Content-Type: text/html Silencing Foreign Voices Silencing Foreign Voices: Restrictions on Alien Ownership of Broadcast Stations By James V. D'Aleo Doctoral Student School of Journalism and Mass Communication Carroll Hall University of North Carolina at Chapel Hill Chapel Hill, North Carolina 27599 404 Jones Ferry Road, Apt. H-17 Carrboro, North Carolina 27510 919-968-1725 [log in to unmask] Submitted to Law Division Association for Education in Journalism and Mass Communication On March 2, 1999, Rep. Cliff Stearns (R-Fla.) introduced bill H.R. 942, titled "Broadcast Ownership for the 21st Century Act," in the House of Representatives. Referred to the Subcommittee on Telecommunications, Trade and Consumer Protection, the bill would reduce the number of restrictions on broadcast ownership. Specifically addressing the issue of foreign ownership in one of the sections, the bill proposes raising the maximum percentage a foreign corporation or individual can own of a U.S. broadcast property, provided certain conditions are met. In introducing the bill before the House, Stearns cited his reason for the measure: "Mr. Speaker, many nations prevent American companies from owning any percentage of their domestic broadcast industry. We must institute reciprocity and this bill starts this process now."[1] Section 5 of Stearns' bill adds to the provisions of Section 310(b) of Title 47 of the U.S. Code dealing with foreign ownership. Parts of Section 310 date as far back as the Radio Act of 1912[2] and were most recently amended by the Telecommunications Act of 1996.[3] Section 310(b) states that a broadcast license will not be granted to an alien, a foreign corporation or a corporation of which more than 20 percent is foreign owned.[4] In addition, a corporation owned by a holding company, which has more than 25 percent foreign ownership, can be refused a license if the Federal Communications Commission (FCC) finds the public interest will be served by the refusal.[5] Stearns' bill would add another provision to the law, making it the policy of the United States to treat a foreign entity trying to purchase portions of American broadcast properties in the same way that its home country treats American companies seeking to enter its broadcast industry.[6] Should this bill become law in its present form, it would provide a marked change in the way the United States regulates broadcast ownership. Only one time in the FCC's 65-year history has that organization allowed a foreign company to breach one of the ownership benchmarks in an American broadcast property.[7] Under the Stearns proposal, a foreign individual or corporation could own as much as 40 percent of an American broadcast property, either directly or through a holding company.[8] In addition, the bill seems to indicate that the FCC would have the discretion to approve a license for a company that surpassed the 40 percent foreign ownership benchmark.[9] The implication is that the FCC would not necessarily have to automatically refuse a license to those companies with direct foreign ownership over 20 percent, increasing the Commission's discretionary power from just indirect holdings to direct holdings as well.[10] Whether or not H.R. 942 becomes law, the broadcast industry has changed drastically since the Communications Act of 1934 was first passed, creating the FCC and the indirect ownership restrictions. With the merger between Sprint, Deutsche Telekom and France Telecom, telephone companies have shown that multinational corporations have become a force in the business world, creating situations in which partial owners of a single company could be from several different countries. The communication boundaries between countries have been almost erased with the advent of direct satellites and the Internet, all of which spread various types of content throughout the world very quickly. The FCC has already made some concessions to this new environment by allowing mergers between large international telephone companies, which the Communications Act refers to as common carriers.[11] The purpose of this paper is to determine whether this new environment necessitates a change in treatment for American over-the-air broadcast properties. Background With minor changes over the years, the foreign ownership restrictions on broadcast licenses have remained basically the same since the Communications Act of 1934 created the FCC. The restrictions themselves came almost completely from Section 12 of the Radio Act of 1927,[12] which itself was a continuation of restrictions dating back to 1912.[13] The Radio Act of 1927 disallowed ownership by an alien, foreign government (the current Section 310(a)), or any company that had 20 percent foreign ownership.[14] In order to close a loophole in that law, the 1934 Act added a provision which allowed the FCC to prevent a company owned by a holding company with 25 percent foreign ownership from gaining a license if the Commission found the public interest would be served by the denial.[15] These restrictions have remained in place for the past 65 years with only minor variations, the most recent of which came in 1996 when the Telecommunications Act removed a provision prohibiting a license-holder or holding company from having alien directors.[16] Stearns' bill would not change these provisions, only add to them. The new section, titled "Reciprocal Treatment for Broadcast Stations," states that if a foreign country allows U.S. companies to own a minimum of 20 percent directly, or 25 percent indirectly, of a broadcast company in that country, then the U.S. government would permit corporations or individuals from that country to own the same percentage, up to 40 percent, of an American broadcasting company.