**[[Recommendation on Merger Review]{.underline}]{.smallcaps}**

**[Transactional Transparency and Outreach Subcommittee]{.smallcaps}**

**[of the Advisory Committee on Diversity for Communications in the
Digital Age]{.smallcaps}**

# Recommendation

The Transactional Transparency and Outreach Subcommittee recommends that
the Advisory Committee commend to the Commission the following
recommendation:

In order to ensure that a transaction is in the public interest, and
that it would promote diversity of ownership, divestiture remedies
should be fashioned to promote practical opportunities for small
businesses, women and minorities to own and operate media and
telecommunications services. For example, the Commission should consider
making it a general policy to extend divestiture deadlines where a
company, when divesting assets, has actively solicited bids for spin-off
properties from socially and economically disadvantaged businesses, and
it appears that disadvantaged businesses in the relevant industry face
barriers to capital access and thus are likely to require additional
time to secure financing.

# Synopsis

The Subcommittee proposes that the Advisory Committee recommend adoption
of this policy statement by the Commission to establish clearly and
succinctly the objective of the Commission, where practicable, to
undertake to promote diversity of ownership of media and
telecommunications facilities when administering divestitures of
properties associated with transactions subject to the Commission's
jurisdiction. It is not the intention of the Subcommittee that the
proposal would alter the circumstances under which divestitures are or
will be a part of transactions submitted for Commission approval.

**[Background]{.smallcaps}**

-   Mergers, consolidation and other factors have created significant
    barriers for minorities, women and small business owners to own and
    operate telecommunications carriers.

-   As found in the December 2000 FCC-commissioned study entitled
    "Historical Study Of Market Entry Barriers, Discrimination and
    Changes in Broadcast and Wireless Licensing, 1950 to Present":

-   "Small firms face barriers erected by deregulation and consolidation
    in both wireless and broadcast."

-   "Minorities and women confront those same barriers; and yet those
    obstacles stand high atop a persistent legacy of discrimination in
    the capital markets, industry, advertising, and community\--and
    prior FCC policies, which worsened the effects of discrimination."

-   Former Chairman Kennard also observed that "\[s\]mall
    telecommunications businesses generally, and those owned by women
    and minorities in particular, report that the market consolidation
    permitted by the relaxation of the FCC\'s ownership rules has
    created nearly insurmountable obstacles to those seeking to enter,
    or even survive as a small player." *See*
    http://ftp.fcc.gov/Bureaus/Enforcement/News\_
    Releases/2000/nren0034.html.

-   The FCC is bound by statute and otherwise directed by Congress not
    only to ensure that barriers to market entry in the wireless mobile
    telecommunications segment are removed for minorities, women and
    small businesses but also to take steps to encourage that these
    groups own and operate wireless mobile telecommunications
    businesses.

-   Section 257 of the Communications Act of 1934 (added as part of the
    Telecommunications Act of 1996) mandates that the FCC identify and
    eliminate market entry barriers for small telecommunications
    businesses.

-   Section 309(j) of the Communications Act of 1934 reflects the
    directive of Congress that the FCC further opportunities in the
    auction of licenses to provide spectrum-based services for small
    businesses and businesses owned by women and minorities.

-   The FCC has said that it is committed "to implement the spirit and
    mandate of Section 257 to promote policies 'favoring diversity of
    media voices, vigorous economic competition, technological
    advancement, and promotion of the public interest, convenience, and
    necessity." *See In the Matter of Section 257 Proceeding to Identify
    and Eliminate Market Entry Barriers for Small Business*, Report
    (http://www.fcc.gov/Bureaus/OCBO/fcc00279.html).

-   Before the FCC can approve the transfer of control of authorizations
    and licenses connected with the proposed mergers under Sections
    214(a) and 310(d) of the Communications Act, it must weigh the
    potential public interest harms of the merger against the potential
    public interest benefits to ensure that, on balance, the proposed
    transfer of licenses and authorizations would serve the public
    interest, convenience and necessity (i.e., the Public Interest
    Test). Where necessary, the Commission can attach conditions to a
    transfer of licenses and authorizations in order to ensure that the
    public interest is served by the transaction.[^1]

-   This evaluation necessarily encompasses the "broad aims of the
    Communications Act,"[^2] which includes, among other things,
    preserving and enhancing competition in relevant markets, ensuring
    that a *diversity of voices* is made available to the public, and
    accelerating private sector deployment of advanced services.[^3]

-   Specifically, under the Public Interest Test, the FCC considers
    whether the transaction is consistent with the Commission's policies
    to advance diversity. It has long been a basic tenet of national
    communications policy that "the widest possible dissemination of
    information from diverse and antagonistic sources is essential to
    the welfare of the public." *See, e.g.,* *Turner Broadcasting
    System, Inc. v. FCC*, 512 U.S. 622, 663 (1994) quoting *United
    States v. Midwest Video Corp.*, 406 U.S. 649, 668 n.27 (1972).

-   In addition, the Public Interest Test requires, at a minimum, that
    the transaction not interfere with the objectives of the
    Communications Act. The Communications Act---particularly with its
    Telecom Act amendments---contains specific, direct mandates and
    instructions, many of which, when implemented by the FCC, embody
    proactive, *ex-ante* requirements.

```{=html}
<!-- -->
```
-   For example, section 309(j) of the Communications Act states that,
    when designing a system of competitive bidding for Commission
    licenses: "\[T\]he Commission shall include safeguards to protect
    the public interest in the use of the spectrum and shall seek to
    promote the purposes specified in section 1 of this Act and the
    following objectives: ...promoting 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 . . . ."

-   In addition, Congress stated that "\[i\]n prescribing regulations
    pursuant to \[the above sections\], the Commission shall . . .
    prescribe . . . bandwidth assignments that promote (i) an equitable
    distribution of licenses and services among geographic areas, (ii)
    economic opportunities for a wide variety of applicants, including
    small businesses, rural telephone companies, and businesses owned by
    members of minority groups and women, and (iii) investment in and
    rapid deployment of new technologies and services."

-   Furthermore, as noted, section 257 of the Communications Act
    obligates the FCC to identify and eliminate market entry barriers
    for entrepreneurs and other small businesses in the ownership of
    telecommunications services.

    Consequently, as a means of fostering access to opportunity in the
    transactional arena, where divestiture remedies are required or
    voluntarily available, the Commission should encourage the
    structuring of those remedies to ensure that small businesses, women
    and members of minority groups have substantial opportunities to own
    and operate media and telecommunications services.

[^1]: *See* 47 C.F.R. § 1.110; *see also WorldCom-MCI Order*, 13 FCC Rcd
    at 18031-32 ¶ 10; *Bell Atlantic-NYNEX Order*, 12 FCC Rcd at
    20001-02 ¶ 30.

[^2]: *Comcast-AT&T Order,* 17 FCC Rcd at 23255; *EchoStar-DirecTV HDO*,
    17 FCC Rcd at 20575.

[^3]: *See Comcast-AT&T Order,* 17 FCC Rcd at 23255; *EchoStar-DirecTV
    HDO*, 17 FCC Rcd at 20575; *AT&T-MediaOne Order*, 15 FCC Rcd at
    9821; *cf*. 47 U.S.C. §§ 521(4), 532(a).