Filing Deadline for 2013 Biennial Form 323 Extended Already!

Yikes, time is just screaming past us. Has it really been two years since the last biennial Ownership Report (FCC Form 323) was filed? Apparently so – and we know this because the FCC, apparently looking to get a jump on things, has already extended the deadline for the next biennial Form 323. In an order issued on its own motion (i.e., nobody even had to ask), the Media Bureau has announced that the 2013 biennial Ownership Reports will be due no later than December 2, 2013. (That’s a month later than the original deadline.)

The Commission provided a similar one-month extension the last time around, back in 2011.

These biennial reports must be filed by all commercial full-power AM, FM, TV, and LPTV stations (including Class A stations), as well as any entities that happen to have attributable interests in any such stations. While the deadline for filing has moved, the “as of” date – that is, the date as of which the information in the report must be accurate – has not moved. So this year’s Ownership Reports must reflect the reporting entity’s information as of October 1, 2013.

The Commission still has taken no action in the rulemaking proceeding it kicked off last New Year’s Eve. You may recall that, in that Sixth Notice of Proposed Rulemaking, the Commission proposed ditching the “special use FRN” (SUFRN) that has been a feature of the biennial Form 323 since late 2009. (The SUFRN has an interesting history, which you can read about here (and in the earlier links you’ll find there). It’s a device that permits some reporting individuals to avoid having to cough up their Social Security Numbers in order to get an official FCC Registration Number (FRN) to include in the Ownership Report.) The Bureau’s order doesn’t mention SUFRNs, which is par for the course. But since the Commission has not adopted that proposal, it seems at this point that it’s a reasonable bet that the SUFRN will still be available for 2013 Form 323 filers. You can never be too sure, though, so it would probably be prudent to check back here periodically between now and then.

GAO Report: In Wake of Successful Hack of FCC Computer Systems, $10 Million Fix Ineffective

Gee, do we really want to entrust our social security numbers to the FCC?

Did you know that, in September, 2011, the FCC was the victim of “a security breach on its agency network”? 

Neither did we. 

The precise nature and extent of the breach hasn’t been made public (as far as we can tell), but it must have been impressive. Did you also know that, in reaction to that breach, within a couple of months the FCC had wangled out of the Office of Management and Budget a cool $10 million to undertake an immediate “Enhanced Secured Network” (ESN) Project to improve its computer security against such cyber attacks? 

Neither did we.

And did you also know that the General Accountability Office (GAO), called in to assess the manner in which the FCC implemented its ESN Project, concluded that the FCC messed up? In particular, according to the GAO, the Commission “did not effectively implement or securely configure key security tools and devices to protect these users and its information against cyber attacks.” And did you know that, as a result, again according to the GAO, the Commission continues to face “an unnecessary risk that individuals could gain unauthorized access to its sensitive systems and information”? 

Neither did we.

This is all spelled out – circumspectly, to be sure, presumably so as not to reveal too much about the FCC’s vulnerabilities – in a GAO report sent to Congress on January 25, 2013. The report was not publicly announced until last week.

The fact that the FCC’s computer systems have been compromised is bad enough. The fact that the FCC, apparently acting in haste, cut a few too many corners in its effort to lock up the barn door after the horse had taken a hike is even more troublesome.

But what is especially galling – to this blogger, at least – is the fact that, while all that has been going on, the Commission has proposed to force a large universe of individuals to trust the FCC with their social security numbers. And in so doing, the Commission hasn’t bothered to mention that the computer systems on which those numbers would presumably be maintained have already been shown to be vulnerable to hackers.

As we reported last month, the Commission is considering the elimination of the Special Use FRN in connection with broadcast Ownership Reports (FCC Forms 323 and 323-E). If adopted, that elimination would mean that all attributable interest holders of all full-service broadcast stations (as well as LPTV and Class A TV stations) would have to cough up their social security numbers to the Commission in order to obtain an FCC Registration Number (FRN), which would have to be included in all Ownership Reports. Comments on that proposal are currently due to be filed on February 14.

The FCC’s seeming reticence relative to the fact that it suffered an apparently successful cyber attack 18 months ago, and that its efforts to fix the problem in the meantime have apparently been less than successful, is understandable, if regrettable (and also curiously contrary to this Commission’s professions of “transparency”).

But it seems extraordinarily inappropriate for the Commission, knowing of those vulnerabilities, to then propose that a huge number of folks must provide to the FCC the crown jewels of their identity, their social security numbers. In so doing, shouldn’t the Commission, at a bare minimum, have alerted us all to the fact that not only are their computers possibly vulnerable (we all know that that’s an unfortunate fact of modern-day life), but that their computers had already been successfully attacked? Oh yeah, and mightn’t it have been a good idea to spread the word that GAO had been called in to see whether the problem had been fixed? And once GAO concluded that, um, the problem hadn’t been fixed, don’t you think the FCC might have at least had some second thoughts about persisting in its proposed insistence on the submission of social security number-based FRNs?

Before you answer those questions, consider this. In 2009, when the FCC first proposed to require the submission of SSN-based FRNs for all attributable interest holders, a number of parties objected, pointing out (among other things) that such submission would increase the risk of identity theft. The Commission’s response? We quote it verbatim:

While identity theft is a serious matter, none of the comments identify a single instance of a security breach with respect to the Commission’s CORES system. Indeed, their claims are purely speculative. The FCC has a robust security architecture in place for CORES that exceeds Federal guidelines and recommendations and has deployed strict operational controls in compliance with NIST guidance. The servers are located in secured locations with strict access control. Logically, the databases are located behind several firewalls that protect the data from the Internet and the general FCC user population. All servers and communications are monitored both by automated tools and systems as well as operational procedures. The CORES application uses separate roles for various user classes, and administrative access is only permitted from limited set of known internal workstations. All transmission of non-public data is encrypted.

(You can find the entire FCC response on the OMB website. It’s the “Supplementary Document”, uploaded on 10/16/09 and titled “Response Letter to OMB on Comments Received”.)

So, according to the FCC, the notion that its oh-so-secure computer systems might be compromised was, at most, far-fetched speculation. 


We now know that that speculation was not at all far-fetched. That being the case, the Commission may want to re-think its proposed abandonment of the Special Use FRN. And anyone who, in response to the proposal to deep-six the SUFRN, expresses concern about data security should be sure to cite to the GAO report. That way, the Commission can’t claim that such concerns are merely speculative.

Form 323 - Kissing the SUFRN Good-bye?

FCC proposal would abandon “special use FRNs” in Ownership Reports, require social security number-based FRNs instead . . . for noncommercial licensees, too!

If you’ve got an “attributable interest” in a broadcast licensee, you might want to make sure that you’ve got your social security number (SSN) handy. The FCC is trying – again – to insist that all attributable interest holders provide SSN-based FCC registration numbers (FRNs) when the time comes to file biennial Ownership Reports on FCC Forms 323 (for commercial licensees) and 323-E (for noncommercial licensees). 

In a Sixth Further Notice of Proposed Rulemaking (6th FNPRM) the Commission has proposed deep-sixing the “special use FRN” (SUFRN, as in “SUFRN succotash”) alternative that has been available since the July, 2010 filing of the biennial Form 323. The Commission has also proposed expanding the SSN-based FRN requirement to Form 323-E for noncoms, which would meant that folks on the controlling boards of NCE stations would have to get SSN-based FRNs. And the Commission has also renewed a proposal first bandied about in the Fifth Further Notice of Proposed Rulemaking (5th FNPRM) back in 2009. (In the nearly four years since the 5th FNPRM, that proposal – which would expand the FRN reporting requirement even more – apparently never made it to the Federal Register . . . until now!)

So long, SUFRN?

The history of the FCC’s efforts to require the reporting of SSN-based FRNs by all attributable interest holders in commercial licensees makes for fascinating reading. Unfortunately, the summary of those efforts as set out in the 6th FNPRM is not entirely accurate; it misses a lot of important details concerning the provenance of SUFRNs, a device made available for those not interested in providing their SSNs to the FCC. If you need to brush up on things, let us refer you to our fine collection of posts on the topic. (Note: when you click on the link, the posts – about a couple dozen – will appear in reverse chronological order, so be sure to scroll down to the May, 2009 entries before you start reading.) For a quick synopsis, check out this post, and for a good chuckle, check out this one.

In a nutshell, back in 2009 the FCC tried to insist that all attributable interest holders in commercial broadcast licensees would have to provide SSN-based FRNs. The universe of “attributable interest holders” is vast; it includes all general and many limited partnership interests, all members of LLC licensees, holders of five percent or more of a corporate licensee’s stock, and all officers and directors of a licensee. But wait, there’s more. That universe also includes individuals and entities who hold indirect interests in broadcast licensees, i.e., through intermediate holding companies. (Possibly helpful illustration: if Corporation A happens to own a 20 percent ownership interest in a corporate licensee, then all of Corporation A’s officers, directors and 25 percent or greater shareholders would be deemed to hold attributable interests in the licensee.)

Prior to 2009, a licensee had generally been responsible for, at most, its own FRN. But with the revised Form 323 introduced in 2009, that changed dramatically. Suddenly – and we do mean suddenly, since the Commission sprang the revised form on the broadcast industry in mid-August, 2009, without having made it available for public review beforehand – commercial broadcasters would have to obtain and report SSN-based FRNs not only for the licensees themselves, but also for all their attributable interest-holders. That would impose a substantial burden on many, possibly most, licensees. It also gave rise to legitimate privacy concerns. In this day and age of identity theft, we are all taught not to hand out our SSNs unnecessarily.

Not surprisingly, considerable opposition to the mandatory reporting of SSN-based FRNs arose, despite the fact that the Commission seemed bent on minimizing the opportunity for any public comment. Faced with serious resistance, the Commission initially (in December, 2009) announced that SUFRNs could be used by licensees to report interest holders for whom the licensee could not obtain SSN-based FRNs as of the deadline for filing the Ownership Report. But the licensee would still be obligated to obtain and report SSN-based FRNs for all its attributable interest holders.

Fletcher Heald, joined by a number of state broadcast associations, took that requirement to court. The day our petition was filed, the FCC announced that it was postponing the then-imminent Ownership Report deadline indefinitely. Coincidence? You make the call.

By May, 2010, the requirement was still with us, and the new filing deadline was fast approaching. Back to court we went. This time the court ordered the Commission to respond to our petition. Two days after that order came down, the FCC revised Form 323. Coincidence? You make the call. In so doing, the Commission didn’t bother to tell anybody other than the Office of Management and Budget, which rubber-stamped the change.  

The Commission then paraded into court, pointing to its revised form without mentioning to the court that the ink was still wet on the revised version. The court eventually denied our petition, but only based on the revised version of the form, which the court interpreted to say that no individual attributable interest holder would be required to submit an SSN-based FRN if he/she preferred not to. So even though our petition was technically “denied”, we had largely achieved the result we wanted.

The biennial Form 323 filings went in in 2010 and 2011 (yes, it really was “biennial”, since the 2010 report related back to 2009) without apparent problems. But now, with the 6th FNPRM, the Commission is proposing to eliminate the SUFRN option.

Why? It’s not entirely clear. The Commission speaks generally about the need to “facilitate long-term comparative studies” of broadcast “ownership”. It sees SSN-based FRNs as “essential to providing the kind of searchable and manipulable database needed to support accurate and reliable studies of ownership trends.” And now we learn that, apparently, the “fundamental objective” of the biennial Ownership Report is to “track trends in media ownership”.

As far as we know, the FCC’s interest in studying “ownership trends” is of extremely recent vintage, as is the notion that that activity is the “fundamental objective” of Ownership Reports. But even if we indulge the Commission on this point for the moment, serious questions remain about the proposal to toss the SUFRN option.

For example, the Commission seems to think that reliance on an SSN-based system will assure greater accuracy than any alternative. But that assumes that everyone obtaining an SSN-based FRN provides accurate input. That’s not necessarily a given: the potential for inadvertent slip-ups always exists, as does the possibility that folks who prefer not to provide their SSN might intentionally mis-enter it in the CORES system. How can the FCC police against that? Also, if you’re familiar with CORES, you know that it’s possible to get an FRN without entering an SSN at all. For example, you can simply indicate that you have applied for an SSN (the assumption being that you haven’t yet received it), and bingo, you can get yourself an official FRN without an underlying SSN. (In a footnote to the 6th FNPRM, the FCC itself acknowledges that the CORES FRN system can be circumvented and requires accurate input from users.)

So the FCC’s insistence on the virtues of an SSN-based approach to FRNs seems a bit over-stated.

So, too, does the Commission’s insistence on getting data from all attributable interest-holders. While rounding up that universe of respondents will for sure provide an incredibly comprehensive snapshot of essentially all participants in the broadcast industry, is that really necessary? What difference does it make if Joe and Loretta Six-Pack happen to own a five percent, or even ten percent, interest in their brother-in-law’s station down the block? Who cares if, strictly for purposes of convenience (e.g., for signing the occasional corporate document for regulatory purposes), a broadcast president/CEO has appointed one of her office staff to serve as “Assistant Secretary” of the licensee corporation? If the FCC’s goal is to chart and monitor the major veins and arteries of the broadcast industry, why bother scanning down to the capillary level, especially when that imposes a substantial burden on the scannees?

And let’s not forget the legitimate privacy concerns of everyone who would have to get an SSN-based FRN. One’s SSN is normally viewed as among the crown jewels of one’s array of personal identifying information. We are frequently encouraged not to provide our SSN unnecessarily.

The FCC initially began collecting SSNs only from those who “do business with” the Commission, as a mechanism to facilitate debt collection. While that might be a valid basis for SSN collection, does it have anything at all to do with Joe and Loretta Six-Pack or the Assistant Secretary who happens to hold a corporate officership simply for convenience purposes? The Commission can’t claim with a straight face that it might try to go after such bit players for regulatory obligations incurred by the licensee.

