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Now that the Democratic and Republican conventions are over and the candidates begin the final sprint to the November 6 elections, the political broadcasting season goes into overdrive. Effective last Friday, lowest unit rates are in effect. In this year which will probably break all records for political spending, is your station ready to comply with all of the political rules? We thought that we’d provide a series of articles on some of the basics of the FCC political broadcasting rules, to make sure that your station is prepared to deal with the most common issues that arise in a political season.  Today, as the lowest unit charges have just kicked in, we’ll hit some of the common questions that we get about these rates.  In coming days, we'll address other areas of the FCC's political rules.

Essentially, lowest unit charges guarantee that, in the 45 days before a primary and the 60 days before a general election, candidates get the lowest rate  in any class of advertising time for a spot in that class that is then running on the station. Candidates get the benefit of all volume discounts without having to buy in volume – i.e. the candidate gets the same rate for buying one spot as your most favored advertiser gets for buying hundreds of spots of the same class.  But there are so many other aspects to the lowest unit rates, and stations need to be sure that they get these rules right.

It is a common misperception that a station has one lowest unit rate, when in fact almost every station will have several – if not dozens of lowest unit rates. Even on the smallest radio station, there are probably several different classes of spots.  For instance, there will be different rates for spots that run in morning drive and spots that run in the middle of the night. For each of these time periods with different rates, that class of time has a different lowest unit rate. On television stations, there are often classes based not only on daypart, but even down to the individual program. Each rotation on the station is its own class, with its own lowest unit rates (e.g. a 6 AM to noon rotation is a different class than a 6 AM to 6 PM rotation, which is different from a 24 hour rotator – and each can have its own lowest unit rate). Even in the same time period, there can be preemptible and non-preemptible time, each forming a different class with its own lowest unit rate. Any class of spots that run in a unique time period, with a unique rotation or having different rights attached to it (e.g. different levels of preemptibility, different make-good rights, etc.), has a different lowest unit rate.

One question on which we’ve written many times before, is one that still comes up with surprising regularity – that is whether these rates apply to state and local candidates, as well as Federal candidates. Indeed they do – so if your station is running advertising for candidates for mayor or city council; or for governor or the state senate; or even for the board of education, municipal court judge, or state attorney general – they and any other candidate in any public election gets lowest unit rates. See our past articles on this topic here and here.

In this season where PACs, Super PACs and other non-candidate interest groups are buying much political advertising time, broadcasters need to remember that these spots don’t require lowest unit rates. Stations can charge these advertisers anything that the station wants – no need to stick to lowest unit rates.

We are hearing that stations are facing the one exception to the above paragraph, where political parties are requesting lowest unit charges. In some cases, parties may in fact be entitled to these rates – but only where they are using specific types of donations subject to political campaign limitations, and where the advertising purchases are authorized and “coordinated” with a candidate (and, in Federal races, where the spots make that coordination clear with the “I approved this message tag”). Not all party spots are entitled to this treatment – only this special class of coordinated expenditures – and stations are entitled to get written confirmation from the party or the candidate that the expenditures are coordinated under the election laws. If not coordinated, the parties get charged the same as any other third-party organization.

Various advertising sales packages, and how they are factored into lowest unit rate calculations, also seem to lead to many questions by broadcasters. Candidates cannot be forced to buy packages on stations to get low unit rates. Instead, the package must be broken down by the station into a price per spot.  That is done by allocating the package price to the various spots of each class that are contained in the package. Then the allocated rates, on a unit basis, are compared to other spots of the same class that have been sold on the station to determine if the spots from this package have any impact on the station’s lowest unit rates. This allocation is done in an internal station record, which does not need to go into the file, and does not need to be revealed to the candidate.  Other than the station, only the FCC will see it should they do some sort of inspection.  We wrote more about this process of allocating spots in a package here.

And these are just some of the myriad issues that arise in computing lowest unit rates. Stations need to be familiar with these rules, and apply them accurately through the remainder of the lowest unit rate window. Watch for our next installment on political broadcasting basics – when we write about equal opportunities.

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At its meeting today, the FCC voted to require that television stations maintain most of their public inspection files online, in a database to be created by the FCC (see the FCC's Public Notice here).  While the details about this obligation have not yet been released, from the comments at the FCC meeting, much is already evident.   All TV stations will have to post their files to an online server to be maintained by the FCC.  Proposals for new obligations to post information about sponsorship identification and shared services agreements have been dropped, at least for now.  Most documents not already online at the FCC will need to be uploaded within 6 months of the rule becoming effective.  And, in the most controversial action, broadcaster's political files will need to be posted to the new online database, though in a process that is to be phased in over time.

The political file obligation will apply at first only to affiliates of the Top 4 TV networks in the Top 50 markets.  And only new information for the political file will need to be posted.  Information in the file before the effective date of the order apparently will not need to be posted online, at least not initially.  The requirement for posting the political file online will be reviewed in a proceeding to begin one year after the effective date of the new rules.  As stations outside the Top 50 markets, and other stations in those large markets, will not need to comply with the political file obligations until July 2014, the FCC will be able to reexamine the impact of the disclosure obligations before the compliance obligation for the political file expands to all stations. 

Issues about the posting of the political file dominated the conversation.  Commissioner McDowell, the lone Republican Commissioner, suggested that the FCC missed an opportunity for compromise.  Broadcasters concerned about the burden of uploading hundred or thousands of documents in the days before an election, and about the specific disclosure of their lowest unit rates in an on-line database available to anyone, anywhere, offered a compromise proposal that would have had them creating a summary of the candidate's purchases on the station, but would not have given the actual rate information.  McDowell suggested that the FCC start with that level of disclosure, and examine in a further proceeding if specific information about lowest unit rates needed to be disclosed online. 

Commissioner Clyburn seemed to acknowledge the competitive concerns of broadcasters having to give out their lowest rate online, where everyone, everywhere, can see it.  From her days as a newspaper publisher, she stated that she knew how hard it was to negotiate with potential advertisers who were always looking for a better deal on rates.  But the Commissioner said that she thought that the public demand for information - whether it be from candidates, regulators, public interest groups, whistleblowers or just people "with too much time on their hands" - outweighed the burden put on broadcasters.  Commissioner Clyburn suggested that the review after the first year could determine if the publicity of the lowest rates really did cause problems.

FCC Chairman Genachowski was the least sympathetic to broadcaster's concerns, essentially saying that, as the information was already in the station's paper files, putting it online was just the modern way to do disclosure.  He dismissed any claims that it would present a burden to broadcasters - claiming that it will actually save broadcasters money in the long run (query why the broadcasters would be objecting so much if the proposal really would save them money).

In fact, the theme that online disclosure was the modern way of doing things, and that it would save broadcasters money, was repeated throughout the presentation.  The Media Bureau attorney who presented the FCC decision suggested that yearly compliance costs would be between $80 and $400 per station (a number that broadcasters I'm sure would find surprising).  This question may well become one that will be crucial to the effective date of the proposal as Commissioner McDowell suggested that a Paperwork Reduction Act analysis of the order might prove troublesome.

