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After we published our Advisory reminding licensees of the deadline to electronically file the Quarterly Children’s Television Programming Report on FCC Form 398 for the Third Quarter of 2010, the FCC disclosed that it has modified its electronic filing system to require the entry of a Federal Registration Number (“FRN”) and password as the final step before the report can be filed. The FCC issued no advance public notice of this requirement, but instead placed the following notice on its webpage dedicated to the Children’s Television Act of 1990, although NOT on the page that licensees visit to prepare and file the report itself:

To enhance the security and integrity of the KidVid database, we now require authentication with an FRN and password associated with the broadcast facility for each Form 398 filing. After you have completed Form 398, you will be prompted to enter this information. You must enter your FRN and password to complete the form. If you have forgotten your FRN password, please contact the CORES helpdesk at 877-480-3201.

Because of the potential for surprises associated with the implementation of this new requirement, we recommend that, if possible, licensees complete their Form 398 filings in advance of the filing deadline. The filing deadline for this quarter falls on Tuesday, October 12, 2010 due to the Columbus Day holiday, so Friday, October 8, 2010 is a good target date for completing the Form 398. This will allow additional time for station personnel to address any issues that arise, such as determining which FRN and password combination(s) will be accepted by the filing system, and, if necessary, to locate the correct information.

Should you have any questions regarding this Alert or the FCC’s children’s programming requirements in general, please contact any of the attorneys in the Communications practice section.

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The Department of Homeland Security’s Federal Emergency Management Agency (FEMA) announced in a public notice released today that it has adopted the Common Alerting Protocol (CAP) v1.2 Standard for FEMA’s Integrated Public Alert Warning System (IPAWS). Under the FCC’s Rules, Emergency Alert System (EAS) participants (e.g., radio and television stations, and wired and wireless cable television systems) must be able to receive CAP-formatted EAS alerts no later than 180 days after FEMA publishes the technical standards and requirements for CAP transmissions. Although FEMA’s public notice does not mention the 180 day clock, an FCC representative stated today that the 180 day period commences with issuance of the FEMA public notice. As a result, all EAS participants should assume that the release of the public notice today (September 30) initiated the 180 day period to acquire and install CAP-compliant equipment.

At its essence, IPAWS is a network of alert systems through which FEMA is upgrading the way Americans receive alert and warning information, providing that information through as many communications pathways as possible. CAP is an alerting format that uses digital technology to allow a consistent warning message to be disseminated simultaneously over as many different warning systems as possible. In addition to enhanced audio and video, CAP permits digital photos and text to be included in emergency alerts and AMBER alerts.

FEMA and the FCC are to be commended for their hard work in seeking to improve EAS and better alert the American people in the event of an emergency. However, EAS participants and equipment manufacturers alike have argued that 180 days is not enough time to acquire equipment compatible with the new CAP standards and to configure EAS systems to receive and relay CAP messages. Manufacturers of EAS equipment may not be able to meet the sudden demand for new equipment by that deadline if every EAS participant is indeed required to have CAP-capable equipment installed within 180 days. Many EAS players have also noted that the 180 day time frame does not take into account legitimate budgeting concerns, given that the equipment alone can cost $2,000-$3,000. With tight federal, state, and local budgets, most EAS participants will likely get no assistance in acquiring the equipment necessary to make the new alerting system work.

There is also the issue of equipment certification and testing. FEMA is expected to wrap up its initial certification process by issuing a list of CAP-certified equipment by the end of November. But it isn’t clear if the FCC will conduct its own certification process to provide EAS participants and EAS equipment manufacturers with the certainty of FCC rule compliance they would like prior to moving forward with acquiring CAP-compliant equipment. Many also complain that it remains unclear if parties will be able to fully test the reliability of their new CAP equipment until late 2011, given that the first national FEMA test of CAP is not expected to occur until that time.

Also, while EAS participants are required to meet the 180 day deadline, there are no rules requiring state or local Emergency Management Agencies or public safety departments to be able to actually deliver such alerts by that deadline. So while EAS participants will need to be able to receive national CAP messages delivered by FEMA, they will also need to make sure that their new equipment can simultaneously receive older “legacy” messages that may continue to be issued locally. And if states decide to implement a CAP-compliant EAS system in the future, there is no guarantee that the equipment they acquire then will be fully compatible with the equipment purchased earlier by EAS participants in that state.

