At its November 14 meeting, the FCC is tentatively scheduled to consider the relaxation of its limits on the ownership of broadcast stations by foreign entities or citizens.  Under the current “alien ownership” limitations, US citizens or entities must own 80% of a broadcast licensee, or 75% of a licensee’s parent company.  In the broadcast world, the 25% alien ownership limit must be analyzed both as to equity and voting interests.  In the modern financial world, where companies are often owned by many diverse investors (or funds with widely diverse ownership), these rules can be very burdensome in assuring compliance and managing the potential investment in US broadcast operations by foreign sources of capital. 

Under the governing statute, Section 310(b)(4) of the Communications Act, the FCC can’t allow a licensee in any service that it regulates to be more than 20% foreign owned.  But the statute allows a parent company of a licensee to be 25% foreign owned, and even allows that parent company to exceed that “limit” unless the FCC finds that the public interest would be compromised by foreign ownership greater than 25%.  Thus, the rules are actually written to presume that the “limit” can be exceeded, unless the FCC sees a problem.  The principal concern that would raise a question under the law would be one of national security – the government does not want crucial communications infrastructure, or the means of dissemination of information to the public, to be controlled or unduly influenced, by foreign interests in the event of some emergency.   As we wrote just 6 months ago, in non-broadcast services, the FCC has routinely allowed foreign ownership to exceed the 25% threshold, and recently made it easier for companies to demonstrate their compliance with the rules.  This clearly shows that national security issues can be addressed in other ways.  How about in the broadcast services?

Such safeguards have not been previously recognized in the broadcast services – the FCC apparently thinking that there is some fundamental difference between broadcast and nonbroadcast services.  But, today, with so much information reaching consumers through nonbroadcast channels (e.g. through the Internet), the distinction that has been made in the past seems unnecessary.  Broadcasters are regulated, their participation in the EAS system is mandated by the FCC’s rules and regularly monitored (see our articles on the recent national EAS test), and the arbitrary 25% limits really don’t seem to make sense in a world where any US citizen is exposed to websites from around the world and cable channels that can be owned by foreign governments.  Effectively, these alien ownership rules limit investment in the broadcast media – disadvantaging traditional media companies in their attempts to compete against online media, a concern noted by some minority organizations who have been among the most vocal supporters of the proposed liberalization.  The announcement about the November meeting seems to signal that the FCC may be about to recognize the need for a reform of these rules.

While all three sitting Commissioners have expressed their support for the changes, that is not to say that this decision will, in and of itself, be enough to change FCC policy.  The FCC may simply say that they will no longer apply their presumption against broadcast holding companies being more than 25% alien owned, and leave it to future decisions to flesh out how the new policy will be implemented, and to determine how to assure that the Commission is comfortable with a greater degree of foreign ownership in any specific situation.  But any relaxation of the foreign ownership rules will be a step in the right direction.  So we’ll be watching the November 14 meeting for the Commission to finalize this long-overdue change.