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Midwest Today, Spring 1999
Reclaiming the AirwavesPrior to 1996, the biggest radio station group in the country
owned 40 stations; now, some own ten times that number.
Over 4,000 of the nation's 10,455 commercial radio stations have
been sold in just two years. The country has lost an average of
three owners in each large market and one in each small market.
The top ten owners have doubled their holdings, the number of
independently-owned stations has been cut in half, and the percentage
of stations owned by minorities has dropped from 3.1% to 2.8%.
Companies that have embarked on a buying binge have snapped up
$35 billion worth of properties. The consolidation allows the
biggest operators to reach the larger audiences that attract national
advertisers, and also helps the companies boost profits by dividing
costs across a larger number of stations.
The ultimate objective of the big radio owners was perhaps best
articulated by Sam Zell, a Chicago real estate billionaire and
chairman of Jacor Communications, the nation's second-largest
owner of radio properties. Zell recalled the radio business as
being "depressed" when he got involved in 1991. He said
the industry was "over-leveraged and fragmented with mom-and-pop
operations all over the country."
But then came deregulation -- what Zell describes as an "extraordinary,
once-in-a-lifetime opportunity." Revealingly, he says "I
was motivated by knowing that in 1920, there were 200 car companies
in the United States. And I think since the mid-1950s, there have
been only three."
Is this what Congress intended would happen to American radio,
and where is the evidence of public support for this?
The trouble is, usually the only way the big boys can service
their big debts is to cut operating costs. They often do so using
Draconian methods. One of the saddest spectacles is how some prestigious,
pioneering broadcasters -- stations which signed on in the early
1920s, for instance, and built proud histories of service to the
public -- have been decimated by the big operators.
What typically happens is that the new guys come in and ruthlessly
clean house. They fire longtime and popular air personalities
so they can hire people at less cost, trim back news departments,
abandon local autonomy in program decisions and eliminate budgets
earmarked for community service. They often bring multiple stations
under one roof and share air personnel. Aside from ruining staff
morale, they shortchange the listener. To fill airtime, many of
them rely on satellite-fed program content produced in some far-distant
place - shows like Rush Limbaugh, Dr. Laura or Art Bell. And/or
they rely on automated music run by computer.
Smaller suburban and outlying rural signals are often "moved
in" toward larger and more lucrative urban markets as broadcast
companies search for new properties. The result has been a loss
of local service to the stations' "Community of License"
and an excessive concentration of stations in the already congested
larger urban areas.
Many rural communities across the Heartland have seen their hometown
radio station abandon most or all of its local content. In many
cases, entire rural regions are without any local radio, especially
at night.
In the case of severe weather or other emergency, there is often
no live radio to offer news and information. Local businesses
lose when their hometown station shifts focus (and rates) to a
larger metro area.
In the urban markets, ownership consolidation and its resulting
increase in the street price of existing properties has forced
broadcasters to abandon service to niche market segments, in favor
of trying to appeal to the broadest common denominator.
Robert McChesney, an associate professor of journalism at the
University of Wisconsin, bemoans this trend. "The electronic
medium that should be the most de-centralized and the most open
to local access and local ownership is becoming the most centralized
and has the least access of any medium," he observed.
Renegade Radio
Enter the radio "pirates" or "micro broadcasters"
as they prefer to be called - low-power and community-based, albeit
illegal stations run by a ragtag group of latter-day First Amendment
champions.
They are an eclectic mix of radical, conservative and, for the
most part, selfless individuals who are filling a niche in countless
communities throughout the United States. The programming they
offer, often on a part-time basis and but a few hours a day or
week, is diverse, edgy, educational or just plain fun.
What they lack in smooth professional voices, they make up for
in enthusiasm for serving their local communities.
From farmers' fields to college dorm rooms, dance clubs to dining
rooms, trailers, attics, basements, backpacks and even portable
units hooked to car batteries, these guerrilla broadcasters beam
their illicit fm signals with a power of anywhere from only ten
to 100 watts. They are mere flyspecks compared with the 3,000-
to 100,000-watt commercial FM goliaths that blanket entire regions.
These radio renegades, says Paul McMasters, First Amendment ombudsman
for the Freedom Forum, "are the broadcast equivalent of the
old anonymous pamphleteers or alternative newspapers."
McMasters says microbroadcasters are "more democratic right
now, in the sense that they can reach the people that can't read
and the people that don't have access to the Internet."
