Efficient Spectrum Use Will Be ‘Sine Qua Non’ for FCC Decision on Foreign Investments Over Cap, Says Wheeler

Efficient use of spectrum will be an important factor in the FCC’s consideration of applications for foreign ownership of broadcasters above the 25 percent cap, said FCC Chairman Tom Wheeler shortly before casting his first-ever vote at Thursday’s FCC meeting. The declaratory ruling, which explicitly says the FCC will consider applications for foreign investments in broadcasters over the cap on a case-by-case basis, was unanimously approved. Though Wheeler later said foreign investment applicants should consider their applications in the context of all of the commission’s larger policy goals, he gave special emphasis to spectrum use, saying it would be the “sine qua non” in considering them.

Wheeler said foreign investment could be used to further “efficient spectrum use,” by providing broadcasters with capital to move to shared spectrum, or financing a broadcaster’s move from UHF to VHF, for example. “We are in the middle of a rather serious dramatic process to make sure spectrum is put to the most effective use,” said Wheeler in a press conference after the meeting. Along with spectrum use, Wheeler said applications would be considered in the context of media diversity, localism and other commission policies. “This is a holistic commission,” said Wheeler.

The declaratory ruling is intended to address an industry “misperception” that the FCC wouldn’t consider investments over the cap, and doesn’t actually change any FCC rules, said Media Bureau Chief William Lake at the meeting. “In the past, some have viewed this benchmark as a bar to foreign investment in broadcast licensees that would exceed the benchmark, rather than as a trigger for the Commission to exercise its discretion,” said bureau staff at the meeting. To be considered for investments over the cap, applicants will have to give the FCC “detailed information” sufficient to determine whether the proposed investment is in the public interest, said bureau staff. Other executive branch agencies may also weigh in on foreign investment applications on issues related to “security, law enforcement, foreign policy, and trade policy,” said bureau staff. The ruling doesn’t include specific procedures for considering an application, but bureau staff said such procedures, substantive guidelines, or even a streamlining process might be adopted in future proceedings.

Commissioner Michael O'Rielly highlighted that lack of specificity in his comments on the item, his first remarks as a commissioner. The FCC could have done more to “move the needle” on foreign investment by issuing a rulemaking notice alongside the ruling that would have sought comment on possible future guidelines, said O'Rielly. The Media Bureau’s mention of possible further proceedings “seems empty,” he said. He also suggested the commission could shift the burden for blocking foreign investment deals to their opponents. Commissioner Ajit Pai also said the commission needed to provide specific guidelines and should “move promptly” in doing so, as well as processing the applications that come in: “This declaratory ruling does not finish the commission’s work on this topic,” Pai said Thursday. But both commissioners praised the item for creating jobs and possibly encouraging other countries to allow U.S. investments overseas in reciprocity for loosening restrictions here.

All the commissioners praised the item as a positive for increasing minority ownership. Commissioner Mignon Clyburn said the item will remove impediments to financing for minority owners, and allow broadcasting to be a “forward-leaning service.” Commissioner Jessica Rosenworcel called treating the cap as an “inflexible bar” an “historical aberration” and praised the case-by-case approach as “consistent with national security objectives."

Though Free Press had recently raised concerns that increased investment from international broadcasters might squeeze out locally produced content from minorities, Lake said the FCC has heard more from minority broadcasters who see the ruling as an opportunity. He said such concerns could be a factor in considering applications for investments over the cap: “We'll consider every transaction on its face.”

"Today’s decision will enable broadcasters to access capital on the same terms as their cable, satellite, wireless and online counterparts,” said a release from Covington Burling broadcast attorney Mace Rosenstein. He represents the Coalition for Broadcast Investment, the group of broadcasters and organizations which requested the declaratory ruling. NAB also released a statement praising the ruling for increasing broadcaster access to capital. The clarification “could be helpful to U.S. broadcasters seeking increased foreign investment and corporate ownership flexibility,” said Stifel Nicolaus in an email to investors. -- Monty Tayloe (mtayloe@warren-news.com)