Streamlined Foreign Media Ownership Procedures (Mostly) Effective in January

A September Commission Order modifying a number of Commission Rules regarding filing and review of foreign ownership in broadcast licensees has now been published in the Federal Register, setting the effective date of at least some of these changes.  Many of those rule changes will now go into effect January 30, although some changes regarding “information collections” (i.e. filings with the Commission) still require further OMB approval.

The rule changes adopted in the Order were designed to accomplish two main purposes: 1) to allow broadcast licensees to take advantage of streamlined waiver procedures long enjoyed by common carrier licensees requesting approval for foreign ownership in excess of the statutory limits; and 2) reforming the methods a licensee (whether broadcast, common carrier, or aeronautical) may use to determine its foreign ownership for purposes of certifying compliance with the limits.

The Commission has long waived, on a case-by-case basis, the statutory limits on foreign ownership in common carrier licensees, allowing such entities to exceed the 20% direct and 25% indirect statutory benchmarks. Such waivers have been based on a number of criteria, including the nationality of the proposed foreign owners, continued management of day-to-day operations by U.S. citizens, demonstrated need for foreign investment, and others.  Prior to the last few years, however, waivers were not available to broadcast licensees, which were for all intents and purposes strictly bound by the statutory limits.

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Making Your Airport Great Again: FCC Waiver Allows Updated Body Scanners

L-3 scanner-2We reported earlier this year that the FCC was seeking comment on a waiver request to allow certification of an updated, wider-band version of airport body scanners, ones that will meet new TSA standards. That waiver, which was not opposed, now has been granted, allowing L-3 Communications Security and Detection Systems to obtain equipment certification for its new technology.

[Blogmeister’s Note: FHH represented clients in this matter.]

 

Are Alternative Inspection FCC Notifications Still Needed?

Is there an easier way to notify the Commission when a station has taken part in the Alternative Broadcast Inspection Program (ABIP)? Or does the FCC need to be notified at all?

The agency seeks public input on the issue. The alternative program is a series of agreements between the Enforcement Bureau and a private entity. That’s usually a state broadcast association, which agrees to facilitate station inspections to determine compliance with FCC regulations. Station ABIP participation is voluntary.

The private entities notify their local FCC District Office or Resident Agent Office in writing of those stations that pass the ABIP inspection. The Commission uses the information to determine which facilities have been certified in compliance with its rules so will not be subject to random agency inspections.

To try and reduce the paperwork burden on small businesses with fewer than 25 employees, the FCC is asking whether the compliance notifications are still necessary and/or if there’s a way to automate the process. This query is the Commission’s attempt to comply with the Paperwork Reduction Act.

Comments on the issue are due by January 30, 2017, which is some 60 days after Federal Register publication to PRA@fcc.gov or Nicole Ongele.

A Thanksgiving Tradition Continues

Last year we posted a link to a You Tube video condensing the famous “turkey drop” episode from the 1970s television show “WKRP in Cincinnati.”  We dubbed this a “Thanksgiving Tradition” even though it was a first time posting.

In the words of our own Founding Blogmeister Harry Cole, “what are traditions about, anyway, if we don’t keep them going?”  Sooooooooooo true, especially when the tradition in question involves one of the greatest television episodes in history AND provides a cautionary tale for our clients and other readers (given that the episode was based on an actual radio station promotion gone wrong).

Once again, here is a short video from the episode formally titled “Turkeys Away”.  Enjoy.

Happy Thanksgiving from everyone at Fletcher, Heald & Hildreth, P.L.C.!

 

 

Employers (and some Employees) Thankful as Federal Court Stays New Overtime Laws

Dept of Labor logo-1For the past few months, business owners have been frantically preparing for a major change in the Department of Labor (DOL) regulations implementing the Fair Labor Standards Act (FLSA) which would greatly increase the number of employees eligible to receive overtime pay for work in excess of 40 hour per week.   These changes, were due to become effective Thursday, December 1.  However, business owners will now be giving thanks to a Judge Amos Mazzant of the United States District Court for the Eastern District of Texas, who has issued a permanent injunction staying the effectiveness of the changes.

