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There is an old vaudeville routine I’ve found more useful for understanding lawmaking in Washington than any textbook.  It goes something like this:

(Scene: a nighttime street corner illuminated by a single streetlight; a short man (Joe) is frantically searching for something near the base of the streetlight when a tall man (Bill) enters from stage left.)

Bill:  Hi Joe.  Did you lose something?

Joe:  I was buying a hot dog at the cart down the street, and when he was giving me my change, I dropped a quarter.

Bill:  Well if you dropped it down the street, why are you looking here?

Joe:  Cause the light’s better here.

When constituents are unhappy, no matter the cause, they make sure their representatives in Congress know it.  In turn, a good politician knows that the worst possible response is to say there really isn’t anything government can do to fix the problem.  So the legislator promises to take immediate action to remedy the constituent’s complaint.  Often, however, the constituent’s issue lacks a governmental solution, or the only solution would create yet worse problems.

As a result, the desire to demonstrate responsiveness leads to legislation that does nothing to actually solve the constituent’s problem, and sometimes makes matters worse.  However, as long as the legislation relates in some way to the subject matter of the complaint, the legislator can claim to have addressed the needs of his or her constituents.  Rather than face the difficult task of explaining the complexities of the issue to constituents, and why the system is working as intended (or at least better than any of the available alternatives), legislators will search for an irrelevant solution where “the light’s better.”

I was reminded of this last week by an exception that proves the rule.  Chairman Wheeler announced the FCC would terminate without further action its congressionally-mandated review of the Commission’s rule requiring that parties to retransmission consent negotiations negotiate in good faith.  Congress had urged the review in response to heavy lobbying from the cable and satellite TV industries for changes to the retransmission consent regime, as well as in response to complaints from viewers frustrated by their pay TV provider’s programming disruptions.  Specifically, Congress directed the FCC to “commence a rulemaking to review its totality of the circumstances test for good faith negotiations under clauses (ii) and (iii) of section 325(b)(3)(C) of the Communications Act of 1934.”

To understand this mandate requires going back to 1999, when Congress passed the Satellite Home Viewer Improvement Act (“SHVIA”).  SHVIA changed copyright law to allow satellite TV systems to retransmit local TV stations, putting satellite TV on an equal competitive footing with cable TV for the first time.  Cable operators had been retransmitting local TV stations for decades, but the lack of a broad compulsory copyright license for satellite providers meant that most subscribers were ineligible to receive broadcast programming via satellite.

Given the monopolistic power of most local cable systems at the time, there was a concern that cable operators would apply pressure on local stations to withhold retransmission rights from satellite providers to preserve cable TV’s continued stranglehold on the programming most desired by pay TV subscribers.  To address this fear, Congress included in SHVIA a provision that would “prohibit a television broadcast station that provides retransmission consent from . . . failing to negotiate in good faith ….”  That the purpose of this requirement was not managing the negotiations themselves, but ensuring that all new entrants, including satellite TV, had an opportunity to negotiate for broadcast programming, was made clear by three associated facts.

First is that good faith negotiation was strangely required of only the broadcaster; the pay TV provider had no such obligation.  This imbalance of rights would have been unthinkable had the purpose of the good faith obligation been to ensure fair negotiations, but it made sense where broadcast programming was in such high demand that requiring pay TV providers to engage in negotiations with local TV stations seemed entirely unnecessary. Continue reading →

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As we previously reported, the FCC last year adopted a number of changes to its rules and policies aimed at revitalizing the AM radio service, which for many years has lived in the shadow of the more robust FM service.  One of these changes was to expand the ability of AM broadcasters to use FM translators to rebroadcast their AM signals, thereby improving coverage, particularly at night.  To accomplish this, the FCC gave each AM station the right to file one, and only one, application to move an FM translator up to 250 miles and change the translator’s frequency, provided that it is used to rebroadcast the designated AM station for the next four years.  If that application does not make it through the FCC process for any reason, the broadcaster is barred from filing another.

The FCC gave smaller Class C and D AM stations first crack at its new policy by opening a window on January 29, 2016, during which Class C and D licensees could file modification applications on a first-come, first-served basis.  In other words, if you filed your application on January 29, you trumped anyone who filed a conflicting application after that date.  If parties file mutually exclusive applications on the same day, the applicants need to resolve the mutual exclusivity through settlement negotiations and/or technical amendments (e.g., one or both parties move to a different frequency).

