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One of the perennial challenges of being a broadcaster is determining what you can air, when you can air it, and how it must be aired without incurring the wrath of the federal government. While the FCC tends to be the federal agency most commonly encountered on content issues, various other government agencies create additional layers of complexity, with the Department of Justice, the Food and Drug Administration, and the Federal Trade Commission all having an interest in what is aired, particularly where it involves advertising. As new products become available and are marketed, the government struggles to keep up, sometimes leaving the media in the lurch as to whether a particular ad is “safe” for airing.

For that reason, broadcasters have stepped carefully with regard to advertisements for medical marijuana (which I’ve discussed previously here), tobacco products, and other items of federal concern. While enforcement encounters with the FCC can be unpleasant, encounters with the DOJ can be downright incarcerating. Fortunately, broadcasters’ encounters with the DOJ are rare, and usually involve the DOJ bringing a court action to enforce collection of an FCC-imposed fine. However, that also means the body of DOJ precedent on substantive content issues can be pretty thin, leaving broadcasters guessing as to what can and cannot be aired.

One area where the DOJ has definitely had a broad role to play is in the advertising of tobacco products. From the original ban on broadcast cigarette advertising implemented in 1971 to its later expansion to little cigars (1973) and smokeless tobacco (1986), the DOJ is the entity charged with enforcing the ban on most types of tobacco broadcast advertising. While a ban on tobacco advertising might seem straightforward, complying with it can be fairly complex, resulting in a number of DOJ decisions regarding what can be said in advertising for tobacco shops and tobacco products not affected by the ad ban. Our recently updated Pillsbury Advisory on tobacco advertising restrictions is a good place to learn more about those nuances.

One new product that continues to garner attention (and confusion) is e-cigarettes, which are battery-powered devices designed to imitate the look and feel of a cigarette, but which deliver nicotine vapor rather than tobacco smoke to the lungs. While e-cigarettes have become fairly common, only limited research has been done on their health effects, and many countries have now regulated them in a variety of ways.

In the U.S., the FDA has expressed serious concerns about the manufacturing and marketing of e-cigarettes, but has not yet been successful in implementing restrictions on e-cigarette sales. However, there have been indications the FDA will move as early as next month to launch a rulemaking to implement restrictions on e-cigarette sales. While it is likely that any ultimate FDA rules will prohibit the marketing of e-cigarettes to minors, it is at this point unknown whether the FDA might try to impose broader restrictions on advertising, and whether such restrictions would stand up in court. What is known is that rulemakings at federal agencies take time, so it will likely be a while before any new FDA rules could be implemented.

That pretty much leaves the question of whether e-cigarettes can currently be advertised up to the DOJ. Given the DOJ’s dim view under existing tobacco ad restrictions of any ad that even mentions the word “cigarette”, many assumed that the DOJ would take a similar view of e-cigarette advertising. However, because the DOJ has not publicly moved to take action against a growing number of e-cigarette ads, broadcasters have so far been left wondering where the government stands on the issue.

We now know the answer to that question. My Pillsbury colleague Paul Cicelski has obtained clarification from the Department of Justice in the form of a letter stating the DOJ’s position on e-cigarette advertising. The letter notes that the ad ban covers “any roll of tobacco” wrapped in paper, tobacco, or any other substance likely to be purchased by consumers as a “cigarette”. It proceeds to note that while e-cigarettes are often manufactured to look like conventional cigarettes, they do not contain a “roll of tobacco” and therefore are not subject to the federal ban on cigarette ads.

So does that mean the floodgates are open on e-cigarette ads? Not quite. First, the DOJ letter indicates that it reflects the views of the Consumer Protection Branch of the DOJ and not “any other governmental office, agency or department,” specifically noting that the Federal Trade Commission has authority over e-cigarette ads that are deceptive, such as those that make health claims without adequate scientific support. Similarly, many states have grown concerned about e-cigarettes and have introduced legislation to restrict their use and advertising. As a result, in addition to being wary of health claims in ads like “e-cigarettes will help you stop smoking”, broadcasters should check the laws of their state for any state-based limitations on e-cigarette advertising. Finally, as noted above, the FDA is clearly interested in this area, and likely will have something to say about e-cigarette regulation once it concludes its soon-to-be-launched e-cigarette proceeding.

