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UPDATE:  On June 2, the FCC issued an erratum revising the Comment date in this proceeding to June 26th.  We've updated our earlier post to reflect the change.

The FCC today issued a Public Notice announcing the filing deadline for comments regarding potential modifications to the ownership report filing requirements for noncommercial broadcasters (see our post, here, on the questions that the FCC is asking).  Comments are due on June 26, with replies on July 13.  As mentioned in our earlier post, the FCC also issued today an Order suspending the requirement that commercial broadcasters who have upcoming ownership report filing deadlines (including the deadline on Monday for on June 1 for radio stations in Arizona, District of Columbia, Idaho, Maryland, Nevada, New Mexico, Utah, Virginia, West Virginia and Wyoming, and television stations in Michigan and Ohio).  This is a new policy, and thus supersedes the information in our post two weeks ago.  As all commercial broadcasters will now have to file reports on the same time - November 1 - the need for a second report was deemed unnecessary, especially given the upcoming revisions to the Form 323 to require more detailed information about some otherwise non-attributable owners, and for certain entities not now required to file.

As we have stated, the FCC is interested in obtaining more detailed ownership information in order to better assess whether additional steps to promote minority ownership are justified.  Watch for details of the new November filing requirement in the near future. 

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In a truly eleventh-hour decision, the FCC released an Order late Friday evening suspending the filing of FCC Form 323 Ownership Reports that would otherwise be due on Monday, June 1st for certain broadcast stations.  In its recent Report and Order adopted in the proceeding devoted to Promoting Diversification of Ownership in the Broadcasting Services, the Commission revised its rules to implement a single November 1st filing deadline for all commercial broadcast stations to submit an ownership report.  The Order, however, neglected to address the fact that numerous broadcast stations faced filing deadlines under the current rules that would require an ownership report to be filed by June 1, August 1, or October 1 (depending on a station's license renewal anniversary). 

It is unclear why this issue was not addressed as part of the earlier Report and Order, which was adopted nearly two months ago on April 8th, or why today's Order was not released earlier in order to prevent stations from filing in advance of the June 1st deadline, but the clarification will be helpful for those stations that have not yet filed, or for those that would otherwise face an August 1st or October 1st ownership report deadline.  For those stations that have already filed their Ownership Reports consistent with the June 1st deadline, the Order is silent as to whether the FCC will refund the filing fees paid by those licensees, or alternatively, if those licensees will be required to pay another fee come November 1st. 

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This past week, I attended the BIAfn Winning Media Strategies Conference in Washington, DC.  During the course of the conference, there was much talk about how broadcasters and publishers need to provide unique service to their communities in order to survive in the competitive media marketplace.  The point was made over and over again that, in each market there are unique attributes and personalities that a station should be covering in its programming, and should be exploiting even more broadly through their digital assets, to tie it to its community.  Only by doing so will the station be able to survive in the new media environment - and by doing so, the station may be able to thrive.  In fact, I was stuck by a statement by USC's Adam Clayton Powell III that domination of the local online and digital media marketplace was "the broadcasters to lose."  In other words, the broadcaster has such unque promotional abilities with its current audience that it can establish its brand in the online and in the mobile world far easier than other media players.  But there were also the repeated warning that there is more and more competition for this local digital market from new entrants and other media entities and that, if the broadcasters did not take advantage of their current advantage, the local service would come from someone else.  What most stuck me was that there was no question that the superservice to local needs would be coming from someone - broadcaster or not - as a result of marketplace developments, not because of any government mandate.  The broadcaster has to adapt to and compete in this new media marketplace or become culturally and economically irrelevant.  The broadcaster needs to serve the local market to meet these challenges, not because some Washington agency has ordered him to do so.  And the broadcaster needs to serve his community in a way that the public will find compelling, not in a way that the government thinks is best.

At BIAfn, the presentation that made the greatest impact was probably that of Greenspun Media from Las Vegas, which has reinvented a secondary newspaper and a Low Power TV station as an on-line powerhouse, uncovering the aspects of the community that would draw the largest audience and covering that information in great detail.  The Las Vegas Sun site not only covers hard news, but also the gaming industry, University of Las Vegas sports and even state government issues in a way that its audience seems to find interesting.  Even a history of Las Vegas, in great detail, is included.  And video plays a big part of the site, with the company in development of a hip news and events program, 702.tv, that will soon be a daily program on the television station and online (featuring local "celebrities" doing the weather, including strippers and Neil Diamond sound-alikes).  While some attendees at the conference thought that Las Vegas presented unique opportunities that might not be available in all communities, many were immediately speculating on the opportunities in their own communities to find unique personalities and events that could be developed on-air and on-line in ways to maximize their connection with their audience. 

