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A panel of the United States Court of Appeals for the Ninth Circuit in San Francisco today ruled, in a 2 – 1 decision, that the long-standing prohibition on the carriage of paid political and issue advertising by noncommercial television and radio stations is unconstitutional and may no longer be enforced by the FCC.

The majority opinion in Minority Television Project Inc v. FCC was authored by Judge Carlos Bea, a George W. Bush appointee, and joined in by Judge John Noonen, a Reagan appointee; Judge Richard Paez, a Clinton appointee, wrote a dissenting opinion. The case arose when Minority Television Project, licensee of noncommercial television station KMTP-TV was fined $10,000 by the FCC for violating the prohibition in Section 399B of the Communications Act against noncommercial stations carrying paid advertising for commercial entities. According to the FCC, KMTP-TV had carried over 1,900 advertisements for entities such as State Farm, Chevrolet and Asiana Airlines in the period from 1999-2002. Minority Television Project paid the fine, but filed suit in District Court for reimbursement of the fine and declaratory relief. After its arguments were rejected by the District Court, Minority Television Project brought this appeal.

The Court of Appeals focused on whether the statutory prohibitions on paid advertising in Section 399B are consistent with the U.S. Constitution. It concluded that the statute contains content-related restrictions that must be reviewed under the standard of “intermediate scrutiny,” which provides that the government must show that the statute “promotes a substantial governmental interest” and “does not burden substantially more speech than necessary to further that interest.”

The Court found that the prohibition on broadcasting paid commercial advertising on behalf of for-profit entities, the primary focus of Minority Television Project’s appeal, was narrowly tailored and promotes the substantial governmental goal of preventing the commercialization of educational television. As a result, the fine imposed on Minority Television Project was upheld. However, the Court went on to address the prohibition on carriage of paid candidate and paid issue advertising by noncommercial stations. It found no legitimate governmental goal underlying that prohibition. The Court reviewed the Congressional record developed when the prohibition on political and issue advertising was adopted, and failed to find any evidence to support the provision. It therefore held that aspect of the law to be unconstitutional.

The decision leaves open many important questions as to how to implement it. For example, the questions of whether or how the lowest unit charge provision of Section 315 of the Communications Act will apply to noncommercial stations are not addressed. Similarly, the Decision does not consider whether federal candidates will be entitled to
“reasonable access” rights on noncommercial stations, permitting federal candidates to buy advertising on noncommercial stations that do not want to accept political advertising. While the reasonable access provision of the Communications Act appears to exempt noncommercial educational stations from that requirement, it is a content-related law, and therefore raises questions as to whether the disparate treatment of commercial and noncommercial stations for this purpose is constitutional. Other practical questions, such as the application of equal opportunities rights, political file obligations, and the like will also have to be resolved if this decision is implemented. More broadly, if the decision stands, it could have a fundamental impact on the nature and funding of noncommercial broadcasting.

The Ninth Circuit’s decision only applies to states located within the jurisdiction of that Court (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington). The FCC and the Justice Department may seek review by the entire Ninth Circuit, sitting en banc, or seek review by the U.S. Supreme Court. As that drama plays out during an active political season, a lot of noncommercial stations will be scratching their heads trying to figure out what they can, can’t, and must do in light of the decision. Conversely, a lot of commercial stations aren’t going to be happy if they find that their political advertising revenues are being diverted to noncommercial stations. One thing is certain–if upheld, the implications of this decision for both noncommercial and commercial stations will be far reaching.

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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.

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Earlier today, the FCC’s Fifth Report and Order revising the Part 11 EAS Rules and codifying the obligation that EAS Participants be able to process alert messages formatted in the Common Alerting Protocol (CAP) was published in the Federal Register. As a result of today’s Federal Register publication, the primary rule changes adopted by the FCC in the Order will be effective April 23, 2012.

If you recall from my previous posts on the matter found here and here, the main focus of the FCC’s Order was to specify the manner in which EAS Participants must be able to receive CAP-formatted alert messages and to clarify the FCC’s Part 11 Rules. Among other things, the FCC took the following actions in its Order:

  • It required EAS Participants to be able to convert CAP-formatted EAS messages into messages that comply with the EAS Protocol requirements, following the conversion procedures described in the EAS-CAP Industry Group’s (ECIG’s) Implementation Guide;
  • It required EAS Participants to monitor FEMA’s IPAWS system for federal CAP-formatted alert messages using whatever interface technology is appropriate;
  • It adopted rules to generally allow EAS Participants to use “intermediary devices” to meet CAP requirements;
  • It required EAS Participants to use the enhanced text in CAP messages to meet the video display requirements; and
  • It adopted streamlined procedures for equipment certification that take into account standards and testing procedures adopted by FEMA.