The first window, limited to Class C and D AM stations, closes on July 28, 2016.  On the next day, July 29, a second window opens during which Class A and B AM stations (as well as Class C and D stations that did not file in the first window) may file modification applications to relocate FM translators to be used for AM station rebroadcasts.

AM stations that have not yet filed should keep in mind that:

  1. If you have a Class A or B AM station and plan to relocate an FM translator for AM rebroadcast purposes, you should get your modification application filed on July 29 in order to give yourself the maximum protection against being bumped by an earlier-filed mutually exclusive application.  If you are planning to buy a translator but haven’t actually acquired it yet, there are still ways to get the modification application on file before closing the acquisition.
  2. If you have a Class C or D AM station and plan to relocate an FM translator for rebroadcasts (and haven’t filed a modification application yet), file by July 28.  While Class C and D stations will not be precluded from filing in the second window, July 29 is sure to bring a wave of new modification applications that will change the translator landscape significantly.

But even having these deadlines circled on your calendar won’t help if your modification application is dismissed.  When it comes to modification applications filed in either of these windows, the FCC has made clear that its policy is one and done.  A dismissed application means that you not only lose your place in the processing line, but cannot file again in the windows.  Such a dismissal could occur due not only to deficiencies in the application itself, but also if your deal to acquire the translator falls through.  AM broadcasters buying a translator are therefore well advised to pay careful attention to the due diligence process, the closing conditions in the acquisition agreement, the compliance of the proposed move with FCC technical rules, and their financing for the acquisition.  If a deal falls through, the reason is irrelevant.  You’ll be sitting out the filing window watching your competitors get their FM translators.

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

Headlines:

  • FCC Refuses TV Licensee’s Request to Defer $15,000 Fine Until After Incentive Auction
  • FCC Proposes $20,000 Fine for Radio Licensee’s Violation of Multiple Ownership Rule
  • FCC Imposes $12,000 Fine and Short-Term License Renewal for Failure to Maintain Public Inspection File and File Ownership Reports

Red Light Blues: FCC Refuses TV Licensee’s Request to Defer Fine Collection Until After Incentive Auction

The FCC’s Media Bureau rejected a Kansas TV licensee’s request to defer a $15,000 fine for failing to timely file fourteen Children’s Television Programming Reports, and for failing to disclose the violations in its license renewal application.

Section 73.3256 of the FCC’s Rules requires each commercial broadcast licensee to maintain a public inspection file containing specific information related to station operations. Subsection 73.3526(e)(11)(iii) of the rule requires licensees to prepare and place in their public inspection files a Children’s Television Programming Report for each calendar quarter showing, among other things, the efforts made during that three-month period to serve the educational and informational needs of children.

In addition, Section 73.3514(a) of the FCC’s Rules requires licensees to include all information requested by an application form when filing it with the FCC. The license renewal application form requires licensees to certify that they have complied with Section 73.3526 and have timely filed their Children’s Television Programming Reports with the FCC.

In April 2016, the FCC issued a Notice of Apparent Liability (“NAL”) to the licensee, asserting that since 2011 the licensee had filed fourteen Children’s Television Programming Reports late, and had subsequently failed to report those violations in its license renewal application. After determining that these actions constituted violations of Sections 73.3526(e)(11)(iii) and 73.3514(a), the FCC proposed a fine of $12,000 for the fourteen late reports and another $3,000 for failing to disclose the violations in the license renewal application—for a total proposed fine of $15,000.

The licensee did not dispute the violations. Instead, it requested a waiver of the FCC’s red light rule, which bars stations from receiving certain benefits if they have an outstanding balance owed to the FCC. In October 2015, the FCC waived the red right rule to allow broadcasters that owed debts to the FCC to participate in the Spectrum Auction.

In requesting a waiver of the red light rule and deferral of the fine until after the Auction concludes, the licensee argued that while it did not owe money to the FCC when it filed its reverse auction application, the current $15,000 fine could make it subject to the red light rule in the near future because it is unable to pay that fine. The licensee explained that if it were a winning bidder in the Auction, it would then be able to pay the fine. Alternatively, the licensee requested a 30 day extension to pay the proposed fine in the event that it was unsuccessful in the Auction.

The FCC rejected the licensee’s requests. In doing so, it first noted that the FCC waived the red light rule for only a very limited purpose at the start of the Auction. Second, it stated that since the licensee admitted that it was not subject to a red light restriction when it filed its reverse auction application and is not currently subject to one, and given that the licensee had provided no documentation showing its inability to pay the fine, any request for a waiver would be prospective and speculative.

