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At a meeting held this week, the Radio Advertising Bureau (RAB) adopted Guidelines promoting the use of "posting" or audience delivery guarantees for the radio industry.  While these guidelines are voluntary, and no doubt some broadcasters will not adopt the practice, those who do should be aware of the political broadcasting implications.  For years, at political broadcasting seminars that I have conducted around the country, the question of how posting affects the political broadcasting obligations of television broadcasters has been much discussed. In its 1991 policy statement on Political Broadcasting, which essentially established the rules that broadcasters have followed in the years since, the Commission's entire discussion of how audience underdelivery make good spots affected a station's political broadcasting obligations was essentially addressed in two sentences - essentially saying that such guarantees must be made available to candidates in the same manner as commercial advertisers.  Thus, stations must offer audience delivery guarantees to political advertisers if they offer such guarantees to commercial advertisers.  The 1992 reconsideration added a few more sentences, making clear that any make-good spots provided to meet any delivery guaranty would not need to be considered in determining the lowest unit charge of the time periods in which the make good runs.  What the Commission leaves to the broadcaster, however, is to fashion a way to compensate the candidate for underdelivery when the underdelivery may not be discovered for months (when the next ratings book is released), which will usually be after the election for which the candidate purchased the spots. 

In the television industry, where posting has been common for years, stations deal with the political implications in many different ways.  First, not all purchased spots will have delivery guarantees. Under Commission rules, spots that have different rights can be considered to be spots of a different class, and each class of spots will have its own lowest unit rate.  Thus, spots with audience delivery guarantees will likely have a higher price than those that do not have the guarantees.  As the make good spots for any underdelivery of audience will be of little value if they are not available until after an election, the candidates will usually opt for the lower priced spots without the guarantees.  Alternatively, stations can offer candidates a discount off of their lowest unit rates for spots with guarantees in exchange for the candidates agreeing to waive any underdelivery make-good spots.  In a few cases, candidates agree to take any make-good spots to which they may be entitled, and use them after the election to thank their supporters or to convey policy positions to their constituents.

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The Commission today published notice in the Federal Register revising the dates for submitting comments in its rule making "In the Matter of Promoting Diversification of Ownership in the Broadcasting Services."  If you will recall, this is the rule making proceeding that seeks comment on a number of new proposals, including whether to revise the definition of "Designated Entities", possibly expanding the FM band to include TV channels 5 and 6, possibly adopting rules to allow AM expanded band stations to retain those stations or transfer them to Designated Entities, and whether Class A LPTV stations should be afforded must-carry rights on cable systems. 

Although the FCC had initially pegged the comment date at July 15th when it first published notice a couple of weeks ago, apparently that date was a miscalculation.  Thus, the dates for commenting have now been revised, and Comments in the proceeding are now due on or before June 30, 2008, and Reply Comments are due on or before July 14, 2008.  This means that interested parties have a couple of weeks less than initially thought to prepare and file comments in this proceeding, so start drafting now.  See our earlier summary of this proceeding for more information.  A copy of today's Federal Register notice can be found here. 

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With the Digital Television conversion date only eight and a half months away, the end game is beginning.  The FCC has announced that Wilmington, North Carolina will be a test market for the digital conversion, going all-digital on September 8 (or almost all digital, as the local NPR affiliate is not planning to turn off its analog signal, and one LPTV station will continue to operate in analog).  This will provide the FCC with an opportunity to determine what will really happen when the digital transition occurs in February of next year.  What will the FCC learn from this early test?  In the statement of Commissioner Copps at a recent town hall meeting held in Wilmington to address the digital conversion, some of the issues to be watched were set out.

Essentially, the Commissioner identified four different broad categories of issues that would be considered.  They are:

• Technical issues - will the DTV signals provide adequate service to their communities?  Will the converter boxes be able to receive the signals with "rabbit ear" antennas, or will there be reception problems
• Will consumers have received the word about the transition, or are there certain groups that will be particularly hard-hit by the transition, missing out on vital information about that transition?
• How will various partnerships work?  The Commissioner identifies partnerships between various industry, government and community groups to distribute news about the transition, but there are also partnerships between stations and multi-channel video providers (cable and direct broadcast satellite) that need to be worked out
• The unknown - what other issues that are not anticipated will arise?

