***H I S T O R I C A L S T U D Y O F***

**Market Entry Barriers, Discrimination and**

**Changes in Broadcast and Wireless Licensing**

***1 9 5 0 T O P R E S E N T***

***Prepared for***

***The Office of General Counsel***

***Federal Communications Commission***

***by***

***Ivy Planning Group LLC***

***Rockville, Maryland***

**•**

**DECEMBER [2000]{.smallcaps}**

##### TABLE OF CONTENTS

**Page**

I. EXECUTIVE SUMMARY [1](#i.-executive-summary)

A. Overview [1](#a.-overview)

B. Summary of Key Findings [2](#summary-of-key-findings)

C. Key Conclusions [3](#c.-key-conclusions)

II\. INTRODUCTION [5](#introduction)

A. Purpose, Statutory Authority and Legal Basis
[5](#a.-purpose-statutory-authority-and-legal-basis)

B. Historical Snapshot [7](#b.-historical-snapshot)

III\. methodology [9](#methodology)

IV\. FINDINGS [11](#iv.-findings)

A. Overview [11](#a.-overview-1)

1\. Broadcasting [12](#broadcasting)

2\. Wireless [16](#wireless)

B. Market Entry Barriers and Other Experiences
[17](#b.-market-entry-barriers-and-other-experiences)

1\. Discrimination in Lending and Limited Access to Capital
[17](#discrimination-in-lending-and-limited-access-to-capital)

2\. Discrimination in the Community As a Market Entry Barrier
[50](#discrimination-in-the-community-as-a-market-entry-barrier)

3\. Discrimination in the Industry as a Market Entry Barrier
[52](#discrimination-in-the-industry-as-a-market-entry-barrier)

4\. Discrimination in Advertising [58](#discrimination-in-advertising)

5\. Effect of Deregulation and Consolidation
[68](#effect-of-deregulation-and-consolidation)

\(a\) Impact Upon Licensees [70](#a-impact-upon-licensees)

\(b\) Impact Upon the Public [78](#b-impact-upon-the-public)

6\. FCC Actions/ Inaction and Discriminatory Effects
[84](#fcc-actions-inaction-and-discriminatory-effects)

\(a\) The FCC Does a Tough Job Well
[89](#a-the-fcc-does-a-tough-job-well)

\(b\) FCC Inaction When Confronting Private Discrimination
[91](#b-fcc-inaction-when-confronting-private-discrimination)

\(c\) Policies and Processes [96](#c-policies-and-processes)

\(d\) Staff Responsiveness and Impact of Bureaucracy
[97](#d-staff-responsiveness-and-impact-of-bureaucracy)

\(e\) Equal Employment Opportunity [99](#e-equal-employment-opportunity)

\(f\) Distress Sales [101](#f-distress-sales)

\(g\) Comparative Hearings [102](#g-comparative-hearings)

\(h\) Repeal of the Tax Certificate
[106](#h-repeal-of-the-tax-certificate)

\(i\) Auctions [108](#i-auctions)

\(j\) Interactive Video and Data Services (IVDS)
[112](#j-interactive-video-and-data-services-ivds)

\(k\) Abuse of the System [115](#k-abuse-of-the-system)

\(l\) Inferior Licenses [116](#l-inferior-licenses)

\(m\) Decision-Making and the Role of Key Market Participants
[118](#m-decision-making-and-the-role-of-key-market-participants)

\(n\) Ineffective or Unaffordable Advocacy
[121](#n-ineffective-or-unaffordable-advocacy)

7\. Education, Training and Experience
[123](#education-training-and-experience)

8\. Perceived FCC Climate [124](#perceived-fcc-climate)

V. IMPLICATIONS OF THE FINDINGS [126](#v.-implications-of-the-findings)

A. Capital and Markets are the Drivers
[126](#a.-capital-and-markets-are-the-drivers)

B. Absence of Critical Mass [126](#b.-absence-of-critical-mass)

C. The Role of the FCC and Congress
[126](#c.-the-role-of-the-fcc-and-congress)

D. Discrimination [128](#d.-discrimination)

E. Bidding Credits in Wireless Licensing
[128](#e.-bidding-credits-in-wireless-licensing)

F. Relaxation of Ownership Caps [129](#f.-relaxation-of-ownership-caps)

G. Loss of Community Service and Diversity of Viewpoints
[129](#g.-loss-of-community-service-and-diversity-of-viewpoints)

H. Potential Loss of Civic Participation, Democratic Values and Freedom
of Speech
[129](#h.-potential-loss-of-civic-participation-democratic-values-and-freedom-of-speech)

I. The FCC is the Public Trustee of the Broadcast and Wireless Spectrum
[130](#i.-the-fcc-is-the-public-trustee-of-the-broadcast-and-wireless-spectrum)

VI\. CONCLUSION [132](#vi.-conclusion)

APPENDICES

Appendix A - Historical Timeline
[135](#appendix-a---historical-timeline)

Appendix b - Interview Guide [152](#appendix-b---interview-guide)

Appendix C - Demographic Breakdown of Interviewees
[158](#appendix-c---demographic-breakdown-of-interviewees)

Appendix D - List of Interviewees
[160](#appendix-d---list-of-interviewees)

Appendix E -- IVY PLANNING GROUP PROFILE
[168](#appendix-e-ivy-planning-group-profile)

# I. EXECUTIVE SUMMARY

## A. Overview

As part of the Federal Communications Commission's mandate to identify
and eliminate market entry barriers for small businesses under Section
257 of the Telecommunications Act of 1996 (hereafter referred to as
"1996 Act"), and its mandate to further opportunities in the allocation
of spectrum-based services for small businesses and businesses owned by
women and minorities under Section 309(j) of the Communications Act of
1934, the Commission commissioned Ivy Planning Group, LLC[^1] to conduct
this historical study of barriers to entry into broadcast and wireless
licensing experienced by small, minority- and women-owned businesses
from 1950 to the present. This study is the first FCC-sponsored
historical, anecdotal, qualitative review of the subject.

Other statistical or quantitative studies have focused on this subject
matter and have often revealed similar findings.[^2] However, this study
offers different insights - the stories - of African-Americans,
Hispanics, Native Americans, Asian Americans, and Caucasians who have
encountered market entry barriers. It is important to hear from real
people about their experiences in order to create context and meaning
for the data that is provided from other sources.

This study was designed to put a face on and give a voice to the process
of obtaining a broadcast or wireless license. By creating a venue for
these voices, the study allows people to say what their experiences
were. Each participant provided his or her story independently. Some
stories were fragmented and less coherent, while others were articulated
clearly and concisely. While the stories vary by year, length, race,
gender, circumstance, and narrator, their respective voices provide
distinctive yet recurring themes on identifiable market entry barriers.
In every case, the stories provide qualitative clarity and specificity
to understand the process of obtaining a broadcast or wireless license
from 1950 to the present.

Ivy conducted individual telephone interviews with 120 key persons
representing small, minority- and women-owned businesses that attempted
(successfully or not) to acquire, sell or transfer a license during the
years 1950 -- present, and 30 telephone interviews with key market
participants (e.g., media brokers, lenders, attorneys, industry leaders,
and/or FCC officials). The findings indicate that there are unique and
significant barriers to entry for small, minority- and women-owned
businesses.

## Summary of Key Findings

Regardless of the tone and tenor of the many voices of this study, a
troubling story line resonates among the interview stories that span a
half-century. Women and minorities faced pervasive discrimination, as
well as small business market entry barriers, particularly in the
fifties and sixties. The FCC attempted to ameliorate that discrimination
in the seventies, eighties and early nineties through the tax
certificate, distress sales, comparative merit, and lottery preferences.

Minorities and women made modest gains in broadcast ownership during
this period, amidst persistent capital market discrimination and other
small business market entry barriers. However, those gains were
essentially reversed, in 1995, by both Congress's elimination of the tax
certificate program and the Supreme Court's decision in
[Adarand]{.underline}, which made it significantly more difficult for
race-specific rules and policies to be implemented by the FCC. The
deregulation and the lifting of the ownership caps under the
Telecommunications Act of 1996 made these barriers nearly insurmountable
for small, minority- and women-owned businesses attempting to thrive or
even enter the broadcast industry.

The FCC's and Congress' actions or inaction on particular regulatory or
market issues have exacerbated those barriers. These actions and
inaction include: the uneven enforcement of EEO policy; under utilized
distress sales/license renewals; repeal of the tax certificate program;
permitting use by non-minority men of minority and female "fronts"
during the comparative hearing process; the lifting of the ownership
caps; and minimal small business advocacy before the FCC.

Today 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.

Based on those interviews, the findings revealed several factors that
impeded and/or precluded small, minority-and women-owned businesses from
entering, successfully competing and surviving in the broadcast and
wireless industries including:

-   Discrimination in the capital markets causing limited access to debt
    and equity capital that would be adequate and affordable for
    minority-and women-owned businesses;

-   Discrimination from the advertising industry against minority-owned
    and --formatted stations; exclusion of minority and women-owned
    businesses from the powerful network of information, deals and deal
    makers;

-   Market deregulation and consolidation caused by the 1996 Act;

-   Lack of industry experience for women and minorities due to few
    employment opportunities offered by majority broadcasters and the
    failure of the FCC to enforce EEO rules;

-   Fractured or a lack of advocacy of small, minority- and women-owned
    communications businesses before the FCC, the courts and Congress;

-   Misuse of minority and gender ownership programs by non-minority
    firms to the disadvantage of female and minority ownership;

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-   Congressional laws, court rulings, and FCC rules, regulations and
    policies, which have operated to the detriment of small, minority-
    and women-owned businesses.

## C. Key Conclusions

Based on the shared experiences and perspectives of the study
participants, Ivy has formed nine key conclusions concerning past,
present and prospective market entry barriers:

(1) Access to the capital markets is critical to the success of small,
    minority- and women-owned businesses;

(2) There is an absence of a necessary critical mass of small, minority-
    and women-owned businesses in broadcast and wireless ownership;

(3) Congress and the FCC erected and heightened market entry barriers
    inhibiting the establishment, growth and development of small,
    minority- and women-owned businesses;

(4) Discrimination played an important role as an entry barrier,
    especially with respect to minority participation in broadcasting;

(5) Bidding credits designed to increase the opportunities for
    participation in wireless auctions by small, minority- and
    women-owned businesses were ineffective and unsuccessful;

(6) The relaxation of ownership caps has significantly decreased the
    number of small, women- and minority-owned businesses in this
    industry;

(7) The declining participation of small, women- and minority-owned
    businesses in this industry has resulted in diminished community
    service and diversity of viewpoints;

(8) The declining participation of small, women- and minority-owned
    businesses in this industry has also resulted in a loss of civic
    participation, democratic values and freedom of speech; and,

(9) The FCC often failed in its role of public trustee of the broadcast
    and wireless spectrum by not properly taking into account the effect
    of its programs on small, minority- and women-owned businesses.

A single question may be heard amidst the many stories, recommendations,
commendations, complaints, and perspectives offered: whose spectrum is
it anyway? In answering the question, the interviewees consistently
responded that spectrum is a public good to be managed by the FCC in the
public interest. While interview subjects believe that maximizing
auction revenue for the public purse is important, it is equally in the
public interest to promote ownership diversity, preserve viewpoint
diversity, and eliminate market entry barriers.

# INTRODUCTION

## A. Purpose, Statutory Authority and Legal Basis

The purpose of this study is to provide a historical perspective on what
market entry barriers, if any, small, minority- and women-owned
businesses have faced in the acquisition, sale or transfer of FCC
broadcast and wireless licenses. The study was designed to assist the
FCC in implementing Section 257 of the Telecommunications Act of 1996,
47 U.S.C. §257[^3], which mandates that the FCC identify and eliminate
market entry barriers for small telecommunications businesses, and
Section 309(j) of the Communications Act of 1934, which requires the FCC
to further opportunities in the allocation of spectrum-based services
for small businesses and businesses owned by women and minorities.[^4]

In addition, this study will assist the Commission in determining
whether there is any evidence of discrimination that may establish a
compelling governmental interest under [Adarand v. Pena]{.underline},
515 U.S. 200 (1995).

In [Adarand]{.underline} the Supreme Court held that any federal program
that uses racial or ethnic criteria as a basis for decision-making must
serve a compelling governmental interest such as remedying past
discrimination, and must be narrowly tailored to serve that interest. In
order to demonstrate such an interest, the government cannot rely on
general societal discrimination. [City of Richmond v. J.A. Croson
Co.]{.underline}, 488 U.S. 469, 509 (1989). Instead, the government must
establish that it is remedying either its own discrimination, or
discrimination in the private sector in which the government has become
a "passive participant." [Croson]{.underline}, 488 U.S. at 504.[^5]

Furthermore, the study was designed, inter alia, to assist the
Commission in determining whether the FCC is or has been a passive
participant to discrimination in the private market. Accordingly, the
study will help determine whether there is the factual predicate and
legal premise to adopt programs encouraging women and minority ownership
of FCC licenses. Moreover, the study will enable the Commission to
gather anecdotal evidence of discrimination, if any, faced by small,
minority- or women-owned communications businesses.

Section 257(a) of the 1996 Act, requires the Commission to complete a
proceeding for the purpose of identifying and eliminating market entry
barriers for entrepreneurs and other small businesses in
telecommunications and information services. To meet this mandate, the
Commission initiated an omnibus Section 257 proceeding by adopting a
notice of inquiry to identify and eliminate barriers for small
businesses. *See Market Entry Barriers Notice of Inquiry*, 11 FCC Rcd
6280 (1996)(NOI).[^6] In this *NOI*, the Commission requested comments
on, among other things, whether minority- and women-owned businesses
encounter "unique" obstacles in the telecommunications market, and
determined that discrimination could be a market entry barrier.[^7]
Following the *NOI*, the Commission released a *Section 257 Report*
regarding the agency's implementation of Section 257,[^8] wherein the
Commission identified several obstacles that small businesses encounter,
including access to capital, access to Commission decision makers,
access to information, and Commission procedure.[^9] The report also
addressed the Commission's commitment to identify and remove market
barriers experienced by women or minorities, but determined that the
agency would have to fully evaluate the record to ensure compliance with
constitutional requirements before the agency could take any action. The
FCC, then, commenced a comprehensive examination, a series of market
entry barrier studies, to further examine the participation of small
businesses, including those owned by women and minorities in the
provision of telecommunications services and the impact of the
Commission\'s policies on access to the telecommunications industry.

In rare cases, anecdotal evidence alone may be sufficient to constitute
a compelling governmental interest. See *Wessmann v. Gittens*, 160 F.3d
790, 801 (1^st^ Cir. 1998)("anecdotal evidence alone can establish
institutional discrimination that could serve as basis for
race-conscious action....only in the most exceptional circumstances.");
*Engineering Contractors Association*, 122 F.3d 895, 925 (11^th^ Cir.
1997)(anecdotal evidence standing alone in rare cases will suffice);
*Coral Constr. Co. v. King County*, 941 F.2d 910, 919 (9^th^ Cir. 1991).
In any event, the Supreme Court has recognized that anecdotal evidence
of discrimination is important because it can "bring the cold numbers
convincingly to life." [International Brotherhood of Teamsters v. United
States]{.underline}, 431 U.S. 324, 339 (1977).

Accordingly, this qualitative, anecdotal study is part of the
Commission's comprehensive examination regarding market entry barriers
and was commenced in conjunction with several statistical studies[^10]
and is designed to complement, illuminate and reinforce the findings of
those quantitative studies.

##  B. Historical Snapshot

The Communications Act of 1934 created the Federal Communications
Commission and provided the means and purpose of allocating frequency
along the radio spectrum. While the mission of the Agency has generally
remained the same, the FCC has used several different means of spectrum
allocation.

From 1950 until 1993 the FCC awarded licenses to mutually exclusive
competing broadcast applications through comparative hearings. If only
one applicant applied, "a singleton", the FCC awarded the license to
that applicant without a hearing, provided the applicant met minimum
requirements. The FCC began distributing wireless licenses by lotteries
in 1982. Since 1993, the FCC allocates wireless licenses, for commercial
use, solely by means of auction. Starting in 1999, broadcast licenses
have also been awarded solely through auctions.

In addition to being awarded a license directly by the FCC, an active
secondary market for licenses exists wherein they are bought and sold
independent of the FCC. Except for requiring FCC approval, the
Commission is not generally involved in these transactions.

At varying times and through varying means (see Statutory, Regulatory
and Historical Timeline at Appendix A), ownership programs have been
made available to small, minority- and women-owned businesses to provide
increased opportunities for them to participate in both broadcast and
wireless license ownership. For licenses obtained from the FCC, various
ownership programs have enhanced the comparative hearing, lottery and
auction processes. In the secondary market, tax certificates and
distress sales have been implemented as opportunity-creating mechanisms
for small, minority and women licensees.

For essentially the first half of the 20^th^ century, the broadcast
industry was dominated by White males. Most stations were owned by large
corporations such as CBS and NBC and had been awarded by the government
at no cost to the licensee. The advantages and opportunities created by
the initial award process provide the foundation for today's
telecommunication industry.

There was virtually nothing like today's ethnic programming on the air.
As late as 1943, radio still upheld its longstanding policy that
African-Americans, in contrast to Whites, would not be referred to as
Mr., Mrs., or Miss on any commercial network show. Furthermore,
African-Americans were portrayed on the air as servants or as comical or
ignorant characters.

Against this backdrop, the following list of "firsts" is offered.

-   In 1922, Marie Zimmerman became the first White woman to own a radio
    license.[^11]

-   "In 1947, station WDIA-AM in Memphis, Tennessee, became the first
    radio station to devote all its air time to Black programs."[^12]

-   It was not until 1949, when Jesse B. Blayton purchased WERD in the
    secondary market in Atlanta, that the industry had its first Black
    radio station owner.[^13]

-   In 1960, Andrew Langston, a Black man, started his more than 13-year
    process of acquiring a radio broadcast license from the FCC through
    a comparative hearing. It was the first time that an
    African-American had filed an application with the FCC. Mr. Langston
    was finally awarded his license in 1974.

-   In 1973, the FCC issued a construction permit to WGPR-TV (UHF) in
    Detroit, the first Black owned television station.[^14]

-   The first Hispanic station opened in the middle 1950s. The record of
    ownership is uncertain; the station operated in the southwestern
    section of the United States, in either Texas or New Mexico.

-   In 1989, after four years in a comparative hearing, Dorothy Brunson
    became the first African-American woman to own a television station.

# methodology

Ivy Planning Group, LLC conducted 150 telephone interviews during a
four-month period.[^15] The study analyzes these interviews, 123 of
which were with key persons[^16] representing small, minority- and
women-owned businesses that attempted to acquire, sell or transfer a
license during the years 1950 to present, irrespective of success; and
27 of which were with "key market participants"[^17] active in the
broadcast and/or wireless markets during the same time frame.[^18]

We selected a total of 150 interviewees to enable us to talk to a
meaningful cross-section of participants in the licensing process from
1950 to present. (See Appendix C for a chart highlighting the
demographic breakdown of the interviewees).

Using a knowledge of the market and random sampling, a list of
interviewees was compiled relying upon various sources.[^19]
Approximately half of the interviewees who were licensees were selected
based on their role and significance in the industry. The balance of the
licensees and unsuccessful applicants were selected at random from the
information sources available to us.

As we compiled the list of interviewees, we made every effort to ensure
representation by year, method of license acquisition, type of license,
type of FCC acquisition rules, race/ethnicity, gender, and size of
business. We acquired some of this information through the
aforementioned data sources; our initial conversations with prospective
interviewees provided us with the remainder.

The list of key market participants was comprised of a sample of people
who are known to have had a significant role in the industry and those
participants whose names arose during the interview process. Key market
participants and current licensees identified earlier generations of
licensees and applicants.

As a further part of the study, Ivy developed a timeline of key
statutory, regulatory and historical developments which have affected
the efforts of small, minority- or women-owned businesses to obtain
licenses in both the primary and secondary markets. The timeline
includes rules, policies, court cases, and statutory regulations that
impacted comparative hearings, lotteries, auctions, bidding credits, tax
certificates, and distress sales. Further, the timeline includes the
number of small, women and minority licensees for selected years between
1950 and present, when available. (The Historical Timeline is attached
as Appendix A.)

The analysis of the interviews combined with the information contained
in the historical timeline form the basis of this report.

# IV. FINDINGS

## A. Overview

The findings of this study may assist the FCC in fulfilling its
statutory mandate regarding market entry barriers. Section 257 of the
1996 Act mandates that the Federal Communications Commission ("FCC" or
"the Commission") identify and eliminate "market entry barriers for
entrepreneurs and other small businesses in the provision and ownership
of telecommunications services and information services, or in the
provision of parts or services to providers of telecommunications
services and information services."

In carrying out the mandate, Section 257(b) states that the Commission
"shall seek to promote the policies and purposes of this Act favoring
diversity of media voices, vigorous economic competition, technological
advancement, and promotion of the public interest, convenience and
necessity." In addition, Section 309(j) of the Communications Act of
1934 requires the FCC to further "economic opportunity for a wide
variety of applicants, including businesses owned by members of minority
groups and women."

The study's findings highlight significant barriers to entry for small
businesses including minority- and women-owned businesses. The
interviewees uniformly reported that the combination of these barriers
has impeded and in many instances precluded these entities from
entering, successfully competing and surviving in the broadcast and
wireless industries. Interviewees specifically identified the following
as market entry barriers.

-   Discrimination in the capital markets causing limited access to
    adequate and affordable debt and equity capital for minority- and
    women-owned businesses;

-   Discrimination from the advertising industry against
    minority-formatted and -owned stations resulting in decreased
    opportunity for revenue generation, cash flow and access to capital;

-   Exclusion of minority- and women-owned businesses from the powerful
    network of information, deals and deal makers thereby limiting
    access to license purchase opportunities and the capital to fund
    them;

-   Market deregulation and consolidation following the 1996 Act
    resulting in increased competition for national advertising dollars,
    inflated purchase prices for stations and a loss of diversity of
    voices and community focus;

-   Lack of industry experience for women and minorities resulting from
    too few employment opportunities offered by majority broadcasters
    and the uneven enforcement by the FCC of its EEO policies, thus
    rendering these groups ill-prepared to compete in a marketplace
    where industry experience and successful track records are critical
    elements for market entry and acquisition of capital;

-   Fractured or lack of advocacy by and on behalf of small, minority-
    and women-owned communications businesses before and within the FCC,
    the courts and Congress, thereby leaving the special needs of these
    licensees under-represented when new rules, policies and laws are
    proposed;

-   A series of FCC actions and inactions which have proven very costly
    for small, minority- and women-owned businesses, who could
    ill-afford the added financial burden, and have frequently had a
    discriminatory impact on these business owners, albeit purportedly
    unintentional; and

-   Misuse of minority and gender ownership policies by majority firms,
    to the disadvantage of "real" minority and female ownership.

This study covers both broadcast and wireless licensing. Background
information on each is presented below to provide context for the
discussion of the findings.

### 1. Broadcasting

Small, minority- and women-owned broadcast licensees and those wanting
to enter into broadcasting face significant barriers to entry and growth
in today's market. While there have always been challenges, and
especially for women and minorities, the relaxation of ownership
restrictions or "caps" by the 1996 Act has changed the landscape of
broadcast properties because the statute allows a single entity to own,
given the applicable market, a larger number of stations nationwide.

Historically, small broadcasters have served their local markets with a
commitment to provide service to their respective geographic or
demographic communities, gaining advertising revenue from both national
and local businesses. From 1950 until 1985, there was healthy
competition among broadcast stations. An individual or company could own
only [one]{.underline} AM, FM and television station in each market and
a total of seven of each type nationally.[^20] In stark contrast, today,
an individual or company can own as many as 8 stations locally, based on
the total number of stations in the local market; and there is no
numerical limit in the national market but a limit on audience reach. In
earlier years when there were more stringent restrictions on broadcast
ownership, small business owners were at least making a living. Now it
is significantly more difficult to do so.

While a number of interviewees had acquired their licenses through the
FCC's comparative hearing process[^21], most of the study participants
had purchased their stations from previous license holders. Many of
those stations had inferior signals and were purchased out of
bankruptcy, with the new owner, in his or her eagerness to own a
station, sometimes taking on more debt than was prudent.

Access to capital, on a timely basis and in quantities needed to acquire
and grow their businesses, has always been a challenge for small
broadcasting businesses. Local banks often did not lend on broadcast
properties because bankers did not understand the business of radio and
television, saw the licenses as too risky (especially since they were
not actually owned by the broadcaster and came up for renewal on a
regular basis), and were unable and/or unwilling to collateralize their
loans with the generally meager assets of the stations themselves. If
broadcasters were able to get loans from conventional lenders, often
other personal assets had to be pledged as collateral. If one was lucky,
the seller of the station was willing to take back a note for a portion
of the purchase price.

The interviewees consistently reported that for minority and women
licensees these market entry barriers have been compounded by the
discrimination they have encountered in the capital markets, in the
broadcasting industry itself, in the advertising industry, in the lack
of employment opportunities, and as a result of various actions and
inaction on the part of the FCC and Congress.

The 1996 Act has heightened these barriers to the point where it appears
that it is almost impossible for small, minority- and women-owned
businesses to enter the broadcast industry. Broadcast ownership is now
determined by Wall Street stock instead of Main Street money. With the
lifting of the ownership caps, there has been consolidation of
ownership, primarily in radio, by large publicly-traded companies,
driving prices up and smaller, independent owners out. Where stations
used to sell for between seven and twelve times projected cash flow,
prices have now been inflated to 20-22 times cash flow. Without
significant equity capital, either from personal funds or outside
investors, it is virtually impossible for individuals and non-public
companies to acquire stations in today's market.

The consolidation of stations precipitated by the deregulatory
provisions of the 1996 Act has also consolidated advertising revenues in
the hands of the large broadcast group owners, significantly limiting
the ability of smaller broadcasters to earn the money necessary to
successfully compete and survive in the business. As a result, smaller
station owners, many of whom are minorities, are being presented with
two choices: (1) to continue to operate their stations at personal
financial risk, which many have done because of their deep commitment to
serve and be a voice for their communities, or (2) to sell their
stations, which others have done because they believe that it is going
to be extremely difficult if not impossible to compete successfully
against these large group owners in the future.

With the exit of local, minority radio station owners, consolidation is
also having an impact on both the diversity of voices and service to the
local communities. With consolidation, the programming, both
entertainment and public interest, has become more homogenized. While
group owners might have urban-formatted ("Black") stations, for example,
in particular markets, interviewees indicated that it is common for the
news and community service programming provided by these stations to not
be particularly geared towards the information needs of that specific
Black community itself.

Additionally, since news programming was often being produced centrally
by the larger companies whose stations covered multiple markets, access
by the audience to general local news and public service announcements
was diminished. Lastly, fewer opportunities exist for the voice of the
minority population to be heard since some minority on-air personalities
and other employees are being precluded by their employers from taking
public stands on issues relative to their minority group.

These market entry barriers have been exacerbated by the FCC's action,
or inaction, on certain regulatory or market issues. For example, they
may include enforcement or unenforcement of EEO policy, distress
sales/license renewals[^22], use by non-minority men of minority and
female "fronts" during the comparative hearing process[^23], the lifting
of the ownership caps, and minimal small business advocacy before the
FCC. The actions and inactions of the FCC have been made worse with
Congress' repeal of the tax certificate program.[^24]

And finally, the gains in station ownership that had been achieved by
minorities in the latter 1970s, 1980s and early 1990s were essentially
reversed by both Congress's elimination of the tax certificate program
in 1995 and [Adarand]{.underline} decision in 1995, discussed supra,
which made it significantly more difficult for race-specific rules and
policies to be implemented by the FCC.

Given the historical disadvantages faced by small, minority- and
women-owned broadcasting businesses, the confluence of the repeal of tax
certificates in 1995, the [Adarand]{.underline} decision in 1995 and the
deregulation of the broadcast industry in 1996, it appears that it is
nearly impossible for small, minority- and women-owned broadcasters to
enter, survive and grow in the broadcast industry.

### 

### 2. Wireless

The barrier to entry in wireless licensing is primarily one of capital.
With the passing by Congress of the Omnibus Budget Reconciliation Act of
1993, Pub. L. No. 103-66, 107 Stat. 388 (1993) (codified, in pertinent
part, at 47 U.S.C. §390(j) (1994)), the FCC was given the authority to
distribute licenses through a competitive bidding process, or auction.
With the enactment of Section 309(j) of the Communications Act,
successful license applicants have to pay the FCC for the issuance of
wireless licenses whereas before they were issued at no charge to the
licensee.[^25]

The financial burden of now having to pay for licenses coupled with 1)
the enormous sums of capital needed to build out wireless systems and 2)
limited access to capital, has severely disadvantaged small, minority-
and women-owned businesses in the acquisition of wireless licenses.

Furthermore, the elimination of auction ownership programs for women and
members of minority groups as a result of the [Adarand]{.underline}
case, has caused access to outside equity investors and vendor financing
for equipment to practically disappear.

A more detailed discussion of these barriers in both broadcast and
wireless licensing is presented below.

## B. Market Entry Barriers and Other Experiences 

Through the years covered by this study, small, minority- and
women-owned businesses in both broadcasting and wireless
telecommunications encountered multiple market entry barriers. They were
erected by discrimination in the capital markets, in communities, in the
advertising industry, and in the competitive marketplace; by the effects
of deregulation and market consolidation precipitated by the 1996 Act;
and by various actions and inaction on the part of the FCC, the courts
and Congress. It is important to note that while essentially all small
businesses were negatively affected by these barriers, those businesses
owned by women and especially those owned by minorities reported the
greatest negative impact.

### Discrimination in Lending and Limited Access to Capital

##### Access to Capital is Key

> *. . . (O)ur number one criteria ... is can they pay for it at the
> closing and will they pay the most. And that kind of supersedes
> everything.* *(Brian Cobb, media broker - BCobb512, p. 13)*

Access to capital was clearly the most common and pervasive barrier to
entry cited by participants in our study, both among licensees, as well
as by most every key market participant (broker, lender, other
intermediaries). In a market where access to capital is a critical
component for entry and growth, lack thereof basically puts you out of
the game. Acquiring money for start-up ventures is difficult enough. If
one is a woman or minority, the difficulties in acquiring capital, as
the female and minority study participants told us, were exacerbated by
discrimination on behalf of the various lending sources and
intermediaries.

##### Access to Capital as an Obstacle for Small Business

Capital affects everything. The more cash-strapped a company is, the
less it is able to invest in those things that help it grow and keep it
viable. These things include attracting and retaining top personnel;
operating out of comfortable, efficient facilities; upgrading to and
maintaining state-of-the-art equipment; retaining attorneys to ensure
information flow and advocacy; promoting the business to
listeners/customers and advertisers; and acquiring additional licenses
to improve competitive advantage.

Access to capital is limited by lending sources' lack of understanding
of the broadcast and wireless businesses and their operations; by
requirements for collateral in excess of operating cash flow; by
increased cost of capital due to consolidation; by exclusion from
information and deal-makers' networks; and by advertising agencies' and
advertisers' practices.

Discrimination based on education might even play a role in limiting
access to capital. As a previous NTIA report on capital market
discrimination indicated, at least in the pre-market consolidation era,
the fact that minorities who acquired capital were better educated than
similarly situated non-minorities may be indicative of discrimination.
The study found that education was more important for minorities
acquiring capital than even the track record of the business for which
the financing was sought.

Erskine Faush, a Black television station owner who acquired his license
in 1989, puts it succinctly.

(I)t's always capital. ... Now you know, we can theorize and rationalize
all of this. But when it comes right down to it, it's the lack of
resources.... (W)hen you have a company with mega bucks, many of them
being \[publicly\] traded, who have ready access to deals in the
marketplace, even to make improvements, to do all of those things
necessary to grow, to fertilize it if you please, without those
resources just how do you make it a level playing field? (EFaush238, p.
15)

Mr. Faush goes on to say that he's not necessarily looking for a hand
out but rather a reasonable foundation on which to compete fairly.

. . . (I)t's that access to capital. It's that barrier. And, you know,
you're not necessarily looking for preferential treatment -- and, yet, I
could make a strong case to justify some \[of it\] because of past
practices in the marketplace. I could make a strong case for that, but I
won't do that. What I will say is this, that once you remove the barrier
that's there, without help you cannot move, and that's the one of
capital, you know, everything else -- once you do that, give me the
wheels to put on my chariot \-- do you understand what I mean -- I'll
drive it. I'll run it.

I don't mind getting in the race with anybody else at any other level
and let it be on initiative, your drive, and all those things that you
ought to have to be a good, viable business enterprise, you know. You
don't have to do that. You don't have to go out and get the business for
me. I'll go get it. Do you understand what I'm saying? (B)ut the one
thing I can't get over is the fact that I'm starting at the starting
gate and I'm expected to ... make the chariot go and there are no wheels
on it. Give me some wheels and I'll get at the race line with everybody
else and line up, and let's see who can run to the finish line.
(EFaush238, p. 26)

Similarly, Ernest James, an African American former licensee (who
purchased his station in 1985 and subsequently lost it in bankruptcy
proceedings) makes these comments.

I had done all of the things that you need to do. I had done the
engineering to ensure that the property that I needed would meet FCC
requirements. But I failed, and the reason that I failed had nothing to
do with my ability, proven by the fact that I am very successful running
\[seven stations for Clear Channel\], and the stations that I run are
not all urban formatted stations. . . (S)o my point is that it wasn't a
matter of skill, it was a matter of access to capital. (EJames268, p. 9)

##### SBA Programs Do Not Ease Access to Capital

During various years, when the "opinion molder rule" was not in
effect,[^26] the Small Business Administration (SBA) was able to lend
money for the acquisition of broadcast properties. Several of our
interviewees were able to finance their station purchases using the
SBA's loan guarantee program. For example, Joyce Banks, a Black female
radio licensee, recalled that SBA was available to help finance her
acquisition, but she only learned of its availability through a state
government official. As she states:

But still \... so what happened is in contacting, I believe he was a
state senator at the time, Paul Simon whom I had worked with for years,
had come across ... or one of his staff persons, I believe ... that the
SBA had just made the decision to loan money to radio stations. And so a
bank whom we had done business with for years then decided that, okay,
with that guarantee, they would be willing \[to loan us the money\].
(JBanks175, pp. 7-9)

Even though the maximum loan amount for broadcasting properties that the
SBA will guarantee has increased over the years to its current level of
\$750,000, that is too low an amount in today's marketplace, as Manny
Davila, Hispanic radio broadcaster, told us.

\[The\] SBA, you know, will lend you \$750,000. Well, wow, that's fine.
That means I can go and buy \[a station in a small town in\] Texas, man.
but I can't buy in San Antonio. But, yet, the banks, if you want to
borrow a couple of mil or a mil or something, no, they don't want to
lend you that. They don't -- no, if you're not borrowing \$3 to 5
million or \$10 million, they don't want to talk to you. (MDavila 128,
p. 42)

Pluria Marshall, Jr., an African-American radio licensee, suggests that
the upper limit on SBA loans should be increased gradually from
\$750,000 to \$1.5 million to \$2 million. As he said, with only being
able to get \$750,000, "basically you couldn't buy much of anything for
that amount of money." (PMarshall115, p. 1)

All small businesses face these obstacles. Minority and women licensees
reported that because of discrimination, they experienced increased
disadvantage.

##### Discrimination As an Obstacle to Capital for Minority- and Women-Owned Businesses

While small businesses typically have more difficulty getting bank
loans, the minorities we spoke with shared stories of even greater
difficulty because of pervasive and often subtle discrimination. Bob
Carl Bailey, an African-American who acquired his radio station in 1977
said:

(F)inancing broadcast facilities or any business if that \[financing\]
was tied to the success of the business, ... is difficult ...
(p)articularly if you're small and even more difficult if you're Black.
Next to impossible. (Bob Carl Bailey, African-American radio
broadcaster) (BBailey167, pp. 3-4)

James E. Wolf, Jr., another Black radio station owner who acquired his
license in 1983, shared the irony of him finally becoming bankable as a
result of the windfall he is reaping from the sale of his broadcasting
business. Furthermore, he makes reference to the banker's willingness to
call him "Mr. Wolf", an appellation of respect that was obviously
lacking before.

The color of the skin I am in is the problem. It has been and still is.
Now I'll tell you, since I've gotten this big, large contract on my desk
\[for the sale of my station\], everybody -- I had one banker \[who I
earlier had tried to get financing from\] tell me, and this is verbatim.
"The kind of deal that you've got, I'm going to have to start calling
you 'Mr. Wolf.'" But now I can get anything I want. But I don't need
them, you know. I can get anything I want now. ... You know, ... I've
had so much notoriety in this community and all of the servicing work
that I've done, any loan ... it had should have been, "All we require is
your signature, Mr. Wolf." That's what it should have been. That's what
it should have been. (JWolf281, pp. 21-22, 27)

Andrew Langston, the first African-American to seek a license directly
from the FCC in 1960, financed his radio station purchase "out of my
piggy bank ... because the bank wouldn't' loan any money." Mr. Langston
had 12 businesses at the time he was seeking financing for his radio
station \[in 1974\]. He had extensive experience and a track record as a
successful businessman. And still he could not qualify for a bank loan.
He was essentially told by the banks to be his own lender.

There was one time I had twelve businesses. . . I borrowed money from
\[my in-laws\] . . \[Banks\] wouldn't loan me any money, because they
told me I didn't need no money. And that was true, I didn't need any
money, I needed to wake up and think. Because here I had a
transportation business. I had a public relations business, a promotion
business, had an insurance agency. I had revenues coming in from that
and I turned around and looked and said "what the hell?" I can loan this
money to the station. Which I did. (ALangston112, pp. 1,12)

Mr. Wolf also talked about how even with his industry and community
recognition and prominence he was still not able to prove his
creditworthiness to the banks.

> *I just really ... positioned myself -- I've won every award that you
> can think of from the cities, economic development awards, from the
> State of Tennessee. (W)e tried unsuccessfully so many times \[to raise
> capital\]. . . . (T)hese are the pressures really that made me
> actually sell at this time, you know. It's because I just got tired of
> begging people, even though you prove yourself over and over. I'm on
> the Chamber \[of Commerce's\] Economic Development Board. I've won the
> pinnacle award of the Chamber of Commerce. I've won the small business
> award. I've won every large award, industry award, that you can win
> here, but I've never proved myself to banks. (JWolf281, pp. 20-21)*

Some minority owners found that the banks were unwilling to lend them
money, but the banks used the information that they received from the
minority applicants against them. For example, William Galloway, a Black
male radio licensee, recalled the following story:

> *We could not borrow any money, and to this day, we don't need any
> money. Because they just would not lend money to a minority, and
> especially in the radio business, because they found that banks are
> not familiar with lending money to broadcast radio stations, and I
> live in Buford, South Carolina. And they're not going to lend me any
> money for this radio station. They will now. I was told no on 3 or 4
> occasions, but someone found out, I guess in the bank, from a friend,
> I guess, because I was approached. They offered me \$85,000 for the
> radio station and I said, well, first of all, how did you know I was
> trying to borrow \$50,000? That was supposed to be confidential.
> Evidently it was not. I live in a small town. Everyone knows
> everybody's business. And so I said, well, if it's worth 85 to you,
> why isn't it worth 50 to the bank? And of course I said, well I'm not
> gonna sell. And I refused to sell. And I do not need any money at this
> point. My radio station's free and clear. I do not owe anybody any
> money. And the only reason is, because it's free and clear, and I'm
> afraid to borrow any money. Because, I can borrow more than I can
> afford to pay back. And, since I have refused to sell, the good way to
> get me is to lend me more than I can afford to pay back, and call the
> advertisers, who are their friends, and say, look, let's not
> advertise. We can get Galloway's station. So that's a way for them to
> get it from me without my agreeing to sell. (WGalloway183, pp. 4-5)*

##### Prominence and Prior Business Success Is Not Enough

As in Mr. Wolf's case, many minorities we spoke with were prominent in
their communities, often had other successful businesses, aligned
themselves with other leading individuals as equity investors, and still
had great difficulty receiving the financing they needed. Often they had
to approach several lending institutions before they succeeded, if at
all.

Notable among them is Percy Sutton, who in 1971 co-founded Inner City
Broadcasting. At the time, Mr. Sutton was Manhattan Borough President,
principal owner of the *Amsterdam News*, a leading Black newspaper in
New York, and an owner of a cable television company. As his son, Pierre
Sutton, President of Inner City and Chairman of the National Association
of Black-Owned Broadcasters (NABOB), reports:

We didn't have access to capital, we didn't. We had an opportunity to
purchase but we were unable to find a bank that would back us in
\[1971\]. In fact we went to some 30 banks in New York looking for
backing and this was to buy an AM daytime radio station in Harlem. . . .
(W)e were fortunate in that one of our shareholders had saved the life
of Bunny Berkley, who was then the \[child of the\] Chairman of the
Board of Chemical Bank, and that's how we got additional financing. But
it was just dumb luck. He \[the shareholder\] was a counselor at summer
camp and he had saved the life of the \[child\] from drowning, saved the
life of this man's child. It's kind of extreme access. (PSutton, pp.
1-2)

Mr. Sutton's poignant story illustrates the extreme lengths to which
minorities had to go to secure financing almost 30 years ago. These
barriers compare to those faced by minorities today as a result of:
market consolidation, the lifting of the ownership caps, the repeal of
the tax certificate program, the issuance of the [Adarand]{.underline}
decision, and the ending of FCC minority and women ownership policies
(comparative merit, installment payments and bidding credits).

Greg Davis, a Black radio licensee, who also has 25 years of experience,
had a more difficult experience:

As minorities we found it -- I found it extremely difficult, and even
with my 25 years in the business, and even proven record having been
there for 12 or 15 years. It was still very difficult to get
conventional financing. So we ended up having to do venture capitalist
money and so forth. So the cost of capital has always been a very strong
deterrent for minorities participating in the broadcast industry,
whether it's wireless, cable, television, or radio...I want that to be
very clear, that it's not only the accessibility, but it's also the cost
of doing business. It's been extremely difficult for us to come ahead.
(GDavis202, pp. 4-12)

Richard Weaver-Bey, an African-American who owns both a real estate
company and his radio station, which he acquired in 1981, had put
together a team of highly visible partners - three lawyers and a doctor.
" ... and still the bank would not lend to us." The bank said "they were
doing what they called asset lending, and they questioned whether or not
the radio station had the ability to sustain or to repay the loan."
Ultimately the bank agreed to do the loan, but only "if it would be
guaranteed 90% by the SBA." (RWeaver-Bey171, p. 7)

Jeffrey Hutton, a White small radio station owner, had a markedly
different experience with his bank. While Mr. Sutton and Mr. Wolf, with
their visibility in the community and record of business success, were
deemed uncreditworthy, Mr. Hutton got his loan, two years later in 1983,
based on the fact that he was an *"upstanding citizen of the
community."* The contrast is stunning.

I went down to the bank \[in 1983\] and got a loan, and they gave me a
loan based on two criteria. Number one, the collateral I was able to put
on the table and number two, my personal credibility because I was
employed as a vice president of a local hospital in town when I went to
my bank. And so as a result I was what they call an upstanding citizen
of the community and you know, served on a United Way board and things
like that so they were really, as I was told later on, they were loaning
the money to Jeff Hutton because of Jeff Hutton not necessarily because
they thought that this business venture was going to fly and make money.

(F)or a period of time when banks were in trouble back in the '80\'s,
they didn't want to loan money to radio stations because it was too
speculative. But I've been fortunate, both of the banks I dealt with
have done so because of me and they understand my work ethic and how I
do things. . . . No, I never had problems with banks. I mean every time
I've gone to the bank and asked them to do something they've done it.
(JHutton383, pp. 5, 6, 7)

##### The Administrative Cost of Capital -- Extraordinary Efforts to Secure Loans

Several minority interviewees indicated that it took extraordinary
efforts to get loans. They were sometimes turned down by several banks;
they may have been treated disrespectfully by bank officials; they may
have been unsuccessful and had to finance by other means; often their
loan agreements required different or more stringent terms; and their
deals received more detailed scrutiny.

Art Gilliam, a Black radio owner who after visiting 10-15 banks in 1977
was able to get his loan, nevertheless, considers his experience a
fortunate one.

> *Well, we were very fortunate.... (W)e went to really, I guess ten or
> fifteen banks, and most of them said no. And many of them right off
> the bat without looking at our proposal, but we did have relationships
> with some of the banks and the one that had financed \[us\] initially
> indicated they would do it along with the minority bank which we'd
> done a lot of business with in the interim. (AGilliam117, p. 11)*

Hispanics have had similar experiences with banks to those of
African-Americans, as Manuel Davila ("Daddy D"), a second-generation
Hispanic radio station owner and on-air personality, shared.

\[W\]e went to several banks \[over two decades, from 1974 to 1996\] and
they all turned us down. . . . The banks won't lend you money because
\[they believe with Mexicans\] all you do is drink and you all beat your
wives and you have a lot of kids and you all have tattoos and you wear
gold chains.... \[We\] couldn't get money. (MDavila128, p. 26)

James Wolf, Jr., an African-American broadcaster, tells us further that
he *"... got turned down by every bank, every traditional institution.
We were redlined and I started to sue -- redlined. And we had proven
that there was nothing in our history that suggested that we were going
to do anything other than \[be\] good stewards of the money we were
loaned at the time. I got rejected all the way up until 1996, 12 years
later." (JWolf281, pp. 20-21)*

Many minority interviewees had similar experiences of being turned down
by several banks, and in some instances despite their efforts to comply
with the banks' requirements and suggestions. For example, Greg Davis, a
Black radio licensee recounts:

> *I went to almost nine different banks in various parts of the
> country, and my story was pretty -- I'll tell you straight to the
> point. It was a very long, tedious process. And initially I would go
> to the bank, and one of the banks would tell me your business plan
> isn't thorough enough. And I'd correct everything that they would tell
> me. I'd go to the next bank and the next bank would tell me that you
> don't have enough experience. I would correct that ... I would tell
> you that it was very, very difficult initially to raise the capital to
> invest in our company...It took six years. I started in 1980. No, they
> never loaned me the money.... I'd go back and correct it and they
> would say, no, we're just not interested for a lot of reasons. So
> access to capital has been a tremendously difficult task, at least
> from my perspective, in trying to start a company...(GDavis202, pp.
> 4-12)*

Certain minorities had to take out home equity loans in order to finance
the purchase of their communications property. For example, Leodis
Harris, a Black male radio licensee, recalled the following:

> *The only way I was able to do it was to go into my home equity. I had
> some small purchase price, but the balance of it I had to get from a
> home equity loan.... Especially with a new owner having no broadcast
> history, it was just almost, well, it was impossible. I had some big
> plans when I purchased the station, market studies and kinds of
> proposals for sales and so on. However, they were based on my being
> able to get a loan, a bank loan, I was trying to get a loan of I think
> \$585,000 or something of that sort. But of course I ended up not
> being able to ever succeed in getting that loan.... With the station
> not up and with me not being able to show any kind of history or any
> kind of prospect except my hopes and dreams, it was difficult and all
> the banks turned me down. (LHarris276, pp. 1-4)*

Even though some minorities had access to some personal capital, this
access did not preclude discriminatory treatment. For instance, Nancy
Waters, a black female radio licensee, recalled the following:

> *When I went looking for money, you know, all the local banks had
> turned me down. That was back in '79. It didn\'t matter that my
> husband had \$200,000 in profit sharing at the local bank. They said
> that I didn\'t know broadcasting, and I was way over my head.
> (NWaters178, p. 5)*

Some banks have treated minority applicants as if they were
unsophisticated borrowers, irrespective of their level of
sophistication. For instance, Joyce Banks, a Black female radio
licensee, recalls that:

> *\[I\]t was just very difficult to start the business with advertising
> being very tight. The banks ... we had no history of broadcast
> experience, and though a lot of the bankers knew me, they still knew
> me in a light that didn't have anything to do with the radio business.
> So as we put together loan packages some of them were quite insulting.
> We would come ... my husband accompanied me ... we would go to some of
> the banks, and they would look at you like you need to put together
> this or that or the other. We knew what to put together. And it would
> surprise them, and yet they would not consider it because we were
> asking for quite a bit of money. Again, we were asking for six hundred
> and some thousand dollars for a start-up business, and they were not
> willing to take the chance. Well, just because some of the
> conversations, and I sincerely mean, were insulting. "Now, well, you
> don't need to ... well, you do have to put a plan together; we can't
> take things brought in a shoe box. You know, people will bring ..."
> Not even noticing that there was a bound book with a planned budget
> and all of that sitting right in front of them. . (JBanks175, pp.
> 7-9)*

Jim Winston, Executive Director of the National Association of
Black-Owned Broadcasters (NABOB), relayed the fact that minorities often
experienced more stringent loan terms than their non-minority
counterparts.

