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

As it turns out, the policy includes some significant qualifying language which could cause it to fall short, in practice, of what the FCC had in mind.  As announced by the 4A’s, the policy reads:

NON-DISCRIMINATION POLICY RELATED TO VENDOR SELECTION

[Insert here name of agency: hereafter Agency] is dedicated to a policy of equal opportunity for all media vendors, suppliers and agents (“Vendors”). Subject to the protection of Agency’s and its clients’ confidential information, Agency will clearly communicate selection criteria to all appropriately qualified Vendors. Consistent with each Agency client's marketing communications strategies, effective media target audience planning, and efficient media buying practices, Agency policy is to grant equal opportunity to all such Vendors.

Complaint Review Process

A Vendor that feels it has been the victim of discriminatory buying practices by Agency shall be provided the opportunity to voice its dissatisfaction through Agency’s complaint review process. For purposes of this review process, discriminatory buying practices shall be defined as any buying policy that is in conflict with FCC media regulations, and thereby negates equal opportunity.

Agency will provide each of its Vendors with the opportunity to present in writing the basis of its dissatisfaction to Agency’s Discrimination Complaint Review Committee. Based on its findings, the committee may request a meeting with the Vendor to discuss all pertinent information related to the complaint.

Consider that language carefully: the equal opportunities to be accorded Vendors are to be “[c]onsistent with each Agency client’s marketing communications strategies, effective media target audience planning, and efficient media buying practices” (we added that emphasis.) What does that mean? Doesn’t it expressly acknowledge that “audience target[ing]”, “marketing strategies” and consideration of “efficien[cy]” are factors which are to be accommodated in the quest for “equal opportunity” for vendors? 

How would that work in practice? 

For example, what if a promoter hoping to sell season tickets to the opera believed, based on reliable and objective market research, that he could more efficiently reach his target audience by advertising on, say, a news/talk station rather than on one with an Urban format? This isn’t to say that no Urban listener would ever buy a ticket to the opera; but if you’re looking to reach a lot of opera buffs all at once, assume that the available research strongly indicates that by far your best bet is with news/talk audiences and not with Urban audiences. If the advertising agency representing that promoter acted accordingly and imposed a “No Urban” limitation on its ad buys, would that still be OK according to the 4A’s non-discrimination policy?  

What about an importer of a food product considered a delicacy among some South American cultures who wishes to advertise that product exclusively on Spanish-language stations – to the exclusion of other foreign-language or English language stations, including Urban music stations – would that be acceptable? 

Both approaches would seem to pass muster under the new 4A’s policy – since the buys in question would be (a) in line with the client’s marketing strategies and (b) designed efficiently to deliver the client’s message to the client’s chosen target audience. And neither approach appears to be motivated by any pernicious racism. But both approaches would, at least arguably, discriminate on the basis of race or ethnicity, and both would appear to involve the type of express “No Urban” order that the FCC seems intent on stamping out. Is that what the Commission had in mind?

And beyond that, when a Vendor that believes it has suffered from discriminatory buying practices, the 4A’s policy statement affords that Vendor an opportunity to express its concerns through a complaint review process. For purposes of this process, discriminatory buying practices are defined as “any buying policy that is in conflict with FCC media regulations, and thereby negates equal opportunity.” But there are no FCC rules (or “media regulations”) whatsoever on this subject. Nor are there likely to be. Sure, the FCC has raised its eyebrows at buying practices that exclude certain stations, and it has required broadcast stations to certify that they themselves maintain nondiscriminatory contracting practices, but the FCC has no jurisdiction over either the advertisers or the advertising agencies that make the actual buying decisions. So the 4A’s policy on its face does not impose any blanket prohibition against any particular type of advertising restriction.

This is not to say that we think for a minute that the 4A’s promotes improper discrimination or that its new policy is just a cleverly worded effort to sidestep the FCC’s wishes while seeming to embrace them.

