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March 2013

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:

  • Delay in Providing Access to Public Inspection File Leads to Fine
  • FCC Fines Broadcaster for Antenna Tower Fencing, EAS and Public Inspection File Violations

Radio Station Fined $10,000 for Not Providing Immediate Access to Public File

This month, the Enforcement Bureau of the FCC issued a Notice of Apparent Liability for Forfeiture and Order (“NAL”) in the amount of $10,000 against a Texas noncommercial broadcaster for failing to promptly make its public inspection file available. For the delay of a few hours, the Commission proposed a fine of $10,000 and reminded the licensee that stations must make their public inspection file available for inspection at any time during regular business hours and that a simple request to review the public file is all it takes to mandate access.

According to the NAL, an individual from a competitor arrived at the station at approximately 10:45 a.m. and asked to review the station public inspection file. Station personnel informed the individual that the General Manager could give him access to the public files, but that the General Manager would not arrive at the station until “after noon.” The individual returned to the studio at 12:30 p.m.; however, the General Manager had still not arrived at the studio. According to the visiting individual, the receptionist repeatedly asked him if he “was with the FCC.” Ultimately, the receptionist was able to reach the General Manager by phone, and the parties do not dispute that at that time, the individual asked to see the public file. During that call, the General Manager told the receptionist to give the visitor access to the file. According to the visitor, when the General Manager finally arrived, he too asked if the individual was from the FCC, and then proceeded to monitor the individual’s review of the public file.

After the station visit, the competitor filed a Complaint with the FCC alleging that the station public files were incomplete and that the station improperly denied access to the public inspection files. The FCC then issued a Letter of Inquiry to the station, requesting that the station respond to the allegations and to provide additional information. The station denied that any items were missing from the public file and also denied that it failed to provide access to the files.

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At the end of every quarter, TV stations across the land must electronically file with the FCC a Form 398–The Children’s Television Programming Report. However, stations attempting to do that filing for the first quarter of 2013 are discovering that the FCC’s online filing system for those forms ends with the fourth quarter of 2012. As a result, it is preventing many TV stations from preparing their electronic report for the first quarter of 2013, rejecting all efforts to select “First Quarter 2013” as the report to be filed.

At first, it appeared that the FCC had bought into the “Mayan Prophecy” that the world was ending in December 2012, marking the end of the Mayan (and perhaps the FCC’s) calendar. And, had the world actually ended in 2012, filing a Form 398 covering the first quarter of 2013 would have indeed ranked low on most broadcasters’ “to do” lists. However, with 2013 well under way, TV stations are now flummoxed as to how to get the FCC’s electronic filing system to allow the preparation and filing of a first quarter 2013 kidvid report.

Fortunately, there is an answer, but it requires a little background. We reported in a 2010 KidVid Advisory that the FCC had suddenly begun requiring stations to enter their FCC Registration Number and password as the final step before permitting a Form 398 to be filed. As it turned out, this was apparently the first step in creating a new FCC Form 398 filing system.

In July 2012, the FCC released what it termed an “alternate” link for accessing the Form 398 filing system and updated its user manual to indicate that the web address for filing the form is the alternate link. However, the FCC’s main Children’s Television Programming page on the Internet continues to show that the original link is the one to use for filing a Form 398, and until this quarter, that original link has continued to work correctly. Of course, most TV stations just have the original link bookmarked, and have no reason to visit the FCC’s website/user manual to see if the filing procedures have been changed. Adding to the confusion is the fact that following the original link does not generate a warning or error message, but takes you to the same filing page stations have been using for years. It is only when a station tries to create a report for first quarter 2013 that a problem arises.

As a result, the “alternate” link is not just an alternate any more, and must be used to file all post-2012 kidvid reports. So, from here on out, use this link for filing your kidvid reports: http://licensing.fcc.gov/KidVidNew/public/filing/submit_login.faces

Note also that, at the new link, you will have to provide your call sign, Facility ID, FCC Registration Number and Password to even be able to log into the system. This is all information you previously needed to file a Form 398, but you supplied it at the end of the filing process. Now, you can’t even get started without it. For TV stations that have been banging their heads against the wall trying to figure out why they can’t prepare, much less file, their Form 398, using the alternate link should solve that problem. It may be a small problem compared to the end of the world, but then the Mayans never had to deal with online filing.

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As we have discussed at great length in the past, the FCC’s rules require that certain video programming delivered online be captioned if the programming previously aired on television with captions. The rules kicked in on April 30 of last year, and all video programming that appeared on television with captions after that date is considered “covered Internet Protocol (IP) video” and will ultimately need to be captioned when being shown online.

The first step of the captioning phase-in occurred on September 30, 2012. Since that date, stations have been required to display captioning for prerecorded full-length programming delivered via IP if the programming was first aired on television with captions on or after the April 30 date noted above.

The second phase of the FCC’s IP captioning rules begins March 30, 2013 (a Saturday), at which time the FCC’s IP captioning rules require all live and near-live programming subject to the rules and shown on television with captions to be captioned when delivered online. The FCC’s definition of “live” or “near-live” captures all programming performed simultaneously or recorded within 24 hours of its first transmission to a video programming distributor. Note that as long as they do not constitute “substantially all” of a full-length program, online video clips are currently exempt from the IP captioning rules.

