The FCC’s Notice of Inquiry and Notice of Proposed Rulemaking on Sponsorship Identification issues (which we summarized in our firm’s advisory and about which we wrote here), which deals with a host of issues including embedded advertising and product placement, was published in the Federal Register late last week, starting the clock on

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

Last year, Congress considered limits on direct to consumer (DTC) prescription drug advertising (about which we wrote here), but this effort stalled.  A recent letter from two Congressional leaders of the Energy and Commerce Committee suggest that Congress is looking at these issues once again.  This advertising has become important to television networks, and to drug

In a decision released last week, the FCC imposed a fine of $4000 on a broadcaster licensed to a community in the state of Arkansas for airing an advertisement for the Missouri State Lottery.  In this case, a station licensed to Arkansas ran a remote broadcast from a store in Missouri.  During the course of the remote, the on-air announcer invited listeners to come to the store and made some not-too-subtle remarks implying that, when they did, they could buy Missouri lottery tickets.  As there is a statutory provision prohibiting a station located in one state from running an ad for a lottery in another state if its own state does not have a lottery, the Commission issued this fine.

This ban is based on a statute passed  by Congress, and approved by a Supreme Court decision 15 years ago – finding a compelling state interest in protecting the citizens of states that ban gambling from allowing stations in their states from advertising that prohibited activity.  Of course, in many cases, a station licensed to one state may be heard (and may in fact be physically located) in another state.  Even so, the city of license is what counts – so a station has to observe the laws of that state.  In some cases, that can mean that there are different rules that apply to different stations in the same cluster (and possibly located in the same building, with advertising being sold by the same sales people).

Continue Reading No State Lottery in Your State? – No Gambling Ads Even For a State Lottery In a Nearby State

At its December meeting, at the same time as it adopted rules relaxing the newspaper-broadcast cross-ownership rules, the FCC adopted new rules to expand diversity in the ownership of broadcast stations, encouraging new entrants into such ownership.  The full text of that decision was just released last week, providing a number of specific rule changes adopted to promote diverse ownership, as well as a number of proposals for changes on which it requests further comment.  Comments on the proposed changes will be due 30 days after this order is published in the Federal Register.  As this proceeding involves extensive changes and proposals, we will cover it in two parts.  This post will focus on the rule changes that have already been made – a subsequent post will cover the proposed changes.  The new rules deal not only with ownership rule modifications, but also with issues of discrimination in the sale of broadcast stations and in the sale of advertising on broadcast stations, new rules that leave some important unanswered questions. 

The rules that the Commission adopted were for the benefit of "designated entities."  Essentially, to avoid constitutional issues of preferences based on race or gender, the definition of a designated entity adopted by the Commission is based on the size of the business, and not the characteristics of the owners.  A small business is one designated as such by the Small Business Administration classification system.  Essentially, a radio business is small if it had less than $6.5 million in revenue in the preceding year.  A television company is small if it had less than $13 million in revenues.  These tests take into account not only the revenue of the particular entity, but also entities that are under common control, and those of parent companies.  For FCC purposes, investment by larger companies in the proposed FCC licensee is permissible as long as the designated entity is in voting control of the proposed FCC licensee and meets one of three tests as to equity ownership: (1) the designated entity holds at least 30% of the equity of the proposed licensee, or (2) it holds at least 15% of the equity and no other person or entity holds more than 25%, or (3) in a public company, regardless of the equity ownership, the designated entity must be in voting control of the company.

Continue Reading FCC Takes Actions to Increase Diversity in Broadcast Ownership

Last week, the FCC approved the long-pending application for the transfer of control of Clear Channel Broadcasting from its public shareholder to several private equity funds. Even though the application had been pending at the FCC for over a year, the Commission’s decision was notable for the paucity of issues that were discussed. The decision approves the transfer, conditioned on certain divestitures by the Company and by the equity funds that will control the new company, including divestitures previously ordered by the Commission in connection with the investment of one of these funds in Univision Broadcasting but not yet completed, and rejects three petitions that, from the Commission’s description, did not involve fundamental issues about the nature of the overall transaction, but were instead devoted to certain limited issues, in two cases involving actions in a single market. The divestiture conditions were approved seemingly as a matter of course, and do not provide any new insights into the law concerning the FCC’s attribution rules (unlike the recent decision approving the transfer of control of Ion Television, about which we wrote here, which contained an extensive detailed discussion of what it takes to make an ownership interest “nonattributable” for purposes of the FCC multiple ownership rules). Given the lack of controversy in the Commission’s order, what is perhaps most noteworthy about the decision are the concurring statements of the two Democratic Commissioners, which may provide some indication of the concerns of the Commission should we have a Democratic-controlled Commission following this year’s Presidential election.

