Published on:

By

While the perennial cliche is that the FCC is perpetually behind the curve in trying to keep up with new communications technologies, my experience has been that the FCC and its staff are pretty up to date on these developments. As a result, when we see a rule remain on the books after its usefulness has ended (or the discovery that it was never useful in the first place), it can usually be attributed to one of two possibilities: either fixing the rule hasn’t risen high enough on the FCC’s list of priorities to dedicate limited staff resources to the process (for example, modifying the FCC’s full power television rules to eliminate the rules and references applicable only to analog TV), or political pressures are impeding the process.

Rules that remain on the books because of a lack of staff resources tend to be addressed eventually. In contrast, rules that remain in place due to political pressures are well nigh immortal. In a 2010 C-SPAN interview with three former FCC chairmen regarding various issues, including the FCC’s media ownership rules, Chairman Hundt was quoted as saying “Why don’t we get an eraser and just get rid of them? None of us thought these rules made sense.” To which Chairman Powell responded “It’s a simple reason. It’s politics.” The third party to that conversation, Chairman Martin, had tried to slightly loosen the prohibition on broadcast/newspaper cross-ownership in 2008 in the nation’s largest markets, only to encounter a firestorm of protests and court appeals from media activists. As a result, the prohibition remains in place, although the FCC announced this past December that it is once again considering loosening the rule in the largest media markets (are you seeing a pattern here?).

Rules residing in political purgatory–those kept on political life support long after their purpose has ended–survive until the facts on the ground change to such an extreme degree that even those who reflexively defend the rule can no longer do so. While some would justifiably rail against that system and demand that the nature of politics change, with rules created, modified, or eliminated based upon the cold hard facts of the situation, the nature of politics is actually the most relevant cold hard fact, and realistically, the least likely to change. Many rules will outlive their usefulness, and in fact become harmful, long before their demise. The only question is how long it takes after that tipping point is reached before it becomes politically feasible for the FCC to modify or eliminate the rule.

Of course, none of this occurs in a vacuum, and both individuals and businesses living with a rule must adapt to the changing situation on the ground, even as the rule itself remains unchanged. Recent “adaptations” make me wonder if we haven’t reached the point where the broadcast/newspaper cross-ownership rule, which certainly had a reasonable purpose at one time, has reached the point where it can no longer be defended with a straight face.

In particular, I am thinking of two recent events which suggest the rule has outlived its time. The first is the announcement last month by Media General that it is selling its newspapers to Berkshire Hathaway in order to concentrate on its broadcast and digital content delivery. When a company that actually does have both broadcast and newspaper interests does not find the combination sufficiently compelling to retain its newspaper operations, the premise of the rule–a fear of powerful broadcast/newspaper combinations dominating the market–appears misplaced.

More interesting, however, is the recent announcement by Newhouse Newspapers that it will be scaling back its daily newspaper in New Orleans (the well-known Times-Picayune), as well as those in Mobile, Huntsville, and Birmingham, Alabama. According to the announcement, these daily newspapers will now be published only three times a week, with increased focus on website content.

Why the drastic cutback from seven days a week to just three, rather than the more measured approach perennially proposed by the U.S. Postal Service of ending only Saturday delivery as a cost saving measure? Given that daily newspapers make a substantial portion of their revenue from publishing legal notices (which are usually required by law to be published in a daily newspaper), these newspapers must have thought long and hard before ceasing daily publication and placing that significant revenue stream at risk.

However, there may be one other factor at play. While the FCC’s rule prohibits ownership of both a broadcast station and a daily newspaper in the same area, the FCC defines a “daily newspaper” as one that is published at least four times a week. Whether by accident or by design, the decision to scale these newspapers back to three days a week makes them exempt from the FCC’s ownership restrictions, thereby expanding the pool of potential buyers to include those most likely to be interested in taking on such an asset–local broadcast station owners.

Whether that fact played into the owner’s decision to publish only three times a week frankly doesn’t matter much. If it did enter into it, then the newspaper cross-ownership rule has become actively harmful, forcing a newspaper that might have been happy to publish four, five or six times a week to instead publish only three times a week to avoid being subject to the rule. If it didn’t, then Newhouse’s decision to cut back to three days a week is merely an indication of things to come in a struggling newspaper industry. Either way, the FCC’s newspaper cross-ownership rule is being mooted by factual changes on the ground.

