A Fundamental Misunderstanding: FCC Implementation of U.S. WTO Commitments

I. INTRODUCTION II. THE SCOPE OF SECTION 310 III. U.S. TRADE COMMITMENTS IV. NAFTA COMMITMENTS V. OTHER TELECOMMUNICATIONS AGREEMENTS VI. WTO COMMITMENTS VII. FCC IMPLEMENTATION OF U.S. COMMITMENTS VIII. CONCLUSION I. INTRODUCTION In Deal or No Deal: Reinterpreting the FCC's Ownership Rules for a Fair Game, (1) Cindy J. Cho concludes that the Federal Communications Commission (FCC) ought to apply a standard of reciprocity to initial and renewal applications for broadcast licenses by foreign-owned companies in order to deal with the anticompetitive conduct of foreign broadcasters in the U.S. market. (2) This conclusion is premised on a fundamental misunderstanding of U.S. trade commitments and the FCC's implementation of those commitments. The market-opening U.S. trade commitments and FCC orders that Ms. Cho discusses do not apply to broadcasting services or broadcast licenses. In fact, nothing in current U.S. trade commitments or FCC orders precludes application of a reciprocity test to applications from non-U.S. companies for a broadcast license. This Article attempts to set the record straight. II. THE SCOPE OF SECTION 310 Section 310 of the Communications Act of 1934, (3) as originally enacted and as modified over time, imposes specific ownership restrictions on who may hold certain types of radio licenses, including: (i) broadcast, (ii) common carrier, and (iii) aeronautical en route and aeronautical fixed radio station licenses. (4) Prior to 1934, [section] 310 contained a flat prohibition on the award of these three types of licenses to foreign individuals, foreign governments, foreign companies, and U.S. companies which are more than twenty-percent owned by foreign individuals, foreign governments, or foreign companies. In 1934, [section] 310 was amended to give the FCC some discretion in allowing up to one hundred percent foreign indirect ownership. (5) The revised [section] 310(b)(4) gives the FCC discretion to allow up to one hundred percent foreign ownership in broadcast and common carrier radio licensees, through a U.S. parent company that has a controlling interest in the licensee. Section 310(b)(4) provides that a company cannot receive a broadcast or common carrier radio license if the company is directly or indirectly controlled by any corporation of which more than twenty-five percent of the capital stock is owned by foreign individuals, foreign governments, and foreign companies, if the FCC determines that the public interest will be served by refusal or revocation of such a license. (6) Thus, under [section] 310(b)(4), the statutory presumption has always been that foreign ownership of a broadcast or common carrier licensee in excess of twenty-five percent is permissible in the absence of an FCC finding to the contrary. In practice, the FCC has exercised its discretion "sparingly," presuming that the twenty-five percent holding company limit should not be waived unless the potential investor can demonstrate that the public interest will not be harmed. (7) Ms. Cho suggests that the FCC's interpretation of [section] 310 changed in the 1990s, prompted by the 1996 Act, from a focus on national security to economic interests. (8) There was definitely a change in the FCC's approach to foreign ownership in the mid-1990s, but only with respect to common carrier licenses. The FCC's policy on foreign ownership of broadcast licenses did not change. As will be described below, the U.S. trade commitments and the orders that Ms. Cho refers to as evidence of new FCC policies with respect to foreign ownership of broadcast licenses, in fact, are limited in scope to international [section] 214 authorizations, (9) cable landing licenses, and authorizations to exceed the twenty-five percent foreign ownership benchmark in section [section] 310(b)(4) for common carrier radio licenses. (10) III. U.S. TRADE COMMITMENTS Ms. …