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That MO&O did, however, refine the eligibility standards for the "new entrant"  T4 xZbidding credit, which, as adopted in the First R&O, provides a tiered credit for broadcast auction bidders  xwith no, or very few, other media interests. In particular, the Commission concluded in its previous  TB4 xMO&O that the eligibility standards for the new entrant bidding credit should be amended to be consistent  xwith the general broadcast attribution standards, by which the Commission defines what constitutes an  xattributable interest in applying the broadcast multiple ownership rules. In addition to attributing mass  xmedia interests for purposes of the new entrant bidding credit to the same extent that such media interests  xare considered attributable for purposes of the broadcast multiple ownership rules, the Commission  TD4 xdetermined in that MO&O to also consider, in a further order, whether to attribute the mass media  xinterests of any individual or entity who holds a significant equity and/or debt interest in a broadcast  T4 xauction bidder claiming new entrant status, even if such an interest is nonvoting.`\~ zP!' xI ԍ Under our current general broadcast attribution rules, nonvoting interests of any size (even those over 50%)  zPW"' x are generally not attributable, while voting interests of only 5% or more are regarded as attributable. See 47 C.F.R.  73.3555 Note 2.` The attached  T4 xMemorandum Opinion and Order does in fact determine to attribute the mass media interests of investors  x3holding more than a 33% equity and/or debt interest in a broadcast auction bidder claiming new entrant status, even if such an interest is nonvoting.  T4 x" B. Significant Issues Raised by Public in Response to Final Regulatory Flexibility Analysis: No" 2 ,l(l(,,t"  xpetitions or comments were received in response to the FRFA or the First Supplemental FRFA. Small  xbusinessrelated issues were raised indirectly by some parties filing petitions for reconsideration against  T4 xthe First R&O. These issues were addressed in detail in the previous MO&O and the First Supplemental FRFA.  T4 xf  C. Description and Estimate of tbe Number of Small Entities Involved: In the FRFA and First  x@Supplemental FRFA, the Commission utilized the definition of "small business" promulated by the Small  xBusiness Administration (SBA), even though, as discussed in detail in the FRFA, we tentatively believed  x<that the SBA's definition of "small business" overstated the number of radio and television broadcast  xpstations that were small businesses and was not particularly suitable for our purposes. No petitions or  x"comments were received concerning the Commission's use of the SBA's small business definition for  x/purposes of the FRFA and First Supplemental FRFA, and we will therefore continue to employ such  xdefinition for this Second Supplemental FRFA. As we are utilizing the same definition of small business  x}for this Second Supplemental FRFA, the description and number of small entities affected by the rule  T7 4 xchange adopted in this Memorandum Opinion and Order should be the same as the entities described in  xboth the FRFA and First Supplemental FRFA, and include, specifically, commercial broadcast stations  T 4(television, low power television, television translator, AM, FM and FM translator stations).D& ~ zP:' x& ԍ In the MO&O, the Commission clarified that the new entrant bidding credit was applicable only in broadcast  zP' xl service auctions and would not be applied in any Instructional Television Fixed Service (ITFS) auctions. See  zP' x MO&O at  81. Thus, the rule amendment contained in this Memorandum Opinion and Order, which pertains only to the eligibility criteria for the new entrant bidding credit, will not apply to any ITFS licensees or applicants. D  Tl4 x# D. Description of Projected Reporting, Recordkeeping and Other Compliance Requirements: The  T94 xFirst R&O adopted a number of rules that included reporting, recordkeeping and compliance  xrequirements. These requirements were described in detail in the FRFA, and, as discussed in the First  x<Supplemental FRFA, generally remained unchanged by the rule amendments adopted in the previous  T4 x'MO&O. The rule change adopted in this Memorandum Opinion and Order does not include any  xladditional or different reporting or recordkeeping requirements, but only affects the standards for qualifying for the new entrant bidding credit.  S4 xC! E. Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant  T4 xAlternatives Considered: The FRFA and First Supplemental FRFA described in considerable detail the  Tp4 xsteps taken in the First R&O and in the previous MO&O to minimize significant economic impact on  T>4 xsmall entities and the alternatives considered. The rule amendment adopted in this Memorandum Opinion  T 4 xIand Order further refines the eligibility standards for the new entrant bidding credit. The Commission  xbelieves that attributing the mass media interests (if any) held by very substantial investors in bidders  xclaiming new entrant status will help properly limit the scope of the bidding credit to those truly new  xentities intended to benefit from the credit (and who are likely to be small businesses). In addition,  x}adoption of this attribution policy should reduce the likelihood of bidder manipulation of the eligibility  T4standards for the bidding credit.N~ xPd"' x} ԍ For example, attributing the media interests held by very substantial investors would prevent a large media  x group owner from providing, by means of nonvoting equity or debt, most or all of the financing for an auction  x applicant that then claims new entrant status and eligibility for a substantial bidding credit. One party filing a  zP$' x} petition for reconsideration against the First R&O in this proceeding had criticized the new entrant rules on this basis. N  xThe Commission also believes that setting this attribution benchmark at 33% reasonably balances its" h ,l(l(,,*"  xginterest in capturing investor relationships that provide a realistic potential to influence the core operating  xfunctions of broadcast auction applicants, and the needs of prospective auction applicants (including small  xbusinesses) to obtain financing. This 33% equity/debt attribution standard does not preclude an individual  xor entity (including any existing broadcaster) from investing any amount in a prospective broadcast  xcauction applicant. Nor does this 33% equity/debt standard require an applicant claiming new entrant  xstatus to contribute a minimum amount of equity, or otherwise affect an applicant's right to participate  xtin a broadcast auction. Because this standard only establishes that the attributable media interests (if any)  x@of an investor who holds more than a 33% equity and/or debt interest in a broadcast auction bidder will  x be attributable to that bidder for determining its status as a new entrant, the Commission concludes that  xIadoption of the 33% equity/debt standard should not unduly hinder the ability of broadcast licensees generally, or broadcast auction applicants specifically, to obtain capital.  T 4 x F. Report to Congress: The Commission will send a copy of this Memorandum Opinion and Order,  xincluding this Second Supplemental FRFA, in a report to be sent to Congress pursuant to the Small  T7 4 xcBusiness Regulatory Enforcement Fairness Act of 1996. See 5 U.S.C.  801(a)(1)(A). In addition, the  T 4 xCommission will send a copy of the Memorandum Opinion and Order, including the Second Supplemental  xFRFA, to the Chief Counsel for Advocacy of the Small Business Administration. A copy of the  T 4 xMemorandum Opinion and Order and Second Supplemental FRFA (or summaries thereof) will also be  Tn4published in the Federal Register. See 5 U.S.C.  604(b)."n ,l(l(,,"  T4  @B-C-@ X APPENDIX C ă Part 73 of Chapter 1 of Title 47 of the Code of Federal Regulations is amended as follows:  T44PART 73 RADIO BROADCAST SERVICES 1. The authority citation for part 73 continues to read as follows: Authority: 47 U.S.C. 154, 303, 334, and 336. 2. Section 73.5008 is amended by revising paragraph (c) to read as follows:  T 4  73.5008 Definitions applicable for designated entity provisions. q* * * * *  T 4 x(c) An attributable interest in a winning bidder or in a medium of mass communications shall be  x@determined in accordance with  73.3555 and Note 2. In addition, the attributable mass media interests,  xif any, held by an individual or entity with an equity and/or debt interest(s) in a winning bidder shall be  xcattributed to that winning bidder for purposes of determining its eligibility for the new entrant bidding  x3credit, if the equity (including all stockholdings, whether voting or nonvoting, common or preferred) and  xdebt interest or interests, in the aggregate, exceed thirtythree (33) percent of the total asset value (defined as the aggregate of all equity plus all debt) of the winning bidder." ,l(l(,,"   @C---@  T4-Z DISSENTING STATEMENT OF COMMISSIONER HAROLD FURCHTGOTTROTH  T4  Rg4 xIn the Matter of Implementation of Section 309(j) of the Communications Act Competitive Bidding for Commercial Broadcast and Instructional Television Fixed Service Licenses, MM Docket No. 97234.  T4 "hIn this Memorandum Opinion & Order, the Commission considers "additional refinement[s],"  T4 xpsupra at para. 2, to the traditional broadcast attribution standards for purposes of the designated entity  xbidding credit in auctions. While I am pleased to see the Commission on its way toward final  ximplementation of the mandates of the 1997 Budget Act, which requires competitive bidding for most licenses, I do not support the "refinements" to the attribution rules adopted today.  "AMy first concern with these new rules is that they are overlyregulatory, complex, and difficult  x8to administer. In this item, the Commission breaks from its previous rules by counting pure debt  xcinstruments in addition to equity interests in deciding whether a company's particular interests are  xattributable. I would not count debt for attribution purposes. When one ventures into the area of pure  xdebt, held by any kind of investor, including purely institutional investors, one encounters an  xadministrative hornets' nest. Almost all companies have some debt, and small companies tend to have  xdebt held by banks, typically commercial loans or notes. Should such interests really be considered  xrelevant for purposes of deciding who truly owns and operates a broadcast entity? For example, if  xMCiticorp holds more than 33% of the debt for one or more companies, then its interest in each company  xwill be attributable under these rules. But Citicorp certainly does not consider itself a broadcasting  x"company, nor does it, in all likelihood, have any interest in the daytoday operational decisions made at its investor companies.  "Moreover, Citicorp, as any large institutional investor, does not with certainty know the precise  xpercentage, at a particular point in time, that it holds of a company's debt. What Citicorp knows is that  xgit has issued a million dollar corporate loan to a company; that the company has a $500,000 line of credit  xwith the bank of which various amounts are exercised at any given time; and that the company has a cash  xEaccount with Citicorp whose balance ranges from $50,000 to $500,000. So, how much debt does  xlCiticorp hold at any given time? That depends on whether one measures gross or net debt. What  xpercentage of a company's debt does Citicorp hold? Citicorp cannot possibly know because it does not  T4 xknow what debt the company has with other institutions or individuals. As a practical matter, debt is  To4 x3a concept that is nigh impossible to measure with reliable precision, even if there is support for the theory  T=4 x&in academic literature. For these reasons, I disagree with the decision to extend attribution rules into the  x'area of pure debt. This decision makes an already complicated regulatory scheme even more  xcomplicated, increasing the administrative burden on those who must live under it, not to mention those here at the Commission who must administer it.  "My other concern with the rules adopted today is that I am not persuaded that they are adequately  T 4 xsupported by the record. Specifically, the selection of the 33% benchmark with respect to both debt  T 4 xand equity appears to lack the requisite record basis. Cf. Motor Vehicles Manufacturer's Ass'n v. State  T!4 xFarm Mutual Automobile Ins. Co., 463 U.S. 29, 42 (1983) (administrative agencies must "examine the  xrelevant data and articulate a satisfactory explanation for its action, including a 'rational connection  TB#4 x}between the facts found and the choice made'") (citation omitted); ATT v. FCC, 832 F.2d 1285, 1291  x<(D.C. Cir. 1987) (requiring that "conclusions reached [by an agency]have a rational connection to the  xtfacts found"). There is no record evidence of 33% being either less or more appropriate than, say, 25%,  T%4 xon the one hand, or 51%, on the other. Although the item asserts that "[t]he record in the broadcast  xattribution proceeding . . . reflects that holders of nonvoting stock and debt interests may be able to  TE'4 xEinfluence broadcast licensees in a significant manner," supra at para. 7, that does not mean, absent  xevidence to support the assertion, that this is true. Nor, more importantly, does it mean that 33% is the  xright place at which to draw the line for purposes of establishing significant influence. How large does  xa holding have to be before its possessor may be able to exert significant influence? There is little to no  xrecord evidence to guide this decision, just speculation and guesswork. Thus, as a matter of administrative law, the rules are difficult to defend against a charge of arbitrariness and/or lack of record support."G+,,,+"Ԍ "ԙFinally, and on the merits, I suspect that these rules will harm "designated entities" more than  xthey will help them. By dint of regulation, we have created incentives to cap investments in designated  xentities from any one source at 33%. Thus, these regulations artificially limit the amount of capital  xMavailable to startups from a particular source, potentially forcing entrepreneurs to go to multiple sources  xpfor funding when, in a freer market, they might not have had to do so. The item counters by arguing  xthat the rules do not prohibit investment over 33%, it just makes investment over such limits attributable  T4 xyto the investor. See supra at para. 10. Becoming snared in the web of this Commission's broadcast  T4 xownership rules, however, is a powerful incentive for investors to stay well under the cap. Cf. Lutheran  Tj4 xChurch v. FCC, 141 F.3d 344, 353 (D.C. Cir. 1998) ("No rational firm . . . welcomes a government  x/audit."). In effect, the benchmark will function as a "safe harbor." Thus, while the rules, to be sure,  x&do not prohibit investments over 33%, they certainly deter them. And that is not good for small or new  x businesses seeking capital. I realize that this "artificial cap" criticism applies to any percentage limitation  x<that would be selected, but I think that we could at least have set the number higher so as to mitigate these unintended consequences.  "hIn sum, because I disagree with the decision to extend attribution rules into the uncharted area  x@of debt interests, and because I am not persuaded that the selection of the 33% benchmark is supported by facts found on the basis of the record, I must respectfully dissent.