The clock is therefore ticking on how long it takes for the political pressure to also fade, allowing the FCC to finally proceed with its plan to loosen (or perhaps eliminate) the rule. During that wait, the only question is whether the rule is merely a curious anachronism, or if it actually harms the newspaper industry, either by preventing broadcasters from investing in local newspapers, or by forcing newspapers to cut back to publishing three times a week in order to circumvent the FCC’s rule. Unfortunately, by the time the political pressures keeping the rule alive finally recede, the damage may already be done, with newspapers ceasing existence or scaling back publication until the FCC’s rule becomes irrelevant. If that happens, the rule’s elimination may turn out to be no more consequential than the FCC’s eventual elimination of analog TV rules–an act of administrative housekeeping done when the item regulated no longer exists.

Published on:

By

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

  • FCC Fines Noncommercial Educational Station $12,500 for Ads
  • Public Inspection File Violations Lead to Three Short Term License Renewals
  • Main Studio Violations and Unauthorized Operations Garner $21,500 Fine

Noncommercial Educational Station Airs Expensive Ads
A recent fine against a noncommercial educational station serves as a warning to noncommercial licensees to be mindful of on-air acknowledgements and advertisements. In concluding a preceding that began in 2006, the FCC issued a $12,500 fine against a California noncommercial FM licensee for airing commercial advertisements in violation of the FCC’s rules and underwriting laws.

In August 2006, agents from the Enforcement Bureau inspected the station and recorded a segment of the station’s programming. During the inspection, the agent determined that the recorded programming included commercial advertisements on behalf of for-profit entities. In January 2007, the Bureau issued an initial Letter of Inquiry (“LOI”) regarding the station’s commercial advertisements and additional technical violations. At the same time, the Bureau referred the matter to the Investigations and Hearings Division for additional investigation. The Division issued additional LOIs in 2008 and 2009, to which the licensee responded three times. In its responses, the licensee admitted to airing four commercial announcements over 2,000 times in total throughout an eight-month period in 2006. It also acknowledged that it had executed contracts with for-profit entities to broadcast the announcements in exchange for monetary payment.

According to Section 399(b) of the Communications Act and the FCC’s Rules, noncommercial educational stations are not permitted to broadcast advertisements, which are defined as program material that is intended to promote a service, facility, or product of a for-profit entity in exchange for remuneration. Noncommercial stations may air acknowledgments for entities that contribute funds to the station, but the acknowledgments must be made for identification purposes only. Specifically, such acknowledgments should not promote a contributor’s products or services and may not contain comparative or qualitative statements, price information, calls to action, or inducements to buy or sell. In addition to these rules, the FCC requires that licensees exercise “good faith” judgment in airing material that serves only to identify a station contributor, rather than to promote that contributor.

In this case, the FCC determined that the materials aired were prohibited advertisements because they favorably distinguished the contributors from their competitors, described the contributors with comparative or qualitative references, and included statements intended to entice customers to visit the contributors’ businesses. As a result, the FCC proposed a $12,500 fine in June 2010.

In response, the licensee argued that the FCC should reduce or cancel the fine because (1) the announcements complied with the FCC’s Rules and “good faith” precedent, (2) the announcements did not contain a “call to action,” and (3) the FCC had not previously prohibited the language used in the announcements. The licensee also claimed that the investigation of the station was improper because the FCC had previously indicated it would not monitor stations for underwriting violations, but would respond solely to complaints.

The FCC refused to cancel or reduce the fine, finding that both the fine and the investigation were warranted given the licensee’s violations. In its Order, the FCC defended its determination that the materials aired by the station were promotional advertisements because they contained comparative phrasing, qualitative statements, and aimed to encourage the audience to purchase the goods or services of the for-profit entities. In addition, the FCC rejected the notion that the investigation was in any way improper, noting that the FCC has broad authority to investigate the entities it regulates, including through field inspections.

Here, as in other underwriting cases, the FCC’s decision to issue a fine came down to a necessarily subjective interpretation of language–is a given statement promotional in nature or does it merely identify a source of funding? The FCC has acknowledged that it is sometimes difficult to distinguish between the two, hence the requirement that licensees exercise “good faith” judgment in airing underwriting announcements. Noncommercial educational stations must therefore carefully review the content of their on-air announcements to ensure the language is not unduly promotional in order to avoid a fate similar to the licensee in this case.

