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

According to the Bureau, the references to the cable company’s “targeted advertising” and “specialized channels” “distinguish [the cable company] from competitors and seek to promote its services”. Ditto for the bank’s claims of “meet[ing] all your banking needs” and “banking the old fashioned way” – in the Bureau’s eyes, those terms alone are “comparative and qualitative” (not to mention “visit one of our four branches”, which the Bureau concluded was an impermissible “call to action”). And double ditto for Bank of America’s reference to “flexible financing”, which “impermissibly seeks to induce patronage by encouraging listeners to explore the bank's financing options”, according to the Bureau.

And “cold refreshing beer”? Well, that “promote[s] that product through use of qualitative terms”, as the Bureau sees it.

Total cost of the resulting fine? A cold, refreshing $2,500, knocked back to $2,000 because the licensee has previously kept its nose clean, according to the Commission’s records.

As we observed last March, there is considerable latitude between the obviously promotional and the permissibly descriptive. While we object as much as the next guy to hearing (or seeing) “commercials” on noncommercial stations, the mere use of accurate, descriptive terminology – to our minds, at least – does not ordinarily offend our sensibilities. And it’s hard to imagine anything more accurate or neutrally descriptive than “cold refreshing beer”. After all, is it even beer if it’s not cold and refreshing? (When was the last time you were able to order up a warm, unsatisfying beer anywhere?)

And as soon as we get ourselves appointed to run the Enforcement Bureau, our views might count for something. Until then, though, they don’t – so we reiterate our suggestion from last March that all NCE licensees might want to take a closer look at their underwriting scripts and weed out any quasi-promotional language that may have snuck in over time. And given the most recent Bureau decisions in this area, it would be best to calibrate your commercial-o-meter to “hyper-sensitive”, just to be on the safe side.

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.

The Commission “affords latitude to the judgments of licensees” in this area: if the licensee exercises reasonable, good faith judgment in this area, the FCC says it won’t second-guess that judgment. Which is all well and good, but danger still lurks in these waters because the Commission has provided only very broad guidelines with which to navigate them.

The Commission has posted on its website a couple of general discussions of its policies in this area. These include a 1992 reprint of a 1986 policy statement and a set of comments presented by Kenneth Scheibel, the Commission’s resident guru on such things, back in 1999. The policies can be summarized like this: underwriter announcements may identify the for-profit contributor and the goods or services which it offers, but those announcements may not “promote” those goods or services.

A prohibited “promotion” usually involves one or more of the following elements:

• Price information – Underwriter announcements may not contain any information about pricing. Particular prices of any goods or services, other indications of savings or monetary value associated with the goods or service, special discount offers that might be available – they’re all to be avoided.
• “Calls to action” – Language which encourages the audience to patronize the underwriter is also verboten. “Stop by our showroom” or “Try our product the next time you’re in the market” or “Call us today for more information” – steer clear of them all.
• Special inducements – This tends to bridge the first two elements, above. Think things like “We’re giving a special bonus to customers who sign up this week” or “Free samples to the first 50 callers” or “Pre-holiday discounts now in effect”.
• Qualitative or promotional language – This is where things tend to get fuzzy. You’re supposed to avoid language which appears to promote the qualitative desirability of the underwriter’s goods or services – for instance, “comparative” references stating or implying that the underwriter’s goods/services are somehow preferable (“the best plumbers in town” or “cheaper than everybody else” or “largest service department”). The prohibition also extends to language which goes beyond the mere identification of the underwriter’s goods or services. For example, you could say that an underwriter “provides a full line of widget products”, but not that that underwriter “provides a full line of widget products in a rainbow of beautiful colors and wonderful textures guaranteed to delight the eye and stay within your budget”.

The trouble is that the there is a lot of room between the obviously promotional and the narrowly identifying. And let’s be frank here: underwriters usually want, and probably expect, more than a “name/rank/serial number” announcement in return for their contribution. So the NCE licensee ends up pulled between the need to comply with the FCC’s less than specific limitations and the underwriter’s preference for at least a little bang for its buck.

The recent LPFM decision suggests that the NCE licensee’s ability to cater to that preference may be shrinking. The Enforcement Bureau identified the following terms as prohibited:

• With respect to restaurants: “a unique eatery” whose food is “made with only the freshest ingredients”; “their world-famous pepperoni rolls”.
• With respect to a copy center: “your one-stop shop for black and white [and] color copies. You can stop by one of our two locations.”
• An automotive service center: the owner “takes pride in their honest and reliable service”.

While we understand that these could all be read as “promotional” in some sense, each of these descriptives seems, well, descriptive. They certainly don’t go overboard and could reasonably have been deemed to be within the “latitude” that the FCC says it accords to NCE licensees.

Curiously, in singling out these particular portions of the various announcements, the Commission made no mention of several fairly clear price references elsewhere in the same announcements: “at affordable prices”, “she wasn’t charged an arm and a leg”, “park for free”, “free local shuttle service”. Since price information is forbidden, one might have thought that the Commission would be concerned about such references – but if it was, you can’t tell it from the decision. In other words, the Commission overlooked some seemingly blatant problematic language and instead whacked the licensee for language which appears – to us, at least – as much closer to, if not comfortably inside, the permissible range.

