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Stockholding BenchmarksLLALLLLLLLLLL17  Y''4A.` ` Voting StockLLALLLLLLLLLLLL18  Y(4B.` ` Voting Stock: Passive InvestorsLLALLLLLL47  Y(4C.` ` Minority Stockholdings in Corporations LLALLLL51"(0*0*0* '"Ԍxwith a Single Majority Shareholder  c_-xD.` ` Nonvoting StockLLLLLLLLLLLL52  cH-VI. xPartnership InterestsLLLLLLLLLLLLLL55  c1-VII. xLimited Liability Companies and Other New Business FormsLL64  c -VIII.xThe CrossInterest Policy and Multiple Business  c -xInterrelationships LLLLLLLLLLLL76  c -xA. The CrossInterest PolicyLLLLLLLLLL78  c -xB. NonEquity Financial Relationships and Multiple BusinessLL93 xInterrelationships  c -IX.xConclusionLLLLLLLLLLLLLLLL101  c-X.xAdministrative MattersLLLLLLLLLLLL102 Appendix: Initial Regulatory Flexibility Analysis ` L@X` hp x (#%'0*,.8135@8:-FCC 2d 997 (1984) ("Attribution Order"), recon. granted in part, Memorandum Opinion and  c'-Order in MM Docket No. 8346, 58 RR 2d 604 (1985) ("Attribution Reconsideration"),  c-further recon. granted in part, Memorandum Opinion and Order in MM Docket No. 8346, 1  c-FCC Rcd 802 (1986) ("Attribution Further Reconsideration"). the rules by which we "define what constitutes a 'cognizable interest' for  c-the purpose of applying the multiple ownership rules to specific situations."[6 c-ԍ Attribution Order, 97 FCC 2d at 999. Generally, we do not consider interests that fall below the attribution benchmarks or those that are exempted or excluded under the attribution rules as of concern in determining whether a licensee or applicant is in compliance with our multiple ownership rules.[ 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"r 0*((n"  c-broadcast services. 6 cy-ԍ An analysis of the Commission's diversity and competition policies, discussed in connection with our review of the television multiple ownership rules, is contained in the  cK-Further Notice of Proposed Rule Making in MM Docket No. 91221 ("Review of the  c4-Commission's Regulations Governing Television Broadcasting"), FCC 94322 (adopted Dec. 15, 1994).   c-x2. A number of changes in the broadcasting industry and in other Commission Rules  c-since our last revision of the attribution rules prompt us to initiate this review. 6 c -ԍ We note that the Commission is statutorily prohibited from expending any of its appropriated funds "to repeal, to retroactively apply changes in, or to begin or continue a reexamination of the rules and the policies established to administer such rules of the Federal Communications Commission as set forth at section 73.3555(d) of title 47 of the Code of Federal Regulations, other than to amend policies with respect to waivers of the portion of section 73.3555(d) that concerns crossownership of a daily newspaper and an AM or FM radio broadcast station." Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1995, Pub. L. No. 103317, 108 Stat. 1724, 1738 (1994). Section 73.3555(d) prohibits ownership of a daily newspaper and a broadcast station in the same market. We invite comment on whether the proposed changes to the attribution rules fall within the scope of the prohibition and should be limited accordingly. First, the multiple ownership rules themselves, to which the attribution rules are related, are  c-undergoing change. We have relaxed our radio multiple ownership rules,/6 c&-ԍ Revision of Radio Rules and Policies, 7 FCC Rcd 2755 (1992), recon. granted in part,  c-7 FCC Rcd 6387 (1992), further recon., FCC 94267 (released Nov. 8, 1994), 59 Fed. Reg. 62,609 (Dec. 6, 1994), 9 FCC Rcd 7183 (1994)./ we have narrowly  cv-relaxed our radiotelevision crossownership rule,Rvk6 c-ԍ See 47 C.F.R.  73.3555, Note 7.R and, today, in a separate proceeding, we seek comments as to whether we should relax national and local multiple ownership limits for  cH-television stations, including the onetoamarket rule. HH6 c-ԍ See Further Notice of Proposed Rule Making in MM Docket No. 91221, FCC 94322 (adopted Dec. 15, 1994). We note that in two pending proceedings we sought comment on  c -certain proposed amendments to the attribution rules and our crossinterest policy. Notice of  c!-Proposed Rule Making and Notice of Inquiry in MM Docket No. 9251, 7 FCC Rcd 2654  c"-(1992); Further Notice of Inquiry/Notice of Proposed Rule Making in MM Docket No. 87 c#-154, 4 FCC Rcd 2035 (1989). We issue this Notice to update the existing record in these proceedings, expand the areas of inquiry, and consolidate pending broadcasting attribution issues into one omnibus proceeding.  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" ,0*(( " broadcasting. We wish to ensure that the attribution rules remain effective in light of the previous and proposed relaxation of the multiple ownership rules.  c-x3. 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  cv-ownership purposes.v6 c-ԍ For example, concerns have been raised recently that networks, while securing interests in stations that do not trigger attribution of an ownership interest, may nevertheless have used (nonvoting or otherwise nonattributable) equity investments to influence station affiliation  c -decisions. See Christopher Stern, "Small Investments Yield Big Benefits," Broadcasting &  c -Cable, October 17, 1994, at 26. 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. x  cb-x4. 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  c-the multiple ownership rules."S 6 c-ԍ Attribution Order, 97 FCC 2d at 999.S For purposes of the multiple ownership rules, the concept of "control" "is not limited to majority stock ownership, but includes actual working control in  c-whatever manner exercised."H 6 c)!-ԍ 47 C.F.R.  73.3555, Note 1.H We have defined "de jure" control as ownership of more than  c-50 percent of a corporation's outstanding voting stock.s  6 c#-ԍ See Attribution Order, 97 FCC 2d at 1018 n. 47; Metromedia, Inc., 98 FCC 2d 300,  c$-306 (1984), recon. denied, 56 RR 2d 1198 (1985), appeal dismissed sub nom., California  c%-Association of the Physically Handicapped v. FCC, 778 F.2d 823 (D.C. Cir. 1985).s We have determined who has "de  c|-facto" control of a licensee on a casebycase basis, looking generally for this purpose to determine who has ultimate control over a licensee's programming, financial and personnel"e 0*((l"  c-policies. 6 cy-ԍ See, e.g., Southwest Texas Public Broadcasting Council, 85 FCC 2d 713, 715 (1981);  cb-Stereo Broadcasters, Inc., 55 FCC 2d 819, 821 (1975). 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  c-to take actions to protect the investment. b6 c-ԍ See, e.g., Amendment of Multiple Ownership Rules, 18 FCC 288, 29293 (1953)  c-("1953 Multiple Ownership Rules"). 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  c-programming and other core operational decisions.T6 c: -ԍ Attribution Order, 97 FCC 2d at 1005.T  c_-x5. 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  c -means by which investment capital may be made available to the broadcast industry.e 6 cx-ԍ See, e.g., Attribution Order, 97 FCC 2d at 1020.e 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.  cy- II. Background and Current Rules  cf-  cO-x6.  The attribution rules have evolved gradually since their inception,O^ 6 c^-ԍ As noted above, the attribution rules govern application of the multiple ownership rules, which are intended to promote diversity and competition. 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 "sevenstation" 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  c-interests._ 6 c#-ԍ 1953 Multiple Ownership Rules, 18 FCC at 29293._ 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 closelyheld company, and, for companies with more than 50 voting" 0*(("  c-shareholders, all voting shares of one percent or more of the outstanding voting stock._6 cy-ԍ 1953 Multiple Ownership Rules, 18 FCC at 29394._ In addition, noting the influence of officers and directors over a licensee's daytoday 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  c-or not they held stock in the licensee.