The Deal: FCC Tries to Spark Foreign Capital Infusion Into Stations

NEW YORK ( The Deal) -- Tom Wheeler will kick off his tenure as Federal Communications Commission chairman by relaxing restrictions on foreign ownership of TV and radio stations when he presides over his first FCC meeting Nov. 14.

The move is intended to draw much-needed new capital to the broadcasting business.

Since passage of the Communications Act of 1934 the FCC has capped foreign investment in broadcast licensees at 25% and only once has the commission waived the rule, in 1994 when it retroactively approved Australia-based News Corp.'s ( NWS) purchase of U.S. television stations 10 years earlier.

The rule has its roots in the Radio Act of 1912, which limited radio licenses to U.S. citizens or corporations amid the international tensions leading up to the First World War.

Today, no other telecom sector -- cable and satellite TV, wireless, telephone or Internet -- is so restricted. The change has broad support across a variety of interests. Broadcasters want the cap lifted to boost the value of their stations. Minority business owners in the U.S. like the idea because they expect it will increase their access to capital -- historically difficult for minorities seeking to get into the broadcasting industry. And activists opposed to media consolidation support the change as a way of bringing new buyers and more diversity to broadcast ownership.

The effort to make a change now was instigated by Democratic Commissioner Mignon Clyburn, who was the FCC's acting chairwoman until Wheeler was sworn in Nov. 4. On Oct. 24 Clyburn asked her FCC colleagues to support a declaratory ruling that would, on a case-by-case basis, permit investments from foreign individuals and companies to exceed the 25% stake. Her move was endorsed by Republican Commissioner Ajit Pai, who has been pressing for the change for a year.

"A foreign company can indirectly hold more than a one-quarter stake in our nation's largest wireless carriers, cable operators, cable programmers, and Internet backbone providers," Pai said in a statement praising Clyburn. "Yet that company cannot own a similar interest in a single radio station in rural Kansas. This disparity makes no sense, especially considering the difficult financial circumstances facing many broadcasters."

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