belo have orchestrated the transaction so that Belo

will transfer the licenses for these stations to a third-party shell company, either Sander

Operating Company or Tucker Operating Company, and Gannett will operate the stations

through a series of agreements. These arrangements attempt to mask the true intent and effect of

the transaction: to allow Gannett to simultaneously influence and control multiple media outlets

in the same local market in a way that is contrary to the public interest and otherwise prohibited

by the Commissions rules.

If approved, the transaction will lead to job losses and a considerable reduction in the

quality of journalism for millions of television homes. At the very least, these proposed

arrangements are contrary to the spirit of the Commissions media ownership rules, which are

intended to promote diversity, competition, and localism. Even if they do not outright violate the

rules, such sharing arrangements are not in the public interest because they reduce the diversity

of viewpoints and reduce competition in the provision of local news and the sale of advertising.

The Gannett-Belo transaction is the first that Petitioners are aware of that attempts to use

sharing arrangements to circumvent the NBCO rule. Because it raises novel issues, the

applications must be ruled on by the full Commission rather than by the Media Bureau under


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delegated authority. We urge that the Commission promptly deny the applications or designate

them for hearing. Failure to act will encourage even further consolidation to the detriment of the

public and will undermine the Commissions credibility and ability to regulate in the public

interest.


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PETITION TO DENY

NABET-CWA, TNG-CWA, National Hispanic Media Coalition, Common Cause, and

Office of Communication, Inc., of the United Church of Christ (collectively Public Interest

Petitioners or Petitioners), by their attorneys, the Institute for Public Representation, along

with Free Press, pursuant to Sections 309 and 310(d) of the Communications Act, 47 U.S.C.

309, 310(d), and 47 C.F.R. 73.3584, petition the Federal Communications Commission (FCC

or Commission) to deny the assignment of licenses from Belo Corporation to Gannett

Company, Sander Operating Companies and Tucker Operating Company.

I. PetitionersFree Press is a national non-partisan and non-profit organization working to reform the

media, to increase informed public participation in crucial media and telecommunications policy

debates, and to generate policies that will produce a more competitive and public interest-

oriented media system. Free Press is the largest media reform organization in the United States,

with nearly half-a-million activists and members and a full-time staff of more than thirty based in

its offices in Washington, D.C., and Florence, Massachusetts.

Since its inception, a core component of Free Presss organizational mission has been to

promote diverse and independent media ownership and to deter overly-concentrated and non-

competitive media markets. Free Press has participated extensively in media ownership

proceedings at the FCC, including the 2010 Quadrennial Media Ownership Review (2010 QR)

(MB Docket No. 09-182). Free Press has been very concerned about covert consolidation of


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media, such as is involved in this case, and has been tracking the number of sharing

arrangements on its website.1

The National Association of Broadcast Employees and Technicians and The

Broadcasting and Cable Television Workers Sector of the Communications Workers of America,

(NABET) is a labor union with 10,000 workers employed in the broadcast field, and along

with the Communications Workers of America (CWA) represents over 600,000 workers in the

public and private sectors in the United States. NABET-CWA and CWA Members are employed

in telecommunications, printing and news media, public service, and cable television fields,

among others. Major employers include the NBC and ABC networks and independent

companies in broadcast television across America. A consistent concern of NABET-CWA is to

protect the interests and jobs of its members. NABET-CWA has an interest in ensuring the

markets in which its members work remain competitive, and ensuring its members receive

competitive wages. CWA is also involved in public communications advocacy, and is at the

forefront of legislative initiatives to promote the creation of well-paid, high-skill jobs in

America. Further, as employees involved in the media and news industries, NABET-CWA

members have an especially strong interest in receiving the best news coverage possible.

NABET-CWA also participated in the 2010 QR.

The Newspaper Guild of the Communications Workers of America (TNG-CWA) was

founded as a print journalists' union. Today, the Guild is primarily a media union whose

members are diverse in their occupations, but who share the view that the best working

conditions are achieved by people who have a say in their workplace. TNG-CWA has more than

1See Covert Consolidation, Free Press, http://www.freepress.net/changethechannels (last visitedJuly 10, 2013); Ownership Chart, Free Press, http://www.freepress.net/ownership/chart (lastvisited July 10, 2013).


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34,000 members in the United States, Canada and in Puerto Rico, and they are journalists, sales

and media workers of all kinds. They are on-line writers and designers, reporters, editorial

assistants, photographers, editors, paginators, editorial artists, correspondents, typographers,

advertising sales people, marketing, information systems specialists, commercial artists,

technicians, accountants, business, customer service reps, drivers, maintenance, mail room,

pressroom, telephone operators, circulation and distribution staff. They are also independent

translators and interpreters, non-profit organization staff members, public relations staff and

technical workers. They are part of many communication media: wire services, newspapers,

magazines, labor information services, broadcast news, public service and dot com companies.

TNG-CWA has an interest in securing robust marketplaces for newspapers throughout the

country, and seeks to prevent mass consolidation that will ultimately lead to fewer newspaper

jobs and a lower journalism standard.

The National Hispanic Media Coalition (NHMC) is a non-profit, civil rights media

advocacy organization created to advance American-Latino employment and programming

equity throughout the entertainment industry and to advocate for telecommunications policies

that benefit the American Latino community. NHMC has participated in proceedings before the

FCC to promote a diversity of viewpoints, a greater role for citizens in Commission regulatory

proceedings, and more minority involvement in the electronic mass media industries. NHMC

filed comments in the 2010 QR, and joined in filing the still-pending Petition for

Reconsideration of the Commissions waiver of the NBCO rule permitting Gannett to own the

daily newspaperArizona Republic and the television station KNXT in Phoenix, AZ.2

2See Petition for Reconsideration of Common Cause et al., 2006 Quadrennial RegulatoryReview, MB Docket No. 06-121 (Mar. 24, 2008), available athttp://apps.fcc.gov/ecfs/document/view?id=6519868534.


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Common Cause is a nonpartisan, non-profit advocacy organization founded in 1970 by

John Gardner as a vehicle for citizens to make their voices heard in the political process and to

hold their elected leaders accountable to the public interest. Today, Common Cause is one of the

most active, effective, and respected non-profit organizations working for political change in

America. Common Cause strives to strengthen our democracy by empowering its members,

supporters, and the general public to take action on critical policy issues. Because its ability to

advance a democratic reform agenda depends on a fair hearing in the media, Common Cause

launched its Media and Democracy Reform Initiative in 2012 to advocate for a public interest

media and telecommunications agenda. Common Cause also joined in filing the still-pending

Petition for Reconsideration of the Commissions waiver of the NBCO rule for Gannett in

Phoenix, AZ.3

Office of Communication, Inc. of the United Church of Christ (UCC) is a non-profit

corporation working to promote justice in media through legal challenges, policy advocacy,

grassroots organizing, and public education. UCC is active in efforts to ensure diversity of

ownership, production, decision-making, and employment in the media. UCC filed comments in

the 2010 QR, in which it presented evidence regarding the widespread use of sharing agreements

to circumvent the FCC ownership limits, and proposed a test for attributing certain sharing

arrangements.4

The Public Interest Petitioners are parties in interest within Section 309(d)(1) of the

Communications Act.5 As demonstrated in the attached declarations, each of the organizational

3See id.4See Comments of Office of Communication, Inc. of United Church of Christ, 2010Quadrennial Regulatory Review, MB Docket No. 09-182 (Mar. 5, 2012),http://apps.fcc.gov/ecfs/document/view?id=7021898383.5See 47 U.S.C. 309(d)(i); Llerandi v. FCC, 863 F.2d 79, 85 (D.C. Cir. 1988); Office of


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petitioners has as part of its mission promoting diversity of viewpoints and ensuring that

broadcast stations serve the needs of the public. The organizations have members and

constituents that reside in areas served by television stations whose licenses are to be assigned.

Grant of the assignments of licenses would harm Petitioners, their members, and their

constituents by causing a permanent loss of diversity of viewpoints available to them and a

permanent decrease in competition in coverage of local news. Moreover, Petitioners would be

deprived of the opportunity to have an independent licensee make decisions about what

programming to air and how to serve its community of license.

