WHITE PAPER ON EQUAL TRANSACTIONAL OPPORTUNITY

Transactional Transparency

and Outreach Subcommittee,

FCC Advisory Committee on

Diversity for the Digital Age

> June 14, 2004

This White Paper addresses "transactional transparency" -- the extent to
which those not in the "old boy network" can learn of potential deals
and participate as bidders. At the heart of transactional transparency
is equal transactional opportunity -- the principle that discrimination
based on an entrepreneur's race or gender must no longer be allowed to
serve as a barrier to entry and growth. It is offered to provide
background attendant to the Advisory Committee on Diversity's
consideration of the Subcommittee's Recommendation for the Adoption of
an Equal Transactional Opportunity Rule.

**[Equal Transactional Opportunity Is Essential To Minority And Female
Ownership]{.underline}**

Entrepreneurs must know of potential deals in order to make deals. Yet
the importance of equal transactional opportunity extends far beyond
that obvious point:

[First, transparency promotes entrepreneurship]{.underline}. Capital
flows toward opportunity, and the starting point for opportunity is
nondiscrimination. Investors and other capital providers deserve to be
secure in the knowledge that the federal government stands squarely
behind the principle that no one may be deprived of transactional
information because of his or her race and gender. Investors,
particularly venture firms, like to permit an entrepreneur to go into
the marketplace and find the best deals, rather than be funded one deal
at a time. An entrepreneur's ability to keep finding the best deals is
essential to building a company of regional or national scope.
Consequently, doubts about entrepreneur's access to opportunity will
limit the entrepreneur's ability to respond quickly with cash when
opportunities do present themselves. It follows that poor access to deal
flow and poor access to capital are mutually reinforcing maladies, and
that strong access to deal flow and strong access to capital are
mutually reinforcing remedies.

[Second, discrimination is anticompetitive and inefficient]{.underline}.
If new entrepreneurs representing new constituencies are unable to grow,
the industry will suffer a loss of intellectual capital, creativity and
cultural competence. The nonparticipation of minorities and women in
ownership is inefficient as a means of organizing production in a
business uniquely based on talent. Since talent is equally distributed
throughout society, the nonparticipation of large sectors of society in
the generation of production of the fruits of talent is inherently
inefficient. Further, entrepreneurial companies typically reach maturity
in a generation; thus, inhibiting new entrepreneurs today will leave the
nation in 2028 with a broadcasting industry that's completely incapable
of addressing the needs of our (by then) approximately 40% minority
population.

[Third, discrimination is beneath the moral dignity of FCC
licensees]{.underline}. Every communications company's most significant
regulatory steps are the purchase and sale of its assets \-- and yet it
is at these moments that too many licensees display a lack of character.
The public expects a licensee to stand for certain principles: it should
not incite riots, promote drug use, knowingly promote a fraud to the
public, or discriminate in employment. Just as an apartment house owner
is not permitted to manipulate the racial composition of his
neighborhood by discriminating in rentals, so too should a licensee be
precluded from inhibiting diversity in his "neighborhood" on the wire or
spectrum by engaging in discrimination.

**[Do Sellers Discriminate?]{.underline}**

No one can deny that the close-knit, exclusive, and nearly homogeneous
group of FCC licensees has replicated itself across generations.
Minority and female entrepreneurs simply do not possess full access to
the networking opportunities enjoyed by other entrepreneurs. They do not
run in all of the same social circles. They do not attend the same
parties, belong to the same fraternities, or receive invitations to join
the same clubs. Indeed, they are commonly barred from joining certain
"private" clubs that are actually proud of their unseemly traditions of
race or gender exclusion.

Thus, it should surprise no one that many minorities and women, despite
their qualifications, cannot find FCC-regulated assets to buy.
Minorities and women learn about potential deals well after other
companies hear about them \-- often only when they read the tombstone
ads in the trade press. At times, minorities are presented deals that
are "good for minorities" only after non-minorities have passed on them.
In the case of broadcasting, minorities are sometimes approached only
with urban or Spanish stations, even though they are well qualified to
run stations with any type of programming. Virtually any minority- or
woman-owned broadcaster can cite examples of deals she did not hear
about until it was too late to bid, where there is no rational
explanation for her lack of knowledge of the deal. The Minority Media
and Telecommunications Council (MMTC) reports that it is aware of, or
has experienced, at least six instances of intentional discrimination
since 2000. (It is noteworthy that in none of these instances was a
media broker involved.) Just these six instances cost minorities or
women millions of dollars in foregone opportunity.

