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January 2014

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 Admonishes Television Stations for “Host-Selling” to Children
  • $7,500 Fine Imposed for Documents Missing From Public Inspection File
  • $17,000 Fine for Unauthorized Operation of a Radio Transmitter

Admonishment Issued for Program Characters Promoting a Product

The FCC continues to enforce its restrictions on commercial content during children’s shows. Section 73.670 of the FCC’s Rules restricts the amount of commercial matter that can be aired during children’s programming to 10.5 minutes per clock hour on weekends and 12 minutes per clock hour on weekdays. The Commission most often examines compliance with these limitations when acting on a television station’s license renewal application.

Earlier this month, the FCC issued identical admonishments to two commonly-owned Wisconsin TV stations for failing to comply with the limits on commercial matter in children’s programming. The stations disclosed in their license renewal applications that they had aired a commercial for cereal during a children’s program seven years ago, and the commercial contained “glimpses of characters from the program on the screen.” The licensee noted that the appearance was “small, fleeting, and confined to a small area of the picture,” and that the software used by the CW Network to prevent such appearances failed to catch this particular incident. Where a program character appears during a commercial in that program, the FCC’s approach is to treat the entire program as a commercial, which by definition exceeds the FCC’s commercial time limits in children’s programming.

The licensee argued that the images did not appear “during the commercial part of the spot but during a portion of the material promoting a contest.” The FCC disagreed, but only issued an admonishment to each of the stations because the violation was an isolated incident. Nevertheless, the FCC warned that it would impose more serious sanctions if the licensee committed any similar violations in the future.

License Assessed $7,500 Fine for Failing to Provide Quarterly Issues/Programs Lists for Seventeen Quarters

Earlier this month, the FCC imposed a $7,500 fine on a Pennsylvania station for willfully and repeatedly violating the Commission’s rule regarding the public inspection file. Under Section 73.3526(e)(12) of the FCC’s Rules, a licensee must create a list of significant issues affecting its viewing area in the past quarter and the programs it aired during that quarter to address those issues. The list must then be placed in the station’s public inspection file by the tenth day of the month following that quarter.

In April of 2010, an agent from the Enforcement Bureau’s Philadelphia office found during an inspection that the licensee was missing fifteen quarters of issues/programs lists. The licensee explained in response to a subsequent Letter of Inquiry that some of the lists had been stolen or removed from the public inspection file and promised to replace the missing lists. However, in February of 2011, a follow-up investigation revealed that the public inspection file contained only one issues/programs list, which meant that there was a total of seventeen quarters of missing lists. At the time of the follow-up, the licensee said that part of the roof of a neighboring building had collapsed and destroyed the records.

In June of 2011, the FCC issued a Notice of Apparent Liability for Forfeiture (“NAL”) for $15,000. In response, the licensee argued that the fine should be reduced because the missing records were outside his control and that he did not have the ability to pay such a fine. In January of 2014, the FCC determined that a reduction of the fine was warranted based on the licensee’s inability to pay, but noted that the failure to maintain issues/programs lists was not outside of the licensee’s control and that the licensee’s explanations as to the cause of the missing documents conflicted with each other. Although the FCC reduced the fine from $15,000 to $7,500, the Enforcement Bureau cautioned that it has previously rejected inability to pay claims for repeated or egregious violations and that in the event this licensee commits future violations, it may result in significantly higher fines that may not be reduced merely because of the licensee’s inability to pay.

Licensee Fined for Interfering with United States Coast Guard Operations

Last month, the FCC issued an NAL against a California licensee for operating a radio transmitter on a frequency not authorized by its license and failing to take precautionary measures to avoid causing interference. The base fine for operating on an unauthorized frequency is $4,000, and the base fine for interference is $7,000.

In January of last year, the United States Coast Guard complained to the FCC of interference with its operations in the 150 MHz VHF band. An agent from the Enforcement Bureau’s Los Angeles office used radio direction-finding methods to determine that the interference was coming from the licensee’s building. The agent located a transmitter at that location that was operating on a frequency different than that indicated on the transmitter’s label. After the Bureau contacted the licensee and informed it of the agent’s findings, the licensee turned off the transmitter, and the interference to the Coast Guard stopped.

