Articles Posted in Television

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A few minutes ago, the FCC released an Order extending the December 2, 2013 deadline for commercial broadcast stations to file their biennial ownership reports to December 20, 2013. The extension is meant to respond to the fact that the FCC took its website (including the Consolidated Database System used for preparing and filing reports and applications) offline during the October government shutdown. Because of this, broadcasters were prevented from preparing their voluminous ownership reports until the FCC reopened and the website was reactivated.

Since the biennial ownership report requires filers to provide their ownership information as it existed on October 1, 2013, broadcasters normally have sixty days after the October 1 reporting date to prepare and submit their reports. By extending the deadline to December 20, the FCC is seeking to maintain that sixty day preparation period.

Noncommercial broadcasters whose biennial ownership reports are due on December 2, 2013 (radio stations licensed to communities in Alabama, Connecticut, Georgia, Massachusetts, Maine, New Hampshire, Vermont, and Rhode Island and noncommercial television stations licensed to communities in Colorado, Minnesota, Montana, North Dakota, and South Dakota) should be aware that this extension does not apply to noncommercial ownership reports. Barring further action by the FCC, noncommercial stations in the listed states should continue to plan on filing their ownership reports by the current December 2, 2013 deadline.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The FCC has therefore decided that it is time to crack down on violations, and ominously, today’s FCC Enforcement Advisory notes that “[o]ther investigations remain ongoing, and the Bureau will take further enforcement action if warranted.” Given today’s actions by the FCC, everyone whose job it is to review ad content before it airs is having a very bad day.

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October 2013

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

  • Online Public File Violations and Failure to Respond Result in $14,400 Fine
  • Unlicensed Broadcast Operation Draws $7,000 Fine
  • Fines Continue for Class A Children’s Television Violations

Licensee Fined for Public Inspection File Violations and Failure to Respond to FCC Inquiries
The FCC issued a Forfeiture Order in the amount of $14,400 to a California television licensee for failing to keep its online public inspection file up to date and for not responding to the FCC’s letters of inquiry.

Earlier this year, the FCC issued a Notice of Apparent Liability for Forfeiture (“NAL”) against the licensee, asserting that the station had failed to place required documentation in its online public inspection file and failed to respond to FCC letters of inquiry. The NAL concluded that the licensee should be assessed a $16,000 forfeiture for these violations, which was comprised of $10,000 for the public file violation and $6,000 for failure to respond to the FCC’s correspondence. Although the usual penalty for failure to respond is $4,000, the FCC imposed the higher penalty of $6,000 on this licensee because its “misconduct was egregious and repeated.”

The licensee timely responded to the NAL and argued against the imposition of a $16,000 fine. The FCC rejected all but the last of the station’s arguments. First, the FCC disagreed with the licensee’s argument that uploading documents into its online inspection file was unnecessary because of their availability at the station’s main studio, noting that “the online public file is a crucial source of information for the public.” Second, the FCC noted that providing the FCC with updated contact information is the responsibility of the licensee, and therefore rejected the licensee’s argument that the station’s failure to reply to FCC letters sent to an outdated address was unintentional. Third, the FCC ignored the licensee’s argument that paying a fine would impose a financial hardship, as the station declined to provide the required documentation of its financial status. Ultimately, however, the FCC agreed to reduce the fine from $16,000 to $14,400 in light of the station’s history of compliance with the FCC’s Rules.

Continue reading →

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The irony. The sheer irony. Just a few weeks ago, Congress was holding hearings in which the challenges of concluding retransmission negotiations without the occasional service disruption featured prominently. Representative Eshoo’s draft legislation targeting such disruptions had just been released, and there was little doubt that some members of Congress felt that CBS and Time Warner Cable had not worked hard enough at preventing a disruption of CBS programming on TWC cable systems, or worse, had been indifferent to the impact on cable viewers.

Fast forward a few weeks and we now face another impasse where the parties have been unable to negotiate an accord, with the resulting disruption greatly affecting the public. Also familiar are the statements to the press and the public by the negotiators that the inability to reach a negotiated resolution is entirely the other party’s fault.

The difference this week is that we are not talking about a retrans dispute, but the shutdown of the federal government. While the ramifications of this disruption are far greater than any retrans dispute, the similarity of circumstances is striking. First, all of the parties to the negotiation knew well in advance exactly when the current authorization was expiring and of the need to negotiate an extension. Second, all of the parties knew that the stakes are high and that disruption of service to the public should be avoided if at all possible. Third, it is primarily a dispute about money.