Meanwhile, the decision also includes the observation that “many” of the announcements in question “appear to exceed thirty seconds in length”. Of course – as the Bureau expressly acknowledges – there is no limit on the length of underwriting announcements. But that doesn’t stop the Bureau from raising its regulatory eyebrow for all to see: the Commission “has found that the longer the announcements, the more likely they are to contain material, as here, that is inconsistent with the ‘identification only’ purpose of such announcements.” So even though the Commission has not imposed any length limits on such announcements, it clearly has limits in mind – um, let’s say 30 seconds -- and it doesn’t seem shy about trying to get that message across.

This case may be an aberration, and may not signal a tightening of standards on underwriting announcements.  But at a minimum it should encourage all NCE licensees to take a closer look at their underwriting scripts and to weed out any quasi-promotional language that may have snuck in over time. This may require some uncomfortable conversations with underwriters unhappy that their announcements are being neutered, but that could be the cost of compliance.

Careful script review would be especially prudent in view of the current economic environment. Commercial broadcasters historically have often bridled at NCE underwriting announcements that tended to sound like real spots. After all, one station’s “underwriting contribution” is another station’s “advertising revenue”. Beyond a fair amount of grousing, though, the commercial folks have not seemed particularly enthusiastic about trying to call in the Federales to stop improper underwriting. But as the number of available advertising dollars shrinks, there may be more incentive for some commercial broadcasters to file complaints with the Commission in an effort to re-direct dollars from the NCE’s to their own bottom-lines. As Sergeant Esterhaus used to admonish the Hill Street Blues squad, “Let’s be careful out there.”

The issue of third-adjacent protection has been around since the LPFM service’s creation in 2000. As originally conceived by the FCC, LPFM stations were not subject to any third-adjacent protection vis-à-vis their full-service siblings. But because of concern that a gazillion LPFM stations peppered across the landscape would cause erosive interference to existing full-power stations, Congress promptly stepped in and overruled the Commission by amending the Communications Act to insure that third-adjacent protections would be retained. Still, acknowledging some doubt as to the extent that such interference really does pose any threat, Congress directed that the FCC study the issue further.

That in turn led to the 2003 Mitre Report, prepared for the Commission by the Mitre Corporation (at a cost of more than $2,000,000). Mitre concluded that third-adjacent interference should not be much of a problem. (Mitre’s conclusions have been questioned by some, including most notably the NAB.)

Buoyed by the Mitre Report, in 2004 the FCC asked Congress to re-amend the Act to delete the third-adjacent provision which had been added in 2000, but it remains on the books to date. As reported in our December, 2007, Memo to Clients in late 2007 the FCC adopted interim processing rules that would permit LPFM stations to seek waivers of the second-adjacent channel protections. (A rulemaking to make such procedures permanent is still pending.) The 2007 action also boosted the status of the LPFM service in a number of respects.

The bill dropped into the hopper this week would further elevate the status of LPFM stations.  Interestingly, though, the bill identifies one broadcast service which will still trump LPFM. The bill provides that third-adjacent protections must be maintained for full-service noncommercial FM stations which provide radio reading services (RRS) on their SCA’s. But if third-adjacent interference is such a problem that RRS need statutory protection, why should such interference be permitted for everybody else? (The RRS carve-out gives rise to other conceptual problems as well: what if a commercial station puts an RRS on its SCA – shouldn’t it be entitled to protection? And is this carve-out constitutionally permissible, since it appears to impose different regulatory standards based on the content of one’s transmissions?)

Perhaps more significantly, the bill would also bolster the Commission’s quixotic efforts to promote “localism” in broadcasting generally. The bill is critical of broadcasters, suggesting that there has been “too much [media] consolidation” and that, as a result, “there have been strong financial incentives . . . to reduce local programming.” The bill calls for a “renewal of commitment to localism”. The bill also suggests that increasing the number of LPFM stations will increase minority and female ownership in broadcasting and will enhance communications during “local or national emergencies”. 

The Commission (whether under Acting Chairman Copps or under his permanent successor) is likely to read that Congressional language as a direction to charge full speed ahead with the localism proposals which largely languished over the last year. While the Commission’s continued obsession with the DTV transition is likely to distract it from “localism” for another couple of months, we can anticipate a return of the “localism” juggernaut before too long.

If the bill passes and third-adjacent protections (except for NCE stations with RSS on their SCAs) are eliminated, and if the FCC then were to pick up where it left off back in 2007 and adopt final rules eliminating the second-adjacent channel protections, full-power FM stations will be protected only from co-channel and first-adjacent interference (whether the source is LPFM, FM Translator or FM Booster operations). Given the NAB’s opposition to LPFM in the past, this should shape up to be a good fight. Stay tuned.