Subsequently, the Enforcement Bureau’s Los Angeles office issued a Notice of Violation (“NOV”) to the licensee for failing to operate in accordance with its authorization and not taking reasonable precautions to avoid interference to licensed services. The NOV noted that the licensee’s authorization specified operation on frequencies that included neither the transmitter’s labeled frequency nor the frequency on which the transmitter was actually operating. In response, the licensee argued that the transmitter was unstable and operating about .8 MHz on both sides of the designated frequency.

Under Section 1.903(a) of the FCC’s Rules, a licensee can only operate a station in compliance with a valid authorization granted by the Commission. The FCC rejected the licensee’s argument that the malfunctioning transmitter was operating on the licensee’s assigned frequency, finding that its agent’s investigation indicated otherwise. The FCC also noted that Section 90.403(e) of the FCC’s Rules requires that licensees take appropriate measures to avoid causing harmful interference, and that the licensee here failed to offer any evidence in response to the NOV that it had taken such precautions.

In determining the appropriate fine, the FCC considered the facts and circumstances and found that the violations warranted proposing a fine higher than the base amount for these violations. Because the licensee caused harmful interference to the Coast Guard’s operations and the licensee was not aware of its spurious signal until the FCC notified it, the FCC assessed a total fine of $17,000, increasing the fine by $6,000 over the base amount for such violations.

A PDF version of this article can be found at FCC Enforcement Monitor.

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Around this time every year, you typically see an abundance of articles in the trades making predictions about what the FCC will do in the coming year. It has become such a rite of the new year that I’ve even joked about it in past posts.

This year, however, I have noticed much less predictive commentary about the FCC, and it isn’t hard to understand why. 2014 is so far looking like a “to be continued” year, forcing FCC soothsayers to concede that it’s hard to say precisely how 2014 will differ markedly from 2013 at the FCC.

For example, 2014 was originally supposed to be the Year of the Broadcast Spectrum Incentive Auction. However, after the confusion surrounding the federal Affordable Care Act website demonstrated that “set a deadline to launch and it will surely be figured out by then” might not be the optimal approach to complex government projects, Chairman Wheeler agreed with much of the broadcast industry that it will take more time to get such a complicated undertaking right. As a result, he announced last month that the auction is now likely a mid-2015 event. While buying health insurance is indeed complicated, it is ditch-digging compared to designing the Broadcast Spectrum Incentive Auction (official motto: “The Broadcast Spectrum Auction–Making quantum mechanics look easy since 2010”).

Similarly, Chairman Wheeler also last month took media ownership proposals being considered internally at the FCC under the prior Chairman off the table in order to give a “fresh look” at the FCC’s media ownership rules. By statute, the FCC is required to review its media ownership rules every four years and eliminate any that are no longer in the public interest. The tabled proposals were part of the still-in-process 2010 quadrennial review, increasing the likelihood that the 2010 proceeding will now be rolled into the 2014 quadrennial review (official motto: “It’s 2014 already?”).

So does this mean 2014 will be boring for media watchers? Not at all. First, one reason for the dearth of breathless predictions is the relatively recent arrival of Chairman Wheeler. A new Chairman can bring many surprises, and as he has succeeded so far in holding many of his cards close to his vest, it’s too early to tell just what all may be on his 2014 wish list. What he will do in 2014 therefore remains more a matter of speculation than prediction, leading many prognosticators to hold back for the moment.

Second, even if 2014 ends up being a quiet year of incremental change at the FCC, there is plenty to keep things interesting on the media front outside of the FCC. First and foremost, last week’s announcement that the Supreme Court is jumping into the Aereo fray ensures that there will be some dramatic developments in 2014. Similarly, the 2014 elections promise to be a significant event for many media outlets, both in terms of bringing political ad dollars through the door while affecting the political balance of a Congress that has promised a rewrite of the Communications Act of 1934 in the next few years.

