This article is no longer available. For more information on this topic, see February Legal Deadlines for Broadcasters – Online Public File, Review of Incentive Auction Comments, Filing Deadline for FM Auction, and Lots of Renewals and EEO Public File Reports

The FCC today announced another round of EEO audits of broadcast stations throughout the country.  The FCC’s Public Notice of the audits, and the list of the stations that are affected, can be found here.  Broadcasters should review this list carefully, both by call letter and licensee name, as we have noted situations where the FCC’s list of licensee names used in this audit is not accurate, even though the licensee is correct elsewhere in the FCC’s databases.  The audit letters were dated June 12, and responses are due in 30 days.  These letters usually require answers to an extensive list of questions, as well as the submission of supporting documentation to show a licensee’s compliance with the FCC’s EEO rules over the last two years.  We have written a Guide to the FCC’s EEO requirements, which can be found here, to help broadcasters assure their compliance with these rules.  Whether or not a broadcaster is on this audit list, this opportunity should be used to review your EEO compliance, as the Commission conducts these audits on a regular basis – so you could be next. 

Last week’s announcement of the partnership between eBay and Bid4Spots and the impending full launch of Google’s service to sell online radio spots beg for FCC action to clarify how these services will be treated for lowest unit rate purposes. We have written about this issue before (see our note here), and the increasing number of online sales tools for broadcast advertising inventory highlights the issue. If advertisers can buy spots using these online systems on a single station, or if stations offer their spots to a particular advertiser at a set price for a specific class of spot, it would seem that these spots could have an effect on the station’s lowest unit rate if the spots sold through the online systems run during lowest unit rate periods (45 days before a primary or 60 days before a general election.). For the peace of mind for all broadcasters, it would be worth the FCC clarifying the status of these services as we hurtle toward what will probably be the busiest political year ever.

In looking at some of these systems, it appears that some of these systems are premised on specific stations offering spots to advertisers on a cost-per-point basis, for specific dayparts as designated by the advertiser and agreed to by the station.  For instance Bid4Spots system advertises that it holds an auction to sell the spots on Thursday for the following week.  And it appears that spots must be sold by a station in specific dayparts on a non-preemeptible basis. For the week in which the spots are offered, the sale of such spots would appear to set a lowest unit rate for non-preemptible spots that run in the same time period. 

Continue Reading Will On-Line Spot Auctions Have an Impact on Lowest Unit Rate? – Only the FCC Knows For Sure

In April, the FCC agreed to Consent Decrees calling for fines totaling $12.5 million from four of the country’s largest radio broadcasters in order to settle allegations that these companies had engaged in violations of the FCC’s payola rules. Recently, another public radio company stated in one of its SEC filings that it had received an inquiry from the FCC about practices at its stations, and rumors have been heard in Washington that there have been letters of inquiry on the subject sent out to other broadcast companies.  With this atmosphere, we thought that an analysis of the terms of the Consent Decrees, which imposed very specific operating conditions on these broadcast companies, was in order.  Thus, we have just published a detailed analysis, A $12.5 Million Teaching Tool – The Payola Consent Decrees, here.  This memo details provisions of those Consent Decrees which impose conditions on these companies requiring, among other things: limits on gifts that their employees can take from representatives of record companies, reporting requirements about their dealings with music companies, and requirements for the education of these companies employees about the requirements of the payola rules.  As set out in the memo, these Consent Decrees can serve as a set of best practices for all broadcasters in complying with the payola rules.

With the FCC restarting its Localism proceeding, about which we wrote yesterday, which asked for public comment on payola practices of broadcasters, the FCC’s focus on payola has not abated with the $12.5 million fines imposed by the Consent Decrees.  So broadcasters should be assessing their policies to make sure that, if they get an inquiry letter from the FCC, they are able to provide responses that would lead to trouble.  We hope that this memo helps with that assessment.

The FCC, after taking two years off, is looking to finish their field hearings on Localism by scheduling a hearing in Portland, Maine on June 29.  This hearing is not one of the six hearings to discuss possible new multiple ownership rules, but instead a continuation of the hearings started by Chairman Powell after public controversy over the 2003 multiple ownership rules.  In an ironic twist of fate, this public notice was released on the Friday before the National Association of Broadcasters Educational Foundation hosts their Service to America Awards Dinner to honor broadcasters and the public service commitment that they have to their communities.  Thus, while the FCC is looking in the hinterlands for evidence of the responsiveness of the broadcast industry to the needs of their listeners, some of the best evidence of that service was on display some 12 blocks from the FCC’s headquarters.

