Multiple Ownership Rules

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In a Further Notice of Proposed Rulemaking, the FCC last week asked for public comment on a series of initiatives to promote the ownership of broadcast stations by minorities and other Socially Disadvantaged Businesses ("SDBs").  These proposals, which include the potential for the sale without requiring any divestitures of clusters of radio stations which exceed the multiple ownership rules now in effect, and the potential for investors to invest in stations controlled by SDBs, even if such investment would otherwise violate the existing multiple ownership rules.  The Further Notice was issued in response to a petition filed over a year ago by the Minority Media Telecommunications Council, which asked for a withdrawal of the FCC’s Notice of Proposed Rulemaking on the Multiple Ownership Rules (which we summarized here) because that Notice did not address the promotion of minority ownership of broadcast stations.  MMTC claimed that the Third Circuit’s remand of the 2003 Multiple Ownership decision mandated that consideration.  Comments on the Further Notice, which will be resolved as part of the current multiple ownership proceeding, are due on October 1, and replies on October 15. 

The Notice raises a number of suggestions for regulatory changes to foster the ownership of broadcast stations by minority owners and other SDBs.  In addition to allowing the transfer of grandfathered radio clusters that no longer comply with the multiple ownership rules, these include specific proposals that would accomplish the following:

  • Allowing investment by exiting broadcasters and others with attributable media interests into companies controlled by minorities without the investment being counted against the ownership holdings of the investing company
  • Allowing minority groups to purchase unbuilt construction permits, and get sufficient time to construct those stations, even if the construction permit is otherwise to expire as it has been outstanding and unbuilt for over three years
  • Granting some non-minority owned companies waivers to exceed the multiple ownership limits if they sell stations to SDBs (including a proposal to create tradable credits for creating minority-owned stations)
  • Allowing for the waiver of the alien ownership limits if the investment by foreign companies would assist a minority-owned company in getting into the broadcast business.
  • Revival of the policies permitting minority distress sales (where a broadcaster against whom there were issues pending which could lead to a revocation of a license could sell their station to a minority group and avoid the revocation proceeding) and minority tax credits  (where a broadcaster who sells to a minority group could defer gains on sale if the money was reinvested into any broadcast company in the future)

Continue Reading FCC Proposes Multiple Ownership Exceptions to Foster Minority Ownership

In March, we wrote about the concurring opinion of Commissioner Copps in connection with the sale of Univision Communications, where the Commissioner asked whether it was in the public interest to allow the sale of broadcast companies to private equity firms.  That theme has now been picked up by Congress, as Congressman John Dingell, Chairman of the House Energy and Commerce Committee, and Ed Markey, Chairman of the Telecommunications Subcommittee, jointly sent a letter to the FCC asking for answers to a series of questions about the impact of private equity ownership of media and telecommunications facilities.  The letter, here, cites the Univision case, the acquisition of Clear Channel and the sale of a number of Radio One radio stations to private equity firms, and suggests that these firms may be more interested in cutting expenses and maximizing profits to the detriment of the public interest.  The letter asks a number of questions about whether the FCC has adequate information about such ownership to assess its impact on the public interest.

The questions posed by the letter include the following:

  • Whether the FCC currently tracks ownership of media properties by private equity companies.
  • Whether the FCC has assessed the impact of private equity ownership on localism and, if it has not, should it
  • Whether the FCC has adequate information to assess the impact of media ownership by these companies on multiple ownership considerations
  • Whether the Commission’s Equity-Debt Plus rules need to be revised to take account of private equity ownership
  • If the ownership of these entities is sufficiently public and transparent for the Commission to review that ownership.

The letter was addressed to Chairman Martin, and he was given until July 20 in which to respond.Continue Reading Congress Asks FCC to Answer Questions about Private Equity Ownership of Media Properties

The FCC, after taking two years off, is looking to finish their field hearings on Localism by scheduling a hearing in Portland, Maine on June 29.  This hearing is not one of the six hearings to discuss possible new multiple ownership rules, but instead a continuation of the hearings started by Chairman Powell after public controversy over the 2003 multiple ownership rules.  In an ironic twist of fate, this public notice was released on the Friday before the National Association of Broadcasters Educational Foundation hosts their Service to America Awards Dinner to honor broadcasters and the public service commitment that they have to their communities.  Thus, while the FCC is looking in the hinterlands for evidence of the responsiveness of the broadcast industry to the needs of their listeners, some of the best evidence of that service was on display some 12 blocks from the FCC’s headquarters.

The Localism hearings were part of a larger proceeding begun in response to the controversy after the 2003 multiple ownership rules.  When the Democratic Commissioners, Congressional legislators from both parties, and a variety of citizen’s groups from across the political spectrum complained about how the public’s input was not sought before the rules were adopted, the FCC tried to respond to some of those complaints by putting out a Notice of Inquiry on Localism.  The proceeding was to assess how well broadcasters were serving their communities, and the Notice asked for public comment on a grab bag of issues including the following:

  • whether a broadcaster’s public interest obligations should be quantified (bringing back obligations abolished in the 1980s that required specific amounts of the programming of broadcast stations to be devoted to news and public affairs programming), 
  • should broadcasters be required to play specific amounts of local music,
  • is payola a major issue,
  • whether more programming should be devoted to political campaigns, 
  • whether the voices of minorities were being heard on the airwaves.
  • if the FCC should authorize more LPFM stations and take other steps to make airtime available to new entrants

Continue Reading Another Localism Hearing and Service to America

In the last few months, attention of the broadcast press has been focused on the pressing regulatory issues of the day – matters such as content regulation (indecency, violence and junk food advertising), the digital conversion of radio and TV, and the new digital media landscape and its impact on broadcasters (XM/Sirius, You Tube and Internet video, and Internet radio).  Almost forgotten is the multiple ownership proceeding that began in earnest last summer when the FCC issued its Notice of Proposed Rule making (see our summary here), but which has really been pending in front of the Commission since the US Court of Appeals issued its Stay of the FCC’s 2003 Order adopting "new" ownership rules.  This week, at least some attention was brought back to the issue following the release by the organization Free Press of a study  that purports to document the effects that consolidation has had on minority and female ownership in the broadcast media.  Coupled with an electronic press conference featuring the two Democratic FCC Commissioners, the report merited an article in the Los Angeles Times and other mainstream press outlets.  It is a study that should be read by broadcasters, as it will likely form part of the debate on this most important issue.