More details of the proposal will be available when the FCC releases the full text of its order.  We will update this summary when the text is out and we've had a chance to review it. 

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While the off-year elections of 2011 are not yet history, the Lowest Unit Rate period for the 2012 Presidential election will soon be upon many stations in the early primary and caucus states.  Last week, Bobby Baker, the head of the FCC's Office of Political Programming, and I conducted a webinar for 13 state broadcast associations to provide a refresher on the political broadcasting obligations of broadcasters.  The webinar covered all the basics of the political broadcasting rules - including reasonable access, equal opportunities, lowest unit rates, the public file and sponsorship ID obligations, and the issues of potential liability of broadcasters for political advertising not bought by candidates but by PACs, unions and other interest groups. PowerPoint slides from the presentation are available here, and the video of the presentation can be accessed here by members of the state associations that were involved.  Additional information about the FCC's political broadcasting rules can be found in our Davis Wright Tremaine Guide to Political Broadcasting.

One particular issue came up in the webinar that warrants additional discussion and clarification. Rate issues are always the most difficult to explain, and the questions concerning package rates are among the most confusing.  The FCC has said that stations cannot force a candidate to purchase a package of spots containing multiple ads of different classes.  Instead, stations must break up the price of packages into their constituent spots and, if the package spots are running during a Lowest Unit Charge period (45 days before a primary or Presidential caucus or 60 days before a general election), determine if the spots in that package affect the lowest unit rates of the classes of time represented by advertising spots contained in the package.  For instance, if you sell a package of 10 morning drive spots with a bonus of 2 overnight spots on your radio station for $100, you need to break up the package price and allocate it to the spots from the two classes of time in the package - the morning drive and the overnight spots. So some of that $100 package price gets applied to the 10 morning drive spots (say, for example, $96) and the rest (for example, $4) is assigned as the value of the 2 overnight spots.  Thus, in this package using this allocation, the unit rate for morning drive spots would be $9.60, and the unit rate for overnights would be $2.  You then take these rates, and see if you have sold spots for these classes of advertising time at lower rates.  If so, the package has no effect on your LUR.  If not, the spots in the package may reduce the LUR for one or both classes of time.  In such cases, the determination of which classes' LUC will be lowered may be affected by the allocation of the package price that you make.

The allocation itself is supposed to be done at the time that the package is being written, so you should be looking at packages that you are writing now, as some are likely to still be running during the LUC window.  By making these allocations wisely, you can preserve rate integrity in high value time periods (if no allocation is made, it could be assumed all spots are of equal value - in our example dramatically reducing the value of the morning drive spots).  The allocation is an internal station document - not one that needs to go in your public file - so you write it down and put it in a station file, only to be disclosed if the FCC requests it.  The allocation that is made is one made by the station for the purposes of computing the true value of the spots in a package for LUC purposes, and need not be the same allocation that is shown on the face of any invoice provided to the purchaser of the advertising time.

The allocation of a package price only needs to be made when the spots are sold on the same station.  Packages that include spots sold on multiple stations need not affect the LUC on any individual station (though the package price should offered to candidates should allow the candidate to get the benefit of volume discounts, even if they don't buy in volume).  Network spots (wired or unwired) similarly don't affect the rates at any single station in that network.

The allocation process also can be of benefit to stations, as it can be used to allocate the price of spots in long-term packages, even if all the spots are all of the same class.  In many presentations, Bobby Baker has talked about how stations can take long term contracts, that may show a uniform rate for spots over a long period - like a full year's contract - and allocate the total purchase price by the true value of the spots.  For instance, if you sell a year-long package of 1200 spots to be run in prime time over the course of 12 months for $12,000, and the advertiser pays $1000 per month for 100 spots per month allowed under the contract, the value of the spots for LUC purposes need not be $10 per spot.  Instead, if there are real economic differences in the 12 month period that are reasonable (and are not set up to simply inflate the price of spots during the LUC periods), the station can allocate the package price differently than what is shown on the invoice that the commercial advertiser receives - allocating, for instance, a lower value to spots that run during January and February when the demand for spots is less, and higher values in the fourth quarter when holiday shopping may drive demand higher.  But remember, the allocation must add up to the total package price.  This allocation can also be used for sports packages, where an advertiser buys a season worth of games, but the games within the package against big rivals may in reality command higher prices, while those against also-ran teams may be less valuable.  These kinds of allocations are used to help value spots at their real economic value, as opposed to some arbitrary average that does not reflect the demand-based changes that are evident in any station's yearly advertising sales cycle.  Again, the allocation should be done when the package is written, in writing, in an internal document maintained in the station's internal files.

This is a complicated area, and broadcasters not fully understanding this process should consult their counsel.  While it may seem complicated to compute, and a paperwork burden, it does allow stations to preserve the value of spots that run in more highly valued dayparts when such spots are sold in combination with spots in less valued dayparts or with spots to be run at less valuable times.  So look at your packages carefully, as the packages that you are writing now may affect the value of the spots of various classes of time within those packages if those spots run during the LUC periods. 

We will, from time to time, write more about political advertising issues that may arise.  So check back from time to time, or look at our archive of past articles on political broadcasting topics, here. 

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Broadcast stations must charge political candidates the lowest unit rate that they charge any commercial advertiser for a comparable advertising spot during the 45 days before a primary and the 60 days before a general election.  Broadcasters need to remember that this applies to state and local races, as well as Federal campaigns, so those charges must be given to candidates for upcoming off-year November elections that are to be held in many states in less than a month.  As we've written before, while reasonable access does not apply to spots for state and local candidates, once a station decides to give these candidates access to the airwaves by selling time, most of the other political rules (lowest unit rates, equal opportunities, no censorship) apply.

With the Iowa caucus likely to take place on January 3, lowest unit rates will need to be afforded to presidential candidates by stations serving Iowa in mid-November, with stations serving New Hampshire, South Carolina, Nevada and Florida moving into a lowest unit charge window soon thereafter.  The FCC has held that candidates are entitled to lowest unit rates for caucuses as if they are primary elections.  And the rules apply to stations in neighboring states that have service into the states with early primaries and caucuses.  So many states are currently in lowest unit rate windows for local races, and others soon will be for the Presidential race.

Look for more information about the FCC's rules in our Political Broadcasting Guide.  I'll also be conducting a webinar summarizing the political broadcasting rules, featuring Bobby Baker, head of the FCC's political broadcasting office, on Wednesday - sponsored by the Michigan Association of Broadcasters in cooperation with the broadcast associations of at least 10 other states.  Get ready for the political broadcasting season by viewing our webinar or one of the other refresher courses sponsored by other associations in the coming months. 

