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September 2012
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 Follows Up a $25,000 Fine With a $236,500 Fine
  • Two Tower Owners Fined for Fading Paint

FCC Issues Second Fine to Cable TV Operator for $236,500
As we previously reported in October 2011, the operator of a cable television system in Florida was fined $25,000 for a variety of violations of the FCC’s Rules, including failing to install and maintain operational Emergency Alert System (“EAS”) equipment, failing to operate its system within the required cable signal leakage limits, and failing to register the cable system with the FCC. This month, the FCC issued a second Notice of Apparent Liability for Forfeiture and Order (“NAL”) to the operator for continued violations of the FCC’s cable signal leakage and EAS rules and for failing to respond to communications from the FCC requiring that the operator submit a written statement of compliance.

In January 2011, agents from the Tampa Office of the FCC’s Enforcement Bureau inspected the cable system and discovered extensive signal leakage, prompting the issuance of a NAL in 2011. The FCC has established signal leakage rules to reduce emissions that could cause interference with aviation frequencies. Sections 76.605 and 76.611 of the FCC’s Rules establish a maximum cable signal leakage standard of 20 microvolts per meter (“µV/m”) for any point in the system and a maximum Cumulative Leak Index (“CLI”) of 64. If potentially harmful interference cannot be eliminated, the FCC’s Rules require that the system immediately suspend operations following notification from the FCC’s local field office. Normal operations cannot resume until the interference has been eliminated “to the satisfaction of” the FCC’s local field office.

In early September 2011, agents from the Enforcement Bureau conducted a follow-up inspection of the cable system. During the inspection, the agents discovered 33 leakages, 22 of which measured over 100 µV/m, and found that the CLI for the system was 86.97, well in excess of the maximum permitted. Two days after the inspection, the local field office issued an Order to Cease Operations, directing the cable system to cease operations until the leakages were eliminated and to seek written approval from the local field office prior to resuming normal operations. At the time of its issuance, the President of the cable system verbally consented to abide by the terms of the Order. However, the cable system operator never contacted the field office to seek approval to resume operations, and the field office has yet to approve further cable system operations.

Between September 2011 and March 2012, agents from the FCC inspected the cable system an additional five times. During those inspections, the agents found that not only had the cable system resumed operation without permission, but they once again observed numerous signal leakages during each inspection.

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The first compliance deadline for the FCC’s new rules for the closed captioning of video programming delivered via Internet protocol (i.e., IP video), as required by the 21st Century Communications and Video Accessibility Act (CVAA), is September 30, 2012. April 30, 2012 was the effective date of the new rules and all video programming that appeared on television with captions after that date is considered “covered IP video” and will need to be captioned when being shown online in the future. “Video programming” is defined as “programming by, or generally considered comparable to programming provided by a television broadcast station.”

Last January, the FCC released its Order adopting rules to implement the CVAA’s requirements governing the closed captioning of IP video. The CVAA requires that all nonexempt full-length video programming delivered over the Internet that first appeared on TV in the United States with captions also be captioned online. According to the rules, video programming shown on the Internet after being shown on television must have captions based on the following timeline established by the FCC:

  • September 30, 2012: all pre-recorded programming not edited for Internet distribution must be captioned for online viewing. Pre-recorded programming is defined as programming other than live or near-live programming.
  • March 30, 2013: all live and near-live programming must be captioned for online viewing. Live programming is defined as programming that airs on TV “substantially simultaneously” with its performance (i.e., news and sporting events). Near-live programming is video programming that is performed and recorded less than 24 hours prior to the first time it aired on television (i.e., the “Late Show with David Letterman”).
  • September 30, 2013: all pre-recorded programming that is edited for Internet distribution must be captioned for online viewing. Programming edited for Internet distribution means video programming for which the TV version is “substantially edited” prior to its Internet distribution.