Yet Richard Lee, chief of the Fed-eral Communications Commission's
compliance bureau, bragged to a group of commercial broadcasters
that "in the 13 months I have been on the job, we have shut
down 325 pirate stations."
Claiming it's worried about dial clutter and interference, the
FCC has dispatched federal agents in a latter-day version of the
old g-men raids on moonshine stills.
McMasters says "I think that is scary in light of the fact
that the government is slapping these people around with great
frequency and force."
He may be right about the overkill. Clandestine broadcasters have
been hunted down and subjected to law enforcement muscle, including
the use of choppers, submachine guns, flak jackets and other equipment
and tactics usually seen in the takedown of killers or major drug
lords.
Tampa, Fla. radio pirate Doug Brewer says his neighborhood was
cordoned off and he was handcuffed in a chair for two hours as
agents took thousands of dollars' worth of electronic equipment,
only some of which was used to broadcast music on a low-power
station beamed out of his house.
"I'm not a militia guy, and we never broadcast anything political
on this station -- just music," said Brewer, 43. "Why
in the hell would you consider me such a threat? They were treating
me like a drug cartel guy or a hit man."
Since 1991, Black Liberation Radio, a small unlicensed pirate
radio station in Decatur, Illinois transmitting with 15 watts,
has defied authorities and found ways to continue its broadcasts.
Napoleon Williams and Mildred Jones, the owners, have been fined,
imprisoned, and had their equipment seized.
The Illinois Attorney General's office took the unusual step of
launching the Decatur Police on a three-hour raid of the Williams
home. Police cordoned off a two block radius around the house,
cut BLR's power, batter-rammed the front door, and entered in
full riot gear with gas masks and automatic weapons.
Williams was subsequently convicted of an obscure charge called
"felony eavesdropping" because he tape recorded conversations
he had on the phone with state officials and then played them
on his station without their permission.
It's not just urban-based micro-radio operators who are getting
into trouble. Roy Neset is a 51-year-old wheat farmer in North
Dakota who got tired of the programming from his town's commercial
station and started sending a satellite feed of right-wing talk
shows into his field when he plows.
"I don't have time to run a radio station -- I'm a farmer,"
Nesit explains. "I just want to have something worthwhile
to listen to as I work." But the fcc shut him down too, prompting
Nesit to remark, "I didn't know what I was getting into when
I started this, but now Big Brother is really flexing his muscle."
Pirates say the fcc is just kowtowing to the National Association
of Broadcasters, a powerful lobbying group that represents licensed
stations. Pirates suspect commercial stations fear their already
diminishing audiences will be claimed by their low-power rivals.
Has the FCC lost sight of its charter?
The FCC was established by the Communications Act of 1934, and
was given the responsibility of making a "fair, efficient
and equitable distribution of ra-dio service" to the various
communities of the United States.
But, says Louis Hiken, a lawyer for radio pirates, "When
the law says you have to regulate radio stations in the public
interest and you create a regulatory scheme that says nobody but
the very rich has access to the airwaves, that's unlawful."
Until 1980, students and nonprofit or-ganizations could get a
"Class d" license that allowed them to operate a station
of ten watts or less. But that changed when commercial interests
and the Corpora-tion for Public Broadcasting were successful in
getting Congress to repeal those licenses, claiming too many "un-professional"
radio stations were cluttering the airwaves.
Takes Deep Pockets
Launching a full-size, commercial radio station can cost as much
as $100,000 to $250,000 in fcc licensing fees and engineering
studies, plus capital costs that can easily exceed $1 million.
Rick Sellers, who bought an existing AM station -- KMRY
in Cedar Rapids, Iowa -- says that even with an uncomplicated
license transfer, his costs including law-yer's fees, were in
excess of $13,000 for the paperwork alone.
Buying a new am frequency is next to impossible in most markets,
because so few are available. Even if you've spent money on an
engineering study and find a new frequency, guess what? The FCC
then opens that frequency up for others to apply for and gives
the license to the "most worthy" applicant, or holds
an "auction" where the highest bidder wins.
FCC red-tape runs the bill up for anyone trying to acquire either
an am or fm station, obviously stacking the deck in favor of the
rich guys.
Since stations cost so much to start, broadcasters rely on shortcut
methods to operate. Fortunately for them, advances in technology
enable station owners to get by on skeleton staffs.
In the old days, when transmitters had vacuum tubes and unstable
crystals, an engineering department was required to monitor operations
and thus assure license compliance. These days, transmitters are
solid state and even the small stations can be run by remote control.
