Broadcast Law Blog

Some PACs Stop Running "Electioneering Communication" Ads to Avoid Reporting Requirements

David Silverman — Tue, 15 May 2012 17:25:41 -0500

In recent days we have seen political action committees (PACs) claiming they are "prohibited" from running political ads in primary states due to "new rules" regarding "electioneering communications." As explained below, these claims are incorrect. What they are really doing is trying to avoid the need to reveal the identity of their contributors, following a US District Court decision in March.

Under Federal Election law, an "electioneering communication" is a broadcast, cable or satellite communication that refers to a clearly identified candidate for federal office within 30 days of a primary or 60 days of an election, targeted to 50,000 or more people in the state or district the candidate seeks to represent. For President and Vice Presidential candidates, an "electioneering communication" is one that can be received by 50,000 or more people within 30 days of a state primary or the nominating convention.

By federal statute, sponsors of "electioneering communications" must disclose the names and addresses of each donor who contributed $1000 or more to the sponsoring organization. This is is the provision that led to the US District Court decision at issue.

The Federal Election Commission (FEC) enacted a rule requiring disclosure of donors whose donation was made "for the purpose of furthering electioneering communications." Maryland Rep. Chris Van Hollen challenged this rule on grounds that it created a loophole in the law. According to Van Hollen, fewer than 10% of the contributors to electioneering communications in 2010 were disclosed to the FEC.

The US District Court agreed with Van Hollen, holding that the statute requires disclosure of ALL contributors of $1000 or more to organizations placing "electioneering communications," even if the contributions were not made for the specific purpose of funding the electioneering communication. The number of contributors that would need to be disclosed under this ruling could be quite high, particularly since the US Supreme Court allowed corporations and unions to fund independent electioneering communications in its landmark 2009 Citizens United case discussed here.

So, while some PACs erroneously claim they are "prohbited" from running electioneering communications due to a recent "FCC" ruling, the truth is that they do not want to subject themselves to the broad disclosure requirements established in the Van Hollen case. The case is on appeal to the DC Circuit, so we should soon know whether the FEC or the US District Court was right in their respective interpretations of the disclosure statute.

In the meantime, "electioneering communications" can be avoided by not referring to a specific candidate, by avoiding states where primaries are to occur within 30 days or by communicating the message to fewer than 50,000 people. While these ads will still be considered "independent expenditures" that have their own FEC reporting requirements, they are not nearly as burdensome as those recently imposed by the court on "electioneering communications."

Radio Music Licensing Committee Announces Settlement With BMI Following Settlement With ASCAP - Why SESAC is Not Included

David Oxenford — Tue, 15 May 2012 12:25:13 -0500

The Radio Music Licensing Committee has announced a settlement with BMI over music royalties for the public performance of musical compositions for the period from 2010-2016. Terms have not been announced, so we can't provide the details, yet. But as we wrote recently when the RMLC announced the terms of its agreement with ASCAP, we would assume that the terms would be somewhat similar to the ASCAP deal. If no settlement had been reached with BMI, the case would have gone to a "rate court" in Federal District Court to see what the fair market value of the performance right was. As analogous rates often form the basis for rate court determinations of fair market value, the settlement with ASCAP would no doubt have been an issue for BMI, as it would appear to set a benchmark rate for the public performance of musical compositions. But, we will have to wait to see what the filings say before we can determine if, for sure, the rates will decrease relative to prior rates to the same extent that they did for ASCAP.

It is worth reflecting on how RMLC came to reach deals with ASCAP and BMI, and to explain why there is no reference to a SESAC deal. I've already heard or seen several people suggesting that an agreement with SESAC may be next - when in fact that is not something that is imminent, as can be explained by the differences between ASCAP and BMI on one hand, and SESAC on the other. ASCAP and BMI are both governed by anti-trust consent decrees that have been in place for over 50 years. Under both decrees, these organizations have to enter into agreements to set royalties for all similarly-situated users of music in various categories of businesses – categories including radio, TV, websites, background music, restaurants, bars, hotels, performance venues and practically every other place where music is performed for the public. If no agreement can be reached on a voluntary license, a “rate court” decides on the royalties. Essentially, that means that a US District Court in New York has a trial to set the rates.

Both ASCAP and BMI had agreements in place with the radio industry that expired at the end of 2009. Negotiations with the RMLC have been ongoing since the last agreements expired (see our article here). The settlement just announced with BMI, and that announced a few months ago with ASCAP, were voluntary agreements to avoid the rate court proceeding. Those proceedings can be very expensive, take a long time and, as with any litigation, the outcome can be unpredictable

SESAC, on the other hand, has never been subject to any antitrust consent decrees. They were never thought to be large enough to merit antitrust scrutiny. While some TV stations have brought an antitrust action against SESAC, seeking to have some kind of relief from what the TV stations claim is prohibited collusive behavior, that case is still progressing, will likely take a long time and, like any litigation, the outcome is uncertain.

Unless and until some court rules otherwise, SESAC is not subject to any rate review. They are a for-profit company. And like any for-profit company, they can negotiate rates and charge essentially what they want for their product. Like any other commercial transaction, stations can decide not to play SESAC music, and not pay them. But if they play any SESAC music, and don’t have a direct license from the publisher for the rights to use the music, they need to get an agreement with SESAC. While SESAC has general licenses for broadcasters and most pay roughly the same amounts, as this is a commercial transaction, the deals can be negotiated by the user and by SESAC to fit particular circumstances. And SESAC tends to charge separately for streaming, HD and other music uses, so there may be some opportunity to negotiate blanket deals covering all of these services. But their rates are currently up to them, not subject to court review. See our article here for more information about SESAC.

But, for now and the foreseeable future, SESAC is not likely to be “next” for the radio industry. As for BMI and radio, we should see what the rates are there in a few weeks.

