I don't think you're understanding the rules as CBS is playing them, Jeff.
For RADIO ownership specifically, the FCC looks at one thing and one thing only: the Arbitron metro. In the case of New York City, that encompasses the five boroughs, Nassau, Suffolk, Westchester, Putnam, Rockland, Fairfield, and a chunk of North Jersey that goes south as far as Middlesex and Monmouth and west out to Passaic and Bergen, but not to Sussex. No company can own, LMA or JSA more than eight stations licensed to communities in those counties, with no more than five of them on any one band. CBS now owns six (3 AM/3 FM) and will own seven (3 AM/4 FM) when the 101.9 deal is complete. So that's kosher, and CBS is one station shy of the radio market cap.
For TV ownership specifically, the FCC looks at the Nielsen DMA. For NYC, that's roughly the same as the Arbitron metro. No company can own more than two stations within that metro area, of which no more than one can be among the market's top four stations in the ratings. CBS now owns two TV stations in the New York DMA, WCBS-TV and WLNY, and only WCBS-TV is in the top four. So that's kosher, and CBS is at the market cap.
When a company owns both TV and radio, one more set of ownership tests kicks in. The cross-ownership rules, uniquely among ownership caps right now, do not look at DMA or MSA. Instead, they create a different sort of "market" (maybe better to think of it as a "universe") comprised of all the AM, FM and TV signals that put a minimum signal level over the entire community of license of each TV station being considered for cross-ownership. For WCBS-TV, that's New York City, and there are enough stations (radio and TV combined) in the WCBS-TV "universe" to allow one company to own a maximum of eight stations total, of which no more than two can be TV. The particular genius of the CBS lawyers was to notice that the WCBS-TV "universe" does not include WLNY, which does not put a sufficient signal over all of the five boroughs. So without WLNY in the picture, CBS is deemed to own eight stations after the 101.9 purchase: one TV (WCBS-TV), four FM, three AM. And so that, too, is kosher. (And out on Long Island, WLNY's cross-ownership "universe," consisting of the signals that cover all of Riverhead, includes only one CBS-owned signal, WLNY itself, so the 101.9 acquisition doesn't register there at all.)
With all due respect, what you're suggesting with Empire downgrades and micro-markets makes no sense in the real world. Arbitron determines its MSA lines based on a combination of client (radio station) demands, signal contours and Census-determined business patterns. There is no demand on the part of CBS or Clear Channel or Cumulus, Arbitron's largest clients in the #1 market in America, to have the size of that market reduced. For the smaller broadcasters who do business around the edges (Greater Media in NJ, Connoisseur and JVC and such out on Long Island, Pamal in the Hudson Valley, Cox on LI and in Connecticut), Arbitron has created smaller "embedded markets" such as Middlesex/Somerset/Union in NJ and Nassau-Suffolk on Long Island to allow them to buy numbers more specific to their corners of the larger market.
There's nothing significant for a CBS or Clear to gain by downgrading Empire signals and buying smaller suburban facilities. Ask Cumulus how little WFAS/WFAS-FM adds to the much larger revenue stream it gets from WPLJ and WABC. If anything, the direction in which the big guys would go, if they could, would be a substantial power increase from Empire to make it possible to draw bigger numbers out of eastern Suffolk and other areas distant out at the fringe (or beyond) of the Empire FM signals.
As I see it, CBS is looking to define their "universe". And I see that shrinking to be able to keep all of their stations (That would be more in keeping with my micro-market scenario), radio and TV, and possibly gaining more in the process. Remember the can of worms of .x's (TV for this discussion) hasn't come into play, yet. Clearly, separate programming on those channels with cable carriage has to be addressed. OTA TV is dead, it just hasn't felt the tap on the shoulder experienced in '09, yet.
Jeff in Sa-ra-so-ta!