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As someone who has been deeply involved in planning for the rollout of ATSC 3.0, I get a lot of questions about the next generation broadcasting standard. By far the two most common questions are “When will the transition start?” and “When will it end?”  My answers—which often lead to quizzical looks—are “Very soon.  And never.”

The visible transition to 3.0 in the United States will begin almost immediately after the FCC approves use of the new technology. Transmitters being built today are 3.0 ready, and many hundreds (perhaps more than a thousand) of these transmitters will be installed as a necessary part of the post-incentive auction repacking process.  Broadcasters are already discussing how to provide ATSC 1.0 simulcasts in many markets so that some stations can begin transmitting in 3.0.  Korean television stations will launch ATSC 3.0 broadcasts beginning in May of this year, accelerating the availability of 3.0-compatible receivers.  So, the transition will begin soon.  I would argue it is already underway.

When I say the transition will never end, I don’t mean the broadcast industry is entering its groundhog day. Quite the opposite.  I mean that ATSC 3.0 provides enormous headroom for broadcasting to continue to grow and evolve long after all stations have made the initial conversion.

And that’s the beauty of ATSC 3.0. It will bring a foundational change to the capabilities of our national television broadcast infrastructure.  Most important, it allows broadcasters to continually expand, enhance and improve the services they offer, even after all stations have converted to 3.0.  That’s why I say the “transition” will never end.

Though we can’t put a date on the end, we do know what the first steps are.

Step 1 – Upgrade to 3.0. Within a matter of years, most or perhaps all stations will have completed the transition to ATSC 3.0, in the sense that they will be broadcasting 3.0 signals.  But the services offered, and the networks and systems behind those services, can evolve to meet the changing demands of the incredibly robust and dynamic marketplace in which broadcasters must compete. Continue reading →

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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.

Continue reading →

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Just before the Labor Day weekend, the FCC issued its Report and Order launching the annual regulatory fee payment process for Fiscal Year 2016.  The FCC has also opened the “Fee Filer” system that must be used to pay regulatory fees.  More information and FAQs about the FY 2016 regulatory fees can be found here.

Payment in full of regulatory fees must be made by 11:59 p.m. Eastern Time on September 27, 2016. Late payment of regulatory fees will result in a 25% penalty and “red light” status, which restricts the FCC’s processing of a late payer’s applications until payment of the fees and penalties has been made.  The FCC specifically reminded participants in the ongoing TV broadcast Incentive Auction that they must pay regulatory fees for FY 2016 if they held a license or construction permit as of October 1, 2015 (and will be liable for next year’s fees if they hold a license or CP as of October 1, 2016).  The FCC also noted that payment of regulatory fees is required before Incentive Auction participants can receive any proceeds resulting from the auction, although given the pace at which the auction is proceeding, that seems unlikely to be an issue until well into next year.

As expected, regulatory fees for broadcast stations generally increased over last year, and the total fees assessed rose from $339,844,000 in FY 2015 to $384,012,497 in FY 2016.  Although the fees assessed for “operational expenses” remained the same as last year, the FCC (in a move which some might find ironic) assessed an additional $44,168,497 to offset FCC “facilities reduction costs.”  According to the FCC, those costs reflect the one-time expense of reducing the FCC’s office footprint and/or moving the FCC to a new location, and are required by Congress to be collected.

Despite the increase in total fees, middle market TV stations caught a break, with fees for stations in markets 51-100 falling from $16,275 last year to $15,200 this year. Fees for TV stations in markets 1-10, on the other hand, took the biggest jump — going from $46,825 to $60,675.

