Federal Communications Commission May Consider Awarding Broadcast Licenses to Entities Indirectly Controlled by Foreign Interests

Since its enactment in 1934, Section 310(b) of the Communications Act has limited foreign investment in entities holding common carrier and broadcast licenses awarded by the Federal Communications Commission (FCC). In the mid-1990s, the foreign ownership restrictions on common carrier licenses (for example, cellular companies, telephone companies) were relaxed, due in part to the United States’ commitments made as part of the World Trade Organization agreement on basic telecommunications services. That relaxation has made possible significant foreign investments in U.S. telecommunications providers including, for example, major cellular telecom companies. However, the limitations on foreign ownership in broadcast licenses, including indirect ownership, have not been relaxed and remain virtually insurmountable barriers to foreign investment in entities operating U.S. radio and television stations.

The limitation on indirect foreign ownership is set forth at Section 310(b) of the Communications Act. Section 310(b)(4) states as follows:

No broadcast or common carrier . . . 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 [Federal Communications] Commission finds that the public interest will be served by the refusal or revocation of such license. (emphasis added).

Read literally, this language, specifically the bolded language, suggests that the FCC may approve the awarding of broadcast licenses to entities that are indirectly controlled by foreign interests, even where the level of foreign control exceeds 25 percent, if the FCC does not find that the public interest would be served by denial of the licenses. However, that has never been how the FCC has interpreted or applied Section 310(b)(4). Since 1934, the FCC has approved only one situation where a foreign entity held more than a 25 percent interest in a broadcast license holder. That was a case in the 1990s involving an Australian company’s, News Corporation’s control of several television stations. With the exception of the News Corporation case, the FCC has refused even to consider proposals for indirect foreign ownership above the 25 percent threshold.

At long last, the FCC has been asked to change its policy against consideration of indirect foreign ownership of broadcast stations. In August 2012, a group called the Coalition for Broadcast Investment asked the FCC to adopt a policy under which it would “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, consistent with and in furtherance of its authority under Section 310(b)(4) of the Communications Act.” Members of the Coalition for Broadcast Investment include major U.S. media companies, many of which own and operate television and radio stations, broadcast networks, and minority-focused advocacy groups.

If this policy change were adopted, the FCC would consider proposals for indirect foreign ownership above 25 percent in radio and television stations on a case-by-case basis as it now does for all other types of radio spectrum licenses. This would be a potentially important development for investment funds and others with foreign capital who seek to acquire ownership interests in U.S. broadcast properties. It would also create new sources of funding for existing broadcast station operators as well as entities who desire to acquire such stations. Furthermore, it would create new sources of potential funding for minority entities to acquire broadcast stations.

On February 26, 2013, the FCC issued a public notice inviting comment on the Coalition for Broadcast Investment proposal. Comments on the proposal are due April 15, 2013; reply comments are due April 30, 2013.