In a recent article in Silicon Valley Insider, TargetSpot’s CEO, Doug Perlson, suggests that the financial savior of Internet Radio might be payola – taking money from record companies or artists to play their songs.  Putting aside any issues of the financial benefits of such a plan, and the creative and aesthetic issues that pay for play may raise, and since this is a blog written by lawyers, we’ll deal with the legal implications.  And as lawyers, we’re forced to play the spoilsport.  As set forth below, such a scheme can be done legally (just as it could be on terrestrial radio with the proper disclosures).  But, while there has been no legal enforcement of such activities, careful Internet radio operators would best be advised to be careful about just taking the money and playing songs, but instead should make some disclosure of the nature of the service that they are providing.

The payola statute, 47 USC Section 508, applies to radio stations and their employees, so by its terms it does not apply to Internet radio (at least to the extent that Internet Radio is not transmitted by radio waves – we’ll ignore questions of whether Internet radio transmitted by wi-fi, WiMax or cellular technology might be considered a "radio" service for purposes of this statute).  But that does not end the inquiry.  Note that neither the prosecutions brought by Eliot Spitzer in New York state a few years ago nor the prosecution of legendary disc jockey Alan Fried in the 1950s were brought under the payola statute.  Instead, both were based on state law commercial bribery statutes on the theory that improper payments were being received for a commercial advantage.  Such statutes are in no way limited to radio, but can apply to any business.  Thus, Internet radio stations would need to be concerned.

Continue Reading Payola on Internet Radio – Legal?

A recent proposal to increase the power levels at which HD Radio stations operate – to improve coverage and, perhaps more importantly, building penetration so that people can receive digital channels inside buildings – has been the subject of a cautionary study released by National Public Radio.  That study was summarized in a story in the NPR magazine Current (an executive summary can be found here, and the entire 280 page study is here).  The study agrees that an increase in power suggested by the recent proposal would increase HD Radio coverage and significantly increase building penetration, but it would do so only at the cost of causing interference to existing analog stations – in some cases significant interference.  Such interference would be especially troublesome in receivers in cars, where radio broadcasters have long concentrated some of their most important programming to capture people in the place where competing entertainment options are most limited.   

The NPR study does suggest that there could be ways to limit the interference using directional antennas or lessening power but using digital boosters that could be tuned slightly off-center on their frequencies to protect adjacent channel stations.  HD radio operates on the sides of a station’s analog channel (thus its original name – "IBOC" for In-Band On-Channel), thus potentially causing interference to adjacent channel stations.  By suppressing the signal on the side of the signal nearest to the adjacent channel station and sending the digital bits out of the other side of the channel, some of this interference could be minimized.  Yet systems capable of such protections have not yet been fully developed.

Continue Reading NPR Study Suggests Concerns With Increase in HD Radio Power

When we first started this blog over two years ago, one of our first posts to receive a comment (proving that at least someone was actually reading what we wrote) dealt with the FCC’s proposal to allow AM stations to be rebroadcast on FM translators, a change of the Commission’s long-standing prohibition on using FM translators for anything other than rebroadcasting FM stations.  While some commenters expected this proposal to be rushed through the FCC, we cautioned that the process might not be so fast, as there were parties who would be opposed to more uses of FM translators, including LPFM advocates who fear that more use of FM translators will preclude opportunities for new LPFM stations.  Well, it looks like the long wait for a decision to allow the use of translators for AM stations may soon be over, as the matter is listed as a possible topic for consideration at the FCC’s September 25 meeting.  This is only a list of possible agenda items, and even were it to make it to the agenda, it can always be removed.  But even being listed as a possible item for consideration does seem to be a positive development indicating that the FCC’s analysis of the matter has neared completion. 

As we have written, the FCC has already allowed some AM stations to begin broadcasts on FM translators pursuant to Special Temporary Authority.  But any STA is by its nature temporary, and can be revoked at any time.  AM broadcasters would welcome the certainty that any permanent decision will bring.  Of course, applications for new FM translators can only be filed during a window for such filings, and as the last translator window is still tied up in questions about how many applications by each party should be processed, AM licensees looking for FM translators must find existing translators (or construction permits from the last window) in order to take advantage of any rule change that the Commission may make.  Nevertheless, any change will immediately provide an important benefit to at least some AM broadcasters.

More than 8 years ago, a group of television station owners (the Network Affiliated Stations Alliance or "NASA") who operated stations affiliated with the major television networks filed a request with the FCC, petitioning the Commission to rule that certain provisions in network affiliation agreements that limited the ability of stations to preempt network programming should be prohibited.  While some of these issues were raised in the Commission’s localism proceeding, the parties have now reached an agreement to resolve many of the issues.  The Commission last week released an order approving that agreement and clarifying some of the legal issues as to what provisions can be contained in network affiliation agreements.  These clarifications not only help to clarify the clauses that can be contained in affiliation agreements, but also give broadcasters insights as to what kinds of provisions can be included in any agreement by which one party provides programming to a broadcast station licensee, including agreements such as LMAs.