$10,000 Fines and Short-Term License Renewals for Missing Quarterly Issues Programs Lists

David Oxenford — Mon, 14 May 2012 22:12:05 -0500

In perhaps the most severe set of penalties that we have seen for public inspection file violations, the FCC released two sets of fines to stations that had self-reported, in their license renewal applications, that they did not have Quarterly Issues Programs lists in their public file for the entire 8 year license term. As we recently wrote, $10,000 fines for missing Quarterly Issues Programs lists have become the new standard where a substantial number of the lists are missing. Here, however, there were no timely filed lists at all in the public files for the stations in question - for an 8 year period. In one case, where the owner had both an AM and an FM stations, both were missing the Quarterly lists, the Commission proposed a fine of $20,000 ($10,000 for each station), and renewed the station licenses for only 4 years, not the normal 8 year license renewal term. A similar fine was proposed for a college-owned noncommercial station, also missing the required Quarterly lists for the entire license period - and that station also received a 4 year license term. In each case, the licensee had indicated that it was doign some renewal-time recreation of missing Quarterly lists, but these efforts did not seem to result in any lessening of the penalties proposed by the FCC. These fines and short-term license renewals show just how importantly the FCC treats these violations.

We do note, however, that where the missing lists are from but a few quarters, the FCC's fine is somewhat reduced, witness a recent $4000 fine for lists missing for just over a year - where the violations were from the beginning of the license term rather than being of recent vintage. But if you are missing list from some longer period of time - seemingly about 2 years - that $10,000 fine seems to kick in. Check you files now to make sure that you don't fall into the $10,000 trap.

Contests and Lotteries - A Presentation on the Legal Issues for Broadcasters

David Oxenford — Thu, 10 May 2012 21:50:24 -0500

FCC fines for violations of the FCC rules dealing with contests have been common in the last few years. Because of these fines, we recently conducted a webinar for the Kansas Association of Broadcasters, discussing the requirements of FCC rule Section 73.1216 which regulates the conduct of station-sponsored contests. We also discussed what should be addressed in contest rules, issues with contests that advertisers themselves sponsor, and considerations that stations should undertake to avoid civil liability when conducting contests. Other legal issues that should be considered in any contest or lottery promoted on a station were also covered. The slides from our presentation, outlining the legal issues that we discussed, are available here.

What are some of the issues we discussed? We recently wrote about fines of $22,000 for a station online contest, promoted on the air, without the station announcing all of the material rules on the air. Even imprecise contest rules have brought fines of $4000, as did a contest not conducted according to the rules announced on the air. Beyond these issues, broadcasters have to consider other legal liability that can arise for injuries to contestants - highlighted by the Sacramento case of a few years ago. Being careful in promoting third-party contests, like those conducted by advertisers, particularly compliance with lottery laws, is also important. Observe the rules and be careful - as there are many potential traps for those who are not prepared.

FCC Asks for Comments on Whether OTARD Rules Should Limit Local Zoning Authority Restrictions on TV Antennas and Other Reception Devices in Common Areas

David Oxenford — Thu, 10 May 2012 07:44:29 -0500

The over-the-air reception of television stations has taken on heightened awareness in recent years. In the regulatory world, this prominence comes from the FCC's consideration of taking back some of the broadcast spectrum for use by wireless broadband based at least partially on the Commission's belief that broadcasters are not using that spectrum efficiently as many viewers,over the last few decades, receive their TV programming from satellite and cable providers. At the same time, there have been more articles in the press and anecdotal stories about the new importance of over-the-air reception as people "cut the cord', getting their video programming from some combination of over-the-air TV and the Internet. Regardless of the truth of either perception, since the conversion to digital, issues about TV antennas have become more important as, in many places, an outdoor television antenna is necessary (or preferable) for decent over-the-air DTV reception. One issue that many television broadcasters have overlooked is that of OTARD - the FCC rules on over-the-air reception devices. As we wrote here, these rules have been interpreted to significantly limit the ability of landlords and local governments to adopt zoning rules or restrictive land-use policies forbidding outdoor TV antennas or small satellite dishes for the reception of video programming. This week, the FCC asked if the restrictions on local authorities should also apply to common areas of housing complexes.

The rules have traditionally been applied to restrict limitations on antennas and small dishes on property owned by the party wanting to make the installation, or property leased by that party and even to common areas under the exclusive control of the lessee (like the portion of a driveway or parking area reserved for use by the tenant). The FCC has allowed landlords and tenants associations to restrict the placement of OTARD devices in common areas not subject to tenant control. But the FCC has not addressed whether local government authorities can restrict the location of antennas and dishes in these common areas. The Satellite Broadcasting and Communications Association and DISH and DirecTV have asked the FCC to rule that, under OTARD rules, local authorities can't pass laws restricting the location of TV antennas and small dishes in these common areas, reasoning that if the owners of the land don't care, government should not be able to restrict the use of reception devices there, just as the government can't restrict the installation of these reception devices on property under the control of a tenant or home owner. This week, the FCC asked for comments whether the OTARD rules should apply to government restrictions over TV reception devices in these common areas. Comment are due on June 7. Reply Comments are due on June 22.

Two New FCC Commissioners Approved by the Senate - What Does It Mean for Broadcasters?

David Oxenford — Wed, 09 May 2012 09:02:42 -0500

The Senate on Monday approved, after months of delay, the nominations as new FCC Commissioners of Democrat Jessica Rosenworcel and Republican Ajit Pai. Once they are sworn in and assume their new jobs in the next few days, this will bring the FCC up to full strength with 5 seated Commissioners for the first time in a year. Rosenworcel comes from having worked for the Senate Commerce Committee, which oversees FCC regulation. She previously worked as a legal assistant to former Commissioner Copps at the FCC. Pai has also worked on the Hill and at the FCC, so both have experience with issues before the Commission.

So what do these nominations mean for broadcasters? Probably, not much in the immediate term. With the two new Commissioners being added to the FCC, the balance of power remains in favor of the Democrats. But, as we have seen over the years, most Commission decisions aren't decided on a partisan basis - in fact most are unanimous. In the recent past, there are a few decisions where the Commission has been somewhat divided, with Republican Robert McDowell tending to take a somewhat more deregulatory position, as in connection with the recent ruling on online public inspection files for TV stations. But party affiliation is not necessarily a guide to a Commissioner's positions, as many of the proposals for broadcast re-regulation first arose during the Republican administration of FCC Chairman Kevin Martin (see, for instance, the proposals for localism regulation and the original proposal for an online public file adopted in 2007).

