The failure to follow FCC filing rules when a station finished construction of new facilities under a construction permit will apparently cost a radio station $7000 according to a recent Notice of Apparent Liability released by the Commission’s Media Bureau.  Before a broadcast station can make most changes to its technical facilities, it must apply to the FCC for approval, which the FCC grants by way of a construction permit.  In most cases, the broadcaster has 3 years to construct the proposed facilities.  Once construction is complete, the broadcaster must notify the FCC of that fact by filing an application for a license on FCC Form 302.  That form gives details of the construction, so that the FCC can tell that the station was built in the manner authorized by the construction permit, and in accordance with any conditions placed on construction in the permit.  In this case, the broadcaster built the new facilities that it proposed within the 3 year period, but forgot to file the Form 302 – and only did so 3 years after the end of the construction period.  Under this Notice, the late filing, and the failure to ask for special temporary authority ("STA") to operate the station after the failure to file was discovered, may cost the station $7000.

In the past, the FCC had allowed some stations to file their license application late, if construction had occurred in a timely fashion, and where the licensee provided proof of the timely construction.  In this decision, the FCC found that these cases were situations where the late filing was for an insignificant period of time – a few days or weeks at the most, not for the years that went by in the case here.  The late filing, and the fact that, as the construction permit had expired and no license had been granted, the station was deemed to have been operating without authority at the new site, warranted the $7000 fine in the FCC’s opinion.  The case not only serves as a reminder to those with construction permits to file their license applications on time after they complete construction, but also shows that while the FCC may show some flexibility in enforcing its procedural rules, it will not allow licensees to ignore them for long periods.  So be careful to meet the requirements of the rules, or look for big fines from the Commission. 

Continue Reading $7000 Fine for Radio Operator Who Builds Construction Permit But Forgets to File a License Application

What does SoundExchange do when it collects royalties from an Internet radio operator, but the operator doesn’t provide complete information about the songs that were played?  That question was raised by the Copyright Royalty Board in a Notice of Proposed Rulemaking on a proposal by SoundExchange for the distribution of such royalties, about which we wrote here.  The CRB has now agreed  to SoundExchange’s proposal to distribute this money via a "proxy system."  In other words, SoundExchange will be distributing the money pro rata based on the information that it has for the songs on which similar services did accurately report.  The CRB provided the authority for this distribution by proxy for unallocated money collected during the period 2004 through 2009, which SoundExchange reports now amounts to approximately $19.4 million (down from the $28 million reported when the CRB’s Notice was released in April). 

Why is there no information for these songs?  As we wrote when the CRB Notice was first released, there are many reasons, beyond simple failure of Internet radio services to meet the requirements for reporting set out in the CRB rules (about which we wrote here).  There are also situations where, under various settlement agreements, no reporting is necessary.  For instance, under the settlement agreement with broadcasters, no reporting is necessary for a certain percentage of songs played by each station.  Even under the CRB rules, there is a recognition that certain small webcasters (particularly noncommercial operators) can’t afford all of the software that is necessary for the recordkeeping required of large webcasters. There will always be some songs for which no information is available, thus the need for this proxy system to distribute the money.  And, as the result of the CRB action, SoundExchange now has the authority to use this system. 

When one broadcast licensee company buys another, or when there is a restructuring of a company with broadcast ownership holdings that are grandfathered under current ownership rules, there often arises a need to divest stations so that the buyer (or the new controlling parties after a restructuring) complies with the multiple ownership rules after the completion of the transaction.  Often, selling the non-compliant stations quickly so as to not unduly delay the closing of the purchase or the restructuring is difficult, as it takes time to locate a buyer for the "extra" stations and to negotiate a fair sales price.  In fact, a forced divestiture can artificially depress the sales price for the non-compliant stations that need to be spun off, as potential purchasers of the stations know that any delay of the principal transaction will impose costs on the buyer and seller in that deal.  Thus, the parties in the principal transactions often look for ways to avoid a forced sale at a depressed price.  One method is the use of a divestiture trust – letting a trustee run the stations to be divested until a suitable purchaser can be found at a reasonable price.  The FCC has permitted such trusts, but in a case decided last week, it demonstrated that there were limits on their use by denying applications that the Commission deemed interests in too many stations in one area in the hands of one company.  This case should provide guidance on the limits of the use of divestiture trusts for those who may consider them in future broadcast transactions.

