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With the heat of Summer now upon us, the FCC is gearing up for its annual regulatory fee filing window, which usually occurs in mid-September. Like other federal agencies, the FCC must raise funds to pay for its operations (“to recover the costs of… enforcement activities, policy and rulemaking activities, user information services, and international activities.”). For Fiscal Year 2014, Congress has, for the third year in a row, mandated that the FCC collect $339,844,000.00 from its regulatees.

Accordingly, the FCC is now tasked with determining how to meet the Congressional mandate. At its most basic level, the FCC employs a formula that breaks down the cost of its employees by “core” bureaus, taking into consideration which employees are considered “direct” (working for one of the four core bureaus), or “indirect” (working for other divisions, including but not limited to, the Enforcement Bureau and the Chairman’s and Commissioners’ offices). The FCC factors in the number of regulatees serviced by each division, and then determines how much each regulatee is obligated to pay so that the FCC can collect the $339M total.

In its quest to meet the annual congressional mandate, the FCC evaluates and, for various reasons, tweaks the definitions or qualifications of its regulatee categories to, most often, increase certain regulatory fee obligations. FY 2014 is just such an occasion. In FY 2013, the FCC, which historically has imposed drastically different fees for VHF and UHF television licensees, decided that, effective this year, FY 2014, VHF and UHF stations would be required to pay the same regulatory fees. In addition, a new class of contributing regulatees, providers of Internet Protocol TV (“IPTV”), was established and is now subject to the same regulatory fees levied upon cable television providers. Prior to FY 2014, IPTV providers were not subject to regulatory fees.

The FCC’s proposals for FY 2014 regulatory fees can be found in its Order and Second NPRM (“Order”). In that Order, the FCC proposes the following FY 2014 commercial VHF/UHF digital TV regulatory fees:

  • Markets 1-10 – $44,875
  • Markets 11-25 – $42,300
  • Markets 26-50 – $27,100
  • Markets 51-100 – $15,675
  • Remaining Markets – $4,775
  • Construction Permits – $4,775

Other proposed TV regulatory fees include:

  • Satellite Television Stations (All Markets) – $1,550
  • Construction Permits for Satellite Television Stations – $1,325
  • Low Power TV, Class A TV, TV Translators & Boosters – $410
  • Broadcast Auxiliaries – $10
  • Earth Stations – $245

The proposed radio fees depend on both the class of station and size of population served. For AM Class A stations:

  • With a population less than or equal to 25,000 – $775
  • With a population from 25,001-75,000 – $1,550
  • With a population from 75,001-150,000 – $2,325
  • With a population from 150,001-500,000 – $3,475
  • With a population from 500,001-1,200,000 – $5,025
  • With a population from 1,200,001-3,000,000 – $7,750
  • With a population greater than 3,000,000 – $9,300

For AM Class B stations:

  • With a population less than or equal to 25,000 – $645
  • With a population from 25,001-75,000 – $1,300
  • With a population from 75,001-150,000 – $1,625
  • With a population from 150,001-500,000 – $2,750
  • With a population from 500,001-1,200,000 – $4,225
  • With a population from 1,200,001-3,000,000 – $6,500
  • With a population greater than 3,000,000 – $7,800

For AM Class C stations:

  • With a population less than or equal to 25,000 – $590
  • With a population from 25,001-75,000 – $900
  • With a population from 75,001-150,000 – $1,200
  • With a population from 150,001-500,000 – $1,800
  • With a population from 500,001-1,200,000 – $3,000
  • With a population from 1,200,001-3,000,000 – $4,500
  • With a population greater than 3,000,000 – $5,700

For AM Class D stations:

  • With a population less than or equal to 25,000 – $670
  • With a population from 25,001-75,000 – $1,000
  • With a population from 75,001-150,000 – $1,675
  • With a population from 150,001-500,000 – $2,025
  • With a population from 500,001-1,200,000 – $3,375
  • With a population from 1,200,001-3,000,000 – $5,400
  • With a population greater than 3,000,000 – $6,750

For FM Classes A, B1 &C3 stations:

  • With a population less than or equal to 25,000 – $750
  • With a population from 25,001-75,000 – $1,500
  • With a population from 75,001-150,000 – $2,050
  • With a population from 150,001-500,000 – $3,175
  • With a population from 500,001-1,200,000 – $5,050
  • With a population from 1,200,001-3,000,000 – $8,250
  • With a population greater than 3,000,000 – $10,500

