Last week, the FCC issued a declaratory ruling concluding that its long-standing policies on foreign ownership of broadcast stations were misunderstood – “clarifying” its policy to make clear that, if alien ownership exceeds 25% of the holding company of a licensee, it may in fact be permissible.  The Commission decided to adopt a case-by-case approach to determine if any proposed alien ownership in excess of 25% is in the public interest.  It is unclear why the FCC made a point to say that this was just a clarification of a policy that has been viewed as a strict prohibition on alien ownership of broadcast properties where the indirect ownership was in excess of 25%.  In the past, the FCC broadcast prohibition was viewed as all but absolute, even though the governing statute allows for the 25% threshold to be exceeded unless the FCC determined that such excess foreign ownership was not in the public interest and ownership in excess of 25% has been allowed (under the same statutory provision) for nonbroadcast services.  Nevertheless, last week’s decision made clear that foreign ownership levels in broadcast holding companies beyond the 25% threshold were possible, but much else was left unclear in the decision.

As stated in the ruling, the foreign ownership limitations were adopted because of concerns that foreign owners who controlled the instruments of communication in a time of emergency could be a security threat.  Moreover, in broadcasting, there was the fear that such foreign owners could disseminate propaganda to the citizens of the US.  While times have changed and the risk of the dissemination of propaganda by broadcasting seems quaint when there are so many other ways to disseminate what might be called propaganda to the public, the FCC still regards this as a concern that needs to be evaluated in every case.  At the FCC meeting where the order was adopted, and in the ruling itself, it was made very clear that, in the event of any application that proposes foreign ownership in excess of 25%, the Executive Branch of government (including Homeland Security) would have to approve the foreign ownership, concluding that it does not pose any threat to the United States.  For foreign companies that want to invest in broadcasting, this is not the only question that remains unanswered. Continue Reading FCC Allows More Than 25% Foreign Ownership of Broadcast Stations – Instructions for Investors are to Be Developed

Last week brought a number of Washington developments that we’ll write about in more detail soon, including the FCC’s decision to relax the limitations on foreign ownership of broadcast stations.  But there were also a number of other actions that bear mention – including the decision released late Friday to extend the deadline for the filing of Biennial Ownership reports that are to be filed by all commercial broadcasters – including AM, FM, TV. LPTV and Class A TV station owners.  These more complicated versions of FCC Form 323 are filed every other year to assess diversity in the ownership of broadcast stations.  These reports were originally to be filed on November 1, but the filing date was extended to December 2 earlier this year (see our article here), due to the recognized complexity of the completion and electronic filing of these forms.  Now, after the FCC shutdown deprived broadcasters of several weeks’ preparation time in which the electronic forms were available for use, the deadline has been extended to December 20.  The FCC Public Notice warns filers to try to submit their reports before the deadline to avoid potential slowdowns in the electronic system due to an expected heavy volume of users as the deadline approaches.

In fact, the effect that heavy demands on FCC’s electronic filing system was made evident by the FCC’s last-minute decision to extend by one day the last day for filing LPFM applications.  That extended deadline passed on Friday, after being extended from the originally announced extended deadline (due to the government shutdown) of Thursday, because glitches in the FCC’s electronic filing system delayed last-minute filings before that Thursday deadline.  There has not yet been any announcement of the number of LPFM applications filed in the window, but many think that the number will rival if not exceed the thousands of applications filed in the 2003 FM translator window – applications that the FCC is still processing over 10 years after their filing. Continue Reading Odds and Ends: Extension of Biennial Ownership Report Deadline, $110,000 Penalty for Indecency, Deadline for UHF Discount Comments, and Closing of the LPFM Window

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. Continue Reading Odds and Ends – Divestiture Trusts, Shared Services Agreements and Determinations of Significantly Viewed Stations

“Business Establishment Services” are copyright-speak for those music services that provide background music to commercial establishments.  These services have come a long way from the elevator music that once was so derided – and now set the mood in everything from retail clothing stores to restaurants to department stores with formats as varied as the commercial businesses themselves.  While the rates paid by these services pay for music rights is a little off-topic for this blog, these rates are a bit unusual, so they are worth mentioning.  The Copyright Royalty Board just announced the adoption of a settlement between services and SoundExchange which will raise the rates from the current 10% of revenue to 12.5%, with a minimum annual fee of $10,000, effective January 1.