[17] Congress has considered this theory of reciprocity before. Both the House and Senate agreed to use reciprocity as a basis to lift the foreign ownership restrictions on common carriers in 1995 but could not agree on the enforcement method, forcing removal of that provision from the Telecommunications Act on 1996.[18] Critical to the issue of foreign ownership is a concept known as economic competitive opportunity (ECO), which is a four-part test used to determine if American companies have an opportunity to compete in foreign countries. Unlike ECO and the plan created by the World Trade Organization (WTO), both of which left broadcasting out of the framework, Stearns' bill would open broadcast ownership in the same way as the common carrier industry. ECO, followed by the WTO Agreement, has made it possible for the United States to allow foreign companies into the common carrier market with some protection against another country taking advantage of the provisions. The ECO test, which the FCC passed in November 1995, consists of four parts: the legal right for U.S. companies to "obtain a controlling interest in a facilities-based carrier," nondiscriminatory interconnection, competitive safeguards against anticompetitive practices and a regulatory framework of enforcement.[19] It was under this basis that the United States approved the merger between Sprint, Deutsche Telekom and France Telecom.[20] Even though the FCC was willing to use this analysis for common carriers, the Commission expressly stated that it was not willing to do so with broadcasting.[21] While the FCC was using this test on a case-by-case basis, the WTO agreement put more of a multinational framework to that analysis. Signed by 69 countries in 1997 and taking effect in 1998, the agreement had the United States presume that the public interest is served by having a company from a WTO signatory enter the U.S. market[22] while maintaining the ECO test for all non-WTO countries.[23] Neither the United States nor many of the other signatories wanted to include broadcasting in the agreement.[24] Literature Review The question of whether foreign individuals or entities should be allowed to invest in American broadcast properties is not the main issue in much scholarly literature. With cable, the Internet and direct broadcast satellites transmitting content to the general populace, it is generally conceded that the ownership regulations for over-the-air television and radio are rapidly becoming outdated. The main dispute among authors is over the best way to provide an open investment market with the benefits of an influx of foreign money and the ability to prevent certain individuals or foreign companies (such as those who may be enemies of the United States) from entering the market. Most look toward a variety of treaties or some form of international framework to act as the basis for an open American market, thereby taking a step toward an open global market, but even that is not a unanimous belief. There are those, such as Ian M. Rose and W. Scott Hastings, who think that the United States should eliminate the foreign ownership restrictions altogether regardless of the policies of other countries. The two authors look at this issue in different ways but manage to arrive at close to the same conclusion. Hastings writes that the United States needs to take the first step in opening up the world market by removing its own restrictions on foreign ownership.[25] Acknowledging that issues of national security and territorial and cultural independence need to be balanced with the desire for free speech and economic opportunities, Hastings writes that by modifying reciprocity, treating other countries as they treat the United States, a global market (which would still allow the United States to exclude unwanted partners and leave some executive authority) eventually can be created.[26] Under Hastings' thinking, creating a market like this would require the United States to unilaterally drop its own restrictions, thereby forcing other countries to open up their markets in order to keep pace.[27] Rose advocates the repeal of the foreign ownership limits because he believes they are a violation of the First Amendment as a content-based regulation on speech and act as an ineffective protectionist trade policy.[28] Rose finds that these limits violate the First Amendment by restricting the public's right to receive information from a certain group,[29] resident aliens' free speech rights[30] and the free speech rights of those Americans who need foreign money to purchase broadcast outlets.[31] Rose says that the regulations' main purpose is to keep foreign voices out of the American marketplace, making the regulations a clear violation of the First Amendment.[32] He also points out that with new technologies like the Internet, which is just as pervasive as over-the-air broadcast and not subject to as many regulations, the broadcast restrictions don't provide the protection that would warrant discriminating against foreign speech.[33] Rahul Kapoor and Vincent M. Paladini also contend foreign ownership limits should be changed, but each author suggests a different basis for new laws. A careful examination, however, shows that the differences between the two are a matter of semantics rather than totally different theories. Kapoor proposes that the FCC should create a "reciprocity rating" based on a number of factors, including using the ECO test on the other country.