Articles Posted in Cable/Satellite TV

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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.

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The FCC’s video description rules require covered broadcasters and MVPDs to provide audio-narration of the key visual elements of a program during pauses in the dialogue so as to make it more accessible to individuals who are blind or visually impaired. Under the current rules (which Congress in 2010 directed the FCC to reinstate after a court struck them down in 2000), broadcast stations affiliated with ABC, CBS, Fox, or NBC that are located in the top 60 television markets are required to provide 50 hours of programming with video description per calendar quarter. The top five non-broadcast networks on Pay-TV systems serving 50,000 or more subscribers (currently USA, TNT, TBS, History, and Disney Channel, as of July 1, 2015) are also subject to this requirement.

In addition to directing the FCC to reinstate its video description rules in the Twenty-First Century Communications and Video Accessibility Act of 2010 (CVAA), Congress gave the FCC authority to adopt additional video description rules if the benefits of doing so would outweigh the costs. At today’s Open Meeting, the FCC tentatively concluded that the substantial benefits of adopting additional video description requirements would outweigh the costs of the proposed requirements, and therefore adopted a Notice of Proposed Rulemaking recommending an update to and expansion of its video description rules.

The FCC’s additional proposed requirements include increasing the required amount of video-described programming on each covered network from 50 hours per calendar quarter to 87.5 hours, and expanding the number of networks subject to the rules from four broadcast and five non-broadcast networks to five broadcast and ten non-broadcast networks.

The NPRM will also seek comment on a “no-backsliding rule”, which would keep covered networks subject to the requirements even if they fall below the top-five (broadcast) or top-ten (non-broadcast) ranking.

Dissenting in part, Commissioners Pai and O’Rielly voiced concern that the FCC’s proposals exceed the Commission’s statutory authority, which had been the downfall of the earlier rules. In particular, both commissioners warned that the proposals far exceed the 75% increase of the total hour requirement permitted under the CVAA:  Commissioner Pai’s “conservative estimate” was that the proposed additional requirements would increase the total hours requirement by 192% (before taking into account the no-backsliding rule).  With respect to the no-backsliding rule, Commissioner Pai described the proposal as the “Hotel California” approach to regulation, and accused the FCC of Orwellian speak and “reinvent[ing] math”—where the “top five broadcast networks can mean more than five networks.”

The text of the NPRM and comment deadlines have yet to be released, but it’s already sounding like the FCC will be in for a lively debate.

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Despite a three-hour delayed opening of the federal government courtesy of the aftermath of Winter Storm Jonas, the FCC, in today’s Open Meeting, adopted rules requiring that radio broadcast stations, as well as satellite radio (i.e., Sirius/XM), direct broadcast satellite providers (i.e., DirecTV and DISH), and most cable television systems, migrate their public inspection files to an FCC-hosted online database.

The FCC has only published a brief Public Notice describing its action, but there will be more details available when the full Report and Order is released, perhaps as soon as tomorrow.  The Public Notice does however clarify that important exemptions that appeared to have gone missing when the Chairman wrote about the proposed requirement in a blog post a few weeks ago (which we discussed here) have since been added, due in  large part to the efforts of the NAB and state broadcasters associations pushing for such exemptions.  Importantly:

  • Only commercial broadcast radio stations that are in Top 50 radio markets and that have at least five full-time employees will need to comply with the new rules when they first become effective.
  • All other radio stations will have two years to commence complying with the new rules, although they are permitted to move online earlier if they wish to do so voluntarily.

The biggest news in the FCC’s Public Notice appeared to be the statement that the FCC would “permit entities that have fully transitioned to the online public file to cease maintaining a local public file, as long as they provide online access to back-up political file material via the entity’s own website if the FCC’s online file database becomes temporarily unavailable.”  For radio stations that have had to remain on constant alert to escort random station visitors inside their facilities to review the “paper” public file (with all the attendant security risks that represents for a media outlet), this regulatory relief was welcome, and had been championed in the proceeding by all 50 state broadcasters associations.

However, the celebration turned out to be potentially premature, as later in the day, the FCC released the commissioners’ individual statements, and Commissioner O’Rielly’s separate statement lamented that:

Unlike cable and satellite operators, commercial broadcast licensees will not have the immediate option of transitioning to an online-only public file, due to the Commission’s rule pertaining to the correspondence file that arguably cannot be made available online for privacy reasons. I very much appreciate the Chairman’s attention to this important issue and commitment to move forward on a proposal to eliminate correspondence file requirements so that broadcasters, too, can have an online-only option for public file requirements.

