Backchannelmedia

Duluth, Minn.)

Jul. 24--Opponents of Malara Broadcasting Group's plan to buy KDLH-TV, Duluth, Minn.'s CBS affiliate, have unleashed their final salvo against the proposed deal. With those written objections in hand, and the comment period drawn to a close, officials of the Federal Communications Commission now must decide whether the sale should proceed.

The operators of two competing television stations in Duluth, WDIO and KQDS, have challenged Malara's proposed acquisition of KDLH, calling it "a cynical mockery of the public interest." In particular, the stations take issue with Malara's plans to enter into a shared-services agreement with Granite Broadcasting, owner of KBJR-TV, Duluth's NBC affiliate. WDIO and KQDS claim the arrangement would place Granite in de facto control of two stations. FCC rules allow for a company to control no more than one of the top four commercial television stations in any single market. Duluth has only four commercial stations, so ownership of more than one station in the market technically isn't allowed.

WDIO and KQDS claim Granite is trying to circumvent ownership rules through its relationship with Malara.

But Malara contends that it, not Granite, would retain full control of KDLH. In its response to WDIO's and KQDS' petition to deny the transfer of ownership, the company asserted: "Granite will have no ability to control MBG Duluth's employees. Rather, Malara Broadcasting Group Duluth's employees will supervise Granite employees at all levels and in all aspects of KDLH's operations." Under terms of its agreement, Granite would provide Malara with up to 15 percent of KDLH's programming and would handle the station's advertising sales and administrative functions But Charles Naftalin, an attorney representing WDIO and KQDS, said Malara's own staffing projections suggest the station essentially plans to cede power to Granite. In its FCC filing, Malara indicates it plans to employ at least two people but fewer than five.

"I find it stunning that they would go from a staff of about 60 to something like two or four people," Naftalin said. "You don't run a network, even in a smaller market, with that many people." He said the company would need to hire multi-talented "superheroes" to make such an arrangement work. More likely, he believes that Granite will take over day-to-day operations.

Malara representative Ed Novotny declined to comment on the case while it remains before the FCC. He said the company's filing papers speak for themselves.

Malara's FCC filing contends its acquisition of KDLH and partnership with Granite would enhance, not reduce, the supply of independent local programming offered to Duluth viewers.

"Overall, Granite's involvement with MBG Duluth will not remove a voice in the Duluth market; instead, it will make that voice stronger," the filing says.

Malara had hoped to complete its acquisition of KDLH by this fall, but the FCC is not obligated to rule on its application within any designated time frame. Some decisions can take months.

Meanwhile Granite continues to confront challenges of its own. The company faces the threat of having its stock delisted on the Nasdaq Exchange because the market value of its shares has fallen below acceptable levels. At the end of trading Friday, Granite's stock was selling for 51 cents per share, and the company has not turned a profit since 1999. During the first quarter of this year, Granite recorded a loss of $17.4 million.

W. Don Cornwell, Granite's chairman and CEO, did not respond to a request for comment Friday.

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