[34] With the introduction of ECO as part of reciprocity, Kapoor believes the United States should repeal Section 310(b)(4), the indirect foreign ownership provision of the Communications Act, in order to aid the growth of American telecommunication companies.[35] Paladini also puts the ECO test into his framework, choosing to use it as part of the idea that the United States should remove the restrictions on a reciprocal basis,[36] exactly what H.R. 942 currently proposes. While most of the writers believe that the FCC regulations need to be improved, Kevin M. McDonald feels that they are an effective way to achieve certain goals. McDonald, in an article discussing media regulation in the European Union, concludes that the European Community (EC) should adopt restrictions like those in the United States in order to promote and protect European culture.[37] Part of the reason McDonald feels that FCC-like rules are needed in Europe is that American programming is overrunning that continent and the European production companies cannot keep up.[38] The irony is that this is the same fear the United States used to propagate its own foreign ownership rules, a point that McDonald does not address. Research Questions, Method and Limitations As mentioned above, the purpose of this paper is to determine whether the foreign ownership restrictions of Section 310(b) have outlived their usefulness in the present media atmosphere. Several questions will be addressed in making that determination. First, are the original reasons for including the foreign ownership restrictions in the Communications Act of 1934 still relevant today? Through an analysis of congressional debates, hearings and documents surrounding the Act, as well as those when the Act was last amended in 1996, this paper will determine whether those reasons, primarily national security and the scarcity of the broadcast spectrum, are still relevant in today's society. This method will be limited because there is no way to truly understand the thought processes of another individual, let alone a member of Congress from 65 years ago. Therefore, this paper can only address those reasons that were publicly discussed. Two additional questions arise from the actual enforcement of Section 310(b). Has this section been rendered meaningless by the FCC's willingness to use the public interest standard to allow telecommunications mergers that exceed the foreign ownership maximum? Is it in the public interest to allow foreign money into the American broadcast industry, much like the FCC has allowed in the telecommunications market? With the case of Twentieth Holding Corp., in which the FCC allowed the company to exceed the indirect foreign ownership benchmark with Fox Television Stations, it would seem that the FCC could use the case to move into the direction of allowing increased foreign ownership in broadcasting, if it so desired. As the only broadcast exception thus far, the Fox decision will be discussed with regard to Section 310(b), including the FCC's reason for allowing a high level of foreign ownership. Unfortunately, as the Fox decision indicates, there is not a great deal of case law on this particular subject[39] and there are apparently few foreign companies that want to invest in American broadcasting.[40] For purposes of this paper, the only portion of Section 310 that will be discussed is subsection (b). Subsection (a) prohibits any foreign government or representative of a foreign government from holding a broadcast license.[41] This portion of the broadcast ownership regulations brings in a multitude of other issues that are beyond the scope of this paper. Arguments that may be logical when brought into the context of a partially foreign-owned company directly or indirectly owning a portion of an American license become strained when applied to a foreign government directly owning an American license. It is unlikely that any member of Congress looking to keep his or her job would vote to change this part of the law. In order to avoid muddling the arguments, this paper will ignore that particular subsection. National security and scarcity As mentioned above, some form of restrictions on foreign ownership of broadcast properties has been in existence since 1912.[42] The Communications Act of 1934, however, created the system that governs the broadcast industry today. In a time when broadcast mainly consisted of radio and common carriers,[43] issues of national security and the scarcity of available frequencies took on a different meaning. Three foreign ownership restrictions were already in place under the Radio Act of 1927;[44] national security and scarcity pushed for the retention of these restrictions and the addition of the 25 percent indirect ownership restriction. National security was a legitimate concern for the United States in the early days of broadcasting. The original Radio Act of 1912 only said that a license needed to be granted to an American citizen or corporation, a loophole that was exploited when two German nationals applied for and received a license under the name of a U.S. corporation.[45] It was this loophole, and the concern about the havoc that could be wrought during a national emergency, that was the impetus for the stricter provisions of the Radio Act of 1927 and the Communications Act of 1934.