And yet, despite the early warning, the high stakes, and the impending loss of service to the public, Congress failed to reach agreement and the government shut down. As I wrote a few weeks ago, as nice as it would be to avoid it, one of the inherent characteristics of arm’s length negotiations is that a disruption is sometimes necessary to jolt the parties into moving off of their original positions and on to a negotiated result. Admittedly, national budgetary policy is more complex than most (but perhaps not all) retransmission negotiations, but then the adverse impact of the accompanying disruption is vastly greater as well.

Unlike a retrans dispute, however, where the public can fully restore service with a set of rabbit ears, nothing I can buy at my local radio Radio Shack will open the national parks or allow FCC staffers to return to their desks to process my applications. In short, even where the harm from service disruption is infinitely greater than in any retrans negotiation, Congress failed to find common ground and avoid that disruption.

Given the high stakes, it is interesting that there are actually far more protections against failed negotiations in the retrans context than in the congressional context. For example, unlike Congress, parties to retransmission negotiations are subject to the FCC’s rule requiring good faith negotiations. While those who assert that the current retrans process is broken frequently argue that merely policing the negotiation process to ensure the parties are negotiating in good faith is not enough, it seems like those rules might actually be fairly useful in the current congressional conundrum.

For example, a party violates the FCC’s good faith rule if it refuses to show up for negotiations, unreasonably delays negotiations, refuses to put forth more than a single unilateral proposal (the “take it or leave it” approach), or fails to respond to a proposal by the other party. Some might argue that such restrictions limit a party’s freedom to negotiate, but all retrans negotiations are conducted within that regulatory framework, making retrans negotiations more regulated than most, and giving proponents of adding yet further layers of restrictions a high hurdle to jump.

That will of course not prevent continued efforts by regulatory proponents to make that leap, but given the events of this week, it will be hard for members of Congress to feign shock and disbelief that two parties, even after making arduous efforts, aren’t always able to negotiate away their differences before those differences disrupt service to the public. Where such intractable disputes arise, we should all be thrilled if all that is needed to solve the problem is a pair of rabbit ears.

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Today’s exploration in vocabulary:

INTRANSIGENT: characterized by refusal to compromise or to abandon an extreme position or attitude : uncompromising < intransigent in their opposition> < an intransigent attitude> (from Merriam-Webster.com).

RETRANSIGENT: characterized by an insistent belief that negotiations which inevitably result in a signed retransmission agreement with less than a 0.01% chance of viewer disruption are ‘broken’ and demand immediate intervention by Congress < he was retransigent in his refusal to negotiate terms> (from CommLawCenter.com).

In the aftermath of the CBS/Time Warner Cable retransmission deal, I noted that one legacy of that negotiation would be lessened concern by future negotiators of finding themselves in a three way negotiation, with the FCC being the third wheel in the room. Since that time, several interesting developments have emerged. First, the Media Daily News reported that a Time Warner Cable representative revealed that the FCC actively discouraged Time Warner from filing a retrans complaint against CBS, indicating that the agency did not just passively decline to intervene, but sought to avoid being drawn into the middle of the negotiation (“don’t call us, we’ll call you!). If true, that puts an exclamation point on the conclusion that the FCC is none too interested in being drawn into retrans negotiations.

MVPDs apparently heard that message as well. They redoubled their efforts on Capitol Hill to have Congress change retrans law, running an ad in Politico aimed at members of Congress and making sure that a discussion of retransmission negotiations occupied an inordinately large portion of two hearings in the House of Representatives last week regarding reauthorization of the Satellite Television Extension and Localism Act (STELA). STELA is the law that permits carriage of distant broadcast signals by Satellite TV providers until the end of 2014. A bill to extend that authority is deemed by most to be must-pass legislation, meaning that retrans reform advocates are hoping to use it as a vehicle to modify retrans laws. That is a long shot effort, but not nearly as daunting as attempting to pass a standalone retrans bill.

