I recently attended the convention of the Montana Broadcasters Association, and just a few weeks before that I had been at an event sponsored by the Washington State Association of Broadcasters.  Talking with small market TV Broadcasters in those states, an issue that does not affect major television markets but which complicates the digital transition has become clear.  In smaller markets in many states, particularly in some of the western states where there are multiple geographically dispersed cities in many television markets, there is at least one network affiliate in many cities that is either an LPTV or TV translator station.   As we’ve written before, LPTV and translator stations are not required to convert to digital by the February 2009 digital conversion deadline.  Instead, these stations can continue to operate in analog until an as yet unspecified date in the future.  While these stations are allowed to convert to digital, many do not have the resources to do so.  Thus, many of these stations will continue to broadcast in analog after the February 18 transition deadline.  What makes the issue particularly problematic is that most  DTV converters do not allow the "pass through" of analog programming, i.e. once they are hooked up, television sets only receive digital signals and analog signals are effectively blocked.  This presents the potential of marketplace confusion for those viewers who do not receive their signals from cable or satellite, as they will be getting conflicting messages – being told to get a digital converter to pick up the full-power stations in a market as they convert to digital, but if the consumer buys the wrong converter box, they will not be able to receive other LPTV and translator stations in the same market.

The problem has been exaggerated as converter boxes with analog pass through have been delayed in reaching the marketplace.  When I bought converter boxes in Washington, DC early last month, neither of the two major electronics retailers had the converter boxes with analog pass-through available.  A well-reviewed box from EchoStar was supposed to hit stores last month, but it is in short supply.  I can find it on-line only at the Dish Network’s (owned by EchoStar) own website.  Thus, for households who buy and connect most of the available digital converter boxes, suddenly their analog LPTV stations are gone.  In some of these smaller Western markets, that may mean the loss of one or more local network affiliates.

Continue Reading The Digital Transition End Game in Smaller Markets – The Problem with LPTV

Last week, the FCC commenced its long anticipated proceeding to reexamine its sponsorship identification rules. This proceeding has been rumored for over six months, having appeared on an agenda for a Commission open meeting in December, only to be pulled from the agenda days before it was to have been voted on. The Commission has initiated this proceeding, to a great degree, at the urging of Commissioner Adelstein who has been vocal in his concerns that the broadcast and advertising industries, in adopting advertising techniques to respond to technological and marketplace changes, has been exposing the public to commercial messages without their knowledge.  One of the principal practices of concern to the Commission, though not the only one, is embedded advertising (as the Commission refers to product placement and product integration into the dialog and/or plot of a program). While many of the trade press reports have focused on embedded advertising, this proceeding is wide-ranging and important to the broadcast, cable and advertising industries. Comments on the proceeding will be due 60 days after its publication in the Federal Register, with replies 30 days later.   We have prepared an Advisory, summarizing the issues raised by the Commission in this proceeding, which can be found here.

According to trade press reports, this proceeding was initially planned as a Notice of Proposed Rulemaking (NPRM), which would have proposed rules which, after public comment, could have been immediately adopted. After significant lobbying from the advertising community, the Notice was released in two parts. First, there is a Notice of Inquiry (NOI), asking a series of questions about the current state of advertising on broadcast and cable outlets, and asking how the Commission should amend its rules to deal with new advertising techniques. Second, the Commission’s announcement contains an NPRM with respect to certain specific items, including proposing to clarify the type of sponsorship identification necessary in television advertising, the extension of the sponsorship identification rules beyond local origination cablecasting to cable network programming, and clarification of the rules with respect to live-read radio commercials. The specifics of the NOI and the NPRM are set forth in our Advisory. 

Continue Reading FCC Begins Investigation of Embedded Advertising and Sponsorship Identification

In two recent FCC decisions, one dealing with a commercial operator and that other with a noncommercial licensee, the Commission’s staff addressed the issue of how large an FCC fine could be imposed on a broadcaster without that fine being subject to reduction because of the licensee’s inability to pay.  In the first case, a commercial station was fined for violations of the EAS rules.  As we’ve written before, EAS seems to be the most common violation found at broadcast stations by FCC inspectors.  However, what is most notable about this decision is not the violation, but the Commission’s discussion of the penalty for that violation.  As in many cases, the licensee argued that, as it had experienced several years of financial losses, the amount of its fine should be reduced as the payment of that fine would impose a financial burden on it.  The FCC rejected the argument, finding that as the fine was less than 2% of the licensee’s gross revenues, it was not excessive.  The Commission stated that, while profits and losses may be important in determining whether a licensee can pay a fine, in most cases, if the fine is less than 2% of gross revenues, it will not be considered excessive even if the licensee has not been making a profit as it it not a significant overall expense.  Therefore, the Commission refused to reduce the fine because of financial hardship argument.

