FCC Loosens Restrictions on Foreign Investments in Broadcast Media

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A larger pool of investors may boost diversity in television and radio station ownership.

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For more than eighty years, the Federal Communications Commission (FCC) has prevented foreign investors from taking more than a twenty-five percent ownership in any broadcast radio or television station in the United States, according to the Coalition for Broadcast Investment (CBI).  In response to appeals by broadcast companies and public interest groups that lifting restrictions on foreign capital in broadcasting would benefit the radio and television industries and the public, the FCC issued a ruling last week that clarifies its position on foreign investment.  Going forward, the FCC will permit investments in domestic television and radio stations over twenty-five percent after a review process.

Instead of interpreting the law to require a full ban on foreign investment, the FCC will now consider approving such investments on a case-by-case basis.

The ruling also addresses an inequality in the treatment of foreign investment in telecommunications carriers and broadcast companies.  The FCC has approved approximately 150 foreign investments in excess of twenty-five percent in U.S. telecommunication companies, such as wireless carriers, cable companies, and internet service providers, while approving no such investments in broadcast companies.  FCC Commissioner Ajit Pai believes this inconsistency in policy has harmed the domestic television and radio industries.

New FCC chairman Tom Wheeler, though, made clear in a statement accompanying the ruling that while the FCC would consider larger foreign investments, it will by no means “rubber stamp them.”  Any investments in radio and television stations that would surpass the twenty-five percent benchmark for foreign ownership will still have to be consistent with the public interest.  Public interest considerations with respect to broadcast ownership include national security and diversity in media.

In order to approve a foreign investment over twenty-five percent, the FCC will review and make a decision based on an analysis of the specific circumstances of the proposed investment.  The FCC will confer with other relevant government agencies about such foreign investment applications, and will defer to those agencies in matters of national security, law enforcement, and foreign and trade policy.  The FCC may request further documents from potential investors, and as a final step, will release a written notice regarding its decision.

With this clarification of its policies, the FCC reversed its approach to the restrictions in the Communications Act of 1934, and will now be open to foreign ownership of broadcast companies even as high as one-hundred percent.  Advocates of permitting additional foreign investment believe that an increase in capital resources could allow more opportunities for minorities, women, and small broadcast companies to enter the competitive industry.

CBI, composed of companies such as Walt Disney Co., Univision Communications Inc., and CBS Corp., asserted that loosening the foreign investment rule will also allow more expansive and innovative broadcast services.  The FCC ruling could potentially help Qatar’s Al-Jazeera network, currently available only on cable and satellite channels, expand its American presence.  It may also allow Mexico’s Grupo Televisa to complete its proposed 2010 offer to buy forty percent of the New York-based television station, Univision.

Chairman Wheeler also hopes that the infusion of foreign capital into certain broadcast networks would further some of the FCC’s efficiency goals, such as moving networks from UHF band to VHF band.  Other benefits of foreign investment would be an improvement in financial stability of existing broadcast companies and a better ability to compete in the fast-evolving video and audio marketplace.

Furthermore, Commissioner Pai hopes that the ruling will not only boost the domestic broadcast industry, but that it will also open up investment opportunities for U.S. companies abroad.  Because some countries require reciprocity when allowing foreign investment in their own media companies, this ruling could potentially open doors previously closed to U.S. investors.  He also hopes that other countries will follow the example of the United States and ease some of their own restrictions on foreign investment in broadcast media.

When adopting the Communications Act in 1934, lawmakers added the foreign ownership restrictions to the statute to address homeland security concerns during times of war by safeguarding governmental communications and limiting the possibility of foreign propaganda on broadcast stations.  But as FCC Commissioner Jessica Rosenworcel stated when the recent ruling was released, “just as horses and bayonets are not the tools of modern warfare, the cyber threats we face today are not especially well-guarded by this prohibition.”

FCC Commissioner Mike O’Reilly, however, believes that while the agency’s clarification is a positive move, it does not go far enough.  He believes the FCC could have gone further by actually establishing a higher cap on foreign capital that would require agency approval, such as forty-nine or seventy-four percent, or shifting the burden onto the FCC to justify a prohibition of an investment rather than requiring the FCC’s affirmative approval.