For FM Classes B, C, C0, C1 & C2 stations:

  • With a population less than or equal to 25,000 – $925
  • With a population from 25,001-75,000 – $1,625
  • With a population from 75,001-150,000 – $3,000
  • With a population from 150,001-500,000 – $3,925
  • With a population from 500,001-1,200,000 – $5,775
  • With a population from 1,200,001-3,000,000 – $9,250
  • With a population greater than 3,000,000 – $12,025

In addition to seeking comment on the proposed fee amounts, the Order seeks comment on proposed changes to the FCC’s basic fee formula (i.e., changes in how it determines the allocation of direct and indirect employees and thus establishes its categorical fees), and on the creation of new, and the combination of existing, fee categories. The Order also seeks comment on previously proposed core bureau allocations, the FCC’s intention to levy regulatory fees on AM Expanded Band Radio Station licensees (which have historically been exempt from regulatory fees), and whether the FCC should implement a cap on 2014 fee increases for each category of regulatee at, for example, 7.5% or 10% above last year’s fees. Comments are due by July 7, 2014 and Reply Comments are due by July 14, 2014.

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

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

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Surprise, surprise, the FCC has instituted yet another application filing freeze! The FCC effectively said “enough is enough” and stopped accepting applications for LPTV channel displacements and new digital replacement translators.

Yesterday, the FCC released a Public Notice indicating that, effective June 11, 2014, the Media Bureau would cease to accept applications seeking new digital replacement translator stations and LPTV, TV translator, and Class A TV channel displacements. The FCC did provide that in certain “rare cases”, a waiver of the freeze may be sought on a case-by-case basis, and that the Media Bureau will continue to process minor change, digital flash cut, and digital companion channel applications filed by existing LPTV and TV translator stations.

According to industry sources, there have been grumblings at the FCC that low power television broadcasters have been using the digital replacement translator and LPTV displacement processes to better position themselves from the fallout of the upcoming spectrum auction and subsequent channel repacking. That appears to be confirmed by the Public Notice, as it states that the freeze is necessary to “to protect the opportunity for stations displaced by the repacking of the television bands to obtain a new channel from the limited number of channels likely to be available for application after repacking….” Setting aside the freeze itself for a moment, it seems clear from this statement that the FCC has no illusions that there will be room in the repacked spectrum for all existing low power television stations.

While there have been myriad FCC application freezes over the years, they have been occurring with increasing frequency. From the radio perspective, absent a waiver, extraordinary circumstances, or an FCC-announced “filing window”, all opportunities to seek a new radio license (full-power, low power FM or translator) have been quashed for some time now.

The first notable television freeze occurred in 1948 and lasted four years. The FCC instituted a freeze on all new analog television stations applications in 1996. In furtherance of the transition to digital television, the FCC instituted a freeze on changes to television channel allotments which lasted from 2004 to 2008. In 2010, the FCC froze LPTV and TV translator applications for major changes and new stations; a freeze which remains in effect today.

Yet another freeze on TV channel changes was imposed in 2011 in order to, among other things, “consider methodologies for repacking television channels to increase the efficiency of channel use.” And as Scott Flick wrote here last year, still another television application freeze on full power and Class A modifications was launched on April 5, 2013. That freeze remains in effect and effectively cuts off all opportunities for existing full-power or Class A television stations to expand their signal contours to increase service to the public. The volume of application freezes has grown to such an extent that it is difficult to keep track of them all.

In terms of reasoning, yesterday’s Public Notice indicated that since the DTV transition occurred five years ago, the impact of the instant freeze would be “minimal” since transmission and contour issues should have been addressed as part of, or generally following, that transition. The Notice proceeded to say that LPTV displacement and digital replacement applications were necessary after the DTV transition, and up to the FCC’s April 2013 filing freeze, for purposes of resolving “technical problems” associated with the build-out of full-power DTV stations, but that since there have been no “changes” to those service areas because of the last freeze, there should be no need for LPTV channel displacements or digital replacement translators.

Left out in the cold by these cascading freezes are broadcast equipment manufacturers and tower crews. As previously noted by numerous broadcasters and the NAB, the FCC’s frosty view of just about every form of station modification is effectively driving out of business the very vendors and equipment installers that are critical to implementing the FCC’s planned channel repacking after the spectrum auction. As we learned during the DTV transition, the size and number of vendors and qualified installers of transmission and tower equipment is very limited and, given the skills required, can’t be increased quickly. Driving these businesses to shrink for lack of modification projects in their now-frozen pipelines threatens to also leave the channel repacking out in the cold.

