Posted on November 4, 2008 by David Oxenford

The Promise of an Obama Administration for Broadcast and Communications Regulation

With Barack Obama's historic victory just sinking in, all over Washington (and no doubt elsewhere in the country), the speculation begins as to what the new administration will mean to various sectors of the economy (though, in truth, that speculation has been going on for months).  What will his administration mean for broadcasters?  Will the Obama administration mean more regulation?  Will the fairness doctrine make a return?  What other issues will highlight his agenda?  Or will the administration be a transformational one - looking at issues far beyond traditional regulatory matters to a broader communications policy that will look to make the communications sector one that will help to drive the economy?  Some guesses, and some hopes, follow.

First, it should be emphasized that, in most administrations, the President has very little to do with the shaping of FCC policy beyond his appointment of the Commissioners who run the agency.  As we have seen with the current FCC, the appointment of the FCC Chairman can be the defining moment in establishing a President's communications policy.  The appointment of Kevin Martin has certainly shaped FCC policy toward broadcasters in a way that would never have been expected in a Republican administration, with regulatory requirements and proposals that one could not have imagined 4 years ago from the Bush White House.  To see issues like localism, program content requirements and LPFM become such a large part of the FCC agenda can be directly attributed to the personality and agenda of the Chairman, rather than to the President.  But, perhaps, an Obama administration will be different.

One of the specific proposals of the Obama campaign is the promise to appoint a Chief Technology Officer as a cabinet-level position to help coordinate policy across the many government agencies that deal with technology and communications.  This position would be designed to develop policies that will enhance the competitive position of the United States in the world-wide technology revolution.  Clearly, such a position will create a new executive-level focus on communications policy that will affect the workings of the FCC.  How will this focus impact broadcasters?  With the unanimous bipartisan decision of the FCC on Election Day approving the use of unlicensed devices in the television band, the so-called "white spaces" decision, one might have a glimpse of the kinds of regulatory actions that could be expected from an Obama FCC (though hopefully not an example of the procedures for making that decision).  No longer will the traditional media or established communications companies be favored if there is the potential for some sort of transformative technology that can increase US technological competitiveness.

But the hope for an Obama administration is that the rhetoric of a transformative candidacy, one geared toward uniting the various divides of the country, will seep into the broader workings of the administrative agencies in Washington - that the pitched battles of one industry versus another, or one partisan viewpoint over another, will be replaced by a more cooperative spirit that will move the country, and specific industries forward.  One would hope that this spirit would encourage compromise, and would bring a new openness to government that will allow real discussion to take place on issues, rather than decisions being made based on agendas that are set in stone before the evidence is in and the arguments made.   One would hope that some of the unyielding positions that some regulators have taken on communications policy issues would be more open to persuasion and discussion.

To be more specific, one would hope that an Obama administration would, in the broadcast regulatory arena, be open to recognizing that we have a pretty incredible broadcast service in this country - one that can rapidly adapt to disasters, and can bend and shape itself to the needs and desires of the audience.  While there have been excesses in broadcasting here and there, these tend to be self-correcting, as witnessed by the recent divestitures of many radio and television stations by big groups - helping to bring back some of the localism lost by the industry's rapid consolidation in the early part of this decade. 

Some have feared that the return of a Democratic FCC will result in the return of the kinds of nitty-gritty broadcast regulation that has seemingly been advocated by some quarters of the Democratic party - a return of the Fairness Doctrine, the kinds of detailed programming disclosure requirements that have been adopted but not yet implemented for television broadcasters that impose great costs without any discernible regulatory benefit (see our post here), or the adoption of other specific regulations that increase government mandates without corresponding benefits.

But I am hopeful that an Obama administration would not be one to adopt unproductive regulation.  Clearly, the Obama administration will be one that will want to stress inclusiveness and opportunity for all in the media, and will look for ways to encourage minorities and other new entrants into broadcast ownership.  But if we look at the recent localism proceedings, for instance, we see that many members of the minority community have actually opposed the kinds of specific regulatory obligations that some have attributed to the Democratic Commissioners, as minority broadcasters and other new entrants realize that they need to make a living operating a station - that broadcasting is a business that must generate a profit.  And that specific and detailed regulation take flexibility and innovation away from broadcasters, and usually impact small broadcasters more than large conglomerates.  So an administration that wants to encourage new owners can't engage in a wholesale re-regulation of the broadcast industry.

Do I expect some more regulation?  Of course - but that seems to be a reaction to the current climate for all industries in Washington where there seems to be building a general consensus that that the philosophy of deregulation may have gone too far (see our post here).  But I would look for regulation around the edges, regulation that imposes some public interest obligations on broadcasters but ones that can be lived with - not ones that are imposed simply for the sake of regulation and which can impose a crushing burden on small business. 