The Localism hearings were part of a larger proceeding begun in response to the controversy after the 2003 multiple ownership rules.  When the Democratic Commissioners, Congressional legislators from both parties, and a variety of citizen’s groups from across the political spectrum complained about how the public’s input was not sought before the rules were adopted, the FCC tried to respond to some of those complaints by putting out a Notice of Inquiry on Localism.  The proceeding was to assess how well broadcasters were serving their communities, and the Notice asked for public comment on a grab bag of issues including the following:

  • whether a broadcaster’s public interest obligations should be quantified (bringing back obligations abolished in the 1980s that required specific amounts of the programming of broadcast stations to be devoted to news and public affairs programming), 
  • should broadcasters be required to play specific amounts of local music,
  • is payola a major issue,
  • whether more programming should be devoted to political campaigns, 
  • whether the voices of minorities were being heard on the airwaves.
  • if the FCC should authorize more LPFM stations and take other steps to make airtime available to new entrants

Continue Reading Another Localism Hearing and Service to America

In the last few months, attention of the broadcast press has been focused on the pressing regulatory issues of the day – matters such as content regulation (indecency, violence and junk food advertising), the digital conversion of radio and TV, and the new digital media landscape and its impact on broadcasters (XM/Sirius, You Tube and Internet video, and Internet radio).  Almost forgotten is the multiple ownership proceeding that began in earnest last summer when the FCC issued its Notice of Proposed Rule making (see our summary here), but which has really been pending in front of the Commission since the US Court of Appeals issued its Stay of the FCC’s 2003 Order adopting "new" ownership rules.  This week, at least some attention was brought back to the issue following the release by the organization Free Press of a study  that purports to document the effects that consolidation has had on minority and female ownership in the broadcast media.  Coupled with an electronic press conference featuring the two Democratic FCC Commissioners, the report merited an article in the Los Angeles Times and other mainstream press outlets.  It is a study that should be read by broadcasters, as it will likely form part of the debate on this most important issue.

While studies have been issued on and off throughout the debate over the multiple ownership rules, seemingly proving almost whatever the party providing the study wants to prove, this study should not be ignored.  Executive summaries and a full copy of the report can be found here.  The report purports to show that consolidation in the media holds down minority and female ownership.  And, unlike many other studies that have obvious design flaws and seem to be based on faulty assumptions, this one considers many of the obvious objections.  It does not under count minority ownership – in fact it takes the FCC to task for under counting such ownership, and actually reports higher amounts of minority and female ownership than the FCC itself had acknowledged.  The report also addresses the usual response to such studies – that it is a question of access to capital that results in the disparities – by doing a comparison of minority and female ownership in broadcasting to that ownership in other industries, and finding broadcasting very close to the bottom in diverse ownership.

Continue Reading Study Released Showing Effects of Broadcast Consolidation – Broadcasters Should Pay Attention

We wrote yesterday about the Second Circuit Court of Appeals ruling throwing out two FCC indecency fines.  Further details on the legal reasoning in that decision are given in our firm’s advisory published today. The decision also provoked heated reactions from two of the FCC Commissioners.  Commissioner Copps issued a statement warning broadcasters not to engage in gratuitous sex and violence on television.  Chairman Martin’s statement was even more aggressive – using the "F-word" and the "S-word" freely – without resorting to the euphemisms that we employ here to avoid triggering spam blockers – for the shock value to emphasize how he believed that a liberal court overlooked the what he thought was a common-sense FCC decision with which most people would agree.

 It seems unlikely that there were many broadcasters waiting for this decision to give them the green light to run out and start gratuitously airing sex and violence.  Look at basic cable.  Years ago, court rulings held that indecency rules did not apply to cable television.  Yet, as I’m writing this, the Daily Show on Comedy Central is airing, and all the explicatives that are of such concern to the Commission are edited out of the program – and this is for a program that is not only on cable, but also is airing at 11 PM, in the safe harbor where indecent programming can air even on broadcast television.  And who has seen a rush of indecent programming on broadcast television in those safe harbor hours?  The Court decision only reached the common sense decision that the passing use of an explicative should not jeopardize an FCC license.  No matter what the Commissioners statements may say, the ruling was not one that opens the door to filth flooding the airwaves, but instead it was only one that demanded that the FCC apply logic and consistency in line with constitutional requirements when making its rulings. 