II. The TransactionGannett Company (Gannett) is an international media company that currently owns

eighty-two U.S. daily newspapers, nearly one thousand weekly newspapers, and twenty-three

television stations.6 Gannett is currently the nations largest newspaper publisher by circulation,

reaching 11.6 million readers each weekday and 12 million readers on Sunday.7 In June 2013,

Gannett reached an agreement to purchase Belo Corporation (Belo) for $2.2 billion.8 This

acquisition includes Belos twenty television stations around the country, affecting over 16.7

million television households.9 The transaction would transfer ownership and/or operational

Communication of the United Church of Christ, Inc. v. FCC, 359 F.2d 994, 1000-02 (D.C. Cir.1966).6 Our Company, GANNETT, http://www.gannett.com/article/99999999/WHOWEARE/100427016(last visited July 19, 2013); Gannett Newspaper Revenue Falls 6.5% in Weak Ad Climate, N.Y.TIMES (July 18, 2011), http://www.nytimes.com/2011/07/19/business/media/profit-at-gannett-fell-in-quarter.html (last visited July 18, 2013).7 Our Company, GANNETT, http://www.gannett.com/article/99999999/WHOWEARE/100427016(last visited July 19, 2013).8 Roger Yu, Gannett to Buy Belo TV Stations in $2.2 Billion Deal , USATODAY (June 13, 2013),http://www.usatoday.com/story/money/business/2013/06/13/gannett-belo/2418219.9Compare Portfolio, BELO, http://www.belo.com/companies/tv-group (last visited July 19,2013), with Local Television Market Universe Estimates, TELEVISION BUREAU OF ADVERTISING(Sept.22,2012),


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control of those twenty stations to Gannett or its partner shell companies. The Gannett-Belo

transaction would give Gannett the fourth-largest portfolio of stations affiliated with Big Four

networks and the third-largest local television station group in terms of revenue.10

Of particular concern are five markets in which seven television stations will be

transferred: Phoenix, Arizona; Louisville, Kentucky; Tucson, Arizona; Portland, Oregon; and St.

Louis, Missouri. In each of these markets, Gannett already owns either a newspaper or a top-four

television station. Thus, Gannett acquiring Belo stations in these markets runs afoul of the

Commissions media ownership limitsspecifically, the newspaper-broadcast cross-ownership

rule (NBCO rule) or the local television ownership rule (duopoly rule).

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In an effort to

evade these rules, Gannett has structured these acquisitions as transfers to a shell company, either

Sander Operating Company (Sander) or Tucker Operating Company (Tucker). These newly-

created companies will technically own the television licenses while Gannett willprovide

services (including local news-gathering and reporting) to the stations, pursuant to a Joint Sales

Agreement (JSA), a Shared Services Agreement (SSA), and/or a Transition Service

Agreement (TSA) (collectively service agreements). These agreements put Gannett in

charge of day-to-day decision-making, and in some cases programming, for the stations that are

putatively owned by either Sander or Tucker. Gannett holds further control over Sander and

http://www.tvb.org/media/file/TVB_Market_Profiles_Nielsen_Household_DMA_Ranks2.pdf.10 Chris Nolter, The Deal: Gannett Stays True to Gannett, Makes Acquisition, STREET (June 14,2013), http://www.thestreet.com/story/11950745/1/the-deal-gannett-stays-true-to-gannett-makes-acquisition.html.11 Gannett has admitted as much by stating that it planned to restructure ownership of theBelo stations in the problem markets, and provide station services for a fee . . . . We areconfident that we will be able to own or service all of the stations, said Gracia Martore, Gannettpresident and CEO. Michael Malone,Jack Sander to Take Over Several Belo Stations,BROADCASTING &CABLE (June 17, 2013), http://www.broadcastingcable.com/article/494074-Jack_Sander_to_Take_Over_Several_Belo_Stations.php.


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Tucker because Gannett is guaranteeing the loans that allow Sander (and probably) Tucker to

purchase the stations.12

Sander13 and Tucker Companies are each wholly owned and controlled by either Jack

Sander or Ben Tucker.14 Jack Sander is a former Belo Corporation executive. Ben Tucker is a

former Fisher Communications president and CEO.15 Sander Companies are slated to control six

of the seven stations Gannett is prohibited from owning outright, while Tucker will own one.

In these markets, authorization of the Gannett-Belo transaction will allow Gannett to

simultaneously own a television station or a newspaper while also providing local news,

advertising, and/or other services to another station in the same local market area. With Gannett

providing these services to more stations, there will be fewer voices for local news and less

competition for advertising and viewers.

12 Diana Marzsalek,Lougee: Belo Duops Will Keep Independence, TVNEWSCHECK(June 18,2013), http://www.tvnewscheck.com/article/68316/lougee-belo-duops-will-keep-independence.13 Technically, multiple Sander Operating Companies are being created to facilitate thistransaction; one for each relevant region. Sander Operating Co. I covers Kentucky; SanderOperating Co. II covers Arizona; Sander Operating Co. III covers Oregon and Washingtonstate; Sander Operating Co. IV covers Missouri; Sander Operating Co. V covers Arizona.Unless otherwise specified, this Petition will use Sander to refer to the relevant Sander holdingcompany in the relevant market, and will use Sander Companies to refer to them collectively.14 Some refer to these as sidecar companies because of the apparent connection betweenGannett and the owner of the company. See, e.g., Price Colman, Gannett Unfazed byOverlapping Stations, TVNEWS CHECK(June 13, 2013),http://www.tvnewscheck.com/article/68242/gannett-unfazed-by-overlapping-stations. DavidLougee, Gannett Broadcasting president, knows Sander well because they used to worktogether at Belo. Michael Malone,Jack Sander to Take Over Several Belo Stations,BROADCASTING &CABLE (June 17, 2013), http://www.broadcastingcable.com/article/494074-Jack_Sander_to_Take_Over_Several_Belo_Stations.php. The companies were also createdexplicitly for this transaction and are likely friendly to Gannetts needsreducing the likelihoodof true competition and diversity.15 Michael Malone,Ben Tucker to Own Gannett-Serviced KTTU Tucson, BROADCASTING &CABLE (June 18, 2013), http://www.broadcastingcable.com/article/494095-Ben_Tucker_to_Own_Gannett _Serviced_KTTU_Tucson.php.


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III. The Full Commission Should Act on the Proposed ApplicationsAt the outset, Petitioners note that only the full Commission has authority to approve

these transfers. FCC rules require that the Media Bureau refer to the Commission en banc for

disposition of [m]atters that present novel questions of law, fact or policy that cannot be

resolved under existing precedents and guidelines.16

This proposed transaction raises novel questions of law, fact, and policy, and thus must

be acted upon by the full Commission rather than the Media Bureau. The Commission has never

allowed a newspaper to acquire a broadcast station in the same market without a waiver of the

NBCO rule. Here, Gannett has not sought waivers (and would not qualify to receive a waiver in

any event) for the acquisition of television stations in the cities where it already owns a daily

newspaper. Instead, it proposes to operate the stations while letting another entity hold the

licenses. Petitioners are not aware of any case in which the Commission has allowed licenses to

use sharing arrangements to circumvent the NBCO and it underlying purpose to promote

competition and diversity in local news.

Petitioners acknowledge that the Media Bureau has allowed similar sharing arrangements

that circumvent the television duopoly rule, but not the NBCO rule. For example, inMedia

Council Hawaii, the Media Bureau decided to take no action against a licensee that, by means of

a series of service agreements that appear to be somewhat similar to Gannetts, was able to

provide local news and other services to three television stations, including two top-four stations.

The Bureau found that this outcome was clearly at odds with the purpose and intent of the

duopoly rule.17 Nonetheless, the Bureau concluded that it lacked the authority to do anything

16 47 C.F.R. 0.283.17 Memorandum Opinion and Order and Notice of Apparent Liability for Forfeiture,KHNL/KGMB License Subsidiary, LLC, 26 FCC Rcd. 16087, 16092-93 (Nov. 25, 2011), app. forrev. pending [hereinafter Media Council Hawaii].


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because no application for transfer of control had been filed. In contrast, here the question of

whether it is in the public interest to permit shared services involving the provision of news

programming by one station to two or more stations in the same market is squarely presented in

the context of a license transfer proceeding.