While such events will create an interesting 2014 regardless of what the FCC has on its menu, it’s meeting the daily deadlines that keeps media businesses going, and meeting the legal deadlines that keep broadcasters in particular operating. For example, while the state by state radio license renewal application filing cycle concludes in 2014, the TV renewal cycle continues on throughout this year and into 2015.

One way, however, that 2014 will differ from 2013 is that October 1, 2014 marks the every-three-years deadline for TV stations to send their must-carry/retransmission consent elections to cable and satellite carriers. Given the growing importance of retrans dollars for broadcasters, and the fact that, at least with regard to cable, a failure to make an election results in a default election of must-carry, these elections are critically important (in contrast, note that failure to send an election to DirecTV or Dish leads to the opposite result, a default election of retransmission consent, just to make it as confusing as possible).

To help broadcasters navigate the less-exciting but still critically important deadlines that keep their licenses intact, at the end of 2013 we published the 2014 edition of our annual Broadcasters’ Calendar. It can be found on the right side of the CommLawCenter main page, as well as at the Communications Publications section of Pillsburylaw.com.

Also, to stay up to date on industry events, keep an eye on our main page Interactive Calendar, as we upload numerous 2014 industry events, including NAB shows, state broadcasters associations conventions, and Pillsbury seminars and webinars on a variety of communications-related subjects. Predicting may be more fun, but knowing your regulatory deadlines keeps the lights on. Regardless, as 2014 reveals itself, I have little doubt that there will be a lot to talk about, and make predictions about, here at CommLawCenter.

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Over the years, I’ve written numerous times about the FCC’s adverse reaction to advertisers seeking to make their ads more attention-getting through inclusion of an Emergency Alert System tone. The most recent was this past November, when the FCC proposed a $25,000 fine against Turner Broadcasting System, Inc. for an EAS tone-laden Conan promo, and announced a $39,000 consent decree with a Kentucky TV station for a local sports apparel store ad containing an EAS alert tone.

I titled the post FCC Reaches Tipping Point on False EAS Alerts, and noted at the end of it that

ominously, today’s FCC Enforcement Advisory notes that “[o]ther investigations remain ongoing, and the Bureau will take further enforcement action if warranted.” Given today’s actions by the FCC, everyone whose job it is to review ad content before it airs is having a very bad day.

Today, the FCC fulfilled that prophecy, proposing an additional $200,000 fine against Turner Broadcasting System, Inc. for distributing another ad containing EAS tones. According to the FCC, Turner’s Adult Swim Network aired ads produced by Sony Music Group promoting an album by rap artist A$AP Rocky and the album’s availability at Best Buy stores. While the ad did not contain any digital data from an EAS tone, it did simulate the EAS audio tone itself. The ad aired seven times over the network’s East Coast feed, and then was repeated seven more times in the West Coast feed three hours later.

The FCC’s decision is “spirited” (at least by FCC standards), managing to convey a fair degree of exasperation, principally because of Turner’s prior violation and the fact that

In response to those [earlier] complaints, which also emphasized the potential impact on public safety of the transmission of such material, Turner represented to the Commission that it had changed certain of its internal review practices. Nevertheless, another Turner-owned channel, less than one year later, transmitted the A$AP Rocky/Best Buy advertisement 14 times over a six day period, which also contained simulations of the EAS codes. Thus, despite its experience with the problem of misusing EAS codes and Attention Signals, Turner continued to violate Section 11.45 of the Commission’s rules and Section 325(a) of the Act, indicating a higher degree of culpability in this instance. Therefore, based on the number of transmissions at issue, the amount of time over which the transmissions took place, the nationwide scope of Adult Swim Network’s audience reach, Turner’s degree of culpability, Turner’s ability to pay, and the serious public safety implications of the violations, as well as the other factors as outlined in the Commission’s Forfeiture Policy Statement, we find that a forfeiture of two hundred thousand dollars ($200,000) is appropriate.

