Before the FEDERAL COMMUNICATIONS COMMISSION FCC 94-324 Washington, D.C. 20554 In the Matter of) ) Review of the Commission's ) MM Docket No. 94-150 Regulations Governing Attribution ) of Broadcast Interests ) ) Review of the Commission's ) MM Docket No. 92-51 Regulations and Policies ) Affecting Investment ) in the Broadcast Industry ) ) Reexamination of the Commission's ) MM Docket No. 87-154 Cross-Interest Policy) NOTICE OF PROPOSED RULE MAKING Adopted: December 15, 1994 Released: January 12,1995 Comment Date: April 17, 1995 Reply Comment Date: May 17, 1995 By the Commission: TABLE OF CONTENTS Paragraph I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. Background and Current Rules . . . . . . . . . . . . . . . . . . . . . 6 III. Recent Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 9 IV. Underlying Principles. . . . . . . . . . . . . . . . . . . . . . . . . 12 V. Stockholding Benchmarks. . . . . . . . . . . . . . . . . . . . . . . . 17 A. Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . 18 B. Voting Stock: Passive Investors. . . . . . . . . . . . . . . . 47 C. Minority Stockholdings in Corporations . . . . . . . . . . . . 51 with a Single Majority Shareholder D. Nonvoting Stock. . . . . . . . . . . . . . . . . . . . . . . . 52 VI. Partnership Interests. . . . . . . . . . . . . . . . . . . . . . . . . 55 VII. Limited Liability Companies and Other New Business Forms . . . . . . .64 VIII. The Cross-Interest Policy and Multiple Business Interrelationships . . . . . . . . . . . . . . . . . . . . . . . 76 A. The Cross-Interest Policy . . . . . . . . . . . . . . . . . . . . . 78 B. Non-Equity Financial Relationships and Multiple Business. . . . . .93 Interrelationships IX. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 X. Administrative Matters . . . . . . . . . . . . . . . . . . . . . . . . 102 Appendix: Initial Regulatory Flexibility Analysis I. Introduction 1. With this Notice, we commence a thorough review of our broadcast media attribution rules, the rules by which we "define what constitutes a 'cognizable interest' for the purpose of applying the multiple ownership rules to specific situations." The multiple ownership rules limit the number of broadcast stations that a single person or entity, directly or indirectly, is permitted to own, operate, or control, so as to foster programming diversity by encouraging diversity of ownership, and to assure competition in the provision of broadcast services. 2. A number of changes in the broadcasting industry and in other Commission Rules since our last revision of the attribution rules prompt us to initiate this review. First, the multiple ownership rules themselves, to which the attribution rules are related, are undergoing change. We have relaxed our radio multiple ownership rules, we have narrowly relaxed our radio-television cross-ownership rule, and, today, in a separate proceeding, we seek comments as to whether we should relax national and local multiple ownership limits for television stations, including the one-to-a-market rule. In an additional separate proceeding adopted today, we also are considering a variety of measures, including relaxing our attribution rules, to aid the entry of minorities and, if deemed necessary, women into broadcasting. We wish to ensure that the attribution rules remain effective in light of the previous and proposed relaxation of the multiple ownership rules. 3. Other concerns merit a reevaluation of our attribution rules. For example, concerns have been raised that certain nonattributable investments, while completely permissible, may permit a degree of influence that warrants their attribution for multiple ownership purposes. Moreover, we are concerned that otherwise permissible cooperative arrangements between broadcasters, which seem to be occurring more frequently in recent years, are being used in combination by those broadcasters to obtain, indirectly, controlling interests in multiple stations that they would be prohibited from holding directly under the multiple ownership rules. Further, we have received applications in which the applicant utilizes a new business form, such as a Limited Liability Company ("LLC"), and we intend to consider how to treat such new business forms for attribution purposes. Finally, we have recently adopted or revised attribution rules for other services that we regulate, and we seek to review the broadcast attribution rules in light of those other attribution rules to ensure that any differences are justified by other factors such as differences between the media or our policies regulating them. 4. In considering revisions to the mass media attribution rules, we seek to identify and include those positional and ownership interests that convey a degree of influence or control to their holder sufficient to warrant limitation under the multiple ownership rules. As we have noted, the attribution rules "represent the Commission's judgment regarding what ownership interest in or relation to a licensee will confer on its holder that degree of influence or control over the licensee and its facilities as should subject it to limitation under the multiple ownership rules." For purposes of the multiple ownership rules, the concept of "control" "is not limited to majority stock ownership, but includes actual working control in whatever manner exercised." We have defined "de jure" control as ownership of more than 50 percent of a corporation's outstanding voting stock. We have determined who has "de facto" control of a licensee on a case-by-case basis, looking generally for this purpose to determine who has ultimate control over a licensee's programming, financial and personnel policies. Where we have referred to "influence," we have viewed it as an interest that is less than controlling, but through which the holder is likely to induce a licensee or permittee to take actions to protect the investment. Our judgment as to what level of "influence" should be subject to restriction by the multiple ownership rules has, in turn, been based on our judgment regarding what interests in a licensee convey a realistic potential to affect its programming and other core operational decisions. 5. While our focus is on the issues of influence or control, at the same time, we must tailor the attribution rules to permit arrangements in which a particular ownership or positional interest involves minimal risk of influence, in order to avoid unduly restricting the means by which investment capital may be made available to the broadcast industry. We intend to ensure that any revisions we make to the attribution rules meet these stated goals. We also seek to ensure that any new rules adopted are clear to our broadcast regulatees, provide reasonable certainty and predictability to allow transactions to be planned, ensure ease of processing, and provide for the reporting of all the information we need in order to make our public interest finding with respect to broadcast applications. II. Background and Current Rules 6. The attribution rules have evolved gradually since their inception, in response to changes in the broadcast industry, including the growth of and changes in sources of capital investment. In adopting the first attribution rules in 1953, in conjunction with the "seven- station" multiple ownership rule, the Commission considered the issue of control of business organizations and sought to ensure that it would not miss any potentially influential interests. Specifically, believing that the holder of a small interest could exert a considerable influence on the operation of a station, the Commission decided to attribute all voting shares in a closely-held company, and, for companies with more than 50 voting shareholders, all voting shares of one percent or more of the outstanding voting stock. In addition, noting the influence of officers and directors over a licensee's day-to-day activities, and citing federal antitrust statutes dealing with interlocking directorships and officerships, the Commission held cognizable the interests of officers and directors of licensees, whether or not they held stock in the licensee. 7. As new types of equity investments and financial instruments were introduced into the financial markets and the broadcast industry, the nature of the financial markets themselves continued to change. Large institutional investors began to hold larger portfolios and to contribute larger amounts of capital to the market. Taking note of the purposes and operation of investment companies, brokerage houses, and certain trusts, in particular, among these larger investors, the Commission observed that while these entities acquired voting stock in their own name, they often held it solely for the benefit of other entities. Therefore, the Commission responded by attributing corporate voting stock solely to the entities with the right to vote that stock. Also, we observed that certain institutional entities were generally acquiring their stock for investment purposes, with no intent to influence or control the broadcast licensees in question. Thus, we defined them as "passive" investors. Accordingly, we gradually increased the attribution benchmarks for certain institutional "passive" investors (investment companies, insurance companies and bank trust departments). Ownership is generally attributed to a stockholder whose voting shareholdings equal or exceed the voting stock attribution benchmark. This may be of concern for banks and other passive investors, which hold stock for investment purposes only in many different media outlets. 8. The attribution rules were last revised over a two-year period between 1984 and 1986. At that time, the Commission raised the attribution benchmark for voting stock from 1 percent to 5 percent, after exhaustive study and analysis, including a thorough survey of its ownership files to determine the size of typical stockholdings, and a review of other federal agency benchmarks. That decision reflected changes in the broadcasting industry and the Commission's perception of the changing roles of smaller voting shareholders. The Commission concluded that 1 percent shareholders were extremely unlikely to be able to exert any influence over a corporate licensee and that their influence was de minimis in comparison with that of firm managers and of more sophisticated large shareholders with greater holdings. The Commission also raised the attribution level for voting stock held by certain institutional investors (bank trust departments, investment companies, and insurance companies) from 5 percent to 10 percent on the grounds that their passive investor status warranted adopting a higher benchmark. III. Recent Proceedings 9. In recent years, the Commission has instituted other proceedings that have begun to reexamine the assumptions upon which the attribution rules and cross-interest policy rest and to determine whether they continue to serve the public interest. These reexaminations were prompted by significant changes in the video marketplace and the broadcasting business, including greatly increased competition and the past economic downturn in the industry. In issuing this Notice to review our current attribution rules, we have elected to consolidate and comprehensively reexamine these other pending proceedings that directly or indirectly implicate the attribution rules. Specifically, in 1992, in our Notice of Proposed Rule Making and Notice of Inquiry in MM Docket No. 92-51, 7 FCC Rcd 2654 (1992) ("Capital Formation Notice"), we sought comments on whether we should relax several of our attribution rules in a number of specific contexts in order to stimulate investment in the broadcast industry and to benefit new entrants, including minorities and women, who have historically experienced significant difficulties in securing adequate start-up funding. We inquired as to whether we should relax our attribution benchmarks for active and passive stockholders, and modify our insulation criteria as to widely-held limited partnerships, including business development companies organized as such. We will incorporate the record from MM Docket No. 92-51 into the record of this proceeding to the extent that it is relevant to our consideration of the foregoing issues. 10. We will also consider in this proceeding the comments received in response to our Further Notice of Inquiry/Notice of Proposed Rule Making in MM Docket No. 87-154, 4 FCC Rcd 2035 (1989) ("Cross-Interest Notice"), in which we asked for comments as to whether we should maintain our cross-interest policy in three areas -- key employees, non- attributable equity interests, and joint ventures. In the Cross-Interest Notice, we invited comment as to whether we should amend the attribution rules to incorporate the key employee portion of the cross-interest policy. We will incorporate the record from MM Docket No. 87-154 into the record of this proceeding. 