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A decision released by the FCC's Media Bureau staff this week makes clear that the permittee of a noncommercial station, who was awarded the permit based on a 307(b) preference, cannot change transmitter sites so as to abandon service to the area that it promised to cover in order to get the preference - even if it proposes to cover an equivalent amount of underserved area from its new transmitter site.  In addition, the decision held that the change in transmitter site was not justified even though the underserved area that had existed at the time the construction permit was granted no longer existed.  Other stations had changed their facilities since the date of the construction permit's grant, and now provided coverage to the area that had been underserved at the time of the grant. The Commission said that the coverage promises made by an applicant, and on which the permit was conditioned, were a snapshot in time that could not be changed even after the grant.  The decision should serve as a reminder to all the noncommercial applicants with applications that are now pending or to be filed in the next noncommercial window (whenever that may be) that they should not propose a technical facility in order to win a construction permit on 307(b) grounds if they can't really construct the station at the site they propose, as they may well be stuck with it - and forfeit the permit if they can't build the station in the way that they promised.

One wonders if a decision like this one will be appealed.  While there is no question that an applicant who makes promises that lead to the award of a permit should be held to those promises (to do otherwise would undermine the system), is it really in the public interest to hold the applicant to these promises in such a way so as to ignore reality?  If the underserved area that the applicant had promised to serve is no longer underserved, and some new underserved area that would have resulted in the applicant receiving the same preference is to be served by the modified proposal, isn't the public better off getting service to these truly underserved areas?  We will have to watch this case to see what develops.

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In a case released this week, the FCC decided to forgive a fine that had been imposed on a radio station for not timely filing its license renewal (and for operating after the license expired without authority).  The fine was eliminated because the station's operator had declared bankruptcy, and the persons who were in charge of the station at the time of the violation were no longer involved in its operation.   Instead, the bankruptcy court had approved a receiver who had sold the station to an unrelated third party.  The Commission found that continuing to require that the bankrupt estate pay the fine would only deprive legitimate, innocent creditors of money to pay the company's debts.  Thus the FCC rescinded the fine.  Note that, in previous cases, the FCC had said that it could hold the seller of a station liable for fines even after the sale had been completed (see our post, here).  Had it not been for the bankruptcy and this decision, the old licensee could have been fined even though the station had been sold.

This decision and the cases that it cites are important in the current economic climate, where there are already many broadcast stations in bankruptcy, and quite possibly more will be following that route.  One of the principal delays that often occurs in the sale of a broadcast station is a delay caused by a pending complaint against a station that could potentially result in a fine or other penalty against the station's licensee.  In such cases, where the station seller is leaving the broadcast industry, the FCC often requires the seller to put the amount of the potential fine for any rule violation into an escrow account, and sign an agreement allowing the FCC to recover the portion of the escrow necessary to satisfy any fine that may be imposed in the future.  These "tolling agreements" (called that because they toll the statute of limitations that may apply to a fine) may delay a sale, and many sellers are reluctant to escrow funds, particularly where they may not feel that the pending complaint has merit.  In a bankruptcy case, were the FCC to insist on one of these tolling agreements and an escrow account, the bankrupt estate may well not be able to come up with the funds for such an account (and the bankruptcy court might not approve the expenditure of such funds if there are other creditors with a higher priority to the funds than the FCC, as an unsecured creditor with a claim that has not even been adjudicated).  By determining that a bankruptcy wipes out a fine, if the station is sold to an innocent third party, the FCC avoids these issues.  Thus, the decision in this case is a clear indication that the FCC is not going to allow a pending fine to work as an impediment to the orderly disposition of a bankrupt radio station.

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The FCC today issued a Notice of Inquiry into the use of the Portable People Meter technology of radio audience measurement now being rolled out by Arbitron in radio markets throughout the country.  Several months ago, various groups petitioned the FCC for an inquiry into the PPM, contending that it has certain methodological flaws that undercounted particular groups, including minority groups, and thus could have an impact on the financial viability of the stations listened to by such groups (see our summary  of the petitions and the issues raised by these petitions).  The Notice of Inquiry asks about those perceived flaws, about the potential impact of any flaws on the use of Arbitron market definitions for purposes of the FCC radio multiple ownership rules, and on the more general question of whether the FCC even has the jurisdiction to regulate the use of the PPM.