In the noncommercial case, the applicant claimed that a fine that it was issued for not having any quarterly programs issues lists in it public file should have been reduced because that fine would significantly deplete the station’s budget that had been allocated to it by the School District with which it was associated.  However, the licensee only provided the FCC with information concerning the budget allotted to the radio station, and it did not provide any financial information about finances of the licensee school district.  Without that information, the Commission stated that it could not determine that the fine was excessive, so it did not reduce the fine on the basis of financial hardship.  Clearly, the Commission is not anxious to reduce a fine based on the licensees financial inability to pay, so a licensee looking for such a reduction must carefully document its request showing that the fine would impose a financial hardship.

David Oxenford conducted a session at the Michigan Association of Broadcasters Annual Meeting and Leadership Retreat at the Crystal Mountain Resort in northern Michigan on July 15, 2008.  The title of his session was A Washington Roadmap to the Broadcast and Internet Regulatory Future.  David discussed legal issues for broadcasters in their digital transition, and highlighted issues that they need to consider in their on-line operations. 

A copy of David’s PowerPoint presentation used in the seminar can be found here. 

Once again, the extension of the sound recording performance royalty to broadcasters has become a hot topic in Washington. The subcommittee on Courts, the Internet and Intellectual Property of the  House Judiciary Committee yesterday approved the bill introduced by Congressman Berman (about which we first reported here).  That bill would include broadcasters in the Section 114 sound recoding royalty currently applicable to digital music users including Internet radio, satellite radio and cable radio. Under the bill, the Copyright Royalty Board would be charged with the responsibility of determining what a royalty would be using the "willing buyer, willing seller" standard. Following this subcommittee approval, the bill would next be considered by the full committee. To become law, the Committee and the full House of Representatives would have to approve it, and similar legislation would need to be enacted by the Senate. As the NAB has garnered the support of a majority of the members of the House on a non-binding resolution opposing the imposition of the royalty on broadcasters, and as there is not much time remaining in the legislative session before the election and the end of this Congress, the whole process may well have to start fresh in 2009 (bills have to be reintroduced after the end of each two-year Congressional session). Yet, with all of the controversy over the issue in recent weeks, it appears certain that the issue will arise again, so it is important to look at some of the recent action.

Two weeks ago, the House subcommittee held a hearing on the issue. Prior to the hearing, the MusicFirst Coalition (principally supported by the RIAA and the affiliated record companies as 50% of any royalty goes to the copyright holders who are usually the labels) had Nancy Sinatra and the Nitty Gritty Dirt Band making the rounds on Capitol Hill in support of the royalty. These appearances follow the precedent set in earlier Capitol Hill proceedings, where the Coalition has brought in niche or oldies artists to address Congress – not major popular current acts. The artists who have testified (who have included Judy Collins, Sam Moore, Lyle Lovett, and Alice Peacock) have argued that the additional income that they would receive from a performance royalty would supplement their incomes which, in some cases, has either never been great or has declined as the demand or ability to tour has declined. The argument is always made that the royalty will encourage musicians to produce their music – though it is rarely if ever claimed that music wouldn’t be made if the royalty is not adopted, as songs have been written and sung for time immemorial, well before any royalty existed, merely for the pleasure or to fulfill the need for self-expression. The question is not one of ensuring the availability of music, but instead it is one about who should get how much of whatever money is made, directly or indirectly, from the use of that music. 

Continue Reading Broadcast Performance Royalty Passes House Subcommittee – But It’s Not Done Yet

We recently wrote about the challenge to appointment of the Copyright Royalty Board’s judges filed by Royalty Logic as part of the appeal of the Board’s decision on Internet Radio royalties.  Royalty Logic argued that the appointment of the Copyright Royalty Judges was improper, as the Librarian of Congress was not the "head of a department" who can appoint lesser government officials under the Appointments Clause of the Constitution.  Thus, Royalty Logic contends that the decision reached by the Board as to Internet radio royalties was a nullity, as the Board effectively does not legally exist.  Earlier this week, the Board and SoundExchange filed their replies to the Royalty Logic motion, arguing that, in fact, the Librarian is the head of a department, as he is appointed by the President and approved by Congress and runs a government "department," i.e. the Library of Congress, of which the Copyright Office is a part.  In demonstrating that the Library is a department, the briefs reach back to the creation of the Library by Thomas Jefferson, and look at the legislative history of legislation modifying the powers of the Library and the process for the appointment of the Librarian – legislation passed in 1870 and 1897.  Essentially, the very technical argument about why the Board was not properly constituted was met with an equally technical one that says it was properly formed.  Clearly, arguments only lawyers could love.

While Royalty Logic will have the opportunity to respond, the litigation process continues on the main portion of the appeal, as SoundExchange filed its intervenor’s brief the week before last, defending the decision of the Copyright Royalty Board.  In one notable departure, SoundExchange, while contending that the Board was correct in determining the minimum fees that would be required of webcasters, it said that, because of the agreement that it reached with certain webcasters that would cap minimum fees at $50,000  no matter how many channels a service might have (see our discussion of the agreement here), it asked that the Court remand that one limited matter back to the Board for adoption of the limitation on minimum fees so that it would apply to all webcasters and not just those who signed the agreement.  In all other respects, SoundExchange opposed the briefs of the webcasters.

