Source: https://www.fcc.gov/document/fcc-clarifies-policy-foreign-investment-broadcast-licensees-0?contrast=highContrast
Timestamp: 2015-11-30 21:19:40
Document Index: 268883182

Matched Legal Cases: ['§ 1', '§ 554', '§ 310', '§ 310', 'arts 20', 'arts 24', '§ 310', '§310']

FCC Clarifies Policy For Foreign Investment In Broadcast Licensees | FCC.gov
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FCC 13-150
Commission Policies and Procedures Under )
MB Docket No. 13-50
Section 310(b)(4) of the Communications Act, )
Foreign Investment in Broadcast Licensees
By the Commission: Chairman Wheeler and Commissioners Clyburn, Rosenworcel, Pai, and O’Rielly issuing separate statements.
This Declaratory Ruling issued pursuant to section 1.2 of the Commission’s rules1 is intended to remove apparent uncertainty about the Commission’s policies and procedures for evaluating potential foreign investment in broadcast licensees under section 310(b)(4) of the Communications Act of 1934, as amended (the “Act”).2 That section restricts foreign ownership or voting interests exceeding 25 percent of the capital stock in U.S.-organized entities that control broadcast (and certain other types of) Commission licensees, when the Commission finds that the imposition of such a limitation is in the public interest. As noted below, broadcasters, public interest groups, and others have expressed the view that it would be in the public interest to increase access to capital and investment financing for the broadcastsector. These parties assert that, as they read Commission precedent, the application of section 310(b)(4) to broadcast licensees has restricted the flow of foreign capital to domestic broadcast licensees or to entities interested in entering the broadcast industry. They assert that foreign sources of capital would be available to broadcasters if section 310(b)(4) were not applied to block access to those sources. Some parties further believe that the benefits of increased capital from foreign investors would assist, among other beneficiaries, minorities, women, and small broadcast entities, for which access to capital is a particular impediment to market entry. In light of these stated concerns, we believe it useful to articulateand clarify the Commission’s policies and procedures in reviewing applications or proposed transactions that propose foreign broadcast ownership that would exceed the 25 percent benchmark contained in section 310(b)(4) and to assure the broadcast industry and potential foreign investors that the Commission intends to consider such matters on a case-by-case basis.
The Act’s foreign ownership restrictions were originally conceived to address homeland security interests during wartime. They were designed to protect the integrity of ship-to-shore and governmental communications and thwart the airing of foreign propaganda on broadcast stations.3 1 47 C.F.R. § 1.2. See also 5 U.S.C § 554(e).2 47 U.S.C. § 310(b)(4).3 See, e.g., Radio Communications: Hearing on S. 3620 and S. 5334 Before the House Commerce Committee, 62nd Cong 35-37 (Mar. 1, 1912) (adopting predecessor language to section 310). See also Fox Television Stations, Inc., 10 FCC Rcd 8452 (1995) (“Fox I”); Wilner & Scheiner, Request for Declaratory Ruling Concerning the Citizenship (continued….)
Nevertheless, those statutory provisions have always provided the Commission with the discretion to approve foreign ownership in broadcast licensees in excess of the 25 percent benchmark. Section 310 currently states in pertinent part:
(b) No broadcast or common carrier or aeronautical en route or aeronautical fixed radio station license shall be granted to or held by – *** (4) any corporation directly or indirectly controlled by any other corporation of which more than one-fourth of the capital stock is owned of record or voted by aliens, their representatives, or by a foreign government or representative thereof, or by any corporation organized under the laws of a foreign country, if the Commission finds that the public interest will be served by the refusal or revocation of such license.4