> *There was always the ongoing problem being a minority buyer, the
> terms were always stiffer. If you could get a lending institution to
> talk to you, the terms they came up with were always stiffer, so that
> minority buyers often found themselves having to sign a personal
> guarantee to the bank when they borrowed money against the station.
> So, essentially, they would take a security interest in all the assets
> of the station, and would still come to the borrower and say, I want a
> personal guarantee from you on top of that. There always seemed to be
> the stories of guys who were buying their second or third or fourth
> stations, who were still being required to do personal guarantees.
> And, nobody was seeing anybody else's bank loan documents. But there
> was this view that the restrictions were -- that personal guarantees
> stayed with our guys longer. (JWinston502, pp. 24-25)*

Some minorities indicated that the banks over-scrutinized their
transactions in comparison to their non-minority counterparts. Pluria
Marshall, Jr., Black male radio licensee, shares his experience.

> *I know friends of mine that are in the business that are able to go
> in and get deals done, and if I come in with the same kinds of deals,
> my deals get scrutinized ten times tougher... And I'm a real small
> operator. So it doesn't really matter how good, how well you can
> function in the business, I mean it just doesn't matter. A Black man's
> gonna have problems and that's it. (PMarshall115, pp. 9-10)*

##### Limited Access to Capital: Banks Don't Understand Broadcasting

Several interviewees observed that yet another obstacle to the access of
capital is that banks simply do not understand the broadcasting business
and are, therefore, reluctant to loan money to loan applicants
attempting to start a broadcast business. Bud Price, a White male radio
licensee, recalls the following:

There were two banks in town. One bank we filled the application out and
he said, "You know, if this was a hog farm, we know hog farms. But we
don't know anything about radio, so we're going to turn you down." So I
went to the bank across the street and they looked over the application
and he said, "You know, the guy across the street who's president of the
other bank told me that he doesn't know anything about radio and neither
do we." And I said, ..."What do you need to know besides my willingness
to pay, my cash flow, my ability to pay, my credit history?" He said,
"Well, you know, if we have to have a fire sale and you go under, we've
got to get that money back and we don't know anything about radio."...
None of that mattered when it came to financing a radio station, because
it was a unique, one of a kind animal in the community and in the
region, and they didn't know anything about it; and there was no access
to typical lines of credit. You know, the only people I know talking of
wild success stories are on the corporate level, that are buying a lot
of radio stations, dumping a lot of people, curtailing the services,
operating it much leaner and, you know, trying to make a little profit
off a lot of stations rather than a living wage off of one station.
(BPrice243, pp. 6, 45)

The primary asset of a broadcast company is generally its cash flow from
advertising revenue. It is not unusual for smaller broadcast companies,
especially in smaller markets, to encounter difficulties in acquiring
debt financing, as they are often seen as higher-risk borrowers based on
the size of their operations and their ability to generate cash. These
companies rarely own the hard assets -- buildings, equipment,
inventory - that banks generally use to collateralize business loans.
Furthermore, since a broadcast license is subject to FCC and public
scrutiny upon regular renewal every eight years, banks do not consider
the license adequate or appropriate collateral.

Absent these business assets, a banker often requires the licensee to
secure the loan with other personal assets such as real property,
marketable securities or compensating bank balances (e.g., stocks and
bonds, treasury bills, certificates of deposit, etc). An alternative or
addendum to personal assets as collateral was often an increased
interest rate on the loan to compensate the lender for the perceived
additional risk. In the absence of business or personal assets,
licensees were largely unable to secure loans for either acquisition or
working capital purposes. The more comfortable the lender was with the
borrower, though, the more he was inclined to look to the operations
(cash flow) of the business rather than to hard assets for his security.

Our study found that while historically small broadcasting and wireless
telecommunications businesses have had difficulty gaining access to
affordable and sufficient capital, discriminatory practices in the
banking industry have disadvantaged minority- and women-owned businesses
more so than White male-owned small businesses. Additionally, when
required to pledge personal assets as collateral for loans, minorities
are frequently confronted with an added market entry barrier due to
historic disparities in intergenerational wealth transfers. If
mortgaging the proverbial farm is necessary to secure a bank loan, a
minority's farm, if they have one at all, is likely to be smaller than
that of their White counterpart.

S. Jennell Trigg, a communications attorney, highlighted the fact that
the Small Business Advisory Committee *"show\[s\] that minorities have
less collateral and less personal equity before they entered into
business than non-minorities. So they\'re always starting off at a
deficit when it comes to cash. And the longer it takes to acquire the
property, the more legal fees. And again, at one point, you reach a
point of no return. If you give up, you\'ve got nothing to show for
it... You\'re pouring...bad money into good. (JTrigg536, p. 30)*

Charles Cherry, an African American who acquired his first station in
1988, summed it up this way.

\[Banks\] don't understand broadcasting and they look at it strictly
\[on the basis of\] collateral . . . . And then, of course, debt is
always tough because if you go to a conventional lender they don't
understand how radio works. . . (t)hey're looking at hard assets . . .
and we've had people say, you know, we don't lend on cash flow. \[But
it's my cash flow that's going to pay you\]. (CCherry262, pp. 3, 19)

Robert Fink, a White small town radio broadcaster who bought his station
in 1998, echoes these comments when he says, ". . . *(Y)ou go to the
small local banks, like we would have here, and they'll at least be
polite and let you make a presentation, but they deem it too risky
because they don't understand the \[broadcasting\] business.*

Amador Bustos, President of Z-Spanish Broadcasting, a successful
Spanish-language broadcaster with 33 radio stations nationwide who first
went into the radio business in 1992, had similar experiences when he
was first starting out.

\[We went to your traditional banks\], the Bank of America, the Wells
Fargo, the people that we knew. That was the only banking relationship
that we had at the time. Being in the broadcast industry and not in the
finance industry we didn't know any investment bankers or anybody in New
York or anything. So we just went to the traditional commercial banks.
And since broadcasting does not carry a lot of assets -- it's just the
value of the franchise and the license -- they did not understand that
kind of financing. They didn't like the collateral of the broadcasting
industry. (ABustos12, pp. 10-11)

Minority broadcasters might be uneasy about educating the banks about
the broadcast industry in order to get a loan, probably because banks
could use the information to the minority applicant's disadvantage. For
instance, Pablo de Jesus Colon, a Hispanic male radio licensee, recalls:

> *In 1982, when the \$400,000 note ballooned, and we didn't have any
> money, ... we went to a couple of banks, I'd say, one bank, they took
> forever to give you a no answer. Yes, we had the Fleet Bank. OK, and
> the Fleet Bank told us that I think it was a troubled credit, \[and
> they\] couldn't give us the loan. The other bank was Founders Bank,
> and we were a little upset at this bank, because we'd prepared a
> 5-inch binder book with all the information on our radio station from
> the beginning, in 1989 to 1993. And when we talked to the bank, to the
> officer at the bank, he was very excited, because we had given him so
> much information about the radio industry and he came out and
> announced to us that he had never done a loan for radio, for
> broadcasting before. But he had another Anglo group that was trying to
> get a loan from the same bank, and he said, now this information that
> you have given me, gives the opportunity to read and get myself
> knowledgeable about this industry, so that I can work out these loans.
> But the other people got the loan and we didn't. So we prepared this
> man with enough information to make a right decision and the other
> loan for the Anglo group, and our information was not good enough for
> us to get a loan. (PColon244, p. 8)*

##### Limited Access to Capital: Broadcast Station Assets Undervalued As Collateral 

Even when owners who were known in the community had businesses with
sufficient hard assets to use for collateral, as was the case for
African-American Erskine Faush, minority owners were still not
successful in getting bank financing.

(E)ach of us, my partner and I, the two Blacks, we put in \$40,000,
which was all we had. \[We went to\] (a)t least three or four \[banks\]
and were getting virtually the same story. In some instances, I can
remember a couple of them at least going through the motions of coming
out and looking at the\[station\] property \[which we owned\].... This
station had some real assets, its studio and the property on which the
studio sits. So it was not just the intangibles that are associated with
the broadcast industry. Therefore, there was some real tangible assets
and the station had enjoyed some years of operation so it had a track
record in terms of its credit rating and paying its bills and that sort
of thing.

We were both indigenous to the soil, to the extent that we also had
personal records. In addition to being a broadcaster I am a minister and
have pastored the largest Black Methodist church in this area. And I
retired from that after 20-1/2 years there. So we were not new or
novices, and we had personal credit records, you know, if personal
guarantees were necessary. So everything was there, I would think, by
any yardstick or measure in a general situation, that would qualify us
for the loan. \[And still we were unsuccessful.\] . . . (I)f you measure
us by any yardstick that you measure the general population, I could
find no reason not to justify granting the loan. So what else is left
\[but discrimination\]? (EFaush238, pp. 3, 4-6)

William Saunders, a Black FM station owner, who acquired licenses in
1971 and 1983, had similar experiences. He owns free and clear 34 acres
of land "right on the water" which is probably worth 20 times the amount
of the loan of \$250,000 he is seeking, "but we can't get \[the loan\]."
His waterfront property is somehow considered inadequate collateral to
provide comfort to the banks he is dealing with. Due to delays in
finding money, his business has been put into receivership.

Even when some minorities had appraisals of their broadcast properties,
banks sometimes still refused to loan them money.

> *... (W)e did go to a couple of banks that had loaned money to radio
> stations. We found that out and approached them because we weren't
> talking to a new entity. They would tell us that the collateral in
> this type of business was ... that we didn't have enough to make them
> comfortable, even when we had letters from -- one from an appraiser,
> one from a person who had offered to buy us before we even started.
> And the appraisal was saying that the license in itself at that time
> was worth about \$800,000... (JBanks175, pp. 7-9)*

##### Limited Access to Capital: Personal Assets as Collateral

Since broadcast lending is based on cash flow versus hard assets, it was
not uncommon for license holders to have to secure their loans with
other personal assets. Michael Carter, a White radio station owner who
first acquired a license in 1977, told us that *". . . \[he\] had to
mortgage a farm"* in order to provide collateral to cover his loan *". .
. because \[the banks\] don't value the FCC licenses. It was terrible."
(MCarter230, pp. 2, 3, 4)*

In talking with Dale Gehman, a Native American radio station owner who
acquired his license in 1991, he tells of how his father mortgaged the
family home and put up the assets of their furniture businesses to get a
loan.

\[My dad\] mortgaged our house ... for the tower site property, and then
the assets of the furniture business \[which was\] the only way the
leasing company would \[provide the loan\] -- I mean, at least he could
help pay the payment if we couldn\'t. And, of course, he never had to .
. . I guess looking at any other minority trying to get in those days,
in the early \'80s there, he was hopeless. I don\'t see how anybody
could have done it with the banks. The banks are just impossible. \[We
also\] tried the Small Business Administration and really got nowhere
there. (DGehman132, pp. 10-11)

But for Native American tribes, gaining access to capital is very
complicated because of their unique status. For instance, Jim Casey, a
communications attorney, states:

The primary barrier, not surprisingly, is capital. Tribes have a very
difficult time raising capital, because of the nature of their assets.
Their assets are typically held in trust by the Federal Government. They
cannot be pledged in a financing arrangement. So they start out at a
disadvantage in getting financing. Another difficulty they have with
financing is their sovereign immunity status. They are often put into a
position to waive their sovereign immunity in order to get a financier
to work with them. (JCasey535, p. 6)

William Saunders, a Black radio station owner, talks about his struggle
to acquire much needed capital for his two stations from 1971-1983 and
everything he put at risk to do so.

I ended up with the two stations and really could not get the capital
that I needed to make it run. I needed operating money, I needed stuff
for promotion, I need a lot of things, and we just couldn't get any of
it. And we went into a deal, that happens to minorities most times, I
bought 49% of the FM station and then my partner, or the White guy that
I was in the partnership with, had a real bad reputation, but a lot of
stuff was against him that I didn't know and I couldn't find out even
from the White friends that I had. They all said he was a good guy. But
he wasn't.

And eventually, the bank attempted to foreclose on him. But \[they\]
allow\[ed\] me to take over the note, because that's the only way I
would have been able to get money. They would not loan me the money but
if I would take over what the station owed, which was about \$631,000.
And what I did, like a fool, I signed on as guarantor for it, and as a
guarantor, it brought in my AM station, and it brought in my house and
my real property and everything, and the bank got a receivership on it
for all of my real property and the two stations. (WSaunders163, pp.
4-6)

When evaluating loan applications, lenders look to the cash flow from
the business to determine borrowing capacity and to adequately cover
debt service. Accordingly, they will often ask to review a company's
business plan and cash flow projections. If lenders believe the
projections to be too optimistic, they will discount (reduce) them. As a
result, the amount of money that the loan applicant can borrow, if they
can borrow at all, is less. For radio stations, cash flow comes from
advertising dollars. Reflecting the frequent experience of urban radio
broadcasters with discriminatory practices in the advertising industry,
it was not uncommon for licensees who had urban-formatted stations to
experience discounting of their cash flows by lenders. Charles Cherry,
an African-American radio licensee, highlighted this point.

The bankers do what the industry does, which is they discount -- if you
are trying to go into an urban format, they discount the buying power,
the purchasing power, of the market that you're trying to serve.
(CCherry262, p. 14)

The discounting of minority-formatted stations is worse than would
appear at first glance. If banks discount the buying power of minorities
and advertisers diminish cash flow by also discounting advertising buys
and/or refusing to advertise on minority formatted stations, the
broadcast property is undervalued in at least two respects. Accordingly,
debt capital is all the more difficult to obtain.

##### Limited Access to Capital: Use of Personal Capital in Lieu of Bank Debt

Several interviewees shared how they had to get creative with raising
funds for the purchase and operation of their stations. Many used cash
savings and proceeds from the sale of other personal and business
assets.

Jose Molina, a Hispanic owner of both radio and television properties,
tells how in 1970 he purchased a one-bedroom house in an undesirable
section of Hollywood, California for \$25,000, with \$3,000 down. Most
weekends, his buddies and he, for the cost of lumber, worked on the
house until it grew to four bedrooms. He then refinanced his mortgage to
pull \$80,000 out of his house and combined that with \$70,000 of
private equity to make his \$150,000 down payment. *"The lady \[seller\]
carried \$500,000 in a 10-year note. So I didn't have to go to banks
because I knew I wouldn't qualify. She carried the paper. . . . (T)his
person was a cream puff. . . . (T)he time period that she gave me was a
godsend. Ten years." (JMolina121, pp. 9-10)*

Since many minorities were not able to secure bank financing, they had
no choice but to sell or mortgage other holdings to generate the cash
needed to buy or build out their stations. In order to buy his low power
television station in 1983, Eduardo Cabellero, a Hispanic licensee,
tells us, *" . . . the money I raised has been mostly by virtue of
selling my business and getting some personal loans, not necessarily
business loans, but my personal loans and giving it to the company."
(ECaballero123, pp. 12, 13)*

While White male-owned small business licensees typically had an easier
time securing bank financing, they were not immune to having to pledge
assets in excess of those owned by their stations and invest significant
capital themselves. Robert Fink and Bob Darling, White radio station
owners who acquired their station in 1998, had to put in 75% of their
own money and borrowed the remaining 25%. "I mean they wouldn't take the
station as collateral. I ... had to put up ... everything I had \... my
home, I had some rental properties, and I had to sign those over.
Literally everything I owned." (RFink235, pp. 12-13)

John Tupper, a White TV station owner, also used his own capital to
finance his business in 1995.

We probably could have gotten funding had we personally signed for the
loan and provided some other collateral to back up any debt that we
would have incurred to build the stations. But the assets themselves
were not bankable collateral to stand on their own. . . . So we decided
to bank it ourselves instead of paying interest to somebody else when in
fact we would have had basically the same assets tied up either way as
collateral. (JTupper216, p.6)

##### Women Experienced Discrimination as Well

Historically, many women were of the opinion that banks were
uninterested in helping them finance their acquisition of a
communication property. For instance, Ruby Unger, a White female radio
licensee, stated:

> *It would seem real clear to me during that whole process and in my
> years with AWRT \[American Women in Radio and Television\] and other
> women's groups and small business women's groups -- it really did make
> a difference in those days if you were going for funding and you were
> a woman, boy, you had a tough, tough road, a very big, uphill battle.
> Yeah. It just -- you know, when you're sitting across from a banker
> who's a man -- if you're a White man you have a much better chance,
> and obviously all the numbers bear that out. I mean, it was something
> like one or two percent of all of the radio and TV stations in the
> United States were owned or managed by women. I mean, come on.
> (RUnger367, p. 10)*

Similarly, Bernadine Nash, a Black daytime AM station owner whose late
husband bought their Boston radio station in 1980, offered her
experiences.

I think \[being a one-station business owned by a Black female has\]
made it virtually impossible \[to raise outside capital\]. . . .I mean,
I think that certainly being small is a distinct disadvantage, and I
think that would be the case for anyone, regardless of whether or not
they are male, female, Black, White, whatever. Just because the tenor
within the industry is that bigger is better. However, the additional
burden of being female . . . (Y)ou know, the reality is that when you
are owning and operating your own business and you're a female and
you're small . . . and a minority, they don't take you seriously.
(BNash118, pp. 11, 14)

Francine Rienstra, a White station owner in Arizona, spent an
exceptionally long time in the application and comparative hearing
process from 1987 to 1993 using up a great deal of her money to wage
that fight. As a result, she had to go into a Local Marketing Agreement
("LMA" -- alternatively referred to as a Lease Management Agreement),
giving someone else the right to use her license and broadcast
facilities for their own benefit in exchange for a monthly fee.

\[We went after the LMA in the first place because\] it was the need for
funding. No one wanted to fund a radio station. No banks in town wanted
to fund a radio station. . . . I did talk to venture capital people, and
a lot of the people that I talked to only wanted to do large deals. They
didn't want to do a small deal because, really, I didn't need a whole
lot of money to get the station up and running. I was asking for about
\$1 million. . . . And I did try that route \[talking to the SBA\]. I
did talk to ... in fact, I talked to some of the national SBA people,
and they would not lend to broadcast or print industries. (FRienstra360,
pp. 17-18)

When Ms. Rienstra, who had put together an all-woman team to apply for
the license, went to the banks she had these experiences which were
compounded by the fact that she and her partners were women..

So, I put my group together. We had pooled our money together. We had
put together a business plan, and I had started meeting with three to
four people for financing through local banks here. And I had gone to
three banks, the first of which was one of the larger banks in town, and
I literally got laughed out of the office. Because they took one look at
me and assumed that I didn't know what I was doing. So that was the
first bank that I went to. The second bank that I went to insisted that
if I were going to try to get a loan or even to apply for a loan, that I
needed to have, not only all of my partners' signatures, but I had to
have all of our husbands' signatures. And we were an all-women group.
Now, granted we live \[in a community property state\]. But by the same
token, I don't know that they would have asked a man that. That was the
second bank. And the third bank said that they do not loan for such
risky ventures. (FRienstra360, p. 1-3)

Bennett Kessler, a White female radio licensee, relays a story of how
the banks were particularly unhelpful to her because she was a woman.

> *...I'm about to get my first bank loan. But the banks were very
> unhelpful... I will say that the banks I felt were not helpful to
> women. That was my general impression and also, the story that I heard
> from other people. ... But it is my general impression, it has been my
> general impression in this area, which I guess you could call kind of
> a redneck area, that a woman named Bennett is really not going to do
> that well. I try to explain that it was my great-great grandmother's
> maiden name. That helps a little bit... (BKessler313, pp. 13,18)*

Patty Ruiz, a Hispanic female television licensee, states:

> *I think it was a lot easier for a man to get financial backing than
> it is for a woman. Oh, yeah. I think those barriers are finally coming
> down a little bit, but at that time, you know, seven, eight years ago
> that was tough*...(PRuiz452, pp. 14-15)

Not all minorities and women had the same difficulties highlighted
above. Some were in the right place at the right time. Johnny and Opal
Shaw, Black radio owners, gave their bank an A+ \[although they also
spoke of the challenges in getting their loan\]. Originally, Mr. Shaw
was general manager of the radio station he ultimately purchased in
1987. The station owner got into financial trouble and offered to sell
the station to Mr. and Mrs. Shaw. They financed the purchase of their
station with personal savings, seller financing and a loan for
approximately 60% of the purchase price from their local bank.
Furthermore, when it was time to upgrade and buy new equipment, their
bank was willing to refinance their loan. (*DSutter205, p. 5)*

Mr. Shaw feels that his ability to get a loan quickly to purchase a
station from his boss was the result of the prior owner putting in a
good word for Mr. Shaw with the bank. *"*... *I was a little bit
surprised \[at their willingness to loan me money\]. I think \[the
sellers\] had something to do with me probably getting that loan as
quick as I did because -- you know, I don't have evidence of this, but I
want to feel like they said, hey, look, we really need to sell this
station, and this guy does have the capabilities of running it. He's had
the experience and so forth, and we need to get it off our hands, and we
need you to help him get it." (JShaw185, p. 3)*

He went on to give his bank high marks for the opportunities he was
given, especially because he was a minority.

I have to say at this point in time that I think, as an African
American, I would have to give my bank an A+. My bank has worked with me
very well throughout this whole process. But we've always been
responsible to them. But at this juncture I think they realize that it's
okay, you know, they can trust us and we can trust them. So our bank has
done well. (JShaw185, pp. 17-18)

##### The Importance of An Informal Industry Network to Success in Acquiring Capital

A number of study participants told us how important it was to have
contacts with lenders and equity investors along with personal financial
sophistication to help overcome the market entry barrier of limited
access to capital. Tyrone Brown thinks that *" . . .today, finance is
the most important thing. The most important thing is you \[have to\]
understand finance because you \[have to\] put together a financial
package and not only understand it but you need contacts in the field."
(TBrown510, p. 13)*

John Thomas, a Black radio licensee who acquired his station in 1992,
believed that his previous banking experience and relationships made all
the difference in his ability to eventually get a loan for his station.

(M)y banking experience and the relationships that I had developed over
the years in the banking industry helped me tremendously. I did have a
small amount of capital, but primarily all of the money was from bank
financing. . . . \[But\] it was \[still\] difficult because, again, I
came in, I did not have any experience operating a radio station.
Second, the station was in bankruptcy, so it was very, very difficult to
convince people that it was worth putting money behind. But I was
persistent and I just kept looking for ways to put the deal together,
and eventually it happened. (JThomas277, p. 4)

-   **White Males had Greater Ease and Success Securing Debt Financing**

Like White radio broadcaster Jeffrey Hutton above, several of the White
male licensees we spoke with had very different experiences compared to
those of their minority and female counterparts*.* Wireless license
owner Dennis Miller, who is White, has had positive experiences with
banks helping to fund his company's expansion, even going so far as to
have lenders eager to provide capital. Mr. Miller shares *"\[As we have
grown, raising capital has been\]* *very easy to do.* *We've gone to
traditional banks. Real Telephone Finance has been providing our
financing now for the last three years. Part of that was CoBank, but we
have investment bankers there, very anxious to provide us funds. Well
actually, we've grown and we've been very successful in our enterprise
here, and so as you get more successful, you get on more radar screens.
(DMiller147, pp. 5-6)*

Trent Boaldin, another White male wireless license holder who acquired
his licenses from 1976-1999, similarly had a relatively easy time
raising money for his new venture. Unlike his female and minority
counterparts, who typically approached multiple lenders and still
received very little, if any, assistance from bankers to ensure their
success in acquiring a loan regardless of their backgrounds and personal
financial strength, his bankers were helpful in suggesting to him how he
might improve his chances of getting a loan. In addition to their
wireless holdings, his family also owns cable television and wireline
telephone in his rural market.

> *We approached three lenders. . . They had some suggestions for
> changes to make to the assumptions and improvements to make in the
> plan. So we incorporated the various suggestions from each one that we
> talked to, revised the plan, and sent it back. . . . (A)nd then at
> that point we got the indication from one of them that they were
> willing to go. . . . We're pleased with what we've got. (TBoaldin307,
> pp. 9, 10)*

##### Increased Cost of Capital for Small, Minority- and Women-Owned Businesses

One way for a banker to mitigate the risk of lending is to charge a
higher interest rate for those loans that are perceived to be more
risky. Business size, type, operating history, and age impact perceived
risk as does the track record and personal creditworthiness of the
borrower. Often for small businesses, the higher interest expense
noticeably impacts their viability and opportunity for growth. For new
businesses, the increased cost of capital can render their business
plans unworkable.

When asked how the size of his business and the fact that it was a new
venture impacted his cost of capital, Mr. Boaldin responded, *"I don't
know what the exact difference would be, but I imagine it's very
significant, yes. . . . \[The interest and terms that we got\] obviously
fit into the business plan. I think it's just the nature of a small
business. That's one of the down sides of a small business. But, you
know, small business has lots of upsides. That just happens to be one of
them that's always an issue. (TBoaldin307, pp. 9, 10)*

The higher cost of capital for small businesses was also noted by other
study participants. Anthony Chase, an African-American radio and
wireless licensee who acquired his licenses from 1992 to 1994, says that
a higher cost of capital for small businesses comes with the territory,
and you just have to learn to work with it.

. . .(M)y sense is that the \[cost of capital\] is always very high for
start up businesses and it's certainly no exception in my case. It's
very high. It's a real barrier to entry in the business. And you know,
you just \[have to\] suffer through it and hope that your first deal
doesn't necessarily become your last because you have to pay pawnshop
rates to get into the business. (AChase119, p. 6)

Minorities told us that they perceived they were paying a premium for
capital, perhaps more than their White male small business counterparts.
Mary Helen Barro, a previously successful Hispanic radio broadcaster who
acquired licenses from 1987 to 1992 and is now in bankruptcy primarily
because she was not able to obtain adequate financing, tells us that she
*"had a very difficult time raising capital. I was a minority woman. If
I did get \[the money\] it was very expensive. I had to go to venture
capitalists; the banks just didn't want to assist us at all."
(MHBarro190, p. 3)*

Dorothy Brunson, one of the first Black women in broadcasting and a
current owner of a UHF television station which she started operating in
1989, also had to pay a higher interest rate for her borrowed capital.

Every time we've had to borrow money, we've had to borrow it at 15%, 16%
interest rates because the history and the growth of the station and the
level of profitability was not there in the early stages. So people
still look at us as high risk. . . . And so you, you're constantly
paying extra dollars to be able to do the basic things that most people
can do with 5 or 6 or 7% dollars, and the same dollars would cost us
12%, 15%. (DBrunson105, p. 9)

As discussed, interest rates are reflective of the perceived risk
involved in the transaction. Charles Cherry, an African-American
licensee, thinks that *"race probably adds an additional risk factor,
but \[he\] can't say that that's the sole sort of determinative in these
kinds of deals.... \[His\] gut tells \[him\] that he's paying a high
price \[because he is a minority\]." (CCherry262, p. 13)*

##### Minority Small Business Investment Corporations (MESBICs)

Those minority study participants who had to deal with Minority
Enterprise Small Business Investment Corporations (MESBICs)[^27] shared
their negative experiences with the process. W. Don Cornwell, an
African-American who is a former senior executive at the investment
banking firm of Goldman Sachs and current President of Granite
Broadcasting, a publicly-held television broadcaster, told us his story.

> *Oh, it\'s awful \[dealing with MESBICs in 1988\]. You know,
> disorganized and not reliable as investors. We had a group of MESBICs
> that committed to put up about \$2 million in the group. I did not
> want that in the deal because all the experiences I had had with my
> prior life of helping other small guys get financed, because I used to
> do that just as a sideline on a pro bono basis when I was \[a senior
> executive\] at Goldman \[Sachs\]. And my experience had always been
> that these guys were not good for the money, but I was \[approached\]
> by a guy who ran one of these, who I had known, and I got a lot of
> smoke blown at me, how I was the kind of guy they really needed to
> back, and you know, this was going to be professional and
> blah-blah-blah.*
>
> *Anyway, the long and short of it all is that they waited until a
> month before it was time to close, and then they started imposing
> demands, and I conceded to one of them which was a pricing change,
> which was in their favor, and against my best interest. But then they
> started to try to take, in effect, control of the company. And to be
> candid with you, one, I wasn\'t going for it; but, two, I had a couple
> of my other investors, including Goldman Sachs, basically tell me that
> they wouldn\'t be in the deal if these terms were put in the deal \[by
> the MESBIC\]. So it was just not a good experience.*
>
> *I\'ve been told that this industry has cleaned its act up a little
> bit, and it\'s better. Some of the people who were part of this group
> after I basically kicked them out \-- because I did, they were
> shocked, because they\'re used to having people who are frankly on
> their knees, and because of my background, I knew how to raise
> capital. And so I kicked them out, which shocked them. (WDCornwell103,
> pp. 22-23)*

Pierre Sutton also had an experience with a MESBIC in 1971 that was more
costly than it might have been with a different lender or if he had not
had to use a MESBIC, especially since he had to give up equity in his
company to get the financing. Now, however, with the company's track
record, his experience has changed.

Initially I don't think \[my cost of capital was the same as for
non-minorities\]; I know they weren't. My cost of capital was high
getting started because \[the MESBIC\] said I had to give up points, I
had to give up 10% of the company. I eventually bought those back. In
fact, I got that back before we went out and bought additional radio
stations. But, no I had to give up points, I had higher interest rates,
because it was a MESBIC. I was getting charged what banking business
would consider usury rates. . . . but I can't say that now, I know that
now we're not getting the same kind of treatment either because we're
better, we're more established, having been in business 20 years, 25
years, we know what we're doing almost 30 years. And we have a good
track record. We're just not going to take it any more, you know.
(PSutton110, p. 14)

Merrill Charles, a Black male radio licensee, is of the opinion that
some MESBICs may take advantage of minority borrowers.

> *I don\'t want to characterize all of the MESBICs ... but I think it
> was very clear that a lot of these organizations that were designated
> as, you know, SSBIC\'s, and you know, got the SBA certification and
> all of that to loan money were definitely taking advantage of their
> opportunity to supply funding for people. I mean by taking out heavily
> on warrants and kickbacks for them as a result. (MCharles458, p. 9)*

-   ***Increased Station Prices Brought on By Consolidation Further
    Limits Access to Capital and Raises Barriers to Entry***

As our study participants told us, capital has historically been
difficult to raise for small businesses. It appears that it has been
nearly impossible for minorities and women. Lacking access to capital,
the ability of these businesses to enter the broadcasting and wireless
markets has been curtailed. With the consolidation of the broadcast
market, the economics of the industry have changed, resulting in
significant implications for small, minority- and women-owned
businesses. The most notable change is the dramatic escalation in prices
that apparently has made it nearly impossible for them to either acquire
new stations or enter the industry for the first time.

The restructuring of the market, with its increased station prices, has
also necessitated a restructuring in the sources of capital needed to
finance purchases. For those needing cash to buy stations, as compared
to having stock to trade, the bar has been raised just that much higher.
Frank Montero, former Director of the FCC's Office of Communications
Business Opportunities (OCBO) offers this perspective.

. . . (P)rices for stations and the like have gotten so high that while
there is still difficulty in getting access to capital, at the same
time, you know, the brass ring is pulling farther and farther away from
them because the prices are going up faster than the supplements to
capital are appearing. And, likewise, what's tied into this is that
lenders or potential investors see what the dynamic in the marketplace
is, namely that markets are being carved up into larger but fewer large
competitors, and so they are becoming more and more reluctant to, absent
some sort of a mandate, invest in these new entrants to the market when
they know that this new entrant is essentially going to be a relatively
small player competing against larger and larger competitive players in
the marketplace and that the viability of that venture is questionable
as to whether they are really going to be able to succeed. (FMontero509,
pp. 9-10)

With stations now selling in the multi-million dollar price range,
anyone trying to enter the market today has to find not only debt
financing but equity capital, as well. These new financing requirements
raise a different set of market entry barriers for would-be entrants.

Lenders of debt typically look to the interest income generated from the
loan to cover their risk, charging higher rates as their perceived risk
goes up. However, there is only so much they will lend on broadcast
properties regardless of the cash flow. With stations selling for
upwards of 20-22 times projected cash flow, and with media lenders only
willing to lend up to 5-7 times cash flow, station purchasers have to
raise equity capital equal to approximately 15 times cash flow. Given
the size of the deals, it is almost certain that prospective purchasers
will have to look to venture capitalists to fill the lion's share of
this gap, with the balance coming either from personal funds or private
equity investors other than traditional venture capitalists.
Understandably, there are very few individuals who can play at this
level.

One of the paradoxes of dealing with media lenders and venture
capitalists, especially these days, is that they are generally not
interested in funding deals that are smaller than \$10 million, nor are
they interested in single-station, single-market opportunities, unless
perhaps they are in a top 10 market. This does not bode well for the
individual or group that wants to start out in a small market with a
small station. As Robert Fink, a White radio licensee tells us, their
financing options are drying up.

> *... (T)he banks won't look at you if you're not looking at \$10
> million deals. Okay? And most of these stations in the small markets,
> you're looking at anywhere from \$300,000 to maybe a million dollars
> in the small market situation. We're too small for them to worry
> about. And that's the biggest complaint that we small broadcasters
> still have \[is that there is\] virtually no outside assistance, and I
> have tons of friends in the business over the years, and I am sure
> they would just echo my comments. We have to almost always go out and
> just find it through private individuals; in other words, all the
> money in our station basically is what Bob and I put into it. We're
> too small for the big guys that are in the broadcast; they're into the
> big corporations. And the saying in radio is that if you don't have a
> \$10 million deal, they won't give you the time of day. (RFink235, pp.
> 9-10)*

Diane Sutter, a successful White television broadcaster, echoes these
thoughts and provides additional insight.

Single stations are very difficult for anyone to do, but a first-time
entrepreneur especially because most of your equity companies as well as
your banks, don't like to have all of their risk in one place. They're
much happier if they can spread the risk amongst other \[broadcast\]
properties so that you don't have to rely on one single station to
support the debt service. So they're very difficult to do. The hardest
thing to do, probably, a single-station deal. They're also usually
small. And most of your private equity funds as well as venture capital
and other sources ignore the group of potential people that you can do
business with because of the size of the deal. So . . . a combination of
factors makes it more challenging to try and finance a single-station
deal. (DSutter205, p. 4)

Ernest James, a former radio station owner who now works for Clear
Channel, the largest broadcasting group owner, wanted to buy a portion
of the stations that Clear Channel was required to divest when they
merged with AM/FM. Even with his successful track record running
stations, the size of the package he would have had to put together to
be competitive in today's market was way beyond his reach. He estimated
that in order for a start-up venture to be competitive he would have
needed to raise a half billion dollars to buy multiple stations.

"I am not able to buy stations because in order to buy a station now or
buy a group of stations the capital that I would need access to would
approach half a billion dollars to really start a company and be
competitive. . . . (T)he stations I wanted to buy from Clear Channel
would have cost and I looked at them and my original request was going
to be to buy 37 stations, it ended up, I kept whittling it down and
whittling it down until I was trying to buy a package of 11 stations,
and even 11 stations was approaching a billion dollars, and then at 20
times multiples, I mean, nobody was going to give me that money. So OK,
maybe I could raise half a million, or maybe a million would be my seed
money to the deal, but \[that's nothing as my share on a billion
dollars\]. (EJames268, pp. 28-29)

In the secondary market, the ability to access information about
opportunities to buy and sell stations determines one's success; and in
today's market, access to that information is created and maintained
through access to capital. The distribution of previously issued
licenses by means of a private market structure necessarily begets a
process driven by financial resources. This need for capital too often
proves prohibitive for small and capital-starved businesses to
adequately compete.

##### Limited Access to Capital: The Impact of Wall Street on the Type and Size of Transactions

Another change precipitated by deregulation which has heightened market
entry barriers for small, minority- and women-owned businesses is the
move away from "mom-and-pop' local broadcasters to a situation where the
broadcasting industry is mostly owned by large publicly-traded
companies. These group owners have two advantages over their smaller
counterparts: (1) they have stations to trade with each other if they
need to divest in certain markets; and (2) they often buy and sell
stations, as well as whole groups, using stock. In both instances they
are in a position to receive more favorable tax treatment than if they
had done an all-cash transaction, which is what smaller, non-public
broadcasters would have had to do. Dale Gehman, a Native American former
radio licensee, summarizes it this way.

It's just a conglomerate \[game\] now, and they use stock market money,
and any facility of any size \[goes to\] the highest bidder, and the
price \[is so high\] \-- there\'s no way I can get in right now and pay
the price that you\'ll get for an FM station in any kind of medium- to
smaller-size market, and pay that money back on any kind of 10-year,
20-year amortization. It\'s a speculative price right now. \[W\]hat's
really hurting is the big conglomerates are giving stock, so they beat
the taxes. So they're getting a little bit of cash, lots of stock, no
big capital gains tax up front. The stock market is going crazy.
They\'re making fortunes. And a little guy without access to capital
from the market, I don\'t know how you possibly could do it. I can\'t
figure out a way \[to finance it\] right now. That\'s why I\'m not in
it, quite honestly. And I know there\'s some bond money. I think, with
my track record and showing what we did, I think at some point I can get
in, but it\'s going to be extremely hard even with my history of raising
that kind of capital. (DGehman132, pp. 35-36)

Manuel Davila, a Hispanic radio station owner, shares this observation
when he says, *"unless you're lucky, and actually got a station in a big
market a long time ago, we don't have a chance. . . . Where \[will a
small guy\] get \$40 million?" (MDavila128, p. 52)*

##### Limited Access to Capital: Buyers Need Money in Hand - Time is No Longer Given to Raise Capital 

Because the market is super-heated and there is acquisition frenzy, only
those people who can quickly bring money to the table are even
considered potential purchasers for properties. If you couple the fact
that it generally takes much longer to raise venture capital than it
does debt financing with the market reality that enormous sums of equity
financing are now required, you end up with a situation where only the
big players who are already in the market and have large coffers of cash
and/or stock to trade can participate in the buying of stations. The
days of the small business owner being given time to raise the needed
capital for station acquisition are long gone.

Art Gilliam, an African-American radio licensee who started acquiring
stations in 1977, makes the point.

I found out about the opportunity \[to buy an AM station in 1977\]
through a broker. At that time, quite different from now, if you made an
agreement with a seller, you had more time to go and find the funds.
Today, in the environment in light of the Telecommunications Act, if
you're not there with the funds in hand, then you're not going to be a
viable buyer. (AGilliam117, p. 1)

Bruce Dickenson, a media broker, shares his perspective that the speed
with which a deal has to get done depends on the actual broadcast
property. "Certainly, with a very expensive property you must have your
money ready. . . . The smaller and less attractive the property, the
more time people potentially have to put together their financing.
\[Since\] we don't get paid until we get a deal done, it behooves us to
pick deals that we think we can get done . . ." (BDickenson517, pp. 5-6)

John Tupper, a White television licensee who acquired his station in
1995, adds:

> *\[Regarding smaller companies acquiring stations\], the biggest issue
> from the standpoint of the seller of the station is which group is
> most likely to close the deal. . . . And, you know, obviously if you
> are dealing with a company that has the capability of just writing a
> check to acquire the station, that's very different than dealing with
> someone who has to align venture capital and bank debt financing to
> put together a transaction. . . . And, there are those who are very
> successful in putting together their venture capital and bank
> financing to acquire stations, and once they've done a few they seem
> to be able to do that repeatedly. There are others who aren't so good
> at it and, therefore, you take more risk in trying to do a deal with
> them. And it, becomes a decision that both we and the seller have to
> make as to with whom we want to do business. (JTupper216, p. 27)*

##### Consolidation, Brokers and the "Old Boys Network"

Diane Sutter, a White former television station owner, who has bought
and sold one television station and is now in the market for another,
explains the chicken-and-egg nature of current financing realities as
well as the need to have in place relations with high-quality brokers,
lenders and venture capitalists.

You can't get the money until you have the deal. And you can't get the
deal, until, especially with a new company, until they're sure you're
going to have the money. Well, I'd love to sell it to you, Diane, but
you know, show me your money. Now the thing that really helped me was
that when I went to someone, even when I was in the middle of doing the
first deal, but not having gotten done yet and I was looking for other
stations, and they say well, who's your money? And I can say Bank Boston
or Burr Egan, two well-known quality firms that people go 'Oh, OK,
you're real. You're for real. I can probably sell it to you.'
(DSutter205, pp. 20-21)

In this market of rapid turnaround on media properties, not only do
brokers, lenders and equity partners weigh in on the prospective buyer.
The seller often approves the list of buyers prepared by the broker. It
is up to the broker to make the seller feel comfortable with the list
prior to sending out marketing materials, solicitation of offer letters
and confidentiality agreements. If an entry on the list is for someone
with whom the broker has not yet done business, it puts the broker at
risk with his client, the seller, to push for its inclusion. Brian Cobb,
a media broker explained his process as follows:

. . . (T)hey will almost always ask as they go through the list, if they
don't recognize a name, they'll say, "Who is that?" You know, I have to
tell them who it is and have to demonstrate that this person belongs on
the list. If I don't have a good answer, they'll tend to take it off,
and the answer usually is do they have the money. . . . (I)t gets down
to a conversation of do they have it, can they get it, or do you think
they can get it. (M)ost of the times they'll leave it on the list \[if I
can vouch for the person\], but some people just say, "No, I don't want
to go through with it. Take them off the list." (BCobb512, pp. 17-18)

##### Financial Sophistication and Track Record are Paramount

As the consolidation in the broadcast market has driven up prices and
gobbled up properties, the criteria for consideration as a viable
candidate for receipt of multi-million dollar debt and equity financing
has become more heavily weighted towards proof of significant industry
experience or a successful track record managing and growing a business
enterprise, sophistication with financing means and methods, a vision
for multi-property holdings, and a desire and/or willingness to
participate in an exit strategy that brings significant returns and
on-going upside potential to debt and equity partners

With the need to acquire equity capital, the selection criteria for who
gets funded becomes more complicated than those used to qualify bank
borrowers. With debt financing, the lender usually looks to the cash
flow of the business and his collateral to cover his risk and repay his
money. Venture capitalists have no such protection. They are giving the
business owner their money on the expectation that 1) their investment
will multiply many times over in three to five years and 2) the company
will be in a position to either go public or be acquired. This
requirement puts enormous pressure on both the business plan and the
quality and track record of the management team. These two elements
become paramount to the venture partner's willingness and desire to
invest equity capital. In today's market, if a team or individual
business owner lacks this success profile, money is virtually impossible
to obtain.

Robert Fink, a White radio broadcaster, explains:

> *... (I)t's a business that is totally dominated by the management of
> the company, and a successful station can be a failure the next day if
> it's not the right management in there. And so acquiring capital has
> just been extremely difficult for anybody that again doesn't have the
> borrowing power to talk big time, so it's really left the small market
> people or people trying to enter into the business without much,
> without any help at all, really. I mean, we have not gained, in my
> opinion, in the position that we were in since I started in the
> business way back when the banks wouldn't even talk to you at all. Now
> it's just the big guys. If you've got a \$10 million deal and we think
> you are strong enough to buy a station in a major market, we'll talk
> to you. But people like ourselves aren't strong enough for that, so
> we're stuck in the small markets (RFink235, pp. 9-10)*

Bruce Dickenson, another media broker, shared with us his primary
criteria for evaluating potential buyers. He was quick to say
*"financial capacity, integrity, proven track record."* To get the
process started in creating a relationship with a broker, a critical
task if one has the desire to participate in today's broadcast market,
Bruce suggests that the buyer *"give us a call, let us know they're
looking for \[properties\]. . . . To be honest, it's a process of
learning about them and as we learn about them we start to make
judgments about their ability to do what they're trying to do. Who
they've surrounded themselves with in terms of deals, financial folks.
You know it's clearly a process to get anybody to the point of making an
offer to us on a multi-million dollar property.* Bruce adds *"known
quantities, where you don't have to educate the people very much, are
more desirable than brand new buyers. (BDickenson517, pp. 1-2, 6)*

Diane Sutter, a successful White former television owner who purchased
her first station in 1997, was unique among our interviewees. She was
the only female who, as a result of her employment with Shamrock
Broadcasting, Roy Disney's company, had developed a significant
employment track record as well as a network of key market
intermediaries in broadcasting. Ms. Sutter relates that her past work
experience as a group executive with Shamrock made all the difference in
the world when she went to raise both debt and equity capital. With
Shamrock, Ms. Sutter was involved in mergers and acquisitions, among
other things, dealing with the station owners, banks and venture
capitalists she would eventually have to approach for her own television
deal.

> *One of the things that I had that was working in my favor, which was
> very unique, and I was very fortunate to have this, is that I had
> spent six years at the corporate office of Shamrock prior to \[owning
> my own station\]. And my responsibilities at Shamrock was working with
> the banks . . . When they were doing financing deals, I was part of
> those. I already had one, the access to the information of what it
> took do these kinds of things, which, as I say, I was very fortunate,
> because there aren't many women at all who get that opportunity, and
> two, I had the relationship. (DSutter205, p. 5)*

Building credibility with a banker or venture capitalist is key, which
is why it is even more difficult for new entrants into the marketplace,
and especially difficult for minorities and women. If you add to that
the extremely high prices for stations in today's market, borrowing
becomes almost impossible. Tyrone Brown, an African-American
communications attorney and a former FCC Commissioner, highlights this
point when he says *"If you're a minority or a woman in this country,
while you're probably better off than you are anywhere else in the
world, the fact of the matter is you still have to get up earlier and go
to bed later in order to get ahead. Don't ever forget that. Because
somebody will remind you of it in a way that will be hurtful ... you
really \[have to\] bring something to the table that is more than
ordinary. It really is a capital game today and you've got to convince
the people who you're asking to turn over money to you that you've got
something that most other people don't have. ...It is true if you're
Black or you're a woman and you go and talk to these investment bankers.
(TBrown510, p. 29)*

Media broker Brian Cobb echoes that point.

You've got to show your financial credibility . . . \[This is\] a big
handicap for somebody starting out that doesn't have a lot of money or
maybe has certain talents but doesn't have the sophistication in the
financial area to put that package together. (BCobb512, p. 14)

George Dobbins, an African-American who acquired his wireless license in
1996, sums it up this way when he questions *"Why would you want to
provide the dollars for a small start-up company when you're already
providing the dollars and playing with the companies that \[are\]
already in place?" (GDobbins362, p. 7)*

Rev. Everett Parker, with the United Church of Christ and a pioneer in
the area of civil rights and communications policy, shares Mr. Dobbins'
view.

... (W)hen the time comes, really the thing that you're interested in --
it really comes down to the point of is Citibank going to give \$50
million or \$100 million or a billion dollars to what they consider to
be an untested group when they can get somebody who they think is tested
to borrow that money? (EParker504, p. 20)

Others spoke about the need to prove themselves with the banks and to
develop a track record. Of course, it helps if you can get a loan in the
first place. Dennis Miller, a wireless license owner who is White and
acquired his first license in 1990, shares his perspective.

(W)e're reasonably aggressive on our business plans and we're meeting
them. I guess if there's one thing that a new entity needs to do, that's
to create that track record with the financing community. You need to
meet your projection. Make them realistic and meet the projections. . .
. (O)ne of the investment bankers I think characterized it the best -
that they're betting on jockeys, not on horses. And as a management
team, you need to be able to instill confidence in these folks that you
can actually deliver on this business plan. (DMiller147, pp. 5-6)

But even with industry experience, some minorities have complained that
they still were not treated seriously. For instance, Peter W. Fong, an
Asian-American wireless license applicant, recalled:

> *It just seemed like we don't have any track record, and it is very
> difficult for people to take us creditably. You have to start
> somewhere, and we are not coming off from some Chinese restaurant, you
> know, jumping into telecommunications. I myself have 15 years working
> with the telephone company, and my partner had 25 years, and so we
> know what we are doing, but still it \... it is just very difficult
> for people to take us seriously. (PFong365, p. 11)*

Don Cornwell, an African-American who is President of Granite
Broadcasting, which owns 11 television stations, understands how this
process of building credibility works. He acknowledges that those who
get to "play" are already the players. So how does one get to be a
player?

