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When CBS and Time Warner announced Monday they had ended their month-long standoff over retransmission of CBS programming on Time Warner cable systems, the announcement brought a sigh of relief from Time Warner subscribers, particularly the NFL fans among them, and the usual press statements putting each party’s best spin on the highly confidential result. However, the real legacy of these negotiations will be to alter how retrans agreements are negotiated in the future, and the somewhat surprising result will be less, not more, retrans blackouts.

When a change in the law in 1992 gave broadcasters the right to negotiate with cable system operators wishing to resell their programming to the public, the idea was to balance the playing field between cable networks, which relied on both ad revenue and a share of cable subscriber fees, and local broadcast stations, which had only ad revenue to support their operations. Prior to that time, broadcasters had effectively subsidized competition from cable because cable system operators could resell broadcast programming without paying for the underlying content, and then use the profits to launch and invest in cable networks that competed with broadcasters for both programming and advertising. These economics are what initiated the migration of sports programming from broadcasting to cable.

In the early retrans negotiations, which I’ll refer to here as Retrans Version 1.0, cable still had local monopolies, leaving broadcasters in the awkward position of attempting to negotiate with a party whose only “competition” was the broadcaster’s free signal. If the broadcaster’s programming disappeared from the local cable system, subscribers couldn’t leave for a new provider. Their only option was to put up an antenna and continue to be a subscriber in order to receive non-broadcast content. Under those circumstances, cable operators didn’t see any reason to pay money for the right to resell broadcast programming–they were the only resellers in town. The result was very few retransmission blackouts, as broadcasters knew that dropping off of the only cable system in town would hurt the broadcaster a lot more than the cable operator.

Unable to obtain money for retrans rights, the compensation broadcasters typically received for permitting retransmission of their signal was the right to program additional channels on the cable system. This cost the cable operator little to nothing while providing it with yet more free content from the broadcaster, making it an easy “give” in retrans negotiations. Ultimately, however, it ended up providing the public with its first great benefit from retransmission negotiations–the launch of a plethora of diverse new program services that not only developed into some of today’s most popular cable networks, but provided an alternative to existing cable networks that were largely owned by the cable systems themselves.

Retrans Version 2.0 commenced after Congress passed the 1999 Satellite Home Viewer Improvement Act, which finally allowed satellite TV to carry local broadcast signals. As a TV service wanting to be competitive to cable, satellite TV operators knew they needed to provide local broadcast signals and fought hard to persuade Congress to change the law to make that a reality. However, lacking the monopoly status enjoyed by most cable systems at the time, satellite TV operators understood they couldn’t replicate the strongarm negotiating tactics that had been employed so successfully by cable operators. Instead, they agreed to pay broadcasters money for the right to retransmit broadcast content, allowing them to attract subscribers away from cable and ultimately end cable’s monopoly. For the first time, broadcasters had competing multichannel providers vying for the right to resell their content to subscribers. As satellite TV’s market share grew, cable operators needed to ensure continued access to the most popular programming on their systems to fend off that competitive threat, and grudgingly began paying for the right to resell broadcast programming as well.

While you might think these competitive developments would have quickly led to a mature market for program retransmission rights with stable pricing, reaching that inevitable destination has been slowed by two factors. The first is simply that the monopoly years of cable so badly distorted market forces that the market for retransmission rights didn’t begin to develop until satellite TV became a competitive force and the retransmission contracts in place in 1999 began to expire, requiring negotiation of new retransmission deals. This occurred much later in markets where satellite-delivered “local into local” service was delayed because of capacity limitations of the satellite systems themselves. Even then, progress was slow for broadcasters, with cable operators being understandably resistant to paying for something they previously saw themselves as receiving for free. One of the best examples of this era is the cable operator who told us during negotiations that he believed paying for the right to retransmit broadcast signals was “unethical” and proceeded to carry my client’s broadcast programming illegally. The negotiation was concluded shortly after the cable operator became the first party ever to be found in violation of the FCC’s rules on good faith retrans negotiations, and the FCC ordered retransmission to cease until an agreement was in place.

Which brings us to the second factor that has delayed countless retrans negotiations and slowed the maturation of the market for broadcast retransmission rights–the possibility of government intervention. Retrans negotiations over the past decade have been conducted with a spectral third party in the room–the threat of governmental intrusion into the negotiations. While the FCC previously concluded that it has no authority to force any particular result in retrans negotiations beyond ensuring that the parties are negotiating in good faith, that has not stopped cable and satellite TV operators from regularly calling upon the FCC to intervene in negotiations. When the FCC resists, the call goes to Congress to “fix” retransmission laws or provide the FCC with authority to step in and alter the dynamics of a retrans negotiation. While such multichannel distributors certainly are hoping to place the government’s heavy thumb on their side of the scale, creating even the possibility of government intervention generates uncertainty which the cable or satellite TV operator hopes will cause the broadcaster to take the deal that’s on the table.

