H I S T O R I C A L S T U D Y O F

Market Entry Barriers, Discr imination and

Changes in Broadcast and Wi reless Licensing

1 9 5 0 T O P R E S E N T

Prepared for

The Office of General Counsel

Federal Communications Commission

b y

Ivy Planning Group LLC

Rockville, Maryland

·

DECEMBER 2000

WHOSE SPECTRUM IS IT ANYWAY?
Table of Contents Whose Spectrum Is It Anyway?

Page i

TABLE OF CONTENTS

Page

I. EXECUTIVE SUMMARY ...................................................................................................... 1

A. Overview............................................................................................................................. 1

B. Summary of Key Findings.................................................................................................. 2

C. Key Conclusions ................................................................................................................. 3

II. INTRODUCTION .................................................................................................................... 5

A. Purpose, Statutory Authority and Legal Basis.................................................................... 5

B. Historical Snapshot ............................................................................................................. 7

III. METHODOLOGY ................................................................................................................... 9

IV. FINDINGS.............................................................................................................................. 11

A. Overview........................................................................................................................... 11

1. Broadcasting ................................................................................................................ 12

2. Wireless........................................................................................................................ 16

B. Market Entry Barriers and Other Experiences................................................................... 17

1. Discrimination in Lending and Limited Access to Capital......................................... 17

2. Discrimination in the Community As a Market Entry Barrier ................................... 50

3. Discrimination in the Industry as a Market Entry Barrier .......................................... 52

4. Discrimination in Advertising..................................................................................... 58

5. Effect of Deregulation and Consolidation .................................................................. 68

(a) Impact Upon Licensees ......................................................................................... 70

(b) Impact Upon the Public......................................................................................... 78

6. FCC Actions/ Inaction and Discriminatory Effects................................................... 84

(a) The FCC Does a Tough Job Well......................................................................... 89

(b) FCC Inaction When Confronting Private Discrimination .................................... 91

(c) Policies and Processes........................................................................................... 96

(d) Staff Responsiveness and Impact of Bureaucracy................................................ 97

(e) Equal Employment Opportunity........................................................................... 99

(f) Distress Sales...................................................................................................... 101

(g) Comparative Hearings ........................................................................................ 102

(h) Repeal of the Tax Certificate .............................................................................. 106

(i) Auctions.............................................................................................................. 108

(j) Interactive Video and Data Services (IVDS)...................................................... 112

(k) Abuse of the System ........................................................................................... 115

(l) Inferior Licenses ................................................................................................. 116

(m)Decision-Making and the Role of Key Market Participants............................... 118

(n) Ineffective or Unaffordable Advocacy ............................................................... 121
Table of Contents Whose Spectrum Is It Anyway?

Page ii

7. Education, Training and Experience......................................................................... 123

8. Perceived FCC Climate............................................................................................. 124

V. IMPLICATIONS OF THE FINDINGS................................................................................ 126

A. Capital and Markets are the Drivers ............................................................................... 126

B. Absence of Critical Mass................................................................................................ 126

C. The Role of the FCC and Congress ................................................................................ 126

D. Discrimination................................................................................................................. 128

E. Bidding Credits in Wireless Licensing ........................................................................... 128

F. Relaxation of Ownership Caps ....................................................................................... 129

G. Loss of Community Service and Diversity of Viewpoints............................................. 129

H. Potential Loss of Civic Participation, Democratic Values and Freedom of Speech....... 129

I. The FCC is the Public Trustee of the Broadcast and Wireless Spectrum....................... 130

VI. CONCLUSION..................................................................................................................... 132

APPENDICES

APPENDIX A - HISTORICAL TIMELINE.............................................................................. 135

APPENDIX B - INTERVIEW GUIDE...................................................................................... 152

APPENDIX C - DEMOGRAPHIC BREAKDOWN OF INTERVIEWEES............................. 158

APPENDIX D - LIST OF INTERVIEWEES............................................................................. 160

APPENDIX E – IVY PLANNING GROUP PROFILE............................................................. 168
Section I. – Executive Summary Whose Spectrum Is It Anyway?

Page 1

I. EXECUTIVE SUMMARY

A. Overview

As part of the Federal Communications Commission’s mandate to identify and eliminate market

entry barriers for small businesses under Section 257 of the Telecommunications Act of 1996

(hereafter referred to as “1996 Act”), and its mandate to further opportunities in the allocation of

spectrum-based services for small businesses and businesses owned by women and minorities

under Section 309(j) of the Communications Act of 1934, the Commission commissioned Ivy

Planning Group, LLC1 to conduct this historical study of barriers to entry into broadcast and

wireless licensing experienced by small, minority- and women-owned businesses from 1950 to

the present. This study is the first FCC-sponsored historical, anecdotal, qualitative review of the

subject.

Other statistical or quantitative studies have focused on this subject matter and have often

revealed similar findings.2 However, this study offers different insights - the stories - of AfricanAmericans, Hispanics, Native Americans, Asian Americans, and Caucasians who have

encountered market entry barriers. It is important to hear from real people about their

experiences in order to create context and meaning for the data that is provided from other

sources.

This study was designed to put a face on and give a voice to the process of obtaining a broadcast

or wireless license. By creating a venue for these voices, the study allows people to say what

their experiences were. Each participant provided his or her story independently. Some stories

were fragmented and less coherent, while others were articulated clearly and concisely. While

the stories vary by year, length, race, gender, circumstance, and narrator, their respective voices

provide distinctive yet recurring themes on identifiable market entry barriers. In every case, the

stories provide qualitative clarity and specificity to understand the process of obtaining a

broadcast or wireless license from 1950 to the present.

Ivy conducted individual telephone interviews with 120 key persons representing small,

minority- and women-owned businesses that attempted (successfully or not) to acquire, sell or

transfer a license during the years 1950 – present, and 30 telephone interviews with key market

participants (e.g., media brokers, lenders, attorneys, industry leaders, and/or FCC officials). The

findings indicate that there are unique and significant barriers to entry for small, minority- and

women-owned businesses.

 

1

 The Commission contracted with the Ivy Planning Group, LLC to do this study pursuant to

Purchase Order No. PUR00000292, Requisition No. AUC00000135, under the GSA MOBIS

schedule GS-23F-9805H.

2

See, e.g. Civil Rights Forum on Communications Policy, When Being No. 1 Is Not Enough

(1999); and R. Suarez and R. Cull, Capital Formation and Investment in Minority Business

Enterprises in the Telecommunications Industries (1995).
Section I. – Executive Summary Whose Spectrum Is It Anyway?

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B. Summary of Key Findings

Regardless of the tone and tenor of the many voices of this study, a troubling story line resonates

among the interview stories that span a half-century. Women and minorities faced pervasive

discrimination, as well as small business market entry barriers, particularly in the fifties and

sixties. The FCC attempted to ameliorate that discrimination in the seventies, eighties and early

nineties through the tax certificate, distress sales, comparative merit, and lottery preferences.

Minorities and women made modest gains in broadcast ownership during this period, amidst

persistent capital market discrimination and other small business market entry barriers.

However, those gains were essentially reversed, in 1995, by both Congress’s elimination of the

tax certificate program and the Supreme Court’s decision in Adarand, which made it

significantly more difficult for race-specific rules and policies to be implemented by the FCC.

The deregulation and the lifting of the ownership caps under the Telecommunications Act of

1996 made these barriers nearly insurmountable for small, minority- and women-owned

businesses attempting to thrive or even enter the broadcast industry.

The FCC’s and Congress’ actions or inaction on particular regulatory or market issues have

exacerbated those barriers. These actions and inaction include: the uneven enforcement of EEO

policy; under utilized distress sales/license renewals; repeal of the tax certificate program;

permitting use by non-minority men of minority and female “fronts” during the comparative

hearing process; the lifting of the ownership caps; and minimal small business advocacy before

the FCC.

Today small firms face barriers erected by deregulation and consolidation in both wireless and

broadcast. Minorities and women confront those same barriers; and yet those obstacles stand

high atop a persistent legacy of discrimination in the capital markets, industry, advertising, and

community--and prior FCC policies, which worsened the effects of discrimination.

Based on those interviews, the findings revealed several factors that impeded and/or precluded

small, minority-and women-owned businesses from entering, successfully competing and

surviving in the broadcast and wireless industries including:

• Discrimination in the capital markets causing limited access to debt and equity capital

that would be adequate and affordable for minority-and women-owned businesses;

• Discrimination from the advertising industry against minority-owned and –formatted

stations; exclusion of minority and women-owned businesses from the powerful network

of information, deals and deal makers;

• Market deregulation and consolidation caused by the 1996 Act;
Section I. – Executive Summary Whose Spectrum Is It Anyway?

Page 3

• Lack of industry experience for women and minorities due to few employment

opportunities offered by majority broadcasters and the failure of the FCC to enforce EEO

rules;

• Fractured or a lack of advocacy of small, minority- and women-owned communications

businesses before the FCC, the courts and Congress;

• Misuse of minority and gender ownership programs by non-minority firms to the

disadvantage of female and minority ownership;

• Congressional laws, court rulings, and FCC rules, regulations and policies, which have

operated to the detriment of small, minority- and women-owned businesses.

C. Key Conclusions

Based on the shared experiences and perspectives of the study participants, Ivy has formed nine

key conclusions concerning past, present and prospective market entry barriers:

(1) Access to the capital markets is critical to the success of small, minority- and womenowned businesses;

(2) There is an absence of a necessary critical mass of small, minority- and womenowned businesses in broadcast and wireless ownership;

(3) Congress and the FCC erected and heightened market entry barriers inhibiting the

establishment, growth and development of small, minority- and women-owned

businesses;

(4) Discrimination played an important role as an entry barrier, especially with respect to

minority participation in broadcasting;

(5) Bidding credits designed to increase the opportunities for participation in wireless

auctions by small, minority- and women-owned businesses were ineffective and

unsuccessful;

(6) The relaxation of ownership caps has significantly decreased the number of small,

women- and minority-owned businesses in this industry;

(7) The declining participation of small, women- and minority-owned businesses in this

industry has resulted in diminished community service and diversity of viewpoints;

(8) The declining participation of small, women- and minority-owned businesses in this

industry has also resulted in a loss of civic participation, democratic values and

freedom of speech; and,

(9) The FCC often failed in its role of public trustee of the broadcast and wireless

spectrum by not properly taking into account the effect of its programs on small,

minority- and women-owned businesses.
Section I. – Executive Summary Whose Spectrum Is It Anyway?

Page 4

A single question may be heard amidst the many stories, recommendations, commendations,

complaints, and perspectives offered: whose spectrum is it anyway? In answering the question,

the interviewees consistently responded that spectrum is a public good to be managed by the

FCC in the public interest. While interview subjects believe that maximizing auction revenue for

the public purse is important, it is equally in the public interest to promote ownership diversity,

preserve viewpoint diversity, and eliminate market entry barriers.
Section II. – Introduction Whose Spectrum Is It Anyway?

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II. INTRODUCTION

A. Purpose, Statutory Authority and Legal Basis

The purpose of this study is to provide a historical perspective on what market entry barriers, if

any, small, minority- and women-owned businesses have faced in the acquisition, sale or transfer

of FCC broadcast and wireless licenses. The study was designed to assist the FCC in

implementing Section 257 of the Telecommunications Act of 1996, 47 U.S.C. §2573, which

mandates that the FCC identify and eliminate market entry barriers for small telecommunications

businesses, and Section 309(j) of the Communications Act of 1934, which requires the FCC to

further opportunities in the allocation of spectrum-based services for small businesses and

businesses owned by women and minorities.4

In addition, this study will assist the Commission in determining whether there is any evidence

of discrimination that may establish a compelling governmental interest under Adarand v. Pena,

515 U.S. 200 (1995).

In Adarand the Supreme Court held that any federal program that uses racial or ethnic criteria as

a basis for decision-making must serve a compelling governmental interest such as remedying

past discrimination, and must be narrowly tailored to serve that interest. In order to demonstrate

such an interest, the government cannot rely on general societal discrimination. City of

Richmond v. J.A. Croson Co., 488 U.S. 469, 509 (1989). Instead, the government must establish

that it is remedying either its own discrimination, or discrimination in the private sector in which

the government has become a “passive participant.” Croson, 488 U.S. at 504.5

Furthermore, the study was designed, inter alia, to assist the Commission in determining whether

the FCC is or has been a passive participant to discrimination in the private market.

Accordingly, the study will help determine whether there is the factual predicate and legal

premise to adopt programs encouraging women and minority ownership of FCC licenses.

Moreover, the study will enable the Commission to gather anecdotal evidence of discrimination,

if any, faced by small, minority- or women-owned communications businesses.

Section 257(a) of the 1996 Act, requires the Commission to complete a proceeding for the

purpose of identifying and eliminating market entry barriers for entrepreneurs and other small

businesses in telecommunications and information services. To meet this mandate, the

Commission initiated an omnibus Section 257 proceeding by adopting a notice of inquiry to

identify and eliminate barriers for small businesses. See Market Entry Barriers Notice of Inquiry,

 

3

Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996), Section 257.

4

 In addition, the Commission has full authority and power to conduct an inquiry for “any

question [that] arise under any of the provisions of [the] Act” pursuant to Section 403 of the Act.

5

 We note that gender-based classifications need only satisfy intermediate scrutiny. See United

States v. Virginia, 518 U.S. 515, 531-33 (1996).
Section II. – Introduction Whose Spectrum Is It Anyway?

Page 6

11 FCC Rcd 6280 (1996)(NOI).6 In this NOI, the Commission requested comments on, among

other things, whether minority- and women-owned businesses encounter “unique” obstacles in

the telecommunications market, and determined that discrimination could be a market entry

barrier.7 Following the NOI, the Commission released a Section 257 Report regarding the

agency’s implementation of Section 257,8 wherein the Commission identified several obstacles

that small businesses encounter, including access to capital, access to Commission decision

makers, access to information, and Commission procedure.9 The report also addressed the

Commission’s commitment to identify and remove market barriers experienced by women or

minorities, but determined that the agency would have to fully evaluate the record to ensure

compliance with constitutional requirements before the agency could take any action. The FCC,

then, commenced a comprehensive examination, a series of market entry barrier studies, to

further examine the participation of small businesses, including those owned by women and

minorities in the provision of telecommunications services and the impact of the Commission's

policies on access to the telecommunications industry.

In rare cases, anecdotal evidence alone may be sufficient to constitute a compelling

governmental interest. See Wessmann v. Gittens, 160 F.3d 790, 801 (1st Cir. 1998)(“anecdotal

evidence alone can establish institutional discrimination that could serve as basis for raceconscious action....only in the most exceptional circumstances.”); Engineering Contractors

Association, 122 F.3d 895, 925 (11th Cir. 1997)(anecdotal evidence standing alone in rare cases

will suffice); Coral Constr. Co. v. King County, 941 F.2d 910, 919 (9th Cir. 1991). In any event,

the Supreme Court has recognized that anecdotal evidence of discrimination is important because

it can “bring the cold numbers convincingly to life.” International Brotherhood of Teamsters v.

United States, 431 U.S. 324, 339 (1977).

Accordingly, this qualitative, anecdotal study is part of the Commission’s comprehensive

examination regarding market entry barriers and was commenced in conjunction with several

statistical studies10 and is designed to complement, illuminate and reinforce the findings of those

quantitative studies.

 

6

 In addition, The Commission’s Office of Communications Business Opportunities (OCBO) and

its Office of General Counsel (OGC) held a Market Entry Barriers Forum to further explore

impediments that small businesses experience.6See FCC Public Notice, Forum on Small

Business Market Entry Barriers, No. 64975 (Sept. 5, 1996) (Market Entry Barriers

Forum)(hearing was held on September 24, 1996).

7

Id. at 6283.

8

In the Matter of Section 257 Proceeding to Identify and Eliminate Market Entry Barriers for

Small Business, Report, 12 FCC Rcd 16802 (1997).

9

Id. at 16824-34.

10 These studies examine: (i) whether there is a link between minority broadcast ownership and

news and public affairs programming; (ii) the utilization ratios and probabilities of success in

wireless auctions for minorities, women, and non-minorities; and the impact, if any, of capital

market discrimination on Broadcast and wireless spectrum business opportunities for minorities
Section II. – Introduction Whose Spectrum Is It Anyway?

Page 7

 B. Historical Snapshot

The Communications Act of 1934 created the Federal Communications Commission and

provided the means and purpose of allocating frequency along the radio spectrum. While the

mission of the Agency has generally remained the same, the FCC has used several different

means of spectrum allocation.

From 1950 until 1993 the FCC awarded licenses to mutually exclusive competing broadcast

applications through comparative hearings. If only one applicant applied, “a singleton”, the FCC

awarded the license to that applicant without a hearing, provided the applicant met minimum

requirements. The FCC began distributing wireless licenses by lotteries in 1982. Since 1993,

the FCC allocates wireless licenses, for commercial use, solely by means of auction. Starting in

1999, broadcast licenses have also been awarded solely through auctions.

In addition to being awarded a license directly by the FCC, an active secondary market for

licenses exists wherein they are bought and sold independent of the FCC. Except for requiring

FCC approval, the Commission is not generally involved in these transactions.

 At varying times and through varying means (see Statutory, Regulatory and Historical Timeline

at Appendix A), ownership programs have been made available to small, minority- and womenowned businesses to provide increased opportunities for them to participate in both broadcast

and wireless license ownership. For licenses obtained from the FCC, various ownership

programs have enhanced the comparative hearing, lottery and auction processes. In the

secondary market, tax certificates and distress sales have been implemented as opportunitycreating mechanisms for small, minority and women licensees.

For essentially the first half of the 20th century, the broadcast industry was dominated by White

males. Most stations were owned by large corporations such as CBS and NBC and had been

awarded by the government at no cost to the licensee. The advantages and opportunities created

by the initial award process provide the foundation for today’s telecommunication industry.

There was virtually nothing like today’s ethnic programming on the air. As late as 1943, radio

still upheld its longstanding policy that African-Americans, in contrast to Whites, would not be

referred to as Mr., Mrs., or Miss on any commercial network show. Furthermore, AfricanAmericans were portrayed on the air as servants or as comical or ignorant characters.

 

and women; (iii) the estimation of utilization ratios and probabilities of obtaining broadcast

licenses from the FCC through the comparative hearing process; and (iv) the impact of

advertising practices on minority-owned and minority-formatted broadcast stations.
Section II. – Introduction Whose Spectrum Is It Anyway?

Page 8

Against this backdrop, the following list of “firsts” is offered.

ÿ In 1922, Marie Zimmerman became the first White woman to own a radio license.11

ÿ “In 1947, station WDIA-AM in Memphis, Tennessee, became the first radio station to

devote all its air time to Black programs.”12

ÿ It was not until 1949, when Jesse B. Blayton purchased WERD in the secondary market

in Atlanta, that the industry had its first Black radio station owner.13

ÿ In 1960, Andrew Langston, a Black man, started his more than 13-year process of

acquiring a radio broadcast license from the FCC through a comparative hearing. It was

the first time that an African-American had filed an application with the FCC. Mr.

Langston was finally awarded his license in 1974.

ÿ In 1973, the FCC issued a construction permit to WGPR-TV (UHF) in Detroit, the first

Black owned television station.14

ÿ The first Hispanic station opened in the middle 1950s. The record of ownership is

uncertain; the station operated in the southwestern section of the United States, in either

Texas or New Mexico.

ÿ In 1989, after four years in a comparative hearing, Dorothy Brunson became the first

African-American woman to own a television station.

 

11 Halper, Donna. Marie Zimmerman – Broadcasting’s First Female Owner.

<http://www.oldradio.com/archives/people/zimmerman.html>.

12 Alston, Roland (1978, July). Black-Owned Radio: Talking to the Airwaves in a Hurry. Black

Enterprise, p. 22.

13 Id., p.23.

14 Molden, Vaughncille. Telecommunications and Black Americans: A survey of Ownership,

Participation and Control. Washington University: St. Louis, Missouri. August 1975, p. 128.

Master of Arts Thesis.
Section III. – Methodology Whose Spectrum Is It Anyway?

Page 9

III. METHODOLOGY

Ivy Planning Group, LLC conducted 150 telephone interviews during a four-month period.15 The

study analyzes these interviews, 123 of which were with key persons16 representing small,

minority- and women-owned businesses that attempted to acquire, sell or transfer a license

during the years 1950 to present, irrespective of success; and 27 of which were with “key market

participants”17 active in the broadcast and/or wireless markets during the same time frame.18

We selected a total of 150 interviewees to enable us to talk to a meaningful cross-section of

participants in the licensing process from 1950 to present. (See Appendix C for a chart

highlighting the demographic breakdown of the interviewees).

Using a knowledge of the market and random sampling, a list of interviewees was compiled

relying upon various sources.19 Approximately half of the interviewees who were licensees were

selected based on their role and significance in the industry. The balance of the licensees and

unsuccessful applicants were selected at random from the information sources available to us.

As we compiled the list of interviewees, we made every effort to ensure representation by year,

method of license acquisition, type of license, type of FCC acquisition rules, race/ethnicity,

gender, and size of business. We acquired some of this information through the aforementioned

data sources; our initial conversations with prospective interviewees provided us with the

remainder.

The list of key market participants was comprised of a sample of people who are known to have

had a significant role in the industry and those participants whose names arose during the

 

15 See Appendix C for a copy of the Interview Guide.

16 “Key persons” are defined as those who: (1) have voting control or an equity interest in the

company which holds the license and (2) were a driving force behind the company’s acquisition

of or attempt to acquire a FCC license on either the primary or secondary market.

17 “Key market participants” are defined as those individuals who act in an intermediary capacity

with respect to FCC broadcast and wireless license acquisition (e.g., media brokers, lenders,

venture capitalists, investment bankers, and attorneys) or who are or were part of the FCC (e.g.,

former Commissioners, Directors, staff members).

18 With the consent of the interviewees, telephone interviews were recorded and subsequently

transcribed. Parenthetical notations after each quote in this document refer to the particular

transcript file and page number(s) from which the quote was taken.

19 Sources used included the following: FCC database and other information; National

Telecommunications and Information Administration (NTIA) Minority Commercial Broadcast

Ownership Report, 1997-1998; Broadcast Investment Analysts (BIA) databases; American

Women in Radio and Television (AWRT); National Association of Black-Owned Broadcasters

(NABOB); and referrals from interviewees.
Section III. – Methodology Whose Spectrum Is It Anyway?

Page 10

interview process. Key market participants and current licensees identified earlier generations of

licensees and applicants.

As a further part of the study, Ivy developed a timeline of key statutory, regulatory and

historical developments which have affected the efforts of small, minority- or women-owned

businesses to obtain licenses in both the primary and secondary markets. The timeline includes

rules, policies, court cases, and statutory regulations that impacted comparative hearings,

lotteries, auctions, bidding credits, tax certificates, and distress sales. Further, the timeline

includes the number of small, women and minority licensees for selected years between 1950

and present, when available. (The Historical Timeline is attached as Appendix A.)

The analysis of the interviews combined with the information contained in the historical timeline

form the basis of this report.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 11

IV. FINDINGS

A. Overview

The findings of this study may assist the FCC in fulfilling its statutory mandate regarding market

entry barriers. Section 257 of the 1996 Act mandates that the Federal Communications

Commission (“FCC” or “the Commission”) identify and eliminate “market entry barriers for

entrepreneurs and other small businesses in the provision and ownership of telecommunications

services and information services, or in the provision of parts or services to providers of

telecommunications services and information services.”

In carrying out the mandate, Section 257(b) states that the Commission “shall seek to promote

the policies and purposes of this Act favoring diversity of media voices, vigorous economic

competition, technological advancement, and promotion of the public interest, convenience and

necessity.” In addition, Section 309(j) of the Communications Act of 1934 requires the FCC to

further “economic opportunity for a wide variety of applicants, including businesses owned by

members of minority groups and women.”

The study’s findings highlight significant barriers to entry for small businesses including

minority- and women-owned businesses. The interviewees uniformly reported that the

combination of these barriers has impeded and in many instances precluded these entities from

entering, successfully competing and surviving in the broadcast and wireless industries.

Interviewees specifically identified the following as market entry barriers.

ÿ Discrimination in the capital markets causing limited access to adequate and affordable

debt and equity capital for minority- and women-owned businesses;

ÿ Discrimination from the advertising industry against minority-formatted and -owned

stations resulting in decreased opportunity for revenue generation, cash flow and access

to capital;

ÿ Exclusion of minority- and women-owned businesses from the powerful network of

information, deals and deal makers thereby limiting access to license purchase

opportunities and the capital to fund them;

ÿ Market deregulation and consolidation following the 1996 Act resulting in increased

competition for national advertising dollars, inflated purchase prices for stations and a

loss of diversity of voices and community focus;

ÿ Lack of industry experience for women and minorities resulting from too few

employment opportunities offered by majority broadcasters and the uneven enforcement

by the FCC of its EEO policies, thus rendering these groups ill-prepared to compete in a

marketplace where industry experience and successful track records are critical elements

for market entry and acquisition of capital;
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 12

ÿ Fractured or lack of advocacy by and on behalf of small, minority- and women-owned

communications businesses before and within the FCC, the courts and Congress, thereby

leaving the special needs of these licensees under-represented when new rules, policies

and laws are proposed;

ÿ A series of FCC actions and inactions which have proven very costly for small, minorityand women-owned businesses, who could ill-afford the added financial burden, and have

frequently had a discriminatory impact on these business owners, albeit purportedly

unintentional; and

ÿ Misuse of minority and gender ownership policies by majority firms, to the disadvantage

of “real” minority and female ownership.

This study covers both broadcast and wireless licensing. Background information on each is

presented below to provide context for the discussion of the findings.

1. Broadcasting

Small, minority- and women-owned broadcast licensees and those wanting to enter into

broadcasting face significant barriers to entry and growth in today’s market. While there have

always been challenges, and especially for women and minorities, the relaxation of ownership

restrictions or “caps” by the 1996 Act has changed the landscape of broadcast properties because

the statute allows a single entity to own, given the applicable market, a larger number of stations

nationwide.

Historically, small broadcasters have served their local markets with a commitment to provide

service to their respective geographic or demographic communities, gaining advertising revenue

from both national and local businesses. From 1950 until 1985, there was healthy competition

among broadcast stations. An individual or company could own only one AM, FM and

television station in each market and a total of seven of each type nationally.20 In stark contrast,

 

20 In 1985, while the rules generally stayed the same with respect to local ownership, the

Commission relaxed the rules so that an individual or company could own as many as 12 AM,

FM or TV stations in the national market under certain circumstances. In addition, since 1985,

the Commission has gradually relaxed the ownership rules. In 1992, one could own 2 AM and

2FM stations, in markets with 15 or more stations, provided the combined share of audience is

less than 25%; in markets that have less than 15 stations, 3 stations with no more than 50% of the

market’s stations. In the national market, an owner could own 18 AM and 18FM stations, plus a

non-controlling interest in 3 AM and 3 FM, provided they are controlled by minorities.

Thereafter, in 1996, the Commission removed the ownership restriction allowing no numericalstation limit, but limiting the audience reach to 35% as to the national market. The FCC also

relaxed the local ownership rules:

(a) 8 stations in markets with 45 or more stations (with no more than 5 stations in AM or

FM;

(b) 7 radio stations in markets with 30-44 stations (with no more than 4 in either service);
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 13

today, an individual or company can own as many as 8 stations locally, based on the total

number of stations in the local market; and there is no numerical limit in the national market but

a limit on audience reach. In earlier years when there were more stringent restrictions on

broadcast ownership, small business owners were at least making a living. Now it is

significantly more difficult to do so.

While a number of interviewees had acquired their licenses through the FCC’s comparative

hearing process21, most of the study participants had purchased their stations from previous

license holders. Many of those stations had inferior signals and were purchased out of

 

(c) 6 radio stations in markets with 15-29 stations (with no more than 4 stations in either

service); and

(d) in markets with less than 15 stations, 5 radio stations (with no more than 3 stations in

either service.

21 In accordance with the Communications Act of 1934, The Federal Communications

Commission has allocated and licensed the radio spectrum for use in radio, television and

telecommunications. From 1945 until 1993, this spectrum was allocated by comparative

hearings from which the successful applicant paid no compensation to the Federal government.

If there were mutually-exclusive competing applicants, they went through the comparative

hearing process wherein an Administrative Law Judge (ALJ) reviewed the applications and

heard the arguments from the applicants, ultimately deciding which one could and would best

serve the public interest. While the applicants generally expended significant sums of money for

engineering advice and legal representation during the application and hearing process,

regulatory and application fees were minimal.

In an effort to refine the process and to provide consistency in decision making, the Commission

issued the Policy Statement on Broadcast Comparative Hearings, 1 F.C.C. 2d 393 (1965). This

Statement articulated the areas in which applicants would receive credit (or “points”) and on

which their applications would be judged. The seven areas of review were: diversification of

control, integration of ownership into management, proposed program service, past broadcast

record, efficient use of the frequency, character, and any other significant and relevant factors to

be considered in the decision-making process.

Minority ownership policies did not commence until 1973 in the wake of TV 9, Inc. v. FCC, 495

F.2d 929 (D.C. Cir. 1973); and gender ownership policies did not commence until 1978 and the

Mid-Florida Television Corp., 69 F.C.C. 2d 607, 651 (Rev. Bd. 1978), set aside on other

grounds, 87 F.C.C. 2d 203 (1981).

The 1978 Statement of Policy on Minority Ownership of Broadcasting Facilities formalized the

use of minority and gender credits in the comparative hearing process, thereby providing a

measure of “preference” to both minority and female applicants. In 1990, the FCC declined to

extend enhancement credits for minority ownership under the diversification of ownership

criterion. The 1993 decision, Bechtel v. FCC, 10 F.3d 875 (D.C. Cir. 1993), had the effect of

freezing comparative hearings. The Telecommunications Act of 1996 eliminated the role of

comparative hearings in the renewal of broadcast licenses.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 14

bankruptcy, with the new owner, in his or her eagerness to own a station, sometimes taking on

more debt than was prudent.

Access to capital, on a timely basis and in quantities needed to acquire and grow their businesses,

has always been a challenge for small broadcasting businesses. Local banks often did not lend

on broadcast properties because bankers did not understand the business of radio and television,

saw the licenses as too risky (especially since they were not actually owned by the broadcaster

and came up for renewal on a regular basis), and were unable and/or unwilling to collateralize

their loans with the generally meager assets of the stations themselves. If broadcasters were able

to get loans from conventional lenders, often other personal assets had to be pledged as

collateral. If one was lucky, the seller of the station was willing to take back a note for a portion

of the purchase price.

The interviewees consistently reported that for minority and women licensees these market entry

barriers have been compounded by the discrimination they have encountered in the capital

markets, in the broadcasting industry itself, in the advertising industry, in the lack of

employment opportunities, and as a result of various actions and inaction on the part of the FCC

and Congress.

The 1996 Act has heightened these barriers to the point where it appears that it is almost

impossible for small, minority- and women-owned businesses to enter the broadcast industry.

Broadcast ownership is now determined by Wall Street stock instead of Main Street money.

With the lifting of the ownership caps, there has been consolidation of ownership, primarily in

radio, by large publicly-traded companies, driving prices up and smaller, independent owners

out. Where stations used to sell for between seven and twelve times projected cash flow, prices

have now been inflated to 20-22 times cash flow. Without significant equity capital, either from

personal funds or outside investors, it is virtually impossible for individuals and non-public

companies to acquire stations in today’s market.

The consolidation of stations precipitated by the deregulatory provisions of the 1996 Act has also

consolidated advertising revenues in the hands of the large broadcast group owners, significantly

limiting the ability of smaller broadcasters to earn the money necessary to successfully compete

and survive in the business. As a result, smaller station owners, many of whom are minorities,

are being presented with two choices: (1) to continue to operate their stations at personal

financial risk, which many have done because of their deep commitment to serve and be a voice

for their communities, or (2) to sell their stations, which others have done because they believe

that it is going to be extremely difficult if not impossible to compete successfully against these

large group owners in the future.

With the exit of local, minority radio station owners, consolidation is also having an impact on

both the diversity of voices and service to the local communities. With consolidation, the

programming, both entertainment and public interest, has become more homogenized. While

group owners might have urban-formatted (“Black”) stations, for example, in particular markets,

interviewees indicated that it is common for the news and community service programming
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 15

provided by these stations to not be particularly geared towards the information needs of that

specific Black community itself.

Additionally, since news programming was often being produced centrally by the larger

companies whose stations covered multiple markets, access by the audience to general local

news and public service announcements was diminished. Lastly, fewer opportunities exist for

the voice of the minority population to be heard since some minority on-air personalities and

other employees are being precluded by their employers from taking public stands on issues

relative to their minority group.

These market entry barriers have been exacerbated by the FCC’s action, or inaction, on certain

regulatory or market issues. For example, they may include enforcement or unenforcement of

EEO policy, distress sales/license renewals22, use by non-minority men of minority and female

“fronts” during the comparative hearing process23, the lifting of the ownership caps, and minimal

small business advocacy before the FCC. The actions and inactions of the FCC have been made

worse with Congress’ repeal of the tax certificate program.24

 

22 The 1978 Statement of Policy on Minority Ownership of Broadcast Facilities, 68 F.C.C. 2d at

981, 42 Rad. Reg. 2d (P & F) at 1691, created the Distress Sale policy which allowed for license

owners that were under scrutiny by the FCC (and under threat of license revocation) to sell their

station to a minority for 75% of the appraised value. In return, the FCC would cease its inquiry

into the suspect license owner.

23 Interviewees reported that in some instances non-minority men would offer ownership and/or

financial resources to minorities and women to become part of their license application team in

order to take advantage of the minority and women ownership programs during the comparative

hearing process, but rarely giving these “fronts” control over the operation of the business. In

these instances, their participation was generally sought after to increase the odds of license

award. Alternatively, others would review FCC filings to see if a minority or woman had filed

for a new frequency. The apparent motivation was either to: (a) get paid off with “greenmail” to

withdraw their application, knowing full well that most women and minorities did not have the

resources for a protracted hearing before the Commission and would therefore pay the

greenmailer to go away; or (b) come in on the back of someone else’s engineering study and

wear down the minority or female applicant through appeals or other means, expecting that this

applicant would eventually withdraw because he/she did not have the money for a protracted

hearing process, thereby leaving the non-minority in a position to receive the license. There

were instances where these practices, as described, were quite predatory in their nature.

24 The 1978 Statement of Policy on Minority Ownership of Broadcast Facilities, 68 F.C.C. 2d at

981, 42 Rad. Reg. 2d (P & F) at 1691, created the tax certificate program. This program which

provided incentives to broadcast owners who sold their properties to minorities (minority buyer

with 50.1% of voting control and 20.1% equity interest). The seller could then defer any gain

realized on the sale of that broadcast property provided it was sold to a minority, and the gain

was rolled over into a qualified replacement broadcast property within 2 years. Specifically, the

tax certificate program encouraged and promoted minority ownership by giving a two-year likekind-transfer tax break for the sale of licenses to minorities if the proceeds were reinvested in a
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 16

And finally, the gains in station ownership that had been achieved by minorities in the latter

1970s, 1980s and early 1990s were essentially reversed by both Congress’s elimination of the

tax certificate program in 1995 and Adarand decision in 1995, discussed supra, which made it

significantly more difficult for race-specific rules and policies to be implemented by the FCC.

Given the historical disadvantages faced by small, minority- and women-owned broadcasting

businesses, the confluence of the repeal of tax certificates in 1995, the Adarand decision in 1995

and the deregulation of the broadcast industry in 1996, it appears that it is nearly impossible for

small, minority- and women-owned broadcasters to enter, survive and grow in the broadcast

industry.

2. Wireless

The barrier to entry in wireless licensing is primarily one of capital. With the passing by

Congress of the Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66, 107 Stat. 388

(1993) (codified, in pertinent part, at 47 U.S.C. §390(j) (1994)), the FCC was given the authority

to distribute licenses through a competitive bidding process, or auction. With the enactment of

Section 309(j) of the Communications Act, successful license applicants have to pay the FCC for

the issuance of wireless licenses whereas before they were issued at no charge to the licensee.25

The financial burden of now having to pay for licenses coupled with 1) the enormous sums of

capital needed to build out wireless systems and 2) limited access to capital, has severely

disadvantaged small, minority- and women-owned businesses in the acquisition of wireless

licenses.

 

similar communications industry. Since the seller was able to defer its tax payment on the

capital gain by selling to a minority, the price was frequently lowered, enabling minority

purchasers to mitigate the associated barrier of “lack of access to capital.”

Prior to 1978, minorities owned approximately 40 broadcast licenses, one-half of one percent of

approximately 8,500 total broadcast licenses granted by the Commission. From 1978 to 1995,

the FCC granted approximately 356 tax certificates to promote minority broadcast and cable

ownership (287 radio, 40 TV and 30 cable licenses). This program helped give a much needed

boost for minority ownership. In 1982, the tax certificate program was expanded to include

cable systems. Subsequently, Congress repealed the tax certificate program with the passing of

the Self-Employed Persons Health Insurance Act of 1995, Pub L. No. 104-7, S 2, 109 Stat. 93

(1995).

25 On August 18, 1998, the Commission released its First Report and Order setting forth

procedures governing auctions of broadcast service licenses. In October 1999, the FCC held its

first auction for broadcast licenses whose distribution was suspended in the wake of the Bechtel

case.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 17

Furthermore, the elimination of auction ownership programs for women and members of

minority groups as a result of the Adarand case, has caused access to outside equity investors and

vendor financing for equipment to practically disappear.

A more detailed discussion of these barriers in both broadcast and wireless licensing is presented

below.

B. Market Entry Barriers and Other Experiences

Through the years covered by this study, small, minority- and women-owned businesses in both

broadcasting and wireless telecommunications encountered multiple market entry barriers. They

were erected by discrimination in the capital markets, in communities, in the advertising

industry, and in the competitive marketplace; by the effects of deregulation and market

consolidation precipitated by the 1996 Act; and by various actions and inaction on the part of the

FCC, the courts and Congress. It is important to note that while essentially all small businesses

were negatively affected by these barriers, those businesses owned by women and especially

those owned by minorities reported the greatest negative impact.

1. Discrimination in Lending and Limited Access to Capital

ÿ Access to Capital is Key

. . . (O)ur number one criteria ... is can they pay for it at the closing and will they pay the

most. And that kind of supersedes everything. (Brian Cobb, media broker - BCobb512,

p. 13)

Access to capital was clearly the most common and pervasive barrier to entry cited by

participants in our study, both among licensees, as well as by most every key market participant

(broker, lender, other intermediaries). In a market where access to capital is a critical component

for entry and growth, lack thereof basically puts you out of the game. Acquiring money for startup ventures is difficult enough. If one is a woman or minority, the difficulties in acquiring

capital, as the female and minority study participants told us, were exacerbated by discrimination

on behalf of the various lending sources and intermediaries.

ÿ Access to Capital as an Obstacle for Small Business

Capital affects everything. The more cash-strapped a company is, the less it is able to invest in

those things that help it grow and keep it viable. These things include attracting and retaining

top personnel; operating out of comfortable, efficient facilities; upgrading to and maintaining

state-of-the-art equipment; retaining attorneys to ensure information flow and advocacy;
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 18

promoting the business to listeners/customers and advertisers; and acquiring additional licenses

to improve competitive advantage.

Access to capital is limited by lending sources’ lack of understanding of the broadcast and

wireless businesses and their operations; by requirements for collateral in excess of operating

cash flow; by increased cost of capital due to consolidation; by exclusion from information and

deal-makers’ networks; and by advertising agencies’ and advertisers’ practices.

Discrimination based on education might even play a role in limiting access to capital. As a

previous NTIA report on capital market discrimination indicated, at least in the pre-market

consolidation era, the fact that minorities who acquired capital were better educated than

similarly situated non-minorities may be indicative of discrimination. The study found that

education was more important for minorities acquiring capital than even the track record of the

business for which the financing was sought.

Erskine Faush, a Black television station owner who acquired his license in 1989, puts it

succinctly.

(I)t’s always capital. ... Now you know, we can theorize and rationalize all of this. But

when it comes right down to it, it’s the lack of resources.... (W)hen you have a company

with mega bucks, many of them being [publicly] traded, who have ready access to deals

in the marketplace, even to make improvements, to do all of those things necessary to

grow, to fertilize it if you please, without those resources just how do you make it a level

playing field? (EFaush238, p. 15)

Mr. Faush goes on to say that he’s not necessarily looking for a hand out but rather a reasonable

foundation on which to compete fairly.

. . . (I)t’s that access to capital. It’s that barrier. And, you know, you’re not necessarily

looking for preferential treatment – and, yet, I could make a strong case to justify some

[of it] because of past practices in the marketplace. I could make a strong case for that,

but I won’t do that. What I will say is this, that once you remove the barrier that’s there,

without help you cannot move, and that’s the one of capital, you know, everything else –

once you do that, give me the wheels to put on my chariot -- do you understand what I

mean – I’ll drive it. I’ll run it.

I don’t mind getting in the race with anybody else at any other level and let it be on

initiative, your drive, and all those things that you ought to have to be a good, viable

business enterprise, you know. You don’t have to do that. You don’t have to go out and

get the business for me. I’ll go get it. Do you understand what I’m saying? (B)ut the one

thing I can’t get over is the fact that I’m starting at the starting gate and I’m expected to

... make the chariot go and there are no wheels on it. Give me some wheels and I’ll get

at the race line with everybody else and line up, and let’s see who can run to the finish

line. (EFaush238, p. 26)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 19

Similarly, Ernest James, an African American former licensee (who purchased his station in

1985 and subsequently lost it in bankruptcy proceedings) makes these comments.

I had done all of the things that you need to do. I had done the engineering to ensure that

the property that I needed would meet FCC requirements. But I failed, and the reason

that I failed had nothing to do with my ability, proven by the fact that I am very

successful running [seven stations for Clear Channel], and the stations that I run are not

all urban formatted stations. . . (S)o my point is that it wasn’t a matter of skill, it was a

matter of access to capital. (EJames268, p. 9)

ÿ SBA Programs Do Not Ease Access to Capital

During various years, when the “opinion molder rule” was not in effect,26 the Small Business

Administration (SBA) was able to lend money for the acquisition of broadcast properties.

Several of our interviewees were able to finance their station purchases using the SBA’s loan

guarantee program. For example, Joyce Banks, a Black female radio licensee, recalled that SBA

was available to help finance her acquisition, but she only learned of its availability through a

state government official. As she states:

But still ... so what happened is in contacting, I believe he was a state senator at the time,

Paul Simon whom I had worked with for years, had come across ... or one of his staff

persons, I believe ... that the SBA had just made the decision to loan money to radio

stations. And so a bank whom we had done business with for years then decided that,

okay, with that guarantee, they would be willing [to loan us the money]. (JBanks175, pp.

7-9)

Even though the maximum loan amount for broadcasting properties that the SBA will guarantee

has increased over the years to its current level of $750,000, that is too low an amount in today’s

marketplace, as Manny Davila, Hispanic radio broadcaster, told us.

[The] SBA, you know, will lend you $750,000. Well, wow, that’s fine. That means I can

go and buy [a station in a small town in] Texas, man. but I can’t buy in San Antonio.

 

26 The Small Business Administration in the administration of its “opinion molder rule”,

generally prohibits governmental financial assistance to business operations relating to the

communication of ideas on the basis that the government should refrain from subsidization of

particular views or ideas, has led the agency to reconsider the rule because it appears to have had

the opposite effect of entangling, rather that extricating, the government in speech matters due to

the need for agency determinations of eligibility. The SBA’s opinion molder rule, which was

lifted several years ago, provided generally that the federal government was prohibited from

granting governmental financial assistance to applicants engaged in the communication of ideas.

13 D.F.R. 120.2
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 20

But, yet, the banks, if you want to borrow a couple of mil or a mil or something, no, they

don’t want to lend you that. They don’t – no, if you’re not borrowing $3 to 5 million or

$10 million, they don’t want to talk to you. (MDavila 128, p. 42)

Pluria Marshall, Jr., an African-American radio licensee, suggests that the upper limit on SBA

loans should be increased gradually from $750,000 to $1.5 million to $2 million. As he said,

with only being able to get $750,000, “basically you couldn’t buy much of anything for that

amount of money.” (PMarshall115, p. 1)

All small businesses face these obstacles. Minority and women licensees reported that because

of discrimination, they experienced increased disadvantage.