The case involved radio stations in two smaller markets in Washington state, Yakima and the Tri-Cities. There, new Northwest Broadcasting had held full complements of stations, at or close to the ownership limits in each market.  New Northwest went into bankruptcy, and a receiver was appointed to run the stations.  The receiver reached a deal to sell the stations to Townsquare Media, which already held clusters of stations in these markets, also at or near the ownership limits in the markets.  Townsquare proposed to cherrypick from the New Northwest cluster a few prime stations, and then to assign the remainder (and a few stations that Townsquare had itself owned) to a divestiture trust, with instructions to sell off these stations to an independent buyer.  While the FCC decision does not explicitly set forth the terms of the trust, it appears that the beneficial interest in the sales price of the stations to be divested (and presumably any operating profit until the stations were sold) would be for the benefit of Townsquare.  In looking at this proposed transaction, the FCC’s Media Bureau determined that the proposal to use this trust would concentrate a beneficial  interest in too many radio stations in the hands of one company.  Thus, the applications were dismissed.

Continue Reading FCC Sets Limits on Use of Divestiture Trusts When Station Purchase Would Put Buyer in Violation of Multiple Ownership Rules

Just a reminder to broadcast stations in certain states of several upcoming August 1st obligations.  Specifically, on Aug. 1, radio stations in certain states must commence pre-filing or post-filing announcements (depending on the state in which they are located) in connection with the license renewal cycle.  In addition, Annual EEO Public File Reports must be prepared and placed in the public files by August 1st for stations in certain states.  And finally, noncommercial stations in certain states must file a biennial ownership report by August 1st.  Further details about these various deadlines — which again are specific to particular states and services — are below. 

First up, August 1st is the deadline for Radio Stations in North Carolina and South Carolina to file their FCC Form 303-S license renewal applications seeking a renewal of their broadcast licenses.  (See our earlier license renewal advisory here.)  Accordingly, radio stations in those two states will also need to commence their License Renewal Post-Filing Announcements on August 1st to inform their communities of the renewal filing.  Specific language for the announcements can be found on the Commission’s website here, and the post-filing announcements continue on August 16, Sept. 1, Sept. 16, Oct. 1, and Oct. 16.

Second, the next batch of radio license renewals — which will be filing their renewals on October 3rd — is Florida, Puerto Rico, and the Virgin Islands, which means that Radio Stations licensed to those three states (or rather commonwealths, territories, islands, etc., as the case might be), must begin their License Renewal Pre-Filing Announcements on August 1.  The precise language of the pre-filing announcements—which is again dictated by the FCC’s Rules—can be found here. The pre-filing announcements for these stations continue on Aug. 16, Sept. 1, and Sept. 16. 

Third, by Aug. 1, Radio and Television Station Employment Units (SEUs) in California, Illinois, North Carolina, South Carolina and Wisconsin must prepare and place in their public inspection file their Annual EEO Public File Report.  Stations that have websites must also post the Report on their website.  The Annual EEO Public File Report summarizes the station’s or the SEU’s EEO activities during the previous 12 months, and provides information about the recruitment and outreach that the station conducted in the past year.  A copy of our recent reminder advisory with more information can be found here.  In addition, Radio Stations in North Carolina and South Carolina will also be filing an FCC Form 396 EEO Report by August 1 in connection with their license renewal filing.

Finally, Aug. 1 is the deadline for Noncommercial Radio Stations in California, North Carolina and South Carolina, and Noncommercial Television Stations in Illinois and Wisconsin to prepare and file an FCC Form 323 Biennial Ownership Report with the FCC.  Please note, this filing date applies only to noncommercial radio and TV stations in the states noted above. The FCC has revised its rules regarding the reporting of ownership interests for commercial broadcast stations, as well as revised the commercial Ownership Report—Form 323. Accordingly, commercial stations now file biennial ownership reports on one unified filing date, which will be later this year.  A copy of our recent reminder to noncommercial stations about the Aug. 1 requirement can be found here.