While studies have been issued on and off throughout the debate over the multiple ownership rules, seemingly proving almost whatever the party providing the study wants to prove, this study should not be ignored.  Executive summaries and a full copy of the report can be found here.  The report purports to show that consolidation in the media holds down minority and female ownership.  And, unlike many other studies that have obvious design flaws and seem to be based on faulty assumptions, this one considers many of the obvious objections.  It does not under count minority ownership – in fact it takes the FCC to task for under counting such ownership, and actually reports higher amounts of minority and female ownership than the FCC itself had acknowledged.  The report also addresses the usual response to such studies – that it is a question of access to capital that results in the disparities – by doing a comparison of minority and female ownership in broadcasting to that ownership in other industries, and finding broadcasting very close to the bottom in diverse ownership.Continue Reading Study Released Showing Effects of Broadcast Consolidation – Broadcasters Should Pay Attention

The FCC today issued the long-awaited text of its decision on Digital Audio radio – the so-called IBOC system.  As we have written, while adopted at its March meeting, the text of the decision has been missing in action.  With the release of the decision, which is available here, the effective date of the new rules can be set in the near future – 30 days after its publication in the Federal Register.  With the Order, the Commission also released its Second Further Notice of Proposed Rulemaking, addressing a host of new issues – some not confined to digital radio, but instead affecting the obligations of all radio operations.

The text provides the details for many of the actions that were announced at the March meeting, including authorizing the operation of AM stations in a digital mode at night, and the elimination of the requirements that stations ask permission for experimental operations before commencing multicast operations.  The Order also permits the use of dual antennas – one to be used solely for digital use – upon notification to the FCC.  In addition, the order addresses several other matters not discussed at the meeting, as set forth below.  Continue Reading FCC Issues Rules on Digital Radio – With Some Surprises that Could Eventually Impact Analog Operations

While the FCC continues its series of public hearings on possible revisions to its multiple ownership rules, the issue of newspaper-broadcast cross ownership is now squarely before the FCC in a number of proceedings. For instance, in the applications proposing a transfer of control of the Tribune Company, waiver requests have been filed in the markets where the company owns both newspaper and broadcast properties.  These markets include some of the largest television markets in the country including Los Angeles, Chicago and New York.  As the current rules prohibit the ownership of a daily paper and either a radio or television station in the same market, Chicago, where Tribune owns radio, TV and newspaper properties and has done so for many years, asks for waivers for both stations.  The FCC just designated the application for transfer of control of the Tribune Company as a permit but disclose proceeding, meaning that parties can talk to the FCC decision makers about the case, as long as they file a written disclosure statement with the FCC for inclusion in the record of the case.

 Also, press reports note that the petitions to deny have been filed against applications for the renewal of Fox’s television stations in New York, arguing that the combination of  Fox’s television stations in the market with the ownership of the New York Post is not in the public interest.

Seemingly, the proposed purchase of the Wall Street Journal by News Corporation, the owners of Fox,  if it were to ever come to fruition, would at least be reviewed by the FCC, as the Journal is published in New York, where Fox owns television stations.  However, FCC precedent established when Gannett purchased a Washington, DC TV station, in the same market where USA Today is published, would seem to set a precedent for the treatment of a specialized national newspaper like the Journal. While published in New York, the Journal really is national in scope – and not focused on local news, sports, entertainment or advertisers in the same manner that a local newspaper would be.  Continue Reading Debate Over Newspaper-Broadcast Cross Ownership Rule Heats Up

The FCC yesterday approved the sale of the stock of Univision Communications to a consortium of private equity companies.  In order to approve the deal, the FCC agreed to a $24 million dollar payment to the US Treasury by Univision as part of a consent decree for alleged violations of the children’s television rules.  The consent decree, attached to the FCC decision on the sale, while providing for one of the largest fines ever paid to the FCC, provides little guidance to broadcasters on what constitutes educational and informational programming directed to children, the source of the violation found by the FCC. But the separate Statement of Commissioner Copps raises a new issue – one he looks for the FCC to study and report on – the effect of private equity and debt on the ability of broadcasters to operate in the public interest. 

The Copps opinion suggests that the debt incurred in connection with acquisitions by private equity companies may impair the ability of broadcast stations to operate in the public interest, as money needed for operations is instead funneled into debt repayment.  Of course, private equity firms are not the first owners of broadcast companies to incur debt, nor is there any evidence that I have seen that private equity companies which own broadcast companies have proportionally more debt than other broadcast owners.  What would the FCC hope to accomplish through such an investigation?  I can’t see the FCC evaluating each transaction that comes before it to determine if the proposed debt structure would be too much of a burden on the operations of a station.  Nor could I foresee the FCC putting broadcast ownership restrictions on certain classes of otherwise qualified potential broadcast owners.Continue Reading Follow the Money and Find the Public Interest?