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May 2014

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

  • FCC Proposes $11,000 Fine for Marketing of Unauthorized Device
  • $2,944,000 Fine for Robocalls Made Without Recipients’ Consent
  • Sponsorship Identification Complaint Leads to $185,000 Consent Decree
  • Premature Consummation of Transaction Results in $22,000 Consent Decree

Modifying Design of Parking Meter Requires New FCC Certification and Warning to Users

Earlier this month, the Spectrum Enforcement Division of the FCC’s Enforcement Bureau issued a Notice of Apparent Liability for Forfeiture (“NAL”) against a company that designs, develops, and manufactures parking control products (the “Company”). The NAL indicated the Company had marketed one of its products without first obtaining an FCC certification and for failing to comply with consumer disclosure rules. The FCC’s Enforcement Bureau proposed an $11,000 fine against the Company.

In August of 2013, the FCC received a complaint that a particular product made by the Company did not have the required FCC certification and that the product did not comply with consumer disclosure requirements. After receiving the complaint, the FCC’s Spectrum Enforcement Division issued a Letter of Inquiry (“LOI”) to the Company. The Company responded in the middle of March, at which time it described the product in question as a “parking meter that accepts electronic payments made with credit cards, smart cards, or Near Field Communications-enabled mobile device applications.” The response to the LOI indicated that the Company had received an FCC authorization in 2011 but had since refined the design of the product. Although one refinement involved relocating the antenna on the device, which increased the field strength rating from the level authorized in 2011, the Company assumed that the changes to the device qualified as “permissive changes” under Section 2.1043 of the FCC’s Rules. In addition, the Company admitted to marketing the refined product before obtaining a new FCC certification for the increased field strength rating, and that its user manual did not contain required consumer disclosure language. However, the Company had not actually sold any of the new parking meters in the U.S.

Section 302(b) of the Communications Act prohibits the manufacture, import, sale, or shipment of home electronic equipment and devices that fail to comply with the FCC’s regulations. Section 2.803(a)(1) of the FCC’s Rules provides that a device must be “properly authorized, identified, and labeled in accordance with the Rules” before it can be marketed to consumers if it is subject to FCC certification. The parking meter falls under this requirement because it is an intentional radiator that “can be configured to use a variety of components that intentionally emit radio frequency energy.” The Company’s product also meets the definition of a Class B digital device, in that it is “marketed for use in a residential environment notwithstanding use in commercial, business and industrial environments.” Under Section 15.105(b) of the FCC’s Rules, Class B digital devices “must include a warning to consumers of the device’s potential for causing interference to other radio communications and also provide a list of steps that could possibly eliminate the interference.”

The base fine for marketing unauthorized equipment is $7,000, and the base fine for marketing devices without adequate consumer disclosures is $4,000. The Company argued that even though it had marketed the device before it was certified, it had not sold any, and it promptly took corrective action after learning of the issue. The Enforcement Bureau declined to reduce the proposed fines because the definition of “marketing” does not require that there be a sale, and “corrective measures implemented after the Commission has initiated an investigation or taken enforcement action do not nullify or mitigate past violations.” The NAL therefore assessed the base fine for both violations, resulting in a total proposed fine against the Company of $11,000.

Unsolicited Phone Calls Lead to Multi-Million Dollar Fine

Earlier this month, the FCC issued an NAL against a limited liability company (the “LLC”) for making unlawful robocalls to cell phones. The NAL followed a warning issued more than a year earlier, and proposed a fine of $2,944,000. The LLC provides a robocalling service for third party clients. In other words, the LLC’s clients pay it to make robocalls on their behalf to a list of phone numbers provided by the client.

The Telephone Consumer Protection Act (“TCPA”) prohibits robocalls to mobile phones unless there is an emergency or the called party has provided consent. These restrictions on robocalls are stricter than those on live calls because Congress found that artificial or prerecorded messages “are more of a nuisance and a greater invasion of privacy than calls placed by “live” persons.” The FCC has implemented the TCPA in Section 64.1200 of its Rules, which mirrors the statute.