The good news is that staff at both FEMA and the FCC have been made aware of these and other concerns surrounding the 180 day deadline and seem sympathetic to those concerns. It is therefore possible that the 180 day compliance period could be extended, but EAS participants should not rely on that being the case. Because of this, EAS participants will need to carefully assess their situation to determine when and how to select EAS equipment appropriate to their needs. EAS participants that wait until too late to focus on this issue will certainly face an emergency of their own.

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Posted in: Emergency Alert System
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The FCC today released an order refining, but largely reaffirming, its earlier decision to allow unlicensed devices to operate in the TV band as long as they do not cause interference to existing users such as TV stations and wireless microphone operators. While many refer to this spectrum as “white spaces” on the theory that it is vacant spectrum located between existing television signals, veterans of the digital television transition question whether white spaces more appropriately fall into the same category of mythical creatures as unicorns.
The digital transition’s compression of television stations that previously occupied Channels 2-69 nationwide into Channels 2-51 took a miraculous feat of engineering (and the displacement of a lot of LPTV stations). Many stations had to be wedged into the shrunken TV band with a shoehorn, which, at least in urban areas, left very little free spectrum. While the phrase “white spaces” evokes a mental image of vast open prairies, the densely populated areas that are the target markets for manufacturers of unlicensed equipment are already spectrum congested, and are more likely to offer “white spots” or “white specks” than white spaces. The benefit of the Commission’s order will likely be greater in rural areas, where spectrum congestion is not an issue even after the digital transition.

As long as the FCC lives up to the Prime Directive of not causing interference to existing inhabitants of the TV band, the benefits of better utilization of spectrum are hard to dispute. Broadcasters understand as well as anyone the challenge of eking out every last ounce of potential from spectrum. However, broadcasters are understandably concerned with a significant change made by the FCC in today’s order — the elimination of the FCC’s requirement that white spaces devices be able to sense local signals and avoid causing interference to them. By eliminating that requirement, the FCC removed the “safety valve” it had installed in its original plan. Instead, the FCC is placing its faith entirely in the creation of one or more privately-created and run databases of existing spectrum users that unlicensed devices will consult before selecting a frequency on which to operate.

Many in the broadcast industry have been strong proponents of requiring unlicensed devices to have “sensing” capability rather than relying solely on a national database of existing signals. “System redundancy” is an important feature in designing reliable communications systems, and removing that redundancy inevitably makes for a less reliable system. As the FCC has noted, eliminating the “sensing” requirement will reduce the cost of unlicensed devices, but as we discovered in the recent Gulf oil spill, short term decisions to reduce costs by reducing safety margins can have far greater and more expensive long term consequences.

While lacking any backup protection, a spectrum database could be a workable solution if properly implemented. However, the challenges of implementation are immense. Ensuring the accuracy of the database itself will be a challenge given constantly changing spectrum use by new and existing operators. Also, signals propagate differently depending on frequency, what part of the country you are in, local terrain, and various other factors, making the database either incredibly complex, or inadequate to address real world circumstances.

Viewers of TV stations in Fresno, whose real world signals extend far beyond their predicted contours because of terrain effect, will suddenly be subject to interference from unlicensed devices. In addition, you have to think that users of those unlicensed devices aren’t going to be too happy when their wireless network won’t function because (unknown to them) it is receiving interference from a TV signal that the database swears isn’t there.

Because of these and many other issues, the FCC needs to keep an open mind as it implements its proposed use of white spaces. A well-performing database that keeps licensed and unlicensed operators adequately separated is in everyone’s interest. If some of the FCC’s initial conclusions need to be rethought in order to accomplish that, those discussions will be healthy ones.

