Posted on October 31, 2011 by David Oxenford

Financial Challenges to Noncommercial Broadcast Funding - What Is the FCC Doing?

As Federal funding to public broadcasters faces serious challenge in a Washington looking to cut the budget for all but the most essential government services, and where voluntary contributions to all noncommercial broadcasters have been constrained by the economic issues faced by the entire nation, more and more noncommercial broadcasters are facing tough questions about the future.  We've seen colleges and municipalities sell stations that have been community fixtures for decades, and noncommercial groups (including some religious broadcasters) deciding to call it a day and liquidate their holdings.  At the same time, the ratings success of many noncommercial broadcasters (both public broadcasters and those owned by religious or other community organizations), especially in the radio world, are showing much success in developing a large listening audience.  With noncommercial stations, by law restricted to raising funds without commercial advertising, many are looking for new ways of operating.  How are FCC regulations and interpretations reacting to these new realities? 

The FCC's Future of Media Study (and the resulting Report on the Information Needs of Communities that we summarized here) recognized the importance of the diversity provided to communities by noncommercial broadcasters and, without detailing any proposals, indicated support for the development of new funding sources for those stations.  Similar general statements were echoed in the hearing on the report recently held by the FCC in Arizona.  But the options of the FCC in pursuing solutions are limited.  In a recent decision, a noncommercial entity that operated a number of stations in small rural markets asked for a waiver of the FCC's underwriting rules to allow it to air a limited amount of advertising for commercial entities, restricted to the top of the hour, and presented so as to not break up normal programming.  The applicant justified the request on the current financial climate that made donations and grants hard to come by, especially in the rural areas where this group operates its stations.  While the Commission's staff expressed sympathy for the applicant's financial plight, it stated that it was powerless to waive the Communications Act, which prohibits noncommercial stations from broadcasting "any advertising."  Faced with this prohibition, and a fear of opening the floodgates to similar requests, the FCC denied the waiver.

So what options are there short of amending the Communications Act (which, if groups of noncommercial broadcasters and others in the community who favor all types of broadcasting that NCE stations provide joined in, is not beyond the realm of possibility)?  One area might be for some clarifications and amendments to the FCC's own rules that interpret and implement the statute.  Based on the number of recent fines levied on noncommercial broadcasters for exceeding the limits of the underwriting rules, and from the reactions of noncommercial broadcasters in discussion during various presentations that I have done on complying with the underwriting rules (see, e.g., our article here about one such presentation), the rules are not necessarily straightforward, and often lead to confusion.  They get especially grey in areas of event-marketing, concert promotion, live appearance and other potential sources of ancillary revenue for noncommercial broadcasters, where such fundraising may have an incidental benefit to commercial groups.  Where are the lines drawn as virtually any area of commerce will have some incidental benefit to commercial entities, even if it is at the level of sales of the the station's electronic equipment, telephones, office supplies and other materials used to create any message on behalf of a nonprofit entity and to convey it to the listener?  Realistic, flexible and understandable rules need to be adopted.

While clarifying the underwriting rules may be helpful in this environment, there have been some troubling developments in the law surrounding fundraising for noncommercial broadcasters.  In a  letter of inquiry sent this summer to a noncommercial station involved in an LMA type arrangement  with another noncommercial broadcaster, the FCC raised numerous issues about such arrangements.  While nothing has been decided in this case, the fact that the letter was publicly released by the FCC raises questions about the continuing use of such arrangements in the noncommercial world.  As a policy matter, why these arrangements, with another noncommercial broadcaster, would be troubling is unclear, as the Commission has recognized that any sort of promotion for noncommercial entities is not advertising and not covered by the Communications Act prohibitions.  Why should it care if noncommercial broadcasters obtain programming from other noncommercial entities?  Many noncommercial licensees, not ready to sell their stations but facing tough economic times, may look at such arrangements as a way to retain the license and the flexibility to resume full independent operations when economic times are more robust.  Inflexibility in this area may cause the sale of more stations in the future.  We will see what happens as this case develops.

Changing times call for changing approaches to regulation and operations.  We will see where the FCC takes these regulations in the coming months, and where noncommercial broadcasters, facing the new reality of today's economic times, decide to push for change in the ways that they can and do they operate.

