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When the FCC voted at its March 31, 2014 meeting to deem television Joint Sales Agreements involving more than 15% of a station’s weekly advertising time as an attributable ownership interest, it announced that broadcasters that are parties to existing JSAs would have two years to modify or terminate those JSAs to come into compliance. However, the FCC’s Report and Order adopting that change to the rules was not released until April 15, 2014, and noted that the effective date of the rule change would be 30 days after the Report and Order was published in the Federal Register.

The Federal Register publication occurred on May 20, 2014, and the FCC today released a Public Notice confirming that the effective date of the JSA attribution rule is therefore tomorrow, June 19, 2014. At that time, the two-year compliance period will also commence, with the deadline for existing JSAs to be modified to come into compliance with the new rule being June 19, 2016. As a result, subject to any actions the courts may take on the matter, all new TV JSAs must comply with the FCC’s multiple ownership rules from their inception, and JSAs that were already in existence before the rule change can remain in place until June 19, 2016.

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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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Oral arguments before the Supreme Court are less than a week away in the Aereo case, and broadcasters are feeling pretty good about their chances. With the Department of Justice, Professor Nimmer (who, along with his father, quite literally wrote the book on copyright), and a host of other luminaries filing in support of the broadcasters’ position, the storyline looks a lot like broadcasters have portrayed it from the beginning: that this is a simple case of copyright infringement hidden behind a veil of modern technological obfuscation.

Sensing that such a storyline is fatal to its prospects, Aereo has responded by casting this case as an attack on consumers’ use of the cloud, and has attracted some allies based on that storyline. However, it is a pretty thin storyline, as few think that the country’s highest court is so careless as to draft a broadcast retransmission rights decision that accidentally destroys the world of cloud computing. The two are not tough to distinguish, and even if the Court secretly disliked cloud computing, it hardly needs to opine on the copyright implications of cloud computing to decide the Aereo question.

Still, lower courts have disagreed on these issues, and only a fool enters the Supreme Court certain that the court will rule in his favor. There are many moving parts, and if a case were easy to decide, it would not have made it to the Supreme Court. That is why both sides will be anxiously watching the oral arguments for hints as to where the various justices stand on the matter.

As of today, however, broadcasters have one less reason to sweat about the outcome. The Court announced yesterday that Justice Alito, who had previously recused himself from the case, is now able to participate. This is a significant development for broadcasters. Because the 2nd Circuit decision being appealed was in Aereo’s favor, Alito’s earlier recusal meant that the case would be heard by the remaining eight justices. That created the risk of a 4-4 tie, which would leave the adverse 2nd Circuit decision in place.

In that scenario, broadcasters would need to win 5 of the 8 possible votes in order to overturn the lower court decision. That can be a tall order, and impossible if it turns out that four justices are firmly on the Aereo side of the fence. With Alito no longer recused, broadcasters now have an additional avenue for scoring that fifth vote. In other words, it’s easier to attract 5 votes out of 9 than it is to get 5 votes out of 8. That means broadcasters are unlikely to find themselves losing on a tie vote, and if the rest of the court should split 4-4, Alito’s entry into the fray effectively gives broadcasters a free throw opportunity at the buzzer to score his vote and break that tie. Now broadcasters just need to convert on that opportunity.

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After Monday’s FCC meeting left television broadcasters facing higher expenses and lower revenues by restricting the use of Joint Sales Agreements and joint retransmission negotiations, broadcasters were due for some good news. Where the FCC is the bearer of bad news, it has often fallen to the courts to be the bearer of good news, generally by overruling the adverse FCC decision. Unfortunately, that process can take years, meaning that in Washington you have to take a very long term view of “the good outweighs the bad.”

This week, however, the FCC’s bad news was followed very quickly by the Supreme Court’s decision today in McCutcheon v. Federal Election Commission. In McCutcheon, the Court ruled that while limits on political contributions to individual candidates continue to be permissible, overall limits on contributions to candidates and party committees are unconstitutional. In other words, the government can limit how much you donate to an individual candidate or party committee, but cannot limit the number of candidates or party committees you support with your donations.

While campaign finance reform will continue to be a hot-button issue, a direct effect of today’s decision will be to increase the war chests of candidates and parties through greater political donations. Much of those increased funds will ultimately be used for political advertising, redounding to the benefit of media in general, but particularly to local broadcasters.