Having a full Commission does, however, sometimes lead to a more thorough vetting of controversial issues. Just having two more Commissioners, each with their own legal staff, to consider the often-controversial matters that come before the FCC can lead to a more thorough and nuanced review of all points raised in any debate. That is just human nature - the more people involved in a decision, the more points of view that will be represented in the debate. From time to time, it may be one Commissioner, or one legal assistant, who becomes the expert on a nuance of an issue, and his or her position can influence the ultimate outcome of a decision. With so many important issues for broadcasters on the Commission's docket - from the ownership proceeding, to the TV spectrum reclamation proposals through the incentive auctions, to the issues about the quantification of the public interest obligation of broadcasters through the new form to take the place of Form 355 and the quarterly issues programs lists - a thorough examination of every issue is always welcome. Obviously, the specific positions that Commissioners will take on issues, and how they will interact with their colleagues and with the industries that they regulate, can't be determined until well after they take office and get settled in their new roles. So watch the full 5-Commissioner FCC carefully over the next few months as these new Commissioners begin to make their positions known and as they exert their influence over the direction of the FCC.

Legal Issues for Broadcasters in the Digital World - A Presentation at the NAB Convention

David Oxenford — Tue, 08 May 2012 20:52:35 -0500

At this year's NAB Convention, digital issues were much talked about. In fact, the NAB held, for the first time, a day and a half session focusing on radio stations and their digital efforts, called the Digital Strategies Exchange. I was on a panel called the Consultant's Corner, and discussed legal issues that broadcasters may face as they move more and more into the digital world. The PowerPoint slides that accompanied my presentation can be found here.

Digital issues for broadcasters go far beyond the streaming royalties for webcasting that we have written about so much in these pages. Recent cases, like the one that we wrote about here, have imposed the FCC's disclosure requirements on contests conducted on a station website that is even mentioned on-air. Broadcasters need to be careful about protecting their branding, as putting a slogan or positioning statement on the Internet makes it available to people worldwide. If a station has not been careful in picking its branding statement, the worldwide exposure can just be an alert of a potential infringement to a trademark or service mark owner. Using music online in ways other than webcasting can pose legal issues as we explained in our advisory here. Sponsorship identification obligations like those that apply to broadcasters have been imposed on online media where companies are given any consideration for endorsements or testimonials (see our article here). And allowing listeners to post videos or music or other content could potentially lead to liability for any copyright violations if a station does not register an agent with the Copyright Office to receive notices of infringement so that the station can take down infringing content (the Copyright Office's instructions for doing so can be found by clicking here). These are but a few of the issues covered in my presentation in Las Vegas. As in any other business endeavor, make sure that you know the rules of the road to avoid the legal issues that might otherwise arise.

FCC Proposes Regulatory Fees for 2012

David Oxenford — Sun, 06 May 2012 20:49:53 -0500

The FCC just released its Notice of Proposed Rulemaking to establish the regulatory fees to be paid by each of the entities that it regulates. Each year, before the FCC collects its annual regulatory fees from broadcasters and other entities subject to its oversight, it asks for comments on the amount of those fees. This year, as has been the case in most of the past few years, there are few changes proposed in this Notice, thought the Commission does promise to issue additional rulemakings later this year, looking to readjust fees to take into account changes in the communications industry since these fees were first imposed almost 20 years ago. Look, for instance, for a change to be proposed in the relative fees for UHF and VHF stations, which still reflect the analog world where VHF stations were more valuable.

But any fundamental changes in the fees won't be effective until 2013. Essentially, the NPRM proposes just minor changes in fees so that the FCC can collect its 2012 fees in September. The NPRM basically makes very small adjustments in the fees for broadcast stations, which are based on population coverage, to include numbers based on 2010 census data. The fees proposed for broadcasters are set out below. Comments on these proposals are due on May 31, with replies on June 7. The exact dates on which these fees will be collected will be announced after the conclusion of this rulemaking proceeding.

AM Radio Construction Permits	550
FM Radio Construction Permits	700
TV (47 CFR part 73) VHF Commercial
Markets 1-10	87,425
Markets 11-25	72,925
Markets 26-50	41,675
Markets 51-100	20,725
Remaining Markets	5,800
Construction Permits	5,800
TV (47 CFR part 73) UHF Commercial
Markets 1-10	34,650
Markets 11-25	31,950
Markets 26-50	21,875
Markets 51-100	12,625
Remaining Markets	3,425
Construction Permits	3,425
Satellite Television Stations (All Markets)	1,350
Construction Permits – Satellite Television Stations	890
Low Power TV, Class A TV, TV/FM Translators & Boosters (47 CFR part 74)	385
Broadcast Auxiliaries (47 CFR part 74)	10

FY 2012 RADIO STATION REGULATORY FEES
Population Served	AM Class A	AM Class B	AM Class C	AM Class D	FM Classes A, B1 & C3	FM Classes B, C, C0, C1 & C2
<=25,000	$725	$600	$550	$625	$700	$875
25,001 – 75,000	$1,475	$1,225	$850	$950	$1,425	$1,550
75,001 – 150,000	$2,200	$1,525	$1,125	$1,600	$1,950	$2,875
150,001 – 500,000	$3,300	$2,600	$1,675	$1,900	$3,025	$3,750
500,001 – 1,200,000	$4,775	$3,975	$2,800	$3,175	$4,800	$5,525
1,200,001 – 3,000,00	$7,350	$6,100	$4,200	$5,075	$7,800	$8,850
>3,000,000	$8,825	$7,325	$5,325	$6,350	$9,950	$11,500

FCC Authorizes TV Channel Sharing in Preparation for Spectrum Auctions

David Silverman — Tue, 01 May 2012 15:24:47 -0500

The FCC has released the text of its Report and Order adopted last week, authorizing full power and Class A TV stations to share spectrum as part of the band clearing process for future wireless broadband spectrum auctions. This action was authorized by Congress in the Spectrum Act, which became law in February as part of the Middle Class Tax Relief and Job Creation Act of 2012. We summarized the Spectrum Act in a previous blog available here.

The Report and Order allows full power and Class A TV stations to enter into agreements whereby two stations will share one six MHz channel, thereby allowing one station to return its existing channel to the FCC for cancellation and availability in the upcoming spectrum auctions. Presumably, one six MHz channel is sufficient bandwidth to support two HD channels. In the Notice of Proposed Rulemaking for this proceeding, the FCC said it would let the sharing stations decide how much bandwidth each station would get.

The station giving up its channel would be entitled to compensation in the so-called "reverse auction" to be held by the FCC, subject to receipt of compensation deemed acceptable by the licensee. Presumably, that compensation would be shared with the station giving up part of its 6 MHz band to allow the two stations to share that bandwidth. The amount of compensation each station would get would likely be determined in their sharing agreement.