ÿ Discrimination As an Obstacle to Capital for Minority- and WomenOwned Businesses

While small businesses typically have more difficulty getting bank loans, the minorities we

spoke with shared stories of even greater difficulty because of pervasive and often subtle

discrimination. Bob Carl Bailey, an African-American who acquired his radio station in 1977

said:

(F)inancing broadcast facilities or any business if that [financing] was tied to the success

of the business, ... is difficult ... (p)articularly if you’re small and even more difficult if

you’re Black. Next to impossible. (Bob Carl Bailey, African-American radio

broadcaster) (BBailey167, pp. 3-4)

James E. Wolf, Jr., another Black radio station owner who acquired his license in 1983, shared

the irony of him finally becoming bankable as a result of the windfall he is reaping from the sale

of his broadcasting business. Furthermore, he makes reference to the banker’s willingness to call

him “Mr. Wolf”, an appellation of respect that was obviously lacking before.

The color of the skin I am in is the problem. It has been and still is. Now I’ll tell you,

since I’ve gotten this big, large contract on my desk [for the sale of my station],

everybody – I had one banker [who I earlier had tried to get financing from] tell me, and

this is verbatim. “The kind of deal that you’ve got, I’m going to have to start calling you

‘Mr. Wolf.’” But now I can get anything I want. But I don’t need them, you know. I can

get anything I want now. ... You know, ... I’ve had so much notoriety in this community

and all of the servicing work that I’ve done, any loan ... it had should have been, “All we

require is your signature, Mr. Wolf.” That’s what it should have been. That’s what it

should have been. (JWolf281, pp. 21-22, 27)

Andrew Langston, the first African-American to seek a license directly from the FCC in 1960,

financed his radio station purchase “out of my piggy bank ... because the bank wouldn’t’ loan

any money.” Mr. Langston had 12 businesses at the time he was seeking financing for his radio

station [in 1974]. He had extensive experience and a track record as a successful businessman.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 21

And still he could not qualify for a bank loan. He was essentially told by the banks to be his own

lender.

There was one time I had twelve businesses. . . I borrowed money from [my in-laws] . .

[Banks] wouldn’t loan me any money, because they told me I didn’t need no money. And

that was true, I didn’t need any money, I needed to wake up and think. Because here I

had a transportation business. I had a public relations business, a promotion business,

had an insurance agency. I had revenues coming in from that and I turned around and

looked and said “what the hell?” I can loan this money to the station. Which I did.

(ALangston112, pp. 1,12)

Mr. Wolf also talked about how even with his industry and community recognition and

prominence he was still not able to prove his creditworthiness to the banks.

I just really ... positioned myself – I’ve won every award that you can think of from the

cities, economic development awards, from the State of Tennessee. (W)e tried

unsuccessfully so many times [to raise capital]. . . . (T)hese are the pressures really that

made me actually sell at this time, you know. It’s because I just got tired of begging

people, even though you prove yourself over and over. I’m on the Chamber [of

Commerce’s] Economic Development Board. I’ve won the pinnacle award of the

Chamber of Commerce. I’ve won the small business award. I’ve won every large award,

industry award, that you can win here, but I’ve never proved myself to banks. (JWolf281,

pp. 20-21)

Some minority owners found that the banks were unwilling to lend them money, but the banks

used the information that they received from the minority applicants against them. For example,

William Galloway, a Black male radio licensee, recalled the following story:

We could not borrow any money, and to this day, we don’t need any money. Because they

just would not lend money to a minority, and especially in the radio business, because

they found that banks are not familiar with lending money to broadcast radio stations,

and I live in Buford, South Carolina. And they’re not going to lend me any money for

this radio station. They will now. I was told no on 3 or 4 occasions, but someone found

out, I guess in the bank, from a friend, I guess, because I was approached. They offered

me $85,000 for the radio station and I said, well, first of all, how did you know I was

trying to borrow $50,000? That was supposed to be confidential. Evidently it was not. I

live in a small town. Everyone knows everybody’s business. And so I said, well, if it’s

worth 85 to you, why isn’t it worth 50 to the bank? And of course I said, well I’m not

gonna sell. And I refused to sell. And I do not need any money at this point. My radio

station’s free and clear. I do not owe anybody any money. And the only reason is,

because it’s free and clear, and I’m afraid to borrow any money. Because, I can borrow

more than I can afford to pay back. And, since I have refused to sell, the good way to get

me is to lend me more than I can afford to pay back, and call the advertisers, who are

their friends, and say, look, let’s not advertise. We can get Galloway’s station. So that’s

a way for them to get it from me without my agreeing to sell. (WGalloway183, pp. 4-5)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 22

ÿ Prominence and Prior Business Success Is Not Enough

As in Mr. Wolf’s case, many minorities we spoke with were prominent in their communities,

often had other successful businesses, aligned themselves with other leading individuals as

equity investors, and still had great difficulty receiving the financing they needed. Often they

had to approach several lending institutions before they succeeded, if at all.

Notable among them is Percy Sutton, who in 1971 co-founded Inner City Broadcasting. At the

time, Mr. Sutton was Manhattan Borough President, principal owner of the Amsterdam News, a

leading Black newspaper in New York, and an owner of a cable television company. As his son,

Pierre Sutton, President of Inner City and Chairman of the National Association of Black-Owned

Broadcasters (NABOB), reports:

We didn’t have access to capital, we didn’t. We had an opportunity to purchase but we

were unable to find a bank that would back us in [1971]. In fact we went to some 30

banks in New York looking for backing and this was to buy an AM daytime radio station

in Harlem. . . . (W)e were fortunate in that one of our shareholders had saved the life of

Bunny Berkley, who was then the [child of the] Chairman of the Board of Chemical

Bank, and that’s how we got additional financing. But it was just dumb luck. He [the

shareholder] was a counselor at summer camp and he had saved the life of the [child]

from drowning, saved the life of this man’s child. It’s kind of extreme access. (PSutton,

pp. 1-2)

Mr. Sutton’s poignant story illustrates the extreme lengths to which minorities had to go to

secure financing almost 30 years ago. These barriers compare to those faced by minorities today

as a result of: market consolidation, the lifting of the ownership caps, the repeal of the tax

certificate program, the issuance of the Adarand decision, and the ending of FCC minority and

women ownership policies (comparative merit, installment payments and bidding credits).

Greg Davis, a Black radio licensee, who also has 25 years of experience, had a more difficult

experience:

As minorities we found it – I found it extremely difficult, and even with my 25 years in the

business, and even proven record having been there for 12 or 15 years. It was still very

difficult to get conventional financing. So we ended up having to do venture capitalist

money and so forth. So the cost of capital has always been a very strong deterrent for

minorities participating in the broadcast industry, whether it’s wireless, cable, television,

or radio...I want that to be very clear, that it’s not only the accessibility, but it’s also the

cost of doing business. It’s been extremely difficult for us to come ahead. (GDavis202,

pp. 4-12)

Richard Weaver-Bey, an African-American who owns both a real estate company and his radio

station, which he acquired in 1981, had put together a team of highly visible partners - three

lawyers and a doctor. “ ... and still the bank would not lend to us.” The bank said “they were
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 23

doing what they called asset lending, and they questioned whether or not the radio station had

the ability to sustain or to repay the loan.” Ultimately the bank agreed to do the loan, but only

“if it would be guaranteed 90% by the SBA.” (RWeaver-Bey171, p. 7)

Jeffrey Hutton, a White small radio station owner, had a markedly different experience with his

bank. While Mr. Sutton and Mr. Wolf, with their visibility in the community and record of

business success, were deemed uncreditworthy, Mr. Hutton got his loan, two years later in 1983,

based on the fact that he was an “upstanding citizen of the community.” The contrast is stunning.

I went down to the bank [in 1983] and got a loan, and they gave me a loan based on two

criteria. Number one, the collateral I was able to put on the table and number two, my

personal credibility because I was employed as a vice president of a local hospital in

town when I went to my bank. And so as a result I was what they call an upstanding

citizen of the community and you know, served on a United Way board and things like

that so they were really, as I was told later on, they were loaning the money to Jeff

Hutton because of Jeff Hutton not necessarily because they thought that this business

venture was going to fly and make money.

(F)or a period of time when banks were in trouble back in the ‘80's, they didn’t want to

loan money to radio stations because it was too speculative. But I’ve been fortunate,

both of the banks I dealt with have done so because of me and they understand my work

ethic and how I do things. . . . No, I never had problems with banks. I mean every time

I’ve gone to the bank and asked them to do something they’ve done it. (JHutton383, pp. 5,

6, 7)

ÿ The Administrative Cost of Capital – Extraordinary Efforts to

Secure Loans

Several minority interviewees indicated that it took extraordinary efforts to get loans. They were

sometimes turned down by several banks; they may have been treated disrespectfully by bank

officials; they may have been unsuccessful and had to finance by other means; often their loan

agreements required different or more stringent terms; and their deals received more detailed

scrutiny.

Art Gilliam, a Black radio owner who after visiting 10-15 banks in 1977 was able to get his loan,

nevertheless, considers his experience a fortunate one.

Well, we were very fortunate.... (W)e went to really, I guess ten or fifteen banks, and most

of them said no. And many of them right off the bat without looking at our proposal, but

we did have relationships with some of the banks and the one that had financed [us]

initially indicated they would do it along with the minority bank which we’d done a lot of

business with in the interim. (AGilliam117, p. 11)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 24

Hispanics have had similar experiences with banks to those of African-Americans, as Manuel

Davila (“Daddy D”), a second-generation Hispanic radio station owner and on-air personality,

shared.

[W]e went to several banks [over two decades, from 1974 to 1996] and they all turned us

down. . . . The banks won’t lend you money because [they believe with Mexicans] all you

do is drink and you all beat your wives and you have a lot of kids and you all have tattoos

and you wear gold chains.... [We] couldn’t get money. (MDavila128, p. 26)

James Wolf, Jr., an African-American broadcaster, tells us further that he “... got turned down

by every bank, every traditional institution. We were redlined and I started to sue – redlined.

And we had proven that there was nothing in our history that suggested that we were going to do

anything other than [be] good stewards of the money we were loaned at the time. I got rejected

all the way up until 1996, 12 years later.” (JWolf281, pp. 20-21)

Many minority interviewees had similar experiences of being turned down by several banks, and

in some instances despite their efforts to comply with the banks’ requirements and suggestions.

For example, Greg Davis, a Black radio licensee recounts:

I went to almost nine different banks in various parts of the country, and my story was

pretty – I’ll tell you straight to the point. It was a very long, tedious process. And

initially I would go to the bank, and one of the banks would tell me your business plan

isn’t thorough enough. And I’d correct everything that they would tell me. I’d go to the

next bank and the next bank would tell me that you don’t have enough experience. I

would correct that ... I would tell you that it was very, very difficult initially to raise the

capital to invest in our company...It took six years. I started in 1980. No, they never

loaned me the money.... I’d go back and correct it and they would say, no, we’re just not

interested for a lot of reasons. So access to capital has been a tremendously difficult

task, at least from my perspective, in trying to start a company...(GDavis202, pp. 4-12)

Certain minorities had to take out home equity loans in order to finance the purchase of their

communications property. For example, Leodis Harris, a Black male radio licensee, recalled the

following:

The only way I was able to do it was to go into my home equity. I had some small

purchase price, but the balance of it I had to get from a home equity loan.... Especially

with a new owner having no broadcast history, it was just almost, well, it was impossible.

I had some big plans when I purchased the station, market studies and kinds of proposals

for sales and so on. However, they were based on my being able to get a loan, a bank

loan, I was trying to get a loan of I think $585,000 or something of that sort. But of

course I ended up not being able to ever succeed in getting that loan.... With the station

not up and with me not being able to show any kind of history or any kind of prospect

except my hopes and dreams, it was difficult and all the banks turned me down.

(LHarris276, pp. 1-4)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 25

Even though some minorities had access to some personal capital, this access did not preclude

discriminatory treatment. For instance, Nancy Waters, a black female radio licensee, recalled the

following:

When I went looking for money, you know, all the local banks had turned me down. That

was back in ’79. It didn't matter that my husband had $200,000 in profit sharing at the

local bank. They said that I didn't know broadcasting, and I was way over my head.

(NWaters178, p. 5)

Some banks have treated minority applicants as if they were unsophisticated borrowers,

irrespective of their level of sophistication. For instance, Joyce Banks, a Black female radio

licensee, recalls that:

[I]t was just very difficult to start the business with advertising being very tight. The

banks ... we had no history of broadcast experience, and though a lot of the bankers

knew me, they still knew me in a light that didn’t have anything to do with the radio

business. So as we put together loan packages some of them were quite insulting. We

would come ... my husband accompanied me ... we would go to some of the banks, and

they would look at you like you need to put together this or that or the other. We knew

what to put together. And it would surprise them, and yet they would not consider it

because we were asking for quite a bit of money. Again, we were asking for six hundred

and some thousand dollars for a start-up business, and they were not willing to take the

chance. Well, just because some of the conversations, and I sincerely mean, were

insulting. “Now, well, you don’t need to ... well, you do have to put a plan together; we

can’t take things brought in a shoe box. You know, people will bring ...” Not even

noticing that there was a bound book with a planned budget and all of that sitting right in

front of them. . (JBanks175, pp. 7-9)

Jim Winston, Executive Director of the National Association of Black-Owned Broadcasters

(NABOB), relayed the fact that minorities often experienced more stringent loan terms than their

non-minority counterparts.

There was always the ongoing problem being a minority buyer, the terms were always

stiffer. If you could get a lending institution to talk to you, the terms they came up with

were always stiffer, so that minority buyers often found themselves having to sign a

personal guarantee to the bank when they borrowed money against the station. So,

essentially, they would take a security interest in all the assets of the station, and would

still come to the borrower and say, I want a personal guarantee from you on top of that.

There always seemed to be the stories of guys who were buying their second or third or

fourth stations, who were still being required to do personal guarantees. And, nobody

was seeing anybody else’s bank loan documents. But there was this view that the

restrictions were – that personal guarantees stayed with our guys longer. (JWinston502,

pp. 24-25)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 26

Some minorities indicated that the banks over-scrutinized their transactions in comparison to

their non-minority counterparts. Pluria Marshall, Jr., Black male radio licensee, shares his

experience.

I know friends of mine that are in the business that are able to go in and get deals done,

and if I come in with the same kinds of deals, my deals get scrutinized ten times tougher...

And I’m a real small operator. So it doesn’t really matter how good, how well you can

function in the business, I mean it just doesn’t matter. A Black man’s gonna have

problems and that’s it. (PMarshall115, pp. 9-10)

ÿ Limited Access to Capital: Banks Don’t Understand Broadcasting

Several interviewees observed that yet another obstacle to the access of capital is that banks

simply do not understand the broadcasting business and are, therefore, reluctant to loan money to

loan applicants attempting to start a broadcast business. Bud Price, a White male radio licensee,

recalls the following:

There were two banks in town. One bank we filled the application out and he said, “You

know, if this was a hog farm, we know hog farms. But we don’t know anything about

radio, so we’re going to turn you down.” So I went to the bank across the street and they

looked over the application and he said, “You know, the guy across the street who’s

president of the other bank told me that he doesn’t know anything about radio and

neither do we.” And I said, ...“What do you need to know besides my willingness to pay,

my cash flow, my ability to pay, my credit history?” He said, “Well, you know, if we have

to have a fire sale and you go under, we’ve got to get that money back and we don’t know

anything about radio.”... None of that mattered when it came to financing a radio

station, because it was a unique, one of a kind animal in the community and in the region,

and they didn’t know anything about it; and there was no access to typical lines of credit.

You know, the only people I know talking of wild success stories are on the corporate

level, that are buying a lot of radio stations, dumping a lot of people, curtailing the

services, operating it much leaner and, you know, trying to make a little profit off a lot of

stations rather than a living wage off of one station. (BPrice243, pp. 6, 45)

The primary asset of a broadcast company is generally its cash flow from advertising revenue. It

is not unusual for smaller broadcast companies, especially in smaller markets, to encounter

difficulties in acquiring debt financing, as they are often seen as higher-risk borrowers based on

the size of their operations and their ability to generate cash. These companies rarely own the

hard assets – buildings, equipment, inventory - that banks generally use to collateralize business

loans. Furthermore, since a broadcast license is subject to FCC and public scrutiny upon regular

renewal every eight years, banks do not consider the license adequate or appropriate collateral.

Absent these business assets, a banker often requires the licensee to secure the loan with other

personal assets such as real property, marketable securities or compensating bank balances (e.g.,

stocks and bonds, treasury bills, certificates of deposit, etc). An alternative or addendum to
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 27

personal assets as collateral was often an increased interest rate on the loan to compensate the

lender for the perceived additional risk. In the absence of business or personal assets, licensees

were largely unable to secure loans for either acquisition or working capital purposes. The more

comfortable the lender was with the borrower, though, the more he was inclined to look to the

operations (cash flow) of the business rather than to hard assets for his security.

Our study found that while historically small broadcasting and wireless telecommunications

businesses have had difficulty gaining access to affordable and sufficient capital, discriminatory

practices in the banking industry have disadvantaged minority- and women-owned businesses

more so than White male-owned small businesses. Additionally, when required to pledge

personal assets as collateral for loans, minorities are frequently confronted with an added market

entry barrier due to historic disparities in intergenerational wealth transfers. If mortgaging the

proverbial farm is necessary to secure a bank loan, a minority’s farm, if they have one at all, is

likely to be smaller than that of their White counterpart.

S. Jennell Trigg, a communications attorney, highlighted the fact that the Small Business

Advisory Committee “show[s] that minorities have less collateral and less personal equity

before they entered into business than non-minorities. So they're always starting off at a deficit

when it comes to cash. And the longer it takes to acquire the property, the more legal fees. And

again, at one point, you reach a point of no return. If you give up, you've got nothing to show for

it... You're pouring...bad money into good. (JTrigg536, p. 30)

Charles Cherry, an African American who acquired his first station in 1988, summed it up this

way.

[Banks] don’t understand broadcasting and they look at it strictly [on the basis of]

collateral . . . . And then, of course, debt is always tough because if you go to a

conventional lender they don’t understand how radio works. . . (t)hey’re looking at hard

assets . . . and we’ve had people say, you know, we don’t lend on cash flow. [But it’s my

cash flow that’s going to pay you]. (CCherry262, pp. 3, 19)

Robert Fink, a White small town radio broadcaster who bought his station in 1998, echoes these

comments when he says, “. . . (Y)ou go to the small local banks, like we would have here, and

they’ll at least be polite and let you make a presentation, but they deem it too risky because they

don’t understand the [broadcasting] business.

Amador Bustos, President of Z-Spanish Broadcasting, a successful Spanish-language broadcaster

with 33 radio stations nationwide who first went into the radio business in 1992, had similar

experiences when he was first starting out.

[We went to your traditional banks], the Bank of America, the Wells Fargo, the people

that we knew. That was the only banking relationship that we had at the time. Being in

the broadcast industry and not in the finance industry we didn’t know any investment

bankers or anybody in New York or anything. So we just went to the traditional

commercial banks. And since broadcasting does not carry a lot of assets – it’s just the
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 28

value of the franchise and the license – they did not understand that kind of financing.

They didn’t like the collateral of the broadcasting industry. (ABustos12, pp. 10-11)

Minority broadcasters might be uneasy about educating the banks about the broadcast industry in

order to get a loan, probably because banks could use the information to the minority applicant’s

disadvantage. For instance, Pablo de Jesus Colon, a Hispanic male radio licensee, recalls:

In 1982, when the $400,000 note ballooned, and we didn’t have any money, ... we went to

a couple of banks, I’d say, one bank, they took forever to give you a no answer. Yes, we

had the Fleet Bank. OK, and the Fleet Bank told us that I think it was a troubled credit,

[and they] couldn’t give us the loan. The other bank was Founders Bank, and we were a

little upset at this bank, because we’d prepared a 5-inch binder book with all the

information on our radio station from the beginning, in 1989 to 1993. And when we

talked to the bank, to the officer at the bank, he was very excited, because we had given

him so much information about the radio industry and he came out and announced to us

that he had never done a loan for radio, for broadcasting before. But he had another

Anglo group that was trying to get a loan from the same bank, and he said, now this

information that you have given me, gives the opportunity to read and get myself

knowledgeable about this industry, so that I can work out these loans. But the other

people got the loan and we didn’t. So we prepared this man with enough information to

make a right decision and the other loan for the Anglo group, and our information was

not good enough for us to get a loan. (PColon244, p. 8)

ÿ Limited Access to Capital: Broadcast Station Assets

Undervalued As Collateral

Even when owners who were known in the community had businesses with sufficient hard assets

to use for collateral, as was the case for African-American Erskine Faush, minority owners were

still not successful in getting bank financing.

(E)ach of us, my partner and I, the two Blacks, we put in $40,000, which was all we had.

[We went to] (a)t least three or four [banks] and were getting virtually the same story. In

some instances, I can remember a couple of them at least going through the motions of

coming out and looking at the[station] property [which we owned].... This station had

some real assets, its studio and the property on which the studio sits. So it was not just

the intangibles that are associated with the broadcast industry. Therefore, there was

some real tangible assets and the station had enjoyed some years of operation so it had a

track record in terms of its credit rating and paying its bills and that sort of thing.

We were both indigenous to the soil, to the extent that we also had personal records. In

addition to being a broadcaster I am a minister and have pastored the largest Black

Methodist church in this area. And I retired from that after 20-1/2 years there. So we

were not new or novices, and we had personal credit records, you know, if personal

guarantees were necessary. So everything was there, I would think, by any yardstick or
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 29

measure in a general situation, that would qualify us for the loan. [And still we were

unsuccessful.] . . . (I)f you measure us by any yardstick that you measure the general

population, I could find no reason not to justify granting the loan. So what else is left

[but discrimination]? (EFaush238, pp. 3, 4-6)

William Saunders, a Black FM station owner, who acquired licenses in 1971 and 1983, had

similar experiences. He owns free and clear 34 acres of land ”right on the water” which is

probably worth 20 times the amount of the loan of $250,000 he is seeking, “but we can’t get [the

loan].” His waterfront property is somehow considered inadequate collateral to provide comfort

to the banks he is dealing with. Due to delays in finding money, his business has been put into

receivership.

Even when some minorities had appraisals of their broadcast properties, banks sometimes still

refused to loan them money.

... (W)e did go to a couple of banks that had loaned money to radio stations. We found

that out and approached them because we weren’t talking to a new entity. They would

tell us that the collateral in this type of business was ... that we didn’t have enough to

make them comfortable, even when we had letters from – one from an appraiser, one

from a person who had offered to buy us before we even started. And the appraisal was

saying that the license in itself at that time was worth about $800,000... (JBanks175, pp.

7-9)

ÿ Limited Access to Capital: Personal Assets as Collateral

Since broadcast lending is based on cash flow versus hard assets, it was not uncommon for

license holders to have to secure their loans with other personal assets. Michael Carter, a White

radio station owner who first acquired a license in 1977, told us that “. . . [he] had to mortgage

a farm” in order to provide collateral to cover his loan “. . . because [the banks] don’t value the

FCC licenses. It was terrible.” (MCarter230, pp. 2, 3, 4)

In talking with Dale Gehman, a Native American radio station owner who acquired his license in

1991, he tells of how his father mortgaged the family home and put up the assets of their

furniture businesses to get a loan.

[My dad] mortgaged our house ... for the tower site property, and then the assets of the

furniture business [which was] the only way the leasing company would [provide the

loan] – I mean, at least he could help pay the payment if we couldn't. And, of course, he

never had to . . . I guess looking at any other minority trying to get in those days, in the

early '80s there, he was hopeless. I don't see how anybody could have done it with the

banks. The banks are just impossible. [We also] tried the Small Business Administration

and really got nowhere there. (DGehman132, pp. 10-11)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 30

But for Native American tribes, gaining access to capital is very complicated because of their

unique status. For instance, Jim Casey, a communications attorney, states:

The primary barrier, not surprisingly, is capital. Tribes have a very difficult time raising

capital, because of the nature of their assets. Their assets are typically held in trust by

the Federal Government. They cannot be pledged in a financing arrangement. So they

start out at a disadvantage in getting financing. Another difficulty they have with

financing is their sovereign immunity status. They are often put into a position to waive

their sovereign immunity in order to get a financier to work with them. (JCasey535, p. 6)

William Saunders, a Black radio station owner, talks about his struggle to acquire much needed

capital for his two stations from 1971-1983 and everything he put at risk to do so.

I ended up with the two stations and really could not get the capital that I needed to make

it run. I needed operating money, I needed stuff for promotion, I need a lot of things, and

we just couldn’t get any of it. And we went into a deal, that happens to minorities most

times, I bought 49% of the FM station and then my partner, or the White guy that I was in

the partnership with, had a real bad reputation, but a lot of stuff was against him that I

didn’t know and I couldn’t find out even from the White friends that I had. They all said

he was a good guy. But he wasn’t.

And eventually, the bank attempted to foreclose on him. But [they] allow[ed] me to take

over the note, because that’s the only way I would have been able to get money. They

would not loan me the money but if I would take over what the station owed, which was

about $631,000. And what I did, like a fool, I signed on as guarantor for it, and as a

guarantor, it brought in my AM station, and it brought in my house and my real property

and everything, and the bank got a receivership on it for all of my real property and the

two stations. (WSaunders163, pp. 4-6)

When evaluating loan applications, lenders look to the cash flow from the business to determine

borrowing capacity and to adequately cover debt service. Accordingly, they will often ask to

review a company’s business plan and cash flow projections. If lenders believe the projections to

be too optimistic, they will discount (reduce) them. As a result, the amount of money that the

loan applicant can borrow, if they can borrow at all, is less. For radio stations, cash flow comes

from advertising dollars. Reflecting the frequent experience of urban radio broadcasters with

discriminatory practices in the advertising industry, it was not uncommon for licensees who had

urban-formatted stations to experience discounting of their cash flows by lenders. Charles

Cherry, an African-American radio licensee, highlighted this point.

The bankers do what the industry does, which is they discount – if you are trying to go

into an urban format, they discount the buying power, the purchasing power, of the

market that you’re trying to serve. (CCherry262, p. 14)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 31

The discounting of minority-formatted stations is worse than would appear at first glance. If

banks discount the buying power of minorities and advertisers diminish cash flow by also

discounting advertising buys and/or refusing to advertise on minority formatted stations, the

broadcast property is undervalued in at least two respects. Accordingly, debt capital is all the

more difficult to obtain.

ÿ Limited Access to Capital: Use of Personal Capital in Lieu of

Bank Debt

Several interviewees shared how they had to get creative with raising funds for the purchase and

operation of their stations. Many used cash savings and proceeds from the sale of other personal

and business assets.

Jose Molina, a Hispanic owner of both radio and television properties, tells how in 1970 he

purchased a one-bedroom house in an undesirable section of Hollywood, California for $25,000,

with $3,000 down. Most weekends, his buddies and he, for the cost of lumber, worked on the

house until it grew to four bedrooms. He then refinanced his mortgage to pull $80,000 out of his

house and combined that with $70,000 of private equity to make his $150,000 down payment.

“The lady [seller] carried $500,000 in a 10-year note. So I didn’t have to go to banks because I

knew I wouldn’t qualify. She carried the paper. . . . (T)his person was a cream puff. . . . (T)he

time period that she gave me was a godsend. Ten years.” (JMolina121, pp. 9-10)

Since many minorities were not able to secure bank financing, they had no choice but to sell or

mortgage other holdings to generate the cash needed to buy or build out their stations. In order

to buy his low power television station in 1983, Eduardo Cabellero, a Hispanic licensee, tells us,

“ . . . the money I raised has been mostly by virtue of selling my business and getting some

personal loans, not necessarily business loans, but my personal loans and giving it to the

company.” (ECaballero123, pp. 12, 13)

While White male-owned small business licensees typically had an easier time securing bank

financing, they were not immune to having to pledge assets in excess of those owned by their

stations and invest significant capital themselves. Robert Fink and Bob Darling, White radio

station owners who acquired their station in 1998, had to put in 75% of their own money and

borrowed the remaining 25%. “I mean they wouldn’t take the station as collateral. I ... had to

put up ... everything I had ... my home, I had some rental properties, and I had to sign those

over. Literally everything I owned.” (RFink235, pp. 12-13)

John Tupper, a White TV station owner, also used his own capital to finance his business in

1995.

We probably could have gotten funding had we personally signed for the loan and

provided some other collateral to back up any debt that we would have incurred to build

the stations. But the assets themselves were not bankable collateral to stand on their

own. . . . So we decided to bank it ourselves instead of paying interest to somebody else
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 32

when in fact we would have had basically the same assets tied up either way as

collateral. (JTupper216, p.6)

ÿ Women Experienced Discrimination as Well

Historically, many women were of the opinion that banks were uninterested in helping them

finance their acquisition of a communication property. For instance, Ruby Unger, a White

female radio licensee, stated:

It would seem real clear to me during that whole process and in my years with AWRT

[American Women in Radio and Television] and other women’s groups and small

business women’s groups – it really did make a difference in those days if you were going

for funding and you were a woman, boy, you had a tough, tough road, a very big, uphill

battle. Yeah. It just – you know, when you’re sitting across from a banker who’s a man –

if you’re a White man you have a much better chance, and obviously all the numbers

bear that out. I mean, it was something like one or two percent of all of the radio and TV

stations in the United States were owned or managed by women. I mean, come on.

(RUnger367, p. 10)

Similarly, Bernadine Nash, a Black daytime AM station owner whose late husband bought their

Boston radio station in 1980, offered her experiences.

I think [being a one-station business owned by a Black female has] made it virtually

impossible [to raise outside capital]. . . .I mean, I think that certainly being small is a

distinct disadvantage, and I think that would be the case for anyone, regardless of

whether or not they are male, female, Black, White, whatever. Just because the tenor

within the industry is that bigger is better. However, the additional burden of being

female . . . (Y)ou know, the reality is that when you are owning and operating your own

business and you’re a female and you’re small . . . and a minority, they don’t take you

seriously. (BNash118, pp. 11, 14)

Francine Rienstra, a White station owner in Arizona, spent an exceptionally long time in the

application and comparative hearing process from 1987 to 1993 using up a great deal of her

money to wage that fight. As a result, she had to go into a Local Marketing Agreement (“LMA”

– alternatively referred to as a Lease Management Agreement), giving someone else the right to

use her license and broadcast facilities for their own benefit in exchange for a monthly fee.

[We went after the LMA in the first place because] it was the need for funding. No one

wanted to fund a radio station. No banks in town wanted to fund a radio station. . . . I

did talk to venture capital people, and a lot of the people that I talked to only wanted to

do large deals. They didn’t want to do a small deal because, really, I didn’t need a whole

lot of money to get the station up and running. I was asking for about $1 million. . . . And

I did try that route [talking to the SBA]. I did talk to ... in fact, I talked to some of the
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 33

national SBA people, and they would not lend to broadcast or print industries.

(FRienstra360, pp. 17-18)

When Ms. Rienstra, who had put together an all-woman team to apply for the license, went to the

banks she had these experiences which were compounded by the fact that she and her partners

were women..

So, I put my group together. We had pooled our money together. We had put together a

business plan, and I had started meeting with three to four people for financing through

local banks here. And I had gone to three banks, the first of which was one of the larger

banks in town, and I literally got laughed out of the office. Because they took one look at

me and assumed that I didn’t know what I was doing. So that was the first bank that I

went to. The second bank that I went to insisted that if I were going to try to get a loan or

even to apply for a loan, that I needed to have, not only all of my partners’ signatures,

but I had to have all of our husbands’ signatures. And we were an all-women group.

Now, granted we live [in a community property state]. But by the same token, I don’t

know that they would have asked a man that. That was the second bank. And the third

bank said that they do not loan for such risky ventures. (FRienstra360, p. 1-3)

Bennett Kessler, a White female radio licensee, relays a story of how the banks were particularly

unhelpful to her because she was a woman.

...I’m about to get my first bank loan. But the banks were very unhelpful... I will say that

the banks I felt were not helpful to women. That was my general impression and also, the

story that I heard from other people. ... But it is my general impression, it has been my

general impression in this area, which I guess you could call kind of a redneck area, that

a woman named Bennett is really not going to do that well. I try to explain that it was my

great-great grandmother’s maiden name. That helps a little bit... (BKessler313, pp.

13,18)

Patty Ruiz, a Hispanic female television licensee, states:

I think it was a lot easier for a man to get financial backing than it is for a woman. Oh,

yeah. I think those barriers are finally coming down a little bit, but at that time, you

know, seven, eight years ago that was tough...(PRuiz452, pp. 14-15)

Not all minorities and women had the same difficulties highlighted above. Some were in the

right place at the right time. Johnny and Opal Shaw, Black radio owners, gave their bank an A+

[although they also spoke of the challenges in getting their loan]. Originally, Mr. Shaw was

general manager of the radio station he ultimately purchased in 1987. The station owner got into

financial trouble and offered to sell the station to Mr. and Mrs. Shaw. They financed the

purchase of their station with personal savings, seller financing and a loan for approximately

60% of the purchase price from their local bank. Furthermore, when it was time to upgrade and

buy new equipment, their bank was willing to refinance their loan. (DSutter205, p. 5)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 34

Mr. Shaw feels that his ability to get a loan quickly to purchase a station from his boss was the

result of the prior owner putting in a good word for Mr. Shaw with the bank. “... I was a little bit

surprised [at their willingness to loan me money]. I think [the sellers] had something to do with

me probably getting that loan as quick as I did because – you know, I don’t have evidence of

this, but I want to feel like they said, hey, look, we really need to sell this station, and this guy

does have the capabilities of running it. He’s had the experience and so forth, and we need to

get it off our hands, and we need you to help him get it.” (JShaw185, p. 3)

He went on to give his bank high marks for the opportunities he was given, especially because he

was a minority.

I have to say at this point in time that I think, as an African American, I would have to

give my bank an A+. My bank has worked with me very well throughout this whole

process. But we’ve always been responsible to them. But at this juncture I think they

realize that it’s okay, you know, they can trust us and we can trust them. So our bank has

done well. (JShaw185, pp. 17-18)

ÿ The Importance of An Informal Industry Network to Success in

Acquiring Capital

A number of study participants told us how important it was to have contacts with lenders and

equity investors along with personal financial sophistication to help overcome the market entry

barrier of limited access to capital. Tyrone Brown thinks that “ . . .today, finance is the most

important thing. The most important thing is you [have to] understand finance because you

[have to] put together a financial package and not only understand it but you need contacts in

the field.” (TBrown510, p. 13)

John Thomas, a Black radio licensee who acquired his station in 1992, believed that his previous

banking experience and relationships made all the difference in his ability to eventually get a

loan for his station.

(M)y banking experience and the relationships that I had developed over the years in the

banking industry helped me tremendously. I did have a small amount of capital, but

primarily all of the money was from bank financing. . . . [But] it was [still] difficult

because, again, I came in, I did not have any experience operating a radio station.

Second, the station was in bankruptcy, so it was very, very difficult to convince people

that it was worth putting money behind. But I was persistent and I just kept looking for

ways to put the deal together, and eventually it happened. (JThomas277, p. 4)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 35

ÿ White Males had Greater Ease and Success Securing Debt

Financing

Like White radio broadcaster Jeffrey Hutton above, several of the White male licensees we

spoke with had very different experiences compared to those of their minority and female

counterparts. Wireless license owner Dennis Miller, who is White, has had positive experiences

with banks helping to fund his company’s expansion, even going so far as to have lenders eager

to provide capital. Mr. Miller shares “[As we have grown, raising capital has been] very easy to

do. We’ve gone to traditional banks. Real Telephone Finance has been providing our financing

now for the last three years. Part of that was CoBank, but we have investment bankers there,

very anxious to provide us funds. Well actually, we’ve grown and we’ve been very successful in

our enterprise here, and so as you get more successful, you get on more radar screens.

(DMiller147, pp. 5-6)

Trent Boaldin, another White male wireless license holder who acquired his licenses from 1976-

1999, similarly had a relatively easy time raising money for his new venture. Unlike his female

and minority counterparts, who typically approached multiple lenders and still received very

little, if any, assistance from bankers to ensure their success in acquiring a loan regardless of

their backgrounds and personal financial strength, his bankers were helpful in suggesting to him

how he might improve his chances of getting a loan. In addition to their wireless holdings, his

family also owns cable television and wireline telephone in his rural market.

We approached three lenders. . . They had some suggestions for changes to make to the

assumptions and improvements to make in the plan. So we incorporated the various

suggestions from each one that we talked to, revised the plan, and sent it back. . . . (A)nd

then at that point we got the indication from one of them that they were willing to go. . . .

We’re pleased with what we’ve got. (TBoaldin307, pp. 9, 10)

ÿ Increased Cost of Capital for Small, Minority- and Women-Owned

Businesses

One way for a banker to mitigate the risk of lending is to charge a higher interest rate for those

loans that are perceived to be more risky. Business size, type, operating history, and age impact

perceived risk as does the track record and personal creditworthiness of the borrower. Often for

small businesses, the higher interest expense noticeably impacts their viability and opportunity

for growth. For new businesses, the increased cost of capital can render their business plans

unworkable.

When asked how the size of his business and the fact that it was a new venture impacted his cost

of capital, Mr. Boaldin responded, “I don’t know what the exact difference would be, but I

imagine it’s very significant, yes. . . . [The interest and terms that we got] obviously fit into the

business plan. I think it’s just the nature of a small business. That’s one of the down sides of a
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 36

small business. But, you know, small business has lots of upsides. That just happens to be one of

them that’s always an issue. (TBoaldin307, pp. 9, 10)

The higher cost of capital for small businesses was also noted by other study participants.

Anthony Chase, an African-American radio and wireless licensee who acquired his licenses from

1992 to 1994, says that a higher cost of capital for small businesses comes with the territory, and

you just have to learn to work with it.

. . .(M)y sense is that the [cost of capital] is always very high for start up businesses and

it’s certainly no exception in my case. It’s very high. It’s a real barrier to entry in the

business. And you know, you just [have to] suffer through it and hope that your first deal

doesn’t necessarily become your last because you have to pay pawnshop rates to get into

the business. (AChase119, p. 6)

Minorities told us that they perceived they were paying a premium for capital, perhaps more than

their White male small business counterparts. Mary Helen Barro, a previously successful

Hispanic radio broadcaster who acquired licenses from 1987 to 1992 and is now in bankruptcy

primarily because she was not able to obtain adequate financing, tells us that she “had a very

difficult time raising capital. I was a minority woman. If I did get [the money] it was very

expensive. I had to go to venture capitalists; the banks just didn’t want to assist us at all.”

(MHBarro190, p. 3)

Dorothy Brunson, one of the first Black women in broadcasting and a current owner of a UHF

television station which she started operating in 1989, also had to pay a higher interest rate for

her borrowed capital.

Every time we’ve had to borrow money, we’ve had to borrow it at 15%, 16% interest

rates because the history and the growth of the station and the level of profitability was

not there in the early stages. So people still look at us as high risk. . . . And so you,

you’re constantly paying extra dollars to be able to do the basic things that most people

can do with 5 or 6 or 7% dollars, and the same dollars would cost us 12%, 15%.

(DBrunson105, p. 9)

As discussed, interest rates are reflective of the perceived risk involved in the transaction.

Charles Cherry, an African-American licensee, thinks that “race probably adds an additional

risk factor, but [he] can’t say that that’s the sole sort of determinative in these kinds of deals....

[His] gut tells [him] that he’s paying a high price [because he is a minority].” (CCherry262, p.

13)
Section IV. – Findings Whose Spectrum Is It Anyway?

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ÿ Minority Small Business Investment Corporations (MESBICs)

Those minority study participants who had to deal with Minority Enterprise Small Business

Investment Corporations (MESBICs)27 shared their negative experiences with the process. W.

Don Cornwell, an African-American who is a former senior executive at the investment banking

firm of Goldman Sachs and current President of Granite Broadcasting, a publicly-held television

broadcaster, told us his story.

Oh, it's awful [dealing with MESBICs in 1988]. You know, disorganized and not reliable

as investors. We had a group of MESBICs that committed to put up about $2 million in

the group. I did not want that in the deal because all the experiences I had had with my

prior life of helping other small guys get financed, because I used to do that just as a

sideline on a pro bono basis when I was [a senior executive] at Goldman [Sachs]. And

my experience had always been that these guys were not good for the money, but I was

[approached] by a guy who ran one of these, who I had known, and I got a lot of smoke

blown at me, how I was the kind of guy they really needed to back, and you know, this

was going to be professional and blah-blah-blah.

Anyway, the long and short of it all is that they waited until a month before it was time to

close, and then they started imposing demands, and I conceded to one of them which was

a pricing change, which was in their favor, and against my best interest. But then they

started to try to take, in effect, control of the company. And to be candid with you, one, I

wasn't going for it; but, two, I had a couple of my other investors, including Goldman

Sachs, basically tell me that they wouldn't be in the deal if these terms were put in the

deal [by the MESBIC]. So it was just not a good experience.

 I've been told that this industry has cleaned its act up a little bit, and it's better. Some of

the people who were part of this group after I basically kicked them out -- because I did,

they were shocked, because they're used to having people who are frankly on their knees,

and because of my background, I knew how to raise capital. And so I kicked them out,

which shocked them. (WDCornwell103, pp. 22-23)

 

27 MESBICs are small business investment companies (SBICs) that address the needs of

entrepreneurs who have been denied the opportunity to own and operate a business because of

social or economic disadvantage. SBICs were created by Congress in 1958, and licensed by the

Small Business Administration. MESBICs are privately organized and privately managed

investment firms. Possessing their own capital and with funds borrowed at favorable rates from

the Federal government, SBICs provide venture capital to small independent businesses. Small

Business Association, Alternative Financing, (visited Aug. 30, 2000).

 <http://www.sba.gov/gopher/Business-Development/Womens-Business-Ownership/FinancialAlternatives/wfin1.txt>
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 38

Pierre Sutton also had an experience with a MESBIC in 1971 that was more costly than it might

have been with a different lender or if he had not had to use a MESBIC, especially since he had

to give up equity in his company to get the financing. Now, however, with the company’s track

record, his experience has changed.

Initially I don’t think [my cost of capital was the same as for non-minorities]; I know they

weren’t. My cost of capital was high getting started because [the MESBIC] said I had to

give up points, I had to give up 10% of the company. I eventually bought those back. In

fact, I got that back before we went out and bought additional radio stations. But, no I

had to give up points, I had higher interest rates, because it was a MESBIC. I was

getting charged what banking business would consider usury rates. . . . but I can’t say

that now, I know that now we’re not getting the same kind of treatment either because

we’re better, we’re more established, having been in business 20 years, 25 years, we

know what we’re doing almost 30 years. And we have a good track record. We’re just

not going to take it any more, you know. (PSutton110, p. 14)

Merrill Charles, a Black male radio licensee, is of the opinion that some MESBICs may take

advantage of minority borrowers.

I don't want to characterize all of the MESBICs ... but I think it was very clear that a lot

of these organizations that were designated as, you know, SSBIC's, and you know, got the

SBA certification and all of that to loan money were definitely taking advantage of their

opportunity to supply funding for people. I mean by taking out heavily on warrants and

kickbacks for them as a result. (MCharles458, p. 9)

ÿ Increased Station Prices Brought on By Consolidation Further Limits

Access to Capital and Raises Barriers to Entry

As our study participants told us, capital has historically been difficult to raise for small

businesses. It appears that it has been nearly impossible for minorities and women. Lacking

access to capital, the ability of these businesses to enter the broadcasting and wireless markets

has been curtailed. With the consolidation of the broadcast market, the economics of the

industry have changed, resulting in significant implications for small, minority- and womenowned businesses. The most notable change is the dramatic escalation in prices that apparently

has made it nearly impossible for them to either acquire new stations or enter the industry for the

first time.

The restructuring of the market, with its increased station prices, has also necessitated a

restructuring in the sources of capital needed to finance purchases. For those needing cash to

buy stations, as compared to having stock to trade, the bar has been raised just that much higher.

Frank Montero, former Director of the FCC’s Office of Communications Business Opportunities

(OCBO) offers this perspective.
Section IV. – Findings Whose Spectrum Is It Anyway?

