Articles Posted in Television

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Yesterday, a day in advance of the November 24th statutory deadline to adopt rules implementing the Satellite Television Extension and Localism Act, the FCC released a flurry of STELA-related orders. STELA governs the satellite carriage of broadcast stations, and in particular, the importation of distant network stations, in local markets. Because STELA and its predecessor statutes lie at the nexus of communications and copyright law, they represent very complex and arcane matters that often leave even communications lawyers scratching their heads if they aren’t experienced in the area.

For those interested in the details of yesterday’s three Orders and the FCC’s request for additional comments, I recommend taking a look at our Client Advisory on the subject from earlier today. For the rest of the population, suffice it to say that the major impact of these orders for broadcasters is how they affect the ability of satellite operators to import a “significantly viewed” (“SV”) duplicating network signal into portions of a local market, thereby undercutting the local network affiliate’s ratings, ad revenue, and retransmission negotiations.

As detailed in the Client Advisory, of the FCC’s three Orders, one favors satellite operators by making it easier to import distant network stations into a market, while the other two favor broadcasters by limiting the proportion of satellite subscribers in a market that are eligible to sign up to receive a distant network station.

Of particular note is the FCC’s conclusion in one of the Orders that “because SV status generally applies to only some areas in a DMA and not throughout an entire DMA, we find it unlikely that an SV station could permanently substitute for a local in-market station, even in the provision of network programming to the market.” The FCC further stated that “because most viewers want to watch their local stations, we do not think that carriage of only SV stations would satisfy most subscribers for an extended time.”

That is a comforting conclusion for broadcasters, and probably an accurate one. However, it may be cold comfort for the local broadcaster in heated retransmission negotiations where the satellite operator threatens to import a duplicative network station into the market. Because of that, and despite the complexity of the law in this area, television station owners and satellite operators need to acquire a keen understanding of each other’s rights under STELA and the FCC’s related rules, or proceed at their own peril.

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Yesterday, the Federal Communications Commission issued three Orders and a Public Notice designed to implement the new requirements of the Satellite Television Extension and Localism Act (STELA).

The FCC beat by one day the November 24, 2010 statutory deadline for adopting new rules governing several aspects of satellite operators’ carriage of television broadcast signals under STELA. The first of three Orders favors satellite providers by making it easier for them to import the signals of significantly viewed (“SV”) stations from neighboring markets into a station’s local television market. However, the other two Orders favor broadcasters in updating the procedures for subscribers wishing to qualify to receive distant network television stations from their satellite operator. Lastly, the FCC issued a Public Notice seeking comments and data for a required report to Congress regarding the availability of in-state broadcast stations to cable and satellite subscribers located in markets straddling state borders.

Significantly Viewed Stations Order
In this Order, the FCC concluded that, under STELA, a satellite subscriber must generally subscribe to the local-into-local package before it can receive the signal of an out of market station significantly viewed (over-the-air) in that subscriber’s area. Illogically, however, the subscriber does not have to receive the signal of the local affiliate of the same network as the imported SV network station. The subscriber’s receipt by satellite of any local station is all that is needed. The FCC stated that its interpretation means that, where a local affiliate is not carried during negotiation of a retransmission consent agreement, the satellite carrier can provide certain subscribers with network programming from an SV network station in a neighboring market.

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As Scott Flick reported in a previous post, our firm filed a Petition on behalf of an unlikely coalition of broadcast and cable associations and their allies, including 46 of the state broadcasters associations, the National Association of Broadcasters, the National Cable and Telecommunications Association, the Society of Broadcast Engineers, the American Cable Association, the Association for Maximum Service Television, National Public Radio, the Association of Public Television Stations, and the Public Broadcasting Service. The parties joined forces to ask the FCC to extend the deadline for all EAS Participants to acquire and install the equipment necessary to use the Common Alerting Protocol (CAP) standard for Emergency Alert System alerts. The unified effort paid off, as today the FCC released an Order waiving Part 11.56 of its Rules and extending the CAP deadline from March 29, 2011 to September 30, 2011.

