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Relaxation of Foreign Ownership Restrictions Sought

Groups, brokers, NAB say 25% threshold thwarts investment needed for multiplatform content delivery

More than 30 minority and civil rights groups have asked the FCC to relax restrictions on foreign investment in U.S. broadcast companies.

Such investment is generally prohibited beyond 25% of one company. The regulation stems from a time when the country feared control of U.S. broadcast facilities by enemy governments.

Minority ownership of stations has experienced “a steep and unprecedented decline,” according to the groups, like the Minority and media Telecommunications Council, American Indians in Film and Television, Latinos in Information Sciences and Technology Association and the Black Leadership Forum. They note that U.S. banks and venture capital firms that financed small and medium-size broadcast deals a decade ago “have left the space entirely.”

To reverse this decline, one of the most significant steps the FCC could take is to reverse that policy, states the groups, who also say encouraging foreign investment in U.S. broadcasters creates reciprocal opportunities for American broadcasters to expand their footprint into radio and television markets in Central and South America, Africa, the Caribbean, Spain, China, Korea, the U.K., Canada and Australia.

NAB, too, has filed on the issue, specifically in response to a request for clarification from the Coalition for Broadcast Investment that the agency really does intend to review its foreign ownership restrictions. The CBI asks the commission to clarify and affirm that it will evaluate proposals for foreign investment in the parent companies of broadcast licensees that exceed the 25% threshold to determine if those proposals serve the public interest.

Radio members of the Coalition for Broadcast Investment include CBS, Clear Channel, Disney, Emmis, Entercom and Univision.

The NAB supports the proposal, saying in comments to the commission that such a review would help “inject vital investment capital into the broadcast industry.”

In an ever-growing multiplatform world, broadcasters need substantial investment funds to develop additional services like new radio and television multicast channels, high-definition radio services and other innovative technologies and services not yet envisioned, according to the broadcast lobby.

The law grants the FCC flexibility to allow foreign investment in U.S. broadcast companies above 25% however the commission has not done so, except for allowing such investment in U.S. common carriers,” says NAB, mentioning Verizon Wireless and T-Mobile USA in a footnote. “No public purpose is served by preventing broadcasters from obtaining investment capital on a more equitable basis with their direct competitors.”

“Regulatory parity alone supports CBI’s request,” notes NAB. “Particularly in today’s competitive multiplatform communications marketplace, the commission should not continue its disparate treatment of broadcast entities seeking needed investment capital from a variety of sources, including those outside the United States.”

The National Association of Media Brokers favors the more flexible approach also. The group tells the commission that NAMB members “put buyers and sellers of broadcast stations together, and provide information about broadcast stations that are for sale, which allows transactions to occur.”

“The difficulty in financing the acquisition of smaller broadcast properties is even more acute in the post-recession marketplace, as many companies which provided capital to prospective new owners who were previously active in the broadcast marketplace have exited the industry,” according to NAMB, which adds that “New sources of capital to take their place have been slow to develop.”

The NAMB further explains that while there’s a high inventory of stations on the block, and always a large number of individuals who want to become buyers, “the lack of available capital is the primary issue that discourages new entrants into broadcast ownership.”

The media broker group continues: “While most of the other portions of the telecommunications industry in the United States have seen significant foreign investment — including investments in the wireless carriers and, in the past, in the cable television industry — broadcasting remains an island where the opportunities for foreign investment have, thus far, been limited. … When the consumer increasingly cannot tell the difference between content delivered by a broadcaster and that which comes from some other source, these arbitrary distinctions no longer make sense.”

The NAMB notes that the car dashboard is no longer reserved for traditional radio, that content can increasingly be delivered through Internet radio and these technologies “have no national boundaries. Audio content can be wirelessly delivered to the listener’s receiver from around the world and often delivered over a wireless network with significant foreign ownership.”

Filing as a citizen, Bradley Gould told the FCC, “This is a bad idea,” and urged the commission to leave the current rule intact. He notes that broadcast licenses “held for exclusive use of American broadcast frequencies also hold an implicit social contract with the American people; to provide a uniquely American voice and vision for America’s future.”

Saying he was speaking as a U.S. citizen as well as an experienced FCC licensee, David Schum also opposed relaxation, saying the CBI is dominated by “multimillion to multibillion dollar broadcast companies” which already control the agency advertising dollars because these broadcasters have the resources to buy the best signals in a market. “The coalition is looking for a way to access billions of dollars from foreign sources which would include offshore hedge funds, private equity funds and venture capital funds,” according to Schum, funding sources “known for their secrecy” not the openness required of an FCC licensee.

Comments on the CBI proposal to ease foreign ownership restrictions were due to MB Docket 13-50 yesterday.