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In the waning days before the mid-term election, we have received many questions about the applicability of the political broadcasting rules to state and local candidates.  In particular, we have seen a number of letters from attorneys representing candidates who are running for state and local offices (everything from Governor to county commissioner or school board representative), who claim that an attack by an opposing candidate is unfounded and that a broadcast station must pull that ad from the air.  Just as is the case with Federal candidates, ads by state candidates cannot be censored by a station.  Thus, except in certain very unusual situations (where the language of the ad would violate some Federal criminal statute, e.g. if it is obscene), a station must air the ad as it was created.  It cannot be rejected because the station disagrees with the content or the tone, and it cannot be pulled even if the opposing candidate believes it to be defamatory.  Because the station cannot censor a candidate's ad, they have no liability for the content of the ad, i.e. they cannot be held responsible for any defamatory content that it may contain, even if they are on notice of that content.  They cannot censor an ad by a candidate or a candidate's authorized campaign committee - whether that candidate is running for a Federal, state or local office.

Note that, as we have written many times, this is in contrast to those situations where a candidate complains about an attack ad sponsored by a non-candidate group.  In those cases, the station does have the option of whether or not to run the ad (the no censorship provisions of Section 315 of the Communications Act do not apply).  Thus, if the station is on notice that there is potentially defamatory content in an ad, it must do some investigation of that ad, and make an informed decision about whether or not to allow the ad to continue to run.  If it does not investigate, and continues to run an ad that is defamatory after receiving notice of that fact, in some extreme cases, it could face liability for that defamatory content.

Most of the other rules governing political broadcasting apply to state candidates as well as Federal candidates.  The requirement that candidate be charged lowest unit rates for the class of advertising time that the candidate purchases in the 60 days before the general election applies with equal force to state and local candidates as it does to Federal candidates.  And equal opportunities requires that a station sell comparable amounts of advertising time to competing candidates, or give free time to one candidate if their opponent appeared on a non-exempt program on the station, also applies to state and local as well as Federal candidates.  Public inspection file obligations - that a station put in its political file information about the amount of political time purchased by a candidate, the class of time sold, the price of the spots, and the schedule that will run - apply to state and local as well as to Federal candidates.

The principal political rule that does not apply to state and local candidates is the "reasonable access" provisions of the rules.  That is to say that stations need not sell time to candidate for all local races.  They can pick and choose in which races they will sell time, or they can restrict candidates for a specific race to buying time in particular dayparts in which the station has more inventory.  But once the decision to sell to candidate for a particular office is made, the other rules mentioned above apply.

More information about the political advertising rules can be found in the Davis Wright Tremaine Political Broadcasting Guide.

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While most of the FCC's political broadcasting rules have remain unchanged for almost 20 years, each year there are a few new wrinkles that arise, and seemingly a few misconceptions that make the rounds among advertising agencies that work with political candidates.  One such misconception that seems to be circulating this year is that an ad for a state or local political candidate does not need to have their voice or picture to be a "use" under FCC rules.  Only "uses" are entitled to lowest unit rates and subject to the no censorship provisions.  For some reason, agencies in several states have tried to convince broadcasters that, as long as a spot has a sponsorship identification at the end (and, for television, a textual sponsorship identification 4% of screen height for 4 seconds), that spot is a "use."  But that is not correct.  A "use" requires that the recognizable voice or picture of a candidate be in the spot - and that is true even for spots for state and local candidates.  Some advertisers may be confused by the change in Federal laws (now itself almost a decade old) that required that Federal candidates identify themselves in their ads and personally state that they approved the message of the ad,  Perhaps some of the advertisers think that, because the law for Federal candidate is so detailed, and because it does not specifically cover state candidates (though several state laws now have imposed the same obligation on state and local candidates in their states), there is no requirement at all for state and local candidates to appear in their ads.  But they are not correct - for a spot to be a use, a candidate him or herself must have a recognizable voice or image in that ad.

While it is not illegal for a station to run a state or local candidate's ad when the ad does not have a candidates voice in it, there are important ramifications for the station if the spot is not a "use".  First, without the candidate's voice or picture, the ad is not entitled to lowest unit rates.  There has been some controversy, not settled by the Federal Election Commission and perhaps subject to interpretations under state election commission rules, about whether a station that charges a candidate lowest unit rates for a spot not entitled to such rates may be making a corporate campaign contribution to that candidate, which is prohibited under Federal law and in most states.  Most importantly for the stations, if the spot does not have the candidates voice or picture in it, the spot is not covered by the 'No censorship" provision of Section 315 of the Communications Act.  That provision prohibits a station from rejecting a candidate's ad based on its content.  But, because the station can't reject the ad based on its content, the station has no liability for the contents of the ad.  Conversely, if the ad does not have the appearance by the candidate in it, then the station is free to reject it based on its content, and thus the station could theoretically have liability for the content of the ad.  As we approach a heated election season where stations don't want the obligation to check the veracity of every claim made by one candidate about an opposing candidate in an attack ad, stations should be careful to insure that spots purchased by candidates are in fact uses, containing the recognizable voice or picture of the candidate - even for state and local candidates. 

We have written about this issue of potential liability for the content of spots many times before, most recently in connection with ads by non-candidate groups that are now allowed from corporations and labor unions following the Supreme Court's Citizens United decision.  Our most recent article on that case can be found here.  For more information about the FCC's laws and policies regarding political broadcasting, check out the Davis Wright Tremaine Political Broadcasting Guide, available here. 

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The DISCLOSE Act recently passed the Committee in the House of Representatives charged with dealing with it, without many of the provisions that most worried broadcasters and cable companies.  We recently wrote about the DISCLOSE Act legislation proposed in both the House and Senate in response to the Citizens United Supreme Court case (which freed corporations and labor unions to spend money during political campaigns to explicitly support or oppose the election of particular candidates).  When introduced, in addition to provisions mandating new disclosure requirements for corporations, labor unions and other third parties who decide to run political ads, the legislation had a section expanding the requirements for lowest unit rates and reasonable access - extending these rights to political parties (as opposed to being limited to the candidate's own campaign committees, who are the only ones eligible under current law) and mandating advertising rates even lower than the current lowest unit charges in certain circumstances.  That section of the original bill also required that the FCC conduct audits of broadcasters' compliance with the political rules, and seemingly expanded the FCC political advertising obligations of cable systems.  The House of Representatives Committee on Administration this week approved the bill, sending it on to the full House for consideration.  The DISCLOSE Act's sponsors want to have the bill approved and in place by July 4th so that it will have an impact on the November elections.  The approval without these provisions, which may well have caused broadcasters and other media companies to come out in opposition to the bill and delayed its passage, signals that the Act may in fact move on the rapid timeline that its sponsors envision.

Of course, this is not the end of the story.  The Senate still has to consider the bill in committee, and the full House and the full Senate have to vote on the legislation before it is adopted.  At any point, amendments can be offered that could have the impact of returning some of these provisions of concern.  But, at least for now, while imposing some additional disclosure requirements on political advertisers, the House version of the legislation is much more palatable to the broadcasting community.  But watch this bill as it progresses through Congress in the coming month to see what else may develop. 

