In recent months, the broadcast industry has experienced one of the most active periods of regulatory activity in recent memory. Since November, the FCC has adopted enhanced disclosure obligations concerning the public interest programming of television broadcasters and requirements for an on-line public inspection file; rejected most calls for increased deregulation of broadcast ownership (allowing only the cross-ownership of broadcast stations and newspapers in the largest markets); established specific prohibitions against advertising practices that involved “no Spanish, no urban dictates”; placed mandatory disclosure obligations on television broadcasters in connection with promotion of the DTV transition; proposed rules that could favor low power FM stations over improvements in full-power broadcast services and existing FM translator licensees; and proposed sweeping regulation of broadcasters which could potentially require specific amounts of nonentertainment programming by all stations, restrict the flexibility of broadcasters’ location of their main studios, require 24-7 live staffing for all stations that operate on that basis, and perhaps even evaluate the music selection process of radio operators. Rumored to be in the offing are proposals to regulate embedded advertising, to adopt enhanced rules on sponsorship identification in connection with video news releases and payola-like practices, and perhaps even expand EEO reporting requirements (as the FCC recently asked for public comment on the employee-classification information for its long-suspended requirements for the filing of FCC Form 395 – the Annual Employment Report in which stations categorize all their employees by their employment duties, race and gender). And Congress has not been idle, with proposals introduced for the adoption of a performance royalty on over-the-air radio for the use of sound recordings, hearings about potential restrictions on prescription drug advertising, and a proposal to roll back the limited ownership reform adopted by the Commission in December.
With all this activity in a six month period under a Republican administration with a Republican majority on the FCC, during a time of great turmoil in the broadcast industry itself, as television prepares for the digital transition and broadcast revenue growth is slow or nonexistent (based on a variety of factors including general economic conditions and competition from the plethora of new media choices), many broadcasters are wondering what’s going on? And some fear even more changes could come about in any new administration that may come to Washington after the November elections, no matter what the result of that election. The one candidate with the most experience in the regulation of broadcasting, Senator McCain who has chaired the Senate Commerce Committee which regulates the broadcast industry, has by no means been a captive of the broadcast industry – leading efforts to enhance the use of LPFM and at one point pushing a spectrum tax proposal for television broadcasters for the use of the digital spectrum.
So what is going on? There was an interesting article in the Wall Street Journal several weeks ago discussing the cyclical nature of government regulation. While the article focused on the financial industry and the calls for re-regulation in light of the subprime mortgage problems, the thesis of the story is equally applicable to the broadcast industry. After almost 25 years of gradual deregulation by the FCC under both Republican and Democratic administrations, where the general consensus was that the less government regulation was better and more reliance on marketplace forces would insure service to the public, the regulatory pendulum has swung back with a vengeance in broadcasting, paralleling moves in almost every industry toward a more aggressive role of the Federal government. Proposals for regulation of broadcasting are simply falling into line with proposals for greater regulation of financial institutions and mortgage companies, airlines, consumer product safety matters, and environmental regulation, just to name a few.
Soon after I graduated law school and started representing broadcasters in 1980, the FCC began the deregulatory progression. Many of the issues that I dealt with in the first few years of my legal practice disappeared – ascertainment, quantitative program obligations, the regulatory “underbrush” (regulations governing many very specific advertising and operational practices of broadcast stations – from restrictions on horse racing ads to FCC enforcement of fraudulent billing practices of some radio stations and even the regulation of whether a station used accurate coverage maps in its promotional materials). At that point in my career, a senior lawyer told me that this was all part of a regulatory cycle that swung from more regulation to less than back again. While I was skeptical at that time, it appears that these statements are now, some 25 years later, being borne out. So, for what little comfort this may provide, the cycle will no doubt at some point run its course and the pendulum will begin to swing back in a more deregulatory direction at some point in the future. Let’s hope that this point is not too far in the future and, during this more regulatory phase, the regulators take the reality of the business into account, and don’t take actions that could, during this time of increasing turmoil in the business, jeopardize the robust over-the-air broadcast business that we have enjoyed for so long .