The LLC received an LOI in 2012 from the Enforcement Bureau’s Telecommunications Consumers Division (the “Division”) relating to an investigation of the LLC’s services. The Division required the LLC to provide records of the calls it had made, as well as to submit sound files of the calls. This preliminary investigation revealed that the LLC had placed 4.7 million non-emergency robocalls to cell phones without consent in a three-month period. After making these findings, the Division issued a citation to the LLC in March of 2013, warning that making future calls could subject the LLC to monetary penalties and providing an opportunity to meet with FCC staff and file a written reply. The LLC replied to the citation in April of 2013, and met with FCC staff.

However, in June of 2013, the Division initiated a second investigation to ensure the LLC had stopped making illegal robocalls. The LLC objected, but produced the documents and audio files requested. The Division determined, by analyzing the materials and contacting customers who had received the prerecorded calls made by the LLC, that the Company made 184 unauthorized robocalls to cellphones after receiving the citation. Continue reading →

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Just two months after assessing nearly $2 million in fines to cable operators for airing ads for the movie Olympus Has Fallen containing false EAS tones, the FCC today granted an 18-month extension of its 2013 waiver allowing the Federal Emergency Management Agency to continue to use false emergency tones in Public Service Announcements.

In this case, the tone being used is not the “broadcast” EAS tone, but the Wireless Emergency Alert (WEA) tone transmitted to cell phones and other wireless devices in an emergency. In the words of the FCC, “[t]he WEA Attention Signal is a loud, attention-grabbing, two-tone audio signal that uses frequencies and sounds identical to the
distinctive and familiar attention signal used by the EAS.”

According to the FCC’s waiver extension order, the FEMA PSAs are a reaction to the public being “startled or annoyed” when hearing the WEA tone for the first time, and then seeking to turn off all future alerts. The PSAs are aimed at teaching the public how WEA works and how their mobile devices will behave when receiving a WEA alert.

Given these facts, on May 31, 2013, the FCC granted an unprecedented waiver of the prohibition on airing false emergency tones to permit FEMA PSAs containing the WEA tone to be aired. However, that waiver was limited to one year. Since that year is about up, FEMA recently sought an extension, and by today’s order, the FCC has extended the waiver for an additional 18 months.

While FEMA indicates that it believes the announcements have been a success, it continues to receive negative media coverage and individual complaints about the WEA alerts. As a result, it wishes to continue distributing the PSAs for airing and needed today’s waiver to accomplish that.

Of course, while FEMA is the party that sought the waiver, it is broadcasters and cable operators that are typically found liable when a false emergency tone airs. Both of those groups should therefore be concerned that the FCC did not grant an unconditional waiver, but instead extended the waiver only to announcements that “mak[e] it clear that the WEA Attention Signals are being used in the context of the PSA and for the purpose of educating the viewing or listening public about the functions of their WEA-capable mobile devices and the WEA program.” As a result, the FCC warned that “leading off a PSA with a WEA Attention Signal, without warning, may be an effective attention-getting device, but it would violate the conditions of this waiver because of the effect that it could have on the listening or viewing public.”

Broadcasters and cable operators will therefore need to screen all FEMA PSAs containing an emergency tone to ensure it is a WEA (and not an EAS) tone, and that the PSA meets the FCC’s waiver conditions and therefore does not pose a risk of confusing the public as to whether an emergency is actually occurring. In other words, if FEMA runs afoul of this requirement in a future PSA, it is the broadcasters and cable operators airing it who will be facing the emergency.

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Earlier today, the FCC held its monthly Open Meeting, where it adopted rules to implement the Broadcast Television Incentive Auction.You can watch a replay of the FCC’s Open Meeting on the FCC’s website.

Thus far, the FCC has released three documents relating to the actions it took today in this proceeding, as well as separate statements from four of the five commissioners, providing at least some initial guidance to affected parties: (1) a News Release, (2) a summary of upcoming proceedings, and (3) a staff summary of the Report & Order.

At the meeting, the commissioners noted that, when released, the Report and Order will contain a number of rule changes to implement the auction. The major takeaways are:

  • The reorganized 600 MHz Band will consist of paired uplink and downlink bands, with the uplink bands starting at channel 51 and expanding downwards, followed by a duplex gap and then the downlink band;
  • These bands will be comprised of five megahertz “building blocks”, with the Commission contemplating variations in the amount of spectrum recovered from one market to the next, meaning that not all spectrum will be cleared on a nationwide basis, and in some markets, repacked broadcasters will be sharing spectrum with wireless providers in adjacent markets;
  • The FCC anticipates there will be at least one naturally occurring white space channel in each market for use after the auction by unlicensed devices and wireless microphones;
  • The auction will have a staged structure, with a reverse auction and forward auction component in each stage. In the reverse auction, broadcasters may voluntarily choose to relinquish some or all of their spectrum usage rights, and in the forward auction, wireless providers can bid on the relinquished spectrum;
  • In the reverse auction, participating broadcasters can agree to accept compensation for (1) relinquishing their channel, (2) sharing a channel with another broadcaster, or (3) moving from UHF to VHF (or moving from high VHF to low VHF);
  • The FCC will “score” stations (presumably based on population coverage, etc.) to set opening prices in the auction;
  • The FCC will use a descending clock format for the reverse auction, in which it will start with an opening bid and then reduce the amount offered for spectrum in each subsequent round until the amount of broadcast spectrum being offered drops to an amount consistent with what is being sought in the forward auction;
  • The auction will also incorporate “Dynamic Reserve Pricing”, permitting the FCC to reduce the amount paid to a bidding station if it believes there was insufficient auction competition between stations in that market;
  • The rules will require repurposed spectrum to be cleared by specific dates to be set by the Media Bureau, which can, even with an extension, be no later than 39 months after the repacking process becomes effective;
  • The FCC will grandfather existing broadcast station combinations that would otherwise not comply with media ownership rules as a result of the auction; and
  • The FCC continues to intend to use its TVStudy software to determine whether a repacked station’s population coverage will be reduced in the repacking process, despite NAB’s earlier protests that the current version of the software would result in reduced coverage for nine out of ten stations in the country.

Finally, the FCC will be asking for public input on numerous additional issues, such as opening bid numbers, bid adjustment factors, bidding for aggregated markets in the forward auction, dealing with market variations, setting parameters for price changes from round to round, activity rules, and upfront payments and bidding eligibility. The FCC will consider in future proceedings ways to mitigate the impact of repacking on LPTV/TV translators, how to address interference between broadcast and wireless operations, and how best to facilitate the growth of “white spaces” devices in the unlicensed spectrum.

Although today’s Open Meeting and these preliminary documents provide some guidance on many complex incentive auction issues, they only scratch the surface, and there are many blanks the FCC will need to fill in between now and the auction. One of those that broadcasters will be watching very carefully is how the Media Bureau will be handling reimbursement of stations’ repacking expenses. That has turned out to be a very challenging issue in past FCC efforts at repurposing spectrum, and the fact that the amount set aside by Congress for reimbursement might well fall short of what is needed has many broadcasters concerned.

We will know more about this and many other issues when the Report and Order is released, hopefully in the next week or two, but the real answers are going to reveal themselves only very slowly over the next year or two. The FCC has to hope that they will still have broadcasters’ attention by the time we reach that point.

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The FCC just gave broadcasters another reason to answer the door graciously. Earlier this week, the FCC whacked a Pennsylvania Class A Television broadcaster with an $89,200 Notice of Apparent Liability (NAL) for refusing to allow FCC inspectors to inspect the station’s facilities, not just once, but on three different occasions. It is rare to see the FCC show its irritation in an NAL, but the language used by the FCC in this particular NAL leaves no doubt that the Commission was not happy with the licensee, particularly with what the FCC believed was blatant disregard for its authority. As the FCC put it, “this is simply unacceptable.”

Regarding specific rule violations by the licensee, the FCC alleged violations of Section 73.1225(a), which requires a broadcaster to make its station available for inspection by the FCC during normal business hours or at any time of operation; Section 73.1125(a), which requires a broadcaster to maintain a main studio location staffed with at least two employees during regular business hours; and Section 73.1350(a), which requires a broadcaster to operate its station in compliance with the FCC’s technical rules and in accordance with its current station authorization.

The NAL indicated that local field agents from the Enforcement Bureau’s Philadelphia Office attempted a station inspection during regular business hours once on August 17, 2011, and twice on September 30, 2011, without success. Physical access to the main studio of record was blocked by a locked gate.

After calling the station, the field agents were met at the locked gate by the station manager, who indicated that he was on his way to a doctor’s appointment, that no one else was available at the station to facilitate an inspection, and that the field agents would have to return the next day in order to gain access to the station. After leaving the site of the main studio, one field agent attempted to call the sole principal of the licensee but was forced to leave a voicemail requesting that the owner return the call to discuss the inaccessibility of the main studio. The field agent also called the main studio and left a voicemail. The call was later returned by the station manager, who indicated that he was still at his doctor’s appointment. According to the NAL, the agent identified the caller ID number on the returned call as being that of the main studio. When questioned about it, the station manager indicated “that the Station used his personal cellular number as the Station’s main studio number.”