From the rumors swirling around DC of the names of potential Chairs of the FCC in the new administration, many have worked at past Democratic Commissions, but many of these have spent time in the business community since leaving the FCC, and are thus familiar with meeting a payroll and the costs of regulation.   I believe that right now, we should keep hope alive and look at the Obama administration as one that may bring a new emphasis to the communications world while not unduly burdening those that are already operating in that world.  It is a new day - let's hope that it is indeed a brighter one for broadcasters.
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Posted on March 29, 2008 by David Oxenford

FCC's Acts to Increase Diversity in Media Ownership - Part 2, The Proposals for Future Actions - Channel 6 for FM, AM Expanded Band, Definition of Designated Entity, Must Carry for Class A TV and Others

We recently wrote about the Federal Communications Commission’s actions in their Diversity docket, designed to promote new entrants into the ranks of broadcast station owners. In addition to the rules adopted in the proceeding, the FCC is seeking comment on a number of other ideas – some to restrict the definition of the Designated Entities that are eligible to take advantage of these rules, 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. The proposals, on which public comment is being sought, are summarized below.

Definition of Designated Entity. The first issue raised by the Commission deals with whether the class of applicants entitled to Designated Entity status and entitled to take advantage of the Commission’s diversity initiatives should be restricted. One proposal is to restrict the Designated Entity status to companies controlled by racial minorities. The Commission expressed skepticism about that proposal, noting that the courts had throw out several versions of the FCC’s EEO rules, finding that there was insufficient justification offered by the FCC to constitutionally justify raced-based preferences. The Commission asked that proponents of such preferences provide a “compelling” showing of needed, as necessary for a constitutional justification for governmental race-based discrimination.

Alternatively, certain parties suggested that the current Designated Entity ("DE") status is too broad, as it could include all sorts of new, small businesses, even including some that are backed by wealthy individuals who do not need government assistance. Thus, if race-based classifications are not acceptable, these groups suggest that the Commission confer DE status only on those groups that demonstrate to the Commission, through a “full file” review, that they are socially and economically disadvantaged. This would be similar to some programs established by university admissions offices to avoid race-based classifications, but still admit minorities and members of other socially disadvantaged groups who might otherwise be overlooked in an admissions process. The Commission asks the proponents of these rules to explain what criteria the FCC would use to determine who is socially and economically disadvantaged, and whether the adoption of such a standard would require a unique review of every applicant who comes before the FCC seeking such status, or if there are objective criteria that could be used to make review easier.

FCC Form 323 Revisions.  To gather information about minority ownership, the Commission is also asking if it should revise some of the processes it uses to collect ownership information, particularly ownership information about broadcast ownership by minorities and women. This information is gathered currently on a station's Ownership Report, submitted every two years on FCC Form 323 (or more often if there has been a transfer of ownership).  Rather than filing ownership reports every two years on the anniversary date of a station’s renewal filing, the Commission asks if it should create a single, uniform date for the filing of FCC Form 323 ownership reports by all broadcast stations. The Commission also asks if it should require the filing of reports by stations owned by individuals and partnerships owned entirely by individuals (which are currently exempt from the requirement to file updated Ownership Reports every two years, as the Commission considers any ownership changes in these entities to require the filing of a transfer form, at a minimum a short-form Form 316 pro-forma transfer of control as, under the common law, any change in the partners of a general partnership represented the creation of a new partnership). Also, to insure that ownership information is correct, the FCC asks if it should conduct random audits of the Form 323 reports that are submitted.

Proposals For Changes in FCC Technical Rules to Increase Broadcast Opportunity.  The Commission also advanced certain suggestions to make available more broadcast stations for DEs to acquire. These include the following proposals:

  • Allowing FM licensees who are multicasting in digital to actually sell one of the multicast channels to a DE, which would be given a separate license for that station, which could itself be sold in the future, separate from the main station with which it is associated. 
  • Allowing AM licensees who operate an Expanded Band AM station (operating on 1610-1700 on the AM band) to keep both the expanded band AM and their original AM station in the traditional AM band if they are a Small Business, or to sell one of the stations to a DE within a year. Most of these stations were supposed to turn in one of these licenses at some point within the last few years (within 5 years of the commencement of operation by the Expanded band station), but many have been permitted to retain the stations on a temporary basis while this proposal, first advanced two years ago, makes its way through the Commission.
  • Reassigning TV channels 6, and possibly 5, for use for new FM stations after the digital television transition. Channel 6, which is immediately adjacent to the FM band, has been kept pretty much vacant under the DTV allocation table, to eliminate interference to FM noncommercial stations which sometimes occurs under current rules. We previously wrote about this proposal, here.
  • Allowing the change in city of license of a radio station to any other community within the same radio market (presumably to allow for better coverage of population centers) even if the move would leave the current community without any full-power radio service, if the applicant agrees to finance the construction of a low power FM station in the community that is being abandoned.
  • Proving must-carry status to Class A TV stations (presumably enhancing their economic viability). Class A TV stations are LPTV stations that were specially designated as Class A stations in a one-time window in the late 1990s, if they could show that they were originating local television programming and otherwise met all rules applicable to full-power stations (e.g. main studio, public file, children’s television rules). Such stations are given protected status from being bumped off the air by new full-power TV stations or increases in the facilities of existing stations.

