FCC Unanimously Approves Streamlined Foreign Ownership Rules
The FCC unanimously approved rules to make it easier for broadcasters and common carriers to receive capital from foreign investors, as expected (see 1609190061). The rule changes codify the process of seeking a foreign ownership declaratory ruling for broadcasters, give them more latitude once such a ruling is issued, and take steps to prevent publicly traded companies that can't identify all their investors from running afoul of the foreign ownership rules, said a Thursday FCC fact sheet. The order is "a praiseworthy example" of the FCC creating opportunity, Commissioner Mignon Clyburn said.
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“This reform will eliminate the need for companies to conduct costly and often unreliable surveys of individual shareholders,” said Commissioner Ajit Pai. Commissioner Mike O’Rielly also praised the order but said reforms to the FCC’s foreign ownership process won’t be effective until the Team Telecom review process is reformed to eliminate uncertainty and delays. Without those reforms, the new rules will be “of little value,” he said.
Most of the rule's provisions affect broadcasting, said the fact sheet. The order creates a specific process for filing for foreign ownership declaratory rulings, allowing broadcasters to request approval of up to 100 percent foreign ownership. It also sets a minimum 5 percent threshold for when broadcasters need to seek approval of a foreign ownership situation. Broadcasters can be up to 10 percent owned by foreign institutional investors -- such as hedge funds -- without seeking FCC approval, International Bureau staff told us.
The order also will allow broadcasters to request approval for a "proposed controlling foreign investor" to increase holdings "at some future time" up to 100 percent, or for a noncontrolling foreign investor to increase its ownership interest up to 49.99 percent, the fact sheet said. The broadcast revisions replace outdated rules that had “a vintage quality,” Commissioner Jessica Rosenworcel said.
To prevent publicly traded companies from inadvertently triggering the foreign ownership rules as happened to Pandora in its purchase of a radio station, the order revises the methodology for determining its level of foreign ownership, the fact sheet said. Such companies will now gauge their level of foreign ownership “using information that is known or should be known” to the company “in the ordinary course of business,” the fact sheet said. The previous rules required the FCC to treat as foreign investors those investors whose origins Pandora couldn’t determine.
Allowing broadcasters to "more freely and fairly compete for investment dollars" is an "important step," said an NAB spokesman. "This order extends to broadcasters the same application and approval process that has been open to our competitors for years," the spokesman said. "NAB applauds the Commission’s decision and looks forward to greater investment in local sources of news and programming." Pending foreign ownership requests from Univision and Frontier Media will be given the chance to restructure their applications under the new rules, IB staff told us.