FOR IMMEDIATE RELEASE                   News Media Contact:
August 5, 1999                               David Fiske (202) 418-0500
                         
        FCC ADOPTS EQUITY/DEBT THRESHOLD FOR PURPOSES OF
    DETERMINING ELIGIBILITY FOR NEW ENTRANT BIDDING CREDIT 
     
The FCC has adopted a Memorandum Opinion and Order concluding that it is appropriate
to attribute the mass media interests of investors holding more than a 33% equity and/or debt
interest in a broadcast auction bidder claiming a New Entrant Bidding Credit, even if such an
interest is non-voting.  

This action is a further refinement of the eligibility standards for the New Entrant Bidding
Credit available to bidders in broadcast auctions created by the Commission as a means to
promote and facilitate the diversification of ownership in the mass media.  In a Memorandum
Opinion and Order released earlier this year, the Commission revised the eligibility standards for
the New Entrant Bidding Credit to ensure that those standards are consistent with the
Commission's general attribution standards.

In its action today, the Commission determined that it was appropriate to attribute the
mass media interests held by very substantial investors in any broadcast auction applicant claiming
a New Entrant Bidding Credit.  The Commission explained that it was taking this action to ensure
that only true new entrants qualify for the bidding credit, because holders of otherwise
nonattributable interests may well have a "realistic potential" to influence bidders claiming new
entrant status.  The Commission further determined, based upon a review of the record in the
broadcast attribution proceeding and the precedent provided by its long-standing cross-interest
policy, that setting the attribution threshold at 33% is appropriate in the new entrant context.

This rule change will be effective upon publication in the Federal Register and receipt of
OMB approval, which the Commission expects to obtain in an expedited manner, in order that the
new rule will take effect prior to the August 20, 1999 deadline for the submission of short forms
(FCC Form 175) for the September 28, 1999 Closed Broadcast Auction.  See Public Notice,
"Closed Broadcast Auction, DA 99-1346, released July 9, 1999.  Therefore, bidders in the
September 28, 1999 Closed Broadcast Auction will be subject to the revised eligibility standards
for the New Entrant Bidding Credit.

     Action by the Commission August 5, 1999, by Memorandum Opinion and Order (FCC
99-201). Chairman Kennard, Commissioners Ness and Powell and Tristani, with Commissioner
Furchtgott-Roth dissenting and issuing a statement.
                                
                            - FCC - 

MMB Contact:  Shaun Maher (202) 418-1600
Report No. MM 99-11
DISSENTING STATEMENT OF COMMISSIONER HAROLD FURCHTGOTT-ROTH

In the Matter of Implementation of Section 309(j) of the Communications Act -- Competitive
Bidding for Commercial Broadcast and Instructional Television Fixed Service Licenses, MM
Docket No. 97-234.

     In this Memorandum Opinion & Order, the Commission considers "additional
refinement[s]," supra at para. 2, to the traditional broadcast attribution standards for purposes of
the designated entity bidding credit in auctions.  While I am pleased to see the Commission on its
way toward final implementation of the mandates of the 1997 Budget Act, which requires
competitive bidding for most licenses, I do not support the "refinements" to the attribution rules
adopted today.

     My first concern with these new rules is that they are overly-regulatory, complex, and
difficult to administer.  In this item, the Commission breaks from its previous rules by counting
pure debt instruments -- in addition to equity interests -- in deciding whether a company's
particular interests are attributable.  I would not count debt for attribution purposes.  When one
ventures into the area of pure debt, held by any kind of investor, including purely institutional
investors, one encounters an administrative hornets' nest.  Almost all companies have some debt,
and small companies tend to have debt held by banks, typically commercial loans or notes. 
Should such interests really be considered relevant for purposes of deciding who truly owns and
operates a broadcast entity?  For example, if Citicorp holds more than 33% of the debt for one or
more companies, then its interest in each company will be attributable under these rules.  But
Citicorp certainly does not consider itself a broadcasting company, nor does it, in all likelihood,
have any interest in the day-to-day operational decisions made at its investor companies.  