Keep in mind that there is a different compliance schedule for all programming that is subject to the new requirements but which is already archived in a video programming distributor’s or provider’s library before it is shown on television with captions. Such programming is subject to the following deadlines:

  • Beginning March 30, 2014, all programming that is subject to the new requirements and is already in the distributor’s or provider’s library before it is shown on television with captions must be captioned within 45 days after it is shown on television with captions.
  • Beginning March 30, 2015, such programming must be captioned within 30 days after it is shown on television with captions.
  • Beginning March 30, 2016, such programming must be captioned within 15 days after it is shown on television with captions.

Clients frequently ask whether the new rules apply to clips, video-clips, or outtakes. Generally, the answer is no. The FCC’s Order defines clips as “excerpts of full-length programming.” According to the FCC, the rules apply to “full-length video programming” defined as “video programming that appears on television and is distributed to end users, substantially in its entirety, via IP.” This definition therefore excludes video clips or outtakes from video programming that appeared on television. However, keep in mind that the FCC also indicated that when “substantially all” of a full-length program is available via IP, whether as a single unit or in multiple segments, that program is not considered a clip and does constitute a full-length program subject to the IP captioning rules.

Those interested in learning more about these issues should contact us.

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The FCC recently released an Order giving companies greater flexibility in how they can structure foreign investment in common carrier licensees, such as wireless companies that provide phone service. This action, taken in a proceeding initiated last year, is a first step towards simplifying and streamlining the FCC’s cumbersome foreign ownership review and approval process, with the goal of facilitating increased foreign investment in telecommunications companies.

The FCC’s foreign ownership policy is governed by Section 310 of the Communications Act. Section (b)(3) of the statute requires the FCC to prohibit certain foreign entities from being FCC licenses themselves and from directly holding ownership interests that exceed specified levels in certain types of FCC licensees, such as common carrier licensees. The FCC’s International Bureau previously interpreted this provision to strictly prohibit foreign entities from having more than a 20% non-controlling interest (direct or indirect) in an FCC common carrier licensee.

The Order replaces this absolute prohibition with a discretionary policy already in use under a different section of the statute, Section 310(b)(4). That section restricts foreign entities from having more than a 25% controlling interest (direct or indirect) in any parent company of an FCC common carrier licensee (among other entities), unless the FCC specifically approves a greater foreign ownership interest.

The FCC makes the determination of whether it should allow greater foreign investment under Section 310(b)(4) and now under Section 310(b)(3), by examining whether the foreign investment is from a World Trade Organization (WTO) Member country, using a “principal place of business” test. If under the principal place of business test the investment is from a WTO Member country, the proposed foreign investment is presumed to be competitive and in the public interest. Where the investment is from a non-WTO Member country, the FCC applies what is known as an “effective competitive opportunities” or “ECO” test. The purpose of the ECO test is to determine whether competitive opportunities exist for American companies in those non-WTO Member countries and whether the foreign investment in the U.S. will serve the public interest.

The FCC’s foreign ownership review and approval process under Section 310(b)(4) has historically proven to be complex and time-consuming, both for licensees and the FCC. Licensees are required to engage in costly and extensive efforts in order to compile detailed information regarding citizenship and principal places of business of investors. There is no exception for individuals and entities that hold even de minimis interests through multiple intervening investment vehicles and holding companies. Moreover, licensees often have to conduct this exercise repeatedly given the fluid nature of investments. For its part, the FCC must expend considerable resources of its own processing (and often reprocessing) the voluminous and detailed information submitted by licensees.

The FCC’s decision liberalizes only its ownership policies under Section 310(b)(3). It leaves for another day the extensive reforms proposed by the FCC in a Notice of Proposed Rulemaking regarding foreign ownership under Section 310(b)(4).

The FCC’s Order has been published in the Federal Register and is now in effect. Parties interested in learning more about the FCC’s Order or the foreign ownership reform proceeding should contact Pillsbury for advice.

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In what seems to be the longest presidential campaign in history, tomorrow, September 7th, marks the beginning of the final stretch. That’s the first day of Lowest Unit Charge Season, the 60-day period before the November 6th, 2012 general election. During that time (which also occurs in the 45 days before a primary election), broadcast stations may charge no more than their lowest rate for each particular class of ad time purchased for a “use” by a legally qualified candidate.