Incubator Program.  In addition to these proposals, the Commission asked for comments on a proposal to create a trail “incubator program": by which a large broadcaster could receive an exemption from the radio multiple ownership rules so that it could have one more station in a market than would be otherwise permitted if it “incubated” the ownership of another radio station in the same market by providing financing or other assistance to the incubated station.

Proposals to Review Broadcast Transactions for Effect on Minority Ownership.  Finally, the FCC asked for comments on proposals that the Commission be able to evaluate any broadcast transaction for its potential effect on minority ownership, to deny temporary multiple ownership waivers in large broadcast transactions which would create temporary ownership holdings in excess of the ownership rules, and to allow minority owners to exceed ownership caps in any market if necessary for those owners to have holdings equal to those of the largest owner in a market (which might have grandfathered holdings).

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These proposals include ones that could create opportunities for many broadcasters and for many individuals who are interested in entering the broadcasting industry through the construction of new stations or the acquisition of existing stations.  There are, however, potential issues for some broadcasters, particularly in connection with the final proposal to review broadcast transactions for their effect on minority ownership, which could slow the processing of some transactions.  Broadcasters should review the entirety of the proposals made by the FCC, and file comments on those issues that most directly affect them. 

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Posted on January 27, 2008 by David Oxenford

Does the FCC's Approval of the Clear Channel Transfer of Control Provide a Window Into the Future?

Last week, the FCC approved the long-pending application for the transfer of control of Clear Channel Broadcasting from its public shareholder to several private equity funds. Even though the application had been pending at the FCC for over a year, the Commission’s decision was notable for the paucity of issues that were discussed. The decision approves the transfer, conditioned on certain divestitures by the Company and by the equity funds that will control the new company, including divestitures previously ordered by the Commission in connection with the investment of one of these funds in Univision Broadcasting but not yet completed, and rejects three petitions that, from the Commission’s description, did not involve fundamental issues about the nature of the overall transaction, but were instead devoted to certain limited issues, in two cases involving actions in a single market. The divestiture conditions were approved seemingly as a matter of course, and do not provide any new insights into the law concerning the FCC’s attribution rules (unlike the recent decision approving the transfer of control of Ion Television, about which we wrote here, which contained an extensive detailed discussion of what it takes to make an ownership interest “nonattributable” for purposes of the FCC multiple ownership rules). Given the lack of controversy in the Commission's order, what is perhaps most noteworthy about the decision are the concurring statements of the two Democratic Commissioners, which may provide some indication of the concerns of the Commission should we have a Democratic-controlled Commission following this year’s Presidential election.

Of course, as we’ve described in our posts about the FCC’s Localism Notice of Proposed Rulemaking (here), and the new rules regarding Enhanced Disclosure requirements for television broadcasters (here), the Commission has already begun to act in a far more regulatory manner than any other Commission in the past 20 years. Yet the issues raised by the Democrats in this decision are in areas not yet considered by the Commission. Commissioner Copps expresses his concern about the role of private equity in broadcast ownership, and whether such ownership is in the public interest. In numerous proceedings and in response to the presentation made at the FCC’s January meeting by the Media Bureau, Copps has suggested that private equity should be investigated, both to determine whether the Commission is fully aware of all ownership ties of the companies involved, and also (as emphasized in this case) for the potential economic impact on the operations of the broadcast stations caused by the new debt involved in the acquisition. Here, Commissioner Copps questions whether the announcement of a potential downgrade of the bonds of the Company if these deals occur should have been of more concern to the Commission. Private equity should be aware that, in a future FCC, an investigation of the economics of their operations should be expected.

