Court Vacates "Designated Entity" Rules

Third Circuit sends 2006 DE rules back to FCC for further consideration; $14B auction results from 2006 left untouched

Back in 2006, with big-ticket wireless auctions fast approaching, the FCC hustled through revisions of a number of rules affecting bidding credits in those auctions. The bad news for the FCC: the U.S. Court of Appeals for the Third Circuit has now sent two of the three rule changes back to the agency for a re-do because of procedural shortcomings in the 2006 rulemaking process. The good news for the FCC: the Court decided that the Commission will not have to re-do the auctions conducted pursuant to those flawed rules and, perhaps more importantly, will not have to give back the $14 billion or so it raked in in the August, 2006 auctions.

The bidding rules at issue involve eligibility for “Designated Entity”, or “DE”, status. Bidders entitled to that status are smaller companies that might otherwise find it hard, if not impossible, to compete with larger, well-established telecom companies in a dollar-for-dollar face-off. Committed to encouraging new entrants into the telecom universe, Congress instructed the Commission (in 47 U.S.C. §307(j)) to ensure opportunities for small businesses by, among other things, making bidding credits available to them. A bidding credit is defined by the FCC as a “percentage discount applied to the high bid amount for a license.” Practical illustration: if a bidder with a 25% bidding credit wins an auction with a bid of, say, $1 million, that bidder would have to pay only $750,000 after the credit is applied.

Credits of 15%, 25% or 35% were available (depending on various factors). With wireless prices hovering in the nine- and ten-figure range (T-Mobile alone bid a total of more than $4 billion-with-a-“b” – in the 2006 auction; four other bidders also tendered aggregate bids topping the $1 billion level), the credits were obviously worth serious money. With an eye toward ensuring that bidding credits were awarded only to companies deserving them, the Commission tried, in the run-up to the August, 2006 auctions, to tighten up the eligibility standards. 

That’s where it ran into problems.

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Parsing Form 397

Which TV licensees have to file?

Recently, the Minority Media & Telecom Council asked the FCC to suspend enforcement of the EEO rules for three months. (You can read MMTC’s request here; alternatively, you can read our monthly Memo to Clients summary of the request here.) At this point, it’s anybody’s guess as to whether the FCC will grant MMTC’s request – although, frankly, if even MMTC is asking that EEO enforcement be suspended, the Commission really should be wondering what’s wrong with this picture.

But regardless of what the Commission eventually does, it might want to take this opportunity to clean up at least one aspect of its EEO “Broadcast Mid-Term Report” (FCC Form 397) that seems oddly and unnecessarily confusing, if not flat-out inconsistent.

Form 397 is a cute little three-page form. The first page calls on the reporting licensee to provide its name and contact information and identify the stations covered by the report. No real surprises there.

But on page two, Section I consists of the following single yes/no question:

Does your station employment unit employ fewer than five full-time employees, if television, or fewer than eleven full-time employees, if radio?

Not an overly complicated question. Then the form reads:

If yes, you do not have to file this form with the FCC. However, you have the option to complete the certification below, return the form to the FCC, and place a copy in your station(s) public file.

This last instruction raises an obvious question – i.e., who in his right mind would “opt” to file a form that the FCC specifically says does not have to be filed? – but that’s not the problem. Rather, the problem arises from the fact that the “filing instructions” located immediately above Section I include the following:

If a television station employment unit employs fewer than five full-time employees, only the first two pages of this report need be filed.

So does that mean that TV stations with fewer than five have to file a report (even if the report is limited to only two pages), or does it not have to file anything at all (unless, of course, it opts to)?

Oh, and did we mention that the underlying rule (47 C.F.R. §73.2080(f)(2)) provides that

The Commission will conduct a mid-term review of the employment practices of each broadcast television station and each radio station that is part of an employment unit of more than ten full-time employees four years following the station's most recent license expiration date as specified in §73.1020.

Let’s get this straight. If you’re a TV licensee with fewer than five full-timers, according to Form 397 either “you do not have to file this form” or “only the first two pages of this report need be filed”. Huh? And Section 73.2080(f)(2) isn’t much help in sorting this out, since that section could be read to say that mid-term reports are expected from TV stations with more than ten FT employees – even though the 2002 Report and Order adopting the rules makes reasonably clear (check out Paragraph 153) that the Commission intended to limit mid-term EEO reviews to TV stations with five or more FT employees.

There is at least one possible way (see “Suggested Solution”, below) to twist this regulatory Rubik’s cube to make all the seemingly incongruous parts look consistent, but really, would it be that hard for the FCC to take the time to articulate its requirements clearly and consistently in the first place? Sure, we know that the number of TV stations with fewer than five full-time employees may be limited, but is that any excuse for at-best-ambiguous-at-worst-hopelessly-inconsistent forms?

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It's Hurricane Season: Who You Gonna Call?

The FCC’s DIRS wants to hear from you.

