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Sen. John McCain, R.-Ariz., has introduced new legislation that offers a market-based solution for the growing concentration of media and telecommunications ownership. The Senate Commerce Committee chairman on Jan. 30 introduced the “Telecommunications Ownership Diversity Act of 2003,” which would offer large capital gains tax deferrals to phone and media firms that sell assets to smaller companies or individuals. “If passed, this legislation would encourage large and midsized businesses to sell assets such as radio stations or wireless assets to smaller owners,” said David Kaut, analyst at Legg Mason Inc. in Washington. McCain’s bill, which is also intended to encourage minorities and women to become media and telecom owners, offers large companies a deferral of up to $250 million if they sell assets to small companies. The taxes are subject to a lengthy deferral triggered by subsequent purchase and sale of telecom assets. “Businesses owned or controlled by socially disadvantaged individuals are, and historically have been, economically disadvantaged in the telecommunications industry,” the bill said. “For these businesses, access to and cost of capital are and have been substantial obstacles to new entry and growth, and consequently, diversification of ownership in the telecommunications industry has been limited.” Under the act, firms that qualify as potential buyers include small broadcast station owners that reach less than 5 percent of the national audience; radio companies with fewer than 50 stations nationwide; and telecom firms, including wireless providers, with less than 5 percent of the national subscriber base. Small cable firms, broadcast radio and television stations, satellite and wireless businesses and broadband companies are all potential buyers, according to the legislation. “Instead of a bunch of big companies buying and selling assets among themselves, this bill will encourage the big firms to sell to smaller companies,” said Robert Rini, partner at Washington D.C.’s Manatt, Phelps & Phillips. “And when you get smaller entrants, it means minorities and women have better access.” Rini said that because of the structure of capital gains, if adopted, the legislation could entice “billion-dollar sales of significant properties in significant markets.” Kaut said McCain introduced a similar bill in the late-1990s that failed. But recent attention regarding the dearth of minority- and women-owned media and telecom companies could intensify interest in the latest measure, he said. Dennis Wharton, spokesman for the Washington-based National Association of Broadcasters, said similar legislation was adopted during the Clinton Administration, but later repealed by Congress. “We know for a fact this was one program that successfully brought more new entrants and minorities into broadcasting, and it will do it again,” Wharton said. One source said parallel legislation adopted during the Clinton administration was repealed because of allegations that large media companies improperly sold assets to “minority-owned” shell firms they controlled. A Senate Commerce Committee staffer said McCain’s bill proposes to combat such tactics by placing restrictions on voting control and ownership of the business. Federal Communications Commission Chairman Michael Powell applauded the McCain measure. “I believe it is essential that we promote greater inclusiveness in our media and communications delivery sectors,” Powell said in a statement. �Copyright 2003, The Deal, LLC. All rights reserved.

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