Further, the Bureaus decision in theMedia CouncilHawaii case is not final and has not

yet been ruled on by the full Commission. The petitioners in that case timely filed an application

for review by the full Commission in December 2011 that argued, among other things, that

letting the Bureaus decision stand would eviscerate the duopoly rule. It pointed out that taken

to its logical conclusion the [Bureau decision] would support the combination of three, four or

more television stations within the same market so long as the legalist forms of agreements were

observed, at least on paper.18 Thus, not only is there no Commission precedent allowing these

types of arrangements, but Commission action on the applications for review is long overdue.

If the Commission itself fails to act quickly to deny the challenged transfers, Petitioners

expect that there will soon be many more sharing arrangements, to the substantial detriment of

the public. A 2011 study found that, already, there were sharing arrangements in 83 of 210

television station markets.19 It further found that [t]he movement toward . . . service agreements

will undoubtedly continue [because t]here are economic incentives for such endeavors.20

Experience shows that when stations enter into shared service agreements, it often leads

to the wholesale elimination of one stations news staff, and reduces the diversity in local news

18 Application for Review,Media Council Hawaii (Dec. 27, 2011) at 13.19 DANILO YANICH,LOCAL TVNEWS &SERVICE AGREEMENTS:ACRITICAL LOOK3 (Oct. 2011),available athttp://www.udel.edu/ocm/pdf/DYanichSSAFINALReport-102411.pdf.20Id. at 109.


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voices.21 For example, when Raycom entered into a service agreement in 2009, it fired more

than sixty people and began producing the same news program for all three stations out of the

same studio using the same personnel.22 And more recently, in Toledo, Ohio, service agreements

led to the firing of sixty-three employees.23 Free Press estimated in 2012 that, in total, 466

people have lost their jobs as a result of services agreements.24

Since 2011, there have been several new sharing agreements.25 In the last five months

alone, Gannett, Sinclair Broadcast Group, and Tribune Company have collectively entered into

agreements worth over $5.88 billion designed to drastically increase their television station

ownership across the country.

26

Many of these transactions involve sharing of services.

27

In

21 Comments of American Federation of Television and Radio Artists, 2010 QuadrennialReview, MB Docket. No. 09-182, at 4 (Mar. 5, 2012) (footnotes omitted).22 Erika Engle, TV Stations Pact Draws Fire, STARBULLETIN (Aug. 19, 2009), available athttp://broadcastunionnews.blogspot.com/2009/09/tv-stations-pact-draws-fire.html; seeGordon Y.K. Pang, Shocked Journalist Worried About Jobs, HONOLULU ADVERTISER(Aug. 19,2009).23 Kris Turner, Channel 36s Owner Plans to Lay off 63, BLADE (March 1, 2012),http://www.toledoblade.com/TV-Radio/2012/03/01/Channel-36-s-owner-plans-to-lay-off-63.html.24 Kris Turner, Channel 36s Owner Plans to Lay off 63, BLADE (March 1, 2012),http://www.toledoblade.com/TV-Radio/2012/03/01/Channel-36-s-owner-plans-to-lay-off-63.html.25 Notice of Ex Parte of American Cable Association, 2010 Quadrennial Review, MB DocketNo. 09-182 (June 3, 2013), http://apps.fcc.gov/ecfs/document/view?id=7022420640.26 Gannetts transaction with Belo is valued at $2.2 billion, Roger Yu, Gannett to Buy Belo TVStations in $2.2 Billion Deal, USA TODAY (June 13, 2013),http://www.usatoday.com/story/money/busines s/2013/06/13/gannett-belo/2418219; Sinclair hasspent over $953 million acquiring stations since February 2013, Deborah D. McAdams, Sinclairto Buy Four Titan Stations for $115.35 Million, TV TECH.(June 4, 2013),http://www.tvtechnology.com/article/sinclair-to-buy-four-titan-stations-for--million/219666;Tribune plans to purchase nineteen television stations from Local TV for $2.73 billion, JenniferSaba & Greg Roumeliotis, Tribune to Buy 19 Local TV Stations for $2.73 Billion , REUTERS (July1, 2013), http://www.reuters.com/article/2013/07/01/us-tribune-acquisition-idUSBRE9600FB20130701.27 Price Colman, Gannett Unfazed by Overlapping Stations, TVNEWS CHECK(June 13, 2013),http://www.tvnewscheck.com/article/68242/gannett-unfazed-by-overlapping-stations; SinclairBuying Barrington News Stations for $370M, TVNEWS CHECK(Feb. 28, 2013),


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addition, there may be other sharing arrangements unknown to the public because stations can

enter into, and modify, such agreements without informing the Commission or the public.

If the Commission fails to act promptly to deny the Gannett-Belo applications for

transfer, it will encourage even more companies to circumvent the ownership limits. Robin

Flynn, an analyst from SNL Kagan, has observed that Gannetts acquisition of Belo is a

transformational deal that creates the fourth-largest TV station owner and a possible platform for

more consolidation.28 She continued: The next round of TV station consolidation is coming

fast and furious, and the larger deals are getting done faster than most people expected. There is

doubtless more to come.

29

Steve Ridge, another analyst, echoed Flynns concerns after Tribune

announced its acquisition plans earlier this month. He warned: Nearly every group owner in the

country is in overdrive this summer considering the various combinations. It is a time to gobble

or get gobbled.30 If the Commissions fails to take action in the face of this massive

consolidation, it would contribute further to the view expressed by Dave Helling at the Kansas

City Starregarding the Gannett-Belo transaction: the FCC (and perhaps the Justice Department)

http://www.tvnewscheck.com/article/65826/sinclair-buying-barrington-stations-for-370m.28 Lisa Brown, KSDK Parent Gannett to Buy KMOV's Parent Company, ST.LOUIS POST-DISPATCH (June 14, 2013), http://www.stltoday.com/business/local/ksdk-parent-gannett-to-buy-kmov-s-parent-company/article_31e7fb91-676f-50cb-825f-9f9f6a6e6f8c.html.29 Lisa Brown, KSDK Parent Gannett to Buy KMOV's Parent Company, ST.LOUIS POST-DISPATCH (June 14, 2013), http://www.stltoday.com/business/local/ksdk-parent-gannett-to-buy-kmov-s-parent-company/article_31e7fb91-676f-50cb-825f-9f9f6a6e6f8c.html.30 Brian Stelter and Christine Haughney, Tribune in $2.7 Billion Deal for 19 Local TV Stations,N.Y.TIMES (July 1, 2013), http://dealbook.nytimes.com/2013/07/01/tribune-to-buy-19-tv-stations-for-2-7-billion. Others are forecasting continuing consolidation, and believe thatlucrative political ad revenue is the inspiration for the recent jump in efforts to consolidate. BrianStelter, Campaign Ad Cash Lures Buyers to Swing-State TV Stations, N.Y.TIMES (July 7, 2013),http://www.nytimes.com/2013/07/08/business/media/with-political-ad-profits-swing-state-tv-stations-are-hot-properties.html.


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might want to take a close look at the transaction. Unless, of course, the rules for TV station

ownership are actually a joke.31

IV. The Public Interest Is Not Served by Authorizing the Transferof Broadcast Licenses from Belo to Sander and Tucker WhereGannett Will Provide Operational and Programming Services

to the Licensees and Will Simultaneously Own Newspapers

and/or Broadcast Stations in the Same Local Markets

Under the Communications Act of 1934, the Commission may not approve a proposed

broadcast license transfer unless the public interest would be affirmatively served by the transfer.

As detailed below, allowing the transfer of licenses in Phoenix, Louisville, Tucson, Portland, and

St. Louis would be inconsistent with the public interest. These transfers should thus be denied.

A. License Transfers Must Meet the Public InterestStandard

Section 310(d) of the Communications Act of 1934 requires the Commissions prior

consent to transfer a broadcast license.32 Section 310(d) encompasses every form of control,

actual or legal, direct or indirect, negative or affirmative, over basic operating policies. 33 Some

transactions are expressly prohibited, absent a waiver. However, even when a proposed transfer

would not violate a specific rule, it may still be contrary to the public interest. The Commission

can only approve transfers of control of broadcast stations if it finds that the public interest

would be affirmatively served by the transfer.34

For decades, the Commission has outlawed certain ownership arrangements in local

markets. Of relevance to this transaction are the NBCO and duopoly rules. Under the duopoly

31 David Helling, Will the FCC Let This Pass?, KANSAS CITY STAR(June 14, 2013),http://www.kansascity.com/2013/06/14/4292626/will-the-fcc-let-this-pass.html#storylink=cpy32 47 U.S.C. 310(d).33Application of Southwest Texas Public Broadcasting Council For Renewal of Licenses, 85F.C.C.2d 713, 715 (Mar. 9, 1981).34 47 U.S.C. 309(a); 47 U.S.C. 310(d).


