[Federal Register Volume 60, Number 21 (Wednesday, February 1, 1995)]
[Proposed Rules]
[Pages 6068-6071]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2420]



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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MM Docket Nos. 94-149 and 91-140; FCC 94-323]


Policies and Rules Regarding Minority and Female Ownership of 
Mass Media Facilities

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Notice of Proposed Rule Making seeks comment on a number 
of initiatives aimed at increasing minority and female ownership of 
mass media facilities. These initiatives include an incubator program 
whereby existing operators assist minority and female operators in 
purchasing facilities, an exception to the Commission's attribution 
rules to permit an individual to hold a larger interest in minority or 
female-controlled properties than is generally permissible, 
modifications to the Commission's existing tax certificate policy, and 
other mechanisms designed to facilitate minority and female ownership. 
The actions proposed in the Notice of Proposed Rule Making are needed 
to provide greater opportunities for minorities and women to become 
operators of mass media facilities and, where applicable, to expand 
their present holdings.

DATES: Comments are due April 17, 1995 and reply comments are due May 
17, 1995.

ADDRESSES: Federal Communication Commission, Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT:
Jane Hinckley Halprin or Diane Conley, Mass Media Bureau, Policy and 
Rules Division, (202) 418-2130.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Notice of Proposed Rule Making in MM Docket Nos. 94-149 and 91-140, 
adopted December 15, 1994, and released January 12, 1995.
    The complete text of the Notice of Proposed Rule Making is 
available for inspection and copying during normal business hours in 
the FCC Reference Center (Room 239), 1919 M Street, NW., Washington, 
DC, and also may be purchased from the Commission's duplicating 
contractor, International Transcription Service, 2100 M Street, NW., 
Washington, DC 20036, (202) 857-3800.

Synopsis of Notice of Proposed Rule Making

    1. The Commission initiates this proceeding to explore ways to 
provide minorities and women with greater opportunities to enter the 
mass media industry, specifically including the broadcast, cable, 
wireless cable and low power television services. Its purpose in doing 
so is to further the core Commission goal of maximizing the diversity 
of points of view available to the public over the mass media, and to 
provide incentives for increased economic opportunity.
    2. While the Commission's existing minority ownership incentives 
(including the tax certificate and distress sale policies and the 
minority ownership rules) have facilitated the acquisition of broadcast 
and cable [[Page 6069]] properties by minorities, the overall 
representation of minorities among broadcast station or cable owners 
remains for below their presence in the national population and the 
civilian labor force. Women have likewise traditionally been 
underrepresented among mass media owners.
    3. The Commission requests that commenters provide current data 
regarding female ownership of mass media facilities. The Commission 
invites commenters to discuss whether, if it is ultimately established 
that women are underrepresented, each of the initiatives proposed below 
to promote minority ownership should also be applied to women. The 
Commission notes that, in the past, female owners were eligible for a 
preference in comparative broadcast hearings, but that policy was 
invalidated by the U.S. Court of Appeals for the District of Columbia 
in Lamprecht v. FCC, 958 F.2d 382 (DC Cir. 1992). Lamprecht found that 
the Commission had failed to show a nexus between women's ownership of 
broadcast stations and diversity of programming. The Commission asks 
commenters to specifically address the extent to which female ownership 
contributes to diversity of programming distributed by the mass media 
and to provide evidence.
    4. As an alternative legal justification for providing incentives 
for greater ownership of mass media facilities by both minorities and 
women, apart from diversity of programming, the Commission solicits 
comment on whether it should instead rely on an economic rationale. 
This concept was espoused by Congress in 1993 when it adopted Section 
309(j) of the Communications Act, 47 U.S.C. Sec. 309(j), in which 
Congress specifically recognized that it is consistent with the public 
interest to adopt competitive bidding procedures that promote economic 
opportunity for a wide variety of applicants, including minorities and 
women. The Commission seeks comment on economic disadvantages faced by 
minorities and women.
    5. The Notice proposes specific mechanisms intended to increase 
minority and female ownership of mass media facilities, and 
particularly seeks to increase those groups' access to capital. The 
suggestions presented in the Notice are not intended to be exhaustive; 
the Commission encourages commenters to propose other ways to advance 
minority and female ownership of mass media outlets.

