1 1 2 3 4 5 MEDIA DIVERSITY: 6 MINORITY MEDIA OWNERS CONQUERING NEW FRONTIERS 7 8 NTIA Minority Ownership Roundtable 9 10 Tuesday, July 18, 2000 11 9:00 a.m. 12 13 Ronald Reagan Building and International Trade Center 14 Polaris Suite, Concourse Level 15 Washington, DC 16 17 18 19 20 21 22 23 24 25 2 1 P R O C E E D I N G S 2 MR. ROHDE: Good morning everyone. Welcome 3 to this roundtable hosted by the National 4 Telecommunications Information Administration. 5 First of all, I wanted to apologize for the 6 room change. We had this scheduled in a different room 7 in the Commerce Department, but the responses and 8 interest in the roundtable got so overwhelming that we 9 had to find a different room. So I apologize for that; 10 and I think that may account for the fact that we have 11 people that are still starting to trickle in, and we're 12 starting a little bit late because of all that. So I 13 apologize for all that. 14 For those of you who may know, with great 15 deal of detail, what the National Telecommunications 16 Information Administration does is that NTIA serves as 17 the chief policy shop for the administration with respect 18 to the Information and Telecommunications Policy. 19 Underneath that broad umbrella of 20 responsibility that we have at NTIA, we also play a 21 critical role within the administration for developing 22 policy with respect to media ownership. And in fact, we 23 have an office called Minorities Telecommunications 24 Development Program which is a very important office 25 within NTIA. One of the primary functions of this office 3 1 is to produce reports on the status of minority 2 ownership, and that brings us to today's roundtable. 3 This roundtable is, indeed, part of that 4 overall information-gathering process of which we are 5 engaged at NTIA throughout this year to come out with a 6 report that we anticipate will be toward the end of the 7 year, some time late fall or early winter. This report 8 in our judgment is critically important. Unfortunately, 9 we have not had a report such as this come out in a 10 couple of years, so it is long overdue, particularly at 11 this time in which the medial industry is changing so 12 dramatically, as we all know, particularly since the 1996 13 Telecommunications Act which dramatically changed a lot 14 of the ownership rules. We have seen very significant 15 changes within the industry, and so we believe it's very, 16 very important for us to conduct this report. 17 And if I could be allowed an 18 advertisement -- I'll probably repeat at this end -- is 19 that shortly NTIA will be sending out a survey to 20 minority broadcasters throughout the country, radio and 21 television. And I know many of you who are here in this 22 room are going to be receiving that survey, and we'd 23 really like to ask your assistance in filling out that 24 survey. The results of that are kept anonymous. There's 25 nothing held specifically to the individual or 4 1 responders. The data is incredibly important to us, and 2 that will provide a key piece of information as we 3 prepare this report. 4 NTIA, as I said, is responsible for policy 5 development and a broad range of telecommunication and 6 information issues, but there probably is no other area 7 of which NTIA works on that really gets to the heart of 8 the fundamental constitutional principle in this country, 9 and that is the ability of people of our society to have 10 the right and exercise the right to speak and to be 11 heard. And that's so critically important. Particularly 12 now, as our economy and our society moves into more of an 13 information-based society, it's critically important that 14 all segments of our society have an opportunity to speak 15 and be heard through the electronic means. Traditionally 16 we've known that as television and radio. Now with the 17 advent of high-speed Internet access, we see the 18 emergence of new technologies that are changing this 19 dynamic. They're creating new opportunities, they may be 20 creating new challenges, all of which we need to be as 21 policymakers cognizant of and look toward in developing 22 policy. 23 So we live in a very exciting time right 24 now, a time in which there's a lot of change, there's a 25 lot of new opportunity. There's also a lot of 5 1 challenges. And the purpose of this discussion and the 2 two panels we'll have this morning and the workshop we 3 will have this afternoon is to try to have an airing out 4 of a number of these issues and to have a frank public 5 discussion about this. 6 Following this roundtable discussion today, 7 NTIA will continue to receive comments on this subject, 8 or you can access our website, ntia.doc.gov, where you 9 find information about this roundtable, as well as an 10 invitation for further comments. So for those of you 11 here who want to collect some of your thoughts and share 12 them with us in written form, we certainly welcome all 13 that. 14 Now, without any further delay, what I'd 15 like to do is begin over here to my left and ask each of 16 the panelists we've invited here this morning to 17 introduce themselves and speak of your affiliation. Then 18 after you've all introduced yourselves, we will then get 19 into a series of questions and proceed. 20 MR. TWIST: Kade Twist with the Benton 21 Foundation and the Digital Divide Network. 22 MS. TRIGG: Good morning, S. Jenell Trigg, 23 Fleischman and Walsh, a law firm here in Washington, D.C. 24 I'm a member of the Broadcasting Internet E-Commerce 25 Groups. 6 1 MR. PEREZ: I am Ben Perez from Abacus 2 Communications Company. We're an FTC, a legal and 3 engineering consulting firm, and I'm also the principal 4 of Abacus Television, a low-power TV broadcaster in and 5 around Pittsburgh, Pennsylvania. 6 MR. HAMMOND: Al Hammond, Santa Clara 7 University School of Law. I guess the affiliation is 8 first director of Minority Telecommunications. 9 Basically, a century ago (Laughter). 10 MR. EDWARDS: Eddie Edwards, President and 11 CEO of Glencairn Broadcasting and Chairman of the Black 12 Broadcasters Alliance. 13 MR. CASEY: Jim Casey. I'm with Greenberg 14 Traurig, a law firm here in town. I represent tribal 15 telephone and telecommunications companies as well as a 16 number of tribal broadcasting interests. 17 MR. CAMPOS: Good morning. My name is Roel 18 Campos. I'm with El Dorado Communications. I'm one of 19 the principal owners along with my partner, Tom Castro. 20 We operate a company in Houston, Texas, and we own and 21 operate three radio stations there and have made 22 contracts to acquire more. We broadcast principally to 23 the Hispanic community in Houston. 24 MS. BUSH: I'm Tony Cook Bush. I'm with 25 Broadwave USA and Northpoint Technology, a new technology 7 1 start-up that will be providing multiple channels of 2 video programming and Internet access. 3 MR. BANKS: I'm Lyle Banks. I started 4 Banks Broadcasting to own and operate television stations 5 recently formed. And we just acquired a couple of 6 television stations in the last 12 months. 7 MR. ROHDE: Thank you all very much for 8 coming here. I would like to begin by turning to the 9 professor in the group, Mr. Hammond. 10 Maybe you could set the stage for 11 us a little bit since you claim to go back a century, 12 which I know is not true. It's slightly less than that, 13 I know, but take us back a couple of decades at least, 14 and kind of set the stage as to what your perspective is 15 and how the broadcast industry -- how the overall stage 16 has changed and evolved. And take us up to the point you 17 see us at today. 18 MR. HAMMOND. Okay. 19 When we started the minority ownership 20 policies back in the '70s, broadcasting was pretty much 21 sort of a country club sort of business. It was an "old 22 boy" sort of business. There were a lot of folks who 23 owned stations, and they saw them basically as cash cows. 24 They were very profitable at that time. And that was the 25 stage in which we started to press to get entry. 8 1 By the time the '80s hit with the 2 relaxation of the multiple ownership rules, we started to 3 notice that prices for acquiring stations went up 4 substantially, and this was despite the fact that we had 5 an acquisition fund that was made available, and we had 6 the tax certificate sale, and a recognition that minority 7 ownership improved or increased the amount of diversity. 8 With those price increases came higher 9 demands for money to get in, and as people began to buy 10 in higher multiples, they sort of had to sell the farm as 11 it were. And when the recession hit, a lot of 12 broadcasters, both minority and majority, found 13 themselves not able to cover their debt. 14 That in turn produced a great deal of 15 pressure from broadcasters to try to minimize the amount 16 of expenses, and to do that, in part, by acquiring more 17 stages and/or reducing the amount of competition within 18 market. That's when the LMA started, among other things, 19 and a lot of that's when the pressure to reduce the 20 duopoly rule started. 21 Along with that the entire information 22 industry was changing, so we had increased competition 23 from cable and, again, greater pressure for multiple 24 ownership in order to combat the need to basically 25 protect your market share. And more recently competition 9 1 from telecommunications which I don't think people are 2 really addressing as much yet. But if telecommunications 3 is competing with cable in the local market for the 4 distribution of video programming and oral programming, 5 generally, and if the Internet is becoming the place over 6 time for webcasting, the entire structure and the focus 7 of broadcasting has got to change. 8 And along with that you have a change in a 9 perception of the value of spectrum. Spectrum is no 10 longer something to be just separated off, cordoned off 11 for only one activity. Spectrum is now something that is 12 fungible and that's usable for lots of different things. 13 And if anyone should have been aware of that, it should 14 have been the broadcasters after Teletext and the use of 15 BDI for transmission of information for the hearing 16 impaired. 17 A spectrum can be split up, it can be 18 multiplexed, it can be used in lots of different ways. 19 The pressure on everybody for the use of that spectrum is 20 going to increase over time. 21 Now, if you look at all those things 22 together, it changes the way in which broadcasting has to 23 be operated. Any broadcaster their self is looking to 24 acquire more stations, is looking to acquire more 25 spectrum and is looking to use that spectrum in as many 10 1 ways as possible with as little restriction on the use of 2 that spectrum as possible; and that's where we find 3 ourselves today. 4 MR. ROHDE: Okay, thank you. Very 5 insightful. 6 I'd like to turn to Mr. Perez. You are 7 actually focused on a particular minority community, the 8 Hispanic community which is a very fast-growing segment 9 of our population. 10 What, from your perspective -- given the 11 outline that Mr. Hammond has just given us about the 12 current circumstance that is increasing costs, the kind 13 of external competition which is putting pressures on 14 ownerships to become larger group ownerships -- what 15 effect does that have for Hispanic broadcasters, from 16 your judgment? 17 MR. PEREZ: Well, they both have a niche 18 market in those markets where there's significant 19 Hispanic population. The niche market has a protective 20 effect for them because they are specialized and more 21 adept at serving that market. But on the other hand, in 22 the many other markets where the Hispanic population 23 constitutes a small percentage of population, it becomes 24 extremely difficult for them to play equally because 25 acquiring stations in those markets when their format 11 1 doesn't fit isn't feasible, and they would either have to 2 diversify into other formats where there are small 3 Hispanic populations or be limited to those markets where 4 the population base is there. So it's both a blessing 5 and a handicap. 6 MR. ROHDE: I'd like to turn to Antoinette 7 Bush. Tony I think, in my judgment -- you have at least 8 established in my mind -- I go way back with you when you 9 were working with Senator Hollings -- to put on your old 10 hat -- from the days in which you had a broader policy 11 objective. 12 Share some of your thoughts about where you 13 think we're at today with respect to broadcasting, and 14 the ability of minority groups to seek ownership of 15 broadcasting properties. 16 MS. BUSH: Well, I think there's good news 17 and bad news. I think obviously we've been through a 18 tremendous amount of consolidation in the radio industry 19 and to some extent in the television industry; and I 20 think that that's had the statistics that NTIA produces, 21 and demonstrates that that's had a negative impact 22 overall on the number of minority broadcasters. 23 There have been some benefits, and some of 24 the benefits is not a result of the Telecommunications 25 Act, but really the Clinton Administration and the 12 1 efforts of the NTIA and the SEC to encourage minority 2 ownership, which has resulted in the sale of stations to 3 minority owners in numbers that were significant higher 4 than before. 5 So while overall I think there's been a 6 decline in the number of minority owners, there has been 7 some success in the existing minority owners acquiring 8 stations and in there being some new entrants into the 9 broadcasting business. 10 I think that the challenge is going to be 11 the ability of minority owners to sustain their ownership 12 interest as consolidation increases. I think there will 13 be continue to be pressure brought by large, non-minority 14 owners for further relaxation. I know it's hard to 15 imagine, but certainly it's constantly there in the 16 television area, and I think that over time we'll 17 probably see it in the radio area. Once everybody gets 18 done with the current consolidation that's going on, I 19 think some of these big guys are going to say, well now, 20 I'd like to have some more and what do I have to do and 21 seeking further relaxation. 22 So I think that's going to be something 23 that we have to continue to be vigilant on and to be very 24 concerned about and to work not just with the FCC and the 25 Department of Commerce on these issues, but I think 13 1 members of the minority broadcasting community have to 2 continue to be active in Congress and letting members 3 know how important it is to keep the current restrictions 4 in place and to continue to promote minority ownership. 5 And I think there needs to be an additional 6 focus by minority broadcasters on what other 7 opportunities there are. I think when Al was talking 8 about the increasing pressures to maximize the use of the 9 spectrum that minority owners, as do all broadcasters and 10 I think all spectrum licensees, have to continue to look 11 at what new opportunities there are to use the existing 12 spectrum that they have and being creative on a 13 going-forward basis. 14 MR. ROHDE: Lyle Banks, I know we've had 15 discussions in the past year. You're a broadcaster, 16 you're somebody who's got some big ideas. In fact, if I 17 was a venture capitalist, you've sold me enough to want 18 to give you money, but I don't have any to give you. 19 You're certainly a man of vision. You want to go places 20 and you're interested. 21 What are the challenges that you see lying 22 ahead of you? You're in the business, you want to expand 23 your role in the business, and you're also caught in the 24 center of other minorities who want to get more into the 25 business. Just articulate for us the challenges you see 14 1 in front of us. 2 MR. BANKS: A challenge right now is 3 growth. Our industry has consolidated so much that it's 4 very difficult for a company my size to really break 5 through as quickly as at least I want to break through or 6 our investors want to break through. If anyone here is 7 backed by a venture capitalist, you're working with a 8 four to six-year time line, and you have to get in and 9 get out, get the returns within a period of time. So 10 it's kind of tough. It's taken me about a year to a 11 year-and-a-half to get funding and to get a couple of 12 stations. 13 This is a very different environment that 14 existed about five or six years ago and the kind of money 15 that we have backing us, we would have been able to 16 purchase large groups before. So growth is an issue in 17 this consolidated industry. 18 The other thing is scale in terms of 19 economies, programming. The fixed-cost items are tough 20 to lever down if you are a small company. So to the 21 extent that you can get some scale, you can start to 22 control those costs a little bit better. 23 I guess the third thing is figuring out 24 what exactly you're going to do with your assets over 25 time. Everyone is a little bit confused about the 15 1 prospects of up digital and data casting and use of the 2 digital spectrum. There isn't really that many clear 3 business plans on how to use that. So that's a little 4 bit of a challenge right now. There needs to be some 5 leadership on the broadcast side other than these big 6 footprints of spectrum that Iblast and other companies 7 are employing. There has to be some local application 8 for that that can really start to increase the values on 9 the television side. 10 So I'm working on those sorts of visions 11 and trying to sell those to my investors as well. 12 MR. ROHDE: Let me ask a similar question 13 to Eddie Edwards. You've been in the business a few 14 decades. You go way back. You've been at many different 15 levels from on-air talent to management and a whole range 16 of things. 17 What, in your judgment, are some of the 18 challenges with respect to access to capital, 19 programming, the whole range of things? Can you tell us 20 your perspective? 21 MR. EDWARDS: I think that the money's out 22 there today. It seems as though everybody's got money 23 that they want to throw your way. Trying to find the 24 right property is a big problem. How can we competitive 25 when we have these mega companies that literally own 16 1 everything today? When you find a station, it's going to 2 be in a very, very small market, and you're not going to, 3 in my opinion, be able to really turn it around and make 4 the kinds of profits that a capital venture firm would 5 want to see or that you personally would want to see. 6 So I'm very concerned about the properties 7 that are available today. There aren't too many to 8 choose from. And once again, when you do find them, 9 you're going to find them in very, very small markets, 10 and in some cases undesirable markets. 11 MR. ROHDE: One of the issues that I've 12 heard a great deal of discussion about is the concern 13 about advertising revenues for minority broadcasters. 14 Jenell, I know you've worked in that area a 15 little bit. Maybe you can speak to some of the issues 16 you see related to advertising revenues. 17 MS. TRIGG: Well, I think Lyle and Eddie 18 addressed some of the issues that are present for 19 minority broadcasters. First of all, minority 20 broadcasters are usually late entrants into a market, so 21 if you're looking for television, you're looking at not a 22 wide choice of network affiliation. You're looking at 23 smaller markets, you're looking at sometimes weaker 24 signals. 25 On radio, you now have majority-owned 17 1 groups competing in a minority format, so you're not the 2 only game in town anymore when it comes to urban format. 3 And what consolidation has done is really I think 4 exacerbated some of the already inherent problems that 5 have existed. 6 You've got multiple combination groups now 7 competing locally, up to eight stations in some market. 8 And nationally, there are local dollars, spot dollars and 9 national dollars. Large groups can leverage not just the 10 acquisition of programming but also spot dollars. 11 It certainly is easier to negotiate with a 12 media buyer -- and Lyle and I have a media buyer-seller 13 relationship from way back -- when you've got multiple 14 stations and you're able to sell and package some of the 15 weaker stations with some of the stronger stations. And 16 again, majority-owned stations in groups can do that. 17 They indeed go into a media buy looking to acquire a 18 certain amount of share revenue. 19 Now, minority-owned stations, regrettably, 20 have had other problems for years without consolidation, 21 and these are in particular radio stations. The no-urban 22 dictate from advertisers that you should not buy 23 minority-formatted stations. Supposedly, that audience 24 is less desirable. Don't spend as much money, don't eat 25 as much product that they're selling; and yet, that's 18 1 immediately to the contrary. 2 Particularly today, when you're looking at 3 the growth of Hispanic and African American consumerism, 4 household income is increasing, you're looking at higher 5 per capita consumption on many core products, but yet 6 those advertisers are not placing their dollars 7 proportionately on minority-owned and particularly on 8 minority-format stations. 9 The FCC -- as Greg will tell you -- we had 10 an opportunity to look at some of these advertising 11 discriminatory practices through a study that originated, 12 believe it or not, from a provision of the 1996 13 Telecommunications Act. Section 257 requires the FCC to 14 eliminate, identify small business market entry barriers; 15 and part of that study was the Civil Rights Forum 16 issuance of When Being Number One Is Not Enough: The 17 Impact of Advertising Practices on Minority-Owned and 18 Minority-Formatted Broadcast Stations. 19 This was a significant study because this 20 has been going on for years. Television stations, radio 21 stations, but for the first time we had a statistical 22 disparity analysis as well as one very large smoking gun 23 which was the Katz memo. If you remember, it was a memo 24 that was issued internally with Katz media, and the 25 phrase that we all remember greatly is, "Advertisers want 19 1 prospects, not suspects," and this was in regards to 2 reaching minority audiences. 3 So this is what minority owners have to 4 deal with, the devaluation of their advertising 5 programming, devaluation of their advertising consumers, 6 the viewers and listeners, as well as sometimes lesser 7 programming. And consolidation post the 1996 act really 8 has just enhanced those difficulties. 9 MR. ROHDE: Thank you. 10 Mr. Campos, do you have some perspective to 11 show on this advertising issue? What Jenell said, is it 12 a similar experience which you've had? 13 MR. CAMPOS: Yes. Jenell I think has 14 summarized it very nicely in terms of the overall 15 situation with advertising. In the Hispanic marketplace 16 when it comes to advertising, you have much of the same 17 phenomena, and things vary market to market. There are 18 inherent prejudices and stereotypes that are out there on 19 the part of buyers of advertising. And the Hispanic 20 community often times, like all minority communities, is 21 viewed as less economically capable, less desirable as 22 far as a consumer or as a purchaser of products. 23 Indeed, that's not the case at all. Both 24 the African American community and the Hispanic community 25 are the significant growth areas in America. An 20 1 incredible number of high percentage of all the babies 2 being born in the next 50 years are going to be Hispanic, 3 for example, in America. That happens to be a factor of 4 demographics, of numbers. It just is the case; you can't 5 hide from statistics. 6 And the recent census will show a lot of 7 those figures, and there will be some very surprising 8 growth that will be demonstrated in many markets, 9 including our market of Houston which has suffered from 10 an undercount of the last census that occurred. 11 So what has to occur is constant effort, 12 constant vigilance and constant education on the part of 13 minority business people because it's a problem that all 14 of us share, not just the media. The people who are 15 spending certain dollars for family products, for baby 16 products, for cars in our particular market -- and we 17 make this example all the time -- are, in our view, our 18 audience, our Hispanic numbers because you have a 19 huge -- again, demographics don't lie -- skewing to the 20 younger-age individuals that are buying, that are 21 purchasing and that are raising families. 22 So these are the kinds of statistics that 23 we need to do to educate. And ultimately, the economic 24 incentives and economic drive of business hopefully will 25 overcome many of these problems. But they're still 21 1 there, and we have to deal with them on a day-to-day 2 basis in our particular marketplace. 3 MR. ROHDE: Thank you. 4 Let's continue our discussion, maybe focus 5 more on programming. 6 I believe it was last summer that there was 7 a huge controversy where the NAACP was threatening to 8 boycott a lot of the network programming because it felt 9 that it didn't have an adequate portrayal of minorities 10 within the content of it. 11 I know that, Jim Casey, you and I have some 12 common background and that we're familiar with some 13 Native American people in the same part of the country. 14 I grew up around the Sioux Indian people in the Dakotas 15 and very familiar with them. I can't recall anything 16 I've ever seen on television that remotely relates to the 17 Sioux Indians that I grew up around and know about that 18 community. I mean, the Native American community seems 19 to be almost entirely absent from any kind of 20 representation, either positive or negative, in 21 programming. 22 I'd be curious about some of your thoughts, 23 James, as well Kade Twist, some of your thoughts about 24 some of the Native American issues with respect to 25 programming. How do Native American people see this 22 1 medium of television that's so dominant in our culture 2 and our society as Americans? But yet, Native Americans 3 struggle with a lot of assimilation issues in our 4 society. 5 What are your thought about that? 6 MR. CASEY: The programming issue for 7 Native Americans and Indian tribes is somewhat different. 8 People get tired of hearing Indians say, "We're 9 different," so the issue's come across in a different 10 way. 11 When you talk about Native American 12 programming from the concept of what the Native Americans 13 are looking for, you very rapidly move into the 14 non-commercial broadcast realm and not the commercial 15 broadcast realm. These groups don't tend to identify 16 commercial radio and television as responsive in any way 17 to their needs, their desires and to serving Indian 18 people. 19 In the non-Indian areas you haven't got the 20 demographics to support a commercial station. With the 21 consolidation of the media and everything you're hearing 22 people talk about right now, the Indian demographic in 23 non-reservation areas simply does not support an Indian 24 format -- a tribal format -- it just doesn't work. 25 In some urban areas, you have programming 23 1 available through groups like the Native American Public 2 Telecommunications, American Indian Radio and Satellite. 3 They produce shows like Native America Calling and Native 4 Voices that get shipped out over non-commercial stations 5 into some of the urban markets, an hour here, an hour 6 there, 3:00 in the morning, whatever. So it's not a 7 major portion. 8 On the reservations, the focus is on 9 cultural redevelopment, language preservation and 10 restoration-- very focused community needs. And again, 11 that does not support the commercial model. So as a 12 result, what you see is there's a fair amount of "Indian 13 programming." You only see it on the reservations for 14 the most part. 15 And you don't see commercial stations. 16 There are three that I'm aware of. Well, there are two 17 that are in existence. 18 MR. ROHDE: Radio? 19 MR. CASEY: Radio stations. There is one 20 that I'm aware of, non-commercial, low-power television 21 station on the Squanamish-Kootenai reservation right in 22 conjunction with a college up there. Television 23 broadcast has just not been a medium that the tribes have 24 been able to get into because of expertise and lack of 25 capital. Tribes have a serious problem with capital 24 1 because they can't pledge assets, meaning their assets 2 just simply can't be pledged. They can't pledge land, 3 for example, so capital becomes a real problem. 4 But there are about 33 non-commercial 5 tribal radio stations serving the needs of the immediate 6 tribal groups, and they have their own set of problems 7 with getting applications for the FCC. Many of them 8 don't think that they need an application from the FCC, 9 but that's a whole other issue. (Laughter) 10 MR. ROHDE: We won't go there. 11 MR. CASEY: We won't keep talking about 12 that. 13 So the problem is very different, and it's 14 been pushed mainly to the non-commercial realm. 15 The commercial realm is starting to move. 16 I know of one application right now before the FCC for a 17 commercial FM radio station in Minnesota. There's talk 18 of one in Florida. So they're starting to move, but many 19 tribal people on content are looking now to leapfrogging 20 to the new technologies. Why start where everybody else 21 started and fight your way through? Let's start with 22 the webcasting and combine that with the broadcast. So 23 that if I am broadcasting from Window Rock, but I need 24 advertising to support that, I'll do my advertising over 25 the Internet and use that advertising to support the 25 1 broadcast because I'm not going to sell ad space out in 2 the middle of the desert; it's not going to happen. So 3 it's a very interesting new development. 4 MR. ROHDE: Kade, I'm interested in your 5 thoughts about this. 6 MR. TWIST: Well, there's two things that 7 really affects the consolidation media. One is the lack 8 of Indian content, which is obvious, and two is the lack 9 of stability in Indian country. Media is a great form of 10 stabilizing, community-building, consensus, building 11 constituencies, developing ideas, closing ideas. You can 12 popularize things. 13 A lot of tribes, if you poll 558 tribal 14 nations, 557 of them are trying to reformulate their 15 constitutions. And without having a public discourse 16 that's community-centered around those very, very 17 important issues -- self-determination issues -- where do 18 you go, what do you do? It's slowed down; the process is 19 incredibly inefficient. And maybe the Internet and the 20 local area networks will help facilitate that, but it's a 21 very severe problem. 22 But the consolidation of media definitely 23 removes community from media. One thing in particular is 24 the idea of identity in cultural and social wills of the 25 community-- of Indian country. It gets removed from that 26 1 context as well. And one of the problems with that is 2 that the quality and the existence of identity becomes 3 something that is commodified; it's a consumer rather 4 than a producer. 5 And unfortunately, the way new mediums are 6 developing, and specifically the Internet -- the way web 7 pages are formulated -- they're totally consumerist in 8 nature. All of the information has to be up front, it 9 has to be positioned in a way to where it can give 10 consumer gratification rather than inspire consumer to 11 transform himself or herself into a producer. 12 What we have then as a end result is 13 throughout Indian country we have this image that has 14 been largely produced. Indians have become signs. We're 15 like strip malls, virtual and non-virtual. We're all 16 over the place, and it's nothing that we've created 17 ourselves. This helps us remove ourselves from our 18 histories and a way to contextualize present experience 19 with past experience, and a lot of Iron Eyes Codys are 20 dangling around in our subconscious because a lot of 21 times that's what non-Indian people really want to see. 22 They want to see product justification from sort of stoic 23 construct. And that is what has happened, that is what 24 is continuing to happen. I don't see an end to that any 25 time soon. And I don't see a new medium of the Internet 27 1 doing anything to change that. I see consumers and 2 consumers and consumerism all over the foreheads of 3 Indian country. 4 MR. ROHDE: You know for years we've 5 assumed that diversity is connected with ownership. In 6 other words, if you want to address and audience or a 7 segment of our population, that the ownership matters, 8 and that ownership is going to determine what the 9 programming and the make-up of the information that's 10 going to be communicated. 11 I wanted to read a couple of statistics. I 12 know that some of these are dated because they're based 13 upon 1998 data that NTIA did in its Ownership report. 14 The African American population in this 15 country is around 12 percent which is recent census data. 16 But in 1998, we found that black ownership -- this is 17 radio and television combined -- accounted for 18 1.7 percent of that. 19 Hispanics constitute about 11 percent of 20 the population, but with respect to media ownership, 21 1.2 percent, radio and television combined. 22 Asian Americans, 3.8 percent of the 23 population, but .04 percent of broadcast ownership. 24 And Native Americans which are .09 percent 25 of the population were down at .02 percent, probably even 28 1 have dropped further in the last couple of years. 2 The question is, there's such a dramatic 3 difference between the breakdown of these certain 4 societal groups and the access they have to owning media 5 properties to communicate within our society. 6 I'd like to maybe turn to you, Mr. Edwards. 7 Does ownership matter? If we want to make sure that all 8 segments of our society have a chance to have their 9 voices heard, they feel represented in what they see on 10 television, they're connected to it, in the programming 11 you're going to address these certain audiences, does it 12 need to be owned by, in proportion, these segments of the 13 population or can the same people who own all the 14 stations speak to all these different people of society. 15 MR. EDWARDS: Absolutely. Minority 16 ownership is a must, and I don't think that you can 17 equate their programming to our 18 community -- satisfactorily anyway, to our liking because 19 ownership is far more than just programming. Let me say 20 that clearly. It's a voice in the community. It's 21 power, the power to make decisions, the power to do 22 business with people in your community which we don't see 23 enough of in these times. So there is no doubt that we 24 need to continue to fight to survive among the ownership 25 ranks and program to the communities that we serve as 29 1 well. 2 Let me say this-- the producers. Tim Reed 3 just build a major studio in Petersburg, Virginia that I 4 had a chance to visit, and we had what I considered to be 5 a very deep conversation because we talked about that. 6 Of course, you have the WB network, you 7 have UPN, you have Fox, and they've all done a fairly 8 good job I think with programming to our community; but 9 when we talk about depth, there's not enough depth. When 10 we talk about documentaries and we talk about educational 11 programming, doing specials on black business people, we 12 just don't see enough of that today. And I personally 13 feel, as he does and many others in our industry, that if 14 we had more owner operators, that picture would 15 drastically change. 16 So there's no doubt that there is a 17 difference. We have to be represented at the table as 18 far as ownership is concerned; no doubt about it. 19 MR. ROHDE: Well, this is a real challenge 20 because, as Mr. Banks has pointed out and others, we're 21 dealing with a fixed market here. There's only so many 22 licenses that one can access, and the ownership is 23 growing consolidated. 24 Mr. Perez, I think you operate some 25 low-power stations. Can you speak to a little bit about 30 1 how some of the low-power television stations have helped 2 minority ownership and where you see that headed? 3 MR. PEREZ: Yes, but let me lead into it 4 with one comment. 5 One of the things we can't forget is that 6 the federal government is very tightly, constitutionally 7 constrained from getting involved in programming and 8 programming format. So both NTIA and the FCC were driven 9 to focus their efforts on ownership and employment 10 because those were areas where at least we had -- we, 11 when I was back in government -- some constitutional 12 latitude to do pro-minority things. 13 Now that latitude has been recently 14 constrained greatly by court cases, but there still is 15 more room to maneuver in the EEO or employment area and 16 the ownership area than there is in programming. The 17 courts instantly slap the FCC when it gets anywhere near 18 programming, and the FCC as a philosophical matter 19 accepts that. 20 So unless somebody comes up with a better 21 handle, I think ownership and employment are the only 22 ways that the government can assist in solving the lack 23 of programming dilemma. 24 One of the areas that there's been some 25 sort of just accidental significant progress is in the 31 1 low-power TV area. Low-power TV was a small secondary 2 service made up of television stations that only have a 3 10 to 15-mile service radius, which is about comparable 4 to a Class A FM service radius. It was created in 1982 5 somewhat as a second thought by the FCC, but unexpectedly 6 they got literally tens of thousands of applications from 7 all over the country, including many applications by 8 minorities in the big cities trying to get into 9 television, who found that both the economics and the 10 spectrum of full-power television was just out of bounds, 11 impossible to tackle. 12 Unfortunately, because it was a secondary 13 service, it was very difficult to get funding, very 14 difficult to get advertising and very difficult to grow. 15 The service continued to grow until there was about 2,400 16 low-power TV stations in the country, roughly twice as 17 many low powers as there are full-power television 18 stations. 19 Recently, the low-power industry pushed 20 through Congress legislation to convert low-power from 21 the secondary status to primary status. And that 22 legislation is in the process of being implemented by the 23 FCC; and about a thousand low-power stations have filed 24 for authority to become primary Class A television 25 stations, the Class A nomenclature being copied from the 32 1 FM service. 2 So now you have about 1,200 full-power 3 large stations, and you have about 1,000 of these new 4 Class A stations. They're in the process of being 5 licensed, and the process will be completed in about five 6 more months. 7 What's unique about the low-power service 8 and what's relative about it for minority ownership 9 purposes is that in the low-power service about 10 10 percent of the licensees are minority. So when the 11 Class A licenses are issued, suddenly the number of 12 "television stations controlled and owned by minorities" 13 would jump by a factor of about 10, just by one swoop, 14 not because anybody was trying to do anything for 15 minority ownership, but because the low-power TV industry 16 fought and got legislation to give it primary status. 17 The thing that's ahead of us is that the 18 television industry, because of duopoly and the pressure 19 on the FCC to raise the television ownership limits is 20 going to go through very rapid consolidation much as the 21 radio industry did. 22 FCC Chairman Kennard in a recent speech 23 said that the FCC has calculated a drop of about 1,000 24 radio station owners since the implementation of the 1996 25 Telecommunications Act. Those were radio station owners 33 1 that dropped out of the mix because of consolidation. 2 I think everyone in low-power TV and 3 full-power TV is expecting the same thing to happen in 4 television as soon as the ownership limit's lifted, or at 5 least raised, which I think the FCC has signaled the 6 willingness to do. 7 I think one of the things that this group 8 can look at is to focus on groups like the full-power and 9 the minority-owned low-power stations and say, well, what 10 can we do to preserve those minority owners so that 11 duopoly television and television ownership relaxation 12 doesn't result in them disappearing over the next five 13 years much as a lot of radio station owners have 14 disappeared? 15 We've just enjoyed a ten-fold increase in 16 ownership, but that could just be erased in the next five 17 years because people are going to come to people like me 18 and offer ten times what was ever available for my 19 stations, and for a small businessman that's very hard to 20 say no. 21 MR. EDWARDS: Greg, can I go back to the 22 programming question that you raised too? 23 MR. ROHDE: Sure. 24 MR. EDWARDS: I was sitting here thinking, 25 and I said to myself, I could probably accept 34 1 non-minorities programming to minorities -- meaning the 2 networks -- providing that we were represented in that 3 decision process. But in most cases today we're not 4 represented in that process which is why ownership is so 5 important. 6 If you go behind the walls of any of these 7 networks, I can't think at any of the networks of one 8 person that's involved in the decision to pick up a 9 program. So if we were at that table, just like this 10 roundtable, discussing what it is that the African 11 Americans out there watching whatever network want to 12 see, then I could accept that. 13 MR. ROHDE: Mr. Hammond, you had a comment. 14 MR. HAMMOND: Let me just say, minority 15 ownership does matter. The court decision basically took 16 issue with the fact that there was no statistical 17 substantive support for the notion that diversity of 18 ownership translated into diversity of programming. But 19 I think shortly we will have statistical evidence that 20 establishes that, and I think that will change, 21 especially with regard to radio; that there's statistical 22 evidence that supports the conclusion that minority 23 ownership does make a difference. It also makes a 24 difference in employment. 25 So I think that's about to change. But 35 1 what also has to happen is it can't be a one-time only 2 study that's done to justify, or to confirm, the value of 3 minority ownership. That study has to be ongoing, and as 4 a responsibility of every broadcaster -- especially those 5 who are given an opportunity to participate because they 6 are suppose to be providing diverse programming to 7 otherwise not-served communities -- to establish that 8 they are doing that and to continue to do that. 9 MR. ROHDE: Thank you. 10 James, you had a comment. 