underwriting spots on noncommercial stations

Last week, the FCC reached a consent decree with a noncommercial broadcaster, where the broadcaster paid an $8000 penalty for, among other things, running underwriting spots that were too promotional. While the consent decree and its implementing order provide no details on the underwriting violations by the broadcaster, we can assume that the broadcaster ran spots that somehow crossed the line – giving price information about a sponsor’s products, or including a call to action suggesting that listeners somehow patronize the sponsor, or making qualitative claims about the sponsor or its products or services. We have written about similar violations many times (see, for instance, our articles here, here, here, here and here) and I have conducted seminars for numerous noncommercial broadcasting organizations talking about specifics as to what is permitted in underwriting acknowledgements and what will get a noncommercial station into trouble (see for instance, the presentations mentioned here and here). Obviously, it is important that noncommercial stations pay attention to these restrictions. But, last week, I received a question that indicated that not all noncommercial stations realize that, while their ability to promote a commercial enterprise is limited, these same restrictions do not apply to on-air spots for other nonprofit organizations.

About 35 years ago, Congress changed the provisions of the Communications Act to redefine what a noncommercial station can and cannot do. Noncommercial stations obviously cannot run commercials. But the language of the statute makes clear that commercials are promotional announcements for profit businesses. In looking at that statutory change, after much discussion, the FCC concluded that the restrictions on underwriting announcements that apply to these noncommercial businesses do not apply to promotional announcements for nonprofit entities.
Continue Reading Remember FCC Rules on Underwriting Limitations – And that They Don’t Apply to Spots Bought By Nonprofit Entities

Section 399b of the Communications Act bans advertising for for-profit companies, as well as political and issue advertising, on noncommercial radio and television stations.  While Congress over 20 years ago loosened some restrictions on fundraising by allowing paid ads by nonprofit groups on noncommercial stations, and permitting commercial entities to provide some minimal information about their businesses (including their logos) on sponsorship underwriting on public TV, the ban has otherwise prohibited commercial and political ads containing qualitative claims, price information or calls to action.  In a recent decision, the US Court of Appeals for the Ninth Circuit affirmed a decision of a California District Court upholding the constitutionality of that ban against a challenge by a noncommercial TV station operator who contended that the rule was an unconstitutional abridgement of the First Amendment.  The case is particularly interesting not just for the analysis by the Court in upholding the ban, but perhaps more so for the dissenting opinion of the Court’s Chief Judge, who found that the Court’s analysis ignored modern realities of the broadcast world in adopting a reduced standard of First Amendment protection for broadcasters leading the majority to be too timid in questioning the justification for the ban advanced by the government.  Thus, the case has importance not just for noncommercial broadcasters looking for new sources of revenue, but also for other broadcasters concerned about intrusive government regulation of their industry and the standard of First Amendment review that would be applied to such regulation.

We had written about an earlier decision in this case here and here.  The case arose when a public television operator in the San Francisco area, Minority Television Project, Inc., was fined by the FCC for having run promotional ads for commercial and political advertisers, and decided to fight that ban in court.  A panel of the Court of Appeals determined that the fine was appropriate for running commercials for for-profit companies, but unexpectedly threw out the Section 399b restriction on ads on political or controversial issues, finding that the public good of speech on these topics outweighed the government’s interest in fostering public broadcasting.
Continue Reading Court of Appeals Upholds Communications Act Ban on Commercial and Political Advertising on Public TV Stations – Significant Analysis of the Standards for First Amendment Review of all Broadcast Regulation

In a decision granting the license renewal of a noncommercial radio station, the FCC’s Media Bureau addressed a number of interesting issues – including the requirements for noncommercial underwriting announcements, whether PSAs meet a station’s public service obligations, and the ability of stations to run cigarette ads in historical radio programs from early radio days. These issues all came up in a decision to renew the station’s license despite a petition from a former manager alleging that the station had violated a number of Commission rules or policies – a petition raising all of these issues.

