UNITED STATES OF AMERICA

    * * * * *

    FEDERAL COMMUNICATIONS COMMISSION

    * * * * * 

    ADVISORY COMMITTEE ON DIVERSITY FOR

    COMMUNICATIONS IN THE DIGITAL AGE

    * * * * *

    JANUARY 26, 2004

    * * * * *

    The Advisory Committee met at the Commission meeting

    room at FCC headquarters, 445 12th Street, S.W.,

    at 2:00 p.m.

[ FAC MEMBERS PRESENT]{.underline}:

JENNY ALONZO

DECKER ANSTROM

ANDREW BARRETT

ANTHONY GEE

BENITA FITZGERALD-MOSLEY

PRISCILLA HILL-ARDOIN

STEVE HILLARD

DAVID HONIG

JAMIE HOWARD

JULIA JOHNSON

GINGER LEW

VONYA MCCANN

FRANCISCO MONTERO

HENRY RIVERA

RILEY TEMPLE

LAUREN TYLER

TERDEMA USSERY

ALEX WALLAU

KELVIN WESTBROOK

JIM WINSTON

ROSCOE YOUNG II

[ FAC EXPERTS PRESENT]{.underline}:

MARK DEVER

MICHELLE FARQUHAR

GRIFFIN JOHNSON

MARVA JOHNSON

[ FCC OFFICIALS PRESENT]{.underline}:

CHAIRMAN POWELL

COMMISSIONER ABERNATHY

COMMISSIONER ADELSTEIN

[FCC STAFF PRESENT]{.underline}:

JAMILA-BESS JOHNSON

ERIN BOONE

KYLE DIXON

SHERILLE ISMAIL

RICHARD LEE

JANE MAGO

MAUREEN MCLAUGHLIN

[PRESENTATION BY]{.underline}:

DAVID STEWARD

This transcript produced from tape(s) provided

by the Federal Communications Commission.

A-G-E-N-D-A

WELCOME 4

PRESENTATION

David Steward, Chairman and CEO of

Worldwide Technologies 25

SUBCOMMITTEE ON CAREER ADVANCEMENT

Jenny Alonzo 60

SUBCOMMITTEE ON NEW TECHNOLOGIES

Riley Temple 71

SUBCOMMITTEE ON FINANCIAL ISSUES

Ginger Lew 85

SUBCOMMITTEE ON TRANSACTIONAL TRANSPARENCY

Steve Hillard 112

    P-R-O-C-E-E-D-I-N-G-S

CHAIR JOHNSON: Good afternoon. I'm Julia Johnson, Chair of the Diversity
Federal Advisory Committee, and I wanted to officially call this meeting
to order.

If we could, we wanted to quickly, before we start our business, go
around the room and very quickly do introductions. I will then go
through a few logistical issues and we will begin immediately with our
welcoming remarks. So with that, Ginger?

MS. LEW: My name is Ginger Lew, Telecommunications Development Fund.

MS. MCCANN: Vonya McCann, Sprint.

MR. MONTERO: Francisco Montero, Fletcher, Heald and Hildreth.

MR. RIVERA: Henry Rivera of Vinson and Elkins.

MR. TEMPLE: Riley Temple, Halprin, Temple.

MR. WALLAU: Alex Wallau, ABC Television.

MS. FITZGERALD-MOSLEY: Benita Fitzgerald-Mosley, Women in Cable and
Telecommunications.

MR. STEWARD: David Steward, Worldwide Technologies.

MR. HONIG: David Honig, MMPC.

MR. HILLARD: Steve Hillard, Council Tree Communications.

MS. HILL-ARDOIN: Priscilla Hill-Ardoin, SBC.

MR. DEVER: I'm Mark Dever representing FACA.

MS. ALONZO: Jenny Alonzo, National Association, Multiethnicity in
Communications.

COMMISSIONER ADELSTEIN: Jonathan Adelstein \-- I know these guys.
Jonathan Adelstein, FCC.

COMMISSIONER ABERNATHY: Kathleen Abernathy, FCC.

CHAIRMAN POWELL: Mike Powell, FCC.

CHAIR JOHNSON: Thank you, again. A few logistical issues. Oh, Jane, yes.
We can't forget Jane and Maureen.

MS. MAGO: I'm Jane Mago. I'm the Designated Federal Officer.

MS. MCLAUGHLIN: Maureen McLaughlin. She's the Alternate Designated
Federal Officer. Thank you, everybody, for coming through the snow.

CHAIR JOHNSON: That's a good transition into \-- if you've noticed,
several of our members are missing today. They will be participating via
conference call. I think we have someone who's going to open up the
line.

They can participate in an interactive way. Most of them have stated,
though, that they don't listen and they have individuals here who sit on
different subcommittees, who will speak on their behalf. But if
necessary, and if we hear someone with questions, we'll try to entertain
those questions also. We have a full agenda of basically committee
reports. I wanted to thank everyone for their active participation and
the work that you've done over the holidays. We've only been together
for three or four months, but in that time, everyone's taken their
responsibilities quite seriously.

We are thankful to have the privilege and the opportunity to add a
group, deal with issues of diversity in the digital age.

Our next meeting will be May 10^th^. At that meeting, I'm trying to deal
with questions that we've received, as to whether or not we would have
action items going forward today, the committees are busy working on
action plans, resolutions, and other activities that will be presented
both through the committee process and also through our process of
conference calls.

At today's meeting, I think most of the presentations will be just that,
teeing up issues to see if there's any redundancy, any issues where
committees can share research, share knowledge, and we will kind of
direct ourselves in the most meaningful way for the entire group.

Also, there was a question as to comments that Commissioners had made at
the last meeting with respect to did we intend to hold all of our
meetings here in D.C., or did we intend to do any outreach? The group
\-- as a group, we have decided that we will hold several meetings here,
but we will do our field visits.

The efforts in that regard will be to better understand what works, what
does not, talk about best practices, talk to real practitioners, other
practitioners outside of this group and the subject matter experts as to
what the barriers might be, and ways in which the FCC, as well as this
committee, could be helpful.

We will take those comments and that information as we forge and present
our recommendations to the full FCC.

With that, I don't want to take up too much time. I did want to make
sure we try to stay on track. Mr. Steward will be speaking. We
understand that he, as well as many others, even sitting around the
table, you're trying to catch planes to get out of here in a timely \--
to make sure you can get home tonight.

So we're very, very mindful of that. I want to thank all of the
subcommittee chairs and the committee members for all of the work that
you've put in thus far, and I look forward to recommendations and
dialogue today.

With that, the person who's been most excited about the work that we've
done to date, and the task that we have before us, Chairman Powell will
speak, with introductory remarks. We also will hear from our other
Commissioners.

We've had the opportunity as subcommittee chairs to meet with the
Commissioners, to better understand each \-- from each and every one of
them their expectations, their thoughts, and also receive information
and data from them as to how we can move forward in the most effective
and efficient way.

They've all been so incredibly responsive. Commissioner Abernathy and
Commissioner Adelstein are here to share more of their thoughts with us,
and we look forward to hearing from them, too.

But the Chairman has had this committee at a special place in his heart
and, as also, at the front of his pin. Whenever we call, whenever we
have questions, whenever we have needs, he's been willing to work with
us to try to address those.

I want to thank him for his support, and because of that, I feel sure
and certain and I'm comfortable in saying that our work will not be
vain, but that our work will be a model of success that will lead to
more opportunities for women, minorities and others as we move forward.
With that, Mr. Chairman.

CHAIRMAN POWELL: Well, thank you Julia. I'm going to hire you to
permanently introduce me at every event I go to. It's very generous of
you. I want to thank all of you for your participation and your
perseverance and commitment to get here, in what in Washington is a
tragic snowstorm.

I just returned from Davos, Switzerland, where it snowed a foot and a
half and nobody even noticed. But I think the perseverance and
determination you show in getting to the meeting or getting to the phone
to be with us today is the kind that we'll need, in order for our
aspirations about diversity to turn into product and action, and I want
to highlight that.

This is the second full meeting of the Federal Advisory Committee on
Diversity in the Digital Age. I wanted to say a thing about the name of
the FACA, because it seemed to me that we thought a lot about why it's
diversity in the digital age.

Because as we've talked extensively about policy and the direction this
nation and the globe is moving, in terms of information technology in
the information age, that all questions seem to me are being returned to
first principles, to think about how to make the next era more fruitful
and production for us as a nation than the last era was. All policies
need rethinking and recalibration in light of that.

I had the benefit not long ago to take a tour for a week up and down the
coast in California, through Silicon Valley, the places we've all wrung
our hands about, the loss and the boom collapse, and the energy and the
optimism of that.

Because there's a recognition that the transformation in the digital age
means one thing fundamentally. It means opportunity. What diversity
should mean in the digital age is opportunity.

You know, when I'm really preaching and I give my speech, I say you
know, my ancestors were picking cotton during the agricultural age, and
they were in segregated facilities in the industrial age. This is the
first economic revolution in which genuine, real and fruitful and
deep-meaning opportunity are presented to us.

So if we're guided by that fact, that as you sit at the dawn of an
information age, what will diverse opportunity be, I think it will give
us the challenge to really reach for the stars, and not just in
increments but in bold and visionary steps.

So I'm very, very excited about that, at every level. In every industry,
I think sometimes we have a tendency to get really unduly focused on one
sector or another sector.

Our children are really going to have a whole range of things. Virtually
everything in our economy is going to have something to do with
technology and communications.

So our commitment to their future, as individual citizens, and their
opportunities as employees and owners and contributors to our economy
really hangs in the balance as to whether we as policymakers can get
this right.

This committee to me is a recognition that we can't get it right without
help. Diversity often means admitting you don't own all the answers.
Diversity also means a willingness to reach out beyond your own comfort
level and your own platform, your own understanding, to people who have
insights and experiences that can be aggregated and brought to bear
forcefully for solutions, and that's really what this committee is
about.

I look around this room, I've been here six years and I see people who
have demonstrated commitment, not only rhetoric but in practice, to the
goals and aspirations that we're trying to achieve. So I'm incredibly
encouraged that we have the people that we need and the leadership that
we need to be successful.

So while some of these questions will be the day-to-day questions about
regulatory policies of the Commission, I think we should be saddened if
that's where the question rests, because the real opportunities for
diversity are going to be far beyond our visionary horizon. They're
going to be much further into the future, with the recognition of what
technology and digital change mean for all of us.

So I'm sorry I didn't read the talking points, Jane. I'm going to do
that. But I just really wanted to do that, because as my professional
experiences expose me more and more to the opportunity presented by the
changes we read about in the paper, I'm more convinced than ever that we
have one of the richest opportunities to think about diversity right
from the beginning, as opposed to how it is so often treated near the
end. This group, I hope, will be a leader, an inspirational leader in
that effort.

So I pledge the support of the Commission, our resources, our time and
our effort, and thank you for doing so equally. I wish you luck, and I
look forward to hearing the subcommittee presentations today, from those
who've really taken on the additional burden of leading the practical
work to a solution. So thank you, Madam Chairwoman, and thank you, Jane.

CHAIR JOHNSON: Thank you. Commissioner Abernathy?

MR. WINSTON: Hello?

CHAIRMAN POWELL: Hello?

MR. WINSTON: Hey, this is Jim Winston.

CHAIRMAN POWELL: Hey Jim.

CHAIR JOHNSON: Hi Jim. You're on the line and you're in the meeting.

MR. WINSTON: Okay, great.

CHAIR JOHNSON: Thank you very much.

MR. WINSTON: All right, thank you.

CHAIR JOHNSON: Commissioner Abernathy?

COMMISSIONER ABERNATHY: Thank you. Thanks again, everyone, for coming
today and to those of you who I didn't have an opportunity to personally
say hello to, we do appreciate your time and your efforts, and your
dedication.

I'm pleased that I'm able to be here today. Luckily for me, the snow
resulted in a cancellation of something I was supposed to be doing, so I
get to be here and listen and learn from everything you're doing.

I just wanted to tell you, I've been talking with some of the
subcommittees and with Julia that I'm so pleased that you're going
beyond sort of what we already have done in the past, which hasn't been
enough, to say "Okay, how do we take ourselves to the future?"

What we've done in the past worked for the past, but what we're trying
to do is deal with the next generation; not ourselves, but the kids, and
those opportunities. So you're looking at things like training and
mentoring and financing, and issues that go beyond what we have
traditionally focused on.

That, I think, is really where the future is, because when I look at my
family, which wasn't discriminated against but came here very poor. I
don't think anyone who was really rich came to the U.S., because they
had it pretty good.

So I think most of the people who came here came here because you
wouldn't do this, you wouldn't leave everything you know, if you had a
really good life there.

So worked on the railroad, drank a lot, good, hard-working people. But
what they knew is that if they worked hard and gave their kids an
opportunity for an education, then their children's lives would be so
different. Every generation has done that, unless and until our society
doesn't give them that opportunity.

I think that's really what this is all about, is that all of us have to
know that because we're where we are, we now have an opportunity to make
sure that others. Now I venture to say most of us haven't come from, you
know real necessarily privileged backgrounds. We've had opportunities
that weren't denied us.

I think that's really what we're talking about here. How do we take
everything that we've known, where we've seen success, where mentoring
has worked, where financial opportunities have worked, where training
has worked, and how do we take all of that and focus it more
effectively.

That's what I'm very, very excited about, because frankly for me, I
wouldn't be here if there hadn't been key people along the way who
helped me and who were interested, and who gave me opportunities. So
thanks again for all your work. We are here to listen and learn, and
facilitate wherever possible. So thanks again.

CHAIR JOHNSON: Thank you. Commissioner Adelstein?

COMMISSIONER ADELSTEIN: Well, thank you. I really appreciate all you
making it out here, especially with the snow. I, being from South
Dakota, can relate to the Davos people more than the Washington people.
I'm not afraid of a couple of inches here, but neither are you, because
these challenges are so big.

I noticed since I was here in September, some of us have been very
productive. Some of us more productive than others, especially our
chairman and myself, who have had children since we last met.
Congratulations to you. Oh yes, and you too.

(Laughter)

CHAIRMAN POWELL: Something I didn't know about.

COMMISSIONER ADELSTEIN: We're creating our own little mini-diversity
there. We've got to make sure they have opportunities when they get to
be, you know, when they grow up, because you sure face a big challenge.
We talked about it last time, and I've been following very closely your
activities.

I've had Anne Perkins follow all of your subcommittee meetings and
Johanna Mikes has made it to some \-- or Johanna Shelton, I should say,
speaking of being productive, monitoring the subcommittees and seeing
what's going on, and I hear a lot about your enthusiasm and how much
effort you're putting into this process.

I know all of us on the Commission really appreciate it, because we're
looking forward to hearing from you. We want to make sure that you have
all the resources you need.

I was pleased to hear Julia's comments about how satisfied you are. If
there's anything we can do, anything I can do, you just let us know,
because we want to make sure you have everything you need to get the
important work that you have before you done.

I said last summer I was here that I hope to be optimistic, even in the
face of big challenges. I remain that way, seeing how much of an effort
you've made and how much progress you've made over these last few
months. My advice, I guess, is just to keep thinking with a broad, open
mind. We need to think outside the boundaries, because what's been done
up to this point clearly isn't working.

We still see minority ownership at the lowest point since we've been
keeping the statistics. We need some fresh ideas; we need new
approaches; we need to jump-start what's happening now.

So we really want you to think with an open mind. We're already hearing
some good, new ideas, I think, what we've heard so far.

