Foreign Investment Clarification Likely to Pass Unanimously, Say Industry Observers
A draft FCC declaratory ruling that could lead to increased foreign ownership of broadcasters has support from all three commissioners and is likely to arrive for a vote at the Nov. 14 open meeting without alterations to its basic thrust, said an FCC official and several broadcast attorneys in interviews Friday. The declaratory ruling would clarify the commission’s rules that transactions that would result in foreign ownership of more than 25 percent of a broadcaster would be approved on a case-by-case basis. Though this was always the case under the Communications Act, industry officials told us it’s been long understood that such waivers would not be granted (CD Oct 25 p5), and the proposed ruling would explicitly reverse that. The ruling “is really a matter of the FCC exercising the authority they already have,” said Davis Wright broadcast attorney David Silverman, who represents Alaskan broadcasters who support the clarification.
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Commissioner Ajit Pai and acting Chairwoman Mignon Clyburn issued statements endorsing the clarification Thursday, and though Commissioner Jessica Rosenworcel hasn’t commented on the draft ruling, she said in an April order on foreign telecom ownership rules (http://bit.ly/1aK5SzE) that she supported “establishing clear-cut, understandable rules” to encourage “investment on a global scale."
Pai’s public support of the item for some time (CD July 11 p3), Rosenworcel’s indication in April of her support and Clyburn’s circulation of the declaratory order indicate it’s likely to be unanimously approved, said industry lawyers. They don’t see the item becoming controversial within the agency or outside it, with no opposition to it foreseen from any quarter. An eighth floor FCC official confirmed that the item is supported by all three commissioners and unlikely to change much before coming up for vote. One of the few potential opponents, National Association of Black Owned Broadcasters Executive Director Jim Winston, may largely keep on the sidelines or at least not actively oppose the draft order’s approval, said some industry lawyers. Winston has said he has concerns about allowing more foreign ownership of U.S. broadcasters (CD Sept 27/12 p2).
"Most minority owned companies do not have the ability to access foreign capital,” Winston told us by email Friday. “So the principal beneficiaries of this waiver procedure will be the large companies that are already consolidating the industry. When the Commission considers the public interest benefits of these waivers, it should consider whether the waivers do anything to promote minority ownership.” Some viewed NABOB as influencing the FCC on an unrelated media ownership proceeding. The group reversed course last winter and abandoned a compromise proposal that would support common radio/daily newspaper ownership in the same area among broadcasters owning no more than two radio stations in all but the smallest markets, where the limit would be one. The media ownership draft deregulatory order first circulated in November remains on circulation, said the FCC’s list of circulates (http://bit.ly/1bmzlkM).
That the draft foreign broadcast ownership declaratory ruling is simple and doesn’t say much on the particular standards a licensee would need to meet to demonstrate that non-Americans’ stakes above 25 percent are in the public interest augurs for easy FCC approval, said industry lawyers. “I think the item is going to be very straightforward,” said President David Honig of the Minority Media and Telecommunications Council, which since the last decade has sought such a declaratory ruling as is reportedly contained in the draft. “I can’t imagine that it’s going to be a 20-page-order,” said Honig. “I don’t think it will be a big production. But it makes a big point.” The FCC Diversity Committee in 2004 sought a waiver policy through a declaratory ruling to allow foreign broadcast ownership of as much as 49 percent in small, disadvantaged businesses if the non-American investor is from a World Trade Organization member country, noted Honig. He said that starting in 2006, such a policy was sought in media-ownership rules by MMTC, a member of the coalition including CBS, Clear Channel, Emmis, Entravision, Ion, LIN and Sinclair that in August 2012 sought (http://bit.ly/11eis79) what’s now said to be in the draft ruling.
Legislators have also indicated support for opening up broadcasters for foreign investment. In a pair of letters filed in July, Sen. Chuck Schumer, D-N.Y. (http://bit.ly/1ajBsFH), and Senate Majority Leader Harry Reid, D-Nev. (http://bit.ly/169tTls), urged the commission to “revisit” the foreign ownership rules, and review foreign investments over 25 percent case by case, as the draft proposes. However, both legislators said such transactions merit extra review for security reasons. “We remain fully aware of national security concerns that could arise from such investment,” said Reid in his letter. Both senators said such transactions should be subject to national security reviews along with the FCC’s processes. “We also remain fully aware of the importance of policy concerns, such as ensuring that broadcasters represent a diversity of voices and remain free from propaganda,” said Reid. “We believe that strict application of the Act’s public interest test can ensure these policy goals continue to be met.” The FCC hasn’t released information about whether the draft ruling includes such a security review, but Silverman said it’s possible the commission would adopt a procedure similar to the way it handles foreign investment in the common carrier rules.
The draft’s relative lack of guidance means that those engaged in future mergers and acquisitions will in practice show what those standards are, based on whatever the Media Bureau approves, said industry lawyers. They said that lawyers representing those engaged in M&A are likely to speak with bureau staff to informally develop a sense of what’s acceptable and not, before any deal is OK'ed. “All that’s necessary is simply to let the standards evolve by case-by-case adjudication,” said Honig. “The way this solves the issue is elegant in its simplicity.” A licensee “can just file your application and do as all good transactional lawyers do and just go to the bureau and ask if it works,” he said. “They'll work it out in the normal way that foreign ownership issues get worked out in other industries.”