A new year – and our annual opportunity to pull out the crystal ball and look at the legal issues that will be facing broadcasters in the new year. We’ve already published our 2024 Broadcasters Calendar and, as we noted before the holidays, it highlights the many lowest unit rate windows for the November election. With a heavily contested election almost upon us, there may be calls on the FCC to modify regulations affecting political broadcasting or for more monitoring of broadcasters’ online public files, which caused so many issues in recent years (see for instance, our posts here and here). Even if there are no FCC proceedings that deal with the rules for political broadcasting, the election will be watched by all broadcasters, and all Americans, to see the direction in which the country will head for the next four years. With that election looming, 2024 may be a very active year in regulation as there traditionally is significant post-election turnover at the FCC no matter which party wins. With that turnover in mind, we may see Commissioners looking to cement their regulatory legacies in the coming year.
Last year, we noted the number of pending issues at the FCC that had not been resolved because of the partisan deadlock on the Commission while the nomination of Gigi Sohn to fill the one vacant seat was stalled in the Senate. That deadlock was finally overcome by her withdrawal from consideration and the subsequent nomination and confirmation of Anna Gomez, who was sworn in as a Commissioner in late September. Since then, the FCC has acted on several long-pending priorities, including the adoption of open internet rules and, for broadcasters, last week’s adoption of an Order resolving the 2018 Quadrennial Review of the local broadcast ownership rules (see our summary of that action here).
The adoption of the Quadrennial Review order does not bring to an end all discussion of the broadcast ownership rules, as broadcast interests have indicated the likelihood of an appeal of an adverse decision. The decision almost invites such an appeal. It acknowledges the significant adverse impact of digital competitors on the audience and revenue for both radio and television, but declines to take any action to lessen ownership restrictions on broadcasters because a majority of FCC Commissioners view these over-the-air media as separate markets from the broader audio and video markets, seemingly on the basis that broadcast media are the only media with local interest obligations. Those obligations are imposed by regulation – so the FCC’s conclusion seems to be that because these services are regulated in one way (i.e., their public service obligations) they should also be regulated as to how much ownership one party can have in a market. In other words, one set of regulations compels more regulation, while digital audio and video competitors go virtually unregulated. And because the FCC determined that imminent economic failure was not on the horizon for either radio or TV, the conclusion was reached that the ownership regulations should stay in place in their current form. Whether this decision meets the statutory standard to weigh competition to determine if the local ownership rules are still necessary in the public interest will no doubt be raised in requests for review of this decision that may be filed this year. Questions will also likely be raised in the FCC’s new proceedings to follow up on its December 2022 initiation of the 2022 Quadrennial Review (about which we wrote here), as the FCC is statutorily obligated to go through this process of reviewing its ownership rules all over again.
The ownership decision was not the only hint of what is likely to come in 2024 from FCC activity in the waning days of 2023. As we noted in our blog article on the ownership decision last week, the FCC has also added to its list of written orders that have been completed and are circulating among the Commissioners for their review and approval an order and a notice of further rulemaking on its broadcast EEO rules. As we noted last week, and have written before, the FCC has been looking to reinstate the Form 395B, requiring all broadcasters to annually report to the FCC on the race, gender, and ethnicity of all of its employees. The FCC has been considering the return of this form for about two decades, needing only to solve the concerns that originally led to its demise – the fear that the FCC would use the data to penalize broadcasters who don’t meet some sort of racial or gender quota if their workforce numbers don’t track with those in the area where they operate (the collection of this information was stopped when a court suggested that the FCC’s penalties for broadcasters whose workforces did not reflect the workforce in their service areas could force discriminatory hiring decisions based solely on race or gender). Given the long consideration that this issue has been given, and the recent public statements from Commissioner Starks and a number of Democratic members of Congress that the form should return so that the FCC can be fully informed about the demographics of the broadcast workforce, we expect that the order will reinstate this form.
The topic of the further rulemaking is less clear. The Pai Commission asked how the broadcast EEO rules could be revised to make them more effective (see our article here). As there has been no action on that notice after comments were filed, we expect that the FCC will be proposing some changes in EEO enforcement intended to address the desire to improve its effectiveness. Exactly what those proposed rules will be is unclear, as the comments advanced when the issue was raised by the Pai Commission went all the way from requiring more frequent reporting and more EEO audits, to lessening the restrictions on most small broadcasters. While we don’t know what is coming, we expect that something will be out soon.
