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

The Commission’s rulebook may be silent about what flies and what doesn’t when it comes to SSAs and JSAs – but the Commission’s processing staff isn’t.

Shared Services Agreements (SSAs) and Joint Sales Agreements (JSAs). To some, they’re a godsend, sustaining stations that would otherwise be dead-and-gone. To others, they’re an anti-diversity scourge, a disingenuous device reflecting all that is wrong with Big Media Consolidation. One thing everybody can agree on, though: as a matter of regulation, SSAs and JSAs are not subject to specific definitions or easily identified parameters. While lots of folks recognize the acronyms and wax eloquent about the concepts underlying SSAs and JSAs, the FCC’s rules themselves are silent about their precise metes and bounds. 

If you’re a newcomer to the world of SSAs and JSAs and would like some background, check out this post from last fall. Quick recap: SSA/JSA arrangements usually involve two separate TV licensees in the same market. While common ownership of the two stations is prohibited by the FCC’s rules, the two licensees wish to cooperate with one another to increase the efficiencies of their operations. This is usually accomplished by one of the licensees (let’s call it the “Services Provider”) agreeing to provide a range of operational services to the other (the “Services Recipient”).

The FCC’s staff has been aware of – and has tacitly blessed – these arrangements for years, but only if the particular terms of the SSA/JSA arrangements don’t cross certain boundaries. Unfortunately, those “certain boundaries” have not been generally publicized. Oh sure, there have been a very small handful of high profile cases – for instance, in Hawaii last fall, or in Corpus Christi two years ago – that have shed some official light on things. But apart from those the allowable parameters for SSAs and JSAs have been disclosed during private conversations with the FCC’s staff when they are evaluating a proposed SSA/JSA arrangement in the context of an assignment of FCC licenses from one party to another.  (In 2004, the FCC did open a formal rulemaking proceeding to consider whether JSAs should be treated as attributable interests. While that proceeding is technically still open, it has gone nowhere in eight years and shows no current signs of life.)

Which is why we figured it might be a good idea to share some of what we have learned from having been in on a number of such conversations.

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FCC pulls rug out from under successful bidder: before auction, FCC says bidder is entitled to discount, but it’s a different story when pay-up time comes.

We’ve warned would-be FCC auction participants about the need to perform due diligence before diving into the bidding. (Look here, for example, or here.) The FCC routinely – and prominently – announces that it doesn’t guarantee that any spectrum it may put up for bids is actually going to work. Accordingly, careful examination of the engineering specs you have in mind is always a good idea before you commit to plunking down a chunk of change on a channel.

But now, with Auction 93 just cranking up, we have yet another reason to sound the Caveat Bidder alarm again. It turns out that, even if the FCC tells you that you’re qualified for bidding credits, you should remember the cautionary admonition: trust but verify. A bidder found out the hard way what happens when you believe what the FCC tells you.

The situation arose seven years ago, in FM Auction 37. 

A couple of brothers formed a partnership to bid on some channels.   They owned attributable interests in only two stations, so they qualified for a 25% discount as new entrants to broadcasting. In their short-form Form 175 auction application they specified the four FM channels they planned to bid on; they also laid claim to the 25% discount, identified their two stations, and fully disclosed their interests in them. So far, so good.

The FCC’s staff then wrote them a letter, pointing out that their stations happened to be in the same area as one – but only one – of the channels they planned to bid on. The FCC advised the brothers that they would not be eligible for any bidding credit with respect to that one channel. Not to worry, though, because the FCC affirmatively advised that the brothers could claim the 25% credit for the other three channels they planned to bid on.

So bid they did – successfully in fact.

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Media Bureau concedes Hawaii shared services arrangement is legal, but signals that that might not be enough for renewal

If you’re looking for evidence of the Commission’s ambivalence toward “shared services arrangements” involving TV operations, look no further than a Memorandum Opinion and Order and Notice of Apparent Liability for Forfeiture (MO&O) released by the Media Bureau the day after Thanksgiving. Although the Bureau acknowledged (as it had to) that such arrangements are not barred by any Commission rules and that the complained about three-station deal in Hawaii didn’t violate any laws, the Bureau couldn’t bring itself to fully bless the deal. 

Instead, it ominously hinted that, come renewal time, the parties to the shared services arrangements might run into some rough water. The agreements may technically be street legal, the Bureau sniffed, but they are still “clearly at odds with the purpose and intent of the duopoly rule”.