August 29 will be the deadline for initial comments on the FCC’s proceeding to set the relationship between applications for new LPFM stations and those for FM translators, a date set forth in a Federal Register publication of the FCC’s Notice of Proposed Rulemaking on this topic.  We wrote about the FCC’s NPRM here.  But it bears emphasizing that the decisions made in this proceeding will impact the processing of the thousands of FM translator applications still pending from the window opened for these applications back in 2003, and the potential for a new filing window for LPFM applications in the near future.  The NPRM also will decide whether FM translators can be used for the rebroadcast of an AM station if that translator was granted after the FCC first authorized the rebroadcast of AM stations by FM translators.  Up to this point, AM stations can only use translators granted before May 1, 2009 to rebroadcast their signals. 

Issues to be addressed in this proceeding include:

  • Whether the FCC’s proposal to use a market based analysis to determine which 2003 translators can continue to be processed (dismissing all translators when there were few opportunities for new LPFM stations) is justified?
  • Whether the technical basis of that analysis is accurate (as the FCC used the same model to assess the availability of channels in a market – overlaying a grid onto each market, and determining if LPFM opportunities existed at set points on that grid – the grid size was uniform in all markets, even though markets obviously are not uniform in size and shape)
  • Whether the assumptions about the number of LPFMs that are needed in each market were justified (the FCC concluding that there should be opportunities for at least 8 LPFMs in the Top 20 markets, 7 in Markets 21-50, 6 in Markets 51-100, and 5 in Markets between 101 and 150 and in smaller markets where at least 4 translator applications are pending – if there were not that many opportunities available, then all the FM translators pending in that market were proposed to be dismissed).
  • How should future opportunities for filing new LPFM and FM translator applications be handled?  What would be the priorities between such applications?

In addition, while this proceeding is pending, all "move-ins" of FM translators into rated markets, where they have become much in demand to rebroadcast AM signals or signals from HD-2 stations, are frozen.  So, many are anxious for the resolution of this proceeding – not only those with 2003 FM translator window applications still pending and those who are anxious to file for new LPFM stations, but also those looking to move a translator into a larger market (and we’re sure that the FCC is anxious to resolve this matter too).  So file your comments by the August 29 deadline, and your replies by September 12.

For our readers in the television business, there have been recent developments in two proceedings about which we have written recently.  Last week, we wrote about the extension of time to file reply comments on the CALM Act implementation Notice of Proposed Rulemaking, where the FCC is implementing a Congressional act to curb loud commercials.  The extension on the reply comments was granted as the Advanced Television Systems Committee was about to announce new amendments to its protocol that is the standard proposed as the basis by which compliance with the act is measured.  Given the importance of these standards, the FCC wanted to give interested parties at least a brief opportunity to comment on the revisions, thus warranting the extension.  According to an FCC Public Notice, those revised standard have now been announced, and can be viewed on the ATSC website, here.  Interestingly, as I write this article, the link to the Standards provided in the FCC Public Notice does not work, and the full report is not evident on the ATSC site.   Hopefully, those issues will be short lived, as the Reply comments are due on August 1.

Another recent proceeding of interest to television operators is the recent Order of the FCC dealing with the digital conversion of LPTV stations, Class A TV stations and TV translators.  We wrote about that proceeding here.  That Order sets deadlines this year for stations still operating in the portions of the television band that have already been reclaimed for use by wireless companies (Channels 52 to 69).  Any LPTV or TV translator still on these channels must file for a construction permit to move to the core television band by September 1 of this year.  The Order further requires that these stations stop operating on their current channels by the end of this year.  So that Channels 52 to 69 can be cleared on this very quick schedule, the FCC is expediting this proceeding, and has already published the Order in the Federal Register.  While this publication triggers the effective date of the Order (August 26 except for the portions dealing with fees for ancillary and supplemental services, which will be set at a later date), it also signals the start of the period in which Petitions for Reconsideration or Court appeals can be filed.  A not-so-fearless prediction – some sort of appeal will be filed, but it seems unlikely that it will be resolved by the September 1 filing deadline absent very unusual Court or Congressional intervention.  But watch for the filings in any event but, if you operate one of these stations on any channel between 52 and 69, be prepared to vacate the channel if nothing unusual changes the FCC’s collective mind between now and then.