No one should doubt that FCC licensees are much different from other
companies in their propensity to practice race and gender
discrimination. For example, although intentional discrimination in
broadcast and common carrier employment has been unlawful since 1969 and
1971 respectively, it still persists on a massive scale. A recent Ford
Foundation-sponsored study found that at the point of hire, 15% of
broadcasters discriminate intentionally against women, 20% against
African Americans and 24% against Hispanics; further, 30% of telephone
companies discriminate intentionally against women, 32% discriminate
intentionally against African Americans, and 25% discriminate
intentionally against Hispanics. Alfred W. Blumrosen and Ruth G.
Blumrosen, [The Reality of Intentional Job Discrimination in
Metropolitan America -- 1999]{.underline} (Rutgers University, 2002),
pp. 204-205. [See also]{.underline} Alisse Waterston [et
al.]{.underline}, \"A Look Towards Advancement: Minority Employment in
Cable,\" NAMIC Research and Policy Committee, August, 1999 (Summary),
finding that "\[s\]ystematic and institutional discrimination
remains....Nearly two out of five (37%) of NAMIC members could cite a
social/business disadvantage or systemic exclusion faced by ethnic or
racial minorities at their company, and a substantial one of out five
(20+/-%) of the NAMIC membership consistently perceive forms of
discrimination to occur at their companies. A solid group of minorities
(21%) and women (22%) perceive their respective personal attributes
(race/ethnicity; gender) have a negative impact on opportunities at
their companies." Some broadcasters resist integration so assiduously
that after a 2001 court decision striking the EEO rules ([MD/DC/DE
Broadcasters Association v. FCC]{.underline}, 236 F.3d 13, [rehearing
and rehearing en banc denied]{.underline}, 253 F.3d 732 (D.C. Cir.
2001), [cert. denied sub nom.]{.underline} [MMTC v. FCC]{.underline},
534 U.S. 1113 (2002)), 42% of broadcast job postings on state
association job sites actually went to the trouble to delete the
formerly ubiquitous (and virtually cost-free) "EOE" (equal opportunity
employer) tag. EEO Supporters Reply Comments in MM Docket 98-204
(Broadcast EEO), filed May 29, 2002, pp. 28-30.

The low priority given to avoiding discrimination in broadcasting is
illustrated by an astonishing 1998 incident involving a very large
market FM "AOR" radio station. For over five weeks, the morning team
(with the approval of senior station officials) aired daily a
promotional giveaway of miniature garden hoes painted black. African
American employees were required to package and ship hundreds of these
\"black hoes\" to advertisers and listeners. Once it was exposed, the
promotion was roundly condemned by NOW and the NAACP. Ultimately the
licensee terminated a middle manager believed to have been involved in
the promotion. Three African American employees sued the licensee, later
settling out of court. The radio station is the parent company's
flagship FM station in the parent company's home city. Yet except for
the station\'s promotion director, every one of the hundreds of company
executives who heard the promotion on the radio did nothing about it.

This incident can be regarded as broadcasting's "Kitty Genovese."
Hundreds of well-meaning broadcast executives heard these broadcasts.
Many of the executives who heard the broadcasts were minorities and
women. Yet only one executive possessed both the sensitivity and the
fortitude to object.

To be sure, estimates vary on the extent to which transactional
discrimination arises. Yet even if it were rare, its impact when it does
occur can be devastating. For a minority or female entrepreneur, a
single act of transactional discrimination can be the difference between
success or failure.

**[Why Do Sellers Discriminate?]{.underline}**

It seems counterintuitive that a seller would deliberately reduce the
number of qualified buyers and thereby rob himself of the maximum price
for his facility. Yet it happens, for the same reasons that
discrimination in education, public accommodations, housing and even
health care happens.

There seem to be three scenarios that give rise to intentional
discrimination in FCC-regulated transactions.

