iHeartMedia 2005 Annual Report Download - page 16

16
Under the FCC’s ownership rules, an officer or director of our company or a direct or indirect purchaser of
certain types of our securities could cause us to violate FCC regulations or policies if that purchaser owned or acquired
an “attributable” interest in other media properties in the same areas as our stations or in a manner otherwise prohibited
by the FCC. All officers and directors of a licensee and any direct or indirect parent, general partners, limited partners
and limited liability company members who are not properly “insulated” from management activities, and stockholders
who own five percent or more of the outstanding voting stock of a licensee or its parent, either directly or indirectly,
generally will be deemed to have an attributable interest in the licensee. Certain institutional investors who exert no
control or influence over a licensee may own up to twenty percent of a licensee’s or its parent’s outstanding voting stock
before attribution occurs. Under current FCC regulations, debt instruments, non-voting stock, minority voting stock
interests in corporations having a single majority shareholder, and properly insulated limited partnership and limited
liability company interests as to which the licensee certifies that the interest holders are not “materially involved” in the
management and operation of the subject media property generally are not subject to attribution unless such interests
implicate the FCC’s “equity/debt plus,” or “EDP,” rule. Under the EDP rule, an aggregate debt and/or equity interest in
excess of 33% of a licensee’s total asset value (equity plus debt) is attributable if the interest holder is either a major
program supplier (providing over 15% of the licensee’s station’s total weekly broadcast programming hours) or a same-
market media owner (including broadcasters, cable operators, and newspapers). To the best of our knowledge at present,
none of our officers, directors or five percent or greater stockholders holds an interest in another television station, radio
station, cable television system or daily newspaper that is inconsistent with the FCC’s ownership rules and policies.
Developments and Future Actions Regarding Multiple Ownership Rules
Expansion of our broadcast operations in particular areas and nationwide will continue to be subject to the
FCC’s ownership rules and any further changes the FCC or Congress may adopt. Recent actions by and pending
proceedings before the FCC, Congress and the courts may significantly affect our business.
The 1996 Act requires the FCC to review its remaining ownership rules biennially as part of its regulatory
reform obligations (although, under recently enacted appropriations legislation, the FCC will be obligated to review the
rules every four years rather than biennially). The first two biennial reviews did not result in any significant changes to
the FCC’s media ownership rules, although the first such review led to the commencement of several separate
proceedings concerning specific rules.
In its third biennial review, which commenced in September 2002, the FCC undertook a comprehensive review
and reevaluation of all of its media ownership rules, including incorporation of a previously commenced separate
rulemaking on the radio ownership rules. This biennial review culminated in a decision adopted by the FCC in June
2003, in which the agency made significant changes to virtually all aspects of the existing media ownership rules.
Among other things:
• The FCC relaxed the local television ownership rule, allowing common ownership of two television
stations in any DMA® with at least five operating commercial and non-commercial television stations.
Under the modified rule, a company may own three television stations in a DMA® with at least 18
television stations. In either case, no single entity may own more than one television station that is among
the top four stations in a DMA® based on audience ratings. In markets with eleven or fewer television
stations, however, the modified rule would allow parties to seek waivers of the “top four” restriction and
permit a case-by-case evaluation of whether joint ownership would serve the public interest, based on a
liberalized set of waiver criteria.
• The FCC eliminated its rules prohibiting ownership of a daily newspaper and a broadcast station, and
limiting ownership of television and radio stations, in the same market. In place of those rules, the FCC
adopted new “cross-media limits” that would apply to certain markets depending on the number of
television stations in the relevant television DMA®. These limits would prohibit any cross-media
ownership in markets with three or fewer television stations. In markets with between four and eight
television stations, the cross-media limits would allow common ownership of one of the following three
combinations: (1) one or more daily newspapers, one television station, and up to half of the radio stations
that would be permissible under the local radio ownership limits; (2) one or more daily newspapers and as
many radio stations as can be owned under the local radio ownership limits (but no television stations); and
(3) two television stations (provided that such ownership would be permissible under the local television
ownership rule) and as many radio stations as can be owned under the local radio ownership limits (but no
daily newspapers). No cross-media ownership limits would exist in markets with nine or more television
stations.
• The FCC relaxed the limitation on the nationwide percentage of television households a single entity is