Promoting and Advocating for the Broadcasters of Nevada, While Serving the Public

Nevada Broadcasters Association

Lisa

All media companies, including broadcasters, webcasters, podcasters and others, need to consider carefully their advertising production after the big penalties imposed on Google and iHeart for broadcast commercials where local DJs promoted the Pixel 4 phone.  Promotions included statements that clearly implied that the announcers had used the phone, including statements that it was “my favorite camera” and “I’ve been taking studio-like photos” with the phone.  But, according to the announcements of the settlement with the Federal Trade Commission and seven state attorneys general (see the FTC press release and blog article), the announcers had not in fact used the phone.  Google will pay the states penalties  of $9 million, and iHeart will pay about $400,000 (see example of the state Court filings on the settlement, this one for Massachusetts, for Google and iHeart).  Each will enter into consent orders with the FTC (Google order here and iHeart here) requiring 10-year recordkeeping and compliance plans to train employees, maintain records of advertising with endorsements, and reports to be filed periodically with the FTC.

The mission of the FTC is to protect the public from deceptive or unfair business practices and from unfair methods of competition.  In that role, the FTC regulates deceptive advertising practices.  Over a decade ago, we highlighted the FTC’s update of its policies on “testimonial and endorsement advertising” that made clear that the FTC required that any sort of “celebrity” (interpreted broadly) endorser had to have a basis for the claims that they were making in their pitches for a product.  This notice also made clear that any statements made about the experience in using a product had to be accurate and, when making claims about the performance of a product, the endorser had to accurately state performance that users can expect to obtain when they use the product.  Just using a “your results may vary” disclaimer was not enough.  In the 2009 proceeding, the FTC emphasized the applicability of these standards to online promotions, requiring disclosures for not only traditional advertising but also for social media influencers and others who are paid to promote products through online channels.  Such payments (or any other valuable consideration the influencer receives) must be disclosed when pitching a product.

More recently, the FTC last year, perhaps foreshadowing last week’s action, issued a notice that we wrote about here, reminding businesses that prohibited practices “include, but are not limited to: falsely claiming an endorsement by a third party; misrepresenting whether an endorser is an actual, current, or recent user; using an endorsement to make deceptive performance claims; failing to disclose an unexpected material connection with an endorser; and misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience.”  In other words, when an endorser says something about a product, the FTC is expecting that the endorser used the product and that the statements it makes about the product are accurate and reflect what consumers can expect from that product.  A similar reminder was sent to social media influencers in 2017 (see our article here).

So the bottom line for all media companies is that, when you are receiving anything from any company to promote their product, you need to disclose the consideration that you received.  And when you make statements about a product, you need to have a reasonable basis for the statements. Endorsers, particularly “celebrity” endorsers which include media hosts, cannot represent that they have used a product and obtained specific results when they have not received those results.  There are many nuances to these rules, and FTC has issued many sets of guidance on the requirements (see their webpage highlighting some of that guidance).  Familiarize yourself with these guidelines.  And, as we wrote here, especially at this time of year when so much advertising is coming your way, watch out for other legal issues that can arise.  Be careful in today’s wild world of advertising!

Courtesy Broadcast Law Blog

On Wednesday, the House Judiciary Committee will be holding a “mark-up session” (see this notice of the session) where they will be considering the American Music Fairness Act which proposes to impose a sound recording performance royalty on over-the-air broadcasting.  This would be a royalty paid to SoundExchange to benefit the recording artist and copyright holder (usually the record company) and would be in addition to the royalties already paid to composers and publishing companies through royalties paid to ASCAP, BMI, SESAC and GMR.  A mark-up session considers amendments to the bill and could lead to the committee’s approval of the bill.  If approved by the Committee, the bill would still need to be approved by the full House of Representatives and the Senate (and signed by the President) before it became law.  With the current session of Congress coming to a close at the end of the month, the proposed legislation would need to start over in the Congress.  Thus, unless the bill is tacked on to some must-pass legislation in this “lame duck” session of Congress, any action this week by the committee will likely simply be a marker for action in the new year.

The NAB has already issued a statement about the session, pointing out that a majority of the House members have signed on to the Local Radio Freedom Act stating that they will not vote for this legislation.  The statement also reiterates the NAB’s interest in working on a “mutually beneficial solution” to the issue of the broadcast performance royalty (an interest in a possible solution we wrote about here).  Nevertheless, with this issue back on the table, even if only in a symbolic way, we thought that we should re-post our summary of the American Music Fairness Act and the issues that it raises that we wrote last year, when the legislation was first introduced.

Here is our article from June 2021 when the legislation was first introduced:

Last week, Congressmen Ted Deutch (D-FL) and Darrell Issa (R-CA) introduced the American Music Fairness Act ( see their Press Release for more details) which would impose a new music royalty on over-the-air radio stations.  The royalty would be payable to SoundExchange for the public performance of sound recordings.  This means that the money collected would be paid to performing artists and record labels for the use of their recording of a song.  This new royalty would be in addition to the royalties paid by radio stations to composers and publishing companies through ASCAP, BMI, SESAC and GMR, which are paid for the performance of the musical composition – the words and music to a song. The new legislation is another in a string of similar bills introduced in Congress over the last decade.  See, for instance, our articles hereherehere and here on previous attempts to impose such a royalty.