I encouraged you all, last September, to engage in a lot of outreach,
and I see you're doing that. You have people like Roscoe Young and Marva
Johnson and other members of the New Technologies Subcommittee are
reaching out to people that are off of the FCC's normal radar screen,
people like Tom Wilkins, I'm talking about, and other minorities that
are trying to make it out there in industry.

They give us some real insight into what it is the FCC can do. I'm
especially looking forward to hearing that subcommittee's meetings in
March. I want to hear about them. You're going out on the road, and
you're doing the subcommittee outreach that we're all so hopeful about.

I know that a lot of the other subcommittees are reaching out as well.
Commissioners Andy Barrett and Rivera last Tuesday studied finance
issues all day long. My compliments to you for keeping at it all day. I
heard it was a very productive session, and we heard new ideas about how
to get over the hurdle of finding capital.

That's been the issue, you identified I think, in the mid-80\'s, as the
biggest issue facing minorities trying to get into this business. It
remains possibly the biggest primary hurdle today. So getting those
deals done is \-- what it takes to get those deals done is what you're
trying to work on.

So it reminds me of health care costs. I remember when I came to
Congress, these old books about health care costs from the early 70\'s,
saying that there's a crisis in the cost of health care in 1972 hearings
in the Senate.

I got there in the late 80\'s and the issue was still health care costs,
and guess what? Still is right now. We heard about it just recently.

Some issues just don't go away, but we've got to think of new, creative
ways to get over them. At another forum, I guess at that same forum, you
heard from Professor Leonard Baines (phonetic), who talked about the
history of this, that broadcast licenses were often given out without a
minority enhancement. People had to get them the old-fashioned way.

Whoever had the most money at the table won out, despite what the
preferences might have been. We've got to make sure that current FCC
processes don't build on that history of discriminatory, or insensitive,
or ineffective practices.

I hear that other subcommittees are making progress as well. For
example, the Transactional Subcommittee has been working hard to address
the need for tax credits, and looking at other possible legislative or
regulatory solutions, to get the assistance that people need. Career
Advancement is properly focused on measures to further minority
employment opportunities.

I think overall the committee's functioning well. It's moving in the
right direction. I'd just like to fill out some themes for you to think
about as you move forward.

First, it seems that you don't have the kind of relevant data that we
need. We hear this again and again from your subcommittees, that you
don't have what you need to understand and fully address these issues.

A number of subcommittees, my staff tell me, do not \-- have a lack of
data or a lack of resources that they need to obtain the necessary data
about what the situation is out there and how to address it.

One good example, Professor Alan Hammond (phonetic) on Tuesday commented
that accessing programming playlists would help in knowing what impact
minority ownership really has on what gets broadcast.

So we need to prioritize the data, and figure out what we need most, and
figure out then how to get it, and let us know how we can help you do
that.

A second issue is the legal support that you need, as you get deeper and
deeper analyzing these proposals. I understand that some *pro bono*
solutions have been found, but I want to continue to work with you on
this and monitor this, and make sure you have what you need and that's
working out.

A third consideration is what role the Commission plays with regard to
minority ownership, and whether or not the FCC should serve as some type
of advisor for small businesses, and identify problems and
opportunities. How much of a role do we have?

Just navigating the waters of the FCC can be difficult for anybody. You
know, you need these high-priced lawyers to figure out what we're up to,
some kind of priesthood, that you need to have all this expertise.

But it shouldn't be that way, and we should be helping out. I mean, some
people that particularly speak Spanish may not even be able to access
that easily. So what role can ARPO (phonetic) take to proactively assist
people? What more can we do than we're doing now? We want to hear from
you about that.

A fourth issue is more understanding of the timing and the end game for
the Commission. This is especially important as we strive to think
outside of the box. For example, as the Chairman noted, as we're moving
to the digital age and multi-channel digital television role, what new
ideas do we need to bring to bear there?

So I know you have a big mission and sometimes frustrating, because like
I say, you keep confronting these same issues over and over again. But I
just want you to know how much we're concerned about what it is you're
doing.

You heard from all of us here today, and I know our colleagues who
couldn't make it here today for snow or whatever reason, feel the same
way, that we want to support you any way we can, and we want to see you
succeed. I think that you're on the right track towards getting there.
So thank you again for being with us.

CHAIR JOHNSON: Thank you all for your comments and your active
participation. I know that on the conference calls that we've been
holding, every subcommittee they've addressed and discussed that each
FCC Commissioner has taken an active role and involvement in what we're
doing. So thank you again for your comments.

Again Commissioner, we took notes, as we did the last time, and we will
be responsive to all of the issues raised, and thank you for your
support. Member Honig?

MR. HONIG: Commissioners and Chairman Powell, I know all of us, and I'm
just speaking as a member, appreciate the encouragement and optimistic
expressions that you've presented us with today.

I just wanted to take the liberty to ask one question, which I'll \--
which you should take, I hope, as a friendly question. We will be
empanelled for two years or possibly more, and we are volunteers. During
the time that any advisory committee is convened, inevitably and
unavoidably, issues that may affect or fall within its scope of
influence or jurisdiction will arise in the normal course, in the
triennials, the biennials, and other forms.

Is it \-- what is your policy or what is your preference, as far as when
those things arise in the normal course, whether either the Commission
or individual bureaus ought to be soliciting the committee's advice and
input during that process, or even perhaps before these issues arise in
a public way?

CHAIRMAN POWELL: Well, the committee is just that. It's an advisory
committee to the Commission on questions of diversity. It serves both as
a resource for the Commission and its constituent elements.

In addition, it has an opportunity, as a separately-chartered and
independent organization, to make its views expressed to the Commission
in the context of proceedings, both as a group or on an individual
basis. So I don't see any problem with that at all.

Now the suggestion, however, which may be implicit in your question,
that somehow it is unsatisfactory if every single regulatory question
that might involve diversity isn't first run through the Council, I
don't know if that's what's you're suggesting. That may be.

MR. HONIG: Not quite. Maybe I didn't make myself clear enough.
Inevitably, there will be some questions that go right to the heart of
diversity. Not implicitly but explicitly, and since we're here, I'm just
suggesting perhaps as the best way to make efficient use of our time and
expertise and so on, and sometimes we may be exploring that issue
anyway, but not be aware that it's being ramped up within a bureau.

It might be a good idea to just make it the Commission's practice, if
not policy, to reach out to us and ask our input. And understanding that
sometimes these things are time-sensitive and it will be necessary for
us to jump. But that might be an additional way in which we could be
helpful to the Commission.

SPEAKER: I would agree with that.

CHAIR JOHNSON: Mr. Honig and other members, we're going to \-- we have a
time slotted for a Q&A towards the end. Mr. Honig, I've allowed you that
privilege, but we do need to try to stay on schedule. If it's the will
of the group, I wanted to go ahead and move forward, and have Mr.
Steward make his presentation.

Before doing that, I just want to spend a few minutes bragging, about
the man that's seated before us today. Worldwide Technologies was
founded by Mr. Steward in 1990. Oh, by the way, I also wanted to
recognize his wife. She's here.

And it was founded in 1990, with four employees, in a 4,000 square-foot
office space, to distribute computer software and hardware. Today, there
are over 400 employees. The company has close to a billion dollars in
sales. They are one of the leading electronic procurement and logistics
companies in the United States.

His honors, as well as the company's honors, have been many. In 2001,
WWT was ranked 14^th^ in *St. Louis Business Journal* for privately-held
companies. In 2000, it was named *Black Enterprise Magazine's* number
one African-American owned business in the United States, making it the
first technology company to receive such honors.

In 2000, he earned national honors for *Federal Computer Week* and
*Washington Technology* as a top minority technology vendor. He was
recently recognized by *Ebony* magazine as one of the top 100 most
influential black Americans. The honors go on and on and on. But most
importantly, the effort, the commitment, and what he has created, not
only for himself but for the others that come after him, and the ones
that are within his company.

In addition to leading this company and its effort, he and his wife,
he's also found time to write a book, titled *Doing Business by the Good
Book*. Another model of success and lessons learned on success, straight
from the Bible. This man and all of his interest, all of his commitment
and all of his efforts has created something just tremendous.

We thought that we would bring him forward, because one of the things
that the Chairman had asked of us is to focus on best practices; what
works, how does it work, and how can we replicate. To the extent that
there are barriers, talk to those who've succeeded and better understand
how they overcame those barriers, and if there are still barriers to be
addressed today.

We are here to listen and to learn from you. I wanted to thank Priscilla
Hill-Ardoin for helping us find him and bring him, at a time when there
are storms and the economy is somewhat upside down, and to give us the
honor of having him present to us today. With that, Mr. Steward.

MR. STEWARD: Madam Chairman, thank you so much for the opportunity to be
able to speak before this Advisory Commission. Chairman Powell, thank
you for receiving me earlier today in your office as well. We had a very
interesting dialogue and conversation there as well. And Priscilla,
thank you for the honor of being here and asking me to come, and talk a
little bit about one of my favorite subjects, and that's this business
called Worldwide Technology.

Also, I'd like to acknowledge, again, my wife of 27 years, who decided
to weather the storm with me, to come here to Washington, D.C. We
weren't quite sure whether we were going to make it or not, with our
plane being a little delayed and their having to do some deicing and so
forth. But we weathered it, and were able to get here and get here on
time. So thank you for coming with me.

I thought it would be important that you kind of get a sense and a feel
for my background, because I thought that would be helpful in giving you
a sense and a feel for, I guess, the personality, the kind of
environment that I kind of grew up in.

It gives you a kind of a background, a kind of a sketch, and then kind
of evolve that to some of the business, other businesses I've owned over
the years, and then talk a little bit about Worldwide Technology in more
detail because, you know, it's not where you end up. I mean, today is
what you see Worldwide as being, but the business actually started years
ago.

Actually, it started when I was growing up in a small town of Clinton,
Missouri, and with my parents being ‑‑ my dad especially being somewhat
of an entrepreneur as well. Not the kind of entrepreneur that we're
talking about today, but the one that we would call someone who hustled
for a living.

He had a number of jobs, from janitorial jobs to barkeeper to a night
watchman to hauling trash, was just the kind of a way we lived, how he
made a living. In addition, that we lived on a semi-farm. We grew up in
a small town called Clinton, Missouri, which is only 6,000 people, and
we lived on the edge of town, on the other side of the tracks.

During those days, it was a time where segregation was prevalent.
However, I was one of the first persons of color to go to the integrated
school in 1957, going directly from home tot eh first grade, as opposed
to having the opportunity to go through kindergarten.

We were challenged in the town. We were going through a very, very
transitional period, where both sides were beginning the process of
learning about one another, being incorporated with one another.

At the same time, there were still some challenges in the community as
well, relative to the movie theater, where you had the persons of color
sitting in a balcony, to the public swimming pool, where you had
segregation or actually we weren't allowed to go to the swimming pool
there or any other restaurant in the community as well. So there were
still those elements that were there, and challenges that we all faced
in our community.

I had the privilege of going to Central Missouri State University,
acquiring a Bachelor's degree and B.S. in Business Administration, with
an emphasis in Industrial Organization. I had the opportunity also to
play college basketball there as well.

Moved onto to St. Louis; initially worked for a company called Missouri
Pacific Railroad Company, that's now merged with the Union Pacific
Railroad Company, in Sales and Marketing. Went through a very extensive
training program with them, and lived in New Orleans, Milwaukee, Houston
and L.A. So I had great exposure there.

Then had an opportunity to work for a company called Federal Express,
which most of you have heard of, an extremely successful company and at
the same time I had the opportunity to be able to get experience in
Sales and Marketing in that company.

Decided that I had this entrepreneurial spirit, something that had been
burning inside of me. My wife said that she would support me totally on
my endeavors. However, she didn't know what was really getting into.
Between the time that I initially engaged and got the first business
started and growing and happening, I had been through seven businesses
since that time.

So it hasn't been easy. There have been challenges along the way. I can
say that the initial businesses I got in evolved me, and was a learning
experience for me with relationships; a learning experience of how
business is done; a relationship to how access was very, very important
to me and to the other diversity companies, how vitally important that
is, to able to be effective in getting the kind of traction you need in
business.

Let me tell you a little bit about the first kind of business, so you
can get a perspective of how this business, how Worldwide Technology
evolved. I was in the audit business, where we actually were auditing
and analyzing, reviewing freight invoices for overcharges assessed
against the various carriers.

So we would actually audit a company's freight bills, for example, a
General Motors or a Ford or Chrysler or SBC and others, and we would get
them money back from the various carriers, whether it was a railroad or
truck line or air freight carrier. We would take a percentage of the
amount of money we were able to find.

We were pretty good at it, and we developed that into a much broader
opportunity by actually becoming an ICC-licensed property broker, where
we actually were brokering truckload movement across the country as
well.

We were able to visibly see what was happening across the country,
relative to transportation, and how companies, private and commercial
fleets were moving their product in and out of the various points of
(inaudible) across the country, and we were seeing that there are empty
miles that were pretty prevalent in the bump traffic end of the
business.

As a result of that, we were able to match up our clients with those
carriers. We were able to obviously take an override on those, which was
the first time that had ever been done in the tank truck end of the
business.

As a result of that, we recognized that we were seeing that there were
just as many challenges with undercharges with the railroads, as there
were overcharges with our clients. So as a result, we set up a separate
company that did nothing but analyze and audit freight invoices for the
railroads, for undercharges.

It had never been done before. I challenged the Union Pacific initially.
It was the initial engagement that we had, for us to an audit. We would
do the audit for nothing.

As a result of that, we were able to get the commitment from the large
\-- one of the largest railroads west of the Mississippi, the Union
Pacific. The statute of limitations happens to be three years, where we
could do the audit. So we have \$15 billion worth of information coming
to us in 1987. How do you do an audit of all that kind of information?

So we would not receive the information in truckloads. So we decided in
1987 to build one of the largest LAN systems in the Midwest. We've only
hung the -‑ it was only 45 (inaudible). The file server that we had,
that we built around, was a file server that was 660 megabytes. The
machines were 8088 machines.

We had a gateway that was tied to the railroads themselves. We had a
converter box that would take the ASCII file from the railroads, and
actually convert it and to download it into our LAN system that we had
built.

Then we began to build a software application in triple C++ to build an
application that allow us to be able to do the audit, 35 to 40 times
faster than the railroads could do it themselves, and then be able to
send the data back to them.

So we were using Intranet, Internet, Extranet applications when we
didn't know what it was, to manage the information. So as a result of
that, this light bulb comes on. I wasn't in the transportation business,
audit business. I was in the business of using technology to change how
and the way that we did business.

So in 1990 evolved this company called Worldwide Technology, and that's
what we're going to talk about today. I thought that was important that
you understood the evolution of all that, because my background is not
in technology. It's not in telecommunications; it is in transportation,
but we recognized that technology made a huge difference in the how and
the way that we did business. Worldwide Technology, we decided that's
what we were going to launch.

Our very first client actually ended up being SBC. They gave us an
opportunity and presented an opportunity where, you know, we weren't in
a business that we had grew up in, and they gave us an opportunity to
prove our capabilities of being able to deliver some technology to the
marketplace, to them, for their infrastructure.

As you can see, at Worldwide Technology you see today we're a company
that last year did almost \$1.2 billion in business. We did that with a
400 and almost 500 people. Actually, we have 556 people in our
organization. You wonder, how do you do that? I say "very carefully."

You have the infrastructure, which we will talk a little bit about. We
have an order process system, a back office system that is second to no
one. We believe that our definition on how we have utilized our business
process engineers and reengineered how and the way that we do business,
our back office.

