The FCC last week issued a decision that should make Buyers think twice in determining how sales of broadcast stations are concluded – especially in the days of $325,000 potential fines for indecency violations. In the case decided last week, the Commission concluded that the licensee of a broadcast station was liable for fines for violations
Just after Christmas, the FCC gave a number of broadcasters the equivalent of coal in their stocking – fining six different licensees for violations of the FCC’s EEO rules. The fines issued that day ranged between $7,000 and $20,000, and included penalties issued to major broadcasting companies including Fox and Cumulus. Also included were fines against Urban Radio in New York City and Puerto Rico Public Broadcasting – demonstrating that the FCC’s EEO rules, adopted in late 2002 after previous rules were declared unconstitutional essentially on "reverse discrimination" grounds (as they encouraged broadcasters to make hiring decisions not based on qualifications but instead based on race or gender), are truly race and gender blind. It would be logical to assume that Urban Radio and Puerto Rico Public Broadcasting both had significant numbers of minority-group members on their staffs but, as they could not demonstrate that they had complied with the new rules requirements to reach out to all groups in their communities (as opposed to just racial or gender focused groups), they were assessed fines. Reporting conditions, requiring that the broadcasters regularly file reports with the FCC so that their EEO efforts can be monitored, were also imposed. All of the decisions can be found on the FCC’s Daily Digest for that day, here.
The basis of all of these fines was the failure of the licensees to be able to demonstrate that they had "widely disseminated" information about all of their job openings. The core of the 2002 EEO regulations was the requirement that licensees broadly disseminate notice about their job openings in such a way so as reach all of the significant groups within the community that the station serves. The Commission was not looking to specifically force minority hiring, but instead to push for hiring from diverse sources. The Commission wanted to push broadcasters to use recruitment sources beyond the existing broadcast community – so that hiring was not simply done by word of mouth or from within other professional broadcast circles. Thus, the rules require that broadcasters use recruitment sources that reach out to various groups within their community and document those efforts.
Come the New Year, we all engage in speculation about what’s ahead in our chosen fields, so it’s time for us to look into our crystal ball to try to discern what Washington may have in store for broadcasters in 2009. With each new year, a new set of regulatory issues face the broadcaster from the powers-that-be in Washington. But this year, with a new Presidential administration, new chairs of the Congressional committees that regulate broadcasters, and with a new FCC on the way, the potential regulatory challenges may cause the broadcaster to look at the new year with more trepidation than usual. In a year when the digital television transition finally becomes a reality, and with a troubled economy and no election or Olympic dollars to ease the downturn, who wants to deal with new regulatory obstacles? Yet, there are potential changes that could affect virtually all phases of the broadcast operations for both radio and television stations – technical, programming, sales, and even the use of music – all of which may have a direct impact on a station’s bottom line that can’t be ignored.
With the digital conversion, one would think that television broadcasters have all the technical issues that they need for 2009. But the FCC’s recent adoption of its “White Spaces” order, authorizing the operation of unlicensed wireless devices on the TV channels, insures that there will be other issues to watch. The White Spaces decision will likely be appealed. While the appeal is going on, the FCC will have to work on the details of the order’s implementation, including approving operators of the database that is supposed to list all the stations that the new wireless devices will have to protect, as well as “type accepting” the devices themselves, essentially certifying that the devices can do what their backers claim – knowing where they are through the use of geolocation technology, “sniffing” out signals to protect, and communicating with the database to avoid interference with local television, land mobile radio, and wireless microphone signals.
Recently, it seems like you can’t read a broadcast industry newsletter without seeing an article about employment reductions or layoffs at some station – sometimes the whole newsletter seems to be dominated by such reports. In this climate, broadcasters need to consider the employment law issues that can arise in such situations. The Davis Wright …
As the Obama administration fills its top level government posts, all eyes are now turning to the next levels of government appointments which, at some point, will include a new Chair of the FCC and potentially other new FCC Commissioners. We wrote about our hopes for an Obama administration at the FCC immediately after the election, and now other voices in Washington are weighing in. And, as one might expect, with so many different perspectives, the advice is far from consistent. As we wrote in our analysis, the appointment of the FCC Chair is crucial as it is the FCC Chair, far more than the President or the White House, who sets the tone for Communications policy. This is made clear by the extensive regulations either adopted or proposed for broadcasters by the current Republican FCC, seemingly at the direction of the current chairman, regulations that would not have been expected from a Republican administration. In light of the economic challenges facing broadcasters, as evidenced by today’s news that two television companies – Tribune and Equity – declared bankruptcy, and another, NBC, has announced a cut back in prime time programming, replacing it with a prime time, 5 day a week Jay Leno program.
