At the FCC’s open meeting last week, the Commission adopted new policies for assessing and computing foreign ownership of broadcast companies – particularly such ownership in public companies. The Commission’s Report and Order on this matter is dense reading, dealing with how companies assess compliance with the rules which limit foreign ownership to 20% of a broadcast licensee and 25% of a holding company unless there is a finding by the FCC that the public interest is not harmed by a greater foreign ownership interest. The rules adopted last week were principally an outgrowth of the petition for declaratory ruling filed by Pandora which sought FCC approval, in connection with its acquisition of a radio station, for foreign ownership of greater than 25%. Pandora did not file such a petition because its foreign ownership exceeded that percentage, but instead because, based on the FCC methodology in use at the time, Pandora could not prove that it was in compliance (see our summary of the Pandora petition here). The new rules adopted last week essentially reverse the presumption to which Pandora had to comply – rather than assuming that there was a compliance issue because a company cannot prove that its foreign ownership was less than 25%, the FCC will now conclude that there is an issue only where a company, based on knowledge either that it has or should have, actually knows that there it has a foreign ownership compliance problem.

The order requires that public companies regularly take steps to assess their owners to determine if there are potential foreign ownership issues. A public company should know who certain shareholders are, either because they are insiders (e.g. officers and directors) or because they are otherwise known to the company (e.g. through proxy fights, shareholder lawsuits or because they are in some way doing business with the company). Other shareholders can be determined through an array of filings made at the SEC – including filings made when a shareholder exceeds holdings of 5% of the stock of a company, and other filings made by companies that manage more than $100 million in assets who are required to report on their stockholdings. In addition, there are other public sources of information about funds and other investment companies that buy the stock of broadcast companies, from prospectuses to Internet news stories. Public broadcast companies need to monitor all of these sources of information to see whether they potentially have a problem with foreign ownership. The FCC did not require that these companies take other measures that had been used in the past or suggested in the Notice of Proposed Rulemaking in this proceeding (about which we wrote here).
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The Federal Aviation Administration’s (“FAA’s”) recently established rules to allow the commercial operation of small unmanned aircraft systems (“sUAS”) – more commonly known as “drones” – took effect on Monday, August 29, 2016.  We previously wrote about these rules (and the opportunities and risks they present for broadcasters) here and here.  For those eager to get their newsgathering drones off the ground, here are a few things to keep in mind:

Certification.  Under the new rule, all operations must be conducted by, or under the supervision of, a person who holds a “remote pilot certificate.”  The least resource-intensive way to achieve this certification is for licensed pilots (with up-to-date flight reviews) to take a free online training course.  Novice flyers without a pilot’s license are required to pass an aeronautical knowledge test and also meet certain age and security clearance requirements.  Luckily, there are resources available (here and here) to usher you through the process.
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New FAA rules for drones were recently approved, and the rules may provide more opportunities for broadcasters to get in the game.  Emilie de Lozier from my firm offers these thoughts:

Broadcasters, prepare for takeoff later this summer.  The Federal Aviation Administration recently finalized rules to broadly permit the commercial operation of small unmanned aircraft systems (“sUAS”) – or drones – provided certain requirements are met.  The new rules are in many cases more permissive than the existing regulatory framework, but some potential pitfalls remain.  Rest assured, we are here to help you navigate the complexities of this new regime.  Below we provide a high-level discussion of the new rules and their effect on broadcasters’ future sUAS operations to support newsgathering.

We previously wrote about the FAA rulemaking to develop these rules here.  As a quick refresher, in 2012, Congress directed the FAA to develop a plan for incorporating drones into the national airspace.  In the meantime, the FAA created an exemption process pursuant to Section 333 of the FAA Modernization and Reform Act of 2012 to authorize commercial UAS operations on a case-by-case basis.  The FAA has granted more than 5,000 exemption requests to date, including for newsgathering purposes, and thousands of these requests remain pending.  (If your petition is among those pending, you should monitor your petition docket for a status update from the FAA in the coming weeks.)  The new rules are intended to minimize the need for parties, including broadcasters, to seek such exemptions.
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Yesterday marked the 10th anniversary of my first post welcoming readers to this Blog.  I’d like to thank all of you who read the blog, and the many of you who have had nice words to say about its contents over the years.  In the ten years that the blog has been active, our audience has grown dramatically.  In fact, I’m amazed by all the different groups of readers – broadcasters and employees of digital media companies, attorneys and members of the financial community, journalists, regulators and even students and teachers. The blog was recently profiled on Lexblog Leaders, relaying some of the stories about readers that I have discovered, and I have many more such stories.  Because of all the encouragement that I have received, I’ve keep going, hopefully providing you all with some valuable information along the way.