To emphasize: these changes are not going into effect on December 1; employers do not need to reclassify employees in response to the changes. What remains to be seen is whether these rules are implemented at all, given the upcoming presidential transition and the clear opposition of House and Senate Republicans to the changes.

I discussed these changes in two different posts earlier this year, both pre-and and post-approval. The latter, in particular, explained the effect the new rules would have on media companies, especially with regard to journalists, who rarely adhere to a conventional 40 hour workweek.

The new rules, published in the Federal Register on May 23, 2016 with an effective date of December 1, contained several changes. But the biggest was clearly the new minimum threshold for the “salary level” portion of the test to determine whether an employee is exempt or non-exempt for purposes of receive overtime pay. Under the new rules, the minimum salary necessary to exempt someone from overtime pay would increase from $23,660 per year ($455 per week) to $47,476 per year ($913 per week).  Anyone making under that amount would automatically be eligible for overtime pay for every hour worked beyond 40 in a single week.  The change was estimated to move 4.1 million employees from “exempt” to “non-exempt”, while another 100,000 or so were likely to receive a salary increase, according to the Department of Labor. This salary threshold would be readjusted every three years going forward, to equate to the 40th percentile of salaried workers around the country.

Opposition with swift and widespread. Two bills were introduced in Congress:

  • HR 6094, the Regulatory Relief for Small Businesses, Schools, and Nonprofits Act, would delay implementation for 6 months (until June 1, 2017). It passed the House of Representatives by vote of 246-177 on September 28 (Mainly a party line vote but with 5 Democrats voting in favor). There is a companion bill in the Senate (S 3462).
  • S. 3464, the Overtime Reform and Review Act, would phase-in the DOL’s new salary threshold in four stages over five years, with an increase to $36,000 on December 1, a “pause year” in 2017 and further salary increases each year thereafter until reaching the new rule’s new threshold of $47,476 on December 1, 2020.

More important for our purposes, two lawsuits were filed, both in the United States District Court for the Eastern District of Texas. They are:

  • State of Nevada et al v. United States Department of Labor et al (filed by 21 state attorney generals).
  • Plano Chamber of Commerce et al v. Perez et al (filed by 50 business groups including U.S. Chamber of Commerce, several State Chambers of Commerce, the National Association of Manufacturers, the National Retail Federation, National Automobile Dealers Association, and the National Federation of Independent Business).

These were quickly consolidated into a single lawsuit (for the record, the case is going forward as State of Nevada et al v. United States Department of Labor et al) and the court began consideration of an Emergency Motion for Preliminary Injunction filed by the plaintiffs in an effort to stay implementation of the rules. On November 22, Judge Mazzant granted that Motion for Preliminary Injunction, holding that:

  • The plaintiffs are likely to ultimately win this case on the merits because imposing these new rules on state and local government agencies is likely to violate the 10th Amendment to the United States Constitution (which many people refer to as the amendment protecting “state’s rights”). This is due, in part, to the fact that the higher salary threshold creates an “evaluation ‘based on salary alone’” rather than really looking at what is an executive, administrative or professional employee. It is also because the automatic updating mechanism involves periodic adjustments to rules without a notice and comment period.
  • This is likely to result in irreparable harm to the state plaintiffs. This harm goes beyond a simple financial injury. For many states, the increase – which will range into the millions of dollars – will be impossible given state budgetary constraints.
  • The “balance of hardships” favors granting a preliminary injunction. While the states identified various hardships that rise to the level of “irreparable harm” if the rules are implemented on December 1 while the federal government could not articulate a true hardship that would result from a stay.
  • The public interest favors a stay because the potential for disruption of state budgets, resulting in possible layoffs and disruption of government functions outweighs the benefits that might accrue to 4.2 million workers around the country.