As this is being written, we have two hurricanes (Danielle and Earl) already formed, and at least one other storm system heading in that direction (next name up: Fiona) – and it’s still August. All of which means that it’s a good time to remind broadcasters of the FCC’s Disaster Information Reporting System (DIRS) – and to encourage them to update their contact information with DIRS regularly (if they’ve previously enrolled in the program), or to get with the program and sign up now, if they haven’t already. At last count nearly 800 broadcasters nationwide had enrolled in DIRS, which appears to leave a significant number still standing on the sidelines.

DIRS enables the FCC to keep tabs on which stations are up and running during, and immediately after, a disaster or large-scale emergency. It also enables the Commission to move quickly to help broadcasters get back on-air if they’re knocked off by the emergency conditions. In emergencies and disasters, obviously, it’s in everybody’s interest to have broadcasters up and operating so that they can provide emergency-related information and updates to the public.

If you’re a communications provider (a broad universe that includes broadcasters), you can sign up for the program online here.  You give the Commission some basic contact information, and you get a user ID and user password. When emergencies occur and the FCC activates the system (participants will be advised by email of any activation), you can then use the system to alert the FCC to the status of your operation – and, if you happen to need any help from the FCC, you can let them know that as well. (FEMA and FCC emergency response personnel use DIRS reports to coordinate needed assistance – including such necessities as fuel and generators – in the aftermath of natural disasters.)

Participation in DIRS is purely voluntary. Even if you sign up, you don’t necessarily have to submit reports. But experience (think Katrina, for one unfortunate example) indicates that when disaster strikes, it is at least helpful, if not absolutely crucial, to have a common point for the collection and dissemination of information about what’s going on in the stricken area and its environs. And don’t forget, the DIRS is available for all kinds of emergencies, not just hurricanes.

Fox v. FCC: FCC Concentrates And Asks Again

Take "no" for an answer?  No way!  FCC seeks rehearing at Second Circuit.  (Supremes will just have to wait.)

As we reported last month, the U.S. Court of Appeals for the Second Circuit overturned the FCC’s indecency enforcement regime as unconstitutional. That left the FCC with only three options if it wanted to fight to defend its indecency regime. It could either: (1) go back to the three judges who rejected the policy, trying to convince them that they got it wrong; or (2) ask the entire en banc Second Circuit (which includes ten active-service judges) to reverse the three-judge panel’s decision; or (3) go for broke and ask the U.S. Supreme Court to review the case. (Obviously, abandoning the indecency regime was also a fourth option, albeit not one the FCC was likely to embrace).

Late in August, the FCC made up its mind: it’s going for Options (1) and (2), leaving for another day (and maybe another case) the possibility of Supreme Court review of indecency enforcement.

According to the FCC’s petition for rehearing, the Second Circuit panel’s Fox decision went too far in overturning the entire indecency enforcement regime. The Commission asserts that the panel’s conclusion – that the FCC’s overall indecency policy is unconstitutionally vague – is inconsistent with earlier decisions by the Supreme Court, the D.C. Circuit, and even the Second Circuit itself. The Commission argues that the Fox decision rejects the “contextual approach” to indecency analysis the FCC has used in the past – and that, by so doing, leaves the Commission with no way to enforce the federal laws prohibiting indecent broadcasts.

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Enforcement Shot Clocks - Tick Tick Tick . . .

Statutes of limitations apply to FCC enforcement actions

Let’s say you’re a licensee on the wrong end of one (or more) of the several hundred thousand (or more) complaints sitting in piles in the Enforcement Bureau, awaiting some kind of action. You might be frustrated by the glacial pace of the FCC’s processes – after all, many of those complaints have been pending for years. 

But wait – there may be a silver lining to that slow-moving dark cloud hanging over you. 

Federal law – 28 U.S.C. §2462, if you care to look it up – requires that lawsuits to enforce a civil fine, penalty or forfeiture be initiated within five years after the underlying claims accrue. In other words, if the government’s got a claim against you, they’ve got five years to use it or lose it. The good news is that this “statute of limitations” could shield you from financial penalties even if the FCC eventually decides that you violated FCC rules.

Much of the credit for this potential benefit goes to the byzantine procedural maze the FCC must navigate before it can even start to think about suing a broadcast licensee.

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Overall Backhaul Overhaul

FCC proposes more spectrum, more flexibility for wireless backhaul in Fixed Microwave Service.

An easily-overlooked aspect of the miracle of modern mobile communications is the fact that, to get anywhere, those communications must link to decidedly non-mobile network connections.  Sure, your iPhone/Blackberry/Droid/etc. roams freely hither and yon, sending its signal to this cell tower or that, wherever you happen to be. But once the signal gets to the tower, it then has to get to the network to make your connection. The link that moves the signal from cell site to core network is prosaically referred to as “backhaul”.

While backhaul has traditionally been carried on copper wire or fiber, carriers are increasingly turning to wireless technology for capacity to meet the increased demand created by growing numbers of bandwidth-hungry mobile devices and applications. Wireless backhaul is particularly desirable in rural and remote locations where laying wire or fiber isn’t practical. 