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In reaction to the Citizens United Supreme Court decision invalidating restrictions on corporate spending on advertising and other messages explicitly endorsing or attacking political candidates (about which we wrote here), new legislation, called the DISCLOSE Act,  has just been introduced in both houses of Congress seeking to mitigate the perceived impact of the Court's decision.  While the announced goal of the legislation is aimed at disclosure of the individuals and companies who are trying to impact the political process, the draft legislation, if adopted would have significant impact on broadcasters and cable companies, including potentially extending lowest unit rates and reasonable access to Federal political party's campaign committees (and not just the candidates themselves).  The draft legislation also proposes lower Lowest Unit Rates in political races where there are significant independent expenditures, more disclosure by broadcasters through an on-line political file, and even mandates for audits by the FCC of the rates charged by television stations to political candidates.  The language could also be read as an expansion of the current applicability of the political rules to cable television - applying reasonable access to cable systems and lowest unit rates and equal opportunities to cable networks.  As Congressional leaders are proposing to move this legislation quickly (with votes before July 4) so that it can be in place for the coming Congressional elections, broadcasters and cable companies need to carefully consider the proposals so that they can be discussed with their Congressional representatives before the bills are voted on by Congress.

While much of the bill is intended to force disclosure of those sponsoring ads and otherwise trying to influence the political process, the portions of the bill that amend provisions of the Communications Act include the following:

• An extension of Reasonable Access to require that broadcasters give reasonable access not just to Federal political candidates, but also to Federal political parties and their campaign committees.  In recent years where the Democratic and Republican Congressional Campaign Committees have been big buyers of broadcast time.  The extension of reasonable access to these groups could put even greater demands on broadcast advertising time on stations in markets with hot races, as stations could not refuse to provide access to "all classes of time and all dayparts", as required by the reasonable access rules.  This could crowd out other advertisers, and even make it harder for ads for state elections (as state and local candidates have no reasonable access rights) in states where there are hotly contested races.
• Extends the Reasonable Access requirements to require reasonable access to "reasonable amounts of time purchased at lowest unit rates."  The purpose of this change is not clear, as all political time must be sold to candidates at lowest unit rates in the 60 days before a general election and the 45 days before a primary. 
• Extends the requirement for Lowest Unit Rates to Federal political parties and their campaign committees.  Currently, the lowest unit charges apply only to the candidate's campaign committees, not to political parties.  Under the proposed language, LUC rates would also apply to the parties, and to groups like the Republican and Democratic National Campaign Committees
• Extends the "no censorship" provisions to Federal political parties and their campaign committees.  This change may be a positive for broadcasters.  As we have written before, a broadcast station cannot censor a candidate's ad.  But, as they have no power to reject a candidate's ad based on its contents, they have no liability should that ad contain material that could potentially be defamatory or otherwise subject the station to liability.  This proposed language would extend the no censorship rule to cover ads from Federal political parties, so that stations would not have liability for those ads either.  As many of the hardest hitting attack ads often come from these committees, if this legislation were to pass, stations would not have to worry about evaluating the truth or falsity of the committee's ads, as they would have no liability for the contents of the ads as they would be forbidden by law from rejecting the ads based on their contents.
• Provides for a lower Lowest Unit Rate in races where there are independent expenditures by any group of more than $50,000.  If a corporation or other group spends $50,000 in any political race, then all stations would be required to charge all candidates in the race the lowest charge made for "the same amount of time in the last 180 days" - not just the lowest charge for the same class of time as is then currently running on the station.  First, this would force stations to look back 6 months to determine their lowest unit rates.  For a primary election in June or July, rates in the doldrums of January or February could set the June political rates.  Moreover, the legislation does not state that it would look at the lowest rate for the same "class" of time over the previous 180 days, but instead it talks only about the same "amount" of time.  It is unclear if this is an intentional attempt to make stations sell prime time spots at overnight rates, but the current language of the bill seems to avoid the traditional distinctions on spots being sold based on their class.
• Forbids the preemption of advertising by a legally qualified candidate or national committee except for unforeseen circumstances.  This provision may well be intended to force stations to sell candidates advertising at their lowest nonpreemptible rates, and then treat the spots as they would much more expensive non-preemptible fixed position spots
• Requires the FCC to conduct random audits during the 45 days before a primary and the 60 days before a general election.  Audits would have to be conducted as follows: 
  • 6 of the Top 50 TV markets
  • 3 of the markets 51-100
  • 3 of the markets rates 101-150
  • 3 markets below 150
  • Audits would be required of the 3 largest networks, 1 independent TV network, 1 cable network, 1 provider of satellite services, and 1 radio network.  The language here, too, seems odd, as the requirements for audits are for "networks" of broadcast, cable and radio stations, not for local operators, and for an "independent television network" which would seem to be an inherently contradictory term - if a station is truly an independent, it is not affiliated with a network, so how can the FCC audit an "independent television network"?  It is unclear of whether this provision is requiring audits of the networks themselves, or of affiliates of the networks in the markets in which audits must be conducted. 
• Requirements that stations keep on their website information about all requests for the purchase of broadcast time by candidates, political parties or other independent political groups. Right now, the rules specifically do not require that political files be kept online.

There is also a provision changing the definition section of the Section 315 of the Communications Act which sets out the lowest unit charge provisions of the Act, along with no censorship and equal opportunities, which currently apply to broadcasters and the operators of cable television systems.  The proposed changes would add to the definition of a broadcast stations the phrase "and a provider of cable or satellite television service", making clear that all such services are included in the lowest unit rate provisions of the rules - which might be read as an attempt to include cable television networks within the scope of the rules.  In fact, as provided above, the law requires an audit of a cable network, implying that they will be subject to the rules if this law is adopted.  The law also adds a reasonable access provision to Section 315, which would seem to extend the concept of reasonable access to cable as well as to broadcast. The clear intent is unstated, but given the definitional language used in the language of the bill, and the fact that this new provision dealing with reasonable access is added to Section 315 which applies to cable (as contrasted to the Section 312 reasonable access provisions which do not), the extension of reasonable access to cable is seemingly the impact of this language.

The bill also extends the "stand by your ad" provisions of the Federal Election law to ads by third party groups, so a spokesman for any third party group buying ad time in connection with a political campaign will be forced to appear on the ad and take "credit" for that ad.  Disclosure of the Top 5 contributors to non-candidate political committees would also be required by this bill.

