CommLawCenter

Posted April 16, 2013

By John Hane

Recently, TVNewsCheck.com ran a short item noting that a large broadcast group (not a network owned and operated group) and a large multichannel video distributor (MVPD) successfully concluded carriage negotiations. There was no interruption of service. Given the successful outcome, I was surprised to see that someone posted a comment regarding the piece saying the deal illustrates why the FCC should tighten its broadcast ownership rules. No matter how many times I read comments of this sort, I am perplexed that people actually believe it's a good thing for the government to mandate that broadcasters be the underdogs in all major negotiations that impact the quality and availability of broadcasters' programming. If anything, government policy should encourage broadcasters to grow to a scale that is meaningful in today's complex television marketplace. Not one of the other major distributors makes its programming available for free.

If independent (non-O&O) broadcasters aren't permitted to achieve a scale large enough to negotiate effectively with upstream programmers and downstream distributors, you won't have to wait long see high cost, high quality, high value programming available for free to those who choose to opt out of the pay TV ecosystem. It's much better to have two, three or four strong competitors in each market, owned by companies that can compete for rational economics in the upstream and downstream markets, than to have eight or more weak competitors, few of which can afford to invest in truly local service or negotiate at arms-length with program suppliers and distributors.

For those who have not been paying attention, the television market has changed profoundly in the past 20 years. The big programmers and the big MVPDs have gotten a whole lot bigger. The largest non-O&O broadcast groups have grown too, but not nearly as much. Fox, Disney/ABC, NBCU and the other programmers are vastly bigger companies with incomparable market power vis-a-vis even the largest broadcast groups. The same is true of the large MVPDs, which together serve the great majority of television households.

There's nothing inherently bad about big content aggregators and big MVPD distributors. And anyway, they are a fact of life. Despite their size, each is trying to deliver a competitive service and deliver good returns for shareholders. That's what they are supposed to do, and in general (with a few exceptions) they serve the country well. But again, they are much, much larger than even the largest broadcast groups. If you believe that having a viable and competitive free television option is a good thing, that's a problem.

So in response to the suggestion that the FCC further limit the scale of broadcasters, I reply: why does the government make it so damn hard for the only television service that is available for free to bargain and compete with vastly larger enterprises that are comparatively unregulated?

Continue reading "Free TV Doesn't Mean Free Lunch"

Posted December 13, 2012

By Lauren Lynch Flick

Today, December 13, 2012, is the effective date of the FCC's rules implementing the Commercial Advertisement Loudness Mitigation (CALM) Act. As a result, all commercial broadcast television stations and multichannel video program providers ("MVPDs") must have by today either sought a waiver or installed equipment and undertaken procedures to comply with the Advanced Television Systems Committee (ATSC) A/85: "ATSC Recommended Practice: Techniques for Establishing and Maintaining Audio Loudness for Digital Television," also known as the RP.

For locally inserted commercials, stations must install and maintain equipment and software that measures the loudness of the content and ensures that the dialnorm metadata value matches the loudness of the content when encoding audio for transmission (try saying that three times fast!). For commercials already embedded in the programming, stations must be able to pass through that CALM-compliant programming without adverse changes.

As long as that benign pass-through is accomplished, stations can rely on appropriate certifications from program suppliers to demonstrate compliance with respect to embedded commercials. If a program supplier does not provide the certification, "large" television stations and "large" and "very large" MVPDs (as defined by the FCC) must conduct annual spot checks of the programming. The first spot checks must be completed one year from today, by December 13, 2013. Details on these compliance requirements can be found in Paul Cicelski's post on the CALM Act earlier this year. We will also shortly be posting a Pillsbury Advisory on ensuring continuing CALM Act compliance.

As noted above, the FCC created a waiver procedure for stations and MVPDs where compliance would be financially burdensome, allowing them up to a year of additional time to come into compliance. Waiver requests were originally due back in October, but the FCC announced two days ago that it would accept waiver applications from small television stations filed through today. "Small" television stations, that is, those with less than $14 million in revenues in 2011 or that are in markets 150 to 210, were not required to submit highly detailed financial data with their waiver requests, and the FCC indicated that waiver requests would be deemed granted upon filing unless the FCC later advises the applicant otherwise.

In response, more than 125 waiver requests were filed. Earlier this week, the FCC granted two of them, including one from a television station in the midst of a studio move that will include installation of upgraded equipment for CALM Act compliance. Stations that do not have a waiver request on file with the FCC by today need to have the equipment and procedures in place to ensure they are operating in compliance with the CALM Act. That means that stressed television viewers will be having a calmer holiday season, while station and MVPD engineers and managers stress out trying to remain CALM.

Posted May 25, 2012

By Lauren Lynch Flick and Paul A. Cicelski

The FCC has announced that the preliminary television channel sharing rules in the FCC's Report and Order in the Innovation in Broadcast Television Bands proceeding will become effective on June 22, 2012. The rules establish the basic framework by which two or more full-power/Class A television stations can voluntarily choose to share a single 6 MHz channel. Channel sharing is integral to clearing the television broadcast spectrum so that the FCC can auction it for wireless broadband as called for in the National Broadband Plan. The rules follow the signing of the "Middle Class Tax Relief and Job Creation Act of 2012", which we discussed in detail in a previous post. Also called the "Spectrum Act," that law gives the FCC authority to conduct incentive auctions to encourage television broadcasters to get out of the business or find new business models that rely on less spectrum, such as doubling up with another station on a single 6 MHz channel.