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rule, an entity is prohibited from owning more than one broadcast station within a Designated

Market Area (DMA) unless, after the combination, there would remain at least eight

independent broadcast voices andthe two combined stations include at least one ranked outside

the top four in the DMA.35

The NBCO rule is similar to, but stricter than, the duopoly rule. The NBCO rule provides

that no license for [a] . . . TV broadcast station shall be granted to any party (including all

parties under common control) if such party directly or indirectly owns, operates, or controls a

daily newspaper and the grant of such license will result in the Grade A contour of that

television station encompassing the entire community in which such newspaper is published.

36

To approve any transfer, the Commission must first find it to be consistent with the public

interest.37

B. A Transfer May Comply with Bureau Precedent butStill Be Inconsistent with the Public Interest

The determination of whether a license transfer is in the public interest, convenience, and

necessity begins by asking whether the proposed transaction complies with the rule of law. If the

transaction would not violate a statute or rule, the Commission next considers whether allowing

the transfer could result in public interest harms (by substantially frustrating or impairing the

35 The duopoly rule provides: An entity may directly or indirectly own, operate, or control twotelevision stations licensed in the same [Nielsen DMA] only under one or more of the followingconditions: (1) [t]he Grade B contours of the stations...do not overlap; or (i) [a]t the time ofapplication to acquire or construct the station(s) is filed, at least one of the stations is not rankedamong the top four stations in the DMA...; (ii) and [a]t least 8 independently owned andoperating, full-power commercial and noncommercial TV stations would remain post-merger inthe DMA... 47 C.F.R 73.3555(b)(1).36 47 C.F.R. 73.3555(d)(1).37 47 C.F.R. 73.3555(d)(2).


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objectives or implementation of the Act or related statutes).38 Therefore, a transfer may, on

balance, be found inconsistent with the public interest and thus denied, even in the absence of

any technical rule violation.39

C. The Commission Should Deny the Following LicenseAssignments Because They Are Inconsistent with the

Public Interest

These facts reflect the agreements as placed on public notice on June 24, 2013, and do

not reflect the amendments to the agreements made July 23, 2013, one day before petitions to

deny were due. Petitioners trust that, if the amendments constitute major change[s],40 the

Commission will provide the opportunity for Petitioners to respond to those amendments.

1. Phoenix, AZPhoenix is the thirteenth ranked DMA, covering over 1.8 million television households.

The Phoenix market is served by only one daily newspaper: the Gannett-ownedArizona

Republic. This market is slightly different from the other four in that Gannett was granted a

waiver of the NBCO rule allowing it to own the top-four ranked KPNX, the NBC affiliate, and

theRepublic simultaneously. Gannett seeks to further increase its media dominance in Phoenix

by controlling, through a Sander shell company, Belos two Phoenix stations, KASW and

KTVK.

Phoenix is served by sixteen television stations representing thirteen independent voices:

Call Sign Owner City Affiliate

KAET Arizona Board of Regents (U of AZ) Phoenix, AZ PBS

38See, e.g.,Applications of Tribune Co. and Its Licensee Subsidiaries, 27 FCC Rcd. 14239,14241 (Nov. 16, 2012).39See Applications of Tribune Co. and Its Licensee Subsidiaries, 27 FCC Rcd. 14239, 14241(Nov. 16, 2012).40 47 C.F.R. 1.927, 1.929.


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KASW Belo (transfer to Sander pending) Phoenix, AZ CW

KTVK Belo (transfer to Sander pending) Phoenix, AZ ThisTV

KDTP Daystar Television Holbrook, AZ Ind. Religious

KUTP Fox Phoenix, AZ MyNetworkTV

KSAZ-TV Fox Phoenix, AZ Fox

KPNX Gannett Company Mesa, AZ NBCKPPX-TV Ion Media Networks Tolleson, AZ Ion

KAZT-TV Londen Media Group Prescott, AZ Me-TV

KPHO-TV Meredith Corp. Phoenix, AZ CBS

KMOH-TV MundoFox Kingman, AZ MundoFox

KTAZ NBC Universal Phoenix, AZ Telemundo

KNXV-TV Scripps Media, Inc. Phoenix, AZ ABC

KPAZ-TV Trinity Broadcasting Network Phoenix, AZ TBN

KTVW-DT Univision Communications Phoenix, AZ Univision

KFPH-DT Univision Communications Flagstaff, AZ UniMas

Gannett also owns the satellite station KNAZ-TV in Flagstaff, AZ that rebroadcasts

KPNX (NBC) programming.

(a) The Commission Should Grant thePending Petition for Reconsideration

The Commission granted Gannett a permanent waiver of the NBCO rule for Gannetts

KPNX/Republic combination in the course of its 2008 Orderin the 2006 Quadrennial Review

(2006 QR).41 Several parties, including Common Cause and others that are also Petitioners

here, sought reconsideration of this decision. The Commission has not yet acted on that

Petition.42

The Petition for Reconsideration argues that the Commissions decision to give Gannett a

permanent waiver of the NBCO rule for Phoenix was arbitrary and capricious on the grounds

that the Commission neither applied the then-existing waiver standards, nor the newly adopted

41See Report and Order and Order on Reconsideration, 2006 Quadrennial Review, 23 FCC Rcd.2010, MB Docket No. 06-121, 77 (Feb. 4, 2008).42See Petition for Reconsideration of Common Cause et al., 2006 Quadrennial Review, MBDocket No. 06-121 (Mar. 24, 2008), available athttp://apps.fcc.gov/ecfs/document/view?id=6519868534. The NBCO waiver issue was broughtup by the petitioners in Prometheus Radio Project v. FCC, 652 F.3d 431, 456 (3d Cir. 2011), butwas not addressed by the court.


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waiver test. Under the new waiver test, which was subsequently overturned, the combination

would be presumed contrary to the public interest because although Phoenix ranked thirteenth

among media markets, Gannetts KPNX was a top-four ranked station in that market. The waiver

test adopted in the now-vacated 2006 QR, like the one proposed in the 2010 QR, presumes that

mergers between a top-four ranked station and a daily newspaper would not serve the public

interest.

Thus, the Commission should vacate its decision to waive the NBCO rule that allows

Gannett to control both KPNX and the Arizona Republic by granting the Petition for

Reconsideration.

43

(b) Terms of the TransactionThe Gannett-Belo transaction requires Belo to assign stations KASW and KTVK to

Sander. Meanwhile, Gannett and Sander will enter into several service agreements.

Gannett and Sander have signed an SSA giving Gannett power and control over portions

of the stations operations and business. Gannett will provide many operational services to

Sander including general support for station operations, 100% website management (probably

through www.azcentral.com), and back office support such as payroll. Gannett will also provide

Sander with physical property that will essentially function as a main studio. 44 Specifically, the

agreement provides that Gannett provide for this main studio at such locations in or near

43 Although the lack of finality does not preclude companies from consummating transfers, theydo so at their own risk. Memorandum Opinion and Order,Application of Improvement LeasingCo., 73 F.C.C.2d 676, 684 (Sept. 14, 1979), aff'd sub nom. Washington Association forTelevision and Children v. FCC, 665 F.2d 1264 (D.C. Cir. 1981).44 Application for Consent to Assignment of Broadcast Station Construction Permit or License ofKASW-TV, File No. BALCDT - 20130619AFJ (June 19, 2013), Attachment 13, Asset PurchaseAgreement (Phoenix Asset Purchase Agreement), Exhibit C-2 (Phoenix SSA), Section 6.


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[Gannetts] premises.45 It is reasonable to assume the main studio for KASW and KTVK will

be co-located with Gannetts already owned KPNX broadcasting space.

