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The full text of the FCC’s revisions to its ownership report filing process was released last week.  The new rules will require that all commercial stations (including LPTV stations) file an updated Form 323 on November 1 every other year – starting in 2009.  The Order does not add much to the summary that we provided when the decision was first announced, though it does make clear that the electronic form will be revised to no longer allow for PDF attachments, instead requiring that all information be provided on the electronic form itself, so that it can be more easily searched.  With complex ownership structures, which are sometimes not easily explained in the confines of an FCC form, this may create some difficulties.  The Order did not seem to freeze the obligations for the filing of Form 323 Ownership Reports on the old version of the form on the current schedule while the new form is being created and approved by the Office of Management and Budget under the Paperwork Reduction Act, so stations in states with June 1 deadlines for their biennial reports should continue their preparation (see our Advisory on the the reports that are due on June 1 for radio stations in Arizona, District of Columbia, Idaho, Maryland, Nevada, New Mexico, Utah, Virginia, West Virginia and Wyoming, and television stations in Michigan and Ohio).

The Order also asked for further comment on the Ownership Report requirements for noncommercial licensees, including LPFM stations.  The Commission asks not only for comments on whether noncommercial operators should be required to file their reports on the same two year cycle as commercial broadcasters, but also for comments on what information should be required from these operators.  As noted by the FCC, the question of who controls a noncommercial station is often not an easy one – as there are varying degrees of control and oversight of station operations at many of the institutions that hold noncommercial licenses.  As noted by the FCC, there has been a Notice of Inquiry into noncommercial broadcast station ownership pending since 1989, trying to set out when there is a transfer of control of such entities that needs prior FCC approval.  Noncommercial stations have been operating under the interim policy set forth in that Notice for almost 20 years.  While the Commission does not seemingly ask for any change in the interim policy at this point, by gathering information about what ownership information should be reported on the new ownership report for a noncommercial entity, a resolution of that long-pending proceeding could potentially be in the works.Continue Reading Rules On New Ownership Reports Released – Including Proposals for Information from Noncommercial Broadcasters

More than 8 years ago, a group of television station owners (the Network Affiliated Stations Alliance or "NASA") who operated stations affiliated with the major television networks filed a request with the FCC, petitioning the Commission to rule that certain provisions in network affiliation agreements that limited the ability of stations to preempt network programming should be prohibited.  While some of these issues were raised in the Commission’s localism proceeding, the parties have now reached an agreement to resolve many of the issues.  The Commission last week released an order approving that agreement and clarifying some of the legal issues as to what provisions can be contained in network affiliation agreements.  These clarifications not only help to clarify the clauses that can be contained in affiliation agreements, but also give broadcasters insights as to what kinds of provisions can be included in any agreement by which one party provides programming to a broadcast station licensee, including agreements such as LMAs.

 The Commission’s Order sets out standards governing the network-station relationship that insure that the licensee maintains control over programming and other basic operational decisions of their station.  From this basic principal, the following specifics were adopted:

  • Station licensees have an unfettered right to reject network programming that they believe is contrary to the public interest, "unsatisfactory" or "unsuitable
  • Stations can preempt network programming when the licensee thinks there is some other programming which is of greater national or local importance.
  • If a preemption is done for one of these reasons, the affiliation agreement cannot impose monetary or non-monetary penalties or limit the amount of such preemptions
  • Affiliation agreements cannot give networks the right to "option" time in the future unless they make a commitment to fill that time with programming.   This is important in a multichannel digital context, as it prevents networks from tying up time on a second or third channel that they might or might not use.

Continue Reading Setting the Standards for the TV Network-Affiliate Relationship – Guidance for LMAs and Other Programming Relationships

The FCC this week issued fines to two broadcasters for issues in connection with the ownership of their stations – in one case the fine was issued simply because the broadcaster did timely not file three consecutive FCC Form 323 Biennial Ownership Reports .  In the second case, the fine was for not requesting FCC approval for a transfer of control of the licensee of the broadcast station.  These cases serve as a reminder that broadcast ownership is closely regulated by the FCC, that broadcasters need to report that ownership once every two years as required by the rules, and to seek approval before any change in control of any company that holds an FCC license.