     Moreover, Citicorp, as any large institutional investor, does not with certainty know the
precise percentage, at a particular point in time,  that it holds of a company's debt.  What Citicorp
knows is that it has issued a million dollar corporate loan to a company; that the company has a
$500,000 line of credit with the bank of which various amounts are exercised at any given time;
and that the company has a cash account with Citicorp whose balance ranges from $50,000 to
$500,000.  So, how much debt does Citicorp hold at any given time?  That depends on whether
one measures gross or net debt.  What percentage of a company's debt does Citicorp hold?
Citicorp cannot possibly know because it does not know what debt the company has with other
institutions or individuals.  As a practical matter, debt is a concept that is nigh impossible to
measure with reliable precision, even if there is support for the theory in academic literature.  For
these reasons, I disagree with the decision to extend attribution rules into the area of pure debt. 
This decision makes an already complicated regulatory scheme even more complicated, increasing
the administrative burden on those who must live under it, not to mention those here at the
Commission who must administer it.

     My other concern with the rules adopted today is that I am not persuaded that they are
adequately supported by the record.  Specifically, the selection of the 33% benchmark -- with
respect to both debt and equity -- appears to lack the requisite record basis.  Cf. Motor Vehicles
Manufacturer's Ass'n v. State Farm Mutual Automobile Ins. Co., 463 U.S. 29, 42 (1983)
(administrative agencies must "examine the relevant data and articulate a satisfactory explanation
for its action, including a 'rational connection between the facts found and the choice made'")
(citation omitted); ATT v. FCC, 832 F.2d 1285, 1291 (D.C. Cir. 1987) (requiring that
"conclusions reached [by an agency]have a rational connection to the facts found").  There is no
record evidence of 33% being either less or more appropriate than, say, 25%, on the one hand, or
51%, on the other.  Although the item asserts that "[t]he record in the broadcast attribution
proceeding . . . reflects that holders of nonvoting stock and debt interests may be able to influence
broadcast licensees in a significant manner," supra at para. 7, that does not mean, absent evidence
to support the assertion, that this is true.  Nor, more importantly, does it mean that 33% is the
right place at which to draw the line for purposes of establishing significant influence.  How large
does a holding have to be before its possessor may be able to exert significant influence? There is
little to no record evidence to guide this decision, just speculation and guesswork. Thus, as a
matter of administrative law, the rules are difficult to defend against a charge of arbitrariness
and/or lack of record support.

     Finally, and on the merits, I suspect that these rules will harm "designated entities" more
than they will help them.  By dint of regulation, we have created incentives to cap investments in
designated entities from any one source at 33%.  Thus, these regulations artificially limit the
amount of capital available to start-ups from a particular source, potentially forcing entrepreneurs
to go to multiple sources for funding when, in a freer market, they might not have had to do so. 
The item counters by arguing that the rules do not prohibit  investment over 33%, it just makes
investment over such limits attributable to the investor.  See supra at para. 10.  Becoming snared
in the web of this Commission's broadcast ownership rules, however, is a powerful incentive for
investors to stay well under the cap.  Cf. Lutheran Church v. FCC,  141 F.3d 344, 353 (D.C. Cir.
1998) ("No rational firm . . . welcomes a government audit.").  In effect, the benchmark will
function as a "safe harbor."  Thus, while the rules, to be sure, do not prohibit investments over
33%, they certainly deter them.  And that is not good for small or new businesses seeking capital. 
I realize that this "artificial cap" criticism applies to any percentage limitation that would be
selected, but I think that we could at least have set the number higher so as to mitigate these
unintended consequences.

     In sum, because I disagree with the decision to extend attribution rules into the uncharted
area of debt interests, and because I am not persuaded that the selection of the 33% benchmark is
supported by facts found on the basis of the record, I must respectfully dissent.