BTW, if you’re not sure how serious the FCC is about enforcing an SSN-based FRN requirement, check this out. According to the 6th FNPRM, if an attributable interest holder is unwilling to provide an SSN-based FRN for inclusion in an Ownership Report, the Commission will apparently expect the licensee to “report the recalcitrant attributable interest holder” so that the FCC can “use its enforcement authority to impose a forfeiture against such individuals”.   Translation (cue sinister music, lower lights menacingly): “We have our ways to get the information we want. Bwahahahaha.” Exactly how such individual forfeitures could be justified is unclear, since (as the FCC admits), its rules don’t currently require attributable interest holders to have FRNs at all. We’re guessing that that wouldn’t stand in the FCC’s way, though, at least until the matter got to court.

In summary, the FCC appears still to be wedded to the SSN-based FRN reporting requirement that it attempted to foist on the broadcast industry in 2009. That initial attempt was foiled, thanks primarily to the fact that the Commission ignored a number of obvious procedural niceties in its headlong rush to impose the requirement. But now, more than three years later, the Commission is taking a more deliberative approach presumably designed to avoid the problems it ran into the last time around. 

While we may all agree that the Commission’s proposal is flawed in a lot of ways, we must face the fact that, unless somebody comes up with an acceptable alternative, the FCC seems bound and determined to toss out the SUFRN option and to insist on SSN-based FRNs from all attributable interest-holders of each licensee. So now’s the time to put your thinking caps on. It’s hard to imagine that a suitable alternative can’t be devised, even if the FCC seems resistant to that notion. Here’s hoping that comments in response to the 6th FNPRM will provide such alternatives.

Non-coms in the FRN cross-hairs?

Also out for comment in the 6th FNPRM is a proposal that the SSN-based FRN reporting requirement be extended to attributable interest holders in noncommercial licensees. The NCE universe dodged this particular bullet back in 2009, although the issue was then teed up in a Fourth Further Notice of Proposed Rulemaking (4th FNPRM). The Commission is now soliciting more comments on it – even though, in response to the 4th FNPRM members of the public broadcasting community severely criticized it. 

Other proposals

Additionally, in the 6th FNPRM the Commission suggests that the biennial ownership reporting requirement be expanded to include entities and individuals whose interests are not otherwise attributable. If their non-attributability arises from either (a) the single majority shareholder exemption or (b) the exemption for interests held in “eligible entities” subject to a higher EDP threshold, then that non-attributabiltiy would go away under the FCC’s proposal.  (This proposal first saw the light of day back in 2009, but has not been actively pursued, until now.)

The Commission is also suggesting that the filing date for biennial Ownership Reports should be shifted back a month, to December 1 (although the “as of” date would remain October 1). The Commission probably thinks that giving broadcasters an extra 30 days to prepare their reports is doing them a favor, but hold on there. December 1 arrives immediately after the Thanksgiving holiday, and coincides with multiple other filing deadlines. Why not pick a date – July 1, for instance – that would not be similarly encumbered. Further, it’s not uncommon for broadcast transactions to be timed to close as of the December 31 of any given year. That being the case, ownership data accurate as of October 1 would often be inaccurate a mere 90 days later. For that reason a mid-year reporting deadline (again, July 1 springs to mind) might be preferable all around.

In any event, the 6th FNPRM has been published in the Federal Register, as a result of which the deadlines for comments have been established. Comments on the various proposals are due to be filed by February 14, 2013 (Happy Valentine’s Day!), and reply comments are due by March 1.

Update: Video Description Now In Effect

[Blogmeister Note: As we reported last September, the FCC has re-imposed the “video description” requirement at Congress’s direction (see the behemoth 21st Century Communications and Video Accessibility Act of 2010). Nearly two years after the passage of that Act, the video description rules have taken effect as of July 1, 2012. If you’re a bit hazy on the details of the new rules and want an in-depth review of who’s got to do what when, check out our earlier post, which lays things out in detail. For those of you who need only a quick refresher course, what better (or, at least, quicker or more refreshing) way of getting that to you than with . . . (wait for it) . . . haikus! A CommLawBlog exclusive: Video Description in 51 syllables! ]

Top four stations in
Twenty-five largest markets
Must have 50 hours

Also provide 50 hours
On top five channels

All others pass through
Video-described programs
To their blind viewers

Form 323 - The Fun Begins Again

Media Bureau announces opening of 2011 Ownership Report season, but leaves out some information that many might find useful

The Media Bureau has reminded commercial broadcasters that their biennial Ownership Reports (Form 323) are due to be filed by December 1, 2011 – and that the opportunity to start filing them opens up October 1, 2011.

But the Bureau’s public notice doesn’t mention some information we kind of hoped they might, since we reminded them of it just a couple of weeks ago. Seeing as how the Commission seems less than clear about what it told the U.S. Court of Appeals for the D.C. Circuit just last year, let us help out here.

The question: Is it really true that anybody and everybody with any attributable interest in a reporting licensee must be identified, in the report, by a Social Security Number-based FCC Registration Number?

Short answer: No.

Longer answer: No, individuals with attributable interests may submit a non-SSN-based FRN – dubbed a “Special Use FRN” (we refer to it as a SUFRN) – under some circumstances. Just what those circumstances are remains a bit fuzzy, since the latest public notice fails to mention an important exchange between the Commission and the D.C. Circuit which shed considerable light on this very point.

First, a brief intro to the SUFRN.  The SUFRN option is not reflected in the instructions to Form 323 or in the form itself . . . BUT, if you get deep into completing the form, you get to the FRN question, which simply requires you to insert an FRN for each attributable interest holder. Immediately under the blank where you’re supposed to insert that FRN, the form reads: “If Respondent is unable to provide an FRN for an individual attributable interest holder reported in this listing, press above button”.

And sure enough, there’s a button labeled “Special Use FRN”. If you push that button, you get a pop-up message that instructs that you don’t need to use an SSN-based FRN. However, according to the pop-up message, eligibility to use a SUFRN arises only “if, after diligent and good faith efforts, Respondent is unable to obtain, and/or does not have permission to use, a Social Security Number in order to generate an FRN for any specific individual whose FRN must be reported on Form 323.”

The pop-up message thus limits use of an SUFRN to situations in which the respondent has made “diligent and good faith efforts” to obtain SSN-based FRNs but has been “unable to obtain, and/or does not have permission to use” such FRNs.

Omitted from the form, the pop-up message, and the FAQs found on the Bureau’s website dedicated to All Things Form 323 is the fact that respondents “are not required to provide SSN-based FRNs . . . if they object to the submission of their Social Security Numbers.” Nor does the Bureau acknowledge that “no individual attributable interest holder will be required to submit Social Security number to obtain an FRN” in order to respond to Form 323. 

But that’s precisely what the Commission and the D.C. Circuit worked out in June-July, 2010.

There’s a fair amount of backstory here. You can catch up with it by reading this series of posts chronicling L’Affaire Form 323 from 2009-2010. You can also read the Emergency Petition we filed with the Commission on September 14, 2011.   If you don’t feel like reading the entire history of the matter – entertaining though it may be – and would prefer to cut to the chase, here are direct links to the FCC’s pleading to the Court and the Court’s response.

The bottom line is that, with respect to use of SUFRNs, the Commission made a very specific representation to the Court and the Court expressly relied on that representation. According to the FCC, respondents “are not required to provide SSN-based FRNs . . . if they object to the submission of their Social Security Numbers.” And according to the Court, “no individual attributable interest holder will be required to submit Social Security number to obtain an FRN” in order to respond to Form 323.

We think that all Form 323 filers are entitled to know that. For some reason, the Commission seems unenthusiastic about that prospect.

As we read all this, inability to obtain an SSN-based FRN – which is what Form 323 suggests is a prerequisite to hitting the SUFRN button in the first place – appears to be immaterial. Ditto for making “diligent and good faith efforts” to get hold of SSN-based FRNs – a duty imposed by the pop-up message when you hit the “Special Use FRN” button. The Commission appears to have told the Court in no uncertain terms that no individual attributable interest holder has to file an SSN-based FRN is he/she objects to doing so. Period.  If the Commission disagrees with our interpretation, it might want to say so.

Another, less prominent, aspect of the SSN-based FRN question involves changes made to the form back in December, 2009, which have since been quietly tweaked. In December, 2009, the SUFRN pop-up message (as well as a public notice issued on December 4, 2009) insisted that reliance on a SUFRN for purposes of getting an Ownership Report on file by the then-operative deadline was only an interim measure. Respondents remained under an “ultimate duty to obtain a fully compliant FRN” for all folks identified in Form 323. According to the December 4, 2009 public notice, the Commission expected all filers relying on SUFRNs to “update their filed ownership reports with fully compliant FRNs when these are obtained.”

The language about some “ultimate duty” to update after the fact was deleted from the pop-up message by the Commission in March, 2010.  You may not have noticed that, since the deletion was effected without explanation or public notice from the Commission. The FCC did ask OMB for permission for the deletion, but in so doing merely characterized the change as “non-substantive”, without offering any rationale. Since the Commission didn’t bother to tell anybody about this change, much less explain it, there was no reason to believe that the concept of some continuing “ultimate duty” did not remain in place.

We mentioned this in our Emergency Petition, and the Commission appears to have taken our comments on this point to heart . . . sort of. On September 28, 2011 – that would be just a couple of weeks after we filed the Emergency Petition, and a mere three days before the form was to go “live” for the 2011 biennial filings – the Commission quietly asked OMB to authorize yet another tweak to the language in the pop-up message, and OMB obliged. Now, stuck on at the end of the pop-up message is the following sentence: “The guidance provided on Special Use FRNs in the Media Bureau’s December 4, 2009 Public Notice (DA 09-2539) has been superseded as discussed herein.”

“As discussed herein”? The problem is that there is no obvious discussion in the pop-up message (or on the FCC’s website) referring back to the December, 2009 public notice, so anyone reading that newly-added sentence wlll be hard-pressed to know what it’s supposed to mean. Our guess is that the Commission is backing away from the notion of some “ultimate duty” to follow-up with SSN-based FRNs for everybody, but the Commission sure hasn’t said that expressly. By contrast, the Commission was very explicit in imposing that duty back in December, 2009 – so if it wants now to countermand that earlier instruction, you’d think that the Commission could do so with similar clarity.

Unfortunately, the Commission appears still to be trying to shore up the multiple weaknesses in its Form 323 in a piecemeal, less-than-public way. The history of Form 323 since 2009 has not been a particularly happy one, and the most recent developments don’t suggest much improvement. With the filing window opening on October 1, the Commission has apparently not focused on problems with the form that were identified, and should have been fixed, more than a year ago. The last-minute addition of unilluminating language in the pop-up message does not suggest that the Commission has taken the time to think through the form carefully. Indeed, the manner in which that last-minute addition was submitted to OMB suggests less than careful and thoughtful preparation:

(This is a screen grab, taken from the OMB website, of a portion of the request for OMB approval submitted by the FCC on September 28, 2011.)

Maybe we’re missing something here, but a hand-written change to a form which is supposed to go “live” within a couple of days doesn’t suggest that the folks in charge of that form have the best handle on it. That’s too bad, since it’s a form that all commercial broadcasters are required to file. We had hoped that the efforts we made in 2009-2010 would have assisted the Commission to get its Form 323 act together by now. We may just have to keep trying.

Update: OMB Signs Off on Video Description Information Collections

It looks like all the pieces are now in place for the video description rules: OMB has signed off on the two information collection components of those rules, and that sign-off has made it into the Federal Register. So Sections 79.3(d) and (e) will become effective October 11, 2011. Those two sections involve, respectively: the process by which a video programming provider may request an exemption (based on “economic burden”) from the overall video description requirements; and the process by which anybody and his little brother may complain about perceived violations of the video description rules. As we have previously reported, broadcasters and MVPDs have until July 1, 2012 to bring themselves into full compliance with the overall video description regime.

Video Description: Back in the Books

All you TV broadcasters and MVPDs – mark your calendars! July 1, 2012 is the current deadline for full compliance.

Let’s have a big “welcome back” for the video description rules – they’ve been gone for years, but as we reported last March, Congress figured it was time to bring them back and now, voilà!

As required by the behemoth “21st Century Communications and Video Accessibility Act of 2010,” the FCC has adopted rules requiring the provision of video description.  (“Video description” involves voice-overs describing a program’s key visual elements. Check out our earlier post for a quick refresher course on video description.) The FCC tried almost ten years ago to impose such rules on broadcasters and certain multichannel video programming distributors (MVPDs), but the rules were struck down by the U.S. Court of Appeals for the D.C. Circuit. The court concluded that Congress hadn’t given the Commission the necessary authority.  That was then, this is now: the FCC now has authority in spades, with explicit instructions from Congress to reinstate the original rules – with a few tweaks.

The new rules are nominally “reinstated” as of October 8, 2011 – that’s what Congress required, and the Commission timed Federal Register publication of the rules accordingly. (One exception: Section 79.3(d) and (e) have to be run through the Paperwork Reduction Act drill before they can become effective.) But take heart – broadcasters and MVPDs have until July 1, 2012, to come into full compliance.

Broadcaster and MVPD obligations under the new rules include the following:

  •  ABC, CBS, Fox, and NBC affiliates located in the top 25 television markets (as of January 1, 2011) must provide 50 hours per calendar quarter of video-described prime time or children’s television. (Fuzzy on exactly current TV market rankings? Click here for the 2010-2011 Nielsen listings.) When the list of top 25 markets will be updated remains to be determined. Note that by the end of 2016, the 50-hour rule will apply to the top 60 television markets.

