Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | MM Docket No. 94-150         |
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| Review of the Commission's       | ) | MM Docket No. 92-51          |
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| Regulations Governing            | * | MM Docket No. 87-154         |
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**MEMORANDUM OPINION AND ORDER ON RECONSIDERATION**

**Adopted:** December 14, 2000 **Released:** January 19, 2001

By the Commission: Chairman Kennard approving in part, concurring in
part and issuing a statement; Commissioners Ness and Tristani approving
in part, dissenting in part, and issuing separate statements;
Commissioner Furchtgott-Roth concurring in part, dissenting in part, and
issuing a statement.

# introduction AND BACKGROUND

1.  In this Order, we grant, in part, and deny, in part, five petitions
    seeking reconsideration of the *Report and Order* released in this
    proceeding on August 6, 1999.[^1] In response to one petition, we
    provide clarification on certain issues related to the newly adopted
    attribution rules. In the *Report and Order*, the Commission
    modified its attribution rules, which define what constitutes a
    "cognizable interest" in applying the broadcast multiple ownership
    rules,[^2] the broadcast/cable cross-ownership rule,[^3] and the
    cable/Multipoint Distribution Service cross-ownership rule.[^4] The
    Commission amended its attribution rules to improve the precision of
    the rules, avoid disruption in the flow of capital to broadcasting,
    afford clarity and certainty to regulatees and markets, and
    facilitate application processing.

2.  In the *Report and Order*, the Commission, in relevant part,
    eliminated its cross-interest policy and adopted the new equity/debt
    plus (EDP) rule, retained the single majority shareholder exemption,
    adopted rules that make interests in certain television local
    marketing agreements (LMAs) or time brokerage agreements
    attributable for purposes of the ownership rules, and established
    policies for grandfathering certain newly attributable interests.
    The Minority Media Telecommunications Council (MMTC), the National
    Association of Broadcasters (NAB), Sinclair Broadcast Group, Inc.
    (Sinclair), the Office of Communications, Inc. of United Church of
    Christ *et al*. (UCC),[^5] and Wells Fargo Communications Finance,
    Division of Norwest Bank MN, NA (Wells Fargo) seek reconsideration
    of issues related to these actions. In addition, on our own motion,
    we provide guidance on several issues that the petitioners did not
    raise, but that pertain to application of the EDP rule. In
    accordance with the scope of the proceeding, we note that the rule
    amendments contained in this *Memorandum Opinion and Order* apply to
    the broadcast multiple ownership rules, the broadcast/cable
    cross-ownership rule, and the cable/Multipoint Distribution Service
    cross-ownership rule.

# discussion

## The Equity/Debt Plus Rule

### Scope of the Rule

3.  **[Background]{.underline}**. We adopted the EDP rule to address the
    concerns raised in the *Notice* and *Further Notice* and in the
    record that our attribution rules did not address some interests,
    including multiple business and financial relationships that
    conveyed significant influence such that they should be
    attributed.[^6] For example, network affiliates had expressed
    concerns that attribution exemptions had permitted networks to
    extend their nationwide reach by structuring nonattributable deals
    in which the networks effectively exert significant influence, if
    not control, over licensees.[^7] The EDP rule is a targeted approach
    that balances our goal of maximizing the precision of the
    attribution rules by attributing only interests that are of concern,
    and our goals of not unduly disrupting capital flow, affording ease
    of administration, and providing certainty to regulatees.[^8]
    Specifically, we apply a two-pronged test to determine whether an
    interest is attributable under the EDP rule. Under the first prong,
    we ask whether the investor is either a major program supplier or a
    same-market media entity subject to the broadcast ownership rules. A
    program supplier that supplies over 15 percent of a station's total
    weekly broadcast programming hours is a "major program supplier"
    under the rule.[^9] An interest holder is considered a "same-market
    media entity" where it has an existing attributable interest under
    our attribution rules, other than the EDP rule, in a broadcast
    station, newspaper, or cable system, in a given market.[^10] The
    second prong looks at the extent of the financial interest. Any
    interest the major program supplier has in a station, to which it
    supplies programming, will be attributable under the EDP rule if the
    interest, aggregating both equity and debt, exceeds 33 percent of
    the total asset value of the station.[^11] Similarly, any interest
    the media entity has in another media entity in the same market will
    be attributable under the EDP rule if the interest, aggregating both
    equity and debt holdings, exceeds 33 percent of the total asset
    value of the additional media entity.[^12]

4.  **[Discussion]{.underline}**. NAB, Sinclair, and UCC challenge the
    scope of the EDP rule, while MMTC and Wells Fargo seek exemptions
    from the rule. We reaffirm the EDP rule as adopted in the *Report
    and Order* and decline, at this time, to allow any general
    exemptions to the rule. NAB first contends that the Commission
    should apply the rule only to investors that are also major program
    suppliers, or should not attribute investments of pure debt.[^13]
    Because debt is attributable under the EDP rule, NAB argues that the
    rule will discourage investment in new entrants, including
    minorities and women.[^14] NAB also expresses its concern that EDP
    restrictions on investment will adversely affect small and new
    broadcasters during the transition to digital television and the
    rule will likely inhibit the "spin off" of broadcast stations to new
    entrants as part of station mergers.[^15] UCC, however, supports
    including debt under the EDP rule, stating that the Commission
    correctly recognized that debt is a powerful form of "contingent
    control" over a licensee.[^16] UCC further contends that the EDP
    rule affects only investors with ownership interests in multiple
    broadcast licensees, leaving "plenty of opportunity for investment,
    unhindered by attribution, in the general market."[^17]

5.  We will neither limit the scope of the EDP rule to major program
    suppliers, nor will we limit the interests attributable under the
    EDP rule to equity investments only. As we have stated, the intent
    of our local broadcast ownership rules is to protect competition and
    program diversity in local broadcast markets. The smaller audiences
    and fewer advertising dollars available in small broadcast markets
    limit the number of viable local broadcast stations in those
    markets. The need to protect incumbents' broadcast signal quality
    from interference from nearby stations limits the number of stations
    in all broadcast markets. These limitations on the entry of new
    broadcast stations make the protection of competition and diversity
    in local broadcast markets particularly important objectives of our
    ownership rules.

6.  The function of our attribution rules is to define which interests
    will be counted in applying our ownership rules. The equity/debt
    approach is intended to resolve our concerns that multiple
    nonattributable business interests could be combined to exert
    influence over licensees.[^18] As a result, rather than applying our
    EDP rule to all investments in broadcasters in a single market, the
    rule is limited only to those relationships that afford the interest
    holder the incentive and means to exert influence or control over
    decisions regarding the core operations of broadcast stations. As we
    stated in the *Report and Order*, this targeted approach balances
    our goal of maximizing the precision of the attribution rules by
    attributing only those interests that are of concern, and our
    equally significant goals of not unduly disrupting capital flow and
    of affording ease of administrative processing and reasonable
    certainty to regulatees in planning their transactions.[^19]

7.  Applying the EDP rule to same-market media entities is based, in
    part, on economic studies that have shown that the partial
    co-ownership of otherwise competing local business entities can lead
    to a decrease in competition between those local businesses. For
    example, the owner of a broadcast station that also has a
    significant financial interest in another local broadcast station
    has an incentive and may have the opportunity to decrease the level
    of competition between the two stations by controlling or
    influencing management decisionmaking of the stations'
    operations.[^20] In the *Report and Order*, we noted that a
    same-market media entity relationship affords the interest holder
    the incentive and means to exert this type of influence over
    licensees.[^21] Specifically, we found that entities with existing
    local media interests may have an incentive and the means to use
    financing or contractual arrangements to obtain a degree of
    horizontal integration, within a particular market, that raises
    concerns because of our goal of protecting local diversity and
    competition.[^22] NAB provides no evidence that would lead us to
    conclude otherwise. We therefore reaffirm our decision to include
    both same-market media entities and major program suppliers as the
    relationships that trigger the EDP rule. Accordingly, we deny NAB's
    request to limit the rule only to major program suppliers.

8.  Similarly, we included debt under the EDP rule because the potential
    for certain creditors to exert significant influence over the core
    operations of a licensee, even though the creditors do not hold a
    direct voting or other equity interest, may undermine the diversity
    of voices we seek to promote.[^23] We have found that, in many
    cases, it is no longer possible to classify investments strictly as
    "equity" or "debt,"[^24] and we have recognized the complexity of
    distinguishing debt from equity in cases where alleged debt
    obligations were found to be more properly characterized as
    equity.[^25] In the *Report and Order*, we concluded that creditors
    may, through contractual rights and their ongoing right to
    communicate freely with the licensee, exert as much, if not more,
    influence or control over some corporate decisions as voting equity
    holders whose interests are attributable.[^26] Based on these same
    concerns, we have found that debt interests are attributable both
    under our cable equity plus debt attribution rule,[^27] and also in
    determining eligibility for the New Entrant Bidding Credit under our
    competitive bidding procedures for commercial broadcast
    licenses.[^28] We have not found that traditional *bona fide* debt
    by itself is attributable under our rules. We do find, however, that
    significant debt relationships combined with other attributable
    interests in the same market, or a major program supplier's holding
    of significant debt in a licensee to which it supplies substantial
    amounts of programming, provide an incentive to influence or control
    key decisions concerning the debtor-station's operations. Again, NAB
    provides no evidence that would lead us to conclude otherwise.

9.  Moreover, based upon the record in the *Report and Order*, we found
    no reason to believe that the EDP rule would unduly curb investment
    in smaller, minority stations,[^29] and NAB presents no new
    arguments or evidence in its petition for reconsideration that would
    lead us to change that finding. The EDP rule does not preclude
    investment in any media entity, including minority and women-owned
    entities. In fact, the 33 percent threshold allows an investor to
    own up to one-third of a station's total assets without triggering
    the EDP rule. Moreover, to help ensure that our actions do not
    unduly impede capital flow to broadcasting, we raised the passive
    investor voting stock benchmark from 10 to 20 percent. We also note
    that UCC supports the inclusion of debt in the EDP rule, agreeing
    that debt is a "powerful form of contingent control"[^30] and
    contending that there is "plenty of opportunity for investment,
    unhindered by attribution, in the general market."[^31] As we stated
    in the *Report and Order*, the function of our attribution rules is
    not to limit investment, but to identify influential interests over
    the core operations of a licensee that should be counted in applying
    the multiple ownership rules. Our ownership rules, in turn, limit
    the extent of combined ownership based on our core policies of
    diversity and competition. Thus, if relaxation of ownership limits
    is warranted, those issues should be addressed through revision of
    the multiple and cross-ownership rules, not through redefinition of
    an attributable interest.[^32]

10. Finally, NAB neither explains how the EDP rule will affect the
    transition to digital television or the "spin off" of broadcast
    stations, nor presents any evidence to support its concerns.
    Moreover, in the *Report and Order*, we stated that we would
    consider individual rule waivers in particular cases where
    substantial evidence is presented that the conversion to digital
    television would otherwise be unduly impeded or that a waiver would
    significantly expedite DTV implementation in that particular
    case.[^33] We therefore deny NAB's request and reaffirm our decision
    to include debt interests in applying the EDP rule.

11. NAB also asserts that the EDP rule will have inconsistent regulatory
    effects depending on the capitalization of broadcast companies.[^34]
    NAB notes that an investor with 34 percent of the equity in a
    company that is 100 percent equity-financed would exceed the 33
    percent threshold while an investor with 49 percent of the equity in
    a company that is primarily debt-financed (*e.g.*, 20 percent equity
    and 80 percent debt) would not be exceed the benchmark (its
    investment would be approximately 10 percent of the total assets).
    NAB concludes that "because equity investments in more highly
    leveraged companies are less likely to be attributable under the EDP
    rule, this rule may operate to the advantage of less conservatively
    financed and highly leveraged entities."[^35] Thus, NAB would
    quarrel with our focus on total assets. We focused on total assets
    rather than looking at equity and debt separately because separate
    consideration could lead to distortions in applying the EDP rule
    depending on the percentage of total assets that each class of
    interests comprises.[^36] That the rule may advantage equity holders
    in entities with large debt interests does not undermine the basis
    of the EDP rule. As we have explained, the EDP rule examines both
    equity and debt interests that are otherwise nonattributable to
    limit the ability of same market media entities and major program
    suppliers to circumvent the attribution rules by using those
    interests to gain significant influence over the licensee.[^37]

12. NAB further argues that the rule is vague and overly broad.
    Specifically, NAB contends that the EDP rule could result in an
    attributable interest where no likelihood of control would exist,
    producing a lack of clarity in the rule that will cause problems
    both for licensees attempting to discern attributable interests and
    for the Commission attempting to administer the rule.[^38] Sinclair
    states that the Commission has not explained how an investment that
    is less than controlling can harm the public interest or competition
    in the marketplace.[^39] Sinclair further asserts that the
    Commission has not demonstrated that the 33 percent threshold is
    appropriate,[^40] while UCC opposes adopting a more lenient
    threshold.[^41]

13. We reiterate that attribution extends to relationships that permit
    significant influence over the core operations of a licensee, not
    just to investments that constitute controlling interests or that
    exceed 50 percent of the ownership of an entity.[^42] Shareholders
    with voting stock interests amounting to 5 percent or more may not
    have actual control over the management and operations of a
    licensee, but we have set the voting equity benchmark at 5 percent
    or more because those shareholders have a realistic potential to
    exert significant influence or control over the licensees in which
    they invest. For example, a shareholder with voting stock interests
    that exceed the benchmark can influence the selection of board
    members through mechanisms such as proxy fights and, therefore,
    exert influence on the management of a licensee's operations.

14. In addition, as we explained in the *Report and Order*, debt-holders
    or preferred stockholders, which do not have voting rights, might
    exert significant influence through contractual rights or other
    methods of access to a licensee.[^43] For example, an agreement
    entered into in conjunction with preferred stock might grant the
    holder the right to select the persons who will run for the board of
    directors. Finally, based on our concern that multiple, substantial
    business interests could be combined to exert influence over
    licensees, we determined that nonattributable interests held by
    major program suppliers and same-market media entities should be
    subject to limitation by the multiple ownership rules.[^44] Thus,
    our attribution rules are applicable where an interest holder has a
    realistic potential to affect the programming decisions or other
    core operating functions of a licensee.