Continue reading →

Published on:

By

The FCC created a stir in the broadcast community when, after proclaiming for more than a year that surrendering broadcast channels for the planned broadband spectrum auction would be entirely voluntary, it began to “volunteer” Class A stations it concluded had not complied with all FCC rules. I first raised this issue in a February post on the day the FCC released the first sixteen Orders to Show Cause demanding that the recipient Class A TV stations submit evidence as to why the FCC should not revoke their Class A status for infractions that would have previously drawn only a fine.

Loss of Class A status not only eliminates protection from being displaced by full power TV stations (or by a spectrum auction), but also disqualifies the station from sharing a post-auction channel with a full power station or seeking any compensation for its spectrum in the auction. Downgrading Class A stations to LPTV status therefore allows the FCC to sweep them aside involuntarily to clear spectrum for the auction, and avoid sharing the proceeds of the spectrum auction with that licensee.

It was therefore not too surprising when that initial batch of FCC orders was followed by dozens of subsequent FCC actions against Class A stations, some of which proposed substantial fines and indicated that the licensee had been earlier informed it could avoid a fine by notifying the FCC it wished to relinquish its Class A status.

Having put scores of stations on notice that their Class A status was either directly at risk or that they could avoid a fine by agreeing to relinquish Class A status, the FCC turned up the heat further this past week when it began issuing follow up orders revoking stations’ Class A status. While the writing was already on the wall for many of these stations given the FCC’s earlier actions against them, one of the orders offers a particularly disturbing insight into the determination with which the FCC is moving to thin the ranks of Class A stations (old FCC motto for Class A stations–“last bastion of independent voices in a consolidated TV world”; new FCC motto for Class A stations–“old and in the way”).

Station KVHM is (or at least was) a Class A station that received a pair of investigatory letters from the FCC in late March and early August of 2011. According to the FCC, the letters noted that the station had failed to file required children’s television reports and provided the licensee with thirty days to respond, making the first response due at the end of April 2011. However, as the FCC itself notes in the Order, the licensee, Humberto Lopez, died in May of 2011. According to his obituaries, Mr. Lopez, who owned multiple TV and radio stations and was an inductee of the Tejano Roots Hall of Fame, died “on May 16 after battling a long illness.”

In the last few weeks of his life, he apparently didn’t find time to respond to the FCC’s March letter, and was certainly unable to respond to its August letter. His failure to respond led the FCC to issue a February 2012 Order to Show Cause demanding that Lopez demonstrate why his Class A status should not be revoked. When, not surprisingly, the licensee was unable to deliver that message from beyond the grave, the FCC issued last week’s Order, stating “Lopez did not file a written statement in response to the Order to Show Cause, and, therefore, we deem him to have accepted the modification of the KVHM-LP license to low power television status.” Talk about being tough on a licensee; the FCC demanded not just that Lopez rise from the grave to defend his Class A status, but that he do so in writing.

While it is easy enough to ridicule an FCC Order that is on its face so completely preposterous as to invite comparison with the worst cinematic portrayals of soulless bureaucracy, the real lesson of this case can be found by delving a bit deeper into the facts. On the FCC’s side of the ledger, it is true that the first investigatory letter did arrive while the licensee was still alive, and that it was at least theoretically possible the licensee could have responded. Had the FCC’s Order been based on this fact alone, rather than on the licensee’s failure to respond long after his death to the 2012 Order to Show Cause, its action would have been hard-hearted, but perhaps defensible. The FCC could have argued that, given the licensee’s failure to meet the original response deadline, his estate lacked the “clean hands” necessary to protest the loss of Class A status, and that the FCC was just playing the hand it was dealt. However, as it turns out, the FCC lacked clean hands as well.

Why, you may ask, did the licensee’s estate not step up to oppose the Class A revocation? Apparently because it is still waiting for the FCC to grant the application to transfer control of the station from the deceased licensee to the licensee’s estate (controlled by an Executor). Despite the fact that such post-death transfers are normally accorded nearly automatic grants, that application remains pending at the FCC since early November 2011. Worse, the apparent reason why the transfer application is hung up at the FCC is because the FCC has still not acted on the station’s 2006 license renewal, which also remains pending. To be blunt, the licensee literally died waiting for the FCC to act on his license renewal application. While the FCC will often sit on a transfer application until the underlying station’s license renewal is granted based on the theory that the “seller” shouldn’t profit from the transfer of a station unless the FCC can first determine he was qualified to own it, the licensee here is beyond caring about such profit.