Each time this idea is introduced, it has a slightly different angle.  In an attempt to rebut arguments that this royalty would impose an unreasonable financial burden on small broadcasters, the new bill proposes relatively low flat fees on small commercial and noncommercial radio stations, while the rates applicable to all other broadcasters would be determined by the Copyright Royalty Board – the same judges who recently released their decision to increase the royalties payable to SoundExchange by webcasters, including broadcasters for their internet simulcasts.  Under the bill, the CRB would review rates every 5 years, just as they do for webcasting royalty rates.

The reduced fees would be just $10 per year for noncommercial stations with less than $100,000 in revenue, $100 per year for larger noncommercial stations with revenues of less than $1.5 million per year, and $500 for commercial stations with less than $1.5 million in revenue.  But these discounts – for both commercial and non-commercial stations – would disappear if the stations are co-owned or otherwise affiliated with other stations that cumulatively have revenues of $10 million or more (so those stations would be subject to royalties established in the CRB rate-setting process).  Revenues would include all revenues earned by a station, whether or not related to the use of sound recordings.

What kind of fees would be likely for larger broadcasters were this proposal to be adopted?  A decade ago, when these fees were first proposed, a Congressional Budget Office (CBO) review of the cost to broadcasters of the proposed performance royalty concluded that the cost of such royalties would likely be “substantial.”  That can be seen in the royalties that SoundExchange has been able to receive from other services who pay for the digital performance of sound recordings.

The recent ratemaking decision for webcasters is difficult to translate to a broadcast context, as webcasting royalties are paid on a per performance rate (per song, per listener).  Obviously, there is no precise way to count performances for over-the-air broadcasting, so a percentage of revenue royalty would be more likely for any broadcast sound recording performance royalty.  But there are analogs in other services where the CRB has set sound recording performance royalties based on a percentage of revenue metric when performances were similarly impossible to determine.

For instance, in 2017, the CRB decided that Sirius XM would pay sound recording royalties of 15.5% of its revenues.  Note that this decision was based on a different standard than that which now applies to most rate-setting proceedings (the so-called 801(b) standard that factored in public interest factors into determining royalty rates in addition to the theoretically market-driven “willing-buyer, willing-seller” royalty rate now to be used for all services following the Music Modernization Act).  The satellite radio rate was also based on subscription revenues received by Sirius XM, which are at least partially attributable to many channels offered by the service that contain sports, talk and other non-music content.  Thus, a rate for a single music-oriented radio station would seemingly be substantially higher than that set for satellite radio.  Imagine what a royalty of 20% or more of radio revenue would do to the radio industry.

In connection with Business Establishment Services (music services that digitally transmit music to retail and other business – what some would call “background music services”), which by law do not pay for the public performance of music but only for the ephemeral copies made in the digital transmission process (the least significant part of the webcaster royalty – assumed to be only 8%-10% of the royalty payment in other contexts), the parties to a proceeding to set their rates for 2019 through 2024 agreed to pay 12.5% of a service’s gross revenues as royalties to SoundExchange, increasing to 13.5% over the 5-year royalty term (see our article here). That is more than twice what the broadcast industry pays to ASCAP, BMI, SESAC and GMR for rights to the musical compositions.

Thus, the CBO’s conclusion a decade ago that the broadcast performance royalty would be substantial seems right on target.   Royalty levels that could be over 20% of revenue, particularly in today’s economic climate, would virtually drain the radio industry of its profit margins.  Obviously, the NAB immediately condemned the proposal and continues to push its own anti-royalty bill.  So the proposed Deutch/Issa legislation will no doubt be vigorously contested.  From time to time over the last decade, there have been discussions of a voluntary resolution of the question of a broadcast royalty – perhaps a lower webcasting royalty in exchange for a share in over-the-air revenues, as some big broadcast companies have, from time to time (see, e.g. our article here and here), negotiated with various record labels.  But, until there is such an agreement, this will be a battle to which radio broadcasters must pay close attention.

Courtesy Broadcast Law Blog

Last week, the Federal Election Commission (FEC) adopted new disclaimer requirements for internet-based political advertising, including the identification of the ad sponsor.  This decision resolves many of the issues that have been debated at the FEC for over a decade as to what internet content is considered a “public communication” that requires a disclosure of the sponsor of the content – and just what the disclosure should reveal.  We wrote about a 2018 rulemaking soliciting comment on these issues that was just part of the process that led to the vote taken last week.  While the FEC had generally acknowledged that online political ads should have some sponsorship identification, it is only now that the FEC has adopted detailed requirements for this identification.  As discussed below, the proceeding requires disclosures when a sponsor pays an online platform to transmit the political message.  However, the FEC postponed for another day consideration as to whether the disclaimers would be required when the sponsor pays others to promote or widely disseminate the message to platforms that are not paid (e.g., where people are paid by a sponsor to post political messages on social media sites).  These rule changes will impact most media companies with websites and mobile apps, as well as the nationwide streaming services now developing ad supported platforms.

Specifically, the FEC adopted a proposal that would amend its rules to require a disclaimer on those “communications placed for a fee on another person’s website, digital device, application, or advertising platform.”   The FEC also issued a Supplemental Notice of Proposed Rulemaking seeking public comment as to whether disclaimers should be required for political communications where the platform itself may not have been paid, but where the sponsor of the communication paid others to promote or otherwise broaden the dissemination of the communication.

The new rules also describe the disclaimers that will be required on internet communications once the new rules become effective.  The FEC rejected proposals to include the “stand by your ad” language required in political advertisements transmitted on TV, radio, and cable.  On these platforms, the stand-by-your-ad provisions require that the candidate identify themselves and state that they approved the message.  The FEC rejected the inclusion of this clause in the mandated disclaimers, finding that, even though very similar audio and video ads are now transmitted online, including by streaming services, the FEC’s statutory authority to require such language only applies to broadcast and cable.