[46] The military, which once had asked for government control over all radio frequencies,[47] pushed Congress to keep foreign entities out of the American broadcasting industry with the 1934 Communications Act. In a letter to the chairman of the Senate Interstate Commerce Committee, the Secretary of the Navy wrote: In the event of war between other nations, nationally owned companies would be expected to scrupulously guard against committing an unneutral act, whereas an international company would not only lack the same incentive, but might even find it advantageous to perform unneutral service. Such stations might easily be employed in espionage work and in the dissemination of subversive propaganda_. National ownership or control of communication systems will continue to exist and no other practical plan for the great nations can be forseen at the present time. Until world conditions are changed, this Department will look with apprehension upon any legislation which permits communication companies in this country to be subject to foreign influence. Such companies must of necessity include international companies. [48] As the letter indicates, if the Navy had its way, there would have been no foreign presence of any kind in American broadcasting. The letter also states that this opinion could change as the world does, an indication that the Secretary of the Navy knew that the restrictions might not make sense once the broadcast industry grew. Much of the Navy's concern came from the fact that the American communications industry, particularly radio stations, were expected to become part of the military communication system during a time of war.[49] Navy Captain S.C. Hooper stated that radio was the main means by which military units communicate with each other, thereby requiring commercial radio stations to augment the military's own facilities should the need arise.[50] Because the commercial radio stations would be used to aid the war effort, the military needed to train radio station personnel, disclosing confidential war plans in the process. The plans were of such a nature that they "may not be divulged to any company, or to individuals of any company regarding which the least doubt can be entertained as to the citizenship, patriotism, and loyalty of any of its officers or personnel,"[51] according to Hooper's testimony. In his testimony before the House Committee on Interstate and Foreign Commerce, Hooper addressed the issue of indirect ownership, stating that "if a holding company owns the subsidiary, it dominates its every act."[52] In a memorandum submitted to the committee, Hooper proposed that all radio companies transmitting in the United States should remain completely American, even to the extent of not allowing American companies to purchase foreign broadcast facilities.[53] It was his belief that [s]uch an international company, dependent as it must be upon the good will of foreign governments for the maintenance of its foreign holdings, could not be depended upon to forego any steps necessary to maintain such good will, even to the extent of divulging information which might be prejudicial to the nation defense of the United States.[54] With radio still in its infancy and television nonexistent, the government's main concern was not with making sure the general public received regular broadcasts; but with the military's ability to function should an emergency arise. Despite such concerns, Congress did not go overboard in writing the law. The Senate Committee on Interstate Commerce wrote in its report that national security objections to allowing any indirect foreign ownership were irrelevant since the President had the right to seize radio stations in a time of war.[55] To place tougher restrictions would hurt unnecessarily those American companies that had foreign connections.[56] Contained within the issue of national security was the scarcity of radio broadcast frequencies, a problem that would rise with the increased communication of war. As mentioned above, commercial radio stations were expected to take part in the war effort by augmenting the military systems.[57] The use of radio communication was becoming more prevalent in the military, despite the limited number of available frequencies.[58] Testifying before the House Committee on Interstate and Foreign Commerce, Maj. Roger Colton of the U.S. Army said: The use of radio by the Army is rapidly and steadily increasing and will continue to increase. As far as we are able to see at present there are not enough frequencies available in the entire radio spectrum to take care of the minimum needs of the Army in combat. Hence, in case of war, it appears that commercial radio communication would have to be materially curtailed, with the result that the greater part of any peace-time communications carried by radio would necessarily be transferred to the wire companies.[59] In essence, commercial radio stations would cease functioning during a time of war with their frequencies becoming property of the U.S. military. Even under the best of circumstances, this would be a difficult task. Having foreign individuals and/or companies involved could make the process much more difficult, in addition to the threat of a hostile country getting hints of the U.S. military's plans. Changing Environment In today's environment, however, national security and spectrum scarcity are no longer overriding concerns. When Congress debated what would be the 1996 Telecommunications Act, there were over 11,000 radio stations and 1,100 television stations,[60] numbers that were expected to rise in the future.