FCC rules to require language against 'No Urban Dictates' in ad contracts

From Radio Ink
(March 5, 2008) The FCC on Wednesday released its report and order and third further notice of proposed rulemaking on "Promoting Diversification of Ownership in the Broadcasting Services," taking, the commission said, "several steps to increase participation in the broadcasting industry by new entrants and small businesses, including minority- and women-owned businesses, which historically have not been well-represented in the broadcasting industry."

The commission notes that public comments "agree that increasing diversity in broadcast ownership is beneficial," and cites comments from the Diversity and Competition Supporters group, the Consumers Union, and Clear Channel Communications.

Eligible Entities
In defining entities that qualify to benefit from the new diversity measures, the FCC is using the term "eligible entity" as it did in its earlier 2002 Biennial Review Order, to mean any entity that would qualify as a small business under Small Business Administration standards for its industry grouping, based on revenue.

The FCC acknowledges that some commenters have asked it to take action to increase ownership by minorities and women specifically and is seeking comment on whether it should adopt a definition of "eligible entity" that would specify those groups.

Under the new rules, eligible entities that acquire expiring construction permits will be allowed up to 18 months of additional time to build out a facility, and the FCC has also changed its equity/debt plus attribution rules to facilitate investments in eligible entities and altered its "distress sale" policy to allow a licensee whose license has been designated for a revocation hearing to sell its station before the hearing to an eligible entity.

The FCC is also adopting DCS proposals to extend divestiture deadlines in mergers when applicants actively seek bids from eligible entities, and to allow the sale of grandfathered radio combinations intact to any buyer -- not just an eligible entity -- as long as the buyer applies to assign the excess stations to an eligible entity or to a trust for the ultimate purpose of making such an assignment.

Nondiscrimination Rules
The FCC has also adopted a rule that states, "No qualified person or entity shall be discriminated against on the basis of race, color, religion, national origin or sex in the sale of commercially operated AM, FM, TV, Class A TV or international broadcast stations (as defined in this part)." Sellers will be required to certify that they've complied by checking a new box on FCC Form 314 or 315.

Broadcasters renewing licenses will also be required to certified that their advertising-sales contracts contain nondiscrimination clauses in an effort to do away with written and unwritten "No Urban" or "No Hispanic" dictates, but the FCC rejected the DCS group's request that the commission provide specific language for ad contracts.

Research Commitments
Though the FCC disagrees with the contention that it has "absolutely no idea" about the current state of female and minority broadcast ownership, it says, "We do recognize that our current data-collection efforts could be improved." To that end, it's modifying Form 323 to collect more information, and, once it has more data, will begin conducting longitudinal ownership studies as recommended by various commenters.

The commission has also committed to educating and encouraging local and regional banks to invest in SBA-guaranteed loans for broadcast and telecommunications transactions.

The FCC is also setting an "access to capital" conference to benefit potential new broadcast entrants, and hopes to schedule the first conference in New York in the first half of this year.

Says the FCC, "As recommended by the Diversity Committee, this conference will focus on the investment banking and private equity communities, and the opportunities for small businesses, new entrants, and designated entities to acquire access to financing and thereby facilitate entry to ownership in the communications sector."

Seeking Comment
As noted above, the FCC is seeking comment on other definitions of "eligible entity," including a DCS-recommended "full file review" approach that would ask applicants to demonstrate that they have "overcome significant social and economic disadvantages, the overcoming of which would be predictive of success in a challenging industry and of the promotion of diversity of information and perspectives and satisfaction of unmet needs in the industry."

The FCC is asking for comment on whether such reviews would increase diversity, on how the reviews would apply to companies rather than individuals, and on whether applicants should bear the burden of proving that they would contribute to diversity of viewpoints, among other questions, and it's inviting commenters to propose other eligibility definitions.

The FCC is also looking for comment on how to improve its data collection on the racial and gender identity of radio and television licensees, including potentially adopting a single renewal filing date, and on whether the commission should conduct audits to assess the accuracy of information in stations' annual ownership reports.

NABOB and the Rainbow/PUSH Coalition made a number of proposals on which the FCC is also seeking comment, including a requirement that the commission examine assignment and transfer applications for their potential impact on minority ownership, treat LMAs as attributable interests, and allow minorities to own station combinations equal to the largest combination in a market, to counterbalance the economic impact of grandfathered holdings.


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