 The Commission’s Order sets out standards governing the network-station relationship that insure that the licensee maintains control over programming and other basic operational decisions of their station.  From this basic principal, the following specifics were adopted:

  • Station licensees have an unfettered right to reject network programming that they believe is contrary to the public interest, "unsatisfactory" or "unsuitable
  • Stations can preempt network programming when the licensee thinks there is some other programming which is of greater national or local importance.
  • If a preemption is done for one of these reasons, the affiliation agreement cannot impose monetary or non-monetary penalties or limit the amount of such preemptions
  • Affiliation agreements cannot give networks the right to "option" time in the future unless they make a commitment to fill that time with programming.   This is important in a multichannel digital context, as it prevents networks from tying up time on a second or third channel that they might or might not use.

Continue Reading Setting the Standards for the TV Network-Affiliate Relationship – Guidance for LMAs and Other Programming Relationships

The FCC recently issued a Notice of Inquiry, asking if it should consider mandating that XM Sirius receivers also be able to receive HD Radio or to play material from other audio sources.  This proceeding was promised as part of the FCC’s approval of the XM-Sirius merger, as a potential way of ensuring that competition in the audio entertainment marketplace remained robust after the merger.  While the Commission required that XM Sirius allow manufacturers to build receivers that could incorporate HD Radio or other audio entertainment technologies (e.g. MP3 player, Internet connectivity, etc), it did not require that any receiver contain such technology.  This proceeding asks if any sort of requirement along these lines should be adopted.  It also seeks information generally about the audio entertainment marketplace.

Specific questions posed by the FCC in this proceeding include:

  • Would a mandate promote lower prices and more choices for consumers of audio entertainment?
  • Should it be expected that audio devices with multiple audio entertainment capabilities will be developed without an FCC mandate?
  • Would an XM Sirius radio with HD Radio capability promote dissemination of state-level EAS messages?
  • How well has HD Radio been developing on its own?
  • Would multi-function devices facilitate the development of HD Radio?
  • Are such devices necessary for the development of HD Radio?
  • What other public interest benefits, if any, would result from such a combinations?
  • What technological issues would there be in multifunction devices (e.g. manufacturing cost, battery life, size and weight, interference, etc.)?
  • If a requirement was adopted, how long would any required phase-in period need to be?
  • Should any requirement cover all radios, or just certain types (e.g. in-car, portables, home receivers, etc)?
  • Does the FCC have the authority to adopt any such mandate?

That last issue, the FCC statutory authority to adopt rules in this area, is a general question considered in several other recent FCC proceedings (for instance, see out post here).  Just because the FCC might think that something is a good idea does not mean that it can adopt rules in an area.  Rules requiring that equipment manufacturers take certain actions have run into problems in the Court of Appeals in the recent past as the FCC has only limited jurisdiction over such manufacturers, so any mandate here will need careful justification or perhaps even a specific statutory mandate.

Continue Reading FCC Begins Inquiry on Mandate for HD Radio on XM Sirius Receivers

Last week, the FCC released a Public Notice asking for comments on whether it should begin a Section 403 investigation into the use of Arbitron’s Portable People Meter ("PPM").  A coalition of broadcast groups, the "PPM Coalition," principally comprised of broadcasters providing service to minority communities, sought the investigation as a way of delaying the implementation of the PPM technology next month in a number of large broadcast markets.  In their request, which can be found on the Minority Media and Telecommunications Council website, the PPM Coalition argues that the investigation is justified based on the Commission’s objectives (and various administrative and legislative mandates) to improve minority ownership in broadcasting.  The PPM Coalition contends that methodology problems in PPM implementation result in artificially low ratings for minority owned stations.  These parties argue that, if the system is implemented, a number of minority-programmed stations will disappear.  Arbitron has argued that the Commission does not have the jurisdiction to regulate ratings services (who are obviously not FCC licensees) or the methodology that they use.  Comments on the request for an investigatory hearing are due on September 24, and replies on October 6 (two days before the PPM system is to be implemented in eight markets).

Section 403 of the Communications Act gives the Federal Communications Commission the power to conduct investigations of any complaint of any violation of its rules or of provisions of the Communications Act, or to explore any other matter relating to the provisions of the Act.  Such investigations are often conducted before an Administrative Law Judge, but can be conducted before the Commission itself, and allow the FCC to use full discovery techniques (e.g. document production requests and depositions) and to conduct an evidenciary hearing.  In the past, the process was used much more frequently.  It has been used both to investigate specific complaints of possible misconduct by individual licensees, and to conduct broader inquiries into business practices in a regulated industry to decide if FCC regulation was necessary.  For instance, in the 1960s, there was an investigation into network practices to determine if those practices required FCC action to regulate the network-affiliate relationship.  In recent years, the power has been rarely used, and when used has tended to relate to specific allegations of misconduct to determine if the FCC should bring some sort of enforcement action against a regulated entity.