11 MR. CASEY: Yes. I just wanted to make a 12 point, a follow-up to what Mr. Edwards said. 13 The idea of ownership, while it may not 14 need to be controlled, there needs to be participation. 15 And the difficulty for -- I can make an example of what 16 the non-Indians providing programming to Indians will 17 give you as an example of why ownership is so important. 18 If you have a bunch of people with no 19 Indian knowledge, no Indian background, no Native 20 American heritage, whatever, and you put them in a room 21 and say, let's come up with some Indian programming, what 22 are they going to come up with? 23 Well, let's run a special on Indian gaming, 24 maybe we'll send some cameras out to a few pow-wows, and 25 we'll run Dances with Wolves. (Laughter) That's your 36 1 Indian programming. And so, without the Indian 2 participation in the process, you're not going to get 3 programming that speaks to anybody but Hollywood. 4 And for Indians that's been a particular 5 problem. Mr. Twist mentioned Iron Eyes Cody. There's 6 been controversy over as to whether he was even Indian. 7 I think he was actually Italian. (Laughter). So it's a 8 problem, and so the ownership becomes a critical piece to 9 get the participation, whether that's a 10 minority-ownership position for minorities, whether 11 that's controlled -- maybe the definition needs to be 12 looked at -- but the participation is critical. 13 MR. ROHDE: Mr. Campos, you had a comment. 14 MR. CAMPOS: I want to make the point that 15 both Mr. Edwards and Mr. Hammond made, but also put it 16 from a different perspective. 17 I think we all have to remember that the 18 airwaves are controlled by government. It's "the" 19 government that has established licenses. It's the 20 "government" that, in the '20s and '30s when the first 21 licenses were given out, that created the "old boy" 22 network or the existing or the vestiges and the progeny 23 of the ownership that exists today. 24 So when we talk about minority ownership, 25 we can't allow ourselves -- this is my view -- and put 37 1 ourselves in the dangerous niche of having to justify it 2 solely with programming; and solely saying that, if you 3 have minority owners, then you will have a certain "type 4 of programming." 5 I think that does happen, but the real key 6 here I think is that because it is a government-created 7 right, then all people, especially minority people, 8 deserve the ability to be an owner and to own those 9 rights that the government created. 10 The danger here in getting involved and 11 justifying our ownership by programming is a huge danger. 12 We can't fall into that trap, if you will, in my view. 13 And so, what we have to do is basically say -- to pick up 14 what Mr. Edwards said in the beginning -- that owning 15 media is very important in our society. Why is it 16 important? Because it's a high-level, high-profile kind 17 of business. 18 If you own media as a minority person, you 19 have disproportionate impact on your community. You have 20 other members of the community being involved in 21 business, creating not only employment, but creating 22 entrepreneurs out there, creating other opportunities for 23 sales, other opportunities for business. 24 The benefits are so huge that we can't 25 forget that. In my community by being a minority owner, 38 1 we bring access to business people in our community that 2 would never have access to media, that would never 3 understand that they need to get business plans. We 4 provide a consulting role, if you will, or a push and a 5 development. 6 So it's our right. It's a 7 government-created situation; therefore, we don't have to 8 justify it by what exactly is on the air. We deserve to 9 be owners in the proportion that we are in the community. 10 MR. ROHDE: Jenell, you had a comment. 11 MS. TRIGG: Certainly. I'd like to expound 12 on that a little bit. I think Mr. Campos and Mr. Edwards 13 touched on some of the other benefits of minority 14 ownership. 15 Having worked in broadcasting for 15 years, 16 there are so many other advantages for minority 17 ownership, and I think it's critical that we remember 18 that all broadcasters are required as a matter of law to 19 serve their communities, serve the public interest, 20 convenience and necessity. And it is, indeed, more than 21 programming. 22 Let's look at what else happens at the 23 operations of a broadcast station. 24 First of all, there are community 25 involvement and the decisions of what organizations to 39 1 support, what not to support and what degree to support 2 are made at the ownership level. And that includes 3 whether you're running public service announcements for 4 what issues are important to the minority community, 5 everything from the news broadcast. 6 Look at competing news broadcast. News is 7 some of the most profitable program areas on television 8 and radio, but yet what stories lead first to what 9 degree, whether you send a news truck with a full camera 10 crew and an anchor to the tenth riot of the week or 11 whether you're focusing on an awards ceremony for 12 disadvantaged kids. Those are the nuances in decisions, 13 in programming, how stories are portrayed, how people are 14 portrayed, how the community is supported that are made 15 at the ownership level. So, yes, every station's got 16 news, but a minority owner has control over the direction 17 of that news. 18 Again, having worked and been at the table 19 when we're deciding on a PSA budget, who gets the prime 20 time PSAs as opposed to the 3:00 a.m. spots? Who gets 21 the primo news anchor at their dinner event or they get 22 the sales account executive who got recruited the last 23 minute? Those are the decisions that are made at the 24 ownership and employment level that get a station 25 involved in its community and involved in the people it 40 1 serves. And that's way beyond programming, and those are 2 the inherent nuances that are critical to maintain 3 minority ownership. 4 MR. TWIST: There's one thing that all of 5 us minorities understand in America, and that is the 6 client-patron relationship. We either tell our stories 7 or we listen to our stories. And ownership allows us to 8 tell our stories. The lack of ownership allows us to 9 listen to our stories. 10 When we listen to our stories from an 11 Indian perspective, we are bombarded with rich gaming 12 tribes-- the battle of the Piquots without reservation, 13 alcoholism, wandering, homeless Indian people in inner 14 cities. We're not seeing the reality of our lives. 15 We're not seeing the reality of our culture or families 16 or clans or identity; it's something that is being 17 shaped, formulated and articulated by our patrons. And 18 if history has proven anything over the last 500 years, 19 it's that the client-patron relationship is self-serving, 20 and it has not gone anywhere to promote a better 21 understanding or a better sense of self-determination for 22 the so-called client. 23 MR. ROHDE: Before we close out this panel, 24 I wanted to get to a couple questions. And since you're 25 volunteering to speak, Lyle, you can speak, but I'd like 41 1 you to answer a question too. 2 And my question is, last summer, the FCC 3 relaxed the duopoly rules, and I'm curious what your 4 thoughts are as to what impact that has had on the 5 ability of minority owners, such as yourself, to try to 6 acquire more properties? 7 MR. BANKS: It's had just a huge, negative 8 impact on me, and I think it will have the same sort of 9 impact for other people coming with me or behind me. 10 It's just close another door of opportunity. It's very 11 tough right now to even get into the top 75 or maybe even 12 85 DMA-ranked markets. Because of the consolidation and 13 duopolies this is very difficult. And I think as Jenell 14 pointed out before, you have a lot of consolidators that 15 are now fishing in DMA-ranked waters that I would 16 normally fish in now, so it just makes it much more 17 difficult. 18 And plus it also impacts the ability to buy 19 programming and other services. So to the extent that 20 you could find a way to keep your programming costs down 21 in light of that, it was very tough to do that. 22 One of the things I wanted to just touch on 23 as far as following up on some of the nice things that 24 Jenell said is, having been a general manager for many 25 years in different stations and an owner now, this issue 42 1 about programming or minority-targeted programming can be 2 important from minority or diverse owners, but I think 3 the important thing is the fact that our existence makes 4 our services and our programming more representative of 5 the communities in which we serve, and that's the 6 important thing to me. 7 The other thing is, as an owner, and trying 8 to either get funding or looking at the landscape, the 9 numbers of minority owners and women owners is so small, 10 and I think a lot of that has to do with the fact that 11 there isn't a huge pipeline of people that are coming 12 through the broadcasting system to be able to take on 13 ownership. And so, we need to do a better job in 14 improving employment opportunities for women 15 minorities-- managers and entrepreneurs coming through. 16 And I think that's one of the responsibilities that we 17 each have as owners and as managers to open up the 18 pipeline. 19 When I graduated from school, I had no idea 20 that opportunities existed on the television side. I got 21 on the TV side just by happenstance. You don't have role 22 models and access to people who are decision-makers or 23 who have an interesting and influential jobs on the 24 television side unless you're actually there. 25 MS. TRIGG: Everybody wants to be an 43 1 anchor -- 2 MR. BANKS: Exactly. 3 MS. TRIGG: -- or a TV cameraman. 4 MR. BANKS: But they don't know that the 5 programming director or the community affairs director or 6 the news director-- that there are jobs that yield an 7 enormous amount of influence at a television station, and 8 there are ways in which you can get into those jobs. And 9 I feel it's my responsibility -- and I have done so in 10 the last 15 years -- to stay as accessible as possible 11 and open to people and giving people those opportunities. 12 MR. EDWARDS: But Greg, the question too 13 is -- if I may -- and I had this discussion with a couple 14 of broadcasters the other day -- is there really equal 15 opportunity behind some of the job opportunities within 16 the broadcasting industry? And as much as it hurts, I 17 would have to say no. 18 I applaud the NAACP and Kwasi Mfume for 19 what he has started and continues to do, looking behind 20 the doors of the networks and local stations at the 21 makeup of their staffs. There are a lot of young people 22 today coming out of school with degrees in mass 23 communication and journalism who can't even get entry 24 jobs who are minorities. It's not fair, and it's been 25 long overdue for an organization such as the NAACP to 44 1 seriously, seriously look into. 2 I applaud you for hosting this roundtable 3 because we have a serious problem in this industry, not 4 just with ownership opportunities; we have a serious 5 problem in this industry with employment, period. So if 6 we can conquer employment, we can conquer ownership. But 7 we need a start; we need job opportunities. 8 MR. BANKS: Of 1,200 television stations, 9 how many African American general managers are there? 10 About six? 11 MS. TRIGG: On a good day. 12 (Laughter). 13 MR. ROHDE: Let me ask this question. 14 Last night, I spoke to Commissioner Susan 15 Neff. She called because she really wanted to be here, 16 but could not because of a conflict. And she asked me a 17 question which I didn't know an answer to. 18 And that was, what about female ownership? 19 Does anybody know the status of female ownership? 20 Toni? 21 MS. BUSH: The last report was done in 1987 22 when the Census Bureau broke down those standard 23 industrial classification codes into the four level. In 24 fact, some of the statistical data that we collected as 25 part of the market entry barriers report back in 1996 45 1 were already nine years old for women ownership, and 2 there has been no study. 3 AWRT looked to the FCC to get statistics, 4 and yet the commission has never collected that data 5 before. So we're working with 13-year-old numbers on 6 statistical and way before the 1996 act; so no, we really 7 don't have an idea where it is for women-- radio, 8 television or any communications group. 9 MR. ROHDE: This may be a speculative 10 question, but perhaps maybe you can speak to it or anyone 11 else here. Maybe Lyle, since you've been involved in 12 management before. 13 Assuming we'd like to expand more 14 opportunities for female ownership and broadcasting, do 15 they face the similar challenges that minorities face or 16 are there unique things about female ownership or what do 17 you suspect is the issue? 18 MS. TRIGG: Having been in management and 19 looked at some ownership properties and trying to 20 transition, it still very much an old boys network, "old 21 white boys" network. So in that context, there are some 22 inherent difficulties on both sides, and sometimes it's 23 tough to tell which obstacle you're dealing with. You 24 don't know whether you're being hampered, particularly in 25 access to the capital side, whether you're a minority or 46 1 whether you're a female; or whether you're asked to get 2 your husband to sign your papers or whether you need to 3 bring more collateral to the table because they don't see 4 you making money. 5 So there are times when it's both. There 6 are some advantages, however, having both disadvantages, 7 but those are far and few between. 8 MR. ROHDE: Toni. 9 MS. BUSH: And I'm going to approach this, 10 Greg, from a slightly different perspective, because 11 we've been talking about the radio industry and the 12 television industry. But I think the problem is larger 13 than that, and we've got the same problems in the cable 14 industry. There is no minority ownership that I'm aware 15 of in the satellite radio industry, the DBS industry. 16 And the concern that I see, while we talk 17 about radio and television stations -- and I think there 18 are some opportunities that minority owners need to 19 explore as to what they can do as the conversion to 20 digital happens. But my big concern is that as the new 21 technologies come along, we're seeing zero ownership by 22 minorities and/or women. And I think that in large part 23 it goes back to the point that Roel made, which is this 24 is the government's spectrum, and the government has to 25 decide how it's going to license the spectrum and what it 47 1 is going to do to promote ownership by a diverse group of 2 Americans in its licensing process. 3 I, of course, can't resist the opportunity 4 to point out that our company currently has license 5 applications pending at the FCC. Broadwave USA is made 6 up of affiliates all over the country. We have 69 7 affiliates; 65 percent of our affiliates are minorities, 8 30 percent are African American, 30 percent are female. 9 Amongst the females, we have African Americans and 10 Hispanics. We have 12 percent Hispanic ownership, we 11 have Native American and Asian American ownership. 12 And so, assuming that we are going to be 13 successful, we will be the first company to have a 14 significant number of minority and female entrants into 15 the broadcasting industry in decades, maybe forever. 16 MR. PEREZ: When you think of the 17 stereotype for an Internet geek, it's always male. You 18 never see a female Internet geek. And I think the 19 stereotype probably has a lot to do with the level of 20 participation in the new media and the new industry. 21 And it's particularly problematic that the 22 Internet media is almost totally male dominated and 23 predominantly white dominated because when you think of 24 broadcasting, particularly television, being the other 25 alternative media to reach people and to influence 48 1 people -- the FCC in 1996 four years ago announced the 2 end of all new analog television licenses being 3 accepted -- television is done growing as an analog media 4 forever. There will be no more licenses to steer to 5 minorities, so the only game will be buying what's there. 6 And I yesterday, in preparation for today, 7 spoke to some of my friends back at the commission, and 8 they're projecting, at the earliest, five years before 9 they're really ready to start accepting digital licenses. 10 So there have been no new television filing 11 opportunities for five years past, and there will be no 12 more for another five years. So that's 10 years at least 13 before there's any new minority applicants. 14 MR. ROHDE: We're going to close this panel 15 off in a couple of minutes, but I'd like to close by 16 asking a question. I'm just curious if anybody on the 17 panel has a response to it, and that is kind of looking 18 ahead a little bit. 19 We all know the Federal Communications 20 Commission is considering some further liberalizations 21 coming up soon with respect to the national ownership cap 22 and maybe some other rules-- cross-ownership rules and 23 all of that. 24 I'm curious as to what the members of the 25 panel think. Since the FCC's not here, it's clear for us 49 1 to talk about them, right? 2 What advice do you have for the commission 3 as they consider these changes? Should the FCC move 4 forward with some more liberalization, should they hold 5 the line, should they make some changes in another 6 direction? What advice do you guys have? 7 MS. TRIGG: When the Adarand case was 8 decided in 1995, then Chairman Hunt pledged to do what 9 was called an Adarand study to look at the disparity 10 between minority ownership and majority ownership 11 licensing -- that whole process -- in fact, across the 12 board. 13 The commission has never conducted a 14 full-blown Adarand study. To their credit, they have 15 conducted some smaller studies -- and one I know that 16 Professor Hammond is working on -- in the discriminatory 17 advertising. But there is a need to stop and assess I 18 think, first, the impact of the 1996 act on minority 19 ownership before they take that additional step. And 20 there are a couple statutory provisions that I would 21 encourage them to read again or to take a look at that 22 give them the authority to do that. 23 And as a matter of law, they are to look at 24 promotion of minority and small businesses. And because 25 minorities fall in that small business context, they need 50 1 to take a look at the industry first and the impact 2 first-- do that Adarand study before they further open 3 the gates for consolidation. 4 MR. HAMMOND: I think it goes a little 5 further than that. You can't just look at broadcasting 6 as an isolated industry anymore. It's the information 7 industry. It's got equipment, it's got program 8 distribution, it's got content, it's got 9 telecommunications distribution, it's got software. 10 We need to know where minority ownership is 11 across the board. If we're going to make sure that 12 minorities actually participate in the 21st century and 13 the information industry, broadly defined, then we have 14 to look at all of these segments. 15 MR. EDWARDS: And I might add that when it 16 is discussed, that everybody be invited. And I've got to 17 go back to I salute you for having this. They've got to 18 invite everybody to the table to se what that impact will 19 be, that I don't think has happened. 20 We need to do a better job. We're in the 21 communications business, and sometimes we're the worst at 22 it. But we need to do a better job of communicating 23 what's happening and the impact that it might have on any 24 segment of our population. 25 MR. BANKS: When the test went away that 51 1 made an immediate negative impact on minority ownership, 2 and combined with the increased consolidation has just 3 been heinous. So I think if there's some discussions 4 that are more substantive about creating incentives to 5 increase access to deals, to lower the cost of capital 6 and financing for women and minorities, and to maybe 7 improve the valuations or incentives for sellers to sell 8 to minorities, women, that would be what I'm for. 9 MR. CAMPOS: There's absolutely no doubt 10 that consolidation has been the worst thing that ever 11 happened to minority ownership and small business 12 ownership; let's just be brutally blunt about it. 13 Any further liberalization will just create 14 and exacerbate the issue. In radio, which is the 15 industry that I'm familiar with, there will, in short 16 order, be a company that owns almost a thousand radio 17 stations across America. And as was said earlier, no 18 longer are the large companies only interested in small 19 markets; there are "business plans" to have clusters in 20 small markets and wheel and hub, and all these kinds of 21 situations to basically control huge numbers of radio 22 stations, in particular, across America. 23 I have seen a phenomena recently in which 24 in a divestiture situation, the company that's divesting 25 is concerned about where they're placing particular 52 1 signals, what signals are going to be left potentially 2 that could come back and be owned by somebody else to 3 compete against them later. So now they have an interest 4 in what is out there that may come back, and they want to 5 keep sort of a potential control on that situation. 6 There is a tremendous chilling in terms of 7 having properties available for anyone else, especially 8 minorities, and this is going all the way through all 9 levels of markets; that's just the way it is. So at a 10 minimum, there can't be any more liberalization. In 11 fact, what we need is a re-study of what has happened. 12 Is this good for America? Is this really what we want? 13 Do we want three or four or five companies 14 all across America to basically own all the radio 15 stations that broadcast and program to about 80 percent 16 of the population? Is that what we want? I mean, that's 17 what we got. 18 And this isn't the marketplace winning out. 19 You can't tell me that, oh, it's because minorities can't 20 compete. These were government policies, these were 21 licenses that were issued, this is a government-created 22 situation. So therefore, we are entitled to a equitable 23 playing field. The fact that new media and so forth is 24 not being attended to is also a big problem. So we have 25 that issue. 53 1 Government has to get involved and has to 2 create diversity and ownership because ownership is the 3 most important factor. Employment's important; 4 everything follows after that. 5 Secondly, government has to find a way to 6 get a new model for private capital. Lyle explained very 7 clearly what the typical minority entrepreneur problem 8 situation is. You've got venture capitalists who want 9 returns in three years, and they've got to have a certain 10 amount of money, and that money cost more for minorities 11 to get than it cost existing companies. We start off 12 almost with a minority situation in ownership of our 13 company because that's what it takes to attract capital. 14 So you start off in the negative. 15 So government-- create incentives to create 16 a new venture capital situation in which a venture 17 capitalist because they're only responding to their 18 particular limited partners who want their money back in 19 a certain number of years, let's find a way to have a 20 longer time span for returns. We're not talking about 21 not making money. We've got to make money. We've got to 22 basically be successful in business, but let's have a 23 different situation to allow minorities to build up their 24 companies and to stay in business. That's a big thing 25 also, to stay in business for the long run. 54 1 VOICE: Are you going to take any questions 2 from the floor? 3 MR. ROHDE: I'll address that in a second. 4 MR. PEREZ: It's always a very difficult 5 task to swim upstream against economic forces, and the 6 economies that flow out of consolidation are a 7 tremendously powerful economic advantage. And so, I 8 think it behooves us to both do what we can to limit or 9 fight further consolidation but also to plan for what we 10 can do within the context of consolidation for fear that 11 we might totally lose that fight. My understanding is 12 that there's tremendous pressure on the FCC to do 13 something in this direction, and I think it's going to 14 happen. 15 Recently, in the radio area, where the 16 consolidation process is much further along, some of 17 these mega companies have spun off some very nice big 18 city properties to minority groups, I think in large part 19 because of pressure coming from the FCC, Rainbow, PUSH, 20 NAACP and other people that are trying to encourage 21 diversification. 22 And, in fact, if you just look at big city 23 radio properties, you might say that minority ownership 24 in that small class of stations has gone up very recently 25 because of the spin offs that are coming out of 55 1 consolidation. So you could look at this problem and 2 turn it into an opportunity if you're successful at 3 controlling or encouraging the right outcome of the 4 spin-off process. 5 I think that for fear that we lose the 6 fight on the TV side, we also want to look at how we can 7 ensure that when the inevitable spin offs come out of the 8 TV consolidation, that those properties go to minority 9 owners. 10 MR. ROHDE: I want to conclude this panel. 11 This has been extremely enlightening, and I really 12 appreciate all of you being here and really thank you for 13 that. What I'd like to do is go to a short break. 14 I know, sir, you've been quite eager to 15 address a question. And I was going to say, well, hold 16 your questions to the end, but since you've been so 17 eager, I'll let you throw the final shot here. Then 18 after you've raised your question, if anybody has a 19 comment to that. We'll take about a 10-15-minute break, 20 and we'll come back for the second panel. And then 21 toward the end of the second panel, I'd like to have some 22 time of which others in the audience who want to make a 23 comment or ask some questions would be able to do that. 24 So please, go ahead. 25 MR. PEARSON: My name is Hugh Pearson. I'm 56 1 from Urban Box Office Network. 2 First of all, I'd like to say to Mr. Rohde, 3 you said that there are few Native Americans here 4 present. I'd like for you to know that 40 percent of the 5 African Americans have Native American blood, so there's 6 a lot of Native Americans present in this room. Okay, 7 number one. 8 My question is the following. In your PR 9 materials you talk about one of your aims is to make sure 10 that foreign governments open themselves up to American 11 companies. 12 I'm wondering why isn't one of your aims to 13 make sure that some of these major conglomerates that are 14 buying up everything, why aren't you questioning some of 15 these major mergers and acquisitions? 16 MR. ROHDE: Why is not NTIA questioning -- 17 MR. PEARSON: Why isn't the NTIA looking 18 into it and telling the FCC to question some of these 19 major mergers and acquisitions? Let's cut through the 20 chase and not do this, "okay, let's talk to the 21 minorities about what they don't own now." 22 Let's cut through the chase, and ask the 23 question, why you are not questioning some of these huge 24 mergers and acquisitions and recommending that they be 25 denied? 57 1 MR. ROHDE: Thank you. 2 With respect to the mergers, within the 3 administration, we've been trying to respect the desire 4 of the Administration to allow the Justice Department to 5 do the review and not to impose a view upon that. So 6 that's why we have stood back and allow the Justice 7 Department to do its review under the antitrust laws and 8 to give them that independence. And that's been a desire 9 within the administration to allow for this kind of 10 structure. 11 However, getting to the content of the 12 concern you're raising, I think you raise a very, very 13 good point and a very important point for us to look at. 14 I think the wave of mergers, not only in just the media 15 area but in the broader telecom area, are raising a whole 16 host of new questions that I don't think we've really 17 confronted before as a government. And particularly, 18 with the globalization of all these mergers are raising 19 new issues. 20 So it's something that we have to be very, 21 very sensitive to, and I think you raise a very good 22 point. Thank you for asking that. 23 Thank you all for being here, and we'll 24 take 25 about a 10-minute break, and we'll come back for the 58 1 second panel. 2 (Recess) 3 MR. ROHDE: I'd like to begin. 4 The intent of the first panel was to kind 5 of take a snapshot or a pulse check of where we stand 6 today with respect to minority ownership and the industry 7 in general. And with this panel we want to look forward 8 a little bit and look to see where things are headed, and 9 also to have a discussion about the role of new 10 technologies and what new technologies hold and what kind 11 of policy issues are related to all that. 12 I'd like to begin by starting over here to 13 my right. If each of the panelists could state your name 14 and your affiliation. Just go around and we'll begin a 15 series of questions just like we did the other panel. 16 So, please, Mr. Wilkens. 17 MR. WILKENS: My name is Herb Wilkens, and 18 I manage the Syncom group of venture capital funds. 19 MR. WINSTON: I'm Jim Winston. I'm the 20 Executive Director of the National Association of Black 21 Owned Broadcasters and a partner in the Washington, D.C. 22 law firm of Rubin, Winston, Diercks, Harrison & Cooke. 23 MS. KONG: Hi, I'm Jacqueline Kong. I'm 24 the executive director of the Asian American Media 25 Development, and the president of a new media Internet 59 1 company broadcasting, webstreaming video on the Internet 2 called HotPopTV.com. 3 MS. LEW: I'm Ginger Lew with the 4 Telecommunications Development Fund. We make investments 5 in early-stage communications companies. 6 MR. SAMARA: I'm Noah Samara. I'm the 7 founder, chairman and chief executive officer of 8 Worldspace Corporation, who has had two satellites built 9 and launched over Africa and Asia, and a third one is 10 being built to be launched over Latin America. 11 MS. HAYLES: I'm Dahlia Hayles. I direct a 12 media and telecommunications project for the Citizenship 13 Education Fund at Rainbow PUSH Coalition in Washington, 14 D.C. 15 MS. HONIG: I'm David Honig. I'm the 16 Executive Director of the Minority Media and 17 Telecommunications Council in Washington, D.C. 18 MS. HODGE: I'm Millicent Hodge. I'm a 19 general partner of the New Markets Equity Fund. It's a 20 recently founded fund that will focus on low and 21 moderate-income areas in urban and rural communities. 22 MR. CHINLOY: Peter Chinloy. I'm a 23 professor of real estate and finance at American 24 University, and I'm interested in telecommunications 25 issues. 60 1 MR. ROHDE: Well, thank you all very much 2 for coming here. I'd like to begin kind of where we left 3 off in the previous panel and talk a little bit about 4 financing and capital. Maybe we can begin with 5 Mr. Wilkens and Mr. Winston and go to Ginger, since 6 you're all involved with the establishment of funds and 7 looking at the capital issues. 8 Mr. Wilkens, could you just maybe share 9 some of your thoughts about where you see the issues 10 headed because of one of the issues we discussed in the 11 previous panel was the challenges that minority 12 broadcasters have in facing capital. Looking ahead a 13 little bit, how do you see this issue unfolding, and what 14 opportunities are out there? 15 MR. WILKENS: Well, you can't really look 16 forward unless you look back, and Syncom over the years 17 has financed a whole host of minority-broadcast 18 companies. We have financed Radio 1, Z-Spanish, 19 El Dorado, Worldspace, District Cable Television, South 20 Chicago Cable Television, Buenavision Telecommunications, 21 on and on and on. We're now financing Internet 22 companies, Net Noir is a new company, and we will 23 probably finance, and continue to finance, a host of 24 other companies. 25 I make that point because most people would 61 1 say, wait a minute -- oh, and I missed BET, Black 2 Entertainment Television -- one company, one venture 3 capital fund, managed to finance all those companies? A 4 lot of them are household names. 5 How did Syncom with very little capital 6 manage to finance all those companies? Well, the answer, 7 quite frankly, is we have taken a different view of 8 minority telecommunications and minority-owned 9 telecommunications companies. Our view is that the 10 talent in the minority community -- and most of you won't 11 believe this, but the proof of the pudding is in what 12 we've done -- exceeds the talent pool available in the 13 majority community because most of the talent in the 14 majority community is employed, perhaps gainfully, 15 perhaps not, but nevertheless they've been absorbed. And 16 there's plenty of talent -- unused talent, capable 17 talent -- in a minority community, so much so that you 18 can offset the capital against that talent, that 19 capability. 20 And what we have done is focused on the 21 best and brightest in our community; the people who 22 really understood what they wanted to do and what they 23 wanted to achieve. And because they have that kind of 24 capability, we're able to reduce the amount of capable, 25 and those people with the talent took those talents and 62 1 created the companies that you now see. 2 Noah Samara's a perfect example. Syncom's 3 investment in Worldspace was $500,000. Worldspace is 4 presently capitalized at $1.4 billion. It is the only 5 direct-satellite-to-earth operating system in the world. 6 Now how did that happen? That happened 7 because Noah Samara created the industry. He understood 8 more about satellites and direct-satellite-to-earth 9 operational systems than anybody we had come in contact 10 with, white or black, across America. He knew it. 11 This goes back 10 years ago, Noah? 12 MR. SAMARA: Yes. 13 MR. WILKENS: Ten years ago. 14 There are a lot of Noah Samaras probably 15 sitting right here in this room who understand various 16 segments of the telecom industry who we will finance. 17 And if we can do deals -- and by the way, I think 18 Worldspace today is conservatively worth maybe 19 $5 (billion) or $6 billion plus dollars. 20 So if we can put up $500,000, take a 21 significant equity stake in the company, and work with an 22 entrepreneur so that he or she can realize their dreams, 23 we can create all the minority owned companies in the 24 world in the future. In fact, we can control 25 communications in this country in the future; and that's 63 1 going to scare a lot of people, but that's the truth. 2 MR. ROHDE: Mr. Winston, do you share the 3 view that there's plenty of capital available for 4 minority broadcasters if they get the means? I mean, the 5 capital's there? 6 MR. WINSTON: First, I wanted to ask Herb 7 what kind of return they got on that $500,000 investment. 8 But I'll add that off the record later. 9 But on a serious note, Herb obviously goes 10 way back in this industry. We've been on many panels 11 together, and we've hosted him in NABOB conferences in 12 the past. 13 The issue with capital is, obviously, a 14 fairly complex one. Herb has taken his magic and applied 15 it in some very creative ways to help some very 16 significant companies. Unfortunately, not everyone's 17 business plan is as ambitious and has the vision to carve 18 out a brand new niche. For many people, they just want 19 to be the African American or Hispanic broadcaster in 20 their local market, and that is there overriding 21 ambition. And for those kinds of entrepreneurs, money 22 has always and continues to be tight. 23 Certainly today, if you're going to a 24 venture capitalist, as was talked about on the last 25 panel, most of them -- and I will exclude Herb; I'll let 64 1 Herb talk about his investment strategies -- are saying 2 we want a business plan that shows us that you're going 3 public or you have some other plan for taking us out in 4 three years, definitely no more than five. And for an 5 entrepreneur who wants to just be a broadcaster to his 6 community, his business plan is not going to fit that 7 model. 8 It used to be that that entrepreneur would 9 go to his local bank and take out a loan to purchase a 10 radio or TV station, but that was back when TV and radio 11 stations sold for 8 and 10 times cash flow. Now they're 12 selling for 20 times cash flow, and your bank's lending 13 it 5 times cash flow -- if you're lucky, they're lending 14 it 5 times cash flow -- then there's a huge gap between 15 what you need to purchase a radio station and what you 16 can get from traditional forms of debt financing. 17 So as a result, there continues to be a gap 18 for smaller to mid-level entrepreneurs, and it's not one 19 that is currently I think adequately being filled. 20 MR. ROHDE: Let's turn to Ginger. 21 Ginger, you are the administrator of the 22 Telecommunications Development Fund which was a creation 23 of the '96 Telecommunications Act. Maybe a lot of folks 24 don't really know a lot about the fund that you 25 administer. Maybe you can give us a little bit of 65 1 background about what this fund is, where you're at right 2 now, how much money you have to work with and what kind 3 of financing you're doing. 4 MS. LEW: The Telecommunications 5 Development Fund was part of the 1996 Telecom Act. The 6 purpose of the fund, which was set up to be a private 7 company, is to make investments in early-state 8 communications companies. 9 We initially receive our funding from the 10 interest paid by financial institutions on spectrum 11 auction deposits. Up until 1996 when the FCC received 12 deposits from interested bidders in the spectrum 13 licenses, they used to place the money into non-interest 14 bearing accounts. Don't ask me why, but that's what 15 happened. (Laughter). And Congressman Towns in 16 particular, who is the father of this particular piece of 17 legislation, proposed the idea that the FCC be authorized 18 to place money into interest-bearing accounts. And in 19 this case, Mellon Bank pays a whopping 3.3 percent 20 interest on these spectrum auction deposits which accrue 21 to the benefit of TDF. 22 When TDF was first created, one of its 23 initial hopes was, in fact, to increase minority 24 ownership broadcast properties, but no one knew how much 25 money TDF was ever going to accrue through this process. 66 1 And over the course of the last 3 years, we've 2 accumulated approximately $25 million from this 3 interest-earning process. 4 Twenty-five million dollars in today's day 5 and age when you talk about broadcast properties doesn't 6 go very far. So as a result of this, the TDF, which has 7 been operational for the past year-and-a-half, has 8 instead chosen to focus on making equity investments at 9 early-stage new media, new communications technology 10 companies because this is where we think a million 11 dollars here and a million dollars there can, in fact, 12 make a difference. 13 We've made approximately six investments to 14 date, all in the range of anywhere from $700,000 to a 15 million dollars. We'll make up to $2 million for any one 16 investment. We have approximately $20 million to invest 17 total, so that's approximately 10 investments. 18 My investment partner, Daryl Williams, who 19 used the vice president of Ameritech's venture 20 fund -- Daryl and I are proposing to our board that we go 21 out and raise a new fund from traditional investment 22 sources -- from banks and pension funds -- in the very 23 new future because we think we've hit upon a very 24 interesting niche of opportunity because when we think 25 about communications and broadcast, we often times focus 67 1 on traditional broadcast. And the reality is, in today's 2 day and age we're talking about webcasting, Internet 3 radio, satellite radio-- all new forms of communications. 4 And I think these are opportunities of ownership that we 5 should be exploring and promoting. 6 MR. ROHDE: Thank you. Maybe this is a 7 segue to have Noah speak for a minute. You've already 8 had an advertisement from Mr. Wilkens. 9 MR. SAMARA: I should be on every panel 10 with him. (Laughter) 11 MR. ROHDE: Tell us a little bit about your 12 satellite technology, how it works, and also about what 13 kind of a role you see this playing domestically within 14 the U.S. in terms of creating more opportunity for media 15 ownership or media delivery. 16 MR. SAMARA: First, before I get into this, 17 I was thinking, $25 million, I'd give it to Herb Wilkens, 18 and it would go pretty far. 19 About 10 years ago, I set up a company, and 20 I didn't have anything at the time -- no money and no 21 financial backing -- but just went off to set up a 22 company that would ultimately have satellites built and 23 launched to cover some 4.6 billion people living in 24 Africa and Asia and Latin America in the Middle East and 25 in the Caribbean. 68 1 That was what we started with. I really 2 didn't know how far this was going to go, whether I was 3 going to start the company, create all of the enabling 4 regulatory environments, et cetera, and somebody would 5 come and buy it up or how exactly it would evolve. But 6 what I did know is that this was something that just 7 needed to get done. 8 First of all, it was a great market 9 opportunity. Just think of being able to reach some 10 4.6 billion people or maybe 10 percent of those people or 11 take 5 percent of those people; it's still a huge market 12 whichever way you cut it. And that was basically the 13 idea, and ultimately 10 years later we actually did end 14 up launching the first satellite ever that does this kind 15 of a service. In fact, we did it in Africa in advance of 16 such a service even being delivered here in the United 17 States. And it's the first such satellite system ever 18 launched that's dedicated; in fact, it's the first 19 satellite system, period, that has ever been launched 20 that is dedicated to cover Africa. So these are like two 21 points that make us mighty proud. 