15. We also reaffirm the 33 percent investment threshold under the EDP
    rule for the reasons stated in the *Report and Order*. Sinclair
    questions the propriety of the 33 percent threshold, but presents no
    new arguments or evidence in its petition for reconsideration that
    would lead us to change the threshold. We adopted the 33 percent
    benchmark, in part, based on our previous experience of using a 33
    percent threshold in the context of applying the cross-interest
    policy.[^45] We found it an appropriate and reasonable threshold to
    use in applying the EDP rule and noted that applying a 33 percent
    threshold had not had a disruptive effect in the context of the
    cross-interest policy.[^46] We found that a 50 percent threshold
    would be inappropriately high and that the thresholds of 25 percent
    or 10 percent would be too low.[^47] In exercising our broad
    discretion to set the threshold, [^48] we were guided by our goal of
    attributing not only interests with the potential to control, but
    also those interests that convey a realistic potential to exert
    significant influence.[^49] We reiterate, however, that while we
    will use this threshold in applying the EDP rule now, we may adjust
    the benchmark in the future, if evidence is provided that would
    warrant an adjustment.[^50]

16. In contrast to the arguments of NAB and Sinclair, UCC asks the
    Commission effectively to review cases individually under the EDP
    rule. Specifically, UCC asks the Commission to expand the EDP rule
    to attribute any relationship that permits an entity to exert
    significant influence or control over the programming, management,
    or budgetary decisions of a licensee. UCC argues that the Commission
    should look to three factors to determine whether an investor's
    interest in a licensee should be attributed: (1) participation in
    programming selection; (2) influence in hiring personnel who make
    programming or core management decisions; and (3) substantial
    control over the licensee's budget.[^51] Initially, we note that our
    rules already address many of UCC's concerns. The EDP rule takes
    into consideration an entity's participation in programming and is
    designed to make attributable debt or nonvoting equity interests
    that have the ability to influence a station's core management
    decisions. We note that the EDP rule may also result in attribution
    of interests that would otherwise be nonattributable by limiting the
    availability of the insulated limited partner, *bona fide* debt, and
    nonvoting stock attribution exemptions.

17. Moreover, we note that in the *Notice* in this proceeding, we
    invited comment on whether to adopt a case-by-case review of
    applications to address our concerns about whether the combination
    of nonattributable interests and business relationships in a
    particular case could create significant influence so as to warrant
    attribution. We sought comment as to whether the burdens and
    uncertainty created by individual case review would be outweighed by
    the benefits of addressing our concerns in this area in the context
    of specific factual situations.[^52] Based on our review of the
    comments filed in response to the *Notice*, and in response to
    individual cases at that time, we rejected the case-by-case approach
    in the *Further Notice*. Instead, we proposed the EDP rule as a
    "balanced, specifically tailored approach that would focus the rules
    more precisely on those relationships that potentially permit
    significant influence such that they should be attributed."[^53]

18. In ultimately rejecting case-by-case review and adopting the EDP
    rule in the *Report and Order*, we found that the benefits of
    applying a rule that provides, to the greatest extent possible,
    regulatory certainty and eases application processing, outweighed
    the arguably increased accuracy that a case-by-case approach might
    afford. Indeed, a case-by-case approach might lead to lengthy
    fact-specific decisions of limited applicability and substantial
    processing difficulties and delays, impeding our goal of rapidly
    reviewing transactions and speeding new service to the public. Such
    a result would disserve the public interest. We therefore believe
    that the bright-line EDP rule is superior to a case-by-case
    approach, and UCC has not dissuaded us of that belief. Accordingly,
    we deny UCC's request that we adopt a routine case-by-case approach
    to attribution. As we stated in the *Report and Order*, however, we
    retain the discretion to review individual cases that present
    unusual issues and apply attribution on a case-by-case basis where
    it would serve the public interest to do so.[^54] We find that such
    discretion ensures a sufficient safety valve for unusual issues or
    cases that may arise.

19. Finally, two petitioners seek general exemptions from the EDP rule.
    Wells Fargo asks the Commission to amend the EDP rule to make an
    exception for banks and other lending institutions. Wells Fargo
    asserts that the EDP rule will detrimentally affect a lending
    institution's ability to invest in media companies because various
    arms of any big bank operate independently, and these independent
    groups may finance different broadcasters in the same market.[^55]
    As an example, Wells Fargo notes that in its case, a venture capital
    subsidiary has an existing voting equity interest in a company that
    plans to acquire stations in a market in which another client of the
    bank, through the bank's lending division, also has stations.[^56]
    Wells Fargo believes the EDP rule will hinder investment in
    broadcast companies by: (1) restricting the amounts lending
    institutions are able to invest in the same market; (2) forcing
    banks to establish burdensome tracking programs to ensure
    compliance;[^57] (3) making it more difficult for lenders to secure
    their loans to broadcasters, thereby limiting remedies on
    foreclosure;[^58] and (4) forcing lending institutions to disclose
    private borrower information in violation of financial privacy
    laws.[^59]

20. As we stated in the *Report and Order*, we believe the EDP rule will
    not significantly curb investment in broadcast stations[^60] and
    Wells Fargo provides no new evidence that would lead us to change
    that belief. Moreover, we find no basis on which to distinguish
    banks or other lending institutions from other investors in media
    entities under the EDP rule. Under our attribution rules, commercial
    banks, including their venture capital subsidiaries, are treated as
    active investors.[^61] We treat only the trust departments of banks
    as passive investors under our voting stock benchmark.[^62] In its
    own example, Wells Fargo describes its venture capital subsidiary as
    having a voting equity interest in a company that owns stations in a
    particular market, but provides no reason to distinguish venture
    capital subsidiaries from other active investors in the marketplace.
    Indeed, the EDP rule places no more restrictions on lending
    institutions, with respect to investment or foreclosure, than on any
    other type of entity interested in investing in a media entity.
    Similarly, Wells Fargo has not provided evidence that a large bank's
    obligation to track its investments for purposes of attribution
    differs from any other investor's obligation to do the same.

21. Wells Fargo cites the Right to Financial Privacy Act (RFPA)[^63] to
    suggest that the EDP rule might force lending institutions to
    disclose private borrower information in violation of financial
    privacy laws. Specifically, Wells Fargo asserts that the EDP rule
    may place lending institutions in conflict with the RFPA, or with
    their ethical obligations to their customers, by requiring them to
    disclose the names and amounts of loans, and the financial structure
    of customers considering an acquisition in the same market.[^64]

22. Congress enacted the RFPA to provide individuals with some privacy
    rights in financial records that are in the hands of third
    parties.[^65] Among other things, the RFPA defines the conditions
    under which financial institutions may disclose an individual's
    financial records and the conditions under which government
    officials may access an individual's financial records. The RFPA
    also provides a civil cause of action for anyone injured by a
    violation of the act's substantive provisions.[^66] Applications for
    construction permits, applications for consent to assignments, as
    well as applications for consent to transfers of control of
    broadcast stations must list: (1) each party to the application
    whose ownership or positional interest in the applicant is
    attributable; (2) that party's citizenship; (3) the basis on which
    the interest is considered attributable, *e.g.*, positional interest
    or investor attributable under the EDP rule; (4) the party's
    percentage of votes; and (5) the party's percentage of total assets
    in the station.[^67] The applications require information about the
    corporate or partnership structure of parties holding attributable
    interests and information on which the interests are deemed
    attributable. The applications do not inquire into the party's
    financial structure or amounts of loans involved in station
    acquisitions. Similarly, ownership reports do not require any
    information regarding financing or loan amounts.[^68] Wells Fargo
    does not explain how the information required in applications, or
    other forms, much less how the EDP rule itself, might cause lending
    institutions to violate privacy rights under the RFPA or any other
    law. In any event, if it is shown that materials filed with the
    Commission contain financial data that would customarily be guarded
    from competitors, our rules provide that the materials will not be
    made routinely available for public inspection.[^69] Accordingly, we
    deny Wells Fargo's request to exempt banks or other lending
    institutions from the EDP rule.

23. MMTC asks the Commission to make certain exceptions to the EDP rule
    where the interest is held in a socially and economically
    disadvantaged small business concern (SDB).[^70] Arguing that most
    broadcasters would not provide investments to SDBs because
    broadcasters find it disadvantageous, in this time of consolidation,
    to hold small, potentially attributable interests in markets not
    critical to their growth strategies, MMTC seeks three exemptions.
    First, MMTC asks the Commission to exempt from attribution any
    existing interest in an SDB that would trigger the EDP rule if the
    interest holder acquired another media entity in the same market at
    a later date.[^71] Second, MMTC seeks an exemption from our
    attribution rules for any interest otherwise attributable under the
    EDP rule that would allow an SDB to build out, or acquire and build
    out, an unbuilt permit. In conjunction with this exemption, MMTC
    asks the Commission to vest the interest holder with the right to
    the processing of any other of the interest holder's applications
    regardless of the duopoly or cross-ownership rules.[^72] In essence,
    MMTC seeks a waiver of the EDP rule and applicable ownership rules.
    Finally, MMTC seeks an additional six months -- 18 months total --
    for a licensee to divest an attributable interest to an SDB, where
    the SDB is trying to raise capital to complete the divestiture.[^73]

24. The governing statute for the Small Business Administration defines
    SDBs as businesses where the majority owners' race or ethnicity has
    impaired the owners' ability to obtain capital or credit for their
    businesses, and therefore impaired the businesses' ability to
    compete.[^74] At this time, we shall defer consideration of MMTC's
    request to create certain exemptions for SDBs. The Commission has
    sponsored fact-finding studies as to whether preferences based on
    minority status may be justified consistent with the Supreme Court's
    decision in *Adarand Constructors v. Pena*.[^75] When the results of
    these studies have been evaluated, we may initiate future
    proceedings in this area, as warranted.[^76]

### Clarification of the Definition of "Total Assets" and the Requirement of Continuing Compliance

25. **[Background]{.underline}**. The EDP rule examines whether an
    interest holder has more than 33 percent of the total assets of a
    licensee or other media entity. In the *Report and Order*, we
    defined total assets as the sum of all debt plus all equity. We
    defined debt under the EDP rule to include all liabilities, whether
    short-term or long-term. Equity includes common or preferred stock,
    whether voting or nonvoting, as well as equity held by insulated
    limited partners in limited partnerships.[^77] We also stated that
    we would require parties to maintain compliance with the attribution
    criteria as any changes in a firm's assets occur. Where sudden,
    unforeseeable changes take place, we stated that we would afford
    parties a reasonable time, generally one year, to come into
    compliance with any ownership restrictions made applicable as a
    result of the change in attributable status.[^78]

26. **[Discussion]{.underline}**. Wells Fargo asks the Commission to
    clarify what is included in the definition of "total assets" under
    the EDP rule. For example, Wells Fargo contends that "equity," as
    defined in the *Report and Order,* includes only paid-in capital and
    not the existing assets of a company. Wells Fargo asserts that
    excluding appreciated assets would result in attributing more
    entities than necessary to avoid concerns about the exercise of
    control through a debt relationship.[^79]

27. Initially, we clarify that we will include all equity, in whatever
    manner or amount the debt or equity is held, in computing whether an
    interest exceeds the EDP rule's 33 percent benchmark. For example,
    we will include stock, non-stock, partnership or any other form of
    equity in the calculation. We will also include all short-term and
    long-term debt liabilities, in whatever manner or amount the debt is
    held, in computing whether an interest exceeds the EDP rule's 33
    percent benchmark.

28. Rather than itemizing what is included in the definition of "total
    assets," we clarify that, for purposes of the EDP rule, an applicant
    may base the valuation of a station on either the book value as
    defined under standard financial accounting practices, or some other
    value, including the fair market value, provided the valuation is
    reasonable. In relying upon the book value, fair market value, or
    other reasonable value of a station, the applicant must use the
    valuation relevant at the time the application or ownership report
    is filed. If the issue arises in connection with a transfer or
    assignment application or an ownership report filed after
    consummation of a transfer or assignment, the applicant must use the
    sales price of that transfer or assignment as the total asset value.
    [^80] We find that clarifying the definition of total assets to
    include the foregoing reasonable methods of valuing a station's
    total assets for purposes of the EDP rule will provide applicants
    flexibility to use the most accurate valuation of the station at the
    time an application or ownership report is filed. We may need to
    review an applicant's basis for computing its valuation where
    petitions are filed against the application. As a result, an
    applicant should retain the documentation on which it computes the
    value of the station so that it can produce the documentation as
    needed.

29. Finally, Wells Fargo asks the Commission to clarify when equity and
    debt interests that change over time should be evaluated for
    purposes of the EDP rule. Wells Fargo explains that as debt is
    repaid, the amount of an entity's loans as a percentage of the total
    capital of a company may change, and an entity may end up with an
    interest exceeding the benchmark, where no violation existed at the
    time the loan was made.[^81] We reaffirm that parties must maintain
    compliance with the attribution criteria as any changes in a firm's
    assets occur. As noted in the *Report and Order*, where sudden,
    unforeseeable changes take place, we will afford parties a
    reasonable time, but no more than 12 months from the time the
    unforeseen change occurred, to come into compliance with any
    ownership restrictions made applicable as a result of the change in
    attributable status. We further note that the scheduled repayment of
    loans is clearly not an "unforeseeable" or sudden event.

### Clarification of Other EDP Issues

30. In addition to the issues that the petitioners raise in their
    petitions for reconsideration, we note that certain other issues
    have arisen with respect to the application of the newly adopted EDP
    rule. While none of the petitioners formally sought clarification on
    these particular issues, we determine that it is in the public
    interest and serves our goals of promoting clarity and certainty
    under our regulations to provide guidance, on our own motion, on (1)
    how we apply the EDP rule to options, warrants, and loan
    guarantees; (2) whether the multiplier rule will be applied to the
    EDP rule; (3) whether an attributable interest in one station owned
    by a multiple-station owner is applied under the EDP rule to all of
    the stations owned by the multiple-station owner; and (4) whether a
    company's interest is applied to its officers and directors or an
    officer's or director's interest is applied to its company under the
    EDP rule.

#### Options, Warrants, and Loan Guarantees

31. Initially, we consider how to apply the EDP rule to options,
    warrants, and loan guarantees. *Bona fide* debt, including a
    guarantee for a loan, is not ordinarily attributable under our
    rules. In addition, options, warrants, and other nonvoting interests
    with the right of conversion to voting interests are not ordinarily
    attributable until the conversion is effected. In the *Report and
    Order*, however, we explained that the EDP approach would focus on
    those relationships that afford the interest holder the incentive
    and means to exert influence over the core operations of a
    licensee.[^82] For example, substantial investors or creditors that
    do not hold a direct voting interest may have the incentive and
    means, through contractual arrangements with the licensee, to exert
    as much, if not more, influence over some corporate decisions as
    voting equity holders whose interests are attributable.[^83] We
    amended our rules to provide that where a major program supplier or
    same-market media entity holds a substantial financial interest in a
    licensee exceeding 33 percent of the total assets, that interest is
    attributable. In addition, we amended our rules making the exemption
    of certain contractual arrangements, including debt and unexercised
    options and warrants, subject to the EDP rule.[^84]

32. Until exercised, options and warrants do not convey the underlying
    interest they entail, but they do constitute assets that are sold
    for consideration. Accordingly, we will include the amount of
    consideration paid for the option or warrant in determining whether
    the option or warrant holder's interest is attributable under the
    EDP rule, and we will include any security deposit or financial
    contribution made by a guarantor for the guarantee of a loan in
    determining whether the guarantor's interest is attributable under
    the EDP rule. As noted, we wish to establish, so far as possible, a
    bright-line test that avoids the uncertainty of case-by-case review,
    and to premise the EDP rule on whether the extent of a financial
    interest is significant and is coupled with a relationship between
    the investor and the licensee that gives the investor an incentive
    to exert influence. Thus, we clarify that we will add any
    consideration or other amounts paid for options or warrants to any
    other equity or debt investment the holder has in a licensee.
    Similarly, we will include any financial contributions made by a
    guarantor, including amounts placed into escrow as security for a
    loan guarantee or amounts otherwise made in connection with the
    guarantee, to any other equity or debt investments the guarantor has
    in a licensee. In all cases, we will then divide that aggregated
    amount by the total asset value of the licensee to determine whether
    the option or warrant holder's interest exceeds the 33 percent
    benchmark.