11. We note that this proceeding is complementary with, and will affect our actions in, two rulemaking proceedings in which we have today adopted Notices: the pending rule making regarding the multiple ownership rules for television stations; and a companion proceeding inviting comment on whether we should adopt a number of rule changes and initiatives to provide minorities and women with greater opportunities to enter the mass media industry. We specifically seek comment in the latter proceeding as to whether we should relax our mass media attribution rules to help minority- and women-owned businesses raise capital. Since the content of the attribution rules is critical to issues raised in both proceedings, we will review the comments received in those proceedings in conjunction with the comments received in the instant proceeding to assure a coordinated approach to the three proceedings. IV. Underlying Principles 12. As we undertake our analysis of the nature and size of interests in broadcast licensees that should be held cognizable for ownership attribution purposes, we are guided by basic economic concepts as to the essential nature of firms, their control, and their conduct. We invite comment on our analysis and encourage parties to support their views with relevant empirical analysis and business and economic theories. We also invite commenters to propose alternative analytical frameworks for establishing the specific interests that should be deemed cognizable under our various multiple ownership rules. Our analysis will focus essentially upon the effect that financial claims on, and associated voting or contractual rights in, broadcasting companies have on their conduct. The economic conduct of concern to us relates to a broadcasting company's programming choices, including affiliation choices, and competitive practices, including advertising pricing. To address these issues with a desirable degree of confidence, we will need as much information as is available to establish the connections and thresholds of concern between financial claims on a firm and its conduct. 13. Accordingly, with respect to each specific ownership or relational interest discussed herein, we seek comment on whether the level or degree of ownership interest in, or relationship to, a licensee would be likely to impart the ability to influence or control the operations of the licensee, including core functions such as programming, such that the multiple ownership rules should be implicated. We intend to base our judgment with respect to each specific attribution limit or criterion considered in this Notice on as much empirical data as can be obtained, as well as economic and business theories on levels of influence in business organizations, as discussed above, and we specifically invite comments that contain such data and are grounded in rigorous economic theories and analyses. In setting a specific attribution limit or determining whether a particular interest should be cognizable or not, we ask commenters to address the degree to which we should attempt to accommodate the competing concerns that have motivated us in the past, such as not inhibiting legitimate business opportunities and encouraging the flow of capital investment into the broadcast industry. An important consideration is the extent to which we can and should accommodate these interests directly, by, for example, creating specific provisions in the ownership rules themselves. In every case, if the new rule or exemption proposed represents a departure from our current rules and standards, commenters should demonstrate the justifications for such a departure. Additionally, in light of our desire to promote ownership opportunities for minorities and women in the broadcasting industry, we invite comment on whether there are other attribution rules, besides those discussed in MM Docket Nos. 94-149 and 91-140, that should be adjusted to promote access to capital for minorities and women. 14. We seek empirical data and analysis that would indicate the ownership level that would likely impart to its holder some ability to influence the operation of a broadcast station in a manner that is intended to be limited by our multiple ownership rules. Also, we seek data and/or analysis, based on sound economic principles, to demonstrate that changing the attribution rules would have a significant effect on capital investment and new entry. We also seek detailed economic data regarding how the capital needs and outlays of broadcasters have changed since the current attribution rules were set, as well as since the earlier set of comments were submitted in response to the Capital Formation Notice, and any impediments to adequate financing imposed by the current rules. 15. We are concerned that any action that we take in this proceeding not inhibit capital investment nor disrupt existing financial arrangements, and we seek comment as to both of these areas with respect to our proposals herein. We also seek comment on whether, and, if so, to what extent, we should grandfather existing situations if any modifications we make to the attribution rules, for example, restricting the availability of the single majority shareholder exemption or attributing nonvoting stock, would result in a new attribution of ownership to an entity for a previously held interest, and that new attribution would result in a violation of the multiple ownership rules. Alternatively, should we permit a transition period, during which licensees could come into compliance with the multiple ownership rules, as affected by any changes we make in the attribution rules? 16. We recognize now, as we did in the Attribution Order, that any specific benchmark or limit that we adopt will not include every influential interest that might be limited by the multiple ownership rules. A particular holding or interest not considered cognizable under our rules may, in the context of the structure of a particular business, including the relative distribution of ownership interests in that company, permit a degree of influence or control that should be regulated under the multiple ownership rules. On the other hand, a rule of general applicability drawn so strictly as to include every possible influential interest would ensnare innumerable interests that have no ability to impart influence or control over a licensee's core decision-making processes to their holders. Weighing these considerations, we preliminarily conclude that our goals of predictability and certainty can best be achieved if we continue to use benchmarks and specific attribution limits rather than proceeding on an ad hoc basis. Of course, we retain the discretion to treat specific factual situations on a case-by-case basis. Commenters may, of course, address these basic propositions. V. Stockholding Benchmarks 17. In devising our attribution rules, we proceed on the basis of certain assumptions. As noted above, our attribution rules focus on the issues of influence on and control of a firm. While the potential for influence may be inherent in a broad range of interests, for economic reasons, equity holders govern or control the management of the firm. Consequently, as we examine control of and influence in a firm, we should first concentrate on equity holders and address whether or not particular equity holdings have the potential to control or influence the firm and its activities. In this Notice, we invite comment on whether to revise our treatment of corporate shareholders for attribution purposes. First, we invite additional comment on whether to raise the benchmarks for voting shares from 5 percent to 10 percent and from 10 percent to 20 percent for certain passive investors. Second, we invite comment on whether we should restrict the availability of the single majority shareholder exemption from attribution. Finally, we seek comment on whether we should attribute nonvoting shares, at least in certain circumstances. A. Voting Stock 18. We now attribute ownership to holders of 5 percent or more of the voting shares of corporations. We do not attribute the shares of nonvoting shareholders, regardless of the percentage of the equity of the corporation contributed by those shareholders or the percentage of the nonvoting shares that they hold. 19. We adopted the current benchmarks in 1984, based on our finding that the previous benchmarks had become unduly restrictive as a result of changes in the broadcast industry and in the investment community. We further observed that a relaxation of the attribution benchmark would serve the public interest by increasing investment in the industry and by promoting the entry of new participants by increasing the availability of start-up capital. In approaching the attribution benchmark issue, we looked to other federal agencies for analogous ownership thresholds and examined other data. 20. We selected the 5 percent benchmark because, according to our examination, a 5 percent shareholder in a widely-held corporation would typically be one of the two or three largest corporate shareholders and thus could potentially influence a licensee's management and operations. Accordingly, we determined that shareholders meeting the 5 percent benchmark would likely have the potential for influencing or controlling a licensee, while those with smaller stockholdings would likely not have such potential. We found other regulatory support for the 5 percent threshold in the Securities and Exchange Commission's ("SEC") rules that require the reporting of ownership interests of 5 percent or greater. The SEC's reporting threshold was intended to protect shareholders' ability to make informed investment decisions by providing them with timely information regarding potential tender offers and other potential changes in corporate ownership or control. We concluded that the objectives of this requirement most closely paralleled in purpose our own objectives in identifying interests with the potential for significant influence or control. 21. In the Capital Formation Notice, we proposed to increase the general attribution benchmark for voting stock from 5 percent to 10 percent in order to stimulate capital investment. With respect to this proposal, we asked commenters how we might preserve investment flexibility while adequately accounting for all influential interests that merit scrutiny under our rules. Based on the record thus far, we do not have information sufficient to justify raising the benchmark to 10 percent. Commenters addressing this issue unanimously supported raising the benchmark, but they did not provide us with critical information we would need before we could conclude that raising the benchmark to 10 percent would not exclude many substantial and influential interests from attribution, or that such exclusion is warranted by competing needs of greater weight. Specifically, commenters asserted that the changes in the economic and competitive environment of the media marketplace since the mid-1980s necessitated revisions in the attribution rules. In addition, they argued that such an increase in the attribution benchmark would facilitate additional investment in the broadcast industry while continuing to adequately identify ownership interests that afford influence or control over a licensee's management or operations. They did not, however, provide us with enough information on the changes in the economic climate and competitive marketplace that would justify raising the benchmark or explain and verify the link between raising the attribution benchmark and precipitating additional capital investment. Without such information, we are not comfortable raising the benchmark. 22. In particular, before we could consider raising the attribution benchmark to 10 percent, we would need answers to the general questions raised in paragraphs 12 through 16 supra, as well as the following specific issues. While commenters argued that a less than ten percent stockholding is not, in itself, sufficient to presume that the holder could exert control or influence over the corporation, they do not explain the basis for that claim or provide any specific information that would allow us to devise a methodology to assume that such a stockholder would remain inactive in the affairs of the company in most or all cases. Moreover, we ask commenters whether such factors as the size, composition of management, and minority shareholder rights of individual corporations might not be increasingly relevant where larger nonattributable stockholdings are permitted. We therefore ask commenters to provide detailed illustrations of the role of minority shareholders in the management of a corporation. In addition, we seek more detailed information about the impact of minority shareholder rights on corporate management generally, particularly in those instances where individual minority shareholders might act in concert with others to affect the decision making of the corporate licensee or permittee. 23. In the Attribution Order, we concluded that the adoption of a benchmark higher than 5 percent may result in many substantial and influential interests being overlooked and that the need to adopt a higher threshold was unclear since every demonstrable benefit to be derived from relaxing the attribution rules would be achievable in large measure from adopting a 5 percent benchmark. We ask commenters to provide evidence that the specific conclusions we reached in the Attribution Order are no longer valid. In particular, we noted in the Capital Formation Notice that our prior determination not to adopt a 10 percent benchmark had been made in economic and competitive circumstances materially different from those prevailing when the Capital Formation Notice was adopted. Do current market conditions cast doubt on the foregoing conclusions made in the Attribution Order, and, if so, what evidence is there that, based on market conditions, raising the attribution benchmark to 10 percent will not incur the risks of ignoring substantial controlling or influential interests that concerned us in 1984? What interests or reasons might justify nonattribution of such substantial interests? 