22 But what the satellite does is, instead of 23 direct TV, imagine having a small receiver that 24 looks -- in fact, this is a working receiver. It works 25 all over Africa and all over Asia. We have two 69 1 satellites that have already been launched. Imagine, 2 instead of a direct TV, just a satellite broadcasting 3 signals directly from the GO stationary orbit to a radio 4 that's this size. 5 And this radio basically has this antenna; 6 that's the satellite dish. That's all you need. And the 7 radio itself can be connected to a computer or you can 8 have a computer card that replaces the radio, and the 9 computer card plus this antenna is all you need to 10 actually receive all kinds of multimedia without the need 11 for telephone infrastructure. 12 The whole idea behind the service is -- the 13 company's mission is to create information affluence. 14 I've always believed that, really, the problem is not one 15 of poverty or one of politics or whatever; the real 16 problem around the world, particularly in the developing 17 world, is one of lack of information. 18 If you were to provide lots and lots of 19 information to people from universities over the air to 20 help broadcasting to lots of great entertainment -- I 21 have taken this radio in very remote areas and have heard 22 Louis Armstrong do his thing. It's just an incredible 23 experience. It's just an incredible experience that 24 we're providing, but that's what this is. 25 MR. ROHDE: What are the capital costs for 70 1 this, for launching this system? 2 MR. SAMARA: It has cost us so far about 3 $1.1 billion, and to fully launch the business into this 4 marketplace will cost another, maybe, $200 million, maybe 5 $300 million more, and we should break even fairly 6 quickly. It's a huge market. 7 VOICE: Are you publicly trading yet? 8 MR. SAMARA: That's the next step. 9 MR. ROHDE: What about the subscribers? 10 What does it cost to have one of those units? 11 MR. SAMARA: Imagine a radio band. We have 12 quite a large radio spectrum actually that's dedicated 13 for the service in one of the choicest parts of the radio 14 spectrum, as you know -- inside joke here. 15 So we have this L band frequency, and if 16 you could imagine a radio spectrum just like AM/FM, 17 there's this new frequency which is the satellite 18 frequency. And what we do is, once a subscriber buys one 19 of these receivers, we have dedicated a good chunk of 20 that radio bank basically to deliver service for free. 21 So if somebody just buys this radio, they 22 will forever until the life of this radio -- or until 23 their life, whichever, as lawyers tend to say -- they get 24 a free service. Then we've also dedicated a smaller part 25 of the spectrum, but still fairly large, to do very 71 1 specialized services that user would pay $10-12 a month 2 for. And we do most of our multimedia that way; we 3 deliver like a huge file into people's computers. And in 4 the U.S. a one-way broadcast of multimedia doesn't make 5 as much sense because of how well developed our telephone 6 infrastructure is; but in much of the developing world 7 you're on line for about 15 minutes and it drops, 8 particularly if you're downloading a big file. 9 So what we do is we aggregate great 10 content, and we deliver those contents across our 11 satellites across the developing world; and that we 12 charge subscriber fees, and then we have an advertising 13 model. 14 So basically we have three models for 15 making money; we lease capacity to broadcasters, we 16 advertise or co-advertise on content -- that's other 17 people's content if we don't develop the content -- and 18 then we charge subscribers for specialized services. 19 MR. ROHDE: Thank you. 20 Jacqueline, let's turn to Internet 21 technologies. What can you tell us about the future of 22 the Internet with respect to -- traditionally we know 23 television and radio broadcasting. And, in fact, this 24 weekend I remember reading in the Washington Post a story 25 about a radio station -- and I think it was in Los 72 1 Angeles -- that has completely switched its format from 2 broadcasting over the airwaves and is now entirely an 3 Internet radio station-- a new experiment. Where do you 4 see this happening? 5 MS. KONG: I see this as a future for 6 broadcasters, and, in fact, I see with the mergers -- you 7 were talking earlier about mergers -- I think that is 8 what is happening with the communications and field. 9 And what's happening is the technology is 10 here now to watch video on demand, at your convenience, 11 at real time, no download time. What hampered the 12 ability to actually broadcast earlier was the fact that 13 you would have to download large files off your computer, 14 off the server, in order to watch. 15 What HotPopTV does -- and we're pretty much 16 a new, start-up company utilizing this technology, 17 working specifically -- in fact, I really was very 18 excited about being here today because what we are doing 19 with HotPopTV is it is a network on the Internet 20 dedicated to ethnic programming. In other words, I spoke 21 at NATPE -- which is the National Association of 22 Television and Program Executives -- at their big meeting 23 in New Orleans with Kwasi Mfume, with Felix Sanchez from 24 the Latino community, and I represented the 25 Asian-American community, and it was very interesting 73 1 what the coalition was trying to do which was try to 2 create more awareness for more inclusion, meaningful 3 inclusion, in programming that accurately portrays ethnic 4 minorities. 5 And what I did find there in January was 6 that no one from the network bothered to take the 7 escalator upstairs from the convention floor. And it was 8 actually well publicized in U.S Today and the L.A. Times 9 and Variety and the Hollywood Reporter, but I just don't 10 see; if they don't bother to take the elevator upstairs 11 to find out about what the issues are for ethnic 12 minorities as far as what we would like to see happen and 13 how we would like to be included as far as programming 14 and management, I don't see that happening in traditional 15 major broadcast networking in the near future. 16 What I do see happening is this new 17 technology on the Internet being at a place where 18 communities are forming very rapidly on the Internet. 19 Black Planet is a major concern right now. And these are 20 not broadcast communities; these are communities that are 21 communicating through chat rooms and bulletin boards of 22 what is happening in their community. 23 What is happening is that major 24 broadcasters aren't satisfying the needs of our 25 communities, so what's happening is a lot of our younger 74 1 college students are running to the Internet, especially 2 the Asian-American community in a large form. 3 Asian Americans have been pretty much left 4 way behind. I believe African Americans and Latinos have 5 paved the way, but still if you look at last year's line 6 up for the fall network, out of 26 shows, not one show 7 that featured any ethnic minorities, and that's why the 8 coalition was formed. 9 Now we're talking a year later, and they've 10 canceled one of the only Asian faces on television which 11 is Martial Law. They did not pick up Gregory Nava's new 12 show which was about a Latino-American family which got 13 rave reviews in the L.A. Times but was not picked up by 14 any of the networks. Cable companies are talking about 15 doing that now. 16 But what I'm saying is, what we found at 17 NATPE was that we were getting a lot of lip service 18 without any results. And why I was excited about being 19 here is, I feel this is a wonderful forum to talk about 20 solutions, not only solutions but a multicultural 21 coalition to actually have some impact on the Internet 22 because I don't want to see us left out of that 23 technology as well. 24 I see what's happening with AOL and Time 25 Warner merging. I see a heavy-hitting, community-based, 75 1 20 million subscribers linked with a major studio which 2 is not really taking into account in a significant way 3 ethnic and minority inclusion. 4 So what I have done pretty much -- and I'd 5 like to actually talk to people here afterwards about 6 partnering up because I think that's the way it's going 7 to go. We have to partner up; we have to split some of 8 these costs because the technology is not as expensive as 9 broadcast technology or satellite technology, but 10 certainly it does cost money, and we have to start 11 hitting the communities off these sites or off HotPopTV. 12 I'm looking for content that can service all communities 13 and partners from all ethnic communities to work with me 14 and having us work together to create our own 15 consolidation before we get swallowed up. 16 MR. ROHDE: One of the more challenging 17 communications issues in this country is closing the 18 Digital Divide, and it's something that we work on and 19 take a great deal of concern at NTIA. But let's assume 20 for a moment that we can succeed in building an advanced 21 telecommunications infrastructure across this country, in 22 all regions of the nation that we can make broadband 23 infrastructure almost as universal as we have the 24 telephone network today or cable network. Let's assume 25 that we can achieve that goal. 76 1 Assuming that, for someone to do any kind 2 of business on the Internet or put up a web page, 3 regardless of what it is, including to have a radio 4 station or maybe even with a television station as the 5 technology improves for video streaming and for the 6 quality to improve, we're talking about a very, low-cost 7 entry medium here. It's significantly a lower cost to 8 start a business and to put a message on the Internet 9 than it is to go buy a radio station or television 10 station and try to communicate through that means. 11 Assuming we have the infrastructure, is 12 this going to be just a completely wide open new 13 opportunity for minority communities now to have another 14 way to speak and to be heard in our society or are there 15 other issues out there associated with the Internet to be 16 concerned about? Are there impediments in front of us? 17 MS. KONG: For the Internet? 18 MR. ROHDE: Yes. 19 MS. KONG: I think that the issue is always 20 the same as it is for traditional broadcasters, and that 21 is acquiring enough content to satisfy viewers and to 22 bring them back repeatedly that would then constitute 23 advertising dollars that will be thrown on to your site. 24 So the idea is, as we have a lot of these 25 small sites, we're going to be competing against each 77 1 other. Like the earlier panel had said, the reason why 2 you're consolidating is because it's easier to sell 3 multiple advertising. If each one of us has to go out 4 and sell advertising, we're quadrupling the workload. 5 Actually, the costs aren't as prohibited as a broadcast 6 entity, but certainly you have to have venture capital to 7 build the site, to pay the engineers -- and it's very 8 competitive right now because they're getting a 9 premium -- to acquire and create content. 10 Now creating the content is the power tool 11 here. And one of the things we found out in talking at 12 NATPE is was, in fact, our images, ethnic minority 13 images, were being created by people that weren't from 14 our community which meant if you were an American Indian 15 or you're Asian American -- I brought Garrett Wong from 16 Star Trek with me, and basically he was doing All 17 American Girl, which was the first Asian-American network 18 television show, and basically, they were trying to tell 19 everyone how to act Asian American. And it was pretty 20 offensive because they kept telling them talk really 21 slowly and over-articulate because that's the way Asian 22 Americans talk. 23 Now, the problem is, we find that all of us 24 end up getting defined if we're not included -- and I say 25 beyond the management and ownership, and of course, that 78 1 would be ideal. But obviously, the creation of these 2 shows -- that's why I think the Internet is a very 3 exciting medium because we are now talking about 4 producing at a much lower cost, getting a targeted market 5 that spends, which is your college-age student that's on 6 the Internet that has access to the high speed modems on 7 campus and will purchase the DSL lines that are necessary 8 to watch, and the formats are shorter. 9 And so you're holding a larger audience for 10 lower costs, you're getting your advertising dollars, 11 you're hitting a very targeted demographic. If you can 12 do that with every, let's say, aspect of HotPopTV -- of 13 there's one arm that's connected to Black Planet that is 14 African American programming that's created by an African 15 American community, that has accurate role models and 16 portrayals, that empowers the community. If there's 17 another arm of that that's broadcasting Asian American 18 programs created by Asian Americans with accurate 19 portrayals and good role models, then you're empowering 20 that community. 21 So I think it does so much more than just, 22 we want to own something. The idea is to empower the 23 community, speak to the community, and you have that 24 power on the Internet at a much lower cost, and I believe 25 that you'll grab those dollars. 79 1 We just got our first account. I can't 2 disclose who it is, but it's quite exciting; they want to 3 sponsor the webesodes on line. And the webesodes, again, 4 are a fraction of the cost to produce, the advertisers 5 are happy, they hit the demographic they want to hit, and 6 I'm looking for partners. So if anyone is out there, 7 traditional broadcasting -- 8 When Mr. Banks was saying there's a limit 9 of where you can go with traditional broadcasting, I say 10 let's partner up and let's take it to the next level 11 which is Internet broadcasting. 12 MR. ROHDE: I have a question. Is 13 "webesode" a real word? 14 (Laughter) 15 MS. KONG: They're using it in Variety all 16 the time. It is now a coined work for like a series. 17 MR. ROHDE: Okay, you learn something new 18 everyday. 19 I'd like to turn to Professor Chinloy. And 20 I understand you're involved with kind of alternative 21 financing models in the media and also for new types of 22 businesses. Share with us some of the things that you're 23 seeing and some thoughts you have. What kind of new 24 ideas are you seeing in general, and are minority 25 communities coming up with some of these new ideas, and 80 1 what kind of issues lie in front of them? 2 MR. CHINLOY: Well, just in terms of 3 background, what's happening -- quite apart from the 4 large scale consolidation like Time Warner/AOL -- there's 5 consolidation going on in the minority media as well. 6 Herbert Wilkens mentioned the local broadcaster, for 7 example, in the minorities station area who can't get the 8 capital. 9 And what's happening there is, frequently 10 what happens is that station -- for example, it's in 11 Sacramento -- might be operated as one station, simply 12 broadcast content in maybe six or seven locations at the 13 local level. So you have consolidation there. 14 What's interesting is that you don't see 15 some developments in the broadcast area that seem to go 16 on in other minority or immigrant business cultures in 17 this country. In other words, for example, you take a 18 dry cleaner or you take any other small business -- I 19 come from Jamaica, and there it's very common when 20 Jamaicans come to the U.S. to set up a small business, 21 almost entirely outside of the formal capital market, 22 through this system called partnering. And yet, the 23 situation occurs in most small business immigrant 24 communities, but it doesn't tend to operate in the 25 broadcasting sector. And I'm not quite sure why that is 81 1 the case. Perhaps it because the barriers of entry in 2 terms of capital cost is very large. 3 But the operation of the thing is fairly 4 straight forward. What happens is that people pool their 5 resources. Everybody is required to put in draws in 6 every particular time. Front-end people -- the ones who 7 want to run the business -- in effect, take a discount. 8 So if everybody puts in $1,000, and you've got 10 of 9 those, that's $10,000; and the one who wants to start up 10 gets $9,000, and in effect, has been provided by a loan 11 from the other people. Somebody else is going to get 12 $11,000 out of this deal. 13 So why does this not work more formally? 14 Part of it is because there is a risk that somebody is 15 left holding the bag. There isn't any sort of formal 16 institutional arrangement -- I'm not saying government 17 should be involved in this, but someplace where the money 18 is held that someone doesn't abscond with all these 19 funds. 20 And the second thing is monitoring the 21 people who actually set up these businesses will perform. 22 In the small, informal businesses there seems to be a 23 structure, say in dry cleaning, where other minority 24 members will come to the aid of a dry cleaners whose 25 almost is going to go out of business because they all 82 1 have a stake in that business. 2 Perhaps there needs to be some kind of 3 structure that would enable assurances or guarantees to 4 occur in the minority-owned broadcasting business as 5 well. That would then focus largely on the spectrum 6 frequency type businesses that actually require capital 7 to enter. 8 MR. ROHDE: Millicent, are you the director 9 or executive director of the New Markets Fund? What are 10 you seeing in terms of opportunities in new technologies 11 and new media for minority communities and what kind of 12 financial issues do you see at stake there? 13 MS. HODGE: Just to give you a little bit 14 of background on what we do, we're focused on low and 15 moderate-income areas, but we're also doing -- and 16 to follow up on Jacqueline's point -- is that we are 17 doing a lot of partnering. 18 Back in April, the White House announced 19 the launch of our fund, and in conjunction with that 20 announcement we talked about our new strategic 21 partnership with AT&T which is valued at $30 million in 22 terms of deal flow. 23 And so we will be doing additional 24 strategic partnerships with other Fortune 500 companies 25 and other entities. And as part of that we anticipate 83 1 seeing a lot of the new media and new technologies coming 2 across the table and having sort of the first seat at the 3 table to talk to minority suppliers to these various 4 industries because we're not only focused just on 5 telecommunications but also on transportation. And we 6 also have a very interesting board which we hope will 7 allow us to see a lot of these kinds of deals. 8 Larry Irving, who is your predecessor, is 9 on our board. Darian Dash, who some of you may know is a 10 28 year old entrepreneur. He is the first African American-owned 11 Internet company that went public, and Isaiah Thomas, Mel 12 Farr and a number of other individuals. Allen Wheat is 13 the chair of our advisory board; he's a former 14 congressman from Missouri. And so, we hope AT&T will be 15 on our board as well as a number of other representatives 16 from Fortune 500 companies. 17 And so, based on our board, and also with 18 these strategic partnerships, we're hoping really to see 19 a lot of the new opportunities coming down the pike. 20 MR. ROHDE: Thank you. 21 I'd like to turn to Dwight Ellis of NAB. I 22 know that the NAB has certainly been a bystander in a lot 23 of these discussions. The NAB has had some of its own 24 initiatives, tried to promote minority ownership. 25 Can you speak to some of the things that 84 1 the NAB has been doing? And also, not to talk too much 2 inside the Beltway politics, but as far as trade 3 associations go, the NAB is faced with some very 4 interesting internal politics because of the 5 rapid-changing nature of the industry and these new 6 technologies. And what kind of things are you seeing on 7 an industry-wide perspective of how the Internet and 8 satellite TV are changing the nature of broadcasting, and 9 also looking ahead, what kind of opportunities are 10 provided? 11 MR. ELLIS: Okay. Thanks a lot. 12 I'm glad to be here. Sorry I got here a 13 little late. I was in San Diego at a conference. In 14 fact, I got in at 2:30 this morning. I was on the same 15 plane as Charles Dutton. We had a conversation about 16 ownership that I'll share with you that sort of relates 17 to some of the comments that were made. 18 As all of you know, the NAB has been in the 19 business and in the process of helping minorities to 20 empower ourselves in the world of telecommunications well 21 over 20 years. I brought with me -- for those of you who 22 may be a little bit short on the side of history -- a 23 publication that my department published in 1978. Some 24 of you may remember Max Robinson, who was our first black 25 network correspondent, inside of this publication, Air 85 1 Time; and there's never been anything like it since 2 because we talked about, during those two years that Air 3 Time was published, the world of minorities, not only in 4 telecommunications but also in the allied arts. 5 In 1978, the NAB, and especially my 6 department, was dedicated to looking at opportunities not 7 only for minorities -- African Americans, Asian 8 Americans, Hispanic Americans and others -- involved in 9 traditional broadcast but also in the area of the film 10 industry and the music industry. 11 Well, we had a two-year conference in 1979 12 that's almost like history repeating itself right here. 13 At that conference was then Commissioner Tyrone Brown, 14 who was our first black commission at the FCC, and of 15 course, Herb Wilkens was there too. So that, 16 Mr. Secretary, is one of the benefits of age, seniority 17 and all that; you can see time sort of repeating itself. 18 The NAB has been very supportive of 19 minority ownership over the years. We worked with NABOB 20 in the early '70s in pulling that organization together, 21 and we ended up having several conferences such as this 22 one. 23 Bringing it up to current, as you know, 24 last year, the Chase Fund was established. NAB is not 25 involved in that effort. As you well know, that is an 86 1 independent entrepreneurial effort by Chase Bank, and 2 Lawry Mays, our former joint-board chairman, was very 3 instrumental in pulling together influential broadcasters 4 to raise a target of $174 million, hopefully going to a 5 billion very soon. 6 Sort of jumping ahead to a question that 7 might be posed as to how that fund may be different from 8 the fund that NAB helped to establish back in the early 9 '70s or late '70s that was later run by John Oxendine, 10 called Broadcap, Broadcap was a not-for-profit entity 11 versus this Chase Fund which is a for-profit entity. And 12 of course, Broadcap was funded largely by the broadcast 13 industry, and it was the first effort made by the 14 commercial industry to infuse capital into this effort. 15 As I said earlier, NAB is not involved with 16 the Chase Fund now. The Chase Fund, in addition to being 17 an entrepreneurial, for-profit entity, it has expanded 18 its efforts to reach out to the ".com" community to new 19 technologies as Reg Hollinger said at that press 20 conference. 21 Of course, this reflects, as you mentioned, 22 a new era, a new situation at the NAB. We have members 23 who are not only radio and television owners, but also 24 cable owners, also owners of .coms. Jeff Smulyan has a 25 .com company. I could name a number of major 87 1 broadcasters who are involved in new media as well as 2 traditional media. I think this will continue. 3 The challenge of Eddie Fritts as president 4 of the NAB, as you can imagine, is to balance all of 5 these various equities and competition just as he did 6 years ago when we had to deal with the vagrancies of 7 Hollywood versus the television industry, and this is one 8 of the things that happens with a trade association. 9 I think, sort of in finality, that progress 10 will continue. The NAB will continue to be a viable 11 organization and go on record as supporting not only 12 minority ownership with a history involved in that area 13 but also in the area of employment, and if we ever get to 14 that, we can touch on that. 15 I had my staff to send over a lot of 16 material, that apparently are in the packets, 17 illustrating some of the current efforts and diversity 18 that NAB is involved in through our NAB foundation which 19 has funded close to a million dollars now to develop 20 avenues and programs for not only bringing more 21 minorities into the business of ownership, but more 22 importantly into the business of management which is a 23 step in that area. 24 MR. ROHDE: I'd like to diverge a little 25 bit into kind of a subset of issues such as news and 88 1 information in media. And I know that if any of us here 2 did a little search about what kind of websites do you go 3 to, to find news and information, we find that it's the 4 major newspapers that own them, we find it's the major 5 networks that own them. I think one of the biggest sites 6 available is NBC. 7 My question is, are we seeing, in terms of 8 the new media -- those that are using the Internet in 9 this new way to provide information to the public and to 10 speak out -- are they being largely acquired by the same 11 people who own traditional media properties such as 12 broadcasting, or are we seeing new entities emerge that 13 are becoming major players in the distribution of 14 information? 15 I'd have that question to you and anybody 16 else who might want to speak on it. 17 MR. ELLIS: Sure, I'll jump on that. 18 Of course, you're going to find the source 19 of major capital is the first entrance pretty much into 20 that area. Bloomdale is in a big way and getting bigger, 21 for example, as somewhat of a new person following Ted 22 Turner's operation as a new entity years ago; MSNBC, of 23 course, CNBC is well in there. 24 I think the trend is more toward 25 partnering. I know that a friend of mine, former counsel 89 1 for New Media Policy at the FCC, Marcellino Floyd Levine, 2 has just joined Iblast.com in a very strong marketing 3 position there which is indication of such partnerships. 4 I know that, for example, MS Communications 5 is involved with Iblast, and I think you'll find that 6 many traditional broadcasters are partnering, reaching 7 over to younger entrepreneurs and younger companies and 8 making sure that their companies are on target for this 9 new, burgeoning opportunity/opportunities. 10 MS. KONG: I'd like to add a comment. 11 MR. ROHDE: Sure, go ahead. 12 MS. KONG: What is happening, the trend 13 right now -- the Internet -- it's going for a second wave 14 right now. The first wave were young entrepreneurs that 15 got incredible amounts of venture capital, basically 16 overspent, blew through it pretty fast and went out of 17 business. And the technology was not there; there was a 18 long download time for looking at information, so people 19 would not stay on line. That was started about a couple 20 years ago, and they pretty much are weeding themselves 21 out. 22 What you're seeing right now in the latest 23 trend are the big boys in Hollywood coming in to play. 24 That's the former head of Disney, Joe Roth, who has got 25 deep pockets, to go and spend a tremendous amount on the 90 1 technology, hire up his own in-house programmers for 2 writing code, creating special sites. 3 We can't compete with that. You can't try 4 to compete with a Joe Roth coming in and creating his own 5 revolution company with deep venture capital funds to do 6 that. The issue is capitalization. You have to grow it 7 in a way that shows that you can bring in advertisers, 8 share some of the risks with partners. 9 One of the things we've done in order to 10 get our broadband is we didn't pay for that broadband, 11 we took on a strategic partner. If we had to pay for 12 that, it would cost us $30,000 a month and would pretty 13 much break the company pretty quickly. 14 And that's why I think it's really an 15 important thing to stress here. If you don't want to 16 spend all that money and go through a lot of venture 17 capital initially, the idea is to partner up with maybe 18 some content companies, broadcasters. You can't afford 19 to buy the broadband right now and to pay the 20 webmasters. We're already doing that, so why do it? 21 Partner up. The idea is to try to lower the risks so 22 that you can gain on the back end if you build up the 23 audience base; that's the whole key. And once you have 24 that audience base and you know your demographic, you 25 can sell advertising like you're doing now on your 91 1 traditional stations. 2 But I think the idea here now is you're 3 seeing a whole new trend. The big creative guys in 4 Hollywood are now coming into the .com arena with lots of 5 money, and that's why you're seeing the CNBC, you're 6 seeing Joe Roth. 7 There's nothing out yet. The interesting 8 thing about what we're doing right now with HotPopTV, 9 it's actually up. You can go on to your computer, click 10 on to it. We did a big Asian American cultural event at 11 the L.A. County Museum of Art, streamed it for eight 12 hours, and we're getting an unbelievable amount of 13 traffic without any advertising. So it just shows that 14 we're satisfying a need for a programming for that 15 audience. 16 I think the niche market is really the way 17 to go and to partner up without having to spend money. 18 Den (sp) just went belly up about a month ago. They're 19 taking huge salaries, the Porches filled up the parking 20 lot. It's a really young industry, and the idea is not 21 to overspend. You want to be able to keep that down, 22 partner up so you don't have to lay out the cash for the 23 technology. 24 MS. LEW: Greg, you made a point earlier in 25 your presentation about the fact that the Internet 92 1 creates very low thresholds for entry. And that's true 2 also from the standpoint of the creation of content in 3 this day and age with digital cameras, video streaming, 4 et cetera. 5 You can put together a news program or a 6 news report in a very edgy, catchy sort of way, and we 7 are seeing a number of young entrepreneurs, college-age 8 kids, graduate students are going out and putting 9 together these programs and streaming it over the Web. 10 For example, you have programs, what I refer to as audio 11 Internet radio stations. They're not even traditional FM 12 or AM radio stations; they are pure Internet plays. 13 There was an interesting report yesterday 14 in The Wall Street Journal about the Napsterization of 15 movies, so that you can now capture a full-length movies 16 off of the Web and stream it into your home. The real 17 trick here is how you monetize it. People are creating 18 all this content and making content available, and if you 19 are creating this new company, how do you monetize it, 20 how do you create the revenue that allows your company to 21 make some money and for you to become a wealthy 22 entrepreneur? And I think that is the real challenge. 23 MS. KONG: Can I answer that? 24 MR. ROHDE: Well, let me go to Dwight 25 first, please. 93 1 MR. ELLIS: I wanted to tag on to what my 2 colleagues across the way said. 3 One of the key answers to this is the 4 partnerships. We know in the old business, the 5 relationships, especially in Los Angeles, what are key 6 relationships, are the same in .com. One of the great 7 challenges that I think my colleagues of the past who 8 were with me in 1978-79, like Herb and others, we had, 9 and still have, our infrastructure that we still work 10 from. We talk about minority ownership, whether it's 11 black ownership, Hispanic or whatever. There's a whole 12 new infrastructure that many of us are not part of 13 related to the .com industry. 14 We speak of young entrepreneurs and all of 15 that, but I would like to give certain examples of some 16 old-school people who are a part of this new generation. 17 People like Joel Dreyfus, who as many of you know is an 18 older newspaper-honed guy who, incidentally was the first 19 black editor-in-chief of PC magazine or any national PC 20 magazine, who is our editor-in-chief of Urban Box Office. 21 And he was sought after by our Urban Box Office which is 22 a major portal that some of you should know about, or all 23 of you should know about, and there are many others. 24 I think what has taken place for those of 25 us who can't accrue the capital to get into this game, 94 1 and it probably will take too long to get that capital. 2 Partnership relationships is the key way to go. That 3 means that not only do you have to show yourself as 4 having skills in things offered to this emerging 5 infrastructure of entrepreneurs, but also be willing to 6 cross over into some younger generation dealings. And 7 that is more of an issue than you can imagine. 8 In finality, I have found in networking and 9 bringing people together -- which is part of what I do at 10 the NAB -- I've found almost as much resistance to 11 cross-generational partnering as I found back in the '70s 12 between cross-racial or cultural partnering. It is a 13 very interesting thing that is going on and something 14 that maybe your agency may want to look into. It isn't 15 all about capital. 16 MR. ROHDE: You had a point, Jacqueline. 17 MS. KONG: Well, to address that, I see 18 that it's just a different way of functioning, I suppose. 19 I think that partnering is the way to go, and I do think 20 the wisdom of the broadcasters should not be overlooked 21 in any way, shape or form because certainly some of the 22 young entrepreneurs are stumbling and making mistakes, 23 and they certainly need that guidance. 24 I think that what is happening, like I 25 said, is the incompetence or sort of weeding themselves 95 1 out, and those were the young hot dogs, I guess, sort of 2 running around trying to just open it up and spend as 3 much money as they can and buy their way into an 4 industry. The idea now is to grow I think at a very 5 slower manner through partnerships and through the wisdom 6 of what everyone brings to the table. 7 And one of the things I would like to 8 mention, everyone talks about this capitalization. Where 9 is the capitalization? Because I have to tell you right 10 now, it is a new frontier. It is less money, but are 11 there funds available to .com companies? 12 MR. ROHDE: Well, let's turn to the person 13 to my right here from the Citizens Education Fund. 14 What are you folks involved in? 15 MS. HAYLES: We are primarily an advocacy 16 group. It's a part of the Rainbow PUSH Coalition. 17 Reverend Jackson founded this entity back in 1984, and 18 the Citizenship Education Fund to talk about advocacy to 19 diversify the media and telecommunications industry 20 through the work of the media and telecommunications 21 project that is housed here at Georgetown because it's so 22 important to create access to capital, access to deal 23 flow and to try to diversify the industries as much as 24 possible so that minorities can have a presence. 25 Obviously, it's in the public interest to 96 1 have minorities present at each aspect of communications, 2 the instruments of communications. And so, we're talking 3 about traditional broadcast, and now we're talking about 4 Internet and new media. And access to capital remains 5 one of the greatest barriers consistently throughout 6 traditional, and now, new media entry. 7 And so, what our advocacy work is designed 8 to do is to provide network opportunities, for example, 9 through Wall Street project conferences that we hold 10 annually in New York. And we have had two medium telecom 11 conferences -- one in New York and one here in 12 Washington, D.C. back in March -- primarily to bring 13 together financiers with sellers and buyers and new media 14 individuals who want to be exposed or get to know to the 15 Goldman Sachs of the world-- those people and the 16 Syncoms. 17 Herb several times participated with events 18 and worked along with people who he met or they met 19 during the events. And I think that's very important. 20 Networking, as Dwight pointed out, partnering -- we 21 support a lot of strategic partnerships. We have a lot 22 of what we call trading partners who are a part of the 23 organization who are majority companies who have sought 24 now to do business with minorities. They used to claim, 25 "Oh, we can't find any minority business people to do 97 1 business with," but that's a misnomer, and we've been 2 able to show them that that is, in fact, a misnomer, and 3 that there are opportunities to be had, and there are 4 opportunities that are comparable to what they would do 5 with non-minority groups if they were to enter into 6 business opportunities with them. 7 So part of what we do is, is to try to 8 de-mystify this whole barrier to entry and to try to 9 bring as many non-minorities together and expose the to 10 access to capital as much as possible. 11 MR. ROHDE: Thank you. 12 I would like to turn to David and ask a 13 question. We've heard this very interesting discussion 14 here, and I feel like I'm in the middle of possible 15 deal-making going on which I can't be part of, 16 unfortunately. 17 But given all this discussion we've heard 18 about the need for partnering, and we've had a lot of 19 discussion about access to capital and some of those 20 issues, is there a role for government in any of this? 21 As we are looking ahead at the possibilities of new media 22 providing more opportunities for people to have voices in 23 public, is there a role for government to pay attention 24 to right now? 25 MR. HONIG: Government has had enormous 98 1 potential in this area for being an agent for progress or 2 for retrogression. It's important to keep an eye on 3 history to know what government can do for us or to us. 4 Let's keep in mind the radio frequency 5 spectrum, what we refer to as the basis of old media, is 6 our property; it belongs to us. And for 51 years, with 7 very rare exceptions, the FCC basically in a very 8 scandalous way mismanaged our public resource, ratified 9 and validated the actions of segregationists, 10 deliberately licensed them. If anyone is from Alabama, 11 do you remember who they gave all the public TV licenses 12 to? They used to train a whole generation of 13 broadcasters-- the Alabama Educational Television 14 Commission, which at the time reported to George Wallace 15 when he was governor. Who do you think got a chance to 16 own stations and get the training to own stations in 17 Alabama? It's no secret. 18 Then after 1978, we had about 17 years of 19 very moderate affirmative action. Really, thanks to Dick 20 Wiley, to Ty Brown and to Ben Hooks, the agency turned 21 itself around and developed, with the support of NAB and 22 community groups, the tax certificate policy. That one 23 policy alone -- if anyone wants to know the potential of 24 government -- was responsible for about 60 percent of all 25 the minority-owned stations on the air today-- about 200 99 1 stations until the policy was killed in 1995. 2 Now, as we all know, there are a couple of 3 Supreme Court decisions that very profoundly affect what 4 government can do. One in particular that I want to call 5 to your attention, of course, is Washington v. Davis. 6 You thought I was going to say another one. 7 Washington v. Davis in 1976 basically 8 held -- a Supreme Court decision -- that a policy which 9 on its face appears to be race neutral, it tends to have 10 an effect tending to benefit one group as opposed to 11 others, or more than others, does not necessarily violate 12 the protection clause. In that case, the group that 13 arguably benefitted and was a testing program for police 14 recruiting in Washington, D.C. happened to be white 15 Americans. 16 But keep in mind what that holds in terms 17 of equal protection. It means that many policies which 18 are, in fact, race neutral aren't impermissible simply 19 because they happen to have the effect of benefitting 20 minorities who've been kept out. 21 One example of such a policy, of course, is 22 the EEO rule. And analogy to that, which we proposed to 23 the FCC, is that sellers of broadcast stations who've 24 enjoyed the opportunity to benefit from both the power 25 and influence and economic prosperity that comes with 100 1 broadcast ownership should be required when they leave 2 the industry or sell stations to market them to 3 minorities and small and disadvantaged businesses. 4 Now, when companies do that 5 voluntarily -- which they sometimes do. We're a media 6 broker, and the brokerage business, if there's any 7 business that's more segregated than at 11:00 at church 8 on Saturday, it's the brokerage business. I don't think 9 there are more than 3 minority brokers here in the 10 country out of 150. 11 For example, we're proud that we just 12 assisted Clear Channel in marketing these 110 spin-off 13 stations to minorities, and the result of that was 46 are 14 going to minority-owned companies, that's $1.3 billion 15 worth of properties all at once, most of which were 16 closed the next two weeks. That one deal alone will 17 increase asset value for minority ownership by about 18 22 percent in the whole country. Right now it's only at 19 about six-tenths of a percent of all broadcast industry 20 asset value. So you're still talking about an enormous 21 burden of past discrimination to overcome and to remedy. 22 Which really brings me to the second 23 important issue that we have to focus on in considering 24 what government can do; and that is that race neutral 25 alternatives will never be enough to overcome those 101 1 51 years of enforced segregation; it never will. 2 Some of the proposals we've advanced at the 3 FCC here, where we really dug deep -- and many of you I 4 know were in those meetings where we tried to figure out, 5 what can the FCC do? And we came up with options, for 6 example, allowing owners of two same TV duopoly or 7 radio-TV combinations, sell them in tact to small, 8 disadvantaged businesses. Race-neutral initiative might 9 tend to help minorities, but very moderate impact. 10 The really big ticket impact is going to 11 have to come from recognizing that under Adarand, 12 preventing discrimination, remedying discrimination is a 13 compelling government interest which is really under the 14 structure of the Communications Act. Not only can the 15 FCC take steps to do that, it really ought to and has to 16 do it. 17 Read the first section of the 18 Communications Act. It was created for the purpose of 19 having this spectrum available to all people. In '96, it 20 was amended without regard to race, creed, color and so 21 forth. 22 Some of the proposals we've had before the 23 commission for years -- having an investment tax credit 24 for minority ownership, creating an entity that we are 25 calling the American Communications Investment Bank to 102 1 pool, aggregate and then disaggregate and spread 2 out -- subject to alien ownership limits -- foreign 3 capital into minority-owned broadcasting. 