Our enterprise resource planning system that we've implemented as well,
is second to no one. It allows us to be able to scale, to be able to
bring some efficiencies in the supply chain that didn't exist prior to
us being there.

As you can see, we're a premier evaluated reseller. We do some
engineering and integration services, as well. We do provide some
procurement and logistics services, and we have an IT consulting arm
that does nothing but implementation of back office ERP and do business
process reengineering. Supply chain services, we were able to provide as
well, and we do some light manufacturing in the organization as well.

The company has been extremely profitable over the years. We just put in
place a \$130 million line of credit, and I was looking at it the other
day. We put in \-- actually it's \$145 million, because I had to sign a
personal guarantee for it, and I never would have believed this young
boy from Clinton, Missouri would be signing for a \$145 million line of
credit. But that's as a result of partnership through relationships and
the success and growth that we have experienced over the years.

We're ISO-9000 certified, and we also were part of the Quest (phonetic)
Forum as well. We're TL 9000- certified as well, which is a much more
stringent process to go through. We've been certified with that. We are
the first person of color, diversity company, to have acquired that
status.

We have logistical centers that are across the country. In fact, we have
over a million square feet of office and warehouse space across the
country, to accommodate the business that we do. And to give you a sense
and a feel for the facilities, and they're mirrored from as far north as
Detroit, to as far south as San Antonio, Texas, to far west as
Livermore, California, and as far east as here in Washington, D.C. area.
We have a pretty substantial presence and facility as a result of the
business that we do on the Federal side of our business.

And to take a look at Worldwide Technology overall, there's a Worldwide
Holding Company, and then there's Worldwide Technology, and then there's
a company called TelcoBuy.com, which is vertically focused on the
telecommunication industry.

At Worldwide Technology and that vertical focus, we have primarily we're
focused on the financial industry, in delivering IT products and
services in that industry, as well as we \-- the Federal government. We
do quite a bit of business in the Federal government as well, in
delivering products and services to our Federal government, and
primarily in DOD.

We were able to \-- we were one of the most successful SBA small
businesses and the 8(a) program that we grew up on as well. We today do
about \$300 million in that sector. We also are heavily involved in the
telecommunications space, where we also have an EF&I team, as well as we
have strategic alliances with some of the biggest OEMs in the country.
You'll see that in the next slide.

People talk a little bit about the supply chain, and how complex it
really is. If you take a look at that slide, you get a sense and a feel
of how people are trying to communicate with one another, the
inefficiencies in the way they are communicating with one another, and
the problems and challenges and so forth they face as well.

We believe that defining and redefining the supply chain is vitally
important for the future of any of the vertical markets that we're
involved in, whether it's telecommunications, or whether it's involved
in the financial marketplace that we're dealing with, or the automotive
space that we're in as well.

As you can see, with that complex kind of ‑‑ you find all kinds of
inefficiencies, and all kinds of problems and issues, in trying to work
through this very complex supply chain. What our company was very
successful at doing a number of years ago, that was putting in a back
office system that we believe is second to no one.

We had an opportunity to be able to redefine the supply chain and the
various programmatic opportunities that we've had, and be able to bring
some real inefficiencies and drive down costs, and increase the
visibility, and at the same time, bring some clarity to the supply
chain, in a way that had never been brought to it before.

It allows us to be able to really define what the supply chain is.
That's where the opportunity is. One of my favorite scriptures is my
"People perish for the lack of vision." If you can see this opportunity,
I think this is an unprecedented opportunity for minority and diversity
companies to take advantage of, and to realize, because I believe that
small business and diversity companies have the \-- not only have the
creativity, but also have the entrepreneurial spirit to allows them to
be able to turn quicker, faster, more efficiently, better than the
larger companies.

We actually have the ability to be able to turn on a dime, in order to
prepare to put these kind of very complicated systems together. But it
takes, in my mind, it takes the right people and right slots in the
organization. I've learned over the years that the most important thing
to \-- that in business, people aren't your greatest asset, but the
right people are. Putting the right people in the right slots in the
organization are vitally important.

My mother said that, I think equally as well, but she said it in a
little different way. Don't have any preconceived ideals of how your
blessing's going to come. It comes in all different sizes and shapes and
colors, and that blessing may just pass you right by if you don't
recognize the true value and get past some of the misconceptions that we
might have about how that's going to come.

So if you take a look at the streamlined complex, the supply chain that
we were talking about earlier, and we're talking about being able to
aggregate the OEMs, the minor suppliers, and be able to integrate
ourselves deep and broad within those, and be supplier-neutral in how we
are deploying that as well.

Then we take a very complicated procurement process, an order process,
and we have it streamlined in such a way they'll be able to drive down
the costs of any kind of inefficiencies that we're talking about, and
bring some real visibility and value in the supply chain to the
customer.

That's what the customer is looking for, us to be able to bring value to
that. We believe that if we're able to define what that supply chain is,
we have an unprecedented opportunity to not only define it but we have
an opportunity to dominate in the areas that we provide this kind of
service, because we believe that no one else will be able to do it the
way we can, with that kind of entrepreneurial, creative approach that we
take.

To kind of give you an idea of the breadth of relationships and contacts
that we've built over the years, as well as, I think, is important,
these relationships weren't built overnight. It took, time, effort,
energy to build the kind of partnerships.

At the end of the day, what happens is that people do business with
people they like and they trust, and those relationships aren't built
overnight. It took a lot of dinners and lunches and events that we went
to and extended ourselves at.

In addition, some of these people

(Tape change)

MR. STEWARD: (tape picks up) inside their comfort zone, to do business
with us as well. We have a number of customers who have done that, a
number of partners who have done that as well. That outside the comfort
zone, decide that "Well, we're going to take a risk on a company that
has been not initially proven, that they can provide all the services
that they say they can, but with a little risk, maybe they can."

One of the things, obligations we know that we have is that each and
every day we earn our stripes. We're only as good as the last deal that
we did, and one of the reasons that I talk a lot about the way and how
we do business, it is vitally we do business with integrity, we're a
vendor that can be trusted with the technology, and that we do what we
say we're going to do and we do it each and every time above and beyond
what the customer and the partnership is expecting.

As a result of that, what happens is that people tend to do a lot more
business with us as a result of that. They want to build even more
partnerships and broader relationships with us, and want to get us even
more engaged in broader opportunities. They realize that we're going to
also invest in that relationship as well.

We're going to bring new technology; we're going to bring new ways of
doing business; we're going to bring our entrepreneurial spirit; we're
going to bring also the ability to be able to bring creativity to that
relationship that gets them to think a little differently about their
supply chain, and how we can bring and drive down costs, and bring
efficiency, and be better as a partnership to that customer, than they
would be without us.

As a result of that, the customer gets very excited about the
relationship as well, and as a result of that, obviously the vendor
looks to us, relative to being their partner, moving forward with their
business with a particular customer, because we're bringing real value.

As you can see, the evolution of the supply chain and some of the things
that we have done over the years as well, how we've improved and
developed our business is a part, a part of our company's history.

As you can see, the back office systems are a big part of that as well.
How we've invested heavily back into the technology that we talk about,
whether it's XML technology, EDI, and how we've integrated ourselves
deep and broad in our supplier base, with our suppliers and also with
our customers, is a big part of that as well.

I know very few companies \-- they're very small \-- that can compete
with the kinds of infrastructure that we've put in place, that we spent
a lot of money, effort and energy to put these systems in place. Without
question, our suppliers are benefiting from it and so are our \-- have
our customers.

As you see, the robust back office infrastructure as well that we've put
in place, we do walk the talk. We use the technology that we talk about,
and we've been doing that for a number of years as well, and we have a
development team and back office team that is second to no one.

A number of awards that we've received over the years have been
numerous, and you've talked a little bit about that. As a result of the
work that we've done at Dell Computer, as you can see, and some at the
SBC, as well as Cisco, and being honored by the National Minority
Supplier Development Council as well, was a big part of last year's
successes.

Then taking a look at some of the things that we've done with the GSA,
with our Federal government in the Federal space, a Partner in
Excellence award that we received from them, just kind of gives you a
sense and the breadth of how people are feeling about the way and how we
do business.

One of the things that we've emphasized with the culture of our
organization, which I think has been vitally important to the success of
the organization as well, is that integrity, and trust, and loyalty and
commitment are a vital part of how we do business.

One of the things that I have been focused a lot of time, effort and
energy on is that I invest an awful lot of time in serving, and showing
integrity and loyalty, commitment within the organization. As a result,
what culminates in the culture of the organization is a sense of
integrity.

As you see, even pocketed throughout our organization, we have \-- trust
and integrity and loyalty and commitment are all pocketed through the
organization, to remind people how vitally important it is to the
long-term growth in our business.

The ability to be able to change, our ability to be able to make a
difference. If you don't have a passion for the business, you need to do
something else, is a part of that as well.

So I try to ‑‑ I do everything I possibly can to lead by example. As a
result, it culminates in the culture of the organization. I believe as a
result of that, people begin to serve one another better.

As a result of that in serving one another better, we tend to put our
customers and our suppliers first, and we also, that little word of
"integrity" in that relationship and building that trusting relationship
with them, tends to come out foremost in building the kinds of
relationships that we want with our supplier base and our customers.

So it gives you a sense and a feel for the awards that we have received.
Can you go a little further? Okay. Supplier diversity. One of the things
that we're very passionate about, and even in our own organization,
simply because we're a diverse company as well, is that we've put a lot
of time, effort and energy.

There was a blue ribbon panel that was commissioned by SBC, and I happen
to be one of those members as well. We came up with a number of
recommendations and so forth for \-- to enhance the supply chain.

One of the things that is vitally important to us at Worldwide is that
we walk the talk as well. We're encouraged also by suppliers and people
that we work with, that we also put together a \-- we think we can do
diversity and inclusiveness of other kinds of companies of color, in the
supply chain, probably a little better, because we understand the
challenges they face.

Whether it's advice relative to building relationships; whether it's
advice relative to capital and the resources necessary; whether it's
regarding the vision relative to the technology that can be utilized, in
order to make their company and provide a better value proposition for
the customer, is a part of that as well.

We also have allowed a number of the partners that we have as well the
opportunity to be able to utilize even our infrastructure, to be able to
get better engaged as well.

If we have to be the front end, and we integrate our systems into place,
and they're able to take advantage of our back office systems in order
to make their business proposition work, and in conjunction to do
business, we've had an opportunity to do that.

As a result of that, we're very proud to say that we won the Phoenix
award from the National Minority Supplier Development Council a couple
of years ago. We do more business with other minority businesses than
any other minority business.

So we're very proud of that, and our passion and commitment to diversity
in our business as well. We think that we're a living example of what
can happen, and how that can continue to grow for all of us.

But if you take a look at the inherent value to the telecom supply
chain, we think that lower-cost structure, we think that the lower
return on investment hurdles and local presence, and the flexibility and
creativity, as I talked about earlier, is vitally important.

And our ability to be able to customize, I think, is something that
diversity companies are able to provide, that companies of size have a
difficult time doing.

A new challenge is required. I think focus on improving our value
proposition beyond the below-margin and basic distribution services
offering, which most companies are involved in, and improved
governances, and strategies for long-term profitability obviously is a
big part of what we look at as we're advising these companies as well.

Growth and diversification, I think, are a big part of it as well. We're
not just in the telecom sector, as I was talking about earlier. We had
the pleasure of being able to diversify our portfolio in such a way that
as the telecom sector did have a downturn, that we had other business
that we were doing, and doing well in, that mitigate the kind of
challenges that most companies were having as the downturn took place.

In our task force recommendations, it gives you a sense and a feel for
what we recognize as being some real issues or real ways to, I think,
improve the diversity companies. As you can see, implement effective
sourcing for supplier diversity was a part of that.

Enhanced risk mitigation; activities in the supply chain; management
practices; our deploy process; quality and control were a part of that
as well. We were part of the Quest Forum, as well, to begin the process
of really getting companies to understand that quality process and how
that process works, and how you incorporate it into your business.

Improved access in capital and finance management was a part of that as
well. Capital has always been a challenge, because of relationships and
because of access. It was a challenge for us for many, many years as
well.

Again, at the end of the day, people want to do business with people
they like and they trust, and the kind of business that we're talking
about in the telecom sector. Not a lot of people understand this
business, and not a lot of people are willing to take the risk as well
with their capital, in this kind of business as well. However, there
are, you know, other kinds of options out there for those companies as
well.

And then, of course, to accelerate supplier diversity participation to
the industry overall, collaborating with one another, and understanding
the importance of diversity and the supply chain as well, and the value
that those companies bring.

One of the things I thought was important is that we're concerned about
the next generation, and trying to provide at least an example. One of
the things that we were \-- did not have the privilege of is having a
Worldwide Technology or some of the other larger companies out there as
an example, or at least something, someone to look to as a model.

So I hope that you look to us regarding advice, regarding counsel,
regarding help, regarding support, relative to the task force mission,
and we're here to support it in any way we possibly can. We're hopeful
that this is helpful and at least gives you some insight into what is
possible, relative to diversity companies.

This is a culmination of 20 years of being in business. I've stepped in
just about every pothole you could possibly step in. I have also, as I
reflect back on my career as well, and as I began to evolve into this
business called Worldwide Technology even for that matter, my wife
tended to say "Oh, another business?"

Because I had a number of failures out there as well, from getting my
car repossessed, to them turning off my water, to my losing my home, and
a whole host of issues that have happened. Not everybody will want to go
through that challenge. However, but we have to convey the opportunity,
because the opportunity for the next generation to realize a dream is
real.

I think there's a window of opportunity right now, low cost of entry, to
utilize technology in a way that's never been used before, and
redefining the supply chain, that allows companies to realize a real
value in seeing these companies come into the supply chain and make a
huge difference in the way and how they do business, and really redefine
the company's future as a result of that.

So I thank you for the opportunity to be able to share this brief story
with you. I've tried to collapse 20 years in this little-bitty
presentation that I've given. But I appreciate you listening, and giving
me the opportunity to be able to testify before you.

(Applause)

CHAIRMAN POWELL: David, I want to thank you and commend you. You know,
in addition to learning about your terrific business, part of what we
are trying to do is study such opportunities and models of success.

I just wanted to go over quickly my notes from what I heard that you
said, which I think presents an opportunity for this committee to
understand the kinds of things we want to be addressing.

At first, I thought it was interesting you talked about the, sort of the
formative experiences that led you where you were. You learned hustle
from your parents; you learned the importance of knowing about one
another. We heard a lot about training. I suppose you learned some
teamwork playing basketball.

I think it's always important, when we focus on our youth, to focus on
those values. But more importantly when you started talking about
business, I thought you said a few, really critical things for us to
think about.

Seeing the opportunity to do something different, I thought, was what I
heard right away, which is you might start off thinking you're doing
something else, but staying eagle-eyed about the opportunity to do
something different or better is where the real wealth and opportunity
come from in an entrepreneurial society.

I also thought you made a point about secondary opportunity; that is,
you may be in a successful business, but you stayed alert to the
possibility to move from the railroad business to the technology
business.

I think sometimes we need to figure out ways to model, how to see
secondary opportunities. And more importantly, relevant to our task, how
technology or communications systems can present secondary opportunities
that might not at first be apparent, I think were important.

You talked about the importance of any business better be ready to turn
on a dime. I think there's an importance about flexibility there as
well, that you know, if we're going to have successful companies of any
type, and when we teach companies, you know, our diverse population,
about how to succeed, the importance of being able to adjust quickly
seemed important in your history.

You said it better when you said "Don't ever have a preconceived notion
of success." You can't make the world bend to your will. You have to go
out and serve the world in a way that it's ready to embrace, and I think
that's interesting.