Judge Mazzant, noted that “[d]ue to the approaching effective date of the Final Rule, the Court’s ability to render a meaningful decision on the merits is in jeopardy. A preliminary injunction preserves the status quo while the Court determines the Department’s authority to make the Final Rules as well as the Final Rules’ validity.” While the DOL argued that the injunction should apply narrowly, only in those states demonstrating evidence of irreparable harm, Judge Mazzant is applying the injunction nationwide.

While many of our readers will certainly welcome this injunction, we caution against dropping all preparations for an eventual change. This is a preliminary injunction, meaning the rules are simply stayed pending the entire trial.  Yes, that trial may take several months but the end result could be that these very rules go into effect in 2017 or 2018. (To the extent you have already changes employees’ statuses in response to the rules, it might be hard to do an immediate reversal – you should absolutely consult with an experienced employment attorney — and now is a good time to remind you that we are not employment attorneys).

We can’t ignore that a big change has occurred since these changes were announced – indeed, since these lawsuits were filed. These changes were a priority for President Obama; there is every indication that his successor opposes the changes and that the new rules were already being targeted for repeal.  The fact that the House had passed HR 6094 was largely irrelevant given that the 246-177 tally amounted to only 58% in favor, short of the 2/3 needed to override a likely Presidential veto.  The change in Administration increases the prospects for HR 6094 and, in fact, introduction and passage of legislation to fully repeal the changes, which could certainly happen before the court case is finished.

Of course, nothing is certain. It would be foolish to assume this means the rules will be scrapped altogether. My advice for those who were dreading these new rules (and remember: this shouldn’t be considered legal advice):  hope for the best but continue to prepare for the worst.

RMLC Seeks to Subject GMR to the Same Competitive Restraints Governing ASCAP’s, BMI’s, and SESAC’s Licensing Practices

We have previously written here, here, here, and here about the Radio Music License Committee’s (“RMLC’s”) successful attempt to impose on SESAC some of the same competitive restrictions that limit ASCAP’s and BMI’s ability to demand inflated license prices for publicly performing the musical compositions of their members. It was only a matter of time before someone would challenge on antitrust grounds the aggressive tactics of the new kid on the music licensing block – Global Music Rights (“GMR”).

On November 18, the Radio Music License Committee (“RMLC”) did just that.

The RMLC is a trade association that represents the interests of thousands of commercial radio broadcasters in music licensing matters (other entities that are active in these matters on behalf of radio broadcasters are the National Association of Broadcasters and the National Religious Broadcasters Music License Committee). Over the years, the RMLC has been particularly active in negotiating licenses with ASCAP, BMI, and SESAC that allow radio stations to broadcast and webcast musical compositions.

GMR is the fourth – and newest – performing rights organization (“PRO”) that negotiates licenses to perform the musical compositions owned by its members (it joins ASCAP, BMI, and SESAC in this function). GMR was founded in 2013 by Irving Azoff with an express goal of extracting much higher music license fees than those that have been negotiated with other PROs such as ASCAP and BMI.  Its strategy has been to attract a small, but select, number of members representing high-value compositions that music users won’t easily be able to avoid playing.  It claims to represent the interests of members owning the copyrights to compositions performed by artists such as The Beatles, Pharrell, Blake Shelton, Bruno Mars, and Taylor Swift, among others.

The RMLC sued GMR in the same court where it had sued SESAC and achieved a favorable settlement following some interim court rulings in its favor.  It claimed that GMR’s licensing practices amounted to monopolization and attempted monopolization under the Sherman Act.  The RMLC specifically called out GMR for:

  • “demand[ing] outrageous fees that are grossly disproportional to the underlying share of works in its repertory,” which the RMLC claims is “‘take it or leave it’ pricing fully divorced from market constraints”;
  • “demand[ing] additional rate increases for each of 2018 and 2019, regardless of whether GMR’s repertory will contain fewer or less frequently played works, or a smaller percentage of fully-controlled works”;
  • offering no alternative other than a full blanket license with no fee reductions for directly licensed works, which means that radio stations can’t save any money by negotiating separate deals with some of GMR’s members;
  • “offer[ing] only a fractional license,” which means for works only partially owned by GMR’s members, the license, standing alone, offers no protection from infringement claims; and
  • failing to be “transparent about what its repertory contains,” which makes it even harder for radio stations to know what rights they are purchasing and whether they even need those rights given their airplay patterns.

