**Summary of the Private Equity Panel Subcommittee**

**Meeting of January 20, 2004**

[Participants]{.underline}

Ed Shirley Fairview Capital Partners

Duane McKnight SynCom Management Company

Anita Stephens Opportunity Capital Partners

[Subcommittee Members]{.underline}

Lauren Tyler Quetzal/Chase Capital Partners

Ginger Lew Telecommunications Development Fund

Anthony Gee Carthage Venture Partners

The distinguished panelists, all partners in private equity and venture
capital funds, were asked to cover several key topics:

1)    Provide an overview of the history of private equity as related to
ethnic entrepreneurs and fund managers, with references to
specific communications funds.

2)    Discuss areas where ethnic entrepreneurs have had successful
entries and exits.

3)    Identify the general challenges in the market.

Mr. Shirley of Fairview Capital, provided an overview of historic
performance of private equity funds that invested in ethnically diverse
companies. Mr. Shirley is a former Board member of the National
Association of Investment Companies (NAIC) which is a trade association
of investment firms led by people of color. Mr. Shirley reported about a
recently completed study that was sponsored by NAIC and the Kauffman
Foundation. The study looked at the historic financial performance of
its member funds. Mr. Shirley was pleased to report that that VC backed
minority firms outperformed S&P 500, providing a 20 percent rate of
return. The study further found that such funds invested primarily in
broadcast, not broadband opportunities. A summary of the report is
attached to this submission.

The panelists identified four broad topics as follows.

[Access to Talented Entrepreneurs]{.underline}

All the panelists reported that there was a broad pool of talented
entrepreneurs. While in the past the pool of well known and established
communications entrepreneurs was relatively small, there is also an
emerging new generation of talented communications entrepreneurs who are
seeking capital.

[Access to talented investment professionals]{.underline}

All the panelists reported that there are more ethnically diverse
investment professionals than ever before, working in both minority and
general investment firms.

[Access to Capital]{.underline}

All the panelists cited the lack of access to capital as a major
impediment to ethnically diverse entrepreneurs being able to launch new
companies, and/or grow their existing companies. As the value of
broadcast properties have increased over the past few years,
acquisitions and start up costs have escalated dramatically.
Consolidation of broadcast properties by larger companies was cited as a
key factor. General investment funds were not viewed by ethnically
diverse entrepreneurs as being "accessible" or "available". Several
reasons were cited. First, general equity or senior lending companies
did not view investments in smaller broadcast deals as being
"attractive". Many of the properties available for purchase are in
second or third tier markets. Thus general equity firms have concerns
about future appreciation and current cash flows from smaller
properties. Second, there is a general lack of familiarity of investing
in ethnically diverse broadcast investments. Third, ethnically diverse
entrepreneurs lack access to the network of general investment funds.
Fourth, the investment opportunities may be too small to reach the
investment thresholds for larger funds. Fifth, a number of lenders
making loans to communications companies have left the marketplace thus
shrinking the pool of debt lenders.

While the number of ethnically diverse private equity funds has
increased, the amount of funds under management by general equity firms
is far greater. With ethnically diverse funds having limited funds,
entrepreneurs seeking to purchase higher valued properties do not have
access to sufficient capital.

[Access to Opportunity]{.underline}

All the panelists identified this as a major barrier to entry that, in
turn, creates a significant competitive disadvantage. Ethnically diverse
entrepreneurs are not "in the loop" to hear about attractive properties.
Without knowing what the opportunities are, their ability to participate
in such deals is severely limited. "They are not at the table, and when
they're not at the table, they can't play". When asked why entrepreneurs
don't hear about such opportunities, Mr. McKnight stated that there is a
perception that ethnically diverse entrepreneurs don't have access to
capital, and therefore don't have the money to participate. The same
sentiment was echoed by Ms. Stephens.

[Other issues that were identified]{.underline}

Over-regulation

Ms. Stephens and Mr. McKnight urged the FCC to be cautious about
adopting policies which may over-regulate minority or small business
community. One example that was cited was requiring 51% minority
ownership of broadcast properties. Panelists indicated that the 51%
threshold created significant problems from an investors' perspective as
it relates to valuations and subsequent exits.

Secondary market

One panelist mentioned that another problem entrepreneurs have with debt
financing is the secondary markets reluctance to accept loans that are
securitized against sales proceeds.

[Recommendations]{.underline}

Reinstatement of the Small Business Tax Certificate

All panelists recommended re-instatement of the Small Business Tax
Certificate. They stated that the Certificate created access to
opportunities that ethnically diverse entrepreneurs would not otherwise
have. The panelists recognized that certain modifications may need to be
implemented to rectify perceived problems with the previous programs.
Nonetheless, there was enthusiastic support for its re-instatement.

Institute Comparative Bid Component to the Spectrum Auction

Establish Set Asides for Small Businesses in the Spectrum Auction

Educate banking regulators

One panelist mentioned that bank regulators often do not understand the
collateralization and valuation of the assets of broadcast properties.
When such assets are undervalued or viewed as "risky", financial
entities are required to increase their reserves. This serves as a
disincentive to lenders to make loans to broadcast entrepreneurs.