David Honig is a civil rights lawyer practicing before the Federal Communications Commission and federal appeals courts. David co-founded the Multicultural Media, Telecom and Internet Council (MMTC). He currently serves as MMTC’s President Emeritus and Senior Advisor, focusing on broadband adoption, literacy, redlining, and employment and ownership diversity.

He was interviewed by Suzanne Gougherty, director of MMTC Media and Telecom Brokers at the Multicultural Media, Telecom and Internet Council. Answers were edited for clarity and brevity by Veronica Devries, MMTC Earle K. Moore Law Fellow. MMTC commentaries appear regularly in Radio World, which welcomes other points of view on industry issues.

Suzanne Gougherty: Decades ago, the minority tax certificate program was an economic incentive provided to broadcast companies to sell their stations to potential minority buyers — was it successful? 
David Honig: It was very successful. It quintupled the number of minority-owned broadcast stations in the 17 years the program was in effect.

Gougherty: Please explain how the tax certificate program worked for broadcast companies.
Honig: If you sold a radio/television station or a local cable system to a minority-controlled entity, you would be given, by the FCC, a certificate which states if you had a capital gain on the sale you can defer payment of the tax on the capital gain if you reinvest in comparable property. It was a way of incentivizing sales to minorities.

The history of it is interesting. In 1970 the FCC was requiring companies that exceeded the station ownership caps (the number of stations you can own in a local market) and other local ownership rules to divest in order to comply with these standards. Because these were compulsory divestitures, to make it go down somewhat easier, the commission said capital gains taxes could be deferred on these compulsory sales.

Subsequently, this tax certificate was extended to voluntary divestitures. In 1977, then FCC Chairman Dick Wiley convened a Federal Advisory Committee to examine whether there were more aggressive steps that could be taken to diversify broadcast ownership. He did this because there were very few minority-owned stations at the time (one television station and 60 radio stations in 1978 when the program was announced). I helped staff that committee. In 1978 the tax certificate program was extended to sales to minority-owned companies. In that way it built on existing framework that the industry was familiar with. The economic impact was spread widely, and it was certainly an incentive to sell to minorities. The program was announced in 1978 and continued until 1995.

Gougherty: Did broadcast companies use the program to increase their ownership portfolio into larger markets or stations?
Honig: Yes, there are examples of it being used by incumbent minority broadcasters to expand the size of their portfolio or the markets they were able to be in so that they could leapfrog up from medium markets to large markets. That was a common use of the economic incentive.

Gougherty: Why was the program stopped?
Honig: Suffice it to say that there was a misinformation campaign.

For 26 years, we have been trying to get the program back. This seems to be the year that has the greatest chance so far of having it come back in some form.

Gougherty: There is a proposal pending in Congress by Rep. G.K. Butterfield (D-N.C.), Sen. Gary Horsford (D-Nev.), Sen. Gary Peters (D-Mich.), and Sen. Robert Menendez (D-N.J.) to bring back the Tax Certificate program. Is it basically the same program; if not, what’s different about this current proposal?
Honig: It is no longer a race-conscious program. It focuses on the eligible companies, that is who can be a buyer, as being socially disadvantaged individuals. There’s extensive case law that points out how an agency must justify a finding that people of color or women are socially and economically disadvantaged and it tracks those standards very closely. It also provides for reports to Congress, to assure that the program won’t be abused. I looked at more than 200 tax certificate deals at the time and there was only one deal where there was fraud, and the FCC did punish that company eventually.

There is also a new provision in the Senate version of the bill that would allow a station owner to receive a tax credit equal to the value of the station, if he or she donates the station to a training institution such as an HBCU. A tax credit is a very valuable thing:  it’s tax you don’t pay. This is a way to help small broadcasters especially, and we are hoping this provision will make it to the final version of the bill after both houses of Congress come together.

Gougherty: What will be the process to ensure fraud does not occur with the certificates — such as the involvement of a nonminority entity using a “front” person, who does not have any activity with the organization at all?
Honig: There’s very high visibility with a program like this. It’s a small industry in terms of the number of companies. Everyone would be watching them to make sure that no one is playing games with the program or trying to create a fraudulent buyer. The commission has been very aggressive in cracking down on frauds in other contexts. It would be very stupid for anyone to think they can try and outsmart the FCC Enforcement Bureau.

Gougherty: Is there any opposition to the bill?
Honig: First, the NAB has been wonderful helping to organize support on this issue. All 50 state broadcasting associations wrote a letter to the members of Congress endorsing the return of the tax certificate policy. That has never happened before. No one has come out in opposition. That doesn’t mean there won’t be opposition, but no one has chosen to go public and oppose it. We hope that its value will be recognized in a bipartisan way. We note, for example, that nine former FCC chairs voiced their bipartisan support. There was a voice vote on the House version in the House Commerce Committee that passed with no dissents. So, all the Democratic and Republican members were at peace with how the legislation was presented in the House a few months ago.