Beyond the unprecedented size of the fine for such a violation, today’s decision is also notable because, unlike the self-inflicted wound of putting an EAS tone in a program promo, this case involved a spot produced by a third party. While the FCC has appeared in the past to have had at least some sympathy where a problem in a third-party ad “slipped through”, the FCC’s sympathy seems to be exhausted at this point. Having said that, it is worth noting that the FCC went after the program network rather than the individual cable and satellite systems that actually transmitted the spots to the public. Cable and satellite providers can take at least some solace in that.

While the nationwide audience and prior violation may have made the size of this fine somewhat unique, it is safe to say that the FCC has reached the point that it is unlikely to find a false EAS tone, no matter the circumstances, to be an excusable “oops” on the part of a program distributor. While the FCC might once have been willing to just admonish a violator and save the fines for repeat offenders, it appears that there will no longer be any free bites at the false EAS tone apple, and that each bite will be appreciably more expensive than the last.

Of course, if the FCC is hoping that steadily escalating fines will cause violators to lose their taste for the forbidden fruit of false EAS tones in ads, the question is whether advertisers will also hear that message, or are broadcasters, cable operators and satellite TV providers forever doomed to play a game of whack-a-mole (whack-a-tone?) with third-party ads?

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Updating the nation`s communications laws is a perennial hot topic in Washington, with the phrase “the law hasn’t kept up with technology” being routinely invoked by those wishing for a change in the law (whether or not technology has anything to do with it).

During the past year, however, the call to update the much amended Communications Act of 1934 has gained momentum, with Congress showing increased interest in taking on the controversial task. While modernizing the statute is not, at least conceptually, all that controversial given how often it has been updated in the past, how it is modernized promises to be a very heated debate given the high stakes involved for a variety of industries.

It is upon the shoals of such controversy that numerous past efforts to update the law have foundered, and observers couldn’t be faulted for believing that any new initiative faces a similar fate. However, what separates the current effort to modernize the statute from many past discussions is that Congress has begun taking concrete steps to move the process forward. Today, the Energy & Commerce Committee of the House of Representatives announced the release of a White Paper outlining the current state of the Communications Act.

The announcement notes that

House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Communications and Technology Subcommittee Chairman Greg Walden (R-OR) today began seeking public input as they work to review and update the Communications Act. In December, Upton and Walden announced that the committee will begin work this year on a comprehensive #CommActUpdate, including a white paper series that seeks to understand areas where the law is no longer working effectively and find ways to improve it to foster an environment for innovation, consumer choice, and economic growth. The white paper released today focuses on broad thematic concepts for updating the Communications Act.

The White Paper, which can be found here, summarizes the history of, and regulatory structure created by, the Communications Act. The Energy & Commerce Committee is asking for input from interested parties on a “series of questions posed in the white paper and is also offering an opportunity for interested parties to comment on any aspect of the Communications Act.” The specific questions include:

1. The current Communications Act is structured around particular services. Does this structure work for the modern communications sector? If not, around what structures or principles should the titles of the Communications Act revolve?

2. What should a modern Communications Act look like? Which provisions should be retained from the existing Act, which provisions need to be adapted for today’s communications environment, and which should be eliminated?

3. Are the structure and jurisdiction of the FCC in need of change? How should they be tailored to address systemic change in communications?

4. As noted, the rapidly evolving nature of technology can make it difficult to legislate and regulate communications services. How do we create a set of laws flexible enough to have staying power? How can the laws be more technology-neutral?

5. Does the distinction between information and telecommunications services continue to serve a purpose? If not, how should the two be rationalized?

While the scope of these questions is immense, the time to respond is not. The announcement of the White Paper asks that comments be submitted by January 31, 2014. Even with Christmas just behind us, it is a safe bet that numerous industry players are hastily drafting their wish lists now in hopes that Congress will be bringing them lots of legislative goodies in any Communications Act rewrite, while leaving their competitors only lumps of regulatory coal.