[Federal Register Volume 72, Number 152 (Wednesday, August 8, 2007)]
[Proposed Rules]
[Pages 44457-44466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-15456]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

[MB Docket Nos. 06-121, 02-277, 04-228; MM Docket Nos. 01-235, 01-317, 
00-244; FCC 07-136]

47 CFR Part 73


2006 Quadrennial Regulatory Review

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: This document seeks comment on various proposals to promote 
minority and female ownership in the media industry. It also addresses 
a motion to withdraw, revise, and republish the Commission's Further 
Notice of Proposed Rulemaking in its media ownership review.

DATES: The agency must receive comments on or before October 1, 2007 
and reply comments on or before October 16, 2007.

ADDRESSES: Comments may be filed electronically using the Internet by 
accessing the Electronic Comment Filing System, http://www.fcc.gov/cgb/ecfs/, or the Federal eRulemaking Portal, http://www.regulations.gov. 
The Commission's contractor will receive hand-delivered or messenger-
delivered paper filings for the Commission's Secretary at 236 
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. Commercial 
overnight mail (other than U.S. Postal Service Express Mail and 
Priority Mail) must be sent to 9300 East Hampton Drive, Capitol 
Heights, MD 20743. U.S. Postal Service first-class, Express, and 
Priority mail should be addressed to 445 12th Street, SW., Washington, 
DC 20554.

FOR FURTHER INFORMATION CONTACT: The Media Bureau contacts for this 
proceeding are Mania Baghdadi and Jamila Bess Johnson, both at (202) 
418-7200. Press inquiries should be directed to Mary Diamond at (202) 
418-2388.

SUPPLEMENTARY INFORMATION: 

I. Introduction

    1. The Commission has before it the ``Motion for Withdrawal of the 
Further Notice of Proposed Rulemaking and for the Issuance of a Revised 
Further Notice'' filed on August 23, 2006 (the ``Motion for 
Withdrawal'') by the Diversity and Competition Supporters 
(collectively, ``MMTC''). MMTC states that the Commission's Further 
Notice of Proposed Rule Making (FNPRM) in the media ownership 
proceeding, 71 FR 45511, August 9, 2006, is flawed and should be 
withdrawn, revised, and republished. The FNPRM invited comment on the 
several media ownership rules adopted by the Commission in its 2002 
Biennial Review Order, 68 FR 46286, August 5, 2003, and the pending 
petitions for reconsideration of the 2002 Biennial Review Order, and 
initiates the statutorily mandated 2006 quadrennial review of the 
Commission's media ownership rules. Specifically, MMTC asserts that the 
FNPRM is deficient because it fails to: (1) Identify and describe 
MMTC's minority ownership proposals remanded by the court in Prometheus 
Radio Project, et al. v. FCC, 373 F.3d 372 (3d Cir. 2004); (2) refer to 
or seek comment on a definition of a socially and economically 
disadvantaged business (``SDB''); and (3) identify section 257 of the 
Telecommunications Act of 1996 as a central legal basis for minority 
ownership relief. MMTC requests that the Commission restart the 
ownership proceeding.
    2. The FNPRM sought comment on MMTC's various proposals, as well as 
on the general issue of fostering minority and female ownership. We 
urged commenters to explain the effects, if any, that their rule 
proposals would have on ownership of broadcast outlets by minorities, 
women and small businesses. Given the impact of these issues on our 
comprehensive ownership review, we believe it would be beneficial to 
issue this Second FNPRM to set forth in greater detail the proposals 
MMTC identified in its Motion for Withdrawal and to clarify the record 
as requested by MMTC. Thus, in this Second FNPRM, we seek comment on 
the proposals MMTC submitted in the 2002 biennial review proceeding, as 
they are described in Appendix A, as well as on the proposals submitted 
to the Commission by the Advisory Committee on Diversity for 
Communications in the Digital Age (``Diversity Committee''), which are 
also described in Appendix A and are set forth more fully in the 
Committee's recommendations to the Commission. See http://www.fcc.gov/DiversityFAC/ for a full listing of Diversity Committee meetings, 
recommendations and white papers. In order to consider fully the issues 
raised by MMTC, as discussed further below, we consolidate our ongoing 
section 257 proceeding with this proceeding.
    3. We find it unnecessary to adopt the specific approach suggested 
by MMTC that we rescind and reissue the FNPRM in its entirety. The 
approach we take, in conjunction with the initial FNPRM, provides ample 
notice to the commenting public on the specific issues germane to our 
media ownership review, including those raised by MMTC relating to 
ownership diversity.

II. Background

    4. In comments filed in the Commission's 2002 biennial review 
proceeding, MMTC proposed numerous measures to promote minority 
broadcast ownership. In the subsequent 2002

[[Page 44458]]

Biennial Review Order, the Commission listed 13 of MMTC's proposals, in 
addition to describing proposals other commenters submitted. The 
Commission stated that, because a ``more thorough exploration'' of 
those comments was warranted, it would initiate a separate proceeding 
to address MMTC's 13 proposals and the other comments regarding 
minority and female broadcast ownership. Responding to MMTC's concern 
that minorities lack equal transactional opportunities, the Commission 
also stated that it would create a federal advisory committee to study 
minority and female ownership issues. In addition, the Commission 
adopted a transfer policy (the so-called ``small business cluster 
transfer policy'') intended to promote diversity of ownership, based 
largely on a proposal submitted by MMTC, which permits sales of 
grandfathered combinations that exceed the ownership limits to and by 
certain ``eligible entities.'' Entities may transfer control of or 
assign an existing grandfathered combination to ``eligible entities,'' 
defined as entities that would qualify as a small business consistent 
with Small Business Administration (``SBA'') standards for its industry 
grouping. In addition, eligible entities may sell existing 
grandfathered combinations without restriction.
    5. In the 2002 Biennial Review Order, the Commission repealed its 
failed station solicitation rule (``FSSR''), which is part of the 
Commission's waiver standard under the local television ownership rule. 
That waiver standard permits a television station purchaser to exceed 
local television ownership limits if the acquired station is failed, 
failing, or unbuilt. See 47 CFR 73.3555 Note 7. Under the FSSR, a 
waiver applicant was required to demonstrate that serious efforts had 
been made to secure an out-of-market buyer for the troubled station. A 
waiver was not granted unless the applicant could show that the in-
market buyer was the ``only reasonably available entity willing and 
able to operate the station'' and that an out-of-market sale would 
result in an ``artificially depressed price.'' In the 2002 Biennial 
Review Order, the Commission retained the waiver standard, but 
eliminated the FSSR requirement.
    6. On review, the U.S. Court of Appeals for the Third Circuit 
remanded the Commission's decision to address MMTC's 13 proposals in a 
separate rulemaking and ordered the Commission to address those 
proposals at the same time that it addresses the other remanded issues. 
The court also remanded the Commission's decision to repeal the FSSR 
because the Commission did not address the potential impact of the 
repeal on minority television station ownership.