 
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Posted on June 9, 2011 by David Oxenford

When Can Underwriting Announcements Be Run on Noncommercial Radio and TV Stations?

The question has recently arisen as to when underwriting announcements can be aired on noncommercial radio and TV stations.  The New York Times recently quoted me on the subject in an article discussing the plans of PBS to experiment with putting underwriting announcements in programming, rather than merely in the breaks between the end of one program and the beginning of the next.  The FCC rules for both radio and TV state, in italics, that the scheduling of underwriting announcements "may not interrupt regular programming."  What does that mean?

In 1982, in adopting the rules as to the timing of sponsorship announcements and the acknowledgment of donations, the FCC relied on what was then a recently-enacted statute addressing the sponsorship of public broadcasting programming.  The House of Representatives report adopting that legislation contained language interpreting the meaning of the prohibition against these announcements interrupting regular programming.  The FCC relied on that language in adopting the rules currently on the book.  There, Congress said that announcements could be run "at the beginning and end of programs,...between identifiable segments of a longer program" or, in the absence of identifiable segments, during "station breaks" where the flow of programming was "not unduly disrupted."  For radio, this seems like a much easier test to meet, as there are always breaks in programs, e.g. between stories on a news program like Morning Edition, between guests on a program like Fresh Air, or between music sets on a noncommercial music-oriented station.  For TV, the issue is somewhat more complicated, thus the questions that the Times wrote about in connection with the PBS tests.

As discussed in the Times article, it seems to me that there are many noncommercial TV programs that have many natural breaks in their programs where underwriting announcements can be run without unduly disrupting the natural flow of the programming - breaks that sometimes are used for station promotional announcements.  Between segments on a segmented Nature program, or on a show like Antiques Roadshow, where the program evaluates several different items as to its value and authenticity, there would seem to be room for natural pauses between each item into which an underwriting announcement could be inserted.  Even in dramatic programming, between scene changes or in other natural breaks in the action, one could determine that the flow of the programming was not unduly interrupted by an underwriting announcement.  These are close questions that each station needs to evaluate on their own, to achieve compliance with the FCC's somewhat nebulous standards.

One consideration in all of this is simply the nature of noncommercial programs.  One reason that many noncommercial stations attract significant audiences is the mere fact that they are noncommercial.  If there are too many breaks in the programs, with too many announcements that looks and feel like commercials, stations risk turning off their audiences.  And, of course, stations need to be sure that they follow FCC restrictions on the content of underwriting announcements, avoiding calls to action, qualitative claims about sponsors, and price and sale information.  For more on these subjects, see my recent presentation to the Maine and Connecticut Broadcasters Associations,here.

Obviously, as governmental and other sources of funding become harder to find, public broadcasting stations need to look to the acknowledgment of contributors through these underwriting announcements as a more and more important source of financial stability.  It has been almost 30 years since these underwriting rules were adopted by the FCC, and most have remained pretty much unchanged since their adoption.  Perhaps, in today's new media world, the FCC should reexamine these rules and see if some further liberalization and clarification is not in order.  Maybe that will even be addressed in the Future of Media report to be released later today. 
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Posted on May 10, 2011 by David Oxenford

FCC to Study Economic Effect of LPFM on Full-Power FM - But Not the Economic Impact of Any Interference that May Be Caused

As part of the Local Community Radio Act which, among other things, repealed restrictions against protecting full-power FM stations from third-adjacent channel interference from LPFM stations, Congress required that the FCC conduct a study of the economic impact that such stations will have on full-power FM stations.  The FCC began the process of conducting that study, asking for public comment on a series of questions designed to look at that impact.  Comments are due on June 24, 2011, with reply comments to be filed by July 25.  The Commission asks for comments in two general areas, asking what impact LPFM will have on full-power stations' revenues and on their audience share, but tentatively decided that it would not look at any economic impact that interference from LPFM would have on full-power stations.

What led the FCC to this tentative conclusion?  The FCC said that the Act did not specifically require any study of the economic impact of interference and, since the principal purpose of the Act was to set out how the FCC should deal with interference remediation, Congress had already addressed all that needed to be considered about any potential interference.  This view was bolstered by the inclusion in previous legislation of a specific directive to study interference, which led to the report from the MITRE  Corporation.  That report concluded that there would be no substantial interference from LPFM to full-power stations, which opened the door to the passage of the Act.  Thus, the Commission reached the tentative conclusion that no additional study of the economic impact of LPFM was necessary, but they seek comment on that tentative conclusion.  We expect that there will be such comments.