Specific questions on which the FCC seeks comments include:

• Does the use of this technology really undercount minority populations?
• If so, what has been the impact on the economics of minority-formatted stations in markets where the system is in use?
• Are there specific information gathering techniques that should be improved in the PPM system?
• What has been the effect on the PPM system of settlements between Arbitron and the Attorneys General of several states - where Arbitron promised to change its sampling process?
• What is the impact of Media Ratings Council accreditation for the PPM in certain markets, and its lack of accreditation in others?
• Do the questions about PPM reliability have any impact on the use of Arbitron to define radio markets for FCC multiple ownership purposes?
• What is the FCC's jurisdiction to review Arbitron's practices in connection with the PPM? 

Details of these questions can be found in the FCC's Notice of Inquiry at pages 12-17.

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The full text of the FCC's revisions to its ownership report filing process was released last week.  The new rules will require that all commercial stations (including LPTV stations) file an updated Form 323 on November 1 every other year - starting in 2009.  The Order does not add much to the summary that we provided when the decision was first announced, though it does make clear that the electronic form will be revised to no longer allow for PDF attachments, instead requiring that all information be provided on the electronic form itself, so that it can be more easily searched.  With complex ownership structures, which are sometimes not easily explained in the confines of an FCC form, this may create some difficulties.  The Order did not seem to freeze the obligations for the filing of Form 323 Ownership Reports on the old version of the form on the current schedule while the new form is being created and approved by the Office of Management and Budget under the Paperwork Reduction Act, so stations in states with June 1 deadlines for their biennial reports should continue their preparation (see our Advisory on the the reports that are due on June 1 for radio stations in Arizona, District of Columbia, Idaho, Maryland, Nevada, New Mexico, Utah, Virginia, West Virginia and Wyoming, and television stations in Michigan and Ohio).

The Order also asked for further comment on the Ownership Report requirements for noncommercial licensees, including LPFM stations.  The Commission asks not only for comments on whether noncommercial operators should be required to file their reports on the same two year cycle as commercial broadcasters, but also for comments on what information should be required from these operators.  As noted by the FCC, the question of who controls a noncommercial station is often not an easy one - as there are varying degrees of control and oversight of station operations at many of the institutions that hold noncommercial licenses.  As noted by the FCC, there has been a Notice of Inquiry into noncommercial broadcast station ownership pending since 1989, trying to set out when there is a transfer of control of such entities that needs prior FCC approval.  Noncommercial stations have been operating under the interim policy set forth in that Notice for almost 20 years.  While the Commission does not seemingly ask for any change in the interim policy at this point, by gathering information about what ownership information should be reported on the new ownership report for a noncommercial entity, a resolution of that long-pending proceeding could potentially be in the works.

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In light of the recent decision upholding the FCC's right to sanction licensees for violations of the FCC's Indecency rules for "fleeting expletives" in the Golden Globes and Billboard music awards, i.e. isolated profanity on the airwaves, the Supreme Court also remanded the Janet Jackson case to the Court of Appeals.  The one sentence remand (see page 2 of the list of orders) was so that the Court of Appeals could consider the impact of the fleeting expletives case on the Court of Appeals decision throwing out the FCC's fine on CBS for the fleeting glimpse of Jackson's breast during the Super Bowl half-time program.  The Third Circuit Court of Appeals that heard the Janet Jackson case had reached a decision very similar to the Second Circuit's decision in the Golden Globes case - finding that the FCC had not justified its departure from a policy of not fining stations for fleeting instances of prohibited speech or pictures, where the words or pictures were isolated and their broadcast was not planned by the station.  Given that the Supreme Court has remanded the case to the Court of Appeals, the lower court will now need to consider the same constitutional issue that the Second Circuit will consider in the Golden Globes case - while the FCC may not have violated administrative procedures in justifying its actions, are the FCC's indecency rules so vague and enforced in such a haphazard manner that they chill free speech or are otherwise unconstitutional?  Based on an analysis of the various concurring and dissenting opinions in the Golden Globes case, the Supreme Court might well decide the constitutionality issue against the FCC.  Could the final ruling in these cases have an impact far beyond the indecency question?

Two of the Davis Wright Tremaine attorneys involved in some of the indecency cases have written this memo, summarizing the Supreme Court decision in the Golden Globes case - pointing out how Justice Thomas seemed to imply that the constitutional basis of the FCC decision was suspect - even though he sided with the majority in finding that the FCC was justified in its administrative decision to find violations.  Justice Thomas seems ready to come down against the FCC on the constitutional issue were it to be squarely presented, questioning whether the Red Lion decision, justifying lesser First Amendment protections for broadcasters than other media outlets based on frequency scarcity, has continuing vitality.  Were this precept underlying the regulation of broadcast content to be undermined, the justification for much FCC content regulation could be in doubt.