So it will take a bit longer before radio stations can say goodbye to their paper public files, but it looks those local files’ days may be numbered.

Another spot of relief is that political file material will need to be uploaded only on a going forward basis.  Historical political information can be retained in paper format until the expiration of the two-year retention period applicable to such documents.  However, stations must have a back-up political file, either in paper or on their websites, in case the FCC’s public file database goes down and the information becomes unavailable from the FCC.

As is the case for television stations, which began moving their public inspection files online in 2012, those covered by today’s order will only need to upload items that are not already electronically filed and available on the FCC’s website.  As a result, documents like ownership reports and most facility modification applications should be automatically loaded into a station’s online public file by the FCC.

The order will apparently include some accommodations for small cable systems as well.  Systems with fewer than 1,000 subscribers will be completely exempt from the online public file requirement, and systems with 1,000-5,000 subscribers will have a two-year phase-in period for their political file material.

Unfortunately, the Public Notice does not indicate exactly when the rules will take effect—an important detail for licensees operating commercial radio stations in the Top 50 markets with five or more full-time employees.  When TV station public files went online, the FCC set the deadline at 30 days following publication of a notice in the Federal Register that the Office of Management and Budget had approved the information collection aspects of the rule.  If this order follows a similar timeline, the new rules wouldn’t likely become effective until sometime in the second quarter of this year.

Over the years, many have criticized the public file as being of little interest to the viewers and listeners it was originally meant to inform, noting that it has instead become merely a source of federal revenue due to the stiff fines imposed by the FCC for violations of the public file rule.  The FCC’s view, however, is that more members of the public will review the file if it can be accessed online, following the motto “upload it, and they will come.”  Whether that is true, the FCC commissioners clearly see the online public file requirement as an effort to move the FCC’s rules into the 21st century.  Broadcasters in particular are hoping that it is the beginning of a much broader effort to bring the FCC’s rules into the 21st century, and many would like to suggest that the FCC next move on to its multiple ownership rules.

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November 2015

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 Admonishes TV Licensee for Prior Station Owner’s Failure to Timely File Children’s Television Programming Reports
  • Inadequate Antenna Fencing and Signage Result in Proposed Fines of $60,000 and $25,000 for Two Broadband-PCS Licensees
  • Cable Company Settles Data Breach Investigation for $595,000

You Can’t Leave Your Troubles Behind: FCC Clarifies That Prior Violations Transfer Along with TV Station

The FCC’s Video Division admonished a New York TV licensee whose station failed to file Children’s Television Programming Reports in a timely manner for thirteen quarters between 2006 and 2010. The licensee acquired control of the station through a long-form transfer of control consummated in September 2010.

Section 73.3526 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) requires TV 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 2011, the FCC sent a letter to the licensee requesting that the licensee provide information concerning missing Children’s Television Programming Reports between 2006 and 2010. In response, the licensee explained that some of the missing reports had actually been filed under a “–FM” call sign, instead of the licensee’s “–CA” call sign, and admitted that the others had not been filed. The FCC later notified the licensee’s counsel that it had concluded its investigation into the Children’s Television Reports at issue in its 2011 letter, and did not impose a fine or other penalty for the violations at that time.

The violations resurfaced, however, after the station’s license renewal application filing in 2015 triggered an FCC review of the station’s online public inspection file. The FCC issued a Notice of Apparent Liability for Forfeiture to the licensee, proposing a $15,000 fine for its failure to timely file the 2006-2010 Children’s Television Programming Reports. The licensee argued that (i) the FCC had previously investigated the station’s public file and deemed it in compliance, and (ii) the licensee was not responsible for untimely report violations of the station’s prior owner, noting “existing regulations and a consistent line of published decisions and notices” to that effect. In particular, the licensee cited Section 73.3526(d) of the FCC’s Rules, which provides that “[i]f the assignment is consented to by the FCC and consummated, the assignee shall maintain the file commencing with the date on which notice of the consummation of the assignment is filed with the FCC.”