To count toward the 50-hour requirement, the programming must not have been previously aired with video description, on that particular channel or station, more than once. Only programming on the primary stream of digital broadcasters counts toward the 50-hour requirement. If another top-four network is carried on a secondary stream, however, it also must meet the 50-hour requirement, as though it were carried by a separate station. 

  • Multichannel video programming distributors (MVPDs) with more than 50,000 subscribers must also provide 50 hours per calendar quarter of video-described prime time or children’s television on the five most popular cable channels: USA, the Disney Channel, TNT, Nickelodeon, and TBS. (The list of “top five popular cable channels” will be revised at three year intervals, if ratings change.)  ESPN and Fox News are not on the list because they provide fewer than 50 hours per quarter of programming that is not live or near-live (i.e.,broadcast within 24 hours of recording).  Live and near-live programming is exempted from the rules due to the difficulty in furnishing video description in such a short time frame.
  • All network-affiliated broadcasters and all MVPDs must “pass through” video described-programming to their viewers if the network provides it, so long as it has the technical capability to do so and that capability is not being used for another purpose related to the programming (such as an audio stream in another language). “Technical capability” means having all the necessary equipment except for items that would be of minimal cost. This requirement extends to secondary digital streams and to low power broadcast stations. Any programming aired with description must always include description if re-aired on the same station or channel.

If a station or MVPD becomes newly-obligated to provide video description (through a new affiliation or by gaining more than 50,000 subscribers), it will have three months to come into compliance.

The Commission declined to carve out any special exemptions from the above obligations for local programming, news programming, and the like. The rationale: since only four hours of programming a week must be video described, and stations and systems can choose what programming to describe, they can simply choose not to describe any programming that poses any particular difficulty. However, if a video described program is interrupted by a breaking news bulletin, it will still count toward the 50 hours.

The rules are not without additional complexities, subtleties and possible surprises. They spread over six single-space pages, after all. So TV licensees and MVPDs would be well-advised to spend the next several months familiarizing themselves with the ins and outs of the new rules. Their requirements are likely to be with us with us for some time.

Form 323 Deadline Extended to December 1, 2011

In apparent memory lapse, Commission fails to mention last-minute effective elimination of all-encompassing SSN-based FRN requirement

Has it really been two years already? 

The Commission has announced that the time has come for the next round of biennial Ownership Reports (Form 323) for commercial broadcasters. And get this, the initial public notice about the upcoming deadline for filing pushes that deadline back a month, to December 1, 2011.

Note that the last round of Form 323s was filed in July, 2010, which (contrary to the whole “biennial” aspect of things) isn’t really a full two years ago. But as long-time readers may recall, that initial round was originally scheduled for the fall of 2009, but got postponed several times. (You can read a collection of our posts about the FCC’s 2009-2010 Form 323 travails here.) 

Form 323 requires all commercial licensees to file reports by a uniform nationwide deadline, once every two years.  The next reports were to be due November 1, 2011, reflecting ownership data as of October 1, 2011.  Apparently responding to concerns that one month is not enough time to compile data and submit a report, the FCC has extended this year’s filing deadline to December 1, 2011.  This is a one-time extension and does not apply to reports due in 2013 and subsequent years (at least for now). 

The ownership information to be reported must still reflect the reporting entity’s relevant information as it stands of October 1, 2011.   Reports may be filed any time between October 1 and December 1; they must be filed electronically on Form 323, using the FCC’s electronic CDBS system.  A filing fee must be paid at the time of filing.

The Commission’s terse notice doesn’t get into the nitty-gritty specifics of Form 323, but merely refers interested readers to the form’s instructions and to the FAQ page about the form on the Commission’s website. Heads up for some clarifications, though, since neither the form itself nor the FAQ page addresses an important change that the Commission committed to back in late June, 2010.

The change involved the question of including separate FCC Registration Numbers (FRNs) for each individual and entity reflected in each report, whether or not that individual or entity was in fact the licensee or even in a position to wield anything akin to control of the licensee. 

We won’t bore you with the details of the back-and-forth we had with the Commission on that touchy point – you can read all about it in our previous blogs on the subject. All you – and apparently, the folks at the Commission – need to recall is that we here at FHH (on behalf of ourselves and a number of clients) asked the U.S. Court of Appeals for the D.C. Circuit to tell the FCC that the Commission could not lawfully impose the FRN requirement as that requirement had been described up to that point. The Commission fussed a bunch, delayed the filing deadline to give it a chance to tweak things, but eventually tried to stick to its FRN guns. We went back to the Court. The Court ordered the FCC to respond to our arguments.

A funny thing happened at that point. After it was ordered to respond but before it did so, the Commission revised the FRN language in Form 323. It then explained to the Court that the form, as revised, made it “clear” that “users are not required to provide SSN-based FRNs for the July 8 filing if they object to the submission of their Social Security Numbers”. (Note that that gloss on the revised form might not have been 100% consistent with the language of the revision, at least in the minds of some folks, but that’s the way the FCC explained it to the Court.) The Court, in turn, interpreted the FCC’s statement to say that “no individual attributable interest holder will be required to submit a Social Security number to obtain an FRN [i.e., FCC Registration Number] for the July 8, 2010, biennial filing deadline or for any imminent non-biennial filing of Form 323.” And, based on that interpretation, the Court denied our petition.

None of that history is reflected in the form’s instructions or on the FAQ page, at least as of today (August 23, 2011). But the fact of the matter is that, in its explanation to the Court, the Commission clearly indicated that nobody would be required to submit a Social Security Number-based FRN if he/she objects to such submissions, regardless of the basis for any such objection. To the extent that the form’s instructions and the FAQ may seem to say otherwise, those indications can and should be disregarded (unless, of course, the Commission is inclined to schlep down to the Court again to explain why what it told the Court in 2010 should no longer apply 2011).

Keep an eye out – particularly here on – for any further wrinkles that might pop up on this front in coming months.

Remember that the filing requirement applies to full power TV, commercial radio, and all Class A and low power TV stations, but not TV or FM translators or low power FM stations.  Noncommercial educational AM, FM, and TV stations must file biennial reports, but they use FCC Form 323-E and must file on staggered dates corresponding to the state where they are licensed rather than the uniform nationwide date that applies to commercial stations.

Commission Slams Door on CP Extensions for Eligible Entities

“Eligible entity” policies suspended in light of Third Circuit decision

From our Unintended Consequences File:  The recent Third Circuit decision on multiple ownership rules – which took the Commission to task for failing to do more to promote minority and female broadcast ownership – has led to the abrupt termination of a Commission policy intended to (wait for it) promote minority and female broadcast ownership. While there remains at least a chance that that termination may be forestalled, a recent public notice from the Commission has set the termination process in motion. 

Under the policy at issue, the Commission extended unbuilt broadcast construction permits by 18 months when they were assigned to “eligible entities”. An “eligible entity” was generally defined as an entity that qualified as a small business under the standards of the Small Business Administration for industry groupings based on revenue. The policy was first announced in the Commission’s Diversity Order released in 2008, as part of a wide-ranging agency effort to promote “diversity”.

As we reported earlier this month, the Third Circuit found that the FCC had not shown how its revenue-based definition of eligible entity would advance its goal of promoting minority and female ownership of broadcast stations. Accordingly, the Court tossed the policy, preventing the Commission from continuing to utilize it at all.

In response, the Commission has issued a public notice alerting potentially affected permit holders and prospective permit assignees of the effect of the Court’s decision.

To understand the way the shut-down will work, you have to understand the concepts of (a) “finality” of FCC actions and (b) issuance of the “mandate” relative to the court’s action.

A grant of an “eligible entity” assignment application – along with the corresponding extension of the underlying permit – becomes final 40 days after public notice of the grant (barring any petition for reconsideration, application for review, or other intervention by the Commission on its own motion).

The court’s decision becomes effective when the court issues its “mandate” to the Commission, telling the Commission that the agency's got to comply with the court's decision. Under the Federal Rules of Appellate Procedure (Rule 41, if you’re checking), an appellate mandate is supposed to issue seven days after the deadline for seeking rehearing has passed or, if rehearing is sought, then seven days after rehearing is denied. The deadline for seeking rehearing is 45 days after the court’s opinion is issued. Note, however, that parties can also ask the court to hold off on issuing its mandate. The Third Circuit decision was issued on July 7 – which means that the deadline for seeking rehearing would ordinarily be August 21 and, if rehearing isn’t sought and the issuance of the mandate isn’t delayed, we can expect to see the mandate pop out on August 29 (August 28, technically the seventh day after August 21, being a Sunday).

Applying those concepts to the problem at hand, the Commission has come up with the following.

CP-extending “eligible entity” application grants that become final prior to the issuance of the Third Circuit’s mandate are safe – they will not be affected by the Third Circuit’s decision. This means that any such application whose grant showed up on a public notice issued at least 41 days prior to August 29 should be OK. (We do the math so you don’t have to: 41 days prior to August 29 is July 19.)

But any such grant that has not become final as of the issuance of the mandate has big problems.  In such cases, the expiration date of the construction permit at issue will automatically revert back to its original, non-extended date. If that non-extended date has already passed and the permit has, thus, expired, the staff will rescind the grant of the assignment application and dismiss the application (since, technically, there’s nothing left to assign). If the non-extended date has not yet passed, the grant of the assignment will remain in effect – but the assignee will be subject to the permit’s original construction deadline, and the likelihood of getting that deadline extended is negligible.

For any CP-extending “eligible entity” assignment application that hasn’t yet been acted on, the news is equally grim. Any such application involving a permit that has already expired will be summarily dismissed. If the permit hasn’t expired, the Commission will process the assignment, but the buyer will be getting the permit as is, without any extended construction deadline. Again, the likelihood of any such extension is negligible.

Is there any ray of hope here? If the Third Circuit’s mandate is delayed, presumably the Commission’s ax won’t start to fall right away, which could afford some valuable time in some instances. What are the prospects for such a delay? Who knows? The Third Circuit’s decision was expansive and, at least to some, controversial. It’s possible that some private parties, or maybe even the Commission, might be inclined to seek rehearing. That could delay the issuance of the mandate by several months, possibly affording relief to some. So, too, could an effort to bring the case to the Supreme Court (although that alone would not necessarily stay issuance of the mandate – a request to hold off on that issuance might need to be filed).

The Commission’s public notice does not address that delay possibility, presumably because the one thing we know for sure at this point is that, absent rehearing efforts, the rules provide for issuance of the mandate on August 29. And while the possibility of delay may exist in theory, it’s a very thin reed on which to rest any hopes.

So a policy designed to increase diversity in broadcast ownership is being deep-sixed by a court decision which complained of the lack of diversity in broadcast ownership. And so it goes.

The Third Circuit Strikes Again

Shades of 2004! Court tosses 2008 version of newspaper/broadcast cross-ownership rule, major elements of 2008 Diversity Order.

Remember in the original Planet of the Apes, when Charlton Heston had gone through years of space travel and wild adventures, only to find after all that that (SPOILER ALERT) he really hadn’t gone anywhere at all and was just back where he’d started from? 

Welcome to the FCC’s media ownership rules, which have just been deposited back at Square One by an opinion of the U.S. Court of Appeals for the Third Circuit.

With one major exception (i.e., the Newspaper/Broadcast Cross-ownership (NBCO) rule), the Court affirmed the Commission’s 2008 Ownership Order. But bear in mind that, in the 2008 Ownership Order, the Commission largely (but not entirely) reversed its own 2003 Ownership Order in response to a 2004 Third Circuit decision. And bear in mind, too, that the 2008 Ownership Order was adopted by a Commission led by Kevin Martin, a Republican. The Third Circuit had stayed the effectiveness of the 2003 Ownership Order, and had continued that stay for the 2008 Order as well.  (Last year the Court lifted that stay, allowing the 2008 revision to the NBCO rule to go into effect temporarily; in light of the new Third Circuit opinion, the issue of the stay is now moot.) In 2009, the Commission – now under new management, i.e., Democrat Julius Genachowski – asked for that stay to remain in place, meaning that the current Commission is not necessarily keen on the 2008 decision which largely reverted to the pre-2003 ownership rules.

Oh yeah – and in a move that could prove very problematic for some, the Court also rejected parts of the Commission’s separate 2008 decision (the Diversity Order) providing enhanced opportunities for certain “eligible entities”.

Confused? Join the club.

Some history might be useful here.

Congress has ordered the FCC to review its ownership rules every four years. In 2002, the Commission (under then-Chairman Powell) started such a review. It was a highly contentious proceeding, with hundreds of thousands (if not millions) of comments filed and much rancorous debate inside and outside the Commission. The upshot was the 2003 Ownership Order. Under that order, the ownership rules generally were abandoned and replaced by a different set of limits (dubbed “Cross-Media Limits”) calculated through a “Diversity Index” applicable to all forms of media cross-ownership. 

Numerous appeals were filed, ending up in the Third Circuit, which promptly stayed the effectiveness of the 2003 Order. In 2004, the Third Circuit shipped a number of aspects of the 2003 Order back to the Commission for further consideration. The Court did agree with the Commission that a complete ban on newspaper/broadcast cross-ownership (in effect since 1975) was no longer necessary. BUT the Court concluded that the new cross-ownership limits as a whole had not been adequately supported by the Commission. So with the stay still in place (and with it, the pre-2003 rules), the Court remanded cross-ownership back to the Commission.

In 2006 the Commission started work on its next quadrennial ownership review. Since the Commission was then still looking at the 2003 rules thanks to the 2004 remand by the Third Circuit, the Commission folded that into its 2006 review. The end result was the 2008 Ownership Order. In that order the Commission ditched its 2003 Cross-Media Limits/Diversity Index approach, opting instead for its pre-2003 rules and standards relative to broadcast ownership. With respect to the NBCO rule, however, it chose not to revert to the pre-2003 absolute ban on newspaper/broadcast cross-ownership. Rather, the 2008 Order permitted such cross-ownership on a case-by-case basis, with a presumption that some limited cross-ownership would be permitted in the largest markets.

