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May 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 Proposes $11,000 Fine for Marketing of Unauthorized Device
  • $2,944,000 Fine for Robocalls Made Without Recipients’ Consent
  • Sponsorship Identification Complaint Leads to $185,000 Consent Decree
  • Premature Consummation of Transaction Results in $22,000 Consent Decree

Modifying Design of Parking Meter Requires New FCC Certification and Warning to Users

Earlier this month, the Spectrum Enforcement Division of the FCC’s Enforcement Bureau issued a Notice of Apparent Liability for Forfeiture (“NAL”) against a company that designs, develops, and manufactures parking control products (the “Company”). The NAL indicated the Company had marketed one of its products without first obtaining an FCC certification and for failing to comply with consumer disclosure rules. The FCC’s Enforcement Bureau proposed an $11,000 fine against the Company.

In August of 2013, the FCC received a complaint that a particular product made by the Company did not have the required FCC certification and that the product did not comply with consumer disclosure requirements. After receiving the complaint, the FCC’s Spectrum Enforcement Division issued a Letter of Inquiry (“LOI”) to the Company. The Company responded in the middle of March, at which time it described the product in question as a “parking meter that accepts electronic payments made with credit cards, smart cards, or Near Field Communications-enabled mobile device applications.” The response to the LOI indicated that the Company had received an FCC authorization in 2011 but had since refined the design of the product. Although one refinement involved relocating the antenna on the device, which increased the field strength rating from the level authorized in 2011, the Company assumed that the changes to the device qualified as “permissive changes” under Section 2.1043 of the FCC’s Rules. In addition, the Company admitted to marketing the refined product before obtaining a new FCC certification for the increased field strength rating, and that its user manual did not contain required consumer disclosure language. However, the Company had not actually sold any of the new parking meters in the U.S.

Section 302(b) of the Communications Act prohibits the manufacture, import, sale, or shipment of home electronic equipment and devices that fail to comply with the FCC’s regulations. Section 2.803(a)(1) of the FCC’s Rules provides that a device must be “properly authorized, identified, and labeled in accordance with the Rules” before it can be marketed to consumers if it is subject to FCC certification. The parking meter falls under this requirement because it is an intentional radiator that “can be configured to use a variety of components that intentionally emit radio frequency energy.” The Company’s product also meets the definition of a Class B digital device, in that it is “marketed for use in a residential environment notwithstanding use in commercial, business and industrial environments.” Under Section 15.105(b) of the FCC’s Rules, Class B digital devices “must include a warning to consumers of the device’s potential for causing interference to other radio communications and also provide a list of steps that could possibly eliminate the interference.”

The base fine for marketing unauthorized equipment is $7,000, and the base fine for marketing devices without adequate consumer disclosures is $4,000. The Company argued that even though it had marketed the device before it was certified, it had not sold any, and it promptly took corrective action after learning of the issue. The Enforcement Bureau declined to reduce the proposed fines because the definition of “marketing” does not require that there be a sale, and “corrective measures implemented after the Commission has initiated an investigation or taken enforcement action do not nullify or mitigate past violations.” The NAL therefore assessed the base fine for both violations, resulting in a total proposed fine against the Company of $11,000.

Unsolicited Phone Calls Lead to Multi-Million Dollar Fine

Earlier this month, the FCC issued an NAL against a limited liability company (the “LLC”) for making unlawful robocalls to cell phones. The NAL followed a warning issued more than a year earlier, and proposed a fine of $2,944,000. The LLC provides a robocalling service for third party clients. In other words, the LLC’s clients pay it to make robocalls on their behalf to a list of phone numbers provided by the client.

The Telephone Consumer Protection Act (“TCPA”) prohibits robocalls to mobile phones unless there is an emergency or the called party has provided consent. These restrictions on robocalls are stricter than those on live calls because Congress found that artificial or prerecorded messages “are more of a nuisance and a greater invasion of privacy than calls placed by “live” persons.” The FCC has implemented the TCPA in Section 64.1200 of its Rules, which mirrors the statute.

The LLC received an LOI in 2012 from the Enforcement Bureau’s Telecommunications Consumers Division (the “Division”) relating to an investigation of the LLC’s services. The Division required the LLC to provide records of the calls it had made, as well as to submit sound files of the calls. This preliminary investigation revealed that the LLC had placed 4.7 million non-emergency robocalls to cell phones without consent in a three-month period. After making these findings, the Division issued a citation to the LLC in March of 2013, warning that making future calls could subject the LLC to monetary penalties and providing an opportunity to meet with FCC staff and file a written reply. The LLC replied to the citation in April of 2013, and met with FCC staff.