24. With respect to the issue of facilitating increased capital investment, we seek answers to the following questions. Is there support for the assumption that an increased attribution benchmark will result in greater capital investment? If so, how would any increased availability of or reduced cost of capital resulting from an increased attribution benchmark be likely to be allocated between smaller, less established broadcasters and larger, more established ones? Should we be concerned that proportionately increasing the capital available to larger entities or reducing its cost to them might actually strengthen those licensees that already dominate the broadcast industry, thereby threatening competition and diversity? Analyses of these effects at several different hypothetical attribution benchmarks are requested. 25. Commission Attribution Rules in Other Services and Attribution Rules in Other Agencies. As we consider revising our broadcast attribution rules, we will take note of the attribution rules we apply in other services and the attribution rules applied by other federal agencies, to the extent that they are relevant to our purposes and goals. 26. Commission Attribution Rules in Other Services. We seek comment on the relevance of attribution rules applied in other FCC services. Many of our attribution rules, including those in most cable and in Personal Communications Services ("PCS") multiple- ownership contexts, incorporate a five percent ownership benchmark. As noted above, we set a five percent voting stock attribution benchmark for broadcasters based on our finding that it identifies those ownership thresholds that enable an entity to influence or control programming or other core decisions. The other services that use a five percent benchmark may apply it differently, but they have generally relied upon this finding in so doing. A critical matter we seek comment on is whether and how a change in our broadcast attribution benchmark would affect the many services that rely on it. 27. In the contexts of cable operator/broadcast network cross-ownership, cable national subscriber (horizontal) limits, and cable channel occupancy (vertical) limits, the attribution standards are identical to those used in broadcasting. Indeed, in drafting these cable attribution rules, we expressly adopted the broadcast model based on our view that the purpose of these cable attribution rules is similar to the purpose of the broadcast attribution rules: to identify those ownership thresholds that enable an entity to influence or control management or programming decisions (for broadcasters), or the programming marketplace (for the two cable concentration attribution rules). Further, Congress has suggested that the diversity rationale is relevant to cable. Consequently, we deemed it appropriate to apply the broadcast attribution standards to the foregoing cable contexts. 28. However, we apply different, usually more restrictive, attribution rules with respect to other cable ownership rules. For instance, in analyzing ratemaking valuation methods for a cable operator's affiliate's transactions ("cable rate valuations"), the Commission considers five percent or more of a corporation's total equity (i.e., the combination of both voting and nonvoting stock) as an attributable interest. We do not apply a single majority shareholder exception. Further, we attribute all limited partnership interests of 5 percent or more, unlike the broadcast attribution rules, which do not currently apply an equity benchmark to limited partnership interests. As discussed infra, the broadcast attribution rules relieve limited partnership interests from attribution in situations where those interests satisfy insulation criteria designed to ensure that the limited partner cannot influence or control the limited partnership. 29. These more restrictive attribution rules reflect the statutory goal intended to be served by these ratemaking rules: to ensure that consumers pay reasonable rates for regulated cable service. In this case, then, the issue is not merely influence or control, but, rather, whether the operator-affiliate relationship is sufficient to create an incentive for cable operators to impose the costs of nonregulated activities on regulated cable subscribers through improper cross-subsidization. In adopting them, we determined that wider-ranging attribution rules were necessary for us to meet our goals. We performed a similar analysis when we adopted identical standards for cable basic service tier rates and equipment. 30. We apply the same, more restrictive, attribution criteria when examining ownership in the contexts of cable cross ownership with video programmers, Multichannel Multipoint Distribution Service ("MMDS"), and Satellite Master Antenna Television Service ("SMATV"). In each case, we have sought to adopt rules that would promote diversity and competition in general. Regarding the cable/programmer proscription, we found that while the broadcast standards addressed some of our concerns, the proscription had a specific additional goal: to foster the development of competition to traditional cable systems. Keeping that goal in mind, we found that a relatively inclusive rule was necessary to curb the incentives of cable operators to influence the behavior of their affiliates to the detriment of competitors. 31. In the context of cable cross-ownership with MMDS and SMATV, we sought to prevent cable operators from "warehousing potential competition," to encourage alternative providers of multichannel video service, and to promote the development of local competition to established cable operators. Again, we concluded that attribution rules more stringent than the broadcast rules were necessary to achieve these goals. 32. We also adopted attribution rules for video dialtone, another service designed to provide multichannel video programming, that were more restrictive than the broadcast rules. The video dialtone rules hold attributable ownership interests comprising five percent or more of a corporation's outstanding stock, whether voting or nonvoting. Further, there is no single majority shareholder exception. Like the broadcast multiple ownership rules, our video dialtone rules are intended to foster competition and diversity. However, the video dialtone ownership rules are also designed to reduce the likelihood of unfair discrimination by local exchange carriers. Relying in part on this distinction, we adopted different attribution rules for video dialtone than we apply in broadcasting. We noted that a nonvoting interest in a video dialtone provider would create incentives for discrimination, thereby implicating the foregoing concerns. We made the same observation with regard to the single majority shareholder exception: a 49 percent voting stockholder in that situation would similarly raise our discrimination concerns. 33. We have established other attribution rules in services that are not intended for broadcasting: narrowband and broadband PCS, cellular, and the specialized mobile radio ("SMR") service. In establishing these rules, our goals have been "competitive delivery, a diverse array of services, rapid deployment, and wide-area coverage." We have set the multiple-ownership attribution benchmark for broadband PCS at 5 percent of the equity, outstanding stock, or outstanding voting stock of the corporation. The rules do not distinguish among limited partners based on whether or not they meet certain insulation criteria. Further, the rules have no single majority shareholder exception. Narrowband PCS service has the same 5 percent attribution benchmark as broadband PCS. 34. However, for purposes of the rules restricting common ownership of PCS and cellular licenses in the same geographic service areas, we have adopted a benchmark of 20 percent of the cellular entity's total equity, voting stock, or nonvoting stock. In so doing, we noted that adopting the more restrictive 5 percent benchmark would have failed to acknowledge the unique history of cellular licensing. In this regard, we had earlier set a 20 percent attribution benchmark for cellular licensees, because voluntary settlements in the initial phase of the service were often resulting in significant, but noncontrolling, interests in cellular licenses being held by various entities. Therefore, we believed that subsequently enacting a stricter attribution rule for PCS (and other CMRS) ownership of a cellular entity would unfairly restrict the access of entities with noncontrolling cellular interests to the emerging mobile services market, thereby inhibiting the early development of PCS. 35. We have taken a similar approach with SMR. Thus, for the purpose of the SMR/cellular/broadband PCS spectrum aggregation limits, we have also adopted a benchmark of 20 percent of the equity, outstanding voting stock, or outstanding nonvoting stock of any of these entities. By so doing, we promote a competitive environment for all players in the CMRS market. 36. We invite comment on the relevance of the foregoing attribution criteria, as well as others not discussed herein, to our consideration of the broadcast attribution rules. Does broadcasting have unique factors that make comparison with other Commission services inapposite, or, to the contrary, should we consider our action in other services as precedential? Is broadcasting sufficiently different from these other services in nature, function of the service or otherwise so as to justify any differences? Or, are the purposes of the broadcasting attribution and multiple ownership rules sufficiently distinct so as to justify any differences between those rules and those of the other Commission services? 37. Other Agency Benchmarks. In addition to taking note of the attribution rules used in other Commission services, we also seek comment as to regulatory benchmarks used by other federal agencies, including those discussed below and other standards that commenters may bring to our attention. 38. The general 10 percent attribution benchmark that was proposed in the Capital Formation Notice is employed in a number of other regulatory contexts. For example, Congress has enacted a 10 percent statutory attribution threshold to implement acreage limitations applicable to federally leased mineral rights. As with the Commission's attribution standards, this statutory threshold, administered by the Department of the Interior, provides a mechanism for enforcing ownership restrictions applicable to limited publicly- owned resources. 39. In a different context, the SEC uses a 10 percent equity benchmark in its "insider" trading restrictions; in Congress' judgment, holders of more than 10 percent of a company's stock, in addition to the company's officers and directors, are in a position to make unfair use of nonpublic information regarding the company. 40. The U.S. Department of Transportation ("DOT") employs a 10 percent benchmark in certain reporting and certification requirements applied to air carriers. An air carrier proposing a "substantial change in operations, ownership, or management" must submit certain data to DOT to allow the agency to determine whether the carrier will continue to meet its certification requirements. A "substantial change in operations, ownership, or management" is, in turn, defined to include the "acquisition by a new shareholder or the accumulation by an existing shareholder of beneficial control of 10 percent or more of the outstanding voting stock in the corporation." An applicant for a new certificate must also submit information regarding holders of 10 percent or more of its voting stock, including whether any such holders are officers, directors, or owners of 10 percent or more of the stock of another air carrier. 41. DOT increased this reporting benchmark from 5 percent to 10 percent in a 1992 rulemaking proceeding, stating that it is "principally concerned about the effects on a carrier's fitness and U.S. citizenship stemming from the influence of those holding a substantial interest in the company...." In DOT's view, ownership of 10 percent or more of voting stock "represents at least the potential for significant influence on a carrier's operations." Noting that the "great majority of the carriers whose fitness the Department monitors are not large or publicly held," DOT found that "requiring carriers to report ownership interests amounting to less than 10 percent would be overly burdensome without providing a concomitant benefit for the Department's fitness purposes." 42. Other federal agencies use benchmarks higher than 10 percent to trigger certain regulatory requirements. Section 7A of the Clayton Act imposes premerger notification and waiting period requirements on certain corporations planning to consummate large mergers and acquisitions. These requirements are triggered when, among other things, the entity seeks to acquire 15 percent or more of a company's voting stock. The purpose of these requirements "is to provide the [Federal Trade] Commission and the Department of Justice with information and time necessary to determine whether a proposed transaction, if consummated, may violate the antitrust laws." 43. In addition, in comments filed in response to the Capital Formation Notice, Belo cites a financial reporting benchmark used by the Interstate Commerce Commission ("ICC") that is greater than 10 percent. Under these ICC financial reporting guidelines, a railroad company must use "principles of equity accounting" in analyzing investments in voting stock of affiliated companies that give "the carrier the ability to significantly influence the operating and financial policies of an investee." The ICC regulations go on to provide that an investment of 20 percent or more of the voting stock of an investee indicates such influence in the absence of evidence to the contrary. 