Last September 30, FEMA announced the adoption of the CAP v1.2 standard, which triggered a 180-day deadline for implementation. In a post found here, I described CAP and what the CAP compliance deadline requires of EAS Participants.

The extension means that the estimated 25,000 to 30,000 EAS Participants now have more time to acquire the new and sophisticated equipment they need to become CAP-compliant, while giving FEMA more time to certify CAP-compliant EAS equipment. The six-month delay will also allow equipment manufacturers to test their CAP products and to make any changes needed to meet the certification requirements. This process, in turn, will give EAS Participants the certainty they need to make better informed decisions regarding what equipment they should obtain and install to ensure compliance with CAP. Finally, the extension will give all parties, including noncommercial broadcasters, smaller cable systems, and rural broadcasters more time to budget for the purchase of new equipment.

The FCC acknowledged that if it failed to extend the 180-day deadline, it could “lead to an unduly rushed, expensive, and likely incomplete process.”

The Order also leaves open the possibility of extending the CAP deadline beyond September 30, 2011. This is because the FCC will soon be conducting a rulemaking proceeding to incorporate CAP into its Part 11 Rules, and at this point it is unclear what specific Part 11 rule changes will be made as a result of the new CAP standard. According to the FCC, it plans to complete that rulemaking prior to September 30, 2011, but will ask for comments on “whether the extension for CAP acceptance by EAS Participants granted in this waiver order is sufficient, and reserves the right to further extend the date for CAP reception in any new rule we may adopt.” Given that the outcome of the rulemaking proceeding will likely result in a number of significant revisions to the FCC’s EAS Rules, another extension of the deadline is certainly plausible in order to give parties enough time to come into compliance with the new rules.

In other words, stay on alert, as we will definitely be hearing much more about CAP in the near future.

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Along with all of the other activities of the coming holidays, December 1 represents a busy filing deadline for digital television stations and many commercial and non-commercial radio stations, depending upon their location. For those affected, below is a brief summary of the applicable deadlines, as well as links to our recent client alerts and advisories describing the requirements in more detail.

December 1 Noncommercial Ownership Reports

Noncommercial educational radio stations licensed to communities in Colorado, Minnesota, Montana, North Dakota and South Dakota, and noncommercial educational television stations licensed to communities in Alabama, Connecticut, Georgia, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont must file their Biennial Ownership Reports by December 1, 2010. For a detailed discussion of the filing requirements, please see our Client Alert here.

December 1 EEO Deadlines

Radio and television stations licensed to communities in: Alabama, Colorado, Connecticut, Georgia, Maine, Massachusetts, Minnesota, Montana, New Hampshire, North Dakota, Rhode Island, South Dakota and Vermont have a number of December 1, 2010 deadlines for compliance with the FCC’s EEO Rule. For a detailed discussion of the requirements, please see our Client Advisory here.

December 1 DTV Ancillary/Supplementary Services Report

All commercial and noncommercial educational digital television broadcast station licensees and permittees must file FCC Form 317 by December 1, 2010. For a detailed discussion of this requirement, please see our Client Advisory here.

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All commercial and noncommercial educational digital television broadcast station licensees and permittees must file FCC Form 317 by December 1, 2010.

The FCC requires all digital television stations to submit FCC Form 317 each year. The report details whether stations provided ancillary or supplemental services at any time during the twelve-month period ending on the preceding September 30. It is important to note that the FCC Form 317 must be submitted regardless of whether stations offered any such services. FCC Form 317 must be filed electronically, absent a waiver, and is due on December 1, 2010.

Ancillary or supplementary services are all services provided on the portion of a DTV station’s digital spectrum that is not necessary to provide the required single free, over-the-air signal to viewers. Any video broadcast service that is provided with no direct charge to viewers is exempt. According to the FCC, examples of services that are considered ancillary or supplementary include, but are not limited to, “computer software distribution, data transmissions, teletext, interactive materials, aural messages, paging services, audio signals, subscription video, and the like.”