We have written about the rates paid by these services before (see for instance our articles here and here).  What makes them unusual is that the royalties are not paid to SoundExchange for the public performance of sound recordings, as are the royalties paid by other digital music services including webcasters or Sirius XM.  That is because, in adopting Section 114 of the Copyright Act, Congress did not want to impose on businesses a new performance right, as there is no general public performance right in sound recordings in the United States.  Businesses and other services that do not digitally transmit performances of audio recordings have no obligation to pay copyright holders in the sound recordings (usually the record companies) or artists for the public performance of music.  Users do, however, pay fees for the public performance of the underlying composition through ASCAP, BMI and SESAC.  As we wrote here, the Register of Copyrights has suggested that a general public performance right in sound recordings be paid in the United States, but as that would impose new fees on all businesses that use recorded music in the US, from stadiums playing “We Will Rock You” at the appropriate point in a big game, to DJs spinning their discs in nightclubs, to the trendy tunes playing in the hip clothing retail stores, to over-the-air radio – this proposal is very controversial.  So, if they are not paying public performance fees, why do background music services have to pay SoundExchange? Continue Reading New Music Royalty Rates for Ephemeral Recordings Used By Business Establishment Services

The FCC is cracking down hard on television stations and cable companies who use EAS alerts – or even simulations of such alerts – in advertising, promotions, and programming.  In two orders released this week, the FCC imposed big penalties on video companies who used fake EAS alerts in commercial messages.  In one case, it fined a cable programmer (Turner Broadcasting) $25,000 for the use of a simulated EAS tone (not using the actual tone, but just a set of tones that sounded like the EAS alert) in a promotion for the Conan O’Brien program.  In a consent decree with a TV broadcaster, in exchange for a $39,000 voluntary payment to the FCC and the adoption by the station of a series of policies to avoid similar problems in the future, the Commission agreed to dismiss a complaint against a station that had used simulated EAS tones in a commercial for a local store.  These decisions were coupled with two other announcements to make the point that the FCC wanted to demonstrate the importance that it places on EAS and its lack of tolerance for any non-emergency use of anything sounding like the EAS tones that could possibly confuse the public.

At the same time as the two decisions were released, the FCC issued a press release emphasizing the importance of EAS and how such actions trivialized the alert system.  A Fact Sheet was also released, making four documents all emphasizing the importance of EAS, and the threat posed to real warnings by any sort of use of sounds that could be confused for the EAS alerts.  Where does the FCC get its authority to impose such fines? Continue Reading Penalties of $39,000 and $25,000 Assessed For Video Programming Containing Fake EAS Messages

There have been many Washington developments for broadcasters in the last week – and while it was all occurring, our Blog was undergoing a makeover, so some of the articles that we published in the last week may have been missed.  Perhaps the biggest news was the confirmation and swearing in of the new FCC Chairman, Tom Wheeler.  Last week, we wrote this article setting out the many legal issues of relevance to broadcasters that will be facing the new Chair.  Among the first issues that will be dealt with is the modification of the FCC’s limits on the foreign ownership of broadcast stations, which is scheduled for consideration by the FCC at their open meeting next Thursday.  We wrote about the issues in that proceeding here.

One of the last issues considered by Acting Chairwoman Mignon Clyburn was the FCC’s Notice of Proposed Rulemaking on the revitalization of the AM radio band.  We summarized the issues set out in that proceeding, and wrote in more detail about the proposal likely to have the biggest impact on AM broadcasters – a window for AM stations to seek FM translators.  That article also discussed how the FCC has seemingly decided to pull back from Mattoon waivers as part of that proceeding, and in a separate decision where the FCC decided that Mattoon waivers could not be used if the primary station is an FM.  We’ll write more about the rest of the AM revitalization proposals soon.  And, related to translators, we wrote about the extension of the last day for filing applications in the LPFM filing window to next week. 