Continue Reading FCC Seeks Comment on Whether to Begin Investigation of Arbitron PPM – How Far Does FCC Regulatory Power Extend?

The Commission this week released an Order exempting certain small cable systems from the requirement that, after the February 2009 digital transition, for a three year period, cable systems carry both an analog version of a broadcast television station’s signal plus the station’s high definition signal.  This dual carriage requirement was imposed so that the cable system would ensure that a version of the station’s signal was available to all subscribers to the system, and so that those who had high definition sets could receive the television signal without "material degradation" of its signal, as required by FCC rules.  As some small systems either did not have the bandwidth to transmit an HDTV signal or could not meet the costs necessary for such carriage, the Commission decided to grant these systems an exemption.  Specifics of the FCC decision and the exemption, and on the background of this ruling, can be found in Davis Wright Tremaine’s Advisory on this order. 

In two recent actions, the FCC has evidenced its concern about the EEO performance of its licensees.  Last week, the Commission’s Enforcement Bureau entered into a Consent Decree with DIRECTV, by which DIRECTV paid the FCC $150,000 in lieu of a fine for the company’s failure to abide by the FCC’s EEO rules by not preparing an Annual EEO Public File Report or submitting a Form 396-C for several years.  The FCC also released a Public Notice announcing changes in the racial categories to be used in FCC Form 395 – the Form breaking down the employees of a broadcaster or cable company by race and gender.  That form has not been filed for years, as its use was prohibited when the FCC EEO rules were declared unconstitutional.  In adopting new EEO rules in 2003, the FCC promised to return the form to use, but has been wrestling with the issue of whether or not the form should be publicly available or whether it should simply used internally by the FCC to collect data about industry employment trends. The adoption of new definitions for the racial categories specified on the form may signal the return of this form.  Together, these actions demonstrate that the FCC has not lessened its concern about EEO in any fashion.

The DIRECTV fine was the result of the company’s failure to prepare Annual EEO Public File Reports or to submit 2003 and 2004 Form 396-C reports – reports that are more detailed versions of the Form 396 filed by broadcasters with their license renewals and the Form 397 Mid-Term Employment report.  The Form 396-C requires that multichannel video providers detail their hiring in the previous year and the outreach efforts made to fill job vacancies, the supplemental efforts that the employment unit has made to educate its community about job openings, and other details on the company’s employment practices.  After review of the company’s efforts, the Commission not only faulted the company for its paperwork failures, but also determined that the company had not engaged in sufficient outreach for all of its employment openings – relying solely on the Internet and on word-of-mouth recruiting for many job openings, which the Commission found to be insufficient.  Broadcasters need to make sure that they do not forget to file their required EEO forms, prepare their annual EEO Annual Public File Report, and engage in wide dissemination of information about all job openings.  Details of the FCC’s EEO rules, policies and requirements applicable to broadcasters can be found in Davis Wright Tremaine’s EEO Advisory.

Continue Reading Big EEO Fines on DIRECTV, and The Return of FCC Form 395B

The FCC has released a Public Notice, warning regulated entities that there are websites that pretend to be the site on which FCC regulatory fees are to be electronically filed.  These so-called "phishing" sites are apparently out to obtain from broadcasters and other entities regulated by the FCC information about their financial accounts.  The Public Notice reminds broadcasters that the site on which fees are to be paid is www.fcc.gov/feefiler.  If you see some other URL address, beware.  Make sure that you are in fact on the FCC’s website before revealing any private financial information.  More on the FCC filing fees can be found in the Davis Wright Tremaine Advisory on the fees, and in our prior posts, here and here. 

Political Broadcasting season is now in full swing, with the Democrats just ending their convention, and the Republicans beginning theirs next week.  Already, we’ve seen disputes about third party attack ads (see our post here), and there are bound to be many more issues about the FCC’s political broadcasting rules that arise during what looks to be a very contentious political season.  For guidance on many political broadcasting issues, you can check out our Political Broadcasting Guide, with discussions of many common political broadcasting issues (including reasonable access, equal opportunities, lowest unit rates, public file issues, and political disclosure statements) in what we hope is an easy to follow question and answer format.   Broadcasters should also remember that the Lowest Unit Rate "political window" opens on September 5, meaning that stations cannot charge political candidates any more than the lowest rate that is charged a commercial advertiser for the same class of time run at the same time as the candidate’s spot. 

We have reminded broadcasters that the Lowest Unit Rate (or "Lowest Unit Charge,"  often abbreviated as" LUC" or "LUR")must be available to all candidates for public office – including state and local candidates.  While state and local candidates have no right of reasonable access (meaning that a station can decide not to sell time to those candidates, or to restrict their purchase of time to particular limited dayparts), if the station sells state and local candidates time, it must be at Lowest Unit Rates during the political window. 

Continue Reading Lowest Unit Rates for Political Candidates Begin on September 5; Get Answers to Political Broadcasting Questions from Our Political Broadcasting Guide