Incubator Programs

    6. First, the Commission discusses ways to refine the Commission's 
previous proposal to create an ``incubator'' program whereby existing 
mass media entities would be encouraged, through ownership-based 
incentives, to assist new entrants to the communications industry. In 
return for providing certain types of assistance to a minority or 
female entrepreneur seeking to acquire a mass media facility, the 
incubating entity would be permitted to exceed the otherwise applicable 
ownership limits.
    7. The Commission seeks comment on the structure of an acceptable 
incubator program. The Commission proposes that an acceptable incubator 
program must include, at a minimum, three elements: (1) substantial 
financial assistance (e.g., direct equity participation, loan 
guarantees or long-term low interest loans at, for example, one-half 
the market rate); (2) operational assistance (such as technical advice 
or assistance with station operations and management); and (3) training 
programs for new broadcasters and/or station personnel.
    8. The Commission also asks commenters to discuss at what point the 
incubating owner should be permitted to acquire additional facilities. 
For example, should the Commission adopt a one-year waiting period 
i.e., an incubator program must have been in place for one year before 
the incubating entity may purchase additional facilities? In the 
alternative, given that the purpose of an incubator program is to 
enable the incubated entity to purchase a facility, the incubating 
entity could be permitted to acquire an additional facility as soon as 
the incubated facility is purchased and operational, subject to a one-
year holding requirement on the part of the incubated owner.
    9. In addition, the Commission seeks comment on how many mass media 
properties a group owner participating in such a program should be 
permitted to acquire above the applicable ownership limit. Should a TV 
licensee, for example, be allowed to acquire one additional TV station 
for every two TV stations it incubates? Further, the Commission 
proposes to require that the additional facilities acquired by the 
incubating owner are of comparable value to the incubated station. It 
would not permit, for example, an owner incubating an FM radio station 
to acquire an additional VHF TV station. It also proposes that the 
facility acquired by the incubating entity must be within five markets 
above the incubated facility's market rank, or must be in a market 
ranked below the incubated facility's market. A parallel formulation 
would also be needed in the cable television context so that the 
additional facilities or ``households'' passed in excess of what is 
ordinarily permitted by the rules has comparable size or value in 
relationship to the incubated facility. The Commission also asks 
whether broadcasters participating in the incubator program should be 
allowed to exceed both the national and local multiple ownership 
limits.

Attribution Rules

    10. Next, the Commission seeks comment on whether and how to modify 
its ownership attribution rules to increase investment in minority and 
female-controlled properties and further to benefit minority and female 
owners. The Commission's broadcast attribution rules, set forth in the 
notes to 47 CFR 73.3555, are used to determine whether particular media 
holdings will be considered ownership interests for purposes of 
applying the Commission's multiple ownership rules. Parallel provisions 
appear in the cable television rules, 47 CFR 76.501. In general, any 
interest that represents five percent or more of the outstanding voting 
stock of a company is an attributable ownership interest and thus is 
counted in determining compliance with the multiple ownership limits.
    11. The Commission suggests that one of the options made available 
to ``designated entities'' bidding for PCS licenses could be adapted as 
follows: If a minority or female individual or entity or group of 
individuals or entities holds more than 50 percent of the voting stock 
of a corporate broadcast licensee or other mass media entity, with at 
least 15 percent of the company's equity, then no other interests in 
that entity will be attributable. The Commission asks whether the rule 
should apply locally as well as nationally, and, if so, whether the 
rule should be limited to large markets with a specified number of 
outlets and independent voices.
    12. The above rule, as proposed, would permit an investor to hold 
49.9 percent of the voting stock in an unlimited number of minority or 
female-controlled entities. The Commission seeks comment on whether to 
adopt a numerical limit on the number of interests in minority or 
female-controlled stations that would, under this exception, be 
considered not attributable to the investor.
    13. Further, this proposed rule would require that the minority or 
female owner or owners actually control the licensee. The Commission 
questions [[Page 6070]] how control should be determined. The 
Commission proposes to require, as a safeguard against misuse, that 
each licensee wishing to qualify for the benefits of the rule certify 
on its application for transfer, assignment or renewal that investors 
taking advantage of this exception (i.e., non-minority or male 
investors holding shares above the applicable attribution benchmark who 
seek to have their interests deemed non-attributable) do not exercise 
control over the day-to-day operations of the broadcast station.