III. Discussion

A. Minority and Female Ownership Initiatives

1. Socially and Economically Disadvantaged Businesses (``SDBs'')
    7. MMTC argues that the Commission erred in the FNPRM by failing to 
seek specific comment on how to define SDBs, adding that the concept of 
SDBs is central to most of the minority ownership initiatives proposed 
in the 2002 biennial review proceeding. MMTC states that the Prometheus 
opinion recognizes the importance of establishing a definition for SDBs 
because, in approving the small business cluster transfer policy, the 
court indicated that, by the next quadrennial review, the Commission 
would have the benefit of a stable definition of SDBs as well as 
implementation experience in order to reevaluate whether an SDB-based 
waiver policy would better promote the Commission's diversity 
objectives. MMTC maintains that, without a definition for SDBs, the 
Commission cannot effectively evaluate the existing small business 
cluster transfer policy or its other proposals, as remanded by the 
Prometheus court.
    8. MMTC states that the issue of the SDB definition has already 
been fully briefed in the Commission's proceeding examining market 
entry barriers. In that proceeding, initiated in 2004, the public was 
invited to comment on constitutionally permissible ways to further the 
mandate of section 257 of the Telecommunications Act of 1996, which 
directs the Commission to identify and eliminate market entry barriers 
for small telecommunications businesses, and section 309(j) of the 
Communications Act of 1934, as amended (``the Act''), which requires 
the Commission to further opportunities in the allocation of spectrum-
based services for small and rural businesses and businesses owned by 
women and minorities. See 69 FR 34672, June 22, 2004. The Media Bureau 
also asked commenters to provide specific recommendations for building 
on the series of market entry barrier studies that the Commission 
released in December 2000. The studies are available on the 
Commission's Web site at http://www.fcc.gov/opportunity/meb_study/ and 
http://www.fcc.gov/Bureaus/Mass_Media/Informal/ad=study/.
    9. We invite comment on MMTC's proposal that the Commission define 
SDBs for purposes of analyzing policy initiatives in support of media 
ownership diversity. We ask that commenters address whether use of a 
proposed definition raises any constitutional concerns, practical 
concerns, or other considerations unique to the Commission's policy 
objectives, and we invite comment on its impact on small entities. To 
ensure full consideration of this issue, we will consolidate the MB 
Docket No. 04-228 proceeding commenced in 2004 with our review of the 
media ownership rules.
2. MMTC Proposals
    10. We seek comment on the various proposals for increasing 
minority and female broadcast ownership identified by MMTC. As MMTC 
suggests, we have attached its description of these proposals as 
Appendix A.\1\ The proposals include: (1) those that MMTC submitted for 
consideration in the 2002 biennial review proceeding; (2) the MMTC 
proposals the Commission listed in the 2002 Biennial Review Order, 
which the Third Circuit ordered the Commission to address on remand; 
and (3) media-related recommendations of the Diversity Committee.\2\ In 
discussing these proposals, commenters should address the various 
questions and issues set forth below.
---------------------------------------------------------------------------

    \1\ We have included the text of Appendix B to MMTC's Motion for 
Withdrawal as Appendix A hereto. Although we have modified the MMTC 
Appendix to eliminate a non-substantive footnote and to correct a 
few apparent minor typographical errors, we have not altered the 
descriptions, assessments, or legal analyses of the proposals, as 
submitted by MMTC. By incorporating these materials, we do not adopt 
any such descriptions, assessments, or analyses as official 
Commission policy; we are providing them only to specifically invite 
public comment on them.
    \2\ The descriptions of the Diversity Committee recommendations 
are provided by MMTC, which is a member of the Diversity Committee 
but which does not represent the Diversity Committee as a whole. 
Although the Diversity Committee recommendations are not subject to 
the Third Circuit's remand, we are seeking comment on them to ensure 
a more complete record.
---------------------------------------------------------------------------

    11. In addition, as MMTC requests, we also seek comment on the 
efficacy of the FSSR in promoting minority and female broadcast 
ownership. When out-of-market purchasers for a station are unavailable, 
the Commission permits ownership rule waivers for failed, failing and 
unbuilt stations because the in-market purchase of such stations is 
preferable to having frequencies go unused, even where the combination 
would violate the local television ownership rule. In the 2002 Biennial 
Review Order, the Commission determined that applicants seeking a

[[Page 44459]]

waiver of the local television ownership rule no longer needed to 
comply with the FSSR requirement that they must first demonstrate the 
unwillingness of out-of-market buyers to offer a reasonable price for 
the failed, failing, or unbuilt station. In eliminating the FSSR 
requirement, the Commission found that the efficiencies associated with 
the operation of two same-market stations, absent unusual 
circumstances, will always result in the buyer being the owner of 
another station in the same market. In remanding the Commission's 
repeal of the FSSR, the Third Circuit stated that the purpose of the 
FSSR was to ensure that minority broadcasters received notification of 
these station sales. The Third Circuit found that the Commission's 
decision was arbitrary and capricious because it failed to discuss the 
effect of the repeal on minority ownership.
    12. We invite comment on the extent to which the FSSR or another 
construction of the rule could promote minority and female ownership. 
We ask commenters to provide concrete evidence rather than generalized 
assertions.

B. Constitutional Issues

    13. Any measures to facilitate minority and female broadcast entry 
that are based on racial or gender classifications must satisfy the 
heightened constitutional standards that apply to governmental 
preferences for minorities and women under the Equal Protection Clause. 
The Supreme Court's ruling in Adarand Constructors, Inc. v. Pena, 515 
U.S. 200 (1995), requires that governmental classifications based on 
race must be analyzed under strict scrutiny, and are constitutional 
only if such classifications are narrowly tailored measures that 
further a compelling governmental interest. Gender classifications are 
subject to intermediate scrutiny, under which the government's action 
must be substantially related to the achievement of an important 
objective. In discussing a proposal targeted or designed to promote 
minority and female broadcast ownership, commenters should describe, 
consistent with relevant case law, how the proposal would satisfy 
constitutional standards. In particular, proponents of initiatives that 
rely on a definition of SDBs should explain in detail whether and how 
the definition would satisfy constitutional standards.

C. Statutory Authority

    14. We also seek further comment on the Commission's statutory 
authority to address issues of minority and female ownership. Section 
257 of the Act requires the Commission to identify and eliminate 
``market entry barriers for entrepreneurs and other small businesses in 
the provision and ownership of telecommunications services and 
information services.'' Despite the apparent limitation of 47 U.S.C. 
257(a) to telecommunications and information services, the 
congressional directive to promote ``the policies and purposes of this 
Act favoring diversity of media voices'' in implementing section 257(a) 
arguably brings broadcasting within the scope of section 257. We invite 
comment on this interpretation of the statute. The statutory provision 
also specifically directs the Commission to ``promote the policies and 
purposes of this Act favoring diversity of media voices'' in carrying 
out its section 257 responsibilities. In addition, in 1996, Congress 
amended section 1 of the Act to make it clear that the Commission's 
mandate is to regulate interstate and foreign communications services 
so that they are ``available, so far as possible, to all people of the 
United States, without discrimination on the basis of race, color, 
religion, national origin or sex * * *'' We ask commenters to address 
whether and how these statutory provisions support the Commission's 
efforts to promote media ownership diversity.
    15. Further, section 309(j) of the Act requires the Commission to 
promote the dissemination of licenses to a wide variety of applicants, 
including members of minority groups and women. Section 309(j) directs 
the Commission to ``ensure that * * * businesses owned by members of 
minority groups and women are given the opportunity to participate in 
the provision of spectrum-based services.'' In addition, section 
309(j)(3)(B) requires the Commission, in establishing eligibility 
criteria and bidding methodologies, to promote ``economic opportunity 
and competition * * * by avoiding excessive concentration of licenses 
and by disseminating licenses among a wide variety of applicants, 
including small businesses, rural telephone companies, and businesses 
owned by members of minority groups and women.''
    16. We invite comment on the Commission's statutory authority to 
facilitate the licensing of spectrum-based services to a diversity of 
entities, including businesses owned by minority groups and women. 
Commenters should also address the limitations of these statutory 
provisions in light of recent court decisions regarding equal 
protection. We also solicit comment on any further statutory provisions 
that would enable the Commission to address ownership diversity, 
particularly in terms of fostering diversity of ownership among 
minorities and women.

IV. Procedural Matters

A. Comment Information

    17. Pursuant to sections 1.415 and 1.419 of the Commission's rules, 
47 CFR 1.415, 1.419, interested parties may file comments and reply 
comments on or before the dates indicated above. Comments may be filed 
using: (1) The Commission's Electronic Comment Filing System (ECFS); 
(2) the Federal Government's eRulemaking Portal; or (3) by filing paper 
copies. See Electronic Filing of Documents in Rulemaking Proceedings, 
63 FR 24121, May 1, 1998.
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/ 
or the Federal eRulemaking Portal: http://www.regulations.gov. Filers 
should follow the instructions provided on the Web site for submitting 
comments.
     For ECFS filers, if multiple docket or rulemaking numbers 
appear in the caption of this proceeding, filers must transmit one 
electronic copy of the comments for each docket or rulemaking number 
referenced in the caption. In completing the transmittal screen, filers 
should include their full name, U.S. Postal Service mailing address, 
and the applicable docket or rulemaking number. Parties may also submit 
an electronic comment by Internet e-mail. To get filing instructions, 
filers should send an e-mail to [email protected], and include the following 
words in the body of the message, ``get form.'' A sample form and 
directions will be sent in response.
     Paper Filers: Parties who choose to file by paper must 
file an original and four copies of each filing. If more than one 
docket or rulemaking number appears in the caption of this proceeding, 
filers must submit two additional copies for each additional docket or 
rulemaking number.
    Filings can be sent by hand or messenger delivery, by commercial 
overnight courier, or by first-class or overnight U.S. Postal Service 
mail (although we continue to experience delays in receiving U.S. 
Postal Service mail). All filings must be addressed to the Commission's 
Secretary, Office of the Secretary, Federal Communications Commission.
     The Commission's contractor will receive hand-delivered or 
messenger-delivered paper filings for the Commission's Secretary at 236

[[Page 44460]]

Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing 
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be 
held together with rubber bands or fasteners. Any envelopes must be 
disposed of before entering the building.
     Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
     U.S. Postal Service First-Class, Express, and Priority 
mail should be addressed to 445 12th Street, SW., Washington, DC 20554.
    People with Disabilities: To request materials in accessible 
formats for people with disabilities (Braille, large print, electronic 
files, audio format) send an e-mail to [email protected] or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).