The FCC indicated the licensee therefore had two options: (i) pay the proposed fine in full, or (ii) seek a reduction or cancellation. Because the licensee did neither, and instead merely provided a statement about its inability to pay the fine without any supporting documentation, the FCC ordered the licensee to pay the $15,000 fine.

Too Soon? Radio Licensee Faces $20,000 Fine for Premature Implementation of Time Brokerage Agreement

The FCC proposed to fine a New York radio licensee $20,000 for implementing a Time Brokerage Agreement (“TBA”) that violated the Commission’s multiple ownership rule before the FCC had an opportunity to rule on the licensee’s waiver request. Continue reading →

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Today, the FCC released a document entitled Fact Sheet: Updating Media Ownership Rules in the Public Interest.  The driver behind the Fact Sheet is the Chairman’s promise to the Third Circuit Court of Appeals that draft multiple ownership rules would be circulated among the commissioners by June 30, with the intent of adopting final rules by the end of 2016.  The Fact Sheet trumpets the accomplishment of that task.  It also makes clear, however, that the path the Chairman has chosen in proposing new rules is to further regulate rather than deregulate broadcasters, and to do so without gathering any additional record evidence to defend that regulatory initiative.  This once again places the Commission on the well-trod path of adopting its desired result and leaving the task of defending it in court to a future FCC.  In the meantime, broadcasters remain in regulatory limbo.

In the Fact Sheet, the Commission explains that the record in the proceeding, which consists of the record of the 2010 quadrennial review as supplemented by comments received in response to the Further Notice of Proposed Rule Making (FNPRM) that commenced the 2014 quadrennial review, is sufficient to conclude that traditional media outlets remain “of vital importance to their local communities.”  Based on this finding, it concludes that continued regulation of the industry is in the public interest.  The Fact Sheet goes on to detail how each of the Commission’s existing media ownership rules will be “tweaked”, but otherwise reaffirmed, save the rules affecting television ownership, which will be tightened.

The Fact Sheet summarizes the proposed rules as follows:

  • The local television ownership rule, which prohibits common ownership of two full-power television stations in a market with fewer than eight independent television owners, and the common ownership of two Top-Four television stations in any market, will be left intact other than to update it to reflect the transition to digital television. However, the new rules will expand the prohibition against ownership of two Top-Four stations in the same market to apply to “network affiliation swaps, to prevent broadcasters from evading” the local ownership limits.
  • The controversial rule that the Commission adopted in 2014 treating TV Joint Sales Agreements (JSAs) as ownership interests (which the Third Circuit recently invalidated) will be reinstated, although existing JSAs will be granted some type of grandfathering relief, consistent with what the Fact Sheet terms Congress’ “guidance” on that issue. The Fact Sheet does not provide any details, nor address whether such grandfathered JSAs will be assignable.
  • TV Shared Services Agreements (SSAs) will now have to be placed in television stations’ online public inspection files. The agreements subject to this provision will be numerous, as SSAs are broadly defined by the Fact Sheet as “[a]ny agreement in which (1) a station provides another station, not commonly owned, with any station-related services, including administrative, technical, sales, and/or programming support; or (2) stations not commonly owned collaborate to provide station-related services, including administrative, technical, sales and/or programming support.”
  • The existing radio ownership rules will remain unchanged except for some “minor clarifications to assist the Media Bureau in processing license assignment/transfer applications.” An example provided of such a clarification is addressing how to define radio markets in Puerto Rico.
  • While the FCC tentatively concluded in the 2014 FNPRM that the Radio/TV Cross-Ownership prohibition is no longer needed for competition or localism purposes, and that the record indicated elimination of the prohibition would not adversely impact ownership diversity, the Fact Sheet, in keeping with its pro-regulation theme, reverses course and states the rule will be retained unchanged except for an update to reflect the transition to digital television.
  • Similarly, while the FCC suggested in the 2014 FNPRM that radio should be eliminated from the Newspaper/Broadcast Cross-Ownership prohibition, the Fact Sheet indicates that the current rule will be retained, but updated for digital television, and will now incorporate a failing or failed station/newspaper waiver standard.
  • The Dual Network Rule, which prohibits common ownership of ABC, CBS, NBC or Fox, will remain unchanged.
  • The Eligible Entity Standard, which determines which entities are eligible for favored regulatory treatment under the multiple ownership rules, was also affected by the recent Third Circuit decision.  The court ordered the FCC to collaborate with advocacy groups on a timeline to adopt a new standard and urged the Commission to engage with those groups on the substance of that standard as well.  The Fact Sheet indicates that the FCC will simply reinstate the prior revenue-based standard, rejecting the advocacy groups’ proposals to use a race or gender-based standard.