\y6 c-ԍ 1953 Multiple Ownership Rules, 18 FCC at 293.\  cv-x7. 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  c -right to vote that stock. *6 c-Ѝ Report and Order in Docket No. 15627, 13 FCC 2d 357, 363 (1968) ("1968  c-Attribution Rules"). 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  cb-(investment companies, insurance companies and bank trust departments).vb6 c-Ѝ Id. at 369 (mutual funds from 1% to 3%); Report and Order in Docket No. 18751, 34  c-FCC 2d 889, 89192 (1972) ("1972 Attribution Rules") (bank trustees from 1% to 5%);  c-Report and Order in Docket No. 20520, 59 FCC 2d 970 (1976), recon. granted in part, 65  c-FCC 2d 336 (1977), aff'd sub nom. National Citizens Committee for Broadcasting v. FCC,  c{-559 F.2d 187 (D.C. Cir. 1977) ("1976 Attribution Rules") (investment companies from 3% to 5%, and insurance companies and banks from 1% to 5%). 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.  c-x8. The attribution rules were last revised over a twoyear 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  c-agency benchmarks.c 6 cF'-Ѝ Attribution Order, 97 FCC 2d at 10031012.c That decision reflected changes in the broadcasting industry and the"0*((" 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  c-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  c_-warranted adopting a higher benchmark.W_6 c-ԍ Attribution Order, 97 FCC 2d at 101217.W  c1-III. Recent Proceedings ĐTP  c -x9.  In recent years, the Commission has instituted other proceedings that have begun  c -to reexamine the assumptions upon which the attribution rules and crossinterest policyH y6 c-ԍ The Commission's crossinterest policy prevents individuals from having "meaningful" crossinterests 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  c-same area." Notice of Inquiry in MM Docket No. 87154, 2 FCC Rcd 3699 (1987). At present, the following are viewed as "meaningful" relationships subject to the policy, which  c-is enforced on an ad hoc, casebycase basis: key employees, joint ventures, and  c-nonattributable equity interests. Further Notice of Inquiry/Notice of Proposed Rule Making in MM Docket No. 87154, 4 FCC Rcd 2035 (1989). 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  c-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  cf-implicate the attribution rules. Specifically, in 1992, in our Notice of Proposed Rule Making  cO-and Notice of Inquiry in MM Docket No. 9251, 7 FCC Rcd 2654 (1992) ("Capital  c8-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  c-historically experienced significant difficulties in securing adequate startup funding._ 6 c-!-ԍ Capital Formation Notice, 7 FCC Rcd 2654 (1992)._ We inquired as to whether we should relax our attribution benchmarks for active and passive stockholders, and modify our insulation criteria as to widelyheld limited partnerships, including business development companies organized as such. We will incorporate the record from MM Docket No. 9251 into the record of this proceeding to the extent that it is relevant": 0*((}"  c-to our consideration of the foregoing issues.D6 cy-ԍ In the Capital Formation Notice, 7 FCC Rcd at 265759, we also asked whether we could, under the Communications Act, and should, for policy reasons, permit the holding of security and reversionary interests in licenses. We will resolve that issue in a separate proceeding. D  c-x 10. We will also consider in this proceeding the comments received in response to  c-our Further Notice of Inquiry/Notice of Proposed Rule Making in MM Docket No. 87154, 4  c-FCC Rcd 2035 (1989) ("CrossInterest Notice"), in which we asked for comments as to whether we should maintain our crossinterest policy in three areas key employees, non cv-attributable equity interests, and joint ventures. In the CrossInterest Notice, we invited comment as to whether we should amend the attribution rules to incorporate the key employee portion of the crossinterest policy. We will incorporate the record from MM Docket No. 87154 into the record of this proceeding.  c -x 11. We note that this proceeding is complementary with, and will affect our actions  c -in, two rulemaking proceedings in which we have today adopted Notices: the pending rule  c -making regarding the multiple ownership rules for television stations;t 46 c-ԍ See Notice of Proposed Rule Making in MM Docket No. 91221, 7 FCC Rcd 4111  c-(1992). We have adopted a Further Notice of Proposed Rule Making in that proceeding  c-today. Further Notice of Proposed Rule Making in MM Docket No. 91221, FCC 94322 (adopted Dec. 15, 1994).t and a companion  c -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  c-industry. 6 c-ԍ Notice of Proposed Rule Making in MM Docket Nos. 94149 and 91140, FCC 94323 (adopted Dec. 15, 1994). We specifically seek comment in the latter proceeding as to whether we should relax our mass media attribution rules to help minority and womenowned 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.  c-IV. Underlying Principles ă  c-  c-x 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"R: 0*((M" 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  c-in, broadcasting companies have on their conduct.,v6 cK-ԍ The various financial claims on a broadcaster may range from the interests of various kinds of equity holders, to different debtholders, and to contractual relationships, including those with suppliers and consumers of various materials and services, such as, for example, professional managers. Each of these financial claims establishes a relationship between the claimant and the licensee that may give rise to that claimant's ability to influence, directly or indirectly, some aspect of a licensee's operation., 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.  cH-x 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  c -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. 94149 and 91140, that  c|-should be adjusted to promote access to capital for minorities and women.|6 c3"-ԍ In our companion Notice in MM Docket Nos. 94149 and 91140, we request current data regarding female ownership of mass media facilities to determine whether women are underrepresented as mass media owners.  cN-x 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"7 0*((." 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  c-comments were submitted in response to the Capital Formation Notice, and any impediments to adequate financing imposed by the current rules.  cH-x15. 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?  cb-  cK-x16. We recognize now, as we did in the Attribution Order,;K6 c-ԍ 97 FCC 2d at 1006.; 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 decisionmaking 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  cN-rather than proceeding on an ad hoc basis. Of course, we retain the discretion to treat  c7-specific factual situations on a casebycase basis. 7y6 ca -ԍ See, infra, Section VIII (seeking comments on whether casebycase oversight is necessary for certain cross interests and multiple business interrelationships). Commenters may, of course, address these basic propositions.  c- V. Stockholding Benchmarks ă  c -x17. 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"!  0*(("" 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  c-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.  c -A. Voting Stock  c -x18.  We now attribute ownership to holders of 5 percent or more of the voting shares  c -of corporations.! 6 c -ԍ 47 C.F.R.  73.3555, Note 2(a). As discussed infra  47, the benchmark for certain passive investors is 10 percent. 