Trade Deal Could Have Major Impact on Radio Industry

The cultural industries exemption was one of many hot potatoes during negotiations
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For as long as there has been broadcasting, the North American nations of Canada, the United States and Mexico have closely guarded their domestic radio and, later, television, industries.

The U.S. Federal Communications Commission would not permit a licensee to have more than 25 percent foreign ownership, while Canada and Mexico forbid non-citizens from owning a broadcasting station. Recent changes in these rules could have a major effect in the U.S. and Mexico. However, it does not appear that change is on the horizon in Canada, and that could have made it difficult to negotiate a three-nation free trade agreement.

Students of broadcast history will remember the “Border Blasters” — high-powered AM stations along the Mexican line that carried programming for an American audience.

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Dr. John Brinkley used his 500,000-watt station across the Rio Grande from Del Rio, Texas, to promote his male rejuvenation surgery using goat glands. While his broadcast operation was outside the FCC’s jurisdiction, the commission found a way to act against him. While running for office in Kansas, Brinkley would continue to do his talk shows via a broadcast loop. The commission instituted the “Brinkley Rule,” or Section 325c, which prohibits sending a program destined for U.S. listeners to a transmitter in another country without FCC authorization. Years later, Wolfman Jack used XERB in Tijuana to serve African-American listeners in Los Angeles.

The “X” stations in San Diego that operate in English from American studios are owned by Mexican companies and leased to U.S. operators. They all have section 325c permits from the FCC’s International Bureau. These arrangements could be in for a major change.

Mexico’s 2014 Telecommunications and Broadcasting Law allowed foreign interests to own up to 49 percent of a radio or television station. However, that percentage can increase to the amount of Mexican ownership permitted in the purchaser’s country. In 2016, the FCC changed its rules to allow 100-percent foreign ownership after a detailed review. Therefore, an American concern can now own a Mexican broadcaster outright, and a Mexican firm could take total ownership of an American broadcaster.

Across the northern border, Canada’s 1968 Broadcasting Act involved much more than foreign ownership restrictions. Canadian music stations must play a minimum amount of songs that meet two of four criteria that measure Canadian production. These Canadian content, or CanCon, rules are cited as one of the reasons CKLW in Windsor went from one of the most listened-to radio stations in the U.S. to oblivion. They are also subject to an involuntary assessment to help produce that music.

Cultural industries, including broadcasting, were exempted from both NAFTA and the U.S.-Canada free trade deal that preceded it. Prime Minister Justin Trudeau has warned that he will stand against any change in that exemption, fearing that American broadcasters may buy Canadian stations.

The second purchase agreement approved by the FCC under these new rules was the buying of two radio stations by Mexican investors. But the approval by Mexican regulators of the sale of a legendary border blaster to an American interest has drawn attention on Capitol Hill. Mexican authorities have approved the sale of XEWW (formerly XETRA) in Tijuana to an American interest. The new owners plan to provide programs for the Chinese-American audience in southern California from studios near Los Angeles. A Section 325c application has been filed to program the station from a U.S. location. The operators of KQEV, a suburban Los Angeles LPFM serving a Chinese audience, have filed a petition to deny that application. The first of two reasons given for the petition was XEWW’s potential negative effect on their listenership.

It is not often that a U.S. senator pays attention to a foreign radio station. In 1982, Sen. Daniel Patrick Moynihan (D-N.Y.) mentioned the U.S. revenue of CKLW in a floor speech criticizing a Canadian decision to remove the tax deductibility of advertising on non-Canadian stations.

In September, Sens. Marco Rubio (R-Fla.) and Ted Cruz (R-Texas) announced their opposition to XEWW’s proposed operation. They were concerned with the second reason in KQEV’s petition. The Washington Free Beacon reported that XEWW’s owners would rely on a programs produced by a Chinese firm called Phoenix TV that reportedly has ties to the Chinese Communist Party.

The cultural industries exemption is just one concern was mentioned frequently as American and Canadian negotiators try to hammer out a new trilateral trade agreement. Mexico has agreed to make the kind of changes in its broadcast ownership rules that it appears would be difficult to find approval for in Ottawa. The XEWW sale shows once again that radio along the border provides a continuing source of intrigue.

Kevin Curran is a Ph.D. candidate at the University of Oklahoma studying cross-border targeted radio in North America. He is also a faculty associate at Arizona State University’s College of Integrative Sciences and Arts. He has held a variety of positions in radio news, sales and management. Reach him at kevin_curran@ou.edu.

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