The FCC's new rules allow a station to tender its existing 6 MHz channel to the FCC, making it available for the "reverse" or "incentive" spectrum auction. The tendering station can set a reserve price below which it won't sell. To encourage more stations to participate in the auction, the FCC is also permitting stations, in advance of the auction, to agree to share a single 6 MHz channel after the auction. In this scenario, one of the two stations would tender its channel into the auction, and both stations would share the proceeds and operate on the remaining 6 MHz channel after the auction. The FCC's Order makes clear that channel sharing arrangements will be voluntary, and that stations will be "given flexibility" to control some of the key parameters under which they will combine their operations on a single channel, including allocation of auction proceeds among the parties.

Each station sharing a 6 MHz channel will be required to retain enough capacity to transmit one standard definition stream, which must be free of charge to viewers. Each will have its own separate license and call sign, and each will be subject to all of the Commission's rules, including all technical rules and programming requirements. Stations that agree to share a channel will retain their current cable carriage rights. Commercial and noncommercial full-power and Class A TV stations are permitted to participate in the incentive auction and enter into channel sharing agreements, but low power TV and TV translator stations are not.

Many more details will have to be resolved prior to the incentive auction. Our own John Hane recently discussed the procedural uncertainties surrounding the auction in a detailed and comprehensive interview conducted by Harry Jessell of TVNewsCheck. The transcript of the interview can be found here. At bottom, John concluded that the largest obstacle facing the FCC will be designing the auction so that a sufficient number of broadcasters find it attractive to participate.

The FCC invited John and other industry experts to participate in a Channel Sharing Workshop earlier this week. In the meantime, John and other Pillsbury attorneys have been actively helping stations assess the risks and opportunities of the incentive auctions, including spectrum valuation and strategies for the forward and reverse auctions and spectrum repacking. Many of the issues raised at the FCC's Channel Sharing Workshop dealt with the intricacies of the arrangements broadcasters will have to craft to govern their relationship with a channel sharing partner. These ranged from how multiple channel "residents" will manage capital investments in facilities upgrades, to what might happen if one licensee on a shared channel goes bankrupt, sells, or turns in its license. A recording of the Workshop can be accessed here.

The FCC acknowledged that much work lies ahead of it. To that end, the FCC announced at the Workshop that the first of a series of Notice of Proposed Rulemakings concerning issues raised during the Workshop will be released in the Fall. The FCC did not predict a timeframe for completing the auction design process and establishing service rules.

As these and other issues take the fore, television broadcasters must remain engaged, shaping the process to allow them the maximum flexibility to develop relationships and business models that can thrive in the post-auction environment.

Posted March 2, 2012

By Scott R. Flick

Following many months of debate and after trying several potential legislative vehicles, the House and Senate finally enacted spectrum auction legislation as part of the bill to extend payroll tax cuts for another year. It was signed by the President last week, and for those following the process for the past two years, the result was somewhat anticlimactic. That is mostly good news for broadcasters, as the NAB was successful in ensuring that the law contains enough protections for broadcasters to prevent the spectral armageddon that it once appeared broadcasters might face.

Having said that, we can't ignore that there were bodies left out on the legislative battlefield, the most obvious being low power TV and TV translator stations. Under the new law, these stations are not permitted to participate in the spectrum auction, are not protected from being displaced to oblivion in the repacking process, and are not entitled to reimbursement of displacement expenses. It is that last point that may be the most important in rural areas. While it is possible there could be enough post-repacking broadcast spectrum in rural areas for TV translators to survive, they will still need to move off of the nationwide swaths of spectrum the FCC intends to auction to wireless companies. Unfortunately, many if not most TV translator licensees are local and regional entities with minimal financial resources. Telling such a licensee that it needs to move to a new channel, or worse, to a different location to make the new channel work, may be the same as telling it to shut down.

This is particularly true when the sheer quantity of translator facilities that might have to be moved is considered. For example, there are nearly 350 TV translators in Montana alone. Moving even a third of them will be an expensive proposition for licensees whose primary purpose is not profit, but the continued availability of rural broadcast service. Further complicating the picture is the fact that in border states like Montana, protecting spectrum for low power TV and TV translators will inevitably be a very low priority when negotiating a new spectrum realignment treaty with Canada or Mexico to permit reallotment of the band.

While full-power and Class A television stations therefore fared much better in the legislation, for those uninterested in selling their spectrum, spectrum repacking will still not be a pleasant experience. Those of us who endured the repacking process during the DTV transition can attest to how complex and challenging the process can be, and the DTV process had the luxury of fifteen years of planning and execution, as well as a lot more spectrum in the broadcast band with which to work. Having already squeezed the broadcast spectrum lemon pretty hard during the DTV transition, the FCC may find that there isn't much juice left in it for a second go around. That, combined with a much tighter time frame, could make this an even more complex and messy process.

In addition, while it hasn't drawn as much attention as it should have, one other changed factor is that after the DTV transition was completed, the FCC opened up TV "white spaces" (spectrum between allotted broadcast channels) for unlicensed use by technology companies seeking to introduce new products and services requiring spectrum. Having enticed companies into investing many millions of dollars in research and development for these white spaces products and services, eliminating the white spaces during the repacking process (which is the point of repacking) could leave many of these companies out in the cold. This is a particularly likely outcome given that the very markets white spaces companies are interested in--densely populated urban areas--are precisely those areas where the FCC most desperately wants to obtain additional spectrum for wireless, and where available spectrum is already scarce. Like low power TV and TV translator licensees, these white spaces companies are pretty much going to be told to "suck the lemon" and hope there are a few drops of spectrum left for them after the repacking.