4 Those sorts of initiative, which can 5 involve billions of dollars of capital formation and 6 deployment, can only happen once the FCC is 7 encouraged -- and we're their constituency -- to 8 undertake and complete the research necessary and have 9 the political will and the moral authority to put an end 10 to the years of segregation, moderate but insufficient 11 action, and benign neglect. 12 MR. ROHDE: Thank you, David. 13 Tyrone Brown, we're very fortunate to have 14 you as a former FCC commissioner here. And one of the 15 things David mentioned was the Tax Certificate Program 16 which was in existence for about 15 years, I believe, and 17 about 350 or so tax certificates were awarded, and we did 18 see an increase in minority ownership during that time. 19 And now there are members of Congress who are talking 20 about bringing this back. 21 I'm curious as to your assessment of the 22 tax certificate. Is this an approach that has some 23 promise or are there other approaches we should be 24 looking at? 25 MR. BROWN: First of all, let me apologize. 103 1 Somehow I got this panel on my schedule for 3:30 this 2 afternoon. 3 I felt that the tax certificate was a 4 small, but very effective way, to encourage minority 5 ownership in a number of respects. First of all, it 6 relied on the greed of sellers of communications 7 properties at a time -- as Wilkens, Winston and Ellis 8 will recall -- when most communications properties sales 9 were not public information. It was a club of 10 broadcasters and a very small club of brokers who kept 11 the information to themselves. And typically, the only 12 time that one found out about properties being on the 13 market was when the transaction was announced. 14 So the tax certificate policy had the 15 benefit of making it attractive for sellers of properties 16 to go out and search for minorities to sell those 17 properties to because they got a tax benefit by doing 18 that. 19 The tax certificate I think also was very 20 important symbolically, and maybe that was its most 21 important aspect. It served as a statement by the agency 22 that was responsible for overseeing the radio spectrum in 23 the country, that it felt that this policy was an 24 important part of federal policy relating to broadcasting 25 and later cable transmission in the country. 104 1 And so, when the tax certificate was 2 eliminated in a flurry of hysterical action on the Hill 3 in 1995, I thought that that was an occurrence that also 4 was symbolic. It was a symbolic negative statement by a 5 group of people that that kind of federal policy was an 6 anathema to them, and they were going to do away with it. 7 Over the past year, I've worked actually 8 with a number of people in this room and with Senator 9 McCain and Congressman Rangel to see if a 10 group -- including industry members, broadcasters, 11 wireless companies, telephone companies, minority 12 advocacy groups -- could reestablish a tax certificate 13 that would pass muster as a legislative matter. And I'm 14 pleased to say that I think, ultimately, this process 15 will lead to a reestablishment of a tax certificate. 16 What I don't know at the moment is whether 17 it will be a small business tax certificate or a small 18 business and minority tax certificate, and that may 19 depend on the outcome of the coming election. 20 MR. ROHDE: Thank you. 21 At this time, I'd really like to take any 22 questions from our audience. If anybody has any 23 questions or comments, please feel free -- we have a 24 microphone there -- to ask any question of anybody on th 25 panel. And I'd greatly appreciate if somebody had a 105 1 question for somebody other than me. (Laughter) 2 MR. WINSTON: I just wanted to add on to 3 what Ty said, because I think it's a very important that 4 we acknowledge, and for those who are new to the 5 industry, educate some of the people here about the 6 interplay of the problems we're talking about with 7 respect to increasing minority ownership and the 8 political climate in which we operate. I know as a 9 federal agency, NTIA has to be careful about political 10 entanglements, so I'll speak on behalf of NABOB only. 11 But what we are seeing is that our 12 condition as minority owners in the broadcast industry is 13 directly related to who controls the White House and the 14 Congress, and it's just that simple. 15 When the tax certificate was created in 16 1978, there were 40 African American-owned radio and 17 television stations in the country. In three years, we 18 went from 40 to 140. In 1981, Ronald Reagan took over 19 the White House and made a big difference. We had a 20 chairman of the FCC who was hostile to minority-ownership 21 policy. 22 So from 1981, after a 100-station increase 23 in three years, from '81 to '95, we saw an increase of 24 only 40 more; it went to 180 African American-owned 25 facilities. Then in '95, when Republicans took control 106 1 of the Congress, we saw our numbers start to decrease 2 with the elimination of the tax certificate. 3 So I say that, as we're sitting here in the 4 2000 election year, as Ty said, whether we're going to 5 have a tax certificate any time in the near future is 6 directly related to what happens in the outcome of the 7 presidential election and the congressional election this 8 year. So for people who are interested in influencing 9 and effecting this process, you need to be looking at the 10 political process because this is not a academic 11 exercise; it's a political exercise first and a financial 12 exercise second. So if you're going to address it, 13 you've got to address it in that order. 14 And that needed to be said here. 15 MR. ROHDE: Thank you. 16 MR. WILKENS: A point that needs to be 17 added to that is, in reference to the elimination in 1996 18 of the SSBIC Program, there's probably no program in the 19 history of this country, including the tax certificate, 20 that provided more support for minority broadcast 21 ownership than the SSBIC Program. That was a program 22 that established a series of venture-capital funds that 23 provided support to the minority community. 24 In 1996, the Republican Congress eliminated 25 the funding for the SSBIC Program. The number of new 107 1 companies financed -- new minority telecommunications 2 companies -- has declined drastically since that funding 3 was eliminated. So again -- not just the tax 4 certificate, not just policy issues-- all of these things 5 that support the ownership of minority properties -- and 6 as was noted earlier by Jim -- small entrepreneurs who 7 want capital got their capital from these government 8 policies that have now been eliminated-- the banking 9 policies, the guarantee of loans. All of those things 10 are government related. So change the Congress, and 11 we'll have minority ownership. 12 MS. HODGE: I just wanted to follow that up 13 with a very quick comment. 14 There is a new program called the New 15 Markets Initiative. It does not take the place of what 16 Mr. Wilkens was talking about. What he was talking about 17 was very critical to the development of this particular 18 industry. 19 However, President Clinton and Reverend 20 Jackson has put forward what's called the New Markets 21 Initiative. I was director of that program. It's to put 22 $22 billion of equity, tax credit, loan guarantees 23 basically into urban and rural areas. It is not a 24 race-based program. Unfortunately, it is geography 25 based, and as you know, there's a high co-variance 108 1 between minorities in urban areas. 2 And so, most of those dollars will be 3 provided to venture capital companies which is why I am 4 now outside the government and have set up the New 5 Markets Equity Fund. But that legislation is moving in 6 the Congress on the Senate and House side, and it's 7 moving very quickly. So this is an opportunity to weigh 8 in. 9 MR. ROHDE: Please, go ahead. You've been 10 waiting for a minute. 11 MR. LLOYD: Thank you. 12 My name is Mark Lloyd. I'm the executive 13 director of the Civil Rights Forum on Communications 14 Policy. We did the study on discriminatory advertising 15 practices which was the FCC study. I think, actually, 16 Jim Winston made some of the comments that I was going to 17 make about the fact that this really is, in large 18 measure, a political matter, and we will have some 19 choices to make in November, both in terms of the 20 election of Congress and with regard to the election of 21 the President which will help determine how far this 22 moves. 23 I am concerned though that, although we 24 talked about the elimination of the tax certificate, we 25 have to note the president of the United States didn't 109 1 veto the congressional act which would have prevented the 2 elimination of the tax certificate; that under this 3 particular administration we have I don't think shown a 4 great deal of political courage in standing up to the 5 Lutheran Church decision made by Republic-appointed, 6 conservative judges on the District Court. 7 There are some things that this particular 8 Administration must do in terms of speaking out. But we 9 have to move beyond the conferences and the panels. 10 These conferences and panels are 10-20 years old. Ty 11 Brown remembers these conferences and panels when he was 12 an FCC commissioner. David Honig has been litigating 13 these issues and remembers these conferences and panels 14 when we were only talking about broadcasting. 15 Is this Administration going to really step 16 up and take the time to do the Adarand study? The NTIA 17 can do it if the FCC does not. The FCC has not under 18 Chairman Kennard or under legal counsel Kennard. 19 And I know that you didn't want a question 20 to you. 21 MR. ROHDE: I was going to ask everybody 22 here what your opinion of that was. 23 (Laughter) 24 MR. LLOYD: My first suggestion would be 25 for the NTIA to take up the Adarand study and try to get 110 1 that done. Let me also mention, that as I understand it, 2 the last I understood was that loans under SBA 3 programs -- the telecommunications industry -- was capped 4 at $750,000 which is really not substantial enough to 5 participate in either new market or old market 6 communications activities. And someone needs to begin to 7 peg the limit on the loan to where the limit is. It 8 seems to me that the current cap is fairly arbitrary. 9 A third recommendation is that we really 10 need a strong recommendation and push by members of 11 Congress and by this administration to return the tax 12 certificate which did not, never did, only support 13 minorities. The tax certificate supported all sorts of 14 ventures that were interested in trend or moving current 15 owners to new owners to diversify the markets. 16 So those are my three recommendations, and 17 I really would like to hear from you regarding whether or 18 not NTIA is going to take up the Adarand study. 19 MR. ROHDE: Let me respond in this fashion 20 and actually challenge you back. 21 And that is, I stated from the outset the 22 reason why we're having this panel, this panel is part of 23 a larger effort for us to gather information and data in 24 doing this minority telecommunications development report 25 we intend to come out with later in the year. 111 1 What I really like is -- you mentioned 2 addressing the Adarand decision and for us to look at 3 that. Also, I'd like to hear other thoughts you might 4 have on things that we should be addressing. Indeed, the 5 report that we're going to come out with the end of this 6 year is going to have some limitations to it, but what 7 I'd really invite is for you and others to provide us 8 your guidance as to the things we need to pursue. 9 One of the things I think is fairly evident 10 for those of us who work in public policy in this town is 11 that the first step in trying to create a change in 12 policy is you need to create an intellectual basis behind 13 that that starts to drive that. 14 All of us now use the words "digital 15 divide," and it's in the common lexicon across the 16 country. Well, the reason why that is, is because NTIA 17 over a period of years did the work to put together 18 studies to look at how we're deploying information in 19 telecommunications technologies, and coined the term 20 "digital divide," because it did the intellectual work 21 for that. That is now driving a very important policy 22 debate here in Washington. 23 We need to do the same thing with respect 24 to minority broadcasting and generating diversity within 25 the media world; and we can do that through creating the 112 1 right kind of studies and doing the intellectual work. 2 And what we need help with is people like yourself and 3 others to challenge us and to come to us and give us the 4 suggestions of the things that we need to start pursuing 5 to make this an institutional exercise within NTIA so we 6 can fulfill job as creating policy for the 7 administration. 8 MR. HONIG: I could not agree more. What 9 was just said was the most important thing that we may 10 hear today. It all starts with the intellectual and 11 moral framework for this. When NTIA writes its report, 12 the first question that people are going to have reading 13 it is, is this optional, is this discretionary, is this 14 something that NTIA wants government to do depending on 15 who happens to be in power? 16 We all know that there are certain rights 17 and privileges of citizenship which we consider to be 18 basic and fundamental which survive changes of 19 administration. That's how we got Medicare, that's how 20 we got social security, that's how we got the minimum 21 wage, that's how we got universal public education. 22 Those are fundamental rights. 23 There is yet not recognized, but there 24 needs to be, a fundamental right of all citizens to 25 participate freely in both directions in the stream of 113 1 communications. 2 Why is that? Because we're now an 3 information-based society. A child graduating from 4 school, dropping out of school who can't participate, 5 even to the extent of knowing how to turn a computer on 6 and access the Internet, is functionally illiterate in 7 society-- can't participate. It is as unable to rise and 8 acquire and benefit from all of the other attributes of 9 citizenship as a child in 1954 would have been if they 10 couldn't read. It's that essential. 11 Everyone I hope will leave here today with 12 in their hearts and minds the moral and intellectual idea 13 in our heads that this is a fundamental right; it's not 14 discretionary, it's compulsory. 15 MR. ROHDE: Thank you. 16 I know you've been waiting for a minute, 17 but we've been blessed by the presence of Congressman 18 Towns from New York who has come here. 19 And, Congressman Towns, we've had a very 20 interesting, lively discussion about a range of issues 21 with respect to promoting minority ownership. But I'm 22 extremely pleased that you stopped by and would like to 23 recognize you to say a few words if you want to. 24 REP. TOWNS: Thank you very much. When you 25 come in late, you do not know what has already been said. 114 1 And my mother said that in a case like that, you 2 shouldn't say much; that way you cut down on the chances 3 of repeating something that's already been said. 4 MR. ROHDE: Actually, they had me in the 5 hot seat, so you're coming to save me. 6 REP. TOWNS: Let me just say, I think that 7 this is great. I really feel that it's important that we 8 have these kind of discussions because this is something 9 that we probably would never see again during our 10 lifetime in terms of what's happening now in terms of 11 telecommunications. I don't care how long you might 12 decide to live, I don't think you will see it. 13 But I think the thing that I'm hearing as I 14 move around the country, that people are saying that the 15 real problem is access to capital; that that is a real 16 issue. And that we must find a way to be able to make it 17 possible for people to get capital and to be able to be a 18 part of this boom. 19 Also to say to you, when we look at what's 20 happening in terms of education, we have to do more in 21 that regard as well. We must find ways and methods to 22 make certain that all schools are wired and that all 23 schools have access to computers. But I think that these 24 are things that we must find money for. And we keep 25 hearing that there is a surplus. I keep hearing that in 115 1 the Congress. I've heard it a lot of times. 2 If there's a surplus, then I think that 3 this is what we should be doing with some of that money, 4 is making certain that our young people have access to 5 computers as well. 6 So let me say to you, Mr. Assistant 7 Secretary, that I really appreciate the leadership that 8 you're providing in this, and I think that in years to 9 come people will realize that this is the way to sort of 10 get there; that when we come together, we have dialogue. 11 And I think that we'll know that there will always be 12 something in our way. But I think that when something is 13 in our way, that only means that we're on our way. And 14 if you're not going anywhere, nothing will every get in 15 your way; you will never get stuck. (Laughter) 16 So I think we need to recognize that and 17 sort of push it out the way, and keep on moving. So 18 thank you very much. I see you have some experts here, 19 people that I feel very comfortable with and know that 20 they're doing a lot of good things. And I think I'll 21 just close by saying, I look forward to working very 22 closely with you, the Congressional Black Caucus is 23 really in tune with this issue, and that we're working 24 very hard to make certain that there is access all the 25 way around. Thank you very much for inviting me over. 116 1 MR. ROHDE: Thank you. Well said, very 2 well said. Thank you. 3 I know you may have to leave, but please 4 feel free to stay. We're taking some questions from the 5 audience we'd love you to stay as long as you can. 6 MS. LEW: Greg, I would like to offer a 7 potential solution to one of the challenges that was 8 offered. 9 There have been numerous mentions about the 10 FCC funding and performing the Adarand study. And going 11 back to my days when I was part of the administration and 12 working at the SBA, one of the things that we explored 13 that you might want to explore further with Chairman 14 Kennard is forming an interagency task force with SBA, 15 NTIA and FCC jointly funding the study because I know the 16 FCC has encountered various funding challenges, and this 17 is one area where it is I think critical importance to 18 our community. And I think you would find interest and 19 support from certainly the SBA on this issue. 20 I think in following up on another point 21 that was made about the cap on small business loans being 22 at $750,000, we should be exploring not only increasing 23 that cap, but the other major factor is increasing the 24 knowledge base of bankers and lenders who do not know how 25 to value telecommunications and broadcast properties. 117 1 For example, I recently ran into a 2 preferred lender that participates in the SBA program who 3 said that an FCC license was valued at zero dollars when 4 he did a valuation based on a potential loan. So I think 5 there are certain program areas that can be explored and 6 should be explored with the various agencies as well. 7 MR. ROHDE: Thank you. We'll go to your 8 question. 9 MR. FOSTER: Thank you very much. 10 My name is Bernie Foster. First of all, 11 Mr. Rohde, let me thank you for allowing us to be here. 12 This is very exciting for me, and I've learned a lot this 13 morning from both panels. And I won't disagree with 14 almost anything some of the panelists said this morning 15 because I really find this real interesting for me. 16 By the way, I live in the west, called 17 Portland, Oregon, way out west. And they say, "Go west, 18 young man," well, I went west. But my experience in the 19 communications business comes from about roughly 25 years 20 in the print side, so I'm probably one of the newer 21 persons in terms of radio. I own two properties, one in 22 Eugene and one in Rosebud, Oregon-- small markets. 23 But one of the things I have found out for 24 me when I started this two years ago was information. 25 And I heard some people talking this morning about 118 1 ownership, how do you do it and some of the things. One 2 of the things I really found -- and I hope it's 3 there -- it was no one kind of mechanism to assist young 4 entrepreneurs into this industry, so I ended up probably 5 spending three times the amount of learning the business, 6 and I'm still learning. 7 But I think one of the key elements I've 8 been hearing about is finances which is a very key 9 element. But the other thing I think that's really, 10 really important is, as we talk about how the new 11 business is going and the new era -- we don't do business 12 the way we did 10 or 12 years ago; we certainly do not, 13 and I think the interest is on relationships now. 14 Relationship is the key element, so is financing-- all of 15 the above. 16 And so, what's happening, I have found for 17 me, is that as you go forward with the ownership -- and 18 I'm really encouraging it because I think it's 19 important -- is that we really take a look at how we do 20 business, how we define who we are, how do you define 21 minority ownerships. And I know there are some rules 22 that have been set 10 or 12 years ago. Is that practical 23 today? Is there different ways of doing that? I think 24 as we go forward, I think those become some very, very 25 important elements. 119 1 And also, I just want to ask Mr. Rohde 2 there, Mr. Rhode, on another issue, I've been following 3 you a little bit, the president new initiative marketing, 4 I certainly would like to talk to you because I've been 5 following it for quite some time. We're in the process 6 of typically trying to coordinate our talents, and that's 7 one of the issues we've been looking at. So it's been 8 very exciting for me, and I want to thank all of you. 9 MR. ROHDE: Thank you. Thank you very much 10 for your comments. 11 MR. RENOS: I wanted to reiterate 12 Congressman Town's statement that access to capital is a 13 critical issue. 14 My name is Victor Renos, and I'm with 15 Radiofutura.com. We are creating an Internet-delivered 16 radio network targeting the U.S. Hispanic and Latin 17 American markets. When I hear people speak in the 18 Internet space of the digital divide, I hear it most 19 often referred to an issue of access. And I would like 20 to ask that the NTIA and us in general begin to think 21 beyond the simple issue of access which will allow 22 minorities to become customers. The question then is 23 customers of whom. 24 I think that from an access of capital 25 standpoint, it needs to become a stronger priority to 120 1 make sure that when these minorities have access, that 2 they have access to content and opportunities that are 3 driven and shaped by people of their own backgrounds, 4 people who speak from similar experiences. 5 The TDF Fund I think is an excellent 6 opportunity, and I think they have carved out a great 7 space for themselves. But as Ginger mentioned, the 8 amount of capital that's available there has hamstrung 9 them. And I think that something needs to be done 10 proactively, rather than reactively, to create incentives 11 for traditional venture capitalists who take higher risks 12 than banks, for which there are some programs in place 13 already, to find the incentive to fund high-risk 14 opportunities in these new markets. 15 We hear ongoing struggle against 51 years 16 of segregation within the broadcasting market. Again, 17 the issue of minority supplying in the automotive 18 industry-- these are older industries for which 19 minorities now have to fight reactively for their fair 20 share and for a fair opportunity at the table. And I 21 think that now is the time that the NTIA and other 22 industries, including the incumbent industries and the 23 minorities who are struggling within the broadcasting 24 industries -- now is the time to push and to create 25 incentives for the new market because otherwise we will 121 1 all have access, but once again, we will have access to 2 industries dominated by those who have a history of 3 access to capital, to what is really a closed capital 4 market. 5 And so, I wanted to just raise that issue. 6 And if anybody else had feedback on things that might be 7 happening to increase that competitive access to 8 high-risk capital. 9 MR. ROHDE: Dwight, do you want to make a 10 comment? 11 MR. ELLIS: Thanks. 12 As I said earlier, having been here before, 13 like many of us, I'm concerned about the lack of time 14 that we really have to go through the process that many 15 of us went through, through the civil rights movement, 16 through the development of these infrastructures that I 17 alluded to earlier on. And I understanding being a part 18 of the inside the Beltway crowd, and we develop public 19 policy, I would suggest whomever becomes president after 20 the new election, I think that we as minority and as a 21 people of color will pretty much be in the same place 22 with or without tax certificate; I think it will be 23 helpful. 24 What I am concerned about is something that 25 I read that I guess one of the earlier speakers, Bob 122 1 Johnson, recited in The Washington Post when the word 2 came out about his deal with the airline. And to 3 paraphrase, he lauded the fact that you have to be in the 4 deal flow to gain access to these opportunities, such as 5 he did. 6 With that in mind -- and it's nothing 7 rocket science about this -- if a person like Bob Johnson 8 can gain, as he has gained through his relationship, with 9 the Malones of the world through cable, through the other 10 industries of the world because he sits on a particular 11 board, you have to wonder why, say, is the National 12 Association of Broadcasters, a board of about 75 -- why 13 we only have in the 25 years that I've been there maybe 14 only about four minorities on that board continuing on 15 and on and on? It is an elected board; it is true. 16 What I suggest to you, it represents a 17 resource that is not being talked about nor focused on as 18 a part of the strategy to empower our business 19 communities, not to mention our regular communities. 20 To be a member, for example, of the NAB's 21 board of directors puts you in a position that Bob 22 Johnson is in as he sits on the board of Hilton, I 23 believe. It puts you in a position to mingle with the 24 Lawry Mays of the world to get involved in a deal flow 25 from which these relationships happen. 123 1 Now, aside from that, we talk about where 2 is the capital. We have more capital certainly as 3 African Americans in our community now than we certainly 4 had 20 years ago. We have a little golfer whom I 5 understand produces over $100 million a year in salary or 6 more, and I'm sure that there are some VCs with whom he's 7 friends of, and his money is going somewhere. 8 We have in New York City a group of 9 entrepreneurs who started Fubu, and I don't know if they 10 went to any government agencies to get their money to get 11 going. We have entertainers, whether they be in music or 12 sports, who have been smart enough to establish 13 foundation to funnel money back into their community, 14 those who are responsible enough and doing so. 15 I would suggest that maybe an idea that the 16 Congressional Black Caucus could help us with, or even 17 the Hispanic Caucus -- and this cannot continue to be 18 totally a black thing; that in addition to the support 19 from the Congressional Black Caucus that we have had for 20 a decade, we need to bring the various caucuses together, 21 whether they be the Asian Americans who sit on Congress, 22 as well as the Hispanics, so we are not viewed as black 23 initiative. 24 If the Congressional Black Caucus, for 25 example, when in September has a forum, or something, 124 1 where they begin to bring together some of these highly 2 monied, very wealthy entertainers whom we support, and 3 say, look, we're not asking for any handouts from you 4 guys; we want to develop some sort of 5 infrastructure -- somewhat like Jim Brown tried to do 6 many years ago when we didn't have as much money then as 7 we have now in our community through entertainment. 8 We need to develop, in addition to public 9 policy, an infrastructure of hardcore money. We need to 10 develop our own VCs, our own venture capitalists, whether 11 they be young or old. And then we will begin to move 12 forward, and then we can put pressure on the public 13 policy advocates-- whomever the president is, whomever 14 the assistant secretary is -- otherwise we're going to be 15 back here 10 years from now during the same thing as my 16 brother over there talks about. 17 MR. ROHDE: Thank you. 18 I see the line here is growing, and I'd 19 like to give people an opportunity to make comments or 20 ask questions, but we're going to do this for about 10 21 more minutes, so please try to keep them brief and quick. 22 Go ahead. Thanks for your patience. 23 MS. MURPHY: Thank you very much. My name 24 is Pearl Murphy. I'm Executive Director of AAMI 25 Broadcast Training Center. We're located here in the 125 1 nation's capitol. 2 This is an excellent opportunity for us to 3 be here with the power and the broadcast industry 4 represented here today as well as NTIA and other 5 representatives of our federal government, and people who 6 are here from across the country. 7 We wanted to put a question forth with 8 reference to the commitment to reinvesting in our future 9 broadcasters and eventual owners of broadcast entities 10 through training and entry-level job interviews. 11 For those of us in the broadcast industry, 12 many owners work their way through the industry-- entry 13 level becoming manager and with a focus on where the 14 revenue really is in broadcasting and sales. And getting 15 young people to understand that the power is not so much 16 in front of the microphone, it's what's happening in the 17 board rooms and behind the microphone, and the hundreds 18 of jobs and opportunities that are behind that microphone 19 in a broadcast conglomerate and corporation. 20 We're looking forward to partnering with 21 the power base in this room with reference to a focus on 22 investing in our future. Even as we speak, the 23 technology is constantly changing. It's no longer the 24 cut and splice back in the days of reel-to-reel. 25 Everything is digital and computerized. So we've got to 126 1 have a focus on hands-on training and opportunities going 2 into the industry for women, African Americans, 3 Hispanics, other minorities, people of color, of all 4 genders, races and ethnicities if we are going to grow 5 and become this power base and own more of our own 6 broadcast companies and go on to disseminate our own 7 message. 8 MR. ROHDE: Thank you very much. 9 MR. PAGE: Greetings. My name is Alan 10 Page. I intern with Mark Lloyd here at the Civil Rights 11 Forum. 12 MR. ROHDE: Okay, next. 13 (Laughter) 14 MR. PAGE: I just wanted to say, people are 15 speaking a lot on the financing of .com companies. I run 16 a website, D-amphibians.com, which is essentially a 17 collective of artists in the D.C. area, visual artists 18 and musical artists, and it cost me about $100 to start 19 up that site. The key thing to starting it was, the 20 young brother that I partner with is only 18 years old, 21 but he understands web design. 22 So while there's a lot of discussion about 23 putting computers in schools and increasing access in 24 inner city schools, I wanted to know if there were any 25 programs in place to encourage, or rather place web 127 1 design courses in school so that kids could learn how to 2 create instead of just be consumers. 3 The brother from futura.com made that 4 point. You're increasing access which merely allows you 5 to get on a computer and look at whatever content someone 6 else has created and create revenue for them. Rather 7 than that, I was wondering if there were any programs in 8 place to allow people in the inner city to create 9 content, to teach them how to web design, to teach them 10 how to create so they can own? 11 MR. ROHDE: I don't know the answer to 12 that. That's an excellent point. 13 MS. KONG: I don't know about on the East 14 Coast, but the universities on the West Coast, there are 15 several courses you can take not only in programming, but 16 certainly web design. You can purchase programs to put 17 out your own newsletter. It's a little different than 18 what you're talking about, web design. A web page is 19 certainly an easy thing to put up, and you can really get 20 manuals and programs that will teach you how to do that 21 and take courses at the university level. And a lot of 22 kids are figuring it out all by themselves. 23 But the area where I'm talking about is 24 broad-band broadcasting which is a little different, and 25 you really can't do that out of your home. 128 1 MS. LEW: There is a program here in 2 Washington, D.C. that is funded by the Meyer Foundation, 3 and what they do is provide computer training and skills 4 for inner city kids. And they actually have a program 5 which is mobile. It's run by a team of seven people who 6 go from various not-for-profit organizations and conduct 7 classes in the communities. You might want to contact 8 them. 9 MR. ROHDE: Thank you. 10 MR. PAGE: One last point. Also, I just 11 want to say, I think these conferences, you should 12 consider having them perhaps in inner city schools 13 because youth don't get a chance to see people who 14 represent them, who are their own skin color, who are in 15 their minority group who are successful. And perhaps you 16 might want to consider holding an event such as this 17 inside an inner city school, so kids could see that 18 people of their background can be successful. 19 MR. ROHDE: Thank you for disagreeing with 20 your former mentor on that point. 21 MS. KONG: I'd take it one step further. 22 You can actually this forum and put it up on the 23 Internet. 24 MR. ROHDE: It is. This is being webcast 25 today. 129 1 MS. KONG: Okay. 2 MR. ROHDE: Please. 3 VOICE: Good morning. My name is Ogoro 4 Manduhanna, and I'm from Amarillo, Texas. I have a radio 5 station, and we program in Spanish. In the hours that we 6 don't program locally, we have the Z network. 7 What the things that I am here to speak 8 today is, I want help. I've looked for help everywhere, 9 and I thought, if I had them all in one room, maybe I 10 could find the help I need. 11 (Laughter) 12 I applied for a license in 1990 and was 13 granted shortly after I applied; and then my partner did 14 everything he could to take it away from me. It took me 15 seven years to fight for that license. And I think it's 16 important to address the fact that, it doesn't matter how 17 much opportunities are given for minorities to obtain 18 anything, there's going to be other people around the 19 corner to grab it from you and to take the capital that 20 you have in order to make this project functionable. It 21 doesn't matter; minorities still are at a disadvantage. 22 I'm a woman, I'm Hispanic, and it doesn't 23 matter because I got the license, but I had to fight my 24 partner off. And I'm still fighting him because it 25 became a domino effect. I cannot get any kind of 130 1 long-term financing because of all the litigation that 2 went on. So all of these things I think is important to 3 bring here. 4 Believe me, I don't have the money or the 5 time to come to these meetings, but I cannot afford not 6 to come. And I can assure you that there's not no one 7 else here -- other than the gentleman from Houston, Texas 8 that came to be on the panel -- other Hispanics of 9 minority station from a small community like ours that 10 would take the time and money to do this. It is not easy 11 out there, folks. 12 MR. ROHDE: Thank you so much for coming. 13 Thank you. 14 MR. SCHWEIKERT: Hello. My name is Ernesto 15 Schweikert. I have a radio station in New Orleans, KGLA; 16 it's a Spanish radio station. I want to thank you for 17 the meeting. It's very informative. 18 I'm a native of Guatemala and Central 19 America, and my son told me, "Papa, is it true that we 20 are living in this country because it's free?" I said, 21 "Yeah." "But we have to pay for everything. Even when I 22 go play Nintendo, I have to pay." 23 I think this is the problem here. There is 24 nothing for free; you have to pay something. And the 25 bottom line is dollars always, how much you pay for a 131 1 property, how much you're going to sell it for. 2 But to your office, I think it's very 3 important. We were discussing in an earlier panel that 4 we have a niche market. I don't care if it's Asian 5 American, African American or Hispanic American, those 6 are niche markets. And I think we have a monopoly with a 7 company called Arbitron. They do the surveys. 8 Those surveys, don't put any attention to 9 these niche markets. Like the broke Microsoft into two 10 companies, I think they have to break Arbitron into two 11 companies and do surveys. 12 MR. ROHDE: I will share your thoughts with 13 Joe Klein at the Justice Department. 14 VOICE: My comments have more to do with 15 starting earlier in the educational pipeline. 16 If we're going to change the numbers 17 presented earlier today, then we really need to start 18 working earlier with youth by providing internship 19 programs within the industry and also working with our 20 nation's colleges and universities that serve 21 predominantly minority youth -- HBCUs, Hispanic-serving 22 institutions -- and also working with community-based 23 organizations that serve our communities; they have a 24 vested interested in changing conditions. Thank you. 25 MR. ROHDE: Thank you so much. 132 1 MR. CHARLES: Hi. My name is Butch 2 Charles. I'm a professor of communications at 3 SUNY-Oswego in Upstate New York, and I owned two radio 4 stations at one point in Central New York. 5 Within the past five months, we had in 6 Syracuse two African American owners of radio stations, 7 both of those -- one mine, the other gentleman is 8 here -- have sold those stations, sold those stations 9 mainly because of consolidation. That's just the fact of 10 life-- an ability to survive because of we're down to 11 maybe three -- there are four big groups represented in 12 our market, and two of them own the lion share of the 13 stations. 14 The Justice Department did come in, did 15 take a look, did try to see if it was going to be too 16 much to have those groups in here, and they left and 17 said, no problem. Except that you take just those two 18 groups, and they take up nearly 85 percent of the 19 advertising income that comes into that market. 20 So, we're forced to sell out, and this 21 community now will probably not have any service speaking 22 to African Americans, specifically, at all. Without 23 ownership by African Americans, our community will not 24 have any. 25 Now, I don't want to get on a soapbox, but 133 1 I got into this 25 years ago because the FCC said you 2 need diversity, you need minority ownership; we'll open 3 the door for you. I went through the '80s and '90s, and 4 like my friend here, spent most of my time giving my 5 money to David Honig to represent me, not that I didn't 6 love him, but I spent more time in litigation trying to 7 get the station than I could doing it. 8 And then by the time I was able to get the 9 station on the air, one month after I got the station on 10 the air and was in business, the Telecom Act was passed, 11 and everybody just started swooping in and taking it up. 12 So the government's role, interest, 13 convenience and necessity, I think that that's lost. 14 It's gone, it's all about money. Myself and Robert 15 wanted to do something for our communities. I grew up in 16 New York City. I grew up with WLIB. I know how a 17 community is galvanized with radio especially. I wanted 18 to do the same thing for the community I went to school 19 in, and it could not happen because of this. 20 Jim Winston hit the nail on the head, 21 access to capital. But, I'm sorry. You guys all have 22 money, you're willing to give it away, but you don't want 23 to help the small guys. If it's not a deal that is going 24 to make millions -- I've had Mr. Wilkens organization, 25 I've had Broadcap. I've done great jobs in terms of 134 1 business plans. I got my degree from SU. I gave them my 2 $100,000; I know how to put the business plan together. 3 But if it's not making a bunch of money for a lot of you 4 guys, you don't want to do it. 5 I was lucky that the SBA changed their 6 rules five minutes before I was ready to go ahead and 7 give it up, and I was able to get some help from them and 8 get local banking, but then the Telecom Act came in, and 9 that was it. So access to capital is still number one. 10 And finally, just so you know -- make no 11 mistake about it -- consolidation is killing the industry 12 for radio for small business, not only for programming. 13 And a lot of you may not be programmers here. You don't 14 know how radio stations are programmed and how 15 information gets to people. Consolidation is going to 16 make one person in one city program radio stations for an 17 entire segment. 18 And I just sat down with record 19 people -- who are shady -- but record people who told me 20 that that's their problem. They're worried about the 21 fact that they can't get the music or the information on 22 in order to do it. Ownership is the other way diversity 23 is obviously going to kill, and employment. 24 Two African American-owned radio stations 25 in my market bought up by larger companies, not one 135 1 African American employee taken from those stations to be 2 picked up. Yet, they will have to go through the same 3 EEO requirements, send out the questionnaires to the 4 schools, looking, "Where are the African American 5 students, where are they coming through?" I had African 6 American employees, he has; they did not pick up one of 7 them. And you can't tell me they weren't qualified. 8 I did not lose my station because I don't 9 know what I'm going to do or how to do it, although I'm 10 still on your list for your program to go work at other 11 stations -- I've been on that list for eight years. And 12 this isn't an indictment; this is just a fact. It's not 13 because I didn't know what to do, so consolidation's 14 killing it in all of those areas, and you've got to help. 15 MR. ROHDE: Thank you so much. That was 16 very thoughtful. 