CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

Consumer-friendly (?) Big Cable seeks Big Cable-friendly overhaul of retransmission consent process

A group consisting of some of the major multichannel video program distributors (MVPDs) has run to the Commission asking for changes in the retransmission consent rules. The group – for convenience, let’s refer to them collectively as “Big Cable”, although they include (in addition to major cable operators) non-cablers DirecTV, Dish, a couple of phone companies, and even some supposedly independent advocacy/think tank groups – is concerned that Big Cable’s ability to call the shots when it comes to carriage of broadcast signals has gone away, and Big Cable understandably wants it back. Who wouldn’t?

In a Petition for Rulemaking, Big Cable declares that the retransmission consent system is “broken”. Not surprisingly, Big Cable had this particular epiphany immediately after several very public sets of carriage negotiations in which, e.g., Fox and ABC demonstrated their negotiating acumen, and clout, in facing down some very major cable operators. Who “won” or who “lost” those negotiations is, of course, a matter of opinion and spin. But Big Cable is now urging the FCC to impose a mandatory arbitration process and to require that MVPDs continue to carry stations when parties can’t reach a deal.

Sure sounds like Big Cable may be thinking that, nowadays at least, the broadcaster-MVPD negotiation process isn’t exactly what it was cracked up to be . . . at least for Big Cable.

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Proposals are intended to make FCC proceedings more efficient and transparent, and less prone to abuse.

Those of us charged with getting the FCC to do things – issue licenses, grant waivers, cancel fines, all of that – are vitally interested in the fine points of FCC procedures, because understanding them can spell the difference between success and failure.  Just as no one would sensibly sit down to a game of poker without knowing that three of a kind beats two pair, no competent practitioner would take on the FCC without knowing the somewhat more complex rules of that agency’s regulatory game. And, sometimes, part of the job lies in knowing how to navigate those rules most advantageously.

So we take notice when the FCC proposes to change its procedures, as it did in two recent Notices of Proposed Rulemaking (NPRMs).  By and large the amendments are meant to serve laudable goals:  to make FCC proceedings more efficient and transparent, and to forestall some of the more common forms of abuse.

One NPRM proposes internal housekeeping changes which would:

• allow the staff (in place of the full Commission) to dispose of frivolous or repetitive requests for reconsideration;
• allow the FCC to amend  an action (as well as to set it aside) within the first 30 days;
• expand the use of electronic filing and notification;
• close some of the 3,000+ dockets that have become inactive;
• split overly large dockets; and
• clarify the effective date of new rules.

In a separate NPRM, the FCC takes on the always-controversial subject of its ex parte rules.

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Long in coming, closed captioning complaint process finally emerges; Contact information due by March 22, 2010

The gestation period for the closed captioning complaint process – which thus far has fallen somewhere between the gestation periods of giraffes (420-450 days) and sperm whales (480-590 days) – appears to have entered its final phase. 

The Commission first announced its new and (arguably) improved complaint process in early November, 2008. As of December, 2009, that process had still not become effective, even though the Office of Management and Budget had signed off on it in July, 2009. But now we are pleased to report that the FCC has announced that the new closed captioning complaint process is effective as of February 19, 2010 . . . except for Section 79.1(g)(3), which still isn’t.

Let’s put that exception off to the side for the moment and focus on the elements of the process that have (finally) become effective.

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With “Reboot.FCC.Gov”, FCC solicits public input to improve public interaction with agency

Depending on who you ask, 2010 may or may not be the start of a new decade. Depending on who answers, 2010 may or may not be the start of a new FCC. That’s because the FCC is relying on you (and you and you, the guy in the brown shoes reading this during his lunch break) to help decide on the direction in which the agency should be moving. They’ve labeled this process “Reboot.FCC.Gov” and, like all the kids are doing nowadays, they’ have not only set up a website at that domain, but also tied the whole thing together with the Blogging, and the Twittering and the Facebooking and the YouTubing (there’s a bunch of other social media connections as well, including, for some reason MySpace, in case the next big indie band wants to participate).

A more conventional format was used to launch the rebooting process on January 13: a press release (the website does contain a one minute “welcome” video from FCC Chairman Julius Genachowski).  As that release explains, the Commission is “soliciting public input on ways to improve citizen interaction with the FCC.” The Chairman elaborates on this, explaining that the goal is to “get input from all corners of the country on ways to improve usability, accessibility, and transparency across the agency.”

The project’s efforts focus on five key elements:

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All is CALM as Eshoo bill moves to Senate

Last June we reported on the renewed efforts by Congresswoman Anna G. Eshoo (D-Calif.) to rid society (well, U.S. society, at least) of that scourge of the TV viewing experience, loud commercials. Having tried unsuccessfully to turn the volume down on TV advertising last year, she came back again last February, legislative mute button in hand.

And this year it looks like she may have a winner with H.R. 1084 – the Commercial Advertisement Loudness Mitigation Act (or CALM Act) – which was recently passed by the full House. But it took some tinkering to get there.

As originally drafted in February, her bill would have required the FCC to prescribe regulations to assure that: (a) ads accompanying video programming (from broadcasters and/or MVPDs) not be “excessively noisy or strident”; (b) ads not be “presented at modulation levels substantially higher” than the programming they accompany; and (c) the “average maximum loudness” of ads not be “substantially higher” than the “average maximum loudness” of the accompanying programming.