Tax Certificates

    14. The Commission next explores ways to expand its existing tax 
certificate policy to encourage entities to sell their mass media 
holdings to minorities and women, and to make it easier for minority 
and female operators to upgrade their facilities.
    15. Exercising the authority conferred upon it by Section 1071 of 
the Internal Revenue Code, 26 U.S.C. 1071, the Commission has, since 
1978, issued tax certificates to promote minority ownership of 
broadcast stations. Under the current policy, tax certificates are 
available to (1) individuals and entities that sell a broadcast station 
or cable system to a minority-controlled purchaser and (2) equity 
holders in a minority-controlled broadcasting or cable entity upon the 
sale of their equity, provided that their interest assisted in 
financing the acquisition of a broadcast or cable property or was 
purchased within the first year after broadcast license issuance, thus 
contributing to the stabilization of the entity's capital base.
    16 A tax certificate enables the seller to defer for two years the 
gain realized by (1) treating it as an involuntary conversion, under 26 
U.S.C. 1033, with the recognition of gain avoided by the acquisition of 
qualified replacement property; or (2) electing to reduce the basis of 
certain depreciable property, under 26 U.S.C. 1071, or both.
    17. Over the past several years, a number of parties have suggested 
that the policy could be of even greater benefit to minority owners if 
the Commission and the Internal Revenue Service set up a working group 
to change certain IRS rules regarding tax certificates. They proposed, 
for example, that the Commission ask the IRS to revise its 1966 ruling 
that requires a holder of a tax certificate to reinvest the proceeds of 
a sale in a corporation that directly operates a communications 
business, as opposed to a holding company. They also proposed that the 
Commission ask the IRS to revisit revenue rulings holding that the 
purchase of interests in a partnership does not qualify as replacement 
property. In addition, they urge the Commission to ask the IRS to 
increase the deferred period from two years to at least four years. 
Another suggestion that has come up in informal discussion with 
minority mass media operators in that the Commission seek to expand the 
definition of suitable reinvestment property for a mass media seller to 
include any communications business. The Commission seeks comment on 
these proposals and invite commenters to suggest other ways the tax 
certificate policy could be used to further the goals set out in the 
Notice.
    18. Further, the Commission notes that it has been suggested that 
the tax certificate policy be extended to investors that provide start-
up capital for minority-controlled cable programmers, and seeks comment 
on this proposal. The Commission also asks whether it should grant tax 
certificates to minority MMDS operators or minority video programmers. 
The Commission also raises the issue of making a tax certificate 
available to a minority operator that sells its facility to a non-
minority buyer if the minority seller uses the proceeds to invest in a 
controlling interest in a more valuable mass media property. In 
addition, commenters are requested to discuss how the tax certificate 
policy could be modified to increase female ownership of mass media 
facilities.

Other Mechanisms

    19. The Commission discusses other ideas that might also contribute 
to greater minority and female ownership of mass media facilities, 
including (1) proposing legislation regarding an investment tax credit 
for investors in minority-controlled communications corporations; (2) 
streamlining certain aspects of its broadcast application procedures 
for applicants funded by Specialized Small Business Investment 
Companies (SSBICs); and (3) adopting a local radio ownership cap that 
would permit a minority-controlled entity to own up to three AM 
stations of any type and up to three Class A FM stations in markets 
with at least 15 stations, subject to a combined audience share 
limitation of 30 percent. The Commission seeks comment on these 
proposals, and specifically asks whether it should adopt a national 
ownership cap for women similar to its national TV and radio ownership 
caps for minority, or any other parallel proposal.

