Subcap Elimination: Not If But When

FCC Juan Alberto Ayala Translator AbuseThe new Republican led FCC seems to be heading closer and closer to the elimination of the AM/FM ownership subcap.

Speaking at the Hispanic Radio Conference this week, FCC Commissioner Michael O’Rielly said the following about the current ownership limits.

Another issue of interest in the broadcasting area is the FCC’s outdated media ownership limits.

I accept that only some of you may care about media ownership, but I contend that you all should. Artificially limiting your ability to buy or sell radio stations or combine with television or newspapers affects the valuation of your stations, raises the cost for debt, prevents the exploration of market synergies, and keeps you from best serving your communities. I am not going to suggest that consolidation or aggressive purchasing in your market is appropriate. But, preventing you from even considering such deals is harmful to the long term health of your stations.

In the radio sphere, keen interest has focused on the AM/FM subcap limit, which is a part of the Local Radio Ownership Rule. Specifically, our subcap limits prevent any one entity from owning more than a subset of AM or FM stations in a market, with the number dependent on how many stations there are in that market. I suggest to you that the radio industry and others have made a compelling case that these limits no longer make any sense. While we need to look at raising the overall ownership caps within a market, there is little reason to maintain the subcaps.

For some to argue that AM and FM are completely separate and distinct mediums ignores the reality that all media modes, including streaming, satellite and social media, are fighting for the same audience and the same advertising dollars. If the Commission believes that your only competitor is the man or woman sitting next to you, it is sadly mistaken. Essentially, every content distributor is part of one big marketplace. That’s great for consumers, but it means we are imposing discriminatory and harmful limitations on your businesses’ ability to compete.

Others will argue that the subcap limits keep existing stronger and larger AM station owners from selling and shifting to FM stations. In other words, the argument is that subcaps force radio owners to buy what some perceive as the weaker technology AM stations because they are maxed out on FM stations in a market. Even if this was once true, the Commission’s AM radio revitalization efforts, especially giving AM operators the ability to obtain and use FM translators, have curtailed or completely eliminated this distinction by improving the ability of AM radio stations to cover and serve markets.

Moreover, even if bigger AM owners exited, opting for FM stations, it would only increase the chances for new entrants, like Hispanic radio and others, to serve diverse and niche populations. Since minority ownership has been one of the biggest obstacles to modernizing our media ownership rules in the eyes of some, isn’t this potentially a good thing?

As discussed earlier this month when a number of group owners petitioned the FCC, the wheels are in motion for the removal of the subcap currently limiting group owners in markets where they own up to eight stations to only have a maximum of five on one band. The group owners and O’Rielly believe that AM stations through the use of 250 watt maximum translators and streaming are now on equal levels with 100kW FMs in a market as well as national streaming platforms.

Looking at the current Entercom/CBS Radio merger. Under the current rules, Entercom must spin-off 2 FMs in Boston, 1 FM in Los Angeles, 3 FMs in Sacramento, 1 FM in San Diego, 4 FMs in San Francisco, 2 FMs in Seattle, and 1 FM in Wilkes-Barre PA where it will lose its grandfathered status. Should the subcaps be eliminated all Entercom will need to get rid of will be 2 stations regardless of band in Boston, 2 stations in Sacramento, and 3 stations in San Francisco.

  1. Joseph_Gallant says

    Entercom will be happy if the subcap limits are greatly raised or eliminated.

    They might not have to spin-off many (or even any) of the CBS Radio stations they’re purchasing.

    1. miketheradioguy says

      Entercom will still have to divest stations, but only half of what they need to under the current rules.

  2. Steve Varholy says

    Commercial radio is it’s own worst enemy.

  3. miketheradioguy says

    Even with the ownership caps lifted, It’s very likely that Entercom will be forced to spin off the WBZ stations in Boston. I understand that people don’t want the WBZ stations going to iHeartMedia (or any competitor), but unfortunately the Department of Justice may not allow Entercom to own the WBZ stations along with WEEI. As for Sacramento, I was thinking that Entercom would spin off KSFM 102.5 to iHeartMedia, allowing them to re brand the station as Kiss FM and start a Top 40 war in Sacramento. San Francisco will probably see Bonneville re-acquire the stations it sold to Entercom 10 years ago.

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