UPDATE 5-29-2008- Please note, the Commission has revised the dates for submitting comments in this rule making proceeding. Comments in the proceeding are now due on or before June 30, 2008, and Reply Comments are due on or before July 14, 2008. This means that interested parties have a couple of weeks less than
As part of its efforts to diversify the ownership of the broadcast media, the FCC promised in its recent order on Localism in the media (see our summary here) to have its engineering staff come up with a computer program to help people determine where a new FM station can be allotted by the…
We recently wrote about the Federal Communications Commission’s actions in their Diversity docket, designed to promote new entrants into the ranks of broadcast station owners. In addition to the rules adopted in the proceeding, the FCC is seeking comment on a number of other ideas – some to restrict the definition of the Designated Entities that are eligible to take advantage of these rules, others to expand the universe of media outlets available to potential broadcast owners – including proposals to expand the FM band onto TV channels 5 and 6, and proposals to allow certain AM stations, which were to be returned to the FCC after their owners received construction permits for expanded band stations, to retain those stations or transfer them to Designated Entities. The proposals, on which public comment is being sought, are summarized below.
Definition of Designated Entity. The first issue raised by the Commission deals with whether the class of applicants entitled to Designated Entity status and entitled to take advantage of the Commission’s diversity initiatives should be restricted. One proposal is to restrict the Designated Entity status to companies controlled by racial minorities. The Commission expressed skepticism about that proposal, noting that the courts had throw out several versions of the FCC’s EEO rules, finding that there was insufficient justification offered by the FCC to constitutionally justify raced-based preferences. The Commission asked that proponents of such preferences provide a “compelling” showing of needed, as necessary for a constitutional justification for governmental race-based discrimination.
Continue Reading FCC’s Acts to Increase Diversity in Media Ownership – Part 2, The Proposals for Future Actions – Channel 6 for FM, AM Expanded Band, Definition of Designated Entity, Must Carry for Class A TV and Others
In two decisions released this week by the FCC, here and here, two large broadcast group owners were admonished for failures to comply with the FCC’s EEO rules. In both cases, failures to widely disseminate information about job openings in one market were discovered by the FCC in the course of random EEO audits that selected these stations for review. In both cases, the Commission determined that the violations were serious, and imposed reporting conditions (essentially subjecting the stations to an FCC audit of their EEO annual public file reports every year for the next 3 years). And in each case, the FCC would have fined the stations for their violations, but the Commission moved too slow, as in both cases, license renewals were granted between the time of the violations and the EEO audit. Under provisions of the Communications Act, the Commission cannot fine a station for action that occurred during a prior renewal term – so the grant of the renewals cut off the possibility of a fine in these cases.
These actions highlight the importance of complying with the Commission’s EEO rules, which we have summarized in our EEO Guide, here. In particular, in both cases, the station groups had not widely disseminated information about job openings, as required by the rules. Wide dissemination requires the use of recruitment sources designed to reach all groups within a community to allow their members to learn about the job openings at the station. The Commission’s aim is to bring into the broadcast workforce employees representing diverse groups within a community rather than hiring all their employees from traditional broadcast sources. In these cases, the stations had used only corporate websites, on-air announcements, and word of mouth recruiting. No outside sources, or sources reasonably likely to reach the entire community, were used by the broadcasters, hence the admonition and the reporting conditions.
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.
The FCC this week released the full text of its decision on the revision of the multiple ownership rules that it adopted at its December 18 meeting. While the text goes into great detail on the decision to relax the newspaper-television cross ownership restrictions (causing the ruling to be condemned by consolidation critics), the order is very brief in addressing the numerous other issues with the multiple ownership rules that were raised in this proceeding. Television broadcasters sought greater opportunities to consolidate in local markets, and radio broadcasters requested reconsideration or clarification of various aspects of the Commission’s 2003 decision adopting Arbitron market definitions as the basis of the determining how many radio stations are in a particular market. These requests were all rejected, some summarily. Will these parties who were denied relief from the FCC protest as loudly as the critics of the decision with respect to the relaxation of the TV-newspaper cross ownership limits?
We summarized the decision with respect to the newspaper television rules here. That summary was based on the statements made at the December 18 meeting and on the press release issued that day which provided a brief summary of the Commission’s decision. The outline we provided in December was basically accurate, and there were few surprises about the newspaper-television cross ownership rules in the text. The Commission was very thorough in documenting the basis for its decision that newspapers and television stations could be commonly controlled without adversely affecting the public interest, citing a legion of studies supporting their decision, while carefully refuting the studies supplied by consolidation critics. However, the remainder of the decision, dealing with other aspects of the multiple ownership rules which the Commission refused to change, contained reasoning which was far more limited. In some cases, particularly dealing with radio issues, the reasoning was almost absent.
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.