The Court’s 5-4 decision was not particularly a surprise, as many saw McCutcheon as the sequel to 2010’s Citizens United decision, in which the Court found restrictions on political expenditures by corporations and unions to be unconstitutional. When the Supreme Court released its decision in Citizens United, we all understood the immediate financial implications for media, but no one was quite sure just how great that impact would be. It turned out to be very substantial, completing the multi-decade transition of political advertising from being a “not worth the regulatory headaches” obligation of broadcasters to now being a highly sought after segment of the overall advertising market. Indeed, there is no stronger validation of this than the fact that cash flow multiples used in station acquisitions are based on two-year averages, balancing political year revenue with revenue from a non-political year.

As in 2010, the question is not whether today’s decision will result in more ad revenue for media outlets, but how much more. Given that in recent years the number of donors bumping up against the now-unconstitutional cap measured in the hundreds rather than the thousands, the economic impact of today’s decision is unlikely to match that of Citizens United. However, it may have a more interesting effect. The limit on overall donations effectively forced a political contributor to pick and choose a small number of candidates to support with the maximum ($2600 at the moment) donation, and to turn away others because of the cap. The practical result was that donors tended to focus their contributions on candidates in hotly contested races where the contribution could have the most impact.

With today’s elimination of the overall cap, a donor can make the maximum individual donation to every federal political candidate it wishes to support. The likely result is an increased flow of political contributions to candidates in races previously deemed to be lost causes, creating tighter races through the influx of political ad dollars.

From a political standpoint, this means the number of hotly contested races around the country will increase. From an economic standpoint, it means political ad dollars will flow on a more geographically diverse basis, ensuring that a larger number of local stations benefit, rather than just those in swing states and swing districts. This will be welcome news for stations that previously found themselves missing out on political ad dollars while candidates and parties flung large sums at stations in nearby swing districts. By itself, it may not entirely remove the sting of Monday’s FCC actions, but given enough time, the courts may eventually produce some good news in that regard as well.

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While it has been around since 2009, Bitcoin has seen substantial media coverage in the past few months. Media outlets (as well as many other businesses) have been increasingly dabbling in the Bitcoin world, if for no other reason than to show they are up to date with the latest consumer fixations.

While numerous businesses have begun accepting Bitcoin transactions, the most likely place to find them in the media world is as contest prizes or as part of an advertiser promotion. Of course, one of the principal reasons for the novelty of Bitcoin is its goal of being an electronic currency unregulated by governments. As a result, how businesses have been treating their usage of bitcoins from an accounting and legal perspective is highly variable, since it is in many ways a new frontier.

That frontier changed significantly yesterday, when the IRS ruled that virtual currencies like Bitcoin are to be treated as property for federal tax purposes, with transactions using virtual currency subject to much the same tax treatment as those involving U.S. currency. Our own Jim Gatto, head of Pillsbury’s Social Media and Games Team, distributed a Pillsbury Client Alert discussing the ruling. In that Alert, Jim notes that the impact of the IRS ruling includes:

  • Wages paid to employees using virtual currency are taxable to the employee, must be reported by the employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
  • Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue IRS Form 1099.
  • The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
  • A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
  • For purposes of computing gross income, a taxpayer who receives virtual currency as payment for goods or services must include the fair market value of virtual currency received as measured in U.S. dollars, as of the date that the virtual currency was received.

The Client Alert provides additional detail, but if you are using bitcoins for any type of transaction, whether as contest prize, currency for purchases on your website, or payments to employees and vendors, the IRS has made clear that you will need to follow the same procedures (and pay taxes) as though the transaction had occurred in dollars.

While that is a big issue for businesses doing large Bitcoin transactions, businesses dabbling in small and occasional Bitcoin transactions will need to pay even closer attention than they would to a transaction using traditional currency. For example, if the prize in a station contest is one bitcoin, the station will need to assess whether awarding the prize triggers the need for issuing IRS Form 1099 to record the awarding of the prize. In a cash prize contest, that is straightforward, since the Form 1099 currently specifies a prize of $600 or more as the threshold for needing to issue the form. As I write this, however, the current Bitcoin exchange rate is roughly $582 U.S. dollars per bitcoin. That means a one bitcoin prize would not trigger the need for a Form 1099, but a two bitcoin prize would.

