Deal or no deal: reinterpreting the FCC's foreign ownership rules for a fair game.

• Author: Cho, Cindy J.

1. INTRODUCTION II. REGULATING FOREIGN OWNERSHIP OF BROADCAST LICENSES A. Background: The National Security Concern B. Fall of the National Security Concern and Rise of the Public Interest Concern III. LICENSE GRANT AND RENEWAL UNDER [section] 301 OF THE ACT A. General Requirements IV. PRACTICAL PROBLEMS ARISING FROM CURRENT INTERPRETATION OF [section][section] 310 AND 301 A. Australian Ownership of Fox Broadcasting Company B. Spanish Language Broadcasting: Drama in More than Just the Programming 1. Univision and Telemundo 2. Televisa, TV Azteca, and Mexican Communications Regulations 3. Telemundo v. Mexico: A Storied Battle 4. Reconsidering the FCC's Grant of Azteca America's Los Angeles License V. RECIPROCITY: PART OF A SOLUTION A. Past Preference for Reciprocity Test Under [section] 310(b) B. Possible Movement Toward Some Form of Reciprocity Test VI. CONCLUSION INTRODUCTION

   Fourteen-year-old girls, accompanied by their mothers, compete in weekly song and dance performances to win the ultimate birthday party and a talent contract with a television network. Four well-known judges try to shore up their waning fame as former celebrities by ripping apart the performances with theatrical and sometimes stinging criticisms.

   Twenty-six models, identically-dressed and each bearing a metal suitcase, saunter onto a brightly-lit stage. Contestants guess the amounts in the suitcases; they agonize over taking the risk of guessing for more money or accepting settlement offers from a mysterious banker in an elevated and darkened glass chamber.

   These are just two of the latest reality television shows captivating American audiences, with one possibly unexpected twist: they are both broadcast in Spanish. Quinceahera mirrors other successful reality shows, notably American Idol, except that the show's prize is based on the Latin-American/Hispanic tradition of celebrating a girl's entrance into womanhood at the age of fifteen, and the girls and judges are all Latin-American/Hispanic. (1) Vas o No Vas is identical in every respect to the new hit American show, Deal or No Deal, except that the multicultural yet identical models, contestants, host, and audience are all Latin-American/Hispanic. (2)

   Popular American television programming is fast being transposed to appeal to Latin-American/Hispanic viewers as the Spanish-speaking populations in the United States and Latin America become critical markets for broadcasting networks. As of June 2005, the United States Census Bureau estimated that 41.3 million Latin-Americans/Hispanics resided in the country. (3) Mexico, an ever-growing market for telecommunications, boasts approximately seventy million residents from the ages of fifteen to sixty-four. (4) Both American and Mexican broadcasting companies are eager to capitalize on each country's burgeoning Spanish language markets.

   With the changing racial and linguistic composition of the American market and the emerging strength of the Mexican market, American broadcast companies are facing a new competitive playing field. Mexican and other Latin-American broadcasting companies are guarding their own regional markets while aggressively pursuing growing Spanish-speaking American audiences; increasingly, regulated competition between the two countries has elevated to a no-holds-barred battle with uncertain legal boundaries. But the struggle over Spanish-speaking audiences is just one part of the global competition between the United States and other countries. The television broadcast community is truly international, and new competition over Spanish-language audiences merely exemplifies the broader efforts that broadcast companies are undertaking to target any nation with a substantial television-owning population.

   This global competition is not without rules, at least within the United States. Section 310 of the Communications Act of 1934 ("Act") establishes the guidelines for when a foreign national is eligible to apply for a broadcast license from the Federal Communications Commission's ("FCC"). This provision sets forth limits on the percentage ownership that a foreign government or foreign agent may hold in an American broadcast license. The FCC currently interprets these limits on foreign ownership very leniently, favoring a policy of deregulation in an attempt to further open up the United States market. This interpretation of [section] 310, in turn, has influenced the FCC's formulation of criteria for granting and renewing broadcast licenses to foreign nationals under [section][section] 301 and 307 of the Act. This Note argues that once foreign nationals have cleared the hurdle of [section] 310's foreign ownership requirements, the licensing standards under [section][section] 301 and 307 are weakened and even ignored, allowing foreign applicants to engage in anticompetitive behavior in order to obtain broadcast licenses over domestic applicants.