Of course, as we’ve described in our posts about the FCC’s Localism Notice of Proposed Rulemaking (here), and the new rules regarding Enhanced Disclosure requirements for television broadcasters (here), the Commission has already begun to act in a far more regulatory manner than any other Commission in the past 20 years. Yet the issues raised by the Democrats in this decision are in areas not yet considered by the Commission. Commissioner Copps expresses his concern about the role of private equity in broadcast ownership, and whether such ownership is in the public interest. In numerous proceedings and in response to the presentation made at the FCC’s January meeting by the Media Bureau, Copps has suggested that private equity should be investigated, both to determine whether the Commission is fully aware of all ownership ties of the companies involved, and also (as emphasized in this case) for the potential economic impact on the operations of the broadcast stations caused by the new debt involved in the acquisition. Here, Commissioner Copps questions whether the announcement of a potential downgrade of the bonds of the Company if these deals occur should have been of more concern to the Commission. Private equity should be aware that, in a future FCC, an investigation of the economics of their operations should be expected.

Continue Reading Does the FCC’s Approval of the Clear Channel Transfer of Control Provide a Window Into the Future?

At its December meeting, the FCC adopted a Notice of Proposed Rulemaking on Localism.  At that meeting, while the Commissioners discussed the generalities of the proposals being made, the specifics of the proposals were unknown.  The full text of the NPRM has now been released, and it sets out the areas in which the Commission proposes to re-regulate broadcast stations.  The order also hints at a number of other proceedings that the Commission intends to launch in the near future, and reminds broadcasters of a number of other existing proceedings that will potentially bring about greater regulation.  From the discussion in the NPRM, new rules will apply to all broadcasters – large and small – and potentially place significant burdens on all stations which, as always, are hardest for small stations to deal with.  Given the number of new regulatory initiatives discussed by the Commission, the NPRM is a must-read for all broadcasters, and this proceeding is one in which all broadcasters should participate.

Among the specific proposals on which the Commission asks for comments include the following:

Community Advisory Boards:  The Commission tentatively concludes that all stations will be required to establish a community advisory board to advise the station on the issues of importance to the community that can be addressed in the station’s programming.  The Commission indicated that it did not want to bring back the burden of the ascertainment process that was abolished in the 1980s, but asks how the Board should be established so as to represent the entire community, suggesting that the categories of community leaders that were used in the ascertainment process could be used as a standard to guide the licensee in determining the make-up of the board.  Other questions include how often the board should meet, and how the board members should be selected (or elected – though by whom, the Commission does not suggest).

Other Community Outreach Efforts.  The Commission also suggests that other community outreach efforts should be considered as possible mandates for broadcasters.  These would include the following:

  • Listener surveys by telephone or other electronic means (general public surveys were also part of the ascertainment process abolished in the 1980s, so if this were adopted together with the Community Advisory Board, ascertainment would effectively be back)
  • Focus sessions or town hall meetings
  • Participation of management personnel on community boards, committees, councils and commissions (mandatory civic participation?)
  • Specific phone numbers or email addresses, publicized during programming, for the public to register their comments on station operations.

Remote Station Operations.  Comments are sought as to whether television stations should be forbidden to operate without being manned during all hours of operation.  Radio operations will be addressed in the proceeding to consider the public interest issues posed in the Digital Radio Proceeding (see our summary here).

Quantitative Programming Guidelines.  The Commission proposes to adopt quantitative standards for programming that a station would have to meet to avoid extra processing and scrutiny at license renewal time.  Questions include what categories of standards should be established (just local programs – or more specific requirements to set required amounts of news, public affairs and other categories – and how to define what programming would qualify in each category), should requirements be established as specific numbers of minutes or hours per day or per week or by a percentage of programming or through some other metric, should other specific requirements or measurements be established?

Main Studios.  The commission suggests reverting to the pre-1987 requirement that each station maintain a main studio in its community of license

Network Programming Review.  The Commission asks whether rules should be adopted to require that local network affiliates have some ability to review all network programming before it is aired.  If so, what programs would be exempt from the requirement (e.g. live programs), how much prior review is necessary, would such a right disrupt network operations?

Voice Tracking.  The Commission asks if "voice-tracking," (i.e. a radio announcer who provides announcing on a radio station from outside a local market, sometimes including local inserts to make it sound as if the announcer is local) should be limited or prohibited, or if disclosure should be required.

Local Music.  While the Commission indicates that it did not think that a ban on national playlists was required, it did ask whether broadcasters should be required to report the songs that they play, and how they choose their music.  With that information, the Commission asks if it should consider the amount of local music played when assessing whether a station has served the needs of its community at license renewal time.