So in the fair world we like to think we live in, the FCC would have promptly granted the station’s transfer application (and perhaps its license renewal application as well), transferring control of the station to the Executor of the licensee’s estate. Without altering its timetable one iota, the FCC could then have proceeded to issue its February Order to Show Cause, and the Executor would have had a reasonable opportunity to try to defend the station’s Class A status. Instead, in its apparent haste to clear “voluntary” spectrum for auction, the FCC cut all of these procedural corners, leaving Lopez’s wife and (according to the obituary) twelve children with an asset of significantly diminished value, and no opportunity to seek their share of any spectrum auction proceeds.

What is particularly ironic is that the Lopez family is the archetype of the kind of licensee the FCC has argued will be interested in participating in the auction–a licensee that may no longer be as interested in running the station as in monetizing it to pay estate taxes and to split any remaining proceeds among the many heirs. The FCC has placed itself in the role of the cattle baron who dams up the stream, depriving his neighbors of water so that he can obtain their land for next to nothing (or in this case, nothing). If the FCC’s thirst for broadcast spectrum has become so intense that it is willing to sacrifice fundamental fairness and “widows and orphans” to get it, all broadcasters need to be looking over their shoulders for the next regulatory lightning bolt encouraging them to also “volunteer” their spectrum. Like death and taxes, it appears the FCC is determined to make surrendering spectrum for the auction an unavoidable fact of life (and death).

Published on:

By

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

  • The FCC’s $10,000 fines for items missing from the public inspection file continue
  • License cancellation no obstacle to FCC proposing $18,000 fine against former broadcaster

FCC Again Issues $10,000 Fines for Public Inspection File Violations

As we have reported on numerous occasions, $10,000 has become the standard fine for even minor public inspection file violations. That proved true again this month, with the FCC issuing a number of $10,000 fines for failure to include all Quarterly Issues/Programs Lists in a station’s public inspection file.

The FCC’s public inspection file requirements are found at Sections 73.3526 (commercial stations) and 73.3527 (noncommercial stations) of the FCC’s Rules. They require broadcast licensees to maintain particular information in their files, including the Quarterly Issues/Programs Lists, and to update the material in the file regularly throughout the license term.

In one decision, the FCC assessed a $10,000 fine against a noncommercial radio station in Louisiana for excluding twenty-four Quarterly Issues/Programs Lists (six years’ worth) from its file over a seven-year period. The licensee had disclosed the problem in its license renewal application. In a second decision, the FCC fined a South Carolina commercial radio station $10,000 for ten absent Quarterly Issues/Programs Lists over a four-year period. Like the first case, the fact that the documents were missing from the file was disclosed in the station’s license renewal application. The station belatedly placed the missing documents in the file when it filed its license renewal application.

Continue reading →

Published on:

By

It’s that time of year. Broadcasters, brokers, bankers, and broadcast lawyers hop on the proverbial bus and head to Las Vegas to seek their fortunes. In contrast to the last few recessionary years, during which the crowds were thinner and many attendees had the glassy-eyed look of disaster survivors, indications are that 2012 will mark the return of the dealmaking, equipment buying, and venture launching that animate the industry. More broadly, cautious optimism about the state of the industry and the economy seems to be giving way to genuine enthusiasm about moving forward. It is a welcome sight.

Attending the show this year to help that process along are eight of our communications attorneys, including myself, Dick Zaragoza, Cliff Harrington, Lauren Lynch Flick, Miles Mason, Paul Cicelski, Lauren Birzon, and our newest addition, partner Lew Paper.

If you see us at the show, say hello, or better yet, buy us a drink and we’ll regale you with tales of great legal battles (buy us two drinks, and we promise not to talk about law at all!). You can reach us by email at the Show by clicking on the name links above. They will take you to our respective bios at Pillsbury where you can find our email addresses.

For those of you headed to the Show, we look forward to seeing you there. For those who aren’t going, we hope to see you there next year.

Published on:

By

Late last month I wrote about a strange occurrence at a number of TV stations that were visited by FCC inspectors demanding that the station make a copy of its entire public inspection file in 24-48 hours and provide that copy to the FCC.

I commented at the time that this highly unusual event was more likely connected to the FCC’s pending proceeding to move the public inspection file online than to any enforcement action, noting that “while this would seem bizarre any place outside of Washington (well, it’s bizarre here too, but you get used to that after a while), the FCC has been on the receiving end of numerous comments and declarations from broadcasters noting how large the public inspection file has become, and how burdensome and time-consuming it would be to require stations to scan the entire contents of it for the sake of posting it online.” It therefore seemed likely that the FCC was not so much interested in the substance of each station’s public file as in determining the sheer size of those files. Regardless, stations with the misfortune of being on the receiving end of these requests had to absorb the overtime and copying costs involved to comply.