Fortunately, the FTC and FDA have traditionally focused their enforcement efforts on advertisers rather than on the media entities carrying the ads, so even if e-cigarette regulations are ultimately adopted, those regulations are unlikely to principally target broadcasters for merely running the ads. As a result, the DOJ’s position on e-cigarettes goes a long way toward resolving a significant source of confusion and angst for many broadcasters while opening up an additional avenue for broadcast ad dollars.

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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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As we prepare to head down to Orlando for the NAB/RAB Radio Show next week, I wanted to remind those who will be at the Show that Pillsbury is again sponsoring the Leadership Breakfast. This year, the event will be in Gatlin Ballroom D at the Rosen Creek Shingle Hotel on Thursday, September 19, beginning at 7:15 a.m., with the presentations to begin at 7:45 am. As before, we will have opening remarks from Marci Ryvicker, a Managing Director with Wells Fargo Securities and Wall Street’s number one broadcast analyst, and then a panel featuring Lew Dickey (CEO of Cumulus Media), Mary Quass (CEO of NRG Media), Jeffrey Warshaw (CEO of Connoisseur Media), and Larry Wilson (CEO of Alpha Broadcasting and L&L Broadcasting).

This year’s event should prove to be especially timely because of changes in the economy and the increased M&A activity, particularly with regard to radio. Cumulus has just announced deals with Townsquare Media to sell some stations and acquire others as well as a separate deal to buy Westwood One; Connoisseur as well as L&L Broadcasting have been active in buying stations; and NRG is always in the hunt. Beyond the particulars for individual companies are new technological developments, including the placement of an FM chip in Sprint’s mobile phones, which will help make radio that much more ubiquitous in the digital world.

The Leadership Breakfast is always a packed event (in part because of a free hot breakfast!), and I expect this year to be no different.

On a separate front, my Pillsbury partner Scott Flick will be speaking on an NAB panel (to be held on Wednesday, September 18, at 10:15 a.m. in Gatlin Ballroom A4) entitled “And the Answer Is: What is Radio Regulatory Jeopardy?” As regular readers of CommLawCenter have probably picked up from his posts here, Scott has an encyclopedic knowledge of FCC rules and decisions, and the session will no doubt be an entertaining and informative look at troublesome FCC issues.

Some of my other colleagues — including Dick Zaragoza, Miles Mason and Andy Kersting — will also be at the Show. One of the great benefits of NAB shows is the opportunity to catch up with old friends and meet new ones, so if you are going to be there, feel free to reach out to any of us and we’ll try to get together. We look forward to seeing you there.

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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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August 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:

  • FCC Catches GPS Jammer at Airport
  • $75,000 Consent Decree Adopted for Class A TV Violations

Jamming Device in Truck Disrupts GPS Navigation at Newark Liberty International Airport

On August 1, 2013, the FCC issued a Notice of Apparent Liability for Forfeiture (NAL) in the amount of $31,875 to an individual in New Jersey for repeated use of a GPS jamming device. The individual had installed a signal jammer in his company-supplied truck, apparently to prevent his employer’s GPS tracking system from knowing his whereabouts.

While use of a signal jammer is itself illegal, the offender compounded his troubles when his GPS signal jammer interfered with the navigation signals at the Port Authority of New York and New Jersey. The FCC’s investigation into this matter arose when the FCC was contacted by the Federal Aviation Administration on behalf of the Port Authority. The FAA reported that the Port Authority had been experiencing interference in testing a ground-based aviation navigation system at Newark Liberty International Airport.

At that airport–one of the busiest in the nation, according to the FCC–an agent from the FCC’s New York Enforcement Bureau office determined that a red Ford pickup truck was emanating radio signals within the restricted 1559 to 1610 MHz band used by GPS satellites. The driver was stopped by Port Authority police at the airport gate. He then surrendered the jamming device to the FCC agent, and the interference with Newark’s navigation equipment ceased.

In determining the appropriate penalty, the FCC found three separate violations of its rules: (1) operating the transmission equipment without a license; (2) using unauthorized equipment; and (3) interfering with authorized communications, which was of particular concern in this case, with repeated and dangerous interference to critical air navigation equipment. That the signal jammer was truck-mounted also caused great concern, as its mobile nature made the interference widespread and its source difficult for authorities to locate and eliminate. Simply driving around the area could have had disastrous effects on GPS-based systems for aircraft.

