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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:

  • Unenclosed and Unpainted Tower Leads to $30,000 in Fines
  • $20,000 Fine for Missing Issues/Programs Lists at Two Stations
  • Increased Fine for Intentional Interference and Unlicensed Transmitter Use

Multiple Tower Violations Result in Increased Fine

Earlier this month, a Regional Director of the FCC’s Enforcement Bureau (the “Bureau”) issued a Forfeiture Order against the licensee of a New Jersey AM radio station for failing to properly paint its tower and enclose the tower within an effective locked fence or other enclosure.

Section 303(q) of the Communications Act requires that tower owners maintain painting and lighting of their towers as specified by the FCC. Section 17.50(a) of the Commission’s Rules says that towers must be cleaned or repainted as often as necessary to maintain good visibility. Section 73.49 of the FCC’s Rules requires “antenna towers having radio frequency potential at the base [to] be enclosed with effective locked fences or other enclosures.” The base fine for failing to comply with the lighting and marking requirements is $10,000, and the base fine for failing to maintain an effective AM tower fence is $7,000.

In March of 2010, agents from the Bureau’s Philadelphia Office inspected the licensee’s tower in New Jersey. The terms of the Antenna Structure Registration required that this particular tower be painted and lit. During their inspection, the agents noticed that the paint on the tower was faded and chipped, resulting in significantly reduced visibility. During their inspection, the agents also found that an unlocked gate allowed unrestricted access to the tower, which had radio frequency potential at its base. The agents contacted the owner of the tower and locked the gate before leaving the site.

In April of 2010, the Philadelphia Office issued a Notice of Violation (“NOV”) to the licensee for violating Sections 17.50(a) and 73.49 of the FCC’s Rules. The next month, in its response to the NOV, the licensee asserted that it inspects the tower several times each year and had been planning for some time to repair the faded and chipped paint and promised to bring the tower into compliance by August 15, 2010 by repainting the structure or installing white strobe lighting. The licensee also indicated that it had never observed the gate surrounding the tower be unlocked during its own site visits and noted that several tenants, each of whom leased space on the tower, also had keys for the site.

In November of 2010, agents inspected the tower again to ensure that the violations had been corrected. The agents discovered that the licensee had neither repainted the tower nor installed strobe lights and that now a different gate to the tower was unlocked. The agents immediately informed the licensee’s President and General Manager about the open gate, which they were unable to lock before leaving the site. The following day, the agents returned to the tower and noted that the gate was still unlocked. The agents again contacted the President, who promised that a new lock would be installed later that day, which did occur. At the beginning of December 2010, agents visited the tower with the President and the station’s Chief Engineer. The tower still had not been repainted, nor had strobe lights been installed. On January 7, 2011, the Chief Engineer reported to the FCC that white strobe lighting had been installed.

The Philadelphia Office issued a Notice of Apparent Liability for Forfeiture (“NAL”) on October 31, 2011 for failure to repaint the tower and failure to enclose the tower with an effective locked fence or enclosure. In the NAL, the Philadelphia Office adjusted the base fines upward from the combined base fine of $17,000 because the “repeated warnings regarding the antenna structure’s faded paint and the unlocked gates . . . demonstrate[ed] a deliberate disregard for the Rules.” The Philadelphia Office proposed a fine of $20,000. In its response to the NAL, the licensee requested that the fine be reduced based on its immediate efforts to bring the tower into compliance with the rules and its overall history of compliance.

In response, the FCC declined to reduce the proposed fine because corrective action taken to come into compliance with the Rules is expected and does not mitigate violations. In addition, the FCC rejected the licensee’s argument that it had taken “immediate action” to correct the violations because the licensee was first notified about the chipped paint in March 2010 and did not install the strobe lights until January 2011. Finally, the FCC declined to reduce the fine based on a history of compliance because the licensee had violated the FCC’s Rules twice before. Therefore, the FCC affirmed the imposition of a $20,000 fine.

Fine Reduced to Base Amount for Good Faith Effort to Have Issues/Programs Lists Nearby

The Western Region of the Enforcement Bureau issued a Forfeiture Order against the licensee of two Colorado stations for failing to maintain complete public inspection files.
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Few dates on the broadcasters’ calendar are easier to miss than the deadline for TV stations (and a few fortunate LPTV stations) to send their must-carry/retransmission election letters to cable and satellite providers in their markets. Because it doesn’t occur every year, or even every other year, but every third year, the triennial deadline can slip up on you if you don’t closely monitor our Broadcast Calendar. For those that haven’t been paying attention, October 1, 2014 is the deadline for TV stations to send their carriage election letters to MVPDs. The elections made by this October 1st will govern a station’s carriage rights for the three-year period from January 1, 2015 to December 31, 2017, and this will be the first set of election letters that stations must immediately upload to their online public inspection file at the FCC.