______________________________________________________________

Update – 7/28 – from an alert reader on the location of the new ATSC protocol:

I checked the ATSC website and the Recommended Practice is there.  Look under "Standards" and drop to "Recommended Practices".  There is probably confusion because the ATSC’s A/85 is not a "Standard" but a "Recommended Practice".

recommended-practices/185-a85-techniques-for-establishing-and-maintaining-audio-loudness-for-digital-television

The FCC link is wrong

 

A consent decree entered into by a radio broadcaster, which included a $12,000 "voluntary contribution" to the US Treasury, demonstrates once again the FCC’s concerns about sponsorship identification issues.  The week before last, we wrote about the FCC fine levied on a television broadcaster for not including sufficient sponsorship information when a "video news release" was broadcast on a local television station without disclosing that the video footage had been produced by the automobile company whose products were featured.  The recent FCC Report on the Information Needs of Local Communities (formerly known as the Future of Media report) also focused on the need for more disclosure in connection with sponsored material carried on broadcast stations and other media (see our summary here).  With a long outstanding Rulemaking proceeding on these issues that remains unresolved (see our summary here), the Commission almost appears as if it is setting its policies in these areas through case law rather than through the rulemaking process.

In this most recent "payola" case, a complaint was lodged against a Texas radio station owned by Emmis Broadcasting alleging that the host of one music program was receiving compensation from a local music club, a local record store, and a manager of local bands in exchange for featuring music on the show.  The allegation contended that other local bands could not get their music played on this show without sponsoring Station events hosted by this particular personality.  The Consent Decree does not resolve the question of whether these allegations were true, but instead requires that the licensee make the voluntary contribution, adopt procedures to make sure that Station employees are aware of the requirements of the sponsorship identification rules, and report  to the Commission on a regular basis on the actions taken by the licensee to ensure compliance with the FCC rules.  In addition to general requirements that the Station educate its employees about the sponsorship identification rules, the Consent Decree also contained conditions setting forth rules governing the relationship that station employees could have with record labels, even though the decree makes no mention of any allegations of improper consideration having come from record companies.  These conditions were ones that appear to have come from consent decrees entered into with a number of broadcasters 4 years ago in the last major FCC payola investigation (which we wrote about here).

Continue Reading $12,000 Consent Decree Payment Demonstrates FCC Concerns About Sponsorship Identification Policies

The recent decision of the Third Circuit Court of Appeals which overturned the FCC’s 2007 rulings on newspaper-broadcast cross ownership and on diversity initiatives, took an unexpected turn today.  The FCC issued a Public Notice announcing that it would immediately stop giving "Eligible Entities" an advantage in certain instances – most particularly the extension of construction permits for new stations that are close to their expiration dates.  In the FCC’s 2007 Diversity Order, the Commission, to encourage more diversity in broadcast ownership, allowed "eligible entities", i.e. small businesses under SBA definitions, to acquire construction permits for new stations that were close to expiration, and to get an additional 18 months in which to construct the station.  In most other circumstances, the FCC will not extend a construction permit (absent some limited "tolling events" that will give applicants a limited amount of time to construct – but just the amount of time that a limited unforeseen event takes out of the usual 3 year construction period).  The 18 month extensions given to Eligible Entities have become an important way of saving construction permits about to expire when the original permit holder could not complete construction in the given 3 year construction period.

Today’s decision takes away that opportunity to extend unbuilt construction permits.  And the ruling goes even further, pulling the rug out from under recent grants of CP extensions – even ones that have already been granted, unless the extensions have become "final," i.e. no longer subject to reconsideration or appeal.  Those extensions granted in the last 40 days are subject to this order, and if these CPs have an initial expiration date that has already passed, they will be canceled.  This will no doubt cause some great consternation among parties who have purchased a construction permit in reliance on an FCC order extending the permit by 18 months, and may even have taken steps to construct the station since purchasing it, and now find themselves with a permit that has already expired.  The Commission makes no suggestion why some other remedy consistent with the Court’s order, but not so harmful to parties that relied on prior Commission policy, could not have been adopted – perhaps a new "tolling event" giving applicants a limited period of time to get a station on the air before the CP was canceled.  Sellers no doubt relied on the prospects of a pending sale (and simultaneous extension) to stop taking last minute extraordinary efforts to get a station constructed before the CP expired, and Buyer’s relied on the FCC order extending a CP to close purchases.  Given the potential for some entities to suffer greatly by this ruling, look for appeals to be filed.