In light of these concerns, the FCC issued a substantial upward adjustment to the normal base fine of $22,000, resulting in a total fine of $42,500. However, it then decided to lower the fine to $31,875 (a 25% reduction) because the individual voluntarily handed over the illegal device. The FCC indicated that it wanted to provide “incentives” for parties to do the same in the future.

Pittsburgh-Based Stations Pay Big for Kidvid and Other Violations

This week, the FCC pursued a Pittsburgh-area group of ten Class A television stations for failure to file, or to timely file, their children’s programming reports with the FCC, as well as for being silent without authorization. In addition to the kidvid violations, some of which had gone on for several years, the FCC states that the stations had, at various times, applied to go silent and proceeded to do so without first obtaining the necessary FCC authorization.

The matter was settled by consent decree, which included a voluntary contribution to the U.S. Treasury of $75,000. Not coincidentally, the licensee of the stations was in the process of selling them, and needed FCC approval to complete that transaction. The FCC granted the assignment application in the same order in which it adopted the consent decree.

This case is merely the latest in a continuing effort by the FCC to crack down on rule violations by Class A TV stations. In this case, by entry into the consent decree, the stations were able to avoid the imposition of fines and the risk of losing their Class A status. In addition to being subject to displacement by full-power TV stations, stations that lose their Class A status forfeit their eligibility to participate in the spectrum incentive auction (and to avoid being repacked out of existence subsequent to that auction).

Given this risk, Class A TV licensees should ensure they are in full compliance with the FCC’s rules to maintain their Class A eligibility. To be eligible for Class A status, the Community Broadcasters Protection Act of 1999 and the Commission’s rules implementing it require that Class A stations: (1) operate a minimum of 18 hours per day; (2) air an average of at least 3 hours per week of programming produced within the market area served by the station; and (3) comply with the Commission’s rules for full-power television stations.

A PDF version of this article can be found at FCC Enforcement Monitor.

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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.

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July 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:

  • FCC Issues “Lighting Fixture” Citation
  • Consent Decree Adopted for Sponsorship ID Violation

FCC Issues Citation to Credit Union for Operating Lighting Fixtures Causing Harmful Interference to Licensed Communications

On July 17, 2013, the FCC issued a citation to the Caribe Federal Credit Union (“CFCU”) in San Juan, Puerto Rico for operating incidental radiators and causing harmful interference to licensed communications in violation of the FCC’s rules. The FCC’s investigation into this matter arose after receiving complaints of interference from an FCC licensee.

On June 12, 2013, an agent of the FCC’s San Juan Office of the Enforcement Bureau used direction finding techniques to determine that the interference, which was transmitting on 712.5 MHz, originated from the CFCU building at 193-195 O’Neill Street, San Juan, Puerto Rico. After further testing, the FCC agent determined that the particular source of the transmission was the interior lighting on the highest ceiling in the building (fifteen light fixtures about 40 feet above the floor).

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Late yesterday, the FCC released a public notice providing information on the repacking process that will follow the broadcast spectrum incentive auction. This is the FCC’s second response to calls by a number of parties seeking greater transparency (and information in general) regarding the technical aspects of the repacking process, including the FCC’s repacking model and modeling assumptions. The FCC anticipates that more pieces of the puzzle, including details about how bids will be selected, how channels will be assigned, and the associated algorithms, will be made public in the coming months.

Specifically, in conjunction with the public notice, the FCC has made available the following:

  1. an update to its TVStudy computer software (now version 1.2) and supporting data for determining the coverage area and population served by television stations using the methodology described in OET Bulletin 69. According to the FCC’s public notice, the updated software operates in the same way as the prior version, but has an improved user interface and enhanced capabilities for station-to-station analysis;
  2. data about Canadian and Mexican television allotments and incumbent licensees in a format that can be readily used with the updated TVStudy software program; and
  3. descriptions of the analysis for “pre-calculating” which stations could be assigned to which channels in the repacking process, and which stations cannot operate on the same channels or adjacent channels, based on geographic issues. The software and data being provided contain preliminary assumptions necessary to perform the analysis. The Commission states that those assumptions are for illustrative purposes only and that the FCC has made no decision as to whether to adopt any of them.

While all additional information regarding the auction and repacking process is welcome, this most recent release appears incremental at best, and we have a long way to go before broadcasters or potential auction bidders will be able to accurately assess their options. Given the stakes, however, those who can decipher the FCC’s auction tea leaves earliest, and most accurately, will be at an advantage in the months to come.