It is clear that the DISCLOSE Act could fundamentally change the way that broadcasters and cable companies deal with political advertising during election periods.  With the push to decrease rates and increase access to the airwaves, there could well be a a significant reaction by those being regulated.  Given the more expansive reading of First Amendment rights from the Supreme Court in the Citizens United case which spurred this proposed legislation, it would be quite possible that some broadcast or cable group could choose to challenge the mandatory access rights given to political parties under these rules, or the very cheap rates for political ads that could be read into the provisions of this bill.  There will be much to debate on this legislation, and the language of the bill could very well change as it makes its way through the Congressional processes.  But there are many important issues to consider - and broadcasters need to be aware of their possible impact. 

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On November 10, Davis Wright Tremaine's David Oxenford and Bobby Baker, the head of the FCC's Office of Political Broadcasting, conducted a webinar on the FCC's political broadcasting rules and policies.  The webinar originated from Lansing, Michigan, before an audience of Michigan Broadcasters, and was webcast to broadcasters in 13 other states.  Topics discussed included reasonable access, equal opportunities, lowest unit charges, and political sponsorship identification and public file rules. 

Seminar participants were provided with Davis Wright Tremaine's Political Broadcasting Guide, available here.  The PowerPoint presentation used in the seminar is available here.

 

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While it seems like we just finished the election season, it seems like there is always an election somewhere.  We are still getting calls about municipal and other state and local elections that are underway.  And broadcasters need to remember that these elections, like the Federal elections that we've just been through, are subject to the FCC's equal time (or "equal opportunities") rule.  The requirement that lowest unit rates be applied in the 45 days before a primary and 60 days before a general election also apply to these elections.  "Reasonable access," however, does not apply to state and local candidates - meaning that stations can refuse to take advertising for state and local elections (unlike for Federal elections where candidates must be given the right to buy spots in all classes and dayparts on a station), as long as all candidates for the same office are treated in the same way. So stations can take ads for State Senate candidates, and refuse to take ads for city council, or restrict those ads to overnight hours, as long as all candidates who are running against each other are treated in the same way.

One issue that arises surprisingly often is the issue of the station employee who runs for local office.  An employee who appears on the air, and who decides to become a candidate for public office, will give rise to a station obligation to give equal opportunities to other candidates for that same office - free time equal to the amount of time that the employee's recognizable voice or likeness appeared on the air.  While a station can take the employee off the air to avoid obligations for equal opportunities, there are other options for a station.  See our post here on some of those options.

So stations need to remember that they do have political broadcasting obligations for elections that may occur in their towns, cities, counties and states this year.  See the Davis Wright Tremaine Political Broadcasting Guide for more information about these issues.

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Come the New Year, we all engage in speculation about what’s ahead in our chosen fields, so it’s time for us to look into our crystal ball to try to discern what Washington may have in store for broadcasters in 2009. With each new year, a new set of regulatory issues face the broadcaster from the powers-that-be in Washington. But this year, with a new Presidential administration, new chairs of the Congressional committees that regulate broadcasters, and with a new FCC on the way, the potential regulatory challenges may cause the broadcaster to look at the new year with more trepidation than usual. In a year when the digital television transition finally becomes a reality, and with a troubled economy and no election or Olympic dollars to ease the downturn, who wants to deal with new regulatory obstacles? Yet, there are potential changes that could affect virtually all phases of the broadcast operations for both radio and television stations – technical, programming, sales, and even the use of music – all of which may have a direct impact on a station’s bottom line that can’t be ignored. 

With the digital conversion, one would think that television broadcasters have all the technical issues that they need for 2009. But the FCC’s recent adoption of its “White Spaces” order, authorizing the operation of unlicensed wireless devices on the TV channels, insures that there will be other issues to watch. The White Spaces decision will likely be appealed. While the appeal is going on, the FCC will have to work on the details of the order’s implementation, including approving operators of the database that is supposed to list all the stations that the new wireless devices will have to protect, as well as “type accepting” the devices themselves, essentially certifying that the devices can do what their backers claim – knowing where they are through the use of geolocation technology, “sniffing” out signals to protect, and communicating with the database to avoid interference with local television, land mobile radio, and wireless microphone signals.

The FCC will also have to complete the digital transition of TV translators and LPTV stations, which are not bound by the February 2009 conversion deadline. The FCC will need to set a digital conversion deadline – a conversion that many translator and low power licensees are not looking forward to paying for, but which may be necessary to preserve their over-the-air viewership as the analog tuner becomes an historical relic.

 

Radio, too, has its own technical issues to deal with. The Commission will be faced with resolving proposals for increased power for HD Radio operations (In-Band On Channel or IBOC digital radio), which some broadcasters have opposed as holding the potential for adjacent channel interference. The Commission will also be faced with resolving proposals for making the measurement of AM antenna patterns easier but, on a most fundamental level, it has also been asked to recapture some of the television spectrum, including Channel 6 and possibly Channel 5, and to use that spectrum for new radio stations. While some worry about the increased competition that new radio channels could bring, others see the expanded FM band as a way to eliminate congestion on the current band – giving LPFM stations places to operate without restricting FM upgrades or endangering FM translators – and others have even suggested that some or all AM stations could be moved onto these channels. This is likely to be a long-term project, but one that may get serious consideration this year.

 

Programming, too, may come in for more review this year. The Commission’s rules, adopted a full year ago, requiring TV stations to document in minute detail their public interest programming on Form 355, has never been implemented, as the form has never been approved by the Office of Management and Budget as being in compliance with the Paperwork Reduction Act. As this form required so much new information, for no appreciable purpose, it seems unlikely that it could survive such a review. Thus, the Form may be revised before being implemented, or it may wait for new FCC programming rules to be adopted as part of the FCC’s localism proceeding, mandating some form of public interest programming, which could then be used to justify the collection of some data requested by the questions on Form 355.

 

Other aspects of the localism proceeding seem likely to be resolved in 2009. The proposal for a fully manned main studio during all hours of operation, located in the station’s city of license, seems to be less likely to be adopted as regulators realize the costs that such a requirement would impose. Yet requirements for some form of mandatory ascertainment of community needs, plus some enhanced disclosure of public interest programming, seem more likely. Some of the proposals rumored to be on the table include requiring that broadcasters be judged by whether they perform certain tasks set out on a menu of options by which they would demonstrate their service of the public interest. One would hope that any set of menu options would be broad enough to recognize all the diverse ways that broadcasters serve their communities, and not so restrictive as to make every station meet the public interest in the same cookie-cutter way, and thus eliminating diversity in approaches that has allowed the broadcast industry to flourish.

 

The return of the Fairness Doctrine, which many conservative pundits have predicted, is unlikely because of the constitutional and practical problems of implementation. Yet some fear that  mandated political coverage and issue-responsive programming, which is more likely,  may effectively take the place of the Doctrine. Restrictions on violent programming could also be at the top of the Congressional agenda, as Senator Rockefeller, the new head of the Senate Commerce Committee, has supported such regulation in the past. . 

