FCC releases ownership diversification rules


A number of measures directed at increasing the number of "eligible entities" in the ranks of broadcast owners are officially out on the street after being adopted by the FCC 12/18/07. An eligible entity is any that "would qualify as a small business consistent with Small Business Administration standards for its industry grouping, based on revenue." It’s hoped that this definition will rope in both female and minority owners.

A good bit of the rulemaking is straight from the Minority Media & Telecommunications Council. One key measure is a change in the equity/debt rule, intended to make it easier for investors with broadcast interests to back prospective eligible owners — these are the kind of investors who would best be able to assess the potential of such a business, but are often prevented from kicking in any cash due to ownership caps. Other rules allow eligible entities more time to build a CP, and several make it easier for distress or divestiture sales to go to such owners.

Significantly, the FCC takes a run at no-Urban and no-Hispanic dictates. At license renewal time, licensees will be required to "to certify that their advertising sales contracts do not discriminate on the basis of race or gender."

RBR/TVBR observation: Michael Copps and Jonathan Adelstein objected to all of the planks which were definition-dependent, arguing that the SBA’s standards were so broad as to render the changes useless. On the flip side, however, is the extreme difficulty any government entity has had making ethnic- or gender-based regulations stick in court. Until somebody can find that magic definition, this type of measure is likely the best that the Commission can put forth. That said, we expect that the general broadcast community will go along with this slate of actions. For MMTC and other interested watchdogs, the next big thing to do is get minority tax credits reinstated. That will take an act of Congress.

* Changes its construction permit deadlines to allow "eligible entities" that acquire expiring construction permits additional time to build out the facility

* Revises the Commission’s equity/debt plus ("EDP") attribution standard to facilitate investment in eligible entities

* Modifies the Commission’s distress sale policy to allow a licensee — whose license has been designated for a revocation hearing or whose renewal application has been designated for a hearing on basic qualifications issues — to sell its station to an "eligible entity" prior to the commencement of the hearing

* Adopts an Equal Transactional Opportunity Rule that bars race or gender in broadcast transactions

* Adopts a "zero-tolerance" policy for ownership fraud and "fast-track" ownership-fraud claims and seek to resolve them within 90 days

* Requires broadcasters renewing their licenses to certify that their advertising sales contracts do not discriminate on the basis of race or gender

* Encourages local and regional banks to participate in SBA-guaranteed loan programs in order to facilitate broadcast and telecommunications-related transactions

* Gives priority to any entity financing or incubating an eligible entity in certain duopoly situations

* Considers requests to extend divestiture deadlines in mergers in which applicants have actively solicited bids for divested properties from eligible entities

* Convenes an "Access-to-Capital" conference that will focus on the investment banking and private equity communities and opportunities to acquire financing

* Announces the creation of a guidebook on diversity that focuses on what companies can do to promote diversity in ownership and contracting.

* Revises the exception to the prohibition on the assignment or transfer of grandfathered radio station combinations