In return for those services, Sander will pay Gannett $666,666 per month.46 Additionally,

if one of Sanders stations does well during a particular month, Gannett shall be eligible to

receive a Performance Bonus with respect to the applicable month, and the amount is at

Sanders discretion, but must be relative to the [Stations] performance for such month . . . .47

Gannett maintains an option to purchase either the parent company (Sander Operating Co. II,

LLC) or the stations themselves for eight years should the Commission revise its ownership rules

to permit acquisition. Gannett will pay $60,000 to keep the parent company option open, and

$86,555 to keep the station options open.48

The agreements contain boilerplate language purportedly giving Sander ultimate

authority over programming at KASW and KTVK. Sander is contractually obligated to maintain

control over station operations, including programming, editorial policies, and human resources;

to maintain the facilities and pay all operating costs of the station. Sander is only required to hire

only one employee per station, or at the very least the minimum required to comply with FCC

rules.49 However, these rights are effectively limited by other provisions in the agreement, such

as Gannetts providing website management and control over Sanders physical property and

main studio, giving Gannett, not Sander, the ability to make decisions in many situations.

45 Phoenix SSA, Schedule 6.5.46 Phoenix SSA at section 9 and schedule A.47 Phoenix SSA at schedule A.48 Phoenix Asset Purchase Agreement, Exhibit F (Phoenix Parent Option Agreement), sections1-3; Phoenix Asset Purchase Agreement, Exhibit G-2 (Phoenix Station Option Agreement),sections 1-3.49 Phoenix SSA at section 3.1.


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(c) The Commission Should Deny theLicense Transfers

The Commission should deny the license transfers between Belo and Sander because they

are not in the public interest.

The transaction meaningfully reduces the number of market voices and harms

competition in the local news market. As detailed above, there are thirteen television broadcast

voices, including Gannetts two media outlets. The transfer of licenses supplants Belos

independent voice in the market for the Gannett/Sanders voice, reducing the number of voices by

one.

Reducing the number of voices by one in a large market, where the only daily newspaper

shares a voice with multiple television stations, is significant. The Phoenix television market

includes 1.8 million homes. The needs of a large, diverse market necessitate numerous

independent and competing media.50 Any reduction in the number of voices will affect a large

number of people who rely on those stations for an independent news voice. Because these

stations and the daily newspaper will share office space, and only require one managerial

employee, the opportunity and incentive to share resources and news stories escalates. Also, the

Arizona Republic is the only daily newspaper; it reaches over half a million people on Sunday,

and roughly 300,000 every other day of the week.51 Those subscribers may now find that KPNX,

50 The most recent U.S. Census Bureau statistics reveal the need for more local news diversity inPhoenix. Compared to Arizona as a whole, Phoenix has a disproportionately large Hispanic andLatino population (40.8% versus 29.6% across all of Arizona and only 16.9% across all ofAmerica), a large African American population (6.5% versus 4.1% across all of Arizona), and alarge exclusively Asian population (3.2% versus 2.8% across all of Arizona and only 2.4%across all of America). The number of individuals who are two races or more is also higher(3.6% versus 3.4% across all of Arizona and only 2.4% across all of America). Phoenix (city),Arizona State & County QuickFacts, U.S.CENSUS BUREAU (June 27, 2013),http://quickfacts.census.gov/qfd/states/04/0455000.html.51 Newspaper Search, ALLIANCE FORAUDITED MEDIA,http://abcas3.auditedmedia.com/ecirc/newsform.asp (search performed July 22, 2013).


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KASW, KTVK, and satellite station KNAZ simply duplicate what theRepublic has already

reported. The website www.azcentral.com may represent all those outlets. Furthermore, the

looming option agreements, which would allow Gannett to outright purchase these newly

acquired stations if the Commission were to relax its rules regarding media ownership, betrays

the real motivation behind these agreements: to control more local news stations and reap

financial gains at the expense of diversity and competition.

Even if these stations are run independently for some period of time, the agreements are

governed only by contract law. They can be modified at any time upon agreement of the parties.

For instance, the parties could later agree that Gannett will provide more operational support,

more advertising support, or more programming.

The net effect of allowing this license transfer is to allow Gannett to own not only the

major daily newspaper and a top-four affiliate, but also to allow Gannett to play a significant role

in operating and influencing two more broadcast stationsstations for which it would normally

have to request additional waivers if not for these sharing arrangements. Thus, diversity of news

sources will be drastically reduced and local competition will suffer irreparable harm.

2. Louisville, KYLouisville is the forty-eighth ranked DMA, encompassing over 670,000 television

households. The only major daily newspaper in Louisville, the Courier-Journal, is owned by

Gannett. The Courier-Journal (and therefore, Gannett) in turn owns one of five weekly

Louisville newspapers, Velocity.52

Gannett seeks to further increase its media dominance in

Louisville by controlling, through a Sander shell company, Belos Louisville station, WHAS-TV.

52 The other weekly newspapers covering the Louisville area areLocal Weekly (for SouthernJefferson County exclusively),Louisville Eccentric Observer,Louisville Defender(a weeklynewspaper marketed toward African-Americans), andBusiness First.


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Louisville is served by ten television stations representing six or seven independent

voices53:


WHAS-TV Belo Kentucky (sale to Gannett pending) Louisville, KY ABCWDRB Block Communications, Inc. Louisville, KY Fox

WMYO Block Communications, Inc. Salem, IN MyTV

WKMJ-TV Kentucky Authority for Educational TV Louisville, KY PBS

WKPC-TV Kentucky Authority for Educational TV Louisville, KY PBS

WKZT-TV Kentucky Authority for Educational TV Elizabethtown, KY PBS

WBKI-TV L.M. Communications Television(operated by Block Communications)

Campbellsville, KY CW

WAVE Raycom Media Louisville, KY NBC

WLKY Hearst Corp. Louisville, KY CBS

WBNA Word Broadcasting Network Louisville, KY ION

(a) Terms of the TransactionThis transaction requires Belo to assign station WHAS-TV to Sander Operating

Company. Meanwhile, Gannett and Sander will enter into multiple service agreements.

Under the JSA, Gannett will provide local news to the station, up to a maximum of 15%

of the stations total broadcast hours for any week (and a maximum of 25 hours per week).54

The agreement allows Gannett to force more programming on WHAS-TV if the Media Bureau

or the Commission ever authorizes more than 15% programming sharing.55 Moreover, Gannett

can dictate the dates and times at which the station plays Gannett programming, subject to a two-

53 Petitioners view Blocks operation of L.M. Communications WBKI-TV to count as only onevoice across both WDRB and WMYO.54 Application for Consent to Assignment of Broadcast Station Construction Permit or License ofWHAS-TV, File No. BALCDT - 20130619AFM (June 19, 2013), Attachment 13, AssetPurchase Agreement (Louisville Asset Purchase Agreement), Exhibit B-2 (Louisville JSA),Section 4.2.55 Louisville JSA, Schedule 4.2.


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week notice provision.56 The JSA also requires WHAS-TV to retain Gannett as its exclusive

advertising marketerboth online and on television.57

Sander must also pay Gannett a flat fee of $808,333 per month for programming,plus

any potential bonus determined in the same way as under the Phoenix agreement.58 In

addition, Sander will pay Gannett 30% of WHAS-TVs Net Sales Revenue per month in

exchange for Gannetts management and operational assistance. If the station cannot meet its

financial burden to Gannett, that shortfall amount is added to future obligations.59 Gannett

further agrees to provide Sander with physical property that will function as a main studio.60 It

is reasonable to assume the main studio for WHAS-TV will be co-located with Gannetts already

ownedCourier-Journal space.


authority over programming at WHAS-TV. Sander can only preempt material provided by

Gannett to present material of greater local or national importance.61 Sander also maintains

final control over station operations, including programming, editorial, and employment

decision-making; Sander must also maintain the facilities and pay all operating costs of the

station. These rights are effectively limited by provisions, such as the provision granting Gannett

the ability to force programming on the station at its preferred time. Gannett, not Sander, has the

ability to make decisions in several situations, and betrays the true intent behind the transaction.

56 Louisville JSA, Schedule 4.2.57 Louisville JSA at section 4.1(a).58 Application for Consent to Assignment of Broadcast Station Construction Permit or License ofWHAS-TV, File No. BALCDT - 20130619AFM (June 19, 2013), Attachment 13, AssetPurchase Agreement (Louisville Asset Purchase Agreement), Exhibit D-2 (Louisville SSA),Schedule A at section 2.59 Louisville SSA, Schedule A at section 3.1.60 Louisville SSA at section 6.5 and Schedule 6.5.61 Louisville JSA at section 4.3.


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(b) The Commission Should Deny theLicense Transfer

The Commission should deny the license transfer between Belo and Sander because it is

not in the public interest.