As even the licensee acknowledged, however, “assignments and transfers are dealt with in separate sub-sections of the rule, and the language about the limited responsibility of a new owner appears only in the assignment subsection.” On that basis, the FCC rejected the licensee’s argument, explaining that “[b]ecause the Licensee remains the same after a transfer of control, as a legal matter, liability remains with the licensee.”

Nevertheless, the FCC concluded that the licensee “had reason to believe it was in compliance at the time it submitted its license renewal application because it had filed previously missing reports in 2011 and 2013.” It therefore exercised its discretion to cancel the proposed fine and instead issue an admonishment. The FCC warned, however, that it would not rule out more severe sanctions for similar violations in the future, noting that the FCC takes the timely filing of Children’s Television Programming Reports “very seriously.”

Broadband-PCS Licensees Face Fines for Exposing the Public to Excessive Radiofrequency Levels

The FCC’s Enforcement Bureau proposed $60,000 and $25,000 fines against two broadband-PCS licensees for inadequate warning signs and fencing surrounding certain antennas in Phoenix, resulting in unprotected areas that exceeded what is permissible radiofrequency (“RF”) exposure for the general public. The violations were discovered on the same day as a result of a complaint from the owner of a nearby office building. Continue reading →

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As we reported here, the FCC released its proposals regarding 2015 regulatory fees last May. As August turned into September, licensees were getting anxious as to when the FCC would get around to issuing an order setting the fees and opening the “Fee Filer” online payment system. That happened today with the release of this Public Notice and this Report and Order and Further Notice of Proposed Rulemaking (note that for the reasons discussed below, these FCC website links will not function correctly until the FCC’s website resumes normal operation on September 8th).

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FCC Chairman Wheeler released a blog post today discussing a number of changes and proposed changes to rules impacting TV and radio broadcasters. While his blog contained good news for the radio industry, TV broadcasters are likely to be less pleased.

On the TV side there are two major initiatives. First, the Chairman is proposing to his fellow Commissioners that the FCC adopt an order eliminating what he termed “outdated exclusivity rules”–the FCC’s network non-duplication and syndicated exclusivity rules. These “non-dup” and “syndex” rules, as they are more commonly known, essentially provide a process by which TV broadcasters can efficiently implement the geographic exclusivity they negotiated in their programming agreements without the need for expensive court actions.  The purpose of these rules is to prevent multi-channel video program distributors (MVPDs) from violating that exclusivity by importing the exclusive programming from out-of-market TV stations.

These rules are of particular importance during retransmission negotiations, since without such rules, MVPDs could import, for example, a distant affiliate of the same network (one which obviously did a poor job of negotiating its own retransmission agreement) to violate the local station’s exclusivity.  With the rule change proposed by the Chairman, the local station could no longer quickly and efficiently resolve the problem by filing a complaint at the FCC. Instead, it would need to initiate a long and costly court battle that would inevitably pull in (1) the distant affiliate, and (2) the network whose contract the distant affiliate breached by entering into a retransmission agreement exceeding that affiliate’s geographic right to the network’s programming.

It’s not hard to understand why an MVPD would like blocking the importation of exclusive programming to be a complex, time-consuming, and expensive proposition for a local TV station, but it’s less clear why the federal government would want to create a less efficient process that further clogs up the courts with multi-party litigation.  The obvious answer is that it is not merely a procedural change, but one meant to alter the balance of substantive rights that existed when Congress created the retransmission consent process.

The second major TV-related item is the Chairman’s circulation among his colleagues of a Notice of Proposed Rulemaking (NPRM) to review the process used to determine whether broadcasters and MVPDs are negotiating retransmission consent rights in “good faith”. The purpose of the good faith regulations is to determine whether a party is negotiating with an intent other than that of reaching a deal (e.g., stalling for time).  To implement this requirement, the FCC created a list of bad faith tactics that are prohibited (for example, refusing to show up for negotiations), as well as a “totality of the circumstances” test which seeks to determine whether a party’s conduct as a whole indicates that the party has not made “good faith” efforts to reach a deal.

While only cable systems have been found to have engaged in bad faith negotiations by the FCC, the MVPD industry has long sought to alter the traditional meaning of “good faith” in an effort to limit certain negotiating tactics that have nothing to do with whether a party is intent upon reaching a deal.  Indeed, the focus has been on limiting the negotiation options available to broadcasters, even where, perversely, the result would be longer MVPD program blackouts.