   This argument is illustrated through two notable broadcasting disputes that will be the subject of later sections of this Note. In 1994, the National Broadcasting Company ("NBC"), Columbia Broadcasting System ("CBS"), and the National Association for the Advancement of Colored People ("NAACP") filed a complaint and petition with the FCC alleging that Fox Broadcasting Company ("Fox") was violating the foreign ownership rules through its connection with the Australia-based News Corporation. (5) By violating the foreign ownership rules, NBC alleged, Fox was able to obtain numerous television broadcast licenses illegally and thus obtain an unfair advantage over NBC and other domestic broadcast companies. NBC asked that the FCC deny renewal of a number of Fox's broadcast licenses. The FCC declined to do so. (6)

   More recently, Mexican broadcast companies TV Azteca and Televisa have thwarted NBC's attempts to break into the Mexican market; at the same time, the FCC has freely granted TV Azteca and Televisa license renewals to operate in the United States. (7) After documented reports of violent and aggressive behavior on the part of these Mexican broadcasters against NBC's Mexican affiliate, NBC filed a petition with the FCC asking the agency to deny renewal of TV Azteca's Los Angeles broadcast license; the FCC rejected NBC's petition and renewed TV Azteca's license. (8) TV Azteca and Fox are two examples of how the free-market, deregulatory policy behind [section] 310 has not had the desired result of opening up international competition and has instead promoted anticompetitive behavior leading to obstruction of the licensing requirements under [section][section] 301 and 307.

   This Note first lays out the history of the FCC's regulation of foreign broadcast license holders and discusses the current regulation of foreign broadcast licensees under [section] 310. The current interpretation of [section] 310 affects license renewals under [section][section] 301 and 307, which are the topic of the second section of this Note. Furthermore, this Note, through case studies of Fox and TV Azteca, explores the problems that have arisen as a result of these interpretations of [section][section] 301,307, and 310. Finally, this Note argues that the FCC must incorporate some requirement of reciprocity under [section] 310 if the agency indeed hopes to foster fair and legitimate international competition free of any anticompetitive behavior.

2. REGULATING FOREIGN OWNERSHIP OF BROADCAST LICENSES

   1. Background: The National Security Concern

   The policy behind foreign ownership restrictions has undergone various transformations since the very first restriction appeared in 1912. This early restriction was based on national security concerns. After the United States Navy had conducted a study of the Japanese Army's use of wireless communications in the 1904 Russo-Japanese War, President Theodore Roosevelt requested that the navy bring the fledgling communications industry under government control. (9) The navy had succeeded in persuading "Congress of the potential military importance of radio, and foreign ownership restrictions were written into the Radio Act of 1912 to prevent foreign agents from transmitting radio messages, especially during wartime." (10)

   Congress revisited the Radio Act of 1912 through the Radio Act of 1927, further restricting levels of foreign ownership by prohibiting foreign nationals from holding office in licensee companies and limiting foreign ownership of stock in licensee companies to twenty percent. (11) In the Communications Act of 1934, Congress created the foreign ownership restrictions that are still in effect today. (12)

   Motivated by lingering World War I national security concerns, Congress used [section] 310 of the Act to close up any loopholes left over from the previous two Radio Acts and to prevent foreign domination, both direct and indirect, of American broadcast licenses. (13) Section 310 lays out the qualifications that foreign applicants must fulfill in order to apply for broadcast, radio, or common carrier licenses.(14) Ownership restrictions are specifically laid out in [section] 310 (b):

   (b) Grant to or holding by alien or representative, foreign corporation, etc.

   No broadcast or common carrier or aeronautical en route or aeronautical fixed radio station license shall be granted to or held by--

   (1) any alien or the representative of any alien;

   (2) any corporation organized under the laws of any foreign government;

   (3) any corporation of which more than one-fifth of the capital stock is owned of record or voted by aliens or their representatives or by a foreign government or representative thereof or by any corporation organized under the laws of a foreign country;

   (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, their representatives, or by a foreign government or representative thereof, or by any corporation organized under the laws of...