Many of the parties who appealed the 2003 Order also appealed the 2008 Order.

In its latest decision, the Third Circuit has again sent the NBCO rule back to the Commission. It’s not that the Court necessarily disagrees with the FCC’s case-by-case approach. The Court’s problem is with the process by which the Commission arrived at that approach: while the Commission had issued a notice of proposed rulemaking generally indicating that it planned to revisit the NBCO rule, the Court felt that that notice didn’t provide the public with enough of a description of the approach ultimately adopted. 

[Wonk Warning: Esoteric Legal Discussion Ahead. Proceed with Caution. This aspect of the Court’s ruling is particularly interesting to administrative lawyers. Agencies are required by the Administrative Procedure Act to describe “either the terms or substance of the proposed rule or description of the subjects and issues involved.” Ordinarily that requirement has not been interpreted to require the agency to spell out its proposals in exhaustive detail; to the contrary, many agency rulemaking actions that don’t conform to the specifics of the underlying notice of proposed rulemaking have been upheld as long as the actions were a “logical outgrowth” of the proposal. The Third Circuit’s rejection of the “logical outgrowth” doctrine here will provide fodder for law review articles and appellate arguments for some time to come.]

The Court’s dissatisfaction with the process leading to the 2008 NBCO rule may have been a reaction to the untidiness of that process. The FCC’s underlying NPRM plainly put everybody on notice that some change to the NBCO rule was on the table. But no specifics surfaced until then-Chairman Martin authored an op-ed piece in the New York Times disclosing what he personally had in mind. That piece appeared barely a month before the 2008 Ownership Order incorporating Martin’s approach was adopted. The Court seemed troubled by this chronology, even though the op-ed was accompanied by a simultaneous invitation for comments on Martin’s suggested NBCO rule. Further complicating matters were the facts that drafts of the 2008 Order were circulating before the comment period relative to Martin’s proposal wrapped up, and the final vote occurred just one week after the close of the comment period.

According to the Court, the FCC was obliged to (a) remain “open-minded” about the issues raised and (b) engage with the substantive responses submitted. As the Third Circuit saw it, the 2008 process fell short of those obligations, at least with respect to the NBCO rule. So back to the Commission goes the 2008 revision to the NBCO rule, with instructions to ensure that the APA is followed in any further revisions. As a result, the Commission’s outright ban on newspaper/broadcast cross-ownership, first adopted in 1975, is now back in force. 

Having sent the NBCO rule back, the Court next addressed the five permanent waivers of that rule that the Commission granted in the 2008 Ownership Order. Despite “several concerns” with these waivers, the Court has left them in place because the folks challenging the waivers in court hadn’t sought reconsideration of the waivers at the FCC first – so the Court doesn’t have jurisdiction to consider them on appeal. 

Despite its unhappiness with the NBCO aspect of the 2008 Order, the Court upheld the Commission’s decision to retain, essentially unmodified, its other primary media ownership rules: the radio/television cross-ownership rule; the local television ownership rule; the local radio ownership rule, including AM/FM subcaps; and the dual network rule. In a very brief discussion, the Court concluded that the FCC adequately justified the retention of each of these rules. Note, though, that these rules are essentially the same that were in effect prior to 2003.

The Court also rejected, almost in passing, constitutional challenges to the cross-ownership rules as a whole.  In particular, the Court adhered to the decades-old “scarcity doctrine” as a justification for broadcast regulation.  Despite the proliferation of new media voices in recent years, the Court concluded that the scarcity rationale – i.e., that “more people would like to access the [spectrum] than can be accommodated” – remains valid. As a result, the broadcast media continue to receive limited First Amendment protections.

Now, about that Diversity Order.

Back in 2004, when the Third Circuit remanded the 2003 Ownership Order, the Court devoted particular attention to what it described as the “the Commission’s obligation to make the broadcast spectrum available to all people ‘without discrimination on the basis of race.’” Among other things, the Court was critical of the FCC’s failure to address a number of minority-oriented proposals that had been advanced by the Minority Media and Telecommunications Council in 2002.

In response to that criticism, on the same day that it adopted the 2008 Ownership Order, the Commission also adopted the Diversity Order in which it adopted 13 proposals intended to enhance minority/female ownership opportunities.  So the Court should be happy, right?

Apparently not. Many of the Diversity Order’s enhanced opportunities were limited to “eligible entities” – a universe defined by reference to revenue factors.  Even though the race/gender-neutral universe of “eligible entities” might logically include a significant number of minorities and women, the Third Circuit rejected rule changes based on that definition of “eligible entities”. According to the Court, the Commission had made no showing that expanding opportunities for “eligible entities” would expand opportunities for women and minorities. The Court is insisting that the Commission explain why it should use the revenue-based “eligible entities” definition rather than a “socially and economically disadvantaged business” (SDB) definition that might “better promote the Commission's diversity objectives”.

In its 2004 decision the Court had directed the Commission to consider SDB-based regulations in its 2006 quadrennial ownership review (i.e., the proceeding that culminated with the 2008 Ownership Order). The Commission, however, did not do so, opting instead to rely on the “eligible entity” approach. 

But that wasn’t good enough for the Court, which has now concluded that the FCC hasn’t explained how a revenue-based “eligible entity” definition would increase female and minority ownership. (In part, the Court noted that this failure stems from the fact that the Commission simply doesn’t have any reliable data on female and minority ownership, although the Court acknowledges that the Commission is working to address that problem.)

So the Court has vacated and shipped back to the FCC all of the Diversity Order’s provisions based on the “eligible entity” definition. (Still alive and kicking are the Diversity Order provisions that don’t hinge on “eligible entity” status – i.e., the ban on discrimination in broadcast transactions; the “zero tolerance” policy for ownership fraud; non-discrimination provisions in advertising sales contracts; longitudinal research on minority and women ownership trends; local and regional bank participation in SBA guaranteed loan programs; “Access to Capital” conference; and guidebook on diversity.)

The tossing of the “eligible entity”-dependent provisions may place the FCC in an awkward position. A number of “eligible entities” who happen to be minority and/or female have been taking advantage of those provisions for some time, and have applications in the pipeline to continue to do so. The Third Circuit’s decision would appear to put the kibosh on such applications – even though tossing such applications would also appear to be contrary to the Court’s underlying goal. Whether the Commission can come up with a way to save the baby from getting thrown out with the bathwater remains to be seen.

It also remains to be seen how the Court’s insistence on explicit consideration of racial and gender factors can be squared with the Supreme Court’s case law on affirmative action. The Supreme Court did uphold (21 years ago) some earlier FCC policies on minority ownership in the face of an equal protection constitutional attack. But that decision was expressly overruled by the Supremes in Adarand, which imposed very heavy burdens on any federal agency attempting to justify race-based decision making. The Third Circuit acknowledges Adarand but seems to insist that the FCC can and should nonetheless consider race and gender in its licensing policies. At the least, according to the Court, the FCC must do more than cite the difficulty of complying with Adarand in deciding not to consider race and gender factors. Reliance on the race/gender-neutral concept of “eligible entity” was designed to get the Commission around Adarand problems. It will be interesting to see how this issue will now evolve.

Video Description, On The Comeback Trail

FCC looks to resuscitate rules rejected by Court in 2002 – but unlike last time, the rules now have Congress’s explicit blessing

They’re baaaaack . . . almost. The video description rules, dealt a death blow by a federal appeals court nearly a decade ago, are one step closer to resurrection with the release of a Notice of Proposed Rulemaking (NPRM) looking to their reimposition. 

As we reported previously, the FCC’s original video description rules were struck down by the U.S. Court of Appeals for the D.C. Circuit in 2002. According to the Court, the FCC did not have the requisite statutory authority to impose such rules.   (Quick refresher course on video description: it’s a process that gives blind and visually impaired people a way to “watch” video programming by adding a spoken narrative describing the visual elements of a scene during natural pauses in dialog. Example: “Workers throw Kane’s belongings into a burning furnace. One item is a sled with the word ‘Rosebud’ stenciled on it.”)

In light of the 2002 decision, only Congress has the power to rescue the rules by granting the Commission the authority it was (and has since been) lacking. Congress did so last October, in a sweeping omnibus disabilities law: the “21st Century Communications and Video Accessibility Act of 2010.” (Back then we coined the abbreviation “21CenComVidAccAct”, but the FCC has since opted for “CVAA”. Even though the FCC’s choice of abbreviation seems a bit too abbreviated – what century are we talking about again? – we’ll bow to their will and use “CVAA”. )

In the CVAA, Congress directed the Commission to reinstate its rules more or less exactly as they were in 2000, with certain mandated changes. One might ask, why go through a rulemaking at all, if all the agency has to do is find a copy of the old rules, cut-and-paste them into a new order, and insert the necessary changes? It turns out, though, that the Commission does have some discretion this time around. In particular, the CVAA leaves it to the FCC to decide what entities – broadcast stations, multichannel video programming distributors (MVPDs), networks – are to be subject to the video description rules. Accordingly, the Commission would like public input on a limited number of points.

So, if you’re a broadcaster or an MVPD, you may want to refresh your memory of the original rules and consider commenting if you might be affected by the proposed modifications.

The Basics

As in the first go-round with video description, the rules this time around will have two main components: the “50-Hour Rule” and the “Pass-Through Rule”.

The “50-Hour Rule” will apply to broadcast stations that are: (a) affiliated with the top four national commercial networks (ABC, CBS, Fox, and NBC); and (b) located in the top 25 markets (per the 2011 Nielson rankings). Such stations must provide 50 hours per calendar quarter of video-described programming during prime time – although any children’s programming can also be included in the 50 hours, regardless of when it happens to be aired. A program can be counted twice – but only twice – if it is re-run. A station can count a program even if the program has previously been telecast elsewhere, so long as the program is airing for the first or second time on that station. [Note: the CVAA requires the Commission to expand this requirement to the top 60 markets by October 2016].

MVPDs (cable, satellite, etc) with 50,000 or more subscribers must also provide 50 hours per calendar quarter of video-described prime time and/or children’s programming on each channel on which they carry one of the top five national non-broadcast networks.  (FYI: the FCC figures that the top five currently are USA, the Disney Channel, ESPN, TNT, and Nickelodeon’s Nick at Nite.  But heads up – Fox News, TBS, A&E, History, the Cartoon Network’s Adult Swim, the Family Channel, and HGTV could also be contenders if any of the top five come up short on the non-exempt programming front.)

Under the “pass-through” rule, broadcasters affiliated with any network and all MVPDs will have to pass through any video description that they receive from a broadcast station or network or a cable network channel, including re-airings, so long as they have the technical capability to do so. And yes, providers subject to the 50-hour rule must also pass through video description programming.

Questions For Comment

These two basic requirements are not up for discussion. However, the FCC would like input on a number of questions regarding their implementation:

  • What is “near-live” programming? The CVAA exempts “live” and “near-live” programming from the new rules. This exemption seems superfluous given that video providers already have latitude in selecting which 50 hours will have video description.  Presumably, the exemption would mainly come into play if a top five cable channel had so much live programming that there weren’t 50 hours left over for video description. The FCC logically proposes, in that case, to exclude the channel from the top five list. It also proposes that “near-live” programming would mean programming produced no more than 24 hours prior to its telecast.
  • How often, if at all, should the list of top 25 markets be updated? As the FCC aptly notes, while market rankings routinely change over time, constant revision of the list would burden and aggravate everyone concerned. Therefore it seeks comment on whether, and how often, to reconsider the top 25 rankings.
  • What equipment would be needed to comply with the pass-through requirement, and how much it would cost?
  • How much would the 50-hour rule cost, per program or hour described? The FCC would like to hear from both the purchasers and producers of video description on this point.
  • Under what circumstances would the rules become so “economically burdensome” to providers to warrant an exemption? The prior version of the rules allowed exemptions when the rules posed an “undue burden.” The CVAA changed the exemption standard to “economically burdensome.” The FCC is not fazed by this change and proposes to use the same factors it used in the previous version.
  • Should the 50-hour and pass-through rules apply to commercial low power stations?
  • Is there a continuing need for the previous “another program-related service” exception?  The former version of the pass-through rule did not apply in situations where the second audio program (SAP) equipment and channel were being used to provide some other program-related service. But a digital universe permits numerous audio channels for any video stream – meaning that there may be no continuing need for an exception. The Commission seeks comments on that question.
  • What digital stream should the rules apply to? For the 50-hour rule, the Commission would for sure count programming carried on the primary stream. But it also proposes to apply the rule to each separate stream which carries another top-four network’s programming. The pass-through rule would apply to all network-provided programming on all digital streams.
  • Should the Commission adopt quality standards for video description?
  • How should programs be selected and advertised?
  • Should the new ATSC standard be incorporated to ensure that video description can be received by all DTV receivers?
  • Should children’s programming mean programming directed at children 16 years old and under?

Finally, the FCC proposes to require compliance with the video description rules (subject, of course, to any OMB approval that may be required for any of the rules) starting January 1, 2012, 85 days after they are scheduled to be adopted and published.

The proposed video description requirements present virtually all of the serious practical difficulties, as well as potential First Amendment arguments, that the earlier version did. The last time around, though, the Court didn’t have to address those considerations because the wholesale lack of statutory authority eliminated the need to do so. Now that the CVAA has plugged that hole, it will be interesting to see whether any appellant(s) raise other, still undecided, issues.

Comments will be due 30 days after publication in the Federal Register. Check back here for updates on that front.