The Commission has traditionally viewed the 25 percent benchmark for foreign ownership and voting interests in U.S.-organized entities that control broadcast licensees as the presumptive limit consistent with the public interest.5 It has done so based on a determination that foreign ownership of broadcast stations presents different questions from those raised by foreign ownership in other types of radio spectrum licensees.6 The Commission’s approach to the benchmark for foreign (Continued from previous page) Requirements of Section 310(b)(3) and (4) of the Communications Act of 1934, 103 FCC 2d 511, 516-17 (stating that “. . . Section 310(b) reflects the broader purpose of ‘safeguard[ing] the United States from foreign influence’ in the field of broadcasting. The specific citizenship requirements governing positional, ownership and voting interests reflect a deliberate judgment on the part of Congress as to the limitations necessary to prevent undue alien influence in broadcasting.”) (1985) (“Wilner & Scheiner”); Request for Declaratory Ruling Concerning Section 310(a)(5) of the Communications Act, 67 FCC 2d 604 (1974) (the prior section 310(a)(5) is now section 310(b)(4)). See alsoLetter from Mace Rosenstein and Gerard J. Waldron, Counsel for the Coalition for Broadcast Investment (“CBI”), to Marlene H. Dortch, Secretary, Federal Communications Commission at 2 (Aug. 31, 2012) (“CBI Request”); Nexstar Broadcasting, Inc. Comments at 2 (“Nexstar”).4 47 U.S.C. § 310(b)(4). The officer and director thresholds originally contained in Section 310(b)(4) were eliminated by Section 403(k) of the Telecommunications Act of 1996, P.L. No. 104-104, 110 Stat 56 (1996); see also Implementation of Section 403(k) of the Telecommunications Act of 1996 (Citizenship Requirements), 61 FR 55579-01, Oct. 28, 1996 (FCC 96-396) (amending Commission rules, 47 C.F.R. Parts 20, 21, 22 and 101 (Communications common carriers, Radio); and 47 C.F.R. Parts 24, 26, 80, 87, 90 and 100 (Radio).5 Traditionally, the Commission has considered the type of radio license at issue in assessing whether foreign ownership in excess of the benchmark would serve the public interest. See, e.g., Review of Foreign Ownership Policies for Common Carrier and Aeronautical Radio Licensees under Section 310(b)(4) of the Communications Act of 1934, As Amended, IB Docket No. 11-133, Notice of Proposed Rulemaking, FCC 11-121, 26 FCC Rcd 11703, 11704 n.3 (2011) (“Foreign Ownership NPRM”) (noting that the Commission historically has recognized different policy concerns for foreign ownership in the U.S.-organized parents of broadcast licensees under section 310(b)(4)); Review of Foreign Ownership Policies for Common Carrier and Aeronautical Radio Licensees under Section 310(b)(4) of the Communications Act of 1934, As Amended, IB Docket No. 11-133, First Report and Order, FCC 12-93, 27 FCC Rcd 9832, 9834 n.11 (2012) (same) (“Foreign Ownership First Report and Order”); Review of Foreign Ownership Policies for Common Carrier and Aeronautical Radio Licensees under Section 310(b)(4) of the Communications Act of 1934, As Amended, IB Docket No. 11-133, Second Report and Order, FCC 13-50, 28 FCC Rcd 5741, 5742 n.4 (2013) (“Foreign Ownership Second Report and Order”), citing to Foreign Ownership NPRMat 11704 n.3. For example, the Commission has noted common carrier radio licenses are passive in nature and confer no control over the content of transmissions. Broadcast transmissions have been found to present additional national security concerns because they implicate content. See, e.g., Foreign Ownership NPRM, 26 FCC Rcd at 11704 n.3, citing Cable & Wireless, Inc., Declaratory Ruling and Memorandum Opinion, Order, Authorization, and Certificate, 10 FCC Rcd 13177, 13179, ¶ 18 (1995); Market Entry and Regulation of Foreign-Affiliated Entities, Notice of Proposed Rule Making, 10 FCC Rcd 4844, 4852 n.19 and accompanying text (1995) (“Market Entry NPRM”). 6 Market Entry and Regulation of Foreign-Affiliated Entities, Report and Order, 11 FCC Rcd 3873, 3947 (1995) (“Market Entry Order”) (Commission determination not to adopt an effective competitive opportunities (“ECO”) approach for broadcast foreign ownership similar to that applied in common carrier section 310 evaluations). See also supra note 5.
investments in broadcast licensees has reflected “heightened concern for foreign influence over or control of [broadcast] licensees which exercise editorial discretion over the content of their transmissions.”7 Over time, the Commission’s approach to foreign investment in the common carrier context has resulted in the development of a body of precedent, rules, and procedures for transactions involving such carriers. The Commission has not been presented with a similar number of applications in the broadcast sector and therefore has not had the opportunity to develop its policies and procedures in this context.