Of course, while the concept sounds simple enough, its implementation at stations with dozens of different classes of ad time has proven to be a biennial headache for broadcasters. However, particularly for stations in political swing states, it can be a fairly profitable headache, and well worth the regulatory aspirin needed to get through it.

Contrary to a common misconception, Lowest Unit Charge applies to all legally qualified candidates during the LUC window, and not just to federal candidates. Also, keep in mind that the 60-day Lowest Unit Charge window is relevant only to the issue of rates. Other political broadcast rules, like the requirements for reasonable access for federal candidates and equal opportunities apply as soon as there are enough legally qualified candidates to trigger them (one in the case of reasonable access, and at least two in the case of equal opportunities, since there has to be a competing candidate to demand an equal opportunity in response to the first candidate’s airtime).

If the statements above have left you perplexed, confused, or questioning the very meaning of your existence, you should definitely take some time to look at the current edition of our Political Broadcasting Advisory. The Advisory fills in lots of detail on the matters discussed above, as well as myriad other issues created by the complexities of selling (or buying) political ad time in a regulated environment.

So, update the rate card attached to your Political Disclosure Statement, and get ready for the final stretch of a political season that has been excruciatingly long for viewers and listeners, but which will be over all too quickly for many broadcasters.

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July 2012
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 is a special issue regarding recent FCC actions that provide a detailed (and expensive) look at Section 73.1206, the prohibition on recording telephone calls for broadcast.

FCC Issues a Total of $41,000 in Fines for Broadcaster Airing Prank Telephone Calls

The close of August in Washington, D.C. has brought with it a surge of beautiful weather, baseball excitement (for the first time in recent memory), and … forfeiture orders related to the improper recording of telephone calls for broadcast. On August 22nd, the FCC issued two forfeiture orders assessing a combined $41,000 in fines against licensees owned by the same parent company for violations of the telephone broadcast rule.

The telephone broadcast rule, Section 73.1206 of the Commission’s Rules, requires that, “[b]efore recording a telephone conversation for broadcast, or broadcasting such a conversation simultaneously with its occurrence, a licensee shall inform any party to the call of the licensee’s intention to broadcast the conversation, except where such party is aware, or may be presumed to be aware from the circumstances of the conversation, that it is being or likely will be broadcast.” While the rule language only talks about providing notice to the calling party, the FCC has reiterated many times that when a station employee intends to record a call for broadcast or broadcasts the call live, the employee must also obtain the party’s consent before recording the call or going live.

Both orders released on August 22nd involved a finding that the licensee had violated this rule. The first order involved prank calls made in April 2006 by radio personalities to members of the public during a comedy segment of the station’s morning show. In one conversation, the caller pretended to be an intruder hiding under the bed of the person receiving the call; in another, the caller pretended to be a loan shark bent upon collecting a debt.

The FCC began investigating the prank calls after receiving a complaint from a station listener. During the investigation, the licensee indicated it was unable to confirm or deny whether the prank calls aired on its morning show, and could not provide a recording or transcript of the program. The licensee acknowledged, however, that the program identified in the complaint was aired on the station and was simulcast on two co-owned stations.

The second forfeiture order released on the 22nd also involved the broadcast of an alleged prank call in which the caller pretended to be a hospital employee who then informed the call recipient that the recipient’s husband had been in a motorcycle accident and died at the hospital. When questioned about the incident, the licensee told the FCC that its parent company had contracted with an outside vendor who made and recorded the call. The licensee admitted that it broadcast the call on multiple occasions.

In the first case, the FCC had proposed a $25,000 fine. In the second case, the FCC had proposed a $16,000 fine. In both cases, the licensee urged cancellation of the proposed fines, to no avail. In batting down a myriad of arguments raised by the licensees, the FCC affirmed not only its broad investigative powers to enforce Section 73.1206, but also the licensees’ responsibility to both adhere to and demonstrate their adherence to the Commission’s Rules.

