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The Federal Communications Commission’s new media rules unveiled Monday contain an unanticipated mergers and acquisitions twist that will make it more difficult for radio companies to buy stations in some markets but easier in others. The new rules keep the current radio limits in place but apply a new definition of radio markets based in part on studies by media research firm Arbitron Inc. The new limits are based on census statistics gathered by the New York-based firm that define markets according to the size of a particular city or town. The new market definition will make it more difficult for companies such as industry leader San Antonio-based Clear Channel Communications Inc. to buy more radio stations in most markets. The ruling is also intended to keep other radio groups from growing to a Clear Channel size. Yet the new radio rules will open up some radio markets to more M&A opportunities. The reason: the old market rules defined a market based on overlapping radio signal contours. Because of the way signals projected out from different cities, some towns were incorporated into larger markets. Minot, N.D., for example, was part of a larger market including other towns under the old definition. That allowed one company, Clear Channel, to buy all eight commercial stations in and around Minot. Under the new definition Minot will be a market on its own with eight radio stations instead of in a larger market with 45 outlets. That’s a big difference since the FCC radio rule that permits one company to own eight radio stations only in markets with 45 or more radio stations remains the same. In smaller markets with 15 or fewer radio stations, one company can only own five stations. Clear Channel, however, will be exempt from having to divest any stations in roughly 60 markets, including Minot, where it exceeds the new definition. Blair Levin, an analyst at Legg Mason Inc. in Washington, said the rules were generally implemented with the idea of keeping Clear Channel from growing substantially and restricting another company from following in its footsteps. Clear Channel, the largest U.S. radio group, owns more than 1,225 broadcast outlets. But Levin added that the new market definition could create anomalies that would permit larger radio companies such as Clear Channel to buy more stations in cities and towns where they were previously prohibited from doing so. Large parts of many cities located close to each other, such as Washington-Baltimore or St. Paul-Minneapolis, were considered one market under the old definition. Now, he said, these markets could be redefined as separate markets, permitting further consolidation by large media companies. Dana Frix, partner at Chadbourne & Parke in Washington, said the modern definitions were implemented to appease confused Wall Street investment bankers who generally didn’t understand the previous complex contour rules. Clearer rules will allow more deals. Frix added that the agency’s decision to include for the first time more than 2,000 public radio stations, along with the 12,000 commercial outlets, in the market definition, will enable some not anticipated consolidation in the sector. Non-commercial radio stations are located in many small, mid-sized and large markets and include many Christian broadcasting outlets and college radio stations. The new market definition, however, only covers about 80 percent of U.S. radio stations. The FCC said Monday it will continue to use the radio signal system for the remaining 20 percent of the U.S. market until it completes a rule that will redefine markets not covered by Arbitron’s geographic census-driven system. An FCC source said he anticipates the new rule to be adopted within the next few months. The source declined to provide any further details. Andrew Lipman, a partner at Swidler, Berlin, Shereff, Friedman, said he anticipates Clear Channel will appeal the new market definition in court. Another attorney, requesting anonymity, said he thought that Clear Channel will argue that Congress established the radio rules in 1996 using the old market definitions and a new system will require modern regulations. The new radio rules are part of a far-reaching FCC decision Monday to permit large and medium-sized newspaper and television companies to start buying media outlets in markets where they were previously prohibited. The new media rules were not intended to deregulate mergers and acquisitions among radio stations.

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