If a DTV station provided ancillary or supplementary services during the 12-month time period ending on September 30, 2010, it must remit to the FCC 5% of the gross revenues derived from the provision of those services. This payment can be forwarded to the FCC’s lockbox at the U.S. Bank in St. Louis, Missouri and must be accompanied by FCC Form 159, the Remittance Advice. Alternatively, the fee can be paid electronically using a credit card on the FCC’s website. The fee amount must also be submitted by the December 1, 2010 due date.

For assistance in preparing and filing FCC Form 317, please contact any of the attorneys in the Communications Practice Section.

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In what has become one of our most popular posts at CommLawCenter, a few months ago I discussed a radio ad that contained an “attention getting” Emergency Alert System tone that was activating broadcast stations’ EAS equipment around the country. The post noted that airing the commercials violated Section 11.45 of the FCC’s Rules (“No person may transmit or cause to transmit the EAS codes or Attention Signal, or a recording or simulation thereof, in any circumstance other than in an actual National, State or Local Area emergency or authorized test of the EAS.”).

The earlier post also noted that these ads potentially violated Section 73.1217 of the FCC’s Rules, which is the FCC’s prohibition on airing broadcast hoaxes. These rules are the result of the FCC’s longstanding concern with the airing of material that could cause public panic, dating all the way back to the Orson Welles Halloween broadcast of War of the Worlds in 1938, just four years after the FCC was created by Congress.

Television stations have now joined their radio brethren in unintentionally airing Emergency Alert System tones. The Society of Broadcast Engineers disclosed yesterday that a television ad for the new movie Skyline, which hits theaters tomorrow, began airing earlier this week with an EAS tone repeated six times throughout the length of the spot. A copy of the spot can be found on the SBE website here, with the EAS tones being very audible in the background.

Stations airing such spots put themselves at risk of adverse action by the FCC, particularly for any airings that occur after the station has learned of the issue. However, stations that aired the spot before SBE’s announcement yesterday are not off the hook, as the FCC holds broadcasters liable for the content they air, and normally takes the position that stations should have checked the spots before they aired for problematic content.

While an EAS tone sounds like digital hash to the human ear, it contains a lot of information that is used to trigger the EAS receivers of stations in a “daisy chain” fashion to quickly spread emergency information. In that regard, each signal is like human DNA, containing information that allows you to determine its origin. In this case, the EAS signal being used is a recording of a Pennsylvania statewide monthly test that fails to include the normal “End of Message” tone. As a result, stations whose EAS equipment is activated by another station airing the false tone could suddenly find themselves retransmitting the content of the other station for a couple of minutes after the tone airs.

Unfortunately, because it is generally the broadcast station and not the creator of the ad that will be held liable, advertisers are not always adequately incentivized to make sure their ads comply with FCC regulations. That means it is up to broadcasters to check each and every ad they run for violations of the law, including violations of the FCC’s sponsorship identification rule, the FCC’s rules involving ads in children’s programming, and ads with questionable content, whether it be indecency, defamation, false product claims, or, in this case, false EAS alerts.

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In a Public Notice released yesterday, the Consumer & Governmental Affairs Bureau of the FCC established new comment dates to refresh the record on several closed captioning issues first raised in proceedings initiated in 2005 and 2008. Comments are due November 24, 2010, with reply comments due December 9, 2010.

2005 Closed Captioning Notice of Proposed Rulemaking (“2005 NPRM”)

First, the FCC is seeking to refresh the record on several items that were raised in its 2005 NPRM that remain outstanding. Specifically, it is asking for additional comments on whether the FCC should establish “quality” standards for non-technical portions of the captioning rules. Such standards would be aimed at ensuring the accuracy of the captions themselves. In this regard, the FCC would like comments on what the adoption of such standards would cost to programmers and distributors, whether there are enough competent captioners to meet the demand, and whether different captioning quality standards should apply to live and pre-recorded programming.