You talked about the importance of relationships and contacts.
Networking is something I've heard talked about a lot about this. I've
never heard it put so well.

People want to do business with people they trust and they like, and
trying to make sure that those we're trying to help have that
opportunity to network and build those relationships, so that they run
into an SBC, or a government contract or something that gives them that
first opportunity and that first access to capital seems a common story.

And that every day you have to earn your stripes. You're only as good as
the last deal you struck. Then near the end, you so repeatedly
emphasized ethics and integrity. I'm always disheartened by \-- the
newspapers are filled every day with companies and people who fell apart
on this prong. So if you're committed to long-term success, it seems to
me you do need to be committed to those values.

Practice what you preach; lead by example; and just raw perseverance.
Your wife's weathered more than today's storm, and clearly that's
commendable. But I just wanted to go through that real quickly to say,
you know, when I listen to a presentation like that, you can hear the
elements that I think provide a lesson to those who are trying to
succeed, but more importantly giving us ideas about things we might
focus on, such as, you know, seeing opportunities to do something
different.

What are the lists of those opportunities where there are underserved
business segments that perhaps there's real entrepreneurial activity in?
Thank you, Madam Chairman.

CHAIR JOHNSON: I think we have a question from committee members.

MR. WALLAU: I just want to answer the Chairman, that I heard certain
things and I'm probably not as positive a person as the Chairman. One
thing that struck me, Mr. Steward, was the greatest impediment for me
and the business that I run, is actually one that you raised as a
positive, which is people want to deal with people they know and they
trust.

What happens every time I push diversity through the ABC Television
Network, people go to the people they know and trust, and that's \--
they have to take that risk that you talked about, to go to places where
they don't have a known commodity, where they don't have the people that
they normally trust.

So knowledge and trust is, I agree with you, critical, and it actually
is a major factor, an impediment to getting diversity drilled deep, all
the way from suppliers to \-- of everything from office suppliers to
television shows. People just tend to go to \-- and that's the biggest
obstacle that there is in diversity.

You've got to, I mean, a small part of the telecommunications industry
I'm involved in, you know, they have millions of dollars invested in a
television pilot. Are they going to hand it direct to some kid who's a
person of color, who's unproven, or you going to go with that same old
person who's going to do the kind of nice B minus job? See, there aren't
too many superstars, so you tend to just sort of play it safe.

And the idea of risk-taking, the idea of we're not going to get what we
want to get in any kind of diversity issues unless we're willing to take
some risk, with significant parts of our businesses, and with people who
we don't know real well, and we haven't had enough experience to build
up trust with.

That really is key to getting this done.

MR. STEWARD: Let me suggest something to you, because I think this is
vitally important to know, is that to mitigate some of that risk, what
customers have done and I've seen it done consistently \-- SBC is very
good at this \-- and that is encouraging a partnership with larger
companies.

Because there are certain things that larger companies don't do as well,
and that smaller companies are capable of doing. Like, for example, in
redefining and being entrepreneurial and redefining the supply chain, an
application to do that, and doing some business process reengineering of
the supply chain.

Larger companies have a stumble with that, and stumble with turning
quickly to accommodate a need of a customer. As a result of that, larger
companies are recognizing that smaller companies can do that better, and
probably be much more creative about how we approach it and do it
differently than probably has ever been done. They're really wanting to
take the risk.

So as a result of that, comes kind of a huge opportunity, not only for a
diversity company, but a huge opportunity for the supplier partner to
also differentiate himself into the customer, which allows him, you
know, more opportunity, more incremental opportunity, in things that he
would not do well anyway. The customer, he gets more value than ever
before. So there are ways of doing it, in a way that allows everybody to
win, and win in a huge way.

CHAIR JOHNSON: Thank you. Any other questions? I think I \-- Steve?

MR. HILLARD: Madam Chairman?

CHAIR JOHNSON: Uh-huh.

MR. HILLARD: Mr. Steward, a couple of things. One is I thought that
there was a lesson in some of your early observations as you began, that
were kind of a lesson for the committee, which is really something I
think we've been talking about, which is to establish, really challenge
ourselves, and then really create the necessity that comes from stepping
up to that challenge, to create some real solutions.

I thought that was great, and I had a question, too, which is in your
experience, maybe you've got an observation. It's a topic that the
committee and our subcommittee is looking at, is how do you \-- in your
experience, how do you look out and find particular transaction
opportunities?

Is there in the course \-- clearly, in the course of the development of
your companies, you moved from one area to another, or seen
opportunities within a given business zone. Any observations that you
could share with us?

MR. STEWARD: You know, it's interesting that you make that, because it
does couple onto what I just said a few moments ago, is that people do
business with people they like and they trust. Over the years, we've
been able to build a level of trust and confidence, and not only that,
but a reputation of providing real value to our business partners.

So, instead of Worldwide being that company that only has 500 people,
you don't do the kind of business that we do and the size of deals that
we're involved and engaged in with the small sales force that we have.
Our business partners will bring us into deals, because they know
without question that we're going to bring value to that partnership,
and we're going to invest in the partnership relationship.

We do business with integrity, and we do business with the trust that,
you know, instead of us having, you know, the 40 sales people we have
spread across the country, we have thousands of sales people out there
selling our partnership, our business proposition together, which allows
us to be able to be engaged in a lot of deals we would have never seen.

That's in the automotive sector; that's in the telecommunications
sector; that's also in the Federal sector that we're involved in as
well. I mean, from the IT partners that we have to the
telecommunications that we have, Alphatel (phonetic), Fujitsu and
Tellamps (phonetic) and the like, and Cisco and the like, are interested
in this relationship, because of the additional value we can bring that
they simply are not a business they're involved in, and that we can
hugely make a difference in the way and how they do business.

CHAIR JOHNSON: Thank you very much. We're going to ‑‑ you've done an
outstanding job, and I see several members have questions. We are
running a bit off schedule. If we could hold questions, that would be
great, and if you can't stay with us, Priscilla's got your number.

Because the dialogue and us better understanding what the barriers might
be, how we can address those and replicate your success with others, is
something that we're certainly interested in. We appreciate the wisdom
that you've brought to us today, and we will follow up with you. With
that, thank you again.

MR. STEWARD: Thank you.

(Applause)

CHAIR JOHNSON: If it's the pleasure of the group, we're going to
continue and go right into our subcommittee reports, with the first
subcommittee report being Career Advancement. Jenny Alonzo.

MS. ALONZO: Thank you, Julia. Is this on? Okay, the committee has a
packet, which is titled "Career Advancement Subcommittee." So if you can
please refer to that, and I am going to walk everyone through our
summary, and our general overview. You need more? Here's \-- you have
it? Okay, alrightee. We have some extras, so \-- okay.

All right. In December 2003, the Federal Communications Commission
Advisory Committee on Diversity for Communications in the Digital Age's
Subcommittee on Career Advancement, requested information from a broad
range of industry, trade associations and foundations across the
country.

The intention of the request was to compile input eliminating the
experiences of such organizations and/or their members companies, in
order to identify workforce identity best practices, that would be
worthy of widespread acceptance throughout the broadcast,
telecommunications, cable, satellite, Internet and broadband industries.

Specifically, the Career Advancement Subcommittee sought information
regarding diversity efforts, programs and policies in the following
categories: employment diversity, diverse contracting initiatives,
evaluation procedures and incentives, the role of the FEO in promoting
diversity, and the Role of Diversity Committee in promoting diversity.

An overview of the responses to the Subcommittee's letter request
received to date is attached.

Our general overview. Requests for information on best practices were
sent to a total of 30 trade associations and four foundations. The full
list of organizations is listed in Exhibit A, and an example of the
letter submitted to trade associations and foundations are shown in
Exhibits B and C, respectively.

Six responses were received from the following organizations, most of
which are cable-oriented: The American Cable Association, the M.L. Bowen
Foundation for Minority Interest in Media, National Association or
Multiethnicity in Communications, National Cable and Telecommunications
Association, United States Telecom Association, Women in Cable and
Telecommunications, and the WIC (phonetic) Foundation.

Additionally, AWRT responded to our request. However, the subcommittee
has not had the opportunity to review, but will do so for subsequent
meetings. The American Cable Association responded in support of the
Subcommittee's initiative, but was unable to supply the required
information in the timeframe requests.

The USTA supplied only very limited information, noting that the FCC
Diversity Committee's inquiry would be better directed to our larger
telecommunication companies, some of which are their members.

The remaining four organizations who responded, the M.L. Bowen
Foundation, NAMIC, NCTA and WIC, all supplied relevant information that
will be summarized in the following pages. The responses from the M.L.
Bowen Foundation and NAMIC provided an insight into diversity practices
on a non-profit level, from foundations that provide recruitment and
training for support of their respective industries.

The information provided by the WIC Foundation highlights the best
companies for women in cable, as measured by the number of women and
women of color, managers and executives, commendation and pay equity,
advancement opportunities and resource for work life support.

The information supplied by the NCTA offers a general summary of the
cable industry practices. The NCTA response was the most comprehensive,
addressing employment diversity, diverse contracting opportunities,
evaluation procedures and incentives, role of the CEO in promoting
diversity, and the role of the Diversity Committee in promoting
diversity.

However, more data is urgently needed. It would be highly valuable if
the separate telecommunication companies themselves would provide input
on specific practices in their own organizations, for use in ultimately
compiling a comprehensive best practices document. Companies in the
various FCC-regulated industries should be encouraged to share their
particular experiences to enhance the credibility, effectiveness and
influence of this project survey by the FCC's Advisory Committee.

The Subcommittee intends to proceed with a follow-up to its best
practices request within the corporate sector. Attached is a summary of
the responses provided by the organizations and above.

Next steps for the Subcommittee: We will be reaching out to corporate
sector directly, and via trade organizations again, to gather additional
information on best practices programs within their respective
companies. Companies' findings and subcommittee's recommendations on the
best of the best practices will be presented to the full committee, and
subsequently to the Commission.

Timeline. We're talking about a second round of letters going out the
week of February 9^th^. Responses will be requested for return by March
9^th^. Draft summary will be distributed to the full committee by April
12^th^, and the Subcommittee will present a draft set of best practices
during full committee meeting in May 2004, back here at the FCC
headquarters.

This draft set is intended to be a living document, as we gather field
learnings during the planned FACA road show in the summer of 2004.

At this point, I would like to open it up to the other Subcommittee
members. If there is anything that you would like to add or enhance on
this overview.

MR. WALLAU: Well, I think that's exactly (inaudible). Indeed, I am a
little adamant (inaudible) to respond, and I think all the broadcasting
companies would respond. I personally would get your request. But we're
used to complying with these type of requests, when they come from
outside entities, primarily associations involved with how to diversify
broadcasting, obviously specifically.

You should know that in the broadcasting sector that's listed here, the
NAB, as you probably know, all the networks have withdrawn from the NAB
for reasons of the conflict between the non-owned affiliates and the
networks. So I think if you went to the networks and to the major
broadcasting, at least in my part of the business, this businesses \--
these numbers of businesses that we're talking about, the companies
would comply with some pretty national information that would be helpful
just to understand the present. You should also hear from them about the
initiatives they have in place, which are substantial. Some are working,
some are not, and we can be helpful in figuring that out together.

CHAIR JOHNSON: That would be great.

MR. WALLAU: But I think going through the rest of these companies is
essential, and I think you'd be \-- I hope you'd be heartened by the
response you'd get.

MS. ALONZO: Any other comments from the committee members, Subcommittee
members or the committee as a whole?

SPEAKER: I would just add one challenge of creativity, also, is in what
way can either the committee or the Commission sort of lend, in some
validating way, sort of its imprimatur to the successful practices, and
in some ways challenge companies with less successful practices, to
either adopt, or some sort of initiative.

You know, I don't know if any of this works or is even legal. But, you
know, I've thought of everything from something as simple as the good
housekeeping seal of approval or an FCC feature of Best Practices, or
something that associates the government's approval or sort of
validation of those things.

You know, I've seen in diversity programs this works pretty well in
other areas. You know, whether you're one of Fortune's Top 50 companies
for diversity, people really work very hard to be on that list, or those
who care about it. It's a pretty significant motivator, as I understand
it inside companies.

So be thinking creatively. What could the FCC potentially do with that
information, that might give it that kind of ongoing validation, that
companies would actually desire, sort of vie for being perceived as, you
know, healthy employment environments for diversity.

MS. ALONZO: Mr. Honig?

MR. HONIG: Did the Subcommittee chair want to address the question of
baseline data?

MS. ALONZO: We actually figured that we would table this and address it
off-line. There was a concern that there's an NPRM for data from
companies, smaller companies in the telecom arena, to get rid of the
mandatory request for data. We figured we would take that off-line.

CHAIR JOHNSON: Thank you. Any other questions?

SPEAKER: Well, just so it isn't a total blow-off, I do think this sort
of raises an important thing to stay cognizant of. There's a very
different set of equities with legal compulsion to report data to the
United States Government, than there is from what you also do
voluntarily.

Both are probably necessary. But I don't think \-- I think they should
be complimentary to each other, because I think there are things you can
get from some sources and not from others as well. We will always have
certain kinds of limitations, everything from the Paperwork Reduction
Act, approval by OMB, the legal rights to compel.

You know, we're a state actor. That's one of my frustrations in the
diversity arena, is we're always subject to sort of the constitutional
scrutiny associated with these things, that often puts limits that we
might not otherwise impose.

So I would only say that, you know, I think I know what we're talking
about. It's fair, but I don't think that that should mean that this
committee doesn't have an opportunity to get good data through its own
processes as well. That's actually one of the reasons we hoped, we put
this group together.

CHAIR JOHNSON: Thank you. Any other comments or questions of the Chair?
Ms. Alonzo? Seeing none, excellent report. We look forward to the
additional work. And again, to kind of reiterate, we drafted and
submitted this information to companies right before Christmas, so we
understood it would be \--

MS. ALONZO: Right. Christmas is a bad time.

CHAIR JOHNSON: Yes. It would be a work in process. Now to kind of hone
it in and go directly to the companies themselves will provide us
probably with even more rich information to build from.

MS. ALONZO: Right, and really everyone we reached out to, no one was
reluctant. Everyone was like "We'd love to help you out," but timing for
some was kind of difficult. But overall, everybody was very interested
in serving.

SPEAKER: I did want to make one comment, as far as (inaudible)
information as far as the best companies list that you were referring
to. We did do a survey such as that this past year for the first time in
the cable industry, and we called it the "Parr Initiative," Women in
Cable and Telecommunications, say for pay equity, advancement
opportunities and resource for work life.

What we found is that, upon doing the survey last year, compiling the
results and partnering with Working Mother Media, who does the annual
100 best companies list for working mothers, that we got the credibility
and the expertise from Working Mother that had done those kinds of
surveys in lists before.

Then we were able to do our own list in the cable industry for the best
companies for women in cable from that. We had the results on November
3^rd^ at our gala that week, honored the very best operator and the very
best programmer in the cable industry.

What we found from that a lot of companies were clamoring after that, to
say "How can we be honored at this event? How can we get on this list?"
It really does cause a lot of warm competition, but also people to look
inside of their own companies, to look at their results from the survey
as we gave them scorecards back to show them how they did.

It was all confidential, so it's not like we're outing people. We just
honored the best companies. It really was a very positive thing for the
industry, a very positive thing for the companies that participated,
because those that didn't do well, nobody knew it. But the ones that did
do well, everybody knew about it.