WASHINGTON--When it gets back to work after the government shutdown, the Federal Communications Commission will have a fair amount of work on its plate — including a formal vote on equal employment opportunity enforcement, which one nonprofit organization is hoping will bring about changes that it says are 14 years overdue.

The president emeritus of the Multicultural Media, Telecom and Internet Council (MMTC) asked FCC Commissioners Brendan Carr and Jessica Rosenworcel to consider additional steps beyond the FCC’s planned housekeeping vote on EEO in order to better address diversity and employment issues at broadcast stations via a series of phone calls in early January.

It was nearly a year ago that the FCC announced a Notice of Proposed Rulemaking (another piece of its ongoing media modernization efforts) that would eliminate the need for TV and radio stations to submit a mid-term report detailing their EEO practices.

The subsequent Report and Order, known as the EEO Mid-Term Report (part of Media Bureau Docket No. 18-23), would eliminate a station’s need to submit a so-called mid-term Form 397 because details about a broadcaster’s EEO compliance are now part of the FCC’s Online Public Inspection File.

But during phone calls with Commissioners Carr and Rosenworcel in early January, the MMTC’s David Honig said he reiterated to the commissioners the MMTC’s concerns about the FCC’s EEO efforts — specifically regarding the long-standing means by which racial and gender discrimination in broadcasting occur: word-of-mouth recruiting.

While the commission does discourage word-of-mouth recruiting, Honig said, the FCC has not taken enough steps to address cronyism, which “is the primary reason why key sectors of the broadcast industry remain largely closed to people of color and, often, to all but a handful of women,” he said in ex parte letters to the commission.

Honig urges the commission to use certain racial and gender data to identify stations which recruit primarily by word of mouth and require them to submit more information as part of a station’s Annual Employment Report. If not, sanctions may be in order, Honig said.

“This two-step method — first identifying those stations that recruit primarily by [word of mouth] and then having those stations submit a Form 395 in camera (in private) — will allow the commission to find and bring to justice those broadcasters that inherently discriminate, thereby fulfilling the purpose of the EEO rule,” Honig wrote.

But in its Report and Order, the FCC noted that MMTC and its filers were seeking “far-reaching substantive changes to the commission’s EEO rules, whereas this NPRM is only concerned with improvements to EEO compliance and enforcement.” As a result, the commission did not address the groups’ proposed broader changes in the item.

The commission did note, however, that it has demonstrated its commitment to EEO enforcement by the relocation of EEO enforcement staff and responsibilities to the Enforcement Bureau, as the EEO supporters suggested.

But Honig expressed concern that the commission has repeatedly avoided opportunities to address key issues impacting EEO hiring.

“[These] proposals, in only slightly different form, have been pending since 2004 [yet] the agency has repeatedly avoided opportunities to address them,” he said. “The NPRM presented members of the public with their first opportunity, in 14 years, to respond to what appeared to be a genuine indication from the commission that it intended to seriously consider the proposals at last.”

The right steps from here, Honig said, would be to put the proposals out for further comment on any specific issues that the commission feels would benefit from additional evidence or argument.

“Fifteen years have elapsed since these proposals were first lodged, and during that time minorities and women in broadcasting have had no protection against ‘cronyism,’” Honig said. Race and gender discrimination in employment is just as top-line an issue as intercarrier comp, undersea cables or retransmission consent.”

He suggested that the commission undertake to complete the proceeding no later than July 2019.

David Honig is the president emeritus and senior advisor of the Multicultural Media, Telecom and Internet Council; Marcella Gadson is the director of communications of the Multicultural Media, Telecom and Internet Council.

Marcella Gadson: Why is diversity in broadcasting so worthy of our attention?
David Honig David Honig: Fifty years ago, the United Church of Christ petitioned the FCC for a rule barring racial discrimination in broadcasting. At the time, the nation was in the midst of its transition to universal first class citizenship. Few women, and virtually no people of color, owned or worked in broadcast stations. Today, a diverse broadcasting industry unites the country, maintains us as one people, helps us understand one another, and allows us to function as a multicultural democracy. None of this would be possible without diversity in broadcasting. And diversity in broadcasting is made possible by two things: the FCC’s equal employment (EEO) rule, and broadcasters’ voluntary efforts to do more than the letter of the rule minimally requires. 

Gadson: What policies, societal norms, and institutional practices have contributed to the lack of diversity in broadcasting?