[Discrimination Scenario #1: Prejudice Indulged Irrespective Of
Cost.]{.underline} In this scenario, the discriminator recognizes that
excluding qualified bidders will depress the asset's selling price, but
he is prepared to pay the economic cost of indulging his personal
prejudices. For some people, the non-pecuniary satisfaction of indulging
their prejudices can outweigh their desire for the optimal economic
return. This type of individual is personified by the manager of an
Annapolis Denny's restaurant who did not care about the potential loss
of income caused by not serving breakfast to African American secret
service agents.

[Discrimination Scenario #2: Prejudice Indulged At Little Perceived
Cost.]{.underline} This scenario arises when a discriminator
irrationally believes that the exclusion of minorities and women will
cost him little or nothing. He may feel that any bidder will pay full
value in a seller's market, or he may reason that there are so few
minority and woman entrepreneurs in his industry that their exclusion
from a private auction will not materially affect the selling price.
Thus, he sees no downside to indulging his prejudices. Such individuals
call to mind the majority of White voters in Alabama and Georgia who
recently cast ballots against the (symbolic) repeals of their respective
state constitutions' bans on interracial marriage.

[Discrimination Scenario #3: Deliberate, Irrational
Stereotyping.]{.underline} In this scenario, the discriminator acts
intentionally, but his actions are not based on hatred of minorities and
women. Instead, he has internalized any of several invidious stereotypes
about minorities and women. For example, in the case of broadcasting, a
discriminator may "reason" that (1) there are not enough Hispanics in
the market to support a Spanish language station, (2) Hispanic
broadcasters would not be interested in owning a station that broadcasts
in English, and therefore (3) there is no reason to solicit potential
Hispanic buyers. Examined in the crucible of formal logic, this
syllogism is valid, but the first premise is often untrue and the second
premise is always untrue. The consequence of this kind of stereotyping
is that qualified Hispanics do not learn that the station was on the
market.

**[Why Are Transactional Discrimination Complaints Only Infrequently
Filed?]{.underline}**

Complaints are seldom filed for at least five reasons.

[First]{.underline}, as shown in the "black hoes" incident described
above, discrimination is widely tolerated in the close-knit broadcasting
industry. Comparable incidents in the cable, wireless and wireline
industries illustrate that these industries are not immune to
discrimination either. There are no incentives for those aware of
discrimination to report it. A well meaning person who hears a colleague
express discriminatory animus has nothing to gain, and everything to
lose professionally and socially, by exposing the matter.

[Second]{.underline}, sale negotiations are always confidential. Even
when a person hears a seller express a discriminatory reason for failing
to consider an offer to purchase, or failing to solicit certain
potential buyers, he or she is may be legally precluded from coming
forward.

[Third]{.underline}, transactional discrimination is easy to conceal.
Those harboring discriminatory intentions are usually judicious enough
not to express them openly. Victims of discrimination are seldom aware
when it has happened to them.

[Fourth]{.underline}, almost no rational entrepreneur would ever lodge a
discrimination complaint, and few communications attorneys would take
such a case. Such an extraordinary step would brand the complainant and
her counsel as troublemakers and ensure that they would seldom hear of
deals in the future. Much like victims of sexual assaults, the
discrimination victim will inevitably be blamed for the incident, or be
falsely accused of harboring improper motives. In this climate, it is
more judicious to "let it go" and pray for fair treatment next time.

[Fifth]{.underline}, under currently operative regulatory policy, the
FCC is unlikely ever to pursue a complaint of transactional
discrimination. No rule expressly bars this practice; thus,
discriminators can claim that they lack notice that their conduct is
unlawful. The standard for just making out a [prima facie]{.underline}
case is extremely high: one must produce a sworn declaration from
someone with personal knowledge. Such a person ([e.g.]{.underline}, the
owner's confidential secretary, or the principal of the company chosen
by a discriminator to buy its station) almost never comes forward.
Witnesses are afforded no protection, not even confidentiality to the
extent allowable under the right of confrontation. If the FCC ever did
hold a hearing, it would take years and cost hundreds of thousands of
dollars. Even if discrimination were proved, the FCC could not order the
discriminator to pay damages; instead, it can only issue admonishments,
forfeitures, short-term renewals, revocations and non-renewals of
licenses. Most likely, the FCC would only slap the wrongdoer's wrist.
Between 1972 and 1995 the FCC held fourteen EEO hearings, and not once,
in the three cases in which it ultimately revoked or non-renewed a
license, did it find that discrimination, by itself, justified that
remedy.