Instead, the general disclaimer rules on disclaimers will be followed.  The FEC summarized the existing rules which include requirements set out below:

  • If a candidate, an authorized committee of a candidate, or an agent of either, pays for and authorizes the communication, then the disclaimer must state that the communication “has been paid for by the authorized political committee.”
  • If a public communication is paid for by someone else, but is authorized by a candidate, an authorized committee of a candidate, or an agent of either, then the disclaimer must state who paid for the communication and that it is authorized by the candidate, authorized committee of the candidate, or an agent of either.
  • If the communication is not authorized by a candidate, an authorized committee of a candidate, or an agent of either, then “the disclaimer must clearly state the full name and permanent street address, telephone number, or World Wide Web address of the person who paid for the communication, and that the communication is not authorized by any candidate or candidate’s committee.”
  • Every disclaimer “must be presented in a clear and conspicuous manner, to give the reader, observer, or listener adequate notice of the identity of the person” that paid for the communication.

The FEC also adopted other requirements for disclaimers:

  • for such communications with text or graphic components, include the required written disclaimer,
  • be of sufficient type size to be clearly readable,
  • be displayed with a reasonable degree of color contrast,
  • for video ads, be visible for at least 4 seconds,
  • For audio with no video, graphic, or text components, be included within the audio.

The decision also discusses exceptions to these requirements where, because of the size of the announcement or other technical limitations, the full disclaimer cannot be added.  These exceptions will apply when the full disclaimer “cannot be provided or would occupy more than 25 percent of the communication due to character or space constraints intrinsic to the advertising product or medium.”  The FEC describes the disclaimer requirements for communications that fit within this exception – an “adapted disclaimer” as “a clear statement that the internet public communication is paid for, and that identifies the person or persons who paid for the internet public communication using their full name or a commonly understood abbreviation or acronym by which the person or persons are known, which is accompanied by: (1) an “indicator” and (2) a “mechanism.” An “indicator” is notice in the ad as to the existence of the full disclaimer information at some other location, and a “mechanism” is a way to get to that information, such as through a link on a textual or graphic ad.

This decision clarifies that, for traditional political advertising on online platforms for federal candidates and elections, sponsorship identification is required.  The Further Notice will seek to clarify the obligations of paid influencers and others as to their disclosure requirements, but it seems safe to assume that some disclosure eventually will be required.

But don’t think that these are the only rules to consider. As we have written before (see, for instance, our articles here and here), states have also been very active in adopting their own rules as to disclosure of sponsors of political advertising, some much broader than the FEC rules adopted last week.  In some cases, the state rules apply only to state candidates and issues.  In other cases, they are not specifically limited.  All of these rules, both state and federal, are very complicated and get into details and nuances not covered in this article.  So, when dealing with these issues (both state and federal) carefully review all the rules and seek guidance from attorneys and other advisors who are familiar with those nuances.

The new FEC rules will become effective after they have been transmitted to Congress for a 30-day review period.  Comments on the Supplemental Further Notice will be due 30 days after the notice is published in the Federal Register.

Courtesy Broadcast Law Blog

In a very busy week, 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.