So what should the transition team look to accomplish at the FCC? In one of the most perceptive articles that I’ve seen recently, Harry Jessell in TV Newsday has urged the new Commission to simply do nothing on broadcast regulation for the next year. The current state of the economy and its ramifications for the advertising that is the lifeblood of the broadcast industry simply leaves no room for broadcasters to have to bear new costs for new regulations. Broadcasting and Cable magazine has echoed that sentiment last week. Recently, not only have we seen the economy and the state of the broadcast industry been reflected by the actions announced by Tribune, Equity and NBC today, but we’ve seen numerous mainstream press articles about the economic peril in which the entire broadcast industry finds itself. In one recent article, radio’s dramatic decline in revenues was highlighted, even as the industry’s listenership remains high (as confirmed by BIA’s recent prediction that radio revenues will decline by 7% in the coming year, coming after declines this year – perhaps the first two year decline in revenues in radio history). I recently attended the Radio Ink Forecast 2009 conference in New York. While the conference is off the record, I don’t think that I’d be betraying any confidences to state that there was much concern about the short term health of the radio industry.
Continue Reading As the FCC Transition Progresses, The Broadcast Industry Shows Economic Strains – Tribune and Equity Declare Bankruptcy and NBC Cuts Programming Costs By Putting Leno on at 10 PM, Five Days A Week
By December 1, 2008, all commercial and noncommercial digital television (DTV) stations must electronically file an FCC Form 317 with the Commission reporting on whether the station has provided any ancillary and supplementary services during the twelve-month period ending on September 30, 2008.
Under the Commission’s Rules, in addition to providing free over-the-air broadcast…
Broadcasting and Cable magazine today reported that the FCC is looking to back off some of the requirements for the "enhanced disclosure" of television broadcaster’s public interest programming (see our summary of the new requirements of FCC Form 355, here). B&C reports that the FCC may lessen or at least better explain…
In two recent actions, the FCC has evidenced its concern about the EEO performance of its licensees. Last week, the Commission’s Enforcement Bureau entered into a Consent Decree with DIRECTV, by which DIRECTV paid the FCC $150,000 in lieu of a fine for the company’s failure to abide by the FCC’s EEO rules by not preparing an Annual EEO Public File Report or submitting a Form 396-C for several years. The FCC also released a Public Notice announcing changes in the racial categories to be used in FCC Form 395 – the Form breaking down the employees of a broadcaster or cable company by race and gender. That form has not been filed for years, as its use was prohibited when the FCC EEO rules were declared unconstitutional. In adopting new EEO rules in 2003, the FCC promised to return the form to use, but has been wrestling with the issue of whether or not the form should be publicly available or whether it should simply used internally by the FCC to collect data about industry employment trends. The adoption of new definitions for the racial categories specified on the form may signal the return of this form. Together, these actions demonstrate that the FCC has not lessened its concern about EEO in any fashion.
The DIRECTV fine was the result of the company’s failure to prepare Annual EEO Public File Reports or to submit 2003 and 2004 Form 396-C reports – reports that are more detailed versions of the Form 396 filed by broadcasters with their license renewals and the Form 397 Mid-Term Employment report. The Form 396-C requires that multichannel video providers detail their hiring in the previous year and the outreach efforts made to fill job vacancies, the supplemental efforts that the employment unit has made to educate its community about job openings, and other details on the company’s employment practices. After review of the company’s efforts, the Commission not only faulted the company for its paperwork failures, but also determined that the company had not engaged in sufficient outreach for all of its employment openings – relying solely on the Internet and on word-of-mouth recruiting for many job openings, which the Commission found to be insufficient. Broadcasters need to make sure that they do not forget to file their required EEO forms, prepare their annual EEO Annual Public File Report, and engage in wide dissemination of information about all job openings. Details of the FCC’s EEO rules, policies and requirements applicable to broadcasters can be found in Davis Wright Tremaine’s EEO Advisory.
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).
Last week, the Office of Management and Budget determined that the FCC’s new rules on Leased Access to cable channels (see our bulletin describing those rules) violated the Paperwork Reduction Act. This means that the new rules, which would have significantly lowered the cost for parties who wanted to lease cable channels to provide their own programming, will be sent back to the FCC for further consideration. These rules are also on appeal to the Courts, which had stayed the effectiveness of the rules while the appeal is being considered, which is usually a good indication that the Court had issues with the rules as well. The OMB action has the effect of returning the rules back to the FCC to be considered anew in light of the OMB findings. Our firm has prepared a memo detailing the decision, here. Given the OMB decision that these rules imposed too great a burden on cable systems, one wonders if this decision portends a similar result when the OMB reviews the FCC’s rules on Enhanced Disclosure and an on-line public inspection file – rules that would impose a significant burden on television broadcasters (about which we wrote here).
The OMB decision on the leased access rules highlighted some of the perceived shortcomings of the FCC decision, including that the FCC had not shown that they had taken steps to minimize the burden on companies who would have to hire staff to comply with the new rules, and they had not provided reasons why reduced timeframes for responses to requests for leased access were necessary. Looking at these standards, one would have to think that much of the same reasoning would apply to the FCC’s Enhanced Disclosure requirements for TV stations as set out in the new Form 355. The completion of the Form would clearly require the hiring of new staff. We’ve also questioned whether the Commission has given any justification for the increased paperwork requirements, as the information itself has no regulatory purpose as the FCC has not adopted any quantitative standards for public interest programming. With no purpose and increased costs, how could the OMB treat the enhanced disclosure requirements differently than it did the leased access requirements?