So just because those agreements might not violate any rules, the Bureau figures that the Bureau won’t be precluded “from considering whether this or similar transactions are consistent with the public interest within the context of individual licensing proceedings” come renewal time. How’s that for providing useful guidance to the folks who have already entered into, or who may be thinking about entering into, such arrangements? Sure, says the Bureau with its regulatory eyebrow raised to new heights, what you’re doing may be legal and all, but that doesn’t mean we won’t try to find a way to whack you anyway.

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American Jobs Act calls for spectrum fees

As it waves a metal detector over every inch of the country’s economy, looking for any stray nickel or dime with which to fund its ambitious American Jobs Act (Jobs Act), the Obama Administration apparently thinks it’s hit a minor jackpot: spectrum fees. That’s probably not good news for spectrum users of any stripe (although TV broadcasters may get a pass, at least initially). As the national debate on the proposed bill develops, all spectrum users should keep their eye on this particular detail. Things could get pricey if this proposal finds its way into law.

 The issue arises in Section 278, which would require the Commission to collect nearly $5 billion over the next ten years through such fees. The fees would come in through annual assessments for spectrum use. The universe of fee payers would include pretty much anybody who holds any kind of spectrum license – except broadcast television and/or public safety licensees, and initial licensees/permittees who got their authorizations through the competitive auction process. (But note – that last exemption for auction winners gets them only through the initial license term or until their license is modified, at which point they join the ranks of the fee-eligible.)

The Jobs Act doesn’t say anything about the regulatory fees that licensees already pay, so presumably the proposed user fees would be in addition to reg fees. The likely rationale: regulatory fees are supposed to cover the cost of the FCC’s regulatory operations; spectrum user fees, by contrast, constitute a tax on the commercial benefits licensees can realize through utilization of their spectrum.

How exactly would the spectrum fee be calculated for licenses in the various services?

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Companies billing for unauthorized services are fined $11.7 million.

The FCC has proposed multi-million dollar fines against four companies for allegedly “cramming”: billing telephone customers for services they did not ask for. At the same time, the FCC issued guidelines to both telephone companies and the public about how to detect and prevent cramming, and plans to offer new rules against the practice.

Cramming problems usually relate to charges by third-party companies for services supposedly ordered by the phone company’s customers, and included on the phone bill. The FCC’s “Truth-in-Billing” rules require phone bills to include clear descriptions in plain language for each service, with a toll-free number for customers to question or dispute the charges.  Until a customer complains, though, the phone company has no way of knowing whether the charges are legitimate. This leaves it up to customers to review their bills for suspect charges. Knowing this, crammers sometimes try charging just two or three dollars a month, hoping that busy consumers won’t notice. The FCC’s Enforcement Bureau says thousands of people have fallen victim. 

The FCC and the Federal Trade Commission (FTC) share responsibility for protecting consumers from cramming. The FCC has jurisdiction over the telephone carriers and other communications service providers. The FTC has jurisdiction over the third-party service providers whose charges (for things like chat lines, diet plans, etc.) are wrongly added to a telephone customer’s bill. The two agencies coordinate their enforcement activities to protect the public.

In the most recent cases, the FCC proposed fines ranging from $1.5 million to $4.2 million against four companies. (The individual “Notices of Apparent Liability” are here, here, here and here.)

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Spectrum auction participants – especially for FM permits – should be on the look-out for potential FAA hang-ups before the bidding opens

With an auction of new FM construction permits in the pipeline, we offer this word of caution: potential participants should be careful to do their homework before they bid. As the FCC makes incredibly clear in its auction announcements (check out Paragraphs 30 and 34 of the recent Auction 91 announcement, as an example), there are no guaranties that actual stations can be built by the “winners” of the auction.

What’s the worst case scenario, you ask? Consider the story of a guy who, in 2004, was the successful bidder for an FM CP in beautiful, scenic Pacific Junction, Iowa. The bidder bid – and, more importantly, paid – big bucks ($4.4 million) for the permit. He also ran up considerable additional costs in upgrading the CP once it was issued and paying to move another station out of the way. 

But when he went to build the station, he got the bad news: it couldn’t be built.

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Agency program looks to ease burden of automatic-loss-of-exemption law; still, Form 990 information returns for many due by OCTOBER 15, 2010 – or else

Those soft-touches over at the Internal Revenue Service are at it again: they have set up a “Filing Relief/Voluntary Compliance Program” for small tax-exempt organizations (not including churches or church-related organizations). The goal: to give such folks a chance to avoid the time-consuming and complex process which they would have to undertake to reinstate their tax-exempt status . . . if, that is, they lost that status earlier this year thanks to a relatively obscure 2006 law.