I want to thank those who have supported me in being able to bring this blog to you.  My old firm, Davis Wright Tremaine LLP helped me get this started (and graciously allowed me to take the blog with me when I moved to my current firm four years ago).  My new firm, Wilkinson Barker Knauer LLP, has also been very supportive, and I particularly want to thanks several attorneys at the firm (especially Rosemary Harold, David O’Connor and Kelly Donohue) who help catch, on short notice, my typos and slips in analysis for articles that I usually get around to finishing shortly before my publishing deadline.  I’ve also published a number of articles written by my colleagues, and I hope that they will continue with their valuable contributions in the future.  Thanks, also, to my friendly competitors at the other law firms that have taken up publishing blogs on communications and media legal issues since I launched mine – you all do a great job with your own take on the issues, and you inspire me to try to keep up with you all. 
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Many are sitting around enjoying their holiday treats while listening to the Beatles on their favorite on-demand streaming service, and the press is treating this as a breakthrough – usually omitting the fact that the Beatles have been available on many streaming services for as long as there have been streaming services, namely on Internet radio.  We’ve twice written about this fact, first when the Beatles became available on iTunes, here, and then on the 50th anniversary of their invasion of America, here.  And we also recently wrote about the same legal issues which explained why Adele could withhold her new recording “25” from many streaming services, but not from Internet radio.  With the Beatles back in the headlines, for some post-Christmas holiday reading, we thought that we would reprise our 2014 article about the Beatles long absence from on-demand streaming services.  Here it is:

50 years ago the Beatles invaded America, stacking up Number 1 hit records by the dozens, and creating music that, even today, remains incredibly popular with many Americans.  But go to many of the interactive or on-demand music services, like Spotify, and search for Beatles music, and what will you find?   Mostly cover tunes by sound-alike bands rather than the original hits.  But yet, on services where you can’t designate your next song, like Pandora, you can hear the original songs.  Why the difference?
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With the Martin Luther King Day holiday just passed, it seems appropriate to review the FCC’s EEO rules, which look to promote broad access to broadcast employment opportunities.  The FCC’s EEO rules no longer seek exclusively to promote minority employment, but instead seek to have stations reach out to all groups within the area they serve to try to attract people from diverse sources into broadcasting – rather than allowing stations to simply recruit through word-of-mouth and traditional broadcast sources (e.g. referrals from consultants and friends).  We have written about the FCC audit process by which it will review the EEO performance of approximately 5% of all broadcast stations each year (see, e.g. our articles here and here) and also about recent fines for stations that did not comply with the FCC requirements in specific areas.  With EEO review also expanding this year through the filing of FCC Form 397 Mid-Term Reports by radio station clusters with 11 or more full-time employees located in certain states (see the list of states on our Broadcasters’ Regulatory Calendar), it might be good to review the basics of the FCC’s EEO requirements.

The FCC requirements, beyond forbidding any station from engaging in overt discrimination, also requires broad outreach to a station’s community to recruit for open employment positions at any station, as well as efforts to educate the community about the duties of and qualifications for  positions at broadcast stations, whether or not a station has any job openings.  These requirements apply to any station employment unit (a group of commonly-owned stations serving the same general geographic area and having one or more common employees) with 5 or more full-time (30 hours per week or more) employees.  What do the outreach rules require of stations?
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Last week, the Senate approved a reauthorization of STELA, the new bill called STELAR (the “STELA Reauthorization Act of 2014”), adopting the version that had been approved by the House of Representatives earlier in the month.  In addition to simply giving satellite television companies (essentially DISH and DirecTV) the a five-year extension of their rights to rebroadcast the signals of over-the-air television stations without authorization from every copyright holder of the programming broadcast on those stations, STELAR made other changes to both the Communications and Copyright Acts that will have an impact on TV station operators once this bill is signed by the President.  The Presidential signing is expected before the end of the year.  [Update, 12/5/2014 the President signed the Bill yesterday evening, so it is now law]

Some of the important provisions for TV stations contained in this bill include provisions that impact not only the relationship between TV stations and satellite TV companies, but also ones that have a broader impact on the relationship of TV stations with all MVPDs, including cable systems. There is also a provision actually providing more latitude for LPTV stations to negotiate carriage agreements.  Some of the specific provisions of this bill include:

JSA Extension:  STELAR will give TV stations currently operating with a Joint Sales Agreement with another station in their market which they cannot own under the current multiple ownership rules 6 more months to terminate such operations – until December 19, 2016 (after the next Presidential election).  See our discussion of the changes in JSA attribution here and here.
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The FCC on Friday voted to extend its rule about captioning TV video repurposed to the Internet so as to cover not only full television programs, but also clips of those programs.  While the rules already require that TV programming that is captioned when broadcast to be captioned when retransmitted in full over the Internet, the new rules, to be phased in as described below, require that clips of TV programs that were broadcast with captions also be captioned when repurposed for online use.  In addition to adopting the rules for phasing in this new requirement, the Commission also asked several questions in a Further Notice of Proposed Rulemaking, asking some technical questions about the rules that it already adopted, and also whether to expand the requirements to other services and to programming that mixes both programming excepted from TV and programming that is original to the Internet.   