As set forth below, many of these issues have been receiving extensive press coverage in recent weeks.

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With the recent spate of severe weather throughout the country, a reminder about the FCC's rules on the presentation of specific emergency information is in order.  The FCC rules requires that any specific emergency information - not a generalized warning, but a specific warning directed at a specific location - must be presented visually as well as in oral form. So if you say that there is a tornado headed to a particular community, and people in the northern portions of the city should head to their basements or an interior room, that information should be presented visually as well as through the statements of the weathercaster who is stating those words.  The nature of the emergency and any information about how to cope with it that is aurally presented must also be presented in some visual manner.  Some time ago, the FCC issued a public notice on this subject.  A correction to that notice, making clear that the emergency information need not be closed-captioned in an emergency, as long as the information is presented in a visual format, is accessible through a previous post on our blog, here.


The Commission made clear that television stations, in emergency situations, need not close caption this information about an immediate and specific emergency, but can present it open captioned, on a chalk board or white board, or in any other way that it is visually apparent to those with hearing difficulties.  The Commission recognized that closed captioning might not be available if an emergency arose outside of the normal news hours, and felt that it was more important that the information be carried than that it be closed captioned.  As the FCC has fined stations for not providing in a visual form this specific information about where there is an emergency and what steps to take to prepare for the emergency, stations should be sure that they are observing these requirements. 

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Last year, Congress considered limits on direct to consumer (DTC) prescription drug advertising (about which we wrote here), but this effort stalled.  A recent letter from two Congressional leaders of the Energy and Commerce Committee suggest that Congress is looking at these issues once again.  This advertising has become important to television networks, and to drug manufacturers anxious to distribute information about their latest products to consumers.  Congress held a hearing in May to consider issues about this advertising.  One concern was whether ads could be misleading when they featured celebrities (a particular concern was when Robert Jarvic, the inventor of the artificial heart who is not an medical doctor, was seen in a drug commercial, which some felt implied that he was giving medical advice). Other concerns include the potential for advertising to build up large demands for new drugs, quickly exposing these drugs to large populations, when a slower roll out would give the companies and the medical community more time to discover any unanticipated side effects.  An article about these concerns is available to Wall Street Journal subscribers, here.  The Congressional letters, which can be accessed here, address both of these issues.

The letter, from Congressmen Dingell and Stupak, both from Michigan, ask several drug companies and the Pharmaceutical Research and Manufacturers of America (the trade association for Pharmaceutical companies), if they were planning to update their guidelines on direct to consumer advertising to address the issue of celebrity advertising.  Also, the letter asked if the companies and the association would back a voluntary two year moratorium on advertising for new drugs, presumably while new guidelines are worked out.  FDA guidelines already require a statement on the major risks of the drug and information on where consumers can learn more about the risks of the drug (suggesting a combination of 4 datapoints in each ad - a toll-free telephone number, a website, a recent print publication - all dealing in more detail with side effects and cautions - and a recommendation to "ask your doctor" about the effects of the drug).  The Congressional Research Service of the FDA has prepared a good  history of regulations in this area and a summary of the issues.  Watch upcoming Congressional actions to see if even more disclosures will be necessary.

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Affected Stations:  

• Radio Stations in Michigan and Ohio
• Television Stations in Arizona, Idaho, Maryland, Nevada, New Mexico, Utah, Virginia, West Virginia and Wyoming, as well as the District of Columbia

Just a reminder that by June 1, 2008, radio stations in Michigan and Ohio, and television stations in Arizona, Idaho, Maryland, Nevada, New Mexico, Utah, Virginia, West Virginia and Wyoming, as well as the District of Columbia, must prepare and file electronically an FCC Form 323 Biennial Ownership Report with the Federal Communications Commission (FCC).  Similarly, noncommercial stations in these states must file a Biennial Ownership Report on FCC Form 323-E by that date.

Ownership Reports are to be filed every other year, reporting on changes in the licensee's ownership and updating the information requested by the form. Ownership information must be provided for all attributable owners of the licensee.  The timing for the filing of the Biennial Ownership Report and the preparation of the Annual EEO Public File Report is based on the anniversary of the filing of the station's license renewal.  In turn, the renewal cycles are organized by state and type of service, and are staggered based on the FCC's prearranged schedule. Periodically, we will remind groups of stations as to their upcoming deadlines, and stations should be vigilant to make these required filings.  A copy of our complete reminder memo containing additional information on this filing deadline can be found here. 

