When the FCC approved a controversial bid by Sirius Satellite Radio to acquire XM Satellite Radio for a reported $3.5 million in July, many in the broadcasting industry saw the approval as giving big media an advantage to form monopolies and shut out small minority-owned operations.

At a hearing at the Schomburg Center for Research in Black Culture in Harlem after the merger was approved, the five FCC commissioners were taken to task for that decision and others when minority broadcast owners, media brokers and investors gathered to discuss the barriers to communications financing for women and minority-owned broadcasting companies. The commissioners had scheduled the hearing to learn why those barriers exist and what options might be available to tear them down.

“The tsunami of media consolidation this country has been through over the past decade and more has been bad — very bad — for minority and female ownership,” said FCC Commissioner Michael J. Copps who along with Commissioner Jonathan S. Adelstein dissented on the decision to approve the Sirius-XM merger. “But as we all know, the commission has taken a very different approach, actually pushing for more media consolidation rather than attempting to stem the tide.” He explained that the nation is approaching a minority population of one-third, but people of color own 3% of full-power commercial television stations.

“These numbers are disturbing to me as a woman, as mother of a daughter, as a policymaker, and as a consumer,” said Commissioner Deborah Taylor Tate, one of the three Republicans who voted for the Sirius XM merger.

Panelists identified certain solutions that could help increase access to financing to improve minority ownership. They ranged from repealing FCC rules and regulations that discourage investors, holding Arbitron, an audience radio research company, accountable for discrepancies when measuring young black and Hispanic audiences, and reinstating the Minority Tax Credit Policy, which initially ushered minorities into media ownership.

An FCC order promoting diversification of ownership in the broadcasting services adopted in December 2007 is expected to help minorities and women obtain access to capital but only minimally since the FCC didn’t adopt definitions other than “small business” to explain who can take advantage of these measures.

The December diversity order also planned to modify the equity-debt plus attribution rule and allow an interest holder to exceed the 33% ownership limit without triggering attribution.
The Equity-Debt Plus attribution rule too often “caused potential investors to cautiously avoid investments that might be combined to approach the ownership limit,” says Tate, a supporter of that modification.

“There is a lot of capital in the market place,” says Anita Graham, general partner with Opportunity Capital Partners. “Without the rules and regulations the capital will flow.”

Restoration of the tax credit is an issue panelists said would increase access to ownership. The passage of the Minority Tax Certificate in 1978 led to an increase of African American ownership. However, when a Republican-run Congress repealed it in 1995 and replaced it with the 1996 Telecommunications Act the number of minority-owned broadcast facilities decreased by 40%. African American ownership decreased by 70% and there has been no female ownership since 1998.

“I am overcome by an ironic sense of Déjà vu,” says Frank Washington, owner of KBTV in Sacramento who played a critical role in the creation of the Minority Tax Certificate. “The minority tax certificate was only possible because of overwhelmingly positive public, industry, government and press support, if not outright pressure [on congress]. The impact of the certificate on minority ownership was unprecedented and undeniable.”

Finally, several panelists accused the “Portable People Meter”, the newest audience measurement technology by Arbitron as critically flawed and having a clear bias against the reporting of minority audiences. Arbitron is the company most used by advertisers to determine which stations they will advertise with.

“Radio stations live and die according to the audience ratings and market ranks reported by Arbitron,” said Winston as he prodded the FCC commissioners to investigate Arbitron. “Initial results from the PPM measurements have shown such huge rating declines for stations serving Black and Hispanic audiences that the financial survival of these stations will be at stake if Arbitron continues to implement PPM across the nation in the form it has been initially introduced.”

In a statement, Arbitron CEO Steve Morris initially said “PPM panels exceeds their sample targets for Blacks and Hispanics.” Later Morris acknowledged that at the suggestion of a the National Association of Black Owned Broadcasters Inc. member, Arbitron plans to review their recruitment and compliance methodology aimed at Black and Hispanic households.

Citing concerns about media consolidation, consumer groups and several lawmakers have openly criticized the idea of a merger between XM and Sirius. “I just have the long-held belief that competition is good for the marketplace,” says Butterfield, leader of the CBC’s working group on satellite radio. “When there is absence of competition bad things happen.” Butterfield, a member of the CBC says that he has been following the details for XM/Sirius merger plan for about a year.

In his response to a number of concerns, Martin issued an order earlier this month containing a number of conditions that both companies would have to meet in order gain approval from the FCC. The conditions would help to determine, among other things, the range of subscription plans and pricing that the new entity would be allowed to offer to the public. Although the order by the FCC chairman has not been officially circulated among the other FCC board members, reports indicate that a varying number of satellite radio channels have been set aside for minorities. The total number of channels would make up just 4% of the spectrum. African Americans would have to compete with other minority groups for a portion of that percentage.

“Four percent [of the spectrum] is completely inadequate,” Butterfield argues. “There is nothing but an opportunity to fail.” Members of the CBC have varied opinions regarding the proposed XM/Sirius merger and as a result the CBC has not taken an official stance on the matter. Ultimately, the decision appears to be in the hands of the five-member FCC board made up of three Republicans and two Democrats. “You’ve got two companies [that] will occupy more space than the AM-FM spectrum combined. It’s a substantial business transaction…I’m in a wait-and-see mode,” Butterfield says.

Last summer, Butterfield and several members of Congress—including Reps. Albert R. Wynn (D-Md.), William Lacy Clay (D-Mo.), Elijah Cumming (D-Md), Bennie Thompson (D-Miss.), and David Scott (D-Ga.)—wrote a letter to the FCC outlining their concerns over the merger. In addition to his feelings about protecting the consumer from a potential media monopoly, Butterfield has questions regarding diversity at the management levels and within the workforces of both companies.

“[I] wanted to see a condition placed on the merger that would require diversity programming and a transfer of 20% of the [satellite] space to minority-owned companies,” Butterfield adds. The transfer of that amount of satellite spectrum space “would allow African Americans to contribute to the satellite radio industry,” Butterfield says, adding that it should take on the form of a lease that would allow minority-owned companies to pay for the right to conduct business in the space.

In a merger update on its Website, XM radio heralds that the “combination of the two companies will lead to more programming and better pricing for our subscribers…We will continue to offer a full complement of programming to our millions of subscribers once the merger is complete.” The show of support by the FCC chairman, coupled with the Dept. of Justice’s March clearance of the merger, appears to give the plan by the two companies a significant amount of momentum to move forward and join forces.