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. . . (P)rices for stations and the like have gotten so high that while there is still difficulty

in getting access to capital, at the same time, you know, the brass ring is pulling farther

and farther away from them because the prices are going up faster than the supplements

to capital are appearing. And, likewise, what’s tied into this is that lenders or potential

investors see what the dynamic in the marketplace is, namely that markets are being

carved up into larger but fewer large competitors, and so they are becoming more and

more reluctant to, absent some sort of a mandate, invest in these new entrants to the

market when they know that this new entrant is essentially going to be a relatively small

player competing against larger and larger competitive players in the marketplace and

that the viability of that venture is questionable as to whether they are really going to be

able to succeed. (FMontero509, pp. 9-10)

With stations now selling in the multi-million dollar price range, anyone trying to enter the

market today has to find not only debt financing but equity capital, as well. These new financing

requirements raise a different set of market entry barriers for would-be entrants.

Lenders of debt typically look to the interest income generated from the loan to cover their risk,

charging higher rates as their perceived risk goes up. However, there is only so much they will

lend on broadcast properties regardless of the cash flow. With stations selling for upwards of 20-

22 times projected cash flow, and with media lenders only willing to lend up to 5-7 times cash

flow, station purchasers have to raise equity capital equal to approximately 15 times cash flow.

Given the size of the deals, it is almost certain that prospective purchasers will have to look to

venture capitalists to fill the lion’s share of this gap, with the balance coming either from

personal funds or private equity investors other than traditional venture capitalists.

Understandably, there are very few individuals who can play at this level.

One of the paradoxes of dealing with media lenders and venture capitalists, especially these days,

is that they are generally not interested in funding deals that are smaller than $10 million, nor are

they interested in single-station, single-market opportunities, unless perhaps they are in a top 10

market. This does not bode well for the individual or group that wants to start out in a small

market with a small station. As Robert Fink, a White radio licensee tells us, their financing

options are drying up.

... (T)he banks won’t look at you if you’re not looking at $10 million deals. Okay? And

most of these stations in the small markets, you’re looking at anywhere from $300,000 to

maybe a million dollars in the small market situation. We’re too small for them to worry

about. And that’s the biggest complaint that we small broadcasters still have [is that

there is] virtually no outside assistance, and I have tons of friends in the business over

the years, and I am sure they would just echo my comments. We have to almost always

go out and just find it through private individuals; in other words, all the money in our

station basically is what Bob and I put into it. We’re too small for the big guys that are

in the broadcast; they’re into the big corporations. And the saying in radio is that if you

don’t have a $10 million deal, they won’t give you the time of day. (RFink235, pp. 9-10)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 40

Diane Sutter, a successful White television broadcaster, echoes these thoughts and provides

additional insight.

Single stations are very difficult for anyone to do, but a first-time entrepreneur especially

because most of your equity companies as well as your banks, don’t like to have all of

their risk in one place. They’re much happier if they can spread the risk amongst other

[broadcast] properties so that you don’t have to rely on one single station to support the

debt service. So they’re very difficult to do. The hardest thing to do, probably, a singlestation deal. They’re also usually small. And most of your private equity funds as well as

venture capital and other sources ignore the group of potential people that you can do

business with because of the size of the deal. So . . . a combination of factors makes it

more challenging to try and finance a single-station deal. (DSutter205, p. 4)

Ernest James, a former radio station owner who now works for Clear Channel, the largest

broadcasting group owner, wanted to buy a portion of the stations that Clear Channel was

required to divest when they merged with AM/FM. Even with his successful track record

running stations, the size of the package he would have had to put together to be competitive in

today’s market was way beyond his reach. He estimated that in order for a start-up venture to be

competitive he would have needed to raise a half billion dollars to buy multiple stations.

“I am not able to buy stations because in order to buy a station now or buy a group of

stations the capital that I would need access to would approach half a billion dollars to

really start a company and be competitive. . . . (T)he stations I wanted to buy from Clear

Channel would have cost and I looked at them and my original request was going to be to

buy 37 stations, it ended up, I kept whittling it down and whittling it down until I was

trying to buy a package of 11 stations, and even 11 stations was approaching a billion

dollars, and then at 20 times multiples, I mean, nobody was going to give me that money.

So OK, maybe I could raise half a million, or maybe a million would be my seed money to

the deal, but [that’s nothing as my share on a billion dollars]. (EJames268, pp. 28-29)

In the secondary market, the ability to access information about opportunities to buy and sell

stations determines one’s success; and in today’s market, access to that information is created

and maintained through access to capital. The distribution of previously issued licenses by

means of a private market structure necessarily begets a process driven by financial resources.

This need for capital too often proves prohibitive for small and capital-starved businesses to

adequately compete.

ÿ Limited Access to Capital: The Impact of Wall Street on the

Type and Size of Transactions

Another change precipitated by deregulation which has heightened market entry barriers for

small, minority- and women-owned businesses is the move away from “mom-and-pop’ local

broadcasters to a situation where the broadcasting industry is mostly owned by large publiclytraded companies. These group owners have two advantages over their smaller counterparts: (1)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 41

they have stations to trade with each other if they need to divest in certain markets; and (2) they

often buy and sell stations, as well as whole groups, using stock. In both instances they are in a

position to receive more favorable tax treatment than if they had done an all-cash transaction,

which is what smaller, non-public broadcasters would have had to do. Dale Gehman, a Native

American former radio licensee, summarizes it this way.

It’s just a conglomerate [game] now, and they use stock market money, and any facility

of any size [goes to] the highest bidder, and the price [is so high] -- there's no way I can

get in right now and pay the price that you'll get for an FM station in any kind of

medium- to smaller-size market, and pay that money back on any kind of 10-year, 20-

year amortization. It's a speculative price right now. [W]hat’s really hurting is the big

conglomerates are giving stock, so they beat the taxes. So they’re getting a little bit of

cash, lots of stock, no big capital gains tax up front. The stock market is going crazy.

They're making fortunes. And a little guy without access to capital from the market, I

don't know how you possibly could do it. I can't figure out a way [to finance it] right now.

That's why I'm not in it, quite honestly. And I know there's some bond money. I think,

with my track record and showing what we did, I think at some point I can get in, but it's

going to be extremely hard even with my history of raising that kind of capital.

(DGehman132, pp. 35-36)

Manuel Davila, a Hispanic radio station owner, shares this observation when he says, “unless

you’re lucky, and actually got a station in a big market a long time ago, we don’t have a chance.

. . . Where [will a small guy] get $40 million?” (MDavila128, p. 52)

ÿ Limited Access to Capital: Buyers Need Money in Hand - Time is

No Longer Given to Raise Capital

Because the market is super-heated and there is acquisition frenzy, only those people who can

quickly bring money to the table are even considered potential purchasers for properties. If you

couple the fact that it generally takes much longer to raise venture capital than it does debt

financing with the market reality that enormous sums of equity financing are now required, you

end up with a situation where only the big players who are already in the market and have large

coffers of cash and/or stock to trade can participate in the buying of stations. The days of the

small business owner being given time to raise the needed capital for station acquisition are long

gone.

Art Gilliam, an African-American radio licensee who started acquiring stations in 1977, makes

the point.

I found out about the opportunity [to buy an AM station in 1977] through a broker. At

that time, quite different from now, if you made an agreement with a seller, you had more

time to go and find the funds. Today, in the environment in light of the

Telecommunications Act, if you’re not there with the funds in hand, then you’re not going

to be a viable buyer. (AGilliam117, p. 1)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 42

Bruce Dickenson, a media broker, shares his perspective that the speed with which a deal has to

get done depends on the actual broadcast property. ”Certainly, with a very expensive property

you must have your money ready. . . . The smaller and less attractive the property, the more time

people potentially have to put together their financing. [Since] we don’t get paid until we get a

deal done, it behooves us to pick deals that we think we can get done . . .” (BDickenson517, pp.

5-6)

John Tupper, a White television licensee who acquired his station in 1995, adds:

[Regarding smaller companies acquiring stations], the biggest issue from the standpoint

of the seller of the station is which group is most likely to close the deal. . . . And, you

know, obviously if you are dealing with a company that has the capability of just writing

a check to acquire the station, that’s very different than dealing with someone who has to

align venture capital and bank debt financing to put together a transaction. . . . And,

there are those who are very successful in putting together their venture capital and bank

financing to acquire stations, and once they’ve done a few they seem to be able to do that

repeatedly. There are others who aren’t so good at it and, therefore, you take more risk

in trying to do a deal with them. And it, becomes a decision that both we and the seller

have to make as to with whom we want to do business. (JTupper216, p. 27)

ÿ Consolidation, Brokers and the “Old Boys Network”

Diane Sutter, a White former television station owner, who has bought and sold one television

station and is now in the market for another, explains the chicken-and-egg nature of current

financing realities as well as the need to have in place relations with high-quality brokers, lenders

and venture capitalists.

You can’t get the money until you have the deal. And you can’t get the deal, until,

especially with a new company, until they’re sure you’re going to have the money. Well,

I’d love to sell it to you, Diane, but you know, show me your money. Now the thing that

really helped me was that when I went to someone, even when I was in the middle of

doing the first deal, but not having gotten done yet and I was looking for other stations,

and they say well, who’s your money? And I can say Bank Boston or Burr Egan, two

well-known quality firms that people go ‘Oh, OK, you’re real. You’re for real. I can

probably sell it to you.’ (DSutter205, pp. 20-21)

In this market of rapid turnaround on media properties, not only do brokers, lenders and equity

partners weigh in on the prospective buyer. The seller often approves the list of buyers prepared

by the broker. It is up to the broker to make the seller feel comfortable with the list prior to

sending out marketing materials, solicitation of offer letters and confidentiality agreements. If an

entry on the list is for someone with whom the broker has not yet done business, it puts the

broker at risk with his client, the seller, to push for its inclusion. Brian Cobb, a media broker

explained his process as follows:
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 43

. . . (T)hey will almost always ask as they go through the list, if they don’t recognize a

name, they’ll say, “Who is that?” You know, I have to tell them who it is and have to

demonstrate that this person belongs on the list. If I don’t have a good answer, they’ll

tend to take it off, and the answer usually is do they have the money. . . . (I)t gets down to

a conversation of do they have it, can they get it, or do you think they can get it. (M)ost

of the times they’ll leave it on the list [if I can vouch for the person], but some people just

say, “No, I don’t want to go through with it. Take them off the list.” (BCobb512, pp. 17-

18)

ÿ Financial Sophistication and Track Record are Paramount

As the consolidation in the broadcast market has driven up prices and gobbled up properties, the

criteria for consideration as a viable candidate for receipt of multi-million dollar debt and equity

financing has become more heavily weighted towards proof of significant industry experience or

a successful track record managing and growing a business enterprise, sophistication with

financing means and methods, a vision for multi-property holdings, and a desire and/or

willingness to participate in an exit strategy that brings significant returns and on-going upside

potential to debt and equity partners

With the need to acquire equity capital, the selection criteria for who gets funded becomes more

complicated than those used to qualify bank borrowers. With debt financing, the lender usually

looks to the cash flow of the business and his collateral to cover his risk and repay his money.

Venture capitalists have no such protection. They are giving the business owner their money on

the expectation that 1) their investment will multiply many times over in three to five years and

2) the company will be in a position to either go public or be acquired. This requirement puts

enormous pressure on both the business plan and the quality and track record of the management

team. These two elements become paramount to the venture partner’s willingness and desire to

invest equity capital. In today’s market, if a team or individual business owner lacks this success

profile, money is virtually impossible to obtain.

Robert Fink, a White radio broadcaster, explains:

... (I)t’s a business that is totally dominated by the management of the company, and a

successful station can be a failure the next day if it’s not the right management in there.

And so acquiring capital has just been extremely difficult for anybody that again doesn’t

have the borrowing power to talk big time, so it’s really left the small market people or

people trying to enter into the business without much, without any help at all, really. I

mean, we have not gained, in my opinion, in the position that we were in since I started in

the business way back when the banks wouldn’t even talk to you at all. Now it’s just the

big guys. If you’ve got a $10 million deal and we think you are strong enough to buy a

station in a major market, we’ll talk to you. But people like ourselves aren’t strong

enough for that, so we’re stuck in the small markets (RFink235, pp. 9-10)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 44

Bruce Dickenson, another media broker, shared with us his primary criteria for evaluating

potential buyers. He was quick to say “financial capacity, integrity, proven track record.” To

get the process started in creating a relationship with a broker, a critical task if one has the desire

to participate in today’s broadcast market, Bruce suggests that the buyer “give us a call, let us

know they’re looking for [properties]. . . . To be honest, it’s a process of learning about them

and as we learn about them we start to make judgments about their ability to do what they’re

trying to do. Who they’ve surrounded themselves with in terms of deals, financial folks. You

know it’s clearly a process to get anybody to the point of making an offer to us on a multi-million

dollar property. Bruce adds “known quantities, where you don’t have to educate the people very

much, are more desirable than brand new buyers. (BDickenson517, pp. 1-2, 6)

Diane Sutter, a successful White former television owner who purchased her first station in 1997,

was unique among our interviewees. She was the only female who, as a result of her

employment with Shamrock Broadcasting, Roy Disney’s company, had developed a significant

employment track record as well as a network of key market intermediaries in broadcasting. Ms.

Sutter relates that her past work experience as a group executive with Shamrock made all the

difference in the world when she went to raise both debt and equity capital. With Shamrock, Ms.

Sutter was involved in mergers and acquisitions, among other things, dealing with the station

owners, banks and venture capitalists she would eventually have to approach for her own

television deal.

One of the things that I had that was working in my favor, which was very unique, and I

was very fortunate to have this, is that I had spent six years at the corporate office of

Shamrock prior to [owning my own station]. And my responsibilities at Shamrock was

working with the banks . . . When they were doing financing deals, I was part of those. I

already had one, the access to the information of what it took do these kinds of things,

which, as I say, I was very fortunate, because there aren’t many women at all who get

that opportunity, and two, I had the relationship. (DSutter205, p. 5)

Building credibility with a banker or venture capitalist is key, which is why it is even more

difficult for new entrants into the marketplace, and especially difficult for minorities and women.

If you add to that the extremely high prices for stations in today’s market, borrowing becomes

almost impossible. Tyrone Brown, an African-American communications attorney and a former

FCC Commissioner, highlights this point when he says “If you’re a minority or a woman in this

country, while you’re probably better off than you are anywhere else in the world, the fact of the

matter is you still have to get up earlier and go to bed later in order to get ahead. Don’t ever

forget that. Because somebody will remind you of it in a way that will be hurtful ... you really

[have to] bring something to the table that is more than ordinary. It really is a capital game

today and you’ve got to convince the people who you’re asking to turn over money to you that

you’ve got something that most other people don’t have. ...It is true if you’re Black or you’re a

woman and you go and talk to these investment bankers. (TBrown510, p. 29)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 45

Media broker Brian Cobb echoes that point.

You’ve got to show your financial credibility . . . [This is] a big handicap for somebody

starting out that doesn’t have a lot of money or maybe has certain talents but doesn’t

have the sophistication in the financial area to put that package together. (BCobb512, p.

14)

George Dobbins, an African-American who acquired his wireless license in 1996, sums it up this

way when he questions “Why would you want to provide the dollars for a small start-up

company when you’re already providing the dollars and playing with the companies that [are]

already in place?” (GDobbins362, p. 7)

Rev. Everett Parker, with the United Church of Christ and a pioneer in the area of civil rights and

communications policy, shares Mr. Dobbins’ view.

... (W)hen the time comes, really the thing that you’re interested in – it really comes

down to the point of is Citibank going to give $50 million or $100 million or a billion

dollars to what they consider to be an untested group when they can get somebody who

they think is tested to borrow that money? (EParker504, p. 20)

Others spoke about the need to prove themselves with the banks and to develop a track record.

Of course, it helps if you can get a loan in the first place. Dennis Miller, a wireless license

owner who is White and acquired his first license in 1990, shares his perspective.

(W)e’re reasonably aggressive on our business plans and we’re meeting them. I guess if

there’s one thing that a new entity needs to do, that’s to create that track record with the

financing community. You need to meet your projection. Make them realistic and meet

the projections. . . . (O)ne of the investment bankers I think characterized it the best - that

they’re betting on jockeys, not on horses. And as a management team, you need to be

able to instill confidence in these folks that you can actually deliver on this business plan.

(DMiller147, pp. 5-6)

But even with industry experience, some minorities have complained that they still were not

treated seriously. For instance, Peter W. Fong, an Asian-American wireless license applicant,

recalled:

It just seemed like we don’t have any track record, and it is very difficult for people to take

us creditably. You have to start somewhere, and we are not coming off from some

Chinese restaurant, you know, jumping into telecommunications. I myself have 15 years

working with the telephone company, and my partner had 25 years, and so we know what

we are doing, but still it ... it is just very difficult for people to take us seriously.

(PFong365, p. 11)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 46

Don Cornwell, an African-American who is President of Granite Broadcasting, which owns 11

television stations, understands how this process of building credibility works. He acknowledges

that those who get to “play” are already the players. So how does one get to be a player?

“. . . what tends to happen is that once you get in the game the brokers discover you. The

brokers don't particularly want to call you until they know you can actually buy

something. And once you've bought something, to them, that's prima facie evidence that

you can do it. . . . The guy who's not known, who has no properties and is starting out, is

almost going to have to convince the broker -- not "is almost" -- is going to have to

convince the broker that they've got the financial wherewithal to do the deal. So that

means that they've got a bank reference that they can point the person to, or they've got

an equity partner that has financial wherewithal that they can point the broker to, et

cetera. They've got to do some fancy talking to get to that next step.”

(WDCornwell103, pp. 16, 17)

As the market has consolidated, properties become more expensive, and deals have to close more

quickly, the job of the “gatekeepers’” (the brokers, lenders, investors, sellers) becomes more

important and has the potential to be more exclusionary. The tendency is to work with who they

know, people they have done business with before. And in a lot of instances, except for a few

notable exceptions, that does not include women and minorities.

The interviewees reported that in the wake of consolidation, the “club” (brokers, bankers,

lenders, and investors), into which minorities and women were rarely invited prior to

consolidation, has become even more exclusive. This market-driven exclusion rests upon

decades of historical disadvantage that has existed since the infancy of the broadcast industry.

Allowed to run unchecked, the market has created a clear insider/outsider, have/have not

environment.

Don Cornwell says that he’s “not aware of any [discriminatory practices]. It doesn't mean that

they don't exist. Look, it's a club. And I think that people have to understand it's a club. I work

pretty hard to get at least on the periphery of the club so I know most of the broadcasters. ... And

when you're in the club, then you hear about things, okay? You hear about what's for sale, what

it isn't, et cetera. I think that's no different than the old thing about well, the deals get done on

the golf course and so forth. So the answer to your question is, of course, there's discrimination,

but could I give you a specific example? No.” When asked what the price of admission was to

the club, Mr. Cornwell answered as follows: “I think the price of admission is admission. You

know what I mean? In other words, I think that the folks at Radio One are in the club now.

They've got a billion dollars of property, you know, or more. I think the guy who's trying to get

started is going to really have to rely on the pressure of the FCC and others to crack the door

open a little bit, to give them a chance to get a shot. And there they have to have both access and

capital to actually ever have anything happen.” (WDCornwell103, pp. 24-26)

Erwin Krasnow, a communications attorney, explains exactly how the contracting process may

differ for those without a track record and for those about whom the banks have doubts about the

applicants’ ability to close the deal.
Section IV. – Findings Whose Spectrum Is It Anyway?

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If there are any doubts about someone closing, the contract process is miserable, because

the seller, because they’re very, very unsure about the buyer’s qualifications asks for,

usually will ask for a much higher percentage of the purchase price to be put in as

escrow as liquidated damages.... to protect themselves in case the deal doesn’t go

through....(EKrasnow500, pp. 11-13)

ÿ Racial and Gender Stereotyping in the Capital Markets

None of the interviewees recounted a specific example of discrimination by brokers or larger

media lenders, but that is not surprising given the limited contact between and among the groups.

The brokers and large lenders interviewed indicated that they had worked with very few or no

women and minorities.

The women and minorities, however, all observe examples of exclusion from this “old-boy’s”

network. If barriers for women and minorities do exist, many are precipitated by the perceptions

about the ability of women and minorities to raise the required capital in the stated time frame.

Brian Cobb, a media broker, offers his observations:

. . . I can’t name an instance where I have seen that it was a rejection because of [race or

gender]. But on the same token, with a female buyer or a minority buyer a seller will ask

more questions and want more documentation as to the financial capability. . . . I don’t

think it’s a matter of prejudice on – it’s not overt prejudice. It’s a matter of – it’s a

perception that [minorities and women] may not have as much money to close, so they

ask more questions. (BCobb512, pp. 21-22)

Whether it is considered prejudice or not, a seller who subjects minority buyers and/or female

buyers to greater scrutiny and requires additional documentation based on ethnic or gender

stereotypes is engaging in discrimination. The fact that this heightened and discriminatory

scrutiny is not considered prejudice but due diligence speaks to both the subtlety and profundity

of the problem.

Sometimes when brokers have had bad experiences with a few minorities, they might have

reservations about dealing with other minorities. For instance, John Lauer, a media broker,

indicated:

There aren't as many minority buyers. And sellers go to the obvious places that would

know big advantage. They'll take the best deal that comes to them. Well, like I said there

are more of them, number one, that have money. Also, in some instances – and this has

happened. I've seen this happen. Blacks, minorities – say Blacks, minorities, get to the

point where they are ready to close and are out of money, even though they've warned

them ...that's been my experience.... Letter of credit, letter from a bank, between the time

that they make the deal, the time the deal is ready to close, the bank has changed its mind

and the lender has changed its mind. Backing out. (JLauer533, pp. 18-19)
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Henry Rivera, a communications attorney, past FCC Commissioner, and Chairman of the Board

of the Minority Media Telecommunications Council, tells us ”(I)t’s hard to say that [brokers’

practices are in fact discriminatory]. I think it’s pretty easy to see what the effect of the way they

do businesses has been, but it’s hard to say that that is driven by discriminatory intent;. [and

they want a deal that can close]. . . so they don’t want to deal with minorities typically. . . .They

don’t because again, they do not see minorities as a potentially good buyer. I don’t think it’s

because they don’t like Black people. . . . . That’s my perception at least. I don’t think they’re

being overtly discriminating. (HRivera516, pp. 28-29)

Jim Casey, a communications attorney, observes that Native Americans also confront racial

stereotypes.

Getting...financing in the [Indian] country is very difficult for a number of reasons. The

asset, not being able to pledge. We will say that the asset is one very big problem.

Sovereign immunity is another big problem. Just the hesitancy to do business with

Indians is another. The assumptions are that they can't afford it, they are not going to

pay their bill, and you're dealing with a very poor population so there's simply assumed

to be a very high risk when it comes to a loan or financing. (JCasey535, p. 21)

ÿ The Inability to Obtain Financing Forces Some Broadcasters to

Sell Their Stations

For many minorities dealing with the inability to obtain financing, their choice is either to sell

their stations or lose them.

James Wolf, Jr., an African-American radio licensee, decided to give up the fight and sell his

station since he could not raise the financing that he needed to successfully operate in a changing

competitive environment.

I was probably the only African-American that had a hot [adult contemporary] format.

And I never could get this money financed to get out of my LMA. And I stayed in it for

two years, up until ’98. And I was so frustrated with – you know, because I wasn’t able

to get the monies I needed to do the financing. And I just really been with all these big

conglomerates, like Capstar, AM-FM Radio, coming at me and offering big bucks. I

said, why am I killing myself. I can’t get what I need. I might as well just go and sell it,

you know. (JWolf281, p. 28)

Even Granite Broadcasting, a public company run by Don Cornwell, an African-American, was

forced to sell stations to raise the capital needed to purchase other more desirable properties.

We sold two properties in Michigan to a company called Freedom Newspapers, and in

all candor we're not sellers of properties. It's a reluctant thing we do. We decided to sell

those two Michigan properties because we were in the process of buying a station in San

Francisco and we needed the money to do that, and we would rather have kept the
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 49

properties and just bought San Francisco, but we didn't have the capital. So we made

that decision. (WDCornwell103, p. 20)

Others, like William Saunders, an African-American radio licensee who acquired his most recent

station in 1983, also chose to sell properties they would rather have kept. Mr. Saunders saw the

sale to Clear Channel as an opportunity to get out of debt, not necessarily to make enormous

profit on the sale. Ultimately, in 1998, he had to sell his AM station that had been in the

community for 50 years.

... (W)e were able to actually do a sale of the AM to satisfy most of the debt for

everybody, and that’s how I again, got Clear Channel[in the deal]. . . . (M)y AM station

was what they wanted for a talk program. . . . and so they offered me just about enough

money to pay off my debt and to take that, because I would prefer having the AM instead

of the FM. You know the AM had been in the community for about 50 years at that time

from 1947, and it’s been the only station that Blacks have had access to. In our area so

we wanted that more than anything else, but they didn’t want [that], they had 4 or 5 FMs

in the market at that. I lost it all in 1998, December of 1998. (WSaunders163, pp. 4-6)

ÿ Luck Played a Part in Some Acquisition Opportunities

From our interviews, it was clearly evident that small businesses and especially minorities were

having significant difficulties getting access not only to capital but also to purchase

opportunities. Some, however, had luck with either financing or station acquisition and took

advantage of it.

Pierre Sutton, and African-American who earlier spoke of his company’s difficulty in raising

capital for their first station in 1971, was later presented with opportunities by those in his

network of industry-related professionals.

... (O)ne time I bought a radio station from a guy in Philadelphia because I was sitting

down at lunch with the President of the bank [that was courting us at the time] in

Philadelphia and he asked me if I knew the owner of this particular radio station in

Philadelphia that wasn’t paying him. And I said, yeah, I’ve known him for years. How

would [you] like to own his radio station? And so he put me together with him and we

worked out something so we became majority owners of that property. Another time a

friend of mine, Stevie Wonder, called and said that there’s a guy who used to work for me

as a newsman who is in trouble in Ft. Lauderdale, Fl with his radio station. And so I

wind up getting that station from him. (PSutton110, p. 15)

Pierre Sutton shared another story about his father, Percy Sutton, impressing a radio station

owner with on-air reporting at the time of the 1967 Harlem riots. As a result of that experience

the owner told the senior Mr. Sutton that “if he ever elected to get out of the [radio] business, he

would like to be able to sell to [my father]. And my father was currently still in public affairs, in

politics, and so he couldn’t do it. So I had the opportunity to play.” (PSutton110, p. 9)
Section IV. – Findings Whose Spectrum Is It Anyway?

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ÿ The Impact of Limited Access to Capital on Operations

Even with occasional luck, most minority participants had to struggle to bring capital into the

business. Since advertising revenues were generally not on par with their White counterparts,

cash had to be generated elsewhere through such means as personal loans to the business or

mortgaging of personal assets. Without sufficient capital, the ability to acquire the necessary

equipment, to recruit and retain top talent, and to promote the business was diminished.

Erskine Faush, an African-American television licensee, explained it this way.

Well, I’m saying that if you need personnel, if you need promotion, if you need

equipment, whatever it is that you need, goes back – you know, you can’t keep good

personnel unless you have the salary level where you can attract and keep good people.

In many instances even if you have entry-level people and take them right out of college,

right out of school, you bring them in, you train them and, of course, once they get to a

certain level then the others with the resources can hire them away from you. Capital –

I’m saying whatever area you want to get into, it is capital. (EFaush238, p. 16)

George Dobbins, an African-American wireless licensee, also expressed his concern over the

effect limited capital was having on his ability to attract and retain a good management team. As

capital sources told us, the quality of management was a major determinant of a business’s credit

worthiness.

Well, capital won’t solve every problem. The other problem is management and

expertise. But if you have the capital you can employ the expertise, just go out and do –

the way I do now in business is if we see a sharp, young person we want in our business

we come up with a deal to bring them in. But if you don’t have the capital it’s difficult to

manage the management team. You know, the management team is making money –

there’s a demand for sharp people in the telecommunications industry now. So if they

are out there making a significant income, they’re not about to go with a broke company.

(GDobbins362, pp. 7-8)

2. Discrimination in the Community As a Market Entry Barrier

Several female and minority interviewees spoke of resistance and downright discrimination that

they encountered in their communities when they were first starting out as well as through their

years of operation. Such things as disputes over tower locations slowed down licensees’ ability

to start up their stations. Menacing calls from racially biased groups made programming and

selling more difficult. Local politics interfered with the acquisition of financing.

Most poignantly, James Wolf, Jr., an African-American, was confronted by the Ku Klux Klan

over the positioning of his microwave tower. The fight was taken to the courts. His life was

threatened in the process.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 51

The [White community] had never really had local autonomy in Black broadcasting,

never a voice in Black broadcasting, and they didn’t know what that meant. . . . The

White community, they were just totally opposed to us, you know. As a matter of fact we

ran into confrontation with the [Ku Klux] Klan and all of that. We had some major stuff

in this small community here that we’re in.

(T)hey tried to stop the erection of our microwave, free-standing tower. (W)e got hung

up in court, in court battles and so on. Finally we surmised that we needed to bring the

media involved in it, so we brought a local television station in[to] it, and I brought the

newspaper in[to] it and I brought [in] others from other communities inside of this

zoning median. We took pictures of all the towers around the town which were hazards,

and we showed where our tower was going to withstand winds of 220 miles per hour.

And they finally, after looking down the cameras and all, said – they granted it. But we

had threats . . . phone calls from the KKK that said don’t build this, don’t open this up,

you know. It was a lot of life threatening stuff that I went through, you know. (JWolf281,

pp. 11-12)

Dale Gehman, a Native American, saw it as “ a political situation where you've got a license,

you're going to service the community, then you become an influence in the community, and I

think there's a lot behind the scenes that we learned later that we were blocked in every move we

made, unfortunately.” (DGehman 132, p. 5)

Willie Walls, a Black radio station owner, stated that his number one obstacle in 1962 when his

station was organized was that “it was a time of some integration, and we had a problem being

Black owned and operated, listing ads, and you know,[we] had opposition”. (WWalls403, p. 4)

Others, like James Wolf, Jr., had experiences of being pressured to change their format away

from urban and toward something less minority focused. He told this story .

[Steve, a White male and one of Mr. Wolf’s partners] wanted to . . . go country and

western, but he compromised it and tried to fuse in pop. And so I had to stand up. I

stood up – and they had a new program director that we had brought in, which is a White

program director from Alabama. And he had nothing but real red neck in him. So he

was glad to do [country and western]. So what I did, I walked in after about 20 hours,

not quite a day, of listening to it, and I told him to put everything back just the way he

found it, and to pack his stuff and go back to Alabama.

... Steve was a part of our organization then, you know, and we had to demonstrate that

since these great White fathers had helped me to get this money to sustain and so on and

so forth, one of the conditions that they wanted was him to be in as a general manager

and . . . It was one of those situations where we had challenges, because they were

getting pressures from the White community, because they didn’t like the Black music,

you know.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 52

... Steve had lost a lot of his friends because of the nature of the beast that we had

created, you know. And so he was just trying to justify – “I’m still White, you know.

Look here, I can change this, you know.” That’s what that was all about. (JWolf281,

pp. 18-20)

3. Discrimination in the Industry as a Market Entry Barrier

Not only was discrimination experienced in the capital markets and in the communities, but

minority and women licensees also encountered discrimination within the industry itself, coming

from other station owners or from employment practices among the large broadcasters.

ÿ Discrimination in Media Portrayals and Coverage of Minorities

Rev. Everett Parker, with the United Church of Christ and a long time civil rights activist in the

area of communications policy, shared stories of how WLBT (Mississippi) reported news about

African-Americans in the 1960s. It highlights the extensive power of the broadcast medium to

affect community views and actions. The following comments by Rev. Parker and Mr. Faush

provide a historical context for the market entry barriers that African-Americans have faced in

their attempts to become broadcast licensees.

Well, in all of the South stations referred to Blacks only by their last name. And women

just the same. They refused to give Blacks the opportunity to present their views on

political issues of great importance to them, such as at that time of school desegregation.

WLBT, when Meredith was admitted to the University of Mississippi, the manager of the

station got on the air and told the people, “You get up there and stand shoulder to

shoulder with the governor and you keep that nigger out of Old Miss,” and they did.

They took their ax handles and their pistols and they went up there and you know there

was a riot and I think some people were killed. The manager of WLBT [told people to do

that].

... For WLBT, when the Brown v. The Board of Education was decided and Justice

Thurgood Marshall ... was on the Today Show, WLBT put up a sign, “Sorry, cable

trouble.” And when the kids from Tougaloo College sat in at the Woolworth store in

Jackson, WLBT covered it for NBC but did not carry it, and things of that sort. And that

was true all over the South. . . . (Y)ou could go all over the South and it was the same.

(EParker504, pp. 6-8)

Broadcasters discriminated against their listeners in ways other than just what news they reported

or how they presented it. Rev. Parker shared that “The broadcast industry at the time – back in

the ‘60s – had no interest in Black people as [an] audience. They said – well, this manager at

WLBT, later after he lost his job and everything, he says, ‘Well, if I thought those Negroes had

any money to spend I’d have given them time.’” (EParker504, pp. 13-14)
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ÿ Discrimination in the Workplace

Mr. Faush, an African-American television station owner, talked about his experiences with

segregation during his earlier days in broadcasting.

... (I)t goes back to the days of segregated everything and what all that involves, whether

you’re talking about public facilities or access to anything. So I came through all that

era and was here, you know, through the demonstrations and everything. (W)e’d always

had the hope [of becoming owners], okay. But obviously the fact that certain gains were

made in certain areas would certainly increase that hope that you’d finally get to the

point where you’d talk about ownership rather than just being employed.

[The segregation that I experienced did stand in the way of that hope] of course. Being

realistic, you’re looking at getting Black-owned, Black-programmed radio stations that

were all owned by Whites. I mean, no matter what hope you have, you’re looking at

something that is in front of you. And you know if your hope takes on any reality at all

and so forth, you know that something has got to have a dramatic change.

You know, we worked inside the radio station where you had Black and White toilets. I

mean, not just outside but inside, you know. The owner of the station and the White

employees had their restroom; the Black employees had theirs. I mean, you came in one

door and they went in another door, yet, you’re in the same facility. Now how blatant

can it be? You don’t have to go out on the street anymore to see a sign separating people

on a bus, behind a water fountain that said, “Colored,” or “White.” (EFaush238, pp.

19-20)

Nancy Waters, a Black radio licensee, talked about her difficulties earning respect from her staff

when she first acquired her station.

With me being Black, I had no respect from the staff when I started. White men – they

would address my husband. You know, I'd say to him, you have to come up and get on to

them, because they won't listen to me about this, and won't listen to me about that. So I

was dealing with the double bias everywhere I went. (NWaters178, p. 16)

While not nearly as blatant, Rev. Parker told us that discrimination still exists in the hiring

practices of large companies.

Well, you certainly see [discrimination] in a [large] company (T)hey could . . . .certainly

have a policy of even just fair promotion, which would open upper management spots,

middle management spots, to anybody who has the capability, and they could hire for

that purpose. And any one of these companies could do that. Certainly they

discriminate. How is it that only White males get onto the decision making level? Maybe

a women here and there. Look at the boards of directors of these companies. They have

maybe one or two women and they are mostly window dressing. But how many of these
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Page 54

big companies really have important people of color on their boards of directors? Just

go over all of these communications companies. (EParker504, p. 27)

Even in small broadcasting companies, disadvantaged groups have difficulties with employment.

Stuart Martin, a White male television licensee, articulated a perception that may hamper the

advancement of women within broadcasting.

The issue on Equal Employment and Fair Employment of women in this business has

been self-correcting. For instance, in our news department, our problem is finding White

males. It’s almost like horseback riding. It’s being dominated by women. I don’t know

why. And all come in and are very eager until they approach 30, then all of the sudden,

somehow or other they seem to drift off in marriage. What happens is, of course, they get

along and all of the sudden, they begin to get the urge to have a family and once they

have a kid or two, they find it’s a hell of a lot more rewarding than pacing around after

stories. Over and over again I see that. (SMartin212, pp. 17-18)

ÿ Ethnic and Gender Marginalizing Practices by Competitors

Minorities have also had their share of difficulties with competitors. Again, Erskine Faush, an

African-American, shares his recollections of how ratings were distorted by his White

counterparts.

I can remember the time when we were number one in the market. But when the

[audience share] ratings came out . . . the general market stations would put up

billboards. And perhaps they were number three or four or whatever, and they would

call themselves number one in the market and with an asterisk by it. In fine print at the

bottom it would say, “excluding ethnic stations.” They just couldn’t bear the thought of

a Black, even programmed, facility being number one in the city. (EFaush238, p. 9)

Such practices have the effect of marginalizing minority-formatted stations, justifying discounted

advertising or no advertising on those stations.

Given the difficulty of acquiring stations, some minorities, just to get started with their

community-specific programming, bought time on others’ stations. Andres Neidig, a Hispanic

radio owner, called all 42 stations in Denver to try to buy time to produce a Hispanic show, and

none of them made any time available for him to buy, ”even the stations that were losing

money.” The general response he got was “Hell, no. I’m not going to put a Mexican program

on the air.” (ANeidig426, p. 18)

Bernadine Nash, an African-American radio broadcaster, talked about the marked difference in

her experiences trying to buy stations both during and after the repeal in 1995 of the Tax

Certificate program.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 55

Well, it was a no-brainer for people in this market [to find me for tax certificate deals]

because I’m the only [minority here]. So, if they wanted ... I mean there is only one

person within the market that they would call. So that was a no-brainer for them.

On the other side of it, and this is where I realized after the tax certificate went away,

that the more institutionalized issues around race began to surface. Because there were

actually two properties that I knew were for sale, that I was interested in (b)ecause my

goal had been to get a 24-hour signal. I didn’t care if it was AM, FM, whatever.

And I would put calls in and then not get calls back, and then I would get a little pissed

off, so . . . then I would like decide, it would become a challenge, so I was determined to

get through. And I would finally get through and I would be told either that the property

was no longer available, or I was given a purchase price that seemed irrational to me.

And after maybe the second time, I had a friend of mine do that game you do sometimes

in housing. And we got different answers. We got different answers [in terms of both

availability and pricing]. (BNash118, pp. 17-18)

Ms. Nash and a friend not known to the local broadcasters both inquired about the availability

and pricing of stations; thereafter they compared the answers. In so doing, Nash employed a

technique, widely recognized by the courts, for ferreting out illegal bias, namely discrimination

testing. The fact that her friend received more favorable answers, in terms of availability and

pricing, underscores not only the importance of the Tax Certificate but why discrimination

makes it necessary.

Nancy Logan, President of American Women in Radio and Television (AWRT), recalls hearing

about the experience of a woman who had been marginalized by a group of local broadcast

competitors.

I remember hearing this woman on the NAB panel speaking about having a difficulty in

her marketplace being [that she owned only] one station and, plus, that she was a woman

owner, and that the guys who ran the stations in town that were groups would, you know,

literally gang up on her in the business way, in the market. (NLogan523, p. 14)

Some women, like Patty Ruiz, a Hispanic female television licensee, told us she had to prove

herself in the male-dominated communications industry.

The truth of it is there's a lot of barriers; it's a man's world especially in the

communications industry. You really have to struggle to make them, not only believe in

your capabilities, because you are woman, and because you are a minority. You know,

you were always banging your head against the wall. You had to really prove yourself to

show that you knew what you were doing and knew the industry and loved the industry. I

mean you got to love and have a passion for the industry to survive. (PRuiz452, pp. 14-

15)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 56

She expounded on how she had to prove herself as a woman so that others could take her

seriously:

Also, I think the engineering studies were, you know, you had to really know what you

were talking about, because you're dealing with – talk about a man's world. And so you

had to constantly prove yourself, and make sure that you understood the lingo and

everything that goes with it. That they took you seriously, that they just didn't think, you

know, this girl doesn't know what the hell she's doing. So you had to work twice as hard

to read and learn about engineering. The sites and where, you know, the towers would

go, and the height and reach, all that great stuff that comes with it. (PRuiz452, pp. 14-15)

In addition to being excluded by local group owners, S. Jennell Trigg, a communications

attorney, opines on the inability of minorities and women to rely on the National Association of

Broadcasters (NAB) for guidance.

I know for small licensees that were not members of groups, independent stand-alones;

[but] if you were minority, you certainly didn't have a voice at NAB. You were dependent

on NABOB. If you were woman owned, you really couldn't depend on NAB, you had to

deal with American Women in Radio and Television.... there are all kinds of politics

going on with NAB that the small guys, and if you're minority, you get lost in my opinion.

(JTrigg536, pp. 37-38)

ÿ Restricted Access to Information and Opportunity

Getting into the “deal flow” is a critical step in the acquisition process. Deal flow refers to being

in the loop to receive information about purchase opportunities. This information can come from

sellers, lenders, brokers, and investors. It is all in who you know.

Diane Sutter, who has managed to get herself into the deal flow for television station purchase

opportunities talks about the lack of incentive for sellers to seek out women and minorities as

prospective buyers.

Well, the problem still exists that you can’t find stations that you can afford to buy

whether you’re male or female, and at the same time, it’s even harder for the women and

minorities because generally they’re not in the deal flow arena. And because there’s no

reason to sell it to a woman or a minority, because there are no Tax Certificates

available today, there’s no incentive to sell it to any of us, so why not just keep it in the

family? And everybody, and you know, it’s like Monopoly. Everybody sits at the board

and they shuffle their hotels around. You know, I’ll trade you a Boardwalk and a Park

Place for St. James Place, and (a “get out of jail free” card). . . . I think it’s especially

difficult—and I’m atypical because I’ve had a lot of things that have worked in my favor.

But someone else going in to do this, today, with consolidation? I think it’s enormously

difficult. (DSutter205, pp. 19)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 57

Brian McNeill, a media investment banker, talks about his experience with women and

minorities and how he judges their ability to participate in a deal.

. . . (W)e look at deals dispassionately based on quality of management, the quality of the

purchase price and how much upside there is. But you know, having said that, . . . it

seems to me, but I’ve never actually done this statistical arithmetic, [that] the bulk of the

deals we see are more from, I think more men are in the business, so I get more plans

from men than women, and minorities are still minorities so we see more plans from

Caucasian men and companies than we do from minorities. So I don’t really know the

statistical breakdown. (BMcneill513, p. 7)

Diane Sutter shared more of her experience when she told us that “when I hired Bank Boston’s

M&A department to do my investment banking for me . . .one of [the two people I was working

with] said to me that I was the first woman client they had ever had. . . . And when I went to the

[venture capital] firms, I think it is safe to say that not one of them had invested in a women

entrepreneur in broadcast. (DSutter205, pp. 8-9)

Willie D. Davis, a Black male radio licensee, observes that minorities are often the last to know

about broadcast deals because they are not a part of the network; and that by the time minorities

find out, the deals have become public and the negotiations have already taken place.

Most of the deals sometimes they’re done kind of behind the scenes and they only

[be]come public pretty much [when] the filing with the FCC takes place. In other words,

the negotiations many times have started very much on an inside track and it only

becomes public when they file. Well, as you probably would surmise, not being heavily

plugged into that network, I would say it’s almost fair to say that minorities are the last

to know. (WDavis120, p. 15)

Mutter D. Evans, a Black female radio licensee, echoes that observation by pointing out that

“[y]ou don’t know what properties are available unless you [are] in the inner circle. Who’s

always been in it? Those who control. White men.” (MEvans275, p. 26)

ÿ Access to Station Purchase Opportunities Through the Informal

Network of Owners

Manny Davila, a Hispanic radio licensee, talked about how stations for sale passed among the

members of the “good old boy network.” What made it difficult for him is that “(t)here wasn’t

a lot of minority ownership. ... It was basically conservative Anglo, you know, and hey, this guy

will sell it to this guy, this guy will sell it to – and it was basically almost like a little group there.

(MDavila128, p 15)

In contrast to Mr. Davila’s experiences, Robert Fink, a White radio station owner, shared how

easy it has been for him to find properties for sale through his network of other station owners
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 58

and brokers. Even if he were to enter a new market, he expressed confidence that he could find a

broker who would be willing to work with him.