Commissioner Adelstein, on the other hand, was concerned not so much about structural issues of the major investors, but instead about the operational affects of consolidated ownership. He has expressed these sorts of concerns previously in connection with questions of payola and other pay-for-play situations that may exist at broadcast stations, and in connection with the selection of music at radio stations owned by big owners. Here, his concern was about the advertising practices of consolidated owners, and as to whether these practices made it difficult for non-consolidated owners to compete. A petition was filed against the transaction alleging that Clear Channel unfairly competed by giving advertisers who spend 100% of their budget on Clear Channel stations some sort of discount or benefit. While the Commission found no concerns with such discounts (implying that they would be more concerned with a requirement that an advertiser, in order to buy any time on a station, spend 100% of its budget on co-owned stations), Commissioner Adelstein suggested that the Commission should have spent more time analyzing the advertising practices to insure that they were in the public interest.

These comments may provide a hint of where Commission policy will go in the future. Already, the Democratic Commissioners have been incredibly successful for members of the minority party in pushing their agenda at the Commission. If they become a majority, who knows what will happen?
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Posted on December 1, 2007 by David Oxenford

Ownership Waivers All Around - FCC Approves Sales of Tribune and Clear Channel TV

With a possible decision looming on December 18 on the Chairman's proposal to loosen the newspaper-broadcast cross-ownership rules (see our summary here and here), the FCC this week granted two applications involving the sales of the Tribune Company and of the Clear Channel television stations, where the decisions focused on the application of the multiple ownership rules - and where the Commission granted multiple waivers of various aspects of those rules - some on a permanent basis and many only temporarily.  And, in the process, both of the Commission's Democratic Commissioners complained about the apparent prejudgment of the cross-ownership rules and one complained about the role of private equity in broadcast ownership.  Both decisions are also interesting in their treatment of complicated ownership structures and, at least under this administration, evidence the Commission's desire to stay out of second guessing these structures. 

In the Clear Channel decision, the Commission reviewed the proposed ownership of the new licensee by an affiliate of Providence Equity Partners.  As there were no objections to the proposed sale, the FCC approval process was somewhat easier than it might have been - though the Commission did seem to be somewhat troubled by the fact that Providence was already a shareholder with an interest attributable under the multiple ownership rules in Univision Communications, which had stations in a number of markets in which the Clear Channel television stations operate.  The Commission approved the sale, giving Providence 6 months to come into compliance with the ownership rules - and conditioning the initial closing of the Clear Channel sale on Providence meeting divestiture requirements that it had promised to observe in connection with the Univision acquisition, and had not yet complied with (in fact the Commission recently asked for comments on a proposal by Providence to come into compliance in the Univision case by simply converting their interest in Freedom Communications, which has interests in Univision markets, into a nonvoting interest which would not be attributable under Commission rules)

The one dissent to the approval of the transaction came from Commissioner Copps, who objected to the fact the Commission has not fully evaluated the impact of private equity ownership on the public interest.  Commissioner Copps echoed comments he has made on private equity previously (see our post on those comments here, and on questions asked by Congress on those issues, here), asking questions about whether the Commission had sufficient information about who really made decisions about the operation of the Buying company (the applicant had identified a three member board as making all decisions for the company)  - and suggesting that the Commission conduct a proceeding to determine if private equity was a good or bad thing - whether it freed companies from the problems of public companies having to answer to shareholder whims and analysts expectations on a quarterly basis, or whether the debt load in acquiring the stations would be such that it would require these companies to strip the companies of many of their expenses including those necessary to produce public interest programming.  Of course, this is probably an unanswerable question, as there are no doubt cases where either or both of these scenarios are true, and the same is probably true with any buyer of a broadcast station, no matter where their financing originates.  But, perhaps most importantly, it sheds light on where the Commission might head if there is a change of administration in a year and Commissioner Copps plays even a greater role in FCC decisionmaking.

The approval of the Tribune sale provides perhaps an even better preview of what a change in administration could mean to the FCC.  The sale of the company from its current public shareholders to a company owned by an Employee Stock Ownership Plan (ESOP) and controlled by a single outside investor, Sam Zell, was approved by a three to two vote, along political party lines.  The approval included a permanent waiver for Tribune's ownership of an AM, TV and daily newspaper in Chicago - the majority of the Commissioners finding that the fact that this combination existed since each of the broadcast stations commenced operations, and the myriad of other media voices in Chicago, justified the permanent waiver.  Tribune's other newspaper-television cross-ownership situations were given temporary waivers.  Obviously, as the other waivers included newspaper-broadcast combinations in New York, Los Angeles and Miami, all markets with no scarcity of media outlets, that was not the deciding factor for the difference in treatment.  Perhaps it was the longevity of the waivers, which illustrate exactly what is prohibited by the current newspaper-broadcast cross-ownership rule.  The rule does not prohibit a broadcast company from acquiring a newspaper in the same market in which it has a television station - as Tribune did in these markets (because the FCC has no jurisdiction over the purchase and sale of newspaper companies).  So broadcasters are free to buy a newspaper in their market.  However, in doing so, they take a major risk as the rule prohibits the grant of any FCC application where such a combination would exist.  Thus, in connection with the broadcaster's next license renewal application, or in connection with an application for sale of the broadcast company (both license renewals of these stations and the sale of the Company were before the Commission in the Tribune case), the application of the rule's prohibition is triggered - requiring the consideration of the waivers.