Rather, the 4A’s policy appears to be a genuine, good faith effort to acknowledge and address the fact that the purchase of advertising, by its very nature, is a fundamentally discriminatory activity. Not “bad” discriminatory, but discriminatory in the sense that the advertiser has to decide where to spend his/her/its limited advertising dollars, and that decision-making process requires the drawing of lines. And when an advertiser draws lines, discrimination is occurring – discrimination based not on bias against race or ethnicity, but on the advertiser’s ability to achieve his/her/its particular commercial goals. 

With that in mind, perhaps it’s time to take another look at this whole issue, starting with the unarguable premise that all players in the advertising game are in it to make money. From the advertiser’s point of view, the goal is to sell as much of the advertiser’s product as possible. No non-discrimination policy will deter advertisers from attempting to meet that goal as efficiently as possible. Perhaps the 4A’s new policy, with its less-than-absolute language and its apparent acknowledgment of the priority of advertisers’ strategic interests, may be the best policy after all.

Now if only the FCC would recognize the practical reality that not all “discrimination” – including some discrimination which might arguably be based on race, ethnicity, gender or other factors – is necessarily unlawful, inappropriate or even undesirable.

To the contrary, citing the First Amendment, the Commission explicitly declined to tell broadcasters precisely what language their advertising contracts should or should not contain. Instead, the Commission simply reiterated that it would “require broadcasters renewing their licenses to certify that their advertising contracts do not discriminate on the basis of race or gender and that such contracts contain nondiscrimination clauses.”

Overall, the Diversity Order’s terse treatment of the NIAP was less than thorough – a fact underscored two years later when the Commission issued an “erratum” revising the phrase “race or gender” to read “race or ethnicity”. Oops.  No explanation was offered. Nor did the erratum address the fact that, by deleting “gender”, the Commission was at least implicitly condoning discrimination based on gender.

Importantly, the NIAP was not incorporated in any rule proscribing discrimination in advertising. (By contrast, the Commission did adopt a specific rule – Section 73.2090 – prohibiting discrimination in the sale of broadcast stations.) All the NIAP did was to impose a new certification requirement in the broadcast renewal application. Since the NIAP was announced in 2008, and the next cycle of broadcast renewals wasn’t due to start until 2011, little was heard of the NIAP in the meantime.

Time moved on, the years passed, and lookee here – it’s 2011! Already! Which means that thousands of broadcasters will soon be required to sign off on the certification in their renewal applications. 

But since the Commission hasn’t bothered to shed any meaningful light on the underlying conduct that broadcasters are expected to be certifying about, many broadcasters have been hoping that maybe, just maybe, the Commission would provide some guidance: Do I need to re-write all of my advertising sales orders to include some magic language (and if so, what might that language be)? What if the advertiser uses a standard form contract for everyone – am I expected to forego a sale if they refuse to incorporate this language? How can a broadcaster confidently certify anything about the intent of the advertiser? If the Commission’s trying to stop discrimination against urban and Spanish format, what happens if an advertiser chooses ONLY Spanish stations or ONLY urban stations – isn’t that race/ethnicity-based discrimination too? If an advertiser sells cowboy hats, is it wrong that he advertises on my country music station but chooses not to buy time on my R&B station? (We could go on, but you get the point.)

So when the Enforcement Advisory appeared, there was at least some hope that the Commission was finally ready to let the industry in on the secret.

No such luck.

Instead of guidance, the Advisory offers not-so-veiled threats about enforcement of the policy without any particular indication of what will constitute a violation. Indeed, in the public notice the Chairman, apparently unaware that the policy is just that – merely a policy – refers incorrectly to the policy as “rules” or a “rule”. If it were a rule, it would show up somewhere in 47 C.F.R. It doesn’t. If it were a rule, the Commission would be able to impose a fine for its violation. It can’t.  

[Of course, there’s always a chance that we’re missing something here. Nobody’s perfect. So if anyone can point us to a section of the FCC’s rules that contains any provision that codifies the NIAP, we would appreciate it if you would let us know by any means that you feel comfortable with – email, phone, comment below, whatever. We’ll happily post a correction, with full credit to you.]