Continue Reading FCC Stops Processing Applications By “Eligible Entities” – No Extensions of Unbuilt CPs When Sold to a Small Business

The FCC has announced the final amount of its regulatory fees for FCC Fiscal Year 2011 – fees that will be due during a window not yet announced – but likely sometime in late August or September.  The Fees, set out below, are pretty much identical to those that were proposed in May, when the FCC sought comments on these fees.  The procedures for filing will be much the same as in the recent past, though the FCC did make a few clarifications on some issues affecting broadcasters.  These issues include the following:

  • The FCC will no longer mail notices to broadcasters about their fee obligations.  Instead, stations will need to go to the FCC website to verify the amount of the fees they owe.  Look for the site containing that information to be live in the next few weeks.
  • The FCC decided that LPTV and TV translator stations that operate both analog and digital facilities during their digital transition will pay only one fee.  As we wrote last week, that transition will end (barring reconsideration or other review of last week’s order) for stations operating on Channels 52-69 at the end of the year, and will end in 2015 for all other LPTV and TV translator stations. 
  • The FCC promised to start a new rulemaking before the end of the year to reassess the allocation of the regulatory fee burden.  Within the broadcast industry, that would mean looking at issues such as whether VHF television stations should pay more than UHF stations for their fees – when in the digital world, most think that UHF channels are actually more valuable than those on the VHF band.  But, with potentially more impact, the FCC would look at rebalancing its fees over all the different industries that it regulates. Congress gives the FCC a specific amount of fees that it must raise from all of the industries that it regulates.  The percentage that broadcasters pay has been unchanged for many years.  The FCC is going to review that allocation to assess how business in the various industries have changed to see how those allocations should be changed in the future.

The FCC also reminded broadcasters that they needed to make the payments on time to avoid late fees and interest charges.  Broadcasters pay fees based on a station’s status as of October 1, 2010.  Thus, a station that was an unbuilt CP as of October I, 2010, but has subsequently been constructed, still pays the CP fee for this year.  The same goes for stations that have received upgrades in the period after October 1 – they pay only the amount due for their status as of October 1, 2010.  However, if a station has changed ownership since October 1, the new owner is still the one liable for the fee payment.  The broadcast regulatory fees for this year are set forth below:

Continue Reading FCC Sets Regulatory Fees for Fiscal Year 2011 – Look for August or September Payment Deadline

If a broadcaster is looking to maximize the fine that they receive for FCC violations, one would be hard pressed to pick three violations more likely to draw the ire of the FCC than those that were found after a field inspection of a North Carolina AM station, leading to a Notice of Apparent Liability proposing to fine the station $25,000.  The inspection found a tower site with an unlocked fence (a fence which was also observed to be in disrepair) around areas of high RF radiation, and no evidence of either an EAS receiver or a public file at the station’s main studio.  In the FCC’s estimation, that public file violation was the most serious, warranting a $10,000 fine.  Those pesky violations that could lead to actual harm to real people if someone wandered onto the tower site or if an emergency message did not reach its intended audience – drew fines of $7000 (for the unlocked fence) and $8000 (for the missing EAS receiver). 

A number of excuses were provided by the licensee, and rejected by the Commission.  The fact that subsequent remedial actions were taken did not reduce the severity of the violations found during the inspection.  An excuse offered after the inspection, that the studio was in the process of being moved to another location at the time of the inspection, meaning that the public file and EAS system were in transit, was also rejected – as the move was not mentioned to the FCC inspectors as a reason for the violation at the time of the inspection, and as the fact was that the station was in violation at the time of the inspection – during normal business hours, no public file or EAS equipment was at what was then the main studio.  The fact that no EAS outage were noted on any station log was also taken into account by the FCC.

Continue Reading $25,000 Fine for Unlocked Tower Fence and Missing EAS Receiver and Public File