Since that time, the FCC has scheduled a vote at its April 27 meeting to require that the public file, including the political file portion of it, be posted online. The timing of the planned vote is not a good sign for broadcasters, as it is a long-standing FCC tradition to schedule votes on orders that are favorable to broadcasters so that they can be released just before the NAB Show, ensuring that FCC commissioners speaking at the NAB Show will receive a warm reception. Conversely, FCC orders that broadcasters are not going to be happy about tend to be delayed until after the NAB Show concludes. With the FCC’s scheduled vote coming the week after the NAB Show, it should surprise no one that the FCC appears ready to adopt an order requiring that public files (including the political file) be moved online.

On the good news side, the FCC appears to be dropping its proposals to require that certain inter-station agreements and sponsorship identification lists be added to the file, either because broadcasters’ complaints about those proposals were heard, or because the FCC saw them as unnecessary judicial baggage in an order that it would like to see implemented quickly.

Returning, however, to the mystery of why the FCC was demanding copies of stations’ public files, the last document placed in the FCC’s record in the online public file proceeding this past Friday (just before the holiday weekend) is illuminating. It is a one-page “Submission for the Record” from the Media Bureau noting that “[t]he Commission requested a copy of the public file from all broadcast stations in the Baltimore DMA in March of 2012, received the documents either on paper or electronically, and subsequently reviewed each file, counting the total number of pages in the following categories….” The Submission then notes the total number of pages in each file (with the award for the largest file going to WJZ-TV, at 8,222 pages), and breaks out the number of pages in the categories of Political File, letters/emails from the public, documents currently available online at the FCC, and documents the FCC found extraneous to the file. This certainly appears to confirm that the FCC’s goal in demanding that stations rapidly provide a copy of their entire public file was merely to determine the quantity, and not the quality, of those files. By placing that information in the public record, the FCC can now rely on it in its decision to implement an online public file requirement (although how it supports that result is still unclear).

While one can question the burden placed on individual stations merely to determine the number of pages in a public inspection file (which is information that is already in the record, having been submitted in numerous broadcasters’ comments), once that information has been gathered, it is fair for the FCC to make use of it by placing it in the record. What is curious, however, is the effort the FCC appears to have expended to do so as quietly as possible. In addition to it being dropped into the record right before the holiday weekend, the Submission itself is an unusual document. It is not on letterhead, it is not dated, and it is not signed. If it were not for the fact that the FCC’s filing system indicates it was submitted by the Media Bureau, you might well wonder where it came from. There may, however, be a reason for this.

When the FCC moved its public comment system online, the FCC and communications lawyers quickly found that the number of one-page submissions from the public stating a position but providing no supporting rationale exploded exponentially. The result was that it became difficult to locate the more substantive comments filed in a proceeding, as they were lost among hundreds or thousands of short “me too” submissions. To the FCC’s eternal credit, it modified its comment search filter so that you can exclude “Brief Comments” from your search, allowing you to focus on the more substantial comments filed. Parties actively following a proceeding therefore tend to use this option and exclude “Brief Comments” when checking the record.

By eliminating all extraneous information, the FCC was able to keep its Submission down to one page in length, and as it turns out, the system’s definition of a Brief Comment is one that is one page long, meaning that those using the search filter will not see it. That may well be nothing more than a coincidence, but it would at least explain the unusually brief and cryptic nature of the FCC’s Submission. But if that is the case, we have just traded one mystery for another–having gone to such lengths to gather this information, why is the FCC being so shy about having found it?

Published on:

By and

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:

  • A discussion of a number of forfeitures issued by the FCC fining individuals up to $25,000 for operating unlicensed radio stations.

FCC Sends Warning to Unlicensed Radio Operators

The FCC has recently been taking an active stance against unlicensed radio operations, as further evidenced by four recently issued penalties for violations of the Communications Act. Radio stations operating without a license should take this as a warning of future enforcement actions against such illegal operations.