Now let’s be clear. Inappropriate discrimination – on the basis of race, ethnicity, gender, religious belief or other similar factors – is wrong and should not be tolerated. But while there are some areas in which the Commission can effectively police improper conduct, it’s not clear that private contractual arrangements are among those areas. After all, even in the Diversity Order the Commission referred to “nondiscrimination laws”, acknowledging that there are legal mechanisms other than FCC regulation with which the government can address such problems. And the misconduct which appears to be the FCC’s primary concern is not misconduct by broadcasters, but rather by advertisers and/or their agents. Rattling the enforcement saber at broadcasters seems a curiously misdirected effort, especially when there are other Federal agencies (the FTC comes to mind as one example) which should already be enforcing the “nondiscrimination laws” to which the FCC itself referred.

We have addressed the question of how one might deal with the NIAP in previous posts (for example, here), long before the Advisory. The Advisory provides little reason to alter what we have said there. But the problem with the situation the Commission has created is that it is difficult, if not impossible, to know for certain what the Commission expects here. Indeed, even the Enforcement Bureau can’t seem to figure it out. The public notice accompanying the Advisory says that the Bureau “will work in close collaboration with the Media Bureau to give this new requirement meaning.”  How could the “new” requirement (that is, the policy that was adopted more than three years ago) still need to be given “meaning”?  

Unfortunately until the Commission sheds more light, broadcasters will have to tread carefully to certify according to their reasonable beliefs and due diligence efforts – whatever that means.

When the Bureau’s anticipated changes in the renewal form first emerged last Fall, one of the highlights was the fact that radio licensees would be relieved of the burden of submitting any exhibits to their RF certifications. But the Notice now could be read to say otherwise:

For stations that have had a material change in their RF environment since they last received a grant of a license application or license renewal application, either an exhibit or a worksheet demonstrating compliance with the RF exposure limits is required.

That seems to say that, at least in some limited cases, it may be necessary to submit something – like an exhibit or worksheet. But that would be flatly inconsistent with what the Commission said last Fall when it spoke, repeatedly and unequivocally, of the “elimination of the exhibit requirement for radio broadcasters”. What’s up with that?

After reading this over several times and chatting informally with the Commission’s staff, we think that the key to understanding the Notice is as follows: while the Notice does say that an exhibit or worksheet demonstrating compliance is, in some instances, “required”, it does not say that that exhibit/worksheet is “required to be submitted with the application”. That is, where there has been a material change in the RF environment of your transmitter site since grant of your last renewal or license application, you will have to work through the worksheets to confirm that the site is still in compliance. (And if the worksheets don’t confirm that, you’ll need to enlist the help of a consulting engineer to study the situation.) But once you get to the point that you can confirm compliance, you would simply so certify and that would be that. No separate supporting documentation would need to be submitted with the renewal application (although it would be a good idea to hold onto your worksheets or engineering study, in case somewhere down the line the FCC asks you to explain your certification).

We’re reasonably confident that this is what the Bureau has in mind – but we’ll keep our eyes out, and if we get any contrary information, we’ll post it here. In any event, though, if you are a radio licensee and there have been material changes at your site since your last renewal/license grant, you probably want to begin looking at the worksheets and, if necessary, lining up engineering services soon.

The Notice also included a couple of useful reminders. 

For one, this renewal cycle the Media Bureau will not be mailing postcards to licensees reminding them of their upcoming renewal applications. In other words, each licensee is on its own to remind itself when its renewal is due. (Where the Bureau has an e-mail address, it will attempt to remind the licensee by e-mail – but if no such reminder arrives, that will not excuse a failure to file on time.) As a reminder, the first license renewal applications are due for radio stations in D.C., Maryland, Virginia and West Virginia on June 1.

