(by John Garziglia) In a notice of proposed rule making that impacts existing US radio broadcasters in only a most ancillary way, the FCC is proposing to streamline and make more transparent its review and coordination of foreign ownership applications, including those for broadcast stations, with the Executive Branch.
If a broadcaster colleague in Canada, an Australian venture capitalist, or a multi-national media conglomerate, wants to purchase a substantial indirect interest in US radio stations, it might be done. But the application process, as described by the FCC itself, is opaque and non-transparent.
Foreign-owned applicants now suffer through an initial open-ended inquiry with no expectation as to when a regulatory decision will be rendered. Under the proposed procedures, an investor or acquiring entity will know what initial information will be requested, and will have a timing expectation of regulatory action. Both information expectations and timing are essential for broadcast station investment and acquisition decision-making.
Section 310(b) of the Act requires that the FCC review foreign investment in broadcast, common carrier, aeronautical en route, and aeronautical fixed radio station licensees with a 25 percent benchmark for investment by foreign individuals, governments, and corporations in the controlling US parent of an FCC licensee. Direct ownership in the licensee itself is strictly limited to 20 percent.
The FCC’s proposal can be thought of as a communications law “TSA pre-check” or “Global Entry.” Now, an FCC application to exceed the 25 percent benchmark is referred to the Executive Branch. Its national security and law enforcement agencies generally then send the applicant a set of questions seeking information on the five percent or greater owners of the applicant, the names and identifying information of officers and directors of companies, and the business plans of the applicant. The applicant provides answers to these threshold, and any follow-up, questions directly without involvement of FCC staff.
An Executive Branch review of foreign ownership applications includes referrals to the Department of Homeland Security; the Department of Justice, including the Federal Bureau of Investigations; the Department of Defense; the Department of State; the Department of Commerce NTIA; the United States Trade Representative; and the Office of Science and Technology Policy.
In a pre-check or Global Entry fashion, the FCC is proposing that applicants impacting the 25 percent threshold for broadcast station ownership submit:
(1) Corporate structure and shareholder information;
(2) Relationships with foreign entities;
(3) Financial condition and circumstances;
(4) Compliance with applicable laws and regulations; and
(5) Business and operational information.
In addition, a diagram would be submitted showing the 10 percent or greater interests in the applicant along with a certification that the applicant will: comply with the Communications Assistance to Law Enforcement Act (CALEA); abide by procedures making available the applicant’s communications (such as emails and documents) to lawful requests; establish a US point of contact; submit accurate information; and acknowledge the potential termination of an FCC authorization along with civil and criminal penalties for false information.
The FCC proposes time limits for Executive Branch responses to foreign ownership applications to remove the uncertain timing emblematic in the current processes. A 90-day time period for initial review is proposed along with the availability of extensions when complex issues arise.
Little by little, the FCC, along with Executive Branch agencies, is moving its regulatory processes into the realm of 21st century global commerce. The procedures proposed here do not relax foreign ownership restrictions. Rather, the procedures propose to bring an expectation of certain timing and set procedures to foreign investments in entities indirectly owning broadcast stations and other FCC-regulated entities.
John F. Garziglia is a Communications Law Attorney with Womble Carlyle Sandridge & Rice in Washington, DC and can be reached at (202) 857-4455.