As last week was Halloween, and also the 75th Anniversary of the broadcast of Orson Welles War of the Worlds, we wrote about the changing views on broadcast hoaxes, and what the FCC would do if the program was broadcast today.  Speaking of emergency broadcasts, the FCC yesterday issued a number of notices on fake emergency broadcasts.  We’ll write more about that issue shortly. Continue Reading While Our Blog Was Getting A Makeover, Did You See Our Stories on the New FCC Chairman, Foreign Ownership of Broadcast Stations, AM Revitalization, Orson Welles and the Hoax Rule and More?

The FCC’s proposals for aiding AM radio have been released in a Notice of Proposed Rulemaking – one of the last actions for broadcasters under Acting FCC Chairman Mignon Clyburn (see our article here on the leftover broadcast issues with which her successor as chairman, Tom Wheeler, will have to deal).  The proposals for revitalizing the AM band that were contained in the NPRM are all ones that the Acting Chair had previewed at the NAB Radio Show, which we summarized in our article about that speech.  While the general proposals that were made in the NPRM were not surprising, in most of these areas there were a couple of surprises in the details – some of which will may be of concern to some broadcasters.

The Commission made several proposals, including the following:

  • A special FM translator window where applications would be restricted to AM licensees.
  • Reduction of both daytime and nighttime city-grade coverage obligations of existing AM stations.
  • Elimination of the ratchet rule that requires that any AM station making facilities changes do so in a way that reduces overall interference in the AM band (in many cases compelling a reduction of service if a change is proposed)
  • The potential for more liberal use of MDCL technologies, which decrease transmitter power when modulation of the station decrease, potentially saving power (though raising some questions about the robustness of the signal that will result)
  • The modification of AM efficiency standards in some way to allow for shorter towers that could be located on rooftops or in other more limited spaces – though the Commission asked for more comments on how its current rules actually limited such uses
  • A general request for other ideas that could help AM stations.

We will cover the special translator window in today’s post, and cover the other issues in more detail in the future.  Most of the other proposals deal with making facilities changes to the AM station, in some cases changes that might actually decrease service to their current service areas (e.g. were some stations to take advantage of the proposed city-coverage limitation to move further from the station’s city of license).  The translator proposal is the one most likely to bring the most relief to the most AM broadcasters in the heart of their service area – and is one that can be quickly implemented.  So below, we will look at the translator proposal in more detail.  Continue Reading FCC Proposals For AM Improvements – Part 1 – A Restricted FM Translator Window and an End to the Mattoon Waiver?

At long last, it appears that we will soon have a complete FCC, as the Senate has approved the nomination of Tom Wheeler to be the next FCC Chairman, and Michael O’Rielly for the other vacancy on the FCC.  The nomination of Mr. Wheeler had been held up by Senator Ted Cruz on grounds that he feared the FCC taking action to implement provisions of the Disclose Act (which we wrote about here).  Senator Cruz was particularly concerned that a new FCC might adopt rules that would require disclosure not just of a political ads sponsor, but also of the chief financing sources of the sponsor.  Mr. Wheeler apparently assured Senator Cruz that the adoption of such a rule was not high on his agenda, the hold on the nomination was dropped, and the new Chairman was confirmed.  He should take office very soon – with press reports suggesting that it will be on Monday.  What issues should broadcasters expect the new FCC to tackle?