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  cy-percentage of the nonvoting shares that they hold.K"yb6 c-ԍ 47 C.F.R.  73.3555, Note 2(f).K  cK-x19. 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  c-industry and in the investment community.# 6 c-ԍ Attribution Order, 97 FCC 2d at 1002. For widelyheld corporations, these changes were: (1) the diminished ability of a 1 percent stockholder to exercise any influence over a widelyheld corporation, due to the general increase in the number of small shareholders; and (2) the decreasing exercise of shareholder rights by their owners due to both the growing sophistication of company management and the rising participation in the stock market by  cn-people without management sophistication. Id. at 100407. In adopting the current benchmarks, we abandoned the previous distinction between widelyheld and closelyheld corporations, finding, with respect to closelyheld corporations, that a 5% benchmark was also appropriate and would eliminate attribution for most noncontrolling and noninfluential  c"-stock interests. Id. at 100708.  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 startup  c-capital.T$6 c~&-Ѝ Id. at 1002, 100708, 1012.T In approaching the attribution benchmark issue, we looked to other federal agencies" $0*(("  c-for analogous ownership thresholds and examined other data.%6 cy-ԍ In particular, we surveyed the Commission's ownership files to determine the typical size and distribution of stockholding among licensees. Id. at 100207, 100910.  c-x20. We selected the 5 percent benchmark because, according to our examination, a 5 percent shareholder in a widelyheld 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  c1-("SEC") rules that require the reporting of ownership interests of 5 percent or greater.i&1b6 cD -ԍ Securities and Exchange Act  13(d), 15 U.S.C.  78m(d). i 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  c -identifying interests with the potential for significant influence or control.^' 6 c-ԍ Attribution Order, 97 FCC 2d at 100607, 1009. ^  c-x21. 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  c-unanimously supported raising the benchmark,(_6 c{-ԍ See Comments of A.H. Belo Corporation et al. ("Belo"), Great American Television and Radio Company, Inc. ("Great American"), National Association of Broadcasters ("NAB"), National Association of Investment Companies ("NAIC"), Canadian Imperial Bank of Commerce ("CIBC"), and the Investment Company Institute ("ICE"). Belo asserted that other federal agencies use ownership benchmarks well above 10 percent to define controlling interests of entities under their jurisdiction, although Belo did not sufficiently define the relevance of these benchmarks to the goals of our attribution and multiple ownership rules. 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 mid1980s necessitated revisions in the attribution rules. In addition, they argued that such an increase in the attribution benchmark would facilitate additional"| (0*((|" 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.  c_-x22. 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  c1-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.  c-x23. 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  c-adopting a 5 percent benchmark.W)6 c -ԍ Attribution Order, 97 FCC 2d at 100607.W We ask commenters to provide evidence that the specific  c|-conclusions we reached in the Attribution Order are no longer valid. In particular, we noted  ce-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  c7-from those prevailing when the Capital Formation Notice was adopted.[*7y6 ca -ԍ Capital Formation Notice, 7 FCC Rcd at 2655.[ Do current market  c -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?  c"-x24. With respect to the issue of facilitating increased capital investment, we seek"" **0*((#" 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.  c -x25. Commission Attribution Rules in Other Services and Attribution Rules in Other  c -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.  c -x26. 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 cb-ownership contexts, incorporate a five percent ownership benchmark.+b6 c-ԍ Unless stated otherwise, the attribution rules discussed in this section share certain characteristics: they attribute all general partnership interests, any entity that exercises actual working control, and officers and directors of the licensee. One exception to the last classification is video dialtone, in which officers and directors hold attributable interests only if they are also shareholders. 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  c-may apply it differently, but they have generally relied upon this finding in so doing.3,6 c-ԍ See, e.g., Memorandum Opinion and Order on Reconsideration and Third Further  c-Notice of Proposed Rulemaking in CC Docket 87266, FCC 94269 (released Nov. 7, 1994 )  c-("Video Dialtone Reconsideration"),  68.3 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.  c-x27. In the contexts of cable operator/broadcast network crossownership,G- 6 c"-ԍ 47 C.F.R.  76.501, Note 2.G cable  c-national subscriber (horizontal) limits,B.Q 6 c%-ԍ 47 C.F.R.  76.503(f).B and cable channel occupancy (vertical) limits,B/ 6 cF'-ԍ 47 C.F.R.  76.504(h).B the"/0*((}"  c-attribution standards are identical to those used in broadcasting.06 cy-ԍ 47 C.F.R.  76.501, Note 2. This has also long been the standard for cable/broadcast crossownership. 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  c-(for the two cable concentration attribution rules).Q1 b6 c -ԍ See Second Report and Order in MM Docket No. 92264, 8 FCC Rcd 8565, 8581,  c -859192 (1993) ("Horizontal and Vertical Limits Second Report and Order"). Moreover, in adopting the cable attribution rules, we cited the legislative history of the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act"), which suggested that the Commission adopt the broadcast criteria for the cable horizontal and vertical integration attribution rules. We also cited Section 11(f)(2) of the 1992 Cable Act, 47 U.S.C.  533(f)(2), which directed the Commission, in part, to consider the significant benefits of industry concentration, including economies of scale and increased capital investment in more and better original cable programming. Thus, in keeping with statutory intent, we balanced the costs of industry consolidation with its significant benefits. As a result, these particular attribution rules set a somewhat less restrictive standard than do some of our other recently enacted cable regulations.Q Further, Congress has suggested that the  cv-diversity rationale is relevant to cable.2v6 c=-ԍ Horizontal and Vertical Limits Second Report and Order, 8 FCC Rcd at 858384  c&-(citing Sen. Rep. No. 10292, 102d Cong., 2nd Sess. at 80, reprinted in 1992 U.S.C.C.A.N. 1133, 1213). Consequently, we deemed it appropriate to apply the broadcast attribution standards to the foregoing cable contexts.  c1-x28. 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  c -Commission considers five percent or more of a corporation's total equity (i.e., the  c -combination of both voting and nonvoting stock) as an attributable interest.3 6 c -ԍ See Report and Order and Further Notice of Proposed Rulemaking in MM Dockets  c!-No. 93215 and CS 9428, 9 FCC Rcd 4527, 466768 (1994) ("Cable Rate Valuation"). 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  c-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  cb-interests satisfy insulation criteriax4b36 cF'-ԍ The insulation criteria for limited partnerships will be discussed infra.x designed to ensure that the limited partner cannot"b40*((" influence or control the limited partnership.  c-x29. 