 

In the advertising world, the FCC will be resolving its embedded advertising and product placement proceeding, where some “public interest” groups have advocated a total ban on such advertising, while others have suggested immediate sponsorship identification, through a crawl or superimposed caption, of any product for which consideration has been paid for its inclusion. The related issue of video news releases – whether stations have to identify on-air anything given them at no charge (e.g. a script, video footage, etc.) before its inclusion into a news report – will also likely be resolved. Some have also suggested that the Commission may be planning some adjustments to its payola rules, though what those changes would be, and how they would improve on the current rules, is hard to fathom.

 

There is also real concern that the Congressional committees which oversee the FCC may well push proposals for limits on prescription drug advertising. The new chairman of the House Energy and Commerce Committee, Henry Waxman, has favored a moratorium on such advertising while the industry works out rules that restrict various perceived abuses. If industry voluntary agreements don’t satisfy Congress, new restrictions on advertising directed to children are also possible, especially in connection with ads for food considered unhealthy (however that may be defined).

 

Copyright issues could also impact the broadcast industry this year – perhaps in ways more fundamental than any of those other issues listed above. For radio, we may see the webcasting royalties issue be resolved one way or the other. Congress has given webcasters and the recording industry until February 15 to settle the webcasting royalty issues and, if that doesn’t result in a resolution of the issue, the pending appeals will be argued this year and perhaps resolved by the end of the year. 

 

2009 will also bring about a renewed attempt by the recording industry to impose a performance royalty on broadcasters for their over-the-air signals, the “performance tax” as it has been labeled by the NAB. That performance royalty would require broadcasters to pay the recording industry and recording artists royalties for the use of music over the air – in addition to the ASCAP, BMI and SESAC royalties that are already paid to the composers. The recording industry was able to get that proposal through the House Judiciary Committee last year, and will make a renewed attempt to have it adopted by Congress. If such an attempt is successful, this could potentially result in the transfer of billions of dollars from broadcasting to the recording industry.

 

TV has its own copyright issues, as the law permitting Dish and DirecTV to import local broadcast stations into local markets must be renewed, and some have suggested that this might be the time to reexamine the must-carry and retransmission consent process for both cable and satellite. While nothing firm is on the table, this issue could arise just as retransmission consent fees are beginning to offer television broadcasters a meaningful new revenue stream.

 

All of these issues seem like plenty - but we haven't even discussed the resolution of the indecency cases currently pending before the Supreme Court that should come this year.  The Commission ended 2008 with several large EEO fines, and this year may bring the resolution of long-pending petitions for reconsideration of the current EEO rules, as well as resolution of whether the Form 395 Annual Employment Report  will make its reappearance and whether the information on the form should be available to the public to judge the EEO performance of broadcasters or should the information be used simply for industry profiling.  Commissioner Adelstein suggested that the information should be public in his concurring opinion on these recent fines.  The FCC's change in its multiple ownership rules to allow some broadcast-newspaper combinations is still on appeal as it becomes increasingly irrelevant (as newspaper companies don't have the money to buy broadcast station, and broadcasters probably don't want to buy newspapers), and other issues as to the local radio ownership rules and the attribution of TV JSAs are still pending and may be resolved one day - perhaps this year.  Even political rules may be revisited in 2009 - as the Commission has never issued rules implementing the BCRA requirements, and it also has a long-pending proceeding to determine how to assess spots sold by on-line auctions for lowest unit rate purposes. 

 

With these (and other) possible changes in the regulatory landscape, one can only hope that the government regulates with a light touch. While the Democrats who have been on the FCC during the Bush years have advocated tough, detailed regulatory mandates, the Obama administration has offered the hope of a less doctrinaire, more inclusive regulatory process. Given the economic outlook for the coming year, and the costs and likely disruptions of the digital transition, an administration that promises hope should deliver some to broadcasters simply by taking a break from excessive regulation to give everyone a chance to adjust to the new realities of 2009. But stayed tuned to these pages to see what develops in this new year. 

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Press Reports (such as this one) have stated that the Obama campaign has purchased half-hour blocks of time on at least NBC and CBS to broadcast a political infomercial to be aired at 8 PM Eastern time on October 29.  Some reports indicate that other broadcast and cable networks will also be broadcasting the same program.  Did the networks have to sell him the time?  In fact, they probably did.  Under FCC rules, Federal political candidates have a right of reasonable access to "all classes" of time sold by the station in all dayparts.  This includes a right to program length time, a right that was affirmed by the US Court of Appeals when the networks did not want to sell Jimmy Carter a program length commercial to announce the launch of his reelection bid.  Because of this right, the networks often had to sell Lyndon LaRouche half hour blocks of time to promote his perennial candidacy for President. 

How often do networks (or stations) have to make such time available?  They only have the right to be "reasonable." While what is reasonable has not been defined, the amount of time that will be requested will probably be limited by the cost of such time.  Even were it not limited by cost, the FCC would probably not require that a broadcaster sell such a prime time block more than once or twice during the course of an election - and given the late stage that we are in the current election, it seems unlikely that more than one such request would have to be honored during these last few weeks of the campaign.  Stations do not need to give candidates the exact time that they requested - so the rumored reluctance of Fox to sell this precise time to the Obama campaign because it might conflict with the World Series would probably be reasonable - if they offered him the opportunity to buy a half hour block at some other comparable time.   

Sometimes, networks or stations may not have problems with the sale of such time.  Remember the repeated appearances of Ross Perot, complete with flip charts, during his 1992 campaign?  If a station has not sold half hour blocks of time in that daypart during the election period, there is no lowest unit rate that applies to such sale.  The FCC has said that the station can set a reasonable fee for the time, plus the station can factor in an increase based on the lost revenue of the subsequent time period because of the likely loss of audience due to the tune-out factor that may result from viewers not interested in the political message.

Local stations are under no obligation (other than perhaps their contractual obligations to the network) to air these half hour political commercials.  That may be one of the reasons that we no longer see the LaRouche infomercials, as many local stations decided to preempt those programs.

Equal time of course applies to these purchases.  If a half hour is sold to one candidate, then other candidates need to be able to buy such a block.  For Federal candidates, this does not make much difference, as they have their own reasonable access rights.  But should a station choose to sell a half hour block to one state or local candidate (it would have no reasonable access requirement to do so), it would have to sell blocks to other candidates for the same office who can afford it and who could request it within 7 days of the first candidate's use.

Cable networks have no reasonable access requirement, so they do not need to sell time at all to Federal candidates, much less program length time.  There has also been some academic debate as to whether network cable is subject to the equal time rules (see our post here).  But, given rumbles heard out of the FCC when Fred Thompson started his campaign, cable networks should consider carefully the equal opportunities obligations that could apply in such situations.

All in all, lots of issues for a seemingly simple half hour political commercial.