". . . what tends to happen is that once you get in the game the brokers
discover you. The brokers don\'t particularly want to call you until
they know you can actually buy something. And once you\'ve bought
something, to them, that\'s prima facie evidence that you can do it. . .
. The guy who\'s not known, who has no properties and is starting out,
is almost going to have to convince the broker \-- not \"is almost\" \--
is going to have to convince the broker that they\'ve got the financial
wherewithal to do the deal. So that means that they\'ve got a bank
reference that they can point the person to, or they\'ve got an equity
partner that has financial wherewithal that they can point the broker
to, et cetera. They\'ve got to do some fancy talking to get to that next
step." (WDCornwell103, pp. 16, 17)

As the market has consolidated, properties become more expensive, and
deals have to close more quickly, the job of the "gatekeepers'" (the
brokers, lenders, investors, sellers) becomes more important and has the
potential to be more exclusionary. The tendency is to work with who they
know, people they have done business with before. And in a lot of
instances, except for a few notable exceptions, that does not include
women and minorities.

The interviewees reported that in the wake of consolidation, the "club"
(brokers, bankers, lenders, and investors), into which minorities and
women were rarely invited prior to consolidation, has become even more
exclusive. This market-driven exclusion rests upon decades of historical
disadvantage that has existed since the infancy of the broadcast
industry. Allowed to run unchecked, the market has created a clear
insider/outsider, have/have not environment.

Don Cornwell says that he's "*not aware of any \[discriminatory
practices\]. It doesn\'t mean that they don\'t exist. Look, it\'s a
club. And I think that people have to understand it\'s a club. I work
pretty hard to get at least on the periphery of the club so I know most
of the broadcasters. ... And when you\'re in the club, then you hear
about things, okay? You hear about what\'s for sale, what it isn\'t, et
cetera. I think that\'s no different than the old thing about well, the
deals get done on the golf course and so forth. So the answer to your
question is, of course, there\'s discrimination, but could I give you a
specific example? No."* When asked what the price of admission was to
the club, Mr. Cornwell answered as follows: *"I think the price of
admission is admission. You know what I mean? In other words, I think
that the folks at Radio One are in the club now. They\'ve got a billion
dollars of property, you know, or more. I think the guy who\'s trying to
get started is going to really have to rely on the pressure of the FCC
and others to crack the door open a little bit, to give them a chance to
get a shot. And there they have to have both access and capital to
actually ever have anything happen." (WDCornwell103, pp. 24-26)*

Erwin Krasnow, a communications attorney, explains exactly how the
contracting process may differ for those without a track record and for
those about whom the banks have doubts about the applicants' ability to
close the deal.

> *If there are any doubts about someone closing, the contract process
> is miserable, because the seller, because they're very, very unsure
> about the buyer's qualifications asks for, usually will ask for a much
> higher percentage of the purchase price to be put in as escrow as
> liquidated damages.... to protect themselves in case the deal doesn't
> go through....(EKrasnow500, pp. 11-13)*

##### Racial and Gender Stereotyping in the Capital Markets

None of the interviewees recounted a specific example of discrimination
by brokers or larger media lenders, but that is not surprising given the
limited contact between and among the groups. The brokers and large
lenders interviewed indicated that they had worked with very few or no
women and minorities.

The women and minorities, however, all observe examples of exclusion
from this "old-boy's" network. If barriers for women and minorities do
exist, many are precipitated by the perceptions about the ability of
women and minorities to raise the required capital in the stated time
frame. Brian Cobb, a media broker, offers his observations:

> *. . . I can't name an instance where I have seen that it was a
> rejection because of \[race or gender\]. But on the same token, with a
> female buyer or a minority buyer a seller will ask more questions and
> want more documentation as to the financial capability. . . . I don't
> think it's a matter of prejudice on -- it's not overt prejudice. It's
> a matter of -- it's a perception that \[minorities and women\] may not
> have as much money to close, so they ask more questions. (BCobb512,
> pp. 21-22)*

Whether it is considered prejudice or not, a seller who subjects
minority buyers and/or female buyers to greater scrutiny and requires
additional documentation based on ethnic or gender stereotypes is
engaging in discrimination. The fact that this heightened and
discriminatory scrutiny is not considered prejudice but due diligence
speaks to both the subtlety and profundity of the problem.

Sometimes when brokers have had bad experiences with a few minorities,
they might have reservations about dealing with other minorities. For
instance, John Lauer, a media broker, indicated:

> *There aren\'t as many minority buyers. And sellers go to the obvious
> places that would know big advantage. They\'ll take the best deal that
> comes to them. Well, like I said there are more of them, number one,
> that have money. Also, in some instances -- and this has happened.
> I\'ve seen this happen. Blacks, minorities -- say Blacks, minorities,
> get to the point where they are ready to close and are out of money,
> even though they\'ve warned them ...that\'s been my experience....
> Letter of credit, letter from a bank, between the time that they make
> the deal, the time the deal is ready to close, the bank has changed
> its mind and the lender has changed its mind. Backing out. (JLauer533,
> pp. 18-19)*

Henry Rivera, a communications attorney, past FCC Commissioner, and
Chairman of the Board of the Minority Media Telecommunications Council,
tells us *"(I)t's hard to say that \[brokers' practices are in fact
discriminatory\]. I think it's pretty easy to see what the effect of the
way they do businesses has been, but it's hard to say that that is
driven by discriminatory intent;. \[and they want a deal that can
close\]. . . so they don't want to deal with minorities typically. . .
.They don't because again, they do not see minorities as a potentially
good buyer. I don't think it's because they don't like Black people. . .
. . That's my perception at least. I don't think they're being overtly
discriminating. (HRivera516, pp. 28-29)*

Jim Casey, a communications attorney, observes that Native Americans
also confront racial stereotypes.

> *Getting***...***financing in the \[Indian\] country is very difficult
> for a number of reasons. The asset, not being able to pledge. We will
> say that the asset is one very big problem. Sovereign immunity is
> another big problem. Just the hesitancy to do business with Indians is
> another. The assumptions are that they can\'t afford it, they are not
> going to pay their bill, and you\'re dealing with a very poor
> population so there\'s simply assumed to be a very high risk when it
> comes to a loan or financing. (JCasey535, p. 21)*

##### The Inability to Obtain Financing Forces Some Broadcasters to Sell Their Stations

For many minorities dealing with the inability to obtain financing,
their choice is either to sell their stations or lose them.

James Wolf, Jr., an African-American radio licensee, decided to give up
the fight and sell his station since he could not raise the financing
that he needed to successfully operate in a changing competitive
environment.

I was probably the only African-American that had a hot \[adult
contemporary\] format. And I never could get this money financed to get
out of my LMA. And I stayed in it for two years, up until '98. And I was
so frustrated with -- you know, because I wasn't able to get the monies
I needed to do the financing. And I just really been with all these big
conglomerates, like Capstar, AM-FM Radio, coming at me and offering big
bucks. I said, why am I killing myself. I can't get what I need. I might
as well just go and sell it, you know. (JWolf281, p. 28)

Even Granite Broadcasting, a public company run by Don Cornwell, an
African-American, was forced to sell stations to raise the capital
needed to purchase other more desirable properties.

> *We sold two properties in Michigan to a company called Freedom
> Newspapers, and in all candor we\'re not sellers of properties. It\'s
> a reluctant thing we do. We decided to sell those two Michigan
> properties because we were in the process of buying a station in San
> Francisco and we needed the money to do that, and we would rather have
> kept the properties and just bought San Francisco, but we didn\'t have
> the capital. So we made that decision. (WDCornwell103, p. 20)*

Others, like William Saunders, an African-American radio licensee who
acquired his most recent station in 1983, also chose to sell properties
they would rather have kept. Mr. Saunders saw the sale to Clear Channel
as an opportunity to get out of debt, not necessarily to make enormous
profit on the sale. Ultimately, in 1998, he had to sell his AM station
that had been in the community for 50 years.

... (W)e were able to actually do a sale of the AM to satisfy most of
the debt for everybody, and that's how I again, got Clear Channel\[in
the deal\]. . . . (M)y AM station was what they wanted for a talk
program. . . . and so they offered me just about enough money to pay off
my debt and to take that, because I would prefer having the AM instead
of the FM. You know the AM had been in the community for about 50 years
at that time from 1947, and it's been the only station that Blacks have
had access to. In our area so we wanted that more than anything else,
but they didn't want \[that\], they had 4 or 5 FMs in the market at
that. I lost it all in 1998, December of 1998. (WSaunders163, pp. 4-6)

##### Luck Played a Part in Some Acquisition Opportunities

From our interviews, it was clearly evident that small businesses and
especially minorities were having significant difficulties getting
access not only to capital but also to purchase opportunities. Some,
however, had luck with either financing or station acquisition and took
advantage of it.

Pierre Sutton, and African-American who earlier spoke of his company's
difficulty in raising capital for their first station in 1971, was later
presented with opportunities by those in his network of industry-related
professionals.

> *... (O)ne time I bought a radio station from a guy in Philadelphia
> because I was sitting down at lunch with the President of the bank
> \[that was courting us at the time\] in Philadelphia and he asked me
> if I knew the owner of this particular radio station in Philadelphia
> that wasn't paying him. And I said, yeah, I've known him for years.
> How would \[you\] like to own his radio station? And so he put me
> together with him and we worked out something so we became majority
> owners of that property. Another time a friend of mine, Stevie Wonder,
> called and said that there's a guy who used to work for me as a
> newsman who is in trouble in Ft. Lauderdale, Fl with his radio
> station. And so I wind up getting that station from him. (PSutton110,
> p. 15)*

Pierre Sutton shared another story about his father, Percy Sutton,
impressing a radio station owner with on-air reporting at the time of
the 1967 Harlem riots. As a result of that experience the owner told the
senior Mr. Sutton that *"if he ever elected to get out of the \[radio\]
business, he would like to be able to sell to \[my father\]. And my
father was currently still in public affairs, in politics, and so he
couldn't do it. So I had the opportunity to play." (PSutton110, p. 9)*

-   ***The Impact of Limited Access to Capital on Operations***

Even with occasional luck, most minority participants had to struggle to
bring capital into the business. Since advertising revenues were
generally not on par with their White counterparts, cash had to be
generated elsewhere through such means as personal loans to the business
or mortgaging of personal assets. Without sufficient capital, the
ability to acquire the necessary equipment, to recruit and retain top
talent, and to promote the business was diminished.

Erskine Faush, an African-American television licensee, explained it
this way.

Well, I'm saying that if you need personnel, if you need promotion, if
you need equipment, whatever it is that you need, goes back -- you know,
you can't keep good personnel unless you have the salary level where you
can attract and keep good people. In many instances even if you have
entry-level people and take them right out of college, right out of
school, you bring them in, you train them and, of course, once they get
to a certain level then the others with the resources can hire them away
from you. Capital -- I'm saying whatever area you want to get into, it
is capital. (EFaush238, p. 16)

George Dobbins, an African-American wireless licensee, also expressed
his concern over the effect limited capital was having on his ability to
attract and retain a good management team. As capital sources told us,
the quality of management was a major determinant of a business's credit
worthiness.

Well, capital won't solve every problem. The other problem is management
and expertise. But if you have the capital you can employ the expertise,
just go out and do -- the way I do now in business is if we see a sharp,
young person we want in our business we come up with a deal to bring
them in. But if you don't have the capital it's difficult to manage the
management team. You know, the management team is making money --
there's a demand for sharp people in the telecommunications industry
now. So if they are out there making a significant income, they're not
about to go with a broke company. (GDobbins362, pp. 7-8)

### 2. Discrimination in the Community As a Market Entry Barrier

Several female and minority interviewees spoke of resistance and
downright discrimination that they encountered in their communities when
they were first starting out as well as through their years of
operation. Such things as disputes over tower locations slowed down
licensees' ability to start up their stations. Menacing calls from
racially biased groups made programming and selling more difficult.
Local politics interfered with the acquisition of financing.

Most poignantly, James Wolf, Jr., an African-American, was confronted by
the Ku Klux Klan over the positioning of his microwave tower. The fight
was taken to the courts. His life was threatened in the process.

The \[White community\] had never really had local autonomy in Black
broadcasting, never a voice in Black broadcasting, and they didn't know
what that meant. . . . The White community, they were just totally
opposed to us, you know. As a matter of fact we ran into confrontation
with the \[Ku Klux\] Klan and all of that. We had some major stuff in
this small community here that we're in.

(T)hey tried to stop the erection of our microwave, free-standing tower.
(W)e got hung up in court, in court battles and so on. Finally we
surmised that we needed to bring the media involved in it, so we brought
a local television station in\[to\] it, and I brought the newspaper
in\[to\] it and I brought \[in\] others from other communities inside of
this zoning median. We took pictures of all the towers around the town
which were hazards, and we showed where our tower was going to withstand
winds of 220 miles per hour. And they finally, after looking down the
cameras and all, said -- they granted it. But we had threats . . . phone
calls from the KKK that said don't build this, don't open this up, you
know. It was a lot of life threatening stuff that I went through, you
know. (JWolf281, pp. 11-12)

Dale Gehman, a Native American, saw it as *" a political situation where
you\'ve got a license, you\'re going to service the community, then you
become an influence in the community, and I think there\'s a lot behind
the scenes that we learned later that we were blocked in every move we
made, unfortunately." (DGehman 132, p. 5)*

Willie Walls, a Black radio station owner, stated that his number one
obstacle in 1962 when his station was organized was that *"it was a time
of some integration, and we had a problem being Black owned and
operated, listing ads, and you know,\[we\] had opposition". (WWalls403,
p. 4)*

Others, like James Wolf, Jr., had experiences of being pressured to
change their format away from urban and toward something less minority
focused. He told this story .

\[Steve, a White male and one of Mr. Wolf's partners\] wanted to . . .
go country and western, but he compromised it and tried to fuse in pop.
And so I had to stand up. I stood up -- and they had a new program
director that we had brought in, which is a White program director from
Alabama. And he had nothing but real red neck in him. So he was glad to
do \[country and western\]. So what I did, I walked in after about 20
hours, not quite a day, of listening to it, and I told him to put
everything back just the way he found it, and to pack his stuff and go
back to Alabama.

> *... Steve was a part of our organization then, you know, and we had
> to demonstrate that since these great White fathers had helped me to
> get this money to sustain and so on and so forth, one of the
> conditions that they wanted was him to be in as a general manager and
> . . . It was one of those situations where we had challenges, because
> they were getting pressures from the White community, because they
> didn't like the Black music, you know.*

... Steve had lost a lot of his friends because of the nature of the
beast that we had created, you know. And so he was just trying to
justify -- "I'm still White, you know. Look here, I can change this, you
know." That's what that was all about. (JWolf281, pp. 18-20)

### 3. Discrimination in the Industry as a Market Entry Barrier

Not only was discrimination experienced in the capital markets and in
the communities, but minority and women licensees also encountered
discrimination within the industry itself, coming from other station
owners or from employment practices among the large broadcasters.

##### Discrimination in Media Portrayals and Coverage of Minorities

Rev. Everett Parker, with the United Church of Christ and a long time
civil rights activist in the area of communications policy, shared
stories of how WLBT (Mississippi) reported news about African-Americans
in the 1960s. It highlights the extensive power of the broadcast medium
to affect community views and actions. The following comments by Rev.
Parker and Mr. Faush provide a historical context for the market entry
barriers that African-Americans have faced in their attempts to become
broadcast licensees.

> *Well, in all of the South stations referred to Blacks only by their
> last name. And women just the same. They refused to give Blacks the
> opportunity to present their views on political issues of great
> importance to them, such as at that time of school desegregation.
> WLBT, when Meredith was admitted to the University of Mississippi, the
> manager of the station got on the air and told the people, "You get up
> there and stand shoulder to shoulder with the governor and you keep
> that nigger out of Old Miss," and they did. They took their ax handles
> and their pistols and they went up there and you know there was a riot
> and I think some people were killed. The manager of WLBT \[told people
> to do that\].*
>
> *... For WLBT, when the [Brown v. The Board of Education]{.underline}
> was decided and Justice Thurgood Marshall ... was on the Today Show,
> WLBT put up a sign, "Sorry, cable trouble." And when the kids from
> Tougaloo College sat in at the Woolworth store in Jackson, WLBT
> covered it for NBC but did not carry it, and things of that sort. And
> that was true all over the South. . . . (Y)ou could go all over the
> South and it was the same. (EParker504, pp. 6-8)*

Broadcasters discriminated against their listeners in ways other than
just what news they reported or how they presented it. Rev. Parker
shared that "*The broadcast industry at the time -- back in the '60s --
had no interest in Black people as \[an\] audience. They said -- well,
this manager at WLBT, later after he lost his job and everything, he
says, 'Well, if I thought those Negroes had any money to spend I'd have
given them time.'" (EParker504, pp. 13-14)*

##### Discrimination in the Workplace

Mr. Faush, an African-American television station owner, talked about
his experiences with segregation during his earlier days in
broadcasting.

... (I)t goes back to the days of segregated everything and what all
that involves, whether you're talking about public facilities or access
to anything. So I came through all that era and was here, you know,
through the demonstrations and everything. (W)e'd always had the hope
\[of becoming owners\], okay. But obviously the fact that certain gains
were made in certain areas would certainly increase that hope that you'd
finally get to the point where you'd talk about ownership rather than
just being employed.

\[The segregation that I experienced did stand in the way of that hope\]
of course. Being realistic, you're looking at getting Black-owned,
Black-programmed radio stations that were all owned by Whites. I mean,
no matter what hope you have, you're looking at something that is in
front of you. And you know if your hope takes on any reality at all and
so forth, you know that something has got to have a dramatic change.

You know, we worked inside the radio station where you had Black and
White toilets. I mean, not just outside but inside, you know. The owner
of the station and the White employees had their restroom; the Black
employees had theirs. I mean, you came in one door and they went in
another door, yet, you're in the same facility. Now how blatant can it
be? You don't have to go out on the street anymore to see a sign
separating people on a bus, behind a water fountain that said,
"Colored," or "White." (EFaush238, pp. 19-20)

Nancy Waters, a Black radio licensee, talked about her difficulties
earning respect from her staff when she first acquired her station.

With me being Black, I had no respect from the staff when I started.
White men -- they would address my husband. You know, I\'d say to him,
you have to come up and get on to them, because they won\'t listen to me
about this, and won\'t listen to me about that. So I was dealing with
the double bias everywhere I went. (NWaters178, p. 16)

While not nearly as blatant, Rev. Parker told us that discrimination
still exists in the hiring practices of large companies.

> *Well, you certainly see \[discrimination\] in a \[large\] company
> (T)hey could . . . .certainly have a policy of even just fair
> promotion, which would open upper management spots, middle management
> spots, to anybody who has the capability, and they could hire for that
> purpose. And any one of these companies could do that. Certainly they
> discriminate. How is it that only White males get onto the decision
> making level? Maybe a women here and there. Look at the boards of
> directors of these companies. They have maybe one or two women and
> they are mostly window dressing. But how many of these big companies
> really have important people of color on their boards of directors?
> Just go over all of these communications companies. (EParker504, p.
> 27)*

Even in small broadcasting companies, disadvantaged groups have
difficulties with employment. Stuart Martin, a White male television
licensee, articulated a perception that may hamper the advancement of
women within broadcasting.

The issue on Equal Employment and Fair Employment of women in this
business has been self-correcting. For instance, in our news department,
our problem is finding White males. It's almost like horseback riding.
It's being dominated by women. I don't know why. And all come in and are
very eager until they approach 30, then all of the sudden, somehow or
other they seem to drift off in marriage. What happens is, of course,
they get along and all of the sudden, they begin to get the urge to have
a family and once they have a kid or two, they find it's a hell of a lot
more rewarding than pacing around after stories. Over and over again I
see that. (SMartin212, pp. 17-18)

##### Ethnic and Gender Marginalizing Practices by Competitors

Minorities have also had their share of difficulties with competitors.
Again, Erskine Faush, an African-American, shares his recollections of
how ratings were distorted by his White counterparts.

I can remember the time when we were number one in the market. But when
the \[audience share\] ratings came out . . . the general market
stations would put up billboards. And perhaps they were number three or
four or whatever, and they would call themselves number one in the
market and with an asterisk by it. In fine print at the bottom it would
say, "excluding ethnic stations." They just couldn't bear the thought of
a Black, even programmed, facility being number one in the city.
(EFaush238, p. 9)

Such practices have the effect of marginalizing minority-formatted
stations, justifying discounted advertising or no advertising on those
stations.

Given the difficulty of acquiring stations, some minorities, just to get
started with their community-specific programming, bought time on
others' stations. Andres Neidig, a Hispanic radio owner, called all 42
stations in Denver to try to buy time to produce a Hispanic show, and
none of them made any time available for him to buy, *"even the stations
that were losing money."* The general response he got was *"Hell, no.
I'm not going to put a Mexican program on the air." (ANeidig426, p. 18)*

Bernadine Nash, an African-American radio broadcaster, talked about the
marked difference in her experiences trying to buy stations both during
and after the repeal in 1995 of the Tax Certificate program.

Well, it was a no-brainer for people in this market \[to find me for tax
certificate deals\] because I'm the only \[minority here\]. So, if they
wanted ... I mean there is only one person within the market that they
would call. So that was a no-brainer for them.

> *On the other side of it, and this is where I realized after the tax
> certificate went away, that the more institutionalized issues around
> race began to surface. Because there were actually two properties that
> I knew were for sale, that I was interested in (b)ecause my goal had
> been to get a 24-hour signal. I didn't care if it was AM, FM,
> whatever.*
>
> *And I would put calls in and then not get calls back, and then I
> would get a little pissed off, so . . . then I would like decide, it
> would become a challenge, so I was determined to get through. And I
> would finally get through and I would be told either that the property
> was no longer available, or I was given a purchase price that seemed
> irrational to me. And after maybe the second time, I had a friend of
> mine do that game you do sometimes in housing. And we got different
> answers. We got different answers \[in terms of both availability and
> pricing\]. (BNash118, pp. 17-18)*

Ms. Nash and a friend not known to the local broadcasters both inquired
about the availability and pricing of stations; thereafter they compared
the answers. In so doing, Nash employed a technique, widely recognized
by the courts, for ferreting out illegal bias, namely discrimination
testing. The fact that her friend received more favorable answers, in
terms of availability and pricing, underscores not only the importance
of the Tax Certificate but why discrimination makes it necessary.

Nancy Logan, President of American Women in Radio and Television (AWRT),
recalls hearing about the experience of a woman who had been
marginalized by a group of local broadcast competitors.

> *I remember hearing this woman on the NAB panel speaking about having
> a difficulty in her marketplace being \[that she owned only\] one
> station and, plus, that she was a woman owner, and that the guys who
> ran the stations in town that were groups would, you know, literally
> gang up on her in the business way, in the market. (NLogan523, p. 14)*

Some women, like Patty Ruiz, a Hispanic female television licensee, told
us she had to prove herself in the male-dominated communications
industry.

> *The truth of it is there\'s a lot of barriers; it\'s a man\'s world
> especially in the communications industry. You really have to struggle
> to make them, not only believe in your capabilities, because you are
> woman, and because you are a minority. You know, you were always
> banging your head against the wall. You had to really prove yourself
> to show that you knew what you were doing and knew the industry and
> loved the industry. I mean you got to love and have a passion for the
> industry to survive. (PRuiz452, pp. 14-15)*

She expounded on how she had to prove herself as a woman so that others
could take her seriously:

> *Also, I think the engineering studies were, you know, you had to
> really know what you were talking about, because you\'re dealing with
> -- talk about a man\'s world. And so you had to constantly prove
> yourself, and make sure that you understood the lingo and everything
> that goes with it. That they took you seriously, that they just
> didn\'t think, you know, this girl doesn\'t know what the hell she\'s
> doing. So you had to work twice as hard to read and learn about
> engineering. The sites and where, you know, the towers would go, and
> the height and reach, all that great stuff that comes with it.
> (PRuiz452, pp. 14-15)*

In addition to being excluded by local group owners, S. Jennell Trigg, a
communications attorney, opines on the inability of minorities and women
to rely on the National Association of Broadcasters (NAB) for guidance.

> *I know for small licensees that were not members of groups,
> independent stand-alones; \[but\] if you were minority, you certainly
> didn\'t have a voice at NAB. You were dependent on NABOB. If you were
> woman owned, you really couldn\'t depend on NAB, you had to deal with
> American Women in Radio and Television.... there are all kinds of
> politics going on with NAB that the small guys, and if you\'re
> minority, you get lost in my opinion. (JTrigg536, pp. 37-38)*

##### Restricted Access to Information and Opportunity

Getting into the "deal flow" is a critical step in the acquisition
process. Deal flow refers to being in the loop to receive information
about purchase opportunities. This information can come from sellers,
lenders, brokers, and investors. It is all in who you know.

Diane Sutter, who has managed to get herself into the deal flow for
television station purchase opportunities talks about the lack of
incentive for sellers to seek out women and minorities as prospective
buyers.

Well, the problem still exists that you can't find stations that you can
afford to buy whether you're male or female, and at the same time, it's
even harder for the women and minorities because generally they're not
in the deal flow arena. And because there's no reason to sell it to a
woman or a minority, because there are no Tax Certificates available
today, there's no incentive to sell it to any of us, so why not just
keep it in the family? And everybody, and you know, it's like Monopoly.
Everybody sits at the board and they shuffle their hotels around. You
know, I'll trade you a Boardwalk and a Park Place for St. James Place,
and (a "get out of jail free" card). . . . I think it's especially
difficult---and I'm atypical because I've had a lot of things that have
worked in my favor. But someone else going in to do this, today, with
consolidation? I think it's enormously difficult. (DSutter205, pp. 19)

Brian McNeill, a media investment banker, talks about his experience
with women and minorities and how he judges their ability to participate
in a deal.

> *. . . (W)e look at deals dispassionately based on quality of
> management, the quality of the purchase price and how much upside
> there is. But you know, having said that, . . . it seems to me, but
> I've never actually done this statistical arithmetic, \[that\] the
> bulk of the deals we see are more from, I think more men are in the
> business, so I get more plans from men than women, and minorities are
> still minorities so we see more plans from Caucasian men and companies
> than we do from minorities. So I don't really know the statistical
> breakdown. (BMcneill513, p. 7)*

Diane Sutter shared more of her experience when she told us that *"when
I hired Bank Boston's M&A department to do my investment banking for me
. . .one of \[the two people I was working with\] said to me that I was
the first woman client they had ever had. . . . And when I went to the
\[venture capital\] firms, I think it is safe to say that not one of
them had invested in a women entrepreneur in broadcast. (DSutter205, pp.
8-9)*

Willie D. Davis, a Black male radio licensee, observes that minorities
are often the last to know about broadcast deals because they are not a
part of the network; and that by the time minorities find out, the deals
have become public and the negotiations have already taken place.

> *Most of the deals sometimes they're done kind of behind the scenes
> and they only \[be\]come public pretty much \[when\] the filing with
> the FCC takes place. In other words, the negotiations many times have
> started very much on an inside track and it only becomes public when
> they file. Well, as you probably would surmise, not being heavily
> plugged into that network, I would say it's almost fair to say that
> minorities are the last to know. (WDavis120, p. 15)*

Mutter D. Evans, a Black female radio licensee, echoes that observation
by pointing out that *"\[y\]ou don't know what properties are available
unless you \[are\] in the inner circle. Who's always been in it? Those
who control. White men." (MEvans275, p. 26)*

##### Access to Station Purchase Opportunities Through the Informal Network of Owners

Manny Davila, a Hispanic radio licensee, talked about how stations for
sale passed among the members of the *"good old boy network."* What made
it difficult for him is that *"(t)here wasn't a lot of minority
ownership. ... It was basically conservative Anglo, you know, and hey,
this guy will sell it to this guy, this guy will sell it to -- and it
was basically almost like a little group there. (MDavila128, p 15)*

In contrast to Mr. Davila's experiences, Robert Fink, a White radio
station owner, shared how easy it has been for him to find properties
for sale through his network of other station owners and brokers. Even
if he were to enter a new market, he expressed confidence that he could
find a broker who would be willing to work with him.

> *(I)n fact, I never used a broker to find anything I bought. It's just
> kind of being in the business and keeping your eyes and ears open and,
> you know, hearing scuttlebutt and hearing that this person might be
> for sale and that type of thing. And that's always kind of been, you
> know, it's a small group, we broadcasters, and you talk to friends and
> you get an idea, and you think, hey, I might want to go there, and I
> hear that so-and-so is having some problems. And you talk to them. And
> so, it's really kind of old-fashioned, just exploring and seeing what
> you are doing. Now that's for me, because I've been so active here in
> California basically, that I have the network. If I were to buy or
> look for a station in Michigan, I would obviously have to go to a
> broker because I don't know anybody there. (RFink235, pp. 16-17)*

### 4. Discrimination in Advertising

Discrimination in the advertising industry against minority-owned and
--formatted stations has been well documented in recent years, most
notably in the report prepared by the Civil Rights Forum on
Communications Policy for the FCC, *When Being No. 1 is Not Enough: The
Impact of Advertising Practices on Minority-Owned and Minority-Formatted
Broadcast Stations* (submitted in January 1999)*.* Our study revealed
similar findings as reported below.

The small, minority and women broadcast licensees that we spoke with
frequently cited routine discriminatory behavior on the part of
advertisers and advertising agencies based on:

-   the race or ethnicity of a broadcast licensee,

-   the minority audience targeted by a format,

-   the operational size and scale of a licensee (e.g. WalMart's common
    refusal to purchase local advertising other than through national
    agency representatives), and

-   whether a licensee could afford to subscribe to rating services
    (e.g. Arbitron).

##### Advertising Dollars are the Life Blood of A Station

Advertising dollars are the lifeblood of a station. Ad revenues provide
the much needed working capital to pay for on-air and behind the scenes
professionals, local news crews, new or upgraded equipment, syndicated
programs, community sponsorships, general station promotion, and return
on the owner's investment. Further, since stations are valued at a
multiple of their cash flow, any diminishment in advertising revenue
reduces many times over the market value of a broadcast property.

If one takes into account the market entry barriers created by limited
access to capital experienced by small, minority- and women-owned radio
stations and couples it with the discrimination that they have
traditionally experienced from advertisers, one begins to understand how
serious a problem this discrimination is for these business owners. The
combined lack of resources severely impacts their ability to compete,
grow and, quite simply, survive. Further, in the face of industry
consolidation, the value of their stations suffers to a point where, if
they decide or are forced to sell, the proceeds from the sale may well
be less than the station would be worth if it were owned by or formatted
for non-minorities.

-   ***Personal Attacks and Racial Slurs***

Minority broadcasters have long had to suffer personal discrimination
that was blatant and insulting. Not only were advertising dollars
withheld because of this discrimination, but also minority owners had to
endure personal attacks and racial slurs. To the extent that such
attacks and slurs were general indicia of the status and standing of
minorities and women in the market, they are instructive. James Wolf,
Jr., an African-American radio broadcaster, shared his historical and
more recent experiences with us.

(W)e had comments made to some of our \[Account executives -- AEs\].
\[Some business owners\] said, "We don't want those kinds of folks in
our business." \[So they wouldn't do advertising on our station..\]
Well, see, they would say it to my White AEs. They would never say it to
my African-American AEs. They would always come back and tell me, you
know. But they never said it to African-Americans.

Now recently my brother got -- he faced some discrimination. He works in
operations here. And he had a client that said that -- "I normally don't
want niggers coming in my business." He said, "But you seem like you're
kind of nice." He said, "I think I'm going to buy some advertising from
you. You're kind of different from them," you know. "I'm just going to
give you a little advertising just because of your attitude. But I
normally don't care for niggers coming in my business." He said that.
And my brother said he let him write that contract up. He said he wrote
that contract. He was so mad. He said, "Man, I've taken more time than
I've taken in a long --" that happened last year as a matter of fact.
(JWolf281, pp. 37-38)

Jose Molina, a Hispanic radio and television licensee who acquired his
licenses between 1980 and 1997, had experiences that were not as blatant
as Mr. Wolf's, yet the feelings of discrimination were there just the
same.

> *Overtly, no \[I didn't experience discrimination because of my
> minority status\]. But sometimes I walked away \[from sales meetings
> with prospective customers\] with a feeling with, hmm, what could have
> happened here? ... \[I don't exactly know what gave me that feeling.\]
> I guess that if you are, I don't know, maybe like in that Bruce Willis
> movie, the Sixth Sense, you know. . . . (I)t's almost impossible to
> put words on when somebody treats you real, real nice, you know, ha ha
> ha, that sort of thing. \[If I had to draw an analogy of what it was
> like\], (a)t the beginning it would have been like The Jeffersons
> show. Remember that? Just like George Jefferson, who is a buffoon.
> That's how you would feel coming out of a meeting;\[and if I felt that
> the discrimination was not present, it\] would feel like you're coming
> out like Top Gun. But it wasn't one of these cruel types of
> discriminations, you know what I mean, \[like\] Jim Crow. . . . (I)t's
> very subtle. (JMolina121, pp. 16-17)*

##### Disparity Between Market Share and Revenue Share

More often, the discrimination took the form of withholding advertising
"buys" from the stations. It was not uncommon that stations would be
ranked in the top five in terms of audience share but be positioned well
below that level in terms of share of advertising dollars.

William Saunders, an African-American whose radio station was No. 1 in
the market as far as listeners, yet he could not get his fair share of
advertising dollars.

> *Well in the marketplace, two things were happening. Our station ended
> up being number 1 in the market, but we still couldn't get
> advertising. They said you \[have to\] be a certain place in the
> \[ratings\] book, a number between 1 and 4. And no matter where \[we
> got\] in the book, and our station WPAL AM was number 1 in the whole
> area, and still we couldn't get that crossover advertisement, so it
> really didn't \[matter\], and we needed the capital to make it run.
> And it put a strain on the corporation. (WSaunders163, p. 4)*

Andrew Langston, an African-American radio licensee who was a pioneer in
the industry, had similar experiences being No. 4 in the market with his
station.

I'm No. 4 in this market and I've been there for 18 months. That's a
year and a half I'm locked in it. The number one station is WHAM . . ..
, No. 2 station is . . . a country station, No. 3 station is . . . a
hip-hop, that's a rock and roll station. No. 4 is \[my station,\] DKX.
Now, I'm not (just ) saying that to you. Here's the classic frustration.
Now am I No. 4 in income? No. And am I No. 5, No. 6, No. 7, they make it
all the way down there, am I No. 9 is income? Hell, no. All right?
That's what is unfair here and how in the world can you let agencies
which some way or another do this and then they like Blackball you. You
don't get this, you don't get that. (ALangston112, p. 4)

##### The "Katz Memo" -- It's Implications for Minority Broadcasters

As recently as last year, Tom Joyner, a well-known and well-regarded
African-American radio personality with a popular, widely-syndicated
morning radio program, released an internal memo that had been written
at the Katz Advertising Agency ("the Katz memo") which essentially said
that media buyers should not place ads with minority-formatted stations
since their clients were looking to advertise to "prospects, not
suspects." As one might imagine, the disclosure of that memo caused a
giant ground swell inside and outside of the industry. Richard
Weaver-Bey, an African-American broadcaster, responded to the Katz memo
this way.

> *\[T\]he Katz memo was sort of the final spike in the coffin, and that
> was just last year . . . that that memo came out. And that's where a
> large advertising agency in New York is saying to its people don't buy
> Black media. I mean, when you say that and then you look at stations
> that are sixth or seventh in the market in the ratings by Arbitron and
> 24^th^ or 25^th^ in ad revenue, it says that there is blatant
> disregard for the stations that are owned by minorities or geared to
> minority listeners. I mean, it can't be anymore poignant than that
> when you look at the facts. You know, many people are saying why are
> African-Americans or minority people always crying, but the facts are
> the facts. (Rweaver-Bey171, p.8)*

Broadcasters like Black radio station owner Art Gilliam see part of the
problem as lack of awareness on the part of advertisers and agencies. He
thinks there is an opportunity to educate the public about
African-American markets and spending power.

I think the advertising community operates in the general framework as
the rest of society in the sense that many of the advertisers,
particularly the agencies, have not much awareness of African-American
markets or their value. So that if you have a real good sales staff,
they can go out and talk directly to retailers and many of those
retailers if they have an interest in Black markets, will be responsive
and some can be convinced of the importance of that market.

But within the agencies, there's a lot less of that and over the years
we've experienced that and unlike radio, where there are certain EEO
requirements which put in place people who understand African-American
markets, that doesn't apply in the advertising business and consequently
if you have for example a lily White advertising agency, that has no
awareness of Black media, Black markets or anything along that line,
then you're going to have a harder time convincing them to buy Black
radio. So there's no question that there is, I don't, I wouldn't
necessarily even call it discrimination, but just an absence of
awareness in that market. (AGilliam117, p. 20)

Charles Cherry, a fellow Black broadcaster, shares Mr. Gilliam's views.

. . . As far as trying to market the station to other folks. . . you
have to educate them in reference to the fact that Black people are a
viable market, because a lot of folks just don't understand that. They
just don't believe that Black people buy anything. And you would think
that people who deal with numbers and understand what statistics say
could see the purchasing power of Black America, the allure to Black
America, the high level of listenership, the susceptibility . . . or the
effectiveness the advertising has on the purchasing power and the habits
of Black America \-- (CCherry262, pp.6, 32)

##### Discounted Pricing for Ads on Minority-Formatted Stations

In addition to withholding advertising altogether, many minorities have
had to accept discounted pricing on their advertising spots. Dorothy
Brunson, the first African-American woman television broadcaster, shares
that *"(t)here has never been an equal process in terms of advertisers.
If you have 10 listeners who happen to be Black, they may be worth
\$2.00; if you have 10 listeners who happen to be White, they may be
worth \$5.00." (DBrunson105, p. 5)* As Ms. Brunson continued, she
indicated that she understood that this was the way it was and learned
to take that into account in the operation of her stations.

This dramatic disparity in prices for ads was not unique to Ms.
Brunson's experience. William Saunders, another African-American
broadcaster, had similar experiences and shared the choices that he had
to make as a result.

> *Normally our price \[for advertising spots\] would be lower . . .
> (p)robably sometimes 50%. . . . We wouldn't even attempt Wal-Mart;
> it's not even worth raising the effort. But get down to just car
> dealers, large car dealers, here, and I don't know if you know much
> about South Carolina, but the coast of South Carolina, where we are,
> Blacks have always been 40-50% of the area, and some of the counties
> now are still 80% Black. And the area where we live, Blacks buy about
> 70% of the cars. These are their estimates, not ours. We think it's
> higher than that. But the advertiser goes to the other stations or to,
> I mean these companies sponsor golf tournament and fishing things and
> all kinds of stuff that has no relationship to my market or my
> business and the African American community gets nothing out of
> spending their money with these merchants.*
>
> *So that's where the problem lies. And even when we do something, like
> I just did a deal with Rick Hendricks, he's the largest dealer here in
> the Charleston area, automobile dealer, and we wanted to do an
> education program called Focus on Education, a half an hour a week.
> And for a year to run this program, it would cost us \$13,000. And we
> went to them with it and they said well anytime that we want to do
> something with the community or we if want to reach the community, we
> always want to do it with you, and we want to just buy advertisement,
> then we go to these other people. Don't make too much sense to me, but
> they ended with the numbers, but they came back to me and said, well,
> our advertising people are saying that the program on your station
> would only be worth \$5200. So what they do in a sense, they put a
> price on my product. And you either take it or you leave it. And you
> know what we did was you know we wanted the program so we said that
> WPAL will sponsor that other part of that \$13,000, but not changing
> our price. (WSaunders163, pp. 8-9)*

Some people, such as Bob Carl Bailey, an African-American radio licensee
who acquired his station in 1977, took bolder actions vis-à-vis their
communities. Mr. Bailey risked alienating one of his largest advertisers
when his station was critical of one of his *"biggest food chain
advertisers for the low numbers of Black people it's hired in the
management ranks of the store. Nine locations, very few Blacks . . . so
how the hell's he going to write me a check when I take that kind of
stand against him?"* he asks. Furthermore, his station insisted that
Black people be hired by the Census Bureau to be the enumerators in the
Black neighborhoods. *"That hurts you financially,"* he offered.

##### National vs. Local Advertising Revenue

For radio broadcasters, it is important to receive a significant
percentage of their advertising revenue from national accounts vs. local
advertisers. The national advertisers are more able to afford
advertising than their local counterparts and advertise with more
regularity and frequency. Historically, minorities have had difficulty
acquiring national accounts. Some, like Willie Walls, an
African-American radio station owner, felt it was because they did not
move in the same circles with those who made advertising decisions.

> *Well, the discrimination was, basically, that we were not able to get
> national accounts and some local accounts that maybe a counterpart ...
> of another race, would do. Because they had inside contacts with
> people. They ate with them, they worshipped with them, which we did
> not do. And they had a better chance of getting ads and advertisement
> that we sometimes did not get. (WWalls403, pp. 4-5)*

Richard Weaver-Bey, an African-American who in addition to his radio
station owns a real estate business and is active in his community,
noted that the lack of contact with the "right" people has impacted his
ability to gain advertising revenue.

# 

I was right here in the Hartford area and I run a real estate business
as well. What I had planned to do was to take control of the radio
station and use my community contacts and a number of boards -- I sit on
a little better than half a dozen boards of directors from the Chamber
of Commerce to the school board, to the Board of Education to Community
In The Arts organization. So I thought that there would be enough
community contacts for me to be able to encourage people to advertise
and thereby getting enough revenue to make our station profitable or at
least break even.

But unfortunately that's not the case that we minority media are finding
around the country. We're finding ... that when stations that are owned
by minority individuals, whether they're first in the marketplace or
not**, t**hey're not generally first in ad revenues, because ad revenues
basically are doled out by large advertising agencies and many of those
deals are made on the golf courses and in the country clubs, and that's
not really the area that is frequented by minority individuals or
females. (RWeaver-Bey171, p.2)

Johnny Shaw, a fellow Black broadcaster, felt that because local,
independent stations are providing service to their communities, *"there
ought to be some regulations put into place to say that independent
owners, especially if they pull good numbers, if they've got the
listenership, ought to get at least a fair, what I would term as, a fair
share of those national dollars. And when I say national dollars, I
speak in term of agencies and, not just local people because you've got
to understand local business, small businesses can't afford to spend a
whole lot of dollars for advertisement. I'm talking about, you know,
your big conglomerate companies who can spend those dollars. I think
some of those dollars should be shared with us. (JShaw185, pp. 15-16)*

Mateo Camarillo, a Hispanic radio licensee, discussed how being in
smaller markets coupled with his minority status and minority
programming markedly affected his ratio of local to national
advertising. He raised the issue of how advertising reps are compensated
for placing ads.

\[Our radio stations\] were in the obviously smaller markets in
\[California\]. One of the problems of having \[stations in smaller
markets is that\] the percentage of local vs. national support is very
skewed so that it's . . . heavily laden with local support as opposed to
the typical formula 60-40 national to local, it's more closer to 100%
local.

And there's a, and I won't say conspiracy, but there's also the media
reps, \[who\] have an incentive just to stay with big cities. And so
even though they may represent you, your representation is not a very
strong advocation for the smaller markets. So the media reps play a role
in the finances and the ability of a medium- to smaller-market station's
being able to get national advertising, which is a real problem in this
industry. And I don't have a solution, but I'm just saying is that there
are very few Hispanic media reps, so the understanding of that issue is
not as clear as it ought to be.

And the consolidation that's taking place, even marginalizes those few
that are, so they have to concentrate on the larger markets where the
consolidation is taking place. So the smaller and medium-sized markets,
which is where the area of Hispanic ownership of licenses happens to be
because they can't afford the bigger cities unless they themselves have
the wherewithal to become a public entity, the majority of Hispanic
licensees are having to struggle. That's why I got out of broadcasting.
That's why this year I sold the end of my stock and I actually started
shifting away in '95. (MCamarillo375, pp. 18-19)

##### The Impact of Rating Services Practices on Minority Broadcasters

Another variable that factors into whether and at what level small
broadcasters receive advertising revenues are the audience rating
services such as Arbitron[^28]. Sampling practices, geographic market
definition and the cost of the service are all impediments for
minorities in the ratings game.

Ed Gomez, a Hispanic radio licensee, shared his experiences with
Arbitron's efforts to capture the Hispanic audience listening patterns
and the reactions of other Arbitron members to the company's efforts to
accurately capture the data.

> *Arbitron was another thorn in our side. Arbitron ... when Arbitron
> instituted a methodology that they called personal placement and
> retrieval ... PPR meant that over a survey period... they had a policy
> of sending so many diaries into high density Hispanic areas and high
> density Black areas. Well, both the Blacks and Hispanics, and
> particularly the Hispanics, were terrible at returning the diaries.
> They just, you know ... they would agree to do it and then they
> wouldn't do it.*
>
> *And it was hard for Arbitron to get back any semblance of diaries
> from the Hispanic communities. So they instituted personal placement
> and retrieval, and they would hire people here in Albuquerque to go
> into the south valley, which is a high density Hispanic area, or the
> north valley, and put in, you know, 50 diaries. And it was a four-week
> survey. They had to keep the diaries. In between the four weeks, these
> people were required to call or even go back and make sure that the
> people were not having any difficulties with the diaries and making
> sure that they were keeping them; And at the end of the survey period,
> go and get them, retrieve them.*
>
> *Well, all of a sudden, stations in large Hispanic markets began to
> generate some really high numbers; some high rating numbers. Because
> they were finally really measuring the Hispanic markets. Well, the
> general market members of Arbitron began to complain, and they said,
> you know, you shouldn't play favorites. I mean you are doing this
> simply to help the Spanish stations, and they didn't want that to
> happen. So they dropped that methodology and went to something else...
> it was just going back to what they did before. And so, if you didn't
> have 80% of the population Hispanic in your market, you lost all of
> your numbers.... And that was, in my opinion, blatant discrimination
> (EGomez370, pp. 34-36)*

Many like Black radio station owner James Wolf, Jr. were confronted with
the impact of Arbitron ratings on their ability to secure local
advertising dollars. Without the ratings, which one had to be a member
of Arbitron to use in selling efforts, advertisers could use that as an
excuse for not buying time on a particular station.

> *Well, ... I've had difficult times with much of the advertisers,
> especially locally. Unless you've got the numbers, you know, the
> Arbitron numbers, you know, you still are not going to do well, you
> know. . . . Oh, they bought from us because we always had the numbers,
> you know.... \[But\] we were brutalized on the local \[advertising\]
> end of it. (JWolf281, pp. 37-38)*

Art Gilliam, an African-American radio licensee, talked about how
Arbitron's definition of metropolitan areas can severely impact the
smaller, low power broadcaster.

The Arbitron rating area, therefore, what they consider their metro
becomes an important factor for us, because if they expand what they
call the metro, it impacts stations with less power. Now, our position
is, and has always been, that the objective way to determine the metro
is to let the government determine what that metro is, which the
government does define standard metropolitan areas, whereas Arbitron, at
the request in many instances of its subscribers, can expand the metro
and has done it in the past, beyond what is the actual government
defined metro and that creates a hardship for stations with less power.

And I don't know to what extent the FCC or government could play a role
in that but it gets very expensive to take it through the Department of
Justice or try to claim anti-Trust or anything like that, but it's
definitely an area that it's time to consider, especially given that
there are offenses taking place now. (AGilliam117, pp. 22-23)

Johnny Shaw and Richard Weaver-Bey, both African-American broadcasters,
talked about the prohibitive cost for small broadcasters of being a
subscriber to Arbitron and the fact that if you do not subscribe, you
cannot quote your Arbitron ratings when you sell advertising. Since
advertising agencies, who place the bulk of national advertising
dollars, almost always use Arbitron ratings as variables in the "buy"
decision, lacking such ratings is a severe handicap for those who cannot
pay the price of admission.

Johnny Shaw offered these experiences.

> *And that's what hurt us the most as independent owners who are trying
> to -- \[get advertising dollars\]. We can't even afford to invest in
> Arbitron because it costs so much money. And I'm not complaining about
> Arbitron, ... (t)he least I can get by with to buy the Arbitron
> figures is \$10,000. (JShaw185, p. 16.)*

Richard Weaver-Bey echoes these comments.

\[We don't\] subscribe to Arbitron because our numbers are not strong
enough, our coverage area is not that broad and it's expensive to
subscribe to Arbitron. And if you don't pay for a subscription to
Arbitron, then they do not focus on your audience in order to publish
your numbers and you're not able to quote the Arbitron numbers. So that
becomes a very difficult challenge. (RWeaver-Bey171, p. 11)

Who gets sampled and how they are sampled determines the accuracy of the
information collected by the ratings agencies. Erskine Faush, a Black
television broadcaster, takes exception with Arbitron's sampling
practices.