B. Regulatory Flexibility Act

    18. As required by the Regulatory Flexibility Act, 5 U.S.C. 603, 
the Commission prepared an Initial Regulatory Flexibility Analysis 
(``IRFA'') in the initial Notice of Proposed Rulemaking in the media 
ownership proceeding and a Supplemental Initial Regulatory Flexibility 
Analysis Act (``Supplemental IRFA'') in the initial Further Notice of 
Proposed Rulemaking in the media ownership proceeding. We have now 
prepared a Second Supplemental IRFA, which is set forth in Appendix B. 
Written public comments are requested on the Second Supplemental IRFA. 
These comments must be filed in accordance with the same filing 
deadlines for comments on the Second FNPRM, and should have a separate 
and distinct heading designating them as responses to the Second 
Supplemental IRFA.

C. Paperwork Reduction Act

    19. This document does not contain proposed information collections 
subject to the Paperwork Reduction Act of 1995 (``PRA''), Pub. L. No. 
104-13, 109 Stat. 163 (1995). Therefore, it does not contain any 
proposed new or modified information collection burden for small 
business concerns with fewer than 25 employees, pursuant to the Small 
Business Paperwork Relief Act of 2002, Pub. L. No. 107-198, 116 Stat. 
729 (2002). However, depending on the rules adopted as a result of this 
Second FNPRM, the report and order ultimately adopted in this 
proceeding may contain information collections. The Commission will 
provide a period for public comment on any PRA burdens contained in the 
report and order and will submit such burdens to the Office of 
Management and Budget for approval when the report and order is adopted 
and released.

D. Ex Parte Information

    20. This is a permit-but-disclose 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.
    21. Contact Information. The Media Bureau contacts for this 
proceeding are Mania Baghdadi and Jamila Bess Johnson, both at (202) 
418-7200. Press inquiries should be directed to Mary Diamond at (202) 
418-2388.

V. Ordering Clauses

    22. Accordingly, it is ordered, that pursuant to the authority 
contained in sections 1, 2(a), 4(i), 257, 303, 307, 309, 310, and 613 
of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152(a), 
154(i), 257, 303, 307, 309, 310, and 533, and section 202(h) of the 
Telecommunications Act of 1996, this Second Further Notice of Proposed 
Rulemaking is adopted.
    23. It is further ordered that, pursuant to the authority contained 
in sections 1, 2(a), 4(i), 257, 303, 307, 309, 310, and 613 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152(a), 154(i), 
257, 303, 307, 309, 310, and 533, and section 202(h) of the 
Telecommunications Act of 1996, notice is hereby given of the proposals 
described in this Second Further Notice of Proposed Rulemaking.
    24. It is further ordered that MB Docket No. 04-228 shall be 
consolidated with MB Docket No. 06-121 et al.
    25. It is further ordered that MMTC's Motion for Withdrawal of the 
Further Notice of Proposed Rulemaking and for the Issuance of a Revised 
Further Notice is granted to the extent described herein, and in all 
other respects, denied.
    26. It is further ordered that MMTC's Request for Ruling on its 
Motion for Withdrawal of the Further Notice of Proposed Rulemaking and 
for the Issuance of a Revised Further Notice is granted to the extent 
described herein, and in all other respects, denied.
    27. It is further ordered that comments and reply comments with 
regard to those matters raised in this Second Further Notice of 
Proposed Rulemaking will be due October 1, 2007 and October 16, 2007, 
respectively.
    28. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Second Further Notice of Proposed Rulemaking, including 
the Second Supplemental Initial Regulatory Flexibility Analysis, to the 
Chief Counsel for Advocacy of the Small Business Administration.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Appendix A--Minority Ownership Proposals and Suggestions \3\
---------------------------------------------------------------------------

    \3\ This Appendix is a verbatim copy of Appendix B to MMTC's 
Motion for Withdrawal, except that this Appendix reflects minor 
typographical corrections and the omission of a non-substantive 
footnote.
---------------------------------------------------------------------------

    Section I (items 1-14) contains the 14 proposals of the 
Diversity and Competition Supporters (``MMTC'') in MM Docket No. 02-
277. The FCC's Advisory Committee on Diversity for Communications in 
the Digital Age (``Diversity Committee'') also proposed eight of 
these items, as noted therein.
    Section II (items 15-26) contains 12 informal suggestions made 
by the Minority Media and Telecommunications Council at a November 
6, 2002 meeting of stakeholders at the Commerce Department. These 
were not the Diversity and Competition Supporters' proposals in the 
media ownership proceeding; rather, they were the Minority Media and 
Telecommunications Council's informal suggestions to stakeholders. 
The Diversity Committee also proposed one of these items, as noted 
therein.
    Section III (items 27-34) contains recommendations issued by the 
Diversity Committee that do not track the proposals or suggestions 
in items 1-26. Among these, items 27-30 are nonregulatory 
recommendations, and items 31-34 are regulatory recommendations. The 
Diversity Committee has propounded 17 recommendations germane to 
media ownership: Eight tracking items in Section I, one tracking an 
item in Section II, and the eight items in Section III.

Section I: MMTC Proposals in MM Docket 02-277

    1. Equal transactional opportunity policy--barring 
discrimination on the basis of race or gender in broadcast 
transactions.
    Location(s) in Record: Initial Comments of Diversity and 
Competition Supporters, MB Docket No. 02-277 (filed January 2, 2003) 
(``MMTC 2003 Comments''), pp. 115-120; MMTC Letter to Hon. Michael 
Powell, MM Docket No. 02-277 (April 28, 2003) (``MMTC April 28, 2003 
Ex Parte''), pp. 11-19.
    Nature of Item: Formal rulemaking proposal.
    Summary of Item: Race and gender discrimination in the sale of 
broadcast stations would be banned, consistent with 47 U.S.C. 151. 
The seller would certify compliance by checking a box on a Form 314 
or Form 315 application.
    Year First Proposed: 1994.
    Parallel Recommendation of Diversity Committee: Transactional 
Transparency Recommendations, May 14, 2004, p. 4; White

[[Page 44461]]

Paper on Equal Transactional Opportunity, April 29, 2004.
    Relevance of SDB Definition: No.
    2. Transfer Restriction of Grandfathered Clusters to SDBs.
    Location(s) in Record: MMTC 2003 Comments, pp. 107-109.
    Nature of Item: Formal rulemaking proposal.