While the full text of the FCC’s decision has not yet been released, from the discussion at the FCC meeting and from its Public Notice about the rules, the outlines of the newly imposed obligations seem fairly clear.  The rules adopted for video clips, and the timeline for the implementation of these rules, are as follows: 

  • January 1, 2016 – captioning for “straight lift” clips, which are defined as a single excerpt of a program that had been captioned when first shown on TV, with the same video and audio as had been broadcast.
  • January 1, 2017 – captioning for video montages – which are collections of clips from different broadcasts, where all had been captioned when broadcast.  
  • July 1, 2017 – captioning for clips of time-sensitive (i.e., live or near-live) programming.  There will be a “grace period” between TV airing and required online captioning of 12 hours for live programming and eight hours for near-live programming.  (The staff confirmed during the post-meeting press conference that once the grace period expires, the posted clip must be captioned; if an earlier, non-captioned version was posted, it must be replaced.)

The Commission discussed that there would be some potential for waivers of these rules for small market stations, but the details of the standards that would apply were not detailed.  Also, there are some limitations on the obligations for posting of video clips that do not apply to the captioning obligations for full-length programs.  Those limitations are discussed below. 
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It is the beginning of another year – and a time to look ahead to look ahead at what broadcasters should expect from Washington in the coming year.  With so many issues on the table, we’ll divide the issues into two parts – talking about FCC issues today, and issues from Capitol Hill and elsewhere in Washington’s alphabet soup of regulatory agencies in the near future.  In addition, watch these pages for our calendar of regulatory deadlines for broadcasters in the next few days.

Each January, we publish a list of issues for the coming year, and it is not always the case that these issues make it to the top of various piles (literal or figurative) that sit in various offices at the FCC.  As set forth below, there are a number of FCC proceedings that remain open, and could be resolved this year.  But just as often, a good number of these issues sit unresolved to be included, once again, on our list of issues for next year.  While some issues are almost guaranteed to be considered, others are a crap shoot as to whether they will in fact bubble up to the top of the FCC’s long list of pending items. So this list should not be seen as a definitive list of what will be considered by the FCC this year, but instead as an alert as to what might be coming your way this year. Issues unique to radio and TV, and those that could affect the broadcast industry generally, are addressed below.
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Sometimes the FCC decisions come out in a flurry, often with little nuggets of importance in each one.  Rather than trying to write about each one, we’ll from time to time, just try to highlight those nuggets for your consideration.  At the end of last week, three decisions came out with just such nuggets – all dealing with different issues.  The first case involved the issue of divestiture trusts – trusts set up to hold broadcast assets when a buyer of broadcast properties, usually in connection with the acquisition of a broadcast group, needs to divest some stations so that the buyer remains in compliance with the multiple ownership rules (usually in radio where the attribution of LMAs and JSAs make impossible divestitures like those used in television, to parties with no connection to the buyer but operating with a Shared Services or Joint Sales agreement).  In the past, the FCC has not put any limit on how long the stations could remain in a divestiture trust, with some stations spending 5 or 6 years (or longer) in such trusts before they are finally sold.  This case involved an acquisition of a large number of radio stations by Townsquare Media from Cumulus.  Here, the Commission established a two year limit on period of time that the trust could hold the stations placed in its care.  Thus, the trustee needs to divest of those stations within that period.  We would not be surprised to see that limit imposed on any trusts created in the future – perhaps even on some longstanding trusts still in place when they are subject to renewal applications, where such trusts have been challenged from time to time.

In TV, often stations that cannot be owned by a broadcaster who is buying another station in the same market consistent with the multiple ownership rules are not sold through a trust, but instead they are sometime bought by an independent party who can support the station through some sort of Joint Sales or Shared Services Agreements with the buyer.  In one of those cases, the continuation of an existing Shared Services Agreement was challenged in connection with the sale of the brokering station held by Young Broadcasting to Media General.  The FCC again (as they have in many cases before, see for instance our article here), held that the sale was permissible and that the SSA could continue after the sale.  The brokering station did supply news to the brokered station, but it was under 15% of the program time, and thus not attributable.  The brokered station continued to have a financial incentive to operate the station successfully, keeping 70% of the cash flow of the station.  And the mere fact that the owner of the brokering station guaranteed the debt of the brokered station did not make that interest attributable to the broker.  Note, however, that the Commission did question the staffing of the brokered station but, as that station was not being transferred as part of the sale before the FCC, the Commission said that they would review that issue in connection with the license renewal of the brokered station.  Shared Service Agreements are also under consideration in the current Quadrennial review of the FCC’s multiple ownership rules (see our stories here and here ).  So some of these issues may be revisited again in the not too distant future, when the new FCC Chair decides to complete that review.
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