Assignments and Transfers

The FCC last week released its tentative agenda for its March open meeting. On it was a single item dealing with broadcast issues, a draft Notice of Proposed Rulemaking proposing to ease the paperwork involved in the sale of a satellite TV station. This item is another action as part of its Modernization of Media Regulation Initiative seeking to lessen the paperwork and regulatory burdens of broadcasters. Similar to other actions taken as part of this initiative (see our article here), this proposal is a small step to reduce burdens on a small class of broadcasters – but at least it is another step that is being taken in this initiative. The draft proposal will be considered at the FCC’s meeting scheduled for March 22.

Under current FCC rules, the FCC will authorize an owner to acquire a second full-power television station in a market, a station which will not count against FCC ownership limits, if the applicant can meet a three part test – (1) the station will not have city-grade overlap with the “parent” station, (2) the satellite station will serve an underserved area, and (3) a showing is made that there is no other owner ready to acquire an existing station or activate an unused channel and operate it as a stand-alone station. Satellite television stations were traditionally used in geographically-expansive rural markets to expand the coverage of a parent station to reach outlying areas. In more recent years, as the Commission abolished the requirement that the satellite primarily duplicate the programming of the parent station, these stations have sometimes been used to provide alternate programming in smaller markets unable to economically support an independent operation. The draft NPRM released by the FCC seeks to address the issue of what happens when such stations are sold.
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At its next open meeting to be held on January 30, the FCC will consider two more proposals in its Modernization of Media Regulation Initiative.  As with many of the other proposals that have been advanced by the FCC as part of this initiative thus far, these proposals address relatively minor matters concerning paperwork obligations rather than substantive FCC rules.  Draft proposals were released yesterday by the FCC dealing with two matters.  The first is a Notice of Proposed Rulemaking suggesting the elimination of requirements that broadcast licensees file paper copies of certain contracts with the FCC.  The second is an Order deleting certain rule sections that explicitly deal with the operations of full-power analog television stations – stations which no longer exist.

It is certainly difficult to argue with the FCC’s decision to delete rules that apply to a service that no long exists, so it is obvious that the more substantive of the two proposals advanced yesterday is the one dealing with the filing of contracts with the FCC by broadcast licensees.  But even this proposal was not particularly substantive, proposing only the elimination of the rules requiring the filing of physical copies of the required contracts, not the obligations that these contracts be available for public inspection and review.  The NPRM suggests that instead of filing the required contracts with the FCC, the inclusion in a broadcaster’s online public file of information about these agreements is sufficient to eliminate the need for the filing with the FCC of physical copies of these documents.  The agreements that are now required to be filed are also required to either be included in the public file or the licensee may opt to include in the public file a list of the contracts with a commitment to produce them within 7 days upon request.  The NPRM also proposes to formalize the practice specifically adopted in connection with some but not all of the required documents – allowing broadcasters to redact financially sensitive business information from any document that it provides upon request.  The NPRM as currently drafted does not ask whether the FCC should examine whether the filing of some or all of these contracts, or even their inclusion in a station’s public file, should be required at all.
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Published today in the Federal Register were two notices from the FCC implementing November’s decision on the FCC’s ownership rules. First, a summary of the changes in the rules was published in the Federal Register. These changes particularly affect the local TV ownership rules (changes that we summarized here). Changes included, among other things, the elimination of the rule that required that there be 8 independent owners of TV stations in a market before any party can own two TV stations, elimination of ownership attribution for Joint Sales Agreements between television stations in the same market (meaning that such arrangements do not count in any analysis of compliance with the local TV ownership rules), and a plan to review proposals to combine two of the top 4 stations in any market on a case-by-case basis. These rule changes become effective on February 7.

Also published in the Federal Register was a summary of a different part of the order, one asking questions about how the FCC should structure an incubator program that would support diversity in the ownership of broadcast stations. In that Notice of Proposed Rulemaking, the FCC asks a series of questions as to how a program could be established in a way that would benefit minorities and other new broadcast entrants. As the usual discussion about such programs involves providing established broadcasters a waiver of an ownership rule or other incentive to assist the new entrant, one of the central issues is how to establish a program providing real benefits without creating a loophole in the ownership rules for the sponsoring broadcaster. Comments on the Notice of Proposed Rulemaking are due on March 9, with replies on April 9. Some of the questions asked by the FCC are summarized below.
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While some might think that the business of deregulation is easy, that usually is not the case, as comments on the FCC’s proposals to modify the public notice requirements for broadcast applications make clear. In a Notice of Proposed Rulemaking about which we wrote here and here, as part of its initiative on the Modernization of Media Regulation, the FCC looked to modify the rules governing public notice that broadcasters must give when they file certain types of broadcast applications – particularly license renewals and applications for the assignment or transfer of broadcast stations. The FCC asked whether the obligations requiring most of these notices to be published in a local newspaper, in addition to being broadcast on the station, could be replaced by giving an online public notice. The Commission even asked if on-air notice was still necessary. The FCC also asked how the rules should be unified, so that the various exceptions and textual differences that apply to different rules could be made simpler to understand. Comments on these proposals were filed last week between the holidays.

