While the FCC Commissioners are in Harrisburg, Pennsylvania today holding the third of the Commission’s promised six field hearings on multiple ownership, an interesting story was published yesterday, announcing an unofficial "town meeting" of consolidation critics in Columbus, Ohio on March 7.  While these unofficial meetings have become a staple of the broadcast landscape, they traditionally feature one or both of the FCC’s Democratic Commissioners.  What makes this upcoming hearing unique is that Commissioner McDowell, one of the Republican Commissioners, will also be in attendance.

Perhaps Commissioner McDowell is simply a fan of the ambiance of the Ohio state capital, but his attendance could signal something more.  The appearance of a Republican Commissioner at one of these events is rare.  Commissioner McDowell has established a bit of a reputation as an independent thinker, holding out from participation in the FCC’s consideration of the AT&T/Bell South merger despite intense pressure from his Republican colleagues to ignore what he perceived as a potential conflict that he had from previous employment, and reportedly showing reluctance to back the Chairman on television multicast must-carry rules.  Does his participation at this meeting signal anything on his position on the multiple ownership proceeding other than curiosity and open mindedness on his part?  Only time will tell.

By now, everyone knows that XM and Sirius have announced plans to merge into a single nationwide satellite radio service provider.  This plan is, of course, subject to approval of the FCC.  The NAB has announced plans to oppose the merger, and Congress today scheduled hearings on the matter, to be held next week.  The obvious issues to be considered by the Department of Justice and the FCC will be whether the merger will be anti-competitive and whether it will serve the public interest.  But there are numerous other legal issues, possibly affecting other FCC proceedings, that may well come out of the consideration of this merger.

For instance, the merger raises the question of whether satellite radio is a unique market that should not be allowed to consolidate into a monopoly, or whether there is a broader "market" for audio programming encompassing not only satellite radio, but also traditional over-the-air radio, iPods, Internet radio, and other forms of audio entertainment.  While the opponents of the merger may argue that satellite radio is a unique market, such a finding may affect the broadcast multiple ownership proceeding, where some broadcasters are advancing arguments similar to the satellite companies in hopes that the FCC will loosen multiple ownership restrictions. 

Another issue that seemingly will be raised by the merger is how important a la carte programming is to FCC Chairman Martin.  The Chairman has been pushing both satellite and cable television companies to allow consumers to purchase only the channels that they want rather than whole packages of channels.  He has argued that consumers could save money by buying only the channels that they want, and consumers could also avoid programing that they don’t want (like adult oriented content).  Service providers have countered that forcing the unbundling of program tiers will make it economically unfeasible to offer many of the more niche program channels.  Published reports indicate that part of the merger proposal to be advanced by the satellite companies may include a proposal for a la carte pricing.  Thus, this case may show how important the Chairman really believes such offerings are – and whether that offering may help tilt the public interest considerations in the proceeding.

Continue Reading XM and Sirius – The Issues Beyond the Issues

Today’s New York Times carried an article announcing that the Mitt Romney campaign is planning to run advertising spots for his Presidential campaign in five states – at least 10 months before the first contest for delegates to the Republican presidential nominating convention.  With this first purchase of political time in what promises to be a very active political advertising cycle, broadcasters need to be ready to meet the requirements of the FCC’s political broadcasting rules.

While the lowest unit rate provisions of the rules do not kick in until 45 days before a primary or 60 days before a general election, most of the other political rules apply as soon as you have a legally qualified candidate.  A candidate for President is legally qualified in every state for FCC purposes once he or she is qualified in 10 states.  So that may very well be soon, as some states have minimal requirements for qualification on the primary ballots.

Once a candidate is qualified, equal opportunities, reasonable access (for Federal candidates), no censorship, and public file obligations are applicable to all spots purchased by that client.  Disclosure requirements as to price and other terms for spot sales also are required, so stations should be getting their political disclosure statements dusted off, updated and ready for presentation when a political candidate’s campaign committee comes calling for spots.  It seems early to start thinking of political obligations for next year – but the time is already here.

Two interesting stories in major national newspapers highlight the attention that the content of broadcast programming is receiving from regulators – both at the FCC and in Congress.  One story, in the Washington Post, reveals a draft FCC report suggesting that the FCC could regulate violent programming in the same way that it regulates indecent programming, if Congress gives the FCC statutory authority to do so.  In another story, appearing in the Wall Street Journal, critics suggest restrictions on when ads for Viagra and other similar medications could be run on television.  That story also mentions pending legislation to restrict all consumer-directed advertising dealing with prescription drugs. 