#### The Multiplier Rule

33. We also clarify, on our own motion, that we will use a "multiplier"
    in applying the EDP rule to indirect interests held in licensees. We
    have traditionally used a multiplier under our attribution rules to
    determine the ownership interest of a party whose interest is held
    through intervening corporate entities. Specifically, attribution
    ownership interests in a broadcast licensee, cable television
    system, or daily newspaper that are held indirectly by a party
    through one or more intervening corporations are determined by
    successive multiplication of the ownership percentages for each link
    in the vertical ownership chain. Under our pass-through exception,
    however, a link in the ownership chain that represents a percentage
    interest exceeding 50 percent is treated as a 100 percent interest,
    when calculating the successive links in the ownership chain.[^85]
    We also note that in calculating the foreign ownership of a licensee
    or its parent under Section 310(b) of the Communications Act, as
    amended, we multiply the percentage of interest held by each foreign
    investor in the successive links of the ownership chain, regardless
    of the amount of equity the foreign investor holds.[^86]

34. As we do under our attribution rules in calculating whether an
    interest exceeds the voting stock benchmark in a corporation, we
    will multiply the successive links in the vertical ownership chain
    of a licensee or other media entity to determine whether an indirect
    interest in the licensee or other media entity is attributable under
    the EDP rule. Specifically, we will multiply the successive
    percentage interests, aggregating both equity and debt, in each
    intervening entity where a party holds an indirect interest in the
    licensee or other media outlet. Rather than applying the
    pass-through exception in determining whether an interest is
    attributable under the EDP rule, however, we will multiply the
    percentage interest even where the interest in the link exceeds 50
    percent. For example, if Investor A has a total equity and debt
    interest in Corporation B amounting to 50 percent of Corporation B's
    total asset value, and Corporation B has a total equity and debt
    interest in Licensee X amounting to 80 percent of Licensee X's total
    asset value, Investor A's interest in Licensee X would be 40 percent
    (0.50 x 0.80) for purposes of applying the EDP rule.

35. In adopting the use of a multiplier, the Commission concluded that
    multiplication of successive interests would more realistically
    reflect a party's attenuated interest in a licensee where there are
    intervening corporations.[^87] The Commission established the
    pass-through exception to reflect the *de jure* control, rather than
    the *de facto* control, an entity might have over a licensee.[^88]
    Because the EDP rule applies not only to voting equity, but also to
    nonvoting equity and debt, we will not employ the pass-through
    exemption to determine which interests are attributable under the
    EDP rule. We made this same determination in the context of foreign
    ownership. Accordingly, we will multiply the successive interests,
    aggregating both equity and debt, in each intervening entity, even
    where the interest exceeds 50 percent, to determine whether an
    indirect interest in a licensee is attributable under the EDP rule.
    We also clarify that we will use the multiplier not only in applying
    the EDP rule to corporations, but also to financial interests in
    partnerships, limited liability companies, or any other type of
    organizational form.

#### Interests in Multiple Stations

36. We next clarify how the EDP rule is applied where an investor holds
    an interest in an entity that owns several stations in one market or
    multiple stations in several markets. The issue of how to apply the
    EDP rule may arise, for example, where the investor holds a
    nonvoting financial interest amounting to over 33 percent of the
    total asset value of the entity that owns or is the licensee of the
    multiple stations. If the investor's interest is nonvoting stock,
    debt, an insulated limited liability company or limited partnership
    interest, the interest would not be attributable under our non-EDP
    attribution rules. If, however, the investor is either a major
    program supplier to a station owned by the multiple-station owner,
    or has a non-EDP attributable interest in another station in the
    same market in which the multiple-station owner owns a station, the
    issue arises whether the investor has, under the EDP rule, an
    attributable interest in all of the stations owned by the
    multiple-station owner. Such an issue might also arise in a case
    where a voting stock interest in the entity is non-attributable
    under the single majority shareholder exemption because the
    exemption is grandfathered, as discussed below.

37. We clarify that the investor in the foregoing case will not
    automatically hold an attributable interest under the EDP rule in
    all of the stations or media outlets owned by or licensed to the
    multiple-station owner. Rather, the investor will have an
    attributable interest under the EDP rule only in those stations or
    media outlets owned by or licensed to the multiple-station owner
    where the investor meets the triggering relationship prong of the
    EDP rule, *i.e.*, the investor is a major program supplier to a
    station owned by the multiple-station owner, or the investor is a
    same-market media entity. Specifically, an investor will have an
    attributable interest, under the EDP rule, in any station that is
    owned by or licensed to a multiple-station owner and to which the
    investor supplies over 15 percent of the station's total weekly
    broadcast programming hours.[^89] An investor will also have an
    attributable interest under the EDP rule in a station or media
    outlet owned by or licensed to the multiple station owner that is in
    the same market as a station or media outlet in which the investor
    also has an attributable interest under our non-EDP attribution
    rules.[^90] For example, Shareholder A owns over 33 percent of the
    total assets of Multiple-Station Owner B, which owns Station X in
    Omaha. Because Shareholder A also owns over 5 percent of the voting
    stock of Station Y in the Omaha market, Shareholder A's 33 percent
    interest in Station X is attributable under the EDP rule.
    Multiple-Station Owner B also owns Station Z in Cleveland. If
    Shareholder A is neither a major program supplier to Station Z nor
    holds an otherwise attributable interest in another media entity in
    the Cleveland market, Shareholder A would not have an attributable
    interest under the EDP rule in Station Z in Cleveland.

#### Officers and Directors

38. Finally, we clarify how we will apply the EDP rule to officers and
    directors. In doing so, we follow established precedent. Under our
    attribution rules, the officers and directors of a parent company of
    a broadcast licensee, cable television system, or daily newspaper,
    with an attributable interest in any subsidiary entity, are deemed
    to have a cognizable interest in the subsidiary.[^91] We will apply
    the same principle under the EDP rule. Each director or officer is
    individually attributed with the company's full equity and debt
    interests for purposes of applying the EDP rule. Where an entity has
    a financial interest in a licensee, its officers or directors will
    be deemed to hold that same financial interest. For example, Bank A
    has provided a loan amounting to 35 percent of the total assets of
    Radio Licensee X, but holds no voting stock in X, and no interest in
    any other media entity in that market subject to the broadcast
    multiple ownership rules. Bank A has no attributable interest in
    Radio Licensee X under the EDP rule. Under these facts alone, while
    Outside Director of Bank A is attributed with all of the investments
    held by Bank A, Outside Director does not have an attributable
    interest in Radio Licensee X because Bank A does not have an
    attributable interest in X. If, however, Outside Director of Bank A
    owns a radio station in the same market in which Radio Licensee X
    operates, Outside Director would have an attributable interest,
    under the EDP rule, in Radio Licensee X based on Bank A's 35 percent
    interest in X.

39. We will not, however, treat an officer's or director's investment in
    a media entity as the company's investment for the purpose of
    applying the EDP rule. For example, under the facts described above,
    although Outside Director would have an attributable interest in
    Radio Licensee X because Outside Director owns another radio station
    in the market, Outside Director's interest in the other radio
    station is not also attributable to Bank A.

## Single Majority Shareholder Exemption

40. **[Background]{.underline}**. Under the single majority shareholder
    exemption from attribution, in a corporation in which a single
    shareholder owns more than 50 percent of the voting stock of the
    corporation, the interests of minority shareholders are not
    attributable. In the *Report and Order*, we intended that the EDP
    rule would limit the availability of the single majority shareholder
    exemption.[^92] Thus, for example, if a minority shareholder's
    financial interest in a licensee amounts to over 33 percent of the
    licensee's total asset value and the minority shareholder is either
    a major program supplier to the licensee or a same-market media
    entity, the minority shareholder's interest would be attributable
    under the EDP rule, even if the licensee has a single majority
    shareholder. We declined, in the *Report and Order*, to eliminate
    the single majority shareholder exemption for broadcast
    stations,[^93] while we eliminated the exemption from our general
    cable attribution rules.[^94]

41. **[Discussion]{.underline}**. UCC asks the Commission to eliminate
    the single majority shareholder exemption for broadcasters, arguing
    that it is arbitrary and capricious to eliminate the exemption for
    cable systems and not for broadcast stations.[^95] We grant UCC's
    request. In the *Cable Attribution Report and Order*, we concluded
    that the single majority shareholder exemption should be eliminated
    because of our concern "that a minority shareholder may be able to
    exert influence over a company even where a single majority
    shareholder exists."[^96] We generally found in that proceeding no
    evidence that differences in ownership, financing, or management
    structures between the cable and broadcast industries warrant
    creating an attribution standard for applying the cable horizontal
    ownership, or other cable rules, that is different than the standard
    we use in applying the broadcast multiple ownership rules.[^97]
    Thus, we see no rational basis to distinguish between cable and
    broadcasting that would justify eliminating the exemption for the
    cable ownership rules while retaining it for the broadcast ownership
    rules.

42. In addition to resolving the apparent inconsistency that resulted
    from our decision to eliminate the single majority shareholder
    exemption in the cable context, eliminating this exemption from the
    broadcast attribution rules would promote one of our primary goals
    in this proceeding: to improve the precision of our attribution
    rules in identifying cognizable interests for purposes of our
    ownership rules. In adopting the single majority shareholder
    exemption in 1984, the Commission reasoned that minority interest
    shareholders "would be unable to direct the affairs or activities of
    the licensee on the basis of their shareholdings" where a single
    majority shareholder controls the corporation.[^98] The Commission
    therefore determined that these minority interests would not be
    deemed cognizable for purposes of the multiple ownership rules.[^99]

43. In this proceeding, as in the cable attribution rulemaking, we have
    repeatedly stated that our attribution rules are designed to
    identify not only interests that enable an entity to control a
    company, but also interests that give an entity the potential to
    exert significant influence on a company's major decisions, even if
    the entity cannot control the company. Minority shareholders may not
    be able to control the affairs or activities of licensees, but, in
    certain circumstances, they clearly have the potential to influence
    a licensee's actions. Although the influence of a minority
    shareholder may be diminished somewhat where a single majority
    shareholder controls the licensee, we have no reason to believe that
    the minority shareholder's influence is eliminated or so attenuated
    in such circumstances that we should ignore its ownership interest
    for purposes of our ownership rules. Accordingly, we will amend Note
    2 of Section 73.3555 of our rules to eliminate the single majority
    shareholder exemption from the broadcast attribution rules.

44. We further conclude that the single majority shareholder exemption
    will no longer apply to minority interests acquired on or after the
    adoption date of this *Memorandum Opinion and Order*. Accordingly,
    any minority interests in a company with a single majority
    shareholder will be grandfathered if the interest was acquired
    before the adoption date of this *Memorandum Opinion and Order*.
    Grandfathering of these minority interests will be permanent until
    the grandfathered interest is assigned or transferred. We note,
    however, that grandfathered minority interests in companies with
    single majority shareholders remain subject to the EDP rule.

## LMA Attribution and Filing Requirements

45. **[Background]{.underline}**. An LMA or time brokerage agreement is
    a type of contract that generally involves the sale by a licensee of
    discrete blocks of time to a broker that then supplies the
    programming to fill the time and sells the commercial spot
    announcements to support the programming.[^100] In the *Report and
    Order*, we adopted attribution rules for television LMAs.
    Specifically, an intra-market television LMA is *per se*
    attributable if the LMA involves more than 15 percent of a brokered
    station's weekly broadcast hours.[^101] In contrast, we will not
    attribute television time brokerage agreements between stations in
    different markets, unless the agreements come under the EDP rule.
    Specifically, an inter-market television LMA is attributable only if
    the broker supplies more than 15 percent of a station's programming
    (*i.e.*, the broker is a major program supplier), and it has a
    financial investment that is more than 33 percent of the brokered
    station's total asset value.[^102] We also decided to attribute
    intra-market radio LMAs for purposes of applying all of our multiple
    ownership rules that are applicable to radio stations, not just the
    radio duopoly rule, as in the past.[^103]

46. In the *Report and Order*, we decided to review the issue of
    grandfathering existing intra-market radio LMAs on a case-by-case
    basis. Specifically, we concluded that we would consider the issue
    of grandfathering radio LMAs whose attribution as of November 16,
    1999, the effective date of the newly adopted rules, resulted in
    ownership violations.[^104] We further concluded that any interest,
    other than intra-market radio and television LMAs, newly
    attributable under the rules that would result in violations of the
    ownership rules, would be grandfathered if the triggering interest
    was acquired before November 5, 1996, the date of the *Further
    Notice* in this proceeding.[^105] We determined that grandfathering
    would apply only to the current holder of the attributable interest,
    and if the grandfathered interest was later assigned or transferred,
    new owners would be given one year to come into compliance with the
    multiple ownership rules.[^106] Non-grandfathered interests, except
    for non-grandfathered intra-market television LMAs, must be divested
    to comply with our multiple ownership rules within twelve months of
    the date of adoption of the *Report and Order*.[^107] Finally, we
    require the licensee that is the brokering station to file with the
    Commission, within 30 days of execution of a time brokerage
    agreement, a copy of any such agreement, redacted as necessary, that
    would result in the arrangement being attributed.[^108]

47. **[Discussion]{.underline}**. UCC asks the Commission to deem
    unlawful LMAs entered into after August 6, 1999, the date the
    *Report and Order* was released. UCC argues that LMAs are an
    unlawful evasion of the ownership rules that hinder diversity and
    competition and are no longer necessary with adoption of the revised
    duopoly rule. UCC further states that the grandfathering plan for
    existing LMAs protects existing equity interests and suggests that
    LMAs entered into after August 6, 1999, may have been entered into
    to bypass the Commission's transfer or assignment authorization
    requirements or to prevent a competitor from obtaining a
    transfer.[^109] NAB urges the Commission to reject UCC's request
    because the Commission has already found that the record shows that
    a number of television LMAs have resulted in public interest
    benefits.[^110]

48. We made no finding in the *Report and Order* that LMAs are *per se*
    unlawful as of any date. Our newly adopted attribution rules do not
    preclude parties from entering into LMAs. Rather, we amended our
    rules to make intra-market LMAs and some inter-market LMAs
    attributable for purposes of our broadcast ownership rules. Some
    LMAs are grandfathered, while interests in others may need to be
    divested. Parties may still enter into LMAs with the understanding
    that they may be subject to applicable ownership rules. Moreover,
    nothing suggests that Congress intended the Commission to deem *per
    se* unlawful all LMAs entered into after a certain date. Indeed, in
    the Conference Report on Section 202(g) of the Telecommunications
    Act of 1996,[^111] the conferees recognized "the positive
    contributions of television LMAs."[^112] We find no reason to
    reconsider our decision that LMA interests may be attributable under
    our newly adopted rules, but that LMAs are not unlawful.
    Accordingly, we deny UCC's request.