44. The strength of the analogy to other benchmarks will, of course, depend on whether the purpose of the particular benchmark in question parallels our objective in identifying ownership interests that confer on their holders the ability to influence the day-to- day operations of a licensee. Indeed, in our 1984 Attribution Order we declined to follow several of the regulatory benchmarks described above, finding that the purposes they served were inapt to the Commission's multiple ownership policies. The Commission instead relied on what it found to be an especially analogous benchmark used for certain SEC reporting requirements; under these requirements, holders of 5 percent or more of the stock of a large, publicly-traded corporation must disclose certain information concerning the nature of their stock ownership. We stated our belief that, as with our attribution rules, the SEC's 5 percent benchmark was "directed to identifying interests with the potential for significant influence or control." 45. While we are not bound to follow another agency's ownership benchmarks, such benchmarks reflect Congressional or administrative judgments in a variety of contexts as to the correlation between different levels of ownership and the ability to influence or control an entity. Commenters should address, in detail, why a particular agency's benchmark may or may not be applicable, by analogy, to our analysis. We are particularly interested in whether the purposes underlying other regulatory benchmarks are comparable to our competition and diversity concerns, and why that agency believed the percentage it selected reflects a substantial enough interest to constitute the level of influence or control that implicates its underlying ownership limitation, and, in particular, whether its analytical methodology would be applicable to our rules. 46. We seek comment on how to devise rules that are consistent with the administrative concerns expressed in our section devoted to our underlying principles, see paragraphs 12 through 16, supra, and that would accommodate the principles reviewed in paragraph 17 supra. Should there be an exemption, similar to the single majority stockholder exemption, for stockholders in firms where management holds some threshold level of stock, on the ground that the inherent control afforded managers would preclude significant influence by other stockholders? Can our stockholding benchmarks rely on, or take cognizance of, the size of a stockholding relative to others in the firm? For instance, should we amend our attribution benchmark to consider whether a stockholder is, or is not, one of the larger or largest stockholders in a firm in determining attribution? We are initially concerned about the practicability of such a standard, however apt, as it appears to introduce uncertainty into the attribution framework. Under such a rule, whether a particular stockholder's ownership interest is attributed may change as a result not only of his own purchases and sales but also as a result of such transactions by others that are beyond his control. The best course of action may therefore be to retain our longstanding approach of basing our attribution benchmark on our best possible estimate of what level of stockholding is likely to be influential, balanced by our intent to avoid attributing interests that provide only a minimal risk of influence in order to encourage capital investment in broadcasting. B. Voting Stock: Passive Investors 47. In the Attribution Order, we adopted a 10 percent attribution benchmark for certain institutional investors (bank trust departments, insurance companies, and mutual funds) that we deemed to be "passive" in nature in order to "increase the investment flexibility of these entities and, in so doing, expand the availability of capital to the broadcast and cable industries without significant risk of attribution errors." We noted that these passive institutional investors generally invest funds on behalf of others, play passive investment roles, and are generally prohibited either by law or by fiduciary duties from becoming involved in the operation or control of the companies in which they invest. To ensure that these institutional investors maintain a truly passive role in the affairs of the licensee, we require them to refrain from contact or communication with the licensee on any matters pertaining to the operation of its stations, and we prohibit such investors or their representatives from acting either as officers or directors of the licensee corporation. Despite these considerations, in 1984, we declined to raise the passive investor attribution level above 10 percent. At that time, we were concerned that merely voting or trading such large blocks of stock might affect the management of a company, even if such results were inadvertent or unintended. 48. In the Capital Formation Notice, we proposed increasing the passive investor benchmark from 10 percent to 20 percent. The commenters who addressed this issue unanimously supported increasing the voting stock attribution level for passive investors. The Investment Company Institute ("ICI") and most other commenters, for example, argued that in the case of passive investors, there is little cause for concern regarding the possible exertion of undue influence over licensees since such entities are passive by nature and are solely concerned with investing in companies, not controlling them. We are not, however, comfortable raising the benchmark based on the record thus far. We invite commenters to delineate what specific assurances we would have that passive investors that hold large stock interests cannot or would not exert influence or control over broadcast licensees and that raising the benchmark would therefore not exclude from attribution holders of interests that have a significant and realistic potential to influence station operations. Are there common factors, intrinsic to all passive investors, or institutional or other safeguards that could provide such assurance? Moreover, the comments do not, in our view, dispose of the concern we have raised regarding the impact on corporate decision-making that could result, even unintentionally, by the trading and voting of large blocks of stock by assertedly passive investors. We invite commenters to address the foundations of the Commission's concern about the possible effect of large stock trades and whether there have, in fact, been any stock transactions of this nature. If so, how substantial have such stock transactions been, and do the costs of the exclusion of such interests from attribution outweigh any potential benefits that might be realized from an increased attribution benchmark? 49. Additionally, while commenters argued that a higher attribution level for passive investors would significantly increase equity investment in the broadcast industry and would increase the availability of capital by giving passive investors greater flexibility with respect to broadcast investments, we seek additional comments on the degree of increased investment that would likely stem from any adjustment of our rules and on the need for such increased investment. Most commenters favoring increasing attribution levels, for example, contended that passive investment in broadcast entities is limited more by the Commission's attribution rules than by the financial resources available to such investors. However, we would like commenters to discuss in greater detail whether they think our present rules inhibit investment, and how modifications of our rules might encourage further investment. Additionally, the commenting parties did not adequately address our concerns that any increase in these attribution levels not implicate our concerns about the potential for influence. We request additional empirical and other data, where appropriate, on the above issues. In commenting on the appropriate benchmark for passive investors, parties should continue to bear in mind the points and concerns raised in our section delineating our underlying principles. Finally, if the benchmark for all investors is raised to 10 percent, does that reduce any need there might be to facilitate broadcast investment by increasing the passive investor benchmark? 50. Several commenters raised a closely related issue not discussed in our Capital Formation Notice. They requested us to further expand the passive investor class to include other institutional investors, such as pension funds, investment and commercial banks, and certain investment advisors. Commenters indicated that such institutions invest solely for income and are not interested in influencing or controlling the management of the companies in which they invest. We do not intend to revisit our decision of 1984 in order to broaden the category of passive investors to include such entities. However, we invite commenters to explain why this tentative conclusion is incorrect. Similarly, we are not prepared to expand the category of passive investors to include Small Business Investment Companies ("SBICs") and Specialized Small Business Investment Companies ("SSBICs"), formerly known as Minority Enterprise Small Business Investment Companies ("MESBICs"), as we proposed in the Capital Formation Notice. In the Capital Formation Notice, we reiterated our conclusion in the Attribution Order that these entities are not entirely passive in nature. Under certain circumstances, these entities are authorized to exercise control over debtor companies for temporary periods. We have received no evidence in the comments made thus far to alter our first conclusion that these entities do not meet our definition of "passive." In another proceeding initiated today, in MM Docket Nos. 94-149 and 91-140, we are, however, considering other rule changes to facilitate capital investment and entry by minorities and women without broadening our definition of "passive" investors. C. Minority Stockholdings in Corporations with a Single Majority Shareholder 51. Minority voting stock interests held in a corporate licensee are not attributable if there is a single majority shareholder of more than 50 percent of the corporate licensee's outstanding voting stock. In adopting this rule in 1984, the Commission reasoned that in this situation minority interest holders, even acting collaboratively, would be unable to direct the affairs or activities of the licensee on the basis of their shareholdings. We invite comment as to whether we should restrict the availability of this exemption. As discussed above, we are concerned that this exemption not be used to evade the multiple ownership limits. We are concerned that our prior conclusion that a minority stockholder could not exert significant influence on a licensee where there is a single majority stockholder may not be a valid conclusion in all circumstances. For example, we can conceive of circumstances in which the minority voting stockholder has contributed a significant proportion of the equity, holds 49 percent of the voting stock, and combines that holding with a large proportion of the nonvoting shares or debt financing. In such a circumstance, would that minority shareholder have the potential to influence the licensee such that the multiple ownership rules would be implicated? We invite comment on how we should approach our concerns in this area. Should we restrict the availability of the exemption? If so, should we do so on a case-by-case basis or restrict it in specified circumstances? If we should do so in specified circumstances, under what circumstances should we restrict the availability of the exemption? D. Non-Voting Stock 52. Under our attribution rules, all non-voting stock interests (including most preferred stock classes) are generally nonattributable. Non-voting stock provides significant benefits as an investment/capitalization mechanism; it specifically precludes the direct means (i.e., by voting) to influence or control the activities of a corporate licensee, but allows investors to acquire sufficient equity to compensate for their risk. Moreover, non- voting stock which is convertible to voting stock is not considered to be a cognizable interest until such time as the conversion right is exercised. If the contingency upon which the conversion right rests is beyond the control of the stockholder, we determined that attribution is not appropriate because the shareholder has no apparent ability to control or influence the licensee corporation. However, even if the conversion right is within the shareholder's ability to effectuate, until the shareholder actually acquires the power to vote, the current rules presume that he should not be able to exercise impermissible influence or control over a licensee. 