In March, we wrote about the concurring opinion of Commissioner Copps in connection with the sale of Univision Communications, where the Commissioner asked whether it was in the public interest to allow the sale of broadcast companies to private equity firms. That theme has now been picked up by Congress, as Congressman John Dingell, Chairman of the House Energy and Commerce Committee, and Ed Markey, Chairman of the Telecommunications Subcommittee, jointly sent a letter to the FCC asking for answers to a series of questions about the impact of private equity ownership of media and telecommunications facilities. The letter, here, cites the Univision case, the acquisition of Clear Channel and the sale of a number of Radio One radio stations to private equity firms, and suggests that these firms may be more interested in cutting expenses and maximizing profits to the detriment of the public interest. The letter asks a number of questions about whether the FCC has adequate information about such ownership to assess its impact on the public interest.
The questions posed by the letter include the following:
- Whether the FCC currently tracks ownership of media properties by private equity companies.
- Whether the FCC has assessed the impact of private equity ownership on localism and, if it has not, should it
- Whether the FCC has adequate information to assess the impact of media ownership by these companies on multiple ownership considerations
- Whether the Commission’s Equity-Debt Plus rules need to be revised to take account of private equity ownership
- If the ownership of these entities is sufficiently public and transparent for the Commission to review that ownership.
The letter was addressed to Chairman Martin, and he was given until July 20 in which to respond.
As we wrote before, one wonders if the Commission has the manpower and expertise to assess the true impact of private equity in the broadcast field. How could the Commission make distinctions between private equity funds and other companies that provide financing and investment to broadcast entities? Don’t all companies have the same incentive to maximize profits? Various banks, finance companies and investment funds have invested in broadcast properties forever, and the Commission’s rules seem to have been able to deal with such investment without serious problem. Why would these investment vehicles be any different? The Commission has rules, like the Equity-Debt Plus rules that limit the financial investments that companies can have in competing media outlets. One would think that the enforcement of these rules would be sufficient to govern any potential for anitcompetitive effects of private equity. Similarly, private equity should not affect localism any more than any other non-local management.
Nevertheless, these issues will no doubt be considered in the upcoming proceedings on localism and multiple ownership (whenever those issues are ultimately considered by the FCC). As Congress examines the role of private equity in other sectors of the economy, expect that these issues won’t disappear anytime in the near future.