Continue Reading Yes We Do Exist – Claims Copyright Royalty Board

Today’s morning newscasts were filled with the stories of the passing of George Carlin – a comedian and satirist who effectively wrote the indecency regulations that most broadcasters abide by – without the FCC ever having had to adopt the regulations that he attributed to them.  In the broadcast world, Mr. Carlin was probably best known for his routine about the Seven Words that You Can Never Say on TV.  When that routine was aired by a New York radio station, and heard by a parent who claimed that he had a child in his car when the routine came over his radio in the middle of the day, the resulting FCC action against the station resulted in appeals that ended in the Supreme Court which, in its Pacifica case, upheld the right of the FCC to adopt indecency rules for the broadcast media to channel speech that is indecent, though not legally obscene, into hours when children are not likely to be listening.  But what this case and the FCC ruling did not hold are perhaps more misunderstood than what the case did hold.

First, the case was about "indecency" not "obscenity."  Many of this morning’s newscasts referred to the Pacifica decision as being an Obscenity decision.  Obscenity is speech that can be banned no matter what the time and place, as it is speech that is deemed to have no socially redeeming value.  Indecency, on the other hand, is a far more limited concept.  Indecent speech is speech that is constitutionally protected – it has some social significance such as the social commentary clearly conveyed by the Carlin routine.  It cannot be constitutionally banned.  But the Supreme Court upheld the FCC’s decision in the Pacifica case that, because of the intrusive nature of the broadcast media, it can be limited to hours where children are not likely to be in the audience.  Hence, the FCC has a "safe harbor" that allows indecent programming between the hours of 10 PM and 6 AM, when "obscene" programming is never allowed on the air.

Continue Reading George Carlin – Writing the Indeceny Rules the FCC Never Did

In a proposal filed by many of the nation’s largest radio broadcasters, a request was made that the FCC allow FM stations operating with the HD Radio (or "IBOC system" – for "In Band On Channel" as the digital signal is transmitted on the same channel as the current analog signal) to increase power by up to 10 dbu, which is said to be less than 10% of a station’s authorized analog power.  The proposal cites the power increase as one that, in most cases, can be made without interference to adjacent channel stations.  In certain instances, particularly those of grandfathered short-spaced stations, only certain lesser power increases would be permitted under this proposal.  The proponents contend that the increased power will help stations replicate their analog service and increase building penetration so that the service can be received inside large office buildings and even in parking garages.  The proponents submit engineering studies that support their position.

I have worded this post very cautiously.  We write about many significant and controversial issues on this blog – e.g. indecency, music royalties, multiple ownership rules – but the most animated responses we usually receive is when a post deals with HD Radio.  While we have written about many broadcasters who have adopted the HD radio system and are using the multicast ability to bring new services to their communities, we recognize that there are many critics of the programming on HD Radio, or the design of the tuning functions on the radio, or for the lack of the consumer "value proposition" for the purchase of a new radio required to receive the digital transmissions.  However, we have found that there are also many who feel vehemently that there are engineering issues with the service.  So we post this notice of the FCC filing, and look forward to the response that we will receive.

In several recent speeches and press releases, FCC Commissioner Jonathan Adelstein has challenged the FCC to do more in the regulation of children’s programming.  In a recent Press Release, the Commissioner outlined proposals including the following:

  • Improve the V-Chip and other program blocking technologies
  • Improve ratings information for television programming – including potentially having third parties review programming for its suitability to children as opposed to the television programmers themselves doing the ratings
  • In the context of a proceeding on Embedded Advertising that has been rumored for quite some time, look at how such advertising is used in children’s programming
  • Restrict interactive advertising directed at children.
  • Convene a summit to explore these issues

In addition to these proposal, the Commissioner gave a recent speech to the Media Institute in which he expanded on these ideas, and also lengthened this agenda to include further Commission action to define and restrict violent programming.  He also expressed his regrets over the recent decision overturning the FCC’s fines for fleeting expletives and urged that action be taken to overturn this decision (see our post here on the FCC’s appeal of that decision).  And in yet another recent speech, he emphasized the proceeding on Interactive advertising in children’s programming, remarking on how the Commission has a pending proceeding that has been pending and unresolved for several years.  He cited the Commission’s tentative conclusion to ban such ads, as broadcasters form a "portal" for children’s entrance to the Internet.  While the Commissioner expressed that the FCC had little jurisdiction to do much on the Internet itself (but see our recent post as asking whether the FCC may soon get more power over the Internet), he felt that restrictions on the links to the Internet from television programs would be useful in protecting children. 

Continue Reading The Regulation of TV Programming for Children – Embedded and Interactive Advertising, Violence, and Ratings

On June 30, 2008, David Oxenford attended the Montana Broadcasters Association Annual Convention in Whitefish, Montana, and presented a seminar titled: Staying Out Of Trouble in Washington – FCC Fines, Streaming Fees and Whatever Else Keeps You Up At Night.  During the seminar, David discussed topics including the FCC’s localism proceeding, the DTV transition, streaming fees and the proposed broadcast performance royalty, as well as the current issues with FCC fines and enforcement matters.

A copy of the PowerPoint shown at the seminar is posted here.