Uncertainty, however, is the enemy of efficient negotiations. When each party knows exactly where it stands, the parties focus on reaching an agreement and getting the deal done as quickly as possible. Where the possibility of government intervention is introduced, the parties cease focusing on each other and start playing to the FCC (or Congress). At best, that means grandstanding and delays in the negotiations while one party hopes to generate enough noise to entice the FCC to step in and get a better result than the party can negotiate on its own. At worst, it means creating high visibility blackouts in an effort to draw the FCC or Congress into launching retrans “reform”. Both approaches are the antithesis of efficient and swift negotiations, with one party quite literally putting off “getting down to business” in hopes that it is buying time for the FCC to join the fray. This approach has unfortunately made some Retrans 2.0 negotiations slow, messy, and unpleasant for all involved, including subscribers.

That is why this week’s CBS and Time Warner deal, regardless of its economic terms, is a watershed event. The negotiations started in typical Retrans 2.0 fashion, resulting in a blackout of CBS programming on Time Warner systems and the traditional public exchange of unpleasantries between the parties as government intervention was sought to protect subscribers from the loss of CBS programming. In fact, some have speculated that Time Warner dug in its heels specifically to create a high profile program disruption that might draw in Congress or the FCC. The FCC played its part in the drama, with a spokesman for the acting Chair of the FCC announcing just five days into the blackout that the agency “stand[s] ready to take appropriate action if the dispute continues.”

However, it is what happened in the nearly four weeks of CBS blackout after that comment was made that carried us from Retrans 2.0 into the world of Retrans 3.0. Specifically: the blackout occurred in the highest profile markets, but the government did not step in; the blackout was geographically widespread, but the government did not step in; the blackout involved high-profile network programming, but the government did not step in; the blackout drug on far longer than imagined, but the government did not step in; the blackout affected a major sporting event and threatened to affect upcoming NFL games, but the government did not step in. In short, it presented one of the most politically-appealing invitations for the government to second guess the path of a free market retrans negotiation, and the government declined to do so. Perhaps just as important, viewers came to realize that the sun still rose in the morning despite the CBS blackout, antenna manufacturers enjoyed a sales boost, and a retrans deal was achieved in less time than it typically takes Congress to name a post office.

Having seen the government’s lack of enthusiasm for getting involved in one of the most extreme examples of a blackout, parties to retrans negotiations will hopefully be able to retire “threatening to involve the government” as a negotiating tactic. While I have no illusions that such threats will now cease, their impact has been considerably diminished over the past month. The CBS/Time Warner dispute presented an unprecedented opportunity for broadcasters and multichannel providers to peer into the deepest recesses of their corporate closets and confirm that there is no government bogeyman residing within, waiting to pounce on unsuspecting negotiators. Freed from the need to look over their shoulder during retrans negotiations, or to play to the governmental crowd, parties can focus on getting retrans deals done quickly and efficiently, without being distracted by the uncertainties and contingency planning surrounding disruptions from outside the negotiating room.

Blackouts are caused by one or both parties to a retrans negotiation misgauging their negotiating power relative to the other party. While that will inevitably still happen from time to time for the same reasons it happens in any business negotiation, the legacy of Retrans 3.0 is that it should no longer happen because one party thinks that if it delays enough, or causes enough of a public stir over a retrans dispute, the FCC will come to its rescue. The result will be better for all, including subscribers.

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August 2013

Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

  • FCC Catches GPS Jammer at Airport
  • $75,000 Consent Decree Adopted for Class A TV Violations

Jamming Device in Truck Disrupts GPS Navigation at Newark Liberty International Airport

On August 1, 2013, the FCC issued a Notice of Apparent Liability for Forfeiture (NAL) in the amount of $31,875 to an individual in New Jersey for repeated use of a GPS jamming device. The individual had installed a signal jammer in his company-supplied truck, apparently to prevent his employer’s GPS tracking system from knowing his whereabouts.

While use of a signal jammer is itself illegal, the offender compounded his troubles when his GPS signal jammer interfered with the navigation signals at the Port Authority of New York and New Jersey. The FCC’s investigation into this matter arose when the FCC was contacted by the Federal Aviation Administration on behalf of the Port Authority. The FAA reported that the Port Authority had been experiencing interference in testing a ground-based aviation navigation system at Newark Liberty International Airport.

