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Firm Skirts Radio Caps in San Diego


SAN DIEGO — Federal regulations prohibit any broadcaster from owning more than eight radio stations in a single market. But here along California's southern border, industry giant Clear Channel Communications Inc. has figured out a way around the rules--and that has left its smaller competitors fuming.

By cutting deals to take over programming of five Mexican stations, including two in May, Clear Channel has grabbed nearly 50% of the San Diego market's radio advertising dollars, according to estimates from research firm BIA Financial. The Federal Communications Commission exempts foreign-owned stations from being counted toward the maximum of eight.

Altogether, the exemption and other loopholes have allowed Clear Channel to take control of 13 stations beaming signals into San Diego. The San Antonio-based company--the nation's biggest radio broadcaster--has more market share here than in any other top-20 market, according to BIA.

With antennas within sight of the U.S.-Mexico border and signals directed north, Clear Channel's so-called X stations (the Mexican outlets' names start with X) have become the key to a power struggle in San Diego radio.

Smaller radio companies protest that the media conglomerate has not only sidestepped federal law by taking over the Mexican stations, but that it is using its size to muscle advertisers. Critics say Clear Channel is throwing its weight around with advertisers in dozens of other markets where it has concentrated power.

Jefferson-Pilot Communications, a small broadcaster that owns four San Diego radio stations, said in a complaint filed with the FCC in March that the exemption Clear Channel is exploiting "has resulted in a serious competitive imbalance" in San Diego and permitted "the very market dominance Congress sought to preclude" by establishing station-ownership caps.

Jefferson-Pilot has asked the FCC to revise its rules and count any station that places a signal into a U.S. radio market and directs significant programming and sales efforts there.

In its basic pitch, Clear Channel tries to sell advertisers on the idea that, if they spend all their radio dollars on the company's stations, they would receive bonuses, such as free spots on its lower-rated stations.

Even if they reject the idea of handing their entire ad account to one company, some media buyers in San Diego say they must buy spots on Clear Channel's stations because it has tied up control of certain coveted demographic groups, including men ages 18 through 34. Some advertisers say that means they must pay Clear Channel's price--or stay off the air.

"I can get proposals from five or six different Clear Channel stations and they're like carbon copies," said veteran San Diego ad buyer J.C. Cordero. "For someone targeting certain demographics, they really have you between a rock and a hard place. It's David and Goliath, and right now Goliath is winning."

John Hogan, recently appointed chief of Clear Channel's 1,200-station radio division, said his company's size has actually helped media buyers by allowing them to engage in one-stop shopping. Some, he said, find that desirable.

At the same time, he denied that his sales force strong-arms advertisers in any way. "We don't insist people buy one station to get another one," Hogan said in a recent interview.

Mike Glickenhaus, Clear Channel's market manager for San Diego, added: "This gives us an opportunity to sell to advertisers who are looking for a specific demographic and give them more choices. We have never presented anyone with forced combinations. We know they've still got lots of choices."

Clear Channel acquired control of the Mexican stations through a so-called exclusive sales agreement, in which the company pays a fee to the license holder in exchange for the right to sell airtime for and program the station.

The antennas for the Mexican stations tower over an impoverished Tijuana neighborhood just five miles south of the border.

But the bulk of these stations broadcast from a sleek, glass office building in northern San Diego where Clear Channel houses its U.S. license stations.

For listeners, discerning between Clear Channel's Mexican stations and its stations on this side of the border is difficult.

One promotes itself as San Diego's "hit music channel" and plays the latest offerings from Shakira and Justin Timberlake.

Another is "your home for hip hop and R&B," thumping out Jay-Z and Nelly. Another station, which advertises itself as "My '80s, My '90s, My Music," plays softer hits by such acts as Michelle Branch.

For the most part, the only clue that radio here is different comes just once an hour, during government-mandated station identification breaks.

On the hip-hop outlet known locally as Z90, for example, a young Latina voice breaks in between songs by Sean Combs and Jay-Z to say "XHTZ, Tijuana, Baja California, Mexico."

In addition, the Mexican licensed stations must air speeches by Mexican President Vicente Fox and must devote time each week to Mexican public affairs programming.

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