While today’s news is hardly surprising, it is disappointing for those waiting for the FCC to address (or even acknowledge) competitive realities that weren’t dreamed of when the FCC completed the 2006 quadrennial review.  For the most part, the Fact Sheet tracks the rules proposed in the even-further-out-of-date-now-than-it-was-then March 2014 FNPRM.  To the extent it varies from the FNPRM, it does so by rejecting any deregulatory proposals, increasing the regulatory burden on broadcasters beyond what was contemplated in 2014.

It wouldn’t be the first time the FCC has had to proceed on an out-of-date record, this time under pressure from the Third Circuit to do something (anything?) before the year is out.  However, expanding TV regulations beyond what the FCC felt could be justified a decade ago will take more than wishful thinking to defend in court, and the decision to go down that path without seeking further comments on the specific new proposals means that the regulatory uncertainty for broadcasters will continue until the courts have had a chance to weigh in.  It is therefore becoming increasingly clear that it is judicial review, and not the FCC’s quadrennial review, that will determine the rules under which 21st Century broadcasters will operate.

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Friday will see the launch of the FCC’s new online public inspection file system, called, not surprisingly, the Online Public Inspection File (“OPIF”).  With stations moving to a “next gen” public inspection file, Pillsbury today released its next gen Public Inspection File Advisory.  Like earlier editions have done since the creation of the public inspection file requirement, this latest edition provides in-depth information on the content of the file for both commercial and noncommercial stations, whether they are already online, moving online this Friday, or not moving online until 2018.

As discussed here previously, the OPIF replaces the Broadcast Public Inspection File (“BPIF”) for full power and Class A TV stations, and becomes mandatory on June 24th for not just those stations, but for:

  • Commercial broadcast radio stations that are located in the Top 50 Nielsen Audio markets with five or more full time employees (“First Wave stations”)
  • DBS providers
  • SDARS licensees
  • Cable systems with 1,000 or more subscribers.

As it did with the predecessor BPIF, the FCC took some commonsense steps to simplify the transition to an online file and avoid unnecessary effort for stations going forward.  Specifically, the FCC will automatically upload to a station’s online public inspection file most applications and reports that are electronically filed with the FCC.

However, stations should not be complacent that the FCC is assuming responsibility for the public file being complete.  Stations must still be knowledgeable about which items actually belong in the public inspection file and for how long.  Not all items required to be filed with the FCC electronically have to be kept in the public file, and many items that are not filed electronically with the FCC do have to be kept in the public inspection file.  Stations must know the difference.  In addition, stations must know where in the file to upload required items.  For example, most commercial stations will have a Political File that covers candidate airtime purchases, and a Section 73.1212 Sponsorship Identification File addressing issue ads.  As the FCC itself has acknowledged, however, many stations have tended to combine those two categories, placing both in their Political File folder.

Knowing how and where these various documents should be uploaded is important for ensuring a rule-compliant file that can withstand worldwide scrutiny on the Internet.  Equally important, however, is knowing when a document should be removed from the public file.  The OPIF does not address this need, and documents that are past their retention period must be manually removed by the licensee.

Of course, the transition to any new online system requires users to become familiar with that system’s architecture and operation as well.  To that end, the FCC recently hosted a live demonstration of the OPIF.  That demonstration revealed that First Wave stations must log into their new online public inspection file on June 24th and actively take steps to switch the file “on” so that the public can access the content.

It turns out that accomplishing this involves several steps.  First, the licensee must sign into the system using its Federal Registration Number (“FRN”) and password, revealing the Owner Dashboard.  The Owner Dashboard displays the Passcode that the system has assigned to each of that owner’s stations.  This allows an owner of multiple stations to give the Passcode to employees responsible for maintaining one station’s public file without having to give up the overall FRN or the Passcodes to its other stations’ public files associated with that FRN.  After this has been accomplished, the licensee will need to log out of the Owner Dashboard and then log back into the system using the “Entity ID”, which in the case of a broadcast station is the Facility Identification Number for the station and the Passcode acquired in the first step.