The Commission said it would allow channel sharing agreements to be entered into between all full power and Class A stations, even if one is commercial and the other noncommercial. The channel giving up its former frequency would not be considered a "multicast" channel. Each station would continue to operate under its own call sign and subject to all FCC rules applicable to stations generally.

Stations entering into channel sharing arrangements will continue to be entitled to both cable and DBS carriage, albeit from their new locations (assuming the two stations will operate from one location), subject to the usual conditions of availability, signal strength and market location. This could result in both gains and losses of carriage. Class A stations participating in channel sharing arrangements with full power stations will likely benefit from increased signal strength resulting in a larger viewing area.

Low power (LPTV) stations that are not operating as Class A stations cannot take advantage of this channel sharing arrangement and remain subject to displacement or worse if their particular bandwidth is needed. It remains to be seen whether and/or how LPTV stations will be protected going forward. Likewise, additional details of the Commission's spectrum clearing process, including potential repacking of frequencies, remain to be seen.

FCC Votes to Require Online Public File for TV Stations - Rejects Compromise for Political File

David Oxenford — Fri, 27 Apr 2012 11:25:00 -0500

At its meeting today, the FCC voted to require that television stations maintain most of their public inspection files online, in a database to be created by the FCC (see the FCC's Public Notice here). While the details about this obligation have not yet been released, from the comments at the FCC meeting, much is already evident. All TV stations will have to post their files to an online server to be maintained by the FCC. Proposals for new obligations to post information about sponsorship identification and shared services agreements have been dropped, at least for now. Most documents not already online at the FCC will need to be uploaded within 6 months of the rule becoming effective. And, in the most controversial action, broadcaster's political files will need to be posted to the new online database, though in a process that is to be phased in over time.

The political file obligation will apply at first only to affiliates of the Top 4 TV networks in the Top 50 markets. And only new information for the political file will need to be posted. Information in the file before the effective date of the order apparently will not need to be posted online, at least not initially. The requirement for posting the political file online will be reviewed in a proceeding to begin one year after the effective date of the new rules. As stations outside the Top 50 markets, and other stations in those large markets, will not need to comply with the political file obligations until July 2014, the FCC will be able to reexamine the impact of the disclosure obligations before the compliance obligation for the political file expands to all stations.

Issues about the posting of the political file dominated the conversation. Commissioner McDowell, the lone Republican Commissioner, suggested that the FCC missed an opportunity for compromise. Broadcasters concerned about the burden of uploading hundred or thousands of documents in the days before an election, and about the specific disclosure of their lowest unit rates in an on-line database available to anyone, anywhere, offered a compromise proposal that would have had them creating a summary of the candidate's purchases on the station, but would not have given the actual rate information. McDowell suggested that the FCC start with that level of disclosure, and examine in a further proceeding if specific information about lowest unit rates needed to be disclosed online.

Commissioner Clyburn seemed to acknowledge the competitive concerns of broadcasters having to give out their lowest rate online, where everyone, everywhere, can see it. From her days as a newspaper publisher, she stated that she knew how hard it was to negotiate with potential advertisers who were always looking for a better deal on rates. But the Commissioner said that she thought that the public demand for information - whether it be from candidates, regulators, public interest groups, whistleblowers or just people "with too much time on their hands" - outweighed the burden put on broadcasters. Commissioner Clyburn suggested that the review after the first year could determine if the publicity of the lowest rates really did cause problems.

FCC Chairman Genachowski was the least sympathetic to broadcaster's concerns, essentially saying that, as the information was already in the station's paper files, putting it online was just the modern way to do disclosure. He dismissed any claims that it would present a burden to broadcasters - claiming that it will actually save broadcasters money in the long run (query why the broadcasters would be objecting so much if the proposal really would save them money).

In fact, the theme that online disclosure was the modern way of doing things, and that it would save broadcasters money, was repeated throughout the presentation. The Media Bureau attorney who presented the FCC decision suggested that yearly compliance costs would be between $80 and $400 per station (a number that broadcasters I'm sure would find surprising). This question may well become one that will be crucial to the effective date of the proposal as Commissioner McDowell suggested that a Paperwork Reduction Act analysis of the order might prove troublesome.

More details of the proposal will be available when the FCC releases the full text of its order. We will update this summary when the text is out and we've had a chance to review it.

FCC Proposes to Liberalize Rules Against Noncommercial Stations Fundraising For Third-Party Non-Profit Groups

David Oxenford — Thu, 26 Apr 2012 22:19:55 -0500

The FCC has adopted a Notice of Proposed Rulemaking suggesting, with significant limitations, a liberalization of its rules that prohibit noncommercial broadcasters from raising funds for an entity other than the station itself if the fundraising suspends or alters normal programming of the station. As we've written before, the FCC prohibits noncommercial broadcasters from raising funds for charities and other non-profit organizations through telethons or other special programming. The prohibition has been in place for some time, and was reaffirmed by the FCC's orders in the early 1980s which established the basic rules that still today govern most noncommercial fundraising and sales activities.

The prohibition on third-party fundraising reflected the Commission's concern that educational stations are "licensed to provide a noncommercial broadcast service, not to serve as a fund-raising operation for other entities by broadcasting material that is akin to regular advertising." Doing too much fundraising for these third parties, in the Commission's view when the rule was adopted, would distract stations from their principal mission of service to the public. While the Communications Act was changed in the early 1980s to allow noncommercial broadcasters to accept paid promotional spots for nonprofit groups, the FCC did not change the rule on third-party fundraising that disrupts normal programming. In the NPRM just adopted, the Commission recites that they still believe the justification for the rule to be true, even though noncommercial stations can now run what is essentially paid advertising for nonprofit organizations, as long as those spots are incorporated into the normal programming of the stations. What the Commission now proposes is a limited degree of liberalization of the third-party fundraising prohibition, subject to many conditions set forth below.