At that airport–one of the busiest in the nation, according to the FCC–an agent from the FCC’s New York Enforcement Bureau office determined that a red Ford pickup truck was emanating radio signals within the restricted 1559 to 1610 MHz band used by GPS satellites. The driver was stopped by Port Authority police at the airport gate. He then surrendered the jamming device to the FCC agent, and the interference with Newark’s navigation equipment ceased.

In determining the appropriate penalty, the FCC found three separate violations of its rules: (1) operating the transmission equipment without a license; (2) using unauthorized equipment; and (3) interfering with authorized communications, which was of particular concern in this case, with repeated and dangerous interference to critical air navigation equipment. That the signal jammer was truck-mounted also caused great concern, as its mobile nature made the interference widespread and its source difficult for authorities to locate and eliminate. Simply driving around the area could have had disastrous effects on GPS-based systems for aircraft.

In light of these concerns, the FCC issued a substantial upward adjustment to the normal base fine of $22,000, resulting in a total fine of $42,500. However, it then decided to lower the fine to $31,875 (a 25% reduction) because the individual voluntarily handed over the illegal device. The FCC indicated that it wanted to provide “incentives” for parties to do the same in the future.

Pittsburgh-Based Stations Pay Big for Kidvid and Other Violations

This week, the FCC pursued a Pittsburgh-area group of ten Class A television stations for failure to file, or to timely file, their children’s programming reports with the FCC, as well as for being silent without authorization. In addition to the kidvid violations, some of which had gone on for several years, the FCC states that the stations had, at various times, applied to go silent and proceeded to do so without first obtaining the necessary FCC authorization.

The matter was settled by consent decree, which included a voluntary contribution to the U.S. Treasury of $75,000. Not coincidentally, the licensee of the stations was in the process of selling them, and needed FCC approval to complete that transaction. The FCC granted the assignment application in the same order in which it adopted the consent decree.

This case is merely the latest in a continuing effort by the FCC to crack down on rule violations by Class A TV stations. In this case, by entry into the consent decree, the stations were able to avoid the imposition of fines and the risk of losing their Class A status. In addition to being subject to displacement by full-power TV stations, stations that lose their Class A status forfeit their eligibility to participate in the spectrum incentive auction (and to avoid being repacked out of existence subsequent to that auction).

Given this risk, Class A TV licensees should ensure they are in full compliance with the FCC’s rules to maintain their Class A eligibility. To be eligible for Class A status, the Community Broadcasters Protection Act of 1999 and the Commission’s rules implementing it require that Class A stations: (1) operate a minimum of 18 hours per day; (2) air an average of at least 3 hours per week of programming produced within the market area served by the station; and (3) comply with the Commission’s rules for full-power television stations.

A PDF version of this article can be found at FCC Enforcement Monitor.

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A few moments ago, on its own motion, the FCC released an Order extending the 2013 deadline for commercial radio and television stations (including Class A and LPTV stations) to file their biennial ownership reports with the FCC. The reports, which are normally due on November 1 of odd-numbered years, must include ownership information that is accurate as of October 1 of that year.

Because of today’s Order, however, the 2013 commercial ownership reports will be due on December 2, 2013 (December 1 is a Sunday). Despite the delayed filing date, the FCC indicates that the reports should still contain information that was accurate as of October 1, 2013.

Today’s move by the FCC is hardly unprecedented. When the FCC first implemented a uniform biennial ownership report filing deadline for commercial stations in 2009, it ended up extending the deadline a number of times because of issues related to the new reporting form, etc. Ultimately, the deadline for 2009 reports fell on July 8, 2010, creating a fair amount of confusion for station owners who had bought their stations between November 2009 and July 2010, and therefore found themselves filing ownership reports certifying as to the ownership structure of the prior station owner.

In 2011, the FCC delayed the ownership report filing deadline by just thirty days. The short delay, along with growing familiarity with the revised reporting form, resulted in a much smoother reporting process in 2011.

Now, explaining the need for an extension in 2013, the FCC states that “we are aware that some licensees and parent entities of multiple stations may be required to file numerous forms and the extra time is intended to permit adequate time to prepare such filings. We believe it is in the public interest to provide additional time to ensure that all filers provide the Commission with accurate and reliable data on which the Commission may rely for research and other purposes.” Despite the extension, the FCC is still encouraging licensees to file their ownership reports as early as possible.

While it is starting to look like these biennial extensions are becoming the norm given the complexity of reporting various ownership structures on the current form, it is risky for stations to start assuming that the deadline will always be extended. It would therefore be helpful if the FCC would permanently change the deadline so that licensees know they will always have sixty days to create and file the various biennial ownership reports required. Alternatively, the reporting form and process could be simplified so that completing the filing within 30 days would not be so difficult. Given the challenge that would present to the FCC, however, we may be seeing more of these ownership reporting extensions in the future.