17 We'll go for three more comments very 18 quickly, and then we're going to close up. 19 MR. RODRIGUEZ: My name is Jose Rodriguez, 20 and I'm the president of the Hispanic Information and 21 Telecommunications Network which is a non-profit 22 organization that own frequencies in 43 markets 23 throughout the United States, ITFS frequencies. 24 We have been talking about ownership in the 25 commercial sector. I participated in a similar 136 1 conference in 1979-80, as they mentioned here, and I 2 decided to go a different route. I wanted to get involve 3 in this industry. If I could not get involved through 4 the front door, I decided to go through the kitchen. And 5 the kitchen door represented the non-profit sector. 6 NTIA has been very involved in the 7 non-commercial sector by providing grants, and initially 8 we were a beneficiary of the NTIA program. Very -- for 9 planning -- but when the time for construction came, that 10 system was not available. And I haven't seen much in 11 terms of minority participation in that area. 12 Now we have another problem in addition to 13 the lack of minority representation in 14 telecommunications. 15 Congressman Towns mentioned the two 16 important areas that we have to address-- capital and 17 education. Well, we have education of frequencies now. 18 We are building systems, broadband capacity, in a number 19 of markets that we can reach. For the first time, our 20 communities are with a number of services-- high-speed 21 Internet, radio services and other services. 22 And now after a decision that was made a 23 couple of weeks ago at the WORC where the 2 to 3 point 24 gigahertz spectrum, each country now has an opportunity. 25 The U.S. was able to prevail in its position. Now it's 137 1 going to decide how that spectrum is going to be used. 2 Now we're hearing there are 3 attempts -- petitions for rulemaking of the commission 4 now -- to try to take away that spectrum that has been 5 set aside for educational purposes, and is now to be put 6 up for auction so the large companies like AT&T now can 7 have a chance at getting them. 8 I would like to know what is NTIA's 9 position regarding specifically a 2.5 spectrum and the 10 attempts now for some large industry players to take away 11 that spectrum for educational purposes? 12 MR. ROHDE: If you don't mind, I'd like to 13 go to the other comments, but I'll very briefly give you 14 a quick answer to that. 15 We haven't taken any formal position yet on 16 that, and I know that there's been some discussion at the 17 commission that looks at some of those frequency bands. 18 I'll just say informally now -- I'm not 19 speaking on behalf of the Administration -- my initial 20 reaction is that I think we need to keep our options 21 open. And the position we developed at WORC was to 22 identify multiple bands that could be used for third 23 generation wireless. And I would hate to see a premature 24 action being done now that would preclude some of those 25 options and take away some of that spectrum. 138 1 So that's just my initial reaction to you 2 right now, but I can talk to you about that further. 3 MR. RODRIGUEZ: Thank you. 4 MR. ROHDE: Two other comments, and then 5 we're going to close. 6 MR. MARTIN: Daryl Martin from Houston, 7 Texas. I'm a property owner. 8 I know we're speaking about minority media. 9 If the stations are available, they are so priced out of 10 range that you can't purchase them no way. So you're 11 finding in a lot of areas that the stations are 12 available, but they're out-priced. So I'd like for 13 someone to address that. Even if you can get the 14 financing, the financing might be available in some 15 cases, but the stations are really priced way out of the 16 price range that the minorities can't really go after and 17 purchase them. 18 MR. ROHDE: Herb Wilkens, you wanted to 19 make a comment. Can you respond to his question quickly, 20 please? 21 MR. WILKENS: There's no way you can 22 address the issues quickly. I just wanted to make a 23 point. 24 We raise capital. We manage presently 25 $300 million of investors capital. Almost all of that 139 1 money is pension fund money. Pension funds put a rather 2 high level of return requirements on venture capitalists, 3 so when we invest their money, we have to earn a return. 4 If somebody comes to us with a business 5 plan to finance a station in the small market, and that 6 business plan doesn't show that it can earn the return 7 that we're looking for, and it doesn't show the growth 8 potential that we think is necessary for us to support a 9 deal, we can't support it. There has to be in that plan 10 something that warrants somebody on my staff to agree to 11 commit four or five years of their time to a deal so that 12 they can create a company of some size and some 13 significance in the marketplace. 14 It is absolutely doable. You can create 15 those kinds of companies. Radio One is a perfect 16 example. It's a Syncom portfolio company. We put the 17 first dollar in Radio One. Z Spanish is another company. 18 Syncom put the first dollar into Z Spanish. 19 You can create these companies, but there's 20 got to be a plan and there's got to be a commitment on 21 the part of the entrepreneur to support our capital 22 needs, so that when we put capital in, we know that our 23 limited partners -- all the pension funds out there that 24 finance us -- will agree to allow us to continue to 25 finance deals, similar type deals. 140 1 In other words, you have got to meet the 2 demands of the marketplace if you want the marketplace's 3 capital. The marketplace does not have a color bar on 4 capital. I'm telling you, it doesn't. It does have a 5 bar on what you do with that capital. 6 MR. ROHDE: Thank you. 7 Last word. 8 MR. SPELLER: I guess it's appropriate that 9 I kind of end this. My name is Brady Speller, and I 10 currently work for Dell Computer Corporation in Austin, 11 Texas. Pardon me for a bit of my idealism or the fact 12 that I've been in an incubator for the last 13 seven-and-a-half years called Dell Computer Corporation, 14 the fastest-growing company in the world. And I'm about 15 to break into broadcasting, and I'm not asking Herb 16 Wilkens or anyone else for dollars to do that. I'm going 17 to retire from Dell in the next few months, and I've got 18 my own money to be able to jump into this business. 19 What's bothering me about what we're 20 talking about here is there seems to be a lack of 21 cohesiveness in the African American community, the Asian 22 community, the Hispanic community, the Indian community 23 and other minorities, the women's community. 24 How many radio station owners are in this 25 room today? Raise your hands. 141 1 How many people own television stations in 2 this room? Raise your hands. 3 Now, what if we all got together and 4 created one entity to go compete with Citadel, Infinity, 5 Clear Channel, and the rest of the conglomerates that 6 we're all bitching about? What if we did that? 7 Excuse me? 8 MR. WILKENS: I'll do it if you do it my 9 way. 10 (Laughter) 11 MR. SPELLER: I'll tell you what, I'll 12 match my dollars with your dollars, and we'll do it our 13 way. That's where I'm coming from. 14 That is a problem. And because I come out 15 of an organization that's constantly about shifting 16 paradigms, excuse me for being futuristic, but if we 17 don't go this way, if we don't go this route of 18 consolidation, the small markets will no longer exist. 19 I'm talking about buying a radio station in 20 Wilson, North Carolina. I've got nothing against Wilson, 21 North Carolina. But I'm going to buy a station with 22 $140,000 of my money, and then put another $400,000 of my 23 money to build it up to a halfway decent station that 24 only covers 50,000 people? For what? If I were to come 25 to Herb with that, he'd laugh me out of the room. 142 1 And so, the problem with getting access to 2 capital, is the fact that we don't have a master plan 3 with a number of people who are powerful enough to be 4 able to bring their resources to the table to challenge 5 these big boys to be a part of that game. 6 So maybe I'm being emotional about this. 7 Jacqueline hit the nail on the head. Thank you very 8 much. She hit the nail on the head. We need to be 9 getting away from the properties. Because you know what? 10 If we created a radio station that could broadcast 11 throughout the entire the world via the Internet, and 12 start using network appliances that -- I've got a Dell 13 computer over there; I don't need it anymore. I've got a 14 computer that I don't need to be able to broadcast to the 15 rest of the world because of wireless communication and 16 the technology that the gentleman, Samara, has in our 17 hands today. 18 So what I'm challenging this group to do is 19 to meet during lunch, somewhere, and everybody sit down 20 and figure out a way that we can pool our resources 21 together and create a conglomerate that will compete with 22 these big boys and start taking a share out of their 23 pocketbooks. 24 MR. ROHDE: Thank you very much. 25 I guess maybe a sign that you're on the 143 1 right topic is when you have no end to when people want 2 to speak about it or have thoughts. So I think maybe we 3 hit a note here. 4 I want to thank everybody for coming. As 5 you know, according to our schedule, we're going to take 6 a short break, but this afternoon we have some workshops 7 scheduled that I encourage you to attend. And in 8 closing, I wanted to tell you just a very brief story 9 which may reveal a little bit of my motivation for why 10 I'm interested in these issues. 11 And that is, before I came to this job at 12 NTIA, I worked on Capitol Hill for Senator Dorgan who 13 represented North Dakota, which is my home state. And I 14 spent about the last three years of my social life, 15 basically, to the development of the Telecommunications 16 Act of 1996. And when that bill came to the floor of the 17 Senate, the language with respect to broadcast ownership 18 in the bill was to completely wipe out all the ownership 19 limits. 20 If you go back and look at the legislative 21 history, the bill that emerged out of the Senate Commerce 22 Committee said, "There will be no more ownership limits 23 on broadcast," period. 24 Well, the senator I worked for, Senator 25 Dorgan, was very concerned about that and instructed 144 1 me -- said, we're going to offer an amendment on the 2 floor of the Senate because we think this is nuts. And 3 our amendment was simply going to restore status quo and 4 say that, what we should do is why don't we give the 5 discretion back to the commission that it currently has 6 and have them continually review these and consider 7 changes to the rules on a case-by-case basis. 8 So that was the nature of our amendment. 9 And we've had a lot of discussion here about partnerships 10 and the need for partnerships. 11 Well, the moral to my story is that you 12 never know who your partner's going to be, and we have to 13 think out of the box, because my senator told me to go 14 find a Republican co-sponsor. I did. It was Senator 15 Strom Thurmond and Jesse Helms. And you can imagine the 16 look on his face when I came back and said, "Jesse Helms 17 wants to co-sponsor this amendment with you along with 18 Strom Thurman. 19 That amendment won that day. We actually 20 won that amendment for about two hours, until Senator 21 Doyle took some Republicans, who voted with us, into the 22 cloak room and twisted their arms and convinced them to 23 come out and reconsider their vote, and then we lost. 24 What that tells me is that, I don't think 25 there was a complete consensus on Capitol Hill about what 145 1 was going on in 1996; that there still is a very 2 significant debate going on. But also, my boss, Senator 3 Dorgan, is just a little bit less Norwegian than I am. 4 And I think part of the message here is, 5 the reason why we care about minority ownership at 6 NTIA -- the reason why I personally care about it in my 7 role at NTIA -- is that it's not just about helping 8 segments of our population have an opportunity to 9 speak -- whether it be African American, Hispanic or 10 Native American or Asian or whatever the group might 11 be -- but it's also about what benefits a nation as a 12 whole. We lose out as a nation as a whole if we have 13 segments of our population that are alienated and don't 14 have an opportunity to speak and be heard. 15 That's why this is very important. It 16 isn't just important to African Americans or Asians or 17 Hispanics; it's important to everybody in our nation. 18 And that's why this issue is so incredibly important. 19 There should be no question in anybody's mind about the 20 commitment and the interest at NTIA in these issues. We 21 really consider ourselves the area of the administration 22 that has to look out for these issues and develop 23 policies. 24 We're at a very critical point where the 25 industry is changing quite rapidly. We've got a lot of 146 1 challenges ahead of us. We also have a lot of promise, a 2 lot of opportunities we've heard about today. And what 3 we want to do with this forum is use this as a launch pad 4 into action, and we need your help to do that. 5 And as I said, this is all part of our data 6 gathering and putting together a report. The summaries 7 at this roundtable and the workshops this afternoon are 8 going to be available on our website for those who want 9 to look at that. We're going to continue to receive 10 comments from the public, from any of you and anyone else 11 who is following this and has an interest, until 12 August 8th. And I really encourage you to share your 13 thoughts with us in writing and give us your guidance on 14 all of that. 15 And once again, I want to thank all of you 16 for your time. Some of you have traveled a great 17 distance to be here. I'm very touched by that, and I'm 18 very grateful for all of you being here. So thank you 19 all very much. 20 (Lunch recess) 21 MS. LEWIS: Ladies and gentlemen, why don't 22 we get started? As I may have said to some of you all, 23 we are expecting Congresswoman Sheila Jackson-Lee to join 24 us momentarily. In the interim, though, I think we're 25 going to go ahead and get started. 147 1 Thank you for coming to this second part of 2 our gathering today. These working groups, as Assistant 3 Secretary Rohde said, are going to be very important to 4 the Minority Telecommunications Development Program at 5 NTIA in its work to provide important information for 6 policymakers on issues regarding minority broadcast 7 ownership. 8 My name is Maureen Lewis. I am the 9 director of the Minority Telecom Development Program, and 10 it really is delightful to see so many of you here 11 willing to roll up your sleeves and do the heavy 12 lifting, as it were, after you've had an opportunity to 13 hear from the panel, to talk about some of the key issues 14 that minority owners are facing. 15 One of them really has to do with access to 16 capital. And as we heard so much discussion this 17 morning, access to the capital is very limited for 18 minority broadcasters, and this is an issue that we'll 19 continue to contend with it seems like for a long time 20 if, in fact, we don't begin looking at new ways to 21 approach some of our old problems. 22 So we're gathered here to sort of talk 23 about access to capital and the definition of minority 24 ownership and how that impacts capital access, and going 25 forward to make sure that we continue to present 148 1 ownership and control issues in a way that assures that 2 minority broadcasters do have access to capital. 3 With that, I would like to introduce my 4 facilitator, Lois Wright, who is the general counsel at 5 Inner City Broadcasting, and she's also counsel to the 6 board of the National Association of Black-Owned 7 Broadcasting. 8 As we begin our discussion, I wanted to set 9 a few little ground rules because we are transcribing 10 this session for analysis and inclusion in our report. 11 So I would ask that each panelist, or each discussant or 12 commenter, state their name before they speak, and we'd 13 like you to do that each time before you speak. And 14 speak into the microphone so that it can be transcribed 15 for the record that we're trying to create here today. 16 So with that, let me introduce Lois Wright. 17 MS. WRIGHT: Good afternoon, everybody. 18 Maureen has indicated to us that what she's 19 trying to do is build up some documentation that she 20 might use in reports, or whatever she has, to support 21 what we know is a very dwindling situation in minority 22 ownership. We have to start out with the fact that the 23 FCC has its definition of minority ownership, and that's 24 50.1 percent. And as background, the FCC, what they 25 really are looking for is control. 149 1 As I was saying to Maureen before we got in 2 here, I've done a lot of financings. I have never seen a 3 bank that said, we want to know what the minority 4 ownership is. And so we don't start with an assumption 5 that minority ownership is what prevents people from 6 getting financing, but what we do know from reality is 7 that a lot of people are having difficulty in getting 8 financing or that there might be other ways to enhance 9 the financing that they get. 10 I guess you want to start with the 11 audience. It appears that you brought the audience to 12 the table, so there's no line here. But what we would 13 like you to do is to go to the mike. 14 In everyone's packet there was a historical 15 piece on the FCC, so I hope everybody had a chance to 16 glance at that, and what minority ownership is right now, 17 and just give us some of your experiences and any ideas 18 that you might have as far as what we could do with NTIA 19 to increase minority ownership. 20 And I have to add, in the radio business there 21 is consolidation -- it's not consolidation in all other 22 industries. TV will be soon be in the same position, but 23 right now it's really radio. But that's not the only 24 telecom business that minorities are involved in. 25 So if someone would like to be the first 150 1 speaker, and just identify yourself for the record. 2 MR. EDWARDS: Yeah, I'd like to start off. 3 Eddie Edwards, president and CEO of Glencairn. 4 The definition, as stated, was 50.1 percent 5 as far as the FCC's definition of ownership. If that is 6 to be followed, wouldn't that then say that the majority 7 of minority owners don't qualify to be classified as 8 minority owners simply because they really don't have 9 50.1 percent of the equity and/or control of the voting 10 stock? It's just a question I'd like to pose. 11 Does anybody have any information to 12 support that? 13 MS. WRIGHT: Well, let me say this. Since 14 we're sitting here, and we don't know the status of all 15 the minority owners, I don't know that we could say that. 16 I don't think we could pose it as a question to see 17 whether or not that's true because I don't think there's 18 anybody here that knows that. 19 What's the reason that would be true? 20 Why wouldn't they have -- that they don't have it. My 21 experience is -- and I know a lot of the owners, so 22 that's not true from my experience. It could be. 23 Jim, you know a lot of owners; it could be. 24 MR. WINSTON: Jim Winston from NABOB. 25 Historically, NABOB members have owned 151 1 51 percent or more of their stations. By and large, that 2 was true throughout all of our membership for many years. 3 Recent years because of the advent of 4 publicly-traded companies, ownership and control of both 5 the voting stock and the equity has become more diluted 6 in the industry. If you look at the biggest company of 7 them all -- Radio One, my review of their most recent 8 filings with the FCC and with the SEC; that they still 9 control the majority of the voting shares in that 10 company. 11 I don't think that there is any problem 12 with that definition in terms of the members of NABOB; I 13 think it still is accurate. And certainly, there are 14 ways to address the control issue when you go public. I 15 was amazed to see that Radio One controlled so much of 16 its voting stock because it is a difficult thing to do 17 when you go public. But I think ownership and control, 18 by and large, for most of the African American-owned 19 companies is still more than 51 percent. 20 MS. LEWIS: I just wanted to say -- since 21 you bring up the issue of the percentage of ownership and 22 control -- when NTIA releases its survey in probably the 23 next couple of weeks, we'll be asking owners to tell us 24 about their voting control so that we will begin to 25 develop a picture of exactly what the ownership structure 152 1 of many of the minority broadcasters is. So we are 2 beginning to look at that question, and we hope to have 3 some data that will help us answer the question. 4 MS. WRIGHT: Well, can I say because we're 5 short on time, if we can focus on the relationship 6 between the minority ownership, control, lack thereof, 7 and financing, we'll be more to the point of what Maureen 8 is trying to get to this afternoon. 9 MR. FOSTER: Hi. I'm Bernie Foster from 10 Portland, Oregon. I would like to use myself as an 11 example. I do own 100 percent of my stations; however, I 12 think it's important. I think, Lois, you said it quite 13 clearly. 14 If it becomes a point where I need to do a 15 deal, would I sell 49 percent or would I sell 51 percent? 16 I don't know. But I think that's on each individual 17 case, and I would hate to have that be the stumbling 18 block for me to be able to advance what I need to do. 19 And I think you're absolutely right. When 20 I did my deal, as a matter of fact, I had to finance mine 21 because the banks traditionally wouldn't finance my 22 business, so I had to a deal out in California, and that 23 never became an issue. 24 MR. BANKS: This is Lyle Banks. About a 25 year-and-a-half ago I started traveling around the 153 1 country to raise funds, and most of the investment 2 banking companies and venture capital firms I've talked 3 to had similar structures where, if they were funding a 4 manager or a team of managers, they were willing to give 5 up to, let's say, 5 to 20 percent of the equity to the 6 team. They would retain the rest of the equity, or it 7 would be shared with other financial institutions. 8 So your equity in these deals is definitely 9 going to be limited, and then there's opportunities 10 upside for performance to build back in, higher levels 11 into your company. And generally, unless you have the 12 financial wherewithal to play in this league, you're 13 going to be looking at some pretty heavy financing. And 14 those are the economics that you're going to be faced 15 with. 16 If you look at Granite Broadcasting, do you 17 consider Granite a minority company? And if you do, 18 consider the fact that they're a publicly-traded company. 19 Don Cornwell, himself, said in the press that he may own 20 about 8 percent of the company in terms of equity, but he 21 still has reasonable control over the company as well. 22 So there are these issues that we do have 23 to deal with. Anybody like me that's coming along is 24 going to have to be faced with maybe owning up to 10 to 25 15 percent personally of any of these deals; 154 1 participating in a board of at least, 4, 5 or 7 or 8 2 other people and sharing that sort of control. 3 It's not until we cash out in our first two 4 or three stations to be able to increase the amount of 5 equity, thus ownership, for me to put into my next round 6 of deals. That's generally what I'm faced with. 7 MS. WRIGHT: So you're saying when you went 8 out last year -- how much equity did you have when you 9 started out? 10 MR. BANKS: Started out? Zero. 11 MS. WRIGHT: So it's a little bit of the 12 opposite. The reason why I asked you that is because I 13 wanted to make it clear. 14 Structure is what influences a lot of this. 15 If you came and had 100 percent of your equity. I think 16 most people do. If you do have 100 percent of your 17 equity, and you have to give up warrants and everything 18 else to move a deal along, it would be unlikely, even to 19 the most voracious investment bank, would you be giving 20 up even 45. It depends on your deal. 21 Now, if your deal is very, very weak, 22 anybody -- if they know that you're in extremis -- and 23 those are venture capital deals. If you're in extremis, 24 you might give up more, but a lot does depend on what you 25 started out with. So if you started out with 155 1 zero -- you're saying you built up to whatever you have. 2 MR. BANKS: I'm saying, you can start out 3 with nothing -- 4 MS. WRIGHT: And make a deal, and raise 5 money. 6 MR. BANKS: -- raise money, and those are 7 the economics and percentages of equity that you'll be 8 faced with. And does that not still qualify me as a 9 minority owner operator? 10 MS. WRIGHT: I think it qualifies you as a 11 minority owner. These things come into play when you're 12 dealing with some regulatory policy, which right now 13 there are so few, that it wouldn't make -- the FCC's 14 definition was a definition born of history and 15 experience. It makes a lot of sense because they are 16 trying to get away from fronts, and fronts are a reality. 17 There are no policies out here now that you'd have to 18 worry about. There is no tax certificate policy; I 19 guess there are a few of the other ones left. 20 And if you were trying to take advantage of 21 one of those, you would expect that you would have to 22 comply with their definition; that's the same in anything 23 else that you might go into. But the fact that you don't 24 have 50 percent doesn't mean that you're not a minority 25 that owns and hopefully controls. 156 1 Control is a reality. I mean, it's 2 certainly a reality in financing. They're looking to see 3 who controls the deal. Nobody invests if they don't know 4 that the guy that they invest in can control the 5 situation, and next year he may not be here. So that's a 6 reality. Control is even more important, especially with 7 deals that are structured deals or public deals. If you 8 don't have enough in the deal to support 50 percent or 9 more of the equity, you are unlikely to get it. But that 10 doesn't mean that because you didn't bring them a good 11 deal that they would still allow you to have control. 12 That's an aside. It's kind of harsh if 13 you're on a board and you're only 1 out of 7; usually, 14 they take a couple of seats, but you don't know the 15 particulars. 16 MR. BANKS: And that's the reality that Don 17 Cornwell faces with Granite. I mean he's one of -- how many 18 people are on that board. 19 MS. WRIGHT: Well, Don is different because 20 he is public, and he's fully public. And a lot of people 21 have not gone fully public, but he is. And that did 22 happen, but as Jim Winston says the Radio One situation 23 is totally different. The documents are all public. So 24 in case you don't want to believe what we're saying, it's 25 all public. And you can see what their structure is, and 157 1 who has the votes and everything, and who has the stock. 2 MR. BANKS: I don't know how much somebody 3 wants to spend on defining who's a minority because my 4 guess is that it's probably not that critical for 5 purposes of this discussion. 6 Who's a minority owner is relevant if 7 you're going to the government asking for special 8 treatment. If you're going to say, I'm a minority owner, 9 and I want X, then it's relevant. If you just want to 10 walk around the street and say I own something, any 11 structure works. If you want to come to the government 12 and say, I want this special treatment because I'm a 13 minority owner, then it's relevant; and then they should 14 be looking very closely, and then they should be 15 dissecting your documents and dissecting your deal. 16 Because the fact of the matter is, part of 17 the reason the tax certificate got destroyed was because 18 it was so obviously used by a front organization. They 19 had two or three different transactions they could point 20 to, not just one. They had several different 21 transactions they could point to that said, this one's 22 bogus, this one's bogus, this one's bogus. 23 So when you put the policy under a spotlight 24 like that and give the opponents an opportunity to point 25 out that you've got bogus deals, then you hurt everybody 158 1 else. So at that point it is relevant to look very 2 closely at who's in control and go beyond the documents 3 and see what the real structure is; and that's relevant. 4 I think that in that situation, a very thorough and close 5 scrutiny of who is a minority-controlled company becomes 6 highly relevant. 7 MS. WRIGHT: Oh no, it is relevant. But 8 I'm not saying it's not relevant. I'm saying for your 9 financing, if you're not trying to get anything from the 10 government, then you don't have to worry about it. If 11 you are -- if you're trying to become a beneficiary of 12 any policy, it is very relevant, and I would say right 13 here, I support that fully. 14 I was at the FCC; that's a real thing. You 15 do need to have control. And I'm in a company right now, 16 and we're doing big finances, and I know why you need 17 control. And if we didn't have control and if we didn't 18 have equity, it would be some different situation. Even 19 with control and equity you have to get people on your 20 board. If you didn't have any, then you could be in this 21 situation, 1 out of 9 or something. I mean, that 22 happens. 23 But I think a greater question is, what 24 happens to the minority? Forget about the policy now. 25 We hope you've come to the deal, we hope you have 159 1 control, and I say, I'm going to sell to you. I'm going 2 to sell to you for $150 million. Where do you get the 3 money? That's the question we have to address here. Or 4 even if it was 50 -- there's nothing cheap now -- or even 5 if it was 10. 6 Why is there such great difficulty in 7 minority companies being financed? So this has nothing 8 to do with their minority ownership. It may have 9 something to do with their structure, but it has nothing 10 to do -- or it shouldn't -- with the fact that I elected 11 to sell to a minority. But I'm like any other seller 12 now. I'm selling it to you; I want to close. I don't 13 want to close a year from now. I want to close when the 14 FCC let's it out. And I want you to give me some 15 assurance that you can close, and that's where most of 16 the deals break down. And that's something that we'd 17 like to focus on and address. 18 MS. TRIGG: If I could just interject a 19 little something now. 20 You mentioned that historically the FCC's 21 rules and regulations were based on policies and things 22 15-20 years ago. Remember then, too, that we were 23 looking at minorities owning one station, maybe one 24 station, a couple markets, and certainly small markets. 25 We're looking at playing in a bigger 160 1 aquarium now. We're looking at owning multiple stations 2 in a market, large markets, getting the spin-offs from 3 Clear Channel, all these divestitures, and that has 4 raised the bar when it comes to equity. 5 Now I'm distinguishing the difference 6 between economic equity and your voting stock. And 7 there is a need to still consider minority ownership when 8 you only have 8 percent of the economic equity because 9 your deal is $1.4 billion. So if we want to play in a 10 bigger field and a bigger arena, we have to be more 11 flexible and creative in defining minority ownership. 12 I do agree that control is critical, but 13 when economic equity is tough to find and you don't have 14 collateral to bring to the table, and you're going around 15 raising money, I don't mind a VC taking 50 percent of the 16 deal as long as I have voting control and control of 17 that. 18 Also, we may want to consider taking a look 19 at another model, particularly when there's still 20 benefits to minority ownership. And even though there's 21 no real race-based explicit policies at the FCC right 22 now, we do want to keep those statistics growing when it 23 comes to minority ownership. We don't want to lose 24 minority ownership on paper at least. 25 And if, indeed, the tax certificate goes 161 1 through or we're successful in getting an Adarand study, 2 we still want to craft a definition that works across the 3 board, as much as possible, something that's prospective. 4 The National Minorities Suppliers 5 Development Council, as you know in January, adopted a 6 flexible plan in considering minority ownership. They 7 have one of the most stringent certification processes. 8 They've had 15,000 minority business enterprises 9 throughout the country, and their requirements were very 10 strict to be considered a minority. It was 51 percent of 11 the voting stock, day-to-day operations and a majority of 12 seats on the board. That's pretty tough. 13 They recognized that raising capital was 14 difficult, particularly if you want a minority business, 15 not just to be a small business, when you wanted to be a 16 larger player. So they looked at a case where they 17 adopted a flexible policy, that you could invite an 18 institutional investor, but you could own up to 19 30 percent of the economic equity. You still had to have 20 control, but you could reduce your equity and still be a 21 certified minority business. And that may be something 22 we need to take a look at. 23 MR. WINSTON: Well, that, of course, 24 created a great deal of controversy when it was adopted. 25 MS. TRIGG: But it was approved by 162 1 76 percent of the board. 2 MR. WINSTON: I'm just saying it wasn't cut 3 and dry, and it prompted a big rift within the 4 organization getting it adopted. And I assume that 5 nobody has any obligations to try to get everybody in 6 this room to adopt the standard today. 7 MS. TRIGG: Well, I recognize raising 8 capital for big deals is tough. Absolutely, Jim, it was 9 highly debated and still is. They recognized that it was 10 difficult to raise capital for big deals. Do you want to 11 have a 100 percent of a small business or do you want 12 30 percent of a multi-million dollar or billion-dollar 13 business? 14 MS. WRIGHT: Can I just suggest something 15 to you, Jenell? I think a lot of that is a cliche. That 16 depends on the deal. An assumption you're making is that 17 you are coming to a deal, and you have a weak deal. That 18 is not true when you have a strong deal. 19 MS. TRIGG: When you say weak or strong, 20 how are you defining weak or strong? 21 MS. WRIGHT: Weak or strong is very clear; 22 do you have money, do you cash flow strongly or do you 23 not? If you have stations that cash flow, you meet the 24 test, you can meet the coverage test, their debt is not 25 over-exposed, they are not looking to take all of your 163 1 equity because everybody is not interested in being in 2 the business of running radio stations. You are; they're 3 in the business of financing them. 4 So there's a lot of assumptions here. 5 Lyle, you had a very good example. That's 6 a deal where you came in and you didn't have the equity 7 and you're building up. And you expect to do that. 8 You're structuring to get that deal done, and you're 9 happy, you want to get some equity. You didn't come in 10 with 100 percent of the equity anyway, so you don't 11 expect that. 12 On the other hand, if you have a deal where 13 you come in with 100 percent of the equity -- and it 14 doesn't matter, you have the control; you have almost all of 15 the equity -- and your deal is very strong, and you can 16 pass all those cash flow tests, they are not coming to 17 take all your equity. I mean, you've got 18 representatives, you must have lawyers and financial 19 people with you. You're not just giving up equity 20 because that's what's done in a deal; you give it up 21 because there's a reason for it. But even that equity 22 means nothing to them if you don't have a good deal. 23 So if you're in a big deal -- 24 MS. TRIGG: I don't disagree. I'm just 25 saying, I think we need to be flexible in looking at this 164 1 definition. 2 MS. WRIGHT: I'm just saying, so big deals 3 and small deals are different. They're very different. 4 But I didn't think we were here trying to 5 argue a way -- people who have a hard time getting equity 6 as it is, I didn't think we were having a discussion to 7 have us get less equity; I think we were trying to say 8 what do we do in the given situation to enhance our 9 ability to do a deal. Equity is not even always the 10 question in all of these deals as it isn't in that one. 11 MS. TRIGG: Well, I'm distinguishing the 12 difference between getting equity and getting financing. 13 MS. WRIGHT: You're saying retaining 14 equity. 15 MS. TRIGG: Well, retaining equity and 16 getting financing. I mean, again, every deal is going to 17 be different whether you proportion your equity or 18 subordinated debt, it's going to depend on where your 19 money is, what your market is, your cash returns, your 20 business plans-- all those things. 21 My point is, we need to look at a flexible 22 way to define minority ownership if we want to grow in 23 this particular industry. Look at it. I don't know 24 whether there's a threshold, a benchmark. I mean, this 25 is open for discussion. I say, let's look at this model 165 1 as does it work, does it not work. 2 Voting control -- I agree, controlling 3 day-to-day operations is critical, but if you only have 4 8 percent, whether you're publicly traded or not, are you 5 then considered minority ownership? 6 MS. WRIGHT: If you only have 8 percent and 7 you weren't publicly traded, you're an investor in the 8 deal. 9 MS. TRIGG: But if you are management and 10 you have control of the station, does that count or does 11 that not count? 12 MS. WRIGHT: I couldn't think of a real 13 world private deal where you have 8 percent and somebody 14 gave you voting control. Who are the other 92 percent 15 people? Because unless it's Santa Claus or your mother, 16 you don't have voting control; they have the control. 17 But I think it's a different question 18 because deals are so different, and it would be very 19 difficult in the time we're given to sit here and talk 20 about it. 21 You may have a bank deal. There's not an 22 equity question there; they're not taking equity. So if 23 you have a bank deal, we want to know can you get 24 financed. If you have a deal that's not just a bank 25 deal, then you're bringing in other people, whether 166 1 you're bringing in equity from private people or you're 2 bringing in structured equity or you're doing something 3 else, you might have to give it up. 4 Because you hear it, and after things are 5 said all the time long enough, they start to take on a 6 life, and they're not necessarily true. Every deal does 7 not involve people taking 80 percent of your equity -- 8 MS. TRIGG: Oh, I agree. 9 MS. WRIGHT: -- 70 percent of your equity. 10 It depends on the deal and the structure and what you 11 bring to it. If you bring empty pockets and good ideas, 12 then you expect that you're not going to have all that 13 equity. But we're just talking about deals, structured 14 deals, how do you get this deal financed. 15 Minority ownership is not a bar to 16 financing; structuring your deal is, and there are other 17 things that are a bar to financing. Minority might be a 18 bar to financing, but the fact that you have an ownership 19 structure, that's not necessarily a bar. 20 MR. CALATAYUD: My name is Tony Calatayud. 21 I'm the founder, president and CEO of Master Media Group. 22 We have, as of about 10 months ago, a brand new and the 23 only 24-hours sports radio station in Miami, which is 24 Market 11, if I'm not mistaken. 25 We are made of 100 percent -- actually 167 1 81 percent because we just did a deal with a venture 2 capital group for 19 percent, and we did that and retained 3 a nice chunk there of Hispanic and African American owners 4 with me being the majority owner. 5 And by the way, somebody else talked about 6 knowledge and the bankers in town. There should be a 7 major seminar made that everybody from Bank of America on 8 down because they have no knowledge of what is going on. 9 But that's besides the point. 10 The interesting thing is we picked up a 11 signal that was on the expanded band. And we talked 12 about this before, and I know Maureen talked about it 13 before. We picked up 1700 AM, and, yes, cars go to 1700 14 as of 1990, and it is an incredible signal. We're heard 15 in Finland, by the way. It is a clear channel because it 16 bounces off the atmosphere. It really is unbelievable. 17 And we go from the Keys to Palm Beach, but I don't want 18 to be too long. 19 One of the things I spoke to Dwight Ellis 20 about at the NAB -- and I spoke in Vegas about this 21 too -- is one way to increase minority ownership in a 22 radio -- -and that's where I'm at -- is on the expanded 23 band, and this is a subject that people either have 24 looked the other way on or not known about. But I'm here 25 to kind of declare it. 168 1 There are 55 radio stations from 1620 to 2 1710 that have usually a pretty good sound and a great 3 signal. 4 Speaking of Mr. Ellis, there he is right 5 there. These radio stations were given to decongest the 6 normal AM band, and as it turned out, people who had 7 radio stations -- for example, mine in South Florida 8 owned 1210 and 1700, and they had to take one of those 9 two in a five-year window. As it turned out, they put 10 1210 at 50,000 watts, and now 1700 is there. 11 We're looking at another radio purchase 12 right now in South Florida, but 1700 I have to give back 13 supposedly in the next two-and-half years. 14 MS. WRIGHT: What power do you broadcast at 15 1700? 16 MR. CALATAYUD: Ten thousand watts. All of 17 a sudden I as a minority -- and I feel almost as a poster 18 child. I'm a minority, I'm a Hispanic, and I'm in the 19 general market. We just got the rights to the Florida 20 Gators, we've got the Dolphin's show. We have gone out 21 and hit a Goliath in our market that's got all the teams, 22 and doing a great job with the front page and Miami 23 Herald and so forth. I don't want to bore you with all 24 that. 25 But the story is the following. We just 169 1 got more money from a venture capital firm because they 2 see the vision and the model of what we want to do. Our 3 station's called "The Fan," and we want to brand "The 4 Fan" across the country. 5 More importantly, in two-and-a-half years, 6 supposedly, we give it back to the FCC for auction as 7 another 58 different stations out there. Why? 8 If what everybody's talking about is 9 minority ownership -- and I'm talking for the Hispanic 10 Americans and the African Americans -- we're going to go 11 across the board here. I almost feel like a family 12 because we're here together. 