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  c-regulated cable service.I56 c-ԍ 47 U.S.C.  543(b) & (c).I In this case, then, the issue is not merely influence or control, but, rather, whether the operatoraffiliate relationship is sufficient to create an incentive for cable operators to impose the costs of nonregulated activities on regulated cable subscribers through  c_-improper crosssubsidization.6_y6 c -ԍ Cable Rate Valuation, 9 FCC Rcd at 4659, 4668. "Crosssubsidization" describes the process by which a cable operator purchases items from its unregulated affiliates for substantial sums, then passes on the artificial "cost" to consumers; or by which the cable operator charges an extremely low price to its affiliates when the undercharges can be offset  c--by increased charges to consumers. Id. at 4664. In adopting them, we determined that widerranging attribution rules were necessary for us to meet our goals. We performed a similar analysis  c1-when we adopted identical standards for cable basic service tier rates and equipment.716 c-ԍ More stringent attribution criteria include: stock interests of five percent of greater, both voting and nonvoting; limited partnerships of five percent or more, regardless of  c-insulation; and the absence of a single majority shareholder exception. Report and Order and  ck-Further Notice of Proposed Rulemaking in MM Docket No. 92266, 8 FCC Rcd 5631, 5788  cT-n. 601 (1993) ("Rate Order").  c -x30. 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  c -competition in general. Regarding the cable/programmer proscription,O8 # 6 c{-ԍ 47 C.F.R.  76.10001003.O we found that while the broadcast standards addressed some of our concerns, the proscription had a specific  cy-additional goal: to foster the development of competition to traditional cable systems.H9y6 c-ԍ First Report and Order in MM Docket 92265, 8 FCC Rcd 3359, 3360 (1993)  c -("Competition and Diversity in Video Programming Distribution and Carriage"), recon.  c!-granted in part on other grounds, FCC 94287, released December 9, 1994.H 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  c4-competitors.;:4W6 c<&-ԍ Id. at 3370.; ":0*(( "Ԍ c-x31. In the context of cable crossownership with MMDS and SMATV, we sought to  c-prevent cable operators from "warehousing potential competition,"};6 cb-ԍ Report and Order and Further Notice of Proposed Rulemaking in MM Docket No. 92 cK-264, 8 FCC Rcd 6828, 6841 (1993) ("Cable Horizontal and Vertical Limits First Report and  c4-Order") (citing S. Rep. No. 92, 102d Cong., 1st Sess. 46 (1992), reprinted in 1992 U.S.C.C.A.N. 1133).} 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  c-the broadcast rules were necessary to achieve these goals.A<46 c -ԍ Id. at 6843, 6845.A  cv-x32. 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  c -majority shareholder exception.D= 6 c-ԍ 47 C.F.R.  63.54(e)(1).D 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  cb-our discrimination concerns._>b6 c-ԍ Video Dialtone Reconsideration at  69._  c4-x 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  c-("SMR") service.?G 6 c-ԍ See, e.g., 47 C.F.R.  24.3. ("Broadcasting as defined in the Communications Act is prohibited" in the broadband PCS service.) In establishing these rules, our goals have been "competitive delivery, a  c-diverse array of services, rapid deployment, and widearea coverage."@ 6 c#-ԍ Memorandum Opinion and Order in Gen. Docket No. 90314, 9 FCC Rcd 4957, 4959  cj$-(1994) ("Broadband PCS Memorandum Opinion and Order"). We have set the multipleownership 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"{@0*(("  c-criteria.aA6 cy-ԍ These criteria will be discussed more fully infra.a Further, the rules have no single majority shareholder exception.EBy6 c*-ԍ 47 C.F.R.  24.204(d)(2).E Narrowband  c-PCS service has the same 5 percent attribution benchmark as broadband PCS..C *6 c-ԍ 47 C.F.R.  24.101. See Memorandum Opinion and Order in Gen. Docket No. 90 c-314 and ET Docket No. 92100, 9 FCC Rcd 1309, 131213 (1994); recon. granted in part,  c-Second Memorandum Opinion and Order, 9 FCC Rcd 4519, 452122 (1994). It should be noted that petitions for reconsideration are pending with respect to certain aspects of the  ch -broadband and narrowband PCS attribution rules. See, e.g., Petition for Reconsideration and Clarification, filed by The Morgan Stanley Leveraged Equity Fund II, L.P., and Morgan  c: -Stanley Capital Partners III, L.P., on September 6, 1994, with respect to Further Order on  c# -Reconsideration in GEN Docket No. 90314, 9 FCC Rcd 4441 (1994) (Broadband PCS order adopting multiplier); Petition for Reconsideration and Clarification, filed by The Morgan Stanley Leveraged Equity Fund II, L.P., Morgan Stanley Capital Partners III, L.P., Morgan Stanley Venture Capital Fund, L.P., and Morgan Stanley Venture Capital Fund II, L.P., on  c-October 7, 1994, with respect to Second Memorandum Opinion and Order in GEN Docket No. 90314 and ET Docket No. 92100, 9 FCC Rcd 4519 (1994) (Narrowband PCS)..  c-x!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  c-percent of the cellular entity's total equity, voting stock, or nonvoting stock.QDv6 c-ԍ 47 C.F.R.  24.204(d)(2)(ii). However, we have carved out exceptions to this rule in order to foster ownership by certain designated entities that have traditionally had difficulty acquiring startup capital. Specifically, pursuant to Section 309(j) of the Communications Act, 47 U.S.C.  309(j)(4)(D), we have adopted a 40 percent benchmark for small businesses, rural telephone companies, and businesses owned by women or members of  c-minority groups. Broadband PCS Memorandum Opinion and Order, 9 FCC Rcd at 500710.Q In so doing, we noted that adopting the more restrictive 5 percent benchmark would have failed to  c_-acknowledge the unique history of cellular licensing..E_6 c-ԍ Second Report and Order in Gen. Docket No. 90314, 8 FCC Rcd 7700, 774546  c-(1993) ("Broadband PCS Second Report and Order"), on recon, Broadband PCS  c -Memorandum Opinion and Order, 9 FCC Rcd 4957, 5002 (1994) , recon. granted in part  c!-and denied in part, Third Memorandum Opinion and Order, 59 Fed. Reg. 55372 (Nov. 7,  c"-1994) ("Broadband PCS Third Memorandum Opinion and Order").. 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" ZE0*((| "  c-emerging mobile services market, thereby inhibiting the early development of PCS.3F6 cy-ԍ Id.3  c-x"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  c-of these entities.Gy6 c-ԍ 47 C.F.R.  20.6(d)(2). See Third Report and Order in Gen. Docket No. 93252, 59 Fed. Reg. 59945, 59948 (Nov. 21, 1994). By so doing, we promote a competitive environment for all players in the CMRS market.  cH-x#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?  cy-x$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.  c-x%38. The general 10 percent attribution benchmark that was proposed in the Capital  c-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  c-limitations applicable to federally leased mineral rights.H6 c-ԍ One such acreage limitation, for instance, generally provides that no single entity can "take, hold, own, or control" more than 246,080 acres of land subject to federal oil or gas  cW-leases in any one state. See 30 U.S.C.  184(d). The statute further establishes a 10 percent equity threshold for determining attribution of ownership in connection with these  c)!-limitations. Id. at  184(e). 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 publiclyowned resources.  cN-x&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" h H0*((-"  c-make unfair use of nonpublic information regarding the company.I6 cy-ԍ See Securities and Exchange Act  16(b), 15 U.S.C.  78p(b); Kern County Land Co.  cb-v. Occidental Petroleum Corp., 411 U.S. 582, 591 (1973).  