A number of diverse interested parties have asked the Commission to review its policies and procedures regarding the assessment of applications or proposed transactions that would exceed the 25 percent threshold in section 310(b)(4) in the broadcast context. On August 31, 2012, the Coalition for Broadcast Investment (“CBI”) filed a “Request for Clarification of the Commission’s Policies and Procedures Under 47 U.S.C. § 310(b)(4).” Therein, CBI sought “clarification” that the Commission willexercise its statutory discretion to “conduct a substantive, facts and circumstances evaluation of proposals for foreign investment in excess of 25 percent in the parent company of a broadcast licensee.”8 On February 26, 2013, the Media Bureau issued a public notice inviting comment on the CBI Request. The Commission received nine comments and five reply comments, the majority of which support CBI’s position.9 5.
CBI asserts that the Commission, for over 80 years, has failed to exercise its authority and discretion to permit foreign ownership interests in entities that control the licensees of broadcast radio or television stations in excess of the 25 percent benchmark.10 It is commenters’ view that the Commission “maintains an irrebutable presumption” against relief from the 25 percent restriction, which inhibits financial institutions and other investors from considering broadcast transactions where the 25 percent benchmark would be surpassed and frustrates the public interest.11 CBI contends that by confirming its intention to exercise the discretion afforded the agency by the plain language of the statutethe Commission can ease the path for new broadcast entrants, while enabling existing broadcasters to offer expanded, innovative services.12 National Association of Media Brokers (“NAMB”) indicates that banks from Canada and Europe have expressed their interest in making equity investments in U.S. broadcast stations but that the alien ownership limitations in section 310(b)(4) of the Act, as applied to the 7 Market Entry NPRM, 10 FCC Rcd at 4884 ¶ 99.8 CBI Request at 1; see also CBI May 28, 2013, Ex Parte at 1. CBI members comprise national broadcast networks, radio and television station licensees, and community and consumer organizations.9 Media Bureau Announces Filing of Request for Clarification of the Commission’s Policies and Procedures Under 47 U.S.C. §310 (b)(4) by the Coalition for Broadcast Investment, MB Docket No. 13-50, Public Notice, 28 FCC Rcd 1469 (MB 2013). Comments were filed by Adelante Media Group, Nexstar Broadcasting, Inc., Asian American Justice Center, Minority Media and Telecommunications Council, National Association of Broadcasters, National Association of Media Brokers, Dale A. Ganske, Bradley L. Gould and David A. Schum. Reply comments were filed by CBI, National Association of Broadcasters, Alaska Broadcast Communications, Inc. et al., Wiley Rein LLP, and National Association of Black Elected Legislative Women. See also Letter from Sen. Harry Reid (D-Nevada) to Julius Genachowski, FCC Chairman (June 8, 2012); Letter from Sen. Charles Schumer (D-New York) to Julius Genachowski, FCC Chairman (July 2, 2012). Senators Reid and Schumer support a case-by-case review process for foreign broadcast investments and coordination of national security reviews with Executive Branch agencies.10 CBI Request at 2. 11 Nexstar Comments at 2; see also Alaska Broadcast Communications, Inc., Juneau Alaska Communications, LLC and Texarkana Radio Center Licenses, LLC (jointly “AJT”) Joint Reply Comments at 2 n.4.12 CBI Reply Comments at 2. 3
broadcast industry, have limited their participation.13 Broadcasters support CBI’s request for clarification as a way to attract new sources of capital to their industry.14
Commenters also highlight the fact that the Commission adjusted its policies and procedures involving common carrier licensees over 15 years ago to authorize foreign investment in excess of the statutory benchmark in order to encourage a “more open and competitive U.S. telecommunications market.”15 Commenters attribute “globalization, growth and innovation” in the telecommunications sector to that Commission decision.16 NAB adds that the Commission has issued approximately 150 section 310(b)(4) rulings authorizing foreign investment in U.S. telecommunications carriers exceeding the 25 percent statutory benchmark.17 By comparison, in the view of industry commenters, the Commission’s inflexibility in its review of broadcast foreign investment over the 25 percent benchmark has deprived the broadcast sector of available capital.18
Several commenters remark that the media landscape has evolved significantly since section 310 was enacted and that those changes eliminate the need to restrict foreign ownership in broadcast licensees to 25 percent.19 CBI member Adelante Media Group states that imposition of the limit on broadcasters is unfair because broadcasters must compete against distribution platforms that are not subject to the same statutory policy – Netflix, Apple, Google, Twitter, multichannel video program distributors, and pay TV networks.20 Others concur,21 stating that wireless carriers and cable operators have seen significant capital investments from foreign interests while broadcasters have been denied those same opportunities.22 Wiley Rein LLP similarly contends that a revised foreign investment policy for broadcasting would c