On the second inspection attempt, the field agents again encountered the locked gate. The station manager, who met them at the gate, asked the field agents to wait outside the gate until he returned from the main studio building. The field agents left “after waiting more than ten minutes for the Station Manager to return….” The field agents returned later that day and once again encountered the locked gate. An agent called the main studio and spoke to the station manager, who indicated that, the “gate must remain locked for security reasons and that the public must contact the station to obtain access.” The field agents noted that there was no signage or other information posted at the locked gate to indicate such a requirement.

After their departure, one of the agents again attempted to contact the station owner in order to discuss the inaccessibility of the main studio. The agent was forced to leave a second voicemail, reiterating his request for a return call. Neither call was returned by the owner.

In March 2012, a local field agent determined that, after monitoring the station’s transmissions, the station was operating from a tower structure that was not specified in its current authorization. The agent, with the collaboration of the tower owner, determined that the station was operating from a tower approximately two-tenths of a mile away from its authorized transmitter site. Both towers were owned by the same tower company.

The NAL noted that the FCC has previously fined broadcasters for failure to provide access for inspection, but that “none of those cases involved repeated, direct, in-person refusals of access by the highest level of a broadcast station’s management, as well as multiple failures by the licensee’s sole principal to return FCC agent calls concerning the refusals.” The NAL also stated that, “continued refusal…is an egregious violation of the Commission’s rules warranting stringent enforcement action.” These events led to the maximum fine of $37,500 for each day the field agents were refused access. The $75,000 was then added to the fines for the main studio and unauthorized operation violations. The main studio base forfeiture is $7,000. The unauthorized operation base forfeiture is $4000, but the FCC elected to upwardly adjust that amount by another $3200. At the end of the day, the licensee was assessed a fine of $89,200.

In hindsight, it seems very unlikely that, even had the station been in a state of disarray or total chaos, any potential fine from the FCC could have exceeded the nearly $90,000 fine the licensee instead received for refusing access.

The obvious lesson learned here if is that if the FCC comes knocking at your door, let them in.

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April 2014

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

  • FCC Proposes $12,000 in Fines for Contest Violations
  • $20,000 Fine for Unlicensed Operation and Interference
  • Violations of Sponsorship Identification and Indecency Rules Lead to $15,000 Consent Decree

Changing Rules and Delay in Conducting Contest Lead to $12,000 in Fines

Late last month, the FCC’s Enforcement Bureau issued two essentially identical Notices of Apparent Liability for Forfeiture (“NALs”) against two radio station licensees for failure to conduct a contest as advertised. Although the stations have different licensees, one licensee provided programming to the second licensee’s station through a time brokerage agreement. The brokering station’s response to a letter of inquiry (“LOI”) addressed both licensees’ actions with regard to the contest. In the subsequent NALs, the FCC’s Enforcement Bureau proposed a $4,000 fine against the brokered licensee and an $8,000 fine against the brokering licensee.

In July of 2009, the FCC received a complaint that several radio stations held a weekly contest called “Par 3 Shoot Out” but did not conduct the contest substantially as announced or advertised. Specifically, the complaint maintained that at least one participant did not receive a promised prize of a golf hat and was not entered into a drawing to win a car or other prizes (as was promised in the contest’s rules). About four months later, the FCC issued an LOI to the licensee conducting the contest about the claims made in the complaint. In its response to the LOI, the licensee conducting the contest indicated that the contest consisted of two phases. The first was an 18-week, online golf competition where the highest-scoring contestant each week would win a hat from a golf club. Each weekly winner and one write-in contestant would be able to participate in the second phase of the contest, a real golf competition consisting of taking one shot at a three par hole. As was publicized online, the prize for the winner of the second phase was a $350 golf store gift certificate, and if anyone hit a hole-in-one, they would win a Lexus car.

According to the brokering licensee, the first phase of the contest took place between June and November 2008. The contest took place entirely online, and although the second phase was scheduled to begin in November 2008, it was postponed due to inclement weather and ultimately did not occur at all because the employee who was tasked with running the live golf competition was fired, and the remaining staff never resumed the contest. The brokering licensee further indicated that it forgot about the contest until it received the FCC’s LOI, and, after receiving the LOI, the second phase of the contest occurred and was completed by January 2010. The brokering licensee indicated that it had provided additional prizes of a $25 golf store gift card and a catered lunch to each finalist in the second phase given the delay in conducting the contest.