At this point, a banner will be visible at the top of the public file screen that reads “[Call Sign] is now ready for keeping public inspection files online.  [Call Sign] profile is currently turned On/Off for public view.”  The last step that needs to be taken is switching the station’s public file view to “On”.  The licensee makes the file visible to the world by toggling the On/Off button to the On position.  This action cannot be undone.  Once it is toggled on, it remains on forever.

As part of this process, a pop up box will open requiring the station to certify (and yes, this is exactly how it reads according to the FCC’s demonstration) “I confirm that you are now uploading to your online public inspection file all new public and political file material on a going-forward basis.”  This appears to be intended to let the public know which radio stations are First Wave stations (whose online public files are being phased in from June 24th to December 24th), and explain why documents created before June 24th may not yet be in that station’s online public file.  Once the certification is checked, the station’s online public file will be visible to the public and a banner will appear stating “This entity has confirmed that it is uploading to the online public inspection file all new public and political file material on a going-forward basis.”

For First Wave stations, public file documents that existed prior to June 24th must be uploaded to the online public file by December 24th.  When a station has completed that uploading process, it must go to the Certification tab in the public file and certify “Yes, I certify I have uploaded all existing public file material required to be included in the online public inspection file” and then enter the name of the person certifying.  A banner stating “This entity has confirmed that it has completed uploading of all existing public file material required to be included in the online public file” will then appear and be visible to the public.  Stations obviously will want to make sure this is an accurate statement before making the certification.

While this somewhat complicated process may make radio stations nostalgic for paper files, the transition on June 24th should be much smoother for full power and Class A television stations.  The FCC plans to move all materials in a TV station’s current online public file into the new system by June 24th.  According to the FCC, the links that stations have on their websites to their online public inspection files in BPIF should still work in an OPIF world, as the FCC intends to automatically redirect that link to the new online filing system.  However, stations are still encouraged to update the link on their website on June 24th to be certain visitors actually reach the new online public file location.  More immediately, the direct link that TV stations are required to have on their website to their most recent EEO public inspection file report (if the report itself is not posted on the station website) will not be redirected by the FCC.  As a result, such TV stations need to manually fix that link on their website as of June 24 or be in violation of the EEO report posting requirement.

One final note: in the new database, the FCC has hidden the various document folders under the “Manage” tab, so television stations that are used to seeing all their materials immediately upon logging in should click that tab before assuming the FCC failed to import their public file documents into the new system.

If “content is king” in programming, then content in the public file is king in a station’s next license renewal.  Successfully navigating the transition to an online public file and the worldwide scrutiny it can bring will determine how smoothly that license renewal will go.  More immediately, knowing what needs to be in the public file and ensuring it is there on time will avoid public file fines that start at $10,000 and go up from there.

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In a Public Notice released today, the FCC has taken the next steps towards implementing the expanded online public inspection file, which is set to go live on June 24th.  Specifically, the FCC announced that on June 13, 2016 at 1:00 p.m. Eastern Time, it will hold an online demonstration on using the new online public file.  In addition, the FCC publicized the Internet address for the new online public file, which licensees must use to create the required link from their websites to the online public file.

As we previously described in Neither Sleet Nor Snow Can Keep the Radio Public File from Going Online and All New Online Public File for TV, Radio, Cable and Satellite Coming June 24th, the FCC adopted a Report and Order in January 2016 extending the online public inspection file requirement to broadcast and satellite radio licensees and cable and satellite television operators.  That requirement is currently applicable only to full power and Class A television stations.  Pursuant to a phased-in schedule, commercial radio stations that have five or more employees and are located in the Top 50 Nielsen Audio markets, as well as satellite radio licensees, cable systems with 1000 or more subscribers, and DBS operators, must begin using the new system on June 24, 2016.  While commercial radio stations not included in this group as well as all noncommercial radio stations are exempt from the new online public file requirement until March 1, 2018, they are allowed to voluntarily commence use of the new system sooner.  Because these exempt stations are permitted to transition early, the demonstration should be of interest to all radio station licensees.  The demonstration will take place in the Commission Meeting Room, but can be viewed live at https://www.fcc.gov/news-events/events/2016/06/demonstration-expanded-online-public-inspection-file-interface.

Today’s Public Notice also notes that the website address where the new online public file will be hosted will be https://publicfiles.fcc.gov/.  Once a station has transitioned to the online public file, it must provide a link to the new online public inspection file from the home page of the station’s website, if it has one.  Full power and Class A television stations that already have such a link will need to update that link to reflect the new website address.

