Giants of Radio, Unlike TV, Face Toughened Rules

The Federal Communications Commission just turned down the volume on major radio conglomerates.

Buffeted by criticism that the seven-year deregulation of the radio business has drained diversity and localism from the airwaves, the commission on Monday radically rewrote the way it defines the boundaries of a local radio market, in an effort to reduce the domination by radio giants of smaller cities and rural areas.

What’s more, the FCC -- in contrast to its loosening of TV ownership rules -- left intact the existing limits on radio ownership, which cap the number of stations one company can own in a single market at eight.

The new rules could make new acquisitions more difficult for giants such as Clear Channel Communications Inc. or Viacom Inc.’s Infinity Broadcasting unit, putting the brakes on an industrywide consolidation that followed a 1996 law that removed the national limit on how many stations one company can own.

The move marks an abandonment of the FCC’s practice of defining radio markets based on the reach of stations’ signals. Under the new, geography-based system for drawing local market boundaries, owners that hoped to bulk up may find themselves already hitting the legal limit.

In other cases, owners with “clusters” of stations will find themselves over the limit in some of the newly drawn markets. The FCC won’t force those owners to divest -- but if they decide to sell, they must sell a cluster in pieces, probably drawing a lower price, or sell the stations as a unit to a small-business rival.

Clear Channel President Mark Mays said the largest radio U.S. station owner was “deeply disappointed” by the vote. The FCC, he said, “is intent on turning the clock back to a time when the industry was incapable of providing consumers the variety of programming it does today.”

Clear Channel executives also said there were flaws in the new definitions, which are based on the Arbitron ratings service’s market boundaries. Among other reasons, they said Arbitron counts too few markets and, in some cases, requires stations to reach a certain level of popularity before being counted.

FCC officials said they would develop rules to define the markets not defined by Arbitron.

Commission officials said they kept the existing ownership caps to promote competition among local stations. The agency said it redrafted the market definition to eliminate anomalies created under the old rules, which let Clear Channel, for example, own six of the eight radio stations in Minot, N.D.

But critics say the new rules contain exceptions that will let big players stay dominant. Allowing companies to sell otherwise prohibited clusters intact, for instance, “is pretty sleazy,” said Andrew Jay Schwartzman, chief of the Media Access Project. “It’s unclear to me if there was much tightening.”