The FCC’s Notice of Inquiry (NOI) on Multiple Ownership has been published in the Federal Register, setting July 12, 2010 as the deadline for comments, with July 26 as the deadline for reply filings.   We previously outlined many of the questions asked in the wide-ranging Notice of Inquiry. The questions deal with the entire spectrum of media ownership issues, from asking questions about how the new media landscape changes the considerations given to media ownership restrictions, to inquiries into the way in which the consumer gets needed news and information programming from broadcast outlets, and the impact of consolidation on that information.  Filing comments in this proceeding before the deadline will help to shape the discussion that will occur. The FCC claims to be intent on finishing its review of the ownership during this calender year but, as the comments in this proceeding must be distilled into more specific proposals to be reflected in a subsequent  Notice of Proposed Rulemaking, which must itself be subject to public comment, this would seem a very ambitious task given that there will be less than 6 months remaining after the comments are replies on the NOI are submitted. Nevertheless, the short 30 day comment period on the NOI seems designed to speed review – so time is short for interested parties to draft and submit meaningful comments on the fundamental and wide-ranging questions that are being asked..

Further highlighting the difficulty in completing the ownership review this year, is the FCC’s Public Notice that was just released – announcing that it is seeking bids for nine different studies to review various issues relevant to the media ownership proceeding. According to the Public Notice, studies will look at many of the issues on which the Commission has sought comment in the NOI, including studies of how consumers receive local news and information, the effect that media consolidation affects the diversity of programming and the degree of civic engagement in a community, and even requesting a study to design a model to be used to measure the degree of media consolidation in a market.  the Commission also asked for suggestions as to other studies that it could conduct relevant to this proceeding.  Comments on other potential areas of study are due by July 7.

Continue Reading Comments Due July 12 on Multiple Ownership Notice of Inquiry – And FCC Solicits Bids for Proposed Media Ownership Studies

In the last few weeks, I’ve been asked several times by broadcasters whether an ad should be considered an "issue ad."   Usually, the ad in question deals with some sort of faintly controversial issue, and the broadcaster seems torn about how to classify the ad.   In many ways, the answer is almost irrelevant as, other than some public file obligations, whether or not an ad is an issue ad has little practical significance.  Issue ads are not entitled to special rates – lowest unit rates are reserved for candidate ads.  They are not entitled to special placement in broadcast schedules.  As there is no Fairness Doctrine, there isn’t even a requirement that you treat both sides of an issue in the same fashion (except perhaps, where a Fairness obligation may still arise if the issue being discussed is a candidate in an election, when the last remnant of Fairness, the Zapple Doctrine, has not officially been declared dead).  So why worry about whether or not something is an issue ad?

The principal reason is the public file. Commission rules require that the sponsor of an issue ad be identified in a broadcaster’s public file, along with the sponsor’s principal officers or directors.  This is required for any ad dealing with a controversial issue of public importance.  The ad does not need to deal with a political issue, or one to be considered by a government body.  Any controversial issue of public importance merits the public file treatment.  For ads dealing with a "federal issue", one to be considered by the US Congress, any Federal administrative agency or any other branch of the United States government, additional disclosures need to be made in the file (which we have listed before), setting out all the information that you would need to provide with respect to a candidate ad – including the price paid for the ad and the schedule on which the ad will run. 

Continue Reading So Just What is an “Issue Ad” and Why Should I Care?

The FCC has wasted no time on the television reallocation proposal outlined in its National Broadband Plan, scheduling the first of four working sessions on the issue for two weeks from now.  The first session will be held at the FCC on Friday, June 25, 2010 from 3:00 to 6:00 PM.  These working sessions are intended to address the technical challenges of the reallocation proposal.  According to today’s Advisory released by the FCC, the Commission has invited "a number of broadcast industry engineers and technical experts in related fields" to participate in the sessions.  On the agenda for the June 25th meeting are such topics as:  The Cellularization of Broadcast Architecture, Methodologies for Repacking the TV Band, Advancements in Compression Technology, and Improvements in VHF Reception.  It’s not clear who has been invited to attend or what the goal of the meeting is with just 30 minutes allocated to each of these four huge topics, but it is clear that the FCC is full speed ahead on its proposed reallocation of spectrum from the TV bands.  See our earlier posting here discussing the spectrum reallocation plan and the potential impact on broadcasters.  The meeting is open to the public and available online at http://reboot.fcc.gov/live/ for those interested in following the proceedings, which should be just about everyone in the television broadcast industry. 