    ?>Summary of Item: The seller of a grandfathered cluster would 
not have to break it up if it were sold to an SDB. In the 2002 
Biennial Review, the Commission adopted a provision for the transfer 
intact of a grandfathered cluster, but decided that small 
businesses, rather than SDBs, would constitute the class of eligible 
buyers. MMTC seeks to develop a definition of ``socially and 
economically disadvantaged business'' (SDB) that would be 
appropriate for broadcasting and be constitutionally sound. SDBs are 
a subset of small businesses. Like other small businesses, they are 
economically disadvantaged; but unlike other small businesses, they 
are also socially disadvantaged. Their social disadvantage stems 
from individualized factors or from their membership in a class 
(such as a racial group in a particular industry) for which 
discrimination has inhibited entry and financing. An SDB definition 
is desirable because it would be less dilute in its impact on 
minorities by omitting, for example, the children of millionaires 
who, as new entrants, can qualify as small businesses although they 
have never been disadvantaged.
    Year First Proposed: 2003.
    Parallel Recommendation of Diversity Committee: none.
    Relevance of SDB Definition: Yes.
    3. Structural rule waiver for selling a station to an SDB, where 
the sale to the SDB is ancillary to a transaction that otherwise 
would be barred by an ownership rule.
    Location(s) in Record: MMTC 2003 Comments, p. 103.
    Nature of Item: Formal rulemaking proposal.
    Summary of Item: A company contemplating a transaction that 
would otherwise be barred by an ownership rule (perhaps one that 
would qualify in the future, e.g., if the Commission adopted a 
staged implementation of deregulation program; see item 13 infra) 
would be permitted to complete the transaction if it sells stations 
to SDBs.
    Year First Proposed: 1995 (concept originally advanced by NTIA 
in 1977).
    Parallel Recommendation of Diversity Committee: Financial Issues 
Recommendations, June 14, 2004, pp. 17-18; White Paper on Incentive-
Based Regulations, May 23, 2004, pp. 5-6.
    Relevance of SDB Definition: Yes.
    4. Tolling buildout deadlines for selling expiring construction 
permits to SDBs.
    Location(s) in Record: MMTC 2003 Comments, pp. 112-115 
(originally a petition for rulemaking filed by Entravision Holdings 
LLC, RM-9567 (filed March 10, 1998)).
    Nature of Item: Formal rulemaking proposal.
    Summary of Item: In 1998, Entravision submitted a petition for 
rulemaking which sought to revise the construction permit expiration 
standard established pursuant to 47 U.S.C. 319(a)-(b) and 
implemented in 47 CFR 73.3598. Entravision proposed that the 
Commission allow holders of expiring construction permits to sell 
them to entities in which minorities own at least 20% of the equity, 
or to entities which commit to serve the programming needs of 
minority or foreign language groups for at least 80% of their 
operating time. MMTC proposed a modification of Entravision's 
concept to make it applicable to all SDBs.
    Year First Proposed: 1998.
    Parallel Recommendation of Diversity Committee: Financial 
Issues. Recommendations, June 14, 2004, pp. 17-18; White Paper on 
Incentive-Based Regulations, May 23, 2004, pp. 9-10.
    Relevance of SDB Definition: Yes.
    5. Structural rule waivers for creating incubator programs.
    Location(s) in Record: MMTC 2003 Comments, pp. 104-105.
    Nature of Item: Formal rulemaking proposal.
    Summary of Item: The Commission would act on still-pending 
incubator plans developed in 1992 by Chairman Sikes and by NABOB. 
With constitutionally required modifications, these plans would 
allow a company to acquire more than the otherwise-allowable number 
of stations in a market if the company establishes a program that 
substantially promotes ownership by disadvantaged businesses. The 
incubator programs could encompass management or technical 
assistance, loan guarantees, direct financial assistance through 
loans or equity investment, training and business planning 
assistance.
    Year First Proposed: 1992.
    Parallel Recommendation of Diversity Committee: Financial Issues 
Recommendations, June 14, 2004, pp. 17-18; White Paper on Incentive-
Based Regulations, May 23, 2004, pp. 6-7.
    Relevance of SDB Definition: Yes.
    6. Bifurcation of channels for share-times with SDBs.
    Location(s) in Record: Comments of the Minority Media and 
Telecommunications Council in MB Docket 01-317 (Radio Ownership) 
(filed March 19, 2002) (``MMTC 2002 Comments''), pp. 111-173; Reply 
Comments of the Minority Media and Telecommunications Council in MB 
Docket 01-317 (Radio Ownership) (filed May 8, 2002) (``MMTC 2002 
Reply Comments''), pp. 6-10; MMTC 2003 Comments, pp. 106-107.
    Nature of Item: Formal rulemaking proposal.
    Summary of Item: The Commission would create a new class of 
``Free Speech Stations.'' They would be independently owned by SDBs, 
have at least 20 non-nighttime hours per week of airtime, and be 
primarily devoted to non-entertainment programming. A Free Speech 
Station would share time on the same channel with a largely 
deregulated ``Entertainment Station.'' A cluster owner that 
bifurcates a channel to accommodate a Free Speech Station and an 
Entertainment Station could buy another fulltime station in the 
market by taking advantage of section 202(b)(2) of the 
Telecommunications Act, which allows for an exception to the local 
radio ownership rule when a new station is created. That additional 
fulltime station would also be bifurcated into a Free Speech and an 
Entertainment Station. In this way, a cluster could grow steadily up 
to the limits allowed by antitrust law.
    Year First Proposed: 2002.
    Parallel Recommendation of Diversity Committee: Financial Issues 
Recommendations, June 14, 2004, pp. 17-18; White Paper on Incentive-
Based Regulations, May 23, 2004, pp. 7-8.
    Relevance of SDB Definition: Yes.
    7. Structural rule waivers for financing construction of an 
SDB's unbuilt station.
    Location(s) in Record: MMTC 2003 Comments, pp. 109-110.
    Nature of Item: Formal rulemaking proposal.
    Summary of Item: When a broadcaster provides an SDB with an 
equity/debt plus interest (``EDP Interest'') that enables the SDB to 
build out an unbuilt permit, (1) the EDP Interest should be deemed 
nonattributable, and (2) the entity providing the EDP Interest 
should be reserved a place in line to subsequently duopolize or 
crossown another same-market station. This reserved place in the 
queue, in markets where only a limited number of new combinations 
can be created under the local ownership rules, would provide an 
incentive to broadcasters to assist SDBs to build out their unbuilt 
permits.
    Year First Proposed: 1999.
    Parallel Recommendation of Diversity Committee: none.
    Relevance of SDB Definition: Yes.
    8. Grandfathering of nonattribution of EDP (equity debt-plus) 
interests in SDBs.
    Location(s) in Record: MMTC 2003 Comments, pp. 110-112.
    Nature of Item: Formal rulemaking proposal.
    Summary of Item: The nonattributable nature of EDP Interests in 
SDBs would be grandfathered, irrespective of whether the entity 
providing the EDP Interest (the ``EDP Provider'') subsequently 
acquires other properties which otherwise would cause the EDP 
Interest to be attributable to the EDP Provider. These arrangements 
would be permissible where (1) the EDP Provider merges with, 
acquires, or is acquired by a company unrelated to the company 
holding a nonattributable EDP Interest in an SDB (an ``Unrelated 
Transaction''); (2) the Unrelated Transaction occurs at least a year 
after the EDP relationship was formed; (3) the Unrelated Transaction 
would otherwise cause the EDP Provider's EDP Interest in the SDB to 
become attributable; and (4) the EDP Provider and the SDB make an 
affirmative showing that the EDP Provider does not exercise undue 
influence over the SDB.
    Year First Proposed: 1999.
    Parallel Recommendation of Diversity Committee: Financial Issues 
Recommendations, June 14, 2004, pp. 17-18; White Paper on Incentive-
Based Regulations, May 23, 2004, pp. 8-9.
    Relevance of SDB Definition: Yes.
    9. Mathematical touchstones: Tipping points for the nonviability 
of independently owned radio stations in a consolidating market, and 
quantifying source diversity.

[[Page 44462]]