I noted in a post here three years ago that the impact of these elections is becoming more significant with each three-year cycle. In particular, that post focused on the fact that network-affiliated stations can no longer consider retrans revenue to be “found” money, but instead as revenue essential to both short-term and long-term survival. Short-term, in that stations must compete for programming and advertising against cable and satellite programmers that have long had two revenue streams–advertising and subscriber fees. Long-term, in that there was little doubt that networks were looking to charge affiliates more for network programming by taking an ever larger share of retrans revenue, and that it was only a matter of time before networks began selecting their affiliates based not upon past performance, but upon which station could bring the best financial package to the network going forward.

As we’ve learned over the past year in particular, that means not just negotiating the best retransmission deals possible, but sending an increasing portion of those revenues to the network. Wells Fargo analyst Marci Ryvicker, who will be one of our speakers at the 2014 Pillsbury Trends in Communications Finance event in New York next month, noted that pattern just a few weeks ago. Using CBS’s recent projections on the overall revenue it expects to receive from affiliates, she was able to calculate the monthly affiliate cost for CBS programming at $1.30 per subscriber by 2020. Add to that the station’s costs for negotiating retrans deals, as well as the increasing cost of producing local programming and securing attractive syndicated content, and it is clear that no network affiliate can afford to be cutting substandard retrans deals and hope to survive in the long term. MVPDs may grumble about those “greedy stations” during retrans negotiations, but generating the revenue necessary to retain the programming that attracts cable, satellite, and over-the-air viewers (not to mention advertisers) is not an optional activity for local TV stations.

The impact of this is not, however, limited to purely matters of retransmission. Yes, broadcasters can no longer afford to enter into amateur retrans deals that threaten to alienate their networks by providing below-market rates, or which sloppily authorize retransmission or streaming rights far outside the local broadcaster’s market (this mistake becoming even more consequential if the FCC moves forward in eliminating the network non-duplication rule). The bigger trend is that these economic forces are driving consolidation in the TV industry.

Building large broadcast groups allows co-owned TV stations the critical mass necessary to negotiate difficult retrans deals against the much-larger cable and satellite operators, and, where necessary, to withstand the economic impact of a retrans impasse when it happens. Similarly, larger TV groups are better positioned to negotiate the best possible programming deals with their networks (keeping in mind that “best possible” isn’t necessarily the same as “good”).

Single stations and small station groups routinely have to punch well above their weight by employing smart executives and counsel with deep experience in retrans negotiations to survive in this increasingly harsh environment. That is what makes the FCC’s prohibition earlier this year on certain joint retrans negotiations, as well as current efforts on Capitol Hill to broaden that prohibition, so perverse. By eliminating one of a small broadcaster’s best options for cost-effectively negotiating viable retransmission agreements, the government is pushing those broadcasters to sell their stations to a larger broadcaster (or some would say, to the government itself). In the current environment, a station that fails to sell to a larger broadcaster possessing the skill and mass necessary to effectively negotiate retransmission agreements risks losing its network affiliation to just such a station group, precisely because that group can frequently deliver better retrans results.

So as you send out your elections this year, keep in mind that while the election process itself hasn’t changed, what you will need to do afterwards has changed dramatically. More to the point, think hard about what you need to be doing with your retrans negotiations if you still want to be around in three years to send out that next batch of election letters.

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Broadcasters let out a small sigh of relief today when the FCC made clear there is no requirement that TV stations have private investigators on staff.

With TV stations’ political files now available online, three political activist organizations have been jointly filing complaints against TV stations alleging various errors and omissions in online public file paperwork relating to political ad buys by third-party advertisers. These three organizations, the Campaign Legal Center, Sunlight Foundation, and Common Cause, expanded their campaign (no pun intended) substantially in mid-July, when they filed complaints against a Washington, DC and a Portland, Oregon TV station. Rather than paperwork problems, however, these complaints claimed that the stations had failed to accurately disclose on-air the true identity of the sponsor behind certain “Super PAC” political ads. In both cases, the complainants asserted that their own research indicated the PACs were mostly or entirely funded by a single individual, and that the stations should have therefore identified that individual rather than the PAC as the sponsor of the political spot.

