CLE presentation asks whether the FCC could revive its tax certificate program to encourage more diversity in media ownership

1. Does Section 309(j) of the
Communications Act
still have TEETH?
FCBA Diversity Committee
CLE - The New Telecom Bills - The Return of the Tax Certificate and
the Future of FCC Designated Entity (DE) Credits
Washington, DC February 8, 2006 6 pm – 8:15 pm
Jeneba Jalloh Ghatt
The Ghatt Law Group, LLC
2 Wisconsin Circle, Suite 700
Chevy Chase, Maryland 20815
(240) 235-5028 (tel)
(301) 476-4531 (fax)
Email: jeneba@ghatt.com
Website: http://lawgroup.ghatt.com

2. The question should be in
what state are 309(j)’s teeth?
• Congress delivered Sec. 309(j) and
created it to ensure increased
participation by and ownership of
communications spectrum --for
minorities, women and disadvantaged
businesses
• In its Infancy, the application of
309(j) showed promise…
• Tax Certificate
• Bidding Credits and
Designated Entity status
• Distress Sale Policy
• Comparative Hearings

3. Early 309(j) application
GOOD START…
 Tax Credits
 Distress sales policies
 Comparative Hearings
 Designated Entity Program

4. With age…
Signs of Decay crept in…
• Bacteria: Fraud, Sham applications, Ineligible partnerships (LMAs),
speculators, illegal “flippers”-
• Cavities: Ineffective screening and oversight of auction participants’
eligibility by the FCC leads to the wrong parties benefiting from DE
programs
• Rot:
– Lack of an effective mechanism post-auction to ensure licensee was
indeed operating as a qualified DE - leads to further dilution of pool of
SDB owners
– Little enforcement of rules when evidence presented contributes to more
decay
– Administrative neglect and/or disregard over the dearth of ownership
diversity
– Decisions from Court Cases (Adarand, Croson) gutted 90% of programs
created under 309(j)
– The remaining program, the Distress Sale policy, doesn’t always yield
good results because sometimes minority buyer must revive a
financially bankrupt station

5. Can it be fixed?
Hmmmmmmm?

6. A GOOD ROUTINE EXAM
AND CLEANING
• A comprehensive search for decay, cavities and rotting in the DE
program is in order (similar to what is planned for pre AWS auction)
• Apply the Findings and Recommendations from this Review to
Clean out the Program applying the same type of attention and
resources used to kick start indecency reform (post Janet Jackson)
– Amend current program and craft measurable eligibility and bidding
credit rules and policies
– Redirect existing resources and or use the money from fines or other
allocations to hire more staff to review applicants
– Conduct useful post auction follow up
BUT SOMETIMES EXTREME PROBLEMS CALL FOR EXTREME
MEASURES…

7. DENTURES!
Throw out the old rotted teeth
Pending Communications Act rewrite
Offers Congress and FCC an opportunity to Study and Review the past
failures and adopt New Creative Solutions
• Reinstate Tax Certificate Program
• Adopt Waiver of Certain Ownership Rules if Entity Seeking Waiver Support Sale to
Socially and Economically Disadvantaged Business (SDB) (from Diversity Advisory
Cmte 6/1/2004 report)
• Adopt Waiver of Certain Ownership Rules if Entity Seeking Waiver establishes an
incubator or financing program that substantially promotes minority ownership (from
Diversity Advisory Cmte 6/1/2004 report)
• Adopt Waiver of Construction Permit Expiration Rules to allow Holders of Expiring
Construction Permits to sell to a SDB which would add a new independent voice to a
community (from Diversity Advisory Cmte 6/1/2004 report)

8. Winners and Losers in 309(j)
Reform
• THE GOVERNMENT
• PUBLIC/PRIVATE PARTNERSHIP
• THE COMMUNICATONS INDUSTRY
• THE PUBLIC

9. WINNERS!
• THE GOVERNMENT but only if it….
– Strictly apply eligibility and bidding credit rules
– Critically review the quality of auction participants applying for
DE credit to avoid sham applicants and ineligible participants
– Reinstate the Tax Certificate program (Congress)
– Amend Rules so that Venture Capital companies can increase
their equity participation in minority-operated entities seeking to
acquire telecommunications entities.
– Real enforcement and “Recapture” of licenses from winners later
found to be ineligible. (Borrow a page from the Old INS: e.g. 2
year conditional Green Card)
– Effective Oversight/Advisory Committee with mandatory
reporting of findings and recommendation to FCC with a copy to
Congress, Media, and Public watchdog groups

10. WINNERS!
PUBLIC/PRIVATE PARTNERSHIPS
Watchdog groups like Leadership Cmt on
Civil Rights, MMTC, CU, MAP,TRAC etc
Groups like NAMIC that have existing
mentoring programs

11. WINNERS!
THE COMMUNICATIONS INDUSTRY but only if it…
– Continues to support and partner with Incubator, Mentoring and
Training programs like the ones within established trade
associations (e.g. NABOB, NAB, AWRT)
– Partners with institutions that specialize in minority and small
business financing, and universities (like Howard, Emma
Bowen), those that assist minorities and disadvantaged
businesses develop business plans, acquire financing and learn
how to access properties when they come available
– Follow Best Practices Models like the one released by the FCC
Diversity Advisory Cmte when it comes to hiring and promotion
of minorities and women
– Actively seeks out qualified new entrants when looking to spinoff
properties

12. WINNERS!
• New entrants SDBs, including those
owned primarily by women and minorities,
will have tools to participate and finally
own communications properties
• The Public: The public interest in diversity
of ownership, viewpoints, cultures and
voices will be promoted

13. LOSERS
Sham applicants, Ineligible large
businesses and others that seek to
exploit for their selfish gain the
initiatives aimed at communications
property diversification

14. CONCLUSIONS…
Whether new policies will be adopted (or
legislatively created) or there will be an attempt
to fix or reinstate past initiatives, none of the
goals can be achieved without proper oversight,
periodic review and enforcement.
A COMPREHENSIVE EXAMINATION AND HEALTHY BALANCED
DIET OF GOOD POLICY AND EFFECTIVE ENFORCEMENT
CAN SAVE THE INTENT AND TEETH
OF 309(J)

15. THE END
FCBA Diversity Committee
CLE - The New Telecom Bills –
The Return of the Tax Certificate and
the Future of FCC Designated Entity (DE) Credits
February 8, 2006 6 pm – 8:15 pm
Jeneba Jalloh Ghatt
The Ghatt Law Group, LLC
2 Wisconsin Circle, Suite 700
Chevy Chase, Maryland 20815
(240) 235-5028 (tel)
(301) 476-4531 (fax)
Email: jeneba@ghatt.com
Website: http://lawgroup.ghatt.com