  • The Federal Trade Commission and seven state Attorneys General announced a settlement with Google LLC and iHeart Media, Inc. over allegations that iHeart radio stations aired thousands of deceptive endorsements for Google Pixel 4 phones by radio personalities who had never used the phone.  The FTC’s complaint alleges that in 2019, Google hired iHeart and 11 other radio broadcast companies to have their on-air personalities record and broadcast endorsements of the Pixel 4 phone, but did not provide the on-air personalities with the phone that they were endorsing.  Google provided scripts for the on-air personalities to record, which included lines such as “It’s my favorite phone camera out there” and “I’ve been taking studio-like photos of everything,” despite these DJs never having used the phone.  The deceptive endorsements aired over 28,000 times across ten major markets from October 2019 to March 2020.  As part of the settlement, subject to approval by the courts, Google will pay approximately $9 million and iHeart will pay approximately $400,000 to the states that were part of the agreement.  The settlement also imposes substantial paperwork and administrative burdens by requiring both companies to submit annual compliance reports for a period of years (10 years in the case of iHeart), and create and retain financial and other records (in the case of iHeart, the records must be created for a period of ten years and retained for five years).
    • This case is a reminder that stations must ensure that their on-air talent have at least some familiarity with any product they endorse, particularly where on-air scripts suggest that they have actually used the product.  Stations should not assume that talent know the relevant rules – they more likely will just read whatever is handed to them without understanding the potential legal risk for the station, which, as demonstrated in this case, could be significant.
  • In a Federal Register notice, the Copyright Royalty Board announced cost-of-living increases in the statutory royalties to be paid by webcasters for the public performance of sound recordings. These are the royalties paid to SoundExchange by those making noninteractive digital transmissions of sound recordings.  In 2022, commercial webcasters, including broadcasters streaming their programming on the Internet, pay $.0022 per performance for a nonsubscription transmission and $.0028 per performance for a subscription transmission.  The Federal Register publication sets out the computations for the cost-of-living increase and announces that the rate for nonsubscription transmissions made in 2023 will be $.0024 per performance, and for subscription transmissions, the rate will be $.0030 per performance.  For noncommercial webcasters, the 2023 rate will be $0.0024 per performance for all digital audio transmissions in excess of the monthly 159,140 aggregate tuning hours of music programming per channel or station that a noncommercial webcaster gets for its yearly $1000 per channel minimum fee.  We provided more information about this cost-of-living increase in an article on our Broadcast Law Blog, here.
  • At an open meeting held on December 1, 2022, the Federal Election Commission (FEC) adopted new disclaimer requirements for internet-based political advertising, including the identification of the ad sponsor.  This decision resolves issues that have been debated at the FEC for over a decade.  These rule changes will impact anyone that accepts political advertising on websites or other digital platforms. The FEC adopted a proposal that would amend its rules to require disclaimers on all “communications placed for a fee on another person’s website, digital device, application, or advertising platform.”  The FEC rejected, by a 4 to 2 vote, a broader proposal that would have included not just communications where the owner of the digital platform was paid for the inclusion of the ad, but also political communications where the platform itself may not have been paid, but where the sponsor of the communication paid others to promote or otherwise broaden the dissemination of the communication.  Instead, the FEC issued a Supplemental Notice of Proposed Rulemaking seeking public comment as to whether disclaimers should be required for such promoted communications. The new rules also describe the disclaimers that will be required on internet communications once the new rules become effective, and include exceptions to these requirements where, because of the size of the announcement or other technical limitations, the full disclaimer cannot be added.   The new rules will become effective after they have been transmitted to Congress for a 30-day review period.  Comments on the Supplemental Further Notice will be due 30 days after the notice is published in the Federal Register.
  • The FCC’s Media Bureau released a Public Notice seeking comment on a Petition for Rulemaking filed in October 2022 by the NAB and Xperi Inc.  The Petition asks the FCC to (i) adopt an updated formula to determine FM digital sideband power levels that would allow many stations to increase digital power; and (ii) consider this request with another raised in a 2019 petition to permit digital FM radio stations to utilize asymmetric sideband power levels without having to request experimental (a request granted by the Public Notice consolidating the issues raised by both petitions into one proceeding). The petitioners believe that adoption of these proposals will give FM HD Radio signals a greater coverage area and more robust signal strength, enhancing the attractiveness of the service to stations and consumers. We wrote more about this proceeding and the issues it raises, here. Comments and reply comments in this proceeding will be due January 12, 2023 and February 13, 2023, respectively.
  • The Media Bureau issued a Public Notice reminding television stations that the FCC’s audio description rules will extend to Nielsen DMAs 81 through 90 on January 1, 2023. Audio description makes video programming more accessible to individuals who are blind or visually impaired through “[t]he insertion of audio narrated descriptions of a television program’s key visual elements into natural pauses between the program’s dialogue.” The FCC’s audio description rules require television broadcast stations affiliated with the Top 4 networks and multichannel video programming distributors (MVPDs) to provide audio description for 50 hours per calendar quarter, either during prime time or on children’s programming, and 37.5 additional hours of audio description per calendar quarter between 6 a.m. and 11:59 p.m. local time, on each programming stream on which they carry one of the top four commercial television broadcast networks.  The FCC relies on Nielsen’s list of DMAs as of January 1, 2020, meaning that DMAs 81 through 90 are the following: Madison, WI; Waco-Temple-Bryan, TX; Harlingen-Weslaco-Brownsville-McAllen, TX; Paducah, KY-Cape Girardeau-Harrisburg, MO; Colorado Springs-Pueblo, CO; Shreveport, LA; Syracuse, NY; Champaign and Springfield-Decatur, IL; Savannah, GA; and Cedar Springs-Waterloo-Iowa City and Dubuque, IA.
  • The Auctions Division of the FCC’s Office of Economics and Analysis issued a Notice of Demand for Payment in the amount of $522,500 to the winning bidder of an FM construction permit in Auction 98 who defaulted on its auction bid and did not receive a waiver of the down payment deadline. The large amount due is attributable to fact that the winning bid received when the permit was re-auctioned was significantly less the bid originally submitted by the defaulting bidder.  This case is a reminder to auction participants that a winning bidder assumes a binding obligation to pay the full amount of its accepted winning bid.  A bidder who defaults on its bid is subject to a default payment including the amount by which the defaulted bid exceeds the amount received when the channel is sold in a subsequent auction, which, as demonstrated in this case, can be significant.
  • The Media Bureau continues to drop in new FM channel allotments, and grant channel substitutions for television stations to address signal reliability. In the past week, the Bureau has proposed to allot a new FM channel, Channel 233C, at Ralston, Wyoming as the community’s first local service. Comments and reply comments are due January 23 and February 7, 2023, respectively.  If allotted, the channel would be available to interested applicants in a future FM auction.  The Bureau has also granted VHF to UHF channel substitutions for existing television stations in Butte, Montana; Great Falls, Montana; and Missoula, Montana, and proposed a VHF-to-UHF channel substitution for a station in Yuma, Arizona (comment and reply comments are due 30 days and 45 days, respectively, after publication of the proposal in the Federal Register).   These VHF to UHF channel changes, which are sought because of UHF’s recognized superiority for digital television service, have been permitted since last year when the FCC lifted the freeze on TV channel changes that had been in effect for almost a decade while the FCC conducted its incentive auction and the subsequent repacking of the TV band.  For more information on the lifting of that freeze, see our article here.
  • On our Broadcast Law Blog, we wrote an article setting out many of the most significant regulatory dates for broadcasters in the month of December including rulemaking comment deadlines in several significant FCC proceedings – see that summary here.

