For more than 80 years, Section 310(b) of the Communications Act 1934 has been interpreted as prohibiting direct foreign ownership of more than 20% and indirect ownership of 25% or more of US radio and television broadcast stations. Effective January 31 2017, this will change as the Federal Communications Commission (FCC) has removed longstanding prohibitions against these limitations on foreign ownership ‒ although it has preserved the right, on a case-by-case basis, to block a foreign acquisition of a broadcast licence in excess of 25% (eg, for reasons of national security).
For quite some time, foreign entities have already been permitted to acquire control over non-broadcast licences (eg, nationwide cell carrier T-Mobile is majority owned by Deutsche Telekom). However, the FCC has steadfastly enforced its longstanding foreign ownership control policies over broadcast station licences. Most famously, Rupert Murdoch had to become a US citizen before being able to acquire control over what today is known as Fox Broadcasting.
Changes adopted to the FCC rules will enable approval of up to 100% aggregate foreign beneficial ownership (voting and/or equity) by foreign investors in the controlling US parent of a broadcast licensee, subject to certain conditions. The revised rules, which newly define and in certain respects create different rules for 'named' and 'un-named' investors, will allow a named foreign investor that acquires less than 100% to increase its controlling interest to 100% at some time in the future. If a named foreign investor acquires a 'non-controlling' interest, that investor will now be permitted to increase its voting and/or equity interest up to a 'non-controlling' interest of 49.99% in the future, if it chooses to do so.
Although the FCC's expansive 'public interest' standard in approving sales and investments in broadcast licences ‒ coupled with input from other executive government agencies ‒ could significantly delay or block investments from some countries, the strong support of this initiative by the remaining Republican members of the FCC would tend to indicate that the FCC will be disposed to allow most transactions to proceed to closing. The FCC has already signalled its willingness to do so by approving just such a foreign ownership acquisition in a recent declaratory ruling issued even before the new rules take effect, ending a decades long back-and-forth haggling over Mexican ownership of Univision.
For further information on this topic please contact Stephen Díaz Gavin, Phil Quatrini or Samuel B Sterrett at Rimon PC by telephone (+1 202 400 3846) or email ([email protected], [email protected] or [email protected]). The Rimon website can be accessed at www.rimonlaw.com.