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

YOU own it. No, YOU own it. No, YOU own it  . . . .

A recent decision from the full Commission teaches us a couple of valuable lessons when it comes to potential liabilities both for tower owners and for those who may not think that they’re tower owners.

It all started in 2006, when Ely Radio, LLC bought KWNA(AM), Winnemucca, Nevada. The deal provided, in standard contractual terms, that the buyer would be acquiring all the “property and fixtures . . . used or useful” in the station’s operation. The average reader might leap to the conclusion that the “property and fixtures” in question would necessarily include the station’s tower. Don’t be so sure. 

Fast forward a couple of years. The Enforcement Bureau’s San Francisco Field Office determines that the station’s tower hasn’t been lit at night; making matters worse, the tower’s owner hasn’t been making the required observations and, as a result, hasn’t reported the outage to the FAA. When the Enforcement folks check the FCC’s database, they determine that the tower’s owner is listed not as Ely Radio, LLC, but rather the company that had sold the station back in 2006.

Covering all their bases, the Field Office reps notify both the 2006 seller and buyer of the problem. The seller promptly writes back to advise the Commission that the tower was sold to Ely Radio as part of the 2006 deal, even though the seller did apparently hold onto the land on which the tower is situated. Based on that information, the Enforcement Bureau issues a Notice of Apparent Liability to Ely Radio for the tower lighting, observation and notification violations; the Bureau throws in an additional violation – failure to notify the Commission of the 2006 change in the tower’s ownership. Ely Radio responds that, contrary to what the 2006 seller may be saying, Ely Radio did not acquire the tower as part of its deal, so the seller is the one who should be liable for any tower-related violations. 

At this point, let’s recall the Commission’s longstanding policy of refusing to adjudicate issues relating to local law.

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Longstanding limits on content, facilities under scrutiny in wide-ranging NPRM

If you (like most of your fellow citizens) spend much time on the highways and by-ways of our great country – or if you have an interest (commercial or otherwise) in reaching folks on those same highways and by-ways – listen up. The Commission has launched a rulemaking to explore possible changes in the Travelers Information Service (TIS), the AM-based low-power service that provides a constant diet of, um, travelers information along highways and near various travel-based locations. At the request of several associations of government officials and TIS operators, the FCC has issued an Order and Notice of Proposed Rulemaking (NPRM) to consider whether TIS stations should be permitted to air a greater range of information at greater power in a greater variety of locations. The range of possible changes includes, at one extreme, a substantial redefinition of the service itself.

The TIS has been around since 1977. TIS stations operate in the AM band, as a primary service on 530 kHz and on a secondary basis on 535-1705 kHz. With maximum power of 50 watts, they are low-power operations designed to reach a narrow audience of travelers passing in the immediate vicinity of each station. The content of their transmissions is limited to “noncommercial voice information” about traffic (including road conditions, hazards, advisories, directions), nearby options for lodging, rest stops and service stations, and descriptions of local points of interest. The strict limitations on the service were imposed out of concern about possible interference and competition with commercial broadcasters.

Citing broad changes that have occurred in the country in the three decades since TIS began, the petitioning associations of government officials and TIS operators suggest that the Commission:

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Enforcement Bureau sets out on an indecency fishing expedition, or a wild goose chase – or, perhaps more accurately, a Fox hunt.

Grab your rod, bait your hook, put on your floaties – and don’t forget the sunscreen – it looks like we’re all going on a fishing expedition, thanks to the FCC’s Enforcement Bureau!

Apparently determined to make the already murky area of indecency regulation even murkier, the Bureau has: (a) issued a Notice of Apparent Liability, to the tune of $25,000, to Fox because Fox’s response to a Bureau inquiry was not, in the Bureau’s eyes, responsive enough; and (b) issued more than 200 more letters of inquiry, addressed to all Fox affiliates. With that many hooks in the water, the FCC is obviously hoping to land a couple of big ones.

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Media Bureau finds no problem with TV deal featuring SSA, JSA, other arrangements between two licensees in Corpus Christi market

In the latest of a growing line of cases, the Commission’s Media Bureau has approved a multi-level operating arrangement permitting two television stations in the same DMA to merge aspects of their operations in ways which bump up against – but apparently don’t violate (according to the Bureau) – the Commission’s duopoly rule.

The case involved two stations (we’ll call them Station A and Station B) in the Corpus Christi, Texas market. Common ownership of both stations would be barred by the duopoly rule, but the two licensees perceived considerable potential benefits if the two stations’ operations were conjoined in certain respects. And as often is the case, where there’s a will, there’s a way.

Station A agreed to sell its licenses, network affiliation and syndication agreements, and certain equipment and leases to a third party (“the New Guy”). At the same time, Station A entered into a separate agreement to sell Station A’s real property, certain other equipment, and additional assets to the owner of Station B. Station B and the New Guy also entered into a series of ten-year operating agreements, including a Shared Services Agreement (SSA), a Joint Sales Agreement (JSA), an Option Agreement and an Equipment Lease Agreement – but while the proposed sale of Station A was pending before the Bureau, the New Guy assigned those agreements to Station A. Additionally, Station B agreed to guarantee a bank loan for the New Guy.

Station A and Station B put the SSA, JSA and Lease Agreement into effect immediately, without waiting for FCC approval.  The net result was that significant elements of Station A’s operation became subject to substantial input, if not control, by Station B. For example, under the SSA, Station B provides newscasts (up to 15% of programming) and Station A pays Station B a monthly fee of $100,000. Under the JSA, Station B sells all of Station A’s commercial time and sets ad rates for Station A.