[61] With so many over-the-air stations available, in addition to those resources available through cable, satellite dishes and the Internet, there cannot be a feasible argument that a scarcity of communication resources exists. Nor is it feasible for the government to claim foreign companies entering the U.S. broadcasting industry would harm national security. The national security rationale was based on the fear that foreign countries could harm the United States militarily through owning radio stations. This concern was barely mentioned during the congressional hearings or debates on the 1996 Telecommunications Act. In only one instance was national security brought up in close to the same context as 1934. Scott Blake Harris, International Bureau Chief of the FCC, stated that the Commission considered national security as part of the public interest test, unless the Executive Branch expressed a specific concern.[62] Other than that statement, the issue of national security was basically absent. Congress and its witnesses seemed more concerned about editorial control and the profitability of American telecommunication companies, rather than military effects. The matter of control over editorial content should not be a factor in deciding the ownership of a broadcast property.[63] Yet when it comes to foreign companies owning a piece of an American broadcast property, content discrimination has apparently become an acceptable reason to keep them out. Larry Irving of the National Telecommunications and Information Administration told the Senate Commerce, Science and Transportation Committee, "The administration believes we should not be too hasty in lifting restrictions on the amount of foreign influence over or control of our broadcast licenses, particularly in light of the editorial discretion that we repose in broadcasters."[64] In another statement, Andrew Jay Schwartzman, Executive Director of Media Access Project, expanded on why his group opposes allowing foreign ownership in broadcasting, a line of reasoning that stands directly in line with the government's: Unlike other media, broadcasting stations are an integral part of the machinery of our democracy. H.R. 514 would allow foreign governments and those working in their service to endorse candidates for public office, decided who can appear on a broadcast debate and to administer candidate's access via equal time and lowest unit rate provisions of the law.[65] Neither of these two statements seems concerned about national security implications in the same way as 1934; they are only concerned with the American public possibly hearing the voice of a foreign national, not even to the level of propaganda. This is not about protecting war plans; it is about keeping foreign ideas out of the American marketplace. A foreign broadcaster enters For all the concerns expressed about the possible entrance of foreign money into the American broadcasting market, the FCC did not seem very concerned about allowing Fox Television Stations to become the first broadcast exception to the indirect ownership provisions. The Fox case shows how the FCC has been willing to simultaneously follow the letter of the law while also ignoring certain facts in order to facilitate an action it believes is in the public interest. At the same time, the Commission's concern about foreign influence in American broadcasting seem hypocritical in light of the reasoning it used to allow Fox to maintain a high degree of foreign equity in its ownership structure. The FCC leadership had made it clear that creating a fourth network was a major policy objective and that Rupert Murdoch was the best individual to achieve that goal.[66] On this basis, the Commission allowed Twentieth Holdings Corp. (THC), the corporate parent of Fox Television Stations, to purchase six television stations from Metromedia in 1985, despite the fact that Murdoch was not yet an American citizen, which he became several months later.[67] Under THC's ownership structure, Murdoch owned all of the company's preferred stock, which accounted for 76 percent of the company's voting shares, and a subsidiary of News Corp., an Australian media company controlled by Murdoch, controlled all of the common stock, representing the other 24 percent of the voting shares.[68] The FCC gave its final approval for the transfer in 1986.[69] An unusual aspect of the THC ownership structure was not revealed until 1994, when Fox informed the FCC that News Corp. had provided 99 percent of the equity to purchase the television stations.[70] Even though News Corp. indirectly controlled only 24 percent of THC, the structure was found to violate FCC rules on indirect ownership. In another 1985 case, the FCC decided it would interpret "the term 'capital stock,' as it applies to non-corporate entities, to encompass the alternative means by which equity or voting interests are held in these businesses_[W]e conclude that the statutory benchmarks are applicable to the partners who hold equity or voting interests in a limited partnership."[71] Because of this ruling, as the FCC would state in the Fox decision, News Corp.'s ownership percentage in THC, a holding company, exceeded the acceptable limit as set by Section 310(b)(4).[72] The FCC's ultimate decision in 1995 came in two parts. The first decision, in addition to stating that Fox was in violation of Section 310(b)(4), stated that despite the contention of the Metropolitan Council of the NAACP Branches, the originator of the ownership complaint, there was no alien control of the broadcast licenses.