Equally important is ensuring that equipment manufacturers fastidiously comply with the FCC’s interference protocols. Broadcasters are rightly concerned that non-compliant or just poorly designed and manufactured unlicensed devices can cause immense damage, and the FCC lacks the tools to put the genie back in the bottle should that occur. Fining such manufacturers after the fact won’t help much if millions of interference-inducing devices are already out there interfering with the public’s ability to watch TV, listen to a sermon, or attend a Broadway show. As the FCC proceeds down this path, getting it right is going to be far more difficult than just getting it done.

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The staggered deadlines for filing Biennial Ownership Reports by noncommercial educational radio and television stations remain in effect and are tied to their respective anniversary renewal filing deadlines.

Noncommercial educational radio stations licensed to communities in Iowa and Missouri, and noncommercial educational television stations licensed to communities in Alaska, American Samoa, Florida, Guam, Hawaii, Mariana Islands, Oregon, Puerto Rico, Virgin Islands and Washington, must file their Biennial Ownership Reports by October 1, 2010.

Last year, the FCC issued a Further Notice of Proposed Rulemaking seeking comments on, among other things, whether the Commission should adopt a single national filing deadline for all noncommercial educational radio and television broadcast stations like the one that the FCC has established for all commercial radio and television stations. That proceeding remains pending without decision. As a result, noncommercial educational radio and television stations continue to be required to file their biennial ownership reports every two years by the anniversary date of the station’s license renewal filing.

A PDF version of this article can be found at Biennial Ownership Reports Are Due by October 1, 2010 for Noncommercial Educational Radio Stations in Iowa and Missouri, and for Noncommercial Educational Television Stations in Alaska, American Samoa, Florida, Guam, Hawaii, Mariana Islands, Oregon, Puerto Rico, Virgin Islands and Washington

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Posted in: Noncommercial Operation
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One of the great things about being a communications lawyer is the wide array of issues you deal with over the course of a day. Contract lawyers negotiate contracts, and litigators litigate, but communications lawyers negotiate contracts, litigate, argue government policy, and generally are thrown into the breach whenever a problem emerges affecting their clients. As a very senior communications practitioner said when I was a young lawyer, “if you want to be a communications lawyer, you better be very good at your trade or have a damn good smile!”
Because of the diversity of communications issues out there, you never know when you answer the phone what the issue will be. One question I have received on multiple occasions over the years is whether it’s true that radio stations are prohibited from airing the sound of a police siren. I have had broadcasters swear there is a flat prohibition on this and that they were taught about it early in their career. While there is no outright prohibition, this “old broadcaster’s tale” stems from a 1970 FCC proceeding where several complainants sought such a ban. The FCC declined to prohibit these sound effects, but basically told broadcasters to use common sense when airing them. Not coincidentally, 1970 was the year that R. Dean Taylor’s song Indiana Wants Me made it to Number 5 on the Billboard charts, complete with siren. A siren-free version of the song was also produced to appease nervous radio stations (take a listen to the “with sirens version“; go ahead, I’ll wait till you get back).

I was reminded of all this today when I received a client call asking about a radio ad from the oil company ARCO that includes the Emergency Alert System tone at the beginning of the spot. The Society of Broadcast Engineers has posted an MP3 of the ad here.

The EAS tone differs from police sirens in two important ways. First, the airing of the EAS tone or a simulation of the tone where no emergency or authorized EAS test exists is flatly prohibited by Section §11.45 of the FCC’s Rules (“No person may transmit or cause to transmit the EAS codes or Attention Signal, or a recording or simulation thereof, in any circumstance other than in an actual National, State or Local Area emergency or authorized test of the EAS.”). It could also potentially violate Section 73.1217, the FCC’s prohibition on broadcast hoaxes.

Second, unlike members of the public who usually can discern from context whether a siren or other emergency sound is a cause for concern (does Indiana really want them?), the electronics that monitor radio signals do not have this capability. As a result, the airing of the commercial has accidentally activated EAS receivers around the country, which hear the alert tone and activate the local emergency alert system as though an actual emergency is occurring. It appears the tone in the spot was tweaked to speed it up a bit, but apparently not enough to avoid fooling at least some EAS receivers.