Courtesy Broadcast Law Blog

Until recently, to many in the industry, HD radio seemed to be an afterthought – maybe useful in feeding analog translators, but otherwise not very accessible to the public.  But there is now more and more interest in HD radio given the increased inclusion of receivers for this digital service as standard equipment in a majority of new cars.  This means that consumers have ready access to programming on digital FM subchannels that the technology allows, plus the digital sound quality that HD radio provides and the auxiliary data services that can be conveyed along with the audio programming.  This week, the FCC’s Media Bureau issued a Public Notice asking for comments on two technical proposals to enhance service to the public while minimizing interference that the service might otherwise cause to nearby adjacent-channel stations.

Comments are sought on a proposal by the National Association of Broadcasters and Xperi, Inc. (which acquired iBiquity, the company that developed the HD Radio technology) seeking adoption of an updated formula for computing the power level of the “sidebands” on which the HD service resides. The request also asks that the proposal be combined with a 2019 request that FM stations be allowed to operate an HD service with “asymmetric sidebands” without having to seek experimental authority.  What do these requests mean and why might they be important?

To explain the issues most simplistically, HD radio operates on what are referred to as “sidebands” of an FM station’s main signal.  In essence, the digital information that can be transmitted by a station operating in HD (including separate programming streams and more textual information) is included on frequencies immediately adjacent to the analog signal.  While this additional digital information is transmitted on the same “channel” as the analog station, that information is put on the edges of the channel (as opposed to in its center where radiation is highest in an analog operation).  When HD radio was authorized early in this century, there were fears that the increased digital use of these sidebands could create interference to adjacent channel stations, as there was greater use of the HD station’s channel on the portions of that channel closest to adjacent channel stations.  Thus, as noted in the new NAB/Xperi petition, the Commission itself recognized that it was being conservative in the power levels permitted for the HD operations to guard against such interference to adjacent channel stations.

So how much power should be allowed in these digital sidebands?   That is a question that has been debated since the service was first adopted, and there have been many proposals for permission to increase the permitted power levels (see, for instance, the proposals we wrote about here and here).  The NAB/Xperi petition contends that, given the experience that has been accumulated in the last decade that HD radio has been in use, there is no longer any reason for the Commission to be conservative about the power levels for these digital sidebands.

The NAB/Xperi petition also asks that its proposal be consolidated with a proposal filed by these same parties (plus National Public Radio) in 2019 that asks the FCC to authorize digital FM operations with asymmetric sidebands, i.e., sidebands operating at different power levels.  Right now, the power of the digital sidebands must be equal unless specially authorized by the FCC.  However, the parties argue that, where the protections need to be greater on one side of the station’s frequency than the other (e.g., a station on an adjacent channel above the HD station’s frequency is closer, or of higher power than any adjacent channel station operating on a channel below the HD station’s frequency), the power can be restricted on that side, and increased on the sideband where there is more leeway.  Allowing increased power on even one sideband would, in the proponent’s view, give the station a better HD signal in its service area.

The purpose of these changes is to help overcome any perception by broadcasters that an HD signal is not worth implementing if it would not provide essentially the same coverage as the analog station.  If a station’s HD signal can be delivered at a higher power, even on one sideband, the proponents believe that the stronger HD signal will be provided to a station’s audience, coming closer to replicating the station’s analog service area (and delivering all the benefits of HD service as well).  The intention is to encourage broader implementation of HD radio services to the public.

Comments on these proposals are due January 12, 2023, with reply comments due by February 13, 2023.  These are but initial comments as to whether the FCC should move forward in its consideration of this petition.  Before any rule changes will be made, the FCC will likely need to issue a Notice of Proposed Rulemaking, spelling out the specific changes it proposes to make in its rules to accommodate the proposals.  That process will require further public comment.  Nonetheless, this is a significant first step in the FCC’s consideration of these proposals – watch as these potential changes to digital radio move forward at the FCC, and offer your opinions on these proposals by the comment dates that the Media Bureau has established.

Courtesy Broadcast Law Blog

Even with the holidays upon us, regulation never stops.  There are numerous regulatory dates in December to which broadcasters need to pay heed to avoid having the FCC play Grinch for missing some important deadline.

December 1 is the deadline for license renewal applications for television stations (full power, Class A, LPTV and TV translators) licensed to communities in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont.  Renewal applications must be accompanied by FCC Form 2100, Schedule 396 Broadcast EEO Program Report (except for TV translators).  Stations filing for renewal of their license should make sure that all documents required to be uploaded to the station’s online public file are complete and were uploaded on time.  Note that your Broadcast EEO Program Report must include two years of Annual EEO Public File Reports for FCC review, unless your employment unit employs fewer than five full-time employees.  Be sure to read the instructions for the license renewal application and consult with your advisors if you have questions, especially if you have noticed any discrepancies in your online public file or political file.  Issues with the public file have already led to fines imposed on TV broadcasters during this renewal cycle.

December 1 is also the deadline by which radio and television station employment units with five or more full-time employees licensed to communities in Alabama, Colorado, Connecticut, Georgia, Maine, Massachusetts, Minnesota, Montana, New Hampshire, North Dakota, Rhode Island, South Dakota, and Vermont must upload Annual EEO Public File Reports to station online public inspection files (also, the FCC has issued an extension that permits stations in Florida that suffered the effects of Hurricane Ian to upload their Annual EEO Public File Reports by December 12).  This annual EEO report covers hiring and employment outreach activities for the prior year.  A link to the uploaded report must also be included on the home page of a station’s website, if it has a website.