I've always had a thing with the rating people. I don't think it's done
fairly. I don't think it's truly representative. I don't think there's
enough sampling. I don't think, you know -- I don't think it's ever
been. And I've still got in my possession, as I said, time when the
stations -- our ratings, you know, exceeded those of the general market
stations even. And, yet, it was always with the asterisk. We can't sell
on the numbers. We're not a subscriber \[to the rating services\], okay,
because of the enormous cost. (EFaush238, pp. 21-22)

Jeffrey Hutton, a White radio broadcaster, made us aware of the fact
that small, non-minority-owned stations have related problems with
Arbitron.

> *I'm in an unrated market, I can't afford to pay Arbitron to tell me
> how many people listen. It wouldn't be accurate anyway because in a
> county our size, they only send out like 20 or 25 diaries so I have to
> be able to sell my results. I have to be able to explain to people why
> working with my station will put butts in their buildings, so to
> speak. And, business does not come to us, I go to everything. I go to
> everybody and that's how we survive. (JHutton383, pp. 9-11)*

Mr. Hutton also shared that since he is *"a hometown radio station"* in
very small city, *"people with national buys never come"* to his town.
Like his minority counterparts, *(t)he \[advertisers\] don't get to me;
I go to them. I have to, I mean, very rarely will somebody ring my
telephone or send me a fax and say I want to buy advertising. I go out
every day and knock on doors and introduce myself to people and try to
sell advertising. (JHutton383, pp. 9-11)*

In contrast, Robert Fink, a White radio broadcaster, told of experiences
selling advertising time quite different from those we heard about from
minority broadcasters. He characterized whatever difficulty he might
have with capturing local advertising dollars as purely a function of
small advertisers' budgets, not discrimination. With national
advertisers, he shared Mr. Hutton's experience being in a small market.

> *Basically \[our experience of going out and getting advertisers has
> been\] really good. And I've been a sales manager in Los Angeles, so
> I've had the experience of, you know, "the big time" and the small
> time. In a small community, they tend to realize that they do need
> you, and it's a difficult sale simply because, again, their budgets
> are so small, and it's more a budgetary problem with our clients than
> whether or not they want to do something with us. Some people don't
> even want to give you the time of day. But anybody that's somewhat
> trying to make their business successful, they will talk to you*
>
> *... I'd say in the small market the biggest problem tends to be the
> budget problem of the local merchants. (L)ocally we're accepted fine
> because we're just one of the people. Where we don't get our share is,
> we do not get our share of what we term regional or national dollars.
> \[With\] the local mom-and-pop, we don't have a problem except for
> budget; the bigger type of people, their hands are controlled by their
> corporate offices that basically give them no dollars to spend on a
> small market. (RFink235, pp. 18-20)*

### 5. Effect of Deregulation and Consolidation

On par with discrimination as a long-standing barrier to broadcast and
wireless entry, study participants cited industry consolidation pursuant
to the 1996 Act, as a fundamental and significant barrier to entry in
recent years.

Johnny Shaw, an African-American radio station owner, characterizes the
raising of the caps on the number of radio stations one can own in a
market as *"the lowest blow for independent owners. I think that
probably has hurt more than anything else. (JShaw185, p. 21)*

-   ***The Shift from Local, Independent Owners to Large National Group
    Owners -- Opening the Floodgates That Virtually Wiped Out Small
    Radio Stations***

With the consolidation resulting from the 1996 Act, there has been a
shift away from independent local owners to large, Wall Street-financed
group owners. Manuel Davila, a Hispanic radio broadcaster, recognizes
the shift from community focus to earnings per share.

\[I\]t's basically all corporate, you know, because they have to answer
to . . . investors now. The investors don't give a damn if it's an
Hispanic radio station or it's a Black disk jockey or it's a Chinese
salesperson. They care about if they get 10 cents on the damn
investment... . All the government did is help the big guys. And that's
what's happened. The big guys, corporate America, have taken over
communications, and it seems to be okay with everybody, or it seems to
be okay with everybody that's of importance, I guess. Now I may not like
it. You may not like it. My dealerships\[who advertise with me\] may not
like it but, hell, there's nothing he can do about it. (MDavila128, pp.
50-51)

Many believe that the deregulation of broadcasting was motivated and
driven by politics, i.e. donations made to legislators by large
broadcasting enterprises. John Tupper, a White television licensee
suggests that *"\[C\]ongress and the FCC shouldn't be fooled by the
contributions being made by the networks to their campaigns for the
purpose of gobbling up more of the voices out there that are going to be
more homogenized over time. (JTupper216, p. 36)*

Mary Helen Barro, a Hispanic former broadcaster, talked about the impact
of raising the caps as *"open\[ing\] the floodgates."* While caps had
been lifted gradually from 1985 to 1996, the big jump allowed by the
1996 Act *"ended up wiping us all out."* She went on to say:

> *The big corporations got what they wanted, and the little people are
> out of business. Bottom line. ... They kept bumping them up because
> you know the big corporations wanted it.... (W)e were pleading with
> them, we were saying, "No! You're going to put us out of business! We
> can't grow fast enough, we can't . . ." . . .(W)e went to the FCC, we
> went to hearings, we wrote letters . . . to the Congress. It did not
> matter. (MHBarro190, p. 13)*

Manuel Davila, a Hispanic broadcaster, blames the government for the
predicament in which small broadcasters find themselves today. He feels
that the only thing the 1996 Act is going to do for the "little guy" is
help him or her get a better price for his station once he or she sells
because he or she can not compete anymore.

Who's going to lend us \$30 million \[to buy a station\]? Because the
government, the government had dictated that big business is going to
own communications. And that's the government's fault, man. Because
somewhere along the line the government said it was all right to own 400
radio stations. ... (L)et me tell you the scenario that I see.

Originally you could own seven stations. . . . Okay, that's kind of back
in the old days. And then that changed to 14 because there was AM and
FM. And then as the people acquired what they needed to acquire -- and
I'm not knocking it but, you know, the big guys, they acquired what they
needed, but they said, you know, it's time to change the rule again. So
let's go to 20 stations. Okay, the government says yeah. They ram this
thing through. Now they can own 20 AMs and 20 FMs, something like that.
And then all the big guys buy what they can buy. And then they said, you
know, we think it's better if we own 25. Well, the government changes
the rule again ... And now they can own all these things.

And they're saying this is all to help the little guys. I haven't seen a
little guy get big yet, you know. I'm not saying they haven't, okay.
Then the government says, you know what, the big guys have bought all
the markets that they can possibly own, New York, LA, Chicago, San
Antonio, Dallas, Houston, El Paso, et cetera, et cetera, et cetera, down
the row. You know what, we think those rules should be changed so we can
own two FMs in those markets because we've bought everything we can buy
and we want to get bigger. So the government says, you know, that's a
great idea. The next thing you know, the rules have changed, again,
under the pretense to help the little guy. All this did for the little
guy is allow him to sell his station. That's about all this did for the
little guy. Because he couldn't afford to buy the big guy out, so he had
to almost out of default sell. (MDavila128, pp. 45-46.)

Mary Helen Barro also acknowledges that deregulation did not help the
independent broadcasters, but rather put them out of business. She
further sees market consolidation as a threat to freedom of speech as
smaller and often minority-owned and minority--formatted stations are
forced out of business.

> *They put us out of business bottom line.... Yeah, no doubt about it.
> I'd be in business today if it weren't for the FCC.... the American
> Hispanic-Owned Radio Associations broadcasters \[fought\] individually
> for years as the FCC and the Congress kept pushing for higher
> ownership caps, trying to gratify the large corporations who wanted to
> expand and they wanted to buy up stations and expand. Now there were
> some small broadcasters who did want to sell. There was no doubt about
> that. But for every one that wanted to sell, there were 10 of us that
> were struggling to stay in business.*
>
> *And when the FCC raised the ownership cap, they literally shoved us
> out of the business. And if you look at broadcasting today, you will
> see that the vast majority are large corporations, fewer minorities
> ... And what I don't think has been discussed up 'til now but what I
> consider a very grave threat is loss of freedom of speech. With fewer
> and fewer companies owning more and more licenses, there is a real
> threat to freedom of speech. (MHBarro190, pp. 1-2)*

##### Economies of Size and Scale

The findings of this study point to an unprecedented level of market
dominance and influence enjoyed by public companies utilizing scale
economies, inexpensive capital, stock-funded acquisitions of licenses,
and similar financial and operational advantages. These attributes of
size and scale represent insurmountable obstacles to competitiveness for
small, women- and minority-owned companies lacking such advantages.

In broadcasting, participation by small and local businesses had been
historically supported due to a regulatory structure that set licensee
ownership levels and encouraged local ownership. Through the 1980's and
early 1990's, the industry saw significant increases in minority and
female ownership, stemming from regulatory initiatives that included
comparative hearing minority ownership policies, distress sales, and tax
certificates. Since 1996, however, small, women- and minority- owned
companies, and the communities they serve, have, and continue to be,
dramatically impacted by a broadcast industry rapidly responding to the
deregulatory nature of The Act by consolidating license ownership.

#### (a) Impact Upon Licensees 

##### Deregulation as a Barrier to Entry 

Deregulation and the resulting industry consolidation have formed
multi-faceted barriers to new entry for small, women- and minority-owned
companies. The dramatic increase in the price of stations, and the
predominance of Wall Street-funded companies with stock and stations to
use as currency for station acquisition, have severely disadvantaged the
small, independent broadcaster. Given the history of limited access to
capital traditionally experienced by small companies, and especially
those owned by woman and minorities, it appears that this disadvantage
is virtually insurmountable.

Brian McNeill, a media investment banker, explains how the economic
landscape for broadcasters has changed in recent years.

... (T)he bulk of our business used to be financing entrepreneurs in the
radio and television business, but as consolidation has played itself
out, most of the assets have gone into the hands of public companies,
there are just quite frankly less opportunities for private companies
and entrepreneurs, and even less opportunities still for start ups.
There's just less opportunities.... (A) much greater proportion of the
stations are owned by large public companies so there's just less
turnover, there's less activity, and in fact, prices have been driven up
by public companies and that makes it harder for entrepreneurs to make
the numbers work. So for both of those reasons there is just a lot less
activity for private companies and entrepreneurs and individuals to buy
assets in the media businesses. (BMcneill513, pp. 5-6)

####### 

Mr. McNeill goes on to talk about how this change of station ownership
from private to public companies has negatively affected small
businesses.

(M)aybe I'm naïve and maybe there's a lot of prejudice and hardship that
goes on at a level that I'm not aware of, but I think the world is
getting pretty focused on quality and pretty color- and gender-blind. I
think the difficult thing is that the structure of the industry has
changed, and I think it's just really difficult now because ten years
ago, there was a very small percentage of the assets in the hands of
public companies. A very large \[number\] of the assets are \[now\] in
the hands of public companies and that's just made doing deals a lot
harder for everybody\... It shifted into high gear in 1996, when they
had the 1996 Deregulation Act. ... So since 1996, it's more the private
and small companies \[that\] are disadvantaged, vis-à-vis, big and
public companies. That's been a more dominant theme than minorities and
women being disadvantaged. (BMcneill513, p. 25)

####### 

Art Gilliam, an African-American radio broadcaster, explains how this
shift affects access to both acquisition opportunities and capital.

> *The \[large companies\] can go to the market place, get funded and
> buy properties, they can also bid up the price because they can wait
> for a number of years to turn a profit. So you have a situation where
> they're able to obtain financing ... so that creates upward pressure
> in terms of pricing. So it's very difficult to find stations and to
> compete for financing with companies that are in that position.
> (AGilliam117, p. 19)*

Frank Montero, former Director of the FCC's Office of Communications
Business Opportunities, talked about the change from a different
perspective. Historically, he has seen that small, minority- and
women-owned companies have *" ... frequently focused on the smaller
markets or the medium-sized markets as opposed to the big markets
because the economies are easier to maintain ..."* He remarks that
initially consolidation took place in the larger, more lucrative market.
He sees that changing now and notes that new entrants will have more
difficulty than before. *" ... I can tell you that consolidation is
definitely moving downstream as you are seeing these large companies
definitely starting to inquire into the middle and I think eventually
into the smaller markets. I think that doesn't bode well for new
entrants, for new people coming into the marketplace. (FMontero509, pp.
10-11)*

##### Deregulation as a Barrier to Expansion

For small, women- and minority-owned companies already operating as
licensees, deregulation and consolidation have meant severe difficulties
in growing their stations, adding to their holdings and remaining
competitive. Growth of existing operations is generally a function of
advertising revenue and access to working capital. Growth in holdings is
a function of access to large sums of capital. With discrimination in
advertising and the capital markets coupled with the effect of
deregulation on national advertising practices and station prices,
smaller broadcasters have virtually lost their ability to compete.

Alfredo Alonzo, a Hispanic male radio licensee, explains how
deregulation has restricted the growth opportunities for small
businesses.

> *You know when the FCC deregulated ownership, in '96 was it? I really
> feel that that hurt the small business owner because of the fact that
> these larger entities were able to buy literally almost all the radio
> stations in the big markets. And it really didn't leave a whole lot of
> pickings for anybody else. A case in point, in Tampa, we happen to
> have 2 AMs and an FM in Tampa, and if you look at Cox, Clear Channel,
> and CBS, between the three companies, they own like 80% of all the
> radio stations in the market. So it only leaves 20%. Before 1996, the
> most you could own was 2 AMs or 2 FMs \[in each market\]. And prior to
> that, a number of years before, the most you could own were 8 AMs and
> 8 FMs throughout the whole country. So I just feel that deregulation
> has hurt the ability of a small business entrepreneur to really grow.
> Because you just don't have assets available to you. These companies
> have grown; they set up these portfolios where they have, you know, 8
> radio stations in their given market, and since they're not forced to
> sell because they could legally own them, they drove up the price
> because they were able to pay more money than the small business
> owner, so I really think deregulation has hurt the small businessman
> more than anything else.* *(AAlonzo377, pp. 7-8)*

Erskine Faush, a Black television station owner, told us of his recent
attempt to buy a station in Birmingham, Alabama. He made an offer on the
station and thought he had a deal. *"... but over the weekend something
happened to that deal and one of the major companies came in with more
bucks and bought it. (EFaush238, pp. 12-13)*

####### 

####### Even though Mr. Faush was trying to buy another station, many small broadcasters are being marginalized and often forced to sell. Mateo Camarillo, a Hispanic broadcaster, says:

> *... (A)s I mentioned to you, my preference is to look at the world
> with more rosy-colored glasses than looking at it half empty and being
> pessimistic about things. But you know, as I see things, it's a real
> challenge, it's difficult to see positive things with the trends, the
> impact of consolidation, with the market being controlled by the big
> guys and the impact with most minorities not being big guys, being
> marginalized and squeezed to the point that ... if it wasn't for their
> dedication and commitment to community, it \[would\] make life real
> difficult. But still their life is difficult. I see few rays of hope.
> (MCamarillo375, pp. 27-28)*

Tyrone Brown, an African-American communications attorney and former FCC
Commissioner, understands that the need to grow or die is what is
driving many small broadcasters, and largely minorities, to sell their
stations. *"Well, I can't get big enough to stay in this game so I
better get out now." (TBrown510, p. 11)*

Patrick Prout, an African-American radio licensee, told us why he was
selling his station.

> *If one does not have a huge number of stations -- at least that's my
> perception and it's my belief and others' -- one cannot survive as a
> small broadcaster.... when you have to compete now that the cap is off
> in terms of how many stations one can own in a particular marketplace.
> We were actually in an LMA \[Local Marketing Agreement\] situation. We
> ended up in an LMA situation.... (T)he owners of the stations that we
> were LMA-ing to were selling their stations, and we decided to go in
> as part of the package. For one, we would get out from under this
> thing. Secondly, I'm still on a full-time basis trying to drive cash
> flow to feed my family. So I couldn't afford to -- just to - put the
> time into this endeavor, and decided I might as well just sell it.
> (PProut284, p. 9)*

##### Economies of Size and Scale as a Barrier to Expansion

Small, women- and minority-owned companies report their viability is
being made more vulnerable due to increasingly larger consolidated
competitors who enjoy natural operational advantages that smaller
companies cannot match. With more stations, one has more clout with
advertisers. For single-station or very small group owners, the
remaining piece of the advertising pie is very small.

Additionally, larger, more well-financed broadcasters have the capital
to finance station improvements, attract and retain top management and
on-air talent, and purchase syndicated programming. For some, the
struggle to stay competitive in today's market reality is no longer
worth it.

Diane Sutter, a White former television licensee, also explains that
size and scale have impacted the small licensee's ability to compete.

> *Well, the trouble with doing anything in radio is ... the monopoly
> game has already been played for a long time, and if you can't get 4
> or 5 or 6 or 8 stations in a market I think it's very difficult to
> survive. I think that's already happened... for me, I don't think
> there's a place for me in radio right now. I mean let's face it; when
> Lowry Mays \[Chairman of Clear Channel\] is selling off a bulk of
> stations that if someone had bought those would have been the 3^rd^
> largest group in the country and Mel Karmizan's \[CEO of CBS radio\]
> got 180. That's not an arena in which someone like myself can compete
> very successful(ly)... (DSutter205, pp. 23-24)*

Dorothy Brunson paints a bleak picture for African-American-owned
television stations, such as hers, over the next few years. Ms. Brunson
predicts that being small, non-network-affiliated stations, struggling
to get carried by cable and satellite systems and still being required
to conform to the new digital television requirements, will cause all of
them to be out of business in the next two years.

> *When I look at the number of African-Americans that own television
> stations in this country, I think there's twelve of us, if I recall
> correctly.... And I'm sure that in the next two years, we won't exist.
> There will probably be none, because certainly, it's going to be more
> difficult for me. As high definition comes about, I've got to find
> funding to do that.... (L)ike right now, because I'm not \[affiliated
> with\] one of the big four \[networks\], the cable and the satellite
> companies don't have to carry me for two years. How am I going to
> survive for two years? And that's happening to all of the smaller
> market stations, where we \[African-Americans\] are. Two of us are in
> large markets and the others are in small- to medium-sized markets.*
>
> *What's going to happen when the satellite (television) companies
> don't have to carry you, and that becomes as important as cable...And
> what happens to most carriers in the interval? For us, it's life and
> death. But for others, they can market because they've got the better
> programs. Well, you sell out. You've got to get out. There's no way
> you can survive, you've got to get out. So then \[the station under
> the new owner\] becomes an ABC affiliate or somebody else who can go
> in and lower the boom on those \[satellite and cable\] guys.*
>
> *And the Commission says, well go in and ... negotiate with those
> guys. I have not been able to get in the door. I haven't been able to
> get in the door of those satellite companies'. Those cable guys, I'm
> still fighting against the opposition from most carriers of seven to
> eight years ago... There's just no way that we can survive. In radio,
> you probably can do a little better, because you don't have the
> technical, you know, those hindrances. And you're not on the cutting
> edge, but I just don't see, I don't see many of us staying in
> television. I just don't see it. I talked to five to six of these
> people all the time. And they're scared. I mean, we can do the basics,
> but we can't compete with the big guys, you know, we just don't have
> the wherewithal. Someone said, well, why don't you all band together?
> But if you take a lot of little nothings and put them together, you
> still got a big nothing. (DBrunson105, pp. 23-24)*

##### Small Businesses Unprepared for Speed and Impact of Consolidation

Mary Helen Barro, a Hispanic former radio broadcaster, shared the impact
that consolidation has had on her life. She lost her stations as did
some of her Hispanic colleagues. Consolidation happened too quickly for
her to put into place a meaningful competitive strategy. At 61, she is
"*on food stamps*" and back in college to get herself *"... a teaching
credential so I can earn a living."* She feels lucky that she did not
lose everything. She knows many who did.

Patrick Prout, a Black radio licensee, asks the FCC to find some way to
help the small owners, a lot of whom are minorities, compete with the
larger players.

With the consolidation and the mega broadcasting companies today, that
certainly has driven a lot of small players out of the marketplace and a
lot of your African-Americans who are coming in -- or minorities,
period, coming in \-- were the smaller players. Some sold to make money
and get out. Others sold because they felt they had to. They couldn't
compete. I think the FCC needs to somehow figure out how they can put an
umbrella around the small players or do something to help the small
players compete with the larger players. (PProut284, p. 19-20)

### 

##### The Impact on Access to Capital

Beyond their relative disadvantage with respect to simple access to
capital, small, women- and minority-owned companies perceive a
diminished supply of capital available to them, resulting from
structural changes and responses in the industry with consolidation, and
with harmful impact on their ability to enter the industry and sustain
their businesses.

Where personal resources and perhaps a bank loan used to be the cash
requirements for license acquisition, ballooning station prices have
necessitated access to huge sums of both debt and equity financing.
Stations are now selling for millions rather than hundreds of thousands
of dollars. Whereas before, banks might finance three-quarters of the
cash needed to buy a stations, they are currently lending only up to
approximately one-third of the purchase price for stations. The balance
has to be financed with either venture capital funds or personal assets.
Few people have personal assets large enough to forego the venture
capital route.

Having been traditionally hampered in their efforts to acquire capital
during the pre-1996 Act years, small businesses and especially
minorities, are virtually precluded from gaining access to the financial
wherewithal needed to be able to participate in today's consolidating
broadcast marketplace.

Charles Cherry, a Black radio broadcaster, tells us that *"Consolidation
sucks. ... (T)wo-thirds of the people that were in this business five
years ago are now gone and \[for\] the people who want to stay in and
grow the business there's no incentive because you can't get any help
from anybody to do it. I mean, they just look at you like, you're just
too small." (CCherry262, pp. 24, 28)*

Michael Carter, a White radio licensee, who benefited from high station
prices when he sold his station, acknowledges that consolidation has
hurt the *"little guy."*

Well, \[raising the caps\] helped me. It helped me get more money for
WHB \[upon the sale of the station\], but it's not good for radio.
What's good for Mike doesn't mean it's good for the industry . . .
because a little guy like me doesn't have a chance to get in today. We
really don't with these mega corporations. I don't have a chance.... You
can't compete with their money. Three radio stations in Kansas City sold
the other day for \$113 million. I can't raise that. (MCarter230, pp.
14, 15)

Manny Davila, a Hispanic radio broadcaster, shares the irrationality of
the prices as they relate to the amount of capital a small radio
operator can possibly raise for station acquisition.

What \[does the FCC\] do? Well, we're going to make it better. We're
going to do a bidding process \[among the buyers\]. We're going to do a
bidding process and make it fair for everybody. So you and I go bid for
-- you know, what are we going to bid? How would you like \[to be\]
doing the cable network in New York, how about that? I want the cable
network in New York. You and I go bid. What are you going to bid, girl?
What am I going to bid?

Well, I've got -- damn, I've got 50 pencils here, man. And with your 25
bucks, we've got 25 bucks here. Oh, by the way, this guy just bid \$10
million and he don't even know \[squat\] -- but he's got it. You know
... come on, has it opened up for all of America? No, it's opened up for
corporate America. Are we saying that maybe we should be on the
corporate ladder? Yes, we should be on the corporate ladder. Have we had
a chance, a real fighting chance to get on the corporate ladder? Hell,
no, we haven't. Because, unless you're lucky, and actually got a station
in a big market a long time ago -- we don't have a chance.... I talked
to a guy in San Antonio. And the guy says, well, you know, they're going
to sell these stations for \$40 million, two FMs that I'd like to buy,
\$40 million. Where is this guy going to get \$40 million? (MDavila128,
p. 51)

Mary Helen Barro shared her story about how the timing of the FCC's
announcement regarding the lifting of the ownership caps killed her deal
to buy additional radio stations and ultimately forced her into
bankruptcy. She was *"(t)wo weeks away from signing a refinancing deal
that would have kept me alive and I would have ended up with 2 AM s and
2 FM s.... Two weeks away from signing my papers, the FCC announces that
they're going to raise the ownership caps and this time they're going to
raise them so high, ... (i)t scared my financing to death and they
backed out. They said, "That's the end of small business in
broadcasting." ... So my whole house of cards fell apart.... And, well,
I went through bankruptcy. I lost everything. Yeah, I wasn't able to go
through on the deal, I lost my FM, OK? My FM that I had on the air, I
lost it." (MHBarro190, pp. 11-12)*

##### Impact on Cost of Capital

Along with access to capital, cost of capital constitutes a competitive
disadvantage and barrier to entry for small, women- and minority-owned
companies. Large, publicly-traded companies have an advantage due to
their ability to acquire debt financing at lower interest rates than can
their small business counterparts; and they can use their stock as
payment for station and company acquisitions.

As Diane Sutter, a White former television licensee, explains, a lower
cost of capital enables the purchaser to bid a higher price than a could
a competitor who had access only to more expensive money.

> *Well, if a deal is going to a broker, it's virtually an auction. And,
> it's very unlikely that an entrepreneur, especially in a larger
> market, that an entrepreneur can compete \[in an auction for a
> station\] because of his cost of money. So once you get to an
> auction... I couldn't compete with the public marketplace, because the
> cost of my money versus the cost of a Sinclair, of a River City at the
> time, of any of these other groups, when they have public financing,
> when they have public money, and their multiples, you know, they were
> trading \[their stock on the stock market\] at 15, 16, 17, 18 times
> multiples.*
>
> *So they could afford to pay a 14 or a 15 times multiple \[that is the
> purchase price was a multiple of cash flow\] to buy a station. And
> they had other stations that they had acquired earlier in a less
> inflationary market, so they could amortize their cost throughout and
> spread them throughout their stations, so an entrepreneur like myself,
> who had expensive money, if you will, I would bid \$20 million on a
> station, and Sinclair would bid \$23, \$24 \[million\] because their
> cost of money was so much less than mine, they could afford to do
> that. (DSutter205, pp. 13-14)*

##### Competition for Revenue -- the Struggle for a Proportionate Share

Small, women- and minority-owned broadcasting businesses experience
particularly acute problems in the advertising marketplace since
deregulation according to existing licensees competing against much
larger firms. Access to national advertisers' dollars is especially
difficult and very necessary for independent station survival. This lack
of access raises a huge market entry barrier for them.

Consolidation has affected not only the rates that one can get for
advertising slots but also the absolute amount of dollars. Large group
owners in a market can offer national advertisers packaged deals within
and across markets, essentially eliminating the need for ad dollars to
be spent with small, independent broadcasters. Large group owners are
gaining a disproportionate percent of total market advertising dollars
relative to their market share of listeners.

Benny Turner, an African-American radio broadcaster who first got into
radio in 1985, explains it this way.

\[The 1996 Act\] has basically allowed for consolidation of ownership
which in this market has allowed a concentration of ownership that
affects the rates that we are able to get for our product, and it's
basically decreased competition and has almost given ownership in this
market the power to basically give their urban formats away, which is
what we basically pursue. \[It is very difficult to grow our station, to
have it be economically viable\] because we basically have been
competing against \[companies who\] had several formats and basically
what they tell the advertisers is, "If you buy our country station or
rock station, we'll basically give you the urban station", and so it
made it difficult for us to command a decent rate, when they were
basically giving the \[urban\] format away. (BTurner108, pp. 10-11, 12)

Francine Rienstra, a White radio licensee, says that *"Nowadays, because
of the deregulation and the \[companies\] owning so many stations, we've
got really four groups in this market that wield the entire ratings and
wield the entire dollar. And everything else is struggling.
(FRienstra360, p. 29)*

Richard Weaver-Bey, a Black radio station owner, addresses the
effectiveness of having more stations to "sell" to advertisers.

And since consolidation we've seen an extraordinary dip in our ability
to sell because you have Infinity and SFX and Clear Channel buying up
five and six stations in the market, consolidating, moving all of their
stations into one location, and when their salespeople go out they can
sell five stations in one swoop. And so why does an advertiser need to
think about a small station that's in a little corner of the market?
(RWeaver-Bey171, p. 12)

#### (b) Impact Upon the Public

Licensees and key market players interviewed expressed significant
concern as to the impact of consolidation on the public; freedom of
speech; diversity of views; and on quality of service to small, rural
and minority communities, and the resulting increases in barriers to
entry for small, women- and minority-owned companies. Henry Rivera,
communications attorney and former FCC Commissioner, made this
observation.

Well I think that \[the lifting of the ownership caps\] has hurt ...
because you are seeing a consolidation of the radio industry that I
don't think anybody envisioned. And you have a lot of people who were in
the business who are selling out. Or people who are going up against
these big conglomerates, trying to buy a station; and they can't afford
the same prices because \[the consolidation is\] driving the prices up.
So it is not a climate that induces a diversity of voices and
viewpoints. Rather it's a climate that encourages consolidation and
voices. So any time you've got that kind of a situation, you're going to
have fewer minorities involved in the broadcast industry. It's just a,
it's just the way things are. (HRivera516, p. 13)

-   ***Loss to the Public Interest***

Erskine Faush, an African-American television licensee, spoke
passionately about the obligations broadcasters assume as public
trustees and the impact industry consolidation is having on diversity of
opinion and voices.

Let me put it this way. I never thought I'd see in my lifetime prior to
the Telecommunications Act, you know, the mega-mergers and so forth,
that that much control of this industry would be in the hands of a few
people. I think it has had its impact in terms of diversity of opinion,
\[and the\] access of the community. I think it's had a profound effect.

... (W)e always understood that, as a public trustee, the community's
interests, not only just your being able to have a viable entity in
order to make money -- and, of course, that's not a bad word at all, you
know, in business. In our economy, you are either going to make money
and stay in business or you don't make any and you're out. It's very
simple. But by the same token you have an obligation as a licensee and
public trustee to act in the public interest with those things that are
going to make, hopefully, the quality of life better for people.

And we have sought to do that in every way we can, to be involved in the
voice of the voiceless and to give access and be involved in those
things that are going to serve the public interest. And seemingly much
of that is on the back burner. In fact, we have, you know, at least in
my opinion, persons who obviously have no broadcast experience, persons
who are in the business... with only a profit motive. Again, I'm not
saying that that's a bad idea, but it's always been our understanding
from everything that we've understood coming out, that this industry had
an obligation, that the airwaves belonged not to you. You are a trustee.
And when you are entrusted with anything that belongs to someone else
... you have an obligation to act in their interest and not just your
own.

... I think serious injury has been done, and frankly I don't know how
it will ever be corrected. I think that we would have been out of
business at this time, along with many others ..., except that we have a
survival mentality and it's been forced upon us by generally the whole
ethos of society. And given our experience, again, in coming up through
the, prior to the, civil rights movement, the struggles that all of that
engendered, coming from that time to where we are today -- and I'm not
unmindful of the tremendous strides that have been made, but I'm also
keenly aware of how far it remains to go. (EFaush238, pp. 13-15)

##### Loss of Freedom of Speech

> *With fewer and fewer companies owning more and more licenses, there
> is a real threat to freedom of speech... (Mary Helen Barro, former
> Hispanic radio broadcaster) (MHBarro190, p. 2)*

Many licensees saw a loss of freedom of speech as a serious consequence
of market consolidation. They attributed this impact to the diminishing
number of small and minority-owned stations and the consolidation of
broadcast properties into the hands of the few. They expressed concern
that formats, news and public service programming were becoming
homogenized and less targeted to the needs of individual communities.
Overwhelmingly, they worried that no one would serve the segment of the
market to which they had committed themselves if they were forced to
either close or sell their station.

Mary Helen Barro offered her view.

> *We little broadcasters dedicated a great deal of time and effort to
> community service, to public service, to informing, especially those
> of us in Spanish radio. We had a lot of activities to inform people
> about what was going on to educate them, to encourage them to become
> citizens, to register and vote, and become active in the process. The
> big corporations, they do a minimum token job of that.*
>
> *Your small broadcasters were much more dedicated to community
> involvement and getting people involved in the process. Your big
> corporations don't do that. And I think it's been a great loss to the
> community. And, as I say again, freedom of speech. ... You don't
> understand the real threat to freedom of expression that has occurred
> due to the FCC's policies. Not only did you shut out the little guy,
> you shut out the opportunity for expression. So it's not like other
> industries. When you're talking about broadcasting, when you're
> talking about media, you're talking about freedom of speech.
> (MHBarro190, p. 15)*

### 

##### Loss of Diversity of Viewpoint

The Commission has long since recognized that a "\[d\]iversity of
ownership fosters \[a\] diversity of viewpoints,"[^29] and aptly
observed in its *Statement on Policy on Minority Ownership of
Broadcasting Facilities* that "\[a\]dequate representation of minority
viewpoints in programming serves not only the needs and interests of the
minority community but also enriches and educates the non-minority
audience....and enhances the diversified programming which is a key
objective not only of the Communications Act of 1934 but also of the
First Amendment." [^30] The Commission's cornerstone responsibility of
protecting and acting in the best interest of the public interest
requires the agency to promote a diversity of viewpoints.[^31] Many of
the interviewees expressed concern over the loss of diversity of
viewpoints.

John Tupper, a White television licensee and network affiliate,
remembered a time when there was more diversity among owners of
affiliate stations and the innovation that came from that diversity.

\[You had\] ideas that came from affiliates who were innovative because
there was more diversity spread about in the license holding which
resulted in basically better programming, new ideas being tried, et
cetera. ... (W)hen you get away from that and you deal with all ideas
emanating from programmers in Burbank, you get a different mix of
service to the public than if you had more diversity in the ownership.
(JTupper216, p. 36)

Erskine Faush, an African-American television broadcaster who has
devoted himself to responsible, informative broadcasting to his
community, is proud of the contribution he has been able to make.

\[Members of the community\] know ... we are the friend that they can
call, whatever they need. We have a talk program on in the mornings and
so forth where we attack the issues, and have been doing it for years,
of giving a voice to the community. And this is what we exist on
because, as I said, we grew up in that time when we felt that that was
an obligation to the community to be involved and to be the voice of
those who had no voice. And I'm glad somebody is paying attention \[with
this study\] to some of the things that's going on, you know.... I'm
glad to have this opportunity, not for my sake but for the generations
and things that will come along. There's a long way yet to go. And
somebody needs to be picking up the mantle and running forward with it.
(EFaush238 pp. 24-25)

##### Loss of Community Service 

The theme of centralized broadcasting versus a local community focus
emerged repeatedly throughout the interviews. Benny Turner shared that
he was concerned about the local voice being lost with consolidation.
*"Yes it does pose a threat and creates a greater opportunity for
syndicated or centralized broadcasting away from the local community.
(BTurner108, p. 14)*

Trent Boaldin, a White wireless licensee whose family owns wireless and
cable systems, expressed that *"(s)erving the community is very much a
driver for what we do. I mean this is a family business. I'm a third
generation member of the family. (TBoaldin307, pp. 21)*

Mateo Camarillo, a Hispanic radio licensee, expressed concern that large
corporations are more interested in serving their shareholders than they
are in serving the communities from which their audience come.

> *And I really believe that ownership has a lot to do with the end
> product, whether you're talking about voice, service to the community,
> truly fulfilling the public trusteeship that you have in that license,
> to serve all of the public that's in your community, because you know
> a corporation in New York City doesn't have the same \[interests\],
> the shareholders are interested in a profit, and they may not be as
> interested in serving the neighborhood in Barrio Logan.
> (MCamarillo375, p. 28)*

Manny Davila, another Hispanic radio broadcaster, got into radio to
serve his community.

We're the last independent(ly) owned station in San Antonio, and we're
the last radio station that somebody can come into off the street with a
tape that he recorded in his garage and we will play the damn song...
And so you're talking about guys that got into radio when the FCC
basically said that this is a community thing, and you're supposed to
help the community. And we said, you know, that's the kind of jobs that
we want, and in the meanwhile we might even make some money, because it
was never the money that motivated us. (MDavila128, pp. 21-22.)

Others, such as Richard Weaver-Bey, an African-American, discussed their
discomfort with selling their stations believing that there will no
longer be a voice of the community it serves when the station is gone.

> *Diversity of voices and views is a pillar of our democracy.... So
> right now we're looking at selling the station, and I really am not
> comfortable having to do that because I understand how strongly the
> station is needed in the community and that it is the voice of our
> community. (RWeaver-Bey171, p. 8, 14)*

Johnny Shaw, who with his wife, Opal, owns a radio station, feels an
obligation to serve his African-American community. His commitment was
expressed this way.

"... (I)t goes back to the service that we provide for the community.
And I feel that I'm obligated, because this window of opportunity \[to
acquire a station\] was open for us, to do this. To me, when we acquired
that license from the FCC, it's kind of like we married the community,
and we agreed that we would serve the community. I think when you sell,
again, to the larger companies, I think you are selling your community
out, because the larger companies are only going to focus on advertising
dollars. They are not going to care about announcing the PTA meeting of
the night. Do you know what I'm saying? . . . and I'm sure in talking to
me you can tell I'm big on this idea of serving the community, being in
the community, being a part of the community. (JShaw185, p. 22, 31)

##### Loss to Minority Communities

Minority licensees especially felt their commitment to their respective
communities - to keep them informed, to empower them, to report on
current events from the perspective of those whom the events would most
impact.

Mateo Camarillo, a Hispanic radio licensee, was one such broadcaster.

I'm an immigrant and ... I've always identified with the Hispanic
community; and my first discipline is social \[work\]. I have a Masters
in social work. I started a school of social work to train Hispanics to
work with the Hispanic community. So I'm very committed to the community
that I grew up in that I feel obligated to pay back and develop that
community. And one of the things that is very obvious is that it doesn't
have the required resources or tools to be able to develop.

One of the commitments I have made to myself is to help empower the
Hispanic community to be at least on equal footing and one of the issues
is information. And information is not readily available. The closest
thing to information are papers that come out once a month or every 2
weeks, or whatever; it's not real-time information. So by the time you
learn about an opportunity, whether it's a job application, or a request
for a proposal, the deadline has passed. The opportunity \[has passed\].
So that is knowledge, such as that the City Council is meeting to decide
the fate of something important to you or the school board is going to
decide about the quality of education for your kid. You know you don't
get the information when you need it. So I had always wanted to help get
real time information so that people can be more efficient and effective
in trying to do things that impact their life. (MCamarillo375, p. 8)

William Saunders, and African-American, entered broadcasting because he
wanted to make sure that the news about his community was reported
accurately and completely. *"And every time that we did something, when
it would end up on the radio and TV and the newspaper, it was different
from what we did. And I felt that there had to be a way that we could
tell people what we were about, the truth about the whole situation, and
that basically is how I got involved."*

Many participants discussed how the perspective of the speaker affects
the nature of what is spoken. Mr. Saunders highlighted that point.

The information that people need, they normally get it from a certain
source; and then they get it better if it's presented by the source that
also \[is\] impacted by that kind of information. So I think that that's
the driving force and I think that's what the original
Telecommunications Act was about in 1934, was to really be able to serve
the community. (WSaunders163, pp. 15-16)

Mr. Saunders adds, *"... (W)e really like to do the kind of programs
that work for our community. I would like to see a program that ...
could deal with having a teacher of the 3^rd^ grade coming in on the
afternoon just for kids to do homework. And to be able to have that kind
of program sponsored by somebody. I think that is important.
(WSaunders163, pp. 10-11)*

### 6. FCC Actions/ Inaction and Discriminatory Effects

Since the enactment of the Communications Act of 1934, the FCC has
regulated the allocation methods and use of the radio spectrum. The FCC
has used three primary methods to allocate a license when two or more
mutually exclusive applicants have applied:

1)  [Comparative Hearings:]{.underline} An FCC proceeding, presided over
    by an Administrative Law Judge (ALJ), to determine, which broadcast
    applicant was 'best qualified' to hold the license. The 1965 Policy
    Statement on Broadcast Comparative Hearings defined the two primary
    objectives of comparative hearings to be: first, 'the best
    practicable service to the public' and second, 'maximum diffusion of
    control of the media for mass communications.' [See]{.underline}
    [Policy Statement on Broadcast Comparative Hearings,]{.underline} 1
    F.C.C. 2d 393 (1965). The FCC provided seven criteria to the
    Administrative Law Judges (ALJs) upon which they should decide the
    comparative merit of the competing applicants:

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(i) Diversification of control of the media of mass communications;

(ii) Full-time participation in station operation by owners;

(iii) Proposed program service;

(iv) Past broadcast record;

(v) Efficient use of frequency;

(vi) Character; and

(vii) Other factors.

> In 1978, the FCC observed a continuation of an extreme disparity
> between the representation of minorities in our population and in the
> broadcasting industry and issued the [Statement of Policy on Minority
> Ownership of Broadcasting Facilities,]{.underline} which formalized
> the use of minority and gender credits in comparative hearings. 68
> F.C.C. 2d 979, 982 (1978). The FCC extended the credit to women owners
> in [Mid-Florida Television Corp]{.underline}., 70 F.C.C.2d 281 (Rev.
> Bd. 1978), set aside on other grounds, 87 F.C.C. 2d 203 (1981). In
> 1992, the D.C. Circuit held that the FCC's use of gender integration
> as a "plus factor" in comparative hearings was unconstitutional. In
> 1993, the DC Circuit held that the integration credit of the FCC's
> comparative hearing criteria was arbitrary and capricious. [Bechtel v.
> FCC]{.underline}, 10 F.3d 875 (D.C. Cir. 1993). In 1994, as a
> consequence of the Bechtel decision, the FCC suspended all active
> comparative hearings. In 1995, the Supreme Court held that any federal
> program that uses racial or ethnic criteria as a basis for decision
> making must serve a compelling governmental interest such as remedying
> past discrimination and must be narrowly tailored to serve that
> interest. [Adarand v. Pena]{.underline}, 515 U.S. 200 (1995);
>
> 2\) [Lotteries]{.underline}: In 1982, Congress enacted Section 309(i)
> of the Communications Act of 1934 to allow the FCC to select licensees
> by random selection. 47 U.S.C. §309(i). Section 309(i) also required
> the FCC to establish incentives, rules and procedures ensuring a
> \"significant preference\" for minority-controlled applicants in
> awarding licenses by lottery. 47 U.S.C. §309(i)(3)(A); 47 C.F.R.§
> 1.1622 The FCC used this section to award wireless licenses for
> cellular, specialized mobile radio, and low power TV. As Part of the
> Omnibus Budget Reconciliation Act of 1993, Congress limited the use of
> random selections to \"applications accepted for filing\" by the FCC
> before July 26, 1993, and Section 309(i) required an FCC determination
> that the use of the communications spectrum is not to be distributed
> by auction. 47 U.S.C. §309(i)(1)(B). In 1997, Congress enacted
> legislation that caused §309(i) to expire effective July 1, 1997
> except for the award of licenses and permits for public, noncommercial
> television stations. Pub.L. No. 105-33, 111 Stat. 251 (1997)
> §3002(1)(2) and;
>
> 3\) [Auctions]{.underline}: Section 309(j) allows the FCC to select
> licensees by auction. Section 309(j)(3)(B) instructed the FCC to
> establish competitive bidding procedures that would \"promot\[e\]
> economic opportunity and competition and ensur\[e\] that new and
> innovative technologies are readily accessible to the American
> people\...disseminating licenses among\...businesses owned by members
> of minority groups and women\....\" 47 U.S.C. §309(j)(3)(B). Again in
> section 309(j)(4)(C)(ii), Congress requires the FCC, in prescribing
> area designations and bandwidth assignments, to promote \"economic
> opportunity for a wide variety of applicants, including small
> businesses\...and businesses owned by members of minority groups and
> women.\" 47 U.S.C. §399(j)(4)(C)(ii). In creating these opportunities,
> Section 309(j)(4)(C)(ii) suggests that the FCC consider using \"tax
> certificates, bidding preferences, and other procedures." 47 U.S.C.
> §309(j)(4)(C)(ii).

Each method of license allocation had advantages and disadvantages. Both
comparative hearings and auctions are expensive. The comparative-hearing
process often cost hundreds of thousands of dollars in legal and
engineering fees. Like many legal proceedings, the comparative hearing
process often was prolonged. Members of the communications industry
sometimes either engaged in predatory practices towards minority and
women broadcast applicants or abused the minority and women ownership
program by adding minority or women "fronts" to their applications.

Acquiring a wireless license through the auction process is a costly
venture, as well, especially when one adds in the cost of building out
the wireless system. Wireless licenses obtained through auction can
therefore cost considerably more than those licenses acquired through
comparative hearings.

The nature and excitement of the auction process, especially in the
entrepreneurs' C-block auction with its small business bidding credits
and numerous delays, tempted and encouraged those with less experience
in the industry to "overbid" for their licenses, thus rendering many
business plans unworkable and unattractive as a financing opportunity.
In contrast, the lottery process was the most cost effective allocation
process from the standpoint of the licensee, but given its randomness,
it did not necessarily allocate the license to the most "qualified," or
to those interested in providing services that would best serve the
public interest. However, the lottery process was effective in
allocating a representative proportion of low power television licenses
to minority-owned businesses.

For each method of license allocation, the FCC has instituted policies,
programs and rules which attempted to increase opportunities for small,
minority and women applicants in the acquisition of broadcast and
wireless licenses. For instance, in the comparative hearing process, the
FCC provided extra credit to those applications with participation by
women and minorities. In the lottery process, the FCC provided minority
applicants with a mechanism for additional participation in those
licenses that they attempted to acquire. In the auction process, the FCC
established bidding credits, installment payments and discounted
interest rates that had some benefit for small, minority- and
women-owned businesses.

Two other FCC programs attempted to increase opportunities for
minority-owned businesses in the secondary market transactions, i.e.,
the minority tax certificate program and the distress sale program. In
1978, the FCC implemented the minority tax certificate[^32] policy,
which provided incentives to owners of existing broadcast properties to
sell the properties to minorities.[^33] The tax certificate program
allowed the seller of a broadcast property to defer any gain realized on
the sale if the property was sold to a minority purchaser, and the gain
was rolled over into a qualified replacement broadcast property.

Congress repealed the tax certificate program for minorities in an
appropriations rider to the Self Employed Persons Health Care Extension
Act of 1995.[^34] The legislative history of this rider demonstrates
that Congress believed the certificate program constituted bad tax
policy.[^35] However, the tax certificate program was a very effective
means of disseminating broadcast licenses to minority-owned businesses.
Prior to 1978, minorities owned approximately 40 broadcast licenses, one
half of one percent of approximately 8,500 total broadcast license by
the Commission. From 1978 to 1995, the FCC granted approximately 356 tax
certificates to promote minority broadcast and cable ownership (287
radio, 40 TV and 30 cable licenses). This helped give a much needed
boost for minority ownership. In 1982, the tax certificate program was
expanded to cable systems. As noted above, Congress subsequently
eliminated the tax certificate program.[^36]

In 1978, the FCC implemented the distress sale policy, which allowed a
broadcast licensee whose license has been designated for a revocation
hearing to sell its station to a minority-controlled entity at 75% or
less of the station\'s fair-market value. Underlying the distress sale
policy was the dearth of minority ownership. Although highly effective,
the FCC rarely used the distress sale program. In fact, in seventeen
years, approximately 48 licenses were transferred to minority-owned
business through the distress sale program. The distress sale policy
still technically exists but its constitutionality is in question since
[Adarand]{.underline}.[^37] There were instances in which these programs
worked well and others in which they were abused.

In 1969, the FCC issued the Nondiscriminatory Employment Policy, which
forbade discrimination on the basis of race, gender, color, religion, or
national origin in employment practice by licensees of commercial or
noncommercial broadcast stations. To ensure compliance, the FCC required
each broadcast station to establish a proactive equal employment
opportunity program. In 1998, the DC Circuit Court held that the FCC's
equal opportunity rules were unconstitutional on equal protection
grounds. [See]{.underline} [Lutheran Church-Missouri Synod v.
FCC]{.underline}, F. 3d (D.C. Cir. 1998). The FCC promulgated new rules
that focus on outreach, which are now also subject to constitutional
challenge. Despite the fact that the FCC Nondiscriminatory Policy is the
most longstanding of the FCC's rules in the area of equal opportunity,
many of the interviewees believe that the FCC has unevenly enforced
these rules. They see this lack of enforcement as a missed opportunity
that could have positioned more women and members of minority groups to
have the kind of track record and corporate broadcast experience needed
to leverage themselves into ownership opportunities. The right kind of
experience can open doors to ownership opportunities, and debt and
equity financing

Many people we interviewed believed that the FCC's actions, inaction,
policies, and rules were not intentionally discriminatory, but the
impact - the unintended consequences -- allowed for discrimination by
third parties against FCC licensees and applicants and clearly
disadvantaged many small, minority and women licensees making them
ill-positioned to compete successfully in either a deregulated
broadcasting or capital-intensive wireless market.

Jerry Byrne, a White male who with his Asian partner owns wireless
licenses, shared his perspective on the FCC and discrimination.