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June 1^st marks the deadline for two FCC EEO requirements.  First, by June 1^st, radio and television stations located in Arizona, the District of Columbia, Idaho, Maryland, Michigan, Nevada, New Mexico, Ohio, Utah, Virginia, West Virginia, and Wyoming, must prepare their Annual EEO Public File Reports.  Specifically, stations or Station Employment Units (SEUs) in those states (and DC) with five or more full time employees (30 hours or more per week) must:  (1) prepare their Annual EEO Public File Report; (2) place it in the public inspection file of each station comprising the SEU; and (3) post the Report on the websites, if any station in the SEU has a website, all by June 1.  The Annual EEO Public File Report summarizes the hiring and EEO activities conducted by the station or SEU during the past 12 months.  The Report provides information about the full time job positions filled in the last year, the recruitment sources used to fill those positions, and the outreach activities that the station or SEU performed during the year.  In preparing their Annual Reports, stations are encouraged to carefully review their EEO activities and take the time to organize their records.  Stations should have appropriate documentation to back up each of the recruitment sources used for each job opening, as well as for each outreach activity.  This annual report is also a good time for the station or employment unit to assess the success of its outreach and the efficacy of its recruitment sources, and to make any adjustments necessary to improve EEO compliance in the coming year.  A copy of our longer EEO advisory can be found here. 

Second, in addition to preparing the Annual EEO Public File Report by June 1, larger radio stations in Michigan and Ohio (those with eleven or more full-time employees), and television stations in the District of Columbia, Maryland, Virginia, and West Virginia must also prepare and file electronically with the Commission an FCC Form 397 Mid-Term EEO Report.  The Form 397 provides the FCC with copies of the SEU's two most recent Annual EEO Public File Reports, and is an important part of both the station’s compliance with the EEO rules and the Commission’s monitoring procedures.  While normally the Annual Report is simply prepared and placed in the station's public file and on the website, at the mid-point of the license term stations must actually provide the FCC with copies of its two most recent Reports.  Notably, June 1st marks the first time that television stations will have filed the Form 397, as television renewals are staggered from radio renewals.  Following the renewal anniversaries, television stations in other states will follow later this year and next.  And again, only radio stations or SEUs located in Michigan and Ohio that have 11 or more full-time employees, and television stations in DC, Maryland, Virginia, and West Virginia with five or more full-time employees are required to file an FCC Form 397. 

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UPDATE  5-29-2008-  Please note, the Commission has revised the dates for submitting comments in this rule making proceeding.  Comments in the proceeding are now due on or before June 30, 2008, and Reply Comments are due on or before July 14, 2008.  This means that interested parties have a couple of weeks less than initially thought to prepare and file comments in this proceeding, so start drafting now.  A copy of the Federal Register correction notice can be found here. 

The FCC has published its Further Notice of Proposed Rulemaking on its efforts to encourage diversity in the broadcast media in the Federal Register, thus setting the dates for public comments.  The FCC is seeking comment on a number of ideas – some to restrict the definition of the Designated Entities that are eligible to take advantage of the rules promote diversity to minority groups and perhaps women, others to expand the universe of media outlets available to potential broadcast owners – including proposals to expand the FM band onto TV channels 5 and 6, and proposals to allow certain AM stations, which were to be returned to the FCC after their owners received construction permits for expanded band stations, to retain those stations or transfer them to Designated Entities.  There are numerous other issues to be considered that we summarized in detail here.  Check out the details, and file your comments, which are due on June 30. 

The Federal Register publication also sets the effective date for the Diversity rules that the FCC did adopt.  These rules will become effective on July 15.  We summarized the new rules here.  While many of these new rules are relatively uncontroversial, allowing certain limited exceptions to the multiple ownership rules for companies that help minority ownership, some have imposed new obligations that, in some cases, are not easily defined.  For instance, while no one would argue with the proposition that parties who discriminate based on race or gender should be penalized, the FCC adopted some rules that may need further clarification.  For instance, the FCC adopted new rules to require certifications that there has been no discrimination in all FCC applications seeking approval for the sale of a station (FCC Forms 314 and 315).  The FCC also adopted rules prohibiting dictates by advertisers that their advertising not run on urban or Spanish formatted stations ('no urban, no Spanish" dictates).  Yet, on neither of these rules did the FCC provide any specificity as to what they were prohibiting, or what the Commission would look at in enforcing these rules.  Watch for potential requests for reconsideration or clarification of these and perhaps other rules - which are due on June 15. 

