In a decision released yesterday, the FCC issued a “remedial declaratory ruling” finding the change in control of stock in a company that owned broadcast stations did not offend the public interest, and that the approval of foreign ownership in the company that controlled broadcast stations above 25% (but capped at 49%) that was

The FCC yesterday issued a Declaratory Ruling approving the acquisition by a company owned by two Mexican citizens of 100% of the ownership interest of a company that owns two radio stations in California and Arizona. Currently, the company owned by the Mexican citizens had only a 25% interest in the parent company of the

The FCC this week announced the filing of two applications seeking broadcast acquisitions by non-US based companies. In one available here, a company controlled by Mexican citizens would go from 25% to 100% ownership and control of a company that owns 2 FM stations in California and Arizona. In another, available here, an

The FCC yesterday released its first decision approving 100% foreign ownership of a group of US broadcast stations. This comes after significant relaxation of the FCC’s interpretation of the foreign ownership limits which, less than 4 years ago, had been interpreted to effectively prohibit foreign ownership of more than 25% of a company controlling

At the FCC’s open meeting last week, the Commission adopted new policies for assessing and computing foreign ownership of broadcast companies – particularly such ownership in public companies. The Commission’s Report and Order on this matter is dense reading, dealing with how companies assess compliance with the rules which limit foreign ownership to 20% of a broadcast licensee and 25% of a holding company unless there is a finding by the FCC that the public interest is not harmed by a greater foreign ownership interest. The rules adopted last week were principally an outgrowth of the petition for declaratory ruling filed by Pandora which sought FCC approval, in connection with its acquisition of a radio station, for foreign ownership of greater than 25%. Pandora did not file such a petition because its foreign ownership exceeded that percentage, but instead because, based on the FCC methodology in use at the time, Pandora could not prove that it was in compliance (see our summary of the Pandora petition here). The new rules adopted last week essentially reverse the presumption to which Pandora had to comply – rather than assuming that there was a compliance issue because a company cannot prove that its foreign ownership was less than 25%, the FCC will now conclude that there is an issue only where a company, based on knowledge either that it has or should have, actually knows that there it has a foreign ownership compliance problem.

The order requires that public companies regularly take steps to assess their owners to determine if there are potential foreign ownership issues. A public company should know who certain shareholders are, either because they are insiders (e.g. officers and directors) or because they are otherwise known to the company (e.g. through proxy fights, shareholder lawsuits or because they are in some way doing business with the company). Other shareholders can be determined through an array of filings made at the SEC – including filings made when a shareholder exceeds holdings of 5% of the stock of a company, and other filings made by companies that manage more than $100 million in assets who are required to report on their stockholdings. In addition, there are other public sources of information about funds and other investment companies that buy the stock of broadcast companies, from prospectuses to Internet news stories. Public broadcast companies need to monitor all of these sources of information to see whether they potentially have a problem with foreign ownership. The FCC did not require that these companies take other measures that had been used in the past or suggested in the Notice of Proposed Rulemaking in this proceeding (about which we wrote here).
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September 29 will be a big day for broadcasters and other media companies when the FCC holds its next open meeting. In the tentative agenda for that meeting released on Thursday, the FCC identified several issues that deal with the media including two big items on video issues – the decision as to what to do about the Commission’s proposals to open the cable set top box to competing systems, and a new proposal designed to promote sources of independent programming for video distributors. In addition to these two items, the FCC also says that it will resolve the proposals to make the FCC’s foreign ownership rules for broadcasting more like those applicable to non-broadcast companies, easing some of the procedural restrictions that made it difficult for non-US investors to become owners of US broadcast stations.

The set top box debate is perhaps the debate that has garnered the most publicity, with the Commission proposing to allow more companies to offer a means to access cable and satellite TV programming – perhaps enabling the use of new apps to access and inventory that programming. Content owners and program distributors have worried about security issues with opening programming to access on a myriad of devices, and have also been concerned that the loosening of these restrictions could interfere with contractual rights limiting access to certain programs to certain devices and distribution channels. The FCC Chairman yesterday released this fact sheet about the proposal setting out some specifics of the proposal that will seemingly be voted on at the late September meeting, and the Chairman published this op-ed article in the LA Times explaining what he is trying to do. The matter is sure to remain controversial right through the late-September meeting, and perhaps after the decision as well.
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Recently, we wrote about two cases seeking declaratory rulings from the FCC that non-US ownership of companies owning broadcast stations should be permitted even though that ownership would exceed the 25% standard that had been, until that last few years, the limit on such ownership. Last week, the FCC announced the filing of another such

In the last two days, the FCC has asked for public comment on two proposals for foreign ownership of US broadcast stations where that ownership would exceed 25% of the company – a limit that has for decades been seen as the upper end of ownership by foreign nationals.  While the FCC three years ago said that they would consider such ownership on a case by case basis (see our article here), up until this week, the FCC had considered only one case under this new flexible policy – and that was the case of Pandora, where the FCC took over a year to approve their acquisition of a broadcast station – and Pandora didn’t even think that their foreign ownership exceeded the 25% threshold, but they could not prove it because of the difficulty of assessing the citizenship of public companies (see our article here on the filing of the Pandora petition).  Now, the FCC seeks comments on two cases, one where an Australian husband and wife team seek to acquire 100% ownership of companies owning 29 radio and TV stations in Alaska, Arkansas and Texas.  The second involves Univision, which asks for FCC approval for foreign ownership of up to 49% of its stock, as it plans a public offering which would also involve the conversion to stock of warrants held by a Mexican company that already has a stake in the company.

