encouraging minority ownership of broadcast stations

The FCC announced on Friday that it will be hosting a symposium on the state of the broadcast industry on November 21.  On that day, there will be a panel in the morning on the state of the radio industry and one in the afternoon on television.  The Public Notice released Friday lists a diverse group of panelists, but says little beyond the fact that the forum will be occurring.  What could be behind the Commission’s decision to host this session?

The FCC is working on its Quadrennial Review of its ownership rules (see our articles here and here).  There were many who expected that review to be completed either late this year or early next, with relaxation of the radio ownership rules thought to be one of the possible outcomes.  Of course, quick action may have been derailed by the decision of the Third Circuit Court of the Appeals to vacate and remand the Commission’s 2017 ownership order.  The court’s decision unwinds the FCC’s 2017 order which included abolition of the broadcast newspaper cross-ownership rule and the rule that limited one owner from owning two TV stations in the same market unless there were 8 independent television operators in that market – see our article here on the 2017 decision and our article here on the Third Circuit’s decision.  The basis of the Third Circuit decision was that the FCC did not have sufficient information to assess the impact of its rule changes on minority ownership and other potential new entrants into broadcast ownership.  If the FCC did not have enough information to justify the 2017 decisions, many believe any further changes in its rules are on hold until the FCC can either satisfy the court’s desire for more information on minority ownership or until there is a successful appeal of that decision.  Even though FCC changes to its ownership rules may be in abeyance, the November 21 forum can shed light on the current state of the industry and why changes in ownership rules may be justified.
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While the trade press has been full of reports that the FCC has voted on an order addressing the issues raised in its Quadrennial Review of its multiple ownership rules, and that the decision largely left those rules unchanged (including the broad ban on the cross-ownership of daily newspapers and broadcast stations), no final decision on the review has yet been released. However, we did see on Friday that, in the FCC’s list of matters pending before the Commission for approval “on circulation” (i.e. to be voted on without being considered at an FCC open meeting) the ownership item was removed from the list of pending items, seemingly confirming that the decision has in fact been voted on and is thus no longer circulating for approval. If the press reports are to be believed, there has been no major change in the rules despite much last minute hope for some relaxation of the newspaper cross-interest rule. The rules are thus likely to be those indicated by the Chairman in his blog post in late June, which we summarized here. Even if the most significant rules (e.g. local ownership rules for radio and TV – the “duopoly” rules, and the newspaper-broadcast cross-ownership rules) remain unchanged, that does not mean that the broadcast community should ignore the upcoming decision, as there are bound to be other issues addressed in the order that may be of significance.

In connection with the newspaper cross-ownership rules, while the press reports indicate that the rules will remain in place, there are reports that there will be some sort of waiver allowed, seemingly where economics justify the combination. If this is akin to the “failing station” waiver used to justify the ownership of 2 TV stations in markets where such ownership would normally not be allowed, some have wondered, given the economic state of the newspaper industry, if such a waiver would ever be used as it will be a rare case where a last-minute broadcast combination will rescue a failing newspaper. But we will need to see what the details are of the waiver standard to be applied.
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At its meeting today, the FCC decided to revamp its Ownership Report filing process – requiring all stations to file Biennial Ownership Reports on FCC Form 323 on November 1 of this year – even stations that have just filed those reports in the normal course in the last few months.  All stations will have to file every two years thereafter – on November 1 of every other year.  Reports will also be required from Low Power TV stations and Class A TV stations, which have not in the past had to file reports.  Reports will also be required from stations that are owned by an individual, and by general partnerships in which all of the partners are individuals (or, in the FCC’s legalese, "natural persons").  In the past, such stations did not have to file reports as any change in ownership would have required, at a minimum, the filing of a Form 316 short-form assignment or transfer application.  Finally, the Commission will require the reporting of the interests of currently non-attributable owners who are not attributable simply because there is a single majority shareholder in the licensee.

The FCC is not asking for this information because it wants to track improper transfers, but instead so that it can gather information about the racial and gender make-up of the broadcast ownership universe.  This information has been required on ownership reports for the last ten years, but the FCC did not believe that the system was extensive enough to capture all information about the ownership of broadcast properties, as so many stations were not covered by the requirements.  Why does the FCC want racial and gender information about the owners of stations?  To potentially take more aggressive actions to encourage minority ownership.  The FCC has considered such actions in the past, but has not felt that it take actions specifically targeted to minority and female applicants, as there was no record of past discrimination in the broadcast industry.  The government can constitutionally only make racial or gender-based decisions if these decisions are to remedy the effects of past discrimination.  To justify such acts, the government agency must demonstrate the past discrimination – and these new filing requirements are meant to gather that information through what is called an Adarand study.  In the recent past, when it adopted certain diversity initiatives for designated entities (like the ability of a designated entity to buy an expiring construction permit and get an extension, which we recently wrote about here), the Commission had to define a designated entity as a "small business" defined by SBA standards.  Chairman Copps today said that this definition did not truly benefit diversity as favoring small businesses "generally benefit white males."


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