> *When \[the FCC\] lay\[s\] out rules, the rules are not
> discriminatory, the way they're laid out. \[But\] if they don't
> enforce the rules that they set out from the start, then there's a
> discriminatory process taking place. My point is this, if they want to
> be inclusive, they can. They can to a point. . . . But, if the rules
> are allowed to be broken during the process, then on its own,
> discrimination is taking place. (JByrne141, p.40)*

Art Gilliam, an African-American radio station owner, talks about the
political influence at the FCC Commissioner level and how that might
translate into discrimination on the part of the FCC.

No I didn't think there was discrimination---well, let's see, I don't
have a perception of the FCC at its . . . staff level engaging in
discrimination. I have not experienced that personally. At the same
time, I think at the Commissioner level, which is an appointed level,
that there is political influence that can be brought to bear down
through the organization . . . (w)hich is different than discrimination,
but it's discrimination in the institutionalized sense in that most \[of
those who\] have political influence are less likely to be African
American. (AGilliam117, p. 17)

Henry Rivera, a communications attorney and former FCC Commissioner,
gave us a historical perspective on a series of changes that affected
minorities' opportunities to participate successfully in the acquisition
of wireless and broadcast licenses.

> *. . . I think in terms of things that have happened to the minority
> community, clearly one of the most devastating has to have been the
> repeal of the Tax Certificate. I mean when we lost that, we really did
> lose a terrific vehicle toward increasing minority ownership. That was
> devastating. Secondly, we lost the Comparative Hearing Process, which
> awarded minorities with preferences in the Comparative Hearing
> Process. That was also a real blow. The Commission really doesn't
> designate licenses for hearing anymore. There was a policy that was
> called the Distress Sale Policy which benefited a broadcaster to sell
> his station to a minority if he had been designated for hearing. And I
> think that policy is still alive, but in fact there are so few
> licenses that are designated it really doesn't make much of a
> difference. Then we've had the whole series of anti-affirmative action
> decisions by the courts, which have hurt the FCC's EEO policy \[which
> the\] Commissioner's trying to . . . re-institute now*[^38]*. But . .
> . this series of things that has happened \[has\] been extremely hard
> on the policy of fostering minority ownership and I think that the
> figures show that. They're have really not been any increases in
> minority ownership over these many years. (HRivera516, pp. 12-13)*

George Dobbins, an African-American wireless licensee, provided his
understanding of the regulatory and market realities.

> *Many of the employees at the FCC, you know, they wanted to see some
> small and minority companies succeed. But it wasn't a lot at that
> point \[after the [Adarand]{.underline} decision\] that the FCC could
> do, because if you don't have any advantages, I mean, the FCC couldn't
> do anything about it. So the thing that enabled the few, the handful
> of major companies that you see out there now that are successful
> \[e.g., Radio One, Granite Broadcasting, Z Spanish\] really become
> successful was when they had the advantages to give the opportunity to
> small and minority companies to get involved. If you put it out on an
> open playing field, it's just about impossible for some of the small
> Black companies out there, undercapitalized, not enough managers
> \[adequate resources\] to compete against these major players. I mean,
> that's the history of it and that's going to be the future of it. The
> history is not going to change. There's a clear-cut pattern of that,
> and it doesn't take a genius to figure it out. (GDobbins362, p. 6)*

#### (a) The FCC Does a Tough Job Well

In speaking with the study participants, many shared their frustrations,
travails and disappointments in dealing with the FCC. However, several
participants had kudos for the Commission, acknowledging that even in
the face of the FCC's tough and complicated job, they felt well served.
While the primary objective of the study was to examine market entry
barriers, it is important to note the FCC's successes.

Tazbah McCullah, a Navajo woman who oversees the operation of a
tribal-owned commercial radio station shares her experience with the
FCC.

> *The \[FCC\] ha\[s\] never hindered our efforts in becoming a
> licensee. Or during the construction permit process, either. They\'ve
> been very helpful. They\'ve provided us extensions pretty readily.
> (TMcCullah133, p. 7)*

Mia Lovink, a female wireless license holder told us that "*The bidding
process \[in the auctions\] was easy. I mean it was -- the FCC made it
easy. Their tech support was always -- you didn\'t have to wait at all.
They were very helpful. (MLovink323, p. 6)* Her experiences with the
process itself were shared by all wireless license applicants who we
interviewed.

Several small licensees were of the opinion that they were under an
unfair financial burden and unrealistic time constraints because they
were subject to the same reporting requirements as large group owners.
In contrast, other licensees, like Jose Molina, a Hispanic radio and
television licensee, believed that if one does what the FCC requires,
he'll have no problem.

> *Oh, the FCC, \[I've\] got no problems with them. You do things right
> the FCC is cool. You screw up, the FCC will give you a chance to
> unscrew it; but I\['ve\] never been in that situation because it is
> easier to do a good job and to follow the rules and the law, then to
> do a sloppy job and have to patch it up. (JMolina121, p. 9)*

Jose Molina, adds to his prior praise of the FCC.

> *I really like the FCC and I tell you, the FCC is not composed of a
> body of non-visionaries. The FCC has visionary people. . . . I am sure
> that they are already working very hard at fixing this situation \[of
> the negative impact on small station owners in a consolidating
> market\]. How they're going to do it, I haven't the slightest idea.
> But they know that those Americans like me who are hard working
> people, that don't stiff banks, no bankruptcies, nothing, you know
> what I mean? (JMolina121, p. 20)*

John Thomas, an African-American radio broadcaster found the FCC staff
helpful even though he wouldn't *"say that is was necessarily easy
\[dealing with them\]."* He did offer that *"it was understandable."* He
acknowledged that the *"people that I dealt with . . . were very clear
about what I needed to do and how things were supposed to be done."* He
concludes that he has *"not had any problems with the FCC at all. My
relationship has been good." (JThomas277, p.. 8)*

Others, like Eduardo Caballero, another Hispanic radio and low power
television station owner, were laudatory and deeply thankful for the
assistance they received from the Commission's staff.

> *Well, they seem to have a great deal of understanding of the problems
> that a minority individual with limited resources had to meet the
> deadlines. Because they give you a \[construction permit\] for a
> limited period of time and you are supposed to build within that time.
> But then if you don't, you have to go back and say I need an
> extension. And if you don't \[again,\] you have to go back and ask for
> another extension. And then at one point they are going to tell you
> show me that you're doing something to build the station in order to
> give you an additional extension, and they would understand that I was
> building one station and that my resources did not allow me to build
> another station at the same time.*
>
> *So I would go there and say, "(T)his is what I'm doing. I'm building
> the station in Bakersfield, but these other 11 construction permits
> are about to expire and I don't have a way to build at the present
> time. I don't want to lose them. This is something I always wanted to
> do; I always wanted to have." And they will get back to me and say,
> well, show me that you are serious about your efforts. And I will go
> there and I will show them that I signed a contract to lease equipment
> or to buy a piece of equipment, and they were extremely helpful in
> understanding.*
>
> *And actually, I have to praise particularly a gentleman. He is in the
> Mass Media Bureau. . . . And most people in there have been, as I say,
> very, very understanding of our difficulties and our problems. \[This
> gentleman\] is a supervisory engineer of the low power television
> branch of the Mass Media Bureau. That man will have my eternal
> gratitude for being so understanding. And I feel very good telling you
> that the FCC must be proud of having somebody like him there.
> (ECaballero124, pp. 15-16)*

#### (b) FCC Inaction When Confronting Private Discrimination 

According to many interview subjects, historically, some individuals at
the FCC have tried to reduce market entry barriers for small, women- and
minority-owned businesses, but have encountered Commission-created
obstacles and difficulties. Had these obstacles been non-existent,
women- and minority-owned businesses might very well have been able to
gain financial and managerial strength, thus better preparing them to
compete successfully within the framework of today's marketplace.

The FCC instituted several successful programs, like the tax certificate
program, to increase the opportunities for small, women-and
minority-owned businesses. However, it appears that in some instances
the FCC chose to ignore discriminatory practices in the primary and
secondary market for licenses.

Rev. Everett Parker provided his insights into the historical challenges
facing those who tried to overcome discrimination and provide a fair
opportunity for small, minority- and women-owned businesses before the
FCC. He told us, "Oh, sure I've seen discrimination \[at the FCC\]. I've
never won a vote at the FCC. The only time I've ever won anything at the
FCC was when we sued them. He has been extensively involved in civil
rights issues as they impact broadcasting -- both licensing and
employment. He shared two of his experiences with the FCC.

> *(W)hen the Civil Rights Act and the effort to protect minorities in
> particular came along, I looked at the stations throughout the South
> and we decided that we should do something about the mistreatment of
> Blacks by stations in the South. And the first thing we did was to ask
> the NAB -- Governor Collins was then the head of the NAB -- to ask
> their \[member\] stations to treat Blacks the same way they treated
> Whites, to use courtesy titles \[e.g., Mr. Or Mrs.\] and to give them
> the opportunity to present their views, especially \[on\] [Brown v.
> The Board of Education]{.underline}. . . . Collins wanted to do that.
> But the board of the FCC flatly turned us down. (EParker504, p. 3)*

Rev. Parker went on to tell us about a license renewal battle he fought
with the FCC and ultimately won.

> *We went down to the South and looked at stations and picked WLBT in
> Jackson and the Channel 13 also, the two stations in Jackson, because
> they were the stations which were owned by Newhouse in Birmingham and
> which we later went after and got Newhouse out of the broadcasting
> business. . . .*
>
> *And we went to Jackson because it's the college there, Tougaloo
> College, which was being attacked every day on WLBT. And we monitored
> for a week and then we petitioned the FCC -- everybody thinks that we
> were after the license or something. But we petitioned the FCC to have
> a hearing knowing full well that they would not accept public
> information, that they would send it to the station and the station
> would say, "I didn't do it," or "I'll stop doing it," and then they
> would send you the mimeograph sheet and would put it in the file that
> we looked at.*
>
> *And we filed a bill of particulars with the FCC instead of filing the
> information. We told them the things that we thought they should look
> at in a review of license renewal. Already the station had been in
> trouble with the White House. And so we filed a bill of particulars
> the way you would in a federal court, which the FCC had never done
> before. And of course, the station came back and said throw them out,
> they didn't put in 21 copies, which you had to put in in those days,
> and all the other things.*
>
> *The FCC wrote us back the usual stuff. And at that point we presented
> our proof, and they didn't know what to do with it and they sat on it
> for a year. And then they renewed the license at Channel 13 and they
> gave WLBT a one-year renewal, knowing full well that they'd come back
> at the end of the year and they'd get their license and that the
> public would say look what we did.*

And they had no thought that we would go to court. But, of course,
that's what we did, and we got this landmark decision by the circuit,
written by Burger.[^39] You know, it was the most conservative panel
that you could get on the circuit. And we then had to have the hearing,
and it was held in Jackson. And we presented our evidence there and, of
course, the hearing examiner, which he was called in those days,
absolutely paid no attention to our stuff and he made so many errors
that the court -- when the commission renewed the license and we again
appealed to the court, which had kept jurisdiction, the court dispersed
it and the court, for the very first time, lifted the license. It didn't
send it back to the FCC for further action.

> *So that's the story of how and why we did these things. But as soon
> as we had the court decision giving the rights to the public to
> intervene in the affairs of federal regulatory agencies, that's when
> we petitioned the commission in 1968 to issue EEO rules and to make
> the reports of the stations public, which they did after much
> pressure. (EParker504, pp. 2-5)*

Former Commissioner Henry Rivera shared with us the difficulties around
enforcing the Commission's EEO policies.

There were many moves to curtail the Equal Employment Opportunity Policy
in the early 80s, to do a lot of things that were not terribly favorable
to minorities; and, instead to look to marketplace solutions to help
them, rather than to government initiatives. I think that's the most
charitable way to put it. (HRivera516, p. 4)

He goes on to recount how the Commission handled the Multi-Point
Multiple Distribution Service in such a way as to avoid overtly
assisting minority ownership.

> *There was . . . a new service, called Multi-Point Multiple
> Distribution Service \[MMDS\]. . . . And initially that was supposed
> to be a broadcast service and the Commission was supposed to grant
> preferences to minorities in issuing those licenses; but they didn't
> want to, so what they did was they classified it as a common carrier
> service where the minority preferences did not apply. So that was an
> interesting thing. I think they did the same thing with Direct
> Broadcast Satellite. So there were a number of instances like that,
> where the Commission was doing things to avoid overtly assisting
> minority ownership. (HRivera516, pp. 9-10)*

Mateo Camarillo, a Hispanic owner of both radio and PCS licenses, talked
of his frustration with the FCC's response to the [Adarand]{.underline}
decision as it affected the delay of the C-block auction of PCS
licenses.

> *. . . (T)he Supreme Court ruling \[in [Adarand]{.underline}\] did not
> say that you could not have those \[race- and gender-based\] programs;
> it said you had to have a justification, it be on a narrow basis, but
> the FCC just threw out everything. (MCamarillo375, p. 21)*

Further, David Honig, Executive Director of the Minority Media
Telecommunications Council, a non-profit advocacy group for minorities
in media and representing multiple civil rights organizations, shares
his knowledge of the FCC's activities around the distribution of
licenses for educational broadcasting, the precursor to public
broadcasting as we know it today. This is an example of the FCC's
enabling a state (Alabama) agency to discriminate.

> *And you look . . . at the way that they handed out the public
> television and public radio licenses in the country. This is before
> the Carnegie Commission report in 1967 which sort of created what we
> now know as public broadcasting. Then it was called educational
> broadcasting.*
>
> *One of the main purposes \[of the educational broadcasting licenses\]
> was to train people who would then go out and work in commercial
> broadcasting, and the schools were much more prominent among licensees
> than they are now.*
>
> *Well, state agencies also were granted some of these licenses. All of
> the television licenses for public TV in the state of Alabama were
> given to something called the Alabama Educational Television
> Commission, between 1958 and 1962. And the agency was a branch of the
> Alabama State Government. And it's members were appointed by the
> governor of Alabama, George Wallace. So you have to assume that the
> FCC had heard of George Wallace, seen him standing in the schoolhouse
> door and had actual notice of what he was going to do with the
> television stations and who he would allow to work there, and thus who
> was going to get the training in Alabama to be able to qualify someday
> to get a bank loan as an experienced broadcaster to apply for and
> obtain a commercial broadcast license. This must have occurred to
> \[the FCC\].* [^40]
>
> *. . . (W)e took a look at . . . state and public colleges and when
> the colleges got their licenses, because often the state college
> systems in Texas and Maryland and Mississippi and Alabama and Florida
> and so on would apply for public broadcast licenses for the White
> schools, not the Black schools. So \[the Black schools\] got them like
> ten years later and \[the stations\] were much lower power \[than the
> ones for the White schools\].*
>
> *I mean the University of Maryland got one way before \[Historically
> Black Colleges\] Bowie State or Morgan State did. Cochran still
> doesn't have one. Coppin State in Baltimore was running a broadcast
> program with no school, I mean can you imagine trying to run an
> airline program to train pilots and they don't have an airplane?
> They've got to train \[solely\] on simulators? Or medical school that
> doesn't have cadavers, they have to train on models? How would you
> like to be operated on by a doctor like that? Actually, managing to
> keep the school going there with no broadcast license. I mean there's
> nothing \[that\] substitute(s) for the immediacy and unpredictability
> of . . . what happens when you're on the air live and you can't turn
> it off and say sorry, we have to pause and figure out what to do.
> There's no substitute for that.*
>
> *And that's why when the Commission rubber stamped these applications,
> the question shouldn't be what were they thinking? The question should
> be, they were thinking and they didn't care. It was an entirely
> predictable consequence. They were basically ratifying and validating
> the decisions of segregationists public and private. (DHonig521 #2,
> pp. 6-7)*

Mr. Rivera explains that the Congress and the courts have often impeded
the FCC's efforts to increase opportunities for small, minority,
women-owned businesses.

> *. . . (A) lot of the things that I suggest\[ed\] earlier that have
> happened to minorities and small businesses and women have happened as
> a result of things external to the Commission. You add in \[a few FCC
> Chairmen\] ... who have been very concerned about fostering minority
> ownership, but have had the pins knocked out from under them,
> basically. And it's very difficult for a, I mean, there's not much
> that could have been done that has not been done at the FCC up to this
> point in the last two \[White House\] administrations. (HRivera516, p.
> 15)*

Mr. Rivera's perspective is shared by Benny Turner, an African-American
owner of radio and television licenses, recognizing that the FCC
operates in a world influenced by political realities and the courts. He
believes that the FCC hasn't *". . . been very effective \[in helping
minorities\]. I think \[that's in\] large part a result of the decisions
rendered by the courts and actions taken by Congress that seem to have
the effect of limiting the authority of the FCC to be more aggressive in
leveling the playing field. (BTurner108, p. 10)*

#### (c) Policies and Processes

Some interviewees discussed the time-consuming nature of FCC practices
and procedures. The longer it takes to get a decision from the FCC, the
more money it costs for attorneys, engineers, trips to Washington, D.C.,
etc. -- money that generally cash-strapped small businesses can ill
afford. Henry Rivera describes the situation this way:

> *No, I never did \[think anyone at the FCC was intentionally slowing
> things down so people who couldn't afford the fight would drop out\],
> although I think that if one were interested in being anti-minority,
> the Commission processes by themselves would often have \[that\]
> result. I mean it just takes a long time to get anything done at the
> Commission, and if you're a minority or a small business, you
> generally don't have the capital to finance the particular matter
> through to its conclusion at the Commission. It just takes a long
> time. There are a lot of pleadings involved and so forth, and you have
> to have the staying power to see your way through those proceedings.
> So, as I said, you didn't need to be discriminatory, you just didn't
> need to do anything extraordinary and the Commission processes by
> themselves would take their toll. (HRivera516, p. 7)*

Many people who we interviewed discussed the repeated appeals or
petitions process that the FCC allowed to take place. Dennis Miller, a
White male owner of wireless licenses, shared his perception that two
competitors of his abused the petition process to gain competitive
advantage over him.

> *There have been two instances where people---this is a personal
> opinion now . . . where people have abused the process. Filing
> petitions to deny the transfers to our company, only in one case, the
> settlement papers say one thing, the other issue, the real reason was
> they wanted a lower roaming rate, and they knew by filing that
> petition to deny \[our license\] it'd gum the gears up for six months
> at the minimum. . . . I think the motive in both cases was financial
> on their side to change the dynamics of a business relationship or a
> separate contract, roaming; being specific it was roaming. . . .
> (T)hey knew that we would be steadfast in closing the transaction; but
> what happens to you from a business perspective is once the
> transactions have been announced and you go on public notice at the
> Commission, it becomes public knowledge that company A is selling to
> company B. And if you can slow that process down in "never-never land"
> or in the middle of it, you gain a competitive advantage. (DMiller147,
> p. 14)*

The pace of change, especially in telecommunications and wireless
technology, has also created delays in FCC decisions. As the Commission
seeks to transform from rigidly service-specific Bureaus towards a New
FCC[^41], responsive to technological and market convergence, some new
entrants contend they are bucking up against an old bureau mindset --
costing scarce resources. Toni Cook Bush, co-owner of a newly-formed,
multi-ethnic, all-female-owned company using integrated technology to
create a new television network distribution concept, discusses her
frustration in trying to get the necessary approvals and licenses from
the FCC.

So I think . . . we have two strikes against us \[at the FCC\]. One,
that we're, you know, a small company that nobody knows, and that two,
we're proposing something different than what the FCC has seen before
and they have not figured out a way to treat applicants who are seeking
the same resource but are in two different bureaus; how to treat them
the same way. (TBush378, pp. 17-18)

#### (d) Staff Responsiveness and Impact of Bureaucracy

Many of the licensees who we interviewed had direct dealings with the
FCC other than the licensees usual reporting requirements and license
transfer transactions. While some shared their deep appreciation for the
assistance they received from various staff members and the FCC, others
spoke of the difficulty they have had with the FCC including the
following: non-responsive staff members, access to Commission
information, access to the Commission web site, or staff members
out-of-touch with the small broadcasters' condition.

Rev. Everett Parker, who has a long history of dealing with the FCC, has
a different perspective on staff assistance and FCC structure.

. . .(W)e could get a lot more help from the staff at the FCC than we
get. You know, you make decisions at the top and nothing happens at the
bottom. Remember what Eisenhower said, "I push all these buttons and
nothing happens." So, no, the FCC is not set up to go out and see what
the public needs and try to do something about it. (EParker504, p. 28)

James E. Wolf, Jr., who has had multiple problems maintaining his radio
interests, shared one of his *"many challenges with the FCC."*

> *I'm going to tell you. I had so many challenges with the FCC, even
> when somebody required that I move off of my signal. But I used to be
> at 95.9. They forced me down to 95.7 to accommodate their power
> increase. When they did that, you know, it brought a short spacing to
> the west of my signal, which meant that we were relegated to a 6,000
> watt station.*
>
> *And I was trying to get my power raised. So just like the \[other\]
> adversities \[I spoke about\] -- the FCC was always, "we don't care as
> long as we serve more people," . . . in this case it was
> \[metropolitan\] Illinois, to be able to serve more people. . . . And
> so when they did that it brought frustration on my behalf, you know,
> because I got boxed in and I could never raise my power up. And I
> thought we are always going to be a small signal, small station. . .
> .*
>
> *I got reimbursed just the other day. And this has been going on since
> 1993. I just got -- not total reimbursement, but I just got some
> money, . . . (f)or the move that I had to make to accommodate the
> station. I made the move back in 1996, you know. I mean, I haven't
> even cashed the check. I've still got it. I just got it the other
> day.*
>
> *\[I had to go through\] (l)itigation -- and what really, really
> bothered me is the FCC said you guys settle this out of court here.
> This is not an FCC matter. They sent documents, papers, and
> everything, down to me. I said this is crazy. I said, you put me in
> this matter. But, you know, there's so much insensitivity here.*

And then finally I asked them to go back and review it again. They went
back and reviewed and said, well, yeah, it is an FCC matter. It was just
callousness on their behalf, you know. And so they went back in and they
made the \[other\] corporation reimburse me the money, but I didn't get
nearly the money I should have gotten. They kept me strung out for half
of a decade, and I only got \$6,000 out of it. And I think it was just
ludicrous, you know, that they operate like that. (JWolf281, pp. 28-29)

Jeffrey Hutton, a White male operating a small-town radio station,
shares his concern over his perception that the FCC doesn't *'have a
grasp \[of small market radio\],* his unhappiness with the FCC's low
power FM decision and his own story about signal strength impeding his
ability to compete adequately.

. . . (T)o me the FCC is a regulatory agency and they don't have a
grasp, they preach small market radio and then they go and do this thing
with all these little micro-stations \[low power FM\]. They don't have a
clue how it works in real life. They're bureaucratic businessmen and
women sitting in Washington that don't get out in the field and they
don't know how it works.

So let me just give you a good example. I'm in a town that has a
population of 600. ... (I)t was probably my fault because I didn't know
how to do proper due diligence, but this station cannot be upgraded.
Okay, logically, for me to be able to have a better station I have to be
able to broadcast with more power from a higher antenna, so I can reach
more of an area, so I can go out to try to sell more advertising to more
people. Well, because of the spectrum spacing rule of the Commission, I
can't do that. I'm locked out.

> *Now they'll turn right around you know and allow a station in a big
> market to increase its power which is somewhat ridiculous because you
> know everybody lives within just a small radius there. They can hear
> the station fine. But that kind of activity blocks out the smaller
> stations like me so, you know, I have to, literally, it's a day-to-day
> struggle to survive with this radio station because I don't have any
> power. I get walked all over by these bigger stations in towns far,
> far away from here that interfere with my signal so I can't even serve
> the county I'm in. There are portions of the county that can't hear me
> because we're only a 6,000 watt station. And I find that very
> frustrating.*
>
> *People all the time saying you are a good station, why don't you
> increase your power so we can hear you better and things like that,
> and I can't do that. So that's my biggest point of contention with the
> FCC from a realistic perspective, they don't have any idea what's
> going on out here. (JHutton385, pp. 7-8)*

Toni Cook Bush raises the issue that even though more recent FCC
Chairmen have worked hard to make it *"better . . . for minorities and
women . . the fact of the matter \[is\] in the bowels of all those
Bureaus, it's the same old guys who've been doing this for 20 years.
That has not changed. But you don't get to the top \[of the FCC\] unless
you can get through some of these guys at the bottom. . . . I think that
is very problematic." (TBush378, p. 20)*

Mary Helen Barro, former president of the American Hispanic-Owned Radio
Association and owner of multiple radio stations, shares her views on
the differences between broadcasters and FCC staff, both in terms of
priorities and time frames.

> *I think the FCC truly does not listen to the small broadcasters. . .
> . I think they think like bureaucrats. They don't think like business
> people and it has hurt the small broadcaster. Whenever broadcasters
> have been in need, and its very common, the wheels of government are
> on a different timetable than private industry is on. Government
> thinks in terms of months and years. Private industry thinks in terms
> of days and weeks. And the response time often times by the FCC when
> small broadcasters were in need was just not timely. And it hurt small
> business a great deal. You don't have that problem nearly today
> because frankly there is little or no small business \[left\] in
> broadcasting \[since the deregulation in broadcasting\]. (MHBarro190,
> p. 8)*

#### (e) Equal Employment Opportunity

In 1969, the FCC issued a Policy Statement which forbade discrimination
on the basis of race, color, religion, or national origin in employment
practices by licensees of commercial and non-commercial broadcast
stations.[^42] Accordingly, each station had to establish a proactive
equal employment opportunity (EEO) program. This was the first time the
FCC had directly addressed the issue of race in a formal policy ruling.
This Policy Statement established the Commission's right to revoke
licenses and to hear allegations of EEO violations in comparative
hearings.

In 1998, the D.C. Circuit Court of Appeals held in [Lutheran Church --
Missouri Synod v. FCC]{.underline}, 141 F.3d 344 (D.C. Cir. 1998) that
certain provisions of the FCC's radio broadcast EEO rules were
unconstitutional. The Commission suspended the requirement for broadcast
licensees to file annual employment reports on September 30, 1998.[^43]
It wasn't until Spring of 2000 that a new EEO Policy Statement was
issued. These new rules are once again before the courts.[^44]

Rev. Everett Parker was instrumental in pushing for the first set of EEO
rules. He understood early on that meaningful employment opportunity
within existing, broadcast companies was critical if women and
minorities were to have a fair chance of becoming licensees. Today, more
so than ever, prior experience and a significant track record of success
in broadcasting is a primary determining factor for participation in the
secondary market for radio and television licenses. Rev. Parker shared
his recollection of the FCC's handling of the EEO reporting
requirements.

> *\[With\] the first EEO rules, when EEO reports were turned in, the
> FCC didn't even open them. They threw them into boxes and took them
> into the library and stored them. . . . They never have examined
> \[radio and television\] stations in detail for their \[EEO\]
> performance even though they are supposed to. And you know, license
> renewal has always been a farce. And the staff at the FCC certainly
> did not want to be bothered with these hundreds and hundreds of
> reports and analysis.*
>
> *In the end, since we were issuing these analyses every year we made a
> deal with the then chairman....(H)e and I made an agreement that
> \[we\] would do the analysis and would have the figures. And as long
> as he was Chair everything was just wonderful.*
>
> *But then, of course, the \[President\] Reagan FCC came along and
> after that, you know, they just said they weren't going to enforce the
> EEO rules and the hiring and promotion of minorities and women went
> down again. By the time the Reagan administration came in, television,
> at least, was as high as any industry in having minorities and women
> in upper level jobs, not at the corporate level, but in the stations.
> (EParker504, pp. 8-10)*

Former Commissioner Rivera, who was at the FCC from approximately 1981
to 1985, experienced during his tenure that *"there were very few things
that were positive at all \[for women and minorities during the years
that I was at the FCC\]."* He especially highlighted the lack of
enforcement of the Commission's EEO policy and the negative impact that
had on the creation of a "*farm team*," those individuals who should
have gotten the experience needed to one day become licensees.

> *I think most of the things that happened were negative. I think that
> one of the things that happened that hurt a lot was the Commission's
> decision basically to stop enforcing its EEO policies. And there was
> no, I mean, clearly, I think \[the then Chairman\] thought that this
> was a bad thing to do, that it was not appropriate for the government
> to be sticking its nose in enforcing broadcasters to hire minorities.
> And, as I said, I think that hurt a lot, because, that's your farm
> team, basically. Those are the folks that you look to in the future to
> get into ownership. And the Commission basically---you can look
> through the records during that period of time and you will find very
> few enforcement actions that had anything to do with EEO. So it was a
> pretty bad time at the Commission in that regard. . (HRivera516, p.
> 9)*

#### (f) Distress Sales

The 1978 Broadcast Policy Statement: Statement of Policy on Minority
Ownership of Broadcast Facilities, 68 FCC 2d 979, 983 (1978) also
created the Distress Sale policy which allowed a broadcast licensees
designated for a revocation hearing to sell their broadcast station to a
minority-controlled entity at no more than 75% of the station's fair
market value.[^45]

The FCC developed the distress sale policy. It was created at the same
time as the tax certificate. Virtually none of the study participants
had acquired their station(s) in this fashion as the license renewal
process rarely resulted in the threat of revocation.

Richard Weaver-Bey, one of the few broadcasters who did acquire his
station under the distress sale program, spoke of delays in the process
which cost him scarce financial resources and advertising revenues,
forced him into default on his SBA loan. After Mr. Weaver-Bey traveled
to Washington, DC to meet with the Commission staff, the FCC approved
his license transfer.

> *We were being told that the FCC was not processing \[our\] paperwork
> or whatever. And we would call down and not get answers. So we decided
> that we would take a trip to Washington \[D.C.\] and see if we
> \[could\] make some headway. . . (W)e were able to have a couple of
> meetings during the course of that day, one in the mid-morning and one
> in the late afternoon, to provide information to two of those
> individuals. \[O\]ur\[license transfer\] process, when we got back
> after that, moved along at warp speed and we were finally able to come
> to a closing.*
>
> *So, I think what the Commission could have done at that point in time
> was to make sure that if there was a distress sale and that if there
> were buyers who were ready to close, that the Commission forced the
> expeditious closing of the station. And that didn't happen. So that
> set us back and cost us a lot of money, as well as when we did get
> into the station, by the time we got into the station, there were a
> number of advertisers that had been brought on in trade and things of
> that nature that were just very difficult to overcome \[contracts had
> been negotiated, etc.\] So our station was sort of behind the eight
> ball . . . from the start, and it was very difficult in attempting to
> catch up, so we fell into default with the SBA loan. (RWeaver-Bey171,
> pp. 5-6)*

#### (g) Comparative Hearings

The FCC used the comparative hearing process from 1945 through 1994 to
award licenses when there were two or more mutually exclusive applicants
for the same frequency. In 1978, the Commission formalized the use of
minority and gender credits in the comparative hearing process, with the
goal being to increase participation by minorities and women. This meant
that if a minority or woman was a controlling member of an applicant's
management team, that application was given more "points" during the
hearing process. The [Bechtel]{.underline} decision in 1993, which
invalidated the FCC's integration criteria, led to the FCC's suspension
of the comparative hearing process in 1994. Thereafter, the 1996 Act
officially eliminated comparative hearings.

Amador Bustos, a successful Hispanic multi-station owner, speaks to the
effectiveness of the comparative hearings as a means to encourage
minority broadcast license ownership. "*I think that \[the FCC was\]
well intentioned but not effective. I think that the comparative hearing
was really not an effective process to try to get minorities into the
hopper and into the system." (ABustos122, p. 12)*

The study participants who went through comparative hearings spoke of
multiple obstacles, challenges, frustrations, and commitment during the
process. The length of time and money expended to acquire a license was
a real burden for these applicants. Ben Perez, a communications attorney
and low power television licensee, represented many minority groups in
comparative hearings before the FCC. He shared his view on the
effectiveness and impact of the process on minority applicants.

This hearing process is horrible. It destroy\[ed\] the hopes and
fortunes of virtually every minority applicant, doing tremendous damage,
and the outcome is not more minority grants. In fact, if anything, it\'s
probably less than it used to be. And the FCC was very good about
refusing to count either the composition of applicants, minority versus
\[non-minority\] or the composition of winners. They never, they refused
to gather statistics, because they, I feel, because they knew if they
quantified, then people would hold them accountable for what was
happening. Claiming to be helping minorities, but the licenses are not
going that way. If they quantified the Comparative Hearing, what
percentage of applicants were minority? What percentage won and got
licenses? The numbers would have been horrible. They did not, and they
never have, and they still haven\'t. (BPerez540, p. 36)

Mr. Perez saw the hearing process as a *"war of attrition."* He detailed
it this way.

Hearings by their nature were a war of attrition. The big broadcaster
who had the most players to expend and had the most appreciation of the
value of the license would spend the most and wear down and defeat all
the other applicants. That\'s another permutation of the same thing, but
if they couldn\'t buy them out they would wear them down, and they
\[would\] get financially exhausted. They literally financially
exhausted them. And, you know, more depositions, longer trials, more
appeals. And if they fought long and hard enough and this was the creed
of the broadcast Comparative Hearing attorney -- I could tell my client,
if you\'re willing to fight hard and long enough, I\'ll win this for
you. (BPerez540, p. 28)

Ruby Unger, a White female radio licensee, primarily felt that the FCC
wanted to push onto the applicants themselves the responsibility for
making the decision about who would end up with the license.

... \[What\] the FCC basically wants the applicants to do is knock each
other out. The FCC did not want to make a decision. They did not want to
rule in anyone's favor. They really wanted to have somebody buy out the
competition, you know, give them money to go away. And when the
depositions were taken here in Novato preliminary to the hearings in
Washington, it was very clear that our application would be the top or
the second in line.... that was the general consensus. I think it was
clear once the process started that -- and I don't really remember who
said that specifically, but it could have been my FCC attorney.... (T)he
upshot is I did settle on the night before I was going to testify. And I
did that because I was advised to do that by my attorney. And in
hindsight it really was the best thing to do. It was really difficult.
It's like being pregnant and then the night before you're going to give
birth you decide, okay, I won't have this baby. It was really sad.
(RUnger367, pp. 2-5)

Mateo Camarillo, a Hispanic radio and wireless licensee, who holds a
masters degree in social work, previously started a school of social
work to aid his Hispanic community, has been an extremely successful
multi-unit McDonald's franchisee, and was a university professor for 10
years, talked of his experience with the comparative hearings as being
*"a horrible process."*

> *(T)here were multiple parties seeking that frequency, seeking that
> spectrum and so obviously I had an attorney, and I thought it was, a
> good firm; it was highly recommended to me. And we proceeded to go
> through the process, the comparative hearing process which, you know,
> meant going to Washington for hearings before the administrative law
> judge.*
>
> *I was not very pleased with the competency of the administrative
> judge, \[who\] shall remain nameless. . . . he would be falling asleep
> while people were making presentations in front of him, things that
> even a lay person would say, gee, what's going on? You know he would
> ask questions \[of\] presenters that already had answered the question
> in their presentation. Things that led you to believe, is this person
> awake? And so I didn't have much faith in a rational recommendation
> coming out of that process.*
>
> *So what eventually I did is I was able to show that of all the
> applicants, I was the most qualified in reference to the criteria.
> There was another firm out of San Francisco, who was also very
> tenacious and it came down in my opinion to that entity and our
> entity. I formed \[my\] company with two other associates and we had
> an S Corporation . . . three stockholders.*
>
> *. . . And what I did then is I was very motivated to win and very
> aggressive in the proceedings and then I even hired a private
> investigator too because I knew \[the other applicant\] was lying. The
> applicant had lied. The top competitor had lied and I knew it. And my
> attorney said it's a big difference between you knowing somebody lied
> and proving to the FCC that they lied. And it was, and he was right.
> There was a big difference.*
>
> *... So it was very frustrating. So I knew that the odds were, it
> wasn't a level playing field. And so what I eventually did, I made him
> an offer to buy him out, his application, which went against my grain
> and my principles because you know I knew I had beat him outright, but
> I offered to pay him what he had expended, which was the rule at that
> time, . . . they couldn't make a profit. They could recover what they
> had spent. So that's in fact what happened. Because I didn't believe
> that I could win, based on what had transpired, even though I was the
> best applicant, even though the other person, the other party had
> lied. So that left a bad taste.*
>
> *It was a long process. It was from '81 to '85. It was four years. . .
> . (B)ecause we bought out the other applicant, we were kind of what
> you might say the only ones left standing at the OK Coral. But again,
> I didn't think it was a fair process. I don't think we won on merits.
> We shouldn't have to win, people shouldn't have to win by having the
> fattest wallet. We should have won based on the merits.
> (MCamarillo375, pp. 3-5)*

Francine Rienstra, a White woman who holds an FM license in Tucson,
Arizona, had a different yet no less difficult experience with her
10-year-long comparative hearing process. She encountered from one
individual three appeals of the decision to award her a license.
Ultimately she prevailed, but by then her resources had so dwindled that
she had to engage in a Local Marketing Agreement (LMA) in order to
generate the funds to build out her station. Eighteen months after the
station went on the air in 1994, Ms. Rienstra sold her station to her
LMA partner per their original agreement. She tells her story this way.

> *Initially, in 1984 I formed a company to acquire a brand new FM radio
> license in Tucson. It was part of the Docket 80/90 batch of licenses;
> approximately 700 licenses across the country were being auctioned off
> \[distributed under comparative hearings\]. I had estimated that it
> might take a couple of years to try to acquire that license and was
> prepared to go ahead and apply for a license, even if it took 2 to 2½
> years, or 3 years at the outside. I figured that was worth it, and I
> was working another job in the meantime. \[It actually took\] ten
> years.*
>
> *I sent in a letter \[to the FCC\]... initially ... stating that I
> would apply for a station should they allocate a license here. The FCC
> said they would allocate a license. Then they said that the . . .
> signal wouldn't work for a class A station. Tucson is in a valley, but
> it is surrounded by mountains. But we have plenty of stations here
> that give good signals. And I was in competition with, initially, 40
> other groups. And then by the time it got to that point where the FCC
> said, no, we're not going to allocate a station here, I'm thinking
> there are 40 other groups here that want this license and there was
> only one license to be allocated to this market. And if somebody
> doesn't say something or do something, then they're not going to
> allocate a license here.*
>
> *I couldn't wait for everybody else to make a move, so I spent my
> money and had my engineer do an engineering study stating that we
> could get city-grade coverage for a class A station. . . . \[The FCC\]
> said that they were not going to allocate a license because you
> couldn't get good city-grade coverage. Based on their figures that
> they did from their computers, I guess, I'm not really sure, I guess
> from their computers. And I believe what happened is that they took
> the 10,000-foot mountain and said that you'd be broadcasting from
> below ground and couldn't get a tower high enough to get a good
> signal. And I said that that's not true and talked to my engineer who
> said that's not true, and I asked him to put together an engineering
> study.*
>
> *And we did, and we essentially appealed to the FCC. No other group
> did that; I was the only one that did. And the FCC made some changes,
> changed the channel number and the frequency, and then they allocated
> us a channel number here.*
>
> *So, continuing in the process, then you have to send in your
> application when they request that you do that, and I did, and so did
> 20 some odd other groups ... or no, it was more than 20, probably
> around 30. And then the FCC weeds them down; they weed down six
> months, and then you have to re-apply. They weed it down and weed it
> down, and every time they weed down, it takes six months to weed down.
> . . . (W)e all applied, and then there was some more weeding-down
> process based on how good of an application you put together. And in
> order to get the 80/90 Docket, there were certain rules that you had
> to follow, and the closer you stuck to those rules, the more points
> you got.*
>
> *. . . \[We were an all-woman group\] and we were all local. We had
> not ... this was part of their parameters ... we had not owned any
> other broadcast entity. I had a minority in my group. I had a radio
> background. . . . All this time, while this whole process was going
> on, I'd been working for radio and television stations as a sales
> person and then as a sales manager. And then, we got to the point of
> weeding it down to \[a point where\] we did depositions and it weeded
> down, and then there were four groups, and really I was the strongest
> out of the four groups.*
>
> *And we went to a comparative hearing in Washington, D.C. \[in 1990\],
> and that's when I was declared the winner. And then one gentleman, who
> had applied for many, many different stations around the country, as
> well as owning a couple of stations in California, had applied for
> this one, too, and he was part of the four remaining groups at the
> comparative hearings. After I had won, he appealed it.... I think he
> said something about my engineering wasn't right, and that wasn't
> true. Because the FCC denied him and said that I was still the winner.
> That was six months long. He appealed it again\... and I won it again.
> He appealed it a third time.*

See, the FCC had formed some kind of a group at that time, and this was
supposed to make the process easier because then it wouldn't have to go
back to the FCC. Well, it did. It went through that group, and I was the
winner. He appealed it back again to the FCC, and I was the winner. He
did appeal it one more time, and then they said I was the winner. And in
order for me to get that license on the air and to even try to get more
funding, because now we had used almost all . . . of our funding . . .
for attorneys, for engineers, for trips, all the research and everything
else that we did. So we had used quite a bit of funding, and we were
still pouring money out of our pockets. This was all out of pocket.
(FRienstra360, pp. 1,6-13)

#### (h) Repeal of the Tax Certificate

The 1978 Broadcast Policy Statement created the tax certificate program
which provided tax benefits to the seller of a media property if it was
sold to a minority business. The tax certificate policy encouraged and
promoted minority ownership by giving a two-year like-kind transfer tax
break (a deferral) for the sale of licenses to minorities if the
proceeds were reinvested in a similar communication industry. In 1995,
as part of the Self-Employed Persons Health Care Deduction Extension
Act, Congress repealed the tax certificate program because of alleged
abuse .

This tax certificate program was the single most effective program in
lowering market entry barriers and providing opportunities for
minorities to acquire broadcast licenses in the secondary market.
Virtually every minority broadcaster with whom we spoke commented on the
program's effectiveness and recommended its reinstatement as a means to
increase opportunities for minority ownership. While it did not
guarantee that transactions would be consummated, the tax certificate
program did motivate sellers to seek out and offer an increased number
of broadcast properties for sale to minorities.

Bernadine Nash, a minority daytime-only AM radio station owner in
Boston, summed up the benefits of the program and the negative impact of
its repeal.

> *The biggest blow for us, really, has been the dissolution of the
> minority tax certificate. Because ...when the minority tax certificate
> was in existence, I actually had people approach me when they wanted
> to sell their radio stations because there were significant tax breaks
> to be derived from it. When that went away, not only did I not get
> phone calls, I couldn't get phone calls returned when I was inquiring
> about properties. I've been trying like crazy and have hit, I can't
> tell you how many, brick walls, and have come to the realization that
> in this market it is not going to happen within the framework that I
> imagined that it would. (BNash118, pp. 7-8)*

Dorothy Brunson, an African-American UHF licensee explained the economic
benefit of the program to the buyer.

> *It lowered the \[purchase price\]. . . . Because what happened, if
> you needed that crucial 20% down payment, and you only had 5%, if you
> got a tax certificate, and that person was able to defer those capital
> gains of 17 or 18 percent of tax on that money, they would then be
> willing to give you maybe a 10% swing \[ on the price of the
> station\]. Or even 12%, if it was big enough. And that 12%, with your
> 5%, well, they'd give you a 20% push to be able to pull that deal out,
> so if you can now get 15 times cash flow \[in financing\], you're
> going to be able to manage that, because you've already got a 20%
> equity stake. (DBrunson105, p. 25)*

Amador Bustos, who was quoted earlier on the ineffectiveness of the
comparative hearing process, said that *"(t)he only thing that was
effective was the tax certificate \[because it\] allowed minorities, as
in our case, access to get some property that we would not otherwise
get, because the seller was motivated by the fact that they could defer
the tax for a period of time. (ABustos122, p. 12)*

Dorothy Brunson, who commented that *"it was a travesty when the
Congress overruled the Commission on the tax certificates,"* provided
some statistics on the program's success.

> *(I)f you go back and look at the number of cases where I went back
> and I believe it was 1997, '96, you probably had about oh, I would say
> close to 250 properties that were owned by African-Americans, maybe
> with Hispanics with the radio stations and one or two TV stations in
> the West, we were looking at probably about 315 properties. Out of
> that 300, probably better than about 100, 150, were based on tax
> certificates*.
>
> *You have to look at some of the historical research. It was
> tremendous. Yeah, there were some who came in and got out, bought with
> tax certificates, turned around and sold \[the stations\]; but you're
> always going to have somebody who's going to abuse the system, but you
> don't throw the baby out with the bath. But it could have been better
> done if the tax certificates were regulated, and all they had to do
> was put a clause in that the persons who had the tax certificates,
> would a) have to hold \[the station\] for a minimum of two years, or
> three years and/or b) \[the FCC\] could have limited them - they
> (could) say no tax certificates over \$300,000 or \$400,000 or
> whatever, you know. But, not to just kill the whole program.
> (DBrunson105 p. 24)*

Henry Rivera's perspective that the repeal of the tax certificate was
*"devastating"* to minorities was shared by many.

> *I think in terms of things that have happened to the minority
> community, clearly one of the most devastating has to have been the
> repeal of the Tax Certificate. I mean when we lost that, we really did
> lose a terrific vehicle toward increasing minority ownership. That was
> devastating. (HRivera516, p. 12)*

#### (i) Auctions

The Omnibus Budget Reconciliation Act of 1993 (which added Section
309(j) to the Communications Act of 1934) gave the FCC authority to
distribute licenses through a competitive bidding process, or auctions.
Initially the auctions were used only for wireless licenses. The first
broadcast auction, the "Bechtel auction", took place in 1999.

The most significant difference between the auctions and the previous
means of distributing licenses (comparative hearings and lotteries) is
that now successful applicants, as a result of the auction bidding
process, are required to pay tens and often hundreds of thousands of
dollars to the FCC for each license awarded to them. The FCC at one time
allocated the spectrum to qualified applicants without receiving any
compensation from the applicants, now the prospective licensee with the
deepest pockets wins.

For already capital-deficient small, minority- and women-owned
businesses, the huge sums of money needed to both acquire the licenses
and build out the systems has created an enormous barrier to entry.

To help counter the financial impact of the auctions, the FCC originally
created bidding credits and later favorable financing for small
businesses, with additional credits being given to minority- and
women-owned businesses. The FCC set the C and F blocks of PCS spectrum
aside as entrepreneur blocks with the expectation, at least with the
C-block auction, that small businesses would get a head start in the
market with PCS service over the larger telephone service providers who
were scheduled to bid for their licenses in the subsequent A- and
B-block auctions.

Unfortunately, the decision in the [Adarand]{.underline} case prompted
the FCC not only to delay the C-block auction beyond the date of the A-
and B-block auctions but also to remove any special credits that had
been available for minorities and woman and to extend those credits to
all small businesses participating in the auction.

The delay in timing of the C-block auction, coupled with the loss of
minority and women bidding credits, impaired bidding strategies, pricing
estimates, and ultimately limited the opportunities for small,
minority-, and women-owned businesses to get financing, meet their
installment payments, and build out their systems.

But more than anything, most interviewees who offered an opinion about
the auction process indicated that, because of the capital requirements
of the process, small business owners would be shut out of the process
and relegated, if given a chance at all, to the least desirable and
therefore most affordable spectrum. Carl Davis, a wireless licensee
characterized the FCC as *"a money-grubbing organization"* which *"isn't
fair any longer."(CDavis322, p. 27)*

Brian Cobb, a media broker had this perspective on the auction process:

. . . (T)he bulk of \[the wireless spectrum\] is being provided to
whoever pays the most money. But . . . the system got perverted when
\[the FCC\] got greedy and started selling to the highest bidder, so all
they are doing is turning over all the frequency to the largest
corporations in the country. That's what's happening. I call it
corporate socialism, because I'm a big fan of small business. (BCobb512,
p. 32)

Toni Cook Bush sees the auction authority as one which now drives and
defines choices made by people at the FCC. *"The bottom line that I
figured out from at least some of the conversations that I've had at the
Commission is that they really do just want to raise money, and they
view their job just to try to figure out ways to get \[companies\] into
an auction." (TBush378, p. 27)*

Henry Rivera sees it this way:

> *The Administration . . . and the Congress like the fact that there's
> money being generated out of something that the Commission is doing
> and the Commission likes that. So, they like to be patted on the back
> and given attaboys and attagirls and you guys are doing a great job
> and you're raising all this money for the Treasury and we think you're
> great. ... \[But\] that's the ball they tend to keep their eye on
> rather than, you know, what can we do about helping minorities? What
> can we do about fostering new technology . . . but I think that their
> mind is not necessarily on advancing the public interest as much as it
> should be but rather \[on\] how much money can we generate from this
> particular auction. (HRivera516, p. 21)*

Brian Cobb asks a more fundamental question about the rationale behind
the auction process.