These two decisions provide an excellent primer for broadcasters on the FCC’s enforcement of the telephone broadcast rule, as between them, the FCC addressed a multitude of defenses raised by the licensees, ultimately concluding that none of those defenses could prevent the imposition of very substantial fines. More specifically, the FCC shot down each of the following licensee arguments:

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Last week the Federal Communications Commission (FCC) adopted a Consent Decree involving a “voluntary contribution” of more than a quarter of a million dollars by a well-known guitar manufacturer, Fender Musical Instruments Corporation, relating to claims of unauthorized marketing of bass amplifiers, pre-amplifiers, tuners, audio mixers, and wireless microphones. While one might be puzzled by the FCC’s interest in regulating musical equipment, the fact is that these devices, like virtually all modern day products, incorporate digital circuitry and generate (intentionally or unintentionally) radio-frequency signals that can cause interference to other spectrum users. The FCC’s action is a reminder to all types of businesses that digital devices are regulated and must comply with the FCC’s Part 2 and Part 15 rules regarding equipment authorization, including certification, verification, and declarations of conformity.

The FCC’s investigation into Fender’s products began in June 2010, when the FCC sent the company a letter of inquiry. While the content of the letter is not publicly available, it appears that the FCC sought information about when Fender received equipment authorizations for certain products, the labeling of such products, and the information disclosed in the user manuals for those products.
Over the course of the next two years, Fender, through its legal counsel, submitted a number of filings responding to the FCC’s inquiry, and executed tolling agreements that permitted the FCC to extend its investigation. Ultimately, Fender reached an agreement with the FCC terminating the investigation. In the agreement, Fender did not acknowledge any wrongdoing (nor did the FCC reach any such conclusion), but the company voluntarily agreed to contribute $265,000 to the U.S. Treasury and institute an internal program to ensure future compliance with the FCC’s rules. While this is nowhere close to being the most expensive equipment-related contribution or fine the FCC has received or assessed for unlicensed devices (in one case the FCC assessed a $1 million dollar forfeiture), it does send a loud message to manufacturers and importers of almost all modern day electronic devices that the FCC polices its equipment authorization rules and treats potential violations seriously.

For an overview of the FCC’s Part 2 and Part 15 rules, you can check out our Client Advisory on the subject.

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The FCC has announced that full payment of all applicable Regulatory Fees for Fiscal Year 2012 (FY 2012) must be received no later than 11:59 PM, ET, on September 13, 2012. As of today, the Commission’s automated filing and payment system, the Fee Filer System, is now available for filing and payment of FY 2012 regulatory fees.

As we reported last month, the FCC released a Report and Order containing final determinations as to how much each FCC licensee will have to pay in Annual Regulatory Fees for FY 2012. The FCC collects Annual Regulatory Fees to offset the cost of its non-application processing functions, such as conducting rulemaking proceedings.

These annual regulatory fees are owed for most FCC authorizations held as of October 1, 2011 by any licensee or permittee which is not otherwise exempt from such fees. As has been the case since 2009, the FCC requires that licensees use the Commission’s online Fee Filer System to submit their regulatory fees. In order to do so, parties must have a valid FCC Registration Number (FRN) and password. Payment can be made with a credit card, online payment from a bank account, check (after receiving an electronic voucher via Fee Filer), or wire transfer. More information regarding submitting a payment can be found here at the FCC’s Regulatory Fees website. Note that, effective June 30, 2012, the U.S. Treasury is no longer accepting credit card payments greater than $49,999.99.

For more information on annual regulatory fees, including assistance in preparing and filing them with the FCC, please contact any of the lawyers in the Communications Practice Section.

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On Thursday, the much anticipated Online Public Inspection File for television stations launched more or less successfully. To complete the task in the short time given them, the FCC staff put forth an Olympic effect, and while they were subject to some point deductions for a few stumbles in the regulatory gymnastics involved, they largely “stuck the dismount” as the system went live.

To its credit, the FCC clearly listened to the many voicemails and emails sent to FCC staff, as well as the comments and questions raised during the FCC’s online demonstrations prior to launch. Some potentially nasty pitfalls for stations were ironed out via the FAQs, and the system will hopefully continue to be refined in the weeks and months ahead.