The NPRM adopts a very protective, almost paternalistic, view of noncommercial stations. It suggests that any liberalization of the prohibition on third-party fundraising be approached very cautiously, with significant limitations. While the waivers of the rules that have been granted many times in the last few years to allow for relief efforts for major disasters of "historical proportion" have shown that such fundraising can be conducted without significant harm, the FCC asks many questions about limitations that it thinks should remain in place even if the absolute prohibition is lifted, seemingly not trusting stations to police themselves. The FCC asks questions including the following:

Should any relaxation apply just to stations that are not funded by CPB? The National Religious Broadcasters Association requested the change in the rules. The Commission states that some CPB-funded stations were concerned about a liberalization of the prohibition, as they do not want to be in a position of choosing between competing organizations who may be worthy recipients of funds raised by a station
Should only particular types of nonprofits be allowed to be the beneficiaries of the fundraising - suggesting that only 501(c)(3) tax-exempt charities be able to receive such funds
Does the FCC need to insure that the fundraising is consistent with the mission of the noncommercial broadcaster?
Should fundraising be limited only to local nonprofit organizations?
How much flexibility should be allowed?
- The Commission suggests a limit on third-party fundraising of 1% of a station's airtime
Should the station be required to collect all of the donations that are raised, or can they promote contributions directly to the third party?
Should stations be required to produce all third-party fundraising messages themselves, as opposed to being able to air programming containing fundraising messages that is provided by the charity itself?
Will audiences find such appeals confusing?
- Should a specific type of disclosure be required so audiences are informed that funds will be given to third-parties?
- How often should such a disclosure be aired? Just at the beginning and end of the appeal, or more often?
Should stations electing to do third-party fundraising have to notify the FCC of the fact that they are doing such fundraising?
- Should they have to file reports with the FCC about the fundraising, e.g. who the funds were raised for and how much was collected, and what interruptions to normal programming were incurred
Should there be a public file obligation with respect to such fundraising?
Should there be a license renewal certification with respect to such fundraising?

Obviously, the FCC seem to, at best, be reluctantly moving into the approval of third-party fundraising by noncommercial stations. Comments on these proposal will be due 30 days after these proposals are published in the Federal Register, and replies due 30 days later. There are certain to be many issues raised about the FCC's proposals.

Extension of Time for Comments on Whether an Internet Delivered Video Service Is an MVPD Under the Communications Act

David Oxenford — Wed, 25 Apr 2012 21:27:34 -0500

As we wrote last month, the Commission has asked for public comment on whether an Internet delivered video programming service can qualify under the FCC rules and the Communications Act to be treated as a multichannel video programming distributor (an "MVPD"). While the FCC has in the past determined that an MVPD needs to have facilities associated with its programming service (like a cable or satellite delivered system), it asks if that is indeed required under the definitions in the Act. If the FCC were to determine that Internet video services were to qualify, all sorts of issues would arise - including whether these video services can get access to cable network programming and even whether they have to observe must carry and retransmission consent obligations of broadcasters. The potential importance of this issue was the talk of the NAB Convention (see this article in TV NewsCheck) and, because of its potential importance to broadcasters, the NAB requested more time to respond to the request for comments. The FCC partially granted that request - extending the comment deadline to May 14. Replies are now due on June 13.

Is $10,000 the New Normal for FCC Fines for Public File Violations for Missing Quarterly Issues Programs Lists?

David Oxenford — Tue, 24 Apr 2012 08:36:02 -0500

In three proposed fines issued in the last few weeks, the FCC proposed $10,000 fines for the failure of stations to have all of their required Quarterly Issues Programs Lists in their public files. In one case, the deficiency was discovered by an FCC inspector, filing random reports missing from 2007-2009. In two others (here involving a noncommercial station and here), the missing reports were reported by the stations in their renewal applications, and the missing reports also just covered parts of the renewal cycle. All three cases resulted in the $10,000 fine. What began as a $3000 fine in the last renewal cycle has escalated over the last 8 years to become the violation of the broadcast rules that seemingly carries the biggest fine - even though the public file is rarely if ever visited by the public. As we've written before, it would seem to us that there are plenty of more serious issues that should demand closer attention by the FCC (and bigger fines), yet the public file seems to be the one that has attracted the Commission's attention most often, and with the biggest fines. Obviously, with the attention over online public files that will only intensify with the expected FCC decision on that issue this Friday, this issue does not seem to be going away anytime soon.

For more information about the required contents of the Public File, see our advisory here. For our last advisory on the Quarterly Issues Programs lists which stations should have placed in their public file on or before April 10, see our advisory here.

Update - 4/24/12, 4:00 PM - Two more $10,000 fines for missing Quarterly Issues Programs lists were issued today, both for violations voluntarily revealed at license renewal time, reinforcing the "new normal." See the FCC decisions here and here.

All the Legal Issues Facing Broadcasters - Presentation to the Oklahoma Broadcasters and Summary in TV NewsCheck

David Oxenford — Mon, 23 Apr 2012 07:31:03 -0500

In the last few weeks, I've twice had the occasion to summarize the legal issues facing broadcasters, and it amazes me at how many issue there are and, how quickly the issues are changing. On April 12, I did an update on these issue to the Oklahoma Association of Broadcasters at their annual convention - the PowerPoint slides for which are available here. The week before, we prepared a summary of the issues facing TV broadcasters that was published in TV NewsCheck, here. It's just over two weeks later, and already the issues that we highlighted have changed. Since we we wrote the TV NewsCheck article, a new issue for television broadcasters has arisen as to the definition of an MVPD - an issue that could have ramifications on all sorts of issues - including rules concerning must carry and retransmission consent. In recent weeks, the FCC has also revised its EAS rules to allow text-to-speech systems to read the alerts that come in from FEMA, the National Weather Service and other authorities. And the FCC meeting that will be held later this week will deal with many issues of importance to commercial broadcasters - including spectrum sharing (the first step in the Commission's plan to clear some of the TV band so that it can be repurposed for wireless users) and the online public inspection file. Also on the agenda is a noncommercial item that will look at broadcast stations raising finds for third parties. That topic is an interesting one - coming only a short period after one US Court of Appeals Circuit suggested that Federal prohibitions on noncommercial radio stations accepting ads from political and issue advertisers were unconstitutional.

In discussing issues with the Oklahoma Broadcasters, there were still many questions about the FCC requirement for a nondiscrimination certification in commercial station's advertising contracts (see our summary of this issue here and here). Also a hot topic, particularly in light of the discussion of the online public file, was the question of what needs to go in the public file, and how long it needs to be retained (see our Checklist for the Public Inspection File, here). The rules for on-air contests, and the required on-air disclosures of the rules for such contests, were also much discussed (see our summaries here and here). And, of course, with the November election looming, questions about broadcasters' political obligations were on the minds of many (see our Guide to Political Broadcasting, here). Many, many issues face broadcasters - and these presentations only touch the surface.