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Closed captioning complaint process inches ahead

From our “Hey, Whatever Happened To . . . ?” file, here’s an update on the new (well, at least it was new a year ago) complaint process relative to the closed captioning rules for video programming. That process was first announced in November, 2008, but has still not yet gone into effect.

As we reported back in November, 2008 (and again in January, 2009), the new complaint process – set out in a Declaratory Ruling, Order and Notice of Proposed Rulemaking released in November, 2008 – requires that the recipient of an incorrectly addressed closing captioning complaint forward that complaint on to the correct party. For example, the complainant might have written to her cable company – since that’s who she normally writes her monthly subscription checks to – not realizing that the party really responsible for the complained-of captioning issue was a program producer or distributor unrelated to the cable company. Under the new rules, the cable company would be obligated to forward the complaint on to the right folks.

As it turns out, that raises a problem.

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The subscriber cap which the Commission adopted in 2007 to keep cable companies from acquiring too much control of program delivery mechanisms is officially toast. The U.S. Court of Appeals for the D.C. Circuit declared the cap arbitrary and capricious and vacated it on August 28. Since the same Court had sent the same cap back to the agency for further consideration in 2001, this should be no big surprise – especially since the Commission’s 2007 explanation for the cap failed to address questions which the Court had told the Commission to consider.

Way back in 1992, Congress directed the Commission to fashion rules that would prevent any cable operator (or group of cable operators) from unfairly impeding the flow of programming to the consumer. In response, the Commission reached into its magic hat, intoned a couple of cryptic mathematic incantations, and – presto – announced that it had concluded that no single cable operator should be permitted to serve more than 30% of all subscribers. That was in 1993.

Since then, the Commission has twice changed the mystical mathematic formula supposedly used to calculate the subscriber cap, but both times the new formulae have miraculously led back to the same 30% cap. What a coincidence!

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It’s official! The FCC has formally announced that the deadline for reg fees this year will be 11:59 p.m. (ET) on (drum roll . . . fanfare) September 22, 2009. But why wait until then? The teller windows are now open at Fee Filer, so why not avoid the late September rush and check this chore off your to-do list right now.

The newly-officialized deadline is indeed the same as was reflected in the reminder letters received by many a week or two ago. While we had informally heard from a Commission staffer that that date might get moved a tad, that plan apparently got nixed – possibly because of the potential for confusion that it reeked of.

When you do pay your reg fees – and, given the penalities for non-payment, there really is no option here – don’t forget to include payments for all your auxiliary licenses. The reminder letter sent out by the Commission lists only your main channel(s), and leaves it to you to track down those pesky auxiliaries (the fee for which is $10 each). While the 25% late charge on a $10 fee may not look bad, the other, non-cash, penalities – including possible red-lighting – should be scary enough to get you into ULS tout de suite to doublecheck your list of auxiliaries against what the FCC thinks you have.

We here at Fletcher Heald will be happy to assist in getting reg fees paid. Let us know if we can help.

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You may be getting a letter from the FCC in the next couple of days (if you haven’t already) alerting you to the deadline for this year’s regulatory fees.  That letter – which will not bear any signature of any FCC official or identify any originating office within the FCC – will probably say that the deadline is September 22. 

Don’t necessarily believe it.

 We have been informally advised by the Commission’s staff that the letters were prepared and shipped out by an outside company to which the FCC had given the September 22 date some time ago.  But in the meantime, the Commission’s staff has apparently determined that either September 23 or 24 might be a better date.  We are told that an official notification – including a banner to be prominently displayed on the FCC’s website – is in the works.  Of course, the final date may turn out to be September 22 after all, just like the letter says.  Sometimes you never know about these things.

Needless to say, whatever the final deadline might be, you are not required to wait until the very last minute to file your fees.  Au contraire.  You should feel free to file your fees at your earliest convenience.  As far as we can tell, the fees specified in the letter notifications that got sent out may be correct (although, as we have previously warned everyone, those notifications do not include fees for any auxiliary stations).  In other words, with the letter in hand you should be able to figure out what you owe.  So you might even be in a position to file your fees today.

Not. 

Unfortunately, as it turns out, the Commission’s Fee Filer system has not yet been set up to accept this year’s reg fees.  And, as we have previously reported, all reg fee filers this year must start the payment process through Fee Filer.

When will you be able to file your fees?  When will you have to file your fees?  At this point nobody seems to know for sure.  We expect all of these questions to be cleared up reasonably quickly.  Check back here to CommLawBlog for updates on getting your reg fees filed.

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Filing deadline still unannounced

The Commission has adopted its final schedule of Regulatory Fees for 2009. You can find the new fees listed in Appendix C of this Report and Order. (Since the R&O – including its nine appendices – runs to 68 pages, it may be helpful to point out that Appendix C appears at pages 21-23 in the PDF version you will find when you click on the link.)

The new fees are, with one exception, the same as the Commission proposed last May. We described those proposed fees here. The sole exception is the fee associated with AM CPs. Here’s a surprise: the final fee ($400) turns out to be $80 less than the FCC had originally proposed!

The only real change this year is that electronic payment of all reg fees must be started through the FCC’s Fee Filer system as of this year. The Commission recognizes that some folks may not be able actually to pay through the Fee Filer system. (For example, the fees for some licensees may exceed $100,000, and credit card payments in such amounts may not be a happening thing.) But at a minimum, everybody is supposed to start at Fee Filer because that will enable them to generate a voucher Form 159-E which, the Commission assures us, “will have important electronic attributes associated with this regulatory fee payment.” With very limited exceptions, anyone not paying their fees through Fee Filer will need a voucher Form 159-E to accompany their payments.

