Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

+---------------------------------+----+------------------------------+
| In the Matter of                | )  | File Nos. BTCCT-20011101ABK, |
|                                 |    | ABT,                         |
| **Telemundo Communications      | )  |                              |
| Group, Inc.**                   |    | ABW, ABY, ACA-ACC, ACE,      |
|                                 | )  |                              |
| (Transferor)                    |    | ACI, ACN and ACP             |
|                                 | )  |                              |
| and                             |    | BTCTTL-20011101-ABM-S        |
|                                 | )  |                              |
| **TN Acquisition Corp.**        |    | ABX, ACF-ACH, ACO, and       |
|                                 | )  |                              |
| (Transferee)                    |    | ADK                          |
|                                 | )  |                              |
| For Consent to the Transfer of  |    | BTCTTA-20011101ABL           |
| Control of                      | )  |                              |
|                                 |    | BTCTTV-20011101ACJ           |
| *Estrella License Corporation*  | )  |                              |
|                                 |    | BTCTT-20011101ACK-L          |
| Licensee of Television Stations | )\ |                              |
|                                 | )\ | FIN: 15772, 19780, 19783,    |
| KVEA(TV), Corona, California    | )\ | 20373,                       |
|                                 | )\ |                              |
| K47GD, San Luis Obispo,         | )\ | 26229, 26231, 35994, 64871,  |
| California                      | )\ |                              |
|                                 | )\ | 64973, 64974, 64975, 64976,  |
| *Telemundo of Los Angeles       | )\ |                              |
| License Corp.*                  | )\ | 64979, 64981, 64982, 64983,  |
|                                 | )\ |                              |
| Licensee of Television Stations | )\ | 64984, 64987, 64969, 64990,  |
|                                 | )\ |                              |
| KWHY-TV, Los Angeles,           | )  | 64991, 64996, 64997, 65000,  |
| California                      |    |                              |
|                                 | )  | 67532, 67545, 70119 and      |
| KWHY-LP, Santa Barbara,         |    |                              |
| California                      | )  | 73333                        |
|                                 |    |                              |
| *Telemundo of Florida License   | )  |                              |
| Corporation*                    |    |                              |
|                                 | )  |                              |
| Licensee of Television Station  |    |                              |
|                                 | )  |                              |
| WSCV(TV), Fort Lauderdale,      |    |                              |
| Florida                         | )  |                              |
|                                 |    |                              |
| *Telemundo of Galveston-Houston | )  |                              |
| License*                        |    |                              |
|                                 | )  |                              |
| *Corporation*                   |    |                              |
|                                 | )  |                              |
| Licensee of Television Station  |    |                              |
|                                 | )  |                              |
| KTMD(TV), Galveston, Texas      |    |                              |
|                                 | )  |                              |
| *Telemundo of Northern          |    |                              |
| California License*             | )  |                              |
|                                 |    |                              |
| *Corporation*                   | )  |                              |
|                                 |    |                              |
| Licensee of Television Stations | )  |                              |
|                                 |    |                              |
| KSTS(TV), San Jose, California  | )  |                              |
|                                 |    |                              |
| K15CU, Salinas, California      | )  |                              |
|                                 |    |                              |
| KEJT-LP, Salt Lake City, Utah   | )  |                              |
|                                 |    |                              |
| K47DQ, Sacramento, California   | )  |                              |
|                                 |    |                              |
| K52CK, Stockton, California     | )  |                              |
|                                 |    |                              |
| W32AY, Boston, Massachusetts    | )  |                              |
|                                 |    |                              |
| K27EI, Santa Maria, California  | )  |                              |
|                                 |    |                              |
| K52FF, Reno, Nevada             | )  |                              |
|                                 |    |                              |
| K61FI, Modesto, California      | )  |                              |
|                                 |    |                              |
| Telemundo of San Antonio        | )  |                              |
| License Corporation             |    |                              |
|                                 | )  |                              |
| Licensee of Television Station  |    |                              |
|                                 | )  |                              |
| KVDA(TV), San Antonio, Texas    |    |                              |
|                                 | )  |                              |
| *WNJU License Corporation*      |    |                              |
|                                 | )  |                              |
| Licensee of Television Station  |    |                              |
|                                 | )  |                              |
| WNJU(TV), Linden, New Jersey    |    |                              |
|                                 | )  |                              |
| Telemundo of Steamboat Springs  |    |                              |
| Colorado License Corporation    | )  |                              |
|                                 |    |                              |
| Licensee of Television Stations | )  |                              |
|                                 |    |                              |
| KMAS-TV, Steamboat Springs,     | )  |                              |
| Colorado                        |    |                              |
|                                 | )  |                              |
| KSBS-LP, Denver, Colorado       |    |                              |
|                                 | )  |                              |
| KMAS-LP, Denver, Colorado       |    |                              |
|                                 | )  |                              |
| K34FB, Pueblo, Colorado         |    |                              |
|                                 | )  |                              |
| Telemundo of Puerto Rico        |    |                              |
| License Corporation             | )  |                              |
|                                 |    |                              |
| Licensee of Television Stations | )  |                              |
|                                 |    |                              |
| WKAQ-TV, San Juan, Puerto Rico  | )  |                              |
|                                 |    |                              |
| W09AT, Fajardo, Puerto Rico     | )  |                              |
|                                 |    |                              |
| W32AJ, Utuado, Puerto Rico      | )  |                              |
|                                 |    |                              |
| W68BU, Adjuntas, Puerto Rico    | )  |                              |
|                                 |    |                              |
| Telemundo of Colorado Springs,  | )  |                              |
| Inc.                            |    |                              |
|                                 | )  |                              |
| Licensee of Television Stations |    |                              |
|                                 | )  |                              |
| K49CJ, Colorado Springs,        |    |                              |
| Colorado                        | )  |                              |
|                                 |    |                              |
| *Telemundo of Dallas License    | )  |                              |
| Corporation*                    |    |                              |
|                                 | )  |                              |
| Licensee of Television Station  |    |                              |
|                                 | )  |                              |
| KXTX-TV, Dallas, Texas          |    |                              |
|                                 | )  |                              |
| *Video 44*                      |    |                              |
|                                 | )  |                              |
| Licensee of Television Station  |    |                              |
|                                 | )  |                              |
| WSNS-TV, Chicago, Illinois      |    |                              |
|                                 | )  |                              |
|                                 |    |                              |
|                                 | )  |                              |
|                                 |    |                              |
|                                 | )  |                              |
|                                 |    |                              |
|                                 | )  |                              |
|                                 |    |                              |
|                                 | )  |                              |
+---------------------------------+----+------------------------------+
|                                 |    |                              |
+---------------------------------+----+------------------------------+

**MEMORANDUM OPINION AND ORDER**

**Adopted: April 9, 2002 Released: April 10, 2002**

**By the Commission: Commissioner Copps approving in part, dissenting in
part, and**

**issuing a statement.**

# 

# I. Introduction

1.  The Commission has before it for consideration the applications for
    consent to the transfer of control of eleven full power television
    stations and seventeen low power and television translator stations
    held by subsidiaries of Telemundo Communications Group, Inc.
    (Telemundo) from Telemundo to TN Acquisition Corporation, a
    subsidiary of the National Broadcasting Company, Inc. (NBC). NBC has
    requested a twelve-month period of time to come into compliance with
    Section 73.3555(b) of the Commission's Rules in order to permit it
    to temporarily own three television stations in the Los Angeles
    television market. [^1] A coalition of Hispanic public interest
    groups (Hispanic Groups)[^2] filed a petition to deny the
    transaction and Paxson Communications Corporation (Paxson) filed a
    petition to deny and request for declaratory ruling.[^3] For the
    reasons stated below, we deny the Hispanic Groups' and Paxson's
    petitions, grant in part and deny in part Paxson's request for
    declaratory ruling, admonish NBC and Paxson for their actions, grant
    NBC's request for a twelve-month period of time to comply with the
    television duopoly rule, and grant the applications.[^4]

2.  As a result of the transaction, television duopolies will be formed
    in the New York, Los Angeles, Chicago, Dallas and Miami Designated
    Market Areas (DMAs). NBC has made showings that these television
    duopolies will comply with our local multiple ownership rules,
    except in the case of Los Angeles. There, NBC would own three
    television stations in the same television market, which is not
    permitted by our television duopoly rule. These stations are:
    KNBC-TV, Channel 4 (NBC), Los Angeles, which NBC presently owns;
    KWHY-TV, Channel 22 (TEL), Los Angeles; and KVEA(TV), Channel 52
    (IND), Corona, both of which NBC is acquiring from Telemundo. The
    applicants have demonstrated that ownership of any two of these
    stations would comply with our rules, and NBC requests a
    twelve-month period of time to come into compliance with the
    multiple ownership rules which will permit it time to divest
    KVEA(TV).