The RMLC also claims that the harm from GMR’s actions “goes far beyond GMR and its repertory” because ASCAP, BMI, and SESAC are watching GMR’s negotiations and attempting to obtain for their own members any fee increases that GMR is able to extract.

The RMLC seeks a preliminary injunction that would require GMR to:

  • grant immediate licenses upon the request of a user while fees are being negotiated;
  • “submit to a judicial rate-making procedure comparable to what the consent decrees regulating ASCAP’s and BMI’s behavior impose”;
  • submit to a judicial procedure requiring it to disgorge monies that a court determines exceed a reasonable license fee;
  • refrain from entering into de facto exclusive licenses with its members;
  • “make available economically viable alternatives to blanket licenses, such as per-program licenses, blanket carve-out fees, and commercial-only licenses.; and
  • “offer only full-work licenses” rather than fractional licenses.

Why does GMR and this lawsuit matter to radio broadcasters and other music users?

Stations have been used to paying three PROs – ASCAP, BMI, and SESAC – for the right to broadcast and webcast musical compositions (they also pay SoundExchange for the right to webcast recordings of those compositions).  They need to adjust to the new reality that there are now four PROs for them to consider as they secure licenses for this right.  While GMR’s catalog is still small (the RMLC estimates that it represents only 5-7.5% of all musical works), GMR has strategically courted copyright owners for big-name works that radio stations will find difficult to avoid in creating their programming – particularly in programming over which they have little to no control, such as syndicated programming and some commercials.

The RMLC has sued GMR because, among other reasons, GMR has demanded fees that the RMLC claims far exceed its share of musical works, amounting to some 15% of all royalties paid for publicly performing those works, and the RMLC has not been willing to agree to those fees. On November 22, the RMLC shared some useful tips with radio stations regarding the lawsuit and four possible approaches that radio stations could pursue as they consider how to respond to this new entrant to the music licensing world:

  1. pay the fees demanded by GMR (which the RMLC discourages given how high those fees are);
  2. attempt to avoid playing any GMR compositions (which could be hard given the prominent names that figure in GMR’s catalog and the difficulty of clearing performances in commercials and third-party programming);
  3. continue to play GMR music without attempting to negotiating license (a risky venture given how high infringement damages can run); and
  4. challenge GMR’s anticompetitive conduct in a lawsuit, as the RMLC did.

The RMLC’s lawsuit is still in its infancy, and GMR has not yet filed its answer to provide a window into its response strategy. It is relatively safe to assume, though, that it will fight the RMLC’s claims vigorously, as they strike at the heart of GMR’s founding purpose to extract more license royalties for its members than the members of the other PROs receive. The case has been assigned to the Honorable Darnell Jones in the Eastern District of Pennsylvania – the same federal judge who presided over the RMLC’s litigation against SESAC that settled on favorable terms for the RMLC last year.  If that litigation is any indication, radio stations may soon see some of the same competitive restraints that limit other PROs’ ability to demand supracompetitive license fees imposed on GMR as well.

If you have any questions about this lawsuit or would like advice about how to deal with GMR, we are here to help. In the meantime, stay tuned ….

DC Circuit Vacates FCC OTT VoIP Order on End Office Access Charges

A recent D.C. Circuit Court decision may significantly impact the access charges billed by over-the-top VoIP carriers.