### Is There FCC Case Precedent Addressing Equal Transactional Opportunity?

Even in the absence of a specific proscriptive regulation, the FCC on
occasion receives complaints of transactional discrimination. These
complaints have been framed around ancillary questions such as the EEO
rule, character qualifications, or contractual obligations. There have
been four such complaints in 30 years, and while the FCC found in each
case that it had jurisdiction over the subject matter, it failed each
time to investigate. [See]{.underline} [Univision Holdings,
Inc.]{.underline}, 7 FCC Rcd 6672, 6683-6684 (1992), [petition for
recon. dismissed]{.underline}, 8 FCC Rcd 3931 (1993), [aff'd. by
Memorandum sub nom.]{.underline} [National Hispanic Media Coalition v.
FCC]{.underline}, No. 92-1549 (D.C. Cir., filed October 30, 1992)
(finding no discrimination in the sale of TV stations and a TV network);
[Federal Broadcasting System, Inc.]{.underline}, 62 FCC2d 861, 872-873
(Rev. Bd. 1977) (a radio station case, to the same effect);
[cf.]{.underline} [NLT Corp.]{.underline}, 52 RR2d 817, 819 (1982)
(rejecting an allegation that a competing TV station intended to
commence a racially motivated advertiser boycott against an African
American owned potential purchaser of another TV station) and [Evening
Star Broadcasting Company]{.underline}, 68 FCC2d 136-140, and 149-155
(Dissenting Statement of Commissioner Joseph R. Fogarty), [recon.
denied]{.underline}, 68 FCC2d 158, 159-163 (1978) (discussing alleged
breach of a provision of a citizens agreement that provided that the
seller would consider minority buyers for its newspaper).

A close analogy to transactional discrimination is the exclusive use of
word-of-mouth job recruitment performed by members of a racially
homogeneous staff. Federal courts regard this practice as inherently
discriminatory, and the FCC discourages it. [See, e.g.]{.underline},
[Thomas v. Washington County Sch. Bd.]{.underline}, 915 F.2d 922, 925
(4th Cir. 1990) ("\[c\]ourts generally agree that, whatever the benefits
of nepotism and word-of-mouth hiring, those benefits are outweighed by
the goal of providing everyone with equal opportunities for
employment"); [Jacor Broadcasting Corp.]{.underline}, 12 FCC Rcd 7934,
7939 ¶14 (1997) (FCC was "troubled that a significant number of the
stations' hires, for which recruitment efforts were made, resulted from
staff or client referrals" (fn. omitted)); [Walton Broadcasting,
Inc.]{.underline}, 78 FCC2d 857, 875, [recon. denied]{.underline}, 83
FCC2d 440 (1980) (condemning "employment practices which discriminated
against minority groups in recruitment and employment" including "'word
of mouth' referrals from a predominately white work force, which, while
unintended, effectively discriminated against minority group
employment.") In 2002, when the Commission adopted new broadcast and
cable EEO rules, it affirmed that ("\[o\]ur purpose is to ensure that
word-of-mouth recruitment practices are not the sole method of
recruitment and that all members of the public have an opportunity to
compete for available jobs." [Review of the Commission's Broadcast and
Cable Equal Employment Opportunity Rules and Policies (Second R&O and
Third NPRM)]{.underline}, 17 FCC Rcd 24018, 24052 ¶101 (2002)
(reconsideration pending) ("[2002 EEO Second R&O]{.underline}").

Thus, if the FCC adopted an equal transactional opportunity rule, it
would not be writing on a completely blank slate. Caselaw arising from
Title II and Title VII of the Civil Rights Act of 1964 (proscribing
public accommodations and employment discrimination, respectively)
helped frame the development of housing nondiscrimination law after the
passage of the Fair Housing Act in 1968. In like manner, the FCC should
be able to import some of its 35 years of equal employment jurisprudence
into the equal transactional context.