Accessing the Fee Filer system requires you to have a current FCC Registration Number (FRN) and associated password. If you don’t have an FRN, we would be happy to help you work through the CORES system to get one.

As it has done for the past five years, the Commission will again send out “assessment notifications” to all broadcast licensees, advising them of the reg fees associated with their primary licenses. But, also as in past years, those notifications will NOT include any necessary fees for auxiliary licenses. This is important to remember, because even though auxiliary fees don’t show up on the FCC’s notifications, such fees are still required to be filed – and a failure to file even the weeny little $10 fee for, say, a remote pickup unit can result in “red light status” affecting all your licenses.

We expect the deadline for reg fees to be announced shortly.  Check back here to CommLawBlog.com for updates.

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It’s that time of year again! Claims for cable retransmission copyright royalties and/or satellite copyright royalties earned during 2008 must be submitted to the Copyright Royalty Board of the Library of Congress by Friday, July 31, 2009. 

Eligibility for royalties is based on carriage of your station's programming outside of your local service area.  As a general matter, a station is eligible to receive royalties if its programs were retransmitted on "distant" cable systems and/or carried on satellites to subscribers outside the station's Designated Market Area (DMA).   A cable system is “distant" vis-à-vis a staion if the cable system is:  (1) outside the station's DMA; AND (2) at least 35 miles from the  station's community of license; AND (3) outside the station's predicted Grade B contour.

If you would like assistance in the preparation and filing of royalty claims, please contact Davina Sashkin at sashkin@fhhlaw.com or (703) 812-0458.

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The Commission has released its Notice of Proposed Rulemaking (NPRM) laying out its proposed 2009 regulatory fees. To no one’s great surprise, for the second year in a row all but one of the 61 categories of broadcast-related fees are proposed to go up. (The lone exception is the fee for a broadcast auxiliary license, which – also for the second year in a row – is proposed to remain at $10.) The proposed fees are listed in Appendix I to the NPRM.

And when we say “up” we mean “UP”. Reg fees for all full-service TV licenses in the Top 100 markets would increase by more than 9%, with UHF stations in the Top 10 going up by more than 14% and VHF’s in Markets 11-25 up by more than 13%. 

On the radio side, Class C AM’s in all markets are looking at double digit surges mainly in the 13%-14% range (and as much as 15.4% for stations serving populations of 25,001-75,000). Class D AM’s would fare only slightly better, with increases in the 11%-12% range (except for those serving fewer than 25,000 listeners – they’d only get whacked for a 9.5% increase). All FM stations are looking at reg fees that would be 5%-9% higher than last year.

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FCC invites comments on birders’ proposals regarding tower approvals

If you think you might be needing to build a tower in the next several years, listen up. The birding lobby has opened a new offensive in its long-running effort to force the FCC to give greater consideration to bird-related concerns when it authorizes tower construction.

Recently, the Commission invited comments on the following proposals advanced by the birders:

• Amend the Commission’s environmental regulations so that exclusions from those rules are available only for FCC actions that have no significant environmental effects individually or cumulatively;
• Prepare a programmatic environmental impact statement addressing the environmental consequences of the Antenna Structure Registration (ASR) program on migratory birds, their habitats, and the environment;
• Promulgate rules to clarify the roles, responsibilities and obligations of the Commission, applicants, and non-federal representatives in complying with the Endanger Species Act (ESA); and
• Consult with the U.S. Fish and Wildlife Service on the ASR program regarding all effects of towers and antenna structures on endangered and threatened species; and
• Complete the proposed rulemaking in the Migratory Birds Proceeding to adopt measures to reduce migratory bird deaths in compliance with the MBTA.

Oh, and did we mention that all of these proposals are supposed to be implemented on an expedited basis?

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First reaction to the Big Decision

[Blogmeister's note: Our crack team covered the oral argument in Fox last November, and will be providing additional coverage of the Court's decision released April 28.  The following is one commentator's view of the landscape.]

The Supreme Court has issued its long-awaited decision in FCC v. Fox Television Stations, Inc., the case involving the application of the FCC’s indecency policy to “fleeting expletives”. By a 5-4 vote, the Justices concluded that the FCC’s action was consistent with its statutory obligations under the Administrative Procedure Act. Accordingly, they reversed the contrary decision of the U.S. Court of Appeals for the Second Circuit and remanded the case back to the Second Circuit. Score one for the Commission.

While any decision favoring the Commission’s indecency policy in any way is troubling, the good news here is that the Supreme Court’s ruling changes very little on the indecency front. To the contrary, its primary effect in the indecency area is to set the stage for the next, and far more important, act in this long-running drama.

But the news is not all good. Lurking behind the high profile “celebrities talking dirty on TV” allure of the case is a major shift in a seemingly mundane legal doctrine, a shift that could affect FCC regulatory activity in all respects for years to come. So while many commentators may choose to dwell on the obvious “indecency” aspects of the ruling, the real importance of this decision lies elsewhere.