In the first two instances involving the same individual in San Jose, California, the Enforcement Bureau issued two separate Notices of Apparent Liability for Forfeiture (“NAL”) for $25,000 each to the operator for unlicensed broadcasting on various FM band frequencies and for a failure to allow inspection of an unlicensed broadcast station. After several months, the operator failed to respond to either of the NALs. As a result, the Enforcement Bureau issued the two $25,000 Forfeiture Orders against the individual.

In a second case, a Florida man was found apparently liable for $15,000 for operating an unlicensed FM radio transmitter in Miami. In September 2011, the Enforcement Bureau, following up on a complaint lodged by a national telecommunications carrier, discovered two antennas used for unlicensed operations on the frequency 88.7 MHz on the roof of a building. During the site visit, the building’s owner indicated that the equipment was located in a rooftop suite rented by a tenant. The Enforcement Bureau agents left a hand-delivered Notice of Unlicensed Operations (“NOUO”) with the building owner, who indicated that he would deliver the NOUO to the tenant. On three subsequent occasions, agents from the Miami Field Office determined that the antennas in question were the source of radio frequency transmissions in excess of the limits of Part 15 of the FCC’s rules, therefore requiring a license for operation.

When the agents were finally able to interview the tenant, he admitted to owning the transmitter and operating the station. He also stated that he had been employed as a disc jockey for a station previously authorized to operate on 88.7 and was “aware he needed a license to operate the station.”

The base forfeiture amount under the FCC’s rules for operation without an authorization is $10,000. In this case, the FCC concluded that a $5,000 upward adjustment of the NAL was warranted because the operator was aware that his operations were unlawful prior to and after receipt of the NOUO.

Though the FCC issued the multiple hefty penalties for unlicensed operations described above, the FCC was ultimately more sympathetic to a third unlicensed operator. In September 2011, the Enforcement Bureau’s San Juan Office issued a NAL against the operator of an unlicensed radio transmitter in Guayama, Puerto Rico for $15,000. In response to the NAL, the operator argued that he believed his broadcast operations were legal, and he submitted financial information to support the claim that he was unable to pay the full amount of the NAL. Though the FCC affirmed its claims that the operator willfully violated the FCC’s rules, the FCC nevertheless lowered the fine to $1,500 due to the operator’s inability to pay.

After issuing multiple fines against unlicensed operators this month, the FCC is likely to continue issuing similar penalties in the future. Radio operators should be mindful of the equipment used in their operations and the signal levels transmitted during operations to avoid facing similar consequences.

Published on:

By

As the FCC’s proceeding to require television stations to place their public inspection files (including their political files) online heats up, life is becoming strange for a number of television stations around the country. In a move presumably connected with the online public file proceeding, FCC inspectors have appeared at television stations in several markets and demanded that the stations provide them with a complete copy of their entire public inspection files within 48 hours or less. Given that most public files are measured in yards, not feet, of paper, there are a lot of broadcast employees burning the midnight oil trying to comply.

But why such a strange and burdensome request? If the FCC wanted to merely determine whether a station’s file is complete, it can just look at the original file during its visit to the station–it doesn’t need its own copy. Besides, the fact that a document is missing from the duplicates provided to the FCC would be weak evidence that the station’s actual file is defective, since it would hardly be surprising if a few documents failed to get copied in this highly rushed process.

Alternatively, if the FCC were doing an in-depth audit of a specific portion of the file (for example, the EEO section) which is difficult to thoroughly review while at the station, FCC personnel could request copies of just that portion of the file. In asking for a copy of the entire file, it appears that the FCC is not particularly interested in the substance of those copies, but in how quickly the station can produce them (particularly since there appears to be no massive emergency file review going on at the FCC actually requiring rapid access to copies of the entire file).

While this would seem bizarre any place outside of Washington (well, it’s bizarre here too, but you get used to that after a while), the FCC has been on the receiving end of numerous comments and declarations from broadcasters noting how large the public inspection file has become, and how burdensome and time-consuming it would be to require stations to scan the entire contents of it for the sake of posting it online. Broadcasters have argued that this burden is hard to justify given that very few members of their local communities have ever expressed the slightest interest in seeing the public file, online or otherwise.

While scanning and posting the content of a public file online will obviously be far more time consuming than just making copies of it, these recent events may suggest that the FCC considers them sufficiently analogous to attempt to prove a point–that scanning every document in a public file is not as time-consuming as many broadcasters have claimed, and is therefore not a fatal flaw in the online file proposal, either from a public interest or Paperwork Reduction Act perspective. Or, the Commission may think broadcasters are bluffing about the size of their public files, and want to prove that they are really not as extensive as claimed. Apparently, the FCC has not realized just how many station renewal applications remain pending for years after filing due to indecency and other complaints, requiring stations to maintain data in their files even longer than usual.