[73] Since Murdoch held 76 percent of the voting rights at THC,[74] exerted almost complete control over THC and Fox[75] and had substantial influence over the workings of News Corp.,[76] there could be no realistic claim of alien control. The FCC also ruled that Murdoch's duties as chairman of News Corp. did not make him a representative of an alien company since his actions were not controlled by News Corp.[77] The FCC delayed a decision on the public interest question for 45 days so that Fox could show why its ownership structure should be allowed.[78] In its second decision, the FCC ruled that the public interest was served by allowing Fox to remain over the Section 310(b)(4) limitations. The Commission cited three reasons why it came to that conclusion: the statute allows for such a possibility; an American citizen (Murdoch) controls Fox and exercises substantial influence over News Corp.; and national security was not implicated.[79] Implications of the Fox decisions The Fox decision should be a step in the right direction for those who wish to see foreign money enter the American broadcast industry. This hope comes from the fact that despite protestations to the contrary, Section 310(b)(4) is not a hard and fast rule but a guideline from which the analysis begins. If the indirect ownership provision were truly set in stone, Fox would have lost its licenses since News Corp.'s stake in THC far surpassed the 25 percent maximum. Instead, the FCC accepted the structure, claiming that Fox could not have known about the prior ruling dealing with equity stakes.[80] While that statement may be true as far as it goes, there is no reason to think that the FCC itself wasn't aware of its own ruling. Fox filed its original application on June 24, 1985,[81] with the transfer finally taking effect on March 6, 1986.[82] The ruling on the treatment of equity stakes was adopted on May 31, 1985, and released on June 25, 1985.[83] Whether anyone associated with Fox was aware of the ruling or not, the FCC should have been. For that reason, the FCC's protestations about the importance of foreign ownership restrictions in 1995 seem disingenuous after the way it handled these rulings. Commissioner James Quello proved to be a major supporter of Fox retaining its broadcast licenses in 1995. In fact, he wrote against having the 45-day period for Fox to prove its ownership structure was in the public interest, stating that there was enough information already on the record to show that it was.[84] Quello felt Fox was acting in the public interest for the following reasons: The first key factor is that Fox is controlled both in law and in fact by an American citizen. The other key factor that was decisionally significant to me was that in approving the applications the Commission would finally be creating the long-sought but hitherto-unattained fourth broadcast network.[85] With this statement, Quello ignored certain points that were the bases for restricting foreign ownership in the first place. According to how the FCC has interpreted Section 310 (b)(4), there would have to be a very good reason to allow partial foreign ownership, even if the license-holder was controlled by an American citizen.[86] A mere six months later, in making rules for foreign companies to enter the American telecommunications market, the FCC wrote: We recognize that the burgeoning number of information and entertainment sources has lessened the concern that misinformation and propaganda broadcast by alien-controlled licensees could overwhelm other media voices. Although somewhat alleviated, this concern remains a real one. We do not believe that the time has yet come to ease restrictions on alien ownership of broadcast licenses to the extent that would result from the implementation of an effective competitive opportunities test in the broadcast context.[87] At no point in the Fox decision did the FCC explain how the Fox case warranted such an exception, other than pointing out that it served to fulfill a FCC objective, creating a new network.[88] Quello could feel safe with allowing Fox to exceed the ownership benchmark because, "if something material changes, the Commission will have the opportunity to approve any change, or disapprove any change, or even change any change, in the normal course of our customary assignment and transfer processes."[89] In other words, if something happens, the FCC has the authority to fix it. During the decade Fox had the broadcast licenses before the 1995 decisions, there had been no undue foreign influence.[90] Since that was the main reason for the benchmark's creation in the first place, there is no reason to solve a problem that doesn't need solving, said Quello.[91] If that statement is true, there is no reason why it could not be used to allow other foreign companies to enter the American market. After all, there's no reason to try to fix a problem that hasn't occurred. Outside the contradictory analysis by the FCC in the Fox case, there is a basic problem that permeates every indirect ownership case before the FCC. Again, it's Quello's concurrence that indicates the problem. He wrote, "Finally, this law has always been waivable upon a persuasive showing that, under the facts of an individual case, exceeding the 25 percent benchmark would serve the public interest."[92] While this is how the FCC interprets Section 310(b)(4), that is not how the law is written. The law states, "No broadcast license_shall be granted to or held by_(4) any corporation directly or indirectly controlled by any other corporation of which more than one-fourth of the capital stock is owned of record or voted by aliens_if the Commission finds that the public interest will be served by the refusal or revocation of such license."