Similarly, yesterday’s IRS ruling seems to indicate that the bitcoin must be valued for tax purposes at the time it is received. As a result, the station holding the contest would need to check the value of a bitcoin on the day the prize is awarded to see if it is above or below the $600 threshold for tax purposes. Of course, given the volatility of the Bitcoin exchange rate, this raises other questions, such as how do you value the bitcoin for tax reporting if the exchange rate was below $600 for part of that day and above $600 for part of that day, or if the day the prize is “sent” is not the same day as the prize winner receives or “cashes” it.

Like so many things, Bitcoin appears to be another example of something meant to simplify life, but which is turning out to only make life more complicated. Look for life to get even more complicated as individual states formally adopt a similar approach in treating virtual currency transactions as taxable events.

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March 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 $40,000 Fine for Public Inspection File/License Renewal Violations
  • Short-Term License Renewal and Hefty Fine for Missing QIP Lists
  • $5,000 Fine for FM Station’s Failure to Maintain Minimum Operating Hours


Failure to Disclose Rules Violations Leads to $40,000 Fine

Late last month, the FCC issued two essentially identical orders against co-owned Milwaukee and Chicago Class A TV stations in response to a number of missing Quarterly Issues/Programs Lists and Children’s Television Programming Reports and for not reporting the missing issues/programs lists in the stations’ license renewal applications. The FCC’s Media Bureau proposed a $20,000 fine against each station, for a total fine of $40,000.

In late December of last year, the FCC issued Notices of Apparent Liability for Forfeiture (“NAL”) for the two stations, noting that the stations had mentioned in their license renewal applications that they had failed to timely file numerous Children’s Television Programming Reports, but had not disclosed the absence from their online public files of over a dozen (each) Quarterly Issues/Program Lists. Section 73.3526 of the FCC’s Rules requires licensees to maintain information about station operations in their public inspection files so the public can obtain “timely information about the station at regular intervals.”

The base fine for failure to file a required form is $3,000, and the base fine for public file violations is $10,000. After considering the facts, the FCC concluded in each NAL that the respective station was liable for $9,000 for the missing Quarterly Issues/Programs Lists, $9,000 for the missing Children’s Television Programming Reports, and an additional $2,000 for failing to disclose the missing Quarterly Issues/Program Lists in their renewal applications.

After receiving the NALs, each station requested that the fine be reduced due to an inability to pay. The FCC will not consider reducing a fine based on a claimed inability to pay unless the licensee submits federal tax returns for the last three years, financial statements, or other documentation that accurately demonstrates its financial status. In this case, each station submitted appropriate documentation about its financial condition. However, the FCC was not persuaded that the amount of the fines exceeded each station’s ability to pay, and declined to reduce the fines.

Public Inspection File Violations Lead to $46,000 in Fines and Limited License Terms
In connection with recent license renewal applications, the FCC issued four essentially identical Memorandum Opinions and Orders and Notices of Apparent Liability for Forfeiture, resulting in $46,000 in fines for a Washington radio licensee. In addition, three of the licensee’s four stations’ license renewal applications were granted for only a four-year term rather than the normal eight-year term.

The first three of the licensee’s stations were missing, respectively, 24, 26, and 20 Quarterly Issues/Programs Lists for various periods during the license term. The fourth station’s public inspection file was missing 12 reports for a two-year period spanning from 2006 to 2008. Continue reading →

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March 2014

TV, Class A TV, and locally originating LPTV stations licensed to communities in Arizona, Idaho, New Mexico, Nevada, Utah, and Wyoming must begin airing pre-filing license renewal announcements on April 1, 2014. License renewal applications for all TV stations in these states are due by June 2, 2014.

Pre-Filing License Renewal Announcements

Stations in the video services that are licensed to communities in Arizona, Idaho, New Mexico, Nevada, Utah, and Wyoming must file their license renewal applications by June 2, 2014 (June 1 being a Sunday).

Beginning two months prior to that filing, full power TV, Class A TV, and LPTV stations capable of local origination must air four pre-filing renewal announcements alerting the public to the upcoming license renewal application filing. These stations must air the first pre-filing announcement on April 1, 2014. The remaining announcements must air on April 16, May 1, and May 16, 2014, for a total of four announcements. A sign board or slide showing the licensee’s address and the FCC’s Washington DC address must be displayed while the pre-filing announcements are broadcast.

