Clear Channel Drawing Static

How many radio stations does Clear Channel Communications Inc. really own?

Some advertisers and competing broadcasters have petitioned the Federal Communications Commission, alleging that the media giant has evaded federal law and misled regulators by taking control of radio stations above the ownership limit in various markets by warehousing them in front companies.

“The problem is that you have a company that’s been told not to own radio stations in certain markets and has decided it’s going to control those radio stations anyway,” said Arthur Belendiuk, a Washington communications attorney who filed the petitions opposing Clear Channel’s proposed purchases of two stations.

Clear Channel, the nation’s biggest broadcaster, claims ownership of “approximately” 1,225 stations and said it fully complies with federal law, which forbids owning more than eight stations in a particular market.

“The FCC has reviewed every one of our transactions and we’ve abided by the rules,” said Clear Channel spokeswoman Pam Taylor. “We just happen to be really good at maximizing flexibility under the rules that are in place.”

However, FCC Chairman Michael K. Powell in a letter last month said the agency was “considering carefully” the issues raised by opponents of Clear Channel’s planned acquisition of an Ohio station. Powell added that the FCC had initiated proceedings to examine the effects of the consolidation that has swept the radio industry in the last six years.

The San Antonio-based chain said it has entered various deals to control sales or programming at about 75 stations beyond the ones it already owns. Under local marketing agreements, Clear Channel can take over another station’s programming, and with joint sales agreements, it sells the station’s advertising time. In most cases under these arrangement, Clear Channel pays a fee to the station’s owner and seeks to sell enough advertising to cover its costs and still earn a profit.

Small radio chains that struck such deals with Clear Channel say they operate independently of the conglomerate. The chains say they have merely turned the FCC limits into a business opportunity by buying stations the conglomerate could not, then auctioning back the advertising operations as allowed by the agency.

Much of Clear Channel’s involvement with such marketing and joint sales deals flows through San Antonio lawyer Van H. Archer III, who has stakes in companies that own 15 radio stations, several in markets where Clear Channel is legally barred from owning any more. All 15 of the stations have sold back their advertising rights to Clear Channel, Archer said.

Archer also has ties to Clear Channel. He incorporated Clear Channel’s charitable arm, the Clear Channel Communications Foundation, in 1999.

In addition, Clear Channel put up $2 million in the mid-1990s to guarantee a NationsBank loan provided to a firm called Mercury Broadcasting Inc., according to regulatory filings. Texas state records show Archer is 100% owner of Mercury Broadcasting.

In an interview, Archer said his arrangements with Clear Channel had “no impropriety.” He said the financing for his companies comes from other sources and added that any Clear Channel loan guarantee “definitely does not ring a bell.” He said an accounting executive at Clear Channel had asked him to incorporate the conglomerate’s nonprofit foundation.

Archer said his stations entered the advertising agreements with Clear Channel because it is “a company that’s been around for a long time, and they’re going to be around for a long time.”

“They’re reputable people,” he said, “and I don’t have to worry about them not paying the [advertising] fees.”

Harry Martin, an attorney for Archer’s firms, said: “My clients have put their own money in. These are far from being front companies.”

The industry long has been rife with rumors that broadcasters have concealed stations to sidestep federal ownership caps, which until the mid-1990s forbade a company to own more than four stations in a market and 40 nationally. But the new allegations are focused on radio’s biggest player at a time when media companies are bracing for a new round of consolidation.

Clear Channel, once a modest broadcasting chain, expanded dramatically after the 1996 deregulation of the radio industry. The company vaulted to the top of the business in a series of massive acquisitions, and today it owns about 10% of the nation’s radio stations.

Regulators approved some of the acquisitions on the condition that Clear Channel sell certain stations to prevent it from accumulating unfair power over programming or advertising rates in some cities. As part of Clear Channel’s $24-billion merger with AMFM Inc., for example, the company agreed to divest 110 stations.

But critics say Clear Channel appears to control the obscure companies buying some of the divested stations. In other cases, Clear Channel is overstepping the bounds of the traditional joint sales agreement, which would allow it to sell air time for another station, by taking full control of the station’s management, according to the petitions filed with the FCC.

As part of the AMFM deal in 2000, Clear Channel agreed to divest KBRQ-FM in Waco, Texas. The station, along with at least five others, was sold to Chase Radio, a small Texas-based firm of which Archer is 49% owner. In November, Chase Radio asked the FCC to approve a plan to sell the station back to Clear Channel.

A petition filed by Belendiuk in January alleges that Clear Channel already runs Chase Radio’s stations. According to the document, Clear Channel filed an employment report disclosing that it had employees working at KBRQ. Moreover, Clear Channel’s Web site said the executive overseeing its Waco stations also managed KBRQ. Clear Channel also filed engineering documents on behalf of the station, the petition states.

Martin, an attorney for Chase Radio, said the company withdrew its request to sell the station before Belendiuk filed his petition. He said Chase had concluded that federal regulators would probably reject the deal on the grounds that Clear Channel would have too much of the Waco advertising market. Martin also disputed the allegations in Belendiuk’s petition.

Martin said Chase Radio previously entered a local marketing agreement and handed control of some operations over to Clear Channel but didn’t have to disclose it initially because the station’s signal was redirected so it wouldn’t overlap with Clear Channel’s stations nearby. He said the engineering report was filed as a Clear Channel document by mistake.

The FCC has yet to rule on another sale opposed by Belendiuk. In November, he petitioned the FCC to deny a request by Clear Channel to buy WKKJ-FM in Chillicothe, Ohio. The station once belonged to Jacor Communications, which agreed to sell WKKJ and other stations to secure approval for its acquisition of a rival.

So Jacor sold WKKJ to Secret Communications II, a small firm owned by Frank E. Wood, Jacor’s former president. In August 1999, Secret entered into a time-brokerage agreement handing control of programming and advertising to Concord Media Group Inc.

But Belendiuk’s petition alleges that Concord is a front company run by Clear Channel. Concord’s president is Mark Jorgenson, a radio broker who has negotiated station sales for Clear Channel. As in the case of the Waco station, the petition cites Clear Channel regulatory filings as evidence that it controls Concord stations.

Concord Media said it entered a joint sales agreement with Clear Channel in June 1999, and that agreement was not disclosed in other FCC filings, Concord said, because such information was not required. Concord said Belendiuk unfairly criticizes the company for doing business in markets where Clear Channel has a heavy concentration of stations.

“It would very difficult to purchase a station where Clear Channel does not have a presence,” Concord Media said in legal filing.

Andrew Jay Schwartzman, president of the Media Access Project, a consumer advocacy law firm, said the questions surrounding Clear Channel’s relationships with small companies such as Chase underscore deregulation’s flaws.

The 1996 telecommunications overhaul “was supposed to end these evasions by making the broadcaster limits high enough to satisfy all but the greediest,” Schwartzman said. “The greediest have kept at it.”