c-x'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  cv-continue to meet its certification requirements.HJvb6 c -ԍ See 14 C.F.R.  204.5.H 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  c1-or more of the outstanding voting stock in the corporation."NK16 c-ԍ See 14 C.F.R.  204.2(n)(3).N 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  c -more of the stock of another air carrier.KL 6 ca-ԍ See 14 C.F.R.  204.3(g).K  c -x(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  cy-substantial interest in the company...."gMyu6 c-ԍ Final Rule, 57 Fed. Reg. 38761, 38763 (August 27, 1992).g 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  cK-operations."!NHK& 6 c"-ԍ Notice of Proposed Rule Making, 56 Fed. Reg. 27696, 27699 (June 17, 1991). DOT also cited as support for its 10 percent benchmark a statutory provision, which is no longer in  c-effect, requiring regulatory approval of certain air carrier mergers. Id.; 49 U.S.C. App.   c-1378. See also 49 U.S.C. App.  1551(a)(7) (repealing provision effective January 1, 1989). This provision provided that "any person owning beneficially 10 per centum or more of the voting securities or capital, as the case may be, of an air carrier shall be presumed to be in  c"-control of such air carrier unless the [Civil Aeronautics] Board finds otherwise." Id. at  1378(f).! 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"6N0*(( "  c-providing a concomitant benefit for the Department's fitness purposes."QO6 cy-ԍ Final Rule, 57 Fed. Reg. at 38763.Q  c-x)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  c-and acquisitions.<Py6 c-ԍ 15 U.S.C.  18a.< These requirements are triggered when, among other things, the entity  cv-seeks to acquire 15 percent or more of a company's voting stock.NQv*6 cQ -ԍ Id. at  18a(a)(3)(A).N 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  c1-consummated, may violate the antitrust laws."^R16 c-ԍ See FTC v. Illinois Cereal Mills, Inc., 691 F.Supp. 1131, 113839 (N.D. Ill. 1988),  c-aff'd, 868 F.2d 901 (7th Cir. 1989). See also H.R. Rep. No. 941373, 94th Cong., 2nd  c-Sess. at 58 (reprinted in 1976 U.S.C.C.A.N. 2637).^  c -x*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")  c -that is greater than 10 percent.GS ^ 6 c-ԍ See Belo Comments at 11.G 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  c-and financial policies of an investee."QT 6 cP-ԍ See 49 C.F.R.  1201.52(b)(1).Q 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  cb-in the absence of evidence to the contrary.2Ub 6 c-ԍ Id.2 x  c4-x+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 dayto c-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"qU0*(("  c-were inapt to the Commission's multiple ownership policies.hV 6 cy-ԍ For example, with respect to the SEC's 10 percent "insider trading" benchmark and the Department of Transportation's air carrier regulations existing at the time, we stated in the  cK-Attribution Order, 97 FCC 2d at 1010, that the:   unifying characteristic of these rules is that they are intended to prevent intrinsically illegal or undesirable activities [such as collusive or anticompetitive behavior.] The levels of stock ownership which these rules variously identify as carrying an appreciable risk of permitting such activities seem inappropriate models where, as here, the activity at issue influencing a licensee's programming decisions is not only legal but expected behavior by  c -one with a legitimate investment interest in the licensee corporation.h 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, publiclytraded corporation must disclose certain information concerning the  c-nature of their stock ownership.wW 6 c-ԍ See Securities and Exchange Act  13(d), 15 U.S.C.  78m(d).w 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  cv-significant influence or control."WXvD 6 ck-ԍ Attribution Order, 97 FCC 2d at 100607.W  cH-x,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.  cb-  cK-x-46. We seek comment on how to devise rules that are consistent with the  c4-administrative concerns expressed in our section devoted to our underlying principles, see  c-paragraphs 12 through 16, supra, and that would accommodate the principles reviewed in  c-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"X0*(("  c-influence by other stockholders?Y 6 cy-ԍ The influence of ownership of voting rights (who holds them and how many) and board composition on managerial and corporate performance is the subject of numerous studies on  cK-the "market for corporate control." See J. Weston, et al., Mergers, Restructuring and  c4-Corporate Control (1990) for a survey of this literature. Based on the data examined in these studies, it appears, first, that the composition of the board is an important determinant of control. Boards with more "outside" directors will likely behave differently than those with more "inside" directors. Second, the distribution of voting rights and who holds them is another factor in determining corporate control. Firms in which voting rights are concentrated in the hands of management will likely behave differently than those in which  c -voting rights among shareholders are concentrated in an outside party (i.e., nonmanager). Additionally, the statistical distribution of voting rights across shareholders influences the threshold at which the management or outside party holdings begin to control the firm. 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.  c -B. Voting Stock: Passive Investors  c -x.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  cK-and cable industries without significant risk of attribution errors."TZK| 6 cx-ԍ Attribution Order, 97 FCC 2d at 1013.T 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  c-becoming involved in the operation or control of the companies in which they invest.W[-6 c#-ԍ Attribution Order, 97 FCC 2d at 101213.W 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"[0*(("  c-representatives from acting either as officers or directors of the licensee corporation.~\6 cy-ԍ Attribution Order, 97 FCC 2d at 101314. Moreover, as an additional safeguard, each licensee is required to certify that no such investor has exerted or attempted to exert any  cK-influence or control over any of the affairs of the licensee. Id. at 1014; FCC Form 323 ("Ownership Report"), Instruction 6. ~ 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  c-inadvertent or unintended.T]46 c -ԍ Attribution Order, 97 FCC 2d at 1013.T  cv-x/48.  In the Capital Formation Notice, we proposed increasing the passive investor  c_-benchmark from 10 percent to 20 percent.[^_6 c-ԍ Capital Formation Notice, 7 FCC Rcd at 2655.[ The commenters who addressed this issue  cH-unanimously supported increasing the voting stock attribution level for passive investors._H6 c-ԍ See Comments of CC Capital Corporation, a MESBIC ("CC"), National Association of Black Broadcasters ("NABOB"), National Association of Investment Companies ("NAIC"); Minority Broadcast Investment Corporation ("MBIC"), Santarelli, Smith & Carroccio, a law  cJ-firm ("Santarelli"), Belo, NAB, Great American, ICI and CIBC. 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  c4-concern we have raised regarding the impact on corporate decisionmaking 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?  c|-x049. Additionally, while commenters argued that a higher attribution level for passive investors would significantly increase equity investment in the broadcast industry and would"e _0*((l" 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  c-rules than by the financial resources available to such investors.