Although the FCC’s new rules will be on the books as of next month, EAS Participants actually have until June 30, 2012 to install the equipment necessary to receive and convert CAP-formatted EAS alerts. When this deadline hits, five years or so of FCC CAP-related FCC decisions will come to a close. But don’t worry, the FCC and FEMA have already indicated that CAP is only the beginning of the digital emergency alert era and that more proceedings related to the so-called “next generation” of emergency alerting, including improving the Integrated Public Alert and Warning System (IPAWS), will likely be coming soon. Stay tuned.

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March 2012

The staggered deadlines for filing Biennial Ownership Reports by noncommercial radio and television stations remain in effect and are tied to each station’s respective license renewal filing deadline.

Noncommercial radio stations licensed to communities in Delaware, Indiana, Kentucky, Pennsylvania, and Tennessee, and television stations licensed to communities in Texas must electronically file their Biennial Ownership Reports by April 2, 2012, as the filing deadline of April 1 falls on a Sunday. Licensees must file using FCC Form 323-E, and must place the form as filed in their stations’ public inspection files.

In 2009, the FCC issued a Further Notice of Proposed Rulemaking seeking comments on whether the Commission should adopt a single national filing deadline for all noncommercial radio and television broadcast stations like the one that the FCC has established for all commercial radio and television stations. That proceeding remains pending without decision. As a result, noncommercial radio and television stations continue to be required to file their biennial ownership reports every two years by the anniversary date of the station’s license renewal application filing.

A PDF version of this article can be found at Biennial Ownership Reports are due by April 2, 2012 for Noncommercial Radio Stations in Delaware, Indiana, Kentucky, Pennsylvania, and Tennessee, and for Noncommercial Television Stations in Texas

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March 2012

Full power commercial and noncommercial radio stations and LPFM stations licensed to communities in Michigan and Ohio must begin airing pre-filing license renewal announcements on April 1, 2012. License renewal applications for these stations, and for in-state FM translator stations, are due by June 1, 2012.

Pre-Filing License Renewal Announcements

Full power commercial and noncommercial radio, LPFM, and FM Translator stations whose communities of license are located in Michigan and Ohio must file their license renewal applications with the FCC by June 1, 2012.

Beginning two months prior to that filing, however, full power commercial and noncommercial radio and LPFM stations must air four pre-filing announcements alerting the public to the upcoming renewal application filing. As a result, these radio stations must air the first pre-filing renewal announcement on April 1. The remaining pre-filing announcements must air once a day on April 16, May 1, and May 16, for a total of four announcements. At least two of these four announcements must air between 7:00 am and 9:00 am and/or 4:00 pm and 6:00 pm.

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, 2012. [Stations that 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, 2012. We must file an application for renewal with the FCC by June 1, 2012. When filed, a copy of this application will be available for public inspection during our regular business hours. 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, 2012.

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

Article continues . . .

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March 2012

This Broadcast Station EEO Advisory is directed to radio and television stations licensed to communities in Delaware, Indiana, Kentucky, Pennsylvania, Tennessee and Texas, and highlights the upcoming deadlines for compliance with the FCC’s EEO Rule.

Introduction

April 1, 2012 is the deadline for broadcast stations licensed to communities in Delaware, Indiana, Kentucky, Pennsylvania, Tennessee, and Texas to place their Annual EEO Public File Report in their public inspection files and post the report on stations’ websites.

Under the FCC’s EEO Rule, all radio and television station employment units (“SEUs”), regardless of staff size, must afford equal opportunity to all qualified persons and practice nondiscrimination in employment.

