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Jonathan Cohen, one of my partners at Wilkinson Barker Knauer LLP, has been closely following the incentive auction by which the FCC is looking to clear a significant part of the television band and take that spectrum, slice it up into different size blocks, and resell it to wireless companies.  He has been guiding numerous companies through its complexities. We’ve written much about the auction on these pages, and now Jonathan offers these observations about the auction. – DDO

With the FCC’s Incentive Auction poised to move into its next phase with the August 16th start of active bidding in the forward auction, where companies looking to provide mobile broadband services will bid on licenses carved out of the spectrum vacated by TV broadcasters, we thought it might be helpful to address a few of the myths that seem to be floating around about the auction.

Myth:      In the initial stage of the reverse auction, broadcasters were greedy, demanding that the government pay $86.4 billion for their spectrum.

Reality:   This line of thinking demonstrates a fundamental misunderstanding of the way the Incentive Auction was designed to work. In each round of the reverse auction, the FCC makes price offers to TV stations, who decide whether or not to accept them. Not the other way around. The FCC decided to set opening price offers at very high levels. The highest opening “go off-air” price offer was $900 million (for a station in New York City), but nine-figure opening offers were plentiful, including to a station in Ottumwa, Iowa (DMA #200). These high prices apparently encouraged a lot of stations to make the initial commitment to accept its opening price offer, which led the FCC to try to clear 126 MHz of spectrum in the initial stage – the most the rules would allow. Under the FCC’s auction design, as prices decline, a TV station can reject the FCC’s offer at any point, but the FCC can continue to reduce its clearing price offers to a station still in the auction only as long as it was still feasible to repack that station given all the other stations that would remain in operation after the auction. At the 126 MHz clearing target, only channels 14-29 are available in the repacked UHF band, and this apparently caused the auction prices for many stations to “freeze” at high levels (once it was determined that a station could no longer be repacked), resulting in the $86.4 billion total clearing cost announced at the end of June. For all we know, however, a great many TV stations that are now possible “winners” in the reverse auction might have been willing to keep accepting price offers below their frozen prices. It was the auction design – freezing station’s buy-out prices when that station could no longer be repacked – that set the prices, not the broadcasters.
Continue Reading Debunking a Few Myths about the FCC’s Incentive Auction

Last week, the FCC announced a consent decree with Sinclair Broadcast Group where Sinclair agreed to pay $9.495 million to the FCC to settle claims that it negotiated retransmission consent agreements involving stations that it did not own with MVPDs (cable and satellite companies).  Sinclair did not admit any liability – but stated that it…

One last minute reminder for broadcasters – by this weekend, they need to have reprogrammed their EAS equipment with a new alert code to recognize alerts associated with nationwide EAS tests. This is supposed to be done by July 30, 2016 (the FCC set the date in paragraph 41 of last year’s FCC order…

The websites of the Library of Congress and the Copyright Office, which include the site used by the Copyright Royalty Board, will be down for maintenance this weekend. This includes the portal for filing cable and satellite royalty claims, which will be unavailable 5 p.m. ET, Friday, July 29, through Sunday, July 31.…

There are so many legal issues that facing broadcasters that it is sometimes difficult to keep up with them all. This Blog and many other activities that those at my firm engage in are meant to help our clients and other broadcasters keep up to date on all of the many regulatory challenges with which…

FCC Chairman Tom Wheeler yesterday used a blog post to announce that the Commission’s pending rulemaking concerning its retransmission consent rules is ending without the adoption of any additional rules.  This proceeding was to review the “totality of the circumstances” test in determining whether TV stations and MVPDs (cable and satellite television systems) were negotiating in good faith to reach a retransmission consent agreement.  In last year’s Notice of Proposed Rulemaking in this proceeding, the FCC proposed a number of possible negotiating tactics that could be declared to be per se violations of the good faith standard – including items such as ending retransmission consent before a major television event (like the Super Bowl) or blocking access to online streams of programming to Internet subscribers who were affiliated with the MVPD involved in the retransmission dispute (see our summary of the proceeding here).  Many broadcasters and industry analysts feared that there would be regulations adopted that could restrict TV stations’ ability to negotiate favorable retransmission consent deals.  But the Commission seems to have reached the conclusion that they can already, under existing rules, cajole parties to reach a deal if the need arises and that no more specific regulations are needed.

