The Office of Management and Budget, acting pursuant to the Paperwork Reduction Act, has just approved the FCC’s broadcast incubator program, about which we wrote here.   That approval makes the program effective.  The program permits an established broadcaster to provide assistance to a new broadcaster (generally, a qualified small business) to enter the radio broadcast industry.  If, over a 3-year period, the assistance provided by the existing broadcaster (usually either financial assistance or management training) is deemed a success, the established broadcaster can receive a credit allowing it to purchase a station in excess of the radio ownership limits allowed for broadcasters in a market of similar size to the one in which the incubation occurred.  It is interesting that this rule became effective just as the US Court of Appeals heard oral argument on the question of whether that program does enough to encourage new entrants into broadcast ownership to meet court-imposed obligations to address these issues.

The oral argument is on the appeal of the FCC’s 2017 ownership decision which, among other things, did away with the prohibition on newspaper-broadcast cross-ownership and the rule that required that there be 8 independently owned TV stations in a market before one owner could own two stations in that market.  The appeal, as we wrote here, essentially argues that the FCC has not done enough to promote minorities and other new entrants to get into broadcast ownership.  Reports are that the judges asked the FCC many questions at yesterday’s argument as to whether the FCC had enough data to conclude that the changes that were made in 2017 were in the public interest and would not unduly burden new entrants who want to get into media ownership.
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The Notice of Proposed Rulemaking in the next Quadrennial Review of the FCC’s ownership rules was adopted in December and was published today in the Federal Register, starting the 60 day period for public comments. Comments on the NPRM will be due on April 29 with reply comments due on May 29. The FCC is looking at numerous issues, including one issue, the rules setting out the limits on the number of radio stations that one company can own in a market, that has not been reviewed in depth in recent Quadrennial Reviews. On the TV side, the FCC is again looking at local TV ownership (specifically combinations of Top 4 stations in a market and shared services agreements) and also at the dual network rule restricting common ownership of two of the Top 4 TV networks. In addition, the FCC is reviewing additional ideas on how to increase diversity in broadcast ownership. Today, let’s look at the FCC’s questions on the local radio ownership rules.

The review of the radio ownership rules may well be the most fundamental issue facing the Commission in this proceeding, as no real changes have been made in those rules since they were adopted as part of the 1996 Telecommunications Act. As we wrote here, the marketplace has certainly changed since 1996 – which was at least a decade before Google and Facebook became the local advertising giants that they now are; and before Pandora, Spotify, YouTube and many other web services offered by tech giants became competitors for the audience for music entertainment. And spoken word entertainment competition was also virtually non-existent – “audiobooks” were a niche product and the concept of a “podcast” would have been totally foreign when the current rules were written. So what are some of the questions about the radio ownership rules that are being asked by the FCC?
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At its meeting last week, the FCC adopted a Report and Order creating an incubator program to incentivize existing broadcasters to assist new entrants to get into broadcast ownership. The FCC in its order last year relaxing TV local ownership rules and abolishing the newspaper-broadcast cross-ownership rule had agreed to adopt an incubator program (see our articles here and here). In fact, the US Court of Appeals for the Third Circuit, which is reviewing the FCC’s ownership order, stayed the processing of that appeal to await the rules on the incubator program (see our article here), as the Court has previously indicated that considerations of how changes in the ownership rules affect new entrants is part of its analysis of the justification for such changes. What rules did the FCC adopt?

The FCC will encourage an existing broadcaster who successfully incubates a new entrant into broadcasting by giving them a “presumptive waiver” of the ownership rules. To understand what this means requires looking at several questions including (1) what services does the existing broadcaster have to provide to qualify for the credit; (2) which new entrants qualify for incubation; (3) what is a successful incubation; and (4) what does the presumptive waiver provide to the broadcaster providing the incubation services. Let’s look at each of these questions.
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It may be time for summer vacations, but the FCC seemingly never rests, so there are a number of important dates of which broadcasters need to take note. By August 1, EEO Annual Public File Reports are due to added to the public files of Commercial and Noncommercial Full-Power and Class A Television Stations and AM and FM Radio Stations in California, Illinois, North Carolina, South Carolina, and Wisconsin, if those stations are part of an Employment Unit with five or more full-time employees. TV stations in California have the added requirement that they submit an EEO Mid-Term Report with the FCC by that same date. While the FCC last year simplified EEO recruiting, it still enforces the EEO rules, as evidenced by an admonition that was issued to a TV station at the end of last week, and the fines imposed on radio stations late last year. So don’t forget these obligations (especially as the enforcement of these rules will soon be handled by the FCC’s Enforcement Bureau, rather than the Media Bureau, suggesting that there will be more enforcement of those rules – see our article here).