53. We invite comment on whether we should amend our attribution rules to consider nonvoting shares as attributable, at least in certain circumstances. We are concerned, for example, that a nonvoting shareholder who has contributed a large part or all of the equity of a corporate licensee may carry appreciable influence that is not now attributed. While such a shareholder could not vote formally on issues, it may deny reality to presume that such a shareholder would not seek the means to potentially influence the operations of the licensee to protect his investment and limit his risk. Since we are not aware of the identity of such shareholders, and licensees are not currently required to file with us all agreements with such shareholders that might affect the operations of the licensee, we are concerned that there may be a gap in this area. We invite comment as to these issues. 54. If we decide to attribute nonvoting shares, should we do so only, as discussed below, where substantial equity holdings are held in combination with other rights, such as some voting shares or contractual relationships? If we decide to attribute nonvoting shares without reference to the existence of other contractual relationships, should we adopt a separate benchmark at the same level as we apply either to voting shares or to "passive" investors? We tentatively believe that we should, if we decide to attribute nonvoting shares, adopt a benchmark at least as high as that applied to "passive investors" since there is a common assumption of less potential for influence or control in both instances. Alternatively, should we establish a separate benchmark for nonvoting shares? If we establish a distinct benchmark for nonvoting shares, what should that benchmark be? While we are not inclined to proceed on a case-by-case basis, because of the administrative burdens imposed by such an approach, would those burdens be outweighed by other factors? We invite information on and analysis of the treatment of nonvoting shareholders in other attribution rules we administer and whether these rules are relevant in the broadcast multiple ownership context. VI. Partnership Interests 55. We generally attribute all partnership interests, except for sufficiently insulated limited partnership interests, regardless of the degree of equity holding, because we determined that the power and responsibility of partners to collectively or individually conduct the affairs of the partnership was a significant enough relationship to attribute ownership. There is no apparent controversy regarding our rule to attribute all general partnership interests, and we do not intend to revisit that rule. We currently exempt from attribution those limited partners that are sufficiently insulated from "material involvement," directly or indirectly, in the management or operation of the partnership's media related activities, upon a certification by the licensee that the limited partners comply with specified insulation criteria. Limited partnership interests that are not insulated are attributable regardless of the amount of equity held. We seek comment on the effectiveness of our current insulation criteria for limited partnership interests. Are additional insulation criteria necessary to assure that the goals of the attribution rules are achieved? Or, to the contrary, should the insulation criteria be relaxed to any degree, at least in certain circumstances, to attract increased capital investment or encourage new entry, and can this be done without implicating the purposes of the multiple ownership rules to encourage diversity and competition? If relaxation is justified, in what ways should the insulation criteria be relaxed? 56. Business Development Companies and Other Widely-Held Limited Partnerships. In the Capital Formation Notice, we proposed to relax insulation criteria with respect to business development companies organized as limited partnerships. Because these limited partnerships contain features that may conflict with our insulation criteria, based on federal and state securities regulatory requirements, our current rules may inhibit their use. Most importantly, under both federal and state regulatory schemes, limited partners in business development companies must be afforded the right to vote on the election and removal of general partners. The Commission's insulation criteria, in contrast, require the absence of such rights (in conjunction with other insulation criteria) to support a presumption that the limited partners are sufficiently insulated from material involvement of the media-related activities of the partnership. We therefore requested comment on whether we should relax the insulation criteria applicable to these widely-held limited partnerships so as to eliminate, as much as possible, the current conflict with state and federal securities laws. Alternatively, we asked whether we should combine an equity ownership standard specific to these partnerships with a more limited relaxation of specific insulation requirements. 57. In the Capital Formation Notice, we also asked for comments on whether we should modify the insulation criteria applicable to all "widely-held" limited partnerships to recognize insulation where limited partners hold an insignificant percentage of the total interests in the partnership. We asked whether a 5 percent or other ownership benchmark would be appropriate in certain circumstances. 58. We have received comments on the issues raised in the Capital Formation Notice. Several parties filed comments in favor of a modification of the Commission's insulation criteria with respect to widely-held limited partnerships and business development companies organized as widely-held limited partnerships to make Commission policy consistent with state and federal securities laws applicable to such entities by allowing limited partners to elect or remove general partners. They argued that allowing these specific voting rights will not result in limited partners of these entities becoming materially involved in the affairs of the partnership in light of the facts that: (1) the Commission would retain other existing insulation criteria which restrict the ability of limited partners to become materially involved in the operations of the partnership's media investments; and (2) the widely-held nature of the limited partnerships involved make it almost impossible that the limited partners could use their voting rights to exercise control over the general partners. 59. These commenters generally believed that widely-held limited partnerships possess characteristics that distinguish them from other investment vehicles and will ensure that limited partners will not be materially involved in station operations. Thus, they believe that widely-held limited partnerships should be subject to a distinct benchmark, or, in the alternative, should be completely exempt from attribution. They also argued that the insulation criteria should be amended for all limited partnerships, regardless of size, to allow non-insulated limited partners (without regard to whether the partnership is widely-held) to hold equity interests below 20 percent without attribution. In this regard, Prudential Insurance Company of America ("Prudential") noted that, although business development companies and widely-held limited partnerships are relatively new forms of investment vehicles, the choice of business organization -- corporation or partnership -- is determined based on tax considerations, not on the degree of participation or influence sought to be acquired. Thus, Prudential claims that either organizational form can be constructed to incorporate the desired level of influence. Prudential further maintained that there is no material difference in the participation and/or voting power of a 20 percent limited partnership interest and a 20 percent voting stock interest, and that this is true whether or not the partnership interest or the stock is in a widely-held or closely-held organization. 60. We seek additional comments in this area. In particular, we would like updated information and additional empirical information on the growth and prevalence of business development companies and widely-held limited partnerships as investment vehicles generally, as well as applied to the broadcast industry in particular, including the percentage of equity typically represented by their investment. In this regard, it will be helpful for commenters to discuss with specificity the operation of business development corporations and widely-held limited partnerships and whether the existing insulation criteria have hindered capital flow from these entities to licensees. We note, however, that we do not intend to revisit our previous decision to attribute all general partnership interests without reference to an ownership benchmark. 61. We ask parties to address the standards that could be used to define widely-held limited partnerships eligible for application of any revised insulation criteria. We specifically seek comment on whether there is anything inherent in the nature of state or federal regulation of business development companies that would insure that they remain widely held and whether such a guarantee, if it exists, is an adequate substitute for any of our current insulation criteria. Parties may also wish to offer additional suggestions for defining widely- held limited partnerships that reflect our concerns that such entities be used exclusively for investment purposes. 62. We also seek additional information, supported by empirical data, on whether we should revise our decision, on reconsideration of the Attribution Order, not to adopt an equity benchmark for noninsulated limited partnerships. In that decision we determined that an equity benchmark should not apply to limited partnerships because, among other reasons, the powers of a limited partner are not necessarily dependent upon the extent of his or her equity holdings. Further, the partners in a limited partnership largely have the power themselves to determine the rights of the general partners, and these may therefore vary in terms of whether they may participate in partnership affairs. Based on these factors, the Commission decided to apply insulation criteria to limited partnerships, instead of applying an equity benchmark. We are not inclined to change this approach based on the record compiled thus far. If parties disagree with this conclusion, they must provide us with more data and analysis to demonstrate that our earlier decision is no longer valid or effective. 63. In this respect, we seek information on the financial and legal structures of limited partnerships to enable us to determine whether there is a uniform equity level below which we need not be as concerned or need not be concerned at all with the application of the insulation criteria. In this regard, should equity interests be attributable in a manner similar to the benchmarks applicable to general voting stock interests -- for example, equity interests below a certain percentage of the total equity would be nonattributable, and those above a certain percentage creating a presumption of attribution -- subject to a noninvolvement certification? Should equity share be defined by the amount of cash contribution, the share of proceeds, or rights on dissolution? If the first, how do we evaluate contributions in the form of services? If the power of a limited partner is not related to his proportional partnership share (which is the premise of the current rules), is there a partnership size that would obviate the power of any one partner, such that ownership should not be attributed to any partner, regardless of his/her share? We also ask whether other state and federal regulations might provide guidance in this area, and/or the extent that such regulations might provide sufficient protections so as to make additional Commission regulations redundant. In this regard, we request estimates, supported by economic or other studies that provide their basis, of how much additional capital might be made more readily or cheaply available to the broadcast industry by adoption of any of these approaches, as well as how such capital is likely to be distributed. VII. Limited Liability Companies and Other New Business Forms 64. In this proceeding we also seek comment as to how we should treat, for attribution purposes, the equity interest of a member in a limited liability company or LLC, a relatively new form of business association permitted and regulated by statute in at least 45 states. LLCs are, in general, unincorporated associations that possess attributes both of corporations and partnerships. We have recently received TV and radio assignment applications where parties have argued that we should exempt certain owners of an LLC from attribution, either because they should be treated as nonvoting shareholders or because they should be treated as fully-insulated limited partners. So that we do not indefinitely delay processing of pending applications, we plan to process them on a case-by-case basis until this rule making is completed, using the tentative proposal delineated in paragraph 69 infra as our interim policy, including the special exception for minorities discussed therein. 