Honig: The single greatest impediment to diversity in broadcasting is the “old boy network” through which job openings in a homogeneous workplace are filled almost entirely by word of mouth; and wide posting of jobs is performed only to go through the motions. In this way, a homogeneous workplace replicates itself across generations. Since 1980, the FCC has recognized this practice as inherently discriminatory — yet it has not brought an enforcement case against the practice since 1998. That’s got to change.

Gadson: What is the history of the EEO rule, and what does the FCC need to do to enforce both the letter and the spirit of the rule so it has a positive impact on diversity in both broadcasting employment and ownership?

Honig: In 1969, the FCC began to require recruitment broad enough to reach all qualified applicants, including minorities and women. In 1998 and 2001, decisions by the D.C Circuit of the U.S. Court of Appeals invalidated parts of the rule, and the FCC had to readopt the rule in a weaker form. The commission could have continued to take action against some of the worst discriminatory practices, but it chose not to do so. Instead, it has gone after broadcasters just for failing to recruit broadly, even if the broadcaster’s staff was already very diverse. These are unfortunately cases where the letter of a rule was followed, while its intent — in this case, promoting diversity — was ignored. Word of mouth recruitment from a diverse workplace may not be the most businesslike method, but it is not discriminatory or wrong, and the FCC has no business doling out forfeitures — sometimes for over $15,000 — for this alleged rule violation. Instead the FCC should focus its attention on actual bad apples, of which there are plenty.

Gadson: Last month, the FCC issued a declaratory ruling allowing the sole use of internet sources for EEO recruitment, which MMTC endorsed with three caveats to ensure that the ruling would not impede broad recruitment to diverse applicants. Does the ruling accomplish this goal?

Honig: MMTC’s three caveats were that online postings (1) should be easy to find; (2) should be posted before a candidate has been preselected; and (3) should not be a substitute for cultivating job referral relationships with resources such as colleges, community groups, and training programs that are traditionally the career paths for minorities and women to enter the industry. The commission didn’t require broadcasters to observe these caveats, but it did say that performance of them is good evidence of rule compliance. Broadcasters thus would be well-advised to observe them.

Gadson: MMTC’s comments in the proceeding also suggested that the commission should conduct a comprehensive, holistic review of its EEO compliance program. Is this action still necessary?

Honig: Absolutely. The internet recruiting issue was but one modest unresolved element of EEO administration that has been waiting for action in the EEO Docket (MB 98-204) since 2004. The FCC needs to revisit several other issues. For example, what constitutes a violation of the rule? How should broadcasters provide equal opportunity for training and promotions? Is the audit program effective? How can bad apples be held to account, and how can the FCC stop punishing those who have done nothing wrong?

Gadson: The FCC’s ruling extended its internet recruitment proposal beyond terrestrial broadcasting to include multichannel video programming distributors (MVPDs, including cable systems, DISH, and DirecTV). What is the significance of this, and what impact will it have on the industry?

Honig: The FCC is wisely treating all industries the same when it comes to issues like civil rights. That way, when broadcasters are expected to go the extra mile to recruit broadly and diversify their workforces, cable and satellite companies must do the same. We would add telephone companies, wireless companies, and broadband providers; as well as “edge” or high-tech information services companies, which often have EEO records far worse than those of most broadcasters

Gadson: What additional steps should the FCC take to improve broadcasting diversity?

Honig: Oh, where to begin! The most important thing the FCC should do is to identify and crack down on bad apples that are a stain on our business — the companies that just will not hire or promote minorities or women. These companies need to be brought kicking and screaming into the 20th century. To do that, the FCC should crack down on those that recruit primarily by word of mouth from homogeneous workplaces — a practice the FCC has long recognized as being inherently discriminatory.

Beyond that, the FCC’s audit program needs to be significantly beefed up. Too few stations are audited, and almost no one ever fails an audit.

Gadson: Are there any other policies or trends that have improved or harmed the outlook for broadcast employment and ownership?

Honig: Broadcast employment is the primary route to broadcast ownership. More companies should be encouraged to establish incubators to help senior managers transition into owners. Last month, the FCC announced that it is going to charge its new Advisory Committee on Diversity and Digital Empowerment with the task of designing an incubator program. Perhaps this effort will generate a creative mechanism to design an employment career path that extends from the water cooler to the executive suite.

Gadson: What effects has the exclusion of people of color from ownership of the airwaves had on our nation as a whole? What will we see come as a result of increased diversity?

Honig: The EEO rule gave admission to broadcasting to the two-thirds of our population who are not white men. In doing that, the rule injected into the industry an enormous dose of innovation, creativity, relevance, and competitive strength. As our population continues to diversify, the rule that keeps the industry equally open to all remains vital to broadcasting’s economic success. Of course, there’s another reason we like the rule: it reminds us to operate with good character as stewards of public property — the radio frequency spectrum.

This article originally appeared on TVT's sister publication Radio World.