A computer monitors transmitter function, and dials a predetermined
call list to alert personnel after hours if there is a problem.
Then it supplies a menu of op-tions and recommendations, enabling
a solution to be implemented by the mere press of a key on the
touch-tone phone.
Stations no longer have to employ people with fcc technical licenses
to oversee operations. A secretary will do as the officially listed
person of accountability.
Almost overnight, for good or bad, radio has been transformed.
The big operators "don't think long-term," observes
Sellers, who has been in radio for 33 years but last year decided
it was time to go into business for himself. He's bucking the
trend with his independent-owned station, that's for sure.
The problem is especially acute in the nation's Top 50 markets,
where half the stations now are part of a broadcasting chain,
according to numbers compiled by Radio Business Report, an authoritative
Alexandria, Va. trade publication.
Critics say that in the midst of all this acquisition fever, listeners
are being left out of the equation. As homogenized programming
takes over, listeners are tuning out. "America's Most Trusted
Name in music research for radio," The Gavin Report, recently
said that overall radio listenership has "hit its lowest
point since 1981." It noted that "Since [1989] the declines
have been fairly steady, representing roughly a 9% loss over the
last nine years." Gavin quoted several possible reasons for
that slippage, including "...homogenized format offerings"
and "...a trend away from 'localness.'"
Sacrificing local content will also make it difficult for over-the-air
stations to compete with the satellite-delivered cd-quality audio
programming that some companies will soon offer nationwide.
High-Risk Gamble?
With all the big money on the line, there are some who are worried
about the financial future of radio. Rick Sellers thinks the same
fate that befell some stations in the 1980s could happen again
if cash flow falters. "The multiples are sky high now,"
Sellers ob-serves, referring to the over-valuation of station
properties. "The debt service becomes so steep that it breaks
your back. And that happened in the late '80s, when banks started
owning radio stations they really didn't want to own because the
owners were in technical default. If enough of these are in default,
the value drops out, the bottom drops out, and that's what happened..."
Nervous investors are taking a look at Chancellor, for instance,
and wondering if it will be able to follow through on its plans
to own the largest group of u.s. radio stations. Last month the
company said that it will try to sell all or part of itself to
boost its stock. Currently it's trading at 18 times cash flow,
whereas rival Clear Channel Communications Inc. trades at 30 times
cash flow and Infinity Broadcasting Corp. at 35 times.
A "multiple" is based on projected aft-er-tax cash flow,
a key measure of the performance of broadcasters, which typically
carry heavy debt loads. After-tax cash flow is defined by the
company and analysts as earnings before depreciation, amortization
and other non-cash charges, and before deferred taxes, capital
expenditures and corporate overhead.
The Pirates versus the Big League
While Disney/ABC radio buys up eight stations in a market, making
it virtually impossible for others to compete, the micro stations
with their volunteer staffs are able to get on the air cheaply.
There are an estimated 1,000 micro stations nationwide -- nearly
double in the last year. They spice the airwaves of ur-ban cauldrons,
Midwestern cornfields and college hubs.
Stephen Dunifer, 46, a self-taught electronics engineer and activist,
launched Radio Free Berkeley in April 1993.
After the FCC forced Dunifer off the air, he began broadcasting
his community news, political commentary and eclectic music from
a backpack, hiking to different locations in the northern California
hills each Sunday night to avoid detection. The FCC fined him
$20,000 and sought an injunction to shut him down.
But for three years, federal Judge Claudia Wilken refused to grant
the injunction. While she reviewed Dunifer's claim that the fcc
might be violating his Constitutional right to free speech, Dunifer
and other radio pirates were emboldened to operate more openly.
Here in the Midwest there was Beat Radio in Minneapolis; Iowa
City Free Radio; Free Radio Prison City in Jackson, Michigan;
Radio Free Indianapolis; kaw in Lawrence, Kansas and others.
Unfortunately for the radio pirates, Judge Wilken finally sidestepped
Dunifer's Constitutional challenge by recently ruling that since
pirates fail to apply for an fcc license, they lack the legal
standing to make these arguments. But there is hope.
FCC Opens Door To Low Power Radio
To the consternation of many commercial stations, the FCC's new
Chairman, William Kennard, says he would be open to officially
sanctioning microstations.
"There are fewer (radio) opportunities for small businesses,
minorities and church groups," Kennard says. "I'm very
sympathetic to the view of some of these microbroadcasters...