As a result, the question we probably receive most often from clients about online captioning is: what exactly does the FCC mean by “substantially all” of a full-length program? It’s a good question that lacks a precise answer. The FCC intentionally decided not to provide a specific threshold for the length or number of clips aired that would constitute “substantially all” of a program. According to the FCC, it did not see “any evidence that Congress sought to exclude only clips of a certain duration or percentage of the full-length program.”

Parties should keep in mind, however, that the FCC will not allow them to game the system by simply “shaving” off a few minutes or brief segments of a full length program in order to avoid the IP captioning obligation. The FCC emphasized that “if there is clear evidence that an entity has developed a pattern of attempting to use video clips to evade its captioning obligations,” the FCC may find that a rule violation has occurred.

There is of course more to come. The captioning requirements for “full length” and “live or near-live” programming are just the beginning of the new IP captioning obligations being implemented in the near future. The next deadline is coming up soon with the September 30, 2013 requirement that all pre-recorded programming that is edited for Internet distribution be captioned for online viewing. Also, don’t forget there are separate captioning compliance deadlines for captioning of IP video programming that previously aired on television prior to the effective date of the rules, but that is shown again on television with captions after the effective date. Those phased-in captioning requirements are scheduled to take place between March 2014 and March 2016, with progressively shorter periods to caption the programming for IP video after it airs on television with captions.

As was the case with the original broadcast captioning rules, each phase-in “deadline” shrinks the amount of programming exempt from the online captioning requirement while requiring the distributor to tackle ever more complex captioning issues. IP captioning will therefore consume a growing portion of the attention of those posting broadcast video online. The big difference is that broadcast captioning was phased in over eight years (twelve years for Spanish language programming), whereas online captioning is being phased in on a much faster schedule.

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While in the works for a while, today’s formal announcement by FCC Commissioner McDowell that he will be departing the FCC leaves a hole in the FCC’s ranks that will be difficult to fill. In many regards, Commissioner McDowell was a throwback to an earlier time, both at the FCC and in Washington, in that his tenure was distinguished not just by his congenial nature, but by an abiding adherence to his regulatory principles, rather than to reaching a particular result. While I suspect he might bristle at being described as a “rational regulator”, preferring instead to be known as a “devoted deregulator”, Commissioner McDowell represented a common-sense approach to the communications industry and the business of regulating it.

Since the job of a lawyer is to obtain for a client the best result legally possible, you would think that lawyers would be big fans of the “predictable vote”–the commissioner whose policy positions are so embedded that there is little doubt as to where they will stand on any particular issue. And of course, if three of the five commissioners are on your side of an issue, that’s a pretty warm and fuzzy place to be. The problem, however, is that for every time three of the five commissioners support your position, there will be a time when three of the five do not.

For that reason, an experienced lawyer will always prefer an inquisitive and open-minded regulator over an ideologue, even when it is an ideologue that agrees with you (today). While the independent-minded regulator will make you work to persuade them each and every time, the opportunity to persuade them is never foreclosed. If you fail to persuade them that your cause is just, then the failure is yours, and not just the result of an agency formalizing a preordained result.

Over the years, the FCC has been blessed with a number of commissioners that have been particularly good at compartmentalizing natural biases, and giving the parties before them a full and fair opportunity to make their case. Probably not coincidentally, many of these same commissioners have had both a healthy sense of humor and humility, putting those around them at ease and creating an environment conducive to an open and lively discussion of the issues. A final characteristic found among this select group–and helpful to anyone in Washington–is the ability to separate the advocate from the issue, recognizing that just because you disagree with the argument that the advocate must make today on behalf of a client doesn’t diminish the advocate who, like the commissioner, is just trying to do their job to the best of their ability, and will have to make a different argument on behalf of a different client tomorrow.

Unfortunately, these characteristics are rarely those that will get you nominated by a President, or see you through a partisan confirmation process, so commissioners with all of these characteristics will inevitably tend to be the exception rather than the rule. Because of this, Commissioner McDowell will be missed by many who work at, and with, the FCC. In a town where some individuals have countdown calendars marking the number of days remaining in a particular government official’s tenure, it is perhaps the ultimate backhanded Washington compliment that the most arresting part of Commissioner McDowell’s departure announcement was where it noted he had been at the FCC for “nearly seven years.” It’s hard to believe it has been that long.

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In response to a request by the Coalition for Broadcast Investment (“Coalition”), the FCC, through its Media Bureau, has invited the filing of comments on the question of whether the Commission should now be open to allowing non-citizens and foreign companies to hold more than a 25% equity interest in U.S. radio and television stations. The deadline for filing comments is April 15, with reply comments due by April 30.

The Coalition is comprised of national broadcast networks, radio and television station licensees, as well as community and consumer organizations. It is urging the FCC to publicly commit, going forward, to considering on their individual merits transactions proposing significant foreign investment in broadcast stations, rather than reflexively rejecting foreign ownership above the 25% mark, as the FCC has traditionally done when reviewing broadcast transactions.