(I)n fact, I never used a broker to find anything I bought. It’s just kind of being in the

business and keeping your eyes and ears open and, you know, hearing scuttlebutt and

hearing that this person might be for sale and that type of thing. And that’s always kind

of been, you know, it’s a small group, we broadcasters, and you talk to friends and you

get an idea, and you think, hey, I might want to go there, and I hear that so-and-so is

having some problems. And you talk to them. And so, it’s really kind of old-fashioned,

just exploring and seeing what you are doing. Now that’s for me, because I’ve been so

active here in California basically, that I have the network. If I were to buy or look for a

station in Michigan, I would obviously have to go to a broker because I don’t know

anybody there. (RFink235, pp. 16-17)

4. Discrimination in Advertising

Discrimination in the advertising industry against minority-owned and –formatted stations has

been well documented in recent years, most notably in the report prepared by the Civil Rights

Forum on Communications Policy for the FCC, When Being No. 1 is Not Enough: The Impact of

Advertising Practices on Minority-Owned and Minority-Formatted Broadcast Stations

(submitted in January 1999). Our study revealed similar findings as reported below.

The small, minority and women broadcast licensees that we spoke with frequently cited routine

discriminatory behavior on the part of advertisers and advertising agencies based on:

ÿ the race or ethnicity of a broadcast licensee,

ÿ the minority audience targeted by a format,

ÿ the operational size and scale of a licensee (e.g. WalMart’s common refusal to

purchase local advertising other than through national agency representatives),

and

ÿ whether a licensee could afford to subscribe to rating services (e.g. Arbitron).

ÿ Advertising Dollars are the Life Blood of A Station

Advertising dollars are the lifeblood of a station. Ad revenues provide the much needed working

capital to pay for on-air and behind the scenes professionals, local news crews, new or upgraded

equipment, syndicated programs, community sponsorships, general station promotion, and return

on the owner’s investment. Further, since stations are valued at a multiple of their cash flow, any

diminishment in advertising revenue reduces many times over the market value of a broadcast

property.
Section IV. – Findings Whose Spectrum Is It Anyway?

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If one takes into account the market entry barriers created by limited access to capital

experienced by small, minority- and women-owned radio stations and couples it with the

discrimination that they have traditionally experienced from advertisers, one begins to

understand how serious a problem this discrimination is for these business owners. The

combined lack of resources severely impacts their ability to compete, grow and, quite simply,

survive. Further, in the face of industry consolidation, the value of their stations suffers to a

point where, if they decide or are forced to sell, the proceeds from the sale may well be less than

the station would be worth if it were owned by or formatted for non-minorities.

ÿ Personal Attacks and Racial Slurs

Minority broadcasters have long had to suffer personal discrimination that was blatant and

insulting. Not only were advertising dollars withheld because of this discrimination, but also

minority owners had to endure personal attacks and racial slurs. To the extent that such attacks

and slurs were general indicia of the status and standing of minorities and women in the market,

they are instructive. James Wolf, Jr., an African-American radio broadcaster, shared his

historical and more recent experiences with us.

 (W)e had comments made to some of our [Account executives – AEs]. [Some business

owners] said, “We don’t want those kinds of folks in our business.” [So they wouldn’t do

advertising on our station..] Well, see, they would say it to my White AEs. They would

never say it to my African-American AEs. They would always come back and tell me, you

know. But they never said it to African-Americans.

 Now recently my brother got – he faced some discrimination. He works in operations

here. And he had a client that said that – “I normally don’t want niggers coming in my

business.” He said, “But you seem like you’re kind of nice.” He said, “I think I’m going

to buy some advertising from you. You’re kind of different from them,” you know. “I’m

just going to give you a little advertising just because of your attitude. But I normally

don’t care for niggers coming in my business.” He said that. And my brother said he let

him write that contract up. He said he wrote that contract. He was so mad. He said,

“Man, I’ve taken more time than I’ve taken in a long –“ that happened last year as a

matter of fact. (JWolf281, pp. 37-38)

Jose Molina, a Hispanic radio and television licensee who acquired his licenses between 1980

and 1997, had experiences that were not as blatant as Mr. Wolf’s, yet the feelings of

discrimination were there just the same.

Overtly, no [I didn’t experience discrimination because of my minority status]. But

sometimes I walked away [from sales meetings with prospective customers] with a feeling

with, hmm, what could have happened here? ... [I don’t exactly know what gave me that

feeling.] I guess that if you are, I don’t know, maybe like in that Bruce Willis movie, the

Sixth Sense, you know. . . . (I)t’s almost impossible to put words on when somebody treats

you real, real nice, you know, ha ha ha, that sort of thing. [If I had to draw an analogy of
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 60

what it was like], (a)t the beginning it would have been like The Jeffersons show.

Remember that? Just like George Jefferson, who is a buffoon. That’s how you would feel

coming out of a meeting;[and if I felt that the discrimination was not present, it] would

feel like you’re coming out like Top Gun. But it wasn’t one of these cruel types of

discriminations, you know what I mean, [like] Jim Crow. . . . (I)t’s very subtle.

(JMolina121, pp. 16-17)

ÿ Disparity Between Market Share and Revenue Share

More often, the discrimination took the form of withholding advertising “buys” from the

stations. It was not uncommon that stations would be ranked in the top five in terms of audience

share but be positioned well below that level in terms of share of advertising dollars.

William Saunders, an African-American whose radio station was No. 1 in the market as far as

listeners, yet he could not get his fair share of advertising dollars.

Well in the marketplace, two things were happening. Our station ended up being number

1 in the market, but we still couldn’t get advertising. They said you [have to] be a certain

place in the [ratings] book, a number between 1 and 4. And no matter where [we got] in

the book, and our station WPAL AM was number 1 in the whole area, and still we

couldn’t get that crossover advertisement, so it really didn’t [matter], and we needed the

capital to make it run. And it put a strain on the corporation. (WSaunders163, p. 4)

Andrew Langston, an African-American radio licensee who was a pioneer in the industry, had

similar experiences being No. 4 in the market with his station.

I’m No. 4 in this market and I’ve been there for 18 months. That’s a year and a half I’m

locked in it. The number one station is WHAM . . .. , No. 2 station is . . . a country

station, No. 3 station is . . . a hip-hop, that’s a rock and roll station. No. 4 is [my

station,] DKX. Now, I’m not (just ) saying that to you. Here’s the classic frustration.

Now am I No. 4 in income? No. And am I No. 5, No. 6, No. 7, they make it all the way

down there, am I No. 9 is income? Hell, no. All right? That’s what is unfair here and

how in the world can you let agencies which some way or another do this and then they

like Blackball you. You don’t get this, you don’t get that. (ALangston112, p. 4)

ÿ The “Katz Memo” – It’s Implications for Minority Broadcasters

As recently as last year, Tom Joyner, a well-known and well-regarded African-American radio

personality with a popular, widely-syndicated morning radio program, released an internal memo

that had been written at the Katz Advertising Agency (“the Katz memo”) which essentially said

that media buyers should not place ads with minority-formatted stations since their clients were

looking to advertise to “prospects, not suspects.” As one might imagine, the disclosure of that
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Page 61

memo caused a giant ground swell inside and outside of the industry. Richard Weaver-Bey, an

African-American broadcaster, responded to the Katz memo this way.

[T]he Katz memo was sort of the final spike in the coffin, and that was just last year . . .

that that memo came out. And that’s where a large advertising agency in New York is

saying to its people don’t buy Black media. I mean, when you say that and then you look

at stations that are sixth or seventh in the market in the ratings by Arbitron and 24th or

25th in ad revenue, it says that there is blatant disregard for the stations that are owned

by minorities or geared to minority listeners. I mean, it can’t be anymore poignant than

that when you look at the facts. You know, many people are saying why are AfricanAmericans or minority people always crying, but the facts are the facts. (RweaverBey171, p.8)

Broadcasters like Black radio station owner Art Gilliam see part of the problem as lack of

awareness on the part of advertisers and agencies. He thinks there is an opportunity to educate

the public about African-American markets and spending power.

I think the advertising community operates in the general framework as the rest of society

in the sense that many of the advertisers, particularly the agencies, have not much

awareness of African-American markets or their value. So that if you have a real good

sales staff, they can go out and talk directly to retailers and many of those retailers if they

have an interest in Black markets, will be responsive and some can be convinced of the

importance of that market.

But within the agencies, there’s a lot less of that and over the years we’ve experienced

that and unlike radio, where there are certain EEO requirements which put in place

people who understand African-American markets, that doesn’t apply in the advertising

business and consequently if you have for example a lily White advertising agency, that

has no awareness of Black media, Black markets or anything along that line, then you’re

going to have a harder time convincing them to buy Black radio. So there’s no question

that there is, I don’t, I wouldn’t necessarily even call it discrimination, but just an

absence of awareness in that market. (AGilliam117, p. 20)

Charles Cherry, a fellow Black broadcaster, shares Mr. Gilliam’s views.

. . . As far as trying to market the station to other folks. . . you have to educate them in

reference to the fact that Black people are a viable market, because a lot of folks just

don’t understand that. They just don’t believe that Black people buy anything. And you

would think that people who deal with numbers and understand what statistics say could

see the purchasing power of Black America, the allure to Black America, the high level of

listenership, the susceptibility . . . or the effectiveness the advertising has on the

purchasing power and the habits of Black America -- (CCherry262, pp.6, 32)
Section IV. – Findings Whose Spectrum Is It Anyway?

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ÿ Discounted Pricing for Ads on Minority-Formatted Stations

In addition to withholding advertising altogether, many minorities have had to accept discounted

pricing on their advertising spots. Dorothy Brunson, the first African-American woman

television broadcaster, shares that “(t)here has never been an equal process in terms of

advertisers. If you have 10 listeners who happen to be Black, they may be worth $2.00; if you

have 10 listeners who happen to be White, they may be worth $5.00.” (DBrunson105, p. 5) As

Ms. Brunson continued, she indicated that she understood that this was the way it was and

learned to take that into account in the operation of her stations.

This dramatic disparity in prices for ads was not unique to Ms. Brunson’s experience. William

Saunders, another African-American broadcaster, had similar experiences and shared the choices

that he had to make as a result.

Normally our price [for advertising spots] would be lower . . . (p)robably sometimes

50%. . . . We wouldn’t even attempt Wal-Mart; it’s not even worth raising the effort. But

get down to just car dealers, large car dealers, here, and I don’t know if you know much

about South Carolina, but the coast of South Carolina, where we are, Blacks have always

been 40-50% of the area, and some of the counties now are still 80% Black. And the area

where we live, Blacks buy about 70% of the cars. These are their estimates, not ours. We

think it’s higher than that. But the advertiser goes to the other stations or to, I mean these

companies sponsor golf tournament and fishing things and all kinds of stuff that has no

relationship to my market or my business and the African American community gets

nothing out of spending their money with these merchants.

So that’s where the problem lies. And even when we do something, like I just did a deal

with Rick Hendricks, he’s the largest dealer here in the Charleston area, automobile

dealer, and we wanted to do an education program called Focus on Education, a half an

hour a week. And for a year to run this program, it would cost us $13,000. And we went

to them with it and they said well anytime that we want to do something with the

community or we if want to reach the community, we always want to do it with you, and

we want to just buy advertisement, then we go to these other people. Don’t make too

much sense to me, but they ended with the numbers, but they came back to me and said,

well, our advertising people are saying that the program on your station would only be

worth $5200. So what they do in a sense, they put a price on my product. And you either

take it or you leave it. And you know what we did was you know we wanted the program

so we said that WPAL will sponsor that other part of that $13,000, but not changing our

price. (WSaunders163, pp. 8-9)

Some people, such as Bob Carl Bailey, an African-American radio licensee who acquired his

station in 1977, took bolder actions vis-à-vis their communities. Mr. Bailey risked alienating one

of his largest advertisers when his station was critical of one of his “biggest food chain

advertisers for the low numbers of Black people it’s hired in the management ranks of the store.

Nine locations, very few Blacks . . . so how the hell’s he going to write me a check when I take

that kind of stand against him?” he asks. Furthermore, his station insisted that Black people be
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 63

hired by the Census Bureau to be the enumerators in the Black neighborhoods. “That hurts you

financially,” he offered.

ÿ National vs. Local Advertising Revenue

For radio broadcasters, it is important to receive a significant percentage of their advertising

revenue from national accounts vs. local advertisers. The national advertisers are more able to

afford advertising than their local counterparts and advertise with more regularity and frequency.

Historically, minorities have had difficulty acquiring national accounts. Some, like Willie Walls,

an African-American radio station owner, felt it was because they did not move in the same

circles with those who made advertising decisions.

Well, the discrimination was, basically, that we were not able to get national accounts

and some local accounts that maybe a counterpart ... of another race, would do.

Because they had inside contacts with people. They ate with them, they worshipped with

them, which we did not do. And they had a better chance of getting ads and

advertisement that we sometimes did not get. (WWalls403, pp. 4-5)

Richard Weaver-Bey, an African-American who in addition to his radio station owns a real

estate business and is active in his community, noted that the lack of contact with the “right”

people has impacted his ability to gain advertising revenue.

I was right here in the Hartford area and I run a real estate business as well. What I had

planned to do was to take control of the radio station and use my community contacts and

a number of boards – I sit on a little better than half a dozen boards of directors from the

Chamber of Commerce to the school board, to the Board of Education to Community In

The Arts organization. So I thought that there would be enough community contacts for

me to be able to encourage people to advertise and thereby getting enough revenue to

make our station profitable or at least break even.

But unfortunately that’s not the case that we minority media are finding around the

country. We’re finding ... that when stations that are owned by minority individuals,

whether they’re first in the marketplace or not, they’re not generally first in ad revenues,

because ad revenues basically are doled out by large advertising agencies and many of

those deals are made on the golf courses and in the country clubs, and that’s not really

the area that is frequented by minority individuals or females. (RWeaver-Bey171, p.2)

Johnny Shaw, a fellow Black broadcaster, felt that because local, independent stations are

providing service to their communities, “there ought to be some regulations put into place to say

that independent owners, especially if they pull good numbers, if they’ve got the listenership,

ought to get at least a fair, what I would term as, a fair share of those national dollars. And

when I say national dollars, I speak in term of agencies and, not just local people because you’ve

got to understand local business, small businesses can’t afford to spend a whole lot of dollars for
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 64

advertisement. I’m talking about, you know, your big conglomerate companies who can spend

those dollars. I think some of those dollars should be shared with us. (JShaw185, pp. 15-16)

Mateo Camarillo, a Hispanic radio licensee, discussed how being in smaller markets coupled

with his minority status and minority programming markedly affected his ratio of local to

national advertising. He raised the issue of how advertising reps are compensated for placing

ads.

[Our radio stations] were in the obviously smaller markets in [California]. One of the

problems of having [stations in smaller markets is that] the percentage of local vs.

national support is very skewed so that it’s . . . heavily laden with local support as

opposed to the typical formula 60-40 national to local, it’s more closer to 100% local.

And there’s a, and I won’t say conspiracy, but there’s also the media reps, [who] have an

incentive just to stay with big cities. And so even though they may represent you, your

representation is not a very strong advocation for the smaller markets. So the media reps

play a role in the finances and the ability of a medium- to smaller-market station’s being

able to get national advertising, which is a real problem in this industry. And I don’t

have a solution, but I’m just saying is that there are very few Hispanic media reps, so the

understanding of that issue is not as clear as it ought to be.

And the consolidation that’s taking place, even marginalizes those few that are, so they

have to concentrate on the larger markets where the consolidation is taking place. So the

smaller and medium-sized markets, which is where the area of Hispanic ownership of

licenses happens to be because they can’t afford the bigger cities unless they themselves

have the wherewithal to become a public entity, the majority of Hispanic licensees are

having to struggle. That’s why I got out of broadcasting. That’s why this year I sold the

end of my stock and I actually started shifting away in ’95. (MCamarillo375, pp. 18-19)

ÿ The Impact of Rating Services Practices on Minority Broadcasters

Another variable that factors into whether and at what level small broadcasters receive

advertising revenues are the audience rating services such as Arbitron28. Sampling practices,

geographic market definition and the cost of the service are all impediments for minorities in the

ratings game.

 

28 Arbitron is an independent company which collects radio listening habits and market share

information from a sampling of families throughout the U.S. using various survey instruments

and methods. Arbitron measures radio audiences in 270+ local markets. This listenership

information is used by broadcasters to attract advertisers. Only those broadcasters who become

members of Arbitron are allowed to quote the data during the selling process.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 65

Ed Gomez, a Hispanic radio licensee, shared his experiences with Arbitron’s efforts to capture

the Hispanic audience listening patterns and the reactions of other Arbitron members to the

company’s efforts to accurately capture the data.

Arbitron was another thorn in our side. Arbitron ... when Arbitron instituted a

methodology that they called personal placement and retrieval ... PPR meant that over a

survey period... they had a policy of sending so many diaries into high density Hispanic

areas and high density Black areas. Well, both the Blacks and Hispanics, and

particularly the Hispanics, were terrible at returning the diaries. They just, you know ...

they would agree to do it and then they wouldn’t do it.

And it was hard for Arbitron to get back any semblance of diaries from the Hispanic

communities. So they instituted personal placement and retrieval, and they would hire

people here in Albuquerque to go into the south valley, which is a high density Hispanic

area, or the north valley, and put in, you know, 50 diaries. And it was a four-week

survey. They had to keep the diaries. In between the four weeks, these people were

required to call or even go back and make sure that the people were not having any

difficulties with the diaries and making sure that they were keeping them; And at the end

of the survey period, go and get them, retrieve them.

Well, all of a sudden, stations in large Hispanic markets began to generate some really

high numbers; some high rating numbers. Because they were finally really measuring

the Hispanic markets. Well, the general market members of Arbitron began to complain,

and they said, you know, you shouldn’t play favorites. I mean you are doing this simply

to help the Spanish stations, and they didn’t want that to happen. So they dropped that

methodology and went to something else... it was just going back to what they did before.

And so, if you didn’t have 80% of the population Hispanic in your market, you lost all of

your numbers.... And that was, in my opinion, blatant discrimination (EGomez370, pp.

34-36)

Many like Black radio station owner James Wolf, Jr. were confronted with the impact of

Arbitron ratings on their ability to secure local advertising dollars. Without the ratings, which

one had to be a member of Arbitron to use in selling efforts, advertisers could use that as an

excuse for not buying time on a particular station.

Well, ... I’ve had difficult times with much of the advertisers, especially locally. Unless

you’ve got the numbers, you know, the Arbitron numbers, you know, you still are not

going to do well, you know. . . . Oh, they bought from us because we always had the

numbers, you know.... [But] we were brutalized on the local [advertising] end of it.

(JWolf281, pp. 37-38)

Art Gilliam, an African-American radio licensee, talked about how Arbitron’s definition of

metropolitan areas can severely impact the smaller, low power broadcaster.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 66

The Arbitron rating area, therefore, what they consider their metro becomes an

important factor for us, because if they expand what they call the metro, it impacts

stations with less power. Now, our position is, and has always been, that the objective

way to determine the metro is to let the government determine what that metro is, which

the government does define standard metropolitan areas, whereas Arbitron, at the

request in many instances of its subscribers, can expand the metro and has done it in the

past, beyond what is the actual government defined metro and that creates a hardship for

stations with less power.

And I don’t know to what extent the FCC or government could play a role in that but it

gets very expensive to take it through the Department of Justice or try to claim anti-Trust

or anything like that, but it’s definitely an area that it’s time to consider, especially given

that there are offenses taking place now. (AGilliam117, pp. 22-23)

Johnny Shaw and Richard Weaver-Bey, both African-American broadcasters, talked about the

prohibitive cost for small broadcasters of being a subscriber to Arbitron and the fact that if you

do not subscribe, you cannot quote your Arbitron ratings when you sell advertising. Since

advertising agencies, who place the bulk of national advertising dollars, almost always use

Arbitron ratings as variables in the “buy” decision, lacking such ratings is a severe handicap for

those who cannot pay the price of admission.

Johnny Shaw offered these experiences.

And that’s what hurt us the most as independent owners who are trying to – [get

advertising dollars]. We can’t even afford to invest in Arbitron because it costs so much

money. And I’m not complaining about Arbitron, ... (t)he least I can get by with to buy

the Arbitron figures is $10,000. (JShaw185, p. 16.)

Richard Weaver-Bey echoes these comments.

[We don’t] subscribe to Arbitron because our numbers are not strong enough, our

coverage area is not that broad and it’s expensive to subscribe to Arbitron. And if you

don’t pay for a subscription to Arbitron, then they do not focus on your audience in order

to publish your numbers and you’re not able to quote the Arbitron numbers. So that

becomes a very difficult challenge. (RWeaver-Bey171, p. 11)

Who gets sampled and how they are sampled determines the accuracy of the information

collected by the ratings agencies. Erskine Faush, a Black television broadcaster, takes exception

with Arbitron’s sampling practices.

I’ve always had a thing with the rating people. I don’t think it’s done fairly. I don’t think

it’s truly representative. I don’t think there’s enough sampling. I don’t think, you know –

I don’t think it’s ever been. And I’ve still got in my possession, as I said, time when the

stations – our ratings, you know, exceeded those of the general market stations even.

And, yet, it was always with the asterisk. We can’t sell on the numbers. We’re not a
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 67

subscriber [to the rating services], okay, because of the enormous cost. (EFaush238, pp.

21-22)

Jeffrey Hutton, a White radio broadcaster, made us aware of the fact that small, non-minorityowned stations have related problems with Arbitron.

I’m in an unrated market, I can’t afford to pay Arbitron to tell me how many people

listen. It wouldn’t be accurate anyway because in a county our size, they only send out

like 20 or 25 diaries so I have to be able to sell my results. I have to be able to explain to

people why working with my station will put butts in their buildings, so to speak. And,

business does not come to us, I go to everything. I go to everybody and that’s how we

survive. (JHutton383, pp. 9-11)

Mr. Hutton also shared that since he is “a hometown radio station” in very small city, “people

with national buys never come” to his town. Like his minority counterparts, (t)he [advertisers]

don’t get to me; I go to them. I have to, I mean, very rarely will somebody ring my telephone or

send me a fax and say I want to buy advertising. I go out every day and knock on doors and

introduce myself to people and try to sell advertising. (JHutton383, pp. 9-11)

In contrast, Robert Fink, a White radio broadcaster, told of experiences selling advertising time

quite different from those we heard about from minority broadcasters. He characterized

whatever difficulty he might have with capturing local advertising dollars as purely a function of

small advertisers’ budgets, not discrimination. With national advertisers, he shared Mr. Hutton’s

experience being in a small market.

Basically [our experience of going out and getting advertisers has been] really good.

And I’ve been a sales manager in Los Angeles, so I’ve had the experience of, you know,

“the big time” and the small time. In a small community, they tend to realize that they do

need you, and it’s a difficult sale simply because, again, their budgets are so small, and

it’s more a budgetary problem with our clients than whether or not they want to do

something with us. Some people don’t even want to give you the time of day. But

anybody that’s somewhat trying to make their business successful, they will talk to you

... I’d say in the small market the biggest problem tends to be the budget problem of the

local merchants. (L)ocally we’re accepted fine because we’re just one of the people.

Where we don’t get our share is, we do not get our share of what we term regional or

national dollars. [With] the local mom-and-pop, we don’t have a problem except for

budget; the bigger type of people, their hands are controlled by their corporate offices

that basically give them no dollars to spend on a small market. (RFink235, pp. 18-20)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 68

5. Effect of Deregulation and Consolidation

On par with discrimination as a long-standing barrier to broadcast and wireless entry, study

participants cited industry consolidation pursuant to the 1996 Act, as a fundamental and

significant barrier to entry in recent years.

Johnny Shaw, an African-American radio station owner, characterizes the raising of the caps on

the number of radio stations one can own in a market as “the lowest blow for independent

owners. I think that probably has hurt more than anything else. (JShaw185, p. 21)

ÿ The Shift from Local, Independent Owners to Large National Group

Owners – Opening the Floodgates That Virtually Wiped Out Small

Radio Stations

With the consolidation resulting from the 1996 Act, there has been a shift away from

independent local owners to large, Wall Street-financed group owners. Manuel Davila, a

Hispanic radio broadcaster, recognizes the shift from community focus to earnings per share.

[I]t’s basically all corporate, you know, because they have to answer to . . . investors

now. The investors don’t give a damn if it’s an Hispanic radio station or it’s a Black disk

jockey or it’s a Chinese salesperson. They care about if they get 10 cents on the damn

investment... . All the government did is help the big guys. And that’s what’s happened.

The big guys, corporate America, have taken over communications, and it seems to be

okay with everybody, or it seems to be okay with everybody that’s of importance, I guess.

Now I may not like it. You may not like it. My dealerships[who advertise with me] may

not like it but, hell, there’s nothing he can do about it. (MDavila128, pp. 50-51)

Many believe that the deregulation of broadcasting was motivated and driven by politics, i.e.

donations made to legislators by large broadcasting enterprises. John Tupper, a White television

licensee suggests that “[C]ongress and the FCC shouldn’t be fooled by the contributions being

made by the networks to their campaigns for the purpose of gobbling up more of the voices out

there that are going to be more homogenized over time. (JTupper216, p. 36)

Mary Helen Barro, a Hispanic former broadcaster, talked about the impact of raising the caps as

“open[ing] the floodgates.” While caps had been lifted gradually from 1985 to 1996, the big

jump allowed by the 1996 Act “ended up wiping us all out.” She went on to say:

The big corporations got what they wanted, and the little people are out of business.

Bottom line. ... They kept bumping them up because you know the big corporations

wanted it.... (W)e were pleading with them, we were saying, “No! You’re going to put us

out of business! We can’t grow fast enough, we can’t . . .” . . .(W)e went to the FCC, we

went to hearings, we wrote letters . . . to the Congress. It did not matter. (MHBarro190,

p. 13)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 69

Manuel Davila, a Hispanic broadcaster, blames the government for the predicament in which

small broadcasters find themselves today. He feels that the only thing the 1996 Act is going to

do for the “little guy” is help him or her get a better price for his station once he or she sells

because he or she can not compete anymore.

Who’s going to lend us $30 million [to buy a station]? Because the government, the

government had dictated that big business is going to own communications. And that’s

the government’s fault, man. Because somewhere along the line the government said it

was all right to own 400 radio stations. ... (L)et me tell you the scenario that I see.

Originally you could own seven stations. . . . Okay, that’s kind of back in the old days.

And then that changed to 14 because there was AM and FM. And then as the people

acquired what they needed to acquire – and I’m not knocking it but, you know, the big

guys, they acquired what they needed, but they said, you know, it’s time to change the

rule again. So let’s go to 20 stations. Okay, the government says yeah. They ram this

thing through. Now they can own 20 AMs and 20 FMs, something like that. And then all

the big guys buy what they can buy. And then they said, you know, we think it’s better if

we own 25. Well, the government changes the rule again ... And now they can own all

these things.

And they’re saying this is all to help the little guys. I haven’t seen a little guy get big yet,

you know. I’m not saying they haven’t, okay. Then the government says, you know what,

the big guys have bought all the markets that they can possibly own, New York, LA,

Chicago, San Antonio, Dallas, Houston, El Paso, et cetera, et cetera, et cetera, down the

row. You know what, we think those rules should be changed so we can own two FMs in

those markets because we’ve bought everything we can buy and we want to get bigger.

So the government says, you know, that’s a great idea. The next thing you know, the

rules have changed, again, under the pretense to help the little guy. All this did for the

little guy is allow him to sell his station. That’s about all this did for the little guy.

Because he couldn’t afford to buy the big guy out, so he had to almost out of default sell.

(MDavila128, pp. 45-46.)

Mary Helen Barro also acknowledges that deregulation did not help the independent

broadcasters, but rather put them out of business. She further sees market consolidation as a

threat to freedom of speech as smaller and often minority-owned and minority–formatted stations

are forced out of business.

They put us out of business bottom line.... Yeah, no doubt about it. I’d be in business

today if it weren’t for the FCC.... the American Hispanic-Owned Radio Associations

broadcasters [fought] individually for years as the FCC and the Congress kept pushing

for higher ownership caps, trying to gratify the large corporations who wanted to expand

and they wanted to buy up stations and expand. Now there were some small broadcasters

who did want to sell. There was no doubt about that. But for every one that wanted to

sell, there were 10 of us that were struggling to stay in business.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 70

And when the FCC raised the ownership cap, they literally shoved us out of the business.

And if you look at broadcasting today, you will see that the vast majority are large

corporations, fewer minorities ... And what I don’t think has been discussed up ‘til now

but what I consider a very grave threat is loss of freedom of speech. With fewer and fewer

companies owning more and more licenses, there is a real threat to freedom of speech.

(MHBarro190, pp. 1-2)

ÿ Economies of Size and Scale

The findings of this study point to an unprecedented level of market dominance and influence

enjoyed by public companies utilizing scale economies, inexpensive capital, stock-funded

acquisitions of licenses, and similar financial and operational advantages. These attributes of

size and scale represent insurmountable obstacles to competitiveness for small, women- and

minority-owned companies lacking such advantages.

In broadcasting, participation by small and local businesses had been historically supported due

to a regulatory structure that set licensee ownership levels and encouraged local ownership.

Through the 1980’s and early 1990’s, the industry saw significant increases in minority and

female ownership, stemming from regulatory initiatives that included comparative hearing

minority ownership policies, distress sales, and tax certificates. Since 1996, however, small,

women- and minority- owned companies, and the communities they serve, have, and continue to

be, dramatically impacted by a broadcast industry rapidly responding to the deregulatory nature

of The Act by consolidating license ownership.

(a) Impact Upon Licensees

ÿ Deregulation as a Barrier to Entry

Deregulation and the resulting industry consolidation have formed multi-faceted barriers to new

entry for small, women- and minority-owned companies. The dramatic increase in the price of

stations, and the predominance of Wall Street-funded companies with stock and stations to use as

currency for station acquisition, have severely disadvantaged the small, independent broadcaster.

Given the history of limited access to capital traditionally experienced by small companies, and

especially those owned by woman and minorities, it appears that this disadvantage is virtually

insurmountable.

Brian McNeill, a media investment banker, explains how the economic landscape for

broadcasters has changed in recent years.

... (T)he bulk of our business used to be financing entrepreneurs in the radio and

television business, but as consolidation has played itself out, most of the assets have

gone into the hands of public companies, there are just quite frankly less opportunities
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 71

for private companies and entrepreneurs, and even less opportunities still for start ups.

There’s just less opportunities.... (A) much greater proportion of the stations are owned

by large public companies so there’s just less turnover, there’s less activity, and in fact,

prices have been driven up by public companies and that makes it harder for

entrepreneurs to make the numbers work. So for both of those reasons there is just a lot

less activity for private companies and entrepreneurs and individuals to buy assets in the

media businesses. (BMcneill513, pp. 5-6)

Mr. McNeill goes on to talk about how this change of station ownership from private to public

companies has negatively affected small businesses.

(M)aybe I’m naïve and maybe there’s a lot of prejudice and hardship that goes on at a level

that I’m not aware of, but I think the world is getting pretty focused on quality and pretty

color- and gender-blind. I think the difficult thing is that the structure of the industry has

changed, and I think it’s just really difficult now because ten years ago, there was a very

small percentage of the assets in the hands of public companies. A very large [number] of

the assets are [now] in the hands of public companies and that’s just made doing deals a lot

harder for everybody... It shifted into high gear in 1996, when they had the 1996

Deregulation Act. ... So since 1996, it’s more the private and small companies [that] are

disadvantaged, vis-à-vis, big and public companies. That’s been a more dominant theme

than minorities and women being disadvantaged. (BMcneill513, p. 25)

Art Gilliam, an African-American radio broadcaster, explains how this shift affects access to

both acquisition opportunities and capital.

The [large companies] can go to the market place, get funded and buy properties, they can

also bid up the price because they can wait for a number of years to turn a profit. So you

have a situation where they’re able to obtain financing ... so that creates upward pressure in

terms of pricing. So it’s very difficult to find stations and to compete for financing with

companies that are in that position. (AGilliam117, p. 19)

Frank Montero, former Director of the FCC’s Office of Communications Business

Opportunities, talked about the change from a different perspective. Historically, he has seen

that small, minority- and women-owned companies have “ ... frequently focused on the smaller

markets or the medium-sized markets as opposed to the big markets because the economies are

easier to maintain ...” He remarks that initially consolidation took place in the larger, more

lucrative market. He sees that changing now and notes that new entrants will have more

difficulty than before. “ ... I can tell you that consolidation is definitely moving downstream as

you are seeing these large companies definitely starting to inquire into the middle and I think

eventually into the smaller markets. I think that doesn’t bode well for new entrants, for new

people coming into the marketplace. (FMontero509, pp. 10-11)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 72

ÿ Deregulation as a Barrier to Expansion

For small, women- and minority-owned companies already operating as licensees, deregulation

and consolidation have meant severe difficulties in growing their stations, adding to their

holdings and remaining competitive. Growth of existing operations is generally a function of

advertising revenue and access to working capital. Growth in holdings is a function of access to

large sums of capital. With discrimination in advertising and the capital markets coupled with

the effect of deregulation on national advertising practices and station prices, smaller

broadcasters have virtually lost their ability to compete.

Alfredo Alonzo, a Hispanic male radio licensee, explains how deregulation has restricted the

growth opportunities for small businesses.

You know when the FCC deregulated ownership, in ’96 was it? I really feel that that hurt

the small business owner because of the fact that these larger entities were able to buy

literally almost all the radio stations in the big markets. And it really didn’t leave a whole

lot of pickings for anybody else. A case in point, in Tampa, we happen to have 2 AMs and

an FM in Tampa, and if you look at Cox, Clear Channel, and CBS, between the three

companies, they own like 80% of all the radio stations in the market. So it only leaves

20%. Before 1996, the most you could own was 2 AMs or 2 FMs [in each market]. And

prior to that, a number of years before, the most you could own were 8 AMs and 8 FMs

throughout the whole country. So I just feel that deregulation has hurt the ability of a

small business entrepreneur to really grow. Because you just don’t have assets available

to you. These companies have grown; they set up these portfolios where they have, you

know, 8 radio stations in their given market, and since they’re not forced to sell because

they could legally own them, they drove up the price because they were able to pay more

money than the small business owner, so I really think deregulation has hurt the small

businessman more than anything else. (AAlonzo377, pp. 7-8)

Erskine Faush, a Black television station owner, told us of his recent attempt to buy a station in

Birmingham, Alabama. He made an offer on the station and thought he had a deal. “... but over

the weekend something happened to that deal and one of the major companies came in with more

bucks and bought it. (EFaush238, pp. 12-13)

Even though Mr. Faush was trying to buy another station, many small broadcasters are being

marginalized and often forced to sell. Mateo Camarillo, a Hispanic broadcaster, says:

... (A)s I mentioned to you, my preference is to look at the world with more rosy-colored

glasses than looking at it half empty and being pessimistic about things. But you know, as I

see things, it’s a real challenge, it’s difficult to see positive things with the trends, the impact

of consolidation, with the market being controlled by the big guys and the impact with most

minorities not being big guys, being marginalized and squeezed to the point that ... if it

wasn’t for their dedication and commitment to community, it [would] make life real difficult.

But still their life is difficult. I see few rays of hope. (MCamarillo375, pp. 27-28)
Section IV. – Findings Whose Spectrum Is It Anyway?

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Tyrone Brown, an African-American communications attorney and former FCC Commissioner,

understands that the need to grow or die is what is driving many small broadcasters, and largely

minorities, to sell their stations. “Well, I can’t get big enough to stay in this game so I better get

out now.” (TBrown510, p. 11)

Patrick Prout, an African-American radio licensee, told us why he was selling his station.

If one does not have a huge number of stations – at least that’s my perception and it’s my

belief and others’ – one cannot survive as a small broadcaster.... when you have to

compete now that the cap is off in terms of how many stations one can own in a

particular marketplace. We were actually in an LMA [Local Marketing Agreement]

situation. We ended up in an LMA situation.... (T)he owners of the stations that we were

LMA-ing to were selling their stations, and we decided to go in as part of the package.

For one, we would get out from under this thing. Secondly, I’m still on a full-time basis

trying to drive cash flow to feed my family. So I couldn’t afford to – just to - put the time

into this endeavor, and decided I might as well just sell it. (PProut284, p. 9)

ÿ Economies of Size and Scale as a Barrier to Expansion

Small, women- and minority-owned companies report their viability is being made more

vulnerable due to increasingly larger consolidated competitors who enjoy natural operational

advantages that smaller companies cannot match. With more stations, one has more clout with

advertisers. For single-station or very small group owners, the remaining piece of the advertising

pie is very small.

Additionally, larger, more well-financed broadcasters have the capital to finance station

improvements, attract and retain top management and on-air talent, and purchase syndicated

programming. For some, the struggle to stay competitive in today’s market reality is no longer

worth it.

Diane Sutter, a White former television licensee, also explains that size and scale have impacted

the small licensee’s ability to compete.

Well, the trouble with doing anything in radio is ... the monopoly game has already been

played for a long time, and if you can’t get 4 or 5 or 6 or 8 stations in a market I think

it’s very difficult to survive. I think that’s already happened... for me, I don’t think

there’s a place for me in radio right now. I mean let’s face it; when Lowry Mays

[Chairman of Clear Channel] is selling off a bulk of stations that if someone had bought

those would have been the 3rd largest group in the country and Mel Karmizan’s [CEO of

CBS radio] got 180. That’s not an arena in which someone like myself can compete very

successful(ly)... (DSutter205, pp. 23-24)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 74

Dorothy Brunson paints a bleak picture for African-American-owned television stations, such as

hers, over the next few years. Ms. Brunson predicts that being small, non-network-affiliated

stations, struggling to get carried by cable and satellite systems and still being required to

conform to the new digital television requirements, will cause all of them to be out of business in

the next two years.

When I look at the number of African-Americans that own television stations in this

country, I think there’s twelve of us, if I recall correctly.... And I’m sure that in the next

two years, we won’t exist. There will probably be none, because certainly, it’s going to

be more difficult for me. As high definition comes about, I’ve got to find funding to do

that.... (L)ike right now, because I’m not [affiliated with] one of the big four [networks],

the cable and the satellite companies don’t have to carry me for two years. How am I

going to survive for two years? And that’s happening to all of the smaller market

stations, where we [African-Americans] are. Two of us are in large markets and the

others are in small- to medium-sized markets.

 What’s going to happen when the satellite (television) companies don’t have to carry

you, and that becomes as important as cable...And what happens to most carriers in the

interval? For us, it’s life and death. But for others, they can market because they’ve got

the better programs. Well, you sell out. You’ve got to get out. There’s no way you can

survive, you’ve got to get out. So then [the station under the new owner] becomes an

ABC affiliate or somebody else who can go in and lower the boom on those [satellite and

cable] guys.

And the Commission says, well go in and ... negotiate with those guys. I have not been

able to get in the door. I haven’t been able to get in the door of those satellite

companies’. Those cable guys, I’m still fighting against the opposition from most carriers

of seven to eight years ago... There’s just no way that we can survive. In radio, you

probably can do a little better, because you don’t have the technical, you know, those

hindrances. And you’re not on the cutting edge, but I just don’t see, I don’t see many of

us staying in television. I just don’t see it. I talked to five to six of these people all the

time. And they’re scared. I mean, we can do the basics, but we can’t compete with the

big guys, you know, we just don’t have the wherewithal. Someone said, well, why don’t

you all band together? But if you take a lot of little nothings and put them together, you

still got a big nothing. (DBrunson105, pp. 23-24)

ÿ Small Businesses Unprepared for Speed and Impact of

Consolidation

Mary Helen Barro, a Hispanic former radio broadcaster, shared the impact that consolidation has

had on her life. She lost her stations as did some of her Hispanic colleagues. Consolidation

happened too quickly for her to put into place a meaningful competitive strategy. At 61, she is

“on food stamps” and back in college to get herself ”... a teaching credential so I can earn a

living.” She feels lucky that she did not lose everything. She knows many who did.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 75

Patrick Prout, a Black radio licensee, asks the FCC to find some way to help the small owners, a

lot of whom are minorities, compete with the larger players.

With the consolidation and the mega broadcasting companies today, that certainly has

driven a lot of small players out of the marketplace and a lot of your African-Americans

who are coming in – or minorities, period, coming in -- were the smaller players. Some

sold to make money and get out. Others sold because they felt they had to. They couldn’t

compete. I think the FCC needs to somehow figure out how they can put an umbrella

around the small players or do something to help the small players compete with the

larger players. (PProut284, p. 19-20)

ÿ The Impact on Access to Capital

Beyond their relative disadvantage with respect to simple access to capital, small, women- and

minority-owned companies perceive a diminished supply of capital available to them, resulting

from structural changes and responses in the industry with consolidation, and with harmful

impact on their ability to enter the industry and sustain their businesses.

Where personal resources and perhaps a bank loan used to be the cash requirements for license

acquisition, ballooning station prices have necessitated access to huge sums of both debt and

equity financing. Stations are now selling for millions rather than hundreds of thousands of

dollars. Whereas before, banks might finance three-quarters of the cash needed to buy a stations,

they are currently lending only up to approximately one-third of the purchase price for stations.

The balance has to be financed with either venture capital funds or personal assets. Few people

have personal assets large enough to forego the venture capital route.

Having been traditionally hampered in their efforts to acquire capital during the pre-1996 Act

years, small businesses and especially minorities, are virtually precluded from gaining access to

the financial wherewithal needed to be able to participate in today’s consolidating broadcast

marketplace.

Charles Cherry, a Black radio broadcaster, tells us that “Consolidation sucks. ... (T)wo-thirds of

the people that were in this business five years ago are now gone and [for] the people who want

to stay in and grow the business there’s no incentive because you can’t get any help from

anybody to do it. I mean, they just look at you like, you’re just too small.” (CCherry262, pp. 24,

28)

Michael Carter, a White radio licensee, who benefited from high station prices when he sold his

station, acknowledges that consolidation has hurt the “little guy.”

Well, [raising the caps] helped me. It helped me get more money for WHB [upon the sale

of the station], but it’s not good for radio. What’s good for Mike doesn’t mean it’s good
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 76

for the industry . . . because a little guy like me doesn’t have a chance to get in today. We

really don’t with these mega corporations. I don’t have a chance.... You can’t compete

with their money. Three radio stations in Kansas City sold the other day for $113

million. I can’t raise that. (MCarter230, pp. 14, 15)

Manny Davila, a Hispanic radio broadcaster, shares the irrationality of the prices as they relate to

the amount of capital a small radio operator can possibly raise for station acquisition.

What [does the FCC] do? Well, we’re going to make it better. We’re going to do a

bidding process [among the buyers]. We’re going to do a bidding process and make it

fair for everybody. So you and I go bid for – you know, what are we going to bid? How

would you like [to be] doing the cable network in New York, how about that? I want the

cable network in New York. You and I go bid. What are you going to bid, girl? What am

I going to bid?

 Well, I’ve got – damn, I’ve got 50 pencils here, man. And with your 25 bucks, we’ve got

25 bucks here. Oh, by the way, this guy just bid $10 million and he don’t even know

[squat] – but he’s got it. You know ... come on, has it opened up for all of America? No,

it’s opened up for corporate America. Are we saying that maybe we should be on the

corporate ladder? Yes, we should be on the corporate ladder. Have we had a chance, a

real fighting chance to get on the corporate ladder? Hell, no, we haven’t. Because,

unless you’re lucky, and actually got a station in a big market a long time ago – we don’t

have a chance.... I talked to a guy in San Antonio. And the guy says, well, you know,

they’re going to sell these stations for $40 million, two FMs that I’d like to buy, $40

million. Where is this guy going to get $40 million? (MDavila128, p. 51)

Mary Helen Barro shared her story about how the timing of the FCC’s announcement regarding

the lifting of the ownership caps killed her deal to buy additional radio stations and ultimately

forced her into bankruptcy. She was “(t)wo weeks away from signing a refinancing deal that

would have kept me alive and I would have ended up with 2 AM s and 2 FM s.... Two weeks

away from signing my papers, the FCC announces that they’re going to raise the ownership caps

and this time they’re going to raise them so high, ... (i)t scared my financing to death and they

backed out. They said, “That’s the end of small business in broadcasting.” ... So my whole

house of cards fell apart.... And, well, I went through bankruptcy. I lost everything. Yeah, I

wasn’t able to go through on the deal, I lost my FM, OK? My FM that I had on the air, I lost it.”