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Last week, the US Senate passed a resolution of disapproval, which seeks to overturn the FCC's December decision relaxing the multiple ownership rules to allow newspapers and television stations to come under common ownership in the nation's largest markets (see our summary of the FCC decision here).  This vote, by itself, does not overturn that decision.  Like any other legislation, it must also be adopted by the House of Representatives, and not vetoed by the President, to become law.  In 2003, the last time that the FCC attempted to relax its ownership rules, the Senate approved a similar resolution, but the House never followed suit (perhaps because the decision was stayed by the Third Circuit Court of Appeals before the House could act).  In this case, we will have to see whether the House acts (no dates for its consideration have yet been scheduled).  Even if the House does approve the resolution, White House officials have indicated that the President will veto the bill, meaning that, unless there is a 2/3 majority of each house of Congress ready to override the veto, this effort will also fail.

The reactions to this bill passing the Senate have been varied.  The two FCC Democratic Commissioners, who both opposed any relaxation of the ownership rules, each issued statements praising the Senate action (see Commissioner Copps statement here and that of Commissioner Adelstein here).  The NAB, on the other hand, opposed the action, arguing that the relaxation was minimal, that it was necessary given "seismic changes in the media landscape over the last three decades" (presumably referring to including the economic and competitive pressures faced by the broadcast and newspaper industries in the current media environment), and that it ought not be undone by Congressional actions.   

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In recent months, the broadcast industry has experienced one of the most active periods of regulatory activity in recent memory. Since November, the FCC has adopted enhanced disclosure obligations concerning the public interest programming of television broadcasters and requirements for an on-line public inspection file; rejected most calls for increased deregulation of broadcast ownership (allowing only the cross-ownership of broadcast stations and newspapers in the largest markets); established specific prohibitions against advertising practices that involved “no Spanish, no urban dictates”; placed mandatory disclosure obligations on television broadcasters in connection with promotion of the DTV transition; proposed rules that could favor low power FM stations over improvements in full-power broadcast services and existing FM translator licensees; and proposed sweeping regulation of broadcasters which could potentially require specific amounts of nonentertainment programming by all stations, restrict the flexibility of broadcasters' location of their main studios, require 24-7 live staffing for all stations that operate on that basis, and perhaps even evaluate the music selection process of radio operators. Rumored to be in the offing are proposals to regulate embedded advertising, to adopt enhanced rules on sponsorship identification in connection with video news releases and payola-like practices, and perhaps even expand EEO reporting requirements (as the FCC recently asked for public comment on the employee-classification information for its long-suspended requirements for the filing of FCC Form 395 – the Annual Employment Report in which stations categorize all their employees by their employment duties, race and gender). And Congress has not been idle, with proposals introduced for the adoption of a performance royalty on over-the-air radio for the use of sound recordings, hearings about potential restrictions on prescription drug advertising, and a proposal to roll back the limited ownership reform adopted by the Commission in December.

With all this activity in a six month period under a Republican administration with a Republican majority on the FCC, during a time of great turmoil in the broadcast industry itself, as television prepares for the digital transition and broadcast revenue growth is slow or nonexistent (based on a variety of factors including general economic conditions and competition from the plethora of new media choices), many broadcasters are wondering what’s going on? And some fear even more changes could come about in any new administration that may come to Washington after the November elections, no matter what the result of that election. The one candidate with the most experience in the regulation of broadcasting, Senator McCain who has chaired the Senate Commerce Committee which regulates the broadcast industry, has by no means been a captive of the broadcast industry – leading efforts to enhance the use of LPFM and at one point pushing a spectrum tax proposal for television broadcasters for the use of the digital spectrum.