 

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Failing to meet the obligations set out under the law for required sponsorship identification on Federal political ads could, theoretically, cost candidates significant amounts of money – if stations decide to hold the candidates to the letter of the law. Under the terms of the Bipartisan Campaign Reform Act (“BCRA”), Federal candidates airing television commercials that refer to a competing candidate must specifically state, in the candidate’s own voice, that he or she has approved the ad, while a full-screen image of the candidate appears on the screen. In addition, the name of the sponsoring candidate’s campaign committee must appear in text on the screen for at least 4 seconds at 4 percent of screen height, with sufficient color contrast to make the text readable. If the proper identification is not contained in an ad, the candidates forfeit their right to lowest unit rates for the entire pre-election period (45 days before a primary or 60 days before an election), even with respect to future ads that comply with the rules. In recent days, representatives of Democratic Congressional candidates have reportedly filed complaints that argue that Republican competitors have not complied with the rules in several cases, as their written disclosures did not air for the full four seconds. The challengers argue that television stations must take away LUR for these candidates. While the statute say that the candidates forfeit their rights to such rates, the law is unclear as to whether stations are obligated to deny that rate to candidates after the right has been forfeited – and these cases could resolve this issue.

Television stations undeniably have the power to charge full rates to candidates whose ads have not complied with the requirements of the campaign statute. However, many stations have been reluctant to do so for minor infractions such as the ones identified in this complaint. Why wouldn’t television stations want to charge more money? For several reasons. First, denying one candidate lowest unit rates will no doubt trigger a fly-specking of every commercial by the competitor who filed the complaint against the first candidate, to try to trigger a forfeiture of the second candidate's right to Lowest Unit Rates, and adjudicating such complaints will no doubt make the station’s political sales process much more difficult and costly to administer. In addition, there is the question of whether, for a minor violation, a station really wants to give the other candidate a political advantage – especially if the candidate who gets charged more more wins the election and gets to vote on laws that may effect business in the future. But can stations legally continue to charge the lowest unit rate even when a candidate has not complied with the legal requirements for sponsorship identification?

The issue is really whether, by charging candidates the lowest unit rates when they have forfeited their rights to that rate, the stations are giving the candidates illegal campaign contributions – i.e. financial benefits from the station's corporate owners in the form of discounted rates. This is not the first time the issue has come up – in several past elections it has been brought to the Federal Election Commission who has, each time, tied in a 3-3 vote as to whether the practice was prohibited. Thus, the issue has remained unsettled. Television stations, and the candidates who have received the discounts, have argued that the candidates are not getting something at below market rates as, by definition, the LUR is the rate charged to the station’s best commercial customer.  Thus, that rate has been charged commercially and hence is not a “contribution” to the candidate, but is a service given for value. Those arguing on the other side contend that, in practice, candidates get benefits by being allowed to buy these spots at rates that most commercial clients could not obtain, and thus client’s are in fact getting a benefit.

 

For more information on the sponsorship identification requirements for political ads, see our Political Broadcasting Guide.  And watch these pages to see if the issues are resolved in time for this election, or if they will continue to be unresolved even if they reach the FEC once again.

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Political Broadcasting season is now in full swing, with the Democrats just ending their convention, and the Republicans beginning theirs next week.  Already, we've seen disputes about third party attack ads (see our post here), and there are bound to be many more issues about the FCC's political broadcasting rules that arise during what looks to be a very contentious political season.  For guidance on many political broadcasting issues, you can check out our Political Broadcasting Guide, with discussions of many common political broadcasting issues (including reasonable access, equal opportunities, lowest unit rates, public file issues, and political disclosure statements) in what we hope is an easy to follow question and answer format.   Broadcasters should also remember that the Lowest Unit Rate "political window" opens on September 5, meaning that stations cannot charge political candidates any more than the lowest rate that is charged a commercial advertiser for the same class of time run at the same time as the candidate's spot. 

We have reminded broadcasters that the Lowest Unit Rate (or "Lowest Unit Charge,"  often abbreviated as" LUC" or "LUR")must be available to all candidates for public office - including state and local candidates.  While state and local candidates have no right of reasonable access (meaning that a station can decide not to sell time to those candidates, or to restrict their purchase of time to particular limited dayparts), if the station sells state and local candidates time, it must be at Lowest Unit Rates during the political window. 

 Some of the other aspects of Lowest Unit Rates as discussed in our Political Broadcasting Guide:

 What is a class of time?

  

A class is a type of spot that has unique rights and characteristics. For instance, spots that run

in different dayparts which have different rates are of a different class, e.g. morning drive is a

different class from mid-day, which is different from afternoon drive. Each of those classes

would have its own lowest unit rate.

 

Even within a given daypart, a station may have spots of many different classes.  Basically, a spot is of a different class if it has different rights. Thus, in any daypart, there may be multiple classes of time, each with its own lowest unit rate. For instance, a preemptible spot would be of a different class than a fixed position spot each with a different lowest unit rate even if they both run during the same daypart. Different rotations can also be different classes with their own lowest unit rate, e.g. a spot which could run anytime between 6 a.m. and midnight could be a different class from one that can run between 6 a.m. and 6 p.m. If the stations sells these rotations, and sells them with differing rates, rights of preemption, or make good privileges, then they would be of a different class and each would have a different lowest unit rate. A candidate can buy spots of any of those classes at the lowest unit rate for that class, and he gets the same rights that commercial advertisers who buy that spot get (e.g. if the candidate buys spots in a 6 a.m. to midnight rotation, his spots are treated just like those of a commercial advertiser who buys those spots and they can run anywhere between those hours).

 

What commercial spots do you look at in determining the lowest unit rate for a given class

of time?

  

You look at the spots of that class running at the same time as the candidate s spots. You need

not look any further than those spots running (or being offered on a rate card) during the 45 days

before a primary or the 60 days before a general election. But even within the 45 and 60 day

periods, the rates can change. If, for instance, a long term package sets your lowest unit rate for a

particular class of time, and the last spot from that package is run midway through the political

window, after the last spot from the package runs, the rates for that class of time can go up for

the rest of the political window. Similarly, if spots are sold on a demand basis, the lowest unit

rate can change on an almost daily basis. If there are fire sales of spots during particular

periods within a window, the lowest unit charge for the fire sale does not set the rates for periods

outside of the fire sale period.

 

Do candidates have to buy in volume to get volume discounts?

 

No. Candidates get the benefit of all volume discounts, even if they do not buy in volume. For

instance, if spots are $10 each, or 12 for $100, the candidate can buy one spot for $8.33 (100

divided by 12) even though a commercial advertiser would have to spend $100 to get the volume

discount.

Check out the Guide for further information about these and other topics dealing with the law of political advertising.

