MINORITY COMMERCIAL BROADCAST OWNERSHIP OVERVIEW

Since the National Telecommunications and Information Administration's ("NTIA") Minority Telecommunications Development Program ("MTDP") began collecting data on Black, Hispanic, Asian, and Native American ownership of commercial broadcast stations in 1990, minority broadcast ownership totals have remained consistently low, never exceeding 3.1 percent. The findings of this year's commercial broadcast ownership survey indicate that minorities now own 2.8 percent of all broadcast properties in the United States.(1) Minorities own twenty-eight fewer stations than last year. The FM station numbers decreased significantly, minorities owned 127 FM stations last year, compared to 100 this year.

Historically, minority broadcast owners and advocates for minority broadcast ownership have argued that this underrepresentation is due to the lack of access to investment capital and the lack of policies and incentives designed to promote minority ownership in the telecommunications industry. MTDP has gathered anecdotal and empirical data that support this claim. Our research indicates that minorities still lack access to the capital necessary to develop broadcasting businesses, and that there are now fewer policy initiatives and incentive-based programs for minority commercial broadcast ownership than there were in 1990 when MTDP conducted its initial broadcast ownership survey. Moreover, changes in industry policies and government regulations have increased station prices, reduced ownership diversity, increased the challenges faced by minority commercial station owners in competing for advertising revenues, rescinded key incentive-based programs designed to encourage minority ownership in commercial broadcasting, and ultimately, increased concentration of media ownership.(2)

The first significant change occurred in 1990, when the Federal Communications Commission ("FCC") declined to extend enhancement credits for minority ownership under diversification of ownership criterion in comparative hearing processes, concluding that

"[u]nder these circumstances, it is inappropriate...to make any change in its treatment of minority ownership at [this] time."(3) Enhancement credits helped to make minority applicants more competitive in comparative hearings. Minority owners have argued that comparative hearings require that they expend an inordinate amount of time and money that may not result in securing ownership and that their chances of securing ownership have been lessened by the removal of this credit.

Perhaps the most significant change in commercial radio broadcasting occurred in September 1992, when the FCC relaxed the national ownership caps to allow a single licensee to own up to 18 AM and 18 FM stations nationwide.(4) Local ownership rules similarly were modified to permit a single owner to own an increased number of stations within a local market, depending on market size. The rules also provided that an entity could hold a non-controlling interest in an additional three stations in each service if those stations were controlled by minorities or small businesses. Most large group owners have not taken advantage of this incentive. In 1992, when the FCC adopted these rules, it stated that it did not believe that it would result in a single firm or group of firms exercising dominance or undue control over the radio stations at the national level.(5)

The FCC predicted that this expansion in national limits would strengthen existing stations by allowing them to achieve economies of scale through combining administrative, sales, programming, promotion, production, or other functions.(6) During the FCC's proceeding, minority owners and minority ownership advocates reported to MTDP that they argued against an increase in ownership limits because they believed that it would work against the competitiveness and economic vitality of independent and minority owned stations. The increase in national ownership limits has resulted in a dramatic increase in the number of commercial radio stations controlled by a single entity, station prices, and the growth of competing media in recent years.(7) Large group owners have significant control over the local media marketplace and an advantage in dominating attractive advertising demographics and dictating the terms for advertising.(8) Some owners contend that this kind of control by large group owners will make it increasingly difficult for minority owned stations to compete in the marketplace.(9) Consequently, the owners believe that the current limits will drive minorities out of broadcast ownership and preclude new minority owners from entering the industry.(10)

In addition to the FCC's relaxation of ownership caps, in 1995, Congress repealed the minority tax certificate program that provided tax benefits to the seller of a media property who sold to a minority investor.(11) Minority owners reported to MTDP that the full impact of this Congressional decision cannot be measured adequately until more research is done to show how many deals were lost and how many preliminary negotiations for deals ceased as a direct result of the tax certificate rescission. Further, the Supreme Court ruling in Adarand Constructors, Inc. v. Pena, that race-based preferences awarded by the Federal government are subject to a standard of strict scrutiny, has created new challenges for designing government incentive programs that are based on race.(12) Minority advocates fear that these changes threaten the future of government incentive programs for minorities.

