There were several reports in the broadcast trade press today about an article in the Hill newsletter from retiring Congressman Greg Walden about his proposals to increase diversity in broadcast ownership. Congressman Walden, a former broadcaster, seeks in his Broadcast Diversity in Leadership Act to foster minority ownership and ownership by new entrants by establishing in legislation an incubator program similar to the one adopted by the FCC in 2018, but put on hold by the Third Circuit Court of Appeals in their decision on broadcast ownership (which is now before the Supreme Court – see our post here). While, given the short time before the end of the Congressional session, the Congressman’s bill stands little chance of passing both houses of Congress and being adopted before the end of the year, the bill is worth reviewing as it has the support of both the NAB and minority-advocacy organizations, so it could well resurface in a new Congress.
The bill adopts much of the framework of the FCC’s incubator program (which we outlined in our article here). Under the proposed legislation, an existing broadcaster could work with an aspiring broadcaster to help that new entrant purchase and operate a broadcast station. The bill asks the FCC to adopt rules outlining the support that could be provided to the new entrant, including training, financing and access to resources of the established broadcaster. The established broadcaster could even hold a non-controlling equity interest in the emerging broadcaster, as long as the new entrant retains control. In exchange for providing the services or financing, if the incubation is determined to be successful after a two-year period, the existing broadcaster would be allowed to acquire one station in a similarly sized market that exceeded the current cap on broadcast ownership allowed by Section 73.3555 of the Commission’s rules. So, if the existing broadcaster operates in a market where one party can only own 6 stations, it could acquire a seventh.
What is different in this proposal from the incubator program that the FCC already adopted? First, it would apply to TV as well as radio. Second, the size of the markets in which the existing broadcaster could exercise its reward for a successful incubation is based not on the number of stations that a broadcaster can currently own, but instead on the size of the market. In the FCC’s program, if the incubated station was in a market where one party could own up to 6 stations, the established broadcaster could acquire its reward for a successful incubation in any market where the cap was 6 stations, no matter the population of that market. In the Walden proposal, the reward would come in a similarly sized or smaller market (market size being based on Nielsen market ranks for radio and TV). So, if the incubation was in a market between 25 and 50, the reward for the successful program would come in a similarly rated market – or one that was smaller. In the legislation, the incubation could be ended and judged successful in two years, as opposed to the three years in the FCC-adopted program.
The legislation would also give a Congressional stamp of approval to the program, insulating it from attacks on the FCC’s authority to adopt it. It would also remove it from review under the Quadrennial Review process, taking it out of the current log-jam on FCC ownership rule changes that has been ongoing, unless the Supreme Court overturns last year’s decision by the Third Circuit that has frozen any consideration of changes in the broadcast ownership rules.
Given the diverse support for this program, watch for its reintroduction in the new post-election Congress, perhaps in connection with other proposals to advance new entrants into broadcast ownership. For instance, as we wrote here, there also proposals in Congress to revive the minority tax certificate as a way to foster new broadcast owners. We will be watching to see what develops next year.