Obviously, these proposals for regulation would strike hard at broadcasters – particularly television broadcasters.  Pharmaceutical advertising has become big business for TV companies.  Sure, we’ve probably all felt uncomfortable at times when a Viagra ad runs in a program we are watching with family members.  But should the government pass laws restricting the the advertising of legal products?  Should we shield viewers from information about these products?  In other contexts, the Supreme Court has struck down restrictions on liquor and legal gambling ads.  How would restrictions on legal drugs fair?

And we all know how well the FCC has done in setting out the limits on indecent programming.  Where would lines be drawn on violent programming?  How does one even define violent programming?  For instance, many of the most popular programs on television are medical programs (e.g. Grey’s Anatomy, ER, House).   All feature very detailed and sometimes disturbing visuals of medical procedures – though rarely are there detailed depictions of what most people would characterize as "violent" actions – shootings, stabbings, etc.  Would these medical shows fall under any restrictions?  And how would rules deal with broadcasts such as "Saving Private Ryan," which has already received a dispensation from the FCC for its indecent content which, in other programs, would have resulted in FCC fines.  Would its violent content also receive such a pass?

 

Continue Reading Violence and Viagra – More Content Regulation on the Way?

Trade press reports yesterday and today announced that the Clear Channel spin-off of a number of its small market radio properties is continuing, with bids due on February 23.  While this is not the end of the process, as the bids will have to be analyzed, and then the high bidders will have further diligence and bidding opportunities before any sale is complete, it does demonstrate that the process is moving forward, and that the 448 stations that Clear Channel plans to spin off will be sold later this year.  As has been announced, there may well be additional spin-offs of larger market stations that cannot be held by Clear Channel under the revised multiple ownership rules when and if its transfer of control to the private equity buyers takes place.  What impact will these sales have on the FCC’s on-going proceedings – particularly the multiple ownership proceeding?

Whenever media consolidation critics discuss the consolidation that has occurred over the last 10 years, one of the biggest issues is always the 1000 plus stations owned by Clear Channel.  If a significant number of those stations are divested, and some end up in the hands of new owners, how will the critics react?  While, as we have written here before, the multiple ownership proceeding is not one we expect to be resolved any time soon, these sales, and those that we have seen in recent weeks by of other large radio and television companies spinning off non-core stations in smaller markets,  may even reduce the pressure on the FCC to act on the multiple ownership proceeding – as more owners will have more opportunities to bid and perhaps buy broadcast stations.  Once again, a reason to conclude that we should not look for any decision in the multiple ownership proceeding any time soon.

Yesterday’s New York Times featured an article on radio’s increasing use of Internet video to promote their on-air programs, to extend their brand, and to increase the connection with their listeners.  This is another manifestation of the theme we wrote about earlier this week in connection with this year’s RAB Convention, where the emphasis was on radio broadcasters maximizing and leveraging their digital assets.  But, in doing so, stations must be alert for the legal issues that this extension can raise.

For instance, we have written before about the concerns about using copyrighted music in video productions without permission from the record company or other copyright holder in the musical performance.  Stations should not make their own music videos without securing authority from a copyright owner of the song that they are featuring (from both the artist and the composer).  If stations are asking listeners to post their own video on the station’s website – like a local YouTube – the station must be prepared to take down any video using copyrighted material if the station is asked by the copyright holder.  And the station should adopt Terms of Use for its site, warning users not to post copyrighted material without permission.  The station should also not encourage the use of copyrighted material without permission – for example, it should not give prizes to the producers of the best music video for the website unless it has obtained permission for the use of the particular song or songs that are to be used by contestants.

Remember, the Internet magnifies all sorts of intellectual property issues by making it possible for copyright and trademark owners to monitor infringement far beyond the coverage contours of the broadcast station. 

The FCC today released a Public Notice announcing that it had sent EEO audit letters to approximately 150 radio and television stations around the country.  The Public Notice contains a list of the stations being audited.  In its Order adopting the current EEO rules, the FCC promised to audit about 5% of all stations each year.  Thus, expect more audits as the year progresses.

As we wrote last week, the FCC recently fined a number of stations for violations of the EEO Rules discovered either as a result of audits or in the license renewal process.  Today, fines of $5000 each were issued to two stations which had not conducted broad outreach for 40% of their job openings (the stations had recruited for only 6 of 10 job vacancies reported in their renewal applications).  This decision is significant as it is one of the first times that the FCC has fined a station for something other than an almost complete failure to recruit or do the necessary paperwork.  Here, the stations had relied solely on word of mouth recruiting for 4 of 10 positions, causing the FCC to find its efforts inadequate.

