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September 2012
Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

  • FCC Follows Up a $25,000 Fine With a $236,500 Fine
  • Two Tower Owners Fined for Fading Paint

FCC Issues Second Fine to Cable TV Operator for $236,500
As we previously reported in October 2011, the operator of a cable television system in Florida was fined $25,000 for a variety of violations of the FCC’s Rules, including failing to install and maintain operational Emergency Alert System (“EAS”) equipment, failing to operate its system within the required cable signal leakage limits, and failing to register the cable system with the FCC. This month, the FCC issued a second Notice of Apparent Liability for Forfeiture and Order (“NAL”) to the operator for continued violations of the FCC’s cable signal leakage and EAS rules and for failing to respond to communications from the FCC requiring that the operator submit a written statement of compliance.

In January 2011, agents from the Tampa Office of the FCC’s Enforcement Bureau inspected the cable system and discovered extensive signal leakage, prompting the issuance of a NAL in 2011. The FCC has established signal leakage rules to reduce emissions that could cause interference with aviation frequencies. Sections 76.605 and 76.611 of the FCC’s Rules establish a maximum cable signal leakage standard of 20 microvolts per meter (“µV/m”) for any point in the system and a maximum Cumulative Leak Index (“CLI”) of 64. If potentially harmful interference cannot be eliminated, the FCC’s Rules require that the system immediately suspend operations following notification from the FCC’s local field office. Normal operations cannot resume until the interference has been eliminated “to the satisfaction of” the FCC’s local field office.

In early September 2011, agents from the Enforcement Bureau conducted a follow-up inspection of the cable system. During the inspection, the agents discovered 33 leakages, 22 of which measured over 100 µV/m, and found that the CLI for the system was 86.97, well in excess of the maximum permitted. Two days after the inspection, the local field office issued an Order to Cease Operations, directing the cable system to cease operations until the leakages were eliminated and to seek written approval from the local field office prior to resuming normal operations. At the time of its issuance, the President of the cable system verbally consented to abide by the terms of the Order. However, the cable system operator never contacted the field office to seek approval to resume operations, and the field office has yet to approve further cable system operations.

Between September 2011 and March 2012, agents from the FCC inspected the cable system an additional five times. During those inspections, the agents found that not only had the cable system resumed operation without permission, but they once again observed numerous signal leakages during each inspection.

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The first compliance deadline for the FCC’s new rules for the closed captioning of video programming delivered via Internet protocol (i.e., IP video), as required by the 21st Century Communications and Video Accessibility Act (CVAA), is September 30, 2012. April 30, 2012 was the effective date of the new rules and all video programming that appeared on television with captions after that date is considered “covered IP video” and will need to be captioned when being shown online in the future. “Video programming” is defined as “programming by, or generally considered comparable to programming provided by a television broadcast station.”

Last January, the FCC released its Order adopting rules to implement the CVAA’s requirements governing the closed captioning of IP video. The CVAA requires that all nonexempt full-length video programming delivered over the Internet that first appeared on TV in the United States with captions also be captioned online. According to the rules, video programming shown on the Internet after being shown on television must have captions based on the following timeline established by the FCC:

  • September 30, 2012: all pre-recorded programming not edited for Internet distribution must be captioned for online viewing. Pre-recorded programming is defined as programming other than live or near-live programming.
  • March 30, 2013: all live and near-live programming must be captioned for online viewing. Live programming is defined as programming that airs on TV “substantially simultaneously” with its performance (i.e., news and sporting events). Near-live programming is video programming that is performed and recorded less than 24 hours prior to the first time it aired on television (i.e., the “Late Show with David Letterman”).
  • September 30, 2013: all pre-recorded programming that is edited for Internet distribution must be captioned for online viewing. Programming edited for Internet distribution means video programming for which the TV version is “substantially edited” prior to its Internet distribution.

Keep in mind that there is a different compliance schedule for all programming that is subject to the new requirements but which is already archived in a video programming distributor’s or provider’s library before it is shown on television with captions. Such programming is subject to the following deadlines:

  • Beginning March 30, 2014, all programming that is subject to the new requirements and is already in the distributor’s or provider’s library before it is shown on television with captions must be captioned within 45 days after it is shown on television with captions.
  • Beginning March 30, 2015, such programming must be captioned within 30 days after it is shown on television with captions.
  • Beginning March 30, 2016, such programming must be captioned within 15 days after it is shown on television with captions.

