The FCC today released its schedule for Regulatory Fees that will be paid in September of this year.  The Order set the fees to be paid by entities regulated by the FCC, increasing those fees as required by Congress by approximately 7.5% over the fees paid last year. The fees to be paid by broadcasters are set forth below.  Fees for all other services can be found in the appendix to the FCC’s Order setting the fees.  The exact window for paying the fees has not yet been set, but should be announced later this month, in a public notice that will also provide more details on the filing process.  The Order also contains a Further Notice of Proposed Rulemaking, asking if the FCC should change the allocation of fees between the services regulated by the FCC.  As to broadcasters specifically, the FCC asks if it should adopt fees for Digital Television, as the current FCC fees apply only to analog television.  Comments on these issues will be due 30 days after this Order is published in the Federal Register.

In reaching its decision as to the fees for 2008, the FCC decided not to impose a fee on AM expanded band stations for the current fee cycle – but it will decide whether to do so after the FCC decides the issue raised in the pending Diversity proceeding as to whether to allow licensees to retain those AM stations if they are held by a small business entity.

Fees are paid based on the status of the station as of October 1, 2007 (so, for instance, if a station had received an upgrade in the interim, it pays based on its old facilities).  However, the licensee who owns the station as of the date that fees are due is responsible for paying those fees, even if it did not own the station as of October 1, 2007.  Fees for radio are set by a combination of the predicted population served by the station and the class of the station, while TV station’s fees are paid based on TV market size.  Parties holding construction permits for new stations pay flat fees regardless of the area served by the proposed station, and there are also flat fees for broadcast auxiliaries, television stations that are authorized as satellites of other stations, and secondary broadcast stations (e.g. translators).  Noncommercial operators are exempt from the fees.  The fees for broadcasters can be seen by clicking on the "Continue Reading" link below. 

Continue Reading FCC Sets 2008 Regulatory Fees and Starts Proceeding to Reallocate Future Fees

The Federal Election Commission ruled recently that it would not grant a waiver of the requirements for a verbal sponsorship identification on ads by an interest group, the Club for Growth, which wanted to run 10 and 15 second commercials opposing Federal candidates for Congress. Because of the abbreviated length of the commercials, the organization wanted the FEC to waive the requirement that there be a verbal identification of the sponsor as the commercial was too short to be able to fit such a message while still conveying their principle message.  The Club promised to have the required written disclosures on the ads, but the FEC said that this was insufficient as Federal law does not make any exception to the requirement for the verbal announcements on television commercials.  Thus, television stations should expect that third party ads dealing with Federal elections should contain both a written and verbal sponsorship identification.

The verbal identification need only identify the sponsor of the ad and state the sponsor’s responsibility for the ad.  Thus, a verbal statement that "The Club for Growth PAC is responsible for the content of this advertisement" is sufficient to meet the requirements of the rule, while the written statement needs to be more detailed – containing not only the verbal identification, but also an address or website for the sponsor and the fact that the ad was not authorized by any candidate.  The written material must be at least 4 percent of screen height and must last at least 4 seconds.  These are the FEC rules regulating the advertiser, which are very similar to the FCC rules for political advertisements.  For details on the FCC’s sponsorship identification requirements and other political broadcasting rules and laws applicable to broadcast stations, see our Political Broadcasting Guide. 

The Copyright Office today issued an Order extending the dates for comments on the Notice of Proposed Rulemaking to determine if, in addition to royalties to ASCAP, BMI and SESAC for the public performance of a musical composition, a royalty is also be due for reproductions of the composition made by real-time webcasting such as Internet radio.  Comments are now due on Thursday, August 28, and Replies on Monday, September 15.  This proceeding, about which we wrote here, is to determine if the statutory royalty of Section 115, dealing with the creation of Digital Phonographic Deliveries ("DPD") is implicated by the RAM and buffer copies made by real-time streaming.  The Order also announces that the Copyright Office will hold a hearing on the issue on September 19.