Data Collection

    20. Finally, the Commission seeks comment on whether to revise its 
Annual Ownership Report form, FCC Form 323, to include a section 
requiring owners to identify their race or ethnicity and their gender. 
The Commission also asks commenters to submit relevant data regarding 
any apparent impact that increased consolidation of facilities 
resulting from relaxation of the multiple ownership rules has had on 
minority and female owners, including the impact of local marketing 
agreements (LMAs) between stations.
    21. Ex Parte Rules--Non-Restricted Proceeding. This is a non-
restricted notice and comment rulemaking proceeding. Ex parte 
presentations are permitted, except during the Sunshine Agenda period, 
provided that they are disclosed as provided in the Commission's Rules. 
See 47 CFR 1.1202, 1.1203, 1.1206.
    22. Comment Information. Pursuant to applicable procedures set 
forth in Sections 1.415 and 1.419 of the Commission's Rules, interested 
parties may file comments on or before April 17, 1995, and reply 
comments on or before May 17, 1995. All relevant and timely comments 
will be considered by the Commission before final action is taken in 
this proceeding. To file formally in this proceeding, participants must 
file an original and four copies of all comments, reply comments and 
supporting comments. If participants want each Commissioner to receive 
a personal copy of their comments, an original plus nine copies must be 
filed. Comments and reply comments should be sent to the Office of the 
Secretary, Federal Communications Commission, Washington, DC 20554. 
Comments and reply comments will be available for public inspection 
during regular business hours in the FCC Reference Center (Room 239) of 
the Federal Communications Commission, 1919 M Street NW., Washington, 
DC 20554.
    23. Initial Regulatory Flexibility Analysis.

I. Reason for the Action

    This proceeding was initiated to explore ways to increase minority 
and female ownership of broadcasting facilities.

II. Objective of This Action

    The actions proposed in the Notice are intended to facilitate 
minority and female entry into mass media services, and are 
particularly aimed at increasing those groups' access to capital.

III. Legal Basis

    Authority for the actions proposed in this Notice may be found in 
sections 4 and 303 of the Communications Act of 1934, as amended, 47 
U.S.C. 154, 303. [[Page 6071]] 

IV. Reporting, Recordkeeping and Other Compliance Requirements Inherent 
in the Proposed Rule

    The Notice seeks comment as to whether to add to the Commission's 
annual ownership report form a section in which owners would disclose 
their gender and their race or ethnicity.

V. Federal Rules Which Overlap, Duplicate or Conflict With the Proposed 
Rule

    None.

VI. Description, Potential Impact and Number of Small Entities Involved

    Approximately 11,000 existing television and radio broadcasters, 
approximately 11,000 cable television operators and approximately 150 
MMDS operators of all sizes may be affected by the proposals contained 
in this decision.

VII. Any Significant Alternatives Minimizing the Impact on Small 
Entities and Consistent With the Stated Objectives

    The proposals contained in this Notice do not impose additional 
burdens on small entities.
    As required by section 603 of the Regulatory Flexibility Act, the 
Commission has prepared an Initial Regulatory Flexibility Analysis 
(IRFA) of the expected impact on small entities of the proposals 
suggested in this document. Written public comments are requested on 
the IRFA. These comments must be filed in accordance with the same 
filing deadlines as comments on the rest of the Notice, but they must 
have a separate and distinct heading designating them as responses to 
the Regulatory Flexibility Analysis. The Secretary shall send a copy of 
this Notice of Proposed Rule Making, including the IRFA, to the Chief 
Counsel for Advocacy of the Small Business Administration in accordance 
with paragraph 603(a) of the Regulatory Flexibility Act (Pub. L. No. 
96-354, 94 Stat. 1164, 5 U.S.C. Section 601 et seq. (1981)).

List of Subjects in 47 CFR Part 73

    Radio broadcasting.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 95-2420 Filed 1-31-95; 8:45 am]
BILLING CODE 6712-01-M