The transaction significantly reduces the number of market voices and harms competition

in the local news market. As detailed above, Gannett will control much of the daily operations of

WHAS-TV, as well as provide programming and advertising services. In effect, Gannetts

viewpoint will be heard on both the ABC station and the only daily newspaper. This transfer

represents the loss of a significant local news voice in the Louisville market. News diversity will

suffer as will the news-consuming public. Because these stations will now share office space,

and because the stations are only required to hire one managerial employee, the incentive to

share resources and news stories escalates. The fact that WHAS-TV has ultimate authority

over programming decisions is no consolation because it has little incentive not to accept the

programming from Gannett for which it pays a substantial amount.

Allowing this transaction would directly undermine the purpose of the NBCO, which

precludes exactly this kind of common ownership and control. Gannett will own the daily

newspaper and will provide programming to a top-four television station, creating one voice

(Gannetts) between the two outlets. The 15% cap (equating to roughly five hours per weekday)

could very well cover all local news broadcasts at WHAS-TV when combined with affiliated and

syndicated content, eliminating whatever diversity this station might have contributed to the

local news market. This transfer would harm diversity of viewpoints, competition, and the local

news viewing public.


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The net effect of approving this transaction is that Gannett will be providing news to its

current wholly-owned outlets, the Courier-Journal, Velocity, andWHAS. Diversity of news

sources will be drastically reduced and local competition will suffer significant harm.

3. Tucson, AZTucson is the seventieth ranked DMA. It covers roughly 440,000 households. Gannett

currently owns one half of the major daily newspaper in Tucson, theArizona Daily Star. Gannett

seeks to further increase its media dominance in Tucson by controlling, through Sander and

Tucker shell companies, Belos two Tucson stations, KMSB and KTTU.

Tucson is served by eleven television stations representing six or seven independent

voices62:


KUAT-TV Arizona Board of Regents (U of AZ) Tucson, AZ PBS

KUAS-TV Arizona Board of Regents (U of AZ) Tucson, AZ PBS

KMSB Belo (Raycom SSA, sale to Gannettpending)

Tucson, AZ Fox

KTTU Belo (Raycom SSA, sale to Gannettpending)

Tucson, AZ MyTV

KVOA Cordillera Communications Tucson, AZ NBC

KGUN-TV Journal Broadcast Corp. Tucson, AZ ABC

KWBA-TV Journal Broadcast Corp. Sierra Vista, AZ CW

KHRR NBC Telemundo License LLC Tucson, AZ Telemundo

KOLD-TV Raycom Media, Inc. Tucson, AZ CBS

KFTU-DT Univision Communications Douglas, AZ UniMas (Spanish)

KUVE-DT Univision Communications Green Valley, AZ Uni

Belos stations have SSAs with Raycom, another television station owner and operator in

Tucson. Raycom provides local news, weather, traffic, and other services to both stations, further

62 Petitioners view as one voice Raycoms KOLD-TV and the two stations through whichRaycom provides local news, KMSB and KTTU.


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reducing the number of independent voices.63 These SSAs will be assigned to Sander and Tucker

as part of the transaction.

(a) Terms of the TransactionThe terms of the transaction require Belo to assign the licenses of its two Tucson stations

to Sander and Tucker operating companies. Sander will own the Fox affiliate, KMSB, while

Tucker will own the CW affiliate, KTTU. However, Gannett will provide to both stations certain

services through individual (and nearly identical) Transition Services Agreements (TSAs)

that each last one year.

The TSAs require Gannett to provide monitoring and maintenance of the stations

technical equipment and facilities, to provide the stations a staff engineer (on an independent

contractor basis), to assist the station with technical FCC compliance, and to provide back-

office support services (traffic, billing/collection of accounts receivable).64 Gannett will also

provide assistance, upon the stations request, with negotiating, maintaining, and/or enforcing

retransmission consent agreements and other distribution agreements with cable and satellite

providers.65

Each station will pay Gannett for the operational services it is providing. KMSB (the Fox

affiliate owned by Sander) will pay $183,333 per month. KTTU (the CW affiliate owned by

Tucker) will pay $41,666 per month. The transaction also includes option agreements that give

Gannett the chance to purchase either station, or either stations parent company, in the event the

63 Michael Malone,Belo's KMSB Tucson Outsourcing News, BROADCASTING &CABLE (Nov. 11,2011), http://www.broadcastingcable.com/article/476766-Belo_s_KMSB_Tucson_Outsourcing_News.php.64 Application for Consent to Assignment of Broadcast Station Construction Permit or License ofKMSB-TV, File No. BALCDT - 20130619AFL (June 19, 2013), Attachment 13, Asset PurchaseAgreement (Tucson Asset Purchase Agreement), Exhibit E (Tucson TSA), Section 6.65 Tucson TSA at section 6.4.


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Commission relaxes its media ownership rules. Gannett will pay $60,000 for the parent option

and $14,077 for the option to purchase the stations.

The agreements contain boilerplate language purportedly giving Sander and Tucker

ultimate authority over programming at their respective stations. They will maintain final control

over operating the stations, including programming and editorial policies and human resources;

they must also maintain the facilities and are in charge of paying all operating costs of the

station. These powers are limited by other provisions in the agreements that give Gannettand/or

Raycom, significant decision-making power. Raycom is providing most of the local news to the

stations already and will continue while Gannett is providing operational services.

Additionally, Sander and Tucker will enter into a JSA with each otheras part of the

overall transaction. Both agree to continue paying Raycom for services received under the pre-

existing SSAs between the stations.66 Media reports of the SSAs reveal that Raycom provides all

local news, weather, traffic, sports, and website administration to KMSB and KTTU.67

The JSA between the two licensees requires Tucker to retain Sander on an exclusive basis

to market and sell essentially all forms of its advertising, including online and on television.68

Tucker also pays Sander 30% of its Net Sales Revenue in exchange for marketing services.69

66 David Hatfield,Little Change on Tucson TV Expected from Belo's Sale to Gannett, INSIDETUCSON BUSINESS (June 14, 2013), http://www.insidetucsonbusiness.com/news/little-change-on-tucson-tv-expected-from-belo-s-sale/article_df926a4a-d470-11e2-9fca-001a4bcf887a.html. TheRaycom SSAs have not been made public.67 Michael Malone,Belo's KMSB Tucson Outsourcing News, BROADCASTING &CABLE (Nov. 11,2011), http://www.broadcastingcable.com/article/476766-Belo_s_KMSB_Tucson_Outsourcing_News.php.68 Application for Consent to Assignment of Broadcast Station Construction Permit or License ofKTTU-TV, File No. BALCDT - 20130619ADJ (June 19, 2013), Attachment 13, Asset PurchaseAgreement, Exhibit B-3 (Tucker/Sander JSA), Section 4.1(a), (c).69 Tucker/Sander JSA at section 3.1.


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(b) The Commission Should Deny theLicense Transfers

The Commission should deny the license transfers between Belo and Sander Operating

Company and Tucker Operating Company because they are not in the public interest.

First, the Commission should take this opportunity to review whether the Raycom SSAs

are in the public interest. The Media Bureau has stated that without a license transfer, SSAs will

not be reviewed, and this license transfer offers the first meaningful opportunity for the FCC to

undertake such review.70

Little public information is available about Raycoms SSAs with KMSB and KTTU. A

review of each respective stations public file reveals no disclosure of the agreements.71

However, it has resulted in staff layoffs.72 The market currently has six television voices and one

newspaper voice. If this transaction is approved, the increase in diversity that would result from

breaking up the Belo duopoly will not occur because Raycom will continue to provide services

to both stations. The fact that Raycom provides news for three stations, including two top-four

stations, causes real harm to the local news market.

Second, this transaction is not in the public interest because it gives Gannett the ability to

control aspects of the stations through its sharing agreements. Gannett will provide operational

support, which will increase the likelihood that newsrooms, staff, journalists, and stories will be

shared, resulting in lost jobs and reduced diversity of viewpoints. Tucker, the KTTU licensee,

70Media Council Hawaii, 26 FCC Rcd. 16087 at 14.71 KMSB Station Profile, FEDERAL COMMUNICATIONSCOMMISSION, https://stations.fcc.gov/station-profile/kmsb/more-public-files/browse-%3Ejoint_sales_agreements; KTTU Station Profile, FEDERAL COMMUNICATIONS COMMISSION,https://stations.fcc.gov/station-profile/kttu/more-public-files/browse-%3Ejoint_sales_agreements.72 P.J. Bednarski,Belo Turning over KMSB, KTTU to KOLD, TV NEWS CHECK (Nov. 15,2011), http://www.tvnewscheck.com/article/55453/belo-turning-over-kmsb-kttu-to-kold.