    **II. BACKGROUND**

3.  On November 1, 2001, NBC and Telemundo filed applications seeking
    Commission consent to the transfer of control of corporations
    holding the licenses of eleven full power television stations and
    seventeen low power and television translator stations (Telemundo
    Stations). NBC is the licensee of thirteen full power and two low
    power and television translator stations. NBC is a wholly-owned
    subsidiary of General Electric Company (GE).

4.  Telemundo has six stockholders: Station Partners, LLC (55.48%
    voting, 29.35% equity), Bron-Villanueva Capital, LLC (3.33% voting,
    5.29% equity), TLMD, LLC (0.59% voting, 0.94% equity), Liberty
    TelemundoNet, Inc. (24.92% voting, 39.56% equity), and Sony Pictures
    Entertainment Inc./SPE Mundo Investment, Inc. (15.67%, 24.87%
    equity). The single majority shareholder of Telemundo is Station
    Partners, LLC, which holds a direct 55.48% voting interest in
    Telemundo and controls 80.40% of the voting interest in Telemundo by
    virtue of an irrevocable proxy it holds from Liberty TelemundoNet,
    Inc. (24.92% voting interest).[^5] The four members of Station
    Partners, LLC are: Council Tree Hispanic Broadcasters, LLC (CTHB);
    BCF Media, LLC; Villanueva Investments, Inc.; and the Bron 2000
    Trust. CTHB is the managing member of Station Partners, LLC and it
    holds a 65.96% voting interest therein.

5.  Pursuant to an Agreement and Plan of Merger executed October 11,
    2001, NBC will acquire all of the capital stock of Telemundo through
    a merger of Telemundo into TN Acquisition Corp. for consideration in
    the amount of approximately \$1.98 billion (excluding the debt of
    Telemundo that NBC will assume). Specifically, each share of common
    stock and preferred stock of Telemundo will be converted, at the
    election of each stockholder, into cash and/or the common stock of
    GE. The exchange ratio will be determined based on the average of
    the daily volume-weighted sales price per share of the common stock
    of GE on the New York Stock Exchange for each of the ten consecutive
    trading days ending on the fourth trading day prior to the closing
    on the merger. TN Acquisition Corp. will then be a wholly-owned
    subsidiary of GE.

    **III. DISCUSSION**

    **A. [Introduction]{.underline}**

6.  Section 310(d) of the Communications Act provides that no station
    license shall be transferred or assigned until the Commission, upon
    application, determines that the public interest, convenience and
    necessity will be served thereby.[^6] We generally consider whether
    the proposed transaction will be consistent with the Communications
    Act and our rules and, in addition to complying with those rules,
    whether the transaction would otherwise serve the public interest.

7.  Under Section 309(d) of the Communications Act, there is a two-step
    test for determining whether a petition to deny raises issues
    requiring that a transfer or assignment application be designated
    for hearing.[^7] First, the petition to deny must set forth
    "specific allegations of fact sufficient to show that . . . a grant
    of the application would be *prima facie* inconsistent with \[the
    public interest\]."[^8] Second, if the Commission concludes, based
    upon the totality of the evidence, that there is a "substantial and
    material question of fact" concerning whether the grant of the
    application would serve the public interest[^9] it must formally
    designate the application for a hearing in accordance with Section
    309(e) of the Communications Act.[^10]

8.  To satisfy the first prong of the test, a petitioning party must set
    forth allegations, supported by affidavit, that constitute
    \"specific evidentiary facts, not ultimate conclusionary facts or
    mere general allegations ....\"[^11] The Commission determines
    whether a petitioner has met this threshold inquiry in a manner
    similar to a trial judge\'s consideration of a motion for directed
    verdict: \"if all the supporting facts alleged in the affidavits
    were true, could a reasonable fact finder conclude that the ultimate
    fact in dispute had been established.\"[^12]

9.  If the Commission determines that a petitioner has satisfied the
    threshold standard of alleging a *prima facie* inconsistency with
    the public interest, it must then proceed to the second phase of the
    inquiry and determine whether, \"on the basis of the application,
    the pleadings filed, or other matters which \[the Commission\] may
    officially notice,\" there is a \"substantial and material question
    of fact.\"[^13] If the Commission concludes that the \"totality of
    the evidence arouses a sufficient doubt\" as to whether grant of the
    application would serve the public interest, the Commission must
    designate the application for hearing pursuant to section
    309(e).[^14]

10. For the reasons set forth below, we find that neither the Hispanic
    Groups or Paxson have raised a substantial and material question of
    fact warranting designation for hearing of the Telemundo
    applications. We further find, given the totality of the evidence,
    that grant of the Telemundo applications would serve the public
    interest.

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B.  **[Hispanic Group's Petition to Deny]{.underline}**

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11. The Hispanic Groups ask the Commission to deny the various transfer
    applications because they claim the applications are insufficient on
    their face to satisfy legislative and administrative standards.
    Alternatively, the Hispanic Groups ask that NBC and Telemundo be
    directed to supply "missing information" and open another
    opportunity for public comment. Specifically, the Hispanic Groups
    allege that NBC has not demonstrated that grant of the applications
    would serve the public interest as required by Section 310(d) of the
    Communications Act of 1934,[^15] arguing that "although NBC is
    qualified to operate and to serve as the transferee of broadcast
    licenses, insufficient information is provided to allow the
    Commission to grant this transfer on a public interest
    determination." The Hispanic Groups note that, pursuant to the
    Communications Act, the Commission must make an affirmative
    determination that the public interest would be served by a grant of
    the transfer applications. The Hispanic Groups claim that NBC has
    not shown how its ownership of Telemundo will result in Telemundo
    becoming a more effective competitor to its chief Spanish language
    programming rival -- Univision, as NBC claims. The Hispanic Groups
    argue that NBC has not addressed "strategic matters like budgetary
    measures and timetables" to develop Spanish-language programming.
    They contend that NBC must demonstrate that its emphasis on
    competition will not be "at the expense of programming dilution by
    limiting programming sources." The Hispanic Groups also argue that
    NBC has not shown that its ownership of Telemundo will ensure
    Hispanic employment at the Telemundo stations. They contend that NBC
    must describe what will happen to the stations' Hispanic employees
    when their operations are eventually combined.

12. The Hispanic Groups are also concerned that, if NBC follows through
    on its promise to operate KNBC-TV and KWHY-TV independently from
    KVEA, that this will result in the Hispanic employees of KVEA being
    "deprived of an opportunity to interact with and influence the
    programmers" at the other stations.

13. NBC, Telemundo and Council Tree all oppose the Hispanic Groups'
    Petition. Telemundo argues that Section 309(d) and (e) of the
    Communications Act place the burden on a petitioner to deny to
    demonstrate that grant of the application will not serve the public
    interest. NBC, Telemundo and Council Tree argue that the Hispanic
    Groups have not met this burden. Telemundo maintains that the
    transfer applications (filed on the requisite FCC Form 315) were
    complete and provided all necessary documentation required by the
    rules. NBC states that the inquiries demanded by the Hispanic Groups
    concerning NBC's proposed management and programming of the
    Telemundo stations are not within the scope of the Commission's
    public interest evaluation. As Council Tree points out, the Hispanic
    Groups have conceded that NBC is qualified to be the licensee of
    Telemundo's stations. No further inquiry is justified or required,
    contend NBC and Telemundo. NBC states that it is not *per se*
    required to make a showing that its ownership of the Telemundo
    stations will result in more diverse programming, other than perhaps
    in support of its temporary request.

14. Further, NBC and Council Tree argue that NBC is not required to
    submit detailed information concerning its post-merger employment
    plans. Council Tree notes that the Commission's former Equal
    Employment Opportunity rules have twice been vacated by the U.S.
    Court of Appeals for the District of Columbia Circuit and the
    Commission would have no rules in place under which to evaluate such
    a submission.[^16] Contrary to the Hispanic Groups' assertion, NBC
    and Telemundo maintain that the merger will enhance programming
    diversity by meeting the needs of a broad segment of the
    Spanish-speaking population.

15. The Hispanic Groups concede that NBC is qualified to act as the
    licensee of the Telemundo Stations. They suggest, however, that we
    should withhold a grant on the transfer applications because NBC has
    failed to demonstrate how the Telemundo Stations will continue to
    meet the needs of the Hispanic community when NBC takes over
    operation of the stations. We see no basis in the record here to do
    so. Moreover, we note that NBC has pledged to continue the
    Spanish-language programming at the Telemundo Stations.