    Location(s) in Record: MMTC 2002 Reply Comments, pp. 22-27; MMTC 
Reply Comments, pp. 17-24; MMTC April 28, 2003 Ex Parte, pp. 6-7.
    Nature of Item: Formal rulemaking proposal.
    Summary of Item: MMTC offered two formulas suitable for crafting 
and implementing rules to promote diversity: (1) The ``Tipping Point 
Formula'' established how the Commission could ensure that local 
radio markets could preserve independent owners. This formula was 
based on the premise that independent owners each need determinable 
and quantifiable revenue streams in order to stay afloat and provide 
service to the public. The formula acknowledges the existence of a 
tipping point in the distribution of radio revenue in a market 
between cluster owners and independents. When the combined revenues 
of a market's cluster owners exceed this tipping point, the 
independents can no longer survive. By identifying this tipping 
point, the formula provides a rational basis for determining whether 
a transaction would limit diversity. (2) The ``Source Diversity 
Formula'' expresses consumers' utility derived from marginal 
increases in source diversity. The Source Diversity Formula is based 
on the premise that increases in consumer utility flow from their 
access to additional sources, with diminishing returns to scale. 
This formula would require field-testing before it could be applied 
in practice to measure source diversity.
    Year First Proposed: 2002.
    Parallel Recommendation of Diversity Committee: None.
    Relevance of SDB Definition: Yes.
    10. Zero tolerance for ownership rule abuse.
    Location(s) in Record: MMTC 2003 Comments, pp. 123-127.
    Nature of Item: Formal rulemaking proposal.
    Summary of Item: Structural abuse is endemic due to limited 
enforcement resources, the ease of concealing abuse, and the high 
financial rewards for rule breaking. Structural rule relaxation 
would be easier to accept if the Commission holds the line on abuse 
through a Zero Tolerance Policy focused on clear standards, pro-
active investigations, evidentiary hearings, and strict penalties 
for rule violations.
    Year First Proposed: 2003.
    Parallel Recommendation of Diversity Committee: None.
    Relevance of SDB Definition: No.
    11. Use of Joint Operating Agreements (JOAs) as an alternative 
to Local Marketing Agreements (LMAs) and Joint Sales Agreements 
(JSAs).
    Location(s) in Record: Comments of the Communications Workers of 
America (CWA) in MB Docket 02-277 (filed January 2, 2003), pp. 4-5 
and 48; MMTC Reply Comments, pp. 15-16.
    Nature of Item: Formal rulemaking proposal.
    Summary of Item: The Commission requires ownership attribution 
of most JSAs and LMAs. While this step promotes diversity, it also 
reduces the options available to financially troubled facilities 
seeking to survive. CWA proposed that JOAs, such as those used in 
the newspaper industry, could be used to help companies survive and 
to promote diversity at the same time. A JOA adapted to broadcasting 
would leave each station's program creation, program organization 
and distribution, and sales strategy and implementation in the hands 
of each station's licensees. At the same time, a genuine JOA allows 
both stations to take advantage of operational synergies for non-
program, non-sales related functions, such as accounting, 
engineering, and physical plant management. A JOA would not be 
attributable.
    Year First Proposed: 2003.
    Parallel Recommendation of Diversity Committee: None.
    Relevance of SDB Definition: No.
    12. Opening FM spectrum for new entrants.
    Location(s) in Record: MMTC 2003 Comments, pp. 128-141; MMTC 
April 28, 2003.
    Ex Parte, pp. 10-11.
    Nature of Item: Formal rulemaking proposal.
    Summary of Item: The Commission has systematically broadened 
spectrum availability as a means of balancing consolidation with new 
entry. MMTC proposed three methods by which the FCC could open the 
FM radio spectrum to new entrants: (1) create two new classes of FM 
stations suitable for serving small communities; (2) perform a 
comprehensive engineering search of the FM spectrum to identify the 
most-needed new drop-in opportunities; and (3) replace FM station 
classes with pure interference-based criteria.
    Year First Proposed: 2003.
    Parallel Recommendation of Diversity Committee: Recommendation 
on Diversifying Ownership in the Commercial FM Radio Band, October 
4, 2004, as amplified by the Recommendations of the Subcommittee on 
New Technologies, June 11, 2004, containing eight relevant subparts: 
(1) Create medium power FM stations; (2) replace the FM Table with 
interference-based allotment criteria; (3) allow Class A stations to 
use low towers and higher-than-standard power while retaining 
appropriate ERP levels; (4) conduct a comprehensive channel search 
for new FM allotments; (5) harmonize regional interference 
protection standards; (6) repeal the third-adjacent FM contour 
rules; (7) relax the community of license and transmitter site 
rules; and (8) authorize interference agreements.
    Relevance of SDB Definition: No.
    13. Staged implementation of deregulation, coupled with a 
negotiated rulemaking.
    Location(s) in Record: MMTC 2003 Comments, pp. 84-101 and 145-
147; Comments of Paxson Communications Corporation, MB Docket 02-277 
(filed January 3, 2003), pp. 6-14; MMTC Reply Comments, pp. 25-32.
    Nature of Item: Formal rulemaking proposal.
    Summary of Item: By implementing deregulation in stages, the 
Commission could measure the impact of deregulation while it is 
underway, and implement mid-course corrections when needed to 
protect diversity, competition, localism and minority ownership. 
MMTC proposed that the Commission would implement its new ownership 
rules over a ten-year period in five two-year stages. In even-
numbered years, the Commission would use quantitative tests to 
measure diversity, competition, localism and minority ownership. If 
these tests showed ill health on any of these four factors, the 
Commission would take corrective steps in the odd-numbered years. If 
a subsequent even-year measurement showed continued ill health, the 
Commission could apply the brakes until market conditions change. 
Paxson Communications offered a similar proposal. The coefficients 
of a staged implementation plan could be worked out in a negotiated 
rulemaking involving representatives of all of the stakeholders in 
the proceeding.
    Year First Proposed: 2003.
    Parallel Recommendation of Diversity Committee: None.
    Relevance of SDB Definition: Yes.
    14. Market-based, tradable diversity credits as an alternative 
to voice tests.
    Location(s) in Record: MMTC Reply Comments, pp. 34-38; MMTC 
April 28, 2003. Ex Parte, pp. 8-10.
    Nature of Item: Formal rulemaking proposal.
    Summary of Item: A system of market-based diversity credits 
would be created as an alternative to voice tests. A quantity of 
diversity credits would be given to SDBs, commensurate with the 
extent of their social and economic disadvantages. Diversity credits 
would also be given to the seller at the closing of a transaction 
that would result in greater structural diversity. If a transaction 
would add to concentration, the buyer would return a number of 
diversity credits to the Commission when the transaction closes. 
Finally, companies could buy or sell diversity credits to one 
another, thereby providing a market-based source of access to 
capital for SDBs. A similar paradigm used by the EPA has replaced 
much command-and-control environmental regulation. Diversity credits 
would (1) incentivize diversity, (2) disincentivize consolidation, 
(3) place on the beneficiaries of consolidation the responsibility 
of paying for the remediation of some of consolidation's ill 
effects, (4) serve as a mechanism to provide access to capital to 
SDBs, (5) capture the measure of diversity more precisely than an 
inherently approximate voice test, and (6) allow for easier 
administration than a system of voice tests and waivers.
    Year First Proposed: 2003.
    Parallel Recommendation of Diversity Committee: Transactional 
Transparency Recommendations, May 14, 2004, p. 3; White Paper on 
Diversity Credits, May 22, 2004.
    Relevance of SDB Definition: Yes.

Section II: MMTC's Informal Suggestions to Stakeholders

    15. Equity for specific and contemplated future acquisitions.
    Location(s) in Record: MMTC, Background Materials: Omnibus Media 
Ownership Proceeding Stakeholders Meeting, U.S. Department of 
Commerce, November 6, 2002, Tab 10 (``Twelve Minority Ownership 
Solutions'').

[[Page 44463]]

