Shape of Things To Come: New Public Interest Obligations, Changes in TV DMAs and More Flexibility For LPFM
As the Commission held its last localism hearing in Washington on Halloween night, FCC Chairman Kevin Martin's views on how the FCC should insure that stations are responsive to their communities became somewhat clearer. In his opening statement, the Chairman outlined a set of actions that could be taken by the FCC to insure more service to the public. While emphasizing the importance of efforts to encourage new entrants into broadcast ownership, the Chairman's proposals to add new regulatory requirements, including requiring that a station be manned during all hours of operation, may well have the result of making it more difficult for any new entrant (or for existing smaller operators) to profitably operate their stations. In addition, he has offered proposals that would seemingly require cable and satellite carriage of in-state television stations not in a system's DMA - a proposal sure to cause concern to stations in DMAs that straddle state lines.
The Chairman's statement includes the following proposals:
- Requirements for uniform filings by broadcasters quantifying their public service - presumably their news and information programming and the public service announcements that they provide
- Requiring that stations have manned main studios during all hours of operations (not just during business hours)
- Allowing flexibility for LPFM stations to be sold, but adopting new rules to insure that such stations are used for local programming, not something provided from a network or other programming source
- Providing television viewers the ability to get an in-state television stations on cable and satellite even if the county in which they reside is "home" to a DMA with stations in another state
- Capping the number of applications accepted from the 2003 FM translator filing window - which might result in the dismissal of hundreds of applications that have effectively been frozen for 4 years
The Chairman's statement makes much of the efforts of the Commission to promote new entrants into broadcast ownership, citing efforts to bring back a tax certificate for minority ownership, efforts to allow minority groups to acquire and construction unbuilt stations even if they may have expiring construction permits, and waiving Equity Debt Plus requirements (allowing more financing by companies that might be prohibited by the ownership rules from providing more than 1/3 of the financial backing to an applicant)(see our summary of some of the pending proposals to enhance minority ownership, here). However, some of his other proposals actually make ownership by new entrants problematic.
On the radio side, requiring the manning of a studio 24 hours a day for stations operating full time may be an expense that a multi-station cluster in a large market would have no trouble handling. However, the costs that the adoption of such a proposal would entail for a small, stand-alone station in a small market could be prohibitive. The financial return in a small market from operating all night is slight, but stations continue such operations as a service to their listeners. Years ago, when the FCC required manned main studios, many smaller stations would sign off in late evenings and overnight hours to avoid the costs of such operations. Re-imposing a requirement that the station be manned whenever it is operated might bring back such limited service during overnight hours, or force smaller stations to consolidate so that the costs of overnight operations could be spread over multiple stations. And to what end? The rules already require that stations be controlled during all hours of operation. With modern technology, the FCC recognized a decade ago when doing away with the requirement that studios be manned, control can be exerted without someone sitting at the studio, and can even originate programming without physically having someone present at the station. And stations should be able to provide contact information to emergency officials so that they can respond to any overnight developments that might take place during unmanned hours.
Communications with emergency officials is really the key - not whether the station has someone sitting at a studio. The proposed new requirements seems to stem from the notorious "Minot" incident, when local authorities made claims that the largest cluster of radio stations in that community were not manned at night and could not respond to an emergency when a rail car carrying dangerous chemicals derailed creating a toxic cloud in parts of the city. In fact, I have heard that general manager of those stations state that the stations were manned, and quickly had reporters covering the story, but that local officials simply did not know the how to activate their EAS system, and thus their phones were flooded by calls, which prevented them from reaching the station (which was in fact trying to call the police to obtain updated official information but prevented by the same overloaded phone system). See Clear Channel's press release on the matter, here .
The DMA (Designated Market Area - the area defined by the Nielsen ratings service as being the primary service area of a television station) issue is another concern to small market operators. A number of Congressional bills started popping up early in the year, seeking to either permit or require cable and satellite operators to carry in-state television stations to all counties in a state, even if those counties fell within a DMA where the television service originated from stations in a different state. While that sounds like a noble idea -giving viewers access to news from an in-state TV station - it caused major consternation among many stations who operate in markets straddling a state border. Especially in small markets, many station operators felt that such a rule would only expand the power of large market stations that would be imported into the market, while cutting into audiences of the small market stations and making their existence more difficult. Some of these stations felt that, in the long term, such rules might cause the disappearance of some small markets as the big-market stations gained statewide carriage. The disappearance of small market stations would then cause a loss in real local news in exchange for some degree of state-wide news coverage. Again, a seemingly simple idea that can cause many real world problems.
The FM translator issue while, again seeming like a simple issue, could cause many problems. The FCC received thousands of applications for new FM translators when it opened a filing window in 2003. While many hundred were processed and granted, in 2004 the FCC put a 6 month moratorium on further processing, while the Commissars considered the relationship of FM translators to LPFM stations. That 6 month moratorium has now effectively been in place for over 3 years, with no end in sight. While the Chairman's proposal to limit the number of applications that will be processed may seem like a good idea, it may well cause problems. First, there are a number of applicants with many pending applications who spent considerable sums to file applications (including clients of our firm). Is it fair to change the rules on these applicants in mid-stream, after these applications were filed in good faith? And what will the impact of the limitation be - especially on the efforts to provide AM stations with FM translators? With so many translator applications, if these were processed and granted, there would no doubt be a secondary market in excess construction permits that would allow AM stations to acquire FM translators for their use (which is being permitted on a temporary basis now, see our post here). If these applications are dismissed or strictly limited, there will likely be a much more limited secondary market, and AM stations may well end up having to fight LPFM applicants for rights to use this spectrum. With the potential of a preference for LPFM applicants, this could seriously curtail the ability of AM operators to obtain FM translators for their use.
All in all, this goes to show that there are no easy answers to the complex problems of the broadcast world. The FCC's seeming interest in intervening in the markets to force the coverage of local issues, and to mandate what it perceives to be in the public interest, may well lead to significant unintended results that actually harm those efforts. Watch these efforts closely.