Still, while there certainly are some obstacles to overcome, the DTV transition gave the FCC staff priceless experience in navigating a repacking, and the FCC already has ample experience auctioning off spectrum. The question is whether this particular undertaking is so vast as to be unmanageable, or whether quick but careful planning can remove most of the sharp edges. Once again, the devil will be in the details, and no one envies the FCC with regard to the task it has before it. However, the chance for an optimal outcome will be maximized if all affected parties engage the FCC as it designs the process. In addition to hopefully producing a workable result for the FCC, broadcasters engaged in the process can ensure that the result is good not just for broadcasters in general, but for their particular stations.

For those interested in getting an advance view of what specifically is involved, Harry Jessell of TVNewsCheck recently interviewed our own John Hane to discuss some of the pragmatic issues facing the FCC and the broadcast industry in navigating the spectrum auction landscape. The transcript of the interview can be found here. John's comments provide additional detail on the tasks facing the FCC, as well as how long the process will likely take.

While everyone impacted by the spectrum auction and repacking process faces many uncertainties as to its outcome, of this we can be certain: challenging times lay ahead.

Posted November 4, 2011

By Glenn S. Richards and Christine A. Reilly

The Commission's Implementation of the Twenty-First Century Communications and Video Accessibility Act of 2010 Initiates a Two-Year Deadline for Providers of Advanced Communications Services and Manufacturers of Equipment Used in Advanced Communications Services to Comply with Disabilities Access Requirements.

The Federal Communications Commission (the "Commission") recently adopted a Report and Order ("R&O") and Further Notice of Proposed Rulemaking ("FNPRM") implementing Section 104 of the Twenty-First Century Communications and Video Accessibility Act of 2010 (the "CVAA"), codified as Sections 716, 717 and 718 of the Communications Act of 1934, as amended (the "Act"). The purpose of the CVAA is to "ensure that people with disabilities have access to the incredible and innovative communications technologies of the 21st century."

Prior to the passage of the CVAA, and pursuant to Section 255 of the Act, the Commission imposed disabilities access requirements on manufacturers of telecommunications equipment (including answering machines, pagers and telephones) and providers of telecommunications services. In 2007, the Section 255 requirements were extended to providers of interconnected VoIP services and manufacturers of VoIP equipment. The CVAA expands the Commission's regulatory authority to historically unregulated providers of advanced communications services ("ACS") and manufacturers of equipment used for ACS (collectively the "Covered Entities") and codifies the requirement as it applies to interconnected VoIP.

ACS includes interconnected VoIP, noninterconnected VoIP, electronic messaging service and interoperable video conferencing services, which are defined as:

• Interconnected VoIP: a service that (1) enables real-time, two-way voice communications; (2) requires a broadband connection from the user's location; (3) requires Internet protocol-compatible customer premises equipment ("CPE"); and (4) permits users generally to receive calls that originate on the public switched telephone network ("PSTN") and to terminate calls to the PSTN.
• Noninterconnected VoIP: a service that (i) enables real-time voice communications that originate from or terminate to the user's location using Internet protocol or any successor protocol; and (ii) requires Internet protocol compatible customer premises equipment" and "does not include any service that is an interconnected VoIP service.
• Electronic Messaging Service: "means a service that provides real-time or near\real-time non-voice messages in text form between individuals over communications networks. This service does not include interactions that include only one individual (human to machine or machine to human communications).
• Interoperable Video Conferencing Services: services that provide real-time video communications, including audio, between two or more users. This service does not include video mail. The Commission has sought additional comment, pursuant to the Further Notice of Proposed Rulemaking, regarding the definition and application of "interoperable".

The Commission clarified that the regulations implemented pursuant to the CVAA "do not apply to any telecommunications and interconnected VoIP products and services offered as of October 7, 2010." The R&O also indicates that any regulated equipment or service offered after October 7, 2010 may be governed by both Sections 255 and 716.

The CVAA established, among other things, a phased compliance timeline due to the financial and technical burdens associated with developing and implementing technological changes required by the CVAA. Covered Entities must comply with Sections 716 and 717 within one year of the effective date. Section 718 compliance must be achieved within two years of the effective date or no later than October 8, 2013. The CVAA also includes long-term reporting obligations, enforcement procedures, limitations on liability for violations and finite compliance deadlines. The Commission decided that the rules, as implemented, would not include any safe harbors or technical standards at this time. Finally, the Commission determined that when implementing the CVAA, its rules should include opportunities for waivers and self-executing exemptions.

Continue reading "Telecom Monitor"

Posted September 13, 2011

By Scott R. Flick

In the past few days, details have emerged from the White House regarding the funding sources being proposed to cover the cost of the American Jobs Act. In the government's search for cash, it should surprise no one that in addition to broadcast spectrum auction language (which seems to be in every new funding bill these days), spectrum fees are also being proposed. While there is some good news for television broadcasters, who are exempt from the fees in the current draft of the bill, you can never tell if that exemption will survive the rough and tumble legislative process. Radio broadcasters aren't so lucky--no exemption for them.

One trend is clear--the government's growing reliance on fees from broadcasters and other FCC license holders. When I started practicing in the 1980s, the FCC did not generally charge fees. Congress later instructed the FCC to collect a fee for each application or report filed, and to set the size of the fee at an amount that would cover the cost of processing that particular application/report. While there was some grumbling about having to pay the FCC to process reports that the FCC had required be filed in the first place, most understood that the government was not going to surrender this newly-found revenue source.