Still, that did not prevent Representative Eshoo, who has been sympathetic to the pleas of MVPDs in the past, from introducing draft legislation last week titled The Video CHOICE (Consumers Have Options in Choosing Entertainment) Act. As described by its sponsor, the bill, among other things:

  • “Gives the FCC explicit statutory authority to grant interim carriage of a television broadcast station during a retransmission consent negotiation impasse.”
  • “Ensures that a consumer can purchase cable television service without subscribing to the broadcast stations electing retransmission consent.”
  • “Prohibits a television broadcast station engaged in a retransmission consent negotiation from making their owned or affiliated cable programming a condition for receiving broadcast programming.”
  • “Instructs the FCC to examine whether the blocking of a television broadcast station’s owned or affiliated online content during a retransmission consent negotiation constitutes a failure to negotiate in ‘good faith.’ “

At one of last week’s hearings, Representative Eshoo appeared to concede that the bill had little chance of passage, indicating it was “a series of ideas intended to spur constructive and actionable debate on ways to improve the video marketplace for video content creators, pay-TV providers and, most importantly, consumers.”

However, the bill demonstrates why government involvement is more complicated than proponents of retrans reform might assert. For example, regarding the requirement that viewers be able to subscribe to cable without subscribing to retrans stations, if the reason for changing the law is to ensure consumers are able to get broadcast programming over their cable system during retrans negotiations, giving consumers the right to not get the broadcast programming at any time over their cable system is not very helpful. In fact, this provision seems to concede that consumers can just use an antenna for broadcast programming rather than rely on their cable system, and since that is the case, these same consumers can just use an antenna to avoid any retrans-based disruptions, obviating the need for the law in the first place.

Because that result is so obviously illogical, I have to assume that this provision is instead aimed at preventing the unfairness of consumers being charged for a broadcast channel they aren’t receiving from their cable provider during a retrans disruption. That, however, has nothing to do with the retrans negotiation itself, and the stated provision wouldn’t fix that problem. If the retrans agreement has expired and the cable system therefore isn’t carrying the broadcast channel, the cable system also isn’t paying the broadcaster for retransmission. As a result, any money paid by subscribers for broadcast content they aren’t receiving is merely an economic windfall for the cable system. If that is the bill’s concern, the solution is to require MVPDs to issue subscriber refunds instead of pocketing the cash. Interfering with negotiations intended to put an end to that inequitable subscriber scenario would actually be counterproductive, as it merely causes the inequity to be extended longer still.

The provision prohibiting bundled negotiations has an even simpler flaw–if broadcasters are prohibited from accepting carriage of their cable networks as a form of compensation for granting retrans consent, they will be forced to shift to requesting all-cash compensation. Doing that, however, would increase a cable operator’s out of pocket program costs while eliminating a currently available avenue for bringing negotiations to a successful conclusion. The result would be more drawn-out and contentious all-cash negotiations that would serve to increase subscription fees, precisely the opposite of the bill’s intent.

Of course, the provision of the bill that has drawn the most attention is the first one, which would allow the FCC to mandate continued carriage of a broadcast station during retrans negotiations. You don’t have to be a rocket scientist to see the flaws in that idea; the big one being that retrans negotiations would never end since the MVPD has no incentive to agree to any deal as long as it can continue to retransmit the programming at the prior subscriber rate (or for that matter at any arbitrary fee that is less than what it would pay in an arm’s length negotiation). To try to solve that problem, the law would need to create some methodology for determining when FCC-imposed retransmission should end if no deal is reached. The logical point in time would be when negotiations cease. However, all such a law would accomplish is to move the time of the retrans disruption to a different date, while incentivizing broadcasters to formally declare negotiations broken off (most likely because the law incentivized MVPDs to negotiate as slowly as possible in the first place by granting forced retransmission). Such incentives merely encourage arbitrary disruptions in the negotiations, making it more difficult to promptly complete negotiations, and causing uncertainty, expense, and aggravation for everyone.

An alternative to that approach would be to limit the FCC’s authority to impose forced retransmission under such a law to a fixed period (e.g., one month), but all that would do is shift any program disruption by a month. In other words, the industry would just move from three-year retransmission agreements to two-year-and-eleven-months agreements that are followed by a one-month FCC-imposed retrans period. In either case, if a retrans disruption was going to occur because the parties couldn’t agree on price, then the disruption is going to occur no matter how the legislation is written.

The unavoidable truth is that the rare retrans disruption doesn’t occur because the parties didn’t begin negotiating early enough to get a deal done; it occurs because the parties can’t agree on price and won’t change their views on pricing until the pressures of a retrans disruption are upon them. In the end, private contractual negotiations are about agreeing on the value of an item to be conveyed, and if the parties can’t agree on that, a transaction doesn’t happen. All the king’s horses and all the king’s men can’t change that. To think otherwise is merely to be retransigent.

