Monday was the deadline for the filing of Motions for Rehearing of the decision of the Copyright Royalty Board decision on Internet radio music royalties for 2006-2010.  As we have written before, the decision proposes significant increases in the royalties, particularly for independent webcasters who have up to now paid royalties on a percentage of revenue basis, rather than on the per song per listener basis set out in the CRB decision.  In motions filed today, many of the webcasters challenged specific aspects of the CRB decision.  And at least one party raised an issue that seems to contradict the very foundation of the Board’s decision.  Plus, in virtually all of the rehearing motions, the parties noted that additional issues may be raised on appeal to the US Court of Appeals, which do not need to be filed for several weeks.  

In the Motion filed by the Broadcasters’ group, it was argued that an expert witness offered by SoundExchange in the proceeding which is now underway to determine royalty rates for satellite radio contradicted some of the basic assumptions used by SoundExchange’s witness in this proceeding.  If the assumptions used by SoundExchange’s expert in the satellite proceeding were to be applied in this case, the royalties would actually decrease from those that were in effect before the Board’s decision. The assumptions used by the expert in the satellite proceeding seemed to confirm the claims offered by the webcaster’s witnesses in this proceeding.  Could this be a smoking gun that could undermine the decision of the Board?  We’ll have to see if the Board accepts this new evidence which seems to challenge the very foundation of the webcasting decision.

As the appeals are addressed to the CRB itself, asking that it reconsider or review its own decision, most of the other issues focused on limited matters that the parties thought that the Board might want to clarify as to avoid unintended consequences.  For instance, the appeals of the DiMA group, representing large webcasters, and the appeal that I worked on for the small commercial webcasters, both addressed the issue of the $500 per channel minimum fee which, if it was to be paid on literally every unique channel streamed by a service, could mean that some webcasters could pay hundreds of thousands or even millions of dollars as a minimum fee.  Some webcasters (like Pandora) serve up a unique stream for every listener.  Virtually all of the parties also addressed the question of whether most webcasters could even compute a royalty based on a per song per listener basis.  This is especially true for retroactive payments, when many webcasters did not keep such records (especially those small commercial webcasters paying on a percentage of revenue basis, or noncommercial webcasters who had payed on a flat fee basis). 

Continue Reading Motions for Rehearing of Copyright Royalty Decision Filed – And the Foundation of that Decision is Challenged

We have been covering the controversy over the rise in the royalties for all those who are providing an Internet radio service, whether they be over-the-air broadcasters streaming their signals on the Internet or pure webcasters whose stations are only available on the web.  Our previous postings on the topic can be found here.  Today, National Public Radio’s program, On the Media, is airing an interview that they did with me on this topic.  You can listen to the Interview, here. 

A number of major media sources are doing stories on the impact of these royalties on small webcasters.  The Wall Street Journal yesterday ran a story focusing on the impact on the royalties on small webcaster, WOXY.  That story can be found here (subscription required for full story).  The Boston Globe also ran a story focusing on two Boston area webcasters.  As those stories set forth, while all webcasters are hit hard by the royalty, small independent webcasters face the most immediate crisis, as their royalty obligations will exceed their total revenues.  The first royalty payment under the new royalty rates is due on May 15, so the clock is ticking for these webcasters.

Requests for rehearing to be filed with the Copyright Royalty Board will be filed on Monday, so coverage of this story will continue.

In the agenda for next week’s FCC meeting, one of the items to be discussed is the proposed acquisition by Citadel Communications of the radio stations currently owned by ABC Radio, a subsidiary of the Disney Company.  As Citadel is one of the broadcasters against which payola issues have reportedly been raised, certain parties objected to this transaction based on these and other issues.  As we have reported, there have been rumors of a large payola settlement between the FCC and broadcast companies including Citadel involving millions of dollars in fines.  As the agenda item for next week’s meeting indicates that the Commission will consider not only the proposed acquisition of the stations, but also a Notice of Apparent Liability, will this be the first case to actually impose the rumored fines for payola?  Watch the FCC meeting next week to see if payola issues are in fact resolved.  We’ll also see if the FCC provides any guidance on payola issues, and what kinds of conduct it sees as being prohibited by the payola rules.

The Agenda for next week’s FCC meeting includes the consideration of 76 groups of mutually exclusive applications for new noncommercial FM stations.  Many of the 200 or so applications contained in these groups have been pending at the FCC for almost 10 years.  Several years ago, the FCC adopted a point system to resolve cases involving these applications as many of the applications were mutually exclusive – meaning that technical considerations prevented more than one of the applications in each of these groups from being granted.  The point system awards each application points for perceived positive attributes such as being owned by a local organization or being part of a state-wide educational broadcasting network.    The adoption of the point system was supposed to speed the processing of these applications, and many such applications were granted using the point system before the processing seemingly stopped last year.  If the remaining applications are all dealt with next week as announced, this should clear the way for the opening of a new window for the filing of applications for new noncommercial FM stations. 

As it has been years since such a window last opened, the FCC expects that there is significant pent-up demand for new noncommercial stations, and that many applications will be filed.  Questions remain as to when the window will open (we are hearing Fall of 2007), and if there will be any sort of limit on the number of applications that can be filed.  Watch for further information on a noncommercial filing window in the coming months.