(MHBarro190, pp. 11-12)

ÿ Impact on Cost of Capital

Along with access to capital, cost of capital constitutes a competitive disadvantage and barrier to

entry for small, women- and minority-owned companies. Large, publicly-traded companies have

an advantage due to their ability to acquire debt financing at lower interest rates than can their

small business counterparts; and they can use their stock as payment for station and company

acquisitions.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 77

As Diane Sutter, a White former television licensee, explains, a lower cost of capital enables the

purchaser to bid a higher price than a could a competitor who had access only to more expensive

money.

Well, if a deal is going to a broker, it’s virtually an auction. And, it’s very unlikely that

an entrepreneur, especially in a larger market, that an entrepreneur can compete [in an

auction for a station] because of his cost of money. So once you get to an auction... I

couldn’t compete with the public marketplace, because the cost of my money versus the

cost of a Sinclair, of a River City at the time, of any of these other groups, when they have

public financing, when they have public money, and their multiples, you know, they were

trading [their stock on the stock market] at 15, 16, 17, 18 times multiples.

So they could afford to pay a 14 or a 15 times multiple [that is the purchase price was a

multiple of cash flow] to buy a station. And they had other stations that they had acquired

earlier in a less inflationary market, so they could amortize their cost throughout and

spread them throughout their stations, so an entrepreneur like myself, who had expensive

money, if you will, I would bid $20 million on a station, and Sinclair would bid $23, $24

[million] because their cost of money was so much less than mine, they could afford to do

that. (DSutter205, pp. 13-14)

ÿ Competition for Revenue – the Struggle for a Proportionate Share

Small, women- and minority-owned broadcasting businesses experience particularly acute

problems in the advertising marketplace since deregulation according to existing licensees

competing against much larger firms. Access to national advertisers’ dollars is especially

difficult and very necessary for independent station survival. This lack of access raises a huge

market entry barrier for them.

Consolidation has affected not only the rates that one can get for advertising slots but also the

absolute amount of dollars. Large group owners in a market can offer national advertisers

packaged deals within and across markets, essentially eliminating the need for ad dollars to be

spent with small, independent broadcasters. Large group owners are gaining a disproportionate

percent of total market advertising dollars relative to their market share of listeners.

Benny Turner, an African-American radio broadcaster who first got into radio in 1985, explains

it this way.

 [The 1996 Act] has basically allowed for consolidation of ownership which in this

market has allowed a concentration of ownership that affects the rates that we are able to

get for our product, and it’s basically decreased competition and has almost given

ownership in this market the power to basically give their urban formats away, which is

what we basically pursue. [It is very difficult to grow our station, to have it be

economically viable] because we basically have been competing against [companies
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 78

who] had several formats and basically what they tell the advertisers is, “If you buy our

country station or rock station, we’ll basically give you the urban station”, and so it

made it difficult for us to command a decent rate, when they were basically giving the

[urban] format away. (BTurner108, pp. 10-11, 12)

Francine Rienstra, a White radio licensee, says that “Nowadays, because of the deregulation and

the [companies] owning so many stations, we’ve got really four groups in this market that wield

the entire ratings and wield the entire dollar. And everything else is struggling. (FRienstra360,

p. 29)

Richard Weaver-Bey, a Black radio station owner, addresses the effectiveness of having more

stations to “sell” to advertisers.

And since consolidation we’ve seen an extraordinary dip in our ability to sell because

you have Infinity and SFX and Clear Channel buying up five and six stations in the

market, consolidating, moving all of their stations into one location, and when their

salespeople go out they can sell five stations in one swoop. And so why does an

advertiser need to think about a small station that’s in a little corner of the market?

(RWeaver-Bey171, p. 12)

(b) Impact Upon the Public

Licensees and key market players interviewed expressed significant concern as to the impact of

consolidation on the public; freedom of speech; diversity of views; and on quality of service to

small, rural and minority communities, and the resulting increases in barriers to entry for small,

women- and minority-owned companies. Henry Rivera, communications attorney and former

FCC Commissioner, made this observation.

Well I think that [the lifting of the ownership caps] has hurt ... because you are seeing a

consolidation of the radio industry that I don’t think anybody envisioned. And you have a

lot of people who were in the business who are selling out. Or people who are going up

against these big conglomerates, trying to buy a station; and they can’t afford the same

prices because [the consolidation is] driving the prices up. So it is not a climate that

induces a diversity of voices and viewpoints. Rather it’s a climate that encourages

consolidation and voices. So any time you’ve got that kind of a situation, you’re going to

have fewer minorities involved in the broadcast industry. It’s just a, it’s just the way

things are. (HRivera516, p. 13)

ÿ Loss to the Public Interest

Erskine Faush, an African-American television licensee, spoke passionately about the obligations

broadcasters assume as public trustees and the impact industry consolidation is having on

diversity of opinion and voices.
Section IV. – Findings Whose Spectrum Is It Anyway?

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Let me put it this way. I never thought I’d see in my lifetime prior to the

Telecommunications Act, you know, the mega-mergers and so forth, that that much

control of this industry would be in the hands of a few people. I think it has had its

impact in terms of diversity of opinion, [and the] access of the community. I think it’s

had a profound effect.

... (W)e always understood that, as a public trustee, the community’s interests, not only

just your being able to have a viable entity in order to make money – and, of course,

that’s not a bad word at all, you know, in business. In our economy, you are either going

to make money and stay in business or you don’t make any and you’re out. It’s very

simple. But by the same token you have an obligation as a licensee and public trustee to

act in the public interest with those things that are going to make, hopefully, the quality

of life better for people.

And we have sought to do that in every way we can, to be involved in the voice of the

voiceless and to give access and be involved in those things that are going to serve the

public interest. And seemingly much of that is on the back burner. In fact, we have, you

know, at least in my opinion, persons who obviously have no broadcast experience,

persons who are in the business... with only a profit motive. Again, I’m not saying that

that’s a bad idea, but it’s always been our understanding from everything that we’ve

understood coming out, that this industry had an obligation, that the airwaves belonged

not to you. You are a trustee. And when you are entrusted with anything that belongs to

someone else ... you have an obligation to act in their interest and not just your own.

... I think serious injury has been done, and frankly I don’t know how it will ever be

corrected. I think that we would have been out of business at this time, along with many

others ..., except that we have a survival mentality and it’s been forced upon us by

generally the whole ethos of society. And given our experience, again, in coming up

through the, prior to the, civil rights movement, the struggles that all of that engendered,

coming from that time to where we are today – and I’m not unmindful of the tremendous

strides that have been made, but I’m also keenly aware of how far it remains to go.

(EFaush238, pp. 13-15)

ÿ Loss of Freedom of Speech

With fewer and fewer companies owning more and more licenses, there is a real threat to

freedom of speech... (Mary Helen Barro, former Hispanic radio broadcaster)

(MHBarro190, p. 2)

Many licensees saw a loss of freedom of speech as a serious consequence of market

consolidation. They attributed this impact to the diminishing number of small and minorityowned stations and the consolidation of broadcast properties into the hands of the few. They

expressed concern that formats, news and public service programming were becoming
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Page 80

homogenized and less targeted to the needs of individual communities. Overwhelmingly, they

worried that no one would serve the segment of the market to which they had committed

themselves if they were forced to either close or sell their station.

Mary Helen Barro offered her view.

We little broadcasters dedicated a great deal of time and effort to community service, to

public service, to informing, especially those of us in Spanish radio. We had a lot of

activities to inform people about what was going on to educate them, to encourage them

to become citizens, to register and vote, and become active in the process. The big

corporations, they do a minimum token job of that.

 Your small broadcasters were much more dedicated to community involvement and

getting people involved in the process. Your big corporations don’t do that. And I think

it’s been a great loss to the community. And, as I say again, freedom of speech. ... You

don’t understand the real threat to freedom of expression that has occurred due to the

FCC’s policies. Not only did you shut out the little guy, you shut out the opportunity for

expression. So it’s not like other industries. When you’re talking about broadcasting,

when you’re talking about media, you’re talking about freedom of speech.

(MHBarro190, p. 15)

ÿ Loss of Diversity of Viewpoint

The Commission has long since recognized that a “[d]iversity of ownership fosters [a] diversity

of viewpoints,”29 and aptly observed in its Statement on Policy on Minority Ownership of

Broadcasting Facilities that “[a]dequate representation of minority viewpoints in programming

serves not only the needs and interests of the minority community but also enriches and educates

the non-minority audience....and enhances the diversified programming which is a key

objective not only of the Communications Act of 1934 but also of the First Amendment.” 30 The

Commission’s cornerstone responsibility of protecting and acting in the best interest of the

public interest requires the agency to promote a diversity of viewpoints.31 Many of the

interviewees expressed concern over the loss of diversity of viewpoints.

 

29 In the Matter of 1998 Biennial Regulatory Review - Review of the Commission’s Broadcast

Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications

Act of 1996, 2000 WL 791562, FCC 00-191 (June 20, 2000).

30 See Minority Ownership of Broadcasting Facilities, 68 FCC 2d 979, 981 (1978).

31 See Public Interest Obligations Of TV Broadcast Licenses, Notice of Inquiry, 14 FCC Rcd.

21,633 (1999)(The Commission’s “public interest standard should promote diversity over the

public airwaves.”).
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John Tupper, a White television licensee and network affiliate, remembered a time when there

was more diversity among owners of affiliate stations and the innovation that came from that

diversity.

[You had] ideas that came from affiliates who were innovative because there was more

diversity spread about in the license holding which resulted in basically better

programming, new ideas being tried, et cetera. ... (W)hen you get away from that and

you deal with all ideas emanating from programmers in Burbank, you get a different mix

of service to the public than if you had more diversity in the ownership. (JTupper216, p.

36)

Erskine Faush, an African-American television broadcaster who has devoted himself to

responsible, informative broadcasting to his community, is proud of the contribution he has been

able to make.

[Members of the community] know ... we are the friend that they can call, whatever they

need. We have a talk program on in the mornings and so forth where we attack the

issues, and have been doing it for years, of giving a voice to the community. And this is

what we exist on because, as I said, we grew up in that time when we felt that that was an

obligation to the community to be involved and to be the voice of those who had no voice.

And I’m glad somebody is paying attention [with this study] to some of the things that’s

going on, you know.... I’m glad to have this opportunity, not for my sake but for the

generations and things that will come along. There’s a long way yet to go. And

somebody needs to be picking up the mantle and running forward with it. (EFaush238

pp. 24-25)

ÿ Loss of Community Service

The theme of centralized broadcasting versus a local community focus emerged repeatedly

throughout the interviews. Benny Turner shared that he was concerned about the local voice

being lost with consolidation. “Yes it does pose a threat and creates a greater opportunity for

syndicated or centralized broadcasting away from the local community. (BTurner108, p. 14)

Trent Boaldin, a White wireless licensee whose family owns wireless and cable systems,

expressed that “(s)erving the community is very much a driver for what we do. I mean this is a

family business. I’m a third generation member of the family. (TBoaldin307, pp. 21)

Mateo Camarillo, a Hispanic radio licensee, expressed concern that large corporations are more

interested in serving their shareholders than they are in serving the communities from which

their audience come.

And I really believe that ownership has a lot to do with the end product, whether you’re

talking about voice, service to the community, truly fulfilling the public trusteeship that

you have in that license, to serve all of the public that’s in your community, because you
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Page 82

know a corporation in New York City doesn’t have the same [interests], the shareholders

are interested in a profit, and they may not be as interested in serving the neighborhood

in Barrio Logan. (MCamarillo375, p. 28)

Manny Davila, another Hispanic radio broadcaster, got into radio to serve his community.

We’re the last independent(ly) owned station in San Antonio, and we’re the last radio

station that somebody can come into off the street with a tape that he recorded in his

garage and we will play the damn song... And so you’re talking about guys that got into

radio when the FCC basically said that this is a community thing, and you’re supposed to

help the community. And we said, you know, that’s the kind of jobs that we want, and in

the meanwhile we might even make some money, because it was never the money that

motivated us. (MDavila128, pp. 21-22.)

Others, such as Richard Weaver-Bey, an African-American, discussed their discomfort with

selling their stations believing that there will no longer be a voice of the community it serves

when the station is gone.

Diversity of voices and views is a pillar of our democracy.... So right now we’re looking

at selling the station, and I really am not comfortable having to do that because I

understand how strongly the station is needed in the community and that it is the voice of

our community. (RWeaver-Bey171, p. 8, 14)

Johnny Shaw, who with his wife, Opal, owns a radio station, feels an obligation to serve his

African-American community. His commitment was expressed this way.

“... (I)t goes back to the service that we provide for the community. And I feel that I’m

obligated, because this window of opportunity [to acquire a station] was open for us, to

do this. To me, when we acquired that license from the FCC, it’s kind of like we married

the community, and we agreed that we would serve the community. I think when you sell,

again, to the larger companies, I think you are selling your community out, because the

larger companies are only going to focus on advertising dollars. They are not going to

care about announcing the PTA meeting of the night. Do you know what I’m saying? . . .

and I’m sure in talking to me you can tell I’m big on this idea of serving the community,

being in the community, being a part of the community. (JShaw185, p. 22, 31)

ÿ Loss to Minority Communities

Minority licensees especially felt their commitment to their respective communities - to keep

them informed, to empower them, to report on current events from the perspective of those

whom the events would most impact.
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Mateo Camarillo, a Hispanic radio licensee, was one such broadcaster.

I’m an immigrant and ... I’ve always identified with the Hispanic community; and my

first discipline is social [work]. I have a Masters in social work. I started a school of

social work to train Hispanics to work with the Hispanic community. So I’m very

committed to the community that I grew up in that I feel obligated to pay back and

develop that community. And one of the things that is very obvious is that it doesn’t have

the required resources or tools to be able to develop.

One of the commitments I have made to myself is to help empower the Hispanic

community to be at least on equal footing and one of the issues is information. And

information is not readily available. The closest thing to information are papers that

come out once a month or every 2 weeks, or whatever; it’s not real-time information. So

by the time you learn about an opportunity, whether it’s a job application, or a request

for a proposal, the deadline has passed. The opportunity [has passed]. So that is

knowledge, such as that the City Council is meeting to decide the fate of something

important to you or the school board is going to decide about the quality of education for

your kid. You know you don’t get the information when you need it. So I had always

wanted to help get real time information so that people can be more efficient and

effective in trying to do things that impact their life. (MCamarillo375, p. 8)

William Saunders, and African-American, entered broadcasting because he wanted to make sure

that the news about his community was reported accurately and completely. “And every time

that we did something, when it would end up on the radio and TV and the newspaper, it was

different from what we did. And I felt that there had to be a way that we could tell people what

we were about, the truth about the whole situation, and that basically is how I got involved.”

Many participants discussed how the perspective of the speaker affects the nature of what is

spoken. Mr. Saunders highlighted that point.

The information that people need, they normally get it from a certain source; and then

they get it better if it’s presented by the source that also [is] impacted by that kind of

information. So I think that that’s the driving force and I think that’s what the original

Telecommunications Act was about in 1934, was to really be able to serve the

community. (WSaunders163, pp. 15-16)

Mr. Saunders adds, “... (W)e really like to do the kind of programs that work for our community.

I would like to see a program that ... could deal with having a teacher of the 3rd grade coming in

on the afternoon just for kids to do homework. And to be able to have that kind of program

sponsored by somebody. I think that is important. (WSaunders163, pp. 10-11)
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6. FCC Actions/ Inaction and Discriminatory Effects

Since the enactment of the Communications Act of 1934, the FCC has regulated the allocation

methods and use of the radio spectrum. The FCC has used three primary methods to allocate a

license when two or more mutually exclusive applicants have applied:

1) Comparative Hearings: An FCC proceeding, presided over by an Administrative Law

Judge (ALJ), to determine, which broadcast applicant was ‘best qualified’ to hold the

license. The 1965 Policy Statement on Broadcast Comparative Hearings defined the

two primary objectives of comparative hearings to be: first, ‘the best practicable

service to the public’ and second, ‘maximum diffusion of control of the media for

mass communications.’ See Policy Statement on Broadcast Comparative Hearings, 1

F.C.C. 2d 393 (1965). The FCC provided seven criteria to the Administrative Law

Judges (ALJs) upon which they should decide the comparative merit of the competing

applicants:

(i) Diversification of control of the media of mass communications;

(ii) Full-time participation in station operation by owners;

(iii) Proposed program service;

(iv) Past broadcast record;

(v) Efficient use of frequency;

(vi) Character; and

(vii) Other factors.

 In 1978, the FCC observed a continuation of an extreme disparity between the

representation of minorities in our population and in the broadcasting industry and

issued the Statement of Policy on Minority Ownership of Broadcasting Facilities,

which formalized the use of minority and gender credits in comparative hearings. 68

F.C.C. 2d 979, 982 (1978). The FCC extended the credit to women owners in MidFlorida Television Corp., 70 F.C.C.2d 281 (Rev. Bd. 1978), set aside on other

grounds, 87 F.C.C. 2d 203 (1981). In 1992, the D.C. Circuit held that the FCC’s use

of gender integration as a “plus factor” in comparative hearings was unconstitutional.

In 1993, the DC Circuit held that the integration credit of the FCC’s comparative

hearing criteria was arbitrary and capricious. Bechtel v. FCC, 10 F.3d 875 (D.C. Cir.

1993). In 1994, as a consequence of the Bechtel decision, the FCC suspended all

active comparative hearings. In 1995, the Supreme Court held that any federal

program that uses racial or ethnic criteria as a basis for decision making must serve a

compelling governmental interest such as remedying past discrimination and must be

narrowly tailored to serve that interest. Adarand v. Pena, 515 U.S. 200 (1995);

2) Lotteries: In 1982, Congress enacted Section 309(i) of the Communications Act of

1934 to allow the FCC to select licensees by random selection. 47 U.S.C. §309(i).

Section 309(i) also required the FCC to establish incentives, rules and procedures

ensuring a "significant preference" for minority-controlled applicants in awarding
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 85

licenses by lottery. 47 U.S.C. §309(i)(3)(A); 47 C.F.R.§ 1.1622 The FCC used this

section to award wireless licenses for cellular, specialized mobile radio, and low power

TV. As Part of the Omnibus Budget Reconciliation Act of 1993, Congress limited the use

of random selections to "applications accepted for filing" by the FCC before July 26,

1993, and Section 309(i) required an FCC determination that the use of the

communications spectrum is not to be distributed by auction. 47 U.S.C. §309(i)(1)(B). In

1997, Congress enacted legislation that caused §309(i) to expire effective July 1, 1997

except for the award of licenses and permits for public, noncommercial television

stations. Pub.L. No. 105-33, 111 Stat. 251 (1997) §3002(1)(2) and;

3) Auctions: Section 309(j) allows the FCC to select licensees by auction. Section

309(j)(3)(B) instructed the FCC to establish competitive bidding procedures that would

"promot[e] economic opportunity and competition and ensur[e] that new and innovative

technologies are readily accessible to the American people...disseminating licenses

among...businesses owned by members of minority groups and women...." 47 U.S.C.

§309(j)(3)(B). Again in section 309(j)(4)(C)(ii), Congress requires the FCC, in

prescribing area designations and bandwidth assignments, to promote "economic

opportunity for a wide variety of applicants, including small businesses...and businesses

owned by members of minority groups and women." 47 U.S.C. §399(j)(4)(C)(ii). In

creating these opportunities, Section 309(j)(4)(C)(ii) suggests that the FCC consider

using "tax certificates, bidding preferences, and other procedures.” 47 U.S.C.

§309(j)(4)(C)(ii).

Each method of license allocation had advantages and disadvantages. Both comparative hearings

and auctions are expensive. The comparative-hearing process often cost hundreds of thousands

of dollars in legal and engineering fees. Like many legal proceedings, the comparative hearing

process often was prolonged. Members of the communications industry sometimes either

engaged in predatory practices towards minority and women broadcast applicants or abused the

minority and women ownership program by adding minority or women “fronts” to their

applications.

Acquiring a wireless license through the auction process is a costly venture, as well, especially

when one adds in the cost of building out the wireless system. Wireless licenses obtained

through auction can therefore cost considerably more than those licenses acquired through

comparative hearings.

The nature and excitement of the auction process, especially in the entrepreneurs’ C-block

auction with its small business bidding credits and numerous delays, tempted and encouraged

those with less experience in the industry to “overbid” for their licenses, thus rendering many

business plans unworkable and unattractive as a financing opportunity. In contrast, the lottery

process was the most cost effective allocation process from the standpoint of the licensee, but

given its randomness, it did not necessarily allocate the license to the most “qualified,” or to

those interested in providing services that would best serve the public interest. However, the

lottery process was effective in allocating a representative proportion of low power television

licenses to minority-owned businesses.
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For each method of license allocation, the FCC has instituted policies, programs and rules which

attempted to increase opportunities for small, minority and women applicants in the acquisition

of broadcast and wireless licenses. For instance, in the comparative hearing process, the FCC

provided extra credit to those applications with participation by women and minorities. In the

lottery process, the FCC provided minority applicants with a mechanism for additional

participation in those licenses that they attempted to acquire. In the auction process, the FCC

established bidding credits, installment payments and discounted interest rates that had some

benefit for small, minority- and women-owned businesses.

Two other FCC programs attempted to increase opportunities for minority-owned businesses in

the secondary market transactions, i.e., the minority tax certificate program and the distress sale

program. In 1978, the FCC implemented the minority tax certificate32 policy, which provided

incentives to owners of existing broadcast properties to sell the properties to minorities.33 The tax

certificate program allowed the seller of a broadcast property to defer any gain realized on the

sale if the property was sold to a minority purchaser, and the gain was rolled over into a qualified

replacement broadcast property.

Congress repealed the tax certificate program for minorities in an appropriations rider to the Self

Employed Persons Health Care Extension Act of 1995.34 The legislative history of this rider

demonstrates that Congress believed the certificate program constituted bad tax policy.35

 

32 In 1981, Congress amended section 309(j) of The Communications Act and granted discretion

to the FCC to award broadcast licenses by lottery. Subsequently, the FCC claimed that the

lottery statute was too vague and declined to implement such an allocation scheme. After the

FCC requested a statutory mandate with greater specificity, Congress responded in 1982 by

passing subsection 309(i)(C)(ii), which specified Blacks, Hispanics, American Indians, Alaska

Natives, Asians, and Pacific Islanders constituting a minority group. Thereafter, the FCC

interpreted section 309 as precluding women from being included as minorities under lotteries;

and thus not entitled to a preference. In re-Amendment of the Commission’s Rules to allow the

Selection from among Certain Competing Applications Using Random Selection or lotteries

Instead of Comparative Hearing, 58 RR 2d 1077 (1985). Accord Pappas v. FCC, 807 F. 2d 1019

(D.C Cir. 1986).

33 1978 Policy Statement, 68 F.C.C 2d 979; Commission Policies Regarding the Advancement

of Minority Ownership in Broadcasting, 92 F.C.C. 2d 849 (1982), proceeding terminated, 99

F.C.C. 2d 1249 (1985).

34 109 Stat. 93 (1995), Pub. L. No. 1044-7 (1995).

35 For instance, Congress believed that the policy evolved far beyond what Congress originally

contemplated, and that the FCC granted the certificates routinely for a wide range of

communications properties Id. Moreover, Congress found that the FCC had developed no

standard for issuing the certificates and that grants "frequently resulted in transitory minority

ownership of broadcast properties." See Greg Forster; Tax Breaks for Being Black, The Wall

Street Journal at A21 (Jan. 8, 1995; but see Testimony, Minority Tax Preferences, Statement of

William Kennard, General Counsel of the Federal Communications Commission, Before U.S.

Senate Committee on Finance, 1995 Westlaw 93492 (F.D.C.H.) (Jan. 27, 19995); Statement of
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Page 87

However, the tax certificate program was a very effective means of disseminating broadcast

licenses to minority-owned businesses. Prior to 1978, minorities owned approximately 40

broadcast licenses, one half of one percent of approximately 8,500 total broadcast license by the

Commission. From 1978 to 1995, the FCC granted approximately 356 tax certificates to

promote minority broadcast and cable ownership (287 radio, 40 TV and 30 cable licenses). This

helped give a much needed boost for minority ownership. In 1982, the tax certificate program

was expanded to cable systems. As noted above, Congress subsequently eliminated the tax

certificate program.36

In 1978, the FCC implemented the distress sale policy, which allowed a broadcast licensee

whose license has been designated for a revocation hearing to sell its station to a minoritycontrolled entity at 75% or less of the station's fair-market value. Underlying the distress sale

policy was the dearth of minority ownership. Although highly effective, the FCC rarely used the

distress sale program. In fact, in seventeen years, approximately 48 licenses were transferred to

minority-owned business through the distress sale program. The distress sale policy still

technically exists but its constitutionality is in question since Adarand.

37 There were instances in

which these programs worked well and others in which they were abused.

In 1969, the FCC issued the Nondiscriminatory Employment Policy, which forbade

discrimination on the basis of race, gender, color, religion, or national origin in employment

practice by licensees of commercial or noncommercial broadcast stations. To ensure compliance,

the FCC required each broadcast station to establish a proactive equal employment opportunity

program. In 1998, the DC Circuit Court held that the FCC’s equal opportunity rules were

unconstitutional on equal protection grounds. See Lutheran Church-Missouri Synod v. FCC, F.

3d (D.C. Cir. 1998). The FCC promulgated new rules that focus on outreach, which are now

also subject to constitutional challenge. Despite the fact that the FCC Nondiscriminatory Policy

is the most longstanding of the FCC’s rules in the area of equal opportunity, many of the

interviewees believe that the FCC has unevenly enforced these rules. They see this lack of

 

William Kennard, General Counsel of the Federal Communications Commission, Hearing

Before the Subcommittee On Oversight of the Committee on Ways And Means, House of

Representatives, 1995 Westlaw 30799 (F.D.C.H.) (Jan.27, 1995) thus frustrating the stated goal

of encouraging minority ownership, 109 Stat. 93 (1995), Pub. L. No. 1044-7 (1995). Congress

also found that the tax certificate policy was not subject to systematic review by the IRS or any

other governmental body to evaluate the cost to the government. Id. However, at least one

senator was of the opinion that there was no showing of "past (or current) discrimination" to

justify the tax certificate program. Senator Packwood, in describing the tax certificate program

posed the following question: "Do we want a Government policy where there is no evidence of

discrimination?” See Proceedings and Debates of the 104th Congress, 141 Cong. Rec S4532-04

Mar. 24, 1995).

36 Self-Employed Health Insurance Act of 1995, Pub L. No. 104-7, S 2, 109 Stat. 93 (1995).

37 The distress sale program was one of two programs explicitly upheld in Metro Broadcasting,

although under intermediate scrutiny. No court has addressed the program’s constitutionality

under strict scrutiny since Adarand was decided.
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Page 88

enforcement as a missed opportunity that could have positioned more women and members of

minority groups to have the kind of track record and corporate broadcast experience needed to

leverage themselves into ownership opportunities. The right kind of experience can open doors

to ownership opportunities, and debt and equity financing

Many people we interviewed believed that the FCC’s actions, inaction, policies, and rules were

not intentionally discriminatory, but the impact - the unintended consequences – allowed for

discrimination by third parties against FCC licensees and applicants and clearly disadvantaged

many small, minority and women licensees making them ill-positioned to compete successfully

in either a deregulated broadcasting or capital-intensive wireless market.

Jerry Byrne, a White male who with his Asian partner owns wireless licenses, shared his

perspective on the FCC and discrimination.

When [the FCC] lay[s] out rules, the rules are not discriminatory, the way they’re laid

out. [But] if they don’t enforce the rules that they set out from the start, then there’s a

discriminatory process taking place. My point is this, if they want to be inclusive, they

can. They can to a point. . . . But, if the rules are allowed to be broken during the

process, then on its own, discrimination is taking place. (JByrne141, p.40)

Art Gilliam, an African-American radio station owner, talks about the political influence at the

FCC Commissioner level and how that might translate into discrimination on the part of the

FCC.

No I didn’t think there was discrimination—well, let’s see, I don’t have a perception of

the FCC at its . . . staff level engaging in discrimination. I have not experienced that

personally. At the same time, I think at the Commissioner level, which is an appointed

level, that there is political influence that can be brought to bear down through the

organization . . . (w)hich is different than discrimination, but it’s discrimination in the

institutionalized sense in that most [of those who] have political influence are less likely

to be African American. (AGilliam117, p. 17)

Henry Rivera, a communications attorney and former FCC Commissioner, gave us a historical

perspective on a series of changes that affected minorities’ opportunities to participate

successfully in the acquisition of wireless and broadcast licenses.

. . . I think in terms of things that have happened to the minority community, clearly one

of the most devastating has to have been the repeal of the Tax Certificate. I mean when

we lost that, we really did lose a terrific vehicle toward increasing minority ownership.

That was devastating. Secondly, we lost the Comparative Hearing Process, which

awarded minorities with preferences in the Comparative Hearing Process. That was also

a real blow. The Commission really doesn’t designate licenses for hearing anymore.

There was a policy that was called the Distress Sale Policy which benefited a

broadcaster to sell his station to a minority if he had been designated for hearing. And I

think that policy is still alive, but in fact there are so few licenses that are designated it
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 89

really doesn’t make much of a difference. Then we’ve had the whole series of antiaffirmative action decisions by the courts, which have hurt the FCC’s EEO policy [which

the] Commissioner’s trying to . . . re-institute now38. But . . . this series of things that has

happened [has] been extremely hard on the policy of fostering minority ownership and I

think that the figures show that. They’re have really not been any increases in minority

ownership over these many years. (HRivera516, pp. 12-13)

George Dobbins, an African-American wireless licensee, provided his understanding of the

regulatory and market realities.

Many of the employees at the FCC, you know, they wanted to see some small and

minority companies succeed. But it wasn’t a lot at that point [after the Adarand

decision] that the FCC could do, because if you don’t have any advantages, I mean, the

FCC couldn’t do anything about it. So the thing that enabled the few, the handful of

major companies that you see out there now that are successful [e.g., Radio One, Granite

Broadcasting, Z Spanish] really become successful was when they had the advantages to

give the opportunity to small and minority companies to get involved. If you put it out on

an open playing field, it’s just about impossible for some of the small Black companies

out there, undercapitalized, not enough managers [adequate resources] to compete

against these major players. I mean, that’s the history of it and that’s going to be the

future of it. The history is not going to change. There’s a clear-cut pattern of that, and it

doesn’t take a genius to figure it out. (GDobbins362, p. 6)

(a) The FCC Does a Tough Job Well

In speaking with the study participants, many shared their frustrations, travails and

disappointments in dealing with the FCC. However, several participants had kudos for the

Commission, acknowledging that even in the face of the FCC’s tough and complicated job, they

felt well served. While the primary objective of the study was to examine market entry barriers,

it is important to note the FCC’s successes.

 

38On January 20, 2000, the Commission adopted new EEO rules that emphasize broad outreach

to all qualified job candidates for positions at radio, television and cable companies. The new

rules prohibit discrimination on the basis of race, religion, color, national origin or gender and,

require, inter alia, broadcast licensees to widely disseminate information about job openings to

all segments of the community to ensure that all qualified job candidates have an opportunity to

compete for positions. See In The Matter of Review of the Commission's Broadcast and Cable

Equal Employment Opportunity rules and Policies, Report and Order, MM Docket No. 98-204,

15 FCC Rcd. 2329 (2000). The rules respond to the D.C. Circuit Court of Appeals' 1998

decision in Lutheran Church [141 F.3d 344 (D.C. Cir. 1998) which held that the Commission's

previous broadcast EEO requirements were unconstitutional. The new EEO rules are also now

subject to constitutional challenge, and 50 of the state broadcast associations have recently

appealed their implementation. State Assns. Appeal New EEO Rules, Television Digest,

Volume 40, Issue 33, Monday, August 14, 2000.
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Page 90

Tazbah McCullah, a Navajo woman who oversees the operation of a tribal-owned commercial

radio station shares her experience with the FCC.

The [FCC] ha[s] never hindered our efforts in becoming a licensee. Or during the

construction permit process, either. They've been very helpful. They've provided us

extensions pretty readily. (TMcCullah133, p. 7)

Mia Lovink, a female wireless license holder told us that “The bidding process [in the auctions]

was easy. I mean it was – the FCC made it easy. Their tech support was always – you didn't

have to wait at all. They were very helpful. (MLovink323, p. 6) Her experiences with the

process itself were shared by all wireless license applicants who we interviewed.

Several small licensees were of the opinion that they were under an unfair financial burden and

unrealistic time constraints because they were subject to the same reporting requirements as large

group owners. In contrast, other licensees, like Jose Molina, a Hispanic radio and television

licensee, believed that if one does what the FCC requires, he’ll have no problem.

Oh, the FCC, [I’ve] got no problems with them. You do things right the FCC is cool.

You screw up, the FCC will give you a chance to unscrew it; but I[‘ve] never been in that

situation because it is easier to do a good job and to follow the rules and the law, then to

do a sloppy job and have to patch it up. (JMolina121, p. 9)

Jose Molina, adds to his prior praise of the FCC.

I really like the FCC and I tell you, the FCC is not composed of a body of nonvisionaries. The FCC has visionary people. . . . I am sure that they are already working

very hard at fixing this situation [of the negative impact on small station owners in a

consolidating market]. How they’re going to do it, I haven’t the slightest idea. But they

know that those Americans like me who are hard working people, that don’t stiff banks,

no bankruptcies, nothing, you know what I mean? (JMolina121, p. 20)

John Thomas, an African-American radio broadcaster found the FCC staff helpful even though

he wouldn’t “say that is was necessarily easy [dealing with them].” He did offer that “it was

understandable.” He acknowledged that the “people that I dealt with . . . were very clear about

what I needed to do and how things were supposed to be done.” He concludes that he has “not

had any problems with the FCC at all. My relationship has been good.” (JThomas277, p.. 8)

Others, like Eduardo Caballero, another Hispanic radio and low power television station owner,

were laudatory and deeply thankful for the assistance they received from the Commission’s staff.

Well, they seem to have a great deal of understanding of the problems that a minority

individual with limited resources had to meet the deadlines. Because they give you a

[construction permit] for a limited period of time and you are supposed to build within

that time. But then if you don’t, you have to go back and say I need an extension. And if
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you don’t [again,] you have to go back and ask for another extension. And then at one

point they are going to tell you show me that you’re doing something to build the station

in order to give you an additional extension, and they would understand that I was

building one station and that my resources did not allow me to build another station at

the same time.

So I would go there and say, “(T)his is what I’m doing. I’m building the station in

Bakersfield, but these other 11 construction permits are about to expire and I don’t have

a way to build at the present time. I don’t want to lose them. This is something I always

wanted to do; I always wanted to have.” And they will get back to me and say, well,

show me that you are serious about your efforts. And I will go there and I will show them

that I signed a contract to lease equipment or to buy a piece of equipment, and they were

extremely helpful in understanding.

And actually, I have to praise particularly a gentleman. He is in the Mass Media Bureau.

. . . And most people in there have been, as I say, very, very understanding of our

difficulties and our problems. [This gentleman] is a supervisory engineer of the low

power television branch of the Mass Media Bureau. That man will have my eternal

gratitude for being so understanding. And I feel very good telling you that the FCC must

be proud of having somebody like him there. (ECaballero124, pp. 15-16)

(b) FCC Inaction When Confronting Private Discrimination

According to many interview subjects, historically, some individuals at the FCC have tried to

reduce market entry barriers for small, women- and minority-owned businesses, but have

encountered Commission-created obstacles and difficulties. Had these obstacles been nonexistent, women- and minority-owned businesses might very well have been able to gain

financial and managerial strength, thus better preparing them to compete successfully within the

framework of today’s marketplace.

The FCC instituted several successful programs, like the tax certificate program, to increase the

opportunities for small, women-and minority-owned businesses. However, it appears that in

some instances the FCC chose to ignore discriminatory practices in the primary and secondary

market for licenses.

Rev. Everett Parker provided his insights into the historical challenges facing those who tried to

overcome discrimination and provide a fair opportunity for small, minority- and women-owned

businesses before the FCC. He told us, “Oh, sure I’ve seen discrimination [at the FCC]. I’ve

never won a vote at the FCC. The only time I’ve ever won anything at the FCC was when we

sued them. He has been extensively involved in civil rights issues as they impact broadcasting –

both licensing and employment. He shared two of his experiences with the FCC.

(W)hen the Civil Rights Act and the effort to protect minorities in particular came along,

I looked at the stations throughout the South and we decided that we should do something
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Page 92

about the mistreatment of Blacks by stations in the South. And the first thing we did was

to ask the NAB – Governor Collins was then the head of the NAB – to ask their [member]

stations to treat Blacks the same way they treated Whites, to use courtesy titles [e.g., Mr.

Or Mrs.] and to give them the opportunity to present their views, especially [on] Brown

v. The Board of Education. . . . Collins wanted to do that. But the board of the FCC flatly

turned us down. (EParker504, p. 3)

Rev. Parker went on to tell us about a license renewal battle he fought with the FCC and

ultimately won.

We went down to the South and looked at stations and picked WLBT in Jackson and the

Channel 13 also, the two stations in Jackson, because they were the stations which were

owned by Newhouse in Birmingham and which we later went after and got Newhouse out

of the broadcasting business. . . .

And we went to Jackson because it’s the college there, Tougaloo College, which was

being attacked every day on WLBT. And we monitored for a week and then we petitioned

the FCC – everybody thinks that we were after the license or something. But we

petitioned the FCC to have a hearing knowing full well that they would not accept public

information, that they would send it to the station and the station would say, “I didn’t do

it,” or “I’ll stop doing it,” and then they would send you the mimeograph sheet and

would put it in the file that we looked at.

And we filed a bill of particulars with the FCC instead of filing the information. We told

them the things that we thought they should look at in a review of license renewal.

Already the station had been in trouble with the White House. And so we filed a bill of

particulars the way you would in a federal court, which the FCC had never done before.

And of course, the station came back and said throw them out, they didn’t put in 21

copies, which you had to put in in those days, and all the other things.

The FCC wrote us back the usual stuff. And at that point we presented our proof, and

they didn’t know what to do with it and they sat on it for a year. And then they renewed

the license at Channel 13 and they gave WLBT a one-year renewal, knowing full well that

they’d come back at the end of the year and they’d get their license and that the public

would say look what we did.

And they had no thought that we would go to court. But, of course, that’s what we did,

and we got this landmark decision by the circuit, written by Burger.39 You know, it was

 

39 In Office of Communications, United Church of Christ v. FCC, 425 F. 2d 543, 549 (D.C. Cir.

1969), then-Judge Burger stated that “The [Hearing] Examiner and the Commission exhibited at

best a reluctant tolerance of this court’s mandate and at worst a profound hostility to the

participation of the Public Intervenors and their efforts. The record now before us leaves us with

a profound concern over the entire handling of this case following the remand to the

Commission. The impatience with the Public Intervenors, the hostility toward their efforts to
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Page 93

the most conservative panel that you could get on the circuit. And we then had to have

the hearing, and it was held in Jackson. And we presented our evidence there and, of

course, the hearing examiner, which he was called in those days, absolutely paid no

attention to our stuff and he made so many errors that the court – when the commission

renewed the license and we again appealed to the court, which had kept jurisdiction, the

court dispersed it and the court, for the very first time, lifted the license. It didn’t send it

back to the FCC for further action.

So that’s the story of how and why we did these things. But as soon as we had the court

decision giving the rights to the public to intervene in the affairs of federal regulatory

agencies, that’s when we petitioned the commission in 1968 to issue EEO rules and to

make the reports of the stations public, which they did after much pressure. (EParker504,

pp. 2-5)

Former Commissioner Henry Rivera shared with us the difficulties around enforcing the

Commission’s EEO policies.

There were many moves to curtail the Equal Employment Opportunity Policy in the early

80s, to do a lot of things that were not terribly favorable to minorities; and, instead to

look to marketplace solutions to help them, rather than to government initiatives. I think

that’s the most charitable way to put it. (HRivera516, p. 4)

He goes on to recount how the Commission handled the Multi-Point Multiple Distribution

Service in such a way as to avoid overtly assisting minority ownership.

There was . . . a new service, called Multi-Point Multiple Distribution Service [MMDS]. .

. . And initially that was supposed to be a broadcast service and the Commission was

supposed to grant preferences to minorities in issuing those licenses; but they didn’t want

to, so what they did was they classified it as a common carrier service where the minority

preferences did not apply. So that was an interesting thing. I think they did the same

thing with Direct Broadcast Satellite. So there were a number of instances like that,

 

satisfy a surprisingly strict standard of proof, plain errors in rulings and findings lead us, albeit

reluctantly, to the conclusion that it will serve no useful purpose to ask the commission to

reconsider the examiner’s actions and its own Decision and Order under a correct allocation of

the burden of proof. The administrative conduct reflected is this record is beyond repair.

“The Commission, itself, with more specific documentation of the licensee’s shortcomings than

it had in 1965 has now found virtues in the licensee which it was unable to perceive in 1965 and

now finds the grant of a full three-year license to be in the public interest. We are compelled to

hold, on the whole record, that the Commission’s conclusion is not supported by substantial

evidence. For this reason the grant of a license must be vacated forthwith and the Commission is

directed to invite applications to be filed for the license.” See Office of Communications, United

Church of Christ v. FCC, 425 F. 2d 543, 549 (D.C. Cir. 1969).
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 94

where the Commission was doing things to avoid overtly assisting minority ownership.

(HRivera516, pp. 9-10)

Mateo Camarillo, a Hispanic owner of both radio and PCS licenses, talked of his frustration with

the FCC’s response to the Adarand decision as it affected the delay of the C-block auction of

PCS licenses.

. . . (T)he Supreme Court ruling [in Adarand] did not say that you could not have those

[race- and gender-based] programs; it said you had to have a justification, it be on a

narrow basis, but the FCC just threw out everything. (MCamarillo375, p. 21)

Further, David Honig, Executive Director of the Minority Media Telecommunications Council, a

non-profit advocacy group for minorities in media and representing multiple civil rights

organizations, shares his knowledge of the FCC’s activities around the distribution of licenses for

educational broadcasting, the precursor to public broadcasting as we know it today. This is an

example of the FCC’s enabling a state (Alabama) agency to discriminate.

And you look . . . at the way that they handed out the public television and public radio

licenses in the country. This is before the Carnegie Commission report in 1967 which

sort of created what we now know as public broadcasting. Then it was called

educational broadcasting.

One of the main purposes [of the educational broadcasting licenses] was to train people

who would then go out and work in commercial broadcasting, and the schools were much

more prominent among licensees than they are now.

Well, state agencies also were granted some of these licenses. All of the television

licenses for public TV in the state of Alabama were given to something called the

Alabama Educational Television Commission, between 1958 and 1962. And the agency

was a branch of the Alabama State Government. And it’s members were appointed by

the governor of Alabama, George Wallace. So you have to assume that the FCC had

heard of George Wallace, seen him standing in the schoolhouse door and had actual

notice of what he was going to do with the television stations and who he would allow to

work there, and thus who was going to get the training in Alabama to be able to qualify

someday to get a bank loan as an experienced broadcaster to apply for and obtain a

commercial broadcast license. This must have occurred to [the FCC]. 

40

 

40 In Applications of Alabama Educational Television Commission, 50 FCC 2d 461 (FCC 1975),

the FCC held that Alabama Educational Television stations engaged in discriminatory practices

because they had few minority performers. The FCC specifically held “while it is true that there

is no evidence that direct orders were ever issued to discriminate on the basis of race, the absence

of such evidence is hardly dispositive. A policy of discrimination may be inferred from conduct

and practices which display a pattern of under-representation or exclusion of minorities from a

broadcast licensee's overall programming.” Radio Station WSNT, Inc., 27 FCC 2d 993 (1971).

In light of the facts of the record set forth below, we find a compelling inference that [Alabama
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Page 95

. . . (W)e took a look at . . . state and public colleges and when the colleges got their

licenses, because often the state college systems in Texas and Maryland and Mississippi

and Alabama and Florida and so on would apply for public broadcast licenses for the

White schools, not the Black schools. So [the Black schools] got them like ten years later

and [the stations] were much lower power [than the ones for the White schools].

I mean the University of Maryland got one way before [Historically Black Colleges]

Bowie State or Morgan State did. Cochran still doesn’t have one. Coppin State in

Baltimore was running a broadcast program with no school, I mean can you imagine

trying to run an airline program to train pilots and they don’t have an airplane? They’ve

got to train [solely] on simulators? Or medical school that doesn’t have cadavers, they

have to train on models? How would you like to be operated on by a doctor like that?