Stations airing the spot, particularly where EAS activations have occurred, should get in touch with their communications counsel immediately. The FCC’s words from 1970 are still relevant here: “The selection and presentation of advertising and other promotional material are, of course, the responsibility of licensees. However, in this selection process, licensees should take into account, under the public interest standard, possible hazards to the public. Accordingly, in making decisions as to acceptability of commercial and other announcements, licensees should be aware of possible adverse consequences of the use of sirens and other alarming sound effects.” It may take 40 years, but what goes around, comes around.

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Anyone who has enjoyed March Madness knows that Lady Luck often intervenes in a team’s journey to the NCAA Final Four. But is getting to the game a literal roll of the dice for spectators too? The Seventh Circuit Court of Appeals in Chicago has recently ruled that a lawsuit can go forward which claims that the NCAA’s ticket sales for the NCAA tournament are an illegal lottery akin to a game of poker or roulette.

Those who run sweepstakes and contests live in fear of having such an accusation leveled against their promotional campaigns. While they know that they must avoid combining the three elements of a lottery: (1) prize, (2) chance, and (3) consideration (such as money), those who are new to the industry can often be heard to say “it’s not like this is real gambling or anything.” Much of the time, the focus is on how to make sure that “chance” or “consideration” (or both) are not present in your promotional game. There is very rarely any debate as to whether there is a “prize,” as there is usually little point to having a promotion without one. Yet, it is that issue which is at the heart of the case against the NCAA. More to the point, the Court seems to have been influenced by the fact that Final Four tickets are highly sought after, so the chance to buy them in and of itself could be a “prize.”

For years, the NCAA has used random selection to determine who will be allowed to purchase tickets to its Final Four basketball games. According to the plaintiffs in this case, to have a shot at scoring a pair of tickets, they were required to pay the NCAA in advance for both the face value of the tickets and a “non-refundable handling” fee of $6-$10. To maximize the chance of being selected, each person could enter up to ten times, submitting the face value of ten tickets plus handling fees, although participants would only be allowed to purchase a single pair of tickets if selected, regardless of the number of entries submitted. After the random selection process, “winning” entrants would receive two tickets and a refund of the face value of the other nine entries, while those who were not selected would receive a refund of the face value of ten pairs of tickets. However, none of the applicants received a refund of the handling fees.

The plaintiffs filed a class action lawsuit alleging that the ticket distribution process is an illegal lottery. They allege that the opportunity to purchase a pair of Final Four tickets at face value is a prize, that the prize is distributed by chance, and that they paid consideration for that chance in the form of the handling fees that were not refunded. From this assessment, the plaintiffs conclude that the NCAA is engaged in illegal gambling in the sale of Final Four tickets.

The trial court initially dismissed the case based on an Indiana court of appeals case, Lesher v. Baltimore Football Club, which held that the Indianapolis Colts were not engaged in gambling when they used a similar ticketing system. In Lesher, however, the handling fees were refunded for all but the tickets that were actually purchased. The Lesher court decided that there was no “prize” involved in the Colts ticket distribution scheme because a “prize” is “something of more value than the amount invested.” Ticket purchasers “invested the price of the tickets and received in exchange either the tickets or the entire amount invested . . . those receiving tickets got nothing of greater value than those who received refunds.” With regard to the NCAA’s ticket sales, though, the Seventh Circuit faulted the trial court for relying on Lesher. According to the Seventh Circuit, the plaintiffs had adequately argued the existence of a “prize” because they asserted that the fair-market value of the NCAA Final Four tickets was much greater than the face value at which the winners had purchased them, and that the plaintiffs had “invested” the handling fees to participate in the random drawing.

While the trial court will ultimately have to decide these issues, the Seventh Circuit’s ruling certainly nudges the trial court in an interesting direction, and the result may expand the definition of what qualifies as a “prize.” This case is a reminder of the importance of structuring promotions with care to avoid the legal morass and potential liability facing the NCAA in this class action lawsuit. Marketers and broadcasters cannot merely rely on doing things the way they were done in the past to protect against lawsuits and prosecution. That approach is, quite simply, a gamble.