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eBay to Take Over Spectrum Auctions

It’s official!! The FCC has eloped with Internet auction giant eBay, forming a “strategic partnership” under which eBay will run all the Commission’s spectrum auctions. Citing “multiple significant synergistic” benefits, the FCC has turned its auction chores over to eBay, lock, stock and barrel: not only will eBay handle the bidding process, but it will also collect all payments through its PayPal system and even provide pre-auction screening of bidders through its established “feedback” system.

By relieving itself of the considerable administrative headaches of auctioneering, the Commission will now be able to devote more of its scarce resources to developing important spectrum management policies, such as increased monitoring of the completeness of broadcasters’ public inspection files and protecting the public from the all-too-occasional “fleeting expletive”.

In return for pulling the laboring oar in all spectrum auctions, eBay will receive a 20% commission on all auction proceeds collected. Additionally, it has been awarded naming rights to the Commission’s headquarters building (formerly known as “The Portals”) in Washington, D.C. 

According to the Commission, no current FCC staff positions will be terminated as a result of the eBay partnership. The existing staff of the Auctions and Spectrum Access Division of the Wireless Telecommunications Bureau – the folks who have historically handled FCC auction details – will help out with the transition of auction duties to eBay. After that, they’ll use their transitioning skills to help with the DTV Transition, staffing phone banks at the FCC’s Call-In Center and assisting in the installation of digital converter boxes and appropriate rabbit ear antennas. When the DTV Transition has been completed (projected date: 2015!!!), remaining FCC staff members will be assigned to serve on Skype Customer Support lines. Skype is an Internet-based telephone service owned by eBay. (Another benefit of the “strategic partnership”: selected FCC users will get a 0.5% bulk discount on Skype service!)

Some adjustments to the auction process will be necessary. For example, in order to accommodate the 20% commission due to eBay, the Commission will no longer permit the use of “bidding credits”, which have historically reduced the proceeds actually realized by the Commission from spectrum sales. Along the same lines, any bidder who has received two or more “negative” feedback comments in any eBay auction during the 10 years prior to an FCC auction will be subject to a 10% surcharge if it is the successful bidder.

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The sharp-eyed policy wonks here inside the Beltway spotted a line item in President Obama’s budget proposal called a “spectrum license user fee.” This tax – sorry, fee – would be assessed against users of spectrum blocks that are licensed but not auctioned. These include most AM, FM, and TV, most two-way mobile radio and fixed microwave, and all satellite, amateur radio, and several other categories. Unlicensed spectrum, such as that used for Wi-Fi and Bluetooth, would be exempt. Even so, the new fee is projected to bring in $200 million in 2010, increasing steadily to $550 million by 2019.

Outraged at this extra dip into the pockets of hard-working Americans? We don’t blame you. But don’t call your congressman quite yet. The chances of anybody ever actually paying this fee are small. The reasons have to do with the annual Washington ritual of budget politics.

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Editors' Note: Let’s be honest. The first day on a new job usually stinks. Everything’s new and different. Everybody’s trying to weasel up to your good side. Big and Important Stuff definitely needs to get done, but right out of the box it can be hard to tell the Big and Important Stuff from the Totally Unnecessary and Possibly Counterproductive Stuff.

As a public service, we here at CommLawBlog have put together a "To Do" List for Julius Genachowski when he arrives on the Eighth Floor of the FCC. (We know he hasn’t been confirmed yet, but who really believes that that’s going to be a problem?)  

But what do we know? The Chairman-Designate would probably benefit even more from suggestions from CommLawBlog readers. We down here in the CommLawBlog bunker merely have our fingers on the pulse of the Regulated Nation; you ARE the pulse of the Regulated Nation.

We’re sure Mr. Genachowski would welcome additional input from the blogosphere for his To Do list. Check out our initial thoughts below, then post your own using the comment box at the end of our list.

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At Congress’s direction, FCC inquires broadly about content-blocking technologies

When Congress tells the FCC to do something, the FCC has no choice: it’s got to follow orders. Back in December, Congress told the FCC to start an inquiry into “advanced blocking technologies and existing parental empowerment tools” so, sure enough, that’s what the FCC has done. On March 2 the Commission released a Notice of Inquiry just like it was ordered to.

The law that got this started – the Child Safe Viewing Act of 2007, which was signed by the President on December 2, 2008 – was not a model of specificity or precision. It directed the Commission to “initiate an inquiry to consider measures to examine”, in effect, the entire range of “blocking technologies” which might be available to “improve or enhance the ability of a parent to protect his or her child from any indecent or objectionable video or audio programming, as determined by such parent, that is transmitted through the use of wire, wireless, or radio communication.”

Gamely attempting to comply with that near-infinite mandate, the Commission is now seeking comment on content-blocking generally.

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FCC calls for comments on complaints from PEG programmers

Virtually all cable systems are required to carry public, educational and governmental (PEG) channels. These are the channels where you find an assortment of city council meetings, homework help sessions, coverage of local festivals and other home-grown programming. The FCC recently invited comments on three separate petitions for declaratory ruling regarding PEG-related carriage issues.

As useful, charming and informative as PEG programming can be, cable operators hardly rank PEG channels up with ESPN, CNN or The Food Network as “must-have” content. Go figure. But Congress has directed that cable systems must carry the PEG channels on their basic tiers, which puts the cable folks in something of a spot.  Recently, a number of cable operators have developed creative ways to fulfill – or at least arguably fulfill – their PEG obligations, while still freeing up channels for other purposes. Some of those methods have drawn the ire of PEG access organizations.