However, in June of 2013, the Division initiated a second investigation to ensure the LLC had stopped making illegal robocalls. The LLC objected, but produced the documents and audio files requested. The Division determined, by analyzing the materials and contacting customers who had received the prerecorded calls made by the LLC, that the Company made 184 unauthorized robocalls to cellphones after receiving the citation. Continue reading →

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Just two months after assessing nearly $2 million in fines to cable operators for airing ads for the movie Olympus Has Fallen containing false EAS tones, the FCC today granted an 18-month extension of its 2013 waiver allowing the Federal Emergency Management Agency to continue to use false emergency tones in Public Service Announcements.

In this case, the tone being used is not the “broadcast” EAS tone, but the Wireless Emergency Alert (WEA) tone transmitted to cell phones and other wireless devices in an emergency. In the words of the FCC, “[t]he WEA Attention Signal is a loud, attention-grabbing, two-tone audio signal that uses frequencies and sounds identical to the
distinctive and familiar attention signal used by the EAS.”

According to the FCC’s waiver extension order, the FEMA PSAs are a reaction to the public being “startled or annoyed” when hearing the WEA tone for the first time, and then seeking to turn off all future alerts. The PSAs are aimed at teaching the public how WEA works and how their mobile devices will behave when receiving a WEA alert.

Given these facts, on May 31, 2013, the FCC granted an unprecedented waiver of the prohibition on airing false emergency tones to permit FEMA PSAs containing the WEA tone to be aired. However, that waiver was limited to one year. Since that year is about up, FEMA recently sought an extension, and by today’s order, the FCC has extended the waiver for an additional 18 months.

While FEMA indicates that it believes the announcements have been a success, it continues to receive negative media coverage and individual complaints about the WEA alerts. As a result, it wishes to continue distributing the PSAs for airing and needed today’s waiver to accomplish that.

Of course, while FEMA is the party that sought the waiver, it is broadcasters and cable operators that are typically found liable when a false emergency tone airs. Both of those groups should therefore be concerned that the FCC did not grant an unconditional waiver, but instead extended the waiver only to announcements that “mak[e] it clear that the WEA Attention Signals are being used in the context of the PSA and for the purpose of educating the viewing or listening public about the functions of their WEA-capable mobile devices and the WEA program.” As a result, the FCC warned that “leading off a PSA with a WEA Attention Signal, without warning, may be an effective attention-getting device, but it would violate the conditions of this waiver because of the effect that it could have on the listening or viewing public.”

Broadcasters and cable operators will therefore need to screen all FEMA PSAs containing an emergency tone to ensure it is a WEA (and not an EAS) tone, and that the PSA meets the FCC’s waiver conditions and therefore does not pose a risk of confusing the public as to whether an emergency is actually occurring. In other words, if FEMA runs afoul of this requirement in a future PSA, it is the broadcasters and cable operators airing it who will be facing the emergency.

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Earlier today, the FCC held its monthly Open Meeting, where it adopted rules to implement the Broadcast Television Incentive Auction.You can watch a replay of the FCC’s Open Meeting on the FCC’s website.

Thus far, the FCC has released three documents relating to the actions it took today in this proceeding, as well as separate statements from four of the five commissioners, providing at least some initial guidance to affected parties: (1) a News Release, (2) a summary of upcoming proceedings, and (3) a staff summary of the Report & Order.

At the meeting, the commissioners noted that, when released, the Report and Order will contain a number of rule changes to implement the auction. The major takeaways are:

  • The reorganized 600 MHz Band will consist of paired uplink and downlink bands, with the uplink bands starting at channel 51 and expanding downwards, followed by a duplex gap and then the downlink band;
  • These bands will be comprised of five megahertz “building blocks”, with the Commission contemplating variations in the amount of spectrum recovered from one market to the next, meaning that not all spectrum will be cleared on a nationwide basis, and in some markets, repacked broadcasters will be sharing spectrum with wireless providers in adjacent markets;
  • The FCC anticipates there will be at least one naturally occurring white space channel in each market for use after the auction by unlicensed devices and wireless microphones;
  • The auction will have a staged structure, with a reverse auction and forward auction component in each stage. In the reverse auction, broadcasters may voluntarily choose to relinquish some or all of their spectrum usage rights, and in the forward auction, wireless providers can bid on the relinquished spectrum;
  • In the reverse auction, participating broadcasters can agree to accept compensation for (1) relinquishing their channel, (2) sharing a channel with another broadcaster, or (3) moving from UHF to VHF (or moving from high VHF to low VHF);
  • The FCC will “score” stations (presumably based on population coverage, etc.) to set opening prices in the auction;
  • The FCC will use a descending clock format for the reverse auction, in which it will start with an opening bid and then reduce the amount offered for spectrum in each subsequent round until the amount of broadcast spectrum being offered drops to an amount consistent with what is being sought in the forward auction;
  • The auction will also incorporate “Dynamic Reserve Pricing”, permitting the FCC to reduce the amount paid to a bidding station if it believes there was insufficient auction competition between stations in that market;
  • The rules will require repurposed spectrum to be cleared by specific dates to be set by the Media Bureau, which can, even with an extension, be no later than 39 months after the repacking process becomes effective;
  • The FCC will grandfather existing broadcast station combinations that would otherwise not comply with media ownership rules as a result of the auction; and
  • The FCC continues to intend to use its TVStudy software to determine whether a repacked station’s population coverage will be reduced in the repacking process, despite NAB’s earlier protests that the current version of the software would result in reduced coverage for nine out of ten stations in the country.