While there is ample precedent for requiring broadcasters to be comfortable that the sponsorship information in a political spot is accurate, the most recent complaints concerned broadcasters for two reasons. First, there apparently was no question that the PACs had indeed been the ones to write the check for the ads and were valid legal entities, so a TV station altering the sponsorship identification text to specify the station’s opinion as to who the “real” sponsor is raises numerous legal issues, not the least of which is that the station could well get it wrong. For example, it would be a pretty brazen station that would change the sponsorship identification on Microsoft ads to “paid for by Bill Gates” on the theory that Bill Gates was the main “person” behind the organization that wrote the check. Of course, in this example the station would be doubly wrong, as Bill Gates ceased being the largest shareholder of Microsoft in May of this year, demonstrating the risk a station takes in attempting to be the arbiter of who is “behind” an advertiser.

This example also demonstrates the second issue that concerned broadcasters about the complaints. If, in the absence of an obvious sham advertiser, broadcasters had an obligation to ignore the “name on the check” and attempt to discern the actual source of the check writer’s income, they would need a full-time staff of researchers doing nothing but verifying the structure of advertisers. In addition, the airing of political ads would be perpetually delayed while stations seek adequate certainty that they have discerned the true source of all ad funds.

The result would be a no-win situation for broadcasters, who would have to expend enormous resources trying to determine where an advertiser’s money comes from, and having done that, expose themselves to both private liability (from the advertiser who wasn’t credited as the sole sponsor of the spot, as well as from the individual who was) and regulatory liability (if the government disagrees with the licensee’s sponsorship conclusions).

Today, the FCC wisely avoided placing broadcasters in that conundrum, ruling in a letter decision that:

We conclude that the complaints do not provide a sufficient showing that the stations had credible evidence casting into doubt that the identified sponsors of the advertisement were the true sponsors. As the Commission has stated previously, “unless furnished with credible, unrefuted evidence that a sponsor is acting at the direction of a third party, the broadcaster may rely on the plausible assurances of the person(s) paying for the time that they are the true sponsor.” While the complaint against [the station] presented some evidence that station employees may have come across facts in the course of news reporting on political issues that could have raised questions in their minds concerning the relationship of NextGen Climate Action Committee and Tom Steyer, we exercise our discretion not to pursue enforcement in this instance, given the need to balance the “reasonable diligence” obligations of broadcasters in identifying the sponsor of an advertisement with the sensitive First Amendment interests present here.

While it is reassuring that the FCC moved quickly to reject the complaints, today’s action leaves the political sponsorship identification waters somewhat murky. In addition to the less than comforting “we exercise our discretion not to pursue enforcement in this instance” language, the FCC proceeded to state that “[o]ur approach might have been different if the complainants had approached the stations directly to furnish them with evidence calling into question that the identified sponsors were the true sponsors.” In using this language, the FCC suggests that the only problem with the complaints “might have been” that the complainants didn’t present their evidence to the stations while the spots were still airing so that the stations could have assessed the evidence at the time and decided whether to modify the sponsorship identification.

While that ruling is generally consistent with past FCC rulings, in that a broadcaster must be presented with “credible, unrefuted evidence that a sponsor is acting at the direction of a third party,” the FCC sidestepped the equally important issue of when a PAC’s sponsorship identification may be deemed adequate, or if PAC contributors must be listed instead. As a result, broadcasters are left wondering if a sponsorship identification will be second-guessed when 80%, 90%, 95%, 99%, or some other percentage of the sponsor’s income comes from one source. Similarly, what if only 50% comes from one individual, but the other 50% comes from another individual, and the two are say, brothers? Once again, broadcasters are being asked, on pain of liability, to make disclosure decisions for PACs that are more correctly the province of the Federal Election Commission.

Of course, the sponsorship identification requirement is not limited to political ads, and the flaws in the approach suggested by the complainants seem jarringly obvious when applied in the context of a business advertiser. For example, should ads for every Mom and Pop business disclose that the real sponsor is not the business, but Mom and Pop, who gave up their vacation this year in order for the business to be able to afford broadcast advertising? Similarly, if it is not the entity writing the check for advertising that is relevant, but the principal source of its income, shouldn’t all ads placed by defense contractors need to disclose the U.S. government as the actual sponsor of their ads?

On the other hand, if, as the FCC has suggested in past sponsorship decisions, the real issue is the identity of the decision maker for that advertiser, how could a broadcaster ever know that information with adequate certainty to reject the assurances of the advertiser and take on the liability of unilaterally changing sponsorship identifications in ads?

To be clear, no one is suggesting that a sponsor should be able to avoid on-air attribution by creating a phony front organization whose faux nature is obvious to all, including the broadcaster. However, a Political Action Committee is an entity legally recognized under the law, which is also regulated by law. If more information about its contributors is deemed a public good, Congress and the Federal Election Commission have the authority and the responsibility to take action to accomplish that result. In the absence of such action, the task should not fall to broadcasters by default.