According to a letter from the Copyright Office that has recently been made public, the economic troubles of broadcasters, which have been used to argue against the imposition of a performance royalty for the use of sound recordings by radio stations, are cyclical and are largely over.  Thus, argues the letter, the improvement in the fortunes of radio stations merits a reexamination of whether the Performance Rights Act imposing such a royalty should be adopted.  The letter contrasts the reportedly good news for radio broadcasters with the Copyright Office’s view of the plight of the record industry, which is deemed to be more permanent, based on the pervasive nature of illegal downloading.  Given the Copyright Office’s concern with the fate of the record companies, and their need to establish a more stable revenue source through payments of fees from the users of music to replace the sales of music that have declined so dramatically, the Copyright Office suggests that further review, with an eye toward adoption of the performance royalty, is merited.  This letter was addressed to the US General Accounting Office, which in February issued a report concluding that the imposition of a performance royalty would have a negative impact on the radio broadcast industry, as it has been hard hit by both fundamental changes in competition and from downturns in the business cycle, and that the imposition of the royalty would cause some stations to go out of business and others to cease playing music.  But the GAO promised a further review of certain issues, and the Copyright Office had not weighed in before the initial GAO report, this letter was prompted. 

The Copyright Office has long been on record as supporting the imposition of a performance royalty in sound recordings in the United States – not just for radio, but for all industries that use music.  This would match the performance royalty in the musical composition, as collected by ASCAP, BMI and SESAC, for the public performance of musical compositions not only by radio, but also by television, cable television, in bars and restaurants and stadiums, and in virtually any other location where music is used in a public setting.  Thus, it should come as no surprise that the Copyright Office would take the position that it does in this letter.  What is perhaps surprising is that the letter seems to go beyond a legal document setting forth the legal justifications for the imposition of the royalty, and instead has the tone of an advocacy piece that takes a firm position in support of the recording industry over the interests of broadcasters, and one which advocates only the position of the recording industry.

Continue Reading Copyright Office Issues Letter In Support of Broadcast Performance Royalty – Suggests that Economic Comeback for Radio Makes Royalty More Affordable

On May 27, 2010, David Oxenford spoke to the Vermont Association of Broadcasters annual meeting in Montpelier, updating the broadcasters on Washington events of importance, and discussing the FCC’s political broadcasting rules.  A copy of Dave’s PowerPoint on issues of importance to broadcasters will be posted here soon.  Broadcasters may want to refer to Davis Wright Tremaine’s Political Broadcasting Guide for a discussion of the political broadcasting issues that may arise in this election season.  One of the political broadcasting issues that was discussed in detail was the issue of what a station should do when faced with a political ad that comes from a third party, attacking a political candidate, and the candidate tells the station that the ad is untrue and, if it continues to run on the air, it may subject the station to liability.

This issue may be coming up more in the coming months.  The recent Citizens United case signals the potential for more campaign spending by corporations and labor unions. This money would be spent directly by these organizations, not contributed to the candidates, as the case did not loosen the limits on corporate contributions directly to candidate’s campaign committees. Thus, as the ads will not come from candidates, they will not be subject to the “no censorship” rule that applies only to candidate ads. Because the no censorship rules prevent a broadcast station from rejecting a candidate’s ad based on its content, stations are protected from any liability for the content of those candidate ads. In contrast, broadcasters are free to reject ads from corporations, labor unions, or other non-candidate groups. Because they can choose whether or not to accept such ads, they can technically be held liable for the contents of those ads, should the ad be defamatory or otherwise contain legally actionable material. This should not be new to broadcasters as, even before Citizens United, stations were often faced with complaints from candidates about ads from third party interest groups (like the political parties’ campaign committees, or so-called 527 groups like MoveOn.org) that were permitted to advertise even before the recent decision. Most broadcasters want to be able to accept these advocacy ads from non-candidate groups, but they also want to avoid potential liability. What is a station to do when it receives such an ad, or when an ad is already running and a candidate complains about its contents?

Continue Reading David Oxenford Speaks to Vermont Broadcasters – Addresses What to Do When a Station Receives a Complaint about the Truth of a Political Ad

On Friday, the FCC released seven Notices of Apparent Liability for violations of children’s programming rules, proposing forfeitures (i.e. fines) of $25,000 to $70,000 per station.  Most of the violations cited were overages of the commercial limits, which restrict stations to broadcasting 10.5 minutes per hour of commercial material during childrens programming on weekends and 12 minutes per hour on weekdays.  Many of these overages were for durations of 15 seconds each.  In one case, the FCC found a Pokemon program to be a program length commercial (discussed below) where a Pokemon game card with the letters "MON" was displayed for one second in a Nintendo GameBoy commercial during the show.  In addition to overages of the commercial limits, other cited violations included failing to provide program guide publishers with information regarding the target child audience of core programs;  failing to update the public file regarding compliance; and failing to publicize the existence and location of the station’s children’s television programming reports, in addition to the program length commercial issue described above. 

