Discussion of FCC, copyright, advertising and other legal issues of importance to radio and television broadcasters and other media companies
Principal Editor: David O’Connor
Here are some of the regulatory developments of significance to broadcasters from the past week, with links to where you can go to find more information as to how these actions may affect your operations.
An intense national conversation on racial justice and equity has been thrust upon the country by the events of the last week. While our focus here on this blog is narrow, it is certainly worth looking at some of the issues that are within our broadcast world that are relevant to this conversation. In recent days, for instance, FCC Commissioner Geoffrey Starks promoted more diversity in broadcast ownership, and an article in Radio Ink by the President of the National Association of Black Owned Broadcasters called for a revival of the minority tax certificate – a program ended decades ago over concerns about its cost to the government. The tax certificate offers perhaps the most meaningful route to the goals sought by the Commissioner and is worth examination as, since its abolition so many years ago, its revival has been discussed so many times that it has become almost a cliché, with many not really understanding what it did and why it was effective.
The minority tax certificate was a program designed to provide broadcasters with an economic incentive to sell their stations to minority owners. Rather than directly subsidizing the potential owners, the certificate instead gave a tax break to sellers that incentivized them to sell to the minority-owned business even if there were multiple bidders for their properties. If the seller sold to a minority-owned business, the seller could take the proceeds from the sale and roll those proceeds over into a new media property without recognizing the taxable gain from the sale. Unlike the typical like-kind exchange where the roll-over into a new property has to proceed within a few months of the sale, the tax certificate treated the sale as an involuntary sale (like the sale of a property because of a government’s exercise of eminent domain) under Section 1033 of the tax code, giving the seller several years to roll the proceeds over into a new purchase. At that point, the new property would have the same tax basis as the old – meaning that no gain would be recognized until the sale of the new property. This spurred many sales to minority companies by broadcasters looking not to get out of the business, but instead looking to realign their holdings or to move up into larger markets. Several hundred radio and TV stations were purchased under this program in the last 20 years of the program’s existence. Why was this seemingly successful program abandoned?
Continue Reading Understanding the Minority Tax Certificate and its Potential for Promoting Diversity in Broadcast Ownership
In September, a three-judge panel of the US Court of Appeals for the Third Circuit released a 2-1 decision overturning the FCC’s 2017 decision modifying many of its ownership rules (see our summary of the Court decision here, and our review of the 2017 decision here). The Court’s decision not only upset the plans of many media companies for acquisitions based on the changes adopted in the 2017 decision, but also dashed the hope of many radio companies for timely changes in the radio ownership rules that are under consideration by the FCC in its next Quadrennial Review of its ownership rules (see our summary of the issues in the current Quadrennial Review here). Last week, both the FCC and a number of industry groups who were parties to the Third Circuit case filed Petitions asking that all of the sitting judges on the Third Circuit vote to rehear the decision of the three-judge panel.
The panel’s decision did not find that any of the rule changes adopted by the Commission (including the abolition of the newspaper-broadcast cross-ownership prohibition) were not justified by changes in the media marketplace. Instead, the panel voided the FCC’s decision because it did not believe that the FCC had enough historical data on minority and female ownership to be able to judge the affects of any ownership changes on diversity of ownership in the media industry. The FCC Petition for Rehearing centered on an argument that the Commission had plenty of data to support its conclusions – and that Courts have never required government agencies to have perfect information in making any decision. Instead, agencies are only required to have sufficient factual data to justify their conclusions. The FCC argued that, where the information that is sought by the panel might simply not exist and where the panel’s insistence on the information has held up the FCC’s attempts to modernize its media ownership rules for a decade and a half as the same judges keep rejecting FCC attempts to justify its ownership decisions, the full Court should step in and conduct a rehearing. The industry parties emphasized how the decision was overbroad – overturning all aspects of the FCC’s decision – even parts that had not been challenged by the petitioning parties. The industry participants also pointed to the fact that real hardships were being imposed on media companies as the FCC had not been able make changes in its ownership rules to reflect the changes in the industry that had occurred in what may have been the most dynamic 15 years in the history of the mass media. With these requests for rehearing on file, what is next?
Continue Reading Third Circuit Asked to Rehear Decision Overturning FCC Ownership Rule Changes – Where Do We Go from Here?
Another month is upon us, along with all of the FCC regulatory obligations that accompany it. August brings a host of license renewal obligations, along with EEO public file obligations in a number of states, as well as noncommercial Biennial Ownership Report filings in several states. We also expect that the FCC will notify stations of the date for the payment of their regulatory fees (which will either be due late this month or early next). As we reported yesterday, the filing of long-form translator applications for over 1000 applicants from the 2003 FM translator window also comes at the end of the month. There are comments due in a number of FCC proceedings. We’ll talk about some of those issues below. For TV broadcasters, we also suggest that you review our article that recently ran in TV NewsCheck, updating TV broadcasters on issues of relevance to them not only this month, but providing a description of the full gamut of issues facing TV broadcasters. We prepare this update for TV NewsCheck quarterly.
Today brings the deadline for the filing of license renewal applications for radio stations in California and for TV stations in Illinois and Wisconsin. Stations in these states, and in North and South Carolina also have EEO public inspection file reports that should be placed in their public inspection files no later than today. Noncommercial TV stations in Illinois and Wisconsin also need to file Biennial Ownership Reports today, and noncommercial radio stations in California, North Carolina, and South Carolina should also file their Biennial Ownership Reports by today.Continue Reading August FCC Regulatory Deadlines for Broadcasters – Including Renewals; EEO; Comments on Indecency, the Online Public File and Cross-Ownership
The FCC has released the agenda for its Workshop on the multiple ownership rules (about which we wrote here). The workshop will span three mornings (November 2-4), and will include live testimony from a different panel each morning. The first panel will include the academic perspective on ownership rules, the second the view from "public interest organizations", and the third from industry representatives, though the participants on that panel are, at this point, the most unsettled. The Commission also requests written comments from the public, which can be filed through November 20. As we wrote when this topic first came up last month, these workshops are the first step in the FCC’s consideration of the multiple ownership rules – a review that it is required to conduct once every 4 years – with 2010 being the year in which such review is required.
The Commission sets out a series of questions that it would like to have addressed. These questions include:
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.Continue Reading Study Released Showing Effects of Broadcast Consolidation – Broadcasters Should Pay Attention