$` 6 c-ԍ In this regard, we note that Great American stated that under our current attribution rules, increased broadcast investment triggers "burdensome" new FCC reporting obligations for additional attributable interests held strictly for investment. There is no further explanation as to why this alleged burden is significantly or directly responsible for any lack of investment in broadcast properties. Parties may wish to provide more information in this regard. Moreover, we emphasize that any increase in the current attribution levels, which would result in expanding the class and nature of nonattributable interests, may require more reliance on disclosure to the FCC of such interests so that we have adequate information to be assured that our rules and policies are being met. We therefore ask parties to address with specificity the safeguards that will be necessary to ensure compliance with our rules without placing unreasonable or unnecessary burdens that may in fact impair further broadcast investment. $ However, we would like commenters to discuss in greater detail whether they think our present rules inhibit  c_-investment, and how modifications of our rules might encourage further investment.a_| 6 c-ԍ For example, Great American stated that one of its passive institutional investors would make additional investments in other broadcast entities but for the restrictions placed by the current attribution rules. This, however, is too anecdotal and isolated to provide adequate guidance as to whether raising the benchmarks will result in a more acrosstheboard increase in the potential capital that might be made available to other broadcast entities. Moreover, CIBC, although supporting an increase in the attribution levels, did not believe that it is the current rules that are responsible for undercapitalization of the industry as much as the fact that such investments are unattractive because of such factors as the volatile nature of broadcast revenues, both across and within individual markets; the rise of alternative advertisersupported media such as cable; and that many markets have too many media outlets to support existing broadcast outlets. Neither of these commenters, however, provided that type of detailed and specific data to enable us to assess how specific modification of the current attribution standards will directly result in increased broadcast investment. We invite comment on what specific attribution rules or other factors may be inhibiting broadcast investment and what specific rule changes might reverse any such problem.  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  c -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" a0*((^ " 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?  c-x150. Several commenters raised a closely related issue not discussed in our Capital  c-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  c1-in which they invest.pb16 c -ԍ See Comments of Great American at 2; Reply Comments of CIBC at 3.p We do not intend to revisit our decision of 1984 in order to broaden  c -the category of passive investors to include such entities.c  y6 cD -ԍ The Commission declined to afford passive status to investment advisors because: (1) such status is unnecessary where an investment advisor does not have the power to vote the stock it holds or direct its disposition because it is then treated as any other custodial holder, that is, ownership is not attributed to it; and (2) where an investment advisor votes the stock, the Commission was not convinced that such advisors were passive in nature. It also noted that it would consider waiver requests from investment advisors seeking nonattribution of their interests. With respect to pension funds, the Commission also declined to afford passive status, finding that pension funds are not so consistently passive as to warrant relaxed benchmark treatment under the attribution rules, and noting evidence that pension funds were increasingly managing their own investments and actively pursuing social goals in their  c^-investment policies. Attribution Order, 97 FCC 2d at 101416 & n. 44. Further, while the Commission did not specifically mention investment and commercial banks, we have not been provided sufficient information here to conclude that such entities are truly passive in nature. 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  c -proposed in the Capital Formation Notice. In the Capital Formation Notice, we reiterated  c-our conclusion in the Attribution Order that these entities are not entirely passive in nature.<d6 cW-ԍ 7 FCC Rcd at 2656.< Under certain circumstances, these entities are authorized to exercise control over debtor  cb-companies for temporary periods.\eb6 c"-ԍ Attribution Order, 97 FCC 2d at 1016 & n. 45.\ 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. 94149 and 91140, we are, however, considering other rule changes to facilitate capital investment and entry by"xe0*(("  c-minorities and women without broadening our definition of "passive" investors.f6 cy-ԍ See Notice of Proposed Rule Making in MM Docket Nos. 94149 and 91140, FCC 94323 (adopted Dec. 15, 1994).  c-C. Minority Stockholdings in Corporations with a Single Majority Shareholder  c-x251.  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  cv-outstanding voting stock.Kgvb6 c -ԍ 47 C.F.R.  73.3555, Note 2(b).K In adopting this rule in 1984, the Commission reasoned that in this situation minority interest holders, even acting collaboratively, would be unable to direct  cH-the affairs or activities of the licensee on the basis of their shareholdings.WhH6 c -ԍ Attribution Order, 97 FCC 2d at 100809.W 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 casebycase 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?  c-D. NonVoting Stock  c-x352. Under our attribution rules, all nonvoting stock interests (including most  c-preferred stock classes) are generally nonattributable.[i6 c!-ԍ See 47 C.F.R.  73.3555, Note 2(f).[ Nonvoting stock provides significant benefits as an investment/capitalization mechanism; it specifically precludes the  ce-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, nonvoting 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"ui0*(( " 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  c-licensee.j16 c4-ԍ Attribution Order, 97 FCC 2d at 102021. In this regard, the Commission observed that a "threat" to convert stock in order to vote on a corporate licensee's affairs would be an "empty gesture" if such conversion would result in the stockholder violating the multiple ownership rules, and, if no violation would result, reliance upon convertible nonvoting stock  c-to exert influence would not contravene the purpose of the multiple ownership rules. Additionally, under the current rules, the power to compel dividends or financial distribution attached to a nonvoting interest is not viewed as conferring the power to influence or control a licensee in a manner contemplated by the multiple ownership rules, and therefore such  c| -powers will not change the noncognizable nature of such nonvoting interests. Id.  c-x453. 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  c -shareholders that might affect the operations of the licensee,Bk 6 cG-ԍ See 47 C.F.R.  73.3613 (describing the contracts that must be filed by licensees). One way to address this concern is by amending our reporting requirements to include all shareholder agreements, at least as an interim measure, and we invite comment on such an approach.B we are concerned that there may be a gap in this area. We invite comment as to these issues.  c-x554. 