As for radio, rates increased over last year for most, but not all, stations.  In light of comments asserting that the regulatory fees proposed by the FCC last May were too burdensome for small independent radio stations, the FCC reduced the fees in the two lowest population tiers for AM and FM broadcasters.  Stations located in markets with populations of more than 3 million, previously the highest of the radio fee tiers, have been split into two groups by the FCC: (1) markets of 3,000,000-6,000,000, and (2) markets over 6,000,000.  Charts showing the regulatory fees for the various TV and radio groups are below:

Broadcast Television and TV/FM Translators and Boosters

Markets 1-10 $60,675
Markets 11-25 $45,675
Markets 26-50 $30,525
Markets 51-100 $15,200
Remaining Markets $5,000
Construction Permits $5,000
Satellite TV Stations (all markets) $1,750
Low Power TV, Class A TV, TV/FM Translators & Boosters $455

 

Broadcast Radio (AM and Full Power FM)

Population AM Class A AM Class B AM Class C AM Class D FM Classes A, B1 & C3 FM Classes B, C, C0, C1 & C2
25,000 or fewer $990 $715 $620 $685 $1,075 $1,250
25,001-75,000 $1,475 $1,075 $925 $1,025 $1,625 $1,850
75,001-150,000 $2,200 $1,600 $1,375 $1,525 $2,400 $2,750
150,001-500,000 $3,300 $2,375 $2,075 $2,275 $3,600 $4,125
500,001-1,200,000 $5,500 $3,975 $3,450 $3,800 $6,000 $6,875
1,200,001-3,000,000 $8,250 $5,950 $5,175 $5,700 $9,000 $10,300
3,000,001-6,000,000 $11,000 $7,950 $6,900 $7,600 $12,000 $13,750
Greater than 6,000,000 $13,750 $9,950 $8,625 $9,500 $15,000 $17,175

In addition, initial AM Construction Permits were assessed a $620 regulatory fee per station for FY 2016, with initial FM Construction Permits drawing a regulatory fee of $1,075 per station.

Finally, the FCC rejected a proposal by the Puerto Rico Broadcasters Association to reduce regulatory fees for stations located in Puerto Rico by 30% to reflect the economic hardships being experienced there.  The FCC responded that individual stations in Puerto Rico may request waivers of regulatory fees if they believe their conditions warrant such relief, but the Commission was unwilling to reduce the fees on a blanket basis.

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As we previously reported, the FCC last year adopted a number of changes to its rules and policies aimed at revitalizing the AM radio service, which for many years has lived in the shadow of the more robust FM service.  One of these changes was to expand the ability of AM broadcasters to use FM translators to rebroadcast their AM signals, thereby improving coverage, particularly at night.  To accomplish this, the FCC gave each AM station the right to file one, and only one, application to move an FM translator up to 250 miles and change the translator’s frequency, provided that it is used to rebroadcast the designated AM station for the next four years.  If that application does not make it through the FCC process for any reason, the broadcaster is barred from filing another.

The FCC gave smaller Class C and D AM stations first crack at its new policy by opening a window on January 29, 2016, during which Class C and D licensees could file modification applications on a first-come, first-served basis.  In other words, if you filed your application on January 29, you trumped anyone who filed a conflicting application after that date.  If parties file mutually exclusive applications on the same day, the applicants need to resolve the mutual exclusivity through settlement negotiations and/or technical amendments (e.g., one or both parties move to a different frequency).

The first window, limited to Class C and D AM stations, closes on July 28, 2016.  On the next day, July 29, a second window opens during which Class A and B AM stations (as well as Class C and D stations that did not file in the first window) may file modification applications to relocate FM translators to be used for AM station rebroadcasts.

AM stations that have not yet filed should keep in mind that:

  1. If you have a Class A or B AM station and plan to relocate an FM translator for AM rebroadcast purposes, you should get your modification application filed on July 29 in order to give yourself the maximum protection against being bumped by an earlier-filed mutually exclusive application.  If you are planning to buy a translator but haven’t actually acquired it yet, there are still ways to get the modification application on file before closing the acquisition.
  2. If you have a Class C or D AM station and plan to relocate an FM translator for rebroadcasts (and haven’t filed a modification application yet), file by July 28.  While Class C and D stations will not be precluded from filing in the second window, July 29 is sure to bring a wave of new modification applications that will change the translator landscape significantly.