Actually, managing to keep the school going there with no broadcast license. I mean

there’s nothing [that] substitute(s) for the immediacy and unpredictability of . . . what

happens when you’re on the air live and you can’t turn it off and say sorry, we have to

pause and figure out what to do. There’s no substitute for that.

And that’s why when the Commission rubber stamped these applications, the question

shouldn’t be what were they thinking? The question should be, they were thinking and

they didn’t care. It was an entirely predictable consequence. They were basically

ratifying and validating the decisions of segregationists public and private. (DHonig521

#2, pp. 6-7)

Mr. Rivera explains that the Congress and the courts have often impeded the FCC’s efforts to

increase opportunities for small, minority, women-owned businesses.

. . . (A) lot of the things that I suggest[ed] earlier that have happened to minorities and

small businesses and women have happened as a result of things external to the

Commission. You add in [a few FCC Chairmen] ... who have been very concerned about

fostering minority ownership, but have had the pins knocked out from under them,

basically. And it’s very difficult for a, I mean, there’s not much that could have been done

that has not been done at the FCC up to this point in the last two [White House]

administrations. (HRivera516, p. 15)

Mr. Rivera’s perspective is shared by Benny Turner, an African-American owner of radio and

television licenses, recognizing that the FCC operates in a world influenced by political realities

and the courts. He believes that the FCC hasn’t “. . . been very effective [in helping minorities].

I think [that’s in] large part a result of the decisions rendered by the courts and actions taken by

Congress that seem to have the effect of limiting the authority of the FCC to be more aggressive

in leveling the playing field. (BTurner108, p. 10)

 

Educational Television] followed a racially discriminatory policy in its overall programming

practices during the license period. See In Re Applications of Alabama Educational Television

Commission, 50 FCC 2d 461 (FCC 1975).
Section IV. – Findings Whose Spectrum Is It Anyway?

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(c) Policies and Processes

Some interviewees discussed the time-consuming nature of FCC practices and procedures. The

longer it takes to get a decision from the FCC, the more money it costs for attorneys, engineers,

trips to Washington, D.C., etc. – money that generally cash-strapped small businesses can ill

afford. Henry Rivera describes the situation this way:

No, I never did [think anyone at the FCC was intentionally slowing things down so

people who couldn’t afford the fight would drop out], although I think that if one were

interested in being anti-minority, the Commission processes by themselves would often

have [that] result. I mean it just takes a long time to get anything done at the

Commission, and if you’re a minority or a small business, you generally don’t have the

capital to finance the particular matter through to its conclusion at the Commission. It

just takes a long time. There are a lot of pleadings involved and so forth, and you have to

have the staying power to see your way through those proceedings. So, as I said, you

didn’t need to be discriminatory, you just didn’t need to do anything extraordinary and

the Commission processes by themselves would take their toll. (HRivera516, p. 7)

Many people who we interviewed discussed the repeated appeals or petitions process that the

FCC allowed to take place. Dennis Miller, a White male owner of wireless licenses, shared his

perception that two competitors of his abused the petition process to gain competitive advantage

over him.

There have been two instances where people—this is a personal opinion now . . . where

people have abused the process. Filing petitions to deny the transfers to our company,

only in one case, the settlement papers say one thing, the other issue, the real reason was

they wanted a lower roaming rate, and they knew by filing that petition to deny [our

license] it’d gum the gears up for six months at the minimum. . . . I think the motive in

both cases was financial on their side to change the dynamics of a business relationship

or a separate contract, roaming; being specific it was roaming. . . . (T)hey knew that we

would be steadfast in closing the transaction; but what happens to you from a business

perspective is once the transactions have been announced and you go on public notice at

the Commission, it becomes public knowledge that company A is selling to company B.

And if you can slow that process down in “never-never land” or in the middle of it, you

gain a competitive advantage. (DMiller147, p. 14)

The pace of change, especially in telecommunications and wireless technology, has also created

delays in FCC decisions. As the Commission seeks to transform from rigidly service-specific

Bureaus towards a New FCC41, responsive to technological and market convergence, some new

entrants contend they are bucking up against an old bureau mindset – costing scarce resources.

Toni Cook Bush, co-owner of a newly-formed, multi-ethnic, all-female-owned company using

 

41 FCC Chairman William E. Kennard, A New FCC for the 21st Century: Draft Strategic Plan.

(visited Aug. 30 1999). <http://www.fcc.gov/21st_century.>
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 97

integrated technology to create a new television network distribution concept, discusses her

frustration in trying to get the necessary approvals and licenses from the FCC.

So I think . . . we have two strikes against us [at the FCC]. One, that we’re, you know, a

small company that nobody knows, and that two, we’re proposing something different

than what the FCC has seen before and they have not figured out a way to treat

applicants who are seeking the same resource but are in two different bureaus; how to

treat them the same way. (TBush378, pp. 17-18)

(d) Staff Responsiveness and Impact of Bureaucracy

Many of the licensees who we interviewed had direct dealings with the FCC other than the

licensees usual reporting requirements and license transfer transactions. While some shared their

deep appreciation for the assistance they received from various staff members and the FCC,

others spoke of the difficulty they have had with the FCC including the following: nonresponsive staff members, access to Commission information, access to the Commission web

site, or staff members out-of-touch with the small broadcasters’ condition.

Rev. Everett Parker, who has a long history of dealing with the FCC, has a different perspective

on staff assistance and FCC structure.

. . .(W)e could get a lot more help from the staff at the FCC than we get. You know, you

make decisions at the top and nothing happens at the bottom. Remember what

Eisenhower said, “I push all these buttons and nothing happens.” So, no, the FCC is not

set up to go out and see what the public needs and try to do something about it.

(EParker504, p. 28)

James E. Wolf, Jr., who has had multiple problems maintaining his radio interests, shared one of

his “many challenges with the FCC.”

I’m going to tell you. I had so many challenges with the FCC, even when somebody

required that I move off of my signal. But I used to be at 95.9. They forced me down to

95.7 to accommodate their power increase. When they did that, you know, it brought a

short spacing to the west of my signal, which meant that we were relegated to a 6,000

watt station.

And I was trying to get my power raised. So just like the [other] adversities [I spoke

about] – the FCC was always, “we don’t care as long as we serve more people,” . . . in

this case it was [metropolitan] Illinois, to be able to serve more people. . . . And so when

they did that it brought frustration on my behalf, you know, because I got boxed in and I

could never raise my power up. And I thought we are always going to be a small signal,

small station. . . .
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I got reimbursed just the other day. And this has been going on since 1993. I just got –

not total reimbursement, but I just got some money, . . . (f)or the move that I had to make

to accommodate the station. I made the move back in 1996, you know. I mean, I haven’t

even cashed the check. I’ve still got it. I just got it the other day.

[I had to go through] (l)itigation – and what really, really bothered me is the FCC said

you guys settle this out of court here. This is not an FCC matter. They sent documents,

papers, and everything, down to me. I said this is crazy. I said, you put me in this

matter. But, you know, there’s so much insensitivity here.

And then finally I asked them to go back and review it again. They went back and

reviewed and said, well, yeah, it is an FCC matter. It was just callousness on their

behalf, you know. And so they went back in and they made the [other] corporation

reimburse me the money, but I didn’t get nearly the money I should have gotten. They

kept me strung out for half of a decade, and I only got $6,000 out of it. And I think it was

just ludicrous, you know, that they operate like that. (JWolf281, pp. 28-29)

Jeffrey Hutton, a White male operating a small-town radio station, shares his concern over his

perception that the FCC doesn’t ‘have a grasp [of small market radio], his unhappiness with the

FCC’s low power FM decision and his own story about signal strength impeding his ability to

compete adequately.

. . . (T)o me the FCC is a regulatory agency and they don’t have a grasp, they preach

small market radio and then they go and do this thing with all these little micro-stations

[low power FM]. They don’t have a clue how it works in real life. They’re bureaucratic

businessmen and women sitting in Washington that don’t get out in the field and they

don’t know how it works.

So let me just give you a good example. I’m in a town that has a population of 600. ...

(I)t was probably my fault because I didn’t know how to do proper due diligence, but this

station cannot be upgraded. Okay, logically, for me to be able to have a better station I

have to be able to broadcast with more power from a higher antenna, so I can reach

more of an area, so I can go out to try to sell more advertising to more people. Well,

because of the spectrum spacing rule of the Commission, I can’t do that. I’m locked out.

Now they’ll turn right around you know and allow a station in a big market to increase

its power which is somewhat ridiculous because you know everybody lives within just a

small radius there. They can hear the station fine. But that kind of activity blocks out the

smaller stations like me so, you know, I have to, literally, it’s a day-to-day struggle to

survive with this radio station because I don’t have any power. I get walked all over by

these bigger stations in towns far, far away from here that interfere with my signal so I

can’t even serve the county I’m in. There are portions of the county that can’t hear me

because we’re only a 6,000 watt station. And I find that very frustrating.
Section IV. – Findings Whose Spectrum Is It Anyway?

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People all the time saying you are a good station, why don’t you increase your power so

we can hear you better and things like that, and I can’t do that. So that’s my biggest

point of contention with the FCC from a realistic perspective, they don’t have any idea

what’s going on out here. (JHutton385, pp. 7-8)

Toni Cook Bush raises the issue that even though more recent FCC Chairmen have worked hard

to make it “better . . . for minorities and women . . the fact of the matter [is] in the bowels of all

those Bureaus, it’s the same old guys who’ve been doing this for 20 years. That has not

changed. But you don’t get to the top [of the FCC] unless you can get through some of these

guys at the bottom. . . . I think that is very problematic.” (TBush378, p. 20)

Mary Helen Barro, former president of the American Hispanic-Owned Radio Association and

owner of multiple radio stations, shares her views on the differences between broadcasters and

FCC staff, both in terms of priorities and time frames.

I think the FCC truly does not listen to the small broadcasters. . . . I think they think like

bureaucrats. They don’t think like business people and it has hurt the small broadcaster.

Whenever broadcasters have been in need, and its very common, the wheels of

government are on a different timetable than private industry is on. Government thinks in

terms of months and years. Private industry thinks in terms of days and weeks. And the

response time often times by the FCC when small broadcasters were in need was just not

timely. And it hurt small business a great deal. You don’t have that problem nearly today

because frankly there is little or no small business [left] in broadcasting [since the

deregulation in broadcasting]. (MHBarro190, p. 8)

(e) Equal Employment Opportunity

In 1969, the FCC issued a Policy Statement which forbade discrimination on the basis of race,

color, religion, or national origin in employment practices by licensees of commercial and noncommercial broadcast stations.42 Accordingly, each station had to establish a proactive equal

employment opportunity (EEO) program. This was the first time the FCC had directly addressed

the issue of race in a formal policy ruling. This Policy Statement established the Commission’s

right to revoke licenses and to hear allegations of EEO violations in comparative hearings.

In 1998, the D.C. Circuit Court of Appeals held in Lutheran Church – Missouri Synod v. FCC,

141 F.3d 344 (D.C. Cir. 1998) that certain provisions of the FCC’s radio broadcast EEO rules

were unconstitutional. The Commission suspended the requirement for broadcast licensees to

 

42 See Non-Discrimination in Employment Practices, 18 FCC 2d 240, 16 RR 2d 1561 (1969)
Section IV. – Findings Whose Spectrum Is It Anyway?

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file annual employment reports on September 30, 1998.43 It wasn’t until Spring of 2000 that a

new EEO Policy Statement was issued. These new rules are once again before the courts.44

Rev. Everett Parker was instrumental in pushing for the first set of EEO rules. He understood

early on that meaningful employment opportunity within existing, broadcast companies was

critical if women and minorities were to have a fair chance of becoming licensees. Today, more

so than ever, prior experience and a significant track record of success in broadcasting is a

primary determining factor for participation in the secondary market for radio and television

licenses. Rev. Parker shared his recollection of the FCC’s handling of the EEO reporting

requirements.

[With] the first EEO rules, when EEO reports were turned in, the FCC didn’t even open

them. They threw them into boxes and took them into the library and stored them. . . .

They never have examined [radio and television] stations in detail for their [EEO]

performance even though they are supposed to. And you know, license renewal has

always been a farce. And the staff at the FCC certainly did not want to be bothered with

these hundreds and hundreds of reports and analysis.

In the end, since we were issuing these analyses every year we made a deal with the then

chairman....(H)e and I made an agreement that [we] would do the analysis and would

have the figures. And as long as he was Chair everything was just wonderful.

But then, of course, the [President] Reagan FCC came along and after that, you know,

they just said they weren’t going to enforce the EEO rules and the hiring and promotion

of minorities and women went down again. By the time the Reagan administration came

in, television, at least, was as high as any industry in having minorities and women in

upper level jobs, not at the corporate level, but in the stations. (EParker504, pp. 8-10)

Former Commissioner Rivera, who was at the FCC from approximately 1981 to 1985,

experienced during his tenure that “there were very few things that were positive at all [for

women and minorities during the years that I was at the FCC].” He especially highlighted the

lack of enforcement of the Commission’s EEO policy and the negative impact that had on the

creation of a “farm team,” those individuals who should have gotten the experience needed to

one day become licensees.

I think most of the things that happened were negative. I think that one of the things that

happened that hurt a lot was the Commission’s decision basically to stop enforcing its

EEO policies. And there was no, I mean, clearly, I think [the then Chairman] thought

that this was a bad thing to do, that it was not appropriate for the government to be

sticking its nose in enforcing broadcasters to hire minorities. And, as I said, I think that

 

43 See SUSPENSION OF REQUIREMENT FOR FILING OF BROADCAST STATION ANNUAL

EMPLOYMENT REPORTS AND PROGRAM REPORTS, 13 FCC Red 21998 (1998)

44 Supra note 34.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 101

hurt a lot, because, that’s your farm team, basically. Those are the folks that you look to

in the future to get into ownership. And the Commission basically—you can look through

the records during that period of time and you will find very few enforcement actions that

had anything to do with EEO. So it was a pretty bad time at the Commission in that

regard. . (HRivera516, p. 9)

(f) Distress Sales

The 1978 Broadcast Policy Statement: Statement of Policy on Minority Ownership of Broadcast

Facilities, 68 FCC 2d 979, 983 (1978) also created the Distress Sale policy which allowed a

broadcast licensees designated for a revocation hearing to sell their broadcast station to a

minority-controlled entity at no more than 75% of the station’s fair market value.45

The FCC developed the distress sale policy. It was created at the same time as the tax certificate.

Virtually none of the study participants had acquired their station(s) in this fashion as the license

renewal process rarely resulted in the threat of revocation.

Richard Weaver-Bey, one of the few broadcasters who did acquire his station under the distress

sale program, spoke of delays in the process which cost him scarce financial resources and

advertising revenues, forced him into default on his SBA loan. After Mr. Weaver-Bey traveled to

Washington, DC to meet with the Commission staff, the FCC approved his license transfer.

We were being told that the FCC was not processing [our] paperwork or whatever. And

we would call down and not get answers. So we decided that we would take a trip to

Washington [D.C.] and see if we [could] make some headway. . . (W)e were able to have

a couple of meetings during the course of that day, one in the mid-morning and one in the

late afternoon, to provide information to two of those individuals. [O]ur[license transfer]

process, when we got back after that, moved along at warp speed and we were finally

able to come to a closing.

So, I think what the Commission could have done at that point in time was to make sure

that if there was a distress sale and that if there were buyers who were ready to close,

that the Commission forced the expeditious closing of the station. And that didn’t

happen. So that set us back and cost us a lot of money, as well as when we did get into

the station, by the time we got into the station, there were a number of advertisers that

had been brought on in trade and things of that nature that were just very difficult to

overcome [contracts had been negotiated, etc.] So our station was sort of behind the

 

45 Lee Broadcasting Corp., 76 FCC2d 462 (1980); Statement of Policy on Minority Ownership

of Broadcast Facilities, 68 FCC2d 979 (1978); and Clarification of Distress Sale Policy, 44 RR2d

479 (1978).
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 102

eight ball . . . from the start, and it was very difficult in attempting to catch up, so we fell

into default with the SBA loan. (RWeaver-Bey171, pp. 5-6)

(g) Comparative Hearings

The FCC used the comparative hearing process from 1945 through 1994 to award licenses when

there were two or more mutually exclusive applicants for the same frequency. In 1978, the

Commission formalized the use of minority and gender credits in the comparative hearing

process, with the goal being to increase participation by minorities and women. This meant that

if a minority or woman was a controlling member of an applicant’s management team, that

application was given more “points” during the hearing process. The Bechtel decision in 1993,

which invalidated the FCC’s integration criteria, led to the FCC’s suspension of the comparative

hearing process in 1994. Thereafter, the 1996 Act officially eliminated comparative hearings.

Amador Bustos, a successful Hispanic multi-station owner, speaks to the effectiveness of the

comparative hearings as a means to encourage minority broadcast license ownership. “I think

that [the FCC was] well intentioned but not effective. I think that the comparative hearing was

really not an effective process to try to get minorities into the hopper and into the system.”

(ABustos122, p. 12)

The study participants who went through comparative hearings spoke of multiple obstacles,

challenges, frustrations, and commitment during the process. The length of time and money

expended to acquire a license was a real burden for these applicants. Ben Perez, a

communications attorney and low power television licensee, represented many minority groups

in comparative hearings before the FCC. He shared his view on the effectiveness and impact of

the process on minority applicants.

This hearing process is horrible. It destroy[ed] the hopes and fortunes of virtually every

minority applicant, doing tremendous damage, and the outcome is not more minority

grants. In fact, if anything, it's probably less than it used to be. And the FCC was very

good about refusing to count either the composition of applicants, minority versus [nonminority] or the composition of winners. They never, they refused to gather statistics,

because they, I feel, because they knew if they quantified, then people would hold them

accountable for what was happening. Claiming to be helping minorities, but the licenses

are not going that way. If they quantified the Comparative Hearing, what percentage of

applicants were minority? What percentage won and got licenses? The numbers would

have been horrible. They did not, and they never have, and they still haven't.

(BPerez540, p. 36)

Mr. Perez saw the hearing process as a “war of attrition.” He detailed it this way.

Hearings by their nature were a war of attrition. The big broadcaster who had the most

players to expend and had the most appreciation of the value of the license would spend

the most and wear down and defeat all the other applicants. That's another permutation
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 103

of the same thing, but if they couldn't buy them out they would wear them down, and they

[would] get financially exhausted. They literally financially exhausted them. And, you

know, more depositions, longer trials, more appeals. And if they fought long and hard

enough and this was the creed of the broadcast Comparative Hearing attorney – I could

tell my client, if you're willing to fight hard and long enough, I'll win this for you.

(BPerez540, p. 28)

Ruby Unger, a White female radio licensee, primarily felt that the FCC wanted to push onto the

applicants themselves the responsibility for making the decision about who would end up with

the license.

... [What] the FCC basically wants the applicants to do is knock each other out. The

FCC did not want to make a decision. They did not want to rule in anyone’s favor. They

really wanted to have somebody buy out the competition, you know, give them money to

go away. And when the depositions were taken here in Novato preliminary to the

hearings in Washington, it was very clear that our application would be the top or the

second in line.... that was the general consensus. I think it was clear once the process

started that – and I don’t really remember who said that specifically, but it could have

been my FCC attorney.... (T)he upshot is I did settle on the night before I was going to

testify. And I did that because I was advised to do that by my attorney. And in hindsight

it really was the best thing to do. It was really difficult. It’s like being pregnant and then

the night before you’re going to give birth you decide, okay, I won’t have this baby. It

was really sad. (RUnger367, pp. 2-5)

Mateo Camarillo, a Hispanic radio and wireless licensee, who holds a masters degree in social

work, previously started a school of social work to aid his Hispanic community, has been an

extremely successful multi-unit McDonald’s franchisee, and was a university professor for 10

years, talked of his experience with the comparative hearings as being “a horrible process.”

 (T)here were multiple parties seeking that frequency, seeking that spectrum and so

obviously I had an attorney, and I thought it was, a good firm; it was highly

recommended to me. And we proceeded to go through the process, the comparative

hearing process which, you know, meant going to Washington for hearings before the

administrative law judge.

I was not very pleased with the competency of the administrative judge, [who] shall

remain nameless. . . . he would be falling asleep while people were making presentations

in front of him, things that even a lay person would say, gee, what’s going on? You know

he would ask questions [of] presenters that already had answered the question in their

presentation. Things that led you to believe, is this person awake? And so I didn’t have

much faith in a rational recommendation coming out of that process.

So what eventually I did is I was able to show that of all the applicants, I was the most

qualified in reference to the criteria. There was another firm out of San Francisco, who

was also very tenacious and it came down in my opinion to that entity and our entity. I
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 104

formed [my] company with two other associates and we had an S Corporation . . . three

stockholders.

. . . And what I did then is I was very motivated to win and very aggressive in the

proceedings and then I even hired a private investigator too because I knew [the other

applicant] was lying. The applicant had lied. The top competitor had lied and I knew it.

And my attorney said it’s a big difference between you knowing somebody lied and

proving to the FCC that they lied. And it was, and he was right. There was a big

difference.

... So it was very frustrating. So I knew that the odds were, it wasn’t a level playing field.

And so what I eventually did, I made him an offer to buy him out, his application, which

went against my grain and my principles because you know I knew I had beat him

outright, but I offered to pay him what he had expended, which was the rule at that time, .

. . they couldn’t make a profit. They could recover what they had spent. So that’s in fact

what happened. Because I didn’t believe that I could win, based on what had transpired,

even though I was the best applicant, even though the other person, the other party had

lied. So that left a bad taste.

 It was a long process. It was from ’81 to ’85. It was four years. . . . (B)ecause we bought

out the other applicant, we were kind of what you might say the only ones left standing at

the OK Coral. But again, I didn’t think it was a fair process. I don’t think we won on

merits. We shouldn’t have to win, people shouldn’t have to win by having the fattest

wallet. We should have won based on the merits. (MCamarillo375, pp. 3-5)

Francine Rienstra, a White woman who holds an FM license in Tucson, Arizona, had a different

yet no less difficult experience with her 10-year-long comparative hearing process. She

encountered from one individual three appeals of the decision to award her a license. Ultimately

she prevailed, but by then her resources had so dwindled that she had to engage in a Local

Marketing Agreement (LMA) in order to generate the funds to build out her station. Eighteen

months after the station went on the air in 1994, Ms. Rienstra sold her station to her LMA partner

per their original agreement. She tells her story this way.

Initially, in 1984 I formed a company to acquire a brand new FM radio license in

Tucson. It was part of the Docket 80/90 batch of licenses; approximately 700 licenses

across the country were being auctioned off [distributed under comparative hearings]. I

had estimated that it might take a couple of years to try to acquire that license and was

prepared to go ahead and apply for a license, even if it took 2 to 21⁄2 years, or 3 years at

the outside. I figured that was worth it, and I was working another job in the meantime.

[It actually took] ten years.

I sent in a letter [to the FCC]... initially ... stating that I would apply for a station should

they allocate a license here. The FCC said they would allocate a license. Then they said

that the . . . signal wouldn’t work for a class A station. Tucson is in a valley, but it is

surrounded by mountains. But we have plenty of stations here that give good signals.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 105

And I was in competition with, initially, 40 other groups. And then by the time it got to

that point where the FCC said, no, we’re not going to allocate a station here, I’m

thinking there are 40 other groups here that want this license and there was only one

license to be allocated to this market. And if somebody doesn’t say something or do

something, then they’re not going to allocate a license here.

I couldn’t wait for everybody else to make a move, so I spent my money and had my

engineer do an engineering study stating that we could get city-grade coverage for a

class A station. . . . [The FCC] said that they were not going to allocate a license because

you couldn’t get good city-grade coverage. Based on their figures that they did from

their computers, I guess, I’m not really sure, I guess from their computers. And I believe

what happened is that they took the 10,000-foot mountain and said that you’d be

broadcasting from below ground and couldn’t get a tower high enough to get a good

signal. And I said that that’s not true and talked to my engineer who said that’s not true,

and I asked him to put together an engineering study.

And we did, and we essentially appealed to the FCC. No other group did that; I was the

only one that did. And the FCC made some changes, changed the channel number and

the frequency, and then they allocated us a channel number here.

 So, continuing in the process, then you have to send in your application when they

request that you do that, and I did, and so did 20 some odd other groups ... or no, it was

more than 20, probably around 30. And then the FCC weeds them down; they weed

down six months, and then you have to re-apply. They weed it down and weed it down,

and every time they weed down, it takes six months to weed down. . . . (W)e all applied,

and then there was some more weeding-down process based on how good of an

application you put together. And in order to get the 80/90 Docket, there were certain

rules that you had to follow, and the closer you stuck to those rules, the more points you

got.

. . . [We were an all-woman group] and we were all local. We had not ... this was part of

their parameters ... we had not owned any other broadcast entity. I had a minority in my

group. I had a radio background. . . . All this time, while this whole process was going

on, I’d been working for radio and television stations as a sales person and then as a

sales manager. And then, we got to the point of weeding it down to [a point where] we

did depositions and it weeded down, and then there were four groups, and really I was

the strongest out of the four groups.

And we went to a comparative hearing in Washington, D.C. [in 1990], and that’s when I

was declared the winner. And then one gentleman, who had applied for many, many

different stations around the country, as well as owning a couple of stations in

California, had applied for this one, too, and he was part of the four remaining groups at

the comparative hearings. After I had won, he appealed it.... I think he said something

about my engineering wasn’t right, and that wasn’t true. Because the FCC denied him
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Page 106

and said that I was still the winner. That was six months long. He appealed it again...

and I won it again. He appealed it a third time.

See, the FCC had formed some kind of a group at that time, and this was supposed to

make the process easier because then it wouldn’t have to go back to the FCC. Well, it

did. It went through that group, and I was the winner. He appealed it back again to the

FCC, and I was the winner. He did appeal it one more time, and then they said I was the

winner. And in order for me to get that license on the air and to even try to get more

funding, because now we had used almost all . . . of our funding . . . for attorneys, for

engineers, for trips, all the research and everything else that we did. So we had used

quite a bit of funding, and we were still pouring money out of our pockets. This was all

out of pocket. (FRienstra360, pp. 1,6-13)

(h) Repeal of the Tax Certificate

The 1978 Broadcast Policy Statement created the tax certificate program which provided tax

benefits to the seller of a media property if it was sold to a minority business. The tax certificate

policy encouraged and promoted minority ownership by giving a two-year like-kind transfer tax

break (a deferral) for the sale of licenses to minorities if the proceeds were reinvested in a similar

communication industry. In 1995, as part of the Self-Employed Persons Health Care Deduction

Extension Act, Congress repealed the tax certificate program because of alleged abuse .

This tax certificate program was the single most effective program in lowering market entry

barriers and providing opportunities for minorities to acquire broadcast licenses in the secondary

market. Virtually every minority broadcaster with whom we spoke commented on the program’s

effectiveness and recommended its reinstatement as a means to increase opportunities for

minority ownership. While it did not guarantee that transactions would be consummated, the tax

certificate program did motivate sellers to seek out and offer an increased number of broadcast

properties for sale to minorities.

Bernadine Nash, a minority daytime-only AM radio station owner in Boston, summed up the

benefits of the program and the negative impact of its repeal.

The biggest blow for us, really, has been the dissolution of the minority tax certificate.

Because ...when the minority tax certificate was in existence, I actually had people

approach me when they wanted to sell their radio stations because there were significant

tax breaks to be derived from it. When that went away, not only did I not get phone calls,

I couldn’t get phone calls returned when I was inquiring about properties. I’ve been

trying like crazy and have hit, I can’t tell you how many, brick walls, and have come to

the realization that in this market it is not going to happen within the framework that I

imagined that it would. (BNash118, pp. 7-8)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 107

Dorothy Brunson, an African-American UHF licensee explained the economic benefit of the

program to the buyer.

It lowered the [purchase price]. . . . Because what happened, if you needed that crucial

20% down payment, and you only had 5%, if you got a tax certificate, and that person

was able to defer those capital gains of 17 or 18 percent of tax on that money, they would

then be willing to give you maybe a 10% swing [ on the price of the station]. Or even

12%, if it was big enough. And that 12%, with your 5%, well, they’d give you a 20%

push to be able to pull that deal out, so if you can now get 15 times cash flow [in

financing], you’re going to be able to manage that, because you’ve already got a 20%

equity stake. (DBrunson105, p. 25)

Amador Bustos, who was quoted earlier on the ineffectiveness of the comparative hearing

process, said that “(t)he only thing that was effective was the tax certificate [because it] allowed

minorities, as in our case, access to get some property that we would not otherwise get, because

the seller was motivated by the fact that they could defer the tax for a period of time.

(ABustos122, p. 12)

Dorothy Brunson, who commented that “it was a travesty when the Congress overruled the

Commission on the tax certificates,” provided some statistics on the program’s success.

(I)f you go back and look at the number of cases where I went back and I believe it was

1997, ’96, you probably had about oh, I would say close to 250 properties that were

owned by African-Americans, maybe with Hispanics with the radio stations and one or

two TV stations in the West, we were looking at probably about 315 properties. Out of

that 300, probably better than about 100, 150, were based on tax certificates.

You have to look at some of the historical research. It was tremendous. Yeah, there were

some who came in and got out, bought with tax certificates, turned around and sold [the

stations]; but you’re always going to have somebody who’s going to abuse the system,

but you don’t throw the baby out with the bath. But it could have been better done if the

tax certificates were regulated, and all they had to do was put a clause in that the persons

who had the tax certificates, would a) have to hold [the station] for a minimum of two

years, or three years and/or b) [the FCC] could have limited them - they (could) say no

tax certificates over $300,000 or $400,000 or whatever, you know. But, not to just kill

the whole program. (DBrunson105 p. 24)

Henry Rivera’s perspective that the repeal of the tax certificate was “devastating” to minorities

was shared by many.

I think in terms of things that have happened to the minority community, clearly one of

the most devastating has to have been the repeal of the Tax Certificate. I mean when we

lost that, we really did lose a terrific vehicle toward increasing minority ownership. That

was devastating. (HRivera516, p. 12)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 108

(i) Auctions

The Omnibus Budget Reconciliation Act of 1993 (which added Section 309(j) to the

Communications Act of 1934) gave the FCC authority to distribute licenses through a

competitive bidding process, or auctions. Initially the auctions were used only for wireless

licenses. The first broadcast auction, the “Bechtel auction”, took place in 1999.

The most significant difference between the auctions and the previous means of distributing

licenses (comparative hearings and lotteries) is that now successful applicants, as a result of the

auction bidding process, are required to pay tens and often hundreds of thousands of dollars to

the FCC for each license awarded to them. The FCC at one time allocated the spectrum to

qualified applicants without receiving any compensation from the applicants, now the

prospective licensee with the deepest pockets wins.

For already capital-deficient small, minority- and women-owned businesses, the huge sums of

money needed to both acquire the licenses and build out the systems has created an enormous

barrier to entry.

To help counter the financial impact of the auctions, the FCC originally created bidding credits

and later favorable financing for small businesses, with additional credits being given to

minority- and women-owned businesses. The FCC set the C and F blocks of PCS spectrum aside

as entrepreneur blocks with the expectation, at least with the C-block auction, that small

businesses would get a head start in the market with PCS service over the larger telephone

service providers who were scheduled to bid for their licenses in the subsequent A- and B-block

auctions.

Unfortunately, the decision in the Adarand case prompted the FCC not only to delay the C-block

auction beyond the date of the A- and B-block auctions but also to remove any special credits

that had been available for minorities and woman and to extend those credits to all small

businesses participating in the auction.

The delay in timing of the C-block auction, coupled with the loss of minority and women

bidding credits, impaired bidding strategies, pricing estimates, and ultimately limited the

opportunities for small, minority-, and women-owned businesses to get financing, meet their

installment payments, and build out their systems.

But more than anything, most interviewees who offered an opinion about the auction process

indicated that, because of the capital requirements of the process, small business owners would

be shut out of the process and relegated, if given a chance at all, to the least desirable and

therefore most affordable spectrum. Carl Davis, a wireless licensee characterized the FCC as “a

money-grubbing organization” which “isn’t fair any longer.”(CDavis322, p. 27)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 109

Brian Cobb, a media broker had this perspective on the auction process:

. . . (T)he bulk of [the wireless spectrum] is being provided to whoever pays the most

money. But . . . the system got perverted when [the FCC] got greedy and started selling

to the highest bidder, so all they are doing is turning over all the frequency to the largest

corporations in the country. That’s what’s happening. I call it corporate socialism,

because I’m a big fan of small business. (BCobb512, p. 32)

Toni Cook Bush sees the auction authority as one which now drives and defines choices made by

people at the FCC. “The bottom line that I figured out from at least some of the conversations

that I’ve had at the Commission is that they really do just want to raise money, and they view

their job just to try to figure out ways to get [companies] into an auction.” (TBush378, p. 27)

Henry Rivera sees it this way:

The Administration . . . and the Congress like the fact that there’s money being generated

out of something that the Commission is doing and the Commission likes that. So, they

like to be patted on the back and given attaboys and attagirls and you guys are doing a

great job and you’re raising all this money for the Treasury and we think you’re great. ...

[But] that’s the ball they tend to keep their eye on rather than, you know, what can we do

about helping minorities? What can we do about fostering new technology . . . but I think

that their mind is not necessarily on advancing the public interest as much as it should be

but rather [on] how much money can we generate from this particular auction.

(HRivera516, p. 21)

Brian Cobb asks a more fundamental question about the rationale behind the auction process.

They haven’t had a very viable solution yet [for issuing licenses]. . . . They tried to set

rules that said, okay, if a minority is involved then they get favoritism or if there is more

localism. . . . So then in the [comparative hearing] process everybody was trying to eat

each other, and they got tied up for years and years and years. That wasn’t very good.

And so the ultimate solution was to make it as simple as possible, whoever has got the

most money gets the frequency; and I don’t understand the rationale in that. I mean, I

understand the economic rationale, but if you say it’s the public frequency, why did you

do that. (BCobb512, pp. 33-34)

Frank Blount also believes that the FCC is focused now on money with little consideration of the

“small business guy”.

And the FCC, I think that this whole thing has been geared to boy, let’s get the billions of

dollars. But, what have they done to the small business guy? They have shut him

completely out of the market. (FBlount153, pp. 23-24.)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 110

Carl Davis shared more of his feelings about the impact of auctions on the “rank and file.”

Really, in my opinion, auctions are illegal...because the airwaves belong to the general

pops, the general population in the United States. And why should you have to pay the

Federal Government? It all belongs to the people. And . . . I don’t [think] we should

have to pay for those licenses. We never paid. People never paid prior to this. So

essentially what happened, the bulk of the licenses were given away to people. And then

all of a sudden when you bring in the rank and file, more or less, then they start charging

. . . . (CDavis322, pp. 17-18)

When the C-block auction finally took place, the result was super-inflated prices driven by a few

supposedly well-financed bidders; and the belief that this was the last real chance for

entrepreneurs to get a meaningful part of the wireless spectrum. The A- and B-block auctions,

which had already put spectrum in the hands of the large companies, had taken place. Whatever

advantage that was expected to accrue to the “entrepreneur block” by being first to market had

been erased when the C-block auction was delayed.

Brian Fontes, a Senior Vice President at the Cellular Telecommunications Industry Association

(CTIA), offered his perspective on the viability of C block licensees given the timing of their

market entry.

I don’t think the Commission did small businesses any great favor with the C-Block; [the

C-block license holders are] the last to market - the small business, women-, minorityowned, Telco-type businesses, which were originally stated under the auction authority,

and Adarand kind of wiped that out. And now it's just a small business exemption or a

small business category. I mean, they auctioned off first the A-Block, then the B-Block,

then the C-Block. So in terms of when these blocks of spectrum become available means

that the other blocks – it's kind of last to market. And I think anybody that's last to

market will have a more difficult time – one, raising capital and two, competing.

(BFontes524, p.11)

C Block licenses sold for considerably more money per population covered by the license than

the A and B blocks. Many applicants either dropped out of the process early, were able to afford

only much less attractive secondary or tertiary market licenses, or considerably overbid for their

licenses thus rendering their business plan uneconomic. Therefore these C-Block business plans

became unattractive as a financial investment either for conventional lenders, equity partners or

vendors.

Many C-block licensees have been unable to meet their installment payments; many have filed

for bankruptcy. In either case, they have had to return their licenses to the Commission, per the

auction rules. Some C block licenses have already been reauctioned. Another block of licenses

is scheduled for reauction on December 12, 2000.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 111

Mateo Camarillo, a Hispanic wireless licensee, whose experience with comparative hearings was

presented above, also shared his disappointing auction experience with us. His story is

illustrative of the stories shared by many other C block participants.

When I became aware of [the C Block] and I found that there was receptivity to those

suggestions [about preferences for minorities such as bidding credits and installment

payments], and they became policy, then I decided to shift focus and I left the

administration of running the radio stations to get involved in PCS and formed a

company, . . . Integrated Communications Group. And we then were successful in getting

investors and other parties to commit to work with us [prior to the beginning of the

auction].

Anyway, what happened is the Supreme Court ruled on a case called Adarand vs. Pena,

and after that ruling came down we lost millions. All our investors went away. All our

investors went away. Because [with] the FCC’s interpretation of the ruling, the Supreme

Court Ruling did not say that you could not have those [minority] programs, it said you

had to have a justification, it be on a narrow basis, but the FCC just threw out everything

and so that’s why our investors went away.

And when they in fact promulgated new rules later that year, we had committed so much

time, so much energy, we went ahead and participated on a reduced scale. And despite

the fact that we lost millions from our investors, we just scaled down. However, we ran

into the same problem that we ran into in radio broadcasting, being in secondary and

tertiary markets, we subsequently found we did bid and prevail in the auction both the C

Block and F Block and obtained 11 licenses. However none were, and our strategy was

along the [U.S. – Mexico] border because that was our niche, that was our strength is

marketing and reaching the Hispanic market which is on both sides of the border, and we

thought that gave us an advantage over you know Joe Doe company that didn’t even

understand that community.

However, we had the Next Waves of the world who outbid us and drove the bidding

prices out of sight, so we had to drop out in Corpus Christi, in Brownsville, in markets

that were important, and so we ended up with tertiary markets.

The problem that we eventually found out is that it was very difficult to attract investors

[and to get] the attention of suppliers, the Motorolas of the world, the Qualcomms of the

world, in secondary and tertiary [wireless] markets. So that was another huge problem

and so we’re now currently in escrow to sell our licenses because we can’t raise the

millions needed to [make installment payments on the licenses or build them out], that we

had before Adarand.

We had everything lined up. We had manufacturers. We had investors, we had all kinds

of things. But we had so much invested in time and energy we thought that we could still

make it work on a smaller scale; but we subsequently learned the hard way that people

aren’t interested in Timbuktus of the world. Which is where minorities tend to end up
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 112

because they don’t have the capital, they don’t have the wherewithal to go public, to have

the critical mass to have this staying power. (MCamarillo375, pp. 21-22)

While few interviewees that were involved in the C-Block auction expressly talked about the

benefit of being able to pay for their licenses using installment payments, it was apparent from

their comments that this program encouraged them to participate in the auction process. The

difficulties for most arose, however, with the delay in the timing of the C-Block auction due to

Adarand.

As was the case with Mr. Camarillo above, lenders and investors lost confidence in the C-Block

applicants and generally decided to withdraw their support. Furthermore, when the auction

finally did take place, the bidding was very active, with prices escalating beyond the point of

economic prudence. Many bidders, given their lack of sophistication with the industry and

financing in general, used all of their available money to make the license down payment,

perhaps naively expecting that since they had time until their first installment payment they

would be able to raise the needed capital from outside sources. With prices for the licenses

generally being higher in most markets than their business plans could accommodate, it became

virtually impossible for licensees to raise the capital needed to build out their systems and make

their installment payments on a timely basis. Several licensees have defaulted on their payments

requiring them to forfeit their licenses.

(j) Interactive Video and Data Services (IVDS)

The FCC auctioned Interactive Video and Data Service (“IVDS”) and targeted this spectrum to

small, minority, and women-owned businesses. Many interviewees stated that, during the IVDS

auction, they came to believe that certain necessary technology was available and carried the

imprimatur of the FCC. In fact the technology did not exist and many have been unable to make

use of their licenses. Realizing the problem, the FCC suspended the requirement that license

installment payments be made. In some cases the FCC has refunded the installment payments

made to date by the licensees in exchange for the return of the license. However, the down

payments made by the winning bidders remain in the hands of the FCC.

Nancy Douglas, an IVDS licensee, talked about the basic problem with this spectrum.

Interactive Video and Data is what it was called, but that name now has gone by the

wayside. Now they just call it 218-219, because it certainly is not interactive video, it

never did do that, could not do that, [even though the FCC] said that it could. It turns

out that the equipment, the amount of spectrum which is 1000 mhz of spectrum, will not

even do what they said that it will do. You need a lot more spectrum to be able to do that.

You need really broadband, you know. So, even that was incorrect, which is basic

engineering. You know, which again shows that the FCC did something that was totally

wrong. And the FCC has refused to take any responsibility for that. (NDouglas155, p. 9)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 113

Carl Davis, who holds five wireless IVDS licenses, among others, explains the financial impact

on him of the IVDS auction process.

I was a winning bidder on five licenses in the IVDS . . . and subsequently put 10% down.

And at that point in time, I think virtually everyone who had bid for those licenses

realized that the company who had stated that they had the equipment to operate at those

frequencies did not have the equipment. And at that point in time, virtually everyone who

had outside financing, the financial community backed off and left us high and dry.

. . . I had deposited for the initial down payment something like $272,000. So then the

financial backing that I had at that point in time decided to back out and left me dry and I

couldn’t come up with the other $272,000 for the [other half of the], I believe, 20% down.

. . . A lot of people got collared. I don’t know the numbers totally, but a number of

people did. . . . I had used my own funds for the initial down payment, but I had backing

for the additional ten percent and the subsequent payments - I think it was an additional

$3 million. [I had] $272,000 [of my own money in the deal].

The Federal Communications Commission kept [my down payment]. . . . Since I didn’t

make the additional 10 percent down . . . they claimed that I did not uphold the

agreement, and, therefore, they confiscated the license. The FCC’s position has been,

and still continues to be, we should have done due diligence [on the equipment and the

spectrum]. And I think that’s a cop out because the Federal Communications

Commission is the one who incessantly tapped onto, Answer TV is what it was called,

stating that they had the equipment, and the FCC was touting this around in the

newspapers and through their correspondence with us. That they’re equipment

essentially did exist.

However, in further research, we found that the Federal Communications Commission

did not even check to see if Answer TV had the equipment. They issued the licenses based

[on technology that] . . . was hypothetical.

Altogether, with respect to IVDS, I spent a total of a half million dollars - in developing

my system [with QVC] that I thought was there, hiring people to write things for me with

respect to how we were going to market this thing; paying attorneys; and doing research

of all sorts. (CDavis322, pp. 1-3, 11-12)

Mr. Davis continued on to conjecture why, with the failure of IVDS, the Commission will not

return licensees’ down payments.

So I’m in contact with a lot of licensees. And they’re complaining. You know even

though they made a second down payment and a few installment payments, they’re saying

well, how come I can’t get all my money back? You know, what’s precluding the Federal

Communications Commission from giving all my money back? There’s no reason for it.

And come to find out there is a reason. And the reason is this - a company called Next

Wave.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 114

[They] (p)ut down half a billion dollars [for licenses in the C-block auction], on the

licenses they bid for on PCS, I think it was called. And they didn’t come up with the

additional half, which was another half a billion. . . . So they are in default. Now because

they are in default, and we’re in default, the FCC doesn’t want to necessarily give our

money back, our down payments back because if they do, it would set a precedent and

then they would get their money back, or in this case, Next Wave is attempting to, they

want their down payment, but the FCC wants to really confiscate that fine and put it back

on the market because now the licenses are worth about ten billion. So they can make a

lot more money. And it’s become a money hungry business. (CDavis322, pp. 26-27)

Mr. Davis also reports that he has finally found a use for IVDS and the accompanying

technology to make it operational. However, since he failed to pay the second half of his down

payment, as reported above, the FCC has confiscated his license and is leaving him without any

way to recoup his personal investment.