Why would we expect comment on this issue?  Many broadcasters have disputed the findings of the MITRE report, contending that it underestimated or downplayed potential interference. Even though the legislation was adopted, it was widely reported that this legislation was the result of a compromise between broadcasters and LPFM advocates (see our summary here).  So one would think that, as a compromise, the parties would not have resolved all controversial issues - but instead agreed to disagree on those matters where consensus was not possible.  Usually, when legislation contains a clause ordering a government study, it's because of one of those 'agree to disagree" moments.  And, certainly, many broadcasters that I have talked to think that interference from a significant number of new LPFM stations, even if it is all cumulative and not the result of any one new LPFM station, will result.  Perhaps we will see these points made in comments on the interference question.

On the issues that the FCC believes need to be considered - audience and advertising competition - the FCC asks a series of questions.  On the question of audience competition, the FCC asks for comments on the following:

  • Will LPFM stations have an impact on the audience ratings of full-power stations?
  • Have existing LPFM stations had an impact on the ratings of full-power stations?
  • Will Arbitron show any impact of LPFM on full-power stations?
  • Is Arbitron the only way to measure any impact of LPFM stations on full-power station's ratings?
  • How can such measurements be made in non-Arbitron markets?
  • Even if the impact of LPFM on full-power station ratings can be assessed, is there any way to measure the economic effect of any such impact?

On the issue of the impact of LPFM on full-power station's revenues, the Commission asks:

  • Does LPFM underwriting impact the advertising market for full-power radio?
  • How much LPFM funding comes from underwriting?
  • Is there any way to assess the impact of LPFM on the revenues of full-power radio stations?
  • Is BIA/Kelsey the bet source of revenue data for radio stations, or should other sources be used?

Finally, the FCC asks if the economic impact should be assessed where the FM station has a coverage area that encompasses an LPFM, or when an LPFM is simply in the same Arbitron market.

The Commission is looking for specific data to make these assessments - something that is probably going to be very difficult to come by.  It may well be that the biggest impact is the one that the FCC has preliminarily decided not to talk about.  So broadcasters should be ready to comment on all these issues - including the impact of interference - all by June 24. 
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Posted on February 11, 2011 by David Oxenford

FCC Underwriting Rules for Noncommercial Radio and TV - A Seminar on the Issues

Fines for noncommercial broadcasters who air acknowledgments of their donors and contributors that sound too much like commercials have been a problem area for many noncommercial educational radio and television stations, and have resulted in significant fines from the FCC.  The FCC allows "enhanced underwriting announcements" that identify a sponsor, what their business is, and where they are located, but such information must be provided in an objective, non-promotional manner.  Earlier this week, I conducted a seminar for noncommercial broadcast stations who are members of the Maine Association of Broadcasters and the Connecticut Broadcasters Association.  During the seminar, we discussed the FCC rules that govern fundraising done on such stations.  The PowerPoint slides from that presentation are available here, and provide an outline of the FCC rules on underwriting, promotions, fundraising and related issues, with samples of announcements that have led to FCC fines for noncommercial stations.

We have written many times about FCC issues related to fundraising and other matters relevant to  noncommercial stations.  We have written articles about cases where the FCC fined stations for enhanced underwriting announcements that were too enhanced, and violated FCC standards by containing prohibited calls to action, inducements to buy, price information or qualitative claims (see, for instance, articles here and here).  Another article discussed fines issued by the FCC for improper underwriting announcements where the announcements were of excessive length, and where the announcement ran in programming that was not originated by the station and from which the station received no consideration.  Another article discussed the FCC prohibition on noncommercial stations interrupting their regular programming to raise funds for charitable groups other than the licensee.  You can scroll though other articles we have written on other legal issues for noncommercial broadcasters by clicking here.  Watch our blog for other issues that relate to noncommercial broadcasters to stay up-to-date on the latest developments about which you should be aware. 