While the FCC last year asked for comments on adopting new processing rules for these kinds of requests – especially those involving public companies – no order has come out of the FCC on that proceeding yet (see our summary here).  Last month, the FCC did adopt some new procedures for the streamlining of the consideration of foreign ownership requests for all services regulated by the FCC, not just broadcasting, but that proceeding did not deal with the substantive issues surrounding foreign ownership, but instead with the process by which the FCC interacts with other government agencies in assessing the national security concerns with foreign ownership of communications properties.  With this background, does the release of these two requests for comment signal any movement from the FCC on foreign ownership issues?
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In Friday’s Federal Register, the FCC published a summary of the Commission’s Notice of Proposed Rulemaking looking to revise its policies regarding the ownership of broadcast stations by non-US citizens setting the date for comments on its proposal of December 21, with Reply Comments being due by January 20.  The FCC two years ago issued a Declaratory Ruling confirming that it would allow broadcasters to have foreign ownership (in a licensee’s parent company) of greater than 25%, overturning what was widely viewed as the Commission’s prior reluctance to approve that degree of foreign ownership of broadcast stations (see our article here for a summary of the FCC’s 2013 action).  But that decision left many unanswered questions, as the Commission decided to proceed on a case-by-case basis in reviewing any requests for approval under the new rules.  When it took almost two years for Pandora to get approval for its acquisition of a broadcast station, almost a year in processing a request under the 2013 ruling (see our article here on the filing of the Pandora petition), when Pandora did not even think that it exceeded the 25% foreign-ownership threshold but it could not prove its compliance based on the FCC’s 40 year old rules setting out the procedures used to assess the foreign ownership of broadcast stations, it was clear that some changes had to be made.  So, in approving the Pandora deal in May, the FCC said that it would conduct a further review of its rules regarding foreign ownership, a commitment that it moves to fulfill by the issuance of this Notice of Proposed Rulemaking.

The NPRM suggests that the FCC will use for broadcasting, with some modifications, the procedures that it uses in assessing foreign ownership of non-broadcast FCC licensees.  While there are many details and nuances in its proposals, the FCC will still need a Petition for Declaratory Ruling to approve foreign ownership above 25% of a parent company of a broadcast licensee (foreign ownership of the licensee itself is flatly prohibited if it exceeds 20%). But it now proposes to adopt the non-broadcast presumptions that, when the FCC approves a foreign owner of more than 5% of a corporation, that approved owner can go up to 49% ownership without further FCC approval.  Similarly, if a foreign owner is approved in a control position, that owner would be able go to 100% without further approval.  But, on a practical level, perhaps more important was the FCC proposals about the mechanics of tracking foreign ownership.
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In November, the FCC changed its policy regarding the foreign ownership of broadcast stations.  In its decision, about which we wrote here, it agreed to entertain applications seeking “alien ownership” exceeding the 25% limit for foreign ownership of broadcast stations that had previously been in place.  In the modern communications era, with its diversity of media outlets, the Commission determined that the risk of increased foreign ownership was outweighed by the potential for new entrants into the broadcast industry, backed by new sources of capital from outside of the United States.  The FCC did not adopt any blanket rules for permitting higher levels of alien ownership, but instead agreed to consider specific requests for a declaratory ruling on a case-by-case basis to show that foreign ownership of a broadcast station in excess of 25% was not contrary to the public interest.  Despite the invitation to file such requests, as far as we know, none have been filed – until now, and that comes from what is perhaps an unexpected source – Pandora, which is best known as an Internet radio operator.

As we wrote several months ago, Pandora has sought to acquire an FM radio station that operates in the Rapid City, South Dakota radio market.  Its application to acquire the station was opposed by ASCAP, who feared that Pandora would use its status as a broadcaster to ask for broadcaster rates negotiated by the Radio Music Licensing Committee (RMLC) for the public performance of ASCAP music.  ASCAP based its opposition principally on the contention that Pandora had not proved that less than 25% of its stock was beneficially owned or controlled by foreign entities.  Despite Pandora being a company founded in the US by US citizens, headquartered and operating almost exclusively in the US, and traded on the US stock exchanges, ASCAP contended that Pandora had not established that its ownership of a broadcast station would not violate the alien ownership rules.  How could they make such an argument?
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