The FCC yesterday approved the sale of the stock of Univision Communications to a consortium of private equity companies. In order to approve the deal, the FCC agreed to a $24 million dollar payment to the US Treasury by Univision as part of a consent decree for alleged violations of the children’s television rules. The consent decree, attached to the FCC decision on the sale, while providing for one of the largest fines ever paid to the FCC, provides little guidance to broadcasters on what constitutes educational and informational programming directed to children, the source of the violation found by the FCC. But the separate Statement of Commissioner Copps raises a new issue – one he looks for the FCC to study and report on – the effect of private equity and debt on the ability of broadcasters to operate in the public interest.
The Copps opinion suggests that the debt incurred in connection with acquisitions by private equity companies may impair the ability of broadcast stations to operate in the public interest, as money needed for operations is instead funneled into debt repayment. Of course, private equity firms are not the first owners of broadcast companies to incur debt, nor is there any evidence that I have seen that private equity companies which own broadcast companies have proportionally more debt than other broadcast owners. What would the FCC hope to accomplish through such an investigation? I can’t see the FCC evaluating each transaction that comes before it to determine if the proposed debt structure would be too much of a burden on the operations of a station. Nor could I foresee the FCC putting broadcast ownership restrictions on certain classes of otherwise qualified potential broadcast owners.
In the context of this case and also in connection with the proposed Clear Channel buy outs, some questions were raised as to the multiple ownership impact of the various holdings of the private equity companies involved in that transaction. In this case, certain divestitures were required. Compliance with the ownership rules is certainly a legitimate area of Commission inquiry. But looking at the financial structure of transactions and making predictions as to how those structures will affect broadcast station operations would seem to involve the Commission in areas where they have neither the expertise nor manpower to explore.
We will have to see if this comment is but an expression of a passing concern, or a real area of inquiry for the FCC. As with so many other issues that are raised in Washington, one can only stay tuned to see what develops.