The NPRM proposed by Chairman Wheeler, responding to a congressional directive to examine the matter, will apparently seek to alter the FCC’s approach to determining whether parties are engaging in good faith retransmission consent negotiations. Networks, local TV stations, and MVPDs all will no doubt eagerly await release of this NPRM to determine how the FCC’s proposals are likely to affect negotiating leverage and fees in the retransmission consent world–an odd result given that Chairman Wheeler’s blog post said the reason for eliminating the network non-dup and syndex rules is to “take [the FCC’s] thumb off the scales” in retransmission negotiations.

Call us cynics, but we’ll be surprised if “importing a station into a market where that station has no program rights” joins the list of bad faith negotiating tactics, even though it is the epitome of seeking a way around entering into an agreement with the local broadcaster.

From the broadcast industry’s “glass is half full” perspective, the Chairman’s blog post also indicated that the FCC will soon conclude a nearly four-year effort to update the FCC’s station contest rule.  That rule requires broadcasters to regularly describe the material terms of station contests on-air.  After long consideration, it appears the FCC will allow contest rules to be posted online as an alternative to speed-reading contest rules on-air. We earlier wrote about this proceeding at various stages in FCC Proposes to Clear Airwaves of Boring Contest Rules, But State Law Issues Remain and Bringing the FCC’s Contest Rule Up to Date. This rule change has had broad support, and while applicable to both TV and radio, is of greater practical importance to the radio industry, which tends to run more station contests and doesn’t have the option of airing written rules onscreen.

Finally, following up on his promise before the NAB Show in April, Chairman Wheeler indicated that he will also recommend to his colleagues that the FCC move forward with adopting several proposals in the 2013 AM Revitalization NPRM. This was a hot topic at the NAB Show in Las Vegas earlier this year when the Chairman signaled that the establishment of a window specifically for AM stations to apply for FM translators was essentially off the table, as Scott Flick wrote last April. Most considered an AM-only filing window to be the most practical and effective path to AM revitalization, particularly for AM daytime-only stations.  In fact, the outcry in response to the Chairman’s dismissal of that option appeared to have stalled the AM Revitalization proceeding. While it looks like AM radio broadcasters can expect some relief from the FCC soon, most will be watching to see if an FM translator window for AM stations is part of that relief.  Regardless, today is one of those days where you’d rather be a radio station than a TV station.

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The FCC has released a Notice of Proposed Rulemaking, Report and Order, and Order (really, that’s the title of it) (“NPRM/R&O”) proposing regulatory fees for Fiscal Year 2015 and making other changes to its regulatory fee structure. Comments on the FCC’s proposals are due June 22, 2015, with reply comments due July 6, 2015.

For the fourth consecutive year, the FCC proposed $339,844,000 in regulatory fee payments. The proposed fee tables are attached to the NPRM/R&O as Appendix C and can be used to estimate your likely 2015 regulatory fee burden. Note that effective this year, regulatory fees on Broadcast Auxiliary licenses and Satellite TV construction permits have been eliminated from the fee schedule.

In the NPRM, the FCC requested comment on whether the apportionment of regulatory fees between TV and radio broadcasters should be changed, noting that it expects to collect approximately $28.4 million from radio broadcasters and $23.6 million from TV broadcasters, but that commercial radio stations outnumber commercial TV stations by 10,226 to 4,754. Because the FCC generally allocates regulatory fees based upon the number of FCC employees employed in regulating a particular service, the FCC appears to be suggesting that radio broadcasters may have to shoulder a larger share of the broadcast regulatory fee burden

The FCC also noted that while TV regulatory fees are based upon the size of the DMA in which the TV station is located, radio fees are based upon the population actually served and the class of the station. The NPRM seeks comment on whether changes should be made to this structure, but indicated that any changes made would be unlikely to impact fees this year.

In addition, the FCC requested comment on a petition filed by the Puerto Rico Broadcasters Association requesting regulatory fee relief for broadcasters in Puerto Rico due to economic hardships and population declines specific to Puerto Rico.