Clearly, the FCC is getting very serious about enforcement of its EEO policies.  For a complete outline of the FCC’s EEO requirements, read our EEO advisory, here.

Two recent FCC cases set confusing and perhaps dangerous precedents for the use of Low Power FM stations.  In one case, the FCC allowed a pirate operator that they had shut down for an illegal operation to then resume operations under Special Temporary Authority (apparently following Congressional intervention).  In another case, where protests were lodged about the sale and probable format change of a noncommercial station, the FCC directed the opening of a special filing window for an LPFM in that community to provide a replacement service.  While the motivation of the FCC in each case may have been laudable, do these cases establish expectations on the part of other similarly situated parties that cannot be met in future cases?

According to a news article, the FCC, at the urging of Senator Harry Reid, the Senate Majority Leader, authorized a pirate radio station to continue operations under Special Temporary Authority until the next low power FM application window opens.  After first shutting the station down for operating without a license, the FCC then permitted the station to resume operations to provide a local service to a small Nevada community.  According to the article, the expectation is that the operator would file for a permanent license once the FCC opens a window for filing applications for new Low Power FM stations.  While service to the Nevada community may be laudable, doesn’t this decision encourage others to start pirate stations in unserved communities, and then ask that their service be permitted to continue under temporary authority if the FCC finds them and shuts them down?  And even if the FCC would allow such operations, these process puts the parties operating at risk, as they may continue to operate stations, and then they may face a competing applicant during the next LPFM window.  Under the FCC’s policies for picking between mutually exclusive applicants, the established party could still end up not being the preferred applicant, and would have to shut the station down – taking away a service that the STA has allowed to become even more established in the community. 

Continue Reading Fun With Low Power FM

I’ve just returned from this year’s Radio Advertising Bureau convention in Dallas.  In reflecting on the convention, and in discussing it with many who were in attendance, the consensus was that this was not your Father’s RAB convention.  I was surprised by how little discussion there was of traditional radio at the conference.  The sessions weren’t the typical ones about how to make the most money from selling your cluster of radio stations in combination, or how to compete against the newspaper or the Yellow Pages, or how to get the most out of your sales staff.  Instead, virtually every session talked about leveraging your digital assets.  There were discussions of using your website, streaming, podcasts, text messaging, and  audio on cell phones to increase the financial performance of broadcast stations.  There were discussions of HD Radio and some of the opportunities that service might offer if and when it starts getting consumer acceptance.  All in all, it seemed as if radio (or at least those planning the convention sessions) had received the message that the industry needs to take advantage of its ability to drive traffic to new technologies, and drive that traffic to new media sources that stations themselves create. 

In the past, there seemed to be a fear about discussing these new technologies.  It was almost as if the technologies weren’t discussed, they’d go away.  But at the RAB, and at many of the conventions of the state broadcast associations that I have attended over the last year, broadcasters seemed to have decided that they need to embrace the new media.  While the old fear had been that these new media sources would cannibalize the current broadcast audience, everyone seems to now recognize that the audience is going to use these technologies no matter what – so the broadcaster might as well be the one cannibalizing its own audience.

While legal and regulatory issues do not tend to be the primary topic of discussion at the RAB Conference, as in almost any broadcast discussion, they do come up.  Here too, the discussion was digital.  For instance, in the speech by NAB President David Rehr outlining the priorities of the NAB for the year, only the effort to authorize FM translators for AM stations (which we wrote about here), was not a "digital" topic.  The other issues discussed by Mr. Rehr included pushing the FCC for final rules for digital radio, monitoring the actions of satellite radio companies XM and Sirius, and finally, the issues that arise out of the Perform Act.  The Perform Act is a copyright bill introduced in the Senate last month that would affect digital royalties for music used on the Internet, place restrictions on services promoting the promotion and sale by digital music providers of devices that disaggregate songs contained in a digital stream, and require copy protection technologies to be employed by digital music providers.  Hardly the exciting stuff that makes for an applause line in a convention speech.  While we will write more about the Perform Act in a separate posting, the major concern for broadcasters is that the sponsor, California Senator Diane Feinstein, suggested in her remarks that the performance royalty on sound recordings which now applies to satellite radio and webcasting (which we have written about many times including here), should also apply to broadcast radio.  And that is a big enough issue – one that could hit broadcasters directly in the pocketbook – that it demands the industry’s attention in every forum.