In July, we wrote about that the FCC was about to adopt final rules for over-the-air digital radio.  But these expected final rules were pulled off the agenda of the FCC July meeting, and they remained in limbo for the last six months.  Finally, today, the FCC announced that it will consider these final rules at its open meeting next week.  The rules have reportedly been held up while considering requests by the Democratic Commissioners that specific public interest obligations be attached to any multi-cast digital streams that a broadcaster may offer.

But the rules will also consider interference issues, and may finally authorize AM digital operations at night.  The rules should also give permanent authority to all digital radio operations which have, up to this time, been conducted under experimental or temporary authority.  It will be interesting to see if the Commission will in fact finally reach a resolution of these issues at its March 22 meeting, and how they will resolve the question of the public interest obligations of digital broadcasters – probably through the Further Notice of Proposed Rulemaking that is also on the agenda for next week’s meeting.

In a curious bit of timing, on the day after the NTIA released its Order setting out the process for providing consumers coupons to finance their purchase of converter boxes to allow their analog televisions to continue to receive a signal after the digital transition, a coalition of high-tech companies visited the FCC to promote the use of the television spectrum to provide a wireless broadband Internet service.  We wrote about the FCC proceeding to allow these uses, on a non-interference basis, here, when the FCC launched its "white spaces proceeding." 

The proposal by many of the leading high-tech companies, including Microsoft, Intel, Google and other computer manufacturers, would allow smart devices to operate in the television band to send and receive wireless Internet signals, without interfering with television users.  The NAB has expressed concerns about whether these devices could in fact operate without interference to television stations.  In a Washington Post story, it was reported that the companies provided the FCC with a prototype device for testing, and stated that the devices could be ready for consumers by 2009 – perfectly timed for the end of the digital television transition.

This is a proceeding that all television broadcasters should watch carefully.

On March 12, the National Telecommunications and Information Administration ("NTIA") released its Final Rules for the Digital-to-Analog Converter Box Coupon Program (Coupon Program).  This program is designed to allow consumers to purchase converter boxes which will allow analog televisions to receive over-the-air broadcast signals after the February 17, 2009 transition date when all full-power television broadcasters will be broadcasting only in digital.  This was a long-awaited action that many view as a necessary step before the country can meet the February 2009 digital conversion deadline.  The Order gives details of the implementation of the converter box program, providing guidelines for consumers, retailers and equipment manufacturers.  Details of the program are set out below.

The heart of the program is the coupons to be distributed to consumers.  Starting January 1, 2008, all U.S. households can request up to two $40 coupons than can only be used toward the purchase of two digital-to-analog converter boxes. There is no needs test, i.e. any household that wants coupons can request them, regardless of household income.  Only one coupon can be used for each converter box.  The coupons will be in the form of an “electronic coupon card;” like a gift card, but they will not carry any value that can be used for anything but a converter box.  The coupons will expire three months (90 calendar days) after the coupon is placed in the U.S. mail. In no case may consumers receive any cash value for the coupon so, if the cost of a converter box is less than $40, consumers cannot receive a refund or credit towards the purchase of another item. Consumers are also prohibited from selling their coupons. If a converter box does not work properly, consumers will be permitted an exchange only for another converter box. Applications for coupons will be accepted only between January 1, 2008 and March 31, 2009 and will be able to be requested by mail, by phone, by fax, or through a website.

Only households are eligible for coupons. No business, schools, or similar entities are eligible. Also, multifamily residences (i.e., a residence occupied by more than one family unit) will not be eligible for more than two coupons unless each household has separate living quarters and has a separate U.S. postal address. Because Post Office Boxes are prevalent on Indian Reservations, Alaskan Native Villages and other rural areas, these households may be required to supply additional information to identify the physical location of the household.  An NTIA  fact sheet for consumers summarizing the above information can be found here.

Continue Reading NTIA Releases Details of DTV Converter Box Coupon Program

I’ve received several calls in the last week asking if the political broadcasting rules apply to municipal elections – such as elections for mayor, city council, or school board.  Even though this is an "off year" for Federal elections, many communities around the country have local elections, and in some of those elections, candidates have sought to purchase advertising time on broadcast stations.  Many stations don’t seem to remember that the lowest unit rate rules do apply to local races.  The rules on rates, as well as the public file requirements, equal opportunities, and the no censorship rule all apply to state and local races, as well as to Federal candidates.

Only the reasonable access provisions of the FCC’s political broadcasting rules do not apply to state and local candidates.  In other words, stations need not sell commercial time to candidates for any local political contest, or the station can set upfront limits on how much time will be sold in the race,  but, once the station decides to sell time, if the spots are to run in the 45 days before the primary or the 60 days before the general election, Lowest Unit Rates do apply.  And all candidates for the same office must be treated alike.  The rules are mandatory – if you sell ads to candidates for public office within the window, the sales must be at lowest unit rates.  So make sure that these rules are applied. 

For those of you tired of reading about the recent Copyright Royalty Board decision on Internet Radio royalties, you can instead listen to a discussion of those royalties.  An interview that I did with World Internet Radio is available to download and listen on their website, at http://www.wirnonline.com/downloads.php.  The interview covers questions about the royalties themselves, the process that went into their adoption, the likely effects of the new royalties if they are not modified, and the possible routes by which the royalties may be changed. 

And, if you are not tired of reading about the royalties, our stories and the dozens of comments that we have received are archived here.