For commercial stations, at least two of these four announcements must air between 6:00 p.m. and 11:00 p.m. (Eastern/Pacific) or 5:00 p.m. and 10:00 p.m. (Central/Mountain). Locally-originating LPTV stations must broadcast these announcements as close to the above schedule as their operating schedule permits. Noncommercial stations must air the announcements at the same times as commercial stations, but need not air any announcements in a month in which the station does not operate. A noncommercial station that will not air some announcements because it is off the air must air the remaining announcements as listed above, i.e., the first two must air between 6:00 p.m. and 11:00 p.m. (Eastern/Pacific) or 5:00 p.m. and 10:00 p.m. (Central/Mountain).

The text of the pre-filing announcement is as follows:

On [date of last renewal grant], [call letters] was granted a license by the Federal Communications Commission to serve the public interest as a public trustee until October 1, 2014. [Stations which have not received a renewal grant since the filing of their previous renewal application should modify the foregoing to read: “(Call letters) is licensed by the Federal Communications Commission to serve the public interest as a public trustee.”]

Our license will expire on October 1, 2014. We must file an application for renewal with the FCC by June 2, 2014. When filed, a copy of this application will be available for public inspection at www.fcc.gov. It contains information concerning this station’s performance during the last eight years [or other period of time covered by the application, if the station’s license term was not a standard eight-year license term].

Individuals who wish to advise the FCC of facts relating to our renewal application and to whether this station has operated in the public interest should file comments and petitions with the Commission by September 1, 2014.

Further information concerning the FCC’s broadcast license renewal process is available at [address of location of the station] or may be obtained from the FCC, Washington, DC 20554.

If a station misses airing an announcement, it should broadcast a make-up announcement as soon as possible and contact us to further address the situation. As noted above, special rules apply to noncommercial stations that do not normally operate during any month when their announcements would otherwise be required to air, as well as to other silent stations. These stations should contact us to ensure they give the required public notice.

Article continues — the full article can be found at Pre-Filing and Post-Filing License Renewal Announcement Reminder

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There was quite a stir today when the FCC, despite being closed for a snow day, issued a Notice of Apparent Liability proposing very large fines against Viacom ($1,120,000), NBCUniversal ($530,000), and ESPN ($280,000) for transmitting false EAS alert tones. According to the FCC, all three aired an ad for the movie Olympus Has Fallen that contained a false EAS alert tone, with Viacom airing it 108 times on seven of its cable networks, NBCUniversal airing it 38 times on seven of its cable networks, and ESPN airing it 13 times on three of its cable networks.

The size of the fines certainly drew some attention. Probably not helping the situation was the ad’s inclusion of the onscreen text “THIS IS NOT A TEST” and “THIS IS NOT A DRILL” while sounding the EAS tone. The FCC launched the investigation after receiving complaints from the public.

All three entities raised a variety of arguments that were uniformly rejected by the FCC, including that “they had inadequate notice of the requirements and applicability of the rules with respect to EAS violations.” What particularly caught my eye, however, was that all three indicated the ad had cleared an internal review before airing, and in each case, those handling the internal review were apparently unaware of Section 325 of the Communications Act (prohibiting transmission of a “false or fraudulent signal of distress”) and Section 11.45 of the FCC’s Rules, which states that “No 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.”

Back in 2010, I wrote a post titled EAS False Alerts in Radio Ads and Other Reasons to Panic that discussed the evolution of the FCC’s concerns about false emergency tones in media, which originally centered on sirens, then on Emergency Broadcast System tones, and now on the Emergency Alert System’s digital squeals. Two months later, I found myself writing about it again (The Phantom Menace: Return of the EAS False Alerts) when a TV ad for the movie Skyline was distributed for airing with a false EAS tone included in it.

That was the beginning of what has since become a clear trend. Those initial posts warned broadcasters and cable programmers to avoid airing specific ads with false EAS tones, but were not connected to any adverse action by the FCC. After three years of EAS tone tranquility, the issue reemerged in 2013 when hackers managed to commandeer via Internet the EAS equipment of some Michigan and Montana TV stations to send out false EAS alert warnings of a zombie attack. The result was a rapid public notice from the FCC instructing EAS participants to change their EAS passwords and ensure their firewalls are functioning (covered in my posts FCC Urges IMMEDIATE Action to Prevent Further Fake EAS Alerts and EAS Alerts and the Zombie Apocalypse Make Skynet a Reality), but no fines.