In addition, by December 1, digital television stations that provided ancillary or supplementary services between October 1, 2021 and September 30, 2022 must submit FCC Form 2100, Schedule G, and pay a fee equal to 5% of the gross revenue derived from any ancillary or supplementary services they provided.  Noncommercial digital TV stations that provided such services on a nonprofit, noncommercial, and educational basis must file the form but are required to pay only 2.5% of the gross revenue derived from those services.  Ancillary and supplemental services do not include non-subscription video channels delivered directly to the public (i.e., multicast channels), but they do include any other services provided over the station’s spectrum from which the station receives compensation, including “computer software distribution, data transmissions, teletext, interactive materials, aural messages, paging services, or audio signals, [and] subscription video.”  Stations that provided no such services do not need to file a report.

Radio broadcasters who, in all but the last months of 2022, entered into consent decrees with the Media Bureau to resolve concerns about documents concerning the purchase of political advertising time that were uploaded late to a stations online public file have until December 9 to file their compliance reports.  These reports certify that the station complied with the training and oversight requirements of the consent decrees, and they must include a spreadsheet showing when all political advertising material sold in the 90 days before the November 2022 election was uploaded to the public file.  For more information about these consent decrees, see our article here.

December also includes deadlines for comments in certain FCC rulemaking proceedings. One of the most controversial is the Second Notice of Proposed Rulemaking seeking comment on proposals to enhance the FCC’s requirements that each broadcaster verify that any program time sold to third parties (or any pre-produced programming received for free) does not come from a “foreign government entity,” i.e., a foreign government or one of its agents.  Various disclosure obligations apply if the programming does in fact come from a foreign government entity.  Initial comments on the Second NPRM are due by December 19, 2022 and reply comments should be submitted by January 3, 2023.  In the Second NPRM, the FCC proposes, among other things, that a licensee certify that it has informed any buyer of program time of the foreign sponsorship identification rules and obtained, or sought to obtain, a certification from the program buyer stating, with standardized language proposed by the FCC, whether the buyer is or is not a “foreign governmental entity.” The FCC also proposes to require that all of those certifications, even when the program buyer is not a foreign government entity, be included in a station’s online public inspection file.  For further background on this proceeding and its implications for broadcasters, see our articles here and here.

By virtue of an extension Order jointly issued by the FCC’s Wireless Telecommunications Bureau and Office of Engineering and Technology, December 12 and January 13 are now the comment and reply comment deadlines, respectively, for the FCC’s Notice of Inquiry that explores opportunities to open the 12.7-13.25 GHz (12.7 GHz) band for next-generation wireless services.  Licensed services currently in the 12.7 GHz band whose operations could be affected by any change in the uses permitted in the band include satellite communications and mobile TV pickup operations (for more background, see our articles here and here).

The Emergency Alert System (“EAS”) is the subject of other possible changes in the FCC rules.  On December 23 and January 23, respectively, comments and reply comments are due on the FCC’s Notice of Proposed Rulemaking  on potential rule changes intended to enhance EAS and Wireless Emergency Alerts (“WEA”). The FCC seeks comment on, among other things, whether to require EAS Participants (including broadcasters) to report to the FCC incidents of unauthorized access to EAS equipment within 72 hours of when the participant knew or should have known that the incident occurred.  The NPRM also asks whether EAS Participants (including broadcasters) should be required to submit an annual cybersecurity certification that demonstrates how the participant identifies the cyber risks that it faces, the controls it uses to mitigate those risks, and how it ensures that these controls are applied effectively.  We wrote more extensively about this proceeding, here.

On the subject of EAS, December 12 is the effective date of a recently adopted FCC Report and Order aimed at making emergency alerts delivered over television and radio stations more informative and easier to understand by the public. The effective date gives broadcasters one year (i.e., by December 12, 2023) to update their systems to comply with the new rules. Among other changes, the updated rules will require broadcasters, cable systems, and other EAS Participants to transmit the Internet-based version of emergency alerts (i.e., those transmitted through the internet based Integrated Public Alert and Warning System, “IPAWS,” using the Common Alerting Protocol or “CAP”) when the station receives alerts from both IPAWS and from the traditional over-the-air “daisy chain” system.  For more details on these new rules and on other proposed changes in EAS requirements for broadcasters, see our article, here.

Looking ahead to January, licensees of full-power stations need to remember that Quarterly Issues Programs lists are to be uploaded to the public file by January 10.  The lists should identify the issues of importance to the station’s community and the programs that the station aired in October, November and December that addressed those issues.  As you finalize your lists, do so carefully and accurately, as they are the only official records of how your station is serving the public and addressing the needs and interests of its service area.  See our post here for more on the importance of the Quarterly Issues Programs list obligation.

As always, this list of dates is not exhaustive and comment deadlines can change.  Review these dates with your legal and technical advisors, and note other dates not listed here that may be relevant to your operations.

Courtesy Broadcast Law Blog

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.