In addition, those SEUs with five or more full-time employees (“Nonexempt SEUs”) must also comply with the FCC’s three-prong outreach requirements. Specifically, all Nonexempt SEUs must (i) broadly and inclusively disseminate information about every full-time job opening except in exigent circumstances, (ii) send notifications of full-time job vacancies to referral organizations that have requested such notification, and (iii) earn a certain minimum number of EEO credits, based on participation in various non-vacancy-specific outreach initiatives (“Menu Options”) suggested by the FCC, during each of the two-year segments (four segments total) that comprise a station’s eight-year license term. These Menu Option initiatives include, for example, sponsoring job fairs, attending job fairs, and having an internship program.

Nonexempt SEUs must prepare and place their Annual EEO Public File Report in the public inspection files and on the websites of all stations comprising the SEU (if they have a website) by the anniversary date of the filing deadline for that station’s FCC license renewal application. The Annual EEO Public File Report summarizes the SEU’s EEO activities during the previous 12 months, and the licensee must maintain adequate records to document those activities. Stations must also submit the two most recent Annual EEO Public File Reports at the midpoint of their license terms and with their license renewal applications.

Exempt SEUs – those with fewer than 5 full time employees – do not have to prepare or file Annual or Mid-Term EEO Reports.

For a detailed description of the EEO rule and practical assistance in preparing a compliance plan, broadcasters should consult “Making It Work: A Broadcaster’s Guide to the FCC’s Equal Employment Opportunity Rules and Policies” published by the Communications Practice Group. This publication is available at: https://www.pillsburylaw.com/siteFiles/Publications/CommunicationsAdvisoryMay2011.pdf.

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March 2012

The next Quarterly Issues/Programs List (“Quarterly List”) must be placed in stations’ local inspection files by April 10, 2012, reflecting information for the months of January, February, and March 2012.

Content of the Quarterly List

The FCC requires each broadcast station to air a reasonable amount of programming responsive to significant community needs, issues, and problems as determined by the station. The FCC gives each station the discretion to determine which issues facing the community served by the station are the most significant and how best to respond to them in the station’s overall programming.

To demonstrate a station’s compliance with this public interest obligation, the FCC requires a station to maintain and place in the public inspection file a Quarterly List reflecting the “station’s most significant programming treatment of community issues during the preceding three month period.” By its use of the term “most significant,” the FCC has noted that stations are not required to list all responsive programming, but only that programming which provided the most significant treatment of the issues identified. Article continues . . .

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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:

  • Inadequate Sponsorship ID Ends with $44,000 Fine
  • Unattended Main Studio Fine Warrants Upward Adjustment
  • $16,000 Consent Decree Seems Like a Deal

Licensee Fined $44,000 for Failure to Properly Disclose Sponsorship ID
For years, the FCC has been tough on licensees that are paid to air content but do not acknowledge such sponsorship, and an Illinois licensee was painfully reminded that failing to identify sponsors of broadcast content has a high cost. In a recent Notice of Apparent Liability (“NAL”), the FCC fined the licensee $44,000 for violating its rule requiring licensees to provide sponsorship information when they broadcast content in return for money or other “valuable consideration.”

Section 317 of the Communications Act and Section 73.1212 of the FCC’s Rules require all broadcast stations to disclose at the time the content is aired whether any broadcast content is made in exchange for valuable consideration or the promise of valuable consideration. Specifically, the disclosure must include (1) an announcement that part or all of the content has been sponsored or paid for, and (2) information regarding the person or organization that sponsored or paid for the content.

In 2009, the FCC received a complaint alleging a program was aired without adequate disclosures. Specifically, the complaint alleged that the program did not disclose that it was an advertisement rather than a news story. Two years after the complaint, the FCC issued a Letter of Inquiry (“LOI”) to the licensee. In its response to the LOI, the licensee maintained that its programming satisfied the FCC’s requirements and explained that all of the airings of the content at issue contained sponsorship identification information, with the exception of eleven 90-second spots. In these eleven spots, the name of the sponsoring organization was identified, but the segment did not explicitly state that the content was paid for by that organization.

Though the licensee defended its program content and the disclosure of the sponsor’s name as sufficient to meet the FCC’s requirements, the FCC was clearly not persuaded. The FCC expressed particular concern over preventing viewer deception, especially when the content of the programming is not readily distinguishable from other non-sponsored news programming, as was the case here.

The base forfeiture for sponsorship identification violations is $4,000. The FCC fined the licensee $44,000, which represents $4,000 for each of the eleven segments that aired without adequate disclosure of sponsorship information.