Form 323: SSN Disclosure Requirement Largely Written Out Of Form In Last-Minute Revision

Court ruling on Fletcher Heald mandamus petition confirms elimination of need for new SSN-based FRNs to complete revised Ownership Report

Last week we reported that the U.S. Court of Appeals for the D.C. Circuit had denied our mandamus petition, and that the July 8 deadline for biennial Ownership Reports (FCC Form 323) would remain in effect. What with the last-minute nature of the Court’s order and the consequent need to wrap up a bunch of 323’s by the deadline (not to mention various other distracting obligations), we didn’t highlight perhaps the most important aspect of the order: the Court effectively confirmed that nobody needs to provide his/her Social Security Number (SSN) for a new FRN in order to file ANY Ownership Report – biennial or otherwise – until further notice.

According to the Court, the FCC has taken the position that “no individual attributable interest holder will be required to submit a Social Security number to obtain an FRN [i.e., FCC Registration Number] for the July 8, 2010, biennial filing deadline or for any imminent non-biennial filing of Form 323.” And since the Court’s denial of our mandamus petition was based on the FCC’s stated position, it appears extremely doubtful that the FCC will be moving off that position soon.

As a result, any person holding an attributable interest in a commercial broadcast licensee – i.e., any person who would have to be reported on Form 323 – who has not already submitted his/her SSN to the FCC in order to obtain an FRN need not do so. This is a significant development, and a significant retreat on the part of the Commission.

Here’s a step-by-step chronology of the rise and fall of the FRN requirement.

Behind closed doors

Back in May, 2009, the Commission announced that Form 323 would be revised. But at that time the Commission said absolutely nothing about requiring individual attributable interest holders to cough up their SSNs part of that process. Likewise, when the Media Bureau announced, in June, 2009, that it had revised the form, it didn’t mention any SSN requirement; to the contrary, the Bureau specifically said that the revised form did not give rise to any need for confidentiality and did not raise any privacy concerns. (Even though the Bureau solicited public comments on its revised form, it elected not to make the revised form available for review, which made it difficult – no, wait, make that impossible – to comment on the draft form.)

From behind a cloud of denial, the revised form appears

In August, the Bureau shipped its revised Form 323 over to the Office of Management and Budget (OMB) for its approval. In so doing, the Bureau – or maybe it was the Commission itself (it’s impossible to tell exactly who sent the item over to OMB) – again expressly claimed that its handiwork did not present anything to worry about from a confidentiality or privacy perspective. But OMB posted the revised form for all to see, finally. Lo and behold, the revised form required that every attributable interest holder listed in any Form 323 be identified by his/her own SSN-based FCC Registration Number (FRN). In other words, in order to complete the form, licensees would have to force their various attributable interest holder to obtain their own FRNs, and that in turn would require those interest holders to hand over their SSNs to the FCC.

Accompanying the form was a “supporting statement” which again asserted that the revised form did not involve privacy or confidentiality issues.

A number of broadcast-related parties pointed out to OMB that, au contraire, the SSN/FRN requirement did indeed implicate serious privacy/confidentiality considerations . . . and oh, by the way, the FCC had never given anybody the opportunity to comment on that requirement in the first place. A month later, a “revised supporting statement” was submitted – presumably by the Commission, although it was unsigned and otherwise unattributed – in which the obvious privacy/confidentiality concerns were finally acknowledged.

In a separate response to the various comments, an official in the FCC’s Office of Managing Director claimed that the SSN-based FRN requirement was a “vital mechanism for data quality assurance”. In essence, the Commission was moving full speed ahead with its revised form, FRN requirement and all.

The FCC blinks once, or maybe twice

Despite the problematic record underlying the revised form, OMB approved it in October, 2009, and the Bureau promptly announced that the new form would have to be filed by December 15. In November, Fletcher Heald asked the Commission to stay the implementation of the form, noting (among other things) that an impressive number of shortcomings in the development of the revised form precluded its implementation. The Commission ignored our pleading, but a week or two later postponed the filing deadline into January

In early December, the Commission made the revised form available for folks to fill in., at least for a while. But it also revealed a further change relating to the FRN requirement. Now parties could avoid disclosing SSN-based FRNs, but only after the licensee had made good faith, diligent efforts to obtain all necessary FRNs. If they had done so but still were unable to come up with the FRNs, respondents could use randomly-generated “special use FRNs” (SUFRN) as a temporary expedient – emphasis on the word “temporary”. According to the revised instructions, use of a SUFRN did not relieve the respondent of its “ultimate duty” to hunt down “fully compliant” FRNs for all concerned. And the SUFRN was not available for non-biennial Ownership Reports (such as those filed by assignees or transferees after the consummation of their acquisition of licenses).

So the SUFRN option in fact did nothing to eliminate the FRN obligation.

In late December, with the January deadline fast approaching, Fletcher Heald – joined by ten state broadcasting associations – asked the D.C. Circuit to intercede. Several hours after that request was filed, the FCC announced that it was indefinitely postponing the filing of the revised form, giving rise to cautious optimism that the FCC might be re-thinking the FRN requirement. (Apparently as a result of the indefinite postponement, three months later the Court denied Fletcher Heald’s December request.)

It’s baaaack.

In early April, it became clear that any optimism, cautious or otherwise, was unfounded. The Bureau announced that the revised Form 323 was back on the calendar. New due date: July 8. The announcement said nothing about the FRN question. But careful review of the FRN question on the form revealed new language. Gone was the admonition that respondents had some “ultimate duty” to chase down SSN-based FRNs for all their attributable interest holders. Instead, the form now provided that

[r]espondents who use a non-SSN based “Special Use FRN” will be deemed fully compliant with the Form 323 filing obligation for purposes of this initial filing and the lack of SSN-based FRNs in response to Question 3(a) will not subject Respondents to enforcement action.

The Commission did not provide any public notice announcing, much less explaining, this change.

The Court steps in

Fletcher Heald, along with several state associations and a number of broadcast licensees, headed back to court with a second mandamus petition. With the new deadline just weeks away, on June 14 the Court ordered the FCC to respond to our arguments by June 21 (later extended to June 23). 

Here’s where things got interesting.

On June 17, the FCC sent OMB yet another revision to the form, changing the instructions to the FRN question further:

Old language: An SUFRN could be used “[i]If, after using diligent and good-faith efforts, Respondent is unable to obtain a Social Security Number”.

New language: An SUFRN may be used “[i]f, after using diligent and good-faith efforts, Respondent is unable to obtain, and/or does not have permission to use, a Social Security Number in order to generate an FRN”. (emphasis added)

In other words, if a respondent had somebody’s SSN and could theoretically have signed that person up for his/her own FRN, the respondent was not obligated to do so if the individual had not given his/her permission. Obviously, the Commission was moving away from its original notion that all respondents had an unavailable “ultimate duty” to nail down SSN-based FRNs for all attributable interest holders.

Additionally, the new instruction made the SUFRN option available not only for the biennial Ownership Report, but also for all other non-biennial uses of the Form 323.

OMB approved that new language on June 21, and on June 23 the Commission relied on the newly-relaxed instructions in responding to FHH’s arguments. The Commission didn’t bother to issue any public notice announcing its revised instructions. More surprisingly, in its response to the Court the Commission also didn’t bother to alert the Court that the language on which the FCC was relying was brand-spanking new – and that that language had been concocted only after the Court had ordered the Commission to respond.

What the Commission did do in its response to the Court was to provide its own gloss on the revised instruction. According to the Commission’s response, that revision makes it “clear” that

users are not required to provide SSN-based FRNs for the July 8 filing if they object to the submission of their Social Security Numbers.

To some, that gloss might go somewhat beyond the precise language of the latest revised instruction. But that’s what the FCC told the Court.

The Court then interpreted the Commission’s gloss to mean that “no individual attributable interest holder will be required to submit a Social Security number to obtain an FRN [i.e., FCC Registration Number] for the July 8, 2010, biennial filing deadline or for any imminent non-biennial filing of Form 323.” And, based on that interpretation, the Court denied our second mandamus petition.

Call us crazy, but we’re prepared to declare a significant (although not yet total) victory here. Yes, the mandamus petition was “denied”, but only because the Commission backed off the FRN requirement. And since the Court clearly identified that retreat as the basis for the Court’s decision, any attempt by the Commission to re-impose its previous, unrelaxed standard would open the door for another mandamus action. In other words, a major flaw in the revised report has been corrected, at least temporarily, as a result of our efforts.

Unfortunately, the last-minute timing of the FCC’s response and the Court’s action kept these developments out of the public eye just as the July 8 deadline rolled around. As a result, it’s likely that a number of folks who might not otherwise have provided their SSNs did so under the misimpression that they had to. Next time, they might want to check out CommLawBlog first.


Is the relaxation – or effective elimination – of the SSN-based FRN requirement permanent? Who knows? Since the FCC has never bothered to explain precisely why such FRNs are supposedly essential, it’s hard to say whether the FCC could justify such a requirement (although many strongly doubt it). And the longer the Commission relies on SUFRNs, the harder it will be to justify any claim that there is no adequate substitute for SSN-based FRNs. 

But the Commission clung tightly to the requirement in the face of strong arguments, and relented only when forced by the Court to try to explain its position. That suggests that we may not have seen the last of the SSN-based FRN requirement. We’ll keep our eyes out for further developments – check back here for updates.

And before signing off, let’s hear it for the folks who stood up with us at the D.C. Circuit in one or both of the mandamus petitions: The Alabama Broadcasters Association, the Alaska Broadcasters Association, the Arkansas Broadcasters Association, the Kentucky Broadcasters Association, the Louisiana Association of Broadcasters, the Mississippi Association of Broadcasters, the New Mexico Broadcasters Association, the Puerto Rico Radio Broadcasters Association, the South Carolina Broadcasters Association, the Tennessee Association of Broadcasters, Hubbard Broadcasting, Inc., Salem Communications Corp. and Spring Arbor University. We appreciate the support they provided and the confidence they showed in us.

Form 323: The Court Weighs In

We’ve received many calls over the last week or so asking whether the D.C. Circuit had issued any decision with respect to our mandamus petition about the revised Form 323. The answer has been “no” – until, that is, today, when the Court issued a very brief order, which you can read here, denying the petition.  As a result, Thursday's deadline remains in effect. 

Form 323: Point/Counterpoint

FCC opposes mandamus petition, petitioners reply.

Following our June 15 post reporting that the U.S. Court of Appeals had ordered the FCC to respond to our mandamus petition relative to the revised Form 323, we have received a number of requests for updates on that front. Here’s the scoop.

Apparently as a result of a glitch in the court’s electronic filing process, the FCC reportedly didn’t receive a copy of the court’s order on June 14, when it was issued. The Commission told the court that the Commission learned of the order only through the trade press on June 16. (And the trade press presumably found out about the order from our post.) The FCC asked for, and was granted, a two-day extension of its response time.

On the extended deadline (that would be June 23) the Commission filed its Opposition, which you can read here. Anyone who has followed the Form 323 festivities will find that it makes for most interesting reading.

The petitioners, led by Fletcher Heald, have filed a reply to the FCC’s Opposition. You can read our reply here.

The matter is now teed up for the court’s consideration. Given the tight time limits the court imposed on both the FCC and the petitioners with respect to this latest round of pleadings, we suspect that the court is aware that the July 8 deadline for filing biennial ownership reports on the revised Form 323 is fast approaching. Check back here for further developments.

Form 323 Update: FCC Has Some 'Splaining To Do

Court gives Commission seven days to respond to charges about irregularities in the way revised ownership report was developed.

With the July 8 deadline for filing commercial ownership reports fast approaching, we have a new development to report: the U.S. Court of Appeals for the D.C. Circuit has ordered the FCC to respond to claims that the revised Form 323 filing requirements – and particularly the requirement that all “attributable” principals provide their social security numbers (SSNs) – were not imposed lawfully. While it’s impossible to predict what the Court will ultimately do, the fact that it has asked the FCC for its side of the story suggests a level of judicial interest which should be of concern to the Commission.

The Court’s involvement was sought by Fletcher Heald, together with a number of state broadcast associations and broadcasters. In May they filed a petition for writ of mandamus asking the Court to step in to compel the Commission to comply with required procedures before forcing anybody and everybody with any “attributable” interest to cough up their SSNs to the agency.

We have been following the problematic history of the FCC’s efforts to revise its ownership report (Form 323) for commercial broadcasters for more than a year. Any readers new to the situation can catch up by taking a romp through our past Form 323 posts here.

A petition for mandamus is what the Court terms an “extraordinary” request in which the petitioner asks the Court to force the agency to comply with statutory requirements which the agency appears to be ignoring. Unlike the more conventional appellate process – which routinely contemplates that the FCC must make its case in a responsive brief before the Court will act one way or the other – the mandamus process does not guarantee any response from the FCC. To the contrary, the Court can, and often does, simply deny or dismiss a petition for mandamus with a two or three sentence order without bothering the Commission at all.

But the Court’s rules provide that a petition for mandamus will not be granted unless the agency is given an opportunity to respond. That’s one reason the Court’s order directing the FCC to respond to the FHH et al. petition is of more than passing interest. Throw in the fact that the Court’s order gives the FCC a mere seven days in which to respond, and that interest grows: such an abbreviated response deadline at least suggests that the Court may be looking to assemble a complete record and act on the petition in advance of the fast-approaching due date (currently July 8) for filing reports on the revised Form 323.

By our reckoning, the FCC’s response to the Court’s order will mark the first time that the Commission will have had to address, in a formal presentation, the unusual – and, in the view of a number of observers, unlawful – approach by which it has tried to force all “attributable” principals to give the FCC their SSNs. Anyone who has been following this story will want to check back here next week to see what the FCC has to say.

NBP Lift-Off!