Expect resolution of another long outstanding proceeding – the FCC’s proposal to bring more definition to the requirements that broadcasters identify when program time has been purchased by a foreign government or its agents – and when that happens, to broadcast on-air sponsorship identification and provide information in a station’s online public file. The rules requiring those actions are already in place, but instead of continuing to rely on broadcaster to generate their own certifications to be obtained from buyers of program time on their stations, the FCC is proposing a detailed FCC-approved certification that broadcasters would need to obtain from every buyer of program time. The FCC also proposed to require that the certifications be placed in a station’s public file regardless of whether they indicate the involvement of a foreign government (currently, the public file disclosure is only required when a foreign government is involved). This is not a partisan issue, with both Democrats and Republicans looking to identify foreign government sponsored programming, so look for action on the pending proposals soon.
For radio, there are various technical proposals that are still on the table for possible consideration. Proposals for a Class C4 FM service (here) and the limited origination of programming on FM boosters through “zonecasting” (here) are pending and could be given further consideration. The C4 proposal is only at the Notice of Inquiry stage so any final rules, before being adopted, would have to be put out for public comment in a Notice of Proposed Rulemaking. The zonecasting proposal has already been on a Notice of Proposed Rulemaking so it is ripe for decision. Zonecasting would allow limited origination on FM booster stations, allowing a broadcaster to target commercials or other information to particular parts of its service area. So, for instance, a radio station could, during the same commercial break, broadcast car commercials for different dealers in different parts of its coverage area. The FCC proposals have been vigorously contested, opposed by many prominent broadcast companies for fear of creating more interference on the FM band and also disrupting traditional radio markets by, for instance, allowing high powered stations to target suburban markets, taking away local advertisers’ ad dollars from suburban stations. Throughout 2023, we saw continued ex parte meetings at the FCC where various parties expressed their opinions on the issues to the FCC. This proceeding could be considered by the Commission this year. Proposals for increased power for HD subchannels for FM radio are also on the table and ready for Commission action (see our articles here and here).
While not part of the Quadrennial Review process, the question of the national cap on television ownership could also be a subject that the FCC could review. Television companies are limited from having an attributable interest in television stations reaching more than 39% of national television households. There are several television companies that have exceeded that threshold by relying on the “UHF Discount” that counts UHF stations as reaching only half the households in their markets, a legacy from the days of analog television broadcasting when VHF stations (those operating on Channels 13 and below) were the preferred means of transmission. Once the conversion to digital occurred, the tables were reversed, as UHF channels are generally acknowledged to have superior transmission capabilities, an advantage that continues in the new ATSC 3.0 “Next Gen TV” transmission standard.
Recognizing that reversal, the last Democratic Commission abolished the UHF discount (see our article here) only for that action to be reversed by the Pai administration (see our article here). The Commission under Republican Chairman Pai questioned whether the FCC had the authority to repeal the UHF discount, as that discount had been in place when Congress enacted the 39% cap. That administration also started a proceeding to review the national ownership cap for television companies, asking if the FCC could amend that cap on its own (or whether it needs authority from Congress) and, if so, what the limits on national ownership should be. That proceeding has never been resolved. With a fifth Commissioner now on the FCC, the UHF discount could again be considered, particularly if there is a proposed acquisition that places the issue before the FCC by relying on the discount to comply with the ownership rules.
While the FCC in 2023 resolved many of the most pressing issues on the ATSC 3.0 transition by retaining the requirement for full power stations that convert to the new standard to retain a signal in the old ATSC 1.0 standard (by programming a multicast stream on another station in the market) until at least 2027, and by deciding that, in such situations, it is the programming station, not the host, that is responsible for the legal compliance of the multicast stream serving as the ATSC 1.0 lighthouse, the FCC is still working with the NAB to look at ways in which the ATSC 3.0 transition can be facilitated. Working committees from throughout the industry are reviewing the transition, with proposals for action due in June.
Also potentially on the table is a review of the status of “virtual MVPDs” – online offerings of cable and broadcast programming that appear very similar to packages offered by cable and satellite TV providers, but which are not currently covered by the must carry/retransmission consent rules. The FCC started but never resolved a proceeding looking at these issues in 2014 (see our article here). Some broadcast companies have urged such a review, while the broadcast networks generally oppose further review. While the Chairwoman has indicted that she did not think that the FCC had jurisdiction to review this issue without Congressional action (see the reference to her letter to Senator Grassley on this issue in our weekly update, here), the push by some prominent Democrats in Congress for a review of this question (see our reference to a request by Senator Cantwell asking that the FCC consider this matter) could lead to at least some FCC inquiries on the issue.
While there are no doubt other broadcast matters that the FCC will be considering in the coming year, we expect significant actions from other government agencies and from Congress that may affect the industry. We’ll cover those issues in a post later this week. For broadcasters, watch all these issues as they develop to see how they may affect your operations and your plans for the future.