I believe we have an obligation to explore new ways to open the
doors of opportunity to use the airwaves, particularly as consolidation
closes those doors for new entrants."
FCC commissioners Gloria Tristani and Susan Ness say they think
consolidation is happening too fast. Tristani fears a loss of
localism and called station owners a vanishing breed.
Kennard made it clear that the FCC would not ignore the low-power
issue simply because "it's inconvenient" for existing
broadcasters. Recently the commission announced it wanted input
on the idea of licensing low-power fm stations (LPFM). It said
that new LPFM stations could provide a low-cost means of serving
urban communities and neighborhoods, as well as populations living
in smaller towns and communities. It said it had received over
13,000 inquires in the last year from persons interested in starting
a low power radio station.
It proposed one level with a power and antenna height of 1,000
watts and 60 meters, which would produce a service area with a
radius of about 8.8 miles. It proposed another service with secondary
use status to operate at maximums of 100 watts and 30 meters with
a service radius out to 3.5 miles. It also asked for comments
on a one- to ten-watt microradio class of stations with an antenna
height of 30 meters and a service radius of one to two miles.
Already there are even attempts to commercialize pirate radio.
Community Radio Coalition wants the FCC to control programming
and is lobbying for restrictions that would assure LPFM stations
are "professional" and full-time only, with out-of-towners
barred but local companies allowed to be as big as they want to
be.
But Don Schellhardt of the Amhearst Alliance opposes this and
asks "Which kind of radio station is more in the public interest:
A ten-watt part-time, time-shared in South Side Chicago that may
someday lead some teenagers out of the ghetto or a 100-watt full-time
station by The Loop that blasts out 'hard rock' to enrich a group
of North Shore investment bankers?
"If newcomers, and even oddballs, can't get a foothold in
low-power radio and new stations can't deal with time and/or income
limitations by 'entering the fray' part-time, then where is the
payoff from low-power radio for society?" He says "I
want them to be small enough so that everyday Americans - and
even more so members of marginalized, excluded groups -- can afford
to get on the air."
Not unexpectedly, any hint that the FCC may allow low-power stations
has inflamed the National Association of Broadcasters (NAB), who
are mounting an aggressive campaign to fight such a move.
Sen. John McCain (R-Arizona), for instance, has been actively
opposing opening up the airwaves for more diversity.
And Rep. Billy Tauzin, a Republican from Louisiana, who chairs
the House telecommunications subcommittee which oversees the FCC,
is widely viewed as the water boy for big broadcasters. Of late
he has subjected William Kennard, the first black chairman of
the five-person commission, to some heavy-handed threats.
Tauzin wrote a letter challenging the FCC's authority to even
explore the idea of licensing low-power stations, and his spokesman,
Ken Johnson, heightened the attempts at intimidation by warning
that "Kennard runs the risk of adding fuel to our efforts
to radically reform the FCC from top to bottom."
Chairman William Kennard fired back that "I'm sure that...Rep.
Tauzin does not want to limit Americans' choices to who or what
they can hear on the radio. The radio airwaves are big enough
for all of us."
Michael Bracy, executive director of the Low Power Radio Coalition,
a nonprofit group in favor of the FCC plan, says "It would
truly be a shame if politics and the companies interested in maintaining
the status quo got in the way."
The Federal Communications Commission is also considering proposals
to tighten current restrictions on station ownership. Stricter
rules could slow the rapid pace of consolidation that has shaped
the radio industry since the 1996 Telecommunications Act. The
FCC is likewise considering whether to eliminate so-called local
marketing arrangements that allow a single person or group to
own one station in a market while managing another -- a way of
skirting current re-strictions on common ownership.
Jeffrey Marcus, CEO of Chancellor Media Corp., told federal regulators
that current broadcast ownership rules are outdated and thwart
competition.
But entertainer Stevie Wonder, who owns a station in California
which targets a black audience, says that's the opposite of the
truth. He notes that independent and minority-owned stations "are
now an endangered species pursued by large corporate predators"
-- and that certainly doesn't promote competition or diversity.
Rick Sellers is one commercial broadcaster who loves the idea
of micro radio -- if it's under 100 watts and if the technical
issues such as interference can be worked out. The problem right
now, he says, is that many pirates are not technically well-backgrounded,
so their make-shift equipment produces harmonics or additive signals
that have been known to interfere with aircraft or emergency communication.
But he thinks the fcc could cut red tape, assign frequencies,
and help low power stations with equipment that is properly filtered,
and still keep the cost to under $1,500.
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