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

  • FCC Enforcement Bureau and Long-Distance Provider Agree to $100,000 Settlement for Violations of FCC’s Rural Call Completion Rules
  • FCC Cancels $3,000 Fine Against TV Licensee for Untimely Kidvid Filings, Upholds $10,000 Fine for Missing Issues/Programs Lists
  • FM Construction Permit Auction Winner Fined $3,000 For Late Application

Dropped Call of the Wild: Investigation of Rural Call Problems Ends With $100,000 Consent Decree

The FCC’s Enforcement Bureau entered into a Consent Decree with a Utah-based long distance carrier to resolve an investigation into whether the carrier failed to sufficiently respond to a rural customer’s complaints of poor call quality and failed to cooperate with the FCC’s resulting investigation.

The FCC has adopted several “Rural Call Completion Rules” in recent years to address poor call quality and call completion problems in rural and other high-cost areas. The Commission clarified in a 2012 declaratory ruling that a carrier violates Section 201 of the Communications Act of 1934 when it knows or should know that calls are not being completed to certain areas and fails to correct the problem or fails to ensure that its intermediate providers correct the problem.

The FCC has also determined that practices that allow lower quality service to rural or traditionally high-cost areas to persist constitute unjust or unreasonable discrimination (based on locality) in violation of Section 202 of the Communications Act. Further, the FCC has interpreted Section 208 of the Act and Section 1.717 of the Commission’s Rules to require that a carrier satisfy (or adequately explain why it cannot satisfy) any informal rural call completion complaints.

In December 2014, a consumer filed an informal complaint with the FCC detailing ongoing problems with receiving work calls. The calls were sent over the carrier’s long distance network to the consumer’s home office, which is served by an intermediate rural local exchange carrier. The carrier investigated the matter and explained in its response to the informal complaint that (1) the consumer had not responded to a follow-up email about the complaint, and (2) the consumer was not its customer.

The carrier took action in March 2015—after the FCC reminded the carrier of its obligations to address rural call quality problems—but the problem recurred. The consumer subsequently filed additional complaints alleging continued call problems in May and June of 2015. Finding that the carrier failed to sufficiently address and resolve the call quality problems with its intermediate provider until late July 2015, the FCC issued a Letter of Inquiry to the carrier and opened an investigation.

To settle the matter, the carrier entered into a Consent Decree with the FCC, wherein the carrier: (1) admitted that it failed to ensure call quality from its intermediate providers and that it did not cooperate with the FCC’s investigation; (2) agreed to pay a $100,000 civil penalty; and (3) agreed to implement a compliance plan going forward. As part of the plan, the carrier must establish operating procedures and training on the Rural Call Completion Rules, and file regular compliance reports with the FCC during the three-year compliance period.

Island Jam: Guam TV Station Successfully Appeals Proposed Fine for Late Kidvid Reports, But Remains on the Hook for Issues/Programs List Violations

The FCC’s Media Bureau cancelled a proposed $3,000 fine against a Guam TV licensee for failing to timely file five Children’s Television Programming Reports, but upheld a $10,000 fine against the licensee for failing to place fifteen Quarterly Issues/Programs Lists in the station’s public inspection file. The FCC also admonished the licensee for its failure to upload copies of its Quarterly Issues/Programs Lists that were in the station’s local file prior to August 2, 2012.

Continue reading →

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The U.S. Court of Appeals for the Third Circuit today issued a decision vacating the FCC rule effectively banning television Joint Sales Agreements (“JSAs”) and threatened to throw out all of the FCC’s remaining broadcast ownership rules if the FCC does not complete its required “quadrennial” review of those rules by the end of 2016.

The case returned broadcasters and advocacy groups to this court for its third major decision on the FCC’s broadcast ownership rules since 2004.  This time around, the case addressed three issues:  public interest groups’ request that the court require the FCC to adopt a new definition of “eligible entity” aimed at promoting female and minority broadcast ownership; broadcasters’ request that the court vacate all broadcast ownership rules due to the FCC’s failure to complete the statutorily mandated quadrennial reviews of those rules; and broadcasters’ request that the court vacate the FCC’s rule making television JSAs an attributable ownership interest.