49. UCC also urges the Commission to require all existing LMAs, not just
    attributable LMAs, to be filed with the Commission. UCC asserts that
    filing all LMAs would allow the Commission to determine the
    attribution status of LMAs. UCC further asks the Commission to post
    the data on the Commission's web site to allow citizen monitoring
    (similar to FCC Form 398) of the agreements and to facilitate voice
    counting.[^113] We will not change the filing requirements for LMAs
    as adopted in the *Report and Order*. The attribution rules impose
    an affirmative obligation on licensees to determine whether a
    particular LMA is attributable and, if it is, to file the agreement
    with the Commission. Commercial radio and television licensees must
    also maintain copies of time brokerage agreements in their local
    public inspection files.[^114] As we stated in the *Report and
    Order*, we believe a licensee's affirmative obligation in
    combination with our filing requirements will subject LMAs to
    sufficient scrutiny by competitors, the public, and the
    Commission.[^115] UCC provides no evidence to the contrary. We
    therefore deny UCC's request and reaffirm the requirement that
    brokering stations must file redacted copies of attributable LMAs
    with the Commission within 30 days of execution of the agreement.

## Cross-Interest Policy

50. **[Background]{.underline}**. The cross-interest policy has been
    applied to preclude individuals or entities from holding an
    attributable interest in one media property (broadcast station,
    newspaper, cable system) and having a "meaningful" albeit
    nonattributable interest in another media entity serving
    "substantially the same area."[^116] In the *Report and Order*, we
    eliminated the cross-interest policy.[^117] The policy had
    covered: (1) key employee relationships, under which a key employee,
    such as general manager, program director, or sales manager of one
    station was generally prohibited from having an attributable
    ownership interest in or serving as a key employee of another
    station in the same community or market; (2) nonattributable equity
    interests, under which an individual who had an attributable
    interest in one media outlet was generally prohibited from holding a
    substantial nonattributable equity interest in another media outlet
    in the same market; and (3) joint venture arrangements, under which
    two local broadcast licensees were prevented from entering into
    joint associations to buy or build a new broadcast station, cable
    television system, or daily newspaper in the same market.[^118] UCC
    asks us to reconsider this decision.

51. In the *Report and Order*, we noted that eliminating the
    cross-interest policy fulfilled our goals of maximizing the clarity
    of the attribution rules, providing reasonable certainty and
    predictability to parties to allow transactions to be planned, and
    easing application processing.[^119] We decided that the regulatory
    costs and the chilling effects of the cross-interest policy and the
    benefits of applying a clear and discernable standard outweigh any
    risks of potential abuses in eliminating the policy.[^120] We noted
    that the cross-interest policy had developed to fill gaps in our
    attribution criteria that had become apparent through our
    case-by-case application of the ownership rules.[^121] We also noted
    that many aspects of the cross-interest policy are now subsumed
    under our newly revised attribution rules, including the EDP
    rule.[^122] While we recognized that the EDP rule does not cover all
    the areas encompassed by the cross-interest policy, including key
    employees, for example, we noted that internal conflict of interest
    policies, common law fiduciary duty, and contract remedies provide
    adequate substitutes for our administration of the policy with
    respect to key employees. We also noted that many key employees are
    also officers and directors and are thus already covered by the
    attribution rules. In any event, we noted that the very small risk
    of harm to competition by a key employee in an instance not covered
    by any of these other regulations and remedies is greatly outweighed
    by the benefits of eliminating our case-by-case approach to
    transactions and applying bright line tests, such as the EDP test
    and our other attribution rules. [^123]

52. With respect to joint ventures, we stated our belief that
    application of a cross-interest policy is unwarranted.[^124] We
    noted that the ownership and attribution rules define the level of
    combined ownership that is permissible in the local market and that
    the cross-interest policy as applied to joint ventures is largely
    subsumed by the application of the current multiple ownership rules.
    To the extent that the cross-interest policy is not so subsumed, we
    stated our belief that it should be eliminated. Because the
    ownership rules define the limits of permitted local ownership
    combinations, we noted that it makes no sense and is unduly
    burdensome to have a routine additional layer of case-by-case review
    for those joint ventures that fully comply with those rules. We also
    noted that the application of the antitrust laws should prevent or
    remedy any abuses of joint venture relationships not already subject
    to the multiple ownership rules. [^125] Finally, we noted that we
    retain the discretion to review individual cases that present
    unusual issues on a case-by-case basis where it would serve the
    public interest to conduct such a review.[^126]

53. **[Discussion]{.underline}**. UCC asks the Commission to reconsider
    our decision to eliminate the cross-interest policy.[^127] UCC
    contends that the Commission has not explained why the policy should
    not be retained in small and medium markets, where, according to
    UCC, a small, closely interrelated business environment lends itself
    to the kinds of arrangements previously prohibited under the
    cross-interest policy. UCC argues that the desire for regulatory
    certainty is not a proper justification for repealing the
    cross-interest policy and that the Commission has failed to consider
    the impact of its decision on diversity. Finally, UCC argues that
    repeal of the cross-interest policy may result in allowing business
    combinations and relationships, that were not permitted under the
    cross-interest policy, that are not covered by the EDP rule, and
    that are not addressed by other rules and remedies referenced by the
    Commission in its *Report and Order*. It considers this result to be
    against the public interest.[^128]

54. We decline to reconsider our decision to eliminate the
    cross-interest policy. Our decision in the *Report and Order* to
    eliminate the cross-interest policy was based on our judgment that
    the regulatory costs and chilling effects of administering the
    cross-interest policy and the benefits of applying clear ownership
    and attribution standards outweigh any risks of abuses in
    eliminating the policy. As we noted, the cross-interest policy did
    not prohibit the relationships it covered outright, but required an
    *ad hoc* determination as to whether the relationships at interest
    would be permitted. We determined that the public interest would be
    better served by administering, to the greatest extent possible,
    bright line tests with respect to attribution and ownership rather
    than case-by-case determinations, which delay processing and involve
    public and regulatory costs. We did not, however, base our
    conclusion, as UCC implies, simply on the increased certainty that a
    rule-based proscription provided. Rather, we carefully reviewed the
    interests typically addressed by the cross-interest policy and
    included within the ambit of the new rules those interests that we
    concluded warranted continued limitation. Most obvious among these
    is the consideration of nonvoting equity and debt interests under
    our EDP standard.

55. In short, our attribution tests were based on our best judgment,
    after a review of the record, as to what relationships should count
    in terms of administering the ownership rules. Our ownership rules,
    in turn, are based on our competition and diversity analysis. The
    local ownership rules do take into account the nature and size of
    the market. Further, we also retained discretion, in an appropriate
    case, "to review individual cases that present unusual issues on a
    case-by-case basis where it would serve the public interest to
    conduct such a review."[^129] While UCC argues that the ownership
    rules do not cover all relationships that it views as abusive or
    anticompetitive, this argument simply contests our considered
    conclusion in this matter. Contrary to UCC's arguments,
    administering regulatory procedures that are, to the greatest extent
    possible, clear and consistent is an important aspect of the public
    interest. The Commission fully explained its decision to eliminate
    the cross-interest policy. Accordingly, we deny UCC's request to
    reinstate the cross-interest policy.

# conclusion

56. In this *Order on Reconsideration*, we decline to limit or expand
    the scope of the EDP rule or to allow any general exceptions to the
    rule at this time. On our own motion, we clarify several issues that
    pertain to the application of the EDP rule. We eliminate the single
    majority shareholder exemption for purposes of the broadcast
    attribution rules, while grandfathering existing minority interests
    held pursuant to the single majority shareholder exemption. We also
    decline to deem all LMAs entered into after August 6, 1999, to be
    unlawful, and we decline to require all existing LMAs, not just
    attributable LMAs, to be filed with the Commission. Finally, we
    reaffirm our decision to eliminate the cross-interest policy.

# procedural matters

57. Authority for issuance of this *Memorandum Opinion and Order on
    Reconsideration* is contained in Sections 4(i), 303(r), 403, and 405
    of the Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i),
    303(r), 403, and 405.

58. *Paperwork Reduction Act Analysis*. This *Memorandum Opinion and
    Order on Reconsideration* contains either new or modified
    information collections. The Commission, therefore, as part of its
    continuing effort to reduce paperwork burdens, invites the general
    public and the Office of Management and Budget to comment on the
    information collections contained in this *Memorandum Opinion and
    Order on Reconsideration* as required by the Paperwork Reduction Act
    of 1995, Pub. L. No. 104-13. Public and agency comments are due 60
    days from date of publication of this *Memorandum Opinion and Order
    on Reconsideration* in the Federal Register. Comments should
    address: (a) whether the new or modified collection of information
    is necessary for the proper performance of the functions of the
    Commission, including whether the information shall have practical
    utility; (b) the accuracy of the Commission's burden estimates; (c)
    ways to enhance the quality, utility, and clarity of the information
    collected; and (d) ways to minimize the burden of the collection of
    information on the respondents, including the use of automated
    collection techniques or other forms of information technology. In
    addition to filing comments with the Secretary, a copy of any
    comments on the information collections in this *Memorandum Opinion
    and Order on Reconsideration* should be submitted to Judy Boley,
    Federal Communications Commission, 445 Twelfth Street, S.W., Room
    1-C804, Washington, D.C. 20554, or over the Internet to
    <jboley@fcc.gov> and to Edward Springer, OMB Desk Officer, 10236
    NEOB, 725 17^th^ Street, N.W., Washington, D.C. 20503 or over the
    Internet to [edward.springer@omb.eop.gov](mailto:fain_t@al.eop.gov).

59. *Supplemental Final Regulatory Flexibility Analysis*. As required by
    the Regulatory Flexibility Act (RFA),[^130] the Commission has
    prepared a Supplemental Final Regulatory Flexibility Analysis
    (Supplemental FRFA) of the possible impact on small entities of the
    rules adopted in this *Memorandum Opinion and Order on
    Reconsideration*.[^131] The Supplemental FRFA is set forth in
    Appendix C.

# ordering clauses

60. Accordingly, IT IS ORDERED that the petitions for reconsideration or
    clarification ARE GRANTED to the extent provided herein and
    otherwise ARE DENIED pursuant to Sections 4(i), 303(r), 403, and 405
    of the Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i),
    303(r), 403, and 405, and Section 1.429(i) of the Commission's
    rules, 47 C.F.R. § 1.429(i).

61. IT IS FURTHER ORDERED that, pursuant to Sections 4(i) & (j), 303(r),
    307, 308 and 309 of the Communications Act of 1934, as amended, 47
    U.S.C. §§ 154(i) & (j), 303(r), 307, 308 and 309, Parts 21, 73, and
    76 of the Commission's rules, 47 C.F.R. Parts 21, 73, 76, ARE
    AMENDED as set forth in Appendix B.

62. IT IS FURTHER ORDERED that the rule amendments set forth in Appendix
    B SHALL BE EFFECTIVE sixty days after publication in the Federal
    Register.

63. IT IS FURTHER ORDERED that the Commission's Consumer Information
    Bureau, Reference Information Center, SHALL SEND a copy of this
    *Memorandum Opinion and Order* in MM Docket Nos. 94-150, 92-51, and
    87-154, including the Supplemental Final Regulatory Flexibility
    Analysis, to the Chief Counsel for Advocacy of the Small Business
    Administration.

64. IT IS FURTHER ORDERED that the new or modified paperwork
    requirements contained in this *Memorandum Opinion and Order on
    Reconsideration* (which are subject to approval by the Office of
    Management and Budget (OMB)) will go into effect upon OMB approval.

65. IT IS FURTHER ORDERED that this proceeding is hereby terminated.

> FEDERAL COMMUNICATIONS COMMISSION
>
> Magalie Roman Salas
>
> Secretary
>
> **APPENDIX A**

**PETITIONS FOR RECONSIDERATION**

1.  The Minority Media Telecommunications Council (MMTC)

2.  National Association of Broadcasters (NAB)

3.  Sinclair Broadcast Group, Inc. (Sinclair)

4.  Office of Communications, Inc. of United Church of Christ *et al*.
    (UCC)

> Black Citizens for a Fair Media
>
> Center for Media Education
>
> Civil Rights Forum
>
> League of United Latin American Citizens
>
> Philadelphia Lesbian and Gay Task Force
>
> Washington Area Citizens Coalition Interested in Viewers'
> Constitutional Rights
>
> Wider Opportunities for Women, and the Women's Institute for Freedom
> of the Press

5.  Wells Fargo Communications Finance, Division of Norwest Bank MN, NA
    (Wells Fargo)

**OPPOSITITIONS TO PETITIONS FOR RECONSIDERATION**

1.  NAB

2.  UCC

**REPLIES TO OPPOSITIONS**

1.  NAB

2.  UCC

**APPENDIX B**

**Rule Changes**

Parts, 21, 73, and 76 of Chapter 1 of Title 47 of the Code of Federal
Regulations are amended as follows:

**Part 21-DOMESTIC PUBLIC FIXED RADIO SERVICES**

1.  The authority citation for Part 21 continues to read as follows:

AUTHORITY: Secs. 1, 2, 4, 201-205, 208, 215, 218, 303, 307, 313, 403,
404, 410, 602, 48 Stat. as amended, 1064, 1066, 1070-1073, 1076, 1077,
1080, 1082, 1083, 1087, 1094, 1098, 1102; 47 U.S.C. 151, 154, 201-205,
208, 215, 218, 303, 307, 313, 314, 403, 404, 410, 602; 47 U.S.C. 552,
554.

2.  Section 21.912 is amended by:

> \(a\) designating Note 1 as "Note 1 to § 21.912";
>
> \(b\) removing paragraph Note 1(b);

\(c\) redesignating paragraphs Note 1(c) through Note 1(l) as paragraphs
Note 1(b) through Note 1(k);

> \(d\) revising redesignated paragraphs Note 1(c) and Note 1(e);
>
> \(e\) revising the first and second sentence of redesignated paragraph
> Note 1(f)(2);
>
> \(f\) revising redesignated paragraph Note 1(h)(3);
>
> \(g\) revising the introductory text to redesignated paragraph Note
> 1(i), and redesignated paragraph Note 1(i)(2); and
>
> \(h\) designating Note 2 as "Note 2 to § 21.912".
>
> The revisions read as follows:

**[§ 21.912 Cable television company eligibility requirements and
MDS/cable cross-ownership]{.underline}.**

\* \* \* \* \*

Note 1 to § 21.912: \* \* \*

\(c\) Attribution of ownership interests in an MDS licensee or cable
television system that are held indirectly by any party through one or
more intervening corporations will be determined by successive
multiplication of the ownership percentages for each link in the
vertical ownership chain and application of the relevant attribution
benchmark to the resulting product, except that wherever the ownership
percentage for any link in the chain exceeds 50%, it shall not be
included for purposes of this multiplication. For purposes of paragraph
(i) of this Note, attribution of ownership interests in an MDS licensee
or cable television system that are held indirectly by any party through
one or more intervening organizations will be determined by successive
multiplication of the ownership percentages for each link in the
vertical ownership chain and application of the relevant attribution
benchmark to the resulting product, and the ownership percentage for any
link in the chain that exceeds 50% shall be included for purposes of
this multiplication. \[For example, except for purposes of paragraph (i)
of this Note, if A owns 10% of company X, which owns 60% of company Y,
which owns 25% of "Licensee," then X's interest in "Licensee" would be
25% (the same as Y's interest because X's interest in Y exceeds 50%),
and A's interest in "Licensee" would be 2.5% (0.1x0.25). Under the 5%
attribution benchmark, X's interest in "Licensee" would be cognizable,
while A's interest would not be cognizable. For purposes of paragraph
(i) of this Note, X's interest in "Licensee" would be 15% (0.6x0.25) and
A's interest in "Licensee" would be 1.5% (0.1x0.6x0.25). Neither
interest would be attributed under paragraph (i) of this Note.\]

\* \* \* \* \*

\(e\) Subject to paragraph (i) of this Note, holders of non-voting stock
shall not be attributed an interest in the issuing entity. Subject to
paragraph (i) of this Note, holders of debt and instruments such as
warrants, convertible debentures, options or other non-voting interests
with rights of conversion to voting interests shall not be attributed
unless and until conversion is effected.

