A Reprieve--and a Lesson--for Class A TV Stations?
Posted March 7, 2012
I wrote in February about a sudden deluge of nearly identical FCC decisions, all released on the same day, proposing to revoke the Class A status of sixteen LPTV stations for failure to timely file all of their Form 398 children's television reports. While I noted at the time that the affected licensees had done themselves no favors by apparently failing to respond to FCC letters of inquiry, the decisions were still somewhat surprising in that the FCC has traditionally fined Class A stations for rule violations rather than revoked their Class A status. Class A status is important because it provides LPTV stations with protection from being displaced by full-power TV stations, and is now more important than ever, as the recently enacted spectrum auction legislation allows Class A stations both the opportunity to participate in auction revenues, and protection from being eliminated in the broadcast spectrum repacking associated with the auction.
Given the peculiar timing of the FCC's decisions (just days after the spectrum auction legislation became law), the sudden shift from fines to Class A revocation, and the release of sixteen such decisions at the same time, the decisions raise the specter that the FCC may be moving to delete the Class A status of non-compliant stations in order to facilitate clearing broadcast spectrum as cheaply as possible in preparation for the newly-authorized wireless spectrum auction. Within a few days of my post, a number of trade publications picked up on this possibility as well. The result was a lot of Class A stations checking to make sure their regulatory house is in order, and a growing concern in the industry that these decisions might be the leading edge of an FCC effort to clear the way for recovering broadcast spectrum for the planned auction.
While that may still turn out to be the case, I was nonetheless at least somewhat relieved to see a trio of decisions released this morning by the FCC that are largely identical to the February decisions with one big exception--the FCC proposed fining the stations for failing to file all of their children's television reports rather than seeking to revoke their Class A status. Specifically, the FCC proposed fining two of the licensees $13,000 each, and the third licensee $26,000 (because it had two stations that failed to file all of their reports).
Each $13,000 fine consisted of $3000--the base fine for failing to file a required form--and an additional $10,000, which is the base fine for having such documents missing from a station's public file. While a $13,000 fine is painful, particularly for a low power station, loss of Class A status could be far more devastating for these stations, and for Class A stations in general. Setting aside spectrum auction considerations, buyers, lenders and investors will be hesitant to risk their money on Class A stations that could suddenly lose their Class A status, and shortly thereafter be displaced out of existence. Stated differently, those considering buying, lending to, or investing in Class A stations will want to do a thorough due diligence on such stations' rule compliance record before proceeding.
So why did the FCC propose fines for these stations while the sixteen stations in the February decisions were threatened with deletion of their Class A status? Although today's decisions and the February decisions are similar in many respects, there is one big distinction. Unlike the licensees in the February decisions, the licensees named in today's decisions promptly responded to the letters of inquiry sent by the FCC, and upon realizing that they had failed to file all of their children's television reports, belatedly completed and submitted those reports to the FCC. While that didn't stop the FCC from seeking to fine these stations, it does seem to have avoided a reexamination of their Class A status.
While the FCC's February decisions to pursue deletion of Class A status are still a worrisome development for all Class A stations, today's decisions thankfully shed some much needed light on when the FCC is likely to pursue that option, and when it will be satisfied with merely issuing a fine. As I noted in my earlier post, a licensee that fails to promptly respond to a letter from the FCC is living life dangerously, and today's decisions confirm that fact. As a result, Class A stations should continue to make sure that their regulatory house is in order, and if they receive a letter of inquiry from the FCC, should contact their lawyer immediately to timely put forth the best possible response to the FCC.