> *They haven't had a very viable solution yet \[for issuing licenses\].
> . . . They tried to set rules that said, okay, if a minority is
> involved then they get favoritism or if there is more localism. . . .
> So then in the \[comparative hearing\] process everybody was trying to
> eat each other, and they got tied up for years and years and years.
> That wasn't very good. And so the ultimate solution was to make it as
> simple as possible, whoever has got the most money gets the frequency;
> and I don't understand the rationale in that. I mean, I understand the
> economic rationale, but if you say it's the public frequency, why did
> you do that. (BCobb512, pp. 33-34)*

Frank Blount also believes that the FCC is focused now on money with
little consideration of the "small business guy".

> *And the FCC, I think that this whole thing has been geared to boy,
> let's get the billions of dollars. But, what have they done to the
> small business guy? They have shut him completely out of the market.
> (FBlount153, pp. 23-24.)*

Carl Davis shared more of his feelings about the impact of auctions on
the "rank and file."

> *Really, in my opinion, auctions are illegal...because the airwaves
> belong to the general pops, the general population in the United
> States. And why should you have to pay the Federal Government? It all
> belongs to the people. And . . . I don't \[think\] we should have to
> pay for those licenses. We never paid. People never paid prior to
> this. So essentially what happened, the bulk of the licenses were
> given away to people. And then all of a sudden when you bring in the
> rank and file, more or less, then they start charging . . . .
> (CDavis322, pp. 17-18)*

When the C-block auction finally took place, the result was
super-inflated prices driven by a few supposedly well-financed bidders;
and the belief that this was the last real chance for entrepreneurs to
get a meaningful part of the wireless spectrum. The A- and B-block
auctions, which had already put spectrum in the hands of the large
companies, had taken place. Whatever advantage that was expected to
accrue to the "entrepreneur block" by being first to market had been
erased when the C-block auction was delayed.

Brian Fontes, a Senior Vice President at the Cellular Telecommunications
Industry Association (CTIA), offered his perspective on the viability of
C block licensees given the timing of their market entry.

> *I don't think the Commission did small businesses any great favor
> with the C‑Block; \[the C-block license holders are\] the last to
> market - the small business, women-, minority-owned, Telco-type
> businesses, which were originally stated under the auction authority,
> and [Adarand]{.underline} kind of wiped that out. And now it\'s just a
> small business exemption or a small business category. I mean, they
> auctioned off first the A‑Block, then the B‑Block, then the C‑Block.
> So in terms of when these blocks of spectrum become available means
> that the other blocks -- it\'s kind of last to market. And I think
> anybody that\'s last to market will have a more difficult time -- one,
> raising capital and two, competing. (BFontes524, p.11)*

C Block licenses sold for considerably more money per population covered
by the license than the A and B blocks. Many applicants either dropped
out of the process early, were able to afford only much less attractive
secondary or tertiary market licenses, or considerably overbid for their
licenses thus rendering their business plan uneconomic. Therefore these
C-Block business plans became unattractive as a financial investment
either for conventional lenders, equity partners or vendors.

Many C-block licensees have been unable to meet their installment
payments; many have filed for bankruptcy. In either case, they have had
to return their licenses to the Commission, per the auction rules. Some
C block licenses have already been reauctioned. Another block of
licenses is scheduled for reauction on December 12, 2000.

Mateo Camarillo, a Hispanic wireless licensee, whose experience with
comparative hearings was presented above, also shared his disappointing
auction experience with us. His story is illustrative of the stories
shared by many other C block participants.

> *When I became aware of \[the C Block\] and I found that there was
> receptivity to those suggestions \[about preferences for minorities
> such as bidding credits and installment payments\], and they became
> policy, then I decided to shift focus and I left the administration of
> running the radio stations to get involved in PCS and formed a
> company, . . . Integrated Communications Group. And we then were
> successful in getting investors and other parties to commit to work
> with us \[prior to the beginning of the auction\].*
>
> *Anyway, what happened is the Supreme Court ruled on a case called
> [Adarand vs. Pena]{.underline}, and after that ruling came down we
> lost millions. All our investors went away. All our investors went
> away. Because \[with\] the FCC's interpretation of the ruling, the
> Supreme Court Ruling did not say that you could not have those
> \[minority\] programs, it said you had to have a justification, it be
> on a narrow basis, but the FCC just threw out everything and so that's
> why our investors went away.*
>
> *And when they in fact promulgated new rules later that year, we had
> committed so much time, so much energy, we went ahead and participated
> on a reduced scale. And despite the fact that we lost millions from
> our investors, we just scaled down. However, we ran into the same
> problem that we ran into in radio broadcasting, being in secondary and
> tertiary markets, we subsequently found we did bid and prevail in the
> auction both the C Block and F Block and obtained 11 licenses. However
> none were, and our strategy was along the \[U.S. -- Mexico\] border
> because that was our niche, that was our strength is marketing and
> reaching the Hispanic market which is on both sides of the border, and
> we thought that gave us an advantage over you know Joe Doe company
> that didn't even understand that community.*
>
> *However, we had the Next Waves of the world who outbid us and drove
> the bidding prices out of sight, so we had to drop out in Corpus
> Christi, in Brownsville, in markets that were important, and so we
> ended up with tertiary markets.*
>
> *The problem that we eventually found out is that it was very
> difficult to attract investors \[and to get\] the attention of
> suppliers, the Motorolas of the world, the Qualcomms of the world, in
> secondary and tertiary \[wireless\] markets. So that was another huge
> problem and so we're now currently in escrow to sell our licenses
> because we can't raise the millions needed to \[make installment
> payments on the licenses or build them out\], that we had before
> [Adarand]{.underline}.*
>
> *We had everything lined up. We had manufacturers. We had investors,
> we had all kinds of things. But we had so much invested in time and
> energy we thought that we could still make it work on a smaller scale;
> but we subsequently learned the hard way that people aren't interested
> in Timbuktus of the world. Which is where minorities tend to end up
> because they don't have the capital, they don't have the wherewithal
> to go public, to have the critical mass to have this staying power.
> (MCamarillo375, pp. 21-22)*

While few interviewees that were involved in the C-Block auction
expressly talked about the benefit of being able to pay for their
licenses using installment payments, it was apparent from their comments
that this program encouraged them to participate in the auction process.
The difficulties for most arose, however, with the delay in the timing
of the C-Block auction due to [Adarand]{.underline}.

As was the case with Mr. Camarillo above, lenders and investors lost
confidence in the C-Block applicants and generally decided to withdraw
their support. Furthermore, when the auction finally did take place, the
bidding was very active, with prices escalating beyond the point of
economic prudence. Many bidders, given their lack of sophistication with
the industry and financing in general, used all of their available money
to make the license down payment, perhaps naively expecting that since
they had time until their first installment payment they would be able
to raise the needed capital from outside sources. With prices for the
licenses generally being higher in most markets than their business
plans could accommodate, it became virtually impossible for licensees to
raise the capital needed to build out their systems and make their
installment payments on a timely basis. Several licensees have defaulted
on their payments requiring them to forfeit their licenses.

#### (j) Interactive Video and Data Services (IVDS)

The FCC auctioned Interactive Video and Data Service ("IVDS") and
targeted this spectrum to small, minority, and women-owned businesses.
Many interviewees stated that, during the IVDS auction, they came to
believe that certain necessary technology was available and carried the
imprimatur of the FCC. In fact the technology did not exist and many
have been unable to make use of their licenses. Realizing the problem,
the FCC suspended the requirement that license installment payments be
made. In some cases the FCC has refunded the installment payments made
to date by the licensees in exchange for the return of the license.
However, the down payments made by the winning bidders remain in the
hands of the FCC.

Nancy Douglas, an IVDS licensee, talked about the basic problem with
this spectrum.

Interactive Video and Data is what it was called, but that name now has
gone by the wayside. Now they just call it 218-219, because it certainly
is not interactive video, it never did do that, could not do that,
\[even though the FCC\] said that it could. It turns out that the
equipment, the amount of spectrum which is 1000 mhz of spectrum, will
not even do what they said that it will do. You need a lot more spectrum
to be able to do that. You need really broadband, you know. So, even
that was incorrect, which is basic engineering. You know, which again
shows that the FCC did something that was totally wrong. And the FCC has
refused to take any responsibility for that. (NDouglas155, p. 9)

Carl Davis, who holds five wireless IVDS licenses, among others,
explains the financial impact on him of the IVDS auction process.

I was a winning bidder on five licenses in the IVDS . . . and
subsequently put 10% down. And at that point in time, I think virtually
everyone who had bid for those licenses realized that the company who
had stated that they had the equipment to operate at those frequencies
did not have the equipment. And at that point in time, virtually
everyone who had outside financing, the financial community backed off
and left us high and dry.

. . . I had deposited for the initial down payment something like
\$272,000. So then the financial backing that I had at that point in
time decided to back out and left me dry and I couldn't come up with the
other \$272,000 for the \[other half of the\], I believe, 20% down. . .
. A lot of people got collared. I don't know the numbers totally, but a
number of people did. . . . I had used my own funds for the initial down
payment, but I had backing for the additional ten percent and the
subsequent payments - I think it was an additional \$3 million. \[I
had\] \$272,000 \[of my own money in the deal\].

The Federal Communications Commission kept \[my down payment\]. . . .
Since I didn't make the additional 10 percent down . . . they claimed
that I did not uphold the agreement, and, therefore, they confiscated
the license. The FCC's position has been, and still continues to be, we
should have done due diligence \[on the equipment and the spectrum\].
And I think that's a cop out because the Federal Communications
Commission is the one who incessantly tapped onto, Answer TV is what it
was called, stating that they had the equipment, and the FCC was touting
this around in the newspapers and through their correspondence with us.
That they're equipment essentially did exist.

However, in further research, we found that the Federal Communications
Commission did not even check to see if Answer TV had the equipment.
They issued the licenses based \[on technology that\] . . . was
hypothetical.

Altogether, with respect to IVDS, I spent a total of a half million
dollars - in developing my system \[with QVC\] that I thought was there,
hiring people to write things for me with respect to how we were going
to market this thing; paying attorneys; and doing research of all sorts.
(CDavis322, pp. 1-3, 11-12)

Mr. Davis continued on to conjecture why, with the failure of IVDS, the
Commission will not return licensees' down payments*.*

> *So I'm in contact with a lot of licensees. And they're complaining.
> You know even though they made a second down payment and a few
> installment payments, they're saying well, how come I can't get all my
> money back? You know, what's precluding the Federal Communications
> Commission from giving all my money back? There's no reason for it.
> And come to find out there is a reason. And the reason is this - a
> company called Next Wave.*
>
> *\[They\] (p)ut down half a billion dollars \[for licenses in the
> C-block auction\], on the licenses they bid for on PCS, I think it was
> called. And they didn't come up with the additional half, which was
> another half a billion. . . . So they are in default. Now because they
> are in default, and we're in default, the FCC doesn't want to
> necessarily give our money back, our down payments back because if
> they do, it would set a precedent and then they would get their money
> back, or in this case, Next Wave is attempting to, they want their
> down payment, but the FCC wants to really confiscate that fine and put
> it back on the market because now the licenses are worth about ten
> billion. So they can make a lot more money. And it's become a money
> hungry business. (CDavis322, pp. 26-27)*

Mr. Davis also reports that he has finally found a use for IVDS and the
accompanying technology to make it operational. However, since he failed
to pay the second half of his down payment, as reported above, the FCC
has confiscated his license and is leaving him without any way to recoup
his personal investment.

> *This is the public notice, \[the Order\], to IVDS people (and we are
> called 218-219 mhz service): . . . they tell you how to get your money
> back, that is your installment payments. If that is the case, or they
> give you another option, you can go ahead and continue to\[pay on
> the\] installments, and they will commence 3 months henceforth, or you
> can request a return of your installment payments, or you can pay off
> the entire loan. Now I have proposed to pay off the entire loan... But
> they say I don't own the license because I didn't put the additional
> 10% down. I have found and a number of other people have found that we
> can utilize the license for digital information data transfer. So now
> the license would at least be able to get some of our money back. And
> I think the price I paid was close to \$4 million, for the license
> totally, three point seven, three point eight, something like that. I
> could \[earn\] that money back in a period of five years.*
>
> *I have gone out and I've turned over rocks and I've come up with a
> financing source. And they are willing to pay the FCC off. I have
> letters to that effect and I've sent the letters to the Federal
> Communications Commission and given them an opportunity to check these
> people's credentials and background and make sure they do have this
> cash; and they still deny me the opportunity to come back, give them
> the 10% down and pay full price for the license. (CDavis322, pp.
> 28-29)*

Mr. Davis concludes by sharing his perception of how the FCC
specifically marketed the IVDS licenses to the small, women- and
minority-owned business communities. He feels that these communities
were "set up" by the FCC.

> *Well, this is hypothetical of course on my part. This is what I see
> happened with IVDS. I think that, it looks like to me, now this is
> strictly speculative, because I have no evident\[iary\] proof, the
> Federal Communications Commission set up the minority community. That
> is, they touted these IVDS frequencies and spectrum to be the greatest
> thing that happened in the world since White bread.*

And what they did was they made great efforts to reach into the
community, into the so-called minority community to get them to apply
for these licenses. . . . Thirty-four percent of those \[who\] won the
licenses were of that nature \[small, minority- and women-owned
businesses\]. Hey, really, \[the FCC\] just touted it like it was a
great thing. You know, this is something that it gonna be a breakthrough
for the so-called small business person, minority individual, and
females. That this is going to be the opportunity for them to get a
break in the communication industry, which will render them wealthy,
essentially.

And we're gonna give them this chance to do this with this new
technology and new ideas and blah, blah, blah, and they went on and they
put it in the Wall Street Journal. It was in the Washington Post. It was
in every newspaper I ever had, they sent out little brochures, they did
everything they could to reach into the communities to get people to bid
on these things. And they did it. They turned around and left a sour
taste in virtually everybody's mouth. (CDavis322, pp. 33-35)

#### (k) Abuse of the System

Ownership programs that were designed to benefit minority- and
women-owned businesses were sometimes abused by White men using women
and minorities as "fronts" for their applications. They would
specifically recruit women and minorities to pursue licenses using FCC
minority and female programs and credits, but lacked the good faith
intentions to include their "partners" in meaningful ownership or
decision-making positions.

Alternately, believing that women and minorities did not have the
"staying power" to put up a protracted fight for a license, other groups
of White men would file applications when they believed a woman or a
minority had an excellent chance of winning a license, fully expecting
that sooner rather than later the woman or minority applicant would pay
them off to withdraw from the selection process. This scheme was
referred to as "greenmail".

Some minority and women interviewees recounted instances when they had
to respond to multiple appeals of the FCC's award of their license. Carl
Davis, the study participant who encountered the IVDS difficulties
above, shared his story of being greenmailed in his bid for cellular
licenses.

> *\[The people who contested the awarding of the cellular license\] . .
> . were two people out of Kentucky. \[Their\] last names were Peter and
> Moon. And then there was a so-called committee out there called
> Committee for a Fair ... Auction, or something \[like that\], I forget
> exactly what their names were. (T) hose were the people that were
> involved. And we were what they referred to as "greenmailed" at the
> time. Meaning they were using a technique that the FCC allowed to take
> place, which was nothing but Blackmail---that is anybody could file a
> petition to deny a license against you for whatever reason they may
> have thought they could have done it for.*
>
> *And it's referred to as greenmail, in the sense that where it was a
> money-making, illegal in my opinion, concoction of somebody out there
> in the hyperspace or whatever you want to call it. Because if you
> didn't \[pay them to go away\], you would have to go through a hearing
> process at the FCC and you \[would\] have to secure lawyers and you
> \[would\] have to do all the things involved.*
>
> *So it costs you a great deal of money just to get to that point in
> time, get your license awarded to you...They chose a lot of people. I
> wasn't just the only one. (T)hey \[filed a number of complaints\].
> They went through an entire listing against those they felt probably
> would pay rather than fight. One guy was, I forgot the first names,
> but I can remember the last names because they were substantial to me
> at the time. Peter and Moon, and they were from out of Kentucky.*
>
> *I ended up paying them a million dollars... Because the FCC was going
> to carry this thing, and carry it out for a long period of time, so I
> just paid them a million bucks... I spent a million dollars to pay
> Peter and Moon, they got \$500,000 a piece. The Committee . . . for a
> Fair Auction, something to that effect, they got \$168,000 I think it
> was. And the legal cost of all of this came to, because I had a
> contingency contract with the attorneys, they ended up getting
> \$700,000. So all told between Peter and Moon, this Committee for Fair
> Auction, my lawyer and his marketing firm, who ended up getting
> \$750,000, so all told it was close to \$2 million dollars.
> (CDavis322, pp. 12-15)*

#### (l) Inferior Licenses

Whether it was late market entry (in both broadcast and wireless),
insufficient funds for the purchase of larger market licenses, or the
perception of brokers and sellers that small businesses, especially
minority businesses, couldn't afford the more powerful signal stations,
small, minority- and women-owned businesses frequently ended up with
inferior properties. In the interview process , we found this with
minority-owned businesses more than any other demographic group.

Broadcast licensees deemed the quality of their licenses as inferior if
they were in small, less populated markets; if their signal strength was
weak or spotty because of geographic terrain; if they suffered
interference from other stations in the area; if they had their AM
station at the 1600 kHz and above, or if they were daytime-only AM
stations. Inferior wireless licenses included secondary and tertiary
markets or spectrum for which no viable technology exists, such as with
IVDS.

As one might imagine, it is more difficult to achieve and maintain
profitability with inferior licenses. Further, anything that the FCC
does to limit these licensees' ability to offset the economic deficiency
such as denying requests for additional power or grandfathering in older
more powerful stations when rules regarding frequency interference are
changed creates a further burden.

Dale Gehman, a Native American radio station owner, offered his opinion
that there are *"two sets of rules"* -- one for new stations and one for
the older stations whose signals create interference but who are
grandfathered in under newer, more stringent FCC regulations.

> *It\'s those that were "the power to be" years ago, and their level of
> what they\'re operating at has extreme interference, but that\'s okay,
> they\'re "grandfathered". But if you do a new facility, a new group,
> try to do something for their community, "oops," you got to meet these
> extreme stringent rules. As far as minorities getting in the market,
> there should be one rule for everybody. If this certain contour is
> interference, then by God it should be for everybody. And if that
> means lowering power on the old stations, so be it.*
>
> *Or at least go to what the worse condition is in the country, and
> that\'s the standard, because the spectrum\'s used up. If they were to
> say, okay, here\'s the rule, because here\'s what the grandfathered
> stations are operating at and everyone can now operate at this, then
> it opens up the spectrum for many more stations.*
>
> *Of course the existing broadcasters are not going to like that.
> They\'re going to say, "hey, that\'s terrible, there\'s new stations
> coming on." But you\'re holding people to two standards. You\'re
> saying, okay, minority groups, we\'d like to have you in broadcasting,
> and we\'ll help train you and we\'ll do our EEO programs, but you
> really don\'t want to be in ownership because we\'re going to limit
> you because you have to meet these new rules while we operate under
> these old rules, that really there\'s no parity at all. It just does
> not make sense to me, and I don\'t really understand. . . . It\'s not
> right. (DGehman132, pp. 25-26)*

We already shared Mateo Camarillo's story about the C-block auction
where, because his funding dried up when the ownership programs were
eliminated due to [Adarand]{.underline}, he had to significantly scale
back his bidding and as a result, acquired licenses in inferior
secondary and tertiary markets.

> *. . . but we subsequently learned the hard way that people aren't
> interested in Timbuktus of the world. Which is where minorities tend
> to end up because they don't have the capital, they don't have the
> wherewithal to go public, to have the critical mass to have this
> staying power. (MCamarillo375, pp. 21-22)*

We're also reminded of comments made by Cellular Telecommunications
Industry Association's Brian Fontes about C block small businesses being
last to market and therefore having *"a more difficult time -- one,
raising capital, and two, competing." (BFontes524, p.11)*

Nancy Douglas, owner of IVDS licenses, shares that ". . . there are no
small minority, small business opportunities anymore. They're gone.
There will not be any. \[E\]verything from now on that they're selling
is really expensive. You know, it's like the only thing that they have
left is stuff way, way up there on the (wireless) spectrum. And that's
stuff's really expensive to construct. (NDouglas155, p. 19)

#### (m) Decision-Making and the Role of Key Market Participants

Almost all licensees acknowledged that they needed legal and often
engineering representation before the FCC. Although fees for these
professionals is often very expensive, most interviewees acknowledged
the value. It was a challenge for many, however, to pay Washington, D.C.
prices for their professional advisors. Additionally, several study
participants spoke of the relationship of key market players, primarily
attorneys, to the FCC and its decision-making function. They shared
experiences where it was their perception that some licensees, or
prospective licensees, were receiving more favorable treatment than one
would expect given their application's merits.

Others spoke of those intermediaries who were all too familiar with the
rules, regulations and inner workings of the FCC "gaming the system" and
causing delays in the process for competing licensees.

Dennis Miller, a wireless license holder, acknowledges the importance of
good legal representation before the Commission when he said *"\[Our law
firm is\] experienced and understands the \[FCC\] well. \[It\] has
relationships with the Commission staff, which is vital. (DMiller147, p.
8)*

Dale Gehman sees it from another perspective. He shares an experience
where he perceived that others were gaining advantage in ways that were
expressly against Commission rules.

> *One thing that really bugs me about the rulemaking branch is that
> there is a great deal of contact by certain \[non-FCC\] people that I
> am convinced helped determine how some of the rulemakings \[came\] out
> of there. I\'ll tell you, there\'s some more stuff going on behind the
> scenes.*
>
> *\[A broadcaster I know\] was on the phone to the rulemaking branch
> every other day. And, it\'s like, those are closed proceedings.
> You\'re not even supposed to talk to those people up there. \[the
> FCC\] allow\[ed\] contact in there that should really be prohibited,
> and I saw this work several places in Alabama \[where\] I know that
> there\'s no way he\'d have got\[ten\] that pulled off, except that he
> just really befriended the people in the rulemaking branch and just
> stayed after them and after them, on the phone calling up there every
> couple days . . .*

# 

I don't understand how some people can get things like that done, and
then we try to follow everything exactly the way it\'s supposed to be
and we would get \[our application\] kicked out with the least little
thing. I mean, it was just like these little tiny areas in dispute. Our
\[applications\] got kicked out. There\'d be other broadcasters around
us. They would have major problems with their applications. Their
attorneys would go over and sit with the Commission, and they would just
set them aside. And we would get kicked out. We would have to go back in
the whole proceeding. (DGehman132, pp. 19-23)

Robert Fink talks about trying to use the Commission's web site to help
defray legal fees.

I have to spend money on lawyers and research engineers to find if there
is something coming up. I mean, go to \[the FCC's\] web site, and
everybody now says, well, everything is available on their web site.
Trying to find something on there is nearly impossible anyway. And 90%
of the time, when you go to it, it tells you "unavailable at this
time"... it just never seems to give us what we want, and, half the time
it is under construction and that type of thing. Their maintenance on it
is horrendous. And if that could be maintained, that would save us a lot
of time but also a lot of \[money) ... we have to call our attorney at
\$150 an hour to find out stuff. (RFink235, pp. 26-27)

Art Gilliam talked about his experience in the comparative hearing
process where he perceived that the outcome of the hearing was
*"politically influenced."*

> *I have participated in a comparative hearing process . . . This was
> related to a television matter that took place involving the RKO
> license . . . there was here in Memphis and . . . some people here put
> together various groups that competed for the license; and I was a
> part of one of those groups, but not the leading part of that group in
> terms of economics. No \[we were not successful in getting the
> license\], and I think that the party that was successful probably had
> political connections because I don't believe that based on the
> criteria that the FCC set forth that that party would have been able
> to otherwise win the license, but they did.*
>
> *They were not local, and it had some considerable differences, based
> on ethnic criteria. So my conclusion from all of that was that
> politics does indeed play a considerable role in the outcome, although
> probably certainly not at the staff level of the FCC. . . . I am
> personally and totally convinced that the outcome was politically
> influenced.... when you look at the criteria, you could readily
> \[see\] that their integration of management into ownership was not at
> the level of several of the other groups, they were not local, so
> several things.*
>
> *In fact, the lawyers we were using, who are themselves well-connected
> lawyers, initially told us that they were assessing the groups and
> said this group basically didn't have that good of a chance that there
> were about three other groups that really were the main competitors
> and we were one. Later on, these \[same\] lawyers, . . . later one
> came back and kind of hedged a bit and talked about how this \[other\]
> group had excellent opportunities. I just believe that they had gotten
> inside information about this group; and it's not something I can
> demonstrate by proof, but it's just a matter that I don't believe
> that, and I guess, subsequent political developments in the country
> that I've come to be aware of, have convinced me even more so that
> money can buy licenses.*
>
> *. . . I don't have a perception of the FCC at its . . . staff level
> engaging in discrimination. I have not experienced that personally. At
> the same time, I think at the Commissioner level, which is an
> appointed level, there is political influence that can be brought to
> bear down through the organization and I think that's what happened in
> this case. Which is different than discrimination, but it's
> discrimination in the institutionalized sense in that most that have
> political influence are less likely to be African American.
> (AGilliam117, pp. 13-17)*

Other than the FCC, the media broker appears to wield the most influence
over who receives notice of station purchase opportunities. David Honig,
Executive Director of the Minority Media Telecommunications Council
(MMTC), explained that through the years civil rights organizations have
complained *"that minorities weren't hearing about stations for sale
until the deal was announced*." When stations were offered to
minorities, Mr. Honig explains, the properties were often troubled or
technically inferior. Dr. Benjamin Hooks, the first African-American FCC
Commissioner tried to correct this situation through a ruling at the
FCC. He was not successful. David Honig, who worked for one of the
organizations that filed a complaint, explains what happened.

What Dr. Hooks was responding to was complaints by some of the civil
rights organizations ...that minorities weren't hearing about stations
for sale until the deal was announced. ... that when minorities would
get called saying a station is for sale, it was often a station where
the owner was desperate that they would even consider minorities and the
station was frankly technically inferior, it was on an environmental
site, or something was wrong with it. But the really juicy deals,
minorities weren't hearing about.

One difficulty that brokers had often pointed out was, "Well once you
start having some of the sales announced publicly and others not, people
will move around. It will be a competitive disadvantage if we have to
announce it and they don't close. Then our staff will move over there
and we're sort of selling the continuity of the staff as an asset that
we're selling that affects the price and sometimes when formats change,
people want to move and they note that it is and so forth, a good point.

\[Dr.\] Hooks' answer was "Fine, let's have a level playing field."
Everyone who sells a station has to announce the sale 45 days before
they can sign a contract on the sale. That way, everyone equally will
know what's for sale, and everyone will have a chance to bid openly. And
let the one with the most money win. And that was a radical idea because
it didn't get any other votes. And the reason it didn't get any other
votes, to be fair, was that some of the Commissioners who opposed it
felt that then everyone will have their key assets moved somewhere else
and depress the value of the industry.

But there was no answer to it in terms of, well, what else are we
\[going to\] look at that might work to open up this brokerage business.
Are you going to have any hearings? Because, \[Dr.\] Hooks was calling
for some remedy for discrimination by brokers. This particular idea was
one, but then the Commission just dropped the ball and well, we'll deny
this idea and not look at anything else either. There was some
boilerplate in it that, well, we think this is an important problem.
We'll continue to look at it. They didn't. (DHonig521 #2, pp. 19-20)

#### (n) Ineffective or Unaffordable Advocacy

Many study participants expressed frustrations over their inability to
afford a cadre of communication attorneys, as the large group owners and
telecommunication companies do, to represent their interests before the
FCC and Congress, to respond to rulemakings and to move licensee
requests for action quickly through the various processes and Bureaus
within the Commission. Advocacy by members of the communications bar
provides more opportunities for access to key FCC decision makers.

Several licensees indicated that they had neither the time nor the
financial resources to be able to spend time in Washington, D.C.
representing their own interests, lobbying members of Congress and
meeting with FCC staff.

Ronda McKenzie, an owner of multiple wireless licenses, shared her
perspective on the issue of small business advocacy before the FCC.

> *Well, I'll tell you the biggest problem is these big carriers have
> tons of money to have 20 lobbyists up on the floor up there with the
> FCC people and, you know, \[the Commission\] grease\[s\] the squeaky
> wheel. And small businesses and minorities don't have that kind of
> money, you know. We can't -- I mean, we're worker bees. We're out here
> trying to make it happen and we certainly don't have the funds to pay
> professional lobbyists to be sitting on the floor to protect our best
> interests. And there's nobody there to protect us. And no one really
> is there to represent our interests. And we don't have the money to do
> -- and we can't fight AT&T and Sprint, you know. (RMckenzie158, p.
> 13)*

To assist the small, minority- and women-owned businesses, the Office of
Communications Business Opportunities (OCBO) was established. According
to Frank Montero, former Director of OCBO, the Office is *"charged with
helping small women and minority owned businesses enter into the
telecommunications and technology marketplace to try to address barriers
that they may be facing in terms of trying to get into that marketplace,
either because they are having difficulty obtaining access to capital,
or they may have difficulty obtaining information about Commission
proceedings that they may be interested in participating in or
information on how to apply for a license." (FMontero509, p. 1)*

Mary Helen Barro, a former owner of radio stations and former President
of the American Hispanic-Owned Radio Association, explained her
perspective, which was echoed in part by others.

> *We went to Congress---well Congress, well, forget Congress. They
> didn't care about the little people. What they cared about and what
> they've always listened to are their big contributors, which \[are\]
> the major corporations, and the major corporations had a lot of money
> and they wanted in. ... I was pretty much up on what was going on in
> the industry. I also had very good and expensive attorneys that kept
> me apprised. But if you did not have the luxury of having an attorney
> stay on top of things for you, you basically were left out of the
> loop. You had to spend a lot of money because believe me, the FCC
> never told anybody anything. Their system of notification ... is
> really one that is structured for the large companies that have the
> money to have attorneys that constantly stay on top of what is going
> on at the FCC. For the small broadcaster, who is on limited funds,
> forget it. You're never going to find out anything. (MHBarro190, p.
> 7-9)*

Henry Rivera, having worked with the FCC in multiple capacities for
years, noted that *"it's very difficult"* for small, minority- and
women-owned business. *"They really don't have much of a voice \[at the
FCC\] and they ... don't have the same stature or muscle power basically
that some of the bigger operations in town are able to muster.
(HRivera516, pp. 14-15)*

Toni Cook Bush highlighted another problem which small businesses,
especially new entrants, can be confronted with when trying to secure
representation before the FCC.

> *"It is very hard to find engineers and attorneys that don't already
> represent one of these other guys, so you find that minority
> companies, and I think female companies and smaller companies go in at
> a disadvantage because there's nobody for them to hire. So if we could
> hire another engineer who was better known at the FCC, we would do it
> in a heartbeat. But we can't find anybody who doesn't have a
> conflict." (TBush378, p. 19)*

To help eliminate some of the reliance on communications attorneys, the
Commission and OCBO have worked hard to make access to information and
the license application filing process more user-friendly through the
use of the Commission's web site. Frank Montero talked of this
transition.

> *I think ... there is clearly a movement afoot at the Commission to
> try to break that reliance \[on Washington, DC-based FCC attorneys\]
> because obviously people who can't afford an FCC lawyer in Washington
> are left out. . . . \[Information technology and the Commission's web
> site\] has certainly broken the inside-the-beltway monopoly on the
> communications law practice. And perhaps this is the first step of the
> evolution is that now, ... if you look through the ranks of the
> Federal Communications Bar Association, it's amazing how many
> communications lawyers are outside of Washington.*
>
> *... Well, there is no way those people could have existed ... five,
> ten years ago. I mean ... you had to be able to walk over to 1919 M
> Street to meet with people, to get copies of things from the reference
> room, to go to the commission meetings. I mean, if you couldn't do
> that, make the filings, you just could not have practiced that type of
> law. The fact that somebody in Little Rock, Arkansas can watch
> commission meetings because it is being web cast on the computer or
> make their filings through the electronic filing system, or get any
> ... information about the status of an application or anything on the
> computer, it is amazing. (FMontero509, pp. 30-31)*

And yet, a web site does not replace the effectiveness usually
associated with well-paid attorneys and lobbyists.

### 7. Education, Training and Experience

The study found that a number of minorities who were in either the
broadcast or wireless industries, or both, had significant educational
background and work experience, in almost all instances, greater than
for their White male or female counterparts.

We interviewed, for example, several people who had undergraduate
engineering or broadcasting degrees; one minority woman had a Ph.D. in
public policy and had attended a small business executive education
program at Harvard Business School; a number of people had law and
either undergraduate or graduate business degrees from various
well-known universities and colleges; one person had been a senior
executive at the investment backing firm of Goldman Sachs; another had
been in charge of international advertising for Proctor and Gamble; a
third had been publisher of a weekly industry newspaper for the Hispanic
radio market; and yet another had a masters in social work, had started
a school of social work, had been a successful multi-unit McDonald's
franchisee, and a university professor.

While education did not necessarily translate into market success, the
kind and quality of prior work experience had an enormous impact on
one's ability to raise significant sums of debt and equity financing
which ultimately translated into opportunities to purchase stations in
the secondary market. For those minorities who experienced greater
access to capital than was usual for minorities taken as a group, the
common denominator was significant private sector work experience,
either in finance, marketing or broadcasting. With this background they
were not only able to capitalize on their successful track records but
also on their network of contacts to assist in the raising of financing
and access to deal flow. Often prior business colleagues became private
or venture capital equity partners or investment bankers and lenders.

Especially in today's broadcast industry climate of consolidation,
extremely high station prices and far more scrutiny of management
expertise by brokers, lenders and venture capitalists, good solid
private sector experience is an enormous benefit to both the new entrant
and those licensees looking to increase their holdings.

Additionally, many station owners we spoke with had, at one point, been
station managers and/or sales managers for others. There is no question
that this background was helpful to them when it came time to deal with
the day-to-day operations of their stations. However, what was generally
lacking in these individuals was knowledge of finance, deal making and
business plan development, all qualities that enter into a media
broker's evaluation of a prospective buyer's "competency to close."

The findings above point to an increased need for small businesses who
are new broadcast entrants or those who currently own stations not only
to receive sophisticated business training but also to have access to
career tracks which will enable them to gain the kind of experience that
opens the doors to opportunity in today's market place.

Many industry-related training programs are available that are not
connected with specialized college and university departments. For
example, The Minority Telecommunications Development Program (MTDP),
under the auspices of the Department of Commerce's National
Telecommunications and Information Administration (NTIA), offers
training in broadcasting through its ComTrain program. S. Jennell Trigg,
a communications attorney, founded and developed The Telecom Opportunity
Institute, a not-for-profit corporation which *"promotes career
opportunities, employment, and ownership in telecommunications for
minorities, women and at-risk youth."* And starting in September 2000,
in conjunction with the National Association of Broadcasters Foundation,
Diane Sutter, a successful television station owner, will be presenting
a year-long broadcast-related "executive MBA" program for thirty
students. Funding has been raised for a three-year pilot program, with
specific financial assistance available for up to 15 women and/or
minority broadcasters each year.

Classroom training aside, nothing can replace solid on-the-job training.
In this study we found clear evidence that prior significant
industry-related work experience was critical for access to both capital
and opportunities. The failure of the FCC's EEO policies through court
action and lack of enforcement severely curtailed the development of a
cadre of women and especially minorities who could have gained the
experience necessary and been ably prepared and ready to compete in the
post-Telecom Act world.

### 8. Perceived FCC Climate

Several study participants expressed concern over their participation in
this study because they did not want to become too visible to the FCC.
There were a few study participants who chose not to have their comments
taped or transcribed or otherwise asked that their comments not be
attributed to them. They felt that if they publicly criticized the
Commission they would be opening themselves up to such things as delays
and unfavorable rulings, both of which would be costly. In a few
instances, interviewees shared experiences in which they were instructed
by their legal counsel not to push certain items with the FCC because by
doing so they might imperil a favorable decision.

When queried, virtually no licensees were aware of any formal complaints
that had been filed against the FCC. Dorothy Brunson, an
African-American television owner, offered this explanation.

> *No, I don't think anybody has that kind of courage. One of the things
> that people are always aware of is that you've got to live in this
> environment, and so you can't cut the hand off that's feeding you. You
> may not be getting a belly full, but you're not starving to death. So,
> you're caught in a kind of a Catch-22. You don't want to appear
> persona non-grata, and do something that's going to make you stick out
> like a sore thumb.*
>
> *And so you kind of keep your mouth shut and you try to continue to
> push and shove without making a tremendous amount of noise. Because,
> you know, you have to survive in this business or you get out. But you
> can't do both. Especially if I were Preston Padden (a broadcasting
> industry lobbyist), or I was any other of the major lobbyists, I could
> say a lot of things that they say all the time, you know, as it
> relates to ABC, or relates to the cable or broadcasters or NBC \[or\]
> National Association of Broadcasters. But we can't say those things,
> because we're too small, we're too vulnerable. So do we file? No,
> nobody in their right mind's going to file. (DBrunson105, p. 21)*

Concerns of this nature conceivably have an impact on small, minority
and women licensees' willingness to "lobby" the FCC or Congress for
programs, regulations and/or rulings that could ultimately either lower
barriers to entry or increase opportunity for business growth. Without
the resources to hire lobbyists on their behalf, their discomfort with
approaching the FCC or Congress muffles the voices of those least likely
to be heard.

# V. IMPLICATIONS OF THE FINDINGS

Our detailed findings of the experiences of small, woman and
minority-owned businesses provide us with the knowledge and perspective
to form broad conclusions in nine major areas concerning past, present
and prospective market entry barriers, as follows:

## A. Capital and Markets are the Drivers

The present broadcast and wireless industries and their regulatory
structure, perhaps more than at any time in the history of the FCC and
the industry, is, by design, responsive to capital and market forces.
Given a well documented, established and accepted fact that (in
increasing order of severity) small, women- and minority-owned
businesses are capital deficient, there is little wonder that
participation by such businesses in FCC licensed industries is
alarmingly low, and, by all appearances, on a steep and severe decline.

In the words of one licensee interviewed, we now experience "\[what\]
blind reliance on market forces brings you to."

## B. Absence of Critical Mass

As to women- and minority-owned companies in broadcasting, timing has
been everything. Historically and systematically excluded from industry
participation due to overt and passive discrimination on the part of
local communities, the broadcast and advertising industries, secondary
market players, and the FCC, modest inroads were made after 1978, with
the adoption of minority and female ownership programs and credits.
Their modest gains through the mid-1990s had hardly the opportunity to
take root, and grow sufficiently strong, in order to buffer them from
and increase their chance of surviving deregulation.

Powerful industry countermeasures, nurtured by Congress and the Courts,
and half-heartedly opposed by the FCC, in rapid succession undid a
less-than-two-decades effort to redress nearly seventy years of barriers
to entry for women and minorities. The sequence of rollbacks of minority
and women ownership programs and credits, industry-wide deregulation,
industry-wide consolidation, even, the absence of accurate, up-to-date
statistics documenting the full impact on women and minority
participation, have combined to present significant barriers to women-
and minority-owned businesses being significantly represented in
broadcast and wireless ownership.

## C. The Role of the FCC and Congress

As stated by one interviewee, "there is something besides the market in
the world ... if unresolved market forces were to be the criteria under
which all would be conducted, why does the Constitution give Congress
the power to regulate commerce?"

As a large bureaucracy with wide-ranging responsibilities, the FCC
presents myriad faces before the public. When it comes to small, women-
and minority-owned businesses, the FCC too often has been perceived as
being detrimental to policies, procedures and enforcement that would
enhance participation by small, women- and minority-owned businesses.

This study revealed anger, frustration, disappointment, and resignation
on the part of numerous small, women- and minority-owned business owners
at Congress and FCC actions that have erected and heightened barriers to
entry and growth. Their concerns included:

-   The FCC "looking the other way" when confronted with Jim Crow
    discrimination in broadcasting in the American South;

-   The perceived lack of strong, corrective action by the FCC on EEO
    and other discriminatory policies perpetuated by "big industry";

-   The FCC's acquiescence to the distribution of licenses in the
    secondary market where information and capital are rationed within
    "old boy networks";

-   A long-standing give-and-take relationship between organized
    industries, e.g. broadcasters, local and long distance telephone
    service providers, and the FCC;

-   Routine FCC acquiescence to interests in the private sector,
    Congress and the Courts opposed to the concerns of small, women- and
    minority-owned business;

-   A perceived lack of responsiveness historically to advocacy by
    small, minority and female business interests;

-   The perception of a willing acquiescence to the abandonment \[by
    Congress\] of the minority tax certificates and other "ownership
    programs" without substantive protest upon the earliest sign of
    judicial opposition;

-   The FCC's support for auctions, despite possible disparate
    implications of distributing wireless and broadcast licenses to the
    highest bidder;

-   Self-interest, resistance and inertia within the FCC on small,
    women- and minority business issues;

Leading up to passage of the 1996 Act, advocacy and representation on
behalf of small, minority and female business interests before the FCC
was considered weak and ineffective, in comparison with stronger, more
influential lobbies representing existing broadcasters and large
corporations. Fear of reprisal from those in a bureaucracy perceived as
being more concerned with future employment with large corporations
served to squelch some from louder, more public dissent.

Many interviewees perceive the FCC as contributing to the lack of
opportunities and participation by small, minority- and women-owned
businesses in the communications market. It is little wonder that many
study participants have reluctantly given up hope of prevailing as
competitors in broadcast and wireless industries in the future.

## D. Discrimination

Discrimination appears to have played an important role as an entry
barrier, especially to minority participation in broadcasting, from;

-   segregation in the Jim Crow South, legally depriving African
    Americans and their communities of information, employment and
    ownership opportunity,

-   pervasive discrimination and structural barriers to financing and
    economic participation,

-   pre-1996 Act barriers to entry and expansion based on advantages of
    size and scale derived under previously discriminatory advantage,

-   the post-1996 Act rollback of previous advances made, primarily from
    the tax certificate program.

A clear majority of women and minority licensees interviewed in the
study believed they had encountered discrimination in their attempts to
become licensees: in raising capital, in the secondary market, and in
operations. As a result, successful licensees persevered, despite
discrimination at many turns, and, despite the belief that their
experiences would have been significantly easier, if their circumstances
had been exactly the same, and they were White males.

This anecdotal study illustrates the complex, intricate and pernicious
working of historical bias and discrimination throughout our society. It
demonstrates the tenacity of individuals in the face of such
discrimination to persevere, to strive to break through in spite of
bias. And it demonstrates the difficulty and enormous resources required
to uncover definitive proof of the bias that lies within the hearts and
behind the actions of some.

## E. Bidding Credits in Wireless Licensing

The study participants perceived the bidding credits as a failure even
though the FCC used them in the wireless auctions in an effort to
enhance opportunities for small, minority-, and women-owned businesses.
Few small businesses, and precious few women and minority businesses,
found bidding credits of sufficient value to offset the capital
resources of large companies in auction contests. The biggest impact of
bidding credits, according to interviewees, was to artificially elevate
the final price of wireless licenses, with little or no impact, on the
eventual result of licenses being issued to small businesses.

## F. Relaxation of Ownership Caps 

Small-, women- and minority-owned businesses, with a small number of
notable exceptions (e.g., Radio One Communications, Z-Spanish Radio,
Granite Broadcasting) have been and continue to be driven rapidly out of
radio and television media ownership. Nearly all cite the relaxation of
ownership caps under the 1996 Act as the principal cause.

With passage of the 1996 Act, nearly every small businessperson
interviewed expressed new and substantial difficulties in competing and
surviving, with expansion being virtually out of the question. The
result has been an avalanche of station sales to dominant national
"consolidators." This trend appears to have impacted all small and local
radio broadcast businesses and has appeared to have affected minority
broadcasters particularly.

## G. Loss of Community Service and Diversity of Viewpoints 

This study's interviewees uniformly reported that small, minority-owned
businesses are more integrated, aligned with, and responsive to the
local communities that they serve. Their declining participation in
broadcast and wireless ownership, it appears, has resulted in a
diminished concern for local issues and needs, which has led to a loss
of diversity of viewpoints.

## H. Potential Loss of Civic Participation, Democratic Values and Freedom of Speech

Informal networks of licensees, attorneys, brokers and others have
worked together to distribute and redistribute licenses among those with
access to the secondary market for decades. Only recently have a few
women and minorities been included in this network.

The interviewees reported that this lack of access to and inclusion in
the secondary market network, made worse by widespread discrimination in
the capital markets, and the lack of strong, effective government and
regulatory intervention, has contributed to the long-standing
under-representation of women and minorities in broadcasting.

The present day effect of these conditions, deeply rooted in
exclusionary market and regulatory structures and behaviors, create
current and future market entry barriers for small, women- and
minority-owned businesses of crisis proportions. These barriers result
in;

-   fewer small, women and minority broadcast licensees,

-   fewer broadcast stations and wireless licenses owned and operated by
    small, women and minority licensees, and

-   fewer communities served by local and community-based small, women
    and minority licensees.

This impact, especially upon small and minority-owned businesses, as
became apparent in this study, was overwhelmingly clear. The result,
according to many of those interviewed, has been a dramatic loss in the
diversity of viewpoints provided by the nation's mass media, and a
concentration of influence and control of the means of mass
communication of possibly unprecedented proportions.

## I. The FCC is the Public Trustee of the Broadcast and Wireless Spectrum

Passage of the 1996 Act, and the rapid and harmful impact on small,
women- and minority-owned businesses as foreseen and testified to by
many, calls into question the proper role of the FCC in allocating
spectrum consistent with the public interest, convenience and necessity.
Questions such as:

-   What is the role of the FCC in an era of auctions and consolidation?
    How does the FCC balance its goal of maximizing revenues with
    maximizing diversity? Which is the greater public good?

-   What constitutes appropriate trusteeship and management of public
    assets such as radio frequency spectrum? To whom do the airwaves
    belong? Do they belong to the highest bidder in auctions that will
    inevitably be controlled by corporations that are nearly 100%
    controlled by White men?

-   Who protects individuals and communities from the excesses and
    effects of capital and markets without "appropriate constraints" on
    corporations?

-   What governmental body provides protection against anti-competitive
    behavior in local markets, as the FTC and DOJ provide over national
    markets?

-   In a free-market economy, what is the measure of "appropriate
    regulation?" Is the current level of FCC regulation insufficient?"

This study revealed a strong linkage between small business, local
ownership and the professed core commitment by the business owner to
local interest and community service. These values were offered in
contrast to the obligations of publicly owned companies consolidating
the broadcast industry to maximize profit and shareholder value.

Radio in particular reveals itself in the words of this study's
participants to be a uniquely personalized and local voice of the
community. This study, therefore, calls into question the meaning and
value in our society of public service and community interest.

Frequent mention was made by participants interviewed of "profit taking
at the expense of social responsibility" referring to the FCC's
sponsoring of auctions to distribute licenses. Has the FCC and the
government become "corrupt from greed" as many suggest, exchanging
public interest for governmental revenue as its purpose, mission and
charter?

In the wake of rapid technological changes and market consolidation,
finally, what is the FCC's role in shepherding and leading the
protection of our freedoms of speech and diversity of viewpoint on the
nation's airwaves? Small, women and minority participants interviewed
were passionate in their belief that vital freedoms and values have
suffered, perhaps irreparably, from recent consolidations of media power
in the hands of relatively few corporate owners.

To the extent that important national trusts are threatened, and
possibly compromised, as this study suggests, critical questions are
raised concerning the nature of the relationships, responsibilities,
accountabilities, and authority between the nation's industries, its
legislative and judicial branches, its citizens, and our society.

# VI. CONCLUSION

Historically, minorities, and less so women and small businesses in
general, have confronted barriers to entry into the broadcasting
industry. An anecdotal study of this nature is particularly valuable
because it specifically illustrates the difficulties faced by small,
minority- and women-owned businesses. This study provides a face and
voice to real-life people who have encountered barriers that are all too
real. They have faced discrimination in the financial markets, limiting
access to capital. They have faced discrimination in their communities,
limiting access to employment opportunities and land for communication
towers. They have faced discrimination in the secondary market, limiting
access to information about and the opportunity to participate in the
buying and selling of stations. They have faced discrimination in the
advertising industry, limiting access to advertising revenue, the life
blood of a broadcasting company. All of these factors have contributed
to a disproportionately low number of minority and women owners in
broadcasting who have been able to sustain their company's viability and
position it for growth.