\(f\) \* \* \*

\(2\) For a licensee or system that is a limited partnership to make the
certification set forth in paragraph (f)(1) of this Note, it must verify
that the partnership agreement or certificate of limited partnership,
with respect to the particular limited partner exempt from attribution,
establishes that the exempt limited partner has no material involvement,
directly or indirectly, in the management or operation of the MDS or
cable television activities of the partnership. For a licensee or system
that is an LLC or RLLP to make the certification set forth in paragraph
(f)(1) of this Note, it must verify that the organizational document,
with respect to the particular interest holder exempt from attribution,
establishes that the exempt interest holder has no material involvement,
directly or indirectly, in the management or operation of the MDS or
cable television activities of the LLC or RLLP. \* \* \*

\* \* \* \* \*

\(h\) \* \* \*

\(3\) The sum of the interests computed under paragraph (h)(1) of this
Note plus the sum of the interests computed under paragraph (h)(2) of
this Note is equal to or exceeds 20 percent.

\(i\) Notwithstanding paragraphs (e) and (f) of this Note, the holder of
an equity or debt interest or interests in an MDS licensee or cable
television system subject to the MDS/cable cross-ownership rule
("interest holder") shall have that interest attributed if:

\* \* \* \* \*

\(2\) the interest holder also holds an interest in an MDS licensee or
cable television system that is attributable under paragraphs of this
Note other than this paragraph (i) and which operates in any portion of
the franchise area served by that cable operator's cable system.

\* \* \* \* \*

Note 2 to § 21.912: \* \* \*

\* \* \* \* \*

**Part 73-RADIO BROADCAST SERVICES**

3.  The authority citation for Part 73 continues to read as follows:

> AUTHORITY: 47 U.S.C. 154, 303, 334 and 336.

4.  Section 73.3555 is amended by:

> \(a\) designating Note 1 as "Note 1 to § 73.3555";
>
> \(b\) designating Note 2 as "Note 2 to § 73.3555";
>
> \(c\) removing paragraph Note 2(b) to Section 73.3555;
>
> \(d\) redesignating paragraphs Note 2(c) through Note 2(k) to Section
> 73.3555 as paragraphs Note 2(b) through Note 2(j) to Section 73.3555;
>
> \(e\) revising redesignated paragraphs Note 2(c) and Note 2(e) to
> Section 73.3555;
>
> \(f\) revising the first and second sentence of redesignated paragraph
> Note 2(f)(2) to Section 73.3555;
>
> \(g\) revising redesignated paragraph Note 2(h)(3) to Section 73.3555;
>
> \(h\) revising the introductory text to redesignated paragraph Note
> 2(i) to Section 73.3555, and redesignated paragraph Note 2(i)(2)(i) to
> Section 73.3555;
>
> \(i\) designating Note 3 as "Note 3 to § 73.3555";
>
> \(j\) designating Note 4 as "Note 4 to § 73.3555";
>
> \(k\) designating Note 5 as "Note 5 to § 73.3555";
>
> \(l\) designating Note 6 as "Note 6 to § 73.3555";
>
> \(m\) designating Note 7 as "Note 7 to § 73.3555";
>
> \(n\) designating Note 8 as "Note 8 to § 73.3555";
>
> \(o\) designating Note 9 as "Note 9 to § 73.3555"; and
>
> \(p\) designating Note 10 as "Note 10 to § 73.3555".
>
> The revisions read as follows:

§ 73.3555 Multiple Ownership

\* \* \* \* \*

Note 1 to § 73.3555: \* \* \*

\* \* \* \* \*

Note 2 to § 73.3555: \* \* \*

\(c\) Attribution of ownership interests in a broadcast licensee, cable
television system or daily newspaper that are held indirectly by any
party through one or more intervening corporations will be determined by
successive multiplication of the ownership percentages for each link in
the vertical ownership chain and application of the relevant attribution
benchmark to the resulting product, except that wherever the ownership
percentage for any link in the chain exceeds 50%, it shall not be
included for purposes of this multiplication. For purposes of paragraph
(i) of this Note, attribution of ownership interests in a broadcast
licensee, cable television system or daily newspaper that are held
indirectly by any party through one or more intervening organizations
will be determined by successive multiplication of the ownership
percentages for each link in the vertical ownership chain and
application of the relevant attribution benchmark to the resulting
product, and the ownership percentage for any link in the chain that
exceeds 50% shall be included for purposes of this multiplication. \[For
example, except for purposes of paragraph (i) of this Note, if A owns
10% of company X, which owns 60% of company Y, which owns 25% of
"Licensee," then X's interest in "Licensee" would be 25% (the same as
Y's interest because X's interest in Y exceeds 50%), and A's interest in
"Licensee" would be 2.5% (0.1x0.25). Under the 5% attribution benchmark,
X's interest in "Licensee" would be cognizable, while A's interest would
not be cognizable. For purposes of paragraph (i) of this Note, X's
interest in "Licensee" would be 15% (0.6x0.25) and A's interest in
"Licensee" would be 1.5% (0.1x0.6x0.25). Neither interest would be
attributed under paragraph (i) of this Note.\]

\* \* \* \* \*

\(e\) Subject to paragraph (i) of this Note, holders of non-voting stock
shall not be attributed an interest in the issuing entity. Subject to
paragraph (i) of this Note, holders of debt and instruments such as
warrants, convertible debentures, options or other non-voting interests
with rights of conversion to voting interests shall not be attributed
unless and until conversion is effected.

\(f\) \* \* \*

\(2\) For a licensee or system that is a limited partnership to make the
certification set forth in paragraph (f)(1) of this Note, it must verify
that the partnership agreement or certificate of limited partnership,
with respect to the particular limited partner exempt from attribution,
establishes that the exempt limited partner has no material involvement,
directly or indirectly, in the management or operation of the media
activities of the partnership. For a licensee or system that is an LLC
or RLLP to make the certification set forth in paragraph (f)(1) of this
Note, it must verify that the organizational document, with respect to
the particular interest holder exempt from attribution, establishes that
the exempt interest holder has no material involvement, directly or
indirectly, in the management or operation of the media activities of
the LLC or RLLP. \* \* \*

\* \* \* \* \*

\(h\) \* \* \*

\(3\) The sum of the interests computed under paragraph (h)(1) of this
Note plus the sum of the interests computed under paragraph (h)(2) of
this Note is equal to or exceeds 20 percent.

\(i\) Notwithstanding paragraphs (e) and(f) of this Note, the holder of
an equity or debt interest or interests in a broadcast licensee, cable
television system, daily newspaper, or other media outlet subject to the
broadcast multiple ownership or cross-ownership rules ("interest
holder") shall have that interest attributed if:

\* \* \* \* \*

(2)(i) The interest holder also holds an interest in a broadcast
licensee, cable television system, newspaper, or other media outlet
operating in the same market that is subject to the broadcast multiple
ownership or cross-ownership rules and is attributable under paragraphs
of this Note other than this paragraph (i); or

\* \* \* \* \*

Note 3 to § 73.3555: \* \* \*

\* \* \* \* \*

Note 4 to § 73.3555: \* \* \*

\* \* \* \* \*

Note 5 to § 73.3555: \* \* \*

\* \* \* \* \*

Note 6 to § 73.3555: \* \* \*

\* \* \* \* \*

Note 7 to § 73.3555: \* \* \*

\* \* \* \* \*

Note 8 to § 73.3555: \* \* \*

\* \* \* \* \*

Note 9 to § 73.3555: \* \* \*

\* \* \* \* \*

Note 10 to § 73.3555: \* \* \*

5.  Section 73.3613 is amended by revising paragraph (d) and revising
    paragraph (e) to read as follows:

**[§ 73.3613 Filing of contracts]{.underline}.**

\* \* \* \* \*

\(d\) *[Time brokerage agreements]{.underline}*. Time brokerage
agreements involving radio stations, where the licensee (including all
parties under common control) is the brokering entity, there is a
principal community contour overlap (predicted or measured 5 mV/m
groundwave for AM stations and predicted 3.16 mV/m for FM stations) with
the brokered station, and more than 15 percent of the time of the
brokered station, on a weekly basis, is brokered by that licensee; time
brokerage agreements involving television stations where licensee
(including all parties under common control) is the brokering entity,
the brokering and brokered stations are both licensed to the same market
as defined in the local television multiple ownership rule contained in
§ 73.3555(b), and more than 15 percent of the time of the brokered
station, on a weekly basis, is brokered by that licensee; time brokerage
agreements involving radio or television stations that would be
attributable to the licensee under § 73.3555 Note 2(i). \* \* \*

\(e\) The following contracts, agreements or understandings need not be
filed but shall be kept at the station and made available for inspection
upon request by the FCC: contracts relating to the joint sale of
broadcast advertising time that do not constitute time brokerage
agreements pursuant to § 73.3555 Note 2(j); subchannel leasing
agreements for Subsidiary Communications Authorization operation;
franchise/leasing agreements for operation of telecommunications
services on the TV vertical blanking interval and in the visual signal;
time sales contracts with the same sponsor for 4 or more hours per day,
except where the length of the events (such as athletic contests,
musical programs and special events) broadcast pursuant to the contract
is not under control of the station; and contracts with chief operators.

6.  Section 73.3615 is amended by revising the second sentence in
    paragraph (a)(3)(iii)(B) to read as follows:

**[§ 73.3615 Ownership reports.]{.underline}**

\* \* \* \* \*

\(a\) \* \* \*

\(3\) \* \* \*

\(iv\) \* \* \*

\(B\) \* \* \* If X has a voting stockholder interest in the licensee,
only those voting interests of X that are cognizable after application
of the "multiplier" described in Note 2(c) of § 73.3555 of the rules, if
applicable, shall be reported. \* \* \*

\* \* \* \* \*

**Part 76-MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE**

7.  The authority citation for Part 76 continues to read as follows:

> AUTHORITY: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a, 307,
> 308, 309, 312, 317, 325, 503, 521, 522, 531, 532, 534, 535, 536, 537,
> 543, 544, 544a, 545, 548, 549, 552, 554, 556, 558, 560, 561, 571, 572,
> 573.

8.  Section 76.501 is amended by:

> \(a\) designating Note 1 as "Note 1 to § 76.501";
>
> \(b\) designating Note 2 as "Note 2 to § 76.501";
>
> \(c\) designating Note 3 as "Note 3 to § 76.501";
>
> \(d\) designating Note 4 as "Note 4 to § 76.501";
>
> \(e\) designating Note 5 as "Note 5 to § 76.501";
>
> \(f\) designating Note 6 as "Note 6 to § 76.501"; and
>
> \(g\) revising paragraph Note 6.
>
> The revisions read as follows:

§ 76.501 Cross-ownership

Note 1 to § 76.501: \* \* \*

\* \* \* \* \*

Note 2 to § 76.501: \* \* \*

\* \* \* \* \*

Note 3 to § 76.501: \* \* \*

\* \* \* \* \*

Note 4 to § 76.501: \* \* \*

\* \* \* \* \*

Note 5 to § 76.501: \* \* \*

\* \* \* \* \*

Note 6 to § 76.501: In applying paragraph (a) of § 76.501, for purposes
of paragraph Note 2(i) of this section, attribution of ownership
interests in an entity covered by this rule that are held indirectly by
any party through one or more intervening organizations will be
determined by successive multiplication of the ownership percentages for
each link in the vertical ownership chain and application of the
relevant attribution benchmark to the resulting product. The ownership
percentage for any link in the chain that exceeds 50% shall be included.
\[For example, if A owns 10% of company X, which owns 60% of company Y,
which owns 25% of "Licensee," then X's interest in "Licensee" would 15%
(0.6x0.25), and A's interest in "Licensee" would be 1.5%
(0.1x0.6x0.25).\]

**APPENDIX C**

**Supplemental Final Regulatory Flexibility Analysis**

*Memorandum Opinion and Order on Reconsideration*

As required by the Regulatory Flexibility Act (RFA),[^132] an Initial
Regulatory Flexibility Analysis (IRFA) was incorporated in Appendix A of
the *Notice of Proposed Rulemaking* (*Notice*)[^133] and Appendix A of
the *Further Notice of Proposed Rule Making* (*Further Notice*) in this
proceeding.[^134] The Commission sought written public comment on the
proposals in the *Notice* and *Further Notice*, including comment on the
IRFAs. The comments received were discussed in the Final Regulatory
Flexibility Analysis (FRFA) contained in the *Report and Order* (*R&O*)
in this proceeding.[^135] As described below, this *Memorandum Opinion
and Order on Reconsideration* (*MO&O*) grants reconsideration of one
action taken in the *R&O* and provides clarification of other issues.
This associated Supplemental Final Regulatory Flexibility Analysis
(Supplemental FRFA) addresses the rule modifications on reconsideration
and conforms to the RFA.[^136]

**Need For, and Objectives of, the *Memorandum Opinion and Order***

The attribution rules seek to identify those interests in licensees or
media entities that confer on their holders a degree of influence or
control such that the holders have the potential to affect the
programming decisions of licensees or other core operating functions.
The attribution rules are used to implement the Commission\'s broadcast
multiple ownership rules. The Commission's goals in this proceeding are
to improve the precision of the attribution rules, avoid disruption in
the flow of capital to broadcasting, afford clarity and certainty to
regulatees and markets, and facilitate application processing. While its
focus is on the issues of influence or control, the Commission must also
tailor the attribution rules to permit arrangements where an ownership
or positional interest involves minimal risk of influence to avoid
unduly restricting the means by which investment capital may be made
available to the broadcast industry. The rule revisions and
clarifications contained in this *MO&O* meet these goals.