This is the public notice, [the Order], to IVDS people (and we are called 218-219 mhz

service): . . . they tell you how to get your money back, that is your installment payments.

If that is the case, or they give you another option, you can go ahead and continue to[pay

on the] installments, and they will commence 3 months henceforth, or you can request a

return of your installment payments, or you can pay off the entire loan. Now I have

proposed to pay off the entire loan... But they say I don’t own the license because I didn’t

put the additional 10% down. I have found and a number of other people have found that

we can utilize the license for digital information data transfer. So now the license would

at least be able to get some of our money back. And I think the price I paid was close to

$4 million, for the license totally, three point seven, three point eight, something like that.

I could [earn] that money back in a period of five years.

I have gone out and I’ve turned over rocks and I’ve come up with a financing source. And

they are willing to pay the FCC off. I have letters to that effect and I’ve sent the letters to

the Federal Communications Commission and given them an opportunity to check these

people’s credentials and background and make sure they do have this cash; and they still

deny me the opportunity to come back, give them the 10% down and pay full price for the

license. (CDavis322, pp. 28-29)

Mr. Davis concludes by sharing his perception of how the FCC specifically marketed the IVDS

licenses to the small, women- and minority-owned business communities. He feels that these

communities were “set up” by the FCC.

Well, this is hypothetical of course on my part. This is what I see happened with IVDS. I

think that, it looks like to me, now this is strictly speculative, because I have no

evident[iary] proof, the Federal Communications Commission set up the minority

community. That is, they touted these IVDS frequencies and spectrum to be the greatest

thing that happened in the world since White bread.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 115

And what they did was they made great efforts to reach into the community, into the socalled minority community to get them to apply for these licenses. . . . Thirty-four percent

of those [who] won the licenses were of that nature [small, minority- and women-owned

businesses]. Hey, really, [the FCC] just touted it like it was a great thing. You know,

this is something that it gonna be a breakthrough for the so-called small business person,

minority individual, and females. That this is going to be the opportunity for them to get

a break in the communication industry, which will render them wealthy, essentially.

And we’re gonna give them this chance to do this with this new technology and new ideas

and blah, blah, blah, and they went on and they put it in the Wall Street Journal. It was

in the Washington Post. It was in every newspaper I ever had, they sent out little

brochures, they did everything they could to reach into the communities to get people to

bid on these things. And they did it. They turned around and left a sour taste in virtually

everybody’s mouth. (CDavis322, pp. 33-35)

(k) Abuse of the System

Ownership programs that were designed to benefit minority- and women-owned businesses were

sometimes abused by White men using women and minorities as “fronts” for their applications.

They would specifically recruit women and minorities to pursue licenses using FCC minority

and female programs and credits, but lacked the good faith intentions to include their “partners”

in meaningful ownership or decision-making positions.

Alternately, believing that women and minorities did not have the “staying power” to put up a

protracted fight for a license, other groups of White men would file applications when they

believed a woman or a minority had an excellent chance of winning a license, fully expecting

that sooner rather than later the woman or minority applicant would pay them off to withdraw

from the selection process. This scheme was referred to as “greenmail”.

Some minority and women interviewees recounted instances when they had to respond to

multiple appeals of the FCC’s award of their license. Carl Davis, the study participant who

encountered the IVDS difficulties above, shared his story of being greenmailed in his bid for

cellular licenses.

[The people who contested the awarding of the cellular license] . . . were two people out

of Kentucky. [Their] last names were Peter and Moon. And then there was a so-called

committee out there called Committee for a Fair ... Auction, or something [like that], I

forget exactly what their names were. (T) hose were the people that were involved. And

we were what they referred to as “greenmailed” at the time. Meaning they were using a

technique that the FCC allowed to take place, which was nothing but Blackmail—that is

anybody could file a petition to deny a license against you for whatever reason they may

have thought they could have done it for.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 116

And it’s referred to as greenmail, in the sense that where it was a money-making, illegal

in my opinion, concoction of somebody out there in the hyperspace or whatever you want

to call it. Because if you didn’t [pay them to go away], you would have to go through a

hearing process at the FCC and you [would] have to secure lawyers and you [would]

have to do all the things involved.

So it costs you a great deal of money just to get to that point in time, get your license

awarded to you...They chose a lot of people. I wasn’t just the only one. (T)hey [filed a

number of complaints]. They went through an entire listing against those they felt

probably would pay rather than fight. One guy was, I forgot the first names, but I can

remember the last names because they were substantial to me at the time. Peter and

Moon, and they were from out of Kentucky.

I ended up paying them a million dollars... Because the FCC was going to carry this

thing, and carry it out for a long period of time, so I just paid them a million bucks... I

spent a million dollars to pay Peter and Moon, they got $500,000 a piece. The Committee

. . . for a Fair Auction, something to that effect, they got $168,000 I think it was. And the

legal cost of all of this came to, because I had a contingency contract with the attorneys,

they ended up getting $700,000. So all told between Peter and Moon, this Committee for

Fair Auction, my lawyer and his marketing firm, who ended up getting $750,000, so all

told it was close to $2 million dollars. (CDavis322, pp. 12-15)

(l) Inferior Licenses

Whether it was late market entry (in both broadcast and wireless), insufficient funds for the

purchase of larger market licenses, or the perception of brokers and sellers that small businesses,

especially minority businesses, couldn’t afford the more powerful signal stations, small,

minority- and women-owned businesses frequently ended up with inferior properties. In the

interview process , we found this with minority-owned businesses more than any other

demographic group.

Broadcast licensees deemed the quality of their licenses as inferior if they were in small, less

populated markets; if their signal strength was weak or spotty because of geographic terrain; if

they suffered interference from other stations in the area; if they had their AM station at the 1600

kHz and above, or if they were daytime-only AM stations. Inferior wireless licenses included

secondary and tertiary markets or spectrum for which no viable technology exists, such as with

IVDS.

As one might imagine, it is more difficult to achieve and maintain profitability with inferior

licenses. Further, anything that the FCC does to limit these licensees’ ability to offset the

economic deficiency such as denying requests for additional power or grandfathering in older

more powerful stations when rules regarding frequency interference are changed creates a further

burden.
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 117

Dale Gehman, a Native American radio station owner, offered his opinion that there are ”two

sets of rules” – one for new stations and one for the older stations whose signals create

interference but who are grandfathered in under newer, more stringent FCC regulations.

It's those that were “the power to be” years ago, and their level of what they're operating

at has extreme interference, but that's okay, they're “grandfathered”. But if you do a

new facility, a new group, try to do something for their community, “oops,” you got to

meet these extreme stringent rules. As far as minorities getting in the market, there

should be one rule for everybody. If this certain contour is interference, then by God it

should be for everybody. And if that means lowering power on the old stations, so be it.

Or at least go to what the worse condition is in the country, and that's the standard,

because the spectrum's used up. If they were to say, okay, here's the rule, because here's

what the grandfathered stations are operating at and everyone can now operate at this,

then it opens up the spectrum for many more stations.

Of course the existing broadcasters are not going to like that. They're going to say, “hey,

that's terrible, there's new stations coming on.” But you're holding people to two

standards. You're saying, okay, minority groups, we'd like to have you in broadcasting,

and we'll help train you and we'll do our EEO programs, but you really don't want to be

in ownership because we're going to limit you because you have to meet these new rules

while we operate under these old rules, that really there's no parity at all. It just does not

make sense to me, and I don't really understand. . . . It's not right. (DGehman132, pp.

25-26)

We already shared Mateo Camarillo’s story about the C-block auction where, because his

funding dried up when the ownership programs were eliminated due to Adarand, he had to

significantly scale back his bidding and as a result, acquired licenses in inferior secondary and

tertiary markets.

. . . but we subsequently learned the hard way that people aren’t interested in Timbuktus

of the world. Which is where minorities tend to end up because they don’t have the

capital, they don’t have the wherewithal to go public, to have the critical mass to have

this staying power. (MCamarillo375, pp. 21-22)

We’re also reminded of comments made by Cellular Telecommunications Industry Association’s

Brian Fontes about C block small businesses being last to market and therefore having “a more

difficult time – one, raising capital, and two, competing.” (BFontes524, p.11)

Nancy Douglas, owner of IVDS licenses, shares that “. . . there are no small minority, small

business opportunities anymore. They’re gone. There will not be any. [E]verything from now

on that they’re selling is really expensive. You know, it’s like the only thing that they have left is

stuff way, way up there on the (wireless) spectrum. And that’s stuff’s really expensive to

construct. (NDouglas155, p. 19)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 118

(m) Decision-Making and the Role of Key Market Participants

Almost all licensees acknowledged that they needed legal and often engineering representation

before the FCC. Although fees for these professionals is often very expensive, most

interviewees acknowledged the value. It was a challenge for many, however, to pay

Washington, D.C. prices for their professional advisors. Additionally, several study participants

spoke of the relationship of key market players, primarily attorneys, to the FCC and its decisionmaking function. They shared experiences where it was their perception that some licensees, or

prospective licensees, were receiving more favorable treatment than one would expect given

their application’s merits.

Others spoke of those intermediaries who were all too familiar with the rules, regulations and

inner workings of the FCC “gaming the system” and causing delays in the process for competing

licensees.

Dennis Miller, a wireless license holder, acknowledges the importance of good legal

representation before the Commission when he said “[Our law firm is] experienced and

understands the [FCC] well. [It] has relationships with the Commission staff, which is vital.

(DMiller147, p. 8)

Dale Gehman sees it from another perspective. He shares an experience where he perceived that

others were gaining advantage in ways that were expressly against Commission rules.

One thing that really bugs me about the rulemaking branch is that there is a great deal of

contact by certain [non-FCC] people that I am convinced helped determine how some of

the rulemakings [came] out of there. I'll tell you, there's some more stuff going on behind

the scenes.

[A broadcaster I know] was on the phone to the rulemaking branch every other day.

And, it's like, those are closed proceedings. You're not even supposed to talk to those

people up there. [the FCC] allow[ed] contact in there that should really be prohibited,

and I saw this work several places in Alabama [where] I know that there's no way he'd

have got[ten] that pulled off, except that he just really befriended the people in the

rulemaking branch and just stayed after them and after them, on the phone calling up

there every couple days . . .

I don’t understand how some people can get things like that done, and then we try to

follow everything exactly the way it's supposed to be and we would get [our application]

kicked out with the least little thing. I mean, it was just like these little tiny areas in

dispute. Our [applications] got kicked out. There'd be other broadcasters around us.

They would have major problems with their applications. Their attorneys would go over

and sit with the Commission, and they would just set them aside. And we would get kicked

out. We would have to go back in the whole proceeding. (DGehman132, pp. 19-23)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 119

Robert Fink talks about trying to use the Commission’s web site to help defray legal fees.

I have to spend money on lawyers and research engineers to find if there is something

coming up. I mean, go to [the FCC’s] web site, and everybody now says, well,

everything is available on their web site. Trying to find something on there is nearly

impossible anyway. And 90% of the time, when you go to it, it tells you “unavailable at

this time”... it just never seems to give us what we want, and, half the time it is under

construction and that type of thing. Their maintenance on it is horrendous. And if that

could be maintained, that would save us a lot of time but also a lot of [money) ... we have

to call our attorney at $150 an hour to find out stuff. (RFink235, pp. 26-27)

Art Gilliam talked about his experience in the comparative hearing process where he perceived

that the outcome of the hearing was “politically influenced.”

I have participated in a comparative hearing process . . . This was related to a television

matter that took place involving the RKO license . . . there was here in Memphis and . . .

some people here put together various groups that competed for the license; and I was a

part of one of those groups, but not the leading part of that group in terms of economics.

No [we were not successful in getting the license], and I think that the party that was

successful probably had political connections because I don’t believe that based on the

criteria that the FCC set forth that that party would have been able to otherwise win the

license, but they did.

They were not local, and it had some considerable differences, based on ethnic criteria.

So my conclusion from all of that was that politics does indeed play a considerable role

in the outcome, although probably certainly not at the staff level of the FCC. . . . I am

personally and totally convinced that the outcome was politically influenced.... when you

look at the criteria, you could readily [see] that their integration of management into

ownership was not at the level of several of the other groups, they were not local, so

several things.

In fact, the lawyers we were using, who are themselves well-connected lawyers, initially

told us that they were assessing the groups and said this group basically didn’t have that

good of a chance that there were about three other groups that really were the main

competitors and we were one. Later on, these [same] lawyers, . . . later one came back

and kind of hedged a bit and talked about how this [other] group had excellent

opportunities. I just believe that they had gotten inside information about this group; and

it’s not something I can demonstrate by proof, but it’s just a matter that I don’t believe

that, and I guess, subsequent political developments in the country that I’ve come to be

aware of, have convinced me even more so that money can buy licenses.

. . . I don’t have a perception of the FCC at its . . . staff level engaging in discrimination.

I have not experienced that personally. At the same time, I think at the Commissioner

level, which is an appointed level, there is political influence that can be brought to bear

down through the organization and I think that’s what happened in this case. Which is
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 120

different than discrimination, but it’s discrimination in the institutionalized sense in that

most that have political influence are less likely to be African American. (AGilliam117,

pp. 13-17)

Other than the FCC, the media broker appears to wield the most influence over who receives

notice of station purchase opportunities. David Honig, Executive Director of the Minority Media

Telecommunications Council (MMTC), explained that through the years civil rights

organizations have complained “that minorities weren’t hearing about stations for sale until the

deal was announced.” When stations were offered to minorities, Mr. Honig explains, the

properties were often troubled or technically inferior. Dr. Benjamin Hooks, the first AfricanAmerican FCC Commissioner tried to correct this situation through a ruling at the FCC. He was

not successful. David Honig, who worked for one of the organizations that filed a complaint,

explains what happened.

What Dr. Hooks was responding to was complaints by some of the civil rights

organizations ...that minorities weren’t hearing about stations for sale until the deal was

announced. ... that when minorities would get called saying a station is for sale, it was

often a station where the owner was desperate that they would even consider minorities

and the station was frankly technically inferior, it was on an environmental site, or

something was wrong with it. But the really juicy deals, minorities weren’t hearing

about.

One difficulty that brokers had often pointed out was, “Well once you start having some

of the sales announced publicly and others not, people will move around. It will be a

competitive disadvantage if we have to announce it and they don’t close. Then our staff

will move over there and we’re sort of selling the continuity of the staff as an asset that

we’re selling that affects the price and sometimes when formats change, people want to

move and they note that it is and so forth, a good point.

[Dr.] Hooks’ answer was “Fine, let’s have a level playing field.” Everyone who sells a

station has to announce the sale 45 days before they can sign a contract on the sale. That

way, everyone equally will know what’s for sale, and everyone will have a chance to bid

openly. And let the one with the most money win. And that was a radical idea because it

didn’t get any other votes. And the reason it didn’t get any other votes, to be fair, was

that some of the Commissioners who opposed it felt that then everyone will have their key

assets moved somewhere else and depress the value of the industry.

But there was no answer to it in terms of, well, what else are we [going to] look at that

might work to open up this brokerage business. Are you going to have any hearings?

Because, [Dr.] Hooks was calling for some remedy for discrimination by brokers. This

particular idea was one, but then the Commission just dropped the ball and well, we’ll

deny this idea and not look at anything else either. There was some boilerplate in it that,

well, we think this is an important problem. We’ll continue to look at it. They didn’t.

(DHonig521 #2, pp. 19-20)
Section IV. – Findings Whose Spectrum Is It Anyway?

Page 121

(n) Ineffective or Unaffordable Advocacy

Many study participants expressed frustrations over their inability to afford a cadre of

communication attorneys, as the large group owners and telecommunication companies do, to

represent their interests before the FCC and Congress, to respond to rulemakings and to move

licensee requests for action quickly through the various processes and Bureaus within the

Commission. Advocacy by members of the communications bar provides more opportunities for

access to key FCC decision makers.

Several licensees indicated that they had neither the time nor the financial resources to be able to

spend time in Washington, D.C. representing their own interests, lobbying members of Congress

and meeting with FCC staff.

Ronda McKenzie, an owner of multiple wireless licenses, shared her perspective on the issue of

small business advocacy before the FCC.

Well, I’ll tell you the biggest problem is these big carriers have tons of money to have 20

lobbyists up on the floor up there with the FCC people and, you know, [the Commission]

grease[s] the squeaky wheel. And small businesses and minorities don’t have that kind of

money, you know. We can’t – I mean, we’re worker bees. We’re out here trying to make

it happen and we certainly don’t have the funds to pay professional lobbyists to be sitting

on the floor to protect our best interests. And there’s nobody there to protect us. And no

one really is there to represent our interests. And we don’t have the money to do – and

we can’t fight AT&T and Sprint, you know. (RMckenzie158, p. 13)

To assist the small, minority- and women-owned businesses, the Office of Communications

Business Opportunities (OCBO) was established. According to Frank Montero, former Director

of OCBO, the Office is “charged with helping small women and minority owned businesses

enter into the telecommunications and technology marketplace to try to address barriers that

they may be facing in terms of trying to get into that marketplace, either because they are having

difficulty obtaining access to capital, or they may have difficulty obtaining information about

Commission proceedings that they may be interested in participating in or information on how to

apply for a license.” (FMontero509, p. 1)

Mary Helen Barro, a former owner of radio stations and former President of the American

Hispanic-Owned Radio Association, explained her perspective, which was echoed in part by

others.

We went to Congress—well Congress, well, forget Congress. They didn’t care about the

little people. What they cared about and what they’ve always listened to are their big

contributors, which [are] the major corporations, and the major corporations had a lot

of money and they wanted in. ... I was pretty much up on what was going on in the

industry. I also had very good and expensive attorneys that kept me apprised. But if you

did not have the luxury of having an attorney stay on top of things for you, you basically

were left out of the loop. You had to spend a lot of money because believe me, the FCC
Section IV. – Findings Whose Spectrum Is It Anyway?

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never told anybody anything. Their system of notification ... is really one that is

structured for the large companies that have the money to have attorneys that constantly

stay on top of what is going on at the FCC. For the small broadcaster, who is on limited

funds, forget it. You’re never going to find out anything. (MHBarro190, p. 7-9)

Henry Rivera, having worked with the FCC in multiple capacities for years, noted that “it’s very

difficult” for small, minority- and women-owned business. “They really don’t have much of a

voice [at the FCC] and they ... don’t have the same stature or muscle power basically that some

of the bigger operations in town are able to muster. (HRivera516, pp. 14-15)

Toni Cook Bush highlighted another problem which small businesses, especially new entrants,

can be confronted with when trying to secure representation before the FCC.

“It is very hard to find engineers and attorneys that don’t already represent one of these

other guys, so you find that minority companies, and I think female companies and

smaller companies go in at a disadvantage because there’s nobody for them to hire. So if

we could hire another engineer who was better known at the FCC, we would do it in a

heartbeat. But we can’t find anybody who doesn’t have a conflict.” (TBush378, p. 19)

To help eliminate some of the reliance on communications attorneys, the Commission and

OCBO have worked hard to make access to information and the license application filing process

more user-friendly through the use of the Commission’s web site. Frank Montero talked of this

transition.

I think ... there is clearly a movement afoot at the Commission to try to break that

reliance [on Washington, DC-based FCC attorneys] because obviously people who can’t

afford an FCC lawyer in Washington are left out. . . . [Information technology and the

Commission’s web site] has certainly broken the inside-the-beltway monopoly on the

communications law practice. And perhaps this is the first step of the evolution is that

now, ... if you look through the ranks of the Federal Communications Bar Association,

it’s amazing how many communications lawyers are outside of Washington.

... Well, there is no way those people could have existed ... five, ten years ago. I mean ...

you had to be able to walk over to 1919 M Street to meet with people, to get copies of

things from the reference room, to go to the commission meetings. I mean, if you

couldn’t do that, make the filings, you just could not have practiced that type of law. The

fact that somebody in Little Rock, Arkansas can watch commission meetings because it is

being web cast on the computer or make their filings through the electronic filing system,

or get any ... information about the status of an application or anything on the computer,

it is amazing. (FMontero509, pp. 30-31)

And yet, a web site does not replace the effectiveness usually associated with well-paid attorneys

and lobbyists.
Section IV. – Findings Whose Spectrum Is It Anyway?

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7. Education, Training and Experience

The study found that a number of minorities who were in either the broadcast or wireless

industries, or both, had significant educational background and work experience, in almost all

instances, greater than for their White male or female counterparts.

We interviewed, for example, several people who had undergraduate engineering or broadcasting

degrees; one minority woman had a Ph.D. in public policy and had attended a small business

executive education program at Harvard Business School; a number of people had law and either

undergraduate or graduate business degrees from various well-known universities and colleges;

one person had been a senior executive at the investment backing firm of Goldman Sachs;

another had been in charge of international advertising for Proctor and Gamble; a third had been

publisher of a weekly industry newspaper for the Hispanic radio market; and yet another had a

masters in social work, had started a school of social work, had been a successful multi-unit

McDonald’s franchisee, and a university professor.

While education did not necessarily translate into market success, the kind and quality of prior

work experience had an enormous impact on one’s ability to raise significant sums of debt and

equity financing which ultimately translated into opportunities to purchase stations in the

secondary market. For those minorities who experienced greater access to capital than was usual

for minorities taken as a group, the common denominator was significant private sector work

experience, either in finance, marketing or broadcasting. With this background they were not

only able to capitalize on their successful track records but also on their network of contacts to

assist in the raising of financing and access to deal flow. Often prior business colleagues became

private or venture capital equity partners or investment bankers and lenders.

Especially in today’s broadcast industry climate of consolidation, extremely high station prices

and far more scrutiny of management expertise by brokers, lenders and venture capitalists, good

solid private sector experience is an enormous benefit to both the new entrant and those licensees

looking to increase their holdings.

Additionally, many station owners we spoke with had, at one point, been station managers and/or

sales managers for others. There is no question that this background was helpful to them when it

came time to deal with the day-to-day operations of their stations. However, what was generally

lacking in these individuals was knowledge of finance, deal making and business plan

development, all qualities that enter into a media broker’s evaluation of a prospective buyer’s

“competency to close.”

The findings above point to an increased need for small businesses who are new broadcast

entrants or those who currently own stations not only to receive sophisticated business training

but also to have access to career tracks which will enable them to gain the kind of experience that

opens the doors to opportunity in today’s market place.
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Many industry-related training programs are available that are not connected with specialized

college and university departments. For example, The Minority Telecommunications

Development Program (MTDP), under the auspices of the Department of Commerce’s National

Telecommunications and Information Administration (NTIA), offers training in broadcasting

through its ComTrain program. S. Jennell Trigg, a communications attorney, founded and

developed The Telecom Opportunity Institute, a not-for-profit corporation which “promotes

career opportunities, employment, and ownership in telecommunications for minorities, women

and at-risk youth.” And starting in September 2000, in conjunction with the National

Association of Broadcasters Foundation, Diane Sutter, a successful television station owner, will

be presenting a year-long broadcast-related “executive MBA” program for thirty students.

Funding has been raised for a three-year pilot program, with specific financial assistance

available for up to 15 women and/or minority broadcasters each year.

Classroom training aside, nothing can replace solid on-the-job training. In this study we found

clear evidence that prior significant industry-related work experience was critical for access to

both capital and opportunities. The failure of the FCC’s EEO policies through court action and

lack of enforcement severely curtailed the development of a cadre of women and especially

minorities who could have gained the experience necessary and been ably prepared and ready to

compete in the post-Telecom Act world.

8. Perceived FCC Climate

Several study participants expressed concern over their participation in this study because they

did not want to become too visible to the FCC. There were a few study participants who chose

not to have their comments taped or transcribed or otherwise asked that their comments not be

attributed to them. They felt that if they publicly criticized the Commission they would be

opening themselves up to such things as delays and unfavorable rulings, both of which would be

costly. In a few instances, interviewees shared experiences in which they were instructed by

their legal counsel not to push certain items with the FCC because by doing so they might

imperil a favorable decision.

When queried, virtually no licensees were aware of any formal complaints that had been filed

against the FCC. Dorothy Brunson, an African-American television owner, offered this

explanation.

No, I don’t think anybody has that kind of courage. One of the things that people are

always aware of is that you’ve got to live in this environment, and so you can’t cut the

hand off that’s feeding you. You may not be getting a belly full, but you’re not starving to

death. So, you’re caught in a kind of a Catch-22. You don’t want to appear persona

non-grata, and do something that’s going to make you stick out like a sore thumb.

And so you kind of keep your mouth shut and you try to continue to push and shove

without making a tremendous amount of noise. Because, you know, you have to survive

in this business or you get out. But you can’t do both. Especially if I were Preston
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Padden (a broadcasting industry lobbyist), or I was any other of the major lobbyists, I

could say a lot of things that they say all the time, you know, as it relates to ABC, or

relates to the cable or broadcasters or NBC [or] National Association of Broadcasters.

But we can’t say those things, because we’re too small, we’re too vulnerable. So do we

file? No, nobody in their right mind’s going to file. (DBrunson105, p. 21)

Concerns of this nature conceivably have an impact on small, minority and women licensees’

willingness to “lobby” the FCC or Congress for programs, regulations and/or rulings that could

ultimately either lower barriers to entry or increase opportunity for business growth. Without the

resources to hire lobbyists on their behalf, their discomfort with approaching the FCC or

Congress muffles the voices of those least likely to be heard.
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V. IMPLICATIONS OF THE FINDINGS

Our detailed findings of the experiences of small, woman and minority-owned businesses

provide us with the knowledge and perspective to form broad conclusions in nine major areas

concerning past, present and prospective market entry barriers, as follows:

A. Capital and Markets are the Drivers

The present broadcast and wireless industries and their regulatory structure, perhaps more than at

any time in the history of the FCC and the industry, is, by design, responsive to capital and

market forces. Given a well documented, established and accepted fact that (in increasing order

of severity) small, women- and minority-owned businesses are capital deficient, there is little

wonder that participation by such businesses in FCC licensed industries is alarmingly low, and,

by all appearances, on a steep and severe decline.

In the words of one licensee interviewed, we now experience “[what] blind reliance on market

forces brings you to.”

B. Absence of Critical Mass

As to women- and minority-owned companies in broadcasting, timing has been everything.

Historically and systematically excluded from industry participation due to overt and passive

discrimination on the part of local communities, the broadcast and advertising industries,

secondary market players, and the FCC, modest inroads were made after 1978, with the adoption

of minority and female ownership programs and credits. Their modest gains through the mid1990s had hardly the opportunity to take root, and grow sufficiently strong, in order to buffer

them from and increase their chance of surviving deregulation.

Powerful industry countermeasures, nurtured by Congress and the Courts, and half-heartedly

opposed by the FCC, in rapid succession undid a less-than-two-decades effort to redress nearly

seventy years of barriers to entry for women and minorities. The sequence of rollbacks of

minority and women ownership programs and credits, industry-wide deregulation, industry-wide

consolidation, even, the absence of accurate, up-to-date statistics documenting the full impact on

women and minority participation, have combined to present significant barriers to women- and

minority-owned businesses being significantly represented in broadcast and wireless ownership.

C. The Role of the FCC and Congress

As stated by one interviewee, “there is something besides the market in the world ... if

unresolved market forces were to be the criteria under which all would be conducted, why does

the Constitution give Congress the power to regulate commerce?”
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As a large bureaucracy with wide-ranging responsibilities, the FCC presents myriad faces before

the public. When it comes to small, women- and minority-owned businesses, the FCC too often

has been perceived as being detrimental to policies, procedures and enforcement that would

enhance participation by small, women- and minority-owned businesses.

This study revealed anger, frustration, disappointment, and resignation on the part of numerous

small, women- and minority-owned business owners at Congress and FCC actions that have

erected and heightened barriers to entry and growth. Their concerns included:

ÿ The FCC “looking the other way” when confronted with Jim Crow discrimination in

broadcasting in the American South;

ÿ The perceived lack of strong, corrective action by the FCC on EEO and other

discriminatory policies perpetuated by “big industry”;

ÿ The FCC’s acquiescence to the distribution of licenses in the secondary market where

information and capital are rationed within “old boy networks”;

ÿ A long-standing give-and-take relationship between organized industries, e.g.

broadcasters, local and long distance telephone service providers, and the FCC;

ÿ Routine FCC acquiescence to interests in the private sector, Congress and the Courts

opposed to the concerns of small, women- and minority-owned business;

ÿ A perceived lack of responsiveness historically to advocacy by small, minority and

female business interests;

ÿ The perception of a willing acquiescence to the abandonment [by Congress] of the

minority tax certificates and other “ownership programs” without substantive protest

upon the earliest sign of judicial opposition;

ÿ The FCC’s support for auctions, despite possible disparate implications of distributing

wireless and broadcast licenses to the highest bidder;

ÿ Self-interest, resistance and inertia within the FCC on small, women- and minority

business issues;

Leading up to passage of the 1996 Act, advocacy and representation on behalf of small, minority

and female business interests before the FCC was considered weak and ineffective, in

comparison with stronger, more influential lobbies representing existing broadcasters and large

corporations. Fear of reprisal from those in a bureaucracy perceived as being more concerned

with future employment with large corporations served to squelch some from louder, more

public dissent.

Many interviewees perceive the FCC as contributing to the lack of opportunities and

participation by small, minority- and women-owned businesses in the communications market. It

is little wonder that many study participants have reluctantly given up hope of prevailing as

competitors in broadcast and wireless industries in the future.
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D. Discrimination

Discrimination appears to have played an important role as an entry barrier, especially to

minority participation in broadcasting, from;

ÿ segregation in the Jim Crow South, legally depriving African Americans and their

communities of information, employment and ownership opportunity,

ÿ pervasive discrimination and structural barriers to financing and economic

participation,

ÿ pre-1996 Act barriers to entry and expansion based on advantages of size and

scale derived under previously discriminatory advantage,

ÿ the post-1996 Act rollback of previous advances made, primarily from the tax

certificate program.

A clear majority of women and minority licensees interviewed in the study believed they had

encountered discrimination in their attempts to become licensees: in raising capital, in the

secondary market, and in operations. As a result, successful licensees persevered, despite

discrimination at many turns, and, despite the belief that their experiences would have been

significantly easier, if their circumstances had been exactly the same, and they were White

males.

This anecdotal study illustrates the complex, intricate and pernicious working of historical bias

and discrimination throughout our society. It demonstrates the tenacity of individuals in the face

of such discrimination to persevere, to strive to break through in spite of bias. And it

demonstrates the difficulty and enormous resources required to uncover definitive proof of the

bias that lies within the hearts and behind the actions of some.

E. Bidding Credits in Wireless Licensing

The study participants perceived the bidding credits as a failure even though the FCC used them

in the wireless auctions in an effort to enhance opportunities for small, minority-, and womenowned businesses. Few small businesses, and precious few women and minority businesses,

found bidding credits of sufficient value to offset the capital resources of large companies in

auction contests. The biggest impact of bidding credits, according to interviewees, was to

artificially elevate the final price of wireless licenses, with little or no impact, on the eventual

result of licenses being issued to small businesses.
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F. Relaxation of Ownership Caps

Small-, women- and minority-owned businesses, with a small number of notable exceptions

(e.g., Radio One Communications, Z-Spanish Radio, Granite Broadcasting) have been and

continue to be driven rapidly out of radio and television media ownership. Nearly all cite the

relaxation of ownership caps under the 1996 Act as the principal cause.

With passage of the 1996 Act, nearly every small businessperson interviewed expressed new and

substantial difficulties in competing and surviving, with expansion being virtually out of the

question. The result has been an avalanche of station sales to dominant national “consolidators.”

This trend appears to have impacted all small and local radio broadcast businesses and has

appeared to have affected minority broadcasters particularly.

G. Loss of Community Service and Diversity of Viewpoints

This study’s interviewees uniformly reported that small, minority-owned businesses are more

integrated, aligned with, and responsive to the local communities that they serve. Their

declining participation in broadcast and wireless ownership, it appears, has resulted in a

diminished concern for local issues and needs, which has led to a loss of diversity of viewpoints.

H. Potential Loss of Civic Participation, Democratic Values and Freedom of Speech

Informal networks of licensees, attorneys, brokers and others have worked together to distribute

and redistribute licenses among those with access to the secondary market for decades. Only

recently have a few women and minorities been included in this network.

The interviewees reported that this lack of access to and inclusion in the secondary market

network, made worse by widespread discrimination in the capital markets, and the lack of strong,

effective government and regulatory intervention, has contributed to the long-standing underrepresentation of women and minorities in broadcasting.

The present day effect of these conditions, deeply rooted in exclusionary market and regulatory

structures and behaviors, create current and future market entry barriers for small, women- and

minority-owned businesses of crisis proportions. These barriers result in;

ÿ fewer small, women and minority broadcast licensees,

ÿ fewer broadcast stations and wireless licenses owned and operated by small,

women and minority licensees, and

ÿ fewer communities served by local and community-based small, women and

minority licensees.
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This impact, especially upon small and minority-owned businesses, as became apparent in this

study, was overwhelmingly clear. The result, according to many of those interviewed, has been

a dramatic loss in the diversity of viewpoints provided by the nation’s mass media, and a

concentration of influence and control of the means of mass communication of possibly

unprecedented proportions.

I. The FCC is the Public Trustee of the Broadcast and Wireless Spectrum

Passage of the 1996 Act, and the rapid and harmful impact on small, women- and minorityowned businesses as foreseen and testified to by many, calls into question the proper role of the

FCC in allocating spectrum consistent with the public interest, convenience and necessity.

Questions such as:

ÿ What is the role of the FCC in an era of auctions and consolidation? How does

the FCC balance its goal of maximizing revenues with maximizing diversity?

Which is the greater public good?

ÿ What constitutes appropriate trusteeship and management of public assets such as

radio frequency spectrum? To whom do the airwaves belong? Do they belong to

the highest bidder in auctions that will inevitably be controlled by corporations

that are nearly 100% controlled by White men?

ÿ Who protects individuals and communities from the excesses and effects of

capital and markets without “appropriate constraints” on corporations?

ÿ What governmental body provides protection against anti-competitive behavior in

local markets, as the FTC and DOJ provide over national markets?

ÿ In a free-market economy, what is the measure of “appropriate regulation?” Is the

current level of FCC regulation insufficient?”

This study revealed a strong linkage between small business, local ownership and the professed

core commitment by the business owner to local interest and community service. These values

were offered in contrast to the obligations of publicly owned companies consolidating the

broadcast industry to maximize profit and shareholder value.

Radio in particular reveals itself in the words of this study’s participants to be a uniquely

personalized and local voice of the community. This study, therefore, calls into question the

meaning and value in our society of public service and community interest.

Frequent mention was made by participants interviewed of “profit taking at the expense of social

responsibility” referring to the FCC’s sponsoring of auctions to distribute licenses. Has the FCC

and the government become “corrupt from greed” as many suggest, exchanging public interest

for governmental revenue as its purpose, mission and charter?
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In the wake of rapid technological changes and market consolidation, finally, what is the FCC’s

role in shepherding and leading the protection of our freedoms of speech and diversity of

viewpoint on the nation’s airwaves? Small, women and minority participants interviewed were

passionate in their belief that vital freedoms and values have suffered, perhaps irreparably, from

recent consolidations of media power in the hands of relatively few corporate owners.

To the extent that important national trusts are threatened, and possibly compromised, as this

study suggests, critical questions are raised concerning the nature of the relationships,

responsibilities, accountabilities, and authority between the nation’s industries, its legislative and

judicial branches, its citizens, and our society.
Section VI. – Conclusion Whose Spectrum Is It Anyway?

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VI. CONCLUSION

Historically, minorities, and less so women and small businesses in general, have confronted

barriers to entry into the broadcasting industry. An anecdotal study of this nature is particularly

valuable because it specifically illustrates the difficulties faced by small, minority- and womenowned businesses. This study provides a face and voice to real-life people who have

encountered barriers that are all too real. They have faced discrimination in the financial

markets, limiting access to capital. They have faced discrimination in their communities,

limiting access to employment opportunities and land for communication towers. They have

faced discrimination in the secondary market, limiting access to information about and the

opportunity to participate in the buying and selling of stations. They have faced discrimination

in the advertising industry, limiting access to advertising revenue, the life blood of a

broadcasting company. All of these factors have contributed to a disproportionately low number

of minority and women owners in broadcasting who have been able to sustain their company’s

viability and position it for growth.

In the wireless industry, where realistic opportunities for small businesses to participate in

acquiring licenses have only been available since the middle 1990s, lack of access to the large

sums of capital needed to build out wireless systems has been the greatest barrier to entry.

Wireless licensees have encountered the same difficulties acquiring debt and equity financing as

those experienced by their broadcast licensee counterparts, causing many of them to default on

financial obligations to the FCC, thereby having to forfeit their licenses.

To help mitigate these market forces, both the FCC and Congress have established through the

years various ownership programs to increase the opportunities for market entry into both

broadcasting and wireless telecommunications for small, minority- and women-owned

businesses. Programs such as minority ownership programs in the comparative hearing process;

bidding credits in the lotteries; and installment payments, bidding credits and favorable interest

rates in the auctions, were established to enhance the probability that women, minorities and

small business owners would participate in the FCC’s processes for awarding new licenses. The

distress sale and especially the tax certificate policies opened up access to the network of sellers

and brokers in the secondary market for media properties to the often excluded minority

prospective licensee.

Countering these positive programs, Congress and the courts halted what progress was being

made in the increase in broadcast ownership by minorities, women and small businesses when in

1995 Congress repealed the tax certificate program and the courts ruled in Adarand, and in 1996

Congress passed the Telecommunications Act of 1996 which deregulated broadcasting and

brought on a sudden and rapid consolidation of media properties into the hands of the few. It

appears that the confluence of these events, with their collective negative impact on small,

minority- and women-owned businesses in the broadcasting and wireless industries, has virtually

forestalled any progress that was being made and has, in fact, created a crisis in participation in

telecommunications by these businesses. The barriers to entry have been raised so high that, left

standing, they appear virtually insurmountable. Minority, women and small business ownership
Section VI. – Conclusion Whose Spectrum Is It Anyway?

Page 133

in these industries is diminishing at such an alarming rate that many we spoke with felt we had

passed the point of no return.

While discussing passionately the negative financial and personal impact small, minority- and

women-owned businesses are sustaining from these converging forces, the greatest concern by

far of those with whom we spoke was the loss of service to their communities, the loss of

diversity of viewpoint, and the threat to freedom of speech that the market consolidation in

telecommunications was creating. They collectively believed that the mission of protecting the

public interest must continue to be served and that market forces left to their own devices would

seriously erode that purpose.

The participants in this study generally agreed that programs, such as the tax certificate policy,

that provide incentives to sellers and investors to conduct business with specific groups of people

work well. Without them, if history is a predictor of the future, the network of participants in the

secondary market for licenses (sellers, brokers, debt and equity investors) will continue to do

business with people they know and with whom they have previously had successful dealings.

Without these incentives, the door to opportunity will remain closed to all new entrants except

for the lucky few who come to the table with just the right mix of vision, experience, and equity.

Furthermore, we heard repeatedly that small, minority- and women-owned businesses need a

louder voice before the Commission if their interests are to be served as mandated. They are

lacking the resources, either individually or collectively, to be strong enough advocates for

themselves. Whether it is more authority for the Office of Communications Business

Opportunities or an office which helps to expedite applications and licensing for small

businesses, these entities have special needs for timely responsiveness and an understanding

from the Commission of the issues they confront running a small business day-to-day. As a

substitute for presence before the FCC, it is also imperative that the Regulatory Flexibility Act be

consistently and seriously implemented, as these actions can serve as the ombudsman for those

whose voice is but a whisper.

Lastly, what also became clear through our study is that there are three government agencies, the

FCC, SBA and the National Telecommunications and Information Administration (Department

of Commerce) that are focused on promoting opportunities in telecommunications for small,

minority and women-owned businesses. Yet there was little evidence that much, if any,

collaborative effort existed to coordinate these agencies’ activities to the benefit of those they are

trying to serve. To have these agencies speak loudly, with one voice where possible, before the

Commission and Congress would meaningfully strengthen the advocacy these businesses so

dearly need.
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Without serious and swift dialogue around how to overcome the market entry barriers discussed

in this report, there will be little chance for small, minority- and women-owned businesses to

enter into and succeed in either broadcasting or wireless telecommunications. It is important that

Congress, the courts and the FCC consider the impact that market forces, left unchecked, will

have on the public good. It seems that the business of telecommunications has shifted its

primary focus from serving the people to serving the pocketbook. It is imperative that a new

balance be achieved if the public interest is to be served.
Appendix A – Statutory, Regulatory and Historical Timeline Whose Spectrum Is It Anyway?

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APPENDIX A - HISTORICAL TIMELINE
FEDERAL COMMUNICATIONS COMMISSION

STATUTORY, REGULATORY AND HISTORICAL TIMELINE

1950-Present

CATEGORY EVENT DATE

 ̧ As a result of Ashbacker Radio Corp. v. FCC, 326 U.S. 327 (1945), the

FCC was required to hold comparative hearings for mutually exclusive

applications. The Supreme Court held that “[w]here the Federal

Communications Commission has before it two applications for

broadcasting permits which are mutually exclusive, it may not, in view of

the provisions of the Act for a hearing where an application is not granted

upon examination, exercise its statutory authority to grant any applications

upon examination without a hearing. ...” 1945

 ̧ The Policy Statement on Broadcast Comparative Hearings, 1 F.C.C. 2d 393

(1965) articulated and clarified the criteria used in the comparative hearings

for assigning licenses. The seven (7) areas for which applicants received

credit (or “points”) were: diversification of control, integration of

ownership into management, proposed program service, past broadcast

record, efficient use of frequency, character, and other significant and

relevant factors to be considered in the decision-making process. 1965

Primary Market:

 Comparative Hearings

 ̧ Comint Corp. challenged the FCC’s refusal to explicitly consider race in the

comparative hearing process (in which Mid Florida Corp. was awarded the

license) and appealed the FCC ruling to the D.C. Court of Appeals. Comint

argued that minority ownership should be given comparative credit on the

basis of the 1965 Policy Statement on Broadcast Comparative Hearings.

The FCC noted that “the Communications Act . . . is color blind and

therefore, in a comparative broadcast proceeding . . . Black ownership

cannot and should not be an independent comparative factor . . .” 1965

Appendix A- Historical Timeline Whose Spectrum Is It Anyway?

 Page 136
CATEGORY EVENT DATE

 ̧ In the 1974 TV 9 Inc. v. FCC decision, the DC Court of Appeals reversed the

result of the Mid Florida comparative hearing. The Court concluded that

minority stock ownership is “a consideration relevant to a choice among

applicants of broader community representation and practicable service to the

public. ... We hold only that when minority ownership is likely to increase

diversity of content, especially on opinion and viewpoint, merit should be

awarded.” This decision set a new precedent for the incorporation of minority

participation as a factor in the comparative hearing process. 1974

 ̧ In Rosemore Broadcasting, Co. (1975), the FCC held that integrated female

ownership should be awarded credit in comparative hearings because women,

like minorities, are “likely to increase diversity of content.” The FCC went on

to state that female participation in an application can be given credit when it

“reflects broader community representation.” 1975

 ̧ Garrett v. FCC (1975) finds that minority ownership/participation is connected

to providing programming responsive to the needs of the minority community. 1975

 ̧ In the 1977 Flint Family Radio decision, the FCC clarified the primacy of

importance of both minority ownership and the participation of these owners

in station affairs. “... the Supplemental Opinion of the Court makes it quite

clear that the two essential elements necessary to receive merit are Black

ownership and participation by these owners in station affairs.” 1977

 ̧ 1978 Statement of Policy on Minority Ownership of Broadcasting Facilities

formalized the use of minority and gender credits in the comparative hearing

process. In 1990 the FCC declined to extend enhancement credits for minority

ownership under diversification of ownership criterion. 1978

Primary Market:

 Comparative Hearings

 (continued)

 ̧ A Review Board hearing the Gainesville Media, Inc. case concluded the “. . .

merit for female ownership and participation is warranted upon essentially the

same basis as the merit given for Black ownership and participation, but that it

is a merit of lesser significance.” This decision demonstrated that credit

should be applied for female participation in a broadcast license application,

but that credit would not be as significant as that credit applied for minority

participation. 1978

Appendix A – Historical Timeline Whose Spectrum Is It Anyway?