16. Similarly, we do not find that the Hispanic Groups have raised a
    substantial and material question of fact with respect to the
    employment matters contained in their petition to deny. The Hispanic
    Groups have provided no evidence, other than their own opinion, that
    Hispanic employment will suffer if NBC is permitted to own the
    Telemundo Stations. To the extent that such allegations imply that
    NBC may intentionally discriminate against certain employees during
    the term of a temporary common ownership as it endeavors to keep the
    operation of its Los Angeles station separate from that of
    Telemundo's Los Angeles stations, we find no support for this
    contention. We accept NBC's representation that it is simply taking
    steps to prevent the concentration of control of its television
    stations during the temporary period of time that it is permitted to
    own three television stations in the Los Angeles market. This does
    not translate into intentional discrimination on the part of a
    licensee.[^17] Therefore, we conclude that the Hispanic Groups have
    not met the standard under Section 310(d) of the Act and we deny
    their petition to deny. [^18]

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B.  **[Paxson's Petition to Deny and Request for Declaratory
    Ruling]{.underline}**

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17. Paxson filed a Petition to Deny the NBC/Telemundo transaction and a
    separate Request for Declaratory Ruling.[^19] In the Petition to
    Deny, Paxson asks that, if pursuant to the Request for Declaratory
    Ruling, the Commission finds that NBC has violated the multiple
    ownership rules, it should deny the Telemundo applications. In light
    of our decision herein with respect to the Request for Declaratory
    Ruling, we deny Paxson's Petition to Deny.

18. Furthermore, Paxson also notes that it has initiated an arbitration
    proceeding with the American Arbitration Association in Atlanta by
    filing a Statement of Claim against NBC. The Statement of Claim
    alleges that NBC's planned acquisition of Telemundo violates
    provisions of NBC's agreements with Paxson because it would prevent
    NBC from following through with its purchase of Paxson. The
    Statement of Claim requests an order enjoining NBC from consummating
    the Telemundo transaction. Paxson asks that the Commission withhold
    action in this case until the arbitration proceeding has been
    completed. The matters before the arbitrator are private contractual
    disputes. We have consistently held that the Commission is not the
    proper forum for resolving such private matters.[^20] Therefore, we
    will not withhold action or condition our decision on the outcome of
    the arbitration proceeding. Our consent does not require
    consummation prior to appropriate resolution of the parties'
    contractual dispute and does not, therefore, prejudice the parties'
    rights.

19. As for Paxson's Request for Declaratory Ruling, the allegations
    contained therein involve an on-going dispute between Paxson and NBC
    concerning certain agreements entered into by the parties in 1999.
    In September of that year, Paxson entered into a partnership with
    NBC pending regulatory changes which would permit the outright
    purchase of Paxson by NBC. These agreements were, as Paxson
    describes them, "designed to comply with the multiple ownership
    rules" and they "created relationships which individually or as a
    whole would not result in 'attribution' of NBC's station ownership
    to Paxson, or vice versa, or result in prohibited delegations of
    licensee control to NBC." Compliance with the multiple ownership
    rules was important, Paxson notes, because both it and NBC owned
    television stations in four markets (Hartford, Raleigh-Durham,
    Birmingham, and Providence) where a single entity could not have
    interests in two television stations. Also, attribution of Paxson's
    stations to NBC would have caused NBC to have interests in stations
    reaching approximately 45% of the United States, in excess of the
    35% national multiple ownership limit.[^21]

20. The September 1999 agreements included: an Investment Agreement; a
    Stockholder Agreement; and a Warrant and Call Agreement. Pursuant to
    the Investment Agreement, NBC purchased a 32 percent economic
    interest in Paxson in the form of 8% non-voting Class B preferred
    shares (NBC Preferred Stock) for \$415,000,000. Those shares are
    convertible into Paxson common shares. Under the Warrant and Call
    Agreement, NBC is permitted to purchase Paxson common voting shares
    and to purchase Paxson's control shares held by Paxson controlling
    shareholder - Lowell "Bud" Paxson. Those options are valid for ten
    years or until September 2009. However, unless the multiple
    ownership rules are modified, NBC cannot convert its NBC Preferred
    Stock, or exercise either its warrants or call on Mr. Paxson's
    control shares.

21. The Investment Agreement gave NBC the right to nominate three
    members of Paxson's board of directors. While not clearly
    delineated, it appears from the Investment and Stockholder
    Agreements that the NBC-nominated members of Paxson's board are
    permitted to vote on all matters that come before the Paxson board.
    This includes the right to vote on certain extraordinary Paxson
    corporate matters for which NBC has a "veto right." These
    extraordinary matters are outlined in Article IV, Section 4.1 of the
    Investment Agreement and limit such actions as Paxson amending its
    corporate documents, increasing the size of its board of directors,
    or incurring large amounts of additional debt, without NBC's
    consent. The associated Certificate of Designations of the NBC
    Preferred Stock also include a covenant that limits Paxson's ability
    to incur additional indebtedness, a common shareholder protection
    provision. That provision also provided that, if any one of the
    NBC-nominated members of Paxson's board of directors voted in favor
    of an action falling within the specified categories, then NBC would
    have been deemed to have consented to such action. Paxson claims
    that this provision was included to ensure that Paxson could
    continue to act freely with respect to the corporate matters covered
    by Article IV. Paxson argues that that freedom is dependent on
    NBC-nominated directors acting independently consistent with their
    fiduciary obligations as directors. Paxson states that it would not
    have entered into the agreements with NBC without this insulating
    mechanism or without the understanding that NBC-nominated directors
    would put Paxson's interests first.

22. It is the alleged conduct of the NBC-nominated directors that forms
    the basis of Paxson's Petition to Deny and Request for Declaratory
    Ruling. Specifically, Paxson claims that certain actions by the
    NBC-nominated members of Paxson's board of directors have violated
    certain terms of their 1999 agreements and may have caused
    attribution of Paxson's television stations to NBC contrary to the
    multiple ownership rules. In 2000, NBC nominated three persons to
    serve as Paxson directors. Paxson characterizes these three persons
    as "NBC senior employees." They were elected at the annual
    shareholders' meeting in 2000 after a vote of Paxson's shareholders.
    They were R. Brandon Burgess, Vice President and Chief Financial
    Officer of NBC Business Development and New Media; Keith G. Turner,
    President of NBC Television Network Sales; and Harold N. Brook,
    Executive Vice President of NBC Entertainment and NBC Studios
    Business Affairs. Mr. Brook was later replaced by R. Edward Wilson,
    President of NBC Enterprises and Syndication.

23. Paxson states that, in October 2000, it requested NBC to extend
    further financing. In a letter on NBC letterhead, Mr. Burgess
    responded that NBC would provide the requested financing, however it
    would "have to coincide with modifying some of the initial
    transactional features that we (NBC) feel have been in part
    responsible for a slower than desired ability on our part to create
    full value for both of our companies." Specifically, Mr. Burgess
    asked for changes in three areas from the original Paxson/NBC
    agreements: (1) the creative process as it relates to programming so
    as to "better align" Paxson's and NBC's programming and marketing
    efforts on the West Coast; (2) the structure, timing, and the
    reduction in the exercise price payable by NBC under the Warrants
    and the Call including the right to be able to call Mr. Paxson's
    control stock before it exercised the Warrants; and (3) the terms of
    the Joint Sales Agreements which Mr. Burgess described as too
    restrictive in terms of limiting the amount of programming that
    could be placed on Paxson's stations by local NBC stations. Paxson
    rejected Mr. Burgess' requests and began exploring alternative
    methods for refinancing some of its debt.

24. In July 2001, Mark W. Begor, NBC's Executive Vice President and
    Chief Financial Officer sent a letter to Paxson alleging that
    Paxson's alternate plan for refinancing would violate the debt
    incurrence covenant associated within NBC Preferred Stock. At a June
    2001 Paxson board meeting, the possibility of Paxson undertaking a
    \$200 million senior note was discussed. NBC had previously informed
    Paxson that it was unacceptable because it created long-term debt
    that would be costly to refinance when NBC obtained control of
    Paxson. In his July 2001 letter, Mr. Begor demanded that NBC be
    provided with a "detailed plan specifying how the additional
    funds...will be used...." In a subsequent letter, Paxson's
    president, Jeff Sagansky, denied that the increase in indebtedness
    would violate the terms of Paxson's Certificate of Designations
    relating to NBC Preferred Stock.