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When CBS and Time Warner announced Monday they had ended their month-long standoff over retransmission of CBS programming on Time Warner cable systems, the announcement brought a sigh of relief from Time Warner subscribers, particularly the NFL fans among them, and the usual press statements putting each party’s best spin on the highly confidential result. However, the real legacy of these negotiations will be to alter how retrans agreements are negotiated in the future, and the somewhat surprising result will be less, not more, retrans blackouts.

When a change in the law in 1992 gave broadcasters the right to negotiate with cable system operators wishing to resell their programming to the public, the idea was to balance the playing field between cable networks, which relied on both ad revenue and a share of cable subscriber fees, and local broadcast stations, which had only ad revenue to support their operations. Prior to that time, broadcasters had effectively subsidized competition from cable because cable system operators could resell broadcast programming without paying for the underlying content, and then use the profits to launch and invest in cable networks that competed with broadcasters for both programming and advertising. These economics are what initiated the migration of sports programming from broadcasting to cable.

In the early retrans negotiations, which I’ll refer to here as Retrans Version 1.0, cable still had local monopolies, leaving broadcasters in the awkward position of attempting to negotiate with a party whose only “competition” was the broadcaster’s free signal. If the broadcaster’s programming disappeared from the local cable system, subscribers couldn’t leave for a new provider. Their only option was to put up an antenna and continue to be a subscriber in order to receive non-broadcast content. Under those circumstances, cable operators didn’t see any reason to pay money for the right to resell broadcast programming–they were the only resellers in town. The result was very few retransmission blackouts, as broadcasters knew that dropping off of the only cable system in town would hurt the broadcaster a lot more than the cable operator.

Unable to obtain money for retrans rights, the compensation broadcasters typically received for permitting retransmission of their signal was the right to program additional channels on the cable system. This cost the cable operator little to nothing while providing it with yet more free content from the broadcaster, making it an easy “give” in retrans negotiations. Ultimately, however, it ended up providing the public with its first great benefit from retransmission negotiations–the launch of a plethora of diverse new program services that not only developed into some of today’s most popular cable networks, but provided an alternative to existing cable networks that were largely owned by the cable systems themselves.

Retrans Version 2.0 commenced after Congress passed the 1999 Satellite Home Viewer Improvement Act, which finally allowed satellite TV to carry local broadcast signals. As a TV service wanting to be competitive to cable, satellite TV operators knew they needed to provide local broadcast signals and fought hard to persuade Congress to change the law to make that a reality. However, lacking the monopoly status enjoyed by most cable systems at the time, satellite TV operators understood they couldn’t replicate the strongarm negotiating tactics that had been employed so successfully by cable operators. Instead, they agreed to pay broadcasters money for the right to retransmit broadcast content, allowing them to attract subscribers away from cable and ultimately end cable’s monopoly. For the first time, broadcasters had competing multichannel providers vying for the right to resell their content to subscribers. As satellite TV’s market share grew, cable operators needed to ensure continued access to the most popular programming on their systems to fend off that competitive threat, and grudgingly began paying for the right to resell broadcast programming as well.

While you might think these competitive developments would have quickly led to a mature market for program retransmission rights with stable pricing, reaching that inevitable destination has been slowed by two factors. The first is simply that the monopoly years of cable so badly distorted market forces that the market for retransmission rights didn’t begin to develop until satellite TV became a competitive force and the retransmission contracts in place in 1999 began to expire, requiring negotiation of new retransmission deals. This occurred much later in markets where satellite-delivered “local into local” service was delayed because of capacity limitations of the satellite systems themselves. Even then, progress was slow for broadcasters, with cable operators being understandably resistant to paying for something they previously saw themselves as receiving for free. One of the best examples of this era is the cable operator who told us during negotiations that he believed paying for the right to retransmit broadcast signals was “unethical” and proceeded to carry my client’s broadcast programming illegally. The negotiation was concluded shortly after the cable operator became the first party ever to be found in violation of the FCC’s rules on good faith retrans negotiations, and the FCC ordered retransmission to cease until an agreement was in place.

Which brings us to the second factor that has delayed countless retrans negotiations and slowed the maturation of the market for broadcast retransmission rights–the possibility of government intervention. Retrans negotiations over the past decade have been conducted with a spectral third party in the room–the threat of governmental intrusion into the negotiations. While the FCC previously concluded that it has no authority to force any particular result in retrans negotiations beyond ensuring that the parties are negotiating in good faith, that has not stopped cable and satellite TV operators from regularly calling upon the FCC to intervene in negotiations. When the FCC resists, the call goes to Congress to “fix” retransmission laws or provide the FCC with authority to step in and alter the dynamics of a retrans negotiation. While such multichannel distributors certainly are hoping to place the government’s heavy thumb on their side of the scale, creating even the possibility of government intervention generates uncertainty which the cable or satellite TV operator hopes will cause the broadcaster to take the deal that’s on the table.