**[Would An Equal Transactional Opportunity Rule Be
Effective?]{.underline}**

The three discrimination scenarios above ([see]{.underline} pp. 3-4
[supra]{.underline}) illuminate why an equal transactional rule would
have a substantial and beneficial impact. Many licensees in Scenario #1
(prejudice indulged irrespective of cost) will never comply with an
equal transactional opportunity rule. However, most licensees in
Scenario #2 (prejudice indulged at little perceived cost) would comply,
albeit grudgingly. Licensees in Scenario #3 (deliberate irrational
stereotyping), perhaps the most common of the scenarios, are very likely
to reform their behavior in order to comply with an equal transactional
opportunity rule.

Broadcasting presents an example of an industry that would be deeply
transformed if sellers studiously avoided discrimination. It is well
established that minority broadcasters typically own standalone
properties with inferior technical facilities, and that they face
extensive advertiser discrimination. [See]{.underline} MMTC, "The
Disparity between Minority and Nonminority Radio Ownership" (October 30,
2003); Kofi Ofori, "When Being No. 1 Is Not Enough: The Impact of
Advertising Practices on Minority-Owned and Minority-Formatted Broadcast
Stations (Civil Rights Forum on Communications Policy, 1999). Financial
institutions realize that a broadcaster who can survive in this climate
is an excellent businessperson. Thus, when minorities are solicited and
afforded bidding opportunities equal to those of non-minority companies,
minorities routinely succeed in securing and closing transactions. A
prime example of this was Clear Channel's 1999 dispositions of 110
stations attendant to the AMFM merger. Minorities were invited into the
process as soon as it began, and their bids were considered on the same
basis as the bids of large, incumbent non-minority companies.
Ultimately, minorities purchased 40 of these stations.

When the FCC adopted the broadcast EEO rule in 1969, many doubted that
it would significantly reform the industry. Opponents of the rule
invoked old saws like "you can't legislate morality" or maintained that
the rule was "burdensome" and would provoke resentment and thus
noncompliance among broadcasters, or claimed that the rule in many
respects duplicated Title VII and thus would have little impact. These
predictions each proved wrong. Instead, minority broadcast employment
went from 5% in 1971 to 19% in 1998 (the last year in which statistics
were kept). Even the strongest opponents of the EEO rule do not deny
that the rule has transformed the industry in a generation.

## FCC Decisions Relating To Transactional Transparency And Equal Opportunity

Efforts to promote equal opportunity in transactions would have been
futile during the first three generations of broadcasting. In 1960, for
example, three clergymen, including Dr. Everett Parker of the Office of
Communication of the United Church of Christ, visited NAB Executive
Director (and former Florida governor) Leroy Collins, a racial moderate,
to offer an amendment to the NAB Code requiring stations to refer to
African Americans with courtesy titles ([e.g.]{.underline} Mr. or Mrs.
Jones rather than "James" or "Edna.") Collins assured the clergymen that
he was confident that the NAB Board would adopt the amendment, and that
the vote would be unanimous. As it turned out, half of Collins'
prediction was accurate. The amendment was defeated, but the vote was
indeed unanimous.

The first effort to promote transactional transparency in broadcasting
occurred in 1978, when Commissioner Benjamin Hooks proposed that all
potential broadcast sales be publicized for 45 days so that all
qualified entities would have an opportunity to bid. This well-intended
proposal faced an entirely rational obstacle: sellers' interest in
confidentiality. Considerable time may elapse between the day a station
is offered for sale and the day of the closing. During this time, the
staff may depart, thereby impairing the value of the property. On this
basis, the FCC rejected Commissioner Hooks' proposal. [Public Notice of
Intent to Sell Broadcast Station]{.underline}, 43 RR2d 1 (1978).