The largest fine, for $70,000, was issued in a case where most of the violations were for "program length commercials", in which a commercial for a memorabilia website shown during a "Yu-Gi-Oh" television program contained a "very brief" reference to Yu-Gi-Oh trading cards.  A program length commercial occurs when an advertisement contains a mention of a character or product that is associated with the program in which the ad appears.  In these situations, the Commission fears that children will not be able to perceive the difference between the programming and the commercial, and thus treats the entire program as a commercial.  In so doing, the station is considered to have exceeded the commercial limits by the entire length of the program less the number of commercial minutes allowed.  This is done even if the commercial image of the character or other program-related material is fleeting.  We’ve written about the difference in treatment between a commercial overage and program length commercial before, and this case makes clear just how seriously the Commission considers the latter and how costly this can be to the offending station.

Continue Reading FCC Increasing Fines for Violations of Children’s Programming Rules – Fines As High as $70,000 Per Station Issued

Only last month, we wrote about the proposal of a consulting engineer for an across the board power increase for AM stations so that they could overcome the effects of interference from all the electromagnetic devices now existing in our modern world that, while making our lives easier, interferes with the signal of AM stations, particularly in urban environments.  In what seems like record time, the FCC today sent the proponent of that change a letter declining to pursue the proposal.  The FCC’s Media Bureau sent Richard Arsenault, the engineer who made the proposal, a letter stating that, after review, the staff decided that the proposal would increase AM interference, in contradiction to the attempts by the FCC to reduce interference on the AM band.  Thus, the proposal was dismissed.

When we first wrote about this proposal, we expressed skepticism about how likely such a move was to get buy in from all of the potentially affected parties, including neighboring countries.  Nevertheless, we are surprised at the speed of the FCC’s denial of this proposal, and its reliance on an almost 20 year old proceeding which took some initial steps to try to reduce AM interference, but which has essentially been inactive for many years.  AM stations are suffering in many places in the country, and the interference identified by Mr Arsenault is real.  We hope that, while the FCC has denied this particular remedy, it will continue to look at means to address AM issues.  One proposal still out there – moving AM to a rededicated TV channel 5 or 6.  Over time, we will see if that proposal, on which the FCC has already received public comment, has any traction at the FCC.

The FCC yesterday released a Notice of Inquiry, formally beginning its Quadrennial Review of the Multiple Ownership Rules.  While the FCC informally began the process of the Congressionally-mandated review of the ownership rules last November through a series of informational panels and workshops, the Notice of Inquiry ("NOI") provides the first formal opportunity for the public to comment on the ownership rules.  The FCC will take the comments that it receives in response to the NOI, and formulate some more specific proposals on how it plans to change the current rules (if at all), which will then be released for additional comments in a Notice of Proposed Rulemaking.  The NOI is a broad-ranging document that gives little indication of the FCC’s final direction in this proceeding – though it does go into detail as to how the media marketplace has changed in recent years, citing declining advertising revenues, and more media outlets providing competition to broadcasters for both audience and advertising revenues.   The NOI posed dozens of detailed questions asking how the Commission should assess the various aspects of the ownership rules, and what impact the changes in the media marketplace should have on its consideration of rule changes.

The FCC is concerned with all aspects of its media ownership rules.  Thus, it sets out that it will explore the following rules:

  • The Local Television Ownership cap, which limits owners to two stations in markets where there are at least 8 competing television owners and operators, and which forbids combinations of the top 4 stations in any market.  Television operators, particularly in smaller markets, have been urging the Commission to allow more consolidation in those markets so that stations can provide better service to their communities.  They argue that the current limits preclude small market consolidation, which is most needed in these markets where the costs of operation are not significantly lower than in large markets, but where revenue opportunities are far more limited.
  • The Local radio ownership caps, that currently limit owners to 8 stations in the largest markets, no more than 5 of which can be in any single service (i.e. AM or FM).  Some radio owners contend that these limits no longer make sense given the competition for audio listening from so many sources (including satellite and Internet radio, who can provide unlimited formats in any market).  Other issues include whether AM and FM still need to be treated separately, and even whether AM should be counted to the same degree as FM in a multiple ownership analysis.
  • The Newspaper-Broadcast cross-ownership rule, that forbids cross-ownership of broadcast stations and daily newspapers without a waiver – which, as the result of changes in the cross-ownership rules in 2007, will be granted on a more liberal basis, but only in the top 20 markets.  Given the economic state of the newspaper industry, many seek the repeal of this rule in its entirety. As we have written before, will the newspaper cross-ownership rule outlive the newspaper?
  • The Radio-Television cross-ownership rule, which limits the number of radio and television stations that can be owned by a single party in a single market
  • The Dual Network Rule, that prohibits the common ownership of any of the top 4 television networks.