From there we moved in a strange direction when the Federal Emergency Management Agency distributed a public service announcement seeking to educate the public about the Emergency Alert System, but used an EAS tone to get that message across. Because it did not involve an actual emergency nor a test of the EAS system, the PSA violated the FCC’s rule against false EAS tones and broadcasters had no choice but to decline to air it. The matter was resolved when the FCC quickly rushed through a one-year waiver permitting the FEMA ad to be aired (Stations Find Out When Airing a Fake EAS Tone Is Okay).

Late last year, however, the evolution of the FCC’s treatment of false EAS alerts turned dark (FCC Reaches Tipping Point on False EAS Alerts) when the FCC issued the first financial penalties for false EAS alerts. The FCC proposed a $25,000 fine for Turner Broadcasting and entered into a $39,000 consent decree with a Kentucky radio station for airing false EAS alert tones. The FCC indicated at the time that other investigations were ongoing, and more fines might be on the way.

We didn’t have to wait long, as just two months later, the FCC upped the ante, proposing a fine of $200,000 against Turner Broadcasting for again airing false EAS alert tones, this time on its Adult Swim network. The size of the fine was startling, and according to the FCC, was based upon the nationwide reach of the false EAS tone ad, as well as the fact that Turner had indicated in connection with its earlier $25,000 fine that it had put in place mechanisms to prevent such an event from happening again. When it did happen again, the FCC didn’t hesitate to assess the $200,000 fine.

Today’s order, issued less than two months after the last Turner decision, ups the ante once again, proposing fines of such size that only some of the FCC’s larger indecency fines compare. The FCC is clearly sending a signal that it takes false EAS tones very seriously, and the fact that the ads containing the EAS tones were produced by an independent third party didn’t let the programmers off the hook. In other words, it doesn’t matter how or why the ads got on the air; the mere fact that they aired is sufficient to create liability.

So what lesson should broadcasters and cable networks take away from this? Well, the all too obvious one is to do whatever it takes to prevent false EAS tones from making it on air. However, an equally useful lesson is to make sure that your contracts with advertisers require the advertiser to warrant that the spots provided will comply with all laws and to indemnify the broadcaster or network if that turns out not to be the case. That won’t save you from a big FCC fine and a black mark on your FCC record, but it will at least require the advertiser to compensate you for the damages you suffered in airing the ad and defending yourself. Unfortunately, many advertising contracts are not particularly well drafted (and some are just a handshake), which can expose you to a variety of liabilities like this unnecessarily.

It is therefore wise to have both your ad contracts and your advertising guidelines carefully reviewed by counsel experienced in this area of the law. Vigilant review of ads submitted for airing is an excellent first line of defense, but as demonstrated in today’s decision, it won’t do much good if the individuals reviewing the ads don’t know what to look for.

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Following a firestorm of media attention regarding the FCC’s efforts to examine newsroom decision making as part of a Critical Information Needs (CIN) Study, the FCC had announced a week ago that it would modify the study to eliminate the questions directed at media entities regarding their newsroom decisions.

That announcement, however, did not calm the furor, with calls from Congress for hearings and legislation to prevent the FCC from proceeding with the study. Late today, the FCC sought to put an end to this certainly unwelcome attention. It released a terse statement, the entirety of which is: “The FCC will not move forward with the Critical Information Needs study. The Commission will reassess the best way to fulfil [sic] its obligation to Congress to identify barriers to entry into the communications marketplace faced by entrepreneurs and other small businesses.”

Whatever else it may represent, this past week’s activities demonstrate the challenges for a government agency forced to operate on “Internet Time” and facing a continuous news cycle. In prior eras, FCC dramas like this would have played out over months or years. In this case, once it became clear that the study was turning into political fodder, the FCC moved with surprising speed to back away from it, and then abandon it entirely, rather than continue to be the subject of news reports and late night monologues. The typo in today’s one sentence announcement (which was subsequently fixed in later versions) presumably indicates the haste with which it was issued, likely in an effort to put the issue to bed before the weekend and avoid a fresh round of media commentary regarding the Study next week.

While the speed with which the FCC moved is impressive, perhaps the most interesting aspect of this week’s events is that, without even conducting the study, the FCC learned a lot about how newsrooms operate, and probably wishes it hadn’t.