In his blog post, Chairman Wheeler stated that after FCC staff had conducted an extensive review of the record, “it is clear that more rules in this area are not what we need at this point.”  He noted that the FCC has an existing nine-point test to judge the compliance of parties with the good faith requirement, plus the broader “totality of circumstances” standard that can be used to find a party in violation even when none of the specifically prohibited conduct has occurred.  While little enforcement action has actually been taken in this area, it has often been threatened to bring parties to the table and encourage a voluntary settlement.  The Chairman seemed to think that the existing remedies were enough to act in extreme cases, and trying to decide in more specificity which practices were prohibited and which were permitted “could limit future inquiries.”    In other words, adopting more specific prohibitions could make it more difficult to rely on the broader “totality of circumstances” test in any particular case that did not involve a specifically prohibited activity. 
Continue Reading FCC Chairman Announces No Changes in Good Faith Negotiation Standards for Retransmission Consent Agreements Between TV and MVPDs

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.
Continue Reading $700,000 to Be Paid By Media General to End Inquiry on its Attempts to Enforce a JSA – What are the Limits on the Enforceability of a Contractual Restriction on an FCC Licensee’s Sale of its Station?

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?
Continue Reading Foreign Ownership of US Broadcast Stations Suddenly the Rage? – FCC Seeks Comments on Two Proposals for Alien Ownership to Exceed 25%, Including One for 100% Australian Ownership

Yesterday, the FCC’s Media Bureau issued a Declaratory Ruling, deciding that a syndicated television program, “Matter of Fact with Fernando Espuelas,” was a bona fide news interview program – meaning that appearances on the program by legally qualified candidates for public office would not give rise to equal opportunities (or “equal time” as it is often called). In looking at such request the FCC looked at the following factors – (1) the program was regularly scheduled, (2) its content is controlled by the station or program supplier, and (3) the decisions as to the inclusion of candidates are based on judgments as to the newsworthiness of the appearance and not for political purposes. If these factors are met, the program is considered a bona fide news interview program, and candidates can appear without competitors having the right to claim equal opportunities, and without a candidate’s appearance being considered a “use” that needs to be noted in the public files of stations that carry the program.

In addition to news interview programs, newscasts and on-the-spot coverage of a news event are also “exempt programs” where candidate appearances do not constitute “uses” giving rise to equal opportunities or public file obligations. Over the years, as we wrote here and here, the FCC has been more and more liberal in its interpretations of what constitutes a news or news interview program. It is no longer just the evening newscast on a station and the boring Sunday morning talking heads news interview program that qualify. Instead, the FCC has recognized that people get their “news” from all sorts of different kinds of broadcast programs, and the FCC has determined that any program that regularly features newsmakers, where the program content is in the hands of the producers and where the program’s guests are selected for newsworthiness, and not to promote a particular political agenda, can be an exempt news or news interview program. So the FCC has ruled that a host of programs that may not look like hard news, from the Today Show to Entertainment Tonight, to the Phil Donahue program to even the Howard Stern radio show, could be exempt news interview programs where a candidate’s appearance did not trigger equal time. If they cover some aspect of the news, and regularly feature news makers, they are likely to be determined to be an exempt program.
Continue Reading Appearances by Political Candidates on Talk Program Exempt from Equal Opportunities – New FCC Declaratory Ruling Explains Why

While TV broadcasters can enjoy an incentive auction respite in July as attention shifts to the “forward auction” where we will see whether wireless carriers come up with enough money to fund the $86,422,558,704 (plus $1.75 billion for repacking costs, plus auction-related administrative costs) needed for the buyout of TV stations who agreed to surrender their spectrum, radio broadcasters will get some of their own attention as, at the end of the month, the second window for the filing of 250-mile waiver applications opens for Class A and B AM stations. We wrote about these waivers here, which allow an AM licensee to acquire an FM translator and file an application to move it up to 250 miles and operate it on any commercial frequency that does not create interference in their market. That window for Class A and B AM stations opens July 29 and runs through October 31 (and remains open for any other AM that has not already filed one of these waivers in the first window which opened back in January).

In addition to the AM window, there are routine filing deadlines for all TV stations – required to file their FCC Form 398 Children’s Television Reports by the 11th of the month (because the 10th of July is a Sunday) demonstrating the educational and informational programming they broadcast directed to children. By the 10th television stations also need to upload information into their online public files to demonstrate compliance with the limits on commercial time in children’s programs.
Continue Reading July Regulatory Dates for Broadcasters – FM Translators for Class A and B AMs; Quarterly Issue Programs and Children’s Television Reports; Comments on EAS, Letters from the Public and Regulatory Fees, Cable Royalty Claims; and More