Unfortunately, the affected broadcasters are now caught in the middle, and face a conundrum: attempt to move heaven and earth in an effort to meet the FCC’s seemingly arbitrary deadline, or risk being accused by the FCC of failing to provide the requested information by the deadline set by the FCC (or both, for the many stations that pull out all stops and still have no hope of meeting the FCC’s stated deadline). Particularly ironic of course is that stations that manage to pull it off in anything close to that time frame may well have that fact presented to them as the very reason why it is not unduly burdensome to have them repeat the process when posting their file online.

As a broadcaster, the obvious thing to do when the FCC may be coming to your door is to make sure that your public inspection file is complete and up to date. However, if the actual point of this exercise is not to look at the substance of what stations produce, but at how fast they can produce it, then these unfortunate stations have been tasked with the regulatory equivalent of a snipe hunt.

Published on:

By

As those who follow our interactive calendar are aware, I spoke last week as a representative of broadcasters on a retransmission panel at the American Cable Association Annual Summit. The ACA’s membership is predominantly smaller cable system operators, and because of that, the ACA has been very vocal in Washington regarding its displeasure with the current state of retransmission law.

While broadcasters are understandably tired of being paid less per viewer than cable networks, smaller cable operators feel they are being squeezed in the middle–forced to pay more to retransmit broadcast programming, but unable to free up money for those additional payments by paying cable networks less than the amount to which those networks have become accustomed. While the economics of supply and demand should eventually bring programming fees in line with the attractiveness of that programming to viewers, this process will take some time. In the meantime, as I heard from operator after operator during the panel, they are looking for a much faster solution, and that solution is for the government to step in and by some method guarantee cable operators low-cost access to broadcast signals.

A discussion of the dynamics of retransmission negotiations and policy could easily fill a book, but for the limited purposes of this post, I just want to focus on a particular refrain I heard from cable operators, which is that losing a broadcast network signal for even a short time is devastating to their business, leaving them in a tenuous bargaining position during retransmission negotiations.

The reason this came to mind today is a pair of decisions just released by the FCC which illustrate the temptation for a small cable operator to engage in a little “self-help” to overcome what it perceives as an unfair negotiation. These decisions also illustrate why other cable operators should ensure they never succumb to that temptation. In these decisions (here and here), the FCC issued two Notices of Apparent Liability to the same cable operator for continuing to carry the signals of two broadcasters after the old retransmission agreements with those stations expired and before new retransmission agreements were executed.

The affected broadcasters filed complaints with the FCC, and the cable operator responded that it “does not refute that it retransmitted [the stations] without express, written consent. Rather, [the cable operator] argues that it faced a ‘dramatic increase’ in requested retransmission consent fees, and states that it receives the signal by antenna rather than satellite or the Internet. [The cable operator] claims that [the broadcaster] is ‘using [the Commission] as a tool to negotiate a dramatic increase in rates’ and it requests that the Commission require the fair negotiation of a reasonable rate.”

After a telephone conference with FCC staff, the parties reached agreement on a new retransmission agreement for each of the stations involved, and the agreements were executed on February 3, 2012. However, the really interesting part of these decisions relates not to how the FCC proceeding arose, but to how the FCC chose to assess proposed forfeitures against the cable operator in the twin Notices of Apparent Liability. The FCC noted that the base forfeiture for carriage of a broadcast station without a retransmission agreement in place is $7,500. Since the cable operator had carried the stations without a retransmission agreement for 34 days, the FCC determined that the base forfeiture for each of the violations was $7,500 x 34, or $255,000. That would make the total base forfeiture for illegally carrying both stations during that time $510,000.

Fortunately for the cable operator, the FCC reviewed the operator’s financial data and concluded that a half-million dollar fine “would place the company in extreme financial hardship.” The FCC therefore exercised its discretion to reduce the proposed forfeitures to $15,000 each, for a total of $30,000. These decisions certainly demonstrate that no matter how frustrated a cable operator is with retransmission costs, the self-help approach is not a wise path to take.