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Last month, the FCC released its proposal to restrict the movement of FM stations from rural areas into larger markets (which we summarized here).  The proposals that the FCC has put forward would greatly restrict the ability of broadcast owners to move stations to cover larger population areas - in many senses reversing the decision of the FCC just two years ago granting stations more flexibility to change cities of license and otherwise improve their facilities (see our posts here and here).  As we pointed out in our summary of the proposals, if adopted, these new rules could impair diversity - making it harder for minorities and other new entrants to acquire stations in larger markets, as move-in stations often provide the only opportunities for such groups to acquire stations at reasonable prices.  The FCC order advancing these changes has now been published in the Federal Register, setting the date for the filing of public comments on these proposals.  Comments are due to be filed on July 13, with replies due by August 11.   Broadcasters interested in these issues should start to prepare those comments now, providing the Commission with sufficient information to show the public interest benefits of these station moves.   

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In a speech to the Free Press Summit, Acting FCC Chairman Michael Copps suggested that broadcast license renewals should no longer be a "postcard", but instead should be a real test of the broadcaster's service to the public interest - and should happen every three years, rather than on the eight year renewal cycle that is currently provided for by the law.  While the Chairman acknowledged that many suggest that the old media are in troubled times and may well be supplanted by new forms of communications, "If old media is going to be with us a while still...we still need to get serious about defining broadcasters’ public interest obligations and reinvigorating our license renewal process."  In other words, while broadcasters may be dying, we should regulate them while we can.

First, it should be pointed out that the broadcast license renewal is no longer a postcard, and really hasn't been for almost 20 years.  The current renewal forms require certifications on many matters demonstrating a broadcaster's service to the public and its compliance with the rules, and additional documentation on EEO performance and other matters.  TV broadcasters also have substantial renewal submissions on their compliance with their obligations under the Children's television rules.  Issues of noncompliance with the rules resulted in many fines in the last renewal cycle, demonstrating that this is not a process where the FCC is without teeth.  Yet most of these fines were for paperwork violations (e.g. not keeping detailed records of EEO outreach or quarterly issues programs lists demonstrating the public interest programming broadcast by a station), not for any substantive claims that station licensees were fundamentally unqualified and should forfeit their licenses.  In fact, the Acting Chairman's speech recognizes that most broadcasters do a fine job serving their communities, yet he believes that more regulation is necessary to police those that don't.  But is this the time to be imposing additional regulatory burdens on all of the industry, for the actions of a few.  Will the overall public interest be served by such actions?  .

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The House of Representatives Judiciary Committee today approved a bill that would impose, for the first time, a royalty on radio broadcasters for the public performance of sound recordings in their over-the-air broadcasts.  if this bill were to be adopted by the full House of Representatives and the Senate, and signed by the President, broadcasters would have to pay for the use of sound recordings (the actual recording of a song by a particular musical artist) in addition to the royalties that they already pay to ASCAP, BMI and SESAC for the public performance of the underlying musical composition.  While, from the discussion at the hearing today, the bill is much amended from the original bill (about which we wrote, here) to try to address some of the issue that have been raised by critics, the Committee made clear that there were still issues that needed to be addressed - preferably through negotiations between broadcasters and the recording industry - before the bill would move on to the full House for consideration.  It was, as Representative Shelia Jackson Lee of Texas stated, still a "work in progress."  In fact, the Committee asked that the General Accounting Office conduct an expedited study of the impact of this legislation on radio and on musicians - but it did not wait for that study before approving the bill - despite requests from some royalty opponents that it do so. 

While I have not yet seen a copy of the amended bill that Congressman John Conyers, the Chairman of the Committee, said had been completed only a few hours before the hearing, the statements made at the hearing set out some details of the changes made to the original version of the bill.  First, changes were made to reduce the impact on small broadcasters - reducing royalties to as little as $500 for stations that make less than $100,000 in yearly gross revenues.  Interestingly, Representative Zoe Lofgren pointed out that, in a bill that means to address the perceived inequality in royalties, a small webcaster with $100,000 in revenues would be paying $10,000 in royalties - 20 times what is proposed for the small broadcaster.  And the small broadcaster who would pay $5000 for revenues up to $1.25 million in revenue would be paying 1/30th of the amount paid by a small webcaster making that same amount of revenue.