Needless to say, this arrangement attracted the attention, and aggressive opposition, of a competitor in the Corpus market. Alarmed that the arrangement would apparently give 50% of the ad revenues in the market to Station B, the competitor challenged the arrangement as a de facto duopoly and an unauthorized transfer of control. The Commission’s staff ruled otherwise.

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Media Bureau puts kibosh on NCE applications with Channel 6 contingencies

Sometimes it doesn’t pay to get creative, especially where the FCC’s rules are concerned.  This was apparent in an April 1 Public Notice which supposedly “provided guidance” to noncommercial educational (NCE) FM stations with regard to television Channel 6 protection requirements.  Significantly, the Notice was issued by the Media Bureau, not the Audio Division.

Because NCE FM channels are close neighbors to Channel 6 on the spectrum, NCE FM stations (and related applications) must protect nearby Channel 6 stations.  A couple of very narrow exceptions are available, one of which involves submission of an unconditional agreement between the NCE and the Channel 6 station in which the latter “concur[s] with the proposed NCE facilities.” 

The Channel 6 protection requirement cropped up big time in the run-up to the October, 2007, NCE FM filing window.  Channel 6 problems would ordinarily have prevented the filing of many applications.  But several NCE applicants came up with a work-around.  They noted first that, after the DTV transition (then scheduled for February 17, 2009), a lot of Channel 6 operations would simply disappear, as the stations in question abandon their analog Channel 6 facilities for digital facilities elsewhere on the TV band.  The would-be applicants then calculated, correctly, that the NCE FM permits they were filing for wouldn’t be granted for at least a year or two – which means that their three-year construction periods would run well past the DTV transition. 

So, they reasoned, if there would be no Channel 6 operation to worry about when construction time actually rolls around, shouldn’t they be able to ignore Channel 6 at the application stage?

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 It's ex parte time as FCC pins "permit-but-disclose" label on application!!

Earlier this month we posted a piece about the ION/Urban Television “assignment” application which proposes the sale of a bunch of secondary digital TV streams – but not the primary streams associated with them – from ION Media Networks to Urban Television LLC, a company controlled by media mogul Robert Johnson.  We have nothing new to report about the proposal itself, but we do have some news about the FCC’s processing of that proposal. 

The Commission has announced that the application will be treated as a “permit-but-disclose” proceeding.  This means that interested parties may communicate with FCC staffers on an ex parte basis – i.e., on a “one-sided”, or one-on-one, basis, away from the prying eyes of other interested parties.

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Talk about outside-the-box thinking. In a deft attempt to snag FCC-blessed mandatory cable carriage for non-primary digital streams – an issue which the FCC has managed to dodge for years – ION Media Networks and BET founder and billionaire Robert Johnson have lobbed in an assignment application which, if granted, would likely have profound effects on the DTV television industry. And by stirring more than a dash of “diversity” flavoring into the mix, ION and Johnson are looking to take advantage of the fascination with diversity that has gripped the Commission for the last year or two (and which will almost certainly continue to grip it in the upcoming Obama administration).

The FCC has invited public comment on (or petitions to deny) the proposal. The current deadline for comments/petitions is December 26. Merry Christmas.

The application, filed by ION and a new Johnson-controlled company (Urban Television LLC), proposes the “assignment” of the licenses of 42 television stations currently held by ION. But ION would not be letting go of its stations in any conventional sense. Rather, Urban is proposing to buy “licenses” to operate on a second digital stream of each of ION’s stations. In other words, ION and Johnson are asking the FCC to treat non-primary digital streams as separate, and separately licensable, authorizations. The proposal contemplates that Urban would hold a separate license for its operations in each of the 42 markets, while ION would continue to hold its own licenses in those same markets.

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 DTV Permittees – This Means You!!!

The FCC has its hand in more broadcasters' pockets again. Effective November 10, 2009, responsibility for annual fees of 5% of revenues from ancillary or supplemental services (e.g., data transmission) extends to DTV permittees as well as DTV licensees. The fees are due on December 1 for the period through the preceding September 30 of each year, accompanied by FCC Form 317 (which must be filed electronically through CDBS). While DTV licensees have had to deal with Form 317 for some time, this year will be the first for DTV permittees – but since the impending DTV transition has already triggered an avalanche of new paperwork for DTV permittees (including quarterly public education reports and construction status reports, not to mention mod applications and license applications), what’s one more report, anyway?

According to the Commission, the services that are subject to reporting and fee requirements include “any ancillary or supplementary service for which a subscription fee is required or for which the licensee receives any compensation for transmission of material other than commercial advertisements used to support broadcasting.” That narrows it right down. In fairness to the Commission, though, this whole ancillary/supplementary fee business came from Congress, which dumped it in the Commission’s lap back in 1996.

Form 317, now available online at CDBS, requires each DTV licensee and permitted to describe:  (1) any and all ancillary/supplementary services provided; (2) which services were feeable; (3) whether any ancillary or supplemental services were not subject to a fee; (4) gross revenues received from all feeable ancillary and supplemental services provided during the applicable period; and (5) the amount of bitstream used to provide the services. From this wealth of information you will be able to determine whether you owe the Feds their 5%. If it turns out you do owe a payment, you’ll have to pony up when you file the report and you’ll have to include Form 159. But even if you owe no payment, you’ve still got to submit Form 317 to verify that you do not.

If you neglect or forget to ante up, you may get caught up in an FCC audit of your records which support the calculation of your payment. To help the FCC nail you, the FCC's rule here requires that you retain records related to the services for three (3) years from the date of payment. (Where’s that pesky Fifth Amendment when you really need it?)

If you would like any help on this latest reporting and payment obligation, let us know. We won't help you pay it, but we can help you with the form and any questions you may have about it.

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