The past few days have been eventful ones in the battle over Internet radio royalties.  Appeals from the decision of the Copyright Royalty Board decision (see our memo explaining that decision, as well as our coverage of the history of this case) were submitted by virtually all of the parties to the case.  In addition, the National Association of Broadcasters, which had not previously been a party to the case, filed a request to intervene in the appeal to argue that the CRB decision adversely affects its members.  Also in Court, a Motion for Stay of the decision was submitted, asking that the CRB decision be held in abeyance while the appeal progresses.  The "appeals" that were filed last week are simply notices that parties dispute the legal basis for the decision, and that they are asking that the Court review that decision.  These filings don’t contain any substantive arguments.  Those come later, once the Court sets up a briefing schedule and a date for oral arguments – all of which will occur much later in the year.  As the CRB decision goes into effect on July 15, absent a Stay, the appeal would have no effect on the obligations to begin to pay royalties at the new rates.

The Stay was filed by the large webcasters represented by DiMA, the smaller independent webcasters that I have represented in this case, and NPR.  To be granted a stay, the Court must look at a number of factors.  These include the likelihood that the party seeking the stay will be successful on appeal, the fact that irreparable harm will occur if the stay is not granted, the harm that would be caused by the grant of a stay, and the public interest benefits that would be advanced by the stay.  The Motion filed last week addressed these points.  It raised a number of substantive issues including the minimum per channel fee  set by the CRB decision, the lack of a percentage of revenue fee for smaller webcasters, and issues about the ability of NPR stations to track the metrics necessary to comply with the CRB decision.  The Motion raised the prospect of immediate and irreparable harm that would occur if the decision was not stayed, as several webcasters stated that enforcement of the new rates could put them out of business.

Continue Reading NAB Joins the Fray on Internet Radio – Appeals and a Request for Stay are Filed, And a Settlement Offer is Made to Noncommercial Webcasters

Just as the FCC issued its order to implement the statutory increase in the amount of indecency fines, raising them to $325,000 per violation (see our comment, here), its enforcement of its indecency policy may be dead in its tracks.  A three judge panel of the US Court of Appeals for the Second Circuit, in a 2 to 1 decision released today, rejected the FCC’s actions against a number of television networks for broadcast indecency.  The FCC actions were in the context of "fleeting utterances," i.e. the use of specific words that the FCC determined were indecent whenever they were used.  The Court rejected the FCC decision as being arbitrary and capricious, as the FCC decisions overturned without sufficient rational explanation years of FCC precedent that had had held that the isolated use of these words was not actionable.  The FCC actions were sent back to the FCC for further consideration to see if the Commission could craft a decision that provided a rational explanation for this departure from precedent.

However, this may prove to be impossible.  While the Court’s decision was based on the FCC’s failure to provide a rational basis for its departure from precedent, the Court also said that it was difficult to imagine how the FCC could constitutionally justify its actions.  The Court pointed to the inconsistent decisions of the FCC – fining stations for the use of the "F-word" and the "S-word" in isolated utterances during awards shows, and when used in the context of a program like PBS’  The Blues, but finding that the same words were not actionable when used in Saving Private Ryan or when used by a Survivor contestant interviewed on CBS’ morning show.  In the Survivor case, the Court indicated particular confusion, as the Commission went out of its way to say that there was no blanket exclusion of news programming from the application of its indecency rules, but then it proceeded to find the softest of news – the Survivor cast-away interview – as being of sufficient importance to merit exclusion from any fine.  The Court felt that these decisions were so conflicting that a licensee would not be able to decide whether a use was permissible or not – and that such confusion, leaving so much arbitrary discretion in the hands of government decision-makers as to where to draw lines between the permissible and impermissible, would not withstand constitutional scrutiny.  It would have a chilling effect on free speech – and could be enforced in an arbitrary manner that could favor one point of view over another.

Continue Reading Second Circuit Throws Out FCC Indecency Fines