The Order states that the principal reason for the extension was the very recent decision of the US Court of Appeals for the Second Circuit in the case Cartoon Network v. CSC Holdings, finding that Cablevision’s proposal for a "remote DVR," providing the same services as a DVR but located at the cable headend, did not infringe on the program producers’ copyrights.  That decision addressed many of the same issues raised by the Copyright Office in its NPRM as to whether "copies" are made, for purposes of Copyright Laws, by RAM and buffer copies.  The Second Circuit essentially determined that no copies are made as there is no "fixation" of copies in the RAM and buffers, essentially the opposite conclusion reached by the Copyright Office in its NPRM in this proceeding.  If fixed copies are made, then a Copyright holder has the right to receive royalties for the reproduction of its copyrighted work.  The seemingly contradictory conclusions of the Second Circuit and the Copyright Office demonstrate the complexity of issues in Copyright law, and we will no doubt see many further proceedings before this issue is finally resolved.

The FCC this week issued fines to two broadcasters for issues in connection with the ownership of their stations – in one case the fine was issued simply because the broadcaster did timely not file three consecutive FCC Form 323 Biennial Ownership Reports .  In the second case, the fine was for not requesting FCC approval for a transfer of control of the licensee of the broadcast station.  These cases serve as a reminder that broadcast ownership is closely regulated by the FCC, that broadcasters need to report that ownership once every two years as required by the rules, and to seek approval before any change in control of any company that holds an FCC license.

The station that failed to file the three ownership reports was fined $6000.  As disclosed on the licensee’s license renewal application, the licensee had not filed 2001 and 2003 ownership reports at all, and filed the 2005 report late and did not put it in the station’s public inspection file.  Biennial Ownership Reports on FCC Form 323 must be filed by the licensees of AM, FM and TV station licensees once every two years, on the anniversary date of the filing of their license renewal applications by all licensees except where the licensee is an individual or a general partnership of natural persons (as opposed to a partnership that contains corporations or other business entities as partners).  We regularly send reminders to our clients about the filing of ownership reports.  For more details on the requirements for the biennial filing, see our advisory for reports that were due on August 1 here, and see our schedule of broadcast filing dates for the remainder of 2008 to see if your station has a biennial filing deadline this year). 

Continue Reading Fines for Broadcast Ownership Issues – Remember to File Biennial Ownership Reports and to Seek FCC Approval Before a Transfer of Control

On Monday, the President signed into law a bill adjusting the reimbursement dates of the Low Power Television grant program by which LPTV and TV translator stations can seek a $1,000 grant in order to ensure that they are able to continue to receive and rebroadcast the signals of primary full-power television stations once the full-power stations complete the transition to digital television.   In late 2007, the government announced the start of the LPTV Digital-to-Analog grant program designed to help translators and low power television stations continue their analog broadcasts after the February 17, 2009 conversion of full-power television stations to DTV.  Specifically, the LPTV Digital-to-Analog Conversion grant program will provide funds to eligible translators and LPTV stations that need to purchase a digital-to-analog converter box in order to convert the incoming signal of a full-power DTV station to analog format for retransmission on the analog LPTV station.  The program has been funded with a total of $8 million, which is available in $1,000 grants to eligible LPTV stations.  As a result of the recent change, funds granted through the LPTV Digital-to-Analog grant program will available beginning in fiscal year 2009 (Oct. 1, 2008 – Sept. 30, 2009), rather than in fiscal year 2011.  In addition, the recent bill also extends the availability of funding through fiscal year 2012.

Any low-power television broadcast station, Class A television station, television translator station, or television booster station that meets the following three criteria may apply for the grant to defray the cost of the digital-to-analog converter box:

  1. It is itself broadcasting exclusively in analog format;
  2. It has not purchased a digital-to-analog conversion device prior to February 8, 2006; and
  3. It is (or will be) re-transmitting the off-air digital signal of a full-power DTV station.

Applications for this grant program are being accepted until February 17, 2009.  Priority compensation will be given to eligible LPTV stations licensed to 501(c) non-profit entities or LPTV stations serving a rural area of fewer than 10,000 viewers.  Thus, priority is given to stations owned by translator associations and others that might not otherwise be able to afford the costs of converting the signals that they receive from analog to digital, and which might, without the grants, go off the air.  More information on how to apply for such grants is available on the NTIA’s website here.   