In fact, the proposed FCC fines are only the beginning of a cable operator’s potential liability for illegal retransmission. Not addressed by the FCC in its decisions is the fact that retransmission of a broadcast station without an agreement is a violation of not just the FCC’s Rules and the Communications Act of 1934, but also of copyright laws. If the illegally-carried broadcast stations chose to pursue it, they could seek copyright damages against the cable operator, and the proposed FCC fines pale in comparison to the potential copyright damages for illegal retransmission. The Copyright Act authorizes the award of up to $150,000 in statutory damages for each infringement, with each program retransmitted being considered a separate infringement. So, for example, if we assume that each station in these decisions aired 24 programs a day for 34 days, the potential copyright damages for such illegal carriage would be $122,400,000 per station. The potential damages for illegally carrying both stations would therefore be close to a quarter-Billion dollars! While it is very unlikely that a court would impose the maximum damages allowed under the Copyright Act, no cable operator would want to run the risk of being ordered to pay even a tiny fraction of that amount for illegal retransmission.

In short, though cable operators certainly may not like paying retransmission fees for broadcast programming, these decisions make clear that the price of not having a retransmission agreement in place can be far higher.

Published on:

By

I wrote in February about a sudden deluge of nearly identical FCC decisions, all released on the same day, proposing to revoke the Class A status of sixteen LPTV stations for failure to timely file all of their Form 398 children’s television reports. While I noted at the time that the affected licensees had done themselves no favors by apparently failing to respond to FCC letters of inquiry, the decisions were still somewhat surprising in that the FCC has traditionally fined Class A stations for rule violations rather than revoked their Class A status. Class A status is important because it provides LPTV stations with protection from being displaced by full-power TV stations, and is now more important than ever, as the recently enacted spectrum auction legislation allows Class A stations both the opportunity to participate in auction revenues, and protection from being eliminated in the broadcast spectrum repacking associated with the auction.

Given the peculiar timing of the FCC’s decisions (just days after the spectrum auction legislation became law), the sudden shift from fines to Class A revocation, and the release of sixteen such decisions at the same time, the decisions raise the specter that the FCC may be moving to delete the Class A status of non-compliant stations in order to facilitate clearing broadcast spectrum as cheaply as possible in preparation for the newly-authorized wireless spectrum auction. Within a few days of my post, a number of trade publications picked up on this possibility as well. The result was a lot of Class A stations checking to make sure their regulatory house is in order, and a growing concern in the industry that these decisions might be the leading edge of an FCC effort to clear the way for recovering broadcast spectrum for the planned auction.

While that may still turn out to be the case, I was nonetheless at least somewhat relieved to see a trio of decisions released this morning by the FCC that are largely identical to the February decisions with one big exception–the FCC proposed fining the stations for failing to file all of their children’s television reports rather than seeking to revoke their Class A status. Specifically, the FCC proposed fining two of the licensees $13,000 each, and the third licensee $26,000 (because it had two stations that failed to file all of their reports).

Each $13,000 fine consisted of $3000–the base fine for failing to file a required form–and an additional $10,000, which is the base fine for having such documents missing from a station’s public file. While a $13,000 fine is painful, particularly for a low power station, loss of Class A status could be far more devastating for these stations, and for Class A stations in general. Setting aside spectrum auction considerations, buyers, lenders and investors will be hesitant to risk their money on Class A stations that could suddenly lose their Class A status, and shortly thereafter be displaced out of existence. Stated differently, those considering buying, lending to, or investing in Class A stations will want to do a thorough due diligence on such stations’ rule compliance record before proceeding.

So why did the FCC propose fines for these stations while the sixteen stations in the February decisions were threatened with deletion of their Class A status? Although today’s decisions and the February decisions are similar in many respects, there is one big distinction. Unlike the licensees in the February decisions, the licensees named in today’s decisions promptly responded to the letters of inquiry sent by the FCC, and upon realizing that they had failed to file all of their children’s television reports, belatedly completed and submitted those reports to the FCC. While that didn’t stop the FCC from seeking to fine these stations, it does seem to have avoided a reexamination of their Class A status.

While the FCC’s February decisions to pursue deletion of Class A status are still a worrisome development for all Class A stations, today’s decisions thankfully shed some much needed light on when the FCC is likely to pursue that option, and when it will be satisfied with merely issuing a fine. As I noted in my earlier post, a licensee that fails to promptly respond to a letter from the FCC is living life dangerously, and today’s decisions confirm that fact. As a result, Class A stations should continue to make sure that their regulatory house is in order, and if they receive a letter of inquiry from the FCC, should contact their lawyer immediately to timely put forth the best possible response to the FCC.