FCC Retracts Text-to-Speech Prohibition from New EAS Rules

David Oxenford — Sun, 22 Apr 2012 13:45:29 -0500

The conversion of EAS alerts from text to speech by broadcast stations and cable systems, through systems contained in the stations and systems EAS equipment, was prohibited in the FCC's Fifth Report and Order (summarized here) implementing the rules for the technology for the Common Alerting Protocol - the Internet-based alert system that must be activated by stations and systems by June 30. After objections to the text-to-speech prohibition raised by the Federal Emergency Management Administration and many other broadcast and technical groups, the FCC reviewed and eliminated that restriction in an Order released late last week. That order will be effective immediately on its publication in the Federal Register, allowing participants in EAS to use text-to-speech if they want to - not making it mandatory, but also not prohibiting its use as had the Fifth Report and Order.

FEMA and the other parties that complained to the Commission suggested that the prohibition on text-to-speech technologies would actually result in less information about certain alerts being conveyed to the public. The Commission was concerned that automatic text-to-speech conversion could result in inaccurate or misleading information being conveyed to the public from a system that it concluded was not yet perfect. The objecting parties disputed that any glitches were serious enough to mandate the prohibition against the use of such systems. For instance, broadcasters and others in Washington State already are using a text-to-speech system. The objecting parties also pointed out that the technology was such that warnings sent using the CAP system without audio already attached might actually cut warnings broadcast on stations short before the public knew the basis of the alert, and even if they didn't, the 90 character limit imposed on textual warnings broadcast through the current SAME system would be insufficient to provide the kinds of information possible through text-to-speech systems. Even National Weather Service alerts are to be formatted in a way so as to use text-to-speech capabilities. Thus, prohibiting the use of text-to-speech might impede the delivery of such warnings

Given these objections, the FCC revoked its prohibition on the use of text-to-speech systems in EAS, making such use optional for broadcasters. The rule was adopted to become effective immediately upon publication in the Federal Register, so that all stations that have to comply with CAP will be able to use text-to-speech systems, if they so desire, by the June 30 implementation deadline.

Librarian of Congress Appoints New Chief Judge of Copyright Royalty Board

David Oxenford — Fri, 13 Apr 2012 09:42:47 -0500

The Librarian of Congress today announced the appointment of a new Chief Judge for the Copyright Royalty Board. The new Chief Judge will be Suzanne Barnett, a superior court judge of King County in Seattle, Washington. This is the first new judge on the three-judge CRB since the judges were first appointed in January 2006, soon after Congress first created the CRB.

The law governing the Copyright Royalty Board requires that the three judges have different experience. One must have a background in Copyright law, a position filled by Judge William Roberts. A second must have a background in economics. That is the position filled by Judge Stanley C. Wisniewski. Each Judge is appointed for a six-year term, with the terms staggered so that one seat is subject to reappointment every two years. The Chief Judge is required to be someone with "at least five years of experience in adjudications, arbitrations, or court trials." The press release issued by the Librarian of Congress stated that Judge Barnett "hears cases of all types and presides over both jury and non-jury trials. Barnett "has served on all the King County calendars - civil, criminal, family, and juvenile - and at all three superior court locations." Prior to her appointment to the Bench, she was an attorney in private practice for 16 years.

The CRB, in addition to setting the rates for sound recording performance royalties for Internet and satellite radio also sets the rates for mechanical royalties (see our post from earlier this week about a settlement of the current case to set those rates); rates paid to ASCAP, BMI and SESAC by noncommercial broadcasters; and the distribution of funds collected from cable and satellite television for the retransmission of copyrighted programming on broadcast television retransmitted by these MVPDs.

The appointment of the new Judge becomes effective on May 20, and we understand that at least one royalty case that was supposed to begin its trial next week (the proceeding to set satellite radio royalties) has been postponed until after the new judge assumes her role at the CRB. We will watch with interest to see how this change in the composition of the Board affects decisions going forward.

Note: Correction made 4/13, 3:45 PM eastern to correct terms of the Judges' appointments.

Court of Appeals Strikes Down Communications Act Ban on Political and Issue Advertising on Noncommercial Broadcasting Stations - Analyzing the Issues

David Oxenford — Fri, 13 Apr 2012 08:50:34 -0500

The Communications Act's ban on noncommercial broadcast stations running political and issue advertising was struck down as unconstitutional by the US Court of Appeals for the Ninth Circuit. While the Court upheld the prohibition on commercial advertising for products and services, the majority of the Court felt that the ban on political advertising could not be justified. Bob Corn-Revere of Davis Wright Tremaine's DC office, who is quite experienced in First Amendment litigation and is a frequent speaker and author on these issues, offers this summary of the constitutional issues raised by this case:

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A divided panel of the U.S. Court of Appeals for the Ninth Circuit held that Communications Act provisions that ban political and issue advertising on public broadcasting stations violate the First Amendment. The court left intact another provision that prohibits commercial advertising on public stations. The majority opinion in Minority Television Project, Inc. v. FCC, written by Judge Carlos Bea, reasoned that Congress lacked substantial evidence that the ban on political and issue advertising set forth in 47 U.S.C. § 399b was necessary to serve the government’s purpose of preserving the mission and quality of public broadcasting, and that the statute was not narrowly tailored. At the same time, the court held that allowing commercial advertising would undermine the purpose of public broadcasting to provide educational and niche programming.

Synthesizing three decades of First Amendment case law, Judge Bea wrote that Congress must have substantial evidence to justify a content-based speech restriction “at the time of the statute’s enactment.” The evidence must show “that the speech banned by a statute poses a greater threat to the government’s purported interest than the speech permitted by the statute.” The decision principally relied on FCC v. League of Women Voters, a 1984 Supreme Court case that struck down a similar Communications Act prohibition on editorializing by public broadcast stations. Judge Bea’s opinion also relied on a 1993 commercial speech case, Cincinnati v. Discovery Network, for “[a]dditional instruction on what narrow tailoring requires. That case invalidated a municipal ordinance that imposed differential regulation on newsboxes, depending on whether they contained commercial or noncommercial matter.

Judge John Noonan concurred in the result but disagreed that the commercial speech precedents applied. Rather, he wrote that “in this delicate and difficult field of rapid change, it would be hard to believe that the restrictions on political speech established by the statute over thirty years ago are constitutionally valid even if they met constitutional criteria when they were published.” Judge Richard Paez dissented and agreed with Judge Noonan that Discovery Network does not apply to a case assessing the constitutionality of broadcast regulation. He wrote that the law should be upheld under the standard articulated in League of Women Voters.