It seems to me now an incentive for companies, after having seen how
well it worked, wanting to get on that list this year. So I would hope
that would be something we could try to do, either a CO or a list or
something, and again, understand the legal ramifications that I did see
firsthand in the last 12 months, how well that can work.

CHAIR JOHNSON: Thank you. Thank you, Jenny. With that, we'll go to New
Technologies. Mr. Riley Temple will be presenting. The Subcommittee
chair, Roscoe Young, is participating via the telephone, as his plane
was not able to get him in today. So Roscoe, we know you're there in
spirit, and you're in good hands with Riley.

MR. YOUNG: I'm alive and well. Thank you very much, Julie.

MR. TEMPLE: Thank you, Roscoe. Thank you, Julia.

MR. YOUNG: Riley.

MR. TEMPLE: I am pinch-hitting here for Roscoe.

CHAIR JOHNSON: Riley, I think you need to come to the microphone.

MR. TEMPLE: I'm pinch-hitting here for Roscoe, and also the engine that
drives our Subcommittee, who is Marva Johnson, who was not able to be
here as well. The Technology Subcommittee has been meeting over the
course of time, and I wanted to outline for you some of the objectives
and our progress report to date.

We also have some preliminary recommendations which we will not present
today, but which are summarized briefly in this report in front of you,
and we will be developing white papers on it for your consideration at
some later time.

Our objective is to assess what ownership and career advancement
opportunities are available in new and emerging technologies, and the
convergence of these technologies, and to develop recommendations for
facilitating opportunities for minorities and women in new industries as
they form.

There are several critical success factors. One is to draw the linkage
between technology opportunities and financing opportunities, and
identify the opportunities that drive technology and advancement in
investment interest, and managing the quick success expectations; that
is, focusing on opportunities for sustainable success, and not
get-rich-quick type schemes.

We're doing this in a phased approached. Phase 1, we're looking at
opportunities that exist right now, i.e., low-hanging fruit, and you'll
see examples of that at the end of this packet, and which we can talk
about if we have the time at the end of this presentation.

Phase 2 will focus on technology-drive development opportunities and
focus on incentive-based and regulatory policy, i.e., not
regulation-based opportunities, with target recommendations to be made
some time mid- to late 2004.

In Phase 3, what does the long-term future hold? We're looking at the
commercial sector, Petri dish research and development opportunities for
minorities and women, and working with incumbents like Microsoft,
Hewlett-Packard, GTE, to identify opportunities to outsource development
in delivery of technological solution for their business needs.

Interestingly enough, we will probably spend some time with Worldwide
Technology after listening to that.

In education, driving the advancement of scholarships and research
opportunities at the graduate level. For example, Emory University has a
New Ventures program at its business school in regulation, focusing on
establishing long-term regulatory programs and policies to drive and
foster nascent technology, with target recommendations to be made in
'05.

We wanted to also today to present a general progress report. We did or
conducted post mortem focus groups. We looked at minority companies who
have made an effort to get into the business and have either stumbled
and failed, and we wanted to look at and get some feedback on their
hurdles, best practices and opportunities.

They included Essential Integration (phonetic), Globenet and the Wilkins
Group. We also looked at retail service providers, and we have some
recommendations as a result of having looked at those retail service
providers, which include Northpoint, Broadwave, UrbanCom (phonetic) and
Savoy.

Our identified initial recommendations in general, and in the broadcast
sector, follow. We have some initial assessments and in the interest of
time, perhaps I shouldn't go through these, but I would recommend them
for everybody's review and comment. I would appreciate your comments in
getting back to us.

They focus on media, communications and telecommunications, and
specifically, in one case, I want to follow up on the need for further
data gathering, which makes it \-- which is difficult in the telecom
arena particularly.

Also, I would have you look at, beginning on page 8, our findings from
the post mortems. What worked and what didn't; the \-- for example, if
you look what didn't work in terms of the auction policies with respect
to Northwave and Urban, bidding credits and what those entities referred
to as "overregulation." On the broadcast side, the hurdles with respect
to financing, discrimination and regulatory policy, and also lack of
industry experience.

Now in terms of our low-hanging fruit recommendations on page 12, in
which no rule changes or legislation are required, which is why they're
determined to be low-hanging fruit. We would like to recommend the
expansion of the working relationship between the FCC and the SBA, as
well as the FCC and other government entities, such as NTIA in the
Department of Commerce, to increase awareness of emerging technology
opportunities for minority and small businesses.

We also recommend the sponsorship of an SBA-FCC conference on minority
small businesses and emerging technologies, such as wireless, voiceover
IP and broadband and others, for a potential conference in the fall of
this year.

Spectrum allocation. We recommend that the FCC establish a database, and
work with outside groups to establish an information clearinghouse of
updated license sales, spectrum leasing and other communications-related
opportunities for minorities and small businesses.

In the engineering area, the creation of a 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,
and to allow interference agreements between licenses of or for a
licensee with itself.

In our next steps, we will finalize these recommendations and submit
white papers on them for your consideration. We are going to work with
the Access Subcommittee to establish a minority supplier program, or to
recommend the establishment of a minority supplier program, identifying
opportunities to leverage resources or the ASABA Group (phonetic), for
example, and enlist the support of top tier players.

We will refine regulatory and legislative-based recommendations, and
leverage the resources of the organizations listed, to reach, to look at
the research minority publishers, and to focus in on private sector
initiatives. Finally, to explore opportunities to resuscitate the
Telecommunications Ownership Diversity Act.

Roscoe or Marva, do you have any other comments?

MS. JOHNSON: Roscoe, did you want to make any comments?

MR. YOUNG: No. I think, Riley, you've covered the point to the talking
note that we have for the day. Marva, feel free to chime in.

MS. JOHNSON: I didn't have any other comments. I did want to thank
everybody on the committee, because the committee has put forth a lot of
hard work in coming up with some initial investment.

CHAIR JOHNSON: (inaudible)

SPEAKER: If I could just \-- (inaudible) because I just thumbed through
this thing quickly, but the thing that strikes me as either potentially
wrong or limiting is somehow the question of broadcast versus
telecommunication. It would be purposely provocative. It would suggest
\-- I would even go so far as to suggest those aren't the two areas I
would list as the new emerging technologies.

What worries me is that, you know, I see some of the assessments of
telecom, for example. It's almost premised on the big telcos or
something, as if the opportunity in telecommunications is an opportunity
to compete with incumbent telephone services which has, of course, all
of the hurdles that I see listed.

I would love to see sort of an edgier expansion, if you would of \-- I
love the framework personally, but I would love to see sort of an
expansion into, you know, perhaps software, hardware industries; new and
emerging technologies; wireless services, WiFi and related services,
powerline and related services.

I think the real exciting part of

(Tape change)

SPEAKER: (tape picks up) quite a bit further removed from traditional
broadcasting and telecom.

MR. TEMPLE: Yes, I think what you have in front of you is our initial
assessment of where we are today. This doesn't include, you know, the
future and forward look. If you look at our phased-in \-- our Phases 2
and 3, in which we will begin to focus on those other areas.

We first looked at low-hanging fruit in order to get the engine moving,
to see what we could, what kind of analysis we could do, to come up with
initial recommendations, and this is the analysis of where they are
right now, and those recommendations are a reflection of this kind of
analysis essentially. So it's just the first step.

SPEAKER: Okay.

MR. TEMPLE: Okay.

CHAIR JOHNSON: Any other comments?

SPEAKER: When David Steward was speaking earlier, he mentioned the fact
that when Worldwide Technologies \-- well, probably in launching all of
his businesses, but particularly that one, that he didn't really have
examples of other companies like his or like what he was trying to put
together, at least not people of color that were heading up those
companies that he could emulate.

I'm, you know, coming from a more professional development background.
But I'm thinking from a business development perspective, that having an
opportunity to have businesses be able to connect CEOs, or people who
are trying to put businesses together, finding mentors in that realm, as
opposed to we're always, in our professional development, thinking about
mentors to help us with our career path.

But in these emerging technologies, that these are things that haven't
been done before, and if they are being done before, by a very, you
know, small number of companies or people that are doing that, and
really to find an opportunity to get those people together, to be able
to talk.

What an opportunity that would be, to help move those technologies
along, as well as helping those companies develop. So I didn't know
where that kind of landed among these four subcommittees, but this one
seemed the most likely, and I'm on it. So that's why I brought it up.

MR. TEMPLE: Actually, I think it does land squarely within our
subcommittee jurisdiction, and particularly when we look at what's in
the supply chain. That's clearly where a lot of the opportunity is
available, and Mr. Chairman, as you mentioned, in the other technologies
as well, the supply chain opportunities are clearly there, which is
where we will be looking.

CHAIRMAN POWELL: You know, just to expand on your point, you know on the
plane ride back, I was looking through some magazines and was almost
embarrassed when I was reading about a number of individuals who were
being featured on the covers of magazines at this conference, who were
minorities, and I had no idea.

Like the CEO of Semantec (phonetic), that owns Norton Antivirus
software, is an African-American. I had no idea. That Rod Atkins, who is
the senior vice president at IBM running the entire Pervasive Computing
Department. Who knew these folks?

You know, and I think that one of the challenges, if we're looking for
mentors who've done it and done it right, they are more than I think we
have been able to see. I think one of our challenges is really to get
educated about who's out there and what they're doing, and try to tap
into their line of mentorship and at least experiences.

Because I think, you know, reading the article about each of them, it
was a primer in how to succeed in high tech businesses that I thought
was real interesting.

SPEAKER: (inaudible)

CHAIRMAN POWELL: Yes ma'am, I did.

MR. WALLAU: Mr. Chairman, I think that's equally important for the
majority of people in business, to see if there are success stories out
there, if not more important.

CHAIRMAN POWELL: Yes.

MR. WALLAU: Because when Riley was reading on page 9 about
discrimination, discrimination (inaudible) and I'm not racist. But then
you can also be discriminate \-- you can discriminate based upon
experience, that the (inaudible) to being a minority is whatever failure
happens to a minority happens to all members of that minority.

So if it's \-- you know, a white person fails well, you know, that
happened to that specific person. But if there's a failure of a black,
any minority company, it is ascribed by the majority viewing it to be
the failure of that entire group.

So I have one bad experience; I therefore am much more reluctant to have
other experiences with any kind of people I do business with, if I'm
that closed-minded. So that the more that we can publicize the people
who are holding the reins of power, that there are successful people,
and I didn't know that about the leader of the Semantec.

That's a big fact. I mean, that's an amazing thing to me. I meet with
these (inaudible) to the story, and the more we get those stories out, I
think the more we'll open people's minds up to the possibility of doing
business in those areas. So I think it's an education \-- well, it's
mentoring. Of course, people of color it's also educating white people.

(Laughter)

SPEAKER: So we can get the (inaudible).

SPEAKER: You know what might be useful, as a product or a takeaway, is
whether we couldn't \-- a symbol or a clip, sort of a reading set of
materials that we're regularly updating, and we could circulate under
the auspices of the committee as experiences, you know, diversity
success stories.

Because these things often have long featured articles. Each one of the
ones I had read, you know, beginning to end, everything that had
happened, because they're interesting and compelling stories. So maybe
that's something we could figure out a way to do.

CHAIR JOHNSON: Maybe a link from the website.

MR. WALLAU: Yes, I was thinking like that. Yes.

CHAIR JOHNSON: Any other questions? Ginger?

MS. LEW: I think another area where the issue of visibility has an
impact is in the new emerging technologies and those entrepreneurs that
are coming out of our business schools and our engineering schools, who
are looking at WiFi, who are looking at powerline management, who are
looking at more efficient semiconductor chips for, you know, your
cellphones, etcetera.

One of the big challenges a lot of these young, and they usually tend to
be younger entrepreneurs, is that they don't have \-- they, too, don't
have mentors. So they don't have people who've made it, other people of
color who have made it in those fields, who can sort of pave the way.

I think another area where it creates a hurdle for them is that they
don't know or have access to majority CEOs of large companies, because
at the end of the day, they end up selling to a Nokia or a Qualcomm, or
whoever it might be.

So it creates this interesting hurdle for some of the new, younger
entrepreneurs that are coming out of school, and we should think about
how we can, number one, identify some of those leaders, and number two,
how we can help them overcome of those hurdles.

CHAIR JOHNSON: Good point. Any final comments? Thank you, Mr. Temple.
Excellent report, and I do recall on one of your meetings, via
conference call, Mr. Wilkins, I believe, one of the entrepreneurs, he
spoke to the same issue, too. He said "You know, the trade show in and
of itself isn't enough. But if you can \-- you know, I need to know the
CEO and he needs to know me, and I have a wonderful story to tell."

So he kind of challenged us to come up with something systemic,
something real that would allow that to occur. He didn't know what it
was, but some forum, some mechanism to make sure that they would. So you
all are on the right track in teeing up that issue, and bringing forward
a real entrepreneur, who could speak from experience, to help us focus
and address. Thank you.

SPEAKER: Or find a forum to get them all together.

CHAIR JOHNSON: Exactly, uh-huh.

SPEAKER: Can I just mention, before we move on to the next subcommittee,
that for those of you on the phone, who didn't have access to the
PowerPoint presentation on this, we will make sure that this is
available on the website, so you can go back and look at the pages that
Riley was summarizing or us.

CHAIR JOHNSON: Thank you. With that, we'll move on to Access to Capital.
I believe, Jenny, were you going to \-- what?

SPEAKER: Ginger.

CHAIR JOHNSON: Oh, Ginger is \-- is Commissioner Barrett on the phone
lines? Commissioner Barrett?

SPEAKER: I think that we would have heard him by now.

(Laughter)

CHAIR JOHNSON: I guess he's not on, so with that, Ginger?

MS. LEW: I would like to acknowledge the other members on the
Subcommittee. Lauren Tyler, who was the chair of the Subcommittee, from
Quetzal/JP Morgan, and Anthony Gee from Carthage. Lauren, are you on the
call? I know she was trying to make it.

MS. TYLER: I am on the call, Ginger.

MS. LEW: Thank you. Well, I'd like to acknowledge the great work you did
in pulling together the Subcommittee, and inviting our panelists to
appear on January 20^th^. Thank you.

MS. TYLER: It was a pleasure.

MS. LEW: We had the pleasure of inviting three members from the private
equity funds. Ed Shirley, from Fairview Capital; Duane McKnight from
Sincom (phonetic), and Anita Stephens (phonetic) from Opportunity
Capital Partners.

The panelists were asked to look at three broad issues. Number one, to
provide an overview of the history of private equity; two, to discuss
areas where ethnic entrepreneurs have had successful entries and exits
and challenges; and three, identify the general challenges in the
marketplace.

Mr. Shirley of Fairview Capital provided an overview of the historic
performance of private equity funds that invest in ethnically diverse
companies. He is a former board member of the National Association of
Investment Companies, which is a trade association of investment firms
led by people of color. I also serve on that board as well.

Mr. Shirley reported on a recent study that was funded by NAIC and the
Kaufman Foundation (phonetic). The study looked at the historic
financial performance of its member funds. There has been, in the past,
a perception, an erroneous perception, by general private equity funds,
that private equity funds led by people of color underperform and do not
provide the types of returns that majority funds do.

The Kaufman-backed study reported that DC-backed minority funds
outperformed the S&P 500, providing a 20 percent rate of return for the
period that was under study. The study also found that such funds
invested primarily in broadcast, and not broadband opportunities. A
summary of this report is attached to this submission.

The panelists then went on to talk about four broad areas. Number one,
access to talented entrepreneurs. Mr. Shirley and Mr. McKnight reported
that there was in fact 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 entrepreneurs who are seeking capital.

