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October 22, 1998

Commissioner Harold W. Furchtgott-Roth, Dissenting In Part

In the Matter of 1998 Biennial Regulatory Review -- Streamlining of Mass Media Applications, Rules, and Processes; Policies and Rules Regarding Minority and Female Ownership of Mass Media Facilities; MM Docket Nos. 98-43, 91-140, 94-149

I thank the Mass Media Bureau and my colleagues for their fine efforts on this good item. I am pleased that we are simplifying our rules regarding, among other things, the filing of mass media applications and reports and that we are moving to a certification system.

I respectfully dissent, however, from the decision to require broadcast station owners to identify their race, ethnicity and gender on Annual Ownership Report Form 323. See supra at paras. 96-105. I do so for several reasons, including: the impracticability of this kind of regulation, the lack of express statutory authority for it, and the general inconsistency of this reporting requirement with the position we recently took in Suspension of Filing Requirement for Filing Broadcast Station Annual Employment Reports and Program Reports.


I believe the central premise of this reporting requirement is fundamentally flawed. There is an inherent futility in seeking to classify broadcast licensees, which are often corporations or partnerships, in terms of race and gender. For instance, what is the race of the ABC radio group? The ethnicity of CBS/Westinghouse? Or the gender of a family-held business, shared equally by husband and wife? Perhaps gender and race identification of companies such as sole proprietorships is feasible.(1) But in the case of most contemporary businesses, an attempt at such categorization is the equivalent of forcing square pegs into round holes. Race and gender are personal characteristics of individuals, not of corporate entities. Applying such labels to non-natural persons thus has little meaning.

If one attempts to bypass this problem by instead assessing the race or gender of the shareholders, one then runs into the fact that almost any corporation in America has significant institutional investors. Indeed, many of the largest shareholders in corporations are diversified stock, mutual, or retirement funds, which represent the interests of literally millions of people. These institutional funds cannot be categorized in terms of race or gender, as the sheer multiplicity of their constituent investors renders the task virtually impossible. Moreover, trying to characterize the racial or gender composition of stockholders is like trying to hit a moving target; even if the majority of shareholders at a certain point in time are of a particular race or gender, tomorrow they may not be. Of course, it is precisely the permanent nature of corporations -- as opposed to the ever-shifting identity of the shareholders -- that fundamentally distinguishes those institutions from other business arrangements.


Even if classifying corporate licensees in terms of race and gender by looking to the race and gender of its individual shareholders made sense, it strikes me as highly inappropriate for government to inquire into the racial and gender identities of those shareholders. As it should be, these factors have absolutely no bearing on a person's ability to buy, sell, or hold stock. Accordingly, we surely would find it chilling if the government wanted to know and record a person's race or gender prior to their purchase of stock interests. It is no less chilling, I submit, for the government to want to know such information subsequent to purchase. Whether done before or after the investment, documentation of the racial and gender identity of corporate shareholders is a highly invasive measure that I do not believe furthers any legitimate governmental interest, since, as discussed above, the race and gender of these people is wholly irrelevant to their ownership of the stock.


We have no specific statutory authority to collect this information. Contrary to the assertion of this item, see supra at para. 102, collection of this information is in no way necessary to fulfill our obligations under section 257. That section speaks only of entrepreneurs and small businesses, not of minorities and women, see 47 USC section 257(a) (requiring report within 15 months of February 8, 1996, on market entry barriers "for entrepreneurs and other small businesses"), nor does the Commission purport to be collecting this information for use in any actual section 257 study. Finally, section 257 is about barriers to entry "in the provision and ownership of telecommunications services and information services," id., not broadcasting.

Similarly inapposite is section 309(j), which by its terms does not require anything in the way of regulation but states that the Commission must "seek to promote" the dissemination of licenses among many applicants, "including" minority groups and women. Id. section 309(j)(3). Furthermore, as the item itself acknowledges, that aspirational language applies only "in implementing the competitive bidding requirement," supra at para. 101, of the 1997 Balanced Budget Act. Section 309(j) thus is not an untethered mandate to "further opportunities for minorities and women in broadcasting," id., but rather a directive for purposes of rulemaking under section 309 -- a task that no one suggests is attempted here.

And, if 309(j) did provide a basis for the collection of ownership information in non-auction contexts, we should not omit from consideration the other entities specifically mentioned in that provision, "small businesses" and "rural telephone companies."

