As he rushes to accomplish his list of objectives before the change in administrations, FCC Chairman Tom Wheeler was able to cross one off that list last week. For the first time, the FCC imposed privacy requirements on providers of broadband internet access services (BIAS). The much-anticipated Order requires BIAS providers to notify customers about the types of information the BIAS providers collect about their customers; how and for what purposes the BIAS provider uses and shares this information; and in some circumstances requires customer consent for the use and sharing of this information. This order was an outgrowth of the FCC’s 2015 Open Internet Order, which reclassified BIAS as a telecommunications service and wrested privacy jurisdiction from the Federal Trade Commission.
The NAB has negotiated a waiver agreement with Sony Music Entertainment that will once again enable radio stations to stream Sony-licensed music unhindered by certain restrictions established by the statutory music streaming license. Stations wishing to take advantage of the Sony waiver need to opt in on the NAB website, and (depending on the amount of streaming they do) may need to place a button on their websites or apps to enable listeners to click through to purchase Sony song downloads. A previous waiver agreement with Sony, as extended, expired on July 31, 2016, leaving stations without a waiver for the past few months. NAB’s new agreement with Sony will last until December 31, 2020.
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.
The FCC released the tentative agenda for its May 25 Open Meeting today, and topping the agenda is an item that could lift a burden that has been on the shoulders of commercial broadcasters for half a century. The FCC will vote on adopting a Notice of Proposed Rulemaking to eliminate the requirement that commercial broadcast stations retain copies of letters and emails from the public in their public inspection files.
That simple description understates, however, the actual impact the proposed change could have. Letters and emails from the public may have at one time simply been one category of documents among many that broadcasters were required to keep in the public file, but when the FCC started requiring that public files be moved online, it recognized that “including these documents in the online file could risk exposing personally identifiable information and . . . requiring stations to redact such information prior to uploading these documents would be overly burdensome.” As a result, the FCC decided that while it would require broadcasters to upload all other public file documents to the online file, broadcasters would not be permitted to upload letters or emails from the public and instead would have to continue to maintain those documents in the local public file at the station’s main studio.
In the rulemaking proceeding that resulted in the online public file requirement being expanded to radio, we filed comments on behalf of all 50 State Broadcasters Associations questioning the utility of maintaining a physical public file at the station solely to hold letters from the public:
If every part of the file is moved online except Letters from the Public, it’s hard to imagine anyone ever visiting a station solely for the thrill of reading its mail. Still, station personnel must remain eternally vigilant for that one person who might show up to look at what will be the last vestige of a station’s local public file.
Those comments encouraged the FCC to take steps to eliminate the requirement, explaining that “as long as this single requirement effectively forces stations to maintain a local public file regardless of whether they also have an online public file, the burden of maintaining both files will for many small stations be a bridge too far.” Commissioner O’Rielly added his support in a blog post this past September.
The biggest benefit of this change, if adopted, would be to allow stations to cease having to maintain a local “paper” public file and ensure that it is continuously available to the public during regular business hours (including lunchtime). This would not only benefit stations struggling to ensure that there is always a staffer standing by to provide immediate access to the file, but increasingly important, eliminate a major security risk for broadcast stations seeking to prevent dangerous individuals from entering the building, as happened last week in Baltimore.
If the FCC ultimately eliminates the requirement to maintain letters and emails from the public in a local public file, access to the other content in the file will still be available to the public (online), and stations will no longer have to grant access to an individual just because he knows the “open sesame” phrase of American broadcasting: “I’m here to see the public file.”
In a blog post today (All That’s Old is New Again), Chairman Wheeler hinted that this rulemaking is unlikely to see much resistance, stating that elimination of this “outdated public file requirement” would be consistent with the agency’s “process reform initiative to review all Commission regulations and update or repeal outdated and unnecessary rules.” Broadcasters couldn’t agree more.
In a recently issued Notice of Proposed Rulemaking, the FCC asked for comments on proposed rules that would apply the traditional privacy requirements of the Communications Act to providers of broadband Internet access services. This proceeding is an outgrowth of the FCC’s decision last year in the Open Internet Order to reclassify broadband as a telecommunications service, subject to certain requirements under Title II of the Communications Act. Specifically, Section 222 of the Act imposes privacy obligations on telecommunications carriers and, in this proceeding, the FCC is considering whether to apply those rules, or other rules that might be more applicable to protect consumers, to providers of Internet access services.
