A recent FCC decision shows how important it is for an applicant for a construction permit for a new or modified broadcast station, which entails the construction of a new tower, to take all steps set out on the the environmental worksheets associated with FCC Form 301 before certifying that the tower will not create environmental issues.  In the recent case, the FCC did not find that any actual environmental issues existed with the applicant’s proposed construction of a new tower, but it nevertheless stated that it would have fined the applicant for a false certification if the statute of limitations for the fine had not passed.  Why?  Simply because the applicant had not touched all of the required bases before making its certification that the tower construction posed no threat to the environment.  The applicant had tried to argue that no environmental study was necessary as the site was a de facto tower farm given that there were already two towers nearby, but that claim was rejected by the FCC, finding that nearby towers do not necessarily constitute a tower farm.

The tower farm issue was interesting in that the applicant pointed to the fact that there were two existing towers within a couple hundred feet of his proposed tower, and thus the existence of these towers, plus the word that he received from local authorities that the site was a good one at which to build a site due to the lack of any perceived impacts, was not sufficient either to make the site a "tower farm" exempt from further environmental processing, nor was it sufficient to demonstrate that there was no need for further environmental study.  The FCC’s staff did a thorough review of the cases about what constitutes a tower farm and, while noting that there was no clear definition in the rules, found that the two nearby towers, as they were substantially shorter than the one proposed by the applicant, were not of the same "character" as that proposed by the applicant, and thus the site was not a tower farm.  Apparently, to some degree, the FCC adopted a "we’ll know it when we see it" approach to the definition of a tower farm, and concluded that they did not see it here.

Continue Reading When are a Bunch of Towers Really a Tower Farm – Only the FCC Knows for Sure

The week, Congressman Rick Boucher, a member of both the House of Representatives Commerce and Judiciary Committees, told an audience of broadcasters at the NAB Leadership Conference that they should accept that there will be a performance royalty for sound recordings used in their over-the-air programming and negotiate with the record companies about the amount of a such a royalty.  He suggested that broadcasters negotiate a deal on over-the-air royalties, and get a discount on Internet radio royalties.  Sound recordings are the recordings by a particular recording artist of a particular song.  These royalties would be in addition to the payments to the composers of the music that are already made by broadcasters through the royalties collected by ASCAP, BMI and SESAC.   Congressman Boucher heads the Commerce Committee subcommittee in charge of broadcast regulation, and he has been sympathetic to the concerns of Internet radio operators who have complained about the high royalty rates for the use of sound recordings.  Having the Congressman acknowledge that broadcasters needed to cut a deal demonstrated how seriously this issue is really being considered on Capitol Hill.

The NAB was quick to respond, issuing a press release, highlighting Congressional opposition to the Performance royalty (or performance tax as the NAB calls it) that has been shown by support for the Local Radio Freedom Act – an anti-performance royalty resolution that currently has over 150 Congressional supporters.  The press release also highlights the promotional benefits of radio airplay for musicians, citing many musicians who have thanked radio for launching and promoting their careers.   The controversy was also discussed in an article on Bloomberg.com.  In the article, the central issue of the whole controversy was highlighted.  If adopted, how much would the royalty be?  I was quoted on how the royalty could be very high for the industry (as we’ve written here, using past precedent, the royalty could exceed 20% of revenue for large music-intensive stations).  An RIAA spokesman responded by saying that broadcasters were being alarmists, and the royalty would be "reasonable."  But would it?

Continue Reading Congressman Boucher to NAB – Accept Performance Royalty – How Much Would It Cost?

NPR Labs has announced that it is going to conduct a further study, financed by the Corporation for Public Broadcasting, of the potential of interference from a proposed increase in the power of HD Radio operations.  Last year, NPR had raised issues with the proposal by Ibiquity and a number of commercial broadcasters for power increases in the digital radio operations of FM radio stations.   At the end of last year, the FCC asked for comments on the proposal for increased HD radio power, and on NPR’s concerns about the power increase.  As set forth in this week’s NPR press release, the new study will be conducted in conjunction with other broadcasters in an attempt to arrive at a way to increase HD radio power without creating undue interference to the analog operations of existing stations.