Uncertainty, however, is the enemy of efficient negotiations. When each party knows exactly where it stands, the parties focus on reaching an agreement and getting the deal done as quickly as possible. Where the possibility of government intervention is introduced, the parties cease focusing on each other and start playing to the FCC (or Congress). At best, that means grandstanding and delays in the negotiations while one party hopes to generate enough noise to entice the FCC to step in and get a better result than the party can negotiate on its own. At worst, it means creating high visibility blackouts in an effort to draw the FCC or Congress into launching retrans “reform”. Both approaches are the antithesis of efficient and swift negotiations, with one party quite literally putting off “getting down to business” in hopes that it is buying time for the FCC to join the fray. This approach has unfortunately made some Retrans 2.0 negotiations slow, messy, and unpleasant for all involved, including subscribers.

That is why this week’s CBS and Time Warner deal, regardless of its economic terms, is a watershed event. The negotiations started in typical Retrans 2.0 fashion, resulting in a blackout of CBS programming on Time Warner systems and the traditional public exchange of unpleasantries between the parties as government intervention was sought to protect subscribers from the loss of CBS programming. In fact, some have speculated that Time Warner dug in its heels specifically to create a high profile program disruption that might draw in Congress or the FCC. The FCC played its part in the drama, with a spokesman for the acting Chair of the FCC announcing just five days into the blackout that the agency “stand[s] ready to take appropriate action if the dispute continues.”

However, it is what happened in the nearly four weeks of CBS blackout after that comment was made that carried us from Retrans 2.0 into the world of Retrans 3.0. Specifically: the blackout occurred in the highest profile markets, but the government did not step in; the blackout was geographically widespread, but the government did not step in; the blackout involved high-profile network programming, but the government did not step in; the blackout drug on far longer than imagined, but the government did not step in; the blackout affected a major sporting event and threatened to affect upcoming NFL games, but the government did not step in. In short, it presented one of the most politically-appealing invitations for the government to second guess the path of a free market retrans negotiation, and the government declined to do so. Perhaps just as important, viewers came to realize that the sun still rose in the morning despite the CBS blackout, antenna manufacturers enjoyed a sales boost, and a retrans deal was achieved in less time than it typically takes Congress to name a post office.

Having seen the government’s lack of enthusiasm for getting involved in one of the most extreme examples of a blackout, parties to retrans negotiations will hopefully be able to retire “threatening to involve the government” as a negotiating tactic. While I have no illusions that such threats will now cease, their impact has been considerably diminished over the past month. The CBS/Time Warner dispute presented an unprecedented opportunity for broadcasters and multichannel providers to peer into the deepest recesses of their corporate closets and confirm that there is no government bogeyman residing within, waiting to pounce on unsuspecting negotiators. Freed from the need to look over their shoulder during retrans negotiations, or to play to the governmental crowd, parties can focus on getting retrans deals done quickly and efficiently, without being distracted by the uncertainties and contingency planning surrounding disruptions from outside the negotiating room.

Blackouts are caused by one or both parties to a retrans negotiation misgauging their negotiating power relative to the other party. While that will inevitably still happen from time to time for the same reasons it happens in any business negotiation, the legacy of Retrans 3.0 is that it should no longer happen because one party thinks that if it delays enough, or causes enough of a public stir over a retrans dispute, the FCC will come to its rescue. The result will be better for all, including subscribers.

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Full payment of annual regulatory fees for Fiscal Year 2013 (FY 2013) must be received no later than 11:59 PM Eastern Time on September 20, 2013. As of today, the Commission’s automated filing and payment system, the Fee Filer System, is available for filing and payment of FY 2013 regulatory fees. For more information on the FY 2013 annual regulatory fees, please see our Client Alert and our prior posts here and here.

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The FCC has released a Report and Order which includes its final determinations as to how much each FCC licensee will have to pay in Annual Regulatory Fees for fiscal year 2013 (FY 2013), and in some cases how the FCC will calculate Annual Regulatory Fees beginning in FY 2014. The FCC collects Annual Regulatory Fees to offset the cost of its non-application processing functions, such as conducting rulemaking proceedings.