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In a decision released late on Friday, the FCC upheld a $9,000 fine on a noncommercial television operator who broadcast underwriting announcements which, in the opinion of the Commission, were too much like commercials and thus were impermissible on a noncommercial station.  Under the Commission's policies governing the noncommercial nature of noncommercial stations, it is permissible to air an underwriting announcement acknowledging a commercial entity that makes a financial contribution to the station.  And it is permissible to state the nature of the business, where it is located, and to air the slogan of the company.  What is not permissible is when the underwriting announcement contains "calls to action," qualitative or comparative claims, price information, or other inducements to do business with this particular company.  In this case, the Commission felt that the announcements crossed some or all of these lines.

In the initial Notice of Apparent Liability in this case, released in late 2004, the text of the announcements at issue are set out.  In last week's order, phrases such as "planning a special occasion?" as the intro line to an announcement about an Ice cream store were deemed to be calls to action, and the description of the ice cream cakes that the store made as "tastefully decorated" were deemed to be qualitative.  Similarly, statements about a real estate company that "we're all about family" and "we love selling real estate" were deemed to be comparative in nature, trying to distinguish this particular agent from other competitors.  In only one of ten ads, one for a school supply store, did the Commission overturn its previous determination, finding that an announcement for "creative learning materials" was arguably descriptive and not qualitative.

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In a case just released by the FCC, a broadcaster was fined for enforcing a non-compete agreement that was entered into when a broadcaster sold one of its stations in a market in and agreed that it would not compete in the same format if it ever acquired another station in the same market.  The agreement had prohibited the Seller from competing with the Buyer in a news-talk format.  After the closing of the sale of the station, the Seller acquired another station in the market and adopted a format that a local court found was covered by the non-compete clause in the contract.  The local court issued an injunction against the continuation of the news-talk format.  At that point, the Seller filed a complaint with the FCC, arguing that, by obtaining the injunction, the Buyer had engaged in an unauthorized assumption of control of the station covered by the injunction, without FCC approval.  The FCC agreed with the Seller, and fined the Buyer $8000 for exercising control over the station that Seller had bought.

The FCC's reasoning in this case, citing a similar letter decision from 2006, is that the restriction on format impedes a licensee's control over its own programming, and restricts its ability to adjust its operations to account for changing market conditions.  The Commission concluded that, barring the licensee from utilizing a particular format, even for the limited period of the non-compete agreement, was contrary to the public interest.  By obtaining the injunction to prevent the Seller from using the news-talk format, the Buyer had impermissibly exercised control over the station that it had already sold.  In fact, the Commission went further, and found that the exercise of control over the programming, personnel or finances of the station would be a violation of the rules. 

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The FCC today released a Notice of Proposed Rulemaking asking for public comment on its proposed Regulatory Fees for 2008.  These fees are paid annually by most commercial entities that are regulated by the FCC for the privilege of being regulated.  Noncommercial broadcasters are exempt from the fees.  The fees are normally paid in August or September, during a period of several days that will be established by the Commission after receiving comments on this proposed fee schedule.  The fees for broadcasters are, as they seemingly always do, increasing.  The Commission is also asking for comment on one specific change in how broadcast fees are collected, asking if it should collect fees from AM station licensees who have expanded band stations for both the expanded band station and the in-core channel, if the licensee is still operating both.  Currently, fees are only paid once by expanded band licensees. 

Broadcast fees are based on Class of Service and the population covered by a station.  For AM stations, the proposed fees are to increase from $400 per station for the least powerful stations in the smallest market to $450, and from $7275 for high-powered stations in the largest markets  to $7925.  For FM stations, the least powerful stations in the smallest markets are proposed to increase from $575 to $600.  For high power stations in big markets, the increase is from $9125 to $10,200.  For TV stations, the fees range from $1875 for a UHF station in the smallest markets, up to $69,400 for a VHF station in the largest markets, up from $1750 and $64,300 last year. 

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In a decision released last week, the FCC imposed a fine of $4000 on a broadcaster licensed to a community in the state of Arkansas for airing an advertisement for the Missouri State Lottery.  In this case, a station licensed to Arkansas ran a remote broadcast from a store in Missouri.  During the course of the remote, the on-air announcer invited listeners to come to the store and made some not-too-subtle remarks implying that, when they did, they could buy Missouri lottery tickets.  As there is a statutory provision prohibiting a station located in one state from running an ad for a lottery in another state if its own state does not have a lottery, the Commission issued this fine.