As we wrote earlier this week, the FCC is to consider at its meeting next Tuesday a Report on the results of its "Localism" proceeding, and a Notice of Proposed Rulemaking seeking public comment on the findings contained in the Report. From rumors going around Washington today, that Notice may ask for comments on tentative findings that would roll back of much of the broadcast deregulation of the last 25 years. Rumors are that the Commission will be issuing "tentative conclusions" determining that the FCC should re-impose specific ascertainment requirements of some sort (requiring that broadcasters regularly meet with specific types of community leaders to get their input on station programming). Also, the Commission will tentatively conclude that there should be quantitative programming requirements – that each station do a specific amount of local programming and perhaps specific amounts of news, public affairs other types of programs each week. If a licensee does not meet the requirements, the station’s license renewal application would not be granted routinely by the FCC’s staff, but instead would be subject to an additional level of scrutiny by the full Commission. The Commission is also apparently proposing that it return to the old rules that all stations have a manned main studio during all hours of operation. There is reportedly also a proposal that stations report to the FCC about how they decide what music they play.
Staring in the early 1980s, the FCC did away with many of the specific, detailed programming requirements that had previously bound broadcasters. These requirements were quite burdensome, especially for small stations and stations in small markets with limited staffs. Rather than spending their time on broadcast operations, station staff had to make sure that their operations met programming standards imposed from Washington, dictating the government’s ideas of what was good for the station’s audience, even if the station might feel, because of its format or the demographics of its audience that a particular type of programming did not serve the needs of its community. In the mid-1980s, the FCC concluded that these rules were no longer necessary, as it was concluded that there was enough media diversity that the marketplace would dictate that broadcasters serve their audiences with appropriate content that met the needs of that audience as, if they did not, some other broadcaster would. The economic incentive of the fear of the loss of audience to a competitor who better served the public was deemed enough to insure that the broadcaster acted responsibly.
In its Public Notice setting out the rules governing the upcoming filing window for applicants seeking new noncommercial FM stations or major changes in existing stations, which we wrote about here, the FCC has put applicants on notice of the many requirements that must be met in order to have an application considered in the upcoming process. This is the first opportunity in this century for the filing of applications for new noncommercial FM stations. In order to participate, all applicants must make sure that they follow the rules set out by the Commission. Applications will be due in a filing window that will open on October 12 and close on October 19.
Fundamentally, the FCC’s Public Notice reminds interested parties that, to be eligible, an applicant must be a noncommercial entity – a nonprofit corporation or a governmental organization. Individual applicants or profit-making entities cannot participate. As eligibility to participate and the comparative qualifications of all applicants are assessed at the time of filing, applicants need to assure their nonprofit status is in order before the upcoming filing window.
The Commission also sets out a number of other requirement for the applications that may be filed during the window. Applications submitted during the window will be filed electronically on FCC Form 340, and must contain very specific technical descriptions of the service they plan. The proposal must specify facilities that don’t interfere with other existing stations or pending “cut-off” noncommercial applications. The applicant must have received reasonable assurance of the availability of its proposed transmitter site (i.e. a legally binding contract is not necessary, but a commitment from the site owner that the site will be available and an idea of the terms on which that availability is premised must be obtained).
In the last few months, attention of the broadcast press has been focused on the pressing regulatory issues of the day – matters such as content regulation (indecency, violence and junk food advertising), the digital conversion of radio and TV, and the new digital media landscape and its impact on broadcasters (XM/Sirius, You Tube and Internet video, and Internet radio). Almost forgotten is the multiple ownership proceeding that began in earnest last summer when the FCC issued its Notice of Proposed Rule making (see our summary here), but which has really been pending in front of the Commission since the US Court of Appeals issued its Stay of the FCC’s 2003 Order adopting "new" ownership rules. This week, at least some attention was brought back to the issue following the release by the organization Free Press of a study that purports to document the effects that consolidation has had on minority and female ownership in the broadcast media. Coupled with an electronic press conference featuring the two Democratic FCC Commissioners, the report merited an article in the Los Angeles Times and other mainstream press outlets. It is a study that should be read by broadcasters, as it will likely form part of the debate on this most important issue.
While studies have been issued on and off throughout the debate over the multiple ownership rules, seemingly proving almost whatever the party providing the study wants to prove, this study should not be ignored. Executive summaries and a full copy of the report can be found here. The report purports to show that consolidation in the media holds down minority and female ownership. And, unlike many other studies that have obvious design flaws and seem to be based on faulty assumptions, this one considers many of the obvious objections. It does not under count minority ownership – in fact it takes the FCC to task for under counting such ownership, and actually reports higher amounts of minority and female ownership than the FCC itself had acknowledged. The report also addresses the usual response to such studies – that it is a question of access to capital that results in the disparities – by doing a comparison of minority and female ownership in broadcasting to that ownership in other industries, and finding broadcasting very close to the bottom in diverse ownership.