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Posted in: Advertising
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You may have noticed that more and more television shows these days seem to be including “product placement,” a form of advertising in which a product, corporate logo, or brand name is positioned as a “prop” in a program or is used as an integral part of the story line. We have all seen the prominently displayed Coca-Cola cups placed on the judges table in front of Simon, Randy and Paula during American Idol. And although Apple stated that it made no payment for what seemed like an entire episode of Emmy Award winning Modern Family devoted to the iPad, many in the media and the public wondered if what amounted to a half-hour advertisement for the iPad was legal.

Does the FCC have rules regarding product placement? Are program producers and broadcasters required to disclose placement deals to viewers?

The simple answer is yes. The FCC considers product placement to be “embedded advertising” that is subject to the FCC’s “sponsorship identification” rule. The rule says that if a program producer, broadcast station, or a station employee receives anything of value, directly or indirectly, in exchange for causing material to be broadcast, the sponsorship and the identity of the sponsor must be disclosed on-air.

Congress decided long ago that members of the public have a right to know when someone has paid to have material aired by a TV or radio station. As a result, if a station or network enters into a placement deal, the deal must be disclosed on the air. Undisclosed product placement can amount to illegal payola.

The FCC’s rules and the Communications Act aren’t limited to just requiring that broadcasters make the necessary disclosures. They also require program producers to notify the broadcaster if they have a deal to include any sort of product placement in a program. This allows the broadcaster to then make the necessary on-air disclosures.

More than two years ago, the FCC began considering whether it should adopt more stringent rules on how television programmers and broadcasters let viewers know when “props” in television shows are actually paid pitches made by an advertiser. However, the FCC has not yet resolved the question. The FCC’s proceeding was fashioned as a “Notice of Inquiry,” which means that the FCC will subsequently need to issue a Notice of Proposed Rulemaking before any new rule can be adopted. Because of this, we are not likely to see the matter resolved soon.

While the FCC’s product placement/embedded advertising proceeding is currently in limbo, broadcasters, networks, and program producers need to keep in mind that product placement deals — when not disclosed on-air — violate the FCC’s sponsorship identification rule. The use of product placement in advertising is only going to increase as advertisers respond to a changing industry, including the use of DVRs, online availability of content, and other tools that let viewers skip traditional commercials. When entering into product placement deals, program producers, networks and broadcasters need to remember that the FCC, and not just the public, may be watching.

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Posted in: Advertising
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As we reported in a previous Client Alert, full payment of all applicable Regulatory Fees for Fiscal Year 2010 must be received no later than today, August 31, 2010, at the Commission’s St. Louis, Missouri address by 11:59 PM, Eastern Daylight Time.

As in previous years, failure of a licensee to submit the required regulatory fees in a timely manner will subject it to a late payment penalty of 25% in addition to the required fee. In order to pay the fees, licensees must generate an FCC Form 159 using the FCC’s online “Fee Filer System” which can be found at: www.fcc.gov/feefiler. In order to access the Fee Filer System, you must have a valid FCC Registration Number (FRN) and password. Once you have successfully accessed the System, you will have the ability to review your fees. Licensees are required to either pay online with a credit card, pay online using a bank account, pay by mailing a check, or pay by sending a wire. The FCC’s instructions for filing fees can be found at: www.fcc.gov/fees/regfees.

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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Posted in: Fees
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Having spent a good portion of last week on the road and on conference calls talking about the latest Performance Tax developments, I heard a lot from broadcasters on the subject. For those blissfully unaware of this legislative battle, the recording industry has been seeking a financial parachute from broadcasters to help slow the rate of its descent into an economic abyss. The irony of course is that if illegal music downloads on the Internet are what has caused the recording industry’s plunge, reaching out to drag broadcasters into the abyss with them merely weakens an ally in the battle to protect content from illegal distribution over the Internet.

Famously dubbed a performance “tax” by broadcasters, the legislation sought by the recording industry would require broadcasters to pay royalties to the recording industry for playing music on-air. Beyond the obvious short term benefit of royalty checks from broadcasters that choose to retain a music-based format, the recording industry hopes the passage of a U.S. law requiring such royalties for broadcasts in the U.S. will cause foreign countries to release royalties already being collected for airplay of U.S. artists in those countries. Unfortunately, because most of the record companies are now foreign-owned, much of that money, along with royalties paid by U.S. broadcasters, would wind up in foreign hands, undercutting any argument for this “found money” being an economic benefit in the U.S. All of the royalty funds would come from the U.S., but only a portion of those funds would stay in the U.S. However, one would hope that at least some of those royalties, if they do come to pass, would actually reach the U.S. artists responsible for creating the music that the recording industry has been selling and reselling to us over the years.