 Page 137
CATEGORY EVENT DATE

 ̧ The FCC articulated and explained its renewal expectancy for incumbent

broadcasters in license renewal comparative hearings in Cowles

Broadcasting, Inc. (WESH-TV) [affirmed Central Florida Enterprises, Inc.

v. FCC (1982)]. 1981

 ̧ Financial qualifications changed from having to prove financial viability to

having only to sign a certificate that the applicant was able to meet the

financial requirements. 1982

 ̧ Until 1986, the term “character” (as a criterion for license assignment) was

often interpreted as moral character. On January 14, 1986 the Commission

issued its Policy Regarding Character Qualifications in Broadcast

Licensing, outlining which character issues should be considered and how

they were to be investigated. The issues to be considered involved various

acts of fraud, misconduct, misrepresentation, and abuse in commercial and

government dealings as well as criminal conviction. Eventually, character

issues were eliminated as a comparative criterion but were kept as a basic

criterion. 1986

 ̧ The Policy Regarding Character Qualifications in Broadcast Licensing, 5

F.C.C.R. 3252 (1990) made certain modifications to FCC policies regarding

character qualifications because the previous policy statement “took an

overly narrow view of the range of misconduct that should be relevant in

licensing decisions covered by it.” 1990

Primary Market:

 Comparative Hearings

 (continued)

 ̧ The decision in the Bechtel v. FCC case (1993) had the effect of freezing

comparative hearings . 1993

 ̧ The Telecommunications Act of 1996 eliminated the role of comparative

hearings in the renewal of broadcast licenses. 1996

Appendix A – Historical Timeline Whose Spectrum Is It Anyway?

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CATEGORY EVENT DATE  ̧ Section 309(i) of the Act granted FCC authority to use lotteries to choose

among mutually exclusive applications. Used to award wireless licenses for

cellular, Specialized Mobile Radio, Multi-channel Multi-point Distribution

Services, and Low Power TV. Congress enacted legislation that caused this

section to expire on July 1, 1997. 1982

 ̧ Section 390(i) of the Act required the FCC to establish incentives, rules and

procedures providing credit for minority-controlled applicants in awarding

licenses. Congress enacted legislation that caused this section to expire

July 1, 1997. 1982

 ̧ In the Lottery Second Report and Order the FCC authorized minority

ownership policies for Low Power TV lotteries. 1983

Primary Market:

 Lotteries

 ̧ The 1993 Omnibus Budget Reconciliation Act limited the use of lotteries to

the allocation of non-commercial licenses and authorized a competitive

bidding system (auctions) to distribute commercial licenses. 1993

 ̧ The Omnibus Budget Reconciliation Act of 1993 (which added Section

309(j) to the Communications Act of 1934) authorized the FCC to allocate

licenses through a competitive bidding process (auctions). Initially the

auctions were used only for wireless. 1993

 ̧ Section 309(j)(3)(B) instructed the FCC to establish competitive bidding

procedures that would “disseminat[e] licenses among ... small businesses

... and businesses owned by members of minority groups and women.” 1993

Primary Market:

 Auctions

 ̧ 1993 Auction Notice of Proposed Rulemaking determined that race- or

gender-conscious remedies must meet the intermediate standards of judicial

scrutiny; i.e., the remedy must be substantially related to serve a significant

governmental interest. 1993

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 Page 139
CATEGORY EVENT DATE  ̧ A 25% bidding credit was made available to women and minority

businesses for selected nationwide and regional PCS and Interactive Video

and Data Services narrowband auctions. (The Adarand Constructors v.

Pena case (1995) held that any federal program or policy which uses race as

a basis for its decision-making must withstand strict judicial scrutiny. Post

Adarand, the bidding credits were made available to small businesses

without distinction for race or gender.) 1994

 ̧ The bidding credits for women and minority businesses increased to 40% in

two of six auction spectrum blocks in the regional narrowband auctions.

Post Adarand, the credits were made available to small businesses without

distinction for race or gender. 1994

 ̧ The Commission established an installment payment program (for down

payments on licenses) and interest rates for small, minority- and womenowned businesses bidding for the basic trading area, major trading area, and

regional narrowband licenses. Post Adarand, the small business credits

were made available without distinction for race or gender. The FCC has

not extended the installment payment program to auction participants since

the C and F Block auctions. 1994

 ̧ The Competitive Bidding Fifth Report and Order set aside PCS broadband

Auction Blocks C and F for designated entities on the basis of their status as

minorities, women, small businesses, or rural telephone companies

(“Entrepreneurs Blocks”). 1994

Primary Market:

 Auctions (continued)

 ̧ The Competitive Bidding Fifth Report and Order established rules

concerning passive non-voting investors, affiliation, additional bidding

credits, tax certificates (for initial investors in minority- and women-owned

businesses – later dropped after Congress eliminated the tax certificate

program in 1995), and installments plans were adopted to enhance

opportunities for businesses owned by women and minorities. There was a

four-tier range of bidding credits, with the most favorable bidding credits

being given to businesses that were small, women-owned and minorityowned. 1994

Appendix A – Historical Timeline Whose Spectrum Is It Anyway?

 Page 140
CATEGORY EVENT DATE  ̧ The FCC eliminated all race- and gender-based provisions in competitive

bidding for the C and F Block auctions. Credits that were available only to

members of minority groups and women were now made available to all

small businesses. 1995

 ̧ The Balanced Budget Act of 1997 expanded the FCC’s competitive bidding

authority under Section 309(j) to include mutually exclusive initial license

applications for certain types of broadcast licenses. On November 26,

1997, the Commission released a Notice of Proposed Rulemaking

proposing general competitive bidding procedures for all auctionable

broadcast services within the scope of the amended 309(j), with certain

exceptions. This Act also required the FCC to promote “economic

opportunity for a wide variety of applicants, including businesses owned by

members of minority groups and women.” 1997

 ̧ On August 18, 1998, the Commission released its First Report and Order

setting forth procedures governing auctions of broadcast service licenses. 1998

Primary Market:

 Auctions (continued)

 ̧ The first broadcast auction (the Bechtel auction) was completed in October

1999. 1999

 ̧ The 1978 Statement of Policy on Minority Ownership Broadcast Facilities

created the Tax Certificate program which provided tax deferral benefits to

the seller of a media property if it was sold to a minority business. The tax

certificate policy encouraged and promoted minority ownership by giving

sellers a two-year like-kind-transfer tax deferral for the sale of licenses to

minorities if the proceeds were reinvested in a similar communication

property. 1978

Secondary Market:

 Tax Certificates

 ̧ Congress repealed the tax certificate program (due to allegations of abuse)

with the passing of the Self-Employed Persons Health Care Deduction

Extension Act of 1995. 1995

Secondary Market:

 Distress Sales

 ̧ The 1978 Broadcast Policy Statement created the Distress Sale policy

which allowed for license owners that were under scrutiny by the FCC (and

under threat of license revocation) to sell their station to a minority for 75%

of the appraised value. In return, the FCC would cease its inquiry into the

suspect license owner. Post Adarand, the FCC has not utilized the distress

sale policy. 1978

Appendix A – Historical Timeline Whose Spectrum Is It Anyway?

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CATEGORY EVENT DATE

 ̧ The three-year trafficking rule applied to an FCC grant of a construction

permit or an assignment or transfer by the FCC. If in requesting a grant of

FCC approval for a transfer or assignment, it appeared that the licensee held

the license for less than three years, the FCC would designate the transfer or

assignment for hearing to determine whether the proposed transfer or

assignment was in the public interest. The three-year rule did not prohibit

someone from transferring or assigning within the three-year period, but it

did make it more difficult to do so.

Secondary Market:

 Anti-Trafficking Rules

 ̧ The one-year trafficking rule replaced the prior three-year anti-trafficking

rule. The one-year rule required the retention of a license acquired through

the comparative hearing process or the minority ownership process (i.e.,

distress sales, tax certificates and comparative hearings) for at least one

year, unless it was sold to another minority. Persons who acquired the

license from non-minorities in the secondary market were not regulated by

the one-year anti-trafficking rule.

 ̧ The 1969 Non-Discrimination Employment Policy Statement forbade

discrimination on the basis of race, color, religion or national origin in

employment practices by licensees of commercial or noncommercial

broadcast stations. Result: each station had to establish an equal

employment opportunity program. This was the first time the FCC directly

addressed the issue of race in a formal policy ruling. This Policy Statement

established the Commission’s right to revoke licenses and to hear

allegations of EEO violations in comparative hearings. 1969

 ̧ In 1970, the FCC adopted its “one to a customer rule” whereby licensees

could have only one AM, FM, and TV license in a given market. (See

charts below for more detailed information on ownership rules.) 1970

Statutory and Regulatory

Developments (not

highlighted elsewhere)

 ̧ In 1971, the FCC modified the ownership rules to allow AM/FM

combinations and radio-UHF combinations in the same market; only

VHF/radio combinations were banned by the rules. 1971

Appendix A – Historical Timeline Whose Spectrum Is It Anyway?

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CATEGORY EVENT DATE

 ̧ In 1979 the World Administrative Radio Conference expanded the AM

band in the Western Hemisphere. The FCC used the expanded band to

reduce congestion in the existing band by allowing existing AM licensees to

operate new stations in the expanded band, and then after a transition

period, shut down the old stations. The FCC limited the entire expanded

band to these existing migrating stations. (1991) Several civil rights groups

proposed that the existing broadcasters be offered tax certificates to sell

existing (to-be-shut-down) stations to minorities. The FCC rejected this

proposal and held that improving congestion was its primary goal. (1993)

1979

1991

1993

Statutory and Regulatory

Developments (not

highlighted elsewhere –

continued)

 ̧ In its 1984 Memorandum Opinion and Order, the FCC declined to extend

minority ownership policies to common carrier services. 1984

 ̧ In 1986 the FCC initiated a Notice of Inquiry on the topic of race and

gender ownership and employment policies in the awarding of broadcast

licenses (Reexamination of the Commission’s Comparative Licensing,

Distress Sales, and Tax Certificate Policies Premised on Racial, Ethnic, or

Gender Classifications). To ensure that those policies were not eliminated,

Congress included provisions in the Commission’s appropriations bills from

1988 to 1994 to prohibit the Commission from expending funds on any

initiative designed to eliminate the broadcast minority ownership policies. 1986

 ̧ In 1988, the FCC announced that it would be inclined to grant waivers to

the one-to-a-market ownership rule in those top 25 markets that had at least

30 broadcast voices. 1988

 ̧ City of Richmond v. J.A. Croson requires a strong basis in evidence of

discrimination for any state or local government conclusion that raceconscious remedial action is necessary. The Court ruled that the

government cannot rely on general societal discrimination to make its case.

Instead, the government must establish that it is remedying either its own

discrimination or discrimination in the private sector in which the

government has become a “passive participant.” 1989

Appendix A – Historical Timeline Whose Spectrum Is It Anyway?

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CATEGORY EVENT DATE

Statutory and Regulatory

Developments (not

highlighted elsewhere –

continued)

 ̧ In Metro Broadcasting, Inc. v. FCC (1990) the Court, applying intermediate

scrutiny, upheld the constitutionality of the FCC’s distress sale and

comparative hearing minority ownership policies. The Court stated that the

policies served the important governmental interest of promoting diversity

in broadcast programming. The Court found that the benefits of

programming diversity are shared by two groups – minorities who gain

access to the broadcasting industry through ownership and “the American

public [who] will benefit by having access to a wider diversity of

informational sources.” Second, the Court found that a causal link exists

between minority ownership and broadcast diversity and therefore that the

minority ownership policies were substantially related to the achievement of

the desired end. 1990

 ̧ In 1992, the FCC relaxed the duopoly rules so that in markets with fewer

than 15 radio stations, licensees were permitted to own up to three stations

as long as the number owned was less than 50 percent of the total number of

stations in the market. In markets with 15 or more stations, the licensees

were permitted to own up to four stations; no more than two could be of the

same service, and there was an audience share cap of twenty-five percent. 1992

 ̧ The 1993 Omnibus Budget Reconciliation Act contained specific language

delegating to the Commission the authority to devise rules to ensure

diversity in license ownership. More specifically, the FCC was instructed

to ensure that women and minorities have the opportunity to participate in

the provision of spectrum-based services. 1993

 ̧ In the Bechtel v. FCC decision, the D.C. Circuit Court found that the

“continued application of the integration [of ownership, management and

programming] credit is arbitrary and capricious, and therefore unlawful.”

By invalidating the integration credit the court effectively eliminated gender

and race ownership and employment policies associated with the integration

credit. In 1994 the FCC suspended all active comparative hearings until an

adequate resolution to the issues raised in Bechtel could be formulated.

1993

1994

Appendix A – Historical Timeline Whose Spectrum Is It Anyway?

 Page 144
CATEGORY EVENT DATE

 ̧ In Adarand Constructors, Inc. v. Pena the Court ruled that any federal

program or policy which uses race as a basis for its decision-making must

withstand strict judicial scrutiny. It is not clear whether the diversity

rationale that survived the intermediate scrutiny standard of Metro would

survive the strict scrutiny standard of Adarand. 1995

 ̧ Section 257 (added to the Communications Act of 1934 by the

Telecommunications Act of 1996) requires the FCC to eliminate market

entry barriers for entrepreneurs and other small businesses. 1996

Statutory and Regulatory

Developments (not

highlighted elsewhere –

continued)

 ̧ In the Telecommunications Act of 1996, Congress directed the FCC to

further relax the duopoly rules so that licensees in markets with 45 or more

commercial radio stations can “own, operate or control up to 8 stations, not

more than 5 of which are in the same service.” In markets with between 30

and 44 stations, the limit is seven stations, “not more than 4 of which are in

the same service.” In markets with between 15 and 29 stations, the limit is

six stations, of which not more than 4 are in the same service. In markets

with 14 or fewer stations, the limit is five stations with not more than three

in the same service, except that a party may not own, operate or control

more than 50 percent of the stations in such market. Furthermore, the Act

eliminated all limits on the number of radio stations that one licensee can

own nationally, eliminated the numerical cap on television stations and

increased the national audience reach cap to 35% for TV. 1996

 ̧ The Telecommunications Development Fund (“TDF”) was authorized by

the 1996 Telecommunications Act to provide a source of loans and

investment capital to small communications businesses. 1996

 ̧ Lutheran Church – Missouri Synod v. FCC (U.S. Court of Appeals, the

District of Columbia Circuit, April 1998) held that certain provisions of the

FCC's broadcast EEO rules were subject to strict scrutiny and

unconstitutional. The FCC adopted a Notice of Proposed Rulemaking

outlining new rules to further equal employment opportunity in

broadcasting in a manner that is consistent with the court’s decision

(November 1998). New rules were adopted in January 2000. 1998

Appendix A – Historical Timeline Whose Spectrum Is It Anyway?

 Page 145
CATEGORY EVENT DATE

Statutory and Regulatory

Developments (not

highlighted elsewhere –

continued

 ̧ On January 20, 2000, the FCC adopted rules creating a new, low power FM

(LPFM) radio service. The new LPFM service is to be exclusively

noncommercial; there will be no commercial LPFM stations. In addition,

current broadcast licensees or parties with interests in other media – cable or

newspapers - are not be eligible for LPFM stations. 2000

 ̧ Mrs. Marie Zimmerman became the first woman to own a radio license. 1922

 ̧ Station WDIA-AM in Memphis, Tennessee, became the first radio station

to devote all its air time to Black programs. 1947

 ̧ Mr. Jesse B. Blayton purchased WERD in Atlanta, Georgia, and became the

country’s first Black radio station owner. 1949

 ̧ First Hispanic radio station went on the air. mid-1950s

 ̧ Mr. Andrew Langston becomes the first African American to participate in

a comparative hearing. His license was ultimately awarded in 1974. 1960

 ̧ The National Association of Black-Owned Broadcasters (NABOB) was

created as an outgrowth of a National Association of Broadcasters (NAB)

seminar on minority ownership. 1972

 ̧ First Black-owned TV license awarded by FCC to WGPR-TV (owned by

the International Free and Accepted Modern Masons, Inc., in Detroit,

Michigan. 1973

 ̧ Dorothy Brunson became the first African-American woman to own a

television station. 1989

Historical Events

 ̧ MTDP (Department of Commerce) created ComTrain to provide a

management training program for minority owners of commercial radio and

television stations. 1993

Appendix A – Historical Timeline Whose Spectrum Is It Anyway?

 Page 146
Local, National and Cross-Ownership Rules

(adapted from KPMG, LLP report: History of the Broadcast License Application Process)

Local Market National Market

Year AM FM TV AM FM TV Notes

1950 1 1 1 7 7 7 National TV: Only 5 can be VHF

1970 1 1 1 7 7 7

Prohibit ownership of radio and TV

stations in the same market.

Grandfathered existing cross ownership.

1975 1 1 1 7 7 7

Additional prohibition of ownership of

TV and newspapers in same market.

Grandfathered existing cross ownership.

1985 1 1 1 12 12 12

Local TV: Could add a 2nd station if it

was a satellite of the first.

National Radio: Could add 2 additional

AM and FM stations if they were

controlled by minorities or small

businesses.

National TV: Could add 2 TV stations if

they were controlled by minorities or

small businesses. TV stations may

reach no more than 25% of the

population. UHF received 50% credit in

population determination.

Appendix A – Historical Timeline Whose Spectrum Is It Anyway?

 Page 147
Local Market National Market

Year AM FM TV AM FM TV Notes

1992

15+: 2 (<25%

mkt share w/

FM)

<15: 2 (3)

<50% of

stations

15+: 2 (<25%

mkt share w/

AM)

<15: 2 (3) +

<50% of

stations

1 18 18 12

Local Radio:

 ̧ In markets with 15 or more stations,

2 AM/FM ,as long as the combined

share of audience is less than 25%.

 ̧ In markets with less than 15 stations,

3 stations with no more than 2 of

either AM or FM as long as it was

no more than 50% of market’s

stations.

National Radio: Could add 3 AM and 3

FM stations is they were controlled by

minorities or small business.

1994 Same as

1992

Same as

1992

Same as

1985 20 20 Same as1985

National Radio: Could add 3 AM and 3

FM stations if they were controlled by

minorities or small businesses.

1996

45+: 5 (8)

30-44: 4 (7)

15-29: 4 (6)

<15: 3 (5)

45+: 5 (8)

30-44: 4 (7)

15-29: 4 (6)

<15: 3 (5)

Same as

1985 No limit No limit

No limit,

with

exception

(see Note

National

TV)

Local Radio:

 ̧ In markets with 45+ stations, 8

stations with no more than 5 in

either AM or FM.

 ̧ In markets with 30-44 stations, 7

stations with no more than 4 in

either service.

 ̧ In markets with 15-29 stations, 6

stations with no more than 4 in

either service.

 ̧ In markets with fewer than 15

stations, 5 stations with no more

than 3 in either service.

National TV: No limit as long as the

stations did not serve more than 35% of

the nation’s population. UHF received

50% credit in population determination.

Appendix A – Historical Timeline Whose Spectrum Is It Anyway?

 Page 148
Local Market National Market

Year AM FM TV AM FM TV Notes

1999 Same as

1996

Same as

1996

See Note

Local TV

Same as

1996

Same as

1996

Same as

1996, with

exception

(see Note

National

TV)

Local TV: 2 TV stations in market if the

second stations is financially troubled,

not yet built, or is not among the

market’s 4 top-rated stations at time of

purchase and 8 independently-owned

TV stations remain. An owner may also

control overlapping stations if they are

based in different designated market

areas.

National TV: Same as 1996 but in

markets where firms own 2 TV stations,

don’t double count towards 35% of

nationwide population limit.

Cross-Ownership – Local Market::  ̧ If the market has at least 20

separately owned broadcast,

newspaper, and cable “voices,” can

own 2 TV and 6 radio stations or 1

TV and 7 radio stations.

 ̧ If the market has at least 10

separately owned broadcast,

newspaper, and cable “voices,” can

own 2 TV and 4 radio stations.

 ̧ 1 TV and 1 radio allowed

everywhere.

 ̧ TV/newspaper cross-ownership is

prohibited.

Appendix A – Historical Timeline Whose Spectrum Is It Anyway?

 Page 149
Minority Ownership of Broadcasting Licenses

A search of the literature provides limited information about minority ownership of broadcasting licenses. Until the commencement

in 1994 of the Department of Commerce’s National Telecommunications and Information Administration (NTIA) annual studies on

minority commercial broadcast ownership in the United States46, information about minority ownership was primarily reported in

various trade publications. Data for the 1980s proved elusive. The table below presents the information we were able to obtain.

INDUSTRY MINORITIES % YEAR TV Radio Total TV Radio Total

197047 N/A N/A N/A N/A 13 N/A N/A

197248 700 >7,000 >7,700 0 <20 <20 <0.3%

197349 N/A 7,350 N/A N/A 33 N/A N/A

197450 N/A N/A N/A N/A <30 N/A N/A

197851 N/A 8,500 N/A N/A 40 N/A N/A

199452 1,151 9,870 11,021 29 293 322 2.9%

1995 1,155 9,973 11,128 32 311 343 3.1%

1996 1,221 10,191 11,412 38 312 350 3.1%

1997 1,193 10,282 11,475 38 284 322 2.8%

1998 1,209 10,315 11,524 32 305 337 2.9%

 

46 The most recent NTIA study available is for 1997-1998. The 1999-2000 report is currently in progress.

47 Supra note 14, p. 244. Numbers are for Blacks only.

48 Broadcasting, “Coming Through the Front Door of Ownership: A New Direction for Blacks in Broadcasting,” October 30, 1972,

p. 25. Numbers are for Blacks only.

49 Supra note 14, p. 214. Numbers are for Blacks only.

50 Id. Numbers are for Blacks only.

51 Federal Communications Law Journal, Krasnow, Erwin G., Fowlkes, Lisa M., The FCC’s Minority Tax Certificate Program:

Life after Death,” May 1999. 51 Fed. Comm. L.J., 671. Numbers are for minorities taken as a group.

52 Ownership numbers for the years 1994 through 1998 are contained in the NTIA Minority Commercial Broadcast Ownership in the

United States reports for the respective years. Information was collected on ownership in the following four minority groups:

Blacks, Hispanics, Native Americans, and Asian Americans. Numbers for television do not necessarily include low power TV.

Appendix A Whose Spectrum Is It Anyway

?

 Page 150
In contacting prospective interviewees, it became apparent that a number of minorities were no longer station owners. With

consolidation in the marketplace, a few former minority group owners have sold their entire holdings of broadcast properties. The

1999-2000 NTIA report on minority ownership is expected to reveal that there are now far fewer minority broadcast owners than

existed in 1998.

Appendix A – Historical Timeline Whose Spectrum Is It Anyway?

 Page 151
Appendix B – Interview Guide Whose Spectrum Is It Anyway?

Page 152

APPENDIX B - INTERVIEW GUIDE
Appendix B – Interview Guide Whose Spectrum Is It Anyway?

Page 153

FCC HISTORICAL STUDY INTERVIEW GUIDE

Subject Name:_________________________________ Interviewee Control #: ____________

Entity: ______________________________________________________________________

INTRODUCTION

Hello, my name is __________________, and I’m calling from Ivy Planning Group at our

scheduled time to conduct the telephone interview you agreed to have with us about FCC

licensing practices. Is this still a convenient time for you? Great. (Note to interviewer: If this

is not a good time, please reschedule for another time as close to this one as possible.)

As a reminder, Ivy Planning Group, a management consulting company, has been hired by the

Federal Communications Commission to conduct a historical study of what market barriers, if

any, small, minority- and women-owned businesses face or have faced in the acquisition, sale or

transfer of FCC broadcast and wireless licenses during the years 1950 to the present.

I will be asking you about your experiences with the process of acquiring, selling, or transferring

FCC licenses, even if you were not successful in or chose to withdraw from these endeavors. It

is my intention not to ask for any information that is proprietary to you or your company.

Our interview has been scheduled to last an hour. It would be helpful not to have any

interruptions during our time on the phone so that I can take as little of your time as possible. I

will be asking a series of open-ended questions for you to consider. Please answer them to the

best of your ability and recollection. The more you can tell me, the more valuable this report is

likely to be for businesses like yours.

As mentioned at the time we scheduled this appointment, I will be recording our conversation to

ensure the accuracy and quality of my final report. The tape will be transcribed verbatim and will

be archived at the FCC. (NOTE TO INTERVIEWER: If interviewee insists on not being

recorded, turn off the machine and take notes by hand. Let the interviewee know that instead of

the recording you will be making written notes of the conversation.)

Our study, along with several others, will be used by the FCC to determine whether there are or

have been market barriers for small, minority- and/or women-owned businesses and, if so, to

suggest changes in the FCC rules or practices to eliminate these barriers. At the end of our

interview, you will have a chance to make suggestions of your own in this regard.

Well, I’m ready to begin the interview now. Do you have any questions before we start?

To help you understand where I’ll be going with the interview, here are the topics to be covered:
Appendix B – Interview Guide Whose Spectrum Is It Anyway?

Page 154

TOPICS TO BE COVERED

1. Characteristics of the entity(ies) and key person(s) involved in the entity(ies) (NOTE TO

INTERVIEWER: entities are small minority- or women-owned businesses; key persons

are the entities’ principals, partners, investors and affiliates, and for publicly traded

companies, the controlling shareholders and any controlling officers.)

2. Entity’s capital structure and key person(s’) experience in raising capital

3. Effect of FCC policies, provisions and rules on cost or availability of raising capital for

auctions, lotteries and/or comparative hearings

4. Key person(s’) experiences in finding about license acquisition opportunities

5. Key person(s’) experiences with barriers to entry or expansion

6. Key person(s’) experiences with advertising secondary market license sales transactions

7. Key person(s’) reasons for participating in, withdrawing from or succeeding in the

license process

8. Suggestions and recommendations of remedies and/or improvements

First, I would like to quickly review the information you previously faxed to me so I can ask the

right questions later on.

a. For the licenses that you currently have, which preferences/incentives/credits, if any,

were in place at the time you acquired the licenses? Did you take advantage of all of

those to which you were entitled? If not, why not?

b. Have you ever sold or transferred any licenses? What kind? How many? When? By

what means? To whom? Did you take advantage of any preferences/incentives/credits at

the time of sale/transfer? If not, why not?

TOPIC 1. Entity and key person characteristics

Opening question. How was your company organized when you obtained (tried to obtain) your

first license? What can you tell me about the people involved, and their preparation for being an

FCC licensee?
Appendix B – Interview Guide Whose Spectrum Is It Anyway?

Page 155

Follow-up topics. Organizational structure and key players (by name, if possible)? Key

person(s) demographics, education, employment, business, management, and industry

backgrounds (especially with communications and information products and services? Previous

unsuccessful attempts?

TOPIC 2. Entity’s capital structure and key person(s’) experience in raising capital

Opening question. How would you describe your experience in raising capital to become an

FCC licensee? How prepared were you, financially, when you first attempted to become a

licensee, and when you first succeeded? From where did you eventually, or do you traditionally,

receive your capital support? Did you experience any discrimination on the basis or race,

ethnicity or gender? Did you experience any difficulties in raising capital because of the size of

your company?

Follow-up topics. Capital structure? Access to debt versus equity? Cost of capital? Access to

and cost of security, collateral, and funds for deposits? Venture capital? Installment payments?

Use of credit cards? Impact of up-front payments, down payments and FCC procedures?

TOPIC 3. Effect of FCC policies, provisions, rules and requirements on cost or

availability of raising capital for auctions and/or non-auction activities (lotteries and/or

comparative hearings)

Opening Question. How effective has the FCC and/or its policies been in helping or hindering

your efforts to become a licensee? How have their policies, licensing provisions, service rules,

or requirements affected you and your endeavors?

Follow-up topics. Auction and/or non-auction (lottery, comparative hearings)? Cost or

availability of capital? Geographic areas to be licensed? Partitioning and/or disaggregation?

Holding periods? Small business, race, or gender based provisions or preferences? Integration

and/or bidding credits? Deposit and/or capital requirements? Installment or up-front payments?

Distress sales? Tax certificate policy? Other policies, provisions, rules or requirements (e.g.,

spectrum caps, rules limiting participation to small businesses, etc.)?

TOPIC 4. Key person(s’) experiences in finding out about license acquisition

opportunities (primary/secondary markets)

Opening Question. How have you learned of opportunities to acquire licenses via auction,

lottery and/or comparative hearings? How have you learned about opportunities to acquire

licenses on the secondary market? How did you hear of your first opportunity? How did that

first experience change over time? How would you or someone like you tend to learn of license

acquisition opportunities now?
Appendix B – Interview Guide Whose Spectrum Is It Anyway?

Page 156

Follow-up topics. Role and importance of FCC public notices and outreach; other government

agencies; informal personal networks; trade associations; business brokers; attorneys; bankers;

venture capitalists; other financing sources; Small Business Investment Companies (“SBIC”);

Specialized SBICs; incumbent licensees; advertisements in general market, minority- or genderspecific media?

TOPIC 5. Key person(s’) experiences with barriers to entry or expansion

Opening Question. What can you tell us about specific barriers, impediments or roadblocks that

you have faced as you have tried to become an FCC licensee (as a small, minority- or womanowned business)? As you have tried to grow your business? What, if any, market obstacles, such

as advertisers’ pricing practices, have you encountered? What, if any, discrimination have you

faced in your efforts (as a woman, minority or small business owner)? (NOTE TO

INTERVIEWER: If interviewee has participated or thought of participating in the auction

process, ask the following question: What has been your experience with the new electronic

auction bidding process?)

Follow-up topics. Role and importance of FCC public notices and outreach; other government

agencies; informal networks; trade associations; business brokers; attorneys; bankers; venture

capitalists; other financing sources; SBICs; SSBICs; incumbent licensees.

TOPIC 6. Secondary market prospective license seller(s’) experiences with advertising

license sales/transfers

Opening Question. What means did you use to let people know that you wanted to sell or

transfer a license?

Follow-up topics. Minority- or gender-specific media, associations, organizations, or networks;

informal personal networks; business brokers; attorneys; bankers; venture capitalists; other

financing sources; SBICs; Specialized SBICs; incumbent licensees. Are you aware of any

alleged discriminatory practices (related to race, gender or size of business) on the secondary

market that the FCC has been made aware of by complaint or other means? How were these

complaints handled?

TOPIC 7. Key person(s’) reasons for participating, withdrawing or succeeding

Opening Question. Why have you decided to participate in purchasing, selling and/or

transferring FCC license(s)? What have been the most important reasons or significant factors

for your participation?

Follow-up topics. When you have made decisions not to participate or to withdraw from

pursuing/selling/transferring specific licenses, what were the reasons or factors at work?

Reasons for succeeding? For not succeeding?
Appendix B – Interview Guide Whose Spectrum Is It Anyway?

Page 157

TOPIC 8. Suggestions and recommendations of remedies and/or improvements

Opening Question. Based on your experiences, what suggestions can you give us which would

have made your experience in the past easier, or more fair, or which might level the playing field

for citizens like yourself in the future?

Follow-up questions. How could these suggestions have helped you in acquiring, selling

and/or transferring FCC licenses?

CLOSE

Thank you for time and perspectives. You’ve been most helpful to our study. I hope you would

not mind if we called to clarify or follow up on any points we’ve covered today. Please feel free

to contact us toll free at (877) 448-9477, ext. 29 if you think of additional points or information

that may pertain or contribute to our study. Thank you again. 
Appendix C – Demographic Breakdown of Interviewees Whose Spectrum Is It Anyway?

Page 158

APPENDIX C - DEMOGRAPHIC BREAKDOWN OF INTERVIEWEES
Appendix C – Demographic Breakdown of Interviewees Whose Spectrum Is It Anyway?

Page 159

Demographic Breakdown Of Interviewee Pool

A total of 150 licensees, unsuccessful license applicants and key market participants53 were

interviewed for this study of market entry barriers from 1950 to the present in broadcast and

wireless licensing. The pool of interviewees was comprised of 123 licensees/unsuccessful

applicants and 27 key market participants (e.g., brokers, lenders, attorneys).

The following table presents the distribution of the 123 interviewees (82%) who made up the

licensee/unsuccessful applicant pool. Of the total, 91 (74%) were from the broadcast industry

and 32 (26%) were from wireless. The groups are comprised as follows: (1) licenses owned by

minorities (large and small businesses); (2) licenses owned by women (large and small

businesses); and (3) licenses owned by white men (small businesses only).

Demographic Breakdown of 123 Interviewees

(Out of a Total of 150)

NUMBER IN INTERVIEW POOL

TYPE OF OWNERSHIP Broadcast Wireless Total

African American 35 4 39

Hispanic 22 2 24

Asian American 1 5 6

Native American 2 1 3

Women 20 7 27

White men (sm. bsn. only) 11 13 24

 TOTALS 91 32 123

The remaining 27 interviewees (26%) were key market participants.

 

53See Appendix D for a complete listing of interviewees.
Appendix D List of Interviewees Whose Spectrum Is It Anyway?

Page 160

APPENDIX D - LIST OF INTERVIEWEES
Appendix D List of Interviewees Whose Spectrum Is It Anyway?

Page 161

Federal Communications Commission

Historical Market Entry Barrier Study

List of Interviewees - Licensees

 Type of Demographic

Last Name First Name Business Group * 

Acker Gary Radio Black

Adelman Robert Radio/TV Small

Alonzo Alfredo Radio Hispanic

Arroyo George Radio Hispanic

Bailey Bob Carl Radio Black

Banks Joyce Radio Woman (Black)

Barro Mary Helen Radio Woman (Hispanic)

Barton Ernesto Radio Hispanic

Beech Richard Wireless Small

Bennet Caressa Wireless Woman

Blount Frank Wireless Small

Boaldin Trent Wireless Small

Broz Robert Wireless Small

Brunson Dorothy TV Woman (Black)

Bustos Amador Radio Hispanic

Byrne Jerry Wireless Asian American

Caballero Eduardo Radio/TV Hispanic

Camarillo Mateo Radio/Wireless Hispanic

Carter Michael Radio Black

Carter Michael Radio Small

Charles Merrill (Butch) Radio Black

Chase Anthony Radio/Wireless Black

Cherry Charles Radio Black

Chu Narisa N.Y. Wireless Woman (Asian

American)

Chung Sejin Wireless Asian American

Clark Susan TV Woman

*Small = White male; Woman (without racial designation) = White woman
Appendix D List of Interviewees Whose Spectrum Is It Anyway?

Page 162

Federal Communications Commission

Historical Market Entry Barrier Study

List of Interviewees – Licensees

(continued)

 Type of Demographic

Last Name First Name Business Group 

Colon Pablo de Jesus Radio Hispanic

Cook Bush Tony Wireless Woman

Cornwell W. Don TV Black

Correa de Garcia Marti TV Hispanic

Crutchfield Ronald Wireless Black

Culpepper Ricahrd Radio Black

Davenport, Sr. Ronald R. Radio Black

Davila Manuel Radio Hispanic

Davis Carl Wireless Small

Davis Greg Radio Black

Davis Willie D. Radio Black

DeBose Helena Radio Woman (Black)

Dobbins George Wireless Black

Douglas Nancy Wireless Woman

Douglas N. John Radio Black

Ehlinger Phyllis Radio Woman

Evans Mutter D. Radio Woman (Black)

Faush Erskine TV Black

Ferrufino Zenon Radio Hispanic

Fink Robert K. TV Small

Fong Peter W. Wireless Asian American

Ford Richard Radio Small

Frank Peter Wireless Small

Galloway William Radio Black

Garcia Joe Radio Hispanic

Gehman Dale Radio Native American
Appendix D List of Interviewees Whose Spectrum Is It Anyway?

Page 163

Federal Communications Commission

Historical Market Entry Barrier Study

List of Interviewees – Licensees

(continued)

 Type of Demographic

Last Name First Name Business Group 

 Gilliam Art Radio Black

Gomez Nelson Radio Hispanic

Gomez Ed Radio Hispanic

Guernica Tony Radio/TV Hispanic

Guerra Belinda Radio Woman (Hispanic)

Harris Leodis Radio Black

Hawes-Saunders Ro-Nita Radio Woman (Black)

Helton Nora Wireless Native American

Heyward Isaac Radio Black

Hoffman Roger Wireless Small

Howard Samuel Radio Black

Hutton Jeffrey Radio Small

Ishihara Glenn Wireless Asian American

James Ernest Radio Black

Kessler Bennett Radio Woman

Keys Brady, Jr. Radio Black

Langston Andrew A. Radio Black

Laurel Oscar M. TV Hispanic

Lee Jang Radio Asian American

Love Ross Radio Black

Lovink Mia Wireless Woman

Lucas Henry M. Wireless Small

Lucas Rochelle Wireless Woman (Black)

Malcolm Colin B. Radio Small

Marchant Byron Wireless Black

Marshall, Jr. Pluria Radio Black

Martin Stuart T. TV Small
Appendix D List of Interviewees Whose Spectrum Is It Anyway?

Page 164

Federal Communications Commission

Historical Market Entry Barrier Study

List of Interviewees – Licensees

(continued)

 Type of Demographic

Last Name First Name Business Group 

McCollum Amy Radio Woman

McCullah Tazbah Radio Native American

McKinzie Ronda Wireless Woman

Miller Dennis E. Wireless Small

Molina Jose Radio/TV Hispanic

Morgan Tommy Wireless Small

Myrick Charles Wireless Small

Nash Bernadine Radio Woman (Black)

Neidig Andres Radio Hispanic

O'Luck Mark Wireless Black

Oxendine John TV Black

Perres Luis Radio Hispanic

Phillips Martin Radio Small

Portillo Ernesto Radio Hispanic

Price Bud & Cathy Radio Small

Prout Patrick Radio Black

Puri Harish C. Wireless Asian American

Rienstra Francine Radio Woman

Riordan Robert Wireless Small

Roberts Michael TV Black

Ruiz Patty TV Woman (Hispanic)

Salva Isabelle Radio Hispanic

Saunders William Radio Small

Shatz Carol TV Woman

Shaw Johnny &Opal Radio Black
Appendix D List of Interviewees Whose Spectrum Is It Anyway?

Page 165

Federal Communications Commission

Historical Market Entry Barrier Study

List of Interviewees – Licensees

(continued)

 Type of Demographic

Last Name First Name Business Group 

Sherrell Charles R. Radio Black

Simms Raymond Radio Black

Spann Pervis Radio Black

Spann-Cooper Melody Radio Woman (Black)

Sutter Diane TV Woman

Sutton Pierre M. Radio Black

Terry Mical J. Wireless Small

Thomas John C. Radio Black

Tortolero Carlos Radio Hispanic

Tupper John B. TV Small

Turner Edna Radio/Wireless Woman (Black)

Unger Ruby Radio Woman

Valasquez Art Radio Hispanic

Vega, Jr Richard Pablo Radio Hispanic

Walls Willie Radio Black

Waters Nancy Radio Woman (Black)

Weaver-Bey Richard Radio Black

Wolfe James E., Jr. Radio Black

Yunis Enrique Wireless Hispanic
Appendix D List of Interviewees Whose Spectrum Is It Anyway?

Page 166

 Federal Communications Commission

Historical Market Entry Barrier Study

List of Interviewees – Key Market Participants

 Last Name First Name Company Name Type of business

Baldon Virgil Baldon Media Service Consultant/Educator

Brown Tyrone Wiley, Rein & Fielding Communications Attorney

Casey Jim Greenburg & Traurig Communications Attorney

Cobb Brian Media Venture Partners Media Broker

Dickenson Bruce Daniels & Associates Media Broker

Ellis Dwight National Association of Industry Organization

Broadcasters (NAB)

Fontes Brian Cellular Telecommunications Industry Organization

Industry Association (CTIA)

Healey Steve Fleet National Bank Media lender

Honig David Minority Media Advocacy Group

Kalil Frank Kalil & Associates Media Broker

Kilrea Jeff FINOVA Capital Venture Capital

Krasnow Erwin Verner, Liipfert, et. al. Communications Attorney

Lauer John Media Broker

Lee Tony Swidler Berlin Shereff Communications Attorney

Logan Nancy American Women in Radio Advocacy Group

and Television (AWRT)

McNeill Brian Burr Egan (Alta Investment banker

Montero Frank FCC-Office of Communications Former Director of OCBO

Business Opportunities (OCBO)

Parker Rev. Everett United Church of Christ Advocacy Group

Perez Benjamin Abacus Communications Communications Attorney

Rivera Henry Ginsberg Feldman & Bress Former FCC commissioner

Schwartzman Andrew Media Access Project Advocacy Group

Smith Chic Benton Foundation Industry Organization

Trigg Ms. S. Jennell Fleischman & Walsh LLP Communications Attorney

Wilkins Herbert Syncom Venture Capitalist

Williams Darrell A. Telecommunications Venture Capitalist
Appendix D List of Interviewees Whose Spectrum Is It Anyway?

Page 167

 Last Name First Name Company Name Type of business

Winston James (Jim) National Association of Industry Organization

Black-Owned Broadcasters

Winston John Federal Communications Former head of Office

Commission of Communications

Business Opportunities
Appendix E – Ivy Planning Group Profile Whose Spectrum Is It Anyway?

Page 168

APPENDIX E – IVY PLANNING GROUP PROFILE
Appendix E – Ivy Planning Group Profile Whose Spectrum Is It Anyway?

Page 169

COMPANY PROFILE

Ivy Planning Group LLC is a full-service management consulting firm. We assist organizations

in becoming customer-driven by focusing on strategic and tactical planning, organizational

development and redesign, and diversity. Named after the principals’ Ivy League educational

backgrounds, Ivy supports its customers’ continuous improvement processes through the

formation of the organizations’ strategy; translation of strategy into tactics; and implementation

through training, change initiatives and consulting services.

Ivy was honored as a Black Enterprise magazine Year 2000 Emerging Company of the Year

Finalist and by Working Woman magazine for Entrepreneurial Excellence. Ivy was profiled in

DreamMakers: Putting Vision & Values to Work, a book that chronicles how leading-edge

organizations are able to succeed and realize their vision and values. Ivy’s President, Janet C.

Smith, author of The Diversity Action Book: 143 Things To Go Do, was named one of “TwentyFive Influential Minority Women in Business” by Minority Business & Professional Network,

Inc.

Some of the world’s most comprehensive and respected methodologies have come from the U.S.

government’s Reinventing Government initiative, where Ivy Planning Group has been a key

player. Ivy was selected by the Federal Quality Institute to participate as a partner in the design,

development, and rollout of President Clinton’s National Performance Review (NPR)

Reinventing Government initiative. Ivy’s responsibilities included creating strategies to address

valuing diversity, benchmarking, the changing role of leadership, and creating a customer-driven

government. Ivy was selected for its ability to translate private sector concepts into public sector

initiatives, proven planning methodology, curriculum development and training skills, and its

expertise in change management.

Ivy Planning Group supports customers in the public and private sectors. Ivy’s clients include

the U.S. Environmental Protection Agency; the U.S. Departments of Labor, Treasury, and

Justice; the U.S. Patent and Trademark Office; the U.S. Postal Service; the Federal

Communications Commission; The Chase Manhattan Bank; Morgan Stanley Dean Witter &

Company; IBM; Pennzoil-Quaker State; Xerox; Bell Atlantic/Verizon; United Way of America;

and Special Olympics International.

Founded in 1990, Ivy takes pride in the reputation it has built with Federal agencies, Fortune 500

companies, and large non-profits. Ivy is unique in its commitment to provide senior consultants

with proven methodological/process skills and experience, who also bring real experience as

managers, and as change agents, in large organizations. Thus, Ivy’s consultants provide practical

solutions to the challenges associated with organizational change initiatives.

Ivy Planning Group provides the skills, experience and professionalism of a large management

consulting firm and the flexibility, senior level access, service, and caring attitude of a small,

founder-led business.

Ivy Planning Group is a minority- and woman-owned firm certified under the U.S. SBA’s 8(a)

program. Ivy holds GSA/MOBIS Schedule #GS-23F-9805H.
Appendix E – Ivy Planning Group Profile Whose Spectrum Is It Anyway?

Page 170

CONTACT INFORMATION

Janet C. Smith, President

Ivy Planning Group LLC

15204 Omega Drive, Suite 110

Rockville, Maryland 20850-4601

Phone: (301) 963-1669

Fax: (301) 963-8068

Toll Free: (877) 448-9477

JSmith@ivygroupllc.com

www.ivygroupllc.com