Another effort to promote transactional transparency bore fruit in the
1999 television duopoly rulemaking proceeding when the FCC adopted the
"Failing Station Solicitation Rule" (the "FSSR"). [Review of the
Commission's Regulations Governing Television Broadcasting
(R&O)]{.underline}, 14 FCC Rcd 12903, 12939 ¶81 and 12941 ¶86 (1999)
(subsequent history omitted). Under the FSSR, before a television
duopoly can be created by invocation of the "failing station", "failed
station" or "unbuilt station" exceptions to the duopoly rule, an
applicant must show that "active and serious efforts" were made to sell
the station or permit to buyers outside the market. This initiative,
adopted at the urging of the NTIA, BET, MMTC and others, was premised on
the recognition that in-market duopoly synergies are not the only way to
build value in a broadcast company. For example, an out of market buyer
might build value based on regional operations, language, race or
culture.

In its 2002 broadcast ownership rulemaking decision [Omnibus Report and
Order]{.underline}, the Commission undid its 1999 decision to adopt the
FSSR. [2002 Biennial Regulatory Review - Review of the Commission's
Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section
202 of the Telecommunications Act of 1996 (R&O and NPRM),]{.underline}
18 FCC Rcd 13620, 13706 ¶225 (2003) ("[Omnibus Report and
Order"]{.underline}), [on appeal in]{.underline} [Prometheus Radio
Project v. FCC]{.underline}, 3d Cir. No. 03-3388 (oral argument held
February 11, 2004). The FSSR had been created expressly to protect
minority and female ownership. It was the only structural ownership rule
having that purpose, it was only four years old, and the record
contained no evidence that the policy was harmful. When it repealed the
FSSR, the FCC did not mention any of these factors. The FSSR was not
mentioned in the notice of proposed rulemaking in the omnibus ownership
proceeding, and only two parties (briefly and casually) objected to the
rule.

Civil rights organizations raised the issue of transactional
discrimination in a 1984 FCC public hearing, a 1990 petition for
rulemaking, and in EEO rulemaking comments in 1996 and in 1999. In 2000,
the FCC condemned transactional discrimination but declined to address
the issue in the EEO docket. [Review of the Commission's Broadcast and
Cable Equal Employment Opportunity Rules and Policies
(R&O)]{.underline}, 15 FCC Rcd 2329, 2362 ¶73 (2000) (subsequent history
omitted) ("\[w\]hile these racist practices are repugnant and may be, in
certain circumstances, inconsistent with our [Character Policy
Statement]{.underline}, we will not separately address these matters in
this rulemaking because they are beyond the scope of this proceeding"
(fn omitted)).

### MMTC's 2003 Equal Transactional Opportunity Proposal

In the omnibus broadcast ownership proceeding, MMTC proposed an equal
transactional opportunity rule. Joining MMTC were sixteen other national
organizations, including LULAC, the National Council of La Raza, the
National Urban League, UNITY: Journalists of Color, and the National
Council of Churches. [See]{.underline}, [inter alia]{.underline}, MMTC
Comments in MB Docket 02-277 (filed January 2, 2003), pp. 115-120; [Ex
Parte]{.underline} Letter, April 28, 2003, pp. 11-19.

MMTC's proposal drew drawn no opposition. Indeed, this appears to be the
first occasion in civil rights history when no opposition surfaced after
a federal authority was asked to adopt a nondiscrimination rule or
statute. However, the FCC declared:

> While such a rule is worthy of further exploration, we decline to
> adopt a rule without further consideration of [its efficacy as well as
> any direct or inadvertent effects on the value and alienability of
> broadcast licenses]{.underline}. We see merit in encouraging
> transparency in dealmaking and transaction brokerage, consistent with
> business realities. We also reiterate that discriminatory actions in
> this, and any other context, are contrary to the public interest. For
> these reasons, we intend to refer the question of how best to ensure
> that interested buyers are aware of broadcast properties for sale to
> the Advisory Committee on Diversity for further inquiry and will
> carefully review any recommendations this Committee may proffer. As
> soon as the Commission receives authorization to form this committee
> we will ask it to make consideration of this issue among its top
> priorities.

