# Presentation: 490504

## FCC ADVISORY COMMITTEE ON DIVERSITY FOR COMMUNICATIONS IN THE DIGITAL AGENEW TECHNOLOGIES SUB-COMMITTEE

*January 26, 2004*

## DDAC SUBCOMMITTEE -TECHNOLOGY 

**TECHNOLOGY SUBCOMMITTEE OBJECTIVES**
- Assess what ownership and career advancement opportunities available in new and emerging technologies (e.g. broadband, digital television, cable, satellite, low power, FM) and the convergence of these technologies; and
- Develop recommendations for facilitating opportunities for minorities and women in new industries as they form.
**CRITICAL SUCCESS FACTORS**
- Linkage between “technology opportunities” and financing opportunities
- Identifying opportunities that drive technology AND investment interest
- Managing the “quick success” expectations
- Focusing on opportunities for sustainable success--- not get rich quick type fixes

## PHASED APPROACH

**PHASE 1:  WHAT OPPORTUNITIES EXIST RIGHT NOW?  LOW HANGING FRUIT**
**PHASE 2:  FOCUS ON TECHNOLOGY DRIVEN DEVELOPMENT OPPORTUNITIES**
- Focus in on incentive based and regulatory policy (versus regulation) based opportunities
- Target Recommendations mid to late 2004
**PHASE 3:  WHAT DOES THE LONG-TERM FUTURE HOLD? **
- Commercial
- “Petri-Dish” Research and Development opportunities for minorities
- Work with incumbents like Microsoft, Hewlett Packard, General Electric to identify “opportunities” to outsource development and delivery of technological solutions for their business needs
- Education
- Driving the advancement of scholarships and research opportunities at the graduate level
- Examples:  Emory’s “New Ventures” program at the Goizuetta Business School
- Regulation
- Focusing in establishing long-term regulatory programs and policies to drive and foster nascent technology
- Target Recommendations early 2005

## GENERAL PROGRESS REPORT

**LEVERAGED “POST-MORTEM FOCUS GROUP” ANALYSIS TO FORMULATE INITIAL FINDINGS**
- Interviewed minority companies in effort to get “real life” feedback on hurdles, best practices, and opportunities
- Suppliers
- Ascension Integration
- GlobeNet
- The Wilkins Group
- Retail Service Providers
- North Point
- UrbanComm
- Savoy
**IDENTIFIED LOW HANGING FRUIT RECOMMENDATIONS AND REFINED OPPORTUNITES FOR LONG TERM FOCUS**
- Identified initial recommendations in general and in the broadcast communications sector

## INITIAL ASSESSMENT

**MEDIA COMMUNICATIONS **
*Radio*
- Limited minority ownership (4.2% as of 2001)
- Limited to “Second class” facilities
- Most minority owned radio stations were AM stations (51.6% as of 2001)
- Minority owned AM stations are 36% more likely to operate at the less desirable frequencies
- Limited access to licensing in non-dominant communities
- Minorities are 37% less likely to be licensed in non-dominant communities
*Television*
- Limited minority ownership (1.5% as of 2002 – Highpower; 10% as of 2002 – Low Power)
- Minority ownership growth stunted by relaxation of broadcast ownership caps

## INITIAL ASSESSMENT

**TELECOMMUNICATIONS **
***Reporting and Analysis Roadblocks***
- Difficult to assess actual minority participation due to limited reports
- Statistical data focused primarily on “communications” ownership in general, specifically media communications and wireless communications
- Limited to using reports on  initial market entry barriers research focused on broadcasting and wireless as a paradigm for common carrier and cable providers
***Initial Assessment***
- Aside from the retail wireless and PCS sector, the primary minority participation in the supplier chain, rather than in the retail segment

## OTHER OBSERVATIONS

**BROADCAST COMMUNICATIONS VS TELECOMMUNICATIONS**
- Though minorities are historically under-represented in both areas, the minority representation in the broadcast communications field appears to be more common due to the following factors:
**Ability to leverage minority centered content**:  Broadcast communications allows minorities the ability to leverage minority based content to capture market share
- Telecommunications is typically content neutral
**Capital Intensiveness**:  Broadcast communications entry requirements tend to be less capital intensive than telecommunications

## POST MORTEMS

**WHAT WORKED?**
***Enterprise Focused Incentive To Deal Programs***
***Minority Tax Certificate Program***
- Reports indicate that minority broadcast and cable ownership grew from 40 minorities owned licenses in 1978 to 356 in 1995 under the Tax Certificate Program
***Targeting Underserved Retail Opportunities***
***Content based services formatted to serve public interest needs***
- Minority owned communications  businesses that focused on providing diversity in programming
***Lifting the Freeze on the Filing of Applications for Major Modifications of AM Stations and New Construction of AM Stations***