The proposed rules focus on transparency, choice and data security. According to the FCC, adoption of the rules will ensure that consumers (i) have the information needed to understand what data broadband providers are collecting and what they do with that information, (ii) can decide how their information is used, and (iii) are protected against the unauthorized disclosure of their information.
- Transparency. The FCC expects that broadband providers’ privacy policies would include disclosure of what information they collect and for what purpose, what information is shared and with whom, and how consumers can opt in or out of use and sharing of their personal information.
- Choice. The proposed rules allow the use of personal information as needed to provide broadband services and for other purposes that make sense within the context of the service provider-customer relationship. They also allow service providers to use customer personal information to market other communications services unless the consumer opts out of such usage, but require specific opt-in approval from customers before broadband providers can share customer information with third parties that do not offer communications services. The proposed rules include mechanisms to document customer opt-in and opt-out choices and provisions on how to notify customers of privacy policies.
- Data Security. Broadband providers would be required to ensure the security, confidentiality and integrity of any customer information they receive. This would include requirements for regular risk management assessments and training of employees that handle customer information. The NPRM also proposes to require broadband providers to notify affected customers within ten days of the discovery of a data breach that triggers customer notification requirements, and seeks comment on whether broadband providers should also notify customers after discovery of conduct that could reasonably be tied to a breach. Further, the NPRM proposes to require broadband providers to notify the FCC of all data breaches, and to notify other federal law enforcement of breaches that impact more than 5,000 customers. The NPRM proposes to require notification to federal law enforcement within seven days of discovery of such a breach, and three days before notification to the customer, and would allow law enforcement to seek delay of customer notification. Broadband providers would be required to keep records of any data breaches and notifications for a minimum of two years.
The FCC suggested that it broadly wants to protect personally identifiable information, which, in the broadband context, would include any information that is linked or linkable to an individual and is acquired by the service provider in connection with its provision of broadband services. This could include: (1) service plan information, including type of service (e.g., cable, fiber, or mobile), service tier (e.g., speed), pricing, and capacity (e.g., information pertaining to data caps); (2) geo-location; (3) media access control (MAC) addresses and other device identifiers; (4) source and destination Internet Protocol (IP) addresses and domain name information; and (5) traffic statistics. The FCC seeks comments on whether other types of information should also be protected, including port information, application headers, application usage and customer equipment information.
The FCC acknowledged that there are existing state privacy laws that could overlap with the proposed rules. To resolve any conflicts, the proposed rules would preempt state laws that were inconsistent with the FCC’s rules—with the FCC making preemption determinations on a case-by-case basis. In addition, the rules would prohibit broadband providers from conditioning the offering of service, or the continuation of services, on a customer’s agreement to waive privacy rights guaranteed by law or regulation.
The proposed rules, like the Open Internet Order itself, drew dissents from Republican Commissioners Pai and O’Rielly. They question the FCC’s jurisdiction to regulate Internet service providers, suggest that the Federal Trade Commission has established standards and precedents to protect consumer privacy, and question whether any rules can be effective that are not also applied to edge and content providers, such as Netflix and Twitter. The Open Internet Order is currently being appealed in the United States Court of Appeals for the DC Circuit, and a decision is expected within the next three months.
Comments on the proposed rules are due May 27, 2016. Reply Comments are due June 27, 2016.
Consumer protection is always in style at the Federal Trade Commission (FTC”). When 50 fashion “influencers” flooded Instagram, all wearing the same dress in photos tagged “@lordandtaylor”, and an article featuring the same dress appeared in the online fashion magazine Nylon, some at the FTC suspected an advertising campaign masquerading as a social media dialogue. While this matter arose in a “new media” context, and therefore impacts all businesses’ online activities, broadcasters are doubly affected—online and on-air—by the FTC’s action.
As we describe in more detail in our Client Advisory Lord and Taylor Case Shows the Importance of Transparency in Advertising, the FTC’s investigation into a supposedly viral phenomenon unveiled an integrated advertising campaign. Among other things, Lord & Taylor formally contracted with fashion influencers, giving them the dress for free and compensating them to “product bomb” Instagram with photos of themselves wearing the dress on one particular weekend. Lord & Taylor approved the influencers’ posts and required them to include the @lordandtaylor tag and #DesignLab hashtag. Lord & Taylor also contracted with Nylon to run an article about its new Design Lab collection, featuring the dress in the article and on Nylon’s Instagram page as well. Again, Lord & Taylor reviewed the content before it was published. However, Lord & Taylor did not require the influencers or Nylon to disclose their connection to Lord & Taylor or that they had been compensated for posting the photos and comments.