25. Following Mr. Sagansky's letter, NBC's Executive Vice President and
    General Counsel Lawrence Tu sent emails dated August 27, 2001, and
    September 5, 2001, asking for the agenda for the upcoming September
    7, 2001 Paxson board meeting. Mr. Tu asked that an additional matter
    be added to agenda for the meeting -- Paxson's plan for incurring
    additional debt to fund capital expenditures and related purposes
    and the "controls applicable to such debt incurrence." At the
    following board meeting on September 7, 2001 in New York, Paxson
    states that the NBC-nominated members of Paxson's board abstained
    from voting on certain matters raised at the meeting including the
    refinancing of certain preferred stock. Paxson maintains that Mr.
    Burgess stated the need to resolve the issues raised by Mr. Begor in
    his letter before he could vote on any Paxson financing matter. In
    addition, the board also addressed the agenda item requested by Mr.
    Tu. Paxson alleges that the NBC nominees to its board were unable on
    their own accord to proceed with the agenda item requested by Mr. Tu
    without first discussing it with him.

26. According to Paxson, its communications counsel expressed his
    concern to NBC about NBC's nomination of its own employees to
    Paxson's board and its purported use of these board members to
    attempt to influence Paxson corporate decision making. Following
    this communications, NBC then offered to remove the NBC directors
    from Paxson's board. Paxson alleges that removal of the NBC members
    from its board would be worse for it from a control standpoint than
    leaving them in place. Paxson cites to Article IV Section 4.1 of the
    Investment Agreement which provides that NBC's consent to certain
    Paxson corporate actions, including the annual Paxson corporate
    budget, program acquisitions, station sales, equity offerings and
    executive compensation, will be deemed given if any one of the three
    NBC-nominated board members votes in favor of it. Without this
    provision, Paxson claims, it would not have entered into its
    partnership with NBC. Paxson concludes that removal of the
    NBC-nominated directors will subject Paxson to direct intervention
    by NBC of the sort evidenced in the NBC communications outlined
    above.

27. Paxson concludes that NBC's conduct has exposed Paxson to a
    potential finding that it has participated in violations of the
    multiple ownership rules. Paxson cites to: (1) NBC's nomination of
    its own employees as Paxson directors; (2) their conduct as board
    members; and (3) NBC's efforts to not only have NBC's directors
    represent NBC's interests, but also to control the agenda and
    minutes of a Paxson board meeting. This is strong evidence, Paxson
    contends, that NBC is an attributable owner of Paxson. Finally,
    Paxson cites to the 1993 merger of Viacom, Inc./Paramount
    Communications, Inc. wherein the Commission approved a short-term
    trust.[^22] In that case, the Commission required that, while the
    trust was in effect, Viacom not be permitted to nominate persons to
    serve on Paramount's board or influence Paramount's selection of
    directors. Paxson argues that the issue is the same here -- whether
    NBC's employees' presence on Paxson's board equates to the presence
    of NBC itself on the Paxson board.

28. Furthermore, Paxson argues, the use of NBC-nominated directors to
    enforce rather than buffer the covenants included in the Investment
    Agreement has sufficiently eroded NBC's insulation from direct
    involvement to make NBC a non-passive investor in Paxson. NBC's
    actions, Paxson alleges, show disregard for Paxson's prerogatives as
    a FCC licensee. Paxson asks that the Commission resolve the issue of
    whether NBC's conduct raises regulatory issues, both from an
    attribution and licensee control standpoint. If the Commission finds
    that NBC has an attributable interest in Paxson, then Paxson asks
    that the Commission consider the following remedies: The Commission
    should require reformation of the Stockholder Agreement to make it
    provide that any NBC-nominated director must be independent such
    that they have no employment or other relationships with NBC.
    Alternatively, assuming a finding that NBC may not nominate members
    of Paxson's board, the Commission should order that the covenants
    contained in Article IV of the Investment Agreement be stricken. If
    the Commission finds that the rights granted to NBC in the various
    agreement cannot be reconciled with the requirement that NBC be a
    nonattributable owner of Paxson, then it should require divestiture
    of NBC's equity and contractual interests in Paxson.

29. In its Opposition, NBC argues that Paxson's Petition to Deny and
    Request for Declaratory Ruling are "wholly lacking in merit." The
    only issue that is conceivably within the Commission's jurisdiction
    in this case, NBC argues, is whether NBC has an attributable
    interest in Paxson. NBC agrees with Paxson that the contracts at the
    heart of the dispute in this case comply fully with Commission rules
    and policy. However, NBC chides Paxson for attempting to portray
    "ordinary commercial behavior as sinister." NBC states that the
    following actions are all ordinary and appropriate exchanges between
    business partners -- NBC-nominated directors abstaining on certain
    proposed corporate actions; NBC objecting to a transaction on the
    grounds that it appeared to be inconsistent with certain protective
    provisions; and NBC seeking to add an item to the agenda of a board
    meeting. NBC notes that Paxson has not alleged that any of these
    actions has compelled or thwarted any actions on the part of Paxson.
    NBC contends that Paxson has been able to carry out every action it
    desired notwithstanding any disagreements expressed by NBC. In fact,
    NBC states, it has not blocked or vetoed any Paxson corporate
    action.

30. NBC maintains that it structured its investment in Paxson as a
    nonvoting stake that fell well below the Commission's
    recently-adopted Equity or Debt Plus (EDP) attribution rule.[^23]
    NBC states that it specifically structured its investment to ensure
    that it would only constitute 32 percent of Paxson's outstanding
    equity and less than 21 percent of the total asset value of Paxson.
    As for the rights conferred on NBC through the various agreements,
    NBC contends that those rights are consistent with those previously
    recognized by the Commission as appropriate to protect the interests
    of nonvoting shareholders.

31. NBC contends that the agreements contemplate two possible avenues
    for NBC to be represented on Paxson's board -- through nomination
    rights and appointment rights. Under a nomination right set forth in
    Section 5.7 of the Investment Agreement, it is stated that "NBC
    intends to nominate three directors...." These nominees are not
    permitted to have an attributable interest in NBC either through
    holding an officer or director position or ownership interest in
    NBC. The second scenario gives NBC an "appointment right" and only
    applies when the rules have changed to allow NBC to have such a
    right. This is an important distinction, NBC contends, because the
    Commission has previously permitted the holder of a non-attributable
    interest in a broadcast licensee to have the right to nominate a
    member of the licensee's board of directors, but may not have the
    right to designate or elect a director.[^24] In other words, NBC
    contends, the licensee entity must have the ability to reject the
    nominees of the non-attributable interest holder. NBC notes that
    Section 2.1(b) of the Stockholder Agreement provides that if the
    rules eventually permit it, then NBC shall have the right to appoint
    members of Paxson's board. Only in this clause is NBC assured that
    its nominees will be elected to Paxson's board. NBC states that it
    has never invoked Section 2.1(b). The three persons that served on
    Paxson's board did so only because the stockholders of Paxson
    (including Bud Paxson) elected them to the board. They were not
    obligated to do so, argues NBC, and NBC did not compel that result.

32. As for its conduct in the relationship, NBC states that the facts
    show that Bud Paxson tightly controls his company and has not been
    thwarted or deterred in pursuing his plans for his company. The
    actions cited by Paxson are characterized by NBC as
    randomly-selected, ordinary commercial behavior that were fully
    within NBC's rights as a nonvoting, minority shareholder. As to
    Paxson's allegations concerning NBC's nominees to Paxson's board,
    NBC states that the employees it nominated to sit on Paxson's board
    "are neither NBC officers or directors" and therefore do not have
    attributable positional interests in NBC or cognizable interests in
    the NBC stations. Therefore, NBC concludes, these individuals could
    sit on Paxson's board without triggering attribution of Paxson's
    stations to NBC.

33. Paxson replies that NBC's manipulation of its nominees to Paxson's
    board is evidence that the NBC directors acted as agents for, and
    under the direction of NBC. The request for concessions from Mr.
    Burgess, the request for materials for a Paxson board of directors
    meeting, as well as the request to add an item to the agenda are all
    evidence, Paxson suggests, that NBC's directors were not acting
    independently. Thus, under Note 2 of Section 73.3555(h) of the
    Commission's rules, the attribution rule was triggered creating an
    attribution problem for NBC.

34. The fact that NBC's directors have resigned from Paxson's board is
    important for two reasons, argues Paxson. First, it is an admission
    by NBC that it should never have placed its employees on Paxson's
    board and second it does not resolve the prior director attribution
    problem. NBC should have nominated members to Paxson's board that
    were independent from NBC as required by the Commission's rules. NBC
    still has the right to nominate members to Paxson's board. Paxson
    expects that NBC will do so and that the new directors will be no
    more independent than previously-appointed members.