**Summary of Significant Issues Raised by the Public**

The comments in response to the IRFAs that addressed small business
issues were discussed in the FRFA contained in the *R&O* in this
proceeding. We received no petitions for reconsideration in direct
response to that FRFA. In its petition for reconsideration, however, the
Office of Communications, Inc. of United Church of Christ *et al*. (UCC)
asked the Commission to eliminate the single majority shareholder
exemption for broadcast stations, arguing that it is arbitrary and
capricious to eliminate the exemption for cable systems and not
broadcasters.[^137] Under the single majority shareholder exemption from
attribution, in a corporation in which a single shareholder owns more
than 50 percent of the voting stock of the corporation, the interests of
minority shareholders are not attributable. The Commission grants UCC's
request, finding no rational basis to distinguish between cable and
broadcasting that would justify eliminating the exemption for the cable
ownership rules while retaining it for the broadcast ownership rules.
Any minority interest in a company with a single majority shareholder
will be grandfathered if the interest was acquired before the adoption
date of this *MO&O*. Grandfathered minority interests in companies with
single majority shareholders, however, remain subject to the equity/debt
plus (EDP) rule.[^138]

**Description and Estimate of the Number of Small Entities to Which
Rules Will Apply**

The rules revisions contained in this *MO&O* will apply to full service
television and radio licensees and permittees, potential licensees and
permittees, cable services or systems, Multipoint Distribution Service,
Multichannel Multipoint Distribution Service, and Instructional
Television Fixed Service, and newspapers. These entities are discussed
in detail in the FRFA contained in the *R&O* at Section III.[^139]

**Description of Projected Reporting, Recordkeeping, and Other
Compliance** **Requirements**

The *MO&O* clarifies various aspects of the EDP rule adopted in the
*R&O*. One clarification is to use the "multiplier" in calculating an
EDP interest. Specifically, the Commission will multiply the successive
percentage interests, aggregating both equity and debt, in each
intervening entity where a party holds an indirect interest in the
licensee or other media outlet. In calculating an EDP interest, however,
the Commission will not apply the pass-through exception, which applies
to indirect voting stock interests in corporations where a link in the
ownership chain that represents a percentage interest exceeding 50
percent is treated as a 100 percent interest. Thus, the Commission will
multiply successive interests for purposes of EDP, even where the
interest exceeds 50 percent.[^140] The decision not to apply the
pass-through exception is less restrictive than the traditional
application of the multiplier on all entities, including small
businesses.

The *MO&O* also eliminates the single majority shareholder attribution
exemption. Elimination of the single majority shareholder attribution
exemption does not affect grandfathered small entities. Moreover,
elimination of the single majority shareholder exemption does not affect
the Commission's ownership reporting requirements. The reporting
requirements for non-grandfathered licensees may increase, however,
because those licensees will be required to report interests that are
newly attributable as a result of elimination of the exemption. Those
entities are already required to file ownership reports with the
Commission, so any additional cost associated with this reporting
requirement is nominal.

**Steps Taken to Minimize Significant Economic Impact on Small Entities,
and Significant Alternatives Considered**

The RFA requires an agency to describe any significant alternatives that
it has considered in reaching its proposed approach, which may include
the following four alternatives (among others): (1) the establishment of
differing compliance or reporting requirements or timetables that take
into account the resources available to small entities; (2) the
clarification, consolidation, or simplification of compliance or
reporting requirements under the rule for small entities; (3) the use of
performance, rather than design, standards; and (4) an exemption from
coverage of the rule, or any part thereof, for small entities.[^141]

Under the Commission's pass-through exception to the multiplier rule, a
link in the ownership chain that represents a percentage interest
exceeding 50 percent is treated as a 100 percent interest, when
calculating the successive links in the ownership chain. The *MO&O*
clarifies that the Commission will not apply the pass-through exception
in using the multiplier to calculate interests under the EDP rule. An
alternative to this decision is to apply the pass-through exception for
purposes of EDP, which would make the calculation of attributable EDP
interests as restrictive on all entities, including small businesses, as
those calculated under the traditional application of the multiplier.

The *MO&O* eliminates the single majority shareholder attribution
exemption. To minimize the disruptive effect of this attribution rule
change, the *MO&O* grandfathers entities, subject to the EDP rule,
relying on the single majority shareholder exemption whose interests
were acquired before the adoption date of the *MO&O*. An alternative to
eliminating the exemption would be to leave the rule as is. In addition
to assuring consistency with the prior decision to eliminate the
exemption for cable operators, however, the Commission believes that
eliminating the exemption from the broadcast attribution rules will
promote one of its primary goals to improve the precision of the
Commission's attribution rules in identifying cognizable interests for
purposes of the ownership rules.

**[Report to Congress]{.underline}:** The Commission will send a copy of
the *MO&O*, including this Supplemental FRFA, in a report to be sent to
Congress pursuant to SBREFA.[^142] In addition, the Commission will send
a copy of the *MO&O*, including the Supplemental FRFA, to the Chief
Counsel for Advocacy of the Small Business Administration. A copy of the
*MO&O* and Supplemental FRFA (or summaries thereof) will also be
published in the Federal Register.[^143]

# STATEMENT OF CHAIRMAN WILLIAM E. KENNARD {#statement-of-chairman-william-e.-kennard .unnumbered}

## Re: In the Matter of Review of the Commission's Regulations Governing Attribution of Broadcast and Cable/MDS Interests Order on Reconsideration, MM Docket Nos. 94-150, 92-51, 87-154. {#re-in-the-matter-of-review-of-the-commissions-regulations-governing-attribution-of-broadcast-and-cablemds-interests-order-on-reconsideration-mm-docket-nos.-94-150-92-51-87-154. .unnumbered}

I write separately to explain my decision to concur in today's
*Reconsideration Order* on the attribution of broadcast and cable
interests.

In our *Attribution Report and Order*, we acknowledged the very real
influence that the brokering party to a Local Marketing Agreement (LMA)
exercises over the brokered station and concluded that certain LMAs
should be attributable in order to reduce incentives to use LMAs to
circumvent our ownership rules. We also required that these attributable
LMAs be filed with the Commission. While I strongly agree that these
steps were necessary and appropriate, I continue to believe that other
troubling aspects of LMAs still need be addressed.

I have long held the view that LMAs represent a sort of artifice that
raise substantial concerns about who actually controls the brokered
station and who is actually responsible and accountable for the
station's programming during brokered time. When we relaxed the
broadcast ownership rules in 1999, I noted that "we need to consider
more broadly the role of LMAs in broadcasting. . . .\[W\]e need to
consider whether the benefits of LMAs could be attained through other
arrangements, such as actual joint ownership that do not raise questions
concerning the responsibility and accountability of the actual licensee
of a station."[^144]

More recently, this issue was raised in a Commission order released just
two days ago, in which the Commission denied a request for a stay of the
grant of an assignment of licenses in transactions implicating two LMAs
in the Columbus, Georgia market.[^145] Although I voted to affirm the
Mass Media Bureau's decision in that case, I wrote separately to express
my doubts about the terms of the particular LMAs involved. I said that I
believe that the rights and entitlements contained in the agreements
presented a significant risk that an unauthorized transfer of control of
the brokered station may occur.

Given these concerns, I urged my colleagues to support a narrowly
tailored expansion of the LMA filing requirement[^146]. Like
Commissioner Tristani, I believe that we cannot make fully informed
decisions about whether to continue to allow LMAs or whether to impose
additional restrictions on their use unless we have more information
about their use. For example, how extensively are LMAs being used in the
industry? Are the brokers usually the prospective buyers of the brokered
station? Do the terms of the LMA make clear distinctions between the
rights of the broker and the licensee? Are the 10- and 15-year terms in
the Columbus agreements typical?

Today, the Commission refused to solicit answers to these critical
questions, citing the burden of such a requirement. But, the burden
would have been marginal. Broadcasters are already required to maintain
copies of these agreements in their local public inspection files. I
simply cannot agree with the majority that this modest first step toward
a fuller consideration of these quasi-ownership arrangements between
broadcast stations was unwarranted.

**STATEMENT OF COMMISSIONER SUSAN NESS, DISSENTING IN PART**

Re: Review of the Commission's Regulations Governing Attribution of
Broadcast Interests

While I support most of the *Order's* conclusions, particularly
elimination of the single majority shareholder exemption, *see* *Order*
at ¶¶ 40-44, I would have preferred narrowly crafting an exemption to
the equity-plus-debt ("EDP") rule to better reflect the realities of the
banking industry. Specifically, I believe that a bank whose lending arm
extends credit to a broadcaster does not implicate our diversity
concerns when its equity investment arm invests in a different
broadcaster in the same market. In practice, the lending and equity
groups in a modern bank do not coordinate their efforts. When our
attribution rules contemplate treating such disparate groups as the same
source of ownership and influence, the rules misconstrue marketplace
realities. As one commenter in this proceeding pointed out, when our
rules codify such inaccurate reflections of the financial industry,
banks can be discouraged from making investments in the broadcasting
industry. *See Petition for Reconsideration of Wells Fargo
Communications Finance, Division of Norwest Bank MN, NA* at 2-3 (October
18, 1999).

Thus, I would have supported a narrowly crafted exemption to the EDP
rule for banks and other institutional investors, where the practices of
lending institutions demonstrate that our policy interest in viewpoint
diversity is not threatened by the investments of a bank's equity and
lending entities. I therefore respectfully dissent in part. *See Order*
at ¶¶ 19-22.

STATEMENT OF COMMISSIONER HAROLD W. FURCHTGOTT-ROTH,

DISSENTING IN PART AND CONCURRING IN PART

I respectfully dissent in large part from this Memorandum Opinion and
Order on Reconsideration, which generally affirms the decisions made in
the original Report and Order on attribution rules for mass media
entities. I do so for the reasons given in my separate statement in that
Report and Order.[^147] I join, however, the portion of today's item
that maintains the Commission's elimination of the cross-interest
policy,[^148] a regulatory repeal that I supported on the first
go-round.

# STATEMENT OF COMMISSIONER GLORIA TRISTANI, DISSENTING IN PART {#statement-of-commissioner-gloria-tristani-dissenting-in-part .unnumbered}

## Re: Reconsideration of the Commission's Regulations Governing Attribution of Broadcast and Cable/MDS Interests, MM Docket Nos. 94-150, 92-51 and 87-154. {#re-reconsideration-of-the-commissions-regulations-governing-attribution-of-broadcast-and-cablemds-interests-mm-docket-nos.-94-150-92-51-and-87-154. .unnumbered}

I write separately to state my deep discomfort with the continued
prevalence of LMAs in the broadcasting industry. Too often, I believe,
LMAs are used to achieve a *de facto* change in control of a broadcast
license where such a change would otherwise be impermissible \-- either
because the transfer would violate the Commission's ownership rules or
because the Commission has not yet formally acted on a transfer
application. In both cases, LMAs have the harmful effect of separating
the entity that programs a broadcast station from the entity responsible
for ensuring that the station serves the public interest.

As with many problems before the Commission, one of the main barriers to
sensible decision-making is the lack of factual information. We simply
do not know how many LMAs exist, what the terms are, and whether those
terms serve the public interest. For this reason, I dissent from the
majority's decision not to require the filing of non-attributable LMAs
with the Commission. I would have required that *all* LMAs be filed.
Under the majority's approach, a licensee could enter into ten LMAs,
each covering ten percent of its programming hours, and yet because none
of the individual LMAs reached the fifteen percent level, the Commission
would never know that the licensee was no longer programming its own
station. Only when we know the true scope of the problem can we properly
assess whether and how it should be addressed.

[^1]: In the Matter of Review of the Commission's Regulations Governing
    Attribution of Broadcast and Cable/MDS Interests; Review of the
    Commission's Regulations and Policies Affecting Investment in the
    Broadcast Industry; and Reexamination of the Commission's
    Cross-Interest Policy, *Report and Order*, 14 FCC Rcd 12559 (1999)
    (*Report and Order*). On the same day, the Commission released its
    related order on local television ownership rules, In the Matter of
    Review of the Commission's Regulations Governing Television
    Broadcasting; Television Satellite Stations Review of Policy and
    Rules, MM Docket Nos. 91-221 and 87-8, *Report and Order*, 14 FCC
    Rcd 12903 (1999) (*Local Television Ownership Report and Order*),
    *on recon.*, FCC 00-431 (rel. Jan. 19, 2001 ); and its order on
    national television ownership rules, In the Matter of Broadcast
    Television National Ownership Rules; Review of the Commission's
    Regulations Governing Television Broadcasting; Television Satellite
    Stations Review of Policy and Rules, MM Docket Nos. 96-222, 91-221,
    and 87-8, *Report and Order*, FCC 99-208 (Aug. 6, 1999) (*National
    Television Ownership Report and Order*), *recon. denied*, FCC 00-406
    (rel. Jan. 19, 2001).

[^2]: 47 C.F.R. § 73.3555.

[^3]: 47 C.F.R. § 76.501(a).

[^4]: 47 C.F.R. § 21.912 Note 1.

[^5]: UCC *et al*. includes the Office of Communications, Inc. of United
    Church of Christ, Black Citizens for a Fair Media, Center for Media
    Education, Civil Rights Forum, League of United Latin American
    Citizens, Philadelphia Lesbian and Gay Task Force, Washington Area
    Citizens Coalition Interested in Viewers' Constitutional Rights,
    Wider Opportunities for Women, and the Women's Institute for Freedom
    of the Press.

[^6]: In the Matter of Review of the Commission's Regulations Governing
    Attribution of Broadcast and Cable/MDS Interests; Review of the
    Commission's Regulations and Policies Affecting Investment in the
    Broadcast Industry; and Reexamination of the Commission's
    Cross-Interest Policy, *Further Notice of Proposed Rulemaking*, 11
    FCC Rcd 19895, 19900, ¶ 9 (1996) (*Further Notice*); In the Matter
    of Review of the Commission's Regulations Governing Attribution of
    Broadcast and Cable/MDS Interests; Review of the Commission's
    Regulations and Policies Affecting Investment in the Broadcast
    Industry; and Reexamination of the Commission's Cross-Interest
    Policy, *Notice of Proposed Rulemaking*, 10 FCC Rcd 3606, 3652, ¶¶
    99 (1995) (*Notice*).

[^7]: *Further Notice*, 11 FCC Rcd at 19900, ¶ 10.

[^8]: *Report and Order*, 14 FCC Rcd at 12581, ¶ 43.

[^9]: Major program suppliers include all programming entities,
    including broadcast networks and inter-market time brokers that meet
    the percentage of programming test. *Report and Order*, 14 FCC Rcd
    at 12579, ¶ 36, 12585, ¶¶ 55 and 56, 12587, ¶ 59. In addition, where
    a person or entity has an attributable interest in a major program
    supplier, that person or entity will be deemed to be a major program
    supplier for purposes of applying the EDP rule. *Id*. at 12585, ¶
    55.

[^10]: *Report and Order*, 14 FCC Rcd at 12579, ¶ 36.

[^11]: *Report and Order*, 14 FCC Rcd at 12579, ¶ 36, 12580, ¶41, 12585,
    ¶ 55.

[^12]: *Report and Order*, 14 FCC Rcd at 12579, ¶ 36, 12581, ¶ 42,
    12584, ¶ 52.

[^13]: Petition for Partial Reconsideration and Clarification of the
    Revised Broadcast Local Ownership and Attribution Rules Submitted by
    the National Association of Broadcasters (NAB Petition) at 3, 10
    (Oct. 18, 1999); Opposition of the National Association of
    Broadcasters to Petitions for Reconsideration (NAB Opposition) at 10
    (Dec. 2, 1999); Reply of the National Association of Broadcasters to
    Oppositions to Petition for Reconsideration (NAB Reply) at 8-9 (Dec.
    13, 1999).