While this proposal seems very straightforward, and many of the comments took the sides that one would expect, there were numerous comments that range from support for continued newspaper publication (principally from the newspaper industry), to calls for more detailed on air-announcements from certain public interest groups, to suggestions that the on-air notice be more abbreviated and used to direct listeners and viewers to a more detailed online disclosure. Let’s look at some of the specific comments that were filed.
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The FCC this week announced the filing of two applications seeking broadcast acquisitions by non-US based companies. In one available here, a company controlled by Mexican citizens would go from 25% to 100% ownership and control of a company that owns 2 FM stations in California and Arizona. In another, available here, an

In addition to the elimination of the main studio rule (about which we wrote here), another media item is proposed for consideration at the FCC’s October 24 meeting. A draft Notice of Proposed Rulemaking (NPRM) was released earlier this week proposing two changes in FCC requirements – neither change, in and of itself, offering any fundamental modifications of significant regulation, but both showing that this Commission is looking to eliminate bothersome burdens on broadcasters where those burdens are unnecessary in today’s media world or where they do not serve any real regulatory purpose. One change proposes to limit the requirement for TV stations to file Ancillary and Supplementary Revenue Reports to those stations that actually have such revenue, and the other proposing to eliminate the obligation of broadcasters to publish local public notice of significant application filings in a local newspaper.

The first deals with the filing by TV stations of FCC Form 2100, Schedule G (formerly Form 317), which reports on the ancillary and supplementary services revenue received by the TV station. This revenue is received by data transmission and other non-broadcast uses of the station’s spectrum. The report is necessary as, by law, each station offering such services must pay a fee of 5% of that revenue to the Federal government. So, by December 1 of each year, under current rules, each TV station must file the form stating how much revenue they received from these non-broadcast services. As most TV stations have not monetized their excess digital capacity by making it available for non-broadcast “ancillary and supplementary” services, most stations dutifully submit a report each December saying that they have not received any such revenue. To minimize paperwork burdens, the FCC draft NPRM proposes to amend the rule so that the majority of stations need not file this report simply to say that they have no revenue – the obligation to file the report would apply only to those stations that actually have some revenue to report.
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The FCC on Friday announced that they were extending the deadline for filing Biennial Ownership Reports by broadcasters from December 1 to March 2, 2018 to be sure that the new version of the form in the FCC’s LMS database will be up and ready to be used. The FCC will open the window for

While most broadcasters are awaiting word of when the FCC’s annual regulatory fees will be due (an announcement that should be coming any day now as regulatory fees will be paid in September by all commercial broadcasters to offset the cost of being regulated), the FCC announced yesterday that its application fees are going up

The FCC yesterday announced a consent decree with Media General by which Media General agreed to pay a $700,000 “settlement payment” to the US Treasury to settle the investigation of its attempts to enforce the provisions of a Joint Sales Agreement with Schurz Communications.  Media General had tried to enforce the JSA when Schurz tried to terminate that agreement in order to sell its station to Gray Television.  Media General tried to get an injunction from a state court seeking to stop the sale, continue the JSA, and prevent Schurz or Gray from putting the station into the incentive auction.  As we wrote here when the case first arose, the FCC wrote to the court, contending that the injunction would not only violate the conditions placed on the sale by the FCC (that the Schurz station be sold before the Gray deal could close) but, more importantly for the general broadcast community, that the restrictions on the sale of the station, and its participation in the incentive auction, were improper restrictions on the control rights of the licensee.  Essentially, the FCC was saying the licensee’s right to sell the spectrum it had was not one that could be conveyed to a third party.  The FCC even stated its intention to initiate a proceeding to determine whether Media General’s FCC licenses should be revoked.

What we wrote when the case came out, and what we wonder now, is what the FCC considers the degree to which a licensee’s ability to sell its spectrum can be limited by contract or agreement.  Yesterday’s release provides no guidance, as it was simply a settlement agreement.  The consent decree recites what the FCC was initially concerned with, but Media General did not admit any liability, and the consent decree does not reach any conclusion as to the actual basis of the settlement payment.  So it is conceivable that the FCC was actually only worried about the attempts by Media General to require that the station be kept and the JSA stay in place, even though the FCC ordered that it end.  It may not have been a case dealing principally with control at all, but instead one dealing with grandfathered JSAs and whether those JSAs can stay in place after the sale of one of the television stations involved in the arrangement.  Otherwise, if the case was really about putting limits on the degree to which contracts can limit the ability of a licensee to sell its station, that issue could have had much broader implications than the FCC may have intended.
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In the last two days, the FCC has asked for public comment on two proposals for foreign ownership of US broadcast stations where that ownership would exceed 25% of the company – a limit that has for decades been seen as the upper end of ownership by foreign nationals.  While the FCC three years ago said that they would consider such ownership on a case by case basis (see our article here), up until this week, the FCC had considered only one case under this new flexible policy – and that was the case of Pandora, where the FCC took over a year to approve their acquisition of a broadcast station – and Pandora didn’t even think that their foreign ownership exceeded the 25% threshold, but they could not prove it because of the difficulty of assessing the citizenship of public companies (see our article here on the filing of the Pandora petition).  Now, the FCC seeks comments on two cases, one where an Australian husband and wife team seek to acquire 100% ownership of companies owning 29 radio and TV stations in Alaska, Arkansas and Texas.  The second involves Univision, which asks for FCC approval for foreign ownership of up to 49% of its stock, as it plans a public offering which would also involve the conversion to stock of warrants held by a Mexican company that already has a stake in the company.

While the FCC last year asked for comments on adopting new processing rules for these kinds of requests – especially those involving public companies – no order has come out of the FCC on that proceeding yet (see our summary here).  Last month, the FCC did adopt some new procedures for the streamlining of the consideration of foreign ownership requests for all services regulated by the FCC, not just broadcasting, but that proceeding did not deal with the substantive issues surrounding foreign ownership, but instead with the process by which the FCC interacts with other government agencies in assessing the national security concerns with foreign ownership of communications properties.  With this background, does the release of these two requests for comment signal any movement from the FCC on foreign ownership issues?
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