35. The parties agree that the majority of the provisions in their
    agreements comply with the Commission's Rules and policies. These
    provisions mirror provisions that we have previously allowed to
    ensure that non-voting, minority shareholders are able to protect
    their investments while avoiding attribution.[^25] However, Paxson
    maintains that we should find problematic Section 4.1 of the
    Investment Agreement that provides NBC with a right of approval for
    the annual operating budget of the Paxson corporation. Under the
    agreement, however, if the parties disagree on the annual operating
    budget, the budget from the previous year shall be used, thus
    assuring access to operating funds by the licensee. We find that
    this limited approval right with respect to certain Paxson budget
    matters is a permissible method of affording a minority shareholder
    like NBC the means by which to protect its investment and does not
    create a problem under our attribution rules.

36. There are also Paxson's allegations concerning directors nominated
    by NBC to sit on its board. Having reviewed the record, including
    the related agreements between the parties and other documentary
    evidence, we find that these directors were not adequately
    independent of NBC to avoid attribution of those directors to NBC
    for purposes of multiple ownership compliance. Moreover, it appears
    that by voting to elect these directors Paxson was complicit in this
    failure. We agree, however, with Paxson and NBC that nothing on the
    face of the agreements between NBC and Paxson established
    attribution.

37. Two aspects of the participation of NBC-nominated directors on
    Paxson's board raise concerns. First, the conduct of the
    NBC-nominated directors (and of NBC) after they took their positions
    on Paxson's board reflected the exercise of influence over Paxson
    sufficient to establish attribution to NBC. For example, Mr.
    Burgess, one of the NBC-employee directors of Paxson, sent a letter,
    on NBC letterhead, to Paxson demanding certain concessions be made
    with respect to the original agreements between the companies. Mr.
    Burgess states that, as a condition of NBC extending its investment
    in Paxson, Paxson agree to certain critical changes in their
    agreements such as changes to the companies' programming to "better
    align" their programming and marketing efforts; changes to the
    structure, timing, and the reduction in the exercise price payable
    by NBC under the Warrants and the Call Agreements; and changes to
    the terms of the Joint Sales Agreements. Paxson rejected Mr.
    Burgess' requests and began exploring alternative methods for
    refinancing some of its debt. The fact that he was speaking on
    behalf of NBC about high-level business matters demonstrates that
    Mr. Burgess was acting as a senior NBC executive protecting NBC's
    interests and not as an independent member of Paxson's board.

38. Later, NBC attempted to use its nominated directors to influence the
    outcome of a Paxson board of directors meeting. NBC's Executive Vice
    President and General Counsel, Mr. Tu, asked that the matter of
    Paxson's seeking to restructure certain of its debt be added to the
    agenda of the meeting. At the meeting, the NBC nominees represented
    that they could not discuss or vote on the debt refinancing plan
    without first conferring with Mr. Tu. Had these nominees been acting
    independently, they would not have had to engage in such discussions
    with a senior NBC executive and would have been able to vote on the
    refinancing plan.

39. Second, NBC's nomination of its own employees to sit on Paxson's
    board, and their subsequent election, creates a relationship between
    NBC and Paxson that is attributable pursuant to the "officer and
    director" attribution provisions of our ownership rules.[^26] The
    close relationship between an employee and his employer, the
    financial dependence of the employee on the employer, and the
    resulting allegiance typically shown by the employee to the
    employer, suggest that an employee nominated to a Board of Directors
    of another company by his employer can be expected to represent the
    interests of his employer. Thus, this relationship gives the
    employer the degree of influence sufficient to warrant positional
    attribution.[^27] As we recently stated in connection with our cable
    attribution rules:

> A party that has the right to appoint a director to the board of an
> entity has the ability to influence that entity's conduct by virtue of
> the director the party selects; thus under the directors and officers
> rule that party has an attributable interest in the entity. Likewise,
> if two entities share common directors or officers, or have employees
> that serve as directors and officers of the other entity, the
> directors and officers render the entities attributable. . . .[^28]

We have reached a similar conclusion in other contexts. For example, if
an entity seeks to avoid attribution through a trust mechanism, we have
required that the trustee "be an independent person with no familial or
business relationship with the beneficiary or grantor.\"[^29] Similarly,
where a limited partner seeks to avoid attribution of its partnership,
it must meet certain insulation criteria, including a requirement that
the "limited partner cannot act as an employee of

the limited partnership. . . ."[^30] We conclude that NBC's
nomination[^31] of its own employees to sit on Paxson's board, and their
subsequent election thereto, resulted in NBC having an attributable
interest in Paxson.[^32]

40. Based upon the information before us, we find that the placement of
    NBC employees on Paxson's board as well as the subsequent actions of
    these directors resulted in NBC having an attributable interest in
    Paxson, and ultimately in violation of our multiple ownership rules.
    NBC should not have nominated its employees to Paxson's board and
    Paxson should have taken steps to exercise its ultimate board member
    approval authority to ensure that NBC's nominees were truly
    independent.

41. While there was a failure to comply with our insulation
    requirements, we believe that admonishment is the appropriate remedy
    in this case and that further inquiry is not necessary. First, we
    note that the NBC nominees have resigned from Paxson's board.
    Therefore, they are no longer in a position to influence Paxson's
    corporate affairs. More importantly, it appears that NBC and Paxson
    clearly intended to comply with our attribution policy and took
    steps to ensure that their various agreements would comply. Only
    when those agreements were put into practice did they result in
    attribution and thus run afoul of our multiple ownership rules. It
    also appears from the record that NBC and Paxson may not have
    understood our broadcast attribution rules in this area; namely,
    that NBC's nomination of its own employees to serve on Paxson's
    board would result in attribution. While we have previously
    addressed the employee-director issue in the context of cable
    attribution,[^33] this is the first time we have done so in the
    broadcast attribution context. We do not, therefore, admonish the
    parties for the nomination and subsequent election of NBC employees
    as Paxson directors, but rather for the conduct of those directors
    after their election. We further clarify that we do not admonish
    Paxson for the decision to approve as directors NBC's employees, but
    rather for the decision not to remove the directors as offered by
    NBC and to continue this relationship in place, despite the actions
    taken by the NBC directors. We do, however, caution both NBC and
    Paxson to conduct any future business activities pursuant to the
    Investment Agreement in a manner consistent with this order.
    Accordingly, should NBC choose to exercise its rights to nominate
    new members of Paxson's board, we require that such persons not be
    NBC employees or agents but persons who would reasonably be expected
    to act independently in all future Paxson matters. We also expect
    Paxson to evaluate more carefully any NBC-nominated new members to
    its board of directors.

    **D. NBC's Request for Twelve-Month Period of Time to Comply With
    the Television Duopoly Rule**

42. *NBC's Request.* In support of its request for a twelve-month period
    of time to come into compliance with the television duopoly rule in
    the Los Angeles market, NBC argues that its requested relief is
    consistent with the goals of the television duopoly rule: (1) to
    promote diversification of programming sources and viewpoints;
    and (2) to prevent undue concentration of economic power. NBC notes
    that, when weighing a request for temporary grant of the duopoly
    rule, the Commission evaluates whether the grant would undermine
    these goals. NBC maintains that this would not be the case here. NBC
    argues that any concerns about the temporary ownership of three
    television stations in a single market is diminished by the
    tremendous diversity of media outlets in the Los Angeles DMA.
    Further, NBC contends, the temporary request will not have an
    adverse impact on economic competition in the Los Angeles market
    because the NBC and Telemundo stations serve distinct audiences and
    do not compete directly for advertising dollars. NBC notes that
    Spanish-language broadcasting is the fastest growing segment in the
    U.S. television industry targeting 35 million Hispanic viewers. NBC
    claims that the Spanish-language market is dominated by Univision
    Communications, Inc. (Univision). While Telemundo has been "gaining
    strength" in recent times, NBC notes that in each of the eight
    markets where Univision and Telemundo compete head-to-head,
    Univision's stations have a "substantially greater audience
    share."[^34] NBC also claims that Univision dominates in the
    competition for advertising. NBC hopes that, by combining its
    resources with those of Telemundo, the merger will result in
    Telemundo becoming a more effective competitor to Univision, which
    in turn will benefit the rapidly growing Hispanic segment of the
    U.S. population.