The station that failed to file the three ownership reports was fined $6000.  As disclosed on the licensee’s license renewal application, the licensee had not filed 2001 and 2003 ownership reports at all, and filed the 2005 report late and did not put it in the station’s public inspection file.  Biennial Ownership Reports on FCC Form 323 must be filed by the licensees of AM, FM and TV station licensees once every two years, on the anniversary date of the filing of their license renewal applications by all licensees except where the licensee is an individual or a general partnership of natural persons (as opposed to a partnership that contains corporations or other business entities as partners).  We regularly send reminders to our clients about the filing of ownership reports.  For more details on the requirements for the biennial filing, see our advisory for reports that were due on August 1 here, and see our schedule of broadcast filing dates for the remainder of 2008 to see if your station has a biennial filing deadline this year).  Continue Reading Fines for Broadcast Ownership Issues – Remember to File Biennial Ownership Reports and to Seek FCC Approval Before a Transfer of Control

In a case just released by the FCC, a broadcaster was fined for enforcing a non-compete agreement that was entered into when a broadcaster sold one of its stations in a market in and agreed that it would not compete in the same format if it ever acquired another station in the same market.  The agreement had prohibited the Seller from competing with the Buyer in a news-talk format.  After the closing of the sale of the station, the Seller acquired another station in the market and adopted a format that a local court found was covered by the non-compete clause in the contract.  The local court issued an injunction against the continuation of the news-talk format.  At that point, the Seller filed a complaint with the FCC, arguing that, by obtaining the injunction, the Buyer had engaged in an unauthorized assumption of control of the station covered by the injunction, without FCC approval.  The FCC agreed with the Seller, and fined the Buyer $8000 for exercising control over the station that Seller had bought.

The FCC’s reasoning in this case, citing a similar letter decision from 2006, is that the restriction on format impedes a licensee’s control over its own programming, and restricts its ability to adjust its operations to account for changing market conditions.  The Commission concluded that, barring the licensee from utilizing a particular format, even for the limited period of the non-compete agreement, was contrary to the public interest.  By obtaining the injunction to prevent the Seller from using the news-talk format, the Buyer had impermissibly exercised control over the station that it had already sold.  In fact, the Commission went further, and found that the exercise of control over the programming, personnel or finances of the station would be a violation of the rules.  Continue Reading Format Noncompete Agreements Can Lead to FCC Fine

Investors in broadcast properties often seek to have their interests "insulated" from "attribution"   meaning that the interests do not count in a multiple ownership analysis.  In other words, if a party has an attributable interest in a company owning a broadcast station, that interest counts in determining whether the party can, under the FCC’s multiple ownership rules, own an interest in another station in the same market.  The FCC has extensive case law describing when an interest is non-attributable and does not count in a multiple ownership review.  In most cases, a non-attributable interest is one that does not hold voting rights on most company decisions.  However, the Commission has always recognized that the non-attributable, non-voting equity owner may retain certain voting rights when dealing with certain fundamental company actions, as necessary to protect the fundamental integrity of their investment.  In the recent decision approving the transfer of the Ion Media Network broadcast stations, the FCC clarified some of the permissible voting rights of nonattributable shareholders.

In the past, the FCC has permitted nonattributable owners to vote on certain fundamental actions of a company without threatening the owner’s nonattributable status.  Such fundamental actions included changes in the articles of organization or the by-laws of the company, a sale of more than 10% of the assets of the company, a merger or transfer of control of the company, a declaration of bankruptcy, or the issuance of new stock.  As these actions could all affect the fundamentals of the economic interests of the nonattributable owners, votes on these actions was permitted.  In the Ion Media case, new rights were found to not affect the non-attributable status of their investmentsContinue Reading FCC Clarifies Permissible Activities of Nonattributable Investors

With a possible decision looming on December 18 on the Chairman’s proposal to loosen the newspaper-broadcast cross-ownership rules (see our summary here and here), the FCC this week granted two applications involving the sales of the Tribune Company and of the Clear Channel television stations, where the decisions focused on the application of the multiple ownership rules – and where the Commission granted multiple waivers of various aspects of those rules – some on a permanent basis and many only temporarily.  And, in the process, both of the Commission’s Democratic Commissioners complained about the apparent prejudgment of the cross-ownership rules and one complained about the role of private equity in broadcast ownership.  Both decisions are also interesting in their treatment of complicated ownership structures and, at least under this administration, evidence the Commission’s desire to stay out of second guessing these structures. 

In the Clear Channel decision, the Commission reviewed the proposed ownership of the new licensee by an affiliate of Providence Equity Partners.  As there were no objections to the proposed sale, the FCC approval process was somewhat easier than it might have been – though the Commission did seem to be somewhat troubled by the fact that Providence was already a shareholder with an interest attributable under the multiple ownership rules in Univision Communications, which had stations in a number of markets in which the Clear Channel television stations operate.  The Commission approved the sale, giving Providence 6 months to come into compliance with the ownership rules – and conditioning the initial closing of the Clear Channel sale on Providence meeting divestiture requirements that it had promised to observe in connection with the Univision acquisition, and had not yet complied with (in fact the Commission recently asked for comments on a proposal by Providence to come into compliance in the Univision case by simply converting their interest in Freedom Communications, which has interests in Univision markets, into a nonvoting interest which would not be attributable under Commission rules)Continue Reading Ownership Waivers All Around – FCC Approves Sales of Tribune and Clear Channel TV