However, when Congress later required the FCC to also collect annual regulatory fees from spectrum users in amounts sufficient to cover the FCC's total operating budget, spectrum users cried foul. They were already paying a filing fee to have the FCC process their applications, and now were expected to pay a separate annual fee to cover all of the FCC's operating costs (including application processing). This meant that the government was double-dipping--collecting fees under the guise of "covering costs" that in fact exceeded those costs. To his credit, Commissioner McDowell acknowledged this strange situation in 2009, when he urged the FCC to "take another look at why we continue to levy a tax of sorts of allegedly $25 million or so per year on industry, after the Commission has fully funded its operations through regulatory fees. That money goes straight to the Treasury and is not used to fund the agency." Despite the protests, the FCC continues to be required by Congress to collect those fees, which increase every year.

So broadcasters and other spectrum users can be forgiven if they are skeptical of calls for yet one more government fee on their existence. Even if the exemption for television broadcasters stays in the bill, that is limited comfort for TV licensees, since any spectrum fee adopted will almost inevitably creep over to television as Congress continues its search for revenue sources that can be called "fees" rather than "taxes."

Sensitive to these complaints, the White House attempted to bolster its case in a summary of the bill, stating that "it is expected that fees would encourage efficient allocation and use of the radio spectrum, as the opportunity cost of spectrum resources would be reflected to commercial license holders that did not receive authorizations through competitive bidding." This perennial argument, that broadcasters shouldn't complain about any governmentally-imposed burden because "they got their spectrum for free," remains one of the urban legends of Washington. Like most urban legends, however, it has no basis in fact.

Very few current broadcasters "got their spectrum for free." The FCC has been auctioning off broadcast spectrum for over a decade, and broadcast stations that were licensed before that time have typically been sold and resold at "fair market value" many times over the years. As a result, it is a rare broadcaster that currently holds a broadcast license obtained directly from the FCC "for free". Most broadcasters have paid dearly for that license, both in terms of the station purchase price and the public service obligations that come with the license.

Still, fee proponents argue that because the original license holder didn't have to pay the government for the spectrum, the "free" argument still applies, no matter how many times the station has changed hands since then. That argument is eviscerated, however, by a simple analogy. When the United States was settled, the government issued land grants to settlers who "staked a claim" to virgin territory by promising to make productive use of that land (the "Sooners" being one of the better-known examples). Other than the promise to use the land, these settlers did not pay the government for their land grants. The land then passed from generation to generation and from seller to buyer many times in the years since the original grant. However, despite the fact that the original owners "got their land for free", I would wager there are few homeowners among us who would agree that we received "our" land for free, much less accept a governmental fee premised on that assertion.

How spectrum/licenses were originally assigned by the FCC (or its predecessor agency) many years ago bears no more relevance to today's broadcaster than 19th century land grants relate to the modern homeowner. In both cases, the original owner lived up to its commitment to the government to make productive use of the asset, and was therefore permitted to eventually sell its claim to others. To assert that these buyers are somehow suspect beneficiaries of land or spectrum ignores reality. Today's broadcasters are merely the spiritual descendants of a different kind of settler--the pioneers of the airwaves.

Posted May 31, 2011

By Scott R. Flick

The FCC today announced a freeze on the acceptance of any petitions for rulemaking seeking to change a station's assigned channel in the Post-Transition Table of DTV Allotments. While application freezes were once relatively rare at the FCC, they became quite common as a planning mechanism during the years when the FCC was creating a new Table of Allotments to initiate and complete the transition to digital television.

Given the FCC's announced intent to begin reclaiming broadcast television spectrum for wireless broadband as part of the National Broadband Plan, and to then repack the remaining television stations into a smaller chunk of spectrum, today's announcement was not a surprise. The Commission's brief announcement stated that the freeze is necessary to "permit the Commission to evaluate its reallocation and repacking proposals and their impact on the Post-Transition Table of DTV Allotments...."

The freeze will put a stop to the steady migration of stations from the VHF to the UHF band, where reception is generally better and the opportunities for successful mobile DTV operations greater. While not discussed in the FCC's announcement, proponents of transferring broadcast spectrum to wireless broadband have no interest in VHF spectrum, so each station that moves from the VHF band to the UHF band makes the FCC's efforts to clear UHF spectrum for broadband that much more difficult. The FCC noted in its announcement that since the lifting of the last freeze in 2008, it has processed nearly 100 television channel changes, and that it therefore believes most stations interested in making a channel change have had sufficient time to do so. The FCC indicated that it would continue to process channel change requests filed before the new freeze commenced.

And so it begins. While the prospects for legislation to implement the National Broadband Plan's broadcast spectrum incentive auctions remain murky, the FCC does not need the blessing of Congress in order to commence the process of spectrum repacking. Now well over a year old, the National Broadband Plan remains mostly that--a plan. Today's freeze marks one of the first concrete steps by the FCC to implement at least some aspects of that plan. Setting aside the issue of whom the ultimate winners and losers in the spectrum debate will be, the painful and expensive process of implementing a new Table of Allotments for digital television is still far too fresh a memory for many broadcasters to want to be subjected to a similar process now.