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Posted on June 17, 2010 by David Oxenford

Noncommercial FM Station Fined $12,500 for Sponsorship Acknowledgments That Were Too Commercial

Stations that are licensed as "noncommercial educational" stations are prohibited by the FCC from running commercials - seemingly a pretty straightforward prohibition.  Yet drawing the line between a prohibited commercial and a permissible sponsorship acknowledgment is sometimes difficult in these days of "enhanced underwriting."   In a recent case, the FCC fined a noncommercial radio station $12,500 for repeatedly airing 4 announcements from sponsors that the Commission found to have crossed the line by being overly promotional.  These announcements, which appear to have been recordings of unscripted sponsor acknowledgments, demonstrate how carefully noncommercial stations must police their sponsorship announcements to avoid risking an FCC sanction.

The announcements in these cases are worth reviewing. Some have subtle promotional messages, while the areas of concern are more clear in others.  But in reaching its decision, the Commission goes through a close analysis of the wording of each announcement to see if the announcement contains "comparative or qualitative descriptions, price information, calls to action, or inducements to buy, sell, rent or lease", all prohibited language in a noncommercial sponsorship identification.  So, when one of the announcement referred to "beautiful Harley Davidson light trucks" sold by a local auto dealer who sponsored the station, the FCC found that this was a qualitative claim that went over the line.  Similarly, statements that "we have it here" or "where we are proud to be Mexicans" (these announcements having been run on a Spanish-language station in California) were found to be attempts to qualitatively distinguish this dealer from others, or to be inducements to buy - a prohibited call to action.  And a specific statement that "no downpayment" would be required on a purchase constituted the kind of price information that should not be contained in a sponsorship acknowledgment.  Another announcement for a local tire store had similar problems in the content of the ads, using phrases such as stating that the company "knows about tires" and that the company's product "reduces [the] loss [of tire] pressure" and "has less risk of suffering damages . . . last longer and [is] not too expensive cause you to save more . . . [and] save more in gas per mileage."

As evidenced by this decision, noncommercial broadcasters need to concentrate on the facts when delivering a sponsorship acknowledgment.  A station can identify the sponsor and provide a non-promotional description of what business they are in, and provide contact or location information.  But they need to keep these product identification statements short and generic, and avoid all that stuff that sometimes makes commercials on commercial stations interesting - the music, the hype, the reason why one business is better or different from its competitors, and the real push to make the listener want to patronize the sponsor.  We've written about some other cases where underwriting acknowledgments have gone too far and prompted FCC fines, here and here.  There is a fine line between the permissible and the prohibited, but it is one that noncommercial stations must carefully walk to avoid FCC penalties. 
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Posted on August 1, 2009 by David Oxenford

David Oxenford Discusses Legal Issues at the Christian Music Broadcasters Momentum '09 Conference

On September 10, 2009, David Oxenford addressed the Christian Music Broadcasters' Momentum '09 Conference in Orlando, Florida.  Dave' s presentation was titled 18 Issues in 18 Minutes: What a Broadcaster Should Worry About From Washington DC.  In 18 minutes, Dave discussed topics including the FCC's proposed localism rules, sponsorship identification and noncommercial underwriting issues, contest fines, FCC technical operating and public file rules , FCC EEO obligations, and copyright issues including streaming fees and the proposed broadcast performance royalty.  The 18 minute presentation to a general session of the conference was followed by a one-hour "Digging Deeper" session where conference participants asked for more details on many of these issues.

A copy of Dave's PowerPoint presentation used for the 18 minute session can be found here. 

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Posted on May 11, 2008 by David Oxenford

FCC Fines Noncommercial Station for Enhanced Underwriting Announcments that Were too Commercial

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

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

So what is a licensee supposed to take away from this decision?  Basically, keep the ads very straightforward.  "This program is sponsored by XXXXX business, located at YYYYYY, which sells [plain factual description], "[insert business' slogan here]."  Essentially, the slogan is the only selling point - the remainder of the ad has to be without color to avoid problems.  The Commission will give the licensee the benefit of a doubt in a close case - but it is much easier to argue that it is a close case when the spot sounds like a fairly simple announcement of who is sponsoring a program, instead of like a commercial announcement.  Too much hype and you're asking for trouble.  So keep it simple and avoid problems.
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