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In a decision that disappointed but didn’t entirely surprise broadcasters, the U.S. Court of Appeals for the Second Circuit today declined to rehear in banc its earlier decision rejecting a request by broadcasters to terminate with extreme prejudice Aereo’s broadcast subscription service in New York. Today’s announcement was not a decision on the merits, but merely the result of a poll taken among the Second Circuit judges in which less than a majority indicated an interest in hearing the case in banc. Barring an effort by broadcasters to seek Supreme Court review (and Fox, at least, has indicated that option is not off the table), the matter will return to the trial court for a full trial on whether Aereo is infringing on broadcast copyrights.

Once again, Second Circuit Judge Denny Chin, who had been the district judge in the earlier Cablevision case on which Aereo has built its business, dissented from today’s decision. His dissent is respectful but spirited, and so thoroughly dismantles the court’s earlier decision in favor of Aereo that a reader new to the dispute could be forgiven for being mystified as to how the other two judges on the original panel could have reached a contrary conclusion.

As interesting as the legal dispute itself is (at least to lawyers), the end result may well be governed more by technology than by law. If you have spent much time in the communications world, you have heard the old saw that “the law struggles to keep up with technology.” In the case of Aereo, however, it has been quite the opposite, with technology struggling to keep up with the law.

After the Second Circuit’s decision in Cablevision created, as Judge Chin’s dissent today puts it, “‘guideposts’ on how to avoid compliance with our copyright laws,” Aereo and others apparently raced to develop technology that could neatly fit through the legal loophole Cablevision ostensibly created. Judge Chin is obviously not a fan of such reverse engineering, noting today that “[i]n my view, however, the system is a sham, as it was designed solely to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law purportedly created by Cablevision.”

So far, the Aereo legal proceedings have presumed that Aereo was successful in its engineering efforts, and that its “one tiny antenna per subscriber” approach allows it to technologically clear the legal hurdles of the Copyright Act. Those familiar with the intricacies of radiofrequency engineering, however, have been quick to point out that the biggest obstacle to the Aereo system isn’t the laws of copyright, but the laws of physics.

One of the immutable laws of RF antenna design is that the size of the receiving antenna must correlate to the wavelengths it is meant to receive. As a result, high frequency devices (which means short wavelengths) can get by with smaller antennas, whereas the comparatively massive wavelengths of TV signals require much larger receiving antennas. That is why, during the golden age of over-the-air TV reception, and during the silver age of over-the-air HDTV reception, the promises of smaller and smaller antennas that would work “just as good” as hulking rooftop antennas never came to fruition.

Aereo’s claim of reliable reception with dime-size TV antennas (particularly in New York, the world capital of urban multipath interference) therefore seemed more akin to alchemy than to advanced RF antenna design. However, with the exception of patent lawyers and a fair number of communications lawyers, engineering expertise is not a common skill in the legal trade. As a result, the debate over Aereo has focused on that which lawyers know–the law–rather than on that which determines whether Aereo even fits within the legal loophole it claims to exploit–incredible advancements in TV antenna design.

Communications lawyers are perhaps more sensitized than most to the law/engineering dichotomy, as communications is one of the few fields where engineering solutions to legal problems are often an elegant alternative to brute force legal tactics. Because of this, one of the most interesting commentaries on the Aereo dispute I have come across is a piece by Deborah McAdams titled Aereo’s Unlikely Proposition.

It is a very intriguing article (and well worth a read) in which a number of engineers discuss why the “fits exactly into the shape of the loophole” system described by Aereo can’t exist in the real world. In other words, that Aereo isn’t an example of the law falling behind technology, but of technology being unable to produce an antenna capable of outrunning the law. If true, then the success of Aereo’s legal battle hangs not on whether it has a groundbreaking legal theory, but on whether the claimed antenna technology emerged from Aereo’s engineering department, or from its marketing department.

In either case, Aereo’s claims for its technology would be better assessed in an RF testing lab than in a courtroom. Extended debate over the legality of Aereo’s claimed technology is pointful only once it has been confirmed that Aereo has indeed created a revolutionary antenna technology that functions as described. If not, then the legal wranglings over a theoretical retransmission system are much ado about nothing.

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June 2013

Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

  • FCC Issues Heavy Fines for Late-Filed Children’s Television Programming Reports
  • Motel with Multichannel Video Programming Distribution System Is Cited for Excessive Cable Signal Leakage

FCC Fines Multiple Licensees for Failure to Timely File Children’s Television Programming Reports

As broadcasters have learned, the FCC takes licensees’ public inspection file and reporting obligations very seriously. This month, the FCC issued multiple Notices of Apparent Liability for Forfeiture (“NAL”) against licensees for failing to file Children’s Television Programming Reports on Form 398 in a timely manner. On June 18 and 21, the FCC issued a total of seven decisions proposing to fine stations between $3,000 and $18,000 for not filing their Form 398s on time.

