FCC Seeks Solution on Localism - What's Being Requested?

We’ve written much about the FCC Localism proceeding and the potential for some resolution of that proceeding in the near term. At the NAB Radio Show, held the week before last, FCC Chairman Kevin Martin suggested that broadcasters should voluntarily agree on a localism plan before there is any change in the administration at the FCC, suggesting that a future FCC may be less willing to compromise than the current one. Of course, a voluntary plan does not mean a code of conduct that broadcasters could unilaterally adopt and voluntarily agree to abide by, but instead it appears to be a request for standards that are voluntarily agreed to by broadcasters and then turned into some version of mandatory rules by the FCC. In a recent article in TV Newsday, some details of what the Chairman would like to see, and what he has apparently suggested to several state broadcast associations, are set out.

According to the article, a significant piece of the Commissioner’s suggested plan would include a requirement (or an option) for broadcasters to meet a mandatory localism obligation by funding investigative journalism conducted by journalism schools at various universities throughout the country. Apparently, stations that funded such journalism, or which aired the stories produced, would get some sort of localism credit. But what would this mean, and how would it impact broadcasters?

The first question is whether this proposal would, in and of itself, be sufficient to meet all of broadcaster’s obligations. There has been some talk of a menu plan, similar to what the FCC uses to assess EEO compliance, by which a broadcaster’s localism and public service performance could be measured. Would the funding of journalism programs be but one of many menu options that a broadcaster could choose from in deciding how to serve his or her community, or would it be the only required obligation? If it is the only obligation, it would seem to raise many issues – including practical ones (how many stations could rely on the same story, how much programming can these schools really produce and how much money do they need) and some that are more of an issue of legal theory – to what extent can the FCC compel a station to fund journalism that they may not agree with, or to air the product of that journalism - as the sole way of meeting its public service obligations.  Would it violate the First Amendment rights of broadcasters?  Even if this is just viewed as a safe harbor (i.e. do it and the FCC can't come after you), if it is the only safe harbor proposal that is set out, such a plan would essentially make compliance mandatory as no broadcaster would want to risk having their other efforts fall short of meeting FCC requirements under a case-by-case analysis.

 

These and many other issues will no doubt have to be resolved before any progress can be made on this issue. And with the election only a month away, and a new administration taking the reins of government in less than four months, is there still time for this FCC to act on this proposal? It remains to be seen.

Payola Settlements - The Details

In April, the FCC agreed to Consent Decrees calling for fines totaling $12.5 million from four of the country's largest radio broadcasters in order to settle allegations that these companies had engaged in violations of the FCC's payola rules. Recently, another public radio company stated in one of its SEC filings that it had received an inquiry from the FCC about practices at its stations, and rumors have been heard in Washington that there have been letters of inquiry on the subject sent out to other broadcast companies.  With this atmosphere, we thought that an analysis of the terms of the Consent Decrees, which imposed very specific operating conditions on these broadcast companies, was in order.  Thus, we have just published a detailed analysis, A $12.5 Million Teaching Tool - The Payola Consent Decrees, here.  This memo details provisions of those Consent Decrees which impose conditions on these companies requiring, among other things: limits on gifts that their employees can take from representatives of record companies, reporting requirements about their dealings with music companies, and requirements for the education of these companies employees about the requirements of the payola rules.  As set out in the memo, these Consent Decrees can serve as a set of best practices for all broadcasters in complying with the payola rules.

With the FCC restarting its Localism proceeding, about which we wrote yesterday, which asked for public comment on payola practices of broadcasters, the FCC's focus on payola has not abated with the $12.5 million fines imposed by the Consent Decrees.  So broadcasters should be assessing their policies to make sure that, if they get an inquiry letter from the FCC, they are able to provide responses that would lead to trouble.  We hope that this memo helps with that assessment.

Another Localism Hearing and Service to America

The FCC, after taking two years off, is looking to finish their field hearings on Localism by scheduling a hearing in Portland, Maine on June 29.  This hearing is not one of the six hearings to discuss possible new multiple ownership rules, but instead a continuation of the hearings started by Chairman Powell after public controversy over the 2003 multiple ownership rules.  In an ironic twist of fate, this public notice was released on the Friday before the National Association of Broadcasters Educational Foundation hosts their Service to America Awards Dinner to honor broadcasters and the public service commitment that they have to their communities.  Thus, while the FCC is looking in the hinterlands for evidence of the responsiveness of the broadcast industry to the needs of their listeners, some of the best evidence of that service was on display some 12 blocks from the FCC's headquarters.

The Localism hearings were part of a larger proceeding begun in response to the controversy after the 2003 multiple ownership rules.  When the Democratic Commissioners, Congressional legislators from both parties, and a variety of citizen's groups from across the political spectrum complained about how the public's input was not sought before the rules were adopted, the FCC tried to respond to some of those complaints by putting out a Notice of Inquiry on Localism.  The proceeding was to assess how well broadcasters were serving their communities, and the Notice asked for public comment on a grab bag of issues including the following:

  • whether a broadcaster's public interest obligations should be quantified (bringing back obligations abolished in the 1980s that required specific amounts of the programming of broadcast stations to be devoted to news and public affairs programming), 
  • should broadcasters be required to play specific amounts of local music,
  • is payola a major issue,
  • whether more programming should be devoted to political campaigns
  • whether the voices of minorities were being heard on the airwaves.
  • if the FCC should authorize more LPFM stations and take other steps to make airtime available to new entrants

Several Localism hearings were announced, and a number were held, with the last one being in Monterey, California in July 2004.  The Commission never completed the remaining announced hearings, one to be held in Portland, and the final one to be held in Washington, DC.  While the Commission has attempted to avoid the mistakes of the past by holding a half dozen public hearings on the proposed new multiple ownership rules, the fact that the Localism hearings were never completed was brought to the attention of the Chairman during some Congressional oversight hearings of the FCC earlier this year.  In response to questioning, the Chairman promised to finish those hearings, apparently leading to the scheduling of this proceeding in Portland.

The irony of scheduling the hearing just before the NAB's gala awards banquet is striking.  At the Service to America awards banquet, the NABEF honored stations from across the country that had undertaken extraordinary efforts to serve their communities - raising funds for disaster relief, adopting community issues and working to address those issues, or simply reporting on the daily matters of importance to their communities, the dinner highlighted these efforts.  Also, the billion dollar plus yearly contribution by broadcasters in public service time and fund-raising for charity were mentioned numerous times.  In fact, three of the FCC Commissioners (Copps, Adelstein and McDowell), were all in attendance and assisted in the presentation of awards.  While critics of the broadcast industry may complain about instances where some issue or another was overlooked, is there really a better system for insuring that every issue is covered?  Perhaps we'll find out at the Portland hearing....