**WHAT DIDN’T? **
***Bidding Credits***
- Though designed to increase participation in wireless auctions by small, minority, and women owned businesses were ineffective
- Auction block allocation and scheduling process, coupled with “generous” financing structure for all participants made bidding credits a “moot” issue
***“******Over” Regulation***
- Forcing “auction” processes on uncontested spectrum
- Incumbents typically already had spectrum from “pre-auction” days as such, these processes increased minority and small business barriers to entry and had little to no effect on incumbent

## PERCEIVED HURDLES

**BROADCAST**
***FINANCING***:  Limited access to capital.
***DISCRIMINATION***:  Specifically, advertising and capital markets have excluded minority formatted and owned media stations.
***REGULATORY***:  Entry barriers raised by cost prohibitive regulatory processes such as auctions.
***LACK OF INDUSTRY EXPERIENCE:*****  **Industry experience and successful track records key to success in acquisition of capital and general market entry

**TELECOMMUNICATIONS**** **
***COMPETITION:***  Entrenched and powerful incumbents
- Overcoming the service inferiority perception
***CAPITAL***:  High capital and investment requirements
**Financial Distress.**  Investors are shying away from telecom in general
***SCALABILITY:***  Success requires ability to leverage economies of scale and geographic scope--- traits that small businesses usually don’t have
***MARKET DOWNTURN***
**Reduced Demand/Supply Chain Glut. **Over capacity and overbuilding coupled with economic downturn

## PERCEIVED NEEDS

**BROADCAST**
*Engineering Deregulation*
*Talent Development*
*Leverage Technology*

**TELECOMMUNICATIONS **
*Access to Strategic Partnerships*
*Regulatory Protection for Competition and Nascent Technology*
*Opportunities to attain scalability*

## PERCEIVED BUSINESS OPPORTUNITIES

**BROADCAST**
*MOVE UP THE FREQUENCY STREAM:***  **Establish medium powered FM stations and AM stations with expanded band
*LEVERAGE CONTENT DIVERSITY:***  **Continue to address the needs of underserved/underrepresented subscribers
*LEVERAGE TECHNOLOGY:  *Leverage the internet to drive market reach and subscriber base for print publications

**TELECOMMUNICATIONS **
***TRIPLE PLAY TRANSFORMATION DRIVERS***:  Convergence is unstoppable.  Wireless, Data and Broadband triple play opportunities still promising.
***SUPPLY CHAIN FOCUS***:  As large players reach aggressively for the triple play, minority suppliers can focus on
- Engineering, installation, network upgrades
- IP applications
- Removing “last mile” bottlenecks
***GAP FILLER***:  Focus on supplier opportunities to resolve capability gaps for large enterprises
- Examples:  Transport to IP based service providers; network build-out partnerships with Wireless carriers; cable company “last mile” upgrades

## LOW HANGING FRUIT RECOMMENDATIONS

**General Technology Deployment – No Rule Changes or Legislation Required**
- Expand the working relationship between the FCC and SBA, as well as the FCC and other government agencies (e.g., NTIA, Department of Commerce)
- Increase awareness of emerging technology opportunities for minority and small businesses
- Sponsorship of an annual FCC/SBA conference on minority/small businesses and emerging technologies such as wireless, VoIP, broadband, etc.
- Potential Conference in the Fall of 2004

## LOW HANGING FRUIT RECOMMENDATIONS

**Spectrum Allocation**
- No rule changes or legislation required
- Establish an FCC database and/or work with outside groups to establish an information clearinghouse of updated license sales, spectrum leasing, and other communications-related opportunities for minority and small businesses** **
**Engineering Restrictions**
- Creation of medium powered AM and FM radio stations
- Relax the community of license and transmitter site rules to allow suburban facilities to move closer to their audiences
- Allow interference agreements between licenses or for a licensee with itself

## NEXT STEPS

***Finalize and Submit White Papers on Low Hanging Fruit Recommendations***
*Work with Access subcommittee to establish a Minority Supplier Program*
- Identify opportunities to leverage resources of the Asaba Group
- Enlist support of Top Tier Players (Cablevision, Charter, Comcast, Cox, Time Warner, Level 3, ILECs, IXCs
***Refine regulatory and legislative based recommendations***
***Leverage resources of the NNPA, NAHP, NABJ, NAHJ, AAJA and similar organizations to:***
- Research minority publishers needs to develop and maintain successful internet operations
- Focus in on private sector initiatives:
- Preserving and expanding NTIA’s TOP program
- Facilitating joint ventures with companies that dominate the internet
- Raising funds for training, including complex Internet site development and management intitiatives in the journalism schools of HBCUs and HSIs
***Explore Opportunities to Resuscitate the Telecommunications Ownership Diversity Act ***