Finally, the FCC will be asking for public input on numerous additional issues, such as opening bid numbers, bid adjustment factors, bidding for aggregated markets in the forward auction, dealing with market variations, setting parameters for price changes from round to round, activity rules, and upfront payments and bidding eligibility. The FCC will consider in future proceedings ways to mitigate the impact of repacking on LPTV/TV translators, how to address interference between broadcast and wireless operations, and how best to facilitate the growth of “white spaces” devices in the unlicensed spectrum.

Although today’s Open Meeting and these preliminary documents provide some guidance on many complex incentive auction issues, they only scratch the surface, and there are many blanks the FCC will need to fill in between now and the auction. One of those that broadcasters will be watching very carefully is how the Media Bureau will be handling reimbursement of stations’ repacking expenses. That has turned out to be a very challenging issue in past FCC efforts at repurposing spectrum, and the fact that the amount set aside by Congress for reimbursement might well fall short of what is needed has many broadcasters concerned.

We will know more about this and many other issues when the Report and Order is released, hopefully in the next week or two, but the real answers are going to reveal themselves only very slowly over the next year or two. The FCC has to hope that they will still have broadcasters’ attention by the time we reach that point.

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May 2014

This Advisory provides a review of the FCC’s political broadcasting regulations.

Introduction
More than ten years after adoption of the Bipartisan Campaign Reform Act (“BCRA”) of 2002, popularly known as “McCain-Feingold,” Congress’ and the FCC’s interest in political broadcasting and political advertising practices remains undiminished. Broadcast stations must ensure that a broad range of federal mandates are met, providing “equal opportunities” to all candidates using the stations’ facilities, affording federal candidates for public office “reasonable access” and treating all candidates for public office no less favorably than the station treats its most favored advertisers. Accordingly, it is imperative that broadcasters be very familiar with what is expected of them in this regulatory area, that they have adequate policies and practices in place to ensure full compliance, and that they remain vigilant in monitoring legislative, FCC, and FEC changes in the law.

In this environment, it is critical that all stations adopt and meticulously apply political broadcasting policies that are consistent with the Communications Act and the FCC’s rules, including the all-important requirement that stations fully and accurately disclose in writing their rates, classes of advertising, and sales practices to candidates. That information should be routinely provided to candidates and their committees in each station’s carefully prepared Political Advertising Disclosure Statement.

Many of the political broadcasting regulations are grounded in the “reasonable access,” “equal opportunities,” and “lowest unit charge” (“LUC”) provisions of the Communications Act. These elements of the law ensure that broadcast facilities are available to candidates for federal offices, that broadcasters treat competing candidates equally, and that stations provide candidates with the rates they offer to their most-favored commercial advertisers during specified periods prior to an election. As a general rule, stations may not discriminate between candidates as to station use, the amount of time given or sold, or in any other meaningful way.

It is also important to note that television stations affiliated with ABC, CBS, NBC, or FOX located in the top 50 markets must keep their political records in their online public inspection file located on the FCC’s website. Beginning July 1, 2014, all other television stations must commence placing new political file documents in the political file section of their online public inspection file as well. This requirement does not apply to radio stations at this time.

While this Advisory outlines some of the general aspects of the political broadcasting rules, there are dozens of possible variations on any one issue. Accordingly, stations should contact legal counsel with any specific questions or problems they may encounter.—Article continues.

A pdf version of this entire article can be found at Political Broadcasting Advisory.

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The FCC just gave broadcasters another reason to answer the door graciously. Earlier this week, the FCC whacked a Pennsylvania Class A Television broadcaster with an $89,200 Notice of Apparent Liability (NAL) for refusing to allow FCC inspectors to inspect the station’s facilities, not just once, but on three different occasions. It is rare to see the FCC show its irritation in an NAL, but the language used by the FCC in this particular NAL leaves no doubt that the Commission was not happy with the licensee, particularly with what the FCC believed was blatant disregard for its authority. As the FCC put it, “this is simply unacceptable.”

Regarding specific rule violations by the licensee, the FCC alleged violations of Section 73.1225(a), which requires a broadcaster to make its station available for inspection by the FCC during normal business hours or at any time of operation; Section 73.1125(a), which requires a broadcaster to maintain a main studio location staffed with at least two employees during regular business hours; and Section 73.1350(a), which requires a broadcaster to operate its station in compliance with the FCC’s technical rules and in accordance with its current station authorization.

The NAL indicated that local field agents from the Enforcement Bureau’s Philadelphia Office attempted a station inspection during regular business hours once on August 17, 2011, and twice on September 30, 2011, without success. Physical access to the main studio of record was blocked by a locked gate.

After calling the station, the field agents were met at the locked gate by the station manager, who indicated that he was on his way to a doctor’s appointment, that no one else was available at the station to facilitate an inspection, and that the field agents would have to return the next day in order to gain access to the station. After leaving the site of the main studio, one field agent attempted to call the sole principal of the licensee but was forced to leave a voicemail requesting that the owner return the call to discuss the inaccessibility of the main studio. The field agent also called the main studio and left a voicemail. The call was later returned by the station manager, who indicated that he was still at his doctor’s appointment. According to the NAL, the agent identified the caller ID number on the returned call as being that of the main studio. When questioned about it, the station manager indicated “that the Station used his personal cellular number as the Station’s main studio number.”

On the second inspection attempt, the field agents again encountered the locked gate. The station manager, who met them at the gate, asked the field agents to wait outside the gate until he returned from the main studio building. The field agents left “after waiting more than ten minutes for the Station Manager to return….” The field agents returned later that day and once again encountered the locked gate. An agent called the main studio and spoke to the station manager, who indicated that, the “gate must remain locked for security reasons and that the public must contact the station to obtain access.” The field agents noted that there was no signage or other information posted at the locked gate to indicate such a requirement.

After their departure, one of the agents again attempted to contact the station owner in order to discuss the inaccessibility of the main studio. The agent was forced to leave a second voicemail, reiterating his request for a return call. Neither call was returned by the owner.

In March 2012, a local field agent determined that, after monitoring the station’s transmissions, the station was operating from a tower structure that was not specified in its current authorization. The agent, with the collaboration of the tower owner, determined that the station was operating from a tower approximately two-tenths of a mile away from its authorized transmitter site. Both towers were owned by the same tower company.

The NAL noted that the FCC has previously fined broadcasters for failure to provide access for inspection, but that “none of those cases involved repeated, direct, in-person refusals of access by the highest level of a broadcast station’s management, as well as multiple failures by the licensee’s sole principal to return FCC agent calls concerning the refusals.” The NAL also stated that, “continued refusal…is an egregious violation of the Commission’s rules warranting stringent enforcement action.” These events led to the maximum fine of $37,500 for each day the field agents were refused access. The $75,000 was then added to the fines for the main studio and unauthorized operation violations. The main studio base forfeiture is $7,000. The unauthorized operation base forfeiture is $4000, but the FCC elected to upwardly adjust that amount by another $3200. At the end of the day, the licensee was assessed a fine of $89,200.

In hindsight, it seems very unlikely that, even had the station been in a state of disarray or total chaos, any potential fine from the FCC could have exceeded the nearly $90,000 fine the licensee instead received for refusing access.

The obvious lesson learned here if is that if the FCC comes knocking at your door, let them in.

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May 2014

Class A and Full-Power Television Broadcasters in All Markets Regardless of Network Affiliation and Market Rank Must Comply with the Online Retention of Political Programming Materials as of July 1, 2014

The FCC recently published in the Federal Register a reminder that all Class A and full-power television broadcasters must, by July 1, 2014, begin maintaining new political advertising materials mandated by Section 73.1943 of the Commission’s Rules in the station’s online public inspection file.

As previously reported, pursuant to the FCC’s Second Report and Order (“R&O”), adopted in May 2012, Class A and full-power television stations affiliated with the top four networks in the top 50 Designated Market Areas (“DMAs”) have been required to comply with the online political file rule since August 2, 2012.

The R&O stayed the online political file requirement for all Class A and full-power television stations that are not a top four network station in the top 50 DMAs until July 1, 2014. Accordingly, from July 1, 2014 forward, all stations, regardless of network affiliation or DMA, must begin keeping their political file in their online public inspection file. Notably, while political advertising documents created on or after July 1, 2014 must be placed in the online public file, stations should continue to retain hard copies of pre-July 1, 2014 documents in their physical public file to comply with the two-year retention period for political file documents set forth in Section 73.3526(e)(6).

The Federal Register notice can be viewed here.

A pdf version of this article can be found at Client Alert.