Access to talented investment professionals. Mr. Shirley again reported
that there are more ethnically diverse investment professionals than
ever before, working in both minority and general investment funds. I
will go back to each of these points in just a moment.

With respect to access to capital, 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 existing
companies. Interestingly enough, consolidation of broadcast properties
has created successful exit opportunities for some of these well-known
entrepreneurs, yet consolidation of broadcast companies has also
resulted in a significant appreciation of certain broadcast property
values, sometimes making the acquisition of new broadcast properties
beyond the scope of minority entrepreneurs.

General investment funds were not viewed by ethnically diverse
entrepreneurs as being accessible or available, and several reasons were
cited. First, Ms. Stephens stated that 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 and 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, Ms. Stephens reported
that 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 of larger funds. Fifth, a number of lenders making
loans to communications companies have left the marketplace, thus
shrinking the pool of debt lenders that are available.

One of the other challenges that was discussed was that with ethnically
diverse funds having limited funds, in fact, NAIC recently announced
that its member funds currently have about \$5 billion under management,
entrepreneurs seeking to purchase higher value properties in the top 100
markets do not have access to sufficient capital to pay for these
newly-appreciated properties.

Access to opportunity. All panelists identified this as the major, if
not the most significant 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 properties there are, their ability to participate in such deals is
severely limited. As Mr. McKnight said, "If they are not at the table,
then they can't play."

When asked why entrepreneurs don't hear about such opportunities, Mr.
Shirley stated that there was a perception that ethnically diverse
entrepreneurs don't have access to capital, and therefore don't have the
money to participate. So therefore, they are not told about these
opportunities. It is an interesting cycle which perpetuates itself.

Of all the issues that were discussed during the sub panel meeting, the
lack of access to opportunity was seen as the greatest hurdle. It was
interesting to note that in Mr. Shirley's comments, he made a statement
that "My people perish for lack of vision. They also can perish for lack
of opportunity."

Other issues that were identified and discussed, overregulation. Ms.
Stephens and Mr. McKnight urged the FCC to be cautious about adopting
policies which may overregulate minority or small business communities.

One example that was cited by both venture capitalists was requiring 51
percent minority ownership of broadcast properties, in order to be
considered a minority ownership property. Panelists indicated that the
51 percent threshold created significant problems, from an investor's
perspective, as it relates to valuations and subsequent exits.

Another panelist mentioned a problem that entrepreneurs have with
respect to debt financing, as the secondary markets have a reluctance to
accept loans that are securitized against sales and cash flows.

Some of the recommendations made by our panelists include reinstatement
of the small business tax certificate; institution of the comparative
bid component to the spectrum auction; establishing set-asides for small
businesses in the spectrum auction; educating banking regulators.

In terms of next steps, the Subcommittee plans to follow up with the
panelists, to flush out their recommendations, in order to submit them
in a fuller way to the full committee. We'd also like to pursue having
discussions with the National Association of Investment Companies, to
comment and work on this, any further suggestions they may have.

We should also reach out to the Tweego (phonetic) Foundation, which is a
foundation designed to encourage more people of color to go into the
investment community, to find out about some of the hurdles that they've
identified.

Finally, in terms of the first two topics that were talked about, the
access to talented investment professionals. I think I mentioned the
Tweego Foundation. But we need to dig a little bit deeper into this
issue about access to talented entrepreneurs.

I think one of the issues that we've run into in recent time is that
again, while we've had some very promising entrepreneurs come out of
business school and engineering schools who are people of color, they
may not have mentors who can help them, in terms of developing a
software company or hardware company or whatever the technology is that
they may be working on.

They may be very fine technologists, but they have very little
experience in the business world. At the end of the day, no matter how
good the technology, you've got to be able to package it and sell it and
make a business out of it.

And so I think this is an area that our committee should look at a
little bit more, because it does have a very significant impact and link
to whether or not these entrepreneurs can qualify and get access to
private equity capital. That concludes the report.

CHAIR JOHNSON: Thank you. Any questions?

MR. WALLAU: I think that you're looking at it mostly with the broadcast
respect, because I know that's (inaudible), the broadcast respect
(inaudible) of the committee. It might be helpful or useful to identify
\-- as I was listening to the presentation, it occurred to me that a lot
of the things that were said are true of everyone who is an
entrepreneur, like Hispanic, Asian, whatever.

There are start-up problems. They're just part of the business. That's
just the capitalist part of the problem for a lot of people (inaudible)
who try to go into business, and the big companies always have
advantage, and they're always going to be talking to each other at a big
table, and a lot of people don't see that.

It just might be useful \-- I know I'm not suggesting that in solving
the problem of limited diversity and microscopic diversity, in the
industries that we're talking about, that we shouldn't address the
problems faced by everyone entering into these businesses. But it also
might be helpful just to try to figure out is there something specific
to people of color getting into these businesses, other than simple
discrimination. Is there something \-- it may be just discrimination.

And therefore, having identified something specific about, that you were
trying to include in these businesses, we might be able to come up with
solutions and speak for those specific issues, rather than the global
issues that affects everyone trying to get, all entrepreneurs trying to
get into businesses, like you were talking about.

CHAIR JOHNSON: Any comments or reactions?

SPEAKER: Ginger, just a follow-up comment. You're absolutely right, that
many of the topics that were discussed are common to any entrepreneur.
But I think one of the biggest challenges is identifying financial
resources.

I mean with all due respect, someone coming out of \-- an
African-American engineer coming out of Stanford, for example, may or
may not be able to find a way to get an introduction to some majority
venture funds in Silicon Valley or in New York or in Texas or wherever
that entrepreneur plans to establish their business.

They may be able to get introductions to some of the NAIC member funds,
and I think the NAIC groups do a very good job in terms of conducting
the outreach, in order to identify these promising entrepreneurs.

But when you're talking about an organization whose funds manage a total
of \$5 billion, and compare that to how much money that's gone into,
say, telecom investments in just any one year, there's a huge
discrepancy there.

So issues of access to capital continue, of the majority funds, or
general private equity funds, is an issue.

SPEAKER: (inaudible) because that sort of trickles up also, because on
the \--

CHAIR JOHNSON: Could you get closer to the microphone?

SPEAKER: In the senior lender panel that was held that day, it was noted
that frequently, the senior lenders are brought in through a network of
contacts that flow up out of the equity investors. So to the extent that
the pool of equity investors is smaller, and their networks are more
limited, that likewise makes it more difficult for senior lenders to
come in to the financing picture, which makes the cost of money more
expensive and makes the deal more difficult to put together.

CHAIR JOHNSON: Any other comments, Mr. Chairman?

CHAIRMAN POWELL: I don't know. I find it intriguing, but I think Alex
does make a point that we should think about, because, you know, in my
limited experience with money people, they're ruthlessly arms merchants.
You know, and unabashedly so. I think that if we talk about access to
capital, in some of kind of high, abstract way, most of the ones I know
who will confide say "This is business. You're just telling me about the
problems of entering a business. Go away."

I mean, I think it would help if we couldn't either identify that
there's systematic persistence that can't be explained otherwise; it
could be discriminatory or implicitly discriminatory, or false
perceptions, you know, about somebody's ability just because of their
status.

Or there's sort of an affirmative side, which is that there's something
important, in terms of sort of social good, about actually actively
trying to encourage greater opportunity for the value of society. But
you know, my arms merchants go "Yes, that's great. Sign me up but don't
call me." That would require, I think, real horsepower at a national
level as well, from leaders at higher pay grades than mine.

But I do think that for six years I've heard access to capital, and I
always had the same reaction. Well, how much of this is \-- it's hard to
be an entrepreneur, and how much of this is systematic, permanent
racism? I've come to the conclusion it isn't me you're trying to
convince, which is the problem. It's people who don't have to play in
your world at all, and there's nothing you can do to compel them.

You know, so we either need to \-- we need to get deeper and have better
arguments and more sophisticated arguments about this, I think, if we
hope to be effective. And then the last comment I would say is I also
think there's a whole community we have to ‑‑ and Ginger's done some of
this \-- we have to expand out to.

I mean, the FCC, this committee, even a lot of the industries, you know,
there's a whole banking finance universe out there that I think is where
we really need to get into, because FCC has no money. It's not going to
have, nobody's going to give us any money, you know.

I'm somewhat skeptical about what policies would actually \-- that we
would do, which would dramatically, or at least in some order of
magnitude, increase the flows of money. I think there's a whole finance
world out there, that part of the networking or the expansion of our
relationships would really benefit us.

MR. WALLAU: (inaudible) I note (inaudible) has nothing to do with
diversifying the owners of broadcast stations, is that (inaudible)
access to capital, lending companies do not view investments in smaller
broadcast deals as being attractive.

That's absolutely right. That's regardless \-- that's just the way
lending institutions look at small 100+ markets, in terms of cash flow,
in terms of returns. I mean, it's just \-- they're not looked at as good
investments.

So it's hard, unless you're aggregating a whole lot of them, it's hard
to go in and get a lending institution to get excited about operating a
small station. You know, the Disney Company doesn't have a lack of
access to capital markets, but the Disney Company hasn't invested in any
small markets. It doesn't make sense. I don't think it's good business.

But that's the place where an entrepreneur would start, with a small
station, and build themselves up. So you've got this disconnect between
lending institutions that think they're bad business decisions and not a
lot of growth opportunities, and therefore want to save their money to
allocate it to the different types of investment propositions, and
entrepreneurs, who have to start there, just because they can't start in
a major market.

So it's just \-- it is important to understand, I think, where the
issues are, just part of the overall economy, I mean driven by just
economics and where it's driven by other things, these are positive. Now
I think the Chairman's right. If you do want to go out and say \-- he's
right about it on both hands, on both statements he made.

The sharks who are in the investment community, the money people won't
share. But they're ‑‑ you actually might have an appealing proposition
to other entities that might have \-- we need to identify if there are
people who would want to be involved in that kind of a proposition, just
because it's the right thing to do.

I mean, all of the companies, you know, that you oversee are involved in
some way in doing some of those, whether it's a broadcast station trying
to do some kind of public service work through use of its broadcast
time. Everybody's involved in some way, some falling short, some
overreaching, in terms of serving the public interest. So this might be
another way to try to drive that proposition.

SPEAKER: You may be right, that this is a uniquely \-- I'm not certain
of this yet. I don't think we got to this point in the panels we have,
but you may be right, that it's a uniquely \-- a minority problem as
much as an entrepreneurial hurdle, that all entrepreneurs are going to
face.

But to the extent that most minority entrants into the market are going
to come into small markets, you know, these panelists were saying over
and over again that with small market deals or small deals, you know,
under \$15 million, under \$10 million, it gets very difficult, because
there is no cash flow. So they're really starting from scratch.

And I think you're also right that we're getting into a whole new
finance world, because the themes that came up over and over again was
you have to educate \-- you have to get out to these small, local and
regional banks and banking associations, and educate them on how to do
telecommunications deals and broadcast deals and wireless deals, but it
scares them. They don't know how to go about it.

And also it was \-- because that's where these entrepreneurs need to go.
They can't go to the large, national banks. They're looking for the \$25
million and up deals. You're going to have to educate the small regional
groups.

Then the other issue that came up was educating the secondary market,
which I found very interesting, because usually these loans are bundled,
and they're sold on the secondary market, and they \-- and you have to
educate the purchasers of these notes on the secondary market, to tell
them, you know, that these types of transactions are not as risky or can
be structured in a way that they're worthwhile.

Then thirdly and lastly was to educate the banking regulators on these
transactions. That came up several times, that the banking regulators,
you know, they don't see inventory. They see it as a highly leveraged
transactions, and they tend to miscategorize these types of \-- these
loans, to make it more difficult for the money to flow.

Again, that is a problem that all entrepreneurs are going to run into,
not necessarily just minority entrepreneurs. But certainly to the extent
that most entrants, new minority entrants into the markets are looking
at these smaller loans, small markets, that it's choking them off from
the capital.

CHAIRMAN POWELL: One thing we should think about, and that's very
thoughtful, Frank. I never thought about the local lending institutions.
But we all \-- whenever I hear this debate, I have never heard it
discussed in any field other than broadcasting.

So one of the things that occurs to me, I'm sort of just would be more
curious, it would illuminate the debate, is what are the lending
experiences for minorities in other things in our portfolio? It would be
very telling if they're all the same.

But it might be eye-opening if they varied, because clearly what we're
saying is we have the danger of an uneconomic proposition for anybody.
If that's where we're going to try to make the biggest difference, you
know, we're going against \-- we may be going sort of fundamentally
against, you know, the economic realities.

But part of our answer should be, well, okay, we can keep pounding
there, but also back to the point of where else might you take that
interest, or leverage from it into something else, where perhaps the
fruits are greater.

But I don't know. I've never heard anyone talk about, you know, lending
to minority Internet companies or lending to minority wireless
companies. A little bit on wireless, I guess, we've heard a little bit
\--

SPEAKER: I was about to comment, Mr. Chairman, on the telecom side,
because it seem to be a fairly different phenomena than in broadcast,
because you're generally not talking about owning a telephone company.

I mean, my God who wants to, and it's so, so very capital-intensive
until, you know, you're talking \-- I mean, you show up. You've got \$70
billion, and I can tell you, people are going to know who you are, no
matter what color you are and you can get at the table to make the deal.

But that's not realistic. So there are services opportunities. The
access to capital issue can still be the same, because it goes back to
the risk proposition, I think, that David mentioned and that Alex
commented on.

A real reality is when you're sitting doing business, leadership
primarily what they bring to the table is judgment. So if I'm going to
do business with someone that is large, with someone that's proven, and
I am a just like you, that company, that company and that company has
also done business with them, when they go into business and they fail,
or the profit margins don't come out the way that you thought they were
going to come out, or it turns out that you lost money on this deal but
you got to where you needed to get to at the end of the day, well,
that's business.

And nobody looks at you really strange. But if you chose to do that with
a new minority company, and you're taking a chance on the David Steward
as his being your first customer, or a new Internet company and it goes
down, the risk composition is very different, because as the manager
now, as the leader of the company, the organization, the division that
decided to make that decision, I all of a sudden have a judgment issue.
This was poor judgment.

I mean, both of them failed. One of them you could accept, because it
was more mainstream and more proven. So I think if there is something
that we can do that would increase the credibility of the new people
that are moving forward. I think awards is one way, and I think we
should look at awards as something other than just an accolade for the
company.

But the award gives some integrity and it says that when you made the
choice to do business with this person, you weren't just sitting back
here having a bad day and making a bad judgment, that credibly, you were
drawn to this for some very logical reasons. That's why I think we can
kind of cast recognitions in a different way.

I also think that, at least on the telecom side, it's been my experience
that many times the company has to be the initial risk taker, and
sometimes you have to finance the person, which creates an interesting
kind of partnership. So you infuse that capital.

We have had experience where one of the largest African-American owned
telecom companies in the country started that way. Credible, runs a
great business, you know, has access on its own. But when he began, you
had to make several millions of dollars of investment in partnership,
and that may be another way of filling the void that Ginger talks about,
that is absent in the financial community, because the deal's not big
enough for them to really register with or to care about getting into.

Then I think if we could identify \-- I think by doing some of those
partnerships, you create success stories, and then you can use those
success stories to do some real apples to apples analysis. I don't buy
the proposition that, you know, businesses that are infused by venture
capital companies of color tend to fail. I mean, you'd have to really
\-- more often than others.

You'd have to really convince me that that's an apples to apples, that
you're talking about the same kind of applicant; that you're talking
about a comparable opportunity; that you're talking about \-- and
business people understand that. So when you can go in and show that
this is \-- it doesn't become a special opportunity; it becomes a
business opportunity.