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 casebycase basis, because of the administrative burdens imposed by such an approach, would those burdens be outweighed by other factors? We"-k0*((n" 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  c-ownership context.Sl 6 cK-ԍ We attribute nonvoting stock in different ways in other services, depending on the particular context. In all the cases discussed below, unless expressly noted, we use a five  c-percent benchmark. As discussed more fully in the text, supra, we consider a corporation's total equity to determine whether certain entities are affiliates of cable operators in the cable ratemaking context and to determine cable cross ownership with video programmers, MMDS, and SMATV. In video dialtone crossownership between the carrier and the video programmer, we also look at the overall ownership interest in a corporation's outstanding stock, whether voting or nonvoting. In the context of the broadband and narrowband PCS multiple ownership rule, our benchmark is based on the equity, outstanding stock, or outstanding voting stock. We use a 20 percent benchmark in the context of the SMR/cellular/broadband PCS spectrum aggregation limits, also based on the equity, outstanding voting stock, or outstanding nonvoting stock of any of these entities.S  c-VI.  Partnership Interests ă  cz-x655.  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  c -ownership.Wm | 6 cK-ԍ Attribution Order, 97 FCC 2d at 102223.W 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  c -insulation criteria.n H -6 c-ԍ These "insulation criteria" include the following: (1) The limited partner cannot act as an employee of the partnership if his or her functions, directly or indirectly, relate to the media enterprises of the company; (2) The limited partner may not serve, in any material capacity, as an independent contractor or agent with respect to the partnership's media enterprises; (3) The limited partner may not communicate with the licensee or general partners on matters pertaining to the daytoday operations of its business; (4) The rights of the limited partner to vote on the admission of additional general partners must be subject to the power of the general partner to veto any such admissions; (5) The limited partner may not vote to remove a general partner except where the general partner is subject to bankruptcy proceedings, is adjudicated incompetent by a court of competent jurisdiction or is removed for cause as determined by a neutral arbiter; (6) The limited partner may not perform any services for the partnership materially relating to its media activities, except that"'m0*(('" a limited partner may make loans to or act as a surety for the business; and (7) The limited partner may not become actively involved in the management or operation of the media  cb-businesses of the partnership. See Attribution Reconsideration, 58 RR 2d at 61820, on  cK-recon., 1 FCC Rcd at 80203. Further, pursuant to 47 C.F.R.  73.3555, Note 2(g)(2), "[i]rrespective of the terms of the certificate of limited partnership or partnership agreement, however, no such certificate shall be made if the individual or entity making the certification has actual knowledge of any material involvement of the limited partners in the management or operation of the mediarelated businesses of the partnership." Limited partnership interests that are not insulated are attributable" n0*((." 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?  cH-x756. Business Development Companies and Other WidelyHeld Limited Partnerships.  c1-In the Capital Formation Notice, we proposed to relax insulation criteria with respect to  c -business development companies organized as limited partnerships.lo1 6 c-ԍ Business development companies are a special class of business investment vehicle organized for the purpose of providing transitional and intermediate financing, as well as management assistance, to small and mediumsized companies. These investments are restricted to ensure that such investment companies provide capital to developing or financially troubled companies. Such companies are structured as limited partnerships to take advantage of favorable tax treatment accorded them by the Internal Revenue Service, are  c-regulated under the Investment Company Act of 1940, 15 U.S.C.  80a1 et seq., and are also subject to the securities laws of each state in which such partnership interests are offered  c-or sold. See Capital Formation Notice, 7 FCC Rcd at 265657.l 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 mediarelated  cb-activities of the partnership.hpb6 c#-ԍ See Capital Formation Notice, 7 FCC Rcd at 265657.h We therefore requested comment on whether we should relax the insulation criteria applicable to these widelyheld limited partnerships so as to eliminate,"Kp0*(("  c-as much as possible, the current conflict with state and federal securities laws. qH6 cy-ԍ The Capital Formation Notice referenced, and sought comment on, two petitions, one filed by Kagan Media Partners and the other filed by Equitable Capital Management Corporation, seeking declaratory rulings on the provisions of certain limited partnership agreements which admittedly do not comply with the current insulation criteria, but which, according to the petitioners, sufficiently insulate the limited partners from any material involvement in the partnerships' media holdings such that those interests should nevertheless be deemed nonattributable. 7 FCC Rcd at 2656. Comments received on the issues raised by  c-the petitions are summarized infra.  Alternatively, we asked whether we should combine an equity ownership standard specific to  c-these partnerships with a more limited relaxation of specific insulation requirements.   c-x857. In the Capital Formation Notice, we also asked for comments on whether we should modify the insulation criteria applicable to all "widelyheld" 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.  c -x958. 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 widelyheld limited partnerships and business development companies organized as widelyheld 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 widelyheld 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.  c-x:59. These commenters generally believed that widelyheld 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 widelyheld limited partnerships should be subject to a distinct benchmark, or, in the  c-alternative, should be completely exempt from attribution.Kr6 c#-ԍ Some commenters did not believe that there is any reason for distinguishing business development companies organized as limited partnerships from other widelyheld limited partnerships for purposes of applying the insulation criteria. They maintained that nothing inherent in the regulation of a business development company results in its limited partners being further insulated from material involvement in the affairs of the partnership than limited"&q0*((&" partners in other widelyheld limited partnerships.K They also argued that the"yr0*((_" insulation criteria should be amended for all limited partnerships, regardless of size, to allow noninsulated limited partners (without regard to whether the partnership is widelyheld) to hold equity interests below 20 percent without attribution. In this regard, Prudential  c-Insurance Company of America ("Prudential")Fsy6 c-ԍ Prudential Comments at 1112.F noted that, although business development companies and widelyheld 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  c -the partnership interest or the stock is in a widelyheld or closelyheld organization.tH *6 c-ԍ Prudential Comments at 12. In addition, Belo stated that the typical individual investment interest held in widelyheld limited partnerships is typically less than 1 percent of total equity. Moreover, unlike the structure of a conventional corporation, Belo stated that widelyheld limited partnerships generally do not require annual meetings and limit limited partners to the election or removal of general partners (subject to the requirements of particular state or federal laws). Thus, it believed that these structural considerations limit the ability of limited partners, either individually or collectively, to exert influence or control over the affairs of the limited partnership. Belo Comments at 1627.   