The FCC adopted many of its proposals without material changes. Some of the more notably proposals include:

  • Eliminating the fee disparity between UHF and VHF television stations beginning in FY 2014, which is not a particularly surprising development given the FCC’s recently renewed interest in eliminating the UHF discount for purposes of calculating compliance with the FCC’s ownership limits;
  • Imposing on Internet Protocol TV (IPTV) providers the same regulatory fees as cable providers beginning in FY 2014. In adopting this proposal, the Commission specifically noted that it was not stating that IPTV providers are cable television providers, which is an issue pending before the Commission in another proceeding;
  • Using more current (FY 2012) Full Time Employees (FTE) data instead of FY 1998 FTE data to assess the costs of providing regulatory services, which resulted in some significant shifts in the allocation of regulatory fees among the FCC’s Bureaus. In particular, the portion of regulatory fees allocated to the Wireline Competition Bureau decreased 6.89% and that of all other Bureaus increased, with the Media Bureau’s portion of the regulatory fees increasing 3.49%; and
  • Imposing a maximum annual regulatory rate increase of 7.5% for each type of license, which is essentially the rate increase for all commercial UHF and VHF television stations and all radio stations. A chart reflecting the FY 2013 fees for the various types of licenses affecting broadcast stations is provided here.

The Commission deferred decisions on the following proposals in the Notice of Proposed Rulemaking that launched this proceeding: 1) combining the Interstate Telecommunications Service Providers (ITSPs) and wireless telecommunications services into one regulatory fee category; 2) using revenues to calculate regulatory fees; and 3) whether to consider Direct Broadcast Satellite (DBS) providers as a new multi-channel video programming distributor (MVPD) category.

The Annual Regulatory Fees will be due in “middle of September” according to the FCC. The FCC will soon release a Public Notice announcing the precise payment window for submitting the fees. As has been the case for the past few years, the FCC no longer mails a hard copy of regulatory fee assessments to broadcast stations. Instead, stations must make an online filing using the FCC’s Fee Filer system, reporting the types and fee amounts they are obligated to pay. After submitting that information, stations may pay their fees electronically or by separately submitting payment to the FCC’s Lockbox. However, beginning October 1, 2013, i.e. FY 2014, the FCC will no longer accept paper and check filings for payment of Annual Regulatory Fees.

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A few moments ago, on its own motion, the FCC released an Order extending the 2013 deadline for commercial radio and television stations (including Class A and LPTV stations) to file their biennial ownership reports with the FCC. The reports, which are normally due on November 1 of odd-numbered years, must include ownership information that is accurate as of October 1 of that year.

Because of today’s Order, however, the 2013 commercial ownership reports will be due on December 2, 2013 (December 1 is a Sunday). Despite the delayed filing date, the FCC indicates that the reports should still contain information that was accurate as of October 1, 2013.

Today’s move by the FCC is hardly unprecedented. When the FCC first implemented a uniform biennial ownership report filing deadline for commercial stations in 2009, it ended up extending the deadline a number of times because of issues related to the new reporting form, etc. Ultimately, the deadline for 2009 reports fell on July 8, 2010, creating a fair amount of confusion for station owners who had bought their stations between November 2009 and July 2010, and therefore found themselves filing ownership reports certifying as to the ownership structure of the prior station owner.

In 2011, the FCC delayed the ownership report filing deadline by just thirty days. The short delay, along with growing familiarity with the revised reporting form, resulted in a much smoother reporting process in 2011.

Now, explaining the need for an extension in 2013, the FCC states that “we are aware that some licensees and parent entities of multiple stations may be required to file numerous forms and the extra time is intended to permit adequate time to prepare such filings. We believe it is in the public interest to provide additional time to ensure that all filers provide the Commission with accurate and reliable data on which the Commission may rely for research and other purposes.” Despite the extension, the FCC is still encouraging licensees to file their ownership reports as early as possible.

While it is starting to look like these biennial extensions are becoming the norm given the complexity of reporting various ownership structures on the current form, it is risky for stations to start assuming that the deadline will always be extended. It would therefore be helpful if the FCC would permanently change the deadline so that licensees know they will always have sixty days to create and file the various biennial ownership reports required. Alternatively, the reporting form and process could be simplified so that completing the filing within 30 days would not be so difficult. Given the challenge that would present to the FCC, however, we may be seeing more of these ownership reporting extensions in the future.