65. These requests raise important questions as to the application of our attribution rules, and we invite comment as to how we should treat LLCs, and other new business forms, such as Registered Limited Liability Partnerships ("RLLPs"), as well as any other new business forms, that may arise in the future for attribution purposes. Any approach we take with respect to LLCs and similar hybrid entities must ensure that exemption from attribution is granted only where there are sufficient assurances that the exempted owner is adequately insulated from control of the entity. In addressing the attribution of LLCs, we hope to delineate the principles to be applied and express them in general terms that we can apply to new business forms that appear in the future. We invite comment as to the form and content of any general principles that may be distilled from our analysis of attribution for LLCs. 66. The specific attributes of LLCs may vary, since their form is regulated by state statutes, and there is, as yet, no uniform state LLC statute. LLCs are, however, generally intended to afford limited liability to members, similar to that afforded by the corporate structure, while also affording the management flexibility and flow-through tax advantages of a partnership, without many of the organizational restrictions placed on corporations or limited partnerships. 67. Of greatest significance with respect to our attribution rules is the fact that, depending on the requirements of the applicable state statute, LLCs generally afford their members broad flexibility in organizing the management structure and permit members to actively participate in the management of the entity without losing limited liability. Thus, with some variation depending on the applicable statute, LLCs may be organized with centralized management authority residing in one or a few members, or delegated to a nonmember, or, alternatively, all members may share management authority. 68. Since the LLC is a relatively new business form, we have not had the occasion before the recently filed applications to rule on the issue of how we should treat LLCs under our attribution rules, i.e., to what degree and under what circumstances we should treat participation as a member of an LLC as a cognizable interest subject to the multiple ownership limits. We have also not had the occasion to rule on RLLPs. Accordingly, we invite comment as to what attribution criteria we should apply to LLCs and RLLPs. We also invite comment as to the advantages of LLCs, in general, and also, in particular, the impact on minority and female ownership opportunities. 69. We tentatively propose to treat LLCs and RLLPs as we now treat limited partnerships. Membership in an LLC or RLLP would be treated as a cognizable interest for multiple ownership purposes unless the applicant certifies that the member is not materially involved, directly or indirectly, in the management or operation of the media-related activities of the LLC or RLLP. We propose that such certification should be based on the criteria specified in our Attribution Reconsideration and Attribution Further Reconsideration. We note, however, that applying limited partnership attribution criteria to LLCs would result in attributing all investors that may provide programming or other services to the LLC. In this regard, our recent experience suggests that such arrangements have been central to proposals that might significantly advance minority ownership of broadcast facilities. Accordingly, we seek comment on whether we should provide an exception to our tentative proposal, on a case-by-case basis, where doing so would advance our policy of enhancing opportunities for broadcast station ownership by minorities. 70. With respect to our tentative proposal to treat LLCs as we now treat limited partnerships, we invite comment on whether the insulating criteria developed with respect to limited partnerships are sufficient to insulate members of LLCs and RLLPs or whether other criteria would be more effective. We propose to adapt the criteria to conform to the specific LLC or RLLP organizational forms without changing any underlying substantive requirements, and we invite comment as to how we should do so. 71. We are not inclined to treat LLCs as we currently treat corporations, exempting from attribution the interests of "nonvoting" shareholders without regard to the presence or absence of insulating provisions in an operating agreement. This interim view reflects both our relative lack of experience with this new business form and also our concern that there are no requirements intrinsic to this business form to require members to be uninvolved in the management of the business, absent insulation provisions agreed to by them. If, however, commenters raise significant policy reasons why we should alter this interim view, we will consider those reasons. We also invite comment as to what approaches we should take to LLCs and RLLPs should we neither adopt the equity benchmark for partnerships nor retain the existing attribution standards. We also request comment on whether there are differences between LLCs and/or RLLPs and limited partnerships such that we should not treat the former entities as we treat limited partnerships. 72. We invite comment on whether, if we adopt the certification approach with respect to LLCs, we should also require parties to file copies of the organizational filings and/or operating agreements with the Commission when an application is filed. If so, what, if any, confidentiality concerns exist, and how should they be addressed? Our justification for any such possible filing requirement is that there is no uniform LLC statute, and the organizational variation among such entities may be broad. Alternatively, we could retain the discretion to require such a filing on a case-by-case basis, where we find it warranted. 73. If we adopt, as our attribution standard, an ownership benchmark applicable to limited partnerships, as discussed above, we invite comment on whether it would be appropriate to apply that benchmark to LLCs and RLLPs as well. 74. We seek comment on the following questions based on our proposed treatment of LLCs and RLLPs and we invite commenters to suggest alternative proposals. If we relax insulation standards for widely-held limited partnerships, as proposed in the Capital Formation Notice and discussed above, should we apply these changes to LLCs and RLLPs? We invite comment as to whether we should take a uniform approach to widely-held LLCs, RLLPs, and "business development companies." Do these entities have similarities in organization and/or function that would mandate such similar treatment or are there significant distinctions? Alternatively, do the policy goals discussed in the Capital Formation Notice apply with respect to LLCs and RLLPs so as to justify such a similar approach? If a uniform approach is warranted, what should that approach be? 75. Should we treat all LLCs the same or differentiate those with centralized management from those with decentralized management? In LLCs where all management authority has been vested in nonmembers who are selected by the members, should the managers be treated, for attribution purposes, as equivalent to officers and/or directors of a corporation? Should we adopt an approach of exempting from attribution members with limited equity interests, regardless of lack of compliance with insulating criteria? For attribution purposes, should the percentage of "ownership" be determined by voting rights among the members, the share divisions designated by the parties, the extent of capital contribution, or by some other measure? Under our current attribution rules, we do not distinguish among partners based on the amount of equity they contribute or their share division. If the determination is made based on capital contribution, what should be done about members whose contribution is in services? How should we treat LLCs in multi-tiered vertical organizational chains? Should multipliers be applied, and, if so, under what circumstances? VIII. The Cross-Interest Policy and Multiple Business Interrelationships 76. We also incorporate in this proceeding the pending issues raised in the Further Notice of Inquiry/Notice of Proposed Rule Making in MM Docket No. 87-154 ("Cross- Interest Notice") with respect to existing aspects of the Commission's cross-interest policy. That policy prevents individuals from having "meaningful" interests in two broadcast stations, or a daily newspaper and a broadcast station, or a television station and a cable television system, when both outlets serve "substantially the same area." We also seek comment regarding the appropriate treatment of nonequity financial interests and multiple business interrelationships between licensees. 77. We review these relationships in light of the fundamental economic principle that the conduct and control of business organizations may at times be influenced by nonequity interests. In particular, debtholders may in particular circumstances be in a position to exert influence over day-to-day management of a firm, especially when coupled with other interests. In addition to reviewing the remaining aspects of our cross-interest policy, we review issues raised by such interests and other multiple business interrelationships, and inquire whether case-by-case oversight of these interests and the remaining cross-interest relationships is necessary. A. The Cross-Interest Policy 78. Background. The cross-interest policy originally developed in the 1940s as a supplement to the "duopoly" rule, a multiple ownership rule which then prohibited the common ownership, operation, or control of two stations in the same broadcast service serving substantially the same area. At that time, either actual working control or ownership of 50 percent or more of the stock of a licensee was necessary to trigger the "ownership, operation or control" requirement of the duopoly rule. Thus, the original local ownership restrictions did not encompass minority stock ownership, positional interests (such as officers and directors), and limited partnership interests. The cross-interest policy was developed to address the competitiveness and diversity concerns created when a single entity held these types of otherwise permissible interests in two (or more) competing outlets in the same market. 79. The cross-interest policy evolved almost entirely through case-by-case adjudication, and through this process the following came to be viewed as constituting "meaningful" interests subject to the policy: key employees, joint ventures, nonattributable equity interests, consulting positions, time brokerage arrangements, and advertising agency representative relationships. The cross-interest policy did not prohibit these interests outright, but required an ad hoc determination regarding the nonattributable interests at issue in each case. 80. In 1987, the Commission initiated a comprehensive review to assess the continuing need for the cross-interest policy in light of the increasingly competitive environment facing the broadcast industry and the 1984 revisions to the Commission's attribution rules. Based on this review, the Commission issued a Policy Statement limiting the scope of the cross-interest policy so that it would no longer apply to consulting positions, time brokerage arrangements and advertising agency representative relationships. This decision was based on a number of factors. First, changes in our ownership and attribution rules had to a large extent superseded cross-interest regulation with respect to the relationships that most significantly affected competition and diversity. Second, the record suggested that the cross-interest policy may be impeding the ability of broadcasters to compete in today's multimedia market by possibly limiting their ability to adopt more efficient forms of organization. Third, there had been enormous growth in the number and variety of media outlets since the cross-interest policy was first established. Consequently, the media marketplace had become significantly more competitive and diverse, diminishing the need for continued cross-interest regulation to achieve these objectives. Fourth, there were numerous alternative safeguards, such as federal and state antitrust laws, fiduciary duties and private contract rights, which addressed the same competition and diversity concerns that formed the basis for the cross-interest policy. In light of these factors, the Commission determined that the burden and uncertainty created by continued cross-interest regulation of consulting positions, brokerage arrangements, and advertising agency representative relationships could no longer be justified. 81. Current Aspects of the Cross-Interest Policy. Although we indicated that the foregoing factors justified elimination of certain aspects of the cross-interest policy, we issued the Cross-Interest Notice to seek further comment concerning key employees, nonattributable equity interests, and joint ventures. We solicited comment on whether retention of the remaining cross-interest policies was necessary to prevent anticompetitive practices, whether alternative deterrent mechanisms exist to assure competition and diversity, and whether continued regulation of relationships not specifically addressed by the Commission's attribution rules is necessary. We also questioned whether regulatory oversight of one or more of these interests should be limited to geographic markets with relatively few media outlets. As described below, only five comments and reply comments were filed in response to the Cross-Interest Notice. 