Absence of Main Studio Staffing Lands AM Broadcaster a $10,000 Penalty
In another recently released NAL, the FCC reminds broadcasters that a station’s main studio must be attended by at least one of its two mandatory full-time employees during regular business hours as required by Section 73.1125 of the FCC’s Rules. Section 73.1125 states that broadcast stations must maintain a main studio within or near their community of license. The FCC’s policies require that the main studio must maintain at least two full-time employees (one management level and the other staff level). The FCC has repeatedly indicated in other NALs that the management level employee, although not “chained to their desk”, must report to the main studio on a daily basis. The FCC defines normal business hours as any eight hour period between 8am and 6pm. The base forfeiture for violations of Section 73.1125 is $7,000.

According to the NAL, agents from the Detroit Field Office (“DFO”) attempted to inspect the main studio of an Ohio AM broadcaster at 2:20pm on March 30, 2010. Upon arrival, the agents determined that the main studio building was unattended and the doors were locked. Prior to leaving the main studio, an individual arrived at the location, explained that the agents must call another individual, later identified as the licensee’s Chief Executive Officer (“CEO”), in order to gain access to the studio, and provided the CEO’s contact number. The agents attempted to call the CEO without success prior to leaving the main studio.

Approximately two months later, the DFO issued an LOI. In the AM broadcaster’s LOI response, the CEO indicated that the “station personnel did not have specific days and times that they work, but rather are ‘scheduled as needed.'” Additionally, the LOI response indicated that the DFO agents could have entered the station on their initial visit if they had “push[ed] the entry buzzer.”

In August 2010, the DFO agents made a second visit to the AM station’s main studio. Again the agents found the main studio unattended and the doors locked. The agents looked for, but did not find, the “entry buzzer” described in the LOI response.

The NAL stated that the AM broadcaster’s “deliberate disregard” for the FCC’s rules, as evidenced by its continued noncompliance after the DFO’s warning, warranted an upward adjustment of $3,000, resulting in a total fine of $10,000. The FCC also mandated that the licensee submit a statement to the FCC within 30 days certifying that its main studio has been made rule-compliant.

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According to the The Sign of Four, Sir Arthur Conan Doyle’s second Sherlock Holmes novel, Holmes preferred a seven-percent solution (a reference that would serve as the basis for another Holmes novel and movie some seventy years later). The FCC, on the other hand, has shown a regulatory fondness for relying on a five-percent solution. For example, a five-percent voting interest triggers application of the FCC’s multiple ownership rules, and when the FCC announced it would conduct random annual EEO audits, it decided that it would audit five percent of radio stations, five percent of TV stations, and five percent of cable systems each year for EEO compliance.

Further evidence of the FCC’s five-percent fondness arose this week in the context of a proceeding we first wrote about in the December FCC Enforcement Monitor. That story discussed a South Carolina AM station which, in an unusual twist, was fined twice for failing to file a license renewal application on time.

Section 73.3539(a) of the FCC’s Rules requires license renewal applications to be filed four months prior to the expiration date of the license. The AM station’s license was set to expire in December 2003, but no license renewal application was filed. The station licensee later explained that it did not file a license renewal application because it did not realize its license had expired. In May of 2011, seven years later, the FCC notified the station that its license had indeed expired, its authority to operate had been terminated, and its call letters had been deleted from the FCC’s database.

After receiving this letter, the station filed a late license renewal application and a subsequent request for Special Temporary Authority to operate the station until the license renewal application was granted. Because so much time had passed since the station failed to timely file its 2003 license renewal application, however, the deadline for the station’s 2011 license renewal application (for the 2011-2019 license term) also passed without the station filing a timely license renewal application. As a result, the FCC found the station liable for an additional violation of its license renewal filing obligations.

The base fine for failing to file required forms is $3,000. Thus, the FCC found the station liable for a total of $6,000 relating to these two violations, and an additional $4,000 for violating Section 301 of the Communications Act by continuing to operate for seven years after license expiration. The base forfeiture for the latter offense is $10,000, but the FCC reduced its proposed forfeiture to $4,000 because the station was not a pirate, and had previously been licensed. Combining all of the various proposed fines, however, still left the station holding a Notice of Apparent Liability for $10,000. On the good news side, the FCC did elect to renew the station’s license, holding that the station’s alleged rule violations did not evidence a “pattern of abuse.”