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The U.S. Court of Appeals for the D.C. Circuit has held that “retention marketing” practices used by Verizon violate Section 222(b) of the Communications Act. As a result, it may be more difficult for Verizon – and other incumbent carriers – to avoid losing customers in the competitive telephone market.

Telephone customers can move from one carrier to another, and they can take their telephone numbers with them. But when they do so, somebody’s got to tell the old phone company to release the customer’s number to the new phone company. That chore generally falls on the new phone company (in this particular case, the new company happened to be cable operators providing phone service), which sends the old company a local service request (LSR) to “port” the number.

Of course, when it receives an LSR, the old phone company learns that that customer is looking to defect to the competition. Attempting to make lemonade out of that particular lemon, Verizon took the opportunity to contact defecting customers (identified through incoming LSRs) and offered them incentives to stay with Verizon. This is a practice known as “retention marketing”.

But Section 222(b) of the Act prohibits a carrier from using for its own marketing efforts any proprietary information that it receives from another carrier "for purposes of providing any telecommunications service." The Big Question, then, was whether Verizon’s use of information from the LSRs ran afoul of that prohibition.

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On January 22, President Obama elevated Commissioner Michael Copps to the position of Acting Chairman of the Commission. Copps, who has been a Commissioner since 2001, will preside over the slimmed-down three-person Commission until a permanent Chairman takes over. Former Commissioner Tate left the agency in December  when her term ended, and former Chairman Martin bailed out as of Inauguration Day – leaving Acting Chairman Copps to rule the roost over remaining Commissioners Adelstein (D) and McDowell (R). No word yet on how long it may be before the Commission returns to full five-member strength (or who might be filling at least one of the two empty seats). Repeated media reports have indicated that President Obama intends to nominate Julius Genachowski – an Obama Harvard Law School chum and Chief Counsel to Former FCC Chairman Reed Hundt – to be permanent Chairman, but until the President makes a nomination and that nominee is confirmed by the Senate, Copps is The Man.

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In what has to have been an unprecedented farewell kiss-off by any Chairman, on January 19, 2009, now-former FCC Chair Kevin Martin (who exited the Furnitureship with the inauguration of Barack Obama) appears to have caused the Enforcement Bureau to issue 28 separate notices of apparent liability (NALs) and three forfeiture orders, all directed to cable companies, seeking an aggregate of more than $500,000 in fines. (We won’t bother to link to each of the separate orders – but you can find links to them at the Enforcement Bureau’s homepage.)

Don’t check your calendars – January 19 was, indeed, Martin Luther King Day, a Federal holiday. (It’s probably a fair question to ask whether the Bureau staffers – many of them union members – got time-and-a-half for coming in on their day off.)

The fines all stem from the cable industry’s on-going conversion to digital signal distribution, which usually cannot be seen on a TV set without a cable box of some sort, for which a monthly gratuity to the cable company gets tacked on to your bill.

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Deadlines set for rulemaking comments, but new complaint process, recordkeeping requirements still NOT in effect

Back in November the Commission released a Declaratory Ruling, Order and Notice of Proposed Rulemaking (DRONPRM) in which it (a) imposed a number of new obligations on TV licensees and other video programming distributors and (b) sought comment on how the revenue-based per channel exemption from closed captioning requirements should be applied to stations with multicast programming streams. But as we reported back then, neither the effective date of the changes nor the deadlines for comments and reply comments would be set until the DRONPRM popped up in the Federal Register. 

Lo and behold, more than two months later, the DRONPRM was published in the Federal Register, in two separate items, on January 13, 2009. (The rule changes which were adopted appear in one document, while the proposed rule changes, on which comment is sought, appear in another.) As a result, a couple of clocks are now running.

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Four-to-five figure fines for recordkeeping, self-assessment short-falls

With the release of six notices of apparent liability (NAL) at the very tail end of 2008, the FCC has given us a glimpse of what EEO enforcement is likely to look like for the foreseeable future. And the outlook is what you might expect: continued emphasis on detailed record-keeping despite the absence of any indication that any unlawful employment discrimination has occurred.

The six decisions appear to be directed to the broadest possible range of stations, with stations in the east and west, large and small licensees, minority and non-minority ownership. One common factor that all share is the age of the alleged violations: all of the alleged recordkeeping shortfalls took place at least two years ago, with most of the data going back to 2003 or 2004.   The penalty in all cases was a combination of a fine (with amounts varying from $7,000 to $20,000) and reporting conditions.

Each of the NALs arose from the Commission’s random audit program. Each year the FCC requires that randomly-selected stations submit detailed information concerning their EEO efforts. The FCC’s review process is apparently rigorous – how else to explain the multi-year timeframe from initial submission of the EEO information to the 2008 issuance of the NALs?

There are a number of lessons to be taken from the NALs.

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On Friday, December 12, we told you that the Commission had released the agenda for their final hurrah of 2008 (scheduled for December 18) - remember? Well, that was sooo yesterday’s news. 

Late that same day, the Commission announced that the December 18^th meeting was cancelled. After the Agenda was released Thursday evening, Chairman Martin received a letter from Representative Waxman and Senator Rockefeller asking the Commission to cancel the meeting and expend the Commission’s resources on the DTV Transition. Apparently, there were items on the agenda, including the AWS-3 Auction, that had raised substantial controversy and the members of Congress did not want the Commission to be distracted from the DTV Transition. According to the FCC spokesman, after receiving the letter, Chairman Martin determined that it did “not appear that there [was] consensus to move forward and the agenda meeting has been canceled.”

