In a press release issued last week, Cambridge Consultants announced that it would be introducing at the Consumer Electronics Show a wireless Internet radio device that would cost less than $15 to manufacture, and would likely retail for around $50.  While several articles have hailed this device as signaling the demise of both satellite and over-the-air radio as consumers get inexpensive access to hundreds or thousands of Internet Radio stations, not one article that I’ve seen addresses the issue of whether these stations will be around to listen to, after the new royalties are announced for the use of sound recordings on the Internet.  Briefs are due to be filed with the Copyright Royalty Board this week, summarizing the evidence that has been received over the past year in the proceeding that has been ongoing to determine these rates.  By March 1, the Board should announce a decision.

We have summarized the rates on which Internet Radio companies should be paying royalties in our memo, here, but noted that these royalties actually expired as of the end of 2005.  Royalties for this year, and the upcoming years through 2010, will be decided by the Board in the current proceeding.  This proceeding, which could well determine the fate of many Internet Radio stations – and perhaps of the devices designed to listen to them – bears careful monitoring.

On Monday night’s episode of NBC’s Studio 60 on the Sunset Strip, that program’s viewers were treated to a subplot about an FCC investigation into indecency on the fictional television network featured in the program. And these viewers were treated to a portrayal of the FCC as an all powerful agency, able to not only issue fines, but also pull "transponder licenses" and stop Asian casino acquisitions by the network’s parent company simply because of the inadvertent use of the "F word" in a live newscast.  Chairman Martin probably wishes that he has as much power as the fictional FCC had on the program.

Perhaps a communications lawyer shouldn’t get concerned about the dramatic license taken by a TV show.  But the program provided such a distorted view of the FCC process that it could even encourage those interested in making trouble for broadcast licensees to file more complaints with the FCC, thinking that the FCC is so powerful.  In fact, the FCC’s power, and its precedent, are nothing like those portrayed on the show. 

Obviously, the FCC’s powers don’t extend to casino acquisitions outside the United States (or for that matter in the United States).  Nor will the FCC pull a satellite transponder license for a broadcast indecency matter – the FCC has never pulled any license for indecency violations, and has thus far shown no inclination to do so (and even had the FCC had been so inclined, it would take years of litigation).  Even the proposed fine level – $350,000 for each of the network’s affiliates – while recently authorized by Congress, has never been levied by the FCC. 

 

Continue Reading Everything I Know I Did Not Learn on TV

Two articles published today talk about on-line media, and the growing importance of local content in advertising and audience growth.  These articles emphasize the long-term importance for broadcasters to capture the local audience that they have controlled over-the-air for so long as that audience makes the transition to the world of Internet media.  This growth of on-line media covering local events and issues, and chasing local advertising dollars, may also figure into the current multiple ownership debate as it tries to assess the dominance of the broadcast media, the new competitive forces, and how much ownership regulation is still necessary.

One article, in today’s Washington Post, explores the transition of certain Gannett newspapers to on-line sources of micro-news covering all sorts of community events that the printed paper and the broadcast news programs would usually ignore.  The broad coverage of very local events in the community, together with user-generated content posted to the site, and reader contributions to investigative journalism conducted by the paper, are intended to involve the whole community in the web version of the paper.

The second article, from today’s New York Times, talks about how search engine Ask.com is introducing a service called AskCity, using search technology on a local basis to highlight local business and events, and to tap into local advertising dollars.  These two articles highlight how the Internet can and will be a local medium, with which the broadcaster will have to compete to an even greater degree in coming years.

Until late 2004, Section 312(g) of the Communications Act provided that the license of any station that had been off the air for more than one year would automatically be forfeited.  In December 2004, Congress amended the law, allowing the FCC discretion to reinstate such licenses "to promote equity and fairness."  In a decision issued today, the FCC actually used that discretion and reinstated the license of a station that had been off the air for several years – giving at least some hope to licensees who are forced by circumstances beyond their control to be off the air for more than a year.

The case decided today, while giving hope to licensees, shows that it takes a compelling case for the FCC to exercise its discretion and reinstate an expired license.  The station involved in this decision was located in the Virgin Islands.  Its tower was destroyed by one hurricane and, after the station had been rebuilt, three more hurricanes substantially damaged the station, knocking it off the air.  In addition, the principal shareholder of the company died, and the company had made plans to move to another island.  In these circumstances, the FCC exercised its discretion and reinstated the license.  So, while the discretion will not be exercised freely (in fact, the FCC has turned down other requests since the law was changed), this case shows that stations subject to severe natural calamities have hope of preserving their licenses.

The FCC on Friday announced the details of the next multiple ownership field hearing to be held in Nashville on December 11.  As in the October hearing in Los Angeles, the hearing focuses both on the specifics of the local market, as well as an industry segment and how consolidation has affected that segment.  In Los Angeles, the hearing focused on television program production companies.  In Nashville, the focus will be on the music industry, and the impact that media consolidation has on that industry.