FCC launches five – uh, make that six – NBP-related items in one day

If you thought the FCC might have been kidding around when it promised quick action on the National Broadband Plan (NBP) agenda items, the FCC is working hard to move you off that thought. In an impressive display of regulatory shock and awe, the FCC has put a substantial dent in its NBP to-do list by launching six separate proceedings covering five discrete subjects. The items include:

The six items top out at a total of just over 250 pages in all, so you might want to start reading now.  If you just want to get a quick sense of what each involves, you might want to check out the public notices which recap each: Universal Service Fund; Roaming Obligations; Survivability; Cyber Security Certification; and Set-top Boxes.

 Each of the six items invites comments and reply comments, but don’t get your calendars out yet. The comment deadlines won’t be set until the various notices are published in the Federal Register. And to make it even trickier to start planning your early summer get-away, the Commission appears to contemplate an oddly diverse set of deadlines. For example, comments and replies in response to the Set-top Box NOI will be due a scant 30 days and 45 days, respectively, after that notice makes it into the Federal Register.  By contrast, comments/replies in the Cyber Security Certification proceeding won’t be due until 60/120 days after publication. And in between you’ve got the Set-top Box NPRM and USF combo NOI/NPRM (60/90 days for each), and the Survivability NOI and Roaming NPRM (45/75 days for each).

With this barrage – or is it a salvo? – the Commission is clearly signaling its determination to move forward with the ambitious campaign mapped out in the NBP, despite the major questions which loom large in the wake of the FCC’s setback in the Comcast case.  And don’t get comfortable, because these are just the beginning.  The NBP envisions more than 60 proceedings in the months to come.  Stay tuned . . .

Can Network Neutrality Survive Comcast v. FCC? (Spoiler Alert: Maybe.)

A look at successes of the past gives the FCC a way to move forward.

(Author’s note: Last November I posted an item here improvidently titled “How to Solve the Network Neutrality Problem.” My solution was overturned, along with the FCC’s efforts at Internet regulation, by the recent court decision in Comcast v. FCC. Below is a revised path to the same goal that still works after Comcast.)

Network neutrality advocates are in despair following the Comcast decision. That case arose when cable company Comcast selectively hindered customers’ access to certain file-sharing services. The FCC told it to stop. Comcast already had stopped, but went to court anyway to protest the FCC’s butting in. The court ruled for Comcast, asserting the FCC lacks authority to regulate Internet service providers. Comcast is free to decide what content to favor, impede, or block entirely. Read our account here

Network neutrality – the principle that Internet providers should treat content even-handedly – seems to be dead, waiting only for someone to close its eyes and straighten its tie.   The more desperate among its advocates – including at least one FCC Commissioner – speak openly about the nuclear option: a step called “reclassification.”  This means the FCC would reclassify broadband Internet service as a common carrier “telecommunications service,” thereby exposing it to a wide panoply of regulation. As my colleague Paul Feldman notes, reclassification would generate opposition from several industry segments and possibly Congress, and would certainly lead to protracted court appeals. Also the legality of reclassification is in doubt. Many components of Internet service simply do not fit the definition of telecommunications service (see below), and so are not plausibly subject to regulation.

Reclassification is a sledge-hammer. We need a scalpel. Fortunately, one is available.

Ah, the old days . . .

But first, a nagging question. The Internet has been popular for two decades. Why are we are talking about network neutrality only now? The anti-NN forces note that the stunning growth of the Internet occurred without regulation. Why not just continue?

True, there was no Internet regulation in the dial-up days, but an even stronger force was at work: competition.  The phone companies all had departments functioning as Internet service providers (ISPs). The FCC’s Computer III rules required the bigger phone companies to open their networks to competing ISPs. That gave most people dozens of ISPs to choose from. None of the ISPs dared tamper with customers’ content, because the customers could easily go elsewhere.

Then broadband appeared, and quickly became essential as web pages grew more complex. Most consumers have either one or two sources for broadband: the cable company, over the same wires that carry cable TV; and the phone company, first via DSL and later, in some areas, through fiber-optic cables. 

The DSL channel was originally subject to the Computer III sharing rules, but the cable never was. The FCC asked whether it should open the cable to competing ISPs, in the manner of Computer III.

Follow this part closely. To apply Computer III, the FCC would have to find that cable broadband is, or includes, a “telecommunications service” – that is, the pure transport of information, for payment, offered to the public. Common sense tells us that sending Internet pages over the cable has to involve a telecommunications service, among other things. But the FCC is not always bound by common sense. According to its 2002 order, the telecommunications component is not separable from the other components, such as interactive choice of content. The FCC resolved to treat the combined, non-separable service as non-telecommunications. That means Computer III does not apply. A cable operator need not open its facilities to competitors, and can require its Internet customers to use its own ISP service. Cable subscribers are not entitled to competition among ISPs.

The Supreme Court’s Brand X case subsequently upheld the FCC. But it did not say the FCC’s decision was the only right one. Rather – and this is the kind of thing that makes non-lawyers glad they picked some other line of work – the court deferred to the FCC’s right to make the decision. The distinction matters because, ruling the way it did, the Court could easily have supported even the opposite outcome from the FCC.

In the meantime, phone companies answered the FCC’s 2002 cable ruling with outraged filings about a “level playing field.” They still had to put their ISP competitors on the broadband channel, while the cable companies enjoyed the exclusive use of their own cables. In 2005, just a few weeks after the Supreme Court handed down Brand X, the FCC ruled that phone-company broadband was, like cable broadband, a combined service to be regulated as non-telecommunications. No more Computer III; no more competing ISPs.

As a result, if you have broadband Internet service, it is very likely that your ISP is the cable company or the phone company. And, if both companies serve your location, odds are your provider has tried to lock you into a long-term deal with a stiff early termination fee. Unhappy with the service? Tough luck.

Still, some people don’t want the Government intruding into the market for Internet services. Others don’t want a near-monopoly provider deciding what content they should receive. After Comcast, is there any hope for the second camp?

A possible way out

Suppose the FCC were to revisit that 2002 cable decision, the one holding the telecommunications and non-telecommunications aspects of Internet service to be inseparable. Could the FCC now change its mind, and separate out the transport-for-pay component as a telecommunications service? Then, instead of applying the full weight of common carrier rules, it could impose just one: a requirement like that in Computer III, requiring the operator to allow competing ISP on the cable. That would bring back competition among ISPs, and create a major disincentive to tampering with content.

Until last year, this would not have been workable. An agency like the FCC could not change its position without an intervening change of circumstances, such as a major shift in the industry landscape. But last year’s Supreme Court case of Fox v. FCC changed the rules on changing the rules. 

After Fox, the FCC need show only that the new policy makes sense – not that it makes more sense than the old policy. Admittedly, abrupt reversals of established policy have historically been disfavored for many good reasons, and such reversals may – as Brother Feldman observes – still be subject to attack as unjustified. But Fox appears to given the agency considerably greater leeway to change its mind.

Had the FCC chosen to regulate the cable transport back in 2002, the cable companies would have gone to court, but they probably would have lost, under the reasoning in Brand X that defers to the FCC’s judgment. And if the FCC could have required ISP competition on the cable in 2002, then the Fox case strongly suggests they could do it today. 

The argument is even better for phone company broadband, which was subject to mandatory-competition rules until 2005. If anything, the case for requiring ISP competition is stronger now, in light of abuses by the providers, followed by the Comcast court’s closing off more direct remedies.

The process has one more step. The FCC can require ISP competition, as above, but not network neutrality, after Comcast. Either one – competition or neutrality – can protect consumers against content discrimination. So why not give the provider a choice? Undo the 2002 and 2005 broadband orders; regulate data transport as telecommunications; require providers to open their facilities to competitors – but waive that rule for providers that adopt network neutrality. Competition will flourish, or content will be available without discrimination. Either way, consumers come out ahead.

In The Wake Of Comcast: Quo Vadis?

FCC faces a range of options, none particularly attractive

As my colleague Mitchell Lazarus concisely analyzed here, the D.C. Circuit has vacated the FCC’s 2008 determination that Comcast’s network management practices violated the 2005 Internet Policy Statement. The Court held that the FCC’s attempt to enforce these particular “net neutrality” policies was invalid for lack of jurisdiction.

 Jurisdiction in this context means power or authority. An independent federal agency’s ability to take any action depends on the authority granted that agency by Congress. If Congress has authorized the agency to act, the agency may act; if Congress hasn’t authorized it, the agency may not act. Of course, things are seldom that cut and dried.  Sometimes Congress authorizes the agency to regulate in a general area but doesn’t mention anything about another, related, area.  (For example, prior to 1984 the Communications Act authorized the FCC to regulate broadcasting, but said nothing about regulating the cable TV industry.) The courts have agreed that, in such cases, the FCC may act in the not-specifically-mentioned area if such action is “reasonably ancillary” to the agency’s “statutorily mandated responsibilities”.

 In the Comcast case, the FCC claimed its regulation of Comcast’s practices was “reasonably ancillary” to a number of the Act’s provisions. But the D.C. Circuit concluded that none of the provisions cited by the FCC imposed any “statutorily mandated responsibility” to which the FCC’s regulation of Comcast might be deemed “reasonably ancillary”. And without that essential nexus, the FCC lacked the power, or jurisdiction, to do what it had done. As a result, the Court’s ruling also signaled that the FCC may lack the power to impose network neutrality principles.

 So where does the FCC go from here if it wants to promulgate net neutrality regulations? There appear to be four major options:

Appeal to the Supreme Court.  In its Comcast arguments, the FCC relied on the Supreme Court’s 2005 Brand X decision. That case involved the Commission’s determination that cable modem Internet access service is an “information service” subject to regulation under Title I of the Act, rather than a “telecommunications service” subject to Title II. In its Brand X

opinion, the Supreme Court observed that the FCC “remains free to impose special regulatory duties on [cable Internet access providers] under its Title I ancillary jurisdiction.” In Comcast, the FCC argued to the D.C. Circuit that that Supreme Court language established that the FCC could claim ancillary jurisdiction derived from Title I.

But the D.C. Circuit felt that the Commission was reading too much into that quotation. In the Circuit’s view, just because the Supreme Court said that the FCC had jurisdiction to impose some kind of regulation on ISPs under Title I doesn’t mean that the agency had jurisdiction to impose this particular regulation (i.e., “reasonable” traffic management); rather, the Circuit held, each claim for ancillary jurisdiction must be analyzed on its own merits.

Given that, the FCC could try to convince the Supreme Court to provide a broad interpretation of its Brand X language, broad enough to support the Commission’s claim of authority to regulate ISP traffic management. This would not be an easy case for the FCC. As the D.C. Circuit’s Comcast decision makes clear, the Supreme Court itself has, in a number of decisions, treated the concept of ancillary jurisdiction as narrow. Like the Circuit, the Supreme Court has held that each new assertion of such authority must be evaluated on its own terms.  So the prospects of a broad, result-changing opinion out of the Supreme Court are not good. Additionally, a trip to the Supreme Court would not be quick: it is unlikely that a decision would be released prior to June, 2011, even if the Supreme Court agreed to take the case (which it is not required to do – indeed, the Supreme Court routinely agrees to review only about 1% of the cases presented to it).

Go to Congress. Seemingly the most direct way to fix a lack of jurisdiction is to get Congress to eliminate that lack by enacting legislation specifically providing the Commission with the authority to do what it wants to do. While legislation is perhaps the most direct route, it is neither the quickest nor the surest. Bills designed to give the FCC such authority have been introduced over the last few years – but they have not progressed significantly. While it’s difficult (if not impossible) to pinpoint precisely why proposed legislation gets stalled, in this instance that may be attributable, at least  in part, to a preference by Congressional Democrats to give the FCC a chance to take a first shot at crafting net neutrality regulations. Another factor possibly staying Congress’s hand: a desire to wait and see what the D.C. Circuit would do in the Comcast case. But now that the D.C. Circuit has ruled against the FCC’s assertion of ancillary authority in this area, those two factors have been eliminated.  

While it may be possible to get legislation authorizing very narrow FCC regulation of Internet traffic management enacted before everyone’s attention turns to the November elections, that seems unlikely. Verizon has been calling for much broader legislation to re-write the Communications Act for the “Internet Age,” but that seems even less likely to occur before November, and Verizon’s proposal probably would not provide the FCC authority to adopt net neutrality rules. Indeed, it took years of work to get the last re-write of the Communications Act enacted in 1996.  

Re-classify the Transport Component of Internet Access to be a Title II Telecommunications Service.  The FCC has recognized for some time that their 2008 Comcast Order was in trouble (as anyone who attended the oral argument at the Circuit could have surmised).  Perhaps because of that, some Commissioners have been floating a possible alternative approach: re-classify at least some aspects of Internet access (including, e.g., the transport component) as a Title II telecommunications service. Since Title II unquestionably contains “statutorily mandated responsibilities” (more so than Title I), so the thinking goes, the Commission would be better able to establish that its regulation is “reasonably ancillary” to such responsibilities, thus avoiding the jurisdictional problem identified in the Comcast decision.

But this “re-classification” approach has its own problems. 

First, re-classification would require the reversal of multiple FCC decisions made between 2002 and 2006. Those decision classified cable modem, DSL, wireless broadband and broadband-over-powerline as “information services” rather than telecommunications services. To be sure, the FCC already has a pending “Open Internet” proceeding through which a record might be built in support of re-classification of Internet transport as a telecommunications service. But what would Net Neutrality advocates use to make the case that the Internet environment has changed so radically in the last couple of years: the growth of “edge” providers and third-party Internet applications? Another difficulty: the FCC’s reasoning back in 2002, upheld by the Supreme Court in Brand X, was that even accessing the world wide web required an integrated information service, not merely telecommunications transport. 

Further complicating matters is Congress. Would a majority of Congress be happy with the FCC taking things into its own hands, when many in Congress probably believe that re-classification (at least re-classification that involves increasing regulation on the re-classified service providers) is the responsibility of Congress, not the FCC.  