[^14]: NAB Petition at 23; NAB Opposition at 8-9. Sinclair states that
    the rule will undercut the objective of increasing minority
    ownership because the more ownership in a broadcast entity is
    fractionalized, the less security there is to satisfy creditors.
    Petition of Sinclair Group, Inc. for Reconsideration (Sinclair
    Petition) at 22 (Oct. 18, 1999).

[^15]: NAB Petition at 24-25; NAB Reply at 8.

[^16]: Opposition and Response to Petitions for Reconsideration of UCC
    *et al*. (UCC Opposition) at 15 (Dec. 2, 1999) (citing the *Report
    and Order* at ¶¶ 37-38); Reply of UCC *et al*. to Oppositions (UCC
    Reply) at 9-10.

[^17]: UCC Opposition at 13-14.

[^18]: *Report and Order*, 14 FCC Rcd at 12580, ¶ 39; *see* In the
    Matter of Implementation of the Cable Television Consumer Protection
    and Competition Act of 1992; Implementation of Cable Act Reform
    Provisions of the Telecommunications Act of 1996; and Review of the
    Commission's Attribution Rules, CS Docket Nos. 98-82 and 96-85,
    *Report and Order*, FCC 99-288, ¶ 83 (rel. Oct. 20, 1999) (*Cable
    Attribution Report and Order*).

[^19]: *Report and Order*, 14 FCC Rcd at 12581, ¶ 43.

[^20]: *See* Joseph Farrell & Carl Shapiro, *Asset Ownership and Market
    Structure in Oligopoly*, 21 [RAND Journal of Economics]{.smallcaps}
    275 (1990) (stating that "\[a\]s firm 1 increases its stake in firm
    2, firm 1 behaves less aggressively and total output falls, although
    all firms other than firm 1 increase their outputs").

[^21]: *Report and Order*, 14 FCC Rcd at 12582, ¶ 47.

[^22]: *Report and Order*, 14 FCC Rcd at 12583-84, ¶ 51; *see* *Cable
    Attribution Report and Order* at ¶ 89 (stating that the same-market
    entity prong was designed to capture controlling or influential
    interests in two media entities within the same market that would
    then trigger the local cross-ownership rules, thereby implicating
    the Commission's goals of promoting diversity and competition).

[^23]: *Report and Order*, 14 FCC Rcd at 12582-83, ¶ 48; *see* *Cable
    Attribution Report and Order* at ¶ 84.

[^24]: *See* *Report and Order*, 14 FCC Rcd at 12589, ¶ 62 (stating
    that, based on academic literature, nonvoting stock and debt may now
    be used to control or influence a licensee in a significant manner,
    especially when coupled with another meaningful relationship or when
    held by someone that has the incentive to influence the station or
    media entity); In the Matter of Implementation of Section 309(j) of
    the Communications Act -- Competitive Bidding for Commercial
    Broadcast and Instructional Television Fixed Service Licenses, 12
    FCC Rcd 12541, 12544, ¶ 7 (1999) (citing legal, financial, and
    academic literature that supports focusing on debt and nonvoting
    stock, as well as voting stock, when examining the ability of
    substantial investors to influence broadcast applicants and
    licensees).

[^25]: *See* Fox Television Stations, Inc*.*, *Report and Order*, 11 FCC
    Rcd 5714, 5719-21 (1995) (concluding that debt interest at issue in
    determining compliance with foreign ownership benchmark was more
    properly characterized as equity capital contribution); NextWave
    Personal Communications, Inc*.*, *Memorandum Opinion and Order*, 12
    FCC Rcd 2030, 2049-51 (WTB 1997) (treating two classes of debt
    instruments as equity); Applications of GWI PCS, Inc. for Authority
    to Construct and Operate Broadband PCS Systems Operating on
    Frequency Block C, *Memorandum Opinion and Order*, 12 FCC Rcd 6441,
    6449-50, ¶ 21 (WTB 1997) (describing advances to thinly capitalized
    companies as generally indicative of venture capital rather than
    traditional *bona fide* debt because of the substantial degree of
    risk to the lender).

[^26]: *Report and Order*, 14 FCC Rcd at 12582-83, ¶ 48; *see id*. at
    12583, ¶¶ 49-50 (explaining in detail how this conclusion is
    strongly supported by the record); *Cable Attribution Report and
    Order* at ¶ 84.

[^27]: *See* *Cable Attribution Report and Order* at ¶¶ 82, 83
    (adopting, for purposes of horizontal ownership limits, the equity
    plus debt rule that ascribes an attributable interest to an investor
    holding an interest that exceeds 33 percent of the total asset value
    (equity plus debt) of the applicable cable entity).

[^28]: *See* In the Matter of Implementation of Section 309(j) of the
    Communications Act -- Competitive Bidding for Commercial Broadcast
    and Instructional Television Fixed Service Licenses, 14 FCC Rcd
    12541, 12544-45, ¶ 7 (1999) (finding that it would be contrary to
    the new entrant bidding credit's diversification goals if the
    Commission failed to consider the media interests held by very
    substantial investors in, and creditors of, auction applicants
    seeking new entrant status).

[^29]: *Report and Order*, 14 FCC Rcd 12581-82, ¶ 45, 12586-87, ¶ 58.

[^30]: UCC Opposition at 13-15; UCC Reply at 9-10. UCC explains that
    "\[t\]he essence of the debtor-creditor relationship is control" and
    "\[t\]he need to stay current on a debt necessarily impacts the
    licensee's daily decisions concerning how to use its resources." UCC
    Opposition at 15.

[^31]: UCC Opposition at 13. In support of its opposition to
    petitioners' assertions that the EDP rule will discourage investment
    in new entrants, UCC notes that broadcasters have created an
    investment fund, the Prism Fund, devoted to providing \$1 billion to
    media businesses owned by minorities and women. UCC Opposition at
    15-16. NAB replies, however, that the EDP rule could adversely
    affect the operation of the Prism Fund if a director in the fund has
    an attributable interest in a media entity in a certain community
    and the fund makes a separate investment in another media entity in
    that same community. NAB Reply at 8. We clarify below how we will
    treat officers' and directors' investments under the EDP rule.

[^32]: *Report and Order*, 14 FCC Rcd 12582, ¶ 46.

[^33]: *Report and Order*, 14 FCC Rcd 12582, ¶ 45.

[^34]: NAB Petition at 24-25.

[^35]: NAB Petition at 25.

[^36]: *Report and Order*, 14 FCC Rcd 12589, ¶ 61. As we explained in
    the *Report and Order*, were we to apply the percentage thresholds
    separately, a company with only 10 percent of its capital from debt
    would be attributable to a creditor providing only 3.4 percent of
    the company's total assets, while any equity holder providing 32
    percent of the total capital would be nonattributable. *Id*.

[^37]: *See* *Report and Order*, 14 FCC Rcd 12589, ¶ 62.

[^38]: NAB Opposition at 9.

[^39]: Sinclair Petition at 22.

[^40]: Sinclair Petition at 22.

[^41]: UCC Opposition at 14. UCC asserts that a more lenient threshold
    would "counter the very purpose of the revised attribution rules"
    and "recent press reports demonstrate \[that\] the 33 percent
    threshold will not prevent market actors from innovating new ways to
    seeding money to new entrants." *Id*.

[^42]: *Report and Order*, 14 FCC Rcd at 12579, ¶ 38. In fact, our
    attribution rules expressly define "control" to include "any actual
    working control in whatever manner exercised." 47 C.F.R. § 73.3555
    Note 1.

[^43]: *Report and Order*, 14 FCC Rcd at 12582-83, ¶ 48.

[^44]: *Report and Order*, 14 FCC Rcd at 12580, ¶¶ 39 and 40.

[^45]: *See*, *e.g.*, *Roy M. Speer*, 11 FCC Rcd 18393, 18442-43 (1996),
    *on recon.*, 13 FCC Rcd 19911 (1998) (limiting the non-attributable
    equity holdings of a same-market television licensee in another
    local television station to 33 percent).

[^46]: *Report and Order*, 14 FCC Rcd at 12590, ¶ 64.

[^47]: *Report and Order*, 14 FCC Rcd at 12590, ¶ 64; *see* *Cable
    Attribution Report and Order* at ¶ 86.

[^48]: 47 U.S.C § 303(r); *see* *Cable Attribution Report and Order* at
    ¶ 86.

[^49]: *Report and Order*, 14 FCC Rcd at 12590, ¶ 64; *see* *Cable
    Attribution Report and Order* at ¶ 86.

[^50]: *Report and Order*, 14 FCC Rcd at 12590, ¶ 64.

[^51]: Petition for Reconsideration of UCC *et al*. (UCC Petition) at
    8-11; *see* UCC Opposition at 16. According to UCC, the Commission
    should use the following analysis to determine if an entity's
    interest is attributable: (1) does the interest fall within any of
    the revised attribution rules; (2) if not, could the investor exert
    influence or control over the licensee with respect to programming,
    management, or budget; and (3) if so, presume the interest
    attributable, placing the burden on the investor to rebut the
    presumption of attribution. UCC Petition at 11, n.7.

[^52]: *Notice*, 10 FCC Rcd at 3652, ¶¶ 99-100.

[^53]: *Further Notice*, 11 FCC Rcd at 19901, ¶ 11.

[^54]: *Report and Order*, 14 FCC Rcd at 12581, ¶ 44. For example, we
    may need to review an application using a case-by-case approach
    where there is substantial evidence that the combined interests held
    are so extensive that they raise an issue of significant influence
    such that the Commission's multiple ownership rules should be
    implicated, even though the combined interests do not come within
    the scope of the EDP rule. *Id*.

[^55]: Petition for Reconsideration of Wells Fargo Communications
    Finance, Division of Norwest Bank MN, NA (Wells Fargo Petition) at 3
    (Oct. 18, 1999).

[^56]: Well Fargo Petition at 5.

[^57]: Wells Fargo Petition at 5-6.

[^58]: Wells Fargo Petition at 6-7. Wells Fargo explains that in a
    typical broadcast transaction, a lender in most cases takes a pledge
    of the licensee's stock or other ownership interest because the
    Commission forbids taking a security interest directly in the
    license. Wells Fargo therefore asserts that a bank could not
    foreclose on the stock pledge of a defaulting company if the bank's
    interest in another company in the same market exceeded 33 percent.
    *Id*. at 6-7. We note that we allow passive investors that acquire
    stock involuntarily, including as a result of the prudent and
    necessary exercise of foreclosure, to exceed the 20 percent standard
    without deeming the interest to be attributable for a period of not
    more than one year. *See* In the Matter of Corporate Ownership
    Reporting and Disclosure by Broadcast Licensee; Amendment of Section
    73.35, 73.240 and 73.636 of the Commission's Rules Relating to
    Multiple Ownership of Standard, FM, and Television Broadcast
    Stations; Amendment of Section 73.35, 73.240, 73.636 and 76.501 of
    the Commission's Rules Relating to Multiple Ownership of AM, FM, and
    Television Stations and CATV Systems; and Reexamination of the
    Commission's Rules and Policies Regarding the Attribution of
    Ownership Interests in Broadcast, Cable Television and Newspaper
    Entities, MM Docket Nos. 20521, 20548, 78-239, and 83-46, *Report
    and Order*, 97 F.C.C. 2d 997, 1017, ¶ 39 (1984) (*1984* *Attribution
    of Ownership Interests Report and Order*), *clarified upon
    reconsideration*, 58 Rad. Reg. 2d (P&F) 604, 612, ¶ 23 (1985).

[^59]: Wells Fargo Petition at 6.

[^60]: *See Report and Order*, 14 FCC Rcd at 12586-87, ¶ 58 (stating
    that commenters provided no empirical evidence to support the
    argument that the EDP rule would curb investment in broadcast
    stations by program suppliers and that because the EDP rule does not
    affect investments by entities other than major program suppliers or
    same-market media entities, we believe the EDP rule will not curb
    investment, deter new entry, or curb the conversion to DTV). We also
    explained in the *Report and Order* that holding debt, or other
    nonvoting interests in one entity in a market that exceeds 33
    percent of the total assets of that entity does not, by itself,
    trigger the EDP rule. Similarly, debt, or other nonvoting interests
    in, for example, 34 percent of the total assets of several stations
    in the same market will not result in attribution of any of the
    stations as long as the investor is not a major program supplier or
    same-market media entity. *See id*. at 12584, ¶ 52. *See also supra*
    at ¶ 9 (explaining that the EDP rule does not preclude investment in
    any media entity).

[^61]: *See* In the Matter of Annual Assessment of the Status of
    Competition in the Market for the Delivery of Video Programming, 12
    FCC Rcd 4358, 4373, ¶ 30 (1997) (describing private equity financing
    to include venture capital firms); In the Matter of Review of the
    Commission's Regulations Governing Attribution of Broadcast and
    Cable/MDS Interests, Review of the Commission's Regulations and
    Policies Affecting Investment in the Broadcast Industry,
    Reexamination of the Commission's Cross-Interest Policy, *Further
    Notice of Proposed Rulemaking*, 11 FCC Rcd 19895, 19934 (1996)
    (stating that institutional investors not considered to be passive
    investors include commercial banks (excluding trust departments),
    investment banks, brokerage firms and pension funds).

[^62]: 47 C.F.R. § 73.3555 Note 2(c).

[^63]: 12 U.S.C. §§ 3401 *et seq.*

[^64]: Wells Fargo Petition at 6.

[^65]: *First Union Nat'l Bank of Fla. v. Bankaltantic Bancorp., Inc.*,
    129 F.3d 1186, 1190 (11^th^ Cir. 1997).

[^66]: *Id*.

[^67]: Application for Consent to Assignment of Broadcast Station
    Construction Permit or License (Sept. 1999); FCC Form 315,
    Application for Consent to Transfer Control of Entity Holding
    Broadcast Station Construction Permit or License (Sept. 1999). In an
    application for consent to transfers of control, the transferor must
    also provide the voting and equity plus debt percentages held both
    before and after consummation of the transaction. FCC Form 315 at 4.
    *See* FCC Form 301, Application for Construction Permit for
    Commercial Broadcast Station; FCC Form 314 (May 1999); FCC Form 316,
    Application for Consent to Assign Broadcast Station Construction
    Permit or License or Transfer of Control of Entity Holding Broadcast
    Station Construction Permit or License (Mar. 1999). FCC Forms 301
    and 316 are currently being updated to require the same attribution
    information required in FCC Forms 314 and 315.

[^68]: FCC Form 323, Ownership Report (Sept. 2000).

[^69]: *See* 47 C.F.R. § 0.457; In the Matter of Examination of Current
    Policy Concerning the Treatment of Confidential Information
    Submitted to the Commission, GC Docket No. 96-55, *Report and
    Order*, 13 FCC Rcd 24816 (1998). Section 0.459 of the Commission's
    rules set forth the requirements for filing a request that
    information submitted to the Commission not be made routinely
    available for public inspection. 47 C.F.R. § 0.459.

[^70]: Petition of the Minority Media and Telecommunications Council for
    Partial Reconsideration and Clarification (MMTC Petition) at 1 (Oct.
    18, 1999).