With the passage of the Telecommunications Act of 1996 ("1996 Act"), further deregulation in commercial broadcasting increased competition and drove station prices to their highest levels.(13) Under the provisions of the 1996 Act, a single company can have radio holdings in a market that are substantial enough to result in its control of up to 40 percent of the advertising revenue in that market.(14) Our data show that minority owners will face increasing difficulty in generating revenues that are sufficient to maintain viable businesses in markets where one company exercises this kind of control.(15)

Minority broadcast ownership is desirable because it enhances diversity of viewpoint and minority broadcast employment. A study released by the California Institute of Technology found that there is a direct relationship between minority broadcast ownership and minority-oriented programming (findings were based on data collected from more than 7,000 commercial radio stations).(16) Anecdotal evidence gathered by MTDP in its 1997 ownership survey supports these findings. Minority owners reported they believe the increased limits will lead to media concentration, posing the single largest threat to minority broadcast ownership and the diversity of viewpoint that it brings to America's airwaves. In 1992, when the FCC raised commercial radio ownership limits, it stated that an increase in the overall number of stations, or an increase in the national ownership caps would not pose any threat to diversity of viewpoint.(17) Minority owners reported to MTDP that the increased limits have restrained diversity of viewpoint in their respective markets. According to Arbitron listening survey results, Blacks are more likely to listen to urban and rhythm and blues formats.(18) The majority of Black-owned stations listed in this year's report have one of these formats. Although non-minority owners provide programming formats that attract minority listeners, independent studies and anecdotal evidence demonstrate that minority owners are more likely to provide entertainment, news and information programs that serve the overall interests of minority audiences.(19)

As reported in our April 1996 Minority Commercial Broadcast Ownership Report, minority ownership also is desirable because it fosters minority employment, particularly with regard to management and professional positions. Minority owners have been proven to hire a larger number of minority broadcasting professionals than do their non-minority counterparts. According to the most recent broadcasting industry report on equal employment opportunity trends, prepared by the FCC's Industry Equal Employment Opportunity Unit, Black Americans have the highest professional employment rating in the broadcasting industry of any minority group, followed by Hispanics, Asians, and finally, Native Americans.(20) This year's minority ownership survey results reflect this same order, suggesting a correlation between minority ownership and minority employment.

At present, there are two programs that can be of assistance to minority broadcast businesses. The first, ComTrain, is a management training program for minority broadcast owners, administered by MTDP.(21) The broadcasters that participated in this year's minority ownership survey reported that ComTrain is the most useful government program designed to assist minority broadcast owners. The second, the Telecommunications Development Fund ("TDF"), was authorized by the 1996 Act to provide a source of loans and investment capital to small communications businesses. The purpose of TDF is to promote access to capital for small businesses; to enhance competition in the telecommunications industry; to stimulate new technological growth and development; to promote universal service; and to enhance the delivery of telecommunications services to rural and underserved areas.(22)

CONCLUSION

Given the continuing decline in the number of minority broadcast owners, it is time for renewed examination and public debate about the impact of media concentration, and the importance of minority ownership to localism, diversity and universal service. Policymakers, legislators, and industry professionals in both the public and private sectors need to think anew about which tools and methods will effectively increase minority participation in the broadcast and telecommunications industries. NTIA has argued consistently that diversity of ownership provides for multicultural expression and awareness, and helps bring focus to issues of particular importance to individual communities. In addition, minority owned firms tend to hire minorities more often than non-minority firms, and often in professional positions. NTIA believes that these are important goals and will continue to work to bring these issues to the fore.


Endnotes

1. Minority broadcast ownership percentages have been consistently lower than minority population percentages released by the Bureau of the Census of the U.S. Department of Commerce. Resident population estimates of all races within the United States released by the Bureau of the Census on June 1, 1997, indicate that minorities represent 28.3 percent of the total U.S. population (Blacks represent 12.7 percent; American Indians, Eskimos, and Aleuts represent 0.9 percent; Asians and Pacific Islanders represent 3.8 percent; and Hispanics of any race represent 10.9 percent).

2. Andrea Adelson, Minority Voice Fading For Broadcast Owners, N.Y. Times, May 19, 1997, at D9.

3. Miracle Strip Communications, 5 FCC 581, 583 (January 31, 1990), Da'Gon Broadcasting Co., Inc. v. FCC, No. 90-116, No. 90-1117 (D.C. Cir. 1991).