Under the FCC’s rules, commercial television stations must report their children’s educational and informational broadcast programming efforts each quarter by electronically filing FCC Form 398, the Children’s Television Programming Report. Historically, the FCC has fined stations for failing to file their reports, and there would be nothing new about the FCC issuing an NAL for “failure to file”.

In these seven cases, however, the stations were not fined for a failure to file their reports, but for failing to file their reports on time. In the decisions, the FCC issued the following fines:

  • For a station that missed the filing deadline twenty-three times, the FCC issued an NAL in the amount of $18,000.
  • For a licensee that missed the filing deadline eleven times on one station and thirteen times on another, the FCC issued an NAL in the amount of $15,000.
  • For a station that missed the filing deadline fourteen times, the FCC issued an NAL in the amount of $9,000.
  • For a station that missed the filing deadline ten times, the FCC issued an NAL in the amount of $9,000 (eight reports were filed more than 30 days late).
  • For a station that missed the filing deadline three times, the FCC issued an NAL in the amount of $6,000 (three reports were filed more than 30 days late).
  • For a station that missed the deadline sixteen times, the FCC issued an NAL in the amount of $6,000.
  • For a station that missed the filing deadline eleven times, the FCC issued an NAL in the amount of $3,000.

The cases were all relatively similar. As an example, in the $15,000 NAL, the licensee filed license renewal applications for its two Class A TV stations. At the time of the applications, the licensee did not disclose that it had filed some of its Children’s Television Programming Reports late, and in fact, certified in its renewal applications that it had timely filed all relevant programming reports with the FCC. However, the Commission subsequently reviewed its records and found that the licensee failed to file programming reports on time for 11 quarters for one station and 13 quarters for another.

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We now know what the per-subscriber fee for cable systems lacking retransmission agreements with local broadcast stations is, and it isn’t “free”.

Section 76.64 of the FCC’s Rules requires cable systems to have a written retransmission agreement in place before retransmitting the signal of a station that elected retransmission consent status. Because the law is clear on this point (for a differing view, see Aereo), there have been few cases where the FCC has had to address complaints of illegal retransmission.

In the first of these cases, the FCC found the cable system violated its obligation to negotiate in good faith with the broadcaster and ordered retransmission to cease until an agreement was in place. Two later cases for a pair of 34-day violations against one cable system operator resulted in base fine calculations of $255,000 each, but the FCC reduced the fines to $15,000 each based upon the cable system operator’s inability to pay.

Today, the FCC upped the ante, proposing a fine of $2.25 million for TV Max, Inc. and related parties for retransmitting six local TV stations to 245 multiple dwelling unit buildings in Houston without a retransmission agreement. Despite having previously had retransmission agreements with all of the stations, the cable system operator claimed it now qualified for an exemption from the retransmission agreement requirement because it had installed a master antenna on each of the buildings, allowing residents to obtain the broadcast signals for free over-the-air. Each of the six stations filed a complaint with the FCC, noting that the respective retransmission agreements with the cable system operator had expired or been terminated for non-payment, but that retransmission was continuing.

On December 20, 2012, following an investigation, the FCC’s Media Bureau issued a letter to TV Max stating its “initial finding that TV Max had willfully and repeatedly violated, and continued to violate, the Commission’s retransmission consent rules, and stating that it planned to recommend that the Commission issue a Notice of Apparent Liability for Forfeiture for these violations.” The Media Bureau later followed up with a March 28, 2013 letter to all of the parties asking for the status of carriage and whether retransmission agreements were now in place. While the stations all responded that they were still being carried without their consent, TV Max indicated it had not retransmitted the stations over its fiber since June 7, 2012.

That led to today’s Notice of Apparent Liability for Forfeiture and Order. In its decision, the FCC found that some of the cable system operator’s statements to the FCC were “lacking in candor”. Specifically, the FCC concluded that the cable system had continued to retransmit the stations over its fiber and had not installed master antennas on all of its buildings by the time it claimed to have ceased fiber retransmission:

Based upon the evidence before us, and in view of the applicable law and Commission precedent, we conclude that TV Max has willfully and repeatedly violated Section 325 of the Act and Section 76.64 of the Commission’s rules, and persists in its violation of these provisions, by retransmitting the Stations’ signals without the express authority of the originating stations. As discussed below, the violations are based on (1) TV Max’s admitted carriage of the Stations from the time their retransmission consent agreements expired through at least July 25, 2012 without the Stations’ consent and without a master antenna television (MATV) system in place in all the buildings it serves; and (2) TV Max’s ongoing carriage of the Stations without their consent since July 26, 2012 because it was not exclusively using its MATV facilities to retransmit the broadcast signals to its subscribers.