82. Key employee relationships. The cross-interest policy has generally prohibited an individual who serves as a key employee, such as general manager, program director, or sales manager, of one station from having an attributable ownership interest in or serving as a key employee of another station in the same community or market. The application of the cross-interest policy in these situations is premised on the potential impairment to competition and diversity and the apparent conflict of interest arising from the ability of key employees to implement policies to protect their substantial equity interest in the other station. The majority of commenters urged the Commission to eliminate the cross-interest policy relating to key employees. They contended that key employees, particularly in smaller corporations, are frequently also officers, directors, or cognizable shareholders and, therefore, are regulated by the current attribution rules. Moreover, to the extent that key employees are not restricted by the attribution rules, these commenters asserted that they are obligated to act in the best interests of their employer and to avoid potential conflicts of interest. According to these commenters, internal conflict of interest policies and common law fiduciary duty and contract remedies ensure this. Commenters also maintained that licensees have an incentive to police potential employee conflicts of interest given the competitive marketplace in which they operate. CFA/TRAC and London Bridge Broadcasting, Inc., on the other hand, urged the Commission to retain the cross-interest policy as it applies to key employees, contending that the influence of key employees on station operations is akin to that of station owners, and therefore they should be treated similarly for purposes of attribution. These parties also questioned the efficacy of the conflict of interest policies and other remedies in deterring abuse. 83. Nonattributable equity interests. The relationship proscribed by the cross-interest policy typically involves an individual who has an attributable interest in one media outlet and a substantial nonattributable equity interest in another media outlet in the same market. The Commission's concern with these relationships has been that the individual could use the attributable interest in one media outlet to protect the financial stake in the other media outlet, thus impairing arm's length competition. (Two or more separate non-attributable interests in a market are not proscribed by this policy, as neither gives rise to the potential to influence station operations that would concern us.) The majority of commenters addressing this issue urged the Commission to eliminate application of the cross-interest policy to nonattributable equity interests. These parties questioned the continued need for cross- interest review in light of the amended attribution provisions of the multiple ownership rules. According to these commenters, any residual concerns not covered by the Commission's ownership rules can be deterred by the competitive marketplace as well as remedies provided by private contracts, federal and state antitrust laws, and fiduciary duties. These parties further maintained that the ad hoc nature of the cross-interest policy imposes administrative burdens and creates uncertainty, impeding the ability of broadcasters to raise capital. In contrast, CFA/TRAC urged the Commission to retain the cross-interest policy as it applies to nonattributable equity interests, arguing that this policy continues to serve an important role and that the uncertainty produced by ad hoc application of the policy is not as great as other commenters indicate. 84. Joint venture arrangements. The cross-interest policy has prevented two local broadcast licensees from entering into joint associations to buy or build a new broadcast station, cable television system, or daily newspaper, in the same market. These joint ventures have triggered cross-interest scrutiny because the successful operation of the joint venture was thought to require a cooperative relationship between otherwise competing stations, and this would impair competition in the local market. Most of the commenters responding to the Cross-Interest Notice urged the Commission to eliminate cross-interest review of joint ventures. In support of this position, the commenters argued that cross- interest regulation of joint ventures has been largely displaced by the current attribution rules. They maintained that where the interests involved are not attributable, such interests lack the requisite potential for influence to warrant regulatory scrutiny. These parties also asserted that the marketplace is sufficiently competitive to deter abuse in this area, and that the antitrust laws provide an additional safeguard. Again, CFA/TRAC took issue. It argued that continued regulation of joint ventures pursuant to the cross-interest policy is necessary, especially given the Commission's relaxation of the multiple ownership rules. CFA/TRAC questioned whether joint venturers will compete vigorously at all times, and argued that "advertising and promotion practices, sales territories and audience selection -- not to mention cross-interest -- can complement the interests of joint venturers." 85. Discussion. The commenters supporting the elimination of the remaining aspects of the cross-interest policy put forth four general arguments: (1) The cross-interests that implicate diversity and competition concerns are now covered by our multiple ownership rules; (2) The video entertainment marketplace has become increasingly competitive, thus diminishing the need for regulatory oversight of cross-interests; (3) Alternative remedies, such as the antitrust laws and internal conflict of interest policies, will serve to deter abuses stemming from cross-interests; and (4) The cross-interest policy imposes significant burdens in terms of administrative costs and uncertainty, chilling investment in the broadcast industry. We believe each of these arguments has merit, and continue to question the continuing need for our cross-interest policy in its present form. To the extent aspects of the policy no longer serve the public interest, they should be eliminated; we also strive to clarify aspects of the policy that may warrant continued enforcement. 86. For a number of reasons, however, we believe we need to develop a more complete and updated record in our review of the cross-interest policy as applied to key employees, joint ventures, and nonattributable equity interests. First, it is appropriate to afford parties the opportunity for further comment concerning the issues raised in the Cross- Interest Notice in light of the review of the attribution rules now underway. Second, after soliciting comments in the Cross-Interest Proceeding, we subsequently relaxed our radio ownership rules in a number of respects, and today propose to relax our television ownership rules. There is an important interplay between the cross-interest policy and our ownership and attribution rules, given that both seek to address the same competition and diversity concerns. It is consequently necessary as a general matter to update the record to ensure that changes in these interrelated policies are coordinated. Moreover, as set forth below, we also seek comment regarding whether multiple cross interests and business relationships between stations, when viewed in combination, raise diversity and competition concerns, an issue that the commenters did not address. 87. On a more specific level, we also seek comment regarding a number of issues either not addressed in the comments or raised by the comments themselves. As set forth below, these issues involve the four principal arguments for modifying the cross-interest policy as well as the possible means of narrowing the policy to the extent we determine that certain aspects should continue to be enforced. 88. As noted above, a number of parties argued that our ownership and attribution rules have supplanted the remaining aspects of our cross-interest policy that implicate diversity and competition concerns. It is true that our attribution rules have evolved to the point where they now apply to a number of interests formerly covered only by the cross- interest policy. We seek comment, however, on whether this argument is undermined by the proposed changes to our attribution rules. For example, would there be a heightened need for the cross-interest policy as it applies to nonattributable equity interests if we raise our attribution benchmark for voting stock from 5 percent to 10 percent? Similarly, will relaxation of our radio and television ownership rules require us to take a more cautious approach in modifying our cross-interest policy? To be sure, a number of parties argued that our ownership and attribution rules reflect the Commission's expert judgment regarding what confers sufficient influence and control over station operations to require regulatory intervention. But while this generally will be the case, there remains the question of whether particular situations warrant case-by-case review to determine whether a cross- interest poses diversity and competition concerns. For example, while a nonvoting stock interest may not generally raise the likelihood of influence over a station's operations and therefore is not attributable, does such an interest require continued oversight under the cross-interest policy when it is a sizable investment or the majority equity interest in the licensee, or when the holder already has attributable interests in the maximum number of stations in the market? We seek comment with respect to these issues, and request commenters to be specific in defining the particular situations and harms they may believe require continued application of the cross-interest policy. 89. We also seek further comment on the argument that the increased competition facing broadcasters eliminates the need for the cross-interest policy. We certainly agree as a general matter that broadcasters are facing increased competition; indeed, since we initiated our cross-interest inquiry the video entertainment marketplace has become even more competitive, with this trend expected to continue as the communications industry undergoes further changes with the emergence of new technologies. But we seek comment on whether there are smaller markets with an insufficient number of media outlets to assume that competition will deter the abuses our cross-interest policy seeks to prevent. If parties believe this to be the case, we ask them to define the size and nature of the markets that raise such concerns. 90. Commenters favoring the elimination of the remaining aspects of the cross- interest policy point to the burdens and uncertainty it creates. Given the nature of case-by- case review, enforcement of the policy does impose administrative burdens, both on the Commission and on applicants, and can lead to results that are difficult to predict in advance. We ask parties, however, to submit, if possible, evidence to support the assertion that the cross-interest policy has impeded the ability of broadcasters to raise capital. We also seek comment regarding the extent, if any, of a shortage of key employees, especially in smaller markets, that may be exacerbated by our cross-interest policy. 91. In addition, CFA/TRAC raised several questions regarding the alternative remedies that other parties maintain lessen the need for the remaining aspects of our cross- interest policy. How common, and how effective, are the internal conflict of interest policies cited by CBS and other parties as providing a means to deter abuses stemming from key employee cross-interests? While the antitrust laws deter anticompetitive conduct, do they address the diversity concerns behind the cross-interest policy? We seek comment as to these questions and more generally as to the effectiveness of these alternative remedies. 92. Finally, we received no comment on ways to clarify and possibly narrow the cross-interest policy in the event we determine that continued enforcement is appropriate. While most parties did not address this issue because they supported complete elimination of the policy, even commenters who supported continued enforcement offered no guidance other than to state generally that there is "ample room for streamlining." We consequently seek specific suggestions as to how we might clarify the cross-interest policy. We also seek comment on the following means of narrowing the policy: (1) Should we limit the application of the cross-interest policy to smaller markets where competition and diversity are of particular concern, and, if so, how should we define these markets? (2) Should we enforce the cross-interest policy only where the cross-interest, if attributable under our attribution rules, would violate the ownership rules? (3) With respect to nonattributable equity interests, should we limit review only to those interests reaching a certain level of ownership, or when those interests exceed or reach a certain percentage of the licensee's voting equity? B. Non-Equity Financial Relationships and Multiple Business Interrelationships 93. In our review of the cross-interest policy, we have focused on each cross-interest individually. But broadcasters in particular markets may also at times enter into a number of different business relationships between themselves. Such interrelationships may be spurred by a number of factors, including the increasing sophistication of the financial markets and the incentive for broadcasters to enter into cooperative arrangements to meet the challenges of the evolving communications industry. While we recognize the important role cooperative arrangements can play, we seek comment as to whether multiple "cross-interests" or otherwise nonattributable interests, when viewed in combination, raise diversity and competition concerns warranting regulatory oversight. 