Class A TV.  The Commission asks whether it should adopt rules that permit more LPTV stations to achieve Class A status, meaning that they would no longer be secondary stations subject to being forced off the air by interfering uses of the TV spectrum by full-power TV stations.

 


Continue Reading FCC Releases Specifics of Localism Rulemaking – Proposing Lots of New Rules For Broadcasters

As 2007 wound to an end, advertising issues figured prominently on the agenda of Washington agencies, including both the FCC and the FTC.  While the FCC is looking at specific regulatory requirements governing broadcast advertising, the FTC is investigating the privacy issues raised by advertising conducted by on-line companies.  In November, the FTC held a two day set of workshops and panels where interested parties discussed issues of behavioral advertising – advertising that can be targeted to individuals based on their history of Internet use, and whether or not regulation of these practices was necessary.  The wide-ranging discussion is summarized on our firm’s Privacy and Security Blog, here.  After gathering this testimony, we will see if the FTC decides to proceed to propose any regulations dealing with this sort of personalized, on-line advertising.

At the FCC, there are two separate proceedings dealing with advertising issues for broadcasters.  The first came about as part of the FCC’s diversity initiatives adopted at its December meeting.  There, the Commission determined that broadcasters will need to certify in their renewal applications that they have not discriminated in their advertising practices.  While this proposal was adopted at the Commission’s December 18 meeting, the full text of the decision has yet to be released, so we do not know the specifics of this new requirement.

Continue Reading Advertising Issues on Washington’s Agenda for 2008

The FCC has released its agenda for its December 18 meeting – and it promises to be one of the most important,and potentially most contentious, in recent memory.  On the agenda is the Commission’s long awaited decision on the Chairman’s broadcast multiple ownership plan relaxing broadcast-newspaper cross-ownership rules (see our summary here).  Also, the FCC will consider a Further Notice of Proposed Rulemaking on Localism issues (pending issues summarized here) following the conclusion of its nationwide hearings on the topic, as well as an Order and Further Notice of Proposed Rulemaking on initiatives to encourage broadcast ownership by minorities and other new entrants (summary here).  For cable companies, the Commission has scheduled a proposed order on national ownership limits.  And, in addition to all these issues on ownership matters, the FCC will also consider revising its sponsorship identification rules to determine if new rules need to be adopted to cover "embedded advertising", i.e. product placement in broadcast programs.  All told, these rules could result in fundamental changes in the media landscape.

The broadcast ownership items, dealing with broadcast-newspaper cross-ownership, localism and diversity initiatives, all grow out of the Commission’s attempts to change the broadcast ownership rules in 2003.  That attempt was largely rejected by the Third Circuit Court of Appeals, which remanded most of the rules back to the FCC for further consideration, including considerations about their impact on minority ownership.  The localism proceeding was also an outgrowth of that proceeding, started as an attempt by the Commission to deal with consolidation critics who felt that the public had been shut out of the process of determining the rules in 2003, and claiming that big media was neglecting the needs and interests of local audiences.

Continue Reading FCC Meeting Agenda for December 18 – Potentially One of the Most Important in Recent Memory – Multiple Ownership, Localism, Minority Ownership, Product Placement and Cable TV National Ownership Caps

The New York Times recently published an article about NBC’s owned and operated station in New York City acceptance of advertising for liquor.  While ads for beer and wine have been a staple on broadcast stations (though see our discussion of the limits on that advertising, here), ads for other alcoholic beverages ads have been less frequent.  Many broadcasters have for years believed that such ads were prohibited by the FCC or some other government agency.  In fact, alcohol ads have not been prohibited by law, but instead by voluntary actions of trade associations representing broadcasters and the alcoholic beverage industry .

Until the early 1980s, the National Association of Broadcasters had a voluntary code of conduct for broadcasters, suggesting good standards and practices for broadcasters: limiting some broadcast content while encouraging broadcasters to air other programming perceived to be in the public interest.  Among the conduct that the Code prohibited was the advertising of hard liquor. While the NAB Code was not mandatory for broadcasters, in filing many routine applications for new stations and for the acquisition of existing stations, the FCC in the past had requirements that the potential broadcasters explain how their programming would serve the public interest.  Most applicants would shorthand their compliance plans by simply promising to abide by the NAB code, in effect binding themselves to the code through those representations made to the FCC.  The Code was in place until the early 1980s, when the Department of Justice became concerned that code provisions suggesting maximum commercial loads and similar matters functioned as a restraint of trade in violation of the antitrust laws, and the NAB Code was abandoned.

Continue Reading Will You Drink to That? – Advertising Liquor on Broadcast Stations