Section 73.1216 of the FCC’s Rules requires that a station-sponsored contest be conducted “substantially as announced or advertised” and must fully and accurately disclose the “material terms,” including eligibility restrictions, methods of selecting winners, and the extent, nature and value of prizes involved in a contest.

The Enforcement Bureau determined that the contest was not conducted as announced or advertised because the rules were changed during the course of the contest and the contest was not conducted within the promised time frame. The Bureau further found that the licensees failed to fully disclose the material terms of the contest as required by the Commission’s rules. According to the Bureau, the on-air announcements broadcast by the stations failed to mention all of the prizes the licensee planned to award and failed to describe any of the procedures regarding how prizes would be awarded or how the winners would be picked. The brokering licensee argued in its response to the LOI that the full rules were included online, which was a better way to make sure that potential contest participants were not confused. However, the Bureau found that while licensees can supplement broadcast announcements with online rules, online announcements are not a substitute for on-air announcements.

The base fine for failure to conduct a contest as announced is $4,000. The Bureau determined that, contrary to the argument presented in response to the LOI, “neither negligence nor inadvertence” due to the overseeing employee’s departure “can absolve licensees of liability.” The Bureau also said that providing additional prizes to make up for the delay does not overcome the violation of Section 73.1216. Finally, the FCC found that the licensees had failed to disclose the material terms of the contest because the advertisements that were broadcast over the air did not mention certain prizes.

The FCC proposed to impose the base fine amount of $4,000 against the time-brokered station after determining that the licensee had violated Section 73.1216. For the brokering licensee, the FCC proposed an increased fine of $8,000 because of the licensee’s “pattern of violative conduct, and because it conducted the Contest over four stations, not one, thus posing harm to a larger audience.”

Nine Years of Unauthorized Operation and Interference to Wireless Operator Lead to Large Fine

The FCC recently issued a Forfeiture Order to the former licensee of a Private Land Mobile Radio Service (“PLMRS”) station. The Forfeiture Order follows an NAL that the FCC released in July of 2012 proposing a fine of $20,000 for the former licensee of the facility for operating without a license for nine years and causing interference to another wireless service provider.

The former licensee initially received the license for the PLMRS station in April 1997 for a five-year term. Three months before the expiration of the license, the FCC sent the licensee a reminder to renew the license, but the licensee never filed a renewal application. Therefore, the license expired in April of 2002. Nevertheless, the licensee continued operating the station, and on July 31, 2011, filed a request for Special Temporary Authority (“STA”) with the Wireless Telecommunications Bureau of the FCC. The licensee stated in the application that it had recently discovered that its license had expired and that it needed an STA to continue operating the station. The Wireless Bureau granted the STA three days later for a period of six months, until the end of January 2012. Continue reading →

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Back in March, the FCC’s Public Safety and Homeland Safety Bureau (PSHSB) issued a Public Notice seeking to update the record on a 2005 Petition for Immediate Interim Relief regarding proposals to make fundamental changes to the FCC’s EAS Rules with respect to requiring broadcast stations to air multilingual EAS alerts. Yesterday, the PSHSB released a Public Notice extending the comment deadlines in the proceeding. Comments are now due by May 28, 2014 and replies are due by June 12, 2014.

The March Public Notice seeks comments on a number of issues, but the most-discussed issue is the Petitioner’s proposal to have the FCC adopt a so-called “designated hitter” requirement for multilingual EAS.

The Public Notice quotes the Petitioner in describing the proposal:

Such a plan could be modeled after the current EAS structure that could include a “designated hitter” approach to identify which stations would step in to broadcast multilingual information if the original non-English speaking station was knocked off air in the wake of a disaster. Broadcasters should work with one another and the state and/or local government to prepare an emergency communications plan that contemplates reasonable circumstances that may come to pass in the wake of an emergency. The plan should include a way to serve all portions of the population, regardless of the language they speak at home. One market plan might spell out the procedures by which non-English broadcasters can get physical access to another station’s facilities to alert the non-English speaking community – e.g. where to pick up the key to the station, who has access to the microphones, how often multilingual information will be aired, and what constitutes best efforts to contact the non-English broadcasters during and after an emergency if personnel are unable to travel to the designated hitter station.