13 Why in the world hasn't the FCC -- and they 14 have no answers, by the way, when I've asked them. And 15 I've met with Commissioner Tristani personally. They 16 have no answers as to what they're going to do with the 17 expanded band. 18 There are 55 to 60 AM radio stations -- and 19 with digital radio, who knows where it's going to 20 go -- that are there for the taking. Why hasn't anybody, 21 or why can't somebody address that issue and go, why not 22 put that aside for minority purchases? 23 We don't want the thing for free. I mean, 24 we've put seven figures in our deal, and we'll put more. 25 And we're going to buy another station, and we're going 170 1 to keep on going. In my case, obviously, I want 1700 in 2 Miami, and I think we'll keep it one way or the other. 3 But the other thing is, how about the other stations that 4 may be around your neck of the wood? Why is that going 5 to go to auction? So Lowry Mays can pick it up? And I'm 6 not in that kind of game. I want to keep it, at least 7 one for me, and I know many, many others for the rest of 8 you. 9 So the end of the story is, expanded band 10 radio should be addressed by the FCC and should be looked 11 at as an alternative for minority ownership. 12 MS. WRIGHT: That is something the NTIA 13 should look at. And you want to know why they're taking it 14 back in two-and-a-half years? 15 MR. CALATAYUD: No, this is a five-year 16 situation from '97 to late 2002, where the plan is that 17 after the five-year window, the radio stations which got 18 the application to also get the expanded band which most 19 are simulcasting on. The signal they don't want goes 20 back to the FCC for auction. And our question is, well, 21 we're serving the public interest in South Florida, I know; 22 and I know many of you could probably serve the public 23 interest where you are with a radio station such as that. 24 Now you're in the ball game. And I think that has to be 25 addressed and has to be looked into, I mean, very 171 1 seriously. 2 MS. LEWIS: Can you use that for data 3 transfer? Do you know if you can use that band for data 4 transfer? 5 MR. CALATAYUD: I believe so. 6 MS. LEWIS: I think that's something we 7 ought to explore a little bit. 8 MR. CALATAYUD: Absolutely. I mean, 9 expanded band is clear; there's no interference out 10 there. We hit Charlotte at night. 11 VOICE: That's a pretty good signal. 12 MR. RODRIGUEZ: I think what the gentleman 13 just stated is another example of something I mentioned 14 this morning. 15 All the wireless band really have become 16 the prime target for big business to take control of, and 17 I think we have to watch very carefully what Congress is 18 doing, what the FCC is doing, what NTIA is doing and the 19 other relevant agencies. 20 I think it's very interesting the answer 21 that the assistant secretary gave this morning, in terms 22 of they're maintaining flexibility into this band, and I 23 think that's fine. However, it's very important for us 24 to express very clearly that whatever decision the 25 commission or NTIA or the Administration takes regarding 172 1 wireless band does not go further into ignoring the gains 2 that minorities have made in ownership of spectrum. 3 Because the way it looks, it's going to be another blow 4 if it's left unchecked, another blow to minority 5 ownership. 6 MS. WRIGHT: Just identify yourself at the 7 mike, please. 8 MR. JAMES: How are you doing? My name is 9 Alvin James. I'm the founder and senior managing partner 10 for the MBC Network. We're a new African American family 11 channel. And we're running into some interesting 12 challenges as it relates to distribution. And clearly, 13 we've made a significant investment as an African 14 American cable network in a very competitive industry 15 where you're required to basically establish yourself 16 before you're taken serious among the MSOs. 17 And I had a concern about a conflict of 18 interest with the MSOs owning interest in other cable 19 networks, and when you show up on their door step, you've 20 got GMs and some of the corporate executives saying, 21 well, if we owned a piece of you, then we could guarantee 22 you distribution. But since you're an independent in a 23 sense, we're really not going to let you kind of skip the 24 line. 25 And I think it's very important that we 173 1 look at having access to broadband distribution in terms 2 of preserving a space for minorities as it relates to 3 just preserving diversity. And clearly, I don't think 4 there's anything being done by the FCC or any of the 5 other supporting agencies to really create a platform to 6 really change that whole paradigm. And I'd just like to 7 get some feedback from someone in reference to what could 8 be done to really investigate the conflict of interest by 9 the MSOs in terms of the ownership conflict as well as 10 whatever additional end roads we could pursue to increase 11 our distribution. 12 MS. WRIGHT: Well, I think you have two 13 issues. 14 MS. LEWIS: Excuse me. Can we hold that 15 thought for just a moment because we've been fortunate to 16 been joined by Congresswoman Sheila Jackson-Lee of Texas. 17 She has a very limited amount of time to spend with us, 18 but she would like to make a few brief remarks. 19 REP. JACKSON-LEE: Thank you, Lois. I 20 apologize to you. In the Congress we say, would the 21 distinguished gentlelady, Lois Wright, yield? 22 MS. WRIGHT: Yes. 23 REP. JACKSON-LEE: Let me just take a 24 moment to say the reason why I ran over here, and the 25 reason why I am tardy, and the reason why I'm running out 174 1 is because I'm in between votes. And we're about to have 2 a vote ring, and if you know of the somewhat more rapid 3 pace of the House, know why all of us are clamoring to 4 get into the United States Senate. (Laughter). We don't 5 control our time, and we apologize to you. 6 But my delay was a pointed delay. We just 7 were concluding hearings in the Judiciary Committee with 8 an array of very profound panelists, including the 9 chairman of the FCC. I know this is with the Commerce 10 Department, and might I thank your department and Gregory 11 Rohde, who has now added his own star to that very 12 important subagency of the Department of Commerce. 13 Gregory has been on the battlefield and is on the 14 battlefield. And Maureen, I want you to know that we 15 appreciate him; that he has not let the bar down. 16 I am also delighted to see all of you who 17 are giving to us the bottom line that the industry is not 18 doing as it should. I know that Congressman Towns has 19 been a leader. I serve not on Commerce but on Judiciary, 20 which has -- don't let Congressman Towns know I said 21 this -- the greater hammer because when you start talking 22 about anti-competitiveness and issues of 23 penalties -- punitive strong penalties -- it's the DOJ. 24 And the Judiciary Committee, which always has a 25 wonderfully, lovingly, contentious relationship with the 175 1 Commerce Committee -- and the reason is because it's 2 overlapping jurisdictions -- I still think has a hammer. 3 So this hearing that we were having deals 4 with legislation by certainly some very renowned members 5 of Congress. The witnesses were Tauzin and Anna Eschoo, 6 but Boucher and Goodlatte are on my committee. But 7 Chairman Kennard was there. You had representatives from 8 Verizon, representatives from IAdvance, representatives 9 from Prism, Maryland Public Service Commission -- that's 10 why I couldn't leave -- the Precursor Group, the Walt 11 Disney Company, the Earth Link, AT&T and Sanford 12 Bernstein (sp) as a consultant, and of course, Robert 13 Sacks represents all the cable companies. 14 So this member of Congress could not leave 15 without pressing the point of minorities, women and small 16 businesses. We were really talking about legislation 17 that would upset or intervene with the Telecommunications 18 Act of 1996. And I was on that Conference Committee, and 19 the Judiciary Committee's perspective on that was 20 competition, competition, competition, opening doors, 21 opening doors, opening doors. 22 I am somewhat disappointed that the 23 competition has shot upward; it has not rooted down. And 24 it has not rooted down to the extent that it has 25 diversified different rungs which would include a large 176 1 number of minority start-ups and others. And so my 2 reason for staying for the questioning is to put into the 3 record and pursue further one-on-one conversation with 4 these individuals as to what they're doing. 5 Daryl Martin. Let me welcome all the 6 Texans and my good friends from all over Texas. And 7 Daryl Martin sitting there on the front row who is so 8 very able in his efforts to educate all of us and to make 9 sure that we see the heavenly gates. And it's hard; it 10 really is, but I'm working on it. 11 But I put into the record, and I said that 12 I wanted all of these very profound individuals who were 13 on the list, and others, to give me the answers of what 14 they have done without this legislative initiative -- and 15 I could give you the bills, but we'll let you get that 16 later -- or what they think they could do with these 17 legislative initiatives that physically challenge 18 minorities, women, small businesses, schools, libraries 19 and the elderly, and to give me pointed answers on 20 whether or not the way we are presently structured, those 21 entities can either have a piece of the pie and also have 22 access to the pie. 23 Now I know you would want me to give you 24 great and glowing answers. Now, I will hold one-on-one 25 sessions with these individuals, but I wanted to 177 1 get that on the record; and leave there to come here to 2 you to say, that the answers were muddled. 3 And so we do have a long way to go, and I 4 think the real issue is that the Commerce Department and 5 NTIA has worked very hard. Might I put an editorial and 6 political comment, we cannot stop the flow because we 7 have not reached it. And even as we thought we would get 8 some door-openers with the Telecommunications Act of 9 1996, these companies are expanding and enjoying great 10 profits. And as you well know, more companies are moving 11 into telecommunications and Internet that didn't even 12 have any inkling or no product line in there. And I 13 don't want to call names, but we have several of them in 14 my community who previously had not any interest but that 15 was not their product line, and they're now in 16 broadband. 17 Broadband is the new kid on the block. 18 And what I would like to engage in or to say -- because I 19 guess you would want me to come with answers -- is to say 20 that we realize that we have not fulfilled the goals that 21 we started out, so we do know that there are some 22 successes that we can highlight. 23 Why the capital access remains a problem, I 24 don't know. You know we fought the battle of the CRA, 25 and we won it to a certain extent. And so capital 178 1 access, I should not be here discussing that. But you're 2 telling me, as I understand it, that that remains a 3 problem. 4 Now, do you want me to push in my 5 discussions and in these hearings for the access of 6 capital to come from the conglomerates or are you 7 suggesting that the financial institutions provid it? 8 And I'm posing a question, and then maybe it will be back 9 to me in writing. Because the point that I was making in the 10 hearing is what I want to hear from the respective 11 gentlemen and ladies who will be visiting with me, what 12 are they doing in collaboration as they expand to give 13 pieces of the product line to small businesses, minorities, 14 women and others -- and then the other group as I 15 said -- and the disabled who are in business as well? 16 And the others, I was talking more about access. 17 So that's one question that I pose, and 18 that's what I posed to them. And whether or not if I was 19 to join them on this legislative initiative, which sort of 20 upsets the Telecommunications Act, can they promise me 21 that they'll get more competitive, and they'll bring 22 these groups in; or if I leave it alone, can the 23 opponents of the bill say we will fix it; we really were 24 doing good, but we're not doing as good as we like. So 25 that's the one question. 179 1 The other one is on the low power. And I'm 2 not sure. Was that part of the discussion here today? 3 So let me not throw apples and oranges together. 4 I believe it should be viable discussion. 5 There are, obviously, the pros and cons of some who are 6 in the bigger entities. I happen to be supportive of the 7 outreach of what low power will do, realizing that 8 ownership that is big as it relates to our radio family 9 falls sometimes in minority hands. They have larger 10 entities, and they have an opposition to the low power. 11 We don't have any conclusiveness as it 12 relates to a consensus in Congress. There are 13 distinctions on the Commerce Committee. I will say to 14 you I think without being incorrect, the Congressional 15 Black Caucus wants outreach. If I wear my Congressional 16 Black Caucus hat -- and I say outreach, along with the 17 Hispanic Caucus -- we view opportunities for those who 18 can have greater outreach as being able to do so in low 19 power. 20 But our door's open to hear from you, so 21 there are no answers. We haven't moved legislatively on 22 that, and there's a big debate but our angle in 23 supporting the opportunity for outreach and expansion 24 of opportunity. 25 Let me close because maybe somebody has one 180 1 question, and I've already over-talked my limit and 2 probably will over-talk yours as well. But in any event, 3 I came here to show my support, and to say to you I'd 4 like to hear the conclusions of this session. I think 5 it's a very important session. Uniquely, you came on the 6 day when we had this major hearing in the Judiciary 7 Committee dealing with some of the components of this, 8 not necessarily on the very point, and I took the 9 opportunity to have these issues raised. 10 And so, I should hope in the next weeks and 11 days to have answers that are solid answers as to why we 12 find ourselves in this dilemma, now some four years 13 later, at the passage of a bill that drew your support 14 and lobbying, and everyone saying this will be a great 15 day for everyone. And if it is not the case, then I 16 think we as legislators who have a special passion for 17 these issues of affirmative action need to do so. 18 I sit down with the note that continuity is 19 important. And I have left the Hill, and I'm on my 20 own time. And therefore, if you think that continuity is 21 important, then don't discard the elections of 22 November 2000 of which many of the folk who are of 23 prominence and profitability and are in business seem to 24 think it doesn't matter to them. 25 Well, I can assure you that these very 181 1 issues will come to a head in 2000. If you're on the 2 wrong side of the political spectrum and aisle, you come 3 tell me who is carrying that argument on the other side 4 of the aisle. And therefore, if you've got an answer, 5 I'm willing to hear you, but if you want continuity, you 6 better pay a lot of attention to the election of a 7 Congress -- Democratic -- and to elect a president that 8 will be held accountable on these very crucial issues. 9 And I'm as bipartisan as the next person; I just want 10 proof that the issues that we're all concerned about will 11 be maintained because we have not reached the point where 12 we can stop the struggle. 13 But thank you very much. 14 (Applause) 15 MS. LEWIS: Thank you so much. 16 MR. GRAY: So we can ask you a question 17 now, correct? 18 REP. JACKSON-LEE: As I go toward the door, 19 but I'm listening. 20 MR. GRAY: I'm Tony Gray of Gray 21 Communications in Chicago. 22 So in the earlier session, we talked about 23 what government can do to aid minorities in the 24 broadcasting field. And as you have heard from some of 25 the panelists here, access to capital is still a problem. 182 1 What some people may not have articulated 2 to you directly is that capital is funneled in specific 3 areas to specific individuals that they want to be 4 involved in this industry. Everyone who is minority by 5 definition doesn't necessarily have the minority 6 communities best interest at heart. And I think you 7 understand my point that I'm trying to make here. 8 So we want to know what you, as a member of 9 Congress, and the rest of the Congressional Black Caucus, 10 and the government, will do to help to fix some of the 11 problems that do exist? Thank you. 12 REP JACKSON-LEE: Thank you very much, and 13 thank you for your question. 14 First of all, I have an aversion or an 15 opposition to isolating -- oh boy, that bell's going to 16 ring -- but tokenism appalls me. And that is -- and I 17 don't know if you were getting there -- that we pick the 18 favorites. And then we have a few favorites, and then 19 that ends it; we've done our job. 20 So the point that I would make to you is 21 that this input is very vital. And what I would like to 22 do, and the questions that I pose, is to put the onus and 23 the burden on these large entities that are most heavily 24 regulated, whether we change our regulation structure by 25 legislative change or that we leave it to be operated 183 1 under the Telecommunications Act. 2 How are they answering the questions of 3 collaborating with smaller entities, in particular, 4 minorities, women and small businesses? How are they 5 providing access to you in terms of capital because they 6 can do it? And then the parallel effort is to ensure 7 that our banking institution -- financial 8 institution -- also provide the resources. 9 So my approach, dealing with the Judiciary 10 Committee and the oversight that I have over this 11 particular aspect of the legislation, is to ask what 12 they're doing to reach out to you, and to not accept that 13 10 years ago they established a relationship with a very 14 fine minority of women-owned businesses, and they still 15 have that relationship. 16 I applaud that, and I applaud the growth in 17 our minority businesses. But what are they doing with 18 start-ups and new kids on the blocks and people who've 19 come about through the 1996 de-reg of the industry? And 20 that's the pressure that I think we need to put them. 21 Thank you very much. 22 (Applause) 23 MS. WRIGHT: Would you just come to the 24 mike, please? 25 You know what we might do also, when you 184 1 come to the mike, anyone that has any other questions 2 that they would like to address to Representative 3 Jackson-Lee, you could give those questions to Maureen in 4 the written form, and she will get them over to her. 5 REP JACKSON-LEE: I appreciate it. 6 MS. WRIGHT: Go ahead. 7 VOICE: I was asked to remind you, there's 8 a question pending on the floor that hasn't been 9 answered. 10 MS. WRIGHT: This is a cable question; it's 11 two parts. I think that as far as NTIA is concerned, I 12 think that's a very good issue because that ties into the 13 general consolidation battle that we've been fighting on 14 other fronts, which is, of course, Time Warner, Cox, 15 Comcast. Many of them own, or have an interest in, many 16 of the programs that they do carry over their cable 17 systems. That's one question. 18 The other question, which will be put to 19 you is, channel capacity is what everybody is talking 20 about. Now, as more of the systems go up in their 21 digital array, they can create more channels because they 22 will say, have you gone through all the steps that you 23 have to go through with each system to comply with their 24 channel-capacity rules? 25 That's something that would also be good to 185 1 get to Maureen which we would get from here. 2 That's why I say it's two parts. The first 3 part I think is very interesting because that's a very 4 big question and a time bomb at the FCC. I don't know 5 that they'd want to answer that; that they'd want to try 6 to force AOL/Time Warner out of all those Turner networks 7 that they own. You're talking about big hitters, but 8 that doesn't make it an unfair question. 9 The second part is, just that you went 10 through the procedures. 11 MR. JAMES: Yes, we complied with all the 12 procedures, and we're having minimum success with the 13 network. We're up to about 5 million households and 14 growing. But I still believe that it's such a critical 15 crossroad. We went into cable because of the challenges 16 in the broadcast industry, knowing that it's been 17 30 years, and we still own less than 2 percent of all the 18 broadcast stations in the country. 19 When we recognize there's 35 million 20 African Americans representing 13 percent of this 21 population with $550 billion in disposable income, I 22 think it's somewhat of a slap in the face. Even the 23 broadcast industry has not fulfilled its commitment in 24 terms of really being logical in their approach that, 25 a) the banks aren't really going to become that 186 1 compassionate towards financing the acquisition of 2 television stations for minorities; and b) I think we 3 have to take a real practical approach to look at the 4 success of some of the other ethnic acquisitions of 5 stations in terms of markets where there are two Hispanic 6 free-over-the-air stations, two Korean free-over-the-air 7 stations. We have two PBS stations in most major cities. 8 Something radical such as allocating one of 9 those stations to an African American owner through the 10 assistance of the FCC and the government I think is going 11 to be a realistic approach to really improving our 12 position in the free-over-the-air broadcast arena. 13 I think we've got to really become 14 pragmatic in trying to cut to the chase because too 15 often we put the problems on the table, and everybody 16 feels good that they get a chance to vent the issues; but 17 at the end of the day we find ourselves really back at 18 square one. And I think somebody has to be willing to 19 take a little more risk and take a much more radical 20 approach to say, do we file a class action lawsuit to 21 force the FCC to really take action? I mean, it has to 22 be something that's aggressive from that 23 perspective -- and this is just my personal 24 opinion -- that really forces them to take a much 25 different approach to dealing with this issue of denying 187 1 us the fundamental opportunity as a people to communicate 2 on a national basis. 3 And today, we cannot get a news story that 4 affects the African American community on a daily basis 5 because there is no infrastructure, and I think that's a 6 sin. 7 MS. WRIGHT: If you would come in and talk 8 to Maureen on that consolidation issue. 9 MR. PEREZ: I'm Ben Perez from Abacus 10 Communications Company. Much as with the simulcast 11 period, in the conversion to digital television, the FCC 12 set up a process where they created an additional 1,600 13 full-power television allocations. And they took each 14 full-power television licensee and they gave them a 15 second channel. And they said that you simulcast both in 16 analog and digital for a five-year period, and at the end 17 of the five-year period, we want you to give back one or 18 the other channels, and we're going to take those 1,600 19 vacant television allotments, and we're going to auction 20 them to the highest bidder. 21 And one might ask if you're trying to 22 improve minority ownership, well, there's 1,600 vacant 23 allotments with stations built on them sitting there that 24 will would go up for auction. So it seems like a 25 gigantic opportunity to do something about the absence of 188 1 significant numbers of minority television owners. 2 But there are two problems. One problem is 3 actually quite simple, but the other is the same problem 4 you have with your AM band concern. 5 The first problem is that Congress 6 legislated that the FCC had to do this auction, and then 7 they did that back when we still had a budget deficit. 8 And they were worried about raising money; and so, they 9 told the Commission we're going to budget the proceeds 10 from the television spectrum auction into our budget 11 forecast, and now you have to do it. 12 Well, now we're in a budget surplus period, 13 so perhaps that legislation could be undone. I don't see 14 it as a big problem because they were talking about 4 or 15 5 billion dollars, and on the scale of things that is not a big 16 problem anymore. 17 But the other problem -- and the problem 18 you have -- and I would like to get somebody's proposed 19 answer. As it seems like in either case, you run smack 20 into the recent Supreme Court cases that say that the 21 government cannot do any type of program where the 22 benefit is being distributed on the basis of race. 23 We're an ethnic group, and I haven't been 24 able to come up with a screen or process that is 25 sufficient to get past the current restrictions that 189 1 would be placed on the government that would allow the 2 FCC to fashion a program, to funnel a significant number 3 of the 1,600 vacant built stations to minorities. 4 MR. CALATAYUD: On the TV side -- and I wasn't fully aware 5 of that; thank you for that information -- it incredibly 6 parallels what we're talking about in radio. I know when 7 I spoke to Commissioner Tristani -- obviously, it wasn't 8 formally on paper, but what she stated was that they 9 would look into the opportunity whereby minorities would 10 have certain allowances that would make it -- well, we 11 had talked about different things. 12 By the Year 2002, they want to look at a 13 variety of different options that would ease the way for 14 minorities to really be players in that kind of expanded 15 band format. I hope that is the case. I don't know 16 where it's going to go from here, obviously. 17 MR. PEREZ: What does that mean? 18 MS. WRIGHT: Allowances. 19 MR. CALATAYUD: Well, when we talked about 20 it, and she stated allowances, that there could be a 21 variety of different financing measures that would be established 22 for assisting minorities for a particular expanded band 23 format. 24 MS. LEWIS: Did she say anything about 25 bidding credits at auctions? 190 1 MR. CALATAYUD: She did. They mentioned 2 that as well. 3 MS. WRIGHT: So it's something like PCS. 4 MS. TRIGG: Before we do an Adarand study, 5 you still can't do a race-based solution. 6 MR. CALATAYUD: But most of what I got, by 7 the way, at the FCC was, we're going to have to look into 8 that; we're going to have to look into that. I mean, 9 that is basically what I got at the FCC. They tried to 10 tell me something. I flew all the way to Washington to 11 talk to Commissioner Tristani, but that was basically it. 12 MR. PEREZ: Even with bidding credits, the 13 output of the auctions that have been held so far have 14 been extremely poor in terms of minority winners, and so 15 bidding credits hasn't been enough. And then on top of 16 that, two years ago, the FCC decided that bidding credits 17 were unconstitutional, and they suspended the use of 18 bidding credits. And there's been no Supreme cases going 19 in the other direction. So I don't know how they could 20 do bidding credits when they already announced that they 21 have repealed the ones they had because they were 22 unconstitutional. 23 MR. CALATAYUD: All I know is we're 24 two-and-a-half years away from that window at the end of 25 2002, and they had better find a way to do something. 191 1 And I can tell you right now, they've got plenty of time 2 to do it. But you can't look at one side of the mirror 3 and go, "We really need to help the minorities and 4 further them in this industry," and then on the other 5 side go, "Yeah, we've got that expanded band situation 6 that could be used for that, but let's think about that 7 in about 2002." I mean, I think it's got to be done in a 8 timely fashion. 9 MS. BROWN: I'm Tamara Brown with the law 10 firm of Chicardi (sp) & Bacon here in Washington, D.C., 11 and I wanted to bring to Commerce's attention as one 12 possible solution in terms of financing. 13 We have the Telecommunications Development 14 Fund that was established under the '96 Act, and 15 supposedly there's money sitting there that's growing 16 with every auction. At a certain portion of each 17 auction, money is sitting there growing. 18 Why isn't that those minorities who are 19 already existing in the telecommunications industry, 20 whether it's broadcast, whether it's new technologies, 21 PCS, why isn't that money not being channeled to some of 22 those small businesses so they can continue to expand 23 their businesses, to go into new opportunities, whether 24 it's with broad-band? 25 So I'd like for Commerce to consider with 192 1 the FCC in Congress, since that pool of money is sitting 2 there, and it's constantly growing with each new auction, 3 that they consider broadcasters who are struggling to 4 expand and go into new areas and go into new markets to 5 use that fund. 6 I may be aware of maybe one or two deals 7 that have been done using that fund; however, it seems to 8 me if access to capital is a problem, then maybe we need 9 to open up the regulations or re-look at those 10 regulations governing TDF to open it up to existing 11 broadcasters, existing minority or women-owned companies 12 that are looking to expand their businesses. 13 MS. LEWIS: I don't know whether the TDF 14 fund is precluded now from investing in current 15 broadcasters, but Ginger Lew, who is head of the fund, 16 talked today about how the high cost of broadcast 17 properties makes it very difficult for the fund to 18 participate in some of the larger deals; and what they're 19 looking to do is to try to come in at first-round 20 financing stages to help give people an opportunity to 21 leverage their dollars into other financing. 22 MS. BROWN: Tamara Brown again. I can 23 clarify that it was for new technologies. The TDF fund 24 was for new technologies and not necessarily broadcast. 25 But I think we need to re-look at that now because you've 193 1 got the fund sitting there, and there hasn't been a lot 2 of money put out to minorities, the purpose for the fund. 3 And so, I think Congress and the Administration needs to 4 look at that again as to how existing licensees and those 5 who want to expand can be able to have access to that 6 capital if that's what it's sitting there fore. So maybe 7 Congress needs to look at that again and possibly bring 8 some resolution for some of the people that are sitting 9 in the audience here who are still struggling in that 10 area. 11 MS. WRIGHT: That's a good point you 12 brought up about the fund because there is the other fund 13 which does invest in broadcast properties. The fund is 14 called Quetzel Fund, and it's managed by Chase Capital 15 Partners and Reggie Hollinger. I don't know if any 16 people here have worked with that fund yet or applied to 17 get some funding, but that would be also something good 18 which their office could track just to see how they're 19 investing. And that fund was established by the large 20 broadcasters. 21 As Representative Jackson-Lee was saying, 22 Justice does not permit them to invest, hold or take-back 23 paper, investment of 30 percent. So what they did is 24 they established this fund, and the fund is third party 25 managed, so essentially they're far away from it. It's 194 1 arms length enough to pass a Justice smell test. I know 2 that they did a .com deal, and they've done one other 3 broadcast. And I know that they're doing others, but 4 it's something that people should be encouraged to look 5 into. 6 MR. WINSTON: I think, Maureen, you all 7 invited Reg Hollinger today. 8 MS. LEWIS: I did, but he wasn't able to 9 attend. 10 MR. WINSTON: I was quoted in the trade 11 press a week or so ago as being critical Quetzal, and I 12 was hoping to have a dialogue with Reg to explain my 13 concerns. It's not my desire to talk about his fund; 14 he's a good committed guy, but I think he's in a setting 15 that is not the best setting for the promotion of 16 minority ownership. 17 Specifically, Chase Capital Partners is a 18 division of Chase Manhattan Bank, and the kinds of 19 business plans -- the business models they're looking 20 for -- is a straight Wall Street model. They're looking 21 for an investment that's going to be ready for an IPO in 22 three years, so they're looking for huge growth rates, 23 they're looking for cutting-edge kinds of deals. And 24 broadcasting is a mature industry, and it's hard for 25 broadcasters to meet their model. 195 1 So as was just pointed out, the impetus for 2 Quetzal was that there was a lack of funding for minority 3 broadcast ventures. They've done four transactions, 4 three of them have been Internet deals and only one 5 broadcasting deal. So my concern is that Quetzal is not 6 going to hit the target that was the impetus for the 7 fund. And, of course, their response is -- the quote 8 that I saw in the article was, "Quetzal is designed to 9 invest in businesses that are going to show the kind of 10 return we're looking for." So they don't view its purpose 11 the way I thought the company was established, which was to be a 12 broadcasting financing vehicle; their view is it's a 13 Chase investment vehicle and Chase's money. That's what 14 Chase does. 15 So I think there needs to be some further 16 clarification of Quetzal's role. I think that Lowry Mays 17 and people who were the impetus in creating Quetzal need 18 to take another look at what it is the objective of the 19 fund is suppose to be. 20 MS. WRIGHT: Well, I think it's very 21 important that people in this room that are able to do 22 that go to that fund because why should Clear Channel and 23 CBS, Viacom, why should they get credit for establishing 24 a fund that increases minority ownership in 25 broadcasting? And that's what the fund was established 196 1 to do, and that's what they told -- we met with Joel 2 Klein. That was what they said they were doing; it was 3 going to eventually be a $2 billion fund. 4 And then three out of the first four deals 5 are not broadcast, and more importantly, they are not 6 investing in the possible applicants that need it the 7 most. If you have the big super deals I was alluding 8 to earlier, you don't need the fund. But what if you 9 just want to pick up two stations somewhere? It 10 shouldn't matter, radio television, whatever. They're 11 mezzanine funds, so you know you're going to have some 12 equity in there, but it's not that terribly onerous. 13 It's more important that they need to invest and need to 14 see some growth because you're not seeing any growth on 15 the minority side of the business. And that's what that 16 fund is there for, and that's what all those people are 17 getting all the tremendous kudos for, but we haven't seen 18 anything yet. 19 MR. BANKS: There's a big need for some 20 lower cost of equity capital because I think that's one 21 of the biggest hurdles, especially if I'm going after 22 deals. Because we're going after fairly sizable deals, 23 but if I have to produce 25 to 35 percent on an 24 annualized basis to my venture capital partners, it's 25 tough to justify prices when I'm running up against a 197 1 Raycom or a Clear Channel who's using maybe 10 percent or 2 12 percent as their return. 3 So if there's ways to take like a TDF fund 4 and expand it and have the return requirements just a 5 little bit less aggressive, I think that you'd find more 6 people using that with much more success. 7 MS. HINES: My name is Jeanell Hines, and 8 I've been seeking to purchase my first radio acquisition 9 and had the opportunity to attempt to do business with the 10 Quetzal fund, and sent a business proposal to Reginald 11 Hollinger and Clarence Zachary; and basically the 12 response that I got back was, in terms of my experience I 13 could be the poster child-- their ideal candidate. 14 However, in seeking to purchase two small stations for 15 about $6 million -- but I need it, and I had my senior 16 debt in line, but was too small for them to deal with. 17 "Jeanell, we want to deal with $30-60 million plus, so 18 when you're ready to be at that level, come back." 19 Well, excuse my French, I was ticked 20 because, like you, I thought their purpose was ideally 21 for someone such as myself who's starting, had the 22 experience. I'm not an inexperienced operator; I wasn't 23 looking for anything free. So I fired off a letter to 24 Eddie Fritts, Mel Karmazin and Lowry Mays. I did hear 25 back from Eddie Fritts basically saying, that's not the 198 1 NAB's purpose in getting involved, et cetera, et cetera, 2 but basically said that I understand their need to want 3 to do big deals, be involved in the .coms, but some 4 portions of that fund should be set aside for smaller 5 investment partnerships, such as myself, those that are 6 looking for monies less than $10 million. 7 So I haven't heard anything. Even the 8 owners that I've been trying to buy this station from put 9 in a call to them to take another look at my deal. But 10 again, no response from them. Needless to say, they're 11 very slow to return phone calls and et cetera; but as far 12 as I'm concerned, I haven't found the Quetzal Fund to be 13 worth all the hoopla for my personal needs. 14 MS. LEWIS: All right. We have time for 15 just two more comments. 16 MR. KARIM: Hi, Talib Karim. I'm actually 17 a principal of the law firm of Karim & Judd, and we're 18 actually in the process of restructuring, and our name is 19 going to be now The Technology and Entertainment and 20 Communications Law Group or Techlaw.com. 21 In that context, I wanted to mention 22 something that seems very obvious. We have the Supreme 23 Court right now that is basically providing an almost 24 impenetratable barrier to advancing affirmative action 25 type programs, and I think clearly, as the congresswoman 199 1 mentioned earlier, that landscape is governed by 2 politics. And the thing that I've always been just 3 amazed at is, why we have black broadcasting vehicles, 4 such as the Radio Ones, such as the Inner City vehicles, 5 that are not basically mobilizing blacks to get involved 6 in a tremendous way that could, in essence, change the 7 landscape. 8 I actually represent a group called the 9 Black Entertainment and Telecommunications Association, 10 and one of the things that we are seeking to do is to 11 work with NABOB and to work with the other non-profit and 12 for-profit entities -- the Radios Ones and the like -- to 13 use their platforms to make a difference this election 14 season with respect to the presidential and congressional 15 elections. 16 Some of us were talking about should we 17 file a class action lawsuit against the FCC. Well, if 18 Congress has the advocate for our community -- that is 19 Chairman Kennard -- in kind of a head block and 20 preventing him from doing some of the things that he 21 would like to do, then we have a Catch 22 situation. 22 That's my first question. How would you 23 encourage or will you begin to encourage the black 24 broadcasters that you have relationships with to really 25 get involved politically in a way that heretofore they 200 1 haven't done? 2 And then second of all, I would like to 3 just once again echo what our distinguished speaker who 4 previously came up said, is that the barriers for new 5 entrants are just tremendous. 6 I look at my colleague here to the left, 7 and look at the excellent work that they're trying to do 8 in terms of providing an alternative to BET. And I think 9 that BET is great -- they're one of our clients, in 10 fact -- but what I'm trying to say is, we need 11 alternatives. 12 The black community cannot be satisfied by 13 just one platform. So I'm wondering what we should do is 14 to really mobilize our resources -- both our capital 15 resources, our promotional resources, our community 16 organizations -- and work in a much more systematic way 17 to make sure that at the end of the day -- at the end of 18 Chairman Kennard's tenure, in fact -- that we don't have 19 the same people who are at the table that were at the 20 table three years ago when he was first appointed to his 21 position. 22 MS. WRIGHT: Kalib, you've cut into our 23 second question. 24 Let me just say this. I don't know what 25 Radio One is doing to push the political agenda this year 201 1 on the elections, but I would imagine that since they are 2 part of NABOB, and NABOB is very heavily involved in doing 3 PSAs and trying to get out the vote, and so, I'm sure 4 they're doing that too. 5 But I can speak for Inner City to say that 6 I don't know when we've ever been accused of not being 7 politically involved. We're very involved in this 8 election, and someone even mentioned one of our stations 9 this morning -- our most involved political 10 station -- and I think what we can do, other than pick up 11 people and drive them out to the polls to get them to 12 vote. 13 And I think that's something that everyone 14 can do, not just your larger broadcast stations. If you 15 have a station and your radio market is local, those are 16 the people that you try to influence. So I think that 17 there's a genuine interest there, and everybody 18 understands, as the representative pointed out, the 19 importance of politics, as Jim pointed out this morning. 20 So I think that everybody is pretty committed on that. 21 On the issues of barriers to entry, I 22 couldn't agree more with you, and I do encourage the 23 gentleman from MBC -- and I am familiar with them from 24 cable -- to make the overtures to NTIA, to NABOB, to 25 anybody else, to go on the Hill because that's a very 202 1 tough issue. That's certainly not an issue that we can 2 resolve here since this has been allowed to go on for so 3 long, but that does not mean that that's not a legitimate 4 issue. And I really hope that you do pursue that, and 5 I'm sure there's a lot of interest around here from 6 people who would like to work with you on that. And 7 especially anyone that doesn't have a lot of stations or 8 they're just a new entrant. So everybody's sort of in 9 the same boat that he's in; they're just in a different 10 form of the media. 11 I guess that's why we're all here to see 12 what we can do to drop barriers to new entry, and I'm 13 sure you'll get a lot of support from Maureen and NTIA. 14 MR. KALIB: Can I just mention? And, 15 again, you guys are certainly to be congratulated in 16 terms of NABOB. But let's look at it. The black turnout 17 historically has been abysmal. And I think when you say 18 we're doing the best we can, I have to say, coming from a 19 community in Memphis, Tennessee where WLOK -- a former 20 and perhaps still a NABOB member, and is like really the 21 big fish, number one or two, as an AM station in the 22 Memphis market -- that black radio can have a tremendous 23 impact on driving people to the polls. And actually it 24 does. It takes people, it drives people to the polls, in 25 Memphis in particular. 