The one point on which all of the judges agreed was that intermediate scrutiny – not strict scrutiny – should be applied, even though the law imposed a content-based restriction on political speech. Judge Bea cited the network brief filed in FCC v. Fox Television Stations and ABC, Inc. and observed that “the Supreme Court itself may soon declare that the era of special broadcast exemption from strict scrutiny is over.” But he added, “that case has not yet been decided, “ and “just as golfers must play the ball as it lies, so too we must apply the law of broadcast regulation as it stands today.”

Nevertheless, Judge Bea applied what he described as “a robust form of intermediate scrutiny” that calls for “judicial ‘wariness’ within the standard described” because the restrictions prohibited core political speech. Apart from some assertions made by the government, he found no evidence, either in the record or in the legislative history, to support the restrictions on issue and political advertising. Thus, he concluded, even under intermediate scrutiny, the government “cannot simply assert its way out of the ‘substantial evidence’ requirement of the First Amendment.

The FCC may seek rehearing by the Ninth Circuit panel or en banc, which is likely given the significance of the decision and the divided panel opinion. If the circuit court denies rehearing or upholds the panel decision, the FCC may seek review by the Supreme Court. It would be expected to do so in such circumstances, since the panel decision invalidated sections of a federal statute

In a separate unpublished opinion, the panel unanimously rejected the Minority Television Project’s argument that the statute is unconstitutionally vague. The court noted that a statute need not have “mathematical certainty” to survive a vagueness challenge, and that, in case of doubt about the law’s scope, the FCC’s rules allow for declaratory rulings for broadcasters who fear they might run afoul of Section 399b.

$11,000 FCC Fine to MVPD for EEO Rule Violations

David Oxenford — Thu, 12 Apr 2012 18:09:39 -0500

Broadcasters are not the only ones with FCC-regulated EEO obligations. Cable system operators and other MVPDs have similar FCC EEO obligations, requiring wide dissemination of information about job openings and the maintenance of public file information. In a decision released today, the FCC proposed a $11,000 fine to an MVPD for failing to widely disseminate information about all of its job openings, for failing to keep a public file with the required information about its recruitment efforts, and for not self-assessing its program in a manner in which these issues were discovered and corrected.

This MVPD had only 3 job openings in the period covered by the FCC audit that led to the proposed fine. For two openings, the company simply relied on its website to advertise for new employees. For the third, it used Craig's List. The FCC, reiterating the position that it has taken with broadcasters (see our article here), said that online recruiting and recruiting through the station's own internal sources are not enough. Recruiting efforts need to include other sources designed to reach all of the significant groups in the system's area. When working with our broadcast and MVPD clients to design an effective EEO plan, we suggest using efforts like notices to community groups, outreach to educational institutions, the use of employment agencies, and publication in a widely read local newspaper (a relic, perhaps, of 2003 when these rules were first adopted) to achieve the required broad outreach to community groups expected by the FCC. This case serves as yet another reminder of the seriousness with which the FCC takes its EEO rules. See our article here for more information about the FCC's EEO obligations.

Music Royalty Settlement Announced on Mechanical Royalties - Not A Decision on Webcasting Rates

David Oxenford — Wed, 11 Apr 2012 21:52:51 -0500

The broadcast and music trade press brought news of a settlement between music companies and digital media services regrading digital music royalties. Some press reports jumped to the conclusion that the decision had something to do with the royalty rates that Internet radio companies pay SoundExchange for streaming their music on the Internet. Others expressed disappointment that it did not seem to address that issue at all. In fact, the reason that the settlement had nothing to do with webcasting was because it was a settlement of a Copyright Royalty Board proceeding involving a totally different right - essentially the right to reproduce a the musical work, i.e. the words and music to a song - not any public performance right that is involved in Internet radio streaming.

As we have written before (including the last time a similar settlement was announced), webcasters pay their royalties principally under Section 114 of the Copyright Act, which sets up a "statutory license" requiring that all copyright holders in a "sound recording" (a recording of a song by a particular artist) make their songs available for public performance to any digital music service that meets certain criteria - including principally that their service is a non-interactive one, where listeners cannot pick the particular song that they want to hear. In exchange for this right, digital music services pay a fee set by the Copyright Royalty Board. These fees cover liabilities for music use in a process where a service generates a product that goes from the service to many people, much like radio does in the traditional world, without making any sort of lasting digital copy that would be akin, in the physical world, to a CD or record. The settlement that was just announced deals with rights that like those paid, in the physical world, by a record company to a music publisher for using a musical composition in a record or CD that the record company is recording with a particular artist, not with the public performance right.

The settlement dealt with Section 115 of the Copyright Act, which deals with payments made to the composers of songs - those who write the words and music of the songs - usually represented by a publishing company. These paymnets are usually refered to as "mechanical royalties." Under Section 115, those who want to make a sound recording can use the musical composition of any song, where that song has already been used in a sound recording. Essentially, anyone can make a cover version of a song once it has first been "fixed" as a sound recording and distributed to the public. In exchange for that right, the publishing company gets paid for every copy of any sound recording made using that musical composition.

In the physical world, the Section 115 right covered the amount that record companies pay publishing companies for the use of these musical compositions. The deal announced yesterday in fact includes such payments - essentially keeping the royalty for physical product the same as it has been - 9.1 cents per copy made (or 1.75 cents per minute for longer songs).

But, in a digital world, it is much more complex to determine when a copy is made that demands compensation under Section 115 - when there has been a "digital phonorecord delivery" or a "DPD". The parties have entered into a very complex agreement setting the amount to be paid by a digital music service for all sorts of potential uses of a musical composition. The simplest is setting a fee for permanent digital downloads at the same 9.1 cents per copy as for physical copies. For ringtones, also a fairly simple situation where the number of copies of a song is easily computed, a fee is set at 24 cents for each time a musical composition is downloaded or copied for use in a ringtone.

But this agreement goes much further - setting fees for all sorts of digital music uses that involve making available musical compositions in various interactive formats - from on-demand streams, to various types of cloud services where music can be played on demand either from music that users have uploaded or from music provided by a service itself, to various types of conditional downloads or cached copies of music available for some limited period of time. All are assigned rates, for the most part computed as a percentage of the royalties paid to the record companies for the use of sound recordings (digital services that offer music on demand cannot rely on the Section 114 royalty available to noninteractive webcasters, each service will have to negotiate a royalty with the record company or other copyright holder for use of their sound recordings).