But for the Commission’s decades-old refusal to be flexible, the Coalition’s request would not have been necessary as Section 310(b)(4) of the Communications Act states that a broadcast license will not be granted to “any corporation directly or indirectly controlled by any other corporation of which more than one-fourth of the capital stock is owned of record or voted by aliens, their representatives, or by a foreign government or representative thereof, or by any corporation organized under the laws of a foreign country, if the Commission finds that the public interest will be served by the refusal or revocation of such license.” The very language of the Act therefore indicates that alien ownership above the 25% mark will be permitted unless the FCC specifically finds that such foreign ownership would not, in the particular situation presented, serve the public interest.

Despite the language of the statute, the FCC has routinely declined to consider broadcast-related transactions proposing more than 25% foreign ownership of a broadcast parent company. The Coalition contends that, by considering the merits foreign ownership proposals in excess of the 25% mark, the FCC will encourage “access to additional and new sources of investment capital [which] will benefit the broadcast industry and American consumers by financing advanced infrastructure, innovative services and high quality programming; and by promoting the creation of highly skilled, well-paying jobs” as well as “provide new opportunities for minority businesses and entrepreneurs, whose access to the domestic capital markets has been limited….”

A clear statement by the FCC that it will now review, on the merits, radio and television transactions proposing significant foreign investment in U.S. broadcast stations should send a very constructive signal to the broadcast industry, to potential foreign investors and to U.S. investors looking to syndicate more of their capital needs offshore for U.S. broadcast investments. Such a new openness and flexibility on the part of the Commission will also serve to create a more equitable “access to capital” environment for broadcasters particularly in relation to other forms of media.

Future Commission actions publicly approving, disapproving and conditioning transactions proposing “plus 25%” foreign ownership will, over time, provide the necessary predictability that is so important for investment decision-making. Pillsbury has considerable experience in crafting FCC-friendly ownership/control structures for banks, companies and firms with foreign ownership that wish to invest in U.S. broadcast stations. Action by the Commission on the Coalition’s letter will hopefully simplify and speed the heretofore painstaking process of balancing the return on investment objectives of foreign investors against the need to meet the letter and intent of the FCC’s rules and policies with respect to foreign ownership of U.S. broadcast stations.

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As we all know, it’s easy to complain about the Federal Government these days given the gridlock that currently exists on Capitol Hill, the Sequester, and the looming debt ceiling battle. But let’s give credit where credit is due.

The FCC has revised its Equal Employment Opportunity (EEO) audit letter for all broadcast licensees, and has eased the burden on respondents by eliminating the need to produce copies of each and every job vacancy notice that was sent out to every referral source, allowing stations instead to file only a representative copy of each job opening notice along with a list of the referral sources to which it was sent. In addition, the FCC has changed its audit letter to allow the submission of a single on-air job advertisement log sheet instead of requiring stations to provide multiple log sheets. The letter also states that stations are not required to provide copies of “applicants’ resumes …, company training manuals, posters, employee handbooks, or corporate guidebooks.” While responding to an EEO audit remains a time consuming task, the FCC has at least taken a step in the right direction by better focusing the audit request on the most consequential materials.

The new version of the EEO audit letter was, as required by the FCC’s rules, sent to randomly selected radio and television stations in the past few weeks. The FCC annually audits the EEO programs of approximately five percent of broadcast stations and has released the list of the stations subject to the most recent audit. All stations, whether targeted for this round of audits or not, should carefully review the FCC’s sample audit letter, as it informs stations of what they will need to present when their time comes.

The FCC’s EEO rules require broadcast station employment units with five or more full-time employees to recruit broadly and inclusively for all job openings, and require substantial recordkeeping, periodic reports to the FCC, and the placement of those reports in stations’ public inspection files and on their websites. Broadcasters must also regularly analyze the results of their recruitment efforts to ensure that broad and inclusive outreach is being achieved and must keep detailed records of their recruitment outreach efforts to submit to the FCC in the event of an EEO audit.

For everything you ever wanted to know about ensuring compliance with the FCC’s EEO rules, see our comprehensive and recently updated Client Advisory: “The FCC’s Equal Employment Opportunity Rules and Policies – A Guide for Broadcasters.”

The fact that stations will no longer need to provide multiple ad log sheets or the corporate materials described above will certainly make responding to an audit easier. That said, the FCC’s EEO rules are, and will continue to be, a significant regulatory burden on broadcasters. While broadcasters will not be required to submit as much material to the FCC as part of an EEO audit, they will continue to be required to maintain records extensively detailing their job recruitment efforts. In addition, stations should take note that the FCC’s Public Notice released with the new version of the EEO audit letter seems to indicate that in exchange for the reduced response burdens, the FCC is raising the bar and now expects stations to adopt a standard of “vigorous recruitment.”

Still, despite concerns as to what the FCC means by “vigorous”, it’s nice to see that the FCC is moving in the direction of simplified audits in an effort to actually ease regulatory filing burdens on broadcasters.