    Nature of Item: Private industry initiative; but see item 29 
infra, proposing collaborative role for FCC in creating a fund or 
funds).
    Summary of Item: Broadcast companies would collaborate with one 
another and with institutional investors to create new targeted 
funds specializing in providing equity for broadcast new entrants.
    Year First Proposed: 1977.
    Parallel Recommendation of the Diversity Committee: None (but 
see item 29 infra).
    Relevance of SDB Definition: No.
    16. Debt on favorable terms--enhanced outreach and access to 
debt financing by major financial institutions.
    Location(s) in Record: Twelve Minority Ownership Solutions.
    Nature of Item: Private industry initiative (but see items 28 
and 29 infra, proposing collaborative role for FCC).
    Summary of Item: Broadcast companies would solicit commitments 
from large institutional lenders to work with new entrants in 
providing debt financing for acquisitions, with or without the 
participation of the SBA as a guarantor.
    Year First Proposed: 1977.
    Parallel Recommendation of Diversity Committee: None (but see 
items 28 and 29 infra).
    Relevance of SDB Definition: No.
    17. Investments in institutions specializing in minority and 
small business financing.
    Location(s) in Record: Twelve Minority Ownership Solutions.
    Nature of Item: Private industry initiative.
    Summary of Item: Broadcast companies would invest in existing 
funds with proven track records of success as participants in the 
financing of new entrants. The Quetzal/J.P. Morgan Fund, the 
Telecommunications Development Fund (TDF), the Broadcast Capital 
Fund and other Small Business Investment Corporations (SBICs) are 
examples of these funds.
    Year First Proposed: 1976.
    Parallel Recommendation of Diversity Committee: None.
    Relevance of SDB Definition: No.
    18. Assistance--cash and in-kind--to institutions that train 
future minority media owners.
    Location(s) in Record: Twelve Minority Ownership Solutions.
    Nature of Item: Private industry initiative.
    Summary of Item: Media institutions would provide assistance to 
colleges and other programs that provide minorities the skill sets 
needed to transition from management to ownership. Examples of these 
institutions are Historically Black Colleges and Universities 
(HBCUs), Hispanic Serving Institutions (HSIs) and other programs, 
particularly the National Association of Broadcasters Education 
Fund's (NABEF's) Broadcast Leadership Training (BLT) Program.
    Year First Proposed: 1992.
    Parallel Recommendation of Diversity Committee: None.
    Relevance of SDB Definition: No.
    19. Creation of business planning centers.
    Location(s) in Record: Twelve Minority Ownership Solutions.
    Nature of Item: Private industry initiative.
    Summary of Item: Business planning centers, typically affiliated 
with universities, would work one-on-one with minority entrepreneurs 
as they develop business plans and strategies, seek financing and 
pursue acquisitions.
    Year First Proposed: 1992.
    Parallel Recommendation of Diversity Committee: None.
    Relevance of SDB Definition: No.
    20. Executive loans, and engineers on loan to minority owned 
companies and applicants.
    Location(s) in Record: Twelve Minority Ownership Solutions.
    Nature of Item: Private industry initiative.
    Summary of Item: The broadcasting industry would create an 
executive loan program, following the examples of similar programs 
in other industries. Loaned executives or engineers would work on 
the staffs of minority broadcasters fulltime for six months to two 
years.
    Year First Proposed: 1992.
    Parallel Recommendation of Diversity Committee: None.
    Relevance of SDB Definition: No.
    21. Enhanced access to broadcast transactions.
    Location(s) in Record: Twelve Minority Ownership Solutions.
    Nature of Item: Private industry initiative.
    Summary of Item: Sellers would give minority new entrants a 
first look at their properties, allowing them a headstart for due 
diligence and financing.
    Year First Proposed: 2002.
    Parallel Recommendation of Diversity Committee: None.
    Relevance of SDB Definition: No.
    22. Nondiscrimination provisions in advertising sales contracts, 
designed to expressly avoid such practices as ``no urban/no 
Spanish'' dictates.
    Location(s) in Record: Twelve Minority Ownership Solutions.
    Nature of Item: Contemplates FCC or FTC policy statement or 
rule.
    Summary of Item: Rep firms, ad agencies, broadcasters and 
advertisers would agree to use a standard provision in advertising 
sales contracts that would confirm that the parties to these 
contracts will not participate in a scheme to restrict advertising 
because of the membership in a minority group of the targets of the 
foregone advertising. The FTC or FCC would obtain certifications 
that this contract provision is always used in ad sales contracts.
    Year First Proposed: 1984.
    Parallel Recommendation of Diversity Committee: None.
    Relevance of SDB Definition: No.
    23. In-house incubation and mentoring programs for future 
minority owners.
    Location(s) in Record: Twelve Minority Ownership Solutions.
    Nature of Item: Private industry initiative.
    Summary of Item: Established media companies would develop their 
own in-house programs to incubate and mentor future minority owners, 
including their own executives who might wish to transition into 
ownership. These initiatives would have no regulatory tie-ins.
    Year First Proposed: 1976.
    Parallel Recommendation of Diversity Committee: None.
    Relevance of SDB Definition: No.
    24. Enactment of tax deferral legislation designed, to the 
extent possible, to foster minority ownership.
    Location(s) in Record: Twelve Minority Ownership Solutions.
    Nature of Item: Legislation; FCC has recommended it to Congress 
several times.
    Summary of Item: The Commission would continue to recommend to 
Congress the adoption of a tax deferral program to replace the 
former Tax Certificate Policy, under which a seller was able to 
defer capital gains taxes on the sale of a media property to a 
minority controlled firm. The new program would be focused on SDBs 
rather than only on minorities, and it would be extended to 
telecommunications. In recent years, Senator John McCain, 
Congressman Charles Rangel and Congressman Bobby Rush have each 
introduced legislation along these lines.
    Year First Proposed: 1977; in effect from 1978-1995 as the Tax 
Certificate Policy (see 68 FCC2d 979 (1978)); repealed by Congress 
in 1995; restoration often proposed since 1995.
    Parallel Recommendation of Diversity Committee: Financial Issues 
Recommendations, June 14, 2004, pp. 14-15; Transactional 
Transparency Recommendations, May 14, 2004, pp. 2-3.
    Relevance of SDB Definition: Yes (included in bills sponsored by 
Senator John McCain and by Congressman Bobby Rush).
    25. Examination of how to promote minority ownership as an 
integral part of all FCC general media rulemaking proceedings.
    Location(s) in Record: Twelve Minority Ownership Solutions.
    Nature of Item: Contemplates FCC policy statement or procedural 
rule.
    Summary of Item: All general mass media rulemaking proceedings 
(except individual FM or TV allotment proceedings) would include a 
request for comment on how the proposed rules affected minority 
entrepreneurship or could be tailored to have a positive impact on 
minority entrepreneurship.
    Year First Proposed: 1973.
    Parallel Recommendation of Diversity Committee: None.
    Relevance of SDB Definition: No.
    26. Ongoing longitudinal research on minority and female 
ownership trends.
    Location(s) in Record: Twelve Minority Ownership Solutions.
    Nature of Item: FCC or NTIA research initiative.
    Summary of Item: The FCC or NTIA would conduct an annual, 
authoritative survey of minority and female ownership trends. As a 
longitudinal instrument, it could track this data over time, 
enabling scholars to examine the impact of rule changes on minority 
and female ownership.
    Year First Proposed: 1995.
    Parallel Recommendation of Diversity Committee: none.
    Relevance of SDB Definition: Yes.

Section III: Proposals Sponsored by the Diversity Committee

    27. Clearinghouse through which licensees could announce 
availability of stations for sale.

[[Page 44464]]

