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OFFICE OF THE CHAIRMAN
STUDIES INDICATE NEED TO PROMOTE WIRELESS & BROADCAST LICENSE OWNERSHIP BY SMALL, WOMEN- AND MINORITY-OWNED
BUSINESSES
Recommends steps to facilitate fair competition
Washington, D.C. - FCC Chairman William E. Kennard, joined by his colleagues
Commissioners Susan Ness and Gloria Tristani, today presided over a public forum at
which five studies on market entry barriers facing small, women- and minority-owned
businesses were released. The five studies highlight the need for policy to promote
wireless and broadcast license ownership among smaller firms as well as for women and
minorities.
The studies provide evidence to address Supreme Court standards in Adarand
Constructors Inc. v. Pena concerning federal programs that use race or ethnicity as a basis
for decision-making. These reports further indicate that consolidation in the
telecommunications industry since the passage of the 1996 Telecommunications Act has
had a particularly harmful effect on the number of small, women-owned and minority-owned businesses in that industry.
"Together with the existing body of research in this area, these studies demonstrate
a compelling governmental interest in developing programs to promote women and
minority ownership," stated Chairman Kennard during a policy forum with the study
authors and other experts held at the FCC in Washington, D.C. He said, "government has
a role to play in ensuring that the doors to the new economy open wide to all Americans."
Kennard recommended four action items:
Congress should re-institute and reinvigorate the tax certificate program. "More
than any policy, the minority tax certificate is recognized as having had the
greatest impact in lowering barriers for minority broadcasters," Kennard said.
Congress should substantially increase funding for the Telecommunications
Development Fund as one means of addressing the lack of capital by small,
particularly minority- and women-owned, businesses. "A TDF increase should
help both wireless and broadcast businesses," urged the Chairman.
The Commission should reexamine the means by which it determines minority
ownership. "A more accurate ownership measure than the current one would
decrease the likelihood of minorities being used as 'straw' participants without
real opportunities for ownership," Kennard stated.
The Commission, industry and public interest organizations should collectively
explore ways to promote opportunities for small, women- and minority-owned
businesses in new rather than old media. "We need to continue forming
partnerships to widen the circle of opportunity," stated Kennard.
The FCC conducted these studies as part of its mandate under Section 257 of the
1996 Telecom Act which directs that the Commission identify and eliminate market entry
barriers for small telecommunications businesses, and Section 309(j) of the
Communications Act, which requires the FCC to further opportunities in the allocation of
spectrum-based services for small businesses and businesses owned by women and
minorities.
The results of these reports, taken together, along with other information available,
will allow the Commission to assess the extent of market entry barriers facing applicants
for FCC licenses, and to discuss what actions it may take to ameliorate this problem.
The major findings of the five studies is attached. The full text of each study is
available on the FCC's web site at www.fcc.gov.
- FCC -
MAJOR FINDINGS OF FIVE STUDIES
The five studies and their major findings are:
-
Content/Ownership Study:
Minority-owned radio stations were far more likely to choose a program format
that appeals particularly to a minority audience;
Minority-owned radio stations were more likely to provide news and public affairs
programming on events or issues of particular concern to minorities;
Minority-owned radio stations report greater racial diversity of on-air talent;
Of radio stations that reported tailoring national news stories to the local
community, minority-owned stations were far more likely to tailor the story to
minority community concerns; and
The same differences were not found in the case of television, and in most cases,
including the areas noted above, there were no statistically significant differences
between minority- and majority-owned television stations.
- Broadcast Licensing Study
During the time period in which the FCC's policy of awarding credit for minority
ownership was in effect:
The number of minority individuals in an application positively
influenced win rates in comparative hearings;
However, minority controlling ownership share did not increase the
likelihood of an application being successful. These findings suggest that,
although non-minorities included minorities in applications, such
participation was non-meaningful (sham); and
Overall, there was a lower probability for an application with any type of
minority ownership winning a license than a non-minority application
winning a license, when controlling for other relevant variables;
During the time period of the FCC's policy of awarding credit for ownership by
women, there was a positive and significant relationship between female ownership
- both by additional numbers of women and by higher percentage of female
ownership - and the probability of license award, suggesting that the FCC's policy
of awarding credit for ownership by women was more effective than that for
minority-ownership;
Both applicant assets and the total number of legal motions filed were strongly
correlated with the likelihood of an applicant winning a broadcast license. If there
has been discrimination in capital markets, then this would suggest that minorities
and women might have been disadvantaged in comparative hearings, even though
no license fees were required; and
Although a high percentage of licenses were awarded to singleton applicants
without need for a comparative hearing, minorities were far less likely to be able to
use this singleton process. That is, when original applications had higher
proportions of minorities, they were statistically more likely to be challenged,
despite the fact that such applications were entitled to credit for the minority
participation in comparative hearings, and, as a result, were theoretically harder to
challenge. While this phenomenon does not necessarily reflect discrimination, it
does show that minorities were less able to obtain licenses without completing the
lengthy and expensive comparative hearing process. This same result was not true
for applications with more female participants.
- Auction Utilization Study
Measured across all wireless auctions through 1999, minority and women
applicants were less likely to win at least one license than were non-minority
applicants;
In an auction by auction comparison, the percentage of winning minorities is
sometimes larger and sometimes smaller than the corresponding percentage for
non-minority applicants. Similarly, women applicants won more frequently than
did men applicants in certain auctions, but less frequently than men in other
auctions;
The inclusion of installment payments in auctions increased the rate at which
minority and women applicants won licenses;
In order to bid in auctions, an applicant must qualify by submitting a completed
short form application and an upfront payment. Minorities and women qualified
for auctions at significantly lower rates than non-minorities. The reasons for this
result are not entirely clear, suggesting this is an area for future research; and
The differences in utilization rates between minority and women applicants and
other applicants are generally less pronounced among small companies than among
large companies.
- Capital Markets and Auctions Regression Study
Among applicants for wireless licenses, the applications for debt financing by both
minorities and women were statistically less likely to be approved than the
applications of non-minorities;
Among current broadcast licensees, minorities' applications for debt financing
were statistically less likely to be approved than non-minorities' applications. The
applications for women were also less likely to be approved than those for men,
but this result was not statistically significant;
Minorities paid statistically higher interest rates on their loans than did other
borrowers. However, there were no statistically significant differences in interest
rates on the basis of gender; and
After controlling for relevant variables, both minority- and women-owned
businesses were statistically less likely to obtain wireless licenses in FCC auctions
than were businesses owned by non-minorities.
- Historical Study
Minorities and women repeatedly report encountering discrimination in their
efforts to obtain capital to finance their broadcast and wireless businesses,
discrimination in securing advertising on their stations, and discrimination by
members of their communities and members of the communications industry;
Small telecommunications businesses generally, and those owned by women and
minorities in particular, report that the market consolidation permitted by the
relaxation of the FCC's ownership rules has created nearly insurmountable
obstacles to those seeking to enter, or even survive as a small player, in the
broadcast industry;
Minority-owned firms report that the repeal of the former tax certificate program -
which, from 1978 until its repeal in 1995, provided tax incentives to encourage
firms to sell broadcast licenses to minority-owned firms - has had a severe negative
impact on their ability to obtain new stations; and
Interviewees believed that EEO enforcement has been uneven over the past fifty
years. This reported uneven enforcement coupled with industry hiring practices has
hindered the ability of minorities and women to obtain the work experience that
could one day assist them to become broadcasters themselves.
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