There are many big issues for broadcasters that are under consideration but not decided, and we would expect that the new FCC chair would want to quickly start to deal with them.  The biggest issue is no doubt the Incentive Auctions – looking at the reclaiming of spectrum from TV broadcasters to allow it to be re-sold to wireless companies for wireless broadband and other uses.  We last wrote about that incredibly complex proceeding here.  The FCC under Chairman Genachowski had looked to have rules in place before the end of this year to reclaim the spectrum and to sell it to the wireless companies.  The former chair had hoped to have the auction itself occur in 2014.  With the delays in the confirmation of the Chairman, and the recent government shutdown, many observers are expecting the rules will be pushed back to next year, and the auction itself to the year after – but all that remains to be seen. Continue Reading Tom Wheeler Confirmed As FCC Chair – What Broadcast Issues Will the New FCC be Addressing?

This is the 75th anniversary of the Mercury Players broadcast of the Orson Welles production of the War of the Worlds – a radio broadcast that seemingly scared many Americans into thinking that the country was under attack by Martians, that my home state of New Jersey had been overrun, and that the rest of the country would be soon to follow.  PBS’s American Experience just ran a great documentary about the production – talking about Wells’ decision to delay an announcement that the program was a fictional production, not a real invasion, long after his network superiors ordered that announcement after the phone lines of the network were tied up.  Also tied up were the phone lines of emergency responders, and it supposedly even caused people to leave their homes to flee the path of the oncoming invaders.  The PBS program talked about how the FCC opened an investigation of the program, and how Congress demanded that laws be passed to prevent such a broadcast from happening again.  Essentially, through some well-publicized apologies by Welles and others involved in the program, and a promise by the network to take steps to prevent it from happening again, the FCC closed its investigation and no law was passed by Congress.  Even though the government did not act 75 years ago, it is interesting to look at how the FCC has changed since that time, and why such a broadcast would not fly under FCC rules today.

Most prominent among the FCC rules adopted since the famous broadcast is the FCC’s rule against “hoaxes.”  As we’ve written before (usually just before April Fools’ Day), this rule (Section 73.1217) forbids broadcasters from airing programs that are false where it is foreseeable that the broadcast will tie up the resources of first responders or that the broadcast will otherwise cause harm to people or damage to property, and where such harm is in fact caused.  Applying that rule to the War of the Worlds broadcast would mean that the radio network (and its affiliated stations) could likely be looking at big fines were such a broadcast to be made today. While a broadcaster could certainly argue (as was done at the time) that no rational person would believe that the Martians were really invading, the fact that the network was deluged with calls, and that the network warned its director to air a disclaimer (which was delayed for dramatic effect) would likely defeat any such arguments. Continue Reading Orson Welles’ War of the Worlds 75 Years Later – What Would the FCC Do Now?

At its November 14 meeting, the FCC is tentatively scheduled to consider the relaxation of its limits on the ownership of broadcast stations by foreign entities or citizens.  Under the current “alien ownership” limitations, US citizens or entities must own 80% of a broadcast licensee, or 75% of a licensee’s parent company.  In the broadcast world, the 25% alien ownership limit must be analyzed both as to equity and voting interests.  In the modern financial world, where companies are often owned by many diverse investors (or funds with widely diverse ownership), these rules can be very burdensome in assuring compliance and managing the potential investment in US broadcast operations by foreign sources of capital. 

Under the governing statute, Section 310(b)(4) of the Communications Act, the FCC can’t allow a licensee in any service that it regulates to be more than 20% foreign owned.  But the statute allows a parent company of a licensee to be 25% foreign owned, and even allows that parent company to exceed that “limit” unless the FCC finds that the public interest would be compromised by foreign ownership greater than 25%.  Thus, the rules are actually written to presume that the “limit” can be exceeded, unless the FCC sees a problem.  The principal concern that would raise a question under the law would be one of national security – the government does not want crucial communications infrastructure, or the means of dissemination of information to the public, to be controlled or unduly influenced, by foreign interests in the event of some emergency.   As we wrote just 6 months ago, in non-broadcast services, the FCC has routinely allowed foreign ownership to exceed the 25% threshold, and recently made it easier for companies to demonstrate their compliance with the rules.  This clearly shows that national security issues can be addressed in other ways.  How about in the broadcast services? Continue Reading FCC to Consider Allowing Increased Foreign Ownership of Broadcast Stations at Its November Meeting