Second, the FCC seeks to refresh the record regarding the need for new rules that go beyond the current “pass through” rule. The “pass through” rule requires video programming distributors to deliver all programming containing closed captioning with the original closed captioning data intact in a format that can be displayed by decoders meeting the standards of Part 15 of the FCC’s Rules. According to the Public Notice, the FCC is looking for ways to prevent technical problems in the delivery of captions and to remedy technical problems quickly when they do occur.

With respect to violations of the captioning requirements, the FCC seeks comments on whether to establish specific “per violation” forfeiture amounts, and if so, what those amounts should be. The FCC is also seeking comments on whether video programming distributors should be required to file periodic captioning compliance reports.

The 2005 NPRM also discussed the continued use of electronic newsroom technique (ENT), in which the closed captioning text is fed directly from a station’s teleprompter. Because this captioning technique does not provide captions for unscripted segments, the current rule limits its use to stations that are not affiliated with ABC, CBS, NBC, or Fox, or which are located outside the top 25 markets. Nonbroadcast networks serving at least 50% of cable/satellite households are also prohibited from relying on ENT. The FCC is asking whether the use of ENT for captioning should be further restricted by, for example, expanding the prohibition to stations outside the top 25 markets.

The FCC is also seeking comments on whether it should mandate that petitions for exemption from the closed captioning requirements be filed electronically.

2008 Closed Captioning Notice of Proposed Rulemaking (“2008 NPRM”)

With respect to the 2008 NPRM, the FCC is asking for comments to refresh the record on how the captioning exemption for “channels” producing revenues of less than $3 million should apply to digital multicasting. In 2008, the FCC asked whether each programming stream in a multicast signal should constitute a separate “channel,” or whether the broadcaster’s primary and multicast streams should be considered a single channel for purposes of determining whether they exceed the $3 million exemption limit. The FCC wishes to update the record, and is asking for comments on the ramifications of ruling that each multicast stream is a separate channel.

As noted above, comments on these proposals are due November 24, 2010, and reply comments are due December 9, 2010. Please contact any of the lawyers in the Communications Practice Section for assistance in the preparation and filing of comments or reply comments.

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By Richard R. Zaragoza

Talk about being in a tough spot. Members of Congress are urging the FCC to broker an agreement between Cablevision and Fox in their ongoing retransmission consent dispute. Cablevision’s subscribers in the impacted areas are worried that the contractual dispute will not end any time soon and the FCC is obviously concerned with the consumer disruption. But what can the FCC actually do? The answer is, not much, and it appears to be doing all it can at the moment.

As a matter of longstanding policy, the FCC has generally refused to get involved in private contractual disputes between companies it regulates. And as we discussed in a previous post, with respect to retransmission consent, the FCC does not have the authority under the Communications Act to force Cablevision and Fox to come to an agreement or to require interim carriage while the parties continue to negotiate.

In other words, the FCC’s hands are largely tied. FCC Chairman Genachowski as recently as last night issued a press release again urging the parties to reach a deal, but absent evidence of a lack of good faith negotiating tactics by the parties, there is little more that he or the FCC can do.

In order to help Cablevision’s subscribers figure out what to do, the FCC has issued a Consumer Advisory that explains what’s going on with the dispute and provides suggestions that may be at a Cablevision subscribers’ disposal. The Advisory is called “What Cablevision Subscribers Should Know About Receiving Fox-Owned Stations WNYW (NY), WWOR (NJ) & WTRF (PA)”, and the document provides an excellent informational resource for any pay-TV subscriber who might be affected by the expiration of a retransmission consent agreement. In my view, the Alert also strongly suggests that subscribers in such circumstances generally have a number of viable alternatives so that they can continue to view their favorite television stations.

The Alert makes it clear that Cablevision may carry the Fox station signals and their programming only if Cablevision and Fox reach a mutually acceptable agreement. Importantly, the Alert also makes clear that subscribers to Cablevision have a number of alternatives to allow them to continue to view the Fox stations and their programs by using other pay-TV providers such as AT&T, DIRECTV, DISH Network, RCN and Verizon FIOS, or viewing the stations over-the-air using a digital television set or an analog TV set connected to a digital-to-analog converter box (using an appropriate antenna in either case). In short, because a number of viewing options are available to the public, no one is prevented from continuing to watch the stations just because Cablevision and Fox have been unable to reach a mutual agreement on the terms of an extension or renewal of their carriage agreement.