    Location(s) in Record: Diversity Committee, Financial Issues. 
Recommendations, June 14, 2004, pp. 13-14.
    Nature of Item: Private industry initiative.
    Summary of Item: The National Association of Broadcasters and/or 
the National Association of Media Brokers could create a website or 
other clearinghouse through which licensees with stations for sale 
could seek minority buyers.
    Year First Proposed: 2004.
    Relevance of SDB Definition: No.
    28. Extension of the Community Reinvestment Act (CRA) to 
encourage financial institutions to provide debt financing to 
broadcasters.
    Location(s) in Record: Diversity Committee, Financial Issues 
Recommendations, June 14, 2004, p. 15.
    Nature of Item: Recommendation for FCC to propose rule revisions 
to the Treasury Department.
    Summary of Item: The FCC would work with the Treasury Department 
to expand the application of the CRA credit to encourage financial 
institutions to place capital in private equity funds led by 
minority and female entrepreneurs, or in funds that invest in 
communities of color. A similar incentive mechanism could be 
explored with the appropriate regulatory agencies to encourage 
pension funds, insurance companies and other financial institutions 
to place monies with such equity funds.
    Year First Proposed: 2004.
    Relevance of SDB Definition: No.
    29. Encourage more local and regional banks to participate in 
SBA guaranteed loan programs for broadcast and telecom ventures.
    Location(s) in Record: Diversity Committee, Financial Issues 
Recommendations, June 14, 2004, p. 16.
    Nature of Item: Recommendation for FCC and SBA to expand 
outreach to banks.
    Summary of Item: The FCC would work closely with the SBA to 
educate and encourage more local and regional banks (which have not 
been heavily involved in broadcast or telecom lending) to make loans 
through the SBA's 7(a) or 504 programs.
    Year First Proposed: 2004.
    Relevance of SDB Definition: No.
    30. Establishment of a fund of funds.
    Location(s) in Record: Diversity Committee, Financial Issues 
Recommendations, June 14, 2004, pp. 16-17.
    Nature of Item: Private industry initiative.
    Summary of Item: The FCC would initiate discussions with the 
major pension funds to encourage the establishment of a fund of 
funds that would place capital with minority focused private equity 
funds such as those belonging to the National Association of 
Investment Companies (NAIC), which are led by minority management 
and which invest in opportunities led by women and minority 
entrepreneurs and/or in opportunities in underserved markets.
    Year First Proposed: 2004.
    Relevance of SDB Definition: No.
    31. Revision of the Distress Sale Policy to institute case-by-
case review of purchasers' qualifications.
    Location(s) in Record: Diversity Committee, Recommendation on 
the Distress Sale Policy, June 1, 2004; Financial Issues 
Recommendations, June 14, 2004, pp. 18-19.
    Nature of Item: Rulemaking recommendation.
    Summary of Item: The Distress Sale Policy, in existence since 
1978 but seldom used recently, would be revised to ensure that it 
satisfies the narrow tailoring prong of strict scrutiny. In 
particular, a potential buyer, of any race, would demonstrate that 
its proposed service to the community would address needs unmet by 
existing media. Service to minority audiences could be an unmet 
need.
    Year First Proposed: 2004.
    Relevance of SDB Definition: No.
    32. Reservation, for a company that finances or incubates an 
SDB, of first place in the queue to form a duopoly in a market for 
which only a limited number of duopolies are permissible.
    Location(s) in Record: Diversity Committee, Financial Issues 
Recommendations, June 14, 2004, pp. 17-18; White Paper on Incentive-
Based Regulations, May 23, 2004, p. 9.
    Nature of Item: Rulemaking recommendation.
    Summary of Item: When the local market voice test limits how 
many LMAs may be created, a company wishing to have its application 
to create an LMA considered first could reserve a place in the 
application queue by financing or incubating an SDB.
    Year First Proposed: 1999.
    Relevance of SDB Definition: Yes.
    33. Relaxation of foreign ownership restrictions (see 47 U.S.C. 
310(b)(4)).
    Location(s) in Record: Diversity Committee, Adoption of a 
Declaratory Ruling on Section 310(b) (4) Waivers, December 10, 2004.
    Nature of Item: Recommendation for rulemaking or policy 
statement.
    Summary of Item: The Commission would consider whether a 
noncontrolling investment from foreigners (e.g. up to 49%) could be 
permitted where the investment would help eliminate a barrier to 
access to capital for domestic minority owned broadcasters as 
contemplated by 47 U.S.C. 257.
    Year First Proposed: 2004.
    Relevance of SDB Definition: Yes.
    34. Extension of divestiture deadlines in mergers where 
applicants have actively solicited bids for spin-off properties from 
SDBs.
    Location(s) in Record: Diversity Committee, Recommendation on 
Merger Review, October 15, 2004.
    Nature of Item: Recommendation for rulemaking or policy 
statement.
    Summary of Item: The Commission has recognized that minorities, 
especially new entrants, often need additional time to line up 
financing. Therefore, the Commission would announce a policy of 
generally affording more time for divestitures where the applicants 
solicit bids from SDBs for spinoff properties.
    Year First Proposed: 1999.
    Relevance of SDB Definition: Yes.

Appendix B--Second Supplemental Initial Regulatory Flexibility Analysis

    1. As required by the Regulatory Flexibility Act, as amended 
(``RFA'') \4\ the Commission has prepared this Second Supplemental 
Initial Regulatory Flexibility Analysis (``Second Supplemental 
IRFA'') of the possible significant economic impact on a substantial 
number of small entities of the policies and rules considered in the 
Second Further Notice of Proposed Rule Making (``Second FNPRM''). 
Written public comments are requested on this Second Supplemental 
IRFA. Comments must be identified as responses to the Second 
Supplemental IRFA and must be filed by the deadlines for comments on 
the Second FNPRM. The Commission will send a copy of the Second 
FNPRM, including this Second Supplemental IRFA, to the Chief Counsel 
for Advocacy of the Small Business Administration (``SBA'').\5\ In 
addition, the Second FNPRM and the Second Supplemental IRFA (or 
summaries thereof) will be published in the Federal Register.\6\
---------------------------------------------------------------------------

    \4\ See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601-612, has been 
amended by the Contract With America Advancement Act of 1996, Pub. 
L. No. 104-121, 110 Stat. 847 (1996) (``CWAAA''). Title II of the 
CWAAA is the Small Business Regulatory Enforcement Fairness Act of 
1996 (``SBREFA'').
    \5\ See 5 U.S.C. 603(a).
    \6\ See id.
---------------------------------------------------------------------------

A. Need for, and Objectives of, the Proposed Rules

    2. The Further Notice of Proposed Rule Making in MB Docket Nos. 
06-121, et al.,\7\ invites comment on how to address the issues 
raised by the opinion of the U.S. Court of Appeals for the Third 
Circuit in Prometheus Radio Project v. FCC,\8\ and, pursuant to 
section 202(h) of the Telecommunications Act of 1996, on whether the 
media ownership rules are ``necessary in the public interest as the 
result of competition.'' \9\ In Prometheus, the court affirmed some 
Commission decisions and

[[Page 44465]]

remanded others for further Commission justification or 
modification.\10\ In the Second FNPRM, we seek additional comment on 
specific proposals advocated by the Diversity and Competition 
Supporters (collectively, ``MMTC'') to foster minority and female 
ownership. In addition, the Commission will consolidate into the 
broadcast ownership proceeding the record established in MB Docket 
No. 04-228, in which the Commission solicited public comment on 
constitutionally permissible ways to further the mandates of Section 
257 of the Telecommunications Act of 1996,\11\ which directs the 
Commission to identify and eliminate market entry barriers for small 
telecommunications businesses, and Section 309(j) of the 
Communications Act of 1934, as amended (the ``Act''),\12\ which 
requires the Commission to further opportunities in the allocation 
of spectrum-based services for small businesses and businesses owned 
by women and minorities. The Commission previously published a 
Supplemental IRFA in connection with the FNPRM. We issue this Second 
Supplemental IRFA in order to invite comment on the effects on small 
entities, including minorities and women, of the proposals 
identified in this Second FNPRM. We particularly solicit comment 
from all small business entities, including minority-owned and 
women-owned small businesses.
---------------------------------------------------------------------------

    \7\ 2006 Quadrennial Regulatory Review--Review of the 
Commission's Broadcast Ownership Rules and Other Rules Adopted 
Pursuant to Section 202 of the Telecommunications Act of 1996, 
Further Notice of Proposed Rule Making, 71 FR 45511, August 9, 2006 
(``FNPRM'').
    \8\ Prometheus Radio Project, et al. v. F.C.C., 373 F.3d 372 
(2004) (``Prometheus''), stay modified on rehearing, No. 03-3388 (3d 
Cir. Sept. 3, 2004) (``Prometheus Rehearing Order''), cert. denied, 
73 U.S.L.W. 3466 (U.S. June 13, 2005) (Nos. 04-1020, 04-1033, 04-
1036, 04-1045, 04-1168 and 04-1177); see also 2002 Biennial 
Regulatory Review--Review of the Commission's Broadcast Ownership 
Rules and Other Rules Adopted Pursuant to Section 202 of the 
Telecommunications Act of 1996, 68 FR 46286, August 5, 2003 (``2002 
Biennial Review Order'').
    \9\ See Telecommunications Act of 1996, Pub. L. No. 104-104, 110 
Stat. 56, sec. 202(h) (1996) (``1996 Act''); Consolidated 
Appropriations Act, 2004, Pub. L. No. 108-199, sec. 629, 118 Stat. 3 
(2004) (``Appropriations Act'') (amending sections 202(c) and 202(h) 
of the 1996 Act). Section 202(h) requires the Commission to 
periodically review its media ownership rules to determine ``whether 
any of such rules are necessary in the public interest as the result 
of competition'' and to ``repeal or modify any regulation it 
determines to be no longer in the public interest.''
    \10\ See Prometheus Rehearing Order. Accordingly, except for 
revisions to the local radio ownership rule, the rule changes made 
in the 2002 Biennial Review Order remain stayed, and the preexisting 
ownership rules remain in effect.
    \11\ 47 U.S.C. 257.
    \12\ 47 U.S.C. 309(j).
---------------------------------------------------------------------------

B. Legal Basis

    3. The Second FNPRM is adopted pursuant to sections 1, 2(a), 
4(i), 257, 303, 307, 309, 310 and 613 of the Act, as amended, 47 
U.S.C. 151, 152(a), 154(i), 257, 303, 307, 309, 310, and 533, and 
Section 202(h) of the Telecommunications Act of 1996.