Continue Reading Dates for Reimbursement Under the LPTV Digital-to-Analog Grant Program Revised

Last week, we wrote about one issue that was addressed at last week’s Senate Judiciary Committee hearing on music royalties – the standards used to derive the royalties, and expressed hope that there was at least some interest in compromise on behalf of the Senators and industry representatives.  However, another issue which came out of those hearings suggests that compromise may not be so easy if the parties really believe what they say – as there is a fundamental distinction in both how the parties view the health of the Internet radio business, and how they view the relationship between royalties and the music business generally.  One can only hope that the gulf that was evident was just due to public posturing as, if it was not, there may well be an insurmountable differences between the parties that cannot be bridged in any settlement negotiations over the royalties that Internet radio pays for the use of sound recordings.

The gap became evident from the opening statements of the first panel – comprised of two Senators interested in the issue- Senator Wyden on behalf of the Internet Radio Equality Act stating that it was necessary to avoid having the high royalties decided by the Copyright Royalty Board destroy a fledgling technology, while Senator Corker of Tennessee talked about the importance of music to radio and the exhaustive process that the CRB had gone through in arriving at the royalties that it approved.  But in the day’s principal panel, the issues became crystal clear, as John Simson of SoundExchange talked about the "vibrant" business of Internet radio, citing an analyst’s report that Internet radio would be a $20 billion advertising market by 2020, and the statement of an employee of CBS that Internet radio was a great business and that CBS was going to "own it."  Speaking next, Joe Kennedy, CEO of Internet radio company Pandora had a dramatically different perspective – talking about an industry analyst who stated that the royalties that would result from the CRB royalties would exceed the revenue of the Internet Radio industry, and that, for Pandora, the failure to find a compromise solution to the CRB-imposed royalties would mean that his service would "die."  He pointed to Pandora’s position as the largest of the Internet radio companies in terms of listenership, the $25 million in revenue that it expects to make this year, and how $18,000,000 of that would go just to the SoundExchange royalties – 75% of its revenue to this one expense. 

Continue Reading Senate Hearing: The Search for Compromise on Music Performance Royalties – Part Two: The Issue of Perspective

Last week, an article in the Wall Street Journal focused on the enforcement of the trademark that the United States Olympic Committee has in the word "Olympics."  Thus, anyone who wants to call some sort of competition an "Olympic" contest, or anyone who uses any derivation of that word, is asking for potential issues should the USOC get word of that use.  What the article did not address was the issue that this raises for broadcasters and advertisers.  Just as the trademarked term "Super Bowl" can cause problems for companies that use it in advertisements without permission of the NFL, advertisers should refrain from the use of the term Olympics in connection with promoting their products.   Companies have paid huge rights fees to get the exclusive rights to use the Olympics in their advertising campaigns, usually getting exclusive rights in a particular product category.  These companies and the Olympic committee do not like to see local advertisers appropriating the use of the Olympics name (or the interlocking circles that comprise their symbol) in someone else’s ad.  So, just as electronic stores promote the sale of their big screen TVs before the Super Bowl by talking about the "Big Game" rather than using the trademarked phrase, advertisers must use care and avoid any trademark infringement by trying to tie their products to the Olympics during this upcoming event. 

The Federal Communications Commission voted 3-2 on to issue an order imposing regulatory controls on the Internet. The ruling concerns a network management technique used by Comcast for its high-speed Internet service that had the effect of giving slightly lower priority to some peer-to-peer (P2P) upload sessions so that the latency-sensitive applications of the vast majority of its Internet customers would remain uninterrupted. The Commission ruled that the practice—which Comcast previously announced would be phased out this year—violated the Commission’s “network neutrality” policy guidelines and amounted to discriminatory “blocking” and “monitoring” of Internet content, as well as “interference” with consumers’ “right to access” lawful Internet content. While not fining Comcast, the Commission instead orders Comcast to report on the technique, submit a compliance plan for terminating it by year-end, and describe to the FCC and the public the specifics of what new management techniques will be implemented. Noncompliance, warns the Commission, will be subject to future injunctive relief and additional enforcement actions.   Additional details of the FCC’s announcement, and specific concerns about this ruling, can be found in our firm’s advisory bulletin about this decision.  The Press Release on the FCC action can be found here.

