The paucity of investment capital is precluding media diversification, Mark Fratrik told federal officials at a hearing in late July. Fratrik, vice president of BIA Financial Network in Chantilly, Va., testified before the FCC at a hearing on Barriers to Communication Financing.

“My charge is to provide a quick overview of the present status of the capital markets and how that status affects the ability of new entrants to secure the necessary equity and debt financing,” Fratrik testified. “â?¦ Anyone reading the general press or watching and listening to local television and radio stations know only too well that the capital markets are very tight. These markets are in “turmoil“ with uncertainty on the overall economy and the soundness of some groups of loans playing a very significant role in making investors and bankers very hesitant.”

Fratrik said one clear indicator of market conditions appeared in Standard & Poor“s midyear recap--second-quarter loan volume is down 76 percent from the same period a year ago. Money is also getting more expensive, costing as much as it did during recessions in 1991 and 2001, and loan conditions are getting more stringent.

“Lenders look to business plans for growth opportunities, and regrettably there is a feeling that there are few growth opportunities in radio and television,” Fratrik said.

The Olympics will boost television this year, but it will create a year-to-year revenue dip in 2009 at a time when traditional ad buyers are cutting back.

“With these more challenging industry forces amid the tougher credit market, it is not surprising to see a dramatic downturn in the number of deals occurring in both radio and television,” Fratrik said.

BIA“s records show that radio station sales in the first six months of 2008 were down 44 percent, while TV stations sales were down by 79 percent compared to last year.

“Many stations are available for sale, but the inability to secure enough equity and debt financing is just proving too difficult,” he said.

Opportunities exist despite the gloom, particularly in small markets.

“Television stations, especially in the smaller markets, offer good, sound investments. These are local radio and television stations that are still viable players in their local advertising markets. They are facing incredible challenges to their businesses, forcing them to find of new ways of operating and new avenues of generating revenues,” he said.

Fratrik said whatever the FCC could “to foster broadcasting as a good business will pay dividends in freeing up the necessary financing for new entrants.”

In other somewhat related news, the Commission is preparing to defend one of its indecency rulings in the Supreme Court. Several networks were fined and censured by the current Commission for what it deemed to be indecent language and nudity. A ruling against Fox over a couple of uttered F-words was tossed out by a federal appeals court and is awaiting a hearing by the high court.

The FCC“s indecency rulings have cause some degree of uncertainty in the industry because they demonstrate that broadcasters can be substantially fined for incidents over which they have limited control.