43. NBC also pledges to operate KNBC-TV and KWHY-TV independently from
    the third station -- KVEA, during the period of common ownership.
    NBC states that it will maintain the stations' separate programming
    strategies, and will refrain from engaging in joint sales in the Los
    Angeles market. Finally, NBC argues that its temporary request is
    consistent with past precedent where the Commission has accommodated
    multi-station transactions by granting a waiver of its multiple
    ownership rules where the conflict in question is incidental to the
    proposed merger.[^35] NBC maintains that a forced sale of one of the
    stations would not serve the public interest during a difficult
    economic climate. Allowing a sale under the twelve-month temporary
    request will, in NBC's opinion, preserve the unique characteristics
    of one of the nation's oldest Spanish-language television stations.

44. *Hispanic Groups' Opposition*. The Hispanic Groups oppose NBC's
    request. They contend that NBC's stated rationale falls short of the
    "special circumstances called as justification for such a request."
    As the Hispanic Groups note, NBC claims that the extended period of
    temporary relief will enhance the possibility that KVEA is sold to a
    qualified buyer who will "appreciate and foster the unique
    characteristics of the divested station." The Hispanic Groups argue
    that it is unlikely that NBC will have difficulty selling a
    commercial television station in the second largest market in the
    nation. The Hispanic Groups also note that NBC has cited to the
    recent economic slow-down in support of allowing it additional time
    to sell one of the Los Angeles Telemundo stations. However, the
    Hispanic Groups argue, NBC has not shown "how the economy will make
    a miraculous turn twelve months rather than six months later." While
    NBC claims that temporary ownership of the three television stations
    will not diminish competition in the Los Angeles market, the
    Hispanic Groups argue that, as the Telemundo stations' ratings grow
    as a result of NBC's ownership, this will "adversely impact the
    market." Finally, the Hispanic Groups cite to other decisions where
    they claim the Commission has denied twelve-month waivers where the
    applicant "failed to provide evidence that market conditions
    warranted more than six months to come into compliance."[^36]

45. NBC and Telemundo respond that the Hispanic Groups have failed to
    show how the temporary request will impede the stated objectives of
    the television duopoly rule -- to prevent concentration of economic
    power and promote diversity in programming sources and viewpoints.
    NBC notes that the Federal Trade Commission has found that the
    merger is not anti-competitive and has granted early termination of
    its merger review. NBC and Telemundo dispute the Hispanic Groups
    claim that Los Angeles is not sufficiently diverse to support the
    temporary request. NBC points out that the Los Angeles market is the
    largest Hispanic broadcast market in the country and "is well served
    by competitive media outlets." NBC notes that eighteen of the
    sixty-nine radio stations in the market, as well as four television
    stations, provide programming directed to the Hispanic market.
    Telemundo maintains that NBC's ownership of its Los Angeles
    television stations will benefit Telemundo's employees for they will
    have greater opportunities for career training and advancement.
    Finally, NBC maintains that a forced sale of KVEA could result in an
    artificially depressed sales price and would have a disruptive
    effect on programming to the community.

46. *Grant of NBC's Request.* When we revised the local television
    ownership rule in 1999, permitting the common ownership of two
    television stations in certain markets, we found that the benefits
    of same-market television station combinations support allowing the
    formation of such combinations in certain cases where competition
    and diversity will not be unduly diminished.[^37] However, we did
    not eliminate or relax the rule further because we believed that
    television broadcasting plays a very special role in our society and
    that we must continue to ensure that the broadcast television
    industry has a diverse and competitive ownership structure.[^38]
    Therefore, in permitting common ownership of two television stations
    in only certain television markets, we carefully balanced these two
    considerations. In considering NBC's request for temporary relief,
    we must once again weigh the benefits of permitting temporary common
    ownership of the three Los Angeles stations against the possible
    harm to diversity and competition that might occur as a result of
    such common ownership.[^39] After factoring in the possible benefits
    that will occur as a result of the grant of NBC's request, we find
    that, on balance, permitting NBC's temporary ownership of three
    stations in the Los Angeles market while it takes steps to come into
    compliance with the television duopoly rule would serve the public
    interest and is warranted.

47. We find that the possible harm that may result by permitting a
    single entity to temporarily control three television stations in
    the Los Angeles television market is significantly diminished
    because of the special circumstances that are present in this case.
    These are: (1) the limited adverse impact of a temporary waiver on
    diversity and competition in the Los Angeles market; and (2) NBC's
    pledge to continue operating KVEA independently during the period of
    common ownership.

48. Los Angeles is the number two television market in the United States
    according to Nielsen rankings. Moreover, Los Angeles actually has
    more independently-owned television stations (nineteen) than the
    number one ranked market, New York. Therefore, permitting common
    ownership on a temporary basis of three television stations in the
    Los Angeles market will likely have less of an impact on both
    diversity and competition than in other smaller television markets.
    We thus agree with NBC's assessment that Los Angeles is an
    "exceptionally diverse" television market. Furthermore, as NBC
    notes, each of the three television stations that it will control
    during the temporary period of common ownership have distinct
    programming and a different audience. The Telemundo stations each
    have a different set of programming designed for Spanish-language
    viewers and are among twenty-two different radio and television
    broadcast stations that are programmed towards the Hispanic audience
    in the Los Angeles market. On the other hand, KNBC broadcasts to a
    wider audience exclusively in English. As a result, we do not
    believe that temporary common ownership of three television stations
    in this market by a single entity will have an adverse impact on
    diversity. We conclude that temporary, common ownership of the three
    television stations here at issue will not likely have an undue
    adverse effect on diversity in the Los Angeles market.

49. For similar reasons, we conclude that the proposed temporary common
    ownership of three stations will not have a substantial adverse
    impact on competition in the Los Angeles market. Once again, the Los
    Angeles market has the largest number of independently-owned
    television stations and the Telemundo stations rank only eighth and
    ninth in the Nielsen ratings and are not dominant in the
    Spanish-language programming niche. The more dominant player
    providing Spanish-language programming is Univision, which owns
    KMEX-TV, the number three rated station in the market. Furthermore,
    Telemundo's stations lack dominant economic power in the market, as
    their combined share of advertising revenue for the year 2000 was
    only 3.18 percent of the top ten television stations in the market.
    By contrast, Univision's single station had 8.97 percent of the
    revenues. Even if KNBC's revenues are combined with that of the
    Telemundo Stations, we note that this percentage is less than that
    of the two television stations for which ABC-Disney sought a
    temporary duopoly waiver in 1996.[^40]

50. Finally, NBC pledges to operate KVEA separately during the period of
    temporary common ownership. NBC has promised to maintain the
    stations' separate programming and to refrain from engaging in join
    sales. We found a similar pledge in the ABC-Disney proceeding
    weighed in favor of a grant of a waiver.[^41] In this case, the fact
    that the third station will be operated separately helps to ensure
    that any anti-competitive effects of the temporary three-station
    combination will be diminished. Therefore, we find that NBC has
    adequately demonstrated that it should be permitted to have
    temporary common ownership of three stations in the Los Angeles
    market.

51. *Length of Period of Temporary Common Ownership*. The remaining
    question is what length of time we should permit NBC to have common
    ownership of the three television stations in Los Angeles while it
    takes steps to come into compliance with the television duopoly
    rule. We have traditionally permitted parties six months to come
    into compliance with our television duopoly rule to accommodate
    transactional needs.[^42] We believe this case presents public
    interest benefits that warrant a longer period. In the past, we have
    granted temporary waivers of our multiple ownership rules to
    facilitate multi-station transactions. We have found that
    multi-station transactions are "a compelling circumstance weighing
    in favor of a temporary waiver."[^43] This is because we have found
    that, in multiple-station transactions, the overall benefits of
    allowing time for an orderly divestiture will outweigh any temporary
    impact on diversity and competition from common ownership.[^44] Even
    under normal market conditions, we disfavor forced sales because
    they restrict the value of the station(s) to be divested and
    artificially limit the range of potential buyers. Given the size of
    the proposed transaction here and the proposed difficulties of
    divesting the necessary station, we find that the advantages of
    permitting a period of temporary common ownership will outweigh any
    temporary impact on diversity and competition and is in the public
    interest. While we find that NBC's ability to find a potential buyer
    for one of the Telemundo stations is likely to be less of a problem
    in this case, given the location of the Telemundo stations in the
    number two television market, we are nevertheless committed to
    permitting NBC a reasonable period of time to find a qualified buyer
    to encourage continued diversity of the media in Los Angeles. A
    shorter period may limit the range of potential buyers, possibly
    excluding those for whom financing could be more difficult to
    arrange.

