In the latest chapter of the attempt by Internet streaming music provider Pandora to acquire a South Dakota radio station, the Federal Communications Commission (FCC) has asked for comments on the petition for declaratory ruling that Pandora filed in late June. The petition, as we explained previously, is the first one filed by an entity seeking to exceed the 25% benchmark for foreign investment in broadcast licensee parent companies imposed by Section 310(b)(4) of the Communications Act. The FCC had previously applied a de facto rule prohibiting such investment, but in November of last year clarified that it would consider, on a case-by-case basis, proposals to exceed the 25% benchmark in the broadcast context.
As the FCC Public Notice requesting comment explains, Pandora’s petition states that although it has reason to believe its level of foreign ownership is less than 25%, it cannot demonstrate compliance in accordance with the guidelines set out by the FCC’s Audio Division in connection with Pandora’s application. Those guidelines are derived from a 1974 internal FCC staff memo and require applicants seeking to demonstrate that they have foreign ownership of less than 25% to engage in a complex, multi-step analysis. Among other things, an applicant with widely held shares must first ascertain the citizenship of as many of its shareholders as possible, and then conduct a statistically valid survey to determine the citizenship of the remaining shareholders. If a shareholder does not respond to the survey or provides information that does not allow the applicant to determine with certainty that the shareholder is domestic, then the applicant must assume that the shareholder is foreign.