While the FCC comment period in this proceeding has ended, the FCC is always willing to accept informal comments until a decision is reached.  The Commission is particularly interested in informal comments if those comments propose a way to resolve the conflict between parties to a proceeding.  If NPR is able, though this testing, to come up with a solution that will protect analog operations while allowing for a power increase in some or all HD radio operations, you can expect that the results will be reflected in the FCC’s final action.  Thus, this study may have important ramifcations for the future of HD Radio. 

The FCC today issued a long-awaited public notice, clarifying the relationship between FM educational stations and the analog Channel 6 TV stations that have or will be disappearing after the digital transition.  As we’ve written before, the question of whether noncommercial FM stations could seek improvements in their facilities based on the imminent disappearance of the Channel 6 stations has been pending for quite some time.  In the Public Notice issued today, the FCC made clear that no application for an improvement in a noncommercial FM station will be accepted before the DTV deadline unless it provides full protection to analog Channel 6 stations.  Even after the transition, applications will only be accepted after procedures are established in another public notice to be issued by the FCC at some later date.  Applications that are currently pending which don’t comply with the current rules that require educational stations to protect Channel 6 TV operations (either protecting them from interference or having unequivocal consent from the TV station to the construction at any time of the FM station not conditioned on the digital transition) will be dismissed.

The dismissal will be particularly crucial in deciding between competing applications still being processed as past of the 2007 window for filing for new noncommercial FM stations.  In that window, many applicants submitted applications ignoring the existence of Channel 6 TV stations, while others protected those stations.  Those who ignored the Channel 6 operations would have received significant comparative coverage advantages had the FCC not taken the action announced today – dismissing those applications who ignored the Channel 6 operations. While this notice seems to be definitive – given the processing issues on these applications so far – we probably have not heard the last of this issue.

As we have written, by April 2, broadcasters who are streaming need to file with SoundExchange a written election in order to take advantage of the SoundExchange-NAB settlement.  For broadcasters who make the election, the settlement agreement will set Internet radio royalty rates through 2015.  One aspect of this agreement that has not received much attention is the waiver from the major record labels of certain aspects of the performance complement that dictates how webcasters can use music and remain within the limits of the statutory license.  When Section 114 of the Copyright Act, the section that created the performance royalty in sound recordings, was first written in the 1990s, there were limits placed on the number of songs from the same CD that could be played in a row, or within a three hour period, as well as limits on the pre-announcing of when songs were played.  These limits were placed seemingly to make it more difficult for listeners to copy songs, or for Internet radio stations to become a substitute for music sales.  In conjunction with the NAB-SoundExchange settlement, certain aspects of these rules were waived by the 4 major record labels and by A2IM, the association representing most of the major independent labels.  These waivers which, for antitrust reasons, were entered into with each label independently, have not been published in the Federal Register or elsewhere.  But I have had the opportunity to review these agreements and, as broadcasters will get the benefit of the agreements, I can provide some information about the provisions of those agreements.

First, it is important to note that each of the 5 agreements is slightly different.  In particular, one has slightly more restrictive terms on a few issues.  To prevent having to review each song that a station is playing to determine which label it is on, and which restrictions apply, it seems to me that a station has to live up to the most restrictive of the terms.  In particular, the agreements generally provide for a waiver of the requirement that stations have in text, on their website, the name of the song, album and artist of a song that is being streamed, so that the listener can easily identify the song.  While most of the labels have agreed to waive that requirement for broadcasters – one label has agreed to waive only the requirement that the album name be identified in text – thus still requiring that the song and artist name be provided.  To me, no station is going to go to the trouble of providing that information for only the songs of one label – so effectively this sets the floor for identifying all songs played by the station and streamed on the Internet.