In the wireless industry, where realistic opportunities for small
businesses to participate in acquiring licenses have only been available
since the middle 1990s, lack of access to the large sums of capital
needed to build out wireless systems has been the greatest barrier to
entry. Wireless licensees have encountered the same difficulties
acquiring debt and equity financing as those experienced by their
broadcast licensee counterparts, causing many of them to default on
financial obligations to the FCC, thereby having to forfeit their
licenses.

To help mitigate these market forces, both the FCC and Congress have
established through the years various ownership programs to increase the
opportunities for market entry into both broadcasting and wireless
telecommunications for small, minority- and women-owned businesses.
Programs such as minority ownership programs in the comparative hearing
process; bidding credits in the lotteries; and installment payments,
bidding credits and favorable interest rates in the auctions, were
established to enhance the probability that women, minorities and small
business owners would participate in the FCC's processes for awarding
new licenses. The distress sale and especially the tax certificate
policies opened up access to the network of sellers and brokers in the
secondary market for media properties to the often excluded minority
prospective licensee.

Countering these positive programs, Congress and the courts halted what
progress was being made in the increase in broadcast ownership by
minorities, women and small businesses when in 1995 Congress repealed
the tax certificate program and the courts ruled in
[Adarand]{.underline}, and in 1996 Congress passed the
Telecommunications Act of 1996 which deregulated broadcasting and
brought on a sudden and rapid consolidation of media properties into the
hands of the few. It appears that the confluence of these events, with
their collective negative impact on small, minority- and women-owned
businesses in the broadcasting and wireless industries, has virtually
forestalled any progress that was being made and has, in fact, created a
crisis in participation in telecommunications by these businesses. The
barriers to entry have been raised so high that, left standing, they
appear virtually insurmountable. Minority, women and small business
ownership in these industries is diminishing at such an alarming rate
that many we spoke with felt we had passed the point of no return.

While discussing passionately the negative financial and personal impact
small, minority- and women-owned businesses are sustaining from these
converging forces, the greatest concern by far of those with whom we
spoke was the loss of service to their communities, the loss of
diversity of viewpoint, and the threat to freedom of speech that the
market consolidation in telecommunications was creating. They
collectively believed that the mission of protecting the public interest
must continue to be served and that market forces left to their own
devices would seriously erode that purpose.

The participants in this study generally agreed that programs, such as
the tax certificate policy, that provide incentives to sellers and
investors to conduct business with specific groups of people work well.
Without them, if history is a predictor of the future, the network of
participants in the secondary market for licenses (sellers, brokers,
debt and equity investors) will continue to do business with people they
know and with whom they have previously had successful dealings. Without
these incentives, the door to opportunity will remain closed to all new
entrants except for the lucky few who come to the table with just the
right mix of vision, experience, and equity.

Furthermore, we heard repeatedly that small, minority- and women-owned
businesses need a louder voice before the Commission if their interests
are to be served as mandated. They are lacking the resources, either
individually or collectively, to be strong enough advocates for
themselves. Whether it is more authority for the Office of
Communications Business Opportunities or an office which helps to
expedite applications and licensing for small businesses, these entities
have special needs for timely responsiveness and an understanding from
the Commission of the issues they confront running a small business
day-to-day. As a substitute for presence before the FCC, it is also
imperative that the Regulatory Flexibility Act be consistently and
seriously implemented, as these actions can serve as the ombudsman for
those whose voice is but a whisper.

Lastly, what also became clear through our study is that there are three
government agencies, the FCC, SBA and the National Telecommunications
and Information Administration (Department of Commerce) that are focused
on promoting opportunities in telecommunications for small, minority and
women-owned businesses. Yet there was little evidence that much, if any,
collaborative effort existed to coordinate these agencies' activities to
the benefit of those they are trying to serve. To have these agencies
speak loudly, with one voice where possible, before the Commission and
Congress would meaningfully strengthen the advocacy these businesses so
dearly need.

Without serious and swift dialogue around how to overcome the market
entry barriers discussed in this report, there will be little chance for
small, minority- and women-owned businesses to enter into and succeed in
either broadcasting or wireless telecommunications. It is important that
Congress, the courts and the FCC consider the impact that market forces,
left unchecked, will have on the public good. It seems that the business
of telecommunications has shifted its primary focus from serving the
people to serving the pocketbook. It is imperative that a new balance be
achieved if the public interest is to be served.

# 

# 

# 

# 

# Appendix A - Historical Timeline

**FEDERAL COMMUNICATIONS COMMISSION**

**STATUTORY, REGULATORY AND HISTORICAL TIMELINE**

**1950-Present**

+----------------+---------------------------------------------+------+
| **CATEGORY**   | **EVENT**                                   | **DA |
|                |                                             | TE** |
+================+=============================================+======+
| **Primary      | -   As a result of [Ashbacker Radio         | 1945 |
| Market:**      |     Corp. v. FCC]{.underline}, 326 U.S. 327 |      |
|                |     (1945), the FCC was required to hold    |      |
| Comparative    |     comparative hearings for mutually       |      |
| Hearings       |     exclusive applications. The Supreme     |      |
|                |     Court held that "\[w\]here the Federal  |      |
|                |     Communications Commission has before it |      |
|                |     two applications for broadcasting       |      |
|                |     permits which are mutually exclusive,   |      |
|                |     it may not, in view of the provisions   |      |
|                |     of the Act for a hearing where an       |      |
|                |     application is not granted upon         |      |
|                |     examination, exercise its statutory     |      |
|                |     authority to grant any applications     |      |
|                |     upon examination without a hearing.     |      |
|                |     ..."                                    |      |
+----------------+---------------------------------------------+------+
|                | -   The [Policy Statement on Broadcast      | 1965 |
|                |     Comparative Hearings]{.underline}, 1    |      |
|                |     F.C.C. 2d 393 (1965) articulated and    |      |
|                |     clarified the criteria used in the      |      |
|                |     comparative hearings for assigning      |      |
|                |     licenses. The seven (7) areas for which |      |
|                |     applicants received credit (or          |      |
|                |     "points") were: diversification of      |      |
|                |     control, integration of ownership into  |      |
|                |     management, proposed program service,   |      |
|                |     past broadcast record, efficient use of |      |
|                |     frequency, character, and other         |      |
|                |     significant and relevant factors to be  |      |
|                |     considered in the decision-making       |      |
|                |     process.                                |      |
+----------------+---------------------------------------------+------+
|                | -   Comint Corp. challenged the FCC's       | 1965 |
|                |     refusal to explicitly consider race in  |      |
|                |     the comparative hearing process (in     |      |
|                |     which Mid Florida Corp. was awarded the |      |
|                |     license) and appealed the FCC ruling to |      |
|                |     the D.C. Court of Appeals. Comint       |      |
|                |     argued that minority ownership should   |      |
|                |     be given comparative credit on the      |      |
|                |     basis of the 1965 Policy Statement on   |      |
|                |     Broadcast Comparative Hearings. The FCC |      |
|                |     noted that "the Communications Act . .  |      |
|                |     . is color blind and therefore, in a    |      |
|                |     comparative broadcast proceeding . . .  |      |
|                |     Black ownership cannot and should not   |      |
|                |     be an independent comparative factor .  |      |
|                |     . ."                                    |      |
+----------------+---------------------------------------------+------+

+---------------+-----------------------------------------------+------+
| **CATEGORY**  | **EVENT**                                     | **DA |
|               |                                               | TE** |
+===============+===============================================+======+
| **Primary     | -   In the 1974 [TV 9 Inc. v.                 | 1974 |
| Market:**     |     FCC]{.underline} decision, the DC Court   |      |
|               |     of Appeals reversed the result of the     |      |
| Comparative   |     [Mid Florida]{.underline} comparative     |      |
| Hearings      |     hearing. The Court concluded that         |      |
|               |     minority stock ownership is "a            |      |
| (continued)   |     consideration relevant to a choice among  |      |
|               |     applicants of broader community           |      |
|               |     representation and practicable service to |      |
|               |     the public. ... We hold only that when    |      |
|               |     minority ownership is likely to increase  |      |
|               |     diversity of content, especially on       |      |
|               |     opinion and viewpoint, merit should be    |      |
|               |     awarded." This decision set a new         |      |
|               |     precedent for the incorporation of        |      |
|               |     minority participation as a factor in the |      |
|               |     comparative hearing process.              |      |
+---------------+-----------------------------------------------+------+
|               | -   In [Rosemore Broadcasting,                | 1975 |
|               |     Co]{.underline}. (1975), the FCC held     |      |
|               |     that integrated female ownership should   |      |
|               |     be awarded credit in comparative hearings |      |
|               |     because women, like minorities, are       |      |
|               |     "likely to increase diversity of          |      |
|               |     content." The FCC went on to state that   |      |
|               |     female participation in an application    |      |
|               |     can be given credit when it "reflects     |      |
|               |     broader community representation."        |      |
+---------------+-----------------------------------------------+------+
|               | -   [Garrett v. FCC]{.underline} (1975) finds | 1975 |
|               |     that minority ownership/participation is  |      |
|               |     connected to providing programming        |      |
|               |     responsive to the needs of the minority   |      |
|               |     community.                                |      |
+---------------+-----------------------------------------------+------+
|               | -   In the 1977 [Flint Family                 | 1977 |
|               |     Radio]{.underline} decision, the FCC      |      |
|               |     clarified the primacy of importance of    |      |
|               |     both minority ownership and the           |      |
|               |     participation of these owners in station  |      |
|               |     affairs. "... the Supplemental Opinion of |      |
|               |     the Court makes it quite clear that the   |      |
|               |     two essential elements necessary to       |      |
|               |     receive merit are Black ownership and     |      |
|               |     participation by these owners in station  |      |
|               |     affairs."                                 |      |
+---------------+-----------------------------------------------+------+
|               | -   1978 Statement of Policy on Minority      | 1978 |
|               |     Ownership of Broadcasting Facilities      |      |
|               |     formalized the use of minority and gender |      |
|               |     credits in the comparative hearing        |      |
|               |     process. In 1990 the FCC declined to      |      |
|               |     extend enhancement credits for minority   |      |
|               |     ownership under diversification of        |      |
|               |     ownership criterion.                      |      |
+---------------+-----------------------------------------------+------+
|               | -   A Review Board hearing the Gainesville    | 1978 |
|               |     Media, Inc. case concluded the ". . .     |      |
|               |     merit for female ownership and            |      |
|               |     participation is warranted upon           |      |
|               |     essentially the same basis as the merit   |      |
|               |     given for Black ownership and             |      |
|               |     participation, but that it is a merit of  |      |
|               |     lesser significance." This decision       |      |
|               |     demonstrated that credit should be        |      |
|               |     applied for female participation in a     |      |
|               |     broadcast license application, but that   |      |
|               |     credit would not be as significant as     |      |
|               |     that credit applied for minority          |      |
|               |     participation.                            |      |
+---------------+-----------------------------------------------+------+

+----------------+---------------------------------------------+------+
| **CATEGORY**   | **EVENT**                                   | **DA |
|                |                                             | TE** |
+================+=============================================+======+
| **Primary      | -   The FCC articulated and explained its   | 1981 |
| Market:**      |     renewal expectancy for incumbent        |      |
|                |     broadcasters in license renewal         |      |
| Comparative    |     comparative hearings in [Cowles         |      |
| Hearings       |     Broadcasting, Inc.                      |      |
|                |     (WESH-TV)]{.underline} \[affirmed       |      |
| (continued)    |     [Central Florida Enterprises, Inc. v.   |      |
|                |     FCC]{.underline} (1982)\].              |      |
+----------------+---------------------------------------------+------+
|                | -   Financial qualifications changed from   | 1982 |
|                |     having to *prove* financial viability   |      |
|                |     to having only to *sign a certificate*  |      |
|                |     that the applicant was able to meet the |      |
|                |     financial requirements.                 |      |
+----------------+---------------------------------------------+------+
|                | -   Until 1986, the term "character" (as a  | 1986 |
|                |     criterion for license assignment) was   |      |
|                |     often interpreted as moral character.   |      |
|                |     On January 14, 1986 the Commission      |      |
|                |     issued its Policy Regarding Character   |      |
|                |     Qualifications in Broadcast Licensing,  |      |
|                |     outlining which character issues should |      |
|                |     be considered and how they were to be   |      |
|                |     investigated. The issues to be          |      |
|                |     considered involved various acts of     |      |
|                |     fraud, misconduct, misrepresentation,   |      |
|                |     and abuse in commercial and government  |      |
|                |     dealings as well as criminal            |      |
|                |     conviction. Eventually, character       |      |
|                |     issues were eliminated as a comparative |      |
|                |     criterion but were kept as a basic      |      |
|                |     criterion.                              |      |
+----------------+---------------------------------------------+------+
|                | -   The Policy Regarding Character          | 1990 |
|                |     Qualifications in Broadcast Licensing,  |      |
|                |     5 F.C.C.R. 3252 (1990) made certain     |      |
|                |     modifications to FCC policies regarding |      |
|                |     character qualifications because the    |      |
|                |     previous policy statement "took an      |      |
|                |     overly narrow view of the range of      |      |
|                |     misconduct that should be relevant in   |      |
|                |     licensing decisions covered by it."     |      |
+----------------+---------------------------------------------+------+
|                | -   The decision in the [Bechtel v.         | 1993 |
|                |     FCC]{.underline} case (1993) had the    |      |
|                |     effect of freezing comparative hearings |      |
|                |     .                                       |      |
+----------------+---------------------------------------------+------+
|                | -   The Telecommunications Act of 1996      | 1996 |
|                |     eliminated the role of comparative      |      |
|                |     hearings in the renewal of broadcast    |      |
|                |     licenses.                               |      |
+----------------+---------------------------------------------+------+

+----------------+---------------------------------------------+------+
| **CATEGORY**   | **EVENT**                                   | **DA |
|                |                                             | TE** |
+================+=============================================+======+
| **Primary      | -   Section 309(i) of the Act granted FCC   | 1982 |
| Market:**      |     authority to use lotteries to choose    |      |
|                |     among mutually exclusive applications.  |      |
| Lotteries      |     Used to award wireles*s* licenses for   |      |
|                |     cellular, Specialized Mobile Radio,     |      |
|                |     Multi-channel Multi-point Distribution  |      |
|                |     Services, and Low Power TV. Congress    |      |
|                |     enacted legislation that caused this    |      |
|                |     section to expire on July 1, 1997.      |      |
+----------------+---------------------------------------------+------+
|                | -   Section 390(i) of the Act required the  | 1982 |
|                |     FCC to establish incentives, rules and  |      |
|                |     procedures providing credit for         |      |
|                |     minority-controlled applicants in       |      |
|                |     awarding licenses. Congress enacted     |      |
|                |     legislation that caused this section to |      |
|                |     expire July 1, 1997.                    |      |
+----------------+---------------------------------------------+------+
|                | -   In the Lottery Second Report and Order  | 1983 |
|                |     the FCC authorized minority ownership   |      |
|                |     policies for Low Power TV lotteries.    |      |
+----------------+---------------------------------------------+------+
|                | -   The 1993 Omnibus Budget Reconciliation  | 1993 |
|                |     Act limited the use of lotteries to the |      |
|                |     allocation of non-commercial licenses   |      |
|                |     and authorized a competitive bidding    |      |
|                |     system (auctions) to distribute         |      |
|                |     commercial licenses.                    |      |
+----------------+---------------------------------------------+------+
| **Primary      | -   The Omnibus Budget Reconciliation Act   | 1993 |
| Market:**      |     of 1993 (which added Section 309(j) to  |      |
|                |     the Communications Act of 1934)         |      |
| Auctions       |     authorized the FCC to allocate licenses |      |
|                |     through a competitive bidding process   |      |
|                |     (auctions). Initially the auctions were |      |
|                |     used only for wireless.                 |      |
+----------------+---------------------------------------------+------+
|                | -   Section 309(j)(3)(B) instructed the FCC | 1993 |
|                |     to establish competitive bidding        |      |
|                |     procedures that would "disseminat\[e\]  |      |
|                |     licenses among ... small businesses ... |      |
|                |     and businesses owned by members of      |      |
|                |     minority groups and women."             |      |
+----------------+---------------------------------------------+------+
|                | -   1993 Auction Notice of Proposed         | 1993 |
|                |     Rulemaking determined that race- or     |      |
|                |     gender-conscious remedies must meet the |      |
|                |     intermediate standards of judicial      |      |
|                |     scrutiny; i.e., the remedy must be      |      |
|                |     substantially related to serve a        |      |
|                |     significant governmental interest.      |      |
+----------------+---------------------------------------------+------+

+----------------+---------------------------------------------+------+
| **CATEGORY**   | **EVENT**                                   | **DA |
|                |                                             | TE** |
+================+=============================================+======+
| **Primary      | -   A 25% bidding credit was made available | 1994 |
| Market:**      |     to women and minority businesses for    |      |
|                |     selected nationwide and regional PCS    |      |
| Auctions       |     and Interactive Video and Data Services |      |
| (continued)    |     narrowband auctions. (The [Adarand      |      |
|                |     Constructors v. Pena]{.underline}       |      |
|                |     case (1995) held that any federal       |      |
|                |     program or policy which uses race as a  |      |
|                |     basis for its decision-making must      |      |
|                |     withstand strict judicial scrutiny.     |      |
|                |     Post [Adarand]{.underline}, the bidding |      |
|                |     credits were made available to small    |      |
|                |     businesses without distinction for race |      |
|                |     or gender.)                             |      |
+----------------+---------------------------------------------+------+
|                | -   The bidding credits for women and       | 1994 |
|                |     minority businesses increased to 40% in |      |
|                |     two of six auction spectrum blocks in   |      |
|                |     the regional narrowband auctions. Post  |      |
|                |     Adarand, the credits were made          |      |
|                |     available to small businesses without   |      |
|                |     distinction for race or gender*.*       |      |
+----------------+---------------------------------------------+------+
|                | -   The Commission established an           | 1994 |
|                |     installment payment program (for down   |      |
|                |     payments on licenses) and interest      |      |
|                |     rates for small, minority- and          |      |
|                |     women-owned businesses bidding for the  |      |
|                |     basic trading area, major trading area, |      |
|                |     and regional narrowband licenses. Post  |      |
|                |     [Adarand]{.underline}, the small        |      |
|                |     business credits were made available    |      |
|                |     without distinction for race or gender. |      |
|                |     The FCC has not extended the            |      |
|                |     installment payment program to auction  |      |
|                |     participants since the C and F Block    |      |
|                |     auctions.                               |      |
+----------------+---------------------------------------------+------+
|                | -   The Competitive Bidding Fifth Report    | 1994 |
|                |     and Order set aside PCS broadband       |      |
|                |     Auction Blocks C and F for designated   |      |
|                |     entities on the basis of their status   |      |
|                |     as minorities, women, small businesses, |      |
|                |     or rural telephone companies            |      |
|                |     ("Entrepreneurs Blocks").               |      |
+----------------+---------------------------------------------+------+
|                | -   The Competitive Bidding Fifth Report    | 1994 |
|                |     and Order established rules concerning  |      |
|                |     passive non-voting investors,           |      |
|                |     affiliation, additional bidding         |      |
|                |     credits, tax certificates (for initial  |      |
|                |     investors in minority- and women-owned  |      |
|                |     businesses -- later dropped after       |      |
|                |     Congress eliminated the tax certificate |      |
|                |     program in 1995), and installments      |      |
|                |     plans were adopted to enhance           |      |
|                |     opportunities for businesses owned by   |      |
|                |     women and minorities. There was a       |      |
|                |     four-tier range of bidding credits,     |      |
|                |     with the most favorable bidding credits |      |
|                |     being given to businesses that were     |      |
|                |     small, women-owned and minority-owned.  |      |
+----------------+---------------------------------------------+------+

+----------------+---------------------------------------------+------+
| **CATEGORY**   | **EVENT**                                   | **DA |
|                |                                             | TE** |
+================+=============================================+======+
| **Primary      | -   The FCC eliminated all race- and        | 1995 |
| Market:**      |     gender-based provisions in competitive  |      |
|                |     bidding for the C and F Block auctions. |      |
| Auctions       |     Credits that were available only to     |      |
| (continued)    |     members of minority groups and women    |      |
|                |     were now made available to all small    |      |
|                |     businesses.                             |      |
+----------------+---------------------------------------------+------+
|                | -   The Balanced Budget Act of 1997         | 1997 |
|                |     expanded the FCC's competitive bidding  |      |
|                |     authority under Section 309(j) to       |      |
|                |     include mutually exclusive initial      |      |
|                |     license applications for certain types  |      |
|                |     of broadcast licenses. On November 26,  |      |
|                |     1997, the Commission released a Notice  |      |
|                |     of Proposed Rulemaking proposing        |      |
|                |     general competitive bidding procedures  |      |
|                |     for all auctionable broadcast services  |      |
|                |     within the scope of the amended 309(j), |      |
|                |     with certain exceptions. This Act also  |      |
|                |     required the FCC to promote "economic   |      |
|                |     opportunity for a wide variety of       |      |
|                |     applicants, including businesses owned  |      |
|                |     by members of minority groups and       |      |
|                |     women."                                 |      |
+----------------+---------------------------------------------+------+
|                | -   On August 18, 1998, the Commission      | 1998 |
|                |     released its First Report and Order     |      |
|                |     setting forth procedures governing      |      |
|                |     auctions of broadcast service           |      |
|                |     licenses*.*                             |      |
+----------------+---------------------------------------------+------+
|                | -   The first broadcast auction (the        | 1999 |
|                |     Bechtel auction*)* was completed in     |      |
|                |     October 1999.                           |      |
+----------------+---------------------------------------------+------+
| **Secondary    | -   The 1978 Statement of Policy on         | 1978 |
| Market:**      |     Minority Ownership Broadcast Facilities |      |
|                |     created the Tax Certificate program     |      |
| Tax            |     which provided tax deferral benefits to |      |
| Certificates   |     the seller of a media property if it    |      |
|                |     was sold to a minority business. The    |      |
|                |     tax certificate policy encouraged and   |      |
|                |     promoted minority ownership by giving   |      |
|                |     sellers a two-year like-kind-transfer   |      |
|                |     tax deferral for the sale of licenses   |      |
|                |     to minorities if the proceeds were      |      |
|                |     reinvested in a similar communication   |      |
|                |     property.                               |      |
+----------------+---------------------------------------------+------+
|                | -   Congress repealed the tax certificate   | 1995 |
|                |     program (due to allegations of abuse)   |      |
|                |     with the passing of the Self-Employed   |      |
|                |     Persons Health Care Deduction Extension |      |
|                |     Act of 1995.                            |      |
+----------------+---------------------------------------------+------+
| **Secondary    | -   The 1978 Broadcast Policy Statement     | 1978 |
| Market:**      |     created the Distress Sale policy which  |      |
|                |     allowed for license owners that were    |      |
| Distress Sales |     under scrutiny by the FCC (and under    |      |
|                |     threat of license revocation) to sell   |      |
|                |     their station to a minority for 75% of  |      |
|                |     the appraised value. In return, the FCC |      |
|                |     would cease its inquiry into the        |      |
|                |     suspect license owner. Post             |      |
|                |     [Adarand]{.underline}, the FCC has not  |      |
|                |     utilized the distress sale policy.      |      |
+----------------+---------------------------------------------+------+

+----------------+---------------------------------------------+------+
| **CATEGORY**   | **EVENT**                                   | **DA |
|                |                                             | TE** |
+================+=============================================+======+
| **Secondary    | -   The three-year trafficking rule applied |      |
| Market:**      |     to an FCC grant of a construction       |      |
|                |     permit or an assignment or transfer by  |      |
| An             |     the FCC. If in requesting a grant of    |      |
| ti-Trafficking |     FCC approval for a transfer or          |      |
| Rules          |     assignment, it appeared that the        |      |
|                |     licensee held the license for less than |      |
|                |     three years, the FCC would designate    |      |
|                |     the transfer or assignment for hearing  |      |
|                |     to determine whether the proposed       |      |
|                |     transfer or assignment was in the       |      |
|                |     public interest. The three-year rule    |      |
|                |     did not prohibit someone from           |      |
|                |     transferring or assigning within the    |      |
|                |     three-year period, but it did make it   |      |
|                |     more difficult to do so.                |      |
+----------------+---------------------------------------------+------+
|                | -   The one-year trafficking rule replaced  |      |
|                |     the prior three-year anti-trafficking   |      |
|                |     rule. The one-year rule required the    |      |
|                |     retention of a license acquired through |      |
|                |     the comparative hearing process or the  |      |
|                |     minority ownership process (i.e.,       |      |
|                |     distress sales, tax certificates and    |      |
|                |     comparative hearings) for at least one  |      |
|                |     year, unless it was sold to another     |      |
|                |     minority. Persons who acquired the      |      |
|                |     license from non-minorities in the      |      |
|                |     secondary market were not regulated by  |      |
|                |     the one-year anti-trafficking rule.     |      |
+----------------+---------------------------------------------+------+
| **Statutory    | -   The 1969 Non-Discrimination Employment  | 1969 |
| and Regulatory |     Policy Statement forbade discrimination |      |
| Developments** |     on the basis of race, color, religion   |      |
| (not           |     or national origin in employment        |      |
| highlighted    |     practices by licensees of commercial or |      |
| elsewhere)     |     noncommercial broadcast stations.       |      |
|                |     Result: each station had to establish   |      |
|                |     an equal employment opportunity         |      |
|                |     program. This was the first time the    |      |
|                |     FCC directly addressed the issue of     |      |
|                |     race in a formal policy ruling. This    |      |
|                |     Policy Statement established the        |      |
|                |     Commission's right to revoke licenses   |      |
|                |     and to hear allegations of EEO          |      |
|                |     violations in comparative hearings.     |      |
+----------------+---------------------------------------------+------+
|                | -   In 1970, the FCC adopted its "one to a  | 1970 |
|                |     customer rule" whereby licensees could  |      |
|                |     have only one AM, FM, and TV license in |      |
|                |     a given market. (See charts below for   |      |
|                |     more detailed information on ownership  |      |
|                |     rules.)                                 |      |
+----------------+---------------------------------------------+------+
|                | -   In 1971, the FCC modified the ownership | 1971 |
|                |     rules to allow AM/FM combinations and   |      |
|                |     radio-UHF combinations in the same      |      |
|                |     market; only VHF/radio combinations     |      |
|                |     were banned by the rules.               |      |
+----------------+---------------------------------------------+------+

+----------------+---+---------------------------------------------+------+
| **CATEGORY**   | * |                                             | **DA |
|                | * |                                             | TE** |
|                | E |                                             |      |
|                | V |                                             |      |
|                | E |                                             |      |
|                | N |                                             |      |
|                | T |                                             |      |
|                | * |                                             |      |
|                | * |                                             |      |
+================+===+=============================================+======+
| **Statutory    |   | -   In 1979 the World Administrative Radio  | 1979 |
| and Regulatory |   |     Conference expanded the AM band in the  |      |
| Developments** |   |     Western Hemisphere. The FCC used the    | 1991 |
| (not           |   |     expanded band to reduce congestion in   |      |
| highlighted    |   |     the existing band by allowing existing  | 1993 |
| elsewhere --   |   |     AM licensees to operate new stations in |      |
| continued)     |   |     the expanded band, and then after a     |      |
|                |   |     transition period, shut down the old    |      |
|                |   |     stations. The FCC limited the entire    |      |
|                |   |     expanded band to these existing         |      |
|                |   |     migrating stations. (1991) Several      |      |
|                |   |     civil rights groups proposed that the   |      |
|                |   |     existing broadcasters be offered tax    |      |
|                |   |     certificates to sell existing           |      |
|                |   |     (to-be-shut-down) stations to           |      |
|                |   |     minorities. The FCC rejected this       |      |
|                |   |     proposal and held that improving        |      |
|                |   |     congestion was its primary goal. (1993) |      |
+----------------+---+---------------------------------------------+------+
|                |   | -   In its 1984 Memorandum Opinion and      | 1984 |
|                |   |     Order, the FCC declined to extend       |      |
|                |   |     minority ownership policies to common   |      |
|                |   |     carrier services.                       |      |
+----------------+---+---------------------------------------------+------+
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+----------------+---+---------------------------------------------+------+
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|                |   |                                             |      |
|                |   |                                             |      |
|                |   |                                             |      |
|                | b |                                             |      |
|                | e |                                             |      |
|                | c |                                             |      |
|                | o |                                             |      |
|                | m |                                             |      |
|                | e |                                             |      |
|                |   |                                             |      |
|                |   |                                             |      |
|                |   |                                             |      |
|                |   |                                             |      |
|                | a |                                             |      |
|                |   |                                             |      |
|                |   |                                             |      |
|                |   |                                             |      |
|                |   |                                             |      |
|                | " |                                             |      |
|                | p |                                             |      |
|                | a |                                             |      |
|                | s |                                             |      |
|                | s |                                             |      |
|                | i |                                             |      |
|                | v |                                             |      |
|                | e |                                             |      |
|                |   |                                             |      |
|                |   |                                             |      |
|                |   |                                             |      |
|                |   |                                             |      |
|                | p |                                             |      |
|                | a |                                             |      |
|                | r |                                             |      |
|                | t |                                             |      |
|                | i |                                             |      |
|                | c |                                             |      |
|                | i |                                             |      |
|                | p |                                             |      |
|                | a |                                             |      |
|                | n |                                             |      |
|                | t |                                             |      |
|                | . |                                             |      |
|                | " |                                             |      |
+----------------+---+---------------------------------------------+------+

+----------------+---------------------------------------------+------+
| **CATEGORY**   | **EVENT**                                   | **DA |
|                |                                             | TE** |
+================+=============================================+======+
| **Statutory    | -   [In Metro Broadcasting, Inc. v.         | 1990 |
| and Regulatory |     FCC]{.underline} (1990) the Court,      |      |
| Developments** |     applying intermediate scrutiny, upheld  |      |
| (not           |     the constitutionality of the FCC's      |      |
| highlighted    |     distress sale and comparative hearing   |      |
| elsewhere --   |     minority ownership policies. The Court  |      |
| continued)     |     stated that the policies served the     |      |
|                |     important governmental interest of      |      |
|                |     promoting diversity in broadcast        |      |
|                |     programming. The Court found that the   |      |
|                |     benefits of programming diversity are   |      |
|                |     shared by two groups -- minorities who  |      |
|                |     gain access to the broadcasting         |      |
|                |     industry through ownership and "the     |      |
|                |     American public \[who\] will benefit by |      |
|                |     having access to a wider diversity of   |      |
|                |     informational sources." Second, the     |      |
|                |     Court found that a causal link exists   |      |
|                |     between minority ownership and          |      |
|                |     broadcast diversity and therefore that  |      |
|                |     the minority ownership policies were    |      |
|                |     substantially related to the            |      |
|                |     achievement of the desired end.         |      |
+----------------+---------------------------------------------+------+
|                | -   In 1992, the FCC relaxed the duopoly    | 1992 |
|                |     rules so that in markets with fewer     |      |
|                |     than 15 radio stations, licensees were  |      |
|                |     permitted to own up to three stations   |      |
|                |     as long as the number owned was less    |      |
|                |     than 50 percent of the total number of  |      |
|                |     stations in the market. In markets with |      |
|                |     15 or more stations, the licensees were |      |
|                |     permitted to own up to four stations;   |      |
|                |     no more than two could be of the same   |      |
|                |     service, and there was an audience      |      |
|                |     share cap of twenty-five percent.       |      |
+----------------+---------------------------------------------+------+
|                | -   The 1993 Omnibus Budget Reconciliation  | 1993 |
|                |     Act contained specific language         |      |
|                |     delegating to the Commission the        |      |
|                |     authority to devise rules to ensure     |      |
|                |     diversity in license ownership. More    |      |
|                |     specifically, the FCC was instructed to |      |
|                |     ensure that women and minorities have   |      |
|                |     the opportunity to participate in the   |      |
|                |     provision of spectrum-based services.   |      |
+----------------+---------------------------------------------+------+
|                | -   In the [Bechtel v. FCC]{.underline}     | 1993 |
|                |     decision, the D.C. Circuit Court found  |      |
|                |     that the "continued application of the  | 1994 |
|                |     integration \[of ownership, management  |      |
|                |     and programming\] credit is arbitrary   |      |
|                |     and capricious, and therefore           |      |
|                |     unlawful." By invalidating the          |      |
|                |     integration credit the court            |      |
|                |     effectively eliminated gender and race  |      |
|                |     ownership and employment policies       |      |
|                |     associated with the integration credit. |      |
|                |     In 1994 the FCC suspended all active    |      |
|                |     comparative hearings until an adequate  |      |
|                |     resolution to the issues raised in      |      |
|                |     [Bechtel]{.underline} could be          |      |
|                |     formulated.                             |      |
+----------------+---------------------------------------------+------+

+----------------+---------------------------------------------+------+
| **CATEGORY**   | **EVENT**                                   | **DA |
|                |                                             | TE** |
+================+=============================================+======+
| **Statutory    | -   In [Adarand Constructors, Inc. v.       | 1995 |
| and Regulatory |     Pena]{.underline} the Court ruled that  |      |
| Developments** |     any federal program or policy which     |      |
| (not           |     uses race as a basis for its            |      |
| highlighted    |     decision-making must withstand strict   |      |
| elsewhere --   |     judicial scrutiny. It is not clear      |      |
| continued)     |     whether the diversity rationale that    |      |
|                |     survived the intermediate scrutiny      |      |
|                |     standard of [Metro]{.underline} would   |      |
|                |     survive the strict scrutiny standard of |      |
|                |     [Adarand]{.underline}.                  |      |
+----------------+---------------------------------------------+------+
|                | -   Section 257 (added to the               | 1996 |
|                |     Communications Act of 1934 by the       |      |
|                |     Telecommunications Act of 1996)         |      |
|                |     requires the FCC to eliminate market    |      |
|                |     entry barriers for entrepreneurs and    |      |
|                |     other small businesses.                 |      |
+----------------+---------------------------------------------+------+
|                | -   In the Telecommunications Act of 1996,  | 1996 |
|                |     Congress directed the FCC to further    |      |
|                |     relax the duopoly rules so that         |      |
|                |     licensees in markets with 45 or more    |      |
|                |     commercial radio stations can "own,     |      |
|                |     operate or control up to 8 stations,    |      |
|                |     not more than 5 of which are in the     |      |
|                |     same service." In markets with between  |      |
|                |     30 and 44 stations, the limit is seven  |      |
|                |     stations, "not more than 4 of which are |      |
|                |     in the same service." In markets with   |      |
|                |     between 15 and 29 stations, the limit   |      |
|                |     is six stations, of which not more than |      |
|                |     4 are in the same service. In markets   |      |
|                |     with 14 or fewer stations, the limit is |      |
|                |     five stations with not more than three  |      |
|                |     in the same service, except that a      |      |
|                |     party may not own, operate or control   |      |
|                |     more than 50 percent of the stations in |      |
|                |     such market. Furthermore, the Act       |      |
|                |     eliminated all limits on the number of  |      |
|                |     radio stations that one licensee can    |      |
|                |     own nationally, eliminated the          |      |
|                |     numerical cap on television stations    |      |
|                |     and increased the national audience     |      |
|                |     reach cap to 35% for TV.                |      |
+----------------+---------------------------------------------+------+
|                | -   The Telecommunications Development Fund | 1996 |
|                |     ("TDF") was authorized by the 1996      |      |
|                |     Telecommunications Act to provide a     |      |
|                |     source of loans and investment capital  |      |
|                |     to small communications businesses.     |      |
+----------------+---------------------------------------------+------+
|                | -   [Lutheran Church -- Missouri Synod v.   | 1998 |
|                |     FCC]{.underline} (U.S. Court of         |      |
|                |     Appeals, the District of Columbia       |      |
|                |     Circuit, April 1998) held that certain  |      |
|                |     provisions of the FCC\'s broadcast EEO  |      |
|                |     rules were subject to strict scrutiny   |      |
|                |     and unconstitutional. The FCC adopted a |      |
|                |     Notice of Proposed Rulemaking outlining |      |
|                |     new rules to further equal employment   |      |
|                |     opportunity in broadcasting in a manner |      |
|                |     that is consistent with the court's     |      |
|                |     decision (November 1998). New rules     |      |
|                |     were adopted in January 2000.           |      |
+----------------+---------------------------------------------+------+

+----------------+---------------------------------------------+------+
| **CATEGORY**   | **EVENT**                                   | **DA |
|                |                                             | TE** |
+================+=============================================+======+
| **Statutory    | -   On January 20, 2000, the FCC adopted    | 2000 |
| and Regulatory |     rules creating a new, low power FM      |      |
| Developments** |     (LPFM) radio service. The new LPFM      |      |
| (not           |     service is to be exclusively            |      |
| highlighted    |     noncommercial; there will be no         |      |
| elsewhere --   |     commercial LPFM stations. In addition,  |      |
| continued      |     current broadcast licensees or parties  |      |
|                |     with interests in other media -- cable  |      |
|                |     or newspapers - are not be eligible for |      |
|                |     LPFM stations.                          |      |
+----------------+---------------------------------------------+------+
| **Historical   | -   Mrs. Marie Zimmerman became the first   | 1922 |
| Events**       |     woman to own a radio license.           |      |
+----------------+---------------------------------------------+------+
|                | -   Station WDIA-AM in Memphis, Tennessee,  | 1947 |
|                |     became the first radio station to       |      |
|                |     devote all its air time to Black        |      |
|                |     programs.                               |      |
+----------------+---------------------------------------------+------+
|                | -   Mr. Jesse B. Blayton purchased WERD in  | 1949 |
|                |     Atlanta, Georgia, and became the        |      |
|                |     country's first Black radio station     |      |
|                |     owner.                                  |      |
+----------------+---------------------------------------------+------+
|                | -   First Hispanic radio station went on    | m    |
|                |     the air.                                | id-1 |
|                |                                             | 950s |
+----------------+---------------------------------------------+------+
|                | -   Mr. Andrew Langston becomes the first   | 1960 |
|                |     African American to participate in a    |      |
|                |     comparative hearing. His license was    |      |
|                |     ultimately awarded in 1974.             |      |
+----------------+---------------------------------------------+------+
|                | -   The National Association of Black-Owned | 1972 |
|                |     Broadcasters (NABOB) was created as an  |      |
|                |     outgrowth of a National Association of  |      |
|                |     Broadcasters (NAB) seminar on minority  |      |
|                |     ownership.                              |      |
+----------------+---------------------------------------------+------+
|                | -   First Black-owned TV license awarded by | 1973 |
|                |     FCC to WGPR-TV (owned by the            |      |
|                |     International Free and Accepted Modern  |      |
|                |     Masons, Inc., in Detroit, Michigan.     |      |
+----------------+---------------------------------------------+------+
|                | -   Dorothy Brunson became the first        | 1989 |
|                |     African-American woman to own a         |      |
|                |     television station.                     |      |
+----------------+---------------------------------------------+------+
|                | -   MTDP (Department of Commerce) created   | 1993 |
|                |     ComTrain to provide a management        |      |
|                |     training program for minority owners of |      |
|                |     commercial radio and television         |      |
|                |     stations.                               |      |
+----------------+---------------------------------------------+------+

**Local, National and Cross-Ownership Rules**

**(adapted from KPMG, LLP report: *History of the Broadcast License
Application Process)***

+---+-------+--------+-----+-----+------+------+---------------------+
| * | **    |        |     | *   |      |      | **Notes**           |
| * | Local |        |     | *Na |      |      |                     |
| Y | Mar   |        |     | tio |      |      |                     |
| e | ket** |        |     | nal |      |      |                     |
| a |       |        |     | Ma  |      |      |                     |
| r |       |        |     | rke |      |      |                     |
| * |       |        |     | t** |      |      |                     |
| * |       |        |     |     |      |      |                     |
+---+-------+--------+-----+-----+------+------+---------------------+
|   | *     | **FM** | **T | **A | **   | **   |                     |
|   | *AM** |        | V** | M** | FM** | TV** |                     |
+---+-------+--------+-----+-----+------+------+---------------------+
| 1 | 1     | 1      | 1   | 7   | 7    | 7    | *National TV*: Only |
| 9 |       |        |     |     |      |      | 5 can be VHF        |
| 5 |       |        |     |     |      |      |                     |
| 0 |       |        |     |     |      |      |                     |
+---+-------+--------+-----+-----+------+------+---------------------+
| 1 | 1     | 1      | 1   | 7   | 7    | 7    | Prohibit ownership  |
| 9 |       |        |     |     |      |      | of radio and TV     |
| 7 |       |        |     |     |      |      | stations in the     |
| 0 |       |        |     |     |      |      | same market.        |
|   |       |        |     |     |      |      | Grandfathered       |
|   |       |        |     |     |      |      | existing cross      |
|   |       |        |     |     |      |      | ownership.          |
+---+-------+--------+-----+-----+------+------+---------------------+
| 1 | 1     | 1      | 1   | 7   | 7    | 7    | Additional          |
| 9 |       |        |     |     |      |      | prohibition of      |
| 7 |       |        |     |     |      |      | ownership of TV and |
| 5 |       |        |     |     |      |      | newspapers in same  |
|   |       |        |     |     |      |      | market.             |
|   |       |        |     |     |      |      | Grandfathered       |
|   |       |        |     |     |      |      | existing cross      |
|   |       |        |     |     |      |      | ownership.          |
+---+-------+--------+-----+-----+------+------+---------------------+
| 1 | 1     | 1      | 1   | 12  | 12   | 12   | *Local TV*: Could   |
| 9 |       |        |     |     |      |      | add a 2^nd^ station |
| 8 |       |        |     |     |      |      | if it was a         |
| 5 |       |        |     |     |      |      | satellite of the    |
|   |       |        |     |     |      |      | first.              |
|   |       |        |     |     |      |      |                     |
|   |       |        |     |     |      |      | *National Radio*:   |
|   |       |        |     |     |      |      | Could add 2         |
|   |       |        |     |     |      |      | additional AM and   |
|   |       |        |     |     |      |      | FM stations if they |
|   |       |        |     |     |      |      | were controlled by  |
|   |       |        |     |     |      |      | minorities or small |
|   |       |        |     |     |      |      | businesses.         |
|   |       |        |     |     |      |      |                     |
|   |       |        |     |     |      |      | *National TV*:      |
|   |       |        |     |     |      |      | Could add 2 TV      |
|   |       |        |     |     |      |      | stations if they    |
|   |       |        |     |     |      |      | were controlled by  |
|   |       |        |     |     |      |      | minorities or small |
|   |       |        |     |     |      |      | businesses. TV      |
|   |       |        |     |     |      |      | stations may reach  |
|   |       |        |     |     |      |      | no more than 25% of |
|   |       |        |     |     |      |      | the population. UHF |
|   |       |        |     |     |      |      | received 50% credit |
|   |       |        |     |     |      |      | in population       |
|   |       |        |     |     |      |      | determination.      |
+---+-------+--------+-----+-----+------+------+---------------------+

+---+-------+--------+-----+-----+------+------+---------------------+
| * | **    |        |     | *   |      |      | **Notes**           |
| * | Local |        |     | *Na |      |      |                     |
| Y | Mar   |        |     | tio |      |      |                     |
| e | ket** |        |     | nal |      |      |                     |
| a |       |        |     | Ma  |      |      |                     |
| r |       |        |     | rke |      |      |                     |
| * |       |        |     | t** |      |      |                     |
| * |       |        |     |     |      |      |                     |
+---+-------+--------+-----+-----+------+------+---------------------+
|   | *     | **FM** | **T | **A | **   | **   |                     |
|   | *AM** |        | V** | M** | FM** | TV** |                     |
+---+-------+--------+-----+-----+------+------+---------------------+
| 1 | 15+:  | 15+: 2 | 1   | 18  | 18   | 12   | *Local Radio*:      |
| 9 | 2     | (\<25% |     |     |      |      |                     |
| 9 | (     | mkt    |     |     |      |      | -   In markets with |
| 2 | \<25% | share  |     |     |      |      |     15 or more      |
|   | mkt   | w/ AM) |     |     |      |      |     stations, 2     |
|   | share |        |     |     |      |      |     AM/FM ,as long  |
|   | w/    | \<15:  |     |     |      |      |     as the combined |
|   | FM)   | 2 (3)  |     |     |      |      |     share of        |
|   |       | +      |     |     |      |      |     audience is     |
|   | \<15: |        |     |     |      |      |     less than 25%.  |
|   | 2 (3) | \<50%  |     |     |      |      |                     |
|   |       | of     |     |     |      |      | -   In markets with |
|   | \<50% | st     |     |     |      |      |     less than 15    |
|   | of    | ations |     |     |      |      |     stations, 3     |
|   | sta   |        |     |     |      |      |     stations with   |
|   | tions |        |     |     |      |      |     no more than 2  |
|   |       |        |     |     |      |      |     of either AM or |
|   |       |        |     |     |      |      |     FM as long as   |
|   |       |        |     |     |      |      |     it was no more  |
|   |       |        |     |     |      |      |     than 50% of     |
|   |       |        |     |     |      |      |     market's        |
|   |       |        |     |     |      |      |     stations.       |
|   |       |        |     |     |      |      |                     |
|   |       |        |     |     |      |      | *National Radio:*   |
|   |       |        |     |     |      |      | Could add 3 AM and  |
|   |       |        |     |     |      |      | 3 FM stations is    |
|   |       |        |     |     |      |      | they were           |
|   |       |        |     |     |      |      | controlled by       |
|   |       |        |     |     |      |      | minorities or small |
|   |       |        |     |     |      |      | business.           |
+---+-------+--------+-----+-----+------+------+---------------------+
| 1 | Same  | Same   | S   | 20  | 20   | Same | *National Radio:*   |
| 9 | as    | as     | ame |     |      | as   | Could add 3 AM and  |
| 9 |       |        | as  |     |      | 1985 | 3 FM stations if    |
| 4 | 1992  | 1992   | 1   |     |      |      | they were           |
|   |       |        | 985 |     |      |      | controlled by       |
|   |       |        |     |     |      |      | minorities or small |
|   |       |        |     |     |      |      | businesses.         |
+---+-------+--------+-----+-----+------+------+---------------------+
| 1 | 45+:  | 45+: 5 | S   | No  | No   | No   | *Local Radio:*      |
| 9 | 5 (8) | (8)    | ame | li  | l    | li   |                     |
| 9 |       |        | as  | mit | imit | mit, | -   In markets with |
| 6 | 3     | 30-44: |     |     |      | with |     45+ stations, 8 |
|   | 0-44: | 4 (7)  | 1   |     |      | e    |     stations with   |
|   | 4 (7) |        | 985 |     |      | xcep |     no more than 5  |
|   |       | 15-29: |     |     |      | tion |     in either AM or |
|   | 1     | 4 (6)  |     |     |      |      |     FM.             |
|   | 5-29: |        |     |     |      | (see |                     |
|   | 4 (6) | \<15:  |     |     |      | Note | -   In markets with |
|   |       | 3 (5)  |     |     |      | *    |     30-44 stations, |
|   | \<15: |        |     |     |      | Nati |     7 stations with |
|   | 3 (5) |        |     |     |      | onal |     no more than 4  |
|   |       |        |     |     |      | TV)* |     in either       |
|   |       |        |     |     |      |      |     service.        |
|   |       |        |     |     |      |      |                     |
|   |       |        |     |     |      |      | -   In markets with |
|   |       |        |     |     |      |      |     15-29 stations, |
|   |       |        |     |     |      |      |     6 stations with |
|   |       |        |     |     |      |      |     no more than 4  |
|   |       |        |     |     |      |      |     in either       |
|   |       |        |     |     |      |      |     service.        |
|   |       |        |     |     |      |      |                     |
|   |       |        |     |     |      |      | -   In markets with |
|   |       |        |     |     |      |      |     fewer than 15   |
|   |       |        |     |     |      |      |     stations, 5     |
|   |       |        |     |     |      |      |     stations with   |
|   |       |        |     |     |      |      |     no more than 3  |
|   |       |        |     |     |      |      |     in either       |
|   |       |        |     |     |      |      |     service.        |
|   |       |        |     |     |      |      |                     |
|   |       |        |     |     |      |      | *National TV:* No   |
|   |       |        |     |     |      |      | limit as long as    |
|   |       |        |     |     |      |      | the stations did    |
|   |       |        |     |     |      |      | not serve more than |
|   |       |        |     |     |      |      | 35% of the nation's |
|   |       |        |     |     |      |      | population. UHF     |
|   |       |        |     |     |      |      | received 50% credit |
|   |       |        |     |     |      |      | in population       |
|   |       |        |     |     |      |      | determination.      |
+---+-------+--------+-----+-----+------+------+---------------------+

+---+-------+--------+-----+-----+------+------+---------------------+
| * | **    |        |     | *   |      |      | **Notes**           |
| * | Local |        |     | *Na |      |      |                     |
| Y | Mar   |        |     | tio |      |      |                     |
| e | ket** |        |     | nal |      |      |                     |
| a |       |        |     | Ma  |      |      |                     |
| r |       |        |     | rke |      |      |                     |
| * |       |        |     | t** |      |      |                     |
| * |       |        |     |     |      |      |                     |
+---+-------+--------+-----+-----+------+------+---------------------+
|   | *     | **FM** | **T | **A | **   | **   |                     |
|   | *AM** |        | V** | M** | FM** | TV** |                     |
+---+-------+--------+-----+-----+------+------+---------------------+
| 1 | Same  | Same   | See | S   | Same | Same | *Local TV*: 2 TV    |
| 9 | as    | as     | N   | ame | as   | as   | stations in market  |
| 9 |       |        | ote | as  | 1996 | 1    | if the second       |
| 9 | 1996  | 1996   |     | 1   |      | 996, | stations is         |
|   |       |        | *Lo | 996 |      | with | financially         |
|   |       |        | cal |     |      | e    | troubled, not yet   |
|   |       |        | TV* |     |      | xcep | built, or is not    |
|   |       |        |     |     |      | tion | among the market's  |
|   |       |        |     |     |      | (see | 4 top-rated         |
|   |       |        |     |     |      | Note | stations at time of |
|   |       |        |     |     |      |      | purchase *and* 8    |
|   |       |        |     |     |      | *    | independently-owned |
|   |       |        |     |     |      | Nati | TV stations remain. |
|   |       |        |     |     |      | onal | An owner may also   |
|   |       |        |     |     |      | TV)* | control overlapping |
|   |       |        |     |     |      |      | stations if they    |
|   |       |        |     |     |      |      | are based in        |
|   |       |        |     |     |      |      | different           |
|   |       |        |     |     |      |      | designated market   |
|   |       |        |     |     |      |      | areas.              |
|   |       |        |     |     |      |      |                     |
|   |       |        |     |     |      |      | *National TV:* Same |
|   |       |        |     |     |      |      | as 1996 but in      |
|   |       |        |     |     |      |      | markets where firms |
|   |       |        |     |     |      |      | own 2 TV stations,  |
|   |       |        |     |     |      |      | don't double count  |
|   |       |        |     |     |      |      | towards 35% of      |
|   |       |        |     |     |      |      | nationwide          |
|   |       |        |     |     |      |      | population limit.   |
|   |       |        |     |     |      |      |                     |
|   |       |        |     |     |      |      | *Cross-Ownership -- |
|   |       |        |     |     |      |      | Local Market::*     |
|   |       |        |     |     |      |      |                     |
|   |       |        |     |     |      |      | -   If the market   |
|   |       |        |     |     |      |      |     has at least 20 |
|   |       |        |     |     |      |      |     separately      |
|   |       |        |     |     |      |      |     owned           |
|   |       |        |     |     |      |      |     broadcast,      |
|   |       |        |     |     |      |      |     newspaper, and  |
|   |       |        |     |     |      |      |     cable "voices," |
|   |       |        |     |     |      |      |     can own 2 TV    |
|   |       |        |     |     |      |      |     and 6 radio     |
|   |       |        |     |     |      |      |     stations or 1   |
|   |       |        |     |     |      |      |     TV and 7 radio  |
|   |       |        |     |     |      |      |     stations.       |
|   |       |        |     |     |      |      |                     |
|   |       |        |     |     |      |      | -   If the market   |
|   |       |        |     |     |      |      |     has at least 10 |
|   |       |        |     |     |      |      |     separately      |
|   |       |        |     |     |      |      |     owned           |
|   |       |        |     |     |      |      |     broadcast,      |
|   |       |        |     |     |      |      |     newspaper, and  |
|   |       |        |     |     |      |      |     cable "voices," |
|   |       |        |     |     |      |      |     can own 2 TV    |
|   |       |        |     |     |      |      |     and 4 radio     |
|   |       |        |     |     |      |      |     stations.       |
|   |       |        |     |     |      |      |                     |
|   |       |        |     |     |      |      | -   1 TV and 1      |
|   |       |        |     |     |      |      |     radio allowed   |
|   |       |        |     |     |      |      |     everywhere.     |
|   |       |        |     |     |      |      |                     |
|   |       |        |     |     |      |      | -   TV/newspaper    |
|   |       |        |     |     |      |      |     cross-ownership |
|   |       |        |     |     |      |      |     is prohibited.  |
+---+-------+--------+-----+-----+------+------+---------------------+

**Minority Ownership of Broadcasting Licenses**

A search of the literature provides limited information about minority
ownership of broadcasting licenses. Until the commencement in 1994 of
the Department of Commerce's National Telecommunications and Information
Administration (NTIA) annual studies on minority commercial broadcast
ownership in the United States[^46], information about minority
ownership was primarily reported in various trade publications. Data for
the 1980s proved elusive. The table below presents the information we
were able to obtain.