There is also another complexity in the copyright world over the question of just when is a copy or DPD made. In the noninteractive world, just as sound recording copyright holders are compensated by services for the public performance of their music, publishers are also compensated for the public performance of their musical compositions. That compensation is made by payments to ASCAP, BMI and SESAC (the Performing Rights Organizations or "PROs"). But in the digital world, there is a real issue that has been struggled with as to when a public performance ends and when a digital copy of the work begins. For instance, should the provider of an on-demand stream be paying ASCAP, BMI and SESAC for the services music use as a public performance, or should they be paying the music publishers directly for a reproduction? Or should they be paying both - essentially getting music back to the songwriter from two separate sources?

Rather than providing a simple answer to that question (as, under current law, there may not be one - see our article on a proceeding that the Copyright Office had to investigate the issue of when DPDs are made - which ultimately led to a conclusion that was, much like the defintion of obscenity that one Supreme Court justice came up with - we may not be able to define it, but we know it when we see it), the agreement instead sets up formulas where the fees paid to the PROs are subtracted from the fees to be paid to the publishers under this agreement - leaving open the question of how much is owed to the PROs for the public performance and how much is owed under the rights of reproduction (and distribution - a separate copyright under the law, stated to be covered under this agreement as the right to distribution usually goes hand-in-hand with the right of reproduction).

The details of this agreement, and the specific percentages of revenue to be paid as royalties by different services will be set out when the Copyright Royalty Board publishes this agreement in the Federal Register and requests public comment. The last time such a deal was reached on the mechanical royalty, there were objections raising the questions of whether services like on-demand streams really implicated the reproduction right at all, or whether these kinds of services should only pay the PROs. We may see that objection again here, or services may instead attempt to follow the finely crafted terms of this agreement that seem to cover most situations where music is used by digital media services.

As for the noninteractive services that rely on Section 114 - don't look for change real soon, as the next proceeding to set new rates for webcasters starts in 2014 to set a rates by late in 2015 for the period from 2016-2020. SiriusXM also pays royalties under Section 114 - and is currently in a proceeding to set royalties for its service for 2013-2017 (see our article about the litigation over their attempts to negotiate lower royalties to potentially be used as evidence in their proceeding). Expect a decision in the CRB case setting SiriusXM's royalties by the end of this year - which could give some preview of what webcasters can expect in their upcoming case.

On the Schedule for the April 27 FCC Meeting: Television Public Interest Obligations, TV Channel Sharing and Third-Party Fundraising by Noncommercial Broadcasters

David Oxenford — Mon, 09 Apr 2012 10:57:44 -0500

Three broadcast items are tentatively scheduled for the next FCC meeting, to be held on April 27, according to the tentative agenda released today. In one expected action, though perhaps moving more quickly than many thought possible, the FCC has indicated that it will adopt an Order in its proceeding requiring TV broadcasters to place and maintain their public files on the Internet. A second broadcast item will adopt rules for channel sharing by TV broadcasters as part of the plan for incentive auctions to entice TV broadcasters to give up some of their spectrum for wireless broadband use. Finally, the FCC proposes to adopt a NPRM on whether to amend current policies so as to permit noncommercial broadcasters from interrupting their regular programming to raise funds for organizations other than the station itself.

The first item is to determine whether to require that the broadcasters maintain an Online Public Inspection File, is a controversial issue about which we wrote last week. The proposal for the online file grew out of the FCC's Future of Media Report (renamed the Report on the Information Needs of Communities when it was released last year, see our summary here). In that same report, it was suggested that the FCC relax rules applicable to noncommercial broadcasters that limit their on-air fundraising for third-parties, if that fundraising interrupts the normal course of programming. The Future of Media Report suggests that this restriction be relaxed so that noncommercial broadcasters be able to do block programming from time to time to raise funds for other noncommercial entities

In recent years, the FCC has issued blanket waivers to allow noncommercial stations to raise funds for relief groups bringing aid to areas where mass disasters have hit (see our articles on waivers granted for for Haitian earthquake relief, here, and for Japan earthquake and tsunami relief, here). It may be that the NPRM will address these types of situations. But, as controversies have arisen in other situations where noncommercial broadcasters enter into business relationships to preserve and expand their service (see our articlehere on some of the issues raised by the FCC in a case involving the sale of a noncommercial licensee and the objections to a pre-sale operating agreement or LMA), this proceeding may well address these more extensive issues.

The TV channel sharing item grow out of the FCC's proposals that hope to recapture some more of the television spectrum to repurpose it for wireless broadband. Congress recently passed legislation (which we summarized here) to allow incentive auctions to try to entice certain TV broadcasters to give back their spectrum for re-auction by the FCC. Given that digital television technology allows for one television channel to now transmit several programming streams, the FCC had suggested that one option for broadcasters was for two TV stations to get together, agree to turn one channel back in to the FCC for wireless use while putting both of their programming onto different streams on the second station, splitting auction proceeds,and perhaps even retaining must-carry rights for both streams. See our summary of the FCC's proposals for channel sharing, issued just over a year ago.

Such a channel-sharing program will be but a first step in the long process of clearing some spectrum for wireless broadband. Even if the FCC adopts rules for channel sharing, it must still adopt rules for the spectrum auctions (both the incentive auctions by which TV stations offer to give up their spectrum in exchange for payment) and for the actual bidding on the cleared spectrum by wireless users. In addition, the FCC will likely want to repack the TV band, moving stations that don't elect to give up their channels to a smaller part of the TV band, to clear the same TV channels so as to provide a consistent spectrum band across the country for wireless use. That plan, akin to the channel changes that took place when DTV was implemented, is no doubt a much longer, more complex process. So this is but the first small step toward the FCC trying to implement their plans for wireless broadband operations on what are now TV channels.

In any event, this may be a very important meeting for broadcasters. This NPRM on the new public file requirements is also connected to the FCC's proposal to create a disclosure form for public interest programming, which may be addressed next. Together, these issues may make April a very busy and important month for broadcasters.

[Corrected 4/9/12, 4 PM to reflect that the FCC meeting will discuss the online public file, not the form for reporting on the public service of broadcasters, as originally indicated]