 

 

 

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According to press reports, the Obama campaign is contemplating an ad schedule during the upcoming Summer Olympics.  This raises the question of what political broadcasting rules would apply to such a buy.  The Olympics run from August 8 through 24, before the lowest unit rate window for political candidates.  Thus, the Obama campaign is not entitled to lowest unit rates.  Instead, the candidate would only be entitled to a "comparable rate" to what a commercial advertiser in a similar situation would receive.  The campaign would not get frequency discounts that a big Olympics sponsor might get, unless the campaign bought in the same frequency, or other discounts that may apply to larger advertisers.  But the reasonable access provisions of the rules do apply once you have a legally qualified candidate, so it would seem as if at least some political ads would have to be placed in the Olympic programming.  In various political seminars held throughout the country, when this question has been raised, the FCC representatives have consistently said that, given the fact that the Olympics run for such a long period, at least some access must be made available to Federal candidates who are willing to pay the price that the airtime commands.

During the Super Bowl, the Obama campaign bought time, but it was purchased on local stations, not on the network itself (see our post here).  Affiliates of NBC would also have reasonable access issues of their own, were the Obama campaign to approach them directly, or were some local Federal candidate to request time on their stations.  As these stations have less inventory during the Olympics than does the network, the amount of time that would have to be provided would be less (and a candidate need not be given access to the exact time spot that they might request - not everyone can get the coveted spots in certain high profile event's finals - as long as the access that they are given is reasonable under the circumstances).  But the access rules would apply -so at least some access would have to be given.  Note that in a few states with late primaries for Congress and the Senate, it is possible that there would be Federal candidates entitled to lowest unit rates, even during the Olympics.  State and local candidates, however, have no right of access, so stations would not have to sell them time in the Olympics.

It is interesting to note that Senator Obama will not officially be the Democratic candidate during the Olympics, as the Democratic Convention will not occur until immediately after the Olympics conclude.  Certainly, the primaries are over.  Is Obama really a legally qualified candidate before the Convention?  Seemingly, at that point, he is still a candidate for the nomination and, having made a"substantially showing" that he is a candidate in 10 states, under FCC rules he would be qualified in all states. So, whether as a candidate for the nomination or for the general election, it would seem that the reasonable access rules would apply.  So we may well have a Little politics with our sports this summer - rather than having one following on the heels of the other.

For more on the law of Political Broadcasting, check out our Political Broadcasting Guide. 

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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.

One more political broadcasting issue needs to be taken into account when a station adopts posting - the need to disclose its posting policies in its political disclosure statement.  The Commission's rules specifically require that the station's political disclosure statement include:

An explanation of the station's sales practices, if any, that are based on audience delivery, with the stipulation that candidates will be able to purchase this kind of time, if available to commercial advertisers.

With any new sales practice, stations need to take into account the political broadcasting implications, especially in a hotly contested political broadcasting year like this one.  So consider those new policies carefully.  And, for more information about the political broadcasting rules, see our Political Broadcasting Guide. 

 

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With the shifting dates for the upcoming Presidential primaries, questions have arisen as to when broadcast stations must start to give Lowest Unit rates to candidates for these elections.  As it appears that, in some states, the primaries or caucuses for the Republicans and the Democrats may be held on different dates, the Lowest Unit rate periods in those states will be different for each party.  For instance, this week's decision by the Iowa Republican party to move its caucuses up to January 3 will move the beginning of the 45 day period for Lowest Unit Charges for Republican presidential candidates in Iowa to November 19. If the Democrats continue to hold to their planned January 14 caucus date, the Lowest Unit Charge period for Democratic Presidential candidates in Iowa will not start until November 30. Remember, Lowest Unit rates are in effect only for 45 days before a primary (or an open Presidential caucus such as that in Iowa) and the 60 days before a general election. They apply on a race by race basis. Just because you are within the LUC period before one election or primary does not mean that Lowest Unit rates apply to any other race.

This often comes up in Presidential election years when the Presidential caucus or primary in a given state is held early in the year, while the primary for the Congressional, state and local elections are held later in the year.  Even though there are declared candidates for those Congressional, state and local elections, Lowest Unit Charges will not apply to these candidates during the early Presidential primary window, but instead will apply only during the 45 days before their own primary elections (and, during those periods in the late spring or summer after the Presidential primaries and more than 60 days before the general elections, the Lowest Unit rates would not apply to the Presidential candidates).  Broadcasters need to remain alert as these dates are bound to keep shifting - perhaps right up to election day.

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Last week’s announcement of the partnership between eBay and Bid4Spots and the impending full launch of Google’s service to sell online radio spots beg for FCC action to clarify how these services will be treated for lowest unit rate purposes. We have written about this issue before (see our note here), and the increasing number of online sales tools for broadcast advertising inventory highlights the issue. If advertisers can buy spots using these online systems on a single station, or if stations offer their spots to a particular advertiser at a set price for a specific class of spot, it would seem that these spots could have an effect on the station’s lowest unit rate if the spots sold through the online systems run during lowest unit rate periods (45 days before a primary or 60 days before a general election.). For the peace of mind for all broadcasters, it would be worth the FCC clarifying the status of these services as we hurtle toward what will probably be the busiest political year ever.

In looking at some of these systems, it appears that some of these systems are premised on specific stations offering spots to advertisers on a cost-per-point basis, for specific dayparts as designated by the advertiser and agreed to by the station.  For instance Bid4Spots system advertises that it holds an auction to sell the spots on Thursday for the following week.  And it appears that spots must be sold by a station in specific dayparts on a non-preemeptible basis. For the week in which the spots are offered, the sale of such spots would appear to set a lowest unit rate for non-preemptible spots that run in the same time period. 

Before broadcasters panic, however, they need to remember that the Commission has always recognized that where spots are sold as a “network” – packaged together and sold as at a single price for multiple stations, the sale of the spots does not have a lowest unit rate impact on any of the stations in the network. If the spots are packaged and sold so that no advertiser is buying any particular station, and no station is selling to any particular advertiser, it would as if these online systems would operate as networks and not affect the lowest unit rates for any station using the service.   It is our understanding that some of the on-line auction systems work this way with spots from one station being packaged with spots from other stations so that the advertiser merely gets a certain audience delivery from the package of different stations that the on-line system puts together.

Even where there is a specific deal for one station to sell ads to one advertiser, the rates would not carry through the entire election cycle. In its 1992 revision of its political policies, the FCC recognized that lowest unit rates could vary throughout an election cycle. Stations could have “fire sales,” selling spots at a very low price during a few days where there was excess inventory, and those rates would only apply during that period of time (and as necessary to respond to any requests for equal opportunities that may flow from the sales of the spots that during these fire sale periods). In fact, as many stations adopt more sophisticated inventory control systems, rates can vary on a daily basis, with the lowest unit rte being set by the cheapest spot running during a particular time period. Thus, stations may be willing to use even the online systems that allow specific matching of stations and advertisers if they recognize that, for the periods during which they offer spots through the on-line system, the spots sold could affect lowest unit rates during that limited period.

But these concerns are all speculative, given the lack of specific guidance from the FCC.   We understand that the FCC has considered these systems and some guidance may be in the works.  Hopefully, that guidance will come soon, so that broadcasters and advertisers may recognize, if these choose, the benefits of this new technology without the fear of unforeseen implications on their political rates and practices.

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