Each of these rules is up for review, and numerous questions have been asked, and issues identified, for consideration in this proceeding. 

Continue Reading FCC Issues Multiple Ownership Notice of Inquiry – Formally Begins Quadrennial Review With Lots of Questions To Assess the Impact of Media Consolidation

In a very cryptic announcement, the Chairs of the House and Senate commerce committees, and the Chairs of the subcommittees dealing specifically with communications matters, have announced that they are beginning the process of rewriting the Communications Act of 1934, the Act which governs regulation of broadcasters as well as telecommunications, satellite and mobile communications entities.  The announcement, from Senator John D. (Jay) Rockefeller IV, Chairman of the U.S. Senate Commerce, Science, and Transportation Committee, Rep. Henry A. Waxman, the Chairman of the House Committee on Energy and Commerce, Senator John F. Kerry, the Chairman of the Senate Subcommittee on Communications, Technology, and the Internet, and Rep. Rick Boucher, the Chairman of the House Subcommittee on Communications, Technology, and the Internet, merely states that they will "will invite stakeholders to participate in a series of bipartisan, issue-focused meetings beginning in June" to address the issues that would be involved in such a rewrite.  The announcement then says that more details will be forthcoming.

What does this mean for broadcasters?  At this point, until more details are released, the issues to be addressed are anyone’s guess.  Much has been made in recent years of the changing nature of the media and communications industry, particularly in light of the development of the Internet.  In a recent decision, the Courts have said that the FCC is limited in its ability to regulate the provision of Internet services, and the initial impetus for this rewrite proposal may well come from that decision.  But these processes, once begun, often take on a life of their own, with new proposals covering issues not necessarily anticipated at the outset of the proceeding arising as the process goes on.  While there are minor amendments to the Act almost every year, the last comprehensive rewrite of the Act took place in 1996.  There, while much of the debate focused on telecommunications issues (which will likely be the case here as well, as there are far more dollars at stake than in the broadcast world), broadcast ownership reform emerged at the last minute – abolishing numerical caps on television ownership and all caps on radio ownership nationally, and raising the local limits on radio ownership from the 4 stations (2 AMs and 2 FMs) previously allowed to be owned in one market by any party, to the current cap allowing ownership of as many as 8 radio stations in the largest markets.

Continue Reading Congress to Rewrite the Communications Act – What Could It Mean For Broadcasters?

The DISCLOSE Act recently passed the Committee in the House of Representatives charged with dealing with it, without many of the provisions that most worried broadcasters and cable companies.  We recently wrote about the DISCLOSE Act legislation proposed in both the House and Senate in response to the Citizens United Supreme Court case (which freed corporations and labor unions to spend money during political campaigns to explicitly support or oppose the election of particular candidates).  When introduced, in addition to provisions mandating new disclosure requirements for corporations, labor unions and other third parties who decide to run political ads, the legislation had a section expanding the requirements for lowest unit rates and reasonable access – extending these rights to political parties (as opposed to being limited to the candidate’s own campaign committees, who are the only ones eligible under current law) and mandating advertising rates even lower than the current lowest unit charges in certain circumstances.  That section of the original bill also required that the FCC conduct audits of broadcasters’ compliance with the political rules, and seemingly expanded the FCC political advertising obligations of cable systems.  The House of Representatives Committee on Administration this week approved the bill, sending it on to the full House for consideration.  The DISCLOSE Act’s sponsors want to have the bill approved and in place by July 4th so that it will have an impact on the November elections.  The approval without these provisions, which may well have caused broadcasters and other media companies to come out in opposition to the bill and delayed its passage, signals that the Act may in fact move on the rapid timeline that its sponsors envision.

Of course, this is not the end of the story.  The Senate still has to consider the bill in committee, and the full House and the full Senate have to vote on the legislation before it is adopted.  At any point, amendments can be offered that could have the impact of returning some of these provisions of concern.  But, at least for now, while imposing some additional disclosure requirements on political advertisers, the House version of the legislation is much more palatable to the broadcasting community.  But watch this bill as it progresses through Congress in the coming month to see what else may develop.