Broadcasters have been successful in blocking Performance Tax legislation because of good grass roots efforts to remind Congress that radio promotes the sale of music at no charge to the record labels or to the artists that have ridden radio airplay to fame (and whose records and concert tickets continue to sell because of radio airplay). The long, sordid history of payola — the record labels’ efforts to curry airplay via cash and other payments to radio station programmers — supports broadcasters’ proposition that the “value” of radio airplay exceeds any “costs” it imposes on the recording industry.

It was therefore with great surprise that many radio broadcasters heard last week that negotiating teams for the two industries were floating a multi-part proposal to resolve the legislative impasse — a compromise that would require, for the first time, that artist (as opposed to songwriter) royalties be collected on broadcast airplay of music. While the proposal has some attractive features for broadcasters (most importantly the inclusion of FM receiving chips in cellphones), I got an earful from broadcasters absolutely incensed at the notion of promoting music and concert sales, and then being charged for doing it.

If any member of Congress thinks that “radio promotes music sales” is just a broadcaster talking point for meetings, encountering a broadcaster last week would have decisively corrected that impression. Some broadcasters I talked to had such a visceral reaction to the very concept of such payments that it didn’t matter to them what the beneficial points of the proposal were. For them, it was as if someone had told them to “pay the ransom to the kidnappers and hope for the best.” Some appreciated that it could be the pragmatic thing to do to put the issue behind them, but still found the very concept reprehensible. To be sure, there is money involved and that can sway a person’s thinking. However, a number of the broadcasters I spoke with were so fundamentally opposed to the concept that they would reject the idea even if other parts of the proposal actually resulted in more money coming in from the proposal than going out.

I understand that perspective, but lawyers are trained to assess the options, and to assist their clients in choosing the best option for that client. Often, but not always, the “best” option is the one most economically beneficial to the client. Here, some broadcasters are not interested in the economics, but in the unfairness of being forced to pay a performance royalty as any part of the package. Despite that, all broadcasters should give the compromise proposal a careful look, if only to sharpen their understanding of the numerous issues in play and how they might affect the future of radio broadcasting. There are any number of reasons why the proposal might not gain momentum, or even be possible given the dynamics of Washington, and I hope to address those in a future post. For now, radio broadcasters should suppress the instinct to reflexively ignore it, and instead talk to their colleagues and counsel about the issues this proposal raises for their future, and for the future of their industry.

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The FCC has opened a rulemaking proposing reforms to its broadband health care initiatives for rural and tribal areas. The FCC’s Notice of Proposed Rulemaking originally released in July was published in the Federal Register today, which establishes the deadline for submitting Comments and Reply Comments in the proceeding. Comments in response to the Notice of Proposed Rulemaking are due on September 8, 2010. Reply Comments are due on September 23, 2010.

Chief among the proposals contained in the Notice of Proposed Rulemaking are:

• Creating a health infrastructure program that would support up to 85% of the construction costs of new regional and statewide broadband networks serving public and non-profit health care providers where broadband is currently unavailable or insufficient;
• Creating a health care broadband services program that would subsidize 50% of the monthly recurring costs of access to broadband services for eligible public or non-profit rural health care providers; and
• Expanding the class of health care providers eligible to receive these funds to include skilled nursing facilities, renal dialysis centers and facilities, and certain off-site administrative offices and data storage centers that perform support functions for health care providers.

We discussed the details of this Notice of Proposed Rulemaking in a recent Client Advisory. Health care providers, as well as rural and tribal communities interested in improving their broadband access for local health care services, should get involved in this proceeding. It is important to provide the FCC with real world examples of the needs and problems faced in providing modern health care services in your community so that those needs are taken into account as the FCC attempts to craft its rural health care initiative.

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Posted in: Internet & Online
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