Even though there are risks associated with this, when you break them
down, there are going to be risks with people entering this industry in
this time, in these economic conditions, with this kind of competition.
So I think we have to learn how to address it from the way that people
who are making the decisions and the lending decisions start to \-- are
prone to think about it.

But I would just bet that if there's a market where there are no dollars
available, and we can prove that there is opportunity there, and that it
is successful opportunity, that there are \-- I know it's been our
instance, when we get vendors up and they are well-established, they can
go and get access to capital.

Of course, the bank certainly doesn't want us running a
telecommunications company and a bank. So they'd much rather loan money
than have us loaning money on a successful venture. They just have to
get to where they can see it proven.

So I do think that there are some small things that can be done that
when you add them together incrementally, they make a compelling
business case for doing this, and it translates into language that we
are trained to work.

CHAIRMAN POWELL: Can I just go \-- I have to run. I just want to make
one final. First of all, that's extremely insightful and I think a new
and creative way to think about it, because I see companies do this all
the time. It's the effort at getting secured validation. I mean, I'm
watching this, because I see entrepreneurial companies entering our
space all over the place. Voiceover IP companies, you know. One of the
first people they have on the payroll is this communications marketing
expert, who kills themselves getting articles written about you, getting
you at conferences, getting you on lists.

I have to say this is not something I normally see associated with a lot
of the minority ventures that I know. What tends to happen, to be blunt,
is we get segregated. Right? It's great to be in *Ebony*, but that's not
going to get the money. You know, you need to be *Fortune* and *Forbes*.
You need to be in the magazines that the people with the money read.

So it would be interesting, for example, if we could talk *Fortune*
into, right? Can you write an issue once a year, in which you featured,
you know, minority companies in the communications sector, who are
having successes? Every one I've ever met in the business world, when
that happens to them, tells me the world takes off.

You know, one article in the right magazine featuring you can really
take someone off. So maybe that's another way, you know, to talk to the
people that we're trying to reach.

I'm going to have to run, but one last thing I wanted to leave you with
is, you know, not to forget that what we're trying to do is be personal
ambassadors as well, and we're going to San Antonio tomorrow for a
localism hearing, and one of the things, you know, I'm going to do, with
Priscilla's help, is we've put together a diversity day with students,
high school and college-age students, to talk about careers in
communications.

So we're going to spend an hour and a half and some lunch time, just as
a coincidence of us being there anyway, and we're going to keep doing
things like that. I think everyone on this committee should really think
about opportunities when they're traveling or going to things. Can you
add an hour to do something like that? We're going to stick our toe in
the water with that tomorrow. So I just wanted to \--

SPEAKER: Jenny (inaudible).

CHAIRMAN POWELL: Oh, is that right? Jenny's going to be there? You're
going to be at the dinner?

MS. ALONZO: Yes.

CHAIRMAN POWELL: Terrific. So thank you, and thank you for being here. I
won't take any more time.

CHAIR JOHNSON: Thank you, Mr. Chairman.

(Applause)

CHAIR JOHNSON: Any final questions there? Or comments? Ginger?

MS. LEW: I would like to put one issue on the record, because it's an
important one that has an impact for investors. I alluded to it in my
remarks, and that is this issue about the 51 percent ownership question,
in order to be treated as a qualified minority owned company. This goes
to the issue of some of the supplier programs that the government has,
and some of the services program that the government has.

If you're an entrepreneur who's starting on \-- this is all going to be
very hypothetical and very, very simplistic. Okay, so I want to give
those two caveats. Let's say you're an entrepreneur who wants to starts
a wireless company and sell services to the government, and you have \--
you're not going to put any money into the deal, okay?

But you need to raise \$50 million for equipment, (inaudible) company,
whatever it might be. Let's make it \$25 million, okay? The 51 percent
ownership rules would then mean that this company, post money valuation,
in order words, after the money's been put into the deal, the \$25
million has been put into the deal, would now be worth \$51 million.
This is with the entrepreneur not having put any money into the
investment, okay?

The entrepreneur needs more money, you know, a year and a half from now,
later, and needs to raise another \$25 million. Now in my simple math
world, the post-money valuation of that would be somewhere around \$76
million or \$75 million. But because the entrepreneur has to maintain 51
percent ownership, the deal now has to be post-money valuation \$102
million, okay?

As a result of that, it almost makes it impossible for entrepreneurs to
get financing, because most investors, I mean, the numbers don't work in
the investment world. I just want to illustrate that, because that \--
people have oftentimes wondered why don't venture capitalists invest in
more minority supplier-owned companies and services, etcetera.

Because when you do that type of math, the ultimate exit from the
investment would mean that you would have to sell this company for a
multiple that, you know, comparable companies wouldn't sell for. So it
becomes a real challenge.

CHAIR JOHNSON: Thank you.

SPEAKER: I'm just going to \--

CHAIR JOHNSON: Frank?

SPEAKER: What current requirements are there ‑‑ those are SBA? It's
under the SBA regs? Okay, all right, all right.

CHAIR JOHNSON: Anything else? Is that it?

SPEAKER: No, that's all. That's helpful.

CHAIR JOHNSON: Okay, thanks Frank. Our final presentation is by
Transactional Transparency. Steve?

MR. HILLARD: Thank you. I'm batting clean-up, so I'm going to be real
brief here. I think each of you has a handout. I did want to thank Madam
Chairwoman and the FCC representatives, the experts that have helped all
the committees, and Chairman Powell and each of the Commissioners.

I wanted to report in this on the activities of the Transactional
Transparency and related outreach subcommittee, a couple of quick
intangibles that I think each of the subcommittees has experienced. But
we have definitely had the benefit of active participation, an earnest
course of discussion over a number of topics, and I think I'm very
pleased by the gravity of the way everyone is taking the challenge of
addressing this chronic problem of lack of representative diversity.

If you look on page 2, kind of posting up the core of what our
Subcommittee's been looking at, and it echoes some of the other
considerations of a number of the other subcommittees, is really that a
key barrier to achieving diversity is access to deal flow. Just in a
succinct sort of way, and that's really become one of the key focuses of
what this subcommittee is going for, to address.

We expect to do a fairly extensive program of outreach, having spent a
lot of time really assessing within the membership what do we think are
some of the core issues to be addressed, and what are some of the
mechanisms that may be available.

Now our task, and I think the hard work for our Subcommittee is ahead of
us, in terms of a lot of outreach, to test and refine and make some
practical judgments about some of the ideas we're going to share with
you.

So if you turn over to the next page, it's really what are some of the
categories of how to address this problem, which we again, has been a
theme here today, of access to deal flow, essentially as a companion to
access to capital. The scope of our efforts really I think will, at
least as a report today, focus on three categories of potential
recommendations.

An affirmative deal flow enhancement mechanisms, and these, I think, we
would take up as a challenge, that the Commission does have the power to
‑‑ it currently exercises it to some extent, but to create real tools
that create points of opportunity for diversity transactions.

Second is an examination of the merits and issues relating to a
transactional non-discrimination rule, and we'll come to each of these
with a separate page in a second. Lastly, to really catalogue and assess
and make specific recommendations, for again a theme that I think has
been common today, of information, education, clearinghouse, voluntary
programs, Good Housekeeping seals and a number of those ideas that I
think do have \-- make real differences.

If you'll look at page, I think it's page 4, on the affirmative deal
flow enhancement mechanisms, the consideration of the Subcommittee is
really that the FCC really can create business opportunities that add to
or create enhancement of diversity, that these are real tools that can
be implemented, expanded, and the array \-- again, I think many of these
have been covered today \-- but everything from spectrum leasing
provisions, creation of new licenses, and if you will, bite-sized chunks
of opportunities for ownership.

We talked a little bit, I think, about radio a little bit ago. Expansion
in policing of auction rules, such as the designated entity program. I
think kind of the philosophy behind this is that these, while they're
somewhat mechanical, really do create the points of interaction and
opportunity that create the presence and the partnering ability and the
presence that really leads to kind of a long-term staying power that I
think, at least I was certainly impressed with, with Mr. Steward's
company today.

So it's not \-- while these are somewhat mechanical, they're not the \--
they do create the opportunities for a longer-term presence in the
industry. Similarly, I think the Commission does have the power to
create affirmative legal incentives that we'll be addressing, again, to
enhance the opportunities for partnering. Everything from, I think, the
tax certificates have been a classic case of that, to expedited
processing of certain criteria met, and other regulatory incentives.

Lastly, to promote voluntary agreements from business associate

(Tape change)

SPEAKER: (tape picks up) kinds of entities. I think the crux of this is
that there are real concrete programs that, as the Chairman said, can
create access to the arms merchants.

On page 5, another thing that the Subcommittee, I think, has accepted as
part of our, a very serious part of our charge, is to examine the
potential for a transactional, non-discrimination rule that may, for
example, be coupled with a certification process. We will be spending
some significant time considering the merits, how to implement that kind
of potential rule, whether it requires a specific certification or some
other affirmative act by an FCC licensee.

We will clearly be spending some serious time looking at the pragmatics
of that, including issues such as how transaction operate, that has an
effect on an ongoing business, asset valuation, transactional delay,
enforcement challenges, and also considering alternatives to that. But
that is a, what I would call, four-square, one of the key considerations
of the Subcommittee.

Then the last category is really what we would call more of an
informational kind of category, to examine a number of mechanisms that
have been talked about today, in terms of databases of opportunities,
educational programs and I think the idea of programs that in effect
create a Good Housekeeping seal for, as an incentive for investment
banks, private equity funds, to work with diverse elements, is also
something that we're going to examine.

I think the crux of it is this is, if you will, a survey of those areas
which the Subcommittee has indicated are where we expect to spend the
crux of our time, and as I said, Madam Chairwoman, this is really where
part of our hard work begins to test each of these, and formulate them
into recommendations to come back to the committee with.

CHAIR JOHNSON: Thank you. Any questions of Steve? Any other comments
from his committee members? Excellent presentation. I appreciate it very
much.

Now we need to go back to the financial committee, because there are a
couple more presentations to be made. Commissioner Rivera?

MR. RIVERA: Julia, thanks. Just to \-- in deference to the hour, I'm
going to be very brief, and I think Frank is also. But just to give you
the context, the Subcommittee empanelled three panels last Tuesday. We
were here six days ago. Ginger's was one of them, dealing with the
equity markets. Frank dealt with primarily senior debt.

The panel that I moderated dealt really with some of the policy areas
that the Commission's going to have to deal with, or the committee's
going to have to deal with, as we move forward and make our
recommendations. So having done this just six days ago, none of us are
really in a position to make any recommendations like the other, many of
the other panels or presentations. We will be coming back to the
committee with some specific recommendations.

The panel I moderated had five speakers. Vince Pepper, a practicing
communications lawyer, for those of you who don't know him. Lois Wright,
who's vice president and corporate counsel, Inner City Broadcasting and
president of Inner City Cable. Then we had three academics, Phil Napoli
(phonetic), who's the director of the Don McGannon (phonetic)
Communications Research Center at Fordham; Al Hammond, who's a Professor
of Law at Santa Clara University School of Law and Director of the
Broadband Institute of California; and Leonard Baines (phonetic), who's
a Professor of Law at St. John's University.

Then we had a civil rights lawyer talk to us, and this was Tom
Henderson, who's Deputy Director and Director of Litigation for the
Lawyer's Committee for Civil Rights Under the Law. Again, just being
very brief here, I would encourage anyone who's interested to look at
the full transcripts. They are on the website of these presentations,
and they were very, very good.

Vince basically gave us a historical presentation, taking us back to
TV-9 and the Court's mandate to the Commission to begin taking race into
consideration when awarding licenses. Lois Wright talked primarily about
consolidation, and how NABOB has made a recommendation to deal with the
issue of consolidation in minority ownership.

Phil Napoli talked primarily about some research that he did, and he
urged the Commission to secure aggregate financial data, ratings data,
programming data, and as well as surveying data, from owners,
advertisers, and audience members, in order to gain a well-rounded
picture of challenges facing minority-owned media outlets, and the
contributions of such outlets to the media marketplace and the factors
that affect their ability to function.

Al Hammond talked. He was commissioned by the \-- by Chairman Kennard
(phonetic), to conduct one of the Commission's Adarand studies. He
proposed that the Commission establish data collection methodologies
that are not based on the political outcome you wish to achieve but
which fairly seek to ascertain the impact of the Commission's policies
on the broadcast industry as a whole, and minorities in particular.

Mr. Henderson talked about Adarand and a case called *Concrete Works*.
He suggests that a remedial justification provides the basis for
race-conscious efforts with regard to ownership, as well as aspects of
broadcasting and avenues to participation in broadcasting,
discrimination in industry, and in opportunities to qualify and
participate in broadcasting, are a proper basis for remedial activity.

He also suggested a second justification under *Grutter* (phonetic) and
*Bakke* was diversity, as an end in itself. And finally, Leonard Baines
talked about the Commission's KPMG study. It was also one of the
Commission's Adarand studies. It analyzed the effectiveness of the
comparative hearing process in producing minority ownership.

He also talked about Justice O'Connor's opinion in *Grutter*, and
contrasted it and compared it to her opinion in *Metro Broadcasting*.
Again, I urge those of you who are interested to take a look at the copy
of the transcript that's available on the website.

With that, I'm going to turn it over to Frank.

SPEAKER: I'm just going to take a minute. Again, as Henry pointed out, I
mean, we had a day-long session of panels, with the regulatory issues in
the morning and then the two lending and investment panels in the
afternoon. Ginger's panel handled equity investments and mine handled
senior debt.

The big concern with senior debt is that there has been a significant
dry-up in the amount of institutional lenders that are available to
entrepreneurs and to minority entrepreneurs, women, but new entrants
into the marketplace, to get loans for acquisitions, build-outs, things
of that nature.

It's the banks, the local banks, that these entrepreneurs have
traditionally gone to. I mean, in the past five or six years or more,
perhaps now, there has been a rapid growth in the availability of
venture capital, and certainly during the technology boom venture
capital was all the rage.

But traditionally, it's been the institutional lender at various levels
that entrepreneurs have gone to get their business loans, and that money
has just completely almost disappeared in the \-- for small
telecommunications companies.

We had three speakers. We had Jerome Fowlkes (phonetic), a director from
BIA Capital; we had Tonya Crossley (phonetic), a managing director with
the Media Group at Fleet Boston Financial; Cable Williams, managing
director of Allied Capital; and Leanne Oliver, who's very interesting.
She's a deputy administrator with the Financial Systems Group at the
U.S. Small Business Administration.

I'll just, you know, boil it down. Basically, they observed that there
is essentially a gap that has developed in the senior lending community,
whereby basically, from the five to say 15 million dollar range \-- this
is some of the things that I already said to the Chairman earlier \--
that it is very, very difficult for new entrants, to get in and get a
loan at that level.

That's because at the lower level, there isn't the cash flow available
in the businesses to loan upon. So they're really just looking at asset
value. You're looking at a business that has no inventory, and so it's
difficult to loan on that.

If you get below \$2 million, the SBA, as Leanne Oliver came in, has
their loan guarantee program that's available to them. It's fairly
limited, but at least there's something there at the very, very, very
low end. But really, when you get above that, there's nothing until you
get up into the upper strata.

So Cable Williams pointed out that basically there's no middle market.
The middle market has just sort of evaporated on senior lending. So then
they try to look at how can we fill that middle market up again. Again,
it was we're \-- you're going to have difficulty looking at the big
national lenders to fill that gap. We're really \-- who we want to try
to bring back into the picture is, are the small institutional lenders,
the small regional banks, the state banks, that can fill that in.