The first two of these issues date back to the FCC’s 2002 biennial review of its ownership rules.  Congress mandated that the Commission conduct periodic reviews of its broadcast ownership rules, originally every two years, but later extended to every four years, in the 1996 Telecom Act.  The Commission undertook reviews in 2002 and 2006 that resulted in orders that were appealed to the Third Circuit.  Thereafter, the Commission consolidated each still-pending quadrennial review with the succeeding one, with the result that the FCC has not concluded a review or updated its ownership rules since 2006.

In its 2002 biennial review, the FCC modified certain of its broadcast ownership rules, including changing its definition of a radio market, with the result that its ownership rules for radio stations were actually more restrictive.  The FCC grandfathered existing radio station combinations that would have exceeded the new limits, but required those combinations be broken up and brought into compliance with the new standards if sold.  To encourage female and minority ownership, the Commission excluded “eligible entities” from the new rules, allowing those meeting the definition to acquire a combination that would otherwise have to be split up under the revised radio ownership rules.

Other similar FCC rules also rely on the definition of an “eligible entity”, making that definition central to the FCC’s efforts to increase female and minority ownership.  The FCC has been using a definition of “eligible entity” based on revenue that was developed by the Small Business Administration, arguing that the test will survive judicial scrutiny because it is not based on race or gender.  However, advocacy groups have countered that there is no evidence that the definition actually enhances female and minority ownership, as opposed to small business entity ownership.  The Third Circuit agreed in 2011, finding the Commission’s use of the definition to be arbitrary and capricious.  However, since the Commission has not completed its required quadrennial reviews, the definition has remained in place, contrary to the Third Circuit’s order that the FCC adopt another definition.

Five other ownership rules, the local television ownership rule, the local radio ownership rule, the newspaper/broadcast cross-ownership rule, the radio/television cross-ownership rule, and the dual network rule have similarly gone without an update since 2006.  The court lamented that this lack of review has left broadcasters subject to rules that are decades old, preventing parties from taking advantage of deregulatory options the FCC has considered, but not acted on.  It specifically highlighted the continued existence of the newspaper/broadcast cross-ownership rule, which was created in the 1970s.  The FCC determined more than a decade ago that the rule is no longer necessary, but it remains on the books because the FCC has not successfully concluded the required quadrennial reviews to eliminate it.

The court dissected the rationales the Commission espoused to justify rolling each quadrennial review into the next one and found that they did not justify the years-long delay.  It stopped short, however, of granting the requested invalidation of all broadcast ownership rules, finding that the delays do not yet justify doing so.  Instead, the court mandated that the Commission go to mediation with the public interest groups to set a timetable for defining “eligible entity”, and based on a promise by the FCC that the Chairman would circulate a Notice of Proposed Rulemaking for revised ownership rules by June 30, gave the agency until the end of the year to take comments, reach a decision completing the 2010 and 2014 quadrennial reviews, and issue new broadcast ownership rules.

Against this backdrop, the court considered the third issue before it—broadcasters’ challenge to the Commission’s decision to attribute television JSA arrangements that had been routinely treated as non-attributable before.  The FCC adopted this rule of its own accord in 2014, arguing that JSAs involving more than 15% of another in-market station’s airtime gave one station influence approximating ownership over the other station, thereby enabling it to evade the limitations of the Commission’s local television ownership rule.  Broadcasters argued, however, and the court agreed, that the Commission could not “expand the reach” of the local television ownership rule without justifying the rule’s continued existence in the first instance in a quadrennial review.

The court’s decision sets in motion activity on a number of fronts.  First, the Commission, while in the midst of its first-ever broadcast incentive auction, will have to participate in mediation with public interest groups.  Second, the Commission will have to quickly finalize a Notice of Proposed Rulemaking that it represents has been in the works for some time.  Third, it will have to collect comments and reply comments, perhaps complete new ownership studies, analyze the record these actions create, and in the next six months, conclude proceedings that have been underway for more than 10 years.

If this timeline is to be accommodated, comment periods will have to be short, extensions of comment deadlines may not be available, and resources the Commission might put toward other activities may need to be reallocated.  Despite having ten years since the 2006 quadrennial review, reasoned decision making may have to give way to rushed decision making.

As a result, broadcasters should start prepping now to participate in the proceeding.  By necessity, it will be fast-moving, and strange things can happen in fast-moving proceedings.  Getting the right result in this quadrennial review will require a lot of effort, and summer vacation just got a lot shorter.

 

 

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On a day when a major broadcast ownership decision from the U.S. Court of Appeals for the Third Circuit garnered most of the attention, the FCC worked on more prosaic matters, issuing a Notice of Proposed Rulemaking to eliminate the requirement that commercial broadcast stations maintain letters and e-mails from the public in their public file.  This requirement is one of the only vestiges of the physical public file that remained after the FCC’s decisions to move television and radio public files online.