4. Prior to September 1992, the FCC allowed an individual or entity to own a maximum of 12 AM and 12 FM stations. The Commission also permitted a single owner to own up to 14 stations in each service if at least two of the stations were minority controlled. On September 16, 1992, the national commercial radio ownership limits were increased to 18 AM stations and 18 FM stations from the previous limits of 12 AM and 12 FM stations. The rules adopted in 1992 also provided that an entity may hold a non-controlling interest in an additional three stations in each service if those stations are controlled by minorities or small businesses. On September 16, 1994, the national ownership limits increased to 20 AM and 20 FM stations. See Revision of Radio Rules and Policies, Memorandum Opinion and Order and Further Notice of Proposed Rule Making, 7 FCC 6387 ¶¶ 6,9,14.

5. See Revision of Radio Rules and Policies. Memorandum Opinion and Order and Further Notice of Proposed Rulemaking, 7 FCC 6387 ¶ 9 (Sept. 4, 1992).

6. Id.

7. Federal Communications Commission, Mass Media Bureau, Radio Station Ownership, at 10, 11 (Oct., 1994).

8. The Research Group, Duopoly 1995: Lessons Learned for the Future, at T-25 and T -65 (Seattle, 1995).

9. Geraldine Fabrikant, Slow Gains by Minority Broadcasters, N.Y. Times, May 31, 1994, at D1.

10. MTDP found that, on average, minorities own broadcast properties with technical characteristics (frequency band and signal power) inferior to those of non-minority owners, thus reaching fewer listeners, generating less advertising revenue, and at least in the case of Black-owned stations, appearing to serve a less affluent segment of the community. These results suggest that, lacking sufficient access to capital, minority broadcasters are more likely to purchase less lucrative stations. National Telecommunications and Information Administration, The U.S. Dep't of Commerce, Minority Broadcast Ownership in the United States, at ii (Apr., 1996).

11. The policy also permitted sellers of broadcasting and cable facilities who sold to minority controlled purchasers to defer capital gains taxes on the sale of those facilities.

12. 515 U.S. 200 (1995).

13. Elizabeth Rathburn, $8 Billion Loose In Station Market; Radio and Television Station Trading in 1995; Includes List of Top Ten Mergers in 1995, Broadcasting and Cable, March 11, 1996, at 40.

14. If the FCC's anticipated approval of a deal goes through early next year, Chancellor Media Corporation will control eight stations in Washington, D.C. and nearly 40 percent of the local radio market will be concentrated in the hands of only three national conglomerates.

15. Adelson, supra note 2, at D9.

16. Jeffrey Dubin and Matthew Spitzer, Testing Minority Preferences in Broadcasting R 19 (Division of Humanities and Social Science, California Institute of Technology, Social Science Working Paper 856, July 1993).

17. See Revision of Radio Rules and Policies, supra note 5, ¶9.

18. Arbitron, Black Radio Today, at 14, 15 (1996).

19. Dubin and Spitzer, supra note 16, R 19.

20. The FCC's equal employment opportunity trend report prepared by the Industry Equal Employment Opportunity Unit, indicates that in 1994 there was a total of 30,633 officials and managers employed in broadcasting - - 3,951 of whom were minorities; there was a total of 47,255 professionals in broadcasting in 1994 - - 8,141 of whom were minorities.

21. In an effort to advance its goal of increasing minority ownership in broadcasting, in June of 1990, MTDP implemented a management training program for minority owners of commercial radio and television stations called ComTrain. Several sponsoring companies (primarily group owners) converged under one umbrella to provide minority broadcast owners with the opportunity to work with successful stations around the country. ComTrain does not provide any guarantee for success to participants, but graduates of the program maintain that it gave them an exceptional advantage in developing their stations. In many instances ComTrain was instrumental in activating the first minority owned commercial station in some markets (See Appendix E).

22. TDF is capitalized, in part, by the interest earned from the upfront payments businesses submit to participate in the FCC's spectrum auctions. TDF also may earn a return from its loans and investments, and is authorized to accept charitable contributions. At the printing of this document, TDF investment and loan applications were not available. The Board will

make announcements regarding TDF's structure, loan and investment criteria, and the availability of applications in the near future. To keep up-to-date on TDF news and developments, please contact the Federal Communication Commission's Office of Communications Business Opportunities ("OCBO") at (202) 418-0990, and ask to be placed on OCBO's mailing list.


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