The public notice indicated that the Commissioners will resolve the seven items that were on the agenda via circulation. So, just like the weather in Washington, if you don’t like what's on the FCC Agenda, wait ten minutes, and it may change…

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The FCC has announced its official agenda for its final meeting of 2008, to be held Thursday, December 18, 2008 in Room TW-C305 at the Commission with a tentative start time of 10 a.m.  At the meeting, the Commission is currently planning to consider seven items:

1. A spectrum auction rules/free broadband proposal
2. Wireless license renewal
3. DTV translator service
4. Cable carriage rules
5. Violations of the Commission’s DTV consumer education requirements
6. Wireless, enhanced 911 location requirements; and
7. Satellite Digital Audio Radio Service.

Admission is free and open to the general public.  For those who cannot make it in person, audio/video coverage of the meeting will be broadcast live with open captioning over the Internet at www.fcc.gov/realaudio.

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With much ballyhoo, on December 9 a report from the majority (i.e., Democratic) staff of the House Committee on Energy and Commerce was released, slapping the bejeebers out of Chairman Martin. Titled “Deception and Distrust: The Federal Communications Commission under Chairman Kevin J. Martin”, the report concluded a year-long investigation. But despite a considerable amount of grandstanding on the part of the House Committee, the report itself is disappointing on a couple of levels. 

While it does conclude that Martin “withheld important and relevant data”, “manipulat[ed]” a staff report, “undermined the integrity of the staff”, engaged in “senseless waste of resources”, yadda, yadda, yadda, the report does not contain any truly blockbuster, make-your-eyes-bleed, exposés – no 8’x10’ glossies or lurid videos of Martin in flagrante delicto committing [fill in the political nightmare of your choice here]. In fact, none of the Committee’s charges even seems to rise to the level of a punishable violation of law or rule (although the Committee does suggest that further investigation into some matters may be in order).

More depressingly, though, the report tends to confirm the long-held but seldom articulated beliefs of a number of observers about the way the FCC operates, regardless of who happens to be its Chair. And the odds are that the issuance of the report is not likely to change anything.

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Agency takes closer look at closed captioning in the Digital Age

In the guise of looking at closed captioning requirements for digital television and easing the complaint filing process, the Commission has added new contact information posting and filing requirements for television stations and other video programming distributors. The Commission also has sought comment on how the revenue-based per channel exemption from closed captioning requirements should be applied to stations with multicast programming streams. The impressively-titled Declaratory Ruling, Order, and Notice of Proposed Rulemaking was the outgrowth of a petition filed by Telecommunications for the Deaf, Inc. and other advocacy groups for the deaf and hard of hearing back in 2004.

Of immediate import to most television stations are the changes that the Commission has made in the complaint process for viewers who run encounter difficulties with closed captioning.  The changes are designed primarily to help consumers make their problems known and obtain a prompt resolution.

Who’s who? Contact information – file it, post it, keep it current. From an operational standpoint, the most significant change is the new requirement that video programming distributors (VPDs) – a group which, for these purposes, consists of over-the-air broadcaster and multichannel video programming distributors, such as cable operators and satellite TV operators – provide contact information so that viewers will know how best to direct their inquiries and complaints. Apparently, a major issue has been that viewers have been uncertain as to whom they should contact with questions and problems. In order to alleviate that perceived difficulty, the Commission will now require that two different types of contact information be made available. While these new information requirements should prove useful, they also set up a trap for the unwary.

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In November, 2007, the Commission imposed a “viewability” requirement on cable operators in anticipation of the DTV Transition. That requirement – which was viewed by some as imposing a kind of dual-carriage obligation on cable systems – provided that cable operators will (until February, 2012) have to either: (a) continue to provide an analog tier, but down-convert the digital signal of must-carry stations into analog format; or (b) transmit the signal of must-carry stations in digital format only (for systems which are digital-only) while ensuring that all subscribers, including those with analog TV receivers, have the necessary equipment to view the broadcast content. We described the “viewability” rules in the February, 2008 Memo to Clients (and we described a later-adopted small-system exemption in the September, 2008 Memo to Clients).

In a terse decision issued on Halloween, the U.S. Court of Appeals for the D.C. Circuit rejected a challenge to the “viewability” rules which had been brought by a number of cable programmers.  The Court’s decision did not address the merits of the various arguments the programmers had advanced because, in the Court’s view, the programmers had failed to satisfy the threshold requirement of demonstrating how the programmers would be harmed by the new rules.

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The FCC recently issued Notices of Apparent Liability against Time Warner Cable (TWC) and Cox Communications, resulting from service changes when those cable TV operators migrated certain programming channels to their Switched Digital Video (SDV) platforms.  In August, 2008, the FCC found that this action by TWC violated an FCC rule requiring 30 days advanced written notice to the local franchise authority before making a service change.  More recently and ominously, however, the FCC has expanded its enforcement action and issued additional Notices of Apparent Liability asserting that the cable operators have also violated two technical rules. The Notices propose a $20,000 fine for each of the operators, as well as a requirement that the operators issue refunds to their customers who have been harmed by the move to SDV.  