The FCC based its proposal to eliminate the requirement in part upon the increase in communication between the public and broadcast stations on social media platforms, and the corresponding decrease in communication by letter and e-mail.  The NPRM also proposes to eliminate a requirement that cable television operators maintain the location of their cable system’s principal headend in their public file.

Initial comments on the FCC’s proposals will be due 30 days after the NPRM is published in the Federal Register, with reply comments due 60 days after Federal Register publication.

As we wrote recently, eliminating the requirement to maintain correspondence from the public in a physical file would free stations from the need to provide free and unfettered access to their offices, and to maintain staff at all times during business hours ready to handle public file requests.

The NPRM enjoyed support from all five Commissioners, each of whom issued a separate statement in support of the proposal—a somewhat rare display of unanimity by the current Commission.  Of particular interest was Chairman Wheeler’s statement that today’s proposal, if adopted, would enable broadcasters to “lock their doors and redeploy resources once used to help the public access the file at the studio.”  Many in the TV and radio community may find themselves quietly nodding in agreement.

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Television broadcasters have had to comply with an online Public Inspection File requirement since 2012.  This past January, the FCC announced that it would expand the online Public File requirement to certain broadcast radio, satellite radio, cable system, and DBS operators.  Today, the FCC released a Public Notice announcing the effective date of that new obligation.  It also announced that it has established a new filing system, the Online Public Inspection File (“OPIF”), for use by these newly-covered entities, as well as by television broadcasters who until now have been using the existing online Broadcast Public Inspection File (“BPIF”).

The entities that are newly covered by the online Public File requirement will begin use of the new system in two “waves,” with larger entities going first and having a phase-in period, and smaller entities going later, but having no phase-in period.  There are lots of dates to keep track of, which include:

  • To Be Announced:  FCC Webinar Demonstrating Use of OPIF
  • June 24, 2016:  Public Inspection File documents (including Political File documents) created on or after this date must be uploaded to OPIF by the “first wave” of newly-covered entities:
    • Commercial radio stations that have five or more full-time employees and are located in the Top 50 Nielsen Audio markets
    • DBS providers
    • SDARS licensees
    • Cable systems with 1,000 or more subscribers (except with respect to the Political File, for systems with fewer than 5,000 subscribers)
  • June 24, 2016:  OPIF use by full-power and Class A television stations becomes mandatory and BPIF use is disabled
    • The FCC says it will transition television stations’ existing documents from the BPIF to the OPIF automatically by this date
  • December 24, 2016:  Public Inspection (but not Political) File documents created prior to June 24, 2016 must be uploaded to the OPIF by the “first wave” entities listed above
  • March 1, 2018:  A “second wave” of newly-covered entities must begin use of OPIF for all newly created Public Inspection and Political File documents and upload all existing Public Inspection (but not Political) File documents.  The “second wave” consists of:
    • All NCE radio stations
    • Commercial radio stations that have fewer than five full-time employees and are located in the Top 50 Nielsen Audio markets
    • Commercial radio stations located outside of the Top 50 Nielsen Audio markets, regardless of staff size
    • Cable systems with between 1,000 and 5,000 subscribers, with respect to newly-created Political File documents only

Commercial broadcast licensees must continue to retain letters and emails from the public at their main studios; the FCC will not let them be posted in the online public file.  However, as we noted last week, the FCC is circulating a Notice of Proposed Rulemaking that proposes eliminating such letters and emails from the public file entirely.

The Public Notice announces that the OPIF will include a number of technical improvements not found in the BPIF system currently used by television licensees.  According to the FCC, these improvements are meant to allow stations to better manage their online files, including implementing APIs to enable the upload of multiple documents from a third-party website and permitting a document to be placed into multiple folders.  OPIF will also feature improved .pdf conversion software to speed uploads, and allow more flexibility to delete empty folders.

While radio stations have been nervously gearing up to face the new frontier of online public files, TV stations may be a bit surprised that the online file is changing for them as well.  Particularly surprised will be those TV stations who haven’t been following these developments and who try to log into the old public file system on July 10 to file their quarterly reports.  Whether you are a TV or radio broadcaster, or a cable, DBS, or SDARS provider, now is the time to start learning how OPIF will work; it’s not a BPIF world anymore.