The treatment of the temporary waivers was somewhat unusual, with multiple conditions on the length of the waivers - which was one of the issues to which the dissenting Commissioners objected.  The length of the waivers is first dependent on when the FCC rules on its multiple ownership proceeding.  If new ownership rules are adopted before January 1, 2008, then Tribune's temporary waivers would be for two years (at least for those markets for which a waiver would still be necessary - which would seemingly be only Hartford if the Chairman's proposals, summarized here, are adopted).  On the other hand, if the rules are not adopted by January 1, Tribune would have to come into compliance in 6 months (perhaps putting pressure on Congress to not take steps to block the rule change from occurring at the December 18 meeting).  However, the Commission also held that, should Tribune decide to appeal the Commission's decision (which one would expect), the waiver would last two years or until 6 months after the end of the appeal - whichever date is later.  As it appears that one way or another, the waivers are for at least two years, why didn't the FCC just say so?

One interesting objection dealt with in the decision was that raised by the Teamsters' Union.  The Union argued that the Commission should not permit the transfer of Tribune ownership to the ESOP unless the employees of the company, who would effectively be the majority owners of the company, have some say in its day-to-day management.  As proposed to the FCC, Sam Zell would make management decisions for the Company.  The Commission denied the objection, citing Section 310(d) of the Communications Act which requires that the Commission evaluate the buyer of a station who has struck a deal with the seller for that buyer's basic FCC qualifications.  The statute precludes the Commission from denying a sale because it believes that there might be some "better" buyer who theoretically exists.  Thus, the Commission felt that it was legally barred by second-guessing the corporate structure of the buyer, as long as that structure did not violate any rules of the Commission.

In this case, both Democrats dissented, arguing that the Commission's multi-tiered contingent waivers did not go far enough in forcing the break-up of existing media consolidations.  The Democrats would not even have allowed the Chicago combination to stay in place. 

These cases clearly demonstrate the divisions in the Commission on the question of broadcast ownership.  Initially, in neither case did the Commission seem too concerned about local TV duopolies in markets where there are at least eight owners - not a point of contention in either case.  But in expanding on the application of existing ownership rules, the Democratic Commissioners seemed to draw a line in the sand.   Clearly, if there is a change in administration, we may have a far different FCC, with far different priorities, seemingly one which would favor diversity in media ownership over industry ownership stability. In a little over a year from now, we will see how these divisions play out, and what a new FCC will have in store for broadcasters. 

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Posted on November 20, 2007 by David Oxenford

FCC Meeting to Consider LPFM Reform, Public Interest Requirements for TV Stations, and Minority Ownership Proposals

The FCC has released the agenda for its Open Meeting to be held on Tuesday, November 27.  The agenda is full of issues of importance to broadcasters, and several items may resolve issues that may be troubling - including issues relating to low power FM stations (LPFM) and resolving a long outstanding proceeding concerning the possibility of mandatory public interest obligations for TV stations.  The Commission also has on tap initiatives to encourage the entry of minorities and other new entrants into the broadcast business - even though comments on the Commission's proposals on this matter were received just a month ago.

First, the Commission is to release an Order on Low Power FM.  We have written about some of the issues that could be decided previously - including issues of whether or not to allow the assignment and transfer of such stations (here) and whether to give these stations preferences over translators and even improvements in full power stations (here and here).

On the TV side, the Commission seems ready to issue an order on the public interest obligations of television operators.  We wrote about the proposals - made as part of the Commission's DTV proceedings (though to be applicable to all TV stations), here.  Proposed rules included the standardization of quarterly issues programs lists, making station's public fies available on the Internet, and quantifying other public interest obligations. 

The proceeding to encourage minority ownership has a laundry list of new proposals, from allowing minority groups to buy expiring construction permits for new stations and giving them increased time to construct, to allowing various modifications of the multiple ownership rules that would allow investments by non-minorities in companies controlled by minorities or new entrants.  We summarized those proposals here.  With the last comments on these proposals just filed on October 15, this would be an exceedingly quick action - as actions on most rulemaking proposals usually take a year or more to resolve.