The March Public Notice asked for comment on a number of questions related to this proposal. The Commission also acknowledged in the March Public Notice that broadcasters have raised concerns that a multilingual EAS requirement using the designated hitter approach would require them to hire additional personnel capable of translating emergency alert information into one or more additional languages.

Given that there is a nine year record in this proceeding and that any multilingual EAS requirements will have wide-ranging implications, those wishing to file comments in the proceeding now have some additional time to make that happen.

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Yesterday, the U.S. Supreme Court heard oral arguments in the Aereo case, providing the first indication of how the Justices view the case pitting Aereo against content providers, particularly broadcast networks. For background on Aereo’s technology and the previous lower court cases, Scott Flick of our office has written extensively on the subject, and a variety of his writings on Aereo can be found here. While trying to read the Court’s mind solely through the questions asked by the Justices can be risky, it is fair to say that Aereo encountered some skepticism on its claim to be an innovator and not a copyright infringer.

Given the significant amount of lower court litigation preceding Tuesday’s oral arguments, there wasn’t much in the way of surprises in the arguments made, many of which focused on the question of whether Aereo engages in a “public performance” when it transmits content to paying subscribers requesting that programming. A transcript of the proceeding can be found here. A number of the Justices focused on the question of whether Aereo’s fabled sea of mini-antennas served any purpose beyond seeking to circumvent the Copyright Act of 1976. Chief Justice Roberts noted that Aereo’s system seemed designed specifically “to get around the copyright laws,” and Justice Ginsburg asked Aereo’s counsel if there is any “technical reason” Aereo needed to have 10,000 dime-size antennas to operate, or if it was merely designed that way to “avoid the breach of the Copyright Act.”

What was a bit of a surprise was the extent to which the Justices’ questions focused on Aereo’s strategic effort to cloak itself as just another provider of cloud services. A number of the Justices indicated concern that there might not be an elegant way of ruling against Aereo without risking a ripple effect to cloud-based services, and it was obvious that none were interested in seeing that happen. Justice Kagan sought clarification regarding how Aereo could be distinguished from other cloud service companies, asking:

What if –­­ how about there are lots of companies where many, many thousands or millions of people put things up there, and then they share them, and the company in some ways aggregates and sorts all that content. Does that count?

Counsel for the broadcasters and the Justice Department attempted to respond to this concern, largely reiterating the position taken in the DOJ’s amicus brief:

The proper resolution of this dispute is straightforward. Unlike a purveyor of home antennas, or the lessor of hilltop space on which individual consumers may erect their own antennas . . . [Aereo] does not simply provide access to equipment or other property that facilitates customers’ reception of broadcast signals. Rather, [Aereo] operates an integrated system–i.e., a “device or process”–whose functioning depends on its customers’ shared use of common facilities. The fact that as part of that system [Aereo] uses unique copies and many individual transmissions does not alter the conclusion that it is retransmitting broadcast content “to the public.” Like its competitors, [Aereo] therefore must obtain licenses to perform the copyrighted content on which its business relies. That conclusion, however, should not call into question the legitimacy of businesses that use the Internet to provide new ways for consumers to store, hear, and view their own lawfully acquired copies of copyrighted works.

The catchphrase for this idea in the oral arguments became a “locker” in the cloud, where consumers could safely store their lawfully obtained content, but which would cross the copyright line if stocked for the consumer for a fee with infringing content by a commercial service like Aereo. While a useful analogy, it did not appear to put an end to the Justices’ concern that the line between a fair use and infringement might not always be clear in the cloud. That is certainly true, but it is also true outside the cloud, where copyright questions are notoriously complex and difficult.

Of course, the most interesting aspect of the Court’s diversion into an examination of cloud services is that it is technically irrelevant to the case at hand. It is safe to say that when Congress enacted the Copyright Act of 1976, cloud computing wasn’t even a distant dream. Imputing an intent on the part of Congress to draft the law in 1976 so as to neatly exclude such services from what might have then been considered copyright infringement is an unrealistic expectation. As a result, courts have always been faced with the task of applying existing copyright law to evolving applications of technologies, with the understanding that Congress will need to step in and change the law if the results cease to be satisfactory.

Having said that, it is the policy of the Supreme Court to narrowly rule on questions before it wherever possible, and drafting a decision addressing only Aereo without reaching the broader question of copyright law in the cloud is certainly the judicious approach, and what most expect the Court to do when a decision is released this summer.