At least with the transition to digital, broadcasters could see the benefits of enduring the difficult process in order to be able to garner the benefits of high definition programming, multicasting, and datacasting. Unfortunately, for broadcasters not interested in selling spectrum in an incentive auction, repacking means all pain and no gain. The best case scenario for a television broadcaster in a repacking is just to survive the disruption and distraction without losing signal coverage of viewers and cable headends. That doesn't leave broadcasters with much light at the end of the tunnel to guide them through the difficult days ahead.

Posted March 4, 2011

By Lauren Lynch Flick and Cydney Tune

On February 22, 2011, US District Court Judge Naomi Reice Buchwald of the Southern District of New York issued a 59-page decision enjoining ivi TV, Inc. from streaming the programming of various network-affiliated television stations on the Internet without their permission. The judge's opinion articulates a basic principle of copyright law -- that the creator of the content holds a bundle of rights which, with very few exceptions, it alone controls. Therefore, even in this age of proliferating distribution platforms, the fact that the copyright owner has made its content available via a number of different technologies does not diminish its ability to control whether and how to make it available on a new platform. The case will likely yield more examination of this issue, as ivi TV has sought a stay of the injunction.

Background
ivi TV began Internet streaming of the signals of several network affiliated television stations located in Seattle and New York in September 2010, and thereafter announced plans to add stations from Chicago, Los Angeles and San Francisco in the future. It offered subscribers located throughout the United States the ability to receive these television signals via an Internet connection for a monthly fee. Subscribers downloaded a player, chose the signals to watch, and the signals were delivered in an encrypted form. In anticipation of the content owners' lawsuit, ivi TV sought a Declaratory Ruling from a US District Court in Seattle that the company was not infringing the copyrights in the programming, but the court dismissed that case as an anticipatory filing. A consortium of television stations, the producers of programming shown on the stations, and Major League Baseball later commenced a lawsuit for copyright infringement in New York, seeking an injunction to prevent any further retransmissions of their content by ivi TV.

Continue reading "Client Advisory: A Look at the Decision Enjoining ivi TV From Streaming Broadcast Content on the Internet"

Posted March 1, 2011

By John K. Hane

More than two months after the FCC released a Notice of Proposed Rulemaking proposing preliminary steps to reallocate and reassign television broadcast spectrum for wireless broadband, the government machinery has finally announced comment deadlines: March 18 for initial comments and April 18 for replies. This is the first of several proceedings the FCC intends to pursue in its goal to repurpose broadcast spectrum.

The notice makes three proposals and asks a number of questions about each. It proposes:

• To add new fixed and mobile service allocations to the TV bands and give them co-primary status;
• To permit two or more stations to share a single 6 MHz channel; and
• To take steps to improve the performance of broadcast signals in the VHF band.

Almost everyone interested in the topic of broadcast spectrum repurposing has a strong view, and opinions differ even among broadcasters. With station transactions at all time lows, some welcome the prospect of another possible exit. Those that don't want to sell are worried about transition costs, being moved to less desirable channels, losing coverage area, or being coerced to sell by threat of hefty spectrum fees. Many broadcasters don't know where they stand. For those, here are two things to keep in mind.

Timing. Regardless of what you read about timetables, it is extremely unlikely that auctions of any reclaimed broadcast spectrum will take place within the next three years. Congress has not authorized incentive auctions. Even if it does so this year, it will be later in the year, and the FCC will then have to adopt implementing rules. Only then can the FCC schedule an auction and can stations determine whether they want to sell. If Congress doesn't permit incentive auctions, the FCC has other options, but those take time to develop too. Right now, there's no coherent Plan B.

The FCC is breaking new ground here, and even without political pressures these are hard questions. They'll take a lot of time and thought to resolve. Almost a year after the release of the National Broadband Plan, we still haven't seen the model the FCC is using to figure out how broadcast spectrum can be cleared and stations repacked.

Apparently, the FCC is having a hard time finding daylight even without second-guessing by outsiders. Assuming everything goes smoothly for the FCC's agenda, it's conceivable auctions could take place in late 2014, with settlements and transition in 2015.

Eligibility and appeal. Most stations either won't be eligible to participate in incentive auctions or the prospect won't be very enticing. The FCC will almost certainly draw some bright lines. It might offer incentives only in the most densely populated areas, or it may preclude certain classes of stations from participating altogether. It might offer bigger incentives to higher band UHF stations, or it might offer better incentives to those stations, and it may preclude VHF or lower UHF stations from participating, or it may offer weaker incentives to them. Much depends on what the yet-unreleased "optimization" models show and what Congress does or does not authorize.

Among eligible stations, only a few are likely to find incentive payments to be attractive. At least today, even the most aggressive projections show spectrum shortages only in a handful of the most densely populated areas. It is not clear that the FCC will seek to clear broadcast spectrum in every market, and even if it does, auction proceeds (and thus, incentive payments) will be progressively lower as market size declines. In the 2007 auction of vacated TV spectrum, some markets commanded more than $3 per "MHz/pop" (one MHz covering one person), while others sold for about a tenth of that.

Except in the very largest markets, incentive payments probably won't exceed the enterprise value of a profitable television station. Auction proceeds have to be split at least three ways. The U.S. Treasury will take its pound of flesh (Congress needs incentives too!) and transition costs will have to be paid. As an example, about two million people live in the Kansas City Metropolitan Statistical Area. Assuming a Kansas City station is credited with covering them all, auction of its 6 MHz channel at $1/MHz/pop would yield $12 million. A lot of this would be spent on whatever transition mechanism is used and the Treasury will keep a substantial portion of the remainder. Perhaps $1 million to $3 million would be available as an "incentive" payment to the station.

