The Minority Media & Telecommunications Council says that the new rules on transferring grandfathered clusters have not had the desired effect of increasing ownership among small businesses, and by extension, females and minorities. The rule, which prohibits the sale of an oversized intact cluster, has resulted in a number of stations going into temporary trusts to allow the bulk of a cluster to be sold. These clusters could have been sold to small businesses on an intact basis.
"Unfortunately, this 'transfer-intact' exception has not resulted in any closings of radio cluster sales to small businesses. New entrants, particularly minorities and women, typically cannot obtain the financing necessary to buy a cluster within the rapid time schedule at which most large broadcast transactions proceed." It argues that a relatively minor rule tweak could change that, "…with no downside to the seller, by allowing the buyer to resell either the entire cluster, or enough stations to come into rule compliance, without time pressure, as long as the subsequent sale is to a small business."
MMTC explains that "[t]his approach would create increased opportunities for small businesses by providing extra time for a small business entrant to raise the capital necessary to make a competitive bid on a radio station. This modest change to the current rule would help foster the goals of diversity, competition and localism."
The MMTC document was submitted by its own David Honig and attorneys from Covington & Burling LLP.
SmartMedia observation: Increasing the percentage of minority and female ownership has been an intractable problem, and there does not seem to be any conceivable way that it will reflect census levels in the foreseeable future. We'd say that every little bit that helps move toward improving those numbers is a good thing and that this proposal, along with the return a tax credit for selling to a small business, should be strongly considered. And in fact, NAB is calling for just that. President/CEO David Rehr just fired off a letter to House Ways and Means Chair Charles Rangel (D-NY) asking for a hearing. He wrote, "NAB strongly supports the reinstatement of a tax incentive program that would provide companies tax credits or other benefits if they sell broadcast properties to minorities or women."