  ----------- -------------- ----------- ----------- ---------------- ----------- ----------- --------
  **YEAR**    **INDUSTRY**                           **MINORITIES**                           **%**

              **TV**         **Radio**   **Total**   **TV**           **Radio**   **Total**   

  1970[^47]   N/A            N/A         N/A         N/A              13          N/A         N/A

  1972[^48]   700            \>7,000     \>7,700     0                \<20        \<20        \<0.3%

  1973[^49]   N/A            7,350       N/A         N/A              33          N/A         N/A

  1974[^50]   N/A            N/A         N/A         N/A              \<30        N/A         N/A

  1978[^51]   N/A            8,500       N/A         N/A              40          N/A         N/A

  1994[^52]   1,151          9,870       11,021      29               293         322         2.9%

  1995        1,155          9,973       11,128      32               311         343         3.1%

  1996        1,221          10,191      11,412      38               312         350         3.1%

  1997        1,193          10,282      11,475      38               284         322         2.8%

  1998        1,209          10,315      11,524      32               305         337         2.9%
  ----------- -------------- ----------- ----------- ---------------- ----------- ----------- --------

In contacting prospective interviewees, it became apparent that a number
of minorities were no longer station owners. With consolidation in the
marketplace, a few former minority group owners have sold their entire
holdings of broadcast properties. The 1999-2000 NTIA report on minority
ownership is expected to reveal that there are now far fewer minority
broadcast owners than existed in 1998.

# Appendix b - Interview Guide

FCC HISTORICAL STUDY INTERVIEW GUIDE

Subject Name:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Interviewee Control #: \_\_\_\_\_\_\_\_\_\_\_\_

Entity:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**INTRODUCTION**

*Hello, my name is \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, and I'm calling
from Ivy Planning Group at our scheduled time to conduct the telephone
interview you agreed to have with us about FCC licensing practices. Is
this still a convenient time for you? Great.* (Note to interviewer*:* If
this is not a good time, please reschedule for another time as close to
this one as possible.)

As a reminder, Ivy Planning Group, a management consulting company, has
been hired by the Federal Communications Commission to conduct a
historical study of what market barriers, if any, small, minority- and
women-owned businesses face or have faced in the acquisition, sale or
transfer of FCC broadcast and wireless licenses during the years 1950 to
the present.

I will be asking you about your experiences with the process of
acquiring, selling, or transferring FCC licenses, even if you were not
successful in or chose to withdraw from these endeavors. It is my
intention not to ask for any information that is proprietary to you or
your company.

Our interview has been scheduled to last an hour. It would be helpful
not to have any interruptions during our time on the phone so that I can
take as little of your time as possible. I will be asking a series of
open-ended questions for you to consider. Please answer them to the best
of your ability and recollection. The more you can tell me, the more
valuable this report is likely to be for businesses like yours.

As mentioned at the time we scheduled this appointment, I will be
recording our conversation to ensure the accuracy and quality of my
final report. The tape will be transcribed verbatim and will be archived
at the FCC*. (NOTE TO INTERVIEWER: If interviewee insists on not being
recorded, turn off the machine and take notes by hand. Let the
interviewee know that instead of the recording you will be making
written notes of the conversation.)*

*Our study, along with several others, will be used by the FCC to
determine whether there are or have been market barriers for small,
minority- and/or women-owned businesses and, if so, to suggest changes
in the FCC rules or practices to eliminate these barriers. At the end of
our interview, you will have a chance to make suggestions of your own in
this regard.*

*Well, I'm ready to begin the interview now. Do you have any questions
before we start?*

*To help you understand where I'll be going with the interview, here are
the topics to be covered:*

**TOPICS TO BE COVERED**

1.  Characteristics of the entity(ies) and key person(s) involved in the
    entity(ies) (NOTE TO INTERVIEWER: ***entities*** are small minority-
    or women-owned businesses; ***key persons*** are the entities'
    principals, partners, investors and affiliates, and for publicly
    traded companies, the controlling shareholders and any controlling
    officers.)

2.  Entity's capital structure and key person(s') experience in raising
    capital

3.  Effect of FCC policies, provisions and rules on cost or availability
    of raising capital for auctions, lotteries and/or comparative
    hearings

4.  Key person(s') experiences in finding about license acquisition
    opportunities

5.  Key person(s') experiences with barriers to entry or expansion

6.  Key person(s') experiences with advertising secondary market license
    sales transactions

7.  Key person(s') reasons for participating in, withdrawing from or
    succeeding in the license process

8.  Suggestions and recommendations of remedies and/or improvements

First, I would like to quickly review the information you previously
faxed to me so I can ask the right questions later on.

a.  For the licenses that you currently have, which
    preferences/incentives/credits, if any, were in place at the time
    you acquired the licenses? Did you take advantage of all of those to
    which you were entitled? If not, why not?

b.  Have you ever sold or transferred any licenses? What kind? How many?
    When? By what means? To whom? Did you take advantage of any
    preferences/incentives/credits at the time of sale/transfer? If not,
    why not?

**TOPIC 1. Entity and key person characteristics**

**Opening question.** How was your company organized when you obtained
(tried to obtain) your first license? What can you tell me about the
people involved, and their preparation for being an FCC licensee?

**Follow-up topics.** Organizational structure and key players (by name,
if possible)? Key person(s) demographics, education, employment,
business, management, and industry backgrounds (especially with
communications and information products and services? Previous
unsuccessful attempts?

**TOPIC 2. Entity's capital structure and key person(s') experience in
raising capital**

**Opening question.** How would you describe your experience in raising
capital to become an FCC licensee? How prepared were you, financially,
when you first attempted to become a licensee, and when you first
succeeded? From where did you eventually, or do you traditionally,
receive your capital support? Did you experience any discrimination on
the basis or race, ethnicity or gender? Did you experience any
difficulties in raising capital because of the size of your company?

**Follow-up topics.** Capital structure? Access to debt versus equity?
Cost of capital? Access to and cost of security, collateral, and funds
for deposits? Venture capital? Installment payments? Use of credit
cards? Impact of up-front payments, down payments and FCC procedures?

**TOPIC 3. Effect of FCC policies, provisions, rules and requirements on
cost or availability of raising capital for auctions and/or non-auction
activities (lotteries and/or comparative hearings)**

**Opening Question.** How effective has the FCC and/or its policies been
in helping or hindering your efforts to become a licensee? How have
their policies, licensing provisions, service rules, or requirements
affected you and your endeavors?

**Follow-up topics.** Auction and/or non-auction (lottery, comparative
hearings)? Cost or availability of capital? Geographic areas to be
licensed? Partitioning and/or disaggregation? Holding periods? Small
business, race, or gender based provisions or preferences? Integration
and/or bidding credits? Deposit and/or capital requirements? Installment
or up-front payments? Distress sales? Tax certificate policy? Other
policies, provisions, rules or requirements (e.g., spectrum caps, rules
limiting participation to small businesses, etc.)?

**TOPIC 4. Key person(s') experiences in finding out about license
acquisition opportunities (primary/secondary markets)**

**Opening Question.** How have you learned of opportunities to acquire
licenses via auction, lottery and/or comparative hearings? How have you
learned about opportunities to acquire licenses on the secondary market?
How did you hear of your first opportunity? How did that first
experience change over time? How would you or someone like you tend to
learn of license acquisition opportunities now?

**Follow-up topics.** Role and importance of FCC public notices and
outreach; other government agencies; informal personal networks; trade
associations; business brokers; attorneys; bankers; venture capitalists;
other financing sources; Small Business Investment Companies ("SBIC");
Specialized SBICs; incumbent licensees; advertisements in general
market, minority- or gender-specific media?

**TOPIC 5. Key person(s') experiences with barriers to entry or
expansion**

**Opening Question.** What can you tell us about specific barriers,
impediments or roadblocks that you have faced as you have tried to
become an FCC licensee (as a small, minority- or woman-owned business)?
As you have tried to grow your business? What, if any, market obstacles,
such as advertisers' pricing practices, have you encountered? What, if
any, discrimination have you faced in your efforts (as a woman, minority
or small business owner)? (NOTE TO INTERVIEWER: *If interviewee has
participated or thought of participating in the auction process, ask the
following question:* What has been your experience with the new
electronic auction bidding process?)

**Follow-up topics.** Role and importance of FCC public notices and
outreach; other government agencies; informal networks; trade
associations; business brokers; attorneys; bankers; venture capitalists;
other financing sources; SBICs; SSBICs; incumbent licensees.

**TOPIC 6. Secondary market prospective license seller(s') experiences
with advertising license sales/transfers**

**Opening Question.** What means did you use to let people know that you
wanted to sell or transfer a license?

**Follow-up topics.** Minority- or gender-specific media, associations,
organizations, or networks; informal personal networks; business
brokers; attorneys; bankers; venture capitalists; other financing
sources; SBICs; Specialized SBICs; incumbent licensees. Are you aware of
any alleged discriminatory practices (related to race, gender or size of
business) on the secondary market that the FCC has been made aware of by
complaint or other means? How were these complaints handled?

**TOPIC 7. Key person(s') reasons for participating, withdrawing or
succeeding**

**Opening Question.** Why have you decided to participate in purchasing,
selling and/or transferring FCC license(s)? What have been the most
important reasons or significant factors for your participation?

**Follow-up topics.** When you have made decisions not to participate or
to withdraw from pursuing/selling/transferring specific licenses, what
were the reasons or factors at work? Reasons for succeeding? For not
succeeding?

**TOPIC 8. Suggestions and recommendations of remedies and/or
improvements**

**Opening Question.** Based on your experiences, what suggestions can
you give us which would have made your experience in the past easier, or
more fair, or which might level the playing field for citizens like
yourself in the future?

**Follow-up questions.** How could these suggestions have helped you in
acquiring, selling and/or transferring FCC licenses?

**CLOSE**

*Thank you for time and perspectives. You've been most helpful to our
study. I hope you would not mind if we called to clarify or follow up on
any points we've covered today. Please feel free to contact us toll free
at (877) 448-9477, ext. 29 if you think of additional points or
information that may pertain or contribute to our study. Thank you
again.*

# 

# 

# 

# 

# 

# Appendix C - Demographic Breakdown of Interviewees

**Demographic Breakdown Of Interviewee Pool**

A total of 150 licensees, unsuccessful license applicants and key market
participants[^53] were interviewed for this study of market entry
barriers from 1950 to the present in broadcast and wireless licensing.
The pool of interviewees was comprised of 123 licensees/unsuccessful
applicants and 27 key market participants (e.g., brokers, lenders,
attorneys).

The following table presents the distribution of the 123 interviewees
(82%) who made up the licensee/unsuccessful applicant pool. Of the
total, 91 (74%) were from the broadcast industry and 32 (26%) were from
wireless. The groups are comprised as follows: (1) licenses owned by
minorities (large and small businesses); (2) licenses owned by women
(large and small businesses); and (3) licenses owned by white men (small
businesses only).

**Demographic Breakdown of 123 Interviewees**

**(Out of a Total of 150)**

  -------------------------------- --------------- -------------- -----------
  **TYPE OF OWNERSHIP**            **NUMBER IN                    
                                   INTERVIEW                      
                                   POOL**                         

                                   **Broadcast**   **Wireless**   **Total**

  African American                 35              4              **39**

  Hispanic                         22              2              **24**

  Asian American                   1               5              **6**

  Native American                  2               1              **3**

  Women                            20              7              **27**

  White men (sm. bsn. only)        11              13             **24**

  **TOTALS**                       **91**          **32**         **123**
  -------------------------------- --------------- -------------- -----------

The remaining 27 interviewees (26%) were key market participants.

# 

# Appendix D - List of Interviewees 

**Federal Communications Commission**

**Historical Market Entry Barrier Study**

**List of Interviewees - Licensees**

**Type of Demographic**

**[Last Name]{.underline}** **[First Name]{.underline}**
**[Business]{.underline}** **[Group \*]{.underline}**

Acker Gary Radio Black

Adelman Robert Radio/TV Small

Alonzo Alfredo Radio Hispanic

Arroyo George Radio Hispanic

Bailey Bob Carl Radio Black

Banks Joyce Radio Woman (Black)

Barro Mary Helen Radio Woman (Hispanic)

Barton Ernesto Radio Hispanic

Beech Richard Wireless Small

Bennet Caressa Wireless Woman

Blount Frank Wireless Small

Boaldin Trent Wireless Small

Broz Robert Wireless Small

Brunson Dorothy TV Woman (Black)

Bustos Amador Radio Hispanic

Byrne Jerry Wireless Asian American

Caballero Eduardo Radio/TV Hispanic

Camarillo Mateo Radio/Wireless Hispanic

Carter Michael Radio Black

Carter Michael Radio Small

Charles Merrill (Butch) Radio Black

Chase Anthony Radio/Wireless Black

Cherry Charles Radio Black

Chu Narisa N.Y. Wireless Woman (Asian

American)

Chung Sejin Wireless Asian American

Clark Susan TV Woman

*\*Small = White male; Woman (without racial designation) = White woman*

**Federal Communications Commission**

**Historical Market Entry Barrier Study**

**List of Interviewees -- Licensees**

(continued)

**Type of Demographic**

**[Last Name]{.underline}** **[First Name]{.underline}**
**[Business]{.underline}** **[Group]{.underline}**

Colon Pablo de Jesus Radio Hispanic

Cook Bush Tony Wireless Woman

Cornwell W. Don TV Black

Correa de Garcia Marti TV Hispanic

Crutchfield Ronald Wireless Black

Culpepper Ricahrd Radio Black

Davenport, Sr. Ronald R. Radio Black

Davila Manuel Radio Hispanic

Davis Carl Wireless Small

Davis Greg Radio Black

Davis Willie D. Radio Black

DeBose Helena Radio Woman (Black)

Dobbins George Wireless Black

Douglas Nancy Wireless Woman

Douglas N. John Radio Black

Ehlinger Phyllis Radio Woman

Evans Mutter D. Radio Woman (Black)

Faush Erskine TV Black

Ferrufino Zenon Radio Hispanic

Fink Robert K. TV Small

Fong Peter W. Wireless Asian American

Ford Richard Radio Small

Frank Peter Wireless Small

Galloway William Radio Black

Garcia Joe Radio Hispanic

Gehman Dale Radio Native American

**Federal Communications Commission**

**Historical Market Entry Barrier Study**

**List of Interviewees -- Licensees**

(continued)

**Type of Demographic**

**[Last Name]{.underline}** **[First Name]{.underline}**
**[Business]{.underline}** **[Group]{.underline}**

Gilliam Art Radio Black

Gomez Nelson Radio Hispanic

Gomez Ed Radio Hispanic

Guernica Tony Radio/TV Hispanic

Guerra Belinda Radio Woman (Hispanic)

Harris Leodis Radio Black

Hawes-Saunders Ro-Nita Radio Woman (Black)

Helton Nora Wireless Native American

Heyward Isaac Radio Black

Hoffman Roger Wireless Small

Howard Samuel Radio Black

Hutton Jeffrey Radio Small

Ishihara Glenn Wireless Asian American

James Ernest Radio Black

Kessler Bennett Radio Woman

Keys Brady, Jr. Radio Black

Langston Andrew A. Radio Black

Laurel Oscar M. TV Hispanic

Lee Jang Radio Asian American

Love Ross Radio Black

Lovink Mia Wireless Woman

Lucas Henry M. Wireless Small

Lucas Rochelle Wireless Woman (Black)

Malcolm Colin B. Radio Small

Marchant Byron Wireless Black

Marshall, Jr. Pluria Radio Black

Martin Stuart T. TV Small

**Federal Communications Commission**

**Historical Market Entry Barrier Study**

**List of Interviewees -- Licensees**

(continued)

**Type of Demographic**

**[Last Name]{.underline}** **[First Name]{.underline}**
**[Business]{.underline}** **[Group]{.underline}**

McCollum Amy Radio Woman

McCullah Tazbah Radio Native American

McKinzie Ronda Wireless Woman

Miller Dennis E. Wireless Small

Molina Jose Radio/TV Hispanic

Morgan Tommy Wireless Small

Myrick Charles Wireless Small

Nash Bernadine Radio Woman (Black)

Neidig Andres Radio Hispanic

O\'Luck Mark Wireless Black

Oxendine John TV Black

Perres Luis Radio Hispanic

Phillips Martin Radio Small

Portillo Ernesto Radio Hispanic

Price Bud & Cathy Radio Small

Prout Patrick Radio Black

Puri Harish C. Wireless Asian American

Rienstra Francine Radio Woman

Riordan Robert Wireless Small

Roberts Michael TV Black

Ruiz Patty TV Woman (Hispanic)

Salva Isabelle Radio Hispanic

Saunders William Radio Small

Shatz Carol TV Woman

Shaw Johnny &Opal Radio Black

**Federal Communications Commission**

**Historical Market Entry Barrier Study**

**List of Interviewees -- Licensees**

(continued)

**Type of Demographic**

**[Last Name]{.underline}** **[First Name]{.underline}**
**[Business]{.underline}** **[Group]{.underline}**

Sherrell Charles R. Radio Black

Simms Raymond Radio Black

Spann Pervis Radio Black

Spann-Cooper Melody Radio Woman (Black)

Sutter Diane TV Woman

Sutton Pierre M. Radio Black

Terry Mical J. Wireless Small

Thomas John C. Radio Black

Tortolero Carlos Radio Hispanic

Tupper John B. TV Small

Turner Edna Radio/Wireless Woman (Black)

Unger Ruby Radio Woman

Valasquez Art Radio Hispanic

Vega, Jr Richard Pablo Radio Hispanic

Walls Willie Radio Black

Waters Nancy Radio Woman (Black)

Weaver-Bey Richard Radio Black

Wolfe James E., Jr. Radio Black

Yunis Enrique Wireless Hispanic

**Federal Communications Commission**

**Historical Market Entry Barrier Study**

**List of Interviewees -- Key Market Participants**

**[Last Name]{.underline}** **[First Name]{.underline}** **[Company
Name]{.underline}** **[Type of business]{.underline}**

Baldon Virgil Baldon Media Service Consultant/Educator

Brown Tyrone Wiley, Rein & Fielding Communications Attorney

Casey Jim Greenburg & Traurig Communications Attorney

Cobb Brian Media Venture Partners Media Broker

Dickenson Bruce Daniels & Associates Media Broker

Ellis Dwight National Association of Industry Organization

Broadcasters (NAB)

Fontes Brian Cellular Telecommunications Industry Organization

Industry Association (CTIA)

Healey Steve Fleet National Bank Media lender

Honig David Minority Media Advocacy Group

Kalil Frank Kalil & Associates Media Broker

Kilrea Jeff FINOVA Capital Venture Capital

Krasnow Erwin Verner, Liipfert, et. al. Communications Attorney

Lauer John Media Broker

Lee Tony Swidler Berlin Shereff Communications Attorney

Logan Nancy American Women in Radio Advocacy Group

and Television (AWRT)

McNeill Brian Burr Egan (Alta Investment banker

Montero Frank FCC-Office of Communications Former Director of OCBO

Business Opportunities (OCBO)

Parker Rev. Everett United Church of Christ Advocacy Group

Perez Benjamin Abacus Communications Communications Attorney

Rivera Henry Ginsberg Feldman & Bress Former FCC commissioner

Schwartzman Andrew Media Access Project Advocacy Group

Smith Chic Benton Foundation Industry Organization

Trigg Ms. S. Jennell Fleischman & Walsh LLP Communications Attorney

Wilkins Herbert Syncom Venture Capitalist

Williams Darrell A. Telecommunications Venture Capitalist

**[Last Name]{.underline}** **[First Name]{.underline}** **[Company
Name]{.underline}** **[Type of business]{.underline}**

Winston James (Jim) National Association of Industry Organization

Black-Owned Broadcasters

Winston John Federal Communications Former head of Office

Commission of Communications

Business Opportunities

# 

# Appendix E -- IVY PLANNING GROUP PROFILE 

**COMPANY PROFILE**

Ivy Planning Group LLC is a full-service management consulting firm. We
assist organizations in becoming customer-driven by focusing on
strategic and tactical planning, organizational development and
redesign, and diversity. Named after the principals' Ivy League
educational backgrounds, Ivy supports its customers' continuous
improvement processes through the formation of the organizations'
strategy; translation of strategy into tactics; and implementation
through training, change initiatives and consulting services.

Ivy was honored as a *Black Enterprise* magazine Year 2000 Emerging
Company of the Year Finalist and by *Working Woman* magazine for
Entrepreneurial Excellence. Ivy was profiled in D*reamMakers: Putting
Vision & Values to Work*, a book that chronicles how leading-edge
organizations are able to succeed and realize their vision and values.
Ivy's President, Janet C. Smith, author of *The Diversity Action Book:
143 Things To Go Do*, was named one of "Twenty-Five Influential Minority
Women in Business" by Minority Business & Professional Network, Inc.

Some of the world's most comprehensive and respected methodologies have
come from the U.S. government's Reinventing Government initiative, where
Ivy Planning Group has been a key player. Ivy was selected by the
Federal Quality Institute to participate as a partner in the design,
development, and rollout of President Clinton's National Performance
Review (NPR) Reinventing Government initiative. Ivy's responsibilities
included creating strategies to address valuing diversity, benchmarking,
the changing role of leadership, and creating a customer-driven
government. Ivy was selected for its ability to translate private sector
concepts into public sector initiatives, proven planning methodology,
curriculum development and training skills, and its expertise in change
management.

Ivy Planning Group supports customers in the public and private sectors.
Ivy's clients include the U.S. Environmental Protection Agency; the U.S.
Departments of Labor, Treasury, and Justice; the U.S. Patent and
Trademark Office; the U.S. Postal Service; the Federal Communications
Commission; The Chase Manhattan Bank; Morgan Stanley Dean Witter &
Company; IBM; Pennzoil-Quaker State; Xerox; Bell Atlantic/Verizon;
United Way of America; and Special Olympics International.

Founded in 1990, Ivy takes pride in the reputation it has built with
Federal agencies, Fortune 500 companies, and large non-profits. Ivy is
unique in its commitment to provide senior consultants with proven
methodological/process skills and experience, who also bring real
experience as managers, and as change agents, in large organizations.
Thus, Ivy's consultants provide practical solutions to the challenges
associated with organizational change initiatives.

Ivy Planning Group provides the skills, experience and professionalism
of a large management consulting firm and the flexibility, senior level
access, service, and caring attitude of a small, founder-led business.

Ivy Planning Group is a minority- and woman-owned firm certified under
the U.S. SBA's 8(a) program. Ivy holds GSA/MOBIS Schedule #GS-23F-9805H.

**CONTACT INFORMATION**

Janet C. Smith, President

Ivy Planning Group LLC

15204 Omega Drive, Suite 110

Rockville, Maryland 20850-4601

Phone: (301) 963-1669

Fax: (301) 963-8068

Toll Free: (877) 448-9477

JSmith@ivygroupllc.com

www.ivygroupllc.com

[^1]: The Commission contracted with the Ivy Planning Group, LLC to do
    this study pursuant to Purchase Order No. PUR00000292, Requisition
    No. AUC00000135, under the GSA MOBIS schedule GS-23F-9805H.

[^2]: *See, e.g. Civil Rights Forum on Communications Policy, When Being
    No. 1 Is Not Enough (1999); and R. Suarez and R. Cull, Capital
    Formation and Investment in Minority Business Enterprises in the
    Telecommunications Industries (1995).*

[^3]: Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56
    (1996), Section 257.

[^4]: In addition, the Commission has full authority and power to
    conduct an inquiry for "any question \[that\] arise under any of the
    provisions of \[the\] Act" pursuant to Section 403 of the Act.

[^5]: We note that gender-based classifications need only satisfy
    intermediate scrutiny. *See United States v. Virginia*, 518 U.S.
    515, 531-33 (1996).

[^6]: In addition, The Commission's Office of Communications Business
    Opportunities (OCBO) and its Office of General Counsel (OGC) held a
    *Market Entry Barriers Forum* to further explore impediments that
    small businesses experience.^?^ *See FCC Public Notice, Forum on
    Small Business Market Entry Barriers,* No. 64975 (Sept. 5, 1996)
    (Market Entry Barriers Forum)(hearing was held on September 24,
    1996).

[^7]: Id. at 6283.

[^8]: *In the Matter of Section 257 Proceeding to Identify and Eliminate
    Market Entry Barriers for Small Business*, Report, 12 FCC Rcd 16802
    (1997).

[^9]: [Id]{.underline}. at 16824-34.

[^10]: These studies examine: (i) whether there is a link between
    minority broadcast ownership and news and public affairs
    programming; (ii) the utilization ratios and probabilities of
    success in wireless auctions for minorities, women, and
    non-minorities; and the impact, if any, of capital market
    discrimination on Broadcast and wireless spectrum business
    opportunities for minorities and women; (iii) the estimation of
    utilization ratios and probabilities of obtaining broadcast licenses
    from the FCC through the comparative hearing process; and (iv) the
    impact of advertising practices on minority-owned and
    minority-formatted broadcast stations.

[^11]: Halper, Donna. Marie Zimmerman -- Broadcasting's First Female
    Owner.

    \<http://www.oldradio.com/archives/people/zimmerman.html\>.

[^12]: Alston, Roland (1978, July). Black-Owned Radio: Talking to the
    Airwaves in a Hurry. *Black Enterprise*, p. 22.

[^13]: Id., p.23.

[^14]: Molden, Vaughncille. Telecommunications and Black Americans: A
    survey of Ownership, Participation and Control. Washington
    University: St. Louis, Missouri. August 1975, p. 128. Master of Arts
    Thesis.

[^15]: *See Appendix* C for a copy of the Interview Guide.

[^16]: "Key persons" are defined as those who: (1) have voting control
    or an equity interest in the company which holds the license and (2)
    were a driving force behind the company's acquisition of or attempt
    to acquire a FCC license on either the primary or secondary market.

[^17]: "Key market participants" are defined as those individuals who
    act in an intermediary capacity with respect to FCC broadcast and
    wireless license acquisition (e.g., media brokers, lenders, venture
    capitalists, investment bankers, and attorneys) or who are or were
    part of the FCC (e.g., former Commissioners, Directors, staff
    members).

[^18]: With the consent of the interviewees, telephone interviews were
    recorded and subsequently transcribed. Parenthetical notations after
    each quote in this document refer to the particular transcript file
    and page number(s) from which the quote was taken.

[^19]: Sources used included the following: FCC database and other
    information; National Telecommunications and Information
    Administration (NTIA) Minority Commercial Broadcast Ownership
    Report, 1997-1998; Broadcast Investment Analysts (BIA) databases;
    American Women in Radio and Television (AWRT); National Association
    of Black-Owned Broadcasters (NABOB); and referrals from
    interviewees.

[^20]: In 1985, while the rules generally stayed the same with respect
    to local ownership, the Commission relaxed the rules so that an
    individual or company could own as many as 12 AM, FM or TV stations
    in the national market under certain circumstances. In addition,
    since 1985, the Commission has gradually relaxed the ownership
    rules. In 1992, one could own 2 AM and 2FM stations, in markets with
    15 or more stations, provided the combined share of audience is less
    than 25%; in markets that have less than 15 stations, 3 stations
    with no more than 50% of the market's stations. In the national
    market, an owner could own 18 AM and 18FM stations, plus a
    non-controlling interest in 3 AM and 3 FM, provided they are
    controlled by minorities. Thereafter, in 1996, the Commission
    removed the ownership restriction allowing no numerical-station
    limit, but limiting the audience reach to 35% as to the national
    market. The FCC also relaxed the local ownership rules:

    8 stations in markets with 45 or more stations (with no more than 5
    stations in AM or FM;

    7 radio stations in markets with 30-44 stations (with no more than 4
    in either service);

    6 radio stations in markets with 15-29 stations (with no more than 4
    stations in either service); and

    in markets with less than 15 stations, 5 radio stations (with no
    more than 3 stations in either service.

[^21]: In accordance with the Communications Act of 1934, The Federal
    Communications Commission has allocated and licensed the radio
    spectrum for use in radio, television and telecommunications. From
    1945 until 1993, this spectrum was allocated by comparative hearings
    from which the successful applicant paid no compensation to the
    Federal government. If there were mutually-exclusive competing
    applicants, they went through the comparative hearing process
    wherein an Administrative Law Judge (ALJ) reviewed the applications
    and heard the arguments from the applicants, ultimately deciding
    which one could and would best serve the public interest. While the
    applicants generally expended significant sums of money for
    engineering advice and legal representation during the application
    and hearing process, regulatory and application fees were minimal.

    In an effort to refine the process and to provide consistency in
    decision making, the Commission issued the Policy Statement on
    Broadcast Comparative Hearings, 1 F.C.C. 2d 393 (1965). This
    Statement articulated the areas in which applicants would receive
    credit (or "points") and on which their applications would be
    judged. The seven areas of review were: diversification of control,
    integration of ownership into management, proposed program service,
    past broadcast record, efficient use of the frequency, character,
    and any other significant and relevant factors to be considered in
    the decision-making process.

    Minority ownership policies did not commence until 1973 in the wake
    of *TV 9, Inc. v. FCC*, 495 F.2d 929 (D.C. Cir. 1973); and gender
    ownership policies did not commence until 1978 and the *Mid-Florida
    Television Corp*., 69 F.C.C. 2d 607, 651 (Rev. Bd. 1978), set aside
    on other grounds, 87 F.C.C. 2d 203 (1981).

    The 1978 Statement of Policy on Minority Ownership of Broadcasting
    Facilities formalized the use of minority and gender credits in the
    comparative hearing process, thereby providing a measure of
    "preference" to both minority and female applicants. In 1990, the
    FCC declined to extend enhancement credits for minority ownership
    under the diversification of ownership criterion. The 1993 decision,
    *Bechtel v. FCC*, 10 F.3d 875 (D.C. Cir. 1993), had the effect of
    freezing comparative hearings. The Telecommunications Act of 1996
    eliminated the role of comparative hearings in the renewal of
    broadcast licenses.

[^22]: The 1978 Statement of Policy on Minority Ownership of Broadcast
    Facilities, 68 F.C.C. 2d at 981, 42 Rad. Reg. 2d (P & F) at 1691,
    created the Distress Sale policy which allowed for license owners
    that were under scrutiny by the FCC (and under threat of license
    revocation) to sell their station to a minority for 75% of the
    appraised value. In return, the FCC would cease its inquiry into the
    suspect license owner.

[^23]: Interviewees reported that in some instances non-minority men
    would offer ownership and/or financial resources to minorities and
    women to become part of their license application team in order to
    take advantage of the minority and women ownership programs during
    the comparative hearing process, but rarely giving these "fronts"
    control over the operation of the business. In these instances,
    their participation was generally sought after to increase the odds
    of license award. Alternatively, others would review FCC filings to
    see if a minority or woman had filed for a new frequency. The
    apparent motivation was either to: (a) get paid off with "greenmail"
    to withdraw their application, knowing full well that most women and
    minorities did not have the resources for a protracted hearing
    before the Commission and would therefore pay the greenmailer to go
    away; or (b) come in on the back of someone else's engineering study
    and wear down the minority or female applicant through appeals or
    other means, expecting that this applicant would eventually withdraw
    because he/she did not have the money for a protracted hearing
    process, thereby leaving the non-minority in a position to receive
    the license. There were instances where these practices, as
    described, were quite predatory in their nature.

[^24]: The 1978 Statement of Policy on Minority Ownership of Broadcast
    Facilities, 68 F.C.C. 2d at 981, 42 Rad. Reg. 2d (P & F) at 1691,
    created the tax certificate program. This program which provided
    incentives to broadcast owners who sold their properties to
    minorities (minority buyer with 50.1% of voting control and 20.1%
    equity interest). The seller could then defer any gain realized on
    the sale of that broadcast property provided it was sold to a
    minority, and the gain was rolled over into a qualified replacement
    broadcast property within 2 years. Specifically, the tax certificate
    program encouraged and promoted minority ownership by giving a
    two-year like-kind-transfer tax break for the sale of licenses to
    minorities if the proceeds were reinvested in a similar
    communications industry. Since the seller was able to defer its tax
    payment on the capital gain by selling to a minority, the price was
    frequently lowered, enabling minority purchasers to mitigate the
    associated barrier of "lack of access to capital."

    Prior to 1978, minorities owned approximately 40 broadcast licenses,
    one-half of one percent of approximately 8,500 total broadcast
    licenses granted by the Commission. From 1978 to 1995, the FCC
    granted approximately 356 tax certificates to promote minority
    broadcast and cable ownership (287 radio, 40 TV and 30 cable
    licenses). This program helped give a much needed boost for minority
    ownership. In 1982, the tax certificate program was expanded to
    include cable systems. Subsequently, Congress repealed the tax
    certificate program with the passing of the Self-Employed Persons
    Health Insurance Act of 1995, Pub L. No. 104-7, S 2, 109 Stat. 93
    (1995).

[^25]: On August 18, 1998, the Commission released its First Report and
    Order setting forth procedures governing auctions of broadcast
    service licenses. In October 1999, the FCC held its first auction
    for broadcast licenses whose distribution was suspended in the wake
    of the *Bechtel* case.

[^26]: The Small Business Administration in the administration of its
    "opinion molder rule", generally prohibits governmental financial
    assistance to business operations relating to the communication of
    ideas on the basis that the government should refrain from
    subsidization of particular views or ideas, has led the agency to
    reconsider the rule because it appears to have had the opposite
    effect of entangling, rather that extricating, the government in
    speech matters due to the need for agency determinations of
    eligibility. The SBA's opinion molder rule, which was lifted several
    years ago, provided generally that the federal government was
    prohibited from granting governmental financial assistance to
    applicants engaged in the communication of ideas. 13 D.F.R. 120.2

[^27]: MESBICs are small business investment companies (SBICs) that
    address the needs of entrepreneurs who have been denied the
    opportunity to own and operate a business because of social or
    economic disadvantage. SBICs were created by Congress in 1958, and
    licensed by the Small Business Administration. MESBICs are privately
    organized and privately managed investment firms. Possessing their
    own capital and with funds borrowed at favorable rates from the
    Federal government, SBICs provide venture capital to small
    independent businesses. Small Business Association, Alternative
    Financing, (visited Aug. 30, 2000).

    \<http://www.sba.gov/gopher/Business-Development/Womens-Business-Ownership/Financial-Alternatives/wfin1.txt\>

[^28]: Arbitron is an independent company which collects radio listening
    habits and market share information from a sampling of families
    throughout the U.S. using various survey instruments and methods.
    Arbitron measures radio audiences in 270+ local markets. This
    listenership information is used by broadcasters to attract
    advertisers. Only those broadcasters who become members of Arbitron
    are allowed to quote the data during the selling process.

[^29]: In the Matter of 1998 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, 2000
    WL 791562, FCC 00-191 (June 20, 2000).

[^30]: *See Minority Ownership of Broadcasting Facilities*, 68 FCC 2d
    979, 981 (1978).

[^31]: *See Public Interest Obligations Of TV Broadcast Licenses*,
    Notice of Inquiry, 14 FCC Rcd. 21,633 (1999)(The Commission's
    "public interest standard should promote diversity over the public
    airwaves.").

[^32]: In 1981, Congress amended section 309(j) of The Communications
    Act and granted discretion to the FCC to award broadcast licenses by
    lottery. Subsequently, the FCC claimed that the lottery statute was
    too vague and declined to implement such an allocation scheme. After
    the FCC requested a statutory mandate with greater specificity,
    Congress responded in 1982 by passing subsection 309(i)(C)(ii),
    which specified Blacks, Hispanics, American Indians, Alaska Natives,
    Asians, and Pacific Islanders constituting a minority group.
    Thereafter, the FCC interpreted section 309 as precluding women from
    being included as minorities under lotteries; and thus not entitled
    to a preference. In re-Amendment of the Commission's Rules to allow
    the Selection from among Certain Competing Applications Using Random
    Selection or lotteries Instead of Comparative Hearing, 58 RR 2d 1077
    (1985). Accord *Pappas v. FCC*, 807 F. 2d 1019 (D.C Cir. 1986).

[^33]: 1978 Policy Statement, 68 F.C.C 2d 979; Commission Policies
    Regarding the Advancement of Minority Ownership in Broadcasting, 92
    F.C.C. 2d 849 (1982), proceeding terminated, 99 F.C.C. 2d 1249
    (1985).

[^34]: 109 Stat. 93 (1995), Pub. L. No. 1044-7 (1995).

[^35]: For instance, Congress believed that the policy evolved far
    beyond what Congress originally contemplated, and that the FCC
    granted the certificates routinely for a wide range of
    communications properties *Id.* Moreover, Congress found that the
    FCC had developed no standard for issuing the certificates and that
    grants \"frequently resulted in transitory minority ownership of
    broadcast properties.\" See Greg Forster; *Tax Breaks for Being
    Blac*k, The Wall Street Journal at A21 (Jan. 8, 1995; *but*
    [see]{.underline} *Testimony, Minority Tax Preferences*, Statement
    of William Kennard, General Counsel of the Federal Communications
    Commission, Before U.S. Senate Committee on Finance, 1995 Westlaw
    93492 (F.D.C.H.) (Jan. 27, 19995); Statement of William Kennard,
    General Counsel of the Federal Communications Commission, Hearing
    Before the Subcommittee On Oversight of the Committee on Ways And
    Means, House of Representatives, 1995 Westlaw 30799 (F.D.C.H.)
    (Jan.27, 1995) thus frustrating the stated goal of encouraging
    minority ownership, 109 Stat. 93 (1995), Pub. L. No. 1044-7 (1995).
    Congress also found that the tax certificate policy was not subject
    to systematic review by the IRS or any other governmental body to
    evaluate the cost to the government. [Id]{.underline}. However, at
    least one senator was of the opinion that there was no showing of
    \"past (or current) discrimination\" to justify the tax certificate
    program. Senator Packwood, in describing the tax certificate program
    posed the following question: \"Do we want a Government policy where
    there is no evidence of discrimination?" See *Proceedings and
    Debates of the 104th Congress*, 141 Cong. Rec S4532-04 Mar. 24,
    1995).

[^36]: Self-Employed Health Insurance Act of 1995, Pub L. No. 104-7, S
    2, 109 Stat. 93 (1995).

[^37]: The distress sale program was one of two programs explicitly
    upheld in [Metro Broadcasting]{.underline}, although under
    intermediate scrutiny. No court has addressed the program's
    constitutionality under strict scrutiny since [Adarand]{.underline}
    was decided.

[^38]: On January 20, 2000, the Commission adopted new EEO rules that
    emphasize broad outreach to all qualified job candidates for
    positions at radio, television and cable companies. The new rules
    prohibit discrimination on the basis of race, religion, color,
    national origin or gender and, require, inter alia, broadcast
    licensees to widely disseminate information about job openings to
    all segments of the community to ensure that all qualified job
    candidates have an opportunity to compete for positions. See In The
    Matter of Review of the Commission\'s Broadcast and Cable Equal
    Employment Opportunity rules and Policies, Report and Order, MM
    Docket No. 98-204, 15 FCC Rcd. 2329 (2000). The rules respond to the
    D.C. Circuit Court of Appeals\' 1998 decision in Lutheran Church
    \[141 F.3d 344 (D.C. Cir. 1998) which held that the Commission\'s
    previous broadcast EEO requirements were unconstitutional. The new
    EEO rules are also now subject to constitutional challenge, and 50
    of the state broadcast associations have recently appealed their
    implementation. State Assns. Appeal New EEO Rules, Television
    Digest, Volume 40, Issue 33, Monday, August 14, 2000.

[^39]: In *Office of Communications, United Church of Christ* v. FCC,
    425 F. 2d 543, 549 (D.C. Cir. 1969), then-Judge Burger stated that
    "The \[Hearing\] Examiner and the Commission exhibited at best a
    reluctant tolerance of this court's mandate and at worst a profound
    hostility to the participation of the Public Intervenors and their
    efforts. The record now before us leaves us with a profound concern
    over the entire handling of this case following the remand to the
    Commission. The impatience with the Public Intervenors, the
    hostility toward their efforts to satisfy a surprisingly strict
    standard of proof, plain errors in rulings and findings lead us,
    albeit reluctantly, to the conclusion that it will serve no useful
    purpose to ask the commission to reconsider the examiner's actions
    and its own Decision and Order under a correct allocation of the
    burden of proof. The administrative conduct reflected is this record
    is beyond repair.

    "The Commission, itself, with more specific documentation of the
    licensee's shortcomings than it had in 1965 has now found virtues in
    the licensee which it was unable to perceive in 1965 and now finds
    the grant of a full three-year license to be in the public interest.
    We are compelled to hold, on the whole record, that the Commission's
    conclusion is not supported by substantial evidence. For this reason
    the grant of a license must be vacated forthwith and the Commission
    is directed to invite applications to be filed for the license." See
    *Office of Communications, United Church of Christ v. FCC*, 425 F.
    2d 543, 549 (D.C. Cir. 1969).

[^40]: In *Applications of Alabama Educational Television Commission*,
    50 FCC 2d 461 (FCC 1975), the FCC held that Alabama Educational
    Television stations engaged in discriminatory practices because they
    had few minority performers. The FCC specifically held "while it is
    true that there is no evidence that direct orders were ever issued
    to discriminate on the basis of race, the absence of such evidence
    is hardly dispositive. A policy of discrimination may be inferred
    from conduct and practices which display a pattern of
    under-representation or exclusion of minorities from a broadcast
    licensee\'s overall programming." Radio Station WSNT, Inc., 27 FCC
    2d 993 (1971). In light of the facts of the record set forth below,
    we find a compelling inference that \[Alabama Educational
    Television\] followed a racially discriminatory policy in its
    overall programming practices during the license period. *See In Re
    Applications of Alabama Educational Television Commission,* 50 FCC
    2d 461 (FCC 1975).

[^41]: FCC Chairman William E. Kennard, A New FCC for the 21st Century:
    Draft Strategic Plan. (visited Aug. 30 1999).
    \<http://www.fcc.gov/21st_century.\>

[^42]: See *Non-Discrimination in Employment Practices*, 18 FCC 2d 240,
    16 RR 2d 1561 (1969)

[^43]: [See]{.underline} SUSPENSION OF REQUIREMENT FOR FILING OF
    BROADCAST STATION ANNUAL EMPLOYMENT REPORTS AND PROGRAM REPORTS, 13
    FCC Red 21998 (1998)

[^44]: Supra note 34.

[^45]: Lee Broadcasting Corp., 76 FCC2d 462 (1980); Statement of Policy
    on Minority Ownership of Broadcast Facilities, 68 FCC2d 979 (1978);
    and Clarification of Distress Sale Policy, 44 RR2d 479 (1978).

[^46]: The most recent NTIA study available is for 1997-1998. The
    1999-2000 report is currently in progress.

[^47]: Supra note 14, p. 244. Numbers are for Blacks only.

[^48]: *Broadcasting*, "Coming Through the Front Door of Ownership: A
    New Direction for Blacks in Broadcasting," October 30, 1972, p. 25.
    Numbers are for Blacks only.

[^49]: Supra note 14, p. 214. Numbers are for Blacks only.

[^50]: Id. Numbers are for Blacks only.

[^51]: *Federal Communications Law Journal*, Krasnow, Erwin G., Fowlkes,
    Lisa M., The FCC's Minority Tax Certificate Program: Life after
    Death," May 1999. 51 Fed. Comm. L.J., 671. Numbers are for
    minorities taken as a group.

[^52]: Ownership numbers for the years 1994 through 1998 are contained
    in the NTIA Minority Commercial Broadcast Ownership in the United
    States reports for the respective years. Information was collected
    on ownership in the following four minority groups: Blacks,
    Hispanics, Native Americans, and Asian Americans. Numbers for
    television do not necessarily include low power TV.

[^53]: [See]{.underline} Appendix D for a complete listing of
    interviewees.