The FCC’s Alert was issued in the midst of calls from Members of Congress, U.S. Senators and others that Cablevision and Fox be ordered to submit to binding arbitration. By the FCC’s action in publishing the Alert, the Commission signals that it does not have the authority either to command agreement between these private parties or to force them into arbitration. The Alert also supports the view that such action is not needed to protect the public because competition from other pay-TV providers, as well as free over-the-air access via indoor or outdoor antennae, assure the public of the continued availability of affected stations and their programming.

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In the heat of the battle raging over carriage of various Fox networks on Cablevision’s systems, Randy May, the founder and chief intellect of the Free State Foundation, has weighed in on the retransmission consent debate (available here). I read his comments with interest, because Randy often provides insightful observations on important telecommunications policy issues, and I care about retransmission consent.

I was disappointed. The paper only rehashes the cable television party line.

Surprisingly, Randy suggests that broadcasters’ exercise of retransmission consent rights should be scrutinized and possibly regulated even more. One would have to dig pretty deep to find the last time Randy advocated solving a problem by throwing more government at it.

The party line Randy endorses goes something like this: broadcasters get special privileges from the government with respect to signal carriage, which give them a retrans “negotiating advantage.” Retransmission consent negotiations don’t happen in a free market goes the argument. The solution? Broadcasters’ retransmission rights should be even more regulated than they are already.
Randy cites two “advantages” broadcasters supposedly enjoy in retrans negotiations: (1) must-carry and (2) program exclusivity. The cable industry party line is a little tortured, coming, as it does, from interests subject to a small fraction of the regulatory umbrella that shadows broadcasters. These are the same companies, after all, that argue government should stand back and let broadband carriers treat Internet traffic as they will.

The party line is also completely wrong about the carriage rules.
First, the existence of must-carry sometimes harms, but never helps, broadcasters that elect retransmission consent. Broadcasters must claim their retrans rights once every three years through a technical and exacting election process. If they make a mistake, they risk having to give away their signals for free. Cable companies routinely use this against broadcasters in retrans negotiations.

By definition, any broadcaster engaged in retransmission consent negotiations has forfeited its must-carry rights. It’s either-or. Each broadcaster makes its election once every three years — same election for all overlapping cable operators, no cherry-picking. If you elect retrans, you have no guarantee of being carried at all and no option to revert to must-carry if negotiations break down.

Must-carry benefits some broadcasters, no doubt. But it doesn’t confer any advantage on a broadcaster that elects retransmission consent. The cable/DBS/telco party line suggests that must-carry gives broadcasters a retrans advantage, but it never identifies what that supposed advantage is. Randy doesn’t explain the advantage either. There is none.
Second, the program exclusivity rules impose huge burdens on broadcasters. Start with the unregulated baseline: producers and distributors are free under the law to agree to exclusive distribution territories. The broadcast networks and affiliates, if they wanted to, could agree that each affiliate has unfettered nonduplication protection throughout its DMA. That would be a free market.

But this is anything but a free market: even if broadcasters purchase exclusivity rights, they may not enforce those rights except within limited, FCC-defined areas. If you doubt me, just read the notes to the network nonduplication and the syndicated exclusivity rules. And this is a bargaining advantage? A reason to pile more rules on broadcasters?
Having read hundreds of Randy’s usually insightful postings over the years, I’m disappointed to see him republish boilerplate cable industry advocacy. His comments run counter to the Free State Foundation’s guiding principles and lack Randy’s trademark sharpness and passion. More to the point, they bizarrely suggest that the government somehow does broadcasters a favor by limiting their free market rights.

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In October of 1996 my boss, the chairman of a $3 billion television production and distribution empire (and one of the smartest television dealmakers I ever met) scoffed when I said that television could be delivered over the Internet. I told him to wait ten years. Well, in 2006 we had YouTube, but I doubt Bill Bevins would count that as television.