[93] If the letter of the law is followed, the burden is not on the company to show why it is in the public interest for a license to be granted; the burden lies with the FCC to show why the public interest demands the license's refusal. The House Commerce Committee in its 1995 final report noted this misinterpretation and said that removing the prohibition of alien directors from Section 310(b) did not "constitute congressional acquiescence to the Commission's past misinterpretation of section 310(b)(4)."[94] In other words, the FCC has misread the indirect ownership provision since its inception in 1934. Conclusion In today's society, there is no reason why the FCC should prevent foreign companies from owning portions of broadcast license-holders, either directly or indirectly. Congress created the foreign ownership provisions to protect the national security of the United States and retain control of broadcast frequencies, a scarce resource at the time. With the number of alternative outlets that serve the same purpose as radio and television, but do not fall under the Section 310 regulations, scarcity is no longer a workable argument, a fact pointed out by the House Commerce Committee in its final report on the 1996 Telecommunications Act.[95] The FCC, on the other hand, has shown more concern over who controls the content of broadcasts rather than the 1934 version of national security.[96] The FCC has already shown a willingness to put aside the foreign ownership restrictions with the telephone companies. Between the longstanding misinterpretation of the indirect foreign ownership provision by the FCC and its perception of Fox's success, the Commission cannot realistically claim that it is in the public interest to restrict ownership by foreign entities. The FCC's acquiescence to Fox's ownership structure proves that there are instances where foreign ownership is not only allowable but also desirable. Fox's success shows that foreign money can aid American companies and still keep the broadcast station American. In addition, the FCC's own rulings and attitudes show that there are no longer any reasons why foreign companies should not be allowed to exceed the direct or indirect foreign ownership limits. [1] 145 Cong. Rec. H833 (daily ed. Mar. 2, 1999). [2] Krista Schwarting Rose, Changing Frequencies: The Federal Communications Commission Globalizes the Telecommunications Industry with the Adoption of the WTO Agreement, 8 Minn. J. Global Trade 161, 162. (1999). [3] Telecommunications Act of 1996, Pub. L. No. 104-104,  403(k), 110 Stat. 56, 131-32 (1996), reprinted in 1 Telecommunications Act of 1996 P.L. No. 104-104: A Legislative History, at Doc. No. 1 (1997). [4] 47 U.S.C.  310(b) (1998) [5] Ibid. [6] H.R. 942,  5(b)(2) (1999). Thus far, only one day of hearings has been held by the subcommittee and only one speaker has addressed the Section 310(b) implications specifically. See, Broadcast Ownership Regulations: Hearing Before the Subcommittee on Telecommunications, Trade and Consumer Protection of the House Committee on Commerce, 106th Cong. 65-69 (1999) (prepared statement of Leonard J. Asper, Chief Operating Officer, CanWest Global Communications Corporation). [7] In re Application of Fox Television Stations, Inc. For Renewal of License of Station WNYW-TV New York, New York, 10 F.C.C.R. 8452, 8529 (1995) (Quello concurring). (Hereinafter referred to as Fox I). In re Application of Fox Television Stations, Inc. For Renewal of License of Station WNYW-TV, New York, New York, 11 F.C.C.R. 5714, 5715 (1995). (Hereinafter referred to as Fox II). One author writes that since it is unlikely a foreign company would ever gain such a sizable foothold in American broadcasting before a question of ownership arises, the Fox precedent becomes almost irrelevant. See, W. Scott Hastings, Foreign Ownership of Broadcasting: The Telecommunications Act of 1996 and Beyond, 29 Vand. J. Transnat'l L. 817, 835 (1996). [8] H.R. 942, supra note 6. [9] Id. [10] Rahul Kapoor, Limits on Foreign Ownership of Radio Licenses Under 47 U.S.C. 310: An Analysis of the Existing Restrictions and Proposed Changes in the Telecommunications Act of 1996, 15 Wis. Int'l L.J. 163, 169 (1996). [11] Schwarting Rose, supra note 2, at 175-179. Rose discusses some of these mergers, pointing out that the FCC wasn't as concerned with foreign influence as it was with the effect on consumers. [12] H.R. Rep. No. 1918, at 48 (1934), reprinted in A Legislative History of the Communications Act of 1934, at 733, 780 (1989). [13] Schwarting Rose, supra note 2, at 162. [14] Id. [15] H.R. Rep. No. 1918, supra note 12, at 48-49. [16] Telecommunications Act of 1996, supra note 3, at  403(k)(1). [17] H.R. 942, supra note 6. [18] 142 Cong. Rec. S689 (daily ed. Feb. 1, 1996) (Telecommunications Bill Resolved Issues, placed into record), reprinted in 4 Telecommunications Act of 1996 P.L. No. 104-104: A Legislative History, at Doc. No. 83 (1997). [19] In the Matter of Market Entry and Regulation of Foreign-Affiliated Entities, 11 F.C.C.R. 3873, 3891-3894 (1995). [20] Kapoor, supra note 8, at 178-179. [21] In the Matter of Market Entry and Regulation of Foreign-Affiliated Entities, supra note 19, at 3946. [22] Foreign Participation in the U.S. Telecommunications Market, 62 Fed. Reg. 64741, 64742 (1997). [23] Id. at 64742. [24] Edmund L. Andrews, 68 Nations Agree to Widen Markets in Communications, N.Y. Times, Feb. 16, 1996, at 