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National Association of Broadcasters President David Rehr today announced his decision to leave the Association, leaving the NAB without a leader at a time when the Association is facing an incredible number of challenges in Washington. One can only hope that the NAB acts quickly to replace Rehr with someone prepared to aggressively address the needs of an industry hobbled by the current economic climate, and challenged by regulatory issues that could further undermine the ability of radio and television operators to compete in today’s media marketplace. The potential broadcast performance royalty, which could require that radio operators pay musicians and record labels for the rights to play their music on the air, is but one of a number of fundamental challenges that need to be addressed very shortly by broadcaster’s representatives in Washington - perhaps in the next week or two when the House of Representatives Judiciary Committee may take up the "performance tax" issue (as the NAB has called it in their arguments on Capitol Hill).

What else will a new NAB President have to contend with?  In addition to the performance royalty, there seems to be a perception in many quarters that broadcasting is no longer the special medium that it once was that demands regulatory deference because of the public interest service that it provides.  Because of the lessening of some of Washington's regard for broadcasters,  there are many issues now before the FCC, Congress, the courts, and other agencies in Washington – all of which could have a serious impact on broadcasters - including:

• The final days of the DTV transition
• The FCC’s implementation of their White Areas order allowing wireless users to use parts of the TV spectrum – and the appeals and other attempts to overturn or modify that decision
• The reauthorization of SHVERA, to continue to allow satellite companies to beam local television signals into local markets – where parties are raising all sorts of extraneous issues about carriage rights and retransmission consent, possible changes in TV market boundaries, and changes in the rights of satellite carriers to import distant signals.
• The FCC’s localism proceeding, which could impose new obligations on broadcasters at a time when broadcast competition has never been so intense - when the marketplace should dictate how broadcasters best serve their communities
• Potential Congressional effort to bring back the Fairness Doctrine in some form or another
• A number of FCC proceedings that could affect new methods of advertising meant to combat technological changes – like embedded advertising and product placement that are meant to partially overcome the effects of DVRs.
• Congressional attempts to regulate advertising and programing – including potential efforts to restrict prescription drug ads, ED treatments, violent programming and programming that promotes unhealthy foods
• FCC attempts to reign in technical changes in FM stations to allow them to take steps to increase power and to move into larger markets
• Congressional moves to remove restrictions on LPFM stations on channels that are third-adjacent to full power facilities – and to potentially give these new stations rights to replace existing FM translators

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A recent stir was created when a Midwestern television company was reported to have signed a contract with a state government agency, promising to market the agency and its programs throughout the state.  This promotion was to include a segment in the company's televised news promoting the effects of the work of the agency.  Questions were immediately raised about whether this was prohibited by FCC rules.  But, when the news pieces ran, the company was very careful to state after these segments that they were sponsored by the station and the state agency.  As the FCC has no rules about what can be included in the "news" (and probably could not consistent with the First Amendment), the only real issue was one of sponsorship identification.  As the licensee did here, if the sponsor of the story is identified, making clear to the public who was attempting to persuade them on the issue addressed, there should be no FCC issues.

This is different from the issues that have arisen previously at the FCC, where there have been fines levied against television stations and cable systems for airing programming that was sponsored, but for which no sponsorship identification was provided (see our posts here and here).  This includes the video news release or VNR issues, where the FCC has fined stations for using news actualities provided by groups with a financial interest in the issue that was being addressed, but without identifying the fact that the material was provided by the interested parties.  Where a program addresses a controversial issue of public importance, the disclosure rules are more strict, requiring that the station not only disclose that it received money to air a story - but to also disclose anything that it got from the interested party - including tapes or scripts.

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We’re not even in what most would consider election season - except for the two states with off-year governor’s contests and those other states with various state and municipal elections. Yet political ads are running on broadcast stations across the country.  Republican groups have announced plans to run ads attacking certain Democratic Congressmen who are perceived as vulnerable, while certain Democratic interest groups have run ads about the positions of Republicans on the Obama stimulus package and the President’s proposed budget.   In addition to these ads targeting specific potential candidates, there are issue ads running across the country on various issues pending before Congress, or likely to be considered by Congress in the near term. These ads often have a tag line “write or call your Congressman and tell him to vote No” on whatever bill is being discussed. While these are not ads for political candidates that require lowest unit rates or specific equal opportunities, they do give rise to political file issues.  Stations need to remember to observe these requirements and put the required information into their public file to avoid FCC issues.

Under provisions of the Bipartisan Campaign Reform Act, when a station runs an ad addressing a “Federal issue”, the station must keep in its public file essentially all the same information about the ad that it would maintain for a candidate ad. The station must identify the spot and the schedule that its sponsor has purchased, the identify of the sponsor (name, address and list of principal executive officers or directors), the class of time purchased, and the price paid for the ads.  Federal issues are ones that deal with a Federal election or with any issue to be considered by Congress or any Federal government agency.

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