And, of course, re-classification would generate very strong resistance on all fronts from across many industry segments. Further lengthy court appeals would be certain. 

Build a Stronger Case for Title I Ancillary Authority.  In Comcast, the D.C. Circuit did not rule that it was impossible for the FCC to make the case for ancillary jurisdiction, just that the Commission had failed to do so here. The Court left open the alternative possibility that the FCC could assert jurisdiction over Internet traffic management if such regulation were in fact ancillary to the Commission’s responsibilities under Section 201 of the Communications Act (which requires that common carrier charges and practices must be just and reasonable). 

The potential for such an alternative arises from the fact that the Circuit declined to consider one line of argument presented by the Commission in support of its claim of ancillary jurisdiction. In its brief, the Commission argued that it could regulate Comcast’s practices because discriminatory practices that impact VoIP traffic affect the prices and practices of traditional telephone common carriers. But the FCC had not included that as a basis for its regulation back in its 2008 Comcast Order that was on review – and the Circuit (as well as most other courts) refuses to consider justifications for an agency action which are made only at the appeal stage, and not in the original action on review. So the ultimate strength of that particular argument has not yet been tested in court.

Accordingly, the FCC could use the pending Open Internet proceeding to build a record establishing a nexus to Section 201 responsibilities. However, the FCC’s Section 201 theories seem pretty far-fetched, and it is hard to conceive of other theories that could be stronger. And while the Court also left open the possibility that the FCC could try to show a nexus to its responsibilities to protect broadcast TV stations under Title III of the Communications Act, it is unclear if and how the FCC would take on that task.

Statements released by Democratic FCC Commissioners and legislators suggest that they are determined to move forward and find a way to enact net neutrality regulations. Of the alternatives set out above, re-classification of Internet transport as a Title II service currently seems to have the most momentum, but the Obama administration may choose to push one of the other alternatives, or perhaps to work on multiple paths at the same time.   Either way, we are sure to see the struggle over this issue continue.

Court Says No To FCC-Imposed Network Neutrality

FCC lacks authority from Congress to regulate provision of Internet services

Just three short weeks ago, the FCC took the Nation to the mountaintop and showed us the promised land of broadband – every man, woman, and child among us interconnected by high-speed Internet. Part of the dream foresees an Internet free of any provider’s control, giving everyone access to all of the content on the planet.

That last part – Commission-protected freedom from providers’ control – has now taken a serious hit from the U.S. Court of Appeals for the D.C. Circuit. The Court has concluded that the FCC lacks authority to require providers to treat Internet content even-handedly.

Comcast launched the case back in 2007, when it deliberately hindered its Internet customers’ access to certain file-sharing services (possibly, some critics thought, to protect its parent companies’ on-demand cable services from competition). Comcast stopped the practice after the story came out, and after its claims that it was “just controlling congestion” were shown to be untrue. The FCC subsequently imposed certain reporting and disclosure requirements on Comcast’s traffic management practices.  Comcast took the FCC to court, where we observed that the oral argument did not go well for the FCC.

The court has now ruled squarely for Comcast and against the FCC, holding that the powers granted to the FCC by Congress do not include the power to regulate Comcast’s provision of Internet service.

The FCC’s position was a little shaky from the start. It never had a rule prohibiting the Comcast action that caused all the trouble, just a loosely-worded policy statement. And nothing in the Communications Act, from which the FCC derives all of its authority, specifically authorizes control over Internet traffic. The FCC thus had to fall back on a claim of “ancillary authority,” based on a catch-all statutory provision that allows the FCC to do pretty much anything “as may be necessary in the execution of its functions.” 

But as the Court had previously held on a number of occasions, ancillary authority applies only if (1) some other statutory provision covers the subject matter, and (2) the challenged action is “reasonably ancillary” to the FCC’s exercising of its authority under (1). The FCC passed the first test, but not the second. The “other provisions” on which the FCC relied, said the Court, were either mere statements of congressional policy (which cannot support ancillary authority) or statutory provisions that miss the specific topics involved in Comcast’s behavior.

As a result, the FCC is legally barred from imposing or enforcing network neutrality.

The FCC still has a few options.  For example, it can ask the same court for a hearing en banc (Latin for “lots more judges”) or appeal to the Supreme Court. Or it can ask Congress for a law that gives it the authority it needs. There may be other alternatives as well, involving adjustments to the existing regulations for a better fit with the existing statutes, but their likelihood of success in court remains to be seen.

But right now, the view from the broadband mountaintop is a little murky. For the time being, at least, Internet providers are free to favor or block content as they choose. And no use complaining to the FCC.

Newspapers And Broadcasting: A Match Made In The Third Circuit?

Court lifts stay of relaxed cross-ownership rules, but little immediate impact likely

It’s been 35 years since any new permanent commonly-owned newspaper/broadcast combinations could be created in any given U.S. market. But that may now change – the U.S. Court of Appeals for the Third Circuit has lifted its stay of the FCC’s 2007 decision relaxing that ban – although exactly when any changes may be realized is still up in the air.

The newpaper/broadcast cross-ownership prohibition was put in place in 1975 – during the Wiley Commission (for those of you with long memories) – out of concern that such combos would unduly dominate local media. In 2003, as part of its controversial ownership proceeding, the Powell Commission decided to relax the cross-ownership ban along with a variety of limits on common ownership. But before anybody could take advantage of the relaxation, the whole package of revisions – including the relaxation of the newspaper/broadcast cross-ownership ban – got appealed to the Third Circuit in the now famous Prometheus Radio Project case.  And while the appeal was pending, the Third Circuit stayed the effectiveness of the proposed rule changes. 

In 2004 the Court upheld the Commission’s determination that an absolute ban on newspaper/broadcast cross-ownership was not warranted . . . BUT the Court disagreed with the way the FCC proposed to loosen the reins. So the Court remanded the decision back to the Commission for further proceedings. And in the meantime, the stay remained in effect – meaning that the 1975 rules still ruled.

In 2006, the Martin Commission again took up the media ownership rules (as Congress told it to).  And after still more hearings and droves of public comments, in 2008 out came a decision adopting a somewhat revised version of the 2003 newspaper/broadcast cross-ownership approach. Under the 2008 approach (as had been the case with the 2003 revision), the absolute ban from 1975 was gone. But now, combinations of a single broadcast station and a single daily newspaper in the top 20 television markets would be allowed, as long as (a) the television station was not ranked in the top four, and (b) a sufficient number of independent “major media voices” would remain in the market. In markets below the top 20, the Commission retained the ban, but set out a four-factor test that it would consider in granting waivers. 

Not surprisingly, the FCC’s 2008 Order was appealed, ending up in the Third Circuit again. And sure enough, the Third Circuit promptly continued its stay of the FCC’s new rule changes. While the appeal was pending, the leadership of the FCC changed, and the new Genachowski Commission notified the Court that the 2008 decision no longer necessarily reflected the views of a majority of the current Commissioners. It asked the Court to continue the stay – and to hold the substantive appeal in abeyance – while the Commission addressed petitions for reconsideration of the 2008 decision and began its next statutorily required quadrennial review of its media ownership rules.

Three times in the past year the Third Circuit asked the FCC and the other parties to the case to update the Court on the status of those proceedings at the Commission. In its last such request (in December, 2009), the Court indicated some impatience with the lack of apparent progress: the Court expanded its previous request to ask why the stay shouldn’t be lifted and why the Court shouldn’t proceed to hear the case. The Commission responded that the Court really ought to wait until the conclusion of the 2010 quadrennial review. It appears that the Court was not convinced. 

In a very brief Order, the Court has now lifted the stay, and established a briefing schedule for the remainder of the case. With initial briefs now due on May 17, and the overall briefing cycle set to wrap up by July 1 (barring any intervening interruptions), things are likely to move reasonably quickly. 

In the interim, the 2008 changes to the newspaper/broadcast cross-ownership rule will go into effect, finally. But bear in mind that the current Commission has already made clear that it does not approve of those 2008 changes. Moreover, until the Third Circuit issues its decision on the merits of the pending appeals, the longevity of those changes is still very much an open question. (Recall that, in its 2004 opinion, the Third Circuit gave the thumbs up to relaxing the cross-ownership ban as a general matter, but at the same time gave the thumbs down to the mechanics of precisely how the Commission proposed to do the relaxing.) So the impact of the Third Circuit’s lifting of the stay is likely to be minimal for almost everybody, at least for the time being. (The technical effectiveness of the 2008 changes will put some burdens on a limited number of parties to the appeal, but they are by far the exception, not the rule.)

Interestingly, the FCC had already scheduled its next public workshop in the media ownership proceeding – a forum titled Newspaper/Broadcast Cross-Ownership Impact on Competition and Diversity in the Media Marketplace – for April 20. With the stay now lifted, that get-together could prove entertaining.

Court Challenges FCC in Early Network Neutrality Test

Chief Judge to FCC lawyer: “How do you want to lose?”

If a recent oral argument before the U.S. Court of Appeals for the D.C. Circuit is any guide, the FCC may have a tough time imposing its proposed network neutrality policies. Unless Congress steps in to give it a hand.

The case (argued on January 8) arose from complaints that Comcast’s Internet service had deliberately and selectively interfered with BitTorrent file-sharing services. Comcast claimed it was just managing traffic on the network; opponents suspected Comcast of trying to shield the parent company’s cable operations from competition.

The FCC sided with the complainants. It did not fine Comcast, but imposed conditions intended to ensure that the practice had ended. Read the details here.

Comcast brought an appeal to the D.C. Circuit, raising two main grounds: (1) the FCC had no actual rule in place prohibiting what Comcast did (due process argument); and (2) the FCC could not have had such a rule because it lacks authority over an Internet provider’s handling of content (jurisdictional argument).

While it is always risky to predict the outcome of a case on the basis of oral argument, things look bad for the FCC – not only as to the Comcast case, but also in regards to its stated goal of adopting network neutrality rules.

The judges seemed to feed “softballs” to the attorney for Comcast, while giving the FCC lawyer a much harder time. We noted three particularly telling moments:

  • The Chief Judge asking the FCC lawyer, “How would you prefer to lose – [on due process or on jurisdiction]?”
  • Another judge pointedly asking the FCC lawyer, “Are there any limits” to the FCC’s jurisdictional claim? The lawyer seemed unable to come up with an answer that both satisfied the court and squared with his own theory.
  • The Chief Judge remarking, “The impact of our decision [on the FCC’s pending network neutrality rules] will be perfectly clear,” in a context suggesting the court expects to undercut the FCC’s ability to adopt those rules.

But even if the FCC loses this case, it would be a mistake to suppose that marks the end of network neutrality. There are two points to remember.

First, the FCC believes it has a decent argument for jurisdiction based on the Supreme Court’s Brand X decision, which has language supporting the FCC’s authority to regulate at least some aspects of Internet service.  The Comcast court appeared uninterested in hearing about Brand X. But the FCC could ask the Supreme Court to rule in its favor under that precedent.

Second, a loss here on jurisdictional grounds will be an invitation to Congress to step in and give the FCC whatever authority it needs to impose network neutrality. Recent congressional proposals have been a lot tougher than the FCC’s proposed rules.

Either way, an FCC loss in this court will only set off the next stage of the dispute.

Court Affirms LPFM-Friendly Rules

In an 18-page decision released June 5, the D.C. Circuit has rejected the NAB’s challenge to certain LPFM-friendly rules adopted by the Commission in 2007.  

Back in 2007, the Commission:  

  • modified its “cease-operation” rule (Section 73.809) to provide that an LPFM station causing interference to a later-authorized (or later-modified) full service station would apply only to co-channel and first-adjacent channel situations, not second-adjacent situations;
  • established new standards for waiving separation requirements when a later-authorized/modified full service station would ordinarily displace an LPFM but there are no alternate, rule-compliant channels to which the LPFM might relocate;
  • created a “rebuttable non-binding presumption” essentially elevating LPFM’s over later-filed full service applications for change of city of license in the overall pecking order if  the LPFM guy can demonstrate that it has “regularly provided at least eight hours per day of locally originated programming.”

The Court acknowledged that some of the NAB’s arguments were at least “seemingly intuitive” – but in the end those arguments ran smack into Congress’s language, which plainly did not support the NAB. Logically, of course, whittling away at second-adjacent protections does appear to be inconsistent with Congress’s express mandate that third­-adjacent (i.e., more attenuated) protections be maintained. However, the fact that Congress did not expressly mandate maintenance of second-adjacent protection was fatal to the NAB’s argument. (As the Court saw it, the FCC’s position was neither “demonstrably at odds” with the statute nor “contrary to common sense” – strong praise, indeed.)

The Court also disagreed with NAB’s attack on the “rebuttable non-binding presumption” which (to the passing eye, at least) appears to be purely content-based, since it is triggered by the LPFM’s claim of having provided “locally originated programming”.  But in the Court’s view, the term “locally originated programming” refers to the “geographic location of the production of programming”, not the “substantive content of the programs.” (The Court did keep the NAB’s content-based argument alive for another day by dismissing it as unripe because “there is no clear indication that the Commission will regulate content in applying the presumption”.)

One more interesting point: the Court again cites the Supreme Court’s Fox opinion to give the Commission broad protection against garden-variety APA arbitrary-and-capricious arguments. We predicted such increasing reliance on the new APA standard articulated by the Supremes back in April.

Do FCC Auction Participants Have An Enforceable Contract With the FCC?

Court Says Maybe

In a case viewed with considerable interest by many wireless industry participants, the U.S. Court of Appeals for the Federal Circuit (“the Federal Circuit”) has denied a request by a jilted auction participant for money damages against the FCC. 