The $3000 fine that the FCC proposes to levy on the station was for what the FCC found to be improper underwriting announcements. Two different issues were found to violate FCC standards – one fairly straightforward, one less so. The relatively easy issue was whether the underwriting announcement by a musical group stating that it was voted “Canada’s #1 bluegrass band” made a qualitative claim. The station argued that the #1 claim was simply a statement of fact based on the vote in Canada. The FCC, not surprisingly,  found that the “#1” label, no matter how it was derived, was a qualitative claim and thus prohibited as part of an underwriting acknowledgment on a noncommercial station.   Such announcements cannot be commercial in nature – meaning that they cannot contain a call to action, price information or qualitative claims about the products or services offered by the sponsor.  See articles that we have previously written on underwriting issues: here and here and here, as well as a presentation on that issue that is discussed here.


Continue Reading $3000 Fine Against Noncommercial Station for Underwriting Violations – With Discussion of PSAs as Public Interest Programming and Cigarette Ads in Classic Radio Program

The FCC has adopted a Notice of Proposed Rulemaking suggesting, with significant limitations, a liberalization of its rules that prohibit noncommercial broadcasters from raising funds for an entity other than the station itself if the fundraising suspends or alters normal programming of the station. As we’ve written before, the FCC prohibits noncommercial broadcasters from raising funds for charities and other non-profit organizations through telethons or other special programming.  The prohibition has been in place for some time, and was reaffirmed by the FCC’s orders in the early 1980s which established the basic rules that still today govern most noncommercial fundraising and sales activities. 

The prohibition on third-party fundraising reflected the Commission’s concern that educational stations are "licensed to provide a noncommercial broadcast service, not to serve as a fund-raising operation for other entities by broadcasting material that is akin to regular advertising."  Doing too much fundraising for these third parties, in the Commission’s view when the rule was adopted, would distract stations from their principal mission of service to the public.   While the Communications Act was changed in the early 1980s to allow noncommercial broadcasters to accept paid promotional spots for nonprofit groups, the FCC did not change the rule on third-party fundraising that disrupts normal programming.  In the NPRM just adopted, the Commission recites that they still believe the justification for the rule to be true, even though noncommercial stations can now run what is essentially paid advertising for nonprofit organizations, as long as those spots are incorporated into the normal programming of the stations. What the Commission now proposes is a limited degree of liberalization of the third-party fundraising prohibition, subject to many conditions set forth below.


Continue Reading FCC Proposes to Liberalize Rules Against Noncommercial Stations Fundraising For Third-Party Non-Profit Groups

As Federal funding to public broadcasters faces serious challenge in a Washington looking to cut the budget for all but the most essential government services, and where voluntary contributions to all noncommercial broadcasters have been constrained by the economic issues faced by the entire nation, more and more noncommercial broadcasters are facing tough questions about the future.  We’ve seen colleges and municipalities sell stations that have been community fixtures for decades, and noncommercial groups (including some religious broadcasters) deciding to call it a day and liquidate their holdings.  At the same time, the ratings success of many noncommercial broadcasters (both public broadcasters and those owned by religious or other community organizations), especially in the radio world, are showing much success in developing a large listening audience.  With noncommercial stations, by law restricted to raising funds without commercial advertising, many are looking for new ways of operating.  How are FCC regulations and interpretations reacting to these new realities? 

The FCC’s Future of Media Study (and the resulting Report on the Information Needs of Communities that we summarized here) recognized the importance of the diversity provided to communities by noncommercial broadcasters and, without detailing any proposals, indicated support for the development of new funding sources for those stations.  Similar general statements were echoed in the hearing on the report recently held by the FCC in Arizona.  But the options of the FCC in pursuing solutions are limited.  In a recent decision, a noncommercial entity that operated a number of stations in small rural markets asked for a waiver of the FCC’s underwriting rules to allow it to air a limited amount of advertising for commercial entities, restricted to the top of the hour, and presented so as to not break up normal programming.  The applicant justified the request on the current financial climate that made donations and grants hard to come by, especially in the rural areas where this group operates its stations.  While the Commission’s staff expressed sympathy for the applicant’s financial plight, it stated that it was powerless to waive the Communications Act, which prohibits noncommercial stations from broadcasting "any advertising."  Faced with this prohibition, and a fear of opening the floodgates to similar requests, the FCC denied the waiver.