In December 2015, the FTC released its Enforcement Policy Statement on Deceptively Formatted Advertisements. The Policy Statement provides an overview of how the FTC intends to apply its consumer protection principles to “native advertising”—online advertising material that resembles editorial content, product reviews, or other content which could mislead consumers into believing that the advertising isn’t really advertising. It also notes some factors that have contributed to a rise in native advertising online, such as the increased ability of publishers to quickly and cheaply reformat and reuse content, evolving business models around monetization of content, and the ability of consumers to skip or block ads placing pressure on advertisers to capture consumers’ attention. However, the Policy Statement concludes that “[a]lthough digital media has expanded and changed the way marketers reach consumers, all advertisers, including digital advertisers, must comply with the same legal principles regarding deceptive conduct the Commission has long enforced.”
In setting out what those legal principles are, the FTC referred back to many cases involving a wide variety of media, including television infomercials that blurred the line between advertising and editorial content. The FTC brought numerous cases in the 1980s and 1990s against infomercials that looked like investigative news reports or consumer product review content and required the addition of conspicuous “PAID ADVERTISEMENT” disclosures at the beginning and throughout the program where product ordering information was presented.
The FTC’s approach to digital marketing is similar. In its Native Advertising: A Guide For Businesses released along with the December Policy Statement, the FTC noted “[t]he more a native ad is similar in format and topic to content on the publisher’s site, the more likely that a disclosure will be necessary to prevent deception.” In the Lord & Taylor case, the Nylon article used language similar to traditional editorial content recommending certain fashion choices. Specifically, it stated: “[W]e’re taking out the guess work and introducing you to spring’s must-have line: Lord & Taylor’s Design Lab.” The FTC faulted Lord & Taylor for not requiring a disclosure that the article was paid-for advertising.
In addition, the FTC’s updated Endorsement Guides published in 2009 require that when advertisers recruit endorsers and provide them with free merchandise or other compensation, they must require their endorsers to clearly and conspicuously disclose their connection to the advertiser and, further, to monitor those endorsements for accuracy and inclusion of the required disclosure language. Here, while Lord & Taylor did review and even edit the endorsements, it did not require any disclosure of the endorser’s relationship with Lord & Taylor. We have written extensively about the Endorsement Guides and how they apply to broadcasters, including common situations that arise in on-air “banter”, here and here.
As a result of its investigation into Lord & Taylor’s advertising of the Design Lab line, the FTC and Lord & Taylor agreed to a settlement which imposes a number of conditions beyond mere compliance on Lord & Taylor going forward. These include filing various reports with the FTC, preserving documents for later FTC review should it be necessary, and providing copies of the settlement agreement to all those who have anything to do with creating similar advertising campaigns. The case is an important reminder to all advertisers that, as the FTC has said, “[r]egardless of the medium in which an advertising or promotional message is disseminated, deception occurs when consumers acting reasonably under the circumstances are misled about its nature or source, and such misleading impression is likely to affect their decisions or conduct regarding the advertised product or the advertising.”
Do your online and on-air promotions meet this test?
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.
In the summer of 2014, CommLawCenter broke the news that the FCC was considering moving radio public inspection files online, following in the footsteps of the FCC’s earlier creation of an online public file requirement for TV stations. Television stations have been required to upload all newly created public file documents to their online public inspection files since August 2012, and to upload public file documents created before that time by February 2013. In adopting the TV online public file requirement, the FCC said that it would serve as something of a “test run” for radio station public inspection files.
Four months later, I wrote here about the FCC’s release of a Notice of Proposed Rulemaking calling the TV online public file effort a success, and a “significant achievement in the Commission’s ongoing effort to modernize disclosure procedures to improve access to public file material.” The NPRM proposed moving forward with an online public file for radio stations, as well as for cable, DBS and satellite radio. The FCC acknowledged that the online public file might represent a burden for at least some radio stations and, as a result, proposed to phase in the requirement beginning with stations that are located in the top 50 markets having five or more full-time employees. In addition, the NPRM proposed giving non-commercial educational stations and stations with fewer than five full-time employees two years to make the transition. While the NPRM was not directed at revamping the content of the public file, the Commission did suggest that some types of documents might be exempted to lessen the burden both on stations and on the Commission’s servers.