1. [25] Hastings, supra note 6, at 822. [26] Id. at 849-50. [27] Id. at 855. [28] Ian M. Rose, Barring Foreigners From Our Airwaves: An Anachronistic Pothole on the Global Information Highway, 95 Colum. L. Rev. 1188, 1190 (1995). [29] Id. at 1205. [30] Id. at 1207. [31] Id. at 1209. [32] Id. at 1211. [33] Id. at 1224. [34] Kapoor, supra note 10, at 180-81. [35] Id. at 180-82. [36] Vincent M. Paladini, Foreign Ownership Restrictions under Section 310(b) of the Telecommunications Act of 1996, 14 B.U. Int'l L.J. 341, 343 (1996). [37] Kevin M. McDonald, How Would You Like Your Television: With or Without Borders and With or Without Culture-A New Approach to Media Regulation in the European Union, 22 Fordham Int'l L.J. 1991, 1992 (1999). [38] Id. at 2009. [39] Fox II, supra note 7, at 5722. [40] Andrews, supra note 24. [41] 47 U.S.C.  310(a) (1998) [42] Schwarting Rose, supra note 2, at 162. [43] Study of Communications by an Interdepartmental Committee, at 1 (1934), reprinted in A Legislative History of the Communications Act of 1934, at 105 (1989). [44] H.R. Rep. No. 1918, supra note 12, at 48. [45] Rose, supra note 28, at 1194. Rose writes that the radio license was revoked during World War I as part of the presidential emergency powers written into the statute. [46] Id. at 1194-95. [47] Federal Communication Commission: Senate Hearings on S. 2910 Before the Committee on Interstate Commerce, 73rd Cong. 165-66 (1934) (Testimony of Capt. S.C. Hooper, Director of Naval Communications), reprinted in A Legislative History of the Communications Act of 1934, at 119, 287-88 (1989). [48] Id. at 169. The Secretary of the Navy made a similar point in a written statement to the Senate Interstate Commerce Committee on Dec. 22, 1932 in hearings on H.R. 7716, which would have amended the Radio Act of 1927. See, Federal Communication Commission: House Hearings on H.R. 8301 Before the Committee on Interstate and Foreign Commerce, 73rd Cong. 54-55 (1934) (Part of written testimony of Capt. S.C. Hooper, Director of Naval Communications), reprinted in A Legislative History of the Communications Act of 1934, at 343, 400-01 (1989). [49] Id. at 170. [50] Ibid. [51] Id. at 170-71. [52] Federal Communication Commission: House Hearings on H.R. 8301 Before the Committee on Interstate Commerce and Foreign Commerce, 73rd Cong. 23 (1934) (Testimony of Capt. S.C. Hooper, Director of Naval Communications), reprinted in A Legislative History of the Communications Act of 1934, at 343, 369 (1989). [53] Id. at 52. (Hooper memorandum to House Committee on Interstate and Foreign Commerce) [54] Id. [55] S. Rep. No. 781, at 7 (1934), reprinted in A Legislative History of the Communications Act of 1934, at 711, 717 (1989). [56] Id. [57] House Hearings on H.R. 8301 Before the Committee on Interstate Commerce and Foreign Commerce, supra note 52, at 52. [58] Id. at 103 (testimony of Maj. Roger Colton, Signal Corps, United States Army). [59] Id. [60] H.R. Rep. No. 104-204, at 54 (1995), reprinted in 1 Telecommunications Act of 1996 P.L. No. 104-104: A Legislative History, at Doc. No. 3 (1997). [61] Ibid. [62] Hearing on Telecommunication Policy Reform: Senate Hearing of the Committee on Commerce, Science, and Transportation, 104th Cong. 249 (1995) (testimony of Scott Blake Harris, Bureau Chief, International Bureau, Federal Communications Commission), reprinted in 2 Telecommunications Act of 1996 P.L. No. 104-104: A Legislative History, at Doc. No. 8 (1997). [63] Rose, supra note 28, at 1190. [64] Hearing on Telecommunications Policy Reform: Senate Hearing of the Committee on Commerce, Science, and Transportation, 104th Cong. 36 (1995) (testimony of Larry Irving, National Telecommunications and Information Administration), reprinted in 2 Telecommunications Act of 1996 P.L. No. 104-104: A Legislative History, at Doc. No. 7 (1997). [65] Communications Law Reform: House Hearing Before the Subcommittee on Telecommunications and Finance of the Committee on Commerce, 104th Cong. 417 (1995) (testimony of Andrew Jay Schwartzman, Executive Director of Media Access Project), reprinted in 2 Telecommunications Act of 1996 P.L. No. 104-104: A Legislative History, at Doc. No. 9 (1997). [66] Stuart Taylor, Jr., Witch-Hunt OR Whitewash, The American Lawyer, April 1995, at 60, 63. [67] Fox I, supra note 7, at 8457-58 [68] Id. at 8458. [69] Id. at 8459. [70] Id. at 8461. [71] In the Matter of Request for Declaratory Ruling Concerning the Citizenship Requirements of Sections 310(b)(3) and (4) of the Communications Act of 1934, 103 F.C.C.2d 511, 516 (1985). [72] Fox I, supra note 7, 8456. [73] Id. at 8518. [74] Id. at 8514. [75] Id. at 8515. [76] Id. at 8519. [77] Id. at 8522 [78] Id. at 8524. [79] Fox II, supra note 7, at 5725. [80] Fox I, supra note 7, at 8456. [81] Id. at 8457. [82] Id. at 8459. [83] In the Matter of Request for Declaratory Ruling Concerning the Citizenship Requirements of Sections 310(b)(3) and (4) of the Communications Act of 1934, supra note 71, at 516, [84] Fox I, supra note 7, 8526. (Quello concurring) [85] Ibid. [86] Supra note 4, 310(b)(1,2) [87] In the Matter of Market Entry and Regulation of Foreign-Affiliated Entities, supra note 19, at 3947. [88] Fox I, supra note 7, 8526. (Quello concurring) [89] Fox I, supra note 7, at 8530. (Quello concurring) [90] Id. at 8529. (Quello concurring) [91] Id. [92] Id. at 8530. (Quello concurring) [93] 47 U.S.C.  310(b)(4) (1998). [94] H.R. Rep. No. 104-204, supra note 60, at 121. [95] Id. at 54. [96] In the Matter of Market Entry and Regulation of Foreign-Affiliated Entities, supra note 19, at 3946.