This week brought an additional chapter to the tale when the FCC released a decision on Valentine’s Day responding to the licensee’s request to have the $10,000 fine reduced or cancelled. The licensee presented two grounds for modifying the FCC’s original order. First, the licensee noted that one of the station’s co-owners had been in very poor health, and it was because of this that the station had missed the license renewal filing deadline (the decision fails to make clear whether it was the first or second license renewal application that the illness caused to be missed). The FCC indicated that it was sympathetic to the co-owner’s health issues, but it made clear that illness does not excuse the failure to timely file a license renewal application, particularly where the person in poor health was not the sole owner of the station.

The second ground presented was that the $10,000 fine was excessive for a small town AM station, particularly given the station’s financial status. As required by the FCC for those pleading financial hardship, the licensee turned over its tax returns for the past three years, showing annual gross revenues of $86,437, $88,947, and $103,707. Applying its five-percent solution, the FCC concluded that the licensee was entitled to a reduction in the fine, stating that “the Bureau has found forfeitures of approximately 5 percent of a licensee’s average gross revenue to be reasonable,” and that the “current proposed forfeiture of $10,000 constitutes approximately 11 percent of Licensee’s average gross revenue from 2008 to 2010.” The FCC therefore reduced the forfeiture to $4,600, stating that it would “align this case with the 5 percent standard used in prior cases.”

While few licensees would be pleased to hand over five percent of their annual gross revenue to the FCC, all should be aware that five percent marks the FCC’s threshold for assessing when a fine moves from being big enough to ensure future rule compliance, to instead causing undue financial hardship. For those facing an FCC fine, that is an important distinction.

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Last Thursday, the FCC’s Media Bureau issued a Letter Decision involving two disputed coordinate correction applications for a station’s main and auxiliary antennas that, at least on paper, proposed to increase the short spacing to another radio station. In the Letter Decision, the Media Bureau spelled out the circumstances under which a requested coordinate correction, absent an actual change in facilities, will be approved by the Media Bureau.

Certain FCC applications and registrations require parties to specify the geographic coordinates for the site that is the subject of the filing. Examples of such FCC filings include applications for modifications to an AM or FM broadcast station on FCC Form 301 or 302, antenna and tower registrations on FCC Form 854, and applications seeking authorization to operate studio transmitter links on FCC Form 601. The Letter Decision emphasized that the coordinates supplied to the FCC should be accurate not only to prevent interference among stations, but also to avoid unanticipated and potentially costly disputes like the one discussed in this decision.

As detailed in the Letter Decision, a California broadcaster filed applications seeking to correct its main and auxiliary transmitter site coordinates on FCC Form 302-FM pursuant to the FCC rule that allows a station to correct its coordinates by no more than three seconds of latitude and/or longitude without requesting a new construction permit. The applications in question were opposed by a broadcaster in an adjacent market who argued that the applications to correct the coordinates would impermissibly increase the existing short spacing between the applicant’s station and its station. While the correction of coordinates did technically reduce the stated distance between the stations, it did so by only 304 feet.

The Media Bureau stated in the Letter Decision that it is an “undisputed fact” that the coordinate changes proposed would increase the short spacing, but it decided to approve the applications because the increase in short spacing was negligible, or “de minimis.” In doing so, the Media Bureau relied on a 1998 case involving a coordinate correction that proposed a “paper” change in coordinates of a similar distance (less than a tenth of a kilometer).

However, the Media Bureau also concluded that in assessing the distances between transmitter sites to determine whether a short-spacing is increased under the FCC’s Rules, it will round distances to the nearest kilometer. Using this rounding methodology, the distance between the stations in the Letter Decision remained unchanged by the correction, since both the old and the new distances rounded to 221 kilometers, and therefore created no “change” in the short spacing between the stations.

The take away from the Letter Decision is that the Media Bureau will likely approve applications to correct coordinates that increase an existing short spacing where (i) the application is for correction of site data that does not involve an actual facility change; (ii) the correction raises no environmental or international (or other) issues; (iii) the difference between the authorized and corrected spacing involved is de minimis (keep in mind the only clear line even after the Letter Decision is that a tenth of a kilometer, or less, will be considered de minimis by the FCC); and (iv) a change of more than a tenth of a kilometer may be permissible where rounding to the nearest kilometer would indicate no change in the distance between stations.