This could be an incredibly important meeting for broadcasters - so be sure to watch for the results on Tuesday.
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Posted on October 18, 2007 by David Oxenford

Push to Complete Multiple Ownership Overhaul By the End of the Year

According to an article yesterday in Broadcasting and Cable Online, and another article in the New York Times today, Chairman Martin of the FCC is looking to complete the multiple ownership proceeding (which we summarized here) by the middle of December.  According to the Times article, the Chairman is looking for relaxation of the current newspaper-broadcast cross ownership rules - the prohibition on the ownership of a broadcast station and a daily newspaper in the same market.  What the Chairman has in mind for the rules regarding local radio and television ownership is less clear.  But, no matter what is planned, forces are already mustering to attempt to delay the Commission action.

Contemplating a December action is certainly aggressive.  The Commission had promised to complete the two sets of public hearings - one on the ownership rules and a second on the localism provided by broadcasters - before reaching conclusions in this case.  Each set of hearings still has a final hearing to be held.  The Commission has yet to officially announce the date and location of either of these final hearings - though press reports have indicated that the Commission may look to hold one at the end of the month on the West Coast, and the final hearing in Washington, DC in early November.  In addition, the Commission has just received the final set of comments on the proposals to foster minority ownership, which the Third Circuit had indicated was to be part of the analysis in this proceeding when it stayed the effect of most of the Commission's 2003 multiple ownership decision and remanded that decision to the FCC for further consideration.  With the comments on minority ownership just having been filed, and comments on the Commission's own studies on the effect of consolidation not not due until next week (see details), and replies due early next month, does the Commission really have time to consider the issues raised in these comments in this proceeding and reach a December decision, or will some issues need to be delayed for independent consideration?  Seldom has the FCC finished any proceeding within a month and a half of the end of the public comment period - much less an important and controversial one like multiple ownership.

While the Commission's direction on newspaper cross ownership seems clear, less certain is the final result on the issues of the local ownership of broadcast stations.  While some television stations have pushed for greater ability to combine the ownership of local television stations, especially in smaller markets where such combinations can now only be established through waivers based on severe financial hardship (which take a very long time to process) or through arrangements that stop short of complete ownership or even direct combination of programming (see our description of one such shared service agreement, here).  With the increased costs of digital operations and other business challenges, many small market stations have been hoping for some regulatory relief, though convincing the Commission to allow less ownership diversity in small markets is always a difficult sell - no matter how good the economic justifications. 

Following the Commission's 2003 multiple ownership decision, the only significant portion of the decision to become effective was the tightening of the radio ownership rules.  While there have been some calls to relax the local ownership rules for radio, these calls seems somewhat muted -especially when contrasted with the calls from newspaper owners to be allowed back into broadcasting, and even when compared with the pleas of small market television for more ability to combine operations.  But, in connection with recent transfers of control of several large radio companies, there are numerous radio stations held in trust, awaiting disposition.  These trusts were formed because, after the 2003 tightening of the rules, certain local radio clusters were no longer in compliance with the rules.  The transfers of control triggered a divestiture requirement.  Could companies look to relief from the divestiture requirements through these upcoming rule changes?  And could the outcome of the proposed XM-Sirius merger affect the decision on local radio ownership?  If the Department of Justice and the Commission allow the merger by finding that these companies are not forming a monopoly in the satellite radio market because they are instead part of a larger market for audio services, wouldn't radio also be part of that greater market, and wouldn't that call for allowing more consolidation?  If one company can own 300 channels in a market, why should another be restricted to 8 (or maybe 13 or 18 should one consider what would happen if FM multicasting in the new IBOC digital radio format becomes more prevalent)?

Already, the anti-consolidation forces are beginning to muster opposition to any rapid resolution of the proceeding.  According to yesterday's Broadcasting and Cable report, the Senate Commerce Committee promised a hearing on the plans to bring the case to a close, while at least two Senators (a Democrat and a Republican) have already written the FCC a letter asking for a delay in the proceeding.   The anti-consolidation forces are also rallying to stop the decision (see the Press Release from the Stop Big Media Coalition, here). 

With so many questions to be answered, and the opposition that is already forming, we will see if the December decision is a real target - or but a trial balloon floated to see if anyone was paying attention.
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Posted on September 24, 2007 by David Oxenford

One Sign That Broadcasters Are About to Become Political Footballs - Obama Suggests Shorter Broadcast License Terms and Less Consolidation

At last Thursday's Public Hearing on multiple ownership in Chicago, about which we wrote here, a statement was read by a spokesman for Presidential candidate Barack Obama.  According to press reports, the statement expressed the candidate's positions favoring shorter license renewal terms for broadcasters so that they would be subject to more public scrutiny, as well as criticizing the FCC for allowing broadcast consolidation.  These thoughts essentially echo the comments of FCC Commissioner Copps, especially on the subject of license renewal terms, whose views we wrote about here.  While many press reports have asked if this statement by Senator Obama foreshadows the broadcast ownership debate becoming part of the presidential campaign issues, we worry that it may signal a far broader attack on broadcasters during the upcoming political year.  The statement by Senator Obama is but one of a host of indications that broadcasters may face a rash of legislative issues that are now on the political drawing boards.

