section 310(b)

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At its November 14 meeting, the FCC is tentatively scheduled to consider the relaxation of its limits on the ownership of broadcast stations by foreign entities or citizens.  Under the current “alien ownership” limitations, US citizens or entities must own 80% of a broadcast licensee, or 75% of a licensee’s parent company.  In the broadcast world, the 25% alien ownership limit must be analyzed both as to equity and voting interests.  In the modern financial world, where companies are often owned by many diverse investors (or funds with widely diverse ownership), these rules can be very burdensome in assuring compliance and managing the potential investment in US broadcast operations by foreign sources of capital. 

Under the governing statute, Section 310(b)(4) of the Communications Act, the FCC can’t allow a licensee in any service that it regulates to be more than 20% foreign owned.  But the statute allows a parent company of a licensee to be 25% foreign owned, and even allows that parent company to exceed that “limit” unless the FCC finds that the public interest would be compromised by foreign ownership greater than 25%.  Thus, the rules are actually written to presume that the “limit” can be exceeded, unless the FCC sees a problem.  The principal concern that would raise a question under the law would be one of national security – the government does not want crucial communications infrastructure, or the means of dissemination of information to the public, to be controlled or unduly influenced, by foreign interests in the event of some emergency.   As we wrote just 6 months ago, in non-broadcast services, the FCC has routinely allowed foreign ownership to exceed the 25% threshold, and recently made it easier for companies to demonstrate their compliance with the rules.  This clearly shows that national security issues can be addressed in other ways.  How about in the broadcast services?
Continue Reading FCC to Consider Allowing Increased Foreign Ownership of Broadcast Stations at Its November Meeting

Two weeks ago, comments were filed in the Commission’s proceeding examining whether to adopt a more relaxed view of the foreign ownership provisions of the Communications Act (see our article about that proceeding here). While the Communications Act limits foreign ownership in communications licensees to 20% (or 25% of a licensee holding company), the Act also allows the Commission to allow greater foreign ownership if it would not adversely affect the public interest. In areas other than broadcasting, the Commission has routinely allowed ownership of more than 25% of a communications licensee, but the limit has been strictly enforced in the broadcasting world. Many of the comments filed in response to the Commission’s request made exactly that point – that in a multimedia world, why should a wireless company or a cable programmer be allowed to be foreign owned, while a competing broadcaster can’t have foreign investors holding more than 25% of its equity?  In what is perhaps a telling indication of where the FCC is going, the statements of three FCC Commissioners, in connection with a recent FCC decision to further streamline the approval process for alien ownership in excess of the 25% limitations in FCC-regulated areas other than broadcasting, suggested that the relaxation of the limits should also be extended to broadcasting.

Two weeks ago, in relaxing rules on the investment of non-US companies and individuals in common carrier licensees and those in certain other non-broadcast services, the Commission vastly simplified the reporting and approval process for alien ownership in excess of the statutory limits. The Commission already had in place a policy of reviewing potential foreign ownership in non-broadcast companies where, through a petition for declaratory ruling, a company could seek FCC approval for ownership, and even control, of these entities by non-US citizens or companies. In the recent proceeding, the FCC made such investment even easier, in very general terms easing certain reporting requirements for alien ownership where the interest of a specific alien investor was less than 5% (10 % in some instances), and also allowing an alien individual or group, once approved, to increase ownership without further approval (if the interest is a minority ownership interest, to 49%, and if it was controlling, to 100%), as long as the interest in possibly doing so is revealed in the original request for approval. Allowing investments by affiliates of the foreign owner, and allowing the company that is approved to seek additional licenses, all without additional approvals, was also allowed in many instances. All these changes were allowed subject to the FCC’s right to reexamine any holdings if specific issues were raised.  But what was most interesting to those in the broadcasting industry were the statements of three of the Commissioners praising these relaxations, and the hopes that the examination of applying these reforms in the broadcast world would move forward quickly.Continue Reading A Change in the FCC’s Broadcast Foreign Ownership Rules In the Near Future?

The limits on the ownership of broadcast stations by those who are not US citizens is being re-examined by the FCC according to a recent Public Notice. Under Section 310(b)(4) of the Communications Act, foreign ownership of a broadcast licensee is limited to 20% of the company’s stock, or no more than 25% of a parent company of the licensee. Over the years, there has been a significant body of precedent developed about applying these caps to other business organizations, including LLCs and Limited Partnerships.  But the caps remain in place, limiting foreign ownership.  While the statute gives the FCC discretion to allow greater amounts of "alien ownership", the FCC has not exercised that discretion for broadcast companies (though, for non-broadcast licenses, the FCC has many times found greater percentages of foreign ownership to be permissible). A coalition of broadcast groups last year filed a request asking that the FCC exercise the discretion provided under the Act, and consider on a case-by-case basis whether alien ownership combinations in excess of 25% should be permitted. The Commission has now asked for public comment on that proposal. Comments are due on April 15, with replies due on April 30.

Why is this important? Many broadcasters have pushed for revisions in the alien ownership limits for decades – seeing foreign investors as a potential source of capital to allow new companies to buy stations or existing companies to expand their holdings. Many minority advocacy groups, too, have thought that relaxation of the alien ownership rules would provide more sources of capital for minority owners to get into the broadcast game. Spanish language broadcasters, in particular, see broadcasters and other investors from other Spanish-speaking countries as being likely sources of new investors in broadcast companies or new buyers for US broadcast stations. Continue Reading FCC To Consider Allowing Alien Ownership of More Than 25% of Broadcast Licensees – Comments Due April 15