Procurement Rule Extension May Not Win Favor With Broadcasters

Now, Honig wants the agency to add language saying it plans to extend the rule to other FCC-regulated industries. In cable, the rule has led to “an enormous increase in contracting by minority businesses,” Honig said in an interview. It's unclear how the rule would function in other industries, including broadcasting.

The cable procurement rule comes from the 1992 Cable Act, and requires a cable system to “encourage minority and female entrepreneurs to conduct business with all parts of its operation,” and to “analyze the results of its efforts to recruit, hire, promote, and use the services of minorities and women and explain any difficulties encountered in implementing its equal employment opportunity program.” In practice, it means cable companies annually certify with a single answer on a form to the FCC that they have made an effort to do business with minority and female entrepreneurs, and in case of an commission audit, be able to explain those efforts further, an attorney familiar with EEO rules told us. Large cable companies have active minority buying programs, but smaller companies sometimes have to work a little harder to assemble a list of women- and minority-owned companies they do business with, the attorney said.

The rule is intended to break up the practice of companies relying on “the old boy network” for procurement, Honig said: Without such regulations, procurement decisions by large companies tend to be made at the local level, and contracts are more likely to go to companies they've used before or companies owned by people the person in charge of the contract process knows. Though the procurement rule doesn't bar that sort of thing, it “makes sure everyone has a chance to be invited,” Honig said. The FCC declined comment.

Even smaller cable companies tend to be rather large business entities that do a lot of purchasing, but that might not translate to other industries, several communications attorneys told us. Broadcasting includes some much smaller entities than the pay-TV industry, and those small entities may have a harder time putting together a list of minority- and woman-owned vendors in the event of an FCC audit, an attorney told us. Broadcasters and other FCC-regulated entities also tend to favor less regulation, and are seen as likely to be opposed to the extension, attorneys told us.

Broadcasters may argue that extending the rule to cover them is unconstitutional, the point of the exchange between Wheeler and MMTC last week. Honig said since the rule requires only outreach and imposes no quotas, it's not vulnerable to being held to the strict scrutiny standard that Wheeler raised during the hearing. Wheeler has since clarified that he was speaking of broader FCC action, but several attorneys said it's not clear such a rule change wouldn't be subject to that standard. The case law on such matters has grown much more complicated since the 1992 Cable Act, a cable attorney told us. It's also not clear what a rule governing procurement has to do with diversity of ownership, a broadcast attorney told us.

The proposed extension of the rule to broadcasting is part of the media ownership draft order, but it would take another proceeding to extend it to other industries, Honig said. He wants the media ownership item to include language promising to take up such a proceeding, he said.