Clients frequently ask whether the new rules apply to clips, video-clips, or outtakes. Generally, the answer is no. The FCC’s Order defines clips as “excerpts of full-length programming.” According to the FCC, the rules apply to “full-length video programming” defined as “video programming that appears on television and is distributed to end users, substantially in its entirety, via IP.” This definition therefore excludes video clips or outtakes from video programming that appeared on television. However, keep in mind that the FCC also indicated that when “substantially all” of a full-length program is available via IP, whether as a single unit or in multiple segments, that program is not considered a clip and does constitute a full-length program subject to the IP captioning rules.

Those interested in learning more about these issues should contact us.

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The FCC recently released an Order giving companies greater flexibility in how they can structure foreign investment in common carrier licensees, such as wireless companies that provide phone service. This action, taken in a proceeding initiated last year, is a first step towards simplifying and streamlining the FCC’s cumbersome foreign ownership review and approval process, with the goal of facilitating increased foreign investment in telecommunications companies.

The FCC’s foreign ownership policy is governed by Section 310 of the Communications Act. Section (b)(3) of the statute requires the FCC to prohibit certain foreign entities from being FCC licenses themselves and from directly holding ownership interests that exceed specified levels in certain types of FCC licensees, such as common carrier licensees. The FCC’s International Bureau previously interpreted this provision to strictly prohibit foreign entities from having more than a 20% non-controlling interest (direct or indirect) in an FCC common carrier licensee.

The Order replaces this absolute prohibition with a discretionary policy already in use under a different section of the statute, Section 310(b)(4). That section restricts foreign entities from having more than a 25% controlling interest (direct or indirect) in any parent company of an FCC common carrier licensee (among other entities), unless the FCC specifically approves a greater foreign ownership interest.

The FCC makes the determination of whether it should allow greater foreign investment under Section 310(b)(4) and now under Section 310(b)(3), by examining whether the foreign investment is from a World Trade Organization (WTO) Member country, using a “principal place of business” test. If under the principal place of business test the investment is from a WTO Member country, the proposed foreign investment is presumed to be competitive and in the public interest. Where the investment is from a non-WTO Member country, the FCC applies what is known as an “effective competitive opportunities” or “ECO” test. The purpose of the ECO test is to determine whether competitive opportunities exist for American companies in those non-WTO Member countries and whether the foreign investment in the U.S. will serve the public interest.

The FCC’s foreign ownership review and approval process under Section 310(b)(4) has historically proven to be complex and time-consuming, both for licensees and the FCC. Licensees are required to engage in costly and extensive efforts in order to compile detailed information regarding citizenship and principal places of business of investors. There is no exception for individuals and entities that hold even de minimis interests through multiple intervening investment vehicles and holding companies. Moreover, licensees often have to conduct this exercise repeatedly given the fluid nature of investments. For its part, the FCC must expend considerable resources of its own processing (and often reprocessing) the voluminous and detailed information submitted by licensees.

The FCC’s decision liberalizes only its ownership policies under Section 310(b)(3). It leaves for another day the extensive reforms proposed by the FCC in a Notice of Proposed Rulemaking regarding foreign ownership under Section 310(b)(4).

The FCC’s Order has been published in the Federal Register and is now in effect. Parties interested in learning more about the FCC’s Order or the foreign ownership reform proceeding should contact Pillsbury for advice.

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In what seems to be the longest presidential campaign in history, tomorrow, September 7th, marks the beginning of the final stretch. That’s the first day of Lowest Unit Charge Season, the 60-day period before the November 6th, 2012 general election. During that time (which also occurs in the 45 days before a primary election), broadcast stations may charge no more than their lowest rate for each particular class of ad time purchased for a “use” by a legally qualified candidate.

Of course, while the concept sounds simple enough, its implementation at stations with dozens of different classes of ad time has proven to be a biennial headache for broadcasters. However, particularly for stations in political swing states, it can be a fairly profitable headache, and well worth the regulatory aspirin needed to get through it.

Contrary to a common misconception, Lowest Unit Charge applies to all legally qualified candidates during the LUC window, and not just to federal candidates. Also, keep in mind that the 60-day Lowest Unit Charge window is relevant only to the issue of rates. Other political broadcast rules, like the requirements for reasonable access for federal candidates and equal opportunities apply as soon as there are enough legally qualified candidates to trigger them (one in the case of reasonable access, and at least two in the case of equal opportunities, since there has to be a competing candidate to demand an equal opportunity in response to the first candidate’s airtime).

If the statements above have left you perplexed, confused, or questioning the very meaning of your existence, you should definitely take some time to look at the current edition of our Political Broadcasting Advisory. The Advisory fills in lots of detail on the matters discussed above, as well as myriad other issues created by the complexities of selling (or buying) political ad time in a regulated environment.

So, update the rate card attached to your Political Disclosure Statement, and get ready for the final stretch of a political season that has been excruciatingly long for viewers and listeners, but which will be over all too quickly for many broadcasters.