C. Description and Estimate of the Number of Small Entities To Which 
the Proposed Rules Will Apply

    4. The RFA directs agencies to provide a description of, and, 
where feasible, an estimate of the number of small entities that may 
be affected by the proposed rules, if adopted.\13\ The RFA defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
entity'' under Section 3 of the Small Business Act.\14\ In addition, 
the term ``small business'' has the same meaning as the term ``small 
business concern'' under the Small Business Act.\15\ A small 
business concern is one which: (1) Is independently owned and 
operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the SBA.\16\
---------------------------------------------------------------------------

    \13\ 5 U.S.C. 603(b)(3).
    \14\ Id. sec. 601(3) (incorporating by reference the definition 
of ``small business concern'' in 15 U.S.C. 632). Pursuant to the 
RFA, the statutory definition of a small business applies, ``unless 
an agency, after consultation with the Office of Advocacy of the 
Small Business Administration and after opportunity for public 
comment, establishes one or more definitions of such term which are 
appropriate to the activities of the agency and publishes such 
definition(s) in the Federal Register.''
    \15\ Id.
    \16\ 15 U.S.C. 632.
---------------------------------------------------------------------------

    5. Television Broadcasting. In this context, the application of 
the statutory definition to television stations is of concern. The 
Small Business Administration defines a television broadcasting 
station that has no more than $13 million in annual receipts as a 
small business. Business concerns included in this industry are 
those ``primarily engaged in broadcasting images together with 
sound.'' \17\ According to Commission staff review of the BIA 
Financial Network, Inc. Media Access Pro Television Database as of 
July 10, 2007, about 880 (68 percent) of the 1,300 commercial 
television stations in the United States have revenues of $13 
million or less. However, in assessing whether a business entity 
qualifies as small under the above definition, business control 
affiliations \18\ must be included. Our estimate, therefore, likely 
overstates the number of small entities that might be affected by 
any changes to the ownership rules, because the revenue figures on 
which this estimate is based do not include or aggregate revenues 
from affiliated companies.
---------------------------------------------------------------------------

    \17\ OMB, North American Industry Classification System: United 
States, 1997, at 508-09 (1997) (NAICS Code 513120, which was changed 
to 515120 in October 2002). This category description continues, 
``These establishments also produce or transmit visual programming 
to affiliated broadcast television stations, which in turn broadcast 
the programs to the public on a predetermined schedule. Programming 
may originate in their own studio, from an affiliated network, or 
from external sources.'' Separate census categories pertain to 
businesses primarily engaged in produced programming. See id. at 
502-505, NAICS Code 512110, Motion Picture and Video Production; 
Code 512120, Motion Picture and Video Distribution; Code 512191, 
Teleproduction and Other Post-Production Services; and Code 512199, 
Other Motion Picture and Video Industries.
    \18\ ``[Business concerns] are affiliates of each other when one 
[business concern] controls or has the power to control the other, 
or a third party or parties controls or has the power to control 
both.'' 13 CFR 121.103(a)(1).
---------------------------------------------------------------------------

    6. An element of the definition of ``small business'' is that 
the entity not be dominant in its field of operation. The Commission 
is unable at this time and in this context to define or quantify the 
criteria that would establish whether a specific television station 
is dominant in its market of operation. Accordingly, the foregoing 
estimate of small businesses to which the rules may apply does not 
exclude any television stations from the definition of a small 
business on this basis and is therefore over-inclusive to that 
extent. An additional element of the definition of ``small 
business'' is that the entity must be independently owned and 
operated. It is difficult at times to assess these criteria in the 
context of media entities, and our estimates of small businesses to 
which they apply may be over-inclusive to this extent.
    7. Radio Broadcasting. The Small Business Administration defines 
a radio broadcasting entity that has $6.5 million or less in annual 
receipts as a small business.\19\ Business concerns included in this 
industry are those ``primarily engaged in broadcasting aural 
programs by radio to the public.'' \20\ According to Commission 
staff review of the BIA Financial Network, Inc. Media Access Radio 
Analyzer Database as of July 10, 2007, about 10,520 (95 percent) of 
11,055 commercial radio stations in the United States have revenues 
of $6.5 million or less. We note, however, that in assessing whether 
a business entity qualifies as small under the above definition, 
business control affiliations \21\ must be included. Our estimate, 
therefore, likely overstates the number of small entities that might 
be affected by any changes to the ownership rules, because the 
revenue figures on which this estimate is based do not include or 
aggregate revenues from affiliated companies.
---------------------------------------------------------------------------

    \19\ 13 CFR 121.201.
    \20\ See NAICS Code 515112.
    \21\ ``[Business concerns] are affiliates of each other when one 
[business concern] controls or has the power to control the other, 
or a third party or parties controls or has the power to control 
both.'' 13 CFR 121.103(a)(1).
---------------------------------------------------------------------------

    8. In this context, the application of the statutory definition 
to radio stations is of concern. An element of the definition of 
``small business'' is that the entity not be dominant in its field 
of operation. We are unable at this time and in this context to 
define or quantify the criteria that would establish whether a 
specific radio station is dominant in its field of operation. 
Accordingly, the foregoing estimate of small businesses to which the 
rules may apply does not exclude any radio station from the 
definition of a small business on this basis and is therefore over-
inclusive to that extent. An additional element of the definition of 
``small business'' is that the entity must be independently owned 
and operated. We note that it is difficult at times to assess these 
criteria in the context of media entities, and our estimates of 
small businesses to which they apply may be over-inclusive to this 
extent.
    9. Daily Newspapers. The SBA has developed a small business size 
standard for the census category of Newspaper Publishers; that size 
standard is 500 or fewer employees.\22\ Census Bureau data for 2002 
show that there were 5,159 firms in this category that operated for 
the entire year.\23\ Of this total, 5,065 firms had employment of 
499 or fewer employees, and an additional 42 firms had employment of 
500 to 999 employees. Therefore, we estimate that the majority of 
Newspaper Publishers are small entities that might be affected by 
our action.
---------------------------------------------------------------------------

    \22\ 13 CFR 121.201; NAICS Code 511110.
    \23\ U.S. Census Bureau, 2002 Economic Census, Subject Series: 
Information, ``Establishment and Firm Size (Including Legal Form of 
Organization),'' Table 5, NAICS Code 511110 (issued Nov. 2005).
---------------------------------------------------------------------------

D. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    10. Depending on the rules adopted as a result of this Second 
FNPRM, the Report and Order (R&O) ultimately adopted in this 
proceeding may contain new or modified information collections. We 
anticipate that none of the changes would result in an increase to 
the reporting and recordkeeping requirements of broadcast stations,

[[Page 44466]]

newspapers, or applicants for licenses. As noted above, we invite 
small business entities to comment in response to the Second FNPRM.

E. Steps Taken To Minimize Significant Impact on Small Entities, and 
Significant Alternatives Considered

    11. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed 
approach, which may include the following four alternatives (among 
others): (1) The establishment of differing compliance or reporting 
requirements or timetables that take into account the resources 
available to small entities; (2) the clarification, consolidation, 
or simplification of compliance or reporting requirements under the 
rule for small entities; (3) the use of performance, rather than 
design, standards; and (4) an exemption from coverage of the rule, 
or any part thereof, for small entities.\24\
---------------------------------------------------------------------------

    \24\ 5 U.S.C. 603(c).
---------------------------------------------------------------------------

    12. We are directed under law to describe any alternatives we 
consider, including alternatives not explicitly listed above.\25\ 
The Second FNPRM describes and seeks comment on the minority 
ownership proposals made by MMTC in comments in the 2002 biennial 
ownership proceeding, as well as the recommendations of the 
Diversity Committee, and consolidates the record developed in MB 
Docket No. 04-228 with the record in MB Docket Nos. 06-121, et al. 
The proposals are intended to promote minority and female ownership, 
and we seek comment on the extent to which they would benefit small 
businesses, including those owned by minorities and women. We 
especially encourage small entities to comment on the proposals 
under consideration in this consolidated proceeding. We do not 
propose specific rules in the Second FNRPM but rather seek comment 
on a number of different proposals that could have an impact on 
small entities. Accordingly, we will describe the steps taken to 
minimize the significant impact on small entities and the 
significant alternatives that we consider in the Final Regulatory 
Flexibility Analysis.
---------------------------------------------------------------------------

    \25\ 5 U.S.C. 603(b).
---------------------------------------------------------------------------

F. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules

    None.

[FR Doc. E7-15456 Filed 8-7-07; 8:45 am]
BILLING CODE 6712-01-P