c -x;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 widelyheld 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 widelyheld 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  c-ownership benchmark.Uu: 6 c!-ԍ Attribution Order, 97 FCC 2d at 1022. U  c- x<61. We ask parties to address the standards that could be used to define widelyheld 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"| u0*((m" insulation criteria. Parties may also wish to offer additional suggestions for defining widelyheld limited partnerships that reflect our concerns that such entities be used exclusively for investment purposes.  c-x=62. We also seek additional information, supported by empirical data, on whether we  c-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  c -benchmark.hv 6 ce -ԍ Attribution Further Reconsideration, 1 FCC Rcd at 80304.h 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.  cy-x>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  c-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.  c!-VII. Limited Liability Companies and Other New Business Forms ă  c"-  c#-x?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"U%!v0*((&"  c-states.=wH6 cy-ԍ For a discussion of LLCs, see Brian L. Schorr, "Limited Liability Companies:  cb-Considerations in Choosing a Business Entity," Forming and Using Limited Liability  cK-Companies and Limited Liability Partnerships 1994, 836 Practicing Law Institute/Corp. 171 (1994); Marybeth Bosko, "The Best of Both Worlds: The Limited Liability Company," 54  c-Ohio St. L.J. 175 (1993); Robert R. Keatinge, et al., "The Limited Liability Company: A  c-Study of the Emerging Entity," 47 Bus. Law. 375 (1992); Nicholas G. Karambelas, "Shaping the Limited Liability Company, The District of Columbia Limited Liability Company Act of  c-1994," The Washington Lawyer, Nov.Dec. 1994 at 38. = 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 fullyinsulated limited partners. So that we do not indefinitely delay processing of pending applications, we plan to process them on a casebycase basis until this  cv-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.  c1-x@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  c -forms, such as Registered Limited Liability Partnerships ("RLLPs"),Kx1 6 c-ԍ Some states have enacted statutes permitting partnerships to elect to become RLLPs. RLLPs afford the benefits of a partnership, while permitting a midlevel of liability protection, unlike LLCs, which provide full limited liability protection. RLLP statutes generally require each partner to bear the consequences of his own negligent or wrongful acts, while insulating the partner from individual liability for the negligent or wrongful acts of other partners or partnership representatives not under the protected partner's supervision or control, unless the protected partner was directly involved in the act, or had notice and  c-failed to take reasonable steps to prevent or cure the act. For a discussion of RLLPs, see  c-Schorr, supra note 119. K 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.  c-xA66. The specific attributes of LLCs may vary, since their form is regulated by state""x0*(("  c-statutes,y6 cy-ԍ LLCs are formed by filing articles of organization with the state. See Bosko, supra note 119, at 18485. and there is, as yet, no uniform state LLC statute. LLCs are, however, generally  c-intended to afford limited liabilityzb6 c-ԍ Limited liability means that the owners of a business entity are not personally liable  c-for the debts of the business. See Larry E. Ribstein, Business Associations  1.02[C][3] (1990). to members, similar to that afforded by the corporate structure, while also affording the management flexibility and flowthrough tax advantages of a partnership, without many of the organizational restrictions placed on corporations or  c-limited partnerships.C{v6 c: -ԍ Unlike a limited partnership, which must have at least one general partner who has unlimited liability, all the members of an LLC may have limited liability. Additionally, a limited partner may lose limited liability protection if he participates actively in the management of the partnership. By contrast, members of an LLC may maintain limited  c-liability while actively participating in the management of the LLC. See Bosko, supra note  c-119, at 19395; Schorr, supra note 119. C  cv-xB67. 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  c -nonmember, or, alternatively, all members may share management authority.o|1 # 6 c-ԍ The LLC statutes of various states may have differing requirements for management of the LLC. Most LLC statutes provide for decentralized management (management by members) as a default provision but allow management by managers if provided for in the  c{-articles of organization or operating agreement. See Ribstein & Keatinge on Limited  cd-Liability Companies  8.02 (1993). Since LLCs have the corporate attribute of limited liability, in order to avoid twotiered corporate tax treatment, LLCs must avoid at least two of the other three characteristics that distinguish corporations and partnerships for tax purposescontinuity of life, centralized management, and free transferability of ownership  c!-interests. See Keatinge, supra note 119 at 385. o  c -xC68. 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  c-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  cb-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"K#|0*(( " invite comment as to the advantages of LLCs, in general, and also, in particular, the impact on minority and female ownership opportunities. x  c-xD69. 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 mediarelated activities of the LLC or RLLP. We propose that such certification should be based on the criteria  cH-specified in our Attribution Reconsideration and Attribution Further Reconsideration.}H6 c -ԍ The insulation criteria required to be contained in the limited partnership agreement  c -are discussed in note 110 supra. 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 casebycase basis, where doing so would advance our policy of enhancing opportunities for broadcast station ownership by minorities.  cy-xE70. 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.  c-xF71. We are not inclined to treat LLCs as we currently treat corporations, exempting  c-from attribution the interests of "nonvoting" shareholders without regard to the presence or  c-absence of insulating provisions in an operating agreement.b~b6 c-ԍ See 47 C.F.R. 73.3555, Note 2(f).b 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.  c!-xG72. We invite comment on whether, if we adopt the certification approach with"!$~0*(("" 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 casebycase basis, where we find it warranted.  c_-xH73. 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.  c -xI74. 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  c -insulation standards for widelyheld limited partnerships, as proposed in the Capital  c -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 widelyheld 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  cb-significant distinctions? Alternatively, do the policy goals discussed in the Capital Formation  cK-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?  c-xJ75. 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 multitiered vertical organizational chains? Should multipliers be applied, and, if so, under what circumstances?  c!-kVIII. The CrossInterest Policy and Multiple Business Interrelationships X` hp x (#%'0*,.8135@8: