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Where the law aims to draw a bright line between what is permissible and what is not, advances in technology often blur that line, creating factual scenarios that couldn’t have existed when the law was drafted. In the case of Aereo’s technology, the mistake many are making is to assume that technology doesn’t just blur the line, but erases it entirely. Courts, however, are remarkably astute at locating that faded line and darkening it rather than just throwing up their hands and saying “Congress didn’t specifically address this technology, so you’re free to do whatever you want with it.” As Napster discovered years ago, just because a technology wasn’t envisioned by Congress when the copyright laws were drafted doesn’t exempt it from their application.

In the proceeding now pending before the Supreme Court, the Court is looking only at the narrow issue of whether the Second Circuit erred in declining to issue an injunction against Aereo’s service on the grounds that Aereo’s transmissions are not “public performances” of broadcast programs. While the details of this debate are quite nuanced, a ruling that Aereo is engaged in transmitting public performances would be the judicial equivalent of a torpedo amidships; Aereo might not sink immediately, but it would start taking on water fast. Aereo’s argument against such a finding is that its system of thousands of antennas paired with thousands of hard drives allows it to engage in thousands of private transmissions, but no transmissions to “the public” triggering copyright liability.

From a policy standpoint, there is little doubt that Congress never intended to bless such an arbitrary distinction, or the use of technological workarounds that serve no purpose but to try to circumvent copyright laws. To some extent, Aereo doesn’t seem to deny this, but argues that Congress left a tiny opening in the law that the Second Circuit then stretched into a man-size opening in the Cablevision case, and Aereo is just stepping through that doorway.

Tellingly, however, the relevant aspects of copyright law have not changed much in recent years, and it was only the Second Circuit’s actions that created a “loophole” where none existed before. As Judge Chin made clear in his Second Circuit dissents, creating the Aereo loophole requires such a tortured reading of the law that “pinhole” is a more accurate description than “loophole”. Because the Supreme Court is not bound by Second Circuit decisions, however, it could well resolve the issue in favor of broadcasters without breaking a sweat.

Lost in the furor over what the Supreme Court will do though, is the fact that Aereo has a lot more at stake at this stage than broadcasters. While a sufficiently adverse ruling by the Supreme Court could be fatal to Aereo, a ruling favorable to Aereo would still leave a rocky path ahead, with many other obstacles to be traversed. As just one example, what if trial discovery reveals that the Aereo architecture doesn’t quite live up to the “one subscriber, one antenna” approach upon which Aereo has staked its legal survival?

Similarly, while the current debate at the Supreme Court is focused on the legality of Aereo’s transmissions to subscribers, missing from the public debate has been much discussion of the legality of Aereo’s copying of broadcast programs to transmit. Aereo’s fundamental legal argument in that regard has been that if a consumer can legally make a home copy, then they should be able to hire Aereo to do it for them. But consider the following example: as a listener, you can record radio broadcasts, including the music in them, and keep those copies for your personal, noncommercial use. Knowing this, I create a company with the ability to receive all local radio stations using sophisticated signal analysis software and databases that can instantly recognize any song and, upon request, copy that song onto a hard drive. I then solicit subscribers, who send me their requested playlists, and for a fee, my sophisticated equipment and full-time employees can automatically record each requested song onto the hard drive I have assigned to a particular subscriber. The subscriber can then access that music for use on home computers and stereos, or pay me an additional fee to convert all of “their” files into MP3, FLAC, or other useful file formats so that the music can be downloaded to any of the subscriber’s consumer devices, including tablets, smartphones, or home music servers.

In an Aereo world, all I’ve done is accomplish what a radio listener (with very expensive and sophisticated monitoring equipment and software) could have done on their own, so my music service is completely legitimate and copyright compliant. Of course, why stop there? Why not sell subscribers a blank CD and then charge them a fee for recording “their” music on it? We’ve just automated the process for subscribers to create their own “home” mix tapes! It’s Pandora without all those pesky ASCAP, BMI, SESAC, and record company royalties. In the real world, however, does anyone think this “Audio Aereo” service would survive even the most cursory of legal challenges? Video Aereo may fare no better.

While advocates of Aereo will cite the Second Circuit’s Cablevision decision as the guiding legal precedent for Aereo’s operations, the true wellspring of Aereo is the Supreme Court’s 1984 Sony Betamax decision. In a narrow 5 to 4 decision, the Supreme Court found that home recording of television programming constituted a “fair use” under copyright law, launching the age of home video recording. The Second Circuit’s contribution in Cablevision was to state that the location of a viewer’s recording device is unimportant, clearing the way for cable subscribers to “rent” a DVR located at the cable headend from their cable provider while retaining the fair use status of “home” recording.

In developing a Rube Goldberg service whose complexity serves no purpose other than seeking to sidestep copyright law, Aereo has pushed the Second Circuit’s logic past the breaking point. In Cablevision, the subscriber had paid for the content, and the cable operator had paid for the right to retransmit that content. It was therefore not difficult for the Second Circuit to conclude, in effect, “if everyone in the process has been compensated, and it doesn’t undercut the market for the content, then what’s the harm of letting a subscriber locate their DVR at the cable headend rather than in the subscriber’s house? Have we really altered the activity to such an extent that recording program content is no longer the fair use blessed by the Supreme Court in Sony Betamax?”
And this is where a fundamental flaw in Aereo’s legal position emerges. The test is not whether a member of the public can copy a program for their own home viewing and call it fair use; the test is whether Aereo copying a program for that subscriber still qualifies as a fair use under copyright doctrine. Fair use analysis considers four factors: (1) the commercial or nonprofit nature of the activity; (2) the nature of the copyrighted work; (3) the substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use on the potential market for, or value of, the copyrighted work. The Supreme Court’s decision in Sony Betamax focused on the first and fourth factors, finding that individuals recording programs for time-shifting is a noncommercial activity, and that time-shifting is unlikely to undercut the market for the copyrighted work. The Supreme Court therefore found that home taping qualifies as fair use.

In contrast, Aereo’s copying of broadcast programming (even at a subscriber’s behest) is decidedly not a “noncommercial activity”, and even the Second Circuit decision affirming the denial of an injunction against Aereo did not disagree with the district court’s finding that Aereo would cause irreparable harm to broadcasters. That irreparable harm arises from undercutting the market for the copied programming. In other words, the two factors that principally led the Supreme Court to bless home taping as a fair use in Sony Betamax produce the opposite result when applied to Aereo. Justice Stevens’ majority decision in Sony Betamax is instructive in this regard. He wrote that “If the Betamax were used to make copies for a commercial or profitmaking purpose, such use would presumptively be unfair,” and “every commercial use of copyrighted material is presumptively an unfair exploitation of the monopoly privilege that belongs to the owner of the copyright….” The Aereo service is clearly a “commercial use of copyrighted material” that undercuts the market for that material. By the very decision that allows home recording to exist as a fair use under copyright law, “home” recordings made by Aereo appear to fall outside that protection, and Aereo would not be able to avail itself of the fair use defense in making copies of broadcast programming.

Which means that if the Supreme Court rules against Aereo on the transmission issue, the Aereo story could come to a relatively abrupt end, but if it doesn’t, Aereo still faces serious legal hurdles ahead. In either case, the Supreme Court’s decision on the transmission issue is not likely to be the “one and done” referendum that Aereo might have hoped for. Stated differently, if the Supreme Court decision does turn out to be “one and done,” it will be Aereo that is done.

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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.

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December 2013

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 Cancels $20,000 Children’s Television Fine
  • Fine and Reporting Requirements Imposed for EEO Violations
  • Individual Fined $15,000 for Unauthorized Operation of a Radio Transmitter

$20,000 Kidvid Fine Rescinded Due to Timely Filing

The FCC has continued to impose fines on numerous licensees for failing to timely file their Children’s Television Programming Reports on FCC Form 398. The FCC’s rules require that full power and Class A television stations file a Children’s Television Programming Report each quarter listing the station’s programming that is educational and informational for children, and regularly notify the public as to where to find those reports. The base fine for failing to file a required form with the FCC is $3,000.

In July of this year, the FCC issued a Notice of Apparent Liability for Forfeiture (“NAL”) against a Louisiana licensee for failing to timely file its Children’s Television Programing Reports 18 times. After examining the facts and circumstances, including the licensee’s failure to disclose the late filings in its license renewal application, the FCC proposed a $20,000 fine.

In response to the NAL, the licensee asserted that the reports in question had been timely filed, and that the “late” dates the FCC was seeing in its filing database were merely amendments to the timely filed reports. Unfortunately, as those who have dealt with the FCC’s filing systems are aware, when an amendment to an existing report is filed, the FCC’s filing system changes the filing date shown from the original filing date to the filing date of the amendment. That is why it is important to print out evidence of the original filing when it is made, allowing the licensee to demonstrate that a timely filing was made if it is later questioned.

Based on the licensee’s ability to produce Submission Confirmation printouts showing that the reports were timely filed, the FCC agreed to rescind the NAL and cancel the $20,000 fine.

License Assessed $20,000 Fine and Reporting Obligations for Failing to Notify Job Referral Sources and Self-Assess Its EEO Performance

Earlier this month, the FCC imposed a $20,000 fine and detailed reporting requirements on an Illinois radio licensee. Under Section 73.2080(c)(1)(ii) of the FCC’s Rules, a licensee must provide notices of job openings to any organization that “distributes information about employment opportunities to job seekers upon request by such organization,” and under Section 73.2080(c)(3), must “analyze the recruitment program for its employment unit on an ongoing basis.”

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As our own Lauren Lynch Flick reported last month, the deadline for commercial broadcast stations to file their biennial ownership reports with the FCC, which the FCC in August moved from November 1st to December 2nd, and then in November moved from December 2nd to December 20th, has now been moved up, but just by a little.

In a Public Notice released today, the FCC announced that:

The Media Bureau previously issued an order granting requests to extend the 2013 biennial ownership report filing deadline to December 20, 2013. Subsequently, a power outage of the FCC headquarters building’s electrical systems, as required by the District of Columbia Fire Code, was scheduled. The Commission’s systems, including CDBS, will become unavailable after business hours on the evening of the filing deadline. The outage is scheduled to begin at 7 p.m. on December 20, 2013. Filers must complete electronic filing of their 2013 biennial Ownership Report for Commercial Broadcast Stations prior to that time to comply with the filing due date.

Because the FCC’s website has been known to struggle on days where large numbers of filings are due, broadcasters should generally avoid filing documents on their due date unless there is good reason to do so. However, one benefit of electronic filing has been the ability to file after normal business hours, when traffic on the FCC’s filing databases eases. That will not be possible this year, and for those on the West Coast, the 7 p.m. (Eastern) deadline means that they will need to get their ownership reports on file by 4 p.m. Pacific time, before their business day actually ends.

As a result, broadcasters will need to be extra vigilant this year to ensure that they don’t find themselves trying to file their ownership reports late in the day on December 20th, only to realize that the FCC’s filing system is moving at the speed of molasses from the high volume of filers. When the lights go out at the FCC on December 20th, so will your chance of a timely filing.

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November 2013

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:

  • Multiple Indecency Complaints Result in $110,000 Payment
  • $42,000 in Fines for Excessive Power, Wrong Directional Patterns and Incomplete Public Inspection Files
  • Cable Operator Fined $25,000 for Children’s Programming Reports

Broadcaster Enters Into $110,000 Consent Decree Involving Allegations of Indecent Material

The FCC recently approved a consent decree involving a broadcaster with TV stations in California, Utah and Texas accused of airing indecent and profane content.

Section 73.3999 of the FCC’s Rules prohibits radio and television stations from broadcasting obscene material at all times and prohibits indecent material aired between 6:00 a.m. and 10:00 p.m.

The FCC received multiple complaints about the television show in question and sent Letters of Inquiry to the broadcaster asking it to provide a copy of the program and to answer questions about possible violations of the FCC’s indecency rule. The licensee complied with the requests but maintained that the program did not contain indecent content.

Earlier this month, the FCC entered into a consent decree with the broadcaster and agreed to terminate its investigation and dismiss the pending indecency complaints. Under the terms of the consent decree, the broadcaster is required to (a) designate a Compliance Officer within 30 days, and (b) create and implement a company-wide Compliance Plan within 60 days, which must include: (i) creating operating procedures to ensure compliance with the FCC’s restrictions on indecency, (ii) drafting a Compliance Manual, (iii) training employees about what constitutes indecent content, and (iv) reporting noncompliance to the FCC within 30 days of discovering any violations. The consent decree also requires the filing of a compliance report with the FCC in 90 days and annually thereafter for a period of 3 years. The requirements imposed under the consent decree expire after three years.

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This morning, the FCC’s proposal to eliminate the UHF Discount was published in the Federal Register, establishing the comment and reply comment dates for that proceeding. Comments are due December 16, 2013, and reply comments are due January 13, 2014.

Under current law, no individual or entity is permitted to hold an interest in broadcast TV stations that, in the aggregate, reach more than 39 percent of U.S. television households. While this if often shorthanded as “no broadcast group can reach more than 39% of the population”, the rule is actually more restrictive than that. Since it applies not just to broadcast groups but to individuals, the rule prohibits an investor from holding 5% of the voting stock of two different TV groups if those otherwise unconnected groups’ stations together reach more than 39% of the population. Similarly, the rule would be violated if an individual served as a director for both companies.

Fortunately, the rule’s impact on broadcast investment has been lessened by the FCC’s UHF Discount, under which the FCC counts only half of the population in a station’s market towards the 39% cap if the station operates on a UHF channel (14-51) rather than on a VHF channel (2-13). Because most digital television stations operate on UHF channels, the practical effect has been to permit a group or individual to hold interests in TV stations located in markets representing more than 39% of the population (note, however, that the rule still counts every TV household in the market against the 39% cap, even where the station does not actually serve those households with an over-the-air signal).

The FCC’s Notice of Proposed Rulemaking (NPRM) proposes to eliminate the UHF Discount on the theory that while UHF stations had weaker coverage than VHF stations in an analog world, VHF frequencies are not well suited to digital transmissions, and it is now VHF stations that are suffering from poor coverage. That is accurate, but it would seem to be an argument for also creating a VHF Discount rather than eliminating the UHF Discount. While it is true that the FCC provided UHF stations with an opportunity to increase their operating power in transitioning to digital television if they could do so without creating interference to other stations, the guiding principal of making channel allotments in the DTV transition was replicating analog service areas, meaning that UHF analog stations were given digital allotments replicating their flawed analog coverage.

Oddly, however, the NPRM looks past that history, focusing instead on the fact that UHF stations and VHF stations are now much more equivalent because of VHF’s digital woes. While the 39% ownership cap, and how it is calculated, may well merit revisiting, the NPRM explicitly makes the decision to forego an examination of the 39% cap and how compliance with that cap should be calculated, and instead limits the FCC’s review to whether the UHF Discount should be eliminated.

In his dissent to the NPRM, FCC Commissioner Pai noted this fact, chiding the FCC for putting on its regulatory blinders while plunging ahead on the UHF Discount:

[B]ecause we are proposing to end the UHF discount, we should ask whether it is time to raise the 39 percent cap. Indeed, this step is long overdue notwithstanding any change to the UHF discount. The Commission has not formally addressed the appropriate level of the national audience cap since its 2002 Biennial Review Order, and it has been nearly a decade since the 39 percent cap was established. The media landscape has changed dramatically in the many years since. I’ve spoken a lot about the importance of reviewing our rules to keep pace with changes in technology and the marketplace, and I wish today’s item had done so with respect to this issue in a comprehensive manner.

Like the story of the blind men and the elephant, the FCC’s NPRM thrusts out its hand, touching only one aspect of the FCC’s ownership rules, and risks discovering later that there is much more to the elephant than its tail.

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Over the years, I’ve written a number of times of the FCC’s concern about airing emergency sounds, from the siren blare telling you that Indiana Wants Me, to Emergency Alert System tones promoting the movie Skyline, to an actual EAS alert warning of the Zombie Apocalypse.

Section 11.45 of the FCC’s Rules states that “[n]o person may transmit or cause to transmit the EAS codes or Attention Signal, or a recording or simulation thereof, in any circumstance other than in an actual National, State or Local Area emergency or authorized test of the EAS.” As a result, every time that annoying EAS digital squeal slips onto the airwaves during a commercial rather than in an EAS test, it is guaranteed that the employee charged with screening ads is going to have a very bad day.

Fortunately, most broadcasters and cable operators are well aware of the restriction and go to great lengths to screen out such content. Unfortunately, advertisers and ad agencies are often not so attuned, and given the sheer amount of ad content being aired, an EAS-laden ad will slip through sooner or later.

Aggravating the situation is that while airing the tone from the old Emergency Broadcast System could cause public confusion, the EAS squeal contains digital information that is relayed to other media entities, whose EAS equipment then reads that data and automatically transmits the alert on down the alert chain. The farther the alert travels from the original source (where observant viewers or listeners might have figured out it was just part of a commercial), the greater the likelihood of public confusion and panic.

While the FCC certainly takes EAS false alerts seriously, it has seemed to recognize that the media entity airing the ad is usually as much a victim of the false alert signal as anyone, and as long as prompt action was taken to prevent a recurrence, has not been particularly punitive in its enforcement actions. Its strongest reaction to false EAS alerts up till now has been to issue an Urgent Advisory after the Zombie Apocalypse telling EAS participants to change the default password on their EAS equipment to prevent hackers from commandeering the equipment over the Internet to send out false alerts.

That changed late today, when the FCC issued a News Release and an FCC Enforcement Advisory warning against “False, Fraudulent or Unauthorized Use of the Emergency Alert System Attention Signal and Codes”, along with a Notice of Apparent Liability (NAL) for $25,000 against Turner Broadcasting System, Inc. and a $39,000 consent decree against a Kentucky TV station.

According to the NAL, Turner aired a promo for the Conan show that contained a simulated EAS tone in connection with an appearance by comic actor Jack Black. The FCC was not amused. While the base fine for violating Section 11.45 is $8,000, the FCC found that the seriousness of the violation, particularly given the nationwide transmission of the false alert signal, as well as Turner’s ability to pay, justified increasing the proposed fine to $25,000. While not specifically addressed in the NAL, the fact that Turner produced the promo itself, rather than this being a case of a third party advertiser slipping it past Turner, appears to have drawn the FCC’s ire.

More interesting still is the $39,000 consent decree, where the Kentucky station did not contest that it aired an ad for a sports apparel store that “stops in the middle of the commercial and sounds the exact tone used for the Emergency Alert warnings.” Besides the eye-opening $39,000 payment, the consent decree requires extensive further efforts by the licensee, including implementing a Section 11.45 compliance program for its staff, creating and distributing a compliance manual to its staff, implementing a compliance training program, filing annual compliance reports for the next three years, reporting any future violations to the FCC, and developing and implementing a program to “educate members of the public about the EAS alerts, the limits of public warning capabilities, and appropriate responses to emergency warning messages.” With regard to this last requirement, the educational program must include:

  • Airing 160 public service announcements (80 on the station’s primary channel and 80 on its multicast channel).
  • Interviewing local emergency preparedness officials and including vignettes on emergency awareness topics at least twice a month on the station’s morning program.
  • Expanding the station’s website to include links to local emergency agencies, banner messages with emergency-related information, and video messages from the Federal Emergency Management Agency and local emergency preparedness agencies.
  • Installing an additional SkyCam at its tower site and using “special radio equipment” to communicate with local emergency management officials and which will relay alerts to the station’s master control personnel.
  • Leasing tower space to the local emergency management agency for a “new modernized communications system” linking local agencies and organizations.
  • Using social media and digital technologies to promptly disseminate emergency alerts, including posting information culled from the station’s public service announcements, vignettes, and the local emergency management agency on the station’s Facebook page weekly, and including timely late-breaking news coverage of severe weather conditions and forecasts on the station’s smartphone app.
  • Utilizing specific computer hardware and software to render weather data and maps for use on-air, online, and in mobile applications, as well as to track severe weather events.
  • Periodically reviewing and revising the station’s educational program to improve it and ensure it is current and complete, including conferring with the National Weather Service and state, county and federal emergency preparedness managers and public safety officials.

The consent decree does not indicate how many times the offending ad aired, or if the station produced it, but the severity of the consent decree terms is startling. Also noteworthy is the FCC Enforcement Advisory’s admonition that not just broadcast stations and multichannel video programming distributors are on the hook, but that “[t]he prohibition thus applies to programmers that distribute programming containing a prohibited sound regardless of whether or not they deliver the unlawful signal directly to consumers; it also applies to a person who transmits an unlawful signal even if that person did not create or produce the prohibited programming in the first instance.”

The FCC has therefore decided that it is time to crack down on violations, and 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.