The nature of the first violation alleged in the Notices is this: the migration of the channels to the SDV platform meant that only customers who had set-top boxes leased from the operators could access the channels moved to the SDV platform – customers who were taking cable service without use of a set-top box, because they were using digital cable-ready TV sets and/or DVRs, suddenly could no longer access channels that were part of their subscription package. The FCC asserts that that is a violation of Section 76.1201 of the rules, which prohibits an operator from “prevent[ing] the connection or use of navigation devices to or with its system.”  The FCC also found a violation of the same rule because the migration of the channels to SDV prevented subscribers without set-top boxes from using some of the functions of their digital-ready TV sets and/or DVRs: viewing picture-in-picture and recording one channel while viewing another.

A bit of background:  Section 629 of the Communications Act requires the Commission to ensure the commercial availability of navigation devices, thus allowing consumers the freedom to purchase and use their own navigation devices from sources other than their cable operator, as long as such use does not lead to theft of service. In order to prevent such theft, the FCC established a framework whereby the navigation functions and the security functions of devices are separated, with consumers who purchase their own navigation devices (e.g., digital cable-ready TV sets) being required to also purchase a “CableCARD” from the cable operator, which allows the subscriber to access the operator’s programming. To facilitate this, major manufacturers and operators entered into an agreement about necessary equipment standards (Plug and Play), and in 2003 the FCC issued an Order requiring compliance with those standards (Plug and Play Order).

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For years a number of programmers have complained that their requests for carriage have not been treated fairly by a number of large cable operators. Now those complaints have been referred to an Administrative Law Judge (ALJ), who has been charged with the task of “resolv[ing] the factual disputes” and recommending some resolution of the dispute within 60 days. 

While the precise issues to be resolved by the ALJ are not laid out with specificity in the “Memorandum Opinion and Hearing Designation Order” (HDO) issued by the Media Bureau, the HDO includes considerable discussion of allegations that cable systems owned by Comcast, Time-Warner, and Cox discriminated in favor of program services in which they own an interest against Wealth TV, the NFL Network, and MASN (a mid-Atlantic baseball network). Discrimination in favor of cable-owned program services is not permitted.

Wealth TV made a prima facie showing, sufficient to warrant a hearing, that MOJO, a programming service in which the cable operators have an interest that has similar content and aims at a similar demographic, was given nationwide distribution when all Wealth TV could get was a so-called "hunting license" to negotiate with individual cable systems. On the sports side, the NFL Network and MASN made a case that the cable companies treat sports channels in which they have an interest better in terms of tier selection. The FCC also raised an eyebrow about the charge that the cable companies asked for licensing fees from the sports channels, as demanding an equity interest in programming in return for carriage is forbidden.

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On September 26, the FCC released a short Declaratory Order clarifying certain issues relating to the mandatory carriage of DTV broadcast television stations on cable systems. The Order addresses the post-DTV transition effect of television stations’ must carry elections (which are due on or before October 1, 2008), the post-DTV transition channel placement rights and obligations and low power television carriage rights.

Specifically, the FCC clarified that the carriage elections for the 2009-2011 carriage election cycle will control both before and after the DTV transition. That is, the must carry election of a station currently broadcasting in analog will apply as a must carry election for the station’s primary DTV signal after the station ceases broadcasting in analog. Stations that intend to terminate analog broadcasts before the February 17, 2009, statutory deadline will need to notify their local cable operators 30 days before terminating their analog signal.

In addition, the FCC clarified that stations’ channel placement rights in the post-DTV transition world will be substantially similar to the current situation. Currently, commercial analog must carry stations are entitled to be carried: (1) on the channel number on which the station broadcasts over-the-air; or (2) on the channel on which it was carried on July 1, 1985; or (3) on the channel on which it was carried on January 1, 1992; or (4) on any alternative channel by mutual agreement. Noncommercial analog must carry stations cannot elect their 1992 channel position but otherwise have the same options.

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Score one for the cable guys...a big one.  A federal appeals court in New York has ruled that a cable company violates no copyrights when it provides virtual digital video recorder services, commonly known as "network DVRs".  Network DVRs store programming on the cable company's computers.  That means TIVO-like service without the need of a separate box hooked up directly to the customer's TV set.

The decision, from the Second Circuit U.S. Court of Appeals, potentially expands customer options, making any digital cable box or two-way TV into a DVR gateway.  For cable providers, it means the cost of providing DVR services will likely be less, potentially cutting the monthly fee needed for a solid return on investment.  If prices go down, subscriber numbers could go up, with a consequent increase in overall bottom-line for the cable guys.

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By Paul Feldman
703-812-0403
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Last month, we alerted you to the FCC's Enforcement Bureau's "Recommended Decision" that the Commission deny in part a formal complaint filed by a number of cable operators against Verizon, in regards to the retention marketing practices Verizon has been using when it receives a notice to port a phone number to one of the cable operators.  While the trade press at that time seemed to present Bureau's decision as a victory for Verizon, we were much less optimistic, noting that the reasoning in the Bureau's decision was very questionable, and that the whole thing would have to be considered by the Commission itself.  Predictably, the full Commission just released its Order and overturned the Bureau: the Commission prohibited Verizon's specific practices of using retention marketing to try to keep a customer after receiving a local service request ("LSR") from a competitor to port that customer's number, but before service has been commenced by the competing carrier.  Verizon has already sought a stay of the Order from the FCC, in anticipation of an appeal to a federal court to overturn the FCC's decision.