We wrote about this issue last May. You may recall that, back then, the IRS made a big effort to alert tax-exempt organizations (OTHER THAN churches or church-related organizations, who don’t need to worry about all this) of the need to file Form 990 informational returns. That requirement had been on the books for a couple of years already, but there was considerable urgency associated with it last Spring. That’s because Congress, in mandating the reporting requirement (in the Pension Protection Act of 2006), gave the law some sharp and ugly teeth: any tax-exempt organization (again, NOT INCLUDING churches/church-related organizations) which failed to file Form 990 reports for three consecutive years would automatically and immediately lose its exemption. 

Since 2008 would have been the first year in which such reports were due, 2010 was the first year in which any organization subject to the requirement could have missed three reports in a row. And the reports’ due date for organizations using the calendar year as their tax year was May 17.  (The filing due date for annual tax returns is the 15th day of the 5th month after an organization’s tax year ends.)

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Statutes of limitations apply to FCC enforcement actions

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

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

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

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

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Commerce Committee passes Senate version of CALM Act to prevent loud commercials

The chronic problem of Excessively Loud Commercials – a bugaboo to TV viewers for decades – may soon be a thing of the past. The Commercial Advertisement Loudness Mitigation Act (apparently mandatory “clever” acronym: the CALM Act) (S.2847) has been approved by the Senate Committee on Commerce, Science and Transportation and shuttled off to the full Senate for its consideration. The bill is intended to force video providers to take steps to assure that commercials (and other “interstitials”) are not annoyingly louder than the programming which they interrupt. Since the full House has already passed its essentially identical version of the CALM Act, the stage appears to be set for passage of the bill, presumably in the not-too-distant future.

As we have written previously, the bill in its current form would require the Commission to incorporate by reference into its rules the “Recommended Practice” adopted by the Advanced Television Systems Committee (ATSC). The ATSC’s recommendation was intended to provide the television industry “with uniform operating strategies that will optimize the audience listening experience by eliminating large changes in sound levels”.

The paladin of the CALM Act for several years has been Congresswoman Anna G. Eshoo (who might want to change the spelling of her name to eSHHHHoo if the bill gets passed). She introduced a version of it two years ago, but that version (as we observed here) suffered a number of practical problems. Those problems got cleaned up considerably this time around, largely eliminating the “wild goose chase” aspect of the earlier version.

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From our “The Job’s Never Over ’Til The Paperwork’s Done” file

Here’s a tip for anyone who’s buying a station the assets of which include a tower subject to FCC registration.

When ownership of an antenna structure which is subject to FCC registration changes hands, the new owner must update the tower’s Antenna Structure Registration (ASR) to reflect that change.  The update does not occur automatically when notice of consummation of the assignment of the station’s license if filed with the FCC. Moreover, the Commission has made clear that responsibility for insuring that the notification is made falls on the buyer, not the seller. Since the ASR information is in a separate FCC database, it needs to be updated separately.  Way back in our March, 2004 Memo to Clients, readers were reminded of this relatively obscure requirement.

We mention this here because a couple of licensees apparently didn’t get the memo: both were the subject of recent forfeiture orders – to the tune of $3,000 each – for failing to update their ASR tower ownership. (You can read those orders here and here.) 

So, apparently, you can either remember to update the FCC’s records, or you can run the risk of having to fork over $3,000. Your call.

Updating ownership information is a relatively simple on-line chore – one which certainly seems to be easier than writing a $3K check to Uncle Sam. You go to the FCC’s ASR homepage, login (you’ll need your FRN and FRN password for that), and work your way through a number of screens. We’ll get you started: (1) The first choice you have to make is simple: pick “Manage Your ASR Numbers”; (2) at the next screen, select the option for “OC – Ownership Change”, and then click “continue”. You’ll encounter several more screens after that. You’ll need the FRN of the tower’s seller (since the tower’s registration presumably is listed under the seller’s ID), and it will be helpful to have the registration number(s) of the tower(s) changing hands. The later screens may not be as obviously user-friendly as, say, your favorite ATM, but not to worry – you should get the hang of it in short order.

And remember, by taking care of this little chore, you’re insuring yourself against a potential $3,000 disappointment.

Good luck.

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