On November 14, 2013, the U.S. Federal Communications (FCC) adopted a Declaratory Ruling clarifying its policies related to foreign investment in radio and television broadcast companies.1 Specifically, the FCC has stated that it will consider, on a case-by-case basis, requests to permit foreign ownership in a broadcast company to exceed 25%. The broadcast industry immediately praised the FCC for bringing its broadcast foreign ownership policies in line with similar policies in the telecommunications sector, a move which the industry expects will enable broadcasters to seek out new sources of capital.
Stemming from concerns over foreign interests' ability to influence or control U.S. communications infrastructure, the U.S. Congress restricts foreign ownership of broadcast companies, as well as wireless and wireline telecommunications carriers, by prohibiting direct foreign investment of more than 20% of the equity and voting interests in a licensee or common carrier, and limiting indirect (through one or more parent companies) foreign ownership of such entities to 25%. Although the Act allows the FCC to permit indirect foreign ownership to exceed the 25% threshold, in reality, national security concerns have impeded most attempts to obtain regulatory approval for greater levels of foreign ownership of broadcast companies.
Starting in the 1990s, the FCC began to permit greater levels of foreign ownership in the other parts of the telecommunications sector with the agency adopting streamlined procedures to review and approve wireless and wireline telecommunications carriers' requests to exceed 25% foreign ownership. The same has not been true in the broadcast sector. Over time, the absence of FCC decisions in the broadcast sector led the 25% threshold to be viewed as an upper limit on foreign ownership of U.S. TV and radio broadcast companies.
The FCC's "Refreshed" Policy on Foreign Investment in Broadcasting
As one of the first decisions under Chairman Wheeler's tenure at the FCC, the Declaratory Ruling sends a clear message that the FCC recognizes the importance of bringing new capital infusion into the broadcast industry and will affirmatively consider, consistent with national priorities, broadcasters' request to exceed the 25% foreign ownership threshold. Citing the changes that have occurred in the media landscape since Congress included the foreign ownership limits in drafting the Act in 1934, the FCC notes that "limited access to capital is a concern in the broadcast industry," and that the Declaratory Ruling "has the potential to spur new and increased opportunities for capitalization of broadcasters."2 In determining which increased foreign investment will be permitted, the FCC will use a "case-by-case" review of each request to permit foreign ownership in excess of 25% in a broadcaster.
Looking beyond the official text, statements of several FCC Commissioners may offer some guidance on how the FCC will assess requests for increased foreign ownership in a broadcaster. For example, in his separate statement following the adoption of the Declaratory Ruling, Chairman Wheeler suggested that foreign investment that would promote efficient use of the spectrum (such as assisting broadcasters to move from UHF to VHF channels) would be consistent with the FCC's policy goals. In addition, Commissioner Clyburn noted in her statement that the Declaratory Ruling begins to level the playing field between telecommunications carriers and broadcasters by removing "whatever hindrances may have restricted new opportunities" for broadcasters to access foreign capital, a sentiment that Commissioner Pai echoed in his statement.
While the Declaratory Ruling is undoubtedly good news for broadcasters in search of new sources of capital, the full impact of the FCC's decision may not be fully realized for some time. In clarifying its interpretation of the Act, the FCC has only signaled a willingness to entertain requests for increased foreign investment, but the agency has not formally established clear criteria under which such requests will be evaluated. However, in the coming months, as it reviews and approves broadcasters' petitions for increased foreign ownership, the FCC will begin to reveal—on a case-by-case basis—the full extent of its refreshed foreign investment policy.
1 Commission Policies and Procedures under Section 310(b)(4) of the Communications Act, Foreign Investment in Broadcast Licensees, Declaratory Ruling, MB Docket No. 13-50, FCC 13-150 (rel. Nov. 14, 2013).
2 Declaratory Ruling, ¶ 10.
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