In a Further Notice of Proposed Rulemaking, the FCC last week asked for public comment on a series of initiatives to promote the ownership of broadcast stations by minorities and other Socially Disadvantaged Businesses ("SDBs"). These proposals, which include the potential for the sale without requiring any divestitures of clusters of radio stations which exceed the multiple ownership rules now in effect, and the potential for investors to invest in stations controlled by SDBs, even if such investment would otherwise violate the existing multiple ownership rules. The Further Notice was issued in response to a petition filed over a year ago by the Minority Media Telecommunications Council, which asked for a withdrawal of the FCC’s Notice of Proposed Rulemaking on the Multiple Ownership Rules (which we summarized here) because that Notice did not address the promotion of minority ownership of broadcast stations. MMTC claimed that the Third Circuit’s remand of the 2003 Multiple Ownership decision mandated that consideration. Comments on the Further Notice, which will be resolved as part of the current multiple ownership proceeding, are due on October 1, and replies on October 15.
The Notice raises a number of suggestions for regulatory changes to foster the ownership of broadcast stations by minority owners and other SDBs. In addition to allowing the transfer of grandfathered radio clusters that no longer comply with the multiple ownership rules, these include specific proposals that would accomplish the following:
Allowing investment by exiting broadcasters and others with attributable media interests into companies controlled by minorities without the investment being counted against the ownership holdings of the investing company
Allowing minority groups to purchase unbuilt construction permits, and get sufficient time to construct those stations, even if the construction permit is otherwise to expire as it has been outstanding and unbuilt for over three years
Granting some non-minority owned companies waivers to exceed the multiple ownership limits if they sell stations to SDBs (including a proposal to create tradable credits for creating minority-owned stations)
Allowing for the waiver of the alien ownership limits if the investment by foreign companies would assist a minority-owned company in getting into the broadcast business.
Revival of the policies permitting minority distress sales (where a broadcaster against whom there were issues pending which could lead to a revocation of a license could sell their station to a minority group and avoid the revocation proceeding) and minority tax credits (where a broadcaster who sells to a minority group could defer gains on sale if the money was reinvested into any broadcast company in the future)
Some of these proposals could be implemented by the FCC, while others (like the tax certificate) would require Congressional actions. Many would benefit all broadcasters – as they could allow investments in companies beyond the multiple ownership limits, or the rescuing of distressed properties or construction permits when unexpected issues arise. However, there are also some proposals that might be of some concern to broadcasters, for instance requiring a certification that there was no discrimination in the sale of a station – as additional certifications always raise questions about what was meant, and whether or not some conduct may be misconstrued and lead to a fight over whether or not the certification was accurately made. Similarly, the notice mentions a proposal for strict enforcement of the ownership limits. That proposal could again lead to disputes over whether or not a broadcaster has violated the rules. When JSAs and LMAs first arose, there were disputes over whether or not they were permissible. These are still occasionally cases where there are questions of whether or not some business arrangement between competing stations goes too far under the rules. This proposal would have to be carefully implemented to avoid punishment that are too strict for violations that may not be clear under the rules.
The Commission has also asked for comment on who would qualify to take advantage of any programs that may be adopted as a result of this proceeding. Some of the proposals talk of minorities as being the beneficiaries, and others of Socially Disadvantaged Businesses. However, there are constitutional issues that can arise if these programs are made available only to minorities, thus it is possible that a broader category of SDBs could overcome any such issues. However, it would then be necessary to define an SDB. Would that include any small business under the guidelines established by the Small Business Administration, or are there some other definitions that should be established?
The proposals also call on broadcasters, the FCC and other groups interested in the broadcast industry to take more efforts to educate and encourage potential new entrants into the business, and to help ease their access to financing so that they can enter the industry. All of these important issues will be addressed as part of the on-going multiple ownership proceeding, based on the comments filed in response to this notice. As all stand to benefit from these proposals, broadcasters should review them carefully, and file appropriate comments.