Of course, the FCC has time and means to create negative incentives. Stations that don't sell may be moved to much less attractive channels, or forced to reduce power or coverage, or (if Congress approves) assessed substantial spectrum fees.

The FCC's rulemaking notice doesn't ask questions about these sorts of issues, but broadcasters should keep them in mind as they formulate their comments in response to the notice.

Posted December 29, 2010

By Scott R. Flick

Earlier this month we posted our 2011 Broadcasters Calendar on CommLawCenter as well as on our Pillsbury web page. We have been annually publishing the Broadcasters Calendar, which contains much information regarding broadcast station deadlines and legal requirements, for as long as I can recall. It has always been one of our most popular publications, and I usually get calls beginning in early November asking when next year's calendar will be available. The "easy to read" pdf version of the Calendar can be found here, and a text-searchable version is available here.

Even a brief review of the 2011 Broadcasters Calendar reminds us that 2011 will be a busy year for not just broadcasters, but for cable and satellite operators as well. October 1, 2011 is the deadline by which broadcasters qualifying for must-carry need to notify cable and satellite operators of their election between must-carry status and retransmission consent. Recent retransmission disputes once again remind us that retransmission negotiations and their associated revenue are critical to the future of broadcast television. However, the sheer volume of negotiations and carriage disputes likely to occur following the October 1 election deadline will almost certainly make this holiday season look tranquil by comparison.

Adding to the action will be continued efforts by the cable and satellite industries to draw Congress and the FCC into the fray, introducing legislative and regulatory uncertainties into an already complex negotiation process. Their chances for success will depend greatly upon how much disruption in carriage of broadcast programming occurs in 2011, and the public's perception of who is at fault for that disruption. Regardless of the outcome of this particular Washington confrontation, look for 2011 to be the year where economics force cable and satellite providers to more tightly link the number of viewers a program service attracts with the amount they agree to pay for that service. Overpaying for niche cable networks that don't pull in large numbers of viewers is so "last decade".

2011 also marks the beginning of the FCC's next eight-year license renewal cycle, with radio stations in DC, Maryland, Virginia, and West Virginia starting pre-filing announcements in April for their upcoming license renewal applications. The filing cycle will continue state by state until it concludes with television stations in Delaware and Pennsylvania running their last post-filing announcements on June 16, 2015.

However, many stations haven't had their last license renewal application granted because of indecency complaints still pending against them. The FCC has pretty much ceased processing indecency complaints while it awaits guidance from the courts as to whether it can legally enforce the prohibition on broadcast indecency, and if so, how it will be allowed to do that. I have been told that there are literally hundreds of thousands of indecency complaints now pending at the FCC, so unless the courts do the FCC the favor of finding the prohibition on indecency completely unconstitutional, it will take the FCC years to sift through these complaints in an effort to apply any refined indecency standard announced by the Supreme Court.

It is therefore reasonable to predict that indecency complaints will continue to play a large role in the processing of upcoming license renewal applications. 2011 will hopefully be the year when the courts tell us exactly how large (or small) that role will be. If the prohibition on indecency survives this latest round of judicial scrutiny, broadcasters and the FCC can expect a lot of complaint investigations and litigation as both struggle with where the line on content is being drawn.

Of course there are numerous other events that will contribute to 2011 being one of the busiest years in memory for broadcasters. A rebounding economy is slowly lifting most boats in the broadcast industry, with the obvious exception being those that burned their critical assets for fuel during the lean times, and don't have much boat left.

With a growing amount of money to fight over, the fights will begin in earnest (see "Retrans" above). Negotiations between the NAB and the recording industry over performance royalties will continue, and "performance tax" legislation will again rise in Congress with the same certainty that the slasher in a horror film returns for unending sequels.

Broadcasters and the FCC will also be implementing the latest generation of the Emergency Alert System in 2011, and the FCC will continue its efforts to repurpose broadcast spectrum for mobile broadband use, leading to new rules permitting multiple broadcasters to share a single channel, and potentially to legislation allowing participating broadcasters to share in the proceeds of broadband spectrum auctions. As with most of the items discussed above, there is both opportunity and peril for broadcasters here, and those that are inattentive risk missing the former and being battered by the latter.

Yes, 2011 will be a very busy year.

Posted December 21, 2010

By Scott R. Flick

While we await release of the text of today's Net Neutrality order from the FCC, it strikes me as useful to take a step back and apply a broader perspective to what can be learned from the debate that led to it. While lawyers get a rush when they think they have come up with the perfect legal argument to support their client's cause (and we're fun at parties too!), those of us working in Washington have to concede that legal arguments are often secondary to the politics involved. Certainly, the FCC's order will not be the last word in the Net Neutrality debate, with a number of prominent members of Congress already promising a legislative rebuke, and the near certainty of the courts being called upon to assess the FCC's authority to adopt such rules.

In spite of the millions spent on lawyers and lobbyists on both sides of this issue, the result was in many ways preordained by the real champion in this debate, linguistics. Much of the battle was won when proponents summarized their position as being in favor of "Net Neutrality", a term that is sufficiently innocuous yet catchy enough to crystallize the debate as being between those who want a neutral/fair apportionment of the Internet's capabilities, and those who, well, don't. Opponents were put instantly on the defensive, trying to explain why a neutral Internet wouldn't be a good thing.