52. In the ABC-Disney case, the parties sought an eighteen-month period
    of time to come into compliance with the television duopoly rule in
    the Los Angeles market. We denied that request and allowed only a
    six-month period of time. We find that the circumstances of this
    case warrant a longer period of time. At the time of the ABC-Disney
    decision, our television duopoly rule did not permit common
    ownership of two television stations with overlapping Grade B
    contours. In granting only a six-month waiver to ABC-Disney, we were
    concerned with the fact that ABC-Disney would own two of the seven
    VHF stations in the market. Those two stations accounted for 25
    percent of the advertising revenue in Los Angeles. Since that time,
    we subsequently amended our duopoly rule to permit common ownership
    of two television stations, even if they are both VHF stations, in
    markets like Los Angeles where there are sufficient number of
    independent television stations. While NBC seeks permission to
    temporarily own three television stations, only one of these is a
    VHF station -- KNBC. Furthermore, the combined share of advertising
    of the three stations (20.95 percent) is less than that of the two
    VHF stations for which ABC-Disney sought temporary ownership
    in 1996. Finally, we are not as concerned in this case that the
    competition for advertising dollars will be diminished because the
    Spanish-language format of the Telemundo stations means that they do
    not compete directly with NBC's station. Even the two Telemundo
    stations have different Spanish-language programming and they
    attract a different type of advertising with one station a Telemundo
    affiliate and the other an independent Spanish-language station.
    Further, we believe that current economic conditions and the
    Spanish-language character of the station to be sold both suggest
    that a somewhat longer compliance period than granted in ABC-Disney
    is appropriate here.

53. Therefore, we find that NBC has adequately demonstrated that
    allowing it a period of twelve months to divest one of the two
    Telemundo television stations in Los Angeles is justified. We expect
    NBC to use its best efforts to promptly achieve compliance with our
    multiple ownership rules. To that end, NBC is directed to report to
    the Commission every ninety (90) days, beginning ninety (90) days
    from the release date of this Memorandum Opinion and Order, as to
    the progress of its efforts.

    **V. CONCLUSION**

54. We have reviewed the proposed merger and find that the applicants
    are fully qualified and that grant of the transfer of control
    applications will serve the public interest, convenience, and
    necessity.

55. Accordingly, IT IS ORDERED, That the Petition to Deny filed by the
    Hispanic Groups IS DENIED.

56. IT IS FURTHER ORDERED, That the Petition to Deny filed by Paxson
    Communications Corporation IS DENIED, and That the Request for
    Declaratory Ruling, filed by Paxson Communications Corporation, IS
    GRANTED to the extent indicated herein and DENIED in all other
    respects.

57. IT IS FURTHER ORDERED, That the request for 12 months to come into
    compliance with the television duopoly rule, Section 73.3555(b), in
    the Los Angeles market IS GRANTED, and THAT within 12 months of the
    release date of this order, NBC is directed to file the application
    necessary to bring it into compliance. In addition, beginning
    ninety (90) days from the release date of this Memorandum Opinion
    and Order and every ninety days (90) thereafter until such
    application is filed, NBC is directed to submit a report detailing
    the progress of its efforts.

58. IT IS FURTHER ORDERED, That the applications for consent to transfer
    of control of the Telemundo Stations (File Nos. BTCCT-20011101ABK,
    ABT, ABW, ABY, ACA-ACC, ACE, ACI, ACN and ACP;
    BTCTTL-20011101-ABM-S, ABX, ACF-ACH, ACO, and ADK;
    BTCTTA-20011101ABL; BTCTTV-20011101ACJ; and BTCTT-20011101ACK-L) ARE
    GRANTED.

    **FEDERAL COMMUNICATIONS COMMISSION**

William F. Caton

Acting Secretary

STATEMENT OF COMMISSIONER MICHAEL J. COPPS

APPROVING IN PART, DISSENTING IN PART

# In the Matter of: Various Applications for Transfer of Control of Telemundo Communications Group, Inc. to NBC Broadcasting Co., Inc.

There are positive aspects to the proposed acquisition of the Telemundo
stations by NBC. I am particularly encouraged by NBC's pledge to
continue the Spanish-language programming at the Telemundo stations. The
transaction could therefore put the resources and experience of one of
the nation's oldest broadcasting companies behind a station group
programming for the Hispanic community. This acquisition should also
ease the very serious financial pressures being experienced by
Telemundo.

Notwithstanding the positive aspects of this transaction, I cannot
support the transfer of stations in Los Angeles that would result in the
first common ownership of three television stations by the same owner.
Admittedly, this transaction seeks to limit the harm from such a
concentration of voices in a single market. NBC has indicated that it
will operate one of the stations on an independent basis. In addition,
the majority requires regular reporting on efforts to divest this
station within twelve months. Nevertheless, I cannot support this level
of concentration by a single owner absent compelling public interest
circumstances. In this instance, I do not find such a level of public
interest benefit. Importantly, members of the community served by the
Spanish-language programming argue that NBC has failed to demonstrate
adequately its commitment of resources to the Telemundo stations to
ensure that they continue to serve the needs of this community. I
therefore dissent in part from the grant of this application.

[^1]: ^?^ 47 C.F.R. § 73.3555(b). The television duopoly rule provides
    that a single entity may own two stations in the same television
    market (Nielsen DMA) if, following the acquisition, there would
    remain at least eight independently owned and operated television
    stations and at least one of the stations is not ranked in the top 4
    in the market based upon the most recent all-day audience share.

[^2]: ^?^ These groups are: The Puerto Rican Legal Defense and Education
    Fund, Inc., National Council of La Raza, League of Latin American
    Citizens, National Hispanic Media Coalition, NOSOTROS, Mexican
    American Grocers Association, National Puerto Rican Coalition, and
    the National Association of Hispanic Publications.

[^3]: ^?^ Also before the Commission are the following pleadings: a
    Consolidated Opposition to Petitions to Deny and Request for
    Expedited Resolution filed by Council Tree Hispanic Broadcasters,
    LLC (Council Tree); NBC's separate Oppositions to the Hispanic
    Groups and Paxson Petitions to Deny; a Consolidated Opposition to
    Petitions to Deny filed by Telemundo Communications Group, Inc.;
    Paxson's separate Replies and a Reply filed by the Hispanic Groups;
    and two amendments filed by NBC on January 25, 2002; and February 5,
    2002. Paxson filed a Motion for Extension of Time (Motion) to permit
    additional time to submit its Replies. NBC, Telemundo and Council
    Tree opposed Paxson's Motion. On December 26, 2001, the Chief of the
    Television Branch granted Paxson's Motion and extended the deadline
    for submitting its Replies to January 10, 2001. On December 26,
    2001, the Hispanic Groups requested additional time to submit their
    Reply that was submitted on January 9, 2001. We grant the Hispanic
    Groups' request and we will consider their Reply.

[^4]: ^?^ Paxson also filed a petition to deny the sale of KNTV(TV), San
    Jose, California, from Granite Broadcasting Corporation to NBC (File
    No. BTCCT-20011221AAS) raising the same arguments as it raised in
    this proceeding. Paxson's petition against the sale of KNTV(TV) will
    be addressed separately.

[^5]: ^?^ Last year, the Commission eliminated the single majority
    shareholder exception to its attribution rules, while grandfathering
    the nonattributable status of existing minority shareholders. *See*
    Review of the Commission's Regulations Governing Attribution of
    Broadcast and Cable/MDS Interests, *Memorandum Opinion and Order*,
    16 FCC Rcd 1097 (2001). In December 2001, the Commission suspended
    the elimination of the single majority shareholder exception. *See*
    FCC 01-353, released December 14, 2001. Either way, pursuant to the
    single majority shareholder exception or through the grandfathering
    provision, the minority interests held by the other stockholders of
    Telemundo are nonattributable.

[^6]: ^?^ 47 U.S.C. § 310(d).

[^7]: ^?^ 47 U.S.C. § 309(d).

[^8]: ^?^ 47 U.S.C. § 309(d)(1); *Gencom Inc. v. FCC*, 832 F.2d 171, 181
    (D.C. Cir. 1987)(*Gencom*); and *Astroline Communications Co. v.
    FCC*, 857 F.2d 1556, 1562 (D.C. Cir. 1988)(*Astroline*).

[^9]: ^?^ 47 U.S.C. § 309(d)(2); *Gencom*, 832 F.2d at 181; and
    *Astroline*, 857 F.2d at 1562.

[^10]: ^?^ 47 U.S.C. § 309(e).