In 2015 the Commission issued a declaratory ruling (In re Connect America Fund, 30 FCC Rcd. 1587 (2015) regarding the classification of end office local switching when internet service providers (“ISPs”) collaborate with over-the-top VoIP providers to complete interexchange calls. AT&T didn’t like what the FCC came up with and asked the D.C. Circuit to weigh in. The court has now vacated and remanded the declaratory order so the Commission might clear up its “muddled treatment” of the term “functional equivalence”.

The court decision reduces the revenue that over-the-top VoIP service providers receive from long distance carriers like AT&T when the VoIP carrier completes a long distance call for the long distance carrier. Instead of receiving payment of an end office switching rate, over-the-top VoIP service providers will receive payment of a tandem switching rate, which is generally much lower.  

After applying the FCC’s functionally equivalent test, the court held that the FCC had failed to identify functions performed by the VoIP carriers that were functionally different from tandem switching and unique to end office switching. In vacating the FCC decision allowing VoIP carriers to charge for end office switching, the court has limited over-the-top VoIP carriers to billing for tandem switching instead.

 

D.C. Circuit Finds FCC’s Unlawful Give-Away of Licenses Unreviewable

In a unanimous decision, the D.C. Circuit Court of Appeals this week rejected a claim by small wireless carrier NTCH, Inc. the FCC had unlawfully awarded thousands of licenses to Verizon Wireless in violation of the Communications Act.

The case arose out of Verizon’s application in 2012 to acquire numerous licenses from SpectrumCo, a consortium of cable companies. The transaction involved a fairly routine examination of whether the acquisition would give Verizon undue power in various submarkets until the very end of the FCC’s review process.

At that point, the agency suddenly issued an order articulating the circumstances by which a common carrier licensee could be relieved of the alien ownership prohibitions of Section 310 of the Communications Act. Three days later, without any prior noticed to the public and on its own motion, the FCC granted forbearance from the alien ownership restriction and approved the SpectrumCo transaction.

The Commission also purported to retroactively forbear from the application of this law to thousands of applications which had been granted to Verizon between the years 2000 and 2012. This action was necessary to legitimize Verizon’s past and future acquisitions since Verizon was indirectly 45% owned by a foreign company, Vodafone, which is contrary to the Act.

NTCH, which had challenged the SpectrumCo deal on conventional grounds, cried foul. In a petition for reconsideration, it argued the Commission could not retroactively forbear from application of the alien ownership prohibition, and the agency should also open proceedings to revoke the numerous licenses that had been improperly granted in the past.

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Some 5G Rules Take Effect Soon

(More rules recently went through public comment and are still pending)

fcc and 5G-1

 

Last July we reported on the FCC’s progress toward future wireless “5G” technologies, which promise blindingly fast data speeds.

The rules adopted then are now slated to take effect on December 14, except for those on satellite earth stations in the 27.5-28.35 and 37.5-40 GHz bands, and on 5G provider cybersecurity requirements. Because these contain new requirements for information collection, they must await approval by the Office of Management and Budget.

The document that adopted these rules also included a Further Notice of Proposed Rulemaking. Comments and reply comments now have been filed in response to that FNPRM. Among the many issues raised …

  • Some parties want to open up the 71-76/81-86 GHz bands to unlicensed use, perhaps indoor-only, and some want to expand use of 92-95 GHz, perhaps also for outdoor use.
  • Another key question – whether the Commission should adopt SAS database requirements (similar to the super-charged database control system that the Commission adopted for the 3.5 GHz band) for operations in the 71-76/81-86 GHz bands – did not receive much support.

While equipment and chip manufacturers are eager to finalize designs and business plans based on these new proposals, the Commission may not move quickly given the upcoming change in administration.

Watch this space for updates

What Will a Trump FCC Look Like?

(Speculation Abounds, But Much Will Stay the Same)

thinkerA new administration always brings many questions from clients about how their FCC issues may be impacted. A Trump presidency brings even more questions than usual, because his campaign did not set out detailed proposals on telecommunications and spectrum policy.

While much speculation brews inside the Beltway, this is what we can say for sure: Continue Reading

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