Continue Reading With April 2 Webcasting Election Due for Broadcasters – A Look at the Record Label Waivers of the Performance Complement

With all the recent discussion of the NAB-SoundExchange settlement (see our post here) and the recent Court of Appeals argument on Copyright Royalty Board decision on Internet Radio royalties, we have not summarized the "settlement" that SoundExchange agreed to with a few very small webcasters.  That agreement would essentially extend through 2015 the terms that SoundExchange unilaterally offered to small webcasters in 2007, and make these terms a "statutory" rate that would be binding on all copyright holders.  The deal comes with caveats – that an entity accepting the offer would be prevented from continuing in any appeal of the 2006-2010 royalties and from assisting anyone who is challenging the rates in the CRB proceeding for rates for 2011-2015, even if the webcaster grows out of the rates and terms that SoundExchange proposes.  Once it signs the deal, it cannot have any role before the court or CRB in trying to shape the rates that his or her company would be subject to once they are no longer a small webcaster until after 2015.  Even with these caveats, the deal does provide the very small webcaster the right to pay royalties based on a percentage of their revenue, and even provides some recordkeeping relief to "microcasters", the smallest of the small webcasters.  Parties currently streaming and interested in taking this deal must elect it by April 30 by submitting to SoundExchange forms available on its website for "small webcasters" (here) and "microcasters" (here).

The Small Commercial Webcasters that I represented in the Copyright Royalty Board proceeding did not negotiate this deal.  In fact, no party who participated in the CRB case signed the "settlement", yet it has become a deal available to the industry under the terms of the Webcaster Settlement Act as SoundExchange and some webcasters agreed to it.  My clients have been arguing for a rate that allows their businesses to grow beyond the limits of $1.25 million in revenue and 5 million monthly aggregate tuning hours set forth in this agreement.  But for very small webcasters not interested or able to participate in regulatory efforts to change the rules, and who do not expect their businesses to grow significantly between now and 2015, this deal may provide some opportunities.  The webcaster pays 10% of all revenues that it receives up to $250,000, and 12% of revenues above that threshold up to $1.25 million.  If it exceeds the $1.25 million revenue threshold, it can continue to pay at the percentage of revenue rates for 6 months, and then it would transition to paying full per performance royalty rates as set out by the CRB.   A service would also have to pay for all streaming in excess of 5 million monthly ATH at full CRB rates.  Microcasters, defined as those who make less than $5000 annually and stream less than 18,067 ATH per year (essentially an audience averaging just over 2 concurrent listeners, 24 hours a day 7 days a week), need pay only $500 a year and, for an additional $100 a year, they can be exempted from all recordkeeping requirements.

Continue Reading SoundExchange “Settlement” With Microcasters – A Royalty Option for the Very Small Webcaster

A few weeks ago, we wrote about just how outmoded the FCC’s prohibitions on the cross ownership of newspapers and broadcast stations were in an era when newspapers seem to be going out of business at an alarming rate.   We quoted a DC trade press reporter who had mused that the newspaper-broadcast cross-ownership rule could well outlast the newspaper itself.  According to a report in Bloomberg News today, the Commission may well be revisiting the issue, according to statements made by Chairman Copps, in light of the economic turmoil in the newspaper industry.  But what would a review of the issue bring from the FCC?  That is unclear from the article – and unclear from the prior statements of the Acting Chairman.

In late 2007, Acting Chairman Copps was active in his opposition to the Commission’s very limited relaxation of the cross-ownership prohibitions.  See our summary of the FCC debate on that relaxation, here.  But would he take the same position today in light of the current economic climate for newspaper publishers?  As the Bloomberg article pointed out, House of Representatives Speaker Nancy Pelosi has suggested that the Justice Department might want to relax antitrust review of newspaper combinations given their economic plight.  Other legislative fixes have been suggested – including allowing papers to operate as non-profit, tax-exempt entities to which charitable contributions could be made.  With these kinds of legislative efforts underway, perhaps a change in direction at the FCC is indeed possible.  One more issue to watch in the coming months. 