While other terms were also bandied about in the early days of the debate (like "broadband discrimination" or "traffic prioritization"), none had the simple positive ring (and alliteration) of Net Neutrality. "Internet Indifference" might have been a good candidate as well, but no one seems to have thought of it at the time.

Added to this linguistic head start is the fact that the concept itself is simply easier to explain in positive terms than in negative ones. Stories on the Washington Post's website today described Net Neutrality as a regulation that "ensures unimpeded access to any legal Web content for home Internet users" and which marks "the government's strongest move yet to ensure that Facebook updates, Google searches and Skype calls reach consumers' homes unimpeded." Based on that description, readers would be hard pressed to conclude that Net Neutrality is a bad thing, and much of the mainstream press used terms similar to the Post's in describing today's action by the FCC.

Taking the contrary position, there are two big problems with arguing that Net Neutrality is "an intrusive government interference into the management of broadband networks that will impede the evolution of new models of business on the Internet while requiring Internet innovators to first consider and navigate government regulations before implementing new Internet services." First, it doesn't exactly roll off the tongue like the Post's description of Net Neutrality. Second, it requires several additional explanations of exactly how Net Neutrality regulations would have that effect. It isn't necessarily obvious from the statement alone.

The point of this is not to debate the merits of Net Neutrality itself, but to note that taking the time to carefully craft and package a proposal before presenting it (to the FCC or any other part of the government, including Congress) frames the debate in your favor. It is not an irrefutable advantage, but claiming the linguistic high ground forces opponents to expend far more of their resources fighting their way uphill, while the proponent conserves its legal and political resources waiting at the top. Many opponents will falter before they reach the top, and those that do make it will be exhausted from the climb.

In the case of Net Neutrality, vast resources were arrayed on both sides of the debate, but the political and public popularity engendered by the phrase "Net Neutrality" and the easily understood arguments on its behalf proved to be insurmountable today. It is safe to say, however, that opponents of Net Neutrality regulations are already regrouping for their next charge in Congress and in the courts, and that today's skirmish was merely the first of many to come.

Posted December 20, 2010

By Scott R. Flick

Members of the Communications Industry that don't keep up with legal and political developments in Washington aren't in the industry for long. That truism has been particularly apt in the past few months, starting with the President's October signing of the Twenty-First Century Communications and Video Accessibility Act of 2010 which, among other things, cleared the way for reinstatement of the FCC's former Video Description rules for television broadcasters, extended closed captioning of video programming to the Internet, and required the FCC to examine methods of increasing the accessibility of emergency information.

Normally, the weeks before a congressional election and the lame duck session afterwards are not a fertile environment for communications legislation, which has a tendency to be controversial because of the stakes involved (can you say "net neutrality"?). However, the Twenty-First Century Communications and Video Accessibility Act, which was spurred to passage by a congressional desire to commemorate the 20th anniversary of the Americans with Disabilities Act, was merely the beginning.

The lame duck session has now generated several more pieces of successful legislation. Last week the President signed the first of these, the Commercial Advertisement Loudness Mitigation Act, which requires television stations to transmit at a consistent volume level (rather than make viewers lunge for their mute button at every commercial break). Congress followed the CALM Act with passage of the Truth in Caller ID Act of 2009, which is now awaiting the President's signature. This legislation prohibits manipulation of caller ID information with intent to defraud or harm others.

Apparently building steam, Congress proceeded to adopt the Local Community Radio Act of 2010 this past weekend, which reduces the extent of interference protection that full power radio stations will receive from Low Power FM stations, thus clearing the way for many more LPFM stations to be wedged into the FM radio band. This legislation is also now waiting for the President's signature.

So, is there something in the DC drinking water that has a lame duck Congress suddenly tackling communications issues as though "gridlock" was only a term from morning traffic reports? Maybe. But the truth is more complicated than that. With regard to the CALM Act, controversy about loud television commercials dates back decades. The FCC long ago considered adopting rules to prohibit such "variable volume" broadcasting, but concluded in 1984 that "due to the subjective nature of many of the factors that contribute to loudness, it would be virtually impossible to craft new regulations that would be effective." However, the transition to digital television has made it far more feasible to craft and enforce objective technical standards for loudness, lessening somewhat broadcasters' concerns that regulation would lead to free-roaming loudness police second-guessing a station's engineering practices.

Similarly, the LPFM interference issue has been simmering for a decade, with a succession of bills trying and failing to eliminate the requirement that LPFM stations protect full power stations' third-adjacent channels from interference. However, what finally put the Local Community Radio Act over the top was a legislative compromise that, among other things, assured full power broadcasters that LPFM will be categorized as a secondary service to full power stations. This means that full power broadcast stations can continue to modify their facilities to improve their audience reach without finding themselves blocked by the interference such a modification might cause local LPFM stations. In light of this and other modifications to the bill, broadcasters were able to offer their support for its adoption, finally breaking the longstanding impasse.

So what's next? Well, Congress remains keenly interested in communications issues, as evidenced by the lively discussion (and legislative threats) surrounding the FCC's upcoming net neutrality order. Broadcasters, however, are hoping that this lame duck session concludes quickly, leaving the Performance Rights Act and its goal of requiring broadcasters to pay royalties to the recording industry the subject of continued inter-industry negotiations, rather than the latest statutory mandate emerging from the twilight hours of the 111th Congress.