Finally, the FCC adopted some changes to its regulatory fee structure. The most significant of these is a new regulatory fee, proposed to be set at $0.12 per subscriber annually, imposed upon direct broadcast satellite (“DBS”) providers (i.e., DISH and DIRECTV). The FCC pointed out that while DBS providers historically have paid regulatory fees with respect to regulation by the International Bureau, they have not paid fees with respect to the Media Bureau which also regulates the service. The payment of fees by DBS providers to recover costs associated with Media Bureau regulation of DBS was teed up in a notice of proposed rulemaking last year and was adopted in the NPRM/R&O.

After comments and reply comments are received, the FCC will release an order setting forth the final 2015 regulatory fee amounts. This order is usually released in August but sometimes isn’t available until September. The order will also establish the precise filing window for submitting regulatory fees, which is typically in the latter part of September.

Those wishing to oppose the proposed regulatory fee changes will need to file their comments and reply comments with the FCC by the respective June 22, 2015 and July 6, 2015 deadlines.

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At its Open Meeting scheduled for next Thursday, May 21, 2015, the FCC will consider extending emergency information accessibility rules to “second screen” devices such as computers, tablets, and smartphones.  The contemplated Second Report and Order and Second Further Notice of Proposed Rulemaking would expand the class of entities subject to the FCC’s accessibility rules (adopted in April 2013) to include multi-channel video programming distributors (“MVPDs”) providing linear video programming on second screen devices.  Such a change could have far-reaching implications for both MVPDs and device manufacturers.

By way of background, the FCC released a Report and Order (“Order”) and Further Notice of Proposed Rulemaking (“FNPRM”) on April 9, 2013, adopting some, and proposing other, emergency information and video description rules to implement Sections 202 and 203 of the Twenty-First Century Communications and Video Accessibility Act of 2010.  Among other requirements, the Order adopted new rules mandating that video programming distributors (“VPDs”) present aurally on a secondary audio stream (“SAS”) any non-newscast emergency information that it presents visually.  The emergency information provided on the SAS must be read at least twice in full and preceded by an aural tone to alert blind and visually impaired audience members that emergency information is available and to differentiate audio accompanying the underlying programming from emergency information audio.

In the FNPRM, the Commission sought comment on whether an MVPD that permits its subscribers to access linear video programming via second screen devices qualifies as a VPD that is providing “video programming”, as defined in Sections 79.1(a)(1) and (2) of the FCC’s Rules, and is therefore covered by the emergency information requirements adopted in the Order.  Issues left open in the FNPRM that the FCC will likely have to address in drafting the Second Report and Order include:

  • Who bears the burden of making emergency information available on these devices: the MVPD, the device manufacturer, or both?
  • Should the rules apply regardless of where the subscriber is located when accessing the programming (i.e., inside or outside the home)?
  • Does it matter whether the emergency content is being delivered over the MVPD’s IP network or over the Internet?

Although the FCC’s announcement in the tentative agenda for the meeting mentions only proposed rules related to accessibility of emergency alerts, the FNPRM also opened the door to extending video description rules to second screen devices.  Notably, the FCC has remarked that, “as a technical matter, once the [SAS] is received by a device, that stream can be made available regardless of whether it is used for emergency information or video description.”  Next week, we’ll hopefully learn how far the FCC intends to go on both of these requirements.

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As we posted earlier, the FCC voted at its February meeting to preempt state laws in Tennessee and North Carolina restricting municipalities from providing broadband service. The FCC has now released the text of its Order, and it reveals the expanse of the FCC’s concerns, filling in the details as to the types of state law provisions the FCC considers to be barriers to broadband competition and therefore subject to preemption. The Order furnishes critical guidance to other municipalities considering a challenge of laws in their own states. It also informs state legislators as to how they can modify existing state laws to avoid a future confrontation with the FCC.

In the Order, the FCC preempted a Tennessee law prohibiting municipal electric utilities from providing broadband service outside their service areas, and certain restrictions and requirements of a North Carolina law. The FCC did so under its asserted authority pursuant to Section 706 of the Telecommunications Act of 1996 to remove barriers to broadband investment and promote broadband competition. The specific restrictions the FCC found to constitute or contribute to such barriers are summarized below, and the breadth of the FCC’s preemption of these restrictions is substantial. As a result, no one should be surprised to see more preemption requests arriving at the FCC.

