Clear Channel Must Cut Stations

Radio giant Clear Channel Communications Inc. will have to bid adios to much of its clout along California’s southern border.

Under provisions in the fine print of last week’s federal order establishing new media ownership rules, the San Antonio-based company must reduce the number of stations it owns or controls in the San Diego listening area over the next two years, either by cutting ties to some of its five affiliated Mexican stations or selling some of its seven U.S.-licensed stations.

The Federal Communications Commission’s recent regulatory overhaul lets broadcasters keep clusters of radio stations whose reach exceeds the limits of new marketplace boundaries. But regulators didn’t extend that protection to Clear Channel’s exotic affiliate agreements -- in which the company bulked up its San Diego presence by making side deals with Mexican stations that broadcast north of the border.

The arrangements created one of the biggest radio powerhouses ever built in a U.S. market. Clear Channel captures an estimated 44% share of San Diego’s $165-million radio market. That is the company’s biggest slice of any of the nation’s 20 biggest cities and roughly triple the share its nearest rival holds in San Diego, according to research firm BIA.

Clear Channel probably will have to shed at least four stations to comply with the changes.

“Obviously, we’re disappointed in the commission’s decision. But we will do whatever it takes to comply with the new rules,” said Andrew Levin, the company’s top lobbyist and senior vice president for governmental affairs.

When Clear Channel gained control of the programming and sales of the Mexican stations, it raised the ire of local advertisers and rivals, which viewed it as an abuse of a regulatory loophole.

Mexican law governs the outlets, including sports station XTRA-AM and hip-hop outlet XHTZ-FM, whose signals emanate from antennas in Tijuana. Clear Channel took control of them through exclusive sales agreements with the stations’ owners, and Clear Channel programs the stations from stateside studios housed in the same complex as the company’s U.S.-licensed operations.

Rivals said the FCC rules could pave the way for more competition.

“We’re really pleased that the FCC took action to close those loopholes. Circumventing the intent and spirit of the rules appears to be unacceptable at this point,” said Darrel Goodin, chief of rival Jefferson-Pilot Communications’ four-station San Diego division. Goodin said his firm was studying the federal order to determine whether it represented a “clear mandate” to force Clear Channel to sever ties with some stations.

Advertisers also applauded the potential loosening of the company’s grip on the market.

“It would only benefit competition,” said Bob Gavin, president of Gavin & Gavin Advertising Inc., a longtime buyer of ad spots on local stations. The possible entrance of a new station owner in the market, he added, would allow for diversity “of information and thoughts, which is what the airwaves are intended to do.”

Under the old media ownership rules, regulators drew the boundaries of local markets based on the intersection of radio signals in a particular area, but exempted foreign-owned stations.

The new method defines markets based on geographical lines as drawn by the Arbitron ratings service and includes any foreign stations counted by the BIA research firm. Stations controlled through so-called sales agreements, including Mexican stations, aren’t protected under the FCC’s grandfathering provisions.

A newly introduced Senate bill would eliminate the grandfathering provision altogether, forcing Clear Channel and other firms to sell stations in a number of markets. With 1,200 stations, Clear Channel is by far the nation’s largest radio broadcaster.

Some observers contend that the entire industry may be hurt by a just-written FCC provision that says existing market clusters, once put up for sale, must be broken up so that new owners meet the new limits. The effect, those people say, will be to lock in the positions of the industry’s big players while making it tougher for smaller ones to bulk up.

Clear Channel executives don’t necessarily view the grandfathering provision as much of a gift, even though it lets them keep otherwise forbidden stations in cities other than San Diego. “Why is it a victory in America when the government lets you keep property you already bought?” Levin said.