Unfortunately, the Commission's most recent Order does not create a clean or clear result.  Last month, we noted that the legal status of retention marketing under Section 222 of the Communications Act is a mess, and that the Bureau's Decision was a "mess on top of a mess."  The most recent Order adds another level of mess on top of that, and there is a real chance that the Order could be reversed by an appellate court.  Until that time, however, carriers would be wise not to engage in the retention marketing practices that Verizon performed.

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The FCC has requested comment on a request by the Motion Picture Association of America (MPAA), which is seeking an "expedited permanent waiver" of the Commission's prohibition against the use of "selectable output control" (SOC) for set-top boxes.  That prohibition was put in place by the Commission in 2003; you can find it in Section 76.1903 of the Rules.  You can find a copy of the FCC's public notice here.

SOC technology enables multi-channel video programming distributors (MVPDs) - mainly, cable operators - to remotely shut-off a particular output or connector on a consumer's set-top box, thereby funneling incoming content through only authorized outputs or connectors.  The primary benefit of SOC is that it would allow the MVPD to discourage, if not prevent, consumers from pirating incoming programming by assuring that such programming was available to the consumer only through outputs designed to protect against unauthorized recording and copying.  That benefits the MVPD by enabling it to attract limited-release or early release program content, such as recent theatrical movies, because the SOC would permit the MVPD to provide the program distributors assurances of extra security against the piracy of their content.

Some consumer groups objected to SOC because they view it as an ad hoc imposition that interferes with the functionality of their equipment.

In 2003 the Commission determined that MVPDs already had plenty of security mechanisms and that SOC was unnecessary.  The FCC also figured that consumer concern about SOC might slow the progress of the DTV transition.  Hence the prohibition.

According to the MPAA, the availability of SOC would "facilitate" partnerships between MPAA members (i.e., the movie industry) and MVPDs which would result in the provision of copy-protected, high definition feature films directly to subscribers prior to the films' prerecorded media release dates.  According to the MPAA, such partnerships would benefit the public by "expanding the timeliness and quality of consumers' in-home viewing choices."

The Commission seeks comment on this proposal.  The comment period is very abbreviated: comments are due on June 25 (less than three weeks after the FCC's notice inviting the comments); reply comments are due July 7.

An observation on semantics: while MPAA has couched its request as one for an "expedited permanent waiver", it seems that it might be characterized more accurately as one for the de facto, if not de jure, elimination of the prohibition.  After all, a "permanent waiver" would completely trump the rule being waived - so while the rule might still technically remain on the books, it would be a nullity, at least as far as anyone subject to the permanent waiver would be concerned.  But by seeking a waiver, rather than a formal change in the rule, the MPAA may be looking to avoid the procedural formalities - and consequent delays - inherent in the rulemaking process.

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Some three months after adopting new rules governing the leasing of channels on cable television systems for commercial use, the FCC has finally released those rules.  The rules will go into effect 90 days after they are published in the Federal Register.  These rules will not initially apply to channel leasing by entities that offer sales presentations and program-length commercials, but the FCC has invited comment on whether the scope of the rules should be expanded to include those entities.

The new rules require cable operators to post detailed information about their channel leasing policies on their websites, to respond to requests for leasing information within three business days, and to conclude contract negotiations and make channel capacity available within 35-60 days after receiving a request.

Upon request, cable operators must supply prospective lessees with information about their channel leasing policies and processes; the geographic area in which leasing is available, the number, location, and available time periods for each eased access channel; a rate schedule, any charges for studio facilities and other services; available methods for delivery programming; a sample contract; and information about their launch timetable.

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In 1978, when cable service was young and growing fast, Congress authorized the FCC to regulate "pole attachments": the rates that owners of poles (usually electric utilities) could charge cable systems for space to string their wires, and the conditions under which utilities could refuse to accommodate them. The FCC adopted rules in a series of vehemently contested orders, then refereed hundreds of disputes over how to apply the resulting formulas.

By the time of the 1996 Telecommunications Act, cable service had grown and matured. Various telecommunications providers, some seeking to compete with cable, also wanted pole space. The 1996 Act accordingly updated the FCC's authority. Among other changes, it expanded jurisdiction over poles also to encompass any duct, conduit, or right-of-way owned or controlled by a utility. And it allowed the FCC to separately regulate pole attachments for cable service and for telecommunications service. Another contentious series of orders ensued.

Yesterday the FCC once again took the lid off the pot with a Notice of Proposed Rulemaking that opens another overhaul of the pole attachment regime. The FCC notes that cable companies increasingly offer telecommunications services, and vice versa, thus calling into question the wisdom of separate rules for the two categories. The FCC proposes a new uniform rate for broadband services regardless of platform, somewhere in between the current cable and telecom rates.

Comment and reply dates have not been established. The NPRM is here.

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A spokesman for the cable industry has endorsed the notion that the FCC should be downgraded to night-watchman status over the next five years.  As envisioned by Kyle McSlarrow, President of the National Cable & Telecommunications Association, the Commission would ultimately be left to tend to consumer protection, much like the FTC.

McSlarrow was commenting in support of a D.C. think tank's proposal along the same lines.

According to McSlarrow, communications industries are all hotly competitive, and the miracle of the marketplace will control competitors more effectively than an intrusive regulatory body.  The FCC-Lite he envisions would be able to grind into action only if it determined that competition was not "adequately protect[ing] consumers against unfair methods of competition or unfair and deceptive practices."

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