But even having these deadlines circled on your calendar won’t help if your modification application is dismissed.  When it comes to modification applications filed in either of these windows, the FCC has made clear that its policy is one and done.  A dismissed application means that you not only lose your place in the processing line, but cannot file again in the windows.  Such a dismissal could occur due not only to deficiencies in the application itself, but also if your deal to acquire the translator falls through.  AM broadcasters buying a translator are therefore well advised to pay careful attention to the due diligence process, the closing conditions in the acquisition agreement, the compliance of the proposed move with FCC technical rules, and their financing for the acquisition.  If a deal falls through, the reason is irrelevant.  You’ll be sitting out the filing window watching your competitors get their FM translators.

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On a day when a major broadcast ownership decision from the U.S. Court of Appeals for the Third Circuit garnered most of the attention, the FCC worked on more prosaic matters, issuing a Notice of Proposed Rulemaking to eliminate the requirement that commercial broadcast stations maintain letters and e-mails from the public in their public file.  This requirement is one of the only vestiges of the physical public file that remained after the FCC’s decisions to move television and radio public files online.

The FCC based its proposal to eliminate the requirement in part upon the increase in communication between the public and broadcast stations on social media platforms, and the corresponding decrease in communication by letter and e-mail.  The NPRM also proposes to eliminate a requirement that cable television operators maintain the location of their cable system’s principal headend in their public file.

Initial comments on the FCC’s proposals will be due 30 days after the NPRM is published in the Federal Register, with reply comments due 60 days after Federal Register publication.

As we wrote recently, eliminating the requirement to maintain correspondence from the public in a physical file would free stations from the need to provide free and unfettered access to their offices, and to maintain staff at all times during business hours ready to handle public file requests.

The NPRM enjoyed support from all five Commissioners, each of whom issued a separate statement in support of the proposal—a somewhat rare display of unanimity by the current Commission.  Of particular interest was Chairman Wheeler’s statement that today’s proposal, if adopted, would enable broadcasters to “lock their doors and redeploy resources once used to help the public access the file at the studio.”  Many in the TV and radio community may find themselves quietly nodding in agreement.

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In a long-anticipated move towards commencement of the spectrum auction, the FCC today released a Public Notice and related Appendix providing an initial clearing target of 126 Megahertz of spectrum in what is currently the broadcast television band. The 126 MHz figure represents the targeted amount of spectrum to be repurposed from broadcast television to mobile wireless uses.  The FCC also announced that bidding in the reverse auction will commence on May 31, 2016.

The 126 MHz target is the highest the FCC was contemplating, and indicates that a large number of television stations have chosen to participate in the auction.  By setting a high clearing target, the FCC is maximizing the amount of broadcast spectrum purchased, but increasing the risk that if there is insufficient interest in the forward auction for this amount of spectrum (at the prices the FCC needs to pay selling broadcasters and cover other costs), the auction may have to be redone with a lower clearing target.

In the forward auction, the FCC will offer 10 paired blocks of spectrum, each block comprised of 10 MHz, to mobile wireless bidders.  The remaining 26 MHz of spectrum to be cleared will be used for guard band and duplex gap purposes; i.e., to protect adjacent users from interference.  If the auction is completed with the 126 MHz clearing target, the post-auction television broadcast band will consist of VHF channels 2-13 and UHF channels 14-29.  The process of repacking stations into channels 2-29 would commence following completion of the auction, and is estimated by the FCC to take approximately three years, although many have questioned whether that is sufficient time for the repack.

With the release of the clearing target information, the FCC has locked in all of the following dates for auction-related events:

May 4, 2016, noon:  Date by which each television broadcast licensee that made an initial commitment in the reverse auction must receive a third confidential status letter from the FCC.  That letter will inform the applicant whether its station(s) will be qualified to participate in the reverse auction.  Applicants who have not received this letter by noon (Eastern Time) on May 4 should contact the FCC Auctions Hotline at (717)338-2868.

May 5, 2016: FCC Incentive Auction Reverse Auction Bidding System User Guide available on Auctions webpage.

May 18, 2016:  Online Bidding Tutorial available on Auctions webpage.

May 23, 2016, 10 a.m.:  Bidding Preview Period begins.

May 24, 2016, 10 a.m.:  Clock Phase Workshop.