Continue Reading Financial Challenges to Noncommercial Broadcast Funding – What Is the FCC Doing?

The question has recently arisen as to when underwriting announcements can be aired on noncommercial radio and TV stations.  The New York Times recently quoted me on the subject in an article discussing the plans of PBS to experiment with putting underwriting announcements in programming, rather than merely in the breaks between the end of one program and the beginning of the next.  The FCC rules for both radio and TV state, in italics, that the scheduling of underwriting announcements "may not interrupt regular programming."  What does that mean?

In 1982, in adopting the rules as to the timing of sponsorship announcements and the acknowledgment of donations, the FCC relied on what was then a recently-enacted statute addressing the sponsorship of public broadcasting programming.  The House of Representatives report adopting that legislation contained language interpreting the meaning of the prohibition against these announcements interrupting regular programming.  The FCC relied on that language in adopting the rules currently on the book.  There, Congress said that announcements could be run "at the beginning and end of programs,…between identifiable segments of a longer program" or, in the absence of identifiable segments, during "station breaks" where the flow of programming was "not unduly disrupted."  For radio, this seems like a much easier test to meet, as there are always breaks in programs, e.g. between stories on a news program like Morning Edition, between guests on a program like Fresh Air, or between music sets on a noncommercial music-oriented station.  For TV, the issue is somewhat more complicated, thus the questions that the Times wrote about in connection with the PBS tests.


Continue Reading When Can Underwriting Announcements Be Run on Noncommercial Radio and TV Stations?

Fines for noncommercial broadcasters who air acknowledgments of their donors and contributors that sound too much like commercials have been a problem area for many noncommercial educational radio and television stations, and have resulted in significant fines from the FCC.  The FCC allows "enhanced underwriting announcements" that identify a sponsor, what their business is

Last week, the FCC issued several fines to noncommercial broadcasters who had underwriting announcements that sounded too commercial.  In these decisions, the Commission found that the stations had broadcast promotional announcements for commercial businesses – and those announcements did not conform to the FCC’s rules requiring that announcements acknowledging contributions to noncommercial stations cannot contain qualitative claims about the sponsor, nor can they contain "calls to action" suggesting that listeners patronize the sponsor.  These cases also raised an interesting issue in that the promotional announcements that exceeded FCC limits were not in programming produced by the station, but instead in programs produced by outside parties who received the compensation that led to the announcement.  The FCC found that there was liability for the spots that were too promotional even though the station itself had received no compensation for the airing of that spot.

The rules for underwriting announcements on noncommercial stations (including Low Power FM stations) limit these announcements to ones that identify sponsors, but do not overtly promote their businesses.   Underwriting announcements can identify the sponsor, say what the business of the sponsor is, and give a location (seemingly including a website address).  But the announcements cannot do anything that would specifically encourage patronage of the sponsor’s business.  They cannot contain a "call to action" (e.g. they cannot say "visit Joe’s hardware on Main Street" or "Call Mary’s Insurance Company today").  They cannot contain any qualitative statements about the sponsors products or services (e.g. they cannot say "delicious food", "the best service", or "a friendly and knowledgeable staff" ).  The underwriting announcements cannot contain price information about products sold by a sponsor.  In one of the cases decided this week, the Commission also stated that the announcements cannot be too long, as that in and of itself makes the spot seem overly promotional and was more than was necessary to identify the sponsor and the business that the sponsor was in.  The spot that was criticized was approximately 60 seconds in length. 


Continue Reading FCC Fines for Noncommercial Stations Having Underwriting Announcements That Were Too Commercial – Even Where the Station Received No Money