[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