May 24, 2016, 6 p.m.:  Bidding Review Period ends.

May 25, 2016, 10 a.m.:  Mock Auction Bidding Round 1.  Additional Mock Auction Rounds occur throughout May 25 and May 26.

May 31, 2016:  Bidding in the reverse auction commences for qualified applicants, with a single round of bidding on May 31 and June 1, and two rounds per day starting on June 2.

While it is unclear how many rounds of bidding will be required before the auction closes, or whether the 126 MHz target might lead to a repeat of the reverse auction, today’s news brings a palpable sense that the auction has really begun.  How successful the auction will be for broadcasters, mobile wireless companies, and the FCC will be a developing story.  Stay tuned for more updates.

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In a decision long awaited by webcasters, the Copyright Royalty Board (CRB) has released its new webcasting royalty rates.  These royalties are paid by non-interactive streaming services on which listeners cannot choose the specific songs they listen to, such as Pandora and radio stations that stream their programming.  The royalties are paid to SoundExchange, a performing rights organization which collects the payments on behalf of record labels and other holders of copyrights in sound recordings.  Services such as Spotify and Apple Music, which allow listeners to choose individual songs to listen to, negotiate licensing arrangements privately with record labels and are not affected by these rates.  The new rates will become effective on January 1, 2016 and will remain in effect until December 31, 2020.

Under the new rate structure, subscription services will pay 22 cents per hundred performances streamed in 2016, with an adjustment based on the Consumer Price Index for subsequent years through 2020. Non-subscription services such as broadcast radio stations will pay 17 cents per hundred performances streamed (with the same CPI adjustment).

For commercial radio stations, the 17 cent rate is a substantial decrease from the 25 cent streaming rate currently paid.  In contrast, pure play (non-broadcast) non-subscription streaming services saw their royalty increase from 14 cents per hundred performances to the new 17 cent rate.  Pandora had argued for a new rate equal to the greater of (i) 11 cents per hundred performances and (ii) 25% of the webcaster’s revenues, while the National Association of Broadcasters and iHeart Media had argued for a rate of 5 cents per hundred performances.  SoundExchange, on the other hand, had proposed a rate for commercial webcasters equal to the greater of (i) 25-29 cents per hundred performances, and (ii) 55% of the webcaster’s revenues.  A “performance” generally consists of the delivery of a song to a single device such as a smartphone.

The royalties are paid for a statutory license allowing webcasters to perform the song by delivering it to listeners’ devices, and to make any ephemeral copies of the song necessary for the streaming process. The CRB is required by statute to adjust royalty rates every five years based on rates which hypothetically would prevail in an open market free from government intervention.

The higher rates will make it tougher for pure play webcasters to make a profit, but Pandora CEO Brian McAndrews focused on the bright side, saying: “This decision provides much–needed certainty for both Pandora and the music industry.”  While pure play webcasters obviously were hoping that their streaming rates would go down, having the new rates at least sets a benchmark against which they can seek to negotiate private deals with record labels.

The National Association of Broadcasters applauded the new rates, with NAB Executive Vice President Dennis Wharton stating that the NAB was “pleased that streaming rates have begun to move in the right direction.”  SoundExchange, on the other hand, announced that “it is deeply disappointing to see that [terrestrial] broadcasters are being given another unfair advantage.”  Webcasters had argued that the rates set in the previous rate-setting proceeding were artificially high and were based on a flawed analysis, including the use of rates paid by interactive services as a basis for setting rates for non-interactive services.  SoundExchange asserted that interactive and non-interactive services were “converging,” and that higher rates were necessary to adequately compensate performers and copyright owners.

The precise reasoning behind the CRB’s decision will not be publically available until after the parties to the proceeding have had an opportunity to review the CRB’s written opinion to determine whether any confidential information should be redacted before it is released to the public.  While the parties will have the right to petition the CRB for reconsideration, and to appeal the decision to the U.S. Court of Appeals, such appeals generally are an uphill battle.  As a result, webcasters and record labels are likely to have to live with the result of today’s decision for the next five years.

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

Continue reading →

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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