While the precise length of time any particular station was carried without a retransmission agreement varied, the FCC noted in its decision that Section 503 of the Communications Act limits its ability to issue fines for cable violations occurring more than one year ago. As a result, the FCC based its proposed fine on 365 days worth of violations involving six stations. While the decision is a bit fuzzy on the precise math behind the final number (particularly given that the maximum fine is much higher than the fine proposed), a little reverse engineering provides some real-world context for a $2.25 million fine.

The FCC notes that the system has about 10,000 subscribers, that six stations were carried without a retransmission agreement, and that the fine reflected one year’s worth of violations. That works out to a monthly retransmission “fee” of $3.13 per subscriber for each station (apparently the federal government has less negotiating leverage than ESPN). Still, that is more than the cable system operator would have paid under an arms-length negotiated broadcast retransmission agreement. Unfortunately for the affected stations, however, payment of the fine goes to the U.S. Government rather than to the television stations.

On the other hand, retransmitting programs without consent is also a copyright violation, meaning that stations pursuing copyright claims against the cable system operator could add significantly to the operator’s financial pain. Such are the risks of reinterpreting the breadth of the Communications Act’s retransmission consent requirements (see Aereo?).

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In what has been a recurring theme at CommLawCenter, I’ve written about the FCC rule prohibiting the airing of Emergency Alert System codes and tones unless there is an actual emergency or EAS test. Despite the rule, the draw of using an EAS tone is apparently irresistible, and we’ve seen it used in movie ads, oil company ads, and even zombie alerts.

Unlike many FCC rules, the ambiguity of which can leave seasoned practitioners arguing over what is or isn’t prohibited, Section 11.45 of the FCC’s Rules has been a model of clarity:

“No person may transmit or cause to transmit the EAS codes or Attention Signal, or a recording or simulation thereof, in any circumstance other than in an actual National, State or Local Area emergency or authorized test of the EAS.”

As a result, while advertisers might succumb to the temptation to slip an EAS tone (really, it’s more of a digital squeal) into their ads, the broadcaster’s duty was straightforward–try to catch the ad before it airs, and then let the advertiser know that the ad can’t be run unless it is modified to delete the tone.

Yesterday, however, life suddenly became more complicated for broadcasters when stations began receiving copies of a Public Service Announcement from the Federal Emergency Management Agency seeking to educate the public about the Emergency Alert System using the EAS tone to get that message across. Station operators were understandably confused, thinking that surely FEMA, as a fellow federal agency to the FCC (and an expert on all things related to EAS), wouldn’t be distributing a PSA that included an illegal EAS tone.

That was not, however, a safe assumption. On multiple occasions, federal and state agencies have, for example, distributed ads or PSAs that lack the sponsorship identification announcement required by the FCC, with one of the more famous examples leading to a 2002 FCC decision refusing to grant a waiver of its sponsorship identification rule to allow the White House Office of National Drug Control Policy to run anti-drug ads without disclosing that it was the sponsor.

As stations began to decline to run the PSAs for fear or incurring the FCC’s wrath, the FCC moved quickly (and quietly, I might add) to break from its prior approach, and today released a decision granting an unprecedented one-year waiver of Section 11.45, permitting FEMA spots to use the EAS tone as long as they make “clear that the WEA [Wireless Emergency Alert] Attention Signals are being used in the context of the PSA and for the purpose of educating the viewing or listening public about the functions of their WEA-capable mobile devices and the WEA program.” The FCC also “recommend[s] that FEMA take steps to ensure that such PSAs clearly state that they are part of FEMA’s public education campaign.”

The good news today is that the FCC approached the problem head on by granting a waiver rather than trying to “interpret” its rule to somehow not cover the FEMA PSA tones. Such an interpretation would have left broadcasters scratching their heads every time an EAS tone pops up in a future spot, trying to figure out whether that use might also fit into such an exception. The bad news, however, is that broadcasters have now been told that fake EAS tones are sometimes okay, and they need to be watching the FCC’s daily releases to determine if a particular use has suddenly become acceptable. Hopefully, such spots will actually educate the public to better understand the purpose of EAS alerts, as opposed to merely acclimating them to hearing the tone on-air and learning to ignore it.

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May 2013

Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

  • FCC Establishes New Enforcement Policy for Student-Run Noncommercial Radio Stations
  • CB Radio Owner Receives Fine for Harmful Interference and Lack of Responsiveness

Student-Run Noncommercial Radio Stations Will Face Lighter Sanctions on Some FCC Enforcement Actions

In a recent Policy Statement and Order, the FCC established a new policy for certain first-time violations of FCC documentation requirements committed by student-run noncommercial radio stations. The new policy allows such stations the option of entering into a Consent Decree with the FCC that includes a compliance plan and a “voluntary” contribution to the government that is smaller than the typical base fines for these violations.