  • The FCC’s Notice of Proposed Rulemaking (“NPRM”) looking to enhance the security of the Emergency Alert System (“EAS”) and Wireless Emergency Alerts (“WEA”) was published in the Federal Register this week.  That publication sets the deadlines for public comment as December 23, 2022, for comments and January 23, 2023, for replies.  The FCC seeks comment on, among other things, whether to require EAS Participants (including broadcasters) to report to the FCC incidents of unauthorized access to EAS equipment within 72 hours of when the participant knew or should have known that the incident occurred, and whether EAS Participants (including broadcasters) should be required to submit an annual cybersecurity certification that demonstrates how the participant identifies the cyber risks that it faces, the controls it uses to mitigate those risks, and how it ensures that these controls are applied effectively.  We wrote more extensively about this proceeding on our Broadcast Law Blog.
  • The FCC’s Wireless Telecommunications Bureau and Office of Engineering and Technology jointly issued an Order granting an extension of the comment and reply comment deadlines for the FCC’s Notice of Inquiry on how to encourage more efficient and intensive use of the 12.7-13.25 GHz band.  Licensed services in the 12.7 GHz band which might be affected by any changes in the use of this spectrum include satellite communications and mobile TV pickup operations. Comments are now due December 12, 2022, and reply comments are now due January 10, 2023.  For background on this proceeding, see our notes about previous steps in this proceeding in our articles here and here.
  • In a decision regarding the sale of radio stations by Univision Radio to Latino Media Network, the Audio Division of the FCC’s Media Bureau discussed the FCC’s longstanding prohibition on the seller of a broadcast station retaining a “reversionary interest” in the station it is selling.  In this case, FCC staff found that the intent of the buyer to enter into a Local Marketing Agreement by which the seller would program some of the stations after closing was not a reversionary interest, because the buyer was free to make post-closing programming decisions for the stations by retaining ultimate control over the programming and station operations, including whether or not to enter into the LMA.  Had the LMA been a condition of the sale required by the seller, or had it served as partial consideration to the seller for the sale, the FCC suggested that it would have violated the prohibition against revisionary interests.  For further information about this case and the FCC’s prohibition on reversionary interests, and the impact that this prohibition has on broadcast financing, see our article here.
  • A list of proposed changes in the city of license of a number of broadcast stations was published in the Federal Register, setting the date for the filing of any objections to these proposed changes.  The proposed changes listed in the publication are: KOLT(AM), from Terrytown, NE, to Lexington, NE; WWLX(AM), from Lawrenceburg, TN, to Loretto, TN; KRXR(AM), from Gooding, ID, to Filer, ID; KABV(FM), from Premont, TX, to Ben Bolt, TX; KAMZ(FM), from Tahoka, TX, to Ropesville, TX; KQXZ(FM), from Richland Springs, TX, to Adamsville, TX; WKIH(FM), from Vidalia, GA, to Twin City, GA; KSZX(FM), from Santa Anna, TX, to Menard, Tx; and KTCY(FM), from Menard, TX, to Wall, TX.  Comments on these proposals are due to be filed at the FCC by January 27, 2023.

Courtesy Broadcast Law Blog

In a decision this week on the sale of radio stations by Univision Radio to Latino Media Network, the Audio Division of the FCC’s Media Bureau discussed the FCC’s longstanding prohibition on the seller of a broadcast station retaining a “reversionary interest” in the station it is selling.  In this case, FCC staff found that the intent of the buyer to enter into a Local Marketing Agreement by which the seller would program some of the stations after closing was not a reversionary interest, because the buyer was free to make programming decision for the stations as long as it retained ultimate control over that programming and station operations.  Had the LMA been a condition of the sale, or had it served as partial consideration for the sale, the FCC suggested that it would have violated the prohibition against revisionary interests. But as the seller did not make the LMA a condition of the sale, the post-closing decision to enter into an LMA was a programming decision under the control of the buyer and thus was not deemed to be a prohibited reversionary interest.  No matter what the holding of this case, a more fundamental question arises – what is a reversionary interest and why is it prohibited?

In reviewing our blog when writing this article, we noted that in the almost 17 years we have been publishing, we don’t seem to have ever referred specifically to the question of reversionary or retained interests in a broadcast station.  It is an issue that does not come up often, but it is related to another issue that we have written about before – the prohibition on a lender taking a security interest in a broadcast license (see, for instance, our two part article on security interests in broadcast licenses, here and here).  The prohibition on the right of reversion or retained interest in a broadcast license is set out in Section 73.1150 of the FCC rules, which states:

(a) In transferring a broadcast station, the licensee may retain no right of reversion of the license, no right to reassignment of the license in the future, and may not reserve the right to use the facilities of the station for any period whatsoever.

(b) No license, renewal of license, assignment of license or transfer of control of a corporate licensee will be granted or authorized if there is a contract, arrangement or understanding, express or implied, pursuant to which, as consideration or partial consideration for the assignment or transfer, such rights, as stated in paragraph (a) of this section, are retained.

The prohibition against the right of reversion, and the prohibition against a lender taking a security interest directly in a license, were both adopted by the FCC to implement Communications Act requirements that state that a broadcast license does not convey an ownership interest in the spectrum being used, but instead only confers on the license holder a right to use the spectrum that does not extend “beyond the terms, conditions, and periods of the license.”  In adopting the prohibitions against a reversionary interest, and the prohibitions on taking a security interest in a license, the FCC believed that these interests would imply an ownership interest in the license akin to the ownership interest that one might hold in other forms of property that can be subject to leases, mortgages, and other security interests.  Thus, the restrictions were imposed over half a century ago.  But, since being implemented, the FCC has from time to time questioned whether these restrictions really were necessary.