In the first ten days of October 2010:

  • I spoke on the “Hot Topics” panel at the annual TPRC conference, where leading academics and policy makers discuss legal, economic, social, and technical issues on national and international information and communications policy. The hot topic this year: over-the-top (OTT) television.
  • A friend called asking for advice – he’d been offered a senior executive post with a very large broadcasting company paying a great salary, and a senior position with a scrappy OTT startup, paying lots of stock and the chance to hit big. In 2010, he sees this as a tough call.
  • I watched Forrest Gump in “high definition” on a 50″ plasma monitor, streamed by Netflix to my son’s Xbox. The quality was stunning.
  • I installed my new AppleTV and watched a high definition podcast, also streamed, and several “high definition” videos on YouTube and Netflix. In several cases, the quality was very good. And the Apple TV interface is much more elegant and easier to use than our FiOS set top box.

I should have told Bill 14 years.

OTT is here. There’s a lot of long tail and niche content online. It’s getting easier to find and use, and if you have a fast broadband connection, the quality can be outstanding. So just what is cord cutting and how do you define OTT? And what do they mean for traditional video providers?

Cord cutting at its extreme means a household drops MVPD service and relies on other sources of television – primarily free OTA television supplemented by long-tail OTT internet services like Netflix and Hulu. OTT means traditional television content delivered through non-traditional (generally Internet) television distribution channels. It doesn’t refer to non-traditional video content (YouTube and other user generated content) regardless of distribution channel. We make this distinction because, rightly or wrongly, we consider YouTube and Vimeo to be something entirely different (and less threatening to incumbent providers) than the delivery of high resolution, full-format, traditional programming over the Internet.

Many fear OTT will lead to tens of millions of households to cut the cord. This is naturally a concern for cable and satellite providers, but many broadcasters worry too, because MVPDs won’t pay broadcasters for cord cutting households. Personally, I think we are likely to see a fair amount of cord cutting in the next few years, and an even larger amount of what I call cord trimming – dropping premium services or higher tier services. In new households, broadband is essential, while pay television service is often optional. And the combination of gorgeous, over-the-air, live high definition broadcast service and increasingly compelling long tail OTT options is likely to be a better option for many households than traditional MVPD service.

But there’s a silver lining for cable systems and broadcasters, and even for DBS providers.

  • Cable systems may lose video subs, but demand for OTT television will drive broadband adoption into more of the 40 million households that haven’t adopted it so far, and it will lead others to upgrade their connections, at higher prices. Since broadband service is generally more profitable than video services, cable profit margins could actually rise even if gross revenue shrinks.
  • Broadcasters could lose retransmission consent fees from cord cutting households, but cord shrinking will affect broadcast competitors – cable networks – before broadcasters, because it’s the expensive higher tiers and premium services that cord-shrinking customers drop. The broadcast and sports channels are the last to go before cord is cut altogether.
  • If total MVPD penetration falls from the high eighties to the mid sixties in the next seven to ten years, as I suspect it will, tens of millions in advertising will migrate back from cable and satellite to broadcast, because reach is still important. Twelve or so years ago, with MVPD penetration in the mid 60s, broadcasters were far more profitable, even without retransmission revenue.
  • Much higher broadband penetration could breathe new life into the DBS business model, which is an incredibly cost efficient way to distribute high quality linear television. With more broadband homes to sell into, DBS providers can create a hybrid satellite-OTT service that meets and in many ways exceeds what the cable operators can do with their own video services.

OTT service will have many effects beyond cord shrinking and cord cutting. But incumbent providers should embrace OTT, because the opportunities it enables – the best of which we can’t imagine yet – far outweigh the risks that it poses to all incumbent business models. It creates opportunities for greater efficiencies and more varied service offerings for all incumbents, if they have the vision to see the opportunities and the perseverance to follow through. Best of all, OTT can make television more satisfying for consumers, more measurable, and easier to use – leading, inevitably, to more usage. In the television business, we all like more usage, as long as we get our share. Getting that share is the challenge and the opportunity.