Tennessee Law

The Tennessee law was fairly straightforward. It prohibited a municipally-owned electric power system from offering internet or video services anywhere outside the geographic footprint in which it provides electric service. The FCC found that this territorial restriction was an explicit barrier to broadband investment and competition, and used its authority under Section 706 to preempt the restriction. This portion of the FCC’s decision offers no real surprises, and relies on a fairly basic view of what constitutes a barrier to growth in municipal broadband.

North Carolina Law

Far more interesting is the portion of the Order relating to North Carolina. The North Carolina law was more complex, containing a variety of restrictions and requirements for municipalities wishing to deploy broadband service. The FCC found that, taken in the aggregate, these portions of the law created a barrier to broadband investment and competition, leading the FCC to preempt them. While acknowledging that some of the preempted provisions in the North Carolina law might have been allowed to stand individually, the FCC concluded that the aggregate effect required their preemption. In taking this approach, the FCC left some uncertainly as to which provisions it would have preempted on even a stand-alone basis, but provided very helpful guidance as to both the nature and scope of the FCC’s concerns. As the list of provisions preempted by the FCC set forth below indicates, the FCC’s view of barriers to municipal broadband growth is quite expansive.
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For a company that could always punch well above its weight in drawing press coverage, Aereo’s sale of its assets in bankruptcy last week drew surprisingly little coverage.

Less than a month before last year’s Supreme Court decision finding that Aereo’s retransmission of broadcast TV signals over the Internet constituted copyright infringement, a Forbes article discussing Aereo’s prospects in court noted the company had “a putative valuation of $800 million or so (that could vault up if Aereo wins).” The article went on to note that “It’s a tidy business, too, bringing in an estimated $40 million while reaping 77% gross margins ….”

Aereo made its case before a variety of judges and in the court of public opinion that it was an innovative tech company, with a growing patent portfolio and cutting edge technology. When broadcasters argued that Aereo was merely retransmitting broadcast programming to subscribers for a fee without paying copyright holders, Aereo doubled down, arguing before the Supreme Court that it was at the vanguard of cloud computing, and that a decision adverse to Aereo would devastate the world of cloud computing. In a blog post published the day Aereo filed its response brief at the Court, Aereo CEO Chet Kanojia wrote:

If the broadcasters succeed, the consequences to American consumers and the cloud industry are chilling.

The long-standing landmark Second Circuit decision in Cablevision has served as a crucial underpinning to the cloud computing and cloud storage industry. The broadcasters have made clear they are using Aereo as a proxy to attack Cablevision itself. A decision against Aereo would upend and cripple the entire cloud industry.

So Aereo’s narrative heading into the Supreme Court was clear: Aereo is a cutting edge technology company that is not in the content business, and a prototypical representative of the cloud computing industry in that industry’s first encounter with the Supreme Court.

As CommLawCenter readers know, the Supreme Court rejected that narrative, finding that a principal feature of Aereo’s business model was copyright infringement, and the Court saw little difficultly in separating Aereo’s activities from that of members of the public storing their own content in the cloud.

The results of Aereo’s asset sale reveal much about the accuracy of the Supreme Court’s conclusions, and about the true nature of Aereo itself. The value of Aereo’s cutting edge technology, patent portfolio, trademark rights, and equipment when sold at auction fell a bit short of last year’s $800 million valuation. How much was Aereo worth without broadcast content? As it turns out, a little over $1.5 million. But even that number apparently overstates the value of Aereo’s technology as represented by its patent portfolio.

Tivo bought the Aereo trademark, domain names, and customer lists for $1 million, apparently as part of its return to selling broadcast DVRs. Another buyer paid approximately $300,000 for 8,200 slightly-used hard drives.

And the value of the Aereo patent portfolio? $225,000.

To add insult to injury, the patent portfolio was not purchased by a technology company looking to utilize the patents for any Internet video venture. The buyer was RPX, a “patent risk solutions” company. The World Intellectual Property Review quoted an RPX spokesman regarding the purchase, who stated that “RPX is constantly evaluating ways to clear risk on behalf of its more than 200 members. The Aereo bankruptcy afforded RPX a unique opportunity to quickly and decisively remove risk in the media and technology sectors, thus providing another example of the clearinghouse approach at work.”

In other words, the Aereo patent portfolio was purchased for its nuisance value, which, having lost the ability to resell broadcast programming, turned out to be all the value Aereo had.