In the meantime, here is what stations need to do now that the system is operational:

1. Be sure you can log in. The FCC’s staff reports that there were a considerable number of stations that had lost or forgotten their FRN (Federal Registration Number) and password or otherwise had trouble with the log in process. The FRN has become an all-access pass to a station’s records with the FCC and anyone who has it can file applications on the station’s behalf in any number of FCC filing systems. The potential for mischief that the FRN and password presents is worthy of another blog post, but for now, know that stations that have used multiple FRNs and passwords may find it hard to get access to their online public inspection files and need the staff’s assistance in straightening the problem out.

2. Input your station address. On the Authorizations page and again on the Letters and Emails From the Public page, stations need to fill in the station’s main studio address, telephone number and email contact information. Stations should also verify that their closed captioning contact is listed correctly.

3. Cross-reference the online public file on the station’s home page. Stations that have websites must include a link on their home page to their online public inspection file and provide the public with contact information for a station employee that can assist the disabled in accessing the public file.

4. Remove out of date documents automatically uploaded by the FCC. Since the FCC simply linked its CDBS public view to the new online public files, there may be numerous items that can safely be discarded as no longer relevant. The FCC did not do this automatically because the retention periods for the various categories of documents that seem straightforward at first blush actually vary considerably depending on a station’s individual circumstances. The FCC has given stations enough rope to hang themselves here, so care should be taken before documents are removed. Nevertheless, for most stations, a lot of material is being put out there that need not be.

5. Check the station’s Section 73.1212(e) and BCRA (Bipartisan Campaign Reform Act) folders. Chances are good that confusion has surrounded your station’s 73.1212(e) folder for years, with the result that many stations’ Section 73.1212(e) folders are empty. Section 73.1212(e) is the rule requiring stations to maintain a list of the executive officers of organizations that buy time to discuss political matters or controversial issues of public importance, and to place that list in the public inspection file. Most stations have treated these types of spots no differently than they do spots purchased by candidates for elective office. As a result, often when we visit a station’s public file, we find neatly labeled folders for each candidate and each issue in the same section of the file cabinet and an empty folder labeled “Section 73.1212(e) Sponsorship Identification” at the very end of the drawer. When BCRA was implemented (requiring stations to maintain more detailed information about third-party political and issue ad buys involving controversial national issues), stations simply labeled more folders and added the BCRA materials to the political file right next to the materials on candidate ads. In addition, many stations found it difficult to distinguish between controversial national issues versus controversial state or local issues, and simply collected and maintained the same disclosure information for all ads that seemed “political” in nature, even if placing that information in the file was not actually required.

Technically (and here’s where we separate the real communications lawyers from people who have interesting lives), the paperwork kept for non-BCRA issue ads was never part of a station’s “political file”, and the BCRA paperwork, which is nowhere mentioned in either the FCC’s political or public file rules, is part of the political file. This distinction could have meant that stations that are not network affiliates located in the Top 50 markets would have been exempt from uploading candidate and BCRA paperwork until July 2014, but would still have to upload state and local issue ad paperwork immediately. Fortunately, the FCC appears to have sidestepped this problem by including in its FAQs a statement acknowledging that, because many stations simply lump all these “political” documents together, they can treat them all as part of the “political file” and only start uploading them in July 2014 (unless they are a Big 4 network affiliate in a Top 50 market).

6. Decide when to start uploading the station’s pre-August 2 documents. The FCC is giving stations six months to upload their required pre-August 2 documents to the website. While the original Report and Order only gave stations five months from the rule’s effective date to get this done, which would make final compliance due over the New Year’s holiday, the FCC through its FAQs and its staff’s advice is granting stations until February 2, 2013 to finish the upload process. Given the continuous “Recent Station History” feed on the FCC’s website notifying the public of the most recent filings, however, stations might want to time their uploading activities to times when other filings are also taking place (i.e, October 1 EEO Public File Reports or October 10 Quarterly Issues/Programs Lists). That way, their recently filed documents are likely to be moved off the front page more quickly.