[^71]: MMTC Petition at 3. MMTC asks the Commission to exempt these
    interests where four conditions are met: (1) the interest holder in
    the SDB merges with, acquires, or is acquired by a company unrelated
    to the interest holder; (2) the merger or acquisition occurs at
    least one year after the interest in the SDB is formed; (3) the
    merger or acquisition would cause the interest in the SDB to become
    attributable under the EDP rule; and (4) the interest holder in the
    SDB and the SDB make an affirmative showing that the interest holder
    does not exercise undue influence over the SDB. *Id*.

[^72]: MMTC Petition at 4-5. MMTC states that the right would vest on
    the date the contract with the SDB is filed with the Commission.
    MMTC argues that the vested right would provide the large
    broadcaster investing in the SDB with the "the secure knowledge that
    its public spiritedness in making an especially risky investment in
    an SDB will be rewarded with a guaranteed opportunity to acquire a
    full complement of local properties." *Id*. at 4. MMTC filed this
    identical proposal in its petition for reconsideration of the *Local
    Television Ownership Report and Order*. Petition of the Minority
    Media Telecommunications Council for Partial Reconsideration and
    Clarification of MM Docket Nos. 91-221 and 87-8 at 17-18 (Oct. 18,
    1999).

[^73]: MMTC Petition at 5.

[^74]: 15 U.S.C. § 637(a)(4)-(6)(A). Section 637 defines a "socially and
    economically disadvantaged business" as a small business that is at
    least 51 percent owned by (1) one or more socially and economically
    disadvantaged individuals; (2) an economically disadvantaged Indian
    tribe (or a wholly owned business entity of such tribe); or (3) an
    economically disadvantaged Native Hawaiian organization. *Id*. The
    statute defines socially disadvantaged individuals as "individuals
    who have been subjected to racial or ethnic prejudice or cultural
    bias because of their identity as a member of a group without regard
    to their individual qualities," and economically disadvantaged
    individuals as "socially disadvantaged individuals whose ability to
    compete in the free enterprise system has been impaired because of
    diminished capital or credit opportunities as compared to others in
    the same business area who are not socially disadvantaged." *Id*.

[^75]: 515 U.S. 200 (1995). These studies include: Christine Bechen,
    Allen Hammond, and Laurie Mason, *Diversity of Programming in the
    Broadcast Spectrum: Is There a Link Between Owner Race or Ethnicity
    and News and Public Affairs* *Programming?* (Dec. 1999); William H.
    Bradford, *Discrimination in Capital Markets, Broadcast/Wireless
    Spectrum Service Providers and Auction Outcomes* (Dec. 5, 2000);
    Ernst & Young LLP, *FCC Econometric Analysis of Potential
    Discrimination Utilization Ratios for Minority- and Women-Owned
    Companies in FCC Wireless Spectrum Auctions* (Dec. 5, 2000); Ivy
    Planning Group LLC, *Whose Spectrum Is It Anyway? Historical Study
    of Market Entry Barriers, Discrimination and Changes in Broadcast
    and Wireless Licensing 1950 to Present* (Dec. 2000); KPMG LLP
    Economic Consulting Servs., *Study of the Broadcast Licensing
    Process* (Nov. 2000); KPMG LLP Economic Consulting Services,
    *Utilization Rates, Win Rates, and Disparity Ratios for Broadcast
    Licenses Awarded by the FCC* (Nov. 2000). The studies are available
    at the Commission's website at the following location:
    \<[www.fcc.gov/opportunity/meb_study](http://www.fcc.gov/opportunity/meb_study)\>.

[^76]: *See* In the Matter of Creation of Low Power Radio Service, 15
    FCC Rcd 2205, 2262 at ¶ 146 (Jan. 27, 2000), *recon. denied*, MM
    Docket No. 99-25, FCC 00-349 at ¶¶ 92-94 (rel. Sept. 28, 2000)
    (deferring a decision on whether to adopt minority control as a
    point system factor in processing applications for low power radio
    FM stations based on the outcome of the same studies).

[^77]: *Report and Order*, 14 FCC Rcd at 12579, ¶ 37, 12588, ¶ 61.

[^78]: *Report and Order*, 14 FCC Rcd at 12590-91, ¶ 65.

[^79]: Wells Fargo Petition at 10-11. For example, Wells Fargo explains
    that a broadcaster may start a company with a single station
    initially capitalizing the company by putting in minimal paid-in
    capital and providing most of the personal financing to the company
    through personal loans, which are paid off over time. Several years
    later, the broadcaster obtains a bank loan for a second station
    using the first station as part of the collateral. Wells Fargo
    claims that, under the Commission's definition, the appreciated
    value of the first station (which Wells Fargo apparently argues
    should be treated as equity) does not appear to be counted in
    determining whether the loan on the second station exceeds 33
    percent of the total assets of that station. *Id*. Our clarification
    of acceptable means of valuing "total assets" resolves this matter.

[^80]: We note that Commission staff no longer routinely reviews sales
    contracts and agreements and that applicants for consent to
    assignments or transfers of control now only need to certify that
    their sales agreements comply with Commission rules and policies.
    Applicants, however, must still file the sales contracts and
    agreements with the Commission for the purpose of making the
    documents available to the public in the Commission's public
    reference room. In the Matter of 1998 Biennial Review --
    Streamlining of Mass Media Applications, Rules, and Processes, MM
    Docket No. 98-43, *Report and Order*, 13 FCC Rcd 23056, 23074-76, ¶¶
    39-42 (1998).

[^81]: Wells Fargo Petition at 11. Wells Fargo also notes that various
    convertible debt and equity interests, or equity interests with
    preferred returns that accumulate before being paid, or even the
    accumulated interest on a simple term loan, could push an interest
    beyond the 33 percent threshold, even when the interest was not a
    concern at the time the loan was made. *Id*.

[^82]: *See e.g.*, *Report and Order*, 14 FCC Rcd at 12582, ¶47, 12584,
    ¶ 51, 12585, ¶ 5612589, ¶ 62.

[^83]: *Report and Order*, 14 FCC Rcd at 12582-83, ¶¶ 48-49, 12584, ¶
    51.

[^84]: 47 C.F.R. § 73.3555 Note 2(f).

[^85]: 47 C.F.R. § 73.3555 Note 2(d). For example, if X owns 60% of
    company Y, which owns 25% of "Licensee," then X's interest in
    "Licensee" would be 25% (the same as Y's interest since X's interest
    in Y exceeds 50%). *Id*.

[^86]: In re Applications of BBC License Subsidiary, L.P, *Memorandum
    Opinion and Order*, 10 FCC Rcd 10968, 10974, ¶ 25 (1995). The *pro
    rata* equity holdings of each investor in the licensee or parent are
    then aggregated to determine whether the sum of their interests
    exceeds the statutory benchmark set forth in Section 310(b). *Id*.

[^87]: *1984* *Attribution of Ownership Interests Report and Order*, 97
    F.C.C. 2d at 1018, ¶ 41.

[^88]: *1984 Attribution of Ownership Interests Report and Order*, 97
    F.C.C. 2d at 1018, n.47.

[^89]: *See Report and Order*, 14 FCC Rcd at 12585, ¶ 55 (noting that
    the EDP rule will apply only to the major program supplier's
    investments in a station to which it supplies 15 percent of the
    station's total weekly broadcast programming hours).

[^90]: *See Report and Order*, 14 FCC Rcd at 12584, ¶ 52 (stating that
    to trigger application of the EDP rule to same-market media
    entities, the interest held in the non-EDP media entity in the same
    market must be attributable without reference to the EDP rule).

[^91]: 47 C.F.R. § 73.3555 Note 2(h).

[^92]: *Report and Order*, 14 FCC Rcd at 12579, ¶ 36 (amending 47 C.F.R.
    § 73.3555 Note 2 (b)). Note 2(b) provides that subject to the EDP
    rule, "\[n\]o minority voting stock interest will be cognizable if
    there is a single holder of more than 50% of the outstanding voting
    stock of the corporate broadcast licensee, cable television system
    or daily newspaper in which the minority interest is held." *Id*.

[^93]: *Report and Order*, 14 FCC Rcd at 12579, ¶ 36.

[^94]: *Cable Attribution Report and Order* at ¶ 81.

[^95]: UCC Petition at 12-13.

[^96]: *Cable Attribution Report and Order* at ¶ 81.

[^97]: *Cable Attribution Report and Order* at ¶ 33.

[^98]: *1984 Attribution of Ownership Interests Report and Order*, 97
    F.C.C. 2d at 1008-09, ¶ 21.

[^99]: *1984 Attribution of Ownership Interests Report and Order*, 97
    F.C.C. 2d at 1008-09, ¶ 21.

[^100]: *Report and Order*, 14 FCC Rcd at 12591, ¶ 66 and 12638
    (amending 47 C.F.R. § 73.3555 Note 2(k)).

[^101]: *Report and Order*, 14 FCC Rcd at 12585, ¶ 55 n.120, 12586, ¶
    56, 12591, ¶ 66, 12597-98, ¶¶ 83-86.

[^102]: *Report and Order*, 14 FCC Rcd at 12586, ¶ 56, 12599-600, ¶¶
    88-89. While we will not count same-market television LMAs toward
    the brokering licensee's national ownership limits, we will count
    inter-market time brokerage agreements attributable under the EDP
    rule for purposes of the national ownership limits. *Report and
    Order*, 14 FCC Rcd at 12597-98, ¶¶ 83-86.

[^103]: *Report and Order*, 14 FCC Rcd at 12600, ¶ 90. We note that the
    radio LMA attribution rules once applied to the national radio
    ownership rules. These ownership rules were eliminated as the result
    of the Telecommunications Act of 1996.

[^104]: *Report and Order*, 14 FCC Rcd at 12600-01, ¶ 91, 12630, ¶ 169.

[^105]: *Report and Order*, 14 FCC Rcd at 12630, ¶¶ 168 and 170. The
    grandfathering period for intra-market television LMAs is addressed
    in the *Local Television Ownership Report and Order*.

[^106]: *Report and Order*, 14 FCC Rcd at 12630-31, ¶ 170.

[^107]: *Report and Order*, 14 FCC Rcd at 12631, ¶ 171. The compliance
    period for non-grandfathered intra-market television LMAs is
    addressed in the *Local Television Ownership Report and Order*.

[^108]: *Report and Order*, 14 FCC Rcd at 12601, ¶ 94. We also require
    stations involved in intra-market as well as inter-market television
    LMAs to keep copies of the agreements in their local public
    inspection files, with confidential or proprietary information
    redacted where appropriate. *Id*.

[^109]: UCC Petition at 18-22.

[^110]: NAB Opposition at 4-5.

[^111]: Telecommunications Act of 1996, Pub. L. No. 104-104, § 202(g),
    110 Stat. 56 (1996).

[^112]: [H.R. Conf. Rep. No.]{.smallcaps} 104-458, at 163 (1996).

[^113]: UCC Petition at 22-23.

[^114]: *Report and Order*, 14 FCC Rcd at 12601-02, ¶ 94; 47 C.F.R. §
    73.3526(e)(14).

[^115]: *Report and Order*, 14 FCC Rcd at 12602, ¶ 95.

[^116]: *Report and Order*, 14 FCC Rcd at 12604, ¶ 100 (citing *Notice
    of Inquiry* in MM Docket No. 87-154, 2 FCC Rcd 3699 (1987)).

[^117]: *Report and Order*, 14 FCC Rcd at 12609, ¶ 112. In 1989, the
    Commission limited portions of the cross-interest policy so that it
    would no longer apply to consulting positions, time brokerage
    arrangements and advertising agency representative relationships.
    *Id*. at 12604, ¶ 102 (citing *Policy Statement* in MM Docket No.
    87-154, 4 FCC Rcd 2208 (1989)).

[^118]: *Report and Order*, 14 FCC Rcd at 12605, ¶ 103.

[^119]: *Report and Order*, 14 FCC Rcd at 12609, ¶ 112.

[^120]: *Report and Order*, 14 FCC Rcd at 12610, ¶ 116.

[^121]: *Report and Order*, 14 FCC Rcd at 12604, ¶¶ 100-01.

[^122]: *Report and Order*, 14 FCC Rcd at 12610, ¶ 116.

[^123]: *Report and Order*, 14 FCC Rcd at 12609-10, ¶ 114.

[^124]: *Report and Order*, 14 FCC Rcd at 12610, ¶ 115.

[^125]: *Report and Order*, 14 FCC Rcd at 12610, ¶ 115.

[^126]: *Report and Order*, 14 FCC Rcd at 12610, ¶ 116.

[^127]: UCC Petition at 13.

[^128]: UCC Petition at 14.

[^129]: *Report and Order*, 14 FCC Rcd at 12610, ¶ 116.

[^130]: 5 U.S.C. § 601 *et seq*.

[^131]: 5 U.S.C. § 604.

[^132]: *See* 5 U.S.C. § 603. Congress amended the RFA, *see* 5 U.S.C. §
    601 *et. seq*., by the Contract With America Advancement Act of
    1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of
    the CWAAA is the Small Business Regulatory Enforcement Fairness Act
    of 1996 (SBREFA).

[^133]: The IRFA in Appendix A of the *Notice of Proposed Rule Making*,
    10 FCC Rcd 3606, 3655-56 (1995), was incorporated pursuant to Pub.
    L. No. 96-354, § 603, 94 Stat. 1165 (1980).

[^134]: *Further Notice*, 11 FCC Rcd 19895, 19919-27 (1996).

[^135]: *Report and Order*, 14 FCC Rcd 12559, 12642-55 (1999).

[^136]: *See* 5 U.S.C. § 604.

[^137]: UCC Petition at 12-13.

[^138]: *See* *supra* at ¶¶ 40-44.

[^139]: *Report and Order*, 14 FCC Rcd at 12643-49.

[^140]: *See supra* ¶¶ 33-35.

[^141]: 5 U.S.C. § 603(c).

[^142]: *See* 5 U.S.C. § 801(a)(1)(A).

[^143]: *See* 5 U.S.C. § 604(b).

[^144]: *Statement of Chairman William E. Kennard, Attribution Report
    and Order*, at 2.

[^145]: In the Matter of Applications of Cumulus Licensing Corp. and
    Clear Channel Broadcasting Licenses, Inc., File Nos.
    BAL/BALH-20000728ACS-ADT (rel. Jan. 17, 2001).

[^146]: Under existing Commission rules, only LMAs that cover more than
    15% of a station's broadcast week and are brokered by a same-market
    station or a party meeting our EDP attribution standard must be
    filed with the Commission. We could have modestly expanded this
    filing obligation by requiring a brokered station to forward LMAs to
    the Commission if the station is a party to multiple LMAs that,
    taken together, cover more than 15% of the station's weekly
    broadcast schedule, even if no single LMA covers more than 15% of
    the brokered station's weekly schedule.

[^147]: *See* Statement of Commissioner Harold W. Furchtgott-Roth,
    Dissenting in Part and Concurring in Part. *Report & Order, In the
    Matter of Review of the Commission's Regulations Governing
    Attribution of Broadcast and Cable/MDS Interests; Review of the
    Commission's Regulations and Policies Affecting Investment in the
    Broadcast Industry; and Reexamination of the Commission's
    Cross-Interest Policy*, 14 FCC Rcd. 12559 (1999).

[^148]: *See supra* at ¶¶ 50-55.