NEW YORK-Allen B. Salmasi, chairman and chief executive officer of NextWave Telecom Inc., went to Wall Street on Dr. Martin Luther King’s birthday to seek support for use of tax certificates to encourage minority business ownership of radio-frequency licenses.
The occasion for Salmasi’s presentation was a workshop: “Restoring Minority Entrepreneurship Opportunities in the Media and Telecommunications Industries.” This was part of the Rainbow/PUSH Coalition’s Wall Street Project conference, a gathering of notables from the public and private sectors, including President Bill Clinton and the Rev. Jesse Jackson Jr., who is coalition president.
Salmasi said NextWave, the largest C-block personal communications services license holder, is working with the newly formed Telecommunications Advocacy Project, Washington, D.C. Last week TAP petitioned the Federal Communications Commission, asking it to let C-block licensees pay for their purchases using minority tax certificates. These are issued to investors who get a deferral of capital gains taxes when they provide start-up capital to minority-controlled companies.
NextWave’s business plan is to be a nationwide wholesaler of wireless services, Salmasi said. Even without tax certificates, “we have broadened ownership in our companies to a lot of (minority-owned) resellers, and they also are becoming owners of our network at the same time,” he said.
Minority tax credits were part of FCC policy for cable and broadcasting TV from 1978 to 1995. Congress ended the program because Viacom International Inc.’s plan to sell its cable TV holdings to a minority-led business group for $2.3 billion would have allowed it to defer more than $400 million in federal taxes, according to published reports. Not only was there concern about the lost revenue, which had been earmarked for health-care tax deductions for farmers and the self-employed, but also about abuses in the FCC’s administration of the minority tax certificate program.
While not addressing tax certificates specifically, Antoinette Cook Bush, a partner in Skadden, Arps, Slate, Meagher & Flom, L.L.P., said, “I have high expectations [that] the FCC, with two blacks and one Hispanic, will do something this year about increasing minority ownership.”
The conference covered a broad range of industry sectors, of which telecommunications and media was just one. The Rev. Jackson provided an introductory overview of its mission.
“At a time when investors pull together large sums to speculate in emerging markets across the world, they too often forget a far larger market that exists right here in the ghettos and barrios of our own cities … We consume more and have more resources. We offer better-educated and better-trained people than poor countries abroad. We offer choice land in central locations, with numerous customers gathered in small areas,” Jackson said.
“During this week’s conference, we will explore in concrete ways the structural impediments and cultural blinders that get in the way of investment in this huge internal market. We will consider the private incentives and public guarantees and resources needed to make this market attractive. This effort is not conservative or liberal. It makes sense, costs less and builds equity and justice.”
Concern about consolidation in telecommunications and its deleterious effect on minority group consumers and workers and on participation by minority-owned enterprises, was a key theme at the conference. The Rainbow/PUSH Coalition early this month asked the FCC and the Department of Justice to declare unlawful the proposed $41.8 billion merger between WorldCom Inc. and MCI Communications Corp.
“The merger application does not contain a word addressing how the merged company will eliminate discrimination and promote fair trade,” Jackson said.
While the Rev. Jackson exhorted attendees to look closer to home for investments, at least one major player in the communications industry said domestic consolidation has caused him to look outside American borders for opportunities.
Percy Sutton, chairman emeritus of Inner City Broadcasting Corp., said that since handing over leadership of the company to his family five years ago, he has set his sites on the Caribbean and Africa for business opportunities.
“Africa has a teledensity of 3 percent, so it seems that 97 percent is available,” Sutton said.
African Communications Ltd., doing business as Actel, has raised about $70 million so far in private capital to launch a satellite telephony service covering South Africa, he said. The company plans to go public on the South Africa Stock Exchange next year.
“I have been an investor through Urban Communications in PCS licenses in North Carolina, South Carolina and Virginia,” Sutton said.
“I am essentially a gambler who takes high risks … but it is my son who decided there is a future here in PCS, cable and radio, and he runs (Inner City Broadcasting).”
Besides infusions of financial capital, investments in human capital are necessary to achieve the goals of greater minority participation, President Clinton said. Educating and training local residents for high-tech jobs are important prerequisites for getting these kinds of businesses to locate in the inner cities, he said. “There are 365,000 computer-related jobs going begging in the United States,” Clinton said.
In his forthcoming State of the Union message, the president said he would propose a federal program “that’s never been done before-to train people already working at lower-echelon jobs to do these kinds of (high-tech) jobs.”
As newly trained workers who had held low-tier jobs move into better employment positions, others who lack any employment will have available a starting rung on the job opportunity ladder, Clinton said.