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has already stated it likely will not produce its own local news.73 Tucker will receive operational

support from Gannett under the TSA, advertising support from Sander under the JSA, and

programming support from Raycom under the SSA. Tucker, it appears, has few, if any,

obligations once the transfer takes place. This presents a clear anticompetitive situation and

shows that Tucker is purely a shell corporation designed to facilitate Gannett and Raycom

control over KTTU.

Importantly, the TSAs last only one year, with an option to renew for one more year. At

the end of that year or two, Gannett would be free to provide its own programming (assuming the

Commission authorizes the transaction), or change the arrangement in any other way suitable to

the parties. This is even worse than in other markets where contracting parties can agree to

modify the contracts after Commission authorization; this agreement explicitly ends at most two

years from now, leaving Gannett free to take over Raycoms provision of local news.

Thus, allowing this transaction would undermine the purpose of the NBCO rule, which

prohibits exactly this kind of combined ownership and control. The pooling of resources in such

a way encourages and incents sharing of news, journalist layoffs, and cost-cutting that is

generally detrimental to the local news viewing public, diversity, and competition.

Tucson residents are significantly harmed when one company provides news to three

media outlets (whether that is Raycom or Gannett).

4. Portland, ORPortland is the twenty-second ranked DMA, covering over 1.18 million households.

There are three major daily newspapers in the Portland DMA: the Oregonian, the Columbian,

and the Statesman Journal, which is owned by Gannett. Gannett seeks to further increase its

73 Michael Malone, Gannett-Belo: Jack Is Back, BROADCASTING &CABLE (July 8, 2013),SECTION: Pg. 26 Vol. CXLIII.


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media dominance in Portland by controlling, through a Sander shell company, Belos Portland

station, KGW.

Portland is served by eleven television stations representing eight independent voices:


KGW Belo (sale to Gannett pending) Portland, OR NBC

KATU Fisher Broadcasting (sale toSinclair pending)

Portland, OR ABC

KUNP Fisher Broadcasting (sale toSinclair pending)

La Grande, OR Uni

KPXG-TV Ion Media Salem, OR Ion

KOIN Lin Media Portland, OR CBS

KPDX Meredith Corp. Vancouver, WA MyTVKPTV Meredith Corp. Portland, OR Fox

KOPB-TV Oregon Public Broadcasting Portland, OR PBS

KTVR Oregon Public Broadcasting La Grande, OR PBS

KRCW-TV Tribune Company Salem, OR CW

KNMT Trinity Christian Center Portland, OR Religious

(a) Terms of the AgreementThis transaction requires Belo to assign station KGW to Sander. Meanwhile, Gannett and

Sander will enter into several service agreements.

These agreements hand significant decision-making control to Gannett. Gannett will

provide local news to Sander, up to a maximum of 15% of the stations total broadcast hours for

any week (and a maximum of 25 hours per week).74 If the Commission were to change its

ownership rules, the agreements allow for Gannett to essentially force Sander to accept more

Gannett programming on KGW.75 Gannett determines the dates and times at which Sander plays

74 Application for Consent to Assignment of Broadcast Station Construction Permit or License ofKGW, File No. BALCDT - 20130619AFN (June 19, 2013), Attachment 13, Asset PurchaseAgreement (Portland Asset Purchase Agreement), Exhibit B-2 (Portland JSA), Section 4.2.75 Portland JSA, Schedule 4.2.


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Gannett programming, subject only to a two-week notice provision. 76 Sander must also retain

Gannett as its exclusive advertising marketerboth online and on television.77 This likely means

that KGW and the Statesman Journal will not be competing for advertising.78

Sander will pay Gannett a flat fee of $1,500,000 per month for programming,plus any

potential bonus determined the same way as under the Phoenix agreements.79 Shortfall amounts

are added to future obligations. Gannett also receives 30% of Sanders Net Sales Revenue.80

Sanders primary obligation to the station in the agreement is to hire a single managerial

employee that reports to KGW alone.81 Gannett further agrees to provide Sander with physical

property that will function as a main studio.

82

It is reasonable to assume the main studio for

KGW will be co-located with Gannetts already ownedStatesman Journal broadcasting space.


authority over programming at KGW. For instance, Sander can preempt material provided by

Gannett to present material of greater local or national importance.83 Sander is contractually

obligated to maintain final control over station operations, including programming, editorial

policies, and personnel matters; maintain the facilities and pay all operating costs of the station.

76 Portland JSA, Schedule 4.2.77 Portland JSA at section 4.1(a).78 It is much more likely the practical effect of this provision will mirror the Phoenix market,where Gannetts joint control over a newspaper and a television station serve as inducements orselling points for new advertisers. See Multi-Media Customer Solutions Tab 5, 12NEWS,http://www.azcentral.com/12news/about12/mediasolutions.html#tab5 (Maintaining andgrowing your business in Arizona can be challenging. Uncontrollable factors can triggerpressures on you and your business. KPNX-TV, azcentral.com, The Arizona Republic, and theother local Gannett properties are here to help you navigate through those obstacles bycustomizing a comprehensive multi-media solution that will speak to your customers imbeddedin our audiences . . . .).79 Portland Asset Purchase Agreement, Exhibit D-2 (Portland SSA), Schedule A at section 2.80 Portland JSA at section 3.181 Portland SSA at section 3.1.82 Portland SSA at section 6.5 and Schedule 6.5.83 Portland JSA at section 4.3.


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As seen above, however, these rights are effectively limited by other provisions in the

arrangement that give Gannett, not Sander, the ability to make decisions in many situations.

(b) The Commission Should Deny theLicense Transfer

The Commission should deny the license transfer between Belo and Sander Operating

Company because it is not in the public interest.


in the local news market. As detailed above, Gannett will control much of KGWs daily

operations, including general operating tasks, and will provide programming and advertising

services. This effectively reduces the number of independent media voices in Portland from

eleven (eight television voices and three newspaper voices) to ten. This is a significant reduction

for the 1.18 million households in that market. Statesman Journal subscribers may soon find the

same stories and opinions in the newspaper being parroted by their local NBC station, which will

receive local news programming from Gannett. Journalists and other members of KGW are

likely to lose their jobs. Further, the 15% cap on Gannett programming (which totals twenty-five

hours per week or five hours per work day) could very easily cover all local prime time slots,

including morning news and evening news. That cap thus does nothing to protect diversity or

competition in local news.

Because Gannett owns the Statesman Journal, allowing it to control KGW as well would

directly contravene the intent of the NBCO rule, which prohibits this kind of common ownership

and control. The combination of an NBC station and a daily newspaper would significantly

diminish competition, diversity, and local news. The fact that KGW and Sander have ultimate

authority over programming decisions is no consolation because they have little incentive to

refuse Gannetts programming, for which it pays a substantial amount.


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The net effect of approving this transaction is to allow Gannett to own or control two

news sources that are critical to the Portland markets news diversity and competition: a daily

newspaper and a top-four affiliate television station. Diversity of news sources will be drastically

reduced and local competition will suffer significant harm. The Commission must not allow this

to happen.

5. St. Louis, MOSt. Louis is the twenty-first ranked DMA, serving over 1.2 million households. Gannett

owns KSDK, the NBC affiliate in St. Louis. Gannett seeks to further increase its media

dominance in St. Louis by controlling, through a Sander shell company, Belos St. Louis station,

KMOV.

St. Louis is served by nine television stations representing seven independent voices84:


KMOV Belo (sale to Gannett pending) St. Louis, MO CBS

KSDK Gannett St. Louis, MO NBC

KTVI Local TV (sale to Tribune pending) St. Louis, MO Fox

KNLC New Life Evangelistic Center St. Louis, MO Religious

WRBU Roberts Broadcasting St. Louis, MO MyTVKDNL-TV Sinclair Broadcast Group (SSA with Gannett) St. Louis, MO ABC

KETC St. Louis Regional Public Media St. Louis, MO PBS

KPLR-TV Tribune (operated by Local TV) St. Louis, MO CW

WPXS Daystar Television Mount Vernon, IL Daystar

Gannett currently operates the NBC affiliate, KSDK. It also currently provides news and

other services to the ABC affiliate, KDNL.85 KDNLs website even states that it do[es] not have

84 Petitioners view as one voice (1) Gannetts SSA with Sinclair, and (2) Local TVs agreementto operate Tribunes KPLR-TV. Tribune recently announced that it will purchase Local TV,further solidifying the latter conclusion. Jennifer Saba & Greg Roumeliotis, Tribune to Buy 19Local TV Stations for $2.73 Billion, REUTERS (July 1, 2013),http://www.reuters.com/article/2013/07/01/us-tribune-acquisition-idUSBRE9600FB20130701.