203 1 MS. WRIGHT: Can I say this because we do 2 have to wrap up? We're all sitting here today. Unless 3 you could name every one of these stations and say you 4 did do some PSAs and you didn't, how can we indict them? 5 We can only encourage people to say that that is what we 6 would like people to do. I wouldn't never say that they 7 did or did not do something. 8 MR. KARIM: Maybe we need to do more than 9 PSAs is what I'm trying to say. 10 MS. WRIGHT: And they can't say anything 11 political at all. So I'll carry your message to NABOB, 12 but Maureen can't say anything. 13 One last short comment. 14 MR. EDWARDS: Eddie Edwards, Glencairn and 15 the Black Broadcasters Alliance. 16 I want to go back to what this group was 17 about and hope that I just get a sense of what we might 18 walk away with defining minority ownership that's crucial 19 to the booklet -- to the report -- that NTIA is trying to 20 publish, and I just didn't get a sense that we spent 21 enough time on that. 22 So I hope that before we leave, we could at 23 least -- 24 MS. LEWIS: Well, unfortunately, because we 25 do have another panel -- but I would encourage everyone 204 1 to file written comments. NTIA has issued a Federal 2 Register notice soliciting comments from the public. Our 3 initial comment date is July 28th, and reply comments are 4 due on August 8th. And we will be incorporating 5 information not only from today's session but also from 6 the written comments. 7 So please, if you have further thoughts on 8 the definition, by all means I encourage you to file 9 comments. 10 Thank you. And with that, we'd like to 11 just shift gears and move into our second working group, 12 which is Programs and Policies to Promote Minority 13 Ownership. But thank you all for your participation. 14 (Applause) 15 MS. TUCK GARFIELD: Are we ready to 16 reconvene again? I'm Chanda Tuck-Garfield. We don't 17 have too much longer to go, but we hope that we will 18 continue to have a fruitful and enlightening and 19 informative dialogue. And this truly is a workshop. And 20 although there are individuals that are here at the head 21 table, we encourage you to put forth your comments to let 22 us know what your thoughts are on this issue as we move 23 forward to talk about issues of minority media ownership. 24 What I would like to do is to just tell you 25 what our goals are for this panel, or actually this 205 1 working group. 2 The goals are to have a more in-depth 3 discussion of some of the policies and programs that have 4 helped to facilitate minority ownership, whether it be 5 tax certificates, distress sales, SSBIC programs, et 6 cetera. We want to have an open dialogue on that and to 7 get everyone in the room's perspective on the issue. And 8 actually, hopefully, we can leave from here with a few 9 priorities for things that NTIA should look at as we go 10 forward-- policies, programs, whatever it may be. [ Sample survey background discussed here. Actual text deleted.] 18 Earlier today, Mark Lloyd from the Civil 19 Rights Forum mentioned that perhaps NTIA should work on 20 the Adarand study-- what role should we be playing, what 21 role or what study should we be doing? So we want to 22 look at that again today. 23 So I'd like to start out by asking a few of 24 the individuals who are on the dais with us here to give 25 us their perspective on what they see as some of the top 206 1 priorities and policies and programs as we move forward. 2 And I'll start on my left with David Honig, 3 and the other individuals who are on the dais with us can 4 feel free to jump in. But I would like to go from David 5 to Dee Dee Ferrell of Viacom, as well as Connie Chick 6 Smith from the Benton Foundation and Talib Karim, and 7 then move to your comments and concerns. 8 MR. HONIG: Thanks very much. I have no 9 answers; I do have three questions. 10 The reason we're all here today, basically, 11 is because NTIA has asked for our help and guidance. And 12 I've been, as you know, to many of these conferences and 13 seen very little come out of them. The next hour is 14 probably our opportunity to give NTIA something of value 15 for having brought us here. So I'd like to commend to 16 the body three questions that might be useful to focus on 17 because they are developing a record. That written 18 record will be probably cited in congressional hearings, 19 cited in various studies and end up being issues in this 20 or that court case. 21 Those three questions are this. First, is 22 there anything specific that NTIA can do better than 23 other parts of the government to stimulate either 24 government-sector or private-sector investment in 25 minority-owned broadcasting? 207 1 Second. Is it a fact that what we refer to 2 among lawyers as race-neutral means are going to be 3 insufficient to remedy the present effects of past 4 discrimination, including government involvement in it, 5 government ratification and validation of it? And if 6 that's so, what's the route for recognition of that fact 7 to being able constitutionally and politically and 8 morally to do something about it? And what is NTIA's 9 role in getting from the recognition of that problem to 10 its solution? 11 And third, should we, given the finite 12 time, energy and resources that we have and that NTIA 13 has -- we as constituents of NTIA -- be devoting our 14 attention more to the rulemaking process of the FCC to 15 develop incentives or to developing and pushing for 16 legislation? 17 MS. TUCK GARFIELD: Dee Dee, would you like 18 to comment next? 19 MS. FERRELL: I don't know that I have 20 specific questions, but I do have two statements that I'd 21 like to give just for food for thought for everyone here. 22 Dwight pointed out earlier that we've had 23 these panels for many years now, starting in '78 and 24 probably even starting before this, so maybe it's time 25 for us to start thinking outside of the box and to start 208 1 thinking of new ideas and new ways. And Toni Cook 2 Bush said it this morning, "Stop focusing so much on just 3 radio and television." There is a telecommunications 4 revolution going on out there, but we are still focused 5 on radio and television. And certainly, as Viacom knows, 6 those are two essential and important parts of our 7 business, but you will notice all of the major 8 telecommunications companies are looking to other places. 9 They're looking to the Internet, and they're looking to 10 broadband. And I'm not saying that those industries are 11 necessarily any easier, but we've got to start thinking 12 outside of the box. 13 And in terms of policy, I think one thing 14 we have to remember -- and it's certainly something I 15 learned when I was at NAB for about six years in their 16 government relations department -- that there are no 17 permanent friends or enemies in Washington, and we have 18 got to figure that statement out and learn how to build 19 coalitions, learn how to think of working with people 20 outside of the minority community, learn how to trade on 21 issues for an issue. 22 A lot of times, there are probably things 23 out there that the Republicans want that they would love 24 to have some support from the Black community, the 25 Hispanic community or the Latino community. There are 209 1 issues that we probably want too. 2 The one thing that I've noticed in Congress 3 is that you have the rural members of Congress and the 4 urban members of Congress coming together because they're 5 realizing that neither of those communities are being 6 served. 7 So we've got to find where our coalitions 8 are, where are people are. You never know, in working at 9 NAB and working at Viacom, the statement is true; 10 "Politics make very strange bedfellows," and we need to 11 find those other bedfellows and stop just looking to each 12 other and start reaching out to some of these other 13 constituencies to see if there are places where we can 14 form coalitions. 15 So I just offer those as to thoughts that 16 maybe we need to consider and start thinking broader than 17 we have been thinking up to this point. 18 MS. SMITH: Chick Smith from the Benton 19 Foundation. I'm kind of like David Honig in that I don't 20 have an answer per se, but I do have a question that I'd 21 like us to think about as well. 22 Because the telecommunications industry is 23 so quick to change -- every week, whether we want to 24 admit it or not, there's something new coming down the 25 pike that we have to adjust to -- we need to think about 210 1 how we can set up an infrastructure that policy can be 2 changed, not as quickly but quicker, so it's not by the 3 time the policy comes down the pike the infrastructure 4 has changed that we were making the policy from. 5 So we need to think about ways that we can 6 put a mechanism in place for rapid change. 7 MR. KARIM: This is Talib Karim for the 8 record, and I'd like to commend both Maureen and Chanda 9 for their leadership in putting this together. And I'd 10 just ask us all to just give a round of applause for 11 their excellent work. 12 Second, both David and Chick had mentioned 13 that they didn't have answers, and they had some 14 questions. Well, I have actually three answers. 15 First of all, I think that when you look at 16 NTIA, I mean, NTIA is essentially the President's bully 17 pulpit for telecom and broadcast-related matters, 18 right? So we're asking what can the President do to 19 stimulate increases of media ownership by blacks and 20 other disenfranchised ethnic groups. 21 First of all, I think we can increase the 22 funding for technology centers and incubators and the 23 so-called developing nations within our borders. Again, 24 I mentioned that my father was a city councilman in 25 Memphis, Tennessee, and Memphis has probably an Internet 211 1 density close to 20 percent, if that. And I think that 2 we can do much more in terms of making available funding 3 for non-profit organizations in Memphis and other places 4 across country in both rural and urban communities for 5 programs designed to train young people, who are right 6 now not possessing the skill sets necessary to compete in 7 this .com economy. Train them, and then place them. 8 And then require these companies that are 9 spending millions of dollars and recruiting people from 10 India, Pakistan, Bangladesh and other places across the 11 world to, again, limit their international outreach and 12 focus on some of the excellent people that we have home 13 grown. So that's the first suggestion. 14 The second suggestion is, I think that NTIA 15 has done a great job with tracking media ownership 16 amongst Blacks, Latinos and other ethnic groups, but I 17 think that we need to expand outside of just media or 18 broadcasting to also look at the numbers of portals that 19 are owned by blacks, look at the numbers of DSL companies 20 that are owned by blacks, look at the numbers of ISPs and 21 look at the numbers of backbone providers, if you will. 22 So I think that NTIA can definitely do that as well. 23 And thirdly, thinking about how well 24 President Clinton used his bully pulpit to legislate 25 almost. I think that the President and NTIA can have a 212 1 focus on divestitures and focus on rewarding companies 2 through, again, public relations types of mechanisms or 3 policy mechanisms, if that's possible. Reward companies 4 that divest their resources in the hands of black people 5 and other ethnic groups. 6 I think that if that were to happen, you 7 could literally see a changing of the landscape 8 overnight. Again, Viacom is an excellent example of the 9 type of merging and consolidation and divestitures that 10 had to occur. 11 I mean, what if there was, again, a Black 12 or Latino or a Native American group that were able to 13 come to the table and say, hey, we're in the position. 14 And not just, hey, we're in the position, but if CBS and 15 Viacom were to say, well, we're going to actively look 16 and find these groups, and we're going to work with the 17 David Honigs and we're going to work with the Benton 18 Foundations, and we're going to work with the NABs to 19 make this type of synergy happen. 20 Perhaps, those three are just some simple 21 ideas that I have, but I'm sure there are many others 22 that could perhaps be utilized by NTIA. And, again, I 23 just want to congratulate Chanda and Maureen on their 24 excellent work in putting together this panel. 25 MS. LEWIS: And we didn't pay him to say that. 213 1 MS. TUCK GARFIELD: Thank you, Talib. 2 And the interesting thing is, I know this 3 morning -- and I'm sure there are some of you who are 4 sitting in the audience saying, we've done this time and 5 time again. We did this in '78, we did it in '79, and we 6 did it in the '80s, we did it '95 when there was a tax 7 certificate. And here we are again doing it in 2000. 8 What is so different about 2000 that we need to do this 9 again? 10 But as you can see, our landscape is 11 changing. The challenges of the past, although they may 12 be similar to some of the challenges in the future, they 13 are different for us. So it is vital -- it is 14 critical -- that we once again have this dialogue. 15 As you heard this morning, satellite radio 16 is here as a new medium. We have AOL, Mr. Jim Moore, 17 with us on our panel, another new media or new venture 18 that's out there. 19 What does that mean? What type of 20 coalition building do we need to do now to move forward 21 in the future? Should we solely focus on legislative 22 means, is that enough for us? Or should we move into a 23 parallel track where we do the legislative on one hand, and on 24 the other hand, we focus on the venture capital and the 25 funding for initiatives such as Lyle Banks and Eddie 214 1 Edwards and others who are out there in the audience, 2 other owners? 3 So it is important for us to talk about 4 that. And as you are raising these questions, we are 5 truly serious about coming up with -- and that's why 6 we're putting in a number. We want to come out of here 7 with at least three things, the top three things, that 8 this working group can come to some sort of consensus on 9 today, and perhaps, even in our comments that you submit 10 before August 8th, that we can begin to move forward; 11 that we can go to Assistant Secretary Rohde and say, this 12 is what the community has said. And thus, he can then go 13 to the President and say, this is what the community has 14 said, and that there is a force who is agreeing on this 15 issue, and we can move forward. I can tell you we are 16 serious about this issue, and we do want to hear what 17 your concerns and your comments are. 18 So along those lines, I'll move to 19 Mr. Moore and ask him as a new media company and here on 20 behalf of AOL to talk about what he sees happening in the 21 telecommunications landscape, and how companies such as 22 AOL can participate in this type of coalition building. 23 And do you see any policies or programs or priorities 24 coming forth? 25 MR. MOORE: Well, now that I've been outed. 215 1 A couple of things I've heard AOL/Time Warner mention 2 several times today. And, obviously, clearly there are 3 very few things I can say about the AOL/Time Warner 4 merger. I can sort of restate a lot of what has been 5 said so that there's some clarity. 6 Our intent certainly isn't to -- and we 7 don't even know that it would be possible to if we wanted 8 to -- sort of consolidate the distribution of content. 9 Time Warner is an amalgamation of a lot of varied content 10 from Nickelodeon to CNN to some magazine properties, and 11 just announced a deal with Essence magazine, so it's the 12 amalgamation of all kinds of content. 13 How many AOL members in the room? Does 14 anybody use the service? Well, if you use the service, 15 you'll notice, real quickly, that we produce very little 16 of that content. We aggregate that content, and we try 17 to make it as easy to use as we possibly can because we 18 want to attract the mass audience. 19 So the merger -- what I can say about 20 it -- is that for us it's about survival in this space. 21 Broadband is coming fast and furiously. We looked 22 around at what we had, and we didn't have the broadband 23 assets that some of our competitors and some of the folks 24 that were coming in have. 25 We operate on a subscriber model at $22 a 216 1 month. We're looking at free Internet service. We're 2 looking at people doing broadband distribution at $50 a 3 month, so we've got on the high end and we've got it on 4 the low end. So we looked at an opportunity to get some 5 scale which we need to drive this industry -- well, we 6 don't even know where it's going, but to be a player 7 whenever it gets there. We needed some scale which is 8 our subscribers matched with some of the TW subscribers. 9 We looked at getting broadband assets, content -- and we 10 talked about that content -- and talent. We look at all 11 the talent that's out there. 12 The way we invest at AOL, and the way we 13 look at partnering up with folks -- and we have a number 14 of partners. Net Noir. Herb mentioned Net Noir earlier 15 today. We were an early investor in Net Noir, and we've 16 stayed with Net Noir through the last four years. Black 17 Voices. Through our relationship with Tribune and 18 Tribune Interactive, we have a significant relationship 19 with Black Voices. I can't talk about the future because 20 those deals are in the works, but we're talking to a 21 number of other folks. 22 This week, we launched AOL Mexico as part 23 of our whole AOL Latin American strategy, and that's 24 going to kind of reverberate back into the U.S., come 25 back north of the border. 217 1 So we do partnerships in a number of ways. 2 One, we look at our distribution. We've got 23 million 3 households, so we're willing to share that distribution 4 if the partner and the content is compelling enough and 5 makes sense. 6 We also invest real money -- cash -- in 7 things that make our service better, that sort of make 8 the member experience better, technologies that help us. 9 As example, we cache websites so that if you go to a 10 website frequently, and you're an AOL member, and you 11 want to come back to that website, then we'll invest in 12 technology. If somebody has some technology that will 13 make that better; we'll invest in that. 14 So those are the kinds of things that we 15 invest in. We don't do early stage, unfortunately. I've 16 talked to a lot of folks. My job, by the way, at AOL is 17 to sort of ensure that where our outreach and business 18 opportunity intersect, we're prepared to make an 19 investment. So I look at outreach in the Black, Hispanic 20 and the Asian communities. So I am looking at business 21 opportunities all the time. 22 I will say this. We're not looking for the 23 next mydog.com. We're not looking to invest in just the 24 Internet website. We are looking at technology, we are 25 looking at compelling content, and we are looking at 218 1 anyone who can advance our subscriber base. 2 MS. TUCK GARFIELD: Well, before we go to 3 Jenell, Dwight and David have comments -- or actually, 4 hopefully proposals -- of how we can move forward, and 5 then we'll move to you, Jenell. 6 And also in the audience, if you all have 7 proposals, comments, please feel free to jump in at any 8 time. 9 MR. ELLIS: This is different this time. 10 Dwight Ellis, NAB, National Association of Broadcasters. 11 Things were changing too 22 years ago. We 12 as minorities -- basically meaning African 13 Americans -- were poised to get a better footing in the 14 traditional broadcast arena. Twenty-two years ago, there 15 was not as great a concern about Latino Americans or 16 Asian Americans or Native Americans even being involved 17 in this business. It was mentioned, but everybody knows 18 that when you said minority, you were talking about black 19 folk because it followed the riots. And basically, white 20 America -- or the general population of this 21 country -- reacted in a way to protect their business 22 interest and general interest from being burned down by 23 black people. 24 So it's different now. It's much more 25 competitive in the arena. You heard from our 219 1 representative from AOL. I've been a strong subscriber 2 for years, ever since the beginning, and I have a lot of 3 respect for that. 4 I found out when a few weeks ago I was a 5 guest on the Essence music festival and cruise, and 6 Clarence Smith, who's the president of Essence is a good 7 friend of mine, had dinner talking about the Essence/Time 8 Warner deal, and I thought that was very interesting. I 9 don't know how many of you know about it or how many of 10 you missed what the good brother said. That was very 11 significant. 12 And correct me if I'm wrong, I believe that 13 Time Warner now owns -- the deal has been cut -- I think 14 49 percent. 15 MR. MOORE: I don't want to misquote. But 16 there's a joint venture, and Essence's assets are in the 17 joint venture, and I think they control it. I don't know 18 if it's 49. 19 MR. ELLIS: Yes. Essence has, according to 20 my intelligence -- I don't mean my personal but what I've 21 learned -- 51 percent is retained by Essence, a black 22 corporation, and 49 percent is Time Warner. 23 Now, nothing negative about that, I can 24 recall -- those of you who are Latino in the 25 audience -- some years ago that Clarence and I used to 220 1 talk about the expansion of Essence. That was before 2 Essence went into the business of selling women's 3 apparel, the catalog. But like any other business, they 4 were looking for ways of growing the company. 5 And I said to Clarence -- this is about 6 1983 -- "One of the great markets that's growing, 7 especially in New York and other urban areas, is the 8 Latino market." In New York City alone where you have 9 large populations, Puerto Rico women are being joined by 10 Dominican women, and even Mexican-American women are now 11 coming, and I said, "And there is no publication; you 12 should have a publication." 13 Clarence said, "Dwight, trust me. I know 14 what you're saying is probably true, but our market is 15 black women, and particular types of black women." He 16 said, "We have to be so careful in marketing our 17 magazine, that if we put a light-skinned, light-eyed 18 black woman on the cover of Essence, we get letters you 19 wouldn't believe from our readership." 20 So for the most part, back in the late '70s 21 and early '80s, the black women that you saw on the cover 22 of Essence magazine -- and those of you who subscribe 23 know it -- were of the stereotypically dark-complected, 24 African-looking black women. And as time went on, 25 Clarence called me one day and he said, "Guess what? 221 1 That was a great idea about 10 or 12 years ago. We're 2 cutting a deal with a Hispanice group," and they're 3 starting a magazine called Latino magazine. The rest is 4 history. 5 Their headquarters are right next-door, 6 right in the same building with Essence. 7 MS. FERRELL: Dwight, did you ask for any 8 money for giving him that idea? 9 (Laughter) 10 MR. ELLIS: So many people get rich off of 11 these ideas. 12 But the point I want to make is, it is 13 different now, and it's different and it's dangerous both 14 at the same time. And it's interesting. I listen with 15 great interest to the gentleman from AOL here because 16 what he's saying is, he is here to do business with you. 17 And he is an African American -- happens to be -- who 18 understands a mode of business and industry that many of 19 you don't understand. And he's probably of another 20 generation, probably younger than I, which goes to the 21 issue that I brought up early on about not only digital 22 divide but the generation divide that we're dealing with, 23 those of us who have been beating this drum for 22 years. 24 This is the guy you've got to know, and this is the guy 25 that you have to work with. 222 1 And understand that whether it's a Latino 2 market or the African American market or anything else, 3 John Johnson may be next for content. This isn't 4 personal; this is about, if we have really convinced the 5 open market -- the financial market -- that finally we 6 can make bucks for a major corporation, they will 7 eventually purchase us or we will go into a partnership 8 arrangement. 9 Now, this is not anti-black or 10 anti-Hispanic; this is about doing business. 11 Omar Wasseau, those of you who should know 12 him, would have never gotten Black Planet.com off the 13 ground were it not for his Asian partners. And I don't 14 know if you knew that. So this black portal that we rave 15 about could not have occurred were it not for a 16 relationship that existed between a 27-year-old black man 17 and a 20-something Asian. 18 MS. KONG: In fact, it was an off shoot of 19 a .com company called Community Connect, which is also 20 launching another Latino website some time this year. 21 Black Planet was launched just in October of last year, 22 and now has over 1 million members, growing simply 23 because the disc jockeys in New York were using the Black 24 Planet.com e-mails, and using that on the air. So 25 everyone was running to jump on the bandwagon. 223 1 I think that what Dwight says is absolutely 2 important. And what's exciting about this panel -- and 3 I'm hoping we can get to these solutions -- that we can 4 present, is that we have to get to the solutions. We 5 have to talk about what NTIA can actually do and present. 6 I'd like to actually bring those up. 7 MR. ELLIS: Sure. 8 MS. TUCK GARFIELD: Hold that thought. We 9 don't want you to forget it. 10 MR. HONIG: I've got something NTIA can do. 11 First, I want to thank Talib for having the graciousness 12 and class to recognize to queens in our presence who will 13 make things happen for all of us. 14 I didn't want the moment to pass without 15 recognizing to elephants in our presence, two that will 16 keep us from achieving these objectives. They're called 17 Richmond v. Croson and Adarand v. Pena. 18 What do those cases say, in a nutshell? 19 First that, any program that is not considered race 20 neutral -- and they must almost be race unconscious -- has to be 21 justified as a compelling government interest. There's 22 only one that's ever been thought to be a compelling 23 government interest, and that is preventing and remedying 24 discrimination where the government ratified and 25 validated past discrimination, and it has present 224 1 effects. Diversity doesn't have five votes in the 2 Supreme Court and may not have three. 3 Second, before the courts will consider 4 whether to adopt the kinds of stronger initiatives that 5 we've been talking about all day that are, candidly, 6 race-conscious initiatives, first a tribunal, such as the 7 FCC, must determine that race-neutral alternatives have 8 been tried and failed. That is, every effort has been 9 made to solve the problem through what are called 10 race-neutral means, but those means proved insufficient. 11 Consequently, even if NTIA is instrumental 12 in getting the Adarand study or studies done, that won't 13 by itself solve the second half of that Adarand-Croson 14 problem because no one can certify that all reasonably 15 possible race-neutral steps have been tried. 16 I want to share with you what MMTC has been 17 doing to try to solve that problem, anticipate it and 18 resolve it in advance, and propose a way that NTIA can 19 help. 20 One thing certainly the government can 21 do -- and it's basic, it's fundamental -- is recognize 22 that especially if you have exclusive use of a valuable 23 public resource -- be it the spectrum or rights-of-way of 24 streets, if you are a telecommunications carrier, cable 25 company or broadcaster -- there certain things that you 225 1 really shouldn't do, not just as a matter of morality but 2 as a matter of your character to hold a broadcast 3 license. 4 You shouldn't be selling your station word 5 of mouth to your friends on the golf course; that's 6 nasty. You shouldn't do that. Ben Hooks recognized that 7 when he proposed this 45-day open period for station 8 sales in 1978. That was the proposal the commission 9 didn't adopt; it thought it would be too disruptive. 10 You shouldn't be marketing your station on 11 the basis of prospects not suspects. That's nasty. If 12 you're a broadcaster, you shouldn't do that. If you're 13 going to do that, someone else can occupy your spectrum. 14 You shouldn't be handing out your contracts 15 for business to build your facility, to buy your 16 gasoline, to buy your equipment based on who was in your 17 social circle of those who you work with and their social 18 circles. You shouldn't be hiring on that basis. And the 19 FCC has just recognized that, and that issue is important 20 now. 21 And if you're a telecom company or a cable 22 company, you certainly shouldn't be deploying service in 23 a manner that doesn't reach everyone equally. You 24 shouldn't be engaged in redlining. 25 That's basic. We're preparing a petition 226 1 for rulemaking to the FCC to ask them to adopt those as 2 rules. The authority for it, of course, is Section 151 3 of the Communications Act, which I spoke about this 4 morning, where Congress told the FCC, you're in business 5 to make sure that service is provided equally to all 6 Americans irrespective of race and so forth. That's not 7 self-executing; no one has ever implemented that. 8 Now, here's where NTIA comes in. Henry 9 Geller, when he was the administrator of NTIA in 1977-78, 10 filed the petition for rulemaking -- this is a government 11 agency filing a proposal with another government 12 agency -- which created the tax certificate policy. 13 NAB, bless their hearts, filed the proposal 14 for distress sales, worked on the tax certificate 15 proposal, and got NTIA to file comments on their 16 petition. Both of them were adopted. 17 We represent the NAACP, LULAC and Rainbow 18 PUSH. We filed a minority ownership proposal as a 19 petition for rulemaking in 1990 and are still waiting on 20 action on it. We're just representing civil rights 21 groups. They don't rule if it's just us. If it's 22 another government agency, they have to respect it, and 23 they certainly respect NTIA. It has the power, it has 24 the moral authority. It only requires the political 25 will, and that's present in this room if we make it 227 1 happen. 2 MS. TUCK GARFIELD: Jenell. 3 MS. TRIGG: Thank you, Chanda. 4 I'd like to piggyback on particularly the 5 Adarand issue. I'm going to put my lawyer's hat on. 6 Having worked at the FCC when Adarand first 7 passed, we were looking at the impact of Adarand on many 8 of the FCC's programs. In fact, if you remember the 9 personal communications services auction was just about 10 to start. The filing period for the short forms was due 11 probably days after the Adarand study was issued. And 12 the Commission had to halt that auction. That auction, 13 if you remember, had special provisions -- bidding 14 credits, installment payments -- for minority-owned 15 businesses, small businesses, entrepreneurs. We had 16 specific programs in place to address the access to 17 capital and the disparities in minority ownership. 18 But the commission's hands are tied because 19 of the two cases, and I would proffer there's a third 20 case with just as great of impact in Washington, D.C. as 21 Adarand and Croson did nationally, and that's Lutheran 22 Church. 23 Specifically in terms of timing, which is 24 where I think we are, we needed solutions yesterday to 25 resolve some of these. This technology and this industry 228 1 and licensing is moving so fast, we will blink, and there 2 won't be anything left for minority ownership, at least 3 premier properties. 4 So the Commission right now has multiple 5 mechanisms in place to promote race neutral which, again, 6 as David said, is critical to promote first to 7 demonstrate that it's failed, and then you can justify 8 doing race conscious remedies are specific minority programs. 9 Section 257 of the Communications Act was 10 put in the Telecom Act by Congressman Bobby Rush 11 specifically to address small business market entry 12 barriers. Remember Adarand had already been decided, the 13 1996 Act could not specifically address minorities, so we 14 had to couch some of those broad minority issues in a 15 small business context which is race neutral. 16 I had the pleasure of co-authoring the 17 notice of inquiry at the FCC to first implement that 18 provision, but I can assure you that the Federal 19 Communications Bar, the trade associations and the 20 industries have not fully supported what that measure can 21 do on a case-by-case and rulemaking basis. There isn't a 22 decision that should come out of the FCC in the Year 2000 23 that doesn't address a market entry barrier. 24 The gentleman who talked about the 25 difficulty of getting cable carriage on MSOs because of a 229 1 conflict, that's a market entry barrier that can be 2 specifically dealt with at the FCC under rulemaking 3 authority and under the authority of Section 257, but 4 I'm sure that no one has filed it in that context. 5 So at the same time we are doing Adarand 6 studies -- and I want to address that quickly -- that 7 those studies, trust me, will take some time. 8 At the Commission I analyzed four to six 9 different Croson studies. Remember, they're call Croson 10 studies because Adarand didn't address what you need to 11 prove anecdotes and statistical evidence of past 12 discrimination; you need a combination of both. 13 We've got tons of anecdotal information on 14 the record. Every PCS, every wireless hearing, ever 15 comparative hearing, we can tell stories about 16 discriminatory practice. We don't have hardcore, 17 statistical evidence to show what wasn't available to 18 minorities, who was qualified at the time, and would they 19 not have gotten that license or access but for race. 20 Congress may not have the authority to pass 21 a race-conscious measure because it's still undetermined, 22 due to Adarand, whether the Supreme Court will give 23 congressional deference. So while we don't have a record 24 across the board for broadcasting, wireless -- it makes 25 no difference -- we need to promote small business, now. 230 1 Currently, we've got the authority to do that. 2 The Adarand studies may take a year, so we've got a year 3 to at least put forth the best effort we can for the 4 small business -- new entrant or small business, either 5 one will work. 6 And then for the Adarand studies, NTIA has 7 tremendous resources in gathering statistical information 8 through its Commerce Department. They've got better 9 resources than the Commission ever would want. 10 I submit NTIA act as a clearinghouse for a 11 lot of these statistical studies, foundations, and maybe 12 even talk to the Benton Foundation or whatever to start 13 to put together a statistical collection of data for use 14 not just by the FCC or the SBA but for the tax 15 certificate. 16 The tax certificate, it will take some 17 time to get it passed. It's not going to happen 18 overnight, regardless of whether we have a change in 19 presidential or congressional party come November. But 20 if we start to work on the record to educate congressmen 21 on both sides of the aisle, what the tax certificate is, 22 how it helps economically -- not how it helps culturally, 23 I don't think we can talk that, even though we know it's 24 important. Let's talk how it benefits the country. 25 NTIA can start to put together some of 231 1 those studies, maybe even look at the origins on 2 communications, or for that matter, minority-owned 3 communications and the economic impact it has on 4 communities, so we have some real hardcore evidence that 5 will help support, whether it's congressional action, 6 whether it's FCC action, SBA or down the line. 7 The other thing that I think will be very 8 helpful is to take this conversation outside of the 9 Beltway. 10 When the tax certificate disappeared, very 11 few people outside of the Beltway knew what the impact 12 was or cared. And when you talk about promoting minority 13 ownership to the people that are not involved in telecom, 14 their question is, "Why should I help a black millionaire 15 get richer?" 16 They don't see the benefit for minority 17 ownership from a real economic point of view in their 18 community, globally for that matter. And maybe NTIA can 19 take this conversation outside of the Beltway, and that's 20 part of our coalition building. And then we've got some 21 grassroots support regardless of whether we win in 22 November or not. 23 MS. TUCK GARFIELD: Those are great 24 comments. And before we move on to Jacqueline -- and 25 then we'll move on to Ben for his comments -- actually 232 1 coalition building made me think of one thing which 2 seemed to work very well for the Benton Foundation. And 3 they seem to have a list serve where a lot of the 4 advocates in telecom come and talk daily about issues. 5 You all are suppose to be giving us advice, 6 but maybe something that we could also think about is 7 whether or not there needs to be a list serve or 8 something for minority media ownership whether it's done 9 by NTIA or some other organization in this room. 10 But just to put that out there before we 11 move on to Jacqueline because if NTIA is going to tackle 12 these issues, we cannot do it alone, and we should not 13 have to do it alone because it is in all of our best 14 interest, and we hope that everyone will be able to 15 participate. And part of that is communication, and what 16 better way to keep in touch than through the Internet. 17 MS. TRIGG: And if I may just add, the last 18 case that upheld FCC policies and promoting specifically 19 minority broadcasting was Metro Broadcasting. And if you 20 read the decision again -- and I have for the umpteenth 21 time just recently -- note all of the studies and the 22 evidence that was cited by the Supreme Court to justify 23 the FCC's policies. 24 Those studies are so old, and we need 25 studies that are post-1996 Act. And we need economic 233 1 studies. And even some of the FCC's records including the 2 interim report of the Small Business Interim Advisory Council-- 3 really 1989 data is what we're talking about. That's irrelevant 4 right now. We need current, up-to-date statistical 5 evidence that supports discriminatory practices in the 6 industry. And maybe NTIA could help look at the 7 relationship between incumbents being able to venture 8 into new media. 9 We talked about portals on the Internet, 10 that most of the news portals are run by the broadcast 11 organizations. This is why everyone's chasing broadcast 12 licenses because with a broadcast license -- which is 13 still, despite I love the Internet; it's part of my law 14 practice. Broadcasters still reach more people than 15 anybody in terms of a mass media distribution, and you 16 don't have to pay to get it. And that still is a very 17 powerful economic incentive, but broadcasters are now 18 into the Internet. And that's why AOL is buying 19 traditional media services because, again, they still do 20 just distribution. 21 So maybe we look at if you owned a radio 22 station or TV station, how are you able to maximize that 23 into a group, to an Internet portal? Or even if you 24 started as entry level AT&T manager, where there were no 25 African Americans up until the '70s, where are those AT&T 234 1 managers now? They're running maybe half the .coms in 2 the country. 3 Again, we need to show what happened in the 4 '60s, '50s -- David, you know this history better -- and 5 how statistically how it took us through today. And I 6 don't think anyone can do that better than NTIA. Thank 7 you. 8 MS. TUCK GARFIELD: Thank you, Jenell. 9 And now, Jacqueline, I hope you have your 10 thoughts in mind. 11 MS. KONG: Well, this is the first time 12 I've actually come to the meeting, and I want to say that 13 I want to acknowledge the hard work in the last 40 to 14 50 years the African American community has made and 15 paved the way for opportunity. But I also have to say is 16 that what I hear here is a tremendous amount of 17 frustration. I hear that funds are set up that no one 18 can get their hands on; that mergers are taking place 19 that are leaving us in the cold. 20 And the reason why I bring that up is 21 because I look at the African American model and 22 community as the groundbreakers for other ethnic 23 groups -- the Latino American groups and the Asian 24 American groups who are leading up the back end -- and I 25 see frustration. 235 1 And when I hear, especially from Jenell, 2 that it will take a year to get some of these studies put 3 together, I want to just let you know, a year -- even six 4 months on the Internet -- is an eternity. Do you know 5 how many start-ups will have started up and already taken 6 off without you within six months? 7 When I heard broadcasters in Los Angeles 8 that are catering to the Asian American community, and 9 they say, well, we'll have a site up in eight months, 10 that's an eternity. 11 So though I applaud what you're doing, and 12 I believe that you need to continue with these studies 13 and to get lawmakers to support this, what I begin to 14 realize as a new player is that we get a lot of lip 15 service. And I can tell you that because I meet in 16 Hollywood with the studios. I've had ABC and Disney take 17 me to lunch and tell me they're going to do more for 18 diversity push then do nothing. 19 I really want to emphasize that when you go 20 there and it looks great and it sounds wonderful, but 21 then there's no real results. And then they want you to 22 prove and prove and prove that, in fact, you are 23 qualified to be a player. And by that time, you're so 24 far back behind the back end, you can't even catch up. 25 And one of the things I try to do is come 236 1 up with solutions so that we can actually be at the 2 forefront and team up. The technology is there, and we 3 have our hands on it, but the idea is to 4 create -- unfortunately, it sounds like these loans may 5 take a long time to get. They're not readily available. 