This ban is based on a statute passed  by Congress, and approved by a Supreme Court decision 15 years ago - finding a compelling state interest in protecting the citizens of states that ban gambling from allowing stations in their states from advertising that prohibited activity.  Of course, in many cases, a station licensed to one state may be heard (and may in fact be physically located) in another state.  Even so, the city of license is what counts - so a station has to observe the laws of that state.  In some cases, that can mean that there are different rules that apply to different stations in the same cluster (and possibly located in the same building, with advertising being sold by the same sales people).

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The FCC today provided two more examples of its policy that virtually any sort of interview program is going to be deemed a "bona fide news interview program" exempt from any claim of equal opportunities (or "equal time" as it is commonly referred to) if the program features an appearance by a political candidate. In the decisions released today, the FCC declared that the 700 Club produced by the Christian Broadcasting Network (decision here) and TMZ produced by Telepictures Productions (decision here), both syndicated across the country, were analogous to programs like Entertainment Tonight, which the FCC had previously found to be an exempt program.  While these programs may focus on some unique aspect of the news or current affairs, the fact that they cover the candidates with their own particular slant (entertainment news, music news or whatever) does not prevent them from being considered bona fide news interview programs.  Where the coverage of the candidate is done based on good faith determinations of what is newsworthy rather than to politically favor the candidate, and where the programming remains under the control of the program producers and not the candidate, the programming is considered exempt from equal opportunities.  This is fully consistent with past Commission policy which we have written about many times before (see, for instance, our post on the evolution of this exemption in the context of political debates, here, and our posts on the candidacies of Fred Thompson and Stephen Colbert).  Thus, while these decisions are not controversial, they do raise some questions that broadcasters and candidates should ponder.

The first interesting question is raised by a paragraph included in both of the decisions released today.  The paragraph warns licensees that, if they are carrying syndicated programming that contains an appearance by a political candidate, and that program is relying on  the news interview exception, the licensee must itself make a determination that the program is newsworthy.  I think that this ties in with another line in the decisions stating that there is no evidence that the decisions by the program producers that the appearances by the candidates are newsworthy were not bona fide journalistic decisions.  In other words, if the program producer was to include candidate appearances in a blatantly political way (e.g. by totally excluding the candidates of one party and promoting the candidates of the other), then the Commission could conclude that the decisions were not "bona fide,"  and that equal opportunities did apply.

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A decision by a US District Court in New York was just released, setting the rates to be paid to ASCAP for the use of their composers' music by Yahoo!, AOL and Real Networks.  The decision set the ASCAP rates at 2.5% of the revenues that were received by these services in connection with the music portions of their websites.  These rates were set by the Court, acting as a rate court under the antitrust consent decree that was originally imposed on ASCAP in 1941.  Under the Consent Decree, if a new service and ASCAP cannot voluntarily agree to a rate for the use of the compositions represented by ASCAP, the rates will be set by the rate court.  The Court explained that they used a "willing buyer, willing seller" model to determine the rates that parties would have negotiated in a marketplace transaction  - essentially the same standard used by the Copyright Royalty Board in setting the rates to be paid to SoundExchange for the use of sound recordings by non-interactive webcasters (see our post here for details of the CRB decision).  The ASCAP decision, if nothing else, is interesting for the contrasts between many of the underlying assumptions of the Court in this rate-setting proceeding and the assumptions used by the Copyright Royalty Board in setting sound recording royalty rates.

First, some basics on this decision.  ASCAP represents the composers of music (as do BMI and SESAC) in connection with the public performance of any composition.  This decision covered all performances of music by these services - not just Internet radio type services.  Thus, on-demand streams (where a listener can pick the music that he or she wants to hear), music videos, music in user-generated content, karaoke type uses, and music in the background of news or other video programming, are all covered by the rate set in this decision.  Note that the decision does not cover downloads, presumably based on a prior court decision that concluded that downloads do not involve a public performance (see our post here).  In contrast, the CRB decision covered the use of the "sound recording" - the song as actually recorded by a particular artist - and covers only "non-interactive services," essentially Internet radio services where users cannot pick the music that they will be hearing.

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