Commenters praise the Commission for considering these reforms of its attribution rules, and welcome this long-overdue initiative. The Commission's attribution rules are vitally important: they are the foundation upon which the multiple and cross ownership rules are built. Without effective attribution rules, Congress could mandate, and the Commission could adopt, nearly any ownership limits - no matter how restrictive and no matter how clearly worded - and would not be able effectively to enforce them. Instead, parties could craft complicated financial structures which give them a vise-like grip on a station's operations, but would avoid application of the current law.
There can be no doubt that the current rules have broken down: recent years have seen cases which shock the conscience for their laxity. As just a few examples out of many, all of the following interests have been held not attributable under the Commission's current rules:
Does anyone really pretend that these investors could not exert their will over the editorial decisions of the licensees? Would any rational station executive say "no" to these 800-pound gorillas? The time for change has come.
Two of the specific proposals in the Commission's notice would effectuate this change, but another would be a big step in the wrong direction. The first proposal, the Equity or Debt Plus rule, would target those investors - program suppliers and same market media entities - that stand in a position to influence licensee decisions unduly. Yet it would not prevent such investments outright, and would not injure licensees' ability to raise capital. As a simple bright-line rule, it enables public accountability, avoids the patchwork quilt of decisions under the current case-by-case approach, and improves the ease of application by the Commission. Indeed, Commenters have only two reservations. First, the proposed threshold level of investment - 33% - is so high that it excludes many investors that should be included. Instead, Commenters suggest a 20% threshold. Second, the proposal would allow an investor to have 32% holdings of debt and equity but still avoid attribution. As a suggested remedy, therefore, the commission should also attribute investments which reach two- thirds, e.g. 22%, of the threshold percentage in any two categories: total equity, total debt, or total capitalization.
After many years of avoiding the issue, the Commission asks whether to attribute television LMAs toward their holder's ownership. Commenters believe that the Commission should go one step further and prohibit LMAs altogether. Among their many outrageous flaws LMAs are, and have always been, a violation on the Communications Act's prohibition on unauthorized transfers of control. If the Commission should continue to allow LMAs, however, Commenters strongly support its proposal to attribute them.
Finally, Commenters oppose the proposal to double the attribution thresholds for voting stock holdings of both active and passive investors, to 10% and 20% respectively. It strains credibility to think that these investors could hold 9.9%, or even 19.9%, of all voting shares and not wield influence. In four years of asking, the Commission has not received one iota of proof showing that raising the benchmark will help raise capital and will not harm diversity. It should finally say "enough is enough," and reject this proposal.