In justifying its more lenient policy toward student-run stations, the FCC noted that such stations are staffed by a continually changing roster of young students lacking experience in regulatory compliance. In addition, such stations function without any professional oversight other than that provided by over-worked faculty advisors, and often operate with budgets so small that they are exceeded by even the base fine for a public inspection file violation. In the past, the FCC has issued numerous fines of $8,000-$10,000 to licensees of student-run stations, and with this new policy, the FCC recognizes that continuing to impose such fines could result in schools selling their stations altogether, as has indeed happened.

In the past, the FCC rejected arguments that fines on student-run stations should be reduced solely because the stations are run by students. The FCC has also typically rejected “inability to pay” arguments for these types of stations, and instead looked at the financial resources of the entire university or college, rather than the financial resources of the station, when assessing a fine. However, the FCC now concludes that allowing the cost of a first-time documentation violation to be reduced in exchange for a consent decree with a compliance plan will actually improve compliance with the FCC’s rules. Specifically, the FCC believes that such compliance plans will assist in the training of students while contributing to the educational function of these stations.

In its Policy Statement, the FCC emphasized that the policy will apply only to student-run noncommercial radio stations where the station is staffed completely by students. Stations that employ any professional staff, other than faculty advisors, do not qualify. The policy is also limited to violations where a student-run station has failed to (a) file required materials with the FCC (e.g., an Ownership Report), (b) place required materials in the public inspection file, or (c) publish a notice in a local newspaper or broadcast an announcement on the air. This new policy will not change the FCC’s forfeiture policies for any other type of violation or licensee.

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April 2013

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:

  • Assignment of Paired AM Stations Denied by the FCC
  • Use of Illegal Cell Phone Jammers Leads to Fines in Excess of $125,000

FCC Denies Two Assignment Applications of Paired AM Stations

Early this month, the FCC issued two letters denying several assignment applications seeking to separately assign jointly-operated AM stations to different licensees, contrary to the FCC’s rules.

In the 1990s, the FCC expanded the AM band frequencies and permitted AM licensees to operate both existing AM band stations and expanded band AM stations in order to improve the quality of the AM service. However, this dual operating authority was contingent upon the surrender of one of the two licenses within five years from the grant of the license for the expanded band station.

In September 1999, one of the licensees filed an assignment application to assign two paired AM band stations to a second licensee. The FCC granted this assignment application, but the receiving licensee only consummated the assignment of one of the two AM stations due to “environmental issues.” Several years later, the two licensees filed several new assignment applications requesting FCC approval to separately assign the stations to new licensees, including one application in 2006 and two applications in 2012. In none of these applications did the licensees mention that the stations were part of a jointly-operated pair or that any additional special conditions might apply.

In its letters, the FCC denied all of the pending assignment applications and declined to grant a waiver of the FCC’s rule requiring the surrender of one of the two licenses. In its decisions, the FCC stated that the grant of the applications would be contrary to the public interest and would “(1) constitute a further violation of a Commission-imposed processing policy; (2) bestow a further benefit on a party that knowingly engaged in such violation; (3) be unfair to those licensees that have returned one of the paired licenses; and (4) be inconsistent with the expanded band licensing principle that each licensee surrender one license at the expiration of the dual operating authority period.” In other words, the FCC made clear that the only assignment application it would be willing to accept is one resulting in both AM stations being held by a single licensee.

Use of Cell Phone Jammers to Prevent Cell Phone Use during Working Hours Does Not Pay Off

The FCC has long kept a careful eye on the sale and use of illegal cell phone jamming devices that interfere with cellular communications. This month, the FCC continued to take action against the use of illegal cell phone jammers by issuing two hefty Notices of Apparent Liability for Forfeiture (“NAL”) against two companies, one in Alabama and one in Louisiana, both of which used several cell phone jamming devices at their worksites.

As described in the two NALs, each company purchased four cell phone jammers from various Internet sources (and a fifth jammer as a backup) and installed them throughout their worksites to prevent their employees from using cell phones while working. In both instances, agents from the FCC’s Enforcement Bureau responded to anonymous complaints and inspected the worksites.

Using direction finding techniques, the agents discovered strong wideband emissions on the cellular bands and determined that the source of these emissions was from signal jammers.

The Enforcement Bureau agents then inspected the worksites and interviewed the managers of the two companies, both of whom admitted that they had purchased the jammers online and operated them at their worksites–one company for a period of two years and the other for a period of a few months. Both managers showed the agents the locations of the jamming devices and voluntarily surrendered them.