The FCC today released a Public Notice announcing that, after many false starts, it is making effective the new schedule of higher application fees on April 28.  We wrote about the on-again, off-again effectiveness of these new fees which, this time, seem quite clearly to be about to become effective.  The schedule of new fees can be found appended to the FCC’s order adopting the fees, here.  Common application fees include a $940 fee for the submission of an application for a minor technical change to a broadcast station (FCC Form 301), or for a transfer of control (FCC Form 315) or assignment of license (FCC Form 314).  The fee to submit an ownership report (FCC Form 323) will be $60 per station, and a request for Special Temporary Authority will be $170.  To avoid having applications rejected for insufficient fees, be sure to be prepared for the new fees for any application submitted on or after April 28.

According to a recent article from the Des Moines Register, a station in Iowa recently fired two employees who, during what they thought was a break in programming, got into a heated, profanity-laden exchange which, luck would have it, ended up on the air as their mikes were live.  Fearing an FCC fine, the station owner fired the duo, hoping to mitigate any fine that the FCC might impose.  We will have to wait to see what impact the employers action will have on any action the FCC might take.  But the action demonstrates two things – first, mistakes happen and will happen whenever there is live programming.  Even clear station policies that absolutely ban such actions and make clear that they are a firing offense (as were apparently in place here) can’t stop human beings from messing up.  Second, the case reminds all on-air employees that they need to respect a microphone, and need to assume that a mike that can pick up sounds is in fact doing so.  Even Presidents seem to have had problems remembering that fact, but these live-mike slip ups can lead to FCC indecency fines.

The action also reminds us that, with the new administration now in place, we don’t know how the new FCC will enforce the indecency policy.  We are waiting for decisions on several court appeals of FCC indecency cases, and on the appointment of new FCC Commissioners.  Until we see the decisions in those cases, and find out who the new Commissioners are and how aggressively they want to enforce the rules, we will likely not know how cases like this one will be treated in the next few years. 

In the last 5 days, the US Court of Appeals in Washington, DC has held two oral arguments on appeals from decisions of the Copyright Royalty Board – one from the Board’s decision on Internet Radio Royalties and the other on the royalties applicable to satellite radio.  The decisions were different in that, in the Internet Radio decision, the appellants (including the group known as the "Small Commercial Webcasters" that I represented in the case) challenged the Board’s decision, arguing that the rates that were arrived at were too high.  In contrast, at the second argument, SoundExchange was the appellant, arguing that the Board’s decision set royalties for satellite radio  that were too low.  But, in both arguments, an overriding question was whether the Judges on the CRB were constitutionally appointed and thus whether any decisions of the Board had any validity.  While the question was expected and specifically raised in the webcasting proceeding (see our post here when that issue was first raised), the discussion at the satellite radio argument was somewhat of a surprise, as the issue had not been raised by either party, and the Appeals Court judges were not even the same judges who had heard the Internet radio argument.  Yet one of the Judges raised the issue, unprompted by any party, by asking if the Copyright Royalty Judges were properly appointed and indirectly asking if their decision would have any validity if the constitutional issue was found to exist.

Will the Court decide the constitutionality issue, and what would it mean?  No one knows for sure.  One of the issues raised by the Court in the Internet radio case was whether the issue had been raised in a timely fashion.  In both cases, the possibility of requiring additional briefing on the issue was also raised by the Court, though no such briefing has been ordered – yet.  Even if the Court was to find that the Board was not properly appointed, there are questions as to whether the existing decisions should nevertheless be allowed to stand, while blocking new decisions until a new appointment scheme is found.  Alternatively, Congress might have to intervene to resolve the whole issue and, if it was to do that, would Congress simply ratify the current decision, or would there be new considerations that would affect any Congressional resolution?  The issue raises many questions, and we’ll just have to wait to see what the resolution will be.

Continue Reading Two Court of Appeals Arguments on Sound Recording Music Royalty Rates – And the Real Question is Whether the Copyright Royalty Board is Constitutional