94. The nature of broadcaster interrelationships can vary widely. They can take the form of a combination of nonattributable interests, such as debt and nonvoting equity. Or, shareholders with otherwise nonattributable interests can combine those interests via voting agreements or other contractual relationships or business relationships. Such interrelationships may also involve family relationships in conjunction with other interests. Many of these business interrelationships serve legitimate purposes and, indeed, have been encouraged by the Commission. For instance, in its review of the radio ownership rules, the Commission determined that it would continue to allow separately owned radio stations to function cooperatively in terms of advertising sales, technical facilities, formats and other aspects of station operation as long as each licensee retains control of its station and complies with the Communications Act, the Commission's rules and policies and the antitrust laws. In addition to permitting such joint arrangements, the Commission also continued to allow time brokerage agreements, also referred to as local marketing agreements ("LMAs"), between radio stations, although it imposed certain restrictions on such agreements if the stations involved operated in the same local market. Television broadcasters are also permitted to enter into LMAs, although we have solicited comment as part of our review of the television ownership rules as to whether we should regulate these arrangements as we have in our radio rules. Television broadcasters also are no longer prohibited by our rules from engaging in combination advertising and joint sales practices. 95. We do not intend to reopen our decisions in our radio ownership proceeding concerning radio joint arrangements or time brokerage arrangements. Nor do we wish to reopen our previous decision regarding joint sales practices in the television industry, or to incorporate here the issues we have raised in our pending television ownership proceeding concerning television time brokerage agreements. We do, however, seek comment as to whether ostensibly separately owned stations could so merge their operations, through a variety of joint enterprises or cooperative agreements, perhaps in conjunction with other nonattributable interests, and thereby create such close business interrelationships as to implicate our diversity and competition concerns. 96. For instance, there may be circumstances where a substantial debtholding should trigger a cross-interest analysis when it is accompanied by a number of other close business interconnections. As stated at the outset, in devising our attribution rules we seek to identify those interests that convey to their holders a realistic potential to influence the operations of the licensee in core areas such as programming and competitive practices, while balancing our concern to avoid unnecessary and costly regulatory intervention by minimizing the attribution of noninfluential interests. Our theoretical analysis recognizes that holders of non-equity interests can have influence on a licensee in ways that may be of concern. Along those lines, we recognize that debt and other contractual relationships can have the associated potential to exert influence on core operational decisions of the licensee. There is evidence suggesting that the distinction between debt and equity based on voting rights is no longer clear, and we recognize that debtholders have, for some time, required borrowers to meet certain financial conditions or face the prospect of forced bankruptcy. While corporations have no obligation to give debtholders voting rights, except in bankruptcy, it is not unusual for a corporation s bankers to have representation on the firm s board of directors. (In such cases, of course, attribution attaches to the directorship.) 97. In 1984, we decided to exclude debt from attribution on the supposition that attributing debt would severely restrict capital sources for broadcasters, and because debt financing was the least likely of all financing sources to involve an interest that implicates the multiple ownership rules. We believe, at this point, that we should continue to exclude such relationships, standing alone, from attribution under the multiple ownership rules because any other approach would, we believe, severely impair the ability of the broadcasting industry to obtain necessary capital. We would neither wish to inhibit such a key means of obtaining capital nor to disrupt existing expectations and relationships to such a degree. If any commenters disagree with this conclusion, we invite them to demonstrate to us that the benefits of extending our attribution rules to debt and other similar contractual relationships outweigh the significant drawbacks we have delineated. 98. While we do not intend to reconsider our 1984 decision not to recognize debtholdings per se as attributable interests, there may be circumstances where debtholding, accompanied by a number of other close business interconnections, should be considered to be attributable. The debtholder, for example, a licensee of another station in the same market, may have also entered into a joint sales or other cooperative arrangement with the debtor station. The identity of the debtholder may be of particular significance: debt financing by institutional lenders may not be as significant to our concerns as debt financing by a multi-station owner, or by the seller of a station, or by the owner of another station in the same market. With respect to institutional lenders, it has been our belief that the nature of such institutions ensures that any risk of attempts to influence or control the licensee debtor will be remote and minimal, and it is therefore unnecessary to consider such interests as cognizable. Moreover, we understand that debt financing by banks is a critical, widely- used, source of financing, that institutional lenders are limited in number, and that it would therefore harm the industry and the public if such debt were found cognizable for purposes of our multiple ownership rules. Another important factor would be the amount of the debt and whether the terms of the credit agreement provide the debtholder leverage over the day-to- day operations of the licensee. 99. We seek comment regarding the potential for debt or other nonattributable interests, in conjunction with a series of cooperative or contractual arrangements, to provide their holders the ability to influence the day-to-day operations of a licensee, thus implicating our competition and diversity concerns. More generally, we seek comment regarding the possibility that our ownership and attribution rules may be underinclusive in certain cases, failing to capture particular concentrations or conglomerations of ownership or influence that undermine diversity and competition. A combination of otherwise nonattributable interests and business relationships, while not raising any concern when viewed in isolation, could possibly add up to create sufficient influence to warrant attribution. We seek comment as to the extent, if any, of such underinclusiveness in our rules, and whether there are certain types of combinations of business interrelationships, such as the debtholding relationship described above, that should be of particular concern. 100. Any regulation of such interrelationships, given their varying forms, would require case-by-case review in the context of applications for new stations or transfer or assignment applications. We seek comment as to whether the burdens and uncertainty created by such review would be outweighed by the perceived benefits of addressing the concerns in this area, and whether these concerns are best addressed in the context of our real-party-in-interest rules and de facto transfer of control challenges. We also seek comment as to whether any review of such close business interrelationships should be limited to those markets where the lack of competition and diversity is a particular concern, and how such markets should be defined. In addition, should we focus on combinations of business interrelationships among stations in the same market only, or do inter-market relationships among stations also warrant review? We wish to emphasize that in considering these issues we are sensitive to the need not to inhibit capital flow into the broadcast industry or unduly disrupt existing financial arrangements. IX. CONCLUSION 101. By this Notice of Proposed Rule Making, we request comments on the many issues pertinent to our analysis of whether the current attribution rules continue to be effective in serving their goals or whether changes to the rules are required. Additionally, we request comment on how to treat Limited Liability Companies and Registered Limited Liability Partnerships for attribution purposes. The attribution rules are a critical enforcement mechanism for the Commission as it applies its multiple ownership rules. We expect that our review of these rules will be thorough and far-reaching, as discussed herein, and we ask commenters to give serious and thoughtful consideration, supported by empirical analysis and rigorous economic theories, to the important issues raised herein. X. ADMINISTRATIVE MATTERS 102. Pursuant to applicable procedures set forth in Sections 1.415 and 1.419 of the Commission's Rules, 47 C.F.R. Sections 1.415 and 1.419, interested parties may file comments on or before April 17, 1995, and reply comments on or before May 17, 1995. All relevant and timely comments will be considered by the Commission before final action is taken in this proceeding. To file formally in this proceeding, you must file an original plus four copies of all comments, reply comments, and supporting comments. If you want each Commissioner to receive a personal copy of your comments, you must file an original plus nine copies. You should send comments and reply comments to Office of the Secretary, Federal Communications Commission, Washington, D.C. 20554. Comments and reply comments will be available for public inspection during regular business hours in the FCC Reference Center (Room 239), 1919 M Street, N.W., Washington, D.C. 20554. 103. This is a non-restricted notice and comment rulemaking proceeding. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided they are disclosed as provided in the Commission Rules. See generally 47 C.F.R. Sections 1.1202, 1.1203, and 1.1206(a). 104. Additional Information. For additional information on this proceeding, contact Mania K. Baghdadi (202-632-7792), or Robert Kieschnick (202-632-6302), Mass Media Bureau. 105. Initial Regulatory Flexibility Analysis. See Appendix attached. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APPENDIX Initial Regulatory Flexibility Analysis I. Reason for the Action: This proceeding was initiated to obtain comment on whether the Commission's broadcast attribution rules continue to be effective in serving their intended goals, and on whether they should be revised in certain areas to more effectively achieve those goals. II. Objective of this Action: The actions proposed in the Notice are intended to assure that the Commission's broadcast attribution rules effectively implement the Commission's broadcast multiple ownership rules by identifying those interests that have the potential to influence the licensee in core operating areas, such as programming. III. Legal Basis: Authority for the actions proposed in this Notice may be found in Sections 4,303, and 310 of the Communications Act of 1934, as amended, 47 U.S.C.  154, 303, 310. IV. Reporting, Recordkeeping and Other Compliance Requirements Inherent in the Proposed Rule: If the attribution rules are changed, the Commission would have to change the reporting requirements in the Commission's annual ownership report form, accordingly, as the attribution rules determine which broadcast interests must be reported to the Commission and are counted for multiple ownership purposes. V. Federal Rules Which Overlap, Duplicate or Conflict with the Proposed Rule: None. VI. Description, Potential Impact and Number of Small Entities Involved: Approximately 11,000 existing television and radio broadcasters of all sizes may be affected by the proposals contained in this decision. After evaluating the comments in this proceeding, the Commission will further examine the impact of any rule changes on small entities and set forth our findings in the Final Regulatory Flexibility Analysis. VII. Any Significant Alternatives Minimizing the Impact on Small Entities and Consistent with the Stated Objectives: The Notice solicits comments on a variety of alternatives. As required by Section 603 of the Regulatory Flexibility Act, the Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the expected impact on small entities of the proposals suggested in this document. Written public comments are requested on the IRFA. These comments must be filed in accordance with the same filing deadlines as comments on the rest of the Notice, but they must have a separate and distinct heading designating them as responses to the Regulatory Flexibility Analysis. The Secretary shall send a copy of this Notice of Proposed Rule Making, including the IRFA, to the Chief Counsel for Advocacy of the Small Business Administration in accordance with paragraph 603(a) of the Regulatory Flexibility Act (Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C. Section 601 et seq. (1981)).