6 I had lunch with the vice president of 7 Paramount pictures, who told me there was a new fund set 8 up because Paramount was bought out by Viacom, and 9 members of Star Trek Voyager had to go there to say how 10 much Paramount is doing for diversity and their 11 programming because that's one of the few diverse shows 12 they have with multi-ethnic faces and role models. 13 But, in fact, where is that fund? How do 14 you get your hands on it? Who gets that fund? That part 15 disappears, but what happens, it makes great headlines in 16 Variety and in Hollywood Reporter, and it helps them get 17 their merger going, and in the meantime we don't get 18 anything. 19 So the question is solutions. I guess what 20 I'm trying to say is I want us to be not the ones 21 complaining on the back side that we got left behind; I 22 want us to be participating in the creation of these 23 sites and these companies, and merge together to form a 24 coalition. 25 Because, really, if you look at all ethnic 237 1 minorities -- the numbers that Secretary Rohde 2 presented -- we're talking about cumulatively 28 percent 3 of the population. That's pretty big and growing, and we 4 can work together. 5 Now, one of the models that's happening in 6 the Internet world is we're seeing communities working 7 together with Community Connect, with Black Planet, with 8 Asian Avenue. The infrastructure is the same if you can 9 actually get everyone working together. 10 So I guess what I propose for 11 solutions -- because I think that NTIA addresses 12 broadcast issues. I'm going back, and I guess what I'm 13 trying to do is talk about Internet which is somewhat 14 different than traditional broadcast media is. 15 But going back to traditional broadcast 16 media, isn't there any way we can set up an incentive 17 fund? Forget at that this point waiting for Congress. 18 Isn't there any way they can help push an initiative for 19 a tax break much like they had when they were trying to 20 increase production in Hollywood back in the '70s, where 21 there was 2 to 1 tax break for investors? And I'm not 22 talking about a fund from the government, but in fact, a 23 fund for investors where they would get a 2 to 1 tax 24 break for any investment in a minority-owed broadcast 25 venture? 238 1 MS. TRIGG: Again, any time you do race 2 consciousness, the restrictions on judicial challenges 3 come into play, and that's the big issue. So that's why 4 Congress has not wanted to touch the tax certificate with 5 a 10-foot pole. I mean, it is has taken us four years to 6 get them to even propose legislation. For three years, 7 they didn't want to talk about it. After they repealed 8 it, it was a hot potato. 9 So any race conscious, even though we have 10 plenty of justification, and even if the industries say 11 they will support it, you will get, you bet -- this is 12 one of the most litigious industries, and it helps 13 support my job, no less, but again, you're dealing with a 14 potential lawsuit which could tie it up for years which 15 is why you need to frame it right now. 16 Because I agree; in Internet time, a year 17 is forever. We can't wait for a year, but we can't stop 18 working on the study either. But right now we have to 19 frame it in a small business context or new entrant 20 context that's race neutral, and maybe put 21 parameters -- unfortunately we're going to restrict, just 22 by the nature of defining it, some minority businesses 23 that may be bigger. Again, we may not be able to help 24 large, successful minority businesses, but whatever way 25 we can frame this to help the majority of minority and 239 1 women-owned businesses is what we may have to do. 2 And that's the debate right now with the 3 tax certificate. Do we frame it in a small business 4 context, do we frame it in a small business minority 5 context? And I submit that even Congress will get 6 questions. Again, there's no set way that, even if 7 Congress passes this, they won't be challenged just like 8 the FCC would. 9 That's an issue that's pending before the 10 Court. The Supreme Court gave high deference to 11 congressional findings in Metro Broadcasting. This 12 Supreme Court is not the same. The political climate is 13 not the same. And I do agree that we could do some small 14 business issues and tax issues, but that has to also work 15 through the political process. 16 MS. KONG: I think this is a great forum 17 and a great way to network with the community. And I 18 think that NTIA could be instrumental in making sure we 19 meet more than every two years or one year, getting 20 together on a regular basis and really pulling together 21 the coalition needed to actually create a consensus? 22 I spoke in New Orleans, and I have to tell 23 you, the representative from New Orleans was adamant. 24 When Kwasi Mfume brought up the idea of possible 25 regulation for more ethnic involvement in television, he 240 1 said that he would fight it tooth and nail, and he said 2 that he would not support that and would make sure that 3 that would never pass. 4 Now, with that in mind, I don't really look 5 towards Congress sometimes to sort of say they're going 6 to move this thing along because you've got some hard 7 line people there that don't want to see that happen. 8 And so, I submit possibly a way for us to 9 meet on a regular basis to talk about a workshop with 10 venture capitalists to get those business plans in a form 11 because sometimes all the elements aren't there. You may 12 have an idea, you may have an idea, but singularly those 13 ideas are not going to fly, but combined there can be a 14 restructuring of some of those plans that can make it 15 viable from a business standpoint. I guess really work a 16 little outside that box; I think that's one of the big 17 messages from today. 18 MR. KARIM: And I want to congratulate my 19 sister from the Asian American community for bringing up 20 the whole idea of thinking out the box because what I 21 think Jenell has articulated and what David has 22 articulated in terms of the regulatory infrastructural 23 impediments cannot and should not impair us from acting. 24 And I think that some of the things that 25 have been suggested, such as those things that we've 241 1 talked about as this sister has mentioned, should be 2 acted upon. Just getting together alone is a way in 3 which we can create some change. 4 And so, again, I don't want to keep on 5 harping on it, but this type of activity should 6 definitely be congratulated. And I think coupled with 7 that -- and I'd have to say that sometimes we've reached 8 out to even people on this panel for ideas and 9 suggestions and have not been able to, again, get the 10 type of support that I think is important. 11 So maybe what we should do at minimum is 12 begin to open up our direct lines of communications to 13 each other and track our progress. And so the next time 14 we get together -- if it the Congressional Black Caucus 15 Telecom or if it's the NTIA's program that they might 16 have next spring or whatever, or whenever -- let's have 17 some type of tracking to say, okay, we got together back 18 in July, and what's happened since that time? Have we 19 created a list serve? Have we returned each other's 20 phone calls even? 21 I mean, maybe just that type of coalescing 22 is what will be necessary in order to do some of these 23 types of things that would not be impeded by the court. 24 MS. TRIGG: For example, there's a very 25 strong small business lobby that got the capital gains 242 1 tax changed, big time changes, lowered the capital 2 gains for small businesses, and I believe it 3 was 14 percent. That was done through the White House 4 Conference on Small Business. It started a couple of 5 years ago when they met for their bi-annual meetings, and 6 they worked through a network of grassroots, 7 congressional appointees, presidential 8 appointees -- worked through their Congress people -- to 9 get major legislation pushed through the Hill at a time 10 in an economic recession to give small business a break 11 for capital gains. 12 Grant it, we cannot frame this in a 13 minority context, but there's no reason why we can't 14 build coalitions with some very experienced, very savvy 15 small business lobbyists and talk to them about the 16 economic impact that increased tax benefits -- again, big 17 businesses have all kinds of tax benefits. They can do 18 transfers and license acquisitions without spending any 19 cash at all; therefore, they're not paying taxes. They 20 can do stock swaps. 21 Some of the biggest tax incentives, more so 22 than the "minority tax certificate" are already written 23 in our tax laws, but that's because they have the 24 lobbying group to do so. 25 So today, why not frame this tax 243 1 certificate issue -- and I say tax certificate issue only 2 because big business needs some incentive, besides just 3 being the right thing to do, to support minority 4 ownership. If you give them an economic incentive, 5 they'll be there. And we don't have an economic 6 incentive that's regulated at this point, so there's got 7 to be another way to get there. 8 MS. KONG: I agree. We can pull together 9 the team that we need to actually affect some change and 10 meet on a regular basis to check on that, and to share 11 ideas. I mean, that's power. There's power in numbers, 12 and we need to keep the numbers together to be heard. 13 Another thing I wanted to mention is, that 14 we do have successes, and those successes are then bought 15 out. That's the way it works. The way it works is, if 16 you haven't proven yourself here in this room, you're 17 going to have a very difficult time getting the money. 18 But once you do prove yourself, somebody's going to want 19 to buy you out for a lot of money; it's very attractive. 20 So what's the incentive to stay in? So we 21 want to have representation, but at the same time 22 temptation is right there. And I'm wondering if there's 23 any way NTIA can somehow affect some kind of language 24 that would talk about incentives to maintain management 25 in those buy-outs, at least some kind of motivation that 244 1 has meaning? 2 We ask for representation for minority 3 officers at the different networks, for example, but I 4 don't really believe those have any effect whatsoever. 5 In fact, I said so at NATPE. It's very interesting 6 because no one below the person who signed it knows what 7 it is as far an initiative or desire for ethnic minority 8 participation, so it never gets implemented. 9 So the idea to me is to have some kind of 10 language that creates an incentive for these large 11 companies that gobble up the successful ones to maintain 12 some management and participation from ethnic minorities. 13 MS. LEWIS: Before we move on to Ben, I do 14 want to say that we are taking your comments, and we're 15 moving forward from this day, looking at ideas and 16 thoughts that we can go with and what NTIA can do within 17 our parameters and what we cannot do. But we want to 18 continue our coalition building. And as Greg mentioned 19 earlier, we will be putting out a summary of what was put 20 forth here, so we will have a written record of the ideas 21 and recommendations that were put forth today. 22 So with that, then we will move on to your 23 comments. 24 MR. PEREZ: In terms of thinking outside 25 the box and thinking inside the box, my broadcast 245 1 perspective makes me feel a little bit like a dinosaur, 2 but I don't want to hesitate because of that in terms of 3 giving a couple of suggestions. 4 I would like to talk about low-power TV for 5 a minute just to give some perspective to set up the 6 first suggestion. The low-power TV industry started in 7 1982 when the commission created the service, and during 8 the two years about 12,000 applications trickled in; and 9 then they had a massive B list for anybody who was going 10 to be mutually exclusive. Well, the first 12,000 11 applications had a window to file, and they got 25,000 12 additional applications. 13 About 14,000 of those got dismissed, but 14 the rest went to lotteries, except for the few that were 15 single that tend to be in the small towns, but the 16 big city, low-power TV applications went through lottery. 17 And the low-power service was the first service to have 18 lotteries, and it was the only significant broadcast 19 service that had lotteries. ITFS had lotteries, but they 20 had been manipulated to take the benefit out of them for 21 minorities. 22 The way the lotteries were structured is 23 that they said that one of the objectives of the outcome 24 of the licensing selection was that 40 percent of the 25 lottery winners should be applicants that had a 246 1 diversification preference. And what a diversification 2 preference was defined as, is having no other media 3 ownership or being minority-owned and controlled. 4 And what they did, is they adjusted the 5 profitability field in the lotteries so that 40 percent 6 of the winning numbers would be somebody with a 7 diversification preference, and then they held hundreds 8 and hundreds of these lotteries, and lo and behold, the law 9 of large numbers operated perfectly, and 20 percent of the 10 tentative selectees out of these lotteries were people 11 with diversification preference, people that owned no 12 other broadcast property. And 25 percent of the 13 tentative selectees were minorities. 14 So it was by far in a way the most 15 successful minority ownership program the Commission ever 16 launched, but what happened after that was all downhill 17 in the following respects. 18 First, there was no mechanism inside or 19 outside government to either count, identify, track, 20 support educate or nurture these hundreds and hundreds 21 and hundreds of minority applicants or grantees. They 22 got their FCC construction permit for broadcast 23 facilities, and then they were just sort of left as 24 newcomers to the industry with no knowledge, and 25 therefore no business acumen. They were left on their 247 1 own, and there was no funding, no Syncom, Broadcap-- none 2 of the venture funds would fund them. 3 And so the attrition rate among the 4 minority tentative selectees was much higher, and the 5 attrition rate among the majority tentative 6 selectees -- in other words, far fewer of the minorities 7 that got the authorizations ever got to the point of 8 constructing their station and getting it licensed. 9 And then, further down the line the 10 Commission got involved the push for the creation for 11 digital television; and out of the need for spectrum for 12 the full-power digital television simulcast allotments, 13 they decided to do some tightening up on the broadcast 14 rules. 15 One of the things they said is no more 16 extensions of construction permits. Second, they said 17 that Congress passed this little statute that said that 18 any station that would start for one year, that that 19 license would automatically cancel. 20 Well, what happened, again, is that the 21 termination of construction permits for non-timely 22 construction and the dark license provision both had a 23 disproportionate effect on the minority licensees. As 24 the least prepared and, of course, the smallest of the 25 grantees, more of them went down the tubes because of 248 1 these policies. 2 Notwithstanding all of that, five years 3 ago -- which is the only time that I know of that the 4 minority participation in industry was counted -- the 5 low-power licensees made up about 10 percent. The survey 6 said 10 to 12 percent -- there was a window for 7 error -- of the licensees were minorities which is 8 basically about 10 times better than full-power 9 television. In other words, there were 256 licensed, 10 low-power television stations owned and controlled by 11 minorities. 12 Now we're going through another process 13 where we're trying to move all of the low-power stations 14 around to make room for digital television stations; they 15 call it displacement. And once that is completed, 16 they're going through a process of trying to allow 17 low-power stations to digitize and become digital 18 television stations as well. 19 Two other things are happening. One, they 20 dramatically raised the power limits for low-power 21 stations so that low-power stations in the UHF band will 22 be able to go up to 150 kilowatts. What that translates 23 into a 30-mile service area instead of a 10 to 12-mile 24 service area. In other words, a lot of them will become 25 economically more valuable and will be better 249 1 competitors. 2 Second, the Congress passed legislation 3 that would allow low-power stations to apply for primary 4 status to that they couldn't get displaced anymore. 5 Assuming that the percentage of minorities applying for 6 Class A status is the same as the percentage of all 7 minority LPTV licensees, I would say that about 100 of 8 the 1,000 Class A licensees will be minority-owned and 9 controlled stations which will be a 10-time increase in 10 the number of primary television stations owned and 11 controlled in this country. So it's a big step forward 12 if it happens. 13 But nobody is out there counting, nobody is 14 out there helping. There's no television organization 15 specifically for the television stations that are 16 minority controlled, a counterpart to NABOB, which I see 17 as a radio group. There's no television group to help 18 people along, and so they're out there by themselves. 19 And so, I don't know whether they applied for Class A. 20 What's all that sad story about? I think 21 what's happening in low power is an example of what has 22 happened with some of the 80-90 stations, and what is 23 happening with some of the expanded band stations, in 24 that even when we have had successes -- small ones though 25 they might have been -- there is on follow-up, and 250 1 neither NTIA nor FCC has thought about how do we protect 2 the weak newcomers that we do get in the door. 3 There hasn't been a lot of focus on 4 protecting your infant, so to speak; and I think that 5 there has to be a better balance between helping people 6 get in the door and making sure that they survive the 7 delicate first few years until they're strong enough to 8 take care of themselves because I think in the long term 9 you'll get a better yield, and you'll get more growth in 10 minority ownership if you balance more between getting us 11 in there and helping us. 12 I mean, it goes so far as NTIA -- and I 13 don't mean to be critical, but when they count minority 14 ownership every year in their report, they don't count 15 how many low-power stations there are, and yet there's 16 more low-power television licensees by far than any other 17 service, but they ignore it. 18 MS. TUCK GARFIELD: I can comment on that 19 point and say that is an issue that we are looking into 20 now as far as an agency, so that is something that's on 21 the table. 22 MR. PEREZ: That's one. Let me pause, and 23 then I'll get my other point. 24 MR. MOORE: I just want to comment real 25 quickly. 251 1 MS. TUCK GARFIELD: Before you go, Jim, 2 there's Jim and Dwight, Jenell and David. [ Sample survey background discussed here. Actual text deleted.] 7 So if you all could make your comments 8 brief, and then we could move into the survey and 9 hopefully not go over time. But just keeping that in 10 mind as we move forward, we would like to talk about our 11 survey or at least have Maureen and myself introduce what 12 we are trying to do this year and get your input and a 13 few of your insights. 14 MR. MOORE: Mine is a question, so it will 15 be brief. 16 Is it within the scope of NTIA's 17 responsibility or capability to host or to sponsor 18 venture fairs which would bring VCs together with folks 19 who have business plans and give them an opportunity to 20 present? Is that something that you can do? 21 MS. LEWIS: Well, it's something that we 22 are considering and hearing today, the difficulty that, 23 first of all, many lenders have in understanding how to 24 value broadcast properties. This was an issue that we 25 think that we need to try to address immediately and to 252 1 bring people together and try to inform of them of how 2 that's done. 3 But, yes, we can bring people together, and 4 of course, our issue always revolves around funding and 5 limits we have within our program. But we are looking 6 for partners, and so there are opportunities for us to 7 partner with other organizations to try to bring together 8 people. So we ought to talk very seriously about how we 9 might do that. 10 MS. TUCK GARFIELD: Dwight, I know that you 11 had some comments. 12 MR. ELLIS: I was simply going to 13 say -- Ben was decrying the problem we've had for years 14 in the real consistent representation. I would suggest 15 to you that as the competition becomes keener out there 16 in the business world, and it is global, that I think we 17 will be able to look less and less to the federal 18 government to protect so-called minorities and 19 multiculturals; that we had better and very quickly 20 develop communities of interest. 21 The whole minority thing is going to go out 22 the window along with affirmative action, and I believe 23 that it will develop into something called communities of 24 interest. Under such a concept, you can develop and 25 maintain partnerships among races, among cultures, among 253 1 genders, you know, the whole thing. 2 It's going to be a lot easier, but I think, 3 unfortunately, because the world that you and I came 4 from, especially, we've been reared on this whole 5 minority thing, that grew from the whole black revolution 6 to the current; that is rapidly becoming passe. 7 And I think we need to re-tool and to 8 re-think the directions that we are to take if we are to 9 survive. And I think communities of interest will be the 10 concept that we will have to go to, and we will have to 11 at some point in time develop, support financially -- or 12 whatever -- a true trade association that addresses the 13 concerns of multiculturals in this new media and old 14 media. We can't do it like we did it the last time; it 15 has to be somebody else, somebody who is on the case, 16 somebody has to be there, somebody has to be our true 17 advocate all the time. And that's why the NAB is what it 18 is today and why NCTA is that way. So we can't continue 19 as we did in the past. 20 MS. KONG: And the boundaries are now the 21 world. There are no boundaries. We're not talking about 22 just the U.S., we're talking about the world. And the 23 boundaries on the Internet -- there are no boundaries. 24 That really is the main thing. You can think in a global 25 sphere. 254 1 MR. ELLIS: One more thing, and I promise 2 I'll stop here. 3 What NTIA could do I think for the next 4 meeting -- and I'm encouraged to see the diversity on the 5 panel, to see two Asian Americans is really 6 revolutionary. Usually, you would see an Hispanic and an 7 African American, but it is very good to see two Asian 8 Americans because those communities -- and they are 9 communities -- there is not one Asian American 10 community -- there are many communities, but in many ways 11 they're on the cutting edge not only in technology but in 12 global finance. 13 And I think we need to begin to develop and 14 maintain relationships there, but I would suggest that 15 the next when we have a congressional representation that 16 we have that some diversity in the congressional 17 delegation. And that is not taking anything away from 18 the African Americans, but somebody ought to be made to 19 say, look, I don't care if they're not on the committee; 20 we need you here. 21 MS. TUCK-GARFIELD: And I can tell you, 22 Dwight, that Secretary Rohde and the rest of NTIA's 23 staff, we did due diligence efforts to reach out to all 24 the members of the Congressional Black Caucus, the 25 Hispanic Caucus, the Asian members, and even the body at 255 1 large as far as members of Congress. 2 MR. ELLIS: But you see, if you have 3 failure, some of us on this panel have relationships with 4 some of those people, and this is where you pick up the 5 phone and call somebody at AOL or whomever and say, look, 6 do you know congressman or senator so and so? They will 7 deliver. 8 MS. TUCK GARFIELD: We will take you up on 9 that, Dwight. We'll remember that you said that. 10 But also going to your comment -- and I 11 know we are running out of time -- about being inclusive 12 and including all groups, we did reach out to Arthur Liu 13 of Multicultural Broadcasting in New York, and 14 unfortunately because of a schedule conflict, he, as one 15 of two Asian American broadcast owners, was unable to 16 attend, but he is very interested in this issue. So 17 hopefully, we will continue to try to develop relations 18 with him and other diverse communities. 19 So next, we will move on to David and then 20 Jenell, if you have any comments; and then move into our 21 survey. 22 MS. TRIGG: David's given me the go ahead. 23 Just to follow up on the recommendation 24 with the bankers, the Small Business Administration's 25 Office of Advocacy does at least an annual study on the 256 1 best banks for small business, and they actually have a 2 rating process on loan terms and availability and all 3 that; it's on their web page. 4 I would recommend that we start with that 5 group and give them some telecom training and a little 6 how to. And Advocacy could certainly work with NTIA in 7 that regard. 8 As to Ben's recommendation in terms of 9 training, I think that is absolutely critical. And I 10 would submit to the FCC that its Office of Communications 11 Business Opportunities could help undertake that with 12 your shop, Maureen. And if the Commission or someone has 13 a problem with that, I would also submit that it would be 14 less expensive to provide some training -- whether it's 15 operational management or whatever, and the enormous 16 administrative burdens to re-auction spectrum, the cost 17 of administering, just keeping up with payments for the 18 auction process, and certainly the inefficient cost of 19 spectrum inefficiency. Remember, every time we license 20 someone that doesn't use the spectrum, it goes to waste. 21 And so, not only can we I think save some 22 money for the federal government on the administrative 23 and spectrum cost by promoting and training new entrants, 24 that's a way we can do another joint program with 25 interagency help as well. 257 1 MS. TUCK GARFIELD: Connie had one last 2 question, and then we'll move to Maureen for the survey. 3 MS. SMITH: I wanted to piggyback on 4 something Jenell said earlier about studies, and I wanted 5 to suggest to the NTIA to use the resources right here 6 and abroad as far as schools. I have to put on my 7 academic hat because I've just completed a masters 8 program at Georgetown, and we are conducting 9 studies -- when I say we, students -- in these issues 10 across the board. And a lot of times they get filed in 11 the library, but this is the information that you want. 12 I'm even sitting here because you knew that 13 I was studying the Telecommunications Act of '96 and the 14 impact of radio. So there are other academics out there 15 doing the same kind of studies to develop relationships. 16 MS. TRIGG: Like I said, a clearinghouse. 17 Submit those studies or a library file, organize file by 18 topic, cross-section, cross-categories, so that way when 19 there is a congressional hearing -- and they do come up 20 quickly -- that we've got a ream of statistical and 21 anecdotal data that can support our issues. As opposed 22 to bemoaning about the lack of minority ownership, we can 23 show how important it is. We need to be ready with 24 ammunition. 25 MS. SMITH: Or reinventing the wheel 258 1 because it's already there. 2 MS. FERRELL: I can tell you, having been 3 at NAB when the tax certificate went down, we received 4 calls from people on the Hill who wanted to help, but no 5 one had up-to-date information. It was the most 6 frustrating process because, quite frankly, as NAB, it 7 was not their job to keep information like this; it was 8 the job of the people who were benefitting from this, and 9 no one had the information. 10 This was in '94. I was going back to 11 information from the '70s, and that just did not cut it. 12 Regardless as to whether the Congress was Republican or 13 Democratic, it just didn't cut it for me to have to go 14 back to, say, well, in 1975 a study was done-- it doesn't 15 work. 16 So you're absolutely right. You need 17 up-to-date studies because when we things happen, they 18 happen very quickly, and you don't have time to go and 19 try to invent something. And that is one of the reasons 20 why organizations like NAB and NCTA are successful, is 21 because they stay as current as possible. 22 MS. TUCK GARFIELD: David, you had one 23 quick comment. 24 MR. HONIG: I was spellbound by the history 25 Ben Perez gave about what the FCC did to these minority 259 1 entrepreneurs who cared enough, mortgaged their houses to 2 get in, and then basically said to them, we don't care; 3 they just recklessly disregarded the dreams of those 4 human beings. 5 Let's think about for just a second. I 6 want to follow up on what Jenell was saying earlier. 7 It's not just whether there's 8 discrimination now. If we ended all discrimination 9 now -- the economic and political and social and cultural 10 condition that people of color found themselves in, in 11 this country -- it would still be basically the same as 12 it was because discrimination has generational effects, 13 and especially in a close-knit industry where the best 14 way to get into this industry is to inherit it from a 15 relative. And if you didn't have relatives who had that 16 opportunity, that is precluded from you. 17 That's why Adarand and Croson studies have 18 to look at not only the very rare example that Ben was 19 able to document of discrimination by the FCC back as 20 late as 1993, but what happened in 1973, '63, '53. 21 That's generational effects. 22 This industry has been around since 1909 23 and some people pass down to families. All that time, 24 that was precluded. Agencies don't like to admit that 25 they ever institutionally ratified or validated 260 1 discrimination. 2 Bill Kennard, obviously, didn't do those 3 things, but the institution of the FCC, again and again, 4 did these sorts of things that Ben pointed out. If 5 you've done Croson studies, you know it's true in city 6 councils; they don't want to admit. 7 NTIA, unfortunately, doesn't have that 8 deficiency. It didn't hand out the licensees. It didn't 9 decide who got jobs indirectly by giving licenses to 10 segregationists, so it is free of that difficult burden 11 of having to see in the FCC meeting room and look at the 12 pictures of the commissioners on the wall and the mentors 13 who preceded you and basically spit in their face. That 14 is hard to do for human beings. 15 Now, the other thing to keep in mind -- and 16 this is critical in terms of the timeliness and urgency 17 of this. You know what happens to people when they get 18 to die. They 'fess up. They make their peace with God. 19 Do you remember George Wallace right before he died what 20 did he do? He must have realized when he was starting to 21 dream and starting to get a little warm, and he 'fessed 22 up and told the truth. 23 The people in government, not just at the 24 FCC, who did these things to people of color in the '50s, 25 '60s, '70s and '90s and so forth, some of them are fixin' 261 1 to die, and no one is getting their oral histories and 2 interviewing them while they're in the mood. The time is 3 now. Can I get an amen, please? 4 (Laughter) 5 MS. TUCK GARFIELD: Well, thank you very 6 much, David. That's a good note to transition into our 7 survey which Maureen will talk a little bit more about. 8 But as far as what you all have mentioned thus far as far 9 as getting concrete data, that is our part of our goal 10 and this is the first step in doing that. 11 Although NTIA has for a number of years 12 done a survey, our hope is to somewhat expand this year, 13 and Maureen will talk more about that now. 14 MS. LEWIS: We don't have a lot of time to [ Sample survey background discussed here. Actual text deleted.] 25 One thing that is different is, we will be 262 1 doing a written survey, and the past surveys have been 2 done by telephone, and what we are trying to do is to 3 develop a rigorous survey instrument. So going forward 4 we will be able to track minority broadcast ownership in 5 a way that will enable us to do trend analysis and to 6 look at a number of different issues as they arise. So 7 that in coming years when we do have opportunities for 8 legislative and regulatory change we have some data that 9 we can refer to. 10 MS. TRIGG: May I also note that in the 11 Croson and Adarand cases that the district courts and 12 circuit courts look not just at the statistical data but 13 the methodology in collecting them. So the methodology 14 is the very basis for making sure the record is adequate. 15 So I commend you for doing a more improved methodology 16 because if we need that data, you don't want the 17 methodology to be challenged. 18 MS. LEWIS: And in fact, Chanda has been 19 very helpful in getting us some assistance from the 20 Census Bureau. So we will be working in conjunction with 21 the Census Bureau to gather the data. 22 Now recognize this is our first effort, and 23 I what I want to just do is tell you briefly about the 24 categories of information we will be requesting. 25 We will be asking about ownership. We'll 263 1 be asking about race and ethnicity. We'll be asking 2 about acquisitions and mergers as well as broadcast 3 industry employment, again, trying to get some sense of 4 whether or not we've got people in the pipeline who were 5 in the business, and then ultimately became owners. 6 We will be looking at advertising revenue, 7 the kinds of business difficulties people have confronted 8 as they owned their stations. We will be asking 9 about station sales and acquisitions and also about new 10 media and station plans to move into Internet 11 broadcasting as examples. 12 We estimate that it will take just about an 13 hour -- maybe less -- to complete the survey; but again, 14 this is our first step, and we will in future efforts try [ Sample survey background discussed here. Actual text deleted.] 17 approved yet for our use. It will be refined some, but 18 we don't have the opportunity in this report to get 19 wholesale comments for this year's survey. But we really 20 encourage you to take a look at this survey and give us 21 your comments, and let us know whether or not we're 22 covering all of the areas that you believe need to be 23 covered so that, again, we can do the kind of rigorous 24 analysis we hoped to do in the past. 25 VOICE: I just have one quick question. To 264 1 whom do we mail the survey? 2 MS. LEWIS: The survey will be mailed to 3 minority broadcasters of whom we have some record of 4 their minority ownership status. So we will be looking 5 at mailing to those businesses that have been included on 6 our previous reports; but also, what we will be doing is 7 looking at the community of broadcasters to give us 8 information about who needs to be receiving the survey. 9 We recognize we are starting with a list 10 that is incomplete. We will also be supplementing this 11 survey with information from a commercial database 12 through BIA which, as many of you know, tracks all 13 the commercial television and radio stations in the 14 country. 15 One of the things that we hope to do is to 16 provide additional information that is not from the 17 survey. And let me make clear that the responses to the 18 survey are confidential. Any information that we use 19 from the surveys will be aggregated and will not be 20 attributed to any individual owner. 21 However, what we would like to do is to 22 supplement the survey trends and the analysis that we 23 will undertake through the survey with information from 24 the BIA database. And one of the things that we thought 25 would be helpful to people as we publish a report is to 265 1 more than just list owner names and stations that they're 2 associated with, but to provide some profile of the 3 stations. That gives people some understanding of the 4 kinds of stations we're talking about, where they are in 5 the marketplace and how competitive are they. But that 6 information will come from the BIA database, because 7 we're not asking for any sales figures, we're just asking 8 for people's experiences as reflected in this survey. 9 So again, we're encouraging you to get back 10 to us with comments, and when the surveys are mailed, we 11 really encourage you to complete them and return them to 12 us. When we call you for follow up because we have 13 questions about the answers that you've given, please 14 take our calls because we really do need this 15 information, and we will be relying on you to help us get 16 the word out about the importance of this survey, our 17 need for the information and how important it is for us 18 to work together on this effort. 19 MS. TUCK GARFIELD: And I also to add to 20 what Maureen is saying, we have worked with a number of 21 organizations, and going to your question about who are 22 we sending it to and how do we create our list, as 23 Maureen mentioned, we did use the 1998 report as a basis 24 for that, but we also got a lot of help from groups such 25 as the Minority Media Telecommunications Council, the 266 1 National Association of Black-Owned Broadcasters, the 2 Black Broadcasters Alliance and a number of other 3 advocacy groups, even NAB as well. 4 We reached out because we want to make sure 5 that we're not being repetitive and that we did have what 6 we thought might be as close as possible to being a 7 complete list of owners. However, we do realize we may 8 have missed some of the owners, and that you all may 9 actually know of people who are currently minority owners 10 that we do not have on our list. 11 So that we hope you will look at the 12 survey, but also help us to identify other minority 13 owners. In the past, as you may know, the categories in 14 the NTIA report have been African American, Native 15 American, Hispanic American and Asian American, and those 16 are the categories that we're trying to make sure that we 17 can quantify this year. 18 MR. PEREZ: Is the list available somewhere 19 where we could see if we know of someone that you're 20 missing? 21 MS. LEWIS: Yes, it is. Our 1998 report is 22 on our website at NTIA.doc. That is the list from the 23 previous report, but we can share the list that we will 24 be using currently. 25 MR. PEREZ: It would be easier for me to 267 1 look at it. 2 MS. TUCK GARFIELD: We can share that list 3 that we have developed. 4 MR. PEREZ: I have another observation even 5 without seeing it. 6 The FCC's been very good about thinking 7 Internet, and I really encourage you to think about 8 putting the survey on the Internet in a machine, editable 9 form from the get go so that year after year as you 10 compile this, we can manipulate it on a computer. 11 MS. LEWIS: Well, thank you for raising 12 that point because that is something that we do intend to 13 do, is to make the survey available on-line. 14 MS. TUCK-GARFIELD: Yes, sir? You wanted 15 to comment? 16 VOICE: This conference is mainly focused 17 on the commercial side of things; however, I'm curious 18 why the non-commercial sector has been ignored, 19 especially when there's a lot of opportunities to develop 20 manager and get training. There hasn't been too much 21 spoken about the non-commercial sector. And 22 particularly, NTIA plays a very important role in 23 promoting and even funding the construction of 24 facilities. I'm curious why that has not been part of 25 the discussion. 268 1 I suggest that when we look at ownership in 2 the commercial as well -- there is a very important known 3 fact that many people are not aware of. In 1934, when 4 the Communications Act was being discussed, one of the 5 means to finance public television was to give them 6 enough frequency so that they can lease excess capacity 7 and therefore generate revenue. 8 My organization is benefitting from that 9 because the FCC decided in 1983 to bring that concept to 10 ITFS. We were able to lease up to 70 percent of our 11 capacity; now they've been allowing us to lease up to 12 94 percent of our capacity. And we find large companies 13 like Sprint and MCI now wanting to have our spectrum, and 14 we hope that they will pay the right amount for it. 15 Unfortunately, there has not been a lot of 16 minority participation in this area because we have not 17 encouraged us to look at that. Well, there's more than 18 that; there was discouragement as well. 19 I remember when the Bedford Stuyvesant 20 Corporation applied for frequencies-- 100 black men from 21 Suffolk. They applied in about 70 markets throughout 22 this country, and they were discouraged very quickly by 23 actions from the Commission on their applications. 24 Right now those frequencies are very valuable. There was 25 a tremendous opportunity. It's almost like a parallel 269 1 history from what Ben has mentioned with low power that 2 has happened here also. 3 But I think we have to, again, address the 4 non-commercial sector in this report some way so that we 5 can see some policy changes in this area also. Thank 6 you. 7 MS. TUCK GARFIELD: Yes, and I can tell you 8 that Assistant Secretary Rohde is also concerned about 9 the non-commercial sector as well as the commercial 10 sector; and although it may not have been a large part of 11 the dialogue, it is on the radar screen of NTIA. And we 12 do hope to take your comments, and those of others, such 13 as Kade Twist and Jim Casey this morning, in talking 14 about the important of non-commercial broadcasting. 15 Do we have any other comments from the 16 audience? Okay. Well, it seems like we had a great day. 17 We've had an informative dialogue. Give ourselves a 18 round of applause for participating in this, and we 19 certainly thank you for coming out and giving your time 20 and your energy. And we'd also like to thank a number of 21 organizations who are very helpful to us, such as the 22 Black Broadcasters Alliance, NAB, NABOB, NMTC, the 23 Rainbow PUSH Coalition, and a number of individual 24 practitioners who are in the room; we'd like to thank you 25 very much. 270 1 And please, comment. August 8th is our 2 comment filing deadline. We'd appreciate it if you 3 would, even if it's short -- if it's a page -- please do 4 submit it to us. Thank you. And we will be getting back 5 to you with summaries on the Internet. Thank you. 6 (The meeting was adjourned at 5:15 p.m.) 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25