As many will remember, after the FCC adopted its short-lived relaxation of the ownership rules in 2003, many in the music community argued that media consolidation adversely affected the ability of new artists to get their music played on the radio.  In the localism proceeding which followed the 2003 order, the FCC asked questions about whether local artists were able to get airplay on radio stations, and whether stations should be required to include some amount of local music content on their stations.  These questions are sure to be aired in Nashville at the December 11 hearing.

On Thursday, the FCC released an order agreeing to allow a company to provide Direct Broadcast Satellite service to the United States using Dutch satellites.  If this company were to actually implement this service, it would compete directly with DIRECTV and Echostar (Dish Network), and compete as well in the larger multichannel video space with numerous other companies including cable television and, in many markets, the telephone companies who are now introducing video services. 

The fact that the FCC has authorized this service does not mean it will be introduced.  Satellite services must also secure approvals from international agencies that coordinate uses between different countries, and they must secure the substantial financing necessary to construct and launch the satellite in face of all the other competition that exists in the market.  It will be a process to watch over the coming years to see if this service ever comes to market.  But FCC approval is the first step toward introducing this competitive service.

In several recent actions, the FCC has imposed severe fines on broadcast licensees for operating auxiliary facilities without a license.  These actions highlight the importance of insuring that your broadcast stations have all of the licenses that they need to operate the technical facilities that they are using. 

In a decision issued today, the FCC fined a Regent radio station $7000 for failing to file a required form on a timely basis and for operating an FM translator station without authority.  According to the decision, Regent had inadvertently failed to include the translator on the renewal application for the main station.  Seven months later, it discovered the oversight, filed the renewal, and requested temporary authority to continue to operate the station.   The Commission imposed a fine of $3000 for failing to timely file the renewal, and $4000 for operating for the 7 months without authority.

Two weeks ago, the FCC released another Notice of Apparent Liability, proposing a $6600 fine for the late filing of two renewal applications for earth stations used by a public television licensee.  One renewal was filed about 2 months late, the second about 2 years late.  The FCC again imposed fines both for the late-filing, and for the operation without authorizations for the operation during the period after the licenses had expired and before the late renewals and STA requests were submitted.

Continue Reading FCC Gets Tough on Forgetful Licensees

The FCC today released the full text of its Order amending the procedures to be used when making changes in the FM Table of Allotments, and allowing city-of-license changes for all radio services to be processed as minor change applications, which should substantially speed their processing.  The text, which provides the details of the decision announced earlier this month (which we summarized in our posting of November 3) can be found on the FCC’s website, here.  The changes in the procedures will be effective 30 days after publication in the Federal Register.  We will provide a more detailed summary of this decision later today. 

For the last 10 years, since the liberalization of ownership rules under the 1996 Telecommunications Act, the broadcast industry has been in the process of putting together cross-market platforms in radio, television and newspapers in markets across the country.  In the flap over media ownership that began with the FCC’s 2003 multiple ownership decision, and which continues through the current proceeding, media critics have sought the shrinking of big media companies, which they hold responsible for everything from violence and indecency on the airwaves to the lack of new music on radio.  Now, suddenly, 2006 has brought a restructuring of big media, without any government intervention whatsoever.  What impact will this restructuring have on the current proceeding?

The announcement by Clear Channel Communications that it is being sold, and at the same time it’s selling all of its television stations and over 400 of its radio stations in 90 smaller markets, is but the most recent example of that emerging trend.  CBS, which itself was split off from Viacom, is in the process of selling off a number of its radio properties in smaller markets.  ABC also has a deal to sell off the bulk of its radio properties, and announced in its comments in the current multiple ownership proceeding that it did not care what the FCC did, as it had no intent of acquiring any additional broadcast stations or newspaper properties.  Similarly, Tribune is exploring strategic options that reportedly include splitting its broadcast and newspaper properties.  The New York Times has also announced that its exploring spinning off its television properties.

All of this unforced media divestiture should have an impact on the current multiple ownership proceeding.  On a practical level, who is going to push for the current proceeding to be completed?  Many of the players who were active in the past no longer seem like they will care about the outcome of this proceeding, and others seem like they will be preoccupied, at least in the short term, with their business deals.  While the FCC has announced the scheduling of its second field hearing (in Nashville on December 11), it still has 4 more promised hearings to hold at some point in the future.  Unless these are scheduled quickly, and without the big players pushing the FCC to move quickly, the decision could easily drag.  

So who is left to actively push the FCC to reach a decision in this proceeding?  On the TV side, Fox and Sinclair seem likely to be the most active proponents of great deregulation – and, based on past history, most likely to pursue court actions to obtain ownership relief if the FCC does not move quickly on the current proceeding.  Gannett and the Journal Corporation own newspaper and TV stations and may push for more relief.  Clear Channel had been the major proponent of further radio deregulation.  Will their activity continue?

 

Continue Reading 2006 – Shrinking Big Media – Without Ownership Reform