"Lets Create a Cluster of Radio Stations"

By Ken and Kelly Orchard

Orchard Media Services has been on the road again this summer seeing clients and picking up work across the country. We’ve also been performing Voluntary Inspections of Radio and TV stations for the Program connected with the California Broadcasters Association.

The Voluntary Inspection Program has been adopted by about 40 State Associations which in cooperation with the Federal Communications Commission have come up with a "Voluntary Inspection Program where radio and television stations sign up to submit themselves to be inspected through your state association. If the Radio or a TV station is found to be in full FCC Compliance, the nearest FCC Enforcement Bureau office is notified, the station receives a "Certificate of Compliance". The FCC will then not inspect the station for a period of two years. However, there is one caveat. The FCC will respond to any complaint received about a station and carry out an investigation, whether they have received a "Certificate of Compliance" or not. The FCC endorses this program, and we believe it is a worthy investment for all broadcasters.

In our travels to perform these voluntary inspections, we have found that there are a small percentage of stations that receive a certificate without being required to address something at their stations. It could be anything as simple as posting a sign at their tower site, to placing their Chief Operator letter in their Public File, to actions more severe as not having an orderly Public File at all, or ignoring the Main Studio Rules. As we have written time and again, the FCC does not take violations of the rules lightly. Yes, many rules have been relaxed or even deregulated over the years, which makes it even more crucial to obey and adhere to the rules that still remain. Broadcasters still need to educate themselves and educate all their employees, even the receptionist and sales staff.

Now, we’d like to take our readers through a journey of creating a cluster of radio stations. It tends to get quite confusing, but it’s a reality in the broadcasting industry today. We have kept call letters, state and the name of this organization out, but let us point out that the following scenario is real. We are not making up this story just to entertain you. This is an actual situation.

A broadcast group is planning to build a cluster of 4 radio stations. For creative purposes, and to keep things clear, we will call the market place "Cityville". To start with, the group wants to purchase four stations and locate them all in one central location.

Are you ready? Station #1 was easy. It is an AM station with a large building, licensed to Cityville. The current building is perfect for housing the offices and studios and has a decent long-term lease for the new buyer.

Now we are ready to move on to purchase radio station #2. This one is an FM station, and is also licensed to "Cityville". The FM station is located in a different location and the building has high rent. The billing has been suffering, and is not enough to pay the high rent, payroll, utilities and all the other financial obligations associated with radio operations.

You’ve agreed had to spend a great deal of money for station #2 and the seller has accepted a Local Market Agreement (LMA) so you begin operations over the station immediately.

Now things start to get complicated. I hope that this does not get to difficult to follow, but here we go. The seller wants the buyer to relocate Station #2 out of this high rent building, because he can then get out of the lease and won’t be responsible for the financial burden. You decide to move on this quickly, and overnight throw together a studio in the larger building that originally housed radio station #1, the AM station.

Overnight you re-locate the Studio Transmitter Link (STL) and, like magic, both stations are out of the same building. The owner of the #2 station has been able to get out of his lease, and begins selling off the studio equipment. The monthly LMA fee is now a profit to radio station #2’s seller.

Have you figured out the FCC violations so far? Well that’s talk about some of them before we go on the Deal #3 and #4. Station #2, the FM is now operating under an LMA. A copy of that LMA notification was to be sent to the FCC plus a copy placed in the Public File of both stations #1 and #2 station. Since radio station #2 is still the responsibility of the previous owner (who is still the licensee until the FCC approves the consummation of sale, etc) the licensee is still mandated to maintain his own Public File, maintain his own station log, have his own chief operator and keep the station if full operation in case he has to go back on the air.

Additionally, station #2 is required to have a way to broadcast the Public Affairs programming to broadcast the issues that serve the Community of License, which is Cityville. Since he moved out of this high rent office and the studios have been relocated, he has even sold the equipment; station #2 does not have a way to comply with FCC rules and is in violation. If somebody turned #2 owner into the FCC, say a disgruntle employee who was recently terminated due to this new consolidation, the FCC will investigate both station number 1 and 2.

Also station #1 did not file for relocation of that STL for station #2, and either one of these owners failed to notify the FCC that station #2 was located at a different address. Are you still with me? I know it’s confusing. Imagine the dilemma of this true to life broadcast group!

Now it’s time to move on. Lets discuss the purchase of station #3 as we continue to build this cluster of four. Station # 3 is another FM, located in a nearby community, but not licensed to "Cityville". The community of license is actually "SmallTown" and it’s located about 32 miles away from "Cityville".

The signal is strong and it would create another format in this Cluster, which will inevitably be an asset to business. This appears to be an easy deal to purchase station #3. They have required a low down payment and the terms are very agreeable. The rental lease on studio office in "SmallTown" was only on a month-to-month basis, so you close escrow and file your consummation letter to the FCC that the sale has been finalized.

During that first week you realize that it might have been a mistake, as the seller sold you a "bill of goods" as the billing was almost all trade and no cash. Its time to immediately save on expenses, so you throw together another studio back in Building #1 located in CityVille, and hook up another receiver to the satellite located in the rear of the building. You change the call letters right away and you now market this new FM as "The MOOSE". (Or whatever. There are so many "cats", "foxes", "frogs" and "eagles" out there why not make light of it and have a "moose" format just for giggles).

Now that we have eliminated a tremendous amount of expense on station #3 we can cover the payments on the purchase of the station, and the contract to the Satellite Company that provides the new "Moose" format. All is FCC Compliant? Not really.

According to FCC regulations, any station cannot be located more than 25 miles from the City of License without having a studio and office in within their City of License. Since "SmallTown" is 32 miles from "CityVille, there should be a Public File available for the public where they can view it, and there should be a studio and office still located in "SmallTown".

Once again, the group neglected to file an application for the STL to get the Moose format back to the transmitter site in "SmallTown". You are still required to serve "SmallTown" with your public Affairs shows and the station is neglected to do that as well.

In fact, The Moose format is doing so well with the audience that the program director feels that a disruption of public affairs programming would mean that listeners would disappear and never listen to the Moose again!

Now we are ready to add station #4 to complete the cluster. Interestingly enough, station # 3 has served the community to the East of Cityville, station number 4 is licensed to another town, serving the West side of Cityville and located more than 25 miles away on the other side. The confusing thing about station number 4 is that this community is located in a different COUNTY of the state. Here we have a similar situation. The owner wants out and you have the opportunity to relocate and save money. But you’ve still got more violations, including the EAS tests provided by county number two.

This is not a fictitious situation. This is a recent finding of Orchard Media Services just this past month. There are numerous violations to this cluster group. Lets name the violations:

These violations could not only result in thousands in fines if the FCC was to show up unexpectedly and they are not showing good faith to take care of these willful violations.

If the contents of this article confuse you, or you had trouble following the scenario, you aren’t alone. But, it is a real life situation that we recently were asked to assess. My group owners are great at many elements of broadcasting. High ratings and advertising market share are important, we all recognize that.

Unfortunately, many FCC guidelines are blatantly ignored in the race to buy up stations and create valuable properties in marketplaces. Lets reiterate what an FCC Attorney from Washington said,

"Without your license, you have no business". We’re here to help.

Orchard Media Services will come to your station. We will check out your Public Inspection Files, Political Files, EEO Compliance, Station Logs, and EAS Compliance and perform Due Diligence Reports. Orchard Media Services is now on contract with the California Broadcasters Association, as Program Supervisors for the Alternative Inspection Program offered to radio and TV stations. Call Orchard Media Services for questions and information at 760-243-4733 or via email @ PIFILE@aol.com.