The case arose from an auction of an FM station in 1998. The FCC awarded the license to the high bidder even though the high bidder had failed to submit certain pre-auction documentation that the FCC had said was essential to being allowed to participate in the auction. The second-highest bidder (Biltmore Forest Broadcasting FM) challenged the FCC’s decision through the usual appellate channels all the way to the Supreme Court. Bowing to the time-worn policy that administrative agencies are best able to interpret their own rules, these courts deferred to the FCC’s determination that the mandatory pre-auction eligibility criteria were actually just “admonishments.” (Full disclosure: the author represents the challenging applicant.)

Still outraged by the FCC’s post-auction manipulation of the rules, Biltmore Forest decided to take a novel path. Having been denied the radio license it felt it deserved, it turned to the U.S. Court of Federal Claims for money damages from the FCC. It sought over $8 million in damages for breach of the contract that it alleged had been established by the eligibility ground rules announced prior to the auction.

The trial court dismissed the case because a decision some years ago seemed to indicate that the Court of Claims had no jurisdiction over FCC licensing matters. Biltmore Forest appealed to the Federal Circuit, pointing out that if the U.S. Court of Appeals for the D.C. Circuit (“the D.C. Circuit”) disclaims any jurisdiction over contract claims and the Court of Claims refuses to hear FCC license cases, the FCC can breach licensing contracts with impunity and the victimized applicant has no court to turn to. The appellate panel refused to re-visit the determination of the panel in the earlier case.

On the plus side, the Federal Circuit did seem to acknowledge that the FCC’s auction process creates a contract between the winning applicant and the Commission. If a rule violation is alleged (as Biltmore Forest alleged), the applicant’s path of challenge must be to the D.C. Circuit. However, if there was no rule violation at stake – for example, if the FCC failed to deliver a license that a high bidder had won or if the FCC delivered less than it had promised – the logic of the Court’s analysis implied that the applicant might very well have recourse to the Claims Court for money damages.  This issue arises more and more often when the FCC threatens to take away or undercut the value of spectrum which it has already auctioned. At some point, its failure to deliver the spectrum as advertised becomes a breach of the auction contract.

It remains to be seen whether the jilted applicant will pay another visit to the Supreme Court.  The original application was filed in 1987, but there are certain wounds that time does not heal.

Court Rejects Attack On DTV Transition-related "Viewability" Rules For Cable Operators

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.

Under well-established rules and precedent governing appeals taken to federal courts, a party seeking to challenge an agency’s ruling must demonstrate that that party would, in fact, be harmed by the ruling being challenged. (This is known generally as having to demonstrate that you have “standing” to bring the appeal.) 

In this particular case, cable operators who would be subject to the new rules would presumably have had a pretty easy time establishing their “standing”, since they would be the ones bearing the brunt of the rules. But cable operators did not appeal. Au contraire, they announced (through the NCTA) that they planned to comply with the new rules whether or not those rules got tossed.  

Instead, it was cable programmers who appealed. Since any harm that they might suffer would be, at best, secondary and indirect, they had an uphill struggle on the standing front. (Their argument was that the viewability rules would force cable operators to reserve more bandwidth for carriage of over-the-air stations than would normally be required, thus creating a shortage of cable bandwidth which would, in turn, increase “competitive pressure” on cable programmers.)  In the Court’s view, they came up short.  As a result, the Court slammed the door on the programmers without consideration of their substantive arguments, leaving the viewability rules undisturbed.

Ordure in the Court?

Fox oral argument in Supremes set for November 4

In planning your Election Day activities this Fall, you might want to pencil in a stop by the U.S. Supreme Court to catch the oral argument in the Fox v. FCC indecency case. (Read about the case in our earlier post.)  It’s currently scheduled for the first argument slot of the day on Tuesday, November 4. On argument days the Court convenes promptly at 10:00 a.m. Doors open at 9:30 a.m., but the line generally starts to form long before that – so vote super early and then drop on by the Court to stand in line, soak up some atmosphere, and hope to get a good seat.  Need directions?  Check out the Court's website for maps, directions and other useful information.  But heads up -- you are not permitted to carry ANYTHING into the courtroom, so leave those Blackberrys, cellphones, umbrellas, newspapers, lunch boxes, brief cases, etc., etc., etc. back at home.  (The Court does provide a coat-check service, if you don't mind fighting through a rugby-like scrum to try to retrieve your belongings.)

Third Circuit Decision in CBS/Jackson Appeal

Indecency appeals – FCC now 0-2 – In a long-awaited decision, the U.S. Court of Appeals for the Third Circuit reversed the FCC’s order holding that CBS and its affiliates had broadcast indecency in the notorious 2004 Super Bowl half-time show featuring Janet Jackson and Justin Timberlake.  The Court found that the FCC had had a longstanding policy not to penalize the occasional fleeting instance of possible indecency and that the Commission had not adequately explained why it chose to depart from that policy when it whacked the CBS folks for the half-second exposure of La Jackson’s right breast.  The Court’s decision was consistent with the Second Circuit’s decision in the Fox case, although unlike the Second Circuit, the Third Circuit did not suggest that the Commission’s indecency policy is unconstitutional.


It’s not clear where this case will go from here.  The Court remanded the matter back to the FCC for further consideration – so if the FCC wants to try to take another crack at explaining its abandonment of the fleeting expletive policy, it could conceivably do so.  But that policy is already before the U.S. Supreme Court in the Fox case, so it’s unlikely that the Commission will bother to try to tweak its policy before Chief Justice

Roberts and his pals get their crack at it.  It would seem more likely that the Commission might try to bring the CBS case up to the Supremes, to be heard at the same time as the Second Circuit/Fox case which is already there.  There is, of course, no guarantee that the Supremes would take the CBS case, but the FCC might think that the image of Ms. Jackson’s anatomy broadcast out to gazillions of football fans presents a stronger case for heavy-handed enforcement than does the situation in Fox (which, you will recall, involves ad lib remarks by Cher and Nicole Richie).  Another theory is that the FCC will just sit tight and do nothing with the CBS/Jackson case until the Supremes have issued their decision in Fox, which will probably occur sometime in the first half of 2009.


Whatever happens, the Third Circuit’s decision provides further confirmation that the Commission’s indecency policy in the wake of the 2004 Super Bowl has been a dramatic, and unjustified, over-reaction.

Federal Appeals Court Overturns CBS Super Bowl Indecency Fine

Earlier today, the federal court of appeals for the 3rd Circuit overturned the FCC's $550,000 fine on CBS for the broadcast of Janet Jackson's infamous 2004 Super Bowl Halftime Show.

The Third Circuit overturned the FCC's decision on much the same grounds as the Court of Appeals for the Second Circuit overturned the FCC's "Golden Globes" decision. Specifically, the Third Circuit held that the FCC could not abruptly abandon its long-standing policy of restrained enforcement of its indecency rules without sufficient notice of the change in policy or a reasonable justification for the change. Because the FCC failed to provide such notice or justification, its decision could not stand.

In addition, the Third Circuit found that the FCC improperly held the CBS stations liable for the actions of Ms. Jackson and fellow performer Justin Timberlake. CBS argued (the Third Circuit agreed) that Ms. Jackson and Mr. Timberlake were independent contractors and not employees for the purposes of that broadcast. Thus, CBS argued, the CBS stations should not have been held responsible for actions of individuals that were not its employees.
The FCC argued that, regardless of whether or not Ms. Jackson and Mr. Timberlake were employees, a broadcast licensee is in and of itself responsible for what is broadcast on its station. Although the Third Circuit found that such "strict liability" was appropriate in some circumstances, cases involving the First Amendment require the FCC to prove some degree of "scienter". "Scienter" roughly means "prior knowledge" or "prior intent", although the Third Circuit acknowledged that it is possible to find scienter even without actual prior knowledge if the party in question acts recklessly with regard what is being broadcast. For instance, according to the Third Circuit, a broadcaster's failure to use available preventative technology, such as a delay for live programming, might be reckless and the broadcaster might have sufficient scienter to be held liable for anything contained in the live broadcast. With respect to CBS, the Third Circuit found that the evidence was insufficient for the court to make a determination.

The Third Circuit vacated the FCC's order imposing the forfeiture on CBS and sent the case back to the FCC for further consideration. However, as the Supreme Court agreed to hear the FCC's appeal on the substantially similar "Golden Globes" case from the Second Circuit, it seems likely that the FCC would want to consolidate that case with the Third Circuit's decision and seek review of both at the same time.

Supreme Court Takes Indecency Case

The Supreme Court has agreed to hear the FCC's defense of its "Omnibus" Indecency order, which involved the FCC's decision to punish "fleeting" expletives.  The case, FCC v. Fox Television Stations, marks the first real Supreme Court review of the FCC's indecency rules since the famous FCC v. Pacifica case considered George Carlin's "seven dirty words."  The outcome of the case could entirely overturn the FCC's authority to regulate indecency content or further entrench that authority.

At issue in the case is the FCC's decision in its Omnibus Indecency order to sanction Fox Television Stations for "fleeting" or "isolated" uses of indecent words, reversing decades of prior policy on "fleeting expletives".  The Supreme Court's decision to hear the case is somewhat surprising, given the fact that the Court of Appeals for the Second Circuit (which issued the decision under appeal) specifically limited the basis of its decision to a point of administrative procedure, rather than direct First Amendment grounds.  Moreover, the Court of Appeals for the Third Circuit is still considering the appeal of the Super Bowl/Janet Jackson case.  Traditionally, the Supreme Court prefers cases that involve issues of 

Constitutional significance that different appeals courts have decided in different ways.  In appealing the case to the Supreme Court, however, the FCC argued, among other things, that the Second Circuit's decision was really an attack on the entire basis of the FCC's indecency regulation and, by extension, an attack on the Supreme Court's decision in FCC v. Pacifica.  If the Supreme Court follows that argument, we could see a reconsideration of FCC's authority to regulate indecent broadcast content.  On the other hand, the Court may simply weigh in on the procedural point, setting up another round of reconsiderations and appeals that could take years to resolve.

Legal pundits will spend the next few months debating on the Supreme Court's motives for taking the case and predicting the ultimate outcome.  For now, we will limit ourselves to noting that the FCC has a backlog of dozens, perhaps hundreds, of indecency cases that have been held in limbo while the FCC has tried to get more guidance from the courts and Congress.  While today's announcement is a significant event, given that the Supreme Court won't actually hear arguments until fall of this year, those cases may expect to stay in limbo until at least 2009.

Supremes Keep Us Hangin' On

You can't hurry love, and you apparently can't hurry the Supreme Court, either.  Despite considerable speculation that the Supremes might announce on Monday, March 3, whether it had decided to hear the FCC's appeal in the Fox Television indecency case, the Court gave no indication one way or the other on that score in the list of orders it released.  According to the Court's published schedule, the next date on which it will be in session - and, therefore, likely to release any decisions of any kind - will be Monday, March 17.

Unlike the lower Federal courts, the Supremes are under no obligation to hear appeals in any particular case (other than a very small universe of "original jurisdiction" cases, such as disputes between two states).  So when the FCC loses in a Federal court of appeals, as it did in the Fox Television case in the Second Circuit last June, it must ask the Supremes to please agree to review the lower court's ruling.  The Supremes, in turn, will agree to do so only if at least four justices vote to do so.  The odds against getting your foot in the door are long: generally, 95%-99% of petitions for Supreme Court review are denied each year.

The FCC's petition and the TV networks' oppositions were distributed to the Justices for consideration at a February 29 "conference".  A conference is a meeting attended by only the Justices during which such petitions are considered and voted on.  Because the Fox Television case was presumably to be discussed and voted on on February 29, the smart money figured that on March 3 (i.e., the next time it was "in session") the Court would announce whether it would hear the case.  But the list of orders issued by the Court on March 3 contained no reference to the Fox Television case.

So revise your calendars for March 17, and check back here then to come see about it.

Second Circuit Trashes FCC Indecency Policy

In a long-awaited decision, the U.S. Court of Appeals for the Second Circuit has finally dropped the hammer on the Commission's indecency policy. In an opinion issued on June 4, 2007, a three-judge panel (with one dissent) has held that the "fleeting expletive" policy invoked by the Commission in 2004 and then again in the 2006 "Omnibus" indecency decision is arbitrary and capricious. In the Court's view, the FCC's asserted justifications for the "fleeting expletive" policy were less than persuasive.

The "fleeting expletive" policy - as first announced in 2004 and then reaffirmed in 2006 - provided that any broadcast of the words "fuck" or "shit", in almost any context, would be deemed indecent. Historically, the Commission had been far more restrained, acknowledging that the occasional slip-up resulting in the broadcast of an isolated expletive should not warrant censure. But in the wake of the public uproar over the Janet Jackson/Super Bowl incident, the Commission suddenly reversed course and took an exceedingly hard line on indecency generally, and the use of those two words in particular.

The Court's decision is at first blush relatively narrow, finding only that the "fleeting expletive" policy is arbitrary and capricious and thus inconsistent with the Administrative Procedure Act. But in a surprising six-page portion of the opinion, the Court offered its very strong suggestion that the policy would not survive First Amendment analysis. (As a matter of practice, courts generally decline to delve into weighty constitutional issues if a case can be resolved on less radical grounds.)

The majority also indicates that the FCC's "profanity" policy - which first popped up in 2004 - essentially overlaps the indecency policy - which indicates that the profanity policy cannot survive, either.

The case is remanded to the Commission for further action consistent with the Court's decision - but the Court seems clearly to signal that if the Commission tries to shore up its policies on remand (as opposed to running up the white flag and abandoning them), the Court anticipates yet another appeal, the result of which would not be favorable to the Commission.

We are, of course, still awaiting further developments in the Janet Jackson case out of the Third Circuit, but oral argument there is not likely to happen for at least another couple of months.