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.