Not surprisingly, the FCC is looking into expanding wireless backhaul technology. It has issued a combined Notice of Proposed Rulemaking (NPRM) and Notice of Inquiry (NOI) inviting your comments.

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Contest Faux Pas: A Day Early, $4K Short

Attention to detail de rigueur when it comes to contests

A Maryland FM station jumped the gun on its own contest back in June, 2008 – and it looks like it’s going to cost the licensee $4,000, according to the Enforcement Bureau.

The station’s heart was obviously in the right place. It invited listeners to send in photos of their dads, with one entry ultimately to be chosen for the grand prize just in time for Father’s Day. The “official rules” and on-air promos provided that the contest would run “through June 13” (which happened to be the Friday before Father’s Day in 2008). But the rules also provided that the winner would be selected on June 13, and promos for the contest indicated that each daily drawing would be announced at 7:20 a.m. So while the “through” language suggested that entries could be submitted all day long (possibly even up until 11:59 p.m., at least as a technical matter), the fact that a drawing was to be conducted on June 13 gave the contrary impression that the cut-off might be earlier in the day than that – and the fact that daily winners were to be announced at 0-dark-30 indicated that the cut-off time would logically have to be no later than 0-dark-29. 

So when was the real deadline on June 13?

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FCC Wraps Up Ultra-Long Ultra-Wideband Proceeding

A promising technology is slowed by regulators, then stifled in the standards-setting process.

After 12 years, the FCC has closed out one of the longest and most contentious rulemakings in recent memory.

Ultra-wideband was bound to be controversial from the start.  The basic idea consists of spreading a low-level signal across a very wide swath of spectrum, often a gigahertz or more. In principle, the level at any one frequency is too low to interfere with conventional spectrum users, but the power adds up across the wide bandwidth into a useful signal.

The FCC expected two main kinds of uses: data transmission, which can reach hundreds of megabits per second over short distances, and a variety of imaging and radar applications.

The Slow Grind of Regulation

When the FCC first proposed rules to allow ultra-wideband, virtually all major categories of spectrum users rose up as one to oppose it. The opposition included:

  • aerospace companies
  • amateur radio associations and operators
  • airlines and their associations
  • broadcasters
  • major cell phone manufacturers
  • cell phone service providers (especially vehement in their opposition)
  • U.S. Government agencies (including the Department of Defense, Federal Aviation Administration, and NASA)
  • the GPS industry association and several manufacturers
  • aviation radio interests
  • maritime radio interests
  • medical telemetry companies
  • many police and fire departments
  • satellite radio providers
  • many satellite companies and their association (likewise vehement)
  • telephone equipment manufacturers, and
  • many more.

Facing down this expensively lawyered force was a small handful of start-up companies, backed by a few established radar manufacturers. But the start-ups had something on their side even more powerful than lawyers: the laws of physics. Straightforward analyses showed that ultra-wideband, with appropriate safeguards, was non-interfering.  Opponents that tried to show otherwise had to make unrealistic assumptions in their math. At least, that is how the FCC saw it.

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FCC Proposes Onerous Wireless Renewal Requirements

Applicants would have to track down and turn over multiple documents – all of which the FCC already has.

Wireless licensees take note: the FCC has proposed changes to its renewal procedures, changes that could mean a lot of extra work for you, with little clear public benefit. 

The Commission is proposing to require wireless licensees to submit, along with their renewal applications, copies of all FCC orders finding a violation or apparent violation issued with respect to the licensee during the license term, whether or not the violation(s) (or alleged violation(s)) relate to the license being renewed – and whether or not a violation was ultimately found. That’s right – the FCC wants more copies of its own documents. It also wants a list of petitions to deny filed for any reason against any application submitted by the licensee – again, even applications involving licenses that are not part of the subject renewal application.

But wait. It gets worse.

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The NAB And The PRA: What's Up With That?

Brilliant stratagem or craven sell-out? It’s too soon to tell – so concentrate and ask again later.

Despite the fact that things on the Performance Rights Act (PRA) front remain quiet down on Capitol Hill, talk about the PRA has been burning up the trade press and the blogosphere lately. The reason? Reports that the National Association of Broadcasters (NAB) sat down with representatives from the music industry to discuss, among other things, the question of performance rights. Throw in a statement from an NAB spokesman alluding vaguely to “possible alternatives to pending legislation” (i.e., presumably, the PRA), and you’ve got the grist for a blog-tastic free-for-all in which anybody and everybody has an opinion, even though most lack a complete picture of exactly what might be going on.

CommLawBlog has done its fair share of writing on the PRA, but it’s been a while. In the midst of the sturm und drang, I think it might be useful to clarify what we know and what we don’t know before the chatter gets out of hand (and if you know something that we don’t, feel free to chime in in the comment section). 

Here’s what we know:

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