Broadcasters make easy targets for politicians as everyone is an expert on radio and television - after all, virtually everyone watches TV or listens to the radio and thus fancies themselves knowledgeable of what is good and bad for the public.  But those in Congress (and on the FCC) have the ability to do something about it.  And, with an election year upon us, they have the added incentive to act, given that any action is bound to generate at least some publicity and, for some, this may be their last opportunity to enact legislation that they feel important.  We've already written about the renewed emphasis, just last week, on passing legislation to overturn the Second Circuit's decision throwing out the FCC's fines on "fleeting expletives" and making the unanticipated use of one of those "dirty words" subject again to FCC indecency fines.  Clearly, no Congressman wants to be seen as being in favor of indecency (look at the rise in the indecency fines to $325,000 per occurrence which was voted through Congress just before the last election), and First Amendment issues are much more nuanced and difficult to explain to the voter, so watch this legislation.

But indecency and ownership are not the only broadcast issues on the Congressional agenda.  Bills to regulate violence on television are pending (see our post here).  Proposals have been made to regulate the advertising of unhealthy food to children, which have been stayed off temporarily by a government commission to study the issue and suggest voluntary guidelines, but at least one Presidential candidate has suggested (as we wrote here) that legislation is an option if the voluntary reforms don't go far enough and move fast enough.  And LPFM, about which we wrote here, also may rise on the Congressional agenda. 

The FCC may itself feel the heat to do something (almost anything) in the election year, and in the last days of the Presidential term and perhaps the last days of the terms of some of the sitting Commissioners (as there is usually substantial FCC turnover after an election, no matter which party wins).  Many FCC issues, from rumored new rules on payola and sponsorship identification, to old issues long waiting for resolution, like the taping of broadcast programs and the extension of broadcast EEO rules to part-time employees and the return of Form 395 all await action.  So, in the crazy days before the election, watch carefully to see what surprises your government has in store.
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Posted on September 21, 2007 by David Oxenford

A New Push to Address Multiple Ownership?

Over a year ago, the FCC released its Notice of Proposed Rulemaking on amendments to the FCC's multiple ownership rules.  Issues from newspaper-broadcast cross-ownership, to local TV and radio ownership limits are all being considered.  Our summary of the issues raised in the NPRM is available here.  The FCC has been holding field hearings throughout the country on its proposals, gathering public comment on the proposals - the most recent having been held in Chicago last night.  Only one more field hearing to go and the Commission will have conducted the six hearings that it promised.  Many, including me, had felt that the timing was such that no decision in this proceeding could be reached until 2008 and, as that is an election year, the decision could quite well be put off until after the election to avoid making it a political issue.  However, there are now signs that some at the FCC are gearing up to try to reach a decision late this year or early next - presumably far enough away from the election for any controversy to quiet before the election.  With this push, others are expressing concern about a rush to judgment on the issues, and may well seek to delay it further.

Evidence of the FCC's increasing attention to the multiple ownership issues include the recent Further Notice of Proposed Rulemaking, asking questions about minority ownership and making proposals on how that ownership can be encouraged (proposals we summarized here).  The FCC has also asked for comment on several studies that it commissioned to look at the effects of ownership consolidation in the broadcast media (the public notice asking for comments is here, and the studies can be found here).  Comments on the Further Notice and the ownership studies are due on October 1, with replies due on October 15.  Some have suggested that this time table is unnecessarily accelerated, especially as certain peer review documents on the ownership studies were just recently released.

At last night's Chicago field hearing, the two Democratic Commissioners expressed their concern about a rush to judgment.  Commissioner Copps, in his Remarks at the hearing, expressed concern over the short time frame given for comments on the issues raised by the Further Notice.  Commissioner Adelstein suggested that the Commission appoint an independent panel of experts to review the ownership studies and report back to the FCC before any decision on the ownership rules is made. 

At this week's Future of Music Policy Summit in Washington, DC, a legal assistant to Commissioner Adelstein expressed concern over this rush to reach a decision, suggesting that the Chairman wanted to see the decision out before his term ended, and was looking for a decision early next year.  Several Congressional staffers on a panel about Capitol Hill activities that affect the music industry, as well as Senator Dorgan of North Dakota, all also expressed concerns about FCC action in this area, and indicated that both the House and the Senate intended to hold hearings on media consolidation this Fall, before any decision can be reached.