[Omnibus Report and Order]{.underline}, 18 FCC Rcd 13620, 13637 ¶52.
Based on our interviews with industry experts, the Subcommittee believes
that the Commission need not fear the potential consequences expressed
in the [Omnibus Report and Order]{.underline}:

1.  ["Its efficacy."]{.underline} The majority of broadcasters do not
    discriminate now. These broadcasters do not need a equal
    transactional opportunity rule. On the other hand, many broadcasters
    will discriminate covertly irrespective of whether there is an equal
    transactional opportunity rule. However, even a rule that will
    seldom lead to enforcement actions is likely to have a substantial
    prophylactic effect on broadcasters who might discriminate but for
    their trepidation about signing, under penalty of perjury, a
    statement that they know to be false. Most broadcast regulation is
    premised on the assumption that broadcasters will obey the rules
    even without close supervision, and this rule is no different.
    [See]{.underline} p. 4 [supra]{.underline} (discussing three
    scenarios of discrimination, and explaining why all but the most
    virulent discriminators would probably obey an equal transactional
    opportunity rule).

2.  ["Value...of broadcast licenses."]{.underline} Self-evidently,
    nondiscrimination does not adversely impact the value of broadcast
    licenses: rather, it is discrimination that has this consequence.
    Discrimination artificially reduces the size of the pool of
    potential buyers, thereby depressing demand and reducing property
    values. The real estate industry's experience in the wake of the
    1968 Fair Housing Act showed that, notwithstanding the predictions
    of segregationists, nondiscrimination in the sale of housing does
    not reduce property values. [See, e.g.]{.underline}, Douglas S.
    Massey & Nancy Denton, [American Apartheid, Segregation and the
    Making of the Underclass]{.underline} (1993), p. 95, noting that
    while many Whites believe that property values fall once African
    Americans integrate a neighborhood, "evidence suggests the opposite,
    at least during the transition process."

3.  ["Alienability of broadcast licenses."]{.underline} There is no
    reason to believe that White broadcasters would refuse to sell their
    stations simply because they would have to permit qualified
    minorities to take the station tour and offer bids. To be sure,
    White homeowners sometimes do refuse to sell to minorities;
    [see]{.underline} Alex M. Johnson, Jr., "Shaping American
    Communities: Segregation, Housing and the Urban Poor: How Race and
    Poverty Intersect to Prevent Integration: Destabilizing Race as a
    Vehicle to Integrate Neighborhoods," 143 [U. Pa. L.
    Rev.]{.underline} 1595, 1620-21 (May, 1995) (explaining that even
    when Whites move out of a neighborhood, they still wish to maintain
    friendships with their to-be-former neighbors (whose children may be
    their children's friends) and thus avoid the loss of friendship that
    the neighbors "can impose on the allegedly 'traitorous' white
    neighbor who sells her home to a Black.") However, broadcasters lack
    this motive for discrimination. Indeed, the Commission's policies
    against restraints on alienation would actually militate in favor of
    a nondiscrimination policy. The Commission frowns on arrangements
    under which licensees impose on themselves irrational limitations on
    the scope of the eligible class of purchasers of their facilities.
    [See, e.g.]{.underline}, [Applications of Advanced Mobile Phone
    Service, Inc.]{.underline}, 53 RR2d 1127 (1983) (voiding partnership
    agreement's restriction against alienation to non-wireline
    carriers). A nondiscrimination rule would preclude the most
    irrational of such licensee-imposed limitations.

### The Subcommittee's Proposed Equal Transactional Opportunity Rule

Intentional race and gender discrimination in transactions should be
against the FCC's rules. An equal transactional opportunity rule should
be easy to understand; for the most part, its impact will be
prophylactic, since licensees generally abide by regulations adopted and
enforced by the FCC.

The original proposal for an equal transactional opportunity rule,
submitted by MMTC, contemplated a rule that would be implemented by a
"checked box" certification by the seller on an FCC application to
assign or transfer assets. However, it has been properly noted by the
National Association of Media Brokers that such a checked box could be
misconstrued as an invitation to challenges directed against
transactions.

It appears possible that a meritless (even if well-intended) challenge
to a clean transaction might have an adverse impact on the transactional
process that extends beyond that incident.  In particular, reasonable
people might fear that a rare challenge to a valid transaction could add
an unknown amount to the cost of capital for all transactions.

Bearing this in mind, in the Recommendation it is offering this date,
the Subcommittee is recommending a ban on discrimination, without a
checked box. We believe that this approach would deter or sanction
discriminators while leaving non-discriminators unharmed.

**\* \* \* \* \***