7. Stations airing pre- or post-filing license renewal announcements must update the language of the spots, while understanding that the public might not appreciate the change. The FCC has now updated the language of the pre- and post-filing license renewal announcements so that, on the one hand, it directs the public to find the station’s license renewal application at www.fcc.gov, but, on the other hand, tells the public to come to the station’s main studio or to the FCC to learn more about the license renewal process. The problem is that stations which filed their license renewal applications on June 1 or August 1 have been telling their viewing public for months that their applications are available at the main studio. This may lead to some disgruntled visitors to the studio, and stations will also need to think about exactly what they can offer members of the public that show up in their lobbies asking for “further information concerning the FCC’s broadcast license renewal process.” As a matter of good public relations, stations going through license renewal may want to consider keeping a hard copy of their license renewal application and the FCC’s “The Public and Broadcasting” publication available to pacify members of the public who trek to their stations in response to the public notices. Of course, stations that have not transitioned all of the required elements of the public file into the FCC’s system must still make the public file available upon request in the traditional manner, and stations will always have to make letters and emails from the public available at the studio even after the transition has ended.

Finally, broadcasters have long noted that visitors to the public file are few and far between. As a result, it has been all too easy for stations to become rusty on the procedures for making the file immediately available to the public, despite the many fines that have been assessed by the FCC for failure to do so. It is likely that visits will become even less frequent now that much of the file will be available online. However, stations must continue to prepare their staffs to receive the public and respond to questions about what is at the station and what is online. The upcoming months will likely be a learning process for all.

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July 2012
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 Assesses $68,000 in Fines for Unauthorized STL Operations
  • EAS Failures Lead to $8,000 Fine

Licensee in Wyoming Slammed with $68,000 in Proposed Fines for STL Operations
July was not a good month for the licensee of FM radio stations located in Casper, Wyoming. The FCC issued four separate Notices of Apparent Liability for Forfeiture (“NAL”) against the licensee for a total forfeiture amount of $68,000.

In August 2011, an agent from the FCC’s Enforcement Bureau inspected the main studios of the licensee’s four FM radio stations and the corresponding studio transmitter links (“STL”) for each station. In the first of the four NALs, the agent discovered that although the station’s STL was operating on its authorized frequency, the STL was operating at the site of the station’s main studio, 0.3 miles away from the STL’s authorized location.

In December 2011, the Enforcement Bureau issued a Letter of Inquiry (“LOI”) to investigate. In the licensee’s delayed response to the LOI in April 2012, the licensee admitted that the STL had been the primary delivery mechanism for the FM station’s programming since 2001 and that an application to change the location of the STL “should have been filed” when the station moved its main studio ten years earlier. Only after the fact (in May 2012) did the licensee file an application to modify the STL’s authorized location. According to Section 1.903(a) of the FCC’s Rules, stations must operate in accordance with applicable rules and with a valid authorization granted by the FCC, and the base forfeiture for operating at an unauthorized location is $4,000. Here, the FCC decided that an upward adjustment of an additional $4,000 was warranted because the STL had been operating at the unauthorized location for ten years.

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Late this afternoon, the United States Court of Appeals for the District of Columbia Circuit denied the Stay requested by the National Association of Broadcasters that would have prevented the FCC’s new online Public Inspection File posting requirement from becoming effective. As a result, television broadcast stations must be prepared to comply with this new requirement effective on August 2, 2012.

As we have previously reported here, the FCC has moved with great speed to create a new filing system to house television stations’ online Public Inspection Files. Until now, broadcasters have had only a brief glimpse of the system they must begin using in less than one week.

This afternoon, the FCC announced that it will hold two public online “screensharing” sessions that will “provide high resolution views of the application screens and cover the material presented during the July 17, 2012 demonstration.”

The sessions will occur at 9:00 am on Monday and 4:00 pm on Tuesday. Those interested in viewing the demonstrations must visit the FCC’s site in advance and join the teleconference prior to its scheduled start time. While the online demonstration will provide the visuals, the audio portion will be done via the teleconference.

We have prepared an Advisory for clients to help them understand which specific items must be uploaded and what steps they should take to make a successful transition to the online Public Inspection File. The next week promises to be chaotic for TV broadcasters, but we hope the Advisory will help alleviate some of the regulatory pain.