On other matters, there are numerous open FCC proceedings in which broadcasters may want to participate. Comments are due on August 6 on the FCC’s rulemaking proposal to adopt simplified rules for processing complaints of interference by FM translators to full power stations. See our articles here and here for details on that proposal.
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April brings with it a milestone – as it is the end of the first quarter since all radio stations have had to have their online public inspection file “live” so that anyone, anywhere, can view a station’s compliance with rules that previously could only be judged by going to the station and reviewing the paper public file. April 10, in particular, is important, as it is when Quarterly Issues Programs Lists, summarizing the most important issues facing the community which the broadcaster serves and the programs that the broadcaster aired to address those issues, must be in the online public file for all full-power radio and TV stations. We wrote about the importance of these sometimes overlooked documents here, as these are the only FCC-mandated documents that reflect how a station has served the needs and interests of its community. We have also noted that, in the past license renewal cycle, missing Quarterly Issues Programs lists were the source of the most fines issued to broadcasters. Now that compliance can be judged at any time by the FCC, their importance is only magnified. So be sure that you get these documents into your online public file by April 10.

EEO Public Inspection File Reports, summarizing a station’s employment record for the prior year, are also to be uploaded to a station’s online public file. For radio and TV stations in Delaware, Indiana, Kentucky, Pennsylvania, Tennessee, and Texas, these reports need to be completed and included in the public file by April 1 by all stations that are part of employment units with 5 or more full-time (30 hours per week) employees. In addition, radio stations in employment units with 11 or more full-time employees in Delaware and Pennsylvania, and TV stations in Texas with 5 or more full-time employees, also need to file EEO Mid-Term Reports, commonly referred to as FCC Form 397 applications. While the FCC is considering the abolition of the Mid-Term Report (see our article here), the obligation is still in place so, for now, stations must comply.
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In a very short order, the US Court of Appeals for the Third Circuit denied the request filed by certain public interest groups that had asked that the Court stop the new FCC ownership rules from taking effect and suggesting that a special master be appointed to oversee the FCC’s ownership review process. We wrote

Published today in the Federal Register were two notices from the FCC implementing November’s decision on the FCC’s ownership rules. First, a summary of the changes in the rules was published in the Federal Register. These changes particularly affect the local TV ownership rules (changes that we summarized here). Changes included, among other things, the elimination of the rule that required that there be 8 independent owners of TV stations in a market before any party can own two TV stations, elimination of ownership attribution for Joint Sales Agreements between television stations in the same market (meaning that such arrangements do not count in any analysis of compliance with the local TV ownership rules), and a plan to review proposals to combine two of the top 4 stations in any market on a case-by-case basis. These rule changes become effective on February 7.

Also published in the Federal Register was a summary of a different part of the order, one asking questions about how the FCC should structure an incubator program that would support diversity in the ownership of broadcast stations. In that Notice of Proposed Rulemaking, the FCC asks a series of questions as to how a program could be established in a way that would benefit minorities and other new broadcast entrants. As the usual discussion about such programs involves providing established broadcasters a waiver of an ownership rule or other incentive to assist the new entrant, one of the central issues is how to establish a program providing real benefits without creating a loophole in the ownership rules for the sponsoring broadcaster. Comments on the Notice of Proposed Rulemaking are due on March 9, with replies on April 9. Some of the questions asked by the FCC are summarized below.
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According to the testimony given yesterday by FCC Chairman Pai at an oversight hearing before the House of Representatives Communications and Technology Subcommittee, the FCC is likely to release today a draft of its order on reconsideration of last year’s FCC decision on its Quadrennial Review of its broadcast ownership rules (the rules restricting the

Tomorrow, the Petitions for Reconsideration of the FCC’s multiple ownership decision is scheduled to be published in the Federal Register (see the pre-publication draft here). This will start the clock on comments on those petitions. If publication occurs as scheduled, comments will be due on Tuesday, January 17 and replies on Friday, January 27 (update: the actual  Federal Register publication states that Replies are due January 24, but we believe that is probably an error, as the FCC rules require 10 days for a reply – watch for a further update). As we wrote here in connection with the comment dates on Petitions for Reconsideration of the abolition of the UHF discount, and here when we commented on the potential impact of the Presidential election of broadcast law, this may be one of the first opportunities where we will be able to assess the meaning of the changes in the membership of the FCC. We will see to what extent the new administration will be willing to roll back the decisions made by the FCC under its old leadership.

The Petitions for Reconsideration raise several issues, both for radio and TV. Questions are raised as to whether the local TV ownership restrictions continue to make sense in today’s economic world – particularly those limiting the co-ownership of any two of the Top 4 stations in a market, and limiting any co-ownership to markets where there will be 8 independently owned and programmed stations.  Attribution of stations that are subject to a Joint Sales Agreement is also questioned. Finally, questions are raised as to whether the FCC is justified in imposing new filing requirements for documents relating to joint operations between TV stations, seemingly looking to collect information in order to impose in the future some sort of restriction on any sort of shared services agreement.
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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.


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