Posted December 10, 2010

By Paul A. Cicelski

As we discussed in a previous post and separate Client Advisory, the FCC released a Public Notice to implement a provision of the Satellite Television Extension and Localism Act (STELA) that requires the FCC to submit a report on in-state broadcast programming to Congress by August 11, 2011. The Public Notice was published in the Federal Register yesterday, which means that comments are due by January 24, 2011, with reply comments due by February 22, 2011.

As we discussed previously, the purpose of the FCC's Report to Congress is to address a concern of some members of Congress that subscribers located in markets that straddle a state line may be unable to receive broadcast news and information from their own state because the local stations made available by cable and satellite providers are all located in the "other" state. According to the FCC, the report will: (1) analyze the number of households in a state that receive the signals of local broadcast stations assigned to a community of license located in a different state; (2) evaluate the extent to which consumers in each local market have access to in-state broadcast programming over-the-air or from a multichannel video programming distributor; and (3) consider whether there are alternatives to DMAs for defining "local" markets that would provide consumers with more in-state broadcast programming.

This proceeding is relevant to retrans because there have been some efforts on Capitol Hill to introduce legislation allowing cable and satellite operators to import the signals of television stations from another market. While the official description of this situation describes these subscribers as being deprived of news and information regarding their own state, the more pragmatic concern of such viewers it is argued is that they aren't able to watch sports teams from their state as often as they would like. However, creating a legislative opportunity to import distant stations carrying such in-state sports (and other) programming would often mean importing a station that duplicates the network and syndicated programming of a local station already carried by cable systems and satellite providers in the market. Importing stations in this manner raises complex issues with respect to potentially siphoning off the local station's viewers (and advertisers), undercutting the local station's program exclusivity, and impacting the local station's leverage when it commences retransmission consent negotiations.

For those who plan on filing comments or replies, keep in mind that the FCC has specifically asked for data to help it analyze the issues relating to the availability of in-state broadcast stations for consumers, including the proper "methodologies, metrics, data sources, and level of granularity" that should be used in its report to Congress. The FCC is also asking for specific information to identify counties and populations within given states that have limited access to in-state broadcast programming.

As a result of efforts currently underway on the Hill with respect to potentially allowing the importation of in-state but out-of-market signals, those interested in retransmission consent should continue to monitor this matter closely.

Posted November 24, 2010

By Scott R. Flick

Yesterday, a day in advance of the November 24th statutory deadline to adopt rules implementing the Satellite Television Extension and Localism Act, the FCC released a flurry of STELA-related orders. STELA governs the satellite carriage of broadcast stations, and in particular, the importation of distant network stations, in local markets. Because STELA and its predecessor statutes lie at the nexus of communications and copyright law, they represent very complex and arcane matters that often leave even communications lawyers scratching their heads if they aren't experienced in the area.

For those interested in the details of yesterday's three Orders and the FCC's request for additional comments, I recommend taking a look at our Client Advisory on the subject from earlier today. For the rest of the population, suffice it to say that the major impact of these orders for broadcasters is how they affect the ability of satellite operators to import a "significantly viewed" ("SV") duplicating network signal into portions of a local market, thereby undercutting the local network affiliate's ratings, ad revenue, and retransmission negotiations.

As detailed in the Client Advisory, of the FCC's three Orders, one favors satellite operators by making it easier to import distant network stations into a market, while the other two favor broadcasters by limiting the proportion of satellite subscribers in a market that are eligible to sign up to receive a distant network station.

Of particular note is the FCC's conclusion in one of the Orders that "because SV status generally applies to only some areas in a DMA and not throughout an entire DMA, we find it unlikely that an SV station could permanently substitute for a local in-market station, even in the provision of network programming to the market." The FCC further stated that "because most viewers want to watch their local stations, we do not think that carriage of only SV stations would satisfy most subscribers for an extended time."

That is a comforting conclusion for broadcasters, and probably an accurate one. However, it may be cold comfort for the local broadcaster in heated retransmission negotiations where the satellite operator threatens to import a duplicative network station into the market. Because of that, and despite the complexity of the law in this area, television station owners and satellite operators need to acquire a keen understanding of each other's rights under STELA and the FCC's related rules, or proceed at their own peril.

Posted November 24, 2010

By Lauren Lynch Flick and Scott R. Flick

Yesterday, the Federal Communications Commission issued three Orders and a Public Notice designed to implement the new requirements of the Satellite Television Extension and Localism Act (STELA).

The FCC beat by one day the November 24, 2010 statutory deadline for adopting new rules governing several aspects of satellite operators' carriage of television broadcast signals under STELA. The first of three Orders favors satellite providers by making it easier for them to import the signals of significantly viewed ("SV") stations from neighboring markets into a station's local television market. However, the other two Orders favor broadcasters in updating the procedures for subscribers wishing to qualify to receive distant network television stations from their satellite operator. Lastly, the FCC issued a Public Notice seeking comments and data for a required report to Congress regarding the availability of in-state broadcast stations to cable and satellite subscribers located in markets straddling state borders.

Significantly Viewed Stations Order
In this Order, the FCC concluded that, under STELA, a satellite subscriber must generally subscribe to the local-into-local package before it can receive the signal of an out of market station significantly viewed (over-the-air) in that subscriber's area. Illogically, however, the subscriber does not have to receive the signal of the local affiliate of the same network as the imported SV network station. The subscriber's receipt by satellite of any local station is all that is needed. The FCC stated that its interpretation means that, where a local affiliate is not carried during negotiation of a retransmission consent agreement, the satellite carrier can provide certain subscribers with network programming from an SV network station in a neighboring market.

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