Second, the Notice advises that the earliest date on which renewals may be filed is May 2. Form 303-S may be available on CDBS prior to May 2, but it can’t be submitted until then – no matter how many eager beaver licensees may prefer to get it over with before then. While there is currently (i.e., as of March 15) a version of Form 303-S listed on CDBS, don’t be fooled: that’s probably NOT the new version. Check under the official OMB number at the top right side of the first page – if it doesn’t say “March 2011”, it’s not the new version. If it’s not the new version,  don’t spend any time looking at it (or the instructions, which are also outdated). If you want to see a PDF version of the new form and instructions, you can find that on the FCC’s forms page. But that version is just for reading – you can’t complete and submit it on line. You’ll have to wait for May 2 for that.

As always, check back here for updates.

• Section II of Form 303-S will contain a required certification that the licensee’s “advertising sales agreements do not discriminate on the basis of race or ethnicity and that all such agreements held by the licensee contain nondiscrimination clauses.” (The form’s instructions will also be revised to address that certification.) This, too, is a response to the 2007 Diversity Order, which for the first time imposed the explicit obligation that advertising contracts contain nondiscrimination clauses. As we observed back in 2008, the Diversity Order technically became effective in 2008, but the certification requirement reaches back to the beginning of the license term, i.e., considerably before then. That could create some practical difficulties (although Steve Lovelady’s post from October, 2008, might provide some guidance around those difficulties).
• Section III of the form will include a new question (Item 4, with accompanying instructions) requiring the licensee to certify that, during the preceding license term, its station was neither silent, nor operating on less than the required minimum schedule, for any period of more than 30 days. If the licensee can’t so certify, it will have to provide an exhibit specifying “the exact dates ... on which the station was silent or operating for less than its prescribed minimum hours.” If you don’t know what this is about, check out our post on the topic from last month. Note also that the proposed revisions to Form 303-S make clear that, for purposes of this certification, the “transmission of ‘test signals’ does not count toward a station’s minimum operating hours.”
• The proposed revision of the form would eliminate the longstanding requirement that full power AM and FM licensees submit an exhibit to demonstrate compliance with RF limits. Historically, such an exhibit has been required if the renewal applicant wasn’t eligible to use the RF worksheets in the old Form 303-S. Under the revised form, all applicants would still have to certify that their facilities comply with the Commission’s maximum permissible RF limits – but no additional exhibit would be expected from full power AM and FM folks.
• Finally, Section V (Item 4) of the form would be changed to clarify that LPTV stations still need to file Form 396 with their renewal application, even though they might not have to file an EEO-related public file report and post that report to their website. Previously, the form required a certification that the licensee had created the public file report and posted it to the station’s website “as” required by the rules. The new form would substitute the word “if” for the word “as” because not all LPTV licensees are subject to public file report requirement.

The good news in all this is clearly the lifting of the RF exhibit requirement from the shoulders of full power AM and FM stations. This should relieve one and all – both private sector applicants and FCC application processors – of an irksome chore, which is all to the good.

Interestingly, while the Commission did publish a notice about its proposed changes in the Federal Register, the Commission stopped short of also publishing a copy of the revised form. You’d think that the FCC would have made the new form available in the Federal Register in order to give everybody the maximum opportunity to look it over as soon as possible. Apparently the Commission doesn’t think like that. While this approach harkens back to the unfortunate situation we all encountered with the FCC’s effort to revise the Broadcast Ownership Report form (FCC Form 323), we need not worry about a re-play of that here. After reading the Federal Register notice, we wrote to the FCC asking for a copy of the form (which we have linked above and here), and the Commission kindly sent one over within a couple of hours.

At this point we can’t say for 100% certain that there aren’t any additional changes lurking in the 39-page form. The ones described above are the ones the FCC has identified in its Federal Register notice. The publication of that notice kicks off a 60-day comment period. Anyone wishing to chip in his/her two cents’ worth relative to the proposed changes has until December 13, 2010 to let the FCC know. After that, the Commission will forward the proposed form over to the Office of Management and Budget, which should give one and all another 30 days in which to comment. Given that timeframe, we can probably expect to see the new and improved Form 303-S online and ready for filing early in 2011, in plenty of time for the first round of renewals.

