As part of its order in it proceeding to encourage diversity in broadcast ownership, the FCC adopted a number of new rules, including a rule allowing parties holding construction permits for new broadcast stations to sell those permits to "qualified entities."   The buying qualified entity would then then get 18 months to construct the new station, even if the construction permit would otherwise expire in less than 18 months.  Under prior policy, an FCC construction permit would expire 3 years after it is issued, with no real opportunity for extension (though the construction period could be "tolled" for the period that certain impediments to construction existed, i. e. litigation over zoning, FCC litigation over the validity of the permit, or Acts of God that temporarily stopped construction – but only for the limited period that such an impediment existed).   The new rule was adopted to encourage the sale to new entrants to broadcast ownership who could purchase construction permits that might otherwise expire.  Today, the FCC issued some clarifications of the new rule.

The clarification was issued principally to set out when the sale must take place in order for the buyer to qualify for the 18 month extension.  The FCC’s staff looked at the literal language of the new rule, and concluded that the sale must be approved by the FCC and consummated before the expiration date of the construction permit in order for the buyer to get the 18 month extension.  If the sale is not completed before expiration, the permit would expire.  Thus, the Commission warned applicants planning to take advantage of this new rule to file for the FCC approval of the sale at least 90 days before the expiration of the permit, to give time for the FCC approval of the sale and a consummation.  However, because of the uncertainty of the rule, the Commission decided that it would allow any party wanting to buy an unbuilt construction permit and who files to acquire that permit by May 31 to get the 18 month extension, even if the permit expires while the FCC application for approval of the sale is pending.  But after June 1, the buyer will not get the extension if the sale is not completed before the expiration of the permit. 


Continue Reading FCC Clarifies Rules on Extension of Broadcast Construction Permits Upon Sale to Qualified Entity

The FCC today issued an order extending the comment deadline in its Broadcast Diversity proceeding, extending the comment date a full month until July 30, with Reply Comments now due on August 29.  This important proceeding, about which we wrote here, will address many issues, including proposals to, among other things, repurpose television

We recently wrote about the Federal Communications Commission’s actions in their Diversity docket, designed to promote new entrants into the ranks of broadcast station owners. In addition to the rules adopted in the proceeding, the FCC is seeking comment on a number of other ideas – some to restrict the definition of the Designated Entities that are eligible to take advantage of these rules, others to expand the universe of media outlets available to potential broadcast owners – including proposals to expand the FM band onto TV channels 5 and 6, and proposals to allow certain AM stations, which were to be returned to the FCC after their owners received construction permits for expanded band stations, to retain those stations or transfer them to Designated Entities. The proposals, on which public comment is being sought, are summarized below.

Definition of Designated Entity. The first issue raised by the Commission deals with whether the class of applicants entitled to Designated Entity status and entitled to take advantage of the Commission’s diversity initiatives should be restricted. One proposal is to restrict the Designated Entity status to companies controlled by racial minorities. The Commission expressed skepticism about that proposal, noting that the courts had throw out several versions of the FCC’s EEO rules, finding that there was insufficient justification offered by the FCC to constitutionally justify raced-based preferences. The Commission asked that proponents of such preferences provide a “compelling” showing of needed, as necessary for a constitutional justification for governmental race-based discrimination.


Continue Reading FCC’s Acts to Increase Diversity in Media Ownership – Part 2, The Proposals for Future Actions – Channel 6 for FM, AM Expanded Band, Definition of Designated Entity, Must Carry for Class A TV and Others

At its December meeting, at the same time as it adopted rules relaxing the newspaper-broadcast cross-ownership rules, the FCC adopted new rules to expand diversity in the ownership of broadcast stations, encouraging new entrants into such ownership.  The full text of that decision was just released last week, providing a number of specific rule changes adopted to promote diverse ownership, as well as a number of proposals for changes on which it requests further comment.  Comments on the proposed changes will be due 30 days after this order is published in the Federal Register.  As this proceeding involves extensive changes and proposals, we will cover it in two parts.  This post will focus on the rule changes that have already been made – a subsequent post will cover the proposed changes.  The new rules deal not only with ownership rule modifications, but also with issues of discrimination in the sale of broadcast stations and in the sale of advertising on broadcast stations, new rules that leave some important unanswered questions. 

The rules that the Commission adopted were for the benefit of "designated entities."  Essentially, to avoid constitutional issues of preferences based on race or gender, the definition of a designated entity adopted by the Commission is based on the size of the business, and not the characteristics of the owners.  A small business is one designated as such by the Small Business Administration classification system.  Essentially, a radio business is small if it had less than $6.5 million in revenue in the preceding year.  A television company is small if it had less than $13 million in revenues.  These tests take into account not only the revenue of the particular entity, but also entities that are under common control, and those of parent companies.  For FCC purposes, investment by larger companies in the proposed FCC licensee is permissible as long as the designated entity is in voting control of the proposed FCC licensee and meets one of three tests as to equity ownership: (1) the designated entity holds at least 30% of the equity of the proposed licensee, or (2) it holds at least 15% of the equity and no other person or entity holds more than 25%, or (3) in a public company, regardless of the equity ownership, the designated entity must be in voting control of the company.


Continue Reading FCC Takes Actions to Increase Diversity in Broadcast Ownership