As for the asserted goals of the information collection -- "to assess the need for, and success of, programs to foster opportunities minorities and females to own broadcast facilities" supra at para. 101 (emphasis added) -- the item does not identify any actual ownership programs that it intends to assess. In fact, many of the ownership programs discussed in the original notice on this issue, such as the minority tax certificate, no longer exist. It is thus not at all clear what programs, if any, will actually be monitored for effectiveness. Assuming such programs exist, we nevertheless cannot, as some commenters suggest, use this information to make regulations based on "fair representation," id.at para. 97 -- i.e., proportional representation for its own sake -- which is precisely what Equal Protection caselaw prohibits. As I have stated previously, we should not require licensees to provide us with information unless we have an identifiable, statutorily-authorized purpose for its use. Every time we add to filing burdens, we increase costs to regulated entities.

While the item concludes that this requirement imposes no undue burden on licensees because "they will not be required to obtain information from anyone whose interests are not already reportable," id. at para. 100, that is only part of the story. The entities with attributable interests themselves may be reportable, but the task of then identifying them, a group that could be very large, based on race, ethnicity, and gender within the meaning of our (less than precise) "Instructions for Completion of FCC Form 395-B Broadcast Station Employment Report" is a heavy administrative burden indeed. While a licensee may be able to look at employees and guess their race or gender or ask them how their community regards them, see id. at n. 180 ("The determination of race, ethnicity and gender . . . may be made visually, from post-employment records or in accordance with what the person is regarded as belonging [sic] in the community"), a licensee cannot always readily see or discuss such things, which are generally not otherwise documented, with its significant shareholders. Will broadcast corporations have to ask investors to identify their race and gender on stock purchase orders? Will this create other legal problems for these companies? How does the licensee keep track of this constantly changing information? The task of racially and sexually "categorizing" shareholders, id. at para. 104, which the Commission today requires broadcast licensees to do, is messy, potentially legally hazardous, and certainly indelicate.


This is a curious time for the Commission to be making this change in its ownership forms. Notably, the issue of whether to require race and gender identification on annual reports was not part of the Notice of Proposed Rulemaking on the streamlining of mass media applications. See In the Matter of 1998 Biennial Regulatory Review, Streamlining of Mass Media Applications, Rules, and Processes, 13 FCC Rcd 11349 (1998). That matter was raised in an entirely separate proceeding, one that has lain dormant for almost six years. See In the Matter of Policies and Rules Regarding Minority and Female Ownership of Mass Media Facilities, 10 FCC Rcd 2788 (1995). Why did the Commission choose now to resurrect this one aspect of that separate proceeding and wrap it into this one? Could it be that the D.C. Circuit's decision in Lutheran Church-Missouri Synod v. FCC, 141 F.3d 344 (1998), rehearing denied (Sept. 15, 1998), has tied the Commission's hands in terms of information collection on race and gender under the now-invalidated Equal Employment Opportunity ("EEO") rules?

Unfortunately, the timing of the adoption of this amendment to the annual reports raises the unseemly appearance that this action is a back-door attempt to do what Lutheran Church might seem to limit and what the Commission itself has declined to do in light of that decision. See In the Matter of Suspension of Requirement for Filing of Broadcast Station Annual Employment Reports and Program Reports (released September 30, 1998) (discontinuing regulation requiring broadcasters' to file annual employment and other reports listing race and gender data). If it is "advisable," id. at para. 2, to discontinue data collection procedures on the race and gender of licensees' employees, then it might seem imprudent to collect information on the race and gender of licensees' shareholders. Although the Commission does not claim to collect the instant information pursuant to authority under the defunct EEO rules, there is significant tension, on a broader level, between these two decisions.

Also, the Notice of Proposed Rulemaking on minority and female ownership predated the landmark judicial decision in Adarand v. Pena, 515 U.S. 200 (1995), and the application of that case in Lutheran Church. Much of the justification in that NPRM for the race- and gender-specific policies contemplated therein, as well as the theoretical link between ownership and programming that it relied upon, have been called into serious doubt by those cases. See, e.g, In the Matter of Policies and Rules Regarding Minority and Female Ownership of Mass Media Facilities, 10 FCC Rcd at para. 2 (citing as support Metro Broadcasting Inc. v. FCC, 497 U.S. 547 (1990), which was overrruled in part in Adarand). Given the subsequent undermining of much of the original theory of the NPRM, I would not have gone to final order on this proposed rule without further notice and comment.

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For the foregoing reasons, I would not require broadcast licensees to attempt to define themselves, or to document their shareholders, in terms of race, ethnicity, or gender on Form 323.

1. Ironically, these entities, along with partnerships composed solely of natural persons, are exempt from the race and gender identification requirement. See supra at para. 103. Where the entities most susceptible to meaningful application of a rule are exempt, and the ones least susceptible are covered, the regulatory scheme seems a crazy-quilt.