In 1995, for instance, the FCC issued a Notice of Proposed Rulemaking and Notice of Inquiry to ask whether these provisions really were required by the Communications Act, and whether the abolition of these restrictions might increase the availability of financing in the broadcast industry.  No action was taken at that time but the issue has since arisen, including in proposals advanced in the Modernization of Media Regulation proceeding begun by former FCC Chairman Pai (see our article here).  In these proceedings, many have argued that allowing broadcasters to retain interests in a license (or the right to reacquire the license if a buyer who pays with a promissory note defaults on the loan) or to take a security interest in a license would not necessarily mean that there was an ownership interest in a license.  Instead, it would only signify that the holder had a valuable right like that granted under any contract or similar agreement, that would be held pursuant to any limitations on the license, including the requirement that, before the station could be reacquired or before a security interest could be exercised, the party seeking to exercise the right would need to secure FCC approval for any transfer of the license.  It was argued that this would make financing for broadcast acquisitions, particularly those by new entrants, more available as lenders would feel more secure in their rights that could be exercised upon any default in a manner in the same way that those rights are protected in other business transactions.  In these proceedings, the FCC itself has recognized that decisions in other communications services, where FCC licenses have been recognized as valuable property rights, have undercut the argument that these prohibitions are necessary under the Communications Act.

In these past proceedings, some have expressed concerns that these interests, if allowed, would give a lender a greater ability to interfere with the licensee’s exclusive control over the way that it operates the station.  The fear is that, if the lender can threaten to repossess a station, the actions of the licensee will be constrained.  Yet, even under current rules, the lender can threaten to foreclose on all of the non-license assets of a station and can threaten to force a licensee into a bankruptcy or receivership in which the lender has a security interest in any proceeds from the sale of the license (as noted in our articles here and here, a security interest in the proceeds from the sale of a license is permitted).  While the station’s license is not guaranteed to come back to the lender, the influence on the licensee seems to be similar – and is not prohibited under current FCC rules.

In today’s media marketplace, where dealmaking has become more sophisticated and station operations more complicated (particularly with the advent of multicasting and spectrum sharing for advanced services that can be provided by new technologies like ATSC 3.0, Next Gen TV), these rules seem to impose unnecessary regulatory hurdles on broadcast operations.  It may be time for the FCC to once again revisit these policies to see if they are really necessary.

 

Courtesy Broadcast Law Blog

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.

  • On November 17, the FCC’s Second Notice of Proposed Rulemaking (“Second NPRM”) on foreign government sponsored programming was published in the Federal Register.  The Second NPRM seeks comment on proposals to enhance the FCC’s requirements that each broadcaster verify whether any program time that it sells to third parties (or any pre-produced programming that it receives for free) does not come from a “foreign government entity,” i.e., a foreign government or one of its agents.  The Federal Register publication sets the comment dates for the Second NPRM – with initial comments due December 19, 2022, and reply comments due by January 3, 2023.  In the Second NPRM, the FCC proposes, among other things, that a licensee certify that it has informed any buyer of program time of the foreign sponsorship identification rules and obtained, or sought to obtain, a certification from the program buyer stating, with standardized language proposed by the FCC, whether the buyer is or is not a “foreign governmental entity.” The FCC also proposes to require that all of those certifications be included in a station’s online public inspection file.  For further background on this proceeding and its implications for broadcasters, see our articles here and here.
  • At the November 17 regular monthly open meeting of the FCC, the Commissioners unanimously adopted a Report and Order to update its rules to identify Nielsen’s monthly Local TV Station Information Report (“Local TV Report”) as the new publication for determining a television station’s designated market area (“DMA”) for satellite and cable carriage purposes, in place of the Nielsen Annual Station Index and Household Estimates currently referenced in the rules.  Also, in response to concerns raised by Commissioner Simington, the Commission committed to monitoring the broadcast audience measurement market.  It encouraged stakeholders to keep the FCC apprised of changes in that market.  For further background about this proceeding, see our article here.
  • The FCC’s Media Bureau announced that the FCC’s new FM broadcast directional antenna verification rules went into effect on November 10, 2022.  These new rules allow for FM and LPFM directional antenna pattern proofing by computer modeling performed by the directional antenna’s manufacturer.  Under the old rules, an FM or LPFM directional antenna’s performance measured relative field pattern had to be verified using either a full-scale mockup or a scale model on a test range or in an anechoic chamber.  The rule change brings the FM rules in line with those for AM and DTV directional antennas.
  • In a speech at the National Association of Farm Broadcasters, Commissioner Simington proposed that the FCC renew its efforts to help AM radio. Among his proposals were a revamping of FCC regulatory fees to ease the burden on broadcasters, encouragement of auto manufacturers to retain or include AM in new cars, and FCC study of AM receiver standards.  He also suggested that the FCC once again look at the potential for activating FM chips in mobile devices.  Watch to see if these ideas proceed at the FCC.
  •  In two recent speeches to Washington groups, including one delivered last week to the Media Institute, Commissioner Geoffrey Starks talked about the opportunities presented by ATSC 3.0, NextGen TV.  In both speeches he cautioned that, while the technology offers many benefits, there are concerns that its capabilities to interact with internet technologies could impinge on consumer privacy.  He suggested that the FCC should review whether privacy rules need to be adopted to govern the use of any consumer information gathered through this new technology.
  • Last week, Sen. Ed Markey (D-MA) and Rep. Anna Eshoo (D-CA) introduced the Communications, Video, and Technology Accessibility Act of 2022 (“CVTAA”)(a press release summarizes the goals).  Among the proposals in the legislation is the extension of closed captioning obligations and the requirement for audio description of video programming to online video providers.  The legislation would also require the FCC to review the rules it has on the quality of closed captioning. While it is late in the legislative session and this proposal is unlikely to advance before the end of this Congress, look for these concepts to reemerge in the new session of Congress that begins in January.

Courtesy Broadcast Law Blog

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