The rules, of course, permit stations to shut down from time to time, and there’s plenty of good reasons why they might: for examples, equipment problems, emergency conditions (think wildfires or earthquakes or hurricanes or floods, etc.), and – particularly in this period of economic hardship – plain ol’ money problems. The Commission itself routinely approves suspension of operation (usually in six-month hits) on a showing of good cause.

Such officially-sanctioned suspensions do not last longer than a year, though, because the Communications Act includes a fail-safe incentive to goose stations back on the air. Section 312(g) provides that any station that “fails to transmit broadcast signals for any consecutive 12-month period” loses its license automatically at the end of that period. (That section does afford the Commission some discretion to breathe the breath of life back into an automatically-expired license, but to date the FCC’s staff has demonstrated a decided reluctance to avail themselves of that discretion.)

Some at the Commission believe that, despite the threat of automatic expiration, a number of licensees are turning their stations off and keeping them off for extended periods. Those licensees dodge expiration, apparently, by returning to the air for brief periods so as to avoid a “consecutive 12-month period” of silence and, thus, the Section 312(g) kiss of death. But, having operated for a while, they then go back off the air. (Note that the FCC has never officially addressed the question of how long a station has to be on the air to toll the 12-consecutive-month period for Section 312(g) purposes. In a footnote (Number 21, if you’re looking) to a 2003 decision not directly involving Section 312(g), the Commission hinted – but stopped short of formally holding – that 24 hours of operation would do the trick.) 

The Commission’s staff has signaled that it will consider instances of non-operation during the preceding license term as part of the renewal process. This could entail revision of the renewal application form (FCC Form 303-S) to require each renewal applicant to provide a detailed listing of instances of non-operation during the preceding license term. 

The general idea goes back to a 2001 Commission decision involving a Pocomoke City, Maryland AM station that was off the air for nearly four consecutive years in the early 1990s (i.e., before Section 312(g)’s automatic expiration provision was inserted into the Act). The Commission, responding to an objection about the licensee’s failure to operate for most of the license term, concluded that renewal was appropriate. BUT – and it’s an ominous “but” – the decision was based on the facts that: (a) historically, the FCC had been “particularly lenient” in granting “stay silent” STAs; and (b) the licensee in question had not been warned that continued silence might “put [its license] at risk”.

The Pocomoke City decision took care of that latter factor, in spades. The Commission wrapped up its decision by pointedly stating that:

we take this opportunity to caution all licensees that as a result of the clarification provided herein, a licensee will face a very heavy burden in demonstrating that it has served the public interest where it has remained silent for most or all of the prior license term.

FCC to broadcast industry: you have now been warned.

A focus on the renewal applicant’s performance during the preceding term is squarely within the chores assigned the Commission by Congress. Section 309(k)(1)(A) of the Act specifies that, before it can grant an unconditional broadcast renewal, the FCC must first determine that, during the immediately preceding license term, the licensee “has served the public interest”. It’s difficult to imagine how a station could logically be said to have served the public interest when it wasn’t operating at all.

Whether the renewal form will in fact be revised remains to be seen. After all, the 200 or so radio stations off-the-air as of September 1 represent only about 1% of all AM and FM stations – not a huge chunk of the industry. Does it really make sense to impose an across-the-board reporting requirement when such a small percentage is being targeted? And bear in mind that at least some, if not many or even most, of those 200 stations may be off-the-air for valid technical reasons, with no intent to stay off longer than necessary to fix the problem and crank back up. In other words, if a chronic off-the-air problem does exist, it may be isolated to considerably less than 1% of the industry. Does the Commission really need to get its Big Guns out?

If the staff does plan to revise the renewal form to include a question about instances of non-operation, it will have to start the ball rolling soon. Form revisions generally require that the public be given the opportunity to comment, both at the FCC and before the Office of Management and Budget. With the next round of renewals due by June 1, 2011, the Commission has significantly less than nine months to have the form ready to go. Check back here for updates.