They are scared by the fact that they don't really understand the
industry, whether it's broadcasting or otherwise. They really just don't
understand it. They hear all these things about \-- Jerome Fowlkes said,
you know, with the inability, for instance, to take a security interest
in the license, especially when you don't have cash flow, you're just
looking at asset value.

The one and only most valuable asset in the business is your license,
and the only thing you can't take a security interest in. Thanks a lot,
they're saying.

So the idea is to educate them on how these loans can be structured, and
educate them on how the business operates, so that we can bring them
back in and make that money available.

Then Cable Williams pointed out that these loans are bundled, and
they're sold out on the secondary market. So you want to start, you want
to educate the purchasers. He's actually supposed to get me a list of
those purchasers of these bundled notes on the secondary market, so that
we can start developing a list of targeted institutions that are going
to need this type of educating.

Leanne Oliver from SBA has already sent me a list of the banks, the
small banks that she's dealt with, that have made available the under
\$2 million loans in the media markets over the past three years.
Interesting list.

Then the last recommendation was to improve the SBA program, see if
there's any way, and I don't know whether it's within the purview if
this committee or not, but to see if there's some way that the SBA can
somehow lift its upper limit, because if we can slowly raise their
limit, and then try to fill in the middle markets through some of type
of an education process or otherwise, basically to try to fill in that
middle gap, because when you're in the five to 15 million dollar range,
that's where most of these new entrepreneurs are coming in at, and
that's where the money is non-existent.

CHAIR JOHNSON: Okay.

SPEAKER: Oh, and by the way, I should say that the entire day's
proceedings, as Henry pointed out, not just the transcripts are
available. You can actually see \-- they were all videotaped, and you
can actually watch them, watch a videotape stream of it. You know, it's
archived off of the FCC's website.

CHAIR JOHNSON: Excellent. Commissioner?

COMMISSIONER ADELSTEIN: Just two quick comments, Madam Chair. First is I
understand that there were a lot of people on the phone, but it was only
one way. They can hear us and we couldn't hear them. So I think
Commissioner Barrett was in fact on the line, and is somewhat frustrated
by his inability to be heard.

Secondly, these panels, the members of the Subcommittee worked very hard
to bring these panels together, and kudos to them, because they really
did bring together a tremendous set of experts. Particularly hats off to
David, who worked very hard, to pull the first panel together. Thank
you.

CHAIR JOHNSON: Thank you. I have to just echo and compliment, because as
I was walking through the halls today, I kept hearing about the day that
you all had with respect to how it was broken up and the level of
participation. So we're anxiously awaiting those written, codified
recommendations, that we can incorporate into what we're going to
present to the FCC. It was obvious to me that the FCC's interested in
them, too.

So, thank you again Commissioner and Frank. I apologize for not
understanding how the presentations were to occur. Any questions of the
Commissioner or Frank or Ginger? No? Seeing none, then we will go into
the public comment and closing remarks. Any general comments or
questions?

We may finish right on time. Is that a \-- Mr. Honig?

MR. HONIG: No. After the public speaks, I had another matter to raise.
But \--

CHAIR JOHNSON: Okay. Any public comments? Seeing none. Committee member?

MR. HONIG: Madam Chair, is it \-- did I misunderstand that the other
members on the phone can listen, but they can't speak and be heard?

CHAIR JOHNSON: No, they could actually \-- they could speak. But the
last time around, when we did the workshop when it was being streamed
over the Internet, it wasn't possible that day.

SPEAKER: I don't think that's right. I think that even this time \--

CHAIR JOHNSON: No.

MR. LEE: Julia?

CHAIR JOHNSON: Roscoe and everybody else?

MR. LEE: Hello?

CHAIR JOHNSON: Oh, there he is.

SPEAKER: Oh, they're here. Okay.

CHAIR JOHNSON: All right.

MR. LEE: Julia?

CHAIR JOHNSON: Uh-huh?

MR. LEE: This is Richard Lee. I've been listening, and Commissioner
Barrett was on, but he couldn't get through.

CHAIR JOHNSON: He couldn't get \-- ahh, okay.

MS. TYLER: And it's Lauren Tyler. I'm not quite sure you were able to
hear me either. I think a couple of people tried to break in at
different points, but it was \-- we could hear fine, but it was
difficult to break in.

MR. LEE: Right.

CHAIR JOHNSON: Okay, thank you.

MR. LEE: Just let me add that the presentations from last Tuesday's
Financial Subcommittee will be on the website tomorrow, and we've gotten
tapes of those presentations, one for each subcommittee.

CHAIR JOHNSON: Excellent. Thank you very much. Any others on the call
with any comments?

MS. JOHNSON: Julia, I did have a question. Will we have access to the
presentations given in the room today, on the web as well?

CHAIR JOHNSON: Yes. Is that Marva?

MS. JOHNSON: Yes.

CHAIR JOHNSON: Yes, we will.

MS. JOHNSON: Okay, thank you.

CHAIR JOHNSON: Any others? Any other questions from our telephonic
audience? David?

MR. HONIG: Since the members on the phone are able to hear, then I think
it is appropriate to go forward with this. I'm going to circulate a
draft and very short resolution on a matter that is somewhat
time-sensitive. It really \-- it relates to the distress sale policy,
which falls closest to the ambit of the Financial Issues Subcommittee,
because it is in fact one of the models for the type of incentive-based
programs that the committee is considering.

This is a policy that's been in effect since 1978. It really came out of
the first committee like this, that was empanelled in 1977, as most of
us know, by Chairman Wiley. The policy was adopted in '78 under the
Ferris administration. It was defended successfully in the Supreme Court
by the Commission in 1990 in *Metro Broadcasting*, where the Commission
contended that it satisfied strict scrutiny. The Court approved it under
a lesser standard, and it has not been constitutionally challenged
since.

It is like that, although not for constitutional reasons, the policy may
be under review by the Commission at some time in the reasonably near
future. So what I'm trying to is craft a resolution that does not
address some of the constitutional or operational aspects of the policy,
but rather speaks to it in the sense that we as members of the
Commission's constituency, who stand on the mountaintop and look out
over the entire valley of this issue, might want to address it globally.

Therefore, it is drafted as a sense of the committee resolution, that
this is an important policy, that we'll need to have a variety of
initiatives to promote minority ownership, of which this would be one,
and that the Commission should preserve and if possible expand upon the
distress sale policy.

CHAIR JOHNSON: Okay, thank you. And I support \-- David and I have had
an opportunity to talk about this, and he's actually brought me, as well
as many of the members, both on the phone and in the room, up to speed
on the issues.

For those of us who are generally not as familiar with the industry, the
individuals that it does impact. What we need to determine is whether or
not we are prepared to vote this out today. We have quite a few people
in the room today, and I'm not certain as to the quorum. It would be
wonderful if we could, because I'm understanding that he's saying it is
time-sensitive.

There are members on the phone. Could we ‑‑ is this something that could
logistically be done today? Or, and you may have to help us, Jane on
that, because if it can, that would be wonderful, at least for
discussion.

MR. WALLAU: I have two questions. A, what's the time sensitivity, and B,
this isn't my business. I'm not a lawyer; I run a television network. I
would not pass the test on what a distress sale policy is. So to be
asked to vote on it without having anything, any discussion of it, I
just \-- I find, if the majority wants to do it, the majority rules. I
don't think it's the right way to sort of ‑‑ for this committee to set
policy.

CHAIR JOHNSON: It might be.

SPEAKER: I think generally there is a question, in my mind, about the
process by which resolutions are voted upon, since, you know, my
subcommittee had some and we decided not to put them forward today
because we weren't sure of the exact procedure for bringing them
forward.

MS. MAGO: I think the procedure really should be to put paper before the
committee, in a way that you can be able to evaluate it, have a
discussion, and then have a vote of that. What I'm sensing here is that
perhaps folks are not ready to think about this one on a quick basis,
but there may be an alternative.

MR. HONIG: What is the procedure with respect to quorums? Are there
rules that govern \--

MS. MAGO: There is no specific rule on quorum.

MR. HONIG: Let me make this suggestion, and maybe you can take it as an
amendment to the motion. Even though there is no specific rule on
quorum, it would still be wise if we had a quorum. At the same time,
because many of us live in various places around the country, and
apparently there are some members that are not fully familiar with the
policy.

Perhaps we could decide today, informally, that within the next two
weeks, I'll volunteer to send a more elaborate discussion of it around,
be available to answer questions, with the idea that then, at a certain
time, members might be able to fax or e-mail in their votes to a central
source, and that would constitute the vote of the committee, as soon as
we have a quorum that votes.

CHAIR JOHNSON: Let's see if that \-- can that process work through Jane?

SPEAKER: Well, I think someone asked, what is the time-sensitive, what
is the timeframe that we're talking about?

MS. MAGO: I don't think there is a specific timeframe. I mean, there's a
\-- what David referred to is there is a proceeding that there's been a
motion in, that's here at the Commission. Right?

MR. HONIG: That's right.

MS. MAGO: And that's an adjudicatory proceeding, and I don't want to
talk about the merits of that, because I think it would be inappropriate
for us to do that. This is on the broadest scale. There is not a
deadline.

But I think that the proposal that David makes, that he circulate more
information to the members, and perhaps we can try to set up a dialogue
through, you know, through electronic means, we are the Federal
Communications Commission, to see if we can figure out how to have a
conversation among the members, that then could precipitate a vote, and
we can figure out how to precisely accommodate that.

But I think it requires that there be some opportunity for discussion
among the members, not just a one-way street. Here's your information,
go ahead and vote. I think that has to be that kind of discussion.

I will also say that when the committee deliberates, under the Federal
Advisory Committee Act there is a requirement that this be public, so
there would be \-- you know, the back and forth exchange on this would
have to be something that would be a matter of public record. We could
put it on the website or something like that. It's a little bit
cumbersome to try to figure out how to do this.

SPEAKER: Are we under the impression that it would be \-- our next
meeting would be too late to act on the resolution, in terms of
(inaudible) at the Commission?

MS. MAGO: I'm not sure of that \--

MR. HONIG: It probably would be too late to do that. But this may be a
healthy development, though, if we're able to have a dialogue. Everyone
hits "reply all" and the results are made available in the file for
public inspection. You can simply say where it is, where to go. That's a
healthy thing, and it allows us to do our work as these whatever matter
it is comes up in the interim between when we meet.

CHAIR JOHNSON: Well, Jane has committed to kind of work through the
logistics and see if we can come up with \-- and ensure that we can come
up with a process that works, and that is efficient and effective, and
also meets all of the rules and regs that we need to \--

MS. MAGO: Yes. We have to make sure we touch all our FACA bases.

CHAIR JOHNSON: Right.

MR. TEMPLE: Jane, I just had sort of a \-- I don't want to get too legal
eagle here, but you said, I mean, to the extent that there's an
adjudicatory proceeding here, if we pass a resolution \-- I'm trying to
think. If we pass a resolution on an issue that is a key issue in an
adjudicatory proceeding, I'm assuming; I don't know, is that \-- does
the committee run the risk of somehow getting embroiled in this
adjudicatory \--

I don't think that we want to become involved in this adjudicatory
proceeding. But I guess ‑‑ I just want to make sure that we're not
inadvertently becoming involved in a matter here that we should be
observing, but not necessarily \--

MS. MAGO: The committee, on a very broad level. I mean, what you're
being asked to do is not to involve yourself in the specific details of
any case, and that's why we're not getting into any of that.

But if it becomes the sense of the committee that you want to make a
comment to the agency, advice to the agency, that we, I think, what
David says, preserve and, if possible, expand the policy, that is a type
of general information, general advice that I think is beyond ‑‑ you
know, it's not one proceeding-specific. His comment on the proceeding is
the matter of timing, right?

MR. HONIG: Yes.

CHAIR JOHNSON: Okay.

MR. WALLAU: I personally am totally open to the idea of endorsing
something, if that's the proper role of the committee. But in terms of
the process, as Riley spoke to, it seems that \-- David, I'm sure you're
totally familiar with this, and there's no doubt in your mind, and
you're fully conversant with all aspects of it, and you see it to be
something that you're recommending that the committee recommend.

I would love to see us \-- I think our responsibility at the committee
is do some form of outreach, to try to identify some voices who would
speak to this in a way that would inform us better about the possible
\-- I mean, some views on this, even if they're negative views, so we
could understand if there have been any unintended consequences of the
role on our committee, which has a very specific transactional
transparency goal, that that's something that we all endorse, you know,
absolutely as a positive thing in concept.

The issue is, whether by putting certain requirements on transactions,
you create disincentives to the industry and end up doing harm to the
overall industry while you were trying to do good, and you end up
messing things up. I have no idea.

You know, this sounds benign. But I just don't know enough, and I would
think that you need to do something beyond even David's position on it.
I'd look just to hear, try to do some kind of outreach as a part of what
we do as a committee, to just kind of identify points of view outside of
this room, that might help us make a more informed decision.

CHAIR JOHNSON: Okay. David, we're going to take a couple of more
comments, and Jane's taking note as to how we come up with a process
that will work, to educate everyone.

MS. MAGO: Yes. The purpose of this is to have an open discussion, where
you can have the robust views, and the process, as we will figure it
out, will accommodate that, and we'll try to figure out how we can get
that done.

MR. HONIG: If I can respond. I don't want to identify or talk about, and
the resolution, I think, tries not to address the particular
adjudication. There may be other ones.

In fact, honestly I don't know of anyone that has articulated in any
proceeding, including that particular one, an objection to the policy.
But it certainly would be constructive if someone knows of someone who
has some objection or some concern, to let the committee members hear
from that person or present that person or entity's position.

As it happens, the parties in the particular case have waived *ex parte*
and both support the policy and MMTC, point of information only, has
filed an amicus. That's the procedural status.

CHAIR JOHNSON: Okay. Any final comments.

MR. WALLAU: I have to go to law school if I'm going to continue coming
here.

(Laughter)

CHAIR JOHNSON: Commissioner?

COMMISSIONER ADELSTEIN: I think that there were originally about seven
initiatives that the Commission had adopted, to promote minority
ownership. I think they're all gone now, except this one, and I think
that's why David suggested that it was the role of this committee, as
the Diversity Committee in the Digital Age, to speak to this policy.

I'm sure, Madam Chairman, that's one of the reasons that you decided to
support this resolution. I support it also, and I certainly have no
qualms about developing a process. We need to do that Riley, and I think
Alex is certainly within his rights and probably obligations to ask to
be more informed.

But I was just trying to give just a little historical perspective, in
terms of what this is all about, and what I think David is trying to
accomplish here.

CHAIR JOHNSON: I think when we develop the process and people receive a
more comprehensive background from David, the white papers, you'll see
that it is pretty benign, but yet it's very powerful with respect to
providing opportunities.

But we do need to have a process, so that everyone feels comfortable
when they're voting, and Jane has committed to working with the
committee. We've heard the comments to get views of those that
understand the area, so that you can have a rich document.

If you have any questions, I'm certain between Jane and David and
others, we'll try to entertain those, address this as quickly as
possible. If we can do it between the meetings, and as soon as possible
we will. If not, we know the latest would be May, I guess, because we'd
have a full committee meeting for discussion, debate and dialogue.

I'm hopeful we can come up with a process that could move a little more
expeditiously. Okay. Any other comments? Seeing none from the public,
then this meeting is adjourned. Thank you all.

(Whereupon, the meeting of the Advisory Committee on Diversity for
Communications in the Digital Age was adjourned.)