For the first time since Congress yanked a tax break for owners who sold stations to women and minorities, there’s a federal program designed to light up radio stations with more diverse owners at the helm. The Federal Communications Commission on Thursday adopted an incubator program designed to help small companies, including women and minorities, break into radio using the lure of expanded ownership opportunities for the radio groups that help them get on their feet.
FCC chair Ajit Pai said the relationship between established broadcasters and small companies or new entrants will help address some of the “significant barriers” faced by companies owned by women and minorities, including lack of access to capital, while promoting broadcast ownership diversity in the process. Pai pointed out the FCC has been discussing an incubator program since 1990—five years after the previous tax certificate policy ended—and despite being addressed in seven different dockets, nothing much came of the proposal. “This Commission has adopted a different attitude, one borrowed from Elvis Presley: ‘A little less conversation, a little more action’,” Pai said.
The incubator program will pair existing radio station owners with new entrants or small and struggling broadcasters with annual revenue of $38.5 million or less. The little guy would need to certify that without the help, they wouldn’t be able to pursue their ownership goals. “This comprehensive incubator program addresses key obstacles to ownership and operation of broadcast stations, namely lack of access to capital and lack of technical, operational, and management experience,” said Jamila-Bess Johnson, an attorney advisor in the Media Bureau’s Industry Analysis Division.
Once the program goes live, the Media Bureau will begin accepting applications and any proposed alliance will need to be approved. Johnson said they’ll also monitor the relationships during the incubation period. “Requiring the incubated entities to meet these standards will help ensure that those receiving incubation are truly new or small broadcasters in need of assistance,” she said.
As an incentive to get established broadcasters to take part in the program and potentially help a new competitor get on their feet, the FCC would give the established company a waiver to the local radio ownership limits, including the AM/FM subcap restrictions. “This incentive has the best chance of encouraging established station owners with the requisite financial means and expertise to assist new, small or struggling entities in overcoming the obstacles to independent ownership and operations of radio stations,” Johnson said.
Broadcasters will be able to use the waiver in the market where the incubator relationship is located, or in a comparably-sized metro area. The waiver could also be transferred to a new owner if the oversized cluster is sold, a change that was pushed during the past few weeks by commissioner Michael O’Rielly. He argued preventing a transfer would hurt participation rates. “Once the incubator earns the benefit from a successful incubation, the reward waiver should apply, period,” O’Rielly said Thursday.
Ownership Issues Hang Over Incubator
Even as the FCC adopted a waiver incentive to get established broadcasters to take part, O’Rielly was quick to point out that the lure of waivers may no longer be needed if he gets his way. When the next quadrennial ownership review process begins—currently scheduled for November—he said he’ll push for such “archaic” regulations to be repealed for all broadcasters. “I truly believe updating our rules to reflect the actual marketplace will allow broadcasters to compete and thrive,” O’Rielly said. “Our media ownership rules have not worked. We must try something new.” He went on to say he will specifically pursue having the FCC eliminate or “drastically” lift the AM/FM subcap restrictions in the quadrennial review, saying in his eyes the decision to repeal the newspaper-broadcast and radio-television cross-ownership rules last November was a decade too late. “We cannot rest on our laurels by maintaining the same regulatory climate that helped seal the fate of so many newspapers,” O’Rielly said.
The Commission voted 3-1 to adopt the incubator program with Democrat Jessica Rosenworcel splitting from the Republican majority. She said the proposal was too “modest” to undo the damage done by the rollback of several media ownership restrictions already adopted. Rosenworcel argued they’ve undercut media diversity, localism and competition. “There is nothing bold here. I fail to see how it will make a material difference in the diversity of media ownership. Its scope is too narrow, its consequences too small, and its impact on markets too muddled,” she said, casting the “no” vote.
Third Circuit Court of Appeals Judge Thomas Ambro had ordered the FCC to file a report with the Philadelphia court on the status of the incubator program by Aug. 6. Rosenworcel predicted the incubator program is unlikely to satisfy his directive that the FCC take action on broadcast ownership diversity.
“I don’t see the power of an incubator proposal when the agency has burned down virtually all its media ownership rules,” she later told reporters. “And so I would dispute that this is effective or that it will materially make any change in women and minority ownership of broadcast stations.”
Just Radio For Now
The FCC’s incubator program begins with just radio, which Johnson said is the “most accessible,” thanks to lower entry costs compared to the high cost of TV – which, for entities with limited capital resources and operational experience, can be an even tougher business to break into. The average radio station sold for $1 million last year.
The National Association of Broadcasters would like to see the initiative expanded to local TV stations, but said it’s happy a radio incubator is now a reality in the meantime. “NAB applauds the FCC for creating an incubator program that will help new entrants realize their dream of radio station ownership,” spokesman Dennis Wharton said. “Incubators are key to breaking down financial and operational barriers to entry for underrepresented communities interested in media ownership.”
The program will take effect once the FCC’s order is published in the Federal Register and it secures the required sign-off by the Office of Management and Budget, a process that could take up to six months.