With battle lines being drawn, there are likely to be stormy times ahead in the multiple ownership debate.  In 2003, with a Republican-controlled Congress, there were a number of bipartisan Congressional attempts to roll back the FCC's relaxation of the ownership rules before the Third Circuit Court or Appeals blocked most of those reforms.  With a Democratic Congress, who knows what would come of any FCC relaxation of those rules in the coming months.  But we may well see that issue play out - and perhaps become a political football in the upcoming elections.
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Posted on August 4, 2007 by David Oxenford

FCC Proposes Multiple Ownership Exceptions to Foster Minority Ownership

In a Further Notice of Proposed Rulemaking, the FCC last week asked for public comment on a series of initiatives to promote the ownership of broadcast stations by minorities and other Socially Disadvantaged Businesses ("SDBs").  These proposals, which include the potential for the sale without requiring any divestitures of clusters of radio stations which exceed the multiple ownership rules now in effect, and the potential for investors to invest in stations controlled by SDBs, even if such investment would otherwise violate the existing multiple ownership rules.  The Further Notice was issued in response to a petition filed over a year ago by the Minority Media Telecommunications Council, which asked for a withdrawal of the FCC's Notice of Proposed Rulemaking on the Multiple Ownership Rules (which we summarized here) because that Notice did not address the promotion of minority ownership of broadcast stations.  MMTC claimed that the Third Circuit's remand of the 2003 Multiple Ownership decision mandated that consideration.  Comments on the Further Notice, which will be resolved as part of the current multiple ownership proceeding, are due on October 1, and replies on October 15. 

The Notice raises a number of suggestions for regulatory changes to foster the ownership of broadcast stations by minority owners and other SDBs.  In addition to allowing the transfer of grandfathered radio clusters that no longer comply with the multiple ownership rules, these include specific proposals that would accomplish the following:

  • Allowing investment by exiting broadcasters and others with attributable media interests into companies controlled by minorities without the investment being counted against the ownership holdings of the investing company
  • Allowing minority groups to purchase unbuilt construction permits, and get sufficient time to construct those stations, even if the construction permit is otherwise to expire as it has been outstanding and unbuilt for over three years
  • Granting some non-minority owned companies waivers to exceed the multiple ownership limits if they sell stations to SDBs (including a proposal to create tradable credits for creating minority-owned stations)
  • Allowing for the waiver of the alien ownership limits if the investment by foreign companies would assist a minority-owned company in getting into the broadcast business.
  • Revival of the policies permitting minority distress sales (where a broadcaster against whom there were issues pending which could lead to a revocation of a license could sell their station to a minority group and avoid the revocation proceeding) and minority tax credits  (where a broadcaster who sells to a minority group could defer gains on sale if the money was reinvested into any broadcast company in the future)

Some of these proposals could be implemented by the FCC, while others (like the tax certificate) would require Congressional actions.  Many would benefit all broadcasters - as they could allow investments in companies beyond the multiple ownership limits, or the rescuing of distressed properties or construction permits when unexpected issues arise.  However, there are also some proposals that might be of some concern to broadcasters, for instance requiring a certification that there was no discrimination in the sale of a station - as additional certifications always raise questions about what was meant, and whether or not some conduct may be misconstrued and lead to a fight over whether or not the certification was accurately made.  Similarly, the notice mentions a proposal for strict enforcement of the ownership limits.  That proposal could again lead to disputes over whether or not a broadcaster has violated the rules.  When JSAs and LMAs first arose, there were disputes over whether or not they were permissible.  These are still occasionally cases where there are questions of whether or not some business arrangement between competing stations goes too far under the rules.  This proposal would have to be carefully implemented to avoid punishment that are too strict for violations that may not be clear under the rules.

The Commission has also asked for comment on who would qualify to take advantage of any programs that may be adopted as a result of this proceeding.  Some of the proposals talk of minorities as being the beneficiaries, and others of Socially Disadvantaged Businesses. However, there are constitutional issues that can arise if these programs are made available only to minorities, thus it is possible that a broader category of SDBs could overcome any such issues.  However, it would then be necessary to define an SDB.  Would that include any small business under the guidelines established by the Small Business Administration, or are there some other definitions that should be established?

The proposals also call on broadcasters, the FCC and other groups interested in the broadcast industry to take more efforts to educate and encourage potential new entrants into the business, and to help ease their access to financing so that they can enter the industry.  All of these important issues will be addressed as part of the on-going multiple ownership proceeding, based on the comments filed in response to this notice.  As all stand to benefit from these proposals, broadcasters should review them carefully, and file appropriate comments.
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