Sections 301, 302(b), and 333 of the Communications Act generally prohibit the importation, use, marketing, and manufacture of cell phone jammers because jammers are designed to impede authorized communications and can disrupt safety communications, such as 911 calls. Moreover, since the primary purpose of a jammer is to interfere with authorized communications, jamming devices cannot be certified and cannot comply with the FCC’s technical standards for operation.

In response to the use of illegal jamming devices, the FCC issued substantial forfeitures to both companies. The relevant base forfeiture amounts are $10,000 for operating without FCC authorization, $5,000 for using unauthorized or illegal equipment, and $7,000 for interference with authorized communications. The base forfeiture for violations of the prohibition on signal jamming is $16,000 per violation or per day, up to a maximum of $112,500 for a single violation. For the company in Alabama that operated four jamming devices for a period of two years, the FCC found that the company committed 12 total violations, representing three violations for each of the four jamming devices in use. Thus, the fine would normally be $16,000 per violation, for a total fine of $192,000. However, since the company immediately surrendered the jamming devices and was cooperative with the Enforcement Bureau agents, the FCC reduced the penalty by 25% to $144,000. The FCC applied the same type of calculation to the company in Louisiana that operated four jamming devices for a period of a few months, resulting in a fine of $126,000 after a 25% reduction in the total fine amount. The FCC also ordered both companies to submit sworn written statements providing contact information for the sellers of the jamming devices and all information regarding the sources from which the jamming devices were purchased.

In addition, the FCC cautioned the companies that while the FCC chose not to impose separate forfeitures for the illegal importation of the jamming devices, the FCC has the power to impose “substantial monetary penalties” on individuals or businesses who illegally import jammers. The FCC further warned the companies and other individuals and businesses that the FCC “may pursue alternative or more aggressive sanctions, should the approach set forth [here] prove ineffective in deterring the unlawful operation of jamming devices.”

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This morning, the FCC released a Public Notice announcing that, commencing immediately and until further notice, it will no longer accept modification applications (or amendments to modification applications) from full power and Class A television stations if the modification would increase the station’s coverage in any direction beyond its current authorization.

The Public Notice also indicates that the FCC will cease processing modification applications that are already on file if the modification will increase the station’s coverage in any direction. Applicants with a pending modification application subject to the freeze are being given 60 days to amend their application to prevent an increase in coverage (or seek a waiver), thereby allowing those applications to be processed by the FCC. Modification applications that are not amended within that period will not be processed until after the FCC releases its order in the Spectrum Auction proceeding, and at that point will be subject to any new rules or policies adopted in that rulemaking that would limit station modifications.

With regard to Class A stations specifically, the FCC will also not accept Class A displacement applications that increase a station’s coverage in any direction. Class A applications to implement the digital transition (flash cut and digital companion channels) will continue to be processed as long as they comply with the existing restrictions on such applications.

The FCC states that the reason for putting modification applications in the deep freeze is that:

We find that the imposition of limits on the filing and processing of modification applications is now appropriate to facilitate analysis of repacking methodologies and to assure that the objectives of the broadcast television incentive auction are not frustrated. The repacking methodology the Commission ultimately adopts will be a critical tool in reorganizing the broadcast TV spectrum pursuant to the statutory mandate. Additional development and analysis of potential repacking methodologies is required in light of the technical, policy, and auction design issues raised in the rulemaking proceeding. This work requires a stable database of full power and Class A broadcast facilities. In addition, to avoid frustrating the central goal of “repurpos[ing] the maximum amount of UHF band spectrum for flexible licensed and unlicensed use,” we believe it is now necessary to limit the filing and processing of modification applications that would expand broadcast television stations’ use of spectrum.

So once again, television broadcasters are tossed into a digital ice age, unable to adapt their facilities to shifting population areas, which seems to be the polar opposite of what Congress intended in requiring that spectrum incentive auctions not reduce broadcast service to the public. Aggravating the situation is that, unlike some of the DTV transition application freezes, the FCC is not limiting this freeze to large urban markets where it hopes to free up broadcast spectrum for wireless broadband. Indeed, modification applications were already less likely in those heavily populated urban areas because of the existing spectrum congestion that makes modifying a TV station’s signal difficult.

As a result, the broadcasters most likely to be hurt by the freeze are those in more rural areas–areas that have ample available spectrum for broadcasting and broadband, and which the FCC has said are not really the target of its spectrum incentive auction. Those broadcasters will have to hope that the FCC is serious about considering freeze waiver requests. Otherwise, rural Americans will once again see improvements in their communications services delayed while the FCC focuses all its attention on securing more spectrum for broadband in urban population centers.