The NPRM attracted numerous comments, many focused on ensuring that any online public file requirement would contain sufficiently broad exemptions for small radio stations and an adequately long phase-in period for other types of stations to ensure that the requirement would not be unduly burdensome. As a filing on behalf of all 50 state broadcasters associations noted, radio stations tend to have smaller staffs than TV stations, and the norm is to have multiple local radio stations operated jointly, meaning that those smaller staffs need to maintain multiple public inspection files.
After the comments were filed, the proceeding went silent, and many wondered if the FCC had begun to have second thoughts as to whether its servers could handle the substantial increase in traffic that a radio public inspection file requirement would generate. In the past few weeks, however, the FCC let it be known that an order was circulating among the five commissioners for a vote on the online public file NPRM. If there was any doubt where it was headed, that ended today when FCC Chairman Wheeler announced in a blog post that the order being circulated will implement online public inspection files for radio stations. He did not, however, give any hints as to what exemptions or phase-in periods the order might contain.
Broadcasters won’t, however, have to wait long to find out. The FCC also announced today the agenda for its January 28, 2016 Open Meeting, and the radio online public file order is right at the top. As a result, radio stations will soon know what changes 2016 will be bringing to their public files.
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:
- Time Brokerage Agreement Costs Station and Broker/Buyer $10,000
- Telecom Provider Agrees to Pay $620,500 to Resolve Investigation of Cell Tower Registration and Lighting Violations
- FCC Admonishes TV Station Licensee for Failing to Upload Past Issues/Programs Lists to Online Public Inspection File
Brokering Bad: Non-Compliant Time Brokerage Agreement Ends With $10,000 Consent Decree
The FCC’s Media Bureau entered into a Consent Decree with a North Carolina noncommercial educational FM broadcast licensee and a company seeking to acquire the station’s license. The decree resolved an investigation into whether the licensee violated the FCC’s Rules by receiving improper payments from, and ceding control of key station responsibilities to, the proposed buyer.
Under Section 73.503(c) of the FCC’s Rules, a noncommercial educational FM broadcast station may broadcast programs produced by, or whose creation was paid for by, other parties. However, the station can receive compensation from the other party only in the form of the radio program itself and costs incidental to the program’s production and broadcast.
In addition, the FCC requires a station licensee to staff its main studio with at least two employees, one of whom must be a manager (the “main studio rule”). The FCC has clarified that, while a licensee may delegate some functions to an agent or employee on a day-to-day basis, “ultimate responsibility for essential station matters, such as personnel, programming and finances, is nondelegable.”
In March 2013, the station licensee and the company jointly filed an application to assign the station’s license to the company, which had been brokering time on the station for a number of years. The application included a copy of the Time Brokerage Agreement (“TBA”) the parties executed in 2003. In return for airing the broker’s programming, the TBA provided for a series of escalating payments to the station, including initial monthly payments of $6,750 for the first year of the TBA, increasing to $8,614 per month in 2008, and then increasing five percent per year thereafter.
Upon investigating the TBA, the FCC found that the payments were unrelated to “costs incidental to the program’s production and broadcast.” Additionally, the FCC concluded that the TBA violated the main studio rule and resulted in an improper transfer of control of the station license by improperly delegating staffing responsibilities to the broker.
To resolve the investigation into these violations, the licensee and the broker/buyer agreed to jointly pay a $10,000 fine. In exchange, the FCC agreed to grant their assignment application provided that the following conditions are met: (1) full and timely payment of the fine; and (2) “there are no issues other than the Violations that would preclude grant of the Application.”
Telecommunications Provider Settles FCC Investigation of Unregistered and Unlit Cell Towers for $620,500
An Alaskan telecommunications provider entered into a Consent Decree with the FCC’s Enforcement Bureau to resolve an investigation into whether the provider failed to properly register and light its cell towers in violation of the FCC’s Rules. With few exceptions, Section 17.4(a) of the FCC’s Rules requires cell tower owners to register their towers in the FCC’s Antenna Structure Registration (“ASR”) system. In addition, Section 17.21(a) requires that cell towers be lit where their height may pose an obstruction to air traffic, such as towers taller than 200 feet and towers in the flight path of an airport. The FCC’s antenna structure registration and lighting rules operate in conjunction with Federal Aviation Administration regulations to ensure cell towers do not pose hazards to air traffic.
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 Station Licensees for Violating Commercial Limits in Children’s Programming
- Telecommunications Provider Agrees to $1.175 Million Payment to Resolve Investigation of 911 Call Failures
- Pirate Radio Operator’s Repeated Disregard for the Rules Results in $15,000 Proposed Fine