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local news or a local news department.86 Accordingly, if the Commission grants Belos

application to assign KMOVs license to Sander, Gannett will own or operate the news

operations of the CBS, NBC, andABC affiliates (all of which are top-four affiliates) in St. Louis.

Furthermore, the St. Louis market is already consolidated. Local TV owns the Fox

affiliate, KTVI. KPLR and KTVI now share a single newsroom. Spencer Koch, the president

and general manager of KTVI and KPLR, stated that [i]n a very conscious effort, we dont

compete against each other.87 If Belo assigns KMOV to Sander, and Gannett operates KMOV

through KSDK, then the ABC, CBS, NBC, Fox, andCW affiliates in St. Louis will be

collectively controlled or owned outright by only two companies: Gannett and Tribune. This

means five stations (including all stations in the top-four) would represent two independent

voices.

(a) Terms of the AgreementThis transaction requires Belo to assign station KMOV to Sander. Meanwhile, Gannett

and Sander will enter into several service agreements.

Pursuant to the agreement, Gannett will provide many operational services to Sander

including support for station operations, maintaining and operating the website, and back office

85 Lisa Brown, KSDK Parent Gannett to Buy KMOV's Parent Company, ST.LOUIS POST-DISPATCH (Jun 14, 2013), http://www.stltoday.com/business/local/ksdk-parent-gannett-to-buy-kmov-s-parent-company/article_31e7fb91-676f-50cb-825f-9f9f6a6e6f8c.html.86 Station, ABC30, http://www.abcstlouis.com/sections/station.87 Lisa Brown, KSDK to Produce Newscasts for KDNL, ST.LOUIS POST-DISPATCH (Nov. 13,2010), http://www.stltoday.com/business/ksdk-to-produce-newscasts-for-kdnl/article_2e5d4a71-38ce-5d1a-933f-659ce0af54ce.html.


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in the local news market. Where there are now seven independent television voices, there will

soon be six. This is deeply troubling given St. Louis market size of 1.2 million households. In a

market that size, there should be many more broadcast voices.

This transfer will harm the television media landscape in St. Louis. Gannett will control

much of the daily operations of KMOV, including general operating tasks, as well as provide

physical space in which KMOV employees will work. This sharing of space will inevitably lead

to sharing of news stories and journalists, resulting in layoffs and reduced investigative

journalism. Diversity, competition, and the local news-viewing public will all suffer.

Allowing Gannett to own KSDK and also to make day-to-day decisions for and share

resources with KMOV would directly contravene the intent of the duopoly rule. There are very

few television voices in St. Louis. Additionally, KSDK and KMOV are both top-four stations,

resulting in Gannetts singular viewpoint being broadcast over three networks.

Even if KSDK and KMOV stations are run independently for some period of time, the

agreements are governed only by contract law. They can be modified at any time upon agreement

of the parties. For instance, the parties could later agree that Gannett will provide more

operational support, more advertising support, or more programming.

The Commission should also take this opportunity to determine whether the SSA between

Sinclair and Gannett in this market is in the public interest. Not much is known about this

agreement, and the station has not disclosed it in its public file.92 News reports state that KSDK

92 KMOV Station Profile, FEDERAL COMMUNICATIONS COMMISSION,https://stations.fcc.gov/station-profile/kmov/more-public-files/browse-%3Ejoint_sales_agreements


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. . . produces newscasts for KDNL.93 In other words, the NBC affiliate (KSDK) is providing

newscasts for the ABC affiliate (KDNL). This kind of concentration would likely violate the

duopoly rule. However, like the Raycom SSAs in Tucson, there has been no Commission

oversight.

Allowing one station to produce the news of the CBS, NBC, andABC affiliates in St.

Louis is transparently against the public interest and destructive to the goals of diversity and

competition. Diversity of news sources will be drastically reduced and local competition will

suffer significant harm if this transaction is approved, and could result in the eventual

dismantling of the KMOV news department. The Commission must not allow this to happen.

CONCLUSION

For the reasons stated above, the transfers contemplated as part of this transaction are not

in the public interest. Therefore, the Commission cannot approve them.

WHEREFORE, Petitioners ask that this matter be considered in the first instance by the

full Commission, that the Commission dismiss or deny the applications or designate them for

hearing, and grant all such other relief as may be just and proper.

93 Lisa Brown, KSDK Parent Gannett to Buy KMOV's Parent Company, ST.LOUIS POST-DISPATCH (June 14, 2013), http://www.stltoday.com/business/local/ksdk-parent-gannett-to-buy-kmov-s-parent-company/article_31e7fb91-676f-50cb-825f-9f9f6a6e6f8c.html.


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July 24, 2013

Matthew WoodAndrew Jay SchwartzmanLauren WilsonFree Press1025 Connecticut Ave. NW, Suite 1110Washington, D.C. 20036(202) 265-1490

Respectfully Submitted,

___________________________________Eric G. Null*Angela J. CampbellInstitute for Public RepresentationGeorgetown Law600 New Jersey Avenue, N.W.Washington, D.C. 20001(202) 662-9535

Counsel for Public Interest Petitioners

* Admitted to the New York bar only; DC bar membership pending. Practice supervised bymembers of the DC bar.


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DECLARAT I ON OF K A T H L E E N MCCAR TH Y

1. I, Kathleen McCarthy, am a member of N A B E T - C W A Loca l 51, located at 240Second Street, Suite 220, San Francisco, C A 94105.

2. I reside at 5960 SE 23 r d Av e , Portland, OR 97202.3. 1 am a regular viewer of the television stations serving the Portland, OR market,

including K G W .4. I reside within the circulation area of the Statesman-Journal and read the

newspaper on a regular basis. The Statesman-Journal is a major daily newspaperproviding comprehensive coverage of my entire community.

5. Gannett's ownership of the Statesman-Journal, as wel l as its intention to providesubstantive services to K G W , harms me by sharply reducing the number ofindependent voices and competitive news sources available to me.

6. I am concerned when a large News entity owns and operates more than one outlet;we loose the quality coverage that loca l competition compels. My other concern isthat, i f they combine or share services that could mean loca l job loss to ourcommunity. This Declaration has been prepared in support of the foregoingPetition for Denial.

7. This statement is true to my personal knowledge, and is made under penalty ofperjury of the laws of the United States of America.

Date Executed: Su 1V , h i 3Signature Kathleen McCarthy


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CERTIFICATE OF SERVICE

I, Eric Null, hereby certify that copies of the Petition to Deny by Free Press, NABET-CWA, TNG-CWA, National Hispanic Media Coalition, Common Cause, and Office of

Communication, Inc., of the United Church of Christ, through their attorneys, the Institute for

Public Representation, have been served by first-class mail and courtesy copy by e-mail, this

24th of July, 2013, on the following persons at the addresses shown below.

James R. Bayes

Wiley Rein LLP

1776 K Street, NWWashington, DC 20006

[email protected]

Counsel for Belo Corp.

John R. Feore, Jr.

Dow Lohnes PLLC1200 New Hampshire Avenue, NW, Suite 800

Washington, DC 20036

[email protected] for Sander Operating Cos. and Tucker Operating Co.

Kurt WimmerCovington & Burling LLP

1201 Pennsylvania Avenue, NW

Washington, DC [email protected]

Counsel for Gannett Co. Inc. and Raycom Media

Clifford M. Harrington

Pillsbury Winthrop Shaw Pittman LLP

2300 N St. NWWashington, DC 20037-1122

[email protected]

Counsel for Sinclair Broadcasting


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Respectfully Submitted,

July 24, 2013 Eric Null

Institute for Public RepresentationGeorgetown University Law Center

600 New Jersey Avenue, N.W.Washington, D.C. 20001

(202) 662-9535

free press' petition to block gannett-belo deal

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