[^11]: ^?^ *United States v. FCC*, 652 F.2d 72, 89 (D.C. Cir.1980) (*en
    banc*) (*quoting Columbus Broadcasting Coalition v. FCC*, 505 F.2d
    320, 323-24 (D.C. Circuit 1974)).

[^12]: ^?^ *Gencom*, 832 F.2d at 181.

[^13]: ^?^ 47 U.S.C. § 309(d)(2); *see also Gencom*, 832 F.2d at 181.

[^14]: ^?^ *Serafyn v. FCC*, 149 F.3d 1213, 1216 (D.C. Cir. 1998)
    (*quoting Citizens for Jazz on WRVR Inc. v. FCC*, 775 F.2d 392, 395
    (D.C. Cir. 1985)).

[^15]: ^?^ 47 U.S.C. § 310(d).

[^16]: ^?^ *See MD/DC/DE Broadcasters Association v. FCC*, 236 F. 3d 13
    (D.C. Cir. 2001). On January 31, 2001, the Commission suspended all
    EEO rules for broadcast, cable, and multichannel video programming
    distributors, except for the non-discrimination provisions. *Equal
    Employment Opportunity Outreach Program Requirements,* 16 FCC Rcd
    2872 (2001) (\"*Suspension Order*\"). *See also* In the Matter of
    Review of the Commission's Broadcast and Cable Equal Employment
    Opportunity Rules, MM Docket No. 98-204, *Second Notice of Proposed
    Rulemaking*, FCC 01-363, released December 21, 2001 (*EEO Second
    NPRM)*.

[^17]: ^?^ *See EEO Second NPRM*, *supra.*

[^18]: ^?^ With respect to their demonstration of the requisite standing
    to oppose the NBC/Telemundo merger under Section 309(d) of the
    Communications Act, the Hispanic Groups claim standing by relying on
    the fact that they are members and representatives of Hispanic
    organizations and that some of their members are residents within
    the viewing area KVEA-TV, Corona, California, one of the stations
    being transferred from Telemundo to NBC. One of these members claims
    in a Declaration that he will be seriously aggrieved if the Petition
    to Deny is not granted because he will be deprived of program
    service and diversity in the public interest. We find that the
    Hispanic Groups have demonstrated standing to file their petition to
    deny. *See CHET-5 Broadcasting, L.P.*, 14 FCC Rcd 13041, 13042
    (1999).

[^19]: ^?^ Paxson claims standing to file its Petition to Deny by virtue
    of the fact that its stations compete in the same television markets
    as NBC and Telemundo stations. *See United Church of Christ v. FCC*,
    359 F. 2d 994 (D.C. Cir. 1966). We find that Paxson has the
    requisite standing to file its petition to deny.

[^20]: ^?^ *See O.D.T. International*, 9 FCC Rcd 2575, 2576 (1994);
    *Decatur Telecasting, Inc.*, 7 FCC Rcd 8622, 8624 (1992).

[^21]: ^?^ *See* 47 C.F.R. § 73.3555(e). On February 19, 2002, the U.S.
    Court of Appeals for the District of Columbia Circuit found that the
    Commission's 1998 decision not to initiate a rulemaking proceeding
    to consider repeal or modification of the national television
    station ownership rule was arbitrary and capricious and the court
    remanded to the Commission the case for further consideration
    whether to repeal or to modify the rule. *See* *Fox Televisions
    Stations, Inc. v. FCC*, No. 00-1222, (D.C. Cir. 2002). The rule,
    however, remains in effect.

[^22]: ^?^ *See Viacom, Inc.*, 8 FCC Rcd 8439 (1993).

[^23]: ^?^ *See* Review of the Commission's Regulations Governing
    Attribution of Broadcast and Cable/MDS Interests, *Report and
    Order*, 14 FCC Rcd 12559 (1999). That rule provides as follows:
    "where an investor is either (1) a 'major program supplier,' as
    defined herein to include all programming entities....that supply
    over 15 percent of a station's total weekly broadcast programming
    hours, or (2) a same-market media entity subject to the broadcast
    multiple ownership rules...its interest in a licensee or other media
    entity in that market will be attributed if that interest,
    aggregating both debt and equity holdings, exceeds 33 percent of the
    total asset value (equity plus debt) of the licensee or media
    entity." *Id.* at 12579.

[^24]: ^?^ *See News International, PLC,* 97 FCC 2d 349, 357-8 (1984).

[^25]: ^?^ *See*, *e.g.*, *AM/FM, Inc.*, 15 FCC Rcd 16062 (2000); *Roy
    M. Speer,* 11 FCC Rcd 14147, 14155-56 (1996), *aff'd*, 13 FCC Rcd
    19911 (1998); *Quincy Jones*, 11 FCC Rcd 2481, 2482-83, 2487 (1995);
    *BBC License Subsidiary, L.P.*, 10 FCC Rcd 7926, 7927, 7933 (1995);
    *National Broadcasting Company, Inc.*, 6 FCC Rcd 4882, 4883, n.2
    (1991); and *News International, PLC*, 97 FCC 2d at 355.

[^26]: ^?^ *See* 47 C.F.R. §73.3555 Note 2(g).

[^27]: ^?^ Attribution in this instance is not based upon a key employee
    relationship. In the past, the Commission attributed to an employee
    the interests of his employer if the employee held a "key" position,
    such as station manager or program director, with the employer. This
    attribution, a component of the Commission's former cross-interest
    policy, was premised upon the possible influence the employee could
    assert over the affairs of his employer due to his position. *See
    Cross-Interest Policy Statement*, 4 FCC Rcd 2208 (1989). The
    Commission eliminated this form of attribution when it adopted its
    Equity-Debt-Plus attribution standards in 1999. *See Attribution
    Report and Order*, 14 FCC Rcd at 12610. Here, we are not concerned
    with the influence of an employee on the company for which he works.
    Rather, we are concerned with the influence of the employer on the
    employee whom the employer has nominated to a highly influential
    position at a company in which the employer has a substantial
    interest.

[^28]: ^?^ *Cable Competition Report and Order*, 14 FCC Rcd at 19060
    (footnote omitted).

[^29]: ^?^ *See* Corporate Ownership Reporting and Disclosure by
    Broadcast Licensees, MM Docket No. 83-46, *Report and Order*, 97 FCC
    2d 997, 1042 (1984).

[^30]: ^?^ *See* Corporate Ownership Reporting and Disclosure by
    Broadcast Licensees, MM Docket No. 83-46, *Memorandum Opinion and
    Order*, 1 FCC Rcd 802, 806 (1986).

[^31]: ^?^ Although Paxson argues that NBC also holds the right to
    designate directors to its board, the agreements do not appear to
    support that contention. In any event, as noted above, designation
    by NBC of any individual to sit as a Paxson director would result in
    attribution of Paxson's interests to NBC.

[^32]: ^?^ We do not reach here the question of whether an
    employee-director could be insulated from its employer by some
    means, such as express restrictions on the employee-director's
    voting rights, sufficient to avoid attribution to its employer. No
    such insulating mechanisms were in place in this case. In any event,
    a determination of the effectiveness of any such insulation would
    require a specific factual record and review by the Commission.

[^33]: ^?^ *See infra* note 30.

[^34]: ^?^ NBC provided Nielsen audience share data to support its
    claims.

[^35]: ^?^ *See*, *e.g.*, *UTV of San Francisco, Inc.*, 16 FCC Rcd 14975
    (2001); and *Westinghouse Electric Corporation*, 11 FCC Rcd 3733
    (1995).

[^36]: ^?^ *See*, *e.g.*, *United Television, Inc.*, 16 FCC Rcd 14975
    (2001); and *Shareholders of CBS Corporation*, 15 FCC Rcd 8230, 8243
    (2000).

[^37]: ^?^ *See* Review of the Commission's Regulations Governing
    Television Broadcasting, *Report and Order*, 14 FCC Rcd 12903, 12930
    (1999)(*Local Ownership R&O*).

[^38]: ^?^ *Id.* at 12931.

[^39]: ^?^ *See LINT Co.,* 15 FCC Rcd 18130 (2000); *Shareholders of CBS
    Corporation*, *supra*.

[^40]: ^?^ *See* *Capital Cities/ABC, Inc.*, 11 FCC Rcd 5841 (1996).

[^41]: ^?^ *Id.* at 5872.

[^42]: ^?^ *See*, *e.g.*, *UTV of San Francisco, Inc.*, *supra; LINT
    Co., supra.*

[^43]: ^?^ *See*, *e.g.*, *Guy Gannett Communications*, 14 FCC Rcd 6204
    (1999).

[^44]: ^?^ *UTV of San Francisco, Inc.*, *supra.*