While the full text of this decision is not yet available, the New York Times ran a story summarizing its effects.  The statements of the Commissioners on this decision are also available.  The dissents approach the issues from somewhat different perspectives.  Both express the hope that these kinds of objections could have been resolved by industry organizations – Commissioner McDowell’s statement going into great detail about the lack of notice and precedent for the decision, and the potential impact that the decision will have on network management practices and voluntary decisions of Internet management organizations.  Commissioner Tate raises questions of what the decision will do to attempts to design technological systems that can sniff out adult content for purposes of protecting children from such content.  It’s interesting that the FCC’s own proposed rules for portions of the 700 mhz band include such requirements for the monitoring of adult content.

Continue Reading FCC Finds Comcast Internet Management Technique Violates Net Neutrality Policy

Tuesday, the Senate Judiciary Committee held a hearing on the sound recording performance royalty, titling the hearing  "Music and Radio in the 21st Century: Assuring Fair Rates and Rules Across Platforms" (a webcast of which can be accessed here).  While the hearing was ostensibly to search for a way to come up with a uniform system of determining music royalties across various digital media platforms (though the broadcast analog performance royalty snuck into the discussion from time to time), in reality it appeared to be two things – a search for compromise and a demonstration of the dramatically different perspectives from which the recording industry and the digital radio industry approach the topic.  While one might assume that the dramatically different approaches would mean that no compromise was possible, there were a few areas of commonality that perhaps reflect the potential that, at some point, common ground can be found.  We will review the hearing’s discussions in multiple parts – today dealing with the issue of the standard to be used in assessing royalties for the public performance of sound recordings and, in a subsequent post, we will summarize the differing world views of the participants and why the dramatically different ways that they see the business make for difficulty in compromise.

But first, a summary of the issues that were to be discussed at the hearing. Essentially, the hearing was to discuss two bills addressing different aspects of the royalty issues.  Senator Feinstein of California, who chaired the hearing, was looking for any common ground that might exist that would allow for movement on the Perform Act that she has introduced.  That act would attempt to do two things – (1) assure that a common standard was used to assess sound recording royalties in all digital media and (2) adopt standards that would require digital services to use some form of security or encryption that would make "stream ripping" more difficult.  The first goal of her bill, looking for a common standard, was an attempt to avoid some of the problems that have been evident in the royalty proceedings that have thus far been held before the Copyright Royalty Board which have resulted in dramatically different royalties – ranging from 6 to 8% of revenue for satellite radio companies and a similar royalty for digital cable music services (see our posts on those rates here and here) derived under an "801(b) standard" (after section 801b of the Copyright Act) , and the royalty for Internet radio that has been estimated to range between 75% and 300% of gross revenues of those services, derived from a "willing buyer, willing seller" royalty standard.  The Perform Act would subject all to a single standard – and it currently proposes a new standard – "fair market value."

Continue Reading Senate Hearing: The Search for Compromise on Music Performance Royalties – Part One: The Issue of Standards

The FCC has released a Public Notice announcing its approval of the XM and Sirius satellite radio merger.  The public notice is only two pages long, with a four page appendix providing very brief summaries of the conditions imposed on the two companies which a majority of the Commissioners found sufficient to protect consumers from harm from the merged entity.  The full text of the decision, providing the full reasoning of the Commission on its approval, has not yet been released.  Until it is, the impact for broadcast ownership and the treatment of broadcast consolidation set by the precedent of this decision remains unclear.

The conditions placed on the merger and outlined by the decision include some surprising ones beneficial to broadcasters, including that the merged company not use its terrestrial repeaters to originate local broadcasts and that the company not enter into exclusive agreements precluding the broadcast of local sporting events by over-the-air broadcast stations.  The decision also imposed price caps on the service for three years, and set out conditions to open the manufacturing of satellite radio receivers to more companies and prohibiting any restriction on combining the radio receiver with other audio devices including digital radio receivers.  No condition requiring that satellite radio receivers be capable of picking up over-the-air digital radio ("HD Radio") was imposed, though the FCC promised to issue a Notice of Inquiry to review that issue.  Specific programming channels will be made available for noncommercial educational use and for leased access.  The FCC also made clear that satellite radio will be subject to the FCC’s EEO rules.

Continue Reading FCC Releases Public Notice of Decision Approving XM-Sirius Merger – Precedent for Broadcast Ownership Not Yet Clear